Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Prasad v Sangha [2012] NSWCA 92
• Hearing dates: 5 April 2012
• Decision date: 19 April 2012
• Before: Meagher JA at [1]; Bergin CJ in Eq at [20]; Sackville AJA at [21]

Decision

(1) Appeal dismissed.

(2) Order the appellant to pay the respondent's costs of the appeal.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: RESTITUTION - appellant paid moneys to respondent - claim to recover as paid under a mistake of fact or for total failure of consideration-alleged paid under an agreement for transfer by respondent of an interest in a restaurant business - agreement alleged to have been made by agent - agency and agreement denied - respondent used moneys to discharge liabilities - whether unjust for respondent to retain payment
• Cases Cited: Attorney-General for Ceylon v Silva [1953] AC 461 at 479; Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118; Lipkin Gorman v Karpnale Ltd [1988] UKHL 12; [1991] 2 AC 548; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451; Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
• Category: Principal judgment
• Parties: Ambrika Prasad (Appellant); Selvey Sangha (Respondent)
• Representation: Counsel: A R R Vincent (Appellant); S J Harben SC (Respondent); Solicitors: Smythe Wozniak Legal, St Marys (Appellant); Mason Lawyers, Newcastle (Respondent)
• File Number(s): CA 2009/332345

Decision under appeal

• Citation: Prasad v Sangha
• Date of Decision: 2011-03-31 00:00:00
• Before: Delaney DCJ
• File Number(s): DC 80 of 2009

Judgment

1 MEAGHER JA: On 8 September 2006 the appellant transferred $150,000 into a bank account of the respondent. That money was paid at the request of a Mr Goodarzi with whom the appellant had been negotiating for the purchase of an interest in a restaurant business known as Bar-Chello in Darby Street, Cooks Hill. The appellant never received an interest in that restaurant business and sought to recover the $150,000 from the respondent in proceedings in the District Court.

2 The appellant did so on two bases. The first was for total failure of consideration. He alleged that the respondent, by her agent Mr Goodarzi, had agreed to sell an interest in the restaurant business to the appellant for $150,000. Any such contract was never performed and on that basis it was said that there had been a total failure of consideration entitling the appellant to recover the amount paid: Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516. The second was for money paid under a mistake of fact. The appellant alleged that he paid the $150,000 in the mistaken belief that the respondent was the owner of the restaurant business: Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353.

3 The appellant's claim was dismissed by Delaney DCJ (the primary judge) in a judgment delivered in March 2011. The claim that there had been a total failure of consideration was rejected on the basis that Mr Goodarzi had no authority to bind the respondent to any agreement to sell any interest in the restaurant business: [103]. It was not necessary to decide whether Mr Goodarzi had in fact made such a contract on behalf of the respondent. The claim to recover for mistake of fact was rejected for two reasons. The first was that the appellant did not pay $150,000 to the respondent by reason of a mistaken belief that the respondent was the owner of the Bar-Chello restaurant business: [100], [109], [110], [120]. The second was that it would not be "unjust" in the circumstances for the respondent to retain that payment: [108], [121]: Lipkin Gorman v Karpnale Ltd [1988] UKHL 12; [1991] 2 AC 548 at 579-580; Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation at 673-674; David Securities Pty Ltd v Commonwealth Bank of Australia at 385-386. This conclusion, whilst the primary judge did not say so expressly, involved acceptance of the respondent's pleaded defence that in good faith she had changed her position on receipt of the payment by using the funds to discharge liabilities incurred to fund the original fit-out of the restaurant.

4 Grounds 1 to 4 of the appellant's notice of appeal challenge the primary judge's rejection of the claim for recovery for total failure of consideration. The issue raised by grounds 1 and 2 is whether the primary judge erred in holding that Mr Goodarzi had no authority to enter into any agreement on behalf of the respondent. Grounds 6 and 7 challenge the primary judge's finding that the appellant did not pay $150,000 as a result of a mistake of fact. Ground 5 addresses the primary judge's holding that it was not unjust for the respondent to retain the payment upon its receipt.

5 An understanding of the issues raised by these grounds is assisted by a short summary of the circumstances in which the payment was made. In early 2005 the Bar-Chello restaurant business was conducted by Bar-Chello Pty Ltd, a company controlled by the respondent and her then husband, Kuldip Sangha (Tcpt p 37.12). Before May 2006 Mr Goodarzi acquired an interest in the restaurant business. In May 2006 Bar-Chello Pty Ltd agreed to sell its interest in the restaurant business to BG Global Pty Ltd, a company controlled by Mr Goodarzi. The purchase price of $310,000 to be paid by two instalments. The first payment of $150,000 was due on 3 August 2006. The second of $160,000 was due on 13 November 2006. The negotiations for that agreement were undertaken on behalf of the respondent by her then husband. In June or July 2006 Mr Goodarzi, who was known to the appellant because they had worked together, offered the appellant the opportunity to buy into the Bar-Chello restaurant. In September 2006 the appellant paid $150,000 into the bank account of the respondent. He did so at the request of Mr Goodarzi. The first occasion upon which the appellant spoke to the respondent about buying any interest in the restaurant was in March 2009 when he raised with her that he had paid $150,000 and never received any interest in the business.

