Aviacion Colombiana Limitada Aviaco Ltda v Commonwealth of Australia

AVIACION COLOMBIANA LIMITADA AVIACO LTDA v. COMMONWEALTH OF AUSTRALIA
No. ACTG20 of 1990
FED No 39/94
Number of pages - 52
Contract - Quasi

COURT

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
NEAVES(1), HIGGINS(2) AND COOPER(3) JJ

CATCHWORDS

Contract - Claim for money had and received - Total failure of consideration - Sale of aircraft subject to end-user approval - Monies paid by purchaser for "get ready" costs - End-user approval refused.

Contract - Principal and agent - Authority of Agent - Agent for respondent's lack of authority to receive and use monies to pay for "get ready" costs.

Quasi - Contract - Restitution - Unjust enrichment - Absence of clear evidence of an enrichment to the respondent.

Abalos v Australian Postal Commission (1990) 171 CLR 167

Devries v Australian National Railways Commission (1993) 112 ALR 641

David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1

O'Brien v Komesaroff (1982) 150 CLR 310

McLean's Roylen Cruises Pty Ltd v McEwen (1984) 54 ALR 3

Golski v Kirk (1987) 72 ALR 443

Calin v Greater Union Organization Pty Ltd (1991) 173 CLR 33

Petersen v Moloney (1951) 84 CLR 91

Brien v Dwyer (1978) 141 CLR 378

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (1943) AC 32

Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221

ANZ Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662

Strang Patrick v The "Sletter" (1992) 38 FCR 501

HEARING

CANBERRA, 26 and 27 October 1992
#DATE 14:2:1994

Counsel for the Appellant: Mr. D. Rofe QC and Mr. B. Hull

Solicitors for the Appellant: Abbott Tout Russell Kennedy

Counsel for the Respondent: Mr. R. Williams QC and

Mr. B. Meagher

Solicitor for the Respondent: Australian Government Solicitor

ORDER

THE COURT ORDERS THAT -

1. The appeal be dismissed.

2. The appellant pay the respondent's costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

NEAVES J This is an appeal from a judgment of the Supreme Court of the Australian Capital Territory (Kelly J) dismissing a claim by Aviacion Colombiana Limitada Aviaco Ltda ("the appellant") against the Commonwealth of Australia ("the respondent"). The appellant's claim was for money had and received by the respondent for and to the use of the appellant in the sum of $US985,000.00. The basis of the claim was that that sum had been paid by the appellant to the respondent for a consideration that had wholly failed. The appellant alleged that the sum in question had been paid in connection with an agreement for the purchase by it from the respondent of two Hercules C-130A aircraft, an agreement that did not come to fruition because a condition precedent, namely that the Government of the United States of America approve the purchase, was not fulfilled.

I have had the advantage of considering the judgment prepared in this matter by Cooper J. I agree, for the reasons given by his Honour, that the appeal should be dismissed, with costs. I also agree with the statement set out in his Honour's judgment of the reasons which led the Court, during the hearing of the appeal, to refuse the appellant leave to raise, by way of amendment of the notice of appeal, an alternative case, a case that had not been pleaded and had not been investigated at the trial.

JUDGE2

HIGGINS J: The appellant claimed against the respondent the sum of $US985,000.00. It alleged, as its cause of action, monies paid to the respondent for a consideration which had wholly failed and which, as a result, were had and received by the respondent to the use of the appellant.

The claim arose out of circumstances surrounding an agreement entered into on or about 1 February 1983 for the purchase from the respondent of two Hercules AC 130 aircraft.
On 22 March 1990, judgment was entered for the respondent by Kelly J.
On 11 April 1990 the appellant filed a Notice of Appeal. The grounds of appeal were substantially amended by an Amended Notice of Appeal dated 2 October 1992.
The learned trial Judge found that, on 20 November 1980, Mr P W Hocking ("Hocking"), was acting as local representative of Ford and Vlahos, Attorneys of San Francisco (California, USA). John J Ford III ("Ford") was a partner in the firm. Hocking proposed to the then relevant Commonwealth Minister (Mr Newman) "alternative procedures for the disposal of C130A Hercules Aircraft ..." using the services of Ford and Vlahos.
Ford and Vlahos held themselves out as experienced brokers able to arrange the disposal of (inter alia) surplus aircraft. They proposed that their remuneration would be by way of a deduction of fees out of the end price. They would meet all expenses.
On 3 April 1981 Ford and Vlahos sought formal authority from the respondent (through the Department of Administrative Services) to act as its agent in disposing of the surplus aircraft in question.
An instrument of appointment was signed bearing date 13 May 1981. It declared Ford and Vlahos to be "sole agents to sell on behalf of the Commonwealth of Australia 10 C130A Aircraft ..."
As the aircraft had been originally purchased by the respondent through the United States Government, the respondent was bound to sell those aircraft only to an end-purchaser approved by the US Department of State.
Ford and Vlahos made various efforts and expended various sums to obtain buyers and ready the aircraft for delivery. Up to 18 December 1981, they had expended over $US300,000.00.
In January 1983, a representative of the appellant met with Ford to discuss the purchase of some of the aircraft in question. As its name suggests, the appellant is a Columbian aviation company. It was agreed that $US600,000.00 would be deposited by the appellant in an "escrow account" by way of deposit. If the sale of the two aircraft in question proceeded, that sum would be credited to the agreed price. If the sale was unable to be completed, the sum would be returned.
Eventually, on 1 February 1983, an agreement was signed, following inspection of the aircraft by representatives of the appellant.
Ford persuaded the representatives of the appellant that, although State Department approval was not forthcoming as yet, some of the funds in the escrow account should be released to Ford and Vlahos to pay for "get ready" costs. $US100,000.00 was released from the $US300,000.00 which had, at that time, been deposited in the escrow account, although it was not then used by Ford and Vlahos.
On 31 May 1983, the sum of $AUS500,000.00 was transferred to a Ford and Vlahos account with Barclay's Bank in Sydney. By then a total of $US600,000.00 had been lodged in the escrow account.
Ford represented to the appellant's representatives that it was necessary for the remaining $US500,000.00 ($US100,000.00 having been drawn as noted above) to be released to him. Ford assured the appellant's representatives that these monies would be refundable if delivery of the aircraft was not able to be effected. That, at least, was Mr Battiston's evidence. He was a representative of the appellant. It does not seem to have been disputed, although there was no express finding to that effect. There was, however, no agreement as to how or from whom such a refund would be obtainable. I will return to that question later.
On 30 November 1983, despite the removal of the aircraft to Alabama USA, ready for delivery to Columbia, the US State Department advised that the proposed sale was not approved.
That outcome was at variance with an assurance Ford had given, about April 1983, that State Department approval had already been given informally. It should be noted that Ford had, in fact, been so informed by relevant representatives of the State Department.
In May 1983, the US State Department had expressed concern about the use of Hercules aircraft in Brazil to ferry arms. There is, of course, no suggestion that the appellant had engaged in such activity or that aircraft purchased from Australia had been so used. Nevertheless, a risk was thus created that some sort of blanket refusal of the importation of such aircraft into South America might be considered.
There was then a meeting at the "Clipper Club" at Los Angeles International Airport on 23 May 1983.
It was then that the appellant's representatives, Messrs Battiston, Harrera and Bravo, agreed to release the balance of the $US500,000.00 held in the escrow account, to enable Ford to get at least one aircraft to the United States, pending end-user approval, "at the buyers' risk". That agreement was against the advice of Mr Battiston ("Battiston") but he was overruled by the others.
Battiston claimed in evidence that he did not believe that the release of the monies in any way affected their refundability in the event that the sale did not proceed. However, he then believed, he said, that end-user approval was already agreed. His concern was the loss of security if the funds were released to Ford.
Efforts by Ford and Mr Bravo ("Bravo"), for the appellant, after 30 November 1983, failed to persuade the State Department to grant end-user approval. Those efforts, and earlier efforts, to obtain end-user approval had been supported by the respondent.
In addition to the initial deposit, Ford, in a reconciliation statement dated 20 January 1984, acknowledged receipt of payments totalling $US985,000.00 up to that date. That sum was shown as a credit towards the ultimate purchase price of $US3,375,000.00.
It was the appellant's position that it expended the additional monies and agreed to release the funds held in the escrow account only because it believed that Ford's representation that end-user approval had been given. Bravo believed, he said in evidence, that Ford would, if unsuccessful in obtaining end-user approval, return the money. He agreed that there had been no records kept of monies paid other than the deposit monies.
Bravo also conceded that, after it became clear that end-user approval for the sale would not be given, Ford had proposed that the aircraft be sold to some other buyer acceptable to the State Department. He proposed that the appellant would be reimbursed out of the proceeds of that sale.
The learned trial Judge noted that, even after advice of refusal of end-user approval, Bravo paid a further $US50,000.00 to Ford. Whether that sum was paid to engage Ford to lobby for a reversal of the refusal of end-user approval or to find a buyer acceptable to the US Government was not clear.
Ford was accepted by the learned trial Judge as "a witness of truth". He was not so impressed with Bravo and Battiston. His Honour considered that they were "evasive" concerning their understanding of the "risk" they were undertaking in releasing the funds held in the escrow account.
His Honour concluded that the risk that was appreciated by the appellant's representatives was that the funds expended would be wasted if end-user approval was ultimately refused. That was a conclusion which substantially depended on his Honour's assessment of the witnesses. This Court is not in as good a position to draw such inferences as was his Honour (see Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 112 ALR 641).
His Honour found, therefore, that in expending the funds held in escrow (and the additional funds provided),

