Re Commonwealth of Australia v Hugh John Mccormack [1982] FCA 283; (1982) 69 FLR 9 (24 December 1982)

FEDERAL COURT OF AUSTRALIA

Re: THE COMMONWEALTH OF AUSTRALIA
And: HUGH JOHN McCORMACK [1982] FCA 283; (1982) 69 FLR 9
No. ACT G62 and G63 of 1982
Appeal - Evidence

COURT

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Smithers J.(1), Woodward(2) and Gallop(3) JJ.

CATCHWORDS

Appeal - Money paid under mistake of fact - Consent award by Arbitrator - Construction thereof - Provisional payment.

Appeal - Money paid under a mistake of fact - Whether money recoverable - Consent award by arbitrator - Construction of award - Whether provisional payment.

Evidence - Admissibility - Extrinsic evidence - Documents containing accounts of conversations - Direct evidence of conversations rejected at first instance - Whether documents admissible on appeal. The respondent leased land from the appellant. The terms provided that if any of the land was withdrawn by the appellant it would pay compensation to the respondent in respect of improvements to the land. The appellant withdrew certain land and paid $75,000 to the respondent as an advance on the compensation, the correct sum of which had not been settled. The compensation question was referred to an arbitrator. Subsequently the arbitrator made a consent award that the appellant pay the respondent $215,000, "being the balance of the value at the date of withdrawal". The appellant paid the $215,000, forgetting that it had already paid $75,000 in advance. The appellant sought to recover the $75,000 on the basis that the money was paid under a mistake of fact. The trial judge held it could not be recovered. The C Commonwealth appealed.

Held: (1) That the payment by the Commonwealth was a payment made under a mistake of fact, namely, the failure to take account of the $75,000 advance when the payment of $215,000 was made. Properly construed, the arbitrator's award fixed the value of the improvements, not the amount then owing by the Commonwealth.

Kelly v. Solari [1841] EngR 1087; (1841) 9 M & W 54; 152 ER 24; Barclay's Bank Ltd v. W. J. Simms Son & Cooke (Southern) Ltd (1980) 1 Q. B. 677, considered.

Ward & Co. v. Wallis (1900) 1 QB 675; York Air Conditioning and Refrigeration (A/asia) Pty Ltd v. Commonwealth [1949] HCA 23; (1949) 80 CLR 11; Huddersfield Banking Co. Ltd v. Henry Lister & Son Ltd (1895) 2 Ch 273; Harvey v. Phillips [1956] HCA 27; (1956) 95 CLR 235; Attorney-General for Manitoba v. Kelly (1922) 1 AC 268, referred to.

(2) Per Gallop J. - That the documents containing the accounts of conversations were admissible, notwithstanding that the direct evidence of the same conversations was ruled inadmissible by the trial judge; they constituted extrinsic evidence of the surrounding circumstances for the purpose of identifying the subject of the agreement, and were admissible to show the sense the words bear with reference to those circumstances.

Bacchus Marsh Concentrated Milk Co. Ltd (in liq.) v. Joseph Nathan & Co. Ltd [1919] HCA 18; (1919) 26 CLR 410; Grant v. Grant (1870) LR 5 CP 727; White v. Australian and New Zealand Theatres Ltd. [1943] HCA 6; (1943) 67 CLR 266, referred to.

HEARING

Canberra, 1982, November 8, 9; December 23, 24. 24:12:1982
APPEAL.

Appeals to the Full Federal Court against decisions of the Supreme Court of the Australian Capital Territory.

B. A. Beaumont Q.C. and W. Knight, for the appellant.

A. R. Castan Q.C. and S. Walmsley, for the respondent.

Cur. adv. vult.

Solicitors for the appellant: B. J. O'Donovan, Commonwealth Crown Solicitor.

Solicitors for the respondent: Macphillamy, Cummins & Gibson.
P.H.M.

ORDER

(1) In appeal No. ACT G.62 of 1982 in respect of action No. S.C. 750 of 1977 the appeal is allowed, judgment therein set aside and in lieu thereof judgment is entered for the appellant in the sum of $75,000 with costs of an incidental to the appeal and the proceedings in the Supreme Court.

(2) In appeal No. ACT G.63 of 1982 in respect of action No. S.C. 799 of 1979 the appeal is allowed, the judgment therein is set aside and in lieu thereof judgment is entered for the appellant by declaring that as at 5 October 1978 (the date on which the appellant withheld payment of $75,000) the appellant was entitled to set-off that sum against the respondent's entitlement to compensation in respect of the land contained in Certificates of Title Vol.72, Folio 7163 and Vol.90, Folio 4, and it is ordered that the respondent pay to the appellant its costs of and incidental to this appeal and the proceedings in the Supreme Court. Appeal allowed.

DECISION

This is an appeal against a judgment dismissing the appellant's claim for $75,000 as money had and received to the plaintiff's use in that it was paid by the appellant to the respondent by mistake of fact.

The appellant's case was that having paid to the respondent the sum of $75,000 as an advance against the amount of compensation which might be found to be due to the respondent by an arbitrator in respect of the value of certain improvements made by the respondent to certain leasehold land, it paid to the respondent the full amount found to be due forgetting that it had previously paid the sum of $75,000 on account thereof. The appellant alleged that the full amount found to be due in respect of such compensation was $215,000.00. The respondent admitted para. 12 of the appellant's Statement of Claim which was in the following terms:-

"In paying the said sum of $215,000.00 the plaintiff by mistake of fact failed to take account of the advance of $75,000.00 referred to in paragraph 7 above."

Paragraph (7) referred to the sum of $75,000.00 as an advance in respect of the appellant's liability arising from the lease. The liability arose under the relevant lease on the withdrawal by the appellant of certain land from it. In that lease the appellant was the lessor and the respondent was the lessee. Clause 2(d) thereof provided that the appellant covenanted that if any land were withdrawn it would pay to the lessee the value of all improvements on or effected by the lessee to the land "such value to be ascertained by agreement or in default of agreement by arbitration . . .".

It would seem that the parties, being unable to reach an agreement submitted to Mr. Murray Wilcox as arbitrator pursuant to clause 2(d) of the lease the claim made by the respondent "for compensation for improvements.". In the submission the parties agreed that the arbitrator might by consent make an interim award "respecting a portion or portions of the matters referred" and that the proceedings would commence on 31 January 1974 when the arbitrator might give such directions as he thought proper.

