The Commonwealth of Australia v McCormack, H.J

[1982] FCA 309

L' ._

CATCHWORDS

I

Appeal - Money pa id under mis take of fac t - Consent award by

I A r b i t r a t o r - Const ruc t ion thereof - Provisional payment.

THE COMMONWEALTH

V.

HUGH J O H N IllcCORMACK

F.C. No. A.C.T.	G.62 of 1982
F.C. No. A.C.T.	G.63 of 1982

Coram: Smithers , Woodward and Gallop JJ.

Date: 23 December 1 9 8 2

Canberra, A.C.T.

c

IN THE FEDERAL COURT OF AUSTRALIA	)
l

AUSTRALIAN	CAPITAL	TERRITORY	j	No. ACT G.62 o f 1982
1	No. ACT G.63 of 1982

REGISTRY DISTRICT 1 1

DIVISION GENERAL j

ON APPEAL FROM THE SUPREME COURT OF

THE AUSTRALIAY CAPITAL TERRITORY

BETWEEN: THE COhfhlONWEALTH OF AUSTRALIA

Appellant

&VD : HUGH J O H N McCOR!!CK

Respondent

ORDER

l

CORAM: Smithers, Woodward and Gallop JJ.

- DATE: 24 December 1982

W E R E W E : Canberra

THE COURT ORDERS THAT:

(1)	In appeal No. ACT G.62 of 1982 in respect of action
No. S.C. 750 of 1977 the appeal is allowed, judgment
therein set aside and in lieu thereof judgment is
entered for the appellant in the sum of $75,000 with
costs of an incidental to the appeal and the proceedings in the Supreme Court.
In appeal No. ACT G.63 of 1982 In respect of action
No. S.C. 799 of 1979 the appeal is allowed, the judgment
therein is set aside and in lieu thereof judgment is
entered for the appellant by declaring that as at
5 October 1978 (the date on which the appellant withheld
payment of $75,000) the appellant was entitle& to set-off
that sum against the respondent’s entitlement o compensation in respect of the land contained i n Certificates of Title Vo1.72, Folio 7163 and V01.90,
Folio 4 , and it is ordered that the respondent pay to
the appellant its costs o f and incidental to this appsal
and the proceedings in the Supreme Court.

I N THE FEDEltRL COURT O F AUSTPALIA

\

AUSTRALIAN	CAPITAL	TERRITORY	1	NO. ACT G 6 2 of 1982
1

DISTRICT REGISTRY	1	No. ACT G 6 3 of 19U2
\
GENERAL DIVISION	)

ON APPEAL from the Supreme Court of the Australian Canital Territory

Between: THE COMMOVWEAGTH OF

AUSTRALIA

(Appellant\

- And: HUGH JQHW YcCnRMACK

(Respondent)

CORAM: Smithers, Woodward and Gallop JJ. alf December l W 2

REASONS FOR J U D G W N "

Smithers J.: This is an appeal against a judgment dismissing

the appellant's claim for S75,OOO as money had and received to the plaintiff's use in that it was paid by the appellant to

the respondent by mistake of fact.

The appellant' S case was that havinq naid to the

respondent the sum of S 7 5 . 0 0 0 a s an advance aqainst the amount

of compensation which miqht be found to be due to the

respondent by a n arbitrator in respect of the value of certain

improvements made by the respondent to certain leasehold land.

,

2.

it paid to the respondent the full amount found to be due forgetting that it had previously paid the sum of S75,OOO on account thereof. The appellant alleged that the full amount found to be due in respect of such compensation was $215,000.00. The respondent admitted para. 12 of the

appellant's Statement	of Claim which	was in the following
terms: -

"Tn paying the said sum of S215,000.00 the

plaintiff by mistake of fact failed to take account of the advance of 5 7 5 , 0 0 0 . 0 0 referred to

in paragraph 7 above."

Paragraph (7) referred to the sum of S75.000.00 as an advance

in respect of the appellant's liability arising from the

lease. The liability arose under the relevant lease on the withdrawal by the appellant of certain land from it. In that

lease the appellant was the lessor and the respondent was the

lessee. Clause 2(d) thereof provided that the appellant

covenanted that if any land were withdrawn it would pay to the lessee the value of all improvements on or effected by the lessee to the land "such value to be ascertained by agreement

or in default of agreement by arbitratlon .. .l'.

It would seem that the parties, beinq unable to

reach an agreement submitted to Mr. Murray Wilcox as

arbitrator pursuant to clause % ( a 1 of the lease the claim made

by the respondent "for compensation for improvements.". In

the submission the parties agreed that the arbitrator might by

. I

7 .

consent make an interim award "respectinq a portion or portions of the matters referred'' and that the proceedings would commence on 31 January 1974 when the arbitrator might

give such directions as he thought proper.

On 25 January 1974 the respondent subnitted its

written claim "In the matter of an Arbitration ktween the

said Huqh John McCormack and the Commonwealth of australia"

supported by a valuation €or the sum of S336,ROO in respect of

the structural and other improvements including tanks, roads,

trees, water, fencing, pastures and timber treatment. m e sum

of $75,000 which is in issue in this case was pa id by the

plaintiff to the defendant on 25 June 1 9 7 4 following

correspondence between the parties a follows:-

"Acting Deputy Crown Solicitor,

...	25 June 1974
Dear Sir,

RE: H . 3 . McCormack - V - THE COMMONWEALTH

(BLOCK 24 SECTTON 7 LAWON\

...

We wish to confirm o u r request that the

Commonwealth makes an advance to our client of

Sl00,000.00 in respect of his leasehold clam.

We enclose a photostat copy of a letter from the Manaqer of the Bank o f Yew South 'gales to aur client dated the 13th instant.

We are obtaining a further advance payment of

$50,000.00 today on Mr. VcCormack's behalf on account O F his claim €or the acquisition of his freehold land in the Territory. You will see from the enclosed letter that Mr. VcCormack needs to

4.

o b t a i n a f u r t h e r S75 .000 .00 t o p a y t h e Bank o f New

South Wales.

Our c l i e n t ’ S o n l y o t h e r a l t e r n a t i v e i s to ob ta in

f i n a n c e a t a n i n t e r e s t r a t e i n t h e r e g i o n of 24%

or to sell a s s e t s a t a time when the marke t i s n o t

s t r o n g . M r . McCormack is ask ing for t h e b a l a n c e

of t h e money so t h a t h e may purchase s tock and pay

o the r expenses .

“le s h o u l d m e n t l o n t h a t t h e l 7 i n i s t e r €or t h e

C a p i t a l T e r r i t o r y v i s i t e d Mr. McCormack some time

ago and. w e unders tand . ind ica ted t o Y r . McCormack

t h a t h e would examine the questlon of an advance

payment	t o o u r c l i e n t f a v o u r a b l y .
...

“The Deputy Crown S o l i c i t o r ,

... 17 Ju ly , 1974

Dear S i r ,

“A.J. McCORMACK RESUMPTION O F LEASEHOLD LRWD

Thank you for your l e t te r of t h e 1 6 t h i n s t a n t

a d v i s i n g t h a t t h e D e p a r t m e n t of the C a p i t a l

Territory is prepared t o a d v a n c e o u r c l i e n t the

sum of $75,000.00 i n r e s p e c t of h i s claim of t h e withdrawal of Crown Lease of Block 29 Lanyon.

However, w e wish t o c o n f i r m o u r t e l e p h o n e r e q u e s t

t o M r . Lav ing ton on beha l f o f ou r c l i e n t for a

f u r t h e r S 2 5 . 0 0 0 . 0 0 .

Our c l i e n t h a s i n s t r u c t e d u s t h a t h e r e q u i r e s t h i s

money t o c a r r y o n h i s a g r i c u l t u r a l a c t i v i t i e s

u n t i l February 1975. H e w i l l r e c e i v e n o income

u n t i l t h a t time when he w i l l be p a i d f o r t h e wool

c l i p . B e c a u s e t h e o f w i t h d r a w a l o f M r .

McCormack’s l ea seho ld l and and t he acqu i s i t i on of

h i s f r e e h o l d l a n d o u r c l i e n t c a n n o longer carry

on a l o n g term p o l i c y of c r o p p l a n t i n g or s t o c k

b r e e d i n g b e c a u s e o f t h e u n c e r t a i n t y o € h i s t e n u r e

o f t h e land . Therefore, he has heen deprived of

t h e income €rom t h e s e a c t i v i t i e s .

Of course, you w i l l be w e l l a w a r e t h a t o u r c l i e n t

r e c e i v e s n o i n t e r e s t i n respect o f t h e money p a i d

to him f o r t h e l e a s e w i t h d r a w a l from t h e d a t e of

w i t h d r a w a l u n t i l	payment.
...

5 .

The respondent acknowledged receipt of the sum of S75,OOn in

writing dated 25 July 1974 in the following terms:-

“I HUGH J O H N McCORMACK of TUGGERANONG in the

Australian Capital Territory hereby acknowledge receipt from the Commonwealth of Australia the sum of seventy five thousand dollars “75,000.00 being payment of an advance against any sums due to or found to be due to me arising out of arbitration in respect of the withdrawal of land from the

Crown lease of Block 79 Lanyon currently the

subject of Arbitration proceedings before Mr. M.

Wilcox.

SIGNED “H.J. McCormack”

This 25th day of July 1974.*

After negotiation between the parties agreement was reached

that the arbitrator should make an award and on 23 July 1976

he did so. The award was in the following terms:-

_ .

