Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd - [2008] WASCA 119

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: ALPHA WEALTH FINANCIAL SERVICES PTY LTD -v- FRANKLAND RIVER OLIVE COMPANY LTD [2008] WASCA 119

CORAM: STEYTLER P
PULLIN JA
BUSS JA

HEARD: 3 DECEMBER 2007

DELIVERED : 6 JUNE 2008

FILE NO/S: CACV 76 of 2006

BETWEEN: ALPHA WEALTH FINANCIAL SERVICES PTY LTD
SAXBY BRIDGE PTY LTD (subject to a deed of company arrangement)
BOULDER SECURITIES PTY LTD
JEFFREY JOSEPH BRAYSICH
Appellants
AND
FRANKLAND RIVER OLIVE COMPANY LTD
First Respondent
PRESTON VALE LTD
Second Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :COMMISSIONER SANDERSON
Citation  :ALPHA WEALTH FINANCIAL SERVICES PTY LTD & ORS -v- FRANKLAND RIVER OLIVE COMPANY LTD [2006] WASC 70
File No  :CIV 1757 of 2005

Catchwords:

Corporations - Managed investment scheme - Pro forma licence and management agreement annexed to the Constitution - Licence and management agreements executed between the responsible entity and each investor - Whether the executed licence and management agreements were incorporated into the Constitution - Whether the executed licence and management agreements incorporated any provisions of the Constitution - Whether the executed licence and management agreements and the Constitution were separate and distinct instruments - Whether the executed licence and management agreements were affected by later amendments to the Constitution and the pro forma licence and management agreement

Equity - Estoppel by convention - Whether a common assumption for the purposes of estoppel by convention may relate to private legal rights - Whether the responsible entity and the investors made a common assumption that each of the executed licence and management agreements had been varied as a result of amendments made to the pro forma licence and management agreement and the Constitution - Whether the elements of estoppel by convention had been established

Restitution - Moneys paid by the investors to the responsible entity pursuant to demands - Demands made on the basis that the amendments to the pro forma licence and management agreement and the Constitution were effective as a matter of law to require the investors to comply with the demands - Moneys paid by the investors as a result of a mistake as to their private legal rights - Defence of change of position at common law and under s 125 of the Property Law Act 1969 (WA) - Onus on the investors to establish prima facie right to repayment of the moneys - Onus on the responsible entity to establish the defence of change of position - No evidence as to the state of mind at material times of the controllers of the responsible entity - Responsible entity failed to establish that there was any change of position in good faith or that any change of position was on the faith of or caused by the receipt of the moneys paid by the investors pursuant to the demands

Legislation:

Corporations Act 2001 (Cth) ch 5C, s 601FA, s 601FC, s 601GA, s 601GB, s 601GC, s 601MA(1)
Corporations Law (Cth)
Property Law Act 1969 (WA) s 124, s 125

Result:

Appeal allowed

Category: A

Representation:

Counsel:

Appellants:     Mr C L Zelestis QC & Mr J C Giles
First Respondent           :     Mr D R Williams QC & Mr S K Dharmananda
Second Respondent       :     Mr D R Williams QC & Mr S K Dharmananda

Solicitors:

Appellants:     Solomon Brothers
First Respondent           :     DLA Phillips Fox
Second Respondent       :     DLA Phillips Fox

Case(s) referred to in judgment(s):

Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656
ASB Securities Ltd v Geurts [2005] 1 NZLR 484
Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286
Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399
Bankstown City Council v Alamdo Holdings [2005] HCA 46; (2005) 223 CLR 660
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985) 160 CLR 226
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193
Ding v Sylvania Waterways Ltd [1999] NSWSC 58; (1999) 46 NSWLR 424
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2006] QCA 194
Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175
Foran v Wight (1989) 168 CLR 385
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1
Goss v Chilcott [1996] AC 788
Government Employees Superannuation Board v Martin (1997) 19 WAR 224
Grand Lodge, AOUW of Minnesota v Towne (1917) 161 NW 403
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd [2003] NSWCA 851; (2003) 59 NSWLR 312
Hole v Garnsey [1930] AC 472
Home Building Society Ltd v Pourzand [2005] WASCA 242
Hookway v Racing Victoria Ltd [2005] VSCA 310; (2005) 13 VR 444
Inn Leisure Industries Pty Ltd (Provisional Liquidator Appointed) v D F McCloy Pty Ltd (No 1) (1991) 28 FCR 151
Johnstone v Knight [2006] QCA 322
Jumbo King Ltd v Faithful Properties Ltd [1999] 3 HKLRD 757
K & S Corporation Ltd v Sportingbet Australia Pty Ltd (2003) 86 SASR 313
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812; (2005) 233 ALR 560
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Mercedes‑Benz (NSW) Pty Ltd v National Mutual Royal Savings Bank Ltd (Unreported, NSWCA, 40583/1992, 1 April 1996)
Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290
National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1999] 2 NZLR 211
National Westminster Finance New Zealand Ltd v National Bank of New Zealand Ltd [1996] 1 NZLR 548
Niru Battery Manufacturing Co v Milestone Trading Ltd (No 1) [2004] QB 985
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Pepe v City & Suburban Permanent Building Society [1893] 2 Ch 311
Port of Brisbane Corporation v ANZ Securities (No 2) [2002] QCA 158; [2003] 2 Qd R 661
Porter v GIO Australia Ltd [2003] NSWSC 668
Quanta Software International Pty Ltd v Quanta Systems Ltd [2004] FCA 1182
Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40
RBC Dominion Securities Inc v Dawson (1994) 111 DLR (4th) 230
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234
Riseda Nominees Pty Ltd v St Vincent's Hospital (Melbourne) Ltd [1998] 2 VR 70
Rural Municipality of Storthoaks v Mobil Oil Canada Ltd (1975) 55 DLR (3d) 1
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65
Santos v Delphi Petroleum Pty Ltd [2002] SASC 272; (2002) 225 LSJS 1
Saunders & Co (A Firm) v Hague [2004] 2 NZLR 475
Southern Wine Corporation Pty Ltd (In liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162
State Bank of New South Wales Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Thompson v Palmer (1933) 49 CLR 507
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Westpac Banking Corporation v Rae [1992] 1 NZLR 338

STEYTLER P: I agree with Buss JA.
PULLIN JA: Buss JA has set out the facts, the documents, the relevant provisions in them, the appellants' grounds of appeal and referred to submissions which were made to the court.
The central issue in relation to ground 1 is whether Licence and Management Agreements entered into between the responsible entity of the managed investment scheme and the appellants (1999 Licence and Management Agreement) could be amended by a special resolution amending the constitution of the scheme. The constitution defined 'Licence and Management Agreement' (LAMA) as meaning an agreement 'entered into between the Responsible Entity and a Grower in the form annexed to and forming part of this Constitution'. That definition is a reference to a LAMA actually 'entered into'. The definition is employed for example in cl 3.2 which states that the responsible entity was entitled to be paid fees provided for in the LAMA (not the annexed forms but in a LAMA 'entered into'). Clause 1.4 of the constitution did not provide that the LAMA actually entered into was a part of the constitution. Instead it read:
The annexed Licence and Management Agreement shall be taken to form part of this Constitution.
The 'annexed' LAMA is a form only (and not a LAMA actually 'entered into').
Thus only the form itself was part of the constitution. The constitution incorporated the form and served to give notice of the consideration growers were to pay if investors were contemplating investing (see cl 3.1), and to give notice that the form might in future be modified by special resolution pursuant to s 601GC(1) of the Corporations Act. However, the existence of cl 1.4 and the provisions of s 601GC(1) did not in any respect provide that by special resolution, a LAMA actually 'entered into' may be modified. Nothing in the 1999 LAMAs contained any provision to the effect that if the form annexed to the constitution be amended, a 1999 LAMA would be amended in like fashion. On the contrary, each of the 1999 LAMAs provided in cl 12 for the method by which the 1999 LAMAs might be varied in relation to additional contributions. A grower could be compelled to make contributions beyond those agreed in the 1999 LAMAs if a general meeting of growers agreed to such increase after considering the options set out in cl 12.6.

Instead of following that course, the responsible entity decided to call meetings of growers to pass special resolutions pursuant to s 601GC(1) of the Corporations Act, and to thereby amend the constitution. Having done so, the responsible entity contended that such amendment amended LAMAs actually entered into, including the 1999 LAMAs. The commissioner found, and the first respondent (the respondent) argues in support, that this amendment did amend the 1999 LAMAs and therefore legally obliged the appellants to pay the 2003 fees, the 2004 fees, and the 2005 fees.
If a meeting had been called under cl 12 of the 1999 LAMAs, then the growers would have had the option of deciding whether they should vote to approve the proposal that they make additional contributions, vote to wind up the scheme, or to implement other measures to provide future funding. The course followed by the respondent, which was to propose changes to the constitution, offered no such choice to the growers. Growers were merely asked to vote for or against the proposed amendments to the constitution.
Because the 1999 LAMAs were not incorporated into the constitution it was necessary as with any 'ordinary' contract (see Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399, 439 (McHugh and Gummow JJ)) for the contract to be varied by agreement between the parties. In this case the growers who had signed LAMAs agreed by cl 12.6 that they could be compelled to make further contributions if, pursuant to cl 12.6, the majority had voted to approve the additional contributions referred to in that clause.
The commissioner concluded that the amendments to the constitution were 'valid and effective and bind' the appellants. By this the commissioner meant that the amendment to the annexed constitution had the effect of amending the 1999 LAMAs. In my opinion that was not so and the commissioner erred in reaching the conclusion referred to, for the reasons set out above.
Before concluding these reasons on ground 1, mention has to be made of one aspect of the notice of meeting of 21 July 2003 which was referred to by senior counsel for the respondent. Senior counsel submitted that the resolution on 21 July 2003, in par 2 provided for an amendment to 'each Growers' Licence and Management Agreement' requiring the payment of an extra management fee of $2,000 for each licensed area. Implicit in that submission was the notion that the growers had in fact voted in accordance with cl 12, of the LAMAs actually entered into, to approve the extra fees. In my view that is not so. The notice of meeting proposed a special resolution:
That, subject to the passage of the extraordinary resolution considered at this meeting:
(a)the Constitution for the SWC MIS be amended as set out under the heading 'Amendments to the Constitution' in the notice of meeting.
Under the heading 'Amendments to the Constitution', par 2 read:
In the Licence and Management Agreement which is Annexure A to the SWC MIS Constitution and each Growers' Licence and Management Agreement: [Insert various new clauses and subclauses]
Thus, par 2 was merely a particular of the resolution to amend the constitution. Furthermore, the whole tenor of the explanatory material accompanying the notice was that the growers were being asked to vote on changes to the constitution. There was nothing at all which referred to, or signified to growers that any decision they were to make at the meeting was a decision pursuant to cl 12.6 of the LAMAs actually entered into.
The reference made by senior counsel to the July notice of meeting also prompted a re‑examination of the January notice. That revealed that the notice of meeting for 23 January 2003, also referred to a proposal to 'amend clause 12 of each Grower's Licence and Management Agreement'. See cl 3.1(b) in the section headed 'The Proposal' in the Notice of Meeting. This was followed by cl 3.1(c) which set out the proposed amendments to cl 12 of 'the' Licence and Management Agreement. However, the only relevant resolution the growers were asked to vote on was a resolution that:
The Constitution for the SWC MIS be amended as set out in Section 3.1(c) of the Booklet in which the Notice of the Meeting appears.
Once again there was nothing to signify that the growers were being asked to consider voting on a proposal, not to amend the constitution, but to decide on whether to make further contributions and in doing so, to consider the options in cl 12.6 of the 1999 LAMAs.
I would uphold ground 1. In consequence it is therefore not necessary to deal with grounds 2 and 3 of the respondent's notice of contention.

