The Morality Behind Lipkin Gorman V. Karpnale Etaf Almutawa*

Title Issues of Unjust Enrichment in English Law: The Morality Behind Lipkin Gorman v. Karpnale Etaf Almutawa*

Abstract

Since the decision in Lipkin Gorman v Karpnale [1991], unjust enrichment scholars have engaged in significant debate about the role that title plays, if any, in an unjust enrichment claim. Shortly after the decision was handed down, Peter Birks attacked the Court’s proprietary analysis and proposed ‘ignorance’ as an alternative unjust factor. Following Birks, a lively debate ensued, which revolved wholly around the impact of title retention by the claimant. The debate has continued to the present day: most recently, Robert Stevens argued against the proprietary analysis in Lipkin Gorman and suggested that the unjust factor should be ‘unauthorised payment of partnership assets’. What is clear is that, despite the longevity of this debate, a number of questions remain unanswered. This paper will argue that looking at the problem through the lens of title retention is causing more confusion. Under this approach, we are not yet able to even answer some simple questions, such as whether a finder or thief can be claimed against in unjust enrichment. The paper takes a fresh look at the proprietary analysis that was doing the work in the decision. It will argue that Lipkin Gorman was not necessarily about title retention or the passing of title. Rather, reference to the solicitors’ property seems to be an expression of the moral idea of ‘belonging’ that had to be explained by proprietary terminologies and common law of tracing. The idea of ‘belonging’ is broader than whether title passed to the defendant. The fact that the solicitors in Lipkin Gorman recovered the money in spite of the Court’s view that title had actually passed to the defendant supports the analysis based on ‘belonging’ which this paper advances.

Table of Contents 1. Introduction 2 2. Setting the Scene 2 3. Lipkin Gorman v. Karpnale revisited 5 4. The aftermath 12 5. A general intuitive approach? 17 6. Conclusion 20

1. Introduction Two years before Lord Goff delivered the main speech in Lipkin Gorman v. Karpnale Ltd1 in the House of Lords, when unjust enrichment was recognised as an independent cause of action, he was invited to write a short comment about the future of the law of restitution.2 He said:

“In truth, we are still in the position where we are asking ourselves the most fundamental questions about the subject – not only about its constituent principles, and about its form, but also about its relationship with other branches of the law, notably the law of contract and the law of property.”3 Lord Goff sought to answer some fundamental questions about the relationship between unjust enrichment and property in Lipkin Gorman. Although the reasoning in the case has faced a great deal of criticism,4 the case is extremely important: it inspires investigation of the meaning of ownership and title and their location in an unjust enrichment claim. This paper contributes towards this investigation. It will explore two aspects of the relationship between property and unjust enrichment. Firstly, the extent to which ownership may be a basis for unjust enrichment liability. Secondly, the form of ownership that is sufficient to be a basis for unjust enrichment liability. The paper has four sections. Section one will explain the core issue surrounding the relationship between unjust enrichment and property. Section two will revisit the facts and context of Lipkin Gorman. Section three will explore how commentators have read the judgement in Lipkin Gorman. Finally, section four will provide an alternative analysis of Lipkin Gorman. 2. Setting the Scene Suppose I find your property and take it. If you opted to bring a claim against me in conversion, no problem would arise. It is uncontroversial that you can sue the finder of your property in conversion.5 However, whether you could bring a claim against me in unjust enrichment, or, more generally, whether ownership may be a basis for unjust enrichment liability, is unclear for many reasons. Let me discuss the reasons. One general reason for this ambiguity was discussed by Niall Whitty. English law “accidentally overlooked its law of unjust enrichment for several centuries and has just rediscovered it. English lawyers are now busy exploring and developing it.”6 This is true. Judges and scholars only began defining the parameters of unjust enrichment in English law relatively

* I am grateful to Robin Hickey and Samantha Magor for their comments. 1 [1991] 2 AC 548. 2 Lord Goff of Chieveley, ‘The Future of the Law of Restitution’ (1989) 12 The Sydney Law Review 1. 3 Ibid, 3. When Lord Goff wrote this comment, Lipkin Gorman had already been through the Court of Appeal. 4 Many commentators have criticised the reasoning in Lipkin Gorman, and particularly the arguments of Lord Goff. For some views see, Peter Birks, ‘The English recognition of unjust enrichment’ (1991) Lloyd’s Maritime and Commercial Law Quarterly 743; Lionel Smith, ‘Simplifying Claims to Traceable Proceeds’ (2009) 125 Law Quarterly Review 338; and Robert Stevens, ‘The unjust enrichment disaster’ (2018) 134 Law Quarterly Review 547. 5 Robin Hickey, Property and The Law of Finders (Hart Publishing 2010) 97. In the same way, the finder can sue any subsequent converter on the basis of the finder’s possession. 6 Niall Whitty, ‘Rationality, nationality and the taxonomy of unjustified enrichment’ in David Johnston and Reinhard Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (CUP 2004) 658.

2 recently. This process began with the publication of The Law of Restitution by Goff and Jones.7 Then in 1985, Peter Birks published his book on the law of restitution.8 But it was only in 1991 that unjust enrichment was unequivocally recognised as an independent body of law in Lipkin Gorman v. Karpnale.9 But what we view today as an independent body of law has a longer history.10 Commentators,11 as well as cases,12 have shaped modern English law of unjust enrichment. And because the law is still developing, we are still investigating its scope and borderlines. For example, we are still considering what role, if any, a claimant’s ownership plays in an unjust enrichment claim, and whether unjust enrichment has one unified cause of action or whether its causes of actions are separate.13 The second reason why there is doubt about whether ownership can be a basis for unjust enrichment liability is that cases supporting this are rare.14 Though it is beyond the scope of this paper, this rarity is worth investigating. Anyone who suggests that this is because conversion is the orthodox claim should explain why that is. Is it a matter of historical custom or logic? Indeed, it is not just that cases supporting this view are rare. It is also controversial whether these cases should be interpreted as early unjust enrichment cases at all. One reason is that English law deals with rights and causes of actions, but this is a relatively recent phenomenon. Between the 13th and 19th centuries English law was arranged around forms of action.15 They were abolished in the 19th century.16 To see why this is a problem, we must first understand what forms of action are:

“Let it be granted that one man has been wronged by another; the first thing that he or his advisers have to consider is what form of action he shall bring. It is not enough that in some way or another he should compel his adversary to appear in court and should then state in the words that naturally occur to him the facts on which he relies and the remedy to which he thinks himself entitled. No, English law knows a certain number of forms of action, each with its own uncouth name, a writ of right, an assize of

