National Westminster Bank Plc v Somer International (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CLARKE,LORD JUSTICE POTTER |
| Judgment Date | 22 June 2001 |
| Neutral Citation | [2001] EWCA Civ 970 |
| Docket Number | Case No: B2/2000/0381 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 June 2001 |
[2001] EWCA Civ 970
Lord Justice Peter Gibson
Lord Justice Potter and
Lord Justice Clarke
Case No: B2/2000/0381
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BRISTOL COUNTY COURT
(HIS HONOUR JUDGE NELIGAN)
Royal Courts of Justice
Strand, London, WC2A 2LL
Dominic Chambers Esquire (instructed by National Westminster Bank PLC)
John Virgo Esquire (instructed by Messrs Thatcher & Hallam, Somerset, for the appellant).
INTRODUCTION
This is an appeal by the defendants Somer International (UK) Limited ('Somer') from the judgment dated 18 February 2000 of His Honour Judge Neligan in the Bristol County Court whereby he ordered Somer to repay to the claimant National Westminster Bank PLC ('Nat West') the sum of £38,688.02 inclusive of interest previously transferred by mistake by Nat West into the account of Somer. The amount ordered to be repaid was the amount of the original transfer made in error, namely US$ 76,708.57 less US$ 21,616.14, that latter sum being the value of goods despatched by Somer to one of its customers on the basis of the transfer before the error was discovered. The judge held that, despite the plea of estoppel by representation raised by Somer in respect of the entirety of the sum transferred, Somer was entitled to rely upon such representation only to the extent that it acted to its detriment in reliance upon it.
In deciding as he did, the judge followed the decision of Harrison J in Scottish Equitable plc –vDerby [2000] 3 All ER 793, since affirmed by this court on 16 th March 2001. On this appeal, Somer has argued that the judge was wrong to follow the Scottish Equitable decision, being bound to follow the previous decision of this court in Avon County Council –vHowlett [1983] 1 WLR 605 (' Howlett'), in which it was stated that estoppel cannot operate pro tanto. Nat West, on the other hand, seek to uphold the decision of the judge. They further argue that this court should if necessary depart from the principle stated in Howlett, applying instead the more limited defence of 'change of position' recognised by the House of Lords in Lipkin Gorman(a firm) –vKarpnale Limited [1991] 2 AC 548 (' Lipkin Gorman'), by which the defence of 'change of position' was held to be a defence to a restitutionary claim for repayment of money paid under a mistake of fact to the extent that it would be an injustice if the payee were called upon to repay or to repay in full: see per Lord Goff of Chieveley at 579E-580H.
Nat West also appeal by way of respondent's notice, as to which see further at paragraph 33 below.
THE FACTS
Somer, which carried on business exporting computer equipment, was at all material times the customer of Nat West and from time to time received payment in dollars from foreign purchasers by sums paid to the credit of a dollar account maintained at Nat West. In summer 1996, Somer began trading with an African based company called Mentor, supplying computer equipment to Mentor for on-sale to African end users. Dealing in round figures by 1997 Mentor owed Somer £166,000 in relation to such supplies. In April 1997 Mentor remitted £100,000 to Somer and indicated shortly afterwards that a further payment of between US$ 70,000 and US$ 78,000 would be forwarded shortly. Somer were in touch with Nat West about the prospective receipt of such payment.
On 28 April 1997, as a result of an error within Nat West a sum of US$ 76,708.57 received by Nat West from a company called Moffett Engineering Ltd and intended for the account of another Nat West client called Somer Sundstrand Limited, was credited to Somer's dollar account. On or about the same date Nat West notified Somer that the further dollar monies which they were expecting had been received into that account. In the belief that, by such payment, Mentor had reduced the balance of its trading account with Somer, on 30 April 1997 Somer despatched goods to Mentor to the value of £5,221.99, and on 30 May 1997, in the same belief, made a further shipment of goods to the value of £7,958.58.
On 24 February 1998, the bank notified Somer that the dollar payment made on 28 April 1997 had been made in error and requested re-payment. By this date, Mentor had ceased to trade from its former premises in Africa and had effectively disappeared as a trading entity. The bank thereafter brought proceedings to recover the dollar payment of US$ 76,708.57.
