Westdeutsche Landesbank Girozentrale

Previously, the courts had only allowed awards of compound interest if the claimant could establish a property right (though this was later reversed in Samara Metals Ltd v IIRC[I]). Accordingly Westchester bank argued that when it paid over the money a re us Ting trust arose immediately, because the bank plainly did not intend to make a gift. Among t he arguments, counsel for the bank submitted that a resulting trust arose on all unjust enrichment claim s, which this was, given that the basis for the initial contract had failed.The council contended that on trade sectional trust law principles here could be no resulting trust (and therefore no property right, and comps undo interest) because the council's conscience could not be affected when it could not know (before the judgment in Hazel) that the contract was void. A resulting trust needed to be linked to a deemed intent Zion of the parties that money be held on trust, but there was none because the bank had intended t he money to pass under a valid swap agreement (even though it did not turn out that way).It followed t hat compound interest could only begin accruing from the later date of the council's conscience been g affected. On the 18 February 1 993, Hoboes J held the bank could recover the money because the council had been unjustly enriched at the bank's 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, Elegant 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 House of Lords by a majority (Lord Brownstone's, Lord Slyly and Lord d Lloyd) held that Westchester bank could only recover its money with simple interest because e it only had a personal claim for recovery in a common law action of money had and received. But the e bank had no pro prietary equitable claim under a resulting trust. There was no resulting trust because t was necessary that the council's conscience had been affected when it received the money, by knoll edge that the transaction had been ultra fires and void.Consequently it was necessary that there would d be an â€Å"intention† 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 Lordship's view all resulting trusts (even those described by Meagerly a s â€Å"automatic† in Re Bandleader's 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 payable (a controversial decision that was overturned in Samara Meta ls Ltd v IIRC[6]). 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 have an unfair impact on other creditors of an insolvent debtor, and similarly because it could potentially be unfair if assets could be traced.However, they would have held that compound d interest should be available on personal claims. Lord Goff, however, expressly did not enter into a discussion of the points about unjust enrichment that went beyond the scope of the present case. Lord d Wolf quoted De Havilland v Powerboat[7] where Lord Mansfield CA stated, â€Å"that though by the common law, book debts http://en. Kipped. Org/wick/ do not of course carry interest, it may be payable in consequence of the usage e of particular branches of trade; or of a special agreement†.There was no reason why compound intern SST should not be awarded if it was ordinary com mercial practice. Lord Goff gave his judgment first, agreeing that there was no resulting trust of r different 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 achieved by means off personal claim in restitution. The question has however arisen whether the Bank should also have the benefit of an equitable proprietary claim in the form of a resulting trust.The immediate reaction must 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 flow from a proprietary claim, for example the benefit of achieving priority in the event of the defendant's inso lvency?After all, it has entered into a commercial transact Zion, and so taken the risk of the defendant's insolvency, just like the defendant's other car editors who have contracted with it, not to mention other creditors to whom the defendant t may be liable to pay damages 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 made 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 jurisdiction to award the plaintiff compound interest in cases who ere the defendant is a trustee. It is the combination of those two factors which has pr vided the foundation for the principal arguments advanced on behalf of the Bank in sup port 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 then continued on the issue of proprietary restitution†¦ In a most interesting and challenging paper published in Equity: Contemporary Y Legal Developments (1992 deed. Goldstein). Professor Birds has argued for a wider roll e for the resulting trust in the field of restitution, and specifically for its availability in ca sees of mistake and failure 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 Brownstone's points out, to impose a resulting try just in such cases is inconsistent with t he 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 mixing with other assets of the payee, and at the at time 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 therefore 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 breach of contract: and there a appears to be no good reason why the sa me should not apply in cases where, as in the pres .NET case, the contract under which the payment is made is void ABA monition and the considerate on for the payment therefore fails at the time of payment. It is true that the doctrine of mistake might 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 conclude, in agreement with my noble and learned friend, that there e is no basis for holding that a resulting tru st 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 account for profits accruing f room the trust property; the inability of the payee to rely upon the defense 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 al so follows that the payer in a case such h as the resent cannot achieve priority over the payee's 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 Bank's 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 Brotherliness's 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 was paid into the mixed account, whereupon the legal title be came me vested in the local authority.But, it was argued, this did not affect the equitable inter est., which remained vested in the Bank (â€Å"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: â€Å"the separation of the legal from the equitable interest necessarily import TTS a trust. † For this latter proposition (â€Å"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 â€Å"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 sen ding 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 â€Å"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.