High Court of Australia Mason C.J. Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 ORDER Appeal allowed with costs. Set aside the order of the Full Court of the Federal Court in so far as it relates to the appellants' appeal on the cross-claim and in lieu thereof order that: (i) the appeal to the Full Court on the cross-claim be allowed; and (ii) the order of the trial judge made 14 June 1989 be set aside. Remit the matter to the trial judge for determination, in accordance with the judgment of this Court, of the following issues: (i) whether the appellants should be permitted to call evidence on the issue of mistake; (ii) whether the appellants paid the additional amounts because of their mistaken belief that their contractual arrangements with the respondent required the payments; (iii) whether the respondent changed its position on the faith of receipt of the payments by the appellants. Cur. adv vult. The following written judgments were delivered:— 1992, Oct. 7 Mason C.J., Deane, Toohey, Gaudron and McHugh JJ. This appeal is brought by the appellants against a unanimous judgment of the Full Court of the Federal Court of Australia [1] . That judgment, in part, dismissed the appeal of the appellants against an order by the trial judge in favour of the respondent, the Commonwealth Bank of Australia ("the Bank"), on its original cross-claim. To understand fully the context in which that cross-claim arose and the basis of the appellants' case in this Court, it is necessary to examine in some detail not only the financial transactions between the appellants and the Bank, but also the history of the litigation. 1. (1990) 23 F.C.R. 1. The facts and the proceedings David Securities Pty Ltd ("David Securities") and A. T. Rahme Sons Pty Ltd ("A. T. Rahme") were family companies controlled at all material times by Antoine and Therese Rahme. The companies carried on business as builders and property developers. At various times, Mr. Rahme and the two companies had obtained finance from the Dee Why branch of the Bank, of which they had been customers for some years. In late July 1984, Mr. Rahme and his son, David, commenced discussions with Mr. Craig, the manager of the Dee Why branch, with a view to obtaining finance for a property development. The course of negotiations between the parties as to the precise form of the borrowing arrangements is not directly relevant to this appeal; suffice to say that a foreign currency loan at a rate of interest lower than domestic rates was recommended and that Mr. Craig also recommended that the Rahmes consult an accountant well versed in foreign loan transactions. As it turned out, Mr. Craig referred Mr. Rahme to Mr. Morgan, a member of a firm of accountants, who thereafter advised the Rahmes during the course of negotiations with the Bank. On or about 17 December 1984, two documents were executed by the parties: a loan agreement between David Securities and the Bank, pursuant to which David Securities exercised an option, recited in the agreement, of utilizing a revolving floating rate multi-currency facility; and an application by David Securities to the Bank for a revolving bills facility with foreign currency option. A drawdown notice for the full amount of the foreign currency loan — the Swiss franc equivalent of $A850,000 — was immediately given and approved. In March 1985, the Bank agreed to a request that A. T. Rahme be permitted to draw down the full amount of the bills discount facility — the Swiss franc equivalent of $A800,000 — and, for this purpose, a loan agreement was executed by A. T. Rahme and the Bank containing terms substantially similar to those in the earlier loan agreement with David Securities. A third, similar loan agreement was executed by A. T. Rahme and the Bank on or about 10 October 1985. The loans were secured by registered mortgages given by David Securities and A. T. Rahme, as well as unlimited personal guarantees from Mr. and Mrs. Rahme, which were further supported by registered mortgages of land under the Real Property Act 1900 NSW. Almost immediately, the adverse fluctuation in exchange rates between the Swiss and Australian currencies resulted in financial losses for the appellants. Throughout 1985, 1986 and 1987, as the exchange rates continued to fluctuate, the appellants and the Bank were in regular dialogue, discussing the possibility of switching currencies (which was done) or bringing the loans back onshore. During this period, the first and second loans were rolled over. Also during this period, in about April 1986, the retainer of Mr. Morgan's firm was terminated by the appellants. Eventually, in October 1987, the Bank wrote to the appellants, alleging default on the facilities and advising that no further switches in currency would be allowed. The appellants commenced proceedings in the Federal Court of Australia against the Bank and Mr. Craig and against Mr. Morgan and two colleagues in his accounting firm. The appellants claimed damages, alleging that they had suffered significant losses by reason of their entry into the foreign currency borrowing arrangements. Their case against the Bank relied upon alleged misleading conduct and representations by Mr. Craig and the Bank, contrary to ss. 52 and 53 of the Trade Practices Act 1974 Cth, and allegations that the Bank had breached either a contractual obligation or a common law duty to advise of the dangers inherent in foreign currency loans or of the ways and means of minimizing losses accruing through adverse exchange fluctuations. The Bank cross-claimed against the appellants for the recovery of moneys allegedly still due under the borrowing arrangements. The appellants' case against Mr. Morgan and his colleagues was framed in both contract and tort. The trial judge, Hill J., dismissed the appellants' claims against the Bank and Mr. Craig but, in a separate judgment, ordered that judgment on the cross-claim be entered for the Bank against David Securities in the sum of $US1,106,113.76, plus interest, and against A. T. Rahme in the sum of $US286,632.58, plus interest. The trial judge also dismissed the appellants' claims against Mr. Morgan and his colleagues on the ground that the breach of contract and the breach of tortious duty found against those respondents did not give rise to the loss suffered by the appellants. The appellants appealed against both judgments of the trial judge. The Full Court (Lockhart, Beaumont and Gummow JJ.) dismissed all grounds of the two appeals in a joint judgment. The appellants now appeal to this Court against that part of the Full Court's judgment dealing with the appellants' challenge to the Bank's success on its cross-claim. For its part, the Bank has filed a notice of contention. The issues in this Court On the appeal to the Full Court of the Federal Court in respect of the cross-claim, the appellants argued that they were liable to pay only some of the moneys claimed by the Bank. Only one of the two grounds relied upon before the Full Court is argued here, namely, that cl. 8(b) in the loan agreements between David Securities and the Bank and A. T. Rahme and the Bank was void by virtue of s. 261 of the Income Tax Assessment Act 1936 Cth ("the Act") with the consequence that David Securities and A. T. Rahme were entitled to a refund of certain moneys paid to the Bank by the companies pursuant to their supposed obligations under cl. 8(b). The appellants submitted that they were entitled to set off these liquidated amounts against the moneys claimed by the Bank because the amounts in question had been paid over under a mistake of law. The Full Court found that cl. 8(b) was rendered void by s. 261 of the Act and that the appellants had made a mistake of law or of mixed law and fact [2] . However, by applying earlier authorities according to their traditional interpretation, the Full Court concluded that the appellants were not entitled to a set-off for the reason that an action for money had and received did not lie in cases of payment under a mistake of law [3] . The Bank's notice of contention filed in this Court challenges the Full Court's findings as to both the applicability of s. 261 of the Act and the existence of a relevant mistake. 1. (1990) 23 F.C.R., at pp. 33-35. 2. ibid., at p. 35. Accordingly, there are three principal issues before this Court: (1) Does s. 261 of the Act operate to render void cl. 8(b) of the loan agreements? (2) Was there sufficient basis for the Full Court's finding of a mistake of law by the appellants? (3) Are the appellants entitled to restitution of moneys paid under a mistake of law? First issue: the applicability of s. 261 The party with which David Securities and A. T. Rahme contracted in the loan agreements was expressed to be the " Commonwealth Bank of Australia of Suite 2204, 50 Raffles Place, Singapore". As the loan moneys were provided by a branch of the Bank which carried on business in Singapore, it was assumed by the parties that the withholding tax provisions of the Act [4] were applicable to the income derived by the Bank as interest under the loan agreements. For their part, the appellants appear simply to have accepted what the respondent told them. By virtue of s. 128B(5) of the Act, liability to pay withholding tax, fixed by legislation at a rate of 10 per cent [5] , is imposed upon the person who derives the income — in this instance, the Bank. However, Pt VI, Div 4 of the Act provides a mechanism for collection of the tax whereby the Australian resident making the interest payments (i.e., David Securities and A. T. Rahme) must deduct the amount of the tax and pay it to the Commissioner [6] . 1. Pt III, Div 11a. 2. Income Tax (Dividends and Interest Withholding Tax) Act 1974 Cth, s. 7(b). 3. ss. 221YL and 221YN of the Act. The operation of the withholding tax provisions necessarily means that a non-resident lender receives less than the full amount of interest provided for in a loan agreement. Being aware of this problem and intent upon remedying it, the Bank included in its standard form foreign currency loan agreement a grossing-up provision which was intended to ensure that the Bank received its full contractual entitlement. Clause 8(b) of the loan agreements in this case provided: All interest payments hereunder shall be paid by the Borrower to the Bank without deduction of any tax or duty or other imposts of any kind whatsoever. Should the Borrower at any time be compelled by law to deduct any such taxes, duties or imposts from any payment to be made by the Borrower the Borrower will pay such additional amounts as may be necessary in order that the net amount received shall equal the full amount the Bank would have received had a deduction not been made or had payment not been made subject to such tax duty or imposts together with an aggregate sum equal to any additional taxes payable by the Bank in respect of any additional amounts (including amounts equal to such taxes) under this clause (including this obligation). As a consequence of the operation of this clause, the appellants paid out the amount of contractual interest (10 per cent of which was paid to the Commissioner) plus an additional amount under cl. 8(b) representing a further 11.1 per cent of what the Singapore branch of the Bank was due to receive after the Commissioner's share had been deducted. According to the evidence, the payments were made by the appellants first drawing a cheque payable to the Bank for the total amount of interest and tax; this cheque was deposited at the Dee Why branch. As the agent of the appellants, the Dee Why branch debited the appellants' account with the amount of the cheque, paid to the Commissioner the 10 per cent withholding tax and remitted the balance, representing the full amount of the contractual interest, to the Singapore branch. In this way, both the Commissioner and the Bank were satisfied. It is these additional amounts which the appellants submit were had and received by the Bank to their use. This submission was made on the basis that s. 261 of the Act rendered cl. 8(b) void. As both the trial judge and the Full Court recognized, s. 261 is designed to protect mortgagors. It relevantly provides: (1) A covenant or stipulation in a mortgage, which has or purports to have the purpose or effect of imposing on the mortgagor the obligation of paying income tax on the interest to be paid under the mortgage shall be absolutely void. (5) For the purposes of this section, "mortgage" includes any charge, lien or encumbrance to secure the repayment of money, and any collateral or supplementary agreement, whether in writing or otherwise, and whether or not it be one whereby the terms of any mortgage are varied or supplemented, or the due date for the payment of money secured by mortgage is altered, or an extension of time for payment is granted. The term "income tax" in sub-s. (1) includes withholding tax payable under Pt III, Div 11A of the Act (s. 128A(4)). Therefore, if the other elements governing the applicability of s. 261 are fulfilled, cl. 8(b) would be void. The submissions of the Bank in support of its notice of contention raise three arguments against the application of s. 261: first, that each loan agreement was not a "mortgage" within the terms of s. 261(5); secondly, that cl. 8(b) is not a "covenant or stipulation in a mortgage" within the meaning of s. 261(1); and, thirdly, if cl. 8(b) is a covenant or stipulation in a mortgage, that it does not purport to have "the purpose or effect of imposing on the mortgagor the obligation of paying income tax on the interest to be paid under the mortgage". In reaching its conclusion that the loan agreements were collateral to the securities taken by the Bank and thus fell within the definition of "mortgage", the Full Court relied upon the definition of "collateral" given in Stardawn Investments Pty Ltd v Comptroller of Stamps (Vict.) [7] . In that case, in the context of the Stamps Act 1958 Vic, Tadgell J. decided that one thing is collateral to another if it exists side by side with the other. In so doing, he rejected the submission of counsel that the word "collateral" necessarily involves the notion of the primacy of one thing over another. 1. (1983) 15 A.T.R. 180, at p. 183; 84 A.T.C. 4097, at p. 4100. In this case, however, the Bank argues that the notion of primacy is essential and that the mortgages given by the appellants as security for the loan were collateral to the loan rather than the other way around. But the prefix "co-" imports a sense of "with" or "in addition to", without any necessary concept of primacy or subordination. The Shorter Oxford English Dictionary definition, "[s]ituated or running side by side, parallel", which was quoted with disapproval by counsel for the Bank in this Court, may well be inapplicable to contractual agreements when interpreted in a spatial sense, but is quite apposite if construed as meaning "related to" or "contributory". In the case In re Athill, Athill v Athill , which concerned the relation between different securities, Sir George Jessel M.R. stated [8] : Then why should we attribute to this word "collateral", which does not by itself necessarily mean "secondary", that meaning, when it is not so expressed in the contract itself? Where the word, as is admitted by the counsel for the Appellants, is at all events susceptible of the strict meaning of "parallel" or "additional", why should it have one meaning rather than the other if the nature of the transaction does not require us to depart from its literal meaning? It appears to me there is nothing whatever in these securities to compel us to say that the word "collateral" means in this case "secondary". Collateral contracts are so called not because they are subordinate or of lesser importance (although they may well be, depending on the facts of the case), but because they impinge upon and are related to another contract. The primary/subordinate distinction is not supported by the case on which the Bank seeks to rely, Heilbut, Symons Co. v Buckleton [9] , in which Lord Moulton stated that collateral contracts have "an independent existence, and they do not differ in respect of their possessing to the full the character and status of a contract". Once the notion of primacy is jettisoned, "collateral" must be understood in the sense of "related to" or even "in addition to". So understood, the word covers the present case. 1. (1880) 16 Ch. D. 211, at pp. 222-223. 