Consequences of upholding ground 1 - summary

Having reached the conclusion that ground 1 should be upheld, it is then necessary to consider the consequences. The review of the law which is set out below reveals that if the 2003 and 2004 invoices were paid by the appellants under the mistaken belief that they were legally obliged to pay, then prima facie they were entitled to recover the money. That prima facie entitlement could be defeated if the respondent makes out the pleaded common law or statutory defence of change of position, or establishes that the parties adopted a conventional basis for dealing with each other leading to the appellant being estopped from recovering the money. Before considering the law, it is necessary to refer briefly to the facts to determine whether the payments were made by the appellants under a mistake. The evidence on this point was not in dispute.

Facts - did the appellants pay the 2003 and 2004 invoices under a mistake of law?

The appellants knew of the proposal to pass the resolutions on 23 January 2003 and 21 July 2003. Mr Braysich, the fourth appellant and the person with authority to deal with the interest of the first, second and third appellants, received the notices of these meetings which set out the proposals. The appellants did not vote in favour of the resolutions at these meetings. Mr Braysich did not attend the meetings.
In relation to the second meeting, Mr Braysich said that each of the plaintiffs appointed a proxy. He then had a discussion with the liquidator of the second‑named appellant who said that 'he felt we were not across the facts and that we should not vote'. The liquidator asked that Mr Braysich withdraw the second‑named appellant's proxy. Mr Braysich agreed and decided to withdraw the proxies given by the other plaintiffs. As a result, he instructed the person who had been appointed proxy that his appointment as proxy had been revoked, and that he was not to cast a vote on any of the resolutions on behalf of any of the appellants. Mr Braysich gained information advising him that the resolutions were passed.
Having received invoices for the 2003 fees and the 2004 fees, the appellants paid them without protest. The appellants then acted in the mistaken belief that the resolutions gave the respondent a legal entitlement to charge the 2003 fees and the 2004 fees and that the appellants were legally obliged to make payment of them.
It is clear from the evidence of Mr Braysich that he acted on t he mistaken belief. He said (ts 197 ‑ 198, 203 and 206):
When you made the payment, you understood the invoices to be payable by reason of the special resolution of the January meeting?‑‑‑I understood the invoices were to be payable because FROC had asked for them and based on that meeting, yes.
…
That's when you finally paid the 2004 invoices?‑‑‑Yes.
At the time you paid them you understood them, did you not, to be invoiced under the 21 July 2003 special resolutions?‑‑‑Did I understand them to be under the special resolutions? I understood them to have been due and payable by FROC.
To FROC?‑‑‑Sorry, to FROC … to FROC and the amounts were set out by the meetings, yes.
…
Mr Braysich, do you accept that the January and July 2003 special resolutions changed the licence and management fees payable by you?...‑‑‑As to the amounts, yes, it did.

The law - payments made under a mistake of law

(a)A mistake of law is now recognised as a 'vitiating factor' which makes a recipient's enrichment of a payment at the payer's expense 'unjust' or 'unjustified';
(b)the payer does not have to prove 'unjustness' over and above the mistake; and
(c)a payment made by a payer to a recipient under a mistake of fact or law is sufficient to give rise to a prima facie obligation on the part of the recipient to make restitution.

See David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 379 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ), 393 ‑ 395 (Brennan J), 402 (Dawson J).

This change of law (or rather restoration of an earlier approach of the law) could give rise to some potentially wide‑ranging ramifications, some of which are still to be worked out. See, for example, the reasons of Brennan J at 394, who said that while mistakes of fact are specific to particular relationships, revealing a mistake of law in one case can 'throw into uncertainty the finality of payments made in a great variety of cases', and allowing recovery for a mistake of law could 'infect many payments with a provisional quality incompatible with orderly commerce'. As a result, certainty of commerce and fiscal administration require that there be some restraint on the breadth of the rule re‑established by David Securities that a mistake of law (as well as a mistake of fact) amounts to a vitiating circumstance, giving rise to a prima facie right to recovery. This restraint is to be worked out first by determining whether the payment of money was made voluntarily (in which case there will be no mistake), or secondly, under the rubric of 'defences' to the prima facie right to restitution following proof that a payment was made under a mistake.

The law - displacement of the prima facie obligation of the recipient to repay

(a)If the prima facie liability of the recipient to make restitution is to be displaced, the onus is on the recipient to plead - and therefore prove - circumstances which the law recognises would make an order for restitution unjust: David Securities 378 - 379, Hookway v Racing Victoria Ltd [2005] VSCA 310; (2005) 13 VR 444 [1], [18] and [99].

(b)One set of circumstances which the law recognises will provide the recipient with a 'defence' to a claim for restitution is proof by the recipient that it changed its position to its detriment, in good faith, and in reliance upon receipt of the payment (change of position defence) David Securities, 385. If this defence is made out, it will not be unjust for the recipient to retain the payment: David Securities. Section 125 of the Property Law Act, if it is to be made out, also requires it to be established that the person received the payment 'in good faith'.

Change of position defence

Further propositions which emerge from David Securities in relation to this defence are that:
(a)from the point of view of the person making payment, what happens after he or she has mistakenly paid over the money is irrelevant, for it is at that moment that the recipient is unjustly enriched. However, the defence of change of position is relevant to the recipient's enrichment precisely because its central element is that the recipient has acted to his or her detriment, on the faith of the receipt (385);
(b)the recipient must be able to point to 'expenditure' or 'financial commitment' (385) which can be ascribed to the mistaken payments; and
(c)a recipient cannot, however, resort to the defence of change of position where he or she has simply spent the money received on 'ordinary living expenses' (386).
This expression will doubtless require some working out in future cases. See Liew K, 'Mistaken Payments - The Right of Recovery and the Defences' (1995) 7(1) Bond Law Review 95.
No further propositions on the legal requirements in relation to this defence can be extracted from David Securities because no evidence was adduced in that case. This was due to the parties' understanding of the state of the law at the time of the trial, and at the time of the appeal in the Federal Court. As to proposition (b) above, in the joint judgment at 385, reference was made to Canadian and United States decisions. The recipient was required to point to specific expenditure 'incurred' because of the payment. See eg Rural Municipality of Storthoaks v Mobil Oil Canada Ltd (1975) 55 DLR (3d) 1, 13 and Grand Lodge, AOUW of Minnesota v Towne (1917) 161 NW 403, 407.
In this case the appellant submitted that expenditure made after the mistaken payments, but in relation to commitments incurred before receipt of the payment, were irrelevant. However, the joint judgment in David Securities at 385 quite distinctly referred to 'expenditure' or 'financial commitment' which could be ascribed to the mistaken payments as possibly being sufficient to establish the change of position defence. The court has not yet limited the defence only to cases where there has been an 'incurring' of expenditure after the payment is received.

Good faith

The expression 'in good faith' may have different meanings. In Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290, in a joint judgment, Gummow, Hill and Drummond JJ had to consider the meaning of the expression 'good faith' where it appeared in a New South Wales statutory provision, affording a defence to certain claims if the council acted in good faith. The meaning of the expression in that case was a matter of statutory construction, but in the course of construing the provision, their Honours said at 298:
In Siano v Helvering (1936) 13 F Supp 776 at 780, Clark J said that the words 'good faith' or their Latin equivalent appear frequently in the law and are capable of, and have received, what he described as 'two divergent meanings'. The first was the broad or subjective view which defines them as describing an actual state of mind, irrespective of its producing causes. The other construed the words objectively by the introduction of such concepts as an absence of reasonable caution and diligence.
The successor to the statutory provision under consideration in Mid Density was considered in Bankstown City Council v Alamdo Holdings [2005] HCA 46; (2005) 223 CLR 660. At [50] mention was made of the reference in Mid Density to various examples in the law where good faith is used as a criterion requiring some state of mind or knowledge other than the personal honesty and absence of malice of the relevant actor, but the High Court did not have anything further to say on the subject. In Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286 [148], Hasluck J, in considering a duty of good faith provision in a contract, stated that context was important and that the motivation underlying relevant events may be relevant in determining whether good faith existed. See also Porter v GIO Australia Ltd [2003] NSWSC 668 [689] ‑ [693] (McClellan J). In Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 [265] Priestly JA, also in a contractual context, said that there is a close association of ideas between the terms 'unreasonableness', 'lack of good faith', and 'unconscionability'.
Whether the 'good faith' requirement is a requirement to prove a particular subjective state of mind of the recipient, or an objective assessment of the recipients' conduct or both, does not have to be decided in this case, for the reasons appearing below.

