Namoi Cotton Co-operative Limited v IAMA Agribusiness Pty Limited

[2001] NSWSC 300

CITATION:	Namoi Cotton Co-operative Limited v IAMA Agribusiness Pty Limited [2001] NSWSC 300
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50001/2000
HEARING DATE(S):	9.04.2001 to 12.04.2001
JUDGMENT DATE:	28 May 2001
PARTIES :	Namoi Cotton Co-operative Limited v IAMA Agribusiness Pty Limited
JUDGMENT OF:	Foster AJ at 1

COUNSEL :	R. Harper/ J. Gillespie - Plaintiff A.S. Monzo - Defendant
SOLICITORS:	Phillips Fox - Plaintiff Webb & Boland - Defendant
CATCHWORDS:	Plaintiff sues defendant to recover amount alleged to have been paid by mistake - amount paid as result of misleading conduct on part of defendant - denied.
LEGISLATION CITED:	s 82 of the Trade Practices Act (Cth) 1974 s 42 of the Fair Trading Act 1987
CASES CITED:	David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Roadshow Entertainment Pty Limited v (ACN 053006269) Pty Limited (Receiver & Manager appointed) (1997) 42 NSWLR 462.
DECISION:	Plaintiff entitled to a verdict and judgment for the sum of $135,758.28 together with interest on that sum from the date of payment, 30 June 1999.; I shall hear the question of costs on a date to be arranged or, if the parties prefer, will deal with the question in the basis of written submissions.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

CORAM: FOSTER AJ

MONDAY, 28 MAY, 2001

50001/2000 - NAMOI COTTON CO-OPERATIVE LIMITED - v - IAMA AGRIBUSINESS PTY LIMITED
JUDGMENT

1    HIS HONOUR: The plaintiff in these proceedings, Namoi Cotton Co-Operative Limited ("Namoi") sues the defendant, IAMA Agribusiness Pty Limited ("IAMA") to recover an amount of $135,758.28, together with interest, which it alleges that it paid to the defendant by mistake. Alternatively, it claims that amount as damages pursuant to s 82 of the Trade Practices Act (Cth) 1974 or s 42 of the Fair Trading Act 1987, on the basis that it paid the amount as a result of misleading conduct on the part of IAMA. Alternatively it asserts that IAMA holds the amount in trust for it.

2    IAMA denies that this amount was paid to it by mistake or that it, relevantly, engaged in misleading conduct or that a constructive trust should be imposed upon it. It also asserts that it is entitled to an equitable set off, the details of which I shall refer to later.

3    There are a number of issues in the case which I shall discuss later. First, I set out some background facts and findings.

4    Background

Namoi has an extensive business in the cotton industry in New South Wales. The general nature of the business and its operations, so far as relevant, is described in the statement of a witness, Donald Griggs, as follows:-

"4. Namoi purchases cotton from local cotton growers. Each year at the beginning of the cotton season Namoi enters into agreements with growers to purchase a certain number of bales of cotton from them for the coming season.
5. Namoi often agrees at the beginning of the cotton season to provide a crop finance facility to a grower to assist the grower in paying for "crop inputs" which are necessary to grow the crop, for example, cotton seed and fertilizer. It is Namoi's usual practice to obtain from the grower a crop lien over the cotton crop as security for the amount of the crop finance facility.
6. At the end of the season, the raw cotton is picked by the grower and compressed into modules. The grower completes a module ticket for each module and sends the module tickets and modules to the ginyard. The module tickets identify, among other things, the number of the module and to whom the cotton is to be delivered for marketing after ginning of the raw cotton is completed.
7. The ginning process separates the cotton lint from the cotton seed and the trash. After the separation process, the cotton lint is compressed into bales which are assigned bale tickets and delivered to Namoi. The bales are then valued according to the terms of the contractual arrangements between Namoi and the grower.
8. The gross proceeds from the cotton are credited to the grower's account/s with Namoi. Namoi deducts from the gross proceeds costs relating to the sale of the cotton, including ginning charges and various industry levies, and premiums and discounts relating to the quality of the cotton. The net proceeds are held in the grower's account/s with Namoi and, depending on the circumstances, may be used to pay debts owing to Namoi or paid to other persons having an interest in the crop or paid to the grower."

5    IAMA is also involved in the cotton industry. As part of its business its supplies "crop inputs" to cotton growers. It, also, takes liens over growers' crops to secure payment. It frequently supplies such inputs to growers financed by Namoi.

6    In the present case Namoi entered into a standard Crop Finance Facility ("the Facility") with a grower, P.J. Greentree Pty Limited ("Greentree") under which it advanced to Greentree the sum of $300,000, to assist in the purchase of necessary crop inputs for the crop it was growing in the 1998/1999 growing season. Pursuant to the Facility, Greentree granted a crop lien to Namoi on 6 October 1998, which was registered with the then Australian Securities Commission on 8 October 1998. After registration, the lien became a public document, the contents of which could be ascertained by search. On 26 October 1998 IAMA also took a lien over Greentree's crop for the season. This was registered on 16 November 1998. It is conceded that Namoi's lien took precedence over IAMA's. IAMA's lien secured an advance of $80,000.

