The plaintiff arranged with his bankers for them to honour cheques of one Patterson and when they advised the plaintiff of the amount of the cheques so honoured, the plaintiff would pay Kessler and Co. The plaintiff paid andpound;500 to the defendants for the credit of Kessler and Co., without being advised by Kessler and Co. that that was due, in ignorance of the fact that Kessler and Co. had committed an act of bankruptcy. The plaintiff sought to recover the andpound;500 from the defendants on the basis of mistake of fact. The plaintiff, having paid the money only in anticipation of a future liability, succeeded at first instance. The Court of Appeal took a different view on the basis that under the arrangement in force at the time of payment, the plaintiff owed that sum to Kessler and Co. and so the plaintiff could not recover the money paid to the defendants even though it was paid under a mistake of fact.
Held:
Of the Court of Appeal’s conclusion that the plaintiff was bound to pay Kessler and Co. andpound;500. Lord Atkinson said: ‘But it followed as a necessary consequence of this conclusion . . that when the plaintiff . . lodged with the defendant the sum of 500L to be placed to the credit of Kessler and Co., he was simply in the position of a debtor who had paid to his creditor the debt he owed in ignorance of the fact of that creditor’s bankruptcy, and that this ignorance did not amount to such a mistake of fact as would entitle the debtor to have the money refunded to him. On the assumption that the plaintiff was, by lodging this sum of money, merely paying a debt he owed, the Court of Appeal were, I think, clearly right in this latter conclusion.’ A payment which is made under a mistake of fact but discharges an existing debt owing to the principal, on whose behalf the payee is authorised to receive payment, is irrecoverable.’
Judges:
Lord Atkinson
Citations:
(1912) 81 LJKB 465
Jurisdiction:
England and Wales
Cited by:
Cited – Lloyds Bank Plc v Independent Insurance Co Ltd CA 26-Nov-1998
The bank had made an electronic transfer of funds for a customer in satisfaction of that customer’s proper debt, but it was done under a mistake of fact as to the cleared status of funds received.
Held: The appeal was turned down. The bank was . .
Cited – Morgan v Ashcroft CA 1937
A gift may be recovered where it was made under the mistaken belief that the donee is someone else. The mistake must be as to a fact which, if true, would create a liability to pay .
Scott LJ said of the Kerrison case that ‘it was definitely . .
Lists of cited by and citing cases may be incomplete.
Equity, Banking
Updated: 29 April 2022; Ref: scu.187275