Australian Financial Services and Leasing Pty Limited v Hills Industries Limited and Anor

[2014] HCATrans 13

[2014] HCATrans 013

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S163 of 2013

B e t w e e n -

AUSTRALIAN FINANCIAL SERVICES AND LEASING PTY LIMITED (ACN 105 657 681)

Appellant

and

HILLS INDUSTRIES LIMITED

First Respondent

BOSCH SECURITY SYSTEMS PTY LIMITED (ACN 068 450 171)

Second Respondent

FRENCH CJ
HAYNE J
CRENNAN J
KIEFEL J
BELL J
GAGELER J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 11 FEBRUARY 2014, AT 10.14 AM

Copyright in the High Court of Australia

____________________

MR C.J. BIRCH, SC:   May it please the Court, I appear with my learned friends, MR M.P. CLEARY and MS R.L. GALL, for the appellant.  (instructed by Hilliard & Berry Solicitors)

MR I.M. JACKMAN, SC:   May it please the Court, I appear with my learned friend, MR T.M. THAWLEY, SC, for the first respondent.  (instructed by King & Wood Mallesons)

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR L. GOR, for the second respondent.  (instructed by HWL Ebsworth Lawyers)

FRENCH CJ:   Yes, Mr Birch.

MR BIRCH:   Your Honours, I have had a discussion with my learned friends.  I am going to try and complete my oral submissions in about an hour and a half, which I think will fit it within a day.  Your Honours, the key issues that this appeal raises, in our submission, can be put very shortly in the following propositions, and these are also our short answers to those propositions.  I will then provide the detailed argument.

Firstly, the respondents, Hills and Bosch, in treating the debts of the TCP companies as having been discharged argue that thereby constituted defence to my client’s restitutionary claim.  We say that ought be rejected because firstly there can be no principle of bona fide discharge or good consideration in the absence either of a valid contract between my client and Hills or Bosch on the one hand, or a payment made by my client with the intention of discharging TCP’s debts.  There is no doubt, we say, that there was neither of those factors present in this case.

KEANE J:   But you do accept, do you, that TCP directed your client to make the payments to Hills and Bosch and that Mr Skarzynski directed Hills and Bosch to appropriate the payments to TCP’s debts?

MR BIRCH:   We would probably not say that it ought be characterised as TCP directing the payment.  TCP provided an invoice for equipment, purportedly from Hills, and we had to purchase it.  The direct and obvious consequence of TCP’s conduct was that we had to make a payment to Hills.  I am not sure then if there is ‑ ‑ ‑

KEANE J:   I am looking at Justice Allsop’s judgment at page 2261 in volume 5.  Page 2261, paragraph 5, line 55:

At Mr Skarzynski’s direction the suppliers credited his companies’ accounts –

MR BIRCH:   That would be – I would accept that is probably a fair characterisation of it.  I think the evidence comes close to that, but that is an event that occurred between Mr Skarzynski on behalf of TCP and Hills and Bosch on the other.  That did not involve my clients.  We say that that is an absolutely crucial distinction.  We say that all the matters that are – all the authoritative decisions that are relied upon by Justice Allsop in his reasons or our learned friends in their submissions, when properly analysed reveal that there was some connection between the payer on the one hand and the crediting of the moneys against the debt on the other.  We say that there is an essential link missing in this case.  Your Honours, that is the first issue.  It is logically prior but factually we may come to others first.

The second aspect of it then becomes whether, even if the payment alone did not bring about a bona fide discharge, there was nevertheless a “change of position” defence which arose because the respondents treated their debts as having been discharged, and while there is a distinction between the way Justice Allsop and Justice Meagher approached the matter, they both ultimately concluded that because TCP’s debts had been treated as discharged, this gave rise to a defence, on Justice Meagher’s reasons a “change of position” defence.

We say that that ought be rejected for these reasons:  that Hills and Bosch never parted with the money, this was not a discharge which involved an actual handing over of the money.  The discharge was merely a cancellation or loss of the choses in action that the respondents had against the TCP entities and the question that is important, therefore, is not whether there was a notional loss of legal rights but what was the value that was lost by the payment away. 

We say because the choses in action ought to have been found to have been valueless, or at least ought to have been found to be worth far less than their face value, there could not have been a “change of position” defence for the whole of the sums that were received.  The point that we make is that the test is value and if value is the critical issue the court had to determine value and having done so the defence operated only to that extent.

HAYNE J:   Determine value of what?

MR BIRCH:   Determine the value of the rights which Hills and Bosch say they lost in consequence of receiving the payment.  In Hills’ case it says we discharge the debts.  So they lost choses in action.  Bosch says we set aside judgment so we lost our legal rights.  We say there is no reason to look at those as other than property rights that can be valued.  If one had purchased property, one would have investigated net loss through value and resale value.  We say a similar exercise ought to have been undertaken here.     That is the short summary of our response to the change of position on the wider view of the facts – reasons that were put forward in the Court of Appeal.

There are two subsidiary points.  I have already mentioned the importance of value.  A factor that plays a role, an important role in the reasons in the Court of Appeal is the forensic difficulties of proof.  In that regard we say that the forensic difficulties of proof for Hills and Bosch – this is the difficulty of establishing what they would have done after they received the money and before they received notice of the fraud that had been worked in, whether they would have been able to recover some or all of the money - those forensic difficulties do not give rise to any special or new legal rule.  They are simply the sorts of issues that courts deal with every day and they could still have been dealt with and a value could still have been arrived at using the usual instruments the courts rely upon.  I will come to those shortly. 

That leaves then one other important defence that is put forward.  I should say, I am dealing with both our primary submissions and the issues in contention in one single submission.  There were lease agreements made between the AFSL company and the TCP companies for the non‑existent equipment. 

The existence of those contractual rights, which we did not purport to rescind, are said to be some form of answer to our restitutionary claim.  We could not, it is said, seek restitution from Hills and Bosch while we retained contractual rights against the TCP companies.  Our response to that is this, that firstly there is no general rule that the existence of contractual rights within the factual matrix precludes the application of restitution and, indeed, quite a number of the very major cases are ones in which there were contracts in existence and yet restitution was still found to have been available.

The respondents do not point to terms in the lease agreements or any particular contractual arrangement which they say cuts off our restitutionary right.  The most we suggest that they can get from the existence of the lease agreements is that there were some payments made.  There were some recoupment and we say recoupment is not a defence to the restitutionary claim.  It is essentially, for the sorts of reasons laid down by this Court in the Roxborough decision, not relevant to the position of the defendant to the restitutionary claim.

KIEFEL J:   The word which has not so far appeared in what you have said, I think, is the word “inequitable”.  Is not the question whether AFSL, whether it would be inequitable to permit AFSL to recover?  How do the respondents place their argument within that construct, rather than whether or not other rights have been acquired?

MR BIRCH:   That is, I think, part of what divides the parties in this appeal.  The respondents rely upon some of those cases and some of that commentary which suggests that one may engage in a balancing of equities between the position of the payer and the position of the recipients.  We say that the modern law of restitution is a clearer and sharper legal doctrine than that, and that the position is that one starts with the – we appeal to the so‑called enrichment analysis that has been discussed, both in the commentaries and in some of the cases. 

One looks at whether the recipients were enriched, and then one looks to see whether there has been, since they received the payment, actions which have deprived them of some of that enrichment.  On that view, we say that one does not get involved in examining what happened between AFSL and the TCP companies under the leases unless it was to bear upon some suggestion that we were acting in bad faith in the way that we had gone about making the payments or something of that sort.

KIEFEL J:   Well, which case in this Court follows a principle of enrichment as being the criterion?

MR BIRCH:   I do not suggest this Court has spoken in that language, your Honour.  I would say that when one looks at the reasoning in David Securities that that is consistent with the enrichment approach.  The language used in the plurality judgment in that decision is essentially the language of enrichment analysis.  I will take your Honour to the passage a little later ‑ ‑ ‑

CRENNAN J:   When you talk about it, though, enrichment analysis, are you referring to Professor Birks’ idea that you need to show a disenrichment?

MR BIRCH:   Yes, I am.

CRENNAN J:   Thank you.

MR BIRCH:   That is - obviously there has been this substantial academic debate that has gone on for some years now about this, but we say it is becoming increasingly reflected in decided cases.  It is a useful means of approaching the sorts of conceptual issues that arise in a decision such as the present one.

KIEFEL J:   It is, in essence, economically‑based analysis which is derived from continental systems.  It is somewhat removed from the notion that there is a vitiating factor which founds an equitable requirement of repayment.

MR BIRCH:   It has been influenced by those continental considerations, and certainly the Anglo‑Australian law of restitution has been influenced by equitable considerations.  I would not reject that proposition.  Nevertheless, though, while that is the case, we say that – and there is a pragmatism in the Anglo‑Australian approach which might not be manifested in some of the continental doctrines.  I am not intending to take the Court to the continental doctrines ‑ ‑ ‑

HAYNE J:   You speak of the Anglo‑Australian approach.  Other than David Securities, what decision of this Court embraces the general approach which you advocate?

MR BIRCH:   There is no decision of this Court which embraces it, and I would accept that, of course, in David Securities itself, the discussion of change of position was at a merely protean stage.  The evidence had not been explored, and that is why the issue is ultimately remitted back by this Court.  It is not the case that I can come here and say this Court has embraced this enrichment analysis and therefore, in light of that, the Court of Appeal should have applied it.  I am simply saying that it is consistent with and represents the smoothest fit with what was discussed by this Court in David Securities.

FRENCH CJ:   Under this rubric of “disenrichment analysis” do you mean anything more so far as change of position is concerned than detriment – an examination of detriment suffered by the recipient as result of the payment?

MR BIRCH:   A little more.  The criticism that is often made of disenrichment analysis is that there can be changes of position which do not involve the gain of any obvious value or certainly a gain which can be easily valued and then changes of position in turn that cannot be valued.  The classic one that is always discussed is if someone in reliance upon a payment was to have and raised children and then they are told that there was a mistake and that they cannot retain the money. 

The having of children is traditionally debated as a classic example of something that is non‑valuable and yet it would appear to be at least plausibly a form of detriment that would prevent one from making or demanding restitution.  It is said that this confounds the disenrichment analysis group.  My response would be to simply say when one is concerned with cases which are focusing on economic loss - this is a case amongst traders or merchants and financiers in which the change of position is the economic loss flowing from abandoning debt collection actions. 

HAYNE J:   That is, the answer that is made to the claim you make is a claim that the respondents suffered a detriment.  Is that right?  Or would suffer a detriment if you were entitled to recover.  Is that right?

MR BIRCH:   Yes, indeed.

HAYNE J:   Why then would we embark upon a generalised description of the whole of the law of the area which is implicit in the way in which you couch your case.  Why should we not focus only on the question of whether there is some relevant detriment?

MR BIRCH:   Your Honour, I would not invite the Court to embark upon propounding such a general or wide‑ranging rule.  My submission would be that here presented with what is a straightforward form of economic loss where issues of value can be easily and quite legitimately applied that the Court can address those issues.  Of course, the Court is not being asked and would be unlikely to concern itself with the sorts of theoretical questions associated with non‑valuable detriments.  I use the child example merely by way of contrast with the sort of case that we are presented with. 

So what I would be urging the Court to do would be to say in the situations where one is presented with an economic loss situation, then the question is how important is value, to what extent can one simply apply a principle akin to an estoppel‑type defence where when one points to some unvalued detriment that that then becomes sufficient to constitute a change of position to the whole of the payment that was made.

Your Honours, apart from those major issues, there are some questions regarding what are referred to by my learned friends as the partial defences.  I think we are able to resolve most of those issues without the need for substantial argument.  I will deal with them very, very briefly at the end and indicate our position and I think most issues concerning those partial defences are going to evaporate.  If there is anything left, your Honours, it will be relatively brief.

Your Honours, could I just go briefly to a few factual matters?  I referred in the opening outline to four factual issues.  The first of these concerns the payments that were made by my client, AFSL.  If your Honours were to go to volume 1 of the appeal books, if your Honours were to start at page 235, that is the invoice that was presented to my client – forwarded to my client by Mr Skarzynski which purports to be a Hills invoice.  There is no dispute that that has been concocted by Mr Skarzynski and is not a genuine document.

If your Honours turn the page to 237, you will see the fifth entry in the transaction in the banking sheet at line 30 shows a debit of $308,000.  The date has been partially cut off there.  That transaction occurred on 25 August, not 5 August as it appears.  There has been a millimetre or two.  I can provide clear copies of that page if the Court would prefer it.  If the Court then turns to page 239, that is an email – you will see the second email from Anne Carragher, on 26 August at 8.45 am to Hills, referring to the payment on 25 August and directly over the page at 240 is the remittance advice.

That advice refers to an invoice number.  It refers to our purchase number, AFSL’s purchase number, and the sum.  The remittance advice did not include the Hills invoice.  It referred to the invoice.  It referred to the purchase number and the Court of Appeal found that the documentation there revealed that viewed objectively AFSL’s intention was to pay for the goods in the invoice, not do anything in regard to repaying the debts of the TCP companies.

If your Honours turn ahead to page 255, the similar invoice for Bosch, similar in the sense that it is a concocted invoice prepared by Mr Skarzynski appears.  At 258 is the record of the payment by my client of 198,000 which occurred on 3 September, and then again at 260 the facsimile of 4 September enclosing the remittance advice that appears at 261.

KIEFEL J:   There are some findings about this by the primary judge, are there not – that is to say, about Hills and Bosch not matching the remittance advice with any invoice it had issued from them.

MR BIRCH:   There is.  I was going to come to that.  That is, in fact, my fourth factual issue, or that is what I think your Honour might be alluding to.

KIEFEL J:   But his Honour found that there was no – well, impropriety is not the correct word – but no commercial misstep ‑ ‑ ‑

MR BIRCH:   Correct.

KIEFEL J:   ‑ ‑ ‑in what was not undertaken.

MR BIRCH:   Each side at the trial attacked the other.  We said that Hills and Bosch had been negligent in not having picked up the fact that we were giving them money to buy goods.  Hills and Bosch said that we had been negligent in not taking further steps to verify that the invoice was for goods that genuinely existed and there was substantial cross‑examination and substantial evidence led about that.  It resulted in a draw so far as factual findings are concerned.  I have referred to those in (iv) of my critical issues.  I will go to those in a second.

Perhaps I could just refer to, briefly, a finding so far as the remittance advices are concerned.  My document in error refers to that by way of a reference to the decision of the Chief Justice.  That is incorrect.  It should have been a reference to the President Justice Allsop.  In volume 5 at 2267, just below line 50, the second last sentence of paragraph 23 in the judgment, Justice Allsop said:

None of AFSL’s documentation, however, objectively manifested a payment to discharge a debtor of Hills or Bosch.  The remittance advices were brief and uninformative other than carrying numbers and references as described above.

Well, they contained just that information that I have referred your Honours to.

KIEFEL J:   Just to be clear, Hills and Bosch did not receive the invoices at all.  They only received the remittance advice.

MR BIRCH:   Correct.  What happened was that when AFSL’s suspicions were finally aroused to the point where they doubted that they sent the invoices to Hills and Bosch and then in March and April – as a result of their direct contact with Hills and Bosch – the scam was uncovered.

KIEFEL J:   So from Hills and Bosch’s perspective they were receiving funds from a third party.

MR BIRCH:   They were receiving funds from a third party but they were receiving those funds, objectively speaking, described for the purposes in the remittance advice.  What might be said against them is the remittance advices were brief.  Justice Allsop says they were uninformative.

HAYNE J:   But on their face they were remittances in payment of an invoice issued by the recipient.

MR BIRCH:   Correct.  That is what we ‑ ‑ ‑

HAYNE J:   The recipient could, had it chosen to engage in a basic matching process, have identified that the invoice identified was not one it had issued.

MR BIRCH:   Indeed.  While there is no finding of commercial fault, or negligence, or bad faith or anything of that sort, it is still, we say, a very important matter that the objective intention manifested was payment for goods not discharge of TCP debts.  It becomes a crucial matter when we turn to this question of discharge as a defence and some of the other issues.

KIEFEL J:   Was the conduct of Hills and Bosch in issue in the Court of Appeal.  It was not, was it?

MR BIRCH:   No, what happened was that, as I have noted in (iv) - perhaps I should just go, it does not matter if I deal with this slightly out of order, if I go to the page references that I have identified in (iv) - if one goes to the judgment of Justice Einstein, the judge who initially heard the matter at 2178 – at 2178, under the heading “The evidence of Mr Sofi” - Mr Sofi was the principal witness called on behalf of AFSL - in paragraph 33 of the judgment, he says:

questions were put . . . to my observation, none of those questions established that the plaintiff had acted inappropriately at any stage.  It was clear that it had taken some considerable time before the plaintiff had discovered the fraud.  When the fraud was discovered the plaintiff acted as quickly as practicable in the circumstances. 

In my view the evidence of Mr Sofi should be accepted in total.  He was a witness of truth.

So that was evidence regarding Mr Sofi’s and the business practices of AFSL.  In regard to the other parties at 2179, just over the page at 42, he refers to Ms McLeod.  Ms McLeod was one of the financial administrators at Hills and he rejects my client’s assertions that there were “sloppy account keeping procedures” and the like:

I note the apparent oversight in not printing and checking the remittance advice sent by AFS and accept that if this remittance advice was thoroughly scrutinised, the fraud induced by TPC may have been found.  However, as explained below, given the commercial realities within which Hills operates this failure was not seriously negligent or reckless.

KIEFEL J:   What are the “commercial realities” which are explained below?

MR BIRCH:   I think these went to the sheer burden of dealing with the daily transactions that were received at the company, the numbers of documents, the amount of checking that was required and his Honour found that, in those circumstances, that they did not conduct full and detailed inquiries to verify each piece of information was excusable.

FRENCH CJ:   It may be oversimplifying it a bit but TCP told Hills they were going to reduce debt by $308,000 by 25 August and that is the amount that came in, albeit from a third party.

MR BIRCH:   Yes, indeed.  It was one of the classic examples of where you have an expectation and then events appear to confirm it.  You assume that the world is going as you have expected it and they were not on their guard for a fraud so, not being on their guard, it was easy for their staff to conclude that the money that turned up fitted with what Mr Skarzynski said.  So that was, in any event, part of the reasoning of Justice Einstein.

KIEFEL J:   The commercial reality is then an acceptance of risk.

MR BIRCH:   It is essentially, yes.

HAYNE J:   It is the same reasoning which underpins the fact that a bank will not look at the signatures on any cheque under a certain amount.

MR BIRCH:   Yes.  That is right.

HAYNE J:   Just pay them out.  Take the risk.

MR BIRCH:   Yes, and essentially saying well that is a commercial practice which cannot be criticised where it is acceptable in light of the sums and risks involved.  If your Honours go to 2190, this dealt with - if one turns back to 2189, you will see the heading, “Amanda Jane Blake”.  She was a witness called on behalf of Bosch.  She was the person who handled the accounts there and there was cross‑examination and submissions that there had been a failure by Bosch to follow some of its own internal procedures.  Justice Einstein at paragraph 117 said:

I am of the view that the break down in processes were understandable in light of the commercial reality -

and 118:

This, and the fact the money was expected -

The point the Chief Justice was just making a moment ago –

explains why the remittance advice was not as closely scrutinised as may have been expected.

So no one managed to really make a hit, so to speak, on the credit of the other side in that contest.  Then if one goes to, in the same volume, 2267 in the judgment of Justice Allsop commencing at about line 20, part way down that paragraph:

In respect of any possible departure from perspicacious business practice . . . that may have led to the detection of the fraud, the primary judge made findings –

I have just referred your Honours to them, and then finally Justice Allsop noted, just below line 30 –

No challenge was made to these conclusions.

So the position was that no one was found to have been relevantly at fault or to have abandoned acceptable business practices without some fair excuse ‑ ‑ ‑

KIEFEL J:   Well, paraphrasing it, no one acted uncommercially.

