(B) INDUCED MISTAKES
If the claimant transfers a benefit to the defendant as a result of a mistake which was induced by a misrepresentation by the defendant, it is not necessary to show that the mistake was a ‘but for’ cause of the benefit being transferred, it being sufficient that the mistake was a contributory cause,[1] at least where the misrepresentation was fraudulent since the defendant knew or suspected that the representation was untrue.[2] [3] If the misrepresentation was negligent or innocent then, by analogy with the test where a contract is set aside for misrepresentation,1 7 it may be necessary to establish that the misrepresentation was an operative ‘but for’ cause of the transfer. The reason for the adoption of this laxer test of causation where the claimant’s mistake was induced by the defendant’s fraudulent misrepresentation is that the defendant is responsible for inducing the claimant’s mistake. It follows that it is easier to conclude that the benefit received by the defendant was unjustly received as a result of the mistake.
Where the claimant has mistakenly transferred a benefit to the defendant in circumstances where the transfer was illegal and the mistake was induced by the defendant’s fraudulent conduct, the claimant will be able to obtain restitution despite the usual rule that participation in an illegal transaction bars a restitutionary claim.[4] This is because in such a case the defendant can be considered to be more blameworthy than the claimant for entering into the transaction.[5] Consequently, a restitutionary claim will only succeed where the claimant is considered to be less blameworthy than the defendant. This is illustrated by Parkinson v College of Ambulance[6] where restitution of a charitable donation was denied because, although the claimant had been induced to give the money by means of a fraudulent representation that by making the gift the defendant charity could arrange for him to receive a knighthood, the claimant knew throughout that such an arrangement was illegal. The claimant was therefore an equal participant in the illegality with the defendant, but had anyway made a misprediction as to what might happen in the future.
- [1] Edgington v Fitzmaurice (1885) 29 Ch D 459.
- [2] Derry v Peek (1889) 14 App Cas 337, 374 (Lord Herschell). 187 See p 197, below.
- [3] 188 See Holman v Johnson (1775) 1 Cowp 341, 343; 98 ER 1120, 1121 (Lord Mansfield). See Chapter27.
- [4] 189 Hughes v Liverpool Victoria Legal Friendly Society [1916] 2 KB 482. 190 [1923] 2 KB 1.
- [5] 191 See, for example, P Matthews, ‘Money Paid Under Mistake ofFact’ (1980) 130 NLJ 587 and P Matthews,
- [6] ‘Stopped Cheques and Restitution’ (1982) JBL 281. See also PA Butler, ‘Mistaken Payments, Change ofPosition
