Lloyds Bank v Independent Insurance
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The Jolly Contrarian Law Reports
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Lloyds Bank v Independent Insurance [1998] EWCACiv 1853
A word about pronouns
A Court of Appeal judge is undoubtedly a guardian of the Queen’s English, and far be it from this snitty little rogue to have an opinion (I mean, can you imagine?), but Lord Justice Waller’s habit of referring to a corporation as if it were[1] a crowd, and therefore a plural is an abomination.
It is galling enough when members of the internet do this, to their favourite foopball teams or pop bands, where there is at least an argument, however misguided, that the whole is no more than the sum of its members, but a corporation, under his honour’s own freaking law, is its own legal personality. It is — must be, at a profoundly ontological level — a singular entity.
And nor can this be put down to wokeness: firstly, it was 1998, so everyone was racist, misogynist and cis-biased etc. etc. etc. — i.e., no-one was woke, and secondly, in any case, “bank” takes the neuter pronoun it, so would have been perfectly woke in the singular anyway.
I have re-rendered the pronouns as they should be.[2]
Right.
Background
LLoyds transferred money into Independent’s account at the Royal Bank of Scotland by mistake. Independent argued that LLoyds made the transfer on behalf of its customer WFL, with its authority, to discharge WFL’s debt that was due to Independent.
At first instance, the court held that WF had not authorised the transfer.
Independent appealed, arguing that LLoyds was authorised, or that it was ostensibly authorised to transfer the money, so the payment discharged WF’s debt to Independent, thus providing a defence to LLoyds’ claim restitution.
Lloyds argued the first instance judge was right, but even if he wasn’t, LLoyds should still succeed on its restitutionary claim.
Facts
There is some confusion to be navigated not only on account of Lord Justice Waller’s curious facility with pronouns, but because both WF and Independent had accounts at RBS. WF was apparently moving its business from RBS to Lloyds. There was a bit of a S.N.A.F.U. where WF first sent Independent a cheque drawn on RBS, which bounced, but this is all a bit of pre-conflict theatre.
The meat of the action happened when WF instructed its new bank, Lloyds, to credit the same amount, £162,387.90, to Indepedent’s RBS account by wire transfer. At the time, Lloyds account only had £982 in it. Lloyds said, “we’ll do it as soon as you put us in cleared funds”. Funds were incoming by means of a cheque for £168,000 drawn in WF’s favour by a third part, Kaffco.
Lloyds credited Kaffco’s cheque to WF’s new account, but marked it as “uncleared funds”, awaiting clearance from Kaffco’s bank.
You’ll never guess what happened next.[3] Lloyds only went and paid out the £168,000 before the third-party Kaffco cleared by mistake, didn’t it.
And you’ll never guess what happened after that: the Kaffco cheque bounced. Whoops. Lloyds put WF’s account into overdraft, but in the meantime, asked Independent for the money back.
Issues
Actual authority: Did Lloyds have actual authority to pay £162,387.90 to Independent? The Court of Appeal was unanimous: it did. This puts this case on a different footing from both Barclays Bank v WJ Simm, where the bank explicitly did not, and Citigroup v Brigade Capital Management, where the bank had no instructions at all.
Ostensible authority: If not, actual authority, did the bank have ostensible authority? This is a tricky area and Lord Justice Peter Gibson, realising he did not have to address this question, preferred not to. Discretion is the better part of valour, and all.
Restitution: If Lloyds had any kind of authority, could it claim restitution of the mistaken payment?
See also
References
- ↑ Note: subjunctive!
- ↑ Yes: like most commercials lawyers I have some kind of obsessive-compulsive disorder, but unusually, also I have appalling attention to detail. This is a cross I have had to bear my whole life.
- ↑ Not, if you have the same acumen as the average distressed lender in the New York market, at any rate: about 12 of them testified in court that they could not imagine in a trillion years, such a thing happening.