mistake Flashcards
Kelly v Solari
life insurance co paid out life insurance policy although it had in fact lapsed.
trial court directed that the claimant could recover from the widow unless claimant would have paid the money regardless of lapse
contractual test of mistake
fundamental mistake e.g. Bell v Lever Bros - mistake must go to the heart of the contract, relate to existence, identity, quantity of the subject matter etc
test for mistake
Barclays Bank v Simms: if a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. Claim may fail if intended payee to have it in all events.
as Kleinwort Benson got rid of the mistake of law bar, the test is the same for mistakes of law. Nurdin & Peacock confirmed that mistakes of fact and law should be treated the same.
causative mistakes
mistake must be a but for cause of the payment
examples: Marine Trade Ritz Hotel Leslie v Farrar Deutsche Morgan Dextra Bank Nurdin
marine trade
not a causative mistake, would have paid anyway to prevent PF terminating the contract
Ritz Hotel Casino
paid money to casino and then sought to recover, arguing that as gambling contracts dont create legally binding obligations to pay, she was mistaken as to her legal liability. failed because gambling contracts legal under new act, but no causative mistake because would have paid anyway out of a sense of honour
Leslie v Farrar
made payments on basis of budgeted costs rather than actual costs. There was a mistake, but it was not a causative mistake. knew the payments might be overpayments but chose not to ascertain the correct amount due. took risk of paying too much by making conscious decision to pay sums without investigating.
Deutsche Morgan Grenfell causation
maj said mistake was causative. Lord Hope said the stage when he made his mistake does not matter, so long as it can be said that if he had known the true state of affairs at the time of the payment he would not have made it. a wrong turning halfway along the journey is just as capable of being treated as a relevant mistake as one made on doorstep at point of arrival.
cf Scott - ACT was paid because there was a legal obligation to pay it. the mistake waw that the parties did not realise they could challenge the failure of the regime to allow them to make a group election.
Bant’s argument for test of mistake
the test is that the mistake must be a but for cause of the payment, unless the D induced the mistake in which case the claimant can recover if it was a contributory cause.
Bant argues that the contributory cause approach should apply to all cases, whether spontaneous or induced. But Goff and Jones explain why this shouldnt be adopted.
mispredictions are not mistakes
arguably no impairment of intention so no recovery
Pitt v Holt: a misprediction relate to a future event whereas a legally significant mistake relates to some past or present matter of fact or law
Birks and Sheehan: misprediction not mistake because cannot be falsified at time when it was made cf Seah who does not require a mistake to be capable of proof at the time it is made, but would still not allow recovery for misprediction because a misprediction involves no causative impairment. The most that can be said is that money was paid under a belief which was uncertain and later shown to be wrong.
misprediction cases
Dextra Bank
Griffiths (although under equitable jurisdiction to unwind gift)
Dextra Bank
Dextra drew a cheque in favour of BOJ, intending it to be secured by a loan agreement with BOJ. Loan never put in place. Claimed mistake was that Dextra had intended to make a loan but no loan had been put into place.
Held D had made a mistake by believing that BOJ had agreed to take a loan, but that was not what had CAUSED the payment. Payment was caused by misprediction that D’s agent would carry out instruction to not hand over cheque unless got evidence of loan.
Griffiths
transfers of property into trusts in order to mitigate effect of inheritance tax on death.
argued that G had made a mistake about his health. By the time of the third transfer, he had lung cancer and did not know. Had he known, he would have known that his chance of surviving was remote and would not hace acted as he did.
Could say this was a mistake by way of tacit assumption about his health, or this was a misprediction as to his chance of surviving.
Pitt v Holt said this was close to causative ignorance
line between mistake and misprediction open to judicial manipulation
Griffiths Dextra Bank (misprediction) vs Re Jones (mistake, on similar facts)
ignorance approach in Pitt v Holt
causative ignorance is not a mistake: Pitt v Holt
but in carrying out fact finding task, the court should not shrink from drawing the inference of conscious belief or tacit assumption where there is evidence to support an inference.
criticisms of approach to ignorance
Goff and Jones - question is finely balanced
Against ignorance sufficing is fact that a person who holds no belief is not mistaken and that ignorance cannot be translated into a positive belief that a fact does not exist (Sheehan). Causal connection is weak when acting in ignroance. Concern about floodgates and worry about claims being brought by those who merely change their minds.
