JUDGMENT
Benedetti (Appellant) v Sawiris and others
(Respondents)
Sawiris and others (Appellants) v Benedetti
(Respondent)
before
Lord Neuberger, President
Lord Kerr
Lord Clarke
Lord Wilson
Lord Reed
JUDGMENT GIVEN ON
17 July 2013
Heard on 26, 27 and 28 February 2013
Appellant
Mark Howard QC
Andrew Twigger QC
Jennifer Seaman
(Instructed by Herbert
Smith Freehills LLP)
Respondent
Laurence Rabinowitz QC
Richard Hill QC
Gregory Denton-Cox
(Instructed by Kirkland &
Ellis International LLP)
LORD CLARKE (with whom Lord Kerr and Lord Wilson agree)
Introduction
1. This is an unusual case. It involves a claim for unjust enrichment and, in
the course of the argument, has led to a wide ranging discussion of the principles
relevant to an aspect of unjust enrichment which has been the subject of lively
debate among academics. It will be necessary to give consideration to at least
some of the principles but, as is so often the case, the appeal can be determined on
the facts without the necessity for the Court to express a final view on all the legal
issues which have been the subject of argument.
The parties
2. Mr Benedetti is an Italian citizen resident in Switzerland. Mr Sawiris is an
Egyptian and American national and was at all material times the Chairman and
CEO of Orascom Telecom Holding SAE (“Orascom”), an Egyptian company
quoted on the Egyptian Stock Exchange and (through Global Depositary Receipts)
on the London Stock Exchange, which operates a telecommunications business
concentrated in the Middle East, Africa and South East Asia. Cylo Investments
Ltd (“Cylo”) is Mr Sawiris’ BVI registered company. April Holding (“April”) and
OS Holding (“OS”) (“the Holding Companies”) are Cayman Island companies set
up by Mr Sawiris’ brother and father respectively (who had held the shares in
Orascom before the two companies were created), and held under discretionary
trusts for the benefit of the wider Sawiris family. Immediately before the relevant
events, Cylo had a holding of 4.1% in Orascom, April had a holding of 34.6% in
Orascom and OS had a holding of 17.7% in Orascom; so that, between them, they
held about 56.4% of Orascom’s shares, with the remaining 43.6% of the shares
being publicly held.
The claims, the judgment and the appeals
3. Mr Benedetti issued these proceedings in August 2007. In them he made a
very large claim against all the respondents. At its most extravagant it amounted
to €3.7 billion. He put his claim in a number of ways. His primary claim was
made in contract under an agreement dated 31 January 2004 (“the Acquisition
Agreement”). His alternative claims were variously based on an alleged oral
understanding (which he said was enforceable in equity by reason of the principle
in Pallant v Morgan [1953] Ch 43), collateral contract, breach of fiduciary duty,
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unconscionable receipt, estoppel and quantum meruit. All the claims were in the
same amount. The trial came before Patten J as he then was (“the judge”) and
lasted for some 31 days in the first half of 2009. In a very impressive judgment of
576 paragraphs, which was handed down on 15 June 2009, the judge dismissed all
Mr Benedetti’s claims except the claim for quantum meruit. He awarded Mr
Benedetti €75.1m.
4. The judge rejected the principal ways in which Mr Benedetti had put his
claim for quantum meruit but held that he was entitled to the sum of €75.1m on the
basis of a proposal first made on behalf of Mr Sawiris in June 2005.
5. Ironically, this alternative claim was only made by Mr Benedetti at a very
late stage of the trial. Until closing submissions it had been maintained on his
behalf that the offer of €75.1m was irrelevant and inadmissible. This had the
effect, which can now perhaps be seen as unfortunate, that the evidential basis for
the claim which ultimately succeeded was not as fully explored as might otherwise
have been the case. However that may be, the judge rejected the submission made
on behalf of Mr Sawiris that it was too late for Mr Benedetti to alter his case to
rely upon it. The judge held that all the respondents were jointly and severally
liable to Mr Benedetti in that amount.
6. Mr Benedetti appealed to the Court of Appeal on the ground that the
amount awarded was calculated on the wrong basis and should have been more.
Mr Sawiris and Cylo cross-appealed on the basis that the sum should have been nil
and, in any event, argued that it should have been less than €75.1m. The Holding
Companies cross-appealed on the same basis. The Court of Appeal (Arden, Rimer
and Etherton LJJ) handed down their judgments on 16 December 2010. So far as
relevant in this appeal, Arden LJ identified the issues as being (1) whether the
court should use the Acquisition Agreement as a template for determining the
award by way of quantum meruit; (2) whether the judge should have taken Mr
Sawiris’ offer of €75.1m into account in valuing Mr Benedetti’s services; (3)
whether any award should have been made given the payment of the sum of €67m
brokerage fee and, if so, what; and (4) whether the Holding Companies should be
held liable.
7. The Court of Appeal answered the questions raised by issues (1) and (2) in
the negative. The Court held that the correct approach was to take, at least as a
starting point, the ordinary market value of the services in fact rendered by Mr
Benedetti, which the judge held to be €36.3m. However, they held that Mr Sawiris
had not been unjustly enriched in that amount because Mr Benedetti had already
received a sum of €67m. They rejected the submission that, given that the figure of
€36.3m was less than €67m, Mr Benedetti was not entitled to anything. Rather, in
relation to issue (3), it was held that he was entitled to €14.52m calculated as
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follows. The judge had held that the figure of €67m was referable to 60 per cent of
the services in respect of which Mr Benedetti was claiming a quantum meruit in
this action. The Court of Appeal held that it followed that Mr Benedetti had been
paid for 60 per cent of those services and that Mr Benedetti was therefore entitled
to receive the market value of the remaining 40 per cent of the services, that is to
say 40 per cent of €36.3m, namely €14.52m. The Court of Appeal accordingly
reduced the amount which Mr Sawiris was liable to pay Mr Benedetti from the
€75.1m ordered by the judge to €14.52m. In relation to issue (4), the Court of
Appeal held that the Holding Companies were not liable.
8. There were a number of other issues before the Court of Appeal, including
issues of interest and costs, but they are not relevant in this appeal. The issues in
this appeal as between Mr Benedetti and Mr Sawiris and his company Cylo are
whether the judge and the Court of Appeal were correct to disregard the
Acquisition Agreement (“the Acquisition Agreement point”), whether the judge
was correct to have regard to the offer of €75.1m (“the €75.1m point”), both of
which arise on Mr Benedetti’s appeal, and whether the Court of Appeal were
correct to award anything to Mr Benedetti, which arises on Mr Sawiris’ and Cylo’s
cross-appeal. Permission to appeal and cross-appeal respectively was in each case
given by this Court. Mr Benedetti also appealed against the part of the decision of
the Court of Appeal in which they held that the Holding Companies were not liable
to him. However, shortly before the hearing of this appeal he abandoned that part
of his appeal.
The legal principles
9. It is common ground that the correct approach to the amount to be paid by
way of a quantum meruit where there is no valid and subsisting contract between
the parties is to ask whether the defendant has been unjustly enriched and, if so, to
what extent. The position is different if there is a contract between the parties.
Thus, if A consults, say, a private doctor or a lawyer for advice there will
ordinarily be a contract between them. Often the amount of his or her remuneration
is not spelled out. In those circumstances, assuming there is a contract at all, the
law will normally imply a term into the agreement that the remuneration will be
reasonable in all the circumstances. A claim for such remuneration has sometimes
been referred to as a claim for a quantum meruit. In such a case, while it is no
doubt relevant to have regard to the benefit to the defendant, the focus is not on the
benefit to the defendant in the way in which it is where there is no such contract.
In a contractual claim the focus would in principle be on the intentions of the
parties (objectively ascertained). This is not such a case. Mr Benedetti did initially
argue that Mr Sawiris, Cylo and the Holding Companies were in breach of the
Acquisition Agreement, on the basis, inter alia, that an implied variation had taken
place (see para 31A of the amended particulars of claim) or that they were in
breach of a collateral contract. Those claims did not, however, rely on an implied
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term requiring the payment of a reasonable sum. In any event, those arguments
were rejected by the judge and there has been no appeal against his judgment in
that respect. Mr Benedetti does not now rely upon a contractual claim, whether on
the basis of a request for the services or otherwise. The focus is only on the law of
unjust enrichment.
10. It is now well-established that a court must first ask itself four questions
when faced with a claim for unjust enrichment as follows. (1) Has the defendant
been enriched? (2) Was the enrichment at the claimant’s expense? (3) Was the
enrichment unjust? (4) Are there any defences available to the defendant? See
Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 227 per
Lord Steyn; Investment Trust Companies v HMRC [2012] EWHC 458 (Ch) at para
38, per Henderson J.
11. On the facts of this case it is common ground that the first three of those
questions must be answered in the affirmative. It is not disputed that Mr Benedetti
did render services to Mr Sawiris which conferred a benefit on him and thus
enriched him. The enrichment was at Mr Benedetti’s expense and the enrichment
was unjust, or would have been if Mr Sawiris did not pay for the relevant services.
As to the fourth question, there are no defences available to Mr Sawiris. The
question remains what is the value of the unjust enrichment.
Market value and subjective devaluation
12. There are essentially two issues which arise. The first is whether Mr Sawiris
is liable to pay the market value of the services or something more than the market
value and, if so, what. That issue requires consideration of whether it is
permissible to have regard to a defendant’s subjective opinion of the value of
services rendered to him in order to: (i) reduce the amount which he would have to
pay on a market value basis for those services (sometimes known as “subjective
devaluation”, a phrase first coined by Professor Peter Birks in 1985 in An
Introduction to the Law of Restitution at p 109); or (ii) to increase that amount
(sometimes known as “subjective revaluation”). As appears below, the consensus
of academic opinion seems to favour the recognition of subjective devaluation.
The second issue is whether Mr Benedetti has already been paid all or part of the
sum so determined out of the €67m he received as explained in more detail below.
13. The basic principle is that a claim for unjust enrichment is “not a claim for
compensation for loss, but for recovery of a benefit unjustly gained [by a
defendant] … at the expense of the claimant”: Boake Allen Ltd v HMRC [2006]
EWCA Civ 25, [2006] STC 606 para 175, per Mummery LJ; see also Goff and
Jones, The Law of Unjust Enrichment, 8th ed (2011) (“Goff and Jones”), para 4-01.
Page 5
Given that Mr Benedetti’s other claims have fallen away, the concern in the
present case is not the value of Mr Benedetti’s loss but of Mr Sawiris’ gain. The
question is whether an objective or subjective approach should be adopted when
calculating that gain.
14. Whichever approach is adopted, it is clear that the enrichment is to be
valued at the time when it was received by Mr Sawiris: BP Exploration Co (Libya)
Ltd v Hunt (No 2) [1979] 1 WLR 783 at 802, per Robert Goff J; see also Goff and
Jones, para 4-34. As appears at para 52 below, in the present case, the services
rendered were completed for all practical purposes by 26 May 2005, by which time
there was no possibility of, or need for, further services from Mr Benedetti.
Similarly, it is clear that, whether an objective or a subjective approach is taken to
the evaluation of the benefit, the question is what is the value of the services
themselves, not of any end-product or subsequent profit made by the defendant:
see eg Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55, [2008] 1 WLR
1752 at paras 41-42, per Lord Scott.
15. In my view, the starting point in valuing the enrichment is the objective
market value, or market price, of the services performed by Mr Benedetti. That is
consistent with the view taken by Professor Graham Virgo in The Principles of the
Law of Restitution, 2nd ed (2006) (“Virgo”):
“Much of the uncertainty concerning the definition of enrichment
stems from the lack of consensus about where the analysis should
start. Essentially there are two options available. Either we start with
an objective test, ascertained by asking whether reasonable people
would consider the defendant to have received something of value,
or we start with a subjective test, by considering whether the
defendant considers that he or she has received something of value.
Whilst both the objective and subjective tests are relevant to the
identification of an enrichment, the better view is that the objective
test should always be considered first…” (p 64)
16. I agree. Although Professor Virgo is there considering the approach to the
question whether a benefit has been conferred on the defendant at all, as opposed
to the question how such a benefit should be valued, it is clear that he takes the
same view in relation to valuation: see Virgo at p 98, where he says that the
general test of valuation which should be adopted is an objective test. Both the
editors of Goff and Jones (eg at para 4-08) and Professor Andrew Burrows in The
Law of Restitution, 3rd ed (2011) (“Burrows”), (at p 61) also take this view. The
approach is supported by, eg: BP Exploration v Hunt [1979] 1 WLR 783, 840, per
Robert Goff J; Cressman v Coys of Kensington (Sales) Ltd [2004] EWCA Civ 47,
[2004] 1 WLR 2775, at para 40, per Mance LJ; Cobbe v Yeoman’s Row at para 42,
Page 6
per Lord Scott; and Sempra Metals Ltd v IRC [2007] UKHL 34, [2008] AC 561, at
paras 116-119, per Lord Nicholls. It is to be noted that Professor Virgo, in the
passage quoted above, does not list as an available option the value which the
claimant considers that he conferred on the defendant. That is because, as he puts
it at p 69, “it is not the function of the law of restitution to assess relief by
reference to the claimant’s loss … compensation is not a function of the law of
restitution.” It is to my mind for this reason that Mr Benedetti’s request for €200
300m in June 2005 has little or no relevance. For these reasons I agree with Lord
Neuberger and Lord Reed (whose judgments I have read in draft) that the general
test, or prima facie position, is that the court should apply an objective test to the
issue of market value.
17. There is a question as to exactly what the objective approach entails.
Professor Virgo states the test (at p 98) as the identification of the market value,
namely the sum “a willing supplier and buyer would have agreed upon”. However
I agree with Etherton LJ (at para 140) that the test is “the price which a reasonable
person in the defendant’s position would have had to pay for the services”. On that
approach, although a court must ignore a defendant’s “generous or parsimonious
personality”, it can take into account “conditions increasing or decreasing the
objective value of the benefit to any reasonable person in the same (unusual)
position” as the defendant (para 145). The editors of Goff and Jones note that such
conditions would seem to include the defendant’s buying power in a market “so
that a defendant who can invariably negotiate a better price for a product than any
other buyer will be allowed to say that this price reflects the ‘objective’ value of
the product to him, or in effect that there is one market for him and another for
everyone else” (para. 4-10). Thus far, I detect no difference between my approach
and that of Lord Neuberger or Lord Reed.
18. The question then arises whether it is permissible to reduce the objective
market value in order to reflect the subjective value of the services to the
defendant. In my opinion, it is. The present case does not, of course, concern
subjective devaluation, but that is the hook on which Mr Howard seeks to hang the
principle of “subjective revaluation”. It is on the possibility of subjective
devaluation that my approach and that of Lord Reed is I think somewhat different.
A defendant, in my view, is entitled to prove that he valued the relevant services
(or goods) provided by the claimant at less than the market value. That principle is
widely accepted by academic commentators and is based on the fundamental need
to protect a defendant’s autonomy. It is important to note that subjective
devaluation is not about the defendants’ intentions or expectations but is an ex post
facto analysis of the subjective value of the services to the defendant at the
relevant time. The editors of Goff and Jones put it thus at para 4-06:
“People have different means and spending priorities, and they value
benefits differently according to their personal tastes. Consequently,
Page 7
as Lord Nicholls said in Sempra, ‘a benefit is not always worth its
market value to a particular defendant’, and ‘when it is not it may be
unjust to treat the defendant as having received a benefit possessing
the value it has to others’. The common law ‘places a premium on
how to spend one’s money’ [see Peel v Ontario [1992] 3 SCR 762 at
para 25, per McLachlin J], and this right might be unfairly
compromised if a defendant were forced to make restitution of the
market value of a benefit which he would not have bought at all. To
avoid this, the court may therefore assess the value of the benefit by
reference to the defendant’s personal value system rather than the
market.”
Professor Andrew Burrows makes the same point at Burrows p 44:
“The question of whether the defendant has been benefited/has
received value is not straightforward because of the need to respect
freedom of choice and individuality of value. Even if the defendant
has been objectively benefited (i.e. a reasonable man could regard
himself as benefited by what has occurred or, put another way, the
claimant’s ‘performance’ has a market value) he or she may validly
argue that benefit has been of no value to him or her.”
19. It is clear (from p 61) that Professor Burrows takes the view that subjective
devaluation applies to both the identification and the value of a benefit. See also,
to the same effect, Virgo at pp 67 and 68, where he noted that, even if the
defendant used what had been received it does not necessarily follow that he or she
valued it because, as Pollock CB said in his well-known dictum in Taylor v Laird
(1856) 25 LJ Ex 329 at 332, ‘[if the claimant] cleans another’s shoes, what can the
other do but put them on?” As Mance LJ said in Cressman v Coys at para 28,
“[t]he law’s general concern is with benefit to the particular defendant, or so-called
‘subjective devaluation’.”
20. I would not accept Mr Rabinowitz’s submission that a distinction is to be
drawn between the identification of a benefit and the value of the benefit to a
defendant and that, while the former can be subjective, the latter is to be objective.
He relied upon the approach adopted by Justice James Edelman as to ‘The
Meaning of Loss and Enrichment’ in Philosophical Foundations of the Law of
Unjust Enrichment (eds Chambers, Mitchell and Penner, 2008), pp 211-241). In
my opinion Professor Burrows is correct to conclude (Burrows at p 61) that “a
sharp distinction between choice and valuation may … be artificial” because “a
person may choose something but only at a particular price or even on the basis
that it is gratuitously rendered”.
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21. After the claimant has adduced evidence of the objective value of the
benefit which the defendant received, the burden of proof falls upon the defendant
to prove that he did not subjectively value the benefit at all, or that he valued it at
less than the market price: Goff and Jones, para. 4-08; Virgo, pp 64 and 66-67.
That principle was established by the majority of the House of Lords in Sempra
Metals: see para 48 per Lord Hope, para 116 per Lord Nicholls and para 180 per
Lord Walker. The minority took a different view, namely that it was for the
claimant to establish the actual benefit obtained by the defendant: see especially
per Lord Mance at paras 231-232 and Lord Scott at para 147. As I see it, the
difference between them is really no more than a different approach to the burden
of proof. In each case the question is what was the value to the defendant.
22. When I first drafted this judgment I thought that Sempra was an example of
subjective devaluation in practice. It was held that the claimant could not recover
the market interest rate on the sums it had paid to the Revenue by way of
unlawfully levied advance corporation tax because the Government was able to
borrow money at lower rates than the market rate. The amount saved by the
Government was thus less than that which would have been saved by a
commercial entity borrowing the same sums of money (see Goff and Jones at para
4-07). However, having read Lord Reed’s judgment I can now see that it may be
an example of the objective value of the money to a person in the position of the
defendant, namely the Government. This perhaps shows the narrowness of the
difference between our two approaches. This can I think be seen from an important
passage in the speech of Lord Nicholls at para 119:
“What is ultimately important in the law of restitution is whether,
and to what extent, the particular defendant has been benefited: see
Burrows, The Law of Restitution, 2nd ed (2002), p 18. A benefit is
not always worth its market value to a particular defendant. When it
is not, it may be unjust to treat the defendant as having received a
benefit possessing the value it has to others. In Professor Birks’s
language, a benefit received by a defendant may sometimes be
subject to ‘subjective devaluation’: An Introduction to the Law of
Restitution (1985), p 413.”
23. Recognising the principle of subjective devaluation raises the question of
what a defendant relying on that principle must prove. A defendant can always
simply assert that he valued a benefit at less than the market value. However, a
court will be very unlikely to accept such an assertion unless there has been some
objective manifestation of the defendant’s subjective views. In principle, this can
occur before or after a transaction, although conduct after the transaction is likely
to carry little weight. Goff and Jones put it thus at para 4-09:
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“A defendant is unlikely to persuade a court that he attached a low
value to a benefit simply by relying on self-serving testimony that he
has a (previously unexpressed) value system that attributes a low
value to such benefits, particularly if this testimony is not borne out
by his previous conduct. If a defendant can produce stronger
evidence of his personal spending preferences, however, then we
believe that he should be able to rely on this evidence consistently
with the view expressed in the foregoing authorities that the law is
concerned to protect his freedom to make his own spending
choices.”
24. An example of subjective devaluation in practice is perhaps Ministry of
Defence v Ashman (1993) 25 HLR 513, although caution is needed because that
was a case about restitution for a wrong (trespass). The Ministry of Defence in that
case were awarded, not the market rent for the property, but a rent equivalent to
what would have been charged for suitable local authority accommodation because
“Mr and Mrs Ashman would probably never have occupied the premises in the
first place if they had to pay £472 a month [i.e. the market rate] instead of the
concessionary licence fee of £95” (see p 520, per Hoffmann LJ). See also Ministry
of Defence v Thompson (1993) 25 HLR 552, where, in a differently constituted
Court of Appeal, Hoffmann LJ, with whom Glidewell LJ and Sir John Megaw
agreed, said this:
“The principles in Ashman may, in my judgment, be summarised as
follows: first, an owner of land which is occupied without his
consent may elect whether to claim damages for the loss which he
has been caused or restitution of the value of the benefit which the
defendant has received. Secondly, the fact that the owner if he had
obtained possession would have let the premises at a concessionary
rent, or even would not have let them at all, is irrelevant to the
calculation of the benefit for the purposes of a restitutionary claim.
What matters is the benefit the defendant has received. Thirdly, a
benefit may be worth less to an involuntary recipient than to one who
has a free choice as to whether to remain in occupation or move
elsewhere. Fourthly, the value of the right of occupation to a former
licensee who has occupied at a concessionary rent and who has
remained in possession only because she could not be rehoused by
the local authority until a possession order has been made, would
ordinarily be whichever is the higher of the former concessionary
rent and what she would have paid for local authority housing
suitable for her needs if she had been rehoused at the time when the
notice expired.”
