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In Australian Financial Services and Leasing Pty Ltd

In Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 307 ALR 512, which
concerned an action to recover in unjust enrichment for moneys paid under mistake, and in Sidhu v Van
Dyke (2014) 88 ALJR 640 (�Sidhu�), which concerned an action to enforce an estoppel, the High Court
of Australia relied upon the concept of detriment as a unifying principle to justify the prevention of
inequitable and unconscionable results. However, in doing so, neither case explained how detriment was
to be assessed. Both cases provide that where the detriment is adjudged to be substantial there will be
no need to determine any pro tanto restoration for moneys paid under mistake. Furthermore, the court
held that a plaintiff will not be required to identify the �minimum equity� that is required to redress the
representation, stating: �[t]he requirements of good conscience may mean that in some cases the value
of the promise may not be the just measure of relief�: Sidhu (2014) 88 ALJR 640, [83] (French CJ, Kiefel,
Bell and Keane JJ). �

In consideration of these two recent decisions, how much detriment must be established before the
representor will be ordered to make good the representation or for a court to protect the innocent recipient
of a mistaken payment?


In the Australian Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14, Total
Concept Projects (TCP) owed money to Hills Industries Ltd (Hills) and Bosch Services. TCP
sent messages to Hills and Bosch informing them that it was organizing for debts to be settled by
its financier, Australian Services and Leasing Pty Ltd (ASFL). However, Hills and Bosch were
not made aware of the fact that ASFL had not been advised by TCP that the money was intended
for paying previous debts. TCP had fraudulently drafted invoices for goods supposedly supplied
by Hills and Bosch that AFSL was to purchase and lease back to TCP.
The fraudulent invoice amounts were paid by ASFL and Hills and Bosch immediately applied
the money to repay the outstanding invoice debts. As a result, Hills quit to understake debt
recovery procedures and Bosch made a cancellation of enforcement procedures concerning
default judgment against TCP. After the fraud discovery, ASFL made a claim to recover the
money from Hills and Bosch due to the fact that there were no goods purchased or supplied.
Hills and Bosch refused to return the money back to ASFL. Consequently, AFSL filed a an

action against Hills and Bosch for the recovery of the monies in the NWS Court of appeal. AFSL
appealed to the High Court of Australia.
The issue before the High Court was with regard to the defence of change of position to a
restitution claim on grounds of mistaken payment. In eventually dismissing the appeal, the High
Court stressed that where a party seeks restitutionary relief on grounds of mistaken payment, the
outcome ought to be guided by the equitable notions of unconsionability as well as an
assessment of the party that should bear the loss and the reasons for the same. Furthermore, as
long as the detriment suffered is substantial, it is important for the recipient to prove a
‘quantifiable financial detriment’.
The initial move by the High Court was to refer to the basic principle of the restitution doctrine
which holds that a payment made on grounds of mistaken fact is sufficient enough to raise a
prima facie entitlement to restitution of the amount that has been mistakenly paid. Secondly, the
Court would consider whether, with regard to the circumstances, it would be inequitable for the
recipient to retain the benefit.
ASFL submitted an alternative approach that the relevant equity needs to concentrate on the
extent to which the recipients have been ‘disentrenched’ in regard to the mistaken receipt. ASFL
further argued that it is necessary and appropriate to make a forensic assessment of the amounts
and debts owed to the recipients or their respective recovery.
Using the approach offered by ASFL, the Court held that the principle of ‘entrenchment’ is not
what governs the law of restitutionary relief in Australia. The Court acknowledged the fact that
its decision was in consistency with the developments of this doctrine in Australia. In addition,
the Court further provided that the law of restitution in Australia is rather governed by equitable

principles and a consideration of the party that should bear the loss and the reasons for such a
consideration rather than adherence to a mathematical rule.
The answer according to the High Court decision in Australian Financial Services and Leasing
Pty Ltd v Hills Industries Ltd fails to provide a proper balance of the competing equities between
the parties based on fault. Thus, the ‘unjust enrichment’ is not a legal principle supplying on the
basis of restitution. Rather, it is important to establish a recognized ‘vitiating factor’ that grants a
right to recover, in this case, mistake infecting the payment.
The change of position defence provides some degree of protection to good faith recipients who
irreversibly change they position on the basis of an impugned benefit such as a mistaken
payment from the plaintiff. Australian courts acknowledge the defence of change of position as
emerging from common law. Lord Mansfield’s concepts of “unjust retention”, “ex-aequo et
bono” and “equity that will rebut the action” were confined to equitable doctrines.
The defence of change of position was first recognized by the High Court in the case of David
Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. In this case, the
High Court provided that an action for restitution of money paid mistakenly has a defence of
‘change of position’ as long as the recipient ‘acted to his or her detriment on the faith of the
receipt’. This case highlighted the fact that the defence of change of position had assumed a
significant status in the Australian legal system as regards unjust enrichment.
With time, the recognition of this defence has enabled the courts to assume a more principled
approach regarding the operation of unjust factors such as mistake, in addition to preventing the
need for fine and ultimately insupportable distinctions between different types of mistake which

