Mohamed Yasir v Ibrahim Hassan [2023] SC 02

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On 18 January 2023, the Supreme Court pronounced judgement in a case which provided further clarity to the principle of restitution for unjust enrichment under the law of equity. The Court further listed the conditions to be fulfilled in order to establish that a party has, in fact, gained an unjust enrichment.

Background

  • Mohamed Yasir subleased the ground floor of M. Sleet (“Leased Premises”) to Ibrahim Hassan for commercial use on 14 February 2016 under a Sublease Agreement. The Sublease Agreement was terminated by Mohamed Yasir citing Ibrahim Hassan breached clause 1 of the Sublease Agreement by failing to pay rent for 2 consecutive months.
  • Subsequent to the termination of the Sublease Agreement, Mohamed Yasir instructed Ibrahim Hassan to surrender the Lease Premises. However, Mohamed Yasir refused to surrender the Leased Premises to Mohamed Yasir claiming he had already invested money for the renovation of the Leased Premises to open a restaurant. The keys to the Leased Premises were handed over to Mohamed Yasir 15 June 2016, only after Mohamed Yasir signed a document agreeing to compensate the expenses incurred by Ibrahim Hassan to renovate the Leased Premises.
  • Mohamed Yasir failed to reimburse the renovation expenses incurred by Ibrahim Hassan. Hence, Ibrahim Hassan filed a case in the Civil Court, to recover the money he invested in the Leased Premises and compensation for damages suffered.

Case History

  • The Civil Court decided that although Mohamed Yasir rightfully exercised his right to terminate the Sublease Agreement due to the breach of a material clause, Ibrahim Hassan is entitled to recover the money he invested in the Leased Premises from Mohamed Yasir under the principles of equity as Mohamed Yair has the possession of the Leased Premises. The Court, however, decided that the damages claimed for by Ibrahim Hassan could not be awarded as the Sublease Agreement was terminated due to a fundamental breach caused by Ibrahim Hassan. 
  • Mohamed Yasir appealed the decision of the Civil Court to the High Court contending that as he was the innocent party when it came to the termination of the Sublease Agreement, he should not have to bear any expenses or damages borne by Ibrahim Hassan as a result. 
  • However, the High Court upheld the lower court’s decision on the same grounds, restating that Ibrahim Hassan is entitled to the recovery of the money he invested in the Leased Premises under the principles of equity. 
  • It is notable that both the Civil Court and High Court held that Ibrahim Hassan was entitled to recover the expenses he incurred to invest in the Leased Premises under the principles of equity and not the law of contract.

Issue

The issue before the Supreme Court was whether a party who breached a contract can still claim for compensation under the principle of restitution for unjust enrichment. 

Supreme Court’s Decision

  • The Supreme Court unanimously upheld the decision of the High Court mainly on the basis that both Civil Court and High Court had correctly identified that Mohamed Yasir had gained an unjust enrichment and further held that Ibrahim Hassan can therefore claim for compensation through restitution regardless of whether or not the termination of the Sublease Agreement occurred due to him breaching the Lease Agreement. 
  • The Court in reaching its decision relied on the Court’s earlier decision in Mohamed Yoosuf v. Fathimath Nazima & 3 Others1 and established the following.
    1. Restitution of a benefit to the party to whom it rightfully belongs to, is recognized in the Maldivian legal system under the legal principles relating to unjust enrichment.
    2. Legal principles relating to unjust enrichment are an entirely separate area of law from that of contract law or tort law or other areas of law and such claims need not be based on a civil wrong.
    3. Unjust enrichment itself is a cause of action for a claim and restitution is the corresponding remedy. Such remedy is different from that sought in claims under contract or tort law in that the compensation for restitution is based on recovering a loss rather than recovering a gain.
  • The Court further expanded on the issue to establish the following conditions that need to be fulfilled in considering whether a person has gained an unjust enrichment.
    1. Respondent must have been enriched;
    2. The enrichment gained was at the expense of the claimant;
    3. The enrichment was unjust; and
    4. Respondent does not have a defence.
  • In application of the conditions to the facts of the case, the Supreme Court stated that when Mohamed Yasir handed over the Leased Premises, the value of the premises had increased due to the investment made by Ibrahim Hassan. The Court further stated that Mohamed Yasir was not able to present any defences to the Court in relation to the issue and the Leased Premises was still in the possession of Mohamed Yasir when the case was filed at court an year after the termination of the Sublease Agreement. Therefore, the Court held that it could be established that Mohamed Yasir gained an unjust enrichment at the expense of Ibrahim Hassan and as such Ibrahim Hassan was entitled to recover the money he invested in the Leased Premises under the principles of restitution for unjust enrichment. 

 Summary

In summary, the Supreme Court established that:

  1. The legal principles in relation to unjust enrichment are entirely different from the principles of contract, tort or any other area of law.
  2. The corresponding remedy for unjust enrichment is restitution.
  3. A claim for restitution for an unjust enrichment need not be based on a civil wrong.
  4. A party who is in breach of a contract may also be entitled to receive compensation under the principles of restitution.

References

  1. [2021] SC 39