Patel’s Wall Street Exchange Ltd v. S K International (Sued As a Firm)
Read the full judgment text of HCA 4025/2002 on BabelCite. This High Court CFI judgment was delivered on 7 January 2005.
1. By this action the Plaintiff, Patel’s Wall Street Exchange Limited, seeks to recover the sum of HK$2.2 million from the Defendant, a firm by the name of S K International, which is a partnership consisting of Mr Nanik Uttamchandani (“Mr Uttamchandani”) and his brother Mr Thakurbharma Uttamchandani. The Plaintiff is a registered remittance agent and money changer in Hong Kong. On 29 May 2002, it paid HK$2.2 million to the Defendant in accordance with instructions which it had received from a
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HCA 4025/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 4025 OF 2002 ____________ BETWEEN
____________ Before: Hon Barma J in Court Dates of Hearing: 27-30 September and 18 October 2004 Date of Judgment: 7 January 2005 _______________ J U D G M E N T _______________ Introduction 1.By this action the Plaintiff, Patel’s Wall Street Exchange Limited, seeks to recover the sum of HK$2.2 million from the Defendant, a firm by the name of S K International, which is a partnership consisting of Mr Nanik Uttamchandani (“Mr Uttamchandani”) and his brother Mr Thakurbharma Uttamchandani. The Plaintiff is a registered remittance agent and money changer in Hong Kong. On 29 May 2002, it paid HK$2.2 million to the Defendant in accordance with instructions which it had received from a remittance agent in the Philippines called R H International Company (“R H International”), pursuant to an agreement with R H International by which the Plaintiff had agreed to purchase 15 million Philippine pesos in banknotes from R H International. The Plaintiff says that under its agreement with R H International, R H International was to deliver the banknotes to it in Hong Kong, but that the money never arrived, having apparently been lost in transit. 2.As it never received from R H International the banknotes out of the Hong Kong dollar equivalent of which it was to make the payment to the Defendant, the Plaintiff claims to be entitled to recover the HK$2.2 million which it paid to the Defendant as money paid under a mistake of fact, or alternatively on the basis that the money was paid for no consideration. It is also alleged that, in the circumstances of this case, the Defendant holds the HK$2.2 million as a constructive trustee for the Plaintiff. The Amended Statement of Claim also contains a claim for conversion, but this was not pursued at the trial by Mr Westbrook S.C., representing the Plaintiff. 3.The Defendant denies liability. Mr Kwok S.C., representing the Defendant, submitted that the Plaintiff’s claim had to fail for one or both of two reasons. The first was that the contractual arrangement between the Plaintiff and R H International only required R H International to deliver the peso banknotes to the Plaintiff in the Philippines, by delivery to an intermediary known to R H International and the Plaintiff as Mr Salaudeen. As it was not disputed by the Plaintiff that R H International had in fact delivered the banknotes to Mr Salaudeen or his employees on 29 May 2002, Mr Kwok submitted that there had been no failure of consideration, as R H International had performed its part of the bargain between the Plaintiff and itself. Mr Kwok said that it followed from this that the allegations of mistake should be rejected. The second line of defence put forward by Mr Kwok was that even if there had been some relevant mistake or a failure of consideration, the Defendant had in good faith paid away the HK$2.2 million which it had received from the Plaintiff, and thus had changed its position so as to render it unjust for it to be ordered to repay that sum to the Plaintiff. The parties and persons involved 4.Although these proceedings are between the Plaintiff and the Defendant, there are a number of other parties who played a part in the events leading up to it. The persons or entities principally involved in this matter are as follows:-
5.In summary, the chain of transactions involving these parties can be described as follows. Persons in the Philippines wishing to make remittances to Hong Kong would approach Esquire to effect the remittance. Esquire would collect payment from them in the Philippines, and make arrangements with R H International for R H International to transfer funds to the Defendant in Hong Kong, via the Plaintiff, paying R H International in pesos in the Philippines (having agreed with R H International a slightly more favourable rate of exchange for pesos to Hong Kong dollars than it was itself offering to its customers). Esquire would also inform the Defendant of the details of the payments to be made in Hong Kong. R H International would then agree an exchange rate with the Plaintiff (which was, in turn, more favourable to it than the rate which it had used in its dealings with Esquire), and would transfer funds to the Plaintiff - it appears from the Plaintiff’s records that this was done in a variety of ways, including telegraphic transfers (usually denominated in United States dollars at an agreed rate of exchange with Hong Kong dollars), or in the form of physical peso banknotes, or (occasionally) by Hong Kong dollar cheque payments into a bank account of the Plaintiff in Hong Kong. It would also give instructions to the Plaintiff to make payment to the Defendant of the Hong Kong dollar amount which it had agreed to pay Esquire. Where physical banknotes were to be transferred, at the material time, Mr Salaudeen or his employees acted as couriers, carrying the banknotes to Hong Kong. The Plaintiff would make payment of the appropriate amount to the Defendant, which would in turn make payments to various persons in Hong Kong in accordance with Esquire’s instructions. I should add that it is not entirely clear from the evidence before me whether these steps necessarily took place sequentially. The witnesses 6.The witness evidence in these proceedings came from Mr Muralidharan and Mr Chandiramani on behalf of the Plaintiff, and Mr Hathiaramani and Mr Uttamchandani on behalf of the Defendant. Each of them had made witness statements for the purpose of these proceedings and gave oral evidence at the trial. So far as their evidence was concerned, I found Mr Muralidharan’s evidence to be of limited assistance, as he accepted that he had no personal involvement in the transaction which formed the immediate background to the claim, and did not appear to have personal involvement in the dealings between the Plaintiff and R H International prior to that transaction either, having never had any contact with Mr Hathiaramani prior to this dispute having arisen. Although he ventured to give evidence as to the general policies and practices of the Plaintiff, insofar as this differed from evidence given by Mr Chandiramani or Mr Hathiaramani as to the practice between the two companies, I prefer their evidence to Mr Muralidharan’s. Mr Muralidharan did, however, appear to have some personal involvement in some aspects of the matter after it came to light that the peso banknotes had not been delivered. Mr Chandiramani, by contrast, was the person who actually dealt with R H International. His dealings were with Mr Hathiaramani. As will become apparent, there are a number of areas in which their evidence was in conflict. As will also become clear, there are a number of aspects of Mr Chandiramani’s evidence which I have had difficulty in accepting. So far as Mr Hathiaramani is concerned, he too had personal involvement in the dealings between the Plaintiff and R H International, and was in a position to give evidence as to these matters. As will be apparent from later in this judgment, in most respects, I accept his evidence, although there are one or two areas in which I do not feel able to do so. Finally, so far as Mr Uttamchandani is concerned, his involvement was limited to receiving instructions from his brother in the Philippines as to payments to be made to various persons in Hong Kong, receiving the HK$2.2 million from the Plaintiff, and making payments in accordance with his brother’s instructions. As with Mr Hathiaramani, I accept much of what I was told by Mr Uttamchandani. The factual background 7.It was common ground that