Unjust Enrichment and Lack of Consent
Bite-sized primers that summarise contemporary restitution issues in Singapore. This month: the difficulties with lack of consent as an unjust factor.
Unjust enrichment claims are more common now. Often, unjust enrichment is pleaded in the alternative and ill-particularised.1 For a recent example, see Tradewaves Ltd v Standard Chartered Bank  SGHC 93, where the court said (at ): “The Plaintiffs have not specified which unjust factor or factors they were relying on, apart from a vague assertion in their closing submissions…” In that case, the pleadings had set out the material facts and simply stated “By collecting the investment fees over this period, the Defendants had accordingly unjustly enriched themselves.” A pleading of unjust enrichment should take care to particularise how the Defendant was enriched at the Plaintiff’s expense, and the unjust factor(s) that the Plaintiff is relying upon. The familiar unjust factors include: mistake, failure of consideration, duress, illegality.
We discuss a less familiar option: lack of consent (sometimes referred to as “ignorance”). A High Court judgment recently recognised lack of consent as an unjust factor. But that decision is unlikely to be the last word. The law is this area is heavily unsettled. At the heart of the debate is, perhaps, a tension between (a) the conceptual elegance and logic of unjust enrichment, and (b) the coherence and commercial realities in the fields of equity and property law that intersect with this area of unjust enrichment. Given the lack of clarity and precedent, it is essential that any practitioner who intends to plead lack of consent as an unjust factor has, at the very least, an understanding of the topography in this area of law, and a willing readiness to engage with the issues.
The Argument for Lack of Consent
What is enrichment by lack of consent? Let’s start with the following examples:
- P loses a $100 note, which D finds and keeps; and
- D steals a $100 note from P.
In both examples, D is enriched by $100 at P’s expense, where P did not consent for D to receive the $100. These are two-party cases. It is important to keep in mind that there are also three-party cases, eg:
- P loses a $100 note, which X finds and gives to a third party.
The argument in favour of recognising lack of consent as an unjust factor is attractive. Reasoning by analogy from the established unjust factors of mistake, failure of consideration, and duress, it is argued that these factors “all reduce to the same proposition that the claimant did not mean the Defendant to have the enrichment. The claimant’s consent to the enrichment was defective either because it was absent (ignorance) or impaired (eg, by mistake) or qualified (eg, failure of consideration).”2 See eg Burrows, The Law of Restitution (3rd Edition), p 405.
Put differently, if unjust enrichment allows P a remedy where (a) P mistakenly pays D $100; all the more there should be a remedy where (b) D steals $100 from P. As a matter of legal logic, this analysis should apply to both two-party and three-party cases. So in a three-party case (example C above), the third party would be enriched by the $100 note at P’s expense, and without P’s consent.3 There is of course the issue of indirect enrichment, which we will leave aside for the purposes of this article. P would accordingly have a claim in unjust enrichment against the third party for the restitution of the $100 note, subject to any defences the third party might raise.
State of Authorities
Until recently, the Singapore courts have refrained from deciding whether lack of consent is an unjust factor.4 See the discussion by the Court of Appeal in Wee Chiaw Sek Anna v Ng Li-Ann Genevieve  3 SLR 801. This changed recently, when the High Court held that lack of consent is a valid unjust factor: AAHG, LLC v Hong Hin Kay Albert  3 SLR 636 (AAHG v Hong). This was apparently the first time a common law court had expressly recognised “lack of consent” as an unjust factor.5 See Hafeez-Baig, Lack of Consent as an Unjust Factor,  2 LMCLQ 176.
The Defendant in AAHG v Hong had essentially transferred the Plaintiff’s shares to himself without authorisation or legal basis. The Plaintiff brought a primary claim in conversion and an alternative claim in unjust enrichment. The Plaintiff relied on lack of consent as the unjust factor. The Plaintiff’s primary claim in conversion succeeded. In obiter dicta the court mused that the unjust enrichment claim would also succeed, accepting without elaboration that lack of consent could be a valid unjust factor. Since this aspect of the decision was obiter, it is not binding. If necessary, the decision in AAHG v Hong can also be confined to the two-party scenario that the court faced.6 The appeal was heard in July 2016. I understand that the Court of Appeal did not address the unjust enrichment point.