Page 10
25. If the principle of subjective devaluation is accepted, it can be defeated by a
claimant proving that: (i) the defendant received an incontrovertible benefit (eg if
the services saved the defendant necessary expense), or (ii) the defendant
requested or freely accepted the benefit: see Goff and Jones, paras 4-12 – 4-33 and
(as to free acceptance) chapter 17; Virgo, pp 72-88; Burrows pp 47-60). These
sources show that many different problems may arise, but it is fortunately not
necessary in this case to define the circumstances in which the principle of
subjective devaluation can be defeated. I agree with Lord Neuberger that the
difference between my approach and that of Lord Reed is not likely to lead to a
different result in more than very few cases.
26. The only real difference may be this. We agree that in the case where
services have been rendered which, viewed objectively, confer a benefit on the
defendant, but a benefit which the defendant did not and does not want and would
not have paid for, as in the examples of Pollock CB’s cleaned shoes or Professor
Virgo’s cleaned windows (at Virgo p 67), the claimant is not entitled to payment
for the services because failure to pay would not unjustly enrich the defendant.
The question is whether, in such circumstances, where there was no free
acceptance of the services before or at the time they are rendered, but the
defendant has accepted that he has received some benefit but not that the value of
the benefit is as much as its market value, the defendant’s figure should be
accepted. In my opinion it should be open to the court so to conclude on the basis,
on the one hand there would be unjust enrichment if the defendant paid nothing
but, on the other hand, that it would not be just to award more than the benefit
conferred on the defendant so calculated. Such an approach seems to me to respect
the principle of freedom of choice or autonomy and to meet the case where the
defendant sees the value of the benefit but would not have ordered the services
save perhaps at a substantial discount to the market rate. I see no reason why a
court should not take into account a defendant’s subjective opinion of the value of
the claimant’s services in order to reduce the value of them to him, provided of
course that the court is satisfied that it is his genuine opinion. If Lord Reed’s
approach would produce a choice between a nil award and an award of the market
value of the services, I would respectfully disagree. I prefer a nuanced approach,
which seems to me to be more consistent with principle. However, given Lord
Reed’s conclusions in para 138 of his judgment, there may be little, if anything,
between us, especially since we both recognise the importance of respect for the
defendant’s autonomy or freedom of choice. It is not necessary to reach a final
conclusion on these questions on the facts of this case. I certainly agree with Lord
Reed that the expression ‘subjective devaluation’ is somewhat misleading.
Market value and subjective revaluation
27. The real issue in the present case is whether a defendant should be required
to pay the claimant more than the market value of his services if it can be shown
Page 11
that the defendant subjectively valued the claimant’s services at a sum in excess of
the market value (ie subjective revaluation, sometimes called subjective
overvaluation). The editors of Goff and Jones suggest (at para 4-11) that, if one
accepts the principle of subjective devaluation, it might be argued that fairness
between the parties requires subjective valuation arguments to cut both ways, so
that the claimant is entitled to rely upon subjective revaluation. Professor Burrows
says at Burrows p 60:
“It is possible to argue that the law should go even further than
‘subjective devaluation’ in recognising the subjectivity of value; and
that where there is evidence (e.g. using the request test) that the
particular defendant overvalues something that has no (or a lower)
objective value, it is the defendant’s own valuation – rather than the
objective market value – that should count.
So, for example, if the defendant requests services at a higher rate
than the market rate then, in so far as there is a claim for restitution
of an unjust enrichment (eg because there is no valid contract) it
would seem that the contract price is the best guide to the value of
the services to the defendant and that that, therefore, should be
central to the measure of restitution.”
28. In his recent work Restatement of the English Law of Unjust Enrichment,
2012, (“Restatement”) p 158, Professor Burrows states that “the correct view is
probably that, without a valid contract, the claimant should not be entitled to
overvaluation. In other words … restitution allows downward subjectivity only so
as to protect a defendant”. This view is expressed in the light of the decision of the
Court of Appeal in the present case and it is possible that Professor Burrows
prefers the view expressed at Burrows p 60 quoted above. In relation to the
question of whether a defendant has received a benefit at all (because the goods or
services had no market value), Professor Virgo, after referring to the principle of
subjective devaluation, states:
“ … logically and for reasons of consistency it should be possible to
use the defendant’s own valuation of what has been received to
identify an enrichment, even though the reasonable person would not
regard the defendant as having received anything of value.” (Virgo,
pp 68-69)
29. However, in my view, the principle of subjective revaluation should not be
recognised. Unlike the principle of subjective devaluation, it is not necessary in
order to protect a defendant’s freedom of choice. It is for this reason, as it seems
Page 12
to me, that it would not be unprincipled to recognise subjective devaluation whilst
rejecting the notion of subjective revaluation. In any event, the principle of
subjective revaluation seems to be unnecessary in the context of identifying
whether a defendant received a benefit at all, that is in cases where the services or
goods have no market value. In such a case, the defendant would in most cases be
estopped from denying that the service constituted a benefit: see Virgo at pp 90-91.
30. In the present case, it is accepted that Mr Benedetti’s services had an
objective value. The issue is whether subjective revaluation can be relied upon,
not in order to identify a benefit, but in order to value the benefit so conferred. In
my opinion, that is not permissible. Although there is some academic support for
such a solution, there is no authority for the proposition that, in cases where a
benefit has an objective market value, the claimant should be entitled to invoke the
defendant’s subjective willingness to pay a higher sum for the benefit as a reason
for valuing the benefit at a higher rate.
31. I agree, for the reasons given above, that there should be no subjective
revaluation in the two hypothetical examples described by Professor Burrows in
his Restatement (at pp 158-159). In example 2, C enters into a contract for the
carriage of D’s goods by sea. D is most anxious to secure the services of C and
therefore agrees to pay twice the market rate. After C completes two-thirds of the
journey, the contract of carriage is frustrated when war breaks out and the ship is
requisitioned. The goods are unloaded and D is able to complete their carriage by a
different route at a cheaper rate. Assuming that C is entitled to a restitutionary
monetary award (or quantum meruit) for the value of C’s services based on unjust
enrichment, it seems to me that the assessment should be based on the market rate.
C would only be entitled to the agreed higher rate if it could bring a contractual
action.
32. In example 3, C mistakenly delivers heating oil to D (rather than D’s
neighbour) just before Christmas. D’s neighbour has plenty of oil and was just
topping up out of an abundance of caution. By contrast, D was running on nearempty, facing a houseful over Christmas, and would have happily paid double the
market rate. Without a valid contract with D, it is hard to see that C should be
entitled to restitution for the enhanced value of the oil to D. Rather, in a claim in
unjust enrichment, C would be entitled to a restitutionary award against D for the
value of the oil assessed at the market rate. (Restatement, p 158).
33. In these examples the enrichment of the defendant is, in my view, only
unjust insofar as it represents the market value. The law of restitution, unlike the
law of contract, is not primarily concerned with the intentions of the parties.
Page 13
The legal principles – summary
34. In summary, in my opinion, in a case of this kind, (i) the starting point for
identifying whether a benefit has been conferred on a defendant, and for valuing
that benefit, is the market price of the services; (ii) the defendant is entitled to
adduce evidence in order subjectively to devalue the benefit, thereby proving
either that he in fact received no benefit at all, or that he valued the benefit at less
than the market price; but (iii) save perhaps in exceptional circumstances, the
principle of subjective revaluation should not be recognised, either for the purpose
of identifying a benefit, or for valuing a benefit received.
The facts
35. I turn to the facts, so far as they are relevant to the issues identified above.
This involves a consideration of the Acquisition Agreement point, the €75.1m
point and of what, if anything Mr Benedetti is entitled to. I will focus only on the
facts which are directly relevant to the issues in this appeal. The full facts are set
out with admirable clarity in the judge’s judgment.
The Acquisition Agreement point
36. The Acquisition Agreement was signed on 31 January 2004. The story
however began in 2002 when Mr Benedetti became aware that Enel SpA (“Enel”),
which was the largest energy company in Italy, might be willing to sell its wholly
owned subsidiary Wind Telecomunicazioni SpA (“Wind”). Mr Benedetti and Mr
Sawiris met in Cairo in December 2002. The events were explained in detail by
the judge at paras 102-117. The judge held that Mr Benedetti sought to persuade
Mr Sawiris that it would be possible to acquire control of Wind through a pyramid
structure with only a limited equity investment. Mr Sawiris made it clear that he
would not be prepared to consider an investment of more than €50m. Between
paras 118 and 168 the judge described in detail the events between the meeting in
December 2002 and the signing of the Acquisition Agreement in January 2004.
He also gave his reasons for rejecting Mr Benedetti’s case that there was any
relevant oral understanding between himself and Mr Sawiris. During that period
Mr Benedetti explored alternative deals in connection with Wind.
37. The judge described the events leading up to the signing of the Acquisition
Agreement in paras 169-190 and his conclusions as to the true construction of it
are at paras 191-225. His findings in this respect are not and could not be
challenged. In short, the Acquisition Agreement provided by clause 2 for the
establishment, within a limited period, of a special purpose vehicle to be called
Page 14
Rain Investments SpA (“Rain”), of which Mr Sawiris’ company would initially
own two-thirds and Mr Benedetti’s company would own one-third. Each company
would provide two of the four directors in Rain, although the chairman would be
appointed by Mr Sawiris’ company and would have the casting vote. The purpose
of the Acquisition Agreement was expressed to be the acquisition of Wind. By
clause 4 the negotiation was to be handled by Mr Benedetti with the support and
advice of Mr Sawiris, both of whom were to use their best endeavours to obtain all
finance obtained from third parties for the acquisition and Mr Benedetti was to use
his best endeavours to obtain the necessary co-operation and approval of the Italian
government and the management of Wind. By clause 5, Mr Sawiris’ company was
to subscribe €200,000, of which Mr Sawiris was to subscribe two-thirds and Mr
Benedetti one-third. For that purpose, Mr Sawiris agreed to lend Mr Benedetti his
share, namely just under €67,000 which, by clause 5.6, was to be repayable out of
dividends when Rain became profitable or was able to declare dividends. By
clause 5.4, the companies were to use their best efforts to raise between €1 billion
and €1.2 billion to complete the acquisition. The only other provision of the
Acquisition Agreement which entitled Mr Benedetti to payment was clause 6,
which provided by clause 6.1 that all directors were entitled to receive directors’
fees and expenses and, by clause 6.2, that in consideration of Mr Benedetti
allocating approximately 60 per cent of his working time to Rain and the
acquisition, he would be entitled to €5,000 per month until the acquisition was
completed.
38. Thus, under the Acquisition Agreement Mr Sawiris was to invest no more
than €50m and it was the role of both Mr Benedetti and Mr Sawiris to find third
party investors. The remuneration to be paid to Mr Benedetti under it was limited.
It was no doubt hoped that both Mr Benedetti and Mr Sawiris would be able to
earn very substantial sums as a result of the investments made by others. The judge
and the Court of Appeal held that the parties abandoned the Acquisition
Agreement and that the transaction which replaced it was very different from it:
see in particular the judge’s judgment at paras 463 to 477 and para 493. As Arden
LJ put it in the Court of Appeal at para 3, the parties had an agreement under the
Acquisition Agreement for other services but no agreement for the services in
issue, namely the services in respect of which the claim in quantum meruit is
advanced. In short, their agreement under the Acquisition Agreement was for the
provision of services in connection with Wind by a different route from that
ultimately adopted. In para 493 the judge held that the parties knew that the
Acquisition Agreement had no relevance to the changed circumstances.
39. It did not prove possible for the parties to the Acquisition Agreement to find
third party investors, so that it was not possible for Mr Benedetti to receive any
payment from that source. It is true that, as the judge held at para 143, Mr Sawiris
accepted that at some stage he agreed that Mr Benedetti should have one-third of
the €50m share capital on the terms of a loan but the judge held that there is no
Page 15
evidence that that arrangement was ever extended to cover the totality of Mr
Sawiris’ eventual investment. The proposed position under the Acquisition
Agreement is set out diagrammatically in para 15 of Arden LJ’s judgment which is
reproduced as Annex 1 to this judgment.
40. From para 226 the judge described in detail the events after the signing of
the Acquisition Agreement. A critical aspect of the Acquisition Agreement was
that third parties would invest in a company controlled by Mr Sawiris and Mr
Benedetti, in which Mr Sawiris would have the majority share. When it proved
difficult to find investors Mr Benedetti began to look for other ways of proceeding,
but they came to nothing. The judge held that Mr Sawiris was at no stage willing
to proceed on any basis other than that he would have control of the new company.
Under the new arrangement there were no third party investors of the kind
anticipated under the Acquisition Agreement, so that the basis upon which Mr
Benedetti had hoped to make a substantial profit fell away.
41. The judge held at para 493 that the Acquisition Agreement ceased to have
effect. It is not now contended that he was wrong about that but it is said that the
Acquisition Agreement continues to have some effect relevant to the assessment
of the benefit which Mr Benedetti conferred on Mr Sawiris by his services. I
would not accept that submission. As Arden LJ concisely described the position in
the Court of Appeal at para 16, in spite of Mr Benedetti’s best endeavours, by
2005 it had become apparent that there would be no outside investors. Instead of a
maximum investment of €50m, Mr Sawiris, Cylo and the Holding Companies
invested very substantially more in a new scheme described by the judge in detail
at the beginning of his judgment. On 26 May 2005 Enel and its holding company
Enel Investment Holding BV entered into a sale and purchase agreement (“the
SPA”) for the disposal of 62.75% of the issued capital of its subsidiary Wind for
€2.986 billion. The SPA contained an option enabling Enel to dispose of further
shares in Wind for €328m which it subsequently exercised. The transaction was
brought into effect by means of two closings, the first on 11 August 2005 and the
second on 8 February 2006.
42. The acquisition, as contemplated as at the First and Second Closings, is set
out in diagrams at Annexes 2 and 3 of this judgment respectively. Annex 2 is taken
from para 17 of the judge’s judgment and Annex 3 is taken from para 17 of Arden
LJ’s judgment and para 24 of the judge’s judgment. As can be seen, the new
arrangements were radically different from those contemplated under the
Acquisition Agreement. In these circumstances, I can see no basis upon which it
can be relevant to an assessment of the benefit which Mr Benedetti conferred upon
Mr Sawiris. It is wholly irrelevant to the market value of the services rendered.
Nor is it relevant to the issue of subjective revaluation.
Page 16
The €75.1m point
43. It is not in dispute that Mr Benedetti rendered services to Mr Sawiris of
considerable value. In the course of his judgment, the judge described them in
some detail. He summarised them between paras 534 and 571. He correctly
rejected the relevance of the Acquisition Agreement at para 550. He then
considered (at paras 551-563) in some detail the evidence of two expert witnesses,
namely Mr Sottile on behalf of Mr Sawiris and Mr Reynolds on behalf of Mr
Benedetti. He preferred the evidence of the former, who said that Mr Benedetti’s
role was essentially that of a broker or adviser, to that of Mr Reynolds, who said
that he was a promoter and that, as such, his remuneration package should be that
relevant to other types of market participants, such as private equity firms or hedge
funds.
44. In essence, the judge concluded at para 560 that equity based awards were
only typically available when the person involved would continue to have some
part to play in the management of the company or the investment after the
transaction completed, that it was clear from the Acquisition Agreement itself that
it was never the intention that Mr Benedetti should assume that role and that he did
not seek remuneration on that basis. In paras 561 and 562 the judge concluded that
all the tasks carried out by Mr Benedetti fell within the agreed scope of a broker or
adviser role. He accepted Mr Sottile’s evidence that on that basis a fair fee in the
market for what Mr Benedetti did would be within the range 0.1% to 0.3% of the
transaction value, which would amount to between €12 and €36.3m. The judge
concluded that it would in all the circumstances be appropriate to take a figure at
the top end of the range. He accordingly held that the market price for the services
in fact performed by Mr Benedetti for Mr Sawiris was €36.3m.
45. Those conclusions were not directly challenged on behalf of Mr Benedetti.
In any event I see no basis upon which they could be challenged in this Court. In
so far as there were or appeared to be suggestions in the course of the argument
that the market in which Mr Benedetti was rendering the services was different
from that assessed by Mr Sottile, whose evidence the judge accepted, I would not
accept them. I therefore proceed on the basis found by the judge, namely that the
objective market value of Mr Benedetti’s services was €36.3m.
46. The judge did not, however, award that sum but the greater sum of €75.1m.
He did so on the basis that Mr Benedetti was entitled to more than the market rate
because there was evidence that Mr Sawiris himself regarded the benefit of the
services to him as being at least €75m. The Court of Appeal disagreed and
awarded him only €14.52m on the basis described at para 7 above. Mr Benedetti
says that he is entitled to significantly more than €75.1m but that he is in any event
entitled to that sum (as the sum awarded by the judge). Mr Sawiris relies upon the
Page 17
fact that Mr Benedetti had already received €67m in support of the submission
that, since that is more than the market value of €36.3m, he is not entitled to
anything. In the alternative he submits that the maximum to which Mr Benedetti is
entitled is €14.52m for the reasons given by the Court of Appeal.
47. In order to resolve these issues it is necessary to consider the findings of the
judge as to the circumstances in which Mr Benedetti came to receive €67m, the
circumstances in which Mr Sawiris offered to pay €75.1m and the relationship
between them. Mr Benedetti continues to assert that he is entitled to more than
€75.1m but I can see no possible basis for such a claim given the judge’s findings
of fact.
48. At para 226 et seq the judge described various steps taken by Mr Benedetti
in order to protect his position if the Acquisition Agreement did not go ahead. In
January 2005 Weather Investments SA (“Weather I”) was incorporated by
Investors in Private Equity (“IPE”). The shares were held by IPE and a subsidiary
of IPE. In March 2005, at a time when one of the potential investors in Rain, Mr
Ross, dropped out, Mr Sawiris asked Mr Benedetti to transfer the shares in
Weather I to him. On 23 March 2005, Mr Benedetti was appointed a director of
Weather I. On 24 March, IPE transferred 99% of the shares in Weather I to Mr
Benedetti and the one remaining share to Mr Abdou, who worked for Mr Sawiris.
On the next day, Mr Benedetti transferred his shares in Weather I to Mr Sawiris.
As of then, the idea of a purchase by an IPE led consortium was effectively a dead
letter.
49. On 24 March 2005, Mr Benedetti made two agreements without the prior
approval of Mr Sawiris and without, at that stage, disclosing to him or Mr Abdou
the fact that he would receive a substantial fee from the transaction. By the first
agreement Mr Benedetti signed a Brokerage Agreement on behalf of Weather I
(“the First Brokerage Agreement”), pursuant to which Weather I appointed
International Technologies Management Ltd (“ITM”), an English company owned
and controlled by Mr Benedetti, to provide “Brokerage Services” (as defined in the
agreement) on behalf of Weather I in accordance with instructions from the
company. In return for the provision of these services ITM was to receive 0.7% of
the transaction value as defined in the agreement, which included the total amount
paid to acquire Wind at its enterprise value including the amount necessary to
refinance its debts. A striking feature of the arrangements was that Mr Benedetti
was able to make the agreement on behalf of Weather I because he had just been
appointed a director and he was able to procure the agreement of ITM, which was
subsequently signed by a Mr Nounou on its behalf, because he controlled it. He
did not send a copy of the First Brokerage Agreement to Mr Sawiris or Mr Abdou,
and they were not made aware that Mr Benedetti was to receive a brokerage fee
until much later. The judge described the creation of the agreement as essentially
a piece of opportunism on the part of Mr Benedetti: see paras 334 and 565.
Page 18
50. Mr Benedetti signed a second agreement on the same day, 24 March 2005
(the “Support Agreement”), on behalf of Weather I, which provided that Managest
Media SA, a company in which Mr Benedetti had a 60% stake, would receive a
flat fee of €3.4m plus expenses in return for the provision of support and logistic
services to Weather I in connection with the acquisition, in accordance with
instructions from Weather I. On 25 March, Mr Benedetti transferred the shares in
Weather I to Mr Sawiris.
51. By early to mid April 2005, IPE were forced to pull out of the deal as they
were not able to secure or find any other suitable investors. Mr Sawiris, together
with his family and companies controlled by his business associates, was left as the
only potential investor. By May 2005, when Weather Investments II SARL
(“Weather II”) was incorporated to replace Weather I, the structure of the
acquisition had changed to include Weather Italy. Mr Benedetti had no beneficial
interest in any of these entities, although, when the SPA was executed on 26 May,
he signed the SPA on behalf of Weather Italy, of which he was a director at the
time. Also on 26 May the First Brokerage Agreement and the Support Agreement
were assigned by Weather I to Weather Italy. The structure of the new deal is set
out in Annex 2, as at the first Closing on 11 August 2005. On or shortly after 11
August 2005 Mr Benedetti resigned as a director of Weather Italy.
52. It is important to note that at para 404 the judge found as follows. Mr
Benedetti confirmed in his first witness statement that with the signing of the SPA
on 26 May 2005 his role in the acquisition was, for all practical purposes, over.
Although detailed work remained to be done by the lawyers and the banks in
relation to the closing arrangements, these were matters of detail with which Mr
Benedetti was not concerned. The judge added that the subsequent history of the
transaction was therefore relevant only to two issues: the discussions which took
place with Mr Abdou and Mr Sawiris about remuneration and the payment to Mr
Benedetti of the €67m brokerage fee. I take the story of the €67m brokerage fee
largely from paras 59-63 of the agreed Statement of Facts and Issues, which are
based on paras 424-438 of the judge’s judgment.
