New South Wales Supreme Court CITATION : Corporate Management Services v Abi-Arraj [2000] NSWSC 361 FILE NUMBER(S) : SC 13005/99 HEARING DATE(S) : 26/04/00 JUDGMENT DATE : 10 May 2000 PARTIES : Corporate Management Services (Australia) Pty Limited v George Abi-Arraj JUDGMENT OF : James J COUNSEL : L Ellison - Appellant M Sahade - Respondent SOLICITORS : Hunt & Hunt - Appellant CATCHWORDS : Restitution - workers compensation - overpayment of workers compensation - defence of change of position DECISION : Appeal dismissed THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION JAMES J Date 13005/99 - Corporate Management Services (Australia) Pty Limited v George Abi-Arraj JUDGMENT 1 HIS HONOUR: This is an appeal by stated case pursuant to s69(2) of the Local Courts (Civil Claims) Act ("the Act"). In a civil action brought in the Local Court by Corporation Management Services (Australia) Pty Limited a magistrate had found a verdict for the defendant Mr George Abi-Arraj. Under s69(2) of the Act an appeal lies to this Court, only if the decision of a magistrate was "erroneous in point of law". The new Pt51B of the Supreme Court Rules does not apply to this appeal and the appeal is governed by the previous procedural rules. 2 It is convenient to set out the stated case in full. "1. Determination 1.1 On 9 December 1998 I entered a verdict for the defendant in a Statement of Claim brought by the plaintiff in which the plaintiff sought to recover monies paid to the defendant under an award of the Workers Compensation Commission of New South Wales. 1.2 The plaintiff was seeking to recover, by way of restitution, overpayments made to the defendant. I held that the defendant had successfully raised a defence of change of position to that claim. 2. Facts 2.1 On 25 May 1983 the defendant obtained a continuing award in his favour in the Workers Compensation Commission of NSW. 2.2 That award was based on the defendant's partial incapacity for work. The amount of the award was calculated on the basis of the defendant's wife and four children being wholly dependent on him. 2.3 On 11 March 1992, on the application of the plaintiff, the Compensation Court varied the original award by finding that the defendant's wife had not been dependent upon him from the date of commencement of the award. 2.4 The defendant received the sum of $17,007.12 for the period 25 May 1983 to 11 March 1992, when his wife was not a dependent. 2.5 In relation to the defence of change of position, I found that: 2.5.1 In 1989 the defendant decided to extend and renovate the family home. 2.5.2 The whole of a lump sum of compensation received in 1986 and further substantial sums were spent on those renovations. That project has now largely stalled, and the premises are in an incomplete state. 2.5.3 The monthly compensation payments themselves were spent on food, clothing, school fees, electricity and the necessities of life. 2.5.4 The financial arrangement of the defendant and his wife were joint arrangements, whereby for practical convenience Mrs Abi-Arraj's wages were allowed to accumulate in her account and Mr Abi-Arraj's compensation money was used to pay for necessities. Mrs Abi-Arraj's account, which has a cheque facility, was then used to pay for building and work supplies. 2.5.5 The defendant was not to blame for the pleadings filed in the Compensation Court which sought payment for a dependent wife, and he did not mislead the plaintiff, nor act without good faith. 3. Grounds of Determination 3.1 The Defendant argued that he had so changed his position on receipt of the compensation monies as to entitle him to successfully raise a defence to the claim of restitution. 3.2 I found the following to be the principles with regard to the defence of change of position, where the defendant has acted to his detriment on the faith of the receipt of monies: a) the onus of establishing the necessary reliance is upon the defendant: b) the defence may be applied pro tanto; c) mere expenditure will not constitute a change of position; d) the defence is not available where the defendant has simply spent the money received on ordinary living expenses; e) money spent solely in reliance on the payment, from which the defendant no longer retains a benefit, will constitute a good defence and f) the defence is only available to those who act in good faith. 3.3 I held the test to be whether money was spent on the building work in reliance on the ongoing payment of the higher benefit and that the case did not turn on in which account the building money accumulated. 3.4 I held that notwithstanding the plaintiff's argument that the defendant has the benefit of the bricks and mortar of the extension work, that the value thereof would be open to serious doubt, given the work is unfinished, is apparently deteriorating and there is no prospect of it being completed. 