Simply paying what a lender wants to by way of settlement will not achieve the desired goal if a customer has not offered to settle at that sum and does not agree to it.

This was the position in Cooper v National Westminster Bank PLC. In October 2002, the claimant gave instructions to his bank, the defendant, to send him a draft payable to a third party in the euro equivalent of £135,000 to his address in Ireland. The defendant did so. The draft was for €213,327 and the exchange rate was £1 = €1.5802. The claimant then wanted that draft replaced with one in the same sum but payable to him. The original draft was to be returned to the defendant but went astray in the post. The replacement draft was issued on 9 December 2002 but the defendant failed to send it to the claimant. The claimant's solicitors wrote to the defendant in July 2003 asking for confirmation that the full amount of the draft had been credited to the claimant's account together with interest from October when the first draft had been issued. The sterling equivalent of the draft at this date was just under £149,000 with an exchange rate at £1 = €1.4318. The defendant replied stating that the account had been credited with £135,040 plus interest of £2,000 plus a goodwill payment of £5,000. The claimant sued for the balance of just over £11,000.

The defendant alleged an offer had been made by the claimant in the July 2003 letter to settle on the basis of a simple reimbursement of the original sum paid for the original draft, plus interest, because the date of October had been referred to in it.

The court held the July letter had not been an offer of settlement. It was insufficiently certain as it did not refer to specific amounts of either the sum required to be repaid or the rate of interest. The defendant had acted unreasonably. It should have sought clarification of what the claimant wanted, whether that might be the then current value of the replacement draft or only the original cost plus some interest. Instead the bank had made a disadvantageous offer to the claimant and had pressed it upon him by crediting his account with that amount. No agreement had been sought from the claimant and the defendant must have known the claimant would not have accepted the payments made.

Accordingly, judgment should be given to the claimant for the balance of the value of the draft plus interest.

Things to consider

Where incidents such as this occur, it is always best to try and reach some agreement with a customer, preferably evidenced in writing, rather than attempt to force what may be seen as a disadvantageous offer upon an innocent consumer.