Point Bay Developments Pty Ltd v Perkins (WA) Pty Ltd

This case arose because another company’s bank account details were mistakenly provided to the ATO for the purposes of a tax refund. The company which incorrectly had the refund paid to it was subject to a Debt Appropriation Order, which resulted in the monies being paid to the respondent. The applicant – who had been entitled to the ATO monies – claimed that the respondent had been unjustly enriched at its expense. In the result, it was successful in obtaining orders for repayment of the money.

Flanagan J

22 October 2021

Background

The applicant company was entitled to a GST refund from the Australian Taxation Office (“ATO”). [6]. In order to be paid that refund, the applicant’s director, Mr Pappas, provided bank account details to his accountant concerning the account into which the funds were to be deposited by the ATO. [6]. However, Mr Pappas “mistakenly included the account details” of another company – Austpro Management Services Group Pty Ltd (“Austpro”). [7].

As a result, on 16 December 2020, a GST refund of $900,058 was deposited by the ATO into Austpro’s Westpac bank account. [10]. On 22 December 2020, the respondent company obtained a debt appropriation order (“DAO”) from the District Court of Western Australia pursuant to the Civil Judgments Enforcement Act 2004 (WA) (“the Act”). [12]. The DAO required Westpac to pay to the respondent “amounts standing to the credit of Austpro with Westpac to a limit of $599,274.71”. [12]. On 22 January 2021, Westpac made a withdrawal of $599,274.71 from Austpro’s bank account, and paid it to the trust account of the respondent’s solicitors. [14]. On 27 January 2021, the applicant advised the respondent’s solicitors that the funds taken from Austpro’s bank account did not belong to Austpro because of the mistaken banking details error. [15]. On 3 February 2021, the respondent’s solicitors transferred the funds to the respondent. [21].

The applicant brought this claim, pleading that a mistake of fact resulted in the payment to Austpro, and subsequently, in the transfer to the respondent. It alleged that the respondent had been unjustly enriched at its expense, and sought repayment of the monies. [20]. In the result, the applicant was successful. [80]. His Honour ordered the respondent to repay the sum of $599,274.71 to the applicant. [80].

In resolving the dispute, Flanagan J was required to address four issues: (1) was there a mistake of fact?; (2) did the mistake of fact result in the ATO paying the GST refund into Austpro’s Westpac bank account?; (3) did the subsequent payment to the respondent pursuant to the DAO unjustly enrich the respondent at the expense of the applicant?; and (4) had the respondent established a change of position defence?

Issue 1 – was there a mistake of fact?

Flanagan J was satisfied that there had been a genuine mistake of fact by Mr Pappas, who “did not at any time intend that the GST refund be paid to Austpro”. [35]. That mistake gave rise to a prima facie right to recovery. As the High Court stated in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662:

“[R]eceipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment …”

Issue 2 – did the mistake of fact result in the ATO paying the GST refund into Austpro’s Westpac bank account?

This issue involved a question of causation. Flanagan J observed that the authors of Mason & Carter’s Restitution Law in Australia assert that the “but for” test of causation applies in the context of mistaken payments. [41]. However, the authors of Unjust Enrichment (J Edelman and E Bant) have advocated a “factor” test. [41].

His Honour considered it unnecessary to resolve this dispute, and “irrespective of which test of causation is applied, the inevitable conclusion is that the applicant’s mistake caused the GST refund to be deposited into Austpro’s Westpac bank account”. [45]. This was “not a case where the payment would have been made notwithstanding the mistake”. [46].

Issue 3 – did the subsequent payment to the respondent pursuant to the DAO unjustly enrich the respondent at the expense of the applicant?

Flanagan J said that it is “well-settled that any restitutionary claim based on unjust enrichment requires proof that the entitlement came ‘at the expense of the plaintiff’”. [49]. The issue here was whether the respondent, as an indirect recipient, had been enriched at the expense of the plaintiff. [54].

His Honour reviewed a number of authorities concerning indirect receipt of value. On balance, those authorities supported the view that the respondents could be liable. For example, in Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285, Finkelstein J said:

“A plaintiff will usually bring a claim for money had and received against the person to whom he made the payment. Here, [the defendant] received the application money from [a third party], not [the plaintiff]. Is [the plaintiff] still entitled to maintain the claim? Clearly, the answer is in the affirmative.”

His Honour observed that this and other cases provided examples of where “the principles of tracing have been used to identify the ‘transactional links’ sufficient to justify the bringing of a claim in unjust enrichment against an indirect recipient of money”. [65].

Further support was provided by Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732, where Leeming JA said:

“Principle confirms that an indirect recipient can be liable. Once a volunteer becomes aware that he or she has received trust property or its traceable proceeds, his or her conscience is bound. There is no reason to distinguish direct and indirect receipt.”

Issue 4 – had the respondent established a change of position defence?

In Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, Gageler J described the change of position defence as follows:

“The defence of change of position is established where a defendant proves the existence of two conditions. The first condition is that the defendant has acted … or refrained from acting … in good faith on the assumption that the defendant was entitled to deal with the payment which the defendant received.”

In this case the respondent alleged it had made out the defence because its position had changed in that its debt against Austpro had been extinguished by the transfer pursuant to the DAO. [77]. If the Court ordered repayment of the monies to the applicant, it would have to apply for a new DAO against Austpro, which would involve “inevitable legal costs”. [79]. However, Flanagan J said that this did not establish a change of position. If the applicant was successful in recovering the money, “the respondent will revert to the position of unpaid creditor”, meaning that it would be “in the same position it was in prior to the payment of the money”. [79]. His Honour also noted that the respondent had received the money in circumstances where it had “received notice of the mistake from the applicant’s accountant and solicitors prior to the money being receipted”. [79].

W Isdale