Arguments for ignorance sufficing:
not obvious why a person who confers a benefit and would not have done so but for ignorance is not deserving of relief. floodgates unlikley to be a reality, and produces a boundary line which may be difficult to draw and in practice may be suspectible to judicial manipulation.
Sheehan approach to ignorance
ignorance is not a mistake because there is nothing that can be proven correct or incorrect. Claiming a mistake in the case of ignorance is to manufacture a mistake ex post. Ignorance of the existence of X is not the same thing as a belief in not-X, or a belief in X. No way to choose between.
examples of tacit assumptions/ignorance
H F L K V - happily forgot like kelly’s vagina
Hookway Racing (Aus)
Freedman
Lady Hood
Kelly v Solari
van der Merwe
hookway racing (aus)
organiser of horse racie paid prize money to wrong horse owner, ignorant to a change in the rules about drug testing. his mistake caused by ignorance, leading to conscious belief about who he had to pay being erroneous
Freedman v Freedman
claimant settled her property on her father/solicitor to protect assets. wanted to rescind because of adverse tax implications.
judge held that as she had been advised what to do, this had led to either an active or tacit assumption that there wouldnt be adverse tax implications, so she could undo.
Lady Hood
lady hood wanted to give her 2 daughters the same amount of money thorughout their lives - gave money to first daughter then 8 yeasr later gave to second. forgot she had already given to first so gave to her again.
ignorance/forgetfulness led to an active/tactit belief that she needed to pay
Van der Merwe
settlement deed of husband and wife resulted in unwanted tax consequences so wanted to rescind. Ignorance of govt budget announced 2 days earlier meant they thought there would be no tax consequences of their settlement.
held ignorance of new budget meant they had a false belief as to there being no tax consequence.
negligence
negligence is irrelevant to recovery e.g. Kelly v Solari, Lady Hood, Scottish Equitable v Derby.
there is no tension between holding that negligence is irrelevant and the fact that risk takers cannot recover because risk takers are aware if a risk, but negligent claimants arent.
doubt - DMG
Deutsche Morgan Grenfell: Lord Hope refined his earlier suggestion that a state of doubt is different to a state of mistake, by saying that the question is what degree of doubt is compatible with a mistake claim. Lord Hoffman - the real point is whether the person making the payment took the risk that they might be wrong.
Marine Trade test
payor can be said to have made a mistake, even if had doubts, if paid concluding that it was more likely than not that he was liable to pay.
confirmed in Jazztel
Deutsche Morgan Grenfell
claimant believed liable to pay tax but had doubt as knew of litigation challenging tax
ultimately challenge succeeded so never liable to pay in first place.
claimant succeeded despite doubt. held doubt would be relevant to risk taking and there would be a tipping point where doubt becomes so large we can no longer say claimant acting under a mistake.
doubt and risk taking
approach of authorities to relevance of doubt is muddled.
There are 4 approaches identified by Goff and Jones:
1. doubt can negate the existence of a mistake. The question is what level of doubt is compatible with a mistake claim (Lord Hope in Kleinwort Benson). Marine Trade holds that a claimant can be mistaken despite doubt if paid believing it more likely than not that he was liable to pay. As Goff and Jones argue, this test is to be preferred to a wider approach that asks whether the claimant would have acted as he did had he known the true facts.
- doubt can mean there is no causation (Lord Hope, DMG).
- Doubt may be relevant to whether the claimant should be refused relief because of risk taking (Lord Hoffmann, DMG, Pitt v Holt). However Goff and Jones argues risk taking should not be elevated to the status of an independent bar in part because it doesnt do anything useful that isnt already achieved through causation, or definition of mistake.
- doubt may be relevant to refuse relief because claimant did not respond reasonably to his doubt. this is not inconsistent with the fact that negligence is not a bar to recovery, because in the negligence cases the claimant is not aware of the risk.
