If you have paid out monies by mistake and the recipient has been "unjustly enriched", you can get your money back.
There have been two chattel leasing cases recently where the funders did get their money back.
In the first case, the new funder paid the supplier (which included upgrading goods and settling the existing finance) and the customer subsequently claimed that the employee who signed the rental agreement was not authorised to do so (nor to agree to the settlement of its existing finance). In the absence of any evidence that the customer, a limited company, had in fact authorised the employee to sign the rental agreement or held him out to the new funder as having the authority to do so, the customer was not, in law, bound to honour the rental agreement. The new funder had paid the supplier in the mistaken belief that the supplier had procured the customer to (i) sign a binding rental agreement for new goods and (ii) authorise the new funder to settle the customer's existing finance leases.
In the second case, the funder paid the purchase price for the goods into an account that was in the name of the supplier's old company, not the account in the name of the supplier's new company, as had been intended. The old account was overdrawn. Unsurprisingly, the recipient bank refused to account to the supplier's new company for the money.
In each of these cases, the recipient of the mistaken payment accepted that the funder was entitled to the return of its money. The funder's claim is under the law of restitution, which is based upon the principle of unjust enrichment, i.e. that the recipient of the mistaken payment has been unjustly enriched. The funder's mistake can be about the factual or legal basis upon which the payment was made.
In the first case, who was unjustly enriched: the supplier, the customer or the existing funders?
Under English law, a debt cannot be discharged by a third person without the debtor's consent or ratification. Even though the new funder had paid the amount required by the existing funders to discharge the customer's liability under the existing leases, the customer was still liable to the existing funders as the customer had neither consented to nor ratified the new funder paying the customer's debt. In law, therefore, the existing funders had been unjustly enriched by the new funder, not the customer.
Having been paid by the new funder, the existing funder had no intention of pursuing the customer. The customer, despite benefitting from the new funder's mistake, had no intention of repaying the settlement monies.
Consequently, the new funder made demand upon the existing funders for repayment of the settlement monies. The existing funders, in turn, made demand upon the customer for repayment of the monies due under the existing leases. The customer then repaid the settlement monies to the new funder to avoid a dispute with the existing funders.
The supplier then repaid the amount that the new funder had paid for the new goods.
In the second case, the recipient bank would have been unjustly enriched if it had retained the mistaken payment and agreed to refund the amount that the funder had mistakenly paid.
The law of restitution is complex and still developing. Consequently, good advice is required as to when a restitutionary claim is appropriate and the claim has to be well managed to ensure that legal costs are proportionate. In my experience, however, they can get your money back.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
