Dispute Resolution

In general legal disputes in Scotland surround the relationships between parties involving a contract or a breach of a duty of care. But what happens when there are no such agreements or duties between parties and one party has suffered a loss? Is there a remedy for when there is no binding legal arrangement or duty between parties?

 

Background of Unjustified Enrichment

 

Unjustified enrichment is said to “fill the gap” where there are no legal arrangements. It is based on the idea that where one party has benefitted without legal justification at the expense of another person the law ought to compel them to provide compensation.

Over the past few years there has been a rise in the number of claims reaching the Scottish courts brought on the basis of unjustified enrichment, but its position as a remedy still raises some questions.

 

What happens when there are other remedies in place for disputes?

 

A key issue is whether claims can be pursued on the basis of unjustified enrichment when other legal remedies are available to a party

Parties and the courts have wrestled with this question since the 1970s with some judges strongly agreeing that all other remedies must take precedence over unjustified enrichment, while others thought it a matter of circumstance for each case.

The Sheriff Appeal Court recently decided that this matter was of such importance that an appeal from a sheriff’s decision should go straight to the Inner House. Unusually, five judges then sat to hear the appeal so that they could, if necessary, overrule previous decisions on the point.

 

The decision of Pert v McCaffrey [2020] CSIH 5

 

The appeal was in the case of Pert v McCaffrey [2020] CSIH 5. Ms Pert had brought a claim based on unjustified enrichment against her ex-partner, Mr McCaffrey, following the sale of their co-owned house. She argued that he was not entitled to retain a one-half share of the sale price (paid to him by Ms Pert’s trustee in sequestration) because the original purchase had been funded from the sale of a property which she had owned.

The sheriff found that her failure to pursue a statutory remedy designed for use by cohabitants (s.28 of the Family Law (Scotland) Act 2006) prevented her from making an unjustified enrichment claim at all. Ms Pert argued that there was no such rule in the particular circumstances of her case.

The Inner House accepted that the availability of a statutory remedy would normally rule out a claim based on unjustified enrichment – but not in this case. Here, the statutory provision was designed to allow the court to make a discretionary order for payment in addition to any other existing legal remedies. Failure to exercise this particular statutory right therefore did not bar use of unjustified enrichment.

Unfortunately for Ms Pert, the Inner House then went on to point out that she had also relied on the existence of an agreement between the parties that she would receive the whole sale proceeds. If proven, then the agreement itself could have been enforced and its existence was therefore fatal to her claim based on unjustified enrichment.

In any event, irrespective of the proper basis of her claim, she had made it too late. The action had been raised more than five years after the parties separated. Any claim she might have had against Mr McCaffrey for either breach of an agreement or unjustified enrichment had therefore been extinguished by prescription.

 

What does this mean for Unjustified Enrichment in the future?

 

While the Inner House touched on the issue of alternative remedies in Pert, they declined to confirm whether there is a general rule that unjustified enrichment will only be available where there are no other legal remedies given the circumstances in this case.

The judgment therefore did not clarify matters, and as a result the availability of unjustified enrichment as a remedy will continue to be unclear in many situations and parties may remain unaware of remedies are available to them.

Ellen Smith