Restitution from banks

This study analyses certain controversial issues commonly arising when a claim for restitution is brought against a bank. Chapter 1 considers the equitable claim traditionally labelled ‘knowing receipt’. Three issues are discussed: (i) the basis in principle of the claim for ‘knowing receipt’; (ii) whether the claim requires proof of fault on the part of the recipient; and (iii) whether the claim can be brought in relation to the receipt by a bank of a mortgage or guarantee offered to the bank in breach of trust or fiduciary duty. The conclusions are (i) that ‘knowing receipt’ is often a claim in unjust enrichment, though the dishonest recipient will also be liable for an equitable wrong; (ii) that when the unjust enrichment version of ‘knowing receipt’ is in issue, the claim should be one of strict liability; and (iii) a claim in unjust enrichment can be brought against a bank to defeat its interest in a mortgage or guarantee offered in breach of trust.Chapters 2 to 4 concern a concept within the law of unjust enrichment that has come to be called ministerial receipt. A ministerial receipt is a receipt of money or property by an agent on behalf of his or her principal. Banks often receive money as agents on behalf of account holders. Chapters 2 and 3 analyse that concept as it is dealt with at common law and in equity respectively. At common law, ministerial receipt is a defence which exists only if the agent pays over the money in question before receiving notive of the right of the plaintiff to restitution. By contrast, ministerial receipt in equity operates to restrict a right to restitution which would otherwise arise. A claim for 'knowing receipt' cannot be brought against an agent in equity. Chapter 4 argues that the equitable tratement of agents is correct as a matter of principle, and that no common law claim in unjust enrichment should be maintainable against a person who receives as agent. Special attention is given to banks.Chapter 5 analyses three other defences which a bank can plead in answer to restitutionary claims: 'good consideration', bona fide purchase and set off. It is concluded that there is no general defence of 'good consideration'; that the bank can plead bona fide purchase in relation to money deposited into an account in credit; and that in the context of combining two or more bank accounts set off is merely a species of bona fide purchase.