England and Wales Court of Appeal (Civil Division) Decisions

NATIONAL WESTMINSTER BANK PLC v. SOMER INTERNATIONAL (UK) LIMITED [2001] EWCA Civ 970 (22nd June, 2001)

Case No: B2/2000/0381

Neutral Citation Number: [2001] EWCA Civ 970

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE BRISTOL COUNTY COURT

(HIS HONOUR JUDGE NELIGAN)

Royal Courts of Justice

Strand, London, WC2A 2LL

Friday 22^nd June, 2001

LORD JUSTICE POTTER:

INTRODUCTION

1. This is an appeal by the defendants Somer International (UK) Limited (`Somer') from the judgment dated 18 February 2000 of His Honour Judge Neligan in the Bristol County Court whereby he ordered Somer to repay to the claimant National Westminster Bank PLC (`Nat West') the sum of £38,688.02 inclusive of interest previously transferred by mistake by Nat West into the account of Somer. The amount ordered to be repaid was the amount of the original transfer made in error, namely US$ 76,708.57 less US$ 21,616.14, that latter sum being the value of goods despatched by Somer to one of its customers on the basis of the transfer before the error was discovered. The judge held that, despite the plea of estoppel by representation raised by Somer in respect of the entirety of the sum transferred, Somer was entitled to rely upon such representation only to the extent that it acted to its detriment in reliance upon it.

2. In deciding as he did, the judge followed the decision of Harrison J in Scottish Equitable plc -v- Derby [2000] 3 All ER 793, since affirmed by this court on 16^th March 2001. On this appeal, Somer has argued that the judge was wrong to follow the Scottish Equitable decision, being bound to follow the previous decision of this court in Avon County Council -v- Howlett [1983] 1 WLR 605 (`Howlett'), in which it was stated that estoppel cannot operate pro tanto. Nat West, on the other hand, seek to uphold the decision of the judge. They further argue that this court should if necessary depart from the principle stated in Howlett, applying instead the more limited defence of `change of position' recognised by the House of Lords in Lipkin Gorman (a firm) -v- Karpnale Limited [1991] 2 AC 548 (`Lipkin Gorman'), by which the defence of `change of position' was held to be a defence to a restitutionary claim for repayment of money paid under a mistake of fact to the extent that it would be an injustice if the payee were called upon to repay or to repay in full: see per Lord Goff of Chieveley at 579E-580H.

3. Nat West also appeal by way of respondent's notice, as to which see further at paragraph 33 below.

THE FACTS

4. Somer, which carried on business exporting computer equipment, was at all material times the customer of Nat West and from time to time received payment in dollars from foreign purchasers by sums paid to the credit of a dollar account maintained at Nat West. In summer 1996, Somer began trading with an African based company called Mentor, supplying computer equipment to Mentor for on-sale to African end users. Dealing in round figures by 1997 Mentor owed Somer £166,000 in relation to such supplies. In April 1997 Mentor remitted £100,000 to Somer and indicated shortly afterwards that a further payment of between US$ 70,000 and US$ 78,000 would be forwarded shortly. Somer were in touch with Nat West about the prospective receipt of such payment.

5. On 28 April 1997, as a result of an error within Nat West a sum of US$ 76,708.57 received by Nat West from a company called Moffett Engineering Ltd and intended for the account of another Nat West client called Somer Sundstrand Limited, was credited to Somer's dollar account. On or about the same date Nat West notified Somer that the further dollar monies which they were expecting had been received into that account. In the belief that, by such payment, Mentor had reduced the balance of its trading account with Somer, on 30 April 1997 Somer despatched goods to Mentor to the value of £5,221.99, and on 30 May 1997, in the same belief, made a further shipment of goods to the value of £7,958.58.

6. On 24 February 1998, the bank notified Somer that the dollar payment made on 28 April 1997 had been made in error and requested re-payment. By this date, Mentor had ceased to trade from its former premises in Africa and had effectively disappeared as a trading entity. The bank thereafter brought proceedings to recover the dollar payment of US$ 76,708.57.

THE DECISION BELOW

7. The case for Somer depended upon the evidence of Mr Richardson, its managing director with overall responsibility for finance and accounts. In his witness statement he said that towards the end of April 1997 he made enquiry of a lady who rang him from the bank's international business department to advise him on another matter, whether the expected sum of US$ 70-78,000 had yet arrived from Mentor in a dollar account. He was told it had not. However, a few days later he received another telephone call from another female employee in which he was told that the payment he had been expecting had been received and that the sum of US$ 76,708.57 had arrived and been credited to the account. He said it was possible that he was told that the funds had arrived from Moffett Engineering, but this would have meant nothing to him as such payments were often received from customers of Somer's African clients by way of payment on their behalf. He said that, after receiving notification from Nat West he had informed Mentor over the telephone that Somer had received the expected monies, to which he received the reply "Have you? OK." He stated that he had no suspicion that the credit of the dollar payment to Somer was other than money which Somer was owed by Mentor. Mr Richardson's evidence was fully tested in cross-examination and, in particular, the bank relied upon a credit advice of payments received by Somer from the bank within a week after the payment had been made which made clear that the sum had been received from Moffett and was intended for `Somer Sundstrand Limited' not `Somer International Limited', which Nat West contended put Somer on notice of the error.

8. The judge made no finding in terms upon the nature or content of any representation made by the bank. However, he found that Mr Richardson was an honest and reliable witness and accepted his evidence that he honestly believed that the dollar payment came from Mentor and was money to which Somer was lawfully entitled. His findings can only sensibly be taken as reflecting and amounting to an acceptance of Mr Richardson's evidence that he was told by the bank on or about 28 April 1997 that the expected dollar payment from Mentor had now been received and was standing to the credit of the defendant's dollar account at Nat West.

9. The judge went on to find that:

"in the belief that the dollar payment had been paid by Mentor, which thereby reduced its debt to Somer, Somer released goods on 30th April to the value of £5,221.99 and on 30th May 1997 to the value of £7,958.58 ... making a total of £13,180.57 and thereby changed its position because of the mistaken credit of the dollar payment to its account on 28th April."

Thus, the judge found that the reason and cause of the detriment to Somer. was the representation of the bank that the expected dollar payment from Mentor had now arrived.

10. The judge went on to state that he was not prepared to find, as Somer had argued, that Somer lost the value of an opportunity thereafter to recover other monies owed by Somer. He said:

"In the first case I am not satisfied that the causal link exists between receipt of the dollar payment and the [loss of the] chance to pursue Mentor successfully for payment of all or a substantial part of Mentor's liability to Somer. Secondly, the evaluation of that chance is nil in my judgment which again gives rise to a totally different situation than that which arose in the Allied Maples Group case.

The result therefore of my findings and conclusions is that having found that Somer had changed its position in reliance upon the dollar payment to the extent £13,180.57 there will consequently be a set-off of that sum or the dollar equivalent against the dollar payment of $76,708.57 in accordance with the principles adopted by Harrison J in Scottish Equitable PLC -v- Derby."

