A claim for unjust enrichment between partners in a restaurant business has failed in Chowdhury v Ali [2022] EWHC 2924 (Ch), a decision which looks at the principal requirements for such a claim.
The claim followed earlier proceedings relating to an agreement between the parties under which Motin Ali advanced £200,000 to Ahmed Chowdhury to invest in a property development in London. Ali raised half the sum personally and borrowed the remainder from Lloyds Bank. In fact, the loan was for £200,000 made to him and Chowdhury on a joint and several basis and secured by a charge over their restaurant in Bath. Ali advanced his share of the loan to Chowdhury pursuant to their agreement.
At trial it was determined that it was an implied term of the agreement that the sum of £200,000 was repayable on demand or if the development did not occur within a reasonable time and that Chowdhury had misrepresented the position and exerted undue influence. Ali was awarded £200,000 damages and £135,000 interest.
The Bath restaurant was sold in April 2017, the loan to Lloyds was repaid and the balance of the proceeds of sale divided between the parties. Chowdhury then brought these proceedings against Ali for unjust enrichment seeking £119,000; being half of the sum paid in redemption of the loan and half of the monthly payments made by the partnership to repay the loan and interest. Ali sought summary judgment arguing that the claim was fundamentally misconceived and had no real prospect of success. At first instance the judge concluded that it raised complex and triable issues sufficient to defeat the application. Ali appealed.
A claim in unjust enrichment requires three elements: that the defendant has been enriched; that the enrichment is at the expense of the claimant; and that the enrichment was unjust Capital Insurance Co Ltd v Samsoondar [2020] UKPC 33. At best, Chowdhury’s pleading argued that Ali was enriched by receipt of part of the proceeds of sale of the property and because the loan was partially repaid by the partnership; that this was at Chowdhury’s expense because his share of the proceeds of sale was reduced; and it was “unjust” for Ali both to retain the money awarded in the earlier proceedings and to receive half of the net proceeds of sale of the property, because that resulted in double recovery.
There was a fallacy at the heart of Chowdhury’s case, which proceeded on the mistaken basis that Ali had received more than he was entitled to on a proper accounting between him and Chowdhury as joint borrowers under the loan and joint owners of the property. Yet Chowdhury had not repaid from his own funds any part of his share of the loan. Whether or not Ali used part of the judgment debt to repay his half of the loan upon sale, the parties ended up in the same net position. The partnership’s payment of monthly instalments in respect of the loan was nothing more than joint payments by those jointly and severally liable under the loan.
The appeal succeeded.
Louise Clark is a property law consultant and mediator
