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Charles Mitchell
Wed, 28 Nov 2007 23:49:21 +0000
Change of position and relative fault


Picking up on Florian's point, it seems to me that cases like Waitaki have something to be said for them despite the Privy Council's rejection of relative fault in Dextra Bank. Where C carelessly pays D by mistake and D has not disenriched himself, the question which arises is whether C or D should now have the benefit which still exists (in D's hands), and in cases like this C's carelessness is not a good reason to let D keep the benefit, whatever D's state of mind, given that C did not truly mean him to have it / there was no legal ground for the transfer. Contrast the case where a good faith D has carelessly disenriched himself: here a different question arises, viz whether C or D should now bear the loss of the benefit which no longer exists in either party's hands. In cases like this the fact that they have both carelessly contributed to the loss of the benefit is a good reason to make them share the loss. In Dextra Bank the PC reasoned that it would be unfair on C to bring his carelessness into account in a relative fault calculation when D tries to raise a C of P defence, given that C's carelessness is ignored when deciding whether he has a prima facie right of recovery, but this strikes me as a non sequitur because the relevance of C's carelessness is different at the cause of action stage and the defences stage.


Best wishes,


Quoting Florian Mohs:

Dear all

I agree that there is a certain interrelation between the issues of mistake and change of position as to the relevant standard of knowledge of the transferor and the transferee.

But is it a risk that we look to both sides of the transaction and inquire into both sides' state of mind? I think no. In my view, it is rather a chance.

For me, a compelling example of a case against an absence of basis-analysis without regard to the transferor’s state of mind is:

National Bank of New Zealand v Waitaki International Processing (NI) Ltd [1999] 2 NZLR 211 (CA).

Summarized the facts of this case are as follows:

The defendant, Waitaki, had been paid money by the plaintiff, National Bank of New Zealand, under the mistaken assumption that the bank owed the money to Waitaki. The defendant knew that the payment lacked a legal basis and objected to the payment. The bank insisted and, finally, the defendant accepted the payment. The defendant then invested the money, at first in government stocks, and then in the property market, where the money was lost. On evidence, the defendant Waitaki had positive knowledge of the mistake of the plaintiff bank. This alone, however, did not suffice to disqualify the defendant from invoking the defence of change of position. The Court of Appeal entered into a balancing of equities and took into consideration the relative fault of both the plaintiff and the defendant.


Charles Mitchell

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