53. As of 27 July 2005, Mr Abdou was aware that a brokerage fee of about
€87.76m, which had been listed in the costs of the transaction as being payable to
ITM, would go to Mr Benedetti personally. He and Mr Nasr (CFO of Orascom)
originally understood that the €87m figure was not intended as a payment to Mr
Benedetti for his brokerage services but was to be used to discharge his liabilities
to third parties. Mr Sawiris was very angry about the scale of the expenses of the
transaction; so Mr Benedetti agreed with Mr Sawiris to reduce the payment from
€87m to €67m, saying that that was the amount he needed at First Closing. The
judge held (at para 432) that Mr Benedetti led Mr Abdou and Mr Sawiris to
believe that the money was to be used to pay third parties who had assisted in the
transaction. Mr Sawiris doubted this, but because he intended to reward Mr
Page 19
Benedetti for his efforts and owed him money, he was content to allow the €67m
to be paid with a view to sorting the position out later.
54. Mr Benedetti then arranged for a new agreement between ITM and Weather
Italy to be prepared called “the Revised Brokerage Agreement”. It was executed
in late July or August but backdated to 26 May 2005, which was (as just stated)
after Mr Benedetti’s services had been concluded. It provided for a fee of €67m
(0.55% of the transaction value) to be paid to ITM in respect of “brokerage
services”. The agreement was signed by Mr Benedetti on behalf of Weather Italy.
Mr Abdou first saw the Revised Brokerage Agreement on or about 3 August 2005,
before the fee was paid. The €67m fee was paid to ITM on about 12 August 2005,
following the First Closing. The fee was paid as a transaction cost: in other words,
it was paid by Weather Italy out of the money raised to finance the transaction. On
13 September 2005, following a meeting in Rome on 12 September 2005 attended
by Mr Sawiris and Mr Benedetti, Mr Abdou sent an email to Mrs Shimi (an
employee of Orascom) asking her to print off the Revised Brokerage Agreement
which he sent as an attachment in readiness for Mr Sawiris’s return from Rome,
saying that Mr Sawiris was expecting it.
55. Mr Sawiris’ knowledge of the payment of the €67m is relevant to Mr
Benedetti’s case that, as the judge held, he is entitled to at least €75.1m. It is also
relevant to the cross-appeal (see below). The judge awarded this sum on the basis
that he was entitled to have regard to negotiations between the parties as to the
value to be placed on Mr Sawiris’ services, even though the negotiations took
place after the services were completed. He held, in particular, that Mr Sawiris
offered to pay the figure of €75.1m and that that offer was evidence of the value
which Mr Sawiris, as the paying party, placed on Mr Benedetti’s services, albeit
with the benefit of hindsight: see para 568.
56. The judge held that the reason for the admission of the parties’ pre-service
agreements as set out in cases such as Way v Latilla [1937] 3 All ER 759 is that
they provide strong evidence of the value which they put on the services and that,
subject to appropriate safeguards, post-acquisition dealings may do the same. In
my opinion, that is not quite correct. It is true that what Lord Atkin called the
bargainings of the parties may be of assistance in order to ascertain the market
value of the services. They may also be of assistance in establishing whether there
is a case for subjective devaluation. However, this is not of course a case of
subjective devaluation but, if anything, of subjective revaluation. I have already
expressed the view that there is no room in principle for increasing the market
value to take account of subjective revaluation in a case of this kind. It follows
that, in my opinion, the Court of Appeal were correct to hold that the judge was
wrong in principle to award €75.1m.
Page 20
57. In the light of the detailed submissions that were made, I will however
consider the position on the facts. The question is whether the evidence establishes
that Mr Sawiris subjectively valued Mr Benedetti’s services at €75.1m or more.
The judge expressed his conclusions concisely in paras 570-571 as follows:
“570. The real issue is whether I should increase the fee payable to
Mr Benedetti to take account of the €75m which Mr Sawiris offered
to pay under the October agreement. Although Mr Benedetti clearly
believes that he is entitled to more, it is difficult to ignore the fact
that Mr Sawiris was prepared to pay him considerably more for his
efforts than a strict application of market rates would produce. Mr
Sawiris says in his witness statement that he regarded the €75m
figure as generous but that is not inconsistent with it representing
what he considered Mr Benedetti’s services to be worth. These
negotiations did not take place under the shadow of threatened
litigation and can properly be considered in my view as a genuine
attempt by Mr Sawiris to pay to Mr Benedetti a proper value for
what he had achieved.
571. The best evidence of Mr Sawiris’s thoughts on this matter is
contained in the June and September e-mails from Mr Abdou quoted
in paragraphs 187-189 above. They indicate both the importance
which Mr Sawiris attached to Mr Benedetti’s role and the reasons
why his remuneration should be limited to the payment of a fee. I
think that it would be wrong to ignore this evidence when
considering the value to be attributed to Mr Benedetti’s services. He
is entitled, in my judgment, to the €75.1m in addition to the
brokerage fee which he has already received.”
58. There were three emails dated 11 June and 12 and 13 September 2005, all
written by Mr Abdou. As the judge found at para 186, they were sent at a time
after the signing of the SPA, when Mr Sawiris was seeking an agreement with Mr
Benedetti about what he should receive for his role in the transaction. The judge
set them out in paras 187-189:
“187. In the first of these e-mails, Mr Abdou wrote:
‘I had two discussions with Naguib regarding your deal. I will tell
you exactly his response. First of all he very much appreciates all
what you have done and he acknowledges that without you, there
would be no deal. However, he feels he has been clear with you from
the beginning that the deal was never meant to be this big and that
when you two signed the agreement over one year ago, the deal has
Page 21
totally changed. But even then, he told you and the agreement says,
that he will not pay commissions etc. for a deal that merges or has
OT as a party and rather the intent and spirit of the deal was that he
would lend you your 1/3 of the Euro 50M target capital to be repaid
with interest after exit so that you would not have to put in money
yourself and that you would look to raise money for a deal that had
his investment maximum at 200 to 300m euro. Today, Weather is no
longer a passive investment for Naguib but rather a vehicle which he
put in all his value that he owns (and a part of his family’s wealth).
He very much wants you involved in the BOD of the company and
to be able to do other deals in the future. He sees the relationship
between you two as strong and positive but he asks for you to be
reasonable in what you ask. When I told him your request and the
logic, he was quite upset as he did not expect you to ask for so much.
While of course he sees that the original agreement needs to change,
he does not agree with your request. In addition, while positive
things happened to improve the deal, a few serious restrictions arose
such as the need for Euro 500M cash (vs 200 to 300) and the limited
financial partners and the somewhat restrictive IMI loan. The only
reason he says this is to make the point that the deal today is totally
different than the original and as such what he is prepared to offer
you is l% of Weather for free and he can pay it to you in shares or
give you a put option to take it in cash. If you choose cash, he wants
to agree with you a timetable so that he can plan his cash sourcing.’
188. In the second e-mail, he said this:
‘I talked to Naguib again. He wanted me to tell you that he feels 1%
(which is Euro 75M today and may double if we succeed in Wind),
is by far more than what you two had agreed to in the beginning
when the deal was simple to lend you Euro 17M in cash to invest. As
I mentioned before, he even crossed out all the sections related to OT
and fees in the original deal because that was never his intention. He
insists that he is being very generous with his offer and again wants
to continue the relationship for a long time. He told me that if he
really thought that you wanted hundreds of millions compensation,
he would not even have done the deal at all. Alessandro, please look
at the initial deal and the current offer. We are talking about Euro
75M versus Euro loan plus interest. Think strategically, long term. I
am telling you as a friend that Naguib truly believes this is a very
generous offer and this is not an attempt to negotiate with you.’
(Emphasis added)
189. Finally, on 13 September Mr Abdou wrote:
Page 22
‘Also, have you concluded the issue of the 1% of free shares in
Weather? Let me advise you with something and I refer to is what I
told you months ago about Naguib. I have talked to him many times
on this point and I have succeeded (in my opinion) to get you the 1%
free shares even though Naguib has never in his life given free shares
to anyone and certainly not an amount of Euro 75M. He had offered
this willingly to you because of what you have done and he has
repeatedly thanked you for it. But I must tell you, he is quickly
getting upset because he does not understand why you are not happy.
The original deal was to loan you 1/3 of Euro 50M which was to be
repaid. The original deal never included OTH (and in fact he crossed
out the reference to paying a success fee on integrating OTH). The
deal was to have other financial partners … you know how that
ended. In any case, never was the amount paid to you supposed to
even get close to 75M. In addition, the fact that they are free and not
a loan is a really big deal that you seem to be underestimating. I
know Naguib and I am telling you that he will not increase the offer
ever and the longer things drag on, the higher the probability that
this ends badly. He wants to have a strong relationship with you in
the future as he values you highly. However, he can not do anything
that will put his family’s interests at risk, either financially or
otherwise.’” (Emphasis added)
59. The first of the three emails also contains a statement that Mr Sawiris had
asked for a letter saying that Mr Benedetti had received the €67m. At para 437 the
judge rejected a submission that that showed that Mr Sawiris knew that Mr
Benedetti had received that sum personally. The judge held that it showed that Mr
Sawiris had his suspicions on the point. He added that the second part of the email
showed that the €75m was to be the total amount paid to Mr Benedetti for his
work.
60. Those emails undoubtedly contain an offer to pay €75m, which was
approximately the value of the 1% of the shares being referred to. Negotiations
continued in 2005 and for much of 2006. They are described by the judge at paras
438-460. They included a meeting in Cairo in January 2006. By that time Mr
Sawiris suspected that Mr Benedetti had taken the €67m for himself. He
nevertheless offered €75m, which it appears was to be on top of the €67m, and Mr
Benedetti agreed in principle to accept it. It was not suggested that there was a
binding agreement to that effect.
61. On 3 February 2006, an interview that Mr Sawiris gave to “L’Espresso”
about the transaction was published, including the following question and answer:
Page 23
“You paid 400m Euro in commissions including banks and the
advisor Alessandro Benedetti. “L’Espresso” calculated that
Benedetti received 90m, although he denied it. Doesn’t that seem
like a high price to pay?!
When it came to discussing the fee, I went to a bank that wasn’t
involved in the operation. I paid 50 thousand Euro for them to give
me an opinion on the fee structure because I had the same feeling.
They told me it was alright. On the other hand Benedetti worked for
me for two and a half years without asking for anything, he took
costs at his own risk, so the bill at the end wasn’t too much.”
The judge noted at para 439 that, when asked in cross-examination based on the
article, whether he believed that Mr Benedetti had received the fee, he said that he
had always felt that Mr Benedetti was lying about the €67m and that he had
received the fee. Mr Sawiris said in his witness statement that by the time of the
Cairo meeting he suspected that that was the case. At para 450 the judge referred
to a letter which confirmed the basic agreement made in Cairo.
62. Finally, as the judge explained at para 457, on 18 October 2006 Mr Abdou
sent Mr Benedetti an email attaching two draft agreements. The first was a draft
Supplemental Agreement to the Revised Brokerage Agreement dated 25 May
2005, to be signed by Mr Sawiris and Mr Benedetti, between Weather II and ITM
which expressly acknowledged receipt of €67m by ITM and which provided that
Weather II would pay a final fixed success fee of €75.1m to ITM. The second was
a termination agreement formally bringing the Acquisition Agreement to an end.
Mr Benedetti did not reply to the email. He said in his witness statement that he
regarded the offer as insulting and proceeded to consult his lawyers.
63. It can readily be seen why the judge said at para 567 that it was clear from
the evidence and from the terms of the draft Supplemental Agreement that by
October 2006 Mr Sawiris was aware that Mr Benedetti had received the €67m and
that the €75.1m success fee was to be an additional payment.
64. Thus, in the end and in spite of the apparent agreement, Mr Benedetti never
accepted the offer of €75.1m. It is submitted by Mr Howard that the negotiations
between the parties show that both parties took the view that Mr Benedetti’s
services were worth at least €75m and that Mr Sawiris personally valued his
services in at least that amount. The judge accepted Mr Sawiris’ evidence that he
regarded the offer as generous, although he said that that was not inconsistent with
the conclusion that it represented what he considered the services to be worth.
One might think that it was consistent with a lower figure. The passages which I
Page 24
have italicised in the above quotations seem to me to be saying that Mr Sawiris
regarded the offer as very generous. They also suggest to me that, in spite of the
protestations, and indeed the finding of the judge, these exchanges were indeed
part of a negotiation.
65. Etherton LJ has given detailed reasons for the conclusion that, even if it
were possible in an appropriate case to increase a restitutionary award above the
usual market rate for the services rendered, such an award would not be justified in
the present case. I agree and, save perhaps for the last sentence of para 156, I
cannot improve on his reasons, which are set out in his paras 155 to 158 and can in
essence be summarised as follows. The June emails were written before Mr
Benedetti had received the €67m and the Revised Brokerage Agreement was not
executed until July or August 2005 and was backdated to 26 May 2005. At the
time of the September 2005 email Mr Sawiris was probably unaware that Mr
Benedetti had received the money personally, although he had his suspicions.
When the sum was paid on 12 August 2005 Mr Benedetti had asked for it to be
paid to third parties. Accordingly the emails are no support for the conclusion that
at that time Mr Sawiris would have been willing to pay Mr Benedetti both €67m
and €75.1m (ie a total of €142.1m), or indeed more than €8.1m, which is the
difference between the two figures. Etherton LJ added that if, as the judge thought,
the emails are the best evidence of Mr Sawiris’ state of mind, they are not
inconsistent with an outcome whereby Mr Benedetti is entitled to retain the €67m
pursuant to the Revised Brokerage Agreement (for which there has been no claim
for repayment) and is awarded €14.52m on the basis described above.
66. By the time of the draft October 2006 agreement, litigation was plainly in
prospect. Clause 5 of the draft expressly provided for a discharge of liabilities on
both sides. As the judge recognised, it is dangerous to rely upon offers made in
such circumstances. I would accept the submission made by Mr Rabinowitz that
the finding of the judge in para 570 that the negotiations for the draft October
agreement did not take place under the shadow of threatened litigation cannot be
justified. Mr Benedetti himself said in a witness statement that in Cairo in January
2006 he said to Mr Sawiris that, if he did not agree with Mr Benedetti, they could
go to court and see who was right. The judge recorded at para 447 Mr Sawiris’
evidence at that time as being that the offer of €75m was “to finish the matter there
and then”. In Mr Benedetti’s closing submissions before the change of tack to rely
on the €75.1m point, it was submitted (in support of a submission that the
negotiations should not be considered) that “those later bargainings [were] in the
nature of some kind of settlement discussions”.
67. In short Mr Sawiris’ position varied considerably from time to time. There
is little evidence of his true opinion as to the value of Mr Benedetti’s services. If
the point had been taken at the outset, the evidence might have been more coherent
but, as I see it, the evidence falls far short of what would be required to establish
Page 25
Mr Sawiris’ subjective opinion of the value of Mr Benedetti’s services.
Accordingly, even if the principle of subjective revaluation were to be recognised,
I would dismiss the appeal on both the Acquisition Agreement point and the
€75.1m point.
What, if anything, is Mr Benedetti entitled to?
68. It follows from the above that, subject to the cross-appeal, I would uphold
the decision of the Court of Appeal to award Mr Benedetti €14.52m. It is
submitted, however, on behalf of Mr Sawiris that, given that the judge held that the
market value of Mr Benedetti’s services was €36.3m and that he has already
received €67m, he has been fully compensated for any unjust enrichment. It is
submitted that, if he is entitled to retain €14.52m as well as €67m he will have
received €81.52m, which would be manifestly unjust.
69. The judge approached the matter in this way. In para 563 he identified the
point being taken by Mr Rabinowitz, namely that credit must be given for the
€67m brokerage fee paid to Mr Benedetti through ITM. In para 564 he identified
two points made on behalf of Mr Benedetti in support of the conclusion that the
award to Mr Benedetti should be in addition to the €67m received under the
Revised Brokerage Agreement. The first point was that the agreement was made
between different parties and the transaction cost was payable by all investors in
Weather Italy. The second was that the agreement covered different services from
those contained in the Acquisition Agreement. In particular the definition of
“brokerage services” did not include bringing the investment opportunity to Mr
Sawiris or obtaining the co-operation of the Italian Government or the
management of Wind.
70. The judge’s conclusions are contained in just two paras of his judgment,
paras 565 and 566. In para 565, as I read it, the judge rejected the first point. He
noted that the claim for unjust enrichment was based on the premise that Mr
Benedetti was entitled to be compensated for the value of the services he
performed because it would be unjust for those who have received them to take
them without payment. If such compensation has in fact been provided as a cost of
the transaction there was no reason in principle why Mr Benedetti should not be
required to bring it into account in any determination of what is the fair reward for
the services he performed, assuming of course that the payment relates to the same
services. The judge added at the end of para 565:
“It is difficult to see how that conclusion would be unjust. I accept
that if it had been agreed between the parties that Mr Benedetti’ s
remuneration from the Defendants should not take into account the
Page 26
sums received under the brokerage agreement then the position
would be different. But that is not this case. There was no agreement
with Mr Sawiris that Mr Benedetti should be paid a brokerage fee in
addition to what he received under the Acquisition Agreement. As
explained earlier, the signing of the First Brokerage Agreement was
essentially a piece of opportunism on the part of Mr Benedetti and,
in so far as it had any historical justification, that lay in the
arrangements between Mr Benedetti and IPE. When the fees
schedules were prepared and it became clear that ITM was to receive
the brokerage fee the original assumption on the part of Mr Abdou
and Mr Sawiris was that the money would be used to pay Mr
Benedetti’s costs and other liabilities to third parties.”
71. As it seems to me, the judge thus rejected the first point on the ground that
Mr Benedetti had personally received the sum of €67m. Both Arden and Etherton
LJJ disagreed with that approach. Arden LJ said at para 93 that if Mr Benedetti
has been wrongly paid the €67m fee to any greater extent than the amount
apportioned by the judge, the paying company has or would have had remedies
against him, which it can pursue and that it would not be right to short circuit the
pursuit of those remedies and give Mr Sawiris all that could be obtained in
proceedings brought for that purpose by treating the €67m as a deduction from an
award. Etherton LJ made a similar point at paras 161 and 162 where he observed
that the Revised Brokerage Agreement was between different legal entities.
72. Mr Rabinowitz submits that those points are irrelevant. He submits that,
quite apart from the dubious nature of the Brokerage Agreement and the Revised
Brokerage Agreement, in these proceedings the focus is on the monies that Mr
Benedetti received personally. He submits that in a claim for unjust enrichment
the claimant must show that he rendered services which conferred a benefit for
which he has not been paid and it follows that, if Mr Benedetti personally received
payment for the totality of the services which conferred the benefit, he is not
entitled to anything more. I would accept those submissions. The judge held that
Mr Benedetti received the whole sum of €67m personally. The question is whether
that sum was in respect of all the services in respect of which this action is
brought.
73. As I see it, the judge recognised that that was the question. He said at para
566:
“The definition of ‘brokerage services’ in the Revised Brokerage
Agreement makes it clear that the €67m was paid in respect of the
work carried out by Mr Benedetti in the negotiation of the purchase
of Wind from Enel and the raising of the acquisition debt from the
Page 27
banks. Mr Benedetti is not entitled, in my judgment, to seek a
quantum meruit for this work when he has already been paid for it.
The sum of €36.3m which, on the evidence, would be the market rate
for the services he performed ought therefore to be apportioned to
take account of this. Being generous to Mr Benedetti, I think that a
fair apportionment· would be to attribute 60% of the €36.3m fee to
the work covered by the brokerage agreement and the remaining
40% to the services not obviously within the agreement. On this
basis, Mr Benedetti would be entitled to receive €14.52m in addition
to the €67m brokerage fee.”
74. It seems to me that the quarrel that Mr Rabinowitz has with that paragraph
is not with the first two sentences but with the last sentence. Here all the services
were rendered before the 26 May 2005. The judge accepted the evidence of Mr
Sottile (at para 552) that brokers or advisers in the position of Mr Benedetti were
compensated for their services by transaction fees, (normally success fees), which
varied between 0.1% and 0.3% of the transaction value for transactions of the size
of the Wind acquisition and included all ancillary services. It was on that basis that
the judge assessed the market value of Mr Benedetti’s services, having taken the
top of Mr Sottile’s range, namely 0.3%.
75. The point was clearly made in the course of the argument by Lord Reed.
He said (Day 3 pp 340-341) that he appreciated that there are factual situations
where a clear distinction can be drawn between different services and the way in
which they would be remunerated in the market, but in this case we were told that
the services as a whole would be remunerated in the market by a unum quid fee
calculated as a percentage commission of the value of the entire transaction. That
amount would work out at a maximum of €36.3m. Lord Reed posed the question
whether, if Mr Benedetti has actually received €67m, one cannot say in that
situation that he cannot possibly have a claim in unjust enrichment, even if the
agreement was a perfectly regular agreement. The alternative is that he will be
remunerated, say, to the tune of €81 or 82m, as the Court of Appeal held, in the
name of avoiding unjust enrichment. He suggested that that was to say the least a
paradoxical result, if the correct starting point is that appropriate remuneration
would have been €36.3m. Mr Rabinowitz naturally accepts that way of putting it.
He submits that the market value of €36.3m was in respect of all the services and
asks rhetorically how Mr Benedetti can possibly be entitled to more.
76. Mr Howard’s answer (at Day 3 p 387) to those questions is based on the
judge’s apportionment. As he put it concisely, the €67m was paid in respect of
services A but services B were also provided by Mr Benedetti and the unjust
enrichment is Mr Sawiris’ failure to pay for services B. Mr Howard submits that
that is in effect what the judge held at para 566.
Page 28
77. As I see it, the problem with the judge’s apportionment is that the judge
gives no reason for his conclusion and it seems to me to be inconsistent with his
conclusions at para 561, where (as stated in para 44 above) the judge concluded
that all the tasks carried out by Mr Benedetti fell within the agreed scope of a
broker or adviser role. He reached that conclusion on the basis of the evidence of
Mr Sottile referred to in para 74 above.
