Recovering Money For Mistake Of Fact: Legal Principles And Case Analysis

Judicial Interpretation of Recovery of Money for Mistake of Fact

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Discuss about the Australia And New Zealand Banking Group Ltd. V. Westpac Banking Corporation .

The main issue of the case is to determine whether money can be recovered from a party in case of mistake of fact or not. In addition to this, it is to be determined that whether mistake of fact can be considered as fundamental mistake or not.

The present case is a historical case regarding the right of recovering the money for mistaken of fact. Certain important facts have been cropped up in this case and the court has able to interpret the case intellectually. The company that the plaintiff in those cases is not under the liability to pay a particular amount of money has held it. Further, the plaintiff will not have to take the plea that the payee should share the mistake in this case. in this case, the court has been observed that if any payment has been made under a fundamental mistake and a person has getting benefitted due to unjust enrichment, there is an obligation to make restitution of the money to the person who has sustained loss due to the mistake. It has been observed by the Court in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 that mistake of fact should not be held as fundamental mistake. It has further been observed by the court that if any mistakes have been done through this way, the victim could get back the payment.

The case of ANZ Banking Group Ltd v Westpac Banking Corporation defines the liabilities of the parties who are getting certain amount of money by mistake of fact. However, before this decision, it has been held that no payment should be made to the victim of the case who transfers large amount of money mistakenly. This principle was established in the case of Bilbie v Lumley (1802) 2 East 469 (102 ER 448). In this case, court has observed that recovery of money should not be made in case of any fund transfer by mistake because the party should have the knowledge to what extent his actions are excusable. Lord Ellenborough had observed the following in this case:

” the insured had withheld a material fact from the underwriter but this was later disclosed before a claim was made by the insured. This fact would have entitled the underwriter to rescind the insurance contract for non-disclosure of material facts at the time of contract. Not realizing the existence of this legal right, the underwriter settled an insurance claim with the insured and later brought an action of indebitatus assumpsit or being indebted at common law to recover the money paid pursuant to the settlement.” 

Liabilities of Parties for Mistake of Fact

In The Law of Restitution, Goff and Jones (1986) has observed that in case a payment has been made for mistake of , the amount will not be recoverable. However, according to them, in case the money has been paid by mistake of fact, the person who gets unjust enrichment should repay the money to the person who can sustain the detriment.

In the case of David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, it has been held by the court that if any provision of a bank contravenes the provision of law, the former will not be prevailed. In this case, it has been observed that the contracting provision of the bank and the company contravened section 261(1) of the Income Tax Assessment Act 1936 (Cth). It has further been observed in that case that money can be recovered if the same has been done by mistake of faith. CJ Mason opines, “The payer will be entitled prima facie to recover moneys paid under a mistake if it appears that the moneys were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the moneys or that the payee was legally entitled to payment of the moneys. Such a mistake would be causative of the payment.”

In the present case, certain principles about the mistaken payment have been discussed. further, the provision of restitution of money has been discussed. The term mistake by fact and mistake by  law has certain differences and the High Court of Australia has abolished the different facts of the same. However, there are certain minimum factors present. According to the Court of law, if a payment has been made voluntarily as against an honest claim and additional money has been paid under the mistake of law; the same amount could not be recovered. Goff and Jones claimed that  ”The essential difference between a restitutionary claim arising from a mistake of law rather than of fact is that the limiting principle, that benefits conferred in submission to an honest claim are irrevocable, assumes considerable importance if the payer's mistake is one of law. But it is in rare cases that a plaintiff’s claim is defeated because he has voluntarily assumed the risk of his own mistake of fact.”

Therefore, it has been observed that if the plaintiff has made the payment voluntarily, he could not claim for recovery of the money from the defendant on the basis that Law does not permit the amount. This principle has been established in the case of South Australian Cold Stores Ltd v Electricity Trust of South Australia (1957) 98 CLR 65. In this case, it has been held that voluntary payment could not be recovered at any extent. Further, a distinction has been made in the case of Woolwich Equitable Building Society v Commissioners of Inland Revenue [1993] AC 70. According to this case, all the public authorities are under an obligation to repay the money if the same has been made in good faith.

Difference between Mistake of Fact and Mistake of Law

In the present case, it has been observed that an employee of the Westpac Bank has given extra money to one of their customer and the rate of the amount was $100,000. The alleged employee who made the mistake informed about the same to the managing director of the company. Certain terms have been used in this case. An overall study of the case revealed that sufficient mistaken clause for the payment has been mentioned in this case. The main point in this case is to determine that whether the mistaken payment can be recovered. It has been held in Hydro Electric Commission of Nepean v Ontario Hydro (1982) 132 DLR (3d) 193 at 209 that if the doctrine of unjust enrichment has been established in a case, the party should have to make repayment of the money. The term unjust enrichment denotes a situation where a person has been benefitted unfairly (Barefoot and Livingston 2017). Further, with the judgment made in David Securities Pty Ltd, it can be said that in case the payment has been made in good faith and there is no voluntary payment made to this effect, the person to whom such payment has been made should repay back the amount. In the case of Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, it has been held by the court that the term unjust enrichment is not a legal term, rather it denotes certain framework of traditional legal rules. According to the general principle of law, when a mistaken payment has been made in good faith, the amount should be restored to the person by whom such mistakes have been done. However, in the case of Bilbie v Lumley, it has been held by Justice Dawson that “a person seeking restitution for money paid under a mistake of law is not attempting to avoid the law but to avail him or her of the law”.  

Certain principle of Tort Act is also laid down in this case. it has been observed that in case the person who is making the payment has known or has assumed that risks can be generated by this payment, he could not make any claim for restoration of the said amount. Therefore, it can be stated that the provision of assumption of risk and negligence are included in this case. in the case of Cam Sons Pty Ltd v Ramsay (1960) 104 CLR 247, it has been observed by the court that the payer should have to check whether the person to whom the large amount has been paid has the capacity to repay the money or not. Further, it is required that the legal capacity of the person should also be taken into consideration. In the absence of this, it will be precluded under the shadow of assumption of risk and the payer could not make any claim for recover of the money (Levy, Golden and Sacks 2016). However, in this case, it has been observed that the money has been paid mistakenly and in good faith.

Conclusion:

To conclude, it is to be stated that the alleged sum of money can be recovered from the party.

References:

ANZ Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 

Barefoot, L.A. and Livingston, M.J., 2017. Unjust Enrichment or Fraudulent Transfer? Try Both. American Bankruptcy Institute Journal, 36(9), p.26.

Bilbie v Lumley (1802) 2 East 469 (102 ER 448)

Cam Sons Pty Ltd v Ramsay (1960) 104 CLR 247

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353

Edelman, J. and Bant, E., 2016. Unjust enrichment. Bloomsbury Publishing.

Hydro Electric Commission of Nepean v Ontario Hydro (1982) 132 DLR (3d) 193 at 209

Levy, N.M., Golden, M.M. and Sacks, L., 2016. Comparative Negligence, Assumption of the Risk, and Related Defenses(Vol. 1). California Torts.

Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221

South Australian Cold Stores Ltd v Electricity Trust of South Australia (1957) 98 CLR 65

Woolwich Equitable Building Society v Commissioners of Inland Revenue [1993] AC 70