Citigroup v Brigade Capital Management: Difference between revisions

Citigroup v Brigade Capital Management (view source)

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 ''Ouch''. The “[[discharge-for-value defense]]”, generally, has been criticised by some US authorities<ref>A Schall, ''Three-Party Situations in Unjust Enrichment Epitomised by Mistaken Bank Transfers'' [2004] RLR 110.</ref> and has no equivalent in English law, where courts have reached the opposite conclusion (see: {{cite|Barclays Bank Ltd|WJ Simms|1980|QB|677}}) but even if the principle is valid, its application here seems rather to have the quality of [[Durum caseum per magnos canibus|hard cheese one feeds to big dogs]].
 ===No notice of the mistake? ''Seriously''?===
-It is not at all clear that prepaying a loan when the loan is not due ''does'' discharge the debt, nor is it remotely credible that any lender laboured for an instant under the misapprehension that the payment was anything but a howling clanger: it is axiomatic that distressed lenders can’t repay their loans ''at all'', let alone ahead of time. The judge agreed with Citi that, to defeat the [[discharge-for-value defense]] it need show only the Lenders had [[constructive]], and not ''actual'', notice of the mistake.<ref>“[[Constructive]] notice” is a term of legal art: “it means a person either knows or has reason to know” the fact in question; “reason to know” including “other facts known to the person would make it reasonable to infer the existence of the fact, or prudent to conduct further equity that would reveal it.”<ref> Citi must have been encouraged by this finding.
+It is not at all clear that prepaying a loan when the loan is not due ''does'' discharge the debt, nor is it remotely credible that any lender laboured for an instant under the misapprehension that the payment was anything but a howling clanger: it is axiomatic that distressed lenders can’t repay their loans ''at all'', let alone ahead of time. The judge agreed with Citi that, to defeat the [[discharge-for-value defense]] it need show only the Lenders had [[constructive]], and not ''actual'', notice of the mistake.<ref>“[[Constructive]] notice” is a term of legal art: “it means a person either knows or has reason to know” the fact in question; “reason to know” including “other facts known to the person would make it reasonable to infer the existence of the fact, or prudent to conduct further equity that would reveal it.”</ref> Citi must have been encouraged by this finding.
 You might, therefore, be surprised to hear the lenders’ evidence about their own states of mind on receiving the funds was strikingly consistent: not ''one'' of them thought it could possibly be an error. The transcript catalogs their testimony: “Not in my wildest imagination ... [did I suspect that the payments could have resulted from an error] ... That just — the thought literally never crossed my mind.”