7    It is clear that there was a degree of liaison established over the years between Namoi and IAMA in relation to the financial position of growers, in respect of which each had secured accounts. Officers of each company would communicate with each other in respect of such accounts, and, in some circumstances, Namoi would pay to IAMA directly the amount owing to it for a crop input supplied by it to a grower, who had a finance agreement with Namoi.

8    On 25 September 1998, following upon discussions between the relevant officers of the two companies, a letter was sent by Namoi to IAMA in the following terms:-

"Robyn Shirtcliff
IAMA
PO Box 3086

TOOWOOMBA VILLAGE FAIR QLD 4350

Dear Robyn,
As you are aware Messrs. P. Greentree, K. Campbell, R. Thomas and G. Welsh have obtained approval for crop finance from Namoi Cotton Co-operative Ltd for the coming 1999 cotton season. This letter is to inform you that Namoi Cotton agrees to pay for the cotton crop inputs obtained from IAMA by the above mentioned growers. This payment will only be forwarded upon the direction of the grower and by the 30/31 day of the due month. The payments will be limited to the amount of finance approved for crop inputs by Namoi Cotton Co-operative Ltd for the coming season and only at the direction of the grower involved.
Yours faithfully,

Jeremy Callachor
Grower Finance Manager"

9    Both Ms. Shirtcliff and Mr Callachor have given evidence in the case, to which I shall make reference later. There is an issue, to which I shall return, as to whether this letter had contractual effect. There is no dispute that these two persons had authority to contract on behalf of IAMA and Namoi respectively.

10    Mr Callachor was employed as the Grower Finance Manager at Namoi's Wee Waa office from April 1998 to late March/early April 1999, when he moved to another position in the company, the position of Grower Finance Manager at that office passing to Mr Griggs, who has held that position since 29 March 1999. The position entailed responsibility for recommendation of grower finance applications, obtaining securities and collecting monies from growers, including the managing of applications for, and approval of seasonal crop finance to such growers and general overseeing of payments to and on behalf of growers. The evidence establishes that Mr Callachor rendered assistance to Mr Griggs in March 1999, in relation to Mr Griggs' taking over of the position of Grower Finance Manager. I am satisfied that, in that period, it is reasonable to regard Mr Griggs as being new to the job and not fully conversant with all aspects of it. Some of the important events in this case took place during Mr Callachor's occupation of the position and the remainder during Mr Griggs' tenure. Ms Shirtcliff, at all relevant times, was the Grower Services Manager for the Central Division of IAMA and had, apparently, an area of responsibility similar to that of Messrs Callachor and Griggs.

11    The evidence indicates that it was not uncommon for growers to run more than one account with Namoi. Greentree had in fact three accounts and the $300,000 advance was allocated between them in the following manner: 8240, $116,000; 10670, $67,000; 14880, $117,000. These amounts were, then, available on those accounts for the payment of Greentree's crop inputs. I accept the evidence of Mr Callachor, whom I found generally to be a reliable witness, that Namoi only paid Greentree's crop inputs if Greentree sent copies of the suppliers' invoices or monthly statements to Namoi, with either a written request endorsed on the statement, or an accompanying verbal request, for the payment to be made. It was Namoi's usual practice not to pay such invoices or monthly statements unless so directed by Greentree.

12    The evidence satisfies me that after a number of payments had been made in respect of Greentree's accounts, the stage was reached at 4 March 1999 that the amount of $305,508.16 had been paid out as follows: 10670, $67,099.95; 8240, $121,494.49; and 14880 $116,913.72. Accordingly, as at that date, the full amount of the Finance Loan had been expended.

13    At about this time Greentree submitted an application to Namoi for an increase in the limit of the Facility from $300,000 to $360,000. Such an increase would, of course, have provided funds for the payment of additional crop inputs. It is clear that Namoi was aware of the existence of the $80,000 lien granted by Greentree to IAMA, which was subordinated to Namoi's own lien. In these circumstances, I am satisfied that Mr Callachor had a conversation with Ms Shirtcliff in which he advised her of Greentree's application for an increase of $60,000 in his finance limit and requested her agreement to Namoi "having priority in recouping the $60,000 in addition to the amount secured by our first ranking lien in front of your lien." Ms Shirtcliff declined this request, with the result that the additional finance for Greentree was not approved by Namoi. I am satisfied that this conversation indicated to her that Greentree, at that time was getting close to, or had arrived at, the limit of Namoi's advance.

14    During March 1999 observations were made by representatives of both Namoi and IAMA of the progress of the Greentree cotton crop. The evidence indicates that these observations tended to show that the crop was likely to be unsatisfactory, resulting in possible problems in relation to the repayment of loans.