THE DECISION BELOW
The case for Somer depended upon the evidence of Mr Richardson, its managing director with overall responsibility for finance and accounts. In his witness statement he said that towards the end of April 1997 he made enquiry of a lady who rang him from the bank's international business department to advise him on another matter, whether the expected sum of US$ 70–78,000 had yet arrived from Mentor in a dollar account. He was told it had not. However, a few days later he received another telephone call from another female employee in which he was told that the payment he had been expecting had been received and that the sum of US$ 76,708.57 had arrived and been credited to the account. He said it was possible that he was told that the funds had arrived from Moffett Engineering, but this would have meant nothing to him as such payments were often received from customers of Somer's African clients by way of payment on their behalf. He said that, after receiving notification from Nat West he had informed Mentor over the telephone that Somer had received the expected monies, to which he received the reply "Have you? OK." He stated that he had no suspicion that the credit of the dollar payment to Somer was other than money which Somer was owed by Mentor. Mr Richardson's evidence was fully tested in cross-examination and, in particular, the bank relied upon a credit advice of payments received by Somer from the bank within a week after the payment had been made which made clear that the sum had been received from Moffett and was intended for 'Somer Sundstrand Limited' not 'Somer International Limited', which Nat West contended put Somer on notice of the error.
The judge made no finding in terms upon the nature or content of any representation made by the bank. However, he found that Mr Richardson was an honest and reliable witness and accepted his evidence that he honestly believed that the dollar payment came from Mentor and was money to which Somer was lawfully entitled. His findings can only sensibly be taken as reflecting and amounting to an acceptance of Mr Richardson's evidence that he was told by the bank on or about 28 April 1997 that the expected dollar payment from Mentor had now been received and was standing to the credit of the defendant's dollar account at Nat West.
The judge went on to find that:
"in the belief that the dollar payment had been paid by Mentor, which thereby reduced its debt to Somer, Somer released goods on 30th April to the value of £5,221.99 and on 30th May 1997 to the value of £7,958.58 … making a total of £13,180.57 and thereby changed its position because of the mistaken credit of the dollar payment to its account on 28th April."
Thus, the judge found that the reason and cause of the detriment to Somer. was the representation of the bank that the expected dollar payment from Mentor had now arrived.
The judge went on to state that he was not prepared to find, as Somer had argued, that Somer lost the value of an opportunity thereafter to recover other monies owed by Somer. He said:
"In the first case I am not satisfied that the causal link exists between receipt of the dollar payment and the [loss of the] chance to pursue Mentor successfully for payment of all or a substantial part of Mentor's liability to Somer. Secondly, the evaluation of that chance is nil in my judgment which again gives rise to a totally different situation than that which arose in the Allied Maples Group case.
The result therefore of my findings and conclusions is that having found that Somer had changed its position in reliance upon the dollar payment to the extent £13,180.57 there will consequently be a set-off of that sum or the dollar equivalent against the dollar payment of $76,708.57 in accordance with the principles adopted by Harrison J in Scottish Equitable PLC –vDerby."
THE LAW
In Lipkin Gorman, the House of Lords in 1991 recognised 'change of position' as a general defence to all restitutionary claims: see the review of the authorities and the conclusion of Lord Goff at 577H-581B. Lord Goff stated at 578G-580G:
"Historically, despite broad statements of Lord Mansfield to the effect that an action for money had and received will only lie where it is inequitable for the defendant to retain the money (see in particular Moses –vMacFerlan (1760) 2 Burr 1005), the defence has received at most only partial recognition in English law …. Instead, where change of position has been relied upon by the defendant, it has been usual to approach the problem as one of estoppel: see, e.g. R E Jones Limited –vWaring & Gillow Limited [1926] AC 670 and Avon County Council –vHowlett [1983] 1 WLR 605. But it is difficult to see the justification for such a rationalisation. First, estoppel normally depends upon the existence of a representation by one party, in reliance upon which the representee has so changed his position that it is inequitable for the representor to go back upon his representation. But, in cases of restitution, the requirement of a representation appears to be unnecessary. It is true that, in cases where the plaintiff...
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