Academic journal article Boston University Law Review

Change of Position: A Defence of Unjust Disenrichment

Academic journal article Boston University Law Review

Change of Position: A Defence of Unjust Disenrichment

Article excerpt


Section 65 of the Restatement (Third) of Restitution and Unjust Enrichment refers to the defence of change of position in a claim for unjust enrichment.1 The section provides, "If receipt of a benefit has led a recipient without notice to change position in such manner that an obligation to make restitution of the original benefit would be inequitable to the recipient, the recipient's liability in restitution is to that extent reduced."2

In England, when the defence of change of position was first explicitly recognised, it was stated in very similar terms. The case which recognised the defence in England was Lipkin Gorman v. Karpnale Ltd.3 In that case change of position was described as a defence available "to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution."4

The leading statement of the defence in both U.S. and English law expresses the defence's focus at this extremely abstract level of inequitability. But inequitability does not operate at large. In particular, the English courts have recently, and rapidly, developed a considerable number of rules relating to applicability of the change-of-position defence to claims based on unjust enrichment. As the reporter's note (a) to Restatement (Third) section 65 observed of the defence's development in English law, "[T]he belated discovery of a general defense of change of position has been the occasion for a much fuller examination of its definition and basic principles than it has ever received in U.S. courts."5

This Article utilises the explosion in English case law to explain what is meant by the notion of inequitability and what it tells us about the nature of the defence of change of position. In English law, the defence of change of position is sometimes referred to as a defence of disenrichment. The thesis of this Article is that establishing disenrichment is a necessary but not sufficient requirement to the defence. As the rules concerning change of position begin to coalesce in England, the picture that has emerged is that a defendant must prove that any disenrichment is unjust.

This Article is divided into three parts. The first Part explains that the foundations of change of position in "inequitability" do not permit unbridled judicial discretion. Instead, this inequitability is manifest in established principles. Recent English law is used to explain these principles. Nevertheless, difficult questions relating to each and every one of these principles require resolution. These questions can only be answered in a principled way once the concept of inequitability, and the rationale for the defence, is elucidated.

The second Part of the Article turns to the rationale for the defence. Suggestions that the rationale is "security of receipt," "loss allocation," "disenrichment," or "irreversibility" are rejected. Although neither disenrichment nor security of receipt are rationales of the defence, disenrichment is, nevertheless, an essential element the defence and security of receipt and loss allocation may be effects of the defence. The rationale is the protection of the defendant's autonomy. The degree of protection for a defendant's autonomy that the courts have chosen is the same degree of protection as that given to the claimant's autonomy. This outcome resulted from courts effectively developing change of position in tandem with the rules for the claimant to establish a prima facie case. In other words, if a claimant can establish a prima facie claim for unjust enrichment by proving that the defendant has been enriched and that the enrichment is caused by an unjust factor, then a defendant will have a defence of unjust disenrichment if, like the claimant, she can prove (1) that she was disenriched and (2) that the disenrichment was caused by an unjust factor. There is a principled coherence to this approach. It could hardly be just for a claimant to be able to insist upon restitution to protect his autonomy and yet deny the same protection to the autonomy of the defendant. …

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