Southage Pty Ltd v Vescovi
[2015] VSCA 117
•22 May 2015
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2014 0051
| SOUTHAGE PTY LTD (ACN 050 240 965) |
| v |
| LISA ANGELA VESCOVI |
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| JUDGES: | WARREN CJ, SANTAMARIA JA and GINNANE AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 29 October 2014 |
| DATE OF JUDGMENT: | 22 May 2015 |
| MEDIUM NEUTRAL CITATION: | [2015] VSCA 117 |
| JUDGMENT APPEALED FROM: | [2014] VSC 141 (Macaulay J) |
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RESTITUTION — Money paid under mistake of fact — Whether order for restitution would be unjust — Change of position on faith of receipt — Whether recipient acted in good faith on assumption entitled to deal with payment — Where third party forged respondent’s signature on loan and mortgage documentation —Where appellant money lender advanced funds to third party in mistaken belief respondent had given security —Third party used lent funds to pay deposit under contract of sale for other land without respondent’s knowledge — Respondent nominated as purchaser and used land as security for mortgage — Where respondent would not have entered mortgage without belief third party paid deposit with own funds — Mortgage entered on faith of receipt — Whether recipient would be in worse position if ordered to make restitution than if funds never received — Where land subsequently sold and respondent retained no proceeds of sale — Unjust to order restitution — David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 — Australian Financial Services and Leasing Pty Limited v Hills Industries Limited (2014) 307 ALR 512.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J Tsalanidis with Mr D V Aghion | Velos Lawyers |
| For the Respondent | Mr P M Bornstein | Hendersons Legal |
WARREN CJ:
SANTAMARIA JA:
GINNANE AJA:
Introduction
This appeal concerns a claim by a lender, Southage Pty Ltd (‘the appellant’), against a purported borrower, Ms Lisa Vescovi (‘the respondent’), in circumstances where the respondent’s signature on the loan and mortgage documents was forged by her husband, Mr Robert Kalivoda. The appellant sought restitution of the money advanced to the respondent on the basis that it was paid pursuant to a mistake of fact — the mistake being that the loan and mortgage documents had been signed by the respondent.
It is well established that when money is paid pursuant to a mistake of fact, the person paying the money has a prima facie right to recover it from the recipient via an action for money had and received. However, that prima facie right may be displaced if the recipient can point to circumstances which would make an order for restitution unjust.[1] One such circumstance which may make an order for restitution unjust is when the recipient has changed their position on the faith of the receipt and thereby suffered detriment.
[1]See, eg, David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 379 (‘David Securities’).
The trial judge held that the respondent had changed her position on the faith of the receipt of the money advanced by the appellant, such that it would be inequitable to require her to pay back the money. The appellant appeals against the trial judge’s decision based on that finding.
Background
The respondent and Mr Kalivoda married in November 2006. The respondent is a lawyer who practised until 2008, when she ceased work shortly before the birth of their first child. Prior to meeting her husband, the respondent had purchased a property at 62 Cole St, Williamstown. After they met and later married, she kept the Williamstown property as an investment.
Mr Kalivoda conducted a business called RK Consultancy Pty Ltd. At the time the respondent and Mr Kalivoda were married, they lived in a rented property in Parkville. After a time, they began looking for a property to buy. Towards the end of 2009, they decided to purchase a property at 4 Evans Road, Kew (‘the Kew property’) as their family home. On 16 December 2009, Mr Kalivoda entered into a contract in his own name to purchase the Kew property for $2,695,000.
On 5 January 2010, Mr Kalivoda paid an initial deposit of $50,000 towards the Kew property.
On 20 January 2010, the appellant advanced $285,000 to Mr Kalivoda pursuant to a loan agreement which purported to have been signed by the respondent as borrower (‘the Southage loan’). The Southage loan was to be repaid three months from the date of drawdown and was to be secured by a second mortgage over the respondent’s Williamstown property. Southage took a mortgage over the Williamstown property that also purported to have been signed by the respondent (‘the Southage mortgage’).
In fact, the signatures of the respondent on the Southage loan and the Southage mortgage were forgeries, of which both the appellant and the respondent were unknowing and innocent victims.
Of the $285,000 advanced by the appellant on 20 January 2010, $219,518 was used to pay the unpaid balance of the deposit that Mr Kalivoda owed to the vendor on the Kew property (‘the Southage money’). Most of the balance of the Southage loan went to Mr Kalivoda’s business, RK Consultancy.
On 5 February 2010, Mr Kalivoda nominated the respondent as purchaser of the Kew property. The respondent accepted the nomination in the belief that the deposit had been financed from funds from her husband’s business and that her husband would meet the repayments on any loan taken out to fund the purchase.
The balance of the purchase price of the Kew property, including stamp duty and other incidentals, was paid by an advance from NAB (‘the NAB loan’) secured by a first mortgage over the Kew property (‘the NAB mortgage’). The NAB loan and the NAB mortgage, together with a personal guarantee in favour of NAB (‘the NAB guarantee’) were executed by the respondent on 12 February 2010.
Hence, the purchase of the Kew property was funded as follows:
·initial deposit: $50,000 (from Mr Kalivoda);
·balance of deposit: $219,518 (Southage money);
·balance of purchase price with adjustments: $2,442,580 (NAB loan); and
·stamp duty and registration fee: $149,577 (NAB loan).
The respondent’s evidence at trial was that her husband was the driving force behind their purchasing a property in that price bracket and that she would have been content with a more modest property. She was not aware of the details of her husband’s financial position, but he represented to her that it was substantial. He said that his business was worth several millions of dollars. He also informed her that he had $2 million in shares that he would sell if they were ever to buy a house and that if there was to be a loan then the loan amount would be relatively small.
By the time the respondent executed the NAB loan, guarantee and mortgage documents, she had realised that no shares would be sold prior to the purchase. Notwithstanding this, she did not take any steps to reverse her position as nominee and elected to enter into a mortgage with NAB for more than 95 per cent of the value of the property.
On 17 February 2010, the purchase of the Kew property was settled in the respondent’s name and she became the sole registered proprietor. The Kew property became the family home of the respondent and Mr Kalivoda.
The respondent and her husband subsequently defaulted in making the mortgage repayments to NAB. As a result of pressure from NAB and Mr Kalivoda, the respondent sold the Kew property by auction on 16 July 2011. The sale price was $2,610,000 and settlement occurred on 16 September 2011. NAB took the whole of the proceeds at settlement.
