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Mistake in the Law of Theft
Published online by Cambridge University Press: 16 January 2009
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A person who receives property under an apparent contract of sale can be guilty of theft of what he receives if the contract is void, for mistake or otherwise. It seems, since the decision of the House of Lords in Lawrence, that a person who obtains a voidable title (title under a voidable contract) can be similarly guilty (assuming, as always, that the other essentials of theft are present). I argue else where that a person who obtains a valid title to property generally does not by doing so make a dishonest appropriation (even though he may be morally dishonest), and should not be guilty of theft. The object of this article is to consider the way in which these principles apply to transfers made under mistake.
In Lawrence the defendant's title to the money was voidable for fraud, which induces a degree of mistake by the transferor; but other sources of mistake are possible. The transferor may make a spontaneous mistake, or a mistake resulting from the transferee's innocent misrepresentation, without fraud.
Three legal results can follow from a mistake in transferring property, according to circumstances.
(1) The mistake may avoid the transaction, preventing title from passing. The transferee can be guilty of theft of the property on ordinary principles, that is to say by applying the definition in section 1 (1) of the Theft Act 1968.
(2) The mistake may make the transaction voidable, so that a voidable title passes. Precisely when the transferee commits theft is a complex question, which will be postponed for the time being.
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References
1 [1972] A.C. 626.
2 A series of articles on the general question is appearing in the Criminal Law Review.
3 If the transferee parts with the property, even at a time when he does not know of the mistake (or, where the property is money, if he buys something with it), the original transferor is presumably entitled to claim the property so acquired in place of the original property, and a dishonest refusal to surrender it to him can amount to theft.
4 As anyone can see by reading the account in Treitel, The Law of Contract, 4th ed., Chap. 8.
5 That a mistake as to the identity of the thing prevents property from passing is implicit in the judgment in Hehir (1895) 18 Cox 267, for otherwise the legal question there discussed would not have arisen. Cf. Goff, and Jones, , The Law of Restitution (London 1966), p. 91Google Scholar, n. 1; Treitel, G. H., The Law of Contract, 4th ed., pp. 185–186.Google Scholar
6 Hehir, last note.
7 See Cundy v. Lindsay (1878) 3 App.Cas. 459.
8 I elaborated this in 33 Can.B.Rev. 271, 380. Cf. R. J. Sutton in 7 N.Z. Universities L.Rev. 43.
9 Lewis v. Averay [1972] 1 Q.B. 198Google Scholar; but see, for the complications, Cheshire and Fifoot, Law of Contract, 8th ed., pp. 228–30; Treitel, G. H., The Law of Contract, 4th ed., p. 181Google Scholaret seq.
10 Cf. Bell v. Lever Bros. Ltd. [1932]Google Scholar A.C. 161.
11 Cf. per Greene M.R. in Morgan v. Ashcroft [1938] 1 K.B. at p. 65.Google Scholar
12 Per Sumner, Lord in R. E. Jones Ltd. v. Waring & Gillow Ltd. [1926] A.C. at p. 696.Google Scholar
13 This is a favoured explanation of Middleton (1873) L.R. 2 C.C.R. 38, which would otherwise be inconsistent with cases like Prince, below. See Orchard in [1973] N.Z.L.J. at p. 112.
14 Morgan v. Ashcroft [1938] 1 K.B. at pp. 65–66.Google Scholar The most powerful of the authorities cited is Norwich F.I. Society v. William H. Price Ltd. [1934] A.C. at pp. 461–62Google Scholar ; but all the authorities relate to the action for money paid under a mistake of fact, and do not deal with the question of the passing of the property for other purposes. There is no need to regard the quasi-contractual action as always depending on the fact that property did not pass.
15 Jackson (1826) 1 Mood. 119; 168 E.R. 1208; Williams (1857) 7 Cox 355; Prince (1868) L.R. 1 C.C.R. 150; Gallagher (1929) 21 Cr.App.R. 172Google Scholar ; all cited by Orchard in [1973] N.Z.L.J. 114. Middleton, note 13 above, which on one interpretation went the other way, has been forcefully criticised (see Russell, Crime, 12th ed., ii, 970); it can perhaps be supported as a case of mistaken identity of the recipient of the money, though even that is doubtful. Anyway, the wider interpretation would make it conflict with settled legal principle.
16 See Goff, and Jones, , The Law of Restitution (London 1966)Google Scholar, Chap. 3. The authors suggest with much force that the same rule should be held to apply to transfers made under a mistake of law, unless the payer makes the payment with full knowledge of the facts in settlement of an honest claim.
17 [1956] 1 Q.B. 439. See the Theft Report, Cmnd. 2977, para. 24.
18 See on both matters Goff and Jones, op. cit., Chap. 42. If the defence of change of position comes to be recognised, it ought to be allowed also to an action for conversion, based on the view that property did not pass because of F.M. Even if the defence were allowed, the law is that if the payee having received the money under an F.M. has spent it in buying property and still has what he bought, the original payer is entitled to that as the proceeds of his own property (see Goff and Jones, op. cit., p. 91), and if the payee dishonestly fails to restore it in circumstances amounting to an appropriation he will be guilty of theft of the property so bought. (But it would often be difficult to establish dishonesty in such circumstances.)
19 Goff and Jones, op. cit., pp. 91–2.
20 [1938] 1 K.B. 49.
21 Although the decision is generally accepted on this last point, it is not beyond question. The court held that if an action lay in such circumstances the normal practice would be for the court to order an account to be taken, with a mutual set-off of losses against winnings; but to do this would in effect amount to enforcing a gaming debt. If an account were taken in that way, the point would be valid. But surely it would not be open to an ordinary debtor to argue that his creditor owes him money under an illegal contract, or one on which recovery is barred by statute, and that since the court cannot take an account that includes this item (since it would be an evasion of the law), he is not liable on the debt. The proper course would be for an account to be taken that excludes irrecoverable items.
