Recovering Money Paid by Mistake

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Article Summary

The most common reason that we see in relation to money paid by mistake, is money accidently paid into the incorrect bank account.

However, if is is an unknown bank account, the banks will evoke privacy to refuse to provide the payer with any details so that we can attempt to collect these funds.

Rule 208C(2)(b) of the Uniform Civil Procedure Rules 1999 (Qld) allows a mistaken payer the ability to obtain orders from the Court to ascertain identity or whereabouts of prospective defendant – this is sometimes called preliminary disclosure.

After you find out the identity of the incorrect payee through preliminary disclosure, then you can commence legal action to recover that mistaken payment.

The Courts have decided that monies paid by mistake into the wrong bank account give rise to a prima facie obligation to make restitution to the payer.  Recovering money paid by mistake is a claim in restitution for unjust enrichment because of mistake.

Overall, there are three (3) components for an unjust enrichment case, they are:

  1. The enrichment; and
  2. The enrichment being obtained at the plaintiff’s expense; and
  3. The enrichment being unjust.

This article explains this process in a lot more detail.

Recovering Money Paid by Mistake litigation lawyers in QueenslandRecovering money paid by mistake is a claim in restitution for unjust enrichment because of mistake.

If you have accidently made a payment to the wrong person – paid into the wrong bank account, overpaid an invoice, etc. then you may have a claim.

Overall, there are three (3) components for an unjust enrichment case, they are:

  1. The enrichment; and
  2. The enrichment being obtained at the plaintiff’s expense; and
  3. The enrichment being unjust.

If a payer makes a mistaken payment to a payee, there are some defences to a restitutionary claim for unjust enrichment.

If you are a payer of money by mistake, or you are the payee of money by mistake, then our debt recovery lawyers explain the causes of action and any possible defences in this article.

If you are a recovering money paid by mistake, or you are the payee of money by mistake, then contact us to explain the causes of action and any possible defences

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Recovering Money Paid by Mistake

The Courts have decided that monies paid by mistake give rise to a prima facie obligation to make restitution to the payer.

In ANZ Group Ltd v Westpac Banking Corporation [1988] HCA 17, the joint decision of Mason CJ, Wilson, Deane, Toohey and Gaudron JJ said:

[R]eceipt 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.

The basic elements for a restitutionary claim for unjust enrichment because of money paid by mistake are as follows:

  1. There must have been a payment to the payee (enrichment); and
  2. The payment must have been at the detriment of the payer; and
  3. The payment must be unjust.

I will explain these in more detail below.

There must have been a Payment to the Payee

Obviously, for an action in restitution for a mistaken payment, there must have been a payment from the payer which enriches the payee.

The payment must also be at the detriment of the payer.

The Payment must have been at the Detriment of the Payer

When recovering money paid by mistake, another basis of the unjust enrichment is that the payee has suffered a detriment.  This means that the money paid must be from the payer’s own funds.

In Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68 the High Court of Australia discuss this in relation to the passing on of the tax obligation to their clients.  Gleeson CJ and Gaudron and Hayne JJ said:

It is clear that, in a direct and immediate sense, the payments were made by the appellants, out of their own funds, to the respondent

If the payer makes a payment to the payee from his/her/its own funds, which enriches the payee at the detriment of the payer, then the enrichment must also be unjust.

The unjust factor is the third element when recovering money paid by mistake.

The Payment must be Unjust

This article is not going to deal with all unjust factors in law.  This article will simply focus on the unjust factors in relation to recovering money paid by mistake.

The unjust factor when recovering money paid by mistake is “mistake”.

In Citibank Limited v Department of Public Works and Services [2001] NSWSC 1066, Newman AJ said:

… once a payment has been made to another by mistake there is a prima facie obligation on the part of the person receiving that payment to make restitution.

So, the prima facie obligation rests on the fact that the payer’s payment due to a mistake, in itself makes the payee’s enrichment unjust.

The mistake can be either in fact or in law.  This was decided in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 in which Mason CJ, Deane, Toohey, Gaudron and McHugh JJ said:

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.

So, just the receipt of money from a payer to the payee that the payee has no right to, paid by mistake or law or of fact, unjustly enriches the payee.

Examples of Money Paid by Mistake

The types of things which allow recovering money paid by mistake can include:

  1. Money paid into the incorrect bank account; or
  2. Money paid pursuant to a contract that was not due and payable; or
  3. Mistaken overpayments – money had and received.

If these things have happened by mistake, at the detriment of the payer, which enriches the payee, then the payer can make a claim in restitution against the payee, subject to any defences.

Defences to a Claim Recovering Money Paid by Mistake

As the cases above illustrate, there is a prima facie right to restitution in relation to recovering money paid by mistake.  This essentially acts the same way as a legal presumption.