On 25 January 1974 the respondent submitted its written claim "In the matter of an Arbitration between the said Hugh John McCormack and the Commonwealth of Australia" supported by a valuation for the sum of $336,800 in respect of the structural and other improvements including tanks, roads, trees, water, fencing, pastures and timber treatment. The sum of $75,000 which is in issue in this case was paid by the plaintiff to the defendant on 25 June 1974 following correspondence between the parties as follows:-

"Acting Deputy Crown Solicitor,
. . .
25 June 1974
Dear Sir,
RE: H.J. McCormack - V - THE COMMONWEALTH (BLOCK 28 SECTION 7 LANYON)
------------------------------------------
. . .
We wish to confirm our request that the Commonwealth makes an advance to our client of $100,000.00 in respect of his leasehold claim.
We enclose a photostat copy of a letter from the Manager of the Bank of New South Wales to our client dated the 13th instant.
We are obtaining a further advance payment of $50,000.00 today on Mr. McCormack's behalf on account of his claim for the acquisition of his freehold land in the Territory. You will see from the enclosed letter that Mr. McCormack needs to obtain a further $75,000.00 to pay the Bank of New South Wales.
Our client's only other alternative is to obtain finance at an interest rate in the region of 24% or to sell assets at a time when the market is not strong. Mr. McCormack is asking for the balance of the money so that he may purchase stock and pay other expenses.
We should mention that the Minister for the Capital Territory visited Mr. McCormack some time ago and, we understand, indicated to Mr. McCormack that he would examine the question of an advance payment to our client favourably.
. . . "
"The Deputy Crown Solicitor.
. . .
17 July, 1974
Dear Sir,
"H.J. McCORMACK RESUMPTION OF LEASEHOLD LAND
Thank you for your letter of the 16th instant advising that the Department of the Capital Territory is prepared to advance our client the sum of $75,000.00 in respect of his claim of the withdrawal of Crown Lease of Block 28 Lanyon. However, we wish to confirm our telephone request to Mr. Lavington on behalf of our client for a further $25,000.00.
Our client has instructed us that he requires this money to carry on his agricultural activities until February 1975. He will receive no income until that time when he will be paid for the wool clip. Because of the withdrawal of Mr. McCormack's leasehold land and the acquisition of his freehold land our client can no longer carry on a long term policy of crop planting or stock breeding because of the uncertainty of his tenure of the land. Therefore, he has been deprived of the income from these activities.
Of course, you will be well aware that our client receives no interest in respect of the money paid to him for the lease withdrawal from the date of withdrawal until payment.
. . . "

The respondent acknowledged receipt of the sum of $75,000 in writing dated 25 July 1974 in the following terms:-

"I HUGH JOHN McCORMACK of TUGGERANONG in the Australian Capital Territory hereby acknowledge receipt from the Commonwealth of Australia the sum of seventy five thousand dollars "75,000.00 being payment of an advance against any sums due to or found to be due to me arising out of arbitration in respect of the withdrawal of land from the Crown lease of Block 28 Lanyon currently the subject of Arbitration proceedings before Mr. M. Wilcox.
SIGNED "H.J. McCormack"
This 25th day of July 1974."

After negotiation between the parties agreement was reached that the arbitrator should make an award and on 23 July 1976 he did so. The award was in the following terms:-

"FINAL AWARD
BY CONSENT I ORDER, that the Commonwealth of Australia pay to the abovenamed lessee of Block 28, District of Lanyon in the Australian Capital Territory, the sum of $215,000.00, being the balance of the value at the date of the withdrawal of the said land of all fixtures and erections on, and of all improvements on or effected by the lessee or by a prior lessee under this lease or under a prior lease of the land, such lease being between the Commonwealth of Australia and the abovenamed lessee. AND I FURTHER ORDER that the Commonwealth pay the said sum to the abovenamed lessee within fourteen days from the date hereof.
DATED this 23rd day of July 1976.
"M. Wilcox"
Arbitrator"

According to the respondent, this award on its proper construction ordered, in respect of the value of the relevant improvements at the date of the withdrawal of the said land from the lease, that the appellant was to pay to the respondent the sum of $215,000 in addition to the $75,000 already paid. To achieve the respondent's desired result he would have to show by a process of construction that somewhere in the award the total order set out above is to be found.

It may be noted that there is no evidence that the arbitrator had any knowledge of the payment of $75,000. It is apparent that if the award were capable of the suggested construction, it would travel outside the terms of the submission. But the award being made by consent its validity would not be affected if, according to its terms, it did deal with matters outside the submission. But when one comes to construe an award, even an award made by consent, one would not construe it as purporting to deal with matters outside the submission unless it were clear from its terms that it was intended so to do.

It is a reasonable inference that the award was intended by the parties to implement the provisions of an agreement which they had reached. In the absence of an allegation that it did not faithfully do this it must be construed by reference to its terms as they operate in their setting in the relevant circumstances. Those circumstances would include the submission, the subject with which the submission was concerned, namely the respondent's claim, the fact that the parties had come to an agreement contemplating a final award, and the fact that $75,000 had been paid in July 1974 as an advance payment on the terms of the documents set out above. At the trial the respondent adopted the position that the award was to be construed according to its terms without reference to the conversations out of which it arose. It had been pleaded by the respondent that the appellant had agreed to pay and did pay to the respondent the sum of $75,000 and that "by the terms of the award" it agreed to pay the further sum of $215,000. It was never suggested by the respondent that in the conversations out of which the agreement to consent to the final award arose there was any reference to the sum of $75,000 already paid. As the respondent's solicitor's letter of 9 November 1976 said, "Our client assumed that the sum of $215,000 was in addition to the $75,000 already paid." It may be mentioned in passing that it is to be inferred from this concession that the conversations did not deal with the state of accounts between the parties but only with the amount of the value of the improvements.

But when the trial began the appellant's advisers had decided that, at least for greater caution its Statement of Claim should be amended to contain a plea to the effect that if on its proper construction the award required the appellant to pay to the respondent the sum of $215,000 in addition to the $75,000 previously paid, it did so by mistake because the award was made to give effect to a prior agreement between the parties that the total liability of the appellant to the respondent was the sum of $215,000. Under this proposed amendment an order was sought that the award be remitted to the Arbitrator so that an award might be made in accordance with the prior agreement alleged. This proposed amendment was objected to at the trial by the respondent and was not allowed. Nevertheless, at the trial, the appellant tendered oral evidence of conversations which gave rise to the consent award. This tender was objected to by the respondent and the objection was upheld. The respondent was consistent in this respect throughout, so much so, that in his final address Mr. Berkeley for the respondent said:

"MR BERKLEY: Your Honour, we have basically and, I hope, not misleadingly a simple proposition. It will require some elaboration to deal with the arguments put by my learned friends. Our basic proposition is this. If the proper meaning of the award is that we are to get $215,000 in addition to the 75 then we are entitled to judgment. And if the proper meaning of the award is that $215,000 is the total sum then we are not entitled to judgment."

And in his appeal Mr. Beaumont for the appellant, took a similar attitude. And in my opinion Mr. Berkeley at the trial and Mr. Beaumont on the appeal were both stating the true position. Accordingly, one must ascertain whether on its true meaning the consent award required the appellant to pay $215,000 in addition to the $75,000 previously paid. The conversations out of which the award arose were never given in evidence. Without the conversations the evidence of the agreement out of which the award arose was incomplete. Accordingly, the only evidence, at the trial, of what that agreement was, is the award. In the absence of a claim to set aside the award on the grounds that the award did not represent the agreement, all that remained to be done was to construe the award. There was no claim to set aside the award for mistake because the amendment of the Statement of Claim which would have raised such a claim was not allowed at the trial. As it turns out, the appellant did not need to amend because of the construction of the award adopted in this Court.

The critical question is whether the award purports to order the appellant to pay the sum of $215,000 in settlement of the state of the accounts between the parties so far as they concern the appellant's liability to compensate the respondent in relation to the relevant improvements, or whether it purports to order the appellant to pay $215,000 as the ascertained value of the improvements. The respondent urges that by the use of the words "balance of value" the award was referring to the monetary balance which would exist if the ascertained value of the improvements had been $290,000 and the $75,000 were allowed for. But to extract this meaning from the expression "being the balance of the value at the date of withdrawal of the said land of all improvements, it has to be deduced that, although the submission to the arbitrator related only to the ascertainment of the value of the improvements and the award refers only to the balance of value and not the balance of money due, it must be treated as referring to the state of accounts between the parties in respect of the value of the improvements. To make that deduction the respondent has no basis other than the use of the word "balance" in a somewhat uncomfortable context.

