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Lloyds Bank v Independent Insurance: Difference between revisions
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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. | 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 | At first instance, the court held that WFL had not authorised the transfer. | ||
Independent appealed, arguing that Lloyds ''was'' authorised, or that it was [[ostensible authority|''ostensibly'' authorised]] to transfer the money, so the payment discharged WFL’s debt to Independent, thus providing a defence to Lloyds’ claim restitution. | Independent appealed, arguing that Lloyds ''was'' authorised, or that it was [[ostensible authority|''ostensibly'' authorised]] to transfer the money, so the payment discharged WFL’s debt to Independent, thus providing a defence to Lloyds’ claim restitution. | ||
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Lloyds argued the first instance judge was right, but even if he wasn’t, Lloyds should still succeed on its [[restitution]]ary claim. | Lloyds argued the first instance judge was right, but even if he wasn’t, Lloyds should still succeed on its [[restitution]]ary claim. | ||
===Facts=== | ===Facts=== | ||
There is some confusion to be navigated not only on account of [[Lord Justice Waller]]’s curious facility with [[pronoun]]s, but because ''both'' | There is some confusion to be navigated not only on account of [[Lord Justice Waller]]’s curious facility with [[pronoun]]s, but because ''both'' WFL and Independent had accounts at RBS. WFL was apparently moving its business from RBS to Lloyds. There was a bit of a [[S.N.A.F.U.]] where WFL 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 | The meat of the action happened when WFL 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 fund]]s”. 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. | Lloyds credited Kaffco’s cheque to WF’s new account, but marked it as “uncleared funds”, awaiting clearance from Kaffco’s bank. | ||
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{{Quote|“(2) [''A claim for [[restitution]]''] may however fail if [...] (b) the payment is made for good [[consideration]], in particular if the money is paid to discharge and does discharge a [[debt]] owed to the payee (or a [[principal]] on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt”}} | {{Quote|“(2) [''A claim for [[restitution]]''] may however fail if [...] (b) the payment is made for good [[consideration]], in particular if the money is paid to discharge and does discharge a [[debt]] owed to the payee (or a [[principal]] on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt”}} | ||
Lloyds had made the rather careful argument that, whether or not it was authorised to make the payment, Independent would be receive a “windfall” enrichment at Lloyd’s expense, since the effect of authorisation would be to discharge the debt. Enrichment, yes; “unjustified”, no: this was no “windfall” in Independent’s hands (except to the extent | Lloyds had made the rather careful argument that, whether or not it was authorised to make the payment, Independent would be receive a “windfall” enrichment at Lloyd’s expense, since the effect of authorisation would be to discharge the debt. Enrichment, yes; “unjustified”, no: this was no “windfall” in Independent’s hands (except to the extent WFL could not meet the debt at all), but the satisfaction of a debt. Nor was Lloyds’ without ''legal'' remedy: as they had acted within their mandate, Lloyds had a claim, in the form of their overdraft, against WFL.<ref>That WFL might not be able to ''pay'' it, meaning they were short of a ''factual'' remedy, is beside the point. This the the business as usual risk that a bank takes on, and can guard against by not advancing funds against uncleared payments.</ref> | ||
It is true that there is an ''economic'' argument here, which Robert Goff adverted to in Barclays: | It is true that there is an ''economic'' argument here, which Robert Goff adverted to in Barclays: | ||
{{Quote|“It is, of course, true that the mistake was entirely of the Plaintiffs’ making and that the Defendants were not at fault in any way in accepting or indeed for the time being seeking to retain the payment; ''on the other hand, the Defendants were prepared to extend credit to | {{Quote|“It is, of course, true that the mistake was entirely of the Plaintiffs’ making and that the Defendants were not at fault in any way in accepting or indeed for the time being seeking to retain the payment; ''on the other hand, the Defendants were prepared to extend credit to WFL by appointing them as their agents and by allowing them to collect premium, whereas the Plaintiffs had never been prepared to have WFL as a debtor''.<ref>Emphasis added.</ref> Moreover, if the Defendants are entitled to retain the payment, it may properly be regarded as a windfall: had the Plaintiffs not made the mistake which they did, the Defendants would have been left to their remedies against WFL ...”}} | ||
In {{Casenote|Barclays Bank Ltd|WJ Simms}} Robert Goff J had found there was no actual authority and the bank’s payment ''did not'' discharge the debt in question. There, restitution ''was'' available, not being defeated by Condition 2(b). Here it was not. | In {{Casenote|Barclays Bank Ltd|WJ Simms}} Robert Goff J had found there was no actual authority and the bank’s payment ''did not'' discharge the debt in question. There, restitution ''was'' available, not being defeated by Condition 2(b). Here it was not. | ||