"... the defendant (sic - "plaintiff") was putting itself at risk of having all the money used for get ready costs before end-user approval was obtained and at the risk that it might not be obtained."

Of course, that does not mean that the appellant's representatives and Ford equally appreciated the extent of the risk they were taking.

His Honour also concluded that, in relation to that expenditure, Ford was acting as the appellant's agent rather than the respondent's agent. He was not satisfied that it was a term of the appellant's arrangement with Ford that the monies so expended would be refunded by the respondent, if end-user approval was not obtained.
The primary finding which the appellant seeks to challenge is the finding that Ford and Vlahos, in expending the "get ready" monies, were not acting on behalf of the respondent in so doing. Of course, even if they were so acting, it does not avail the appellant unless his Honour's finding that the respondent agreed to take the risk of expending such monies without a right to their return is also to be reversed.
Insofar as the appellant challenges the findings of fact made by Kelly J, and prefers the evidence of Battiston and Bravo to that of Ford, it must fail.
It is not, to my mind, "inherently improbable" that the appellant, believing that end-user approval was likely, would permit the monies it had advanced to be expended without an assurance of recovery from the respondent if that belief turned out to be wrong.
The appellant, on the hearing of this appeal, however, sought to put its case on a different basis.
That different basis commenced with a concession that consideration had not totally failed. It was, however, asserted that the consideration was so inadequate as to amount to an unjust enrichment of the respondent. This was because the respondent has had the advantage of the "value added" to the aircraft at the appellant's expense. As over $US1.0m had been expended on the aircraft, the appellant contended, some substantial value must have been added.
That proposition is said to be supported by the recent decision of the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1.
However, the only cause of action pleaded by the appellant, and relied upon at trial, was that it was entitled to have $US985,000.00 restored to it because the consideration for the payment of it to or to the use of the respondent had totally failed.
Certainly, both the alternative and the cause of action as pleaded are causes of action which invoke "the unifying concept" of unjust enrichment.
An amendment was sought to the Notice of Appeal so as to raise the alternative ground as Ground 4. That was a new matter. It asserted that, by reason of the expenditure of the sum of $US985,000.00 which the appellant provided, the aircraft had been substantially improved, leaving the respondent with a more valuable asset than it previously had. It was contended that it would unjustly enrich the respondent to allow that benefit to be retained without recompense to the appellant.
At the hearing on 26 October 1992, leave was refused to amend the Notice of Appeal so as to add this ground of appeal.

Reasons for refusal to allow amendment by adding ground 4
41. The basis upon which leave to amend a Notice of Appeal to add a new ground may be granted was stated by the High Court in O'Brien v Komesaroff (1982) 150 CLR 310, to be as follows:-

(319) "In some cases when a question of law is raised for the first time in an ultimate court of appeal, as for example upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is expedient in the interests of justice that the question should be argued and decided ... However, this is not such a case. The facts are not admitted nor are they beyond controversy.