But the submission was not concerned with the state of accounts as between the parties relating to the appellant's liability to compensate the respondent. How or when the plaintiff might discharge its liability for the value of the improvements as ascertained was a matter quite outside the submission. No doubt if the parties had been in agreement that the arbitrator should order, by consent, that $215,000 was to be paid in addition to the $75,000 already paid, that might have been provided for by appropriate words. But there is no real basis for concluding that the award does travel into the area of the state of accounts between the parties. The order deals with a sum of money being a balance of value, not a balance of accounts. It is said that the expression "balance" is apt to refer to a balance of money and introduces the notion that what is referred to is a balance of money in accounts as between the parties. Certainly to use the expression balance of value is an inapt way to refer to the ascertained value of the improvements, but, at least, in a document implementing an obvious compromise of competing contentions on the subject of values the notion that, in that respect, a balance has been struck, is not incongruous.

To glean from the words used the notion that a new subject altogether, namely the fate of the $75,000 already paid, was being dealt with would be to use imagination rather than to construe the words. The provision is that the plaintiff is ordered to pay $215,000. The critical words "the sum of $215,000 being the balance of the value (of the improvements)", cannot, by a process of construction, be translated into "being the balance due by the appellant to the respondent in respect of the ascertained value of the improvements on the basis that the respondent retains the sum of $75,000 already paid by way of advance against its liability for that value". To ascertain the fate of the $75,000 one goes back to the respondent's receipt of 25 July 1974, where the arrangement concerning it is clearly stated. It is payment of an advance against any sums due to or found to be due to the appellant arising out of arbitration in respect of the withdrawal of land from the Crown lease. The sum of $215,000 is the sum found due on the arbitration. It satisfies the definition of the sum against which the $75,000 was advanced. Clear words would be necessary to show that the $75,000 had changed its nature and been converted from an advance against liability for a sum to be awarded to a payment additional to the sum actually awarded. There are no such clear words.

It is my view therefore that the appeal in No. ACT G.62 of 1982 in respect of action No. S.C. 750 of 1977 should be allowed, the judgment therein set aside and in lieu thereof judgment should be entered for the appellant in the sum of $75,000.00 with costs of and incidental to the appeal and the proceedings in the Supreme Court. Interest should not be ordered to be paid in respect of the sum of $75,000.00 in view of the circumstance that during the relevant period the appellant was withholding the equivalent amount in respect of the cause of action in No. S.C.799 of 1979.

In the appeal No. ACT G.63 of 1982 in respect of Action No. S.C.799 of 1979 I would allow the appeal, set aside the judgment in favour of the respondent and enter judgment for the appellant by declaring that as at 5 October 1978 (the date on which the appellant withheld payment of $75,000.00) the appellant was entitled to set off that sum against the respondent's entitlement to compensation in respect of the land contained in certificates of title Vol.72 Fol.7163 and Vol.90 Fol.4 and order that the respondent pay to the appellant its costs of and incidental to this appeal and the proceedings in the Supreme Court.

I have had the advantage of reading in draft form the reasons for judgment of Gallop J. I adopt his careful analysis of the facts of the case and of the sequence of events before and during the trial of these actions. I agree with the conclusions which he and Smithers J. have reached and with the orders proposed. I shall therefore confine myself to the central questions of law.

This is in my view a clear case of an overpayment by mistake, entitling the payer to recover the amount overpaid. The mistake in question consisted in ignorance of an advance payment made in part satisfaction of an undoubtedly greater liability. Or, to adapt terms used by Baron Parke in the leading case of Kelly v Solari [1841] EngR 1087; (1841) 9 M & W 54 at 58-9, those acting for the Commonwealth, at the time the $215,000 was paid, arranged payment of that amount upon the supposition that no advance payment had been made, and that Mr. McCormack was therefore entitled to payment in full of the amount agreed. The supposition was in fact untrue and the full amount would not have been paid if those responsible had known of the advance payment.

Like the learned trial judge, I have found most helpful the exposition of the relevant law by Goff J. in Barclays Bank v W.J. Simms Ltd (1980) 1 Q.B. 677 at 686-696. However I am unable to agree with his Honour the trial judge that this case "falls precisely within one of the exceptions to the principle of restitution of money paid under a mistake of fact" recognized by Goff J.

That exception relates to the case where ". . . 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" (per Goff J. at 695).

There is nothing in Goff J.'s formulation of principle, or in the cases he cites, to suggest that this exception extends to cover an overpayment of a debt. Indeed Goff J. refers to a very similar case as authority for the proposition that "even if the payee has given consideration for the payment . . . . that transaction may itself be set aside (and so provide no defence to the claim) if the payer's mistake was induced by the payee, or possibly even where the payee, being aware of the payer's mistake, did not receive the money in good faith: cf Ward & Co v Wallis (1900) 1 Q.B. 675".

In that case the plaintiffs had sued the defendant for work and labour done and in doing so had, by mistake, credited the defendant with a payment which he had not made. The defendant realized the plaintiffs' mistake, but paid only the amount claimed. When they discovered their error the plaintiffs brought a fresh action to recover the amount wrongly credited, as money had and received. It was held that, in spite of the general principle that after a settlement under the pressure of process of law the proceedings cannot be reopened, an exception should be made in such a case. Kennedy J. said (at 678-9)

". . . if the person enforcing a payment under legal process has therein taken an unfair advantage or acted unconscientiously, knowing that he had no right to the money, the principle . . . . , may not prevent the defendant from recovering the money back. A similar limitation, as it seems to me, ought to apply to such a converse case as this, where the plaintiff has on the face of the writ credited the defendant with the payment of a sum of money on account, which the defendant must have known to have been so credited by a mistake on the plaintiff's part".

Kennedy J. went on to deal with the facts, saying of the defendant,

"He has not thought fit to come here and deny that he knew it; and, in my opinion, he did know it, and he was acting unconscientiously in taking the receipt from the plaintiffs in full. I think, therefore, that the settlement under legal process was not bona fide on his part, and that the plaintiffs are entitled to reopen it."

In my view the authorities I have cited point clearly to the result that in this case the Commonwealth should be able to recover the amount which it overpaid in error.

This conclusion is not affected by the fact that the agreement of the parties as to the value of improvements was incorporated into a consent arbitrator's award, nor by the fact that the award, by consent, ordered the Commonwealth to

"pay the sum of $215,000.00, being the balance of the value at the date of the withdrawal of the said land of all fixtures and erections on, and of all improvements . . . . to the abovenamed lessee within fourteen days of the date hereof".

It is clear that the award, drawn up by the Commonwealth's solicitor, was affected by the same continuing mistake on the part of Commonwealth officers which had underlain the negotiations and agreement which preceded it and which led finally to the making of a payment of $215,000.

However I have no doubt that the award, properly interpreted, fixes an amount of $215,000 as the total amount to which Mr. McCormack is entitled. This is said to be "the balance of the value at the date of the withdrawal of the said land of all fixtures and erections on, and of all improvements . . . " (underlining supplied). This was in 1972.

