#6835 - Owen V. Tate - Restitution of Unjust Enrichment BCL

Owen v. Tate

Facts

On February 26, 1965, the defendants obtained a loan from Lloyds Bank, Sunderland. This loan was secured by a charge by way of legal mortgage upon the property of a Miss Lightfoot. The plaintiff was in no way concerned with this transaction, and received no money from the defendants. In 1969 Miss Lightfoot became concerned that her deeds were being held by the bank to secure the defendants' loan. She consulted the plaintiff, who offered to help her to get her deeds back. Miss Lightfoot was a former employee of the plaintiff. In order to oblige Miss Lightfoot, and in order to obtain her deeds and keep them in a safe place, the plaintiff deposited 350 with Lloyds Bank and signed a form of guarantee by which he guaranteed payment of all money, limited to 350, due, owing or incurred to Lloyds Bank by the defendants. He did not consult the defendants before doing this. He was not asked to do this by the defendants. His motive was only to help Miss Lightfoot. He did not speak to the defendants at all about the matter. On December 17, 1970, Lloyds Bank applied 350, held by them in support of the plaintiff's said guarantee, in repayment of the defendants' debt. On January 15, 1971, the plaintiff's solicitor demanded from the defendants reimbursement of this sum. The defendants refused and the battle was joined.

Holding

Scarman LJ

The broad analysis of a guarantor situation suffices, and it is this: if, as in this case, there is no antecedent request, no consideration or consensual basis for the assumption of the obligation of a guarantor, he who assumes that obligation is a volunteer. That, of course, is not the end of the transaction. The time comes, or may come, and in this case did come, when the guarantor is called upon by the creditor to honour his guarantee. At that moment undoubtedly the guarantor, having entered into his guarantee, is under an obligation by law, or, in the words of the old cases, "is compelled by law" to make the payment.

The first phase consists of the circumstances in which the plaintiff entered into the guarantee; the second phase consists of the circumstances in which the plaintiff made the payment.

It is enough to refer to the judge's findings of fact to know that the plaintiff assumed the obligation of a guarantor behind the back of the defendants, against their will, and despite their protest. At that moment he was interested, as the judge has found, not to confer a benefit upon the defendants; he was interested to confer a benefit upon Miss Lightfoot. Using the language of the old common law, I would say that the plaintiff was as absolute a volunteer as one could conceivably imagine anyone to be when assuming an obligation for the debt of another.

Defendant encouraged the bank to use the money

…that by the time those letters were written the defendants were well aware, although they had not known it at first, that the plaintiff had guaranteed their account up to the sum of 350 and had deposited this sum with the bank. The defendants' case, of course, is that this was an uncovenanted benefit, if benefit it was, and the fact that the plaintiff had conferred this benefit imposed upon them no duty to indemnify him when he made the payment. But, says Mr. Unwin, if that is their position, they had a perfectly good opportunity in 1970 of telling the bank that on no account was it to have recourse to the plaintiff; that the plaintiff had interfered without their consent in their affairs, and that they proposed to deal with the matter of their overdraft without the support of the plaintiff's guarantee. No doubt had they either paid off the overdraft or made some suitable arrangements for securing it, the bank would not have had recourse to the plaintiff. But they chose at that moment to encourage the bank to have recourse to the plaintiff.

Conclusion

Looking, therefore, at the circumstances as a whole, and giving weight to both phases of the transaction, I come to the conclusion that the plaintiff has failed to make out a case that it would be just and reasonable in the circumstances to grant him a right to reimbursement. Initially he was a volunteer; he has, as I understand the findings of fact of the judge and as I read the documents in the case, established no facts, either initially when he assumed the...