MONEY HAD AND RECEIVED MISTAKE OF LAW RECEIVED As a general rule payments made under a mistake of law are

e irrecoverable. See Bible v Lumley (1802) 2 East 469. The above rule does not apply in most other law jurisdiction see David Securities Property Ltd v Common Wealth Bank of Australia (1990) 175 CLR 353, High Court of Australia. Where a plaintiff with legal title can trace his property at law into the defendants hands he can recover it, or its substitute or product, through a proprietary claim at common law. Such a claim succeeded in Trustee of the property of FC Jones and Sons ( a firm) v Jones [1996] 4 ALL ER 721, CA. Nourse LJ reasoned that an action for money had and received entitles the owner of it to trace his property into its product, not only in the sense of property for which it was exchanged, BUT also in the sense of property representing the original and profit made by the defendants use of it. One was at liberty at common law tracing rules and make a proprietary claim to the money which belonged to him at law or represented profits made by the use of money which belonged to him at law. Millet LJ held that in the particular circumstances of the cases the claimant or trustee could assert a claim to his original money and the profit made use of his money. If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake. In Barclays Bank Ltd vs W. J Simms Son and Cooke (Southern) Ltd [1979] 3 ALL ER 522 Robert Goff J summarised the principle upon which money is recoverable on the ground that it was paid under a mistake of fact as follows:The principles upon which money is recoverable on the ground that it was paid under a mistake of fact. It is no defence to the action that the payee (receiver) mixes the money paid by mistake with other monies held by him [1987] 3 ALL ER 513. MISTAKEN CREDIT BY BANK Ref: United Overseas Bank V Jiwani [1977] 1 ALL ER 696. A bank mistakenly credited a remittance twice, thus inflating a customers account who in term expended it in purchasing a hotel. The Queens Bench Division (Mr. Justice Mackenna) held that to resist the claim by the bank the customer must show: (i) Either that the bank was under a duty to give an accurate statement of account and it was in breach of that duty, or that there had been a misrepresentation as to the account for which the bank was responsible.

(ii)

That the inaccurate information had misled him and he made the purchase of the hotel in that belief and That because of the belief he changed his position in a way which would make it inequitable for him to be ordered to repay the money.

(iii)

The defendant customer had established (i) but had not been misled. Even if he had been misled, he had failed to establish (iii) above.

PLAINTIFFS ACCOUNT DEBITED [See Tai Hing Cotton Milly v Lui Chong Hing Bank [1985] 2 ALL ER 947 PC.] Extent of duty owed. The express terms of the companys contracts with the bank included a requirement that the company should notify the Banks within a specified time of any errors in its monthly bank statements which would otherwise be correct. The defendant bank that debited the companys accounts, alleged that the company could not succeed as the company failed to challenge the debits shown on the bank statements, on the pretext that the company was estopped from asserting that the accounts had been wrongly debited. On the companys appeal, the Judicial Committee, in allowing the appeal held. In a case were English law was applicable, the Judicial committee would follow a decision of the House of Lords and accordingly, as established by authority. 1. that a customer owes no wider duty requiring a customer to take reasonable precautions in the management of his business nor to take such duty/care as a reasonable customer, to check the periodic bank statement in order to be able to notify the bank of any items which were not, or might not have been, authorised could be implied into banking relationships. 2. the express terms of the banking contracts were not sufficiently clear and unambiguous to impose upon the company a contract obligation to examine its bank statements and to accept them as accurately stating the debits if not challenged within the stipulated time limit, 3. since the company was not in breach of any express or implied duty owed to the banks it was not estopped from asserting that the accounts had been incorrectly debited, and that, accordingly, the banks not having authority to pay the forged cheques or debit them to the companys accounts. Had to pay those sums to the company together with interest from the date the writ as issued even though the accounts were not interest bearing.

