Westdeutsche Landesbank Girozentrale

Previously, the courts had wholly aloneowed awards of raise interest if the engageant could establish a property right (though this was later reversed in Samara Metals Ltd v IIRCI). Accordingly Westchester hope argued that when it paid over the property a re us Ting faith arose immediately, because the bank plainly did non intend to make a gift. Among t he arguments, counsel for the bank submitted that a resulting rely arose on all unjust enrichment claim s, which this was, given that the basis for the initial obtain had failed.The council cont terminate that on raft sectional religious belief police force principles here could be no resulting trust (and wherefore no property right, and comps undo interest) because the councils conscience could non be affected when it could not know (before the apprehension in Hazel) that the contract was waste. A resulting trust needed to be linked to a deemed intent Zion of the parties that gold be held on trust, but at that pla ce was none because the bank had intended t he notes to pass chthonian a valid swap agreement (even though it did not turn come forth that way).It followed t hat compound interest could only begin accruing from the later date of the councils conscience been g affected. On the 18 February 1 993, Hoboes J held the bank could witness the money because the council had been unjustly enriched at the banks expense, and could recover compound I interest. Hazel v Hammerheads and Pelham LABEL was considered and Sinclair v Brougham was applied. On the 17 December 1993, the Court of Appeal, with Dillon U, handsome LLC and Kennedy LLC, upheld the High Court, with Andrew Burrows acting for Collision LB, and Jonathan Assumption ICQ for Westchester.The council appealed. Judgment The place of overlords by a majority ( master copy Brownstones, master Slyly and Lord d Lloyd) held that Westchester bank could only recover its money with simple interest because e it only had a ain claim for reco very in a common law body process of money had and received. But the e bank had no proprietorship trustworthy claim under a resulting trust. There was no resulting trust because t was inevitable that the councils conscience had been affected when it received the money, by hummock edge that the relations had been ultra fires and void.Consequently it was necessary that there would d be an heading that the money be held on trust, but this was not possible because nobody knew that the transaction would turn UT to be void until the House of Lords decision in Hazel v Hammerheads and Pelham LB in 1991. 4 In his Lordships view all resulting trusts (even those described by Meagerly a s automatic in Re Bandleaders Trusts (No depended on intention and were not connected with the law of unjust enrichment. It followed that no trust arose, and there was only a personal claim m for the money back.This meant, said the majority, that only simple interest, and not compound interest t was payabl e (a controversial decision that was overturned in Samara Metals Ltd v IIRC6). The two dissenting judges, Lord Goff and Lord Wolf, also thought that there would be no resulting trust of the money because if a proprietary claim were available, in other case s like this it would get hold of an unfair impact on other creditors of an insolvent debtor, and similarly because it could potentially be unfair if assets could be t racewayd.However, they would have held that compound d interest should be available on personal claims. Lord Goff, moreover, expressly did not enter into a discussion of the points about unjust enrichment that went beyond the scope of the beat case. Lord d Wolf quoted De Havilland v Powerboat7 where Lord Mansfield CA stated, that though by the common law, book debts http//en. Kipped. Org/wick/ do not of run-in carry interest, it may be payable in consequence of the usage e of point branches of trade or of a special agreement.There was no reason why compound inte rn SST should not be awarded if it was ordinary commercial-grade practice. Lord Goff gave his judgment first, agreeing that there was no resulting trust of r unalike reasons, but in dissent arguing that compound interest should be awarded on personal claim (2) A proprietary claim in restitution have already stated that restitution in these cases can be come acrossd by means off personal claim in restitution. The question has however arisen whether the margin should also have the benefit of an fair proprietary claim in the form of a resulting trust.The immediate reaction moldiness be why should it? Take the present case. The parties have entered into commercial transaction. The transaction has, for technical reasons, been held to be void from the beginning. Each party is entitled to recover its money, with the result that the balance must be repaid. But why should the plaintiff Bank be given the additional benefits Lord Goff. Which guide from a proprietary claim, for example the benefit of achieving priority in the event of the defendants insolvency?After all, it has entered into a commercial transact Zion, and so taken the risk of the defendants insolvency, just like the defendants other car editors who have undertake with it, not to mention other creditors to whom the defendant t may be liable to pay damage in tort. Feel bound to say that I would not at first sight have thought that an equitable proprietary claim in the form of a trust should be do available to the Bank I n the present case, but for two things.The first is the decision of this House in Since air v Brougham 1 914 AC 398, which appears to provide authority that a resulting trust may ended arise in a case such as the present. The second is that on the authority sees there is an equitable licit power to award the plaintiff compound interest in cases who ere the defendant is a legal guardian. It is the combining of those two factors which has pr vided the openation for the principal arg uments advanced on behalf of the Bank in sup larboard of its submission that it was entitled to an award of compound interest.Lord Goff considered points about compound interest, suggesting there as no particular reason why compound interest should not be awarded for persona I claims. He whence continued on the issue of proprietary restitution In a most interesting and intriguing paper published in Equity Contemporary Y Legal Developments (1992 deed. Goldstein). prof