Lloyd's Maritime and Commercial Law Quarterly
BONA FIDE PURCHASE AS A DEFENCE IN THE LAW OF RESTITUTION
Paul Key*
The recognition of change of position as a defence to restitution has called into question the continued existence of bona fide purchase as a separate defence. This article examines bona fide purchase as a defence to restitution and compares it with change of position. Change of position is rejected as an explanation of bona fide purchase and support for maintaining the traditional distinction between the two defences is expressed. Bona fide purchase is described as operating in limited circumstances to defeat completely an in rem action.
The rise of the law of restitution has prompted a desire for conceptual rigour and an accuracy in the use of terminology. The preliminary task of establishing the basic structure of the law of restitution has been admirably performed by Lord Goff, Professor Jones, and Professor Birks in their respective works. The task now facing jurists is to ensure that the limits of each component doctrine are adequately delineated and the inter-relationship of the various principles precisely described. The necessity for this thorough analysis is evident in respect of all the conditions of an action in restitution. However, recent attention has been focused upon the defence element of such an action. This may be traced to the House of Lord’s recognition of change of position as a general defence to restitution in Lipkin Gorman v. Karpnale Ltd.1 This long-sought recognition has prompted jurists to re-examine the relationship between change of position and other defences. There has been particular interest in the relationship between change of position and bona fide purchase.
Bona fide purchase permits a total defence where the defendant has, in good faith, given some value for the enrichment which he has received. Change of position, as described in Lipkin Gorman, permits a defence if the defendant’s change of position renders it inequitable for the court to require him to make restitution; it is a pro tanto defence and excludes restitution only to the extent that it would otherwise be inequitable. To facilitate a lucid description of defences to restitution and exclude redundant principles it is important to determine whether or not bona fide purchase may truly be examined by change of position. Two divergent approaches are discernible: (1) bona fide purchase is a mere manifestation and logical consequence of change of position; and (2) bona fide purchase is a separate defence which is entirely independent of change of position.
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