From: Robert
Stevens <robert.stevens@law.ox.ac.uk>
Sent: Monday 14
December 2020 18:32
To: obligations@uwo.ca
Subject: Mistake
in the Privy Council
An interesting decision
of the Privy Council on restitution, with the lead judgment given by Lord
Burrows, in an appeal from Trinidad and Tobago.
Samsoondar v Capital
Insrance.
https://www.jcpc.uk/cases/jcpc-2018-0021.html
As presently advised, I
think it is wrong, and that it exemplifies a problem with unjust enrichment
orthodoxy.
The claimant was the
third party loss insurer of the defendant s vehicle. The policy between them
was owner driver only. In 2005 the defendant s lorry was in an accident
damaging a third party s vehicle, whilst being driven by an employee of the
defendant.
The defendant sent a
claim form under the insurance policy, and the claimants informed the defendant
that they were settling the matter with the third party, but that he would have
to pay the excess, which he did
In a T&T judgment
of 9 June 2006 Selwyn Benjamin v Stephen Kokaram J had held
that owner driver only covered cases of those driving with the permission of
the driver, such as this one.
By a letter of 10 April
2007 the claimants disputed their liability under the policy on the basis that
the defendant had not been personally driving, but then on 21 June 2007 told
the defendant that they had paid $43k in settlement of the claim.
In 2012 the Privy
Council in President Insurance Co Ltd v Resha St Hill [2012]
UKPC 33 the overturned the earlier interpretation of policies of this kind, so
that cover did not extend to drivers authorised by the owner.
Amongst a number of
other claims, the claimants sought restitution of the money paid. The Privy
Council overturned the T&T Court of Appeal and denied the claim.
First thing of note is
that the court thought this was a case about the discharge of another s
liability. After all, the payment made had discharged the defendant s
liability in tort.
This seems mistaken,
and the analysis of the Court of Appeal preferable.
There was a contract
between the claimants and defendant. The claimants were, at the request of the
defendant, performing their contractual obligations to the defendant. If a bank
makes a payment authorised by its customer to a third party, where
it does so by mistake the correct defendant (if any) is its customer, not the
third party. If the customer is making a mistake, it may have a claim against
the third party, because the payment was made by it through the agency of its
bank.
The same was true here.
There were two transactions. The insurer was performing its contractual
obligations to its counterparty. The defendant was paying the third party,
through its insurer, the money it owed because of the tort.
The insurer was
performing to its insured. In the language preferred by the English
Restatement, the third party received an incidental benefit from the
performance rendered by the insurer to the insured.
Put another way, this
should have been seen as a straightforward Kelly v Solari case.
The insurer was paying the insured the money.
Second, the claim is
primarily ruled out because of the lack of any unjust factor . Narine JA in
the Court of Appeal had stated
The Privy Council understood Narine JA to be invoking the unjust
factor of legal compulsion, exemplified by cases such as Moule v
Garrett, where a claimant is legally compelled to discharge an
obligation that is primarily owed by the defendant. But that obviously
doesn t apply here as the claimant was not under any legal obligation to the
third party.
A possible alternative on the orthodox account in the textbooks
would be to invoke a mistake but the claimants had not claimed that they were
mistaken in their pleadings. As they hadn t pleaded and proved that, their
claim was rejected.
But why hadn t the claimants said that they were, as a matter of
fact, making a mistake?
For the obvious reason that they weren t.
They had paid because the positive law in 2007 in Trinidad and
Tobago was that they were obliged to do so. They made no
mistake at all. If those with legal authority (ie the judges) say The Law is
X then the law is X. The only exception to this in a system
of binding precedent is where a judge gives a decision without having the
relevant binding legal materials cited to her (ie it is per incuriam
and so not the law). There isn t a kind of shadow law un-posited somewhere in
the ether. The law back in 2007 was that the money was due.
So the claimant s pleadings just told the truth. In 2012 when the
Privy Council overturned the earlier decision the law was changed. It did so
with retrospective effect, but in the words of Birks that cannot falsify
history.
This was a small claim, $43,500. Those responsible for the
pleadings just pleaded the facts as they were. Unversed in unjust enrichment
theory, they had no idea that they were expected to invoke a fictional
mistake. They just said what had happened: they paid because that is what the
law in 2007 required of them.
In England decades ago,
the various parties in the interest rate swap contracts entered into by banks
and local authorities in order to escape caps on local government borrowing
were doing so on the basis of a pretty dubious advice from senior counsel that
it was all valid. This advice obviously turned out to be wrong in Hazel
& Hammersmith. Restitution was allowed on the basis of mistakes
that the Supreme Court (differently constituted) in FII recently described
accurately as "deemed"
In this case, there
was judicial authority saying what the law was. The money was
due. Until it was reversed, that was the law.
The more authoritative
the legal source the more implausible the mistake analysis becomes. (Eg a
statute overturned with retrospective effect.) But the more authoritative the
law is at the time the payment is made, the more deserving the claimant is as it
is implausible to describe him as a risk runner.
If the claimants in this
case had paid on 21 June 2007 knowing full well that the claim was dubious and
that the authority of Kokaram J was doubtful, but did so in order to settle any
dispute, then no claim should succeed. They have consented to the position they
find themselves in, and the law should not come to their assistance.
But where money has
been paid for no reason, who should have to plead that the claimant, rather
unusually, consented to this state of affairs? It should be the
defendant.
The claimants didn t do
so because unaware of the theoretical baggage that expected them to plead that
they didn t consent to this unjust result.
[Lots of other things
of interest, including discussion of enrichment, and an attempt to revive the
"three stage test."]
Rob