Free Commercial Claims And Remedies: The Wall 2wall Case Case Study Example

Wall2Wall Ltd is a design and luxury interior company, first established in 1980, that is known for creating unique, high quality, wallpapers, paints, and other wall-décor supplies, predominately through Do-It-Yourself stores, intended for people wishing to handle home renovation on their own. The business has a history of significant profitability, however, several specific hardships over the last few years have taken a toll on the company’s bottom line, and have ultimately left the company seeking ways to raise their profitability in the coming fiscal year.
Some, though not all, of that financial hardship has occurred as a direct result of multiple financial errors, overlooked accounting issues, and outright thefts, that have cost the company dearly. As they seek to improve their situation, they are hoping to pursue legal action against those they feel have unfairly damaged the company’s profitability. These parties include: Kheimo LTD, Décor Co, Interior Inc. Maple Ltd, and former employee Alisha.
Khemico Ltd is a supplier for Wall2Wall, and has for some time been responsible for providing the home interiors company with the chemical necessary to give their paints a signature lustre. From the beginning of their business relationship Khemico Ltd has tacked a 15% surcharge onto ever Wall2Wall purchase, titled the “hazardous laboratory” charge. Early in the relationship, Wall2Wall questioned the legality of the surcharge. Their lawyers suggested that while there was no case law setting a precedent for the legality, or illegality of the surcharge, they were confident that it could be successfully challenged. However, Wall2Wall elected not to pursue legal action in regard to the surcharge because they for saw it being a long drawn out legal process, and ultimately the benefits of wining such a suit did not outweigh the costs of pursuing it, so they continued to pay the fee, and dropped the issue.
Roughly a year ago, however, the High Court found that Khemico LTD’s practices, with regard to the surcharge were unlawful, and supported another claimant’s suit in court. As the result Wall2Wall has not only stopped paying the surcharge on their orders, but has also demanded that Khemico Ltd repay the surcharges previously paid, with accrued interest on those payments.
If, in fact, Wall2Wall has enough to pursue a legal complaint in this case they must prove unfair enrichment, or that their case, specifically, has all the elements of an unjust enrichment claim. The three points then that must be proven are that first, a benefit was conferred upon the defendant, by the plaintiff, second, that there was an appreciation, or knowledge, by the defendant, of the benefit, and finally, third, that the acceptance and retention of the benefit, by the defendant, under the circumstances given, would be inequitable without some form of restitution.
First, it is clear that the first element is met. The defendant was receiving cash benefits, in the sum equal to 15% of the total order, from Wall2Wall, in such the first is met. Secondly, it is clear, since the charge was applied via invoicing to every order, that the plaintiff had knowledge of, and had even forced the collection of, the fees in question. What is harder to prove, however, is whether or not retention of the benefit is inequitable.
While the fee has been declared by the court as unjust, and Wall2Wall is clearly within its legal rights not to continue paying the fee in question, that does not, necessarily also entitle the plantiff to repayment plus interest. According to the precedent set by Heldenfeis Bros, Inc, V. City of Corpous Christi, 832 S.W. 2d 39, 41 (Tex 1992), “a plaintiff cannot assert a theory of unjust enrichment in cases where the parties have a contract.” Therefore, if Wall2Wall and Khemico Ltd were in contract, Wall2Wall had knowingly, and willingly agreed to pay the surcharge as a part of products and services rendered, and no back-pay or interest is deserved. In this case, the court previously vacating the fee only means that the obligation “was not voided but merely rendered unenforceable by the statute.”
In the case of Décor Co, a payment was accidentally made to Wall2Wall in December of 2010, in the amount of £80,000. Because Wall2Wall was expecting a payment in that amount from another client, they did not realize that Décor Co. had made the payment. Within the last 30 days, roughly 4 ½ years after the initial transaction, Décor Co realized their mistake, claiming that the money represented a double payment against an invoice, and demanding repayment from Wall2Wall.
The legal question here is whether or not the reception of the mistakenly sent, and received, funds can be considered unjust enrichment. Firstly, it is clear, again, that the first element is met. Wall2Wall did receive benefit from Décor Co, in the form of an £80,000 electronic deposit. However, there is some question about the second element of unjust enrichment, which argues that an error must be known to exist, before it can be unjustly held. In this case, however, there was no evidence that Wall2Wall knew the funds were unfairly gained.
