Calculating ‘time value’ in cases of unjust enrichment article banner image

Unjust enrichment arises where one person is unjustly or by chance enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.

Coins in the glass jar, mixed Asian multi currencies

The High Court has recently assessed a claim for unjust enrichment in the case Kowalishin v Roberts and another (2015). In that case, the Claimant had paid £50,000 to a company run by the first Defendant. The Claimant invested the money in the company in return for shares which he did not receive. The Claimant failed to satisfy the court that any agreement had been concluded between the parties and on this basis the Claimant was not entitled to a shareholding in the Defendant company. However, it was held that the Claimant had a claim against the company for the return of its £50,000 and an additional sum representing the time value of the money as if it had been a loan.

The court assessed the time value on the basis of the Defendant’s financial position and concluded that the Defendant would have been able to borrow, and might have accepted, the money at an interest rate of 29.5 %.

The case is a helpful example of the manner in which a claim for the return of an unjust enrichment is to be calculated, in particular the assessment of the time value. The case clarifies the following:

1. A defendant will need to return to the claimant the whole benefit of the enrichment and this is likely to include any time value (i.e. interest);

2. In calculating the time value, the court is likely to conduct a hypothetical exercise of ascertaining the cost to the particular defendant of borrowing the sum in question.

However, the principle of time value may be displaced if the defendant can demonstrate that the money was in fact worth less to it, for example, if the defendant can show that it could borrow the money interest-free.

If you are involved in a dispute and would like advice on this or a related topic, please contact Sian Lloyd by telephone 01392 210700 or email Sian is a member of Stephens Scown dispute resolution team and specialises in commercial and contract litigation.