Unjust enrichment and an “ancient”
Guernsey tort
Alison Ozanne
This article
considers the findings of both the Royal Court and the Court of Appeal in
Guernsey in the recent property related tort case of Hindle v Kitching. It explores the wider legal ramifications
of the courts’ findings including how, in certain significant respects, Guernsey tort law and choice
of law has failed to keep pace with developments elsewhere. The case is also a
useful example of the progress of the law of unjust enrichment in Jersey and
Guernsey.
1 The recent
Court of Appeal case of Hindle v Kitching[1]
dealt with difficult issues relating to Guernsey’s tort law. The Court of
Appeal found that, in certain significant respects, the law was not consistent
with English tort law. The court also held that this case “shows how
difficult it is to strike the right balance between the claims of true owners
and the claims of innocent purchasers”[2] and
confirmed the growing jurisprudence, both in Guernsey and Jersey, recognising
the principles of “unjust enrichment”.[3]
2 The judgment
further tackled complex issues of applicable (or proper) law which again
highlight how Guernsey’s law has failed to keep pace with English law.
Background facts
3 Hindle v Kitching concerned competing
claims to a classic car, being a red 1959 Jaguar XK 150 3.4 litre fixed head
coupe. The plaintiff, Mr Hindle, bought the car in England in 2003, at auction,
in running order. Both the Royal Court, at first instance, and the Court of Appeal
found that he thereby became its legal owner. Having insured the car for
£20,000, Mr Hindle brought it to Guernsey in 2008 and left it with a
mechanic for repair. By 2011, after a “puzzling”[4]
delay and inaction by Mr Hindle (whose evidence the Royal Court treated with “some
scepticism”[5])
both the mechanic and the car had disappeared. The car (registered throughout
by the DVLA in England) had, it transpired, been purchased in Guernsey in 2011
by a well-established English classic car dealer from a “seller who
cannot be identified”.[6] The
dealer referred to the car “undergoing prolonged restoration”[7] due
to its very poor, unroadworthy condition.
4 The dealer
took the car to England, repainted and sold it, still in a very poor or “rough”[8]
state of repair, to a Mr Goldie. Mr Goldie sold the car in 2013 to the
defendant, his friend Mr Kitching. Both Mr Goldie and Mr Kitching were, the
court found, entirely innocent purchasers. Mr Goldie spent considerable sums
improving the car which Mr Kitching in effect “purchased”[9] when
he bought it. He then carried out further (less significant) improvements.
5 In 2016, out
of the blue, Mr Kitching received a letter from Mr Hindle’s Guernsey
lawyers stating that he (Hindle) was the legal owner and demanding that the car
be forthwith “delivered up”, with no concession as to the cost of
any improvements. The demand was received in England by Mr Kitching, where he
had resided throughout. Since 2011 the car had been in England.
6 In the Royal
Court, Mr Hindle commenced a claim for delivery up (which he later clarified as
a claim in detinue) or alternatively damages for conversion. Thereafter there
followed “hard-fought and protracted”[10]
proceedings in the Royal Court.
7 At trial, Mr
Hindle conceded that improvements should be paid for by him before taking back
the car, but only to the limited extent to which Mr Kitching (who had paid
£65,000 for the car) had actually spent money, namely around
£3,500.
8 The Royal
Court (then Deputy, now Bailiff, McMahon presiding, sitting with Jurats) found
that Mr Kitching clearly “cherished”[11] the car
during the six years he had possessed it, whereas Mr Hindle regarded it merely
as “an asset to be realised”[12] not “a
possession giving him any particular pleasure”.[13]
9 The Royal
Court found that whilst Mr Hindle remained the legal owner of the car, in the
interests of what was “fair and equitable” it chose to exercise its
discretion to give Mr Kitching the election to keep the car he “cherished”
on payment of £20,000 (which it quantified as being Mr Hindle’s
loss for the market value of the car had it remained unimproved at trial) and
£100 “nominal” damages for Mr Kitching’s failure to
deliver up after the initial request. This reflected the value of the actual
loss of enjoyment suffered by Mr Hindle. The Royal Court ordered
that the receipt in respect of that amount by Mr Hindle would effect transfer
of legal title to the car to Mr Kitching. Mr Kitching was given the
alternative that he could choose to return the car on receipt of the sum of
£46,989 from Mr Hindle, which the Royal Court quantified as the cost of
the improvements.