At the time that the respondent was nominated as purchaser, and later when she became the registered proprietor of the Kew property, she did not know of Southage, the Southage loan, or the Southage mortgage. Indeed, it was not until late August 2011 that she first became aware of Southage when she discovered that Southage had lodged a caveat over her Williamstown property for the purpose of securing the Southage loan.
In about September 2011, the respondent and Mr Kalivoda separated.
On 20 January 2012, Southage’s solicitor lodged the Southage mortgage for registration and commenced proceedings against the respondent.
On 27 January 2012, Mr Kalivoda became a bankrupt.
It was not until February 2012 that the respondent first became aware that the Southage loan was supported by a mortgage over the Williamstown property which purported to have been granted by her.
The proceedings below
The trial below involved two proceedings. The first was an action commenced by the appellant, as lender, to enforce an unregistered mortgage (the Southage mortgage) against the respondent’s Williamstown property, or alternatively for restitution of moneys lent by Southage on the strength of that alleged mortgage (the Southage loan). The second was an action commenced by the respondent to restrain registration of the Southage mortgage on the ground that it was a forgery.
On 27 and 28 August 2013, both proceedings came on for trial before a judge of the Trial Division.
During the afternoon of the first day of trial, the judge heard oral evidence from a solicitor, Mr Alfonso Grillo, relating to a solicitor’s certificate concerning the mortgage apparently signed by Mr Grillo. Mr Grillo’s evidence was to the effect that the signature appearing on the solicitor’s certificate was not his and that he had not given the respondent independent advice in respect of the Southage loan as the certificate alleged. In light of Mr Grillo’s evidence, the appellant conceded that the respondent’s signature on the Southage mortgage was a forgery.[2]
[2]Southage Pty Ltd v Vescovi [2014] VSC 141, [10] (‘Reasons’).
Accordingly, the respondent applied for judgment preventing the registration of the mortgage. This was granted by the trial judge without opposition from Southage. The effect of that judgment was to set aside the Southage mortgage, which had been lodged for registration but not registered, the registration having been stayed pending the hearing and determination of the proceeding.
The trial then proceeded with respect to the appellant’s remaining claim, being the claim for restitution of the money advanced pursuant to the Southage loan in an action for money had and received.
It was not in dispute between the parties at trial that the Southage loan was paid under a mistake of fact. The arguments by counsel focused, in substance, on three matters, namely:
·Did the respondent receive a benefit from the Southage money by which she was enriched?
·If so, was that enrichment unjust?
·If so, did the respondent change her position on the faith of the receipt such that she has a good defence to the claim?
On the question whether the respondent received a benefit by which she was enriched, the trial judge held:
[88]In my opinion, the matter is resolved in Southage’s favour when attention is paid to the essential question: did Ms Vescovi receive the benefit of the money Southage paid under a mistake? That question is answered by applying the principles of tracing. Seen in that way, the question becomes whether the value inherent in the Southage loan can be traced into the hands of Ms Vescovi, albeit in a substitute asset.
[89]The answer to that question is: yes it can, in the form of the interest as proprietor of the fee simple interest in the Kew property. The incurrence of liabilities to acquire that asset are a separate issue. Of themselves, they do not impact the fee simple interest, including the NAB loan secured by a registered mortgage.
[90]In the result, it is my view that Ms Vescovi was prima facie enriched by the Southage loan when she acquired her interest as proprietor of the fee simple estate in the Kew property.[3]
[3]Reasons (citation omitted).
On the question whether the enrichment was unjust, the trial judge observed:
[94]Although both parties identified the question whether the enrichment was unjust as the next issue, each moved almost immediately to the question of Ms Vescovi’s change of position defence saying that the two issues were closely interrelated. Although that is true, perhaps the simplest reason for moving directly to the defence is that, once it has been established that the defendant has been enriched because of a mistakenly made payment by the plaintiff, the prima facie position is that the defendant has thereby been unjustly enriched and is obliged to make restitution.
…
[97]A very clear exposition of the close interrelationship between the injustice of the enrichment and the concept of change of position is to be found in the judgment of Allsop P and Handley AJA (Campbell JA agreeing) in Perpetual v Heperu:
In Lipkin Gorman v Karpnale Ltd [1988] UKHL 12; [1991] 2 AC 548 Lord Goff (with whom Lord Bridge of Harwich, Lord Griffiths and Lord Ackner agreed) made clear (at 578) that it is the inequitable retention of money or benefit which lies at the root of both the injustice of the enrichment and the related concept of change of position (578–580). Likewise, Lord Templeman (with whom the same Lords agreed as agreed with Lord Goff) spoke of the necessity to remain unjustly enriched (560). This notion of continuance of the injustice of the enrichment through retention is not to be defeated by a view that once the prima facie right to repayment arises, the unjust enrichment has been proven for all time. It is certainly the case that the injustice of the receipt and the right to recovery is prima facie enlivened by the relevant legal circumstance accompanying the payment: here, the mistake or the fraud: see David Securities at 379. The necessity for the retention to remain unjust can be seen to be the clear justification for a defence of change of position. Such a defence has been recognised by the High Court: David Securities at 385–386 …
[98]As will appear, notions of the inequitable retention of money or benefit and the necessity to remain unjustly enriched, emphasised in that passage, will assume critical importance in the resolution of this case.
[99]But, for the present, it follows from the finding that Southage made a mistaken payment that caused Ms Vescovi to be enriched, that she was prima facie obliged to make restitution of the benefit she received. The question is now whether she has pointed to circumstances that the law recognises would make an order for restitution unjust. In this case, the only such circumstances advanced by Ms Vescovi were that she changed her position on the faith of the receipt of the benefit of the Southage loan.[4]
[4]Reasons (emphasis in original, citation omitted).
On the question whether the respondent changed her position on the faith of the receipt, the respondent submitted that the adverse changes to her position were all or some of the following:
·being nominated as the purchaser;
·incurring the liability to pay stamp duty and registration fee;
·entering the mortgage to secure repayment of the NAB loan;
·agreeing to sell, and selling, the Kew property under ‘forced’ circumstances;
·her husband paying interest to Southage for most of the time of their occupancy of the home; and
·signing the NAB guarantee.
