Money Had and Received: Understanding the Change of Position Defence
In cases where someone wants to recover money that was mistakenly or unjustly transferred, the recipient might use the defence of “change of position.” This defence argues that repaying the money would be unfair because the recipient has acted in good faith and relied on the funds in a way that has changed their position. It balances the claimant’s right to recover the money with the need to avoid causing undue hardship to the recipient who has already adjusted their circumstances based on receiving the money.
What Is the Change of Position Defence?
This defence helps protect someone who has received money by mistake if returning it would cause them unfair harm. It’s based on the idea that if the recipient has relied on the money and made significant changes in their financial situation, requiring them to give the money back could be unjust.
Key Points of the Defence
- Good Faith Reliance: To use this defence, the recipient must show they received the money honestly and didn’t know it was a mistake. If they were aware of the error or should have known, this defence will not apply.
- Significant Change in Position: The recipient must prove that their financial situation has significantly changed because of receiving the money. This could include using the funds to pay off debts, make investments, or purchase goods.
- Fairness: The court considers whether it would be fair to demand the money back. If returning the funds would cause undue hardship because the recipient has already relied on them, the court may allow the recipient to keep some or all of the money.
Case laws
- In the case of William Co-Buchong & Anor v Citigroup Pty Limited & Anor [2011] NSWSC 1199, City bank mistakenly transferred $500,000 to NAB. NAB used the money in good faith. When Citibank sought to recover it, the court agreed with NAB, saying it would be unfair to demand repayment because NAB had relied on the funds.
- In Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14, Hills Industries used mistaken payments to continue their business and delay legal action. The court ruled it would be unjust to require repayment because Hills had significantly changed their position based on the funds.
Next Steps
If you’ve received money by mistake and relied on it, you might be able to use the change of position defence to avoid unfair repayment demands. Our legal team at MCLP can help you understand if this defence applies to your situation and guide you through the process.
If you are interested in discussing your options, please contact our office for a free consultation at (02) 9262 5495 or contact Mr Murdock at dmurdock@mclp.com.au, or subscribe to our newsletter by visiting https://mclp.com.au/publications/