In the context of proceedings under s 130 of the Industrial Relations Act 1996 ('the Act') the New South Wales Nurses and Midwives' Association seeks an order in the nature of a small claim under s 380 of the Act or in the alternative an award of a sum of money to individual employees under the award making power.
The claim arises in this factual circumstance, the employee, a Miss Craig, was wrongly credited leave on the respondent Local Health District's payroll system. This went on as I apprehend it for a number of years. There is no suggestion that Ms Craig knew anything of this error and she certainly did not take advantage of it by using up the leave or anything of that nature.
She was then told in writing by the chief executive officer that she had excessive leave, in good part because of this very mistake. The mistake was perhaps surprisingly not detected by Human Resources at the time she was so advised in writing; the fact remains that it was not. She was not directed in terms to take the leave, but there is no controversy about this matter; as a consequence of receiving the letter from the CEO she took leave that she would not otherwise have taken. There is no question but that the leave was approved. As it happens she incurred certain expenditure while on that leave; I have less regard for that matter, but certainly Ms Craig forewent work for reward because she acted on the advice from the CEO.
Not long after that she resigned her permanent full time employment and at that point or around that point it was said to her, "You have been wrongly credited with leave which resulted in an overpayment in the sum of about $10,000". I am expressly advised by counsel for the Local Health District, on instructions of course, that Ms Craig was paid that money, that is to say a sum representing the whole of the sum deducted from her final entitlements while she was absent on the leave from work that I have adverted to earlier in this decision. And I am advised that precisely that sum, that is the sum deducted, was money that she would not have been paid while absent from work had her leave entitlement been correctly calculated. If that is so, and I accept that it is, an overpayment has occurred.
The Public Health System Nurses and Midwives' (State) Award 2011, the version of the award that was operative at the time the facts with which I am here concerned took place, provides that overpayments may be recovered and provides a mechanism to do so. I return to that. In any event I make it clear that in my view, and it was only faintly contested, an overpayment occurred. That means that Ms Craig was unjustly enriched and the principle of restitution means that she ought repay the money the sum of the overpayment to the payer, the Local Health District, whose money I am told it was.
Certainly, at general law, there is without doubt prima facie right to recovery of monies overpaid in that circumstance. The authority for that, amongst others, is a decision of the High Court in David Securities Pty. Limited v Commonwealth Bank of Australia [1992] HCA 48; 175 CLR 353.
The overpayment, as I have said, occurred at a time that Ms Craig was on leave and something turns on that to which I return. I have adverted to the general principle that a person who has been unjustly enriched has a prima facie obligation to repay the money and the party whose money it was has a prima facie right to recover the money; that is without argument.
Under the same principles, however, a person who may have been on the face of matters unjustly enriched by a payment made by mistake may, in very particular circumstances, be freed from the obligation to repay the money that arises under the prima facie right of recovery. This has been summarily referred to in a number of decisions in the High Court and the Supreme Court as the "change of position defence," a term I will adopt in the course of this judgment. It is set out with real clarity in the decision of the Court of Appeal of the Supreme Court of New South Wales in Citigroup Pty Limited and National Australia Bank Limited [2012] NSWCA 381, a Full Bench comprising Bathurst CJ, Allsop, Meagher, Macfarlan and Barrett JJA.
In that decision the Court of Appeal, having cited David to which I have already referred and having cited Australia and New Zealand Banking Group Ltd and Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662, went on to deal with this question of a change of position defence.
Having referred to those decisions the Court of Appeal said, summarised, that whilst the statements of the High Court in the two cases to which I have referred reflect slight differences of wording, the concept was entirely clear: in order to make good the defence of change of position the recipient of the payment must show, that he or she acted in reliance on the fact of the payment. It is not enough that a mistaken payment be made to make out the defence; a person must show that they acted in reliance on the fact that he or she received the money paid by the payer. The Court went on to say this, again referring to the two cases to which I have adverted,
"Quoting all these considered statements made by members of the High Court, the elements of detrimental reliance on the making of the payment and therefore its receipt and good faith change of position accordingly are components of the case a defendant must make out in order to displace the plaintiff's prima facie right of recovery. Thus while change of position may in a loose sense be described as one example of circumstances recognised by the law as making an order for restitution unjust it is only a change of position that is accompanied by the additional element of detrimental reliance on the receipt in good faith that under our law may properly be regarded in that way."