traditionally operated to restrict the restitutionary liability of defendants at the expense of
plaintiffs’ legitimate claims.
The Court referred to the relevance of the ‘equitable notions of good conscience’ as a conscience
‘properly informed and instructed’. The Court made reference to the decision in Campbell v
Kitchen & Sons Ltd and Brisbane Soap Co Ltd (1910) 12 CLR 662 at 531in emphasizing the
long established principle in Australian law that recovery is largely dependent on the question of
whether it is equitable for the defendant to retain or the plaintiff to demand the money. The Court
also inquired into the circumstances in which the defendants relied on the defence of change of
position and what was actually done on the receipt of the funds to the extent that it would be
detrimental for the defendants to be ordered to repay the monies.
In the material sense, for present purposes, a defence of change of position is in general
considered to operate ‘pro tanto’, that is to say, in line with the detriment. Australian Financial
Services and Leasing Pty Ltd v Hills Industries Ltd establishes a bleak example of why a defence
of change of position may be relevant, as the defendants received mistaken payments from the
plaintiff due to the involvement of a third party fraudster. Relying on the mistaken payments, the
defendants changed their position in various important ways. Unless the defendants succeeded in
their pleaded defence, they would find themselves in a worse position than they occupied before
the receipt of the mistaken payments. Gageler J stated that in cases where the detriment is
quantifiable and is less the whole amount of payment, the defense of change of position can be
applied pro tanto.
The issues that the Court determined in coming up with a ruling were; whether there was a
physical payment of the monies required, and whether the payments were irreversible. The

Appellants relied on the Court’s decision in the case of Australia and New Zealand Banking
Group Ltd v Westpac Banking Corporation (1998) 164 CLR 662 to reinforce their argument that
the payments were receipts or book entries and that there was no real value attached to these
payments. The Court dismissed these claims, holding that it was not proper to characterize the
payments made to the defendants as ‘mere book entries’ or ‘bare receipts’. Further, the Court
stated that an honest recipient of money in payment of a debt cannot be considered in the same
position, for purposes of the defence of change of position, as a recipient of money in advance
payment for future supply of goods.
As regards irreversibility of the payments, the joint reasons of the Court established a practical
approach to this issue and considered the effect of a reversal of the payment from the plaintiff to
the defendants, even in situations where the discharge of the debt owed by the fraudulent third
party was reversible. The Court found that, as a practical matter of business, the consequences of
the defendants, particularly the decision to continue trading with the fraudulent third party
surpassed the mere fact of the receipt, making the consequences irreversible. By contrast, French
CJ concentrated on the decision to give up options for recovery of the debts owed, reasoning that
the defendants had suffered an irreversible detriment from the time they had made a decision not
to pursue their legal remedies on the faith of the receipt of payments made to them by the
Finding in favor of Hills and Bosch, the High Court made a consideration of the rationale of the
defence, whether it applies to non-reliance based modifications, or whether changes in position
have to be valued in regards to specific monetary sums and the interplay between change of
position and other defences such as estoppels and the defence of payment over by an agent.

Change of position became relevant in the AFSL case due to the fact that the Hills and Bosch had
forgiven the debts with TCP, including the refrain from commencing debt collection or
enforcement proceedings. The defendants argued that they had changed their position in good
faith and on the basis of relying on the action of the fraudulent TCP and therefore, they were
entitled to retention of the monies paid to them by AFSL. The High Court agreed with the
arguments of the defendants and found that Hills and Bosch had changed their position in good
faith in reliance on the payments. The Court further noted that the payments had caused the
defendants to act or refrain from acting, and that ordering them to pay restitution at this point
would occasion them to detriment beyond that even if they received no payment at all.
The High Court declined to make a comprehensive statement as the scope of the defence of
change of position in more general terms on grounds that doing so would be misleading as it
would distract attention from the content of the principle to the manner of its expression.
Consequently, the Court has reinforced the perspective that a grant of restitutionary relief may be
regarded in all situations and with regard to the practical consequences of such relief, instead of
making reference to any strict test or mathematical calculations of monetary loss.
Gageler J in a separate judgment took a critical analysis on estoppel and established that change
of position is a certain reflection of the modern Australian law on estoppel. Particularly, His
Honour noted that estoppel is not restricted to assumptions induced by representations, but it
may consist of other classes of ‘induced assumption from which departure may be
unconscionable’. The doctrine of estoppel now applies in equity and as a substantive rule of law.
In declining to consider whether change of position is ultimately to be assimilated in estoppel,
Gageler J noted that coherence in law was sufficiently enhanced if change in position operates in
where two conditions are fulfilled. The first condition is where the defendant acts or does