The consequence is that the appellants' case fails at the threshold. They cannot argue this point on appeal; it was not pleaded by them nor was it made an issue by the conduct of the parties at the trial.
In any event the substantive argument has little to commend it." (per Mason J).
If further authority is needed, reference may be made to McLean's Roylen Cruises Pty Ltd v McEwen (1984) 54 ALR 3, 9 per Gibbs J.
It was conceded that the point sought to be raised by the amendment was not the subject of the pleadings nor was there any refusal to allow the point to be taken at trial.
What, if any, recompense would be payable cannot be resolved by reference to the evidence already given. How much, if any, of the $US985,000.00 expended added value to the aircraft is not clear.
Whether any such added value was off-set or enhanced by the change of location to Alabama is, itself, not clear. No evidence was addressed to that issue either.
There is also the consideration, referred to by Kelly J in Golski v Kirk (1987) 72 ALR 443, that the amendment now seeks to raise a new cause of action which, was it now to be separately sued upon, would be irrevocably statute-barred.
I agree that the mere fact that a matter was not raised for determination at first instance is not an insuperable barrier to it being raised on appeal (see Calin v Greater Union Organization Pty Ltd (1991) 173 CLR 33). I am of the view, however, that the appellant should not now be permitted to rely on the ground of appeal it seeks to add.
In any event, I consider that, even had it been raised, the issue would inevitably have been decided against the appellant for reasons which will emerge from a consideration of the claim for restitution of the $US985,000.00 (or some portion thereof).

The Agreement
50. The sale fell through because end-user approval was refused, albeit unexpectedly, by the US Government, acting through its Department of State.

It is important to observe the terms upon which the appellant agreed with Ford and Vlahos to acquire the aircraft.
It agreed to deposit $US600,000.00, being $US300,000.00 for each aircraft, by way of deposit in an escrow account.
Upon obtaining all necessary approvals, including US end-user approval, the appellant was to lodge letters of credit for $US2,000,000.00. It was then to deposit a sum of $US387,500.00 for the balance of the price.
The "seller", the respondent, agreed "as a part of the purchase price" to put the aircraft into a "Get Ready" condition, and to fly them safely to Columbia or to a designated "overhaul facility".
It was also agreed that the respondent would "make arrangements" for the ferry flight to the designated overhaul facility. However, the cost of overhaul, including painting and polishing, was to be met by the appellant, including "transportation, lodging and accommodations of Seller" incurred in negotiating the overhaul contract terms.
The further ferry flight (if any) to Columbia was to be at the respondent's expense, in that it would be met out of the purchase price. The respondent agreed to facilitate the training of the appellant's personnel in relation to the aircraft. The cost of that training excluding the "cost of transportation and accommodations" of those persons was to be included in the purchase price.
The respondent had agreed with Ford and Vlahos that the latter would meet any pre-delivery expenses. It is, at least, likely that the respondent would have been entitled to refuse to authorise the incurring of any expenses otherwise payable by it until satisfied that end-user approval had been given and the "purchase price" secured.
Ford and Vlahos had agreed with the respondent to carry out the preparations for ferry flight and delivery.
The position as at 23 May 1983 (the Clipper Club Meeting) was that $US600,000.00 had been provided by the appellant by way of deposit. As well, the appellant had permitted the release of $US100,000.00 "as an act of good faith" to enable the respondent to start the "get ready procedure" on the planes. That provided Ford and Vlahos with funds which they could then expend on the cost of that "get ready procedure".
End-user approval by the US Department of State had not been given at that time, although it had not been refused. None of the parties seemed to doubt that it would be forthcoming.
The appellant had permitted the release of the $US100,000 referred to above by giving Ford a cheque for that sum. Ford had not dated and deposited that cheque by the date of the "Clipper Club" meeting. At that meeting, Ford asked for the remaining $US500,000.00 to be released to him. The purpose of that release was, he said, to provide funds to get the aircraft out of Australia and to the overhaul facility. The appellant agreed to that proposal because it was concerned that the respondent would not release the aircraft until the "get ready" processes had been finalised.

According to a declaration made on 5 December 1985, the appellant's representative, Battiston, noted that Ford had, in effect, been asked to get the aircraft to the United States. The English translation of his recollection then proceeded,

"Mr Ford stated that in order to bring the planes to the United States, we would have to transfer the funds from the bank to Australia and pay for the costs needed to repair the planes, training of the crews in China and the ferry."

Battiston, in that declaration, gave his understanding of the consequences of agreeing to that proposal as follows,

"I was very clear and told them (that is, the other persons representing the appellant) that withdrawing the funds from the bank would mean losing the security that the bank had given us of returning the funds to the transfer agent, the Banco Ganadero in Panama in the event the sale did not go through."

Notwithstanding this advice, the other representatives of the appellant to whom he referred "... authorized the transaction. It was a risk that they accepted". What was that "risk"?

Ford says that he told the appellant's representatives that,

"... if we took the step of ferrying the aircraft across the Pacific Ocean, halfway around the world, that in accordance with my instructions from the Australian government, it would have to be at the buyer's risk."

His Honour found, and there is no reason to reject his finding, that all parties were then aware that end-user approval was lacking, although it was confidently expected that it would be granted.

It is also obvious, from the evidence accepted by his Honour, that the aircraft would not have been released from Australia, under normal circumstances, until end-user and all other necessary approvals had been given.
Clearly, the respondent expected Ford and Vlahos and/or the appellant to meet the costs of delivery of the aircraft. That appears from the departmental minutes of discussions with Hocking. So far as the appellant was concerned, some of those costs would be absorbed in the agreed price (which exceeded the return to the respondent). Other costs would not.
In particular, overhaul costs, en route to Columbia, were expenses to be paid by the appellant in any event.
No evidence was given as to what part of the $US600,000.00 deposit was expended on the "get ready" program which was to have been the seller's expense and included in the price. Similarly, there was no evidence as to what sums were expended on matters which were to have been at the buyer's expense, according to the agreement. However, for what it is worth, Ford's statement of account to the appellant seems to concede that the sum of $US985,000.00 was to be absorbed in the agreed price.
It seems that, after 23 May 1983, Ford received further monies from the appellant. Those sums were presumably for expenses incurred after the aircraft were in Alabama. There was no evidence as to the nature of that expenditure.
After the sale fell through, Ford authorised the balance in the escrow account to be refunded to the appellant. That did not result in any funds being paid to the appellant. That authority was given, it appears, in anticipation of the sale of the aircraft to some other party. That would have resulted in funds thereafter being credited to the escrow account.
Part of the deposit monies were, clearly, expended on insuring the aircraft. That cost was $US17,125.00. That was not an expense to be undertaken by the respondent. It was part of the "buyer's risk" in removing the aircraft from Australia to Alabama.
There was also an additional $US50,000.00 handed to Ford in January 1984, for unspecified purposes over and above the $US985,000.00 acknowledged by Ford in the memorandum he gave to Bravo.
That sum, however, is not mentioned in the authority addressed by Ford to Barclay's and dated 14 August 1985. That authority acknowledges only $US985,000.00 as having been paid by the appellant towards the purchase price.
Of course, if Ford had authority to make admissions on behalf of the Australian Government that could be regarded as an admission by the respondent that $US985,000.00 had been received and used for costs for which the respondent, and not the appellant, was responsible.
The appellant had agreed to advance $US600,000.00. That was to be held in trust to secure the "get ready" costs in the event that, for example, the appellant wrongfully terminated the agreement.
In agreeing to advance any funds to Ford and Vlahos to facilitate the departure of the aircraft from Australia to Alabama, the appellant must have known it was doing something not required of it by the agreement with the respondent. It was done because the appellant's representatives were concerned to get the aircraft to the USA as soon as possible.
In paying sums of money to Ford and Vlahos, the appellant was also taking the risk that they lacked authority to receive the sums in question on behalf of the respondent (see Petersen v Moloney (1951) 84 CLR 91).
The authority of Ford and Vlahos was as defined by the agreement between the appellant and the respondent (see Brien v Dwyer (1978) 141 CLR 378). That agreement, in this case, gave no authority to Ford to receive and use deposit monies to pay for "get ready" costs.
The appellant invested large sums in readying, ferrying, overhauling and registering the aircraft for delivery to Columbia. It may be accepted that it did so without appreciating the real risk that US end-user approval would be refused.
If the agreement for the sale of the aircraft fell through without fault on the part of the appellant, the appellant could, no doubt, have looked to Ford and Vlahos to fulfil Ford's promise that the funds advanced would be "refundable". However, it may be noted that Kelly J was not persuaded that the appellant expected all the sums expended to be refunded.
His Honour found that Battiston's reluctance to sign the cheque for Ford on 23 May 1983 arose from,