“FTN4I. AWARD

BY CONSENT I ORDER, that the Commonwealth of

Australia pay to the abovenamed lessee of Block balance of the value at the date of the withdrawal

28, District of Lanyon in the Australian Capital

of the said land of all fixtures and erections on,

and of all improvements on or effected by the

lessee or by a prior lessee under this lease or

under a prior lease of the land, such lease being

between the Commonwealth of Australia and the

abovenamed lessee. AND I FURTHER ORDER that the

6.

Commonwealth pay t h e s a i d sum t o t h e abovenamed

lessee wi th in fou r t een days from t h e d a t e h e r e o f .

DATED t h i s 2 3 r d d a y of J u l y 1 9 7 6 .

"M. Wilcox"

Arbitrator"

Accord ing t o t h e r e s p o n d e n t , t h i s a w a r d o n i t s p r o p e r

c o n s t r u c t i o n ordered, i n r e s p e c t of t h e v a l u e of t h e r e l e v a n t

improvements a t t h e d a t e o f t h e w i t h d r a w a l of t h e s a i d l a n d

f r o m t h e l e a s e , t h a t t h e a p p e l l a n t was t o p a y t o t h e

r e sponden t t he sum o f S 2 1 5 . 0 0 0 i n a d d i t i o n t o t h e S75,OOO

a l r e a d y p a i d . would have t o show by a To a c h i e v e t h e r e s p o n d e n t ' s d e s i r e d r e s u l t h e

p rocess o.? c o n s t r u c t i o n t h a t somewhere

i n t h e award t h e t o t a l order set out above i s t o be found.

I t may be n o t e d t h a t t h e r e is n o e v i d e n c e t h a t the

arbitrator had any knowledge of t h e payment of S 7 5 . 0 0 0 . I t is

a p p a r e n t t h a t i f t h e award were c a p a b l e of t h e s u g g e s t e d

c o n s t r u c t i o n , it w o u l d t r a v e l o u t s i d e t h e terms O E t h e

submiss ion . B u t t h e award b e i n g made by consent i ts v a l i d i t y

would n o t be affected i f , acco rd ing t o its terms, it d i d deal

w i t h matters outs ide the submiss ion . B u t when one comes t o

construe an award, even an award made by consent, one would

n o t c o n s t r u e it a s p u r p o r t i n g t o d e a l w i t h m a t t e r s o u t s i d e t h e

submiss i sn un le s s it were c l e a r from i t s terms t h a t it was

in tended so t o do.

I t is a r e a s o n a b l e i n f e r e n c e t h a t t h e award was

in tended by the p a r t i e s to implement t h e p r o v i s i o n s of a n

7.

agreement which they had reached. In the absence of an

allegation that it did not faithfully do this it must be

construed by reference to its terms as they operate in their

setting in the relevant circumstances. Those circumstances

would include the submission, the subject with which the

submission was concerned, namely the respondent's claim, the

fact that the parties had come to an agreement contemplating a

final award, and the fact that $15,000 had been paid in July

1974 as an advance payment on the terms of the documents set

out above. At the trial the respondent adopted the position that the award was to be construed according to its terms

without reference to the conversations out of which it arose.

It had been pleaded by the respondent that the appellant had

agreed to pay and did pay to the respondent the sum of S75.000

and that "by the terms of the award" it agreed to pay the

further sum of $215,000. It was never suggested by the

respondent that in the conversations out of which the

agreement to consent to the final award arose there was any

reference to the sum of S75,000 already paid. As the

respondent's solicitor's letter of 9 ?Tovember L976 said, "Our

client assumed that the sum of $215.000 was in addition to the

S75,OOO already paid." Tt may be mentioned in passing that it

is to be inferred from this concession that the conversations

did not deal with the state of accounts between the parties

but only with the amount of the value of the improvements.

R .

But when the trial began the appellant's advisers had decided that, at least €or greater caution its Statement of Claim should be amended to contain a plea to the effect that if on its proper construction the award required the

appellant to pay to the respondent the sum of $215,000 in

addition to the $ 7 5 . 0 0 0 previously paid, it did so by mistake

because the award was made to qive effect to a prior agreement

between the parties that the total liability of the appellant

to the respondent was the sum of $215,000. Under this

proposed amendment an order wag sought that the award be

remitted to the Arbitrator so that an award might be made in

accordance with the prior agreement alleged. This proposed

amendment was objected to at the trial by the respondent and

was not allowed. Nevertheless, at the trial. the appellant

tendered oral evidence of conversations which gave rise to the consent award. This tender was objected to by the respondent and the objection was upheld. The respondent was consistent

in this respect throughout, so much so, that in his final

address Mr. Berkeley for the respondent said:

"MR BERKLFI: Your Honour, we have basically and, I

hope, not misleadingly a simple proposition.

It will require some elaboration to deal with the arguments put by my learned friends. Our basic proposition is this. If the proper meaning of the award is that we

are to get '3215,000 in addition to the 7 5

then we are entitled to judqment. And if

the proper meaning of the award is that

$215,000 is the total sum then	we are not
entitled to judgment."

..

9.

And in his appeal Mr. Beaumont for the appellant, took a similar attitude. And in my opinion Mr. Berkeley at the trial

and Mr. position. Accordingly. Beaumont on the appeal were both stating the true

one must ascertain whether on its true

meaning the consent award required the appellant to pay

$ 2 1 5 , 0 0 0 in addition to the S 7 5 , 0 0 0 previously paid. The

conversations out of which the award arose were never given in

evidence. Without the conversations the evidence of the agreement out of which the award arose was incomplete. Accordingly, the only evidence, at the trial, of what that

agreement was, is the award. In the absence of a claim to set

aside the award on the grounds that the award did not represent the agreement, all that remained to be done was to

construe the award. There was no claim to set aside the award

for mistake because the amendment of the Statement of Claim which would have raised such a claim was not allowed at the trial. A s it turns out, the appellant did not need to amend

because of the construction	of the award adopted in this
Court.

The critical question is whether tha award purports

to order the appellant to pay the sum of S215,OOO in

settlement of the state of the accounts between the parties so

far as they concern the appellant's liability to compensate

the respondent in relation to the relevant improvements, or

whether it purports to order the appellant to pay S215,OnO as

the ascertained value of the improvements. The respondent

urges that by the use of the words “balance of value“ the

award was referring to the monetary balance which would exist

if the ascertained value of the improvements had been S290.000

and the S75,OOO were allowed for. But to extract this meaninq

from the expression “being the balance of the value at the

date of withdrawal of the said land of all improvements, it has to be deduced that, although the submission to the arbitrator related o n l y to the ascertainment of the value of

the improvements and the award refers only to the balance of value and not the balance of money due, it must be treated as

referring to the state of accounts between the parties in

respect of the value of the improvements. To make that

deduction the respondent has no basis other than the use of

the word “balance” in a somewhat uncomfortable context.

But the submission was not concerned with the state of accounts as between the parties relating to the appellant‘s

liability to compensate plaintiff might discharge its liability for the value of the improvements as ascertained was a matter quite outside the the respondent. How or when the

submission. No doubt if the parties had been in agreement

that the arbitrator should order, by consent, that S215.000

was to be pald in addition to the $75,000 already paid, that might have been provided €or by appropriate words. But there

is no real basis for concluding that the award does travel

into the area of the state of accounts between the parties. The order deals with a sum of money being a balance of value,

11.

not a balance of accounts. It is said that the expression

"balance" is apt o refer to a balance of money and introduces

the notion that what is referred to is a balance of money in

accounts as between the parties. Certainly to use the

expression balance of value is an inapt way to refer to the ascertained value of the improvements, but, at least, in a document implementing an obvious compromise of competing contentions on the subject of values the notion that, in that

respect, a balance has been struck, is not incongruous.

To glean from the words used the notion that a new subject altogether, namely the fate of the 575,000 already

paid, was being dealt with would be to use imagination rather

than to construe the words. The provision is that the

plaintiff is ordered to pay S215.000. The critical words "the

sum of $215,000 being the balance of the value rof the

improvements]", cannot, by a process of construction, be

translated into "being the balance du by the appellant to the

respondent in respect of the ascertained value of the

improvements on the basis that the respondent retains the sum

of $75,000 already paid by way of advance against its

liability for that value". To ascertain the fate of the

$75,000 one goes back to the respondent' S receipt of 25 July 1974, where the arrangement concerninq it is clearly stated.

It is payment of an advance aqainst any sums due to or found to be due to the appellant arisinq out of arbitration in respect of the withdrawal of land from the Crown lease. The

12.

sum of S215.000 i s t h e sum found ue on t h e a r b i t r a t i o n . I t

s a t i s f i e s t h e d e f i n i t i o n of the sum a q a i n s t w h i c h t h e s75,Onn

was advanced. Clear words w o u l d be necessary to show t h a t the

$75,000 had changed its na ture and been conver ted from a n

a d v a n c e a g a i n s t L i a b i l i t y for a sum t o be awarded t o a payment

a d d i t i o n a l	to	t h e	sum	ac tua l ly	awarded .	There	a r e no	such
c l e a r words.

It i s m y v i e w t h e r e f o r e t h a t the a p p e a l i n Vo.