It is therefore clear that the award made no allowance for the fact that $75,000 had been paid in 1974. The reference in the award to "the balance of the value . . . . of all fixtures and erections on, and of all improvements . . . " can only have been intended to relate to an accounting balance of the value of various items. It did not relate to a balance of payments. If the Commonwealth had made a payment of $140,000, the award would have been satisfied. The amount of $75,000 was overpaid by mistake and is recoverable.

I should perhaps add that I agree with the learned trial judge that the Commonwealth's 1974 payment of $75,000, by way of advance, was not a provisional payment within the meaning given to that phrase by Dixon J. (as he then was) in York Air Conditioning and Refrigeration (A/sia) Pty Ltd v The Commonwealth [1949] HCA 23; (1949) 80 C.L.R. 11 at 63-64.

There was never any doubt in the present case that the amount ultimately to be paid by the Commonwealth to Mr. McCormack would considerably exceed $75,000. That sum was, in my view, paid finally and unconditionally as an instalment of the total sum which had still to be determined.

These are two appeals from the judgments of the Supreme Court of the Australian Capital Territory in actions in which the Commonwealth of Australia ("the Commonwealth") claimed the sum of $75,000 as money paid under a mistake of fact and in which Hugh John McCormack ("McCormack") claimed the sum of $75,000 plus interest from the Commonwealth.

In 1957 McCormack leased land in the Australian Capital Territory from the Commonwealth pursuant to the Leases Ordinance 1918. By clause 2(d) of the lease the Commonwealth covenanted with McCormack that it might, by notice in writing, withdraw the land from lease and that in such circumstances the Commonwealth would pay to McCormack the value at the date of the withdrawal of all fixtures, erections and improvements. The value thereof was to be ascertained by agreement or, in default of agreement, by arbitration under the provisions of the law for the time being in force in the Australian Capital Territory relating to arbitration. The law in force at that time was the Arbitration Act 1902 of New South Wales.

The Commonwealth duly gave notice of withdrawal of the land and McCormack, by letter from his solicitors dated 22 May 1973, claimed $336,800 as the value of the improvements. The Commonwealth did not agree with this value and on 18 January 1974 the parties, through their respective solicitors, submitted the dispute to an arbitrator for determination. McCormack duly submitted to the arbitrator his claim for $336,800 supported by a valuation in writing, a copy of which was delivered to the Commonwealth.

On 25 June 1974 McCormack, through his solicitors, requested the Commonwealth to advance a sum of $100,000 "in respect of his leasehold claim". The Commonwealth agreed to advance the sum of $75,000, which was acknowledged by McCormack's solicitors by letter dated 17 July 1974. McCormack executed a receipt for this sum in the following terms:

"I HUGH JOHN McCORMACK of TUGGERANONG in the Australian Capital Territory hereby acknowledge receipt from the Commonwealth of Australia the sum of seventy five thousand dollars $75,000.00 being payment of an advance against any sums due to or found to be due to me arising out of arbitration in respect of the withdrawal of land from the Crown lease of Block 28 Lanyon currently the subject of Arbitration proceedings before Mr M. Wilcox.
SIGNED . . . Hugh J. McCormack . . .
This 25th day of July 1974."

There does not appear to have been any further progress towards settlement of McCormack's claim either by agreement or by negotiation until 1976. On 21 June 1976 there was a meeting between officers of the Lands Branch of the Department of the Capital Territory and McCormack and his valuer. Agreement was reached that McCormack would accept an offer of $215,000 in full settlement of his claim and the officers undertook to recommend payment of that amount. No contract was formed at that time as the officers of the Department had no authority to bind the Commonwealth.

Following the agreement referred to, McCormack's valuer, by letter dated 21 June 1976 confirmed that McCormack "will accept the sum of $215,000 in full settlement of all claims excluding plant and equipment, e.g. workshop, shearing shed, as per our original agreement, made in respect of the abovementioned lease". McCormack also signed a postscript to the letter in the following terms:

"I hereby confirm that the terms and conditions as set out herein are in accordance with the agreement made this day."

By further letter dated 1 July 1976, McCormack's valuer confirmed that McCormack would accept the sum of $215,000 in full settlement of all claims for all lessee-owned fixtures, erections and improvements on the resumed land.

On the hearing of the actions the Commonwealth called as witnesses the officers who were present on behalf of the Commonwealth during the oral negotiations between the parties on 21 June 1976 and sought to lead evidence from them of the conversations that then took place. The evidence was objected to by counsel for McCormack and was rejected as irrelevant to any issues arising in the case. Nevertheless, the documentation necessary to give effect to the agreement, namely, a submission from the Assistant Secretary, Land Management, to the First Assistant Secretary in the Department of the Capital Territory and a minute to the Minister recommending payment of the sum of $215,000, had been admitted into evidence and were not disputed.

Returning to the chronology, on 7 July 1976 the Commonwealth raised within its own administration the appropriate action to effectuate a payment of $215,000 to McCormack. As was found by the trial Judge, the internal document was a requisition for supplies signed by the Secretary of the Department of the Capital Territory on 7 July 1976. This was a Treasury form requiring the provision of $215,000 "in full settlement of all outstanding claims" under the relevant lease.

On 14 July 1976 the document called Claim for Payment (another Treasury document) was duly certified for the "purchase of improvements on resumed leases" and particulars of the claim were referred to as "28 Lanyon. Payment in full settlement of all outstanding claims" under the relevant lease.

On 21 July 1976 the Commonwealth's solicitor wrote to the Arbitrator, who had been appointed by letter of 18 January 1974, informing him that agreement had been reached in relation to McCormack's claim and other claims and requested him to sign a consent award which had already been approved by McCormack's solicitors and return it to the Commonwealth's solicitor. The Arbitrator duly executed the document called a Final Award, which was in the following terms, on 23 July 1976:

"FINAL AWARD

BY CONSENT I ORDER, that the Commonwealth of Australia pay to the abovenamed lessee of Block 28, District of Lanyon in the Australian Capital Territory, the sum of $215,000.00, being the balance of the value at the date of the withdrawal of the said land of all fixtures and erections on, and of all improvements on or effected by the lessee or by a prior lessee under this lease or under a prior lease of the land, such lease being between the Commonwealth of Australia and the abovenamed lessee. AND I FURTHER ORDER that the Commonwealth pay the said sum to the abovenamed lessee within fourteen days from the date hereof.
DATED this 23rd day of July 1976.
(Murray Wilcox)
.......................
Arbitrator"

On 2 August 1976 the Commonwealth paid the sum of $215,000 by cheque to McCormack's solicitors and by mistake of fact failed to take account of the advance of $75,000 already paid in the same way on 17 July 1974. On 25 October 1976 the Commonwealth's solicitor wrote a letter to McCormack's solicitors saying, inter alia:

"By mistake, the amount appearing in the order of Mr Wilcox described as the balance of the value at the date of withdrawal was shown as $215,000.00 instead of $140,000.00. In furtherance of that mistake, an amount of $215,000.00 was forwarded to and received by you.
As a result of this mistake, there has been an overpayment to you of the amount of $75,000.00. I am instructed to demand from you payment of the amount of the overpayment within seven days of the date hereof; failing which I am to institute legal proceedings against you without further delay."

