08:20 AM Loh Yu Wei Junie (Associate, Tan Rajah & Cheah)

    Settling Down Change of Position Defence: Southage Pty Ltd v Vescovi [2015] VSCA 117



    Local case law on unjust enrichment is presently limited owing to the smaller case load in our jurisdiction. As such, it remains useful to consider developments in other common law jurisdictions, especially in how the foreign courts would respond to different factual scenarios. In doing so, however, our courts must bear in mind the differences in approach in these other jurisdictions.

    In Southage Pty Ltd v Vescovi [2015] VSCA 117 (“Southage CA”), the Court of Appeal of Victoria (Australia) examines when the maker of a mistaken payment will be able to make a successful claim for restitution from a recipient of that payment, who had disposed of the property representing that payment without receiving anything in return. The focus of this commentary will be on whether the defence of change of position was made out. However, some attention will also be devoted to the question of whether the defendant was enriched in the first place, which was given little consideration in the case.


    This case involves a claim by a lender, Southage Pty Ltd (“Southage”), against a purported borrower, Ms Vescovi (“Ms Vescovi”). The purported loan from Southage to Ms Vescovi was secured by a mortgage over a property, the Williamstown Property, of which Ms Vescovi was the sole registered proprietor. However, Ms Vescovi’s signature on the loan and mortgage agreements had been forged by one Mr Robert Kalivoda (“Mr Kalivoda”), who was the husband of Ms Vescovi at the time of the purported loan agreement. Ms Vescovi never received the Southage monies, and remained ignorant of the purported loan and mortgage until much later.

    The loan monies had been advanced to Mr Kalivoda. Mr Kalivoda used the bulk of the Southage monies to fund the deposit of a property, the Kew Property, whilst most of the remaining balance was paid to Mr Kalivoda’s company. The remainder of the purchase monies for the Kew Property was borrowed from a bank (“the Bank”), which obtained a first mortgage over the Kew Property.

    Although Mr Kalivoda had entered into a contract in his sole name for the purchase of the Kew Property, he subsequently nominated Ms Vescovi as purchaser. Ms Vescovi agreed to the nomination under the belief that Mr Kalivoda had paid the deposit with his own moneys and had sufficient financial resources to repay the loan that was taken out. The nomination secured Mr Kalivoda’s right to compel the vendor to transfer title to Ms Vescovi in place of himself, but did not give Ms Vescovi the power to compel the vendor to complete the transaction, nor oblige her to pay the purchase price. Following the nomination, Ms Vescovi became the registered proprietor of the Kew Property, and executed the first mortgage over the Kew Property.

    However, by the time of trial, the Kew Property had been sold through a forced sale pursuant to the Bank’s rights under the mortgage. There was no surplus payable to Ms Vescovi from the sale. Mr Kalivoda’s company had also been put in liquidation, and he himself had been declared bankrupt. Moreover, Southage’s mortgage over the Williamstown Property had been set aside as it was a forgery.

    In these circumstances, Southage sought restitution from Ms Vescovi on the ground of mistake of fact. The Supreme Court of Victoria at first instance, in Southage Pty Ltd v Vescovi [2014] VSC 141 (“Southage FI”), said that the problem of unjust enrichment may be “unlocked” by asking five questions:

    (1) Was the defendant enriched?

    (2)Was it at the expense of this claimant?

    (3)Was it unjust?

    (4)What kind of right did the claimant acquire?

    (5) Does the defendant have a defence?

    The trial judge decided that Ms Vescovi was enriched at Southage’s expense, but she was not obliged to make restitution as the defence of change of position was made out. She had changed her position by disposing (as she had believed, in good faith, she was entitled to) of the very asset which represented the value of the Southage monies, and had received nothing in return. Given these circumstances, the trial judge concluded (at [140]) that “it would be unjust to require Ms Vescovi to make restitution to Southage of any amount”.

    Southage appealed that decision to the Court of Appeal of the Supreme Court of Victoria.

    The Court of Appeal’s Decision (“Southage CA”)

    The Court of Appeal clarified that, under Australian law, “unjust enrichment” did not denote any specific form of legal liability. Rather, the term is merely a “unifying legal concept”, that is to say, it is not a principle capable of direct application to disputes. The Court of Appeal disapproved (at [49]) of determining liability to restitution by answering the five questions identified by the trial judge. In cases involving mistaken payments, the Court of Appeal instead (at [50]) highlighted the two-stage analysis identified in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353:

    (1) Was the payment made by the plaintiff caused by a mistake?

    (2)Can the defendant raise any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust?

    In relation to the second question, the defence of “change of position” is said to be simply a description of one form of disadvantage that a defendant would suffer if he or she were ordered to make repayment. In this, the Court (at [64] to [65]) accepted the two-part formulation of the test for ‘change of position’ as set out in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 307 ALR 512:

    (1) That the defendant has acted or refrained from acting in good faith in reliance (the relevant causal link) on the assumption that he or she was entitled to deal with the payment which the defendant received; and

    (2) By reason of having so acted or refrained from acting, the defendant would be placed in a worse position if ordered to make restitution of the payment than if the defendant had not received the payment at all. This difference in position need not always be financial or pecuniary.

    Applying these principles to the present facts, the Court of Appeal found that Ms Vescovi had acted in good faith in reliance on the receipt of the deposit moneys (that had come from Southage). If she had not believed that her husband had provided the funds for the deposit, she would not have entered into the loan and mortgage over the Kew Property. And by the time the restitution claim was brought, Ms Vescovi no longer retained any of the value of the Southage loan, and would thus be placed in a worse position if she were ordered to make restitution than if she had not received the moneys at all.

