Electric Life Pty Ltd v Unison Finance Group Pty Ltd

Court of Appeal (NSW)|2015-11-10|Before: Gleeson JA, Adams J, Emmett JA

[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.]

Judgment

GLEESON JA: I agree with Emmett JA that the primary judge misconstrued clause 8 of the Rental Agreement and accordingly, the applicant had no obligation to pay rent to the respondent in respect on any period after 10 November 2003.
I also agree with his Honour that the applicant's restitutionary claim for recovery of the over payments of rent after 10 November 2003 must fail for the reasons given by his Honour. In this regard, I agree with the additional observations of Tobias AJA.
I agree with the orders proposed by Emmett AJA.

The Proceedings in the Local Court

On 5 September 2013, the Renter commenced proceedings against the Owner in the Local Court of New South Wales seeking recovery of the sum of $57,600.40, plus various fees. The allegations made by the Renter in its statement of claim may be restated in the following terms:

By the Rental Agreement, the parties entered into a contract in respect of the rental of the Equipment;
In accordance with the Rental Agreement, the Renter was to pay quarterly payments of $1,378 plus GST over a 48-month period;
The Renter's obligation to pay the quarterly payments ended in June 2003;
In contravention of the Rental Agreement, the Owner continued to deduct payments in the sum of $1,515.80 (including GST) per quarter from the Renter's bank account from 1 July 2003;
The direct debits ceased in December 2012 once the Renter advised its bank to cease making payments;
The Renter claims a refund of the moneys wrongfully received by the Owner.

It is notable that there is no allegation in the statement of claim of any basis upon which it is alleged that the Renter was entitled to a refund of any moneys, other than the assertion that certain moneys were "wrongfully received" by the Owner. Specifically, there is no allegation that the Renter made any payment under a mistake, whether of fact or law.
The Owner filed a defence to the statement of claim, denying that it was liable to the Renter for the amount claimed. In its defence, the Owner admitted that it received sums of $1,515.80 per quarter after 1 July 2003, but denied that it deducted such payments from the Renter's bank account and that such payments were received by it in contravention of the Rental Agreement. The Owner also denied that any moneys paid by the Renter were wrongfully received by the Owner and denied that the Renter was entitled to receive a refund of any part of such moneys. The defence asserted that, in the events that had occurred, all moneys paid by the Renter to the Owner represented rent to which the Owner was entitled under the terms of the Rental Agreement and such moneys were not liable to be repaid to the Renter.
In further answer to the statement of claim, the Owner made observations to the following effect:

It was a term and condition of the Rental Agreement (cl 8(a)) that, upon the expiration of the initial term of 48 months, the term of the Rental Agreement would automatically renew without the need for any notice unless: 1. the Owner received notice in writing from the Renter, not later than 90 days and not earlier than 180 days prior to the date on which the initial term was to expire, that the Renter did not wish to renew the term; and 2. the Renter returned the Equipment to the Owner by no later than the date on which the initial term was due to expire;
It was also a term and condition of the Rental Agreement (cl 8(b)) that, in those circumstances, the initial term of the Rental Agreement "would renew" for a period that was the lesser of the initial term of 48 months and 12 months and otherwise upon the same terms and conditions as appeared in the Rental Agreement;
Upon the expiration of the initial term on 10 November 2002, the Renter did not give to the Owner any written or other notice in consequence whereof the term of the Rental Agreement automatically renewed for 12 months to 10 November 2003 and the Renter became liable to pay rent for that period and did so;
Thereafter, in the absence of the Renter's giving any further written or other notice and in the absence of the Renter's returning the Equipment to the Owner, the term of the Agreement continued to automatically renew for successive periods of 12 months and the Renter continued to be liable to pay rent to the Owner for those periods and did so up to and including November 2012.