THE LAW

11. In Lipkin Gorman, the House of Lords in 1991 recognised `change of position' as a general defence to all restitutionary claims: see the review of the authorities and the conclusion of Lord Goff at 577H-581B. Lord Goff stated at 578G-580G:

"Historically, despite broad statements of Lord Mansfield to the effect that an action for money had and received will only lie where it is inequitable for the defendant to retain the money (see in particular Moses -v- MacFerlan (1760) 2 Burr 1005), the defence has received at most only partial recognition in English law .... Instead, where change of position has been relied upon by the defendant, it has been usual to approach the problem as one of estoppel: see, e.g. R E Jones Limited -v- Waring & Gillow Limited [1926] AC 670 and Avon County Council -v- Howlett [1983] 1 WLR 605. But it is difficult to see the justification for such a rationalisation. First, estoppel normally depends upon the existence of a representation by one party, in reliance upon which the representee has so changed his position that it is inequitable for the representor to go back upon his representation. But, in cases of restitution, the requirement of a representation appears to be unnecessary. It is true that, in cases where the plaintiff has paid money directly to the defendant, it has been argued (though with difficulty) that the plaintiff has represented to the defendant that he is entitled to money; but in a case such as the present, in which the money is paid to an innocent donee by a thief, the true owner has made no representation whatever to the defendant. Again, it was held by the Court of Appeal in Avon County Council -v- Howlett that estoppel cannot operate pro tanto, with the effect that if, for example, the defendant has innocently changed his position by disposing of part of the money, a defence of estoppel would provide him with a defence to the whole of the claim. Considerations such as these provide a strong indication that, in many cases, estoppel is not an appropriate concept to deal with the problem .... It is not however appropriate in the present case to attempt to identify all those actions in restitution to which change of position may be a defence. A prominent example will, no doubt, be found in those cases where the plaintiff is seeking repayment of money paid under a mistake of fact; but I can see no reason why the defence should not also be available in principle in a case such as the present, where the plaintiff's money has been paid by a thief to an innocent donee, and the plaintiff then seeks repayment from the donee in an action for money he had and received. At present I do not wish to state the principle any less broadly than this: that the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full. I wish to stress however that the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable that he should be called upon to repay, because the expenditure might in any event have been incurred by him in the ordinary course of things. I fear that the mistaken assumption that mere expenditure of money may be regarded as amounting to a change of position for present purposes has led in the past to opposition by some to recognition of a defence which in fact is likely to be available only on comparatively rare occasions."

12. Prior to Lipkin Gorman, as pointed out by Lord Goff, in order to establish a defence of change of position in respect of money paid under a mistake of fact, it was necessary for the defendant to spell an estoppel out of the circumstances surrounding the mistake of fact on the basis of which the plaintiff asserted his right to recover in a claim for money had and received. That was not always easy and, in the case of a bank making a mistaken transfer or credit entry in the account of a customer, a degree of inventiveness might sometimes prove necessary. However, it is plain that, in the passage from his speech quoted above, Lord Goff did not attack the reasoning of the Court of Appeal in Howlett.

13. In Howlett, the terms of the defendant's contract of employment with the plaintiffs and the manner in which the plaintiffs controlled the assessment of the defendant's pay rendered the plaintiffs under a duty to determine his entitlement and not to misrepresent it. Thus, the court held that in making over payments in error to him from time to time, the plaintiffs represented to the defendant that the sums paid were indeed his entitlement. The defendant pleaded that, in reliance upon the plaintiffs' representation, he incurred expenditure which he would not otherwise have incurred had he appreciated that his income was lower than that represented by the sums paid to him. The trial judge held that the defendant could retain any of those sums he had spent in reliance on the plaintiffs' representations. Slade LJ stated as follows in relation to the defence of estoppel at 620F-H:

"The following general propositions of law are to be found set out in Goff and Jones, The Law of Restitution, 2^nd ed (1978) pp 554-555 (though I do not quote them verbatim). A plaintiff will be estopped from asserting his claim to restitution if the following conditions are satisfied:

(a) the plaintiff must generally have made a representation of fact which led the defendant to believe that he was entitled to treat the money as his own;

(b) the defendant must have, bona fide and without notice of the plaintiff's claim, consequently changed his position;

(c) the payment must not have been primarily caused by the fault of the defendant.

In my opinion these propositions are entirely consistent with both the general principles which govern the doctrine of estoppel and with the authorities which have been cited to this court, illustrating the relevance of estoppel as a defence to claims to restitution. Examples of the more important of such authorities are Skyring -v- Greenwood 4 B&C 281; Holt -v- Markham [1923] I KB 504 and Lloyds Bank Limited -v- Brooks (1950) 6 Legal Decisions Affecting Bankers 161."

14. Later, at 621E-G he said:

"The judge considered that the defence of estoppel was in fact capable of being applied pro tanto, in the sense that a payer who has overpaid a payee, even in circumstances where all of conditions (a), (b) and (c) above are satisfied, will be precluded from claiming restitution only to the extent that it would be inequitable to require the payee to repay the relevant sums or part of the relevant sums in question. The judge clearly regarded the doctrine of estoppel as being a flexible doctrine, as indeed Lord Denning MR described it in Amalgamated Investment & Property Co Limited -v- Texas Commerce International Bank Limited [1982] QB 84, 122.

If I may respectfully say so, I feel some sympathy for the judge's point of view. I also initially found unattractive the submission, placed before and rejected by him, that, if the defendant be treated as having spent in reliance on the plaintiffs' representations some £546.61 of the £1,007 received, the plaintiffs could not recover the balance of £460.39 even if it were still sitting untouched in some deposit account. At first sight such a conclusion would seem to leave the defendant unjustly enriched."

15. Nonetheless, Slade LJ went on to state that the conclusion of the judge involved the proposition that, if the defendant was successfully to resist a claim for repayment of a particular sum, the onus fell on him to prove specifically that the pecuniary amount of the prejudice suffered by him as a result of relying on the plaintiffs' representation equalled or exceeded that sum and pointed out the difficulties of doing so in a situation where the defendant, as in the instant case, had relied on a representation by ordering his general mode of living or undertaking commitments which it would be difficult for him subsequently to recall and identify in detail. He stated at 622B-C that:

"though extreme hypothetical cases can be envisaged, and indeed were canvassed in argument, in which broad considerations of equity and justice might appear to require the barring of a plaintiff's claim only pro tanto, if this were legally possible, I would not expect many such cases to arise in practice. In any event I do not consider the present case to be one of them, even on the basis of the facts as pleaded. I prefer to approach it simply by what I regard as the established legal principles governing the doctrine of estoppel."