MR BIRCH:   Yes.

HAYNE J:   On the face of it, the remittance advice had no connection with TCP, did it?

MR BIRCH:   Correct.

HAYNE J:   What enabled the recipient to draw connection sufficient to credit the funds received to the account of TCP?

MR BIRCH:   In part, the point that was just made a short moment ago by the Chief Justice, namely that Skarzynski had been in touch with Hills and Bosch ‑ ‑ ‑

HAYNE J:   The expectation that X dollars will arrive.

MR BIRCH:   Yes, the money is coming, and indeed, I think there is even an email or two in the appeal books which shows that there was no doubt that both Hills and Bosch were expecting that payment to arrive, and Skarzynski had lied and said “I have got some money coming through, and I have told these people to pay it to you to pay off my accounts”, but AFSL was of course entirely in the dark about these statements that Skarzynski is making to Hills and Bosch.

Can I just make one final point; I will return to it later.  While the President, Justice Allsop, had said “No challenge was made to these conclusions”, one complaint I will make later is that nevertheless, there is a surreptitious or covert attribution of blame; in other words, while everyone is found not to have been at fault, we are, in some fashion, said to be more liable for what happened than are Hills and Bosch, and so we ‑ ‑ ‑

FRENCH CJ:   This is AFSL’s delay?

MR BIRCH:   Yes, that is right, the AFSL delay argument.  We say, of course, that really was not a fair finding, that the delay was a result of the shared mistake of both the parties.  Neither of them discovered it until they discovered it and his Honour had found that our client had acted with all due haste when we did find it.

KIEFEL J:   Are you speaking of President Allsop’s reasons, or the primary judge’s reasons?

MR BIRCH:   I am speaking chiefly of some references in Justice Allsop’s judgment in which he says that the position that Bosch and Hills found themselves in was, in a fashion, because of AFSL.  It is not a strong finding against my client, but nevertheless it is an attribution of blame, in one sense, which we say is not consistent ‑ ‑ ‑

KIEFEL J:   It is tied to a notion that they are unable to produce evidence, is it not?

MR BIRCH:   It is partially tied to that.  That is correct, yes.  I will come to that shortly.

CRENNAN J:   This is the idea, is it, that the payer can be responsible to a certain degree for the predicament in which the payer finds itself; that kind of language which is used by President Allsop?

MR BIRCH:   But that is the problem because we say that if we have been found to have acted in accordance with reasonable commercial practice, then while one might say in a causal sense what happened was because we did not find out until five, six months later and alert them, things have happened in the meantime.  The language of Justice Allsop is stronger, in my submission, than merely detecting a causal link and because of the way he expresses it, he says that we should bear the consequences, so to speak.

Now that, in my submission, suggests that it is more than merely detecting a causal link, it is suggesting that we in some fashion are in a worse position or ought be seen in a worse light and have the consequences of forensic difficulties visited upon us rather than them being visited upon the defendants.  I will have to wrestle with that a little later.

GAGELER J:   Mr Birch, as you commenced your submissions, you addressed a question of Justice Keane about a factual statement made at the bottom of page 2261 and you touched upon this again where it says:

At Mr Skarzynski direction the suppliers credited his companies’ accounts –

Could you give the precise factual references that underlie that global statement?

MR BIRCH:   Your Honour, I can.  What I will do is I will have them identified and I will convey them to you shortly, but what ultimately occurred was this.  Mr Skarzynski was in touch with each of Hills and Bosch and said, I am owed some money and it will be coming through, expected in a day or two, and in consequence when the money arrived from AFSL, Hills and Bosch believed this was the money that Skarzynski was speaking of and Skarzynski had told them to expect it and it would be in payment of the accounts.

So the representations or directions of Skarzynski were made prior to the payments and thereafter when they were received Hills and Bosch formed the belief that these were moneys that had been owed to Skarzynski entities and, therefore, they were now entitled to credit them to the Skarzynski accounts or the ‑ ‑ ‑

FRENCH CJ:   Not so much a direction as an apparent response to demands and pressure.

MR BIRCH:   Correct.  That is why I cavilled a little when Justice Keane asked me if he had directed because it was not a commercial arrangement where someone had given a written direction to do something.  It was just this factual understanding which was acted upon by Hills and Bosch believing that – it was in substance, I suppose, very similar to having received a direction.

GAGELER J:   Was Mr Skarzynski acting as agent for his companies in making that statement or was there any ‑ ‑ ‑

MR BIRCH:   We would assume so.  The documents reveal – I am almost confident of this – that he was a director of TCP, the relevant TCP companies, and he was a man who regularly purported to conduct managerial operations on behalf of those companies.  There would be little doubt that he was their agent, we would have thought.

Your Honours, the only other factual issue I wanted to refer to – sorry, there are two.  I have to deal with what is ii.  This is issues that relate to what Hills or Bosch would have done but for the payment.  If one goes to, in regard to Hills, in volume 2 at page 969, this is evidence of Mr Andrew Muir who was the officer on behalf of Hills who principally led this advice.  On page 969 at sideline 40 is paragraph 26 of Mr Muir’s affidavit and he says that this in fact, in partial answer to your Honour Justice Gageler’s question, he refers earlier in this affidavit to the email correspondence with Mr Skarzynski and the expectation.  Then in paragraph 26 he says:

I instructed Renee McLeod to send the letter of demand if payment was not received because it is the usual practice of Hills to protect its interests by taking steps to recover –

He then says that he would have expected Ms McLeod to engage lawyers, that she was experienced and would do the usual things.  I will not read it but, in a sense, it can be summarised in this fashion, that he would have instructed Ms McLeod to take all the normal steps to commence a legal recovery process against the TCP entities.  There is some references to that evidence in the cross‑examination.  There is some other passages in the affidavit which refer again to this process but, in our submission, it never goes higher than what is set out by Mr Muir in paragraph 26 which is that had they not received the payment they would have given instructions and taken the usual steps.

That is the evidence that they led to establish their change of position.  Simply, we would have done some things.  There is no evidence that fleshes it out in any detail or, importantly from our perspective, any evidence that allowed the Court to make a more detailed judgment about the likelihood of success or the quantum of success. 

FRENCH CJ:   They also gave them continuing, albeit reduced, trading terms, did they not?

MR BIRCH:   They did.

FRENCH CJ:   $200,000 down from $350 or something, I think.

MR BIRCH:   They resumed trading with them but they did it largely on a cash on delivery basis. 

FRENCH CJ:   But there was a credit time allowed, was there not, because they ended up being owed some more.

MR BIRCH:   They imperfectly did it on a cash on deliver basis so that when the whole thing ground to a halt or crashed there was $21,000 worth of goods that had been delivered as a result of reopening the account for which the TCP entities had not paid and we cannot dispute that that is fairly and squarely a “change of position” defence.

KIEFEL J:   That is a detriment acting on the faith of the receipt.

MR BIRCH:   It is, indeed, yes.  So there is no dispute by us that that would be a sum that would normally be offset.  It is confused in this instance only because we made two concessions which, in my submission, we did not have to make and so I will just wash that up at the end and explain why we – except that $21,000 has to go, the question is what happens to the two other sums that we wrongly conceded.  The crucial thing is that the reliance, “change of position” evidence, is just what I have read to you so far as Hills is concerned.  In regard to Bosch, there is ‑ ‑ ‑

KEANE J:   But it is right, is it not ‑ sorry, Mr Birch ‑ that what the Chief Justice put to you is right, that they did extend, they continue to extend a $200,000 credit limit?

MR BIRCH:   They did.  I suppose why I am putting less emphasis on that is because the only loss that could be said to have flowed from the reopening of the account ‑ ‑ ‑

KEANE J:   Is the ultimate – the ultimate 20‑odd thousand.

MR BIRCH:   Is the 21,000, we do not dispute it.  So while there was that additional reliance, it led to only the 21,000 and because of the nature of this defence there is no doubt, we say, that that 21,000 is a discrete or a limited defence to that extent only.  The wider issue of the rest of the payment is left untouched by that question.

In regard to Bosch, the evidence is that of Amanda Blake.  There is a defect in my document.  After volume 3 I have omitted the page number which is 1119.  Bosch was in a different position because it had obtained default judgments against the TCP entities.  It had made application to issue writs of levy and had issued examination summonses, so it was considerably further down the track in terms of enforcing its legal rights.  At page 1119, just below line 50, the deponent who is Amanda Blake, says in paragraph 46:

If Bosch had not received the $198,000 from AFSL on behalf of the TCP companies, Bosch would have continued with the legal action against the TCP companies and their directors.

There were submissions made, both at the hearing before Justice Einstein and in the Court of Appeal, to the effect that Hills and Bosch might have applied pressure to extract a mortgage because my client in February extracted a mortgage from Mrs Skarzynski for all of the liabilities that were continuing future liabilities of AFSL.  In Hills’ Case, Mr Muir says, “I would have instructed Ms McLeod to take the usual actions which would have included demanding security”, although that does not seek to pinpoint people or assets that might, realistically, have been able to aid the cause of Hills.

KEANE J:   Was there any evidence that Mr Muir was aware of the possibility of getting a mortgage from Mrs Skarzynski?

MR BIRCH:   There is no evidence that was led at the trial but at the trial there was a submission put.  AFSL got a mortgage from Mrs Skarzynski.  Who is to say that we might not have chanced on that idea and applied the pressure?

KEANE J:   But what there was not was evidence that they were aware of it and, therefore, would have pursued it.

MR BIRCH:   Correct.

BELL J:   And the trial judge made a finding at 2183 – in dealing with the Hills defence – this is at paragraph 76 and 78 – that it was not clear that:

Mrs Skarzynski would have been prepared to give a mortgage to Hills as it did to TCP in respect of the debts owed to AFS ‑

MR BIRCH:   That is right, yes.  Indeed, Justice Einstein, on 2183, from paragraph 76 down to 79, makes some general findings.

BELL J:   Your point – just in relation to the Bosch defence – it was never put by reference to the possibility that the enforcement action would have ‑ ‑ ‑

MR BIRCH:   I should be clear about this.  It was put as a submission to Justice Einstein that that was something that might have been done but it was not something that was dealt with by the witnesses ‑ ‑ ‑

BELL J:   Yes.

MR BIRCH:   ‑ ‑ ‑saying, we were conducting inquiries, we were going to seek from Mrs Skarzynski, or we might have sought from Mrs Skarzynski, or this was a technique we regularly availed ourselves of, or anything like that.  So it was a submission which was not embedded in any factual evidence that had been led but it was certainly something that was put to Justice Einstein.

KIEFEL J:   You said that AFSL extracted the mortgage from Mrs Skarzynski.  Is that exactly how it occurred, or was the evidence that it was offered when he sought to re‑negotiate the whole of the borrowings?

MR BIRCH:   Your Honour is probably more accurate in the way you have just summarised it.  What happened was that in February there was a review.  There were concerns being expressed about TCP’s ability because they were not managing to make punctual payments in any event, but they now had a substantial number of these agreements.

While I am dealing with these factual issues, I will just add, if one goes to volume 2 of the appeal book at 543, 543 shows a copy of the mortgage which was given, as you will see on 542, in February 2010.  You will see there are four rental agreements in (a) and two more in (b).  Your Honours are probably aware that in addition to Hills and Bosch, there was a third defendant before Justice Einstein, Jetobravo, and there were, indeed, other agreements that my client had been induced to enter into, although these were not actually even with genuine entities.  They were just fraudulent from beginning to end.  The Bosch rental agreement is 1(a)(ii) of that agreement, and the Hills one is 1(a)(iii).

If your Honours turn back to page 540, there is an email from Mr Sofi which gave the payout figures.  The very last payout figure, the $357,500, is the Hills agreement, and the $225,500 is the Bosch agreement.  But your Honours will see that there were several other substantial agreements, all of which ultimately came to be secured by the Skarzynski mortgage.  Indeed, we say that there is no adequate basis for concluding that Hills or Bosch would have succeeded in obtaining the Skarzynski mortgage for themselves had AFSL not made the payments.  But the question arises as to, even if Mrs Skarzynski was seen to be a potential advantage, just how one spreads that benefit over all of the various agreements that were in play between AFSL and Mr Skarzynski.  Your Honours, if I could then ‑ ‑ ‑

KEANE J:   So you would say there is no finding, and certainly no evidentiary basis for a finding, that even if they had been aware of the possibility of a mortgage from Mrs Skarzynski, there is no basis for concluding that there would have been any equity available to them?

MR BIRCH:   Well, no.  There was some evidence of some equity because, by the time of the trial, there had been the sale of the property.  Some $500,000 had been paid into an account which was what was left over from Mrs Skarzynski’s house, but that was paid into an account subject to a continuing legal dispute between Mrs Skarzynski and AFSL, so there was some possible equity, but it was unclear to Justice Einstein whether AFSL would or would not extract it, and even if one had said, well, that could possibly have been extracted, how could that have been a defence for the whole of the Hills debt, the whole of the Bosch debt, and the whole of the Jetobravo debt, the three matters all before ‑ ‑ ‑

KEANE J:   Well, if it is about valuing a lost opportunity, they would need to show that – that is to say, the respondents would need to show that not only might they have got the mortgage, but they would have got in and got the mortgage before AFSL.

MR BIRCH:   Yes, correct.

KEANE J:   Because on any view, the obligation of the debts to AFSL exceeded the 500.

MR BIRCH:   Indeed, very substantially, very substantially.  Your Honours, that is the extent of the factual matters that I wanted to take the Court to.

HAYNE J:   Can I just see if I understand where we have got to?  I would understand the facts to be possibly capable of reduction to these.  AFSL makes a payment to each of Hills and Bosch.  AFSL does not know any more than that an apparent invoice has been issued by Hills or Bosch, as the case requires, and pays on that invoice.  Hills and Bosch act as they do after receipt of the payments made by AFSL, in particular in crediting the account of TCP, with the knowledge and dissent of TCP through Skarzynski, but without knowledge of, or assent by, AFSL.  Is that right?

MR BIRCH:   Yes, that is so.

HAYNE J:   That is, there are events occurring apparently in two separate boxes.  AFSL is paying money, apparently on an invoice.  AFSL is then doing things with TCP’s account without knowledge of or assent by AFSL.  Is that right?

MR BIRCH:   That is right.  That is indeed correct, and it is the fact that they were disconnected to that degree, we say, that it is a complete answer to at least the discharge argument that is considered by the President but it is also, of course, part of the whole framework.

FRENCH CJ:   AFSL thinks it is acquiring ownership to the goods shown on the invoice as apparently issued by Hills and Bosch.

MR BIRCH:   Yes, correct.  In contractual terms, it is a point made by Professor Burrows in the article that I handed up with the three‑page document and that is that we say that there had to have been – there could not have been a valid contract between AFSL on the one hand, or Hills and Bosch on the other because the contract would have been void for common mistake and I would adopt the comment of Professor Burrows.  It is at the end of the second major paragraph of his article that we just referred your Honours to where he says although there is no mention of this in the reasoning of the judges it would appear, et cetera, that any purported contract was void for common mistake and we say that had to flow from the facts that have just been summarised by Justice Hayne.

Your Honours, as far as the – we have called it the “true rule” in regard to the “change of position” defence, simply I suppose to highlight this, that what the Court has to grapple with is the issue of extent to which so far as a recipient is concerned they must offer up some evidence of value and the Court must make some determination of value where there has been facts such as these. 

We refer to it as this being a form of economic loss because, as I have said to Justice Hayne earlier, we are not inviting this Court to propound some general rule which will deal with many other quite different situations not presently before the Court.  We seek to extract this rule from the following propositions.  Firstly, that the central element of the defence is that the recipient has acted to his detriment on faith of the receipt.  The words:

has acted to his or her detriment on the faith of the receipt –

are in the plurality judgment in David Securities at page 385, point 6.  What we say is that, together with the further statement of reasons that flow on the balance of that page, is what I think I have said in response to one answer, best fits with the notion of disenrichment, rather than a more general concept of detriment, at least where one is concerned with economic losses.

The second proposition, that the recipient bears the onus of making out the defence is I do not think particularly controversial, although we have given some references to David Securities for that.  What, of course, is controversial in this instance is what has to be made out and the onus is upon the defendant but what must they show.  The third proposition, which again I do not understand to be controversial, is that the defence can operate pro tanto.  In that sense, it is often said to be in contrast to the principles of estoppel although, of course, the law of estoppel is perhaps moving away from the idea that when one has shown some detriment that then one does not go behind the represented state of affairs.

Certainly, there are English cases ‑ we have referred to them in our principal submissions, or an English case often cited ‑ that once there has been some detriment shown, then the court holds the party to the represented state of affairs whereas, in regard to change of position, the court simply determines the extent of the prejudice or detriment.  Now that ‑ ‑ ‑

HAYNE J:   Detriment in that context, the context at least of estoppel, to be understood in the fashion, analysed by Justice Dixon in Grundt?

MR BIRCH:   Yes.  I suppose I would say two things.  Certainly, so far as Australian estoppel law is concerned, the idea that once there is detriment established, one just holds the representor to the state of affairs, has perhaps never been adopted in quite that doctrinaire a fashion, and so courts have displayed a preparedness to find that one might have to grant a remedy which reflects merely the remedy needed to reverse the detriment.

HAYNE J:   But departure is what occasions the detriment, is it not?

MR BIRCH:   Yes.

HAYNE J:   Is that how you seek to have us understand the point you make in (i) at page 2 of your outline of oral argument?  How would you have us understand the notion of the recipient having acted to his detriment on faith of the receipt?

MR BIRCH:   We say that where the detriment is a straightforward economic loss, traders engaged in loss of commercial rights, then ‑ ‑ ‑

HAYNE J:   That seems to be injecting a notion of detriment different from that identified by Justice Dixon in Grundt.  I understand Grundt is concerned with estoppel.

MR BIRCH:   Yes, yes.

HAYNE J:   But is the detriment, the detriment that will follow if departure is permitted?  What is the detriment of which you speak in (i)?

MR BIRCH:   The detriment we are referring to is essentially the loss of value.  So this is where the disenrichment concept becomes important.  One looks, not to see whether there is loss of a legal right or a right which may have a notional or face value of $308,000 or whatever, rather what one looks to is to see to what extent the position of the recipient is in economic terms, reduced or rendered worse off, in consequence of what has happened since the payments were received.

HAYNE J:   That would embrace any case in which the recipient has paid the money away, would it not?

MR BIRCH:   If they had actually paid the money away, it would.

HAYNE J:   That is to enlarge the defence to one of some width, I would think. 

MR BIRCH:   Well, I should perhaps add this, your Honour.  Paying the money away in circumstances where it is clearly reversible may not be sufficient.  One of the issues I will deal with is where someone receives a substantial payment – uses it to, for example, pay down their home mortgage.  The general view is that there is no reason why they ought not to disgorge that gain.  They have to borrow the money back.  They have to make reparation.  Nevertheless, the fact is that they have ‑ ‑ ‑

HAYNE J:   That is the theological approach to the problem, Mr Birch, not one I find especially helpful.

MR BIRCH:   Well, your Honour, it is looking, in very practical terms, to see – just to use a commonsensical phrase – how worse off the recipient is if they have to disgorge the payment than they would have been had they not received it in the first place.  So if one takes the mortgage example that I just used, the person who has paid their mortgage down but then has to draw it back up again is ultimately no worse off than if the money had never been received by them.  They would have, let us say, owed the bank a million dollars before.  After they have disgorged, they still owe the bank a million dollars.  We say that that practical – using the “no worse off” terminology – is the gist of the test.  That is what this Court was, essentially, speaking about in David Securities and that is the sort of idea that lies behind the concept of detriment. 

KIEFEL J:   But, what you are – in David Securities it was a much narrower notion acting to detriment on the faith of the receipt – probably by analogy to estoppel.  Disenrichment would have the effect of effectively allocating the risk of what occurs to the plaintiff, would it not?  It is much broader, much broader than that.