78. Mr Rabinowitz is very critical of the Revised Brokerage Agreement but it is
important to note that it was made in July or August and backdated to 26 May
2005, by which time all Mr Benedetti’s services had been completed. Moreover,
taken at its face, its recitals show that it was intended to cover the remuneration for
ITM’s services (ie Mr Benedetti’s services) in the past as well as the future. There
were no services rendered in the future. By clause 7.2 the “Broker’s fee” was
described as “a success fee of 0.55% of the Transaction Value”. Although the
numbers are different, that was precisely the same approach as that advanced by
Mr Sottile and accepted by the judge. In these circumstances, even taking the
Revised Brokerage Agreement at face value, I cannot see any basis for the
apportionment adopted by the judge. It appears to me to be clear that it covered the
same services as the services in respect of which compensation is sought in this
action.
79. In the course of the argument Lord Wilson drew attention to the third and
fourth recitals to the draft agreement of October 2006, which were prepared on
behalf of Mr Sawiris, at which time he was willing to settle on the basis that Mr
Benedetti could keep the €67m and receive €75.1m in addition. The recitals in the
draft agreement accepted that ITM performed a wider scope of services than the
Brokerage Services referred to in the Revised Brokerage Agreement and
recognised that Weather wished to supplement that agreement in order to
compensate Mr Benedetti for those wider services. The suggestion is that these
recitals are inconsistent with the conclusion that the services rendered under the
Revised Brokerage Agreement were the same as those in respect of which payment
is sought in this action. I would not accept that suggestion. The draft was no more
than a draft settlement agreement under which Mr Sawiris was willing to pay over
€142m to Mr Benedetti in order to bring this whole affair to an end.
80. The draft seems to me to be inconsistent with the basis upon which the
services were assessed by Mr Sottile and the judge, namely that there should be a
single fee to cover all the services performed by Mr Benedetti and that the market
value of all those services was €36.3m. A conclusion which entitles Mr Benedetti
to €81.52m does not seem to me to be just.
81. I would add that, as Mr Rabinowitz submits, and as appears above, the
figure of €67m was agreed by way of reduction from €87.76m without reference to
Page 29
the Revised Brokerage Agreement, which had not yet been created, or to the First
Brokerage Agreement and at a time when Mr Benedetti was claiming that the
money was going to third parties. Moreover the first Brokerage Agreement was, as
the judge held at para 334, opportunistically created by Mr Benedetti in order to
provide a justification for the payments he was intending to draw. In truth the
figure of €67m was not arrived at by reference to his remuneration at all and there
is no evidence that it was intended to compensate him for some but not all of the
services he had provided. In these circumstances, it seems to me that the definition
of “brokerage services” in the Revised Brokerage Agreement relied upon by the
judge and the Court of Appeal is not a sound basis for the apportionment exercise
carried out by the judge and upheld by the Court of Appeal.
82. For all these reasons I have concluded that the whole of the €67m, which
Mr Benedetti received personally, should be taken into account in deciding
whether he is entitled to anything further for the services he rendered to Mr
Sawiris. Since that figure is significantly greater than the market value of the
services rendered, namely €36.3m, it follows that he is not entitled to any further
payment. I would therefore allow the cross-appeal.
CONCLUSION
83. In all the circumstances I would dismiss the appeal and allow the crossappeal.
Page 30
ANNEX 1
THE ACQUISITION – AS CONTEMPLATED BY THE ACQUISITION
AGREEMENT
Mr Sawiris Mr Benedetti’s
company
Outside
Investors
providing
virtually all of
the funds
needed to
acquire Wind
not covered
by any bank
borrowings
Rain
Subsidiary or
Subsidiaries of Rain
Wind
66.6% 33.3%
Management
Fees
Generating
Income for
Rain
51-100%
0-49% votes
Page 31
ANNEX 2
FIRST CLOSING on 11 August 2005
April OSH Cylo
60.4% 31.4% 8.2%
3.6% 91.2% 5.2%
Weather Italy
100% 100%
Weather Capital “Pikco” (Italy)
Wind Acquisition
Holding Finance
SpA
50.1% 100%
50% +1 share in
OTH (pledged to
IMI)
“Bidco” (Italy)
Wind Acquisition
Finance SpA
WIND
62.75%
37.25%
Middle
Eastern
Investors
Weather II Enel
Page 32
ANNEX 3
SECOND CLOSING on 8 February 2006
Middle Eastern
Investors
Weather II Enel
Weather Italy
2.8% 71.1% 26.1%
100% 100%
Weather Wind Acquisition
Capital Holdings Finance
S.pA.
Orascom
(pledged to
IMI)
Wind Acquisition
Finance S.pA.
50.1% 100%
100%
Wind
Page 33
LORD REED
84. I too would dismiss Mr Benedetti’s appeal and allow Mr Sawiris’s crossappeal, for largely the same reasons as Lord Clarke and Lord Neuberger, although
I adopt a different approach to some extent to the subject of “subjective
devaluation”.
85. The case, as advanced on behalf of Mr Benedetti, is concerned with services
provided and accepted in the expectation of reward under a contract which in the
event was not concluded. A contract, referred to as the acquisition agreement, had
been entered into at an early stage in the parties’ dealings with one another, but it
had envisaged a venture of an entirely different character from that subsequently
entered into, and the only inference which could be drawn from the parties’
conduct was that they had tacitly agreed to abandon that agreement. Mr Benedetti
nevertheless provided his services to Mr Sawiris and his companies (which can for
present purposes be elided with Mr Sawiris) in circumstances where it was
understood that Mr Benedetti expected to receive some form of reward, but where
there was no agreement, or even a loose understanding, as to the form which such
a reward might take or as to its amount. It might perhaps have been possible in
those circumstances to argue that there was a contract with an implied term that
reasonable remuneration would be paid, and the court would then have determined
what, in the whole circumstances, ought to be regarded as reasonable
remuneration. The case has not however been brought on that basis. Instead, Mr
Benedetti has brought a claim based on unjust enrichment: a claim of a
fundamentally different character.
86. There is no doubt that Mr Sawiris was enriched by the provision of Mr
Benedetti’s services; that the enrichment was at the expense of Mr Benedetti, in
the sense that he expended his labour to provide those services, and his labour was
a marketable commodity; and that, in the absence of some reward for those
services, the circumstances called for restitution by Mr Sawiris, since he accepted
Mr Benedetti’s services in the knowledge that Mr Benedetti expected to be
rewarded for providing them. There was, on that footing, what is sometimes
described as a failure of consideration (not using that term in its strict contractual
sense): the services were provided on the basis that arrangements would be agreed
for Mr Benedetti to be rewarded, but no such arrangements eventuated.
87. Mr Sawiris however relies on the fact that Mr Benedetti received €67m as
remuneration under a contract referred to as the revised brokerage agreement. He
Page 34
maintains that there is no scope for applying the concept of unjust enrichment, or
at least that Mr Benedetti’s receipt of the €67m has to be taken into account. Mr
Benedetti on the other hand maintains that the revised brokerage agreement
remunerated him for only part of the services which he provided. He therefore
claims that he is entitled to a restitutionary award in respect of the remainder of his
services.
88. It may be helpful at this stage to note that the revised brokerage agreement
and its predecessor, known as the first brokerage agreement, were entered into
after Mr Benedetti’s services had been provided. He entered into the first
brokerage agreement as a director of the company which was to be used by Mr
Sawiris as the vehicle for the venture, and of which Mr Sawiris was about to
become the sole shareholder. The other party to the agreement was Mr Benedetti’s
service company. Mr Benedetti then concealed the true nature of the agreement
from Mr Sawiris, maintaining untruthfully that the €87m payable under the
agreement was to be used to meet liabilities which he had incurred to third parties
in connection with the venture. When Mr Sawiris expressed concern about the
amount, Mr Benedetti drew up the revised brokerage agreement, under which the
amount payable was reduced to €67m. That amount was then paid to his service
company by Mr Sawiris’s vehicle company.
89. There is also an issue as to the value to be placed on Mr Benedetti’s
services, so far as he may not already have been remunerated for them. The trial
judge, Patten LJ, found that the market value of the whole of the services was
€36.3m. Mr Benedetti however maintains that his services were valued by Mr
Sawiris at a much higher figure. In response to Mr Benedetti’s demands for
payment for his services, Mr Sawiris offered him €75.1m. He did so initially at a
time when he did not know that Mr Benedetti had personally received the €67m,
and in circumstances in which there was an awareness of the possibility of legal
proceedings. Mr Sawiris subsequently renewed the offer of €75.1m at a time when
he knew that Mr Benedetti had personally received the €67m. In those
circumstances, Mr Benedetti maintains that a restitutionary award ought to be at
least €75.1m.
90. The questions raised by the case can be summarised as follows. First, does
Mr Benedetti have any claim under the law of unjust enrichment at all, given that
he received €67m under a contract for his remuneration? Secondly, on the
assumption that Mr Sawiris was unjustly enriched notwithstanding Mr Benedetti’s
receipt of that contractual remuneration, by how much was he enriched where (1)
the services rendered had a market value of €36.3m, (2) Mr Sawiris offered to pay
€75.1m for the services after they had been rendered, at a time when Mr Benedetti
was maintaining that the €67m payment covered liabilities incurred to third parties
and Mr Sawiris did not know that that was untrue, and (3) Mr Sawiris continued to
Page 35
offer €75.1m, in addition to the €67m already paid, after he knew that Mr
Benedetti had received the €67m as remuneration?
The effect of the contractual remuneration
91. It seems to me that the logical starting point is to consider the effect of the
contract under which the €67m was paid. If the contract made provision in respect
of Mr Benedetti’s remuneration for the whole of the services provided, to which
Mr Benedetti agreed, then on the unchallenged assumption that the contract was
valid, no question of unjust enrichment can in my view arise.
92. The trial judge, in the course of an impressive judgment dealing with a
multiplicity of issues, construed the revised brokerage agreement as covering only
60% of the services provided by Mr Benedetti. On that basis, he considered that no
remuneration had been paid for the remaining 40%, and that Mr Sawiris had to that
extent been unjustly enriched. The market value of the services as a whole was
found to be €36.3m. Rather than awarding 40% of that figure, which would be a
sum of €14.52m, the judge held that Mr Benedetti was entitled to a further €75.1m,
on the basis that that amount had been offered by Mr Sawiris at a time when he
knew about Mr Benedetti’s receipt of the €67m. The Court of Appeal on the other
hand considered that no weight could be attached to the offer of €75.1m, for a
variety of reasons which I shall discuss. Proceeding like the trial judge on the basis
that the revised brokerage agreement covered only 60% of the services provided
and that Mr Sawiris had been unjustly enriched in respect of the remaining 40%,
the Court of Appeal concluded that he should be ordered to make restitution of
40% of the value of the entire services, which they took to be €36.3m. On that
basis, it awarded Mr Benedetti €14.52m.
93. Lord Clarke and Lord Neuberger have explained the circumstances in
which the first brokerage agreement was concluded. As the trial judge found, the
agreement gave Mr Benedetti the security of a payment for his services which was
not dependent on any agreement with Mr Sawiris: Mr Benedetti had taken
advantage of his directorship of Mr Sawiris’s vehicle company to secure the
payment for himself. The revised brokerage agreement between the vehicle
company then being used by Mr Sawiris and Mr Benedetti’s service company
merely reduced the amount to €67m, which was then paid.
94. I agree with Lord Clarke and Lord Neuberger that the implication of the
judge’s findings is that the purpose of the brokerage agreements was to ensure that
Mr Benedetti received €67m for the services he had provided. No-one has
questioned the validity of the agreements. Taken at face value and considered in
Page 36
their factual context, agreements under which Mr Benedetti was to be remunerated
for his services, which were entered into after the completion of the services
between his service company and the vehicle company to be used for the venture,
would naturally be expected to cover the entirety of the services, unless their terms
clearly indicated otherwise. The terms of the agreements do not appear to me to
point clearly away from that construction. I therefore agree with Lord Clarke that
the trial judge erred in construing the revised brokerage agreement as relating to
only 60% of the services provided. It appears to me to follow that no question of
unjust enrichment arises. Mr Benedetti’s appeal should be dismissed, and Mr
Sawiris’s cross-appeal should be allowed.
95. I also agree with Lord Clarke that, even if the contract related to only part
of the services provided by Mr Benedetti, he would be unable on the evidence in
this case to maintain a claim for restitution of the value of the remaining services.
According to the evidence, services of the kind provided by Mr Benedetti are
valued as a whole, rather than being broken down into distinct elements each with
its own value. Indeed, even if it were assumed that the elements hypothetically
excluded from the scope of the contract might have a value in themselves, there is
no evidence as to what that value might be. In those circumstances, if the
contractual remuneration exceeded the value of the services as a whole (as I would
hold, in agreement with Lord Clarke and Lord Neuberger), then I cannot see how
Mr Benedetti can establish a claim to a further payment on the basis of unjust
enrichment.
The measure of restitution where a person has been unjustly enriched
96. As I have explained, there is no dispute in this case, subject to the questions
arising from the payment under the revised brokerage agreement, that Mr Sawiris
was enriched by the provision of Mr Benedetti’s services, that the enrichment was
at the expense of Mr Benedetti, and that the circumstances called for restitution by
Mr Sawiris, since he accepted Mr Benedetti’s services on the basis that they were
not being provided gratuitously. The issue in dispute is the amount to be paid by
way of restitution. That issue has to be considered at this stage on the hypothesis
that there was no contract between the parties.
97. In Kingstreet Investments Ltd v New Brunswick (Finance) [2007] 1 SCR 3
Bastarache J, giving the judgment of the Supreme Court of Canada, stated at para
32:
“Restitution is a tool of corrective justice. When a transfer of value
between two parties is normatively defective, restitution functions to
correct that transfer by restoring parties to their pre-transfer
Page 37
positions. In Peel (Regional Municipality) v. Canada [1992] 3 SCR
762, McLachlin J (as she then was) neatly encapsulated this
normative framework: ‘The concept of ‘injustice’ in the context of
the law of restitution harkens back to the Aristotelian notion of
correcting a balance or equilibrium that had been disrupted’ (p
804).”
98. That dictum might be related to Lord Wright’s observation in Fibrosa
Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 64-65, in
the context of unjust enrichment arising from the frustration of a contract after part
of the contract price had been paid:
“There was no intention to enrich [the defendant] in the events which
happened … The payment was originally conditional. The condition
of retaining it is eventual performance. Accordingly, when that
condition fails, the right to retain the money must simultaneously
fail.”
Mutatis mutandis, the same might be said where services have been provided on a
basis which has not been fulfilled, subject to the qualification that since the
services themselves cannot be returned, the remedy must take the form of
restitution of their monetary value.
99. The object of the remedy in a case of the present kind is therefore to correct
the injustice arising from the defendant’s receipt of the claimant’s services on a
basis which was not fulfilled. That injustice cannot be corrected by requiring the
defendant to provide the claimant with the reward which either party might have
been willing to agree. That is because, in the absence of a contract, neither party’s
intentions or expectations can be determinative of their mutual rights and
obligations. Nor can the court make the parties’ contract for them: a contract which
might have included many other terms and conditions besides a price. In such
circumstances, the unjust enrichment arising from the defendant’s receipt of the
claimant’s services can only be corrected by requiring the defendant to pay the
claimant the monetary value of those services, thereby restoring both parties, so far
as a monetary award can do so, to their previous positions.
100. Prima facie, the monetary value of the services can be fairly ascertained by
determining what a reasonable person in the position of the defendant would have
agreed to pay for them. That will depend on how much it would have cost a
reasonable person in the position of the defendant to acquire the services elsewhere
in the market (assuming that a relevant market exists, as will normally be the case).
The payment by the defendant of the value of the services to a reasonable person
Page 38
in his position will normally achieve a result which is just to both parties in a case
of this kind, since the claimant will receive the amount for which he could have
sold his services to another recipient in the same position, and the defendant will
pay the amount which the services would have cost a reasonable person in his
position to acquire from another supplier in the market. The basis of the valuation
is thus consistent with the purpose of the valuation exercise.
101. A question arises as to what is meant by “the position of the defendant”.
The answer can be derived from the purpose of the valuation exercise. In order to
arrive at an award which is just to both parties, it is necessary to take account of
circumstances which would affect the value placed upon the services by a
reasonable person receiving them. Those are also circumstances which would
affect the cost to a reasonable person in that position of acquiring the same
services in the market, and the amount which the claimant could have received if
he had sold his services to another recipient in the same position. Such
circumstances will include in particular the availability and cost of similar services
provided by alternative suppliers (as in Sempra Metals Ltd (formerly
Metallgesellschaft Ltd) v Inland Revenue Commissioners [2007] UKHL 34; [2008]
AC 561), and prevailing rates and practices in the relevant market (as in Cobbe v
Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752). They
will include any relevant characteristics of the defendant, such as, in the context of
borrowing, its credit rating, or whether it belongs to the public or the private sector
(as in Sempra Metals). They will include other personal characteristics, such as the
defendant’s age, gender, occupation or state of health, if they bear on the price at
which such a person could obtain the services in question in the market. To give
one example, a film star may not have to pay the ordinary price for a designer
dress, as the fashion house may allow her a discount to reflect the fact that her
wearing the dress will enhance its brand image. Her being a film star is thus an
objective aspect of her position which affects the cost to her (or anyone else in her
position) of obtaining such a dress, and therefore affects the value of the receipt of
such a dress to a person in her position. The circumstances which are relevant to
determining the value of the services to a reasonable person will not however
include the personal preferences of the individual defendant, or any idiosyncratic
views which the defendant may hold as to the value of the services, since the
preferences or views of the particular recipient do not affect the services’ value to
a reasonable recipient.
102. There may of course be goods or services which are so tailored to the
preferences of a particular recipient that the idea of a reasonable recipient (other
than the actual recipient) becomes unrealistic: an example might be the costumes
designed for the stage performances of some pop artists. Even in such cases,
however, the value of the goods or services is not assigned by the recipient, but is
likely to be ascertainable on the basis of objective evidence (which may, according
to the circumstances, relate to such matters as the cost of obtaining the goods or
Page 39
services from alternative suppliers, or the cost in the market of the materials and
services involved and the profit margin which the evidence suggests would be
reasonable in the circumstances).
103. The adoption of the objective approach to valuation which I have described,
as the normal measure of a restitutionary award, is consistent with the relevant
authorities. In particular, in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1
WLR 783, 840, Robert Goff J said, in relation to restitutionary awards for services,
that “in making such an award, it is the market value of the services which is
taken”; and in British Steel Corporation v Cleveland Bridge and Engineering Co
Ltd [1984] 1 All ER 504, 511 the same judge held that the defendant should pay “a
reasonable sum”. In Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland
Revenue Commissioners [2007] UKHL 34; [2008] 1 AC 561, para 45 Lord Hope
of Craighead stated that “questions of this kind are normally approached
objectively by reference to what a reasonable person would pay for the benefit that
is in question”; and Lord Nicholls of Birkenhead said in the same case (para 103)
that the measure of a restitutionary award in respect of the use of money was “the
market value of the benefit the defendant acquired”. In Cobbe v Yeoman’s Row
Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752, para 41 Lord Scott of
Foscote observed, in relation to his well-known example of the locksmith, that the
extent of the unjust enrichment was “the value of the locksmith’s services”. In the
case at hand, the developer’s award was to be “assessed at the rate appropriate for
an experienced developer” (para 42), that is to say at the rate ordinarily applicable
in the market to a developer comparable to the claimant.
104. In relation to this approach, it may be helpful to say a word about the
concept of “market value”, which has been employed in some of the authorities (eg
BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 840; Sempra
Metals, para 103). It is an expression which can be used in more than one way, but
the definition used by the Royal Institution of Chartered Surveyors captures the
essence of the concept:
“The estimated amount for which an asset or liability should
exchange on the valuation date between a willing buyer and a willing
seller in an arm’s length transaction after proper marketing and
where the parties had each acted knowledgeably, prudently and
without compulsion.”
105. So understood, market value is specific to a given place at a given time.
That point can be illustrated by the episode in Vanity Fair in which Becky Sharp
sells her horses during the panic which grips the British community in Brussels
after the battle of Waterloo, when rumours reach the city that Napoleon has
defeated Wellington and that his army is approaching. The circumstances create a
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market in which horses are exceptionally valuable, and Becky obtains a price
which is far in excess of the ordinary value. It is, nevertheless, the value of the
horses in the market in which they are sold.
106. That example illustrates the general point that market value depends
critically on the identification of the relevant market, since there are different
markets for many types of goods and services. That is reflected, for example, in
the variability in the price of a haircut, or the cost of a meal in a restaurant, or the
fees charged by solicitors, or the salaries of professional footballers, depending on
the market in which they are operating.
107. The case of Sempra Metals provides another example. The defendant, as a
public body, could purchase the benefit in question (the use of money) at a lower
price than commercial enterprises. The benefit arising from the mistaken payment
of tax before it was due was therefore valued on the basis of the public sector
borrowing rate rather than ordinary market rates of interest. Equally, it is
conceivable that money might be paid mistakenly to, and used by, a defendant
with a poor credit rating who could borrow money only at rates above ordinary
market levels. In such a case the benefit to that defendant, calculated as in Sempra
Metals in terms of “the rate of interest … appropriate to the enrichee’s
circumstances” (per Lord Hope at para 46) or “the reasonable cost the defendant
would have incurred in borrowing the amount in question” (per Lord Nicholls at
para 103), would exceed that measured according to ordinary market rates of
interest. It would still however be an objective value, which had nothing to do with
the defendant’s personal perception of the value of the money. Indeed, it would be
a market value: the defendant in such a case would borrow in a different market
from ordinary commercial borrowers, just as public sector borrowers constitute a
distinct market. The higher rate of interest would reflect the risk of the defendant’s
inability to repay the money, and thus could be said to reflect the value transferred
by the claimant, who would be bearing that risk.
