The Abu Dhabi Plaza (pictured left), in Nur-Sultan (formerly Astana), the capital city of Kazakhstan, is the highest building in Kazakhstan and Central Asia. It was designed by HKR Middle East (HKRME) Architects in the United Arab Emirates, whose principal was Dublin architect Jeremiah Ryan. To keep his UAE receipts beyond the reach of his Dublin creditors, between April 2012 and March 2013, Ryan directed HKRME to pay US$8,094,873 to Sunvit, an entity in the British Virgin Islands controlled by the defendant, Barry English, a Director of one of Ireland’s leading engineering companies. While the monies were notionally received by Sunvit, McDonald J held that English was in fact the real beneficiary, and that Sunvit was no more than a vehicle to receive funds on his behalf. HKRME sued English for the return of the monies. In a series of judgments, in HKR Middle East Architects Engineering LC v English (No 1)  IEHC 306 (10 May 2019); (No 2)  IEHC 142 (3 March 2021); (No 3)  IEHC 376 (31 May 2021), HKRME’s claims in trust, contract, and breach of UEA law, failed. However, McDonald J held that the consideration for the payments to Sunvit had failed, such that the defendant had been unjustly enriched at the plaintiff’s expense. McDonald J’s judgment in HKR v English (No 1) is an important contribution to the law on unjust enrichment by failure of consideration.
As Viscount Simon LC explained in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd  AC 32, 48,  UKHL 4 (15 June 1942), at common law
an enforceable contract may be formed by an exchange of a promise for a promise, or by the exchange of a promise for an act … and thus, in the law relating to the formation of contract, the promise to do a thing may often be the consideration. But when one is considering the law of failure of consideration and of the quasi-contractual [restitutionary] right to recover money on that ground, it is, generally speaking, not the promise which is referred to as the consideration, but the performance of the promise. The money was paid to secure performance and, if performance fails, the inducement which brought about the payment is not fulfilled.
This was cited with approval by McDonald J in HKR v English (No 1)  (and by MacMenamin J in the earlier Lombard & Ulster Banking v Mercedes-Benze Finance Ltd  IEHC 168 (11 January 2006) ).
Two matters of terminology arise. First, the description of the restitutionary cause of action as a “failure of consideration” is “well-established”, but, because of the potential for confusion between the contractual and restitutionary issues distinguished by Viscount Simon LC in Fibrosa, that description is “not wholly apt” (Benedetti v Sawiris  1 AC 938,  UKSC 50 (17 July 2013)  (Lord Neuberger), cp  (Lord Reed)). As Lord Toulson (Lady Hale, and Lords Kerr, Wilson and Hughes concurring) put it in Barnes v The Eastenders Group  1 AC 1,  UKSC 26 (08 May 2014) :
To avoid this confusion, Goff and Jones suggest, at paras 12-10 to 12-15, that the expression “failure of basis” is preferable to “failure of consideration” because it accurately identifies the essence of the claim being pursued. Whichever terminology is used, the legal content is the same. The attraction of “failure of basis” is that it is more apt, but “failure of consideration” is more familiar.
Hence, very recently, BP Oil International Ltd v Vega Petroleum Ltd  EWHC 1364 (Comm) (21 May 2021) concerned a successful claim for restitution of US$17,235,448 on foot of what Cockerill J (at ) described as “the ‘failure of basis’ ground for restitution, previously referred to as … ‘total failure of consideration’.”
Second, we now say that, in the case of a quasi-contractual obligations, the claim arises in restitution (British Steel Corporation v Cleveland Bridge and Engineering Co Ltd  1 All ER 504, 511 (Goff J); Arcadis Consulting (UK) Ltd v AMEC (BCS) Ltd  EWCA Civ 2222 (10 October 2018) -) for unjust enrichment (Barnes v The Eastenders Group  1 AC 1,  UKSC 26 (08 May 2014) ; see also Test Claimants in the Franked Investment Income Group Litigation v Revenue and Customs (No 2)  UKSC 47 (20 November 2020) (FII (No 2))  (Lords Briggs and Sales (in a joint judgment; Lord Carnwath concurring) (dissenting in part)). Hence, in Danske Bank v Mangan  IESC 17 (08 March 2018) Dunne J (Clarke CJ and O’Malley J concurring) referred to the plaintiff’s claim throughout as one to restitution for unjust enrichment. Consequently, in Skandinaviska Enskilda Banken AB (Publ) v Conway  AC 1111,  UKPC 36 (29 July 2019)  the Privy Council commented that after the abolition of the forms of action, the basis of a failure of consideration claim “was usually described as quasi-contract”, but, in more recent times, following the lead given by Lord Wright in Fibrosa, “the basis of this type of claim to restitution has been described as unjust enrichment”.
