#6815 - United Australia V. Barclays Bank - Restitution of Unjust Enrichment BCL

United Australia v. Barclays Bank

Facts

The appellant company was the plaintiff in an action brought against the respondent bank in the following circumstances. A company called Lower Ancobra (Gold Coast) Areas, Ld., owed the appellants a sum of 1900l., and in payment drew a cheque for that amount making it payable to the appellant company or order. The appellant company had a secretary named Emons, who had authority to indorse cheques for the purpose of paying them into the appellant company's bank account, but had no authority to indorse cheques specially on behalf of the appellant company for the purpose of enabling payment to be made to a third party. Emons, purporting to act on the appellant company's behalf, specially indorsed the cheque so as to make it payable to the M. F. G. Trust, Ld. (hereinafter called "M. F. G."), of which Emons was a director. Thereupon M. F. G. indorsed the cheque and paid it into its account at the respondent bank. The respondent bank knew that Emons, besides being secretary of the appellant company, was a director of M. F. G., but without making any enquiries the bank collected the proceeds of the cheque and placed them to the credit of M. F. G.'s account.

By writ issued on November 8, 1937, the appellant company sued the respondent bank for (1.) damages for conversion; (2.) alternatively, damages for negligence; (3.) in the further alternative, for 1900l. as money had and received by the defendants to the use of the plaintiffs. The respondent bank in its defence claimed to be protected from liability by s. 82 of the Bills of Exchange Act, 1882, but it did not attempt at the trial to establish that defence and it became common ground that the circumstances in which the respondent bank had dealt with the cheque were such as would make it liable to the appellant company for the 1900l., unless it was relieved from liability in consequence of earlier proceedings taken by the appellant company in an endeavour to recover the 1900l. from M. F. G.

Proceedings against MFG: On May 13, 1935, the appellant company issued a writ against M. F. G. claiming the 1900l. as "money lent," or alternatively as "money had and received" by M. F. G. to the use of the appellant company… On October 28, 1935, on the petition of another creditor, a winding-up order was made against M. F. G. The action by the appellant company against M. F. G. was thereupon automatically stayed before trial and no judgment was ever obtained… There was thus never any recovery, either by judgment or otherwise, of any part of the sum claimed from M. F. G.

Issue

Whether the proceedings against M. F. G., carried on up to the point that they in fact reached, constitute a valid ground of defence for the respondent bank and so relieve it in the present action from a liability.

Holding

The House has now to decide whether the Courts below are right in holding that the appellants are barred from recovering judgment against the bank because they previously instituted proceedings, on the basis of "waiving the tort" against M. F. G., when those proceedings never produced any judgment or satisfaction in the plaintiff's favour.

Court held that it is the recovering of the proceeds by an action for money had and received which would be a conclusive election and not the mere bringing of proceedings in the first action.

The true proposition is well formulated in the Restatement of the Law of Restitution promulgated by the American Law Institute, p. 525, as follows: “A person upon whom a tort has been committed and who brings an action for the benefits received by the tortfeasor is sometimes said to 'waive the tort.' The election to bring an action of assumpsit is not, however, a waiver of tort but is the choice of one of two alternative remedies.”

So far, I have been discussing what is the true proposition of law when the second action is brought against the same defendant. In the present case, however, the action which is said to be barred by former proceedings against M. F. G. is not an action against M. F. G. at all, but an action against Barclays Bank. I am quite unable to see why this second action should be barred by the plaintiff's earlier proceedings against M. F. G. In the first place, the tort of conversion of which the bank was guilty is quite a separate tort from that done by M. F. G. M. F. G.'s tort consisted in taking the cheque away from the appellants without the...