McCormack's solicitors replied by letter of 9 November 1976, inter alia, in the following terms:

"We are instructed that there was no mistake as to the final settlement figure to be paid to our client. The sum of $75,000 was paid to our client on 25 July, 1974 on account of the compensation to which he was entitled. During the relevant discussions with Officers of the Commonwealth including the meeting of 21 June, 1976 there was no reference to the payment of $75,000. The offer of $215,000 was made by the officers of the Commonwealth without any suggestion that it was to include the $75,000 previously paid. Our client assumed that the sum of $215,000 was in addition to the $75,000 already paid and this assumption was made by him, not only during the meeting of 21 June, 1976, but when the letters were written by Mr O'Dea on 21 June and 1 July, 1976.
The final Award of the Arbitrator, prepared by you and approved by this firm, is quite clear in its terms that the sum of $215,000 was the balance of the value at the date of withdrawal of the land of the relevant fixtures, erections and improvements. Indeed, the Commonwealth pursuant to the Award, paid our client the sum of $215,000.
Our client denies that there has been any overpayment."

This completes the chronology of events prior to the institution of proceedings by the Commonwealth to recover from McCormack the sum of $75,000 paid under a mistake of fact, being action No. S.C. 750 of 1977.

In action No. S.C. 799 of 1979 McCormack sued to recover a sum of $75,000 with interest from the Commonwealth. He was the owner in fee simple of lands in the Australian Capital Territory which were acquired by the Commonwealth under the Lands Acquisition Act 1955. On 23 March 1978 it was agreed between McCormack and the Commonwealth that the compensation payable in respect of such acquisition should be $500,000 together with statutory interest and costs and that the Commonwealth should purchase from McCormack other freehold land not in the Territory for the sum of $40,000. The Commonwealth, relying on a set-off of the $75,000 which was in question in action No. S.C. 750 of 1977, paid the whole amount due except the sum of $75,000 and McCormack instituted action No. 799 of 1979 for recovery of this amount together with interest to the date of judgment.

This action was heard contemporaneously with action No. S.C. 750 of 1977 and for the reasons given in that action, the learned trial Judge rejected the Commonwealth's defence and adjourned the hearing of the action to enable McCormack to move for judgment in appropriate terms.

The appeals this Court are against both decisions and it was common ground that the matter in dispute is common to both actions and both appeals.

The Commonwealth's appeals to this Court are on the following grounds set out in the amended Notice of Appeal:

1. His Honour erred in Law in finding that payment made by the plaintiff of $75,000.00 on or about 25 July 1974 to the defendant was not made provisionally.

2. His Honour erred in Law in finding that the payment made by the plaintiff of $215,000.00 on or about 2 August 1976 to the defendant was made for good consideration, namely, to discharge a debt owed to the defendant.

3. His Honour erred in Law in holding that payment of $215,000.00 by the plaintiff to the defendant on or about 2 August 1976 was pursuant to a concluded contract to pay it in discharge of the defendant's claim under the lease of Block 28, Lanyon in the Australian Capital Territory.

4. His Honour erred in Law in failing to find that the plaintiff had paid to the defendant $290,000.00 by mistake pursuant to a concluded contract between the plaintiff and the defendant whereby the plaintiff agreed to pay $215,000.00 to the defendant in full discharge of the defendant's claims under the lease of Block 28, Lanyon in the Australian Capital Territory.

5. His Honour erred in Law in refusing the plaintiff's application for leave to amend the statement of claim so as to seek an order setting aside the consent award on the ground of mistake.

6. His Honour erred in Law in failing to set aside the consent award on the grounds of mistake.

7. His Honour erred in Law in holding that the payment of $215,000.00 by the plaintiff to the defendant was pursuant to a valid award of the arbitrator.

8. His Honour erred in Law in holding that the case was one of a mistake made by one party only in entering into the contract.

9. His Honour erred in Law in holding that on its proper construction the award required the payment by the plaintiff to the defendant of $215,000.00 in addition to the monies already paid by the plaintiff to the defendant namely $75,000.00.

10. His Honour erred in Law in failing to find: - (a) that $75,000.00 was paid by the plaintiff to the defendant pursuant to a mistake of fact; and (b) that such sum was recoverable by the plaintiff from the defendant as money had and received by the defendant to the use of the plaintiff.

11. His Honour erred in Law in refusing to allow evidence to be adduced as to the conversations in June 1976 between officers of the Commonwealth and the defendant and the representatives of the defendant.

It is necessary to examine the conduct of both actions before the learned trial Judge and the issues raised on the pleadings as amended.

The Commonwealth's claim was for money payable by McCormack to the Commonwealth for money had and received by McCormack for the use of the Commonwealth and the Commonwealth claimed the sum of $75,000. The Statement of Claim recited the factual matters leading up to the Arbitrator's award made on 23 July 1976 requiring the Commonwealth to pay to McCormack the sum of $215,000 in respect of McCormack's claim arising from the withdrawal of the subject land from lease. It is unnecessary to recite those paragraphs of the Statement of Claim. It is sufficient to repeat paragraphs 9, 10, 11, 12 and 13 thereof which were in the following terms:

9. On or about 23 July 1976 the arbitrator made an award which required the plaintiff to pay the defendant the sum of $215,000.00 in respect of the defendant's claim arising from the withdrawal of the said land from lease.

10. The plaintiff has never been found liable or agreed to pay any sum other than $215,000.00 to the defendant by reason of arbitration or otherwise under the terms of the said lease.

11. On or about 2 August 1976 the plaintiff paid to the defendant the sum of $215,000.00.

12. In paying the said sum of $215,000.00 the plaintiff by mistake of fact failed to take account of the advance of $75,000.00 referred to in paragraph 7 above.

13. Owing to the said mistake of fact the plaintiff has overpaid the defendant an amount of $75,000.00.

By his defence, McCormack denied the matters alleged in the above paragraphs except paragraph 11. When the actions came on for hearing McCormack through his Counsel admitted the mistake of fact pleaded in paragraph 12 of the Statement of Claim. The Commonwealth applied to amend its statement of claim so as to seek an order that, in the event of a certain construction being put upon the award, the award be set aside and remitted to the Arbitrator to frame an award in accordance with the agreement of the parties. This application was opposed and ultimately refused.

McCormack applied to amend the defence. The application was not opposed and the amendment allowed, the terms of which were to delete his denials of the matters alleged in paragraphs 9, 10, 12 and 13 of the Statement of Claim and to substitute a plea in the following form:

"3. In answer to the matters alleged in the statement of claim under the heading "Particulars" the defendant says

(a) The plaintiff agreed to pay and did pay to the defendant the sum of $75,000.00 referred to in paragraph 7 of the Statement of Claim.

(b) The plaintiff by the terms of the said award agreed to pay and did pay to the defendant the further sum of $215,000 referred to in paragraph 12 of the Statement of Claim.

(c) Subject to production of the said award and reliance upon the terms thereof the defendant admits paragraphs 1 - 9 and 10 and 12.
(d) The defendant denies paragraphs 10 and 13."

Thus it was clear at the commencement of the trial that McCormack, having admitted the mistake of fact pleaded, proposed to rely upon the terms of the award as evidence of an agreement by the Commonwealth to pay a sum of $215,000 in addition to the $75,000 already paid. It was also clear that the Commonwealth wished to recover the $75,000 as a payment made under a mistake of fact arguing against that construction of the award; but, in case the terms of the award were to be construed by the Court as meaning that the $215,000 was in addition to the $75,000 already paid as contended for by McCormack, the Commonwealth wished to have the award set aside.

