Judgment Westdeutsche Landesbank Girozentrale v Islington LBC

lord goff.



(2) proprietary claim in restitution

i have stated restitution in these cases can achieved means of personal claim in restitution. question has arisen whether bank should have benefit of equitable proprietary claim in form of resulting trust. immediate reaction must - why should it? take present case. parties have entered commercial transaction. transaction has, technical reasons, been held void beginning. each party entitled recover money, result balance must repaid. why should plaintiff bank given additional benefits flow proprietary claim, example benefit of achieving priority in event of defendant s insolvency? after all, has entered commercial transaction, , taken risk of defendant s insolvency, defendant s other creditors have contracted it, not mention other creditors whom defendant may liable pay damages in tort.

i feel bound not @ first sight have thought equitable proprietary claim in form of trust should made available bank in present case, 2 things. first decision of house in sinclair v brougham [1914] ac 398, appears provide authority resulting trust may indeed arise in case such present. second on authorities there equitable jurisdiction award plaintiff compound interest in cases defendant trustee. combination of 2 factors has provided foundation principal arguments advanced on behalf of bank in support of submission entitled award of compound interest.

[... lord goff considered points compound interest, suggesting there no particular reason why compound interest should not awarded personal claims. continued on issue of proprietary restitution...]

in interesting , challenging paper published in equity: contemporary legal developments (1992 ed. goldstein). professor birks has argued wider role resulting trust in field of restitution, , availability in cases of mistake , failure of consideration. thesis avowedly experimental, written test temperature or water. feel bound respond temperature of water must regarded decidedly cold: see. e.g., professor burrows in [1995] rlr 15. , mr. w.j. swadling in (1996) 16 legal studies 133.

in first place, lord browne-wilkinson points out, impose resulting trust in such cases inconsistent traditional principles of trust law. on receipt of money payee presumed (as in present case) identity of money lost mixing other assets of payee, , @ time payee has no knowledge of facts giving rise failure of consideration. time facts come light, , conscience of payee may thereby affected, there therefore no identifiable fund trust can attach. there other difficulties. first, there no general rule property in money paid under void contract not pass payee: , difficult escape conclusion that, general rule, beneficial interest money likewise passes payee. must case consideration payment fails after payment made, in cases of frustration or breach of contract: , there appears no reason why same should not apply in cases where, in present case, contract under payment made void ab initio , consideration payment therefore fails @ time of payment. true doctrine of mistake might invoked mistake fundamental in orthodox sense of word. not position in present case: mistake in present case must classified mistake of law which, @ law @ present stands, creates own special problems. no doubt much-criticised doctrine fall reconsidered when appropriate case occurs: cannot think present such case, since not has point not been argued (as appear) opinion there event jurisdiction award compound interest in present case. of these reasons conclude, in agreement noble , learned friend, there no basis holding resulting trust arises in cases money has been paid under contract ultra vires , therefore void ab initio. conclusion has effect practical problems flow imposition of resulting trust in case such present, in particular imposition upon recipient of normal duties of trustee, not arise. dramatic consequences occur detailed professor burrows in article on swaps , friction between common law , equity in [1995] rlr 15, 27: duty account profits accruing trust property; inability of payee rely upon defence of change of position: absence of limitation period: , on. professor burrows goes far conclude action money had , received rendered otiose in such cases, , indeed in cases payer seeks restitution of mistaken payments. however, if no resulting trust arises, follows payer in case such present cannot achieve priority on payee s general creditors in event of insolvency - conclusion appears me just.

for these reasons conclude there no basis imposing resulting trust in present case, , therefore reject bank s submission here entitled proceed way of equitable proprietary claim. need add that, in reaching conclusion, not find necessary review decision of goulding j. in chase manhattan bank na v israel-british bank (london) ltd [1981] ch 105.

lord browne-wilkinson s judgment, agreed majority, followed.

lord slynn gave short opinion concurring lord browne-wilkinson. lord woolf concurred lord goff. lord lloyd concurred lord-browne-wilkinson.