Citation(2018) 30 SAcLJ 149
Date01 December 2018
Published date01 December 2018

This article argues that, contrary to the position taken by some judges and commentators, morally blameless defendants who have committed torts of strict liability should be able to raise the change of position defence against claimants who sue for a release fee (also known as “Wrotham Park damages”). For the defence to be available, however, release fees need to be understood not as compensatory, as many currently insist, but as gain-based. The defence should not necessarily be available in the context of restitution for wrongs to all defendants who have changed position in good faith, as is the case for unjust enrichment by subtraction. Those who changed position by dissipating wealth for their own benefit should be denied the defence if their breach of the claimant's rights was careless. Defendants who, in contrast, altered their circumstances in such a way that they derived no net enrichment as a result of their wrong should be allowed to rely on the defence, even if they acted without care.

I. Introduction

1 For certain torts, such as conversion and trespass, fault is not an element of the wrong and defendants who have infringed claimants' rights are liable to compensate their victims for any loss suffered even if their actions were morally blameless. What is less clear is the extent to which defendants who have acted without fault in committing such torts might be subject to pay a reasonable fee for the use of goods they have possessed or land they have occupied. This article examines whether morally blameless wrongdoers who are sued for their gains can benefit from the defence of change of position that is widely available in the law of enrichment by subtraction.

2 The issue is important not least because of the growth in “release fees”:1 awards reflecting what would have been a reasonable sum

for the claimant to have charged in return for relaxing the right that was breached. However, the question is complicated by a controversy as to the conceptual nature of such relief. Given that the change of position defence is understood to be a response to restitutionary causes of action alone, it can be relevant in this context only if it is concluded that release fees are based on the defendant's gain rather than the claimant's loss. This article argues that there is a compelling case for allowing the use of the defence in this context and that this represents a powerful reason for favouring a gain-based analysis of this form of relief. Indeed, the importance of a gain-based reading of release fees was apparent in the decision of the High Court of Singapore in Cavenagh Investment Pte Ltd v Kaushik Rajiv2 (“Cavenagh Investment”), a case in which a morally blameless defendant was permitted to rely on the change of position defence when sued for a release fee in the context of a trespass to land.

3 The article considers accounts that purport to establish that, as a matter of analytic logic, the change of position defence has no place in the context of restitution for wrongs. It makes the case that changes of position involving dissipation of wealth for the defendant's own purposes are morally salient in the context of restitution for wrongs in much the same way that they are in the context of subtractive unjust enrichment. To deny the defence to morally blameless defendants sued for release fees after they have altered their circumstances in reliance on their right to the benefit in question would fail to pay due respect to their interest in making informed choices about their spending.

4 It should not, however, be assumed that we should necessarily apply the change of position defence in this context in the same manner that we do in cases of enrichment by subtraction. There are important distinctions that might potentially influence the courts in their application of the change of position defence in restitution for wrongs. First, a distinction can be drawn between different types of changes of position which have attracted the use of the defence in enrichment-by-subtraction cases. Scholars have treated those cases in which defendants

dissipate wealth for their own benefit as paradigmatic of the defence. However, the defence equally operates in some instances where a defendant's circumstances have changed in ways that do not result in the defendant ultimately gaining a net enrichment from the benefit in question. The denial of the change of position defence in circumstances in which a blameless defendant has gained no net enrichment from the benefit in question would be particularly egregious. A second potentially important distinction in this context is one which focuses on the degrees of fault. In cases of subtractive unjust enrichment, the defence is available to defendants who have acted in good faith, even if they ought to have realised that they had been unjustly enriched. In contrast, in the context of restitution for wrongs, it may be appropriate to deny the defence to good-faith defendants who were careless in breaching claimants' rights, at least in those cases where the defendants have personally benefited in the course of changing their position. In circumstances in which defendants were not enriched, on the other hand, it should be enough that defendants changed their position in good faith.
II. Innocent wrongdoers and change of position defence3
A. Identifying when issue is likely to assume significance – Release-fee awards

5 The question as to whether morally blameless wrongdoers are entitled to have recourse to the change of position defence will be of consequence only in cases in which it would be advantageous for claimants to found an action on the defendant's gain rather than on their own loss. For torts in respect of which the defendant is strictly liable for the claimant's loss, a claim in restitution will not ordinarily offer any substantive advantage over an action for compensatory damages. On the other hand, the change of position defence could prove important where a claimant seeks to recover gains that exceed her own loss.

6 In theory, it is possible that the defence might assume relevance for this reason where a claimant, rather than suing for damages in tort, elects to sue in assumpsit for the gain made by the defendant in committing the wrong. This would be the case, where, for example, the claimant, instead of seeking damages in conversion for a wrongful sale by the defendant, sued in assumpsit to recover proceeds of sale by the

defendant where those proceeds exceeded the value of the chattel sold.4 Commentators examining the issue tend to treat this as the paradigm case for the application of the change of positon defence in the context of restitution for wrongs.5 In truth, however, claimants elected to sue in assumpsit rather than in tort because the former cause of action was subject to less onerous rules of evidence6 and to less restrictive adjectival rules governing its availability.7 Most of the disadvantages facing those seeking to sue in tort have been removed,8 with the consequence that the practice of claimants with an action in tort electing to sue in assumpsit has fallen into disuse.9

7 Equally, the defence might theoretically have a role to play in the context of claims where the claimant seeks an account of profits. In practice, the defence is irrelevant in actions in contract or tort, where such relief is regarded as extraordinary and would never be awarded against defendants who had acted in good faith.10 The law does, in contrast, impose strict liability for consequential profits derived from breaches of fiduciary duty, reflecting an impulse to protect vulnerable relationships of trust and confidence. There is no prospect of the change of position defence being made available in this context as it would undercut the objectives of certainty and deterrence that the courts have privileged.11 Moreover, it is worth bearing in mind that breaches of

fiduciary duty, even if committed in good faith, are never entirely without fault, in that the law clearly spells out the prohibitions in question.

8 In practice, the change of position defence is most likely to aid a wrongdoer who is sued for a release fee in circumstances in which the claimant has suffered little or no loss. One reason the defence is potentially significant in this context is because the prevailing orthodoxy is that, even if such relief is viewed as gain-based in nature, claimants have the right to demand a release fee against morally blameless transgressors.12 It is clear that the change of position defence would be relevant in only a small subset of claims for release fees. While deliberate wrongdoers will not be in a position to avail themselves of the defence, morally blameless wrongdoers who have committed torts of strict liability, such as trespass or conversion, would be potential beneficiaries of the defence. The defence might, for example, protect a defendant who enjoyed the possession of a chattel that was given or lent to him and who is able to demonstrate that he changed his position in good faith in the belief that the transferor had good title to that chattel. In addition, as Cavenagh Investment illustrates, the defence might avail good-faith purchasers sued for a release fee that would exceed the extent of any consequential loss suffered by the claimant.13

B. Conceptualisation of release-fee awards

9 Many judges and some commentators have insisted on characterising release-fee awards as loss-based in nature. Some argue that this form of relief should be understood as compensation for the loss of an opportunity to bargain.14 However, the reality is that the courts do not insist on proof that, but for the defendant's breach, the claimant would have realised a valuable bargain.15 Others argue that release-fee awards are properly characterised as compensatory not on the basis that they provide damages for consequential loss, but rather as compensation for a breach of the...

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