[COURT OF APPEAL]

AVON COUNTY COUNCIL v. HOWLETT

[1976 C. No. 3574]

Estoppel - Representation - Detriment - Overpayment of salary - Recipient using part of moneys overpaid - Claim for moneys had and receive - Whether claim barred in its entirety

The defendant was a teacher at one of the plaintiffs' schools. In January 1974 he was injured in an accident at the school. Thereafter, apart from a period of six weeks, he was unable to carry on working. Under his conditions of service he was entitled to be paid for the first six months of sickness at the full rate of pay, for the next six months at half rate and nothing thereafter. However, the plaintiff continued to pay the defendant at the full rate from January 1974 until September 1974 and at half rate until August 1975. He and his wife made inquiries of the plaintiffs' official and were informed that the payments were correct. The defendant bought a suit for himself and a second-hand car at a total cost of £460.50. He did not claim social security benefit of £86.11 which he would have claimed had he not received the payments from the plaintiffs. The plaintiffs, on discovering that they had overpaid the defendant by £1,007, Claimed that sum as moneys paid to the defendant by mistake. The defendant pleaded in his defence that due to the plaintiffs' representations he had suffered detriment in the sum of £546,61, and that the plaintiffs were estopped from claiming the overpayments. The judge, having found that, on the evidence, the defendant had spent the whole of the overpayment, invited amendment of the figure of £546,61 set out in the defence. The defendant declined to make the amendment and the judge, holding that he was bound to deal with the case on the pleadings as they stood, found that the plaintiffs had made the payments under a mistake of fact, that the defendant had suffered detriment but that it was limited to £546.61, and that the plaintiffs were entitled to recover £460.39, being the balance of the overpayment.

On appeal by the defendant:-

Held, allowing the appeal, that there was sufficient material before the judge to support the inference that the mistakes made by the plaintiffs were mistakes of fact and not of law and, since the defendant had been led to believe that he was entitled to treat the entirety of the overpaid moneys as his own and had acted on that representation, the doctrine of estoppel by representation was a defence to the plaintiffs' claim for moneys had and received; that the operation of the estoppel was not restricted to the precise amount which the defendant had proved he had suffered in reliance on the representation and, accordingly, the plaintiffs' claim failed in its entirety (post, pp. 609G-H, 610A-B,611C-E, 619B, G-H, 621B-C, 622G, 624D-E, 625B-C).

Dictum of Lord Watson in Ogilvie v. West Australian Mortgage and Agency Corporation Ltd. [1896] A.C. 257, 270, P.C. and Greenwood v. Martins Bank Ltd. [1933] A.C. 51, H.L.(E.) applied.

Quaere. Whether, in circumstances where it would be unconscionable for a defendant to retain all moneys received,

the doctrine of estoppel defeated a claim for moneys had and received in its entirety (post, pp. 608G-H, 611H-612A, 624H-625A).

Per Cumming-Bruce L.J. Once the judge had held that it would be inequitable to require the defendant to repay any part of the moneys overpaid, he should have refused to decide the case on a basis that was neither pleaded nor supported by the evidence. If the plaintiffs has wished to argue that it was inequitable that the defendant should retain some part of the £1,007, they should have pleaded the facts relied on in support of that plea (post, p. 609D-E.).

The following cases are referred to in the judgments:

Adams v. Naylor [1946] A.C. 543; [1946] 2 All E.R. 241, H.L.(E.).

Allcard v. Walker [1896] 2 Ch. 369.

Amalgamated Investment & Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] Q.B. 84; [1981] 3 W.L.R. 565; [1981] 3 All E.R. 577, C.A.

Bilbie v. Lumley (1802) 2 East 469.

Cooper v. Phibbs (1967) L.R. 2 H.L. 149, H.L.(I.).

Fung Kai Sun v. Chan Fui Hing [1951] A.C. 489, P.C.

Greenwood v. Martins Bank Ltd. [1932] 1 K.B. 371, C.A.; [1933] A.C. 51, H.L.(E.).

Holt v. Markham [1923] 1 K.B. 504, C.A.

Jones (R.E.) Ltd. v. Waring and Gillow Ltd. [1926] A.C. 670, H.L.(E.).

Kelly v. Solari (1841) 9 M. & W. 54.

Lloyds Bank Ltd. v. Brooks (1950) 6 Legal Decisions Affecting Bankers 161.

Ministry of Health v. Simpson [1951] A.C. 251; [1950] 2 All E.R. 1137, H.L.(E.).

Ogilvie v. West Australian Mortgage and Agency Corporation Ltd. [1896] A. C. 257, P.C.

Skyring v. Greenwood (1825) 4 B. & C. 281.

The following additional cases were cited in argument:

Bell v. Lever Brothers Ltd. [1932] A.C. 161, H.L.(E.).

Greasley v. Cooke [1980] 1 W.L.R. 1306; [1980] 3 All E.R. 710, C.A.

United Overseas Bank v. Jiwani [1976] 1 W.L.R. 964; [1977] 1 All E.R. 733.

APPEAL from Sheldon J.

The plaintiffs, Avon Council, by a specially indorsed writ dated December 23, 1976, claimed £1,007 in respect of overpayment of salary and sickness benefit made to the defendant, Harold Ellis Howlett, on the termination of his employment with the plaintiffs. By his defence the defendant pleaded that he and his wife had made inquiries of the plaintiffs' officials about the payments and had been told that they were correct. Relying on that the defendant had spent a total of £460,50 on buying a suit and a second-hand car and refrained from claiming £86.11 in social security benefits to which he would otherwise have been entitled. On July 20, 1981, Sheldon J. held that the defendant had suffered detriment in that he had spent £546.61, but that the plaintiffs were entitled to recover the balance of £460.39. He directed that the judgment was not to be enforced without leave of the court.

By a notice of appeal dated January 5,1982, the defendant appealed on the grounds, inter alia, (1) that the judge misdirected himself in law and in fact in holding that the sums claimed by the plaintiffs were paid by them to the defendant under a mistake of fact when the evidence before him showed that the plaintiffs were unable to identify the person who made

the mistake or to establish what specific fact, if any, thought to be true but in fact untrue which was the basis of the payment of any of the sums or to exclude on the balance of probabilities the possibility that the payments were made under a mistake of law or by mere misadventure; (2) that the judge misdirected himself in law in holding that, the plaintiffs having made representations to the defendant that he was entitled to the sums claimed by them, being representations upon which the defendant was intended and entitled to, and did, rely, and the defendant having relied thereon to his detriment to an extent which was not de minimis, the plaintiffs were estopped from pursuing their claim to those sums only to the extent of the detriment pleaded and proved by the defendant; (3) that the judge should have held that the plaintiffs were estopped from pursuing the whole of their claim; and (3 A) that the judge should have held that the plaintiffs were estopped from pursuing the whole of their claim save in so far as they were able to show that any identifiable part of their mistaken payment still remained in the defendant's hands (alternatively, still remained in his hands in circumstances which would make it inequitable for him to retain it).

The facts are stated in the judgment of Slade L.J.

J. M. Bowyer for the defendant.

D. H. Fletcher for the plaintiffs.

December 21. The following judgments were read.

