Fore! Wayward golf winnings, restitution of mistaken payments, and interceptive subtraction

Dinosaur golfer; via PixabayLast month, English golfer Tommy Fleetwood came twelfth in The Open golf championship. Earlier this month, Thomas Fleetwood had the St£120,000 (US$154,480, €133,000) winnings deposited in his bank account. There doesn’t seem anything exceptional in that story, so let’s try again. Last month, British golfer Tommy Fleetwood came twelfth in The Open golf championship. Earlier this month, Florida golfer Thomas Fleetwood had the St£120,000 winnings deposited in his bank account. That’s right – golf’s authorities lodged the winnings to the bank account of the wrong golfer. One of Thomas’s golf friends posted a picture of the lodgement record on twitter. And Thomas duly repaid the wayward deposit. But he would not have been able to keep it anyway, had he been minded to. As I have said before on this site, you can’t keep the proceeds of a bank error in your favour; and, if you do, you probably won’t be able to get out of jail free (see also here, here, here, here, and here). So, Thomas would have had to give back the winnings to golf’s authorities; and they in turn will no doubt pay them on to Tommy, if they have not already done so.

We are so used to wayward golf shots that there is a convention that the golfer hitting the wayward shot shouts “fore!” to alert those in its path. Wayward winnings are less common. So, purely as a hypothetical for the purposes of this post, let us assume that Thomas hadn’t repaid them. It is clear that the golf authorities could sue him to recover their mistaken payment (see National Bank v O’Connor & Bowmaker (1969) 103 ILTR 73 (Budd J); Donal Rigney Ltd v Empresa De Construcoes Amandio Carvalho SA [2009] IEHC 572 (27 November 2009) (Laffoy J); Vanguard Auto Finance Ltd v Browne [2014] IEHC 465 (14 October 2014); see also Barclays Bank v Simms [1980] QB 677 (Goff J); Kleinwort Benson v Lincoln City Council [1999] 2 AC 349, [1998] UKHL 38 (29 Oct 1998); Prudential Assurance Company Ltd v Revenue and Customs [2019] AC 929, [2018] UKSC 39 (25 July 2018)). Moreover, the authorities’ carelessness in making the payment to Thomas rather than Tommy does not by itself undermine the mistake as ground of restitution (Kelly v Solari (1841) 9 M&W 54, 152 ER 24, [1841] EngR 1087 (18 November 1841) (pdf); Banque Financière De La Cité v Parc (Battersea) Ltd [1999] AC 221, [1998] UKHL 7 (26 February 1998); Futter v Revenue and Customs, Pitt v Revenue and Customs [2013] 2 AC 108, [2013] UKSC 26 (9 May 2013)). US common law rules are the to same effect, as are the relevant provisions of the Restatement (Third) of Restitution and Unjust Enrichment (ALI, 2011) [R3RUE].

Again, purely as a hypothetical for the purposes of this post, let us assume not only that Thomas doesn’t repay the winnings, but also that the golf authorities do not sue him to recover their mistaken payment. The question would then arise as to whether Tommy could sue Thomas to recover the mistakenly misdirected winnings. In a restitution claim, he would have to demonstrate in particular, that Thomas’s enrichment is at his (Tommy’s) expense? This is functionally a causation enquiry, linking the defendant who has received an enrichment with the appropriate plaintiff at whose expense the defendant has been enriched (see, eg, Menelaou v Bank of Cyprus UK Ltd [2016] AC 176, [2015] UKSC 66 (4 November 2015) [27] (Lord Clarke)). If the winnings had passed directly from Tommy to Thomas, it could be said that Thomas’s enrichment was by subtraction from Tommy, and Thomas’s enrichment would clearly and directly have been at Tommy’s expense. One school of thought argues that a defendant’s enrichment will be at a plaintiff’s expense only when there is such a direct subtraction (Andrew Burrows The Law of Restitution (3rd ed, Oxford University Press, 2010) 69-85; Graham Virgo Principles of the Law of Restitution (2nd ed, Oxford University Press, 2006) 105-112; section 8(1) of the Restatement of the English Law of Unjust Enrichment (Andrew Burrows) (OUP, 2012)). On this view, where the winnings which should have been paid by the golf authorities to Tommy were in fact paid by them to Thomas, Thomas would not have been enriched at Tommy’s expense, and the only possible restitution claim would be that of the golf authorities against Thomas (Lionel Smith “Three-party restitution: a critique of Birks’s theory of interceptive subtraction” (1991) 11 Oxford Journal of Legal Studies 481; see also Andrew Tettenborn “Lawful Receipt – A Justifying Factor?” [1997] Restitution Law Review 1).