Before the Local Court, the Renter relied (inter alia) on the evidence of Mr Michael Cimino, one of its directors, as well as the evidence of Mrs Nancy Cimino, his wife, who was an employee of the Renter from 1992 until June 2012. Neither Mr Cimino nor Mrs Cimino was cross-examined on the affidavit evidence given by them. It is desirable to state the effect of their evidence.
In November 1998, the Renter needed to update its computers, scanners, digital camera and telephone system. Mr Cimino obtained quotes from various places in respect of each of those items. Once he had settled on the equipment that he wished to purchase, he contacted the Owner "to arrange the finance" and the Owner "approved the finance". Mr Cimino said that the purchase of the Equipment was "fully financed by the loan" from the Owner. Once the documents were signed, the Owner paid the suppliers directly and Mr Cimino arranged to pick up some of the Equipment and to have some of it delivered to the Renter's premises.
Mr Cimino said that "the loan amount" was repayable in four years "with no residual payment at the end when we would own the Equipment". Clearly, that statement could do no more than evidence Mr Cimino's understanding of the arrangement. That understanding has some relevance.
All of the Equipment was replaced by the Renter by the end of 2003. By that time, the Equipment was of no value and it was disposed of. No part of the Equipment was returned to the Owner.
Mr Geoffrey Martin was employed by the Renter as its bookkeeper. There was no evidence as to when he began his employment. Mr Cimino said that he left "the repayment of the loan" to the bookkeeper to arrange by periodic payments from the Renter's bank account with National Australia Bank Ltd (NAB).
While Mrs Cimino ceased working with the Renter in June 2012, she resumed employment for a short time in August 2012 while Mr Martin was on holidays. While attending to the bookkeeping duties, she discovered that each quarter, a payment was deducted from the Renter's bank account with NAB in the sum of $1,517.60. She queried with Mr Cimino as to what the payment related to and he told her that he did not know. After ascertaining from NAB that the payment was to the Owner, Mrs Cimino checked with Mr Cimino, who said: The contract with them finished ages ago. Why are they still taking payments[?] Put a stop to it.
Mrs Cimino was told by NAB that the payments could not be stopped because a direct debit authority had been signed by Mr Cimino and was enforceable by the Owner. After an exchange of communications between Mrs Cimino and the Owner, NAB agreed to stop the making of further direct debit payments.
On 17 April 2014, for reasons delivered ex tempore on that day, a magistrate of the Local Court (the Magistrate) directed a verdict for the Renter against the Owner in the sum of $54,568.50, plus interest, and ordered the Owner to pay the Renter's costs. That figure represented the quarterly payments of $1,550.80 made after November 2003. His Honour was satisfied, on the balance of probabilities, that the payments made since November 2003 "amounted to an unjust enrichment" of the Owner, in that there was no continuing obligation on the part of the Renter to pay and the Owner did nothing to seek the return of the Equipment.

The Proceedings in the Common Law Division

By summons filed in the Common Law Division of the Supreme Court on 12 May 2014, the Owner claimed an order that the decision of the Local Court be set aside on several grounds, relevantly as follows:

The Magistrate erred in his interpretation and construction of cl 8 of the Rental Agreement by holding that the clause provided only for one 12-month period of renewal;
The Magistrate erred in holding that, as a consequence of that interpretation and construction of cl 8, the Renter was entitled to recover from the Owner rental paid for the period November 2003 to November 2012 on restitutionary grounds as moneys paid under a mistake; and
The Magistrate erred in holding that such moneys had been paid by the Renter to the Owner as a result of a mistake on the part of the Renter. The Owner appealed as of right on a question of law, pursuant to s 39(1) of the Local Court Act 2007 (NSW).

On 10 March 2015, for reasons published on that day, [1] a judge of the Common Law Division (the primary judge) ordered that the appeal against the verdict and judgment of the Local Court on 17 April 2014 be upheld and that, in lieu of that verdict and judgment, there be judgment in favour of the Owner. His Honour ordered the Renter to pay the Owner's costs of the proceedings in the Local Court and in the Supreme Court.
The primary judge observed that the authority to make the deductions from the Renter's bank account with NAB was executed at the outset and remained on foot throughout. His Honour held that the Renter must be taken to have been aware, through its bookkeeper in charge of its accounts, that the payments were being made. [2] His Honour observed that the evidence of Mr Cimino was that he thought that the arrangement was one of hire purchase, in which the loan entered into to obtain the Equipment was fully financed by a loan from the Owner and was repayable by the rental payments in four years, at the end of which time the Renter would own the Equipment. His Honour observed that the Rental Agreement in no way reflected such an arrangement and that Mr Cimino's evidence about that was irrelevant, except that it might explain why, at the end of four years, he took no steps to terminate the arrangement. [3]
After considering the terms of the Rental Agreement, the primary judge dealt with the arguments concerning the meaning of cl 8. His Honour summarised the contentions of the Renter and the Owner and concluded that the Owner's submissions must be accepted. His Honour considered that the schedule to the Rental Agreement, which defined the "Initial Term", remained a part of the contract, thus continuing its application in "the new clause 8" in the same way as it did in "the original agreement". It followed, his Honour said, that, since the Renter did not give notice in terms of cl 8(a) or return the Equipment in terms of cl 8(b), "the agreement was continuously renewed" until 14 December 2012 when it was terminated by the agreement of the parties, the Owner not seeking a return of the Equipment. [4] His Honour observed, however, that "most right thinking people" would consider that the Owner had been unjustly enriched at the expense of the Renter and taken "unfair advantage of [the Renter's] mistake". Nevertheless, his Honour concluded that the Owner was entitled to succeed. [5]
Significantly, the primary judge made no other observations in relation to the contentions advanced on behalf of the Owner concerning alleged mistake on the part of the Renter. In particular, his Honour did not specify the mistake on the part of the Renter of which he considered the Owner had taken unfair advantage.
On 7 April 2015, the Renter filed a notice of intention to appeal from the orders made by the primary judge and, on 10 June 2015, the Renter filed a summons seeking leave to appeal from the orders made by the primary judge. Leave is required because the amount involved is less than $100,000. [6] The proposed grounds of appeal are as follows: 1. The primary judge erred in failing to find that cl 8 was limited to one occasion of renewal for a 12-month period and thus the rental terminated on 10 November 2003; 2. In so deciding, the primary judge erred in failing to take into account relevant considerations raised by the Renter as follows: 1. the Owner had utilised a similar renewal clause in another agreement which the Magistrate found to be significantly different from cl 8; 2. to the extent that cl 8 was in any way ambiguous, it should have been construed against the interests of the Owner as the preparer of the Rental Agreement; 3. the construction of cl 8 adopted by the primary judge meant that the phrase "Initial Term" had multiple meanings in the Rental Agreement, a construction that should be rejected; 4. the common intention of the parties, as determined by reference to the fact that the five-year Rental Agreement would have seen the Equipment reach its natural lifespan, was that the rental would not extend beyond five years. At the hearing of the appeal, the Court was informed that ground (b)(iv) above was not pressed. In addition, the other agreement referred to in ground (b)(i), although the subject of submissions by both parties, does not assist in the resolution of the dispute concerning the construction of the Rental Agreement, and I do not propose to say anything about it. Given the conclusion that I have reached on the construction question, it is in any event not necessary to consider it.
In addition, the Owner has filed a draft notice of contention. The grounds upon which the Owner proposes to contend that the decision of the primary judge should be affirmed are as follows: 1. His Honour should have held that the Renter was obliged, pursuant to cl 12 of the Rental Agreement, to pay rent until the Equipment was returned and there was therefore no unjust enrichment of the Owner; 2. His Honour should have held that the Renter did not make the payments by reference to an established mistaken belief and that, therefore, there was no unjust enrichment of the Owner.

