(ii) The Benefit Must Be Transferred to the Principal
The defence will only be available to the agent if he or she had transferred the benefit which he or she had received from the claimant to his or her principal. Usually it will be obvious that the benefit has been transferred. For example, where the agent received money from the claimant it is sufficient to show that the agent paid this money to the principal. But the agent can be considered to transfer a benefit to the principal in other ways. This was recognized by Lord Atkinson in Kleinwort Sons and Co v Dunlop Rubber Co when he said that it is sufficient that the agent ‘had paid over the money which he received to the principal, or settled such an account with the principal as amounts to payment, or did something which so prejudiced his position that it would be inequitable to require him to refund’.
Essentially, the defence will only be available to the extent that the agent’s circumstances have changed because the principal has effectively received the benefit from the agent. So, for example, the agent can be deemed to have transferred money to the principal if the agent has expended the money on behalf of the principal and with the principal’s authority, for example by paying it to a third party. The defence will not, however, be available if the agent simply credited the principal with the payment, because a credit entry can easily be reversed without the principal even knowing of its existence.