"... his view that the defendant (sic - it is agreed that the reference should have been to the appellant) was putting itself at risk of having all the money used for get ready costs before end-user approval was obtained and at the risk that it might not be obtained."

I do not know that the evidence can support the view that Battiston's concerns were so precisely defined. That probably does not matter. He was certainly conscious of the risk in general terms of permitting deposit moneys to be expended by Ford and Vlahos before completion of the sale.

His Honour did express the view that the advance of monies after Bravo knew of the refusal of end-iuser approval was,

"... inconsistent with the plaintiff's (that is, the appellant's) contention that the money expended by Mr Ford was to be repaid if the end-user was not finally approved."

I do not consider that conclusion follows from the premise on which it is based. It is clear that the appellant at all times expected Ford to arrange the refund of at least the sum of $US985,000.00 which had been advanced if the sale fell through. However, the source of those funds and the party upon whom the obligation fell to pay them was not addressed. I think the appellant's representatives accepted that, as between themselves and Ford, the sum of $US985,000.00 was to be credited to the total price when the sale was completed. They expected that, if end-user approval was not given, they could look to Ford to recover the $US985,000.00 for them. However, it was made clear to them by Ford that recovery of those funds would be from the on-sale of the aircraft. Insofar as his Honour was dealing with a contention that the appellant expected the respondent to repay the monies so expended, then I agree with that conclusion.

There was no agreement by the respondent to refund monies expended by the appellant. Whatever the appellant's expectation, the only agreement with the respondent was that some of the money expended would be credited to the total price upon end-user approval and delivery of the aircraft to Columbia.

Money had and received
83. However, the appellant's claim was not based on an agreement between it and the respondent. It was based on a total failure of consideration. Its case was that a security deposit (and other monies advanced additionally thereto) had been paid on account of the price of the aircraft. It was paid to the respondent's agent and the consideration for which it was paid failed insofar as the sale of the aircraft to the appellant could not be completed.

The cause of action was for money had and received upon a total failure of consideration.
In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (1943) AC 32 the respondent agreed to buy machinery from the appellant. Prepayment of pounds 1,000 had been made. The contract was frustrated by the outbreak of war. In the absence of any contractual or customary stipulation otherwise, it was held that the sum paid was recoverable. The sum had been paid but the consideration for it had totally failed. It was then recoverable, not because of any agreement that it should be, but because it was just that it be refunded.
The basis for that cause of action was considered by the High Court in Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221. Deane J said,

(256) "The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution."

There is no general rule that money expended ought to be refunded in full once it is determined that the consideration for it has failed. The value of the benefit unjustly conferred may be less than that sum. Deane J expressed that concept in the following terms,

(263) "What the concept of monetary restitution involves is the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or "enrichment" actually or constructively accepted."

The right to restitution has been now held to extend to a right of indemnity conferred upon a third party under a contract of insurance.

The juridical basis for imposing an obligation to indemnify a third party as promised to the insured by the insurer, was put by Gaudron J in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (supra), in the following terms,

(174) "... if consideration has been wholly executed under an unenforceable contract, the law imposes an obligation or imputes a promise to make compensation for the benefit accepted: Pavey and Matthews. The obligation may be limited by the terms of the contract to correspond in content with the unenforceable contractual obligation, but it is an obligation which has its source in law and, not in the contract."

Again, her Honour said,

(175) "The obligation to make restitution and the concept of unjust enrichment are not limited to situations in which the parties stand in a contractual relationship, or would so stand but for some matter rendering the contract invalid or bringing the relationship to an end."

It is, therefore, apparent, I think, that the right conferred on the appellant (if any) was at best a right to have restitution of so much of the monies it paid to Ford as remained unexpended in the hands of the respondent or, if expended, represented the extent to which the respondent had been otherwise unjustly enriched.

