(A) THE CONDITIONS FOR ESTABLISHING THE DEFENCE OF ESTOPPEL
The leading case on the estoppel defence is United Overseas Bank v Jiwani,[1] where McKenna J identified three conditions which needed to be satisfied before the defence is applicable.[2] He also emphasized that the burden of proving these elements is, as with all defences, placed on the defendant.
(i) The Defendant is Led to Believe that He or She is Entitled to the Benefit
The claimant must either have made an unequivocal representation that the defendant was entitled to receive the particular benefit or have owed a duty of accuracy to the defendant which the claimant breached. McKenna J assumed that these were alternative conditions, so it is sufficient that either is established. It has, however, sometimes been assumed that these are not alternatives and so both a representation and a duty of accuracy must be identified in every case.[3] This would be unnecessarily limiting, particularly because the courts will only be able to find that a claimant owed a duty of accuracy to the defendant in the most exceptional of cases. Consequently, the view of McKenna J is to be preferred.
(1) Representation
Where the claimant is alleged to have represented that the defendant was entitled to receive the benefit, the representation must be collateral to the transfer in the sense that it cannot be implied from the mere fact that the claimant voluntarily transferred the benefit to the defendant.[4] So, for example, where a bank honours a cheque which is a forgery it does not represent that the cheque was genuine,[5] although an estoppel might be established if the bank was put on notice as to the validity of the cheque.
The representation may have been made expressly or might be implied from the circumstances surrounding the transfer, but in either case it must be clear and unequivocal and the claimant must have intended that the defendant act on it.[6] It has been recognized that the representation may relate either to the facts or to the law,[7] although where the representation relates to the state of the law it will often not be reasonable for the defendant to rely on it, save where, for example, the representation was made by a lawyer to an unrepresented lay person.
The best example of an express representation is where, having transferred the benefit to the defendant, the claimant confirms that it was properly transferred to the defendant. This is illustrated by Deutsche Bank (London Agency) v Beriro and Co,1 where the claimant mistakenly informed the defendant that a bill of exchange had been collected and consequently it paid a sum of money to the defendant. When the claimant discovered its mistake it sought to recover the money from the defendant, but it was estopped from asserting that the money had been paid by mistake because of its express representation that the bill had been collected.
The decision of the Court of Appeal in Holt v Markham14 illustrates how a representation might be implied from the circumstances surrounding the payment. In this case the claimant paid the defendant air officer more money than he was entitled to receive. Two years later the claimant sought to recover the money on the ground that the defendant was retired and so was not entitled to receive all of the money. Whilst it was correct that the defendant was not entitled to receive the money, it was not because he was retired. The defendant informed the claimant of this, but he did not hear anything further for another two months. By the time the claimant eventually contacted the defendant to inform him that he was not entitled to receive the money for another reason, the defendant had lost the money which he had received by investing it in a failed business venture. Although the Court of Appeal held that the claimant’s mistake was one of law and not fact so restitution was not available,15 it also held that, even if the mistake had been one of fact, the claimant would have been estopped from relying on the mistake. Two different types of representation were identified by the judges. First, Scrutton LJ concluded that there was an implicit representation that the claimant would inform the defendant of any mistake it had made in paying the money to the defendant within a reasonable time of the money being paid.16 This is highly artificial since it amounts to the implication of a representation from the mere fact that the claimant had paid the money to the defendant. Such an implied representation is only acceptable where the claimant owes a duty of accuracy to the defendant and there was nothing to suggest that such a duty existed in this case. More convincing was the reasoning of Bankes and Warrington LJJ, who identified an implied representation that the money had been properly paid to the defendant from the fact that the claimant had failed to respond to the defendant’s letter.17
The representation on which the defendant relies must have been made by the claimant and not a third party. This is the effect of the decision of the House of Lords in RE Jones Ltd v Waring and Gillow Ltd,18 where the claimant had been induced to pay money to the defendant as a result of a fraudulent misrepresentation made by a third party. It was held that the defence of estoppel was inapplicable, presumably because any representation as to the validity of the payment to the defendant came from the fraudster and not the claimant and the claimant was not responsible for the fraudster’s representations.19
(2) Duty of Accuracy
In exceptional circumstances it will be possible to establish an estoppel even though the claimant did not make an actual representation of fact to the defendant, if the claimant owed a duty of accuracy to the defendant which he or she had breached. Although it is [8] [9] [10] [11]
preferable to distinguish such a duty of accuracy from representations of fact, the effect of the claimant owing a duty of accuracy to the defendant is that, when the claimant transfers a benefit to the defendant, there is an inherent representation that the benefit was properly transferred.