MR BIRCH:   No, we would suggest that it does not do it for this reason.  The disenrichment, after all, is based upon proper determination by the court of the value that has been lost through the conduct of the defendant.

KIEFEL J:   Whatever they do?

MR BIRCH:   Yes.

KIEFEL J:   The plaintiff takes the risks of whatever they do?

MR BIRCH:   Well, if we took this particular case, the defendants were in a position where they had rights that they could enforce to recover the debts that one should have foreseen as, coupled with very substantial risks, they would make a full recovery.  If one was engaged in apportioning a value to it on a Sellars v Adelaide Petroleum‑type test, one might say that it would be unlikely that they would have had – let us just say the judge at first instance had said a 30 per cent prospect of making a full recovery of those debts. 

So, they obtain payment which now pays them in full and they say we do not have to return any money at all.  Our argument is that what they have done is they have converted a risky problematic recovery which was unlikely to have yielded 100 cents in the dollar into a certainty.  They now have achieved 100 cents in the dollar.  They have achieved that as a result of my client’s mistake.

KIEFEL J:   This goes to the question of whether it is equitable for them to retain it then, does it not?

MR BIRCH:   Our submission is that to answer that question the best approach is to ask oneself how are they worse off.  If, for example, one looks at their position before they receive the payment and say they had some very questionable legal rights with substantial risk associated, you would not – if they were marketing those choses in action or factoring them, they would not get a sum that would have been remotely close to 100 cents in the dollar if they had sought to sell them to Dun & Bradstreet.  Yet, they have converted those not particularly valuable rights into very valuable ones as a result of my client’s mistake. 

Now, if a court was to say, well, we will give you credit for 25 per cent of their value to reflect the marketable value of those rights given all the risks associated with them, then there would not be much that I could complain about if the court had gone down that path.  They would have had to disgorge 75 per cent of the sum and they would have kept what the court determined to be the value that they had lost assuming that, in practical terms, they really had lost it.  But that is a proper balancing of the equities, if one approaches it in that fashion.  Our submission, of course, is that to answer the question how do you balance the equities the way you do it is this valuation ‑ ‑ ‑

KIEFEL J:   There is a question, do you balance the equities?  What case says that you do?

MR BIRCH:   We do not say that there is any authoritative statement that it is a balancing of equities exercise.  Indeed, we urge the Court to go away from that direction.  Our submission is that the best ‑ ‑ ‑

KIEFEL J:   Conduct is not in issue here except to the extent that objectively it is obvious that each of the parties commercially is taking a certain risk which comes to pass.  I do not really understand why you need to get into such wide discussion as disenrichment where it is patently obvious what Hills and Bosch did on the faith of the receipt of the moneys.  The question is should they be obliged to repay it?  How do you answer that question?

MR BIRCH:   We say that the – well, perhaps if I go to look quickly at what the Court of Appeal said.  The Court of Appeal said that because they ‑ ‑ ‑

KIEFEL J:   I prefer you answered it in principle.  We know what the Court of Appeal said.

MR BIRCH:   The answer in principle is this, that ‑ ‑ ‑

KIEFEL J:   I should say not in principle, because that will get us back into the area we do not want to be in, perhaps factually might be useful – factually, evidentiary and by having regard to what is equitable in the circumstances of the case.

MR BIRCH:   Assuming that there was a basis for concluding that in practical terms the – Hills and Bosch did not take enforcement action between the date they received the payment and discovering the mistake in March, April.  So in that six‑month period they abandoned enforcement and so their argument is we have suffered a relevant loss which counts as a change of position because the enforcement that we may have taken in that period could have yielded money and, therefore, having lost the money that we might have got from that abandoned enforcement we ought not to have to disgorge the moneys that we received.  We say, well, the evidence suggests that, in fact, your attempted enforcement would have yielded nothing, that you were pursuing companies and entities that were hopelessly insolvent and your rights that you did not enforce were worthless. 

Had it been put against me that that is too harsh, there was a prospect, although not a great prospect, then in those circumstances the court could have attributed some value to those rights as it does when it has to do this in other sorts of case and if Justice Einstein had said “I think the value of all those rights or the value that might have been obtained from enforcement in that six‑month period was 20 per cent of the value of the rights”, then that would have been the loss that resulted from the change of position or the detriment and they would disgorge the balance between that and the amount that they were found to have foregone.  That is the approach that we suggest should have been taken.

CRENNAN J:   Do you accept on these facts there was more than mere receipt or bare receipt and, therefore, the only question for us is the value point that you are putting, or are you really keeping two balls in the air that somehow this is only a bare receipt.  It is a book entry and nothing further.  I just do not – you seem to conflate the value point all the time with an anterior question about loss of legal rights by constantly using expressions such as “questionable legal rights”. 

MR BIRCH:   I must apologise for that, your Honour.

CRENNAN J:   Where do we start, do you say?

MR BIRCH:   The phrase “bare receipt” is used by us to show that when the moneys were paid they were not paid pursuant to any contract between AFSL and Hills or Bosch.

HAYNE J:   Now, stop there.  That is to say, Hills and Bosch, you say, received money, which they may have expected because they were told it was coming, but to which they were not entitled.

MR BIRCH:   Yes.

HAYNE J:   They received money in apparent payment of invoices which they had not issued.  Now, the subsequent analysis that you make, however you cast it, seems to proceed from the premise that the subsequent dealings that Hills and Bosch may have with TCP bear upon, in some unstated fashion, whether Hills and Bosch are bound to repay that which has been paid to them by mutual mistake, by mistake not only of the payer, AFSL, but received by Hills and Bosch by mistake.

MR BIRCH:   I am not sure, your Honour, if that is the point I really wanted to make then. 

HAYNE J:   I am sure it was not.

MR BIRCH:   Perhaps I could put it this way.  The payment that is made, if, for example, the mistake had been uncovered two or three days after the moneys were received, then in that period of time there was only a remote prospect that Hills and Bosch could have made any successful recovery of what was owed to them.  We say that, in those circumstances, we would have been entitled to full recovery.  That still leaves the discharge argument.  I will get to that in a few minutes. 

It is because time goes by that Hills and Bosch are able to argue that, well, we had abandoned our recovery action and, given that five or six months rolled by, we might have managed to squeeze some money out of the TCP entities.  So the question then becomes, how does that work?  Now, in terms of balancing the equities, if one wants to adopt that framework, we say there would have been no equity in Hills or Bosch to assert against our claim had we turned up two or three days after the mistake and payments were made and demanded them. 

Does the fact that some months rolled by?  Well, our argument is that balancing equities rather connotes the notion that one is looking to whether there has been some form of unconscionable conduct by parties or representational conduct or something of that sort.  We say that is all inappropriate for this sort of an analysis here.

FRENCH CJ:   It is the unjustness of the retention we are concerned about, is it not?

MR BIRCH:   Indeed, but the unjustness really just boils down to nothing more than this; given that some months rolled by, is it the case that money that you might have managed to get in is now foregone by you?  You should have a credit for that money you might have got in and, therefore, you will only have to pay the balance.  What is the amount of that money you might have got in?  That is the value question, and that is the question that the Court of Appeal declined to embark on.

GAGELER J:   Do you really need to put it quite that way?  Can you not simply say that the detriment is the practical giving up of rights or inability to enforce rights, and that the extent of the detriment is the value of the rights that were given up or foregone?

MR BIRCH:   That is, indeed, in our submission, an acceptable way of doing it, provided one accepts that you have to go through the valuational exercise.  There is at least some passages in Justice Allsop and Justice Meagher’s judgment where they say if you give up a judgment debt or you give up a chose in action, and you cannot recover it back because of the irreversibility, then that is enough.  We say even if the transactions are irreversible, the discharges cannot be reversed.  Nevertheless, you still have to go through the valuational exercise.  If I have given up a debt that was worthless, I have not actually lost anything.  I am happy with that formulation, your Honour, if one accepts that you take the second step of valuing.

GAGELER J:   All I was wanting to explore was the necessity to jump straight to the economic analysis.  It seemed to me that you were tending to leave out an important step in what I had understood to be your argument.

MR BIRCH:   I was not intending to leave it out.  We were accepting that judgment debts were set aside.  The consent orders setting aside the judgment debts are in the appeal books.  Hills and Bosch re‑credited the TCP accounts and recommenced trading.  There was an alteration of legal rights that we cannot dispute, so we are not spending time on that, but we say that there was the second step.

KEANE J:   Mr Birch, how does your argument about disenrichment and valuing the extent of addition disenrichment?  How does that stand with a case like Holt v Markham where the pensioner spent the money and resisted the claim and no one suggested that in order to succeed in resisting the claim, the pensioner was obliged to demonstrate that his economic worth had diminished subsequent to the receipt so as to make it not unjust of him to resist the claim?  Holt v Markham would be wrong on this approach, would it not?

MR BIRCH:   Not necessarily, your Honour, but it involves two issues.  Firstly, in Holt v Markham, the person has actually spent the money in that they have not just simply credited it, debited it, given it away; they have bought things ‑ ‑ ‑

KEANE J:   But on your approach, you would have to value the things they bought to see if they were worse off.

MR BIRCH:   What this takes us into is the realm of what is called by the text writers “subjective devaluation”.  In other words, if I get a large amount of money and because I have got all this money, I now think I should go off and do things I would not otherwise do, for example, buy lottery tickets, then it may be that – let us assume the commercial value of the lottery tickets is precisely the money I have paid for them – the fact is I would not have bought them had I not believed that I had this excess wealth.

Indeed, the United Kingdom Supreme Court in Sawiris has recently said although they did not have to decide it, that in principle they accept that subjective devaluation would be available where people could argue that the benefit that they received did not have the market value for them in their hands, and so those sorts of cases may well be analysable from the enrichment/disenrichment perspective, taking that into account.  That does not come into play in this case at all because the rights that were being dealt with were straightforward economic rights.

It is always discussed in examples where someone gets the money and goes off and spends it on expensive restaurant meals or things like that.  Their market value might be precisely what they pay, they may have had a net increase in wealth, if you wish, but they are entitled to argue that I did not want that wealth unless I got it as a windfall and now that I learnt I did not get a windfall I cannot be obliged to pay it back.

Your Honours, could I do this in order to try and keep to my time?  I have said why, in our submission, the Court of Appeal erred in its approach to the wider facts argument.  The way they approached the case was to say simply because the opportunities for recovery of the whole sum had been abandoned and not taken up, that that was an answer.  They adverted to the forensic difficulties in the path of Hills and Bosch as to proof of those matters and I have said, I think, almost all I can as to why we think they erred.

I could mention two further matters only.  In answer to this question about assessing it, we do not accept – we do not deny that it can be difficult but the law is familiar with this.  We have in our primary written submissions under the heading “Proving Detriment and Valuing Lost Opportunities” from paragraph 64 referred to matters such as Sellars.  Amann Aviation is also referred to by our opponents, although we say when one reads the whole of the passage of Justice Brennan’s judgment to which they refer that it is supportive of our position.

In particular, what we also say is that the process of valuing these counterfactuals, what would have happened had I taken enforcement action but did not take enforcement action is precisely what the law presently does in the context of actions against, for example, negligent lawyers who have allowed limitation periods to expire.  It is not enough to prove that the solicitor negligently allowed a limitation period to expire. 

If the action was against a defendant who would have been unable to pay the judgment debt, then there may be no damages awarded against the solicitor, and that is clear from decisions of this Court in cases such as Nikolaou v Papasavas which we have referred to in our decisions.  This Court says in Nikolaou v Papasavas that these are hard things to prove and the Court permits the plaintiff to invite a broad brush approach to the proof of these matters.  Sorry, Justice Crennan is about ‑ ‑ ‑

CRENNAN J:   I do not want to cut you off, so please finish what you were about to ‑ ‑ ‑

MR BIRCH:   No, I was just saying that we say that the instruments are there to resolve these issues but the Court of Appeal did not purport to engage in any of that form of analysis and it ought to have done so.

CRENNAN J:   In paragraph 67 of your written submissions to be found on page 17, you make a number of – or state a number of negative propositions that the appellant does not suggest that a lost opportunity would involve proving of any “liquidated sum” or “actual financial expenditure” and so on, or “be established with precision”.  Is there a question on the facts here that once Hills and Bosch have established what they did establish in relation to the history of them seeking to recover their debts and so on, does the onus shift at that point?

MR BIRCH:   No.  We say that the onus does not shift and they had to go somewhat further.  There is some material in the appeal books indicating the financial state of the TCP entities in Musico and Skarzynski in mid‑2010 when there were winding‑up orders and bankruptcy orders made and it is a sorry picture of deep insolvency.  We have summarised that in bullet‑point form on the schedule to the three‑page handout.  That shows that Mr Skarzynski, for example, went bankrupt, I think, with $10 million worth of debts in excess of his available assets.  The companies were all insolvent.

Now, of course, nobody knows what the position of the companies was back when the payments were received in late August, early September 2009, and what money was floating around.  What the defendants say is, well, there could have been some money floating around – who knows, we might have got it.  Our response is, yes, but you had to show that.  You could have got an accountant to look at the books and come along and said, there was enough cash flow, there was a prospect that they would have got recovery – maybe not 100 cents in the dollar, maybe 50 cents in the dollar, or whatever. 

That is the sort of analysis that is led at trials regularly.  None of that was embarked on.  It was simply stopped at the level of saying, well, we would have carried on with some recovery action had we not got the money.  That is the gist of our complaint really, that they did less than half the job and then they were let off having to do it. 

Your Honours, I am getting close to the end of the time that I have allotted after discussion with my opponents.  Could I go down to the question of the defence of discharge and say something ‑ ‑ ‑

KIEFEL J:   Just before you do, Mr Birch ‑ ‑ ‑

MR BIRCH:   Yes.

KIEFEL J:   ‑ ‑ ‑ and this may be forcing you to repeat something that you have probably said many times.  In essence, your answer to the “change of position” defence is that no detriment has been proved. 

MR BIRCH:   Correct.

KIEFEL J:   That is the top and bottom of it, is it not?

MR BIRCH:   That is correct, although, of course, what we say is that there is a pathway that one had to go down in proving it and they never embarked on that pathway.  It is not, for example, as if they called some evidence that was unsatisfactory.  It is not a factual issue.

KIEFEL J:   So we are not in the realms of quantifying loss, really.  What you are saying is they may have done things on the faith of the receipt of the moneys, but they have proved no detriment followed.

MR BIRCH:   They would say, I suppose, that they abandoned recovery action and that is a detriment.

KIEFEL J:   That is their act.  That is their conduct.

MR BIRCH:   That is their conduct and that is insufficient, we say, because there needs to be – if I might pick up the point Justice Gageler made to me – they should have taken a separate step.  I was asked whether I would analyse it that way and maybe I should embrace that.  Yes, there was a detriment in the abandonment of some legal rights but they needed to then present to the court some evidence as to value that they had abandoned.

FRENCH CJ:   So, if we knew nothing of the asset position of TCP, of the companies and of Mr Skarzynski, and knew only that they had abandoned recovery action and not exercised legal rights, that would be insufficient to establish detriment.

MR BIRCH:   Indeed, because as one can easily imagine, the TCP companies may have been rich and been able to pay with ease or they could have been so hopelessly insolvent that there was no remote prospect that they could have made a recovery.  On the one basis, they would have given up something very valuable.  On the other, they, clearly, would not have been entitled, we say, to anything.  They want to invite the Court to conclude, without having shown where along that continuum, they lay.  But, nevertheless, they should be treated as having given up something that was worth 100 cents in the dollar.

KEANE J:   But they do not know whether they are entitled to resist your claim until there is this inquiry or this investigation in the course of the action in relation to the relative solvency at various times of the TCP companies.  It is a funny thing, is it not, that on your view they are not able to say, when you make demand, that they are entitled to resist it because they do not know whether or not if they re‑open the transaction they are going to be able to recover from Skarzynski or not.

MR BIRCH:   There is certainly an onus on them to do some work and that might mean that they do not know quickly and easily what their position would be.  Mind you, there would be many situations in the law, one might think, where someone meeting a demand would know immediately what the strength of their position is and ‑ ‑ ‑

KEANE J:   But they just would not know, not immediately.  They would only know after investigation, possibly only after reaching the discovery stage in the action or third party discovery or the completion of the receiver and liquidator’s reports.

MR BIRCH:   Yes, but that is quite possibly the case with other sorts of action, quite possibly the case with estoppel actions where one may not be aware or able to establish the extent of detriments.  I mean, I accept what your Honour is saying is that it appears to put them in a difficult position but, then again, they have a very large amount of money now which, in our submission, was improbable they would have received if they had just been left to the pursuit of their original rights.

KEANE J:   Or unless the old cases in equity, one of them is the judgment of Lord Justice Bowen where he said where accounts have been settled, it is a detriment in being asked to re‑open the settled account.

MR BIRCH:   It is a detriment but if ‑ ‑ ‑

KEANE J:   Because commerce proceeds, commerce goes on.  The moving finger having written moves on ‑ ‑ ‑

MR BIRCH:   What we say is that one cannot presume that that sort of a detriment ought be valued at the full face value of the whole payment.  For example, let us assume that they had got an accountant to look at the materials and the accountant had come along and said well, look, doing the best I can, this is the position but I have got problems and he identifies them and things of that sort.  Then, in those circumstances, the court could say, well, they have done the best they can and there are unavoidable problems which have been highlighted by their witness.  They did not do that. 

In our submission, it cannot be the case that they can half do the case, come along and say, well, it is very difficult without even having brought the evidence that demonstrates that it is very difficult, it is a presumption that is being made by the Court of Appeal and by the respondents.  Without the court ever being told, look, I have looked at the books of account and what is available and it is very difficult, who knows, maybe it was not that difficult.  Certainly, these companies were hopelessly insolvent nine, 10 months later.  Possibly it was not that bad in October, November, but they never proved that.

Your Honours, I think I have to say something about the discharge point quickly, since I am almost at the end of my time.  There is really two issues, or there are two approaches to it.  Justice Allsop has suggested that if a recipient discharges a debt, then that may constitute a complete defence, even though there was no intention on the part of the payer that the payment would discharge a debt.

Now, I will not spend a long time on that because we say that that simply cannot be right and, indeed, in the article by Professor Burrows, he suggests that that is incorrect and the reasons that he gives I would adopt for the purposes for these submissions.  Perhaps I can do it really quickly by referring to the Banque Worms decision that is referred to by Justice Allsop.  This is one that his Honour says establishes or helps establish the proposition that if I use money to discharge a debt, then in those circumstances it will operate as a complete defence, even if the payer did not intend it to be for that purpose. 

Justice Allsop’s analysis of this decision, his general statement is at paragraph 114 of the judgment; that is 2299 in volume 5.  He says that if Hills and Bosch in fact discharged a debt, that is sufficient without looking at AFSL’s intention or whether there was a contractual relationship with AFSL.  He says in paragraph 117 that this is a principle which can be got from cases like the Banque Worms Case and he analyses that one commencing at page 110 and following in his judgment.  It was the case where the Australian company, Spedley, paid money to its New York agent who paid twice, banks, when Spedley only intended one payment to be made. 

The point is simply that, in fact, on a careful analysis, in my submission, the case proves the opposite.  Spedley had a contractual obligation to the bank, Banque Worms.  The money went through its New York agent, although it intended to pay somebody else.  There were, therefore, complete contractual relationships that were not void through common mistake or whatever.  There was simply a mistaken payment made.  The recipient of the money was owed money, which was owed by the payer through its agent.  In those circumstances, it is not like our case at all where there is a complete disconnection between the payer on the one hand and the recipient on the other as a result of a void contract for common mistake.  That is perhaps a somewhat overly compressed analysis, borrowing from Professor Burrows, but for that reason we say you simply cannot get to the stage in this particular case where there can be a defence of discharge.

I think I will have to probably rest the remainder of my argument there on what has been said by Professor Burrows.  The alternative way is the way that Justice Meagher dealt with it in the Court of Appeal.  Justice Meagher said that there is a change of defence argument which derives from the discharge, and this arises because the money has been paid away, he says, notionally ‑ ‑ ‑

HAYNE J:   What page?