7 Robert Goff and Gareth Jones, The Law of Restitution (Sweet & Maxwell 1966). 8 Peter Birks, An Introduction to the Law of Restitution (OUP 1985). 9 [1991] 2 AC 548. 10 See, generally, John Baker, Introduction to English Legal History (5th edn, OUP 2019). 11 See William Evans, Essays on the Action for Money Had and Received, on the Law of Insurances, and on the Law of Bills of Exchange (Merritt & Wright 1802); James Ames, ‘The History of Assumpsit’ (1888) 2 Harvard Law Review 1; William Holdsworth, ‘Unjustifiable Enrichment’ (1939) 55 Law Quarterly Review 37; Wolfgang Friedmann, ‘The Principle of Unjust Enrichment in English Law’ (1938) 16 Canadian Var Review 243; and Harold Guttridge and René David, ‘The Doctrine of Unjustified Enrichment’ (1934) 5 The Cambridge Law Journal 204. 12 See particularly Lord Mansfield’s speeches in Moses v. MacFarlane (1760) 97 ER 676 and Clarke v. Shee and Johnson (1774) 98 ER 1041. 13 See Lionel Smith, ‘Restitution: A New Start?’ in Peter Devonshire and Rohan Havelock (eds), The Impact of Equity and Restitution in Commerce (Hart Publishing 2018). Smith’s approach is to divide the causes of actions of unjust enrichment into “big” and “small”. The interference with pre-property rights fall within the former category which Smith does not seem to support. For a reply to Lionel’s new approach, see Andrew Burrows, ‘In Defence of Unjust Enrichment’ (2019) 78 Cambridge University Press 521. 14 Arguably, these cases include Clarke v. Shee and Johnson (1774) 98 ER 1041; Bristow v. Eastman (1794) 170 ER 317; Holiday v. Sigil (1862) 172 ER 81 and Moffat v. Kazana [1969] 2 QB 152. 15 Baker (n 10) Ch. 4. 16 Common Law Procedure Act 1852.

novel disseisin or of mort d'ancestor, a writ of entry sur disseisin in the per and cui, a writ of besaiel, of quare impedit, an action of covenant, debt, detinue, replevin, trespass, assumpsit, ejectment, case. This choice is not merely a choice between a number of queer technical terms, it is a choice between methods of procedure adapted to cases of different kinds.”17

The roots of modern unjust enrichment as an independent cause of action can be found in a form of action called ‘money had and received’.18 This form of action was established in the 17th century.19 Money had and received covered, as examples, money paid by mistake, money paid under duress and money paid under a consideration which had failed.20 It was also the claim brought in the cases I suggested earlier may have been early unjust enrichment cases.21 But even this is contested: some scholars have argued that money had and received was used in these cases as a substitute for other causes of action, such as conversion or restitution for wrongs.22 There are two final explanations for why it is difficult to answer directly whether ownership can be a basis for unjust enrichment liability. Under the facts of finding, or any other situation where the claimant’s property is in the possession of someone else without a legal basis, the claimant will retain ownership. The retention of ownership by the claimant under these facts means that a claim in conversion is available to her. Some suggest that the availability of conversion may prevent a claim in unjust enrichment.23 This is referred to as subsidiarity. In sum, subsidiarity says that a claim in unjust enrichment is prevented where another claim is (or was) available. If an owner has a claim in conversion, she will not be able to sue in unjust enrichment. Whether unjust enrichment is subsidiary to conversion in English law is not clear. The term ‘subsidiarity’ is not normally used in English law. Subsidiarity may have stemmed from the development of the general unjustified enrichment claim in French civil law. Briefly, the concept of subsidiarity in French law means that claims in unjustified enrichment will not lie if another claim is available to the claimant.24 The concept stems from a gradual development of the general unjustified enrichment claim in French legal history. The French Civil Code of 1804 did not include a general claim in unjustified enrichment. Problems with the Civil Code began to emerge, and 19th century French scholars began calling for a general enrichment claim.25 In 1892 the Court

17 Fredrick Maitland, The Forms of Action at Common Law: A Course of Lectures (1st edn, CUP 1936) 2. 18 See, James Edelman, ‘Money Had and Received: Modern Pleading of an Old Count’ (2000) 8 Restitution Law Review 547. 19 Clarke v. Shee and Johnson (1774) 98 ER 1041; Bristow v. Eastman (1794) 170 ER 317; Holiday v. Sigil (1862) 172 ER 81 and Moffat v. Kazana [1969] 2 QB 152. 20 Moses v. Macfarlane (1760) 97 ER 676, 681. 21 (n 14). 22 William Swadling, ‘Ignorance and Unjust Enrichment: The Problem of Title’ (2008) 28 Oxford Journal of Legal Studies 627, 630 and Peter Birks, 'Property and Unjust Enrichment: Categorical Truths' (1997) 1997 New Zealand Law Review 623, 648. 23 Ross Grantham and Charles Rickett, ‘On the Subsidiarity of Unjust Enrichment’ (2001) 117 Law Quarterly Review 273; and Lionel Smith, ‘Property, Subsidiarity and Unjust Enrichment’ in David Johnston and Reinhard Zimmermann (eds), Unjustified Enrichment: Key Issues in Comp arative Perspective (CUP 2010); and see, generally, Mat Campbell, ‘Subsidiarity in private law?’ (2020) 24 Edinburgh Law Review 1. 24 Nicholas Barry, ‘Modern Development in the French law of Unjust Enrichment’ in Jack Beatson and Eltjo Schrage (eds), Cases, Materials and Texts on Unjustified Enrichment (Hart Publishing 2003). 25 Brice Dickson, ‘Unjust Enrichment Claims: A Comparative Overview’ (1995) 54 Cambridge Law Journal 100, 112- 113.

4 of Cassation recognised a general unjustified enrichment claim on the grounds of natural justice.26 Two features of the claim led to it being made subsidiary to other claims. The claim did not have a basis in the Civil Code and, at first, its scope of application was broad. As a result, the Court of Cassation began to be cautious about its application and confined its scope gradually in later decisions. One of the methods adopted to confine the claim’s scope was to lay down so-called ‘subsidiarity’. The subsidiary nature of unjustified enrichment was first expressed in the Clayette case in 1914.27 The concept continued to be developed by jurists and judges28 and was codified in the French Civil Code in 2016.29 The challenges with explaining whether an owner can sue a finder in unjustified enrichment in some civil law jurisdictions may be overcome through investigating the concept of subsidiarity. However, subsidiarity comes at a later step, after unjustified enrichment liability has been established. When the elements of an unjustified enrichment liability are satisfied, and thus the liability arises, then a claim in unjustified enrichment becomes available. It is only then that subsidiarity is discussed. In English law there seems to be a more fundamental issue, save the availability of unjust enrichment claim, it is not even clear whether the liability arises at all. For unjust enrichment liability to arise, the claimant must show that (1) the defendant was enriched (2) at the claimant’s expense (3) without a just reason.30 How can the defendant be enriched at the claimant’s expense when the claimant retains title?31 The impact of the claimant’s retention of title on unjust enrichment liability is controversial. Scholars began debating this just after Lipkin Gorman, so I will save this discussion for section three (the aftermath of Lipkin). But, for now, three preliminary questions must be asked if we are to explain the relationship between unjust enrichment and ownership. Firstly, is the claimant’s retention of title a condition for unjust enrichment liability to arise?32 Secondly, does the claimant’s retention of title prevent unjust enrichment liability from arising?33 Thirdly, is unjust enrichment liability not wholly dependent on whether title passed? 3. Lipkin Gorman v. Karpnale revisited Norman Barry Cass was a gambler. From 1978 to 1980 he was also a partner in a firm of solicitors (Lipkin Gorman). Cass was authorised to withdraw money from the firm’s clients’ bank account, and he began to use the money for gambling. Of the £323,222.14 he withdrew, £222,908 was not recovered, the majority of which Cass lost at the club (Karpnale). The solicitors’ firm (the

26 Patureau-Miran v. Boudier, Cass. Req. 15 June 1982, S.1893.1.281 27 Clayette v. Liquidator of the congregation of the Missionaries of la Salette, Cass. Req., 12 May 1914. 28 Semereab Michael, ‘The Doctrine of Subsidiarity of the Action for Recovery of an Unjust Enrichment in French and Ethiopian Law’ (1968) 5 Journal of Ethiopian Law 173. 29 Art. 1303-1303.4 of French Civil Code 2016. 30 McDonald v Coys of Kensington (Sales) Ltd [2004] 1 WLR 2775, 2786. 31 Swadling (n 21) 634-638. 32 See Samuel Stoljar, The Law of Quasi-Contract (Sweet & Maxwell 1964); Author? ‘Unjust Enrichment and Unjust Sacrifice’ (1987) 50 The Modern Law Review 602. 33 Graham Virgo, ‘Reconstructing the Law of Restitution’ (1996) 10 Trust Law International 20; William Swadling, ‘A Claim in Restitution?’ [1996] Lloyd’s Maritime and Commercial Law Quarterly 63; David Fox, ‘Common Law Claims to Substituted Assets’ (1997) 56 The Cambridge Law Journal 30; and Ross Grantham and Charles Rickett, Enrichment and Restitution in New Zealand (Hart Publishing 2000).

