Citigroup v Brigade Capital Management: Difference between revisions
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''Ouch''. This is the “discharge for value defense” — criticised by some US authorities,<ref>A Schall, ''Three-Party Situations in Unjust Enrichment Epitomised by Mistaken Bank Transfers'' [2004] RLR 110.</ref> but still the law there. The English courts have come to an opposite conclusion: {{cite|Barclays Bank Ltd|WJ Simms|1980|QB|677}} | ''Ouch''. This is the “discharge for value defense” — criticised by some US authorities,<ref>A Schall, ''Three-Party Situations in Unjust Enrichment Epitomised by Mistaken Bank Transfers'' [2004] RLR 110.</ref> but still the law there. The English courts have come to an opposite conclusion: {{cite|Barclays Bank Ltd|WJ Simms|1980|QB|677}} | ||
This was the crux of the decision: the payment, though mistaken discharged a debt, was received without inducement or notice of the mistake. It is not at all clear that prepaying a loan when the loan is not due ''does'' discharge the debt, nor that the Lenders can have been labouring under the slightest hint of an misapprehension that the payment was intentional and not mistaken — but the Judge was not prepared to play the [[Anus matronae parvae malas leges faciunt|little old lady]] card in favour of Citigroup. | This was the crux of the decision: the payment, though mistaken discharged a debt, was received without inducement or notice of the mistake. It is not at all clear that prepaying a loan when the loan is not due ''does'' discharge the debt, nor that the Lenders can have been labouring under the slightest hint of an misapprehension that the payment was intentional and not mistaken — but the Judge was not prepared to play the [[Anus matronae parvae malas leges faciunt|little old lady]] card in favour of Citigroup. To the contrary, citi got the [[durum caseum per magnos canibus]]'' treatment: the court considered itself bound rather literally by ''Banque Worms'', and I dare say that precedent will get a good testing on appeal. | ||
==Citi and Revlon== | |||
This all leaves things rather delicately poised between Citi and Revlon. Forgetting for a moment that Revlon might not be able to pay Citi back, does it ''have'' to? A rather odd artefact of agency law comes into play here. | |||
As against a third party without notice, an [[agent]] with the [[ostensible authority]] to bind a principal, in fact, ''does'' so: this is part of the legal case for the Lenders. Here Citi had been explicitly appointed by Revlon as [[agent]] and, for all the Lenders knew or cared (let’s park [[constructive knowledge]] for now) is acting on instructions, within the scope of authority, and binds the principal. Hence the debt is discharged. To the rest of the world, Citi was an agent. | |||
To Revlon, in making that payment, it was ''not''. Revlon might say “I did not ask you to make that payment. I did not want my debt discharged. I was rather enjoying ''not'' having to discharge it for the time being. So this one, Citi, is on you.” This might, indeed seem fair, if Citi can then proceed against the Lenders in an action for [[money had and received]]. ''But it can’t''. Citi is in a [[paradox]]ical position: as regards the Lenders it ''is'' an agent; as against the principal, it is ''not''. | |||
We might suppose that Citi has somehow assumed the Lenders’ claims, then. But has it? This does not seem to be what it has done at all. It has ''repaid'' those loans, unasked, on Revlon’s behalf. Revlon neither agreed to it doing this, nor provided any [[consideration]] for it | |||
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{{c|Paradox}} | |||