Commercial

Bank account - Customs and Excise Commissioners repaying overpaid VAT into creditor's bank account by mistake - payment not constituting payment of commissioners' debt unless accepted by creditor

Customs and Excise Commissioners v National Westminster Bank plc: ChD (Judge Rich QC): 18 October 2002

The commissioners were obliged by section 80 of the Value Added Tax Act 1994 to repay to the creditor a sum representing overpaid VAT.

The creditor, which had an overdraft at the defendant bank, wrote to the commissioners requesting that the sum be paid into an account held with its solicitors rather than into its bank account.

The commissioners mistakenly paid the money into the creditor's bank account, thereby reducing its overdraft.

After the creditor had complained to the commissioners, who then made a second payment into the account held with the solicitors, the commissioners asked the bank to repay the original sum paid by mistake.

The bank refused.

The commissioners brought a claim for repayment against the bank.

The bank admitted that there had been no acceptance of the payment to it on the part of the creditor, and conceded that prima facie a person was entitled to recover money paid to another under a mistake of fact, but contended that, since the bank was authorised to receive the payment on behalf of the creditor, the payment discharged a debt owed to the creditor by the commissioners.

David Quest (instructed by Solicitor, Customs and Excise) for the commissioners; David Wolfson (instructed by DLA, Leeds) for the bank.

Held, giving judgment for the commissioners, that since a creditor was under no legal duty to accept any payment and a debtor could not force any payment of any kind upon its creditor without the latter's consent, an unsolicited payment into a creditor's bank account would not constitute payment of a debt unless it was accepted as such; that the commissioners' statutory duty to repay overpaid VAT was to be treated as a contractual debt; that there was a distinction between the ministerial/physical act of delivering money and the payment of a debt; that there was no general rule authorising the bank to accept the payment on the creditor's behalf so as to discharge the commissioners' debt, merely by virtue of its holding an account for the creditor; and that, accordingly, the commissioners were entitled to the repayment of the money paid by mistake.