15    The evidence indicates that at the end of March or early in April, Damien Wales, the Branch Manager of IAMA's Gunnedah office, became aware that no payment had been received from Namoi for crop inputs provided to Greentree in February 1999. He telephoned Mr Callachor and a conversation occurred to which both men depose. There are differences in the versions of each as to what was said but I accept that the main point of the conversation was a statement by Mr Callachor that the invoices had not been paid because Greentree had reached the limit of its finance. Reference was made to the letter of 25 September 1998, Mr Callachor indicating that under the letter "we only agreed to pay crop inputs until the grower's limit was reached and as directed by the grower."

16    As a result of this conversation, Mr Wales reported on the situation to Ms Shirtcliff, who then had a conversation in late March or early April with Mr Callachor. Ms Shirtcliff's version of the conversation is as follows:-

" I said: "Damian's just told me that you're not going to pay our accounts for Greentree's crop. What's going on?"
He said: "It's as I've told Damian, he's exceeded his credit limit."
I said: "But what about our agreement set it out in your letter to me? Don't you remember, I'll send it to you."
He said: "He's reached his limit and that's it."
I said: "We have a legal, binding agreement as far as I am concerned."
He said: "I'll get some legal advice on that."
Mr Callachor does not recall the reference to a legally binding agreement or the obtaining of legal advice but recollects an assertion of the part of Ms Shirtcliff to the effect of there being an agreement.

17    Accordingly, it appears clear from the evidence that, as at the end of March or early April, the parties respective positions were as follows. Mr Callachor was asserting that Namoi had no obligation to pay IAMA's February invoices to Greentree, as the latter's finance had run out and Ms Shirtcliff, apparently, was asserting reliance on the letter of 25 September 1998, as requiring that payment be made. Also, Ms Shirtcliff had known, from early March, that Greentree had sought an extension of finance in the amount of $60,000 which, in the circumstances, would not have been granted by Namoi.

18    Another employee of Namoi had dealings with Ms Shirtcliff, in relation to Greentree. She was Ms Ali Bushby, who was employed as Grower Accountant by Namoi, and had the functions of arranging payments of proceeds, collection of liens, arranging payments to lienees, arranging payment of loans and generally overseeing Namoi's grower accounts. She was under the control of the Grower Finance Manager. On 30 March 1999 she received a facsimile from Ms Shirtcliff which, so far as relevant, read as follows:-

" Dear Ali

Attached is the list of crop liens that we have this year, I have also noted some Irrevocable Orders that have been sent as well. We still have some crop liens to be registered and Irrevocable Orders to be signed. I will update this list mid April and forward to all.

…………..

In the first week May I will update everyone on balances of growers accounts as at 30th April 1999.


This should assist you."

19    The list attached to this communication consisted of the names of a number of growers together with references to the registered numbers of their liens granted to IAMA and the amount in respect of which the liens had been granted. The list included against the name Peter J. Greentree P/L, the information "16/11/98 ASC registered 671837, $80.000." This item clearly referred to the lien which IAMA had taken over Greentree's crop for the season. In the case of two growers, T.J. McFarland and Garry and Lynette Campbell the registration details of the lien were "to be advised".

20    On 8 April 1999 Ms Bushby responded to this communication in a letter addressed to Ms Shirtcliff. She referred to the list of crop liens which had been supplied in that communication. She provided a list of growers marketing with Namoi and requested copies of the registered liens held by IAMA. Among the long list of growers so supplied, there was reference to Greentree. The evidence established that requests for copies of the relevant liens were frequently made but were not responded to by Ms Shirtcliff.

21    On 6 May 1999 Ms Shirtcliff sent a letter to Ms Bushby in the following terms:-

"Dear Ali,
Attached is a list of updated crop liens for this year. Please note correspondence sent to you March 29th, stating that balances would be updated as at 30th April 1999.
Regards,
Robyn Shirtcliff."

22    The accompanying list, which corresponded with the one forwarded on 30 March contained, against the entry for Greentree, the amount of $315,788.92. The entry relating to T J McFarland included a book reference for the IAMA lien and contained the following figures:-

$80,000 - $158,668.46. The entry for Garry and Lynette Campbell included now a reference to a particular charge and its number and also included the amount of $694,357.61. It was indicated in Ms Shirtcliff's oral evidence that the reference to March 29 in the letter set out above was an error. The reference should have been to the letter of 30 March. It is not suggested that this error caused any difficulty for Ms Bushby.

23    Ms Bushby testified that on or about 28 June 1999, in the course of a regular check of the growers' accounts, she found that Greentree's accounts 8240 and 10670, as a result of amounts received into them from cotton proceeds, were in credit. Account 8240 had a credit balance of $28,593.24 while account 10670 had such a balance of $107,165.04, the total credit balance for the two accounts being $135,758.28.

24    The evidence shows that a practice had become established between Namoi and IAMA for Namoi to distribute to IAMA in respect of growers who had given to IAMA crop liens for the current crop, proceeds from cotton sales in Namoi's accounts for those growers, which were surplus to Namoi's needs, up to the amount secured by IAMA's lien.

