High Court Decides When a Claim for Unjust Enrichment Accrues

The Commercial Court recently issued its decision in Anron Bunkering DMCC v Glencore Energy UK Ltd, [2023] EWHC 295 (Comm) (published by Quadrant Chambers) on the question of when a claim for unjust enrichment due to failure of contractual basis accrues.

Background

Ordinarily, restitution for unjust enrichment is an appropriate remedy where a contractual transaction is subject to a condition which has not been satisfied (i.e. a “failure of basis”).

The Court of Appeal explained in Dargamo Holdings Ltd v Avonwick Holdings Ltd, [2021] EWCA Civ 1149:

The core concept of “failure of basis” is that a benefit has been conferred on a joint understanding that the recipient’s right to retain it is conditional. If the condition is not fulfilled, the recipient must return the benefit (see Goff & Jones at 12-01). Whilst failure of basis ranks alongside the unjust factors of mistake, duress and undue influence as a factor negativing consent, it differs in that it is concerned with qualification of consent, as opposed to impaired or vitiated consent (see Burrows, The Law of Restitution, 3rd ed, 2011).

Dargamo and its related cases were then discussed by the Commercial Court in Anron Bunkering.

Decision

In Anron Bunkering, the Commercial Court considered whether a claim for unjust enrichment in connection with a contract’s failure of basis first requires the contract to have been terminated, determined or discharged (i.e. could a failure of basis occur before any termination?).

The Court held that termination was not required in order for a cause of action for unjust enrichment to accrue (and start running the clock on the relevant limitations period). It held:

In my judgment, it is not a requirement that the contract in question be terminated in a sale of goods case before a claim in unjust enrichment can be brought. The test is whether “the state of affairs contemplated as the basis or reason for that payment [had] failed to materialise”, and that test may, in appropriate circumstances, be met without termination of the contract.

Anron Bunkering involved an advance payment on one of several goods instalments and the delivery and sale of that instalment to a third party, rather than the contract party. The Court reasoned that, from that time, Glencore was no longer entitled to hold the advance payment since the state of affairs, i.e. delivery under the contract, had failed to materialise and this was true regardless of whether the contract had been terminated.