2. [1913] A.C. 30, at p. 47. The Bank next argues that, even if each loan agreement is a "mortgage", cl. 8(b) is not a "covenant or stipulation" within the meaning of s. 261(1). The Bank submits that cl. 8(b) creates no legal obligation because cl. 8(c) provides that a failure to pay the additional amounts pursuant to cl. 8(b) is not a breach of contract. The word "stipulation" had a technical meaning in Roman law and in the Admiralty Courts, but long ago assumed the more common meaning of anything which forms a material provision of an agreement [10] . In In re Jarvis and Burgess's Contract, Lowe J. used the word to refer generally to a promise [11] . The word "covenant", however, retains the strict legal meaning of a promise under seal, although in general legal parlance it is used to denote any promise, whether contained in a deed or not [12] . To this extent, the meanings of the two words in s. 261(1) overlap. It may well be true, as the Bank submits, that a promise or covenant to do something creates no obligation if a failure to abide by it gives the innocent party no redress. That question can be left open for it is not the same as the issue which faces the Court in this case. While failure to pay the additional amounts under cl. 8(b) would not have amounted to a breach of contract by the appellants, the combined operation of cl. 8(b) and (c) would relieve the Bank of its obligation under cl. 2(d) to renew any advance or to replace any maturing bills in the event of non-payment by the appellants. Clause 8(b) thus directs the appellants — and, in so doing, uses the word "obligation" — to do something which, if not done, would result in non-renewal of the loans. To suggest that the appellants' promise under cl. 8(b) is somehow formal only and imposes no obligation is therefore to take too technical and restrictive a view of the agreement. The ability to sue upon breach may generally be considered an element of a "covenant". However, the absence of that element in this case does not have the effect that the appellants assumed no obligation upon agreeing to the clause. The clause specifically imposes an obligation and this fundamental feature is not altered by the fact that separate provision is made in the loan agreement to the effect that limited consequences will flow from non-compliance with this obligation. 1. Bouvier's Law Dictionary (1866), vol. 2, p. 549. 2. [1932] vL.R. 1, at p. 3. 3. Hayne v Cummings (1864), 16 C.B. (N.S.) 421, at pp. 426-427 [143 E.R. 1191, at p. 1194]; see also Halsbury's Laws of England, 4th ed., vol. 12, par. 1539. The Bank raises another argument, that the covenant in cl. 8(b) nevertheless does not "have the purpose or effect of imposing on the mortgagor the obligation of paying income tax on the interest to be paid under the mortgage". Without cl. 8(b), the obligation to pay withholding tax rests on the Bank as a non-resident receiving income in the form of interest. Part VI, Div 4 of the Act provides a mechanism whereby the Australian resident making the interest payments is given responsibility for deducting and remitting to the Commissioner the amount of the tax; this does not have the effect of transferring the statutory liability for payment, which remains imposed on the non-resident. Without cl. 8(b), the appellants would pay an amount of money representing the contractual interest and the Bank would pay — albeit through the agency of the appellants, as the collection mechanism requires — an amount of money representing the 10 per cent withholding tax. By virtue of cl. 8(b), the Bank sought to ensure that payment of both amounts of money came from the coffers of the appellants. While the statutory obligation to pay the withholding tax still lay upon the Bank, cl. 8(b) had the effect of obliging the appellants to bear the financial burden represented by the withholding tax. In these circumstances, it seems entirely apposite to conclude that the clause had "the purpose or effect of imposing on the mortgagor the obligation of paying income tax". Nevertheless, the Bank argues that the appellants were not paying income tax, but only "additional amounts" as described by the clause. This argument relies upon the judgment of Isaacs J. in Brett v Barr Smith [13] where his Honour concluded that a covenant in a mortgage which allowed the mortgagors to pay interest at a reduced rate if they also paid an amount representing the mortgagee's income tax liability did not oblige the mortgagors to pay tax on interest at all, but merely to pay interest either at the express contractual rate or, upon certain conditions, at a reduced rate. Such a covenant, which would now be rendered void by s. 261(3) and (4), is quite different from the covenant in issue in this case. In cl. 8(b), the appellants were not presented with a choice but with a legal obligation to pay the additional amounts, nor were they given a discount for their pains as were the plaintiffs in Brett v Barr Smith . The Bank demanded and received its full income and ensured that the appellants met the Bank's own tax liability. The construction of s. 261 contended for by the Bank is unnecessarily restrictive and would fly in the face of the legislative intention to provide protection for mortgagors. This argument must therefore be rejected. 1. (1919) 26 C.L.R. 87, at p. 96. Second issue: the sufficiency of the finding that there was a mistake of law In its notice of contention, the Bank challenges the inference drawn by the Full Court of the Federal Court that the appellants paid the moneys sought to be reimbursed under a relevant mistake. The appellants did not plead that they paid the moneys away under a mistake. In par. 30a of their further amended statement of claim the appellants pleaded that, in purported reliance on the terms of cl. 8 of the loan agreements, the Bank required the appellants to reimburse the Bank for interest withholding tax deducted by the Bank from interest paid by it on moneys borrowed overseas. In par. 66, the appellants referred to the Bank's claim for reimbursement of interest withholding tax deducted from interest paid by the Bank on moneys borrowed overseas in contravention of s. 261. And, in par. 67, the appellants sought an "accounting for and a refund of all moneys claimed by and paid to the Bank in reimbursement of interest withholding tax". Unfortunately, the pleading fails to make clear the legal basis on which this claim is made. In its defence, the Bank denied the appellants' entitlement to relief. Notwithstanding that the pleadings did not throw up the specific issue whether the moneys in question were paid under a mistake, whether of fact or law, it is evident that the case was argued on that basis. Hill J. observed, with reference to the payments: These payments, if cl. 8(b) was, as [a] result of s. 261, void, were paid by the borrowers under a mistake of law, the mistake being that cl. 8(b) required the payment to be made. So far as appears the payments were not made under protest and indeed, it is highly doubtful whether the borrowers' case, as pleaded, claimed at all a recovery of amounts wrongfully paid under the clause. However I am content to assume that such a case was pleaded. His Honour went on to hold that money paid under a mistake of law was not recoverable. The appellants applied for leave to call evidence that the payments were made under a mistake. That application was evidently made during the course of addresses and was rejected, probably because his Honour was of the opinion that if the moneys were paid under a mistake, the mistake was one of law. The Full Court said [14] : Counsel for the Bank submitted that the appellants had offered no direct evidence to the effect that without the mistake being made on their part, by regarding cl. (8)(b) as valid rather than void, they would not have made payments pursuant to that subclause. However, in the circumstances of this case, there is sufficient evidence from which one can infer that the appellants would have made no payment but that which they regarded themselves as legally obliged to make pursuant to their contractual and security arrangements with the Bank. 1. (1990) 23 F.C.R., at p. 33. Having regard to the way in which the case was conducted at the trial, the issue whether payment was made under a mistake was litigated. Whether there was evidence to support the inference drawn by the Full Court and the finding that appears to have been made by the primary judge is not an easy question to determine. That is because neither the primary judge nor the Full Court has identified the evidence which sustains the finding or gives rise to the inference. In the circumstances, we are not satisfied the evidence warrants the drawing of such an inference. Certainly the fact that the Bank required the payments to be made does not of itself warrant the drawing of such an inference, the more so since it is arguable that the appellants may have wished to ensure that there was a roll-over, whatever their belief as to the existence of an obligation to do so. But this conclusion does not mean that the appeal should be dismissed. If the Court were to conclude that moneys paid under a mistake of law were recoverable, contrary to the views expressed by Hill J. and the Full Court of the Federal Court, the matter should be remitted to the primary judge to enable him to reconsider the appellants' application to call evidence on the issue of mistake. His Honour refused that application in a context where he considered that moneys paid under a mistake of law were not recoverable. If that view be mistaken, then the application should be considered afresh. Third issue: if the moneys were paid by the appellants under a mistake, are the appellants entitled to restitution? In considering this question, it is necessary to have regard to the nature of the mistake which, it is alleged, was made. In this respect the Full Court of the Federal Court stated [15] : In the present case, the mistake related to the subsistence of the liability itself, and [was] not made simply because of what was or was not stated in the loan agreement or because of the existence of some related circumstance, such as the date on which a payment fell due. The mistake was as to the existence of s. 261 and its operation to render void the purported contractual obligation in cl. 8(b). This was a mistake of law for the purposes of this particular field of discourse, or at least a mistake as to law mixed with fact. As Winfield makes clear, mistake not only signifies a positive belief in the existence of something which does not exist but also may include "sheer ignorance of something relevant to the transaction in hand" [16] . A mistake of this latter kind, and one similar to the mistake allegedly made in this case, was found in J. S. Holdings Pty Ltd v N.R.M.A. Insurance Ltd. [17] . In that case, the failure of a money lender to comply with an Australian Capital Territory ordinance regulating loan contracts meant that the loan contract was void in so far as it provided for payment of a rate of interest higher than 12 per cent. The borrower unsuccessfully sought repayment of the excess interest it had paid in compliance with the contractual provision for interest. The Full Court (Blackburn, Deane and Ellicott JJ.) concluded [18] that the borrower's mistake consisted of its "ignorance of or inadvertence to the existence or operation of the general statutory provisions contained in s. 12 of the Ordinance" and denied recovery to the appellants on the basis of the so-called traditional rule that restitution is not available in cases of a mistake of law. Their Honours referred to various authorities in other jurisdictions, as well as to textbooks, which reject the rule, but having noted [19] that "the distinction which has been drawn between mistake of fact and mistake of law has been subjected to much learned criticism and is often difficult to apply", observed that, at least as far as the Federal Court was concerned, the distinction was "firmly entrenched" [19] . Further, in that case, there was no insistence that the borrower show that it had protested before paying or that duress or involuntariness be proven in order for a finding of mistake to be made, though the Court referred to such matters in the context of when money paid under a mistake of law might be recoverable. Thus, in this case, the Bank's claim that the appellants paid the additional amounts without protest is of little consequence in itself. 1. (1990) 23 F.C.R., at p. 34. 2. "Mistake of Law", Law Quarterly Review, vol. 59 (1943) 327, at p. 327. 3. (1982) 61 F.L.R. 108; 41 A.L.R. 539; 6 A.C.L.R. 803. 4. ibid., at p. 118; p. 547; p. 810. 5. ibid., at p. 122; p. 550; p. 813. 6. ibid., at p. 122; p. 550; p. 813. The Full Court in the present case also applied what was seen as the traditional rule precluding recovery in a case of mistake of law, quoting the statement of Williams J. in York Air Conditioning Refrigeration (A/asia) Pty Ltd v The Commonwealth [20] : A mistake in the construction of a contract is a mistake of law and payments made under a mistake of law cannot be recovered in an action for money had and received. Like the Full Court in J. S. Holdings, their Honours noted the criticism which the rule has attracted but nonetheless felt constrained to apply it, observing that it is open only to the High Court to remove the distinction between mistakes of fact and mistakes of law [21] . 1. (1949) 80 C.L.R. 11, at p. 30. 2. (1990) 23 F.C.R., at p. 35. The traditional rule The Restatement of the Law of Restitution states [22] : Until the nineteenth century no distinction was made between mistake of fact and mistake of law and restitution was freely granted both in law and in equity to persons who had paid money to another because of a mistake of law. In Farmer v Arundel De Grey C.J. stated [23] : When money is paid by one man to another on a mistake either of fact or of law, or by deceit, this action [i.e. assumpsit] will certainly lie. 1. American Law Institute, (1937), p. 179. 