As the company had lost the opportunity of placing the money at interest as a result of the unauthorised debits made by the banks to the respective current accounts, interest was therefore payable on those monies to the appellants. In this circumstance under the guise of recovery of money had and received, it is proper to plead that the defendant made an unhonest demand or misrepresented the accounts and position of the plaintiffs accounts. In Woolwich Equitable Building Society v Commissions of Inland Revenue [1993] AC 70 the House of Lords held that a tax payer was entitled to recover payments with interest, which it had paid under protest in pursuance of a demand by the Revenue which was subsequently held to be ultra vires. A payment made under such a compromise cannot in the absence of misrepresenta tion, duress, undue influence or lack of good faith, be recovered on grounds of mistake of fact, unless it can be shown that it was an express or implied term of the agreement that, in the event of the parties being mistaken as to that fact in question, the money should be repaid . In Moses v Macferlan 79 ER 676 it was held that if one recovers money malafide by suit in an inferior court, indebtitiatis assumpsit will lie to make him refund it back. In Astley v Reymoids 93 ER 939 the principle was settled that; Wherever a person has wrongfully paid money, he may have it back again by this action for money had and received to his use. Money paid by the plaintiff under mistake is thus recoverable, taking into account circumstances of a particular case. See Moses v Macferlan 97 ER 676 at PP 680, 681, Sindar v Brougham (1914) A.C 398 P 415, 417, 454, 455; John v Dodwell & Co (1918) A.C 563, at 571, 572 Dominion Coal Co. Ltd v Maskironge Steamship Co Ltd (1922) 2.KB 132, at 139. The key points in determining recoverability in regard to a mistake of fact and a mistake of law is What are the relations of the parties? If there is an illegal/wrongful demand by a person who would have been able to enforce it if legal, and who proposes to enforce it, then the situation of the parties is not equal within the meaning of the cases which deal with voluntary payments and the money paid can be recovered. See William v Hedley 103 ER 388 at P 389 , 390. Water house v Keen ER ER 1033 at 1036 1037. Although the decision in Brockle banks case [1924] 1 B 647 was reversed on appeal, it was not overruled on the question of voluntary payment. As per Leake on Contracts, 6th Ed. (1911) P.6 3 the general rule is that money paid voluntarily that is to say, without compulsion or extortion or undue influence and with a knowledge of all the facts, cannot be recovered although paid without any consideration.

The doctrine of money had and received has been consideration in Lodge v National Union Investment Co. [1907] 1 CH. 300 and Baylis v Bishop of London [1913] 1Ch 127. In the latter case the money was recovered from the bishop although he had paid it away. The case of Mason v New South Wales [1958-1959] 102 C.L.R 108 much in point; to the effect that in circumstances where payments are not made voluntarily but under compulsion, the plaintiffs are entitled to recover it, under an action for money had and received. Compulsion is implied where money is exacted coloen officii, because of the relationship of the parties just like in Masons case. The plaintiffs right to recover is established upon proof that (a) (b) An official demanded payment, That such official was acting in the exercise of his office, That the demand was illegal and that payment was made.

Protest alone is enough to show that payments were not voluntarily made and it presupposes that such payment accompanied by other evidence (circumstances) was never made to end a deadlock and that payer did not regard the payment as closing the transaction. Mc Tiernarn J in Mason (Supra) said, I think that it is clear from the general terror of the protests which mason made that he was merely reserving his right to claim back the money if the pending appeal to be privy and stood to succeed. Fullagar J in Masons case (Supra) said, The payments were made with expressed unwillingness in response to what purported to be an authoritative demand, and they were made in order to avoid a very real risk that a refusal to pay would be followed by action which could be ruinous to the plaintiffs. That is, in my opinion, sufficient. The general principle to be considered according to Kitto J in Mason case (Supra) is that which Pallock called the common principle that if a man chooses to give away his money or to take his chance whether he is giving it away or not, he cannot afterwards change his mind but it is open to him to show that he really had no choice. Principles of contract 15th ed (1950) P.481. Pallock when he referred to a choice he was using the language of practical affairs. He meant a free choice, uninfluenced by compulsion of any sort. In accordance to Kelly v The King (1902) V LR 522 as quoted in Mason at 125, the expression voluntary payment does not mean a payment which the petitioner or any other person wishes to make. A voluntary payment means at most a payment made to get rid of a liability, made with a free exercise of the will where no advantage is taken of the position of the person or the situation of his property. An actual or threatened seizure or detention of the payers property has often been the feature relied upon as showing that there really was no choice. But other circumstances may show it also. See Mason at 125. Kitto J referred to the United States Supreme Court case of Maxwell v Griswold (1850) 10 How. 242 [13 Law Ed

