Change of position

Change of position may be presented as a defence to a claim for restitution for unjust enrichment.

The defence operates to allow a defendant to set against the money gained (enrichment) the amount of any disenrichment that has taken place. The nature of the defence is illustrated by the memorable case of Lipkin Gorman v Karpnale Ltd (1991) not least because the case involved the gambling habits of Norman Cass who was a partner in a firm of solicitors named Lipkin Gorman. Cass had in effect helped himself to £222,0000 of the firm's money and had a good time gambling it away at the Playboy club in Park Lane, London. Apparently he was not a very good gambler and he lost £154,000 of the money. Cass fled to Israel, but was returned to the country and sentenced to three years prison for theft in 1984. At the time, gambling contracts were contrary to public policy, and therefore void under the Gaming Act 1845.

 

The claimant firm of solicitors sought to recover money which had been stolen from them by a partner, and then gambled away with the defendant. The solicitors sued the casino arguing that whilst he had purchased the casino's gaming chips they were worthless as they were gambling debts, and as such no consideration had been given.

 

The case reached the House of Lords the court of appeal having dismissed the defence of change of position. The House accepted the defence and allowed the appeal. The casino was effectively able to show that they had altered their position and as such the defence was permitted as they had acted in good faith and that it would be inequitable to require them to make restitution. As a result the amount that should have been made good to the solicitors was reduced, the Playboy Club were ordered to return around £150,000 but not the balance of the £222,000 that Mr Cass had spent, as they had paid it out to him in winnings. 

 

Lord Goff was adamant saying “where an innocent defendant's position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution”.

 

Lord Goff went on to say “If the plaintiff pays money to the defendant under a mistake of fact, and the defendant then,acting in good faith, pays the money or part of it to charity, it is unjust to require the defendant to make restitution to the extent that he has so changed his position. Likewise, on facts such as those in the present case, if a thief steals my money and pays it to a third party who gives it away to charity, that third party should have a good defence to an action for money had and received. In other words, bona fide change of position should of itself be a good defence in such cases as these. The principle is widely recognised throughout the common law world”.


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