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(E) THE RELATIONSHIP BETWEEN CHANGE OF POSITION AND OTHER DEFENCES

The change of position defence has a significant role to play in the modern law of restitution. But one of the most difficult questions following the recognition of the defence is what effect it will have on a number of the other defences which have been applied to restitutionary claims, particularly estoppel, the agent’s defence and bona fide purchase.

(i) The Relationship Between Change of Position and Estoppel

Following the recognition of the defence of change of position the continued role of estoppel remains a matter of some controversy, even though Lord Goff did recognize in Lipkin Gorman that the defences were distinct.[1] It has been suggested in some cases that, with the recognition of change of position, there is no longer any place for the defence of estoppel by representation, at least in a restitutionary context.[2] Other cases have treated the defences as compatible.[3]

The question of the relationship between the two defences was considered by the Court of Appeal in National Westminster Bank plc v Somer International (UK) Ltd,[4] where it was emphasized that it was not for that court to conclude that, with the recognition of change of position, there is no longer any scope for relying on estoppel by representation; that being a decision for what is now the Supreme Court. But the Court of Appeal also recognized that the estoppel defence should be applied only to the extent by which the defendant’s position had changed.246 Although this would dramatically reduce the difference between the two defences, Potter LJ did identify certain remaining distinctions between them. For example, estoppel still requires proof of a representation and the fact that such a representation has been made may affect the court’s view as to whether restitution should be ordered and, if so, by how much. He also recognized that change of position only protected actual reduction of the defendant’s assets and did not cover somebody who has foregone a realistic and quantifiable opportunity to increase his or her assets. His Lordship did not, however, cite any authority for this proposition.247 But surely, if the defendant foregoes an opportunity in reliance on the receipt of an enrichment and it can be shown that, but for the receipt of the enrichment, the defendant would have taken the opportunity, and, had he or she done so, a benefit would have been obtained, the test of causation will be satisfied since the defendant will be disenriched to the extent of that valuable benefit and the defence of change of position will be available. It might be thought that in such a case the defendant is better regarded as having taken a risk and it is not appropriate for the defence of change of position to be available, but if the change of position defence is not available in such a case then why should the defence of estoppel be available instead? Further, is the claimant’s representation really of such significance to justify distinguishing between the two defences? A further difference between the two defences, not recognized by the Court of Appeal, is that, whereas change of position may not be available to a wrongdoer,2 8 there is no similar bar on the defence of estoppel by representation. One way to justify such a distinction is that, in the context of estoppel, the claimant’s representation, on which the defendant has relied, may negate the effects of the defendant’s wrongdoing. There is, however, no authority on this point.

An alternative argument has been suggested, the effect of which is that the very recognition of the defence of change of position means that there is no longer any scope for a distinct defence of estoppel by representation. This argument was canvassed by Robert Walker LJ in Scottish Equitable v Derby;249 an argument which he described as ‘novel and ingenious’ and which he found convincing. The essence of this argument is that, with the recognition of the defence of change of position, a detriment for the purposes of estoppel cannot be identified. The steps of the argument are as follows: first, to establish an estoppel a detriment must be suffered at the time when the person making the representation wishes to renege on it. Secondly, let us assume that, by the time the claimant wishes to renege on the representation, the defendant has suffered detriment by spending the money on a holiday. Thirdly, the claimant will say that the defendant did not in fact suffer a detriment, since the claimant cannot recover this sum back because it constitutes a defence of change of position. Consequently, the existence of change of position defeats the operation of estoppel by representation.

But this argument is not as convincing as Robert Walker LJ thought. First, as the law stands, it is presumably open to the defendant to choose on which defence he or she wishes to rely. If the defendant does wish to rely on estoppel, because a representation can be identified, is it really then open to the claimant effectively to plead a change of position in response? Why does not the very fact that the defendant has pleaded estoppel constitute [5]

a waiver of the defence of change of position? Secondly, the success of the argument turns on what we mean by detriment for estoppel. Is it simply a factual detriment or does it encompass, as Robert Walker LJ appears to assume, detriment in a legal sense? Surely if the defendant has spent the money he or she has received on a holiday, so that the money has been dissipated, and even though the defendant presumably enjoyed the holiday, there is still a detriment since the defendant no longer has the money. Detriment equates with loss and it is possible to lose things in an enjoyable way and still suffer detriment.

The role of the defence of estoppel by representation clearly needs to be reviewed by the Supreme Court. The recognition by the Court of Appeal, albeit in obiter dicta,[6] that estoppel is a defence which operates as a matter of substance rather than evidence is to be welcomed, for it is clearly unacceptable for the defence to operate only as a complete bar to a restitutionary claim.[7] But is there a continued need for the estoppel defence? Surely not. The nature of the representation is not sufficient to justify the recognition of a distinct defence. Change of position should do the work. The defence of estoppel by representation should consequently be rejected.[8]

  • [1] 243 Dominion Securities Inc v Dawson (1994) 111 DLR (4th) 230 (Newfoundland Court of Appeal); Philip
  • [2] Collins Ltd v Davis [2000] 3 All ER 808, 826 (Jonathan Parker J).
  • [3] South Tyneside Metropolitan BC v Svenska International plc [1995] 1 All ER 545; Scottish Equitable plc vDerby [2001] 3 All ER 818. See also Law Commission No 227 (1994), 48-9 and 141.
  • [4] [2002] 1 All ER 198, [2001] EWCA 970. See p 673, above.
  • [5] See p 673, above. 247 He only cited the note written by E Fung and L Ho, ‘Change of Position and Estoppel’ (2001) 117 LQR14,17, but they do not cite any authority for this proposition either. Now see Commerzbank AG v Gareth Price-Jones [2003] EWCA Civ 1663, [2005] 1 Lloyd’s Rep 298 where the Court of Appeal recognized that a nonpecuniary change of position may be sufficient to establish the defence. See p 688, above. 248 See p 692, above. 249 [2001] 3 All ER 818, 830-1.
  • [6] National Westminster Bank plc v Somer International (UK) Ltd [2002] 2 All ER 198,212 (Potter LJ) and218 (Clarke LJ).
  • [7] Cf Hudson, ‘Estoppel by Representation as a Defence to Unjust Enrichment—the Vine Has NotWithered Yet’ who argues that the defence has a continued role as an absolute defence. See also Bant, TheChange of Position Defence, 230.
  • [8] See also P Key, ‘Excising Estoppel by Representation as a Defence to Restitution’ [1995] CLJ 525.
 
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