405] at 256 where the Court said . It can hardly be meant, in this class of cases, that, to make a payment involuntary. It should be by actual violence or any physical duress, it suffers if the payment is caused on the one part by an illegal demand, and made on the other part by an illegal demand, and made on the other part reluctantly and in consequence of that illegality and without being able to regain possession of his property except by submitting to the payment. At 126 Kitto said, when duress is exerted under circumstances sufficient to influence the apprehensions and conduct of a prudent business man, payment of money wrongfully induced thereby ought not to be regarded as voluntary. Even in case of a statutory body, which forces one to pay, the payer has the same right to sue if he pays under compulsion of a statute, whose self executing provision amount to duress. Payment to avoid consequences of a statute, is not voluntary but compulsory and may be recovered back see Mason at 127 or 1911) 223 at 471. NB Exortion is a common law misdemeanor, defined by Coke as the taking of money by any officer, by colour of his office, either where none is due, or not so much is due or where it is not yet due (Col Lt 368, 10 Rep 102). In Dew v Parsons 106 ER at 1504 a Sheriff had been paid more than he was entitled to have, the party paying being ignorant that it was not due. Money paid under the constraint of threats to interfere with a legal right is recoverable, Valpy v Manley 135 ER 673. So in all instances (Kiriri Cotton Co Ltd v ewan) [1960] 1 ALL ER 177 where parties are not in pari delicto, money paid under mistake is recoverable. Reliance to Halsbury Laws of England 4th ed at 454. Where money is paid to another under the influence of a mistake, that is upon the supposition that a specific fact is true which would entitle the other to the money, but which fact is untrue and the money would not have been paid if it had been known to the payer that the fact was untrue, an action will lie to recover it back. NOTES For restitution from the crown see 1(i) Halsburys Laws 4th Ed reissue para 194, 196. For actions for money had and received, see 9 Halsburys Laws (4th ed) paragraphs 637,676-677 and for cases on the subject see 12 (2) Digest (2nd reissue) 496-503, 8126-8189. In Maskell v Horner [1914-1915] ALL ER Rep 595 or [1915] 3 KB 106 at 118 Lord Reading CJ said Upon the second head of claim the plaintiff asserts that he paid the money not voluntarily but under the pressure of actual or threatened seizure of his goods, and that he is therefore entitled to recover it as

money had and received. If the facts proved support this assertion the plaintiff would, in my opinion, be entitled to succeed in this action. If a person with knowledge of the facts pays money, which he is not in law bound to pay, and in circumstances implying that he is paying voluntarily to close the transaction, he cannot recover it. Such a payment is in law like a gift, and the transaction cannot be reopened. If a person pays money, which he is bound to pay, under the compulsion of urgent and duress in the strict sense of the term, as that implies duress of person, but under the pressure of seizure or detention of goods which is analogous to that of duress. Payment under such pressure establishes that the payment is not made voluntarily to close the transaction. The payment is made for the purpose of averting a threatened evil and is made not with the intention of giving up a right but under immediate necessity and with the intention of preserving the right to dispute the legality of the demand. In Aiken v Short [1843-60] ALL ER Rep 425, a case which is remembered principally for an obiter dictum of Bramwell B, his remarks at 427 when he said In order to entitle a person to recover money paid under a mistake of fact, the mistake must be as to a fact which, if true, would make the person paying liable to pay the wrong, not where if true, it would merely make it desirable that he should pay the money. In Kieinworts, Sons & Co V Dunlop Rubber Co {72 LT 263 at 264, Lord Loreburn LC stated the principle of recovery in very broad terms thus It is indisputable that if money is paid under a mistake of fact and is redemanded from the person who received it before his position has been altered to his disadvantage, the money must be repaid in whatever character it was received. It therefore follows that money paid under a mistake of fact which was material and was indeed the only reason for payment is recoverable. See Kerrison v Glyn, Mills, Currie & Co.[1911-13] ALL ER Rep 417 at 423. In Great Western Ry Co. v (1869) LR 4HL 226 at 249 where the learned judge said that he had always understood that when a man pays more than he is bound to do by law for the performance of a duty which the law says is owed to him for nothing, or for less that he has paid, there is a compulsion or concussion in respect of which he is entitled to recover the excess by condition in debit, or action for money had and received. In short what matters is determining whether parties were at the time in para delicto. The limitation question Following the case of Diplock, Wintle [1948] 1 CH 465 at 514 which discusses provisions that are in para materia with our S 4 1(a) of the Limitation Act, the words

founded on the contract in Section 4 must be taken to cover actions for money had and received and in particular those based on contract. S. 6 of the Limitation Act provides The section shall not apply to any claim for other equitable relief, except in so far as any provision thereof may be applied by the court by analogy. To which it was said in no uncertain terms that The effect of this is somewhat different language must be to limit the analogous application of S.2 the Act to a claim of a kind for which no express provision is to be found elsewhere in the statute That is allowing for automatic extension of time. To qualify for this, the plaintiff shall aver that the cause of action is analogous to the common law of action for money had and received. If one asserts that analogy, he must take it with its attributes and consequences. In re Diplock (supra) at 515 it was held that At common law, in an action to recover money paid under a mistake of fact S. 26 would operate to postpone the running of time. It is true that no that no such action would like where the mistake is one of law. In a nut shell, their Lordships contended that S. 26 can be adopted to an action for relief from the consequences of mistake no less than would be an action at common law to recover money paid away under a mistake of fact. It was further stated that in actions for relief from the consequences of a mistake the period of limitation shall not begin to run until the plaintiff has discovered or could with reasonable diligence have discovered the mistake and that S. 26 operates to postpone the running of time. 1. LIMITATION