the Plaintiff and R H International have had business dealings since the early 1990s, and that in the early stages of their relationship, they dealt in a number of different currencies, although principally Philippine pesos. It would appear that R H International also made remittances to the Plaintiff in Hong Kong for onward distribution in accordance with instructions to be given by R H International. It appeared to be common ground that R H International would sometimes send physical banknotes (both pesos and other currencies) to the Plaintiff, and at other times would remit funds by telegraphic transfer. On the occasions that physical banknotes were delivered, such delivery was effected by Mr Hathiaramani himself, or a member of his staff. Mr Hathiaramani agreed that at this stage of the relationship, any expenses associated with the delivery of peso banknotes to the Plaintiff, such as airfares and hotel expenses, were absorbed by R H International. In about 1997 or 1998, following the Asian financial crisis, it appears that the part of the business involving the delivery of physical peso banknotes ceased for a period of time, apparently because of new regulations imposed by the Philippines government restricting the amount of physical currency that could be taken out of the Philippines. It appears that it was not until about the end of 2001 that transactions involving the delivery of physical banknotes resumed. It was again common ground that from the end of 2001 onwards, delivery of such banknotes was no longer effected by Mr Hathiaramani or his staff. Instead, deliveries were effected through Mr Salaudeen’s employees - principally a Mr Ahamad. However, there was a dispute as to who, as between the Plaintiff and R H International, introduced Mr Salaudeen and his services to the other, which of them made arrangements for Mr Salaudeen to pick up the banknotes from R H International, which of them (if either of them did) made the travel arrangements for Mr Salaudeen or his staff, and which of them was responsible for paying Mr Salaudeen’s charges and out of pocket expenses for this service. I shall return to this aspect of the matter later in this judgment, when considering what was agreed between the Plaintiff and R H International in respect of delivery of peso banknotes where these were physically to be sent to the Plaintiff in Hong Kong. Mr Chandiramani said that when peso banknotes were sent to Hong Kong, they would normally arrive later the same day, or by the following evening. Mr Chandiramani said that in any event, Mr Hathiaramani’s account would not be credited until the banknotes had actually arrived, been counted and checked for counterfeit or soiled notes. Mr Hathiaramani intially agreed with this, but later in his evidence said that so far as he was concerned, while the Plaintiff might not actually have credited him in its books with the value of the banknotes until they were received, he considered that he had done his part of the transaction by delivering the banknotes to Mr Salaudeen’s representative in the Philippines, and was thereafter entitled to have their value credited to his account with the Plaintiff. 8.It is also apparent that the Plaintiff and R H International maintained a number of running accounts. Mr Muralidharan said that there were three such accounts - one for Hong Kong dollars, one for US dollar transfer of funds and one for US dollar currency notes. However, the documents in the trial bundle contained only print outs for the first two of these accounts. When asked by Mr Kwok about this, Mr Muralidharan said that copies of the print outs for all three accounts had been supplied by the Plaintiff to its solicitors, and he could offer no explanation as to why documents for only two accounts were in the bundle. The relevant events 9.I now turn to the events that led to these proceedings. It would appear that on 28 May 2002, there was a telephone conversation between Mr Chandiramani and Mr Hathiaramani, in which the possibility of a transaction involving the purchase of peso banknotes by the Plaintiff from R H International was discussed. Mr Chandiramani said that this discussion was initiated by Mr Hathiaramani. Having regard to the fact that Mr Chandiramani accepted that it was the Plaintiff which required peso banknotes in Hong Kong, this is somewhat surprising. Further, in an exchange of instantaneous MSN Messenger messages (a form of online communication on computers through the internet, in which the participants are able to “talk” to one another by typing in messages and responses which appear on the other party’s monitor as they are being typed, with no appreciable time lag) the next day, in which the transaction was finalised, Mr Hathiaramani said, after concluding the transaction, that he would sell the exchange accordingly, a statement which indicates that he did not have the physical banknotes immediately available. For these reasons, it is in my view more likely that the matter was first raised by Mr Chandiramani. 10.The next morning, there was, as I have noted, an exchange of MSN Messenger messages. This exchange was recorded by Mr Hathiaramani, and transcripts of the exchange were produced at the trial. Mr Chandiramani accepted that the transcripts appeared to be an accurate record of the messages exchanged between himself and Mr Hathiaramani. Mr Chandiramani indicated that there had been a number of telephone conversations between Mr Hathiaramani and himself that day as well, but did not suggest that anything material as to the terms of the transaction was said during such telephone conversations. The contents of this exchange of messages are clearly important evidence of the terms of the transaction, as they constitute a contemporaneous written record of the discussion between Mr Chandiramani for the Plaintiff and Mr Hathiaramani for R H International. 11.So far as material, the conversation was as follows (C represents Mr Chandiramani and H represents Mr Hathiaramani):-
12.Shortly afterwards, Mr Hathiaramani sent Mr Chandiramani the fax that he had promised, in which he confrmed that his “credit from [Mr Salaudeen] will be HKD 2,347,417.84" and requested Mr Chandiramani to make a number of payments out of that sum, including a payment of HK$2.2 million to Mr Uttamchandani. 13.Thereafter, Mr Chandiramani appears to have contacted Mr Uttamchandani, and effected the payment of HK$2.2 million by two cheques for HK$522,100 and HK$1.6 million respectively the same day, with a further HK$77,900 being paid in the form of a cash payment of US$10,000. He also appears to have effected the other, smaller, payments that he was instructed to make by Mr Hathiaramani’s fax to him. At the time that these payments were made, the peso banknotes had not been delivered to the Plaintiff. However, Mr Chandiramani said that as there had never been any problems with delivery of the banknotes in the past, he decided to make the payments notwithstanding that the banknotes had not yet arrived. 14.I should make it clear that it is not suggested by the Plaintiff that Mr Hathiaramani did not deliver the banknotes to Mr Salaudeen’s representative for onward carriage to Hong Kong. Mr Hathiaramani’s evidence was that he did so, by sending one of his staff to meet Mr Salaudeen’s representative at the latter’s hotel room in Manila, where the banknotes were handed over. This was not challenged by Mr Westbrook S.C., who represented the Plaintiff. 15.Mr Uttamchandani in turn caused the Defendant to make a number of payments to various recipients over the course of 29 to 31 May 2002, having been instructed to make such payments by faxes sent by his brother in the Philippines. Mr Uttamchandani attributed these payments (which totalled slightly in excess of HK$ 2.2 million) to the HK$2.2 million which the Defendant received from the Plaintiff. I shall return to this aspect of Mr Uttamchandani’s evidence later in this judgment, when considering the Defendant’s allegation that it changed its position in reliance on the payment to it by the Plaintiff. 