An enrichment will be unjust, such that a claim to restitution will lie, where “the case belongs in a specific category which justifies so describing the enrichment: possible instances are money paid under duress, or as a result of a mistake of fact or law or accompanied by a total failure of consideration” (Dublin Corporation v Building and Allied Trade Union (the Bricklayers’ Hall case)  2 IR 468, 483;  2 ILRM 547, 558, (24 July 1996)  (doc | pdf | html) (Keane J; Hamilton CJ, O’Flaherty, Blayney and Barrington JJ concurring) (emphasis added)). This was followed by McDonald J in HKR v English (No 1) -.
In Fribrosa itself, the plaintiffs had made a payment in advance for delivery of machinery on foot of a contract which was frustrated when the second world war broke out. The House of Lords held that the frustration amounted to a failure of consideration, and that the plaintiff was entitled to recover the advance payment. As Lord Wright explained, the plaintiffs’ payment “was originally conditional. The condition of retaining it was eventual performance. Accordingly, when that condition fails, the right to retain the money must simultaneously fail” (Fibrosa 65; see Andrew Burrows “Conditional intention as an unjust factor” in Elise Bant, Kit Barker and Simone Degeling (eds) Research Handbook on Unjust Enrichment and Restitution (Edward Elgar, 2020) 345 (chapter 17)). Similarly, in United Dominions Trust (Ireland) Ltd v Shannon Caravans Ltd  IR 225, 231  IESC 2 (18 March 1976), the plaintiffs had sought to purchase a caravan from the defendants, but the defendants had no title to give. The Supreme Court held that there was a failure of consideration, and that the plaintiffs were entitled to recover the purchase price from the defendants. As Griffin J explained, “where a plaintiff has paid money in pursuance of his obligations under a contract and the consideration for which he entered into the contract totally fails, he may bring an action for the return of the money so paid” (see also Chartered Trust Ireland Ltd v Healy and Commins (High Court, unreported, 10 December 1995, Barron J)). And in Vanguard Auto Finance Ltd v Browne  1 ILRM 191,  IEHC 465 (14 October 2014), the third named defendant had received a payment of €111,320 from the plaintiff on foot of a fictitious invoice for goods which were never ordered. Barton J referred to the judgment of Keane J in the Bricklayers’ Hall case (id -); he held that that the payment had been made for a consideration which had wholly failed (id ); and he concluded that this constituted an unjust enrichment for which the plaintiff was entitled to a remedy (id ).
In HKR v English (No 1)  McDonald J held that there was a “very clear parallel” between Vanguard and HKR. He followed Barton J’s approach to unjust enrichment (and he was in turn approved in Persona Digital Telephony Ltd v Minister for Public Enterprise  IECA 360 (16 December 2019)  (Donnelly J; Baker and Costello JJ concurring) and Wheelock v Promontoria (Arrow) Ltd  IECA 71 (12 March 2021)  (Haughton J; Collins and Pilkington JJ concurring)). And he concluded (id ) that HKR was “a classic case in which the remedy of unjust enrichment applies”, so that HKRME were entitled to a remedy against Mr English arising out of the transfers in question:
very substantial payments were made by HKRME to Sunvit in respect of completely fictitious introduction services purportedly to be provided by Mr English. Those services were not provided and were never intended to be provided. There was accordingly a total failure on the part of Mr English to perform what was promised under the agreement. In fact, the entire arrangement was simply a mechanism that had been put in place to enable monies to be extracted by Mr English. (id ; see also , , (c), ).