something, or refrains from acting or doing something that he should have otherwise done in
good faith, assuming that he was entitled to deal with the payment that he received. The second
condition is where the defendant would find himself in a worse position if ordered to make a
restitution than if the he had not received the payment.
The High Court decision in Sidhu v Van Dyke [2014] HCA 19 made clarifications on several key
issues relating to the law of equitable estoppels, particularly in line with reliance and remedy. In
this case, Van Dyke had rented a cottage from Sidhu and his wife, which was jointly owned by
the two. Sidhu and Van Dyke started a sexual relationship and this resulted into the breakdown
of Van Dyke’s marriage. Sidhu informed Van Dyke that there was nothing to worry about with
regard to getting a property settlement in divorce as the property between him and his wife
would be subdivided and Van Dyke would be entitled to the cottage. When the relationship
between Sidhu and Van Dyke came to an end about eight years later, Sidhu sought to repudiate
his earlier promises and his wife refused to consent to a subdivision.
The High Court made a clarification that Australian law does not acknowledge the presumption
of reliance as established by Lord Denning in Greasley v Crooke [1980] 1 WLR 1306. Thus,
Australian law does not presume reliance on the part of a representee, and a represente still has
an obligation to show detrimental reliance. Furthermore, the burden of proof for establishing
detrimental reliance lies on the respresentee. The High Court held that the New South Wales
Court had erred in proceeding by presuming that the Respondent had acted to her detriment by
relying on the representations of the appellant. In a unanimous decision, the court found that Van
Dyke had shown detrimental reliance and that Sidhu was precluded from denying his promise to
Van Dyke. But since the cottage in question had burned down and the subdivision had never

occurred, the Court awarded Van Dyke equitable compensation reflecting the value of what she
had lost.
According to French CJ, Kiefel, Bell and Keane JJ, the category of equitable estoppel in which
this case lies plays the role of vindicating the expectations of the representee against a party
seeking unconscionably to resile from an expectation it has initiated. The degree at which it is
unconscionable for the defendant to seek to resile from the position expressed in his promise to
the plaintiff can be determined by a reflection of the likely response of plaintiff if the defendant
had in the first place informed the plaintiff that the promise would last for a certain period of
time or under certain conditions.
According to Gageler J, it is not necessary for the promise to have been the key inducement for
the conduct of the plaintiff. The belief induced by the representations of the appellant should
only be a contributory factor to the reliance.
With regard to the remedy, Sidhu claimed that the proper measure of compensation could not be
based on the fulfillment of the promise to Van Dyke, but rather on the amount of loss suffered by
Van Dyke. Nevertheless, the High Court noted that despite the fact that there may be cases where
it would be inequitable to insist that the representor makes good the promise, where the
unconscionable conduct comprises of resiling from a promise that has induced conduct to the
detriment of the other party, the ordinary value of the relief is fulfilling the promise.
The High Court’s decision in Sidhu v Van Dyke implies that a representor who seeks to preclude
another party from resiling from a promise may not argue for a ‘presumption of reliance’ but
rather has to prove reliance on the representation in the ordinary way. A representor who
proposes an alternative remedy needs to establish a good reason as to why the ordinary rule

should not be applied. Such kind of reasoning can be based on the disproportion between the
damage that might flow to the representor by making good on the promise and the detriment
sustained by the representee.
These two cases indicate that in estoppel and in change of position, the reliance requirement
constitutes causation, particularly that the representation or receipt caused the decision of the
defendant to change position. The High Court has indeed shown that further inquiry needs to be
made in the assessment of detriment and that the court should put into account the circumstances
surrounding the case in applying the concept of detriment as a unifying principle to justify the
prevention of inequitable and unconscionable results

Australian Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14.
Sidhu v Van Dyke [2014] HCA 19.

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