What states should know about unjust enrichment
Who can be sued? A claim can be brought against any person who has been unjustly enriched at the expense of the state. There is no need for there to be a contractual relationship between the state and the enriched party.
When might it be used? Claims for unjust enrichment may be appropriate against defendants who have received the proceeds of wrongdoing in circumstances where either they did not knowingly participate in the wrongdoing themselves or where evidence of knowing participation is insufficient.
What needs to be proved? The state must prove:
A party has been enriched. The enrichment, referred to as "the benefit", will often take the form of the receipt of money, goods or assets such as land. However benefits that have already been recognised are many and various and can take the form of the receipt of something positive (professional services) or the avoidance of something negative (a legal claim). The categories of what may be deemed an enrichment are not finally determined.
The enrichment is unjust. To establish that a payment is unjust, it must meet one of the four "unjust factors", namely that the benefit has been bestowed on the defendant (i) by mistake, (ii) under compulsion, (iii) as a result of necessity, or (iv) in circumstances where there has been no consideration (value) to the state. Claims made by states will, for the most part, rely on the fourth factor.
The enrichment was at the expense of the state. Claims for unjust enrichment are typically made by claimants that have bestowed the benefit on the defendant themselves, for example in respect of payments to sham companies for infrastructure related projects that never transpire are an obvious example; however, cases in which individuals in positions of authority siphon off to third parties funds or other benefits destined for the state would also meet this requirement.
What does not need to be proved? The state does not need to prove that the defendant requested the enrichment. However, if the defendant has not requested it, it must at least have been aware of and "freely accepted" the benefit.
Defences. Claims for unjust enrichment will fail if any of the following applies: the benefit was a valid gift or was bestowed pursuant to a valid obligation or as part of a settlement of an honest claim. Finally, and perhaps controversially, it is a defence to show that instead of his/her position being improved by the enrichment it was ultimately changed detrimentally.
Remedies. A claim for unjust enrichment is personal not proprietary: the state may claim the amount by which the defendant was enriched but cannot make a claim against any profit that the defendant may make from the benefit or seek to recover any property that the defendant acquires by way of the benefit. Should the defendant be bankrupt, the state will sit alongside the defendant's ordinary creditors. Where the third party has had the benefit of services rather than money or property, the claim will be a "quantum meruit" claim (ie a claim for a sum that reasonably reflects the monetary value of the services provided).
What are the advantages of this claim? A claim in unjust enrichment does not require evidence of any underlying wrongdoing, such as the need to establish a breach of fiduciary duty in claims for dishonest assistance or knowing receipt. This allows states to target a wider range of potential defendants who received a benefit at the expense of the state but who are not susceptible to other claims.
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