5 claimants) sued the club (the defendant)34 on several grounds to recover the money. We are interested in the claim in money had and received under a void contract. The claim was rejected by the High Court and the Court of Appeal, but the House of Lords ruled in favour of the claimants on the basis of unjust enrichment. Many issues were raised in the case but in this paper, I will focus on one issue: the solicitors’ ownership of the money as the basis of the club’s unjust enrichment liability. The solicitors made several arguments in an attempt to recover the money. They argued that the thief purchased the gambling chips from the club using the stolen money. This contract between Cass and the club was void under section 18 of the Gaming Act 1845.35 This provision states that: “all contracts or agreements, whether by parole or in writing, by way of gaming or wagering, shall be null and void…”. The solicitors’ argument was that Cass’s contract with the club falls into the category ‘by way of gaming’, which renders the contract void.36 As a result, the club did not give valuable consideration for the money. Therefore, the thief could not pass title in the stolen money to the club,37 and that the club had no right to retain the money.38 Rather, it is the solicitors who were entitled to the money, and they could recover either through a claim in conversion or money had and received.39 Further, the solicitors had a right to trace the money. And even if there was no identifiable fund remaining because the club had mixed the money paid by Cass with its other money, they were still entitled to recover.40 For its part, the club argued that the solicitors did not have title to the money they were claiming. Title passed to Cass when he withdrew the money. They argued that if a partner acquires partnership money outside the scope of their authority, title vests in that partner. In equity, they will hold the money as a trustee for the partnership. The solicitors chose not to make this claim. As an alternative, the club argued that at common law the solicitors had a right to trace the money. “But tracing is not automatic.” The solicitors had to choose between seeking legal ownership of the money or claiming it in equity. In the meantime, title remained vested in Cass alone.41 In the High Court, Alliott J agreed with the solicitors that the contract between Cass and the club was void. He also seemed to accept that the money was the solicitors’ property in law, asking: “Can the plaintiffs, as the legal owners of the money held by them on trust for their clients, without more sue the recipient to whom the thief passed their money?” Alliott J’s view was that they cannot. He pointed out that there were no reported cases in this jurisdiction of an owner

34 The solicitors also sued Lloyds Bank Plc (the second defendant) for (1) conversion of cheques; (2) conversion of a draft; (3) breach of contract; and (4) as constructive trustee rendering knowing assistance. This is beyond the scope of this paper. 35 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 552. 36 Lipkin Gorman v. Karpnale Ltd [1987] 1 WLR 987, 992. 37 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 552. The solicitors relied on Shoolbred v. Roberts [1899] 2 QB 560 and Morgan v. Ashcroft [1938] 1 KB 49. 38 Lipkin Gorman v. Karpnale [1991] 2 AC 548, 552. They mainly relied on Clarke v Shee and Johnson (1774), 98 ER 1041 200-201 and Corking v. Jarrard (1807) 1 Camp 36. That principle was applied in Abbots v. Barry (1820) 2 Brod & B 369; Aubert v. Walsh (1810) 3 Taunt 277; Becker v. Fitch (1917) 2 ALR. 340; Sinclair Houston Federal Credit Union v Hendricks (1954) 268 SW 2d 290 and Black v. S. Freedman & Co. (1910) 12 CLR. 105. 39 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 553. They relied on United Australia Ltd. v. Barclays Bank Ltd. [1941] AC 1, 18-19, 34-35 and Hudson v. Robinson (1816) 4 M & S 475, 478. 40 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 553. 41 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 555.

6 successfully recovering stolen money in money had and received after the thief lost it gambling, and he was not content to extend the reach of this claim.42 In a majority judgement (Lord Nicholls dissenting) the Court of Appeal also rejected the claim in money had and received. But, importantly for our purposes, they did not argue that the solicitors were not the true owners of the money and thus they were not entitled to recover. Rather, the rejection was based on the Court concluding that the club gave valuable consideration. None of the judges rejected the idea that the solicitors were the true owners of the money. Nicholls LJ held that the solicitors were the true owners. Parker LJ did not go into detail on this point, but he did not accept the argument that Cass did not steal the money. May LJ did not refer to the solicitors’ property in the money, but he also did not deny it. Looking at the judge’s arguments in more depth, Parker LJ refused to accept the argument advanced by the club that Cass did not steal the solicitors’ money at all.43 He also did not accept the authorities that the club relied on as showing that title passed to Cass.44 He said:

“The authority of the two cases relied on is not binding on us but must be regarded as particularly persuasive in view of the individual authority of those concerned. Nevertheless, I find great difficulty in following the reasoning. I am also quite unable to accept that the decisions establish that, in cases such as the present, either in relation to the drafts or the cash, the solicitors had no property in either unless and until they ratified. It does not however in my view matter. To maintain an action in conversion it is sufficient for the solicitors to show an immediate right to possession and this in my view they had.”45 However, Parker LJ concluded that the club received the money in good faith, without notice and for valuable consideration. May LJ made a similar argument, stating that the club took the money “bona fide, without notice of the defeat in his title and for value” (although he did not address the problem of title in the money).46 On this basis, the solicitors’ claim in money had and received was denied.47 In his dissenting judgement, Nicholls LJ argued that the club did not receive the money for valuable consideration. In relation to the solicitors’ title, Lord Nicholls’s view was based on the fact that the solicitors’ claim in money had and received is a response to the cause of action in conversion.48 He strongly supported the view that title was vested in the solicitors from the moment the bank paid Cass the money in exchange for the cheques. He said:

“[T]he solicitors had the right to be paid a sum equal to the amount standing to the credit of their account. On behalf of the firm, albeit improperly, Mr. Cass exercised that right, by signing a cheque and thereby

42 Lipkin Gorman v. Karpnale Ltd [1987] 1 WLR 987, 992- 993. 43 Lipkin Gorman v. Karpnale Ltd [1989] 1 WLR 1340, 1361. “I should not be taken as accepting an argument advanced by Mr. Lightman, for the club, that Cass did not steal from the solicitors at all.” 44 The Club relied on Wilton v. Commonwealth Trading Bank of Australia [1973] 2 NSWLR 644; Strachan v. Universal Stock Exchange Ltd. (No. 2) [1895] 2 QB 697 and In re Diplock, Diplock v. Wintle [1948] Ch 465. 45 Lipkin Gorman v. Karpnale Ltd [1989] 1 WLR 1340, 1371. 46 Lipkin Gorman v. Karpnale Ltd [1989] 1 WLR 1340, 1349. 47 Lipkin Gorman v. Karpnale Ltd [1989] 1 WLR 1340, 1361, 1362, 1364. 48 Lipkin Gorman v. Karpnale Ltd [1989] 1 WLR 1340, 1382 -1384, 1386.

