There may be a whole string of cases coming your way?! In news today, it was reported that the Commonwealth Bank online banking has been thrown into chaos:
Turmoil has hit the Commonwealth Bank’s online banking system after it duplicated customer transactions.
The double-up, caused by an overnight processing error, has affected NetBank customers, the bank said this morning. It is not yet known how many customers are affected.
Of course, banking errors are staple restitutionary fare, with Chase Manhattan Bank N.A. v Israel British Bank (London) Ltd [1981} Ch 105 being a particularly notable case. An amount of over US$2million was accidentally transferred to Israel British Bank twice, but before the mistake could be rectified, the IBB became insolvent. Doh! Controversially, Chase Manhattan was awarded a constructive trust (or arguably a resulting trust) over the wrongly transferred money, and thus it was a secured creditor in the insolvency. Whew. Lucky for them.
I read an amusing blog post the other day (found via the Restitution blog post website). The post recalled that card in Monopoly which states: “Bank error in your favour. Collect $200.” The author then goes on to note that it is very rarely that bank errors are in the consumer’s favour in real life. {This is why the defence of good faith change of position to a restitutionary claim is an awesome thing.)
I wonder how many claims there will be coming from this debacle. Imagine all the amounts credited or debited twice…
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Personally, I don’t have an internet-enabled bank account. But then I’ve been programming for 3 decades and have been involved in diagnosing a very nasty hack or two.
That way, if there are any transactions associated with internet access, it is trivial to say “nope… your problem”.
Got rid of my credit card two decades ago for similar reasons (as well as removing temptation).
Glad this became public… tip of the iceberg.
I am actually an affected customer – there was an accidental double payment into my account, it seems. What’s more I unknowingly transferred some money to another bank account I have (at another bank) and have used some of it. So, in theory, I fall right in the middle of the “good faith change of position” principle. I spoke to the CBA today when I noticed that my account with them was suddenly several hundred dollars in the red.
They seem to be treating it like a debt I have to them, but we didn’t debate the finer points of whether they are actually entitled to the whole amount from me. We also did not discuss the ins and outs of whether they are actually entitled to arbitrarily withdraw hundreds of dollars from my account without my knowledge or consent. That is particularly interesting given that I have been with them since I was a kid, so to my recollection I have no written agreement with them which I have entered into as an adult.
Dave, you realise that Visa at least (and probably Mastercard) give you a fairly high degree of protection against credit card fraud? You are pretty safe so long as you keep track of charges on your credit card – if you get defrauded (and not by your own idiocy) then Visa will reverse the charges and pursue the supposed beneficiary of the payment.
Paul,
Check the wording of the contract you have with them (you know, that glossy thing they send out periodically that everyone throws in the bin). They will have written in there large clauses about bank errors and the results in your accounts. You will need a good lawyer if you are going to try to wriggle out of them.
Luckily I am a (reasonable) lawyer, albeit not in banking law. But I do enjoy a fight, especially against organisations like banks and phone companies who habitually overstep the line. My best results have included a free mobile phone from B Mobile based on misrepresentation (signed up for a contract, only to find minimal reception at my house), and a number of successful skirmishes with Telstra (my bete noir).
As I say, I have never signed a contract with CBA that I can recall. The mere act of mailing someone a document in respect of a pre-existing commercial relationship does not automatically make that document into a binding agreement. It would be a surprising result if I could be bound by a document I have never even read. It would also be very interesting to see how a court would define the terms of the agreement I have with the Bank at present.
Another legal question (LE, you are a restitution junky): what defines a “voluntary” payment as opposed to a payment under a mistake of fact or law for the purposes of the doctrine of unjust enrichment? Would a computer glitch amount to a “mistake of fact”, or is it in fact “voluntary” in some sense (i.e. there was never any “fact” which led CBA to believe it was required to make the extra payment)?
Paul, transfer by electronic mistake falls squarely into mistake. There is no sense by which the transfer is voluntary on their part.
When you agree to open an account with a bank you agree to certain terms and conditions (as Andrew says, those glossy booklets everyone throws in the bin). I’m sure there would be some nifty contractual terms in there about banking mistakes.