ACT G.62 of 1982 i n r e s p e c t o f a c t i o n NO. S.C. 750 of 1977

should be a l lowed, the judgment there in set a s i d e a n d i n l i e u

thereof judgment should be e n t e r e d for t h e a p p e l l a n t i n the

sum of $75,000.00 w i t h costs of a n d i n c i d e n t a l to t h e a p p e a l

and the p r o c e e d i n g s i n t h e Supreme Cour t . I n t e re s t shou ld no t

be ordered to be p a i d i n r e s p e c t of the sum of S75.000.00 i n

view of the c i r c u m s t a n c e t h a t d u r i n g the r e l e v a n t p e r i o d t h e

a p p e l l a n t w a s wi thhold ing the e q u i v a l e n t amount i n r e s p e c t of

t h e c a u s e of a c t i o n i n No. S.C.749 of 1979.

I n the appea l N o . ACT G.63 o € 19A2 i n r e s p e c t of

Action No. S.C.799 of 1979 I m u l d a l l o w t h e a p p e a l , set aside

the judgment i n f avour of the respondent and enter judgment

for t h e a p p e l l a n t b y d e c l a r i n g t h a t a s a t 5 October 1979 ( t h e

da t e on wh ich t he appe l l an t w i thhe ld paymen t o f S75.000.00)

. t h e a p p e l l a n t r e s p o n d e n t ' s w a s e n t i t l e d t o s e t o f f t h a t sum a q a i n s t t h e

e n t i t l e m e n t t o compensation i n r e s p e c t of t h e

l a n d c o n t a i n e d i n c e r t i f i c a t e s of t i t l e Vo1.72 Fo1.7163 and

t

13.

vo l . 90 Fo1.4 and order that the respondent pay to the

appella nt its cost proceedings in the Supreme S of and incidental to this appeal and the

Court.

t I

I N THE XDZR.4L COURT OF \USS"RALIA \

AUSTRALIAN CAPITAL TERRITORY

NO. ACT G G2 of 19R2

DISTRICT REGISTRY	No. ACT G 63 of 1992
GENERAL DIVISTON

ON APPEAL F90Y THE SUPREW COURT

OF THE AUSTPALIAh7 CAQ1TP.L TERRTTOQY

THE COYMOWIF4LTH OF AUSTRALIA Appe l l an t

and

HUGH JOHN McCORMACK Respondent

CORAM: Smithers, Woodward and Ga l lop JJ.

- DATE: 24 December 1982

WOODWARD J . REASONS FOR JUDGMENT

I h a v e h a d t h e a d v a n t a g s o f r e a d i n g i n d r a f t form

the reasons for judgment of G a l l o p J. I a d o p t h i s c a r e f u l

a n a l y s i s of t h e facts of t h e case and of the sequence of

e v e n t s b e f o r e and d u r i n g t h e t r i a l of t h e s e a c t i o n s . I a g r e e

with the conclusions which e an? Smi-thers J. have reached

and w i t h t h e orders proposed. I s h a l l therePOre c o n f i n e

myself to t h e central q u e s t i o n s of law.

- 2 -

T h i s i s i n my view a c l e a r c a s e of an ovcrpayl lcnt

b y m i s t a k e , e n t i t l i n q t h e p a y e r t o r e c o v e r t h e a m o u n t

overpa id . The mis take i n q u e s t i o n c o n s i s t e d i n i q n o r a n c e of

a n a d v a n c e p a y m e n t made i n p a r t s a t i s f a c t i o n of a n

u n d o u b t e d l y g r e a t e r l i a b i l i t y . O r , t o a d a p t terns used b.1

Baron Pa rke i n t he l ead ing ca se of Kelly v Sol-ri flQdll 9 !4

6i W 5 4 a t 59-9, t h o s e ac t ing f o r t h e Commonwealth, a t t h e

time t h e SZlS,OOO was paid, arranged payment of that amount

upon the suppos i t i on t . ha t n o advance payment ha? been mile,

and t h a t Mr. f u l l of the amount EkCormack was t h e r e f o r e e n t i t l e d t o payment i n

agreed. The s u p p o s i t i o n w a s i n f ac t

unt rue and the f u l l amount would not have been pa id i f those

r e s p o n s i b l e h a d known of the advance payment.

L ike the l e a r n e d t r i a l j u d g e , I have found most

h e l p f u l the e x p o s i t i o n of the r e l e v a n t law by Goff J. i n

Barc l ays Bank v W.J. S i m m s T.td (1qnOj 1 Q.B. 677 a t 686-6q6.

However I am unable t o agree w i t h h i s Honour t h e t r i a l judge

t h a t t h i s case " f a l l s p r e c i s e l y w i t h i n o n e of t h e e x c e p t i o n s

t o t h e p r i n c i p l e o f r e s t i t u t i o n of money pa id under a mis t ake

of fac t" recognized by Goff J.

Tha t excep t ion re la tes t o t h e c a s e where ' I . . . t h e

payment is made f o r good c o n s i d e r a t i o n , i n p a r t i c u l a r i f t h e

money i s pa id to d ischarge , and does d i s c h a r g e , a d e b t owed

t o the payee" (per Goff J. a t 6 C ) S ) .

- 3 -

T h e r e i s n o t h i n g i n G o f f J. 'S f o r m u l a t i o n o f

p r i n c i p l e , or i n t h e c a s e s h e ci tes, t o s u g q e s t h a t h i s

e x c e p t i o n e x t e n d s t o cover an overpayment of a debt. Tndeed

Goff J. refers t o a v e r y s i m i l a r c a s e as a u t h o r i t y f o r the

p r o p o s i t i o n t h a t ' * e v e n i f t he payee has qiven cons i f i e r a t ion

f o r t h e payment .... t h a t t r a n s a c t i o n may i t s e l f b e set aside

(and so prov ide n o d e f e n c e t o t h e c l a i m ) I € t h e p a y e r ' s

mistake was induced by the payee, or poss ib ly even where t h e

payee, being a w a r e o f t h e p a y e r ' s m i s t a k e , d i d n o t r e c e i v e

t h e money	i n good	fa i th :	cf	Ward-& CO v	W a l l i s	( 1 Q O O \	1 Q . R .
6 7 5 " .

I n t h a t c a s e the p l a i n t i f f s had sued the de fendan t

for work and lahour done and in do ing so had , by mis t ake ,

c r e d i t e d t h e d e f e n d a n t w i t h a payment which h e h a d n o t made.

The defendant realized t h e p l a i n t i f f s ' mistake, b u t p a i d o n l y

t h e amount claimed. When t h e y d i s c o v e r e d t h e i r error t h e

p l a i n t i f f s b r o u g h t a f r e s h a c t i o n t o r e c o v e r t h e amount

wrong ly c r ed i t ed , as money had and received. I t was h e l d

t h a t , i n s p i t e o f t h e g e n e r a l p r i n c i p l e t h a t a f t e r a

s e t t l e m e n t u n d e r t h e p re s su re o f p r o c e s s of l a w t h e

proceedings cannot he reopened , an except ion should be made

i n such a case. Kennedy J. s a i d ( a t 67q-9)

- 4 -

' I . . . lf the p e r s o n e n f o r c i n g a p a p e n t u n d e r

legal process h a s t h e r e i n t a k e n an u n f a i r

advantage or acted unconscient iously, knowing

t h a t h e hac1 n o r i g h t t o t h e money, t h e

p r i n c i p l e . . . . , may n o t p r e v e n t the de€endant

from recove r inq the money back. A similar

l i m i t a t i o n , a s it seems t o m e , ouqht t o apply

t o such a c o n v e r s e c a s e as t h i s , where the

p l a i n t i f f h a s o n the f a c e of t h s writ credi ted

t h c d s f e n d a n t w i t h t>e payinent of a SUT of

noney on account , which t h e defendant mus t

have known t o have been so credited by a

n l s t a k c o n t he p l a i n t i f f ' s p a r t " .

Kennedy J. went on t o d e a l v i t h the f ac t s , S a Y i W

of t h e d e f e n d a n t ,

" H e h a s n o t t h o u g h t fit to come here and deny

t h a t he knew it; a n d , i n my o p i n i o n , h e d i d

Rnow it, and he w a s a c t i n g u n c o n s c i e n t i o u s l y

i n t a k i n g t h e receipt from t h e p l a i n t i f f s i n

f u l l . I t h i n k , therefore, t h a t t h e s e t t l e m e n t

under l eqa l process was not bona f i d e on h i s \

p a r t , and t h a t t h e p l a i n t l f f s a r e e n t i t l e d to

reopen	i t . "
my	Tn	v iew the a u t h o r i t i e s I h a v e c i ted p o i n t

c lear ly t o the r e s u l t t ha t i n t h i s case the Commonwealth

s h o u l d	h e	a h l c	t o	r e c o v e r	t h e	amount	which	i t	o v e r p a i d	i n
error.

This c o n c l u s i o n is n o t a f f e c t e d hy the f a c t t h a t

the agreement of t h e p a r t i e s a s to the v a l u e of improvements

was i n c o r p o r a t e d i n t o . a c o n s e n t a rh i t r a to r ' s award, nor by

t h e	fact	t h a t	the	award.	hy	c o n s e n t , o r d e r e d	t h e	Commonwealth
t o

1 .

- 5 -

" p a y t h s s u m o f S21~,[email protected], b e l n q t h e

b a l a n c e of t h e v a l u e a t t h e d a t e of t h e

withdrawal of the sai.1 Land of ?l1 f i x t u r e s

and erections on, and of a l l improvements ....

to t h e abovena-nerl lessee w i t h i n f o u r t e e n d a y s

of t h e d a t e h e r e o f " .

