This decision of Einstein J is an recent example of a successful claim for restitution for unjust enrichment. It also shows the interaction between restitution and equity, in particular knowing receipt, dealing with principles as old as those as in Barnes v Addy (1874) LR 9 Ch App 244; and Briginshaw v Briginshaw (1938) 60 CLR 336, as well as those as recent as those dealt with in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89. This post focuses on the successful claim for restitution for unjust enrichment, though it is also worth reading for its discussion on knowing receipt.1
The Facts
Put simply, the defendants made fraudulent invoices for equipment which was meant to be provided by third parties. The plaintiff successfully claimed for the money he mistakenly paid pursuant to these false invoices.
Einstein J set out the law in Australia for unjust enrichment2:
As a starting point, the three essential elements of an unjust enrichment claim are:
(a) That the defendant received a benefit;
(b) That the benefit must be unjust in a legal sense; and
(c) That the benefit has to have been made at the plaintiff’s expense.
He continued:
Upon satisfaction of these elements, a payer (such as the plaintiff) is prima facie entitled to recover moneys paid under a mistake of fact, that is, a mistake as to a fact giving rise to a legal liability make a payment or that the payee (the defendants) was legally entitled to a payment (Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; ANZ Banking Group Ltd v Westpac (1988) 164 CLR 662 and David Securities Pty Ltd v Commonwealth Bank (1992) 175 CLR 353 (a case on mistake of law)).
This prima facie liability to make restitution will only be displaced in circumstances that the law recognises would make an order for restitution unjust (ANZ Banking Group v Westpac and Perpetual Trustees Australia Ltd v Heperu [2009] NSWCA 84). The onus of which lies with the enriched party. It is not a defence to claims for recovery of mistaken payments (based on mistake of fact) that the defendant(s) honestly believed in his or her entitlement to receive or retain the money mistakenly paid (cf David Securities Pty Ltd v Commonwealth Bank; see Mason & Carter’s Restitution Law in Australia 2 nd edition, at [438]).
His Honour went on to explain the differences between English and Australian restitution law
In Lipkin Gorman v Karpnale Pty Ltd [1988] UKHL12 ; [1991] 2 AC 548, the majority of the House of Lords made clear that it is the inequitable retention of money or benefit which lies at the root of the injustice of the enrichment (approved in Perpetual Trustee Australia v Heperu).
In saying this, it is important to recognize that unjust enrichment is “not a definitive legal principle according to its own terms” Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [151], but rather depends on the existence of a qualifying or vitiating factor falling into some particular category, Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [150].
Fortunately for the Plaintiff, its case fell into one such factor (mistake).
His Honour also examined the possible defences3 available to a claim for restitution for unjust enrichment, which include:
- no enrichment at [57];
- the plaintiff can recover from others at [60];
- change of position (as a complete defence) at [65];
- payment for good considerations as a complete defence at [78].
These defences were ultimately unsuccessful for the first and third defendants (the second defendant succeeded on a change of position defence).
For other perspectives on restitution law, see my blog post on Professor Burrows’ article: The Australian Law of Restitution: Has the High Court lost its way? (and the article itself).
2At [21]
3As well as some partial defences which turned on the individual facts at [80].
MyLearnedFriends 
Posted on June 11, 2011
0