16. He pointed out that estoppel by representation is a rule of evidence, the consequence of which is simply to preclude the representor from averring facts contrary to his own representation. That being so, a party entitled to rely on an estoppel might in some cases recover more than the actual damage suffered by him as a result of the representation which gave rise to it. He went on to refer to a number of authorities which demonstrated that in cases where estoppel by representation was available as a defence to money had and received the courts do not treat the operation of the estoppel as being restricted to the precise amount of the detriment which the representee proves he has suffered in reliance on the representation. At 624B he stated:

"If it were in every case possible for the doctrine of estoppel by representation to operate merely pro tanto in cases where it is being invoked as a defence to an action for money had and received, I think that the Court of King's Bench in Skyring -v- Greenwood 4 B&C 281, and the Court of Appeal in Holt -v- Markham [1923] 1 KB 504 and indeed, Lynskey J. in Lloyds Bank Ltd v Brooks, 6 Legal Decisions Affecting Bankers 161 would have been bound to conduct a much more exact process of quantification of the alteration of the financial position of the recipients, which had occurred by reason of the representations. The courts, however, in those cases, manifestly regarded any such process as irrelevant and inappropriate. All the relevant conditions for the operation of an estoppel being satisfied in those cases, the plea operated as a rule of evidence which precluded the payers from recovering any part of the money mistakenly overpaid or from retaining any part of the moneys mistakenly over-credited.

I think that no authority has been cited, other than the judgment of the judge, which directly supports the proposition that estoppel is capable of operating merely pro tanto in a case such as the present, where it is otherwise capable of being invoked as a complete defence to an action for money had and received. For the reasons which I have given, I conclude that such a proposition is contrary to principle and authority."

17. Nonetheless, Slade L.J. went on to observe at 624H:

"I recognise that in some circumstances the doctrine of estoppel could be said to give rise to injustice if it operated so as to defeat in its entirety an action which would otherwise lie for money had and received. This might be the case for example, where the sums sought to be recovered were so large as to bear no relation to any detriment, which the recipient could possibly have suffered. I would for my part prefer to leave open the question whether in such a case the court would have jurisdiction, in the exercise of its discretion, to exact an undertaking of the nature referred to by Viscount Cave L.C., if it was not voluntarily proffered by the defendant."

18. The undertaking referred to was a reference to the observations of Viscount Cave L.C. in R.E. Jones Ltd v Waring & Gillow Ltd [1926] AC at 685 in which, in the course of his dissent (with which Lord Atkinson agreed), he would have required the recital in the order made on the appeal of an undertaking by the defendants in that case which reflected their offer to repay to the plaintiffs any part of the sum received which they ought not to be entitled to keep on the basis that it would have represented a profit to them.

19. For his part, Cumming-Bruce L.J. in Howlett expressed the view at 608E that:

".. it is not easy to determine whether and when the court will restrict the effect of an estoppel if to apply it with the full rigour will clearly produce injustice. Viscount Cave L.C. in R.E. Jones Ltd v Waring & Gillow Ltd...evidently thought that the court should find a way of preventing a party so using estoppel as to make a profit, but Lord Denning M.R. thought that estoppel was a flexible doctrine: see Amalgamated Investment & Property Co. Ltd v Texas Commerce International Bank Ltd...I do not consider that the decision of this court in the instant appeal is authority for the proposition that where, on the facts, it would be clearly inequitable to allow a party to make a profit by pleading estoppel, the court will necessarily be powerless to prevent it."

20. Finally, Eveleigh L.J. said at 611H:

"However I am far from saying that whenever the recipient of money paid under a mistake has been led to think that it is his, then he will be entitled to retain the whole by demonstrating that he has spent part of it. The payment may involve no representation, as where a debtor presents an account to the creditor. Then while there might have been a representation there may be circumstances which would render it unconscionable for the defendant to retain a balance in his hands. There may also be circumstances which would make it unfair to allow the plaintiff to recover."

21. In Scottish Equitable, the claimant insurance company had overstated the amount of a pension fund available to the defendant, as a result of which he received a substantial overpayment, the company having overlooked the fact that he had previously exercised an option to take an early retirement benefit. The result of the benefits accruing to the defendant were, in broad terms, that he received an overpayment of some £172,500, while incurring expenditure of some £9,600 in making modest improvements to his life-style in reliance on the over-statement received. At first instance, Harrison J, in referring to Howlett, cited the reservations contained in the individual judgments which we have quoted and said as follows at 805e:

"On the face of it, therefore, Avon C.C. v Howlett provides strong support for the defendant's submission that, some detriment having been shown, estoppel should operate as a complete defence. However, it is important to bear in mind two matters. Firstly, the reservations expressed by the Court of Appeal as to the ambit of the decision in that case, and, secondly, the fact that that case was decided before the House of Lords recognised the defence of change of position in the Lipkin Gorman case."

22. He went on to say at 806b:

"In my judgment, it would be unconscionable, or clearly inequitable, to allow the defendant to keep the whole of the overpayment of £172,451 when his detriment is limited to £9,662 of that amount. In those circumstances, and having regard to the dicta of the Court of Appeal, which I have just quoted, I do not consider that I am bound by Avon CC v Howlett to hold, in the circumstances of this case, that estoppel must operate as a complete defence.

Secondly, there is the fact, as I have mentioned, that the case was decided before the House of Lords recognised the defence of change of position in the Lipkin Gorman case. In the latter case Lord Goff remarked that previously these kind of cases have been dealt with on the basis of estoppel."

23. Before turning to the decision on appeal in the Scottish Equitable case, I pause to make reference to the decision of Jonathan Parker J. in Philip Collins Ltd v Davis [2000] 3 All ER. 808, in which he was concerned with a change of position defence in a situation where he did not regard the making of the payments sought to be repaid as amounting to a representation for the purposes of estoppel by representation. In so holding, he made the following observation:

"In any event, as I read the relevant authorities, the law has now developed to the point where a defence of estoppel by representation is no longer apt in restitutionary claims where the most flexible defence of change of position is in principle available (see the Lipkin Gorman case at 580, Goff and Jones: The Law of Restitution (5th Edition) 1998) pp 828-829, Scottish Equitable Plc -v- Derby.... and Avon CC -v- Howlett ....."

24. He then went on to find that the ingredients of the defence of change of position had been established in respect of half the overpayment claimed.

25. In his leading judgment in the Court of Appeal, affirming the decision of Harrison J in the Scottish Equitable case, Robert Walker LJ asked three questions, the second and third of which were how far the defence of change of position assisted the payee in the circumstances of the case and what part (if any) had estoppel to play now that the defence of change of position has been recognised. So far as change of position was concerned, he referred to the view of Andrew Burrows (The Law of Restitution (1993) pp 425-8) that there is a narrow and a wide version of the defence. Robert Walker LJ stated at paragraph 30 of his judgment:

"The narrow view treats the defence as "the same as estoppel minus the representation" (so that detrimental reliance is still a necessary ingredient). The wide view looks to a change of position, causally linked to the mistaken receipt, which makes it inequitable for the recipient to be required to make restitution. In many cases either test produces the same result, but the wide view extends protection to (for instance) an innocent recipient of a payment which is later stolen from him (see Goff & Jones, The Law of Restitution 5^th ed (1998) p.822, also favouring the wide view)."