MR BIRCH:   It is page 2336 in volume 5, at paragraph 209.  Justice Meagher says at the beginning of paragraph 209:

In applying the received funds in discharge of debts, what each of Hills and Bosch did was equivalent to paying those funds away to the TCP companies for no consideration or value in return and to receiving them back in consideration for the discharge –

He then says towards the bottom of this paragraph, and this is the critical line –

If Hills and Bosch are to be regarded as having given value, in the form of the discharges, equivalent to the value they received, the position remains that overall they suffered detriment in paying the funds away on the faith of their receipt.

We simply say why should they be regarded “as having given value, in the form of the discharges, equivalent to the value they received” if the discharges were discharges of legal rights that would ultimately have turned out to have been worthless.  What we say is this, that while they gave away legal rights on the assumption Justice Meagher is making, and they may have had a face value equal to the payments, one still has to engage in the valuation exercise.  In that passage, Justice Meagher is treating that argument as another form of “change of position” defence.  We say if this is a change of position, then the valuation exercise has to be gone through.  You cannot simply say “I discharged a debt worth $300,000 on its face; I get credit for $300,000”.

BELL J:   Justice Meagher relies at paragraph 211, as President Allsop had relied, on Taylor v Blakelock, making the point that Justice Keane made to you a few moments ago, to the notion that it is sufficient to establish the payment of the debt for valuable consideration, and to invalidate the transaction would be “to unsettle business”.

MR BIRCH:   Our response to that is this, that if there had been some form of contractual relationship which existed between AFSL and Hills and Bosch, then that argument would be a stronger argument.  This is where I think I used the phrase “bare receipt” in our submissions at one stage; because there was no contractual relationship between AFSL, a void one at best, the argument about security for receipt really can have far less weight.  If, for example, money just turns up in my bank account, for instance, then the fact that I have received it does not really, one would have thought, attract a strong argument that therefore I should have a presumptive right that will counterbalance your right for disengorgement.  There was an expectation, admittedly, on the part of Hills and Bosch that they would receive the moneys, but not one that we had done anything to cause.

So our response is that the security of receipt argument, that is discussed actually in the Banque Worms Case, and one can see its value in the Banque Worms Case because here you have got a series of parties, all of whom are engaged in business transactions with each other.  There is no fraud.  It is purely an innocent mistake; someone misreads a telex and in those legitimate and lawful business relationships which link each of the entities, there is a true value in security for receipt, but not, we say ‑ ‑ ‑

HAYNE J:   Well, a possible point of view is that the only relevant relationship of debtor and creditor is between TCP and either Bosch and Hills.  On the face of it at least, AFSL was neither debtor nor creditor to Bosch or Hills, was it?

MR BIRCH:   Yes.  Your Honours, I need to just say two things about the partial defences.  Hills relied on three elements, the lease payments that we had received from – several lease payments we received from TCP companies before they petered out.  They came to about some $50,000 worth.  There was a GST credit that we got because we thought we were buying equipment, and also in regard to Hills there was the $21,000 worth of credit that was extended.  The situation is unfortunately confused. 

As a matter of principle, we say, they get the $21,000 worth of credit they extended.  The lease payments we got and the GST credit we got a recoupment.  They do not constitute part of a “change of position” defence and there is nothing inequitable in us keeping them and that would be our preferred position.  However, I have to accept that there were some concessions made by counsel for AFSL before the Court of Appeal. 

In transcript he says, in effect, to a question from the Chief Justice that he surrendered on the lease payment and the GST payment.  He, in a written note, conceded the GST payment but not the lease payment.  I think I have to accept that the concession was clear and unequivocal on the GST payment but, nevertheless, we say – we do not seek to disturb $28,000 worth of the judgment for that reason, but if Mr Jackman persuades you that our concession went further then I suppose he will get credit for the $55,000 lease payment as well. 

The position of Bosch is that it paid away two TCP entities a sum of the order of $52,000‑odd and they were clearly paid away in reliance on the

payment and we do not dispute that they constitute legitimate changes of position.  I think there is an arithmetical error in the order, the number that we have sought in our statement of orders.  Making that concession, that is in regard to Bosch, the order we seek should be $145,673.65.

FRENCH CJ:   Thank you, Mr Birch.  Yes, Mr Jackman.

MR JACKMAN:   In our respectful submission, the statements of principle by the House of Lords and by this Court in the early 1990s as to the fundamental nature of the “change of position” defence have stood the test of time and that there is no occasion for this Court now to seek to diminish the scope of the defence as it was articulated, particularly in David Securities. 

Can I take those two landmark cases in order and begin with Lipkin Gorman, and although there are some tentative passages in the reasoning of Lord Goff in Lipkin Gorman [1991] 2 AC 548, the central element of his Lordship’s reasoning is the statement of principle on page 579. The paragraph that begins just before the letter F poses the rhetorical question:

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.

That then finds a couple of echoes in this Court’s reasoning in David Securities a year or two later in 175 CLR.  If I can go first to page 379 at about point 8 the Court says:

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.

So, the generality with which their Honours spoke about any matter of circumstance is a fairly clear indication that the word “unjust” was not one to be narrowly construed or applied and if one then goes through to page 385 in the first full paragraph, their Honours say:

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.

Again, the language of Lipkin Gorman and dropping down several lines:

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.

It is our submission that that is a statement of principle that has withstood the test of time, the question of detriment and the question of injustice not confined to measurable, financial diminution in what was received, although many cases will involve that.  It is certainly not confined to the narrow question of ascertaining and measuring how much of the defendant’s initial enrichment has survived in the defendant’s hands. 

The breadth of the defence can be ascertained by reference to the principal factors which go towards the kind of analysis that both the House of Lords and this Court spoke of, the first being to identify the detriment suffered by the defendant.  It need not be an actual diminution of assets such as by specific expenditure on something which ordinarily would not have been bought.  It can also be expressed in terms of lost opportunities.  It certainly cannot be expressed invariably in terms of disenrichment or measuring how much of an enrichment has survived in the defendant’s hands.

There is also the moral element of insisting on the defendant’s good faith and there is the causal question of linking the payment and the conduct by the defendant, or by some third party, which has brought about the relevant change of position.

In the present case, we rely on four elements of detriment.  The first element is Hills discharging $308,000 of the debt owed to it by TCP.  Your Honours will find in the Court of Appeal’s reasoning in Justice Allsop’s judgment at paragraph 28 and Justice Meagher’s judgments in paragraph 176, consideration of that element. 

One question which arose during my learned friend’s address was how was it that Hills knew that the $308,000 was connected to TCP?  Can I supplement the references that my learned friend gave the Court on that question by taking the Court to volume 2 of the appeal books, first to page 825?  Page 825 is part of an affidavit by Ms McLeod who was the credit manager at Hills with responsibility of supervising the TCP account and at page 825, paragraph 80 of her affidavit, there is an extract from an email from Mr Muir – he was the general manager of finance at Hills – which, in turn, forwarded an email from Mr Skarzynski – all of that dated 21 August:

‘Dear Andrew,

We wish to confirm that we will arrange to EFT the first payment for the amount of $308,000 into your account on Tuesday, 25 August and will advise when the balance will be paid -.

signed off by Mr Skarzynski.  Then, over the page, Mr Muir wrote:

‘If they do not pay, send the letter of demand Wednesday regardless and get the clock running.”

So, it is a matter at the front of their minds.  Then, at line 20, there is a statement from Mr Muir – sorry, this statement from Mr Muir refers to a discussion Ms McLeod had with him at or about this time when he said:

If TCP do not make the payment . . . on 25 August, please take steps with our legal advisers to demand payment to commence legal proceedings.’

Dropping down to 81, on 25 August – that is the date of the promised payment, there is an email from Mr Skarzynski to Mr Muir saying:

‘We wish to confirm that the amount of $308,000.00 has been transferred into your account today. … We wish to take this opportunity to thank you for your support in this matter.’

To complete the topic, if your Honours go through to page 970, Mr Muir, in his affidavit – part of which is at page 970, refers at the top of that page, to that discussion with Ms McLeod about:

‘If TCP do not make the payment on 25 August, please take steps with our lawyers to demand payment to commence legal proceedings.’

Then there is an email on 24 August in which Mr Skarzynski asks Mr Muir to contact him and Mr Muir made the call and Mr Skarzynski, says:

‘Andrew, thank you returning my call, I am simply calling to confirm that we will be sending to you, as promised, the amount of $308,000 by EFT tomorrow.  When you have received the payment could you please reactivate our account ‑

and so on.  So there was no doubt by reason of those communications that the 308,000 was in connection with the TCP account.  Then ‑ ‑ ‑

GAGELER J:   Mr Jackman, can I just ask you about that first detriment?  You put it in terms of Hills discharging $308,000 of a debt owed to Hills by TCP ‑ ‑ ‑

MR JACKMAN:   Yes.

GAGELER J:   Discharge, of course, is a legal conclusion.

MR JACKMAN:   Yes.

GAGELER J:   What happened in fact was the crediting of an account.

MR JACKMAN:   Yes.

GAGELER J:   What additional facts, if any, do you rely upon to demonstrate the discharge of the debt?

MR JACKMAN:   Well, there is an outward communication by ‑ it is not just an internal book entry.  There is an outward communication by Hills to TCP that that has occurred and the account is then reinstated and then there is conduct, which I am about to move to on my second aspect of detriment, about the continuation of their trading relationship.

GAGELER J:   So the position, in your submission, is that there no longer existed a debt owed by TCP ‑ ‑ ‑

MR JACKMAN:   That is right.

GAGELER J:  ‑ ‑ ‑ to Hills.  So Hills, notwithstanding that Hills itself was the victim of fraud on the part of an agent of TCP, if it sued TCP in debt, would be met by a defence of discharge.

MR JACKMAN:   Correct.  That is right.  It would be a good defence.

KEANE J:   It would not even be entitled to prove in the liquidation of TCP.

MR JACKMAN:   That is correct, not for that debt, which has been discharged.  Yes.  Then the second aspect of detriment is that Hills reopened TCP’s account and continued trading with TCP.  Again, Justice Allsop refers to that at paragraph 28 and Justice Meagher at paragraph 176.  One matter which emerges from that is that TCP’s money was going towards the purchase of further goods and TCP’s money was also going at that time towards making rental payments to AFSL and those are summarised in Justice Allsop’s judgment.  If your Honours go to paragraph 36 and 37 at page 2271, paragraphs 36 and 37 in the learned President’s judgment collect the various payments that were made to AFSL during the following six months and they total about $128,000.

FRENCH CJ:   In terms of detriment to Hills, associated with the continued trading, what do you say to the proposition that Mr Birch has put, that that was the $21,000 you were left lamenting for at the end ‑ ‑ ‑

MR JACKMAN:   That is part of it, but in allowing TCP to continue to trade, we are allowing TCP to trade with all of its creditors.  We do not know what it was paying other creditors.  We do know what it was paying AFSL during the six month period, which was a very substantial amount of money, 128,000 of rental payments to it.  The point is that is money which could have been used to repay our debt.  My learned friend said that there is a state of complete ignorance about TCP’s financial position in late August 2009, which is not so.  We cannot say conclusively what its financial position was, but we do know that it was continuing to trade and it was making payments to us, and it was making very substantial payments to AFSL, which is all money that could have been paid to us had we enforced the $300,000‑odd debt there and then.

The third element of detriment is that we ceased to take steps of engaging lawyers to enforce the debt and to seek security.  Before I go to the evidence, can I just go to Justice Allsop’s paragraph 29 on the previous page, 2269.  Justice Allsop in paragraph 29 does refer to the primary judge’s reasons:

that it was “not altogether clear that recovery actions would have immediately commenced in August 2009 if payment of the $308,000 had not been made.” –

and there are other findings as to likely conduct of Mr Skarzynski –

With respect to the primary judge, the evidence of Mr Muir –

I will come to that in a moment –

which was not the subject of challenge, makes it tolerably clear that had the $308,000 not been received, Hills would have requested its legal advisers “to demand payment [and] to commence legal proceedings”.  Hills challenges the finding in [74] as to likelihood of challenge, and justifiably so.  The finding should have been made that had the payment not been received when it was, Hills would have requested its legal advisers to demand payment of the balance of the stopped account and would have begun legal proceedings . . . These legal actions would have been against any debtor company and the guarantors, [the two directors].  Mr Muir also said in his affidavit that he would have instructed Ms McLeod to instruct the lawyers to seek security or alternate payment arrangements, inferentially if such possibilities were available.  This evidence was not challenged and should be accepted.

The evidence to which Justice Allsop is referring is in volume 2, once again.  If I can take the Court first to page 973; this is the same affidavit of Mr Muir that I was taking the Court to a little while ago, specifically at page 970, but on this point, if I can ask the Court to pick up the story at 973, the 308,000 has been received and Mr Muir has told Ms McLeod to reopen the account on a reduced credit limit.  Paragraph 32 takes up the story.  He says at that time that he did so:

I had no reason to believe there had been any problem whatsoever with the payment . . . of $308,000 . . . Indeed I relied on that payment having been received from TCP in deciding to agree that Hills SVL should extend further credit to TCP and restore the account with a limit of $200,000.  I would never have done so if I had any reason to believe that Hills SVL was not entitled to receive the payment of $308,000 which had been received on 25 August 2009 ‑

Then going over to page 976, paragraph 44 at the very foot of 976 –

I would not have authorised, in the terms which I did on 7 September 2009, the restoring of the account and continuing to trade with TCP on a credit limit of $200,000 unless Hills SVL had been paid the $308,000 . . . If that payment had not been received, I would have instructed [Ms] McLeod to take steps to commence legal proceedings to recover payment –

and the contemporaneous emails back at 970 prove that point –

and to place pressure on TCP and its directors to make arrangements to secure payment to Hills SVL.  I was aware that Hills SVL held personal guarantees from each of the directors and I would have directed [Ms] McLeod to instruct our external lawyers to issue proceedings against [the directors] in relation to their personal guarantees and to seek to negotiate security or alternate payment arrangements.  I have previously pursued and entered into such arrangements with other customers of Hills to secure payment.

Now, Mr Muir never gets to the point of finding out what would have happened if he had put the weights on Mr Skarzynski and Mr Musico because he had received the 308,000 and did not take those steps.  What we do know is that the plaintiff itself, AFSL, did take advantage of that opportunity and a question was raised as to how that opportunity – that is, to get a mortgage from Mrs Skarzynski – came about. 

The answer to that is in appeal book volume 1, at page 206.  This is part of an affidavit of Mr Sofi who was a director of AFSL and he recites in the paragraphs leading up to paragraph 149 the way in which he put the weights on the directors of TCP to pay their debts which were in default.  At paragraph 149 out of the blue he gets a telephone call from a lady, Eleanor Howard, and she says:

I act on behalf of Anthony Musico –

one of the directors –

in relation to some other issues with Total Concept.  I have advised my client not to attend the meeting –

it was a meeting to discuss arrangements to pay the debts of TCP, and further down at line 25 or so –

Once I have reviewed the documents, I will come back to you.  There are some issues with these blokes.  Have you guys thought about a mortgage over the property of Skarzynski’s wife?’

So the idea comes from the TCP camp, namely, a solicitor who is acting for the fellow director of Mr Skarzynski, namely Mr Musico.

HAYNE J:   You speak of the TCP camp as though it is acting in complete unity and lockstep at that point; possibly not, Mr Jackman.

MR JACKMAN:   Possibly not, but tensions often do arise between directors and these sorts of circumstances and it may be somewhat optimistic, if not Pollyanna‑ish to think that they were always on good terms with each other in the crisis.  But the point is that as soon as a creditor does put the weights on the directors and on the company itself to pay debts, then out pops the suggestion, well, Mrs Skarzynski might give you a mortgage over her property.

There is no reason to think that six months earlier, if Mr Muir had taken the steps that he says he forewent as a result of the receipt of 308,000, then similar kinds of solutions may have been forthcoming.  It may have been different.  It may have been a refinance at that time.  It may have been some other kind of security, but one of the things which may well have emerged was that there was equity in Mrs Skarzynski’s house and she was willing and able to give a mortgage to provide security for outstanding debts.

That is the material that Justice Allsop summarises at paragraphs 43 to 46 and at 53 – I do not think I need take your Honours to the evidence, but paragraph 53 is a useful collection of propositions about the value that ultimately emerged when, six months after our opportunity was foregone, AFSL did put the weights on TCP and the directors to resolve their account and paragraph 53 recites ‑ ‑ ‑

FRENCH CJ:   Page?  Sorry.

MR JACKMAN:   Sorry, paragraph ‑ ‑ ‑

FRENCH CJ:   Page?

MR JACKMAN:   Page 2275, I am sorry, does recite that the property had been sold and, at the date of the hearing of the appeal, there was:

a sum of $512,000 lay in Court awaiting resolution of the dispute ‑

That is the dispute between rival financiers of TCP’s. In the event, after judgment was reserved but before judgment was given, that dispute between TCP’s financiers was resolved in favour of AFSL. The decision is (2012) NSWSC 1004. The 512,000 actually went to AFSL. So it is a very strong case in terms of weighing injustice, in the language of Lord Goff, because we say we forewent a valuable opportunity of receiving payment, or security for payment, or some alternative arrangement, and it is the very opportunity which the plaintiff actually availed itself of.

BELL J:   How do you deal with the primary judge’s findings, in this respect, at 2183, paragraphs 76 and following, where his Honour seems to make to some finding respecting the significance of the role of a Mr Christowski in terms of the willingness of Mrs Skarzynski to give security for TCP’s debts?

MR JACKMAN:   Mr Christowski was the representative of Jetobravo Pty Ltd – a principal of Jetobravo Pty Ltd – which was the third defendant which dropped out ‑ ‑ ‑

BELL J:   I see.

MR JACKMAN:   ‑ ‑ ‑of the case by the time of the appeal.  There was a question of whether some inference could be drawn from statements made to Mr Christowski as to Mr and Mrs Skarzynski’s ability and willingness to provide for Jetobravo’s debts in this sort of way.

BELL J:   At 76(1) and (2), the primary judge does not seem to have seen the loss of the opportunity in quite the way you characterise it.

MR JACKMAN:   With great respect to his Honour, he missed the force of Mr Muir’s evidence in paragraph 44.

BELL J:   Does the Court of Appeal come to that conclusion?

MR JACKMAN:   Yes.  That is the point that Justice Allsop ‑ ‑ ‑

BELL J:   Where do we find that?

MR JACKMAN:   That is the point that Justice Allsop makes at paragraph 29, which is not the subject of appeal.

BELL J:   I thought at paragraph 29, his Honour is making a clear rejection of the finding at paragraph 74.

MR JACKMAN:   Yes.

BELL J:   Where do we find the treatment by the Court of Appeal of the finding at 76?

MR JACKMAN:   That may well be a typographical – I am sorry.  It seems to be a typographical error in paragraph 29 in referring to 74 because the quotation, attributed to paragraph 74 at the very start of paragraph 29, is actually from paragraph 76.

BELL J:   Yes, I see.

MR JACKMAN:   So it seems to be an intended reference to paragraph 76.  Paragraph 74 is simply recording part of your Honour’s reasoning in Palmer v Blue Circle, so it is an error – a clerical error, if you like, in paragraph 29.  It should refer to 76.

KIEFEL J:   Mr Jackman, the detriment to which you refer bears similarity to the detriment in estoppel cases which do not require quantification, although they might be subject, one imagines, to rules such as the de minimis rule but they look to the alteration of position based upon reliance.  However, the “change of position” defence was lighted upon, was it not, not the least because of some deficiency seen in estoppel operating in circumstances such as this?

MR JACKMAN:   That is right.  The main problem with the estoppel defence is the requirement of a representation.  This is a point Lord Goff makes forcefully in Lipkin Gorman.

KIEFEL J:   Because it will involve a third party?

