Unjust enrichment cures no man’s bargain!
On 25 January 2023, the UK Supreme Court handed down its decision in Barton and others v Morris and another in place of Gwyn Jones (deceased), recounting the key principles that underpin implied terms in contract law and unjust enrichment. In a narrow majority decision, the Supreme Court reversed the finding of the English Court of Appeal that the Appellants had been unjustly enriched such that the respondents were entitled to receive a reasonable sum under the agreement.
The case before the Supreme Court concerned a conditional commission agreement for the sale of property. Mr Barton (the key Respondent) had entered into an oral agreement with Foxpace Limited (the key Appellant) that if he procured a buyer for Foxpace’s property for a sum of £6.5 million, then Foxpace would pay him £1.2 million for making the introduction. Mr Barton secured a buyer, Western UK (Acton) Limited, who was originally willing to pay 6.5 million GBP, but due to certain restrictive covenants concerning the property, paid £6 million. Mr Barton then made a claim in Foxpace’s insolvency for the payment of £1.2 million, which Foxpace wholly rejected on the basis that they had no such agreement with Mr Barton.
The first instance judge found that there was a contract between Mr Barton and Foxpace but held that the bargain struck was clear: Mr Barton had to secure a buyer for £6.5 million to secure payment under the contract. There was no room to imply a term that Mr Barton would be paid a reasonable portion sum for the introduction where the property is sold for less. Mr Barton had also argued in the alternative that Foxpace was unjustly enriched at his expense, and so he should be compensated. The trial judge also rejected this argument based on the decision in MacDonald Dickens & Macklin v Costello  QB 244 that unjust enrichment should not be used by parties to undermine the express risk allocation arising from contracts. He held that Mr Barton bore the risk of receiving no payment if the agreed purchase price was not met by the buyer, as he stood to receive three times the usual commission were the purchase price met.
The Court of Appeal overturned the first instance decision. In particular, the Court of Appeal held that Mr Barton had successfully made out a case for unjust enrichment. They held that the rule in Costello could not apply to the current case as there was no allocation of risk that Mr Barton would be paid nothing if a lower purchase price was paid because the contract was silent on what was to happen in these circumstances and that Mr Barton was entitled to reasonable remuneration for his service
The Supreme Court concurred with the trial judge that there was no room to imply a term into the contract that Mr Barton be paid a reasonable sum. In addressing the Respondent’s alternative case, the Supreme Court held that when parties stipulate in their contracts circumstances that must occur in order to impose a legal obligation on party to pay, they necessarily exclude any obligation to pay in the absence of those circumstances. The Supreme Court held that the enrichment to Foxpace for no reward to Mr Barton was not unjust because it was an outcome provided for by the agreement, concluding firmly that unjust enrichment mends no one’s bargain.
The case is a welcomed refresher on the principles of implied terms in contract law and unjust enrichment. This decision will be highly persuasive in the BVI and Cayman Islands. We expect our courts to similarly uphold the sanctity of freedom of contract in the same manner.