Estoppel by convention

Another defence to a claim for restitution is estoppel by convention. A recipient of money will be entitled to resist the prima facie entitlement to restitution if:
(a)the parties proceeded under an assumption of fact, or law, or both; and
(b)the assumption of fact, law, or both, gave rise to circumstances rendering it unconscionable to allow the payer to recover the money paid.
A summary of the elements of the defence was set out in National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548, 550. This summary of the law (with a qualification) has been accepted as accurate by Finn J in Australia in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 and Beaumont J in Quanta Software International Pty Ltd v Quanta Systems Ltd [2004] FCA 1182.

The conduct of the case - good faith and assumption evidence

As mentioned above, Mr Braysich gave evidence for the appellants. During the course of that evidence, Mr Braysich made statements about the assumption the appellants adopted, leading them to make the payments. Mr Braysich also gave evidence that he believed the extra amounts invoiced were legally 'due and payable' as a result of the resolutions. The evidence of the appellants' assumption was relevant to the respondent's estoppel defence and supported it. All that was required of the respondent, in relation to the first element of the defence of estoppel, was for them to lead evidence to prove that they were governed by the same assumption.
The evidence on the part of the respondent was led via witness statements of a Mr Raffan and a Mr Pulford. Mr Raffan was the general manager of the respondent, but he commenced working for the respondent as group accountant in late March 2005. This was after the circumstances leading to the meetings which, in turn, led to the amendments to the constitution. It was also after the 2003 invoices and 2004 invoices were set and paid.
Mr Pulford was a vineyard manager employed to manage the Preston Vale vineyard. He was an employee of Southern Olive Management Pty Ltd. He did not give any evidence about the circumstances leading up to the meetings.
The evidence of Mr Braysich was that he had conversations with Mr David Carr, the managing director of the respondent in mid‑2004 concerning the 2004 invoices. Mr Carr was not called as a witness by the respondent. It seems likely that if called he could have given evidence, at least about the respondent's assumptions when the 2004 invoices were sent and could have given evidence bearing on the issue of good faith.
From the material before the court, it was clear enough that advice had been obtained in 2003 from solicitors Blake Dawson Waldron. This is clear because the notice of the July meeting referred to the proposal to pay Blake Dawson Waldron for services to 30 April 2003:
[P]lus their fees relating to the meeting of growers held in June 2003, the replacement of Southern Wine Corporation Ltd … as the responsible entity for the SWC MIS and any other legal services in relation to the SWC MIS up to the date of appointment of FROC as Responsible Entity of the SWC MIS, as at the date of this notice being $30,000.
What advice was given to the responsible entity would likely have been important evidence relating to the assumption made by the responsible entity. It would have been important evidence also as to whether it acted in good faith in receiving the payments. For example, the advice may have been about whether to amend via the constitution or to call a meeting of growers pursuant to cl 12 of the 1999 LAMAs. The former course required the passing of a special resolution to amend the constitution. A meeting of growers called pursuant to cl 12.6 was an alternative course. The former course required a special resolution, but allowed the presentation of only one solution, namely a vote for or against amendment to the constitution. A meeting of growers called pursuant to cl 12.6 would have allowed the growers to consider a range of options, namely whether to approve the additional fees, whether to wind up the SWC MIS in accordance with the constitution, or implement 'such other measures as are available to provide future funding'. However, what legal advice was actually given (if any) about the effectiveness of attempting to achieve the outcome by amending the constitution was not disclosed. No‑one was called by the respondent to explain why the decision was taken to proceed to amend the constitution rather than call a growers' meeting under cl 12.
If the respondent was to discharge the onus of establishing the assumption it operated under, and of establishing that it received payments in good faith, it was necessary for there to be some evidence on those subjects. If the appropriate officers or officer who acted on behalf of the responsible entity at the relevant time had given evidence that they knew the course they planned to take was legally doubtful, then the conclusion might have been that the responsible entity did not operate under the same assumption as the appellants, and did not act in good faith. On the other hand, if the legal advice it obtained did not cause it to doubt that the amendment to the constitution and the form of LAMA actually amended the 1999 LAMAs, then it would have supported a conclusion that the respondent acted on the same assumption as the appellants, and acted in 'good faith'.
Whether 'good faith' required proof of the actual state of mind of the controlling officers, or whether good faith is a reference to an objective assessment of the action taken after the advice was received, matters not in this case. There was no evidence either of the state of mind of those controlling the responsible entity, or of the circumstances leading the responsible entity to the position where it proposed changing the constitution, rather than calling a meeting of growers under cl 12 of the 1999 LAMAs. As already mentioned, the respondent bore the onus of establishing that it acted in good faith, establishing the existence of an assumption sufficient to make out the estoppel defence and establishing that it would be unconscionable for the appellants to depart from the alleged common assumption. It did not lead any evidence on those topics. Evidence was required before the respondent could succeed in discharging its onus, particularly where there was evidence that the appellants found difficulty getting 'across the facts'. It is likely that other growers would also have had a similar difficulty. This was because the 1999 LAMAs and the meeting documents were confusing because of careless drafting. Thus, cl 12.1(e) of the 1999 LAMAs contained a reference to a 'general meeting pursuant to Clause 12.5'. In fact the reference should have been to cl 12.6 which was the provision referring to a general meeting. However, in the LAMA form annexed to the constitution, cl 12.5 was the general meeting provision, equivalent to cl 12.6 in the 1999 LAMAs. Then, as already mentioned above, in the notices of meetings for January and July 2003 there was a reference in some of the explanatory material to a proposal to amend 'each Grower's' Licence and Management Agreement. However, this was not what the proposed resolution provided for. It provided for an amendment to the constitution.
Such confusion, created entirely by the respondent, is not a firm foundation for a contention that the appellants were acting unconscionably in claiming the repayment of money paid under a mistake of law.
The appellant contended before the commissioner that the evidence did not establish what assumption the respondent had made. The commissioner said:
With respect that seems to be at odds with the evidence. There is no reason at all to suggest that the defendant did not believe that the amendments to the constitution had increased the contribution required from the members. Why else would it have made the amendments in the first place and then proceeded to collect the fees? Leaving to one side the oral evidence, the exhibits to which I have referred above clearly establish the defendant's views. In my view, there is no doubt that the parties acted with a common intention. [69]
Then at [86], in relation to the change of position defence and the statutory defence under s 125(1) of the Property Law Act, his Honour said:
There is no evidence that the defendant had acted other than in good faith.
Both of the passages quoted reveal error, because the court was obliged to proceed on the basis of the prima facie entitlement of the appellant to recover the moneys paid under mistake of fact. The onus was then on the respondent to establish one of the 'defences'. If there was an absence of evidence, then that absence redounded to the disadvantage of the respondent, rather than to the disadvantage of the appellant. To conclude as the commissioner did, that there was 'no evidence' that the respondent acted other than in good faith, reveals that the commissioner proceeded on the basis that the absence of evidence was a problem for the appellant rather than the respondent. Similar language in [69] reveals the same error of approach in relation to the estoppel defence.
As a result, the prima facie entitlement the appellants had to recover the payments made by mistake was not disturbed by any evidence to the contrary. It was not possible to draw any inference about the state of mind of the responsible entity or what advice was given, motivating the respondent to proceed as it did, rather than proceed to call a meeting of growers under cl 12.6 of the 1999 LAMAs.

'Expenditure' or 'financial commitment'

The evidence was slight but it seemed to reveal that the respondent did irrevocably pay out money on rent and other expenses following receipt of the appellants' money. If the respondent had acted in 'good faith' in receiving the payments then the question would have arisen as to whether this expenditure would have supported the defence of change of position. In other words it would have been necessary to decide whether expenditure in relation to prepayment commitments could support a change of position defence. In the result, it is not necessary to decide that point.
The same question may also have arisen if it had been necessary to consider detriment in relation to the estoppel defence.

Voluntary payment

In the joint judgment in David Securities, their Honours referred to authorities to the effect that a payment of moneys made voluntarily will not ground a claim for restitution. This was on the ground that the payment was not in those circumstances made by mistake. Their Honours stated at 373 ‑ 374 that a payment:
[I]s voluntary or there is an election if the plaintiff chooses to make the payment even though he or she believes a particular law or contractual provisions required the payment is, or may be, invalid, or is not concerned

to query whether payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation rather than contest the claim for payment.

Mr Braysich made statements that the liquidator of the second‑named appellant had said that 'we were not across the facts and that we should not vote'. This might have suggested that there could have been an argument that no mistake existed. In fact, there were no submissions to that effect, and it was not pleaded that there was no mistake for that reason. In any event, Mr Braysich said that by the time he made the payments he understood the amounts to be 'due' and payable. Further, the High Court added in David Securities at 374:
We use the term 'voluntary' … to refer to a payment made in satisfaction of an honest claim, rather than a payment not made under any form of compulsion or undue influence.
The reference to 'honest claim' means that evidence is required from a recipient to prove what the circumstances were leading to the claim for payment. Once again there was no such evidence. I should add that Brennan J in his reasons, was critical of the 'honest claim' requirement as being one which was at once too broad and too narrow. See David Securities 396. See also the discussion by Ormiston JA in Hookway v Racing Victoria Ltd [22] ‑ [39].
Grounds 1, 4(a) and 5(a) and (b) have therefore been made out and restitution of the 2003 fees and the 2004 fees should be ordered. The 2005 fees are not payable. It is not necessary to consider whether the respondent breached its duty under s 601FC, or whether damages should be awarded under s 601MA(1). The appellant's application to adduce fresh evidence need not be considered. The parties should confer about the form of orders which should be made.
BUSS JA: The appellants are investors in the Preston Vale Managed Investment Scheme (Preston Vale MIS). The Preston Vale MIS is a managed investment scheme regulated by Ch 5C of the Corporations Act 2001 (Cth). It operates the Preston Vale Vineyard, a large vineyard to the east of Donnybrook. The first respondent (to whom I will refer as the respondent) is the current responsible entity of the scheme.
The appellants brought proceedings in the Supreme Court in connection with two attempts, the first by the liquidators of the previous responsible entity, Southern Wine Corporation Ltd (now in liquidation) (SWC), and the second by the respondent, to increase the fees payable by

investors, or 'growers' as they are described in the scheme documents, to the responsible entity. The relevant increase in fees was sought to be effected by amendments to the scheme constitution. The appellants alleged that the amendments were ineffective to increase the fees payable by them. They claimed repayment of the increased fees which they had paid; alternatively, damages pursuant to s 601MA(1) of the Corporations Act in the amount of those payments; and declaratory relief in respect of increased fees which had been demanded by the respondent but not paid by them.