108. There may be room for argument in particular circumstances as to whether
the variation in the value of a benefit according to the position of the recipient is
more aptly described as an aspect of market value or as a departure from it. The
fact that the cost of an annuity may depend on the age, gender, state of health and
personal habits of the annuitant would probably be regarded by most people as an
aspect of market value: the annuity market differentiates between relatively young
female non-smokers in good health and older male smokers in poor health. An
economist might take the same view of the more favourable terms on which a film
star may be able to buy a designer dress; but most people would probably say that
the film star obtained the dress for less than its market value. I shall refer to
“ordinary market value” to describe the amount which would be agreed in the
market in the absence of some unusual characteristic of the particular purchaser.
Page 41
109. It follows that some other vocabulary has to be found to describe the
departure from ordinary market value which will be required where, as in the case
of the film star, the value of the benefit to the reasonable person in the position of
the defendant will be different from its ordinary market value. I shall refer to the
objective value of the benefit, which will usually be its ordinary market value, but
may in particular circumstances be either more or less than that amount.
“Subjective devaluation”
110. Counsel for Mr Benedetti argued that there was an established principle of
“subjective devaluation”, according to which the amount of a restitutionary award
could be reduced below the objective value of the benefit in order to reflect the
defendant’s personal view of its value, and that by analogy a principle of
“subjective revaluation” (or, perhaps more aptly, “subjective over-valuation”)
could justify on the same basis the making of an award in excess of the objective
value.
111. It has to be emphasised that this is not an argument for the uncontentious
proposition that the objective value of a benefit to the defendant may be less than
its ordinary market value (as, for example, in Sempra Metals, or in my example of
the film star), or may conceivably be greater than its ordinary market value (as
might be said of the example from Vanity Fair, although that might also be
regarded as an illustration of how the ordinary market value can vary according to
the specific place and time; or as in my example of a mistaken payment made to a
recipient who has a poor credit rating). The proposition being advanced is that the
value of a benefit received by a defendant is not in principle arrived at objectively,
but depends on the defendant’s personal opinion of its value, or at least that an
objective approach to valuation can be displaced by establishing that the defendant
did not in fact value the benefit at its objective value.
112. The expression “subjective devaluation” has appeared occasionally in
judgments where references have been made to the work of the late Peter Birks,
who employed the expression in some of his writings in relation to the question
whether the recipient of a benefit in kind had chosen to accept it and should
therefore be taken to have been enriched (see eg Introduction to the Law of
Restitution (1985, revised 1989), pp 109 and 413). As used by Birks, “subjective
devaluation is an argument whose premiss is that where something has not been
chosen by its recipient it cannot normally be said to have been of value to him”
(Introduction to the Law of Restitution p 266; emphasis in original). Accordingly,
“a defendant who has freely accepted the benefit cannot use that argument” (ibid).
Page 42
113. Whether the recipient of a service can be taken to have assumed
responsibility to pay for it is undoubtedly relevant to the question whether he is
under a liability to make restitution of its monetary value on the basis of unjust
enrichment (but it is important to add that it is not conclusive of that question:
there are circumstances in which the receipt of a service may call for restitution of
its monetary value even if the receipt was involuntary). Nothing I say about socalled “subjective devaluation” is intended to question that principle. As Pollock
CB famously asked (albeit in the context of an analysis based on implied contract),
“One cleans another’s shoes; what can the other do but put them on?” (Taylor v
Laird (1856) 25 LJ Ex 329, 332). I am however doubtful of the aptness of the
expression “subjective devaluation” to describe that principle, since it seems to me
that the reason for declining to make a restitutionary award based on ordinary
market value in such a case is most aptly understood as being, not the defendant’s
idiosyncratic valuation of the service, but the importance of respecting his right to
choose whether, and on what basis, to assume responsibility to pay for it. The issue
is therefore not at bottom a matter of valuation; and, on one view, it is to be judged
objectively. This point has been noted by a number of academic writers. For
example, the Canadian academic Mitchell McInnes has written, “The important
point is not the defendant’s personal valuation of a benefit, but rather his personal
choice to accept the risk of financial responsibility for it” (“Enrichment Revisited”,
in Understanding Unjust Enrichment (2004), eds Neyers, McInnes and Pitel, p 175
fn 44 (emphasis in original). See also Edelman and Bant, Unjust Enrichment in
Australia (2006), pp 107-108, and Lodder, Enrichment in the Law of Unjust
Enrichment and Restitution (2012), chapter 6).
114. Birks himself recognised that the central issue underlying his concept of
“subjective devaluation” was choice:
“When the argument from the subjectivity of value (subjective
devaluation) is available, it does not consist in an appeal to and proof
of the tastes and priorities of the particular recipient but, on the
contrary, only requires the recipient to show he made no choice to
receive the benefit” (“In Defence of Free Acceptance”, in Essays on
the Law of Restitution (1991), ed Burrows, p 129).
It is of course the benefit by which the recipient has been unjustly enriched which
has to be valued for the purpose of making a restitutionary award; but its valuation
is conceptually distinct from the identification of the enrichment or the decision
whether (or to what extent) it was unjust.
115. The recipient’s freedom of choice is relevant not only to the all-or-nothing
case where he either did or did not assume responsibility to pay for the service, but
also, as Birks recognised (see eg “In Defence of Free Acceptance”, loc cit, p 129),
Page 43
to the case where the recipient assumed responsibility for payment, but only on a
particular basis: for example, that the service was to be provided at half price as an
introductory offer, or that the cost of the service would be a specific sum. In
practice, most such cases are likely to fall within the scope of the law of contract,
but some could fall within the scope of unjust enrichment (eg if a contract were
void or unenforceable). The qualified nature of the recipient’s acceptance of
responsibility may then be relevant to limit any liability based on unjust
enrichment. On the other hand, although I accept that a contract price in excess of
the ordinary market value might be evidence of the objective value in particular
circumstances, I have difficulty, like Lord Clarke and Lord Neuberger, in seeing
how the recipient could be required, in the absence of a contract, to pay more than
the objective value of the benefit on the basis of unjust enrichment.
116. Birks’s use of the expression “subjective devaluation” to describe a
principle concerned with issues relating to freedom of choice reflects his view that
such issues should be addressed at the stage of determining whether the defendant
has been enriched. On that approach, since enrichment involves a transfer of value,
and the involuntary nature of the receipt of a benefit does not diminish the
objective value transferred, the existence of enrichment must be denied, where
necessary to protect the defendant’s autonomy, by asserting that, subjectively, no
(or only a limited) value was transferred.
117. Since the object of this principle is to protect the defendant’s freedom to
choose whether to assume responsibility to pay for a benefit in kind (and if so, on
what basis), it seems to me that it might contribute to clarity of analysis if the
principle were explicitly concerned with freedom of choice rather than “subjective
devaluation”. I would also comment that, although the expression “subjective
devaluation” reflects Birks’s treatment of the question whether and to what extent
the defendant assumed financial responsibility for the benefit as part of the inquiry
into whether there has been “enrichment”, it is not self-evident that that is the most
apt way of addressing the question: indeed, like some other academic authors (eg
Goff & Jones, The Law of Unjust Enrichment, 8th ed (2011), eds Mitchell,
Mitchell and Watterson, para 17-02), Birks in some of his writings also treats “free
acceptance” as an “unjust factor” or ground of liability, so that the question
whether the imposition of liability would be consistent with respect for the
defendant’s autonomy is taken into account at more than one stage of the analysis.
118. Another possible approach might be to treat enrichment as dependent upon
the objectively beneficial nature of the receipt, and to consider at a later stage of
the analysis, when determining whether it would be just to impose liability to make
restitution (at all, or on a particular basis), the question whether the imposition of
such a liability would be compatible with respect for the defendant’s autonomy or
freedom of choice. I note that the Canadian Supreme Court has taken a
straightforward economic approach to the questions whether the defendant has
Page 44
been enriched by the plaintiff and whether the plaintiff has suffered a
corresponding deprivation, and has dealt with other considerations, including
arguments concerning individual autonomy, at the stage of deciding whether the
defendant’s retention of the benefit is unjust: see for example Kerr v Baranow
[2011] 1 SCR 269 at paras 37, 41 and 45. That approach appears at first sight to
have the virtue of simplicity, in so far as it groups normative issues under an
explicitly normative heading, and applies Occam’s razor to Birks’s repeated
reliance on the concept of “free acceptance”. It does not entail a descent into
unstructured reasoning about injustice. I should add that, as Lord Nicholls
indicated in Sempra Metals at para 119, the defence of change of position may also
be relevant in some circumstances to the protection of the defendant’s autonomy,
especially if such a defence may be based on an anticipatory change of position, as
the Privy Council accepted in Dextra Bank & Trust Co Ltd v Bank of Jamaica
[2002] 1 All ER (Comm) 193, para 38.
119. Interesting and important as these issues as to the conceptual framework of
unjust enrichment may be, they do not need to be decided in the present case,
where there is no doubt that Mr Sawiris freely accepted Mr Benedetti’s services on
the basis that a reward would be provided. All that need be said is that, at whatever
stage in the analysis the defendant’s freedom of choice is best taken into account, I
am inclined to think that it is preferable that it should be done explicitly rather than
on the basis of so-called “subjective devaluation”. I would also observe that this
area of the law is at an early stage in its development, and that it remains to be
seen whether we have yet found the most suitable analytical scheme.
“Subjective over-valuation”
120. Some academic writers (eg Burrows, The Law of Restitution, 3rd ed (2011),
pp 60-61; Virgo, The Principles of the Law of Restitution, 2nd ed (2006), pp 88
89) have also used the expression “subjective revaluation” (or “over-valuation”) in
relation to the question how the benefit should be valued where services are
provided in order to create an end-product which has no objective value. Examples
sometimes discussed, which illustrate the nature of the issue, are those of a
landowner who chooses to have a folly erected on his land, or a person who
chooses to have his house decorated in execrable taste, adding nothing to its value.
It is argued by Virgo (ibid) that, in such a case, a reasonable person would not
regard the claimant’s work as valuable, and that a restitutionary award is therefore
based on the value subjectively attached to the work by the defendant.
121. As Burrows recognises (ibid), however, there is no need in relation to such
examples to rely on a notion of “subjective over-valuation”. The claimant
benefited the defendant by providing his services. Those services had an objective
value in the market: competitive quotations could have been obtained for the
Page 45
erection of the folly or the decoration of the house. A restitutionary award would
therefore be based on the market value of the services.
Subjectivity and value
122. There is in addition an inherent conceptual difficulty about the notion of
subjective valuation. Value, in the economic sense which is relevant in the context
of the valuation of services or other non-monetary benefits, is not established by
individual attribution, but by exchanges between different individuals, usually in a
market. It is the cumulative preferences of consumers which are important to the
interaction of supply and demand that determines economic value, rather than the
preferences of an individual party to a specific transaction. Even in situations
where goods or services are tailored to the preferences of an individual party, their
value is likely to depend on the supply and demand for the materials and services
required, as is illustrated by the examples of the folly and the pop artist’s costume.
If on the other hand a person declares, for example, that coal is more valuable than
diamonds, and intends to be understood as describing the relative monetary value
of the two commodities, then one would be inclined to suppose that he has taken
leave of his senses. He cannot make the monetary value of coal greater than that of
diamonds by personal fiat. If a character in a science fiction film says that, on her
planet, coal is more valuable than diamonds, one imagines a society where that
might be true: where diamonds are plentiful and coal is scarce, where jewellery is
made out of coal, and so forth: in other words a society in which market forces and
consumer preferences could establish the relative value of coal and diamonds in
the opposite sense to that operating in our own society. That is not to say that
everyone has the same preferences. A woman who had no interest in fashion might
not attach any more importance to a handbag from a fashion house than to one
from a chain store, and might be unwilling to spend any more on the one than the
other. But she would acknowledge that the former handbag was more valuable
than the latter (and would doubtless claim its market value under her insurance
policy if it were stolen), unless she was using the word “valuable” in a sense other
than its economic one.
123. In the particular context of making a restitutionary award for unjust
enrichment, there is a further reason why it is problematical for the valuation of a
benefit to depend on the idiosyncrasies of the recipient. As I have explained, the
purpose of restitution, where unjust enrichment has resulted from the receipt of
services, is in my view to achieve a just result by restoring to the claimant the
monetary value of the services which he has provided to the defendant. That aim
will be compromised if the services are valued on a basis which depends on the
idiosyncrasies of one party, rather than one which is even-handed as between them
both.
Page 46
The authorities
124. Three authorities were said to support the existence of a principle of
“subjective devaluation” in the sense for which Mr Benedetti contended: that is to
say, that a restitutionary award for unjust enrichment resulting from the receipt of a
service should be based on the defendant’s personal valuation of the service. On
examination, none of them appears to me to provide support for it.
125. In the first case, Cressman v Coys of Kensington (Sales) Ltd [2004] 1 WLR
2775, Mance LJ referred at para 28 to Birks’s discussion of “subjective
devaluation” in the context of the question whether the defendant had been
unjustly enriched by his receipt of a personalised number plate, as the result of a
mistake. It was held that he had been, as he had chosen to retain the plate in
circumstances in which he could easily have returned it but had refused to do so.
The context, in other words, was a discussion of whether the recipient of a benefit
as the consequence of a mistake had chosen to retain it and should therefore be
taken to have been unjustly enriched (or, as it might be put, whether the imposition
of liability for unjust enrichment would be consistent with respect for the
recipient’s autonomy): not whether a restitutionary award should be based upon
the defendant’s personal valuation of the benefit.
126. The second case, Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v
Inland Revenue Commissioners [2007] UKHL 34; [2008] 1 AC 561, concerned
restitution for unjust enrichment arising from the premature payment of tax as the
result of a mistake. The majority of the House of Lords held that the Revenue had
obtained a benefit, identified as being “the opportunity to turn the money to
account” (per Lord Hope at para 33) during the period before the payment was
due. The claimant sought to value that benefit according to commercial rates of
interest. It was held however that the benefit should be valued according to the
public sector borrowing rate.
127. That conclusion is consistent with the approach which I have described. The
claimant had provided the Revenue with the benefit of the possession of the money
for a period of time. The time value of money is assessed by applying a rate of
interest. The appropriate rate of interest in the circumstances was one which was
applicable to the public sector, since the circumstances involved the provision of
money to an organisation in the public sector. A reasonable lender and borrower in
the position of the claimant and the Revenue would have agreed on the public
sector borrowing rate, since that was the rate at which alternative funds were
available to the Revenue.
Page 47
128. The case is thus an example of the way in which the position of the
defendant can affect the objective value of the benefit which he receives. Just as
Becky Sharp’s horses had a higher value to a purchaser in Brussels during the
panic than they would have had to a purchaser in ordinary circumstances, so the
use of the taxpayer’s money had a lower value to a public body than it would have
had to a commercial enterprise.
129. The reasoning by which the majority of their Lordships arrived at their
conclusion, so far as based on restitutionary remedies available at common law,
was consistent with this approach. Lord Hope said that questions of this kind were
normally approached objectively by reference to what a reasonable person would
pay for the benefit (para 45), and explained the importance of focusing on the
circumstances of the enrichee in order to determine the extent of the enrichment
(para 49). Lord Nicholls stated that the relevant measure was “the market value of
the benefit the defendant acquired”, which was the reasonable cost the defendant
would have incurred in borrowing the amount in question for the relevant period
(para 103). This was described as an objective measure (paras 116, 117). The third
member of the majority, Lord Walker of Gestingthorpe, favoured an approach
based on the court’s equitable jurisdiction to award interest.
130. Lord Nicholls added, obiter, that in other circumstances it might be unjust
to order the recipient of a mistaken payment to pay interest: for example, where
the recipient had made no use of the money and had repaid it when the mistake
came to light, it might be most unfair to order him to pay interest (para 118). That
is evidently correct: in such a case, the recipient had the opportunity to enrich
himself through the use of the money, but did not choose to do so. Lord Nicholls
continued (para 119):
“Here, as elsewhere, the law of restitution is sufficiently flexible to
achieve a just result. To avoid what would otherwise be an unjust
outcome the court can, in an appropriate case, depart from the
market value approach when assessing the time value of money or,
indeed, when assessing the value of any other benefit gained by a
defendant. What is ultimately important in restitution is whether, and
to what extent, the particular defendant has been benefited: see
Burrows, The Law of Restitution, 2nd ed (2002), p 18. A benefit is
not always worth its market value to a particular defendant. When it
is not it may be unjust to treat the defendant as having received a
benefit possessing the value it has to others. In Professor Birks’s
language, a benefit received by a defendant may sometimes be
subject to ‘subjective devaluation’: An Introduction to the Law of
Restitution (1985), p 413. An application of this approach is to be
found in the Court of Appeal decision in Ministry of Defence v
Ashman [1993] 2 EGLR 102.Whether this is to be characterised as
Page 48
part of the ‘change of position’ defence available in restitution cases
is not a matter I need pursue.”
This reference to “subjective devaluation” was in turn referred to in the speeches
of Lord Walker (at paras 184 and 187) and Lord Mance (at paras 232-233). Lord
Walker preferred to adopt an approach to recovery in such cases based on equity,
and Lord Mance correctly explained that Birks’s concept of “subjective
devaluation” was concerned with the existence of an unjust enrichment rather than
the measure of restitution.
131. If, by “market value”, Lord Nicholls means what I have called ordinary
market value, then his observations are consistent with the approach I have
described. Lord Nicholls did not in that passage endorse valuation based on the
idiosyncrasies of the defendant, and I would not interpret the passage as bearing
that implication, given first that the remainder of his speech followed an objective
approach, secondly that such an approach would have conflicted with authorities
of which Lord Nicholls will have been well aware, and thirdly his citation of the
decision of the Court of Appeal in Ministry of Defence v Ashman (1993) 66 P &
CR 195.
132. The case of Ashman, followed on similar facts in Ministry of Defence v
Thompson (1993) 25 HLR 552, was concerned with the liability of a trespasser for
her wrongdoing. The Ministry rented married quarters to the second defendant,
who was serving in the RAF, at a concessionary rent. His wife, the first defendant,
remained in the premises after they separated, despite a notice to quit, as the local
authority would not re-house her until an eviction order had been made. Once the
necessary proceedings had been taken she moved into local authority
accommodation at a higher rent. The Ministry sought to recover mesne profits
based on the open market rental value of the premises. An award made on that
basis was overturned on appeal, and the court remitted to the court below to
reassess the award on the basis that it should be based on the rent which the first
defendant would have paid for local authority housing if it had been provided.
133. Hoffmann LJ, with whose judgment neither of the other members of the
court expressed agreement, treated the claim as one for restitution. He referred in
the course of his judgment to Birks’s discussion of “subjective devaluation”, which
he treated as being relevant on the basis that the first defendant “had no choice but
to stay in the premises”. In other words, the “involuntary” nature of the first
defendant’s continued occupation of the premises, after she had ceased to be
entitled to do so at the concessionary rent, supported the conclusion that she was
not enriched by her wrongful occupation of the premises to the full extent of their
value. If she had been free to choose whether to accept the benefit of continued
occupation of the premises, she would not have done so, but would have moved
Page 49
into local authority accommodation and paid the rent of such accommodation. The
only enrichment arising from her occupation of the premises was therefore the
amount of rent which she had avoided paying on that basis.
134. I would observe that if, as Hoffmann LJ considered, the first defendant had
no choice but to occupy the premises, the application of Birks’s approach would
have led to the conclusion that she had not been unjustly enriched at all. The
decision may perhaps be better rationalised, in terms of the law of restitution, as
raising a question of change of position, as Lord Nicholls suggested in Sempra
Metals. The central point was arguably not whether the first defendant chose the
benefit of occupying the premises, but rather that her receipt of that benefit
prevented her from receiving the equivalent benefit from the local authority at a
lower cost. Her receipt of the benefit thus altered her position in such a way that
she would be worse off if she were required to make restitution of the market value
of the benefit than if she had never received it.
135. The important point for present purposes however is that the case is not an
example of “subjective devaluation” in the sense in which that expression has been
used in the present case. Hoffmann LJ’s judgment provides no support for the idea
that the valuation of a benefit can be based on the recipient’s personal ideas about
its value. On the contrary, Hoffmann LJ’s approach to the valuation, on the basis
of the rental of the alternative accommodation which might reasonably have been
available to a person in the first defendant’s position, was objective. He rejected a
subjective approach to that issue, saying that, if the defendants had been occupying
the premises at the open market rent before they separated, they could not claim
that the premises had become less valuable to them because they could not find
anywhere else to go; nor could they say that the premises were worth less to them
than suitable accommodation they could realistically obtain. As Simon Brown LJ
observed in relation to the case of Ashman in Gondal v Dillon Newspapers Ltd
[2001] RLR 221, 228:
“A restitutionary award, i.e. damages calculated according to the
value of the benefit received by the occupier, is rightly decided … by
an objective determination of what the wrongful occupation was
worth to the trespasser.”
