(B) THE RATIONALE OF THE CHANGE OF POSITION DEFENCE

In Lipkin Gorman Lord Goff identified the essence of the change of position defence as being that it is ‘inequitable’ for the defendant to make restitution.^[1] This emphasis on equity as the foundation for the defence is significant for two reasons. First, it may indicate what the rationale of the defence is. The accepted view of many commentators is that the defence applies to claims founded on unjust enrichment and so its function is to negate or qualify at least one aspect of the unjust enrichment claim. But there is no definite conclusion as to which element of the claim should be negated or qualified. One interpretation is that the defence exists to negate the defendant’s enrichment.^{[2] [3]} In other words, where the defendant has received an enrichment and has subsequently changed his or her position, the defendant’s liability to make restitution should be curtailed because the enrichment has been reduced or negated. However, the emphasis on equity may mean that the defence should operate instead to determine whether the defendant’s retention of the enrichment is unjust, since, if the defendant’s position has changed then, to the extent of that change, it is not just for the defendant to make restitution.^{1 4} Alternatively, the defence can be interpreted as operating both to determine the extent of the enrichment (the causation question) and the unjust requirement (the equity question).^{[4] [5]} This is, at least, consistent with the way the defence was identified by Lord Goff in Lipkin Gorman and is the preferable interpretation of its operation. The defence should be considered to have a dual function in that it exists to protect the defendant’s reliance on the security of his or her receipt,^{1 6} so that if the defendant changes his or her position as a result of the receipt of the enrichment it is not appropriate to make restitution, in order to protect the defendant’s autonomy.^[6] But the defence should also be interpreted as existing to counter-balance the principle of corrective justice which underpins the unjust enrichment principle itself.^[7] For example, if the claimant is able to obtain restitution simply because of a spontaneous causative mistake without needing to prove any fault on the part of the defendant, it is only just that relevant changes in the defendant’s circumstances should be taken into account in determining the restitutionary claim.¹⁰⁹ Consequently, the real function of the defence is to identify those cases where the justice of the defendant not making restitution outweighs the justice of the claimant obtaining restitution. In fact, it is not useful to relate the application of the defence to specific elements of the unjust enrichment principle at all. It is much more accurate to analyse it with reference to the remedial question of whether it is appropriate to require the defendant to make full restitution to the claimant in the light of subsequent events, having regard to the need to protect reliance on the security of receipt but ensuring that if the defendant remains enriched then it is appropriate for him or her to make restitution.^[8]

Bant adopts a somewhat different approach to her analysis of the defence in The Change of Position Defence. She does not relate the defence to specific elements of the unjust enrichment claim, and indeed considers that it is available generally to qualify or defeat any claim for restitution.^[9] In particular she does not consider that the defence responds to the defendant’s disenrichment, but rather to the fact that the defendant’s change of position is irreversible, for then it is not appropriate to require the defendant to make restitution.^[10] Whilst this notion encompasses cases where the defendant is no longer enriched, she considers that the test of irreversibility better explains the characteristics of the defence, particularly the inclusion of non-pecuniary change of position.^[11] She also considers that it is not necessary to consider as a separate requirement that the defendant changed his or her position in good faith, since she considers that the defendant’s change of position must be reasonable.^{[12] [13] [14]} Whilst this is a highly persuasive analysis of how the defence of change of position should be interpreted it cannot yet be considered to represent the state of English law.

The other significance of Lord Goff’s emphasis on ‘equity’ when analysing the defence is that it may consequently be interpreted in a discretionary way, albeit grounded on principle, as reflected by a number of the recent decisions of the courts. For example, in Dextra Bank and Trust Co Ltd v Bank of Jamaica¹¹⁵ the Privy Council emphasized that the House of Lords in Lipkin Gorman ‘appears to have adopted a broad approach based on practical justice, and to have avoided technicality’. Other cases have focused on

considerations of unconscionability^[15] and inequity.^{[16] [17]} Some members of the judiciary have sought to take a middle way between rule and discretion. For example, in Commerzbank AG v Gareth Price-Jones¹¹⁹ Mummery LJ recognized that ‘the decided cases steer a cautious course, aiming to avoid the dangers of a diffuse discretion and the restrictions of rigid rules’. Munby J, however, in the same case¹²⁰ asserted that the defence was ‘intended to be a broadly stated concept of practical justice’ and that ‘technicality and black letter law are to be avoided’.

