The Action of Unjustified Enrichment

The action of unjustified enrichment, also known as the actio de in rem verso, dates back to Roman Law and despite the fact that it was formally included in the Maltese Civil Code in 2007 by means of Article 1028A, it has always been accepted by the Maltese Courts. The notions of equity and fairness serve as the foundation of this action. One should be compensated for the benefit gained by an individual without a just cause to the detriment of the former. Owing to its quasi-contract nature, the obligation does not arise from a contract and therefore, in line with the principle of objective justice forming the basis of this action, one is entitled to compensation regardless of consent and capacity. The aim of this action is described eloquently by the Court in Bartolo vs. Micallef [1], “li terġa’ trodd l-ekwilibriju bejn il-patrimonju ta’ min ikun stagħna u dak tal-parti li tkun għamlet jew nefqet spejjeż biex dan ikun seħħ.”

One of the main strong suits of this action is its flexibility in that it can cater for various situations and seeks to provide a remedy to anyone who has been wronged in whatever shape or form. However, the actio de in rem verso is a subsidiary action and can only be employed when the issue is not governed by contract, law or any other obligation.

In one of the earliest judgments on the matter, Said vs. Testaferrata Bonnici [2], the Court laid down the three fundamental and cumulative elements for this action. The first basic element is the notion of enrichment. In Grech vs Gauci [3], the Court provided that there is still enrichment despite the fact that the assets of the beneficiary did not increase. The mere fact that as a result of the plaintiffs’ intervention, the assets of the beneficiary did not diminish constituted an indirect enrichment which amounts to a negative value.

Secondly, there must be a causal link between the activity of the plaintiff and the enrichment procured by the individual from whom compensation is being sought. When only two individuals are involved, the nexus is easily ascertained yet issues can crop up when there a third party intermediary enters the scenario. This was the case in Said vs. Testaferrata Bonnici [4] where a certain Pace was occupying a tenement owned by the defendant. Pace bought materials from the plaintiff to carry out repairs and improvements to the tenement yet became insolvent without having paid the plaintiff. The latter instituted an unjustified enrichment action against the owner of the tenement, claiming that he had procured a benefit since the value of the tenement had increased. The defendant argued that there was no link of causality between the two. The Court, referring to Baudry-Lacantinerie, a major exponent of the actio de in rem verso, ruled that if the original act done by the third party is intended to cause a benefit to the defendant then the actio de rem in verso succeeds. However, if after the original act the third party has to intervene again to change the destination of the original act for the benefit of the defendant then the action is unsuccessful. The beneficial intention has to subsist ab initio. The Court therefore concluded that since Pace had always intended to use the materials to improve the tenement, then the plaintiff was entitled to compensation.

Lastly, the advantage procured by the defendant must have an unjust character, i.e. no legal basis. In Buttigieg vs. Bartolo [5], a father took out a loan to maintain his children yet passed away without having repaid the loan. The creditor attempted to sue the children under the actio de in rem verso. The action failed as the enrichment was with cause since the father had a legal duty to maintain his children and the latter were entitled to maintenance.

A question that arises is whether the unjustified enrichment action can be used when an unlawful contract forms the basis of such action. In the past, the Maltese Courts were reluctant to give compensation in such cases as they did not want to promote the notion that illegality is still compensated. The position today is not so stringent and follows the French line of reasoning by adopting a middle-way approach. On the one hand, by reason of the illegality, one should not expect to be paid according to the normal rate, whilst on the other hand, the beneficiary, who was also party to the illegal contract, should not gain a full benefit. This reasoning was adopted in the case Mercieca vs. Laferla [6] . Here, the plaintiff performed work with no license, workbook or NI for another individual and the former sued the latter for compensation. The Court emphasised on the omni labor opta premium (every work deserves a payment) principle yet awarded a lesser amount than what was agreed upon between the parties. In this way, the Court punished the worker for committing an illegality yet, on the basis of justice, compensated him so as not to give an unfair advantage to the employer.

When considering the amount of compensation to be awarded, the Court has to take into account both the value of the enrichment as well as the value of the loss of the other party. It is important to note that the plaintiff is not necessarily entitled to an amount equivalent to the enrichment gained. The general approach adopted by the Maltese judiciary has been to grant as compensation the lesser of the two amounts. This method of calculation has been embraced due to the fact that this action is rooted in equity and there has to be an intimate relationship between the loss and the profit. Moreover, as confirmed in Maltacom vs Vestimoda Co. Ltd [7] , the prescriptive period of the actio de in rem verso is five years. This period emerges from Article 2156(f) of the Civil Code which prescribes the period of five years for “actions for the payment of any other debt arising from commercial transactions or other causes.”

The unjustified enrichment action is a powerful tool in the hands of those individuals who have suffered a loss and detriment at the hands of another person who has obtained a benefit without just cause. This action is important as it serves as a safety net of last resort, guaranteeing a remedy to those who do not otherwise have a clear-cut remedy to address their grievances. This is achieved through its malleable nature in that it can be moulded to tackle different situations, ensuring that fairness, justice and equity prevail in all instances.