On the other hand, another school of thought holds that, where an enrichment is intended by a third party to reach the plaintiff, but which instead reached the defendant, the defendant has indeed been enriched at the plaintiff’s expense. For example, Prof Birks has argued that if “the wealth in question would certainly have arrived in the plaintiff if had not been intercepted by the defendant en route from the third party, it is true to say that the plaintiff has lost by the defendant’s gain” and that the defendant has thereby been enriched at the plaintiff’s expense (Peter Birks An Introduction to the Law of Restitution (Revised ed, OUP, 1989) 133-134; Peter Birks Unjust Enrichment (2nd ed, OUP, 2005) 94-95; Peter Birks “At the Expense of the Claimant: Direct and Indirect Enrichment in English Law” (2000) Oxford University Comparative Law Forum 1). He has been followed in this by La Forest J in the Supreme Court of Canada in LAC Minerals v International Corona Resources [1989] 2 SCR 574, 669-670, (1989) 61 DLR (4th) 14, 45, 1989 CanLII 34 (SCC) (11 August 1989). The defendant’s enrichment is not by direct subtraction from the plaintiff, but by interception, and so Birks describes it as interceptive subtraction. On this view, Thomas would indeed have been enriched at Tommy’s expense.

Stephen Watterson “‘Direct transfers’ in the law of unjust enrichment” (2011) 64(1) Current Legal Problems 435 (preprint pdf) argues that the cases do not require a categorical “direct transfer” rule. This has subsequently been borne out by the England and Wales Court of appeal and the UK Supreme Court. In Relfo Ltd v Varsani [2014] EWCA Civ 360 (28 March 2014) Arden LJ comprehensively demonstrated that the courts have not rigidly confined themselves to a direct transfers only rule. In HM Revenue and Customs v Investment Trust Companies [2018] AC 275, [2017] UKSC 29 (11 April 2017) ([46]-[51] (Lord Reed)) and Lowick Rose LLP v Swynson Ltd [2018] AC 313, [2017] UKSC 32 (11 April 2017) ([20] (Lord Sumption), [58]-[68] (Lord Mance), cf [114]-[115] (Lord Neuberger)) the Supreme Court decided that there must be some transactional connnection between the two parties, but that this need not be a direct transfer from plaintiff to defendant, and might include a series of closely connected transactions which were intended to function as one composite transaction. If the law does not require a direct transfer rule, then it can accommodate the principle of interceptive substraction.

The Irish cases have been similarly expansive in the context of interceptive subtraction. For example, in McMechan v Warburton [1896] 1 IR 435, Mrs Warburton intended to settle certain shares upon trust for the plaintiff, but the solicitor in error omitted this from the deed; and, upon her death, the shares went to the defendant. Chatterton VC and the Court of Appeal held that the defendant held the shares for the plaintiff. In In re PMPA Insurance Co Ltd [1986] ILRM 524, the Company and the Society were members of the same group of companies, and they shared the same bank. The bank, having received cheques, standing orders, bank giros and so forth, validly filled in with respect to the Company, nonetheless paid them to the Society. Lynch J held that the plaintiff Company could recover these misdirected payments from the defendant Society. In HKN Invest OY v Incotrade PVT Ltd [1993] 3 IR 152, Costello J held that where a promoter purports to contract in the name of a company to be incorporated, and without fraud receives a commission for services which the company is to render, “he has received the commission for the benefit of the company which is to be incorporated and not for his own benefit” ([1993] 3 IR 152, 162). The commission was certainly meant for the company, and in intercepting it, the promoter has been enriched at the company’s expense. In Shanahan v Redmond (High Court, unreported, 21 June 1994) a donor had instructed a life assurance company to name the plaintiff as beneficiary, but the company had failed to do so and paid out to the defendant who was the beneficiary originally named in the policy. Carroll J held that the policy ought to be treated as though it named the plaintiff and not the defendant (See Eoin O’Dell “Insurance Payments (Mis)Directed, Equitable Maxims (Mis)Used, and Restitution Doctrines Missed” [1997] Lloyd’s Maritime and Commercial Law Quarterly 197 (Tara)). In Behan v Bank of Ireland [1997] IEHC 146 (15 August 1997) three credits supplied by the Minister for Agriculture to the bank to give interest relief to the plaintiff were applied by the bank to reduce another liability which it claimed the plaintiff owed it. However, that liability had been settled by an agreement by the bank to accept a reduced amount; Morris J held that having made that agreement, “the bank were not entitled to apply these monies in the manner in which they did”. Hence, the bank had simply misapplied to itself money intended for the plaintiff, and the plaintiff was “entitled to receive these amounts as money had and received to his use” ([32]). On appeal ([1998] 2 ILRM 507), the Supreme Court affirmed on different grounds, and the restitutionary claim for money had and received did not arise. A subsequent case brought by the plaintiff foundered on the rock of res judicata ([2002] IESC 20 (19 March 2002)).