I t is c l e a r t h a t t h e a w a r d , drawn up by t h e

Commonwealth's sol ic i tor , was a f f e c t e d b y t h e same c o n t i n u i n q

m i s t a k e o n t h e part of Commonwealth o f f i c e r s which had

under la in the negot ia t ions and agreement which preceded i t

and which ied f i n a l l y t o t h e makinq o f a payment of S7.15 ,OOO.

Hwdever I have no doubt that the award , p rope r ly

i n t e r p r e t e d , f i x e s an amount of S215.000 a s t h e t o t a l amount

to which Mr. ?4cCormack is e n t i t l e d . T h i s i s s a i d t o be " t h e

b a l a n c e of t h e v a i u e a t t h e date of the w i t h d r a w a l o f t h e

s a i d 1ar.d of a l l f i x t u r e s a n d e r e c t i o n s o n , a n d of a i l

improvements ..." ( u n d e r l i n i n g s u p p l i e d ) . T h i s was i n 1972.

I t is t h e r e f o r e c l e a r t h a t the award made n o

a l lowance for t h e f a c t t h a t S75,@00 h a d been pa id i n 1974 .

The re ference i n the award to " t h e b a l a n c e of t h e v a l u e . . . .

of a l l f i x t u r e s a n d erections on, and of a l l improvements

..." can only have been intended t o r e l a t e to an account inq

<

- G -

b a l a n c e of t5,e v a l u e of v a r i o u s items. I t d i d n o t r e l a t e to

a b a l a n c e of payments. If t h e Commonwealth had made a

payment of $140,009, the award would have been s a t i s f i ed .

The amount of S75.000 w a s o v e r p a i d b y m i s t a k e a n d i s

recove rab le .

I shou ld pe rhaps ad3 t ha t I a g r e e w i t h t h e l e a r n e d

t r i a l j u d g e by way of advance, t h a t t h e Commonwealth‘s 1974 payment of $75,000,

was not a p r o v i s i o n a l payment w i t h i n t h e

meaning given t o t h a t p h r a s e b y Dixon J. ( a s h e t h e n w a s ) i n

York A i r C o n d i t i o n j n q a n d R e f r i q e r a t i o n ( R / s i a j P t y L t d v - The

Connonwealth (1949) R 0 C.L.R. 11 a t 63-64.

..

IN THE FEDERAL COURT OF AUSTRALIA )

1

AUSTRAL1.W CAPITAL TERRITORY	?	No. ACT G 6 2 of 1982 No. ACT G 6 3 of 1982
DISTRICT REGISTRY	i
1

DIVISION GENERAL j

ON APPEAL FROM THE SUPREME COURT

0-F THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: THE CO&"4ONWEALTH OF AUSTRALIA

Appellant

AND : HUGH JOHN NcCORMACK

Respondent

CORAH: Smithers, Woodward and Gallop JJ.

DATE: 24 December 1982

REASONS FOR JUDGMENT

GALLOP J.

These are two appeals from the judgments of the

Supreme Court of the Australian Capital Territory in actions in

which the Commonwealth of Australia ("the Commonwealth") claimed

the sum o f $75,000 as money paid under a mistake of fact and in

which Hugh John McCormack ("I.icCormack") claimed the sum of

$75,000 plus interest from the Commonwealth.

In 1 9 5 7 McCormack leased land in the Australian Capital

Territory from the Commonwealth pursuant to the Leases Ordinance

1918. By clause 2(d) of the lease the Commonwealth covenanted

with McCormack that it might, by notice in writing, withdraw the

land from lease and that in such circumstances the Commonwealth

would pay to McCormack the value at the date of the withdrawal

of all fixtures, erections and improvements. The value thereof

was to be ascertained by agreement or, in default o f agreement, by

arbitration under the provisions of the law for the time being

in force in the Australian Capital Territory relating to arbitration.

The law in force at that time was the Arbitration Act	1902 of
New South Wales.

The Commonwealth duly gave notice of withdrawal of

the land and McCormack, by letter from his solicitors dated

22 May 1973, claimed $536,800 as the value of the improvements.

The Commonwealth did not agree with this value and on 18 January

1974 the parties, through their respective solicitors, submitted

the dispute to an arbitrator for determination. McCormack duly

submitted to the arbitrator his claim for $336,800 supported by

a valuation in writing, a copy	of which was delivered to the
Commonwealth.

On 25 June 1974 McCormack, through his solicitors,

requested the Commonwealth to advance a sum of $100,000 "in

respect of his leasehold claim". The Commonwealth agreed to

advance the sum of $75,000, which was acknowledged by McCormack's

solicitors by letter dated 17 July 1974. McCormack executed a

receipt for this sum in the following terms:

"I H U G H J O H N McCORMACK of TUGGERANONG in the

Australian Capital Territory hereby acknowledge receipt from the Commonwealth of Australia the sum of seventy five thousand dollars $75,000.00 being

payment of an advance against any sums due to or

found to be due to me arising out of arbitration

in respect of the wlthdrawal of land from the

Crown lease of Block 28 Lanyon currently the

subject of Arbitration proceedings before

Mr M. Wilcox.

S I G N E D . . .!'-?gb .G: .f!cC?K??ck.. . .

This 25th day of July 1974."

There does not appear to have been any further

progress towards settlement of McCormack's claim either by

agreement o r by negotiation until 1976. On 21 June 1976 there

was a meeting between officers of the Lands Branch of the

Department of the Capital Territory and PIcCormack and his valuer.

Agreement was reached that McCormack would accept an offer of

$215,000 in full settlement of his claim and the officers undertook

to recommend payment of that amount. No contract was formed at

that time as the officers of the Department had	no authority to
bind the Commonuealth.

Following the agreement referred to, McCormack's valuer, by letter dated 21 June 1976 confirmed that McCormack

"will accept the sum of $215,000 in full settlement of all claims

excluding plant and equipment, e.g. workshop, shearing shed, as

per our original agreement, made in respect of the abovementioned

lease". McCormack also signed a postscript to the letter in

the following terms:

"I hereby confirm that the terms and conditions as set

out herein are in accordance with the agreement made

this day."

By further letter dated 1 July 1976, McCorrnack's

valuer confirmed that McCormack would accept the sum of $215,000

in full settlement of all claims for all lessee-owned fixtures,

erections and improvements on the resumed land.

On the hearing of the actions the Commonwealth called as witnesses the officers who were present on behalf of the

Commonwealth during the oral negotiations between the parties on

21 Juze 1976 and sought to lead evidence from them of the

conversations that then took place. The evidence was objected

to by counsel f o r hlcCormack and was rejected as irrelevant to any

.

issues arising in the case. Nevertheless, the documentation

necessary to give effect to the agreement, namely, a submission

from the Assistant Secretary, Land Management, to the First

Assistant Secretary in the Department of the Capital Territory

and a minute to the Minister recommending payment of he sum of

$215;000,had been admitted into evidence and were not disputed.

Returning to the chronology, on 7 July 1976 the

Commonwealth raised within its	own administration the appropriate
action to effectuate a payment	of $215,000 to McCormack. As was

found by the trial Judge, the internal document was a requisition

for supplies signed by the Secretary o f the Department of the

Capital Territory on 7 July 1976. This was a Treasury form

requiring the provision of $215,000 "in full settlement of all

outstanding claims" under the relevant lease.

On 14 July 1976 the document called Claim for Payment (another Treasury document) was duly certified for the "purchase of improvements on resumed leases'' and particulars of the claim

were referred to as "28 Lanyon. Payment in full settlement of

all outstanding claims" under the relevant lease.

On 21 July 1976 the Commonwealth's solicitor wrote to

the Arbitrator, who had been appointed by letter of 18 January 1974,

informing him that agreement had been reached in relation to

McCormack's claim and other claims and requested him to sign a

consent award which had already been approved by McCormack's

solicitors and return it to the Commonwealth's solicitor. The was in the following terms, on 23 July 1976:

5.

"FINAL AWARD

BY CONSENT I ORDER, that the Commonwealth of Australia

pay to the abovenamed lessee of Block 28, District of

Lanyon in the Australian Capital Territory, the sum of

$215,000.00, being the balance of the value at the date

of the withdrawal of the said land of all fixtures and

erections on, and of all improvements on or effected

by the lessee or by a prior lessee under this lease

or under a prior lease of the land, such lease being

between the Commonwealth of Australia and the above-

named lessee. AND I FURTHER ORDER that the Commonwealth

pay the said sum to the abovenamed lessee within four-

teen days from the date hereof.

DATED this 23rd day of July 1976.

[Murray Wilcox]

........ ........ ....... Arbitrator"

On 2 August 1976 the dommonwealth paid the sum of

$215,000 by cheque to McCormack's solicitors and by mistake of

fact failed to take account of the advance of $75,000 already

paid in the same way on 17 July 1974. On 25 October 1976 the

Commonwealth's solicitor wrote a letter to McCormack's solicitors saying, inter alia:

"By mistake, the amount appearing in the order of

Mr Wilcox described as the balance of the value at the

date of withdrawal was shown as $215,000.00 instead of

$140,000.00. In furtherance of that mistake, an amount

of $215,000.00 was forwarded to and received by you.

As a result of this mistake, there has been payment to you of the amount of $75,000.00. a over-

I am

instructed to demand from you payment of the amount of

the overpayment within seven days of the date hereof;

failing which I am to institute legal proceedings

against you without further delay."