Failure of the consideration or basis for a payment “means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself” (Sharma v Simposh Ltd  Ch 23,  EWCA Civ 1383 (23 November 2011) ; Barnes  (Lord Toulson); Patel v Mirza  AC 467,  UKSC 42 (20 July 2016)  (Lord Toulson; Lady Hale and Lords Kerr, Wilson and Hodge concurring); referring to Peter Birks An Introduction to the Law of Restitution (rev ed, Clarendon Press, Oxford, 1989) 223). Consequently, failure of consideration of basis “is not limited to non-performance of a contractual obligation, although it may include that” (Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516,  HCA 68 (6 December 2001)  (Gleeson CJ, Gaudron and Hayne JJ, in a joint judgment); see also [102 (Gummow J); hence a failure of consideration or basis “may consist of the failure of a non-promissory event or state of affairs” (Barnes  (Lord Toulson); see also Patel  (Lord Toulson)).
Barnes provides a good example of a non-contractual failure of basis as the ground of a claim for restitution of unjust enrichment. The Crown Prosecution Service (CPS) sought an order to appoint the appellant as management receiver of the assets of the Eastenders group of companies. The order was made at first instance and the appellant began the work; but the order was quashed on appeal, after the appellant had incurred costs and expenses of St£772,547. Had the order been valid, the receiver would have been remunerated out of the companies’ assets. Since the order had been quashed, Lord Toulson held that there wad been a total failure of consideration or basis in relation to the receiver’s rights over the companies’ assets, which was fundamental to the basis on which the receiver was requested by the CPS and agreed to act, and that the receiver was therefore entitled to recover his costs and expenses from the CPS.
In HKR v English, the network of arrangements and understandings between Ryan and HKRME and Sunvit and English was not straightforward; and all of this was further complicated by various evasions by Ryan and by the involvement of many other parties. Most of the arrangements and understandings involving HKRME and English were vague, unspecific, and inconsistent; and many of them might be said to have failed. It is likely that many, if not most, of these arrangements and understandings did not amount to formal contracts. That being so, HKR v English may well provide another example of a non-contractual failure of basis as the ground of a claim for restitution of unjust enrichment. The key failure of basis identified by McDonald J was the failure by English to provide the fictitious introduction services said to be the justification for the payments from HKRME to Sunvit. As Lord Wright put it in Fribosa (above), the plaintiffs’ payment was effectively conditional. The basis or condition of retaining it were the introductions to be provided by Englsih. Accordingly, when that basis or condition failed, the right of Sunvit and English to retain the money simultaneously failed. This would have justified a claim by HKRME for restitution of the full US$8,094,873 paid to (Sunvit and thus to) English. Unaccountably, however, HKRME did not make a claim for the return of the entire of that sum (HKR v English (No 1) ). Consequently, McDonald J held that the only relief which he grant was “in relation to the liabilities of HKRME” (ibid), and that an account of the unpaid and lawful liabilities of HKRME should be taken. In HKR v English (No 2), McDonald J resolved some discovery issues relating to that account.
In HKR v English (No 3), HKRME contended that McDonald J made a significant error in In HKR v English (No 1) in finding that its claim was confined to HKRME’s liabilities, and sought to pursue a claim against English in respect of the entire of the monies transferred to him. That claim failed for essentially two reasons. First, it failed as a matter of fact: in orchestrating the transfers to Sunvit, Ryan’s intention was that “while the liabilities of HKRME would have to be met, the balance of the monies were not intended to be held for HKRME” (id ). As a consequence, HKRME could properly contend that the element of the monies transferred to it to meet its liabilities “remained its property and that, accordingly, the transfers had, to that extent, been made at its expense on foot of the fictitious invoices” (id ). Second, it failed on the pleadings: they referred explicitly to HKRME’s liabilities being met (id ), and “elements of the case made in the statement of claim which might suggest that HKRME was pursuing a claim in respect of the entire of the sums paid to Sunvit” had to be read “in conjunction with the facts pleaded as a whole” and in particular in the light of the reference to HKRME’s liabilities (id ). And he concluded ():
If I am wrong in my understanding of the case pleaded by HKRME in the statement of claim, that is a matter that can be addressed in due course as part of the plaintiffs’ appeal to the Court of Appeal.