That is not an easy matter to determine. Even when only sums of money are involved, the result can be complex.
For example, in ANZ Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, the ANZ Bank had, by mistake, forwarded $114,158.20 to Westpac, instead of $14,158.20, to be credited to a customer's account. Westpac applied the funds to reduce the customer's overdraft and pay outstanding cheques before it was advised of the ANZ Bank's error. It was, effectively, held entitled to retain the benefit of that portion of the overpayment.
In David Securities Pty Ltd v Commonwealth Bank of Australia (supra), the respondent had demanded from and been paid by the appellant, sums of money to cover the respondent's tax liability in relation to the transaction in question. It was accepted that, as a matter of law, the respondent had no relevant tax liability.
The issue of mistake was not raised on the pleadings but it was nevertheless argued at first instance. The appellant had sought to lead evidence of the mistake as to the respondent's supposed tax liability. That application had been rejected, probably because it had been seen as raising a mistake of law rather than a mistake of fact. The majority (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) were of the opinion that a payment made to satisfy a non-existent legal obligation was not a payment made for good consideration. Thus the payer had a right to expect a refund of the benefit so conferred on the payee. In the circumstances, there was no injustice to the payee in requiring it to make that refund.
Conversely, in Strang Patrick v The "Sletter" (1992) 38 FCR 501, Cooper J denied restitution to a party who conferred voluntarily a benefit on another. No benefit had, in fact, accrued from that conferral. There was, therefore, no injustice in denying recovery. The party conferring the benefit had, simply taken the risk that the other party would pay for or become liable to pay for the benefit in question.
In this case, in my view, the learned trial Judge was entitled to conclude that the release of the escrow monies and the expenditure of those monies, together with the additional funds provided, was undertaken by the appellant pursuant to an arrangement with Ford to which the respondent was not a party. Accordingly there can be no claim simply for the return of the $US985,000.00 paid out by the appellant.
I am prepared to assume that the appellant would nevertheless have been entitled to be compensated for any benefit the respondent had obtained as a result of the expenditure of monies on the aircraft. However, that was not an issue which the appellant addressed at trial.
The evidence in this case does no more than indicate that it is possible that the value of the aircraft was enhanced by the expenditure of the monies provided by the appellant. No evidence was called to indicate what, if any, benefit accrued to the respondent consequent upon the failure of the sale agreement.
For instance, it is possible that the storage and maintenance costs have eroded completely any enhanced value of the aircraft as a result of the expenditure of the appellant's funds. There is no evidence as to whether the aircraft were, in fact, "on-sold" and, if so, for what price.
This is not a case where the appellant attempted to address the issue of the enhanced value of the aircraft but was refused leave to do so. For the same reasons as leave to add ground 4 was refused, it seems to me that the appellant should not be permitted now to relitigate this issue. It is not, in my view, appropriate to do otherwise than to dismiss the appeal with costs.

JUDGE3

The Application to Amend the Notice of Appeal
COOPER J On the hearing of the appeal the appellant sought to amend its notice of appeal to include the following paragraph 4 :-

"4. Alternatively to 3 above, His Honour should have found that the Appellant had made out its claim for money had and received for the use of the Appellant in that the sum of US$985,000 or some substantial part of such sum being monies of the Appellant, had been used by it to the knowledge and with the acquiescence and co- operation of the Respondent in improving and adding to the value of the 2 aircraft 3212 and 3216 owned by the Respondent, in circumstances where:

(a)

the Respondent was unjustly enriched to the

extent of the whole or a substantial part of the US$985,000 to the detriment of the Appellant; and

(b)

it would be unjust to allow the Respondent to

retain such benefits valued at $US985,000 or some substantial part of such sum;"

The appellant commenced proceedings in the Supreme Court of the Australian Capital Territory by writ of summons issued on 27 May, 1986. On 2 July, 1987 pursuant to an order of the court of 18 June, 1987 the appellant amended its statement of claim to plead :-

"The plaintiff's claim is for moneys had and received by the defendant for and to the use of the plaintiff in the sum of $US985,000.00, being money paid by the plaintiff to the defendant for a consideration which has wholly failed, and interest thereon pursuant to section 53A of the Supreme Court Act 1933".

The following particulars of the claim were pleaded :-

"1. The plaintiff is a corporation incorporated pursuant to the laws of the Republic of Colombia and is entitled to sue in the abovenamed corporate name.

2. On or about the first day of February, 1983 by an agreement partly written and partly oral the defendant agreed to sell and the plaintiff agreed to buy from the defendant two Hercules AC 130 aircraft, payment for which was to be made by the plaintiff in the currency of the United States of America.

3. Pursuant to the terms of the said agreement, the plaintiff paid to the defendant a total of $US985,000.00 as part payment for the said aircraft.

4. The defendant has not delivered any of the said aircraft to the plaintiff or at all.

5. In the premises, the consideration for the payment of the said sum of $US985,000.00 has wholly failed and the defendant has had and received the said sum for and to the use of the plaintiff".

The respondent by its amended defence denied the agreement for sale alleged in paragraph 2 of the amended statement of claim, denied the payment to it of the sum alleged in paragraph 3 of the amended statement of claim as alleged or at all, admitted that it had not delivered the aircraft as alleged in paragraph 4, but denied a liability to so deliver, and denied the allegations contained in paragraph 5 of the amended statement of claim. Additionally, the respondent pleaded that if contrary to its denial it had received the alleged or any monies from the appellant, then such monies were not received to the use of the appellant and were expended at the direction of and with the consent of the appellant with the consequence that the appellant was estopped from claiming the monies from the respondent. The respondent further pleaded that if, contrary to its denial the appellant paid any money to the respondent, such payment was not a payment constituting the whole or any part of the purchase price of the aircraft.
The negotiations with the appellant concerning the sale of the aircraft were conducted by John J. Ford III of Ford and Vlahos, attorneys of San Francisco, who had been appointed by the respondent as sole agent for the purpose of the sale of those and other Hercules C130A aircraft.
By way of anticipation to the factual case which would be led against it to make out the allegations pleaded in paragraphs 2 and 3 of the amended statement of claim, the respondent pleaded in paragraphs 9 - 15 of its amended defence as follows :-

"9. At no relevant stage did Ford and Vlahos, Attorneys at Law of San Francisco, California have authority from the Defendant to: (a)

enter into an agreement to sell as alleged in paragraph 2 of the Particulars in the Amended Statement of Claim;

(b)

expend monies of or due to the Defendant in respect of "Get Ready" preparation, ferry flight delivery, ground and flight training, painting, overhaul or maintenance of the said aircraft (hereinafter referred to as "the preparations").

10. To the extent to which Ford and Vlahos entered into the said agreement to sell or expended monies of the Defendant on the preparations it acted beyond the scope of its authority from the Defendant.

11. In or about the month of May 1983 the Plaintiff instructed John J. Ford III a partner of Ford and Vlahos, to carry out the preparations at its risk, notwithstanding that end-user approval had not been received from the United States.

12. The said Ford had the preparations carried out, paying for the same at the direction of and with consent of the Plaintiff with monies that had been deposited by the Plaintiff in an account entitled "Australian C130A Escrow Account" at Barclays Bank of California together with any other monies provided by the Plaintiff to him between the months of August July 1983 and January 1984.

13. In having the preparations carried out and in paying for the costs thereof the said Ford was acting on behalf of and as agent for the Plaintiff.

14. Alternatively to paragraphs 9 to 13 hereof, if Ford and Vlahos or Ford was an agent of the Defendant for the purpose of receiving and expending monies in respect of the aircraft, it/he incurred the costs of the preparation in reliance upon the assurance of the Plaintiff that it was at its risk in the event that end-user approval was not received.