A more recent High Court decision has been less unequivocal, electing to leave the same point open: Ong Teck Soon v Ong Teck Seng  4 SLR 819.
First Area of Difficulty
We will be familiar with the modern line of knowing receipt cases stemming from Royal Brunei Airlines v Tan  2 AC 378, The classic case is where X holds property on trust for P, and X in breach of trust transfers the property to D.7 X does not have to hold the property on trust, so long as he occupies a position of stewardship over the property: Goff and Jones: The Law on Unjust Enrichment (9th Edition) at [8-29]. P may hold D personally liable if D had knowledge that the property was transferred in breach of trust. P’s claim lies in equity and is fault-based — ie it is based on D’s “knowing receipt”.
But if lack of consent is a recognised unjust factor, P could have, in addition to (or even as a substitute for) a claim in knowing receipt, a parallel claim in unjust enrichment. And under this parallel claim, P would not have to prove D’s fault (ie that D had relevant knowledge of the breach of trust). P would simply have to prove that D received the property that had been held on trust for P, and that the transfer had been without P’s consent.8 See further Wee Chiaw Sek Anna v Ng Li-Ann Genevieve  3 SLR 801. It would then be for D to show that he could rely on a valid defence, like change of position.
Not only would the parallel claim in unjust enrichment in effect subsume a large number of knowing receipt cases, it would also extend D’s liability to cases where D did not know of the breach of trust (because unjust enrichment is strict liability, not fault-based). That amounts to recognising a new factual class of claims where previously there was none. The key question is whether there are good reasons, in policy or principle, to do so.
The argument in favour draws deeply from conceptual elegance and logic. “It cannot be correct that if X takes money from C’s pocket and transfers it to D, D is strictly liable to make restitution to C subject to defences, whereas if X as a trustee takes money from a trust fund held for C and transfers it to D, D is only liable to make restitution to C if it knew, or ought to have known, that the money was transferred in breach of trust.” Yet one could reply that it is not necessary for the courts to impose symmetry on the common law and equity.9 See Farah Constructions v Say-Dee  HCA 22, a decision of the High Court of Australia.
Another objection is that since a strict liability regime would replace P’s burden of proving knowing receipt with D’s burden to establish a defence, the outcome is commercially impractical. This is in part because it undermines D’s security of receipt. In many cases D would be a bank receiving misdirected trust monies. Imposing strict liability (subject to defences) on banks may have the result that they are “exposed to higher risk of litigation and liability, and are likely to respond by imposing due diligence checks that might slow down commerce.”10 See Yip Man and Yeo Tiong Min SC, Restitution, (2013) 14 SAL Ann Rev 465; Salmons, Claims Against Third-Party Recipients of Trust Property  CLJ 399 Wee Chiaw Sek Anna at –. But one can query whether the argument on commercial impracticality is overstated — unjust enrichment for mistaken payments is also strict liability and applies to banks: there seems to be no issue of commercial uncertainty.
Second Area of Difficulty
There is another unresolved wrinkle arising in part from the law of property. Let us go back to the example where D steals a $100 note from P. D clearly does not get title to the $100 note. If there has been no transfer of title, can D be said to have been enriched at P’s expense? The significance of this enquiry is that if D is not enriched at P’s expense, then there can be no claim in unjust enrichment. Instead, P’s claim against D is based on his existing title to the $100 note, which seeks to vindicate P’s property rights.11 See the commentaries gathered at Goff and Jones (9th Edition), p 232, fn 10. If this argument is right, then “lack of consent” cannot be an unjust factor, since there is no resulting enrichment.