The appellants' action was tried before Commissioner Sanderson, who dismissed the action. He held, relevantly, that the amendments to the scheme constitution were valid, and bound the appellants. The learned commissioner also decided that, in any event, it would be unconscionable to allow the appellants to now contend not only that they were entitled to a repayment of fees, but that they were not obliged to pay further fees. He held that the respondent had made out a defence of estoppel by convention, a common law defence of change of position and a defence under s 125 of the Property Law Act1969 (WA).

The respondent brought a counterclaim. It was alleged, in essence, that if the amendments to the scheme constitution were invalid or otherwise ineffective to increase the fees payable by the appellants, and the defences to the appellants' claim failed, then the respondent was entitled to be paid, in quantum meruit, for the services it had rendered. The learned commissioner dismissed the counterclaim on the basis that the amendments to the scheme constitution were valid, and the appellants were bound, pursuant to those amendments, to pay the increased fees.
The appellants appeal to this court against the learned commissioner's judgment. The respondent has filed a notice of contention in which it seeks to support the judgment on another ground.

Formation of the managed investment scheme

The Preston Vale MIS was originally known as the SWC MIS. It was registered as a managed investment scheme on 15 December 1998 by the then responsible entity, SWC, pursuant to Ch 5C of the Corporations Law. A prospectus dated 24 December 1998 (the Prospectus) was also registered. In the Prospectus, the features of the Preston Vale MIS were described. They included:
(a)The scheme was to comprise up to 1,515 investors or growers, each of whom was to enter into a licence and management agreement with the project manager, SWC, to conduct a viticulture business with the object of producing premium wine grapes.
(b)Each grower was also to subscribe for units in a property trust to be known as the Fernvale Unit Trust. The property trust had contracted to purchase a parcel of land on which each grower's 'licensed area' was to be located. The term 'licensed area' was defined to mean an area of 0.165 hectares containing 330 vines, licensed or to be licensed to the grower under the licence and management agreement and individually identified on a plan of the Preston Vale Vineyard which was to be attached to that agreement.
(c)The scheme and the property trust were to be linked by a proposed lease between the trustee of the scheme and the project manager. Rent was to be payable under the lease at the rate of $1,200 per hectare with the rent to be increased as explained in s 12 of the Prospectus.
(d)The duration of the scheme was to be 20 years, being the term of the licence and management agreement. Upon expiry of the term of that agreement, all vines and improvements then on the grower's licensed area were to revert to the trustee. Growers who retained their units in the property trust would share in the benefits derived from the development of the Preston Vale Vineyard in their capacity as unitholders.
(e)It was intended that the maximum number of interests to be issued pursuant to the Prospectus would be 1,515 licensed areas at $25,300 each, and 3,030 units at $737.50 each plus $15.60 stamp duty per unit.

Licensed areas held by the appellants

Each of the appellants is the holder of one or more interests (licensed areas) as follows:
(a)first‑named appellant - 1 licensed area
(b)second‑named appellant - 16 licensed areas;
(c)third‑named appellant - 3 licensed areas;
(d)fourth‑named appellant - 16 licensed areas.

The 1998 Constitution and the 1999 Licence and Management Agreements

As required by s 601GA of the Corporations Act, the Preston Vale MIS has a constitution. By the original constitution dated 15 December 1998 (1998 Constitution) the appellants were required to, and each of them did, enter into a licence and management agreement (1999 LAMA) with the responsible entity. A pro forma licence and management agreement was annexed to and formed part of the 1998 Constitution. Between the date of the 1998 Constitution and the date on which the appellants invested in the scheme in 1999, the pro forma agreement annexed to the 1998 Constitution was varied, but the substance of the variations is not material for present purposes.

An overview of the provisions of the 1998 Constitution and the 1999 LAMAs in relation to fees

Each of the 1999 LAMAs was for a term of 20 years, commencing on 1 June 1999 and expiring on 30 June 2019.
The appellants and other growers agreed, by entering into the 1999 LAMAs, to pay licence and management fees to the responsible entity for the licensed areas and various services in managing the Preston Vale Vineyard. Clause 3.2 of the 1998 Constitution provides that the responsible entity is entitled to be paid, from scheme property, all fees provided for in the 'Licence and Management Agreement' (as defined in cl 1.1 of the Constitution). Clause 4 of the 1999 LAMAs defines the licence fees which are to be paid. Clause 12 of the 1999 LAMAs defines the management fees which are to be paid. Clauses 4.3 and 12.6 of the 1999 LAMAs prescribe a procedure to vary the fees payable under the 1999 LAMAs.

Relevant amendments to the 1998 Constitution

In 2001 and subsequently, SWC was in financial difficulty.
On or about 23 December 2002, SWC issued a notice for a meeting of growers to be held in Sydney on 23 January 2003.
The notice comprised five sections. By way of introduction, there is a separate section headed 'Action Required of Growers' which provides, relevantly, as follows:
A Proposal for funding immediate needs of the SWC MIS is set out in this Booklet. If the resolution is passed Growers will be asked to pay $1,254 per Licensed Area held by them. If the Scheme is wound up those Growers who contribute will have their $1,254 per Licensed Area returned in priority to any further distribution to Growers. The Proposal can only be implemented if the Growers pass the proposed Special Resolution set out in the Notice of Meeting in section 2 of this Booklet…
In s 2 of the notice, the special resolution is set out:
That:
(a)the Constitution for the SWC MIS be amended as set out in section 3.1(c) of the Booklet in which the Notice of the Meeting appears; and
(b)the Responsible Entity of the SWC MIS is directed to immediately execute a Deed of Variation of the Constitution and lodge it with the Australian Securities and Investments Commission to give effect to those amendments and to do all other things necessary, desirable or incidental to implement the Proposal.
Clause 3.1(c) in s 3 of the notice reads:
Amendments to Clause 12 of the Licence and Management Agreement
Insert the following as a new clause 12.7:
12.7The Grower agrees to pay the Responsible Entity $1,254 for each Licensed Area held by them. This money is to be paid to the Responsible Entity in the form of a cheque or money order by 6 February 2003.
At the meeting on 23 January 2003, the special resolution was passed. None of the appellants voted. After the meeting, invoices were issued to each of the growers, including the appellants.
On or about 20 June 2003, SWC issued another notice for a meeting of growers to be held in Sydney on 21 July 2003. It was proposed that the respondent replace SWC as the responsible entity, the name of the scheme be changed from SWC MIS to Preston Vale MIS, and that other amendments be made to the 1998 Constitution.
The proposed other amendments to the 1998 Constitution (including the annexed pro forma licence and management agreement) included, relevantly:
(a)extending the date by which the growers were required to pay the contribution of $1,254 to 31 August 2003;
(b)permitting the respondent to retain the grape proceeds for the 2003 ‑ 2004 harvest year;
(c)requiring the respondent to appoint Southern Olive Management Pty Ltd (SOM) as agent to manage each grower's licensed area; and
(d)requiring the growers to pay the respondent a management fee of $2,000 per licensed area per annum on 31 March 2004 and each year thereafter, subject to variation in accordance with the Consumer Price Index, All Groups, Perth.
The resolutions in question were passed at the meeting on 21 July 2003. None of the appellants voted at the meeting.

The management agreement between the respondent and SOM

The respondent and SOM are related corporations.
In the notice relating to the meeting held on 21 July 2003, the growers were informed that, as a result of SWC's inability to meet its management obligations in respect of the Preston Vale Vineyard, the liquidator of SWC had entered into an arrangement with SOM under which SOM had managed the vineyard for SWC in return for the grape harvest of 2003. This arrangement expired in April 2003, but SOM had continued to tend the vineyard in return for a weekly fee. The fee was being paid from funds raised from the growers. If the arrangement was to continue, further funds would need to be contributed by the growers to enable SOM's management fee to be paid.
The proposed amendments to the 1998 Constitution (including the annexed pro forma licence and management agreement) included inserting a new cl 11.8 into the pro forma agreement, as follows:
For the period commencing from the date of appointment of [the respondent] as Responsible Entity and concluding on 30 June 2004 or termination of the SWC MIS if earlier, the provisions of cls 11.1, 11.2, 11.3 and 11.6 will not apply. The Responsible Entity must appoint SOM or another appropriate entity as its agent to manage each Grower's Area in accordance with this Agreement.
On 18 November 2003, the respondent and SOM entered into a written management agreement. By the agreement, the respondent, as the responsible entity, appointed SOM to act as manager under the licence and management agreements which had been entered into with the appellants and the other growers.

Invoicing of the 2003 and 2004 Management Fees

On or about 31 January 2003, SWC issued invoices to each of the appellants for the sum of $1,140 plus GST of $114 per licensed area for management fees for the year ending 30 June 2004 (2003 Fees).
The following written invoices were rendered:
(a)first‑named appellant - invoice dated 31 January 2003 in the sum of $1,254 including GST;
(b)second‑named appellant - invoice dated 31 January 2003 in the sum of $20,064 including GST;
(c)third‑named appellant - invoice dated 31 January 2003 in the sum of $3,762 including GST;
(d)fourth‑named appellant - invoice dated 31 January 2003 in the sum of $20,064 including GST.
The respondent reissued those invoices on 15 August 2003.
On or about 6 February 2004, the respondent levied each of the appellants the sum of $2,000 plus GST of $200 per licensed area for management fees for the year ending 30 June 2004 (2004 Fees).
The following written invoices were rendered:
(a)first‑named appellant - invoice dated 6 February 2004 in the sum of $2,200 including GST;
(b)second‑named appellant - invoice dated 6 February 2004 in the sum of $35,200 including GST;
(c)third‑named appellant - invoice dated 6 February 2004 in the sum of $6,600 including GST;
(d)fourth‑named appellant - invoice dated 6 February 2004 in the sum of $35,200 including GST.