10 Mr Hindle
appealed, maintaining that he should get the improved car back, on payment of
only c.£3,500 to Mr Kitching.
Grounds of appeal
11 The Court of
Appeal referred to the 19 grounds of appeal as “overlapping”.[17] By
the time of the appeal, Mr Hindle had conceded that the remedy of delivery up
was a discretionary remedy, not an absolute right. The grounds of appeal were
in essence directed at the Jurats’ findings of fact, or the exercise of
discretion.
“Morton
repainted?”
12 Mr Hindle
relied upon an action in detinue (even though he did not expressly plead it)
rather than a pure conversion. This is important because the remedies are
different. Detinue (described by the Court of Appeal as an “ancient”[18]
tort) was abolished in England by the Torts (Interference with Goods) Act 1977
(“T(IWG) Act 77”).
13 Both courts
cited a 1975 edition of Clerk &
Lindsell on Torts to define “detinue” as being—
“the wrongful
detention of the plaintiff’s chattel. The action is available against a
defendant who . . . withholds the plaintiff’s chattel after the
plaintiff has demanded its return. The principal object of the action is to
recover the chattel or its value. Such an action is as much concerned with
matters of . . . property as with matters of tort.”[19]
14 The Court of
Appeal went on to examine the “important distinctions”[20]
between claims in detinue and conversion, including that detinue is “of
the nature of an action in rem”[21] and
conversion is a “purely personal action”[22] citing General and Finance Facilities Ltd v Cooks
Cars (Romford) Ltd.[23]
This distinction impacts on the measure of damages. Conversion is a purely
personal action and results in judgment for damages only, the measure of damage
being the value of the chattel at the date of conversion and any consequential
damages that were not too remote. The action in detinue is an action in rem,
whereby the plaintiff seeks restitution of his chattel.
15 Mr Kitching
argued in the Royal Court that Guernsey’s customary law had never
developed to recognise detinue (the only precedent being an action for delivery
up of papers that was described by the judge as “in effect an action in
detinue”[24]): Inalux SA v Old Crown Trust Ltd.[25]
Alternatively, even if detinue had existed in customary law, that would now, in
accordance with the principles established in Morton v Paint, have been extinguished as
a cause of action, leaving only conversion. The Royal Court characterised this
argument as in effect “reverse Morton
v Paint”.[27]
16 In confirming
that detinue continues to constitute a cause of action in Guernsey, the Court
of Appeal cited the seminal case of Morton
v Paint, in which Southwell JA observed—
“It would not be
appropriate to leave Guernsey law in the state reached by English law nearly 40
years ago, which was justly criticised as something of a blot on English
jurisprudence and requiring urgent reform. For the Guernsey Courts to cling to
obsolete English common law cases which ceased to be authoritative in England
and Wales 40 years ago would not be in the interests of those who live in
Guernsey or their visitors.”[28]
17 However, the
Court of Appeal went on to find that “certain fundamental parts of
Guernsey law are incapable of alteration by judicial decision”.[29] The
court classed detinue as such a “fundamental part of Guernsey law”.[30]
This is perhaps rather surprising given the lack of authority for a claim in
detinue in Guernsey, other than the passing reference stated above. As such a “fundamental”
right, the court went on to confirm that it cannot “be abolished through
the development of the customary law”,[31] as the
customary law cannot be “abrogated without legislative intervention”.[32]
18 In reaching
this conclusion the Court of Appeal took account of the Trading Standards
(Enabling Provisions) (Guernsey) Law 2009,[33] which
gives the States power to abolish detinue, mirroring the 1977 English statute,
which had two consequences. First, it added weight to the conclusion that
detinue “continues”[34] as
part of Guernsey’s customary law. Secondly, it would require legislative
enactment to abolish it. It was a situation where “the legislature has
started to take steps to follow the statutory changes made in England but has
not yet completed that task”.[35]
19 The Court of
Appeal went on to uphold the Royal Court’s finding that at the date of
the abolition of detinue in England in 1977 such a claim could have been
brought in Guernsey as “in tort cases the Guernsey Courts follow the
decisions of the English courts on the common law”.[36] Morton v Paint in fact suggests that the
situation is more nuanced than this and subsequent cases show that Guernsey
Courts do not always follow the English Courts on the common law, but this was
the relevant finding for the purposes of this case.