Leave to Appeal

A direction was given that, if leave be granted, the appeal be heard concurrently with the application for leave. Two principal bases were advanced on behalf of the Renter as justifying the grant of leave. The first is that the appeal raises a matter of public interest. The second is that there would be a substantial injustice if leave were refused.
There is no substance in the first basis. It was said that if the reasons of the primary judge stand, financiers might be tempted to draft rental agreements that included language equivalent to cl 8 in order to create ambiguity and thereby induce prospective renters to continue to pay rental through some misunderstanding. It is difficult to imagine why a financier would deliberately adopt ambiguous language in the hope that rental payments may be made under a misapprehension. Such a course would be calculated to engender claims such as the present one that the payments were made under a mistake.
On the other hand, if, on its proper construction, cl 8 did not result in a renewal of the hiring after the first renewal for twelve months, and it is demonstrated that the payments made by the Vendor were made under a relevant mistake, then there would be a substantial injustice. Accordingly, notwithstanding that the amount involved is less than $60,000, I would be disposed to grant leave if the Renter is successful in relation to both contentions.

The Grounds of Appeal

There are two questions raised by the appeal. The first is whether, on the true construction of cl 8, the absence of notice under cl 8(a) coupled with the failure to return the Equipment had the consequence that the Rental Agreement continued to be renewed year after year until it was terminated in December 2012. The second is whether the Renter has established that the payments in question were made under a relevant mistake.

Construction of the Rental Agreement

The Renter sought to rely on the following maxim: verba chartarum fortius accipiuntur contra proferentem. The precise meaning of the maxim is by no means clear. The obscurity surrounding its true application arises from the use of the verb "profero, proferre". Relevantly, the verb had the following meanings in Latin: [7]

To give a voice to, utter, pronounce (words, speech);
To put into words, express (an opinion or thought);
To produce (documents, etc.) in evidence;
To bring up (a fact, circumstance, etc.) in support of a contention, adduce;
To put forward (a statement, argument, etc.) for consideration;
To make (facts, etc.) known, publish, disclose. Literally, therefore, the maxim means that the words of an instrument are to be understood more strongly against a person who can properly be characterised as a "proferens", that is to say, the person doing the things as defined above.

