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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Derby v Scottish Equitable Plc  EWCA Civ 369 (16 March 2001)
Cite as:  3 All ER 818,  OPLR 181,  EWCA Civ 369,  2 All ER (Comm) 274,  Pens LR 163
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (HARRISON J)
Strand, London, WC2A 2LL
Friday 16th March 2001
B e f o r e :
LORD JUSTICE ROBERT WALKER
LORD JUSTICE KEENE
| GORDON DERBY
|- and -
|SCOTTISH EQUITABLE PLC
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr S Moriarty QC and Mr R Handyside (instructed by Addleshaw Booth & Co for the respondent)
Crown Copyright ©
LORD JUSTICE ROBERT WALKER:
"It would appear from the claimant's memorandum of that conversation that the defendant probably told the claimant that he was already receiving an annuity from them. The defendant cannot recall that conversation although his telephone bills show that he made a call to the claimant on that day. Another entry on the memorandum contains an internal instruction that a quotation should be prepared. A subsequent annotation on the memorandum suggests that the defendant's records were checked, but that it was concluded, wrongly, that the defendant had not received early retirement benefit, because the person checking the records had only looked at the defendant's cancelled decision to take early retirement benefit in August 1989, without looking at the rest of the microfiche."
"I find, on the balance of probabilities, that he did inform the claimant that he was already receiving a pension from them, and that he was nevertheless assured by them that the figures quoted in the statement of retirement benefits were correct. I am surprised that the mistake was not discovered by Mr Donald, his financial advisor, but I feel I must accept the defendant's evidence that Mr Donald did not tell him that a mistake had been made."
" ... when the defendant was paid his early retirement benefits in February 1990 his computer records should have been amended to show that only his residual fund necessary to pay his guaranteed minimum pension remained. That residual fund should have been £29, 486, producing the guaranteed minimum pension of £2,637. That had not been done, as a result of which the claimant mistakenly paid to the defendant the amount to which he would have been entitled had he not taken the early retirement benefits under the policy in February 1990.
The mistake should have come to light in December 1992, when Miss Duncan was working as an assistant manager in the claims department on a project to check that the files were correct for the end of year valuation. When she was carrying out that exercise, she noticed that the records did not tally, in so far as the annuity payment system for the defendant in 1992 showed that an annuity had been set up, but the VPR record did not show that a tax-free lump sum had been paid. As a result, Miss Duncan sent a memorandum dated 11 December 1992 to Mr Clark, her section manager, requesting his department to alter the VPR records for the defendant's policy. If that had been done, the record would have been updated to show that the defendant had received early retirement benefit in 1990 and, therefore, show the true value of his remaining fund. Miss Duncan did not take any further action to check if the record had been corrected because she moved to another department. Mr Clark, in his evidence, said that he had no recollection of that memorandum, but it would have been his procedure to have passed such a memorandum to someone in his section to update the VPR records. However, for some reason, it was not allocated to a specific member of staff and he could not say why the instruction to update the records was not actioned."
(No-one in court was able to tell the judge what 'VPR' stood for, but it was part of the computerised system. Paper records were stored on microfiche.)
" ... he agreed in evidence that the only thing he did differently after receiving the monies was to pay off the sum of £41,671 from the mortgage, and to use the remaining £9,662 from the tax-free sum of £51,333, together with the increased income under the Norwich Union policy, to live a little better by improving the lifestyle of himself and his family in very modest ways, which he agreed were not irreversible commitments. The defendant accepted that, without those payments, he would not have been in any position to save any money. He was on the breadline, he had no spare cash and he was borrowed up to the hilt. He also accepted that his age precluded him from obtaining useful employment. He said: 'Once you are 65, it's impossible to get employment.' When asked in re-examination what he could have done to improve his position, he said, 'Not very much', although he would have stayed in the recruitment business, but done less."
"The safest rule however is, that if the party makes the payment with full knowledge of the facts, although under ignorance of the law, there being no fraud on the other side, he cannot recover it back again. There may also be cases in which, although he might by investigation learn the state of facts more accurately, he declines to do so, and chooses to pay the money notwithstanding; in that case there can be no doubt that he is equally bound. Then there is a third case, and the most difficult one, - where the party had once a full knowledge of the facts, but has since forgotten them. I certainly laid down the rule too widely to the jury, when I told them that if the directors once knew the facts they must be taken still to know them, and could not recover by saying that they had since forgotten them. I think the knowledge of the facts which disentitles the party from recovering, must mean a knowledge existing in the mind at the time of payment."