SlcCormack's solicitors replied by letter of 9 November

1976, inter alia, in the following terms:

W e are instructed that there was no mistake as to

the final settlement figure to be paid to our client.

The sum of $75,000 was paid to our client on 25 July,

1974 on account of the compensation to which he was

entitled. During the relevant discussions with

Officers of the Commonwealth including the meeting of

6 .

21 June, 1 9 7 6 there was no reference to the payment

of $75,000. The offer of $215,000 was made by the

officers of the Commonwealth without any suggestion

that it was to include the $75,000 previously paid.

Our client assumed that the sum of $215,000 was in

addition to the $75,000 already paid and this

assumption was made by him, not only during the meeting

of 2 1 June, 1976, but when the letters were written by

Mr O'Dea on 21 June and 1 July, 1976.

The final Award of the Arbitrator, prepared by you and approved by this firm, is quite clear in its

terms that the sum of $215,000 was the balance of

the value at the date of withdrawal of the land of

the relevant fixtures, erections and improvements.

Indeed, the Commonwealth pursuant to the Award, paid

our client the sum of $215,000.

Our client denies that there has been any overpayment."

This completes the chronology of events prior to the

institution of proceedings by the Commonwealth to recover from

McCormack the sum of $75,000 paid under a mistake of fact, being

action No. S.C. 7 5 0 of 1977 .

In action No. S.C. 799 of 1979 McCormack sued to

recover a sum of $75,000 with interest from the Commonwealth.

He was the owner in fee simple of lands in the Australian Capital

Territory which were acquired by the Commonwealth under the Lands

Acquisition Act 1955. On 23 March 1978 it was agreed between

McCormack and the Commonwealth that the compensation payable in

respect of such acquisition should be $500,000 together with

statutory interest and costs and that the Commonwealth should

purchase from McCormack other freehold land not in the Territory f o r

the sum of $40,000. The Commonwealth, relylng on a set-off of

the $75,000 which was in question in action No. S.C. 750 of 1977,

paid the whole amount due except the sum o f $75,000 and hlcCormack

instituted action No. 799 of 1979 for recovery of this amount

together with interest to the date o f judgment.

7 .

This action was heard contemporaneously with action

No. S.C. 750 of 1977 and for the reasons given in that action, the

learned trial Judge rejected the Commonwealth's defence and

adjourned the hearing of the action to enable McCormack to move

for judgment in appropriate terms.

The appeals to this Court are against both decisions

and it was common ground that the matter in dispute is common

to both actions and both appeals.

The Commonwealth's appeals to this Court are on the

following grounds set out in the amended Notice of Appeal:

1. His Honour erred in Law in finding that payment made

by the plaintiff of $75,000.00 on or about 25 July

1974 to the defendant was not made provisionally.

2 . made by the plaintiff of $215,000.00 on or about

His Honour erred in Law in finding that the payment consideration, namely, to discharge a debt owed to the defendant.

3 .	His Honour erred in Law in holding that payment of
$215,000.00 by the plaintiff to the defendant on o r
about 2 August 1976 was pursuant to a concluded
contract to pay it in discharge of the defendant's
claim under the lease of Block 2 8 , Lanyon in the

Australian Capital Territory.

4 .	H i s Honour erred in Law in failing to find that the
plaintiff had paid to the defendant $290,000.00 by mistake pursuant to a concluded contract between the plaintiff and the defendant whereby the plaintiff agreed to pay $215,000.00 to the defendant in full discharge of the defendant's claims under the lease of Block 18, Lanyon in the Australian Capital Territory.
S .	His Honour erred in Law i n refusing the plaintiff's
application for leave to amend the statement of claim

so.as to seek an order setting aside the consent award

on the ground of mistake.

I

8 .

6 . His Honour e r r e d i n Law i n f a i l i n g t o s e t a s l d e t h e

consent award on the grounds of mis take .

7. His Honour e r r e d i n Law i n h o l d i n g t h a t t h e payment of

$215 ,000 .00 b y t h e p l a i n t i f f t o t h e d e f e n d a n t was

pursuant t o a va l id award o f t h e a r b i t r a t o r .

8. His Honour e r r e d i n Law i n h o l d i n g t h a t the case was

one of a mistake made by one par ty o x l T i n e n t e r i n g

i n t o t h e c o n t r a c t .

9 . His Honour e r r e d i n Law i n h o l d i n g t h a t on i t s proper

c o n s t r u c t i o n t h e a h a r d r e q u i r e d t h e payment by t h e

p l a i n t i f f t o the defendant of $215,000.00 i n a d d i t i o n t o

the monies a l ready pa id by t h e p l a i n t i f f t o t h e

defendant namely $75 ,000 .00 .

10. His Honour e r r e d i n Law i n f a i l i n g t o f ind : - (a) t h a t

$75,000.00 was p a i d b y . t h e p l a i n t i f f t o the de fendan t

p u r s u a n t t o a mis t ake o f f ac t ; and (b ) t ha t such sum

was r e c o v e r a b l e b y t h e p l a i n t i f f f r o m t h e d e f e n d a n t a s

money had and received by the defendant t o t h e u s e of

t h e p l a i n t i f f .

11. His Honour e r r e d i n Law i n r e f u s i n g t o a l low evidence

t o b e a d d u c e d a s t o t h e c o n v e r s a t i o n s i n J u n e 1 9 7 6

be tween o f f i ce r s o f t he Commonwealth and the defendant

a n d t h e r e p r e s e n t a t i v e s o f t h e d e f e n d a n t .

I t i s necessary to examine the conduct of b o t h a c t i o n s

b e f o r e t h e l e a r n e d t r i a l J u d g e a n d t h e i s s u e s r a i s e d on t h e

p l e a d i n g s a s amended.

The Commonwealth's claim was f o r money payable by

McCormack t o t h e Commonwealth f o r money had and received by

hlcCormack f o r t h e use o f t h e Commonwealth and the Commonwealth

c la imed the f a c t u a l m a t t e r s l e a d i n g sum o f $75 ,000 . The Statement o f C la im r ec i t ed t he

up t o t h e A r b i t r a t o r ' s award made on

23 J u l y 1976 r e q u i r i n g t h e Commonwealth t o pay t o McCormack t h e

sum of $215 ,000 i n respect o f McCormack's c l a i m a r i s i n g from t h e

withdrawal of t h e s u b j e c t l a n d from l e a s e . I t i s unnecessary

9.

t o r ec i t e s u f f i c i e n t t hose pa rag raphs o f t he S t a t emen t o f C la im. I t i s

t o r e p e a t p a r a g r a p h s 9 , 1 0 , 11, 1 2 and 13 t he reo f

which were i n t h e f o l l o w i n g terms:

9. On o r about 2 3 J u l y 1976 t h e a r b i t r a t o r made an

a w a r d w h i c h r e q u i r e d t h e p l a i n t i f f t o p a y t h e

de fendan t t he sum of $215,000.00- in respec t of the

d e f e n d a n t ' s claim a r i s ing f rom the wi thd rawa l o f t he

sa id land f rom lease .

10. The p l a i n t i f f h a s n e v e r b e e n f o u n d l i a b l e o r agreed

to pay any sum o t h e r t h a n $ 2 1 5 , 0 0 0 . 0 0 t o t h e d e f e n d a n t

by r e a s o n o f a r b i t r a t i o n o r o the rwise unde r the

terms o f t h e s a i d l e a s e .

11. On or about 2 August 1976 t h e p l a i n t i f f p a i d t o t h e

de fendan t t he sum of $-215,000.00.

12. In p a y i n g t h e s a i d sum of $ Z l S , O O O . O O t h e p l a i n t i f f

by m i s t a k e o f f a c t f a i l e d t o t a k e a c c o u n t of t h e

advance of $75 ,000 .00 re fer red to	in paragraph	7
above.

13. Owing t o t h e s a i d m i s t a k e o f f a c t t h e p l a i n t i f f h a s

ove rpa id the de fendan t an amount of $75,000.00.

By h i s d e f e n c e , ElcCormack den ied the matters a l l e g e d

i n the above paragraphs except paragraph 11. When t h e a c t i o n s

came on f o r h e a r i n g McCormack th rough h i s Counse l admi t t ed the

mis t ake o f fac t p l e a d e d i n p a r a g r a p h 1 2 o f t he S ta t emen t o f Claim.

The Commonwealth a p p l i e d t o amend i t s s t a t e m e n t o f c l a i m so a s t o

seek an order t h a t , i n t h e e v e n t o f a c e r t a i n c o n s t r u c t i o n

be ing put upon t h e award , t he award be se t a s ide and r emi t t ed to

the Arbi t ra tor to f rame an award In accordance wi th the agreement

o f t h e r e f u s e d . p a r t i e s . T h i s a p p l i c a t i o n was opposed and u l t imate ly

hIcCormack a p p l i e d t o amend t h e defence . The a p p l i c a t i o n

was n o t opposed and the amendment a l lowed , t he terms of which were

10.

t o d e l e t e h i s d e n i a l s o f t h e matters a l l e g e d i n p a r a g r a p h s 9 ,

1 0 , 1 2 and 13 of the S ta tement of Cla im and to subs t i tu te a p l e a

i n t h e f o l l o w i n g f o r m :

"3. In answer t o t h e matters a l l e g e d i n t h e s t a t e m e n t o f

claim	under the head ing "Pa r t i cu la r s " t he de fendan t s ays
(a)	The p l a i n t i f f a g r e e d t o pay and d id pay t o t he
de fendan t t he sum o f $ 7 5 , 0 0 0 . 0 0 r e f e r r e d t o i n
paragraph 7 of the Statement of Claim.
(b)	The p l a i n t i f f by the terms of t he s a id award ag reed
to pay and d id pay to the de fendan t t he fu r the r sum
of $215 ,000 r e f e r r e d t o i n p a r a g r a p h 1 2 o f t h e
S ta tement of Claim.

