#6770 - Nurdin Peacock V. Ramsden - Restitution of Unjust Enrichment BCL

Nurdin & Peacock v. Ramsden

Facts

The plaintiff was the assignee of a lease granted by the defendant in November 1990 for a term of 25 years. The annual rent was 207,683 payable quarterly, but in the fourth and fifth years of the term the tenant was required to pay an additional 59,338. Although there was provision for an upwards only rent review on 17 November 1995, no such review took place. Accordingly, from that date the plaintiff's annual liability under the lease reverted to the initial figure of 207,683. Despite that, the defendant continued to demand payment on the basis of the higher amount due in the fourth and fifth years of the term. Between November 1995 and February 1997 the plaintiff paid all the sums demanded without demur, but in April 1997, after reading the terms of the lease, it informed the defendant that it would only pay the lower amount and that it intended to set-off the overpayments against future rent. Subsequently, the plaintiff's solicitors advised it to continue paying the higher sum without set-off until the dispute had been resolved through arbitration or court proceedings, and further advised that the plaintiff would be entitled to a full refund if those proceedings were successful. Acting on that advice, the plaintiff paid the higher amount purportedly due on 1 May 1997 (the May overpayment). In fact, the plaintiff had no legal right to recover that overpayment since it was aware that it might not have been due.

The solicitor’s advice when the matter was brought to their notice was this: “[Nurdin] should not set-off the possible overpaid rent against future rent as forfeiture of the lease may allow the landlord, a competitor, into occupation. Legal advice from [Nurdin's solicitors] is that we should continue therefore to pay the rent at the higher level and seek to resolve the dispute by negotiation or through arbitration/court proceedings.”

Evidence shows that overpayments in respect of the rent due on 1 May, 1 August and 1 November 1996, were paid by Nurdin without any of its employees, solicitors or agents having looked at (or even having considered looking at) the lease, at least with a view to seeing what the level of rent should be, since the execution of the share sale agreement…. So far as the rent due on 1 February 1997 is concerned, it appears that it was paid on or about the date it was due, and by then Nurdin had at least woken up to the fact that it would be sensible to look at the lease. However, I am satisfied on the evidence that Nurdin paid the rent due on 1 February 1997 on the same basis as the immediately preceding four instalment.

Mistake as to the first five payments: Mr Lamb stated that the rent was paid by Nurdin on an automated payment system: this involved payment being made automatically, if and when the invoice, was passed to Nurdin's accounts department, unless that department received a positive instruction not to pay. “I should have noticed that the payments had been made in error as it was my responsibility to check and sign off invoices, but for the reasons set out above I failed to notice that the rent was being overpaid.”

Holding

First Five Payments

Nurdin's mistake can be characterised in one of two ways, or, possibly more accurately, in two cumulative ways. First, when putting the automated payment arrangements into effect in 1994, Nurdin failed to ensure that the arrangements were such that the level of payment was to be the subject of, at the least, reconsideration, and, at the most, automatic reduction, once the instalment due on 1 November 1995 had been paid. Further or alternatively, in November 1995, Nurdin forgot that the extra 59,338 pa ceased to be payable under the lease, and therefore failed to instruct the accounts department not to pay DBR quarterly payments at the rate of more than 207,683 pa unless and until the rent was reviewed above that figure.

In my judgment, each of Nurdin's oversights was, as a matter of ordinary language, a mistake of fact, not a mistake of law. Given that I have accepted Mr Lamb's evidence as accurate, his mistake was to fail to give proper instructions to the accounts department in 1994 and/or to forget that the terms of the lease required him to give fresh instructions to the accounts department in 1995/96. To put it another way, by 1995/96, he had forgotten what the lease provided. I suppose that one could characterise that as a mistake of law, in the sense that he assumed that the terms of the lease provided that the amount payable to DBR under the lease continued at the previous rate, but I consider that would be an artificial way of explaining what happened.

