Kleinwort, Sons, & Co. v. Dunlop Rubber Co. [1907] UKHL 633
(Before the Lord Chancellor (Loreburn) , Lords James of Hereford , Robertson , and Atkinson .)45 SLR 633Kleinwort, Sons, & Company v. Dunlop Rubber Company.Subject_ Payment — Payment by Mistake — Right to Recover. Facts:a. A. was financed byb. B. & Co. andc. C. & Co., both firms of bankers, who advanced him money on the security of goods. A. sold goods tod. D. & Co., and instructed them to remit the price direct to B. & Co., who had a right of security over the particular goods sold. D. & Co. by mistake remitted the price to C. & Co., who received it in good faith believing that it represented a sum due to them of a similar amount. In a previous action, reported (1905) AC 454 ), the House of Lords found D. & Co. liable to pay the sum again to B. & Co. In the present action (a jury having found in fact that what had occurred had not altered C. & Co.'s position as regarded A. for the worse), held that D. & Co. were entitled to recover the money from C. & Co. as being money paid under a mistake of fact.Appeal from a judgment of the Court of Appeal ( Collins, M.R., Cozens-Hardy, and Moulton , L.JJ.), delivered in February 1907, affirming a judgment of Channel , J., at the trial of the case before him with a special jury in November 1906.The action was brought by the respondents against the appellants to recover money alleged to have been paid under a mistake of fact.The facts are fully set out in the judgment of the Lord Chancellor.Lord Chancellor (Loreburn )—The facts of this case are simple enough. Messrs Kleinwort, Sons, & Company, bankers, were in the habit of making advances to Kramrisch & Company upon the security of parcels of indiarubber. Sometimes they released rubber which they held as security in order that it might be sold; sometimes they advanced money wherewith to buy rubber, on the terms that when it was sold by Kramrisch & Company the proceeds of sale should be remitted direct by the purchasers to them, Kleinwort, Sons, & Company. Among others the Dunlop Rubber Company were in the habit of buying rubber from Kramrisch, and on the 16th September 1902 Kramrisch & Company directed the Dunlop Company in future to send all remittances direct to their bankers Kleinwort, Sons, & Company instead of to themselves. Kramrisch & Company were at the same time borrowing upon similar security from other bankers, namely, Messrs Brandt. On the 5th January 1903 Kramrisch sent to the Dunlop Company a quantity of indiarubber which Messrs Brandt had enabled him by advances to deliver, and directed the Dunlop Company to pay the price, £3263, 16s. 4d. to Messrs Brandt, who had an equitable mortgage upon it. The Dunlop Company agreed to remit this money to Messrs Brandt as directed, but by an oversight they did not so remit, and sent the £3263, 16s. 4d. to Messrs Kleinwort, Sons, & Company instead of to Messrs Brandt. The payment was made and received in entire good faith, the receivers believing that it represented a sum due to them of a very similar amount. But in fact it was a payment made in error. Shortly afterwards it was discovered that Kramrisch was a rogue. He was convicted of frauds in connection with this rubber business, and the facts of this payment came to light. The Dunlop Company were held liable in your Lordships' House to pay this money to Messrs Brandt (1905) AC 454 , and now they have brought their action to recover it from Messrs Kleinwort, Sons, & Company as money paid under a mistake of fact. The only other material fact which I need mention is that when they received this money on the 20th January 1903 Messrs Kleinwort, Sons, & Company had allowed Messrs Kramrisch & Company considerably to exceed their agreed overdraft of £100,000. They placed the money so received to the credit of the account, and continued the account for some little time longer, making further advances. Your Lordships heard an interesting and learned argument as to the difference in law between the position of a principal to whom money has been paid under a mistake of fact and that of an agent in like case. The appellants contended that this sum had been paid to them as agents, and that they had accounted for it to their principals in a way equivalent to payment. The respondents asserted that in receiving this money Messrs Kleinwort, Sons, & Company were really principals, and therefore liable to repay it whether they had paid it over to others or not. In the view which I take of the case this is immaterial, for it is indisputable that if money is paid under a mistake of fact, and is redemanded from the person who received it before his position has been altered to his disadvantage, the money must be repaid in whatever character it was received. Now, that is this case. The third finding of the jury disposes of the controversy raised at the trial on this head. Channel, J., put the question very plainly to the jury, and explained to them the contention of the appellants (which I need not examine in detail) that they would not have continued, as they did continue, to make advances to Kramrisch & Company if it had not been for this payment of £3263, 16s. 4d. by the Dunlop Company. This contention the jury refused to accept. To my mind nothing could be more disastrous to the course of justice than a practice of lightly overthrowing the finding of a jury on a question of fact. There must be some plain error of law which the CourtPage: 634 ↓
