(ii) The Justice of the Case
An alternative explanation of the defence, as suggested by Lord Atkinson in Kleinwort Sons and Co v Dunlop Rubber Co,[1] is that it is founded on equitable principles whereby it is unjust to require the agent to make restitution where he or she has transferred the benefit to the principal. But such a notion of justice is too vague a principle on which to found the defence, although it is clearly an influential factor in determining its ambit.
(iii) Determining the Proper Party to Sue
Another explanation of the defence is that it simply exists as a means of determining which is the better party to sue, either the agent or the principal.[2] [3] This was recognized by the High Court of Australia in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation,87 where it was held that the defence was applicable where the principal had ‘effectively received the benefit of the payment with the consequence that prima facie liability to make restitution has become his’. In other words, where the benefit which was received by the agent has effectively been transferred to the principal, it is the principal who is the proper person against whom the restitutionary claim should be brought. But this explanation does not explain all the requirements of the defence, most notably the fact that it is limited to where the principal is disclosed.
- [1] (1907) 97 LT 263, 265.
- [2] P Millett, ‘Tracing the Proceeds of Fraud’ (1991) 107 LQR 71, 76.
- [3] (1988) 164 CLR 662, 674. See also Portman Building Society v Hamlyn Taylor and Neck (a firm) [1998] 4All ER 202, 207 (Millett LJ); Niru Battery v Milestone Trading Ltd [2002] EWHC 1425 (Comm), [2002] 2 AllER (Comm) 705, 740 (Moore-Bick J).