The history of the use of the maxim from the sixteenth century onwards reflects the ambiguities that can arise from the term "proferentem". One approach that has been applied in connection with insurance contracts assumes that one party has the responsibility for putting forward the entire document. Hence, the document will be construed against that party, even if the other party has had some involvement in its drafting. In other cases, the identity of the party who introduced particular words into the contract has been considered relevant. Thus, words added to the printed form of an insurance contract have been assumed to have been added by the insured, rather than the insurer. Sometimes, the enquiry into who proposed particular words is answered by analysing the document to determine who ought to be taken to be putting the words forward. That leads to the approach that a provision in a contract is to be interpreted against the person for whose benefit it is inserted. Such an approach resulted in the rule that a deed is construed against the grantor, on the basis that the principle of self-interest will ensure that a party will not prejudice itself by using words that are more extensive than is necessary. [8] Such different approaches can lead to conflicting results. For example, a conveyance or transfer of land is commonly prepared by the transferee, but is a grant by the transferor.
The maxim had a counterpart in Roman law as follows: ferre secundum promissorem interpretamur. [9] That phrase means that one usually construes words in favour of the promisor. The rationale there given is "quia stipulatori liberum fuit verba late concipere" ("because the stipulator [see below] was free to choose his words at large"). Elsewhere, the principle is stated as follows: verba contra stipulatorem interpretanda sunt. [10] That is to say, words should be interpreted against the stipulator.
Those phrases are used in the Digest in the context of the verbal contract recognised in Roman law and known as stipulatio. Such a contract was made by one party (the stipulator) asking the other party (the promisor) whether the promisor would do something or give something. If the promisor responded in terms that coincided with the question put by the stipulator, the promisor was contractually bound. The justification given for the rule is that it was the stipulator who chose the words in the question.
Elsewhere in the Digest, the following principle appears: veteribus placet pactionem obscuram vel ambiguam venditori et qui locavit nocere, in quorum fuit potestate legem apertius conscribere. [11] That principle, which has particular application in the present circumstances, may be understood as saying that the classical Roman jurists held that an obscure or ambiguous promise should prejudice the vendor, or the bailor under a contract of hire, in whose power it was to write the terms more clearly. The Romans regarded the contract of sale and the contract of hire as being very similar.
While judicial views have been diverse on the meaning of the "contra proferentem" rule of interpretation, they are far less diverse on the method of its application. The rule is designed to assist the Court in choosing between alternative meanings of particular language, being meanings that are fairly open. However, the rule is one of last resort. In particular, it is not permissible to use the rule where the relevant language is not ambiguous. In deciding whether the language is ambiguous, no stretch or artificial notion of ambiguity is to be used. [12] In the present case, cl 8 was formulated by the Owner. However, it appears to be in the interests of the Renter and not of the Owner. That is to say, the Renter is entitled to maintain the bailment by way of hire until it chooses to terminate the hiring by giving notice under cl 8(a). Accordingly, if the principles of construction outlined above are to be applied (if the clause is considered to be relevantly ambiguous), any ambiguity should be resolved against the Renter.
It is necessary to construe cl 8 in the context of the Rental Agreement as a whole. It is therefore desirable to say something about the scheme of the Rental Agreement.
The schedule to the Rental Agreement specifies an "Initial Term" of 48 months from the "Commencement Date of this agreement". Clause 6 of the Rental Agreement provides that the term of the Rental Agreement commences from the "Rent Commencement Date" and ends upon the expiration of the number of months in the "Initial Term", unless cl 8 applies. Under cl 7, the Renter is required to make rent payments, the first of which is to be due on the "Rent Commencement Date" and then on the same day of each month thereafter. Under cl 7, the Owner is authorised to fill in the "Rent Commencement Date" on the Rental Agreement. There is no definition of "Rent Commencement Date", only "Commencement Date". The schedule contains provision for acceptance by the Owner and the insertion of a date as "Commencement Date". There is, however, no reference in the schedule to "Rent Commencement Date".
Clause 8 must be read in conjunction with cll 12 and 20. Those latter clauses deal respectively with surrender and default. Those three clauses may be restated as follows (emphasis added): 8. Renewal. (a) Immediately upon the expiration of the Initial Term this Agreement shall renew without the need for any further notice from either Owner or Renter unless: 1. (i) Owner receives notice in writing from Renter not later than 90 days but not earlier than 180 days prior to the date on which the Initial Term expires that Renter does not wish to renew the term of this Agreement; and 2. (ii) Renter returns the Equipment to Owner or to such person as the Owner directs in the state and condition required by this Agreement by no later than the date on which the Initial Term of this Agreement expires. (b) Where sub-clause (a) applies, the term of this Agreement shall renew for a period which is the lesser of the Initial Term or twelve months and otherwise upon the same terms and conditions as appear in this Agreement. 1. […] 12. Surrender. Upon the expiration of the Initial or any renewed term of this Agreement (subject to clause eight), or upon demand by Owner made pursuant to clause twenty hereof, Renter, at its expense, shall return Equipment (and all associated standard materials including software and manuals) by delivering it in the same condition as when delivered to Renter, reasonable wear and tear excepted, to such place or on board such carrier, packed for shipping, as Owner may specify or if no such place is specified, then to Owner[']s address as stated in this Agreement. Equipment shall be returned in a condition in accordance with the provisions of clause eleven. Rent shall continue to be payable by Renter under this Agreement until Equipment is returned to Owner and additional rent subject to Clause 8. In the event of notice to return under clause eight either Owner or Renter may give written notice before the expiry of the term that there be a holding over period of three months to allow for the orderly return of Equipment during which rental payments will be paid to Owner at the average monthly rental paid during the initial term. […] 20. Default. (a) If at any time [certain specified events occur] …; then in any such case Owner may at its option …: A) take appropriate action to enforce the performance of this Agreement by Renter and/or to recover damages for breach thereof B) by notice to Renter terminate this Agreement and in such event Renter shall forthwith return Equipment to Owner …. In the event of Renter failing to so return the Equipment[,] Owner may at any time thereafter retake possession of the Equipment … . (b) In the event that Owner terminates this Agreement following a breach