25    In this context, Ms Shirtcliff gives evidence of a conversation with Ms Bushby on 28 June 1999 relating to the amount of $135,758.28, amongst other amounts, in which Ms Bushby said to her: "I've got some grower payments for you…do you require this money?" Ms Shirtcliff stated that she would check the balance on her computer and that she would fax a reply shortly. Ms Bushby cannot recall this conversation but I consider that, on the probabilities, it occurred, because on the same day Ms Shirtcliff sent a fax to Ms Bushby in which she said: "We would appreciate the following as discussed." There followed a list of growers and payment amounts which included "P.J. Greentree $135,758.28." It may be noted that the evidence establishes that, as Ms Shirtcliff well knew, the payment amounts in respect of the other growers related to the amount of their liens or irrevocable orders, whereas the amount relating to Greentree did not relate to the amount owing in respect of the $80,000 lien but represented the amount previously provided to her by Ms Bushby, which was well in excess of the amount necessary to pay out the Greentree-IAMA lien.

26    Upon receiving this facsimile Ms Bushby arranged for Ms Hardy, her Grower Accounts Clerk, to make payment to IAMA of the amount of $135,758.28 from Greentree's account numbers 8240 and 10670 in the amounts previously referred to. This payment was made in conjunction with a number of other payments to IAMA relating to IAMA's crop liens with other growers, as requested in Ms Shirtcliff's fax of 28 June.

27    The payment of $135,758.28 is the amount in issue in these proceedings, being allegedly paid as a result of mistake. It is convenient now to refer to Namoi's evidence relating to this assertion.

28    Evidence as to mistake

Ms Bushby referred to the communication from Ms Shirtcliff of 6 May 1999 with the enclosed list. She said:-

"I specifically recall seeing and registering the figure of $315,788.90 against 'Peter J Greentree P/L' on the list of crop liens attached to that facsimile when I received that facsimile. On the basis of that facsimile I formed the belief that IAMA was owed $315,788.90 pursuant to its purported crop lien."

29    She further said:-

"At the time I arranged for the payment of $135,758.28 to be made to IAMA pursuant to its purported crop lien, I recall clearly that I believed that the payment of $135,758.28 was a part payment of the $315,788.90 referred to ( in the earlier facsimile)."

30    Ms Bushby provided the following detailed evidence as to Namoi's payment procedures relating to other lienees, in her affidavit of 9 June 2000:-

"5. At the beginning of each season, Namoi receives from lienees lists of the growers who have given them liens. Namoi's usual practice on receipt of the lists is to request copies of the crop liens from the lienees.
6. Since I began working at Namoi, Namoi's usual procedures relating to payments from growers' accounts have included the following steps:
(a) Each Friday any proceeds from growers' cotton crops are calculated and credited to the respective grower's account with Namoi. If the account is in debit because money is owed to Namoi the credit is automatically set-off against that debit.
(b) Each Monday the growers' accounts are checked for any accounts in credit.
(c) If a "P" code is recorded on Namoi's computer records for a grower's account, it indicates that there is a lien relating to that account and/or there are special instructions for that account, for example, relating to payments to lienees. The "P" code warns the Accounts Department to further investigate the instructions relating to that account before making any payments. Usually, there is some form of instruction written above the ""P" code. For example, if the Grower Finance Manager has issued a memo to the Accounts Department instructing that no payments are to be made from an account as any available funds are to be offset against a debt to Namoi in another account, the instruction recorded on the relevant grower's account is to the effect of 'refer to memo', or 'transfer to other grower numbers'. If it says 'refer to memo', the Accounts person must check the instructions on the relevant memo before making any payments.

(d) If available funds in a grower's account are to be offset against debts owed to Namoi in other accounts for that grower rather than being paid to lienees, it is Namoi's standard procedure that the Grower Finance Manager sends a written instruction, usually in the form of a memo, to the Accounts Department to the effect that no payments are to be made from any funds in credit in that account. On receipt of such a memo, the Accounts Department ensures that a "P" code is recorded on the relevant grower account and writes words to the effect of 'refer to memo' near to code.

(e) Unless a "P" code and a note of a memo or instruction from the Grower Finance Manager as described in sub-paragraph (d) above are recorded on Namoi's records for a grower's account, the Accounts Department's usual procedure when a grower's account is in credit is not to check the grower's other accounts with Namoi or to recoup debts in other accounts for that grower from the funds in credit. In those circumstances, the Accounts Department's usual procedure is to inform the next-ranking lienee indicated on Namoi's records for that grower that funds are available and if the lienee requires payment to its lien to ask it to send a fax to Namoi requesting the same."

31    Ms Bushby further says that, as at the date of payment, 30 June 1999, the Accounts Department had not received any memo or instruction from the Grower Finance Manager, then Mr Griggs, of the kind and to the effect of the instruction referred to in paragraph 6 (d) in the quoted passage. In fact Greentree's account 14880 was, as at 30 June 1999 in debit to the extent of $122,570.32. At the time of making the payment Ms Bushby was unaware of this. Had the appropriate instruction been received from Mr Griggs, the payment would not have been made to IAMA and "Namoi would have followed the usual practice and procedures and the credit balance of Greentree's accounts 8240 and 10670 as at 30 June 1999 would have been applied against the debit balance of Greentree's account 14880."