The trial judge held that of these possibilities the third and fourth had most merit. The trial judge made the following findings of fact with respect to the respondent’s change of position:
[125] Ms Vescovi received the title to the Kew property believing she was entitled thereafter to deal with it free of any interest other than those of herself, her husband and the NAB. That is because she received the title believing it had been paid for solely by a deposit supplied by her husband and settlement monies supplied by NAB.
[126] She received the title because she had been nominated to take it. It is important to remember that Ms Vescovi consented to the nomination. That is, she consented to a process that had the legal effect that when the balance of the purchase price was paid she would become the proprietor of the land. She might have refused. The nomination could not be effective without her consent.
[127] No less importantly, she only consented to the nomination because she was informed by her husband that the deposit had been fully paid. And, critically, she was told and believed the deposit had been paid from his or his companies’ money. Had she known it had been borrowed money she would not have given her consent.
[128] It follows, then, that she received the title interest because she believed that her husband had paid the deposit from his own financial resources. She was entitled to have that belief. Holding such a belief involved no negligence, or want of proper care on her behalf. There is nothing in the evidence to suggest that, at that time, she was not entitled to trust what her husband had assured her. Her grounds for mistrust only arose later.
[129] So, being told the deposit had been paid for by her husband, she had information that entitled her to believe she could deal with the property the way that she did: first, to mortgage it to the NAB to secure the monies used to complete the purchase; then, when it appeared that she (or her husband) could not afford to meet the mortgage payments, to sell it without accounting to any interest other than the NAB.
[130] She did all of that without knowing that Southage had supplied most of the deposit money.[5]
[5]Reasons (emphasis in original).
The trial judge, after affirming that the relevant inquiry is ultimately whether the respondent’s retention of the benefit flowing to her from the Southage loan was unjust in all the circumstances, held:
[132] In my view, the steps taken by Ms Vescovi, first to enter the mortgage with the NAB and later to sell the land with all proceeds going to the NAB, were, as a matter of substance, acts taken on the faith of the receipt of the deposit.
[133] As a result of these steps being taken, by the time she came to know that the Southage advance had funded most of the deposit on the land, she no longer retained any of the value inherent in that loan. Ultimately, Ms Vescovi changed her position by disposing of the very asset in which the value of the Southage loan had been invested, receiving nothing in return. By the time it came to her attention that the loan had funded the deposit, the retained ‘value’ was nothing more than a memory of having owned and lived in the property.
Relevance of not retaining any benefit
[134] That then leads to the final — and in my view determinative — consideration relevant to the justice or injustice of an order for restitution. Given that she did not retain any benefit from the Southage loan when first informed Southage had funded the deposit, is it just that Ms Vescovi be ordered to make restitution to Southage for having once received it? In my opinion, in all the circumstances of this case, the answer is no.
[135] I referred earlier to the notion of inequitable retention of money. The focus on whether a benefit was actually retained by the recipient when informed of the true source of the receipt has been emphasised in several cases: see Lipkin Gorman; Ford; Heperu v Belle and Hills Industries.
[136] In Heperu v Belle, Allsop P contrasted the way in which Lord Templeman and Lord Goff had reached their respective conclusions in Lipkin Gorman. That contrast exposed slightly differing approaches, but each highlighted the centrality of the retention of the benefit:
Lord Templeman reached the conclusions he did, not by concluding that there was a prima facie obligation to repay all received moneys less a deduction based on a defence of change of position, but relying on Banque Belge, by focussing on the unjust enrichment by reference to the money retained.
Lord Goff of Chieveley (with whom Lord Bridge of Harwich, Lord Griffiths and Lord Ackner also agreed) at 578–582 dealt with the arrival at the net retained sum by an application of a defence of change of position; that is there was a prima facie obligation to repay all received moneys, less a deduction based on a defence of change of position.
…
Thus, the approach of the Court of Appeal in Banque Belge and of Lord Templeman in Lipkin Gorman (supported by Professor Smith in “Simplifying Claims to Traceable Proceeds” (2009) 125 LQR 338 at 340) is entirely supportive of an obligation at law to restore, in money terms, the value of the retained proprietary benefit derived (as here) from the receipt of funds traceable in equity from cheques misappropriated from the appellants. The importance of retention of benefit, as a matter of substance, can be seen in Ford v Perpetual Trustees Victoria Limited [2009] NSWCA 186 at [119]–[131].
…
The remedy, both at law and in equity should focus upon the value properly attributable to the earlier receipts derived from misappropriations and still retained by the volunteer at the relevant time. …
And, as Allsop P also said in Hills Industries:
The ‘moment of enrichment’ is that of receipt … but it is the retention that is to be regarded as unjust for an order to be made.
[137] In my view, the conclusion that it would be unjust to order Ms Vescovi to pay Southage the value of its loan, or any part of it, can be reached soundly by either of two methods.
[138] The first is to conclude that there was a prima facie obligation to repay all received benefit (traceable from the Southage loan) less a deduction based upon the extent to which Ms Vescovi had adversely changed her position on the faith of the receipt. The second is to regard the legal obligation to make restitution as one to restore, in money terms, the value of the retained benefit derived from the receipt of the Southage loan traceable into the title to the Kew property.
[139] In summary, the pertinent circumstances in the context of which the prima facie obligation to make restitution must be considered are these:
·the Kew house, in which the value of the Southage loan had been invested, was sold;
·the entire proceeds of sale were paid to the NAB;
·the disposition was one that Ms Vescovi was entitled to make on the basis of a belief that the only persons who possessed an interest in the home, apart from the NAB’s security interest, were herself and her husband;
·the disposition was made in good faith;
·it was made without knowledge of Southage’s interest; and
·Ms Vescovi received nothing in return for it.
[140] Either way, the conclusion in those circumstances is the same whichever analytical method is adopted: it would be unjust to require Ms Vescovi to make restitution to Southage of any amount.[6]
[6]Reasons (emphasis in original, citations omitted).
Grounds of appeal
The appellant appeals against the trial judge’s findings that the receipt of the Southage money caused the respondent to change her position such that it was unjust to order her to make restitution.
The appellant relied on the following grounds:
1. The learned trial judge erred in concluding that the acts of the first defendant (Ms Vescovi) to:
(a) enter into the mortgage with the National Australia Bank Limited (NAB) over the Kew property, to secure repayment of the NAB loan (paragraph 101, 3rd bullet point of the judgment); and
(b)agree to sell, and selling, the Kew property under ‘forced’ circumstances (paragraph 101, 4th bullet point of the judgment);
constituted adverse changes to her position, made on the faith of the receipt of the loan from the plaintiff (Southage) that was used to pay the deposit for the Kew property (hereinafter change of position defence).