by Renter of an Essential Term hereof or upon a repudiation of this Agreement by Renter then … Renter must pay to Owner upon demand the aggregate of: (i) all unpaid rent to the date of termination of this Agreement or the date of repossession of Equipment (whichever shall first occur) … and (ii) the balance of the total rent in respect of the period from the date of termination of this Agreement or the date of repossession of Equipment (whichever shall first occur) until the end of the period of this Agreement, after discounting to its present value each rent payment which would otherwise have been payable at a later date … . Provided Renter has returned the Equipment to Owner, Owner will credit against the moneys otherwise due to be paid by Renter under this clause, the Termination Value of the Equipment. For the purpose of this clause "Termination Value of the Equipment" shall mean the increased value (if any) of the Equipment in the hands of Owner at the time of repossession and resale of them, as compared to their value in Owner's hands at the date on which the term of this Agreement would otherwise have expired. Where Renter does not return the Equipment to Owner for any reason then the Termination Value of the Equipment shall be nil. (c) The method of calculation of Owner's damages referred to in subclause (b) is in addition to and not in substitution for the damages to which the Owner is or may be entitled under the general law, to the intent however that Owner shall only be entitled to recover one or other of them.
The Owner contends that cl 8 provides for successive, automatic renewals. It starts with the proposition that, under the Rental Agreement, ownership of the Equipment never passes to the Renter. That is the effect of cl 22. Further, under cl 12, the Renter is obliged to continue paying rent until the Equipment is returned to the Owner. The Rental Agreement is in its terms a contract for the hire of goods, which would be described in Roman law as locatio conductio rei. On the other hand, it is clear from the references set out above that it is, in its terms, a financing arrangement. That is to say, it is a means whereby the acquisition of the Equipment by the Renter is financed by the Owner. The Rental Agreement proceeds on the basis that the Equipment is not yet owned by the Owner and that any representations or warranties as to the fitness or suitability of the Equipment are matters as between the Renter and the Vendor (see cl 1). As a financing arrangement, the payment of rent under the Rental Agreement would not be expected to continue after the Owner has been repaid the amount of the purchase price paid to acquire the Equipment from the Vendor, together with interest on that purchase price.
The scheme of cl 20, dealing with default, confirms that approach. That is to say, where there has been default by the Renter and the Owner has repossessed the Equipment, the Renter will, in certain circumstances, be entitled to a payment of the "Termination Value", or at least credit for the "Termination Value". Such an arrangement would make sense only in the context of a financing arrangement. In the case of a pure contract for hire, the measure of damages to which the Owner would be entitled would be the difference between the rent payable for the balance of the term and the market rent that could be charged for the Equipment for the balance of the term. There would be no allowance to the bailee.
The Owner contends that the effect of cl 8(a) is that the Rental Agreement will renew without the need for any further notice unless the conditions in each of cll 8(a)(i) and 8(a)(ii) are satisfied. Clause 8(b) then provides that, upon such renewal, there will be a hiring for a further term of 12 months and "otherwise" on the same terms and conditions as appear in the Rental Agreement. The Owner contends that the use of the word "otherwise" indicates that the operation of cl 8(b) is to modify the meaning of "Initial Term" on the occurrence of a renewal, so as to refer to the renewed term, but on the basis that the terms and conditions are the same in all other respects as in the printed form of the Rental Agreement, including cl 8. Thus, the Owner says, the effect is that, at the expiration of each 12-month period after the period of 48 months of the Initial Term, the hiring is automatically renewed for a successive period of 12 months unless the relevant notice is given and the Equipment is returned.
The Owner contends that cl 12, dealing with surrender, recognises that there is a continuing obligation to pay rent until the Equipment is returned. Until the Equipment is returned, rent continues to be "payable by [the] Renter under" the Rental Agreement. That is to say, so the Owner contends, the term of the hiring is intended to continue until the Equipment has been returned. It says that cl 4, dealing with non-cancellable rent, and cl 6, which provides that the term ends upon expiration of the Initial Term unless cl 8 applies, supports that construction of cl 8.
An important difficulty for the construction advanced by the Owner is the need to attribute to the phrase "Initial Term" different meanings according to whether the hiring is for the initial term or for a subsequent renewed term. Clause 8(a)(i) requires notice in writing not later than 90 days and not earlier than 180 days prior to the date on which the "Initial Term expires". The Owner's construction requires that, when considering the position during the first renewed term of 12 months, the notice must be given not later than 90 days and not earlier than 180 days prior to the date on which the renewed term expires. Clause 8(a)(i) would make no sense at all unless the words "Initial Term" were replaced by words to the effect of "the renewed hiring period". The Owner seeks to achieve that result by construing the word "otherwise" in cl 8(b) as having that effect. In the context of the Rental Agreement as a financing arrangement, there is no justification for reading the word "otherwise" as incorporating cl 8 into the terms and conditions of the renewed hiring.
It would clearly be in the interests of the Renter for the bailment of the Equipment to continue after the expiry of the Initial Term, since the Owner by then would have been repaid the price paid for the Equipment plus interest (assuming, reasonably, that that was the basis on which the quarterly rental payments were calculated). However, the Renter would not be expected to continue to pay a quarterly rental that over-compensated the Owner for its outlay.
The Rental Agreement is, in one sense, anomalous in having a clause providing for renewal at all. Clearly enough, the parties wished to ensure that the Rental Agreement could not be construed as a hire purchase agreement, under which, at the expiration of the period of the hire, the Renter would have the option to purchase the Equipment. Nevertheless, I consider that, on balance, the preferable construction is that contended for by the Renter. That is to say, the hiring of the Equipment under the Rental Agreement came to an end on 10 November 2003, when the renewed term of the hiring expired. Thereafter, the Owner was entitled to the return of the Equipment and it would have a cause of action in detinue or in conversion by reason of the Renter's failure to return the Equipment. Clause 20(c) makes clear that the method of calculation of the Owner's damages referred to in cl 20(b) is in addition to and not in substitution for damages to which the Owner may be entitled under the general law. The Owner has made no claim for damages by reason of the failure to return the Equipment. The Renter had no obligation to pay rent to the Owner in respect of any period after 10 November 2003. The primary judge erred in concluding to the contrary.