Payment of the 2003 and 2004 Management Fees

Each of the appellants paid the 2003 Fees in or about October 2003. Each of them paid the 2004 Fees on or about 23 July 2004.

Demand for repayment of 2003 and 2004 Management Fees

Before the appellants commenced the Supreme Court action, they made demand on the respondent for the repayment of the 2003 Fees and the 2004 Fees. The respondent refused to repay.

The 2005 Invoices

On or about 1 April 2005, each of the appellants received an invoice from the respondent for $2,257 including GST for licence and management fees for each licensed area, which invoices were said to be due and payable by 30 April 2005 (2005 Invoices).
The following written invoices were rendered:
(a)the first‑named appellant - invoice dated 1 April 2005 in the sum of $2,257 including GST;
(b)the second‑named appellant - invoice dated 1 April 2005 in the sum of $36,112 including GST;
(c)the third‑named appellant - invoice dated 1 April 2005 in the sum of $6,771 including GST;
(d)the fourth‑named appellant - invoice dated 1 April 2005 in the sum of $36,112 including GST.
The appellants have refused to pay the 2005 Invoices on the basis of their allegation that the moneys claimed in the invoices are not payable.

The essence of the dispute between the parties

The appellants do not dispute their continuing obligation to pay fees in accordance with the 1999 LAMAs. Those agreements provide that, as from 1 July 2002, the relevant fees are only payable from the proceeds of grape sales. The respondent, under the 1999 LAMAs, has no right to demand any further payment from the growers.
By the resolutions passed at the meetings on 23 January 2003 and 21 July 2003, the pro forma licence and management agreement, which was annexed to and formed part of the 1998 Constitution, was amended. The respondent asserts that the effect of the amendments is to require the growers in the Preston Vale MIS, including the appellants, to pay an additional fee of $1,254 per licensed area (generally referred to as the 2003 Fees) and an additional annual fee of $2,000 plus GST with annual CPI increases (generally referred to as the 2004 Fees and the 2005 Fees). By contrast with the fees payable from 1 July 2002 under the 1999 LAMAs (which are payable only from the proceeds of grape sales), those additional fees are purportedly made payable by the growers, irrespective of grape sales.
The appellants assert that they paid, under a mistaken belief that the fees were payable, the disputed 2003 Fees and 2004 Fees claimed by the respondent. The appellants' mistake is said to be that they thought the fees payable under the 1999 LAMAs had been 'recalibrated'; it was not a mistake that two new fees were payable. The appellants claim repayment of those fees; either restitution for mistaken payments or a total failure of consideration, or damages for breach of the respondent's duty under s 601FC(1) of the Corporations Act. The appellants have refused to pay the disputed 2005 Fees. The respondent claims a right to terminate the appellants' interests in the Preston Vale MIS by reason of that non‑payment.

The appellants' grounds of appeal

The appellants' grounds of appeal are these:
1.The Honourable Commissioner erred in law in holding that resolutions passed at meetings of members of the Preston Vale Managed Investment Scheme (PV MIS) operated to amend the licence and management agreements between each of the appellants and the responsible entity of the PV MIS and to impose on the appellants:
(a)An additional fee of $1254 per licensed area payable to the respondent in 2003; and
(b)An additional fee, first payable in 2004, of $2000 plus GST (plus annual CPI increases) per licensed area payable to the respondent.
2.Alternatively to ground 1, the Honourable Commissioner erred in law in holding the constitution of the PV MIS, as amended, imposed on the appellants an annual fee, first payable in 2004, of $2000 plus GST (plus annual CPI increases) per licensed area. The Honourable Commissioner should have construed the amended constitution to only permit the respondent to pay to itself a fee from the sum of $1254 per licensed area paid to the respondent pursuant to the resolutions passed at a meeting held on 23 January 2003.
3.Alternatively to ground 1 and further or alternatively to ground 2, the Honourable Commissioner erred in law in holding that the additional fees payable in 2003 and April 2004 were payable although, by s.601GC(2) of the Corporations Act 2001, the amendments to the PV MIS constitution did not take effect until registered with ASIC on 2 December 2004.
4.Further, the Honourable Commissioner erred in law and in fact in:
(a)Holding that, by a conventional estoppel based on the three matters identified @ [67], the appellants were obliged to pay to the respondent the fees referred to in Ground 1. The Honourable Commissioner should have held that to establish a conventional estoppel the respondent had to establish the six elements identified in GEC Marconi Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1, each of which or one or more of which had not been established in relation to each of the additional fees; and
(b)Admitting into evidence or accepting as reliable evidence, exhibits 111‑113 when under s.79C(2a) of the Evidence Act 1906 the admissibility of the exhibits was not established and the author of the documents conceded substantive inaccuracies in the documents.
5.Further, the Honourable Commissioner erred in law and in fact in holding that the respondent had established a defence of change of position. The Honourable Commissioner should have held that:
(a)the moneys paid by the appellants to the respondent were repayable; and
(b)the respondent had failed to establish that in good faith it changed its position in reliance on receipt of the payments by the appellants to the respondent; or
(c)(in relation to the statutory defence only) that no third party was shown to be adversely affected if the respondent was ordered to repay the appellants.

Ground 1: the salient provisions of Ch 5C of the Corporations Law and the Corporations Act

The Managed Investments Act 1998 (Cth) was enacted and commenced on 1 July 1998. It introduced a new Ch 5C into the Corporations Law. Chapter 5C replaced Div 5 and 5A of Pt 7.12 of the Law, which had regulated prescribed interest schemes. In addition to the requirement for registration, managed investment schemes were required to be operated by a single 'responsible entity'. The responsible entity had to be a public company which held an Australian Financial Services Licence authorising it to operate a managed investment scheme: s 601FA. There were numerous requirements in relation to the contents of the Scheme's constitution, the duties of the responsible entity, the manner in which the responsible entity was to hold assets, the preparation of a compliance plan, the auditing of the compliance plan, and the establishment of a compliance committee (unless at least half of the responsible entity's directors were external directors).
Section 601GA(1) stated that the constitution of a registered scheme must make adequate provision for:
(a)the consideration that is to be paid to acquire an interest in the scheme; and
(b)the powers of the responsible entity in relation to making investments of, or otherwise dealing with, scheme property; and
(c)the methods by which complaints made by members in relation to the scheme are to be dealt with; and
(d)winding up the scheme.
Section 601GA(2) made provision with respect to fees and indemnities to which the responsible entity was entitled. It provided:
If the responsible entity is to have any rights to be paid fees out of scheme property, or to be indemnified out of scheme property for liabilities or expenses incurred in relation to the performance of its duties, those rights:
(a)must be specified in the scheme's constitution; and
(b)must be available only in relation to the proper performance of those duties;
and any other agreement or arrangement has no effect to the extent that it purports to confer such a right.
The term 'scheme property' was defined in s 9 in these terms:
'scheme property' of a registered scheme means:
(a)contributions of money or money's worth to the scheme; and
(b)money that forms part of the scheme property under provisions of this Law or the ASIC Law; and
(c)money borrowed or raised by the responsible entity for the purposes of the scheme; and
(d)property acquired, directly or indirectly, with, or with the proceeds of, contributions or money referred to in paragraph (a), (b) or (c); and
(e)income and property derived, directly or indirectly, from contributions, money or property referred to in paragraph (a), (b), (c) or (d).

By s 601GB, the constitution of a registered scheme was required to be contained in a document that was legally enforceable as between the members and the responsible entity.
Section 601GC(1) provided that the constitution of a registered scheme may be modified, or repealed and replaced with a new constitution:
(a)by special resolution of the members of the scheme; or
(b)by the responsible entity if the responsible entity reasonably considers the change will not adversely affect members' rights.
By s 601GC(2), the responsible entity was required to lodge with the Australian Securities and Investments Commission a copy of the modification or the new constitution. The subsection also stipulated that the modification, or repeal and replacement, could not take effect until the copy had been lodged.
On 15 July 2001, the Corporations Act replaced the Corporations Law. The provisions of the Corporations Law and the Corporations Act with respect to managed investment schemes are identical.

Ground 1: the making of a 'special contract'

Although a managed investment scheme must have a constitution, and the contents of the constitution must comply with s 601GA and may provide for other matters relevant to the scheme, neither Pt 5C.3 nor any other provision of the Law precluded a member from contracting individually with the responsible entity in relation to matters relevant to the scheme. Such a contract has been called a 'special contract'. In Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399, McHugh and Gummow JJ noted that the term 'special contract' appears to have been coined by Lindley MR and Romer LJ in Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656, 673 ‑ 674, 679 (439). McHugh and Gummow JJ added:
The expression has proved to be an unfortunate one. What it identifies is no more than a contract which is not a 'statutory contract'. That is to say, the expression identifies a contract which is constituted otherwise than solely by the articles unsupplemented by any external facts. Once the relevant 'statutory contract' cannot be so found (which is, in our view, the position in the present case), then it is a question whether the evidence supports the finding of the existence of a contract which, in truth, is ordinary rather than 'special' in nature. Such a contract may, as this case illustrates, pick up in a particular fashion provisions of the articles (439).
In Bailey, the High Court considered the interaction between the articles of association of a company and a special contract between the company and a member. Brennan CJ, Deane and Dawson JJ said, in relation to an amendment to the articles of association of the company after it had entered into the special contract with the member:
Even if the terms of a special contract are to be determined by reference to the articles, an alteration to those articles will not necessarily mean an alteration to the terms of the contract. It will depend upon the intention of the parties to the contract, namely, the member and the company. Thus, a special contract may import as a term one or more of the articles upon the basis that they may be altered by the company and an alteration of the articles in those circumstances will alter the terms of the contract. On the other hand, a special contract may be concluded upon the basis of the articles but with the intention that the terms of the contract are not to be varied by an alteration to the articles. That will not confine the statutory power of the company to alter its articles, but the company in acting upon the basis of an alteration may be acting in breach of contract. That, we think, was what Lindley MR had in mind in Allen v Gold Reefs of West Africa Ltd ([1900] 1 Ch 656 at 673) when, in speaking of special contracts, he said that a 'company cannot break its contracts by altering its articles'. Put another way, a company cannot unilaterally vary its contracts by altering its articles unless that is the basis upon which the contract was made (See Hickman v Kent or Romney Marsh Sheep-Breeders' Association [1915] 1 Ch 881 at 900).
And where a special contract does import as a term one or more of the company's articles in an alterable form, an alteration to the articles will have the effect of varying the contract prospectively only because, save perhaps in extraordinary circumstances, any other result would be inconsistent with the intention of the parties to the contract (410 ‑ 411).

