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There are a number of defences that should be considered when faced with a restitutionary claim for unjust enrichment. Essentially, these defences are available where it is either impossible to restore the claimant to the original position prior to the enrichment, or it would be unjust to do so.
A defendant may avoid liability if they can show that their position 'has so changed that it would be inequitable in all the circumstances to require them to make restitution' (Lipkin Gorman v Karpnale).
In Westdeutsche Landesbank v Islington, Lord Goff described the defence in these terms:
'Where an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution.'
The aim of the defence appears to be fairly balancing a claimant’s interest in restitution with a defendant’s interest in having certainty that it can make decisions regarding payments, without the potential for those payments subsequently being held to be invalid on account of unjust enrichment. Courts are likely to exercise their discretion having regard to this principle (Scottish Equitable v Derby).
It will be a question of fact in each case whether there has been a change of position.
A common situation where the defence applies is where
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