The Court went on,
"In Australia and New Zealand Banking Group the High Court referred to 'some adverse change of position by the recipient in good faith and in reliance on the payment which the law recognises were made in order for restitution unjust' whereas in David the words were, 'the defence have changed a position as relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his detriment on the faith of the receipt'".
As I say the Court of Appeal went on to synthesize those two slightly different forms of the wording and to state that the principle is clear.
So far as the decision of the Privy Council in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 was called in aid by the notifier in this matter, it must be pointed out so far as that that decision suggests that there is a wider or less constrained basis on which the defence may be made out, that is not the law in Australia or in New South Wales. The law is authoritatively set out in the High Court decisions which I have thrice referred as summarised helpfully by the Court of Appeal in Citigroup. So the elements are as set out in Citigroup. A change of position accompanied by an element of detriment or reliance on the receipt in good faith for a mistaken payment.
Very well, there was a mistaken payment. Ms Craig relied upon the mistake in the assessment of her leave to absent herself from work, her unchallenged evidence was as set out in paragraph 7 of her statement, admitted into evidence:
"I would not have chosen to take annual leave at this time and travel on an overseas holiday if I had not been informed that I was required to take the leave. I would usually only take leave during the units shutdown at Christmas this is because it was difficult to get additional leave at this time as everyone wanted time off for Christmas and school holidays. However, because I had received a letter from my chief executive I did not think that I had a choice."
I accept that evidence, it was not challenged. It falls short of suggesting a direction was made to take the leave, and I do not find there was any direction, but I accept the evidence advanced by Ms Craig that she did not think that she had a choice.
She went on leave and absented herself from work in circumstances where had the true position been properly understood she would not have been paid. By going on that leave she created circumstances where she was overpaid. In my view noting what the Court of Appeal said in Citigroup at [6]:
"The circumstances in which the payee acts on the faith of, or in reliance on, the receipt will be many. It will be a factual question in each case. The acts and omissions will occur in the context of a certain body of knowledge which will include knowledge of the receipt and of facts that support reliance upon the stability of the receipt and an entitlement to treat the receipt as able to be dealt with."
It is quite clear in my view that Ms Craig absented herself, thus allowing herself to be overpaid, in reliance upon the facts with which she had been provided by the CEO, no doubt on the advice of his advisors, and she did so in good faith. In my view reliance is made out and good faith is made out.
Detriment is established by on the unchallenged evidence of Ms Craig foregoing employment for reward in taking off the time from work and the depletion of her accrued leave that occurred as a consequence of that proceeding on leave. I place no weight on the holiday expenditure she incurred but on the foregoing of paid employment when, as she says in her unchallenged evidence, she would not have chosen to do so without the CEO's advice. It seems to me the proposition of detriment is amply made out. It must be said Ms Craig was entitled to rely upon the CEO correctly advising her of her leave position.
Those are the elements of the defence of change of position. In my view absent anything else the defence of change of position is made out which would have the result that there properly understood was no obligation for Ms Craig to repay the mistaken overpayment but, I hasten to add, the matter does not end there.
The respondent points to clause 27 of the Award to which I have referred, the Public Health System Nurses and Midwives (State) Award and says of it that it is a comprehensive code dealing with overpayments. The respondent further says that the Award clause provides for an absolute right to recover overpayments, which right excludes any recourse to the general law or equity and excludes any ability to mount the defence to which I referred here, that is, the change of position defence.
My first observation is that clause 27 of the Award cannot be a comprehensive code dealing with the repayment of overpayments because if it were, the Local Health District or any employer bound by the award, would be constrained from recovering any monies by any means from employees that exceeded entitlements they had due on termination. That is because of the provisions of subclause 27(b) (v). That demonstrably is not the intention of the Award clause nor, as properly understood, its effect and that does some damage to the proposition that the Local Health District's right to recover is unrestrained by the general law.
But there is a more important element of the analysis and it is this. The general law of course recognises the prima facie right of recovery: see David and other cases of that kind. That is the 'right' which in my view is referred to in clause 27(b) (v). Beyond that I do not accept that the Award sets out to or does override or exclude the principles of the general law as the Local Health District asserts.
Counsel for the Local Health District helpfully set out in some detail the law as it properly applies to the interpretation of awards. I do not cavil with any of that it; is correctly stated, but in this case a reading of the Award simply cannot permit a view that it excludes the application of defences or any other provisions of the general law if they are available on the facts, such as, in this case, the change of position defence.
