(D) RESTITUTION FROM THE CREDITOR
The claimant’s payment to a creditor will automatically discharge a debt owed by the defendant to the creditor once the creditor has accepted payment, at least where the payment was induced by legal compulsion, save where the claimant’s intention to pay the creditor can be treated as vitiated.314 This will be the case, for example, where the claimant paid the creditor as a result of a mistake. Since the debt owed by the defendant will not be discharged in such circumstances, the claimant is unable to obtain restitution from the defendant, simply because the defendant will not have been enriched. Rather, it is the creditor who will have been enriched, since the creditor has received the claimant’s money and can still sue the defendant for payment. The claimant must then establish a ground of restitution to secure restitution. Usually, the reason why the claimant’s payment did not discharge the debt will also constitute the ground of restitution. So, for example, if the claimant paid the money to the creditor due to the [1]
effect of an operative mistake, that mistake will prevent the debt from being discharged and will also ground the claimant’s restitutionary claim against the creditor. This was what happened in Barclays Bank v Simms,[2] where the claimant bank had mistakenly paid the creditor of its customer once the customer had revoked the authority to do so. Robert Goff J assumed that the payment had not discharged the customer’s liability to the creditor and so the customer was not considered to have received any benefit from the payment. But the claimant successfully secured restitution from the creditor who had received the payment. This case must have been correctly decided. The customer’s debt could not be regarded as discharged by the claimant since its intention that the customer receive the payment was vitiated by the mistake, and this mistake also provided the ground for restitution from the creditor.
Alternatively, where the claimant pays money to the creditor purporting to discharge the defendant’s debt and the debt is not discharged, the claimant may found restitution on the ground of failure of basis,[3] since the expected effect of the payment, namely the discharge of the liability, has not occurred.[4] Whether the basis for the payment has failed will depend on whether the payment was effective in any way, which will turn on what the claimant expected the payment to achieve. If, as will usually be the case, the claimant simply intended the payment to discharge the debt, and the debt has not been discharged, there will have been a total failure of basis and it should be irrelevant that the creditor treated the debt as being discharged and had refrained from suing the defendant.[5]
- [1] See Chapter 19. 314 See p 235, above.
- [2] [1980] QB 677. Cf B Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928] 1 KB 48.
- [3] See Chapter 13. 317 Walter v James (1871) LR 6 Ex 124, 127 (Kelly CB).
- [4] 318 Beatson, The Use andAbuse ofUnjustEnrichment, 202. CfFriedmann, ‘Payment of Another’s Debt’, 539.
- [5] 319 J Hilliard, ‘A Case for Abolition of Legal Compulsion as a Ground of Restitution’ (2002) 61 CLJ 551.
