BL-2020-001417 - [2025] EWHC 2487 (Ch)

An important issue in the case is the need to define whether the enrichment was by reference to the services provided or the end-product. More specifically, was the benefit conferred by the services provided by Matrix or by the end-product, namely the investment being made? If the latter, at what point did the cause of action in restitution accrue. Was it at the point in time when Musst became entitled to sue Astra (that is upon Astra receiving money from the investor) or was it when Musst received money from Astra whether voluntarily or upon judgment being enforced? The answer to these questions will inform both as regards the limitation issue and about the nature of the alleged unjust enrichment.

Where the provision of services is an issue, considerable debate can arise as to whether the enrichment is properly characterised as the services themselves or their end-product. The relevant legal principles for identifying the enrichment in the provision of services cases are considered in Goff & Jones paragraphs 5-39 – 5-42. They make the distinction between ‘pure’ services, where the provision of the services themselves constitutes the enrichment, and an ‘end-product’, where the product of the services in question constitutes the enrichment:

“5-39 In some cases where the claimant has done work for the defendant the only benefit which the defendant can have received is the provision of the services themselves, because they leave no marketable residue in the defendant’s hands: once the services have been performed, nothing remains from which the defendant can derive any further benefit. One example is R. (Rowe) v Vale of White Horse DC, where the claimant provided the defendant with sewerage services; another is Chief Constable of Greater Manchester Police v Wigan Athletic AFC, where the claimant provided the defendant with special policing services at football matches; a third is Brenner v First Artists’ Management Pty Ltd, an Australian case where the claimant provided management services to a pop star. It is well established that “pure” services of this kind can constitute an enrichment, the value of which can be recovered in an action for unjust enrichment.

5-40 Cases where the claimant’s services leave a marketable residue in the defendant’s hands can be more difficult, because there is more than one way to characterise the benefit received by the defendant: it may be the services themselves, just as in the “pure” services cases, but it may also be the product of the services. …

5-42 … The best approach is for the court to keep an open mind, and to take all the circumstances into account, including whether the parties themselves thought that the benefit being transferred was the services or their end-product.” (Emphasis added).

Where the benefit transferred comprises services, the usual value of the product is to be calculated by reference to an objective test, ascertained by asking whether the reasonable person would consider the defendant to have received something of value. Thus, in Benedetti v Sawiris, in the judgment of Lord Clarke, he said:

“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, 8^th ed (2011) ("Goff and Jones"), para 4-01. 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.

This was explained by Lord Scott in Cobbe v Yeoman's Row Management Ltd  above in the above passage per Lord Scott at paras. 40-42 as follows:

“40.

There is no doubt but that the value of the property will have been increased by the grant of planning permission and that the appellant has, accordingly, been enriched by the grant of the permission for which it has had to pay nothing. Since the planning permission was obtained at the expense of Mr Cobbe it is very easy to conclude that the appellant has been enriched at his expense and, in the circumstances that I need not again rehearse, unjustly enriched. So, in principle, he is entitled to a common law remedy for unjust enrichment.

41.

But what is the extent of the unjust enrichment? It is not, in my opinion, the difference in market value between the property without the planning permission and the property with it. The planning permission did not create the development potential of the property; it unlocked it. The appellant was unjustly enriched because it obtained the value of Mr Cobbe’s services without having to pay for them. An analogy might be drawn with the case of a locked cabinet which is believed to contain valuable treasures but to which there is no key. The cabinet has a high intrinsic value and its owner is unwilling to destroy it in order to ascertain its contents. Instead a locksmith agrees to try to fashion a key. He does so successfully and the cabinet is unlocked. As had been hoped, it is found to contain valuable treasures. The locksmith had hoped to be awarded a share of their value but no agreement to that effect had been concluded and the owner proposes to reward him with no more than sincere gratitude. The owner has been enriched by his work and, many would think, unjustly enriched. For why should a craftsman work for nothing? But surely the extent of the enrichment is no more than the value of the locksmith’s services in fashioning the key. Everything else the owner of the cabinet already owned. So here.

Quantum Meruit

42.