CUMMING-BRUCE L.J. The course which the case took at the hearing gives rise to difficulty in determining how far the decision of this court can be relied upon as establishing how the law of estoppel will be applied to other cases. The difficulty is the result of the fact that the judge admitted evidence which satisfied him that the defendant had spent all moneys overpaid but then decided the case on an artificial case pleaded in the defence. The defendant's counsel, on instructions, deliberately refused to apply to amend the defence in order to reconcile the detriment pleaded in paragraph 12 of the re-amended defence with the evidence of the defendant. So the judge found as a fact that the defendant had spent all the £1,007 which he had received as an overpayment due to the plaintiffs' mistake but decided the case on the basis of the pleaded case which alleged that he had only spent £546,61 and that there was no evidence about what had happened to the balance of £460.39. This was untrue. The judge solved the practical problem by making an order in the following terms:

"It is ordered that the plaintiffs are entitled to recover from the defendant the sum of £460.39 the plaintiffs having undertaken not to execute this judgment without leave of the court and that the defendant's counterclaim is dismissed. And there is no order for costs."

The judgment was, in my view, based on a hypothetical state of facts, without substance or reality, because the judge in the course of his judgment had found that the defendant had spent all the £1,007. He said:

"At an early stage of the hearing, however, it also became clear that all the money so overpaid had long since been spent by the recipient - and, indeed, that the defendant neither had nor would be likely in the future to have sufficient fund switch which to meet any judgment

that might be given against him. On my inquiring of the parties, however, whether there was any purpose in incurring further costs in this connection I was told that the local government reorganisation in question had resulted in a number of similar overpayments having been made to other individuals and that, accordingly, both the plaintiffs and the union concerned (the Confederation of Health Service Employees) wished to use this as a test case, so far as possible, to establish the various rights and liabilities. I was also told that the plaintiffs, if they succeeded in their claim against the defendant, were prepared to undertake not, without leave of the court, to seek to enforce any such judgment against him."

In Adams v. Naylor [1946] A.C. 543, the House of Lords disapproved a practice whereby the Crown authorities nominated a defendant in order to bring into court for judgment issues which were really issues between the plaintiff and the Crown, but for convenience disguised in the pleadings as issues between the plaintiff and the personal defendant. As Lord Uthwatt stated, at p. 555:

"It was not open to the parties to this suit by agreement to have the matter dealt with on the footing, proved to be false, that the defendant was in occupation of the land in question. The matter could not be dealt with on the basis wished by the Crown."

In the instant case the defendant has no practical reason for objecting to the order against which he appeals. There is on the judge's finding back to the plaintiffs. The appeal is brought in order to obtain the decision of the court upon a purely hypothetical question of detriment in its relevance, to the law of estoppel. The hypothetical question is of general importance, and is said to be of importance in other cases in which the plaintiffs and the defendant's union are concerned. I have found the resolution of the hypothetical question difficult; it is not easy to determine whether and when the court will restrict the effect of an estoppel if to apply it with the full rigour will clearly produce injustice. Viscount Cave L.C. in R.E. Jones Ltd. v. Waring and Gillow Ltd. [1926] A.C. 670, 685, evidently thought that the court should find a way of preventing a party so using estoppel as to make a profit, and Lord Denning M.R. though that estoppel was a flexible doctrine: see Amalgamated Investment & Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] Q.B. 84, 122. These cases afford strong reasons for refusing to give a judgment founded on estopped on facts which exist only in the mind of the pleader. The law does not and should not develop by such a device, and the ratio of such a decision is liable to be seriously misleading. I do not consider that the decision of this court in the instant appeal is authority for the proposition that where, on the facts, it would be clearly inequitable to allow a party to make a profit by pleading estoppel, the court will necessarily be powerless to prevent it.

In argument before us upon this hypothetical question, it was contended on behalf of the defendant that where the defendant successfully proved that he had acted to his detriment upon a representation by the plaintiff which was inconsistent with the true facts, and that his detriment was proved to be substantial in the sense that it was not de minimis, he was entitled to keep all the money paid through the mistake which the plaintiff was estopped from alleging, even though the result was to leave him with a

windfall profit. Alternatively, it was contended that if he was liable to repay any sum on the ground that it was inequitable for him to retain it (a) the onus lay upon the plaintiff to prove that the facts that made such retention inequitable, and (b) on the pleadings the plaintiffs had alleged no such facts or resulting inequity.

Having regard to the facts actually found by the judge, the whole of this argument was fanciful. The money had never been paid as a single sum to the defendant. £1,007 represented the total arrived at by adding together a large number of small sums received over a period of many months and paid as the remuneration on which he relied for discharge of his ordinary living expenses. By the date of trial nothing was left, and the judge found that it would be inequitable to require the defendant to repay anything. It would, in my view, by quite wrong in those circumstances for the court to indulge in speculation about where the onus might lie having regard to pleadings that were accepted by both parties to be a fiction. In other cases it may be a nice question whether on the pleaded facts the plaintiffs have established prima facie that it would be inequitable to retain some of the money had and received by a mistake which the plaintiff are estopped from denying. If the defendant by his defence has raised estoppel, the plaintiff may by reply contend that it is inequitable to allow the defendant to retain part or all of the benefit of the mistake; the defendant may plead by rebuttal facts repelling the charge that retention is inequitable. At trial the evidential burden may shift. But none of this arises in this case because the facts found by the judge demonstrate that the case raised in ground 2,3 and 3A of the grounds of appeal is a fiction.

My conclusion is that once the judge had held that it would be inequitable to require the defendant to repay any part of the moneys overpaid, he should have refused to decide the case on a basis which was neither pleaded nor supported by evidence. If the plaintiffs wished to argue that it was inequitable that the defendant should retain some part of the £1,007, they should have pleaded the facts relied upon in support of that plea. It was submitted by Mr. Fletcher that only the defendant could know what had happened to the money, so to require the plaintiff to plead facts giving rise to an equity in their favour is to place upon them a burden impossible to discharge. I disagree. The solution of their procedural problem may in the appropriate case lie in an application for discovery of document and answers to interrogatories. But before the judge there was no reply by the plaintiffs alleging that it was inequitable for the defendant to retain any part of the money, and the evidence which the judge admitted proved that it was not inequitable. So on the case as pleaded, and on the evidence before him, there was no material on which he could hold that the defendant was liable to pay back any part of the money paid to him by the proved mistake of fact.

For these reasons I would allow the appeal.

I have had the advantage of reading the judgment that Slade L.J. is about to deliver. I agree with it, though I go further than he does in my view that there is a fundamental objection to the approach of the judge in that he yielded to the persuasions of the parties, or perhaps more realistically to the persuasions of the union supporting the defendant and of the plaintiffs to try a question which had become hypothetical once more of the facts has emerged in evidence before him. I have however myself been enticed into expressing my views obiter on the necessity for a pleading by way of reply in any case in which the plaintiff, faced by a defence raising estoppel, seeks to raise a plea that it is inequitable for the defendant

to retain a windfall. It might have been wiser to restrict myself to the issues which actually arose on the facts found by the judge. But whether on any given state of facts the law recognises any such equity as that propounded by the plaintiffs must await a case in which it is necessary to decide the question.

