United Building Society v Smookler’s Trustees 1906 TS 623

United Building Society v Smookler’s Trustees 1906 TS 623

Issue: Whether a person who has made a payment to another person under a mistake of fact is entitled to recover the payment, even if the other person has changed their position in reliance on the payment.

Facts:

Smookler (the debtor) was indebted to the United Building Society (the creditor) in the sum of £100. Smookler's trustees mistakenly believed that Smookler owed the creditor £200. The trustees paid the creditor £200.

The trustees later discovered their mistake and demanded that the creditor return the extra £100. The creditor refused to return the money, arguing that it had changed its position in reliance on the payment. The creditor had used the extra £100 to pay off a debt that it owed to another person.

The trustees then sued the creditor for the return of the extra £100.

Held:

The Transvaal Supreme Court held that the trustees were entitled to recover the extra £100 from the creditor. The Court reasoned that a person who has made a payment to another person under a mistake of fact is entitled to recover the payment, even if the other person has changed their position in reliance on the payment.

The Court distinguished this case from the case of Gazide v Nelspruit Town Council 1949 (4) SA 48 (T), where the Court had held that a person who has made a payment to another person under a mistake of law is not entitled to recover the payment. The Court reasoned that a mistake of law is different from a mistake of fact. A mistake of law is a mistake about the law, while a mistake of fact is a mistake about the actual circumstances of a situation.

Key Facts:

• A debtor's trustees mistakenly believed that the debtor owed a creditor £200 and paid the creditor £200.
• The trustees later discovered their mistake and demanded that the creditor return the extra £100.
• The creditor refused to return the money, arguing that it had changed its position in reliance on the payment.
• The trustees sued the creditor for the return of the extra £100.

Reasons:

The Court held that the trustees were entitled to recover the extra £100 from the creditor because a person who has made a payment to another person under a mistake of fact is entitled to recover the payment, even if the other person has changed their position in reliance on the payment.

Conclusion:

The Court's decision in United Building Society v Smookler’s Trustees 1906 TS 623 is a significant case in South African law. The Court's decision clarifies the law relating to the right of a person to recover a payment they have made under a mistake of fact.