( c ) Sub jec t t o p roduc t ion of t h e s a i d award and r e l i a n c e

upon	t h e terms	the reo f	the de fendan t admi t s
-

paragraphs 1 - 9 and 1 0 and 12.

(d) The de fendan t den ie s pa rag raphs 1 0 and 13."

Thus i t was clear a t t h e commencement o f t h e t r ia l

t h a t IrlcCormack,having admi t t ed the mis t ake o f fact pleaded, proposed

t o r e l y upon the terms of the award a s ev idence o f an agreement

by the Commonwealth t o p a y a sum of $215,000 i n a d d i t i o n t o t h e

$75 ,000 a l r e a d y p a i d . I t was a l s o c l e a r t h a t t h e Commonwealth

wished t o r e c o v e r t h e $75,000 as a payment made under a mis take

of fact a r g u i n g a g a i n s t t h a t c o n s t r u c t i o n of the award ; bu t , i n

c a s e t h e terms of the award were t o be cons t rued by the Cour t a s

meaning t h a t t h e $ 2 1 5 , 0 0 0 was i n a d d i t i o n t o t h e $ 7 5 , 0 0 0 a l r e a d y

pa id a s con tended f o r by McCormack, t h e Commonwealth wished t o

have the award se t a s ide .

In h i s r easons fo r j udgmen t the l ea rned t r i a l Judge

f o u n d t h a t t h e r e was a conc luded con t r ac t be tween the pa r t i e s

made o r a l l y a t t h e m e e t i n g o n 2 1 June 1976 and repea ted in wr i t ing

b y t h e v a l u e r ' s l e t t e r of t h e same date , which was coun te r s igned

b y McCormack, a n d a g a i n b y t h e v a l u e r ' s l e t t e r o f 1 J u l y 1 9 7 6 ,

11.

namely, that McCormack would accept $215,000 in full settlement

o f all claims and that the offer must have been accepted by the

delivery of the unsigned award by the Commonwealth's solicitor

to McCormack's solicitors for approval.

His Honour went on to say that the payment of $215,000

by the Commonwealth was either in pursuance of a concluded

contract to pay it in discharge of NcCormack's claim under the

lease or it was in pursuance of the award of the Arbitrator.

He said that, regarded as a case of contract, it was one of

mistake made by one party only in entering into the contract.

He rejected the Commonwealth's case that the payment of $75,000

was a provisional payment (in the 'sense given to that phrase by

Dixon J. as he then was, in York Air Conditioning and Refrigeration

(A-Asia) Pty Limited v. The Commonwealth (1949) 80 C.L.R. 11)

and also rejected the Commonwealth's construction of the award to

the effect that the $215,000 was the total amount for which

McCormack was entitled to receive compensation.

The learned trial Judge relied upon the dicta of

Goff J. i n Barclay's Bank v. W.J. Simms (1980) 1 Q.B. 677 at 695

and found that the case fell precisely within one of the exceptions

to the principle of restitution of money paid under a mistake

of fact, namely that the payment was made to discharge, and did

discharge, a debt owed t o the payee.

It was submitted on behalf of the Commonwealth on the

hearing of the appeals that the only proper conclusions	to be
deduced from the evidence are:

- that the Commonwealth made a mistake in paying the

sum of $290,000 instead of $215,000, which mistake

was admitted on the pleadings;

12.

- that McCormack had not been prejudiced or

disadvantaged and had not otherwise changed his

position by reason of the mistake; and

-	that the $75,000 was recoverable as money paid
under a mistake of fact.
Where money is paid voluntarily under a mistake on the

payer's part 3 s to a material fact, as a general rule, It may

. I

be recovered in an action for money had and received to the

plaintiff's use. Money paid voluntarily with full knowledge of

the facts and without bad faith cannot be recovered. The mistake

may consist in the payer never having k own the real facts or

in his forgetfulness of facts of bhich he once had full knowledge

(Halsbury, 4th ed., Vo1.32, para.63-64).

With regard to the learned trial Judge's conclusion

that there was a concluded contract between the parties, the parties to pay $215,000 in addition to the $75,000 already paid

and that the only contract was to pay a total sum of $215,000.

Grounds 2, 3 and 4 of the amended Notice of Appeal relate to this submission.

At the trial the Commonwealth called as witnesses the

Departmental officers who were present on the occasion of the oral

negotiations with McCormack and his valuer on 21 June 1976.

Those negotiations resulted in McCormack reducing his claim by

offering to accept a sum o f $215,000 in full settlement and an

undertaking by the Departmental officers to seek approval for

the payment of that sum in full settlement.

13.

Evidence of what took place during those negotiations

was objected to by counsel for McCormack and was rejected on the

ground of irrelevance. Nevertheless, there was some evidence of

what took place during the negotiations in the documentation

prepared by the Departmental officers immediately after the

negotiations and agreement as above.

The undisputed evidence was that when I\IcCormack came

to the meeting he was still pressing the claim as lodged,

namely, for $336,800. The Commonwealth's valuation had been

assessed on 30 September 1972 at $104,384. A second valuation

had been made on behalf of the Commonwealth on 24 March 1976

and the revised valuation was fo; an amount of $150,816.

Following receipt of that revised figure the Commonwealth had

made an offer of $130,000 and that offer had been rejected at a

meeting between McCormack and the Minister for the Capital

Territory on 3 June 1976.

At the meeting on 21 June 1976 the Departmental

officers made an offer of $183,000 in full settlement of all claims.

McCormack rejected this offer and pressed his claim at a figure

of $280,000. Following further discussions and in an endeavour

to reach settlement the Departmental officers undertook to

recommend $190,000 "without prejudice to the valuation", apparently

meaning that if the matter had to be litigated, the Commonwealth

would be entitled to rely upon its revised valuation of $150,846.

McCormack responded by reducing his claim to $255,000,

without prejudice to his own claim of $280,000. Further

negotiations of a protracted nature took place and the Departmental

officers then undertook to recommend payment of an amount of

$212,500, being midway between the previous offer of $190,000 and

14.

the counter-offer by McCormack of $235,000. There were other

matters discussed such as interest and charges for occupancy

after withdrawal of the lease. Finally, the Departmental

officers undertook to recommend payment of an amount of

$215,000 and McCormack agreed to accept that amount.

The evidence of what took place during the negotiations

and the resolved position of the parties at the end of the

negotiations as disclosed by the Departmental documents in

evidence were not disputed. In his reasons for judgment the

trial Judge did not deal with this evidence. He referred to the

terms of the letter from NcCormack's solicitors in response to

a letter of demand for the sum o f $75,000 paid under amistake of

fact in which the solicitors said that McCormack assumed during

the discussions on 21 June 1976 that the sum of $215,000 was in

addition to the $75,000 already paid. His Honour said that there

was no evidence suggesting that the defendant did not so assume.

This finding was disputed on the hearing of the appeals.

It is true that there was no evidence that the sum of

$75,000 was mentioned during the negotiations 21 June 1976.

His Honour went on to say that the evidence did not clearly show

that the officers assumed the contrary, namely, that the $215,000

was to include $75,000 so that only $140,000 was stlll to be paid.

In my view the only proper inference from the

undisputed evidence of what took place in the negotiations 1

that all parties attended the conference in order to try to

reach agreement about the total sum payable by way of compensation

for the value, at the date of withdrawal of the lease, of all

fixtures, erections and improvements on the property. The parties

had only 2 alternatives under clause 2(d) of the lease i.e. to

reach agreement or, in default of agreement, to submit the

matter to arbitration. The whole purpose of the meeting on

21 June 1976 must have been to try to reach agreement. That

agreement was reached.

Furthermore, McCormack's total claim dating from 22 May 1973 when it was first lodged by letter from his solicitors,

never exceeded $336,800 and this was his opening figure at the negotiations. If he assumed during those negotiations that the

sum of $75,000 already paid was to be in addition to any sum

agreed upon at the conference, he would not have commenced

negotiations at his original figure claimed in 1973 and again in

1974. Nor would he negotiations of $280,000 because such have made a cbunter-offer during the

a claim, additional to the

$75,000 already paid, would have exceeded his total claim as originally lodged. Likewise, the Departmental officers could not have had in mind that the.figure they were endeavouring to

negotiate was to be in addition to the $75,000.

The opening offer of $183,000 was based upon a

revised valuation and the increased offers could only have been

made in an endeavour to reach agreement rather than refer the

whole matter to arbitration.

Although these facts and inferences were established in the documentation prepared by the Departmental officers

immediately after the negotiations on 21 June 1976, it was

submitted on behalf of McCormack on the hearing of the appeals

that in so far as the documents contain accounts of the conversations

alleged to have taken place, the); do not have the status o f

uncontradicted evidence because direct evidence of the conversations

16.

had been rejected by the trial Judge. I do not accept	this
submission.