He went on:

"In this court Mr Stephen Moriarty QC .. for Scottish Equitable .. did not argue against the correctness of the wide view, provided that the need for a sufficient causal link is clearly recognised. The fact that the recipient may have suffered some misfortune (such as a breakdown in his health, or the loss of his job) is not a defence unless the misfortune is causally linked (at least on a `but for' test) with a mistaken receipt. In my view Mr Moriarty was right to make that concession. Taking a wide view of the scope of the defence facilitates is a more generous approach .. to the recognition of the right to restitution" (Lord Goff in Lipkin Gorman at p.581; and compare Lord Goff's observations in Kleinwort Benson -v- Lincoln City Council [1999] 2 AC 349 at p.385A-F)."

26. Having referred to the particular submissions of counsel as to the nature of the decisions which the payee may make and put into effect in reliance on the mistaken over-payment and the degree to which such decisions may properly be regarded as involving a change of position for the purposes of the defence, Robert Walker LJ observed:

"I would readily accept that the defence is not limited (as it is, apparently in Canada and some states of the United States: see David Securities Pty -v-Commonwealth Bank of Australia (1992) ALJR 768,780, noted in Goff & Jones at p.819) to specific identifiable items of expenditure. I would also accept that it may be right for the court not to apply too demanding a standard of proof when an honest defendant says that he has spent an overpayment by improving his lifestyle, but cannot produce any detailed accounting: see the observations of Jonathan Parker J in Philip Collins -v- Davis [2000] 3 All ER 808, 827, with which I respectfully agree."

He added, however, (at paragraph 34):

"But the court must proceed on the basis of principle, not sympathy, in order that the defence of change of position should not (as Burrows puts it at p.426) `disintegrate into a case by case discretionary analysis of the justice of individual facts, far removed from principle ... In general it is not a detriment to pay off a debt which will have to be paid off sooner or later: RBC Dominion Securities -v- Dawson (1994)111 DLR (4^th) 230. It might be if there were a long-term loan on advantageous terms, but it was not suggested that that was the case here."

27. So far as estoppel was concerned Robert Walker LJ referred to Lord Goff's observation in Lipkin Gorman quoted above to the effect that estoppel is not an appropriate concept to deal with mistakes of this kind, partly because of its `all or nothing' operation. He observed that the same view has been widely expressed both by academic writers and in the courts. However, on the basis of the finding of Harrison J that the claimant had made a representation to the defendant that he really was entitled to the payment he had received, Robert Walker LJ proceeded to consider the decision in Howlett in detail. Having referred to various of the passages which I have already quoted, he said in relation to the facts of the case before him:

"I would be content to follow the judge in refraining from attempting any general statement of principle and treating this case as comfortably within the exception recognised by all three members of this court in Avon County Council -v- Howlett. We cannot overrule that case but we can note that it was not seen, even by the court which decided it, as a wholly satisfactory authority, because of its fictional element."

28. He then proceeded to record a novel argument addressed to the court by counsel for the claimant that, since Lipkin Gorman, the defence of change of position pre-empts and disables the defence of estoppel by negating detriment in the following sense. As stated by Dixon J in Grundt -v- Great Boulder Pty Gold Mines (1938) 59 CLR 641 at 674-5:

"the basal purpose of the doctrine [of estoppel in pais] .. is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting ... the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who alters his situation upon the face of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it allowed, his own original change of position will operate as a detriment"

29. That being so, in a situation where A mistakenly transfers to B, or recognises his entitlement to a sum of money and B spends or loses some of it in a bad investment, but places the balance in the bank, if A then sues B but limits his claim to that balance, no detriment is demonstrable by B. Robert Walker LJ stated that he found this argument, which appeared not to have been considered by commentators interested in this area of law to be not only ingenious but convincing. However, he placed his decision upon the basis that recovery was in this case consistent with the decision in Howlett. He concluded his judgment by predicting `with some confidence' that with the emergence of the defence of change of position the court would no longer feel constrained to find that a representation has been made, in a borderline case, in order to avoid an unjust result, as appeared historically to be the position. He also predicted that the development of the law on a case by case basis would have the effect of enlarging rather than narrowing the exception recognised in Howlett. Finally, he observed:

"That process might be hastened (or simply overtaken) if the House of Lords were to move away from the evidential origin of estoppel by representation towards a more unified doctrine of estoppel, since proprietary estoppel is a highly flexible doctrine which, so far from operating as `all or nothing', aims at the "minimum equity to do justice" (Crabb -v- Arun District Council [1976] Ch 179,198)."

30. It seems to me that the facts of this case are such that, assuming the judge was correct in holding that a representation had been made by Nat West upon which Somer acted to its detriment in consigning further goods to Mentor to the value of some £13,000 but in no further respect, it involves this court in facing directly the questions raised by Robert Walker LJ. In the Scottish Equitable case the actual detriment found by the court, and which Scottish Equitable conceded it would not seek to recover, was some £9,660 out of a total overpayment of £172,451, a ratio of 1:17, giving rise to an overpayment of £162,790. While it could not be said that the detriment to Mr Derby was de minimis, it could readily be held that it was unconscionable and inequitable to allow him to retain the vast bulk of the overpayment, when his real detriment was limited to such a small proportion, and hence within the exception to the `all or nothing' rule recognised in Howlett. The instant case is, by reason of the sums involved, a somewhat less glaring illustration of an unjustifiable windfall to the defendant. That said, however, in cases of payments made under a mistake of fact, it is difficult to see why principles of equity and unconscionability should not apply to cover any case in which it appears a substantial windfall would otherwise be incurred by the transferee at the expense of the mistaken transferor.

THE GROUNDS OF APPEAL

Somer

31. For the appellant Mr Virgo has submitted that the judge was wrong to rely upon the reservations expressed by the Court of Appeal in Howlett and to adopt the same process of reasoning as Harrison J. in the Scottish Equitable case. He submits that, having accepted and found that the bank mistakenly made the dollar payment to Somer, representing at the time that the monies were due to Somer and that it might treat them as its own, and that Somer had thereafter acted on such representation to its detriment, he ought to have held that the bank was estopped from claiming repayment of any part of the payment made in accordance with the general principle upheld and applied in Howlett. He submits that the exception to the principle recognised in Howlett and applied in Scottish Equitable should only be applied 'where the sums sought to be recovered were so large as to bear no relation to any detriment which the recipient would possibly have suffered' (see per Slade L.J. at paragraph 17 above). In the present case, he submits that the sum sought by the bank was not in that category. Mr Virgo also relies upon the observation of Slade L.J. in Howlett that, if the pecuniary amount of a defendant's prejudice has to be precisely quantified, he may be faced with obvious difficulties of proof where he has either altered his general mode of living or (as in this case) proceeded to conduct his business on the assumption that the representation is correct.

