Restitution Discussion Group Archives
| Sender: |
Eoin O' Dell |
| Date: |
Thu, 4 Jul 1996 11:53:04 +0100 (BST) |
| Re: |
Defences |
Hi, all:
Lionel has, as usual, managed to bring us to the very
edge of the subject. I haven't yet read Lyons v. Jefferson Bank &
Trust, 793 F. Supp. 981 (D.Colo. 1992), aff'd 994 F.2d 716 (10th
Cir. 1993) but I will. Lionel says of it that the plaintiff's securities
were sold by the third party, and the proceeds of the sale were transferred
to the defendant's account; the plaintiff succeeded in tracing the securities
into the plaintiff's account. Lionel is troubled by the (non)availability
of defences: I'm troubled by the fact of the liability in the first place.
It seems to me that when the third party was finished, there were (at
least) two possible identifiable end products: the shares in the hands
of the purchasers from the third party; and the money paid by the third
party to the defendant.
As to the first, the purchasers are bona fide purchasers
for value without notice, and therefore any claim against them would successfully
be met with a defence,
As to the second, this was used because the first would
not yield a result. Yet, it seems to me that the ordering I have adopted
is the logical ordering, and this claim discloses the usual desperation
of the plaintiff whose primary action would fail seeking to find some
(any) other alternative remedy. To me, the purchasers from the third party,
and the defendants here, are in exactly the same position. The usual scenario
for the defence of bona fide purchase is that the defendant has given
value to the third party in exchange for the impugned receipt: the fact
that the payment is in advance should not render it any the less in exchange
(contrast re change of position: Svenska), and here, the payment
is in advance but still in exchange, for the following reasons. If we
treat the relationship between the defendant and the third party simply
as that between customer and banker, when the defendant customer lodged
his assets with the third party banker, the customer generates a debt
in his favour (represented in a bank account), and also pays for and receives
banking services. On our facts, the defendant has satisfied that antecedent
debt by paying over the impugned payment. Though in advance, that payment
is still in exchange for the lodgement. In the alternative, if we use
the language of trust, and treat the relationship between the defendant
and the third party as that between beneficiary and trustee, when the
defendant beneficiary transferred his assets to the third party trustee,
and thereafter instructs the trustee to retransfer the trust assets to
the beneficiary, a debt arises at that stage by virtue of the instruction
and the defendant satisfies that debt by paying over the impugned payment.
Again, though in advance, that payment is still in exchange for the lodgement.
Thus, on either view, there is a debt arising prior to the breach, which
prior debt the payment in breach satisfies, and the prior purchase of
the debt renders the receipt a bona fide purchase for value without notice.
Lionel, however, considers that:
The defendant was owed a debt by Wymer, for
breach of trust, but the defendant did not know it at the time it got
the payment. Can it be a bfp? My reaction is that it cannot; the defence
protects security of transactions, and that interest is not present
where the character of the transaction is completely different from
what the defendant understands it to be. Any views, or other cases?
If the only relevant debt were that arising from the
breach I would (probably) have to agree, but on the view above there is
also an initial debt arising from the prior deposit/transfer, and the
security of that initial transaction is secured and protected by according
the defendant the defence.
As to whether that payment would thereafter be a voidable
preference, as Lionel suggests, I will leave to Simon Evans' long and
thoughtful discussion.
Finally, I thought that there might be a third possible
identifiable end product: the chose in action which the third party had
against the defendant (if one arises) (and if it arises, then it would
to my mind be intermediate between the first two identified above). Since
all I know about tracing into the proceeds of a debt is derived from Lionel's
CLJ article, I wouldn't even presume, but even if (contrary at least to
Irish authority and to BIM v Homan) one can trace into a debt,
it seems to me that there is in reality no debt owed by the defendant
to the third party. What happened was that the defendant was itself owed
a debt (the bank account), and that debt was satisfied by the third party's
payment to it. No reverse debt arises, since (I think) the third party
would have no action as against the defendant simply because he used the
proceeds of a fraud to settle the debt. Thus, in theory, there are three
recourses, and in the following order:
the shares in the hands of the purchasers from the third
party; the chose in action which the third party had against the defendant;
and the money paid by the third party to the defendant.
The first fails, the second also fails, it makes me really
worry as to why the third might succeed, and, as I hope I have set out
above, I don't think that it should it have at least at the level of the
defence.
Hope this helps,
Eoin.
EOIN O'DELL Trinity College ph (+ 353 - 1) 608 1178 (All opinions are personal; no legal responsibility whatsoever
is accepted.)
Barrister, Lecturer in Law
Dublin 2
Ireland
fax (+ 353 - 1) 677 0449
Eunice and I got engaged last Saturday, 25 May 1996. !!
Live Long and Prosper !!
<== Previous message Back to index Next message ==>
»
»
»
»
| For
editorial policy, see here. For the unedited archive, see here. The archive editor is Steve Hedley. |
