ATTORNEY GENERAL v. THE BANK OF WEST AFRICA [1965] GLR 245

DIVISION: SUPREME COURT

DATE: 12 APRIL 1965

BEFORE: MILLS-ODOI, OLLENNU AND SIRIBOE JJ.S.C.

CASES REFERRED TO

(1) Kerrison v. Glyn, Mills, Currie & Co. (1911) 81 L.J.K.B. 465; 105 L.T. 721; 28 T.L.R. 106; 56 S.J. 139, H.L. (2) Higgs v. Scott (1849) 7 C.B. 63; 137 E.R. 26. (3) Bromley v. Holland (1802) 7 Ves. Jun. 3; 32 E.R. 2. (4) Freeman v. Jeffries (1869) L.R. 4 Exch. 189; 38 L.J.Exch.116; 20 L.T. 533. (5) Holt v. Markham [1923] 1 K.B. 504; 92 L.J.K.B. 406; 67 S.J. 314; 128 L.T. 719, C.A. (6) Larner v. London County Council [1949] 2 K.B. 683; [1949] L.J.R. 1363; [1949] 1 All E.R. 964, C.A. (7) Colonial Bank v. Exchange Bank of Yarmouth, Nova Scotia (1885) 11 App.Cas. 84; 54 L.J.P.C. 14; 54 L.T. 256, P.C. (8) Kelly v. Solari (1841) 9 M. & W. 54; 11 L.J. Exch. 10; 152 E.R. 24. (9) Imperial Bank of Canada v. Bank of Hamilton [1903] A.C. 49; 72 L.J.P.C. 1; 87 L.T. 457; 19 T.L.R. 56, P.C. (10) R. E. Jones, Ltd. v. Waring and Gillow, Ltd. [1926] A.C. 670; 95 L.J.K.B. 913; 42 T.L.R. 644; 70 S.J. 756; 135 L.T. 548, H.L. (11) Norwich Union Fire Insurance Society, Ltd. v. Wm. H. Price, Ltd. [1934] A.C. 455; 50 T.L.R. 454; [1934] All E.R. Rep. 352; 103 L.J.P.C. 115; 49 LI.L.R. 55, P.C. (12) Anglo-Scottish Beet Sugar Corporation Ltd. v. Spalding Urban District Council [1937] 2 K.B. 607; [1937] 3 All E.R. 335; 106 L.J.K.B.885; 157 L.T. 450; 53 T.L.R. 822. [p.247] of [1965] GLR 245 (13) Racecourse Betting Control Board v. Mount [1938] 3 All E.R. 547, C.A. (14) Weld-Blundell v. Synott [1940] 2 K.B. 107; [1940] 2 All E.R. 580; 109 L.J.K.B. 684;163 L.T. 39; 56 T.L.R. 677. (15) Kleinwort, Sons & Co. v. Dunlop Rubber Co. (1907) 23 T.L.R. 696; 97 L.T. 263, H.L.

NATURE OF PROCEEDINGS

APPEAL from a ruling by Apaloo J. (as he then was) sitting in the High Court, Kumasi, in which he awarded costs against the plaintiff-appellant. The facts are fully set out in the judgment of Mills-Odoi J.S.C.

COUNSEL

N. M. C. Dodoo, Senior State Attorney, for the appellant.N. M. C. Dodoo, Senior State Attorney, for the appellant. B. J. da Rocha for the respondent.

JUDGMENT OF MILLS-ODOI J.S.C.

The action out of which this appeal has arisen was brought by the plaintiff-appellant (hereinafter referred to as “the employer”) to recover a sum of £G664 4s. 5d. lodged by the Public Works Department (an erstwhile Department of the Ghana Government now known as Ghana National Construction Corporation) between November 1960 and March 1961 under a mistake of fact, in the defendant-respondent’s bank (hereinafter shortly referred to as “the bank”) to the credit of the account therein of a Mr. Paul Kenneth Johnson (hereinafter referred to as “the employee”) who was engaged by the employer as a mechanical engineer on contract. The facts are really not in dispute; they are simple, straight-forward and free from any complexity. But much controversy arose as to whether in law the employer’s cause of action was against the bank or against the employee. The contract which the employee had with the employer was for an eighteen months’ tour of duty with effect from 16 February 1957. On the completion of the said tour of duty on 13 July 1960, the employee proceeded to the United Kingdom on leave which was due to expire on 28 November 1960. It was the understanding between the employer and the employee that on the expiration of the latter’s leave he would return to Ghana for a further tour of duty, provided his contract was renewed for such further tour. Through circumstances which are not disclosed in the employer’s statement of claim, and which are not material to the issue in this case, the renewal of the employee’s contract was delayed, and, when eventually the offer for renewal was communicated to him in the United Kingdom by the employer, he declined to accept it.