16.The banknotes did not arrive in Hong Kong on 29 May 2002. Nor did they arrive the following day. In his statement, Mr Chandiramani said that he made several telephone calls to try to contact Mr Salaudeen on 30 May 2002, and when he eventually contacted him that evening, was told that the banknotes were on the way and would arrive by the next day. However, following several further phone calls, Mr Salaudeen told him at around 11:00 on the morning of 31 May that the banknotes had been lost. Mr Chandiramani was told that Mr Salaudeen’s employee was carrying the banknotes in checked in luggage from the Philippines to Hong Kong via Singapore, but the luggage had been lost between the Philippines and Singapore. 17.In his evidence in cross-examination, Mr Chandiramani added that he contacted Mr Hathiaramani on a number of occasions on 30 and 31 May 2002. He said that on 30 May, he rang Mr Hathiaramani to ask why the banknotes had not arrived, that Mr Hathiaramani suggested that he should check with Mr Salaudeen, so that he then made the various telephone calls which he did to Mr Salaudeen. He said that on 31 May 2002, after he learnt from Mr Salaudeen that the banknotes had been lost, he had about four telephone conversations with Mr Hathiaramani, which he put at about 12:30 pm, 2 pm, 4 pm and around 5:30 or 6 pm. Mr Chandiramani said that he told Mr Hathiaramani what Mr Salaudeen had said in the first of these telephone calls, and that the other calls were made because he was anxious about what to do to try to trace the banknotes. He said that Mr Hathiaramani offered to try to check the position from his end, and also suggested that Mr Chandiramani should seek out Mr Salaudeen and take the matter up with him. 18.Mr Hathiaramani, however, said that there had been no such phone calls, and that the first time he learnt that the banknotes had apparently gone missing was in a MSN Messenger exchange of messages on the afternoon of 31 May 2002. Mr Hathiaramani produced a copy of a transcript of this exchange, which Mr Chandiramani accepted was accurate. The relevant parts of that exchange are as follows:-
19.Thereafter, it appears that Mr Chandiramani informed Mr Muralidharan about the situation, and it was eventually decided that Mr Chandiramani and a more senior member of the Plaintiff’s organisation should travel to Singapore to meet Mr Salaudeen. This happened in early June 2002. Mr Chandiramani said in his oral evidence that he made enquiries about travel arrangements for this trip with Mr Uttamchandani in around the first week of June 2002, and informed him at that time that the banknotes out of which the money paid to the Defendant was to have come had never been delivered. It appears also that during this visit to Singapore, Mr Chandiramani met Mr Salaudeen and discussed the matter with him. As a result of their discussion, Mr Salaudeen appears to have agreed to pay the Plaintiff compensation of US$150,000 by 24 equal monthly instalments of US$6,250, the first such instalment to be paid on 1 July 2002. This agreement was recorded in a letter from Mr Salaudeen to Mr Chandiramani dated 11 June 2002. 20.However, no payments were made pursuant to this agreement, and on 5 July 2002, the Plaintiff’s solicitors wrote to the Defendant and the other recipients of payments made by the Plaintiff on 29 May 2002, demanding restitution of such payments. On the same day, the Plaintiff’s solicitors also wrote to Mr Hathiaramani claiming payment of HK$2,347,417.84, alleging that he had fraudulently represented that this amount had been remitted to the Plaintiff, and that the Plaintiff had in reliance on this representation made the payments which it did to the Defendant and the other payees. This allegation was repeated in a further letter from the Plaintiff’s solicitors to Mr Hathiaramani dated 12 July 2002, notwithstanding that Mr Hathiaramani had by then sent them copies of the MSN Messenger transcripts for the exchange of messages between himself and Mr Chandiramani on 31 May 2002, in which Mr Chandiramani had acknowledged that Mr Hathiaramani had delivered the peso banknotes to Mr Salaudeen’s representative. In a letter dated 22 July 2002, addressed to Mr Hathiaramani’s solicitors, it was suggested that Mr Hathiaramani was obliged to remit the sum of HK$2,347,417.84 to Hong Kong, and that even if payment had been made to Mr Salaudeen, Mr Salaudeen was acting as Mr Hathiaramani’s agent for the purpose of effecting the remittance. 21.As I have noted, before me the Plaintiff accepted that it was in no position to allege that Mr Hathiaramani had not delivered the peso banknotes to Mr Salaudeen’s employee. 22.In the event, the Plaintiff only commenced these proceedings against the Defendant. I was told by Mr Westbrook that it was not thought worthwhile to proceed against the other recipients, given the small amounts involved, and that a decision had been taken not to pursue Mr Hathiaramani at this stage. 23.The only other matter that I should note is that on 11 October 2002, Messrs Khattar Wong & Partners, a firm of solicitors in Singapore, wrote to K A Rahim Marketing (Mr Salaudeen’s company) demanding payment of US$150,000, alleging that it had collected funds on behalf of the Plaintiff but had failed to deliver them, and that notwithstanding the agreement in June 2002 to repay US$150,000 by instalments, no payments had been made. However, on 31 October 2002, Khattar Wong & Partners sent a further letter purportedly cancelling their earlier letter as it contained what was said to be a “factual error”, and demanding instead the sum of HK$2,347,417.84, on the basis that this sum had been received from R H International for transmission to the Plaintiff, but had never been forwarded to the Plaintiff. On 20 March 2003, Khattar Wong & Partners wrote to the Plaintiff stating that the first letter had been sent in error, without the Plaintiff’s approval, and that they had never been instructed by the Plaintiff that the funds received by K A Rahim Marketing had been received by that company on behalf of the Plaintiff. The claim to recover on the basis of a mistake of fact 24.Against this background, I propose to consider first the Plaintiff’s claim to recover the HK$2.2 million paid to the Defendant as money paid under a mistake. It is now well established that where one party pays money to another on the basis of a mistake of fact, or a mistaken belief as to the existence of a particular state of affairs, the payer is generally speaking entitled to recover the amount of the payment so made from the payee, subject to such defences as may be open to the payee. 25.Perhaps the best known summary of the principles on which such recovery rests is that in Barclays Bank Ltd v W.J. Simms Son & Cooke (Southern) Ltd [1980] 1 QB 677, in which the plaintiff bank, overlooking the existence of an instruction from its customer to stop payment on a cheque, paid the amount of the cheque to the payee, the receiver of a building company, despite such instruction. Goff J having reviewed the authorities, stated the principles thus (at p.695C-D):-
What was the mistake? 26.In order to be entitled to recover, therefore, the payee must first show that he made the relevant payment under a mistake of fact. I therefore ask myself what was the mistake of fact that the Plaintiff relies on in this case, as the mistake of fact which caused it to make the payments totalling HK$2.2 million to the Defendant? The answer would appear to be found in paragraph 4 of the Amended Statement of Claim, which (as amended) is in the following terms:-
