In Scottish Equitable Plc v. Derby 1 in the Court of Appeal, the claimant, Scottish Equitable Plc, paid out about £200,000 to the defendant, Mr Derby, as the lump sum due on a pensions policy, £50,000 to Derby as a cash payment and £150,000 to the Norwich Union, as directed by Derby, as the price of an annual pension. It turned out that this was an overpayment by about £150,000. The mistake arose from the carelessness of Scottish Equitable in failing to keep or consult a record of the fact that Derby had previously partly cashed in his policy. Of the £50,000 cash received by Derby, about £40,000 was used to pay off part of his mortgage, and the remainder was used to improve his general standard of living. The court identified three issues in the case: the extent to which Derby could rely on change of position; the relevance (if any) of the carelessness of Scottish Equitable; and whether estoppel had any continuing role in the law of restitution as an alternative to change of position.

The court held that a defence of change of position was available to the defendant, following Lipkin Gorman v. Karpnale. 2 The court noted the difference between a narrow and a wide version of change of position.3 According to the narrow version, change of position applies only where the payee incurs a loss by acting in reliance on the receipt: it is like estoppel without the requirement of a representation. According to the wider version, change of position covers any loss to the defendant’s estate that was caused by the receipt, i.e. any loss that would not have happened but for the receipt. Thus the wider version covers, for example, a loss to the defendant’s estate by theft or damage that would not have happened in the absence of the receipt. It is not clear that the facts of Derby made it necessary to determine which was correct, but the court accepted a concession that the wider version was correct.

1