Limitation of Actions Consultation - Law Commission

to say that the cause of action will accrue for an action in restitution when the
defendant has been unjustly enriched by receiving a payment (or other benefit)
from the plaintiff even though this may be later than the date of payment or
receipt of the payment. This is supported, in the context of when a cause of action
accrues for the purposes of calculating interest payments, by cases on frustration.
For example, in BP Exploration Co (Libya) Ltd v Hunt (No 2), 9
which concerned
an action brought under the Law Reform (Frustrated Contracts) Act 1943, it was
held that the action accrued when the contract became frustrated. 10
At that time
(later than the date of receiving the payment), the plaintiff suffered a total failure
of consideration and the defendant could be said to be in receipt of an unjust
benefit.
5.9 In Kleinwort Benson Ltd v Sandwell Borough Council, 11
Hobhouse J noted that the
bank’s restitutionary cause of action, which he controversially treated as being
based on ‘absence of consideration’, 12
did not accrue until the local authority could
be said to be have been enriched, net of payments it had made to the bank. It
therefore did not matter that three payments paid by the bank and three payments
paid by the local authority were outside the six-year period preceding the issue of
the writ. What was important was that there was a net unjust enrichment in
respect of a single underlying transaction and that the writ claiming restitution of
that net unjust enrichment was issued within six years of that net enrichment.
Hobhouse J said:
Only one underlying transaction was involved ... The successive payments
merely altered the location and extent of the enrichment which existed
from time to time. The earlier payments had long ceased to give any cause
of action to either party. They were merely part of the previous dealings
between the parties which were relevant to ascertaining what, if any, cause
of action either party had at a later date. 13
5.10 The same question arose in Kleinwort Benson v South Tyneside Metropolitan Borough
Council. 14
Here Hobhouse J held that no account could be taken of the payments
which had been made more than six years before the issue of the writ. The
against the defendant. See the discussion in A Burrows, The Law of Restitution (1993), pp
442 - 443 and Goff and Jones, The Law of Restitution (4th ed 1993), p 766.
9 [1983] 2 AC 352, 373H - 374A.
10 See also Guardian Ocean Cargoes Ltd v Banco do Brasil (No 3) [1992] 2 Lloyd’s Rep 193,
200.
11 [1994] 4 All ER 890, reported with Westdeutsche Landesbank Girozentrale v Islington London
Borough Council.
12 The ‘absence of consideration’ approach was also utilised by the Court of Appeal in
Westdeutsche Landesbank Girozentrale v Islington Borough Council [1994] 1 WLR 938
although in the House of Lords [1996] AC 669 the language of ‘failure of consideration’
was preferred and Lord Goff referred to academic criticism that had been directed at the
notion of ‘absence of consideration’. As the ground of restitution was not regarded as being
mistake, s 32 of the 1980 Act was treated as irrelevant.
13 [1994] 4 All ER 890, 941.
14 [1994] 4 All ER 972.
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