20 The Court of
Appeal also stated the importance of the difference between the “relief”[37]
prayed for and the “remedies” available in a claim of detinue; the “remedy”[38] of
delivery up was discretionary.
Applicable law
21 Again, in
relation to its conflict of laws rules, Guernsey lags somewhat behind English
law, there being no Guernsey statutory equivalent to the Private International
Law (Miscellaneous Provisions) Act 1995 (“PIL (MP) Act 95”) nor the
European Parliament and Council Regulation (EC) 864/2007 (sometimes referred to
as “the Rome II Regulation”)[39] which
dictates the applicable law. Therefore, when deciding which law to apply, the
Royal Court looked to the common law principles, of which the leading authority
remains the 1971 case Chaplin v Boys.[40]
22 The Royal
Court noted that Lord Wilberforce in Chaplin
v Boys had declined to adopt the lex
delicti (ie the law of the place
where the tort was committed).
23 Under
Guernsey’s common law, the “double actionability” test
therefore still applies. This states that if an act done abroad is tortious and
actionable, and if it is also an act which if done in Guernsey would be a tort
and not justifiable, it will be actionable in Guernsey. The “double
actionability” rule was abolished in England in 1971 by the PIL (MP) Act
95. The Royal Court stated that the wrongful act did not have to involve the
same cause of action in Guernsey, just some cause of action. The fact that
detinue was abolished in England was not a bar to claiming in detinue in
Guernsey.
24 Under the
Limitation Act 1980, time starts running against the claim at the date of the
original conversion, even if there are successive conversions. This was held by
the Royal Court not to be part of Guernsey law, a position upheld by the Court
of Appeal. This approach reveals a serious prescription issue as each new
conversion in Guernsey law will, it seems, start time running afresh.
25 Mr Kitching
had argued in the Royal Court that this case was “exceptional” and
therefore all material aspects of it should be treated as substantive and not
procedural (pure procedural law always being subject to Guernsey law) and that
English law should apply. The Royal Court rejected this argument and held that “this
is not the exceptional type of case”.[41]
26 The Court of
Appeal, upholding the decision of the Royal Court, also found that the
applicable law for the claim was Guernsey law, despite the fact Mr Kitching at
all times resided in England, received the demand for delivery up of his
English purchased, registered and sited car at home, and that English law
claims exclusive jurisdiction over torts committed in England.
Unjust enrichment
27 Having found
that Mr Hindle was still the legal owner of the car, the Royal Court went on to
consider the appropriate remedies available under customary law. As seen, Mr
Kitching was given an election to keep the car, which he took. This decision
was made on the basis that delivery up was a discretionary remedy and that as
the car was “of no special value or interest”[43] to Mr
Hindle, the discretion to deliver up “ought not to be exercised”.[44] Mr
Hindle’s claim for an absolute right to delivery up failed.
28 The question
therefore was how much was due to Mr Hindle to compensate him for his loss.