In his reasons for judgment the learned trial Judge found that there was a concluded contract between the parties made orally at the meeting on 21 June 1976 and repeated in writing by the valuer's letter of the same date, which was countersigned by McCormack, and again by the valuer's letter of 1 July 1976, namely, that McCormack would accept $215,000 in full settlement of all claims and that the offer must have been accepted by the delivery of the unsigned award by the Commonwealth's solicitor to McCormack's solicitors for approval.

His Honour went on to say that the payment of $215,000 by the Commonwealth was either in pursuance of a concluded contract to pay it in discharge of McCormack's claim under the lease or it was in pursuance of the award of the Arbitrator. He said that, regarded as a case of contract, it was one of mistake made by one party only in entering into the contract. He rejected the Commonwealth's case that the payment of $75,000 was a provisional payment (in the sense given to that phrase by Dixon J. as he then was, in York Air Conditioning and Refrigeration (A-Asia) Pty Limited v. The Commonwealth [1949] HCA 23; (1949) 80 C.L.R. 11) and also rejected the Commonwealth's construction of the award to the effect that the $215,000 was the total amount for which McCormack was entitled to receive compensation.

The learned trial Judge relied upon the dicta of Goff J. in Barclay's Bank v. W.J. Simms (1980) 1 Q.B. 677 at 695 and found that the case fell precisely within one of the exceptions to the principle of restitution of money paid under a mistake of fact, namely that the payment was made to discharge, and did discharge, a debt owed to the payee.

It was submitted on behalf of the Commonwealth on the hearing of the appeals that the only proper conclusions to be deduced from the evidence are:
that the Commonwealth made a mistake in paying the sum of $290,000 instead of $215,000, which mistake was admitted on the pleadings;
that McCormack had not been prejudiced or disadvantaged and had not otherwise changed his position by reason of the mistake; and
that the $75,000 was recoverable as money paid under a mistake of fact.

Where money is paid voluntarily under a mistake on the payer's part as to a material fact, as a general rule, it may be recovered in an action for money had and received to the plaintiff's use. Money paid voluntarily with full knowledge of the facts and without bad faith cannot be recovered. The mistake may consist in the payer never having known the real facts or in his forgetfulness of facts of which he once had full knowledge (Halsbury, 4th ed., Vol.32, para.63-64).

With regard to the learned trial Judge's conclusion that there was a concluded contract between the parties, the Commonwealth argued that there was never any contract between the parties to pay $215,000 in addition to the $75,000 already paid and that the only contract was to pay a total sum of $215,000. Grounds 2, 3 and 4 of the amended Notice of Appeal relate to this submission.

At the trial the Commonwealth called as witnesses the Departmental officers who were present on the occasion of the oral negotiations with McCormack and his valuer on 21 June 1976. Those negotiations resulted in McCormack reducing his claim by offering to accept a sum of $215,000 in full settlement and an undertaking by the Departmental officers to seek approval for the payment of that sum in full settlement.

Evidence of what took place during those negotiations was objected to by counsel for McCormack and was rejected on the ground of irrelevance. Nevertheless, there was some evidence of what took place during the negotiations in the documentation prepared by the Departmental officers immediately after the negotiations and agreement as above.

The undisputed evidence was that when McCormack came to the meeting he was still pressing the claim as lodged, namely, for $336,800. The Commonwealth's valuation had been assessed on 30 September 1972 at $104,384. A second valuation had been made on behalf of the Commonwealth on 24 March 1976 and the revised valuation was for an amount of $150,846. Following receipt of that revised figure the Commonwealth had made an offer of $130,000 and that offer had been rejected at a meeting between McCormack and the Minister for the Capital Territory on 3 June 1976.

At the meeting on 21 June 1976 the Departmental officers made an offer of $183,000 in full settlement of all claims. McCormack rejected this offer and pressed his claim at a figure of $280,000. Following further discussions and in an endeavour to reach settlement the Departmental officers undertook to recommend $190,000 "without prejudice to the valuation", apparently meaning that if the matter had to be litigated, the Commonwealth would be entitled to rely upon its revised valuation of $150,846.

McCormack responded by reducing his claim to $255,000, without prejudice to his own claim of $280,000. Further negotiations of a protracted nature took place and the Departmental officers then undertook to recommend payment of an amount of $212,500, being midway between the previous offer of $190,000 and the counter-offer by McCormack of $235,000. There were other matters discussed such as interest and charges for occupancy after withdrawal of the lease. Finally, the Departmental officers undertook to recommend payment of an amount of $215,000 and McCormack agreed to accept that amount.

The evidence of what took place during the negotiations and the resolved position of the parties at the end of the negotiations as disclosed by the Departmental documents in evidence were not disputed. In his reasons for judgment the trial Judge did not deal with this evidence. He referred to the terms of the letter from McCormack's solicitors in response to a letter of demand for the sum of $75,000 paid under a mistake of fact in which the solicitors said that McCormack assumed during the discussions on 21 June 1976 that the sum of $215,000 was in addition to the $75,000 already paid. His Honour said that there was no evidence suggesting that the defendant did not so assume. This finding was disputed on the hearing of the appeals.

It is true that there was no evidence that the sum of $75,000 was mentioned during the negotiations on 21 June 1976. His Honour went on to say that the evidence did not clearly show that the officers assumed the contrary, namely, that the $215,000 was to include $75,000 so that only $140,000 was still to be paid.

In my view the only proper inference from the undisputed evidence of what took place in the negotiations is that all parties attended the conference in order to try to reach agreement about the total sum payable by way of compensation for the value, at the date of withdrawal of the lease, of all fixtures, erections and improvements on the property. The parties had only 2 alternatives under clause 2(d) of the lease i.e. to reach agreement or, in default of agreement, to submit the matter to arbitration. The whole purpose of the meeting on 21 June 1976 must have been to try to reach agreement. That agreement was reached.

Furthermore, McCormack's total claim dating from 22 May 1973 when it was first lodged by letter from his solicitors, never exceeded $336,800 and this was his opening figure at the negotiations. If he assumed during those negotiations that the sum of $75,000 already paid was to be in addition to any sum agreed upon at the conference, he would not have commenced negotiations at his original figure claimed in 1973 and again in 1974. Nor would he have made a counter-offer during the negotiations of $280,000 because such a claim, additional to the $75,000 already paid, would have exceeded his total claim as originally lodged. Likewise, the Departmental officers could not have had in mind that the figure they were endeavouring to negotiate was to be in addition to the $75,000.

The opening offer of $183,000 was based upon a revised valuation and the increased offers could only have been made in an endeavour to reach agreement rather than refer the whole matter to arbitration.

Although these facts and inferences were established in the documentation prepared by the Departmental officers immediately after the negotiations on 21 June 1976, it was submitted on behalf of McCormack on the hearing of the appeals that in so far as the documents contain accounts of the conversations alleged to have taken place, they do not have the status of uncontradicted evidence because direct evidence of the conversations had been rejected by the trial Judge. I do not accept this submission.