MR JACKMAN:   Yes.  There is no need to have a representation.  What one has is conduct in reliance on the validity of the receipt, on the faith of the receipt. 

KIEFEL J:   So the receipt takes the place of the representation, but you say that the analogy with detriment is, nevertheless, a good one?

MR JACKMAN:   Yes, we do.  It is a particularly good one in terms of lost opportunities of this kind and of a kind which I am about to come to under our fourth head of detriment.  This is a point that is specifically made by Justice Allsop in his Honour’s paragraph 165.

HAYNE J:   Page?

MR JACKMAN:   At 2319 and 2320.  At the very top of 2320, his Honour there refers to Delaforce v Simpson‑Cook which is an equitable estoppel case, and his Honour is drawing the analogy by the reference to Delaforce v Simpson‑Cook with equitable estoppel, and it is a point which Justice Meagher takes up with the specific approval of Chief Justice Bathurst at paragraph 216 where Justice Meagher refers at line 32 to Delaforce in terms of the detriment for an equitable proprietary estoppel case à la Delaforce v Simpson‑Cook.

KIEFEL J:   But detriment viewed in this way is not the path that the English cases have taken.

MR JACKMAN:   The English cases are not prescriptive as to the kind of detriment that may be involved and there is nothing in the English cases, in our respectful submission, which says one cannot draw an analogy with detriment in the law of estoppel.  The critical difference is that one ‑ in the “change of position” defence one does not have to establish a representation.

KIEFEL J:   You do not see the English cases as moving to a more economically valued loss basis?

MR JACKMAN:   No, in fact, there is a decision of the Court of Appeal, we refer to Commerzbank.  We have given reference to that in our written submissions which expressly rejects that proposition, that the detriment must be a financially quantifiable amount.  I mentioned in answering your Honour’s question paragraph 165 at the fourth – paragraph 165 refers to a submission, or a point, that I was seeking to make, at about line 41 that Hills having foregone the steps to recover the debt or obtain security for the debt at line 41:

such steps or opportunities as were or might have been available to creditors of the TCP companies, including the obtaining of security from third parties . . . were arrogated to the benefit of AFSL.

In other words, it is a strong case for a “change of position” defence, that is, the detriment that we suffer showing the injustice of ordering recovery of a mistaken payment, because to the extent that our detriment consisted of foregoing an opportunity to secure our debt that is the very thing the plaintiff got.  So it is an unusually strong case and the word “arrogated” is an apt one, in our respectful submission.

Now, his Honour then moves to a consideration of difficulties of proof, which is really an introduction to our fourth head of detriment, namely, that Hills was placed in a position of being unable to demonstrate what would or may have happened if those opportunities had been pursued, and Justice Allsop says at line 50 on 2319:

The events of the six months cannot be undone.  Such steps of enforcement or securing of the debt cannot now be taken.  Whilst it can be accepted that the ascription of a precise monetary value to the lost opportunities of non‑discharge and enforcement of rights may be to a degree speculative, the difficulty in that regard stems from the timing and duration of AFSL’s mistake.  This length of time (inimical to the security of receipt of Bosch and Hills), and the difficulty of proof flowing from it, are relevant to the sufficiency of what has been proved in the assessment of injustice –

with a reference to Delaforce.  Then there is reference to the ‑

real and potentially valuable commercial opportunity to enforce or secure payment from their trade debtors.

Some of the difficulties of proof are then illustrated back at paragraph 164 when his Honour sets out what AFSL’s submission requires of commercial parties, and the first point that his Honour makes at 164 is that:

The TCP companies were some of Hills’ and Bosch’s trade creditors.  Hill and Bosch received, effectively, cash in the ordinary course of business.  On the faith of its receipt, they desisted in legal remedies and agreed to discharge the relevant debts of the TCP companies.  Six months later, the payer called into question its own effective cash payments to them.  For a successful change of position defence, on AFSL’s submissions, Hills and Bosch must disentangle the financial affairs of a number of related trade debtors over a period of six months, in circumstances of the kind of detail that the above‑described facts reveal, in order to demonstrate what would have happened on a hypothesised financial basis (with the possible intervening acts of unrelated third parties, such as other creditors secured and unsecured), and that that proved hypothesised reality would have been more advantageous than the position now obtaining of repaying the cash payment in full and prosecuting ‑ ‑ ‑

FRENCH CJ:   Well, that is not really a “change of position” point, is it?  That embodies some sort of premise about what you need to do to demonstrate a change of position and then you are saying it is unjust that ‑ ‑ ‑

MR JACKMAN:   One could argue about how to characterise Justice Allsop’s reasoning on the point, but the point is made crystal clear by Justices Meagher and Bathurst, that this is detriment that goes to change of position, and Justice Meagher refers to ‑ ‑ ‑

KIEFEL J:   Sorry, the requirement of the proof itself is detriment?

MR JACKMAN:   The inability to prove what would or may have happened in events six months earlier than the concrete case we can point to, which is what happened when AFSL put the weights on the debtor.

FRENCH CJ:   But you are putting that as a detriment which rests on some premise about the nature of the detriment you would have to establish.

MR JACKMAN:   Yes, and the nature of the detriment is the inability to demonstrate now what would or may have happened six months earlier than the time when AFSL acted.

FRENCH CJ:   Well, you say if it is necessary for us to demonstrate value to show detriment, because it is hard to do it now that is a superadded detriment.

MR JACKMAN:   Yes, it is stronger than harder, it is impossible.  This is a point that both Justice Meagher and Justice Bathurst make clearly as an aspect of detriment.  If I can take your Honours to Justice Meagher at paragraph 216, page 2339.  In 216 Justice Meagher refers to two aspects of detriment – this is on what is on, of course, the wider view of the facts.  One aspect is the foregone opportunities of obtaining payment or security for the payment.  Then at line 29, the second aspect:

was being placed in the position of being unable to demonstrate what would or even may have happened had that opportunity been pursued -

with reference to Delaforce where both those aspects of detriment were relevant –

in a case of equitable proprietary estoppel.  For the same reasons, an assessment as to whether it is inequitable to require restitution in the present case should take account of both of these aspects of detriment.

That is an aspect of detriment that is perhaps more common in cases of laches than of estoppel or change of position, but it is the routine way in which one makes out the detriment in a laches case to say that the time the plaintiff has taken to enforce its equitable rights has meant a loss or destruction of evidence than I could have called and I am totally unable to tell the court now what the evidence would have amounted to.

KIEFEL J:   But except that the “change of position” defence fastens upon the receipt of the money, not laches, not delay or conduct.

MR JACKMAN:   Quite, it is what happened, and what happened because of the receipt of the money is that opportunities were foregone for a period of six months and it is now impossible to say what would have happened if we had taken those opportunities six months earlier.

KIEFEL J:   Or perhaps more relevantly, all that needs to be said is what was said at page 2319, paragraph 165, by Justice Allsop that:

thereafter [they] ordered their commercial affairs on the basis of the discharge.

That is all that would be necessary on equitable principle, so is your acceptance or adoption of the difficulties of proof an alternative – a true alternative to that principle proposition?

MR JACKMAN:   It can be seen as an alternative or a supplementary feature to the detriment which was suffered.  Justice Meagher identifies as a separate aspect of detriment at 216 and that is a passage that Chief Justice Bathurst expressly approves back at page 2260 in paragraph 1 of the learned Chief Justice’s judgment where his Honour expressly agrees with Justice Meagher’s additional observations in paragraph 216.  Now, in a sense it is a separate aspect of detriment as in a laches case, that is.  I now just cannot prove what I would have been able to prove if I had been called upon at an earlier point in time and ‑ ‑ ‑

HAYNE J:   But casting the point as one of difficulty of proof may possibly be obscuring two questions which need to be confronted directly.  One, when are you assessing detriment?  Are you assessing detriment at the time of payment?  Are you assessing detriment at the time of sought recovery?  That is one set at issue.  Second, is detriment to be understood either as including or possibly being limited to detriment of the kind of which Justice Dixon spoke in Grundt, namely, whether the position is reversible and to talk about “I cannot prove it” seems to be a plea ad misericordiam, and a plea ad misericordiam which is obscuring a possibly deeper and more relevant consideration and if it is not obscuring a deeper and more relevant consideration, the plea ad misericordiam is likely to fall on very hard ears.

MR JACKMAN:   Can I say three things in answer to your Honour’s points?  The first is that one cannot assess detriment at the time of payment because in almost every “change of position” case, the detriment occurs subsequently.

HAYNE J:   Just so.

MR JACKMAN:   Every now and then, one gets an anticipatory case – Dextra v Bank of Jamaica is the case usually cited for that – but, in almost all cases, it is subsequent.  The second proposition is that we do see an analogy with what Sir Owen Dixon said in Grundt in terms of detriment that is not reversible.  The foregone opportunities here are not reversible and one cannot recreate a position – an evidentiary picture – of what would have happened.  The third point is that‑ ‑ ‑

HAYNE J:   You cannot create an evidentiary picture because you cannot put the person back into the position they would have been in.

MR JACKMAN:   Yes, quite.

HAYNE J:   It is not a question of having enough witnesses to parade through the box.

MR JACKMAN:   No, no, it is not.

HAYNE J:   It is the impossibility of demonstration.

MR JACKMAN:   That is right because the circumstances are so complex and contingent, with a number of creditors, no doubt swirling around TCP, each trying to deploy the first move for advantage and getting paid, or getting security, and it is impossible to do.  The third point I wanted to make ‑ ‑ ‑

FRENCH CJ:   There is an unlimited number of counterfactuals, in other words.

MR JACKMAN:   Quite, quite.  There is just no way of knowing, in any reliable way, what would have happened six months earlier, save to say, that it was a real and valuable opportunity.  The third point I want to submit is that this aspect of detriment, the difficulty or inability of proof, is a direct answer to what my learned friend is advancing because my learned friend says unless we can establish quantifiable, measurable, detriment, then we do not have a “change of position” defence. 

But if an aspect in our detriment is the inability to measure or quantify it, then that detriment shows the injustice of being required to repay the plaintiff and it means that my learned friend’s submission is completely incompatible with any defence which is couched in terms of the injustice of requiring the defendant to repay.  So, even if my learned friend were to persuade the Court that in the ordinary circumstances a defendant should be expected to quantify, or measure its detriment, that cannot be the case where part of the detriment is the inability to do so.

HAYNE J:   At some point after the adjournment, I would be grateful if you would tell me whether your submission differs in any material respect, either because it is larger or narrower than what Dr Bant says in her book at pages 162 to 163 in the first of the bullet points appearing at the foot of page 162 in connection with the question of detriment, but do not stay to examine it now.

MR JACKMAN:   May it please the Court.  We do, in our written submissions, refer to a number of cases that have considered lost opportunities.  I only want to take the Court to one of them, which is your Honour Justice Bell’s decision in Palmer v Blue Circle Southern Cement (1999) 48 NSWLR 318. Your Honour dealt there with a case involving a recipient of a mistaken payment who said that he had given up the opportunity of claiming social security benefits as a result of the receipt. Going through to paragraph 23, your Honour made the point that:

The appellant does not point to expenditure or financial commitment which might be ascribed to the award payments.  He relies on the detriment that he made no claim to payment from the Department of Social Security.  I have been able to locate few authorities which support the proposition that a detriment, other than the expenditure of the moneys mistakenly paid (on items other than ordinary living expenses) constitutes a change of position for the purpose of the defence.

Then your Honour reviewed a number of the cases and one of them at paragraph 27 is the Canadian case of Morgan Guaranty v Outerbridge where Justice Osborne:

considered the change of position defence in a case in which the defendant’s bank had mistakenly credited the sum of $150,000 to his account.  The defendant was a solicitor.  He believed that the sum had been paid into his account on behalf of a client.  Acting on the strength of that belief he had handed over his files with respect to that client to new counsel believing that his account had been paid in full.

So he surrenders the solicitor’s lien over the file.  Then, dropping down towards the end of the paragraph after reference to Storthoaks, which was Canada’s Lipkin Gorman or David Securities, that is, its landmark case that recognised change of position, your Honour says:

His Honour accepted that the handing over of the defendant’s files to new counsel had deprived him of the leverage that would have been immeasurably important in securing payment of the amount due to him on behalf of the client . . . it would be inequitable for the defendant to be required to repay the moneys to his bank.

Now, those words “immeasurably important” in Justice Osborne’s words, and whether one reads them literally as meaning impossible to measure or whether one reads them in a more loose or figurative sense as meaning of a high order or high importance does not particularly matter.  The point is there was no need to discount the value of the defence according to the relative chances or probabilities of that form of leverage meaning the solicitor would get paid the 150,000.  What is sufficient is that a real and valuable opportunity has been foregone which may have produced payment of the full 150,000 and therefore that detriment is a complete answer to the claim for the full amount of 150,000.

FRENCH CJ:   Now, Mr Jackman, how are we going for time?

MR JACKMAN:   I will finish within half an hour, probably a good deal less.

FRENCH CJ:   All right.  So in terms of time allocation agreed between the parties there is no difficulty at the moment?

MR JACKMAN:   I think we are on track.

FRENCH CJ:   All right.  Adjourn until 2.15.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

FRENCH CJ:   Yes, Mr Jackman.

MR JACKMAN:   In answer to your Honour Justice Hayne’s question just before lunch, we have read during the luncheon adjournment with considerable admiration what Dr Bant says at the foot of page 162 in that first bullet point, and we respectfully adopt that as setting out in substance the nature of our argument as to the “change of position” defence, and in particular the kind of detriment which qualifies ‑ ‑ ‑

HAYNE J:   There is no alternative or different proposition that you are advancing?

MR JACKMAN:   No, we ‑ ‑ ‑

HAYNE J:   The point of my inquiry is to make sure that I understand what is the case you are advancing.

MR JACKMAN:   Yes, we do advance an unqualified acceptance and adoption of what Dr Bant says in that bullet point.  Going back to a question that your Honour Justice Bell raised concerning paragraph 74, as Justice Allsop refers to it, in the primary’s judge reasoning or paragraph 76 as it appears to have been intended, I did unintentionally malign Justice Allsop in suggesting that his Honour had made a clerical mistake.  In fact, the mistake is the product of the computerised version of the primary judge which the appellants have chosen to put in the appeal books. 

If your Honours go to page 2179, which is part of the reasons of Justice Einstein as reproduced, your Honours will observe that on page 2179 the numbering is out, and this computerised version does not have a 38, and it does not have a 47.  In fact, the certified copy of the judgment correctly numbered the paragraphs, which is why Justice Allsop refers to 74, whereas that paragraph appears in this copy as 76.

Now, on to matters of slightly more substance, my learned friend Dr Birch advances an analogy in this case with the reasoning on “loss of a chance” assessments of damages.  In our respectful submission, the analogy should be rejected.  The circumstances which call for damages to be assessed by way of loss of a chance are circumstances where the defendant has committed a wrong which has caused loss to the plaintiff which the common law must do its best to quantify and - difficulties and assessment not recovery – the court does the best it can and rather than using the very blunt instrument of assessment on probabilities, which would be all or nothing, the assessment is more nuanced in terms of possibilities. 

That is quite distinguishable, in our submission, from the adjustment of rights between two innocent parties in circumstances where the defendant has not committed a wrong and we can say with some confidence that in a mistaken payment case the defendant has not committed a wrong.  That was an aspect, perhaps, of the old implied contract theory where the drafter of a pleading would allege that there was an implied contract which the defendant had breached by not returning the mistaken payment.

We know since Pavey & Mathews v Paul that that is heresy in Australia and once one recognises the fiction in the implied contract theory, one is left with the position that the present context is one of adjustment of rights between innocent parties, not one where the common law must do the best it can to quantify the loss occasioned by the wrong that the defendant has committed.

I can deal fairly briefly with the other aspects of our submissions.  In setting out the four elements of detriment upon which we rely, I was really covering both what is called by the Court of Appeal, change of position on the narrow view, which is elements one and two and change of position on the wider view, which is all four elements and elements one and two where there is a discharge of debt, which is not a mere in‑house book entry, uncommunicated to the debtor but, rather, it is the basis on which future dealings – trading dealings – are engaged in.

That is in, itself, we would submit, tantamount to Hills paying away the funds on the faith of the receipt as Justice Allsop says at paragraph 139 and Justice Meagher says at 187.  Both of their Honours are at pains to say that what has happened is more than a mere book entry.  There is acknowledgement by both of their Honours – by Justice Allsop at 115, Justice Meagher at 195 – that a mere in‑house book entry would not be sufficient because of its reversibility.  But, here, there is continued trading and continued communication on the basis of the discharge of the debt which is a real, not a theoretical, detriment because it is not, in a realistic sense, reversible once the facts have come to light.  It is impossible, commercially, to recover in distinction to the way in which it may have been possible to recover back in August 2009.

GAGELER J:   If you separate the continued trading from the discharge of the debt, is the mere discharge of the debt an irreversible change, in your submission?

MR JACKMAN:   Yes, it would be because it is a discharge which is communicated and therefore binds Hills.  If it were simply an in‑house book entry uncommunicated to TCP, then it would be reversible, but the mere fact of communication of that discharge is enough to bind us and that is then strengthened by the fact there is continued trading on the basis of that discharge which then makes it impossible for us to revive the debt as a matter of law and it is commercially impossible for us to revive it as a matter of commercial recovery.

GAGELER J:   So the fact that the discharge is procured by fraud does not enter into the analysis at all?  It would just be surprising to me if as a matter of law the discharge was irreversible.  Practicality may be something different.

MR JACKMAN:   Well, yes, your Honour’s point is that any transaction procured by fraud can be set aside, reversed.  I accept that ‑ ‑ ‑

KEANE J:   There is no ‑ ‑ ‑

MR JACKMAN:   It is the practicality of not being able to recover when the events come to light that is the real thrust of irreversibility as a matter of substance, yes.

KEANE J:   What is the fraud between the parties to the transaction payment, the payment by the appellant to your client?

MR JACKMAN:   Well, I think the hypothesis is that one can imply or infer a representation by TCP to us which ‑ as to the bona fides of their source of funds perhaps, of the 308,000.  The judgments below do not consider this possibility.  It may be possible to imply or infer some representation along those lines by TCP to us, although the thrust of TCP’s misrepresentation is simply to AFSL.  That is where TCP’s fraud occurs.  They do not lie to us about the invoices because they do not even tell us about the invoices.  Yes, I take your Honour’s point.

BELL J:   But they do make ‑ ‑ ‑

KEANE J:   They just tell you the money is coming.

MR JACKMAN:   Yes, yes, that is right.  They just tell us the money is coming.  They do not tell us that they have procured the money in a particular way which later could be shown to be fraudulent.

CRENNAN J:   I suppose the practical point too is one which I think Justice Keane put this morning, which is that a liquidator of TCP is likely to take the notification of the discharge of the debt as a defence to any attempt by Hills to prove in the liquidation.

MR JACKMAN:   Yes, and that would then have to be set aside, presumably, on some vexed question of whether there is a sufficient representation by TCP to us to enable us to set it aside, but it may be we cannot find one, in which case the discharge would stand.

BELL J:   It might be found in the material that you took us to a little earlier relating to the representations made by Mr Skarzynski concerning the funds.

MR JACKMAN:   They did not tell us that they were procuring the funds on a rental agreement on equipment that was supposedly purchased from us.

BELL J:   Most certainly they did not say that.

MR JACKMAN:   Nor did they tell us the source of the funds or the nature of how they had raised the funds.  I take your Honour Justice Keane’s point, that it may be problematic in fact for us to find a misrepresentation against TCP which would enable us to set aside that discharge, contrary to what I said to Justice Gageler.

GAGELER J:   Mr Skarzynski told your client that money would be paid to your client in partial discharge of the debt owed by TCP to your client, did he not?

MR JACKMAN:   That is right.

GAGELER J:   That was false, was it not?

MR JACKMAN:   Well, no.  We then received money which we did treat as – false in the sense that AFSL did not have that intention of paying TCP’s debt, but sure, as a matter of commercial substance that TCP was procuring money which would come to us which TCP intended that we use to discharge its debt.