27.This pleads three distinct mistakes under the effect of which the Plaintiff is alleged to have operated when making the payments totalling HK$2.2 million to the Defendant. Having regard to Mr Muralidharan’s candid acceptance that he had had no involvement in this matter until after the fact that the peso banknotes were missing had come to light, his state of mind cannot be relevant when seeking to ascertain the Plaintiff’s state of mind at the time when the payments were made. For present purposes, therefore, the only person whose state of mind has to be considered is Mr Chandiramani. 28.However, of the three alleged mistakes of fact pleaded, the first two were (in my view, rightly) not pursued by Mr Westbrook. Mistake as to whether or not the banknotes had been delivered to Mr Salaudeen 29.As to the first, the alleged belief that Mr Hathiaramani had given the peso banknotes to Mr Salaudeen’s representative at the time that the payments to the Defendant were made, it is to be noted that no such belief is mentioned in Mr Chandiramani’s witness statement. Nor did he depose to such a belief in his evidence at the trial. Further, and in any event, as I have noted in paragraphs 14 and 21 above, it was not suggested by the Plaintiff at the trial that Mr Hathiaramani had not in fact handed over the peso banknotes to Mr Salaudeen’s representative. Mr Hathiaramani’s evidence was that he caused 15 million pesos worth of banknotes to be handed over by a member of his staff to Mr Salaudeen’s representative in Manila on 29 May 2002, shortly after the exchange of MSN Messenger messages with Mr Chandiramani that morning. The Plaintiff was not in a position to contradict that evidence. Moreover, in the later exchange of messages on 31 May 2002, Mr Hathiaramani told Mr Chandiramani in no uncertain terms that he had handed the banknotes over, and Mr Chandiramani (perhaps in the light of his earlier conversations with Mr Salaudeen) accepted this. I therefore accept Mr Hathiaramani’s evidence on this matter, and in consequence, would not have accepted this allegation had it been pursued. Mistake as to whether the banknotes were in Mr Salaudeen’s possession 30.The position in relation to the second alleged mistake, that the Plaintiff believed at the time of its payments to the Defendant that the peso banknotes were in the physical possession of Mr Salaudeen or his representative, is broadly similar. Again, there was no mention of such a belief by Mr Chandiramani, whether in his witness statement or in his oral evidence at trial. In any event, given that the evidence at trial indicated that Mr Salaudeen’s representative was in Manila throughout 29 May 2002, and was only booked to leave Manila by a flight to Singapore the next day, it would not seem possible for the Plaintiff to establish the existence of any mistake in this respect. Given my acceptance of Mr Hathiaramani’s evidence as to the delivery of the banknotes to Mr Salaudeen’s representative, it follows that the banknotes must have been in the latter’s possession at least until they were loaded as checked in baggage on the flight to Singapore the next day, and any belief on Mr Chandiramani’s part that the banknotes were in the possession of Mr Salaudeen’s staff at the time that the Plaintiff made the payments totalling HK$2.2 million to the Defendant would not, in fact, have been mistaken. Mistake as to whether the banknotes were about to be delivered 31.I turn therefore to the third alleged mistake. As pleaded, it was that “he [in this context this must be a reference to Mr Salaudeen] was about to deliver the said cash to the Plaintiff forthwith in Hong Kong”. Read literally, this would mean that at the point in time that the payments were made by the Plaintiff to the Defendant, Mr Salaudeen (or his representative) would have to be on the verge of making the delivery to the Plaintiff imminently, within a very short period of time. This gives rise to the question of how imminent the delivery to the Plaintiff in Hong Kong had to be, bearing in mind that the peso banknotes could only have been handed over to Mr Salaudeen’s representative at some point after about 11:44 am on 29 May 2002 (when Mr Hathiaramani said in the course of the MSN Messenger exchange with Mr Chandiramani that he had made arrangements for 15 million pesos to be paid to Mr Salaudeen, whom he referred to as the Plaintiff’s party, and asked Mr Chandiramani to tell Mr Salaudeen or his staff to contact Mr Hathiaramani to arrange for delivery of the banknotes to them) and the first payment to the Defendant (by a cheque for HK$1.6 million) was made just about one hour later, at 12:54 pm. Mr Chandiramani’s evidence was in fact that deliveries of peso banknotes agreed on any particular day were usually delivered either the same afternoon or evening, or, at the latest, by the next day. Taking this timeframe, the allegation cannot be taken literally, but must, insofar as it is an allegation of a mistaken belief as to fact, be (as Mr Kwok submitted) that Mr Chandiramani’s belief was that Mr Salaudeen or his staff were intending to make delivery to the Plaintiff in Hong Kong that evening or the next day. 32.However, so understood, that belief would not appear to have been mistaken. The Plaintiff did not (and was not in a position to) suggest at trial that the loss of the banknotes was anything other than an unfortunate accident. That being so, there is no basis for thinking that at the time that the payments were made by the Plaintiff to the Defendant, the intention of Mr Salaudeen or his staff was anything other than to deliver the banknotes to the Plaintiff in Hong Kong. Further, the evidence at trial was that Mr Salaudeen’s representative was booked to travel to Hong Kong via Singapore the next day, 30 May 2002, which would also appear to indicate an intention to make delivery of the banknotes to the Plaintiff in Hong Kong. 33.Thus, none of the alleged mistakes would appear to be established by the Plaintiff, and if matters rested there, I would conclude that the Plaintiff has failed to establish that it was acting under any operative mistake of fact at the time when it made the payments totalling HK$2.2 million to the Defendant. A mistaken belief that the banknotes “would be delivered” 34.Mr Westbrook, however, submitted that the mistake should not be so narrowly regarded, but should be understood as being a mistaken belief on the part of the Plaintiff that the banknotes “would be delivered” to the Plaintiff the same evening or the following day. Indeed, this is the way in which the matter is put in Mr Chandiramani’s witness statement, where he says at paragraph 10, that:-
As I have noted, in his oral evidence, Mr Chandiramani changed this slightly, by extending the time by which he expected the peso banknotes to be delivered to the following day. Recoverability of money paid on basis of a misprediction 35.So formulated, I have little difficulty in accepting that Mr Chandiramani made the payments of HK$2.2 million to the Defendant in the belief or expectation, which proved ultimately to have been wrong, that the 15 million pesos in banknotes which Mr Hathiaramani had delivered to Mr Salaudeen or his representative would be delivered to Hong Kong the same evening or the following day. However, even if this mistaken expectation was causative of the payments to the Defendant, in the sense that Mr Chandiramani would not have effected the payments to the Defendant had he known that his expectations would turn out to be ill-founded, it seems to me that a mistaken expectation does not amount to a mistake of fact so as to provide a basis of recovery by the payor who pays under such mistaken expectation from his payee. A payment made on the basis of a belief as to what will happen in the future, even if it turns out that such belief was mistaken, is based on a prediction, or assessment of the likelihood of a future event, by the payor. It is not, in my view, based on a mistake as to something that can properly be described as a mistake of fact, and does not therefore provide a basis for the recovery of a payment made because of such mistaken assessment. 36.That this is so is, I think, established by the decision of the Privy Council in Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193. That was a case in which the appellant, Dextra, drew a US dollar cheque in favour of the Bank of Jamaica, intending to lend the sum represented by the cheque to the Bank of Jamaica. The Bank of Jamaica, however, intended to purchase the sum specified in US dollars in exchange for the equivalent amount of Jamaican dollars, which it paid to individuals which it understood to have been nominated to receive such Jamaican dollars on behalf of Dextra. Dextra had delivered the cheque to the Bank of Jamaica through an agent and a sub-intermediary, who deceived both Dextra and the Bank of Jamaica as to the intentions of each other, and had made off with the proceeds of the cheque. In rejecting Dextra’s claim that it had made the payment under a mistake of fact, Lords Bingham and Goff, delivering the judgment of the Privy Council, explained the basis of their decision as follows (paras 27 to 29 of the judgment, p.201j to 202j):-