2. (1772) 2 W. Bl. 824, at p. 825 [96 E.R. 485, at p. 486]. However, in Bilbie v Lumley [24] , Lord Ellenborough C.J. refused recovery of moneys paid under a mistake of law. An underwriter sought recovery of moneys from a successful insurance claimant whom he had paid, unaware that non-disclosure by the insured of essential facts at the time of entering the insurance contract relieved the insurer from liability. The underwriter was in possession of all the facts which would have allowed him to deny liability. After counsel was unable to name a case in which recovery had been allowed to a plaintiff who was aware of all relevant facts, Lord Ellenborough C.J. denied recovery on the basis of a maxim wholly inapplicable to the case, namely, ignorantia juris non excusat. This approach appears to have been based on an obiter dictum in the judgment of Buller J. in Lowry v Bourdieu [25] . On its facts, the decision in Bilbie v Lumley was probably correct because the payment appears to have been made voluntarily and not under any mistake at all. Only a few years before, in Cartwright v Rowley , Lord Kenyon C.J. had stated [26] : This action cannot be maintained, nor the money recovered back again by it: it has been paid by the plaintiff voluntarily; and where money has been so paid, it must be taken to be properly and legally paid; nor can money be recovered back again by this form of action, unless there are some circumstances to shew that the plaintiff paid it through mistake, or in consequence of coercion. This was not a case of mistake of law. The plaintiff had employed the defendant, an engine-maker, to make engines under the plaintiff's patent. While work was in progress, the plaintiff advanced money to the defendant, which he then sought to recover because the defendant had caused the plaintiff to miss a business opportunity by taking too long to complete the work. The plaintiff's payment was "voluntary" in the sense that he had known all the relevant circumstances and yet had chosen to pay the defendant rather than withhold payment or dismiss him. A similar concept of voluntariness was adopted by Chambre J., in dissent, in Brisbane v Dacres [27] , where he concluded that the plaintiff was entitled to recover money paid under a mistake of law because he could not be said to have waived inquiry and chosen to settle the claim. In the same case, Gibbs J. took a similar approach in principle, holding that, if a person paid money in response to a claim when fully aware of all the facts, he or she was deemed to have submitted to the demand [28] . 1. (1802) 2 East 469 [102 E.R. 448]. 2. (1780) 2 Doug. 468, at p. 471 [99 E.R. 299, at p. 300]; cf. the view Lord Ellenborough adopted in the later case, Perrott v Perrott (1811), 14 East 423, at p. 440 [104 E.R. 665, at p. 671]. 3. (1799) 2 Esp. 723, at p. 723 [170 E.R. 509, at p. 510]. 4. (1813) 5 Taunt. 143, at pp. 159-160 [128 E.R. 641, at pp. 647-648]. 5. ibid., at pp. 152-153 [p. 645]. It is on the basis of such opinions as this that it has been suggested that Bilbie v Lumley is authority for the limited proposition that payment made in settlement of an honest claim is irrecoverable [29] . However, rather than being confined to its facts, Bilbie v Lumley became recognized as authority for the broad proposition that recovery will not be ordered of moneys paid under a mistake of law. It was followed by the majority in Brisbane v Dacres where Gibbs J. said [30] : [W]here a man demands money of another as a matter of right, and that other, with a full knowledge of the facts upon which the demand is founded, has paid a sum, he never can recover back the sum he has so voluntarily paid. 1. Goff Jones, Law of Restitution, 3rd ed. (1986), pp. 118-119. 2. (1813) 5 Taunt., at p. 152 [128 E.R., at p. 645]. Bilbie v Lumley was distinguished in Kelly v Solari [31] , a case allowing recovery of moneys paid under a mistake of fact. It thereby became entrenched as a decision denying recovery because the mistake of the plaintiff was one of law. Despite its dubious foundation, the principle gained such acceptance that Croom-Johnson J. said of it that it was "beyond argument at this period in our legal history" [32] . 1. (1841) 9 M. W. 54 [152 E.R. 24]. 2. Sawyer Vincent v Window Brace Ltd. [1943] KB. 32, at p. 34. The respondent claims that the principle has also been accepted in this Court; however, an examination of the relevant cases, apart from the statement of Williams J. in York Air Conditioning [33] , suggests that they may also be reconciled with the narrower principle of voluntary submission. In Werrin v The Commonwealth , in which the plaintiff sought recovery of sales tax that he had paid upon secondhand goods sold by him, Latham C.J. stated [34] : The principle appears to me to be quite clear that if a person, instead of contesting a claim, elects to pay money in order to discharge it, he cannot thereafter, because he finds out that he might have successfully contested the claim, recover the money which he so paid merely on the ground that he made a mistake of law. 1. (1949) 80 C.L.R., at p. 30. 2. (1938) 59 C.L.R. 150, at p. 159. See also p. 168, per McTiernan J. In South Australian Cold Stores Ltd. v Electricity Trust of South Australia [35] , the plaintiff made monthly payments to the defendant of electricity charges assessed at an increased rate, then successfully challenged the validity of the Minister's order increasing the charges and sought recovery of the excessive charges paid over. Prior to making the monthly payments, the plaintiff had objected to the increased charge and had even declined to pay the extra amount pursuant to the first monthly account. In a unanimous judgment, the Court denied recovery. It stated [36] : In the present case the only reason why the higher rates were not chargeable was because the formal requirements of the law were not observed by a third party for expressing or giving effect to the decision at which he had actually arrived. Neither he nor the trust were aware of his failure lawfully to exercise his authority. They were unaware because they did not perceive what was required or the true effect of what the document contained. On the side of the company it was simply taken for granted that somehow or another the charges might be lawfully made. This seems to fall outside the reason of the rule under which an action of money had [and] received lies in cases of payment by mistake. Under that rule the action is available when the payee cannot justly retain the money paid to him because it would not have come to his hands if it had not been for a false supposition of fact on the part of the payer causing the latter to believe that he was compellable to make the payment or at all events that he ought to make it. It is to be noticed that Parke B. in Kelly v Solari defines the requisite mistake as "the supposition that a specific fact is true, which would entitle the other to the money, but which fact is untrue" [37] . According to the decision of Pilcher J. in Turvey v Dentons (1923) Ltd. [38] it is too restrictive to say that the fact would if true have entitled the payee to the money; and perhaps the word "specific" may also be too definite. But here there was nothing but an assumption that in some way or other the increased charge might lawfully be made and a readiness to comply with the payee's demand without more, a demand which but for formal defects in the authorisation would have been enforceable. 1. (1957) 98 C.L.R. 65. 2. ibid., at pp. 74-75. 3. (1841) 9 M. W., at p. 58 [152 E.R., at p. 26]. 4. [1953] 1 Q.B. 218. More recently, as has been mentioned, the Full Court of the Federal Court has applied the principle against recovery. In the case of J. S. Holdings, the Full Court quoted the above passage from South Australian Cold Stores and then stated [39] : The insufficiency of mistake of law as the foundation of an action for recovery of money paid is commonly stated as a general principle or rule of law precluding any right of action in a case where the payment was voluntary It is preferable to frame the general rule in terms of insufficiency rather than in terms of preclusion. So stated, the general rule is that a mistake of law does not, on its own, found an action for the recovery of money paid: see, generally, Kiriri Cotton Co. Ltd. v Dewani [40] . (Emphasis added.) 1. (1982) 61 F.L.R., at p. 123; 41 A.L.R., at p. 551; 6 A.C.L.R., at p. 814. 2. [1960] A.C. 192, at pp. 204-205. An important feature of the relevant judgments in these three cases is the emphasis placed on voluntariness or election by the plaintiff. The payment is voluntary or there is an election if the plaintiff chooses to make the payment even though he or she believes a particular law or contractual provision requiring the payment is, or may be, invalid, or is not concerned to query whether payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation, rather than contest the claim for payment. We use the term "voluntary" therefore to refer to a payment made in satisfaction of an honest claim, rather than a payment not made under any form of compulsion or undue influence. If such qualifying, factual circumstances are considered relevant, the sweeping principle that money paid under a mistake of law is irrecoverable or even the Federal Court's modification of that principle to the effect that mistake of law does not on its own found an action for the recovery of money paid is broader and more preclusive than is necessary. As the authorities cited earlier in explanation of the term "mistake of law" make clear, the concept includes cases of sheer ignorance as well as cases of positive but incorrect belief. To define "mistake" as the supposition that a specific fact is true, as Parke B. did in Kelly v Solari [41] , which was a mistake of fact case, leaves out of account many fact situations. A narrower principle, founded firmly on the policy that the law wishes to uphold bargains and enforce compromises freely entered into, would be more accurate and equitable. 1. (1841) 9 M. W., at p. 58 [152 E.R., at p. 26]. The identification and acceptance of such a narrow principle is strongly supported by the difficulty and illogicality of seeking to draw a rigid distinction between cases of mistake of law and mistake of fact. The artificiality of this distinction and the numerous exceptions to it [42] lie behind many of the calls for abolition of the traditional rule. Judge Learned Hand called it "that most unfortunate doctrine" [43] . The Supreme Court of Canada indicated its willingness to abolish the rule in its recent decision of Air Canada v British Columbia , following the "thorough, scholarly and damning analysis of the mistake of law doctrine" [44] by Dickson J. in his dissenting judgment in the earlier case of Hydro Electric Commission of Nepean v Ontario Hydro [45] . Western Australia and New Zealand have abolished the rule by legislation [46] . The Law Reform Committee of South Australia [47] and the Law Reform Commissions of New South Wales [48] and British Columbia [49] have recommended abolition of the rule, as has most recently the English Law Commission [50] . Also very recently, the House of Lords has had occasion to refer to the strong criticism to which the traditional rule has been subjected [51] . 1. Goff Jones, op. cit., pp. 124-125. 2. St. Paul Fire Marine Ins. Co. v Pure Oil Co. (1933), 63 F. (2d) 771, at p. 773. 3. [1989] 1 S.C.R., at p. 1199; (1989) 59 D.L.R. (4th) 161, at p. 191, per La Forest J. 4. [1982] S.C.R. 347, at pp. 357-370; (1982) 132 D.L.R. (3d) 193, at pp. 201-215. 5. Property Law Act 1969 WA, ss. 124 and 125 (s. 124 was applied in Inn Leisure v D. F. McCloy (1991) 28 FC.R. 151); Judicature Act 1908 NZ, ss. 94A and 94B. 6. Report Relating to the Irrecoverability of Benefits Obtained by Reason of Mistake of Law, Report 84, (1984). 7. Restitution of Benefits Conferred Under Mistake of Law, Report L.R.C. 53 (1987). 8. Report on Benefits Conferred Under a Mistake of Law, Report L.R.C. 51 (1981). 9. Restitution of Payments made Under a Mistake of Law, Consultation Paper No. 120 (1991). 10. Woolwich Building Society v Inland Revenue Commissioners [1993] AC. 142, at pp. 153-154, per Lord Keith of Kinkel; pp. 164-165, per Lord Goff of Chieveley; pp. 199-200, per Lord Slynn of Hadley. Commentators have been highly critical of both the fact versus law distinction and the traditional rule precluding recovery. Goff and Jones reject the rule and seek to reconcile the cases with a narrower principle [52] . Palmer is unable to find any reason to support treating restitution in cases of mistake of law any differently from cases of mistake of fact [53] . Birks considers that the old rule cannot be justified and that recovery should be permitted in certain cases where there is a mistake of law [54] . In Canada, the authors of a recent text on the law of restitution condemn the traditional rule and conclude that it is unnecessary to distinguish between mistakes of law and of fact in order to fulfil the policy in favour of the finality of dispute resolution [55] . As the same authors say, it "would be difficult to identify another private law doctrine which has been so universally condemned" [56] . 1. op. cit., p. 119. 2. Law of Restitution (1978), vol. 3, §14.27. 3. An Introduction to the Law of Restitution (1989), pp. 166-167. 4. Maddaugh and McCamus, The Law of Restitution (1990), p. 255. 5. ibid., p. 256. The criticism gains added impetus in Australia by virtue of the recognition by this Court in Pavey Matthews Pty Ltd v Paul of the "unifying legal concept" of unjust enrichment [57] . As Dickson J. stated in Ontario Hydro [58] : Once a doctrine of restitution or unjust enrichment is recognized, the distinction as to mistake of law and mistake of fact becomes simply meaningless. If the ground for ordering recovery is that the defendant has been unjustly enriched, there is no justification for drawing distinctions on the basis of how the enrichment was gained, except in so far as the manner of gaining the enrichment bears upon the justice of the case. 1. (1987) 162 C.L.R. 221, at pp. 256-257, per Deane J. (with whom Mason and Wilson JJ. agreed); see also Australia New Zealand Banking Group Ltd. v Westpac Banking Corporation (1988), 164 C.L.R. 662, at p. 673. 2. [1982] S.C.R., at p. 367; (1982) 132 D.L.R. (3d), at p. 209. In the light of our view that the decision in South Australian Cold Stores can in this Court be justified on a narrower basis and that the traditional rule was not necessary to the decision, there is no other decision of this Court which constrains us to adopt the traditional rule. For the reasons stated above, 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, we intend to refer to circumstances where the plaintiff pays moneys to a recipient who is not legally entitled to receive them. It would not, for example, extend to a case where the moneys were paid under a mistaken belief that they were legally due and owing under a particular clause of a particular contract when in fact they were legally due and owing to the recipient under another clause or contract [59] . 1. Barclays Bank Ltd. v W. J. Simms Son Cooke (Southern) Ltd. [1980] QB. 677, at p. 695, per Robert Goff J.: "Of course, if the money was due under a contract between the payer and the payee, there can be no recovery on this ground." 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 [60] , so that there would be a prima facie entitlement to recover moneys paid when a mistake of law or fact has caused the payment. Jurisdictions which have abolished the traditional rule by legislation have done so by stating that recovery should be allowed in cases of mistake of law in the same circumstances as it would be were the mistake one of fact (Western Australia and New Zealand). 