National Westminster Bank plc v Somer International (UK) Ltd

Where a mistaken payment is accompanied by a representation that the recipient is entitled to it, estoppel by representation ordinarily operates as a complete defence once bona fide reliance and detriment are shown. It is not generally confined to the amount of detriment proved. The defence of change of position remains distinct. Equity may nevertheless require repayment of the balance where it would be clearly inequitable or unconscionable for the recipient to retain the whole payment. Detriment should be assessed broadly, without demanding impossible precision, but must be causally linked to the representation or receipt.

National Westminster Bank mistakenly credited Somer’s dollar account with US$76,708.57 intended for another customer. Somer, believing the payment came from its debtor, supplied further goods. The Bristol County Court found a representation, but allowed Somer to retain only the value of goods supplied in reliance on it and ordered repayment of the balance.

Somer appealed, arguing that estoppel barred recovery of the entire payment. The bank challenged the factual findings by respondent’s notice. The central issue was whether the all-or-nothing operation of estoppel applied, or whether equity permitted partial restitution where retaining the balance would be unconscionable.

1. Appeal dismissed. Potter LJ and Peter Gibson LJ gave reasons supporting dismissal, and Clarke LJ agreed with both. The bank’s challenges to the judge’s principal factual findings failed.
2. Recognition of the defence of change of position in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 did not displace estoppel by representation. The two defences remained distinct, and the Court of Appeal was not free to treat Avon County Council v Howlett [1983] 1 WLR 605 as overruled.
3. Estoppel by representation ordinarily operates as a rule of evidence. Once its conditions are satisfied, it ordinarily prevents recovery of the mistaken payment as a whole rather than merely the amount of detriment proved. However, the equitable origins of the doctrine permit an exception where it would be clearly inequitable or unconscionable for the recipient to retain the balance.
4. The relevant assessment depends on all the circumstances, including the nature of the representation, the steps taken in reliance and the relationship between the sum received and the detriment suffered. The court should not impose an unduly demanding standard of proof, but the alleged detriment must be causally linked to the representation or receipt. Somer’s alleged lost opportunity to recover from Mentor was rejected as causally unsupported and worthless.
5. On the findings, Somer had changed its position by supplying goods worth £13,180.57. The mistaken credit was US$76,708.57. The disparity made it unconscionable for Somer to retain the balance, although it could retain the value of the goods supplied in reliance on the representation.

The bank was awarded its appeal costs, subject to the costs of obtaining the transcript, and permission to appeal was refused.

1. Court of Appeal (Civil Division): On 22 June 2001, dismissed Somer’s appeal and refused permission to appeal.
2. Bristol County Court: On 18 February 2000, His Honour Judge Neligan ordered Somer to repay the mistaken payment, allowing a set-off for the value of goods supplied in reliance on the bank’s representation.