29 The Royal Court held that “the
primary heads of relief were not materially different, whether at common law or
under statute”,[45]
comparing the remedies under the General and
Finance Facilities case (in the absence of any
Guernsey authority) and s 3(2) of the English T(IWG) Act 77 which sets out
the “form of judgment where goods are detained” (also cf fn 23).
30 In essence
the remedy consisted of three options—
(a) an order for delivery of the goods and payment
of consequential damages; or
(b) an order for deliver up but an alternative of
paying damages by reference to the value of the goods and consequential
damages; or
(c) damages.
31 The aim of the damages would be to
achieve the “general principle of putting [Mr Hindle] into the position
in which he would have been had the wrong not been committed against him”.[47]
This would involve “a value judgment concerning the extent of the loss
for which the defendant ought fairly or justly to be held liable”,[48] the
aim being not unjustly to enrich the plaintiff at the innocent defendant’s
expense.
32 The law of
unjust enrichment is an area of law which is undeveloped by comparison with
England and Jersey. In contrast to the position in England where four steps are
required to succeed in a claim for unjust enrichment,[49] the
Jersey courts have settled on a model founded on natural justice and general
principles of équité.
Those principles are helpfully set out in the authoritative 2012 Jersey case of
Flynn v Reid.[50] In
Guernsey, in the Investec v Glenalla
litigation,[51] the
Court of Appeal based the Guernsey law of unjust enrichment on the English
model but the court’s judgment was heavily caveated and the court
expressed a hope that its decision would be challenged in the future. However,
to date, the Guernsey courts have not engaged in the kind of comparative
analysis that the Guernsey Court of Appeal had hoped for and the development of
the law of unjust enrichment in Guernsey, and attempts to identify its
underlying principles, are the subject of ongoing debate, notably, in two
articles published in this Review in
2019 where the respective authors engaged in a careful analysis of the state of
the law.[52]
33 The Court of Appeal in Hindle v Kitching noted that “extensive
reference was made to the opinion of Lord Nicholls in Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 and 5) [2002]
2 AC 883 a case in conversion”.[53] In assessing what was “justly” due to
Mr Hindle, great weight was given to the analysis in Goff & Jones, The Law of Restitution (7th ed) and the
analysis of Lord Denning MR’s 1973 judgment in Greenwood v Bennett,[54] and
stated as follows—
“In 1972, when Greenwood
v Bennett was decided, the principle of unjust enrichment had not yet
received authoritative judicial recognition . . . it is evident that
the basis of the improver’s claim was mistake and that the owner had
gained an incontrovertible benefit which was readily realisable, which had not
been realised, and which was gained at the improver’s expense.”
The ceiling was that—
“the improver should
never recover more than he spent . . . At the end of the day, the court must balance the claims of the
innocent improver against those of the innocent owner. In our view, the
equities of the improver’s claim are more appealing.” [Emphasis
added][56]
34 Mr Kitching
submitted that Guernsey law recognises the existence of relief for unjust
enrichment (just as it is recognised in Jersey)[57] and that,
as a result, the analysis in Goff & Jones should be followed in Guernsey.[58] On
this aspect of the case, the Deputy Bailiff, at first instance, having referred
to a number of authorities setting out the position in England, reminded the
Jurats that they were not bound to follow them and that their task was to reach
a just outcome with the aim of putting Mr Hindle into the position in which he
would have been had the wrong not been committed against him.[59]
35 In Jersey in
the Esteem case Mr Birt (then Deputy
Bailiff) said[60]—
“Unless and until he
was deprived of that title by order of the court setting aside the alienation,
the recipient was entitled to the fruits of the thing which he owned. The
position was analogous to that considered in Mendonca v. Le
Boutillier . . . where the court held in reliance inter alia
upon the principles expounded by Pothier, Traité du Contrat de
Vente, para. 326, at 363 (1830 ed.), that a transferee, who acted in good
faith in accepting movable property from a transferor who did not have good
title did acquire the right to receive any income or benefits from that movable
property arising in the meantime, without having to account for them to the
owner.”