More specifically, according to Finch, in Sharkey v. Mansfield, when the mistake is mutual, both parties are innocent, and neither is in the wrong. The party honestly receiving the money through a common mistake owes no duty to return it until at least informed of the error. It is just that he should have an opportunity to correct the mistake, innocently committed on both sides, before being subjected to the risks and expenses of a litigation. . . . The necessity of a demand does not, therefore, exist in a case where the party receiving the money, instead of acting innocently, and under an honest mistake, knows the whole truth, and consciously receives what does not belong to him, taking advantage of the mistake or oversight of the other party, and claiming to hold the money thus obtained as his own.” More specifically, it is held in England that the defendant cannot be subject to the cost of litigation until he has been given an opportunity to restore “what he lawfully received.”
This means, that there was not a case for mistake of fact and unjust enrichment until Décor Co. informed Wall2Wall of their mistake, and asked for reimbursement. If they filed litigation before formally informing Wall2Wall of the mistake and asking for reimbursement, then they have no case, and no repayment can be made. However, if the demand was made in advance of the legal action, and Wall2Wall failed to appropriately respond, there is legal grounds for the claim.
However, assuming the demand was correctly made in advance, and given that we know that Décor Co made the payment under the belief that they needed to pay a specific invoice, to cover a debt owed to Wall2Wall, the precedent established by Kelly vs. Solari establishes that “the plaintiff had to show that it had paid in a belief that some fact was true, which would have led to the plaintiff being under a liability to pay, when in fact that belief was incorrect.”
Another issue in this case, however, is the length of time that Wall2Wall held the property, in this case financial assets, before Décor Co. realized their mistake and asked for repayment. Generally, it is held that information of the mistake must be promptly made in order to create an argument for recovery of funds under mistake of fact. It will ultimately depend on the date of maturity for the obligation, and the judge’s discretion with regard to when the statute of limitations began, at the moment that the funds were transferred, or at the moment when the demand was made, and unjust enrichment was substantiated.
In the case regarding Interior Inc., the company mistakenly received an $80,000 shipment of goods from Wall2Wall. Upon discovering the mistake, also 4 ½ years later, Wall2Wall contacted Interior Inc. for payment for, or return of the shipment. Interior Inc. has refused to pay for and return the shipment, while it has been discovered that some of it is still in the warehouse, while other elements of the shipment were sold, given as samples or given to employees.
In this case, it is not enough that the debt was assumed paid by the payment received from Décor, Inc. Because a payment that satisfies debt, when made by a third part, is not sufficient to discharge the debtor if there is no evidence of agency. This principle was founded on the fact precedent set by David Hunter, Q.C. and Peter Cresswell. Because the payment made by Décor Inc. was made under the assumption of debt, related to their own accounts, and not as an agent to Interior Inc., Interior is still legal responsible for the debt associated with the afore mentioned deliver of supplies.
It can also be proven, by the same set of evidence that Wall2Wall had a real belief that Interior Inc. had paid for the shipment, and acted upon that understood fact, which is legal foundation for their action, whether it was true or not. According to the precedent in Kleinwort, Sons & Co. v. Dunlop Rubber Co. any benefit gained through mistake of fact, when demanded back from the rightful owner, or the payee, must be repaid, under mistake of fact.
Mistake of fact argues that resources can only be repaid in certain scenarios, however. More specifically, in Aiken v. Short, Bramwell established that: “In order to entitle a person to recover back money paid under a mistake of fact, the mistake must be as to a fact which, if true, would make the person paying liable to pay the money; not where, if true, it would merely make it desirable that he should pay the money.” In this case, however, it is clear that Wall2Wall believed that product had been paid for, and so were obligated to deliver the shipment promptly to Interior Inc., which they did. Thus, since this establishes mistake of fact, and sense delivery was a point of liability, not desirability, repayment is clear.
Since it is known that, in accordance with the law, Wall2Wall has demanded return of the product or financial payment for the products remaining, and it is know that Interior Inc. having sold part of the product or given it out as samples, has benefited from its use, Wall2Wall is now in a position to take legal action, grounded in clear knowledge of unjust enrichment, against Interior Inc. for the full value of the shipment. This could be reduced, however if Interior Inc. agreed to return the product that remains in the warehouse, rather than offering cash restitution for the full load, since it is truly the merchandise and not a financial gain which the company wrongfully received.