1. See Barclays Bank v W. J. Simms Ltd. ; Australia New Zealand Banking Group Ltd. v Westpac Banking Corporation . The proposition that there should be a prima facie entitlement to recover moneys paid when a mistake of fact or law has caused the payment has not been universally accepted. Two alternative formulations of the basis of recovery have been proposed: first, that the person making the mistaken payment must have supposed that he or she was legally liable to make the payment; and, secondly, that the mistake of the person making the payment must have been a fundamental one [61] . The first of these formulations can be subjected to the same criticism levelled at the traditional rule denying recovery in cases of mistake of law, namely, that it is illogical to concentrate upon the type of mistake made when the crucial factor is that the recipient has been enriched. To overturn the traditional rule and then replace it with a proposition incorporating the classic formulations of the liability approach by Parke B. in Kelly v Solari [62] and Bramwell B. in Aiken v Short [63] would be counter-productive. In Barclays Bank v W. J. Simms Ltd. , Goff J. illustrated [64] how existing authority had moved beyond the narrow liability approach. In Australia New Zealand Banking Group Ltd. v Westpac Banking Corporation , this Court implicitly accepted that view [65] and we see no reason now to doubt that conclusion. 1. Beatson, The Use and Abuse of Unjust Enrichment (1991), p. 150. 2. (1841) 9 M. W., at p. 58 [152 E.R., at p. 26]. 3. (1856) 1 H. N. 210, at p. 215 [156 E.R. 1180, at p. 1182]. 4. [1980] Q.B., at pp. 690-695. 5. (1988) 164 C.L.R., at pp. 671-672. The second alternative formulation asserts that, in addition to being causative, the mistake must also be fundamental. This raises the question expressly left open in Westpac Banking Corporation. In that case, the Court stated [65] : [I]t is unnecessary, for the purposes of the present case, to investigate what constitutes a "fundamental mistake" for the purposes of the principle that money payable under a fundamental mistake of fact is prima facie recoverable by the payer: see, e.g., Porter v Latec Finance (Qld.) Pty Ltd [66] . It can, however, be said that we can see no reason to doubt the correctness of the view expressed or implicit in the judgments in the courts below to the effect that the notion of "fundamental mistake" does not require either that the payer's mistake be shared by the payee or that the mistake be as to the existence of a fact which, if it had existed, would have resulted in the payee being under a legal obligation to make the payment: see Commercial Bank of Australia Ltd. v Younis [67] ; Barclays Bank Ltd. v W. J. Simms Son & Cooke (Southern) Ltd. [68] ; Bank of New South Wales v Murphett [69] . That having been said, it is preferable to leave for another day consideration of the question whether the requirement that the mistake be fundamental involves any more than that it appears that, without the mistake on the part of the payer, the payment would not have been made: cf., e.g., Porter [70] and Barclays Bank Ltd. v W. J. Simms Son & Cooke (Southern) Ltd. [71] . The requirement that the mistake be fundamental as well as causative is not as restrictive as the liability approach considered above, but it has been suggested that the requirement is still a worthwhile precaution against a potential flood of claims and consequent insecurity of receipts [72] . The notion of fundamentality is, however, extremely vague and would seem to add little, if anything, to the requirement that the mistake cause the payment. If the payer has made the payment because of a mistake, his or her intention to transfer the money is vitiated and the recipient has been enriched. There is therefore no place for a further requirement that the causative mistake be fundamental; insistence upon that factor would only serve to focus attention in a non-specific way on the nature of the mistake, rather than the fact of enrichment. 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. 1. (1988) 164 C.L.R., at pp. 671-672. 2. (1964) 111 C.L.R. 177, at pp. 187, 190, 204. 3. [1979] 1 N.S.W.L.R. 444, at pp. 447-450. 4. [1980] Q.B., at pp. 686-694. 5. [1983] 1 vR. 489, at pp. 491-492, 494-495. 6. (1964) 111 C.L.R., at pp. 186-187, 204. 7. [1980] Q.B., at pp. 694-696. 8. Birks, op. cit., p. 159. However, the respondent argues that a plaintiff should be required to prove that retention of the moneys by the recipient would be unjust in all the circumstances before recovery should be granted; if the circumstances of the case showed that it would not be unjust for the recipient to retain the money, the fact that the plaintiff could point to a causative mistake, whether of fact or law, would not assist the plaintiff. According to the respondent's submissions, moneys paid under a mistake of law could only be recoverable in so far as the recipient has been unjustly enriched at the expense of the payer, such that it would be unconscionable for the recipient not to give restitution to the payer. In support of this approach, the respondent relies, inter alia, on the recent decisions of this Court in Westpac Banking Corporation and Pavey & Matthews. Although this alternative approach is not greatly different from that stated above, it does have important consequences in relation to the elements of the action which the plaintiff must plead and prove. It also appears to proceed from the view that in Australian law unjust enrichment is a definitive legal principle according to its own terms and not just a concept. The two decisions of this Court just mentioned reject that approach. In Pavey & Matthews, Deane J. stated [73] : To identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate That is not to deny the importance of the concept of unjust enrichment in the law of this country. It constitutes a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case. Accordingly, it is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality. As this Court stated in Westpac Banking Corporation [74] : In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment. As La Forest J. stated in Air Canada v British Columbia [75] , the two species of mistake (i.e., fact and law) should be "considered as factors which can make an enrichment at the plaintiff's expense "unjust" or "unjustified" ". 1. (1987) 162 C.L.R., at pp. 256-257. 2. (1988) 164 C.L.R., at p. 673. 3. [1989] 1 S.C.R., at p. 1201; (1989) 59 D.L.R. (4th), at p. 192. The respondent's submission that the appellants must independently prove "unjustness" over and above the mistake cannot therefore 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 [74] . 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. 1. (1988) 164 C.L.R., at p. 673. The two "defences" upon which the respondent relies in this Court are, first, that the payments by the appellants were made for good consideration and, secondly, that in reliance upon receipt of the payments the respondent, in good faith, changed its position to its detriment. In the context of a mistake case, these "defences" were included in the well known formulation of Goff J. in Barclays Bank. His Lordship stated [76] : (1) If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (2) His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or (b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt; or (c) the payee has changed his position in good faith, or is deemed in law to have done so. The respondent argues that this is a case where the appellants, having accepted the benefit of performance by the respondent, now seek to recover part of the consideration promised for that performance, namely, the payments made referable to withholding tax. This argument and the respondent's attempt to analyze the facts on the broader basis of unjust enrichment rather than mistake specifically, already discussed, echo the view expressed by some writers that "the true basal principle which enables recovery of money paid under a mistake, whether of fact or law, is "failure of consideration" " [1] . It is unnecessary in the present context to assess the merits of this argument because, as we have stated, the more traditional approach, exemplified by the judgment of Goff J. in Barclays Bank and the decision of this Court in Westpac Banking Corporation, specifically provides for the "defence" of valuable consideration. 1. [1980] Q.B., at p. 695. 2. Butler, Mistaken Payments, Change of Position and Restitution, in Finn (ed.), Essays on Restitution (1990), p. 88. See also Matthews, Money Paid Under Mistake of Fact, [1980] New Law Journal 587 ; National Mutual Life Association v Walsh (1987), 8 N.S.W.L.R. 585, at pp. 595-596. The respondent submits that it agreed to lend money to the appellants at the rate named in the loan agreements because of the appellants' agreement to pay the additional amounts pursuant to cl. 8(b). If it had known that these additional amounts were not payable, the respondent argues, it would have negotiated a different interest rate to ensure that its net return reached the required level. By not being charged this higher interest, the appellants have received consideration for the bargain. In the circumstances, they should not be allowed to take advantage of the chance to recover some of the money they had agreed to pay. The difficulty in evaluating this argument lies in the fact that it depends primarily upon an assessment of the intention and purpose of the appellants at the time of entering the loan agreements and paying the additional amounts pursuant to cl. 8(b). By stating that the appellants contracted to pay the additional amounts without adverting to the question of whether they could legally be forced to pay, the respondent effectively submits that the appellants voluntarily submitted to payment. This entails the conclusion that the appellants either cannot truly be said to have made a mistake, as they knew what they were agreeing to — a proposition discussed above — or waived inquiry into the issue and paid the additional amounts with the intention to effect an absolute transfer. It is necessary to examine closely the terms of the loan agreement and the course of events preceding its signing in order to discover what the payer gave and expected to receive by way of consideration. It is only by doing this that it can be ascertained whether the payment of the additional amounts was absolute or conditional. If the payment was conditional, it was subject to the original or continued existence of a particular subject matter, such as an existing or future indebtedness or other obligation owed to the payee [2] . In this case, the evidence suggests that the appellants agreed to pay and actually paid the amounts representing withholding tax because the respondent represented that the withholding tax on interest payments must be met by the appellants. Such representations may have caused the appellants to believe that cl. 8(b) took its form because of a general obligation on borrowers to pay the particular tax. When the matter is looked at in this light, it can be argued that the appellants agreed to pay the nominated interest rate as the price of the loan and further agreed to pay the additional amounts with which the Dee Why branch, as agent of the appellants, discharged what the appellants considered to be their own tax liability. However, the true situation was, of course, that the liability for payment of withholding tax fell upon the lender and that s. 261 avoided any attempt to pass this burden on to a borrower in circumstances such as the present. The appellants thus had no indebtedness in respect of withholding tax, the discharge of which could form consideration for the payments under cl. 8(b). Those payments were therefore not made for good consideration within the terms of the defence outlined in Barclays Bank and Westpac Banking Corporation. 1. Porter v Latec Finance (Qld.) Pty Ltd (1964), 111 C.L.R., at p. 205. The respondent, taking a different view of the contractual arrangements, asserts that all its pre-contractual statements concerning payment of withholding tax simply took the form of a contractual offer, which the appellants were at liberty to accept or to reject. Viewed from the angle of contract formation between equal and experienced parties, this is undoubtedly true. But we are not concerned in this case with what a hypothetical, experienced commercial person believed he or she was contracting for; in order to decide whether the appellants in this case have received consideration for payment of the additional moneys, we must ask what these particular appellants, in all the circumstances, thought they were receiving as consideration. In this context, consideration means the matter considered in forming the decision to do the act, "the state of affairs contemplated as the basis or reason for the payment" [3] . And, as we have stated, the "state of affairs" existing in the appellants' minds was that the withholding tax was their liability. 1. Birks, op. cit., p. 223. So, in the context of failure of consideration, the failure is judged from the perspective of the payer. In Rover International Ltd. v Cannon Film Ltd. [4] , Kerr L.J. stated: The question whether there has been a total failure of consideration is not answered by considering whether there was any consideration sufficient to support a contract or purported contract. The test is whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract or purported contract. On the other hand, there has been an insistence that the failure of consideration be total. The law has traditionally not allowed recovery of money if the person who made the payment has received any part of the "benefit" provided for in the contract [5] . However, as the passage already quoted from Rover International Ltd. demonstrates, the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact. Thus, in Rowland v Divall [6] , the plaintiff succeeded in an action for repayment of the purchase price of a car he had bought from the defendant, unaware that the car had been stolen before it came into the defendant's possession. The defendant resisted the claim with the argument that the plaintiff could not prove total failure of consideration because he had used the car for several months. The Court of Appeal, however, dismissed this argument on the ground that the plaintiff had not received "any part of that which he contracted to receive — namely, the property and right to possession" [7] . 1. [1989] 1 W.L.R. 912, at p. 923; [1989] 3 All E.R. 423, at p. 433; see also Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. [1943] AC. 32, at p. 48, per Viscount Simon L.C. 2. Hunt v Silk (1804), 5 East 449 [102 E.R. 1142]; Whincup v Hughes (1871), L.R. 6 C.P. 78. 3. [1923] 2 K.B. 500. 4. [1923] 2 K.B., at p. 507. Similarly, in Rover International Ltd. itself, the plaintiff succeeded in its claim for restitution of payments made to the defendant even though the defendant had performed some of its obligations under the contract. The plaintiff was to dub and distribute films provided to it by the defendant and receive a share of the box office receipts as its payment. The plaintiff was also required to make substantial payments to the defendant in advance of recovering its share of the receipts. The defendant supplied the films to the plaintiff and the plaintiff made the pre-payments before breaching the contract. The plaintiff was then able to recover the pre-payments on the basis that the delivery and possession of the films were not what the plaintiff had bargained for; the "relevant bargain" was the opportunity to earn a substantial share of the gross receipts. In cases where consideration can be apportioned or where counter-restitution is relatively simple, insistence on total failure of consideration can be misleading or confusing. In the present case, for instance, it is relatively simple to relate the additional amounts paid by the appellants to the supposed obligation under cl. 8(b) of the loan agreements. The appellants were told that they were required to pay withholding tax and the payments that they made were predicated on the fact that, by so doing, they were discharging their obligation. Such an approach is no different in effect from the cases under the old statutes of usury whereby a borrower could recover from the lender the excess interest which the lender was prohibited from stipulating or receiving [8] . 