Overpayment – Can I Keep the Payment?
It doesn’t happen very often, but just sometimes, you get overpaid. This can range from being given the wrong change at the shops, too much money being paid into your account from your employer or receiving a pension overpayment. One should never get too excited about this as legally, the person who has mistakenly made the overpayment is entitled to reclaim the sum from you. This is known as restitution. However, although there is the recognised legal right to reclaim overpayments, there also exists the equally well recognised defence commonly known as ‘change of position’.
This defence has been summarised by the courts as follows:
“ 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 claimant restitution.”
These were the words of Lord Goff in the case of Lipkin Gorman –v- Karpnale decided by the House of Lords in 1991 . The Law Lord went on to say that the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full.
The Court of Appeal had cause to reconsider this defence recently in the case of Commerzbank AG and Price-Jones (“PJ”). Briefly, PJ worked as an investment banker at Commerzbank and the case concerned the payment of two guaranteed bonuses and whether PJ was entitled to one or both of those payments. PJ had claimed that if it weren’t for the prospect of receiving the second bonus he would have sought alternative employment and that this constituted a relevant change of position.
The Court of Appeal dealt with three interesting points as regards the change of position defence.
The first point was the chronology of events and the issue of whether someone could seek to rely on the prospect of a future benefit. In general, the Court of Appeal stated, a relevant change of position was more likely to occur after the receipt of an overpayment which would allow the recipient to spend the money in question. Whereas in this case PJ had argued that his change of position had occurred before the mistaken overpayment of £250,000. The court made clear that the mere reversal of the normal order of events did not affect the availability of the defence. Essentially, this means that when faced with the question of whether it would be unreasonable to require repayment, the person who has been overpaid can submit a defence that he has changed his position in good faith in the expectation of receiving a future benefit. Of course, whether or not this is actually a good defence will depend on the facts in each case.
The second issue dealt with by the court was that of whether there was a requirement for the change of position to be financial in nature. The court acknowledged that the more obvious cases involve a reduction in the assets of the recipient. However, the court saw no reason why the scope of the defence should be restricted and said it could easily apply to incidents where employees had turned down an offer of a better paid job or simply given up work altogether.
Lastly, the issue of whether the change of position was caused by the actual or anticipated payment (“causation”) was addressed. The court noted that PJ could not claim a change of position unless he could show that there was a sufficient causal link between his change of position and the actual or anticipated payment. The court did not apply the principles of causation, but merely said that there should be a relevant connection between the change of position and the actual or anticipated payment.
On the facts the Court of Appeal decided that PJ was not entitled to retain both bonus payments, that there was no obstacle to him repaying the money (as he still had it), that his decision to remain at the bank did not have a significant or substantial adverse impact on him and that there was no relevant causal link between his decision to remain at the bank and the payment of the second bonus promised by the bank.
If you think you’ve received an overpayment or have made an overpayment and want to know how to recover it, then get in contact with our Commercial Litigation department for further help.
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<p><strong><a href="http://www.lemon-co.co.uk/article_overpayment.php">Overpayment – Can I Keep the Payment?</a></strong><br />
It doesn’t happen very often, but just sometimes, you get overpaid. This can range from being given the wrong change at the shops, too much money being paid into your account from your employer or receiving a pension overpayment. One should never get too excited about this as legally, the person who has mistakenly made the overpayment is entitled to reclaim the sum from you....</p>