Placing the emphasis simply on what is equitable makes the defence potentially far too wide and uncertain. Indeed, the fear that the defence would be too vague and unpredictable was one of the main reasons why it had previously been rejected. As Hamilton LJ said in Baylis v Bishop of London,¹²¹ ‘we are not now free in the twentieth century to administer that vague jurisprudence which is sometimes attractively styled “justice as between man and man”’. But in recognizing the defence in Lipkin Gorman Lord Goff emphasized that restitutionary defences should be formulated with reference to principle rather than arbitrary judicial decision, when he said:

It does not, in my opinion, follow that the court has carte blanche to reject the [claimant’s] claim simply because it thinks it unfair or unjust in the circumstances to grant recovery. The recovery of money in restitution is not, as a general rule, a matter of discretion for the court. A claim to recover money at common law is made as a matter of right; and, even though the underlying principle of recovery is the principle of unjust enrichment, nevertheless, where recovery is denied, it is denied on the basis of legal principle.^[18]

It follows that if the defence is to succeed it must be interpreted by reference to principles rather than through the exercise of arbitrary judicial decision.^[19]

• [1] Ibid, 580.
• [2] PBH Birks, Unjust Enrichment (2nd edn, Oxford: Oxford University Press, 2005), 208-19; J Edelman,‘Change of Position: A Defence of Unjust Disenrichment’ (2012) 92 Boston ULR 1009. See also Burrows, TheLaw of Restitution (3rd edn), 526 and RC Nolan, ‘Change of Position’ in PBH Birks (ed), Laundering andTracing (Oxford: Clarendon Press, 1995), 136, who says that the defence is ‘principally an enrichment relateddefence’.
• [3] See Birks, Unjust Enrichment (2nd edn), 258-61.
• [4] Further, see ibid, 207 and 209, who preferred to analyse the defence by dividing it into two types: oneinvolving disenrichment and one involving a non-disenriching change of position. This is excessively complicated and can be avoided by insisting on disenrichment to establish the defence and then having regard toquestions of justice, however defined, to determine whether the defendant is disabled from relying on it.
• [5] But it can apply even where there is no reliance. See p 683, below.
• [6] Grantham and Rickett, ‘A Normative Account of Defences to Restitutionary Liability’, 121. See alsoBenedetti v Sawiris [2013] UKSC 50, [2014] AC 938, [118] (Lord Reed).
• [7] See p 4, above. 109 Birks, Unjust Enrichment (2nd edn), 209.
• [8] The decision of the Privy Council in Dextra Bank and Trust Co v Bank of Jamaica [2001] UKPC 50,[2002] 1 All ER (Comm) 193 is consistent with this approach. See also Birks, Unjust Enrichment (2nd edn),209.
• [9] Bant, The Change of Position Defence, 208. 112 Ibid, 132. 113 Ibid. See p 688, below.
• [10] 114 Ibid, 151. See further p 691, below. 115 [2001] UKPC 50, [2002] 1 All ER (Comm) 193.
• [11] 116 Citing Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, 581-93 (Lord Goff).
• [12] 117 National Westminster Bank plc v Somer International [2002] 1 All ER 198, 210 (Potter LJ); Niru Battery
• [13] Manufacturing Co v Milestone Trading Ltd [2003] EWCA 1446 (Civ), [2004] QB 985.
• [14] 118 Scottish Equitable plc v Derby [2000] 3 All ER 793, 806 (Harrison J).
• [15] 119 [2003] EWCA Civ 1663, [2005] 1 Lloyd’s Rep 298, [32]. 120 Ibid, [48].
• [16] 121 [1913] 1 Ch 127, 140. See also H Cohen, ‘Change of Position in Quasi-Contracts’ (1931-32) Harvard
• [17] Law Review 1333, 1361.
• [18] Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, 578.
• [19] See Phillip Collins Ltd v Davis [2000] 3 All ER 808, 827 (Jonathan Parker J).