Misdirected Funds: Problems of Uncertainty and Inconsistency
The recent cases of Lipkin Gorman v Karpnale LtdI and Agip (Africa) Ltd v Jackson2 and the ensuing academic comment have done much to clarify the principles behind the law of restitution and the various forms of equitable liability for involvement in a breach of trust. It must not, however, be forgotten that in practice a claim based on unjust enrichment or wrongful involvement in a breach of trust is likely to be brought in conjunction with a claim for conversion or for a breach of a contractual or tortious duty to take reasonable care to safeguard the plaintiff from fraud. An examination of the principles behind tortious and contractual liability shows that they are not necessarily consistent with these recent developments, and that as a result the outcome of a case may depend more on the mechanism used by the fraudster to misdirect the plaintiff's money than on either the injustice of the defendant's enrichment or the wrongful nature of his behaviour.3 This leads to inconsistency and the blurring of the key issues. As one commentator has already pointed out in this context,4 the court should never lose sight of the fact that the fundamental question is who, as between two innocent parties, should in good conscience bear the loss caused by a third party. The difficulty is aggravated by the different intellectual approaches of the 'property lawyer,' the 'restitution lawyer' and the 'common lawyer.'5 This article examines the ways in which restitution, contract, tort and equity address the problems of misdirected funds. It highlights the inconsistencies between the approaches adopted by each branch of the law, and suggests that the outcome of any dispute will depend more on the technical nature of the fraud than on the key issue of principle, namely which of two innocent parties should bear the loss. Finally, it is argued that the law could be clarified and simplified if the