"If, indeed, the money is intentionally paid, without reference to the truth or falsehood of the fact, the plaintiff meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true or false, the latter is certainly entitled to retain it; but if it is paid under the impression of the truth of a fact which is untrue, it may, generally speaking, be recovered back, however careless the party paying may have been, in omitting to use due diligence to inquire into the fact. In such a case the receiver was not entitled to it, nor intended to have it."
"first, that the jury may possibly find that the directors had not in truth forgotten the fact; and secondly, they may also come to the conclusion, that they had determined that they would not expose the office to unpopularity, and would therefore pay the money at all events."
"But it does not in my opinion follow that the court has carte blanche to reject the [claimants'] claim simply because it thinks it is unfair or unjust in the circumstances to grant recovery. The recovery of money in restitution is not, as a general rule, a matter of discretion for the court."
Change of Position
"Considerations such as these provide a strong indication that, in many cases, estoppel is not an appropriate concept to deal with the problem."
"In these circumstances, it is right that we should ask ourselves: why do we feel that it would be unjust to allow restitution in cases such as these? The answer must be that, where an innocent defendant's position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution. If the plaintiff pays money to the defendant under a mistake of fact, and the defendant then, acting in good faith, pays the money or part of it to charity, it is unjust to require the defendant to make restitution to the extent that he has so changed his position."
He noted the general acceptance of the defence in other common law jurisdictions (his citations could now be supplemented by reference to the decision of the High Court of Australia in David Securities v Commonwealth of Australia (1992) 109 ALR 57).
"I am most anxious that, in recognising this defence to actions of restitution, nothing should be said at this stage to inhibit the development of the defence on a case by case basis, in the usual way ... At present I do not wish to state the principle any less broadly than this: that the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full. I wish to stress however that the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable that he should be called upon to repay, because the expenditure might in any event have been incurred by him in the ordinary course of things. I fear that the mistaken assumption that mere expenditure of money may be regarded as amounting to a change of position for present purposes has led in the past to opposition by some to recognition of a defence which in fact is likely to be available only on comparatively rare occasions. In this connection I have particularly in mind the speech of Lord Simonds in Ministry of Health v Simpson  AC 251, 276."
"In my judgment, the justice of the situation is met by the extent to which the defence of change of position has succeeded and it would be wholly unjust and inappropriate in those circumstances to allow estoppel to operate so as to provide a complete defence to the whole of the overpayment."
"to give a judgment founded on estoppel on facts which exist only in the mind of the pleader. The law does not and should not develop by such a device, and the ratio of such a decision is liable to be seriously misleading. I do not consider that the decision of this court in the instant appeal is authority for the proposition that where, on the facts, it would be clearly inequitable to allow a party to make a profit by pleading estoppel, the court will necessarily be powerless to prevent it."
Cumming-Bruce LJ thought that the judge should have refused to decide the case on a basis which was neither pleaded (that is, that it would be inequitable to allow the defendant to retain part or all of the benefit) nor supported by evidence.
"would have been bound to conduct a much more exact process of quantification of the alteration of the financial positions of the recipients, which had occurred by reason of the representations."
"I recognise that in some circumstances the doctrine of estoppel could be said to give rise to injustice if it operated so as to defeat in its entirety an action which would otherwise lie for money had and received. This might be the case for example where the sums sought to be recovered were so large as to bear no relation to any detriment which the recipient could possibly have suffered."
Eveleigh LJ had made similar observations (at p.611), and I have already quoted the remarks of Cumming-Bruce LJ (para 41 above). Harrison J (at p.807 c) treated the present case as "just the sort of situation that the Court of Appeal must have had in mind in Avon County Council v Howlett when expressing reservations about the ambit of that decision".
" ... the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment."
(Dixon J in Grundt v Great Boulder Pty Gold Mines (1938) 59 CLR 641, 674-5, quoted in Spencer Bower and Turner, The Law Relating to Estoppel by Representation 3rd ed (1977) pp.110-1).
B: "You are estopped by your representation on which I have acted to my detriment."
A: "You have not acted to your detriment. You have had a good party, and at my expense, because I cannot recover the £250 back from you."
The facts that B has spent £250 in an enjoyable way, and that A readily limits his claim to £750, put the argument in its most attractive form. But it seems to have some validity even if B had lost £250 on a bad investment, and A began by suing him for £1000.
LORD JUSTICE KEENE:
LORD JUSTICE SIMON BROWN:
"A claim to recover money at common law is made as a matter of right; and even though the underlying principle of recovery is the principle of unjust enrichment, nevertheless, where recovery is denied, it is denied on the basis of legal principle."