Court Court of Appeal | Citation(s) [1981] Ch 105 | |
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Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105 is an English trusts law case, concerning constructive trusts. It held that a trust arose to protect a payment made under a mistake, with the benefit of a proprietary remedy. This is seen important for the question of what response, personal or proprietary, may come from a claim in unjust enrichment.
Contents
Facts
Chase Manhattan was instructed to pay $2m to the Israel-British Bank, but it paid the sum twice by mistake. The Israel-British Bank went insolvent, after Yehoshua Ben-Zion, the managing director, was convicted of embezzling £20 million ($39.4 million) from the bank. Chase Manhattan wished to claim its money back, without waiting in the insolvency queue. The Israel-British bank had known about the mistake before it finally went into liquidation.
Judgment
Goulding J held that Chase Manhattan could recover the full sum, because the money was held on trust from the moment it was received. He said the following.
Criticism
The decision has been subject to "sustained, authoritative criticism."
The case was reviewed in Westdeutsche Landesbank Girozentrale v Islington LBC by Lord Browne-Wilkinson, and expressed doubts as to the reasoning. He stated "I cannot agree with this reasoning. First, it is based on a concept of retaining an equitable property in money where, prior to payment to the recipient bank, there was no existing equitable interest. Further, I cannot understand how the recipient's conscience can be affected at a time when he is not aware of any mistake." This view, expressed by way of obiter dictum was particularly criticised by Peter Birks on the ground that the more straightforward way to establish a claim would be for unjust enrichment, should trigger a proprietary remedy in a similar circumstance, regardless of the position of one's notional conscience.
Lord Millett, writing extrajudicially, has also criticised the decision, stating "It is easy to agree with Lord Browne-Wilkinson that [Chase Manhatten v Israel-British Bank] was wrong decided, but it was wrongly decided not because [the transferee] had no notice of the [transferor's] claim ... but because the [claimant] had no proprietary interest for it to have notice of."