In the case of Alisha, former senior design editor for Wall2Wall, it is clear that legal impropriety has occurred, but lawyers have suggested that, from a legal action her actions have not caused the company more than a minimal loss. That said, legal infractions in the place include that she acted in a manner contrary to a legal contract, that she used Wall2Wall’s intellectual property in order to elicit personal gain, and that she committed a tort, which is against competition litigation.
Given that the case has resulted in only minimal loss, the company cannot expect to receive more than nominal damages. Nominal damages reflect that the plaintiff was, indeed, legally wronged, but reflect that little or no financial loss that occurred as a direct result of the legal wrongdoing, as demonstrated in the case of Rookes V. Barnard. This is relevant in cases where a defendant’s conduct, like that of Alisha, was calculated to make a profit for himself, but not necessarily to create harm for the plaintiff.
The three areas in which Wall2Wall could see nominal damages include, first, breach of contract. The basic premise of this claim was laid out in the case of Attorney-General v. Blake, Blake published a book based on his experiences as a government employee, which was a breach of contract; however, the information was old enough, at the time of publication that it did not represent a significant loss to the state. Nonetheless there was still a criminal breach of contract, and so the defendant was required to give account of his profits and pay nominal damages. Similarly, Alisha has used knowledge gained through her employment with Wall2Wall to successfully establish a design company, and her efforts have earned her significant profits, however there is no evidence to suggest that they have also cost Wall2 Wall more the minimally. As a result, there is a criminal breach of contract, but not a substantial fiduciary loss, and only nominal damages can be expected to be awarded.
The second area of concern, with which Wall2Wall could pursue a suit against Alisha is use of Wall2Wall’s intellectual property for elicit personal gain. This is directly tied into the breach of contract, and the use of knowledge that she gained through that contract, in order to build her current business. This is, essentially, a copyright issue, under the European directive 2004/48/EC, which protects the civil liberties guaranteed to the original owner of intellectual properties. It guarantees the plaintiff the right to seek legal action in the case of infringement of intellectual property rights, and establishes the precedent law for nominal damages as “the amount of royalties which would have been due if the infringer has requested authorization.” In other words, in this case, Alisha should be required to pay for the estimated purchase or lease value of the information she improperly used.
Finally, Wall2Wall can seek financial compensation for its losses, though minimal, created by her tort, violating competition legislation. A tort, in essence, is the improper infringements of another’s civil rights. This is, in fact the area in unjust enrichment, according to Grantham and Rickett, because it has allowed the defendant to gain through unfair or unconscionable means; this also means it is the hardest position to dismiss, and the one most likely to be awarded damages.
According to Slaughter and May, Alisha’s actions against Wall2Wall are a tort, based on the principle that any “private legal action brought before the English courts claiming damages and or relief for breaches of competition law are generally framed as tortious action.” In the case of Alisha, she prohibited the anti-competitive agreement, by leaving Wall2Wall and immediately starting a business that was in the same business sector.
All in all, Wall2Wall is in a position to, potentially, collect damages from former-employee Alisha, and Interiors Inc., beyond the shadow of a reasonable doubt. They also owe Décor Co., and should pay promptly in order to avoid the additional expense of litigation, and potential cost of increased settlement, rather than direct repayment, which could occur as the result of having the case go before the high court.
The one case without a clear argument for or against damages in the case of Wall2Wall v. Khemico Ltd. The question, in this case, essentially comes down to the terms of the contract signed, and whether or not the 15% service fee was specifically noted in the contract, and signed by Wall2Wall executives, thereby creating a binding agreement that included the fee.

References:

Aiken v. Short [1856] 156 ER 1180 (H&N)
Heldenfeis Bros, Inc, V. City of Corpous Christi, [1992] 832 S.W. 2d 39, 41 (Tex)
(EC) IP Righrs Enforcement Directive 48 EC [20004] OJ Le.g. 423/1
E. Weinrib, Corrective Justice (1st, Oxford University Press , Oxford 2012)
Kelly v. Solari [1841] 152 M&W 24 (ER)
Kleinwort, Sons & Co. v. Dunlop Rubber Co. [1907] 97 LTT 263
Rookes v Barnard [1964] 1 AC 1129
Shatkey v. Mansfield [1882] 90 N.Y. 227 (N.Y.)
Slaghter & May, 'Competition Litigation in the UK' [2004] 1, 34
W. Keener, 'Recovery of Money Paid Under Mistake of Fact ' [1887] Harvard Law Review.