Furthermore, the law of restitution is prima facie on their side – you have been unjustly enriched at their expense as a result of a computer mistake. Therefore, they are entitled to treat it as a debt, subject to your defence of good faith change of position (GF COP).
Change of position is established in Australia if the defendant can show that s/he irreversibly changed her position in good faith and in reliance on receipt of the benefit: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353.
There are three elements:
(1) The change of position must be irreversible. If the defendant can easily give the money back, then she should do so.
(2) The defendant must have relied on the receipt: David Securities. Note that change of position may be whole or partial.
(3) The defendant/recipient must be in good faith.
It depends what you spent the money on. If you made a purchase which you would not otherwise have made, then you are more likely to have made a GF COP. See eg, Gertsch v Atsas [1999] NSWSC 898. But if you spent the money on a debt you would have had to pay any anyway, or on household expenses you would have expended anyway, you are unlikely to establish GF COP.
Incidentally, Mum said that on talkback radio this morning, there were people saying they’d cleaned out their accounts after finding double the money in there…and she thinks they were serious. They will not have a defence of GF COP. If they refuse to give the money back, they might be charged with theft…
Banks will often roll when the customer in question is a lawyer, although I don’t know whether the CBA will on this one – it depends how much they stand to lose overall.
Lawyers routinely get attornment clauses removed from instruments of mortgage (I did), negotiate different fee arrangements on particular accounts, or are able to modify ‘boilerplate’ contracts to an often remarkable degree. One fairly senior banking official admitted to me years ago that most people simply do not appreciate their power to negotiate. Even people who are otherwise wealthy or well informed tend to just accept the piece of paper the bank gives them.
Not lawyers – or, rather, not this lawyer.
Interesting. As I say, I do not believe I have entered into any written agreement with them as an adult, but presumably a court would have to find some way in which to govern the relationship and might well find a way to impose the bank’s standard conditions I suppose.
Reading those conditions (for the first time
) I found this clause to be interesting:
One might argue that those clauses represent a waiver of their common law rights in some respects.
On the meaning of “irreversible” – what if I spend $50 purchasing something that I would not otherwise have spend as a result of good faith reliance on a mistaken payment of $50, but I also happen to have $1000000 in cash that I am not using. Obviously in a practical sense I could easily give back a ‘different’ $50, but at the same time I would not have spent the $50 but for my reliance. Is this ‘irreversible’ in the relevant sense (assuming good faith)?
Teehee… I’m thinking of those early common law cases where ‘rescission’ meant returning not just $50, but the very same notes
Obviously, equity put a stop to that.
Unjust enrichment law deals with transfers of value. Therefore it doesn’t matter whether it is the exact same $50, as long as you have the funds to repay the value of $50. It is distinct from, but overlaps with, tracing (which identifies property and what it has been exchanged for).
My favourite crazy common law tracing case is Taylor v Plumer (1815) 3 M&S 562; 105 ER 721, which gives you a right to personally seize the thing for which your property has been exchanged.
Even if I had those funds already from a separate source? I had always understood that a person’s other assets were irrelevant so long as there had been a detrimental change of position. E.g. in my example, I would arguably be $50 less liquid than I was previously, so it shouldn’t (in principle) matter that I might also have other money available to me. Is that assumption incorrect?
It’s an interesting area of law. Tracing sounds even more fun…
Courts require a defendant to prove that there are significant legal or practical obstacles to reversing the change of position. If you can access the other account with $1,000,000, I don’t think you can argue that there is a significant legal or practical obstacle to reversing the change of position. In coming to this answer, I should say that I have consulted James Edelman and Elise Bant’s excellent book on Unjust Enrichment.
Tracing is awesome. It’s always fun to draft problem questions where assets increase or decrease massively in value. In practice, I once traced a transfer of money into an improvement to someone’s house. Unfortunately, I don’t know what happened in the end because I left the firm.
I like cryptic crosswords, and tracing has the same kind of appeal – untangling threads, following clues to see where the money went and what it was exchanged for.
Paul,
The contracts are normally phrased such that use of the account constitutes acceptance of the contract related to the account. You may have signed nothing – but you still have a contract.