EVELEIGH L.J. The plaintiffs overpaid the defendant because of a mistake. For the reasons set out in the judgment of Slade L.J. with which I respectfully agree, the mistake was one of fact. The terms of the defendant's contract of employment and the manner in which the plaintiffs controlled the assessment of the defendant's pay show that they were under a duty to him to determine his entitlement and not to misrepresent it. They represented to him that his entitlement was those sums which they paid to him from time to time. Those sums in truth over a period from January 1974 to August 1975 amounted to an overpayment of £1,007. It is admitted that in respect of that overpayment the plaintiffs are to be taken as having represented to the defendant that he was entitled to treat the whole of the money as his own. The defendant positively relied upon this representation. The overpayment was spread over the period. The amount depending as it did upon the complicated regulations relating to sick pay was not easy to determine. The defendant spent it in ordinarily living expenses and in the purchase of a suit for £53.50 and for the hire purchase of a motor car involving the total outlay of £472 less £65 received in part exchange for his own car. He did not claim £86.11 social security benefit to which he would have been entitled had his income been less. He and his wife were careful people. They spent reasonably according to their position and the income which they were receiving. As the judge found, they put aside each week in different envelopes sufficient money to be able to meet the current household bills when they were received and they used the balance to meet their day to day expenses. They might, as he found, occasionally be able to put some aside for a rainy day but in general the more they had left in their pockets the more they were able to spend and they found it possible for the defendant to buy his new suit and to exchange his old car for another second-hand one. Had it been known that the defendants' true wage entitlement was less than that which he was receiving they would have governed their expenditure accordingly. They were a careful couple and no one has suggested the contrary.

On those facts, as the judge indicated, the plaintiffs' claim would fail completely. However, in paragraph 12 of his defence the defendant pleaded that relying upon the plaintiffs' representation he made no claim for additional social security benefits and he incurred expenditure which he would not have incurred has his income been as the plaintiffs now asserted, namely (1) the purchase of clothes, and (2) the hire-purchase of a motor car. Paragraph 13 read: "In the premises the plaintiffs are estopped by their said representations from pursuing any part of their claim herein." Earlier in the defence, namely paragraph 10 thereof, it was pleaded that the defendant had telephoned the Education Department because he and his wife were anxious about their financial situation with mounting medicine bills, travelling to and from hospital, the increased cost of living and an ageing motor car becoming difficult for the defendant to drive because of his injuries and queried his salary cheque only to be assured that it was in order. It might be thought that the pleadings as a whole did indicate that the defendant was spending all that he was receiving but there is no doubt that only the three items

amounting to £546.61 were specifically pleaded as having been the subject of expenditure incurred in reliance upon the plaintiffs' representations. Quite clearly the judge was asked to determine the case upon the basis that those three items were the only ones being put forward as additional expenditure so incurred. The defendant's counsel declined an invitation to amend his pleadings to put the defence on a broader basis.

The judge was therefore asked to decide the case upon the basis that there has been an overpayment of £1,007 caused by a mistake of fact and that the defendant, relying upon a representation that he was entitled to the £1,007 spent £546.61 of it. The problem as thus posed contained no information as to whether or not it would be unconscionable for the defendant to retain the balance of the sum. It contained no information upon which the court could determine whether or not it would be unfair to make him repay. Having, in effect, been asked to ignore his finding of fact which was so favourable to the defendant I can readily understand the judge coming to the conclusion which he did. However, not without some hesitation, I have reached the same conclusion as Slade L. J., namely that once the defendant had shown detriment which prevented the plaintiffs from asserting the truth behind the payment that obstacle barred the whole of their claim for, pleaded simply as a case of mistake, evidence of the defendant's true entitlement was essential if the plaintiffs were to succeed. I think that this must follow from the speech of Lord Watson in Ogilvie v. West Australian Mortgage and Agency Corporation Ltd. [1896] A.C. 257, 270; and Fung Kai Sun v. Chan Fui Hing [1951] A.C. 489 in which the former case was considered. Strictly speaking the words of Lord Watson were obiter, but as Slade L.J. has pointed out, the decision of the Court of Appeal in Greenwood v. Martins Bank Ltd. [1932] 1 K.B. 371 was to the same effect. In that case Scrutton L.J. said, at pp. 383-384:

"If the claim of the bank were for damages for failure to disclose, it might be that the improbabilities of recovering anything in the action might be taken into account; but the authorities show that in a question of estoppel, where the question is whether the customer is estopped from alleging that certain bills are forgeries, if the bank has lost something, the value of that something is not the measure of its claim, but, the customer being estopped from proving the bills forgeries, the bank gains by the amount of the bills."

I would not for myself regard Skyring v. Greenwood (1825) 4 B. & C. 281 and Holt v. Markham [1923] 1 K.B. 504 as determining the same question. Those cases may be explained upon the basis that the defendant's manner of living generally had been influenced by the payments made to them so that although they had not been able to point to specific items of expenditure amounting to the whole sum in question the money had nonetheless been spent. Alternatively such cases may be said to rest upon the basis that to compel the defendant to make any repayment would be to impose upon him an overall financial strain brought about only by his being misled as to his financial position by the representations of the plaintiffs.

However I am far from saying that whenever the recipient of money paid under a mistake has been led to think that it is his, then he will be entitled to retain the whole by demonstrating that he has spent part of it. The payment may involve no representation, as where a debtor presents an account to a creditor. Then while there might have been a

representation there may be circumstances which would render it unconscionable for the defendant to retain a balance in his hands. There may also be circumstances which would make it unfair to allow the plaintiff to recover. It may be that it is important to determine whether or not the plaintiff making the representation owes a duty to the defendant as was the case in Ogilvie v. West Australian Mortgage and Agency Corporation Ltd. [1986] A.C. 257. I too am unhappy in being asked to decide a case in an unreal situation and I am content to say that the question we have been asked to determine is that already decided in Greenwood v. Martins Bank Ltd. by Scrutton L.J. [1932] 1 K.B. 371.

SLADE L.J. Where an employer has a large pay-roll, there must always exist the risk that, due to error or inadvertence, an employee may be paid either greater or lesser sums than those to which he is strictly entitled under his contract of service. There are many potential sources of such error and the advent of computerisation has introduced yet another one. The present is such a case. Harold Ellis Howlett, the defendant in the action, has been overpaid in a sum of £1,007 by his former employers, Avon County Council, who are the plaintiffs in the action. Sheldon J., in a judgment of July 20, 1981, gave judgment for the plaintiffs in the sum of £460.39 subject to an undertaking by the plaintiffs not to enforce the judgment without the leave of the court and dismissed a counterclaim by the defendant. The defendant now appeals from this judgment, seeking an order that the plaintiffs' claim be wholly dismissed.

The case raises difficult and important questions of law concerning the principles governing the recovery of money paid under a mistake and the relevance of the doctrine of estoppel in this context. The essential facts of the case are quite simple.

