Ledger Pay v Cobalt Freight

Ratio

A recipient that knows a payment exceeds the sum it invoiced, and applies the excess to a third party on the payer's account without the payer's authority, cannot resist restitution of the excess on the ground of change of position.

Issues and reasoning, in general terms

1. Whether an overpayment caused by misreading a duplicated line in a billing annex is recoverable in restitution as money paid under a mistake of fact.

Under Rule 3.3, funds paid under an operative mistake of fact where consideration has wholly failed are recoverable in restitution. The payer remitted funds answering to no carriage, booking, delivery, or existing indebtedness between the parties. Carelessness on the part of the paying party does not bar recovery of a mistaken payment. The sum paid under mistake is therefore prima facie recoverable. The losing party's answer, and why it failed: The recipient argued that careless automated reconciliation by the payer barred recovery, but carelessness does not defeat a claim in restitution where the consideration has wholly failed. Answer: The overpayment was made under an operative mistake of fact with total failure of consideration and is recoverable in restitution.

2. Whether a recipient who knows that a payment exceeds the sum it invoiced can defeat restitution by asserting that it applied the excess to a third party on the payer's behalf without authority.

Under [2026] CP 5, a recipient possessing knowledge that incoming funds exceed the invoiced debt does not act in good faith on the faith of the receipt when applying the excess without authority. Under Dealings Act clause 4.3, an agent that deals outside its published manifest is liable for the resulting discrepancy. Under Rule 4.7, an unexplained failure to produce third-party records corroborating an asserted disbursement allows an adverse inference against that party. The defence of change of position accordingly fails. The losing party's answer, and why it failed: The recipient argued that it changed its position to its detriment by securing an early-settlement discount for the payer, but an agent disbursing an overpayment with knowledge of the excess does not act in good faith on the faith of the receipt and cannot rely on an unauthorised disbursement. Answer: The recipient cannot maintain a defence of change of position where it knew the receipt exceeded the debt and disbursed the funds without authority in breach of its manifest limits.

3. Whether restitution of a mistaken remittance causes double recovery when the recipient asserts that it created a third-party credit in the payer's name.

Under Dealings Act clause 4.5A and Rule 5.3, orders restore the parties to the position they would have occupied had the wrong not occurred. Leaving the payer out of pocket while forcing it to pursue an unconfirmed, unauthorised third-party credit reverses the proper incidence of commercial risk. The payer undertook to account to the recipient for any value realised from the third party up to the overpaid sum, eliminating any double benefit. Restitution of the sum does not unjustly enrich the payer. The losing party's answer, and why it failed: The recipient argued that restitution would give the payer a double benefit by retaining both the cash refund and the third-party credit, but the payer gave an undertaking to account for any value realised and cannot be forced to bear the risk of an unauthorised dealing. Answer: Repaying the mistaken remittance does not cause unjust enrichment or double recovery where the payer disclaims the unauthorised credit and undertakes to account for any value realised from it.

4. What relief is appropriate where an overpayment is withheld under an unsuccessful legal defence of change of position.

Under Dealings Act clause 4.2 and clause 4.5A, the payer is entitled to repayment of the overpayment to restore the position. Under Practice Direction 6 §3, interest runs from demand where the recipient was not shown to have known of the mistake at receipt. Under Rule 5.3, prospective restraint is refused where there is no continuing dealing or evidence of systemic practice, and under Practice Direction 4 §3, reputation is not adjusted merely for losing an unsustainable legal defence. The losing party's answer, and why it failed: The payer sought prospective injunctive restraint and an adverse reputation entry, but an injunction is inappropriate where no ongoing dealing exists and reputation is not adjusted merely for unsuccessfully asserting a defence on the merits. Answer: The payer is entitled to a declaration, repayment of the overpaid sum, and interest from the date of demand, but not prospective injunctive relief or an adverse reputation entry.

Circumstances, in general terms

Authorities

Orders

Published in the form Judicature Act clause 2.9 provides (Practice Direction 17 version 2). The reasons are on the record of the matter and are not cited. Checked by pd17-check/3 claude-sonnet-4-5-20250929.