1. e.g., Bosanquett v Dashwood (1734), Cases T. Talbot 38 [25 E.R. 648]. In this case, the Bank must prove that the appellants are not entitled to restitution because they have received consideration for the payments which they seek to recover. It does not avail the Bank to argue that the appellants were provided with the loan moneys agreed. Indeed, the severability of the loan agreement into its relevant parts would seem to be accepted by the Bank for it submitted that the appellants' consideration for agreeing to pay the additional amounts under cl. 8(b) was the Bank's agreement not to charge a higher interest rate. In circumstances where both parties have impliedly acknowledged that the consideration can be "broken up" or apportioned in this way, any rationale for adhering to the traditional rule requiring total failure of consideration disappears. It might be said that to order restitution in the present case would, in the absence of any other defences, confer something in the nature of a windfall upon the appellants at the expense of the respondent. This possible result flows from the fact that, having proved mistake, the appellants are prima facie entitled to recovery and the respondent bears the onus of proving why an order for restitution would be unjust. Given the conclusion we have reached upon the issue of mistake and consideration, we need not examine the appellants' argument, based upon Lord Denning's judgment in Kiriri Cotton Co. Ltd. v Dewani [9] , that the Bank was primarily responsible for the mistaken payment or the argument that the payment should be recoverable because it was made pursuant to a contractual obligation rendered void by statute. However, factors of the kind outlined in Kiriri reinforce our conclusion as to the purposes of the parties when entering the loan agreement. The respondent knew of the existence of s. 261 and understood its potential reach even if it was not aware that it invalidated cl. 8(b). It acknowledged drafting cl. 8(b) with s. 261 in mind. In circumstances where the party in the best position to order its affairs in the light of specialist advice has deliberately chosen to charge a particular interest rate and seek additional amounts by virtue of separate provision in the loan agreement, there is no injustice to that party in ordering recovery. Otherwise the policy of s. 261 would be defeated. 1. [1960] A.C., at p. 204. The respondent next submits that an order for restitution would be unjust because it has changed its position. The defence of change of position has not been expressly accepted in this country. In Westpac Banking Corporation, the Court referred to the displacement of prima facie liability by "some adverse change of position by the recipient in good faith and in reliance on the payment" [10] . The issue did not, however, arise for decision in that case. In this country, conflicting views have been expressed. In Bank of N.S.W. v Murphett [11] , Crockett J. thought change of position was a defence. However, in National Mutual Life Association of Australasia Ltd. v Walsh [12] , Clarke J. concluded that the English Court of Appeal decision in Baylis v Bishop of London [13] ruled out the acceptance of such a defence in the case before him. In England, there is strong authority in favour of acceptance of the defence, viz. the judgment of Kerr L.J. in Rover International Ltd. [14] , Barclays Bank [15] and most importantly the recent decision of the House of Lords in Lipkin Gorman v Karpnale Ltd. [16] . In the last case, Lord Bridge of Harwich, Lord Ackner and Lord Goff of Chieveley held that English law should recognize the defence, although they declined to define its scope. Text writers [17] , such as Goff and Jones and Birks, also support the existence of the defence, particularly in view of the inflexibility of the related doctrine of estoppel, as evidenced by Avon C.C. v Howlett [18] where the Court of Appeal held that estoppel could not operate pro tanto. And, in Canada [19] and the United States [20] , the defence of change of position has been recognized. Section 125(1) of the Property Law Act 1969 WA and s. 94B of the Judicature Act 1908 NZ also provide for this defence. 1. (1988) 164 C.L.R., at p. 673. 2. [1983] 1 vR., at p. 496. 3. (1987) 8 N.S.W.L.R., at pp. 598-599. 4. [1913] 1 Ch. 127. 5. [1989] 1 W.L.R., at p. 925; [1989] 3 All E.R., at p. 434. 6. [1980] Q.B., at pp. 695-696. 7. [1991] 2 A.C. 548, at pp. 558, 568, 578-580. 8. Goff & Jones, op. cit., pp. 46-47; Birks, op. cit., pp. 414-415; Beatson, op. cit., pp. 155-160. 9. [1983] 1 W.L.R. 605; [1983] 1 All E.R. 1073. 10. Rural Municipality of Storthoaks v Mobil Oil Canada Ltd. (1975), 55 D.L.R. (3d) 1. 11. Restatement of the Law of Restitution, §69(1). If we accept the principle that payments made under a mistake of law should be prima facie recoverable, in the same way as payments made under a mistake of fact, a defence of change of position is necessary to ensure that enrichment of the recipient of the payment is prevented only in circumstances where it would be unjust. This does not mean that the concept of unjust enrichment needs to shift the primary focus of its attention from the moment of enrichment. From the point of view of the person making the payment, what happens after he or she has mistakenly paid over the money is irrelevant, for it is at that moment that the defendant is unjustly enriched. However, the defence of change of position is relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt [21] . In the jurisdictions in which it has been accepted (Canada and the United States), the defence operates in different ways but the common element in all cases is the requirement that the defendant point to expenditure or financial commitment which can be ascribed to the mistaken payment [22] . In Canada and in some United States decisions, the defendant has been required to point to specific expenditure being incurred because of the payment. Other cases in the United States [23] allow a wider scope to the defence, such that a defendant can rely upon it even though he or she cannot precisely identify the expenditure caused by the mistaken payments. In no jurisdiction, however, can a defendant resort to the defence of change of position where he or she has simply spent the money received on ordinary living expenses. 1. Birks, op. cit., p. 410. 2. Rural Municipality of Storthoaks v Mobil Oil Canada Ltd. (1975), 55 D.L.R. (3d), at p. 13; Grand Lodge, A.O.U.W. of Minnesota v Towne (1917), 161 N.W. 403, at p. 407. 3. e.g., Moritz v Horsman (1943), 9 N.W. 2d 868. The difficulty lying in the path of acceptance or detailed explication of the defence in this case is that the facts which might give rise to a plea of the defence and thus require a decision by this Court were not adduced in the courts below. As mistake of law was only briefly raised by the appellants in the Federal Court, the respondent addressed no argument in support of the defence of change of position. Only in this Court were submissions made by the parties on this issue. In its written outline of submissions, the respondent puts its case thus: In the present case, on the occasion of each rollover, the respondent changed its position by acceding to the appellants' request to "rollover" a rollover which it would not have been bound to do, by the operation of clause 8(c). The respondent, thereby incurred a liability for withholding tax which it otherwise would not have incurred. If the respondent is now obliged to repay amounts to the appellants, it will be out of pocket. Counsel for the respondent submits that an inference should be drawn that, having regard to the terms of the bargain, it would have exercised whatever contractual rights were open to it to ensure the performance of its bargain. The short answer to this submission is that there is simply an insufficient basis in the evidence for reaching this conclusion. The respondent should not be penalized for failing to provide evidence in support of the defence before the lower courts; it had no reason to fight the case on that basis. The case should be remitted to the trial judge for consideration of this issue. In the result we would allow the appeal, set aside the order of the Full Court of the Federal Court in so far as it relates to the appellants' appeal on the cross-claim and in lieu thereof allow that appeal to the Full Court and set aside the order of the trial judge made 14 June 1989. We would remit the case to the trial judge for determination, in accordance with the judgment of this Court, of the following issues: (a) whether the appellants should be permitted to call evidence on the issue of mistake; (b) whether the appellants paid the additional amounts because of their mistaken belief that their contractual arrangements with the Bank required the payments; (c) whether the Bank changed its position on the faith of receipt of the payments by the appellants. As the appellants were successful in this Court with their submissions as to the construction of the loan agreements, the interpretation of s. 261 of the Act and the issue of mistake of law, the Bank should pay the appellants' costs of this appeal. However, in view of the fact that the appellants' appeal to the Full Court of the Federal Court succeeded on only one of many issues, we would decline to make any order as to costs in respect of that appeal. Brennan J. Gratefully adopting the statement of facts and issues in the majority judgment, I respectfully agree with their Honours that: (1) Section 261 of the Income Tax Assessment Act 1936 Cth operates to render void cl. 8(b) of the loan agreements between the respective borrowers and the Bank. (2) This Court cannot be satisfied that the evidence in the case supports the "finding" by the Full Court of the Federal Court that the borrowers "would have made no payment but that which they regarded themselves as legally obliged to make pursuant to their contractual and security arrangements with the Bank". I also agree that the order to be made on the appeal depends on the resolution of the third issue, namely, if the moneys supposedly due under cl. 8(b) (which I shall call the "tax equivalent") were paid to the Bank by the respective borrowers under the mistake that cl. 8(b) legally obliged them to make the payment, are the respective borrowers entitled to restitution? In order to address this issue, I would add some observations to their Honours' reasons for holding that cl. 8(b) of the loan agreements contains an "obligation" and thus attracts the operation of s. 261 of the Income Tax Assessment Act. The loan agreements provided that, although the facility was to continue for the "availability period" (defined in cl. 1.), the Bank's obligation to renew the loan at the end of each "interest period" (also defined in cl. 1) falling within the availability period was contingent on the respective borrowers' payment of the tax equivalent under cl. 8(b): cl. 8(c)(ii). The sanction for non-payment of the tax equivalent was not liability in damages for breach of contract (cl. 8(c)(i)) but the loss of the contractual right to renew the advance for the ensuing interest period. The Bank was empowered to abbreviate the "availability period" but it did not do so. Perhaps the power to do so was not at large. At all events, cl. 2(d) continued to impose on the Bank an obligation to renew contingent on the respective borrowers' due payment of the tax equivalent. The sanction of the loss of the contractual right to renew is sufficient to stamp the character of an obligation on cl. 8(b). If that be accepted, however, two further questions arise: first, when s. 261 of the Income Tax Assessment Act avoids the obligation in cl. 8(b), what effect does the avoidance have on the Bank's obligation to renew that is contingent on the respective borrowers' performance of cl. 8(b); and, second, if the respective borrowers are now to have restitution of the tax equivalent, is the Bank entitled to counter-restitution? [1] 1. Birks, An Introduction to the Law of Restitution (1989), pp. 423-424. The effect of s. 261 is not the same as the effect of a statute which makes the performance of a contractual obligation illegal: it does not invalidate obligations which are dependent upon performance of the illegal obligation. The purpose of s. 261 is confined to the relief of mortgagors; it is not intended to relieve mortgagors of a liability and thereby to expose them to another, perhaps more onerous, liability. The section avoids the mortgagor's obligation to pay tax or the equivalent of tax, but it is not intended to trigger the clauses of a mortgage that provide a sanction for a mortgagor's failure to discharge the obligation to pay tax or the equivalent of tax. Section 261 relieves mortgagors without penalty: it does not accelerate, or enliven a mortgagee's right to accelerate, the repayment of a mortgage debt. It follows that, when cl. 8(b) is made void by operation of s. 261 of the Income Tax Assessment Act, it does not bring down cl. 2(d). Clause 8(b) and (c)(ii) are both nullified, but the Bank remained under a contractual obligation to renew advances until the availability period expired. The tax equivalent may have been paid by the respective borrowers under a mistake of law, but it cannot be recovered as a payment made for a consideration that has totally failed. A consideration in this context is "the benefit bargained for under the contract or purported contract" [2] . The benefit for which the respective borrowers bargained by promising to pay the tax equivalent was the right to renew advances during the availability period and they have had the benefit of that right to the full. Section 261 did not nullify cl. 2(d) and the performance of that obligation by the Bank was therefore good consideration [3] . The only consequence of the respective borrowers having had the benefit of renewal is to focus attention on the category of restitution into which this case must fall if the respective borrowers are entitled to any relief. Payments made under a mistake and payments made for a consideration that has totally failed are distinct categories but both are subsumed under the heading of unjust enrichment as Lord Wright pointed out in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. [4] although his Lordship was there speaking only of mistakes of fact: It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution. The root idea was stated by three Lords of Appeal, Lord Shaw, Lord Sumner and Lord Carson, in R. E. Jones Ltd. v Waring & Gillow Ltd. [5] , which dealt with a particular species of the category, namely, money paid under a mistake of fact. Lord Sumner referring to Kelly v Solari [6] , where money had been paid by an insurance company under the mistaken impression that it was due to an executrix under a policy which had in fact been cancelled, said: "There was no real intention on the company's part to enrich her." Payment under a mistake of fact is only one head of this category of the law. Another class is where, as in this case, there is prepayment on account of money to be paid as consideration for the performance of a contract which in the event becomes abortive and is not performed, so that the money never becomes due. There was in such circumstances no intention to enrich the payee. (Emphasis added.) In Pavey & Matthews Pty Ltd v Paul [7] , Deane J. described the concept of unjust enrichment as "a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff". If, under a mistake, money is paid to and unjustly enriches a payee, the payer's right to recover the amount paid accrues at the moment when the payee received the money. By contrast, a payment made for a consideration that totally fails is not affected by any operative mistake: it is made in order to obtain the consideration bargained for. The payer acquires no right to recover when the payment is received, but only when the consideration totally fails. The very hypothesis which makes it unjust for the payee to retain the payment when the consideration fails is that the payer has received no part of the contractual benefit for which the payment was made. There are cases which appear to fall into both categories — for example, where money is paid as the price of goods sold in ignorance of the fact that the goods have perished — but, on analysis, cases of that kind will reveal one mistake affecting the formation of the contract under which the payment is purportedly made and a mistake as to the existence of the contract pursuant to which the payment is made [8] . If a case should occur where a payment is recoverable as having been made both under a mistake and for a consideration that has totally failed, the facts would reveal both a receipt which unjustly enriches the payee and a failure by the payer to acquire the contractual benefit for which the payment was made. The point of distinguishing the two categories of unjust enrichment is this: "consideration", when given for a payment made under a mistake, is a benefit given at or prior to the receipt by the payee: at that moment it can be determined whether and to what extent the payee has been unjustly enriched. On the other hand, "consideration which has totally failed" refers to a benefit under a contract or purported contract that the payee has totally failed to give during the period available for contractual performance. It is therefore a fallacy to conflate the two categories and to find a total failure of consideration to be an element common to both. 1. Rover International Ltd. v Cannon Film Ltd. [1989] 1 WL.R. 912, at p. 923; [1989] 3 All E.R. 423, at p. 433. 