2. The learned trial judge failed to take into account (or failed sufficiently to take into account) that, in order to make out a change of position defence to a claim of money had and received (unjust enrichment), it is necessary to establish a causal link between the receipt of the money and the acts of the recipient done on the faith of that receipt.
3. The learned trial judge ought to have held that the effective cause (sine qua non) of the act set out in paragraph l(a) above (the entry into the NAB mortgage) was:
(a) Ms Vescovi’s risky decision to complete the purchase of the Kew property and to fund the purchase by entering into the NAB loan secured by the Kew property, when (as was the fact and as Ms Vescovi well knew) the total amount of the NAB loan exceeded 95% of the purchase price of the Kew property; and
(b)Ms Vescovi’s erroneous belief that her husband’s business could afford to fund repayments of the NAB loan.
4. The learned trial judge ought to have held that the effective cause (sine qua non) of the act set out in paragraph 1(b) above (the sale of the Kew property by Ms Vescovi under forced circumstances), was the failure of her husband’s business to repay the NAB loan.
5. The learned trial judge ought to have held that Ms Vescovi’s erroneous belief that her husband’s business had provided funds for the 10% deposit on the purchase of the Kew Property, when in fact the deposit was paid from moneys advanced by Southage:
(a)was neither necessary nor sufficient for Ms Vescovi to conclude that she should enter into the NAB loan and the NAB mortgage;
(b)was not causative of the acts set out in paragraphs 1(a) and (b) above;
(c)was therefore not an effective cause of Ms Vescovi’s adverse change of position.
Notice of Contention
By her notice of contention the respondent seeks to uphold the decision of the trial judge on the additional grounds that:
1. [The learned trial judge] erred in concluding that the Respondent was prima facie enriched by the loan made by the Appellant when she acquired her interest as proprietor of the fee simple estate in the property at 4 Evans Road, Kew[7] … in circumstances where
(a) the Respondent was not the recipient of the loan or any part of it; and
(b)there was no evidence that the value of the interest that the Respondent acquired upon being registered as the proprietor of the Kew property exceeded the amount of the loan made by National Australia Bank Limited to enable the Respondent to complete the purchase of the Kew property, that loan being secured by a mortgage over the Kew property.
2. The learned trial judge ought to have held that the Respondent was not enriched, alternatively that the Appellant had not discharged its onus of proof that she was enriched, by that part of the loan made by the Appellant that was applied in payment of part of the deposit paid under the contract for the purchase of the Kew property.
[7]Reasons [90].
Submissions of the parties
The appellant did not seek to challenge the judge’s findings that:
· Ms Vescovi received the title to the Kew property in the false belief that her husband Mr Kalivoda had funded the deposit from his business, and that the only sources of funds for the purchase of the Kew property were Mr Kalivoda as to the deposit and the National Australia Bank Ltd (NAB) as first mortgagee;
· there was no want of care on Ms Vescovi’s behalf in forming that belief, and she was entitled to take the title to the Kew property and deal with the title on the strength of that belief;
· by the time that Ms Vescovi became aware that she had received the Southage money, she had sold the Kew property and most of the proceeds had gone to the NAB as first mortgagee;
· accordingly, if Ms Vescovi did receive a prima facie benefit by taking title to the Kew property, ultimately she received nothing for it.
At the hearing of the appeal, senior counsel for the appellant conceded that the respondent’s belief that her husband provided the money used to pay the deposit was ongoing, and that it was a belief she was entitled to hold.
The nub of the appellant’s submissions was that it was not the respondent’s belief that her husband had provided the money for the deposit from his own funds that was the cause of her entering into the transaction to purchase the Kew property, or the subsequent sale of the property under forced circumstances. Rather, it was the respondent’s risky decision to commit to the transaction knowing that she was borrowing more than 95 per cent of the value of the property she was to purchase, together with her erroneous belief that her husband had the capacity to meet the mortgage repayments on the NAB loan. It contended that the defence of change of position should fail because the respondent had not discharged her onus of establishing the requisite causal link between the Southage money, her entry into the transaction and the detriment she suffered.
The appellant identified the critical date as being 12 February 2010, as this was the date at which the respondent entered into the NAB loan, mortgage and guarantee and bound herself to the transaction that resulted in her detriment. By this date, it was apparent that the plan that her husband would sell his $2 million in shares to fund the purchase would not eventuate. Despite the fact that the basis for the transaction — as the respondent had understood it — had changed significantly, the respondent did not seek to withdraw from the purchase. The appellant submitted that at least as at 12 February 2010, there was a basis for the respondent to mistrust any claim that her husband was able to finance the purchase of the property. In those circumstances, it submitted that the judge should have found that the respondent took a pre-determined risk to enter the transaction. It was this and not her mistaken belief that her husband had paid the deposit from his own funds that was the real cause of her detriment.
The appellant submitted that the trial judge ought to have held that the respondent’s belief that her husband’s business had provided funds for the 10% deposit on the purchase of the Kew property was neither a necessary nor sufficient condition of the respondent’s deciding to enter into the NAB loan and the NAB mortgage and therefore did not cause her to change her position.
The respondent submitted that the case as put on the appeal by the appellant was not put to the judge at trial and that the submissions now relied on by the appellant had not been put to the respondent in cross-examination. They therefore lacked a basis in the evidence and, moreover, it was unfair to the respondent to permit them to be raised at this late stage. The respondent submitted that the analysis of the law and the findings of fact made by the trial judge in respect of the change of position defence were correct.
The respondent further submitted that nothing turned on the fact that she did not seek to withdraw from the transaction on 12 February 2010. While the trial judge referred to the decision of Nettle J in Commissioner of State Revenue v Politis[8] as authority for the proposition that, as at the time that the nomination was signed on 5 February 2010, there was nothing that committed the respondent to completing the purchase, this was not the position as understood by the respondent at the time, or by counsel at trial. The transcript reveals that both the respondent and counsel for the appellant believed that having accepted the nomination, she was bound to complete the purchase:
In nominating as the purchaser, you understood as a lawyer that you were responsible, legally responsible, to complete the contract of sale, weren’t you?---Yes.[9]
[8][2004] VSC 126, [15]. See also Reasons [69] where the trial judge held, citing Nettle J’s decision:
It is well settled that a nomination under a clause in those terms does not operate as a novation of the contract or give the nominee any power to compel the vendor to complete. For the same reason, it does not make the nominee liable to complete the contract or to pay the purchase price. Those obligations remain with the named purchaser.