[p.248] of [1965] GLR 245

By his refusal to accept the offer for the renewal of the contract, the employee ceased to be in the employer’s employment with effect from 29 November 1960. Consequently, he ceased to be entitled to any salary or other emoluments from the employer after 28 November 1960. But before the rejection of the offer for the renewal of his contract was received by the employer, the latter, through the then Public Works Department, had paid into the former’s account with the bank, a sum of £G664 4s. 5d. the subject of fierce controversy in this case, representing salary and other emoluments which would have been due to the employee if his contract had not expired. By a letter dated 19 June 1961, addressed to the bank, the employer gave the bank full particulars of the mistake and demanded repayment of the said sum of £G664 4s. 5d., but the bank did not pay back the amount and, on 12 December 1961 the employer brought this action. On 14 December 1961 a writ was served on the bank and four days later an appearance was entered on their behalf by their solicitors. On the same day as the appearance was entered (i.e. 18 December 1961), the bank filed a motion in the High Court, Kumasi, the court which was seised with jurisdiction of the case, praying for relief by way of interpleader summons to issue on the employer and on the employee. The bank maintained the ground that as the employee’s account had been credited with the amount in question and notice of it had also been given to him it would be unbusinesslike to readily repay the said amount to the employer without any authority from the employee. Paragraph (9) of the affidavit accompanying the motion above referred to contained the following averments, “The defendants [the bank] are ready and willing to pay or transfer into court the sum of £G664 4s. 5d. or to dispose of the same as the court or the judge may direct pending the hearing and determination of this action.” A copy of the motion and the affidavit thereto attached were served on the employer on 28 December 1961. The motion was however set down for hearing on 29 January 1962. On 3 January 1962 the bank, through their solicitors wrote a letter to the employer saying that they had received instructions from the employee to repay the said sum of £G664 4s. 5d. On the strength of the instructions the bank repaid into the account of the employer the whole amount in dispute on 9 January 1962. On 29 January 1962 when the parties appeared before the judge of the High Court for the hearing of the motion, the bank, through their counsel, withdrew the application, on the ground that the said sum of £G664 4s. 5d. had been repaid to the employer and there was nothing to complain of. Whereupon learned counsel for the employer

[p.249] of [1965] GLR 245 asked for costs to be awarded against the bank, who, according to the view expressed by him, “ought to have paid before the writ was issued.” This application was strongly opposed by learned counsel for the bank who urged that the employer was not entitled to costs, because the employer “has no cause of action against the bank.” He contended that the employer “ought to have sued the ex-employee, not the bank.” It is crystal clear therefore that the question for decision is which party is entitled to costs. The learned judge determined the issue in favour of the bank and gave the following as his reason for so doing: “I think on the facts which are admitted, the action against the bank was ill-conceived. It seems to me plain that the defendant bank must have been put to expense. I consider it right that the costs incurred by it should be borne by the plaintiff. But as the case has not been heard to completion, I consider that 25 guineas is reasonable. I accordingly order that the defendant bank do recover from the plaintiff 25 guineas costs.” Against this order the employer has appealed to this court on the following grounds: “(1) That the learned trial judge erred in holding that on the admitted facts the plaintiff’s action was ill-conceived. That the learned trial judge wrongly exercised his discretion in awarding costs to the defendant. (3) That the costs awarded to the defendant by the learned judge were excessive.” When the appeal came on for hearing Mr. Dodoo, senior state attorney, appearing for the employer, was at great difficulty to advance any tangible argument in support of grounds (2) and (3) of the grounds of appeal referred to above. His arguments were therefore confined substantially to the first ground of appeal. In developing his argument in support of ground (1) (supra) Mr. Dodoo cited the case of Kerrison v. Glyn, Mills, Currie & Co.,1 and argued that in law the employer had a cause of action against the bank. He then contended that the learned judge was wrong in holding that the action was ill conceived. Learned counsel for the bank, Mr. da Rocha, conceded, and rightly so in my view, that the authority cited by the senior state attorney lays down the correct law and support the contention of Mr. Dodoo that the grounds on which the learned judge awarded costs against the employer are wholly untenable.

