Claim for Unjust Enrichment brings no relief

February 15, 2019

Jonathan Pennington Legh discusses the Court of Appeal case of Gibbs v Lakeside Developments [2018] EWCA Civ 2874

This second appeal concerned the narrow question: “If a possession order was liable to be set aside for non-service of the proceedings, can the tenant recover the proceeds of sale of the property on the basis of unjust enrichment without the possession order first being set aside?” But there are various lessons to be learnt from it.

Facts

Ms Gibbs was the lessee of a property under a 999 year lease. In 1990 she went to live in Hong Kong leaving the flat mostly unoccupied; even when she returned to the UK in 1999 she did not live there. In 1990 she gave the managing agents her parents’ address and correspondence between them took place from that address. The problems started because after 2006 she essentially stopped paying ground rent and insurance contributions to the freeholder, Lakeside, who in 2009 issued proceedings for arrears totalling around £1400.

That Claim was served at the property address, which was not good service under CPR part 6 as it was clearly not her last known address. Unsurprisingly, there was no response to the Claim and judgment in default was entered in September 2009. Now that it had its money judgment, Lakeside issued a Claim for possession, again serving it at the property which was again not good service. A possession order was made in February 2010; Lakeside took possession in April of that year and started marketing the property in June 2011, when Ms Gibbs learnt of the situation.

She wrote to Lakeside’s solicitors (who simply said they were no longer instructed) and to the estate agents marketing the property, who were told not to respond. She instructed her own solicitors in October 2011 who applied for a caution, but for some reason one was never registered. Solicitors then issued an application for relief from forfeiture and to set aside the possession order (but not the money judgment), but made no application for an injunction to restrain the sale, despite not receiving the undertaking in that regard they had sought from Lakeside.

As you might have guessed a new lease was granted to a third party in December 2011. On learning this Ms Gibbs amended her application to include a claim for unjust enrichment and for damages for conversion of the goods in the property.

At first instance

The Court of Appeal indicated that DJ Parfitt (as he then was) found that Ms Gibbs had by the time of the trial abandoned her claim for relief from forfeiture and to set aside the possession order. This was upheld in the first appeal before HHJ Walden-Smith.

Both lower courts held that “there can be no claim in unjust enrichment for money paid or property transferred or extinguished pursuant to an order of the court without first setting aside the order”.

Ms Gibbs appealed again and permission was given on the narrow ground set out above.

The main argument

Ms Gibbs did not challenge the aforementioned principle as a general proposition but submitted, “that it is subject to an exception in a case where an order cannot be set aside by reason of intervening third party interests. In such a case, he submits, it should be sufficient to establish that the order would otherwise have been set aside”. The argument was that because a new lease had been granted, Ms Gibbs could not succeed in an application to set aside, even though in ordinary circumstances she would have succeeded (under CPR part 13 because the Claim was never properly served).

The judgment of the Court of Appeal – appeal dismissed

The problem for Ms Gibbs was that the authorities were clear that a court order is valid and enforceable until set aside, even if obtained by fraud.

Further, the Court disagreed with the submission that Ms Gibbs could not have applied to set aside. “The order could be set aside on terms that did not call into question the new lessee’s title, but confined the consequences of setting aside the order to a financial remedy against the respondent, by reference to the premium received by the respondent on the grant of the new lease, less sums properly due to the respondent”.

Lewison LJ (after agreeing with David Richards LJ) then gave a judgment summarising various authorities and important aspects of the law relating to forfeiture and relief from forfeiture, which is worth reading.

His conclusions on the facts of this case were effectively that Ms Gibbs was doomed from the start in relation to relief:

  • In the county court an application for relief has to be made within 6 months of the forfeiture (s.138 Administration of Justice Act 1985 as amended).
  • In this case, forfeiture occurred when re-entry occurred (April 2010) not when the proceedings for possession were “served” (November 2009) because they were sent to the wrong address and so were never served.
  • Her application was made around 1.5 years after forfeiture and so the county court had no power to grant relief. If the case was in the High Court where the jurisdiction to grant relief is equitable there would be very little difference – although there is no statutory 6 month limit, equity has to regard the law. This means that the case of Pineport Ltd v Grangeglen Ltd [2016] EWHC 1318 (Ch), [2016] L & TR 28 in which relief was granted after 14 months was probably wrongly decided.

The moral?

Where to start?

The principle directly obtainable from the decision is that in order to obtain sale proceeds in these circumstances under the principle of unjust enrichment the lessee must first set aside the possession order and any money judgment.

However, there were other lessons to be learnt from the sorry saga, apart from always pay your rent and insurance.

First: always make an application for an injunction to stop a sale where no undertaking is received.

Second: having made that application, apply to register a Unilateral Notice in respect of the pending land action.

Third: an order is valid until set aside, even if it should not have been granted. As an aside, this means that a person can be held in contempt for failing to comply with such an order until it is set aside – see e.g. M v Home Office [1992] QB 270.

Fourth: if proceedings for possession were not served properly, the clock for relief from forfeiture will start ticking when re-entry occurs.