15. By reason of the foregoing the Plaintiff is estopped from claiming of the Defendant or its agent the costs so incurred".

It was upon these issues that the matter proceeded to trial.
On 22 March, 1990 Kelly J gave judgment for the respondent, and at the conclusion of lengthy reasons for judgment stated :-

"In all the circumstances the plaintiff has failed to satisfy me on the balance of probabilities that it has made out its claim for money had and received and there must, therefore, be a verdict for the defendant".

The respondent opposed the granting of leave to amend the notice of appeal in the manner sought on the basis that the case to be advanced was neither pleaded nor argued before his Honour the trial judge. Further, it was submitted that the respondent would be prejudiced because it had not led evidence relevant to the issues raised in the proposed amendment and, so far as the evidence available to the trial judge was concerned, it was not the whole of the evidence relevant to the new issues.
In Banque Commerciale S.A., en Liquidation v. Akhil Holdings Ltd. (1990) 169 CLR 279, Mason CJ and Gaudron J in their joint judgment stated (at 286 - 287) :-

"The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.) (1916) 22 CLR 490 at p 517, per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, e.g., Browne v. Dunn (1893) 6 R., at p 76, Mount Oxide Mines (1916) 22 CLR, at pp 517-518. Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference".

Of particular importance is the possibility that the

respondent may, if the ground had been raised below, have wished to call evidence in response to it. This is clear from the joint judgment of Mason CJ, Wilson, Brennan and Dawson JJ in Water Board v. Moustakas (1988) 62 ALJR 209 at 211 :-

"More than once it has been held by this Court that a point cannot be raised for the first time upon appeal when it could possibly have been met by calling evidence below. Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied.

....

In deciding whether or not a point was raised at trial no narrow or technical view should be taken. Ordinarily the pleadings will be of assistance for it is one of their functions to define the issues so that each party knows the case which he is to meet.

....

It is necessary to look to the actual conduct of the proceedings to see whether a point was or was not taken at trial...".

A similar approach has been taken in other decisions of the High Court - see Banque Commerciale at 284, 290; Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418 at 438; University of Wollongong v. Metwally (No. 2) (1985) 59 ALJR 481 at 483; Coulton v. Holcombe (1986) 162 CLR 1 at 7-8; O'Brien v. Komesaroff (1982) 150 CLR 310 at 319.
The appellant submitted that since the decision of the High Court in David Securities Pty. Ltd. v. Commonwealth Bank of Australia (1992) 175 CLR 353, given on 7 October, 1992 after the trial and judgment in the present case, it was sufficient to warrant the granting of leave to amend the notice of appeal in the manner sought that there be a finding, or that the appellant show on the facts as found, that money was had and received by the respondent for the use of the appellant. In that circumstance it was submitted, the appellant would show as a matter of law a prima facie right to recover the money paid. It was further submitted that it was then for the respondent to show that there was some legal reason why the appellant was not entitled to recover or some factual circumstance which would make recovery unjust. If necessary, justice as between the parties could be done by remitting the case to enable the respondent to call further evidence eg. evidence that there was no increased value in the aircraft in order to make out a defence. In support of this contention the appellant relied upon the majority judgment in David Securities (at 379) where Mason CJ, Deane, Toohey, Gaudron and McHugh JJ said :-

"The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust

((1988) 164 CLR, at p. 673). There can be no restitution in such circumstances because the law will not provide for recovery except when the enrichment is unjust. It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust".

Putting aside for the moment that the appellant does not have such a finding in its favour to sustain a prima facie right of recovery, the appellant must go beyond a finding of the mere payment of monies to be expended at its direction on the get ready, training and ferrying costs of the aircraft referred to under the agreement for sale. In David Securities the joint judgment (at 378-379) cited with approval statements made by Deane J in Pavey and Matthews Pty. Ltd. v. Paul (1987) 162 CLR 221 at 378-379 and said :-

"In Pavey and Matthews, Deane J stated (1987) 162 CLR, at pp. 256-257 :-

'To identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate... That is not to deny the importance of the concept of unjust enrichment in the law of this country. It constitutes a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case'. Accordingly, it is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality. As this Court stated in Westpac Banking Corporation (1988) 164 CLR at p. 673 : 'In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment".

What is clear is that, in the facts proved which it is said give rise to an obligation to make restitution, there must be proved the existence of some qualifying or vitiating factor such as mistake, duress or illegality upon which to base recovery. For example, in the case of money said to have been paid under mistake, the payer must prove :-

(a) The payment of the money to the recipient;

(b) That the payment was made under a qualifying or vitiating factor, ie. mistake;

(c) Enrichment of the recipient by the receipt and retention of the money;

(d) A free acceptance by the recipient of the receipt of the enrichment;

(e) A countervailing detriment to the payer in the loss or deprivation of the money.

It is that the payment has been caused by mistake which gives rise to the prima facie obligation to make restitution because the enrichment of the recipient at the expense of the payer is unjust. It is for the recipient of the money to point to circumstances which in law would make an order for restitution unjust.
The elements of enrichment and detriment must arise at the time the payment is made. They may sufficiently appear from the proof of the payment and retention of the money. Likewise, free acceptance of the benefit or enrichment may flow from the proof of payment of the money and its retention. But, the provision of services to, or the carrying out of work on, the property of another does not necessarily enrich the property owner or provide a benefit. Additionally, whilst the receipt and retention of money may, in particular circumstances, be seen as the free acceptance of the benefit, the mere expenditure of money in the provision of services to, or the carrying out of work on, property, by itself, does not and something more in the nature of a request or acquiescence with knowledge on the part of the property owner is necessary. (See Strang Patrick Stevedoring Pty. Ltd. v. The Owners of the M.V. "Sletter" (formerly the "Hibiscus Trader") (1992) 38 FCR 501 at 521-524).
Where the claim is for monetary restitution for money paid for services to, or work on, property of another, the payer must show :-

(a) The payment of money for the provision of the services or work;

(b) The existence of a vitiating or limiting circumstance in the payment of the money for that purpose eg. a request or knowledge and acquiescence;

(c) The receipt of a benefit or the enrichment of the property owner in its continued enjoyment of the property;

(d) A free acceptance and retention of the benefit or enrichment by the property owner;

(e) A countervailing detriment to the payer.