[9]Transcript of Proceedings, Southage Pty Ltd v Vescovi (Supreme Court of Victoria, S CI 2012 00450, Macaulay J, 28 August 2013) 115.
Applicable Principles
The trial judge began his analysis of the law by referring to what the High Court had said in David Securities Pty Ltd v Commonwealth Bank of Australia:[10]
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. 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.[11]
[10](1992) 175 CLR 353 (‘David Securities’).
[11]Ibid 379 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) (emphasis in original, citation omitted) citing Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, 673.
As we observed earlier, counsel before the trial judge focused in substance, on three questions: (a) Did Ms Vescovi receive a benefit from the Southage loan by which she was enriched? (b) If so, was that enrichment unjust? (c) If so, did she change her position on the faith of the receipt such that she has a good defence to the claim? Thereafter, the judge said that the question whether there had been an ‘unjust enrichment’ might be ‘unlocked’ by asking five questions: (i) Was the defendant enriched? (ii) Was it at the expense of this claimant? (iii) Was it unjust? (iv) What kind of right did the claimant acquire? (v) Does the defendant have a defence?[12]
[12]The trial judge took the five questions from Peter Birks, Unjust Enrichment (Oxford University Press, 2nd ed, 2005) 39.
In several cases, the High Court has said that, in Australia, unjust enrichment is not a ‘definitive legal principle’.[13] The term itself does not denote a specific form of legal liability. The Court has rejected the idea that unjust enrichment is the overarching legal genus of which, for example, payment under a mistake or failure of consideration or duress or undue influence or demands made without authority are merely species.
[13]David Securities (1992) 175 CLR 353, 378 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 544-545 (Gummow J); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 156 (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); Bofinger v Kingsway Group Limited (2009) 239 CLR 269, 299 (Gummow, Hayne, Heydon, Kiefel and Bell JJ); Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498, 515-516 (French CJ, Crennan and Kiefel JJ).
In Pavey & Matthews Pty Ltd v Paul,[14] Deane J said that unjust enrichment 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.[15]
[14](1987) 162 CLR 221.
[15]Ibid 256–7 (citation omitted). See also David Securities (1992) 175 CLR 353, 378–9 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ).
In Bofinger v Kingsway Group Ltd,[16] Gummow, Hayne, Heydon, Kiefel and Bell JJ affirmed that ‘the concept of unjust enrichment was not a principle supplying a sufficient premise for direct application in a particular case’,[17] but that ‘[t]he concept of unjust enrichment … may assist in the determination by the ordinary processes of legal reasoning of the recognition of obligations in a new or developing category of case’.[18] In that case, the Court emphasised that ‘[i]n the years which have followed the Court has reaffirmed this position and all other Australian courts are bound accordingly’.[19] Similarly, in Equuscorp Pty Ltd v Haxton,[20] French CJ, Crennan and Kiefel JJ said that unjust enrichment ‘does not found or reflect any “all-embracing theory of restitutionary rights and remedies”’.[21]
[16](2009) 239 CLR 269.
[17]Ibid 299 [85].
[18]Ibid 300 [89] (citations omitted).
[19]Ibid 299 [86] (citations omitted).
[20](2012) 246 CLR 498.
[21]Ibid 516 [30], quoting Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 544 [72] (Gummow J).
More recently, in Australian Financial Services and Leasing Pty Limited v Hills Industries Limited,[22] Hayne, Crennan, Kiefel, Bell and Keane JJ reaffirmed[23] this understanding of the concept of unjust enrichment and said that it was ‘not the basis of restitutionary relief in Australian law’.[24]
[22](2014) 307 ALR 512 (‘Hills Industries’).
[23]Ibid 536 [73].
[24]Ibid 537 [78].
Accordingly, authority binding on this Court is against liability to restitution being established either by resolution of the three issues that the parties focused on below or, for that matter, by answering the five questions identified by the judge.
As indicated in David Securities, in order to raise a prima facie entitlement to restitution, it is sufficient for a plaintiff to show that a payment was caused by a mistake; it is not incumbent upon a plaintiff further to plead or to establish that the receipt or the retention of the moneys is unjust. However, in so far as the law will not provide for recovery ‘except where the enrichment is unjust’ it is open to a defendant 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’.[25]
[25](1992) 175 CLR 353, 379.
In the present case, the two stage analysis identified in David Securities[26] may not have been appreciated. The plaintiff framed its relevant claim as ‘the amount of the loan as money had and received by [Vescovi]’. In the alternative, it said ‘by the payment of the loan or alternatively, by the payment of the amount of $219,500, [Vescovi] has been unjustly enriched and is required to make restitution to the plaintiff …’. In her amended defence, the assumption that ‘unjust enrichment’ is a source of liability in respect of which there may be relevant defences also appears; it is alleged that ‘if she has been unjustly enriched, which is denied, then she has bona fide changed her position whilst being unaware of the payment of the sum of $219,500 or any sum by the plaintiff’. Particulars are provided and the conclusion expressed thus: ‘in the premises, if she has been unjustly enriched, which is denied, she is not obliged to make restitution to the plaintiff’. Notwithstanding the way in which the claim and the defence to it were framed, simply stated, if the defendant should not be required to make restitution, she has not been unjustly enriched.
[26]Ibid.
As the various judgments in the High Court have explained, the common law action for money had and received had its roots in equitable principles. And, as those judgments make clear, what is now termed the defence of ‘change of position’ is simply a modern description of one form of disadvantage that a defendant would suffer were an order made that he or she repay moneys paid where, for example, there has been a total failure of consideration or the payment was made under mistake.
In the recent case of Hills Industries,[27] the High Court examined the principles governing the change of position defence. First, all the members of the Court emphasised the equitable origins of restitution and traced the history of the defence of change of position in order to locate it within a broader doctrinal context. The joint judgment identified the origin of the right to recover money mistakenly paid to another in the decision of Lord Mansfield in Moses v Macferlan.[28] There, Lord Mansfield explained that in the case of a mistaken payment, a plaintiff seeking to recover the payment need not show any special circumstances but may simply declare that the money was received by another. A defendant, on the other hand, ‘may go into every equitable defence … in short, he may defend himself by every thing which shews that the plaintiff, ex aequo & bono, is not intitled to the whole of his demand, or to any part of it’.[29]
[27](2014) 307 ALR 512.