The facts

Before April 1, 1974, the defendant had been employed by the Bristol City Council as a teacher in charge of sports and physical education at the New Fosseway School, Bristol. On April 1, 1974, as a result of local government re-organisation which came into effect on that date, the plaintiffs succeeded to the rights and liabilities of the Bristol City Council in the field of education. Thus, on that date the defendant entered the employment of the plaintiffs.

The defendant, however, was not then able to undertake any duties for the plaintiffs, because he had unfortunately been injured in an accident in one of the classrooms, which had occurred on January 8, 1974. In the event, he returned to work only for about six weeks between April 5 and May 18, 1976. Ill-health then once again prevented him from working until he reached the retirement age of 65 on October 6, 1976. A claim by him against the plaintiffs for damages for injury and loss arising from the accident was pursued to trial and dismissed.

It is common ground that, following his accident on January 8, 1974, and consequent absence from work, the defendant, under his conditions of service, was entitled to be paid at full rates of pay for the first six months, at half rates for the next six months and to no pay thereafter, so long as he was not working.

In fact the plaintiffs continued to pay him at full rates for several months beyond the expiration of the first six months' period, that is to say

until September 1974. They then continued to pay him at half rates long beyond the expiration of the second six months' period, that is to say until August 1975. There is in evidence an agreed schedule, which shows the net amounts which the defendant actually received from the plaintiffs or their predecessors for each of the months January 1974 to August 1975 inclusive. This schedule shows the component parts of each net payment, that is to say "basic pay," an addition for "threshold" and deductions for "sick benefit," "superannuation," "tax," "national insurance" and "graduated pension." The net amounts thus received by the defendant over the period January 1974 until August 1975 totalled £1,900.66.

Some time after August 1975 the plaintiffs discovered that, up to and including January 1975, the defendant had been regularly overpaid and that after January 1975 he had been paid for seven months when he should not have been paid anything at all. There is in the index an agreed schedule, which shows the net amounts which he should have received for each of the months January 1974 to January 1975, inclusive, if the payments had been correctly calculated. It contains a breakdown of the figures and indicates that the aggregate of the net amounts which were in fact due to be paid to the defendant over the period January 1974 to January 1975 inclusive was only £950.65, resulting in an overpayment of £950.01. It is also common ground that he was overpaid by an additional small sum of £56.99, particulars of which are to be found in the index. These two sums of £950.01 and £56.99 produced the sum of £1,007 on which the present claim is based.

On December 23, 1976, the plaintiffs issued a writ against the defendant indorsed with a very short statement of claim, which claimed repayment of the sum of £1,007, thereby alleged to represent "an overpayment of salary and sickness benefit paid to the defendant by mistake." The pleading gave no further indication at all as to the nature of the mistake alleged.

On April 19, 1978, an order was made in the Bristol District Registry that the plaintiffs should serve on the defendant, inter alia, the following further and better particulars of the statement of claim:

"(1) Specify the mistake alleged to have occasioned the payment, indicating upon what basis the plaintiffs took the view that the defendant was entitled to the payments made to him."

Further and better particulars under this head were served by the plaintiffs on May 18, 1978, pursuant to this order. They read:

"The mistake made was in assuming that the defendant was entitled to the sums which were paid to him whereas his total entitlement was a lesser sum by the amount claimed in this action . . . It was a mistaken view. The mistaken basis upon which the mistaken view was formed is irrelevant to these proceedings."

On March 5, 1980, the defendant's solicitors, apparently unaware or forgetful of the particulars that had already been delivered, served a similar request on the plaintiffs' solicitors. The plaintiffs' solicitors on June 16, 1980, replied stating that the request had been answered by particulars served on May 18, 1978. The defendant's legal advisers thereafter apparently pursued this request no further, so that, by the time when the action came to trial, the only particulars of the allegations of

mistake were those rather unenlightening particulars which had been served on May 18, 1978.

Meantime the defendant had served a defence and counterclaim. This pleading was in due course amended and re-amended. The counterclaim is not relevant on this appeal. I need only refer to a few of the contents of the defence. Paragraph 15 pleaded that if, which was denied, any of the payments were made by a mistake, such mistake was a mistake of law and the plaintiffs were for that reason not entitled to recover any of them. The defence, however, also asserted, as a quite separate plea, that the plaintiffs are in any event, estopped from pursuing any part of their claim by reason of various representations made by them to the defendant. The representations relied on are to be found set out in detail in paragraphs 9, 10 and 10B of the defence. In paragraph 11 it is asserted that by the documents, conversation and conduct referred to in paragraphs 9, 10 and 10A, the plaintiffs and/or their predecessors represented to the defendant that he was entitled to each of the relevant sums paid to him. Paragraph 12 of the defence reads:

"The defendant relying, as he was entitled and instructed by the plaintiffs and their said predecessors to do, upon the said representations: - (a) made no claim to and was not paid additional social security benefits by way of increase of industrial disablement benefit because of special hardship or to supplementary benefit and/or rent rebate and/or rates rebate to which he would or might have been entitled had his income during the said period been as the plaintiffs now seek to assert it should have been and which in the case of the said benefits, he cannot now claim or obtain or which, in case of the said rebates (and alternatively to the above, in the case of the said benefits), he will only be able to obtain at cost and expense to himself and after considerable delay (b) incurred expenditure which he would not have incurred had his income been as the plaintiffs now assert it should have been namely: (i) purchase of clothes to the amount of £53.50 from Montague Burton Ltd. on June 21, 1975, (instalment payment for which was completed in February 1976). (ii) hire purchase through United Dominion Trust of a motor car from Wrington Service Station, Bishopsworth Road, Bristol, in August 1975. Its cash price was £395. The defendant paid £130 in cash and was allowed £65 credit against his old car the balance of £200 plus £91 interest being payable at £12 per month."

Paragraph 13 alleged: "In the premises the plaintiffs are estopped by their said representations from pursuing any part of their claim herein."

Further and better particulars were in due course delivered of the loss alleged in paragraph 12 (a) of the defence, which limited it to £86.11. The expenditure referred to in paragraph 12 (b) of the defence was quantified at the trial in an agreed sum of £460.50. It followed that the defence as pleaded did not allege specific detriment to have been suffered by the defendant in reliance on the representations beyond a sum of £546.61.

However, at an early stage of the trial it became clear that, notwithstanding the form of paragraph 12 of the defence, all the money so overpaid had long since been spent by him and indeed that the defendant neither had, nor was likely to obtain, sufficient funds with which to meet any judgment that might be given against him. The judge therefore inquired of the parties whether there was any purpose in incurring further costs in this connection. He was told that the local government re-organisation in

question had resulted in a number of similar overpayments having been made to other individuals and that accordingly both the plaintiffs and the union which supported the defendant (the Confederation of Health Service Employees) wished to use this as a test case, so far as possible to establish the various rights and liabilities. He was also told that the plaintiffs, if they succeeded in their claim, were prepared to undertake not to seek to enforce any such judgment against the defendant without the leave of the court. He therefore proceeded to hear the case to its conclusion.