37.Although the facts of the present case are very different from those in the Dextra case, it seems to me that the same principle applies. Here, Mr Chandiramani decided to make the payment because, as he said, there had never been any problems with the delivery of peso banknotes purchased from Mr Hathiaramani before, and he therefore thought that it would be safe to make the payments, in the knowledge that Mr Hathiaramani had handed over the banknotes to Mr Salaudeen’s representative, and the expectation that they would be delivered in due course, the same evening or the next day. However, in doing this, Mr Chandiramani was not acting under any mistake of fact, but on what turned out to be his misprediction that what had always happened in the past (i.e. that the banknotes would arrive safely) would happen again on this occasion. That being so, his misprediction cannot form the basis of a claim by the Plaintiff to recover the money which it paid to the Defendant as having been paid under a mistake of fact. 38.In coming to this conclusion, I do not think that it makes any difference what the contractual term as to the place of delivery of the peso banknotes was, or whose agent Mr Salaudeen was in connection with the carriage of the banknotes from Manila to Hong Kong. With whom the risk in the pesos lay during the course of their carriage, as between R H International and the Plaintiff, would depend on whether R H International’s obligation was to deliver to the Plaintiff in Hong Kong, or to deliver to Mr Salaudeen in the Philippines for carriage to the Plaintiff. But wherever the risk lay, and regardless of whether Mr Salaudeen is properly to be characterised as being the Plaintiff’s or R H International’s agent (which may be much the same point), the factor which led Mr Chandiramani, on his own evidence, to make the payments to the Defendant in advance of having the peso banknotes in hand was his expectation that they would be delivered to the Plaintiff without any problems, as had always been the case in the past. 39.Mr Westbrook sought to distinguish the Dextra case on the basis that in that case the intermediaries who had been responsible for the deception were the agents of the plaintiff, Dextra. In those circumstances, he suggested, Dextra had only itself to blame for the actions of persons whom it had chosen to rely upon as its agents. Here, however (said Mr Westbrook), the position was different, in that on his case Mr Salaudeen was not the Plaintiff’s agent, but the agent of Mr Hathiaramani. I do not think that this is a valid distinction. As I have explained above, no matter whose agent Mr Salaudeen was, the belief on which Mr Chandiramani acted was his belief that Mr Salaudeen would (in the future, even if only a matter of hours or a day or so) deliver the peso banknotes to the Plaintiff as he had done in the past. Moreover, the suggestion that the Plaintiff should be debarred from recovery because of an act of its agent would seem to be at odds with the decision in Barclays Bank v Simms (supra), where the payment to the defendant of the stopped cheque must have been an act done by an employee, and thus an agent of the bank, and with the well established principle that carelessness on the part of the plaintiff is no bar to recovery of a payment made under a mistake of fact - as Lords Bingham and Goff pointed out in paragraph 45 of their judgment in the Dextra case, where they said (at p.207c):-
40.On this basis, therefore, I conclude that the Plaintiff’s claim to be entitled to recover the money paid to the Defendant as money paid under a mistake of fact must fail. Relevance of the contractual term as to delivery 41.Had I considered that the mistake relied upon by the Plaintiff could found a claim for recovery of money paid under a mistake of fact, the question of the contractual term as to delivery, as between the Plaintiff and R H International would, I think, have become relevant, since there would then, in principle, have been a claim for recovery by the Plaintiff of the HK$2.2 million which it had paid to the Defendant, subject to the three qualifications expressed by Goff J in Barclays Bank v Simms (supra). It seems to me that the contractual term as to delivery would have been relevant to the first, and perhaps the second, of those qualifications. 42.In terms of the first qualification, if the contractual term as to delivery were that delivery of the peso banknotes was to be effected by R H International in the Philippines, it would follow that, as Mr Hathiaramani did, as I have accepted, make delivery to Mr Salaudeen’s representative in Manila, R H International had performed its obligations under its contract with the Plaintiff so that the Plaintiff would have come under an obligation to do its part under that contract, which would be to credit Mr Hathiaramani’s account with it with the Hong Kong dollar equivalent of the 15 million pesos, and to make the payments which the Plaintiff had been directed by Mr Hathiaramani to make. In these circumstances, even if one were to accept that the Plaintiff would not, in fact, have made the payments had it known that the banknotes were not going to arrive, it would not be open to the Plaintiff to assert this, having regard to the fact that it was contractually bound to make the payments in any event. It seems to me that in such circumstances, the law would regard the Plaintiff as intending to make the payment in any event, because it was obliged under the terms of its contract with R H International to do so. 43.As for the second qualification, it seems to me that if the contractual term as to delivery were that delivery of the peso banknotes was to be effected in Manila, the consequence would be that the Plaintiff would be indebted to R H International in the Hong Kong dollar equivalent amount (under its current account with Mr Hathiaramani), and the payment by the Plaintiff to the Defendant would have discharged, pro tanto, its liability to R H International/Mr Hathiaramani on such current account. In that sense, therefore, consideration for the payment would have been given by the Defendant to the Plaintiff, so that the Plaintiff would be debarred from recovery on this ground also. 44.I would just add that in the context of a claim to recover a payment made under a mistake of fact, the second qualification, in referring to consideration, refers to the giving of consideration for the payment by the payee. This appears from a later passage in Goff J’s judgment in Barclays Bank v Simms (supra) at p.695G, where he expands on this second qualification in terms which make it clear that in referring to the payment having been made for good consideration, he is considering the position as between payer and payee. 45.In the light of my views as to the inability of the mistake relied upon to form the basis of a claim by the Plaintiff for the recovery of the money paid by it to the Defendant as money paid under a mistake of fact, it is not necessary for me to consider the question of the contractual term as to the place of delivery of the peso banknotes as between R H International and the Plaintiff. The claim to recover on the basis of a failure of consideration 46.I turn next to consider whether or not that question arises for determination in the context of the Plaintiff’s alternative claim which was put on the basis that it was entitled to recover the money as having been paid to the Defendant for a consideration which had totally failed. 47.Traditionally, a claim for the recovery of money paid for a consideration which has totally failed is a claim which lies between two parties to a contract, one of whom has paid the other a sum of money in consideration of the other’s performance of his obligations under that contract. Where the other entirely fails to perform his obligations, it is said that the consideration for the payment has totally failed, and the payer is entitled to recover the payment from the other party to the contract on the basis of a total failure of consideration. In this context, consideration refers not to the promise given by the other party to support the payer’s obligation to pay, but the actual performance of that promise. 