One can also take into account S. 16 (2) (b) of the Judicature Statute, that adopts common law and the doctrines of equity. It is injustice if a plaintiff who is statute barred (under limitation) before plaintiff became aware of existence of cause of action. See The Foundation Co. of Canada Ltd v Consumers Glass Co Ltd[1986] LRC (comm.) 730, Ont. What should be borne in mind is that law is about justice. It is evident under provision (b) of S. 16 that equity or common law in relation to money had and received as discussed earlier, under S. 26 of the Limitation Act, section 4 (1) (a) relating to limitation time in case of contracts, does not come into

play until subjected to section 3 and the provisions of part III of which S. 26 is part thereof by analogy of court. As per Ghelani v Radia [1968] ULC 401 one to rely on S. 26 of Limitation Act has to plead either mistake or fraud otherwise action has possibility of being dismissed. 2. EQUITY

The principle of equity, as indicated by Lord Parker in Sinclair v Brougham [1914] AC 398 is that Equity may operate on the conscience not merely of those breach of some trust, express or constructive, of some other judiciary obligation, but of volunteers provided that as a result of what has gone before some equitable propriatory in the hands of the volunteer. The root of equitable jurisdiction is that: Equity intervenes not to do what might be thought to be absolute justice to a claimant but to prevent a defendant from acting in an unconscionable manner. In olden times equity could not interfere where a mix of monies takes place, in the banking account of any one not standing in a judiciary relationship. See Re Diplok [1948] 1 Ch at 535. The modern position has altered the position in Bangque case [1921] 1 K.B 321 and Sinclair (1914) AC 398. There is now a remedy in equity upon a right and property recognised by equity as vested in the plaintiff throughout, and this right is not lost by the payment into a banking account, nor by the mixture of moneys nor by merger in a mass of assets. In all these cases the equitable remedy by way of declaration of change is available. FIBROSA V FAIRBAIRN ETC., LTD 1942 It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution.

As per Ghelani v Radia [1968] ULC 401 one to rely on S. 26 of Limitation Act has to plead either mistake or fraud otherwise action has possibility of being dismissed. 3. For purposes of postponement of limitation time under S. 26, mistake must be an essential ingredient of the cause of action as eg where money has been paid or a contract entered into in consequences of a mistake see Phillips Higgins v Harper [1954] 1 Q.B 411 or [[1954] ALL ER 116

claim for an account in an action alleging underpayment due under a contract had not an action for relief from the consequence of a mistake within the meaning of paragraph C of S. 26. In understanding the limitation of the common law doctrine and the reasons why equity was able to take a more liberal view, are three matters worth of mention 1. The common law did not recognise equitable claims to property, whether money or any other form of property. Sovereigns in As pocket either belonged in law to A or they belonged in law to B. The idea that they could belong in law to A and that they should nevertheless be treated as belonging to B was entirely foreign to the common law. This is the reason why the common law doctrine finds its typical exemplification in cases of principal and agent. If B, a principal, hands cash to A, his agent, in order that it may be applied in a particular manner, the cash, in the eyes of the common law, remains the property of B. If therefore A instead of applying it in the authorised manner, buries it in a sack in his garden or uses it for an unauthorised purchase, B can, in the former case, recover the cash as being still his own property and, in the latter case, affirm the purchase of something bought with his money by his agent. If, however, the relationship of A and B was not one which left the property in the cash in B but merely constituted a relationship of debtor and creditor between them, there could, of course, have been no remedy at law under this head, since the property in the cash would have passed out of B into A. The narrowness of the limits within which the common law operated may be linked with the limited nature of the remedies available to it. Specific relief as distinct from damages (the normal remedy at common law) was confined to a very limited range of claims as compared with the extensive uses of specific relief developed by equity. In particular, the device of a declaration of charge was unknown to the common law and it was the availability of that device which enabled equity to give effect to its wider conception of equitable rights. It was the materialistic approach of the common law coupled with and encouraged by the limited range of remedies available to it that prevented the common law from identifying money in a mixed fund. Once the money of B became mixed with money of A its identification in a physical sense became impossible; owing to the fact of mixture there could be no question of ratification of an unauthorised act, and the only remedy of B, if any, lay in a clam for damages.

2.

3.

CASES 1. 2. 3. 4.
AB/jd

Ghelani v Radia [1968] ULR 401 Jamal Ram Co Ltd v Lint Marketing Board [1962] ULR 176 Dukhiya v Standard Bank of South Africa [1959] EA 958 In re Halletts Estate [1079] 13 696.
legalbriefs: money had and recieved

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