22 [1972] 1 W.L.R. 1341, [1972] 3 All E.R. 280. See [1972] Crim.L.R. 586, note.
23 (1873) L.R. 2 C.C.R. 38.
24 [1938] 1 K.B. at p. 66.
25 Benjamin, , Sale of Goods (London 1974)Google Scholar 280 cites authority for the proposition that the buyer cannot accept part of the excess. It seems a ridiculous technicality. If the excess is deemed to be offered to him at the contract rate, why cannot he accept part of the excess at that rate?
26 (1851) 6 Exch. 903, 155 E.R. 813.
27 The actual decision was the iniquitous one that the buyer, owing to the seller's mistake, was entitled to reject the whole consignment, even though it would have been perfectly simple for him to take his ten hogsheads, and even though the court suspected that the buyer rejected the delivery only because the price of claret had fallen in the meantime. Benjamin, , Sale of Goods (London 1974), p. 177Google Scholar treats the case as still being good law, but the S.G.A. is silent upon it. Anyway the decision has no importance for the criminal law.
28 See J. C. Smith [1972B] C.L.J. 207–08; Goode, 92 L.Q.R. 387.
29 See [1969] Annual Survey of Commonwealth Law 187, and Smith, J. C. [1972B]Google Scholar C.L.J. 207, discussing Lacis v. Cashmarts [1969] 2 Q.B. 400.Google Scholar
30 [1905] 2 K.B. 273.
31 This was assumed in an obiter dictum in Lacis v. Cashmarts [1969] 2 Q.B. 400.Google Scholar
32 Bonner [1970] 1 W.L.R. 838Google Scholar, 2 All E.R. 97n. Technically the charge should be of stealing an undivided part, namely one-third of one and a half cubic metres in the above example. But an indictment for stealing half a cubic metre would obviously be valid.
33 This is also the view of Professors Smith and Griew. See Griew, The Theft Act 1968, 2nd ed., p. 18.
34 The point is dealt with in the articles in the Criminal Law Review referred to at the outset.
35 Until the decision of Lord Denning in Car & Universal Finance Co. Ltd. v. Caldwell [1965] 1 Q.B. 525Google Scholar it was naturally thought that the decision to avoid had to be communicated to the other party. Lord Denning, however, held that the party can avoid by an unequivocal act of election “in the plainest and most open manner competent to him,” even though the avoidance is not known to the other party whose whereabouts are not known. Avoidance can therefore be by going to the police. The Law Reform Committee recommended the reversal of this rule: 12th Report, Cmnd. 2958 (1966), para. 16.
36 See A. J. Oakley in 28 Current Legal Problems 64; R. M. Goode in 92 L.Q.R. at p. 532, n. 21. These writers put the transferor's right upon an equitable basis; they overlook criminal cases deciding that the transferor can follow even as a matter of common law. See Bunkall (1864) L. & C. 371, 169 E.R. 1436; De Banks (1884) 13 Q.B.D. 29; R. v. Governor of Holloway Prison (1897) 18 Cox 621, 66 L.J.Q.B. 820. These were cases of bailment, but they strongly support the view that the common law treated the proceeds of property resulting from a wrongful conversion by the bailee as being equivalent to the property.
37 The brackets in the text attempt to deal, perhaps inadequately, with an unsolved legal problem. Upon avoidance the transferor (let us call him V) is entitled to have his property back from the person (other than a bona fide purchaser) to whom the transferee (D) has transferred it. But the authorities in the last note suggest that, in the alternative, V is entitled to claim the proceeds in D's hands. Clearly he cannot have both. In the absence of an election by him he must be entitled to his original property, namely that in the third party's hands, not to the substitutional property. Presumably, if he elects to have the substitutional property this will validate the third party's claim to the original property that has been transferred to him. However, there is no authority on what constitutes an election by V. Is an election made by V claiming the substitutional property from D? Or must he actually receive it? Before the election, whenever it is, D must be the owner of the substitutional property (even if V has avoided the transaction, that only restores V, presumptively, to his title to the original property). So an appropriation of the substitutional property by D in this interim cannot be theft.
V's avoidance and election cannot be retrospective for the purpose of the criminal law (they cannot make people guilty of crimes on account of acts done previously). This is of importance in relation to a charge of handling. D obtains a voidable title to a chattel from V without dishonesty. If D sells the article before avoidance by V, the proceeds of sale in his hands are not initially stolen goods, so if (having discovered the defect in his title) he passes them to a dishonest recipient the latter will not be guilty of handling, notwithstanding the Theft Act 1968, s. 24 (2). Nor will the recipient become retrospectively guilty when V avoids the transaction. He may, however, be guilty either of handling or of theft (or both) by reason of what he does afterwards.
38 See Heaton in [1973] Crim.L.R. 744–746.
39 J. C. Smith in [1972B] C.L.J. 207 states the first and third of these views.
40 Jackson (1826) 1 Mod. 119; 168 E.R. 1208; Prince (1868) L.R. 1 C.C.R. 150.
41 Prince, last note, per Blackburn J.; Middleton (1873) L.R. 2 C.C.R. 38 (view of the three minority judges).
42 Stewart (1845) 1 Cox 174.
43 See Bowstead, Agency, 13th ed., Chap. 3; Fridman, Agency, 4th ed., Chap. 10.
44 [1970] 1 W.L.R. 838; [1970] 2 All E.R. 97 n.