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The Case

Discuss about the Contemporary Nature Of The Relationship Between Common Law And  Equity.

The issue in this case was related with the determination as to which entity was required to bear the cost of a fraud. The brief facts of this case are that the finance company has rented out purchased equipment to its clients.[1] One of the clients was a fraudster and he entered into the rental agreement with the finance company regarding the equipment that was never in existence. The fraudster provided the finance company with fraudulent invoices, regarding the payments made to different suppliers to whom the fraudster owed money and the finance company wanted the return of payments that have been made by a mistake to these suppliers. However, the suppliers refused to refund the money. Therefore, regarding the claim for unjust enrichment, it was mentioned by the court that the three elements that are essential for the claimant to be established in a claim for unjust enrichment:

  • That a benefit should be received by the defendant (in this case,, money was received by the suppliers);
  • That in the legal sense, the benefit should be unjust (it was unconscionable on the part of the suppliers to retain the money that has been paid on account of mistake of a genuine invoice or fraud committed by a third party);
  • That the benefit should have been made at the expense of the plaintiff (the finance company did not obtained property in any equipment and therefore it was not able to recover all the money from other parties).

In this case, the finance company was successful against the first and the third supplier. However it could not succeed against the second supplier, who has successfully argued its change of position defense. On the other hand, it was argued by the first supplier that an injustice would be suffered by him if he was required to be paid the money because he had changed his position by forgoing the opportunity to take recovery actions against the fraudster. However, this argument was dismissed by the court as being too speculative, because the recovery was considered to be unlikely in view of the precarious financial position of the fraudster.


It was also argued by the second supplier that a change of position defense was available to act on account of the fact that its judgment debts have been extinguished as a result of consent orders when the money was received and this was irreversible because now the debris was not possible on account of the financial position of the fraudster. The defense was successful in the court because the second supplier was successful in showing real determinant on account of extinguishment of its claim to the property of fraudster by relying on the payments received, so that it will be unjust to require repayment.[2] The court rejected the change of position defense claimed by the third supplier, because it has suffered only disappointment of expectation instead of a real detriment. It was stated that, "it is the real detriment instead of disappointment that is required to make this successful change of position defense". But the court discovered that the finance company has received certain benefits (a payment and import tax credit) that need to be deducted on the amount that was going to be paid by the first and third suppliers.

Elements of Claim for Unjust Enrichment

It was alternatively claimed by the finance company that repayment should be made on account of knowingly receiving trust property. However, the court stated that liability needs that the recipient should be aware of it while receiving the property that it was trust property and that it was being misapplied.[3] Therefore in this context, knowledge can be actual knowledge, willful and reckless failure to make the inquiries that would have been made by any honest and reasonable person, willfully shifting eyes to the obvious, knowledge regarding circumstances that indicate the facts to any reasonable and honest person and the knowledge of circumstances that would have, would any reasonable and honest person on inquiry.


In this context, it was discovered by the court that the suppliers did not have knowledge (evidence had been given that it was not unusual to receive payments from third-party finance companies) and as a result, the claims failed.

Change of position defense: under the law of restitution, any payment is allowed that causes a person to become enriched, to be detained, provided no ground is present for rendering the retention of the payment unjust. On the other hand, there it would be unjust to retain the payment; a defendant is required to make restitution of such enrichment. Such defendant can resist the repayment Begin established the change of position defense. Although the level of conceptual disagreement related with the operation of the defense makes it difficult to provide a simple definition, it has been suggested by the experts that a valid defense constitutes the following essential elements:

An amount of money is paid by the claimant to the defendant and the spontaneous mistake; and

The claimant pursue its personal rights to restitution for recovering the pavement; whereas

The defendant, while being in good faith and are relying on the security of the receipt of payment, has changed its position by applying the payment to its benefit.

The basis of this defense: An early hint regarding the change of position defense can be found in the 18th century case of Moses v MacFarlan.[4] It was stated by the House of Lords that a person who is resisting restitutionary claim as their defense available to him by everything that the claimant ex aequo et bono (from equity and conscience) is not allowed by the law, to demand. However, despite this statement, the House of Lords expressly mentioned against the presence of an explicit change of position defense in 1913. In Baylis v Bishop of London,[5] it was stated by Hamilton LJ that a transparent legal system do not allow the resistance of a play on account of vague, discretionary and unprincipled justice. The result was that this case will be a hurdle in the legitimacy of the defense under English law. However in the significant case of Lipkin Gorman,[6] the prohibition imposed in Baylis was overruled by the House of Lords. Therefore it can be considered as the modern starting point for examining the primary elements of change of position defense.[7] In Lipkin Gorman, the reasoning adopted by Lord Goff provides that the defenses available to persons who has changed its position to such an extent that it would be in equitable under the circumstances to ask the person to make restitution or alternative lead to make restitution in whole.