It seems to me plain that Mr Cobbe is entitled to a quantum meruit payment for his services in obtaining the planning permission. He did not intend to provide his services gratuitously, nor did Mrs Lisle-Mainwaring understand the contrary. She knew he was providing his services in the expectation of becoming the purchaser of the property under an enforceable contract. So no fee was agreed. In the event the expected contract did not materialise but a quantum meruit for his services is a common law remedy to which Mr Cobbe is entitled. The quantum meruit should include his outgoings in applying for and obtaining the planning permission, which should be taken to be reasonably incurred unless Mrs Lisle-Mainwaring can show otherwise, and a fee for his services assessed at the rate appropriate for an experienced developer. To the extent, of course, that Mr Cobbe’s outgoings included the fees of planning consultants whom he employed, there must not be double counting. The amount of the quantum meruit for Mr Cobbe’s services would, in my opinion, represent the extent of the unjust enrichment for which the appellant should be held accountable to Mr Cobbe (emphasis added)”

By contrast, the end-product case is different. Frequent incidences of the difference are as follows:

The case of Gray v Smith is directly in point. Mr Richard Smith (as he then was) sitting as a Deputy Judge of the High Court said the following at paras. 440-451:

“440.

According to Benedetti (at [15]-[16]), whether the defendant has been enriched is an objective test, ascertained by asking whether the reasonable person would consider the defendant to have received something of value. As Goff & Jones notes (at [5-39]), where the provision of services is in issue, considerable debate can arise as to whether the 'enrichment' is properly characterised as the services themselves or their 'end-product'. In this case, the Defendants contend for the latter, saying that the purpose of Mr Gray's involvement in Blackmoor was the raising of capital. Goff & Jones suggests (at [5-39] (Footnote: ¹)) that, in deciding the proper characterisation of the relevant benefit:-

" The best approach is for the court to keep an open mind, and to take all the circumstances into account, including whether the parties themselves thought that the benefit being transferred was the services or their end-product ."

441.

The value of any enrichment is also to be determined, in the first instance, by an objective test, namely " the price which a reasonable person in the defendant's position would have had to pay for the services " ( Benedetti (at [17])). The authorities show that such " price " may take different forms. So, in Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 , a 'pure services' case concerning the provision of management services to a pop group, the Court considered it would be appropriate in many cases to assess the value of the services by applying an hourly rate to the time spent, making a " global assessment " where an itemisation of the hours spent or of the precise services is not possible. However, in other cases, the Court has adopted a different approach to valuation where, for example, a commission, fee, royalty or some other basis reflects industry practice or the parties' own understanding of the value of the claimant's services (see Goff & Jones (at [5-45]-[5-46])). Finally, if the defendant can show that he or she valued the enrichment less than its market value, that market value may be reduced to reflect the defendant's 'subjective devaluation' ( Benedetti (at [18])).

442.

Applying these principles here, the Claimant says that it would be wrong simply to look at the end-product rather than taking into account " all the circumstances ", consistent with the approach suggested in Goff & Jones (noted at [440]). I was also referred further to Brenner , including for the proposition that " where the services were requested and accepted, the law will not stop to enquire whether they were, on any other basis, of benefit to the party requesting and accepting them ". However, this did not seem to advance matters much beyond it being well established that the provision of 'pure services' can constitute enrichment for the purpose of a claim in restitution.

443.

As to the proper characterisation of the benefit in this case , the Claimant points to the value of various aspects of the services he provided, including (i) the pooling of contacts, evidenced by the significant names introduced by Mr Gray and Blackmoor continuing to pitch to contacts from the period of their collaboration (ii) the iterative, collaborative and long-term processes of developing marketing materials, analysing target companies and identifying investors (iii) Mr Smith continuing their association for nearly a year, including their marketing trips and pitches (iv) Mr Gray's inclusion in the FCA application (v) his appointment as BIPL director (vi) Mr Gray's pedigree and credentials and (vii) these efforts cumulatively permitting the seamless continuation of Blackmoor's development to the launch of the Blackmoor Fund.

444.