3.5 I held that the defendant has changed his position, to his detriment, by undertaking the building project. I held that he thought he could afford to undertake the work because he was receiving a certain level of workers' compensation. 3.6 That being so, I held that the change of position defence was established and that the defendant had not been unjustly enriched. Accordingly, I entered a verdict for the defendant. 4.0 Appellant's Contention 4.1 The Appellant contends that my determination was erroneous on a point of law in that; 4.2 I was in error in holding that expenditure - (whether it be on necessities or building work) would constitute a change of position when that is contrary to principle held by me to be applicable. 4.3 I was in error in finding the defence of change of position available when the defendant had spent the money on necessities and/or building work. 4.4 I was in error in finding that the defendant had acted in good faith. 5. The matter to be determined by the Court is whether my determination was erroneous in point of law". 3 On the hearing of the appeal the magistrate's judgment was tendered and admitted by consent and the legal representative of each party referred, without any objection by his opponent, to parts of the judgment. 4 The magistrate dealt with the defence of change of position in pp4-8 of his judgment. On pp6-7 of the judgment the magistrate said:- "Now, it is true that Mr Ellison, for the plaintiff, got concessions from the defendant in cross-examination. That he used his monthly cheques to buy food, clothing, school fees, electricity, and the necessities of life. But that is not the end of the argument. It was apparent on the evidence that funds were accumulated in Mrs Abi-Arraj's account, which had a cheque facility, and it was her account which was used to pay for building work and supplies. The Abi-Arraj's financial arrangements were joint arrangements, whereby they did not draw distinctions as to who owned the money in each account. It was of practical convenience to use Mr Abi-Arraj's money for necessities, and allow Mrs Abi-Arraj's wages to accumulate. The test is whether money was spent on the building work in reliance on the ongoing payment of the higher benefit, and the case does not turn on in which account the building money was accumulated. It would be wrong to suggest that if, for example, Mrs Abi-Arraj's wages were used for the necessities of life, and Mr Abi-Arraj's payments accumulated for the building work, then the outcome of the case would be different". 5 Of the alleged errors of law stated in par4 of the stated case, par4.4 in which it was alleged that the magistrate had erred in finding that Mr Abi-Arraj had acted in good faith, was not pressed on the hearing of the appeal. It became apparent in the course of the hearing of the appeal that the errors of law which it was submitted the magistrate had committed, were:- 6 1. In holding that the defence of change of position had been established, when the magistrate had found that the monthly workers' compensation payments had been spent by Mr Abi-Arraj on ordinary living expenses or the necessities of life (these two expressions being treated as equivalent). 7 2. Insofar as expenditure on the building work could be taken into account:- (i) In not holding that this expenditure was expenditure on ordinary living expenses. (ii) In not holding that this expenditure was expenditure from which Mr Abi-Arraj retained some benefit. 8 I will deal with these alleged errors of law in turn. 9 As to 1:- 10 It is true that in par3.2(d) of the stated case the magistrate stated, as a principle of law to be applied by him, that the defence of change of position is not available where the defendant has simply spent the money received on ordinary living expenses and that in par2.5.3 of the stated case the magistrate stated a finding that the monthly compensation payments had been spent on the necessities of life. 11 However, the magistrate also found that the financial arrangements of Mr Abi-Arraj and his wife were joint arrangements and that, while workers' compensation payments Mr Abi-Arraj had received were used to pay for necessities, money in his wife's account was expended to pay for the building work (stated case par2.5.4) and Mr Abi-Arraj had changed his position by undertaking the building work, because he was receiving a certain level of workers' compensation (stated case par3.5). 12 I do not consider that the magistrate made any error of law in adopting this reasoning. In my opinion, where a defence of change of position is based on the incurring of expenditure by the defendant after a payment was received from the plaintiff, it is not essential that the money expended by the defendant should be identical with the money which was received from the plaintiff. It is sufficient that the defendant should have acted to his detriment on the faith of the payment received from the plaintiff. 