136. These cases do not therefore appear to me to involve subjectivity: the
valuation of the benefit in Sempra Metals or Ashman was not an attempt to
discover the price which the individual defendant would in fact have been willing
to pay, and therefore did not depend on the defendant’s personal views. As was
said in a Scottish appeal to the House of Lords, in a case where a person had
erected a building on land in the mistaken belief that he was the proprietor, “it is
not according to the fancy of the owner or the builder that the improvement upon
Page 50
the estate is to be estimated” (York Buildings Co v Mackenzie (1797) 3 Paton 579,
584 per Lord Loughborough LC). The point illustrated by Sempra Metals is that
there are differences between the circumstances of individuals which may affect
the objective value to them of a given benefit in kind. The ratio of Ashman is less
readily identified, and need not be decided now: views may differ as to whether
the case is best understood as a further example of objective value being below the
ordinary market value, or as relating to “enrichment”, or as relating to a defence to
the imposition of liability. It appears however to be concerned with the effect of
constraints upon the choices made by a defendant in relation to the receipt of a
benefit, and with the avoidance of imposing a liability which would leave the
defendant worse off than if the benefit had not been received, rather than with a
subjective approach to the valuation of benefits.
137. The present case is not one where any issue arises as to freedom of choice,
since Mr Sawiris accepted Mr Benedetti’s services freely, on the basis that Mr
Benedetti would be rewarded, and without any cap on the reward. Nor is this a
case in which it is said that the recipient of the benefit has particular characteristics
which affected its objective value. The authorities cited do not appear to me to
support a principle of “subjective devaluation” in the sense in which that
expression is employed in the present case, namely the valuation of a benefit by
which the recipient was unjustly enriched according to his personal opinion of its
value.
138. In relation to para 26 of Lord Clarke’s judgment, I should add, for the
avoidance of doubt, that the ideas which I have discussed as possible alternatives
to an analysis based on “subjective devaluation” do not appear to me to be less
flexible or more liable to lead to windfalls for defendants. In particular, I entirely
accept that there are circumstances in which a defendant may be unjustly enriched
by the involuntary receipt of a benefit, and in which a restitutionary award may
therefore be appropriate: see para 113. I also accept that a court can make a
restitutionary award which is below the market value of the benefit conferred, in
particular where that is necessary to respect the defendant’s autonomy or freedom
of choice: see para 115. An approach which explicitly respects freedom of choice,
rather than adopting a concept of “subjective valuation”, can be equally nuanced.
Similarly, the adoption of an approach which addresses issues relating to
autonomy at the stage of considering whether enrichment was unjust, rather than at
the stage of considering whether there was enrichment at all, need not alter the
outcome of cases. Finding the most suitable analytical framework to help the
courts to reach principled decisions on particular facts and to articulate reasons for
their decisions is nevertheless not unimportant.
Page 51
The present case
139. In the present case, the amount which Mr Sawiris offered to pay Mr
Benedetti for his services, after they had been provided, is significant only in so far
as it provides evidence of the objective value of the services at the time they were
provided (as in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008]
1 WLR 1752, para 44). The fact that the offer was made after the services had been
provided does not render it irrelevant, although it is important to bear in mind that
the services are to be valued as at the time when they were received (see, amongst
other authorities, BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR
783, 802). Equally, the fact that the amount offered exceeded the amount which,
according to other evidence, would be the ordinary market value of those services,
does not make it irrelevant: as I have explained, it is possible that the objective
value of services in particular circumstances may be more or less than their
ordinary market value. These facts may however greatly affect the weight to be
placed on the offer as an indication of objective value, in the absence of any
identified circumstances which could account for the divergence from the value
indicated by other evidence. As is familiar to practitioners in fields such as
valuation for rating or rent reviews, the sums agreed in respect of comparable
subjects, in comparable circumstances, can vary greatly, and outlying figures, even
if relating to the very subjects to be valued, may have to be discarded if they
cannot be reconciled with other evidence which is considered to be more reliable.
140. The significance of the sums offered by Mr Sawiris therefore depends upon
whether they provide evidence of the objective value of Mr Benedetti’s services at
the time they were provided. In that regard, the fact that Mr Sawiris offered
€75.1m for services which would ordinarily be valued at €36.3m plainly calls for
an explanation. Was there something exceptional about the circumstances which
rendered Mr Benedetti’s services exceptionally valuable? The judge did not
identify anything about the circumstances in which the services were provided
which would indicate that they had a higher objective value in those circumstances
than their ordinary market value. Or was Mr Sawiris’s offer influenced by
extraneous factors, such as the desire to settle Mr Benedetti’s claim in the shadow
of potential litigation? If so, the offer would not be reliable evidence of the
objective value of the services at the time they were received. Or was Mr Sawiris
simply being generous, as Mr Abdou said in the relevant emails, and as Mr Sawiris
maintained in his witness statement? If so, the offer would again not be reliable
evidence of the objective value of the services: generosity (or parsimony) may
influence a person’s attitude towards paying a given price, but it does not affect the
objective value of what he has received. Or was Mr Sawiris influenced by the
success of the venture in connection with which Mr Benedetti’s services had been
provided? If so, the offer would again not be reliable evidence of the objective
value of the services, since that value has to be determined as at the time when the
Page 52
services are received, and cannot be quantified with hindsight in the light of their
success.
141. The fact that Mr Sawiris renewed his offer of €75.1m after he had
discovered that Mr Benedetti had already received €67m under the revised
brokerage agreement calls even more strongly for an explanation. Had his
valuation of Mr Benedetti’s services increased to €142.1m? Or can one infer from
his successive offers, as counsel for Mr Benedetti argued, that his valuation of Mr
Benedetti’s services was even higher? Or should one infer from the surrounding
circumstances that the increased offer was a further attempt to avoid litigation,
there being evidence that the possibility of litigation had been discussed by that
time? Or was it further evidence of his generosity?
142. These questions were not explored at the trial, where the parties sought to
establish the objective value of Mr Benedetti’s services by leading expert
evidence. That evidence, as assessed by the judge, demonstrated that Mr
Benedetti’s services would ordinarily be remunerated by a fee of between 0.1%
and 0.3% of the transaction value. Selecting the top end of that range, and applying
the scale fee to the value of the transaction in question, the judge assessed the
market value of the services at €36.3m. It was only in closing submissions that
counsel for Mr Benedetti sought to place any reliance on the offers made by Mr
Sawiris, having maintained throughout the trial that they were irrelevant. Even at
that stage, it was suggested that they could be used mainly as a check on a
valuation based on the expert evidence. In the absence however of any explanation
of their being far in excess of the market value established by the expert evidence,
other than Mr Sawiris’s generosity (a factor which is not relevant to the
measurement of the benefit, as I have explained), or his desire to avoid litigation
(which would be equally irrelevant), and given the real possibility of their being
influenced by extraneous considerations, they could not reasonably be regarded as
reliable evidence of value.
The approach of the trial judge
143. In dealing with this evidence, the trial judge’s starting point was that a
“claim to a quantum meruit gives the court a wide discretion to award what it
considers to be a fair and reasonable sum for the services” (para 58). That is not
the correct approach. As I have explained, the court has to determine the objective
value of the services at the time of receipt, that is to say the price which a
reasonable person in the defendant’s position would have paid for the services.
That exercise may involve the exercise of judgment, but it does not involve the
exercise of discretion (Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, 578;
Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349, 385; Sempra
Metals at para 46 per Lord Hope).
Page 53
144. Although in principle evidence of negotiations between the parties might be
relevant to that exercise, it is not clear that the judge treated the offers made by Mr
Sawiris as evidence of the objective value of Mr Benedetti’s services. He stated
that “regard must also be had to any prior negotiations or agreement between the
parties which indicate that they put a particular value on the services in question”
(para 528), and that the evidence relating to the offers was admissible “if and so far
as that evidence does show the value which the paying party (albeit with the
benefit of hindsight) considered that the services were actually worth” (para 568).
As I have explained, however, the object of the exercise is not to discover what the
defendant thought the claimant’s services were worth, either before or after they
were provided, but what they were objectively worth at the time they were
received. As I have explained, the offers might in principle have been significant if
and in so far as they indicated the objective value of Mr Benedetti’s services at the
time those services were rendered. It was not however established that the offers
had been made on that basis. In view of the absence of any explanation of the
disparity between the offers and what the judge described as the market rate for the
services Mr Benedetti performed, other than Mr Sawiris’s generosity or his desire
to avoid litigation, the judge could not reasonably have treated the final offer of a
further €75.1m, in addition to the €67m already received, as determinative of the
value of Mr Benedetti’s services.
145. In the event, the judge appears to have awarded Mr Benedetti the €75.1m,
in addition to the €67m already received, on the basis that it represented “what [Mr
Sawiris] considered Mr Benedetti’s services to be worth”. As I have explained,
however, that is not the proper measure of a restitutionary award. The offers could
not be treated as overriding the evidence as to the market rate on the basis that Mr
Sawiris’s personal scale of values was the proper measure of a restitutionary
award.
The approach of the Court of Appeal
146. In reaching that conclusion I am in agreement with the Court of Appeal.
Arden and Etherton LJJ however differed in the reasoning by which they reached
that conclusion, and Rimer LJ agreed with both judgments in relation to the
valuation of the services. I am in agreement with the judgment of Etherton LJ,
who adopted an objective approach to valuation.
147. I should explain why I do not entirely agree with the thoughtful analysis of
Arden LJ. She appears in some parts of her judgment to have proceeded on the
basis that an award in restitution should reflect the parties’ common intention. On
that basis, an unaccepted offer could not even in principle be relevant evidence of
value. This appears to me to be incorrect in principle, and inconsistent with the
significance attached in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL
Page 54
55; [2008] 1 WLR 1752, para 44, to an unaccepted offer in settlement, made in the
course of the proceedings, as an indication of the amount a quantum meruit might
provide. I would not therefore agree with her comment (para 85) that it was an
error on the part of the trial judge to take the figure of €75.1m into account
because it was not agreed. Nor would I agree with the example she gives of a
plumber who charges 10% over the market rate. In her view, if a customer had
agreed to that rate in the past, the court, if awarding an amount by way of quantum
meruit to the plumber against the customer on a further occasion, would take into
account the parties’ course of dealing in the past in preference to market rates. The
point of the example, as stated by Arden LJ, is that “the court must look to the
outward manifestation of the parties’ common intentions” (para 72). It appears to
me that that would be the proper approach if the award were being made on the
basis of an implied contract, but not on the basis of unjust enrichment. I would add
that it is important to bear in mind that although the term “quantum meruit” is used
both in the context of contract and in the context of unjust enrichment, the basis on
which a quantum meruit award is made differs according to which context is
relevant.
148. The approach adopted in the passages I have mentioned, which treats the
quantification of the benefit in a case of the present kind as resting on some
common intention or understanding, has echoes of the old view that a
restitutionary claim rests on an implied contract; and Arden LJ appears to have
been influenced by Lord Atkin’s speech in Way v Latilla [1937] 3 All ER 759,
which proceeded on the footing that there was in that case an implied contractual
term to pay reasonable remuneration. Lord Atkin stated that there “existed between
the parties a contract of employment under which Mr Way was engaged to do
work for Mr Latilla in circumstances which clearly indicated that the work was not
to be gratuitous”, and that Mr Way was therefore “entitled to a reasonable
remuneration on the implied contract to pay him quantum meruit” (p 763). The
present case is not however based on implied contract, and Way v Latilla therefore
does not appear to me to be of assistance: the implied contract approach to
restitutionary awards for unjust enrichment was decisively rejected in
Westdeutsche Landesbank Girozentrale v Islington London Borough Council
[1996] AC 669. On the other hand, Arden LJ was in my opinion on sounder
ground in rejecting the relevance of the offer of €75.1m on the basis that there was
nothing in the evidence relating to the offer to shed light on the market value of Mr
Benedetti’s services as opposed to an offer that for whatever reason Mr Sawiris
was prepared to make (para 86).
149. Having rejected the relevance of the offer of €75.1m and taken the value of
the services to be €36.3m, the Court of Appeal then awarded Mr Benedetti
€14.52m on the basis that his contractual remuneration of €67m under the revised
brokerage agreement related to only part of the services he had provided. As I have
explained, I disagree with that understanding of the effect of the agreement.
Page 55
Conclusion
150. I would therefore dismiss Mr Benedetti’s appeal against the decision of the
Court of Appeal, and allow Mr Sawiris’s cross-appeal.
LORD NEUBERGER
The background
Introductory
151. Two questions require to be determined. The first, which is raised by Mr
Benedetti’s appeal, is what sum he should be awarded for the services which he
carried out for Mr Sawiris and his companies (which, for present purposes, can be
elided with Mr Sawiris) in connection with the acquisition of Wind
Telecomunicazioni SpA (“Wind”). The second issue, which is raised by Mr
Sawiris’s cross-appeal, and only arises if the appeal is dismissed, is whether Mr
Benedetti’s entitlement to that sum should be treated as satisfied, because a
company which he owns and controls has already received €67m.
152. Each issue raises a point of principle, but is complicated by the very
unusual facts of this case. Those facts are set out in the judgment of Lord Clarke in
paras 3-8 and 35-66, and, while it is unnecessary to repeat them in any detail, I
shall begin by identifying what seem to me to be the salient features in connection
with the issues raised in this appeal and cross-appeal.
A brief summary of the relevant facts
153. In 2002, Mr Benedetti became aware that Wind might be for sale, and he
contacted Mr Sawiris, who he believed might be interested in buying it. Following
discussions, they entered into an “acquisition agreement” on 31 January 2004,
which envisaged that Wind would be acquired pursuant to the following scheme
(“the scheme”) which can be summarised, on a somewhat simplified basis, as
follows: (i) Mr Sawiris would subscribe for two-thirds of the €200,000 initial share
capital in a new company; (ii) Mr Benedetti would subscribe for the remaining
one-third (with a loan from Mr Sawiris); (iii) Mr Sawiris would contribute €50m to
this new company; (iv) Mr Benedetti would try to find other, third party, investors
who would put up most of the money (around €1.2bn) required for the purchase of
Page 56
Wind; but (v) the structure of the new shareholdings in Wind would give Mr
Sawiris, through the new company, de facto control of Wind.
154. It was part of Mr Benedetti’s case at trial that there was an understanding
(referred to by the Judge as “the alleged understanding”) that Mr Sawiris (and
other investors) would pay him 1% brokerage in respect of the acquisition of the
shares in Wind. The Judge rejected the existence of such an understanding (but I
mention it as it has some relevance to the cross-appeal).
155. Two promising investors were found by Mr Benedetti, a Mr Ross, who had
a large amount of capital at his disposal, and a company called Investors in Private
Equity (“IPE”), which represented potential investors (including, at least in some
respects, Mr Ross), and with whom Mr Benedetti entered into a so-called
“collaboration agreement” in February 2004. As negotiations with them
proceeded, a company called Weather Investments SA (“Weather Investments”)
was formed in January 2005, with a view to putting the scheme into effect. All
hundred shares in that company were initially held by a subsidiary of IPE, on
behalf of Mr Ross (the reasons do not matter). Mr Ross appeared to have lost
interest in the scheme around mid-March 2005, so Mr Sawiris required the shares
in Weather Investments to be transferred to him. On 24 March 2005, IPE
transferred 99 of the shares to Mr Benedetti and the remaining share to Mr Abdou,
Mr Sawiris’s assistant. The following day, 25 March 2005, Mr Benedetti
transferred the 99 shares to Mr Sawiris.
156. Two days before, on 23 March 2005, Mr Benedetti became a director of
Weather Investments. On the following day, 24 March 2005, the day before he
transferred all the shares in Weather Investments to Mr Sawiris, Mr Benedetti,
without Mr Sawiris’s knowledge, entered into two contracts, on behalf of Weather
Investments, each for the benefit of companies wholly or largely owned and
controlled by Mr Benedetti. One of these contracts has been referred to as “the first
brokerage agreement”, under which International Technologies Management Ltd
(“ITM”), a company owned and controlled by Mr Benedetti, was appointed to
provide Weather Investments with “brokerage services” for a 0.7% fee.
157. By mid-April 2005, IPE dropped out (and the collaboration agreement
accordingly fell away), because it became clear that any potential investors it had
represented had lost interest. Despite Mr Benedetti’s best efforts, no other third
party investors could be found, and so it became clear that the scheme could not be
progressed. Mr Sawiris, together with his family and some associates, were left as
the only potential investors in Wind, and he decided to proceed nonetheless.
Negotiations accordingly took place over the next few weeks, in which Mr
Benedetti was actively involved. As a result of those negotiations, terms were
Page 57
agreed for the acquisition of Wind, culminating in a sale and purchase agreement
on 26 May 2005.
158. Pursuant to the sale and purchase agreement, the great majority of the
shares in Wind were acquired by companies ultimately controlled by Mr Sawiris,
his family and business associates. This was accomplished in two stages, which
were completed on 11 August 2005 (“first closing”) and 8 February 2006 (“second
closing”). The cost of over €3bn was mostly funded by bank loans, but it also
included the introduction of the controlling interest of a company known as
Orascom. After second closing, the ownership structure involved (i) (albeit
through 100% owned subsidiaries) a company called Weather Investments Srl
(“Weather Italy”) (of which Mr Benedetti was initially a director) owning all the
shares in Wind, (ii) companies controlled by Mr Sawiris and his family owning a
substantial proportion of the shares in Weather Italy, and (iii) Mr Benedetti having
no interest, either directly or indirectly, in Wind or Weather Italy.
159. On the same day as the sale and purchase agreement was entered into, the
rights and obligations of Weather Investments (which had ceased to have any part
to play in this matter) under the first brokerage agreement were assigned to
Weather Italy. This was done by Mr Benedetti, as a director of both companies,
without the knowledge of Mr Sawiris.
160. The accounts drawn up for first closing recorded around €87m being
payable to ITM, which Mr Sawiris knew was owned by Mr Benedetti. However,
Mr Sawiris was led by Mr Benedetti to believe that this sum was attributable to Mr
Benedetti’s expenses and was due to third parties in connection with the
negotiating of the sale and purchase agreement. Mr Sawiris was unhappy about the
amount, and Mr Benedetti agreed to reduce it to €67m. Mr Benedetti then prepared
a “revised brokerage agreement” between Weather Italy and ITM, which provided
for a 0.55%, rather than a 0.7%, fee, and back-dated it to 26 May 2005. This
agreement was seen by Mr Abdou before first closing, and, on 12 August 2005,
€67m was paid to ITM as part of the cost of first closing. Around that time, Mr
Benedetti resigned as a director of Weather Italy.
161. Before first closing, discussions were already taking place about Mr
Benedetti’s remuneration. During June 2005, Mr Sawiris offered him €75.1m, in
cash or Weather Italy shares, to which Mr Benedetti responded by saying, in
effect, that it was far too little. In January 2006, the two men met to discuss the
issue. At that time, Mr Sawiris suspected, but did not know, that Mr Benedetti had,
through ITM, received the €67m under the revised brokerage agreement for his
own use. However, he adhered to his offer, to which Mr Benedetti agreed in
principle, but only if a proposal that he acquire some shares in Weather Italy at a
good price was realised. That proposal came to nothing, and negotiations
Page 58
continued desultorily. In October 2006, Mr Abdou sent a draft agreement to Mr
Benedetti proposing a fee of €75.1m, and acknowledging that Mr Benedetti had
received €67m. Mr Benedetti did not reply, and, shortly after, he began the present
proceedings, which led to a hearing before Patten J.
The decisions of the courts below and the issues before the Supreme Court
162. That hearing lasted over thirty days, as Patten J heard much factual and
expert evidence and had to resolve many issues, most of which are no longer live.
In his full and careful judgment, [2009] EWHC 1330 (Ch), Patten LJ (as he had
become), concluded that:
(a) The acquisition agreement was abandoned some time in April
2005, once the parties accepted that virtually no third party
interest could be found, and that Mr Sawiris was effectively on
his own so far as paying to acquire Wind was concerned;
(b) Mr Benedetti’s contention that he should be paid for his services
on the basis of an express contract, a contract supported by
equity, fiduciary duty, or estoppel should be rejected;
(c) Nonetheless, as Mr Sawiris accepted, he was liable to pay Mr
Benedetti a quantum meruit for his services, as otherwise Mr
Sawiris would be unjustly enriched;
(d) There was a market for the sort of services provided by Mr
Benedetti, and, in that market, he would have been paid €36.3m
(the top end of the figures provided by the expert called by Mr
Sawiris, but far less than the figure suggested by the expert
called by Mr Benedetti);
(e) In view of the €67m paid to Mr Benedetti’s company, ITM,
under the revised brokerage agreement, the €36.3m should be
reduced by 60% to €14.52m, as the revised brokerage agreement
covered at least 60% of the work referable to the quantum
meruit;
(f) However, as Mr Sawiris had been prepared to pay Mr Benedetti
€75.1m, and had maintained that position after he knew that
ITM had received the €67m, the correct figure to award Mr
Benedetti as a quantum meruit was €75.1m.
163. The Court of Appeal, [2010] EWCA Civ 1427, in effect upheld conclusions
(a) to (e), but reversed the Judge’s conclusion (f). More specifically, the Court of
Appeal:
Page 59
(a) Rejected Mr Benedetti’s contention that he should have received
more than the €75.1m on the basis that the acquisition
agreement supported a larger award;
(b) Upheld Mr Sawiris’s contention that the Judge should not have
awarded more than the market value of Mr Benedetti’s services
by way of a quantum meruit; and
(c) Rejected Mr Sawiris’s contention that the whole of the €36.3m
quantum meruit award had effectively been satisfied by ITM’s
receipt of the €67m.
Accordingly, the Court of Appeal overturned the Judge’s award of €75.1m in
favour of Mr Benedetti, and replaced it with an award of €14.52m (being 40% of
the €36.3m quantum meruit award).
164. Mr Benedetti now appeals against the Court of Appeal’s conclusions (a)
and (b), and Mr Sawiris appeals against the Court of Appeal’s conclusion (c).