Ground 1: the salient provisions of the Prospectus, the 1998 Constitution and the 1999 LAMAs

The Prospectus included a summary of all material contracts including a summary of the pro forma licence and management agreement.
The summary of the pro forma licence and management agreement stated, in relation to the payment of management fees, relevantly:
The Management Fees for Years 4 to 20 are payable from the Growers' gross project income. If the Growers' gross project income in any year is not sufficient to pay the Management Fees for that year, such Management Fees may be deducted from the Growers' gross project income in any subsequent year. Where such funds are inadequate, the Project Manager may call for the contribution of more funds subject to the approval of Growers in general meeting in accordance with the Growers' MIS Constitution (98).
Year 4 was the period from 1 July 2002 to 30 June 2003 and Year 20 was the period from 1 July 2018 to 30 June 2019.
The Prospectus invited applications for membership of the proposed scheme. It was necessary for two applications to be completed and signed, and sent to SWC; one related to the licensed areas and the other to units in the Fernvale Unit Trust.
The application relating to the licensed areas contained a declaration by the applicant that the form was 'signed and sealed according to the declarations and statements made on the reverse side of the Application Form'. The declarations and statements on the reverse side included, relevantly:
I/We appoint the Project Manager to act as my/our agent and attorney for the purposes of entering into the Licence and Management Agreement in accordance with the Prospectus.
I/We agree and acknowledge that:-
I/We do, by and on the acceptance of this Application, offer and agree to enter into the Licence and Management Agreement in accordance with the provisions as summarised in the Prospectus, those agreements relating to my/our rights and obligations in respect of the development and management of a vineyard and the sale of grapes grown or growing on that vineyard;
I/We will, by and on the acceptance of this Application, become a party to, and be bound by the provisions, of the Licence and Management Agreement as a Grower;
Upon becoming a Grower, I/We will be bound to make further payments as Management Fees and Licence Fees in accordance with the Licence and Management Agreement and the Prospectus;
Each of the appellants completed and signed, and sent to SWC, the requisite application forms. SWC, in its capacity as the project manager, accepted the applications.
Clause 1.1 of the 1998 Constitution provides that, in the constitution:
'Constitution' means this constitution for the SWC MIS executed as a deed and as amended from time to time;
'Corporations Law' has the same meaning given to it by Part 3 of the Corporations (Western Australia) Act 1990 and references to the Corporations Law have the effect given to them by Section 13 of that Act;
…
'Grower' means a grower pursuant to a Licence and Management Agreement and a member of the SWC MIS;
'Grower's Area' means the interest acquired by a Grower pursuant to a Licence and Management Agreement;
'Licence and Management Agreement' means an agreement entered into between the Responsible Entity and a Grower in the form annexed to and forming part of this Constitution;
'Responsible Entity' means Southern Wine Corporation Ltd ACN 083 901 786;
'SWC MIS' means the managed investment scheme registered in accordance with the Corporations Law in relation to the Grower's Area;
'SWC MIS Compliance Plan' means the compliance plan for the SWC MIS; and
'SWC MIS Property' has the meaning given to 'scheme property' by the Corporations Law.
By cl 1.4:
The annexed Licence and Management Agreement shall be taken to form part of this Constitution.
Clause 2 provides that the constitution has the effect of a deed under seal between the growers and the responsible entity.
Clause 3.1 provides that the consideration payable by the grower for the acquisition of the grower's area is provided for in the annexed licence and management agreement.
By cl 3.2:
The Responsible Entity shall be entitled to be paid all such fees as are provided for in the Licence and Management Agreement from SWC MIS Property in relation to the proper performance of its duties with respect to the SWC MIS.
Clause 10 provides that no Grower has a 'right to withdraw with respect to the SWC MIS'.
Clause 4 of the pro forma licence and management agreement annexed to the 1998 Constitution provides:
4.1In consideration of the licence granted by the Responsible Entity to the Grower in Clause 2.1, the Grower shall pay an annual Licence Fee per Licensed Area or Half Licensed Area for the Term, which Licence Fee for the Initial Period and Years 2 and 3 of the Grower's Project, shall be payable yearly in advance to the Responsible Entity as follows or as provided for in Clause 4.2:

Licensed Area Licence Fee	Half Licensed Area Licence Fee
Initial Period	$180	$90
Year 2	$189	$94.50
Year 3	$198	$99

4.2For the remainder of the Term (being Years 4 to 20 of the Grower's Project), the Licence Fee payable by the Grower to the Responsible Entity for the Grower's Area will be calculated annually in advance as $198 per Licensed Area or $99 per Half Licensed Area increased at the expiration of each Year of the Grower's Project by an annual increment of the Licence Fee equal to either 5 per cent per annum of the Licence Fee for the previous Year or the increase in the Consumer Price Index All Groups Perth (or if such index ceases to exist a similar replacement index) during the previous Year, whichever is the higher.
4.3Other than as provided for in Clause 12.3, the Licence Fees as provided for in Clause 4.2 must be paid from the Participating Growers' Gross Project Income prior to the payment to the Responsible Entity of Management Fees in each Year the Gross Project Income is sufficient to pay the Licence Fee. If the Participating Growers' Gross Project Income in any Year is not sufficient to pay the Licence Fees for all Growers for that Year, such Licence Fees may be deducted from Participating Growers' Gross Project Income in any subsequent Year or Years and the Responsible Entity may provide funding for any shortfall from the Responsible Entity's own resources, borrow such funds secured against the future Participating Growers' Gross Project Income or require Growers by notice in writing, subject to approval in general meeting pursuant to Clause 12.5, to make such additional contributions to SWC MIS Property as are required to make up any shortfall. The Responsible Entity may recover the reasonable costs of borrowings from SWC MIS Property.

