Category: Restitution

Restitution of mistaken payments, again: Chase quickly recovers $50billion; while Citibank eventually recovers (a mere) $500million, defeating defences of “discharge for value”

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| Mistaken payments, Restitution, Restitution, Subrogation

RepaymentIn my previous post, I looked at Foris GFS Australia Pty Ltd v Manivel [2022] VSC 482 (26 August 2022), in which cryptocurrency trading platform Crypto.com accidentally transferred Aus$10.5m [€7.35m; US$7m; St£6.3m] to an Australian customer when processing an Aus$100 [€70; US$67; St£60] refund, by mistakenly entering her account number into the “payment amount” field. Elliott J held that part of the proceeds could be traced into a property gifted by the customer to her sister, who held the property on trust for the payor.

In this post, I want to look at two other computer-enhanced mistakes. The first is almost unbelievable:

Dad becomes 25th richest man in world after €45 billion lands in account after bank error

A family were made multi billionaires when a banking mishap saw [US$50 billion] €45 billion deposited into one lucky dad’s account, momentarily making him the 25th richest man in the world. … [He] was alerted to the huge sum by his staggered wife, …

The dad-of-two, from Louisiana in the US, … admitted to what had happened and arranged for the money to go back to its rightful owner. … When he alerted [his bank] Chase, they immediately began work to get the funds back, but never said where the money came from, or how the error came about.

…

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Fortune favours the brave, but not the foolhardy – recipients of mistaken payments must make restitution, or face the consequences

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| Mistaken payments, Restitution

Oops key on keyboard, via Flickr (modified))To err is human, but to really foul things up requires a computer, so we are told. And it gets really dreadful indeed when computer buzzwords like “crypto” get included. And so it is with cryptocurrency trading platform, Crypto.com. In May 2021, it accidentally transferred Aus$10.5m [€7.35m; US$7m; St£6.3m] to an Australian woman, Thevamanogari Manivel, when processing an Aus$100 [€70; US$67; St£60] refund. Although computers were involved, the problem was plain old human error: Manivel’s account number had been accidentally entered into the “payment amount” field. Worse, they failed to notice the error until the following December, seven months later, by which time much of the money had already been given away to six other family members or spent on various luxury purchases, including an Aus$1.35m [€945,000; US$900,000; St£810,000] home in Craigieburn, Melbourne, for her sister, Thilagavathy Gangadory. [Update: Crypto has company – a Texas bank made the same mistake to deposit US$37m in a customer’s account; but, unlike here, the Texas customer alerted the bank and returned the money].

Gangadory Craigieburn propertyThis sounds like a classic exam question, but it is in fact the scenario faced by Elliott J in the Supreme Court of Victoria, Australia, in Foris GFS Australia Pty Ltd v Manivel [2022] VSC 482 (26 August 2022).…

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Some practical perspective on the recovery of misdirected payments

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| Mistake, Mistaken payments, Restitution

Chips, via WikipediaI’ve written quite a bit on this blog about payors’ rights to recover mistaken payments from recipients. However, a column in today’s Irish Times makes an important practical point about it. A client of bank who had sought to make a payment of €20,000 into his daughter’s account in a different bank. He had the right details, but the payment never arrived in his daughter’s account. Dominic Coyle dispensed his usual sage, common sense, advice, and the banks are now being helpful, so the enquirer and his daughter will probably track down the money. Meanwhile, Dominic added, almost en passant:


By the way, not that it is relevant here, in cases where there has been an Iban error on the part of the person making the payment, repayment will be requested from the inadvertent recipient. However, I am told, somewhat surprisingly, that that depends on the recipient agreeing to the repatriation of the funds. Otherwise you’re apparently looking at legal action which could make your €20,000 look like chips.

So, he’s right that, where there is a mistake, the recipient of the mistaken payment must make restitution of the mistaken payment. However, he’s also right that, if the matter has to be vindicated in court, the costs could be prohibitive (even if, in principle, the costs should follow the event, so that the plaintiff would recover the mistaken payment and also be entitled to costs).…

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Mistaken payments and criminal liability – a cautionary tale from South Africa

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| Mistaken payments, Restitution, Restitution

I have warned many times on this blog (especially here, here, here, here, here, here, here, and here – with examples from Ireland, the UK, Australia, New Zealand, and the US) that the recipient of a mistaken payment not only has a duty to make restitution of that unjust enrichment but also faces potential criminal liability for theft if the payment is kept (and, worse, spent) rather than returned. A recent cause célèbre from South Africa provides another cautionary tale:

Sibongile Mani sentenced to 5 years’ imprisonment for theft of NSFAS funds

Sibongile ManiWalter Sisulu University (WSU) student Sibongile Mani [left] has been sentenced to five years’ imprisonment for theft relating to R14 million [€870,000] accidentally credited to her account by the National Student Financial Aid Scheme (NSFAS) in 2017.

East London Regional Court Magistrate Twanette Olivier found Mani guilty of stealing R818,000 [€51,000] of the funds.

She was only entitled to a R1,400 [€87] food allowance and was accused of failing to report when R14 million [€870,000] was credited to her account erroneously. She instead embarked on a spending spree. …

A little more background:

Key events that led up to the sentencing and appeal of NSFAS ‘millionaire’ Sibongile Mani

…
June 2017
A technical glitch led to funding administrative company Intellimali erroneously transferring R14m into Mani’s account.

