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Unjust Enrichment: the Court of Appeal's decision in Dargamo Holdings Limited v Avonwick Holdings Limited [2021] EWCA Civ 1149

Unjust Enrichment: the Court of Appeal's decision in Dargamo Holdings Limited v Avonwick Holdings Limited [2021] EWCA Civ 1149


The Court of Appeal's judgment in Dargamo Holdings Limited v Avonwick Holdings Limited [2021] EWCA Civ 1149[1] contains important remarks in respect of both the interaction between the law of contract and the law of unjust enrichment, as well as the operation of doctrine of "failure of basis" as a ground of restitution.

The judgment affirmed the proposition that the law of unjust enrichment will not tend to intervene to contradict the express terms of a valid and legally binding contract.


A dispute emerged between three Ukrainian businessmen in respect of a division of their interests in businesses and entities operating in the Ukrainian metallurgical sector[2].

The underlying facts were complex and there was extensive litigation between the parties, with multiple claims and counterclaims being made[3].

However, the facts relating to the issue raised on appeal can be stated fairly simply.

Sergiy Taruta's corporate vehicle (the "Claimant") entered into an English law governed[4] share purchase agreement (the "SPA") with both Vitali Gaiduk's corporate vehicle (the "Defendant") and Oleg Mkrtchan's corporate vehicle ("Azitio"), under which the Defendant would sell the whole share capital in a company named Castlerose Limited ("Castlerose") to the Claimant and Azitio in equal proportions[5].

The key provision of the SPA (Clause 2.4.) read as follows: "the consideration for the sale of the Shares[6] shall be US$950,000,000."

The Claimant and Azitio paid their respective share of the consideration due, and the Defendant duly transferred the shares of Castlerose to them in accordance with the terms of the SPA[7].

However, there was a common understanding between the parties that part of the consideration sum was a prepayment for shares of other companies owned by the Defendant (the "Additional Shares"). It was therefore commonly understood that the Defendant would in the future make arrangements to transfer the Additional Shares to the Claimant and Azitio (again in equal proportions).

There was, however, no legally binding agreement that gave effect to that common understanding. The SPA only referred to an obligation for the Defendant to transfer the shares of Castlerose[8]: there was no mention of a transfer obligation in relation to the Additional Shares[9]. Though the reason for this was unclear, it was common ground that the parties had deliberately omitted reference to the Additional Shares from the SPA[10]. Further, a side letter and a memorandum of understanding that sought to document the common understanding were not executed[11].

The Defendant decided to transfer the appropriate proportion of the Additional Shares to Azitio but not to the Claimant[12].

The Claimant therefore made a number of claims against the Defendant to recover the consideration that was said to constitute a prepayment for its proportion of the Additional Shares (US$82.5m[13]). The Claimant made claims under (a) the tort of deceit; (b) an alleged shareholders' agreement; and (c) unjust enrichment.

At first instance, Picken J dismissed all such claims.



The Claimant only received permission to appeal in respect of the claim in unjust enrichment[14].

The Claimant argued that, in not giving effect to the common understanding that part of the consideration paid under the SPA was a prepayment for the Additional Shares, the Defendant had been unjustly enriched[15].

Legal Background

The Court recognised that, in general[16], an unjust enrichment claim needs to satisfy four conditions to be successful[17]:

  • the defendant has been enriched;
  • that enrichment is at the expense of the claimant;
  • the enrichment is unjust; and
  • there are no defences available to the defendant.

It was uncontroversial that the Defendant had been enriched and that this had been at the expense of the Claimant[18]. The Defendant did not raise any formal defences; instead alleging that its enrichment was not "unjust".

In determining the injustice of the enrichment, the English courts do not adopt a freewheeling discretionary approach whereby they seek to adapt the doctrine of unjust enrichment to the perceived needs of justice in any particular case[19]. Instead, a particular ground of restitution (a so-called "unjust factor"[20]) must be made out. Grounds of restitution include mistake, incapacity and duress. 


The Claimant alleged that the "unjust factor" that was satisfied in this case was "failure of basis"[21]. Failure of basis is founded on the principle that the recipient of a conditional payment must return the payment where the condition is not satisfied[22]. Applying that principle to this case, the Claimant argued that the transfer of the Additional Shares was a condition of the transfer by the Claimant of the total consideration under the SPA. As that condition was not fulfilled, a "basis" of the SPA failed.