It appears that the contentious issues of fact at the trial fell within a narrow compass. It was not disputed by or on behalf of the defendant that overpayments totalling £1,007 had been made to him. Mr. Fletcher, on behalf of the plaintiffs, conceded that representations of fact had been made by or on behalf of the plaintiffs to the defendant which had led him to believe that he was entitled to treat all the relevant payments as his own, and that these representations were capable of giving rise to an estoppel if the other conditions necessary for the application of the doctrine were satisfied. It was not asserted that the defendant had received any of the relevant sums in the knowledge that he was not entitled to them. In these circumstances it appears that the contentious issues of fact principally concerned the circumstances in which the overpayments had come to be made in the first place.

The judgment of Sheldon J.

The plaintiffs called as their only witness on this aspect of the case Mr. Hewlett, a group leader in the staffing and pay division of that part of their organisation which deals with the payment of teachers. He had been employed in a similar capacity by the Bristol City Council before the takeover on April 1, 1974.

The judge at an early stage in his judgment referred to an argument advanced by Mr. Bowyer, on behalf of the defendant, to the effect that the mistakes leading to the relevant overpayments were mistakes not of fact but of law - or at least that, as the plaintiffs could not identify the clerk who made the error or errors, or who fed the information into the computer, they could not establish that the mistake was one of fact rather than one of law derived from some misinterpretation of the relevant regulations and salary scales. Sheldon J., however, clearly felt no difficulty in rejecting this particular argument, in just six lines of his judgment:

"In all the circumstances, however, and having heard the evidence of Mr. D.J. Hewlett, head of the county council's staffing and payroll division, I have no doubt whatever that the overpayments were an oversight and due entirely to as mistake or mistakes of fact on the part of the council staff."

The judge obviously found the question of estoppel a more difficult one. Having observed that there had been a representation of fact sufficient to give rise to an estoppel, he stated the principle which guided him:

"In such a case, in my opinion, the payer will be estopped from claiming restitution if and to the extent that the payee, bona fide, in reliance upon the representation and without notice of the plaintiff's claim, has so changed his position that it would be inequitable to require him to repay the money - provided that the payment or overpayment in question was not due substantially to the payee's own fault: Larner v. London County Council [1949] 2 K.B. 683. With that proviso too, however, this case is not concerned."

In the course of a further investigation of the authorities Sheldon J. again referred to the consideration, "whether and to what extent it would be inequitable for him (the recipient ) to be compelled to repay the money or any part of it." He said that he was satisfied that, on the real facts of the case, the defendant did bona fide, in reliance upon the plaintiffs' representations that he was entitled to treat the money as his own, and without notice of their claim, spend the would of the sums overpaid in ordinary living expenses or otherwise for his own purposes, and that it would be inequitable to require him to repay them. He said that, on these facts as found by him, and if those had been the issues raised by the pleadings, he would have had no hesitation in dismissing the plaintiffs' claim in toto and giving judgment for the defendant. However he went on to say:

"The issues raised by the pleadings, however, in my opinion, are not so wide. For whatever reason, moreover, whether to preserve its value as a test case or for any other reason, Mr. Bowyer, instructed by the union on the defendant's behalf, made it clear that he did not intend to apply to re-amend the defence and counterclaim. Mr. Fletcher, too, on behalf of the plaintiffs, was anxious that the case should be decide strictly on the pleadings as they stand. In all the circumstances, moreover, and having regard to their undertaking, I am satisfied that there is no risk of the defendant being prejudiced by such a course."

He pointed out that the form of the defence limited the detriment alleged to have been suffered by the defendant in reliance on the representations to the loss of a claim for £86.11 social security benefit and expenditure of some £460.50. He observed that there was no allegation that the balance of some £460.39 had been spent in reliance on the plaintiffs' representations and that the mere fact that the money had been spent beyond recall was no defence to the claim. He rejected a submission that the doctrine of estoppel would have prevented the plaintiffs from recovering any part of the £1,007 even if the balance of £460.39 had still been sitting untouched in some deposit account. In his opinion:

"the payer will be estopped from claiming restitution only if and to the extent that the payee, if the has satisfied the other requirements in this connection, has so changed his position that it would be inequitable to require him to repay the sum of money in question."

Strictly on the case as pleaded in the statement of claim, the judge concluded that the plaintiffs, though estopped from reclaiming the £546.61 lost or expended by the defendant in reliance upon their representations, were nevertheless entitled to claim repayment of the outstanding balance of £460.39, because it would not be inequitable to require him to repay it.

The plaintiffs have not sought to challenge the judge's conclusion that the £546.61 is irrecoverable. As to this point there is no appeal. The issue on this appeal by the defendant solely concerns the £460.39.

It may be that there were good reasons (for example relating to costs) why the defendant's counsel did not avail himself of the opportunity to apply to re-amend his defence so as to plead all the true material facts. From the point of view of the court, the present situation is not wholly satisfactory, since the case is perilously near to being one of a hypothetical nature. Nevertheless, at the request of both parties, who regard it as a test case, this court has been willing to deal with it on the same basis as the

trial judge, that is to say on the footing that both sides must be confined to the limits of the facts as both pleaded and proved in evidence.

Mistake

I now turn to consider whether the excessive payments totalling £1,007 made by the plaintiffs to the defendant were made under a mistake and if so what was the nature of that mistake. It is common ground that the onus of proving that there was a mistake lies upon the plaintiffs: see, for example, Holt v. Markham [1923] 1 K.B. 504, 511, per Warrington L.J. Furthermore, it is common ground that the mistake in question must be one which can be properly categorised as being a mistake of fact rather than a mistake of law, since payments made under what is properly categorised as a mistake of law are not generally recoverable.

Parke B. authoritatively stated the principles governing the recovery of money paid under a mistake of fact in Kelly v. Solari (1841) 9 M. & W. 54, 58-59:

"I think that where money is paid to another under the influence of a mistake, that is, upon the supposition that a specific fact is true, which would entitle the other to the money, but which fact is untrue, and the money would not have been paid if it had been known to the payer that the fact was untrue, an action will lie to recover it back, and it is against conscience to retain it; though a demand may be necessary in those cases in which the party receiving may have been ignorant of the mistake . . . If, indeed, the money is intentionally paid, without reference to the truth or falsehood of the fact, the plaintiff meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true or false, the latter is certainly entitled to retain it; but if it is paid under the impression of the truth of a fact which is untrue, it may, generally speaking, be recovered back, however careless the party paying may have been, in omitting to use due diligence to inquire into the fact. In such a case the receiver was not entitled to it, nor intended to have it."

This statement of the relevant principles were cited with approval by Lord Shaw of Dunfermline and Lord Carson in R.E. Jones Ltd. v. Waring and Gillow Ltd. [1926] A.C. 670, 688 and 698. Its correctness has not been challenged in the present case. In this instance the evidence of Mr. Hewlett in my opinion clearly establishes on the balance of probabilities that the extra moneys were paid to the defendant under a mistake of some kind on the part of the plaintiffs or their servants or agents. This is not a case where, to quote the words of Parke B. in Kelly v. Solari, 9 M. & W. 54, 59:

"the money is intentionally paid, without reference to the truth or falsehood of the fact, the plaintiff meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true or false."