32. In this connection, he submits that, but for the bank's representation, Somer would have refused to ship further gods unless it received payment of its outstanding account and thus there was a chance that the outstanding sums due to Somer would have been paid. He points out that the evidence given by Somer was that Mentor had always (eventually) paid in the past and that the sub-purchasers, upon whose creditworthiness Mentor's ability to pay depended, were substantial concerns. He submits that, having received an assurance from Mentor that it was shortly to make further payment of $70-78,000, there is no reason to think that this did not reflect a realistic level of receipts in hand from sub-purchasers. However, when, as a result of the bank's error, Mr Richardson indicated to Mentor that the expected moneys had been received, this enabled Mentor to take advantage of the situation by accepting the suggestion that the monies had been paid. If the inference is to be drawn that Mentor were dishonest, then the bank's error facilitated the very fraud which was then committed. Further, if Somer had pressed for payment there was no reason to suppose that Mentor would not have passed on, rather than dissipated elsewhere, monies received from its sub-purchasers. The very difficulty of valuing Somer's lost opportunity in that respect was itself a reason for holding Nat West to the representation which it made without any form of restitution.

Nat West

33. There is an extensive respondent's notice in this case, largely directed to the factual findings of the judge. First it is contended that there was no sufficient evidence of a representation by the bank. Second that, Somer failed to adduce sufficient evidence for the judge to be satisfied even that further goods had been shipped in reliance upon the representation. Third, that the judge failed to take proper account of the inequity to the bank in allowing Somer to retain any part of the money paid to it by mistake. I do not propose to deal with the matters advanced in any detail. Suffice it to say, that it seems clear to me that there was before the judge evidence which entitled him to come to all his main conclusions as I have stated them.

34. So far as the law is concerned, the respondent's notice summarises Nat West's submissions in law (without reference to authority) as follows. First, it states that the defence of estoppel by representation cannot operate so as to defeat a claim for restitution of money paid by mistake when the detriment said to have been suffered as a result can be accurately assessed to the court's satisfaction in money's worth and is less than the amount received in error. In such a case, equity requires only that the recipient be entitled to retain an amount sufficient to compensate him for his detriment; accordingly, in such circumstances, only the defence of change of position is available to the recipient and he must account to the payor for the balance of the money received by him in error. Secondly, it is submitted that in any event the defence of estoppel by representation should not be allowed to defeat a claim for restitution of money paid by mistake unless the unintended recipient can show that the value of the detriment suffered by him in reliance on the representation founding the estoppel was substantial when compared to the amount of money received.

DISCUSSION

35. It is unattractive that, in a case of monies paid over under a mistake of fact and sought to be recovered on the basis of unjust enrichment, the extent of the recovery should depend on whether or not, at the time of the transfer of the monies, the transferor represented by words or conduct that the transferee was entitled to such payment. When the mistake occurs, particularly in the context of a banker/customer relationship, whether or not an actual representation as to entitlement was made or can be spelt out is largely fortuitous and ex hypothesi the result of accident rather than deliberate conduct. It also seems clear that, where there has been such a representation, the only substantial hurdle standing in the way of recovery, subject to an appropriate equitable adjustment in relation to the actual `detriment' suffered, is the view that the historical origin and technical status of estoppel by representation as a rule of evidence dictates an `all or nothing' solution the effect of which is that, once the representation has been acted on to the detriment of the transferee the contrary may not be asserted. This differs from the position in the case of so-called `equitable' or `promissory' estoppel in respect of which a specific promise to waive or refrain from enforcing rights may be withdrawn on reasonable notice and, in `proprietary' estoppel, where when giving effect to the interest or right in property which the party raising the estoppel asserts, the court assumes a wide discretion as to the terms on which such relief is granted. In this respect estoppel by representation also differs in nature from the defence of `change of position' which is only permitted to prevail to the extent that it would be inequitable to require the transferee to return the money.

36. There is no doubt that the preponderance of legal authority and judicial dicta at the highest level favours the view that estoppel by representation is a rule of evidence rather than of substantive law: see Low -v- Bouverie [1891] 3 Ch 82 at 105 per Bowen LJ ("Estoppel is only a rule of evidence: you cannot found an action upon estoppel ... [It] ... is only important as being one step in the progress towards relief on the hypothesis that the defendant is estopped from denying the truth of something which he has said.") and see to similar effect per Lord Russell of Killowen in Nippon Menkwa Kabushiki Kaisha -v- Dawson's Bank Limited [1935] 51 Lloyd's LR 147 at 150; see also per Viscount Haldane in London Joint Stock Bank Limited -v-MacMillan [1918] AC 777 at 818 ("it is hardly a rule of what is called substantive law in the sense of declaring an immediate right or claim. It is rather a rule of evidence, capable not the less on that account of affecting gravely substantive rights."); finally per Lord Wright in Evans -v- Bartram [1937] AC 473 at 484 ("estoppel is a rule of evidence that prevents the person estopped from denying the existence of a fact.")

37. Nonetheless, because of the decisive impact which estoppel by representation may have upon the outcome of any individual case, whether as a step on the way to establishing a cause of action, or as defeating a prima facie valid claim based on facts which (absent the representation) would entitle the claimant to recover, such estoppel undoubtedly gives rise to substantive legal consequences. As Lord Wright later observed in Canada and Dominion Sugar Co. Limited -v- Canadian National (West Indies) Steamships Limited [1947] AC 46 at 56:

"Estoppel is a complex legal notion, involving a combination of several essential elements, the statement to be acted on, action on the face of it, resulting detriment to the actor. Estoppel is often described as a rule of evidence as, indeed, it may be so described. But the whole concept is more correctly viewed as a substantive rule of law."

It seems that the only judicial statement in unqualified form which classifies estoppel by representation as a rule of substantive law rather than a rule of evidence is the observation of Lord Denning MR in Moorgate Mercantile Co Limited -v- Twitchings [1976] QB 225 at 241H:

"Estoppel is not a rule of evidence. It is not a cause of action. It is a principle of justice and of equity. It comes to this: when a man by his words or conduct, has led another to believe in a particular state of affairs, he will not be allowed to go back on it when it would be unjust or inequitable for him to do so."

In the light of the state of the authorities and the clear statement in Howlett on a matter integral to the court's decision, it does not seem to me that it is open to this court at least to depart from the traditional classification of estoppel by representation as a rule of evidence.