In making this argument, the Claimant also sought to rely on precedent[23] that indicates that the Court is entitled to pragmatically "apportion" any consideration paid under a contract into its constituent parts. Although the relevant provisions of the SPA[24] did not purport to apportion the consideration as between the shares of Castlerose and the Additional Shares, the Claimant relied on the common understanding that the consideration under the SPA was both payment for the shares of Castlerose and a prepayment of the Additional Shares; and it was that latter condition that had failed[25]. Apportioning the consideration in this way was crucial to the Claimant's argument, given that the failure of basis must be "total" under English law[26].

The Defendant argued that claims in unjust enrichment will not tend to be available where the sums were paid under a valid contract. The Defendant acknowledged that, although it was (in principle) possible to apportion consideration paid under a contract in the manner suggested by the Claimant, any such apportioned payment could only be recovered where there was no conflict between the allocation of risk under the contract and the claim in unjust enrichment[27]. In this case, the Defendant argued that there was such a conflict[28].

Decision of the Court

The Court unanimously dismissed the unjust enrichment claim.

Carr LJ, giving the leading judgment, stated that the "fundamental reason[29]" for this holding was that the SPA expressly stated that the consideration was payable in respect of the shares of Castlerose only[30]. In arguing that the consideration under the SPA constituted both payment for the shares of Castlerose and a prepayment of the Additional Shares, the Claimant contradicted the express contractual terms of a freely negotiated and legally valid contract[31]. Carr LJ stated that this was an "extreme" position that was not permitted by English law[32]. Indeed, the leading cases indicate that (subject to very limited exceptions[33]) a recipient of a payment cannot be said to be unjustly enriched where the recipient is legally entitled to receive that payment[34]. Here, the Defendant was legally entitled by the SPA to receive the full consideration payment in exchange for transferring only the shares of Castlerose. 

Somewhat more pithily, Asplin LJ (concurring) stated that the Claimant "sought to use the principle of unjust enrichment to override rather than complement the express contractual obligations contained in the [SPA]"[35]. In her view, that was impermissible in this case.

Therefore, the Court determined that, where a valid, freely negotiated and legally binding contract expressly allocates a risk to a party, the law of unjust enrichment should not intervene to override that allocation[36]. Here, the SPA clearly allocated the risk that the Defendant would not transfer the Additional Shares to the Claimant. Had the Claimant wished to safeguard itself from this risk, it should have ensured that the Defendant was contractually obligated by the SPA to transfer the Additional Shares as well. There was therefore "no space[37]" for a claim in unjust enrichment to lie in this case.

Carr LJ considered that, though it may sometimes be appropriate for a court to look outside the terms of a contract to determine the basis of the payment, it would be wrong to inquire into a basis that flatly contradicts the unequivocal basis set out in the contractual documents[38].

Having disposed of the case, the Court did not address ancillary issues arising in relation to the purported "apportionment" of the consideration[39].


This case is important for three reasons.

Firstly, it provides clarity as to the relationship between contract and unjust enrichment. Though the Court was at pains to stress that the law of unjust enrichment is not subordinate (as such) to the law of contract[40], the Court affirmed that the law of unjust enrichment will not subvert a clear, valid and legally binding contractual term[41]. This had the effect (as Carr LJ indicated) of holding contracting parties to the express terms of a contract that they freely negotiated[42] which, in turn, reinforced the legal certainty provided by the contract. This case demonstrates the pragmatism and robustness inherent to English law, and it is these qualities that mean commercial parties the world over use English law to govern their contractual arrangements. Though the Court acknowledged that it was (in principle) permissible for a court to look outside the terms of the contract to support a claim in unjust enrichment[43], the thrust of the judgment is that there is a strong presumption in favour of upholding the express terms and risk allocation provided by a contract[44].

Secondly, the Court reaffirmed the proposition that the doctrine of unjust enrichment requires a claimant to positively identify an established ground of restitution for a claim to succeed[45]. The Court stressed that this approach means that unjust enrichment claims are not based on an open-ended assessment of the perceived needs of "justice" in any particular case[46]. This approach enhances the predictability and certainty of the doctrine. In this case, it was the failure to identify an express ground of restitution that meant that the Claimant's claim was unsuccessful[47].  

