Sinclair v. Brougham

Abstract

The case of Sinclair v. Brougham has been generally regarded as an authority of first-rate importance. I think it has been properly so regarded, though my reasons for so thinking may not altogether agree with the reasons emphasized by some lawyers. I regard the case as primarily significant as embodying the leading principles on which the Court acts in exercising its equitable jurisdiction to give relief in order to prevent unjust enrichment, or to achieve restitution, if we accept the useful term which has been employed in the recently published American Restatement of the Law of Restitution. The word itself is only an echo of language which will be found in English judgments, indeed, in this very case of Sinclair v. Brougham. The case shows how the Court can do justice by applying equitable principles where the Common Law would have been powerless. But since every Court is now bound in the same proceeding to apply either law or equity or both as the circumstances may require, the distinction between law and equity is now only important in the sense that the differences of method and rules must be observed. In the case we are considering a company had borrowed money for purposes for which it was ultra vires for it to borrow. There could in law be no claim for money lent and no claim in law for the repayment on the ground of quasi-contract or, to use the now obsolete phrase, contract ‘implied in law’, because to allow such a claim as a merely money claim would be to sanction an evasion of the public policy forbidding ultra vires borrowing by companies. Further, as the money lent or its products could not be identified in the company's possessions, a claim in law could not be maintained. But the powers of the Court were not exhausted. The problem was further complicated by the conflicting claims of the shareholders.