36 However the
remedy chosen by the Royal Court dealt with the cost of the improvements and
that is the “ceiling”,[61] not the
increase in market value. The Court of Appeal roundly rejected Mr Hindle’s
suggestion that this very narrow approach to construing the value of “improvements”
as it was “wholly unjust”.[62] “The
effect that such an order would have is obvious: it would have enriched [Mr
Hindle] at [Mr Kitching’s] expense”,[63] this
outcome would have been “oppressive and unjust”.[64] This
is especially so in the light of the Royal Court finding that Mr Kitching acquired
“a form of title to the improvements when he purchased the car”.
37 The Royal
Court was, the Court of Appeal said, therefore quite correct to “avoid
such an unfair outcome”.[66] It
was “accurate and fair to say that [Mr Kitching] purchased the
improvements”[67]
from Mr Goldie. The Court of Appeal rejected the proposition advanced by Mr
Hindle that Mr Kitching would suffer no prejudice for his unrecovered losses
because he could sue Mr Goldie, who in turn could sue the dealer. This “would
be a backward step procedurally, especially as justice could be done between
the parties in the manner determined by the Royal Court”[68] and
it was both “unrealistic and disproportionate”.[69]
38 The Court of
Appeal got no satisfactory answer from Mr Hindle as to why the windfall he felt
he should receive would be in any sense “fair” or “just”.
Instead, the Court upheld the Deputy Bailiff’s approach of inviting the
Jurats to consider the approach set out in s 6 of the T(IWG) Act 77 “Allowance
for improvement of the Goods” as “illustrative of what might be
regarded as fair”.[70]
39 The Court of
Appeal found that it was indeed “correct to proceed on the basis of the
long-established principle of Guernsey law that the law must be developed in a
way which is in the interests of those who live in and visit Guernsey”.[71]
40 With regard
to remedies therefore, the customary law can and does therefore continue to
develop in line with the classic Morton v
Paint approach.
Outcome of the appeal
41 The Court of
Appeal dismissed all 19 grounds which were “without substance”.[72]
There was no reason to disturb the Jurats’ findings of fact as they were “based
on the evidence adduced by the parties”.[73] Further
if—
“the Royal Court was
correct to balance the views and interests of both [Mr Hindle], as owner, and
[Mr Kitching], as innocent purchaser, in making the orders that it did as an
exercise of its discretion.”
Wider impact?
42 The Court of
Appeal has clarified the approach to the development of the customary law.
Rights which the court regards as “fundamental”[75] parts of
Guernsey customary law will not be “abrogated”[76] without
legislative intervention. Accordingly, the customary law will not develop to
extinguish such claims, including an “ancient”[77] tort like
detinue abolished over 40 years ago in England. Contrast that, however, with
the court’s approach to the development of remedies which the law will
provide to such a claim. Here, the court will look to modern English case law
and statute as “illustrative”[78] of what
is fair, rather than rely on outdated English common law (the approach so
decried in Morton v Paint).
43 Careful
thought should therefore be given to the continuing impact on other areas of
Guernsey’s tort law where legislative change has not kept pace with
English law. For instance, s 8 of the T(IWG)Act 77 abolished the defence
open to a defendant in a claim for wrongful interference with property, to
allege that a third party has a better right to the property in dispute than
that claimed by the plaintiff (the jus
tertii) which (on the reasoning of
this case) will continue to exist as a defence in Guernsey. In the law of
prescription, successive conversions could lead to an unhappy lack of clarity
as to when a claim is extinguished.
Epilogue
44 Mr Kitching
elected to keep his “cherished”[79] car, and
on paying the £20,100 became its legal owner. He continues to enjoy
driving it (weather permitting) in Yorkshire and Scotland.
Alison Ozanne is
an advocate of the Royal Court of Guernsey and a partner in Walkers where she
heads the IDR team. She acted for Mr Kitching in the above litigation.