Unjust Enrichment

What is unjust enrichment

It is an occurrence in law (usually in a contractual dispute) whereby a person is enriched at the expense of another, and the enrichment is deemed to be unjust in the eyes of the law. 

For example, A and B entered into a contract whereby A will pay a sum of money to B to renovate his house. However, B breaches the contract and the contract was terminated prematurely by A. 

When the contract was terminated, B had renovated at least a ⅔ of the house. Can A not pay for the part of the house that has been renovated? The answer is no, and this is where the law kicks in to ensure that A does not reap the benefit at the expense of B and that B will at least be paid for the work that he has done for A.

Why is there a need for such a law?

Generally in a contractual or tortious dispute, a party who has been wronged is awarded compensation by the court. For example, if one party breaches the contract and causes the other to suffer loss or when one person is injured as a result of an act of negligence by another, they will typically be awarded damages by the court. 

Compared to the above scenario, there was simply no solution to the unjust enrichment conundrum in the early days. To prevent this problem from spiraling out of hand, the court had to come up with a solution that compels one party to restore the unfair/ unjust benefit received by him/ prevent one party from retaining the money of or some benefit derived from another which it is against conscience that he should keep.  The law on unjust enrichment was birthed to deal with such an issue.

What is the law in relation to this topic?

This law is a fairly new concept in Malaysia. In fact, the law on unjust enrichment is only recently expounded by the Federal Court case of Dream Property Sdn Bhd v Atlas Housing Sdn Bhd. 

In the case, the court noted that in order to prove a party was unjustly enriched, the aggrieved party must be able to show that: 

1. The opposite party must have been enriched as a result of the transaction/ contract between the aggrieved party and the opposite party;
2. The enrichment must be gained at the aggrieved party’s expense; 
3. The retention of the benefit by the opposite party is unjust; and 
4. There must be no defense available to extinguish or reduce the opposite party’s liability to make restitution. 

As of now, the court noted that so long as a party can fulfill the requirements laid down in Dream Property, the court will order the party who has received a benefit to restore the benefit received by him to the other party.

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