Barclays Bank v Simms
Housing association drew cheque in favour of building company. Then housing assoc called bank to cancel cheque. Bank’s paying official overlooked instruction to stop and made payment.
bank acted without mandate so payment not effect to discharge the drawer’s obligation on the cheque
no mistake of law bar
Kleinwort Benson
when does the mistake occur when it is a mistake of law
Kleinwort Benson - when the mistake was discoverable, i.e. when the decision was made rendering the previous law wrong.
cf Sheehan - the HL was wrong, adopts a Dworkinian view that there is always a right answer to a legal question, so at the time of the earlier judgment which is later ruled as being wrong, could have discovered the mistake. Adoption of Herculean judge view that the correct law is always ascertainable. The earlier case was incorrect, regardless of whether the court says so.
Lord Brown DMG minority review time starts running on a mistake of law when a party realises that it has a worthwhile claim
I agree with Sheehan - maj relied on declaratory theory of law, which holds that the later judgement didnt change the law but simply declared it.
bars to recovery: mistake
risk taking
valid contract
D has a statutory entitlement to the enrichment
voluntary enrichment/gift
third party authorises C to pay D, in order to settle debt owed by X to D
Tettenborn’s objective test of causation
should be rejected, because the bsis of finding a mistake is subjective
whose mistake is relevant
can rely on the mistake of an agent: Barclays Bank v Simms
activating agent concept
BP Oil v Target Shipping High Court
can rely on an employee or other agent who made or caused payment
The question who is regarded as an activating agent depends upon the nature of the mistake that caused the payment. Here the mistake, on BP’s case, was that payment of the invoice was authorised when it should not have been, and so their case depends on the states of mind of those who authorised it.
note Goff and Jones - if company knew of mistake and ommitted to intervene when it could have, the mistake will like not causative.
activating agent concept
BP Oil v Target Shipping High Court
can rely on an employee or other agent who made or caused payment
The question who is regarded as an activating agent depends upon the nature of the mistake that caused the payment. Here the mistake, on BP’s case, was that payment of the invoice was authorised when it should not have been, and so their case depends on the states of mind of those who authorised it.
note Goff and Jones - if company knew of mistake and ommitted to intervene when it could have, the mistake will likely not causative.
Wilmott-Smith
rejects concept of risk taking
risk taking reasonings
Goff and Jones argues risk taking should not be elevated to the status of an independent bar in part because it doesnt do anything useful that isnt already achieved through causation, or definition of mistake.
Wilmott-Smith rejects application of risk taking in context of failure of consideration but arguments would apply to mistake too.
mere passing uncertainty
is not inconsistent with finding that the claimant subsequently proceeded on the basis of a mistake: BP Oil v Target Shipping
mistaken gifts
test to set aside a formal gift is a sufficiently serious causative mistake where to leave it uncorrected would be unconscionable: Pitt v Holt
there is a trend in some recent cases suggesting there may be a stricter test for undoing a gift at common law: Lord Scott in DMG showed discomfort with the idea that any causative mistake might allow you to do an act of generosity.
The Pitt test was assumed to apply to common law in Pagel, and obiter in Van Der Merwe suggests it should apply across the board.
However DAVIES AND VIRGO have criticised the vagueness of Lord Walker’s test, and HACKER has identified issues with this approach because of uncertainty caused by the strong discretionary elements in the test. Hacker also argues that the test amounts to saying that “gift” is the legal basis for the transfer which must be invalidated, however the problem with this is that english law doesnt have a full blown theory of gift. Hacker suggests that law relating to mistaken gifts should be integrated into the existing unjust enrichment framework, and the causative mistake test should be applied. She argues a gift should only be required to be set aside if the claimant seeks proprietary restitution.
contract bars recovery
Barclays Bank v Simms: if the money was due under a contract between a payer and the payee there can be no recovery unless the contract itself is held void for mistake or rescinded
where D has a statutory entitlement to the enrichment
Kleinwort Benson: can’t be said to be unjustly enriched if entitled to receive sum paid (Hope)
DMG Lord Scott - the ACT was paid because there was a legal obligation for the money to be paid
in future cases a statutory entitlement is likely to act as a bar as DMG didn’t remove it.
Bhandari and Mitchell
DMG involved a deemed mistake, but issue with deemed mistake is a claimant cannot prove that the mistake caused payment