38. I would only add in this connection that there are various dicta in terms which support the view that a single purpose underlies all forms of estoppel on the basis that all aspects of the rules developed are examples of general principle applied so as to prevent A from refusing to recognise, or seeking unjustly to deny or avoid, an assumption or belief which he has induced, permitted or encouraged in B and on the basis of which B has acted or regulated his affairs: see for instance Moorgate -v- Twitching (supra) at p.241H-242G; see also the observations of Scarman LJ in Crabb -v Arun DC [1976] Ch 179 at 193 in relation to the distinction between promissory and proprietary estoppel. However, various particular difficulties in the manner in which, and the limitations subject to which, the various types of estoppel have been developed, have so far prevented a rationalisation of this kind. As stated by Millett LJ in First National Bank -v- Thompson [1996] Ch 231 at 236F:

"[An attempt] to demonstrate that all estoppels other than estoppel by record are now subsumed in the single and all-embracing estoppel by representation and that they are all governed by the same requirements has never won general acceptance. Historically unsound, it has been repudiated by academic writers and is unsupported by authority."

39. Despite some advances in this direction made in Commonwealth jurisdictions, it seems to me that the position remains unchanged in this country to date. Thus, faced with an invitation to formulate a single general principle to cover two types of estoppel with which he was called upon to deal in Republic of India -v India Steamship Company Limited No 2 [1998] AC 878, Lord Steyn observed at 914C:

"The question was debated whether estoppel by convention and estoppel by acquiescence are but aspects of one overarching principle. I do not underestimate the importance in the continuing development of the law of the search for simplicity. I, also, accept that at a high level of abstraction such an overarching principle could be formulated. But .. to restate the law in terms of an overarching principle might tend to blur the necessarily separate requirements, and distinct terrain of application, of the two kinds of estoppel."

40. That said, and accepting estoppel by representation to be a rule of evidence, which ordinarily requires that a more than de minimis degree of detriment is definitive of the transferee's right to retain the entirety of a mistaken payment, it is plain that the court in Howlett, and subsequently in the Scottish Equitable case, considered that there yet remained scope for the operation of equity to alleviate the position on grounds of unfairness or unconscionability, although in the latter case it failed to elucidate that conclusion by reference to authority other than Howlett which in turn quoted no authority to that effect. It seems to me that authority in the form of a clear statement as to the underlying principles being those of equity is nonetheless available, whatever the appropriate juridical classification of estoppel by representation.

41. Although the doctrine of estoppel by representation was developed in the field of commercial transactions by the common law in the early 19^th century as a principle of broad application it had its origins in cases concerning the negotiation of marriage settlements which were principally heard in the Courts of Equity (see generally Cooke: The Modern Law of Estoppel (O.U.P.) pp.19-22). In Jorden -v- Money (1854) 5.H.L.C. 185 (10 ER 868) at 210 (880) estoppel by representation was described by Lord Cranworth LC as:

"a principle well known in the law, founded upon good faith and equity, a principle equally of law and of equity."

42. Later at 212-213 (881) he stated:

"The whole doctrine was very much considered at law, for it is a doctrine not confined to cases in equity, but one that prevails at law also; and there are, in fact, more cases upon the subject at law than in equity."

43. Thus, whether or not the dicta of Lord Denning MR in Moorgate -v Twitchings (see paragraph 37 above) be correct in terms of classification, it is clear that the doctrine of estoppel by representation stems from and is governed by considerations of justice and equity. That being so, it is difficult to see why equity should, as between the parties, be impotent in an appropriate case or category of case to require a person relying upon the defence of estoppel by representation to rely upon it only to the extent of any detriment suffered

44. In Howlett the court cited three cases which suggested that, where estoppel by representation is raised as a defence to a claim for money had and received, the courts do not treat the operation of estoppel as being restricted to the precise amount of the detriment which the representee proves he has suffered in reliance on the representation: Skyring -v Greenwood 4B.&C. 281, citing a passage from the judgment of Abbott CJ at 289; Holt -v-Markham [1923] 1 KB 504; and Lloyds Bank Limited -v- Brooks, 6 Legal Decisions Affecting Bankers for the Arbitrators Award of 14 September 2000. The court also cited Ogilvie -v- West Australian Mortgage and Agency Corporation Limited [1896] AC 257 and Greenwood -v- Martins Bank Limited [1932] 1 KB 371 (affirmed in the House of Lords [1933] A.C. 51) as demonstrating that a claimant who, as a result of being able to rely on estoppel, succeeds on a cause of action on which, without being able to rely on it, he would necessarily have failed, may be able to recover more than the actual damage suffered by him as a result of the representation which gave rise to it.

45. It is difficult to see how the last two cases support the principle for which they were cited. In each case a bank customer discovered that cheques drawn on his account had been forged, but failed to inform the bank until a substantial period had elapsed. In each case it was held that there was no need to investigate whether the bank could in fact have recovered money from the forger had it acted immediately. The banks had not received benefit, but had suffered loss of any opportunity for recovery elsewhere, as to which the uncertainty of such recovery was resolved in favour of the representee. That point is made in Goff & Jones: the Law of Restitution (5^th ed) at 832.

46. Similarly, the point is made that, albeit in Skyring -v Greenwood and Holt -v- Markham there was no exact enquiry into the degree to which each defendant had altered his financial position, there was equally no judicial statement that estoppel by representation could not operate pro tanto in an appropriate case. In Skyring -v- Greenwood, indeed, it is not clear that there was evidence of any detrimental reliance, the court simply assuming that it had taken place. In Holt -v- Markham, while it is clear from the judgment of Warrington LJ at 512 that not all the money had been spent, there is no indication whether the balance which remained was substantial and it is clear that, in addition to mere spending, the defendant had parted with his War Savings Certificates: see per Bankes LJ at 511. It seems to me that those cases do no more than establish that the court will generally think it appropriate to treat the matter broadly and will not require the defendant to demonstrate in detail the precise degree or value of the detriment which he has suffered in circumstances where, as Slade LJ pointed out, "he may find it difficult subsequently to recall and identify retrospectively the nature and extent of commitments undertaken or expenditure incurred as a result of an alteration in his general mode of living". However, it is open to the court, acting on equitable principles, to take the view that some restitution is necessary, albeit the burden upon the defendant of proving the precise extent of his detriment should be a light one. In these circumstances, the court may well have broad regard to, without being bound to follow, the developing lines of the courts' approach in `change of position' cases. However, the two defences will remain distinct, unless or until the House of Lords rules otherwise.

47. There may indeed be good reasons why this should be so and why the issue is not simply one of jurisprudential `tidiness'. First, in considering the equities between the parties, there are plainly arguments for holding that the fact that a representation was made (albeit mistakenly) may in particular circumstances affect the court's view as to whether and how far, detriment having been established, it should order a restitutionary payment. Second, as pointed out by Fung and Ho in their article `Change of Position and Estoppel' (2001) 117 LQR 14 at 17, the defence of `change of position' only protects actual reduction of the transferee's assets following receipt. A transferee who, in reliance upon a receipt, forgoes a realistic and quantifiable opportunity to increase his assets is not apparently protected. It has also been held in South Tyneside MBC -v- Svenska International plc [1995] 1 All ER 545, following Hobhouse J in Kleinwort Benson Limited -v- South Tyneside MBC [1994] 4 All ER 972 that, in order to be successful, a change of position defence must be based on a change after the receipt of the mistaken payment, the facts of Lipkin Gorman having been exceptional. The South Tyneside -v- Svenska decision has been the subject of some criticism (see Goff & Jones at pp 822-824). However, assuming its correctness (and we have heard no submissions in that regard), it marks a further difference between the defence of `change of position' and of estoppel in any case where a representation as to the entitlement of the payee has been communicated to him and relied on in anticipation of actual receipt.

