Scottish Court of Session Decisions

Pursuer: Sutherland, Advocate; Harper MacLeod, Solicitors

Defender: MacColl, Advocate; Morton Fraser, Solicitors

17 March 2011

Introduction

[1] This case came before me on the procedure roll in respect the defender's 4^th and 1^st pleas in law (prescription and relevancy).

[2] The defender is the pursuer's brother. He inherited a family croft at Kilmory, Acharacle, from an uncle, in about 1989. The pursuer and her siblings had visited the croft during school holidays and the pursuer subsequently took her own children there. The parties also have a sister. The dispute relates to a house that was built on the croft by the pursuer in the early 1990's. The pursuer claims that she is entitled to recompense from the defender on the basis that he has been unjustly enriched at her expense. She sues for £170,000.

Background

[3] According to the pursuer's averments, having discovered, in about February 1993, that grant money was available (under the Rural Enterprise Programme Business Development Scheme) for the construction of certain buildings, she decided to build a house for use by her and her family when they were staying at Kilmory. The house was to be funded partly by grant money and partly by her own funds. She made this decision "after speaking to the Defender and her sister" (article 3 of Condescendence). As regards planning permission, the pursuer advised the defender of her proposals. She believed that he had no objection to them. He chose the location for the house. She "agreed to provide the Defender with keys to the new house once it was built so that he could have the use of it during those periods it was not let out or being used by the Pursuer and her family". She went ahead and built a house on the croft. It was completed by August 1994 at a cost of about £62,000, £25,000 of which was funded by grant. It was and is called "Kilmory Cottage".

[4] Once Kilmory Cottage was built, the pursuer and her family used it. She also let it out for part of each year and received and retained the rent - parties are at issue as to the amount of rent received over the years with the defender averring that she has received over £56,000 and the pursuer averring a lower sum. The pursuer controlled the use of the house. She told the defender that he could use it whenever it was unoccupied and he had visitors stay there from time to time. By 2009, the parties' relationship had deteriorated and the defender "took over occupation and possession of Kilmory Cottage" (article 4 of Condescendence). The pursuer has been excluded from the house since then.

[5] The pursuer knew that she did not own the land on which Kilmory Cottage was built. It is not suggested that she had any belief that by building on the land she would acquire any legally enforceable interest in it. She does not aver that she entered into any contract with the defender regarding her use of Kilmory Cottage or acquiring any interest in it. She does not, for instance, aver that they entered into a licence agreement regarding her occupation and use of it. Mr Sutherland explained the pursuer's position in the course of submissions as being that her averments demonstrated that there was a mutual understanding between parties that she would build the house with her money and the grant money so as to be able to use it with her family and that she would have control of the property.

[6] The pursuer does not aver that the defender has, at any time, acknowledged that he has any obligation to her in respect of her expenditure on building and/or supplying it with furnishings, fixtures or fittings.

[7] The present action was signetted on 1 April 2010.

Relevant Law

[8] The law that applies is that branch of Scots law which seeks to afford redress where there has been an unjustified enrichment upon the broad equitable principle nemo debet locupletari aliena jactura. Where, as here, A, without being obliged to do so, deliberately confers benefit on B, at A's expense, in circumstances where B is enriched, the remedy of recompense may be available. As explained by Lord Hope of Craighead in Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1998 SC(HL) 90, the availability of that remedy is restricted to circumstances where:

"...the enrichment cannot be justified on some legal basis arising from the circumstances in which the defender was enriched." (p.94)

and

"In general terms it may be said that ...the enrichment lacks a legal ground to justify the retention of the benefit." (p.98)

In Shilliday v Smith 1998 SC 725, the Lord President (Rodger) was content to adopt the general explanation of the nature of unjust enrichment provided by Lord Cullen in Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1996 SC 331 and, at p. 727, said:

"a person may be said to be unjustly enriched at another's expense when he has obtained a benefit from the other's actings or expenditure, without there being a legal ground which would justify him in retaining that benefit."

[9] Prescription is at issue in the present case and, accordingly, the critical question is: when did any such enrichment occur? Whilst the precise point at which enrichment occurs may depend on the facts and circumstances of the individual case, it is clear from the authorities that the answer to that question is that it is as soon as the recipient is in the position of having had a benefit of some sort conferred on him without him having any legal right to it, whatever it is. Thus, in Devos Gebroeder v Sunderland Sportswear 1990 SC291, it having been found after proof that the defenders - recipients of certain waterproofed cloth - obtained benefit from that cloth as soon as they had made it up into golf rainwear and sold it, it was determined that that was the point from which they were to be regarded as having been enriched. At p. 299, the Lord President (Hope) said:

"But the question at this stage is not whether a claim of recompense could relevantly be made on the facts which I have outlined, but whether the claim at the pursuers' instance in this action has prescribed. It was accepted by the pursuers' counsel, as it had been in the debate before the Lord Ordinary, that some of the golf rainwear had been made up and sold by the defenders by 1^st December 1982 so the defenders had by that date derived some benefit from the cloth which had been supplied to them by the pursuers."

