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This is a follow up to the mailings from Andrew Dickinson and Paul Todd.

My Lexis research produced 44 cases from 1971 to 1999 in which change of position was discussed (my search term, in ALLCAS, was <"change of position" and enrichment>). Of those, a large number are the cases we would expect to see (Kleinwort Benson, Goss v Chilcott, Westdeutsche, Svenska, South Tyneside, Lipkin Gorman, Barclays v W J Simms). There are some others which are interesting and which do not appear in Paul Todd's list.

One of those is Euroactividade AG v Moeller and others, CA, 1 February 1995 (unreported). The first and second defendants were Mr and Mrs Moeller, both of whom were directors of the Liechtenstein-registered plaintiff company (the main business of the company was developing golf courses around the world). The claim against the first defendant (Mr Moeller) was for misappropriation of company funds. There were allegations that funds of the company had been transferred to a joint bank account no 968 held by the first defendant and second defendant (Mrs Moeller). It appears that the claim against the second defendant was mainly one for money had and received (based on the fact that she was the joint holder of the bank account). Summary judgment for recovery of the money was given in favour of the plaintiffs by Jacob J; various grounds of appeal were made out before the Court of Appeal.

The second defendant raised a change of position defence. It appears that there had been a number of payments made from account 968 back to the company. The explanation given was that the payments to and from account 968 were part of a scheme to minimise the company's tax liability. An incidental argument was raised to the effect that the payments back should be deducted from the amount of the judgment given by the court in favour of the plaintiffs. The position of the judge at first instance, supported by Simon Brown LJ, was that the payments back should not be accounted for in the instant claim. Instead, the defendants should seek to recover them in a separate action, based on the *flexible doctrine of unjust enrichment ... such a cause of action is available whenever payments are made without consideration, there being no intention to make a gift* (no comment! I think this is arguably obiter).

The argument for the second defendant was that the payments back could in any case be the basis for a change of position defence. The payments were made out of the joint account by the first defendant. The Court of Appeal seems to have accepted that *the second defendant's husband changed her [the second defendant's] position by making payment to the plaintiffs of substantial sums that had initially been paid into account 968*. Simon Brown LJ continues: *Let me for present purposes assume that to be a sufficient change of position in law to satisfy that aspect of the matter*. The practical difficulty for the second defendant was the absence of evidence of good faith on her part. On that basis the defence was rejected.

The analysis of the Court of Appeal is interesting. There are two points. First, the Court of Appeal sees the defence as having two distinct elements - the (factual) change of position, and the element of good faith. The question perhaps remains as to whether the requirement of good faith relates to the initial receipt or the change of position. Distinguishing between them may be difficult. The second point is that the Court of Appeal appears to recognise constructive change of position, or perhaps change of position by proxy (that D2's position may be changed by the actings of D1 operating on the joint bank account).

Other interesting cases are:

Lloyds Bank v Independent Insurance, CA, [1999] 2 WLR 986
Lloyds Bank v Simpson, QBD, 23 November 1996 (unreported)
Friend's Provident v Hillier Parker, CA, [1995] 4 All ER 260
Home Office v Ayres, EAT, [1992] ICR 175, [1992] IRLR 59

The last case is quite an interesting and novel one (or at least appears to be from a cursory reading of the Kwic print from Lexis). In the course of the decision of the appeal tribunal it is noted that *I fear that the mistaken assumption that mere expenditure of money may be regarded as amounting to a change of position for present purposes has led in the past to opposition by some to recognition of a defence which in fact is likely to be available only on comparatively rare occasions*.

This leads nicely to Andrew's question about the lack of development of the defence. There may be a number of reasons for the paucity of authority, none of which may be particularly satisfying.

The requirement of good faith may be, quite correctly, the main problem for defendants. If the defendant's receipt is tainted by bad faith (or lack of good faith, which may relate to the quality of the knowledge possessed by the defendant relating to the receipt), that element of bad faith may colour the subsequent change of position. I suspect that the advice given to the majority of defendants in that position is that the defence is not worth running. The simple question may be: did you reasonably believe that you were entitled to the payment received? This may admittedly be easier to answer in the affirmative in relation to claims based on plaintiff-sided unjust factors (where the conduct or knowledge of the defendant is not so much in focus).

The other reason why the defence may be difficult to establish is that plaintiffs may be much quicker these days in putting potential defendants on notice that the transfer (and therefore the enrichment) will be subject to challenge. This may not give the defendant time to change their position.

As I have noted, these may not be wholly satisfying reasons.

I am also bound to note that the old Scots case of Credit Lyonnais v George Stevenson & Co Ltd, 1901, 9 SLT 93, provides authority for the existence of the defence (although there was no detailed exposition of it there).

Scott

Solicitor, Glasgow

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