[2025] EWHC 2477 (Ch)

We also consider it relevant that in this case the parties were at the material time in a contractual relationship and the contract between them has not been rescinded or terminated. The contract continues in existence. It has been strongly affirmed by each of the defendants, who have continued to pay rent and to occupy their properties long after they became aware of the breach of duty. The defendants have conceded that, even if they could establish their disputed claims for a breach a contract, they could prove no damage. They have suffered no loss, and no damage. In those circumstances, for them to counterclaim for repayment of rent, not pursuant to the contract, but by way of a restitutionary claim, appears to us to be wrong.

It is wrong in principle, because no right to repayment of the rent is given to them by statute, and no right to repayment of the rent is given to them in their contracts, and it is not usual for restitution to be available when the parties are in a subsisting contractual relationship (Goff & Jones on Unjust Enrichment 10^th edition (2022) para 3-12). This is discussed by Professor Jack Beatson (later Beatson LJ) in “Restitution and Contract: Non-Comul?” Theoretical Inquiries in Law 1.1 (2000) 141.

It is also wrong in law and equity, because it overrides the allocation of risk which the parties had an opportunity to consider in their contract and which the legislature provided for in the legislation, and would provide the defendants with a windfall which no-one else agreed or enacted should be theirs.

We do not accept the defendants’ argument that the rent was not paid pursuant to the contract because it was not required to be paid under the contract in the circumstances prevailing when it was paid. First of all, some of the rent was paid in advance and it was due under the contract at the date of payment. But second, and in any event, all the rent was paid pursuant to the contract, even when it was not required to be paid. The rent was stipulated in the contract and it was because of the contract stipulations that it was paid. It was not contrary to the contract that it should be paid. It was not required to be paid, but it was open to the defendants to pay it if they chose. When they made the payments, they made them pursuant to their contracts and for no other reason. We have already found that they did not make the payments as a result of their mistake. As we said in the First Judgment (para 146):

“…of course payment of rent is not “precluded”. It is not unlawful to pay the rent. There is nothing wrong with paying the rent. No-one is going to stop a contract-holder paying their rent as usual. No-one is going to object to it. No-one did object to it when the contract-holders did, in fact, pay their rent even during the period when (in accordance with our finding on Issue 1A) they were not required to.”

Turning to the legislation, we notice that there is provision for compensation in certain cases of breach of the Act, and there is provision for the right to that compensation to be set off against the contract-holder’s liability to pay rent.

The duties referred to in section 87 do not include the duty to provide contract-holders with a copy of the ECR relating to their property. Nowhere in the Act or in its associated legislation is a right given, not only not to pay rent, but to reclaim rent which has been paid, or to set-off rent paid when it was not due on account of non-receipt of an ECR against rent paid or payable in a subsequent period.

The relief claimed in this action by the counterclaims is not in accordance with the statutory scheme, as well as not being in accordance with the contracts. The statutory scheme and the contracts both provide that the contract-holders are not required to pay rent but neither of them say that rent must not be paid, or that contract-holders who do pay the rent may subsequently reclaim it, on the grounds of mistake, in respect of a period when an ECR should have been given to them and was not. The defendants are relying on restitution to create rights not given to them under the contracts or by the legislation. Their arguments, if successful, would reallocate risk. That is, in our judgment, another good reason for not allowing the counterclaims.