32    On or about 8 July 1999 Mr Griggs, having observed that the payment had been made to IAMA, enquired why, having regard to Greentree's indebtedness to Namoi, this had occurred. Ms Bushby advised him that there had been no instructions in place to refrain from making payments from Greentree's accounts to lienees. Mr Griggs, thereupon, provided an appropriate memo to cover any future payments. It is, of course, Namoi's case that this memo was provided too late. There was a relevant mistake in its not having been provided earlier, which mistake resulted in the making of the payment to IAMA by Ms Bushby.

33    Mr Griggs confirms this evidence in his affidavit of 31 May 2000. He states that he did not become aware of the memo procedure until 8 July 1999 when he had discovered the payment of $135,788.28 to IAMA, in the circumstances that there was indebtedness remaining in the Greentree account No. 14880. He was made aware of the practice on that day. Had he been previously aware of it he would have issued an appropriate memo to the Accounts Department, which, obviously, would have been incorporated in a "P" memo in the computer system.

34    Upon discovering the problem, Mr Griggs sent a facsimile to IAMA, for the attention of Ms Shirtcliff, in the following terms:-

" Funds were forwarded to you in error on 30.6.99.
We are still working to establish the funds that are available for distribution and cannot yet identify actual numbers right now. I will contact you when hard numbers are established. This should be today or tomorrow. In the meantime please note that we will be seeking the repayment of at least part of our remittance.
I will call you as soon as possible.
Don Griggs."

35    I am satisfied that this communication was sent at a time when there was considerable activity in relation to the receipt of cotton growers' modules and bales by Namoi, with the result that the ultimate state of growers' accounts was not yet determined. It does not appear that either Mr Griggs or Ms Bushby adverted, at that time, to the fact that the IAMA-Greentree lien was for only $80,000 and that the payment, in any event had well exceeded the amount of IAMA's entitlement under its lien. Ms Bushby thought the amount paid was, in fact, owing under the lien.

36    There was a meeting between Mr Griggs and Ms Shirtcliff on 23 July 1999 in which Mr Griggs explained to her how the payment of $135,758.28 had come to be made and requested its repayment. After discussion, Mr Griggs said that Ms Shirtcliff said to him words to the effect of: "The payment was for $135,758.28. Our lien is for $80,000. How about we keep $80,000 and pay you back the balance?" To this Mr Griggs responded that he could not agree but that he would refer the matter to Namoi. In the result, on 26 July 1999, he sent a facsimile to Ms Shirtcliff demanding the repayment of the full sum "that was paid to you in error." It may be noted that there is no dispute in the evidence that the meeting and conversation of 23 July took place, in the way described.

37    It is convenient to state now, that I formed the view, during the giving of their evidence, that Mr Griggs, Mr Callachor, and Ms Bushby were truthful and reliable witnesses. There were other witnesses for the plaintiff whose evidence related to issues which disappeared during the hearing of the case and who need not now be mentioned.

38    I now turn to consider the issues that the parties have posed for determination. It is convenient first to consider the issue of mistake.

39    Mistake

In the leading case of David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353, the principles applicable to the recovery of monies paid as a result of mistake on the part of the payer are fully considered. For the purpose of this case it is sufficient, in my view, to refer to two passages. The first is in the judgment of the majority (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) at 379. It reads as follows:-

"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 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."

40    Also, in the judgment of Brennan J, the following passage appears at 393:-

"When a defendant receives a payment which he has no right to receive and which the plaintiff has paid to him by mistake, the injustice of the defendant's enrichment does not depend on the nature of the mistake that caused the payment to be made. Whether the plaintiff made a mistake of law or a mistake of fact, the defendant, having no right to receive the payment, is unjustly enriched by its receipt."

41    It is the plaintiff's case that the defendant was unjustly enriched by the payment, resulting from its mistake, of the sum of $135,758.28. It is, therefore, prima facie, entitled to recover this money either by way of a claim for restitution or under a common money count for money had and received to its use. Similarly, it seeks a declaration that the money is held in trust for it by the defendant on the basis that its retention would, in the circumstances, be unconscionable.

42    The causative mistake relied upon is twofold. In the first place Ms Bushby, as a result of her reading of Ms Shirtcliff's fax of 6 May 1999, assumed that the figure of $315,788.90 referred to therein was an amount secured by the lien granted by Greentree to IAMA. In this she was mistaken. The amount secured by the lien was only $80,000. The figure in the fax referred to the full amount owed by Greentree to IAMA and included significant amounts referable to previous years, to which the lien could not and did not relate. Her evidence indicates, further, that she regarded the amount of $135,758.28 paid to IAMA at Ms Shirtcliff's request as being a portion of the amount of $315,788.90, accepted by her as being secured by IAMA's lien from Greentree. In this, she was also mistaken. I am satisfied, that had she been aware that the amount being paid was not referable to the lien and, therefore, did not fall within the established practice referred to above, she would not have made the payment without seeking instructions or clarification. In this regard, it may be noted that the other payments made by her at the same time were all in relation to liens granted by growers to IAMA and, consequently, fell within the practice.

