#6749 - Barclay’s Bank V. Wj Simms - Restitution of Unjust Enrichment BCL

Barclay’s Bank v. WJ Simms

Facts

A housing association drew a cheque for 24,000 on its account with the plaintiff bank, in favour of a building company, there being sufficient funds in the association's account to meet the cheque. The following day a receiver was appointed to call in the building company's assets, and as a result the association phoned the bank to give instructions to stop the cheque, subsequently confirming its telephone instructions in writing to the bank. The bank's computer was programmed accordingly, and the following morning the amendment to the computer was checked by the bank's staff. That same day the receiver presented the cheque, and the bank's paying official, overlooking the stop instruction, made payment on that date. The bank did not give notice to the company or the receiver of its claim for repayment on the day the cheque was paid but subsequently demanded repayment of the sum of 24,000 from the receiver, who refused to make repayment.

Issue

This case raises for decision the question whether a bank, which overlooks its customer's instructions to stop payment of a cheque and in consequence pays the cheque on presentation, can recover the money from the payee as having been paid under a mistake of fact.

Holding (Lord Goff)

Rejection of the supposed liability rule

Kelly v. Solari: The case was concerned with a payment made with the intention of discharging a supposed liability of the plaintiff to the defendant. It is no doubt for that reason that the first part of Parke B.'s statement of principle was directed to such a case; though it is to be observed that, in the context of such a case, Parke B. did not place any restriction on the nature of the mistake which would ground recovery. But it would not, in my judgment, be right to infer that Parke B. was stating that money paid under a mistake of fact was only recoverable in cases where the plaintiff's mistake led him to believe that he was under a liability to the defendant to pay the money to him. There is nothing to indicate that the first part of his statement of principle was intended so to restrict the right of recovery; indeed later in his judgment he stated the principle of recovery in broader terms, as did Rolfe B., which appears to indicate that it is sufficient to ground recovery that the plaintiff's mistake has caused him to make the payment.

Branwell B in Aiken v. Short: It appears from the rather fuller report in 25 L.J. Ex. 321, 324 that Bramwell B. did not necessarily regard his statement of principle as comprehensive. But, strictly construed, it appears to restrict the right of recovery more narrowly than did Parke B. in Kelly v. Solari. It purports to exclude recovery in cases where the plaintiff's mistake did not lead him to believe that he was liable to pay the money to the defendant… Subsequent decisions of the House of Lords show that so restricted a statement of the principle of recovery does not represent the law.

Kerrison V. Glyn, Mills, Currie & Co.: This decision, too, is therefore inconsistent with the proposition that the only mistake which will ground recovery is a mistake which leads the payer to believe that he is liable to the payee to pay it to him. But the case is also of interest for present purposes because of statements in the speeches of their Lordships relating to the type of mistake which will ground recovery. These are in very broad terms… went on to suggest that those speeches only emphasize the need for a causal relationship between the mistake and the payment in question.

In sum: It thus appears that, provided the plaintiff's mistake is "vital" or "material," which I understand to mean that the mistake caused the plaintiff to pay the money, the money is prima facie recoverable; but that if the payment discharged an existing debt owing to the payee (or to a principal on whose behalf the payee is authorised to receive the payment), it is irrecoverable. Such a conclusion is, if I may say so with respect, entirely consistent with the decision in Aiken v. Short, 1 H. & N. 210, though not with the dictum of Bramwell B. in that case.

Rejection of “mistake as between the payer and payee” rule

The court was satisfied in Chambers v. Miller, 13 C.B.N.S. 125 that the cashier's mistake did not prevent the property in the money from passing. It was in the context of considering that question that Erle C.J. referred to the mistake as being “not as between [the cashier] and the bearer of the cheque, but as between him and the customer.” This dictum has, however, been taken out of its context and it has subsequently been suggested on its authority that no action will lie to recover money paid under a mistake of fact, unless the mistake was “as between” the payer and the payee, in the sense that both parties were suffering under the same mistake.

Interpretation of RE Jones v. Waring and Gillow: Pollock M.R., deciding the case in the lower court held that the appellants' claim to recover the money as paid under a mistake of fact must fail, because the mistake was not a mistake as between the appellants and the respondents…. The House of Lords were however unanimous in concluding (overruling Pollock B’s judgment) that the appellants' mistake of fact was sufficient to ground recovery, though a minority considered that the respondents had a good defence to the claim because they had changed their position in good faith.

It is significant that Viscount Cave L.C. did not consider it necessary to identify the precise capacity in which the appellants supposed that the respondents received the money; it was enough for him that the appellants supposed that the respondents were "nominees" of International Motors who could give a good receipt for the money - a purely neutral term. It follows that he did not regard it as necessary that the appellants should have supposed that they were liable to the respondents to pay the money to them.

First, the House of Lords must have rejected the view, expressed by Pollock M.R., that to ground recovery the mistake must have been "as between" payer and payee, in the sense of having been a mistake shared by both parties. Second, it is implicit in the speeches of all their Lordships that it is not a prerequisite of recovery that the plaintiff must have mistakenly believed that he was liable to the defendant to pay the money to him. Third, as I understand their Lordships' speeches, in particular the speech of Viscount Cave L.C. (with which Lord Atkinson agreed) and the speeches of Lord Shaw and Lord Carson, it is sufficient to ground recovery that the plaintiff's mistake should have caused him to pay the money to the payee.

Distinguishing Morgan v. Ashcroft

It is submitted further that the expression "voluntary payment" must here be understood as a payment made without legal obligation, so that, generally speaking, a person who makes a payment without the intention of discharging a legal obligation cannot recover the money from the payee although it has been paid under a mistake of fact except possibly in circumstances where the mistake can be described as fundamental, for example where the mistake is as to the identity of the payee. (this argument was based on Morgan v. Ashcroft)… If he is right, money would be irrecoverable in the following, by no means far-fetched, situations. (1) A man, forgetting that he has already paid his subscription to the National Trust, pays it a second time. (2) A substantial charity uses a computer for the purpose of distributing small benefactions. The computer runs mad, and pays one beneficiary the same gift one hundred times over. (3) A shipowner and a charterer enter into a sterling charterparty for a period of years. Sterling depreciates against other currencies; and the charterer decides, to maintain the goodwill of the shipowner but without obligation, to increase the monthly hire payments. Owing to a mistake in his office, the increase in one monthly hire payment is paid twice over. (4) A Lloyd's syndicate gets into financial difficulties. To maintain the reputation of Lloyd's, other underwriting syndicates decide to make gifts of money to assist the syndicate in difficulties. Due to a mistake, one syndicate makes its gift twice over. It would not be difficult to construct other examples.

Lord Goff went on to establish that the opinion of Wilfrid Greene did not command majority as far as they suggested that only payments made in discharge of legal debts were recoverable. In particular he relied on comments made by Lord Scott who suggested that “the rule as stated in Aiken v. Short, 1 H. & N. 210...