Clause 11 of the pro forma licence and management agreement makes provision with respect to the harvesting and sale of grapes. By cl 11.1, relevantly, a grower has 'full right, title and interest' to any grapes produced from vines on the grower's licensed area or areas, together with the right to sell such produce. By cl 11.2, relevantly, an 'Electing Grower' (that is, a grower who notifies the responsible entity in writing that the grower elects to collect and market the grapes produced from his or her vines) must collect those grapes at a time and place designated and notified by the responsible entity to the electing grower. By cl 11.3, relevantly, if an Electing Grower fails to collect his or her grapes, then he or she will be deemed to be a 'Participating Grower' (that is, a grower who is not an Electing Grower or a grower who is deemed not to be an Electing Grower). By cl 11.4, relevantly, the responsible entity is authorised as a Participating Grower's agent to collect and market his or her grapes with those produced by other Participating Growers of the SWC MIS for sale or for use in the production of wine by the responsible entity. By cl 11.6, the responsible entity must distribute to each Participating Grower the net income from the Participating Grower's licensed area or areas, which is calculated rateably in accordance with the area which that Participating Grower's licensed area or areas bears to the total area of all Participating Growers' licensed areas.
Clause 12 of the pro forma licence and management agreement provides:
12.1In consideration of the Responsible Entity agreeing to carry out at its expense the management services as provided for in this Agreement, the Grower agrees to pay to the Responsible Entity the Management Fees and the Responsible Entity shall be entitled to the Management Fees from SWC MIS Property as follows:
(a)for the Initial Period of the Grower's Project, the sum of $18,700 per Licensed Area or $9,350 per Half Licensed Area, such fees being prepaid in advance on application on or before 30 June 1999;
(b)for Year 2 of the Grower's Project, being the period of twelve months after the conclusion of the Initial Period, the sum of $4,700 per Licensed Area or $2,350 per Half Licensed Area payable to the Responsible Entity in advance on or before 30 June 2000;
(c)for Year 3 of the Grower's Project, being the period of twelve months after the conclusion of Year 2, the sum of $1,900 per Licensed Area or $950 per Half Licensed Area payable to the Responsible Entity in advance on or before 30 June 2001;
(d)for Years 4 to 20 of the Grower's Project, the sum of $1,957 per Licensed Area or $978.50 per Half Licensed Area payable annually in advance on or before 30 June of each Year commencing on 30 June 2002 and each anniversary thereafter which Management Fees shall be payable from the Participating Growers' Gross Project Income and the Management Fees for Years 5 to 20 of the Grower's Project must be indexed annually by an increment equivalent to either 3 percent per annum of the Management Fee paid for the previous Year of the Grower's Project or by the increase in the Consumer Price Index All Groups Perth (or if such index ceases to exist a similar replacement index) since the previous increase in the Management Fee, whichever is the greater; and
(e)if the Participating Growers' Gross Project Income in any Year is not sufficient to pay the Management Fees for that Year, such Management Fees may be deducted from Participating Growers' Gross Project Income in any subsequent Year or Years and the Responsible Entity may provide funding for any shortfall from the Responsible Entity's own resources, borrow such funds secured against the future Participating Growers' Gross Project Income or require a Grower by notice in writing, subject to approval in general meeting pursuant to Clause 12.5, to make such additional contributions to SWC MIS property as are required to make up any shortfall. The Responsible Entity may recover the reasonable costs of borrowings from SWC MIS Property;
12.2In addition to the Management Fees referred to in Clause 12.1, the Responsible Entity shall be entitled to deduct the following fees from SWC MIS Property;
(a)if in any Year the Profit Incentive is achieved, then the amount of the Profit Incentive shall be payable by the Participating Grower from SWC MIS Property to the Responsible Entity; and
(b)the Responsible Entity shall be entitled to the amount of the Margin Incentive upon production and sale of wine from the Grower's Project.
12.3The Responsible Entity shall be entitled to require a Grower by notice in writing to make, in addition to the Management Fees provided for in Clause 12.1 and the Licence Fees provided for in Clause 4, additional contributions in relation to the Grower's Project to Licence Fees or Management Fees or by deducting such contributions from SWC MIS Property in the following circumstances:
(a)an event of force majeure occurs in accordance with Clause 20 resulting in a requirement to increase in [sic] the Grower's Licence Fees or Management Fees; or
(b)there is a Change in Law as provided for in Clause 26.1.
12.4Notwithstanding Clause 18.1, where the Grower fails to pay any Licence Fees or Management Fees within 30 days of the notice of contribution issued by the Responsible Entity to the Grower pursuant to Clause 12.3 and such default is not remedied by the Grower within 14 days of distribution of a notice of default by the Responsible Entity, the Responsible Entity shall be entitled to terminate this Agreement in accordance with Clause 18.2 of this Agreement.
12.5Where a notice in writing is issued to Growers requiring additional contributions to SWC MIS Property pursuant to Clause 4.3 or Clause 12.1(e) of this Agreement, the Responsible Entity must call a meeting of Growers in accordance with the Constitution to consider:
(a)whether to approve the additional contributions as provided for in Clause 4.3 or 12.1(e) by Growers;
(b)to wind up the SWC MIS in accordance with the Constitution; or
(c)implement such other measures as are available to provide future funding to the SWC MIS.
By cls 17.1 and 17.2, a grower may transfer, assign or otherwise dispose of the Grower's Area to various specified persons and entities.
The pro forma licence and management agreement does not make any provision for its variation. By cl 17.3, however, the grower irrevocably appoints the responsible entity as its attorney to do and execute all acts, matters, things and documents which are necessary or which the responsible entity considers expedient for the grower to do including, amongst other things, the execution of any agreement supplemental to the licence and management agreement.
The pro forma licence and management agreement provides for it to be executed by a director of the responsible entity, Carol Norma Hardie, as the attorney of and in the name and on behalf of the grower.
As I have mentioned, between the date of the 1998 Constitution and the date on which the appellants invested in the scheme in 1999, the pro forma licence and management agreement annexed to the 1998 Constitution was varied, but the substance of the variations is not material for present purposes. I should note, however, that cl 12 of the pro forma agreement was varied by the addition of a new cl 12.3, and that cls 12.3, 12.4 and 12.5 in the original pro forma document were renumbered cls 12.4, 12.5 and 12.6 in the 1999 LAMAs executed on behalf of the appellants.
Also, as I have mentioned, the pro forma licence and management agreement annexed to the 1998 Constitution was varied by the resolutions passed at the meetings on 23 January 2003 and 21 July 2003. The amendments made on 21 July 2003 included the addition of a new cl 11.8 (see [68] above) to the effect that for the period commencing from the date of appointment of the respondent as responsible entity and concluding on 30 June 2004 or termination of the SWC MIS if earlier, the provisions of cls 11.1, 11.2, 11.3 and 11.6 of the pro forma agreement would not apply.
Further, the amendments to the pro forma licence and management agreement made pursuant to the special resolution passed at the meeting on 21 July 2003 including a new par (f) at the end of cl 12.1. Clause 12.1(f)(i) provided that the responsible entity shall be entitled to the net proceeds from the sale of grapes from the harvest in the period from April 2003 to April 2004.

Ground 1: the critical issues

Ground 1 raises four broad issues. First, were the 1999 LAMAs incorporated into the scheme constitution? Secondly, do the 1999 LAMAs incorporate any of the provisions of the 1998 Constitution? Thirdly, are the 1999 LAMAs and the scheme constitution separate and distinct instruments? Fourthly, do the amendments to the scheme constitution (including the annexed pro forma licence and management agreement), made pursuant to the special resolutions passed at the meetings on 23 January 2003 and 21 July 2003, vary the rights and obligations of the parties under the 1999 LAMAs?

In David Securities, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ referred to s 125(1) of the Property Law Act, but merely to note that that subsection and s 94B of the Judicature Act provided for the defence of change of position (385).
Section 125 of the Property Law Act (and its precursor in this State) has received scant attention. See, however, Inn Leisure Industries Pty Ltd (Provisional Liquidator Appointed) v D F McCloy Pty Ltd (No 1) (1991) 28 FCR 151, where s 125 was mentioned in the context of, relevantly, an examination of s 124. By contrast, the New Zealand provisions have been examined on numerous occasions. See, for example, Westpac Banking Corporation v Rae [1992] 1 NZLR 338; Goss v Chilcott [1996] AC 788; National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1999] 2 NZLR 211; Saunders & Co (A Firm) v Hague [2004] 2 NZLR 475; ASB Securities Ltd v Geurts [2005] 1 NZLR 484.

Ground 5: change of position and s 125: the learned commissioner's decision and reasoning

The learned commissioner said that the common law defence of change of position and the defence under s 125 of the Property Law Act, if made out, would result in the respondent not having to repay to the appellants the 2003 Fees and the 2004 Fees [82].
The learned commissioner also said that the common law defence of change of position requires the court to consider whether the injustice that would result from compelling the recipient to repay the money in question outweighs the potential injustice suffered by the payer if he or she is denied recovery. After citing Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, 579, 580, his Honour asserted that the common law defence 'sits alongside' s 125 [82].
The learned commissioner recorded that, in the present case, the payment and the receipt were proved, the 'assumed state of affairs' had been established, there had been the requisite reliance by the respondent and, in the circumstances, there had been 'a change of position by [the respondent]' [84].
The learned commissioner was satisfied that the common law defence of change of position and the defence under s 125 had been made out. His Honour's reasoning was as follows:
The evidence of the defendant's expenditure in relation to the MIS is not mere expenditure on ordinary living expenses. This was expenditure for the benefit of the MIS and on necessary works and maintenance. The money was spent in reliance on fee payments and the [respondent] no longer retains a benefit from the payments. The [respondent] would not otherwise have incurred these and other expenses if it had not received payment from the [appellants] and other growers.
There is no evidence that the [respondent] has acted other than in good faith. The parties acted according to the assumed state of affairs in 2003 and 2004. It was suggested by the [respondent] that the [appellants] did not alert the [respondent] as soon as possible after discovering the alleged mistake about entitlement to payments. I am not satisfied that is the case. In my view, there are no grounds for suggesting that delay on the part of the [appellants] supports either of these defences.
It is relevant, however, to take into account the position of parties other than the parties to the proceedings. There is no evidence that any of the other growers has demanded the return of their moneys. Further, if the [respondent] was required to pay back the 2003 fees and 2004 fees to the [appellants], there is a real prospect that the scheme would come to an end. The fact that other members have not joined in these proceedings suggests - although I accept it goes no further than that - other members do not want to bring the scheme to an end. That, I think, supports this defence. I am satisfied that both the change of position defence and the defence under s 125 of the Property Law Act are made out [85] ‑ [87].