13 In the leading High Court decision of David Securities Pty Limited & Ors v Commonwealth Bank of Australia (1992) 175 CLR 353 Mason CJ, Deane J, Toohey J, Gaudron J and McHugh J said in their joint judgment at pp385-386:- "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. 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. 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 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"" 14 Mason and Carter Restitution Law in Australia say at p840 in reliance on this passage in the joint judgment in David Securities:- "The central claim of the change of position defence is that the defendant has acted to his or her detriment on the faith of the receipt". 15 In the present case, it was open to the magistrate to hold that, notwithstanding that at least some of the workers' compensation payments had been spent on ordinary living expenses, Mr Abi-Arraj had nevertheless acted to his detriment on the faith of the workers' compensation payments, that is, had changed his position, in that he and his wife had undertaken a building project and money from his wife's account, which was subject to their joint financial arrangements, had been expended on the building project. 16 As to 2:- 17 In determining whether these alleged errors have been made out, it is necessary to keep in mind the very limited circumstances in which a finding of primary facts by a tribunal or a determination by a tribunal that facts as found by the tribunal satisfy a particular test, involve errors of law, as distinct from errors of fact. See for example Azzopardi v Tasman UEP Industries Limited (1985) 4 NSWLR 139 especially at 156-157. 18 (i) It is clear that the magistrate held, at least implicitly, that the money spent on the building work was not money spent on ordinary living expenses. 19 In my opinion, this finding was open to the magistrate and did not involve any error of law. The reason why expenditure on ordinary living expenses will not ground a defence of change of position is that the defence will only lie where the defendant has "changed his position", that is has acted differently, on the faith of the payment from the plaintiff. 20 Mason and Carter say at p847:- "The defence is not available where the defendant has simply spent the money received on ordinary living expenses. This requires the court to consider what is 'ordinary' for the particular defendant, because the search is for evidence that the defendant acted differently (changed position) on the faith of the belief that the benefit conferred by the plaintiff was the defendant's to spend". 21 The magistrate found that the building project was "to extend and renovate the family home" (stated case par2.5.1), and not merely to effect repairs to the family home. On the basis of this finding of primary facts, it was open to the magistrate to find that the defendant had changed his position, that is had acted differently from how he would have ordinarily have acted, on the faith of the workers' compensation payments. 22 (ii) It was suggested that the magistrate had adopted a wrong test in that in par3.4 of the stated case he had referred to the "value" of the work and not to whether Mr Abi-Arraj any longer retained any benefit from the work. However, in par3.2(e) of the stated case the magistrate had correctly stated the relevant principle and I consider that in par3.4 the magistrate referred to whether the work had any "value" as part of the process of determining whether Mr Abi-Arraj retained any benefit from the work. 23 The magistrate found that the building work was unfinished, was deteriorating and that there was no prospect of it being completed (stated case par3.4). 24 On these findings of primary facts, a conclusion was reasonably open to the magistrate that the defendant no longer retained any benefit from the expenditure he had incurred on the faith of the workers' compensation payments. Accordingly, the magistrate did not make any error of law in reaching this conclusion. 25 It was submitted in the course of the hearing of the appeal that, if the defence of change of position was available, it was only available pro tanto. However, this submission was not fully developed and the facts as stated in the stated case are insufficient to properly raise the point. It would appear from the magistrate's judgment that the amount expended on the building project exceeded the amount of the workers' compensation payments in issue. 26 I order that the summons be dismissed and that the appellant pay the respondent's costs of the appeal. ********** Last Modified: 09/25/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.