calling for payment of part of that sum in cash. Mr. Chapman then took the cheque, on behalf of the firm, to the bank, where he received the banknotes in exchange for the cheque. I am unable to see why the title to the money paid out in this way by the bank did not pass automatically to the solicitors.”49 Lord Nicholls was not persuaded by the club’s argument that title passed to Cass. He said:

“The present case is quite different. Here there is no question of the solicitors' claim depending on their having title to some property acquired by Mr. Cass with misappropriated money. The solicitors' claim is to the money itself, withdrawn from their bank account. That was the money taken by Mr. Cass to the club, who, in all innocence, converted it to the club's own use.” 50

The case reached the House of Lords, which held that the solicitors could recover the money on the basis of unjust enrichment even though the club was an innocent third party because they did not give valuable consideration. Liability was subject to the defence of change of position, which was recognised for the first time. Two major speeches were given, one by Lord Goff and another by Lord Templeman. The rest of the judges gave shorter speeches, agreeing with Lords Goff and Templeman.51 Lord Templeman’s speech was reasonably general, not delving into knotty arguments about whether and how title had passed. This is important, as it indicates that there is something intuitive about the solicitors’ claim to the money. It was intuitively obvious to Lord Templeman that the solicitors had a right to the value of the money on the basis of unjust enrichment. He believed that the solicitors were the “true” owners of the money and that it should be returned to them, arguing that: “the law imposes an obligation on the recipient of stolen money to pay an equivalent sum to the victim if the recipient has been 'unjustly enriched' at the expense of the true owner.”52 Lord Templeman also quoted Lord Wright, speaking in the Fibrosa case:53

“It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep.”54 Lord Templeman held that the club could not have been unjustly enriched if it gave valuable consideration for the money, but it did not.55 Lord Templeman also briefly addressed the argument that title had passed to Cass: “it is argued, the club was not unjustly enriched because, in the belief that the money tendered by Cass was his own personal money…”. He did not, however, explain

49 Lipkin Gorman v. Karpnale Ltd [1989] 1 WLR 1340, 1385. 50 Lipkin Gorman v. Karpnale Ltd [1989] 1 WLR 1340, 1386. 51 Lord Bridge of Harwich, Lord Griffiths and Lord Ackner. 52 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 560, 559. 53 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 559. 54 Fibrosa Spolka Akcyina v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 61. 55 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 560.

8 why he believed this argument was incorrect. Rather, Lord Templeman did little more than assert that the solicitors were the “true owners” and the money was “stolen”.56 Responding to a thread of cases relied upon by the club, Lord Templeman argued that they were analogous to the present case. For example, in Hudson v. Robinson57 the defendant fraudulently contracted in the name of the partnership to sell goods to the claimant. The claimant (the partnership) recovered the purchase price on the basis of money had and received. Lord Ellenborough said:

“It is said that an action for money had and received is not maintainable in this case. But an action for money had and received is maintainable wherever the money of one man has, without consideration, got into the pocket of another…the question is whether this has been without any consideration…”.58 Lord Templeman argued that, as in Hudson v Robinson, the solicitors’ money got into the club’s pocket without any consideration.59 Another case that Lord Templeman drew an analogy with was Banque Belge pour l'Etranger v. Hambrouck.60 In this case, a clerk fraudulently obtained money from his employer and gifted it to a third party, who did not know about the fraud. The third party deposited the money in their bank account and the clerk’s employer sued the third party on the basis of money had and received. Counsel for the third party argued that they had obtained good title in the money. Lord Bankes said:

“to accept either of the two contentions with which I have been so far dealing would be to assent to the proposition that a thief who has stolen money, and who from fear of detection hands that money to a beggar whom he happens to pass, gives a title to the money to the beggar as against the true owner - a proposition which is obviously impossible of acceptance.”61 Because the contract under which the club received the money from Cass was void, Lord Templeman argued that: “in my opinion the club in the present case are in no better position than the donee in the Banque Belge case.” He pointed out that, according to authority, a donee (in this case the club) is obliged to reimburse the owner of stolen money (in this case the solicitors) received and retained by the donee, otherwise it is an unjust enrichment.62 It seems that Lord Templeman was suggesting that the mere act of retaining someone else’s property is an unjust enrichment. But one question remains: on what basis were the solicitors the “true owners” when title had passed to Cass? As mentioned above, Lord Templeman did not address this argument. Lord Goff, on the other hand, did.

56 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 560, 561. 57 (1816) 105 ER 910. 58 Hudson v. Robinson (1816) 105 ER 911. 59 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 564. 60 [1921] 1 KB 321. 61 Banque Belge pour l'Etranger v. Hambrouck [1921] 1 KB 321, 327. 62 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 566.

The solicitors sought to establish that the money was their property at law, as the basis for a claim in money had and received.63 Lord Goff was persuaded by this argument and, unlike Lord Templeman, he set out his reasons. Lord Goff began by excluding the possibility that the solicitors were suing the defendant in conversion, stating that the solicitors’ claim was in money had and received.64 Lord Goff said that the present case and Clarke v. Shee and Johnson65 were identical. In this case, a clerk was employed to collect money from the claimant’s customers, which he spent on betting with the defendant. The betting contracts were void under the Lottery Act 1772. The claimant sued the defendant in money had and received. Lord Goff argued that in both cases the money was stolen, it was gambled away by the thief and the claimant was entitled to recover their money from the recipient in money had and received.66 It is clear that Lord Goff accepted that legal title to the money was the solicitors’. He began by explaining why the solicitors had to prove they had legal title to the money to succeed in a claim in money had and received. Because it was not a direct transfer of money from the solicitors to the Club, but rather a transfer through Cass, the solicitors had to show that the money was their legal property.67 Since Lipkin Gorman was handed down the idea of “indirect enrichment” has surfaced, and this concept can help us to explain why Lord Goff was concerned about the solicitors proving their legal property in the money. Indirect enrichment generally refers to cases where the defendant is enriched at the expense of the claimant through a third party, or where the property went through multiple hands before reaching the defendant. 68 Lipkin Gorman is a good example. Cass took the solicitors’ money and, paid it to the club. The solicitors then sued the club in money had and received (unjust enrichment). Indirect enrichment is usually discussed as an issue under the ‘at the expense’ limb of unjust enrichment liability,69 because it is difficult to explain how this limb is satisfied.70 It seems that Lord Goff was saying that because the enrichment was indirect, the solicitors had to prove they were the legal owners of the money to satisfy the ‘at the expense’ element. If this is correct, then it is not true that the claimants had to prove their legal property in the money just because it was an indirect enrichment. They had to prove this to show that the club was enriched at their expense, regardless of whether that enrichment was direct or indirect.71 In Holiday v. Sigil,72 the claimant accidentally lost £500 and the defendant found it and picked it up. It was held that the claimant could recover the money in money had and received. This case

63 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 552. 64 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 570. 65 (1774) 98 ER 1041. 66 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 571-572. 67 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 572. 68 See, for example, Peter Birks, ‘At the expense of the claimant: direct and indirect enrichment in English law’ in David Johnston and Reinhard Zimmermann (eds), The Comparative Law of Unjustified Enrichment (CUP 2004). 69 Charles Mitchel, ‘Unjust Enrichment’ in Andrew Burrows (ed), English Law Private (OUP 2013) 18.42. 70 See, for example, Ben McFarlane, ‘Unjust Enrichment, Property Rights and Indirect Recipients’ (2009) 17 Restitution Law Review 37. 71 Birks addresses this issue. He argued that when ownership is the basis of unjust enrichment liability, indirect enrichment is an illusion. When someone receives your property, she receives it directly from you, regardless of how many hands it passed through. See: Birks (n 68) 517. 72 (1826) 172 ER 81.