6 When addressing these circumstances, the primary judge rejected aspects of the appellant's evidence. Relevantly, he did not accept as reliable the appellant's version of a conversation in August 2006 at which the respondent's husband was present ([105]) and he made findings that at the time the payment was made, the appellant expected to acquire an interest in the restaurant with Mr Goodarzi and "did not know who was the vendor of an interest in the restaurant and what that interest was" because "he never saw any contract for the sale of the interest or indeed any document about it": [100]. For those findings to be overturned this Court must be satisfied in accordance with the principles stated in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 that the primary judge's conclusions were wrong.

7 It is possible to address the issue raised by grounds 1 and 2 without dealing with the appellant's challenge to the primary judge's rejection of the appellant's version of the conversation in August 2006. Otherwise it would be necessary to consider the attack on that finding in the light of the primary judge's observation that the appellant was an "uncertain and, at times confusing witness" ([39]) and the uncontradicted evidence that in May 2006 the respondent's husband had negotiated with Mr Goodarzi for the sale of the restaurant business by Bar-Chello Pty Ltd to BG Global Pty Ltd and that shortly afterwards the purchaser had apparently taken possession of the business.

8 The appellant relies upon two aspects of the evidence as justifying a conclusion as to Mr Goodarzi's authority. The first is the respondent's concession that in May 2006 she had authorised her husband to negotiate with Mr Goodarzi for the sale of the Bar-Chello restaurant business to him (Tcpt p 73.13, 73.50.). The other evidence is the conversation said to have occurred in August 2006 at a business centre car park at Bella Vista (between Sydney and Newcastle). The appellant's evidence was that in Kuldip Sangha's presence Mr Goodarzi described the appellant as "the guy who's purchasing your business" and described Kuldip Sangha as "the owner of the restaurant" (Tcpt p 8.32).

9 The appellant argues that this evidence supports three conclusions. First, that Kuldip Sangha had express authority from the respondent to negotiate with Mr Goodarzi "on the sale" of the Bar-Chello Restaurant. Secondly, that Kuldip Sangha held Mr Goodarzi out to the appellant as his and the respondent's agent to act on their behalf on the sale of their interest in the Bar-Chello restaurant. Thirdly, that Mr Goodarzi was agent of the respondent in respect of the sale of the respondent's interest in the restaurant. The appellant then contends that he agreed with Mr Goodarzi to purchase the respondent's interest in the restaurant business for $150,000. In oral argument the appellant was not able to point to any evidence which supported the making of such an agreement.

10 The two aspects of the evidence referred to above do not support any of the three propositions for which the appellant contends. As to the first, Kuldip Sangha had express authority from the respondent to negotiate with Mr Goodarzi for the sale to him, or an entity controlled or nominated by him, of the Bar-Chello business. That authority was exercised in May 2006 by the making of the agreement between Bar-Chello Pty Ltd and BG Global Pty Ltd. On the evidence, that express authority did not extend beyond a sale to Mr Goodarzi or an entity controlled or nominated by him. As to the second proposition, by his silence in the face of Mr Goodarzi's comments during the alleged conversation at Bella Vista, Kuldip Sangha did not hold Mr Goodarzi out to the appellant as acting in any way on behalf of the respondent or in respect of the sale of any interest of the respondent in the business. No mention was made of the respondent having any interest in the business during this alleged conversation. As to the third proposition, there was no evidence that Mr Goodarzi had actual authority from the respondent to sell any interest she might have had in the Bar-Chello business. Nor does this evidence suggest that Kuldip Sangha had actual authority from the respondent to hold Mr Goodarzi out as her agent to sell an interest in the Bar-Chello business (which in any event was not something that Kuldip Sangha did). For that reason, it could not give rise to any apparent or ostensible authority of Mr Goodarzi to sell on behalf of the respondent: Attorney-General for Ceylon v Silva [1953] AC 461 at 479; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [36].

11 The primary judge was correct to conclude that Mr Goodarzi did not have authority from the respondent to sell any interest she had in the Bar-Chello restaurant. This makes it unnecessary to address whether the primary judge erred in rejecting the appellant's version of what happened in August 2006 at Bella Vista and whether any such agreement was made as asserted by the appellant.

12 It is not controversial that money paid under a mistake may be recoverable: Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation; David Securities Pty Ltd v Commonwealth Bank of Australia. The relevant mistake need not be a mistake of law. However, it must be a mistake which "caused" the payment: David Securities Pty Ltd v Commonwealth Bank of Australia at 376, 378.

