Gibbs v Lakeside Developments Ltd

Factual and Procedural Background

The appellant was granted a 999-year lease of a studio flat at Coopers Close, Whitechapel, London E1, commencing in 1986, with obligations including rent and insurance premiums. The appellant moved abroad in 1990, providing an alternative address for correspondence, and paid rent and insurance until 2006. The respondent acquired the freehold in 1990 and issued a claim for arrears in 2009, which was served incorrectly at the property rather than the appellant's known address. Judgment in default was entered without the appellant applying to set it aside.

Possession proceedings followed, again served incorrectly, resulting in a possession order in February 2010 and the respondent taking possession in April 2010. The property was marketed from June 2011. The appellant only became aware of the possession order in July 2011 and sought to challenge it, initially applying for relief against forfeiture and to set aside the possession order. The application was adjourned following the sale of a new long lease to a third party unaware of the appellant's claim.

The appellant later amended the claim to one of unjust enrichment and damages for conversion. The courts below held that the possession order had to be set aside before a claim for unjust enrichment could succeed and found that the appellant had abandoned the claim to set aside the possession order. Permission for a second appeal was granted on the point of principle whether unjust enrichment could be claimed without first setting aside the possession order.

Legal Issues Presented

1. Whether a tenant can recover proceeds of sale on the basis of unjust enrichment without first setting aside a possession order that was liable to be set aside for non-service of proceedings.
2. Whether an exception exists where the possession order cannot be set aside due to intervening third party interests.
3. The effect of setting aside a possession order on relief against forfeiture and the tenant's rights.

Arguments of the Parties

Appellant's Arguments

• The appellant contended it was unnecessary to set aside the possession order to claim unjust enrichment.
• Argued for an exception to the general rule where the possession order cannot be set aside due to third party interests, provided it would otherwise have been set aside.

Respondent's Arguments

• The respondent maintained the established principle that a court order must be set aside before a claim for unjust enrichment can succeed.
• Argued the possession order could be set aside on terms preserving third party interests, limiting consequences to financial remedies.
• Raised issues related to relief against forfeiture, asserting the appellant's delay barred relief.

Table of Precedents Cited

Court's Reasoning and Analysis

The court examined the principle that possession orders are binding and enforceable until set aside, citing established authorities confirming that steps taken in compliance with a valid court order cannot constitute unjust enrichment. The court rejected the appellant's submission that an exception should apply where third party interests prevent setting aside the order, finding that the possession order could be set aside on terms protecting those interests, specifically by confining consequences to financial remedies against the respondent.

The court further analyzed the interplay between possession orders and relief against forfeiture, noting that the respondent lawfully forfeited the lease by physical re-entry after judgment for arrears and possession order. The court held that setting aside the possession order would not reverse the forfeiture and that relief against forfeiture was barred due to the appellant’s delay in applying for it, both in the county court and, likely, the High Court.

The court declined to interfere with the lower courts’ concurrent findings that the appellant had abandoned the claim to set aside the possession order and that it was too late to revive it. The procedural history and detailed factual findings supported this conclusion, which was considered inappropriate for reconsideration on second appeal.

Holding and Implications

The court DISMISSED THE APPEAL, affirming the principle that a possession order must be set aside before a claim for unjust enrichment based on that order can succeed.

The decision confirms the binding effect of court orders until set aside and clarifies that exceptions based on third party interests do not override this principle if the order can be set aside on terms protecting those interests. The ruling also underscores the importance of timely applications for relief against forfeiture and the legal finality of possession orders and forfeiture once statutory and equitable time limits have passed.

No new precedent was established beyond the reaffirmation of existing legal principles, and the direct effect is to uphold the lower courts’ dismissal of the appellant’s claim for unjust enrichment absent setting aside the possession order.