In my view the evidence was relevant to the concluded contract between the parties made orally on 21 June 1976 and repeated in writing by the valuer's letter of the same date and again by another letter on 1 June 1976, which concluded contract was found by the trial Judge. It was also relevant as part of the surrounding circumstances to prove that the words of the award which were susceptible of more than one meaning were applicable to one only of those meanings - that is, that the sum of $215,000 was agreed as the value of the improvements. It is legitimate to adduce extrinsic evidence of the surrounding circumstances, not for the purpose of adding a term to the written agreement or of altering its ordinary legal construction, but to identify its subject. For the purpose of identifying the subject of the contract prior negotiations are available as evidence (Bacchus Marsh Concentrated Milk Co. Ltd. (In Liquidation) v. Joseph Nathan & Co Ltd. [1919] HCA 18; (1919) 26 C.L.R. 410 per Isaacs J. at 427). All facts are admissible which tend to show the sense words bear with reference to the surrounding circumstances of and concerning which the words were used (Grant v. Grant (1870) L.R. 5 C.P. 727 at 728 cited by Williams J. in White v. Australian and New Zealand Theatres Ltd. [1943] HCA 6; (1943) 67 C.L.R. 266 at 281). The evidence also served to negate the assumption on the part of McCormack set out in his solicitors' letter of 9 November 1976 that the sum of $215,000 agreed upon at the meeting was in addition to the $75,000 already paid.

It follows that on the evidence before him, I am of the view that the trial Judge should have entertained no doubt that McCormack and the Departmental officers all assumed that they were trying to reach a final figure for settlement of McCormack's claim, and that the sum of $75,000 already paid, if it was averted to at all, was relevant to their negotiations only in so far as it would have to be brought into account when the agreement was put into effect by payment by the Commonwealth to McCormack of the negotiated figure.

McCormack called no evidence and did not give evidence himself though present throughout the trial.

If it were necessary I would find some support, or be reinforced in the conclusion I have reached by the decision of Jones v. Dunkel [1959] HCA 8; (1959) 101 C.L.R. 298 and the following passage from Wigmore on Evidence, 3rd ed., Vol.2, s.285, p.162:

"The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which made some other hypothesis a more natural one than the party's fear of exposure. But the propriety of such an inference in general is not doubted."

As Windeyer J. went on to say (at p.321), this is plain commonsense, and, quoting from Wigmore, exactly the same principles apply when a party who is capable of testifying fails to give evidence. Unless a party's failure to give evidence be explained, it may lead rationally to an inference that his evidence would not help his case.

It follows that, in my view, the trial Judge was wrong in finding on the undisputed evidence that, regarded as a case of contract, it was one of mistake made by one party only in entering into the contract. Such a finding was against the evidence and the weight of evidence. The only rational conclusion available on the evidence is that the payment of $215,000 in so far as it was based upon contract, was a payment in pursuance of a concluded contract to pay a total sum of $215,000 and not $290,000.

Furthermore, His Honour seems to have found that the mistake of fact relied upon by the Commonwealth as the basis of its action for money had and received, was that at the time of the negotiations on 21 June 1976, or at the time when the consent award was submitted to the Arbitrator, the Commonwealth had forgotten the earlier payment. That was not the mistake of fact pleaded in paragraph 12 of the Statement of Claim and particularised in response to a request for further and better particulars in the course of the litigation. The mistake of fact was particularised in the following terms:

"The fact in relation to which the mistake is alleged to have occurred is the fact of the existence of the $75,000.00 advance the details of which are stated in paragraph 7 of the particulars contained in the statement of claim.
The mistake of fact referred to in paragraph 12 of these particulars consisted in the failure of the plaintiff to take account of the fact referred to in paragraph 7 at the time when the subsequent payment to the defendant of $215,000.00 was made."

It is clear that in the litigation the mistake by the Commonwealth was alleged to have occurred at the time of the payment of $215,000 and not earlier.

It was submitted on behalf of McCormack that the mistake of fact relied upon by the Commonwealth was set out in the letter of demand from the Commonwealth's solicitor to McCormack dated 25 October 1976. The relevant part of that letter read as follows:

"By mistake, the amount appearing in the order of Mr Wilcox described as the balance of the value at the date of withdrawal was shown as $215,000.00 instead of $140,000.00. In furtherance of that mistake, an amount of $215,000.00 was forwarded to and received by you."

It was submitted on behalf of McCormack that, by his solicitors' letter in reply dated 9 November 1976, issue had been joined on whether such a mistake had occurred in the drafting of the award. This submission is without substance. The fact that a different mistake of fact was set out in the letter of demand to that relied upon when proceedings were instituted is of no importance. The mistake pleaded was admitted.

I turn to the construction of the award. There are only two possible constructions; i.e. that it was to provide for a total payment of $215,000 (which is the construction contended for by the Commonwealth), or that it was to provide for the payment of $215,000 in addition to moneys already paid. That they were the only two constructions available was common ground on the hearing of the action.

In order to determine which is the correct construction of the award it is convenient to commence with the letter signed by the solicitors for the parties referring the matter to the Arbitrator pursuant to clause 2(d) of the lease. The letter requested the Arbitrator formally to act as such pursuant to clause 2(d) of the lease and stated the mutual agreement of the parties that:

"1. You as Arbitrator may, at the request of the parties by consent, make an interim award or interim awards respecting a portion or portions only of the matters referred and the making of such interim award or awards shall not affect the submission of the other matters referred.

2. The submission shall not be revoked or affected by the death of the Claimant before the making of an award which may be delivered to the personal representative of the Claimant if he dies before the making of an award.

3. You as Arbitrator shall be at liberty to direct points of claim and defence to be delivered and to allow such amendments in the points of claim or defence at any time upon such terms as to costs as you may think proper."

Following the reference to the Arbitrator, McCormack submitted his claim, quantified out at $336,800 and supported by a valuation. After the concluded negotiations at the conference on 21 June 1976 the Commonwealth's solicitor wrote to the Arbitrator advising him that agreement had been reached "as to the value of improvements and payment to be made" to McCormack and other lessees on the withdrawal of their leases. The Arbitrator was requested to sign the final award in the case of McCormack's claim, which he did on 23 July 1976.

It seems to me that, in so far as the award purports to order the Commonwealth to pay the sum of $215,000 to McCormack, it exceeds the Arbitrator's function, which was to determine the value of the improvements pursuant to clause 2(d) of the lease. The terms of the award however were acceptable to the parties and should be regarded only as a formal determination of the value of the improvements. The order for payment in the award does not add to its force or efficacy as an award.

The main difficulty in construction arises out of the words "the balance of the value at the date of the withdrawal of the said land of all fixtures and erections on and or improvements on or effected".

It was submitted on behalf of the Commonwealth that the consent award was clearly intended to give effect to the prior agreement between the parties that the Commonwealth would pay to McCormack the sum of $215,000 in full settlement of his claim for compensation which had been referred to arbitration. Although the claim had been referred to the Arbitrator on 18 January 1974 and an advance payment made on 25 July 1974 the Arbitrator had never been asked to make an interim award which would have been his proper function. Furthermore, the terms of the receipt signed by McCormack acknowledging receipt of the sum of $75,000 contained no reference to the payment being for part value of the improvements.

It was submitted that the receipt is a clear acknowledgement that the payment was by way of an advance against any sums found due as a result of the arbitration and not for part of the value of the improvements on the subject land.