The Renter's Cause of Action

In its written submissions to the primary judge, the Owner asserted that there was no mistake of fact or law by the Renter, since the payments were made in performance of a legal obligation to pay rent, absent the giving of notice and the return of the goods. Therefore, it was submitted, there was no unjust enrichment of the Owner because the Owner was entitled to payment under the terms and conditions of the Rental Agreement.
The written submissions then asserted, in the alternative, that, if the Owner was not entitled to the disputed rental payments, the Renter had to adduce evidence that the payments were made as a result of a mistake that caused the payments to be made. The Owner said that, to succeed, the Renter needed to establish, as a matter of fact, that it had a mistaken belief and that the payments were made by reference to that belief. The Owner contended that the evidence adduced on behalf of the Renter did not establish such a mistake, in that Mr Cimino simply deposed that he had left the repayment of the loan to the bookkeeper to arrange and there was no evidence from the bookkeeper.
In response, the written submissions on behalf of the Renter referred to the uncontested evidence that Mr Cimino believed that the Equipment would be owned by the Renter after four years, that he left the repayment of the loan to the bookkeeper to arrange by direct payment from NAB and that neither Mr Cimino, nor his wife, became aware that the payments had continued to be made until 2012. It asserted that the Magistrate had accepted that the payments had been made by mistake based on the evidence before him. In any event, it submitted, the alleged error on the part of the Magistrate, in holding that the disputed payments had been made by the Renter as a result of a mistake on its part of was, at best, a question of mixed law and fact, for which leave was required and no leave had been sought or granted. [13]
In the light of the conclusion reached by the primary judge on the construction question, it was not necessary for his Honour to decide the second question of whether there was a relevant mistake. In view of my conclusion that his Honour erred on the construction question, it is now necessary to address the question of mistake.
There was no allegation of mistake in the Renter's statement of claim in the Local Court. Accordingly, the Owner's defence did not expressly put in issue the question of whether any payment was made under a mistake. However, in an outline of submissions provided to the Local Court in support of its claim, the Renter contended that its cause of action was for "money had and received". The submissions asserted that "the mistake" of the Renter in making quarterly payments after 10 November 2003 was a "qualifying or vitiating factor", [14] whereby the Owner had been unjustly enriched. The submission said that that cause of action "provides a remedy to enforce an equitable obligation arising from the receipt of money by one party that belongs to another party, which in equity and justice should be returned, such as where the money has been paid by mistake and/or there is a failure of consideration".
The Renter asserted that recovery depended upon enrichment of the defendant by reason of one or more recognised classes of qualifying or vitiating factors such as mistake, duress, illegality or failure of consideration, by reason of which the enrichment of the defendant was treated by the law as unjust. It said that unjust enrichment, so identified, gives rise to a prima facie obligation to make restitution, a prima facie liability that can be displaced by circumstances that the law recognises would make an order for restitution unjust. The Owner did not, for example, make any allegation of change of position as an answer to the Renter's claim for "a refund of the monies wrongfully received".
In written submissions to the Local Court, the Owner accepted that a party who has been unjustly enriched as a result of having received monies paid by another under a mistake of fact or law is, in the absence of a properly recognised defence to such a claim, required to repay that money. However, it said, in the present case, the relevant question is whether the disputed payments were made under a causative mistake, such that, if the Renter did not make the payments because of a mistake, the Owner had not been unjustly enriched and no recovery would be permitted. The submissions asserted that such a claim will not be upheld where the payer was simply not concerned to query whether the payment was legally required to be made or was prepared to make the payment irrespective of the validity of the obligation, rather than contest the claim for payment. [15] Thus, the Owner submitted, the Renter was aware, through its bookkeeper, that the quarterly payments of rental were being made to the Owner by NAB. Mr Cimino's evidence was that he was content to leave to the bookkeeper the matter of "repayment of the loan". The Owner asserted that none of the Renter's witnesses had given any evidence that any of the payments were made as a result of a mistake.
The Renter sought to read an affidavit by Mr Martin. The solicitor for the Owner objected to a statement in Mr Martin's affidavit as follows: I assumed it was an ongoing expense as I was not aware of the contract or its duration. The Magistrate said that all that Mr Martin could say was that the payments were made and that it did not matter, for the purposes of the present case, what he assumed. His Honour said that Mr Martin was just going to say that the payments came out each month. Counsel for the Renter responded that it was uncontested that the payments were made every month. His Honour then asked what the relevance of Mr Martin's evidence was. The response given by counsel for the Renter was that it went to "the mistake aspect of the moneys had and received claim". Counsel said that it was "a mistaken payment" and that the Renter "was not aware that the payment had been continuously being made".
In response to an enquiry from the Magistrate as to what authority Mr Martin had to make or not to make the payments, counsel for the Renter responded that they were automatically debited to the Renter's bank account and Mr Martin was saying that he did not realise that those payments were still automatically being made because he was not aware of the Rental Agreement, and so did not know what the payments were for: rather, he just made an assumption that they were valid payments. His Honour responded that he did not consider that it "adds much to the case one way or the other" and observed that the fact that the bookkeeper made the payments is "neither here nor there". His Honour suggested that it was the knowledge of the directors of the Renter that was relevant and indicated that, unless they had given Mr Martin specific instructions, he did not consider that his affidavit "takes us anywhere", or that it "adds anything to the case". His Honour observed that, if Mr Martin had said that he had been directed to make the payments as an ongoing expense, that would be different but that, in the present case, it was not as though Mr Martin could have stopped the direct debits. His Honour observed that the only persons who could have stopped the direct debits were the directors and therefore Mr Martin's evidence did not have any relevance. Counsel for the Renter made no further submission in support of the relevance of Mr Martin's affidavit.