10 can be seen as an example of a claimant’s ownership being the basis for liability in money had and received. The claimant won the case because he demonstrated how he lost the £500, and this led the court to treat him as the owner. Firstly, a clerk proved that the claimant received the note in question from their house. Then, the claimant proved that the claimant and the defendant were in the same place when the plaintiff lost the note. It was also proved that the claimant complained to a police officer that he had lost the £500. The claimant hired an attorney to trace the note. After that, a clerk proved that they had received the note from the defendant. A witness also stated that he saw the claimant put his hand in his pocket, then he saw the defendant pick something up. He asked the defendant whether he had picked up any notes and the defendant said: “a small note I dropped”.73 Lord Goff made it explicit that the claim brought by the solicitors was a personal claim, not a proprietary claim, despite arguing that the money in the club’s possession was the solicitors’ property.74 He also excluded the trust analysis. He said that title vests in Cass, but he would hold it on trust for the solicitors. As a result, the solicitors could trace the money in equity. However, the analysis in equity is excluded since the solicitors chose to rely on a common law claim in money had and received. The club conceded that if the solicitors could prove their title to the money, this would not be defeated by the mixing of the money with the club’s money.75 Unfortunately for the club, it was proved the solicitors did have title to the money. The club relied on two authorities to argue that title passed to Cass the moment he received the money from the bank. These authorities are Union Bank of Australia Ltd. v. McClintock76 and Commercial Banking Co. of Sydney Ltd. v. Mann.77 These authorities were rejected by the Court of Appeal and were not discussed by the majority of judges in the House of Lords. Lord Goff was unique in his consideration of the cases, but still reached the conclusion that the solicitors had legal property to the money. In sum, these authorities establish that where a partner obtains money from the partnership’s bank account without authority, the partner alone acquires legal title to the money. The solicitors argued that the two cases were wrongly decided, or they were materially different from the present case. Lord Goff refused to overrule the authorities, but he was satisfied that the solicitors are able to overcome the fact that title passed to Cass.78 Lord Goff argued that the solicitors had legal property to the money for two reasons. Firstly, the solicitors had a chose in action79 in the money, and this chose in action was their legal property. Secondly, the solicitors could trace their legal property, represented by this chose in action, into its product i.e. the money withdrew by Cass. I will discuss each point separately.

73 Holiday v. Sigil (1826) 172 ER 81. 74 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 572. 75 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 572. 76 [1922] 1 AC 240. 77 [1961] AC 1. 78 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 573. 79 Personal property in English law is either in possession (chose in possession) or action (chose in action). The latter was defined in Torkington v Magee [1902] 2 KB 427 by Channell J: “Chose in Action is a known legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession.” See, William Holdsworth, ‘The History of the Treatment of “Choses” in Action by the Common Law’ (1920) 33 Harvard Law Review 997.

The first point is that the money was in the clients’ bank account. The solicitors’ relationship with the bank was that of a creditor and a debtor: the solicitors did not have legal property to the money at that time. The debt constituted a chose in action. This chose in action is, Lord Goff said: a “species of property; and since the debt was enforceable at common law, the chose in action was legal property belonging to the solicitors at common law.”80 The second point is that the solicitors could trace their property at common law. Lord Goff relied on two cases, Taylor v. Plumer81 and Marsh v. Keating82, as establishing that the solicitors could trace their money at common law. In Taylor v. Plumer, the defendant gave his stockbroker, Walsh, a cheque to buy him Exchequer bills. Walsh instead used the draft to buy securities and doubloons for his own purposes. Walsh was caught when he was waiting to abscond to America. The American securities and doubloons were ceased and returned to the defendant, who sold them and kept the proceeds. Walsh’s assignees in bankruptcy (the claimants) brought a claim in conversion against the defendant to claim the proceeds. The Court of King’s Bench held that the claimant could not recover the proceeds because the fact that the property had changed form did not stop it from being the property of the defendant.83 On the basis of Taylor v. Plumer, Lord Goff held that the solicitors should be able to trace their property at common law in that chose of action, into its product.84 The other case that Lord Goff relied on was Marsh v. Keating.85 Mrs Keating owned £12,000 interests the Bank of England. Mrs Keating gave a power of attorney to the firm of Marsh, Sibbard & Co. Henry Fauntleroy, a partner at Marsh, Sibbard & Co, forged Mrs Keating’s signature and transferred £9000 of Mrs Keating’s interests to a broker, William Tarbutt. The broker sold them for £6,018 15s and wrote a cheque for £6,013 2s. 6d (he deducted the sale price) payable to Marsh, Sibbard & Co. Mrs Keating discovered Fauntleroy’s misappropriation and brought a claim in money had and received against Marsh, Sibbard & Co. Mrs Keating succeeded in her claim.86 In the present case, Lord Goff said that the solicitors, as owners of the chose in action, could trace their property in that chose in action into its direct product i.e. the money Cass withdrew from the bank account.87 4. The aftermath The key issue in Lipkin Gorman v. Karpnale88 was the basis of the defendant’s liability. Lord Goff held that the solicitors could recover the money drawn from the clients’ account despite title having passed to Cass. His reasoning was that the money was the traceable proceeds of the chose in action that the solicitors had against the bank; this chose in action was their legal property.89

80 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 574. 81 (1815) 3 Maule and Selwyn 562. 82 (1834) 131 ER 1094. 83 Taylor v. Plumer (1815) 105 ER 721. 84 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 574. 85 (1815) 3 Maule and Selwyn 562, 547. 86 Marsh v. Keating (1834) 131 ER 1094. 87 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 574. 88 [1991] 1 AC 548. 89 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 574.

This analysis led to confusion and a myriad of questions. Commentators addressed different issues with Lord Goff’s analysis, and proposed different ways of making sense of the case. Generally, we might say that theories about the basis of liability in Lipkin Gorman can be divided into three broad categories. In the first of these are theories where an attempt is made to explain more clearly the nature of the solicitors’ proprietary interest in the money withdrawn by Cass, and the role of tracing in allowing the solicitors to bring a claim in unjust enrichment to recover that money. Secondly, there are theories which seek to reinterpret the case as belonging to the law of property and not unjust enrichment. Finally, a subset of the first category, there are theories which focus on the issue of ‘unjust factors’, where alternative unjust factors are proposed as a more accurate basis for the defendants’ liability. This section of the paper reviews each of these theories. While they each have merits, they also fail somehow to explain the decision in a manner consistent with a close reading of the judges’ arguments. This, in turn, supports the argument in the final section of the paper that an alternative understanding of Lipkin Gorman is desirable. 4.1 The nature of the claimants’ right What was the nature of the solicitors’ right in the money? Tracing is the process of identifying property which has changed form: it does not confer property rights or interests.90 Therefore, it is unclear how Taylor v. Plumer,91 and tracing more generally, could justify the conclusion that the solicitors’ held a property right in the money.92 Birks sought to argue that the nature of the solicitors’ right was a “power in rem”, which enabled them to vest the money in themselves.93 The claimant’s right in the substitute assets remains imperfect until that power is exercised.94 Once exercised, the power will alter the proprietary status in the assets.95 The power, though a lesser proprietary interest than ownership, is sufficient to create a “proprietary connection” between the claimant and the property in question.96 Birks admitted that the power in rem model is controversial. Birks said that one problem is that it is difficult to explain how the claimant in cases where her property is misappropriated acquires the power in rem in the substitute. 97 Tracing cannot answer this question, since tracing does not confer property rights, save a power to vest property rights.98