48.In this case, the contract under which delivery of the peso banknotes was to be made was the foreign exchange contract between the Plaintiff and R H International. The Defendant was not a party to that contract, and owed the Plaintiff no obligations under it. In these circumstances, it seems to me that while the Plaintiff might have a claim against R H International to recover the payments which it made at R H International’s direction on the basis that the consideration for such payments had totally failed (assuming the term as to the place of delivery to be as contended for by the Plaintiff), it does not have a claim against the Defendant, which was not a party to that contract, and was under no obligations to the Plaintiff in respect of it. I was not cited any authority which suggested that a claim for the return of money paid for a consideration which has failed lies against any party other than the other party to the contract under which the consideration has failed, and I do not consider that such a claim does lie. 49.Further, it seems to me that this conclusion is consistent with general principles - it is not, in my view, the law that every payment made for no consideration (which is a quite different thing from money paid for a consideration which has failed) is recoverable from the payee on the basis that he is a mere volunteer. Were that the case, all gifts would be recoverable from the donee by a donor who had changed his mind. Where a payment is made for no consideration, it may, however, be possible for the payer to establish that his intention to confer a benefit on the payee was vitiated for some reason. One example in which such intention might be vitiated would be where the payment was made under a mistake of fact, but for the reasons which I have explained above, I do not consider that any such claim can be brought by this Plaintiff on that basis here. 50.I therefore consider that even if, as between the Plaintiff and R H International, there had been a total failure of consideration, on the footing that R H International’s obligation under its contract with the Plaintiff was to deliver the peso banknotes to the Plaintiff in Hong Kong (as the Plaintiff claims) and not in Manila (as the Defendant and R H International claim), this would not provide the Plaintiff with a basis for recovering the payments which it had made to the Defendant. The contractual term as to delivery 51.On this basis, the question of what was the contractual term as to place of delivery of the peso banknotes does not arise in the context of the Plaintiff’s claim to recover the money paid to the Defendant as money paid for a consideration which has failed either. 52.That said, however, the question of the contractual term as to place of delivery was a matter that was the focus of much of the evidence from Mr Chandiramani, and almost all of the evidence of Mr Hathiaramani. It was also the subject of detailed submissions from both counsel. I therefore propose state my finding on this question, giving my reasons for coming to it, in case I am wrong in the conclusions to which I have come above, and this question is relevant to the determination of the Plaintiff’s claims in this action. 53.I take as my starting point the contemporaneous exchange of MSN Messenger messages between Mr Chandiramani and Mr Hathiaramani on 29 May 2002. It was clear from Mr Chandiramani’s evidence that such telephone contacts as there were between himself and Mr Hathiaramani on 29 May 2002 or the previous day did not touch on this question. Taken in isolation, that exchange of messages would appear, on the face of it, to admit of only one answer to the question of where delivery of the peso banknotes under the foreign exchange contract made between the Plaintiff and R H International was to take place - namely, in Manila, to Mr Salaudeen’s representative. As is apparent from the extract of the transcript of such messages which I have set out in paragraph 11 above, Mr Chandiramani told Mr Hathiaramani to “prepare 15 million pesos to be given to Salaudeen or his people” and that he (Mr Chandiramani) would credit Mr Hathiaramani’s account accordingly. This statement was repeated slightly later in the exchange, when Mr Chandiramani reiterated that “it is confirmed 15 million pesos to be given, I shall credit your account here for HK$2,347,000.00 plus”. Towards the end of the conversation, Mr Chandiramani said again, after Mr Hathiaramani indicated that he had the banknotes ready to be handed over, “your total credit is HK$2,347,417.00, you may release the 15m”. Each of these statements appears clearly to indicate that Mr Hathiaramani was to deliver 15 million pesos in banknotes to Mr Salaudeen or his representative in Manila, not to the Plaintiff in Hong Kong. 54.Further, towards the end of the exchange, Mr Hathiaramani said that he had made arrangements to pay the Plaintiff’s party in Manila the 15 million pesos, and asked Mr Chandiramani to ask that party to call Mr Hathiaramani when they were ready to receive the banknotes from them. 55.At no time during the exchange of messages or in any telephone conversations prior to or during it did Mr Chandiramani correct Mr Hathiaramani’s statements, either as to the place of delivery, or as to Mr Salaudeen being the “Plaintiff’s party”. 56.Quite apart from the exchange of messages on 29 May 2002, this impression is reinforced by the exchange of messages on 31 May 2002, in which Mr Hathiaramani, having been informed by Mr Chandiramani that the banknotes had not arrived, told Mr Chandiramani in no uncertain terms that he was clear in his accounts with Mr Chandiramani, because he had, as instructed, paid 15 million pesos in banknotes to Mr Salaudeen’s representative, as Mr Chandiramani knew. Mr Chandiramani’s response was not that Mr Hathiaramani’s obligation was to deliver the banknotes to the Plaintiff in Hong Kong, but that Mr Hathiaramani was “clear”. Later, in response to a specific reference to the fact that there could be no claim against Mr Hathiaramani, rather than taking the position which he now seeks to take, Mr Chandiramani simply said not to worry, because on Mr Hathiaramani’s side, he was “clean”, going on to accept that Mr Hathiaramani had paid Mr Salaudeen 15 million pesos based on Mr Chandiramani’s instructions. 57.Further evidence which, to my mind, points to the probability being that the agreed term as to delivery was for delivery to take place in Manila is to be found in the Plaintiff’s actions after discovery of the loss of the banknotes. The Plaintiff’s first response was to pursue Mr Salaudeen, travelling to Singapore to meet him, and obtaining from him a promise to repay US$150,000 (about half of the amount that had been lost) by instalments. It was only after Mr Salaudeen defaulted on the first instalment that steps appear to have been taken to make a claim against Mr Hathiaramani and the recipients of the funds in Hong Kong. If delivery was to have taken place in Hong Kong, and more pertinently, if Mr Salaudeen was Mr Hathiaramani’s agent for carrying the banknotes to Hong Kong, one would have expected the focus of any claim or complaint to have been directed towards Mr Hathiaramani, the principal, rather than his agent. 58.Even when notice of a claim was first given to Mr Hathiaramani by the Plaintiff’s solicitors’ letter of 5 July 2002, I note that rather than making the simple claim which would have been available for breach of contract, on the basis of a failure to deliver the banknotes to the Plaintiff in Hong Kong as had been agreed, no mention was made of such a claim, it being said instead that Mr Hathiaramani was guilty of a fraudulent misrepresentation by having told Mr Chandiramani that he had (as the Plaintiff now appears to accept) handed the banknotes over to Mr Salaudeen. 59.Finally, on this point, there is the fact that the Plaintiff instructed solicitors in Singapore to issue a letter of demand to Mr Salaudeen seeking repayment of the lost banknotes. Even accepting that there may have been a misunderstanding or failure in communications between the Plaintiff and its Singapore solicitors in respect of the statement in the latter’s letter to K A Rahim Marketing of 11 October 2002 to the effect that Mr Salaudeen had collected the peso banknotes “on behalf of” the Plaintiff, the fact remains that even at this late stage, the Plaintiff was seeking to pursue Mr Salaudeen for the lost banknotes, as appears from Khattar Wong & Partners’ letter of 31 October 2002. 60.Mr Westbrook, however, submitted that the exchange of messages should not be taken at face value. He submitted that:-
