Hill Street Services Company Ltd v National Westminster Bank Plc & Anor

A company mandate authorising a director to give banking instructions is not necessarily confined to written instructions. Where a sole director controls the company’s board, he may have implied authority to give oral instructions or vary an apparent writing requirement. Authorisation is determined on the balance of probabilities, and circumstantial evidence may be decisive. A court may reject an account that is inherently improbable when assessed against the whole evidential picture. A settlement of a bank’s claim for personal account and loan liabilities does not, without more, compromise a later restitutionary claim arising from separate transactions.

Hill Street claimed £135,750 from Natwest, alleging that transfers from its account to the personal account of its sole director, Burjor Mistry, were unauthorised. Mistry denied authorising the transfers. Natwest brought a Part 20 claim against him, conditional on liability to Hill Street, alleging mistake and unjust enrichment.

Mistry relied on an earlier Tomlin Order settling Natwest’s claim for liabilities on his personal and loan accounts. The court had to determine whether the disputed transfers were authorised and, if necessary, whether Natwest’s separate claim was barred by that compromise, constituted an abuse of process, or was defeated by change of position.

1. Claim against Natwest. Hill Street’s claim failed. The mandate did not expressly require instructions to be in writing, and the authorised-signatory sheet merely provided specimen signatures where signatures were required. The court rejected the contention that oral instructions were necessarily unauthorised.
2. As sole director and shareholder, Mistry had implied authority to give banking instructions and, if necessary, to vary any writing requirement. This conclusion was consistent with HJ Symons v Barclays Bank [2003] EWHC 1249 (Comm) and Morrell & Anr v Workers Savings and Loan Bank [2007] UK PC3.
3. Natwest bore the burden of proving authorisation. Applying the balance of probabilities, the court considered the direct and circumstantial evidence together. The admitted telephone transaction, the use of Hill Street funds for Mistry’s personal purposes, the pattern and timing of transfers, the Portman Square transaction, and Mistry’s lack of credibility established that the transfers would not have been made without his instructions. The approach was consistent with Rhesa Shipping Co v Edmunds [1985] 1 WLR 948.
4. The bank’s failure to keep contemporaneous telephone records and its unsatisfactory procedures were criticised, but did not determine the issue because the question was whether the conversations occurred, not whether their content was misunderstood.
5. Natwest’s conditional claim. It was unnecessary to decide the claim after Hill Street failed. If it had arisen, the Tomlin Order would have been confined to the personal and loan-account claims expressly settled. Bringing the restitutionary claim would not have been an abuse of process. Mistry would not have established change of position because he knew of the payments and had merely discharged pre-existing obligations.

This was a first-instance trial decision. The judgment records that Deputy Master Jefferies dismissed Mistry’s earlier application to set aside his joinder on 23 March 2007; that decision was not appealed.