After considering the affidavit evidence and the written submissions, the Magistrate heard argument on the proper construction of cl 8 of the Rental Agreement. The issue was whether cl 8 provided for further renewal after the first renewal.
Counsel for the Renter then made a further submission in relation to the mistake issue. It was put to his Honour that unjust enrichment occurred where one party obtained a benefit to which it was not entitled and that, in the present circumstances, the Owner had been unjustly enriched by accepting payments from the Renter to which it was not entitled and not saying anything about it. Therefore, it was submitted, the Renter was entitled to restitution.
The solicitor for the Owner, in reply, challenged the assertion by counsel for the Renter that the Renter was not aware that the payments were being made. He drew attention to bank statements annexed to Mrs Cimino's affidavit that made it clear that somebody had been through the bank statements and had ticked off the disputed payments as they were being made. He submitted that the bank statements disclosed to the Renter that the payments were being made to the Owner. Accordingly, he submitted, the Renter could not say that the payments were being made without its knowledge.
The Magistrate then asked the solicitor for the Owner why the Owner was entitled to keep the money. The response was that, on its proper construction, cl 8 applied and there is no remedy for restitution for money paid by mistake unless the payer can establish that the recipient was unjustly enriched by reason of the payments. He said that there was no injustice in holding a party to a contract if the contract required the payments. The solicitor said, in effect, that if the Owner was right as to its interpretation of cl 8, it was entitled to keep the money. No further submission was made on behalf of either party in relation to the question of mistake beyond the written submissions summarised above.
After hearing brief submissions in reply by counsel for the Renter, the Magistrate gave judgment ex tempore. His Honour concluded that the Equipment should have been returned to the Owner at the end of five years and that the quarterly payments should have ceased, unless the parties entered into a collateral or further agreement, which they did not do. His Honour then considered the effect of the payments made after November 2003. His Honour observed that there may have been "some sloppy accounting and bookwork" by the Renter in not stopping the payments.
The Magistrate was satisfied that the payments were made, noting that there was no dispute that the payments were made and received. The effect, therefore, his Honour held, was that the Owner had received payments of $1,515.80 quarterly for the period between November 2003 and the cancellation of the Rental Agreement in 2012. His Honour then referred to the exchange of communications between the Renter and the Owner in 2012, observing that the Owner did not seek return of the Equipment. His Honour concluded that he was therefore satisfied on the balance of probabilities that, "in effect": the payments made since November 2003 amounted to an unjust enrichment to [the Owner] in that there was no continuing obligation to pay and [the Owner] did nothing to seek the return of the [Equipment]. His Honour said that he did not intend to go through the evidence because it was quite clear that there was only an interpretation issue about what cl 8 meant and he found in favour of the Renter's interpretation.
After a further exchange concerning calculations, his Honour directed a verdict for the Renter in the sum of $54,568.50, together with interest up to 17 April 2014 in the sum of $4,091.39. He ordered the Owner to pay the Renter's costs.
The Magistrate did not make any finding as to whether the Renter made a mistake. Rather, his Honour appears to have proceeded on the basis that the only question was the question of construction. However, as the submissions referred to above make clear, the Owner contended that there must be a relevant mistake and submitted that there was no evidence of a mistake such that it could be said that the payments were made under a mistake. No mistake was alleged and no submission was made as to a mistake on the part of the Renter that caused the disputed payments to be made.
There was an error of law on the part of the Magistrate in so far as his Honour made no finding of an essential integer in the cause of action relied on by the Renter, namely a causative mistake. Indeed, his Honour was not asked by the Renter to make such a finding, notwithstanding the submissions advanced on behalf of the Owner. Even in this Court, the Renter had significant difficulty in formulating the mistake relied on as giving rise to the cause of action. In any event, the evidence in the Local Court did not support a finding of any relevant mistake on the part of the Renter. It may be that the evidence of Mr Martin could have established a relevant mistake. However, no complaint was made on behalf of the Renter either before the primary judge or in this Court that the Magistrate erred in rejecting his evidence.
The only basis advanced by the Renter for the relief claimed in the Local Court was mistake. The Magistrate made no finding of any fact that would justify an order for restitution. The payments were made knowingly by the Renter. That is clearly inconsistent with a stated belief on the part of Mr Cimino that the Renter would own the Equipment at the end of the "Initial Term". It is difficult to discern what mistake was made on the part of the Renter and who made the mistake. For example, Mr Cimino could have said that he believed that the liability of the Renter under the Rental Agreement continued after the expiration of the first renewal. That may have been a mistake of law, but would nevertheless have been sufficient to support the claim for restitution. [16] Mr Cimino gave no evidence of any mistake on his part.
It would have been possible to adduce evidence from the bookkeeper, Mr Martin, to the effect that he, mistakenly, believed that the hiring continued after the end of the first renewal. Mr Martin's evidence was not before us and, as I have said, the rejection of his evidence by the Magistrate was not relied on by the Renter before the primary judge. Had it been relied on, it may have been necessary for a new trial to be ordered. However, the question did not arise.
Finally, it should be noted that no contention was advanced on behalf of the Renter that the provisions of the Rental Agreement operated as a penalty. For example, the requirement under cl 12 that the rent continued to be payable until the Equipment was returned to the Owner might have constituted a penalty in circumstances where the Equipment had had no value at the expiration of the Initial Term and the first renewal of 12 months.