In my view it is clear the Award is to be read together with the general law and indeed it is implicit in subclause 27(b)(v) that that is its intent. For example, just as the general right to recover is not precluded by the provisions of the Award clause that deal with recovery from final monies due to an employee, nor are a number of other statutory provisions potentially affecting overpayments and recovery thereof excluded: The Bankruptcy Act 1966 and other legislation of that kind.
Of course the award is to be interpreted, as is perfectly clear on the authorities, in the same way as in a statute, but part of that is this; that the ordinary canons of statutory construction as adverted to in the authorities to which the respondent helpfully takes the Commission presume that the general law and common law doctrines specifically are not overridden by the Parliament without the very clearly expressed intention to do so and there is a range of authorities for that going back to Potter v Minahan (1908) 7 CLR 277.
It is always the case that a construction which is in accordance with common law principles is to be favoured over a construction that would run against such well-established principles, unless there is a clear intent by the legislature to override the common law. I see no such clear intent in clause 27 of the Award or the award at large.
It is also the case, as counsel for the notifier urges on the Commission, that statutes are to be interpreted in consonance with the principles of equity, again in the absence of a clear contrary intention appearing in the enactment. In support of that proposition Minister for Lands Forests v McPherson (1991) 22 NSWLR 687 is cited, and there is no doubt that the change of position defence is a fundamental element of the law of restitution.
The Award ought not be, in my view, construed as removing the defence against injustice, which is what the equitable defence is, without clearly stating that it does so. That means that whether or not, understood in its context, an overpayment is substantiated for the purpose of clause 27(v) of the Award does not need to be determined. The position is, in my view, that at whatever point it might be advanced the defence is available. The provision of the award clause that the Ministry shall have the right to deduct any balance for such overpayment from monies owing to the employee must be subject to law; indeed as I have said other laws may also impinge upon that right. Nothing in the Award so expresses it to have the intent of excluding the general law or the principles of equity where either might be available.
It follows from what I have said that absent anything else the "amended position defence", to use that term, is not excluded or overridden in my view by clause 27 of the award. The further submission advanced by the notifier that clause 27 of the award is procedural and mechanical is not wholly correct in my view because clause 27(b)(v) gives in terms a right to the Ministry to recover, but it gives that right subject to the law which it does not exclude.
If what I have said so far is the correct analysis of the law and the facts it follows that up to this point the notifier's argument is well founded and should result in orders in its favour. Once again the matter does not end there.
The respondent advanced as a bar to any of the applications made by the notifier in these proceedings the decision of the Court of Appeal of the Supreme Court in Attorney General v Gray [1997] 1 NSWLR 406. It is clear enough what the proposition is in Gray, and that is that neither estoppel nor the sort of remedy sought here - which I interpose is of course a very close cousin of estoppel, one sees the learned discussion at paragraphs 127 to 136 of the decision of the Supreme Court in Citigroup that is so - but neither estoppel nor the kind of remedy sought here is available to any party to condone or enforce an illegality. That proposition is entirely unremarkable and with great respect to the learned judges of the Supreme Court that gave it, obviously correct given the nature of equitable remedies.
In Gray the proceedings turned on the objective provision of the Public Service Act 1902, the version of that Act in force at that time, at ss.14(1) and s 14A. Those sub-sections provided that salaries were to be paid to employees relevant to the case before the Court, precisely as they had been fixed by the Public Service Board. It followed that the payment of any greater sum would be and was an unlawful extraction from consolidated revenue. An unlawful extraction from consolidated revenue cannot be defended by any kind of remedy, certainly not by any kind of equitable remedy or the kind of defence advanced here. It is put here that this position applies.
In submissions which were helpfully developed by Mr Britt for the respondent as the argument unfolded this morning, he advanced that s 116A of the Health Services Act 1997 operated conjunct the award to have same effect.
There is no express equivalent in terms of ss 14(1) and 14A of the then Public Service Act to be found in s 116A of the Health Services Act or elsewhere in that Act, but that is not the whole of the test.
The elements which are said to add up to the same test as applied to disqualify the defence in Gray are as follows, as I apprehend the argument.
There is an award; I have referred to it. Section 116A provides that the Health Secretary may fix the salary, wages and conditions of employment of staff employed under the Act so far as they are not fixed by or under any other law. That is, this section is permissive to the Health Secretary to fix certain salaries. There is no evidence that he has done so. There is no evidence that he fixed any rate permitting Ms Craig to be paid in excess of her true entitlement. Therefore, it is said, the overpayment was necessarily unlawful, and it follows - and it certainly would follow from that if that were so - that the defence cannot hold out.
