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Unjust enrichment - Payment into Court - Personal Injury Claim Settled - Mistaken Payment out of Court - Change of Position Defence - Betterment.
 EWHC 3714 (QB)
26 November 2013
The defendant had not been unjustly enriched when he received a mistaken payment out of court, after his personal injuries claim had been settled. He had acted in good faith and had spent most of the money on extraordinary expenditure which he would not have incurred but for the enrichment.
On 10 November 1993, the defendant was seriously injured whilst playing in a rugby match for the John Ruskin College team, the claimant in these proceedings. He pursued a personal injury claim and the claimant's solicitors made a payment into court of £25,000 on 12 March 2007 in full and final settlement of the claim. This was not accepted as almost £19,000 was payable for CRU benefits. In August 2000, an interim payment for damages of £50,000 was made and on 26 February 2001, a further payment of £250,000 was made into Court. The defendant's solicitors by notice of acceptance under CPR Part 36 accepted this amount together with the £50,000 interim payment in settlement of the whole of the claim. The defendant's solicitors paid him his damages in several payments and in correspondence stated that they would hold £25,000 for any potential shortfall in the recovery of their costs. However by 14 March 2002, they paid him the last payment bringing the total he received for damages to £300,508.27. The claimant's solicitors realised the original £25,000 payment still remained in court, and sent a draft consent order to the defendant's solicitors to enable the money to be refunded to the claimant's insurers. After 6 years, nothing had happened until the Court Funds Office ("the CFO") wrote to the claimant's solicitors to advise them of the money remaining at court, which was now £40,800 due to accumulated interest to determine to whom the payment should be paid.
The solicitors began correspondence in an attempt to return the money to the claimant's insurers however the CFO stated that efforts must be made to trace the defendant. The defendant and his father found correspondence from his solicitors which stated £25,000 would be withheld to cover any shortfall for their costs and the defendant prepared a witness statement, stating he believed he was entitled to this money. The CFO made a payment out to the defendant and the claimant issued proceedings for unjust enrichment alleging mistake of fact and deceit.
It was held the defendant had been a transparent honest and decent witness. The allegation of dishonesty was rejected, and there was found no prima facie case of fraud which could have justified including the allegations in the pleadings. Both the defendant and his father recalled that a sum of £25,000 was withheld to cover the shortfall of costs and they had not recalled that two further payments had been made by the solicitors. It was found that the defendant believed that it was for the court to make its inquiries and reach its decision on the payment and he could not be expected to write back to the court to ask whether the Senior Master was sure he had made the right decision, when the money was paid out to him. The case of Niru Battery Manufacturing Co v Milestone Trading Ltd  QB 985 was cited as good law that it was not desirable to limit the definition of good faith. The allegation of fraud, recklessness, and all other variations were rejected.
The defendant had a defence of change of position for the amount of £26,029.35 as he had incurred extraordinary expenditure as a result of the payment. A further sum of £19,741.50 was subject to the betterment argument, however as no permission had been given for expert evidence, the court directed that a jointly appointed expert should report on the issue of betterment to resolve this issue and determine the amount to be disallowed by way of the defence to the claim for unjust enrichment.
This is an interesting case, which illustrates the difficulties in succeeding with allegations of fraud and dishonesty. It also identifies the court's approach to the defence of change of position in claims for unjust enrichment.
Kim Pryce, Anthony Gold