Therefore, the onus is on the payee defendant to raise any of the legal defences open to them.

In Barclays Bank Ltd v W J Simms Son and Cooke (Southern) Ltd [1979] 3 All ER 522 Lord Goff J stated:

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.  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 only two (2) considered in this article are:

  1. The payment is made for good consideration; and
  2. The payee has changed his/her/its position.

I will discuss these in more detail below.

The Payment is Made for Good Consideration

Consideration is defined in Butterworths Concise Australian Legal Dictionary as:

The price, detriment, or forbearance given as value for the promise.

In contract law, consideration must flow from both sides, and is the value exchanged.  Commonly, money in exchange for goods and/or services.

Therefore, if the payee defendant has given consideration for the money paid by the payer plaintiff, then it would not be unjust for the defendant to keep it, or part of it.

This defence is most commonly raised in matters where money is paid pursuant to a contract that was not due and payable.  As with all contractual interpretation, the term must be read in conjunction with the contract as a whole.

The other arguable defence is the change of position defence.

The Payee has Changed His/Her/Its Position

The basis for the change of position defence is that the payee defendant has received the money in good faith and has changed its position in reliance of the receipt of the money paid by mistake.

In Lipkin Gorman v Karpnel Ltd [1991] AC 548, the House of Lords said:

… the defence is available to a person whose position has so changed that it would be inequitable in all circumstances to require him to make restitution, or alternatively to make restitution in full.

This was seemingly accepted in Australia in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 in which Mason CJ, Deane, Toohey, Gaudron and McHugh JJ said:

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.

The change of position defence essentially means that a right to restitution may be denied if it would cause a greater injustice to the payee defendant, who has acted to his/her/its detriment on the faith of the receipt, than the injustice being suffered by the payer plaintiff.

The elements of the defence can be made out if:

  1. The payee is no longer enriched; and
  2. The payee has acted to their/its detriment on the faith of the receipt; or
  3. Because the enrichment has been taken away from them in circumstances beyond their control; and
  4. The recipient’s position changed is as a result of the enrichment; and
  5. It would be more unjust to require the recipient to make restitution.

Recovering Money Paid into the Wrong Bank Account

The most common reason that we see in relation to money paid by mistake, is money accidently paid into the incorrect bank account.

It is extremely difficult to recover money paid by mistake into the wrong bank account if the payee does not want to give it back, because the bank will usually not do anything to assist.

The bank may try to contact the account holder, but banks do not have the power to transfer the funds back if the funds have already been transferred.

Further, the banks will evoke privacy to refuse to provide the payer with any details so that we can attempt to collect these funds.

This ultimately leaves you with no money, no (or very little) assistance from the bank, and no idea who to sue to recover these funds.  We can help!

Rule 208C(2)(b) of the Uniform Civil Procedure Rules 1999 (Qld) allows a mistaken payer the ability to obtain orders from the Court to ascertain identity or whereabouts of prospective defendant – this is sometimes called preliminary disclosure.

Preliminary Disclosure to Find a Debtor

Rule 208C(2)(b) states:

(2) The court may order that the other person:
(b) produce to the applicant a document or thing relating to the identity or whereabouts of the prospective defendant as directed by the order.

This Court order allows you to seek an order ordering the bank to provide the identity or whereabouts of the mistaken payee. The bank will then have to provide the mistaken payer with information such as (but not limited to):

  1. the residential addresses and mailing addresses for the holder or holders of the Account.
  2. contact phone numbers for the holder or holders of the Account; and
  3. email addresses for the holder or holders of the Account.

Example of an Order for Preliminary Discovery

We successfully obtained orders for preliminary discovery which enabled us to recover a significant amounts of money for clients who had inadvertently paid money into the wrong bank account.  The Typical order would be:

The order of the court is that pursuant to rule 208C(2)(b) of the Uniform Civil Procedure Rules 1999 (Qld):

1. By 4:00pm on a date seven days after the entry of orders for discovery, the respondent make discovery to the applicant of the following documents in relation to the [BANK] account (BSB: 000-000 Account: 000 000 00) which received $XXXXXX on or about [DATE] from [PAYER] account number ending XXXX held in the name of the applicant, [PAYER NAME]:

(a) a document or record showing the name of the holder or holders of the Account and persons authorised to operate and transact on the Account for the period 1 November 2021 to the date of these orders;

(b) a document or record which discloses the following information for the period 1 November 2021 to the date of these orders:

(i) the residential addresses and mailing addresses for the holder or holders of the Account and any persons authorised to operate the Account;

(ii) contact phone numbers for the holder or holders of the Account and any persons authorised to operate the Account; and

(iii) email addresses for the holder or holders of the Account and any persons authorised to operate the Account;

2. There be no order as to costs.

The application should be accompanied by an affidavit with evidence of all the steps taken by the payer and the bank to recover these funds, and the final notice from the bank that the payee will not return the funds, and that they can do nothing else.