The Court's Ruling on Change of Position Defense


It needs to be noted that in Lipkin Gorman, the key element in case of the change of position difference was inequitablity due to which the court had to look at the equities of the situation of the defendant and as a result. The ability of the defendant to make restitution to the claimant on case to case basis. However this situation can be compared with the Australian formulation mentioned in David Securities[8], where the High Court had identified the following character as being significant for the Australian change of position defense that the defendant should have acted to his or her detriment by relying on the receipt. Even if, it has been argued that both in Lipkin Gorman and David Securities, a unified defense has been envisaged these cases instead of what is now generally considered as branches of analytically distinct reasoning, namely the broad and narrow approach a change of position defense.[9]

Contemporary Approach adopted in Australia: The difference present in the broad approach adopted in Lipkin Gorman and the narrow approach adopted in David Securities has been recognized with differing emphasis. As mentioned above the narrow reliance version of the change of position defense has been adopted by the law in Australia as a result of the decision given in David Securities, a case focusing on detrimental reliance being the cornerstone of this defense. However it is submitted that the imprecision in subsequent reception and application of the defense has inadvertently resulted in broadening the nano version due to which Edelman J has written academically that there is a lingering uncertainty regarding the basic principles of the narrow defense.[10] However, such uncertainty in the documents clearly undesirable and the fault is two fold. First of all, it is present in the divergence of academic opinion related with unjust enrichment law. That is particularly related with the blurred line present in broad and narrow defenses, containing the ideas like "rigidly exclusive as they are forceful". However, it is also significant to note that there appears to be an academic conflict related with the limits of the broad and narrow conceptions that has built into the application of narrow principles by the Australian judiciary. This means that the state of law as declared in somewhat chaotic.

In ANZ Westpac,[11] a case before David Securities, the High Court of Australia had revealed its willingness to recognize the change of position defense. It referred to the defense that it was acceptable to have an adverse change of position by the recipient in good faith and by relying on the pavement, which is recognized by the law to make restitution unjust.[12] It is clear that the body, but this approach, the narrow reliance test that was later on followed by the court in David Securities has been foreshadowed.

The Basis of Change of Position Defense


It can be stated in the end that the Australian conception of change opposition defense has received extensive but confuse examination under the common law. However this has proved to be a mixed blessing for practitioners as well as academics. The High Court of Australia had advanced detrimental reliance as the main element of change of position defense in David Securities. This situation reveals the acceptance of the narrow branch of the defense by Australia as compared to the broad approach adopted in Lipkin Gorman. However, the treatment of narrow defense by an indecisive High Court and the unconsidered application of significant legal analysis has resulted in the slow broadening of the narrow defense that has certain unwelcome elements present in the inequitable analysis of the broad difference.. Under this trend, the need is for decisive correction. Therefore the need is to draw on the form and not on the substance of the present restatement models as Australia is required to draft clear and bad among restatement framework so that the confusion in this regard can be ended. As the concession made by Lord Goff in Lipkin Gorman that the English law and followed behind the other legal systems in the field of unjust enrichment is now for Australia to accept that its position is also equally untenable, and it is the time to introduce reforms related with the change opposition defense that have been long overdue.[13]

It is revealed by the above mentioned discussion that there are significant doctrinal uncertainties present in the current state of law in Australia. It has also been established that this ambiguity has allowed the slow broadening of the narrow starting point that was adopted by Australia regarding the change of position defense in David Securities. Although it is not possible to completely reverse the nature of the response that is required for rectifying the doctrinal issues, but they were certainly advances the argument that there is a strong need for reviewing the law related with the change of position defense.

Australia & New Zealand Banking Group v Westpac Banking Corporation (1988) 164 CLR 673

Bant, Elise, The Change of Position Defence (Hart Publishing, 1st ed., 2009).

Barker, Kit and Ross Grantham, Unjust Enrichment (LexisNexis Butterworths, 1st ed., 2008)

Birks, Peter, Unjust Enrichment (Clarendon Press, 2nd ed., 2005)

Burrows, Andrew, ‘Change of Position: The View from England’ (2003) 36 Loyola of Los Angeles Law Review 803

David Securities v Commonwealth Bank of Australia (1992) 127 CLR 353.

Edelman, James, ‘Change of Position: A Defence of Unjust Disenrichment’ (2012) 92 Boston University Law Review 1009

Gouldkamp, James and Mitchell, Charles, ‘Denials and Defences in the Law of Unjust Enrichment’ in Charles Mitchell and William Swadling (eds) The Restatement Third: Restitution and Unjust Enrichment Critical and Comparative Essays (Hart Publishing, 2013)

Kremer, Ben, ‘Book Review: Restatement (Third) of Restitution and Unjust Enrichment by the American Law Institute’ (2012) 35 Melbourne University Law Review 1197

Case Law

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 307 ALR 512

Baylis v Bishop of London [1913] 1 Ch. 12

Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 A. C. 548

Moses v Macferlan (1760) 2 Burr. 1005

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My Assignment Help. Change Of Position Defense In Unjust Enrichment Law: An Analysis [Internet]. My Assignment Help. 2019 [cited 16 June 2024]. Available from: https://myassignmenthelp.com/free-samples/relationship-between-common-law-and-equity.

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