Finally, this case serves as a reminder of the fundamental importance for contracting parties to ensure that the commercial "deal", to the extent practicable, should be reflected in the express terms of a contract. The reasoning in this case is entirely consistent with the broader theme that English law does not generally allow a court to look past the natural reading of a contract to rescue a party from a bad bargain[48]


[1] Unless otherwise indicated, all references are to the judgment of Carr LJ in the case, reported at Dargamo Holdings Limited and Anor v Avonwick Holdings Limited and Others [2021] EWCA Civ 1149.

[2] Paragraph [2].

[3] See paragraph [4] for a brief summary. For a lengthier summary of the relevant facts, please refer to paragraphs [1] – [67] of the first instance judgment, reported at Avonwick Holdings Limited v Azitio Holdings Limited [2020] EWHC 1844.

[4] Paragraph [16].

[5] Paragraphs [12] – [14].

[6] "Shares" was defined in the SPA as "the issued shares in the capital of [Castlerose]" – see paragraph [14].

[7] Paragraph [17].

[8] Paragraphs [13] – [14].

[9] Paragraph [17].

[10] Paragraph [112].

[11] Paragraphs [19] – [24].

[12] Paragraphs [25] – [26].

[13] Paragraph [5].

[14] Paragraph [7].

[15] Paragraphs [5] and [49].

[16] The Court acknowledged (at paragraph [56]) that recent dicta from the Supreme Court (in particular in Investment Trust Companies v HMRC [2017] UKSC 29 and Swynson Ltd v Lowick Rose LLP [2017] UKSC 32) indicate that these conditions are not rigid legal tests.

[17] Paragraph [55].

[18] Paragraph [45].

[19] Paragraphs [57] – [64].

[20] Paragraph [58]. The categories of unjust factors have, in accordance with the common law tradition, developed incrementally over time – see A. Burrows: "In Defence of Unjust Enrichment" C.L.J (2019) 521 – 544, at 526.

[21] This doctrine is also known as "failure of consideration". Carr LJ adopted the terminology of "failure of basis" on the grounds that the term "failure of consideration" is apt to confuse – see paragraphs [77] – [78].

[22] See Paragraph [79] and C. Mitchell, P. Mitchell and S. Watterson: "Goff and Jones on the Law of Unjust Enrichment", 9th ed. (2016), para 12-01.

[23] E.g. Giedo van der Garde BV v Force India Formula One Team Ltd [2010] EWHC 2373 (QB), at paragraph [297].

[24] Clause 2.4., quoted above. 

[25] Paragraph [49].

[26] E.g. Fibrosa Spolka Akcyjna v Farburn Lawson Combe Barbour Ltd [1943] AC 32, at 77.

[27] Paragraph [50].

[28] Paragraph [50].

[29] Paragraph [114].

[30] Clause 2.4., quoted above.

[31] Paragraph [116].

[32] Paragraph [117].

[33] Paragraphs [72] – [74].

[34] E.g., Kleinwort Benson Ltd v Lincoln City Council [1999] 1 AC 349, at 408.

[35] Paragraph [142] (Asplin LJ, concurring).

[36] Paragraph [140] (Sir Timothy Lloyd, concurring).

[37] Paragraph [76].

[38] Paragraphs [132] – [133].

[39] Paragraph [136].

[40] Paragraphs [75] – [76].

[41] Paragraph [126]; paragraph [141] (Sir Timothy Lloyd, concurring).

[42] Paragraph [137].

[43] Paragraph [132]. The Court cited Barnes v Eastenders Cash & Carry plc [2014] UKSC 26 as a case of this kind. However, and as Carr LJ made clear, the unjust enrichment claim in that case was founded on a shared assumption between the contracting parties that was entirely consistent with (even if not expressly spelled out by) the underlying contract – see paragraph [97].

[44] Paragraphs [126], [128] and [133].

[45] Paragraph [57].

[46] Paragraphs [58] – [61].

[47] Paragraph [137].

[48] E.g., Arnold v Britton [2015] UKSC 36, at paragraph [20].


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