Payment under mistake of fact - recipient aware of mistake but not dishonest - not entitled to rely on defence of change of position

Niru Battery Manufacturing Company and another v Milestone Trading Ltd and others: CA (Dame Elizabeth Butler-Sloss President, Lords Justice Clarke and Sedley): 23 October 2003

The second claimant, a bank, paid moneys on a letter of credit to the fourth defendant under a mistake of fact.

The fourth defendants then paid the moneys away to third parties.

In the subsequent proceedings, the judge, among other things, rejected a claim against the fourth defendant in deceit but held that, since it was not entitled to the defence of change of position, it was liable in restitution to repay the moneys.

The fourth defendant appealed on the ground that it was entitled to rely on that defence since the judge had found that they had not acted dishonestly.

Michael Bloch QC and Tiffany Scott (instructed by Clyde & Co) for the fourth defendant; Geraldine Andrews QC and Zo O'Sullivan (instructed by Ashurst Morris Crisp) for the fifth defendant; Ali Malek QC and David Quest (instructed by Richards Butler) for the claimants.

Held, dismissing the appeal, that it was not necessary to show that a recipient of money was dishonest in order to defeat the defence of change of position; that the essential question was whether, on the particular facts, it would, in all the circumstances, be inequitable or unconscionable to allow the recipient of money paid under a mistake of fact to deny restitution to the payer; and that, having found that the fourth defendant had failed to make enquiries despite realising payment had been under a mistake, the judge had been entitled to hold that it would be unjust to deny the second claimant a right to restitution.