Goss v Chilcott
A lender could recover the balance of a loan for total failure of consideration, although the borrowers had paid some interest, because the security which formed the basis of the loan had failed.
Facts
A finance company lent money to Mr and Mrs Goss, secured by a mortgage over their property, which was drawn up by a solicitor, Mr Chilcott, who was the borrowers' son in law and a director of the lender. The money was paid to Mr Chilcott, who misappropriated most of it. The borrowers made two interest payments. Mr Chilcott then altered the mortgage to extend the repayment date without the borrowers' consent, which had the effect of discharging them from their obligations under the mortgage. The lender sued the borrowers to recover the money.
Legal principle
The Privy Council held that the lender could recover the capital sum as money paid for a consideration which had totally failed. Lord Goff said that the lender had advanced the money on the basis of the borrowers' contractual promise to repay it, and that, once the borrowers had been discharged from that promise by the alteration, the consideration for the advance had failed. The fact that the borrowers had made two payments of interest did not prevent the failure from being total in relation to the capital, because the interest payments could be apportioned to the use of the money. The fact that the money had been paid to a third party, Mr Chilcott, at the borrowers' direction did not prevent recovery.
Related cases on mistake, failure of basis, duress and services
- Barclays Bank Ltd v WJ Simms Son & Cooke (Southern) Ltd [1980] QB 677
- BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783
- Craven-Ellis v Canons Ltd [1936] 2 KB 403
- Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2006] UKHL 49, [2007] 1 AC 558
- Dextra Bank & Trust Co Ltd v Bank of Jamaica [2001] UKPC 50
- Dimskal Shipping Co SA v International Transport Workers Federation (The Evia Luck) [1992] 2 AC 152
- Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
- Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1
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