In my view the evidence was relevant to the concluded

contract between the parties made orally on 21 June 1976 and

repeated in writing by the valuer's letter of the same date and

again by another letter on 1 June 1976, which concluded contract

was found by the trial Judge. It was also relevant as part of the

surrounding circumstances to prove that the words of the award

which were susceptible of more than one meaning were applicable to

one only of those meanings - that is, that the sum of $215,000

was agreed as the value of the improvements. It is legitimate to

adduce extrinsic evidence of the surrounding circumstances, not for

the purpose of adding a term to the written agreement o r of

altering its ordinary legal construction, but to identify its

subject. For the purpose of identifying the subject of the

contract prior negotiations are available as evidence (Bacchus

Marsh Concentrated Milk Co. Ltd. (In Liquidation) v. Joseph Nathan

& CO Ltd. (1919) 26 C.L.R. 410 per Isaacs J. at 427). All facts

are admissible which tend to show the sense words bear with

reference to the surrounding circumstances of and concerning which

the words were used (Grant v. Grant (1870) L.R. 5 C.P. 727 at 728

cited by Nilliams J. in White v. Australian and New Zealand

Theatres Ltd. (1943) 67 C.L.R. 266 at 281). The evidence also

served to negate the assumption on the part of McCormack set out

in his so11citors' letter of 9 November 1976 that the sum of

$215,000 agreed upon at the meeting was in addition to the

$75,000 already paid.

17.

I t f o l l o w s t h a t on the ev ldence before h im, I am of

t h e view t h a t t h e t r i a l J u d g e s h o u l d h a v e e n t e r t a i n e d no doubt

t h a t NcCormack a n d t h e D e p a r t m e n t a l o f f i c e r s a l l a s s u m e d t h a t

t hey were t r y i n g t o reach a f i n a l f i g u r e f o r s e t t l e m e n t o f

McCormack's claim, a n d t h a t t h e sum of $75 ,000 a l ready pa id , i f

i t was a v e r t e d t o a t a l l , was r e l e v a n t t o t h e i r n e g o t i a t i o n s

o n l y i n so f a r as i t would have t o b e b r o u g h t i n t o a c c o u n t when

the agreement was p u t i n t o e f f e c t by payment by t h e Commonwealth

t o McCormack o f t h e n e g o t i a t e d f i g u r e .

McCormack c a l l e d no ev idence and d id not g ive ev idence

h i m s e l f t h o u g h p r e s e n t t h r o u g h o u t t h e t r i a l .

If i t were necessa ry I would f i n d some s u p p o r t , o r

b e r e i n f o r c e d i n t h e c o n c l u s i o n I have reached by t h e d e c i s i o n

of Jones v. Dunkel from Wigmore (1959) 101 C.L.R. 298 and the fo l lowing passage

on Evidence, 3rd ed. , Vo1.2, s.285, p.162:

"The fa i lure t o b r i n g b e f o r e t h e t r i b u n a l some

circumstance, document, o r witness, when e i t h e r

t h e p a r t y h i m s e l f or h is opponent claims t h a t t h e

facts w o u l d t h e r e b y b e e l u c i d a t e d , s e r v e s t o i n d i c a t e ,

as t h e most n a t u r a l i n f e r e n c e , t h a t t h e p a r t y fears t o

do so, and t h i s fear i s some e v i d e n c e t h a t t h e

c i r cums tance o r document o r witness, i f brought, would

have exposed fac ts unfavourable to the par ty . These

i n f e r e n c e s , t o b e sure, c a n n o t f a i r l y b e made excep t

upon ce r t a in cond i t ions ; and they a re a l so open a lways

t o e x p l a n a t i o n by circumstances which made some o t h e r

hypo thes i s a more n a t u r a l o n e t h a n t h e p a r t y ' s f e a r o f

exposure. But t h e p r o p r i e t y o f s u c h a n i n f e r e n c e i n

g e n e r a l i s not doubted."

As IVindeyer J. went on t o s a y ( a t p . 3 2 1 ) , t h i s i s p l a i n

commonsense, and , quot ing from Wigmore, e x a c t l y t h e same p r i n c i p l e s

apply when a p a r t y who i s c a p a b l e o f t e s t i f y i n g f a i l s t o g i v e

evidence. Unless a p a r t y ' s f a i l u r e t o g i v e e v i d e n c e b e e x p l a i n e d ,

it may n o t h e l p h i s c a s e . l e a d r a t i o n a l l y to a n i n f e r e n c e t h a t h i s e v i d e n c e would

18.

It follows that, in my view, the trial Judge was wrong

in finding on the undisputed evidence that, regarded as a case

of contract, it was one of mistake made by one party only in

entering into the contract. Such a finding was against the

evidence and the weight of evidence. The only rational conclusion -

available on the evidence is that the payment of $215,000 in so

far as it was based upon contract, was a payment in pursuance

of a concluded contract	to pay a total sum of $215,000 and not
$290,000.

Furthermore, His Honour seems to have found that the mistake of fact relied upon by the Commonwealth as the basis of

its action for money had and received, was that at the time of

the negotiations on 21 June 1976, or at the time when the consent

award was submitted to the Arbitrator, the Commonwealth had

forgotten the earlier payment. That was not the mistake of

fact pleaded in paragraph 12 of the Statement of Claim and

particularised in response to a request for further and better

particulars in the course of the litigation. The mistake of

fact was particularised in the following terms:

"The fact in relation to which the mistake is alleged

to have occurred is the fact of the existence of the

$75,000.00 advance the details of which are stated in

paragraph 7 of the particulars contained in the

statement of claim.

The mistake of fact referred to in paragraph l2 of

these particulars consisted in the failure of the

plaintiff to take account of the fact referred to in

paragraph 7 at the time when the subsequent payment

to the defendant of $215,000.00 was made."

It is clear that in the litigation the mistake by

the Commonwealth was alleged to have occurred at the time of the

payment of $215,000 and not earlier.

19.

It was submitted on behalf of McCormack that the mistake

of fact relied upon by the Commonwealth was set out in the

letter of demand from the Commonwealth's solicitor to McCormack

dated 2 5 October 1976.	The relevant part of that letter read	s
follows:

"By mistake, the amount appearing in the order of

bfr lVilcox described as the balance of the value at the date of withdrawal was shown as $ZlS,OOO.OO instead of

$140,000.00.	In furtherance of that mistake, an amount
o f $215,000.00	was forwarded to and received by you."

It was submitted on behalf of PlcCormack that, by his

solicitors' letter in reply dated 9 November 1976, issue had been

joined on whether such a mistake had occurred in the drafting of

the award. This submission is without substance. The fact that a different mistake of fact was set out in he letter of demand

to that relied upon when proceedings were instituted is of no

importance. The mistake pleaded was admitted.

I turn to the construction of the award. There are

only two possible constructions; i.e. that it was to provide for a total payment of $215,000 (which is the construction contended

for by the Commonwealth), or that it was to provide for the payment

of $215,000 in addition to moneys already paid. That they were the

only two constructions available was common ground on the hearing

of the action.

In order to determine which is the correct construction

of the award it is convenient to commence with the letter signed

by the solicitors for the parties referring the matter to the

Arbitrator pursuant to clause 2(d) of the lease. The letter

requested the Arbitrator formally to act as such pursuant to clause 2(d) of the lease and stated the mutual agreement of the parties that:

2 0 .

"1. You a s A r b i t r a t o r may, a t t h e r e q u e s t o f t h e p a r t i e s

by consen t , make an in t e r im award o r i n t e r im awards

r e s p e c t i n g a p o r t i o n o r p o r t i o n s o n l y o f t h e m a t t e r s

r e f e r r e d a n d t h e making of such inter im award o r

a w a r d s s h a l l n o t a f f e c t t h e s u b m i s s i o n o f t h e o t h e r

matters r e f e r r e d .

2. The submiss ion sha l l no t be r evoked o r a f f e c t e d by t h e

d e a t h of t he C la iman t be fo re the making of an award

which may b e d e l i v e r e d t o t h e p e r s o n a l r e p r e s e n - t a t i v e

of the Cla imant i f h e d i e s b e f o r e t h e making of an

awa r d ,

3 . You as A r b i t r a t o r s h a l l b e a t l i b e r t y t o d i r e c t p o i n t s

o f c amendments l t ime upon such t e rms a s a im and de fence to be de l ive red and to a l low such

i n t h e p o i n t s o f claim o r d e f e n c e a t a n y

to cos t s as you may t h i n k

proper ."

F o l l o w i n g t h e r e f e r e n c e t o t h e A r b i t r a t o r , McCormack

s u b m i t t e d h i s claim, q u a n t i f i e d p u t a t $336,800 and supported

by a conference on v a l u a t i o n . After t h e c o n c l u d e d n e g o t i a t i o n s a t t h e

2 1 June 1976 t h e Commonwealth's s o l i c i t o r w r o t e t o

t h e A r b i t r a t o r a d v i s i n g him that agreement had been reached

"as to the va lue of improvements and payment to be made" t o

McCormack a n d o t h e r l e s s e e s o n t h e w i t h d r a w a l o f t h e i r leases.

The A r b i t r a t o r was r e q u e s t e d t o s i g n t h e f i n a l a w a r d i n t h e case

of McCormack's claim, which he did on 2 3 J u l y 1976.

It seems t o me t h a t , i n s o fa r a s t h e a w a r d p u r p o r t s

t o o r d e r t h e Commonwealth t o pay the sum of $215,000 to McCormack,

it exceeds the Arb i t r a to r ' s func t ion , wh ich was t o d e t e r m i n e

the va lue o f t he improvemen t s pu r suan t t o c l ause 2 (d ) o f t he

l e a s e . The te rms of the award however were acceptab le to the

p a r t i e s a n d s h o u l d b e r e g a r d e d o n l y a s a fo rma l de t e rmina t ion

of the value of the improvements . The o r d e r f o r payment i n t h e

award d o e s n o t a d d t o i t s f o r c e o r e f f i c a c y as a n award.

