Re Citibank (the Revlon case)—Pleading a Third Party’s Indebtedness as a Defence to Recovery of a Mistaken Payment

Abstract

In 2020, Citibank NA personnel accidentally caused the payment of nearly US$900 million to lucky recipients. The recipients were lenders to an insolvent Revlon Inc, who to their delight suddenly found they had been paid out in full. Citibank brought restititutionary proceedings against the recipients to reverse the mistaken payments. It lost at first instance, but succeeded before the New York Court of Appeals in Citibank NA v Brigade Capital Management LP, on the basis that the recipients ought to have realised that something must have gone wrong. This article analyses the fact pattern on the basis of Commonwealth case law, and concludes that Citibank would have won without needing to show that the recipients ought to have realised that someone had made a mistake. Whereas the NY courts assumed that the recipients were prima facie entitled to assume that the payments were made on Revlon’s behalf to discharge the outstanding loans, a Commonwealth court would simply have concluded that Revlon never authorised the payments and there was no basis for suggesting that Revlon had held out Citibank as authorised to discharge the loans. There is no representation of entitlement in a mere bank payment. Nor could Revlon have ratified the payments.

Keywords: Restitution, mistaken payments, Citibank (Revlon) case, agency, authority, ratification

JEL Classification: K10, K11, K12