In Kelly v Cahill [2001] 1 IR 56, [2001] 2 ILRM 205, [2001] IEHC 2 (18 January 2001) the settlor of a deed intended certain property to go to his wife, but due to the negligence of his solicitor, it went instead under his will to his nephew, Barr J held that the nephew held the property for his aunt (see, generally, Eoin O’Dell “Unjust Enrichment and the Remedial Constructive Trust” (2001) 23 Dublin University Law Journal (ns) 71 (Tara); The liability in tort of a negligent solicitor to a disappointed beneficiary is now well established; arguably the actual but unintended beneficiary ought in principle to be liable in restitution to the intended but disappointed beneficiary (see Eoin O’Dell “Restitution, Rectification and Mitigation. Negligent Solicitors and Wills, Again” (2002) 65 Modern Law Review 360 (Tara); compare the liability of the vendor overpaid by a purchaser due to the negligence of the surveyor: McCullagh v Lane Fox and Partners Ltd [1996] PNLR 205, 222, [1995] EWCA Civ 8 (19 December 1995) (Hobhouse LJ; Slade and Nourse LJJ concurring); Walsh v Jones Lang Lasalle Ltd [2017] IESC 38 (01 June 2017) [38], [46] (O’Donnell J; O’Malley J concurring)). In all of these cases, the enrichment of the defendant is at the expense plaintiff, even though it is not direct but interceptive. Of course, the court must be able to hold with sufficient certainty that the third party had intended to benefit the plaintiff so as to hold that the enrichment of the defendant is at the plaintiff’s expense. These cases demonstrate that it is a finding that can be made in an appropriate case. As a consequence, Irish law seems to have decisively adopted the concept of interceptive subtraction.

Again, US common law rules are the to same effect, as are the relevant provisions of the Restatement (Third) of Restitution and Unjust Enrichment (ALI, 2011). For example, in Cocke v Pacific Gulf Development Corp 594 SW2d 545 (Tex App 1980) a hotel manager distributed to the appellant various hotel revenues due to the respondent, and the Texas Court of Appeals held that the appellant was unjustly enriched at the expense of the respondent. And § 48 R3RUE provides

If a third person makes a payment to the defendant to which (as between claimant and defendant) the claimant has a better legal or equitable right, the claimant is entitled to restitution from the defendant as necessary to prevent unjust enrichment.

Hence, it is clear that, on the question of whether a defendant’s enrichment is at the expense of the plaintiff, the law does not require require that a defendant’s enrichment have come directly (by subtraction) from the plaintiff, but instead allows that it can have come from a third party (such as the golfing authorities) and intended for the plaintiff (Tommy) but misdirected to the defendant (Thomas). Hence, Thomas’s enrichment is indeed at Tommy’s expense. It is to be hoped that there are fewer wayward payments of golf winnings than there are wayward golf shots; but, if winnings are misdirected, they can be recovered by the intended payee. Meanwhile: fore!