ABSTRACT
Where payment is made under a mistake of fact and discharges a debt of
the payer’s or of a third party who authorised the payer to make the
payment, restitution of the payment will not be ordered.
Ltd sent a fax to its own bank (a) saying that it was expecting incoming
credits to its account totalling over £167,000 and (b) requesting onward
payment (by CHAPS) of £162,387.90 to the defendant. The expected
credits did not arrive and W Ltd then paid into its account a cheque from
K for £168,000 and orally requested the bank to pay the defendant ‘as
soon as possible’. The bank responded that it could make the payment to
the defendant only after the cheque from K had been cleared. Three days
later, the bank, acting in the mistaken belief that the cheque from K had
been cleared, made the payment to the defendant. This left W Ltd’s
account substantially overdrawn. In fact, K’s cheque had not been cleared,
though subsequently a credit of £55,000 from K was paid into W Ltd’s
account. The bank brought these proceedings seeking restitution from the
defendant of £107,387.90, being the full amount of the transfer made to
the defendant by the bank, less the amount of the credit from K (£55,000)
subsequently paid into W Ltd’s account. The judge at first instance
allowed the claim, holding that W Ltd had imposed a condition precedent
to the payment by the bank, namely that the bank was not to make the
payment until the incoming cheque from K had been cleared. He thus
held that W Ltd had not authorised the payment by the bank to the
defendant. The defendant appealed.
