Southage Pty Ltd v Vescovi - [2015] VSCA 117

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2014 0051

SOUTHAGE PTY LTD (ACN 050 240 965)

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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] VSCA 117
Decision Date: 22 May 2015

CaseChat Overview and Summary

In Southage Pty Ltd v Vescovi, the Federal Court was asked to decide whether the appellant, a money lender, could recover funds paid to the respondent under a mistaken belief that the respondent had provided security for a loan. The appellant had advanced funds to a third party who had fraudulently forged the respondent's signature on loan and mortgage documents. The third party used the funds to pay a deposit for the sale of another property, and the appellant believed it was securing a mortgage from the respondent. The respondent, unaware of the transaction, later used the property as security for a mortgage. The property was subsequently sold, with the respondent retaining no proceeds.

The central legal issues were whether the respondent should be ordered to make restitution for the money received and if such an order would be unjust given the respondent's change of position. The court had to consider whether the respondent acted in good faith in assuming they were entitled to the payment and if ordering restitution would leave the respondent in a worse position than if they had never received the funds. The respondent argued that they would not have entered into the mortgage without believing the third party had paid the deposit with their own funds, and that the mortgage was made in good faith reliance on the receipt of the funds.

The court found that the respondent's actions were in good faith and that ordering restitution would place the respondent in a worse position than if they had never received the funds. The respondent had used the property as security for a mortgage, and the subsequent sale of the property left the respondent with no proceeds. Given these circumstances, the court held that it would be unjust to order restitution, as the respondent would be left worse off than if the funds had never been received. The court referred to precedents such as David Securities Pty Ltd v Commonwealth Bank of Australia and Australian Financial Services and Leasing Pty Limited v Hills Industries Limited in reaching its decision.

The final orders of the court were that the appellant's claim for restitution was dismissed, and the respondent was not required to make any restitution of the funds received. The court emphasised the importance of considering the respondent's good faith and the resulting change of position in reaching its decision.

Orders