48. Thus, the question to be decided on this appeal is whether, in the light the judge's findings that Somer had suffered detriment and/or changed its position only to the extent of £13,180.57, it should be obliged to repay the balance of the sum received from Nat West on the basis of the exception recognised in Howlett. This was a case where the mistake of the bank would have been detected early had Somer kept close account of its dealings with Mentor. Although the judge found that Mr Richardson had continued to rely upon the information first communicated to him that the payment from Mentor had now been received, Nat West shortly afterwards forwarded a credit advice which made the position clear at a time when Somer had forwarded goods worth only £5,221.99. The judge rejected the case for Somer that it had incurred any detriment other than despatch of goods worth £13,180.57 in reliance upon the representation, being satisfied that Somer's chance of pursuing Mentor successfully for payment was nil. In those circumstances, it seems to me that the judge was fully entitled to hold that the payment sought was of such a size that it bore no relation to the detriment which Somer could possibly have suffered and that it would be unconscionable for Somer to retain the balance over and above the value of the goods shipped.

CONCLUSION

49. For the reasons above stated, I would dismiss this appeal.

LORD JUSTICE CLARKE:

50. I agree that this appeal should be dismissed for the reasons given by Peter Gibson and Potter LJJ, whose judgments I have seen in draft.

51. The decision in Scottish Equitable v Derby, unreported, 16^th March, 2001, and the argument in this case have again demonstrated some of the problems which surround the doctrine of estoppel by representation. In particular there are two problems which it seems to me should if possible be considered by the House of Lords in an appropriate case. The first is the extent, if at all, to which estoppel by representation can operate pro tanto and the second is the relationship between such an estoppel and the defence of change of position. I agree that it is not open to this court either to hold that there is no room for estoppel where the defence of change of position is available or to depart from Avon County Council v Howlett [1983] 1 WLR 605.

52. I do not wish to say anything about the defence of change of position, but only to consider briefly the principles which seem to me to apply to the application of the doctrine of estoppel by representation as matters stand at present and absent any definitive consideration by the House of Lords. I do so in part because this is an estoppel case on the facts and because it seems to me that, even if the House of Lords were to hold that there is no longer any room for the operation of estoppel where a defence of change of position is available, there are likely to remain cases where a defendant who has acted on a promise that he is to receive money will properly wish to plead an estoppel.

53. In order to consider the law as it stands at present, it seems to me that it is necessary to identify the propositions of law for which Howlett is authority. To my mind it is authority for two propositions and there is a tension between them. The first is that estoppel by representation is a rule of evidence, the consequence of which is to preclude the representor from averring facts contrary to his own representation: per Slade LJ at page 622D. Slade LJ discussed the operation of the doctrine in a number of classes of case between pages 622 and 624 and concluded at page 624D:

"All the relevant conditions for the operation being satisfied in those cases, the plea operated as a rule of evidence which precluded the payers from recovering any part of the money mistakenly overpaid or from retaining any part of the moneys mistakenly over-credited.

I think that no authority has been cited, other than the judgment of the judge, which directly supports the proposition that estoppel is capable of operating merely pro tanto in a case such as the present, where it is otherwise capable of being invoked as a complete defence to an action for money had and received."

54. In the interesting article by Fung and Ho on Change of Position and Estoppel (2001) 117 LQR 14 which is referred to by Potter LJ the authors criticise that approach and say at page 19 that it is high time that estoppel was regarded as a substantive (as opposed to an evidential) defence and that it can operate pro tanto. There seems to me to be much to be said for that point of view, but I do not think that it is open to this court to develop the law in that way in the light of the decisions in Howlett and Scottish Equitable. However, as I see it, much the same result has been achieved by an application of the second proposition to be derived from Howlett.

55. All three members of the court in Howlett recognised that the application of the first proposition might lead to injustice. So they concluded that there was or might be an exception to it, although they did not all express the exception in the same terms. Potter LJ has quoted the relevant passages from the judgments. Slade LJ gave as an example (at page 625A) a case where the sums sought to be recovered were so large as to bear no relation to any detriment which the recipient could possibly have suffered. Cumming-Bruce LJ, who was particularly concerned by the hypothetical nature of the exercise upon which (as Peter Gibson LJ explains) the court was engaged, said (at page 608H) that he did not consider the decision as authority for the proposition that where, on the facts, it would be clearly inequitable to allow a party to make a profit by pleading estoppel, the court will necessarily be powerless to prevent it.

56. Eveleigh LJ to my mind most clearly pointed the way to the future. He said (at pages 611H to 612A):

"However, I am far from saying that whenever the recipient of money paid under a mistake of fact has been led to think that it is his, then he will be entitled to retain the whole by demonstrating that he has spent part of it. The payment may involve no representation, as where a debtor presents an account to a creditor. Then while there might have been a representation there may be circumstances which would render it unconscionable for the defendant to retain a balance in his hands. There may also be circumstances which would make it unfair to allow the plaintiff to recover."

Eveleigh LJ thus appears to have regarded a relevant test, if not the relevant test, as unconscionability.

57. The exception was further considered in Scottish Equitable, although the court did not attempt to formulate the nature of the exception. Robert Walker LJ, who gave the leading judgment, did not attempt a formulation of his own but (at paragraph 43) was content to adopt the view of the judge that the case was "just the sort of situation that the Court of Appeal must have had in mind in ... Howlett when expressing reservations about the ambit of the decision." He added in paragraph 44 that it can be predicted (albeit with some reservation) that development of the law on a case by case basis will have the effect of enlarging rather than narrowing the exception.

58. It seems to me that the exception recognised in both Howlett and Scottish Equitable can best be formulated as suggested by Cumming-Bruce and Eveleigh LJJ, namely that the estoppel should not operate in full where it would be clearly inequitable or unconscionable for the defendant to retain a balance in his hands. Whether it would or not of course depends upon all the circumstances of the particular case, which may include the nature of the representation and (as Peter Gibson LJ observes) will certainly include the steps taken by the recipient in reliance upon the representation.

59. I recognise that there is a tension between the first proposition in Howlett and the exception because, as I see it, even after making all allowances in favour of the recipient, it will very often be unconscionable to permit him to keep the whole of the sums paid to him. However, I do not think that it is appropriate to allow a defendant to rely upon an estoppel, whether at common law or in equity, to achieve a result which can fairly be regarded as unconscionable. I am conscious of recent cases in which it has been said that it is not appropriate to try to identify a common principle applicable to all estoppels. However, I observe that in Johnson v Gore Wood [2001] 2 WLR 72, which was admittedly not concerned with estoppel by representation, Lord Goff said (at page 100C):

"In the end, I am inclined to think that the many circumstances capable of giving rise to an estoppel cannot be accommodated within a single formula, and that it is unconscionability which provides the link between them."

