Hills Industries Ltd v Australian Financial Services and Leasing Pty Ltd

The dispute before the Court of Appeal of New South Wales concerned claims for restitution of money paid under a mistake. Australian Financial Services and Leasing Pty Ltd (AFSL) had paid a seller for equipment that did not exist, based on false invoices concocted by a fraudster. The seller then used these funds to discharge pre-existing debts owed by companies associated with the fraudster. AFSL sought to recover these payments from Hills Industries Ltd (Hills), which was the ultimate recipient of the funds.

The primary legal issue was whether AFSL was entitled to recover the money paid to the seller, and consequently, whether Hills was liable to repay those funds to AFSL. This involved considering the principles of restitution for money paid under mistake, and in particular, the defence of change of position, which can preclude recovery if the recipient has, in good faith, altered their position in reliance on the payment.

The Court of Appeal found that the seller had applied the funds received from AFSL in discharge of pre-existing debts owed by the fraudster's companies. This constituted a change of position on the part of the seller, which rendered it unjust for AFSL to require restitution of the money. Consequently, AFSL's claim against Hills failed. The Court dismissed AFSL's appeal against Bosch Security Systems Pty Ltd, allowed Hills' appeal against AFSL, and ordered that judgment be entered for Hills. AFSL was ordered to pay Hills' costs of the appeal.