Lloyd's Maritime and Commercial Law Quarterly
USE VALUE AND INTEREST IN UNJUST ENRICHMENT
Tatiana Cutts *
It is accepted by judges and academics alike that the restitutionary liability of an unjust payee ought to encompass both the principal sum transferred and an additional sum that reflects its “use value” over the period between receipt and restitution. The issues that divide opinion concern the proper method of conceptualising and calculating use value. Two theories have predominated: the first is that the defendant should pay compound interest on the principal sum for the period of the enrichment, as complete restitution of an enrichment unjustly received; the second is that the defendant should pay simple interest on the principal sum for the period of the enrichment, at a rate that (broadly) reflects the claimant’s loss of use of that sum. In this article, I argue that there is a third, better, option: the defendant should be entitled to discharge her restitutionary duty by restoring the principal sum at any date before or in compliance with a court order to that effect. There should be no attendant liability for interest, compound or simple, as the “use value” of money paid.
I. INTRODUCTION
On 1 April 2014, A directs her bank to pay £1,000 from her account to that of B, under the misapprehension that she owes B that sum. The bank complies with the (mis)instruction. Five years later, A discovers her mistake. She asks B to retransfer £1,000, and B obliges: £1,000 is credited to A’s account on 1 April 2019. Should B also be required to pay A a sum that reflects the “use value” of money over the five-year period between 1 April 2014 and 1 April 2019?
That question has been answered with a unanimous “yes” both in and out of the courts. The issues that divide opinion concern precisely how “use value” ought to be conceptualised and calculated. Two theories have predominated: the first requires B to pay compound interest on £1,000 over the five-year period, as complete restitution of an enrichment unjustly received;1 the second requires B to pay simple interest on £1,000 over
* Assistant Professor, London School of Economics. I am grateful for comments from Caspar Bartscherer, David Kershaw, Charles Mitchell, Rob Stevens, Emmanuel Voyiakis and Stephen Watterson on an earlier draft. Any errors remain my own.
1. Sempra Metals v IRC [2007] UKHL 34; [2008] AC 561. See also G Virgo, “Compound Interest Made Simple”(2007) 66 CLJ 510, 511; M Yip, “The use value of money in the law of unjust enrichment” (2010) 30 LS 586; M Yip, “Use Value of Money—the Defence of Exhaustion of Benefits [2012] RLR 99; M Hsiao, “A Shift in the Objective Measure of the Time Value of Money” [2015] RLR 92; and C Mitchell, P Mitchell and S Watterson (eds), Goff & Jones: The Law of Unjust Enrichment, 9th edn (Sweet & Maxwell, London, 2016) (hereafter “Goff & Jones”), [5.15].
Use value and interest in unjust enrichment
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