…

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Convenience as consideration? Payment for good consideration as a defence to a claim to restitution for unjust enrichment

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| Restitution, Restitution

Red light sign in FloridaIn Barclays Bank Limited v Simms [1980] QB 679, 695, Goff J held that a claim for restitution on the grounds of mistake would fail, inter alia, if

the payment is made for good consideration, in particular if the money is paid to discharge and does discharge a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt … [emphasis added]

We have already seen an interesting US case of the particular example of the three party case [update: the appeal is noted here]. Now comes news of an interesting US case of the italicised general example of payment made for good consideration.

In Pincus v American Traffic Solutions, Inc, Pincus was photographed going through a red light (similar to the one in the photo, right), and he paid a penalty to American Traffic Solutions, Inc (ATS), made up of the statutory penalty and an additional fee for the convenience of paying online rather than by mail. He brought a putative class action (pdf) against ATS in Federal Court, alleging that several Florida statutes barred ATS from charging the convenience fee and that ATS was unjustly enriched by retaining it.…

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Taking the Santa out of Santander for £130m; putting the Santa into Citibank for $500m; and Fraiser’s Dad’s road to perdition – restitution of mistaken payments, again; and the defence of bona fide purchase

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| Mistaken payments, Restitution

Santa-nder: Santa carrying a sack branded SantanderBanks are more often cast in the role of Scrooge than Santa; and, even when they start out in the latter role, they end up in the former.

For example, where over-active ATMs played Santa and permitted withdrawals of amounts greater than available funds or credit, the bank quickly became Scrooge, insisting that all money withdrawn by customers in excess of their balances will have to be repaid. Unlike in monopoly, you cannot retain the proceeds of a bank error in your favour. It’s not a gift either from God or from the bank. As I have explained many times on this blog, this is a mistaken payment, and the recipient must return it, unless there is a defence. And, if it is not returned, it could constitute theft.

Just before Christmas, Santander bank found itself first as Santa and then as Scrooge:

Bank accidentally deposits $176 million into people’s accounts on Christmas Day

Thousands of people received a surprise gift on Christmas Day this year when European bank Santander accidentally deposited £130 million ($176 million) across 75,000 transactions.

The mistake happened when payments from 2,000 business accounts in the U.K. were processed twice, meaning some employees saw their wages double, while suppliers also got more than they were expecting.

…

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A short note on the quantification of enrichment in HKR Middle East Architects Engineering LC v English

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| Restitution

HMRC, 100 Parliament Square, via WikipediaIn two previous posts (here and here), I have looked at issues arising out of McDonald J’s judgments in HKR Middle East Architects Engineering LC v English (No 1) [2019] IEHC 306 (10 May 2019); (No 2) [2021] IEHC 142 (3 March 2021); (No 3) [2021] IEHC 376 (31 May 2021). In HKR v English (No 1) McDonald J held that English had been unjustly enriched at the expense of HKRME. However, he valued that enrichment, not as the full US$8,094,873 ultimately paid to English, but as limited to the (probably substantially smaller) amount of HKRME’s unpaid and lawful liabilities. And he directed that an account should be taken of those liabilities. In both HKR v English (No 2) and HKR v English (No 2), McDonald J affirmed this conclusion.

In my first post, I pointed out that a cause of action for restitution of unjust enrichment is complete when the payment is made by the plaintiff and received by the defendant, so that the defendant’s enrichment is the amount paid by the plaintiff. This is because, where the enrichment is the payment of money, complex questions seldom arise (Dublin Corporation v Building and Allied Trade Union (the Bricklayers’ Hall case) [1996] 2 IR 468, 483; [1996] 2 ILRM 547, 558, (24 July 1996) [37]-[40] (doc | pdf | html) (Keane J; Hamilton CJ, O’Flaherty, Blayney and Barrington JJ concurring); Test Claimants in the Franked Investment Income Group Litigation v Revenue and Customs (No 3) [2021] UKSC 31 (23 July 2021) [FII (No 3)] [170] (Lords Reed and Hodge (in a joint judgment; Lords Briggs, Sales and Hamblen concurring)).…

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Was there an automatic resulting trust HKR Middle East Architects Engineering LC v English?

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| Restitution, Trusts

VandervellIn my previous post, I discussed the unjust enrichment claim that was at least partially successful in in HKR Middle East Architects Engineering LC v English (No 1) [2019] IEHC 306 (10 May 2019); (No 2) [2021] IEHC 142 (3 March 2021); (No 3) [2021] IEHC 376 (31 May 2021). In this post, I want briefly to discuss a trust point that was not taken in the case that may have availed HKRME. In HKR v English (No 3) [2}, McDonald J recorded that, in the first stage of the case, HKRME claimed

… that the monies transferred from HKRME to the BVI entity [Sunvit] were held on trust for the children of Mr Ryan under a trust known as the Ryan Children’s Trust (“the RCT”). For reasons which are explained in the principal judgment, I came to the conclusion that, at least insofar as it purported to relate to the monies transferred to the BVI entity, the alleged trust was a sham and that the intended beneficiary of the transfers (subject to the unpaid liabilities of HKRME) was not any such trust but was instead Mr Ryan himself who had put the relevant arrangements in place with a view to concealing assets from his creditors.

…

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