The amount of the money actually paid for the services provided or the work done, or the market value of the goods and services provided in such a case does not necessarily represent just compensation for the benefit or enrichment received. As was observed by Deane J in Pavey and Matthews Pty. Ltd. v. Paul (at 263) :-

What the concept of monetary restitution involves is the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or 'enrichment' actually or constructively accepted. Ordinarily, that will correspond to the fair value of the benefit provided (e.g. remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied). In some categories of case, however, it would be to affront rather than satisfy the requirements of good conscience and justice which inspire the concept or principle of restitution or unjust enrichment to determine what constitutes fair and just compensation for a benefit accepted by reference only to what would represent a fair remuneration for the work involved or a fair market value of materials supplied. One such category of case is that in which unsolicited but subsequently accepted work is done in improving property in circumstances where remuneration for the unsolicited work calculated at what was a reasonable rate would far exceed the enhanced value of the property".

In the instant case, the pleaded cause of action for money had and received for a consideration which has totally failed, relied on the total failure of consideration in the facts as pleaded as the limiting or vitiating circumstance upon which recovery was sought and which brought into operation the legal concept of unjust enrichment. The case which was sought to be raised by amendment on the appeal required that a totally different set of factual circumstances be established. Such a case required proof that the money, or some of it, was paid to effect repairs to the aircraft with the knowledge, acquiescence and co-operation of the respondent, that the payment constituted a benefit to the respondent because it resulted in enhancement in the value of the two aircraft owned by the respondent, that any enhancement was freely accepted by the respondent and, finally, required proof of how much of the US$985,000.00 was so spent on the aircraft, as opposed to ferry and training and other expenses, and to what extent, if any, such expenditure on the aircraft increased their value.
These issues were not canvassed on the trial of the action. In my view, it was too late to do so on appeal on evidence which was incomplete for the purpose and which was led to establish a different set of circumstances in order to found the relief as pleaded. For these reasons leave to amend was refused on the hearing of the appeal.

The Merits of the Appeal
21. On 1 February, 1983 the appellant, by Mr. Frank Battiston and Mr. Luis Carlos Herrera, and the respondent, by John J. Ford III, executed a written agreement for the purchase of the aircraft and spare parts and for get ready, ferry and training. The agreement provided as follows :-

"AGREEMENT TO PURCHASE AIRCRAFT AND SPARE PARTS AND FOR 'GET READY', FERRY, AND TRAINING

DATED: 1 FEBRUARY 1983

WHEREAS, on 1 February 1983, AVIACO LTD., by and through its representatives, Frank Battiston and Luis Carlos Herrera completed the inspection of ten (10) C-130A Lockheed Hercules aircraft and spare parts in Melbourne and Sydney Australia and;

WHEREAS, AVIACO LTD. has determined to purchase two (2) of said aircraft and is therefore entitled to first selection of 20% of the spare parts associated with said aircraft.

It is hereby agreed as follows:

1. Purchase of two aircraft and spare parts described herein having been approved, AVIACO LTD. hereby deposits with Barclays Bank of California, 3rd and Market Street, San Francisco, California the sum of Three Hundred Thousand Dollars (US$300,000.00) on account of aircraft Serial No. 3212, to be applied as a deposit on the purchase and delivery of said aircraft and the spare parts associated therewith.

2. Buyer shall deposit the additional sum of U.S. Three Hundred Thousand Dollars (U.S.$300,000.00) to secure delivery of the second aircraft, Serial No. 3216 and spare parts associated therewith.

3. Buyer shall obtain Colombian Authorization to Import and U.S. End Use Certificate for said aircraft and spare parts from appropriate Colombian authorities, whereupon Buyer shall transmit to Barclays Bank, Singapore, duly authenticated and approved Bank Letters of Credit, guaranteed by the Central Bank of Colombia, in the amount of U.S. One Million Dollars (U.S.$1,000,000.00) for each airrcraft

(sic) and associated spare parts the subject of this agreement.

Buyer shall further deposit the sum of U.S. Three Hundred Eighty Seven Thousand Dollars (U.S. $387,500.00 (sic)) for each aircraft and associated spare parts with such Barclays Bank as is designated so as to constitute a total purchase price of U.S. Three Million Three Hundred Seventy Five Thousand Dollars (U.S. $3,375,000.00) for the two aircraft described herein, together with twenty percent (20%) of the entire spares parts inventory, of which Buyer shall be entitled to first selection.

4. Seller shall make arrangements, as a part of the purchase price for all "Get Ready" preparation of the aircraft on-site at Australian RAAF Base Laverton, Melbourne, Australia so that a safe ferry flight delivery may be made to the Republic of Colombia or an overhaul facility as designated by Buyer.

5. Seller shall make arrangements, as a part of the purchase price for the required ferry flight of both aircraft from Australian RAAF Base Laverton, Melbourne, Australia to an overhaul facility designated by Buyer for the purpose of required I.R.A.N., overhaul, painting, polishing or maintenance of both aircraft as further directed by Buyer.

All overflight and en-route clearances required shall be obtained by the ferry flight designee. The buyer will assist in obtaining any and all en-route or refueling (sic) clearances as required.

The Buyer will pay the approved cost of said required I.R.A.N., overhaul or maintenance in accordance with contract terms to be negotiated by the Seller with said overhaul facility. Costs of transportation, lodging and accommodations of Seller incurred in said negotiations shall be paid by Buyer.

6. Following I.R.A.N., overhaul or maintenance, seller shall make arrangements, as part of the purchase price, with the ferry flight designee for further ferry flight delivery of each of the two (2) aircraft to the Republic of Colombia. All overflight and en-route clearances required will be obtained by the ferry flight designee. Buyer will assist in obtaining any and all en- route or refueling (sic) clearances as required.