The main d i f f i c u l t y i n c o n s t r u c t i o n a r i s e s o u t o f t h e

words "the b 'alance of the value a t t h e d a t e o f t h e w i t h d r a w a l o f

_ .

i

2 1 .

the said land of all fixtures and erections on and or improvements

on or effected".

It was submitted on behalf of the Commonwealth that the

consent award was clearly intended to give effect to the prior

agreement between the parties that the Commonwealth would pay to

ElcCormack the sum of $215,000 in full settlement of his claim

for compensation which had been referred to arbitration. Although

the claim had been referred to the Arbitrator on 18 January 1974

and an advance payment made on 25 July 1974 the Arbitrator had

never been asked to make n interim award which would have been

his proper function. Furthermore, the terms of the receipt signed

by McCormack acknowledging receipt of the sum of $75,000 contained

no reference to the payment being for part value of the improvements.

It was submitted that the receipt is a clear

acknowledgement that the payment was by way of an advance against

any sums found due as a result of the arbitration and not for

part of the value of the improvements on the subject land.

It follows, so it was submitted, that by his consent

award the Arbitrator was determining the value of the improvements

and the purpose of the award was to give effect to the prior

agreement between the parties which was for $215,000 and not

$290,000. The alternative construction contradicts the fact that

agreement between the parties had been reached and is difficult

to reconcile with McCormack's admission	of the mistake of fact
pleaded.

The further submission was that, as the award

contradicts the agreement reached, it should be treated as a

nullity for present purposes because this Court has the means of knowledge of the underlying agreement to the consent award.

2 2 .

Counsel for the Commonwealth referred to the following passage in

the judgment of Lindley L.J. in Huddersfield Banking Coinpany

Limited v. Henry Lister 8 Son Limited (1895) 2 Ch. 273 at 280:

"A consent order, I agree, is an order; and so long as

it stands it must be treated as such, and so long as

it stands I think it is as good an estoppel as any other

order. I have not the slightest doubt on that; nor have

I the slightest doubt that a consent order can be

impeached, not only on the ground of fraud, but upon

any grounds which invalidate the agreement it expresses

in a more formal way than usual."

His Lordship went on to say:

"To my mind, the only question is whether the agreement

upon which the consent order was based can be invalidated

o r not. Of course, if that agreement cannot be invalidated

the consent order is good.	If it can be, the consent
order is bad."

He went on to say that in such circumstances the

agreement can be set aside, formally if necessary, or treated as

set aside and invalid without any process o r proceedings to do so.

Counsel also referred to Harvey v. Phillips (1956)

95 C.L.R. 245 , which was a case in which the High Court considered

the circumstances in which a consent order of a court will be

set aside. The court said at p.243:

"The question whether the compromise is to be set aside

depends upon the existence of a ground which would suffice

to render a simple contract void or voidable o r to entitle

the party to equitable relied against it, grounds for

example such as illegality, misrepresentation, non-disclosure

of a material fact where disclosure is required, duress,

mistake, undue influence, abuse of confidence o r the like."

The High Court referred to the above dicta of

Lindley L.J. in Huddersfield Banking Company Llmited	v. Henry
Lister & Son Limited.

Counsel for the Commonwealth submitted that on the

basis of the above authorities this Court ought to treat the

award as set-aside and enter judgment f o r the Commonwealth f o r

23.

the sum of $75,000. Alternatively, it should give leave to

the Commonwealth to amend its Statement o f Claim so as to seek

an order setting aside the award and remit the matter to the

Supreme Court	f o r new trial. Ground 9 in the amended Notice of
Appeal refers.

It was submitted on behalf of McCormack that the

words "balance of value" mean "in addition to any earlier value",

i.e., in addition to the earlier value of $75,000. It was submitted

that this meaning is consistent with the Commonwealth's

accounting documents which refer to the sum of $215,000 as "part

value". It was further submitted that as the award was a consent

award and courts are reluctant to' set aside awards of an

Arbitrator (Attorney-General for Manitoba v. Kelly (1922) I A.C. 268), this Court should not set aside the award or treat it as

set aside. Nor should this Court permit any amendment of the

Statement of Claim so as to allow the Commonwealth to seek an

order to set aside the award because there is a procedure

prescribed by section 13(2) of the Arbitration Act 1902 (N.S.W.).

Any such application in accordance with the procedure would not

be out o f time and although the Supreme Court has power to grant

an extension of time (Order 6 4 , rules 5 and lO), the Commonwealth

did not apply at the trial for an extension of time and did not

seek any adjournment so that it could collate material to support

such an application and still has not applied.

In my view the Commonwealth's construction of the

award should prevail, notwithstanding its inappropriate terminology.

The award should be regarded as a formal document to give effect

to the prior agreement between the parties that $215,000 be paid

by the Commonwealth in full settlement of the claim referred to

the Arbitrator. The award was unnecessary. Once the Minister

gave his approval and that approval was communicated to McCormack

the parties were ad idem. In so far as the award inappropriately

expressed the agreement of the parties, it should be ignored.

It follows that payment of the $215,000 was made under

the award but was made under the mistake of fact relied upon by

the Commonwealth, namely, the Commonwealth failed to take account

of the fact of the $75,000 advance when the payment of $215,000

was made. In the circumstances it is unnecessary to consider

whether the trial Judge should have granted leave to the Commonwealth

to amend the Statement of Claim so as to seek an order setting

aside the consent award (ground 5) .

At the trial counsel iontended as n alternative basis

of the Commonwealth's claim that the payment of $75,000 was a

provisional payment in the sense given to that phrase by Dixon J.

in York Air Conditioning and Refrigeration (A-Asia) Pty Limited v.

The Commonwealth (1949) 8 0 C.L.R. 11 - that is to say, a payment

which was not made once for all but subject to ascertainment of

the final liability. The trial Judge rejected that submission. He was satisfied on the evidence that at the time of the payment of the $75,000 there was no doubt that the Commonwealth's

liability to EfcCormack would eventually be found to be more than

$75,000 and that the $75,000 was an advance payment on account

of a larger sum. It was never contemplated by either party that

if the Commonwealth's liability should be determined to be less

McCormack would be liable to repay the excess.

In the circumstances he was not persuaded that the

-	York case had any application and was satisfied that the payment
was not made provisionally. Certainly the facts in the present
matters are different from the facts in the - York case, but it is

25.

still appropriate to identify the payment of $75,000 as a

provisional payment in the sense used by Dixon J. He said that

a payment made and received on account of a liability yet finally

to be ascertained is prima facie to	be considered provisional,
He went on to say:

"When the liability has been ascertained the residue of

the money lies in the payee's hands un-applied to the

purpose for which it was received, namely the discharge

of the ultimate debt. Once it is found to have been paid provisionally and not finally, all difficulty

disappears, in my opinion, and the balance can be

recovered in an action for money had and received."

In my view the trial Judge should have found that the

$75,000 was paid provisionally in-the sense used by Dixon J.,

namely on account of a liability yet finally to be ascertained.

I

I would uphold the Commonwealth's argument entitling it to the

sum of $75,000 as a provisional payment.

For these reasons I would allow the appeals and set

aside the judgments in favour of the respondent. It is necessary

to add some orders to dispose of both appeals. In the action by

the appellant against the respondent (NO. S.C. 750 of 1977),

which action was dismissed with costs, judgment was entered on

9 August 1982. In delivering his reasons for judgment in both

matters on that day the Chief Justice adjourned the action by

the respondent against the appellant for the sum of $75,000 plus

interest (No. S.C. 799 of 1979) for further hearing to enable

the successful respondent to move for judgment. On the resumed

hearing on 27 August 1982 the Chief Justice entered judgment in

that action for the sum of $75,000 plus interest at the rate of

5.75% per annum on that sum from 18 September 1978 (the date on

which final payment less the $75,000 was made) and costs. It was

agreed that 5.75% per annum was the appropriate statutory rate.

.

26.

By its Notice of Appeal in action No. S.C. 750 of 1977 the appellant seeks orders that there be judgment for the appellant

against the respondent in the sum of $75,000 plus interest at

the rate of 5.75% per annum on that sum from 18 September 1978

to 27 August 1982. In allowing the appeal in that action and

setting aside the judgment it is not appropriate to make the

order sought in respect of interest. During the relevant period

the appellant has been withholding the sum of $75,000 by way of

set-off. In action No. S.C. 7 5 0 of 1977 (Appeal No. A.C.T. G.62 of 1982) I would allow the appeal, set aside the judgment appealed

from and enter judgment for the appellant in the sum of $75,000

with costs of the trial and of the appeal. In action No. S.C. 799

of 1979 (Appeal No. A.C.T. G.63 of 1982) I would allow the appeal,

set aside the judgment appealed from and enter judgment for the

.

appellant by declaring that s at 5 October 1978 (the date on

which the appellant withheld payment of the sum of $75,000) the

appellant was entitled to set-off the sum of $75,000 against the

respondent's entitlement to compensation in respect of the land

contained in Certificates of Title, Volume 72, Folio 7163 and

Volume 90, Folio 4 . I would also order that the respondent pay

the appellant's costs of the trial in action	No. S.C. 799 of
1979. and of the appeal.