90 Lionel Smith, The Law of Tracing (OUP 2003) 299-300. See also Foskett v McKeown [2001] 1 AC 102. 91 (1815) 3 Maule and Selwyn 562. 92 Another difficulty with Lord Goff’s analysis is that it has been argued that Taylor v Plumer is about the assertion of equitable property against a faithless fiduciary and that it has nothing to do with the assertion of common law property. See Lionel Smith, ‘Tracing in Taylor v. Plumer: Equity in the Court of King’s Bench’ (1995) Lloyd’s Maritime and Commercial Law Quarterly 240. 93 Birks (n 4) 478. 94 Peter Birks, ‘Mixing and Tracing’ (1992) 45 Current Legal Problems 69, 89-90. 95 Ibid. 96 Birks (n 68) 519. 97 Peter Birks, Unjust Enrichment (2nd edn, OUP 2005) 198. 98 Birks attempted to explain the claimants’ acquisition of the power in rem through a causal basis argument. Accordingly: “the casino would not have received the money but for the enrichment by subtraction from the firm of the primary recipient, the gambling solicitors.” in Birks (n 68) 519.

Lionel Smith provided another explanation for the nature of the solicitors’ right.99 Smith began by excluding the forms that the solicitors’ right in the money could not take. First, the solicitors’ right was not full ownership - that was in Cass. Second, the solicitors’ right did not carry an immediate right to possession of the money, otherwise the defendant would have been liable in conversion with no defence of change of position.100 Third, it could not have been a power in rem, because a power is not a right.101 Smith argued that there is not much left, and it seems to be a “strange innominate right”.102 Smith examined a consistent line of cases,103 which he argued demonstrate that a common law claim in money had and received may be made in respect of a sum of money held on trust for the claimant, and that this money is the traceable proceeds of an unauthorised disposition of trust property, or of the claimant’s legal property.104 In relation to Lipkin Gorman, Smith argued that the solicitors did not have legal property, Cass did. The only remaining explanation is that the claim in money had and received stemmed from the solicitors’ equitable right arising from a trust.105 Cass was the legal owner and trustee, while the solicitors were the beneficiaries.106 4.2. Reinterpreting Lipkin Gorman v. Karpnale The proprietary nature of the solicitors’ right (whatever it is understood to be) led some commentators to argue that Lipkin Gorman is not about unjust enrichment at all.107 For example, Graham Virgo argued that the reasoning of the judgement captured a proprietary cause of action and not unjust enrichment. This cause of action triggered restitutionary liability to vindicate the solicitors’ continuing proprietary interest.108 Virgo’s view of Lipkin Gorman stems from his belief that there is no relationship between unjust enrichment and property.109 In one sense, this means that if the defendant retains an asset in which the claimant has a continuing property interest then that in itself is enough to create a cause of action, founded on the law of property, which the claimant can rely on to vindicate her property rights. The claimant in this situation need not also prove that the defendant was unjustly enriched at her expense.110 Ross Grantham and Charles Rickett adopted similar views to Virgo when reinterpreting Lipkin Gorman.111 They argued that the claim in money had and received is best understood as analogous to a claim in conversion, in the sense that it mediates the vindication of property

99 Smith (n 4). 100 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 570. 101 Smith (n 4) 339. 102 Ibid. 103 Case v. Roberts (1817) 171 ER 317; Allen v. Impett (1818) 129 ER 384; Remon v. Hayward (1835) 111 ER 256; and Bartlett v. Dimond (1845) 153 ER 385. 104 Smith (n 4) 346. 105 Ibid. For a similar view see McFarlane (n 70). 106 Smith (n 4) 346. 107 Alternatively, the case is sometimes interpreted as centring on unjust enrichment and vindicatio at the same time. See David Fox, ‘Legal Title as a Ground of Restitutionary Liability’ (2000) 8 Restitution Law Review 465. 108 Virgo (n 33) 23-24. 109 See particularly Graham Virgo, ‘Vindicating vindication: Foskett v McKeown reviewed’ in Alastair Hudson (ed), New Perspectives on Property Law, Obligations and Restitution (Cavendish Publishing Limited 2004). 110 Graham Virgo, The Principles of the Law of Restitution (3rd edn, OUP 2015). 111 Grantham and Rickett (n 33).

14 rights.112 Grantham and Rickett are strong advocates of the subsidiarity of unjust enrichment.113 They argue that where the claimant retains title to property which is in the defendant’s possession, it is the law of property that should respond to this, not the law of unjust enrichment.114 4.3. The unjust factor arguments Other commentators accepted that Lipkin Gorman is about unjust enrichment, though they did not believe that the solicitors’ legal property in the money was the basis for the defendant’s liability.115 For example, shortly after the decision in the House of Lords was handed down, Birks criticised what he called the “proprietary approach” adopted by Lord Goff.116 One of Birks’ main fears was that the proprietary approach may create a precedent whereby the claimant retaining title would become a condition for unjust enrichment liability. Instead, Birks suggested that the unjust factor in Lipkin Gorman should be the solicitors’ “ignorance” of Cass’s misdirection of the money.117 Birks sought to argue that cases of misdirected assets, such as stolen or lost property, can be viewed as instances of unjust enrichment without having to prove any wrong. The reason why these are cases is because of the claimant’s ignorance.118 Birks justified his claim that ignorance should be recognised as an unjust factor by drawing a comparison with mistake (a recognised unjust factor in English law). Birks argued that if a legal system recognises a restitutionary right because of the claimant’s mistake in transferring her assets then, a fortiori, the claimant who was ignorant of her misdirected assets should also have a restitutionary right.119 Ignorance as an unjust factor has been criticised for different reasons. For example, William Swadling argued that an ignorant owner cannot consent to title passing, meaning that title is retained by the claimant. So long as title is retained by the claimant she will not be able to demonstrate a key element of unjust enrichment liability: an enrichment by the defendant at her expense.120 If the claimant’s title remains vested in her, this will not be an enrichment of the defendant at the claimant’s expense, despite the claimant not having possession of her property.121 One of the reasons is, Swadling argued, that the legal system deals in rights, not things: “this distinction, between things, and property rights in respect of things, is fundamental to our law.”122 Under Swadling’s view, if the claimant’s title has been destroyed, such as through the application of bona fide purchaser rules, then the law of unjust enrichment will not protect her, because title has to be transferred to the defendant. This outcome is criticized.123 However,

112 Ibid, 43. 113 Grantham and Rickett (n 22). 114 Ibid, 276. “[W]here the plaintiff has retained rights in the asset, which is the subject matter of the enrichment, those rights represent a more than sufficient basis for recovery.” 115 Charles Mitchel, Paul Mitchel and Stephen Watterson (eds), Goff and Jones: the law of unjust enrichment (8th edn, Sweet & Maxwell 2011) 197; Ewan McKendrick, ‘Restitution, Misdirected Funds and Change of Position’ (1991) 55 Modern Law Review 377, 382; and Birks (n 4) 482. 116 Birks (n 4) 482. 117 Ibid. 118 Birks (n 8) 141. 119 Ibid. 120 Swadling (n 33) 56; and (n 21) 634-638. 121 Ibid. 122 Swadling (n 21) 643. 123 See Ross Grantham and Charles Rickett, ‘Restitution, Property and Ignorance – A Reply to Mr Swadling’ (1996) Lloyd’s Maritime and Commercial Law Quarterly 463, 456. They argue that the loss of title precludes the claimant 15