Justice Allsop does spend a considerable amount of analysis on the question whether there is a separate defence of bona fide purchase, or of good consideration, even though the consideration moved to or from the third party, TCP, rather than the payer, AFSL.  In substance, his Honour in the facts of this case does not seem to have regarded that as being materially different, applied to the present facts, from the narrow view of the “change of position” defence. 

We take that submission from paragraph 4 of Justice Allsop’s judgment on page 2261, at the top of 2261, in which Justice Allsop refers to having read Justice Meagher’s reasons in draft and does not disagree with it, despite the fact that Justice Meagher is at pains to say that the separate defence of bona fide purchase or good consideration does not work in the present case as distinct from change of position.  His Honour Justice Allsop says:

This reflects, to a degree, the taxonomical flexibility that underpins the subject in its legal development –

and his Honour appears to mean there that one can attach different labels in the present case to essentially the same thing, which is the discharge of the debt by Hills, relevantly to my client, in a way that is irreversible and counts as special detriment for a “change of position” defence. 

So although his Honour does refer to US authority and academic writing which support the existence of a separate defence, separate from change of position, on the facts of this case it amounts to little more than a different label for the same matters.  Considered from the point of view of “change of position”, there is no problem with that because “change of position” looks at the detriment suffered by the defendant and it does not matter whether the defendant has provided consideration to a third party as distinct from the payer. 

The important thing is to see the detriment which the defendant has suffered and, in our submission, on the present case there is really no material difference, certainly in the application between “change of position” on the narrow view and a separate defence, should it exist, of bona fide purchase or provision of good consideration.

HAYNE J:   Just going back to questions of payment and discharge, if necessary after the hearing I would be assisted by a note of what you say is the best and clearest authority for the proposition that AFSL’s payment discharged the debt owed by TCP.  I know it was applied in satisfaction of it.  I understand what was done with it but how that payment ‑ ‑ ‑

MR JACKMAN:   Can I provide your Honour with an answer now and supplement it later if need be.  If your Honour goes to paragraph 187, at page 2327, your Honours will see towards the end of paragraph 187 Justice Meagher’s collection of authorities dealing with:

the legal effect of payments made on behalf of others or moneys applied to discharged debt in the context of restitutionary claims –

and Justice Allsop picks that up in paragraph 139.  Towards the foot of page 2309 Justice Allsop says:

The agreement to use the funds to discharge the debt was in substance to pay the funds to the debtor and to receive back the funds in payment and discharge.  This is the analysis referred to by Rugg CJ in Smith v Knapp –

and add the other references to which Justice Meagher refers at 187, I think.

HAYNE J:   The agreement between whom?  Who were the parties to the ‑ ‑ ‑

MR JACKMAN:   Between Hills and TCP.  We accept that AFSL did not pay the money with the intention of discharging TCP’s debt to Hills.  It is a separate but connected transaction between Hills and TCP which is the agreement to use the funds to discharge the debt. 

HAYNE J:   I am not to be taken as doubting the proposition, I simply observe that at some point I would be glad if you would look at what is said in Chitty in the 31st edition at paragraph 21-042 particularly at note 256 in the many cases and articles there cited. 

MR JACKMAN:   I will take that on notice, if I may.

HAYNE J:   God bless her and all who sail in her, Mr Jackman. 

MR JACKMAN:   I will take that on notice and produce a note in due course, if I may.

GAGELER J:   Mr Jackman, could the boat also cover the incidence of that presumably implied agreement between Hills and TCP that you rely on, in particular the consideration of the agreement?

MR JACKMAN:   Yes, certainly.  Now, can I then go to the last of the various alternatives that arise on our notice of contention which concern the three specific reductions against the possibility the Court may be against us on all that we have put to date.  The first is not contentious, that is the $21,739, being the unpaid balance of TCP’s account with Hills after trading resumed.  Then there are two contentious items, one of 55,000‑odd and another of 28,000‑odd. 

Now, the first thing we say about them is that a concession was made at the hearing of the appeal concerning those matters by AFSL and that concession removed those matters from the field of combat between the parties.  My learned friend, Dr Birch, referred to some transcript and some written submissions.  Can I provide copies of those to your Honours and point out the salient passages in them.  In the transcript for 10 May 2012, which was the end of the first day of hearing of the appeal, at line 17, Mr Moses then representing AFSL said that:

Bosch raises an argument that the amount of –

I do not know about the position of Bosch but it is certainly the position of Hills –

restitution it may owe should be reduced by the amount of some rental payments received by AFS from Skarzynski’s companies and by the GST input tax credit on the fraudulent invoice.  I don’t press those aspects of our submissions.  We’d seek to take issue with that, that is that in the event that the Court concludes that there ought be an order made –

sorry, the transcript seems to have gone wrong there.  It must have been intended to record “We do not seek to take issue with that” –

in favour of AFS then those amounts we say should –

and I think it should read –

should [rightfully be] the subject as it were of setoff in terms of the payments to be received.

Justice Allsop says:

You’re giving up on the 55 –

That is the amount that we raised, Hills raised –

and the GST input are you?

MOSES:  Yes, your Honour, I don’t press it.

Then in the written submissions that followed a few days after the hearing of the appeal at paragraph 2.12, a point is made about the GST component of the 308,000 and AFSL at paragraph 2.12 remind the court that:

AFSL has already conceded that the GST must be set‑off against any order for restitution made against Hills -

The written submissions do not deal with the rental payments of 55,000 but the concession at page 42 of the transcript plainly applied to both.

Now, those concessions then removed as issues the 55,000 and the 28,000.  The 55,000, it is said by my learned friend, Dr Birch, is a kind of passing on which this Court in Roxborough v Rothmans said is not a defence.  It is conceptually distinct in fact from passing on.  We are not saying that it is an operative defence that AFSL received $55,000 under the rental agreement in diminution of the 308,000 that they had paid out which may be a species of passing on characterised that way.  What we are saying is that the 55,000 was money that TCP had that it may have paid to us in reduction of the debt, if we had enforced that debt in August 2009. 

So it is an aspect of our detriment that we lost the opportunity of obtaining that amount of 55,000 which was, in fact, paid to AFSL.  The 28,000 is the amount of the GST input tax credit which AFSL will be entitled to as a result of acquiring the goods – as a result of paying out the 308,000 on the basis of that being for the acquisition of goods.

The concession that was made by Mr Moses then saved the parties from a debate about whether a GST input tax credit is a kind of passing on, a kind of passing on of your expense to the government or whether that is really artificial because in a business context you are not really out of pocket for GST in circumstances where you have got a GST input tax credit to set off against the GST expense that you incur. 

Now, that debate did not occur as to whether it was a real or an artificial expense by AFSL in light of the concession and, at the very least, we submit those three sums should be set off against any recovery which the plaintiff – or appellant might otherwise be awarded.  Unless there is anything further I can assist the Court with, those are those submissions.

FRENCH CJ:   Thank you, Mr Jackman.  Yes, Mr Walker.

MR WALKER:   May it please, your Honours.  Much of what has been put by way of outline in propositions 1 to 6 in our outline has already been covered.  May I just, in order, supplement as follows.  Proposition 1, of course, is the way in which we put the case in answer to the appellant’s encapsulated proposition this morning, that the test is value. 

We do not say that value plays no part in the question whether it is unjust to repay or not unjust to retain.  The formulae reflect a different sensibility about onus, about which there is no dispute.  But we do say that by putting value as the test, that two things are lost sight of, namely, that the ultimate exercise is that question of what is or would be – it is the would be that matters – equitable or inequitable as the case may be, and, second, that the tool chosen to avoid the apparently undesirable and much feared scourge of judicial idiosyncrasy – feared, at least, by academics – is the search for so‑called detriment.

Now, I call it “so‑called detriment” because it is a convenient, single word for a compound notion.  It is a hypothetical, of course.  That was Sir Owen Dixon’s point in Grundt.  It is the looming or threatened detriment if the sought after judgment is awarded, that is, the single word “detriment”, and obviously it does not require the absurd and perverse position of a defendant against a count for money had and received by a mistaken payment on the part of the plaintiff, saying that he, she or it has already dissipated the funds in an entirely unbeneficial fashion, that is, has already suffered detriment.  The defendant can, of course, point to circumstances which show the use of the money beneficially or sensibly or wisely.  It would be a detriment, however, if that use were ignored so that the defendant would be worse off, that is, could not be restored to the position it was immediately before the payment was received.  That is the heart of the matter.

Now, your Honours, I can spare taking you for a second or third time to authorities.  Your Honours see, of course, the passages in David Securities.  There is no challenge to David Securities.  There is, of course, a gloss in the nature of an application of it to particular facts advanced by the appellant but, in our submission, much of the appellant’s position in submissions in fact departs from those core elements of this Court’s statement of the rule or principle in David Securities and we respectfully adopt what my learned friend, Mr Jackman, has had to say on that.

Could I move to proposition 2 please?  Naturally enough, it is a critical question as to the respective times at which one is examining both the operation of the mistake, that is, the plaintiff’s claim, and the operation or the existence of what I will call “the detriment”, that is, the defendant’s answer.  Obviously enough in this case, particularly given that the parties, as my learned friend, Dr Birch, put this morning, fought themselves to a bloody standstill on the question of wisdom, negligence or some other quality of their respective commercial conduct, the mistake was operative, hence the prima facie entitlement to restitution, there being no entitlement on my client to the money when received.  There is no doubt about that.

All the weight of the case was on the answer, the onus of which lay on us, which was to the effect, it is not unjust that we retain the money because of the detriment we would suffer by reason of the change of position being irreversible, that has come about by dint of the payment, that is, on faith of the payment, us having acted in such a way as we did.

The detriment thus always falls to be assessed, as we put it in proposition 2, at the time of the claim being made for restitution and that has two elements.  It could not be said that there comes a period after the receipt ‑ I stress a receipt in good faith.  It could not be said that there comes a time when events become irrelevant.  There may be no relevant events but it cannot be said that there is a period when, as a matter of rule, it will be too late to call in aide what has happened.  If anything, the longer the time that has gone, the more water has flowed under the bridge and to mix metaphors as one is tempted to in this area, the less possible it is to unscramble the eggs.

FRENCH CJ:   Does it matter who is to blame for that?

MR WALKER:   No, not at all.  That reversibility is a quality of the state of affairs.  It is not a blameworthy consequence of anyone’s conduct.  To adopt and, with respect, urge what my learned friend, Mr Jackman, has already put, it is of the essence in the current analysis being argued in this case that, of course, as a matter of elementary proposition, the cause of action does not cast the defendant as a wrongdoer.  That is why, in our submission, the legal principle guiding the resolution of today’s question should cleave to the proposition that, de minimis aside, the defendant should not be in a worse position.  The plaintiff should not be entrenching upon the defendant’s position by obtaining the relief sought.  That is important because that in turn opens the door to what all parties before you either assert or concede, namely, that there can be, in appropriate cases, pro tanto availability of the “change of position” defence; that is, the detriment can sufficiently, readily and appropriately be allocated or quantified so as to produce an answer that is just in the circumstances.

FRENCH CJ:   So if you are able to demonstrate irreversible abandonment of legal rights, or irreversible loss of an opportunity to enforce legal rights and no more, and nothing about the value of those rights, that is sufficient detriment?

MR WALKER:   Yes, irreversibility of the position so that we are worse off.

FRENCH CJ:   What if the evidence should show that the legal rights are worthless?

MR WALKER:   First of all, that is not this case.  Neither with the onus allocated to us, as it was, is that where the findings in the Court of Appeal leaves us ‑ to the very contrary ‑ but I will come back to the aspect of our case in a moment on that.

FRENCH CJ:   I am just testing it by reference to extremes.

MR WALKER:   Quite so.  In our submission, if there were a case where the contentions for the defendant, pointing to the irreversible change of position, revealed by reason of the illusory nature of the change no real change at all, then it is not a matter of proceeding by reference to a valuation exercise.  It is simply a matter of saying “there has been no change of position.  You have been rearranging deckchairs on the Titanic.  Nothing has happened to change the position”.

Now, I stress that is not to open the door or at least, in our respectful submission, this case does not call for this Court to rule in any such way as to require some kind of moment in time economic analysis of all the players thought to be relevant in order to see that they are not, relatively among themselves or individually for themselves, in a worse position as a result of the restitution that the plaintiff claims.  An overall, what I will call economic analysis, would indeed involve what the Court would know would be, if I may say so, the usual array of the usual suspects of close to pseudo expert evidence about the value of things which, in the real world, are not always saleable.  It is glib to talk of factoring.

KIEFEL J:   So when you referred, Mr Walker, to being worse off you were not intending to mean in an economic conclusory way?

MR WALKER:   No, quite so.  As your Honours know, we point to the solidity of our position.  We were as well advanced as one could have been - if I can just jump ahead to summarise matters I do not have to dwell on otherwise.  We had default judgment including against the director guarantors.  We had writ of execution.  We had garnishee order.  I am going to take your Honours very briefly to material about that.  We had examination orders and their value can be seen on the record.  They produced real action.  Alas, they produced fraudulent and criminal action, but they produced real action.  They pushed people to the extremity of the arrangements that were made for this variant on a Ponzi scheme or a kiting. 

Now, it is impossible in those circumstances to say that the advantages we had - Justice Osborne in Ontario used the word “leverage” - by being so far advanced down the legal route do not in themselves have a value that does not call to be valued.  The notion of selling those judgments or that writ or those orders for examination or garnishees, simply are not to the point.  The garnishee, as the record shows, operated as plainly it is meant to.  By holding in hostage cash flow, it concentrates the mind of the debtor.

CRENNAN J:   Does this mean that the concept of reversibility is to be tested always by asking whether or not the restitution sought is going to occasion prejudice rather than focusing on the possible legal steps that might be taken to reverse.  Is that a distinction you are making?

MR WALKER:   In a sense, yes, but let me make clear the relation between the two.  The inquiry is into the prejudice.  Evidence and argument about it may well include a consideration of well, what was the position you were in so that I could examine whether or not your change from it is truly irreversible.  Now, the intervening insolvency receivership and for that matter, AFSL getting in to the Strathfield property as mortgagee, those are intervening matters which strongly inform, indeed to a degree, constitute the manner in which our change of position become irreversible.

HAYNE J:   But how much intermediate trading occurred between the point at which you call off the dogs of war and finally TCP go under and the fraud is discovered?  Is it not the intervening fact that your side called off the dogs of war?

MR WALKER:   Yes.

HAYNE J:   TCP then, as I understand it, correct me if I am wrong, goes back into the marketplace and continues to trade to some extent.

MR WALKER:   Yes, very much so.

HAYNE J:   With persons other than those represented at the Bar table.

MR WALKER:   Quite and that is why, another mixed metaphor, it is a can of worms to try and even name the people whose conduct, position and hypothetical intentions, I stress hypothetical intentions, “Sir, what would you have done if one of your 250 trade creditors presenting with this statement of assets and liabilities had asked for” – it is an absurd proposition, not even a liquidator’s examination would include all the hypothetical ramifications.

The notion that the law imposes this as a burden on a defendant in a case such as this where a mistaken payment is, in good faith, applied for the purpose that the fraud responsible – the rogue responsible for the whole imbroglio – said it should be applied is, in our submission, unthinkable in terms of the effect it has upon that which would strike a proper conscience as what is just in these circumstances.  By hypothesis, we are not responsible by dint of falling short in some appropriate standard of commercial conduct for what happened.  Neither, of course, is the plaintiff.  In that sense, both are innocents.  Theirs is the operative mistake but, no doubt, we suffered mistake as well.   

That is why we refer, in proposition 4 – just to jump ahead a bit – to the way in which, in his case note on this case in the Court of Appeal, Professor Burrows puts the point – it is 129 LQR.  It is at 330 and it is the second full paragraph on that page.  I will not, of course, read it.  It is the one starting “On these facts”.  In our submission – and this is a very long‑winded answer, I think, to one of Justice Kiefel’s questions to me – yes, we say, without going into dollars, it is the fact that we now find ourselves in a position which cannot be reversed that renders it unjust for us to repay, or not unjust for us to retain.  I do not need to, and will not, take your Honours to anything in Lipkin Gorman but your Honours see the reference and have seen our written submissions on the point.

KIEFEL J:   Could I just ask you something about Lipkin Gorman [1991] 2 AC at page 579?

MR WALKER:   Yes, your Honour. 

KIEFEL J:   The examples given by Lord Goff at about G, are they examples of detriment in the Grundt ‑ ‑ ‑

MR WALKER:   If your Honours excuse me – I will call it “Grundt” if you do not mind ‑ ‑ ‑

KIEFEL J:   I might prefer you to.

MR WALKER:   If your Honours just let me turn up that passage – I am sorry, your Honour, what ‑ ‑ ‑

KIEFEL J:   At page 579 at about G.

MR WALKER:   Yes, thank you.  Yes. 

KIEFEL J:   I think if I am right in my recollection that Mr Birch considered that Lipkin Gorman and the English cases are not inconsistent with the earlier estoppel cases to which there has been discussion about what constitutes detriment - they are paying‑away cases, are they not?  Do they support the notion of disenrichment that Mr Birch is referring to?

MR WALKER:   No.  The problem with disenrichment, apart from its mere logistic element, is that it does not, by the prefix, tell anything useful about the content of the notion.  That, indeed, perhaps is an extension of the idea that maybe the word “enrichment” was not all that useful either.

KIEFEL J:   I suppose the question is is Lord Goff suggesting that payment away in good faith is a sufficient change of position?  On one view he is.

MR WALKER:   Lurking behind all of this, I suppose, is that the action for money had and received is not intended to and does not accomplish a theoretically unending chain of tracing cases.  It is not a proprietary claim.

CRENNAN J:   Well, Lord Goff makes it clear I think on the bottom of page 580 a bit below point G that – he has reacted in part to a speech of Lord Simonds in the Ministry of Health v Simpson, and so what Lord Goff is reacting to is the idea that spending the money, of itself, is not enough.

MR WALKER:   Yes.  He calls it “mere expenditure”.

CRENNAN J:   Yes.  I think his examples need to be understood with that being the background to why he is exemplifying the general position that he is stating in the way that he did.

MR WALKER:   Yes.  May I digress to make an answer to Justice Crennan before returning to Justice Kiefel’s question?  “Mere expenditure” has a deal packed into it.  Partly it may involve expenditure which is not in truth on the faith of the receipt.  Let me explain.  The notion, which is repeated in the cases and still to be found in the treatises, that there is some special case to be observed or some exception to be made for what is called expenditure on ordinary living – usually one senses some judicial disapproval of extravagant living there, but ordinary living expenses.  That is not an exception.  No exception is called for. 

That is the money you have to spend anyhow, even without the mistaken receipt.  You were going to pay the rent.  You were going to buy the children’s bread.  Do not say that this is money, as if it has isotopes attached to it, that you have applied to the rent, you have applied to the bread, I cannot get the bread back from the children, the landlord certainly will not refund. 

In our submission, one always has to return to the basic proposition there is not going to be an order for restitution on money had and received for a mistaken payment where the only conduct – sorry, there will be – where the only conduct relied upon by the defendant to resist it is that it has been spent in a way that the money would have been spent even without the receipt.  So one could put all – the mere expenditure very often will simply fall into that category, got nothing to do with change of position or anything like that.  

Certain expenditures will constitute a change of position, and the first and most obvious requirement of them is that they would not have been made but for the faith of the receipt.  Faith of the receipt – it is again a pithy phrase which has packed into it the notion of security.  Money paid to me for me to use as I will.  I have received it, it is my money.  I may now apply it as I choose without there being some invisible cord by which the payer can pull it all back.  That is what it means to be conducting oneself on the faith of the receipt, changing a position on the faith of the receipt.  Of course there will be expenditure; presumably it will not be “mere expenditure” then.  Of course there will be expenditure that falls into that category.

