and
King's Bench Division
15 December 1950
In this case Lloyds Bank Ltd. are claiming from the Honourable Cecily Kate Brooks the sum of £1,108 as money had and received by her, the money having been paid to her under a mistake of fact.
The statement of claim first of all alleges that that sum (and the claim is based upon that sum) was paid under a mistake of fact. Then it goes on to allege as an alternative claim that it was an implied term of their agreement with the defendant, as her bankers, that she should take reasonable care in the conduct of her account with the plaintiffs, including the checking of her pass book from time to time and informing the plaintiffs of any error therein.
Further, they say that by reason of such relationship of banker and customer, the defendant was under a duty to the plaintiffs to act in that way, and failed to do so. Finally, they allege that in the circumstances the defendant received the moneys to the use of or was a trustee for the trustees of the estate of which she was a beneficiary of the sums wrongly credited to her account. Those were the three heads of the claim put forward.
With regard to the last head of claim, Mr. Laski, appearing for the plaintiffs, abandoned that claim in the course of his opening. As regards the first alternative claim, namely, breach of a term of the defendant's banking contract with the plaintiffs, Counsel for the plaintiffs said that he felt it was not open to him to argue that head of claim before me, but he desired to reserve his right to argue that head of claim elsewhere if necessary, so there is no necessity that I should trouble myself further about the claim under that head.
That really leaves me to deal with the plaintiffs' claim upon the basis that these moneys, £1,108, were paid by the plaintiffs to the defendant under a mistake of fact, and that is the only head of claim which I have got to consider in this matter now.
The defence is a denial that the circumstances were such that in law the money was paid under a mistake of fact. There is a further plea that if it was so paid, then the plaintiffs were under a duty to the defendant by reason of their relationship of banker and customer to take reasonable care to ensure that the pass sheets delivered to her from time to time contained an accurate statement of her account. Further, that by sending the defendant the pass sheets setting out these sums as credited to her they represented that they had received them on her behalf and for her use and formed part of her income, and that, relying on those representations contained in those pass sheets, the defendant had altered her position to her detriment in that she was led to believe that her income was greater than it was in fact and has spent more money than she otherwise would have done in and since the year 1941. Under those circumstances the plaintiffs, she says, are now estopped from alleging as against the defendant that the said sums were not received on her behalf. Those are the issues which I have to try in this case.
Now the circumstances are that apparently at some date, of which I have no information, under some document which has not been produced to me, but which has been referred to as a family settlement or a marriage settlement (and sometimes in the course of this case simply as a trust deed) the trustees, who were apparently trustees for William Lord Crawshaw, now deceased, opened accounts with the plaintiff bank at some date apparently in 1923 or prior thereto, and on May 28, 1923, the trustees having opened their accounts, instructed the plaintiffs by a letter of that date as to how they should deal with certain incomes from investments which were due to the trustees, that they should collect the dividend warrants or other warrants in respect of their investments, and that they should appropriate them to accounts on behalf of the trustees. There were executors as well, but, so far as I know, they do not enter into this particular matter ...
[the defendant in the action was entitled to the income from 2,170 6% Preference Shares in the Bolsover Colliery Company Ltd. Owing to a mistake in the bank's investment department, the dividend credit card which showed from what investments Miss Brooks' income was derivable, was wrongly increased by 4,000 8% Preference Shares of the Bolsover Colliery Company Ltd.]
Apparently between June and December of 1947 the trustees sold 2,000 of these 4,000 8% Second Preference Shares in the Bolsover Company, and of course the effect of that sale was to reduce the dividend which would be payable by half. The result was that for the dividends which were dated December 31, 1947, the £123 16s. 1d. which had previously been credited was reduced to the sum of £79 16s. 2d. Thereupon, Miss Brooks wrote a letter to the bank on March 2 of some year -- apparently March 2, 1948 -- in which she says:
Dear Sir,
The enclosed dividend vouchers for Bolsover Colliery amount to £79 16s. 2d. My previous dividends have been £123 16s. 1d. I should be obliged if you would explain this. I also note that on the voucher for the Second Pref. it is stated that the amount of stock is £2,000 -- it should be $4,000. Would you please let me know the reason for both the above changes.
That letter is an important one in connection with the defendant's plea. Miss Brooks herself is raising the question with the bank as to the reason for the change of circumstance. Of course the bank's case here is that she knew all along she was receiving money to which she was not entitled from the bank under a mistake made by the bank; but it is curious, to say the least, if that was the position, that she should write that letter claiming that somebody was interfering and not giving her sums to which she was entitled, but that is the effect of the letter.
