Knowing Assistance and the Equitable Defence of Change of Position
Yesterday, I blogged on the legal doctrine of “knowing assistance” as considered in a recent case out of England.
As noted, the doctrine may give rise to liability on the part of a financial institution that, through wilful blindness or bad faith, permits rogue clients to use its facilities as an instrument of fraud. When such an allegation is made, the defendant bank will plead the defence of “change of position.” This legal principle has been broadly defined as being available as a defence to a person “whose position has so changed that it would be inequitable in all of the circumstances to require him to make restitution…” (see Lipkin Gorman (a firm) v. Karpnale Ltd. [1991] 2 AC 548 @ 580).
In the case discussed yesterday, the Court found that the bank did change its position: by making payments out of its account in response to the Plaintiff’s instructions, the bank’s position was so changed that it would be inequitable to require it to make restitution.
The Court further implied that the bank acted in good faith by complying with Nigerian law as it related to money laundering. The Court stated (at p.431) that the imposition of liability in this case would “serve to motivate banks not to act for customers in areas of business which gave rise to a general suspicion of money laundering even where there was no information or suspicion that the customer was so involved. It seems to me that that is a road down which the court should not go…."
Until tomorrow,
David