Now, my learned friend, Dr Birch, correctly says that sometimes expenditure which would not have been made but for the receipt will be such that the position is reversible because, for example, money has been exchanged for palpable money’s worth in a way that does not offend any sense of fairness in saying “you cannot give back the cash or the cheque you received, but you can give back the shares in BHP that you purchased with it”.  One has to be very careful, of course, that one does not inventing some kind of ersatz tracing claim, but no doubt in reversibility cases it will be possible to say to a person who says “I bought shares”, to say to them at the time of judgment “You have still got those shares.  They are not worth less than what you paid for them.  Your position may be reversed by ordering restitution without injustice”.

FRENCH CJ:   If the person took a round‑the‑world holiday ‑ ‑ ‑

MR WALKER:   On the other hand, the urbane veneer you achieve by a round‑the‑world holiday will not be seen in the same way as that parcel of BHP shares.

CRENNAN J:   What about barrister’s living expenses?

MR WALKER:   The mind boggles, your Honour ‑ ‑ ‑

CRENNAN J:   Do not go there.

MR WALKER:   ‑ ‑ ‑at any defendant’s argument that could be raised, and I will not try it.

KIEFEL J:   But the disenrichment of defence applied in relation to the shares would have it, would it not, that if the shares went down, the defendant does not have to pay it back, so the plaintiff then bears the risk of what the defendant does.

MR WALKER:   Quite.  On the faith of the receipt, I made an investment which has failed.  That is not blameworthy; the whole idea of a good faith receipt and acting on the faith of the receipt involves the security dealing with what appears to be your money and, indeed, is in law your money until and unless – well, it remains your money always.

FRENCH CJ:   Irreversibility seems to be a fairly critical element in this area of discourse.

MR WALKER:   Your Honours see that that is at the heart of what we put in our proposition 6, and the worth of irreversibility – I am sorry, I need to answer Justice Kiefel’s question, I do apologise, [1991] 2 AC 579, just above F to just below G, the generalisation or the rule is:

an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay or to repay in full –

there is the pro tanto possibility ‑ ‑ ‑

KIEFEL J:   It is the examples, really, of that that I was interested in.

MR WALKER:   Quite, and then there is another generalisation, “If the plaintiff pays money”, et cetera –

acting in good faith, pays the money or part of it to charity –

Now, it is not quite clear why his Lordship has chosen “charity”, but ‑ ‑ ‑

KEANE J:   It is a gift.

MR WALKER:   I was about to say, it is probably because there is no legal means you can get it back except by appealing to the charity of a charity, which is not notorious, I should say.

KIEFEL J:   But it might be tax deductible.

MR WALKER:   It might also be tax deductible.

KIEFEL J:   You see, what I am really focusing on is his Lordship is obviously intending this to be quite wide and goes on to say –

In other words, bona fide change of position should of itself be a good defence –

That would mean anything.

MR WALKER:   I am sorry, your Honour?

KIEFEL J:   That would mean any payment away that cannot be recovered that is made in good faith.

MR WALKER:   That sentence on its own, but it is in a paragraph that included, as you will recall, that phrase “called upon to repay or to repay in full”.  If I am paid $100,000 by mistake, but at the time of demand for restitution, I have only irretrievably expended $50,000, it would be quite absurd to suppose that under the rubric of what is equitable or inequitable, just or unjust, I could hang on to the $50,000 as if there was some solidary identity to funds which meant that once any part above de minimis was irretrievable, then all was irretrievable.  We do not say that at all.  In this case, of course, all is irretrievable by reason of the matters to which I am going to come.

So, the example in that paragraph of Lord Goff’s reasons works only to the extent that can be said that the payment away cannot be retrieved.  If the plaintiff succeeds, the defendant will be worse off.  Charity also, of course, plays this part.  It would dispel any notion of what I might call “reprehensible use of the money”. 

His Lordship has chosen an example which very plainly says yes, the plaintiff is at risk of good faith dealing with money which the defendant was justified, though as it happens, wrongly, in believing was the defendant’s to use if the defendant has used it in a way which puts it beyond, that is, the position beyond retrieval. 

In our submission, it is an admirably, that is commendably simple proposition, therefore, that one tests by asking if the plaintiff gets the judgment sought where will that leave the defendant.  The defendant should not be worst off.  If the defendant cannot retrieve the defendant’s position upon the plaintiff getting the judgment that is a reason, or that is perhaps the actuating reason why it would be not unjust for the defendant to retain the funds.

GAGELER J:   Worse off to any extent?

MR WALKER:   Worse off to any extent and then the inquiry is as to whether the case lends itself, as in my example of spending irretrievably only $50,000 of a $100,000 mistaken receipt, to a pro tanto answer.  Your Honour uses the phrase “to any extent”.  We are not talking about cases of simple quantification.  “I have given $1,000 to the Red Cross from $100,000 receipt”.  No one argues, least of all us, that that would mean the $100,000 is immune from restitution.  The $1,000 though should be.  But when you are talking about extents in the sense of a financial amount and neither is the word “extent” appropriate for what happened in our case. 

As I say, in our case, we were in a position, a legal position, of very considerable advantage, legally sanctioned empowered advantage over our debtor.  All of that was given up.  That is a change of position which the appellant accepts and we cannot retrieve.  We cannot be put back in that position.  That is a change of position to which the phrase “to any extent” does not really have sensible application.

GAGELER J:   Because the value is inestimable?

MR WALKER:   No, because the change of position is (a) not de minimis and (b) irretrievable. 

GAGELER J:   But (c) surely can be valued?

MR WALKER:   Well, no, it does not follow at all that these things can be valued, by whom?  There is no such thing as an expert valuer in what multifarious, indeed, in this case, it would be potentially unknowable people would do or not in the relevant trading relations.  My friend talks about accountants.  Accountants do not have expertise to do this, perhaps psychologists or those who study sociopaths may but no, they cannot give evidence either.  It is a hopeless reconstruction.

CRENNAN J:   Is part of your position that, broadly speaking anyway, you have acted in a commercially acceptable way ‑ ‑ ‑

MR WALKER:   Yes.

CRENNAN J:   ‑ ‑ ‑ that is not getting into bona fides, which is ‑ ‑ ‑

MR WALKER:   Granted.

CRENNAN J:   ‑ ‑ ‑ how long is a piece of string kind of test but is that part of the argument?  You have said well, it is not de minimis and it is irretrievable but is it part of the argument that it is irretrievable in circumstances where you have acted in a commercially explicable fashion?

MR WALKER:   It is part of our argument that one looks at all the circumstances, that being the nature of something founded in equity, yes, in conscience, yes.  It is not an inquiry into blameworthiness.  It is not an inquiry into causal responsibility in a way which should attract disapprobation on either side, plaintiff or defendant. 

True it is, when it comes to that element of the matter which bears at least to a degree a resemblance to the approach in laches, true it is that the way in which the parties have conducted themselves respectively, the plaintiff by not making demand and the defendant by making good faith dispositions on the strength of the receipt, true it is that that will affect the Court’s assessment of the defence.  Is it not unjust to retain, is it unjust to repay?

Now, your Honours have seen, including with some support from authority, phrases such as “balance of equities” or “balance of the justice”.  We, with respect, submit that because we are talking about the defendant’s answer, the plaintiff having made good utterly their prima facie claim, which is again based upon what used to be called natural justice or equity in the older sense, one should, in our submission, see it through the prism of, is it not unjust for the defendant to retain the payment and that is the kind of inquiry where of course circumstances ought to play a part. 

But once one, as in this case, easily satisfies the proposition that what we did was on the faith of the receipt, there is no doubt about that in this case, no contest, then, in our submission, the inquiry naturally turns to whether the position achieved by what we did, which is different from the position that existed immediately before the receipt, hence the word “change”, is one to which we can sufficiently, equivalently, that is, leaving aside de minimis, be restored so that we, a non‑wrongdoer, will not be worse off for the restitution sought, bearing in mind that there has to be a choice.  This is relevantly all or nothing.  Either the plaintiff wins or the defendant wins and neither is a wrongdoer.

Now, I was asked also by Justice Kiefel whether these were Grundt examples and the answer is yes, that is, if you are required to give full restitution, with no account taken of what you have given to charity, if you have only given some to charity, or if you are required to give restitution having given it all to charity, then of course you will then be in a position of detriment, that is, it is the detriment threatened by the plaintiff’s relief sought.

Your Honours, could I quickly then go to the sequence of matters which, in particular, picks up an important element of the argument to which I think Justice Hayne has made reference?  If I may do it as briefly as I may, by first going to volume 5 of the appeal book at 2190.  The purpose of this part of my address is in relation to propositions 4, 5 and 6 in relation to the events that produced the change of position and the substance that it represents and the irreversibility.

As one sees from the first instance judgments findings, starting at line 39 on 2190, there was a position where we were commercially with a grievance against the TCP companies.  They were substantially in arrears. If one goes to 2264, one finds in the Court of Appeal, line 33, the matter is put succinctly.  That was in May 2009.  By July/August 2009, there were default judgments – contending myself with the Court of Appeal – see 2264, lines 32 to 34.  I should say paragraph 14.  Then page 2190, lines 51 and following, there are the writs of levy and examination notices and then, importantly, on the same page, line 56 over to the top of page 2191, one has the garnishee.  That leads to the sting which is felt by the debtor and Mr Skarzynski complains – one sees that at 2190. 

In the findings by his Honour in relation to the expectation of money in paragraph 115 that starts on 2189 over to 2190, one sees that there was the outstanding garnishee which was the occasion – I will come back to the emails that make that very clear.  At 2191, one sees the reference at line 10 in particular to “expecting the money to come in”.  That was an expectation, of course, engendered by the fraud.

Now, the way in which TCP responded to the sting of the garnishee can be seen to have involved by 2 September – that is, following the promise of payment on 31 August, 2 September – there was a stay being sought of the garnishee and, in particular, if I could take your Honours please to page 1116 in volume 3.  There is the reference to the emails with respect to the garnishee order balances, the prompt response by reason of the promise of payment, see paragraph 32 on page 1116, and the manner in which the payment of $198,000 received on 3 September was allocated – one will see that from 2191, line 24 and following – on the morning of the 4th.

Before that afternoon the remittance had arrived – that is, the remittance advice had arrived from AFSL.  So the sequence of events was that the money on the findings, and clearly on the evidence, in good faith received, expected and to be applied to outstanding balances which had been the subject of the most extreme form of pressure pursuant to the default judgments.

In our submission, one – and this is to adopt and adapt to our case an argument of Mr Jackman’s that we respectfully adopt – it is not sensible to suppose that the success we had at that point in bringing pressure to bear would not, in the absence of the mistaken payment – that means without AFSL being deceived into making the payment – would not have produced something of commercial value.  How on earth can one actually put a figure on it without sending into the spurious?  One cannot.

That is what, in paragraph 165 of the learned President’s reasons, to which enough reference has already been made, by an important, perhaps pivotal element, is the fact that there could be no turning back the clock.  The water had flowed under the bridge.  It is for those reasons that it is not to the point as to whether we knew that Mr Skarzynski had a wife, let alone that the house they lived in was in her name, whether it was hers beneficially or not even more irrelevant. 

The fact is the squeeze had been put on with effect.  Why would anyone suppose that the value that that plainly had at the time would not have been reflected in some other way, no doubt, had there not been the fraud practiced by Mr Skarzynski and, therefore, not the mistaken payment by AFSL?  That is the way the Court of Appeal reasons it and, with respect, correctly so.  In our case, that is also to a degree how the first instance judge reasoned it and also, at least as to outcome, correctly so.

As to the actual squeeze and the way in which the commercial value of it was realised, albeit by dint of the fraud in actuality, if I could take your Honours to volume 3, pages 1495 to 1494 – I have put it that way because it is an email string and you have to read backwards.  This is right at the heel of the hunt in terms of the enforcement action.  One has Mr Liu for TCP conveying his instructions on 1495 to request consent “to a stay of the garnishment”.  In return:

confirmation of payment of $198,000 to Bosch from an alternative account (other than TCP) –

so primed for a remittance which would not have the TCP name on it.  The internal consideration of that can be picked up at 1494, starting about line 30, Mr Vine for Bosch –

The garnishee order has had its affect and the bank has frozen their accounts and taken some money . . . the bank is allowed to hold the money . . . They are going to ask the bank to hold it.  The debtors will attempt to pay the whole of the three debts . . . It should show up in your accounts –

In other words, looking out for money, we know 198 had been, as it were, rounded up –

When that happens, please notify me . . . and I will then instruct their banks to unfreeze their accounts and refund the seized money to them -

undoing a position of very considerable advantage shown on these pages to be yielding commercial return –

If not, we simply proceed as planned.

So this is not retrospective evidence reconstructing what would have happened once one knows the disaster that ensues.  This is evidence from the time showing the determination to proceed, we already having proceeded with considerable energy to the very advanced position of recovery that had been achieved.  At the top of the page, a comment from the client which is perhaps a bit two edged for the legal system, but it shows an appreciation that juristic dentition has its worth to business.

All that was given up; totally reversed.  We took steps that it is not sensible to put a price tag on, because we took steps to permit further trading with these people who could not have been the best credit risk in our books, surely.  That is not something that avails the plaintiff, because it only renders it not sensible to say all this ought to be a matter of valuation.  As my learned friend, Mr Jackman, has emphasised, it is not just a matter of the two creditors that this Court is aware of.  There are all the others, some of whom you have already seen reference to.

Reconstructing the position, once one removes the hypothesis of the mistaken payment by AFSL, it is impossible.  It is not a matter of, in our submission, assessing chances.  It is the kind of detriment being worse off by reason of the restitution order which, in our submission, the robustness of the defence simply nips in the bud as an inquiry. 

Then, with great respect, we would adopt and urge in support of that argument the virtue of legal doctrine which permits not merely ordering the consequences of catastrophe in a courtroom, but also enables people to order their affairs so as to avoid ever going to a courtroom; that is, Justice Keane’s comment for response by counsel raising the question whether it is not of significance that if an out‑and‑out valuation exercise is called for, then it will be in many cases, particularly if traders with more than one creditor and perhaps less than straightforward accounts – debtor, I should say – it will be quite impossible to answer, other than by a stab in the dark, the letter of demand for restitution by the mistaken payer.

Your Honours, quickly in relation to proposition 6, could I just, without taking your Honours to the Western Australian Court of Appeal decision, add a reference to paragraph 201 in Justice Buss’ reasons which were agreed in by President Steytler.  It does not say anything further from what we have been putting but, in our submission, it represents reasoned support for the approach taken particularly by Justice Meagher in the Court of Appeal. 

In proposition 7 we cover material, most of which I have already put.  It is, in our submission, in the nature of inquiry raised by the defendant’s contention that it would be not unjust for the defendant to retain the money.  From as long ago as Moses v Macferlan there can be account taken of matters which have transpired since the receipt and up unto a time when an appropriate demand has been made for disgorgement.  I do not wish to add anything further to that.

Proposition 8 has, we think, already been covered by concession this morning.  We do not need to spend any further time on it.  I come then to discharge.  Now, this is a variant or at least a separate strand to the argument.  Let me make it clear, our primary position, as your Honours will have seen from the way we order our address and I hope the way we have written our submissions, that change of position is the better frame in which to consider, in this case, what is conveniently called the discharge. 

I say conveniently called the discharge because for the purpose of the “change of position” argument, it does not matter whether it legally effected a discharge.  It is the conduct which included the so‑called discharge and everything else, in particular, the giving up of the strong position we were in.  With intervening events it meant that there was no longer, for example, a Strathfield property to be popped out when the squeeze got extreme, as it did.  All of those are matters which inform the change of position. 

Can I come, however, to the discharge seen on its own?  Now, it has to be accepted that when one looks at Aiken v Short, when one looks at the way Sir Robert Goff, as he then was, put it in Barclays, as one sees in this Court in Porter v Latec, all references to which have been put in our written submissions, it has to be accepted that the decisions which talk of discharge are, I think, all of them, with one qualification, decisions where the payment was intended by the payer to effect the discharge that is at the heart of the matter. 

There is a qualification, of course.  Porter v Latec was the unhappy family of the son masquerading or practising imposture in relation to his father and also forgery for good measure.  So, query whether the intention in that case was an intention that could ever be carried into effect in law.  That query was answered in this Court by the majority.  Yes, it was a good discharge and we have given references already to it. 

We have noted them again in proposition 9 of our written submissions.  Given the time, I will not take your Honours to them.  It suffices to say that the majority in Porter v Latec say notwithstanding the fraud and criminality that must have vitiated on one level the entirety of the transaction that produced the so‑called discharge it was still, nonetheless, a discharge. 

There had been receipt of funds.  There had been notification of acceptance in discharge.  There was, as Sir Garfield Barwick reasons, in effect, my words not his, it was important for the security of accounts that there not be a looking behind of the source of a debtor’s proffered funds in order to achieve a discharge.  Where would that end?

KIEFEL J:   But the action for money had and received is an exception to that, is it not?  It may be a limited exception but it is an exception.

MR WALKER:   Quite, it is just that.  The law has, with respect, placed the onus on the defendant precisely in order to ensure that if there is to be a denial of what, prima facie, appears just, namely, the defendant pay back the money to which the defendant had no right, it has to be for a reason which countervails and the countervailing reason of discharge has always been accepted when the payer intended the discharge.  As I say, the authorities to that effect include the case of Porter v Latec where the whole of the intended discharge was based upon crime and fiction.  So when one talks about intending to repay, one is not talking about an unvitiated intention at all.  One is talking about intention that may have been produced by crime, by fraud.  

KIEFEL J:   You simply mean in your 9(b) that the payer follows the request of the debtor directing the authorisation of the payment.  Is that what you mean?

MR WALKER:   Certainly.

KIEFEL J:   The payer may not know whether it is going to, in fact, pay a debt.

MR WALKER:   Quite.  That is what we are putting.

KIEFEL J:   But there is a direction or authorisation given by the debtor ‑ ‑ ‑

MR WALKER:   That is right.

KIEFEL J:   ‑ ‑ ‑ to the payer to do so and the payer does it.

MR WALKER:   Yes.  Now, I have to take further steps.  As in this case, a payer in such a case, misled by the debtor as to the reason for making the payment to the defendant, nonetheless intends that the defendant get the money.  That happened in this case.  There was no Quistclose trust imposed upon the money.  For reasons best known to themselves, for which no criticism can now be mounted in any juristically relevant sense, this money was not to be held in escrow pending delivery of goods, or pending delivery of title documents or anything like that.

KIEFEL J:   But it was intended to be paid to purchase equipment.

MR WALKER:   Certainly.  It is not impressed with the trust.  It is intended to be paid and it is paid in advance of any conveyance or completion.  It was money for Bosch.  If it is money for Bosch, it can be used for anything.  One does not, as a vendor, use purchase price in order to deliver the goods at all, except in the rare cases where you live so hand to mouth that you need the price in order to produce the goods.  There are few traders of whom that would be right.

GAGELER J:   But, Mr Walker, so far as the payer was concerned, it was money for Bosch to pay a particular debt ‑ ‑ ‑

MR WALKER:   Unquestionably. 

GAGELER J:   ‑ ‑ ‑ which did not exist.

MR WALKER:   Unquestionably.  What I am attempting now is to go beyond what the cases have illustrated.  I have called in aid the fact that the cases do illustrate, as I say – on their face, they all are cases where the payer plaintiff makes the payment intending to discharge the debt which was discharged upon which the defendant now relies as a change of position – I should not say “as a change of position” – as an answer to the restitution sought.

I have attempted first to say it is important to examine the quality of that intention.  It can be an entirely vitiated intention – see Porter v Latec.  In other words, can be produced by the fraud – query whether that is an operative intention whenever it comes to doing something such as discharging a debt.  Our answer is, well, of course, the discharge will be good.  There will be causes of action, to which I am about to come, that may arise, or will arise.  Whether they are worth anything depends upon the worth, normally, of a rogue.  That is not an answer, however, to the proper legal analysis.