2. Cf. Lipkin Gorman v Karpnale Ltd. [1991] 2 AC. 548, at p. 575, where performance of a gaming contract was held to be not good consideration. 3. [1943] A.C. 32, at p. 61. 4. [1926] A.C. 670, at p. 696. 5. (1841) 9 M. & W. 54 [152 E.R. 24]. 6. (1987) 162 C.L.R. 221, at pp. 256-257. 7. Birks, op. cit., pp. 151-152. Assuming for the purpose of considering the third issue that the respective borrowers paid the Bank the tax equivalent because, as the Full Court found, "they regarded themselves as legally obliged to make [the payment] pursuant to their contractual and security arrangements with the Bank", the proposed category of restitution to be considered is not payment for a consideration that has totally failed. The consideration bargained for was renewal of the advances when an interest period expired during the currency of the availability period. As it turned out, the respective borrowers were not obliged in law to pay for that consideration: s. 261 so operated. But that is not to the point. The point is that the respective borrowers got precisely what they bargained for but they were not obliged to pay for it. The payment of the tax equivalent was not for a consideration that totally failed; it was paid under the mistake that it was due and payable. The mistake, if mistake there was, arose from ignorance of the operation of s. 261 of the Income Tax Assessment Act. The category of restitution proposed for consideration in this case is payment under a mistake of law. To determine whether it is right to admit a remedy in restitution for payments made under a mistake of law, it is relevant to consider the conception of unjust enrichment which is present in all cases in which the common law action for moneys had and received lies to recover money paid by a plaintiff to a defendant. Unjust enrichment in cases of payment under a mistake In South Australian Cold Stores Ltd. v Electricity Trust (S.A.) [9] this Court, in reference to the rule under which an action for money had and received lies in cases of payment by mistake, said: Under that rule the action is available when the payee cannot justly retain the money paid to him because it would not have come to his hands if it had not been for a false supposition of fact on the part of the payer causing the latter to believe that he was compellable to make the payment or at all events that he ought to make it. The notion that unjust enrichment is the essential requirement of an action to recover money paid under a mistake appears more recently in the judgment of this Court in Australia & New Zealand Banking Group Ltd. v Westpac Banking Corporation [10] : The basis of the common law action of money had and received for recovery of an amount paid under fundamental mistake of fact should now be recognized as lying not in implied contract but in restitution or unjust enrichment: see, generally, Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. [11] ; Goff & Jones [12] ; Birks [13] . It is a common law action for recovery of the value of the unjust enrichment and the fact that specific money or property received can no longer be identified in the hands of the recipient or traced into other specific property which he holds does not of itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution. Before that prima facie liability will be displaced, there must be circumstances (e.g., that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust. This citation omits, inter alia, a sentence speaking of "compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment". That sentence raises a question as to the availability of restitution as a remedy in cases where the plaintiff is not seeking a return of money or property with which the plaintiff has parted. That is not the present case and the problems which arise in those cases can be left for another day. A plaintiff's right to restitution of a payment made under a mistake may be lost, even if the defendant has been unjustly enriched by receipt of the money, where supervening circumstances give rise to an overriding defence, e.g., estoppel. The passage cited from Australia & New Zealand Banking Group Ltd. v Westpac Banking Corporation contemplates a possible change of position defence. That defence has now been accepted in England [14] . Leaving aside defences that arise from supervening circumstances, the essential condition for an order for restitution of money paid by mistake is that the receipt of the payment by the defendant has unjustly enriched the defendant at the expense of the plaintiff. What is meant by unjust enrichment? 1. (1957) 98 C.L.R. 65, at p. 75. 2. (1988) 164 C.L.R. 662, at p. 673. 3. [1943] A.C., at pp. 61-64. 4. Law of Restitution, 3rd ed. (1986), p. 5ff. 5. English and Roman Learning in Moses v Macferlan , Current Legal Problems, vol. 37 (1984) 1. 6. Lipkin Gorman v Karpnale Ltd. In essence, to say that a defendant has been unjustly enriched by the receipt of a payment is to say that the defendant has no right to receive it. Palmer [15] translates the judgment in an ancient case [16] as holding "if I pay money in satisfaction of a duty, and he to whom it is paid has no title to receive it, and so the duty is not satisfied, he to whom the money is paid is thereby indebted to me". If a defendant has a right to receive a payment, whether under a statute, in discharge of a liability owing to him or pursuant to a contract [17] , a mistake by the plaintiff in making the payment does not convert the receipt into an unjust enrichment [18] . To the extent that a payment satisfies a defendant's right to receive it, the defendant gives good consideration and is not unjustly enriched. If the defendant receives more than his due, he may be unjustly enriched to the extent of the excess and restitution may be ordered pro tanto [19] . Apart from cases where a payment is made by mistake to satisfy a defendant's supposed right to receive it, a plaintiff may mistakenly make a payment by way of gift, not intending to acquire a benefit or discharge a liability. If the payer would not have paid the money had the payer known all the relevant circumstances, both legal and factual, the defendant is unjustly enriched by the receipt. In principle, there seems to be no reason — though there are cases to the contrary [20] — why the donor should not be entitled to restitution in such a case. It is not necessary to decide that question now. Again, when a plaintiff has paid money for a consideration that has totally failed, the defendant's unjust enrichment consists in his retaining money which, when the consideration fails, he no longer has any right to retain [21] . Enrichment is unjust because the defendant has no right to receive or, as the case may be, to retain the money or property which the plaintiff has paid or transferred to him [22] . 1. Law of Restitution (1978), vol. III, p. 144, par. 14.1, fn. 4. 2. Bonnel v Foulke (1657), 2 Sid. 4 [82 E.R. 1224]. 3. The position of a defendant authorized to receive a payment on behalf of a third person need not now be addressed, but see Australia & New Zealand Banking Group Ltd. v Westpac Banking Corporation . 4. See Aiken v Short (1856), 1 H. & N. 210, at pp. 214-215, per Pollock C.B. and Platt B. [156 E.R. 1180, at pp. 1181-1182]. 5. e.g., Devaux v Conolly (1849), 8 C.B. 640 [137 E.R. 658]; Anglo-Scottish Beet Sugar Corporation v Spalding U.D.C. [1937] 2 KB. 607; York Air Conditioning & Refrigeration (A/asia) Pty Ltd v The Commonwealth (1949), 80 C.L.R. 11. 6. Aiken v Short (1856), 1 H. & N., at p. 215, per Bramwell B. [156 E.R., at p. 1182]; cf. South Australian Cold Stores Ltd. v Electricity Trust (S.A.) (1957), 98 C.L.R., at p. 75. 7. Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. [1943] AC., at p. 65. 8. Restitution lies when property has passed: Barclays Bank v W. J. Simms Ltd. [1980] 1 QB. 677, at p. 689. If mistake affects the passing of the property, the plaintiff may be entitled to proprietary remedies. When a defendant receives a payment which he has no right to receive and which the plaintiff has paid to him by mistake, the injustice of the defendant's enrichment does not depend on the nature of the mistake that caused the payment to be made. Whether the plaintiff made a mistake of law or a mistake of fact, the defendant, having no right to receive the payment, is unjustly enriched by its receipt. Then should the distinction between the two categories of mistake make any difference to a finding of unjust enrichment? In Hydro Electric Commission of Nepean v Ontario Hydro [23] Dickson J., in a notable dissenting judgment, said: Once a doctrine of restitution or unjust enrichment is recognized, the distinction as to mistake of law and mistake of fact becomes simply meaningless. The statement may be too broad but I respectfully agree with the reasons of their Honours in the majority in the present case for rejecting the distinction between a mistake of fact and a mistake of law as critical to the question whether the defendant has been unjustly enriched. But that is not to say that the distinction is immaterial to the question whether there has been a mistake of the kind which entitles the plaintiff to restitution. The distinction between mistakes of fact and mistakes of law is material to the question whether a payment is "voluntary" and, on that account, is irrecoverable. 1. [1982] 1 S.C.R. 347, at p. 367; (1982) 132 D.L.R. (3d) 193, at p. 209. Laskin C.J.C. concurred in the judgment and it commanded the assent of Lamer, Wilson, La Forest and L'Heureux-Dubé JJ. in Air Canada v British Columbia [1989] 1 SC.R. 1161, at pp. 1199, 1211; (1989) 59 D.L.R. (4th) 161, at pp. 168, 191. Voluntary payments and mistakes of law In Woolwich Equitable Building Society v Inland Revenue Commissioners [24] Lord Goff of Chieveley said: Where a sum has been paid which is not due, but it has not been paid under a mistake of fact or under compulsion , it is generally not recoverable. Such a payment has often been called a voluntary payment. In particular, a payment is regarded as a voluntary payment and so as irrecoverable in the following circumstances: (a) The money has been paid under a mistake of law See e.g., Slater v Burnley Corporation [25] , and National Pari-Mutuel Association Ltd. v The King [26] . 1. (1888) 59 L.T. 636. 2. (1930) 47 T.L.R. 110. His Lordship added other paragraphs descriptive of classes of voluntary payments. The dichotomy between voluntary payments which are irrecoverable and payments made under a mistake or under compulsion which are recoverable can be found as far back as Cartwright v Rowley [27] . It is not surprising that payments made under a mistake of law have been treated as a class of voluntary payments. That has been a convenient legal mechanism for holding such payments to be irrecoverable. To admit mistake of law as a ground for restitution in any case in which a mistake of fact would ground such a remedy would render many payments insecure even in cases where both parties expected the payment to be final: the uncertainty of the law and the overruling of decisions by later cases or on appeal would infect many payments with a provisional quality incompatible with orderly commerce. Moreover, while mistakes of fact are specific to particular relationships, the revealing of a mistake of law in one case could throw into uncertainty the finality of payments made in a great variety of cases. Although payments made under a mistake of law should not be excluded entirely from the categories of cases in which restitution may be ordered, something more than a mere mistake of law is required before the remedy is available. As Lord Denning said in Kiriri Cotton Co. Ltd. v Dewani [28] : The true proposition is that money paid under a mistake of law, by itself and without more, cannot be recovered back. The problem, of course, is to articulate the elements additional to a mere mistake of law that entitle a plaintiff to restitution or preclude recovery of the money paid under a mere mistake of law. That problem, it should be said immediately, does not affect payments made in compromise of contested claims. When a claim is settled by accord and satisfaction, a payment made in satisfaction is made in discharge of an obligation created by the accord: it is unaffected by any mistake as to the validity of the claim compromised. 1. [1993] A.C. 142, at pp. 164-166. 2. (1888) 59 L.T. 636. 3. (1930) 47 T.L.R. 110. 4. (1799) 2 Esp. 723, at p. 723 [170 E.R. 509, at p. 510]. 