Hence, it was held that the first five installments were clearly recoverable – this is regardless of the characterization into mistake of law or fact because after Kleinwort Benson, even if they had been characterized as mistakes of law, they would still have been recoverable.

In these circumstances, I conclude that the first five overpayments are repayable, on the basis that they were paid pursuant to a mistake of fact (although it would now make no difference to my conclusion if the mistake were one of law) and that there is no special defence open to DBR.

Succeeding installments

The May 1997 overpayment was made by Nurdin to DBR on the basis of a belief on the part of Nurdin that, if DBR failed in its arguments on construction and on rectification, the overpayments would be repayable by DBR.

In other words, Nurdin accepts that, while the House of Lords has decided that money is not irrecoverable because it was paid under a mistake of law pursuant to a bona fide demand, the decision does not go so far, at least in the absence of special facts, to enable a person who has made a payment which is not due to recover it, where he was aware that he might not be liable to pay.

Doubt factor rejected:

In this connection, it is right to say that Mr Brock's argument is justified in so far as the facts are concerned…. I am quite satisfied on the evidence in this case that the May 1997 overpayment would not have been made in the absence of the belief, induced by Mr Drew, and accepted and acted on by Mr. Dye, that, if it transpired that the overpayments were not in fact due to DBR, Nurdin could recover them. I am satisfied that, had Mr Dye not been led to believe that recovery was possible, he would not have authorised payment of the May 1997 overpayment, and it would not have been made.

So, here, I believe that it would be surprising if the payee was unjustly enriched because the payer thought he was liable to make the payment, but that he would not be unjustly enriched if the payer, knowing that there was an argument as to whether he was liable or not, made the payment in the clear belief that he thought it would be recoverable if it turned out not to have been due as a matter of law. For the issue of recoverability to turn upon a nice analysis as to the precise nature of the mistake of law appears to me to be almost as undesirable as it is for recoverability to turn upon whether the mistake made by the payer was one of fact or law.

Logical Paradox argument

Mr Nugee attractively further argues that Nurdin's claim for repayment is logically unsustainable. The argument proceeds thus. Either the May 1997 overpayment is recoverable, or else it is not. If Mr Brock succeeds in his argument, and the overpayment is recoverable, there was no mistake; on the other hand, if Mr Brock is wrong in his argument and the overpayment is not recoverable, then that is the end of the matter. Accordingly, DBR contends, the question of according Nurdin relief for the consequences of mistake simply does not arise in relation to the May 1997 overpayment.

It may also be said that my conclusion involves wrong advice turning out to be right, a logical paradox of the type illustrated by the fictional Cretan who said that all Cretans were liars. That is on the basis that the advice to Nurdin was that the overpayments were recoverable, the advice was wrong, Nurdin followed that advice, therefore Nurdin paid under a mistake of law, therefore the advice was right; therefore, no mistake was made. This is really another way of putting Mr Nugee's argument that Nurdin's case is logically unsustainable. The trouble with this argument is that it appears to me to amount to a classic vicious circle, because, if one follows the last step in the argument, the overpayment is not repayable, in which case the advice given to Nurdin, upon which it relied, was wrong, in which case the overpayment was made pursuant to a mistake. In my judgment, at least following the Kleinwort Benson case, and in light of the factors I have already discussed, it seems to me that the right point at which to cut the vicious circle is at the point where one concludes that Nurdin made the May 1997 overpayment under a mistake of law.

Mistake as to recoverability is sufficient

Argued: Against this, Mr Nugee contends on behalf of DBR that nothing in the decision of the House of Lords in the Kleinwort Benson case affects the previous law so far as the May 1997 overpayment is concerned. This is because the May 1997 overpayment was not made by Nurdin under a mistake as to whether or not it was liable to make it, but under a mistake as Nurdin's right to get it back. Mr Nugee contended that the Kleinwort Benson case is only concerned with a case where a payment is made under a mistake of law by the payer as to whether or not he is liable to make the payment.

Rejected: In the first place, the decision of the House of Lords in...