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Kelly v Solari 1841
Insurance company paid money to widow, not realising policy had lapsed (mistake of fact). Widow had to repay money.
Aiken v Short 1856
Obiter, it was said that the mistake of fact should be one which, if true, would make C liable to pay the money (supposed liability test).
Supposed liability test applied
Lord Greene in Morgan v Ashcroft 1938 - bookmaker mistakenly paid D twice on a bet. No restitution - a wagering debt is not binding in law.
Suggested test - mistake must be fundamental to the transaction
Lord Scott in Morgan v Ashcroft 1938
Supposed liability test rejected by Lord Goff
- Barclays Bank v Simms 1980
- Suggested test - if the mistake caused the payment, it would be prima facie recoverable, but could not be recovered if:
- a) (legally), the payor intends for the money to be paid, whether the fact is true or false
- b) payment is made for good consideration e.g. payment of a debt
- c) the payee has changed his position in good faith
Case - if the payment discharged a debt, it will not be recoverable even if mistaken
Lloyds Bank v Independent Insurance 2000
Case - recovery for mistake of law not allowed
Bilbie v Lumley 1802
Restitution for mistake of law first recognised
Kleinwort Benson v Lincoln CC 1999 - completed swaps case
Lord Browne-Wilkinson in Kleinwort Benson
Dissenting - even though the decision had retrospective effect, it would be false to claim that the parties were mistaken at the time of entering into the agreement
Lord Goff in Kleinwort Benson
- Majority - there is no good reason for the distinction between mistake of law and mistake of fact, particularly as the two can be difficult to distinguish.
- The transaction was never valid, so it doesn't matter that it was completed.
Lord Hope in Kleinwort Benson
The decision in Hazell was just a declaration of the law, not a change in the law. Therefore the parties had been mistaken.
Case which decided swaps agreements were ultra vires
Hazell v Hammersmith and Fulham BC 1992
Greenwood and Bennett 1973
H repaired car, believing he had good title to it. It actually belonged to B. The car was returned to B but he was ordered to pay H for the work carried out.
What does Weir say about Greenwood and Bennett?
The outcome was satisfactory but it did not clarify the law in the area or create a true principle
Beatson and Bishop - three ways of formulating reliance loss (change of position)
- Conventional reliance loss
- Out of pocket reliance loss
- Real reliance loss (preferred by B&B)
What is conventional reliance loss?
Beatson and Bishop - the amount of the mistaken payment that has been spent by the payee
What is out of pocket reliance loss?
Beatson and Bishop - the amount spent by the payee, minus what he would have spent anyway
What is real reliance loss?
Beatson and Bishop - the amount spent by the payee, minus what would have been spent anyway, minus the extra he would have been willing to pay for what he actually ended up with
Re Diplock 1944
Residuary gift was void but the executors had distributed it anyway. They were liable to the next of kin, but they were not allowed to recover from the bodies they had paid money to, because they had made a mistake of law.
What case does Birks use as an example of unnecessary hardship caused by the rule against restitution for mistake of law?
Re Diplock 1944
What does Birks say about Bilbie v Lumley?
It may have just been an accident, but the rule was firmly established in the following case law.
What did John Austin think about the rule against restitution for mistake of law?
- It was necessary because ignorance of the law should not exempt anyone from being bound by it.
- If allowed, mistakes of law would be constantly asserted and would be difficult to test.
Special problems with mistake of law that do not arise with mistake of fact (two)
- 1) Poses a threat to finality of transactions
- 2) Judges may feel inhibited when interpreting law, wary of creating floods of new restitutionary claims
Why did Birks disagree with the majority in Kleinwort Benson? (three)
- 1) The agreement had been completed - the mistake was 'spent' and could not do any harm
- 2) There needs to be finality of transactions, including transactions carried out on the basis of an existing consensus on the state of the law
- 3) The parties made a misprediction, not a mistake. Their intention to make payments was not impaired as it would have been if a genuine mistake was made
Birks - why is Kleinwort Benson better explained by the absence of basis approach?
Absence of legal ground can be created retrospectively, impairment by mistake cannot.