5. [1960] A.C. 192, at p. 204. Cases of compromise apart, a number of factors have been proposed to limit the cases in which mistake of law will ground recovery. Their Honours in the majority judgment consider and discard two suggested criteria: first, that the mistake should be as to the legal liability of the plaintiff to make the payment; and, second, that the mistake be fundamental. I respectfully agree. The judgments in Porter v Latec Finance (Qld.) Pty Ltd establish that a mistake as to legal liability is not essential and, although those judgments describe the requisite mistake as "fundamental" [29] , the case did not turn on the fundamental character of the respondent's mistake but on whether that mistake in truth caused the payment to the appellant to be made. In Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation [30] the Court said: we can see no reason to doubt the correctness of the view expressed or implicit in the judgments in the courts below to the effect that the notion of "fundamental mistake" does not require either that the payer's mistake be shared by the payee or that the mistake be as to the existence of a fact which, if it had existed, would have resulted in the payee being under a legal obligation to make the payment: see Commercial Bank of Australia Ltd. v Younis [31] ; Barclays Bank Ltd. v W. J. Simms Son & Cooke (Southern) Ltd. [32] ; Bank of New South Wales v Murphett [33] . That having been said, it is preferable to leave for another day consideration of the question whether the requirement that the mistake be fundamental involves any more than that it appears that, without the mistake on the part of the payer, the payment would not have been made: cf., e.g., Porter [34] and Barclays Bank Ltd. v W. J. Simms Son & Cooke (Southern) Ltd. [35] . The term "fundamental" lacks sufficient specificity to be invoked as a working criterion of mistakes that ground recovery [36] . What is essential to a claim in restitution is that the mistake be a cause of the payment to be recovered. If the payer would have made the payment even if the mistaken fact or mistaken operation of law had been known, the money paid is not recoverable on the ground of that mistake. 1. (1964) 111 C.L.R. 177, at pp. 187, 190, 204. 2. (1988) 164 C.L.R., at pp. 671-672. 3. [1979] 1 N.S.W.L.R. 444, at pp. 447-450. 4. [1980] Q.B., at pp. 686-694. 5. [1983] 1 vR. 489, at pp. 491-492, 494-495. 6. Porter v Latec Finance (Qld.) Pty Ltd (1964), 111 C.L.R., at pp. 186-187, 204. 7. [1980] Q.B., at pp. 694-696. 8. Goff & Jones, op. cit., p. 88. Regretfully, I am unable to accept the proposal in the majority judgment that payments made in satisfaction of an honest claim should be classified as "voluntary" and, on that account, be held to be irrecoverable. Such a definition of irrecoverable payments is at once too broad and too narrow. It is too broad because it is capable of including payments under compulsion or duress and, in cases of mistake of fact, it precludes recovery in cases where it is undoubted that restitution lies. All that the definition requires is that the payee should make a claim honestly and the payment be made in satisfaction of the claim. If the case stated in Porter v Latec Finance (Qld.) Pty Ltd had been understood as Kitto J. understood it (that is, Latec on its own behalf paid Porter the amount required to secure a discharge of the purported mortgage held by Porter and to obtain possession of a clear certificate of title), the payment by Latec to Porter would have been made in satisfaction of Porter's honest claim but Latec would nevertheless have been entitled to recover the money paid under the mistake that Porter held a valid mortgage. "Voluntary" is a term descriptive of the state of mind of the payer. It is essential to retain the state of mind of the payer as the criterion of voluntariness in order to distinguish voluntary payments from payments made, for example, under compulsion, duress or undue influence. It is inappropriate to define the term by reference to the state of mind of the payee. That is not to say that payments made under a mistake of law in satisfaction of an honest claim should not be protected. To the contrary, they should be protected but, in my respectful opinion, not by characterizing such payments as voluntary. So long as mistake of law was excluded as a ground for recovery of a payment, it was appropriate to use the term "voluntary" to indicate the state of mind of a payer who, having full knowledge of the material facts, is consciously unaware of the relevant law but chooses to pay a demand honestly made [37] . In that event, as P. A. Butler points out [38] : "there is simply no operative mistake forming part of the facts founding recovery; that is, the money is irrecoverable as being paid in the settlement of an honest claim. The principle embodied here may be called the "voluntary settlement" principle." When such a voluntary settlement is made, the payer consciously abandons any right to impeach the finality of the payment. But, once a mere mistake of law is admitted as a prima facie ground for recovery of a payment, the payer has, so to speak, reserved a right to impeach the finality of the payment if it should turn out that the payee had no right to receive it. Of course, if a plaintiff consciously waives any right to impeach a payment if the law should turn out to be different from what the payee assumes it to be and intends to satisfy the payee's honest demand in any event, any mistake of law that emerges is not causative and it is right to describe such a payment as voluntary. But such a case would be exceptional. The ordinary case of payment under a mistake of law arises when the payer and the payee make an erroneous assumption as to the existence of an obligation and the error of law is subsequently revealed to both. It would lead to great uncertainty if the payer should be entitled to recover the money paid in every case of that kind. Gibbs J. sought to avoid this result in Brisbane v Dacres [39] by bundling all payments under a mistake of law into the class of voluntary submissions to claims: We must take this payment to have been made under a demand of right, and I think that where a man demands money of another as a matter of right, and that other, with a full knowledge of the facts upon which the demand is founded, has paid a sum, he never can recover back the sum he has so voluntarily paid. It may be, that upon a further view he may form a different opinion of the law, and it may be, his subsequent opinion may be the correct one. If we were to hold otherwise, I think many inconveniences may arise; there are many doubtful questions of law; when they arise, the Defendant has an option, either to litigate the question, or to submit to the demand, and pay the money. I think, that by submitting to the demand, he that pays the money gives it to the person to whom he pays it, and makes it his, and closes the transaction between them. Latham C.J. in Werrin v The Commonwealth [40] stated the principle in similar terms: The principle appears to me to be quite clear that if a person, instead of contesting a claim, elects to pay money in order to discharge it, he cannot thereafter, because he finds out that he might have successfully contested the claim, recover the money which he so paid merely on the ground that he made a mistake of law. The fallacy in this approach is that many payments, without conscious adversion to the relevant law, would not have been made had the payer known the true legal position. Such payments are no more voluntary than payments made under a mistake of fact when the payer does not have full knowledge of the facts when the payment is made. Many cases of payments that turn out to have been made under a mistake of law are made simply by an omission to consider the law: they cannot realistically be treated as payments made in submission to a claim. Professor Birks reminds us that [41] : Not only are there many doubtful questions of law, there are also many decent people and institutions whose habit is to meet their liabilities without waiting to be hounded, and necessarily they meet the liabilities they think they see. Mistakes only come out later. Since the law is often misunderstood and even changes under foot, recipients have a special need for security whether they actively claim or passively receive. If it be desirable to introduce a principle to protect the finality of payments made under a mistake of law in satisfaction of what, to the mind of the payee, is an honest claim of right, it is not satisfactory to press into service the concept of voluntary payments. The principle should be dressed in modern attire rather than in an older garb that will not fit. 1. See Kelly v Solari . 2. "Mistaken Payments, Change of Position and Restitution", in Essays on Restitution, ed. P. D. Finn (1990), p. 95. 3. (1813) 5 Taunt. 143, at p. 152 [128 E.R. 641, at p. 645]. 4. (1938) 59 C.L.R. 150, at p. 159. See also p. 168, per McTiernan J. 5. op. cit. (1989), p. 166. The reason for introducing any limitation on restitution of payments made under a mistake of law should be identified: it is to achieve a degree of certainty in past transactions [42] . Unless some limiting principle is introduced, the finality of any payment would be as uncertain as the governing law. How should the limiting principle be stated? The Restatement of the Law of Restitution [43] proposes a rule of "honest claim" in these terms: It is not essential to retention that the transferee demand performance; he is entitled to retain what he has received if, because of a mistake of law, he does not know when he learns of the transfer and for what it was given, that he was not entitled to it. On the other hand, if he has no substantial doubt as to the law and believes that the transfer is made because of the other's ignorance of the law, his non-disclosure is fraudulent and he is not entitled to retain what is given. Whether the principle be stated positively ("an honest claim") or negatively ("does not know that he was not entitled"), it is right in my opinion to state it in terms of the state of mind of the payee at the time when he learns of the receipt of the payment. Then (or, at the latest, shortly thereafter) the payee acquires title to the money paid or property transferred and becomes enriched by the receipt. 1. See Hydro Electric Commission of Nepean v Ontario Hydro [1982] 1 SC.R., at p. 412; (1982) 132 D.L.R. (3d), at p. 243, per Estey J. 2. American Law Institute (1937), p. 186. The limiting principle will be applicable only in cases where the plaintiff has made a payment under a mistake of law and the defendant has no right to receive it. The principle will therefore be invoked to rebut a prima facie right to restitution. Stated in terms of the defendant's state of mind, the onus of establishing the applicability of the principle must rest on the defendant. If the principle be seen as a defence to a claim in restitution for a payment made under a mistake of law, it is unnecessary to consider whether the payer has made the payment in submission to the payee's demand or not. Such a defence, focusing on the payee's state of mind, is best formulated in accordance with what Lord Mansfield said in Bize v Dickason [44] : "where money is paid under a mistake, which there was no ground to claim in conscience, the party may recover it back again by this kind of action." The protection which the principle should give to a payee who, on a true understanding of the governing law, has been unjustly enriched by the payment, should impose on the payee the onus of proving that, when he learnt of the payment, he had a "ground to claim in conscience". I would therefore state the principle thus: It is a defence to a claim for restitution of money paid or property transferred under a mistake of law that the defendant honestly believed, when he learnt of the payment or transfer, that he was entitled to receive and retain the money or property. 1. (1786) 1 T.R. 285, at p. 287 [99 E.R. 1097, at p. 1098]. Three observations should be made about this formulation. First, it restores the distinction between mistake of fact and mistake of law which is no longer determinative of the question of unjust enrichment. Unless restitution for mistake of fact is to be curtailed, or restitution for mistake of law is to unsettle commercial transactions to an unacceptable extent, I see no formula which would eliminate the distinction entirely, however unsatisfactory the distinction may be [45] . Secondly, the defence applies pro tanto; it does not apply to any part of the money or property which the defendant did not honestly believe himself to be entitled to receive and retain. Thirdly, if money paid under a mistake of law is not received in satisfaction of an honest claim of right, it may not be possible to raise a defence of change of position, assuming that that defence is available, in claims for restitution of money paid under a mistake of law [46] . This is a question which cannot be resolved in advance of a case in which the facts call for a resolution. 1. Cf. Goff & Jones, op. cit., p. 119, who suggest that "the principle in Bilbie v Lumley (1802), 2 East 469 [102 E.R. 448] should only preclude recovery of money which was paid in settlement of an honest claim". The suggestion thus relates solely to payments made under a mistake of law. 2. See the Restatement on Restitution, supra, p. 46. The defence of receipt in satisfaction of an honest claim of right is necessarily subject to the operation of any relevant statute. Where the mistake under which the payment is made consists in the payer's ignorance of a statute which, in protection of a class of which the payer is a member, absolves the payer of the obligation to pay, the mistake of the payee who receives the payment honestly claiming it to be his due does not entitle the payee to retain it. If it were otherwise, an honest but mistaken claim by the payee would frustrate the operation of the statute. In the present case, s. 261 does not prohibit the payment of the tax equivalent and it is therefore beside the point to inquire whether the parties are in pari delicto. Section 261, which is clearly a provision in protection of mortgagors, simply avoids an obligation on mortgagors to pay the tax equivalent. If, as Kitto J. held in South Australian Cold Stores Ltd. v Electricity Trust of South Australia [47] , the payer is a member of a class protected by the statute, the payer is entitled to succeed in an action to recover the money paid under a supposed obligation nullified by the statute [48] . It follows that, if the tax equivalent was paid by the respective borrowers under the mistake that they were obliged to do so by the applicable loan agreement, they are entitled now to recover the money so paid. 1. (1965) 115 C.L.R., at pp. 257-258 — a case where the statute created an offence. 