Then the letter came from the bank. They did not know what had happened. In the letter they wrote to the solicitors for the trustees they said:
We are not able to satisfy Miss Brooks' request for an explanation of the reduction and if you are able to assist us we shall be grateful.
In due course the solicitors wrote on March 5, 1948, pointing out that this £4,000 was the Elder Son's Fund, that they had sold £2,000 of it, and that the £2,170 of the Bolsover shares was the property of Miss Brooks.
Now what the bank say is that they paid that money under a mistake of fact. I have been referred to a number of authorities of what is a payment under a mistake of fact. It is said here by Mr. Nelson, for the defendant, that there was no mistake of fact which the law will recognise as such. He said the bald position here is that there has been gross carelessness on the part of the bank in making the payments, they having in their records the true position but completely disregarding it. In particular, as regards the payments made up to November 7, 1946, he said in fact that the bank had full knowledge of all the circumstances then.
Well, I have heard his argument and I have been referred to the authorities. I am not going to go through them. Regarding the question of whether a payment is made under a mistake of fact, the words 'mistake of fact' there are used in contradistinction to a mistake of law. If the hand that pays the money, even though it be only that of an agent, is acting under a mistake of fact, that payment is a payment made under a mistake of fact. Even if the bank themselves knew or some of their officials knew the true position, if a mistaken entry is made in that dividend credit card and as a result of that the person whose duty it is to compile the ledger makes that entry in the ledger in the belief, based upon the card, that Miss Brooks was the beneficiary under the estate in respect of those 8% Preference Shares and subsequently the money is drawn out in the ordinary way, it seems to me that that is a payment made under a mistake of fact, however negligent or however much in breach of their duties that may be.
With regard to the payments made after they received this notice of November 7, 1946, again the bank were clearly in breach of their duty. They clearly had knowledge of the facts if they had read this document, but the entry was allowed to stand on the dividend credit card. The result was that the person crediting and ultimately authorising the payment of that item there was in fact making the payment because of a mistaken belief that Miss Brooks was the beneficiary who should receive the dividend from those shares. So it seems to me on the authorities that these payments were made under a mistake of fact.
Of course that does not conclude the case. Miss Brooks' defence is that the plaintiffs are estopped from asserting that they had not received the moneys credited to her on her account because of their representations to her.
Now the question I have to decide is, first of all, did Miss Brooks receive these moneys knowing that she was not entitled to them, or did she receive these moneys with a strong suspicion that she was not entitled to them and closed her eyes or refused to make any inquiries about them, or did she in fact receive them honestly believing that she was entitled to them?
That depends almost entirely upon the evidence of Miss Brooks herself. She is a lady against whom, the bank manager said -- neither her nor her family -- there was not the slightest suggestion, and he had the highest opinion of her and her family's integrity. She told me that she had been receiving dividends from the trustees of what she called the family settlement for many years, and that was her main source of income. She says that she left it to the trustees to manage the investments, as she had to do, and to credit her through the bank with what she was entitled to. She says that when in June, 1941, she found that her income had increased she thought the trustees had been giving her an increase and that she had no idea at that time, and had no idea through the years up to 1948, that she was not entitled to these sums which were being credited to her. She thought that the trustees were authorising the bank to collect the dividends on her behalf, and she thought the bank, when crediting her account, were acting in accordance with directions given by the trustees. She said she had no reason to believe some mistake had occurred, at any rate, on the part of the bank. It may be said of course, I suppose, as a general observation, that most people -- particularly ladies like Miss Brooks -- are inclined to believe that banks do not make mistakes, though most of us know that they do occasionally.
She was cross-examined, and cross-examined carefully and in full detail -- not improperly. It is necessary in a case of this sort. It turned out that she had kept a ledger. She was cross-examined in detail about this ledger and cross-examined about other matters as well, but in spite of that careful cross-examination she was not shaken, so far as I could see, in her evidence. She had some awkward things to answer from the point of view of covenant, but it did not shake her in her view.
I have to decide here whether I accept her evidence and whether I can take the only other view, that is, that this lady has been deliberately and knowingly receiving these sums over a number of years, knowing it was not hers and informed nobody, not even the trustees, and in fact acting in a way which only could be described as completely dishonest. Well, having seen her and having heard something of her background, including her charities, I do not think she is that type of woman. I accept her evidence. I believe that when the amounts were credited to her in 1941 she thought she was entitled to them and continued to think she was entitled to them right up to 1948 and, as I indicated before, one of the matters which persuades me that that is a correct view is the fact that she herself wrote this letter to the bank on March 2, 1948.