[p.250] of [1965] GLR 245

The law on banking as I understand it, and which in my view is too plain for argument is that the position of a banker does not differ from that of any other recipient of money acting as factor or agent; and as a general rule, money paid to a banker under a mistake of fact can be successfully re-demanded from the banker by the person who so paid it. This general rule is subject to certain restrictions or limitations, as, for example, where money is paid voluntarily with full knowledge of the facts, and there is no malafides, it cannot be recovered: see Higgs v. Scott2 and Bromley v. Holland.3 Similarly, where there has been neglect or misconduct on the part of a plaintiff, he may be prevented from recovering by the fact that the defendant will be placed in a worse position than if the money had not been paid: see Freeman v. Jeffries4 and Holt v. Markham.5 But where there has been no such neglect or misconduct, the plaintiff will be entitled to recover, even though the defendant cannot be put in quite the same position as before the money was paid: see Larner v. London County Council6; also Colonial Bank v. Exchange Bank of Yarmouth, Nova Scotia.7 In Kelly v. Solari,8 Parker B. stated that: “where money is paid to another under the influence of a mistake, that is, upon the supposition that a specific fact is true, which would entitled the other to the money, but which fact is untrue, and the money would not have been paid if it had been known to the payer that the fact was untrue, an action will lie to recover it back, and it is against conscience to retain it; though a demand may be necessary in those cases in which the party receiving may have been ignorant of the mistake. The position that a person so paying is precluded from recovering by laches, in not availing himself of the means of knowledge in his power, seems, from the cases cited, to have been founded on the dictum of Mr. Justice Bayley, in the case of Milnes v. Duncan ((1827) 6 B. & C. 671) and with all respect to that authority, I do not think it can be sustained in point of law. If, indeed, the money is intentionally paid, without reference to the truth or falsehood of the fact, the plaintiff meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true or

[p.251] of [1965] GLR 245 false, the latter is certainly entitled to retain it; but if it is paid under the impression of the truth of a fact which is untrue, it may, generally speaking, be recovered back, however careless the party paying may have been, in omitting to use due diligence to inquire the fact. In such a case the receiver was not entitled to it, nor intended to have it.” The principle enunciated by Parke B. was followed by a long line of cases of which the following are few: Imperial Bank of Canada v. Bank of Hamilton9 where Lord Lindley in reading the opinion of the board said, inter alia that, “it was long ago decided in Kelly v. Solari that money honestly paid by mistake of fact could be recovered back, although the person paying it did not avail himself of means of knowledge which he possessed”; R. E. Jones, Ltd. v. Waring & Gillow, Ltd.10; Norwich Union Fire Insurance Society, Ltd. v. Wm. H. Price, Ltd.11; Anglo-Scottish Beet Sugar Betting Control Board v. Spalding Urban District Council12 ; Racecourse Betting Control Board v. Mount13 and Weld-Blundell v Synott.14 It is beyond doubt, on the strength of these authorities, that money paid by a plaintiff to a defendant under a bona fide forgetfulness of facts which disentitled the defendant to receive it may be recovered back in an action for money had and received, under a mistake of fact: see Chitty on Contracts (21st ed.), Vol. 2, p. 104 and Halsbury’s Laws of England (3rd ed.), Vol. 26, p. 921, para 1711. A banker is in no better position than any other recipient to whom money is paid as an agent under a mistake of fact. The general principle that money when paid into a bank ceases altogether to be the money for the principal applies solely in regard to the relationship between a banker and his customer. It is not meant to be applied, and indeed, it does not apply to or cover the case of money paid whether by a customer or not under a mistake of fact. Even if the banker has credited the customer’s account with the amount he (the banker) has received and has informed the customer of it, as long as it is proved that the money was paid under a mistake of fact and as long as the banker has not paid it over to the customer, he is in law, and indeed in business, not entitled to retain it, if a demand is made by the payer. “A person who has received money which has been paid to him under a mistake of fact is liable to refund it if he has dealt as a principal with the person who paid it. If he dealt

[p.252] of [1965] GLR 245 with such person as agent, whether or not he will be liable to refund the money will depend upon whether, before the mistake was discovered, he has paid over the money to his principal, or settled such an account with the principal as amounts to payment, or has done something which has so prejudiced his position that it would be inequitable to require him to refund it. Accordingly, if a banker receives a remittance which has been sent to him by a debtor of his customer in mistake instead of to another banker, and he places it to the credit of his customer’s account, but the mistake is discovered before the banker has allowed the customer to draw against this amount, or otherwise acted to his disadvantage upon the faith of it, he will be liable to refund it to the person entitled to it. See Hart’s Law of Banking (3rd ed.), pp. 536-537. There is no doubt that, if a person pays money to another who pays it to his banker to his own account, without notice, the former cannot recover the money from the banker. “But if the money is paid by a third person to the account of another under a mistake of fact, the person paying in the money can sue the bank for money had and received, and where the facts are clear the customer or his legal personal representative need not be joined.” See Grant’s Law of Banking (7th ed.), p. 191. In the case of Kleinwort, Sons & Co. v. Dunlop Rubber Co.,15 a fierce controversy arose 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 a like case. In that case the appellants contended that the amount in question 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, & Co., were really principals, and therefore liable to pay it, whether they had paid it over to others or not. Lord Loreburn L.C. in settling this controversial issue, made this important pronouncement in the judgment which he read to the House16: “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 it 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.”

