(ii) The Relationship Between Change of Position and the Agent’s Defence
The recognition of the defence of change of position might mean that there is no longer any role for the agent’s defence where the agent has received a benefit which is effectively transferred to the principal.[1] [2] But, again, the differences between the two defences are such that the agent’s defence continues to be relevant.2 4 These difference include that, for the agent’s defence, it is not necessary to show that the agent’s circumstances have changed detrimentally, neither is it necessary to prove any extraordinary change of circumstances on the part of the agent, it being sufficient that he or she transferred the benefit to the principal because he or she was under a duty to do so.
Since the defences are compatible it follows that an agent could rely on both as defences to one restitutionary claim. So, for example, if the claimant paid the agent ?1,000 by mistake, intending this sum to be paid to the principal, and the agent only paid ?800 to the principal, the agent’s defence will apply in respect of this amount. If the principal informed the agent that he or she could retain the remaining ?200 as commission, and the agent donated this sum to charity, he or she could invoke the defence of change of position in respect of that amount.
- (iii) The Relationship Between Change of Position and Bona Fide Purchase[3] One consequence of the recognition of the defence of change of position is that the continuing existence of the defence of bona fide purchase has been called into question. It has been suggested that bona fide purchase is the paradigm example of change of position[4] and that the two defences are founded on the same principle, namely that the defendant has changed his or her position in circumstances which make it inequitable to require the defendant to make restitution to the claimant. But, although Lord Goff recognized in Lipkin Gorman that change of position was akin to the defence of bona fide purchase, he did not regard the defences as identical.[5] [6] This is the correct view.2 There are enough differences between the two defences to justify their continued separate treatment.
- (1) The bona fide purchase defence is a complete defence to the restitutionary claim, whereas change of position will only operate to the extent that the defendant’s position has actually changed.
- (2) The change of position defence will only apply where the defendant has detrimentally changed his or her position, whereas there is no need to show any detriment to establish the defence of bona fide purchase.
- (3) Most importantly, whereas the change of position defence is a general defence which is potentially applicable to all restitutionary claims, the bona fide purchase defence is a specific defence which only applies where the restitutionary claim is founded on the vindication of property rights. This is because the rationale of the bona fide purchase defence is to give the defendant indefeasible title to property in which the claimant had a proprietary interest.
Since the requirements for establishing the two defences and the policies underlying them are so different, the recognition of change of position should not affect the continued existence of the defence of bona fide purchase.
- [1] This is the view of Bant, The Change of Position Defence, 231.
- [2] Jeremy D Stone Consultants Ltd v National Westminster Bank [2013] EWHC 208 (Ch), [244] (Sales J).
- [3] For analysis of the bona fide purchase defence see Chapter 23. On the relationship between bona fidepurchase and change of position see K Barker, ‘After Change of Position: Good Faith Exchange in the ModernLaw of Restitution’ in PBH Birks (ed), Laundering and Tracing (Oxford: Clarendon Press, 1995), ch 7.
- [4] P Millett, ‘Tracing the Proceeds of Fraud’ (1991) 107 LQR 71, 82.
- [5] Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, 580-1.
- [6] See P Key, ‘Bona Fide Purchase as a Defence in the Law of Restitution’ [1994] LMCLQ 421 and Nolan,‘Change of Position’, 186.