Swadling’s position on the unjust enrichment claim in Lipkin Gorman is not clear. He once agreed that Lipkin Gorman was an unjust enrichment case, despite the money having belonged to the solicitors.124 This is because the solicitors had to trace their property, and property rights in substitute assets are always restitutionary. It was only for this reason that Swadling agreed that Lipkin Gorman was a case of unjust enrichment.125 However, Swadling has also argued that just because money had and received was the form of action used, that does not mean we are necessarily within the area of restitution.126 The substance of the case was that the money belonged to the solicitors, and if they were the true owners then the enrichment was not at their expense. According to Swadling, Lipkin Gorman was a case involving the vindication of property rights.127 Birks’ ignorance argument has been criticised for lacking judicial approval and being illogical.128 Robert Chambers and James Penner argued that ignorance as an unjust factor is logically flawed and has no basis in judicial arguments.129 In cases of misdirected assets, such as lost or stolen property, the claimant’s ignorance is irrelevant.130 In many cases, such as mistake or duress, the claimant’s intention is important: it creates the basis for unjust enrichment liability. However, misdirected assets are different, as the misdirection is not caused by the claimant’s action. Thus, the claimant’s intentions are irrelevant and cannot form the basis of an unjust enrichment claim to recover the value of the asset. Chambers and Penner argue instead that the misdirection of assets is unjust because there was no authority to transfer the property or its value. Therefore, the unjust factor should be a lack of authority, not ignorance.131 Another unjust factor was suggested by Robert Stevens, who argued that an unauthorised payment of partnership assets should be a sufficient basis for unjust enrichment liability in Lipkin Gorman.132 Stevens theorised Lipkin Gorman as follows: the claimant was a partnership, and a partnership has one legal personality, and each member of the partnership has title to their property that they own jointly.133 If a bank account is opened in the name of a partnership, all partners will have joint title to any credit balance. Cass withdrew the money, but he did not have sole title to the money when he spent it in the casino. Rather, he held the money jointly with the claimants. This case can be distinguished from the cases in the Privy Council, which established that title passes to the partner in possession of the money. The cheques that Cass cashed were made out to him as a partner, not personally. Therefore, unauthorised payment of partnership assets is the basis for unjust enrichment in Lipkin Gorman.134

from a property based claim. If a restitutionary claim is also precluded, the claimant will have no avenue to recover. This result should not be supported. 124 Swaddling (n 33) 66. 125 Ibid, 65-66. 126 This argument has been addressed above in section 2. 127 William Swadling, ‘Restitution and bona fide purchase’ in William Swadling (ed), The Limits of Restitutionary Claims: A Comparative Analysis (UKNCCL 1997) 95-100. 128 Robert Chambers and James Penner, ‘Ignorance’ in Simone Degeling and James Edelman (eds), Unjust Enrichment in Commercial Law (Lawbook Co 2008). 129 Ibid, 253. 130 Ibid, 255. 131 Ibid, 253. 132 Stevens (n 4) 561. 133 Ibid, 561-562. 134 Ibid.

5. A general intuitive approach? Although it has been almost thirty years since Lipkin Gorman v Karpnale was handed down, the nature of the solicitors’ right in the money remains ambiguous. Shortly after the decision, there were different discussions that mainly sought to explain the basis of the defendant’s liability, and the reasoning behind the decision. Section three provided an overview of these discussions. This section will demonstrate how the discussions surrounding Lipkin Gorman do not marry with the substance of and language used in the judgement. It will argue that the judges treated the solicitors as the true owners despite title having passed to Cass. This can be understood as a general intuitive approach towards the kind of ownership that unjust enrichment defends. Some commentators have suggested that Lipkin Gorman was about vindicating property rights rather than reversing unjust enrichment.135 One problem with this argument is that the property right in the solicitors is taken for granted. But this is not the main issue. Establishing the solicitors’ property right in the money is not impossible. The issue with this argument is that it completely overlooks the universally recognised right to restitution as a remedy for unjust enrichment and the defence of change of position, which is exclusive to unjust enrichment claims. The judges were crystal clear that the defendant was unjustly enriched at the expense of the claimants. As Lord Goff held: the solicitors’ claim is a personal claim, not proprietary, and it is based on the defendant’s unjust enrichment at their expense.136 Other discussions have centred around the nature of the solicitors’ right to the money. These discussions were sparked by the fact that legal title passed to Cass, so there has to be an explanation for the solicitors being owners of the money. One argument was that the solicitors had a power in rem to vest title in themselves. According to Birks, Lord Goff’s analysis “can hardly be encapsulated in any term but power.”137 Birks addressed one difficulty with the power model, namely that it is unclear how the solicitors acquired it.138 Frankly, the issue is not how the power was acquired. Conceivably, we may say that such a power arises from the defendant’s unjust enrichment. The difficulty with the power model is that this is not what the judges said in Lipkin Gorman.139 The word ‘power’ appears four times in the judges’ speeches, but never in the context of the solicitors’ right.140 Even if we read Lord Goff’s speech (from which Birks developed the power model) closely, we will see that there was nothing that indicated the solicitors’ power in rem to vest title in themselves. Lord Goff held that the solicitors could trace their property, and tracing would involve a decision by the owner of the original property to assert his title to the product. Lord Goff continued: “[T]his is sometimes referred to as ratification, I myself would not so describe it…”141 This does not explain how the solicitors had a power to vest title in themselves.

135 Virgo (n 33) 23-24. 136 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 572. 137 Birks (n 94) 90. 138 Birks (n 97) 198. 139 Another general problem is that the power itself is an anomalous kind of legal relation and its content has not been pinned down. See, for example, Adam Reilly, ‘Is the ‘Mere Equity’ to Rescind a Legal Power? Unpacking Hohfeld’s Concept of ‘Volitional Control’’ (2019) 39(4) Oxford Journal of Legal Studies 779. 140 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 552, 567, 574. 141 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 573.

