INSOLVENCY Alert: Payments made by mistake and the defence of Change of Position

19 May 2014

Publications

The High Court has confirmed that where it is claimed that a payment was made by mistake the defence of change of position will still apply where it would be inequitable to order the return of the payment because of a change in circumstances of the payee.

On 7 May 2014 the High Court handed down its decision in Australian Financial Services and Leasing Pty Limited v Hills Industries Limited & Anor [2014] HCA 14. In this case the Court was asked to consider the defence of change of position to a claim in restitution based upon a claim of mistake of payment.

In ultimately finding that the appeal be dismissed, the High Court emphasised that where restitutionary relief is sought by a party on the basis of money mistakenly paid, the outcome should be  guided by the equitable notions of unconscionability and an assessment of who should bear the loss and why. The joint reasons further state that so long as the detriment to be suffered is substantial, a recipient need not show a ‘quantifiable financial detriment.’ In addition, the Court acknowledged that forbearance would be relevant to the question of detriment.

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