And Mr. Bowyer, as I understood his argument, did not seek so to contend.

On this aspect of the case, his argument has been substantially founded on the propositions (i) that the plaintiffs have not proved by their evidence that the relevant mistakes were mistakes of fact rather than of law and (ii) that if these were mistakes of law, the plaintiffs would not be entitled to recover the money.

The only evidence called at the trial on behalf of the plaintiffs to explain and identify the relevant mistakes was that of Mr. Hewlett. Through no fault of his own, his evidence was somewhat sparse. He explained in chief that problems in converting the data taken from the computer records of the Bristol City Council gave rise to mistakes affecting a number of employees. Save in one respect relating to the defendant, he did not particularise as to the nature of these mistakes, and indeed, with this one exception, he was not invited by counsel on either side to do so. His examination, cross-examination and re-examination were all conducted on the footing that only one mistake occurred in relation to the defendant, such mistake being that the pay clerk concerned did not instruct the computer at the plaintiffs' office to reduce the defendant's pay to half pay until too late, with the result that for a period of time he was paid at the full rate when he should have been paid at only half rate. Mr. Bowyer in cross-examination understandably sought to extract an admission from Mr. Hewlett which might tend to show that the relevant mistake had been one of law. In the course of his cross-examination, in answer to the question, "A pay clerk incorrectly interpreted his conditions?" Mr. Hewlett replied, "Obviously, yes, sir." I take the reference to "conditions" in this context as being a reference to the defendant's conditions of service. However, later in cross-examination, Mr. Hewlett made it clear that he could not say from his own knowledge how the mistake occurred, because, after a large turnover of staff in the plaintiffs' office, he was not in a position to identify the pay clerk who had failed to give the computer the correct instructions. Furthermore in re-examination he made it clear that he did not regard the defendant's conditions of service as containing any relevant ambiguity. He was asked, "Is there any room for a different interpretation?" He replied:

"There could have been only one interpretation in my view, but if that interpretation is not actioned correctly it does not alter the interpretation. There is only one set of conditions which can apply. The employer has laid down an entitlement to so many months full pay and so many months half pay."

The first of the grounds of appeal set out in the defendant's notice of appeal asserts that the judge misdirected himself in law and in fact in holding that the sums claimed by the plaintiffs were paid by them to the defendant under a mistake of fact when

"the evidence before him showed that the plaintiffs were unable to identify the person who made the mistake or to establish what specific fact, if any, thought to be true but in fact untrue which was the basis of the payment of any of the said sums or to exclude on the balance of probabilities the possibility that the payments were made under a mistake of law or by mere misadvertence and the tenor of the evidence of their witness Mr. D.J. Hewlett . . . was that upon the plaintiffs taking over from April 1, 1974, certain functions of the City and County of Bristol . . . errors had been made as a result of misinterpretation of that other authority's records and/or of the defendant's conditions of employment but he could give no evidence as to how or why this had occurred in the plaintiffs' case."

Estoppel apart, these were substantially the grounds argued by Mr. Bowyer before this court. I think there is some force in them. I also think there is some force in his submission that the further and better

particulars of the statement of claim, which I have already quoted, were not an adequate plea of a mistake of fact, because the pleaded assumption that "the defendant was entitled to the sums which were paid to him" couldhave been based on a mistaken view of the law. However, so far as I am aware, no objection was taken to the sufficiency of the pleading, as a plea of a mistake of fact, either before or at the trial, and I do not think it would be right to decide this appeal on this pleading point.

On the substantial issues, I have come to the conclusion that there was sufficient evidence before the judge to support the inference that, on the balance of probabilities, the mistakes which led to the relevant overpayments were mistake of fact and not mistakes of law. Though there is no precise evidence to this effect, I think it a reasonable inference from the evidence as a whole that any pay clerk employed by the plaintiffs would have been likely to know the simple fact that an employee of the plaintiffs, such as the defendant, while absent from work following an accident, was under his conditions of service entitled to be paid at full rates of pay for the first six months of his absence, at half rates for the next six months of absence, and to no pay thereafter. Accordingly, on the evidence, I think it a fair inference on the balance of probabilities that the reason why the plaintiffs continued to pay the defendant at full rates after the end of the first six months of his absence from work was that the pay clerks concerned were unaware or had forgotten that more than six months had elapsed since the defendant's accident and for this reason failed to give the appropriate instructions to the computer, which would have led to the appropriate reduction in the defendant's pay at the appropriate time. This was in my vies plainly a mistake of fact rather than one of law.

Other errors clearly occurred, which were not explored by either side in evidence at the trial. In particular the defendant continued to be paid half pay for seven months after January 1975 when he should have been paid nothing at all. A comparison of the two schedules referred to earlier in the judgment reveals a number of further discrepancies (for example relating to deductions for sick benefit) between the amounts which he actually received and those which he should have received. Mr. Bowyer urged that they might have been caused by a misinterpretation of documents, such as the relevant regulations setting out the entitlement of the plaintiffs' employees while absent from work. He submitted that such misinterpretation would have constituted a mistake of law: see, for example, Holt v. Markham [1923] 1 K.B. 504 and Ministry of Health v. Simpson [1951] A.C. 251, 269-273. However, nothing appearing from the evidence or submitted in argument leads me to think there is any real likelihood that these errors were caused by mistakes of law rather than of fact. On the evidence, I think it a fair inference that the reason why the plaintiffs continued to pay the defendant after the end of the first 12 months of his absence from work was that the pay clerks concerned were unaware or had forgotten that this 12 month period had expired. The other errors in my opinion are similarly likely to have occurred simply through incorrect factual data having been fed into the plaintiffs' computers. Thus in my opinion, albeit by a fairly narrow margin, the plaintiffs have discharged the onus which falls upon them of showing that the overpayments were made under mistakes of fact.

However, since this is a text case, I would like to add the following observations before leaving this aspect of it. Though in the present instance the incorrect final figures were produced by computers, it has not

been suggested that the fault was that of the computers themselves. It was human error that gave rise to the mistakes, by feeding the computers with the wrong data. In the present instance it has not been possible for the plaintiffs to identify the individual person or persons who were responsible for the errors. However, in other similar cases the court might well expect the responsible individuals to be identified and called as witnesses. Employers who pay their employees under a computerised system should not in my opinion assume from the decision of this court in the present case that, if they overpay their employees through some kind of mistake, they are entitled to recover it simply for the asking, provided only that they are not barred by estoppel or some other special defence. The borderline between mistakes of law and mistakes of fact is not clearly defined in the cases. Decisions such as Copper v. Phibbs (1967) L.R. 2 H.L. 149 and Allcard v. Walker [1896] 2 Ch. 369 suggest that the courts are not quick to extend the former category. The distinction has been the subject of some criticism. The authors of Goff and Jones, The Law of Restitution,2nd ed. (1978), p. 91 express the view that the principle in Bilbie v. Lumley (1802) 2 East 469 should only preclude recovery of money which was paid in settlement of an honest claim and that any other payment made under a mistake of law should be recoverable, if it would have been recoverable had the mistake been one of fact. Nevertheless the distinction still exists in English law. I think the burden will still fall on an employer who seeks to recover an overpayment from an overpaid employee to satisfy the court that, on the balance of probabilities in all the circumstances of the case, it was a mistake of fact which gave rise to the overpayment. The plaintiffs in the present instance in my opinion succeed in relation to this issue only because they have discharged this burden on the particular facts of the case.