[28](1760) 2 Burr 1005.
[29]Ibid 1010.
In Australia, the availability of a defence of change of position in the context of a claim to recover a mistaken payment was foreshadowed by the High Court in Australia and New Zealand Banking Group v Westpac Banking Corporation.[30]There, Mason CJ, Wilson, Deane, Toohey and Gaudron JJ held that
the fact that specific money or property received can no longer be identified in the hands of the recipient or traced into other specific property which he holds does not of itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution. Before that prima facie liability will be displaced, there must be circumstances (e.g., that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust.[31]
[30](1988) 164 CLR 662.
[31]Ibid 673.
All members of the Court in Hills Industries referred to the recognition of a general defence of change of position in the United Kingdom in Lipkin Gorman v Karpnale Ltd.[32] In that case, Lord Goff (with whom Lord Bridge, Lord Griffiths and Lord Ackner agreed) provided the broad formulation of the defence:
At present I do not wish to state the principle any less broadly than this: that the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full.[33]
[32][1991] 2 AC 548 (‘Lipkin Gorman’).
[33]Ibid 580.
When the issue came before the High Court again in David Securities,[34] the decision in Lipkin Gorman was referred to in support of the recognition of the defence of change of position in Australia. Discussing the content of the defence and the rationale for its adoption, the joint judgment held:
If we accept the principle that payments made under a mistake of law should be prima facie recoverable, in the same way as payments made under a mistake of fact, a defence of change of position is necessary to ensure that enrichment of the recipient of the payment is prevented only in circumstances where it would be unjust. This does not mean that the concept of unjust enrichment needs to shift the primary focus of its attention from the moment of enrichment. From the point of view of the person making the payment, what happens after he or she has mistakenly paid over the money is irrelevant, for it is at that moment that the defendant is unjustly enriched. However, the defence of change of position is relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt.[35]
[34](1992) 175 CLR 353.
[35]Ibid 385 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) (emphasis in original, citation omitted).
As observed earlier, the majority affirmed, echoing Moses v Macferlan, that the recipient of a payment ‘is entitled to raise … any matter or circumstance’ to show that his or her retention of the payment would not be unjust.[36] The majority also observed that ‘the common element in all cases is the requirement that the defendant point to expenditure or financial commitment which can be ascribed to the mistaken payment’.[37] These passages were referred to with approval by the joint judgment in Hills Industries.[38]
[36]Ibid 379.
[37]Ibid 385.
[38]Hills Industries (2014) 307 ALR 512, 538 [81]–[82].
Referring to the decision in David Securities, Gageler J in Hills Industries observed:
The joint reasons in David Securities invoked the language of estoppel when it emphasised the “central element” of the defence of change of position to be that the defendant “has acted to his or her detriment on the faith of the receipt”. There is much to be said for treating the defence of change of position as there articulated as a particular application of that doctrine. The doctrine has always been recognised to operate as a defence to a common law action for money had and received although, for so long as the action lay for money paid under a mistake of fact but not for money paid under a mistake of law, it was understandable that it would be thought appropriate that it be constrained only to operate where there was a representation on the part of the payer. The doctrine is itself founded on notions of good conscience indistinguishable in concept from those underlying the law of unjust enrichment. In the flexible form in which it has developed in Australia, the doctrine provides a principled basis for determining circumstances in which it would be inequitable or unjust to require the innocent recipient of a mistaken payment to make restitution or full restitution. The doctrine employs established concepts capable of predictable application. Treating the defence of change of position as a particular application of it would avoid both the uncertainty of defining a separate content for the change of position defence and the complication of attempting then to determine whether, and if so how, circumstances giving rise to the defence might separately give rise to an estoppel.[39]
[39]Ibid 559 [155] (emphasis in original, citations omitted).
The joint judgment in Hills Industries also referred to ‘the equitable doctrine concerning detriment’, and their Honours observed that their view of this doctrine accorded with the understanding of detrimental reliance sufficient to ground an estoppel:
The equitable doctrine concerning detriment is concerned with the consequences that would enure to the disadvantage of a person who has been induced to change his or her position if the state of affairs so brought about were to be altered by the reversal of the assumption on which the change of position occurred. On this view, the injustice which precludes such a result lies in the disadvantage which would result to the recipient if the payer were to be permitted to recover payments as mistakenly made where they have been applied by the recipient.[40]
[40]Ibid 539 [84] (citations omitted).
Their Honours then referred to Dixon J’s reasons in Grundt v Great Boulder Pty Gold Mines Ltd[41] and concluded:
It will be observed that Dixon J saw that a party’s position, which had changed on the basis of an assumed state of affairs that is now sought to be altered, provided the necessary detriment. The passage makes clear that the detriment must flow from reliance upon that assumption, when that assumption is to be departed from.[42]
[41](1937) 59 CLR 641, 674–5.
[42]Hills Industries (2014) 307 ALR 512, 540 [87] (citation omitted).
As to the approach to be taken when determining whether the defence has been made out, French CJ observed in Hills Industries:
As a general proposition, the change of position defence should be applied in a way that is faithful to its origins in Moses, reflected in the general rubric of “inequitable” recovery adopted in Lipkin Gorman. The acceptance of that standard as the foundation of the defence does not involve the acceptance of an arbitrary judicial discretion. The application of the standard on a case-by-case basis, according to the common law process, as foreshadowed by Lord Goff, allows for the development of criteria adapted to particular classes of case.[43]
[43]Ibid 525 [23].
The joint judgment in Hills Industries similarly affirmed that the approach to be taken when determining whether the defence is made out is to proceed on a case by case basis, without adopting a narrow or technical approach:
It will be observed that these conclusions are not reached by first attempting to state comprehensively what is encompassed by the notion of a change of position, or the circumstances in which a defence described in that way is available to meet a claim for recovery of money paid under mistake. As has been explained, to apply reasoning of that kind would be sharply at odds with the established doctrine and unchallenged decisions of this court in this area.
