David Securities v CBA
David Securities Pty Ltd v Commonwealth Bank of Australia
(1992) 175 CLR 353
High Court of Australia
Case details
Court
High Court of Australia
Citations
(1992) 175 CLR 353
[1992] HCA 48
(1992) 66 ALJR 768
(1992) 109 ALR 57
Judges
Mason CJ
Brennan J
Deane J
Dawson J
Toohey J
Gaudron J
McHugh J
Appeal from
Full Court of the Federal Court
(1990) 93 ALR 271 ➤
Federal Court (trial)
Issues
Restitution
Unjust Enrichment
Money had and received (mistake)
Overview
Facts
David Securities borrowed money from the Commonwealth Bank of Australia (CBA) through CBA's Singapore branch (Swiss franc loan agreement). Tax legislation required withholding tax to be paid on interest payments to non-residents. To overcome this issue the Bank included a 'grossing-up' provision intended to ensure CBA received its full entitlement under the contract (clause 8(b)), which provided all interest payments shall be paid by the Borrower (David Securities) to the Bank without deducting tax and that the Borrower would pay additional tax sums as may be required.
As it transpired, the clause was rendered void by the tax legislation and David Securities claimed that the extra 'grossing-up' payments made by it to the CBA constituted 'money had and received' by the bank. They argued that they made the payment under the mistaken belief that CBA was legally entitled to demand the payment.
Outcome
Both mistakes of fact and of law can give rise to a claim for money had and received. The distinction between mistakes of fact and law could no longer be justified where unjust enrichment was the foundation of the restitutionary remedy.
Catchwords
Restitution—Income Tax (Cth)
Restitution—Money paid under mistake—Mistake of law—Right to recover—Unjust enrichment—Defences—Change of position. Income Tax (Cth)—Void covenant—Mortgage—Imposition on mortgagor of obligation to pay tax on interest—Collateral agreement—Income Tax Assessment Act 1936 (Cth), s. 261.
Key passages
Chief Justice Mason and Justices Deane, Toohey, Gaudron and McHugh
'... the rule precluding recovery of moneys paid under a mistake of law should be held not to form part of the law in Australia. In referring to moneys paid under a mistake of law' [para 40]
'Having rejected the so-called traditional rule denying recovery in cases of payments made under a mistake of law, it is necessary to consider what principle should be put in its place. It would be logical to treat mistakes of law in the same way as mistakes of fact ... so that there would be a prima facie entitlement to recover moneys paid when a mistake of law or fact has caused the payment. ...' [para 41]
'... There is ... no place for a further requirement that the causative mistake be fundamental; .... If a strict approach is taken towards the issue of mistake so that a plaintiff bears the burden of establishing on the balance of probabilities that a causative mistake has been made, there would also be no need to appeal to the element of fundamentality as a limiting factor. So, 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.' [para 43]
'The respondent's submission that the appellants must independently prove "unjustness" over and above the mistake cannot ... be sustained. The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust .... There can be no restitution in such circumstances because the law will not provide for recovery except when the enrichment is unjust. It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust.' [para 47]
Commentary
Journal articles
Blogs
Elise Bant, ‘Change of Position in the High Court: Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd’ (High Court Blog, 9 May 2014)
Includes discussion of David Securities.