#6884 - Thomas V. Houston Corbett - Restitution of Unjust Enrichment BCL

Thomas v. Houston Corbett

Facts

At the beginning of 1964 the appellant, then 25 years of age, having passed his final medical examinations, was employed as a house surgeon at the Waikato Hospital. In or about March 1965 he sold his motor car and in result had a credit in the joint bank account of himself and his wife of 539. He had become acquainted with one Varner Joseph Cook whom he knew to be a law clerk employed by a firm of Hamilton solicitors.

In this situation he consulted Cook with a view to the investment of 400, apparently not being content with the interest he could have earned in a savings bank account. H e was then given vague particulars of the nature of the investment which Cook had in mind, namely, the providing of temporary finance for someone he understood to be a client of the respondents who was immediately unable to pay for a section he had purchased at Taupo.

Cook asked him to make out two cheques. The first cheque, which was dated 26 April 1965, was made out for 100 in favour of "V. J. Cook or bearer"; the second, bearing the same date, was made out for 300 in favour of the respondents. No trust account receipt was given but the appellant accepted a promissory note for the total amount of 400 signed by Cook personally. Cook paid the 300 cheque into the respondents' trust account, but not the 100 cheque. Two days later by means of false entries and false information given to one of the principals of the respondent firm, Cook obtained the respondents' trust account cheque for the 300. On the same day the appellant's 100 cheque and the 300 cheque Cook had obtained from the respondents were both paid into Cook's private bank account.

In July 1965, the appellant, requiring the 400 to enable him to purchase his new car, saw Cook and asked him to make this sum available to him. There was some delay during which time Cook arranged temporary bank accommodation for the appellant.

He told the appellant that he had paid into his account a sum of money (whether the exact sum was mentioned was left in doubt) informing him that this was the total amount from the land transaction which the appellant had entered into in April but that he required from the appellant his cheque for 840 which he said belonged to others interested in the land transaction. The appellant, who was not versed in business matters, wholly trusting Cook, gave him his cheque for the 840.

A few days later he found that sure enough 1,381 13s. 3d. had been paid into his account on 6 September 1965. The position then was that in the eyes of the appellant the land transaction had been a satisfactory one and had resulted in his gaining a profit of some 141. The appellant was not told by Cook who the drawer was of this cheque but in point of fact it came from the respondents' trust account and was paid into the appellant's account by the respondent firm's accountant, Mrs Olson. Later the respondents discovered that Cook had stolen a large sum of money from their trust account.

Mr Houston, a principal in the respondent firm, found that he had been induced by Cook to sign a crossed cheque marked "not negotiable" drawn on the firm's trust account in favour of the appellant for the 1,381 13s. 3d. on the false representation by Cook that this sum was due to the appellant in respect of the sale of a section.

When the true facts were discovered the respondents on 3 May 1966 commenced proceedings against the appellant seeking the recovery of 1,381 13s. 3d. The appellant denied any obligation to repay this amount and further filed a counterclaim seeking to recover from the respondents the 400 paid to Cook on 26 April 1965, the 840 paid to Cook on 6 September 1965 and a further sum of 200 paid to Cook on 30 September 1965.

Holding

North J

The court found that the payment had been mistakenly made by the respondent firm to the appellant and therefore that it is recoverable. However, the question was whether the appellant is entitled to deduct the money paid out by them to Mr. Cook in reliance of the payment by the respondent firm.

Section 94B of the Judicature Act, 1908:

Relief, whether under section ninety-four A of this Act or in equity or otherwise, in respect of any payment made under mistake, whether of law or of fact, shall be denied wholly or in part if the person from whom relief is sought received the payment in good faith and has so altered his position in reliance on the validity of the payment that in the opinion of the Court, having regard to all possible implications in respect of other persons, it is inequitable to grant relief, or to grant relief in full, as the case may be.

Application of s. 94B to facts: The first requirement is that the defendant must have received the payment in good faith. In the present case there is no doubt in my mind that the appellant meets this requirement. He was innocent in business affairs and did not question the actions of Cook or doubt his word that the 1,381 13s. 3d. had been paid into the appellant's bank account.