From: Barry
Allan <barry.allan@otago.ac.nz>
Sent: Monday 14
December 2020 21:59
To: obligations@uwo.ca
Subject: Re:
Mistake in the Privy Council
Greetings
I have enjoyed this discussion of the
possibility of mistake being relied on, as it has become a live issue here in
New Zealand in respect of guarantees. A lower court decided that a particular
form used counted as a guarantee (despite any words of guarantee in the
document). In different proceedings based on the same form of document (it is a
standard form loan agreement), our Supreme Court (Brougham v Regan [2020] NZSC 118) has held that it is not a guarantee. As you might know, New
Zealand has a weird statutory law of mistakes, so it is possible that creditors
might try to claim they entered the guarantee under an operative mistake of
law, and thus get some relief from the Supreme Court decision.
This would take some contortion to find that
they entered a guarantee under a mistake when it was only later the Supreme
Court held their contract was not a guarantee, but Kleinwort Benson held
that a payment made based on
settled law was the result of a mistake because that settled law was later
declared wrong. Then in Brennan v Bolt Burdon, the English Court of Appeal extended this to
mistakes in the the entry into contracts. Underlying these cases is the
declaratory theory of the common law, that when the House of Lords (or our
Supreme Court) spoke, it was just declaring the law as it always had been. It
seems an odd sort of thing to call a mistake, but there you have it.
Barry
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Barry Allan | BA, BCOM, LLMAssociate Professor Faculty of Law | Te Kaupeka T tai ture University of Otago | Te Whare W nanga o Ot go |
From: Matthew Hoyle <MHoyle@oeclaw.co.uk>
Sent: Tuesday, 15 December 2020 8:31 AM
To: 'Robert Stevens' <robert.stevens@law.ox.ac.uk>;
obligations@uwo.ca <obligations@uwo.ca>
Subject: RE: Mistake in the Privy Council
As far as
I knew, counsel did not advise on the legality of swaps one way or the other
until 1989, shortly before Hazell commenced proceedings against Hammersmith.
Most of the councils seem to have just assumed they could do it on the
portfolio management basis, and Hammersmith and Fulham were just plain
reckless.
As to the
point on mistake it seems clear to me that the parties did make a mistake here.
Like Hammersmith, this isn t even a hard case of an ultimate appellate court
overturning its own previous decision, or even an ultimate court overturning an
appellate court. It is an erroneous first instance judgment being overturned by
an appellate court. Given that courts of coordinate jurisdiction are free to
(and do) take different views on the same point of law, there clearly is some
unwritten law (the applicable principles of the common law?) which the later
court is able to apply (and a party is able to be mistake about, even if
following the first judgment). The law cannot be both at once, but there is no
question that the second court has somehow retrospectively changed the law.
It seems
difficult to me that if a first instance judge has erroneously decides that you
are free to punch me in the face if I insult you, that your conduct is not
unlawful until a second court retrospectively makes it so. It is always
unlawful to punch me, and any person familiar with the relevant case law could
reach that conclusion and determine that the first judge was mistaken without a
second judge saying so.
I m not
sure per incuriam can bear such weight. If I cite a determinative statute to a
judge and they irrationally ignore it, that cannot somehow render their
decision more correct than if I simply didn t cite the authority to them.
I also
struggle with the equivalence between overruling an erroneous decision and a
retrospective act of legislation. More needs to be done to establish the two
are comparable I m not sure any legal system adopts such an equivalence
(though interestingly it seems some systems permit interpretative changes to
laws by a legislature but not innovative changes e.g. Peruvian law: Minera
Las Bambas [2020] EWHC 108 (Comm) at [11]).
Best,
Matthew
From: Robert Stevens <robert.stevens@law.ox.ac.uk>
Sent: 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
existence of the contract of insurance; (ii) breach of the contract by
permitting a person not authorised under the policy of insurance to drive
the vehicle; (iii) the accident which gave rise to the third party claim,
and the liability of the appellant for same;(iv) the request of the
appellant to Capital to handle the claim of the third party, (demonstrated
on the evidence by his approach to Capital after the accident via his
employee, the completion of a claim form in which his driver indicated that
he was the party in the wrong, and his payment of the uninsured excess);
(v) the consequential payment thereafter by Capital of the third party
claim; (vi) the inability of Capital on the state of the law as it
then stood, to avoid payment of the third party s claim against the
appellant; (vii) the appellant's obtaining, by Capital s payment, the
benefit of his discharge from legal liability to the third party; and
(viii) the unconscionable refusal of the appellant to make restitution to
Capital in circumstances in which he had accepted liability by having his
employee fill out the claim form to this effect, and paid the excess under
the policy, while yet retaining the benefit of Capital s payment on his
behalf.
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
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