Lord James of Hereford concurred.Lord Atkinson —It is admitted in this case that the course of dealing between Kramrisch & Company, Kleinwort, Sons, & Company, and William Brandt's Sons & Company, and the plaintiffs, is correctly set forth in the judgment of Lord Macnaghten in Brandt & Company v. Dunlop Rubber Company (1905) A C 454 . The facts of the case have been fully stated by the Lord Chancellor, and I need not repeat them. Many authorities were cited to your Lordships, the decisions in which are little more than applications of the broad principle laid down by Lord Mansfield, C.J., in Butler v. Harrison ( 2 Cowp. 565). They seem to establish that, whatever may in fact be the true position of the defendant in an action brought to recover money paid to him under a mistake of fact, he will be liable to refund it if it be established that he dealt as a principal with the person who paid it to him. Whether he would be liable if he dealt as agent with such a person will depend upon this, whether before the mistake was discovered he had paid over the money which he received to the principal, or settled such an account with the principal as amounts to payment, or did something which so prejudiced his position that it would be inequitable to require him to refund. In Holland v. Russell ( 1 B. & S. 424, 4 B. & S. 14) the case is rested on the ground that the defendant who received the money was agent for a foreign principal; that the plaintiffs knew this, paid him in that capacity, and with the intention that he should pay over the money to his principal. The defendant was therefore held not to be liable. In Newall v. Tomlinson (L. Rep. 6 C. P. 405) both the plaintiff and the defendant were cotton brokers in Liverpool. Each was in fact agent for an undisclosed principal, but they dealt with each other as principals, that being customary amongst such brokers in Liverpool. It was urged that, both being brokers, each must have known that the other was acting for an undisclosed principal. The defendant, before the mistake was discovered, had made advances to and settled an account with his principal, and when the latter suspended payment a balance of £2000 was owing by him to the defendant on the footing of these transactions, yet, as the plaintiff and defendant had dealt with each other as principals, it was held that the latter was liable, the determining consideration being, not what the defendant in fact was, but the character in which he purported to deal with the person who paid him the money. That being the state of the law, Channell, J., apparently with consent of the counsel on both sides, left to the jury the two questions following, with another—(1) “Was the money paid to Kleinwort & Company as principals or as agents?” (2) “Did Kleinwort & Company receive the money as principals or as agents?” To the first question the jury answered, “It was paid as agents for Kramrisch & Company;” and to the second they answered, “As principals, and in their own right,” by which answer they apparently meant to say that Kleinworth & Company took this money when they got it, and dealt with it as if they were principals. Together these findings must, I think, be taken to mean, as suggested by Moulton, L.J., that Kleinwort & Company were by the letters of the 16th September and the 18th October designated as the persons to receive payment on behalf of Kramrisch & Company, and that Kleinwort & Company received the money as equitable assignees of the plaintiff's debt, and when they received it held it on behalf of themselves as such assignees, and dealt with it in that character and by that right. Had the original purchase of the rubber, of which this cheque represented the price, been financed by Kleinwort & Company instead of by Brandt's Sons and Company, as in fact it was, and had the debt due by the plaintiffs in respect of it not been equitably assigned to Brandt's Sons & Company, as in fact it was, there might be nothing to object to these findings; but Sir Robert Finlay, on behalf of the appellants, urged that, neither of these things being so, the money being in fact the money of Brandt's Sons & Company, not of Kramrisch & Co., and the respondents having in fact no claim to it whatever, the finding of the jury on the second question is contrary to the facts, and cannot be sustained; that Kleinwort & Company may, at the time when they received the money, have been under the impression that they were equitable assignees of the plaintiff's debt, and may have dealt with the money when received in that character; but that this was in truth part of the mistake of fact under which the money was paid, and that the legal result of the receipt of and dealing with the money must depend on the true facts and not on the erroneous impressions of the receivers at the time when they received it; that the jury having found that it was paid to them as agents for Kramrisch & Company, it could in fact only have been received by them at the latter's bankers, and held by them in that right. He further contended that if this be the true position, then something has taken place between the appellants as bankers and Kramrisch & Company as customers, which is equivalent to payment over to the customer of the money received, or has prejudiced the position of the appellants to such an extent as toPage: 635 ↓
Lord Robertson took no part in the judgment.Appeal dismissed.Counsel for the Appellants— Sir R. Finlay, K.C.— Chaytor. Agents— Hollams, Sons, Coward, & Hawksley, Solicitors.Counsel for the Respondents— M. Lush, K.C.— Schiller. Agents— John B. & F. Purchase, Solicitors.