43    In the second place Mr Griggs' failure to put in place a direction not to make payment because of the level of indebtedness in Greentree's third account, was, relevantly, a mistake which operated as a cause of the making of the payment, for the reasons already referred to.

44    It is quite clear, then, in my opinion, that the payment was, relevantly, a mistaken one.

45    It must be noted, however, that "mistake" was put in issue by the defendant, even though the credibility of Mr Griggs and Ms Bushby was, apparently, not attacked in the course of their evidence. Counsel for the defendant has supplied written submissions as to why a finding of mistake should not be made. I have found these difficult to follow. They do not appear to assert that either Mr Griggs or Ms Bushby knew that the payment was not in relation to the $80,000 IAMA-Greentree lien or that Ms Bushby was aware that there was indebtedness in the third Greentree account and, nevertheless, made the payment, or that Mr Griggs knew that the payment was going to be made, notwithstanding that indebtedness, and deliberately allowed it to go forward. No such matters were suggested to these witnesses in cross-examination.

46    A suggestion seems to be made that Mr Griggs, with knowledge of the standard practice of issuing instructions not to pay in circumstances where credit in a grower's account was matched by indebtedness in another, chose not to follow the practice. Alternatively, the suggestion appears to be made that even if he had known of the practise he would not have followed it in the present case.

47    In my opinion, neither of these submissions find support in the evidence. They were not put in terms to Mr Griggs or Ms Bushby. As already indicated, I am quite satisfied that their evidence was truthful. That evidence clearly establishes the mistakes relied upon.

48    The question is, therefore, whether the defendant, the onus being on it, has established any defence. There is no question of relevant change of position on the part of the defendant as a result of the payment. Consequently, the question is whether the defendant can establish that it was not "unjust" for it to receive and retain the payment. Leaving aside the defence of "equitable set-off" which is best considered separately, it would appear that the only question is whether IAMA was entitled to receive the payment notwithstanding that, as Ms Shirtcliff freely conceded in evidence, it could not recover under its lien more than $80,000 plus interest. The only other basis of entitlement would appear to be the letter of 25 September 1998. I have some doubt as to whether this letter had contractual force. There may well have been no consideration for it. This question was not fully argued. I do not find it necessary to decide it, because, even if it had contractual force, it contained conditions that payment would not be made once Namoi's advance had been expended by Greentree and, in any event, would not be paid without his authorisation. These conditions could not be fulfilled at the time of payment. The advance had been fully expended by 4 March and Greentree had disappeared from the district and was uncontactable from some date in May.

49    I am satisfied that, subject to the defence of equitable set-off, no defence has been established to the claim for restitution or for money had and received based upon the mistakes which I have found to be established. Indeed, the uncontested evidence is that, when Mr Griggs advised Ms Shirtcliff, in conversation, as to the occurrence of the mistake, she did not dispute it, or claim an entitlement to the money paid notwithstanding the mistake. Her response was merely to the effect that IAMA was owed $80,000 under its lien and, in effect, she thought IAMA should be able to keep that amount.

50    I am, therefore, of the view that the plaintiff has established its entitlement to recover the amount of $135,758.28 with interest under this head of claim.

51 I turn then to the plaintiff's next head of claim, namely that the payment was made as a result of misleading or deceptive conduct by IAMA, in breach of s. 52 of the Trade Practices Act (Cth) 1974 or s. 42 of the Fair Trading Act, 1987.

52    Misleading conduct

In making this claim the plaintiff does not rely simply upon objectively misleading conduct. It asserts that Ms Shirtcliff engaged in deliberately misleading conduct, with a view to tricking Ms Bushby into making the disputed payment. I now consider this allegation.

53    By March 1999 Ms Shirtcliff had been made aware that the limit of Namoi's advance to Greentree had been reached. She knew this, in the context that Namoi had not made payment of IAMA's February invoices to Greentree which amounted to $124,174.13. She also knew that Namoi denied any obligation to make these payments pursuant to the letter of 25 September 1998. The advance had run out and the payments had not been authorised by Greentree. It is possible that Ms Shirtcliff was not entirely convinced that the payments were not owing by Namoi, but she took no steps to enforce any rights she felt that IAMA had under the letter. There clearly were no such rights.

54    As a result of these events in March, Ms Shirtcliff was well aware that Namoi considered it had no obligation to pay the February invoices and refused to do so.

55    On 30 March 1999 Ms Shirtcliff sent the facsimile and accompanying list referred to in paragraph 18. As can be seen, the letter advised that the attachment to it was a list of crop liens for the current year, some of which were yet to be registered, it being stated that the list would be up-dated "mid April". It was further stated in the letter that, in the first week of May, Ms Shirtcliff would "update everyone on balances of growers' accounts as at 30 April 1999". The attached list referred, as already indicated to the Greentree lien, giving its registered number and date of registration, with an indication of its being in the amount of $80,000.