It follows, so it was submitted, that by his consent award the Arbitrator was determining the value of the improvements and the purpose of the award was to give effect to the prior agreement between the parties which was for $215,000 and not $290,000. The alternative construction contradicts the fact that agreement between the parties had been reached and is difficult to reconcile with McCormack's admission of the mistake of fact pleaded.

The further submission was that, as the award contradicts the agreement reached, it should be treated as a nullity for present purposes because this Court has the means of knowledge of the underlying agreement to the consent award. Counsel for the Commonwealth referred to the following passage in the judgment of Lindley L.J. in Huddersfield Banking Company Limited v. Henry Lister & Son Limited (1895) 2 Ch. 273 at 280:

"A consent order, I agree, is an order; and so long as it stands it must be treated as such, and so long as it stands I think it is as good an estoppel as any other order. I have not the slightest doubt on that; nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud, but upon any grounds which invalidate the agreement it expresses in a more formal way than usual."

His Lordship went on to say:

"To my mind, the only question is whether the agreement upon which the consent order was based can be invalidated or not. Of course, if that agreement cannot be invalidated the consent order is good. If it can be, the consent order is bad."

He went on to say that in such circumstances the agreement can be set aside, formally if necessary, or treated as set aside and invalid without any process or proceedings to do so.

Counsel also referred to Harvey v. Phillips [1956] HCA 7; (1956) 95 C.L.R. 245, which was a case in which the High Court considered the circumstances in which a consent order of a court will be set aside. The court said at p.243:

"The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relied against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like."

The High Court referred to the above dicta of Lindley L.J. in Huddersfield Banking Company Limited v. Henry Lister & Son Limited.

Counsel for the Commonwealth submitted that on the basis of the above authorities this Court ought to treat the award as set aside and enter judgment for the Commonwealth for the sum of $75,000. Alternatively, it should give leave to the Commonwealth to amend its Statement of Claim so as to seek an order setting aside the award and remit the matter to the Supreme Court for new trial. Ground 9 in the amended Notice of Appeal refers.

It was submitted on behalf of McCormack that the words "balance of value" mean "in addition to any earlier value", i.e., in addition to the earlier value of $75,000. It was submitted that this meaning is consistent with the Commonwealth's accounting documents which refer to the sum of $215,000 as "part value". It was further submitted that as the award was a consent award and courts are reluctant to set aside awards of an Arbitrator (Attorney-General for Manitoba v. Kelly (1922) 1 A.C. 268), this Court should not set aside the award or treat it as set aside. Nor should this Court permit any amendment of the Statement of Claim so as to allow the Commonwealth to seek an order to set aside the award because there is a procedure prescribed by section 13(2) of the Arbitration Act 1902 (N.S.W.). Any such application in accordance with the procedure would not be out of time and although the Supreme Court has power to grant an extension of time (Order 64, rules 5 and 10), the Commonwealth did not apply at the trial for an extension of time and did not seek any adjournment so that it could collate material to support such an application and still has not applied.

In my view the Commonwealth's construction of the award should prevail, notwithstanding its inappropriate terminology. The award should be regarded as a formal document to give effect to the prior agreement between the parties that $215,000 be paid by the Commonwealth in full settlement of the claim referred to the Arbitrator. The award was unnecessary. Once the Minister gave his approval and that approval was communicated to McCormack the parties were ad idem. In so far as the award inappropriately expressed the agreement of the parties, it should be ignored.

It follows that payment of the $215,000 was made under the award but was made under the mistake of fact relied upon by the Commonwealth, namely, the Commonwealth failed to take account of the fact of the $75,000 advance when the payment of $215,000 was made. In the circumstances it is unnecessary to consider whether the trial Judge should have granted leave to the Commonwealth to amend the Statement of Claim so as to seek an order setting aside the consent award (ground 5).

At the trial counsel contended as an alternative basis of the Commonwealth's claim that the payment of $75,000 was a provisional payment in the sense given to that phrase by Dixon J. in York Air Conditioning and Refrigeration (A-Asia) Pty Limited v. The Commonwealth [1949] HCA 23; (1949) 80 C.L.R. 11 - that is to say, a payment which was not made once for all but subject to ascertainment of the final liability. The trial Judge rejected that submission. He was satisfied on the evidence that at the time of the payment of the $75,000 there was no doubt that the Commonwealth's liability to McCormack would eventually be found to be more than $75,000 and that the $75,000 was an advance payment on account of a larger sum. It was never contemplated by either party that if the Commonwealth's liability should be determined to be less McCormack would be liable to repay the excess.

In the circumstances he was not persuaded that the York case had any application and was satisfied that the payment was not made provisionally. Certainly the facts in the present matters are different from the facts in the York case, but it is still appropriate to identify the payment of $75,000 as a provisional payment in the sense used by Dixon J. He said that a payment made and received on account of a liability yet finally to be ascertained is prima facie to be considered provisional. He went on to say:

"When the liability has been ascertained the residue of the money lies in the payee's hands un-applied to the purpose for which it was received, namely the discharge of the ultimate debt. Once it is found to have been paid provisionally and not finally, all difficulty disappears, in my opinion, and the balance can be recovered in an action for money had and received."

In my view the trial Judge should have found that the $75,000 was paid provisionally in the sense used by Dixon J., namely on account of a liability yet finally to be ascertained. I would uphold the Commonwealth's argument entitling it to the sum of $75,000 as a provisional payment.

For these reasons I would allow the appeals and set aside the judgments in favour of the respondent. It is necessary to add some orders to dispose of both appeals. In the action by the appellant against the respondent (No. S.C. 750 of 1977), which action was dismissed with costs, judgment was entered on 9 August 1982. In delivering his reasons for judgment in both matters on that day the Chief Justice adjourned the action by the respondent against the appellant for the sum of $75,000 plus interest (No. S.C. 799 of 1979) for further hearing to enable the successful respondent to move for judgment. On the resumed hearing on 27 August 1982 the Chief Justice entered judgment in that action for the sum of $75,000 plus interest at the rate of 5.75% per annum on that sum from 18 September 1978 (the date on which final payment less the $75,000 was made) and costs. It was agreed that 5.75% per annum was the appropriate statutory rate.

By its Notice of Appeal in action No. S.C. 750 of 1977 the appellant seeks orders that there be judgment for the appellant against the respondent in the sum of $75,000 plus interest at the rate of 5.75% per annum on that sum from 18 September 1978 to 27 August 1982. In allowing the appeal in that action and setting aside the judgment it is not appropriate to make the order sought in respect of interest. During the relevant period the appellant has been withholding the sum of $75,000 by way of set-off. In action No. S.C. 750 of 1977 (Appeal No. A.C.T. G.62 of 1982) I would allow the appeal, set aside the judgment appealed from and enter judgment for the appellant in the sum of $75,000 with costs of the trial and of the appeal. In action No. S.C. 799 of 1979 (Appeal No. A.C.T. G.63 of 1982) I would allow the appeal, set aside the judgment appealed from and enter judgment for the appellant by declaring that as at 5 October 1978 (the date on which the appellant withheld payment of the sum of $75,000) the appellant was entitled to set-off the sum of $75,000 against the respondent's entitlement to compensation in respect of the land contained in Certificates of Title, Volume 72, Folio 7163 and Volume 90, Folio 4. I would also order that the respondent pay the appellant's costs of the trial in action No. S.C. 799 of 1979, and of the appeal.