    Hence, the change of position defence was made out; it would be inequitable in the circumstances to require Ms Vescovi to make restitution.


    In Southage FI, Ms Vescovi challenged Southage’s arguments that she had been enriched. However, the Court held that Ms Vescovi had received the benefit of the money that Southage paid under a mistake simply because it could be traced into the hands of Ms Vescovi, i.e her interest as the registered proprietor of the fee simple interest in the Kew property.

    Although the Court in Southage CA did not consider it necessary to determine the issue of whether Ms Vescovi had been enriched (indeed, they also did not mention at which stage of the two-stage analysis that such an issue would be considered), the Court said, at [85], that “we would not be prepared to find for the appellant on the threshold question of whether the respondent was enriched in the absence of any evidence as to the value of the equity that can be ascribed to the Southage money.”

    This is likely correct because benefits in kind are not automatically considered “enrichment” (for example, see Cressman v Coys of Kensington [2004] 1 WLR 2775 on the discussion of whether the registered number plate was a ‘benefit’). Therefore, it follows that the mere fact that a substitute non-cash asset has been identified in the recipient’s hands is insufficient to establish that the recipient has received a benefit, and is thereby enriched. In this case, we may assume that Ms Vescovi had received a benefit because she had voluntarily accepted title to the property. However, the existence of enrichment is separate from the valuation of enrichment: the question of how that benefit should be valued remains. Putting aside the multitude of arguments on subjective devaluation for the purposes of this short commentary, it remains pertinent to point out that Ms Vescovi had received an encumbered property, and not clear title. The extent of the enrichment, represented by the objective market value of the Kew property, must reflect the fact that the property that has been mortgaged for more than 95% of its value. The incurrence of liabilities to acquire the Kew Property is not, as Southage FI held, a separate issue.

    Change of Position: some reflections for Singapore law

    It is important to note that the Singapore courts’ approach to unjust enrichment is markedly different from that of the Australian courts.  Singapore law endorses the Birksian framework of analysis to a case of unjust enrichment, by asking the following four questions, as enunciated by the Singapore Court of Appeal in Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd [2011] 3 SLR 540:

    (1) The defendant has received a benefit (i.e he/she has been enriched);

    (2) The enrichment is at the plaintiff’s expense;

    (3) It is unjust to allow the defendant to retain the enrichment (i.e. whether there is any “unjust factor”); and

    (4) There are no defences available to the defendant.

    Nevertheless, Southage CA may still be useful reference at the stage where a change of position defence is considered in a Singapore dispute. The defence of change of position to a claim for unjust enrichment has been recognised in Singapore. In Management Corporation Strata Title Plan No 473 v De Beers Jewellery Pte Ltd [2002] 1 SLR(R) 418, it was said that the 3 elements of the change of position defence are that:

    (1) The recipient has changed his position;

    (2) Bona fide; and

    (3) It would be inequitable to require him to make restitution or restitution in full.

    In addition, a causal link between the change of position and the receipt of the enrichment is also necessary in order to establish a relevant change of position. If the recipient would have changed his/her position in any event, then the defence will not be made out. Unlike Australian law, however, the Singapore courts have not designated “reliance” as the relevant causal link.  As such, Singapore law may admit events of change of position that are independent of the acts of the claimant, for example, theft.

    Notably, in a recent article, “Taking Stock of the Change of Position Defence” (2015) 27 SAcLJ 148, Professor Tang Hang Wu advocated Professor Elise Bant’s dual rationale understanding of the change of position defence, as advanced in her book, The Change of Position Defence (Oxford: Hart Publishing, 2009). Namely, that (A) the defence must protect the recipient from the harm that he/she would suffer where a restitution claim would leave him/her in a worse position as compared to prior to the receipt, and (B) that the defendant must be required to take reasonable steps to protect himself/herself against the possibility that the receipt of the enrichment might be called into question.

    It may be observed that this dual rationale understanding is consistent with the Australian approach to the change of position defence (as applied in Southage CA, and detailed earlier), albeit that it is not entirely clear whether the requirement of good faith can be equated with taking “reasonable steps” to protect oneself against the possibility that the receipt of the enrichment is not secure. Alternatively, the taking of reasonable steps could be interpreted as part of (but not wholly exhaustive of) the requirement of good faith. It is arguable that the defendant cannot claim to have acted in good faith if he had not acted reasonably, for example, if he had suspicions that he was not entitled to the money received. 

    Further, although in Southage CA, being placed in a “worse position” was used in a pecuniary sense, there is no reason why it could not also be non-pecuniary in nature (see [64]). For example, if a recipient had decided (in good faith) to start a family based on the receipt of the benefit, that recipient may be in a worse position if ordered to make restitution as, in addition to the increased expenditure that may be expected as the cost of raising a child, ordering restitution would frustrate his/her expectations. As Professor Tang highlighted in his article, “[f]rustrated expectations are not trivial costs for two reasons: first, the payee faces a difficult evidentiary hurdle in proving reliance expenditure, especially when a considerable amount of time has elapsed between the payment and the claim; and secondly, a restitutionary claim might disrupt a payee’s individual autonomy”.  The difficulty though, is in valuing the extent of the change of position. 

    * This blog entry may be cited as Loh Yu Wei Junie, " Settling Down Change of Position Defence: Southage Pty Ltd v Vescovi ", Singapore Law Blog (29 August 2015) (

    ** A PDF version of this entry may be downloaded here

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