Estoppel

I now turn to the defence of estoppel. The following general propositions of law are to be found set out in Goff and Jones, The Law of Restitution,2nd ed. (1978), pp. 554-555 (though I do not quote them verbatim). A plaintiff will be estopped from asserting his claim to restitution if the following conditions are satisfied: (a) the plaintiff must generally have made a representation of fact which led the defendant to believe that he was entitled to treat the money as his own: (b) the defendant must have, bona fide and without notice of the plaintiff's claim, consequently changed his position: (c) the payment must not have been primarily caused by the fault of the defendant.

In my opinion these propositions are entirely consistent with both the general principles which govern the doctrine of estoppel and with the authorities which have been cited to this court, illustrating the relevance of estoppel as a defence to claims to restitution. Examples of the more important of such authorities are Skyring v. Greenwood, 4 B. & C. 281; Holt v. Markham [1923] 1 K.B. 504 and Lloyds Bank Ltd. v. Brooks (1950) 6 Legal Decisions Affecting Bankers 161.

In the present case it is common ground that the plaintiffs made representations to the defendant which led him to believe that he was entitled to treat the entirety of the overpaid moneys as his own. This was conceded by the plaintiffs at the trial, so that the judge did not find it necessary in his judgment to give any particulars at all of the relevant representations. Certain authorities suggest that a plea of estoppel can afford a good defence

to a claim for restitution only if the plaintiff owed a duty to the defendant to speak or act in a particular way: see, for example, R.E. Jones Ltd. v. Waring and Gillow Ltd. [1926] A.C. 670, 693, per Lord Sumner; Lloyds Bank Ltd. v. Brooks, 6 Legal Decisions Affecting Bankers 161, 168 et seq. However, this point causes no difficulty for the defendant in the present case since the plaintiffs, as the defendant's employers, in my opinion clearly owed him a duty not to misrepresent the amount of the pay to which he was entitled from time to time, unless the misrepresentations were caused by incorrect information given to them by the defendant. It has not been suggested that the misrepresentations were so caused or that the overpayments were brought about by the defendant's own fault.

The judge found as a fact that the defendant had, bona fide and without notice of the plaintiffs' claim, changed his position in reliance on the representations, by losing the claim for £86.11 social security benefit and expending the sum of £460.50 which I have already mentioned. In the circumstances and in accordance with the principles already stated. he was in my opinion clearly right to hold that the plaintiffs' claim was barred by estoppel to the extent of at least £546.61 and there is no challenge to this part of his decision. However, according to the defendant's case as specifically pleaded, the change of position which he has undergone in reliance on the plaintiffs' representations, has only deprived him of the opportunity to return £546.61 of the overpayment; it has not deprived him of the opportunity to return the outstanding balance of £460.39 which, so far as the pleading reveals, may be still in his possession.

The judge considered that the defence of estoppel was in effect capable of being applied pro tanto, in the sense that a payer who has overpaid a payee, even in circumstances where all of conditions (a), (b) and (c) above are satisfied, will be precluded from claiming restitution only to the extent that it would be inequitable to required the payee to repay the relevant sums or part of the relevant sums in question. The judge clearly regarded the doctrine of estoppel as being a flexible doctrine, as indeed Lord Denning M.R. described it in Amalgamated Investment & Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] Q.B. 84, 122.

If I may respectfully say so, I feel some sympathy with the judge's point of view. I also initially found unattractive the submission, placed before and rejected by him, that, if the defendant be treated as having spent in reliance on the plaintiffs' representations some £546.61 of the £1,007 received, the plaintiffs could not recover the balance of £460.39, even if it were still sitting untouched in some deposit account. At first sight such a conclusion would seem to leave the defendant unjustly enriched.

On further reflection, however, I think that references to broad concepts of justice or equity in a context such as the present may be somewhat misleading, as well as uncertain in their application. The conclusion of the judge in the present case really involves the proposition that, if the defendant is successfully to resist a claim for repayment of the entire sum of £1,007, the onus falls on him to prove specifically that the pecuniary amount of the prejudice suffered by him as a result of relying on the relevant representations made by the plaintiffs equals or exceeds that sum. For present purposes, however, one has to postulate a situation in which the defendant was perfectly entitled to conduct his business affairs on the assumption that the relevant representations were true, until he was told otherwise. Meantime, a defendant in the situation of the defendant in the present case may, in reliance on the representation, have either altered

his general mode of living or undertaken commitments or incurred expenditure or entered into other transactions which it may be very difficult for him subsequently to recall and identify retrospectively in complete detail; he may even have done so, while leaving some of the particular moneys paid to him by the plaintiff untouched. If the pecuniary amount of his prejudice has to be precisely quantified by a defendant in such circumstances, he may be faced with obvious difficulties of proof. Thus, though extreme hypothetical cases can be envisaged, and indeed were canvassed in argument, in which broad considerations of equity and justice might appear to require the barring of a plaintiff's claim only pro tanto, if this were legally possible, I would not expect many such cases to arise in practice. In any event I do not consider the present case to be one of them, even on the basis of the facts as pleaded. I prefer to approach it simply by what I regard as the established legal principles governing the doctrine of estoppel.

Estoppel by representation is a rule of evidence, the consequence of which is simply to preclude the representor from averring facts contrary to his own representation: see Spencer Bower and Turner, Estoppel by Representation, 3rd ed. (1977), p. 112. It follows that a party who, as a result of being able to rely on an estoppel, succeeds on a cause of action on which, without being able to rely on it, he would necessarily have failed, may be able to recover more than the actual damage suffered by him as a result of the representation which gave rise to it. Thus if a bank's customer is estopped from asserting that a cheque with which he has been debited is a forgery, because of his failure to inform the bank in due time, so that it could have had recourse to the forger, the debit will stand for the whole amount and not merely that which could have been recovered from the forger: see Ogilvie v. West Australian Mortgage and Agency Corporation Ltd. [1896] A.C. 257. In that case Lord Watson said, at p. 270:

"There are some obiter dicta favouring the suggestion that, in a case like the present, where the amount of the forged cheques is about £1,500, the estoppel against the customer ought to be restricted to the actual sum which the bank could have recovered from the forger. But these dicta seem to refer, not to the law as it was, but as it ought to be; and, in any view of them, they are contrary to all authority and practice."

The decision of the Court of Appeal in Greenwood v. Martins Bank Ltd. [1932] 1 K.B. 371, affirmed in the House of Lords [1933] A.C. 51, is to the same effect.