165. On the Court of Appeal’s conclusion (a), there is little to add to what Lord
Clarke says in paras 40-41 above. As is now accepted by Mr Benedetti, the Judge
was right to conclude that the acquisition agreement had been abandoned by the
parties, once it became clear that no independent third party investors could be
found and the scheme could not proceed, so that Mr Sawiris would have to
proceed effectively on his own (albeit with members of his family and business
associates) if he wished to acquire control of Wind. For the same reason, the terms
of the acquisition agreement are of no assistance to Mr Benedetti’s quantum meruit
claim, because those terms reflected both the nature and the product of his services
being different in nature from that which in fact eventuated. Even if they could, in
principle, be of assistance to him in that claim, I find it hard to see how that
assistance could be turned to quantitative account.
166. However, the issues raised by the Court of Appeal’s conclusions (b) and (c)
merit more consideration, not least because, according to the arguments developed
in this Court and in the courts below, they concern an area of law, unjust
enrichment, which has been impressively developed in legal academic circles over
the past fifty years, but has not received much attention in the United Kingdom
courts.
Page 60
The first issue: the sum to which Mr Benedetti is entitled
The unusual factual position
167. The problem thrown up by the appeal in the present case arises from a
strikingly wide discrepancy between (i) the figure found by the Judge, on the basis
of the expert evidence, to be the market value of the services provided by Mr
Benedetti (“the Services”), namely €36.3m, and (ii) the sum Mr Sawiris, an
experienced and successful businessman, was prepared to pay Mr Benedetti for the
Services, namely at least €75.1m. The discrepancy is all the more striking once
two other factors are appreciated. In relation to point (i), the Judge’s figure of
€36.3m was at the top end of the expert evidence. That is because the dispute
between the two experts was about the characterisation of the Services, and, once
the Judge had accepted Mr Sawiris’s expert’s characterisation, €36.3m was the
highest figure he could have adopted on the evidence. And in relation to point (ii),
Mr Sawiris’s final offer of €75.1m (a) took into account the fact that Mr Benedetti
had, through ITM, pursuant to the revised brokerage agreement, already received
€67m, and (b) was rejected by Mr Benedetti as being not enough (at least, unless
he received some shares in Weather Italy, effectively at a discount).
168. At any rate, in the absence of any other evidence or any good reason to the
contrary, where two parties agree, at arm’s length, that one of them will pay a
certain sum, or at a certain rate, for a type of benefit to be provided by the other,
there must be a prima facie presumption that that amount is, or at least is good
evidence of, the market value of that type of benefit. Apart from complying with
commercial common sense, this approach seems to have been assumed to be
correct almost four hundred years ago in Lampleigh v Brathwait (1616) Hob 105,
to have found favour with Kelly CB in Scarisbrick v Parkinson (1869) 20 LT 175,
and to be in accord with what was said by Lord Atkin and Lord Wright in Way v
Latilla [1937] 3 All ER 759, 764 and 766 respectively. The approach is also
inherent in the well-established practice of invoking comparable transactions in the
field of rating and other property valuation disputes. In such cases, arm’s length
lettings or sales of properties similar to the hereditament in dispute are routinely
accepted, at least prima facie, as good evidence of the market value of the property
the subject of the transaction. A letting or sale at arm’s length of the hereditament
to be valued must, albeit again only prima facie, be very good evidence of that
hereditament’s value.
169. In the present case, it is true that the €75.1m (i) was offered only after the
Services had been provided, and (ii) was not accepted by Mr Benedetti, so there
was no actual agreement. However, those points are not that telling. As for point
(i), Mr Benedetti was only to be paid if the transaction succeeded, and the figure
was proposed shortly after the sale and purchase agreement was signed, and before
Page 61
first closing. So far as point (ii) is concerned, the fact that Mr Benedetti wanted
more suggests that €75.1m is, if anything, a low, rather than a high, figure.
170. Nonetheless, the Judge assessed the market value of the Services as being
much lower than the sum which Mr Sawiris was prepared to pay for them. While it
may appear to be a surprising decision on the bare facts just recited, an appellate
court should be wary of overturning decisions of trial judges on fact and on
inference from fact. Patten LJ’s decision on this point, like most findings after a
trial with factual and expert evidence, was inevitably, and correctly, heavily
influenced by the way in which the parties presented their respective cases, in
terms of both the evidence and the argument.
171. It is no doubt for that reason that there was (quite rightly) no real attack in
this Court on the Judge’s finding that the market value of the Services was €36.3m.
Both sides called expert evidence on the issue at trial, and the Judge’s analysis of
the effect of that evidence, and his reasons for preferring that tendered by the
expert called by Mr Sawiris, were full, careful and rational. Although Mr Benedetti
is now heavily relying on Mr Sawiris’s offer of €75.1m, he placed no weight on
that offer at trial (except at a very late stage, when he placed some, if pretty slight,
weight on it), not least because he was seeking much more. Indeed, initially Mr
Benedetti contended that Mr Sawiris’s offer of €75.1m was inadmissible as
evidence of value. When it was admitted into evidence, “neither side wished to
contend that this was a proper basis for assessing the quantum meruit claimed”, as
the Judge put it. However, as he immediately went on to explain, counsel for Mr
Benedetti “has now” (which I understand to mean in his closing speech, after the
evidence had been given) “changed his position on that and suggests that the court
can look at it but mainly in order to use it as a check on its assessment of
quantum.”
172. The Judge considered the offer of €75.1m, and rejected it as being helpful
as an indication of market value. There is some background support for that
conclusion, quite apart from the general points that can be made, namely (i) that in
every field, there are “rogue” comparables, ie arm’s length agreements (or offers)
which are simply out of line with the rest of the market for no necessarily
discernible reason, and (ii) the very fact that the €75.1m was never agreed can be
said to cast doubt on it as a reliable guide to value: although the parties got very
near to reaching a binding agreement, they did not do so; accordingly, not merely
Mr Benedetti, but also Mr Sawiris, were entitled to have second thoughts about it.
173. The fact that Mr Sawiris did not reduce his offer when he discovered that
Mr Benedetti had obtained €67m, and misled him about it, either suggests that his
original offer was much too low or that he was being very generous to Mr
Benedetti. It was open to the Judge to opt for the latter alternative, especially as Mr
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Sawiris said in evidence that he considered his offer to be generous, and the Judge
accepted that as true. Additionally, despite the Judge saying otherwise, it seems
likely that the offer of €75.1m was made under the threat of litigation (as was
apparently accepted by the Judge elsewhere in his judgment).
174. In principle, then, the offer of €75.1m was a potentially relevant fact for the
Judge to take into account when determining what sum to award Mr Benedetti, but
it was a piece of evidence which the Judge was entitled to reject as unhelpful. In
the end, if the correct figure to be awarded as a matter of law in the light of the
Judge’s assessment of the evidence, was indeed the €36.3m which the Court of
Appeal awarded, the fact that Mr Benedetti turned down a much higher offer
before issuing proceedings is his misfortune.
The issue to be determined
175. The Judge held that Mr Benedetti had a claim in unjust enrichment and that
was accepted by the Court of Appeal. The circumstances in which such a claim
can arise are multifarious, but they can all be said to involve the conferment of a
benefit on a defendant at the expense of a claimant in circumstances where it
would be unjust for the defendant not to pay the claimant. Examples of the
circumstances in which such a claim can be made include where the benefit has
been conferred by or under a mistake, duress, undue influence, incapacity or
compulsion. (I express these examples in the most general of terms: in many such
cases, the enrichment may not be unjust and so no claim arises). The present claim
is in another category, namely, to use a well-established if not wholly apt
expression, where there has been a failure of consideration. This arises where there
was a contract, but, in whole or in part, it was ineffective (eg due to illegality,
frustration or unenforceability), or it ceased to apply for some reason.
176. It is, and always has been, accepted by Mr Sawiris that (subject to his
argument on the cross-appeal) Mr Benedetti has a valid claim in unjust enrichment
in respect of the Services. This is because (i) by providing the Services, Mr
Benedetti conferred a benefit on Mr Sawiris, (ii) the provision of the Services was
at the “expense” of Mr Benedetti, (iii) because the scheme fell away, this was a
case where the consideration failed, (iv) it would be unjust if Mr Benedetti was not
paid for the benefit, and (v) save as a result of the receipt of the €67m (which is
relevant to the cross-appeal), Mr Sawiris has no defence to the claim. The appeal is
thus concerned with how the sum to be paid to rectify the injustice of the
enrichment is to be assessed.
177. That sum has been described throughout this case as being a quantum
meruit. It is, I think, arguable that this is a mischaracterisation. It is true that the
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original contractual arrangement, which identified Mr Benedetti’s consideration,
fell away. It is also true that the new arrangement which developed did not involve
any such identification. However, it seems to me that the new arrangement
probably gave rise to a contract, arising from the parties’ words and conduct in
April and May 2005. That contract did not specify Mr Benedetti’s remuneration,
but it must be at least arguable that there would be implied into the contract a term
that he should be paid a reasonable sum. I say no more about this possible point of
distinction, as (i) the point was not argued, (ii) the point may be wrong, (iii) even if
it is right, the point may involve an issue of terminology rather than principle, and
(iv) even if there is an issue of principle, I am confident it makes no difference to
the outcome of this appeal, given the conclusion I have reached.
178. The term quantum meruit, expressed as it is in the old language of the forms
of action, might fairly be said to “conceal … as much as it reveals about the nature
of a claim” – to quote from Goff & Jones on The Law of Unjust Enrichment, 8th ed
(2011), para 1-29. In this appeal, the quantum meruit refers to the value of the
services rendered by Mr Benedetti, in circumstances where there was no contract
which expressly provided how the price he was to be paid for the Services was to
be quantified. In awarding a quantum meruit for a benefit, the court is essentially
deciding how much is deserved for the conferment of that benefit (and, as Arden
LJ pointed out in the Court of Appeal, the literal translation of quantum meruit is
“as much as he deserves” – [2010] EWCA Civ 1427, para 2).
179. The appeal therefore turns on whether the quantum meruit which Mr
Benedetti claims for the Services which he performed for Mr Sawiris is (i) the
open market value of the Services as assessed, now unchallengeably, by the Judge,
€36.3m, or (ii) the higher sum which Mr Sawiris was prepared to pay for the
Services, namely (at least) €75.1m. The former figure can be characterised as the
“objective” value in the sense that it does not depend on the particular view or
assessment of either party. I am prepared to assume that the latter figure can be
characterised as the “subjective” value, in the sense of being what the Services
were assessed by Mr Sawiris to be worth to him. It is true that, on the Judge’s
findings, the offer of €75.1m was substantially over the market value and was seen
by Mr Sawiris himself as being “generous”. However, it was offered by a very
experienced and very successful businessman, with access to the best advice. It can
therefore, at least arguably, be explained on the basis that it represented what the
Services were worth to Mr Sawiris (or, as Mr Benedetti would say, the minimum
amount that they were worth to Mr Sawiris, as the figure represents an unaccepted
offer).
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The prima facie position
180. Where, as is agreed to be the position here, a claimant is entitled to a
quantum meruit based on the fact that he has enriched the defendant by the
provision of benefits, which have an assessable market value, it seems to me pretty
clear that the sum prima facie to be awarded is the market value of those benefits.
That conclusion is consistent with commercial common sense, the authorities, and
the leading academic works on the topic of unjust enrichment.
181. It is hard to identify a rational alternative basis to market value, in the
absence of a good reason to the contrary on the particular facts of a particular case.
It seems to me that, even to those who might favour a generally subjective
approach to the assessment of quantum meruit in unjust enrichment cases, there
must be a presumption that the value of a particular benefit to the defendant is its
market value. The nearest one can get to the value of a good or service, at least in a
capitalist system (which can be said to equate price with value, which has echoes
of Oscar Wilde’s cynic), is its market value, and I agree with Lord Reed’s
description of that expression in paras 104-108. If a different valuation, in this case
a subjective valuation, is said to be appropriate in a particular case, the onus must
be on the person seeking to justify the different valuation to establish that it exists
and differs from the market value as a matter of fact, and that that different
valuation is justified as representing the quantum meruit in that particular case.
182. In his judgment in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1
WLR 783, 822 and 839-841, Robert Goff J said in terms that any quantum meruit
is to be assessed by reference to market value. More recently, Lord Scott in Cobbe
v Yeoman’s Row Management Ltd [2008] 1 WLR 1752, paras 41-42, rejected the
suggestion that a quantum meruit was to be assessed by reference to the increase in
the value of the defendant’s property thanks to the claimant’s services, and held
the claimant entitled to what those services would cost in the market. Further,
although the issue involved can be said to be slightly different, namely payment
under a mistake, the approach of Lord Hope and Lord Nicholls, in the House of
Lords decision in Sempra Metals Ltd v Inland Revenue Commissioners [2008] 1
AC 561, paras 45-47 and 113-116 respectively, seems to me, as it did to Etherton
LJ at [2010] EWCA Civ 1427, para 144, to indicate that market value is the prima
facie basis of valuation in this area of law. Also like Etherton LJ four paragraphs
later in his judgment, I do not regard the reasoning of the House in Way v Latilla
[1973] 3 All ER 759 as inconsistent with this conclusion, as it was found that there
was no open market value assessable for, or to use Lord Atkin’s words, no “trade
usage” as to, the services which were in issue in that case.
183. The academic support for a prima facie objective valuation includes
Professor Burrows, A Restatement of the English Law of Unjust Enrichment (2012)
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section 34, Goff & Jones op cit, para 6-69, Virgo The Principles of the Law of
Restitution, 2nd ed pp 98 and 103, and Birks, Unjust Enrichment, (2nd ed, (2005),
pp 52-63.
184. There may be penumbra round this otherwise clear prima facie principle,
but I consider that they will normally involve arguments about the precise basis
upon which market value is to be assessed in a particular case. Thus, there could
be cases where the defendant would, for some reason or another, be able to
negotiate an unusually low price for the benefits in the open market – eg he could
be a particularly active and prestigious client, so the provider of the benefits would
hope for repeat business; or the service-provider’s reputation and goodwill would
be enhanced by it being known that he had acted for that client. In my view, in
such a case, the very fact that the particular defendant would be able to negotiate a
lower price in the open market provides the answer: if it was shown that the
market would have appreciated that factor and would have been likely to take it
into account, then the market value should reflect it. (Lord Reed gives some
instructive and colourful examples in paras 101, 102, 105 and 106). One should
not ignore objective characteristics of one or both of the parties, which would be
known to, and taken into account by, the market, when assessing market value, at
least in the instant context. The claimant as a provider of the benefits, would, by
the same token, be able to seek more, on a market value basis, if he had a
particular expertise or experience, provided that he could show that that was a
factor which would have been appreciated by the market and could have been
expected to be reflected in the market for the particular benefits in question.
Subjective devaluation
185. Having identified the prima facie position, the next stage in the argument
involves addressing the proposition that the quantum meruit should be reduced in a
case where the defendant establishes that, for one reason or another, the benefits
provided by the plaintiff were worth less to him than the open market value; in
other words, where the subjective value of the benefits to the defendant in the
particular case is less than the objective, market, value. This proposition, known as
subjective devaluation, is treated by most academic writers as being correct – see
eg per Burrows op cit, section 34.2, Goff & Jones op cit, paras 4-06 to 4-11 and 6
69, Virgo’s Principles op cit, p 98, and Birks, op cit, pp 52-63. However, others,
notably Edelman and Bant in Unjust Enrichment in Australia (2006, p. 108),
appear to challenge the whole notion of subjective devaluation, primarily on the
basis that the enquiry into whether the defendant desired the receipt of the benefit
should be objective, referring to Deane J’s description of the issue as one of
“constructive acceptance” of a benefit by a defendant: see Pavey & Matthews Pty
Ltd v Paul (1987) 162 CLR 221, 256-257 and Foran v Wight (1989) 168 CLR 385,
438.
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186. There is some judicial support for subjective devaluation in Ministry of
Defence v Ashman (1993) 25 HLR 513, 519-520, a case concerned with damages
for trespass, where Hoffmann LJ (whose reasoning was adopted by a subsequent
Court of Appeal in which he sat in Ministry of Defence v Thompson (1993) 25
HLR 552, in a passage cited by Lord Clarke at para 24) specifically referred to
subjective devaluation with approval. He explained that “a benefit may not be
worth as much to the particular defendant as to someone else. In particular … to a
defendant who has not been free to reject it”. To describe a former tenant who
remains in occupation of the premises as a trespasser in this way may, I think, be
questionable in this context: the former landlord has not voluntarily conferred any
benefit on him. I share Lord Reed’s view expressed at para 136 that this is not the
occasion to consider that question further. The speeches of Lord Hope and Lord
Nicholls in Sempra Metals [2008] AC 561, paras 49 and 118-119 respectively, at
first sight provide some support for subjective devaluation in an unjust enrichment
case, although that case was concerned with payment of money by mistake.
However, as Lord Clarke says at para 22, Lord Reed’s analysis at paras 126-131
convincingly establishes that the analysis, and indeed the conclusion reached, in
those speeches are both consistent with a market valuation approach, in line with
what he says in paras 101-106 (and with what I say in para 184).
187. In my view, it may well be that, in some cases of unjust enrichment,
subjective devaluation could be invoked by a defendant to justify the award of a
smaller sum than that which would be prima facie payable, namely a sum based on
the market value of the benefits conferred on him. Lord Clarke discusses the
question in paras 18-26, and Lord Reed does so in paras 110-118. Lord Clarke
adopts a so-called subjective devaluation approach, which involves a two-stage
process, at the second stage of which the defendant may deny that the benefit
conferred on him was worth as much as its market value, and leaves it to the court
to decide on the facts whether he can justify such a subjective devaluation, and if
so to what figure. Lord Reed, on the other hand, tends to favour a so-called choice
of benefit approach, which concentrates on whether the defendant was in some
way responsible for the conferment of the benefit, and deals with the question of
value as part of a holistic question of enrichment.
188. Given that it is unnecessary to do so, I would prefer to express no
concluded view as to which approach is correct. I can see attractions and problems
in each of the two approaches, and it appears that there are even differing views as
to what each approach entails or should entail. Broadly speaking, the subjective
devaluation approach has the attraction of making the defendant pay for the benefit
in so far as it has improved his position, but it may involve a greater risk of letting
the defendant name his price. The choice of benefit approach has the merit of
greater simplicity in some cases, but it may be more likely to lead to a defendant
receiving what many might regard as a windfall at the expense of the claimant, in
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circumstances where the defendant would (or, on some views, should) have been
prepared to pay for the benefit.
189. I suspect that in the great majority of cases where unjust enrichment is
raised these two approaches will lead to the same result. Indeed, the difference
between the two approaches may turn out to be one of procedural analysis rather
than outcome, particularly given what Lord Clarke says at para 26 and Lord Reed
says at para 138. Whether that is right or wrong, where, as in this case, there is no
doubt that the benefit was conferred at the defendant’s request, or with his prior
consent, it is hard to see how the two approaches would lead to different results. In
particular, on either approach, I do not consider that subjective devaluation would
be open to a defendant in a case such as the present, where, in the context of an
arm’s length commercial relationship, he voluntarily accepted the benefits, and
said nothing to the claimant, before the benefits were conferred, or even while the
benefits were being conferred, to suggest that they would be worth less than their
market value to him, or that he expected to pay less than market value. This was a
case of a claimant conferring a benefit on a defendant who was not merely free to
reject it, but who positively encouraged the claimant to provide it, and who did so
without ever suggesting that he would not pay the market value, or that the benefit
would have limited value to him.
190. Assuming subjective devaluation is available in some cases, it would, in my
view, require a very unusual case indeed before a defendant could rely on
subjective devaluation where (i) the services were provided at the defendant’s
request or by agreement between the parties, (ii) either the request or agreement
failed in some way to have legal effect, or it had no effective basis for quantifying
the remuneration to be paid to the claimant, (iii) the defendant never gave the
claimant to understand that the services had a lower than market value to him, or
that he was not prepared to pay market value for them, and (iv) the claimant never
gave the defendant to understand that he expected to be paid less than the market
value. I am not prepared to say that subjective devaluation could never be relied on
in such circumstances, but, as presently advised, I find it impossible to conceive of
a case which includes these features where it could.
191. Equally, where the defendant can return the benefit, it seems hard to justify
a departure from market value, if he chooses not to return it – as in Cressman v
Coys of Kensington (Sales) Ltd [2004] 1 WLR 2775. On the other hand, in some
other circumstances, most obviously the classic case of an unreturnable benefit
being conferred on a defendant without his prior or contemporaneous consent or
knowledge, there is obvious force in the argument that, once he has paid the
claimant a sum equal to what the benefit is worth to him, the enrichment he has
gained thanks to the claimant cannot be unjust. Equally, in some cases, it may
often be unreasonable for a claimant to claim a market-based payment, when he
has taken the risk of providing benefits to a defendant without the protection of a
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contract specifying how his remuneration is to be quantified, or where there have
been prior discussions and the defendant has indicated that he would not be
prepared to pay as much as the market price for the benefit.
192. It would seem wrong, at least in many such cases, for the claimant to be
better off as a result of the law coming to his rescue, as it were, by permitting him
to invoke unjust enrichment, than he would have been if he had had the benefit of
a legally enforceable contractual claim for a quantified sum. However, I would
expressly leave open how far the personal tastes, or even the eccentricities and
idiosyncrasies, of a defendant can be taken into account when assessing the
subjective value – a point which would be of some potential relevance in this case
if subjective valuation had been a maintainable argument – see para 179 above. As
a general proposition, I would have thought that the more personal, and in
particular the more objectively dependent on personal taste, a particular benefit is,
the more powerful the case for giving great weight to the defendant’s particular
priorities and preferences. I should add that, not least for this reason, I agree with
Lord Clarke and Lord Reed that the expression “subjective devaluation” may not
be a happy one.