Ground 5: change of position and s 125: some relevant principles

It is convenient first to consider the common law defence of change of position before turning to s 125 of the Property Law Act.
In David Securities, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ held that a person is prima facie entitled to recover moneys paid under a mistake if the moneys were paid in the mistaken belief that he or she was under a legal obligation to pay them or that the recipient was legally entitled to the payment (378). It is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable; rather, recovery depends upon the existence of the qualifying or vitiating factor of, relevantly, mistake (379). It is unnecessary for the payer to prove independently 'unjustness' over and above the mistake. The making of the payment under mistake is sufficient to give rise to a prima facie obligation on the recipient's part to make restitution (379).
Mason CJ, Deane, Toohey, Gaudron and McHugh JJ then turned their attention to whether it is a defence to a claim to recover money paid under a mistake that the recipient has adversely changed his or her position in reliance on the payment. Their Honours said:
Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust (Australia & New Zealand Banking Group v Westpac Banking Corporation (1988) 164 CLR, at p 673). There can be no restitution in such circumstances because the law will not provide for recovery except when the enrichment is unjust. It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust.
The two 'defences' upon which the respondent relies in this Court are, first, that the payments by the appellants were made for good consideration and, secondly, that in reliance upon receipt of the payments the respondent, in good faith, changed its position to its detriment. In the context of a mistake case, these 'defences' were included in the well known formulation of Goff J in Barclays Bank. His Lordship stated ([1980] QB, at p 695):
(1) If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (2) His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or (b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt; or (c) the payee has changed his position in good faith, or is deemed in law to have done so (379 ‑ 380).
Later, after noting that the defence of change of position had not been expressly accepted in Australia, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ said:
If we accept the principle that payments made under a mistake of law should be prima facie recoverable, in the same way as payments made under a mistake of fact, a defence of change of position is necessary to ensure that enrichment of the recipient of the payment is prevented only in circumstances where it would be unjust. This does not mean that the concept of unjust enrichment needs to shift the primary focus of its attention from the moment of enrichment. From the point of view of the person making the payment, what happens after he or she has mistakenly paid over the money is irrelevant, for it is at that moment that the defendant is unjustly enriched. However, the defence of change of position is relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt Birks, op cit, p 410. In the jurisdictions in which it has been accepted (Canada and the United States), the defence operates in different ways but the common element in all cases is the requirement that the defendant point to expenditure or financial commitment which can be ascribed to the mistaken payment: Rural Municipality of Storthoaks v Mobil Oil Canada Ltd (1975), 55 DLR (3d), at p 13; Grand Lodge, AOUW of Minnesota v Towne (1917), 161 NW 403, at p 407. In Canada and in some United States decisions, the defendant has been required to point to specific expenditure being incurred because of the payment. Other cases in the United States, eg, Moritz v Horsman (1943), 9 NW 2d 868, allow a wider scope to the defence, such that a defendant can rely upon it even though he or she cannot precisely identify the expenditure caused by the mistaken payments. In no jurisdiction, however, can a defendant resort to the defence of change of position where he or she has simply spent the money received on ordinary living expenses (385 ‑ 386).
In David Securities, their Honours decided that, in the circumstances of the case before them, it was inappropriate to provide a detailed explication of the defence of change of position (386).
The rationale for change of position as a defence to a restitutionary claim based on mistake lies in the inherent unfairness of requiring a recipient to make restitution where the recipient has received the payment in good faith and has irreversibly and materially altered his or her position, on the faith of the receipt, to his or her detriment. In those circumstances, the recipient has a proper interest in the security of the receipt. In Lipkin Gorman, Lord Goff of Chieveley said, in explanation of the availability of the defence:
In these circumstances, it is right that we should ask ourselves: why do we feel that it would be unjust to allow restitution in cases such as these? The answer must be that, where an innocent defendant's position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution (579).
By way of general summary, the key elements of the defence of change of position are these. First, the recipient must have changed his or her position, and the change must be legally or practically irreversible or there must be significant difficulties in reversing the change. See Lipkin Gorman, (560) (Lord Templeman); K & S Corporation Ltd v Sportingbet Australia Pty Ltd (2003) 86 SASR 313, 348 (Besanko J); Saunders & Co (A Firm), (495 ‑ 496) (Chisholm J). Secondly, the recipient must have changed his or her position on the faith of the receipt. See David Securities, (385 ‑ 386) (Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ); Mercedes‑Benz (NSW) Pty Ltd v National Mutual Royal Savings Bank Ltd (Unreported, NSWCA, 40583/1992, 1 April 1996) [17] ‑ [18] (Sheller JA, Priestley and Clarke JJA agreeing). That is, the recipient's change of position must have been 'caused by the receipt'. See David Securities, (385). Expenditure does not, of itself, constitute a change of position. Thirdly, the recipient must have changed his or her position in good faith. See David Securities, (384). In State Bank of New South Wales Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350, Priestley, Handley and Sheller JJA noted that the requirement of 'good faith' is linked to the recipient acting on the 'faith of the receipt'. A recipient will not act in good faith if the recipient knows that he or she does not have a valid claim or suspects that he or she may not have a valid claim to the amount in question. Fourthly, the recipient's change of position must accord with his or her knowledge of the facts and circumstances attending the payment in question (Niru Battery Manufacturing Co v Milestone Trading Ltd (No 1) [2004] QB 985, 1003 ‑ 1004 (Clarke LJ, Butler‑Sloss P agreeing); Port of Brisbane Corporation v ANZ Securities (No 2) [2002] QCA 158; [2003] 2 Qd R 661, 675 (McPherson JA, Davies JA and Mullins J agreeing). In State Bank of New South Wales, it was held that where a recipient has derived knowledge otherwise than from the payer, that knowledge cannot be relevant in deciding whether the recipient has changed his or her position on the faith of the receipt (355). Fifthly, the critical moment for the payer, in relation to the mistake, is when the payment is made; that is, when the unjust enrichment occurs. The critical moment for the recipient is when the change of position occurs, but that change must be on the faith of the receipt. See David Securities, (385).
An area of some uncertainty concerns detrimental reliance; that is, whether the recipient must prove that he or she has not only received the payment in good faith, but has acted to his or her detriment 'on the faith of' or 'in reliance on the validity of' the payment. The view that it is necessary for the recipient to prove a detrimental reliance 'on the faith of' or 'the validity of' the payment has been described as part of the 'narrow version' of the defence. The so‑called 'wide version' of the defence is based on Lord Goff's statement in Lipkin Gorman that 'the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full' (580). Also see s 142(1) of the Restatement of the Law of Restitution (American Law Institute St Paul Minn 1937). Generally see the discussion in National Bank of New Zealand, (229) (Thomas J); Scottish Equitable plc v Derby [2001] 3 All ER 818 [30] ‑ [31] (Robert Walker LJ); C Mitchell, Change of Position: The Developing Law [2005] LMCLQ 168, 178 ‑ 179; Goff and Jones, The Law of Restitution (7th ed, 2007) par 40‑008. The following observations of Mason CJ, Deane, Toohey, Gaudron and McHugh JJ in David Securities appear to be consistent with the 'narrow version':
the defence of change of position is relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt (385).
In the joint judgment, their Honours cite Birks, An Introduction to the Law of Restitution (1989), p 410, in support of that proposition. Compare, however, Prof Birks' later views expressed in The English Recognition of Unjust Enrichment [1991] LMCLQ 473, 486 ‑ 496 and Restitution - The Future (1992), Ch 6. It is unnecessary, in this appeal, to discuss this issue further in that, for reasons which I enunciate below, the learned commissioner should have held that the respondent had failed to make out the defence under either version.
It appears that the defence may apply to an anticipatory change of position in addition to a subsequent change of position. That is, it may extend to losses incurred before, but in anticipation of, the receipt of the payment in question. See the advice of the Privy Council in Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193, 204.
The payer must, of course, establish that the moneys in question were paid, relevantly, in the mistaken belief that he or she was under a legal obligation to pay them or that the recipient was legally entitled to the payment. However, the recipient bears the onus of establishing the defence of change of position. See David Securities, (379, 405); RBC Dominion Securities Inc v Dawson (1994) 111 DLR (4th) 230, 238.
I turn now to consider, briefly, s 125 of the Property Law Act.
The criteria which must be established for the defence under s 125(1) to be made out are these. First, the recipient of the payment must have received the payment in good faith. Secondly, the recipient must have altered his or her position. Thirdly, the recipient must have made the alteration to his or her position in reliance on the validity of the payment. Fourthly, the nature or extent of the recipient's alteration of his or her position in reliance on the validity of the payment must be such that, in the opinion of the court, having regard to all possible implications in respect of the parties (other than the plaintiff or claimant) to the payment and of other persons acquiring rights or interests through them, it is inequitable to grant relief, or to grant relief in full, to the plaintiff or claimant.
It is unnecessary, in this appeal, to analyse s 125(1), including the divergences between the elements of the statutory defence and the elements of the common law defence in that, in the circumstances of the present case, if the common law defence fails then the statutory defence will also fail. See, generally, the discussion of s 125 by E Bant and P Creighton, The Statutory Change of Position Defences in Western Australia, (2003) 31(1) UWAL Rev 47.

Ground 5: change of position and s 125: its merits

Before this court, there was no challenge to the learned commissioner's finding that the common law change of position defence and the s 125 defence only applied to the 2003 Fees and the 2004 Fees. In other words, there was no challenge to the finding that those defences did not apply to the appellants' contentions in relation to future fees.
The respondent bore the onus of establishing the elements of the common law change of position defence and the s 125 defence. As I have mentioned, the respondent did not, however, call any evidence from any of its directors or other officers.
In my opinion, for the reasons set out below, the respondent failed to establish the requisite elements of the defences.
The respondent's failure to adduce any evidence as to the state of mind of its controllers at material times precludes a finding that any change of position of the respondent was 'on the faith of' or 'caused by' the receipt. For example, the respondent's failure to call any of its directors or other officers as witnesses means none of them gave any evidence to the effect that they believed the respondent was lawfully entitled to the additional fees and contributions from the appellants (and the other growers) as a result of the amendments made to the scheme constitution pursuant to the resolutions passed at the meetings on 23 January 2003 and 21 July 2003. It is apparent from the notices relating to each of those meetings that the respondent was in receipt of advice from solicitors in connection with the proposed amendments to the scheme constitution. If any of the respondent's directors or other officers had entered the witness box they would, no doubt, have been cross‑examined on their belief as to the efficacy of the amendments to the Constitution, and whether they believed there was any doubt as to the lawfulness of the demands for additional fees and contributions in the absence of compliance with cl 12.6 of the 1999 LAMAs or agreed variations to those agreements. There is no basis for inferring that any change of position was in good faith or that any change of position was on the faith of or caused by the receipt. It is unnecessary, in the circumstances, to consider whether any other elements of the common law defence or the statutory defence were established at the trial.
Further, if the 'wide version', as distinct from the 'narrow version', of the defence is to be preferred, and the notion of 'relative fault' or the weighing of 'equities', as distinct from detrimental reliance, is relevant to the common law defence as well as the statutory defence, the respondent's contentions also fail for the reasons I have expressed in the context of ground 4 in finding that it would not be unconscionable, in the circumstances, for the appellants to resile or depart from any common assumption.
Ground 5 has been made out.

The respondent's notice of contention

The respondent filed a notice of contention in which it asserted that the learned commissioner's decision as to the effectiveness of the amendments to the scheme constitution made as a result of the special resolutions passed at the meetings on 23 January 2003 and 21 July 2003 should be upheld on the basis that those amendments took effect upon registration of those amendments with the Australian Securities and Investments Commission on 2 December 2004.

I have already dealt with this issue in the context of considering grounds 1 and 3. For the reasons I have given in relation to grounds 1 and 3, the notice of contention fails.

The consequences of holding that grounds 1, 4 and 5 have been made out

The consequences of holding that grounds 1, 4 and 5 have been made out are as follows.
By reason of ground 1 having been established, the appellants were not required to pay any additional fees. The learned commissioner found that Mr Braysich was a witness of credit and that conclusion was not challenged before us. It should therefore be concluded that the appellants paid the 2003 Fees and the 2004 Fees under mistake and that, grounds 4 and 5 having been established, restitution of the 2003 Fees and the 2004 Fees should be ordered. Further, the 2005 Fees are not payable. It is unnecessary, in the circumstances, to consider whether there was a total failure of consideration. Similarly, it is unnecessary, in the circumstances, to consider whether the respondent breached its duty under s 601FC and, if so, whether damages should be awarded under s 601MA(1).

The appellants' application to adduce fresh evidence

The appellants applied to adduce fresh evidence in the appeal. They asserted that the fresh evidence was relevant to grounds 4 and 5. It is unnecessary, in the circumstances, to rule upon the application.

Conclusion

I would allow the appeal. Counsel should be heard as to the precise form of the orders.