Crantrave Ltd ((in Liquidation)) v Lloyds Bank Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MAY |
| Judgment Date | 13 April 2000 |
| Judgment citation (vLex) | [2000] EWCA Civ J0413-2 |
| Docket Number | CASE NO: CCRTI 1999/0765/B1 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 April 2000 |
[2000] EWCA Civ J0413-2
Lord Justice Evans and
Lord Justice May
CASE NO: CCRTI 1999/0765/B1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE MAYORS AND CITY OF LONDON COURT
(HIS HONOUR JUDGE SIMPSON)
ROYAL COURTS OF JUSTICE
STRAND, LONDON WC2A 2LL
Mr Nicholas Jackson (instructed by Messrs Emrys James & Co) appeared for the appellant
Mr Matthew Phillips (instructed by Messrs Edge & Ellison) appeared for the respondent
LORD JUSTICE PILL:
This is an appeal against the judgment of His Honour Simpson given at the Mayor's and City of London County Court on 8 March 1999. The judge allowed an appeal against an order of District Judge Samuels given on 18 February 1999 whereby he gave summary judgment to Crantrave Ltd against Lloyds Bank plc in the sum of £20,598.93 (including interest of £7,101.78). The claimant company is in liquidation and the action was brought by the Liquidator Mr E S Hunt with the sanction of the Official Receiver. The winding-up order was made on 16 August 1993 pursuant to a petition dated 16 June 1993.
The judge began his judgment by stating that the facts were agreed and that the argument had proceeded upon a matter of law. In 1993 the company were defendants in an action brought by Mr Sykes and Mr Lister. By an order made on 28 April 1993 the company were required to pay the sum of £150,000 to them. On 7 May 1993, the plaintiffs in that action secured a garnishee order nisi upon the funds of the company with the defendant bank. On or about the 10th of May 1993, the bank paid to solicitors acting for Mr Sykes and Mr Lister the sum of £13,497.50. The garnishee order nisi was not made absolute and the proceedings founded on it were stayed.
The Liquidator claims that the bank wrongfully and without authority debited the company's account with that sum and the sum is reclaimed. In their defence, the only point raised by the bank is that "by making the … payments the defendant partially discharged an existing debt of the plaintiff and as a consequence thereof the plaintiff had suffered no loss as a result of the actions of the defendant and is as a consequence not entitled to repayment of monies claimed in the particulars of claim or any sum". A payment to a third party is agreed but there is no evidence to support the assertion that a debt was discharged.
In his affidavit, which was before the judge, Mr Hunt confirms the indebtedness and states that "from the company records that are in my possession and from correspondence which I have received from the former directors of the company it is clear to me that no authorisation was given to the defendant as to the payment of the money nor was the payment of the money by the defendant ratified on behalf of the company. I have not ratified or adopted the payment". A legal submission was included in the affidavit; in the absence of authorisation or ratification, the equitable doctrine of equitable subrogation was not available to the defendant.
In an affidavit sworn on behalf of the bank in opposition to the application for summary judgment, Mr C A Wright states that "it is inappropriate for the plaintiff to assume the nature of the defence which is clearly pleaded on the basis that the plaintiff has no recoverable loss against the defendant in this action. The plaintiff has accepted that it made payment of monies under the terms for garnishee order nisi but in doing so the defendant discharged a debt of the plaintiff which was due under the terms of the judgment in a sum in excess of £150,000. By making this payment the defendant has discharged a payment due from the plaintiff to the judgment creditor and as such the plaintiff has suffered no loss as a result of the defendant's actions. In the circumstances I verily believe the defendant has a valid defence to the plaintiff's claim in this matter".
The judge declined to order summary judgment on the basis that the legal point raised on the authority of the Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928] 1 KB 48 was arguable. The judge set out the submissions of the parties fully and stated that "the bank might be able to rely upon the authority of Liggett". I do not read the latter part of his judgment as a departure from his opening statement that "the facts are agreed and the argument has proceeded upon a matter of law". The matter of law is whether Liggett applied upon the agreed facts. The Liquidator had not accepted that a debt was partially discharged and had expressly denied ratification. The application to the judge proceeded on the basis that the facts were agreed and, from the pleadings and affidavit, the facts were as I have stated them to be. Ratification was not as such raised by the bank, either in their pleading or in the affidavit on their behalf which went out of its way to affirm the defence as pleaded. The point taken in the pleading and the affidavit, which the judge was asked to resolve, was whether the bank could resist the claim by a customer for money wrongfully paid by the bank out of the customer's funds with the bank on the ground that, because the payment had partially discharged an existing debt of the customer, no loss had been suffered by the customer.
It was submitted by the bank before the judge and before this court that, notwithstanding that the garnishee order nisi was not perfected, a genuine belief that the bank was entitled to act as it did was a defence to the claim. It is further submitted that, on the authority of Liggett, there is an equitable doctrine that the person who pays the debts of another without authority is allowed the benefit of such payment. It is for the company to prove its loss and it has not done so.
I reject at once the first of those arguments. It is accepted that the belief, however genuine, was not, on the evidence, a reasonable belief. The belief relied on does not give rise to the equity. As to the second point, the bank relies upon the payment to a creditor of the company, in this case a judgment creditor, as establishing the pleaded case that the company has suffered no loss and as giving rise to an equitable doctrine that a banker is entitled to take credit for the payment.
For the company, Mr Jackson submits that this is a straightforward claim by the company, in this case by its Liquidator, for the payment to him of the company's funds held by the bank. Being a straightforward claim for that sum, no further questions of loss arise. If the bank seek to recoup their loss, it is for them to recover the sum from the creditor, if they can.
In Liggett, the defendant bank negligently and contrary to instructions paid cheques to their customers which had been signed by one director only when two signatures were required. The cheques were drawn in favour of trade creditors of the company in payment for goods supplied to the company. Wright J stated (p 61) as a general principle of equity:
"that those who pay legitimate demands which they are bound in some way or other to meet, and have had the benefit of other peoples money advanced to them for that purpose, shall not retain that benefit so as, in substance, to make those other people pay their debts".
Wright J applied that principle as between banker and customer (p 63):
"In such a case there is obviously no conversion, but there is misapplication, under an honest mistake as to the validity of the authority, of the credits which constitute the medium of exchange in place of cash. Under these circumstances I think that the equity I have referred to ought to be extended even in the case where the cheque was paid out of the credit balance, and was not paid by way of overdraft, so that the banker will be entitled to the benefit of that payment if he can show that that payment went to discharge a legal liability of the customer. The customer in such a case is no worse off, because the legal liability which has to be discharged is discharged, though it is discharged under circumstances which at common law would not entitle the bank to debit the customer.
The result is that I must order an inquiry, because I have not the facts before me sufficiently to come to a conclusion whether the rule of equity which I have stated...
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