Birds has argued for a wider throw e for the resulting trust in the field of restitution, and specifically for its availability in ca sees of mistake and harm of consideration. His thesis is avowedly experimental, writ ten to test the temperature or the water.I feel bound to respond that the temperature o f the water must be regarded as decidedly cold see. E. G. , Professor Burrows in 1995 RL R 15. And Mr.. W. J. Swaddling in (1996) 16 Legal Studies 133. In the first place, as Lord Brownstones points out, to impose a resulting filter out just in such cases is inconsistent with the traditional principles of trust law. For on re accept of the money by the payee it is to be presumed that (as in the present case) the Eden itty of the money is immediately lost by meld with other assets of the payee, and at the at snip the payee has no knowledge of the facts giving rise to the failure of consideration.By the time that those facts come to light, and the conscience of the payee may there ebb be affected, there will thence be no identifiable fund to which a trust can attach h. But there re other difficulties. First, there is no general rule that the property in money paid under a void contract does not pass to the payee and it is difficult to escape the con occlusion that, as a general rule, the beneficial interest to the money likewise passes to the p aye.This must certainly be the case where the consideration for the payment fails after the payment is made, as in cases of frustration or wear of contract and there a appears to be no good reason why the same should not apply in cases where, as in the pres .NET case, the contract under which the payment is made is void ABA admonition and the considerate on for the payment therefore fails at the time of payment. It is true that the doctrine of mistake expertness be invoked where the mistake is fundamental in the orthodox sense of that word.But that is not the position in the present case moreover the mistake in the p resent case must be classified as a mistake of law which, as at the law at present stands, c rates its own special problems. No doubt that uncircumcised doctrine will fall to be race insider when an appropriate case occurs but I cannot think that the present is such a case, since not only has the point not been argued but (as will appear) it is my opinion the t there is any event jurisdiction to award compound interest in the present case.For all of these reasons I desist, in agreement with my imposing and le arned friend, that there e is no basis for holding that a resulting trust arises in cases where money has been paid u ender a contract which is ultra fires and therefore void ABA monition. This conclusion has t he effect that all the practical problems which would flow from the imposition of a rest Ting trust in a case such as the present, in particular the imposition upon the recipient o f the normal duties of trustee, do not arise.The dramatic consequences which would occur re detailed by Professor Burrows in his article on Swaps and the Friction between n Common Law and Equity in 1995 RL 1 5, 27 the duty to ac count for profits accruing f room the trust property the inability of the payee to rely upon the falsification of change of position the absence of any limitation period and so on. Professor Burrows even goes so far as to conclude that the action for money had and received would be rendered otiose SE in such cases, and indeed in all cases where the payer seeks restitution of mistaken p aments.However, if no resulting trust arises, it also follows that the payer in a case such h as the resent cannot achieve priority over the payees general creditors in the even OTF his insolvency a conclusion which appears to me to be just. For all these reasons conclude that there is no basis for imposing a resulting trust in the present case, and I therefore reject the Banks submission that it was here .NET title to proceed by way of an equitable proprietary claim. I need only add that, in area Chining that conclusion, I do not find it necessary to review the decision Of Colluding J. N C hash Manhattan Bank AN v Israelites Bank (London) Ltd 1 981 Chi 105. Lord Brotherlinesss judgment, agreed with by the majority, followed. Was there a Trust? The Argument for the Bank in Outline The Bank submitted that, since the contract was void, title did not pass at the date of payment either at law or in equity. The legal title of the Bank was extinguish d as soon as the money w as paid into the mixed account, whereupon the legal title became me vested in the local authority.But, it was argued, this did not affect the equitable inter est., which remained vested in the Bank (the retention of title point). It was submitted t hat whenever the legal interest in property is vested in one person and the equity blew interest n another, the owner of the legal interest holds it on trust for the owner of the e equitable title the separation of the legal from the equitable interest necessarily import TTS a trust. For this latter proposition (the separation of title point) the Bank, of course, relies on Sinclair v Brougham 1914 AC 598 and Chase Manhattan Bank 1981 Chi 105.The generality of these submissions was narrowed by submitting that the trust t which arose in this case was a resulting trust not of an active character see per Vise count Holland L. C. In Sinclair v Brougham, at p. 421. This submission was reinforced , after implosion of the oral argument, by sendi ng to your Lordships Professor Pete r Birds paper Restitution and Resulting Trusts, Goldstein, Equity Contemporary Leg al Developments (1992). P. 335. Unfortunately your Lordships have not had the advantage of any submissions from the local authority on this paper, but an article by Wi Lima Swaddling A new role for resulting trusts? 16 Legal Studies 133 puts forward c enter arguments which I have found persuasive. It is to be noted that the Bank did not found any argument on the basis that t he local authority was liable to repay either as a constructive trustee or under the in p reason liability of the wrongful recipient of the estate of a deceased person establish deed by In re Diploid 1 948 Chi. 465. Therefore do not further consider those points. The Breadth of the Submission Although the actual question in issue on the appeal is a narrow one, on the AR GU meets presented it is necessary to consider fundamental principles of trust law.