Attempts to describe the defence comprehensively, or to chart its metes and bounds, are apt to mislead by distracting attention from the content of the principle to the manner of its expression.[44]
[44]Ibid 542 [97]–[98] (citations omitted).
Justice Gageler held:
The explanation comes to this. The fact that a payment is caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the recipient to make restitution. That is because causative mistake is a circumstance which the law recognises to be prima facie sufficient to make the recipient’s receipt, and retention, of the payment unjust. To displace that prima facie obligation, the recipient must establish some other circumstance which the law recognises would make an order for restitution unjust. The defence of change of position comprehends one of those circumstances. The defence, if established, results in the prima facie obligation of the recipient being in whole or in part displaced at the time an order for restitution is sought.[45]
[45]Ibid 543 [106].
His Honour proposed a two-part test for determining when the defence was made out:
The defence of change of position is established where a defendant proves the existence of two conditions. The first condition is that the defendant has acted (that is, done something the defendant would not otherwise have done) or refrained from acting (that is, not done something the defendant would otherwise have done) in good faith on the assumption that the defendant was entitled to deal with the payment which the defendant received. The defendant need not for the purpose of meeting this condition have acted on knowledge derived from the payer. Whether the defendant needs also to have acted reasonably is a question which does not now arise for determination. The second condition is that, by reason of having so acted or refrained from acting, the defendant would be placed in a worse position if ordered to make restitution of the payment than if the defendant had not received the payment at all. The detriment constituted by that difference in position need not, in every case, be financial or pecuniary. If financial or pecuniary, it need not, in every case, be established with precision. It can be an opportunity forgone. It must, in every case, be shown by the defendant to be substantial.[46]
[46]Ibid 559 [157] (citations omitted).
We consider that the formulation of the defence as proposed by Gageler J in Hills Industries is consistent with the defence and the principles on which it is based as set out by the majority.
On the question of the kind of causal relationship that must obtain between the receipt and the detriment in order for the defence to be made out, the joint judgment held:
Whether English cases subsequent to Lipkin Gorman have taken a wider view of the defence, one which eschews a requirement of detrimental reliance in favour of a mere causal link, cannot alter what was said in David Securities regarding the defence. Whether the conclusion reached in the English cases, including Lipkin Gorman, is different from that which would be reached by reference to equitable principles is a moot point. In any event, consistently with an enquiry as to whether it is unconscionable for the recipient to retain the moneys, it is necessary in cases such as the present to consider what was done by the recipient in reliance upon the receipt.[47]
[47]Ibid 538 [81] (citing Scottish Equitable plc v Derby [2001] 3 All ER 818 (CA); Commerzbank AG v Price-Jones [2003] EWCA Civ 1663).
Whatever the position may be in England, the decision in Hills Industries makes clear that the requirement of reliance is the relevant causal link.[48] While there may be other circumstances where reliance does not provide a relevant causal link — for example if a mistaken payment is received and is then immediately stolen — such circumstances do not arise in this case. If it is shown that the respondent was acting in reliance on the receipt of the deposit when she entered the transaction that caused her detriment, the required causal link will be satisfied. Equally, if it is shown that the respondent would have entered into the transaction in any event, the detriment that resulted from the purchase cannot be said to be causally related to the receipt and therefore falls outside the operation of the defence.
[48]Hills Industries (2014) 307 ALR 512, 538 [81].
In accordance with the principles set out in Hills Industries and the cases to which it refers, the ultimate inquiry is whether it would be inequitable in all the circumstances to require the respondent to make restitution. The focus for the Court in answering this question is on what was done by the recipient in reliance upon the receipt.
Analysis
The respondent’s evidence at trial was that she entered the transaction on the basis that her husband had paid the deposit and would make the mortgage repayments. She stated in her evidence in chief:
Now, you accepted a nomination as purchaser of the Kew property, did you not?---M’mm.
Now, when you did so, did you know that the moneys to pay the deposit had been borrowed?---No.
By your husband?---No.
Had you known that they’d been borrowed by your husband, would you have accepted a nomination?---No.
Why wouldn’t you have accepted a nomination?---Clearly, if the deposit had been borrowed, my husband didn’t have access to the money that I thought that he did.
…
Could you repeat your answer please?---Clearly if — if my husband had to borrow the — couldn’t even come up with the deposit, he didn’t have the funds that I thought that he did to purchase the house.[49]
[49]Transcript of Proceedings, Southage Pty Ltd v Vescovi (Supreme Court of Victoria, S CI 2012 00450, Macaulay J, 28 August 2013) 100–1.
The respondent was cross-examined about the fact that she did not seek to reverse her position as nominee when she realised that her husband did not sell his shares in order to reduce the liability under the mortgage as he indicated he would:
In nominating as the purchaser, you understood as a lawyer that you were responsible, legally responsible, to complete the contract of sale, weren’t you?---Yes.
And you knew that in order to do that, the balance of the purchase price would have to be paid?---Yes.
You said to my learned friend that you thought that your husband had $2m worth of shares that he was going to sell to buy a property. Do you remember saying that?---Yes.
And you thought therefore that if you were going to take a loan, it would be a relatively small one. Is that right?---Yes.
That’s not what happened though, is it?---No.
In fact a mortgage was taken with the National Australia Bank?---Yes.
The mortgage was for virtually all of the balance of settlement, wasn’t it?---Yes.
And you knew that at the time that you nominated on 5 February, didn’t you?---No.
When did you find that out?---The day that I attended Alfonso Grillo’s office is when I first saw the documentation.
Which documentation was that?---A loan and the guarantee that I was being asked to sign, which I hadn’t previously been given a copy of.
It was at that point that you realised that there was a mortgage — or there would have to be a mortgage to the National Australia Bank for virtually all of the balance of the settlement proceeds. Is that right? Sorry, balance of the purchase price?---Yes, yes. Well, it was a — yes.
Do you remember the date that you went to see Mr Grillo?---12 Feb 10.
You didn’t take any steps to reverse your position as nominee, did you?---No.
You went ahead?---Yes.[50]
[50]Transcript of Proceedings, Southage Pty Ltd v Vescovi (Supreme Court of Victoria, S CI 2012 00450, Macaulay J, 28 August 2013) 115–16.