I cannot imagine a person who knew that they were receiving money to which they were not entitled and to which they had no claim, which they would in their own interest attempt to conceal, writing a letter of this sort inviting inquiries and complaining they were only getting part of a sum of money to which they were entitled. It seems to me clear the very fact the defendant wrote that letter is the strongest corroboration I can find that she was in fact under the belief that she was entitled to this money.
Of course the matter does not end there. If I had taken the view that she knew she was not entitled to this money, then of course her defence would fail because there could be no estoppel under circumstances where a person, knowing she was receiving money to which she was not entitled, does not repay it. She could not, under those circumstances, resist a claim for repayment, and Mr. Nelson on behalf of the defendant agreed that in law that was the position.
The next thing I have to decide is, did she act upon the representations which were made to her by the statements of account which were sent to her from time to time and which showed the state of her account? It seems to me, first of all, that the bank are under a duty if they do make written statements of any account, as indeed they must, to take care that those statements are accurate. In fact, Mr. Laski did not seek to argue before me (although I think he reserved the right to argue it elsewhere) that that was not the law. That is another way of saying the bank are under a duty when they deliver an account of this sort to a customer to take reasonable care to see that that account is accurate.
Now did the defendant rely upon that account? Well, according to her own evidence, she did. One would naturally expect her to do so in the ordinary sense, and she said that she relied upon that account and, having relied upon that account, she thought her position financially was as the bank disclosed by that account. Then she goes on to say she acted to her detriment, and I have to decide whether (and this may be and probably is the real issue from the point of view of the defendant's case) relying upon that account, she did act to her detriment.
The way she puts her case as regards acting to her detriment is this. She says that, relying upon the plaintiff's representations, she altered her position to her detriment in that she was led to believe that her income was greater than it was in fact and has spent more money than she would otherwise have done in and since the year 1941.
First of all, a question of fact arises upon that which Mr. Laski challenged -- did she in fact spend more money because of those representations? She said she did, and if one looks at the figures one finds that after the income -- that is, the extra income -- ceased, she did reduce her expenditure to some degree. One has the further fact that, looking at the accounts, one sees that the whole of this money has been expended by her with the exception, according to the defendant on extracts from her account, of £296 0s. 9d. That figure can only be achieved, of course, by endeavouring to show that all expenditure which took place was exclusive of the overpaid amount until the other assets had been exhausted. I am quite satisfied here that the defendant, because of this increased credit which she apparently was receiving, did in fact spend more money on matters for her own purposes than she otherwise would have done.
That is a finding of fact, but Mr. Laski says, notwithstanding that finding of fact, she did not act to her own detriment. He says that in law if a person receives money and spends that money for their own purposes, even though they would not otherwise have made the expenditure but for the overpayment, nevertheless that is not to their detriment.
Mr. Nelson says it clearly is, and Mr. Nelson referred me to the case of Holt v. Markham [1923] 1 K.B. 504, where this matter was considered. That was a case where an officer was given an excessive gratuity because someone had not been told that the gratuities of officers on the emergency lists were paid at a lower rate, and it was there held, as the defendant had been led to believe by the plaintiffs' agent that he might treat the money as his own and in that belief altered his position by spending it, the plaintiffs were estopped from alleging it was paid under a mistake.
On the face of it that authority would seem to be conclusive in favour of the defendant's contention, but Mr. Laski called my attention to some earlier cases and, indeed, a later case as well. He referred me to the decision of the House of Lords in R.E. Jones Ltd. v. Waring & Gillow Ltd. [1926] A.C. 671. He referred in particular to the speech of Viscount Cave, then the Lord Chancellor, which, although a dissenting speech, was not dissented from on this point by the other Law Lords who were there. In that speech Lord Cave said, at p. 683:
The same condition of the payer's right to recover -- namely, the absence of any alteration of the payee's position to his detriment -- has been emphasised in a number of cases
and he recites a number of cases --
'and the plaintiffs failed on that ground. It is true that, where the payee has done nothing more than to expend the money on his own purposes, that has been held to afford no defence.'
The learned Law Lord cited Standish v. Ross (1849) 3 Exchequer 527 and Baylis v. Bishop of London [1913] 1 Ch. 127. He goes on to say:
This may be because the payee has suffered no real detriment.
Now Mr. Laski says that in view of that speech of Lord Cave and in view of the decisions in Standish v. Ross and Baylis v. Bishop of London, notwithstanding the decision in Holt v. Markham, if all that has happened is that the defendant has used this overpaid money for her own purposes, even though she has expended it when she would not have otherwise done so, that is not a detriment in law.