[p.253] of [1965] GLR 245

In reading his judgment in Kleinwort’s case referred to above, Lord Atkinson also had this to say17: “Many authorities were cited to your Lordships, the decisions in which were little more than applications of the broad principle laid down by Lord Mansfield C.J. in Butler v. Harrison (2 Comp. 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 it.” The case of Kerrison v. Glyn, Mills, Currie & Co. referred to above, cited by the senior state attorney in support of his submission is an authority for saying that the mere fact that the customer on whose behalf the money is received, under a mistake of fact, is indebted to the banker makes no difference. The banker is not entitled to retain the money; he is also not entitled to recoup himself with it. In that case, the facts appearing in the headnote are as follows: “The appellant, who lived in England, was the English manager of a mine in Mexico. By a system of revolving credit, he agreed to pay to the respondents moneys paid to the New York bankers of the mine. For this purpose he had paid £500.” to the respondents. The New York bank was largely indebted to the respondents, who claimed to retain the £500.” Lord Atkinson, who read the judgment of the House, stated inter alia as follows,18 “if money be sent direct by one person to another in payment in advance for services to be rendered by that other, in the belief that the latter is alive when, in fact, he is dead, it could be recovered by the sender from the person, whether agent or legal representative of the deceased, into whose hands it came. The fact that the deceased was largely indebted to such agent, and that the latter would, as between himself and the legal representative of the deceased, be entitled to set off

[p.254] of [1965] GLR 245 pro tanto the money received as against the debt due to him could not possibly prejudice the rights of the person transmitting the money. He would obviously have the same rights as against the agent to whom the deceased owed money as he would have against the agent of the deceased to whom nothing was owed. And this would even be so even though the deceased authorised the agent to apply the money, when received, to the discharge pro tanto of the sum due to him” It may well be that money lodged by a customer with his banker is, as between themselves, considered to be a loan to the banker, who may thenceforth deal with the money as his own; but the lodgment of the £500 was not a loan from Kerrison to the defendants. That is clear. It was the mode selected by Kessler & Co. themselves by which each of these different sums of £500 should from time to time be paid to them. If it was transmitted direct by post, neither Kessler & Co. nor their assignees in bankruptcy could, I think, retain it. It would be against good morals to permit them to do so. The defendants cannot, I think, have a better right to hold the money than Kessler & Co. would have had.” The opinion of Lord Shaw, which does not derogate from the narrative of facts and the conclusions in law reached by Lord Atkinson in Kerrison’s case, contains the following material passage19: “I agree with the opinion that money so paid can be successfully re-demanded, and I do not think that it would be correct, either in law or in business, to permit the recipient though a banker, to impound money which his principal could not have honestly or legally retained. This rule applies generally even although the recipient, whether banker or agent, was, as here, ignorant at the time of the receipt of the disability of the principal to do the thing for which, and for which alone, the money was deposited, or was himself under a mistaken impression on that subject.” It is abundantly clear, from the long line of cases referred to above, that where a person makes a payment to a bank on behalf of a customer, and the customer is informed of it, and the person making the payment subsequently shows that it was made under a mistake of fact, the person making the payment is entitled to recover it from the bank without the customer being made a party to the proceedings. But, if the banker has paid over the money to the customer, or has altered his position in relation to his customer