[10] Prescription was not at issue in Shilliday or in the Dollar Land decision referred to above but the reference by Lord Rodger to unjustified enrichment occurring "when" one person obtains the relevant benefit, accords with the approach in the Devos Gebroeder case.

[11] Finally, s. 6 of the Prescription and Limitation (Scotland) Act 1973 applies. Accordingly, if more than five years have passed since the obligation on which the pursuer founds (in this case the obligation to make recompense) came into existence, the obligation has been extinguished.

Submissions for the Defender

[12] In a clear and succinct submission, Mr MacColl explained that the defender's case was that even if the pursuer proved all that she had averred, it could only demonstrate that the defender had been unjustly enriched by August 1994 at the latest. The action having been raised in April 2010, the obligation had, manifestly, prescribed. The references in the pleadings to the pursuer's contemplation and belief as to what was going to happen after the house was built did not help her. At their highest they might be seen as an attempt to establish that she and the defender had entered into a contract whereby she would build the house and have the use of it for herself and her family but if that was so, there could be no obligation under the law of unjustified enrichment; the existence of such a contractual obligation would necessarily exclude it. This was not a case where parties had both acted on the basis that a future event would happen which did not in fact occur. The pursuer's beliefs and contemplations were irrelevant. It was, he submitted, plain that there was no legal basis on which the defender could have forced the pursuer to build the house. He had no legal right to the benefit of her actions but he did benefit as soon as the house was completed in 1994.

[13] In short, the pursuer could have claimed against the defender at any time from August 1994. She had not done so and it was too late to do so now.

[14] Separately, Mr MacColl submitted that the pursuer's pleadings were irrelevant in respect that she approached quantification on the basis that she need have no regard to the rental monies that she had retained over the years. It was important to note that the remedy only applied where one party had been enriched at the other's expense and that meant that any benefit retained or earned by the pursuer required to be taken into account.

[15] In all the circumstances the defender should be assoilzied, which failing the action should be dismissed.

Submissions for the Pursuer

[16] Whilst the nature of the case being advanced for the pursuer was not always clear and was at times contradictory, the submissions made on her behalf can be summarised as follows.

[17] It was not suggested that there was ever any contract between the parties. There was, rather, a "mutual understanding" that the pursuer would build the house using her money and the available grant money so that she and her family could use it whenever they were at Kilmory. The pursuer had control of the house once it was built. Even if the pleadings did not indicate such a mutual understanding they at least indicated that the pursuer had a bona fide belief that that was the position and that was enough. The practical benefit of the house was taken away from the pursuer in 2009 when the defender "took back" the house.

[18] Mr Sutherland accepted, however, that the defender was enriched when the house was completed in August 1994, a concession which seemed to run counter to his principal approach of regarding the defender as only having benefitted when he recovered full possession of the house in 2009. Mr Sutherland submitted that his concession did not mean that time started running in 1994. That was because it was not just a question of enrichment; the enrichment had to be unjust and it only became unjust when the defender, in 2009, "reneged" on the parties' mutual understanding and said he was going to exercise his proprietor's rights, rights which Mr Sutherland also accepted he had had all along. He referred to the Devos Gebroeder case as showing that it was necessary to ask what was the unjustified element in the enrichment. Mere receipt of the goods in that case was not enough. Delivery of the goods did not itself amount to enrichment. He appeared to draw no distinction between moveable and heritable property in that respect and whilst stating that he recognised that as a matter of law, the house attached to the land and was the defender's property, he did not appear to have considered the obvious implications. In particular, he did not appear to have considered that that meant that the defender had immediately acquired a valuable asset.

[19] Mr Sutherland's repeated references to the parties' mutual understanding and to the defender having reneged on it might have been thought to indicate that the parties' dispute was actually about something that had been agreed between them - about a contract which was not adhered to - it remained his submission throughout that he did not seek to make any contractual case. His case was, rather, founded on what he referred to as a free and easy interpersonal set of understandings between family members, not that he went so far as to suggest that that was a concept recognised by the law.