61.As to the first of these points, although Mr Hathiaramani accepted that in the early 1990s he (or his staff) carried banknotes to Hong Kong at his own expense, and it appears, at his own risk, he said that the position had changed after 1997, when following the Asian financial crisis, the Philippine Government imposed limitations on the amount of peso banknotes that could be carried out of the Philippines. Mr Hathiaramani said that when that happened, he ceased dealing in banknotes with the Plaintiff. It was accepted by Mr Chandiramani that from about 1997 or 1998, there was a period of some three years or so during which there was no trade in banknotes (and it would appear that the overall level of business between R H International and the Plaintiff would also have declined in this period). It seems to me that having regard to the break in the dealings between R H International and the Plaintiff, it cannot be assumed that the terms on which they dealt following the resumption of the trade in peso banknotes was necessarily on the same terms as before. 62.Although Mr Westbrook suggested that there was no reason why the introduction of Mr Salaudeen as the carrier in place of Mr Hathiaramani himself should have affected the term as to delivery, or as to at whose risk the banknotes were carried to Hong Kong, it seems to me that this could well have been a relevant factor. Whereas Mr Hathiaramani might have been prepared to run the risk that the banknotes might be lost when he was carrying them himself (or sending them with his own staff), it is clearly possible that when a third party was brought in as the carrier, he may no longer have wished to run that risk. 63.Moreover, although Mr Chandiramani said in his evidence that he thought that Mr Hathiaramani might have wished to deal in banknotes because that might provide him with a better profit margin, this would appear to be a matter of speculation on Mr Chandiramani’s part. Certainly the suggestion was not backed up by any evidence as to the relative rates of exchange for banknotes as opposed to transfers by other means, such as telegraphic transfers. For his part, Mr Hathiaramani said that so far as he was concerned, it was the Plaintiff who needed peso banknotes in Hong Kong. For the purposes of his remittance business, he said, transferring funds by telegraphic transfer was much less risky and did not involve any particularly significant expense. I would accept that there whereas there was no particular need for Mr Hathiaramani to send banknotes to Hong Kong, there was a demand on the Plaintiff’s part for peso banknotes to sell to customers in Hong Kong - a matter which the Plaintiff’s witnesses accepted in their oral evidence. Further, the Plaintiff’s statement of account with Mr Hathiaramani indicates that during the period from December 2001 to May 2002, there were at least as many, if not rather more, occasions on which Mr Hathiaramani transferred funds to the Plaintiff by way of telegraphic transfer (or by Hong Kong dollar cheque) for the purposes of his remittance business, as compared to occasions when peso banknotes were sold to the Plaintiff. 64.For these reasons, I do not consider that any course of dealings that there may have been prior to 1997 assists the Plaintiff in respect of the dealings between December 2001 and May 2002. 65.As to the question of whether Mr Salaudeen was Mr Hathiaramani’s agent, each of Mr Chandiramani and Mr Hathiaramani said that the other had introduced Mr Salaudeen to him. Doing the best that I can with the available evidence, it seems to me more likely that the Plaintiff introduced Mr Salaudeen into the process, since it was the Plaintiff which required peso banknotes in Hong Kong, and would have required someone to carry them to Hong Kong once Mr Hathiaramani had ceased to be interested in doing so. Moreover, Mr Chandiramani’s evidence as to when the introduction took place was (as I have indicated) inconsistent - placing the alleged introduction as early as 1999 (in his oral evidence), in contrast to his witness statement, in which he stated that the introduction took place in 2001. In these circumstances, I conclude and find that the introduction of Mr Salaudeen into the process of transporting banknotes from Manila to Hong Kong was effected by the Plaintiff rather than by Mr Hathiaramani. 66.So far as the question of who paid Mr Salaudeen’s expenses is concerned, the Plaintiff’s accounts certainly would appear to indicate that these expenses were borne by Mr Hathiaramani. However, I note that nowhere in Mr Chandiramani’s statement does he make this point, it being made for the first time in his and Mr Muralidharan’s oral evidence at trial. Mr Hathiaramani’s evidence on this was that he did not pay Mr Salaudeen’s expenses, and that he had once queried the debits to his account which appeared to record payments to Mr Salaudeen in respect of travelling expenses and other charges, only to be told by Mr Chandiramani that this was simply an internal bookkeeping matter on the Plaintiff’s side, which need not concern him, so long as the balances on the account were correct. I am conscious that these proceedings are between the Plaintiff and the Defendant, and not between the Plaintiff and Mr Hathiaramani, and that Mr Hathiaramani’s own accounts (which may have thrown some light on this aspect of the matter) were not produced, it does seem to me that Mr Hathiaramani’s explanation is difficult to credit. For present purposes, therefore, I would accept, on balance, that Mr Salaudeen’s expenses were met by Mr Hathiaramani, rather than the Plaintiff. However, as Mr Kwok pointed out, even if this was the case, it did not follow that Mr Salaudeen was Mr Hathiaramani’s agent, but only that Mr Hathiaramani had agreed to absorb the cost of sending the banknotes to Hong Kong. On balance, therefore, I consider it more likely than not that Mr Salaudeen was the Plaintiff’s agent, in the light of my conclusions as to the matters discussed in the preceding three paragraphs. 67.So far as the suggestion that the Plaintiff was not obliged to credit Mr Hathiaramani’s account until the banknotes were actually received in Hong Kong is concerned, although Mr Hathiaramani appeared at first to accept that this was the case, he later clarified his answer to indicate that as long as his account was credited, he did not pay too much attention to when precisely the credit was posted. He was, however, firm in his contention that the Plaintiff was obliged to credit his account after he had delivered banknotes to Mr Salaudeen. In my view, whatever the Plaintiff’s practice may have been, whether or not it was obliged to credit Mr Hathiaramani’s account before the banknotes had physically arrived in Hong Kong depends not on the time at which the Plaintiff recorded such credit in its own books, but upon the agreement between the parties as to the place and mode of delivery of the banknotes. I do not, therefore find the Plaintiff’s accounting entries or practice to be of much assistance in determining this question. 68.As for the point that Mr Hathiaramani’s fax indicates that the credit to his account would not arise until the banknotes had reached Hong Kong, it seems to me that this argument seeks to read too much into the fax, the main purpose of which was to indicate how the credit was to be dealt with, not when it would arise as a matter of contract between Mr Hathiaramani and the Plaintiff. By contrast, for example, in at least two places in the 29 May 2002 MSN Messenger exchange of messages, Mr Chandiramani refers to the credit in the present rather than the future tense, which might just as well suggest that it arose on delivery of the money to Mr Salaudeen in Manila. 69.Finally, although I would make due allowance for Mr Chandiramani’s clearly somewhat distressed state of mind on 31 May 2002, it does seem to me that Mr Hathiaramani was making his position abundantly clear, and that Mr Chandiramani’s response, far from taking issue with that position, was to accept it. In this context, I should add that I do not accept Mr Chandiramani’s evidence that he had spoken to Mr Hathiaramani on a number of occasions prior to this exchange of messages and informed him of the delay to and apparent loss of the banknotes. This assertion was at odds with his witness statement, in which he makes no reference to any telephone conversations with Mr Hathiaramani prior to the exchange of text messages. It is also, to my mind inconsistent with the tone of Mr Hathiaramani’s messages which indicate that he was unaware, until told of it in the exchange of text messages, that the banknotes were missing and had not been delivered. 