Chase Manhattan Bank v Israel-British Bank [1981] Ch 105

• A New York bank, had by mistake paid the same sum twice to the credit of the defendant, a London bank. Shortly thereafter, the defendant bank went into insolvent liquidation.

• The question was whether Chase Manhattan had a claim in rem against the assets of the defendant bank to recover the second payment.

• In the State of New York, where a payment under a mistake of fact of money which the payee cannot conscientiously withhold gives rise to the imposition of a constructive trust.

• Goulding J said this was in accord with the law in England too.

  • It is common ground that if (as I have decided) there is a right in English law to trace money paid by mistake, it rests on a persistent equitable proprietary interest.

  • Moreover, as I have already indicated, the right to trace given by New York law is, in my judgment. on the evidence, likewise founded on such a proprietary interest.

Goulding J

A constructive trust, unlike an express trust, is a remedial and not a substantive institution. The court does not give relief because a constructive trust has been created; but the court gives relief because otherwise the defendant would be unjustly enriched: and because the court gives this relief it declares that the defendant is chargeable as a constructive trustee.

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