Whether such a duty of accuracy exists will depend on the nature of the relationship between the claimant and the defendant. Such a duty is likely to arise where the claimant occupies a position of superiority over the defendant because he or she possesses all the information and expertise to assess the validity of the transfer of the benefit. The identification of such a duty of accuracy is illustrated by Skyring v Greenwood20 where the defendant was an army paymaster who had credited a Major Skyring with certain allowances. Although the defendant was informed in 1816 that Skyring was not eligible to receive these allowances, the defendant continued to credit Skyring with them until Skyring died in 1821. When Skyring’s executors sought to recover the sums which had been credited to him, the defendant refused to pay on the ground that the deceased had not been eligible to receive the allowances. The executors’ action succeeded because the defendant had been under a duty to inform the deceased that he was not entitled to the allowance immediately the defendant had been informed that this was the case. Although the court specifically stated that it did not consider the defendant to have been estopped from denying that the money credited was actually due to the deceased, this was surely the effect of the decision. The defendant’s breach of duty in failing to communicate with the deceased meant that he was estopped from arguing that the deceased was not eligible to receive the allowance. The existence of this duty of accuracy was also recognized in Avon County Council v Howlett21 where it was suggested that a local government officer owed a duty of accuracy to an employee in respect of the overpayment of the employee’s salary.
It is only in exceptional cases that the court will recognize that the claimant owes a duty of accuracy to the defendant. So, for example, in National Westminster Bank Ltd v Barclays Bank International Ltd22 it was accepted that a bank does not owe a duty of accuracy when it honours a cheque, at least where there is nothing to suggest that the cheque was not genuine. Where, however, the claimant is aware of certain facts relating to the validity of the transfer of the payment to the defendant he or she may be under a duty to disclose these facts to the defendant. So, for example, in Greenwood v Martins Bank Ltd,23 where the claimant’s wife had withdrawn the claimant’s money by forging his signature, it was held that he was estopped from relying on the forgery to recover his money from the defendant because, once he was aware of what his wife had done, he owed the defendant a duty to disclose the forgeries.
- [1] [1976] 1 WLR 964. 7 Ibid, 968.
- [2] 8 See RE Jones Ltd v Waring and Gillow Ltd [1926] AC 670, 693 (Lord Sumner); Weld-Blundell v Synott
- [3] [1940] 2 KB 107,114 (Asquith J); Lloyd’s Bank Ltd v Brooks (1950) 6 Legal Decisions Affecting Bankers 161,168.
- [4] RE Jones Ltd v Waring and Gillow Ltd [1926] AC 670.
- [5] National Westminster Bank Ltd v Barclays Bank International Ltd [1975] QB 654.
- [6] Sidney Balson Investment Trust Ltd v E Karmios and Co (London) Ltd [1956] 1 QB 529, 540 (Denning LJ).
- [7] Briggs v Gleeds [2014] EWHC 1178 (Ch), [2014] 3 WLR 1469, [32] (Newey J), following the rejection ofthe mistake of law bar in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349. See p 162, above.
- [8] (1895) 73 LTR 669 (ns). See also Avon County Council v Howlett [1989] 1 WLR 605.
- [9] [1923] 1 KB 504. 15 Mistake of law does now ground a restitutionary claim. See p 162, above.
- [10] 16 Holt v Markham [1923] 1 KB 504, 514. 17 Ibid, 511 (Bankes LJ) and 512 (Warrington LJ).
- [11] 18 [1926] AC 670. 19 Ibid, 692 (Lord Sumner).