Doubtless there will be an appeal. It may even include an application pursuant to Order 28 Rule 1 (RSC) to amend the pleadings to avoid the problems identified by McDonald J. Such a late amendment would be frowned upon, but is not impossible. Pleadings may be amended during trial (Wildgust v Bank of Ireland  1 ILRM 24,  IESC 10 (13 April 2000) and even on appeal (in Allen v Irish Holemasters  IESC 33 (27 July 2007) Finnegan P (Murray CJ and Kearns J concurring) in the Supreme Court referred with apparent approval to a case called Sassoon v Cababe 1879 WN 122 in which the Court of Appeal held that pleadings could be amended on appeal to take account of the case as it had evolved at trial. Indeed, in the recent FII (No 2) -, the UK Supreme Court (Lords Reed and Hodge (in a joint judgment; Lords Lloyd-Jones and Hamblen concurring)) exercised its discretion to permit pleadings to be amended before them at a very late stage in immensely complex litigation). A “certain sensible flexibility” is exercised by the Supreme Court “when a point is sought to be argued which was not advanced in the High Court though closely connected to points which were argued, and which would not have any implication for the evidence adduced in the High Court” (Lough Swilly Shellfish Growers Co-Operative Society Ltd v Bradley  IESC 16 (13 March 2013)  (and see also ) (O’Donnell J)) and the same must now also be true of the Court of Appeal.
Whether or not there is an application to amend the pleadings to make good the gap identified by McDonald J, HKRME will doubtless renew their claim that they should recover the full US$8,094,873 paid to (Sunvit and thus to) English in 2012 and 2013. In Vanguard (a), Barton J held that an enrichment may arise, inter alia, “in the form of money since this is said to be a medium of exchange and store of value, the receipt of which incontrovertibly benefits a defendant”. Furthermore, “the enrichment is to be valued at the time when it was received” (Benedetti v Sawiris  (Lord Clarke)). As a consequence, a cause of action for restitution of unjust enrichment is complete when the payment is made by the payor and received by the payee (Kleinwort Benson Ltd v Lincoln City Council  2 AC 349, 356 (Lord Browne-Wilkinson), 378, 386 (Lord Goff), 409 (Lord Hope)  UKHL 38 (29 October 1998); FII (No 2) ,  (Lords Reed and Hodge (in a joint judgment; Lords Lloyd-Jones and Hamblen concurring),  (Lords Briggs and Sales (in a joint judgment; Lord Carnwath concurring) (dissenting in part)). Indeed, from “the point of view of the person making the payment, what happens after he or she has … paid over the money is irrelevant, for it is at that moment that the defendant is unjustly enriched” (David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 390,  HCA 48 (7 October 1992)  (Brennan J)). These statements of the law reflect the application of the general principle “that a cause of action arose or accrued when every fact which it would be necessary for the plaintiff to prove in order to support his right to judgment of the court was in existence” (Cantrell v Allied Irish Banks plc  IESC 71 (10 December 2020)  (O’Donnell J; Clarke CJ and Dunne, Charleton and O’Malley JJ concurring)). Here, the payments were complete in 2013 at the latest. The cause of action accrued with the completed payments. Anything that happened after that receipt is irrelevant to the cause of action. Limiting HKRME’s claim in the way that McDonald J did is distinctly odd. Certainly, his factual reasons for doing so are unpersuasive; if, as between HKRME on the one hand, and (Sunvit and) English on the other, there has been a failure of basis, Ryan’s intentions for the money in English’s hands are entirely beside the point. McDonald J’s pleading reasons may be stronger. But if the pleadings contain a claim that the defendant is unjustly enriched at the expense of the plaintiff, and that the plaintiff seeks restitution in the amount of that unjust enrichment, then the claim is sufficiently pleaded.
In any event, the legal principles relating to failure of basis adumbrated by McDonald J in HKR v English (No 1) are important and correct, and should not be disturbed on appeal. But predictions are difficult, especially about the future; all that can be said for certainty is that this case is likely to run and run.