56    A copy of the Greentree lien was requested by Ms Bushby but was not provided. However, the amount of the lien was clearly indicated in the list.

57    It is reasonable to assume that by early May, as a result of the crop inspection, Ms Shirtcliff would have been aware that the Greentree crop was likely to be a failure.

58    On 6 May 1999 Ms Shirtcliff sent the letter and accompanying list referred to in paragraph 21. The letter referred to the attached list "of updated crop liens for this year." It referred to the earlier letter which had stated that "balances would be updated as at 30 April 1999". Against the entry for Greentree the amount of $315,788.90 was noted.

59    It is the plaintiff's case that the inclusion of this figure was a deliberate attempt on the part of Ms Shirtcliff, in the context of the events which had happened, to mislead Ms Bushby into believing that this was the amount then secured by the Greentree lien. I am satisfied, as already indicated, that Ms Bushby, on reading the letter and list, believed that this was the position, a belief which ultimately influenced her payment of the amount in dispute on 30 June 1999.

60    Ms Shirtcliff was cross-examined vigorously about her inclusion of this figure in the communication of 6 May. It was put to her, quite directly, more than once, that when she included the figure she deliberately intended to mislead. She continually denied this assertion. It amounts to an allegation of fraudulent conduct. Consequently, I must consider it with regard to the appropriate standard of proof.

61    I have carefully considered the evidence in relation to this aspect of the case and also the demeanour of Ms Shirtcliff when answering questions in relation to it. Although I am not entirely free of suspicion that she may have intended to mislead by including the figure in question, I am not satisfied to the required standard. The letter of 30 March had made a clear distinction between the amounts of the liens and "balances of growers' accounts". The latter were to be updated in the first week of May. The list attached to the first letter clearly indicated the amounts secured by the various liens. They were all in round figures and, as such, did not have the appearance of account balances. The letter also referred to the fact that some crop liens were not yet registered and that the list of liens would be updated and forwarded.

62    The second letter refers back to the first. It refers to its attaching a list of updated crop liens. In this regard the list includes two liens which were "to be advised" in the earlier letter. In respect of each lien, information is provided in the later list. As already indicated, the entry against one showed $80,000 - $158,668.46. I consider that the $80,000 clearly represented the amount of the lien which had not previously been provided. The letter also indicated that updated balances had been provided. The second figure, in my opinion, is an indication of the present balance of the growers' account with IAMA. When one considers all the other amounts set out in the second list, they are clearly updated balances. In each case they exceed the amounts secured by the liens set out in the earlier letter. None of them could be taken, the two letters being read together, as an indication that they were amounts secured by the relevant liens.

63    Ms Shirtcliff asserted that outstanding balances of this kind were often provided as a guide to the recipients. I found her evidence, in this regard, somewhat difficult. However, when the two letters are read together, they fall short of persuading me that, in the case of Greentree, Ms Shirtcliff was attempting to mislead Ms Bushby into believing that the amount of $315,788.90 was in fact secured under the IAMA - Greentree lien. As the second letter clearly refers to the first, I consider that it would not be unreasonable for Ms Shirtcliff to have expected Ms Bushby to refer back to the first when reading the second. Had this occurred, it would have appeared that the amount in question could not have been secured under the lien.

64    Ms Bushby was clearly mistaken in believing this to have been the position but I am not persuaded that there was any deliberately misleading conduct on the part of Ms Shirtcliff in this regard, nor am I satisfied that, in the circumstances, the second letter was objectively misleading.

65    I have a different view, however, of the situation on 28 June 1999. At that point of time Ms Shirtcliff knew full well that Namoi did not intend to pay the February invoices. She also knew that they amounted only to $124,174.13. She also knew that Greentree's crop had been a disaster and that he had disappeared. In this situation she was made an offer by Ms Bushby to pay to IAMA $135,758.28 in respect of Greentree. This figure obviously did not correspond to the figure of the invoices. The offer was made in the context of a similar offer in respect to certain other growers. It would have been entirely clear to her, having regard to the established practise already referred to, that the offer was being made in respect of the liens held by IAMA over the growers' crops. This was, in fact, the case. In respect of the offer relating to Greentree, however, she could not have failed to realise that the amount of the offer far exceeded the $80,000 secured by the lien and could, therefore be, in no way, appropriate to it. She would also have known that it was most unlikely, having regard to the general Greentree situation, that Namoi would have had any funds available to pay to IAMA, in respect of the latter's lien over Greentree's crop.

66    I regard her acceptance of the offered amount as being entirely opportunistic. Her attempts, in cross-examination, to justify this acceptance, seemingly on the basis that Mr Griggs had in some way relented in respect of the previous refusal to pay IAMA's February invoices, were completely unconvincing. She referred to matters which, if they were to be worthy of any credence, should have appeared in her affidavit evidence. They were also matters which clearly should have been put to Mr Griggs in his cross-examination, if they were to be relied upon. She also referred to a discovery document which was not put to her in re-examination, or otherwise sought to be put in evidence. Her demeanour, in this part of her evidence, did not assist her credibility.

