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A (a company) purports to enter into a contract with B under which B acquires benefits from A. The directors who enter into the deal are, however, fraudsters and lack both actual and ostensible authority. Can A recover back the benefit conferred under the purported contract?

It is submitted that the answer is yes. If we adopt an 'unjust factors' approach, what is the unjust factor? Mistake will not do if the directors are the 'controlling mind and will' of the company. The claimant is not making a mistake as the knowledge of the directors will be attributed to A Ltd (see Dollar Land). For the same reason the claimant is not 'ignorant' of the transfer, although this is an 'unjust factor' with no judicial support that I am aware of. Perhaps 'powerlessness' as suggested by Professor Burrows in his textbook would suffice? Again, there is no judicial support for such an unjust factor. I cannot, for myself, see that Lord Nicholls identifies any 'unjust factor'.

By contrast, if we adopt an 'absence of legal ground' analysis the answer is obvious. 'If ... the agreement is set aside, B will be accountable for any benefits he may have received from A under the agreement.'

Whatever the view one takes of the above two paragraphs, the claim in the hypothetical I give is not a claim in equity for knowing receipt. Nor, properly understood, was the claim in Akindele. If A Ltd has paid B money, A Ltd's claim is for money had and received (cf Kleinwort Benson v Lincoln CC and Guinness Mahon.) Is it seriously being argued that the claims in the swaps cases could and should have been pleaded as knowing receipt? If the benefit conferred by A Ltd is a service it is, I would have thought, obvious that the claim is not one for 'knowing receipt' in equity.

The error that counsel and the CA in both Akindele and Criterion made is in thinking that because the directors are in breach of their fiduciary duties in entering into the contract, the claim against the counter-party to the contract is 'knowing' receipt.

If B holds an asset on trust for A and in breach of trust transfers that asset to C, A may have a claim against C based upon knowing receipt. Because Akindele proceeded upon a mistaken assumption as to the nature of the claim, it is submitted that it is weak authority on the issue of the degree of fault (if any) on the part of the recipient which needs to be shown for A's personal claim against C to succeed. Similarly, it is submitted that Lord Nicholls statement is not a reiteration of his extra-judicial views on this important but completely different point.

Robert Stevens
Barrister
Fellow and Tutor in Law
Lady Margaret Hall
Oxford University