Mr. Laski quite properly laid great stress upon the Bishop of London's case, which did seem to me a hard case. There the Bishop received from his agents what he thought were tithes that had been collected, and when those tithes were paid over to him he, in accordance with his ecclesiastical duties, used those tithes for purposes of an ecclesiastical nature and spent the money, but it was held that that was not a detriment to him. He had to pay the money back because apparently it had been paid under a mistake of fact, namely, that some persons were liable as owners of certain land when in fact they were not.It did seem to me that those two decisions, although cited and referred to in the judgment of Scrutton, L.J. in Holt v. Markham, might, in view of the fact that that point was not argued apparently by Counsel, throw some doubt upon Holt v. Markham and, in effect, leave me free to follow either having regard to the fact that the decisions on the face of them were to some degree contrary.
But, in my view, these cases can be reconciled, and can be reconciled upon the basis to which Denning, L.J. refers in the case of Larner v. London County Council [1949] 2 K.B. 683. That is a case where there had been overpayment by the County Council because of a serving employee's failure to disclose the fact that his rank or his pay had increased or improved, and the question there arose as to whether the County Council on their counterclaim could recover the overpayment. The passage to which I am referring, which was contained in the judgment of Denning, L.J., who delivered the judgment of the Court, is at p. 688. He says there:
It is next said, however, that Mr. Larner did change his position for the worse before the Council asked for the money. He spent the money on living expenses -- or his wife spent it for him -- and he spent it in a way which he would not otherwise have done. This defence of estoppel, as it is called -- or more accurately, change of circumstances -- must, however, not be extended beyond its proper bounds. Speaking generally, the fact that the recipient has spent the money beyond recall is no defence unless there was some fault -- as, for instance, breach of duty -- on the part of the paymaster and none on the part of the recipient. In both Skyring v. Greenwood & Cox and Holt v. Markham there was a breach of duty by the paymaster and none by the recipient.
and he refers also to Jones Ltd. v. Waring & Gillow Ltd., and the speech there of Lord Sumner.
Now it seems to me that in the cases of the Bishop of London and the other case on which Mr. Laski relied there was an overpayment by a person who owed no duty to the recipient, whereas in the case of Holt v. Markham and in the case of Skyring v. Greenwood there was not.
It seems to me in this case there was a duty on the bank to keep the defendant correctly informed as to the position of her account, and there was a duty on the bank not to over-credit her statement of account, and there was a duty on the bank also, for that matter, not to authorise her or induce her by faithful representations contained in her statement of account to draw money from her account to which she was not entitled. It seems to me that this particular case falls within the case of Holt v. Markham and not within the Bishop of London's case and that in this case, in view of the breach of duty by the bank and what I have found -- no fault on the part of the recipient -- under those circumstances, having regard to the fact she has spent more than she should have done, that amounts to a change of circumstances. I might say that on this point I would like to adopt the language of Abbott, C.J. in one of the cases when he is dealing with the question -- that it is important that a man or a woman should know the state of their account and the state of their finances, and a wise man or a wise woman looks at that statement before they spend money.
If, as a result of a mis-statement by a bank, a person is induced to spend more money than they have got to spend, then it seems to me in the ordinary case, from the factual point of view apart from the legal point of view, they are certainly acting to their detriment, particularly if as the result of that, if one takes the other view that they are liable (as this lady would have been) to have to find £1,108, which apparently she could not have done without selling securities and further decreasing her income. That is only an example.
I am satisfied on the facts of this case, and I find in fact, that Miss Brooks did act to her detriment as a result of the bank's action in making this overpayment and in their breach of duty in representing to her that she was entitled to money to which they now say she is not entitled. Under those circumstances it seems to me that there must be judgment for the defendant. One other point was raised, but it does not seem to me to be necessary to deal with it in view of the findings of fact I have come to and my view of the law. That was that the limitation was raised as regards the first few payments, but as I find there is no liability at all it is not necessary that I should deal with that point. If the point should be raised elsewhere I just find these facts. When the first payment was made any inquiry on the part of anybody in the bank would have elicited the true facts from information within the bank's own doors; they had only to look at their file of mandates. If it is necessary for anyone else to consider this point, I am prepared to find on the facts before me that any degree of diligence would be sufficient to have enabled the bank to find out that this overpayment was being made. I do not come to any other conclusion on the matter from the point of view of law, but in case, as I say, it has to be considered by anyone else hereafter, I make that finding of fact. There will be judgment for the defendant.