#6882 - Portman Building Society V. Hamlyn Taylor Neck - Restitution of Unjust Enrichment BCL

Portman Building Society v. Hamlyn Taylor Neck

Facts

The appellant is the Portman Building Society ( “the Society” ). The respondent is a firm of solicitors, Hamlyn Taylor Neck (“the firm” ). The case concerns a property in Torquay which was bought by a Mr Biggins with the assitance of a mortgage advance of 93,000 by the Society. In his mortgage application Mr Biggins stated that it was his intention to use the property exclusively for residential purposes. He repeated this in a letter which he later wrote to the Society. The Society made it an express condition of its offer of a mortgage advance that the property should be used solely for Mr Biggins' own private occupation.

Breach 1: In accordance with the usual practice the firm acted for both Mr Biggins and the Society in the transaction. In the proceedings the Society alleges that in fact the property was an established guest-house with some eight bedrooms and that to the firm's knowledge it was Mr Biggins' fixed intention throughout to continue to use it as a guest-house and not solely as a private residence for himself and his family.

Breach 2: The firm did not tell the Society that part of the purchase price had been apportioned to the goodwill of the business, or that only 87,250 of the purchase price had been apportioned to the property itself. In consequence, the Society alleges, it believed that the special condition regarding the residential use of the property had been complied with and that the full amount of the purchase price of 98,000 was attributable to the property which was to be the subject of the proposed mortgage.

Claim against the solicitor firm: The transaction was completed in March 1989, when in accordance with its instructions the firm paid the sum of 92,100 to the vendor's solicitor and obtained a conveyance and mortgage of the property in favour of the Society in exchange. Mr Biggins afterwards defaulted in making payments due under the mortgage. The Society became aware that Mr Biggins was using the property as a guest-house. It brought proceedings against Mr Biggins for possession, recovered possession and sold the property, realising a substantial loss. It has not pursued Mr Biggins on his personal covenant for repayment, presumably on the ground that such an action would not be cost effective. Instead, in January 1996, it brought the present action against the firm… The last claim, however, is a straightforward claim in quasi contract for money had and received or, as we would now call it, restitution.

Society’s claim: The Society alleges that, in the events which happened, it paid the sum of 92,100 to the firm in the mistaken belief induced by the firm (i) that the special conditions contained in its offer of a mortgage advance that the property would be used solely as a private residence had been complied with and (ii) that the whole of the purchase price of 98,000 was attributable to the property itself. The Society alleges that, if it had not been for those mistakes, it would not have been prepared to make the mortgage advance to Mr Biggins and would, therefore, not have paid the 92,100 to the firm in the first place. Accordingly, the Society contends, it is entitled to maintain an action for the recovery of the 92,100 as money paid to the firm under a mistake of fact

Holding

Millet LJ

Thirdly, the Society relies on the doctrine described in Article 113 of Bowstead & Reynolds on Agency , 16th ed., 1996, and Goff & Jones, The Law of Restitution (4th ed., 1993) at pages 750–51. The general rule is that money paid (e.g. by mistake) to an agent who has accounted to his principal without notice of the claim cannot be recovered from the agent but only from the principal. The Society submits that the agent's defence in such a case is a particular species of the change of position defence and does not avail the agent who has notice, actual or constructive, of the mistake which founds the plaintiff's claim.

I myself do not regard the agent's defence in such a case as a particular instance of the change of position defence, nor is it generally so regarded. At common law the agent recipient is regarded as a mere conduit for the money, which is treated as paid to the principal, not to the agent. The doctrine is therefore not so much a defence as a means of identifying the proper party to be sued. It does not, for example, avail the agent of an undisclosed principal; though today such an agent would be able to rely on a change of position defence.

The true rule is...