MERCEDES-BENZ (NSW) PTY LTD v NATIONAL MUTUAL ROYAL SAVINGS BANK LTD [1996] NSWCA 363

MERCEDES-BENZ (NSW) PTY LTD v NATIONAL MUTUAL ROYAL SAVINGS BANK LTD

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

PRIESTLEY, CLARKE and SHELLER JJA 27 February, | April 1996 [1996] NSWCA 363

FRAUD — misappropriation of funds — mistake of fact — conversion — defence of change of position — Cheques and Payments Orders Act 1986 s95(1)

Mercedes-Benz (MB) brought proceedings against National Mutual Royal Savings Bank (NMRB) to recover money paid to it under mistake of fact through MB's payroll system, and to seek damages for conversion of a number of cheques. NMRB defended the first claim on the basis that it had by expenditure or financial commitment changed its position in good faith, and second in respect of some of the cheques in reliance on s95(1) of the Cheques and Payments Orders Act 1986. Palmer AJ upheld these defences, and MB appeals against this decision.

MB argued that NMRB's expenditure and financial commitment were tainted by negligence or knowledge of the facts which had led to the irregularity and that the defence of change of position was not available to NMRB or partial restitution should be ordered. MB also submitted that NMRB should not be protected by s95(1) because it had acted negligently, even if in good faith.

HELD

1. The trial judge's finding, which was not challenged on the appeal, that NMRB was under no duty to MB to do anything more than it did meant that there was no relevant wrongdoing. Nor was there any irregularity known to the respondent of the kind that would deprive it of a change of position defence. The finding of Palmer AJ should not be disturbed.

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; Australia and New Zealand Banking Corporation Ltd v Westpac Banking Corporation (1988)164 CLR 662 at 681-2.

2. Nothing occurred in the course of opening the new accounts which would have put NMRB on enquiry that the new accounts were opened fraudulently or by mistake. Accordingly the respondent discharged the onus of establishing a defence under s95(1) of the Cheques and Payments Orders Act 1986. This ground of appeal must fail.