Although I acknowledge that Mr Gray did make significant efforts to attempt to raise capital for Blackmoor, his exposition overlooks the following important matters: first , as noted (at [76]), it is common ground that Mr Gray's most important task was the raising of capital. As both experts agreed (Joint Statement at [2.4]):-

"… the activities being undertaken by the Claimant were centred around successfully bringing in investors ."

445.

Second , without success in capital raising, there would have been no Fund;

446.

Third , as I have already found (at [309]), and noted (at [431]) in the context of the 'unjust factor' relied on, Mr Gray understood that he would not remunerated unless successful in capital raising in his own right . As Chitty notes in the context of non-monetary benefits (at [32-022]), "[r]estitution will not be awarded if the dealing between the parties shows that the risk is to be borne by the party rendering the services ."

447.

Fourth , in terms of a start-up's ability to pay its investment team pre-launch, the experts also agree (Joint Statement at [2.5]) that:-

"…. prior to launch, a start-up fund has no ability to pay. The ability of a fund to pay its investment team is typically subject to both agreement from the owners of the fund and a successful launch, at which point, performance and management fees become payable ."

448.

Fifth , Blackmoor was no different. The Bi-Invest Contract funded its expenses but it did not have the means to pay for Mr Gray's services (or direct expenses) as well; and

449.

Sixth , despite his pedigree and their collaboration lasting for nearly a year, Mr Gray did not succeed in raising any capital.

450.

Finally, I have already rejected Mr Gray's 'continuum argument', including (at [435]) in a restitutionary context as well. It was Mr Smith taking Blackmoor " in a different direction ", not Mr Gray's prior efforts which eventually allowed the Blackmoor Fund to launch. None of those who invested in it were contacts of Mr Gray or Mr Smith during the period of their collaboration.

451.

In circumstances in which the principal objective of their collaboration was the raising of capital, Mr Gray knowingly took the risk that he would not be paid for his work unless he was successful and the parties' mutual understanding in that regard was consistent with market practice, BIPL's enrichment cannot be said to lie in the individual services provided by Mr Gray. Rather, I would have found that such enrichment lay in their end-product in the form of committed investor capital and that the appropriate measure of the value of that enrichment (if any) would have been a fee, commission or percentage share based on the level of capital raised, not the time spent (or expenses incurred) to that end. Since Mr Gray failed to raise any capital, I would therefore have found that BIPL was not enriched.”

The instant case has parallels with the case of Gray v Smith. In that case:

There is an important difference between the instant case and Gray v Smith. In that case, the defendant was the fund (in the instant case, the position of Octave/Astra). In the instant case, there are three parties to consider. The case put forward in Musst v Astra was that of a tripartite relationship of Musst, Astra and Matrix, but that was rejected in the judgment in that action. The contract that was found was the one as pleaded between Musst and Astra (by novation). The court in that case did not have to deal with the question of whether there was a contract between Musst and Matrix because the Master on 2 November 2020 refused to give permission to the instant action to be heard at the same time as the claim in Musst v Astra.

The contractual case put forward in the instant case was two contractual relationships, that is between Matrix and Musst and between Musst and Octave/Astra. That case was withdrawn following the conclusion of the evidence at trial, albeit that it had been pursued right up to trial, and Musst has had to respond to it in detail in its opening.

The unjust enrichment case is on the basis of a contract between Musst and Octave/Astra, but services provided which have enriched Musst at the expense of Matrix and in circumstances where the enrichment is unjust. What is that enrichment? The case is put in alternative ways, namely either the sums to which Musst became entitled or the sums received by Musst. Whichever it is, this is an end-product case rather than a services received case. The reasons for this are as follows:

It was known that Musst was a start-up and so the expectation was that it would not have the resources to make payment unless put in funds itself by Astra. Likewise, it would have been known that Astra as a start-up would not be expected to have the resources to make payment unless put in funds itself by the investor.

The totality of this strongly points to the fact that these were end-product arrangements. It follows that money would not become due until at earliest the money had been paid by the investor to Astra whereupon money would have been due to be paid to Musst. Further, for reasons set out below, no moneys would be payable to Matrix until money had actually been received from Musst.