UNJUST ENRICHMENT CLAIM CANNOT SUBVERT CONTRACTUAL ARRANGEMENTS

In Costello v Macdonald [2011] EWCA Civ 930, [2011] All ER (D) 40 (Aug) the Court of Appeal held that the claimant builders were not entitled to bring an unjust enrichment claim against the defendants in respect of work done pursuant to a construction contract concluded between the claimants and a company which was owned and controlled by the defendants. In so far as the claimants had a claim in respect of the work which they had carried out, it was a claim against the company with which they had contracted. They could not subvert the contractual structure which had been set up by bringing a direct unjust enrichment claim against the defendants.

The facts

In July 2007 the claimant builders entered into an oral contract with a company, Oakwood Residential Ltd (hereafter, ‘Oakwood’), under which they agreed to carry out work in connection with the construction of eight residential houses in Bournemouth. Mr and Mrs Costello, the first and second defendants, were the only shareholders and directors of Oakwood which had no significant assets of its own. Mr and Mrs Costello were also the owners of the site on which the work was carried out. The claimants worked on the site until September 2008 when they stopped work as a consequence of a dispute regarding the quality of the work done and whether it had been completed. A total of £65,038 was left outstanding on the invoices submitted to Oakwood by the claimants.