[p.255] of [1965] GLR 245 to his detriment, on the strength of the payment, the banker may refuse to repay the money and may leave the person who has paid him to enforce his remedy against the customer. In the present case, the sum of £G664 4s. 5d. which was paid to the bank represented salaries and other emoluments which the employee would be entitled to receive after he had performed certain specific services to the employer. Since he declined to accept the offer for renewal of the contract for further tour of duty, and since he did not, at any time, render any such service for which, and for which alone the money was deposited, he was himself not entitled to retain it and the bank is in no better position than the employee. The bank did not deny that the money was paid under a mistake of fact; and indeed, they admitted that full particulars of the mistake were given to them and a demand for re-payment was made. It is immaterial, as contended by the bank, that “notice of receipt of such payments was given by the defendants [the bank] to the said P. K. Johnson [employee] on or about the 15th day of the month succeeding that in which the said instalments were paid.” The circumstances here are that the bank had in no way altered their position when they were asked to repay it. They held money which they ought not to retain because it had been paid to them under a mistake of fact, and, to borrow the words of the Lord Chancellor in Kerrison’s case, “it does not matter in what character it was received by them.” It is beyond doubt, and I am fortified by the authorities referred to above in saying, that Apaloo J. (as he then was) fell into grave error when he held that “the employer’s action was ill-conceived,” i.e. that the employer had no cause of action against the bank. The facts and the circumstances of the case clearly show that the employer’s cause of action for the repayment of the sum of £G664 4s. 5d. is against the bank, without even the employee being made a party to the proceedings. It follows from the conclusion that I have reached that the reasons given by the learned judge in awarding the costs of 25 guineas to the bank are wholly untenable. Be that as it may, the question which I have to discuss at this stage is, whether or not the bank are entitled to costs at all. The issue between the parties was, whether the bank was indebted to the employer in respect of the sum of £G664 4s. 5d. being money lodged with them on behalf of the employee, under a mistake of fact. The repayment of the amount in full by the bank to the employer shows that the latter established his right to the amount which he claimed. But it is significant to note that the case was not tried on its merits; and the amount in question was repaid when pleadings had

[p.256] of [1965] GLR 245 not closed. The averments in the employer’s statement of claim did not state that there had been a refusal by the bank to repay the money when the letter of demand dated 19 June 1961 was sent to them. The employer did not even plead that a reply to the letter of demand was given by the bank. If there was a reply to that letter, or any communication between the bank and the employer in which a refusal to refund the amount was made, surely the latter would have readily pleaded the same in his statement of claim. Paragraph (10) of the statement of claim contains an averment that the bank failed to repay the money on demand. It is simply a blunt and inescapable truth that mere failure to do a thing is entirely different from a refusal to do that thing; unless the act of the person who is in duty bound to do the thing amounts to an absolute refusal and repudiation of the other’s right. But it is not so in this case. Indeed, the facts and surrounding circumstances show that the bank was not guilty of misconduct. On the contrary, right from the beginning, it was exploring all avenues to contact the employee before refunding the amount to the employer, for no prudent banker, and indeed, no shrewd businessman, will readily refund money which has been lodged with him on behalf of his customer, under a mistake of fact, without first informing the customer of a demand for repayment, if in fact such a demand is made by the payer. And it is common sense that such a step should be taken by the banker or the businessman when the customer’s account has been credited with the amount and he has been notified of it. This was exactly the step taken by the bank, in the instant case, when the letter of demand, referred to earlier in this judgment, was received by them. But before any letter was received by the bank from the employee and, in the absence of any document evidencing a refusal on the part of the bank to repay the money, the employer hastily instituted this action to enforce his right to recover the sum of £G664 4s. 5d. which he lodged in the bank under a mistake of fact. In the circumstances the bank took the wise step, a step which any banker would have taken, to secure his position, by applying to the High Court for a relief by way of interpleader summons. I am of opinion, on full consideration, that although the employer had a cause of action against the bank to recover the sum of £G664 4s. 5d. which was paid under a mistake of fact, the conclusion reached by the learned judge that the bank, not the employer, was entitled to costs is wholly acceptable. However the reasons given by him in arriving at that conclusion are wholly untenable. I feel, therefore, that the only course to follow is to allow the appeal, vary the order appealed from by deleting therefrom the following words “the action against the bank was ill-conceived.”

[p.257] of [1965] GLR 245 and substitute therefor the following, “the bank, not the plaintiff [employer], is entitled to costs.” There remains the question of the costs of the appeal to this court on which the employer has succeeded. It is true that the bank has not been deprived of the costs awarded to it at the court below. Nevertheless the employer has, by the result of this appeal, obtained a definite recognition of his right against the bank and, in so doing, has successfully challenged the finding of the court below that “the action was ill conceived.” I think, therefore, that he is entitled to some of the costs of this appeal, though not to all, since he cannot be said to have won a complete victory over the bank. The cost of the record to which he would be entitled, if he had been wholly successful, would be; £G9 3s. 9d. To this would be added; £G21 for counsel, making a total of £G30 3s. 9d. In my opinion the employer should have half this sum and I accordingly award him £G15 2s. costs against the bank. JUDGMENT OF OLLENNU J.S.C.

I agree.

JUDGMENT OF SIRIBOE J.S.C.

I also agree.

DECISION

Appeal allowed. Order of court below varied.

S. K. D.B.