A version of ‘acceptance by conduct’.
Once again, you cannot accept something you have never seen. The terms of a document which I have never read or seen are not capable of acceptance without some additional step.
In practice I am sure a lot would depend on whether I had to click “I agree” or similar on a terms of service statement when Netbank was first activated (I can’t recall).
I think the use of the account is an acceptance of the terms and conditions. Somewhat like a bus ticket or a parking ticket.
As I’ve related in a previous post, one of my favourite judgments of all time is Lord Denning in Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163, in particular this extract describing the “offer and acceptance” procedure when one takes a parking ticket from an automatic machine:
The formal offer and acceptance analysis doesn’t work for many contracts. Ordinarily, I’d say bank accounts are one of those kind of contracts. The fact that the bank sends you glossy little booklets of terms is enough – you don’t have to have read them.
In the ticket cases, where printed terms and conditions were effective it was because they were drawn to the attention of the person before they bought the ticket. This was indeed the case in Shoe Lane Parking – the car park operator could not rely on terms and conditions which were not brought to the attention of the customer at the time of purchase of the ticket.
The fact that they couldn’t back out after they had purchased the ticket did not mean that they were bound by terms and consitions which they had not seen. Parker v South Eastern Railway (1877) 2 CPD 416 is an example of the opposite – where a person was aware of the existence of specific terms printed on a ticket but did not bother to read them, they were bound – but they would not have been if the terms had not been (in effect) drawn to their attention by being printed on the ticket. This contrasts with cases where a parties have been prevented from relying on exclusionary or other onerous terms which they have not brought to the attention of the other party to a contract.
In Olley v Marlborough Court Hotel [1949] 1 KB 532, a condition which was brought to the attention of one party by the other after the contract was formed was ineffective.
I think in this situation a lot would hinge on the “red hand”/”red ink” principle – if the Bank wants to rely on an exclusion clause of some kind, it must have sufficiently drawn it to my attention (before formation). Given that I had to google to find the t&c now, I think they’d struggle to show that. Their other option would be to show that there was a variation or new agreement when I (for instance) signed up for Netbank – I think that’s probably more likely, although I have no recollection of agreeing to any terms and conditions at the time.
Personally, I think that offer and acceptance can be applied to any contractual scenario. One must simply have a flexible understanding of what those terms mean, which (as you suggest) hardly ever involves two parties saying:
A: “I offer X in exchange for Y“.
B: “I accept”.
Thing is, realistically speaking, there’s often no choice to reject or accept an offer because of the bargaining strength of one of the parties. If you want to open up a bank account, you have to accept terms of a certain type (and all the banks have similar kinds of terms). You could try and renegotiate, but it depends how much they want your business.
In fact, they have so much power that it’s hard to force them to even keep to the contract sometimes. I tried to argue with the CBA when they took fees out of my account when I was a uni student. They showed no interest at all in refunding me, and then I said I would take my money out of the bank. They didn’t care at all – didn’t care that they’d breached the terms of the contract, and didn’t care that I was going to go to another bank – I was just a student…
I think there would definitely have been a new agreement when you signed up to Netbank. In fact, I think I’ve looked at comparable agreements from other Banks in my dim distant past. The contracts are always those ones which are pages long and have a tick box at the bottom saying “I Accept”. Mostly no one ever reads them. {Except I do sometimes, now I’m older and wiser).
I hope this is not OT, but can any of you lawyer types make an accurate estimate of what % of legal academics think Australia is doomed for the fourth world unless we get a Bill of Rights?
JG, I’d say the proportion who support a Bill of Rights would be pretty high. But it’s hard to be exact. There may be some who are doubtful about it as a solution to all the ills of the world, as I am…
It’s a very interesting issue, isn’t it? I’ve often pondered whether there would be some way to legislate a more equal bargaining position – somehow to require CBA and Telstra and other monopoly/oligopoly industries to negotiate terms and conditions in good faith. It’s very hard to come up with a model that would work – in the end, you can’t force the Bank to negotiate if they don’t want to, but they have the borderline coercive power that everyone really does need a bank account behind them.
