Joanna Steele Partner
Unjust enrichment and the six-year time limit
Anron Bunkering DMCC v. Glencore Energy UK Ltd  EWHC 295 (Comm)
This was a dispute arising under sale contracts for unleaded gasoline. The seller did not deliver all instalments due under the contracts. The buyer sought to recover the money paid in advance for the unperformed part. The Court found that the claim was time-barred, having been brought more than six years after the cause of action arose.
The background facts
On 15 July 2015, the parties entered into a contract for the sale of unleaded gasoline for delivery at Hodeida, Yemen. By a further contract dated November 2015, they entered into another contract for the sale of two further instalments. The July contract was performed but only part of the first instalment was delivered under the November contract, with the balance being delivered to a third party instead. The partial delivery took place in April 2016, but before that date, the buyer had chosen to accept the seller’s repudiation in relation to the second instalment around the end of December 2015.
The buyer had made advance payments of almost US$49 million between July and November 2015. Further payments were made in April 2016 of almost US$3.3 million. The seller sent statements of account showing overpayments of US$8.7 million on the July contract that were allocated to the November contract. With the advance payments made under the November contract, there was a total of just under US$12 million allocated to that contract. After deducting costs in respect of performance of the first instalment under the November contract, there was a balance of almost US$1,958,219.40 in the buyer’s credit. However, the seller purported to allocate this sum to various other entries in the statement of account, resulting in a minor balance owed by the buyer to the seller.
The buyer challenged this accounting and sought to recover the full balance. Its claim was brought in unjust enrichment on the ground that it was for recovery of sums that were transferred on a basis that subsequently failed.
S.54 of the Sale of Goods Act 1979 provides:
“Nothing in this Act affects the right of the buyer….to recover money paid where the consideration for the payment of it has failed”.
The buyer relied on BP Oil v. Vega Petroleum  EWHC 1364 (Comm), in which the Court held that the buyer under an FOB sale contract for crude oil was entitled to its money back when it did not receive the contractual goods. Despite paying almost US$17 million under the contract, none of the oil had been delivered and there had, therefore, been a total failure of consideration. As a result, the seller had been unjustly enriched.
A claim for unjust enrichment has to be brought within six years of the cause of action arising. The seller in this case argued that the claims for money had and received were time-barred because the relevant payments were made and the alleged non-delivery occurred more than six years before the claim was issued.
The Commercial Court decision
Although the July contract had been performed and the buyer had accepted the seller’s repudiation of the second instalment under the November contract, the Court needed to consider the question whether a contract had to be terminated or discharged before an unjust enrichment claim such as this one could be brought because of the partial delivery of the first instalment. In BP v. Vega, the Court thought that termination was a necessary ingredient but found that the contract in that case had been terminated. However, in Dargamo Holdings v. Avonwick Holdings  EWCA Civ 1149, the Court of Appeal identified the test as whether “the state of affairs contemplated as the basis or reason for that payment [had] failed to materialise,” although it did not need to decide the point.
The Court in this case proceeded on the basis that, in appropriate circumstances, the test might be met without termination of the contract. In some cases, termination would be necessary e.g. where defective goods were delivered, the buyer could not recover an advance payment, or an instalment, unless and until it had decided to reject the goods. Similarly, in the case of late delivery, if delivery remained a possibility under the contract, then it might not be possible to conclude that there was a failure of basis unless and until delivery ceased to be a possibility – which might, in reality, be only if and when the contract was terminated. However, in other circumstances, it might be concluded that the basis had failed to materialise even without any party terminating the contract.
This case was an example of the latter circumstances.Any real possibility of delivery of the first instalment of the November contract had gone by 4 May 2016, by which time the goods destined for the buyer had been delivered to Fujairah, and sold to a third party. From such time, the seller was no longer entitled to hold the advance payments, since the state of affairs contemplated as the basis for such payments, namely deliveries under the July and November contracts, had failed to materialise. Accordingly, the cause of action in unjust enrichment on the ground of failure of basis had arisen by the latest 4 May 2016. On that basis, the claim was out of time.
The Court also dismissed the argument that the statements of account constituted a statutory acknowledgment of a debt owed to the buyer because there was no admission in them of a legal liability to pay the sum which the buyer now sought to recover. Had the Court found otherwise, then time would have started to run from the date of the statements of account, 10 June 2016, potentially avoiding any time-bar.
This was a summary judgment application heard in the absence of an appearance by the buyer. The seller was, therefore, under an obligation to present the facts and arguments fairly, but had no duty of full and frank disclosure.
Consequently, the decision does not set out the circumstances surrounding the seller’s partial non-performance or explore whether the seller’s statements of account were accurate.
However, and in light of the fact that the buyer had terminated the November contract in December 2015, and the overpayment which gave rise to the balance due to the buyer had been made in April 2016, the judgment had the effect of identifying a later possible date on which to apply the statutory six-year time limit for this claim. As a result, it may have given rise to an interesting development of the law relating to unjust enrichment in the contractual context.
A time bar argument had also been raised in BP v. Vega. In that case, however, the contract incorporated the time bar provision from BP’s general terms and conditions, which provided for a two-year time limit rather than the statutory six-year time limit that applied in this case. The Court in BP v. Vega construed the contractual time bar narrowly and found it did not apply to the buyer’s claim.
This case is a reminder that parties should keep a close eye on both contractual and statutory time-limits and be ready to take advice where there is any doubt about the applicable limit.
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