Subjective revaluation
193. Of course, Mr Benedetti is not seeking to rely on subjective devaluation in
this case. However, it is a step in his argument. Having concluded that (i) the
prima facie basis of assessing a quantum meruit payment in an unjust enrichment
case is by reference to the market value of the benefits, and (ii) in some cases, it
may be open to the defendant to reduce the sum otherwise payable by relying on
subjective devaluation, the final question is whether it is open to the claimant in
this case to rely on subjective revaluation. In other words, is it open to a claimant,
as Mr Benedetti contends it is, to recover more than the market value of the
benefits where the value of the benefit to the defendant is greater than the market
value of the benefits?
194. There is a seductive simplicity in the contention that, if a defendant can take
advantage of subjective devaluation, then a claimant should be able to take
advantage of a subjective revaluation. That is a contention which receives a degree
of support from some academic writers. Thus, Virgo acknowledges that subjective
revaluation could be said to follow “logically and for reasons of consistency” from
subjective devaluation in his Principles op cit p 64. However, in his Restatement,
op cit p 158, Professor Burrows says that “[t]he correct view is probably that,
without a valid contract, the claimant should not be entitled to an overvaluation”.
The same view appears to be taken in Goff & Jones op cit, para 4-11 (and see paras
6.63-6.74), although the arguability of the contrary view is acknowledged.
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195. In my view, while, once again, this is not the occasion to lay down firm
rules, I find it difficult to think of circumstances where subjective revaluation
would be available to a claimant in an unjust enrichment claim to increase the
quantum meruit above the open market value of the benefits he has conferred on
the defendant. Even assuming that subjective devaluation is available to a
defendant in some cases, it does not follow that subjective revaluation should be
available to a claimant, and, if it is, it appears to me that it would be more difficult
to establish than subjective devaluation. A closer analysis of the two situations
indicates that part of the argument which supports subjective devaluation actually
helps negative, rather than support, the case for subjective revaluation.
196. Where a benefit is conferred on a defendant by a claimant, it would, at least
in the absence of special circumstances, be hard to describe the defendant’s
consequent enrichment as “unjust” if he pays the claimant the market value of the
benefit. Viewing the matter from the other perspective, if the defendant could have
gone into the market and purchased the benefit for the sum which he has to pay the
claimant, it is hard to see what injustice there could be to the claimant if he cannot
claim any more, whichever of the two approaches briefly summarised in para 187
above one adopts.
197. In many cases where the benefit has a special, higher, value to the
defendant, it will by no means be clear that, if the parties had agreed a contractual
quantification of the claimant’s remuneration, that factor would have been taken
into account. That is particularly true given that one is considering cases where the
reason the benefits would have a special value to the defendant would not be
known to the market or would not be reflected in the market value – see para 184
above.
198. It would, at least in general, be surprising if a claimant could obtain more
by pursuing an unjust enrichment claim, which can be said to involve the law
coming to his rescue because, for one reason or another, he does not have the
benefit of a contractual claim, than he would have been likely to receive if he had
had the benefit of a legally enforceable contractual claim. This argument, which
appears to help to undermine subjective revaluation, is the mirror image of an
argument which seems to me to help to justify subjective devaluation – see para
192 above.
199. A possible exception to the rule that a claimant cannot claim subjective
revaluation may be where the defendant has led the claimant to believe that he will
be prepared to pay more for the benefits than the market value, and the claimant
reasonably and foreseeably relies on that indication. However, the claimant’s case
in such circumstances may, on analysis, be said to involve an overlay of estoppel
on top of, or even a contractual claim in lieu of, his claim in unjust enrichment.
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200. Even if subjective revaluation is available in some unjust enrichment
claims, it seems to me clear that it should not be available in a case such as this,
where (i) the Services were provided voluntarily by the claimant with the
agreement, or at the request, of the defendant, (ii) the request or the agreement
failed in some way to have legal effect, or it had no effective basis for quantifying
the remuneration to be paid to the claimant, (iii) prior to the Services being
provided, the defendant never gave the claimant to understand that the Services
had a higher than market value to him, or that he was prepared to pay more than
the market value for them, and (iv) prior to the Services being provided, the
claimant never gave the defendant to understand that he expected to be paid more
than the market value.
Conclusion on the first issue
201. Accordingly, in agreement with Lord Clarke, Lord Reed and the Court of
Appeal, I conclude that the sum to which Mr Benedetti is entitled by way of
quantum meruit, based on unjust enrichment, is €36.3m, rather than the €75.1m
determined by the Judge. I would accordingly dismiss Mr Benedetti’s appeal. That
means that the cross-appeal must be addressed.
The second issue: the extent to which the quantum meruit should be reduced
The nature of the issue
202. Mr Sawiris’s case on the cross-appeal is simple. It is that (i) Mr Benedetti is
entitled to a quantum meruit of €36.3m for the Services which he provided for Mr
Sawiris; (ii) following first closing, he was paid far more than that, namely €67m;
(iii) accordingly, even before he began these proceedings, he had received more
than he was entitled to; and (iv) therefore his claim should have been dismissed.
203. That argument was rejected by the Judge on grounds which the Court of
Appeal held were open to him. The Judge’s reasoning may be summarised in the
following propositions: (i) the €67m was paid to ITM, Mr Benedetti’s company,
for “brokerage services” under the revised brokerage agreement; (ii) the scope of
those brokerage services under that agreement, as a matter of construction, only
covered (what on a view generous to Mr Benedetti was) 60% of the Services (ie
the total Services which he provided); accordingly (iii) the €67m included a
payment in respect of 60% of the Services; so that (iv) the quantum meruit of
€36.3m should be reduced by 60%; resulting in (v) an award of €14.52m, if the
€75.1m were left out of account.
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I
204. Mr Benedetti’s case is primarily that any attempt on the part of Mr Sawiris
to attack the Judge’s analysis and conclusion is bound to fail because, properly
analysed, it is an appeal against a finding of fact, and, indeed, a finding of fact
which the Court of Appeal upheld. I would accept that the Judge’s findings of
primary fact should be interfered with only in exceptional circumstances, on the
very well established ground that such issues are best left to the trial judge,
especially when his conclusions have been upheld by the Court of Appeal.
would also accept that many of the Judge’s inferences from primary fact should
not be interfered with for very similar reasons. Thus, if he was right in his
conclusion that the revised brokerage agreement should be accepted at face value
and that it covered some, but not all, of the Services which Mr Benedetti provided
to Mr Sawiris in terms of introducing Mr Sawiris to the possibility of acquiring
Wind and negotiating the sale and purchase agreement, then we should not
interfere with the conclusion that it covered 60% of the Services. The very fact that
this assessment had to be no more than a rough and ready assessment is a good
reason for leaving it to the trial judge: having considered, read and heard oral and
documentary expert and factual evidence over more than thirty days, he was in a
far better position to make such an assessment than an appellate court.
205. However, that is not the basis on which Mr Sawiris attacks the Judge’s
conclusion. He puts his case in two ways. First, he contends that the Judge should
have concluded that the terms of the revised brokerage agreement were irrelevant
because the payment of €67m was not really attributable to that agreement.
Alternatively, he says that, if, as the Judge found, the revised brokerage agreement
did apply, then, properly construed, it covered all aspects of the Services which Mr
Benedetti provided to Mr Sawiris. I shall consider those two arguments in turn.
Was the €67m attributable to the revised brokerage agreement?
206. Mr Sawiris’s basic submission under this head is that (i) the €67m which
Mr Benedetti was paid had, in reality, nothing to do with any Services he
supposedly provided under the first brokerage agreement or the revised brokerage
agreement, but (ii) it was a payment which Mr Benedetti engineered for his own
benefit as a result of being involved in the acquisition of Wind, and to which he
was not entitled, so in these circumstances (iii) Mr Sawiris is entitled to have it
taken into account on the determination of how much is to be paid to Mr Benedetti
for the Services, and, accordingly, (iv) as the payment exceeds the quantum meruit
to which Mr Benedetti would otherwise be entitled to be paid, he should receive
nothing.
207. In this connection, it is necessary to look at the findings which Patten LJ
made about the first and revised brokerage agreements and the payment of the
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€67m in a little more detail. At [2009] EWHC 1330 (Ch), para 334, the Judge
described the creation of the first brokerage agreement in this way:
“On 24 March [2005] Mr Benedetti responded to the prospect of Mr
Ross’s and IPE’s departure from the transaction by using the
opportunity presented by his appointment as director of Weather
[Investments] and the transfer of shares to procure two agreements
for his own benefit without the prior approval of Mr Sawiris and
without disclosing to him or Mr Abdou the fact that he would receive
a substantial fee from the transaction. … [T]he payment of a
brokerage fee in addition to the shares received under the acquisition
agreement was not a term of that agreement or part of the alleged
Understanding and … the first brokerage agreement … gave Mr
Benedetti the security of a payment out of the transaction that was
not dependent on any agreement with Mr Sawiris about the terms of
his remuneration or on IPE remaining involved in the transaction so
as to give him a return under the … collaboration agreement.”
208. The assignment of the rights and liabilities of Weather Investments under
the first brokerage agreement to Weather Italy was effected, without the
knowledge of Mr Sawiris or Mr Abdou, by Mr Benedetti two months later, on 26
May 2005, the day on which the sale and purchase agreement was executed.
Accordingly, Mr Sawiris and Mr Abdou were unaware of the existence of a
potential contractual claim by Mr Benedetti or his companies until after 26 May
2005.
209. The first time Mr Sawiris or Mr Abdou had any sort of notice of such a
claim was at the end of July 2005, when Mr Abdou received details of all the fees
to be paid in anticipation of first closing. This included €87m payable to ITM,
which was reduced to €67m as Mr Sawiris thought it was too high. There was a
dispute at trial as to the purpose to which Mr Benedetti led Mr Abdou and Mr
Sawiris to understand that this money would be put. The Judge reached this
conclusion at [2009] EWHC 1330 (Ch), paras 432-433:
“It seems clear … that Mr Abdou …originally understood that the
€87m figure was not intended as a payment to Mr Benedetti for his
brokerage services but was to be used to discharge his liabilities to
third parties. … [Mr Benedetti led] Mr Abdou and Mr Sawiris to
believe that the money was to be used to pay third parties who had
assisted in the transaction. But … when Mr Benedetti was asked to
identify precisely who was going to receive the money he did not
answer. …
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Mr Sawiris said that this caused him to have doubts about the story
that the money was needed to pay third party advisers but that as he
intended to reward Mr Benedetti for his efforts and owed him
money, he was content to let the €67m be paid and to sort it out later.
… Mr Benedetti says that he therefore agreed to reduce the payment
from 0.7% (€87m) to 0.55% (€67m). He then arranged for the
revised brokerage agreement to be prepared which was identical in
terms to the first brokerage agreement except for the fee. [T]his
Agreement was executed in July or August but backdated to 26
May.”
210. Information as to what then happened to the €67m is very limited. At
[2009] EWHC 1330 (Ch), para 434, the Judge said that “Mr Benedetti was crossexamined about [the €67m] and accepted that part of the money was spent on
items such as antique candlesticks which were used to furnish his office”. He
continued by saying that, although “this has a certain resonance with other recent
events, there is, as [Mr Benedetti’s counsel] pointed out, no counterclaim for the
recovery of these sums on the grounds that they were in some way
misappropriated and the issue of expenses is not, I think, ultimately relevant to
what I have to decide.”
211. In the light of the Judge’s conclusions in the passages I have set out above,
it seems to me that the argument advanced on behalf of Mr Sawiris on this issue is
correct. In summary, the position appears to me to be as follows. (i) The €67m was
received by Mr Benedetti, or at least a company wholly owned by him, either for
nothing or for the very benefits which he had conferred on Mr Sawiris, namely the
Services; (ii) I do not consider that anything which passed between Mr Sawiris and
Mr Benedetti calls that conclusion into question; (iii) if the €67m was received for
nothing, then, particularly as it was obtained as a result of Mr Benedetti’s
involvement with the very transaction for which he provided the Services and for
which he claims quantum meruit, it must be set off against that quantum meruit;
(iv) if, on the other hand, the sum was received for the Services, then a fortiori it
must be set off against the quantum meruit; (v) whether (iii) or (iv) is correct, as
the quantum meruit to which he was entitled, according to the Judge’s analysis (as
adjusted by the Court of Appeal), was less than the sum of €67m, his claim must
be dismissed.
212. It is appropriate to examine those conclusions in a little more detail.
213. The Judge’s analysis of the circumstances in which the first brokerage
agreement was executed, as quoted in para 207 above, is important not merely
because it shows that Mr Benedetti concealed the creation of that agreement from
Mr Sawiris. It is also important because it shows that the purpose of the agreement
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was to enable Mr Benedetti to obtain “the security of a payment out of the
transaction” and a payment which “was not dependent on any agreement with Mr
Sawiris about the terms of his remuneration” or on any other contingency.
214. It seems to me very hard to argue against the proposition that this means
that the purpose of the first brokerage agreement was to ensure that Mr Benedetti
got at least something for the Services he had agreed to provide. There is nothing
in the findings of the Judge to suggest that he was envisaging that he would be
paid for something different. It is true that the Judge was saying that Mr Benedetti
was seeking to insulate himself against the loss of other possible sources of
income, resulting from IPE and Mr Ross pulling out, or under the alleged
understanding, but that cannot assist Mr Benedetti. IPE and Mr Ross did pull out,
and he therefore had no claim to anything in that connection, and, as the Judge
found, the alleged understanding never existed.
215. If the purpose of the first brokerage agreement was not to provide a basis
for ensuring that Mr Benedetti was paid something for the Services when a
transaction in relation to Wind eventuated, it seems to me that it can only have
been a sham document prepared for the purpose of extracting money from the
transaction, because, if the “brokerage services” therein referred to were not the
Services for which Mr Benedetti should receive a quantum meruit, there seem to
have been no other Services to which they could refer.
216. The next stage is the assignment on 26 May 2005, which was also effected
by Mr Benedetti without Mr Sawiris or Mr Abdou’s knowledge. Other than
confirming the secret nature of the whole brokerage arrangement, that takes
matters no further.
217. One then gets to late July and early August 2005, when the existence of a
possible contractual claim came to light, and the purpose of what was originally
the €87m was discussed. It seems to me that Mr Benedetti misled Mr Sawiris as to
the purpose of the €87m (which was reduced to €67m in those very discussions).
He said that it was to pay third parties, but in my view that cannot be accepted, in
the light of the following points, which have particular force, given that the onus
must be on Mr Benedetti to establish that the €67m was paid out to third parties: (i)
the absence of any reliable evidence from Mr Benedetti as to the identity of the
alleged third parties; (ii) the absence of any evidence of any specific payment
having been made to any third parties; (iii) the purpose of the agreement as
described by the Judge in the passage quoted at para 207 above; (iv) Mr
Benedetti’s rejected contention that there was the alleged understanding, which
would have entitled him, not third parties, to brokerage; and (v) the Judge’s
admittedly laconic finding as to what happened to the €67m, as quoted in para 210
above. Even if (which appears unlikely) any significant proportion of the €67m
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went to third parties, I find it impossible to accept, on the evidence at trial and on
the Judge’s findings, that Mr Benedetti did not retain the lion’s share – ie much
more than half, and, crucially, more than the €36.3m to which he was entitled by
way of quantum meruit.
218. I do not consider that the fact that Mr Sawiris may have had doubts as to
whether the €67m was going to third parties can possibly assist Mr Benedetti on
this issue. It has not been suggested that the €67m was intended to be a gift to Mr
Benedetti. In so far as it was not going to third parties as Mr Benedetti had said, it
seems to me that the €67m was probably viewed by Mr Sawiris as a payment on
account for the Services (and hence he was prepared to “sort it out later”). If that is
the right analysis, then one is led straight back to the point raised by the appeal,
namely that the correct measure for the quantum meruit is objective market value,
not some species of subjectively revalued value.
219. Apart from the actual payment of the €67m, the only other relevant fact was
the execution of the revised brokerage agreement. Neither of these events takes the
matter much further, save that the fact that Mr Benedetti found it relatively easy to
agree to such a significant reduction in the sum payable under the revised
brokerage agreement provides mild support for the notion that it was to be retained
by him rather than being payable to third parties.
220. The Judge decided that the payment of the €67m under the revised
brokerage agreement was, in the light of the definition of “brokerage services” in
that agreement, partly, but only partly, in respect of the Services supplied by Mr
Benedetti. The Court of Appeal agreed with the Judge or at least considered that
the Judge was entitled to reach that conclusion. But, as I see it, that approach was
wrong because it treated the revised brokerage agreement as representing the basis
upon which Mr Sawiris agreed that ITM should be paid €67m. However, in the
first place, the Judge had already reached his conclusions described and discussed
in paras 213-214 above, which amounted to finding that, giving it the explanation
that is the most creditable from Mr Benedetti’s point of view, the revised
brokerage agreement, reflecting the first brokerage agreement, was to protect his
claim for a quantum meruit. Secondly, although the revised brokerage agreement
was a document which, on its face, did justify the payment, the truth is that, as
explained and discussed in paras 209 and 213 above, the payment was only
authorised and agreed by Mr Sawiris after he had been told by Mr Benedetti that it
was to reimburse third parties, whereas Mr Benedetti kept at least most of it, and
probably all of it. Thirdly, over and above these two points, I agree with what Lord
Clarke says in paras 74-77, namely that, despite the Court of Appeal’s approval, it
was, on analysis, inappropriate and arbitrary to apportion the remuneration in the
way that the Judge did.
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221. In the Court of Appeal, Arden LJ relied on the fact that there was no
counterclaim for the €67m. But I do not see that as a problem. The fact that Mr
Sawiris did not allege that Mr Benedetti had been paid too much does not preclude
him from contending that Mr Benedetti had, at its lowest, been paid enough to
satisfy his quantum meruit claim.
222. Another point touched on by Arden LJ was that the brokerage agreements
were between ITM and Weather Italy, whereas the Services were negotiated, and
were treated as being provided, as between Mr Benedetti and Mr Sawiris. I accept
that a court must be very wary of treating companies as if they were the
individuals who own or control them – see Salomon v A Salomon and Co Ltd
[1897] AC 22 and Prest v Prest [2013] UKSC 34, [2013] 3 WLR 1. However,
properly analysed, it seems to me that Mr Benedetti and (in so far as he was aware
of the involvement, or even existence, of ITM) Mr Sawiris were treating Mr
Benedetti’s right to compensation from Mr Sawiris as satisfied by the obligation of
Weather Italy, a company owned and controlled to a significant extent by Mr
Sawiris, to ITM, a company owned and controlled by Mr Benedetti. That would
appear to follow from the Judge’s explanation of Mr Benedetti’s thinking behind
the execution of the first brokerage agreement (see para 207 above), and Mr
Sawiris’s approach to the payment of the €67m (see para 209 above), as well as
being inherent in the 60% reduction to the €36.3m quantum meruit made by the
Judge and approved by the Court of Appeal.
223. Etherton LJ also made the point that the fact that Mr Benedetti had executed
the first brokerage agreement, the revised brokerage agreement (and the
assignment of the first brokerage agreement) for both parties did not invalidate
those agreements. While I agree with that as far as it goes, it does not go very far
in answering the points which can, for the reasons given above, be validly made by
Mr Sawiris in support of his cross-appeal.
The interpretation of the revised brokerage agreement
224. The alternative argument raised by Mr Sawiris is that, even on the Judge’s
approach, the payment of the €67m was a payment in respect of all the Services
which Mr Benedetti had provided. That argument turns on whether the definition
of “Brokerage Services” in the revised brokerage agreement extended to all the
Services provided to Mr Sawiris by Mr Benedetti.
225. The expression “Brokerage Services” is defined as meaning “the effecting
of transactions of and/or relating to the purchase of and dealing in Securities in the
name and for the account of [Weather Italy] as well as the assistance in the
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negotiation with the prospective seller, raising of acquisition debt and further
raising of financial debt for Wind”.
226. It is said on behalf of Mr Sawiris that the Judge did not make it quite clear
in his judgment which aspect or aspects of the Services provided by Mr Benedetti
was or were not included in that definition. However, I think Etherton LJ was right
at [2010] EWCA Civ 1427, para 160, to say that the Judge “clearly accepted Mr
Benedetti’s argument that the definition … did not include bringing the investment
opportunity to Mr Sawiris or obtaining the co-operation of the Italian government
and the management of Wind”. The question is whether Etherton LJ was right to
add this was a “finding [which] cannot properly be criticised”.
227. I accept that, on a literal, relatively narrow, approach to the definition of
“brokerage services”, it would not include introducing Mr Sawiris to the
possibility of purchasing Wind, which can fairly be said to be an action which
occurred before the activities covered by the definition. However, the revised
brokerage agreement must, like any document, be construed contextually, and
there obviously is an argument that the definition can and should be interpreted
relatively widely to extend to all the Services which Mr Benedetti provided, in the
light of the purpose which he had in mind when executing the first brokerage
agreement – see para 207 above.
228. However, the conclusion I have reached on Mr Sawiris’s first argument to
support his cross-appeal renders it unnecessary to consider this alternative
argument, and I do not think that it is right to decide it. First, the extent of the
definition under scrutiny is not a point of any general importance. Secondly, given
the somewhat artificial circumstances in which the first brokerage agreement was
executed, it is not easy to identify the factual matrix. Thirdly, there could be
difficult questions to be resolved – eg (i) is everything in Mr Benedetti’s mind at
the time of execution admissible, as he signed on behalf of both parties, and (ii)
must the meaning of the terms in the revised brokerage agreement be the same as
in the first brokerage agreement. Fourthly, the issue was not the subject of much
argument before us.
Conclusion
229. Accordingly I have reached the conclusion that, in agreement with Lord
Clarke and for much the same reasons, I would dismiss Mr Benedetti’s appeal, and
allow Mr Sawiris’s cross-appeal. It therefore follows that Mr Benedetti’s claim is
dismissed.
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