Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd

The High Court of Australia considered an appeal by Australian Financial Services and Leasing Pty Ltd ("AFSL") against Hills Industries Ltd and Bosch Security Systems Pty Ltd ("Hills" and "Bosch"). AFSL had made payments to Hills and Bosch under the mistaken belief that it was purchasing equipment for leaseback to a company called Total Concept Projects ("TCP"). These payments were induced by the fraud of a TCP director, who had created false invoices. Hills and Bosch, at TCP's request, credited these payments against TCP's existing debts. When AFSL discovered the fraud, it sought to recover the mistaken payments.

The central legal issue before the High Court was whether the respondents, Hills and Bosch, could rely on the defence of change of position to resist AFSL's claim for restitution of money paid under a mistake of fact. Specifically, the court had to determine if the respondents had suffered a detriment by changing their position in reliance on the mistaken payments, such that it would be inequitable to require them to repay the money. AFSL contended that the respondents had not adequately demonstrated economic detriment, arguing that simply ceasing to pursue existing debts and continuing to trade was insufficient to establish the defence.

The High Court reasoned that the defence of change of position requires an inquiry into whether the recipient of mistaken payments would suffer a detriment if required to repay. The court found that Hills and Bosch had indeed changed their position in reliance on the payments. They treated TCP's debts as discharged, ceased efforts to recover those debts, and continued to trade with TCP. The court held that the abandonment of the opportunity to recover existing debts and the continuation of trading relationships constituted a sufficient change of position, making it inequitable for AFSL to recover the funds. The appeal was dismissed.