The combined effect of the evidence in chief and the cross-examination referred to above was disputed by the parties. The appellant sought to use it to ground its claim that the cause of the respondent entering the transaction was that she had taken a pre-determined risk to do so. However, while the cross-examination establishes that the basis for the transaction as the respondent had understood it had changed significantly, and while this may have given the respondent reason to doubt her husband’s representations as to his financial position, it was never put by the appellant that prior to entering into the mortgage the respondent in fact had doubts that her husband had truthfully represented his financial position, or that there was a basis for her to have such doubts. Indeed, it was not put that the respondent had any reason to doubt her husband’s ability to meet the mortgage payments as at 12 February 2010, much less that she had any reason to doubt that he had paid the deposit from his own funds.
It is plain that the respondent was not challenged on her evidence in chief that had she known that her husband had not paid the deposit she would not have gone ahead with the purchase. It was not put to the respondent that it was unreasonable for her to continue to believe that her husband had paid the deposit. Quite properly, it was conceded by the appellant that this belief continued, and that she was entitled to hold this belief.
The fundamental problem for the appellant is that it was never put to the respondent that her belief that her husband paid the deposit from his own funds was not operative at the time she entered into the transaction. It was never put to the respondent that by 12 February 2010 she would have entered the transaction in any event. The effect was that the respondent’s evidence on this point went unchallenged.
We do not consider that anything turns on the fact that the respondent did not take steps to withdraw from the transaction once it became apparent that she would be taking out a substantial loan. Although it is plain that the respondent (and counsel for the appellant) assumed that she was bound to complete the purchase from the time she accepted the nomination, it is not apparent why she should have withdrawn. The evidence was that at that time she believed that her husband had paid the deposit and was able to service the mortgage. It was not put to her that she had reason to believe her husband had misled her or that her belief was unreasonably held. She believed he had assets, and a business of substantial value. She may have believed that he had sufficient assets to pay the purchase price, but instead of committing his capital to the house, thought it preferable that they borrow the money. None of this was explored with the respondent in evidence.
The trial judge made findings that the respondent only consented to the nomination because she believed the deposit had been paid from her husband’s or his company’s money;[51] that had she known her husband had borrowed the money for the deposit she would not have given her consent;[52] that she received the title interest because she believed that her husband had paid the deposit from his own financial resources;[53] and that she was entitled to hold that belief.[54]
[51]Reasons [125].
[52]Reasons [127].
[53]Reasons [128].
[54]Ibid.
The trial judge concluded that the respondent entered the transaction in reliance on this belief. His Honour did not err in failing to take into account, or in failing adequately to take into account, the need to establish a causal link. His Honour sought to determine whether the steps taken by the respondent, first to enter the mortgage with NAB, and later to sell the land with all proceeds going to NAB, were, as a matter of substance, acts taken on the faith of the receipt of the deposit. He was not, as a matter of law, required to do more. His Honour found that had the respondent known that the deposit had been paid using borrowed money, she would not have given her consent to be nominated purchaser and would not have completed the purchase. This is sufficient to satisfy the required causal link and, on the evidence adduced, was compelling.
Decisions are often made for a variety of reasons. This is especially the case in respect of decisions as significant as the purchase of a substantial property. While it may be accepted that causes of the respondent entering into the NAB loan and mortgage included her decision to complete the purchase, her faith in her husband’s ability to make the repayments on that loan, and, we may speculate, her view that the Kew property was desirable, these do not preclude her from having entered into the loan and mortgage in reliance on her belief that her husband paid the deposit from his own funds.
Similarly, while it may be accepted that a cause of the respondent’s detriment resulting from sale of the Kew property under forced circumstances was the failure of her husband to repay the NAB loan, this does not preclude it being on the faith of the receipt of the deposit moneys that the respondent entered into the loan and mortgage that resulted in her detriment.
The trial judge was correct to find that were it not for the respondent’s belief that the deposit had been paid by her husband, she would not have entered into the transaction. The cross-examination does not provide a basis to doubt the trial judge’s finding on this point, or for refusing to accept the respondent’s evidence. Indeed, the respondent’s evidence on this critical point was unchallenged. It follows that the respondent has established the first limb of the change of position defence.
It is also plain that by the time the appellant’s claim in restitution was brought, the respondent had suffered irreversible detriment, such that she would be in a worse position if ordered to repay the Southage money than had she not received the Southage loan at all. The trial judge’s findings were that the respondent had signed a mortgage for more than 95% of the $2,695,000 purchase price of the Kew property, that she had thereby become liable to pay the interest that accrued on that principal sum, and that she had subsequently sold the property at a loss with NAB taking all proceeds from the sale. By the time the restitution claim was brought, the respondent retained none of the value inherent in the Southage loan. Those findings were undisputed and are sufficient to establish the second limb of the change of position defence.
It follows that the trial judge was correct to hold that in the circumstances it would be inequitable to now require the respondent to repay the Southage money.
Notice of contention
The respondent submitted by notice of contention that although the trial judge found that the respondent was prima facie enriched when she acquired her interest as proprietor of the Kew property, because he found the respondent had made out her change of position defence, he was not called upon to determine the value of that enrichment. Had the trial judge been required to do so, such calculation would require, as a first step, a determination of whether there was any excess in the value of the Kew property after the liabilities incurred to acquire it were accounted for. Assuming that there was such an excess, it would then need to be determined what proportion of that excess was attributable to the Southage money.
There was no evidence beyond the purchase price of the equity (if any) that the respondent gained in the property upon becoming the registered proprietor. In the absence of such a finding, the respondent submits that the appellant, who bears the onus of establishing an enrichment, has not established that the respondent was enriched by the receipt of the Southage money.
The value of the enrichment received must be assessed at the time of the enrichment (being when the respondent became the registered proprietor of the Kew property). In this case, the respondent did not receive the money directly. Rather, any benefit she received crystallised upon her taking title to the Kew property. The value of that benefit is to be determined by valuing the proportion of the equity, if any, that the respondent acquired in the Kew property upon acquiring title that was attributable to the sum of $219,518, being the amount of the Southage loan used to pay the balance of the deposit.
Because, like the trial judge, we are satisfied that in the circumstances it would be inequitable to order the respondent to make restitution, we do not consider it necessary to determine the issues raised by the notice of contention. However, were it necessary to do so, we would not be prepared to find for the appellant on the threshold question of whether the respondent was enriched in the absence of any evidence as to the value of the equity that can be ascribed to the Southage money.
We would dismiss both the appeal and the notice of contention.
8