70.Taking all of these factors into account, it seems to me that the Plaintiff has not made good its submission that the exchanges of text messages of 29 and 31 May 2002 should not be read in their ordinary sense. While there is some force in the point made on the basis of the Plaintiff’s accounting records, it does not seem to me that that is sufficient to overcome the clear words which were used by Mr Hathiaramani, to which Mr Chandiramani took no exception. For the reasons which I have explained, it does not seem to me that there is sufficient evidence of any relevant course of past dealings which would justify reading the exchanges differently, so as to ignore or put a gloss on Mr Chandiramani’s instructions to Mr Hathiaramani to deliver the peso banknotes to Mr Salaudeen, or his later acceptance that he had indeed given such instructions to Mr Hathiaramani. In these circumstances, I conclude that the contractual arrangement between the Plaintiff and R H International only required Mr Hathiaramani to deliver the banknotes to Mr Salaudeen’s representative in Manila. Change of position 71.Although it is not strictly necessary to do so, having regard to the conclusions which I have already reached, I turn finally to consider, very briefly, the Defendant’s argument that even if there had been some mistake or failure of consideration which might form the basis of a claim against it, it should be permitted to retain the benefit of the payments from the Plaintiff as it had expended such payments in making payments to third parties in accordance with the instructions of Mr Uttamchandani’s brother, and so had changed its position in good faith in reliance on the payments which it had received. 72.In his statement, Mr Uttamchandani identified a total of 12 separate payments, totalling slightly in excess of HK$2.2 million which, he said, were made in accordance with his brothers’ instructions, received by fax or telephone, as to payments to be made. In relation to each such payment, the Defendant produced the relevant fax containing Esquire’s instruction to pay the payee, documentation from Esquire evidencing a contract to remit funds to the payee in Hong Kong, and cheques issued by the Defendant and/or pay in slips showing payments into the accounts of the various payees of the amounts said to have been paid to them. 73.It is clear that all the payments referred to by Mr Uttamchandani were made before the Defendant had received any intimation from the Plaintiff that the banknotes had not arrived, still less that the Plaintiff might wish to recover the HK$2.2 million from the Defendant. 74.Mr Westbrook pointed out that the payments by the Defendant to its payees were made on 29 to 31 May 2002, that the instructions to make such payments were received over those three days, and that some of the exchange contracts with the customers of Esquire in the Philippines were not made until 30 or 31 May 2002. In those circumstances, he suggested that it could not be said that these payments were made in reliance on the payment from the Plaintiff, and that the Defendant had failed, therefore, to show that it had changed its position in reliance on the Plaintiff’s payment to it. Mr Westbrook also suggested that the Defendant was, as Esquire’s agent, under an obligation to make the payments, so that it would have been bound to make the payments in any event, whether or not it had received the HK$2.2 million from the Plaintiff. 75.I think it is fair to say that Mr Uttamchandani had some difficulty in linking together the particular payments which he said had been made with the payments received from the Plaintiff. However, his evidence was essentially fairly simple, and was to the effect that he was expecting funds to come from Esquire, through Mr Hathiaramani and the Plaintiff, that such funds were sent for the purpose of funding on-payments to payees in accordance with instructions to be provided to him by Esquire, and that having received the funds from the Plaintiff, he went on to make the payments which he was instructed to, so that the Defendant had not retained any benefit from such payments. He acknowledged that not all the payments to the payees were made out of the account into which the HK$2.2 million was paid, explaining that the Defendant had other bank accounts as well. 76.In my view, the difficulties which Mr Uttamchandani had in linking the payments listed in his statement to the HK$2.2 million received from the Plaintiff are not fatal to the Defendant’s claim to have changed its position in good faith in reliance on the payments it received from the Plaintiff. It is clear that payments totalling some HK$2.2 million were made by the Defendant on the day that that amount was received from the Plaintiff and the two days following. Mr Uttamchandani struck me as an honest witness, and I accept, despite his lack of knowledge of the precise details of the payments to be made, that he caused the Defendant to make the payments on to the payees having been told by his brother to do so, and having also been told by his brother that funds to make such payments were to be transmitted to the Defendant through the Plaintiff. 77.The defence of change of position is now well recognised as a defence to a claim for recovery of money paid under a mistake of fact. It is a defence which has been very broadly defined, no doubt because of the generous basis on which the claim to recover payments made under a mistake of fact is now available to plaintiff payers. In Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 at 580, Lord Goff said this of the defence:-
In the Dextra case (supra), Lords Bingham and Goff, having referred to this passage, said that the House of Lords appeared to have adopted a broad approach based on practical justice, and to have avoided technicality in relation to this defence. 78.Bearing this approach in mind, I must confess that I see nothing unjust in denying the Plaintiff relief – on the contrary, it seems to me that having regard to the fact that the Defendant does not appear to have retained the benefit of the payments made to it by the Plaintiff, having made payments to payees prior to being informed of any possible claim or basis for claim on the part of the Plaintiff, it would be unjust for the Defendant now to have to make restitution of those payments to the Plaintiff. While it has not, perhaps, been possible for the Defendant to put forward the most complete or perfect evidence in order to demonstrate the relationship between the payments which it made to its payees and the payment it had received from the Plaintiff, it has, I think, to be remembered that a defendant in the position of the Defendant in this case is unlikely to have at the forefront of its mind the need to be able to prove, giving chapter and verse, that payments which it has made having obtained an anticipated receipt, in circumstances where it has no reason to believe that there might be any difficulty or problem in relation to such receipt, that the payments made by it were linked causatively to the receipt in question. 79.Had it been necessary, therefore, I would have held that the Defendant has changed its position so as to make it unjust or inequitable to require it to make restitution to the Plaintiff. Constructive trust 80.Finally, having rejected the Plaintiff’s claims to be entitled to recover the HK$2.2 million which it paid to the Defendant, whether on the basis of a mistake or a failure of consideration, it follows that there can be no basis on which the Defendant can be regarded as a constructive trustee for the Plaintiff in respect of the HK$2.2 million which it received. Determination and costs 81.I therefore dismiss the Plaintiff’s claim, and make a costs order nisi that the Plaintiff is to pay the Defendant its costs of these proceedings, to be taxed on the party and party basis if not agreed.
Mr Simon Westbrook, SC, instructed by Messrs Oldham, Li & Nie, for the Plaintiff Mr Kenneth Kwok, SC, instructed by Messrs Wilkinson & Grist, for the Defendant |
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