Lloyd's Maritime and Commercial Law Quarterly
SUBROGATION AND UNJUST ENRICHMENT IN THE SUPREME COURT
John Leung*and Siu Yin Wong†
Menelaou v Bank of Cyprus
A. Introduction
In Menelaou v Bank of Cyprus UK Ltd,1 the Supreme Court granted the remedy of subrogation to the unpaid vendor’s lien where the lender had not advanced its own monies for the purchase of a property with defective security. The controversial questions faced by the Supreme Court were: (1) whether a pre-existing property right is required for a claim of subrogation through unjust enrichment; and (2) applying the principles, whether the Bank could recover on the facts. The case also raised interesting questions as to the wider debate concerning restitution from indirect recipients and the availability of proprietary remedies for unjust enrichment claims. Lord Clarke, Lord Neuberger and Lord Carnwath gave three separate judgments,2 where they adopted distinct approaches. All three judgments deserve careful examination.
This Comment will first briefly summarise the facts and then examine the Supreme Court’s decision in depth, paying particular attention to the court’s reasoning as regards
(i) the formulation of an unjust enrichment claim; (ii) the necessary causal link for the “at the claimant’s expense” requirement; (iii) the proprietary link required for subrogation; and (iv) the debate whether the case can be read as a vindication of property rights.
B. The facts
The case was one of “unusual” facts.3 Mr and Mrs Menelaou (the “Parents”) owed to the Bank of Cyprus (the “Bank”) debts in the sum of £2.2 million which were secured by two charges on their family home, Rush Green Hall. In 2008, the Parents decided to sell Rush Green Hall with the aim of downsizing to a further and smaller property, Green Oak Court. Their daughter, Melissa, was told that Green Oak Court would be purchased under her name as a gift. The Bank agreed to release its charges over Rush Green Hall and allowed the Parents to use £875,000 out of the sale proceeds of Rush Green Hall to acquire Great Oak Court, subject to a lump sum payment of £750,000 and a new third-party charge over Great Oak Court, which was registered in Melissa’s name. However, owing to negligence of the solicitors, the charge on Great Oak Court was void; and the Bank had already released the charge on Rush Green Hall at the time of discovery. Melissa was not aware of the charge and subsequently sought rectification of the register, arguing that she had not signed the charge and that the deed had been altered without her authorisation. The Bank did not dispute the invalidity of the charge but counterclaimed that Melissa was unjustly enriched at its expense, as a result of which it was entitled to an equitable charge arising from subrogation to an unpaid vendor’s lien over Great Oak Court.
1. [2015] UKSC 66; [2015] 2 Lloyd’s Rep 585; [2016] AC 176 (hereafter “Menelaou”).
2. Lord Kerr and Lord Wilson agreed with both Lord Clarke and Lord Neuberger.
3. [2013] EWCA Civ 1960; [2013] Lloyd’s Rep Plus 70, [43].
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