Conclusion

In the circumstances, I am persuaded that there was an error on the part of the primary judge such as to justify the grant of leave to appeal. I would grant leave to appeal. However, the appeal should be dismissed on the second ground raised by the notice of contention. The Renter should pay the Owner's costs of the application for leave and of the appeal.

Endnotes

Unison Finance Group Pty Ltd v Electric Life Pty Ltd [2015] NSWSC 170.
[2015] NSWSC 170 at [3].
[2015] NSWSC 170 at [4].
[2015] NSWSC 170 at [10].
[2015] NSWSC 170 at [12].
Supreme Court Act 1970 (NSW), s 101(2)(r).
See PGW Glare (ed), Oxford Latin Dictionary (Oxford University Press, 1982) at 1474-5.
See generally North v Marina [2003] NSWSC 64 at [57]-[71] and the authorities there cited.
Digest of Justinian (trans. Alan Watson) (University of Pennsylvania Press, 1985), vol 4, p 666 at 45.1.99.pr.
Digest of Justinian, vol 4, p 656 at 45.1.38.18.
Digest of Justinian, vol 1, p 71 at 2.14.39.
See North v Marina at [75]-[78].
Pursuant to s 40(1) of the Local Court Act 2007 (NSW).
Citing David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; 175 CLR 353 at 379.
Citing Roxborough v Rothmans of Pall Mall Australia Ltd [1999] FCA 107; 161 ALR 253 at [69].
See David Securities Pty Ltd v Commonwealth Bank of Australia.

Amendments 14 December 2015 - Paragraph [13]: amend "2013" to read "2003" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 December 2015

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