67 I am satisfied that her silence, in circumstances where she must have known that Ms Bushby was mistaken in making the offer of payment, encouraged Ms Bushby to accept that the amount was owing and amounted to misleading or deceptive conduct within the meaning of s. 52 of the Trade Practices Act (Cth) 1974 and s. 42 of the Fair Trading Act 1987. The situation between the two of them was such as to lead to a reasonable expectation on the part of Ms Bushby that Ms Shirtcliff would not stand by and allow her to act on a mistaken view of the facts. It required her to break silence rather than capitalise on Ms Bushby's obvious mistake (Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31).

68    There remains for consideration the question whether a defence of equitable set-off has been made out.

69    Defence of Equitable set-off

This defence is based upon paragraph 13(g) of the Further Amended Defence filed in Court on the first day of the hearing. So far as relevant it provides as follows:-

"The plaintiff failed to warn or notify the defendant within a reasonable time, or at all, that such approved finance limit had been reached, in consequence whereof and in reliance upon the letter 25 September 1998…the defendant to its detriment continued in good faith to provide Greentree with goods and services to the value of $124,174.13 (this amount being the total of February and March invoices for goods supplied to Greentree)"

70    No cross-claim in this amount was ever pleaded. The defendant relies upon the principles relating to equitable set-off, to enable it to assert that the plaintiff's claim should be reduced by the amount pleaded.

71    Equitable set-off has been the subject of much discussion in the cases and academic writings. This is not the occasion for further discussion.

72    In Roadshow Entertainment Pty Limited v (ACN 053006269) Pty Limited (Receiver and Manager appointed) (1997) 42 NSWLR 462, the Court of Appeal (at 481 to 485) considered the scope of the doctrine. It is sufficient, for present purposes, if I refer to what was said in the Court's judgment at 481:

"Equitable set-off is a substantive defence: see S R Derham, Set-Off, 2nd ed (1996) at 56-65. As Goff LJ said in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1978] QB 927 at 982, a defence of equitable set-off may be set-up 'not merely as a means of preventing…judgment, or, at any rate, execution, but also as an immediate answer to…liability to pay'. This must be correct because an equitable set-off impeaches the title of the other party to the legal demand against which it is asserted. When 'the circumstances which support an equitable set-off exist, it is unconscionable for the creditor to regard the debtor as being indebted': Derham (at 60). The debtor can therefore claim that the payment demanded was never due."

73    It is, apparently, the defendant's contention that a failure on the part of the plaintiff to "warn or notify" the defendant that Greentree's finance was about to run-out produced a situation whereby the defendant could claim that it was entitled, in equity, to set-off against the plaintiff's claim the amount of the invoices it paid whilst it was unaware of the state of the plaintiff's advance to Greentree.

74    This claim is ultimately based upon the letter of 25 September 1998. The letter contains no provision requiring the plaintiff to give any such warning or notification. Moreover, it was conceded by the defendant's counsel that no term to that effect could be implied in the letter. Accordingly, even assuming that the letter itself was a contractual document, no contractual term requiring warning or notification could be relied upon to found a claim for debt or damages in the amount of the invoices.

75    Moreover, it was accepted that considerations of confidentiality would have prevented Namoi disclosing to IAMA the amount of the advance made by Namoi to Greentree. Also, it was acknowledged in the plaintiff's evidence that IAMA could have obtained the information from Greentree without difficulty, in so far as its representatives visited him fairly regularly. The same representatives could also have ascertained from him what his current indebtedness to Namoi was at any time. Accordingly, it was quite possible for IAMA to have made its own enquiries in this regard. It had no need to obtain the information from Namoi and Namoi had no contractual obligation to supply it.

76    In these circumstances, I am quite unable to see how the equity relied upon can be said to arise. I am satisfied that it did not. This defence must fail.

77 An attempt was made to base a defence upon the fact that Namoi made payment of IAMA's invoices as agent for Greentree. It may be that it did. However, this appears to me to be quite irrelevant. The payment was quite clearly made by mistake for the reasons that I have already referred to and this is sufficient to ground the plaintiff's claims for restitution and for money had and received. Also, it can have no effect, in my view, on the plaintiff's right to recover under s. 52 of the Trade Practices Act and s. 47 of the Fair Trading Act.

78    Accordingly, I hold that the plaintiff is entitled to a verdict and judgment for the sum of $135,758.28 together with interest on that sum from the date of payment, 30 June 1999. I do not find it necessary to consider whether a constructive trust should be imposed.

79    I have been asked to refrain from dealing with the question of costs until the parties have had an opportunity to consider these reasons. Accordingly, I shall hear the question of costs on a date to be arranged or, if the parties prefer, will deal with the question in the basis of written submissions.

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Last Modified: 05/28/2001