Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548

What's the case about?
The claimants (Lipkin Gorman) were a firm of solicitors.  Mr Cass was one of the partners.  He stole £222,000 from the firm's client account in order to fund his gambling habit.  He made company cheques payable to 'cash', and gambled the money away at the Playboy Club casino in Mayfair.  Mr Cass was not a particularly lucky gambler - he lost around £150,000 of the money he had stolen.  The Playboy Club were not aware that Mr Cass was gambling with stolen money.  When the other partners of Lipkin Gorman discovered Mr Cass' theft, they sued the owners of the Playboy Club for the return of their clients' money.

Where is it on the map?
At point B.

Who won?
The Playboy Club were ordered to return the majority of the money - around £150,000.  But the Club did not have to return the balance of the £222,000 that Mr Cass had spent, as they had paid it out to him as winnings. 

What's the principle?
This case was heard by the House of Lords and illustrates the operation of the common law remedy of restitution.  Where the legal owner of property (in this case Lipkin Gorman solicitors) is deprived of that property, they can sue the person who is now holding the property on the grounds that they have been 'unjustly enriched'.

The legal owner can recover a sum equivalent to the value of the property that they have been deprived of.  Liability is 'strict', which means that the defendant will have to reimburse the claimant regardless of whether they received the property in good faith.  However, the claimant must be able to prove that the defendant received their property using the rules of common law tracing.

There are two defences available to an innocent defendant:

1.  A defendant will not have to reimburse a claimant if he receives the money or property as part of a valid  contract.  In this case, the defence was not available because, under the law at the time (the Gaming Act 1845) it was not possible to make a valid gambling contract. 

2.  A defendant who has acted in good faith will not have to reimburse a claimant if he has changed his position as a result of receiving the property.  This is why the Playboy Club did not have to return money equivalent to the amount that they had paid out to Mr Cass as his winnings - those winnings were paid in good faith and the Club could not easily get them back.

What's it like today?

London's original Playboy Club - the star of this case - closed in 1981 and is now a Dorchester Hotel:

The doorman very kindly allowed me to photograph the lobby:

There are some wonderful photos of the building on the Dorchester's website.

And, the BBC have a slideshow of photos from back in the days when the building was still the Playboy Club.