Lipkin Gorman v. Karpnale Ltd.
Lipkin Gorman v. Karpnale Ltd.
 UKHL 12
(Wagering Agreements – Unjust Enrichment)
C was a partner in a firm of solicitors and a compulsive gambler at the casino run by defendant. In order to finance his gambling, C, in the capacity of partner of the firm, resorted to drawing cheques on the firm’s clients’ account. By the time C’s theft was discovered almost £223,000 was missing and at least £155,000 had been lost by C at the casino. On one occasion, C procured the issue of a banker’s draft in favour of the firm by issuing a cheque in favour of the bank drawn on the client’s account and then presented to the club, which accepted it. On discovering C’s fraud, the firm brought an action against the club to recover the loss incurred by them and for conversion of the banker’s draft.
- Whether Solicitors had any title over the money stolen by C?
- Whether club gave any valuable consideration to C in return for the money received by it?
- Whether there was any alteration of position of the club in reliance on the money so received such that no claim for unjust enrichment lies against it?
Consideration: Club contended that contract for supply of chips in lieu of money was separate and independent of the contract under which bets were placed at the casino. First contract for exchange of money with chips was not void by way of gaming rather was just in contemplation of gaming, hence, constituted valid consideration. Alternatively, even though the actual contracts were void under statute for being wagering in nature, C obtained in exchange for money the chance of winning and of then being paid, hence, received valuable consideration from the club.
The bona fide recipient of the stolen money is under an obligation to restore an equivalent sum to the plaintiff if he had not given full consideration for it and thus had been unjustly enriched by it unless he could show that he had altered his position in good faith so that it would be inequitable to require him to make restitution or restitution in full. This alteration of position must be, first of all, in good faith, i.e. a mala fide change in position, as where defendant pays away the money with knowledge of facts entitling plaintiff to claim restitution, is no defence; secondly, this change of position must not be in the ordinary course of events, i.e. defendant must establish that he incurred expenditure of the money so received, which he would not have incurred but for money so received.
The defence of alteration of position is allowed in equity because the injustice of requiring innocent third party, who throughout acted in bona fide belief, to repay or repay in full the amount received, outweighs the injustice of denying the plaintiff restitution. The rationale behind this defence is not estoppel because, first of all, estoppel normally deals with representation by one party, while cases of restitution don’t have normally to do anything with representation; secondly, estoppel can’t operate pro tanto.
1) Although solicitors had no proprietary interest in any cash lying at the bank, the bank’s indebtedness to them (because clients’ accounts were at all material times in credit and therefore bank was debtor and solicitors creditors) constituted a chose in action, which was legal property belonging to the solicitors since debt was enforceable under common law. A legal owner is entitled to trace his property into its product, provided that the latter is indeed identifiable as the product of his property. Therefore, solicitors should be entitled to trace their property at common law in that chose in action into its product, i.e. cash drawn by C from their clients’ accounts at the bank.
2) With respect to first contract of exchange of money with chips club didn’t give any valuable consideration to C in return for stolen money because:
a) the chips were only a convenient mechanism which facilitated gaming in casino
b) gambler didn’t buy them for money from the club as throughout they remained property of club and were to be redeemed by the club for money.
c) they were only a token of gratuitous deposit with club, with the person’s liberty to draw upon that deposit to gamble and obligation in equity for club to refund any chips not used again for money (to avoid the claim of unjust enrichment.)
With respect to second contract of placing bets on table, it was void by way of gaming or wagering under the statute, hence, by accepting the bet, casino doesn’t thereby provide any valuable consideration as it was under no legal obligation to honour the bet. If it pays anything out of gambler’s successful bet that is to be treated as mere gift and not any valuable consideration.
3) The court rules that solicitors were not entitled to recover all their money because the club changed its position on each occasion he placed a bet with it and was successful in winning. It would be inequitable to require casino to repay in full without bringing into account the winnings paid by it to the gambler on any one or more of the bets so placed with it. Therefore, club was asked to repay only to the extent of net amount which left with club after paying C his substantial winnings out of gambled clients’ money.
QUESTION TO PONDER:
Q) An undischarged bankrupt played a match of billiards for 100/- a side, the money being deposited with stakeholders. The bankrupt was the winner. If the trustee in the bankruptcy of the winner claims 200/- on account of latter’s winning on basis of skills, then can the contract be avoided?
A) Here people embark in a perfectly lawful game and contest of skill, not trusting to fortune but to skill, to ascertain comparative eminence of two persons, nevertheless the sums so deposited are by way of wagering because the persons have no other interest except for in money so won or lose on the basis of determination of some future uncertain result, both the parties having chance of either winning or losing, it falls squarely within the definition of wager and hence, is void.
Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)