2. Cf. Kiriri Cotton Co. Ltd. v Dewani [1960] AC., at pp. 204-205. No question of counter-restitution arises in this case. By operation of s. 261 of the Income Tax Assessment Act, the Bank was contractually bound without payment of the tax equivalent to renew the advances during successive interest periods throughout the availability period. If the respective borrowers are now entitled to restitution in the amount of the tax equivalent, the Bank has not been prejudiced: it simply performed its contractual obligation. What the Bank might have done had it not received payment of the tax equivalent in accordance with cl. 8(b) is irrelevant to any issue. Equally irrelevant is any expectation entertained by the respective borrowers dehors the loan agreements as to what they might or would receive for paying the tax equivalent. The only consideration they received was performance by the Bank of the loan agreements and, by operation of s. 261, they were entitled to that without payment of the tax equivalent. In the present case, there remains for determination by a trial judge only this issue: Did the respective borrowers pay the tax equivalent to the Bank under the mistake that they were obliged to do so by the loan agreements? If the answer is in the affirmative, judgment should be for the respective borrowers; if in the negative, for the Bank. Had the Bank received the tax equivalent in satisfaction of its honest claim to receive it and had the mistake under which the payment was made been a mistake of law that arose otherwise than by operation of a statute enacted for the protection of a class including the payers, there would have been a second issue to be found: Was payment received by the payee in satisfaction of an honest claim of right? I would join in making the orders proposed by their Honours in the majority judgment, but I would limit the questions to be remitted to those identified in the proposed order as (a) and (b). Dawson J. In Pavey & Matthews Pty Ltd v Paul [49] , I did not think it necessary to examine the true nature of quasi-contract because I did not regard my conclusion as requiring any reliance to be placed upon that branch of the law. Deane J., with whom Mason and Wilson JJ. were in agreement, took a different view and decided that a remedy in quasi-contract is not, as the name would suggest, based upon a contract implied or otherwise, but lies in restitution of which the true basis is unjust enrichment. That view was accepted in Australia & New Zealand Banking Group Ltd. v Westpac Banking Corporation [50] . That was a case in which a claim for money had and received was made to recover an amount paid under a mistake of fact. The Court said that the action lay [51] : not in implied contract but in restitution or unjust enrichment In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment. There is now no longer any question that there is in this country a law of restitution based upon the concept of unjust enrichment which encompasses what was previously the common law of quasi-contract. No question about that is raised in this case. What is said is that, whilst there can be an order for the restitution of money paid under a mistake of fact, the remedy does not extend to the recovery of money paid under a mistake of law. 1. (1987) 162 C.L.R. 221. 2. (1988) 164 C.L.R. 662. 3. ibid., at p. 673. But the recognition of restitution as the true remedy in the case of money paid under a mistake of fact makes it no longer possible to sustain in logic or in principle the denial of the same remedy in the case of money paid under a mistake of law. If the payment of money under a mistake of fact raises a prima facie case of unjust enrichment on the part of the recipient there can be no reason why the payment of money under a mistake of law should not do likewise. While the recent reappraisal of cases in quasi-contract has made quite apparent the absence of any relevant distinction between the two types of mistake, the distinction which has been drawn in the cases has always been unsoundly based. Not only is it often possible to classify a mistake of law as a mistake of fact and vice versa [52] , but the original justification for the denial of a remedy in cases of mistake of law was that "[e]very man must be taken to be cognizant of the law" [53] . That is a presumption which has no foundation in truth. The true principle is that ignorance of the law is no excuse, that is to say, a person cannot escape the consequences of breaking the law by pleading ignorance of it. A person seeking to recover money paid under a mistake of law is not seeking to escape from the law, but to avail himself of it. The subject is examined in the reasons for judgment of Mason C.J., Deane, Toohey, Gaudron and McHugh JJ. I agree with their conclusion that the rule precluding the recovery of moneys paid under a mistake of law should not be held to form part of the law in Australia. I agree with their reasons for reaching that conclusion and shall not attempt to repeat them. I also agree, for the reasons given by Mason C.J., Deane, Toohey, Gaudron and McHugh JJ., that a mistake of law should be treated in the same way as a mistake of fact, so that a prima facie entitlement to restitution arises when a mistake of law has caused a payment to be made. And I agree, for the reasons given by Mason C.J., Deane, Toohey, Gaudron and McHugh JJ., that s. 261 of the Income Tax Assessment Act 1936 Cth rendered cl. 8(b) in the relevant loan agreements void. 1. See, e.g., Solle v Butcher [1950] 1 KB. 671. 2. See Bilbie v Lumley (1802), 2 East 469, at p. 472 [102 E.R. 448, at p. 449]. I wish only to add some observations. Mason C.J., Deane, Toohey, Gaudron and McHugh JJ. point out that the relevant authorities in this Court [54] which have denied the recovery of money paid under a mistake of law may, with the exception of a passage in the judgment of Williams J. in York Air Conditioning & Refrigeration (A/asia) Pty Ltd v The Commonwealth [55] , be explained upon the basis that the payments were made voluntarily and were not recoverable for that reason regardless of any mistake of law. At the same time these cases illustrate the difficulty of establishing that a payment was made under a mistake of law as opposed to a mistake of fact. Facts tend to be black or white but the law very often is not. Where it is not possible to be completely confident of the relevant law, a person may meet an honest claim in the belief that he is entitled to resist it and yet make the payment voluntarily. That is to say he may make the payment in the exercise of his judgment, notwithstanding his belief that the law does not require him to do so or relieves him of the obligation of doing so. A fortiori, where a person makes a payment with no belief one way or the other about the relevant law, he makes the payment voluntarily even though he is not obliged by law to do so and may not have done so had he known that he was not obliged to do so. In that respect a mistake of law is no different to a mistake of fact. As Parke B. said in Kelly v Solari [56] : If, indeed, the money is intentionally paid, without reference to the truth or falsehood of the fact, the plaintiff meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true or false, the latter is certainly entitled to retain it; but if it is paid under the impression of the truth of a fact which is untrue, it may, generally speaking, be recovered back, however careless the party paying may have been, in omitting to use due diligence to inquire into the fact. 1. Werrin v The Commonwealth (1938), 59 C.L.R. 150; South Australian Cold Stores Ltd. v Electricity Trust (S.A.) (1965), 115 C.L.R. 247. 2. (1949) 80 C.L.R. 11, at p. 30. 3. (1841) 9 M. & W. 54, at p. 59 [152 E.R. 24, at p. 26]. Those who honour their contractual obligations may or may not do so because they believe them to be legally binding. They may do so simply because they have contracted to do so and not because they have turned their minds to any question of law. A payment made in those circumstances is made voluntarily and even if it turns out that there was no legal obligation to make the payment, it does not seem to me that it can be said that the payment was made under a mistake of law. Indeed, it cannot necessarily be said that, if the payer had turned his mind to the question of law, he would not have made the payment. Some contractual obligations are commonly performed in the knowledge that they are not binding and not every question of law can be answered so clearly or definitely as to warrant the resistance of an honest claim for payment. Considerations such as these would seem to lie behind the modern tendency to justify the rule that there can be no recovery of money paid under a mistake of law, not upon the basis of presumed knowledge of the law (which is unsupportable), but upon the basis that payments made under a mistake of law are made voluntarily unless they are induced by the behaviour of the payee, for example, by compulsion, extortion or undue influence. This is reflected in the observation of the Federal Court in J. & S. Holdings Pty Ltd v N.R.M.A. Insurance Ltd. [57] : The insufficiency of mistake of law as the foundation of an action for recovery of money paid is commonly stated as a general principle or rule of law precluding any right of action in a case where the payment was voluntary. [58] 1. (1982) 61 F.L.R. 108, at p. 123; 41 A.L.R., at p. 551; 6 A.C.L.R., at p. 814. 2. See also Goff & Jones, Law of Restitution, 3rd ed. (1986), pp. 118-119; Birks, An Introduction to the Law of Restitution (1989), p. 164. It is also reflected in the view of Latham C.J. and McTiernan J. in Werrin v The Commonwealth . In that case the plaintiff resisted the payment of sales tax upon a basis which ultimately proved to be correct. Nevertheless he paid, albeit reluctantly. There was no compulsion, extortion or undue influence or anything of that kind. Latham C.J. and McTiernan J. held that the payment was made voluntarily, albeit under a mistake of law. Latham C.J. said that "if a person, instead of contesting a claim, elects to pay money in order to discharge it, he cannot thereafter, because he finds out that he might have successfully contested the claim, recover the money which he so paid merely on the ground that he made a mistake of law" [59] . And in South Australian Cold Stores Ltd. v Electricity Trust of South Australia , the plaintiff was held to have voluntarily paid the higher rates at which electricity was supplied to it by the defendant notwithstanding that it is a fair inference that, had it known that they were not validly imposed, it would not have paid them. There was "nothing but an assumption that in some way or other the increased charge might lawfully be made and a readiness to comply with the payee's demand without more, a demand which but for formal defects in the authorization would have been enforceable" [60] . 1. (1938) 59 C.L.R., at p. 159. 2. (1957) 98 C.L.R., at p. 75. But a payment made under a mistake of law is not necessarily voluntary when it is made in the absence of some compulsion or inducement by the payee. Voluntariness may afford a convenient explanation for the rule that money paid under a mistake of law cannot be recovered, but it is not an explanation in every case. Perhaps in the nature of things the cases may be relatively few, but it is obvious that a person may be caused by a mistake of law on his part to make a payment which he would not otherwise have made. The payment would not, in those circumstances, be voluntary. In the present case, the Full Court below expressed the view that "there is sufficient evidence from which one can infer that the appellants would have made no payment but that which they regarded themselves as legally obliged to make pursuant to their contractual and security arrangements with the bank" [61] . Whether that is the appropriate inference to draw is another thing. It seems to me that the first question should be whether the appellants turned their minds to the question of their legal obligation at the time they made the relevant payments or whether they made those payments merely because the contract provided they should do so, that is to say, voluntarily and not because of any mistaken belief in the law. If the latter, then it is immaterial that they later formed the view, by reference to s. 261 of the Income Tax Assessment Act, that they were not legally obliged to make the payments at the time they made them. 1. David Securities Pty Ltd v Commonwealth Bank of Australia (1990), 23 F.C.R. 1, at p. 33. In Barclays Bank Ltd. v W. J. Simms Ltd. , Robert Goff J. extracted from the authorities the following principles [62] : (1) If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (2) His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or (b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorized to receive the payment) by the payer or by a third party by whom he is authorized to discharge the debt; or (c) the payee has changed his position in good faith, or is deemed in law to have done so. In Australia & New Zealand Banking Group Ltd. v Westpac Banking Corporation this Court recognized that the prima facie liability to restore money paid under a mistake may be displaced, but only in "circumstances (e.g., that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust" [63] . No doubt the Court regarded money paid voluntarily as money not paid under a mistake and hence as not giving rise to any prima facie liability to repay (cf. Goff J.'s category 2(a)). The onus of proving the circumstances which displace prima facie liability must, of course, lie upon the recipient. The tentative acceptance of change of position as a defence to a claim for restitution may now I think be stated more positively in the light of the decision of the House of Lords in Lipkin Gorman v Karpnale Ltd. [64] . As Lord Goff of Chieveley observed in that case, it is basic to the concept of unjust enrichment that [65] "where an innocent defendant's position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution". Whilst unjust enrichment does not of itself constitute a cause of action, it provides a "unifying legal concept" and serves to mark out the defences to claims in restitution [66] . 1. [1980] Q.B. 677, at p. 695. 2. (1988) 164 C.L.R., at p. 673. 3. [1991] 2 A.C. 548. 4. ibid., at p. 579. 5. See Pavey & Matthews Pty Ltd v Paul (1987), 162 C.L.R., at pp. 256-257. The circumstances in which the existence of good consideration for the payment of money made under a mistake will make it unjust to order restitution of the money must necessarily be limited. Goff J. in Barclays Bank Ltd. v W. J. Simms Ltd. says that the defence is founded upon the decision in Aiken v Short [67] and upon dicta in Kerrison v Glyn, Mills, Currie & Co. [68] . In Aiken v Short money was paid to discharge a debt owed by a third party to the payee. A man named Carter mortgaged to the plaintiff bank an inheritance supposedly due to him. The supposed inheritance was already subject to an equitable charge to secure a debt due from Carter to the defendant. The plaintiff paid the amount of the debt, apparently as Carter's agent, to discharge Carter from his liability to the defendant and to clear the equitable charge. It turned out that there was no inheritance. But the defendant, the payee, had provided good consideration for the payment, namely, discharging the debt. The plaintiff's mistake was really as to the value of its security and, although that mistake caused it to make the payment to the defendant, it would have been unjust, as between the plaintiff and the defendant, to require the defendant to return the payment, the defendant having done that for which the payment was made, namely, discharging Carter's debt. Goff & Jones [69] treat Aiken v Short as an illustration of the defence of bona fide purchase. The underlying purpose of the defence of bona fide purchase is to determine where the loss should lie as between two innocent parties. If the payee has not been unjustly enriched then he should not be required to make restitution [70] . 1. (1856) 1 H. & N. 210 [156 E.R. 1180]. 2. (1911) 81 L.J.K.B. 465. 3. op. cit., pp. 108-110. 4. See also Porter v Latec Finance (Qld.) Pty Ltd (1964), 111 C.L.R. 177. The situation in the present case is not analogous to that in Aiken v Short . If the appellants were caused by mistake to make the payments under cl. 8(b) of the loan agreements, it was not a situation in which a court was called upon to determine, as between two innocent parties, who should bear the loss. Either the respondent shared the appellants' mistake in exacting and receiving the payments or it was aware of the appellants' mistake and received the payments nevertheless. It was not a situation in which, because the respondent provided consideration in the form of the money lent, it could be said that it would be unjust to require the respondent to restore the payments made by the appellants under cl. 8(b) if they were made by mistake. I agree with the order proposed by Mason C.J., Deane, Toohey, Gaudron and McHugh JJ.