So far as they go, the authorities suggest that in cases where estoppel by representation is available as a defence to a claim for money had and received, the courts similarly do not treat the operation of the estoppel as being restricted to the precise amount of the detriment which the representee proves he has suffered in reliance on the representation. In Skyring v. Greenwood, 4 B. & C. 281, the paymasters of a military corps had given credit in account to an officer for a period from January 1817 to November 1820, for certain increased pay. They had mistakenly supposed that this had been granted by a general order of 1806 to an officer of his situation. But in fact the paymasters had been informed in 1816 that the Board of Ordnance would not allow the increased payments to persons in the officer's situation. A statement of that account was delivered to the officer early in 1821, giving him credit for the increased pay to which they

supposed him to be entitled. After the officer's death in 1822, his personal representatives sought to recover the whole of the pay which had been credited to him. The defendants claimed the right to retain the overpaid sums. The Court of King's Bench rejected this claim, apparently without any inquiry as to the amount of the expenditure or financial commitments which the officer had incurred in reliance upon the erroneous credit. The basis of the court's decision is to be found in the following passage from the judgment of Abbott C.J., at p. 289:

"I think it was their duty to communicate to the deceased the information which they had received from the Board of Ordnance; but they forbore to do so, and they suffered him to suppose during all the intervening time that he was entitled to the increased allowances. It is of great importance to any man, and certainly not less to military men than others, that they should not be led to suppose that their annual income is greater than it really is. Every prudent man accommodates his mode of living to what he supposes to be his income; it therefore works a great prejudice to any man, if after having had credit given him in account for certain sums, and having been allowed to draw on his agent on the faith that those sums belonged to him he may be called upon to pay them back."

In Holt v. Markham [1923] 1 K.B. 504 the defendant was a demobilised officer of the Royal Air Force. His name was on a list called the Emergency List. This meant that, under a certain military regulation, he was entitled to a gratuity at a lower rate than if he was not on that list. The plaintiffs acted as the government's agents for the payment of gratuities to demobilised officers. In ignorance of the fact that the defendant was on the Emergency List, but also in forgetfulness of the regulation, and not appreciating the materiality of an officer being on that list, they paid the defendant his gratuity at the higher rate to which he would have been entitled if he had not been on it. Subsequently they sought to recover this sum. But by then the defendant, thinking this matter was concluded, had sold his holding of War Savings certificates and invested a substantial sum in a company which subsequently went into liquidation: see p. 507 of the report of the facts. The Court of Appeal held that the plaintiffs' action failed on two grounds, first that the plaintiffs' mistake was one of law rather than of fact and secondly that, as their conduct had led the defendant to believe that he might treat the money as his own and he had altered his position in that belief, the plaintiffs were estopped from alleging that the money had been paid under a mistake. Scrutton L.J. put the matter very simply, at p. 514:

"I think this is a simple case of estoppel. The plaintiffs represented to the defendant that he was entitled to a certain sum of money and paid it, and after a lapse of time sufficient to enable any mistake to be rectified he acted upon the representation and spent the money."

However, the facts as set out in the report of the case do not indicate that the defendant had necessarily spent the whole of his gratuity and Bankes and Warrington L.JJ. were careful not to suggest that they did. They clearly regarded it as immaterial whether or not he had. Thus Bankes L.J. said, at p. 511:

"it appears that for a considerable time he was left under the impression that, although there had been at one time a doubt about his title to the money, that doubt had been removed, and in consequence he

parted with his War Savings certificates. Having done that, it seems to me that he altered his position for the worse, and consequently the plaintiffs are estopped from alleging that the payment was made under a mistake of fact."

Warrington L.J., at p. 512, referred to the defendant as having spent "the whole or a large part of the gratuity which had been paid him."

If it were in every case possible for the doctrine of estoppel by representation to operate merely pro tanto in cases where it is being invoked as a defence to an action for money had and received, I think that the Court of King's Bench in Skyring v. Greenwood, 4 B. & C. 281, and the Court of Appeal in Holt v. Markham [1923] 1 K.B. 504 and indeed Lynskey J. in Lloyds Bank Ltd. v. Brooks, 6 Legal Decisions Affecting Bankers 161, would have been bound to conduct a much more exact process of quantification of the alteration of the financial position of the recipients, which had occurred by reason of the representations. The courts, however, in those cases, manifestly regarded any such process as irrelevant and inappropriate. All the relevant conditions for the operation of an estoppel being satisfied in those cases, the plea operated as a rule of evidence which precluded the payers from recovering any part of the money mistakenly overpaid or from retaining any part of the moneys mistakenly over-credited.

I think that no authority has been cited, other than the judgment of the judge, which directly supports the proposition that estoppel is capable of operating merely pro tanto in a case such as the present, where it is otherwise capable of being invoked as a complete defence to an action for money had and received. For the reasons which I have given, I conclude that such a proposition is contrary to principle and authority. The authors of Goff & Jones, The Law of Restitution, 2nd ed. (1978), do not assert any such proposition, but they do say, at p. 556:

"The effect of such an estoppel will generally be to defeat the claim altogether. But where the defendant's change of position has deprived him of the opportunity to return only part of the money he has received, to dismiss the plaintiff's claim in its entirety would enable the defendant to make a profit out of the transaction. This should not be allowed. In such circumstances the court may only give effect to the estoppel, subject to the defendant's undertaking to repay to the plaintiff any part of the sum received which he ought not to be entitled to keep."

The suggestion of an undertaking stems from the speech of Viscount Cave L.C. in R. E. Jones Ltd. v. Waring and Gillow Ltd. [1926] A.C. 670. In that case the majority of the House of Lords held that the plaintiffs were entitled to recover certain moneys on the principle of Kelly v. Solari, 9 M. & W. 54. Viscount Cave L.C., who dissented and with whom Lord Atkinson agreed, considered that the plaintiffs were estopped from recovering the money. On the particular facts, however, the operation of an estoppel in this manner would have left the defendants with a profit. The defendants disclaimed any desire to make such a profit and offered an undertaking (in effect) to return it to the plaintiffs. Viscount Cave L.C., at p. 685, express the view that such undertaking should be recited in the order to be made on the appeal, but said that, subject to the undertaking, he would dismiss it.

I recognise that in some circumstances the doctrine of estoppel could be said to give rise to injustice if it operated so as to defeat in its entirety an action which would otherwise lie for money had and received. This might

be the case for example where the sums sought to be recovered were so large as to bear no relation to any detriment which the recipient could possibly have suffered. I would for my part prefer to leave open the question whether in such a case the court would have jurisdiction, in the exercise of its discretion, to exact an undertaking of the nature referred to by Viscount Cave L.C., if it was not voluntarily proffered by the defendant.

On the particular facts of the present case as pleaded and proved, however, I could in any event see no sufficient ground for exacting any such undertaking from the defendant in the exercise of the court's discretion, even assuming that such discretion existed. The conditions for the operation of an estoppel have in my opinion all been satisfied. For the reasons which I have given, both on principle and in accordance with authority, I conclude that such estoppel bars the whole of the plaintiffs' claim.

I would accordingly allow this appeal. I would set aside the judgment of the judge and in lieu thereof dismiss the plaintiffs' claim with costs. I am reassured by the knowledge that, as appears from his judgment, this is the decision which the judge himself would have thought the proper one, if he had not regarded the form of the defendant's pleading as compelling a different conclusion.

Solicitors: Gillhams; Director of Administration and County Solicitor, Avon County Council.

A. R.