[20] Mr Sutherland also approached the pursuer's claim on the basis that it was on all fours with the circumstances in Shilliday where the parties were looking ahead to a marriage which did not, ultimately, occur. Similarly, what happened here, he said, was that what the pursuer expected - an unlimited ability to use the house - did not, ultimately, happen. Her ability to use it was stopped by the defender yet she had expected it to continue. The defender began to benefit from the use of the house as from 2009 and that was, accordingly, when the five year prescriptive period began. Mr Sutherland's submission was that it would have been premature for the pursuer to raise an action against the defender prior to him excluding her from it because it was not until then that her purpose failed. It was also not until then that the defender, according to Mr Sutherland, benefitted from the house. That submission however, took no account of the legal entitlement to the house that was conferred on the defender as soon as it was built nor of the pursuer's own averments to the effect that the defender had use of the house as from 1994, when she was not using it and, presumably, when it was not let out.

[21] Mr Sutherland summarised his submission as being that it was necessary to look for an unjust event and that was something other than the mere acquisition of the asset without legal justification. For that proposition, he referred to no authority.

[22] In addition to the authorities already referred to above, Mr Sutherland also made submissions in this part of his response under reference to: Newton v Newton 1925 SC 715 and McIntyres v Orde 1881 18 SLR 604. They were not, in my view, in point.

[23] Regarding the defender's plea to the relevancy, Mr Sutherland submitted that quantification was simply a question of assessing the extent to which the defender had been enriched. No regard was to be had to how much the pursuer had spent on the property and no regard was to be had to the extent to which she had benefitted from it financially. In his submission these were simply irrelevant. He did not refer to any authority in support of that submission. He relied on the general statements about the nature of the claim of recompense in D. Ramsay & Sons v Brand (1898) 25R 1212 and Evans Jones: Unjustified Enrichment at paragraph 9.02.

Discussion and Decision

[24] I am readily persuaded that the defender's fourth plea in law should be upheld. The pursuer's averments demonstrate that she built a house, partly at her expense, on the defender's land, that the house was completed by August 1994, that she paid for various fittings, furnishings and fixtures that were incorporated into the house, that there was no contract between the parties relating to her building or fitting out the house or relating to how or by whom it was to be used thereafter and that once the house was completed she immediately began to use it, continuing to do so until the owner (the defender) stopped her doing so in 2009. This all happened in circumstances where, from the outset, the defender had no legal right or entitlement to have the pursuer build anything on his land or to confer any benefit on him by way of taking any action on or relating to his land. As the authorities to which I refer in the "Relevant Law" section above show, it is clear that, as a matter of law, the defender was enriched as soon as the house was completed - at that point it can readily be inferred that the value of that part of the land on which his house was built would have been significantly enhanced. Further, that was an enrichment which, again, as a matter of law, was wholly unjustified because he had no legal right or entitlement to it. The pursuer's averments about the defender's knowledge of and lack of objection to what she was doing (article 3 of Condescendence) and about her own contemplation as to what would happen after the house was built (article 5 of Condescendence) do not affect that. They are not averments to the effect that the defender had any right to the house at all.

[25] I also observe that there is no question, on these averments, of the house having been built on the basis of parties having a mutual expectation that a future event would take place which, in the event, did not occur. This was not, for instance, a case where the money was spent by a woman in building a house on her fiancé's land and, subsequently, rather than their mutual promise of marriage come to fruition, the engagement was called off.

[26] The pursuer's case seemed to proceed, at least in part, on the basis that, as in Shilliday, she could pray in aid the condictio causa data causa non secuta. The facts of this case, however, could not support the application of the condictio, as I have explained above. As to the notion that it is necessary to look for an unjust event which is more than the acquisition of an asset by a defender without any legal justification therefor, whilst it demonstrates that the pursuer feels strongly that she ought, morally, to be able now to seek redress, I have to apply the law relating to unjustified enrichment and to prescription; it is not open to me make a moral judgment on the matter. As a matter of law, it was open to the claimant to make a relevant claim against the defender in respect of the remedy that she now seeks to pursue at any time in the five year period beginning in August 1994. It is not now open to her, by means of a claim instituted almost ten years later, to do so because any obligation that the defender had to make recompense to her has been extinguished through the operation of prescription.

[27] It is, accordingly, not necessary to deal with the defender's arguments in support of his general plea to the relevancy. Had I required to do so, however, I would have been persuaded that Mr MacColl's submissions were well founded. Recompense is an equitable remedy and it would plainly be inequitable if no regard were to be had to any financial benefit derived from the property conferred; it is implicit in the reference to the requisite benefit having been "at the expense of" the person who claims that it would be wrong to assess that expense without taking account of any financial returns actually received.

[28] I will pronounce an interlocutor sustaining the defender's fourth plea in law and pronounce decree of absolvitor.