60. This is perhaps an example of the principles of equity being employed to mitigate the rigours of the common law. However that may be, it seems to me to follow from Howlett and Scottish Equitable that there are exceptions to the strict rule of evidence that an estoppel by representation cannot operate pro tanto and that those exceptions are or include cases where it would be unconscionable or wholly inequitable to permit the recipient of money to retain the whole of it.

61. I am not sure that this approach is markedly different from that described by Robert Walker LJ in paragraphs 45 to 47 of his judgment in Scottish Equitable and referred to as a "novel and ingenious point". If, as Dixon J put it in Grundt v Great Boulder Gold Mines (1938) 59 CLR at pages 674-5, and as Robert Walker LJ said was correct in paragraph 45, detriment must be judged when the representee seeks to go back on his representation, the recipient will not have acted to his detriment if he is entitled to keep the part of the money that he has spent but not the rest. Provided that he is entitled to keep the amount spent, it is likely (subject to the circumstances of the particular case) to be unconscionable to allow him to keep the rest, in which event he should not in principle be entitled to do so. As I see it, the application of what may be called the unconscionability test does not involve the exercise of a discretion but provides a principled approach to the problem in a case of this kind.

62. For the reasons given by both Peter Gibson and Potter LJJ I agree that on the facts found by the judge it would be unconscionable and inequitable for Somer to be permitted to retain the balance paid to it in error by Nat West. It follows that I too would dismiss the appeal.

PETER GIBSON L.J.:

63. The consequences of the recognition by the House of Lords in the landmark decision in Lipkin Gorman v Karpnale Ltd. [1991] 2 AC 548 of the defence of change of position to a claim in restitution based on unjust enrichment are still being worked out by the English courts. The Law Commission in its report, Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments (Law Com. 227), considered this area of the law but recommended no legislative intervention (para. 5.14). It reported that the majority of persons consulted by the Commission favoured retaining estoppel by representation as a defence as well as the defence of change of position, but it thought that the precise relationship between those defences should be worked out by the common law. It continued:

"We believe that the importance of estoppel will diminish as a result of the introduction of a broad defence of change of position, but it is premature to regard it as redundant". (para. 5.17)

64. Mr. Virgo for Somer submits that the two defences are recognised as distinct and necessary parts of English law, estoppel being a defence of general availability apt to be invoked against the assertion of any kind of right, whereas the defence of change of position may be available in circumstances where the defence of estoppel could not be established, for example where there is no representation accompanying the mistaken payment. He relies on Avon County Council v Howlett [1983] 1 W.L.R. 605 as authority binding this court that the operation of the defence of estoppel is not restricted to the precise amount which the recipient may prove he has suffered in reliance on the representation.

65. Mr. Chambers for the Bank submits that the defence of estoppel is no longer available in a case such as the present where the defence of change of position is available to the defendant. There are Canadian authorities which hold that estoppel is no longer an appropriate way of dealing with the problem, the defence of change of position most fairly balancing the equities (see RBC Dominion Securities Inc. v Dawson (1994) 111 DLR (4th) 230, a decision of the Newfoundland Court of Appeal, applied in The Empire Life Insurance Co. v Neufeld, unreported, 24 April 1998, a decision of Lowry J. in the Supreme Court of British Columbia). In this country Jonathan Parker J. in Philip Collins Ltd. v Davis [2000] 3 All E.R. 808 at p. 826 has suggested that a defence of estoppel is no longer apt in restitutionary claims where the defence of change of position is available. Mr. Chambers argues that we should not follow Howlett on the basis that it cannot now stand with the decision of the House of Lords in Lipkin Gorman. Alternatively, he submits that the present case plainly falls within an exception recognised in Howlett to the "all or nothing" application of the estoppel defence.

66. Howlett is a procedural oddity. The trial judge found as a fact that the defendant had spent all the money overpaid to him but decided the case on the artificial basis pleaded in the defence that he had only spent a little over half the money overpaid. The judge held that the payers were entitled to recover the balance, but they undertook not to execute the judgment without leave of the court. The defendant appealed, although, as Cumming-Bruce L.J. put it at p. 608, he had no practical reason for objecting to the order, and the appeal was brought in order to obtain the decision of this court upon a purely hypothetical question of detriment in its relevance to the law of estoppel. It was decided at a time when the defence of change of position was not recognised. But it was not expressly overruled by the House of Lords in Lipkin Gorman. In Goff and Jones: The Law of Restitution, 5th ed. (1998) p. 829, it is said that "the House of Lords may conclude that .... Howlett cannot stand with Lipkin Gorman .... and should be overruled." The caution of the editor should be noted: he is suggesting the possibility that Howlett will be overruled by the House of Lords. I doubt if this court is free to treat Howlett as overruled.

67. In my judgment in the present case this court should follow the approach adopted in Scottish Equitable v Derby, both by Harrison J. at first instance ([2000] 3 All ER 793) and by this court on appeal from him, and should consider whether the circumstances are such that the case falls within the exception recognised as a possibility by each of the members of this court in Howlett (see [1983] 1 WLR at pp. 608, 9 per Cumming-Bruce L.J. pp. 611, 2 per Eveleigh L.J. and pp. 624, 5 per Slade L.J.). (See also Chitty on Contracts, 28th ed. (1999) para. 30 - 113.) When Slade L.J. posited the case where the sums sought to be recovered were so large as to bear no relation to any detriment which the recipient could possibly have suffered, he did so expressly by way of an example of circumstances where the doctrine of estoppel could be said to give rise to injustice were it to defeat in its entirety an action in restitution. The test is whether it would be unconscionable and inequitable for the recipient of the moneys mistakenly paid to retain the moneys having regard to what the recipient did in reliance on the representation made to him.

68. I fully accept that the court, when assessing detriment, should not apply too demanding a standard of proof because of the practical difficulties faced by a defendant conducting a business who has been led to believe that the moneys paid by mistake are his (see the remarks of Slade L.J. in Howlett at pp. 621, 2). But in view of the clear findings of fact made by the Judge as to the extent of the detriment suffered by Somer and in particular his outright rejection of the argument that Somer was induced to forgo the opportunity to pursue Mentor for payment, I am not able to accede to Mr. Virgo's submission that this is a case where it would be unjust not to give full effect to the estoppel. On the contrary, the circumstances here, as found by the Judge, are such that the disparity between the US $76,708.57 mistakenly credited to Somer and £13,180.57, being the value of the goods despatched by Somer in reliance on the Bank's representation, makes it unconscionable and inequitable for Somer to retain the balance.

69. For these as well as the reasons given by Potter L.J. I would dismiss the appeal. I also agree with him in rejecting the Bank's challenges by the Respondent's Notice to the Judge's findings of fact.