#6876 - Scottish Equitable Plc V. Derby - Restitution of Unjust Enrichment BCL

Scottish Equitable Plc v. Derby

Facts

In the spring of 1988 Mr Derby was made redundant. On his redundancy he received a total sum of 125,000 of which 90,000 seems to have been a transfer payment under his occupational pension scheme. The transfer payment went into a single-premium pension policy with Scottish Equitable.

In these circumstances Mr Derby considered, and eventually decided on, exercising an option to take early retirement benefits under his policy with Scottish Equitable. What happened (and it helps to explain, although it does not excuse, the mistakes which were later made) was that in August 1989 Mr Derby asked for figures to be quoted for the option, decided to take it, and then changed his mind; and then in February 1990 he again asked for a quotation, decided to take it, and this time did not change his mind.

Mr Derby was approaching his 65th birthday (1 May 1995) and he telephoned Scottish Equitable (at its customer services division in Edinburgh) to inquire what would happen to his pension when he became entitled to the state pension.

On 25 May 1995 Scottish Equitable sent Mr Derby a print-out statement showing that his policy had a value of 201,938. Mr Derby's evidence was that he was very pleasantly surprised by this (since the fund value appeared to have increased by a factor of four within five years) but that he was naive in pension matters.

In quoting a fund value of 201,938 Scottish Equitable had made a serious error. It had not taken account of the early retirement benefits which Mr Derby had taken (after a false start) in 1990.

When Scottish Equitable discovered the mistake in October 1996 it asked Mr Derby to repay the overpayment, but he declined to repay it.

Holding

Robert Goff LJ

Affirming the wide view – reliance is not necessary

The narrow view treats the defence as 'the same as estoppel minus the representation' (so that detrimental reliance is still a necessary ingredient). The wide view looks to a change of position, causally linked to the mistaken receipt, which makes it inequitable for the recipient to be required to make restitution. In many cases either test produces the same result, but the wide view extends protection to (for instance) an innocent recipient of a payment which is later stolen from him (see Goff and Jones p 822, also favouring the wide view).

In this court Mr Stephen Moriarty QC (appearing with Mr Richard Handyside for Scottish Equitable) did not argue against the correctness of the wide view, provided that the need for a sufficient causal link is clearly recognised. The fact that the recipient may have suffered some misfortune (such as a breakdown in his health, or the loss of his job) is not a defence unless the misfortune is causally linked (at least on a 'but for' test) with the mistaken receipt. In my view Mr Moriarty was right to make that concession.

Nature of ‘disenrichment’ required – not limited to expenditure

I think it may be useful to note that when a person receives a mistaken overpayment there are, even on the narrow view as to the scope of the defence, a variety of conscious decisions which may be made by the recipient in reliance on the overpayment. Some are simply decisions about expenditure of the receipt: the payee may decide to spend it on an asset which maintains its value, or on luxury goods with little second-hand value, or on a world cruise. He may use it to pay off debts. He may give it away. Or he may make some decision which involves no immediate expenditure, but is nevertheless causally linked to the receipt. Voluntarily giving up his job, at an age when it would not be easy to get new employment, is the most obvious example. Entering into a long-term financial commitment (such as taking a flat at a high rent on a ten-year lease which would not be easy to dispose of) would be another example.

Mr Derby's decision to slow down his work, and his omission to take alternative steps to provide for the future of himself and his family. I would readily accept that the defence is not limited (as it is, apparently, in Canada and some states of the United States: see David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 385, noted in Goff and Jones p 819) to specific identifiable items of expenditure.

Evaluation of Evidence – Reasonable Approximation

It may be right for the court not to apply too demanding a standard of proof when an honest defendant says that he has spent an overpayment by improving his lifestyle, but cannot produce any detailed accounting.

Payment of a debt – not a detriment

Mr Weatherill submitted that the payment-off of the mortgage was a change of position, but I cannot accept that submission. In general it is not a detriment to pay off a debt which will have to be paid off sooner or later: RBC Dominion Securities Inc v Dawson (1994) 111 DLR (4th) 230.

Estoppel

I would be content to follow the judge in refraining from attempting any general statement of principle and treating this case as comfortably within the exception recognised by all three members of this court in the Avon CC case. We cannot overrule that case but we...