Commercial

Banking - unauthorised payment from customer's account discharging customer's debt - no equity in favour of bank against customerCrantrave Ltd (in liquidation) v Lloyd's Bank Plc: CA (Pill and May LJJ): 13 April 2000

The bank paid 13,497.50 from the claimant's account to judgment creditors of the claimant in purported compliance with a garnishee order nisi which had not been made absolute.The bank's defence to the claimant's claim for restitution was that since the payment discharged an existing debt the claimant suffered no loss.The district judge struck out that defence and gave summary judgment for the claimant.But, on appeal, the judge accepted that the bank might arguably rely on the equity established by Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928]1 KB 48, that a person who paid the debts of another without authority was allowed the benefit of such payment.Nicholas Jackson (instructed by Emrys Jones & Co, Welshpool) for the claimant; Matthew Phillips (instructed by Edge Ellison) for the bank.Held, allowing the appeal, that without authorisation or ratification by the claimant, the mere fact that the bank's payment to the third party enured to the claimant's benefit did not establish an equity in favour of the bank against the claimant (see In re Cleadon Trust Ltd [1939] 1 Ch 286); that to establish the Liggett equity the bank must first show that the payment discharged a legal liability of the claimant and, without evidence that it was made on behalf of or later ratified by the claimant, the payment made to the judgment creditor could not of itself discharge the claimant's liability to the creditor; that merely to assert the absence of loss was insufficient; and that, therefore, the district judge rightly struck out the bank's defence.

(WLR)