Change of Position
| Published date | 01 July 1995 |
| Date | 01 July 1995 |
| DOI | http://doi.org/10.1111/j.1468-2230.1995.tb02027.x |
Change
of
Position
Paul
Key*
Introduction
Proof of a defendant’s unjust enrichment at the expense of the plaintiff constitutes a
prim facie
obligation to make restitution. Nevertheless, an action for restitution
will be denied
if
the defendant can establish a positive defence. Change of position
is the most recent addition to the set of defences available to the defendant. It
presents great potential for the development and rationalisation of the law of
restitution. However, courts recognising change of position have, in general,
confined their analyses of the defence to the specific facts presented for their
consideration and have refused to enter into a wider examination of its scope.
Thus, a cloud of uncertainty surrounds the availability of change of position. Some
jurists have taken noteworthy steps towards clarification of the defence; however,
many issues are yet to be addressed and there is little consensus as to the justifiable
limits of change of position. This article is an attempt to redress this state of
affairs.
Recognition of the defence
The availability of a defence of change of position to an action for restitution has
been a moot point for the common law. However, after a long period of
uncertainty it can now be stated with confidence that the common law recognises a
general defence to unjust enrichment based upon the defendant’s change of
position. Restitution will be denied if the defendant’s change of position renders it
inequitable for the court to require him to make restitution.
Early support for the principle may be found in Lord Mansfield’s comment in
Moses
v
Macferlan‘
that, in
an
action for money had and received, the defendant
may defend himself by ‘everything which shows that the plaintiff,
ex
aequo
et
bono,
is not entitled to the whole of his demand, or to any part of it.’* However,
subsequent case law was more cautious in its support of change of position. Prior
to
Lipkin
Gorman
v
Karpnale
Ltd,3
there was no obvious example of a court
refusing restitution on the express ground of change of position. The relevant cases
involved either: (a) mere
dicta
in favour of the proposition4; or
(b)
denial of the
defence on the ground that the facts did not support the alleged change of
*Solicitor, Herbert Smith, London.
Much of the research for this article was carried out while completing a PhD at Gonville and Caius College,
Cambridge under the supervision of Professor Gareth Jones, Trinity College, Cambridge.
1
(1760) 2
Burr
1005.
2
ibid
1010.
3 [1991] 2
AC
548;
noted in McKendrick, ‘Restitution, Misdirected Funds and Change of Position’
(1992)
MLR
377.
4
eg
Barclays Bank Ltd
v
W.
J.
Simms
Son
and Cooke Ltd
[
19801
QB
677,695
-
6%
per
Robert Goff J;
Bank
of
New South Wales
v
Murphett
[1983]
VR
489,493
per
Starke
J,
496
per
Crockett J;
National
Mutual Life Association
of
Australasia Ltd
v
Walsh
(1987)
8
NSWLR
585, 598-599
per
Clarke J;
Rover International Lid
v
Canon Film Sales Lid
[1989]
1
WLR
912, 925
per
Kerr
LJ;
but cf the
rejection, in principle, of this defence by Dillon
LJ
in the same case, at p
935.
0
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1995
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p~sition.~ Furthermore, there were cases denying that a defence of change of
position existed.6
Nevertheless, the matter was finally resolved by the House of Lords in
Lipkin
Gormun’
where the defence was explicitly recognised and applied. A partner
of
the plaintiff law firm had stolen a net total of
f222,908
from it and gambled with
this
money at a club owned by the defendant company. The plaintiff sought to
recover the money from the defendant. It was held that the defendant had a
partial
defence to
this
action based upon its change of position. It had paid out winnings to
the thief and its net enrichment totalled only
f
150,960;
the plaintiff was restricted
to recovery of this amount.
Cases in Australia,8 Canadag and New Zealandlo indicate that the defence of
change of position
is
also
available
in
those jurisdictions.11 Furthermore, it
is
also
well recognised outside the Commonwealth.l* For example, it
is
implemented in
German law by section
818(3)
of Das Burgerliche Gesetzbuch:
The obligation to disgorge
or
to make good the value is excluded where the recipient is no
longer enriched.I3
And in the United States, section
142(
1)
of the
Restatement ofRestitution
provides:
The right of a person to restitution from another because of a benefit received is terminated
or diminished if, after the receipt of the benefit, circumstances have
so
changed that it would
be
inequitable to require the other to make full restitution.’4
Change
of
position:
an overview
The essential elements of change of position are clear. The defendant must
establish that he would suffer detriment if the plaintiff were to be awarded
restituti~nl~; that is, restitution would leave the defendant in a worse position than
5
eg
Rural Municipality of Storthoaks
v
Mobil
Oil
of
CaMda
Ltd
[1976] 2
SCR
147.
This case
recognised that,
in
principle, a defendant’s ‘material change of circumstances’
is
a defence to a claim
for restitution of mistakenly paid money.
See
also
David Securities Pty Lid
v
Commonwealth Bank of
Australia
(1992) 175
CLR
353.
6
eg
Standish
v
Ross
(1849)
3
Exch
527;
Durrant
v
me Ecclesiasrical Commissioners for England
and
Wales
(1880)
6
QBD
234;
Baylis
v
Bishop of
London
[1913]
1
Ch
127.
7
n
3
above.
See
also
Westdeutsche Lundesbank Girozentrale
v
Islington
LBC
[1994] 4
All
ER
890,
affmed
[1994]
1
WLR
938;
South Tyneside MBC
v
Svemka Internationalplc
[1995]
1
All ER
545.
8
David Securities Pty Ltd
v
Commonwealth
Bank
of Australia
(1992) 175
CLR
353.
9
Rural Municipality of Storthoaks
v
Mobil Oil of
CaMda
Ltd
[1976] 2
SCR
147;
Morgan Guaranty
Trust
Co
of New York
v
Outerbridge
(1990)
66
DLR (4th)
517;
RBC
Dominion Securities Inc
v
Dawson
(1994)
111
DLR
(4th) 230.
10
Waitemata Power Board
v
King
Builders Ltd
[1992]
3
NZLR
357;
Mamh
v
Pont
[1993] 2
NZLR
25.
11
In many Commonwealth jurisdictions,
support
for change of position may also
be
found in statutes.
For example, Judicature Act
1908
(New Zealand),
s
94B;
Administration Act
1969
(New Zealand),
s
51A;
Law Reform
(Property,
Perpetuities and Succession) Act
1962
(Western Australia),
s
24;
Trustee Act
1962
(Western Australia),
s
65(8);
Property
Law Act
1969
(Western Australia),
s
125(1).
12
But there is no defence of change
of
position
in
France: see Zweigert and Kotz,
Introduction to
Comparative Law
(Oxford: Clarendon, 2nd ed,
1987)
vol
II,
pp
276-277.
13
‘Die Verpflichtung
zur
Herausgabe oder zum Ersatze des Wertes ist ausgeschlossen, soweit der
Empfanger nicht mehr bereichert ist.’
14
American Law Institute,
Restatement of the Law of Restitution,
s
142(1)
(Minnesota: American Law
Institute,
1937);
see
also
s
69(1).
15
See,
for example,
David Securities Pty Ltd
v
Commonwealth Bank ofAustralia
(1992) 175
CLR
353,
385;
Rover International Ltd
v Canon
Film Sales Ltd
[1989]
1
WLR
912, 925
per
Kerr
LJ.
Rural
Municipality of
Storthoaks
v
Mobil Oil
Canada
Ltd
[1976] 2
SCR
147, 164
per
Madand J, requires
that the defendant ‘materially changed its circumstances as a result
of
the receipt
of
the money.’
506
0
The
Modern
Law Review Limited
1995
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