13 The mistake under which it is said the appellant laboured was not precisely or consistently formulated. It was pleaded and particularised as that the respondent "would transfer to the [appellant] her interest in" the restaurant. The mistake which the primary judge addressed was that the respondent was the vendor of an interest in the restaurant: [100]. In grounds 6 and 7 of the notice of appeal, the mistake is described as being that the respondent was "the owner of the restaurant" or the "relevant owner of the restaurant". It is not clear what the significance of the word "relevant" is in this alternative formulation. The appellant's written submissions formulate the mistake as being that the respondent "had an interest in the business capable of being transferred" to the appellant.

14 The primary judge made the following findings concerning the making of the payment: that the appellant did not know who was the vendor of an interest in the restaurant and what that interest was: [100]; that the appellant did not know who owned the restaurant: [109]; and that the appellant was not interested to know who owned the restaurant because it was of no consequence to him and he paid the money as instructed by Mr Goodarzi: [120]. The appellant submits that those findings were not supported by the evidence.

15 The evidence given by the appellant in relation to his understanding either before or at the time the payment was made was as follows: that in about July 2006 Mr Goodarzi asked him if he wanted to "buy this Bar-Chello restaurant which he got shares with Sanghas" (Tcpt p 7.5); that in August 2006 Mr Goodarzi told him that Kuldip Sangha was the "owner of the restaurant" (Tcpt p 8.34); that when the payment was made he was wondering if he should transfer the money and Mr Goodarzi kept "pushing for it so I finally transferred it" and that Mr Goodarzi told him that "when the money's transferred [the Sanghas] will do all the paperwork and your name will be on this restaurant" (Tcpt p 11.15, 11.40); that he made no inquiry as to who actually owned the restaurant and based on what Mr Goodarzi had told him believed that Mr Goodarzi had some interest in the restaurant and that the Sanghas had some interest in the restaurant (Tcpt p 17.10); that he thought the restaurant was owned by a partnership and did not understand the difference between a partnership and a company (Tcpt p 17.18); that he was hesitant to pay the money because at the time he had no documents but did so after Mr Goodarzi "gave me the assertion" (Tcpt p 19.49); that he said to Mr Goodarzi "you want this money transferred and I don't have any documents at all and transferring that big amount of money I don't know how we're going to go about transferring the business to my name" in response to which Mr Goodarzi "asserted" that "he will do all the paperwork and get Sangha's to do it on behalf of both of us" (Tcpt p 23.5).

16 That evidence does not establish that the appellant believed at the time of the payment that the respondent was the owner of the restaurant or had a specific interest in the business and that he made the payment on the basis of such a belief. Nor does it establish that the appellant believed that the respondent would transfer "her interest" in the restaurant to the appellant. Contrary to the appellant's submission, the evidence does support the findings of the primary judge that the appellant did not know who or which entity owned the restaurant and was not really interested in understanding who owned it but rather paid the money as instructed by Mr Goodarzi: [109], [120]. The existence of the May 2006 agreement for the sale of the business to BG Global Pty Ltd and the fact that the appellant did not pursue the respondent for the transfer by her of any interest for more than two and a half years after the payment are only consistent with the position being as found by the primary judge. On the basis of those findings, the primary judge did not err in rejecting the appellant's claim to recovery on the basis of a payment made under a mistake of fact.

17 The second issue in relation to mistake is whether the primary judge erred in concluding that the respondent changed her position so that it would be unjust if she was required to return the payment. The $150,000 was transferred to the respondent's bank account by the appellant at the request of Mr Goodarzi and in satisfaction of the obligation to make the first payment under the May 2006 agreement. The respondent treated the $150,000 as reimbursement for advances made by her to a related company, Kul-in Restaurant Group Pty Ltd, which had incurred costs of over $300,000 for fitting out the restaurant (Tcpt pp 53.50, 76.5).

18 That evidence does not permit a conclusion as to whether the respondent received the $150,000 as agent for Bar-Chello Pty Ltd and paid it away in satisfaction of liabilities of that company or in satisfaction of the liabilities of a company to which that company was liable for the fit-out or on some other basis. The significant point, however, is that when the money was received the respondent was not aware of any asserted mistake or error on the part of the appellant as payer and, in reliance upon receipt of moneys to which Bar-Chello Pty Ltd was entitled, used the money to discharge liabilities which had been incurred in relation to the fit-out of the restaurant business. The primary judge did not err in concluding that, in the circumstances, it was not unjust that the respondent retain the money.

19 For these reasons, the appeal should be dismissed with costs. I would make the following orders:

(1) Appeal dismissed.

(2) Order the appellant to pay the respondent's costs of the appeal.

20 BERGIN CJ in Eq: I agree with the orders proposed by Meagher JA and with his Honour's reasons.

21 SACKVILLE AJA: I agree with the orders proposed by Meagher JA and with his Honour's reasons.

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Decision last updated: 19 April 2012