Another way of understanding the solicitors’ right is that it was an equitable right.142 The argument is that Cass held legal property in the money, but he held the money on trust for the solicitors. Lipkin Gorman was argued wholly at common law, not in equity. Indeed, Lord Goff explicitly excluded the trust analysis.143 This makes the equity model inconsistent with the judgement, just like the power model. The last set of discussions about Lipkin Gorman have sought to find the unjust factor in the case. In section three, I highlighted some unjust factors which were proposed as the basis for the defendant’s liability in the case. The first and most influential one was ‘ignorance’. The mistake that scholars are repeatedly making is that they seek to explain Lipkin Gorman with concepts and ideas that are not present in the judgement. This is why the judgement remains unclear. The misuse of partnership assets was not something the judges spent time considering. Cass was treated as a thief, not a co-owner. The same applies to ignorance as an unjust factor: the judges did not pinpoint this as the basis of the liability. Proposing other unjust factors will not solve the mystery of Lipkin Gorman. If anything, proposing further unjust factors makes the problem more complicated. Take ignorance as an example. When we say that the solicitors were ignorant of the misappropriation of the money, we are still confronted with the fact that title had passed to Cass. If someone steals my money, and I claim the value of that money on the basis of unjust enrichment, I have to have a connection to that money; there has to be a right that supports my ignorance. Ignorance alone is not enough. The solicitors’ ignorance had to be based on their right to the money, and the nature of the solicitors’ right is the question that remains unanswered. The nature of the solicitors’ right has to be explained in a manner more consistent with the judgement. But if the unjust factors, power and equity models do not marry with the reasoning in Lipkin Gorman, then what is the case actually about? First, we need to accept that the basis of unjust enrichment liability was the solicitors’ property in the money, despite the nature of this property not being clearly explained in the judgement. One reason for the lack of clarity is perhaps that the claim in unjust enrichment was so “morally compelling” that the judges felt able to “skimp the finding of an unjust factor”.144 If we read the judgement with an open mind, we may say that the judges in Lipkin Gorman adopted a general intuitive approach towards unjust enrichment. They strongly believed that the money belonged to the solicitors, and that was enough to recognise an unjust enrichment claim. This intuitive approach did not hang on the claimant’s passing or retention of title. It was concerned with something broader and stronger: that the money belonged to the claimants. But Lipkin Gorman exposed a gap in the law. The judges were not able to rely on existing legal principles that explained how the money belonged to the solicitors despite title having passed to Cass. But to them, something was intuitively wrong about the casino retaining the money. The claim was recognised on that intuitive basis. The solicitors’ right in the money winning over Cass’s title says that Cass was the owner, but the solicitors were the rightful owners. Is this even possible in English common law? One way to explain this position is through the concept of

142 Smith (n 4) 346. 143 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 572. 144 Michael Bryan, ‘What is unjust about theft?’ (2019) 1 Acta Juridica 347, 351.

18 relativity of title, and to investigate the definition of ‘title’. Title is sometimes used as a synonym for ownership. But Cass’s title cannot be full ownership because the solicitors were treated as the true owners. David Fox instead defines title as the strength of the claimants’ claim to the enjoyment of the property.145 Fox argued that if this is how title is understood then “it makes sense to speak of two claimants having competing titles to an asset where their claim is something less than ownership.”146 It can be said that the solicitors had a stronger title than Cass. They were treated as the true owners, despite the passing of title to Cass. Some might object to this analysis for the following reasons. Firstly, this paper argued that the discussions surrounding Lipkin Gorman are flawed because they bring in concepts and ideas not found in the judgement. So, how can we say that the solicitors had a stronger title in the money than Cass, when the judges said nothing about that? The answer is that my criticism of the discussions surrounding Lipkin Gorman does not hang on the literal text of the judgement. Rather, it is about what the judges ‘meant’ and said in terms of substance and concepts. So long as the explanation is consistent with the judgement and captures the mindset of the judges, there is no problem. For example, the power in rem model is not flawed because the judges did not use the word ‘power’ in the context of the solicitors’ right. It is flawed because the judges’ speeches cannot be read as suggesting that the solicitors had a power in rem. The same applies to other commentators’ arguments. Moreover, the judges treated the solicitors as true owners of the money. So, the idea that the solicitors had a stronger title than Cass is grounded in the judges’ reasoning. Secondly, if the solicitors had a stronger title, why did Lord Goff exclude the possibility of suing in conversion? Should they not also have a right to immediate possession, on which they could sue Cass in conversion? This is exactly the gap that Lipkin Gorman exposed, and at this stage I have no clear answer to this question. Lipkin Gorman was a shock because it revealed that title in the orthodox sense (which was vested in Cass) is not the ultimate power, and the right to immediate possession may be defeated by a stronger title, which was vested in the solicitors. Imagine that the facts of the case were different. Cass withdraws the money and on his way to the club some of the money was stolen. It is clear that Cass could sue the thief in conversion because of his title. But the fact that the solicitors had no alternative claim in conversion does not necessarily mean that they had no title or that they were not the rightful owners. It may mean that the kind of title that was vested in them is protected by a claim in unjust enrichment. This would suggest that conversion and unjust enrichment do not do the same job; they are independent entities which protect different values and interests. The remaining question is why the solicitors’ title was prioritised over Cass’s, despite Cass having an immediate right to possession. It may be that relativity of title does not necessarily operate by the concept of temporal priority “first in time, stronger in right” but also by moral considerations.147 In Lipkin Gorman, these moral considerations were Cass’s dishonesty, his misuse of the money, the fact that he absconded to Israel and then was extradited, and that he was

145 David Fox, ‘Relativity of Title at Law and in Equity’ (2006) 65 Cambridge Law Journal 330, 333. 146 Ibid. 147 See, generally, Larissa Katz, ‘The Concept of Ownership and the Relativity of Title’ (2011) 2 Jurisprudence 191.

19 convicted at the Central Criminal Court of 21 counts of theft of the solicitors’ money.148 Of course, this is in addition to the judges concluding that the club did not give valuable consideration. It may be that all these circumstances combined made the solicitors’ title in the money stronger than Cass’s. The judges in Lipkin Gorman showed a strong moral attitude towards unjust enrichment. It resembled Lord Mansfield’s mindset in Moses v MacFarlane when he said: “In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.”149 Their approach was to treat the solicitors as the rightful owners, such that the club was enriched at their expense. The judges focused on why the solicitors could recover and why it was an unjust enrichment. But how the solicitors were the rightful owners, despite title having passed to Cass, was left for property lawyers to explain. This sense of ‘belonging’ emerged from the solicitors, who framed their claim in the language of theft.150 Technically, if title had passed to Cass then the solicitors could not have been the owners and, of course, Cass would not have been a thief. An owner cannot steal her own property. However, this is not what the judges believed. Lord Templeman called the solicitors the “true owners”. He also saw Cass as a thief and the money as stolen money.151 He deemed these facts sufficient to satisfy the elements of unjust enrichment liability. It was obvious to him that the money belonged to the solicitors, so much so that the issue of title passing to Cass was almost a technicality. The same can be said about Lord Goff’s speech. His first comment was that the facts of Lipkin Gorman are identical to Clarke v Shee and Johnson.152 Lord Goff also saw Cass as a “thief” and the money as stolen, and argued that the claimant was “entitled” to recover in a claim of money had and received. 153 The fact that Lord Goff relied on tracing in itself indicates that the solicitors owned the money. Tracing does not confer rights, and this is not the job that it was meant to do in Lipkin Gorman. Lord Goff relied on tracing as a pragmatic tool to achieve a moral end. The reliance on tracing in the case was meant to say that the solicitors were already entitled to the money, and the passing of title to Cass did not change anything about their entitlement. Lord Templeman and Lord Goff’s speeches were compatible; they both agree that the solicitors’ property in the money was the basis of the defendant’s liability in unjust enrichment. 6. Conclusion This paper has suggested that Lipkin Gorman revealed that unjust enrichment defends a form of title that is broader and stronger than our orthodox understanding of title. This is a general intuitive approach which is concerned with the idea of ‘belonging’ rather than the passing of title. The fact that the money belonged to the solicitors despite the passing of title to Cass is better explained and investigated via the concept of relativity of title. The next step is to explore the meaning of title and the extent to which moral considerations should lead us to prioritise one title over another.

148 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 569. 149 (1760) 97 ER 676, 681. 150 Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548, 552. 151 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 560, 559. 152 (1774) 98 ER 1041. 153 Lipkin Gorman v. Karpnale Ltd [1991] 1 AC 548, 571-572.