It is common that the bank as defendant will not consent or oppose these orders, or orders like them. So this type of order can be made in chambers without the need for an oral hearing.

Once the orders are made, serve them on the bank, and the bank will provide you with the payee’s details and you can start the process of recovery and enforcement.

Recovering Money Paid by Mistake

Recovering money by mistake in restitution for unjust enrichment is complicated.  We strongly advise seeking qualified legal advice.

If you are a payer of money by mistake, then contact us in relation to the causes of action and commencing legal action in Court.

If you are the payee of money by mistake, then contact us in relation to any possible defences, such as valuable consideration or change of position.

If you are a recovering money paid by mistake, or you are the payee of money by mistake, then contact us to explain the causes of action and any possible defences

FIXED FEES – DEDICATED TEAM – PROVEN RESULTS

CONTACT US TODAY

OR CALL: 1300 545 133 FOR A FREE PHONE CONSULTATION

Money Paid by Mistake FAQ

Can you recover money paid by mistake?

Recovering money paid by mistake is a claim in restitution for unjust enrichment because of mistake. It they do not repay, then you will have to sue is restitution.

What is unjust enrichment?

Overall, there are three (3) components for an unjust enrichment case, they are (1) The enrichment; and (2) The enrichment being obtained at the plaintiff’s expense; and (3) The enrichment being unjust (because of mistake).

Are there any defences to money paid by mistake?

The only two (2) main defences considered in this article are: (1) The payment is made for good consideration; and (2) The payee has changed his/her/its position.

How do I recover money paid into the wrong bank account?

Try with the bank first. If no success, then you can make an application to the Supreme Court under rule Rule 208C(2)(b) of the UCPR for preliminary disclosure. This is the only way to find the payee / defendant.

What is an order for preliminary disclosure?

There are a number of orders, including an order to produce to the applicant a document or thing relating to the identity or whereabouts of the prospective defendant as directed by the order.

What type of things can I discover?

This Court order allows you to seek an order ordering the bank to provide the identity or whereabouts of the mistaken payee. The bank will then have to provide the mistaken payer with information such as (but not limited to):

  1. the residential addresses and mailing addresses for the holder or holders of the Account.
  2. contact phone numbers for the holder or holders of the Account; and
  3. email addresses for the holder or holders of the Account.

If someone deposits money in my account can they take it back?

If someone deposits money into your account they can take it back. They can sue you in restitution for unjust enrichment because of mistaken payment.

What happens if you receive money by mistake?

If you receive money by mistake, you might have an obligation to make restitution for unjust enrichment. The person who made the mistaken payment could potentially seek to recover the money from you. However, there are some defences, so contact a lawyer immediately.

What happens if someone accidentally transfers you money?

If someone accidentally transfers money to you, it could lead to a situation where they try to recover the money through legal means, claiming unjust enrichment due to the mistake. However, there are some defences, so contact a lawyer immediately.

What happens if you transfer money to the wrong account?

If you transfer money to the wrong account, you might have legal recourse to recover the funds claiming unjust enrichment due to the mistake. However, the process can be challenging, especially if the recipient doesn’t want to return the money.

What happens if you pay someone by mistake?

If you pay someone by mistake, you may have a claim for unjust enrichment and could potentially seek to recover the payment. The person who received the money might need to return it.

What to do if you paid money into the wrong account?

If you paid money into the wrong account, you should first try to work with the bank to resolve the issue. If that doesn’t work, you might consider seeking legal assistance. You could potentially apply for a court order to obtain information about the account holder.

How to recover money paid by mistake?

To recover money paid by mistake, you might need to pursue a legal claim for unjust enrichment. Consulting with legal professionals is advised to understand the specific steps and defences involved.

How to get money back if paid to the wrong account?

If you paid money to the wrong account, you should contact your bank immediately and explain the situation. If the recipient doesn’t return the money willingly, legal action might be necessary.

How to recover money sent to the wrong account?

To recover money sent to the wrong account, you might need to follow legal procedures. This could involve seeking court orders for preliminary disclosure to identify the recipient and potentially pursuing a claim for unjust enrichment.

How to get back money from bank transfer?

If you need to get back money from a bank transfer, especially if it was sent to the wrong account, you should contact your bank as soon as possible. If the recipient refuses to return the money, legal action might be necessary to recover it.

If you are a recovering money paid by mistake, or you are the payee of money by mistake, then contact us to explain the causes of action and any possible defences

CONTACT US TODAY

OR CALL: 1300 545 133 FOR A FREE PHONE CONSULTATION

 

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