I am told that there was a very acrimonious AGM of the South Australian Bar recently where this issue was debated.
I would guess that a majority of lawyers would be pro a bill of rights, but that a significant and vocal minority would be anti.
My view is that in some ways we are already a second (perhaps not “fourth”) world country when it comes to our civil institutions. We are virtually the only western democracy without some sort of rights statute (I don’t count the HREOC legislation, which is very limited indeed).
However I think there are clear signs that a statutory bill of rights is on Labor’s radar and might well be introduced in the next year or so.
Hi All,
I am not a lawyer, so my comments are “layman logical”.
It appears to me that the banking industry, as an example, believes it is above the law and government.
If they hurt they cry to the government to dig them out of the mud.
If a customer is hurt forget it.
I had a small shelf company incorporated and was the only director.
My son, in another state, took the opportunity to purchase goods and services in the name of my company. He did not have the authority.
I asked the bank why it did not do a company search. They checked and found it had not been done. I then said had they done that they should have asked for a director’s authority as he had no authority. They had not done that. Had they done that then it would seem logical they should have contacted their client (me) to let me know what my son was doing.
I was asked what I expected. An apology; investigations of my son’s activities, or compensation.
I said all of that.
I was then contacted by the bank’s legal section and told that the contacting solicitor was to be the person undertaking the investigation for alleged fraud.
I never heard anymore so at 18 months 2 years I contacted the local bank manager to see how the investigation was going. She could not say but would contact head office and ask on my behalf.
I received a call from one of the bank’s lawyers demanding what right did I think that I should ask my manager. All contact was through him.
I told him to back off and stop trying to intimidate me. It would not work.
I said that he or a representative should have been liaising with me to keep me informed.
I then asked how far the investigation had progressed. He said that it had not started. The bank was waiting on me for my out of pocket expenses. I said “bulldust”, a nice layman’s reply to legal argument. My personal costs were a separate issue and would be dealt with later. The longer the bank delayed investigations then the less likely they would recover any funds… His arrogance and bullying stance implied to me that the bank had no intention of investigating or compensating me, so I lodged a complaint with the banking Ombudsman. I am a 77 year old and I believe the bank will delay hoping my death will resolve their problem. There are other issues resulting from their Failure of Duty of Care or a practice of due diligence. Banks have a habit of changing the type of account and notifying the customer after it has been changed without consultation. This I believe is also a breach of contract. The obscene fees and charges I have listed. I do not have a problem of banks seeking reimbursement for administrative additional work. But I firmly believe they have used this process as a revenue generator far beyond the administrative costs. I and also the Government auditor have costed some of these charges as up to 92 times the administrative cost agreed to by the government.
When banking was done manually banking transfers were estimated as 2 days. Under certain circumstances the bank could also expedite this for a small fee.
Today banks have a complex computer system whereby there are no human hands to process the transaction. They make the excuse that it costs extra. Rubbish. The process is automated. If you purchase something using a credit or saving card the money immediately leaves your account and will show on your account balance. I recently spoke to a person I had made a purchase from and jokingly said you now can celebrate having my money. He laughed and said don’t you believe it. It takes 5 working days before that money will go into my account. Why the delay? They could do it faster when the transaction was done manually. I can only assume that the banks hold the money for short term investment. While it might not return a large amount from my money, if enough clients contribute it becomes a substantial amount. The same applies where an item is shown as 95 cents and you hand over $1, there is no change. The same applies if it is above 95 cents and you hand over the $1 there is no change. The 5+ or minus will be deducted from your account, so don’t they just charge $1. It is purely an advertising gimmick.
You might argue they will round it down when it is below 95 cents. How often you have seen anything below the “5 cents”, seldom I would say.
While my comments may not quite technical relate to your comment it will demonstrate the legal system using a colander to provide justice. Being full of holes it leaks badly, leaving the richest will win against those most vulnerable.
Hmmh. Today must represent a bad day as this is my second comment for the day castigating the system. Blame it on injustices I have encountered. I am usually an easy going sort of guy except where I see victims and injustices.
Regards
Professori_au
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