The monies so expended after 23 May, 1983 were expended not as a part payment under the agreement for sale, but as payment of necessary costs to get the aircraft to an overhaul facility and ultimately to the United States in contemplation that the sale would be completed there. The monies were not paid to the respondent. Nor were they paid to Ford and Vlahos as agents for the respondent. At the time the monies were spent on "get ready" training and ferry expenses, the appellant under the agreement was not obliged to pay the monies as part of the purchase price nor was the respondent obliged to put the aircraft in a "get ready" condition or arrange or incur any liability for training and ferry of the aircraft. It does not assist the appellant to submit that, if the sale had been completed, the sum of US$985,000.00 would have been credited against the price. If the obligation to pay had arisen, the appellant would have been entitled to either an abatement of price or an equitable right to set-off the monies paid (it is unnecessary to determine which). This is because the monies required by the contract to be paid out of the purchase price by the respondent to discharge the liability for the costs had not been so paid and the value of the subject matter of the agreement received by the appellant would have been reduced to the extent of the payments made by the appellant. (See Gilbert-Ash (Northern) Ltd. v. Modern Engineering (Bristol) Ltd. (1974) AC 689 at 717; D. Galambas and Son Pty. Ltd. v. McIntyre (1974) 5 ACTR 10 at 25 - 26). The payments by the appellant in these circumstances did not constitute a part payment of the price.
Even if it was agreed between the parties that the payment of the monies on "get ready", training, and ferry would be treated as part payment, the agreement that the risk of the loss of the monies in the event that the contract was not completed due to non-fulfilment of a condition precedent was to be borne by the appellant, denied to the appellant a right of recovery. The parties had agreed what would occur in the event of non-completion; the loss was to be borne solely by the appellant.
The agreement and authorisation of 23 May, 1983 was oral. His Honour the trial judge accepted the evidence of Mr. Ford in relation to what occurred at the meeting. In making the finding which he did, his Honour has made findings as to the credibility of different witnesses and accepted one account from the competing accounts as to what occurred on 23 May, 1983. His Honour, in forming a view as to the reliability of the different witnesses, referred specifically to the allegation made against Mr. Ford in relation to his professional practice in the United States and the absence of any receipts relating to the expenditure. These matters his Honour weighed in the balance against accepting the evidence of Mr. Ford. His Honour also set out in his reasons those matters which persuaded him not to accept the evidence of Mr. Battiston and Mr. Bravo. Mr. Herrera did not give evidence so that his Honour was unassisted by the oral testimony of one of the other persons present at the meeting in Los Angeles. His Honour had the opportunity to see the witnesses in the witness box and make his own assessment as to any difficulty under which the witnesses laboured because of their lack of English and the need for interpreters. His Honour was entitled to reject the evidence of Mr. Battiston because of the total inconsistency between his declaration and the contents of his affidavit tendered in evidence by the appellant. In the declaration Mr. Battiston stated that Mr. Ford told those at the meeting that the get ready costs, training and ferry costs would have to be paid by the appellant and obtained release of the money in escrow for that purpose. In his affidavit (paragraph 18) Mr. Battiston stated that the money was to be paid as part of the purchase price because United States approval had been obtained and that Mr. Ford informed him that no part of the US$500,000.00 would be used for delivery, get ready, fuel or otherwise.
The appellant also argued that his Honour failed to take into account, or give sufficient weight to, the failure of Mr. Ford to declare the appellant as a foreign principal for whom Ford and Vlahos was acting, or, declare the monies expended on the appellant's behalf, in returns to the United States State Department during the relevant period. Alternatively, it was argued that the finding that Mr. Ford was acting on behalf of the appellant in receiving and expending the monies was inconsistent with the returns as filed.
In the returns Mr. Ford disclosed the respondent as the foreign principal for whom his firm acted in attempting to sell the aircraft. Mr. Ford was cross-examined as to his failure to include the appellant in the returns. Mr. Ford stated that his belief was that the disclosure which he made was a sufficient disclosure under the relevant United States requirements. The appellant argued that the explanation given was inadequate on the basis of a printed instruction on the form. Depending upon the terms of the Foreign Agents Registration Act of 1938 (U.S.) as amended, it may well be that registration and disclosure was required. However, the Act was not before the court and an erroneous belief as to the adequacy of the disclosure, even from a lawyer, does not of itself make the witness uncredible. As his Honour does not refer to the matter in his reasons, it is probable that he accepted the explanation or did not consider the matter sufficiently important having regard to the other evidence he had before him.
The appellant also relied upon a telex sent by Mr. Hocking to Mr. Butler, an officer of the respondent, on 25 September, 1983. The telex stated that the appellant had advised Mr. Ford that it intended to withdraw from the sale of the aircraft unless affirmative action was taken immediately to expedite approval in Washington to allow the first aircraft to depart from Australia for overhaul. The telex included the statement :-

Failure to do so will result in Aviaco's withdrawal, the return of their deposited purchase funds and the loss of 3 aircraft sales".

His Honour made reference to the contents of the telex in his recitation of the historical narrative without comment. However, his Honour found that the money held in escrow in the United States was forwarded to Australia and that, save for $17,125.00 spent on insurance, none of the money was expended until after 29 July, 1983. It does not appear whether the monies were still held on 25 September, 1983. Although expenditure of the monies was authorised by the appellant, it was on the basis that the aircraft were brought to the United States. That required the approval which was sought as a matter of urgency in the earlier part of the telex. The statement made in the telex was consistent with the limitation on the authority of Ford and Vlahos to spend the money to procure removal of the aircraft to the United States. If the aircraft were not to go to the United States, then the money held would have been repayable as Ford and Vlahos had no basis to retain the same if the appellant withdrew from the agreement.
In the absence of evidence that the monies transferred to Australia had been fully spent so that there were no funds then held on deposit, the telex does not persuade me that its contents were inconsistent with the findings of the trial judge. The return of the money with the exception of the insurance premium as contemplated by the telex was consistent with the letters of Mr. Hocking of 29 July, 1983.
In Devries v. Australian National Railways Commission (1993) 112 ALR 641 at 645, Brennan, Gaudron and McHugh JJ said :-

"More than once in recent years, this court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. (See Brunskill (1985) 59 ALJR 842; 62 ALR 53; Jones v. Hyde (1989) 63 ALJR 349; 85 ALR 23; Abalos v. Australian Postal Commission

(1990) 171 CLR 167; 96 ALR 354). If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge 'has failed to use or has palpably misused his (or her) advantage' (SS Hontestroom v. SS Sagaporack (1927) AC 37, at 47) or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly improbable' (Brunskill (1985) 69 ALJR, at 844; 62 ALR, at 57)".

Applying that test the appellant has not made out any basis upon which this court should set aside the findings of the trial judge.

The appellant cannot succeed on the appeal faced with the finding that the appellant authorised the expenditure of the money and agreed to accept the risk of its loss if the sale did not proceed. Although unexpected, that risk became a reality when the end-user certificate was refused. It was irrelevant whether Ford and Vlahos were acting as the agent of the appellant or the respondent in expending the monies on the get ready, training and ferry. The finding that the risk of loss of the monies was agreed to be borne by the appellant in the event that the sale was not completed precluded recovery of those monies from the respondent on any basis.
The appeal should be dismissed and the appellant ordered to pay the respondent's costs of and incidental to the appeal.

[1994] FCA 39

14 FEBRUARY 1994