Let us develop this idea further in a three-party scenario. Say X steals an iPhone from P, and transfers the iPhone to D. P, as the owner of the iPhone, retains his title to the iPhone. That title is never transferred to X or D. What X had (before he transferred the iPhone to D) was a right to possession. D acquired X’s right to possession, not P’s title. So even if D was enriched, it was at the expense of X and not P. So what P is doing when he sues D is for wrongful interference with P’s right of possession (as part of P’s title). P is not seeking to reverse D’s enrichment, which came from X.12 See R Chambers, Two Kinds of Enrichment in Chambers, Mitchell and Penner (Eds) Philosophical Foundations of the Law of Unjust Enrichment (OUP 2009), 242
In the same vein, say D receives from X property held on trust for P. The receipt of the property by D is undoubtedly an enrichment, but since X was the trustee of the property, the rights over the trust property arguably came from X (as the trustee) instead of P (as the beneficiary). D gets “legal title to the trust property; that is something which the beneficiary never had. In some kinds of trust it may be that the trustee itself did not have legal title. But in any case the Defendant acquires its interest from the trustee, and so gets something which the beneficiary never had.”13 Lionel Smith, Unjust Enrichment, Property and the Structure of Trusts (2000) 116 LQR 412.
One rough and ready counter argument is that enrichment should be assessed factually, not legally. The point is perhaps better illustrated if D had stolen C’s Ming vase. D does not have legal title to the Ming vase, yet D is arguably enriched simply by being able to display the vase in his home. And D’s enrichment is clearly at C’s expense, since C no longer has possession and hence enjoyment of the vase. In other words, enrichment focuses on the receipt of value, and there is value in the right of possession, as distinct from title.
Lack of consent as an unjust factor engenders debate at almost every level of the analysis, beginning with whether there can even be enrichment, to the wider ramifications for the law of equity and the commercial world. The daunting task for the practitioner who next brings such a claim before the courts is twofold: (a) to present an argument for “lack of consent” that not only serves his client’s interests, but develops the law in a manner that is principled and commercially realistic; and (b) to ensure that arguments made in other common law jurisdictions on property rights and equity are applicable to the local context and consistent with local precedent. But it is the start of the new year, and a time to be optimistic.
Endnotes [ + ]
|1.||↑||For a recent example, see Tradewaves Ltd v Standard Chartered Bank  SGHC 93, where the court said (at ): “The Plaintiffs have not specified which unjust factor or factors they were relying on, apart from a vague assertion in their closing submissions…” In that case, the pleadings had set out the material facts and simply stated “By collecting the investment fees over this period, the Defendants had accordingly unjustly enriched themselves.”|
|2.||↑||See eg Burrows, The Law of Restitution (3rd Edition), p 405.|
|3.||↑||There is of course the issue of indirect enrichment, which we will leave aside for the purposes of this article.|
|4.||↑||See the discussion by the Court of Appeal in Wee Chiaw Sek Anna v Ng Li-Ann Genevieve  3 SLR 801.|
|5.||↑||See Hafeez-Baig, Lack of Consent as an Unjust Factor,  2 LMCLQ 176.|
|6.||↑||The appeal was heard in July 2016. I understand that the Court of Appeal did not address the unjust enrichment point.|
|7.||↑||X does not have to hold the property on trust, so long as he occupies a position of stewardship over the property: Goff and Jones: The Law on Unjust Enrichment (9th Edition) at [8-29].|
|8.||↑||See further Wee Chiaw Sek Anna v Ng Li-Ann Genevieve  3 SLR 801.|
|9.||↑||See Farah Constructions v Say-Dee  HCA 22, a decision of the High Court of Australia.|
|10.||↑||See Yip Man and Yeo Tiong Min SC, Restitution, (2013) 14 SAL Ann Rev 465; Salmons, Claims Against Third-Party Recipients of Trust Property  CLJ 399 Wee Chiaw Sek Anna at –.|
|11.||↑||See the commentaries gathered at Goff and Jones (9th Edition), p 232, fn 10.|
|12.||↑||See R Chambers, Two Kinds of Enrichment in Chambers, Mitchell and Penner (Eds) Philosophical Foundations of the Law of Unjust Enrichment (OUP 2009), 242|
|13.||↑||Lionel Smith, Unjust Enrichment, Property and the Structure of Trusts (2000) 116 LQR 412.|