The next step I need to take, as I say, is to point to the fact that when one is talking about the justness or lack of justness of the defendant paying back, it is to be recalled the defendant is relevantly equally the dupe, that is, also innocent like the plaintiff.  In our submission, it would be a wrong step to introduce categories as if we were dividing things like Restoration comedies into different genres of comedies, of frauds practiced, the fraud that deceives only the payer, the fraud that deceives the defendant with the same story, the fraud that deceives the defendant with a different story, which is this case.

In our submission, that would be a backward step when the test simply should be is it or is it not unjust for the defendant to retain, and the defendant saying “It is not unjust for me to retain because I used it in a way which on the faith of the receipt would render it unjust for me to repay”.

GAGELER J:   Are you still addressing proposition 9?

MR WALKER:   Yes.

GAGELER J:   Are you still seeking to make out that there was in law a good discharge of the debt?

MR WALKER:   Yes, and my point is this.  There is no relevant application say of non est factum when money is paid to a person to be used as they will and a price paid to a vendor is surely that, I stress not a Quistclose, not an escrow.  Neither do our researches show any such unilateral legal act as undischarged.  For that matter, it is to be recalled that discharge is not in itself contractual.  It may involve something in the nature of consensus, but it does not involve consideration. 

The promise to pay already exists supported by consideration, the acceptance of payment acknowledged to be in discharge of the debt rather than on some other account may involve the consensus of saying the payer intends to discharge and the payee accepts the discharge and grants it but it does not make it a contract and it is therefore not susceptible of remedies to rescind, as it were.  There is nothing to rescind.  There is no executory element of any kind. 

Neither is it straightforward to suppose that the fraud is operative by way of a cause of action in deceit as between payer and payee.  If there has been a discharge, to put it vulgarly, where is the beef?  The payee has been paid.  Someone else may have a cause of action in deceit and there may be statutory claims for criminal compensation, but between the payer and the payee – I should say between the debtor, the fraudulent debtor and the payee – there could not be a claim in deceit. 

For a start, unless there were special facts, tendering money would not involve an implied representation that there is no one else who has claims upon this money or I am using this money in accordance with the way in which the persons from whom I have obtained it are agreeable I should use it.  That would be far too long a bow to draw in relation to the tender of money to pay a debt.

It is for those reasons, in our submission, that the payee who by definition on the argument I am now putting, has accepted money in discharge, is not in a position to complain about any loss.  Now, it would be different, of course, if later they are on the wrong end of a claim for money had and received, as in this case, then they have to pay it back.  Then they

probably would have an action in deceit, worthless as it happens in this case and, in any event, subject to irretrievable transformation in its nature because of the intervening events that will have occurred and have occurred in this case, and it is for those reasons, in our submission, that if there is any role of fraud here it is not to prevent the discharge for having operated as a discharge, it is to highlight the change of position achieved for somebody in our case where if the discharge is ignored the restitution is granted, we at most are left with a claim in deceit against somebody against whom formerly we had such a good claim in debt that it had fructified in judgment and writs in assistance of that judgment.

Of course, the purpose of the argument that I am labouring in to support proposition 9 is, as we put it in proposition 10, but I do not need to elaborate, discharge is discharge is discharge and, in our submission, if we are correct in that view of the case that says there is a discharge here, the fraud does not vitiate the discharge, it does give rise to causes of action, certainly by the payer and perhaps by the payee, if the payer succeeds in getting restitution but it does not alter the fact of the discharge.

Your Honours, propositions 11 and 12; I will not labour proposition 11 which might be seen to be more rhetorical than substantive at this stage of the afternoon.  There was a sequence of events that is relevant to this.  I can, I hope, efficiently refer to that sequence by turning to our own written submissions in this Court, paragraphs 20 to 21.  Could I add to paragraph 21 at its beginning, line 29 on page 4, that it was on 14 April that the further demands were served and one sees from the references there given, particularly volume 2, page 685, I will not take you to it, that the claims made unequivocally chose to enforce rights said to come from the fraudulently induced rental agreements for goods that relevantly did not exist.

Now, we do not criticise the choice made, but we point to the fact that there was a choice made, and in our submission, for reasons which get support in analogy from the passages in Lumbers to which we have referred in our proposition 12 and elaborated in our written submissions, it is not unjust for us to retain the money where AFSL has said in the most solemn and serious fashion possible that they are entitled to the money; that is, to what was due to them by reason of their outlay, including profit component, in the proceedings referred to there.  The fact that that has failed commercially is, in our submission, not relevant any more than it was relevant to ascertain what had happened between the two building companies in Lumbers.  May it please your Honours.

FRENCH CJ:   Thank you, Mr Walker.  Yes, Mr Birch.

MR BIRCH:   Your Honours, could I commence by saying something about reversibility?  There are two issues; firstly, the reversing of the discharges and the judgments, the reversing of the loss of legal rights.  We say that there was no loss of reversibility.  We say that there was an opportunity – there was at least the legal possibility for the respondents to have set aside the discharges that they purported to give.

The discharges were, we say, clearly procured by fraud and by fraudulent representations not just to my client but by the TCP representatives to the respondents in the – there is a document that we have provided to the Bench that responded to a question asked of me by Justice Gageler this morning, that is, the materials that revealed how the payments were understood by Hills and Bosch coming from AFSL to relate to the TCP companies.  The documents entitle the appellant’s response regarding paragraph 5 of Allsop P. 

The key references there are to the final AB numbers which are the emails from, in Hills’ case, Mr Skarzynski to Hills and in the Bosch instance emails of Bosch indicating representations that had been made by Mr Skarzynski.  In fact, Mr Walker took your Honours to one a short while ago.  If you have before you volume 3 at page 1495 there is an email there to Tony Piper from Kingsley Liu who was a solicitor who had done work for Mr Skarzynski:

Richard instructs that he will furnish Bosch with confirmation of payment of $198,000 to Bosch from an alternative account (other than TCP) within the time period of 48 hours and which he has confirmed with Bosch yesterday that he has already made arrangements for that payment –

Now, that is, in a rather jumbled fashion, saying no more nor less than that Mr Skarzynski is telling you that you are getting $198,000 to pay the debts of TCP.  In fact, that is false.  The $198,000 is coming from another entity believing that it is coming through as payment.  So the payment – the representation – we would contend is clearly one that would have grounded action by Bosch to set aside the discharge that it had given on the grounds it had been procured by fraud.  It consented to judgments being set aside.  It would have been an elementary application to a court to demonstrate that the consent it had given to set aside the judgment had been procured by a fraudulent ‑ ‑ ‑

HAYNE J:   Be it so, so what?

MR BIRCH:   Your Honour, the case did not turn on this reversibility issue.  It turned on a second aspect of reversibility and that is this.  While the legal rights could be reversed in the fashion I have described, in the period that time ran there were opportunities for enforcement that were not availed of.  One cannot reverse the fact that those enforcement actions were not taken.  That is the only reversibility, we say, that is material in this instance.  Therefore, what was irreversibly lost were not the legal rights and judgments but the opportunities of enforcement.  Then the question becomes what flows from that? 

There was a reference – Mr Jackman, I think, referred to a passage in Professor Bant’s book at page 162.  I think your Honour Justice Hayne asked if he embraced the first bullet point on 162.  He did.  That refers to detrimental change.  It does not say, of course, anything about value.  However, Professor Bant, given a lengthier description, and we would embrace this proposition, on page 137, she said:

the irreversibility approach to the change of position defence does not lead to the feared breadth of judicial discretion that has been said to so greatly favour adoption of the disenrichment analysis . . . On the irreversibility approach, once the defence is made out, the court undertakes a valuation of the (irreversible) changes to the defendant’s position and offsets that amount –

We embrace that statement of the way in which one would approach irreversibility in this particular context.  Adopting that conceptual framework, the irreversible changes or losses where the opportunities – one still has to engage in the valuation exercise.

KEANE J:   Mr Birch, just before you go on, in relation to page 1495, that email you took us to, I am not quite sure I understand what you are saying.  In the second paragraph, it says:

Richard instructs that he will furnish Bosch with confirmation of payment of $198,000 to Bosch from an alternative account (other than TCP) –

That is saying, is it not, that the money is not coming from TCP?

MR BIRCH:   That is correct, but what it is saying though is that it is coming to pay you, Bosch, the money that is owed by TCP.  There are further – at 1493, Tony Piper to Amanda Blake – this is as between officers of Bosch themselves:

Richard has advised the account will be paid in full by Friday this week.  Costs should also be recovered.

Then there is more contained on 1494.  The inferences that we say one draws from that is that Bosch is being told by Mr Skarzynski money is going to come in and it will be to pay the outstanding debt TCP owes to Bosch.  That statement is false because the money that comes in comes in from an entity who is providing that money apparently for purchase of equipment.

So let us assume, for instance, that upon the discovery of the mistake, Bosch had promptly remitted the money back to AFSL, and then when Mr Skarzynski rings up and says “I have paid my debt” and they have said, “No, I am sorry, that was not money to pay your debt.  You had procured that by a fraudulent scheme.  We are not treating your debt as discharged at all”, Mr Skarzynski could have had no possible answer to that response and there would have been no doubt that Bosch would have been perfectly entitled to reverse any discharge on its books.

In fact, I think Mr Walker was hinting at – I am not sure whether I grasped his point.  He seemed to suggest that if restitution had been ordered, then Bosch might have been in a position where it would have been entitled to set aside any discharge.  I am not sure whether that is quite what he meant to say, but let us assume that the arguments had not been accepted at trial so that Bosch had been made to disengorge the money, it would seem surprising, in that circumstance, that TCP and the Skarzynski entities could have, nevertheless, hung on to their discharge had they then been freshly pursued in new proceedings.  It would be unimaginable, one would think.  The attempt by them to say, well, you had originally agreed to discharge would have been, one thought, swept aside in light of the facts.

So, we say, that, therefore, that aspect of reversibility is not the relevant one.  We concede that there was a practical opportunity lost.  If there was no practical opportunity lost, then there would have been no defence of change of position at all.  From the view that we have taken of this case, we make this concession.  We say, well, there was a degree of irreversible loss – a loss of opportunity – but that is as far as you got and because you did not go and establish the other matters that I discussed at length this morning, the defence fails for you.  Could I say something about estoppel?

HAYNE J:   How could you value that which was lost without making assumptions about what persons not party to the action did, might have done, could have done, would have done, in the six months trading that thereafter ensued?

MR BIRCH:   Well, it is said that it is extremely difficult.  The difficulties have been emphasised.  It is said by Mr Walker, for example, that accountants would not have helped.  But what one ultimately would have been looking at would have been the solvency of the targets at about the date the payments were made, the end of August, the beginning of September.  Solvency, cash flow, available cash flow; these are the sorts of things that accountants are very good at measuring and determining, and from that one would have been able to offer a plausible judgment about whether there was a realistic prospect of some particular sum or a reasonable probability of some sum being obtained.

KEANE J:   They are the sort of exercises with which we are familiar in liquidations and proceedings brought under the insolvency regimes, individual and corporate, which expressly provide for going back and getting to the bottom of things as best one can.  One is familiar with those exercises under that statutory authority.  What one is not familiar with is the idea that you bring in the economists and the accountants in accounts for money had and received.

MR BIRCH:   Well, your Honour, my response to that is partly this; there has already been discussion today of examples where it is relatively straightforward.  In response to a question from Justice Gageler, Mr Walker said, well, if the rights were clearly illusory, then in those circumstances there would not be a relevant change of position.  But one could simply add to that, well if, for example, the evidence showed that it was clear that you would have recovered $100,000, do you not then have a change of defence established for $100,000?  Why would you, where the evidence is clear, not apply the pro tanto principle in a straightforward fashion?

HAYNE J:   Because these people went on trading for a further six months.  No other creditor of this group of companies moved to liquidate – so far as the evidence goes, no other creditor moved against them in any way.

MR BIRCH:   The answer to that is, in part, a point emphasised by Mr Walker himself that he said we had our foot firmly on their throat at about the time the money came through.  We were pushing our garnishee notices, and it is clear that the pressure produced a response.  What the pressure produced was a fraudulent scheme, and one therefore says if the company’s response when it was under extreme pressure at the end of August was to seek to gain a breathing space by a fraudulent scheme, what is the likelihood that it had available cash to lawfully and properly pay debtors who are pressing for well over $500,000, coupled with the fact, as I said this morning, that no defendant provided any evidence at all of exactly what the company was doing between August/September and the appointment of the receivers in April 2010.

There is nothing that is suggestive of available cash resources that makes it plausible that payments might have been made.  One might have thought the straightforward conclusion was simply that the rights were worthless.  But if your Honour says to me that is a tough assumption to make, my response is it was for the defendants to put sufficient material before the court regarding the position of the TCP entities to contest that.  They did not do so.

GAGELER J:   Mr Birch, what do you say to Mr Jackman’s fourth source of detriment?  It is Justice Allsop’s judgment at paragraph 165 and Justice Meagher’s judgment in the second half of paragraph 216, that is that the passage of time has contributed to the difficulty of the company’s establishing the value of the opportunity that you accept they lost.

MR BIRCH:   One thing I have already said, which is partly in answer to that is that it is an assumption made without evidence that these difficulties were as extreme and difficult as their Honours suggested and for all we know an accountant could have looked at the books and given us an answer quickly. 

Secondly, we say what Justice Allsop does at one point is to say that the passage of time was a result of AFSL’s mistake and we say well what is really happening is that covert blaming of AFSL for the passage of time and the difficulties that have arisen and, therefore, we say that is not fair in light of the findings. 

Ultimately, and finally, when one – if the Court had been placed in a position where it had all the facts that could be known then it was the job of the first instance judge to wrestle with those and make a judgment about what was an appropriate value to put upon those lost opportunities.

HAYNE J:   Can you point to any case in which it is done?  If you take the compulsory winding‑up or bankruptcy, the only question that will emerge is whether at a particular point the company was trading whilst insolvent.  That is not a question of valuing the worth of a lost chance, radically different.

MR BIRCH:   I accept that, your Honour, certainly that is the case.  But it may also be true that in the course of doing that analysis one can make a reasonably accurate judgment about the likelihood that creditors would receive a payment when the winding‑up is complete or whether at a certain period shortly out from a winding‑up there is a likelihood that creditors will receive a payment.  Those are relatively straightforward questions that are answered and they are not too dissimilar from the questions that would have had to have been answered in this particular case.

Your Honours, there were two other issues I wanted to deal with.  One was this question of estoppel.  Mr Jackman said receipt takes the place of representation and, indeed, on the other side of the Bar table there is a move to bring the “change of position” defence closer to an estoppel argument where we are moving in the other direction.  Let me try and summarise it this way.

Let us assume that we had made a representation that the moneys that we were remitting were in payment of TCP’s debts and we had done that for some foolish or mistaken reason and in consequence there had been action taken by Hills and Bosch on the strength of that representation.  We then discover our mistake and we seek to resile from the representation.  The representational analysis is caught up with the notion that a party is prevented from asserting a state of affairs where there has been detrimental reliance. 

When we come to assert that we are entitled to money back because it was not paid to pay a debt, the representee says “No, you cannot assert that state of affairs.  You are bound by the representation that you made because of our detrimental reliance”.  This is tied up in part with estoppel’s roots which are evidentiary as well as a substantive action.  Indeed, of course, there has been long debate through the 20th century about the extent to which estoppel was merely some form of shield or whether it gave rise to a possible action of its own.

Because it is about holding a party to a state of affairs, it does not attract the notion of valuation and it does not attract the flexibility of approach where one looks to, in effect, the net economic difference which is what I have emphasised in my submissions this morning.  Of course, there is another distinction as well.  The representor might be innocent but they have actively induced mistake in the mind of the representee in a way different from this.  Each party has deluded themselves, so to speak, in our case.  It is not the case that my client has induced the delusion in the defendant or vice versa. 

KIEFEL J:   Might the notion of certainty of payment in commercial transactions provide a basis for an analogous approach to that in estoppel?

MR BIRCH:   It can in some cases and those cases will be largely, as I suggested this morning, ones where there is a contractual relationship connecting the parties in a way which puts a high value on holding them to those relationships.  That is not the case here because, we say, there was never a contract between the AFSL and the defendant.

I think I have dealt with the principal issues.  We will rest on our submissions regarding our response to what is put by Bosch regarding the partial defences.  What we have said in our reply is that we accept a 52,000‑odd sum which reflects moneys they have actually paid out to TCP entities.  They press in their oral submissions a GST and lease payment sum as well.  My understanding of their claim is that that is additional to the concession that we have made. 

So, if your Honours accept my “no recoupment” point, then they do not get any of the issues that they have raised in their oral submissions because our concession did not relate to those and we have built our concession into the form of order which I identified this morning when I identified it as $145,000.

That leaves only this one outstanding question.  It is a pity that there was confusion created by the concessions made by us to the Court of Appeal.  It is clear that the counsel appearing made a form of concession in regard to the lease payments and the GST sum.  However, I can only say this, that the Court of Appeal itself, rather than simply rest upon the concession, adverted to those issues at paragraph 217 on 2339 and expressed difficulties with – that is in Justice Meagher’s judgment, and in Justice Allsop’s judgment at page 2320.  Neither of their Honours simply rested on the concessions that were made, but they did not argue through and deal with the issues because they did not have to be decided in light of their ultimate conclusions.

We say the principle is clear and therefore, ironically, the one item that should have been conceded, the $21,000, was the one item that was not conceded, and the two items that were conceded were items that principle suggests should not have been.  In those circumstances, we say that we can have no argument with them getting $21,000.  We accepted in writing the GST component, which was 28 and if the Court holds us to the number of 28 we cannot complain about that at all.  As to whether they should have a fuller deduction because of the larger concession for the lease payments will depend upon whether the Court concludes that we ought not to be able to step away from that concession.

GAGELER J:   Does your grant of special leave extend to raising in the appeal matters of concession before the Court of Appeal.  I mean, I do not really see a ground of appeal that covers this particular ‑ ‑ ‑

MR BIRCH:   It did not, your Honour.  The notice of appeal sought the full sum though, the 308,000 from Hills and the 198,000 from Bosch.  Then, the parties have dealt with the subsidiary issues through the ‑ ‑ ‑

KEANE J:   It might be fair to say that if this issue had emerged at the application for special leave, leave would have been tailored so that the leave you were granted did not encompass these matters.

MR BIRCH:   Your Honour, I have to accept there is some blame on our part for this.  I can only highlight how it has arisen and suggest that the

issues have been capable of being ventilated in any event and it made clear what we actually do concede as a matter of principle.  Whether we are held to more than that it will be a matter as to whether the Court considers that we ought to be entitled to step back from that concession.

KEANE J:   Just before you sit down, can I just ask you this?  Do you submit that the effect of David Securities was to – or at least of the plurality in David Securities was to hold that, in effect, Aiken v Short was wrongly decided or is it consistent with Aiken v Short?

MR BIRCH:   I would have said it was consistent with Aiken v Short, yes.
I am not sure that ‑ ‑ ‑

KEANE J:   With the majority view in Porter v Latec.

MR BIRCH:   Yes.  We deal with Porter v Latec in our submissions in reply and we say that the principle of Porter v Latec has just been mischaracterised by our opponents.  When you analyse it carefully, it does not raise the issue they assert, that what happened in Porter v Latec was that there was a payment by the payer to an intermediary and a payment by an intermediary to the ultimate recipient.  That made all the difference and made it quite distinguishable from our case where AFSL simply paid it into the accounts of Hills and Bosch and we ‑ ‑ ‑

KEANE J:   What I think on the Chief Justice’s view - anyway ‑ ‑ ‑

MR BIRCH:   Well, because of the hour I will have to rest on our submissions, but we have put in a paragraph or two in our submissions in reply that respond to our opponents on Porter v Latec.

FRENCH CJ:   Thank you, Mr Birch.  The Court will reserve its decision.  The Court adjourns until 9.45 tomorrow for pronouncement of orders.

AT 4.16 PM THE MATTER WAS ADJOURNED