The High Court is set to examine, for the first time since 1992, the change of position defence to restitution claims for payments made under a mistake of fact.
In August the High Court granted special leave to an equipment financier (AFSL), to appeal the 2012 decision of the NSW Court of Appeal (Hills Industries v Australian Financial Services and Leasing & Anor.
Earlier in the year we reported on two decisions of the NSW Court of Appeal which addressed different aspects of claims for restitution for payments made under a mistake of fact and the defences to such claims. The Hills decision was one of those.
In Hills, AFSL had advanced money to a borrower by making payments directly to two third parties, Hills and Bosch. The money advanced was paid directly to Hills and Bosch on the basis of hire purchase documents that had been forged by the borrower and submitted to AFSL.
Having received the payments from AFSL, Hill Industries and Bosch applied the funds to extinguish the pre-existing debts of the borrower.
When the fraud was uncovered AFSL commenced proceedings against Hills and Bosch to recover the funds it had paid on the basis that it did so under a mistake. Hills and Bosch defended the proceedings claiming that even though the money was paid as a mistake the funds were received in good faith and applied to the pre-existing debts. Hills and Bosch raised the defence of change of position arguing that it would be unfair to now require them to pay the funds back.
At trial, AFSL was successful in recovering the funds from Hills but not Bosch.
Hills appealed the decision to the Court of Appeal and succeeded in having the trial judgment reversed. AFSL also appealed the decision of the trial judge allowing Bosch to retain the funds, but that appeal was refused.
AFSL has now obtained special leave to appeal to the High Court with the appeal date yet to be set. A High Court decision in this area is overdue and will provide some much needed certainty on the circumstances in which a payment received by mistake can be retained.
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