It is of course true, as Mr Britt advanced to the Commission, that there is no evidence that the secretary fixed particular rates or the monies that were paid to Ms Craig while she was absent on leave; rather, they were salaries established under the Award. That is where the rate or the monies that were overpaid to Ms Craig while on leave came from.
The Award is not, in contrast to the position in Gray, a law which provides for precisely the sum to be paid, any more than which would be illegal. The award is rather an instrument which fixes minimum terms of conditions of employment. An employer bound by the award may pay a greater sum than the award prescribes without committing an illegality. It is not a question of policy or procedure that arises here, but of illegality. If it were not unlawful to pay the money to Ms Craig that she was overpaid while she was on leave then Gray, and the undoubtedly correct rule it espouses, does not act to defeat the defence which on its face is otherwise available to Ms Craig in the factual circumstances.
If an over award payment has occurred or a payment above that which is prescribed in the award has occurred, that is not unlawful. If a mistake has occurred in circumstances where the minimum prescription for the payments to be made, in contrast to provision in Gray, is in fact paid under an award then the monies that were paid under that mistake are not paid unlawfully. It follows that it is not contrary to law or principle to permit, if the facts justify it, a defence of altered position to be mounted.
The decision in New South Wales Nurses Association and Sydney Local Health District [2013] NSWIRC 28, which is called in aid by the respondent in support of the propositions advanced about the effect of Gray's case, does not act contrary to the principle I have just espoused, because in that case a contract could legally have been made by the respondent, while on the given facts in that case the officers who purported to make a contract acted without authority. But that case does not, on my reading of it, lend support to the proposition as an over award contract let alone an over award payment would be illegal, unlawful. Accordingly, in my view on reading of the authorities, the position in Gray, correct as it obviously is, simply does not arise here.
The sum of this is that in my view the defence is established and the proposition that the defence is excluded by clause 27 of the award fails. The proposition that the defence is excluded or overridden or set aside by the principles set out in Gray, fails. In my view it follows that there ought be an order made under s 380 of the Act for the sum of money that was actually deducted from Ms Craig's final entitlements as a permanent employee plus interest.
I ask that the parties draw up orders ideally by consent reflecting the terms of this decision and filed within seven days. If they cannot be agreed the parties have leave to file individually. I hope that is not necessary.
I add this for completion. I was asked in the alternative to make an award, exercising the Commission's award making powers applying to Ms Craig alone for the sum sought. I do not do that and I would not do that. Given what I have held, and given that I have expressly said I would not make such an order, the reasons I would not do so would necessarily be obiter and I do not trouble the parties with them because they have no value.
I add lastly this; I well understand that custodianship of public monies is a serious charge and the Crown in all its emanations is entitled to do and indeed is obliged to do all that it possibly can to recover monies due to it. That must be and is the correct starting position for any matter of this kind.
I do note however that the award at clause 27 provides in terms a discretion in the delegate. That is provided in subclause 27(b)(vi). That subclause refers to the subclauses above it, which establish certain parameters for underpayments, and then goes on to say:
Where the circumstances make it appropriate, the Chief Executive of the Public Health Organisation or delegate, may exercise discretion in regard to recovery of overpayments.
That is permissive; it provides a discretion which on its face is unfettered but in my view will be fettered properly by the position I have set out above, that the Crown as the custodian of public monies must act to preserve those monies as much as it properly should. But in the very particular circumstances of this case in my view that discretion might well have been thought to be properly exercised in favour of not pressing for the recovery of this overpayment.
Here in circumstances where there has been not just one error but a series of them: the erroneous crediting for a number of years of undetected leave entitlements to Ms Craig; the incorrect advice that there was excessive leave, which advice being a relatively serious matter one might have thought would have promoted a check on the apparent excess leave and might well have revealed the circumstances in which it arisen; then the failure, when leave was applied for and granted, which necessarily involved a reference to the leave records held by the respondent in relation to Ms Craig's leave, to check whether the accruals were in fact correctly based and notice the mistake, and all of this on the part of the party which has an obligation under statute to keep those records. That is then coupled with, in my view more importantly than those errors, an employee having actively conducted themselves to their detriment on the basis of that series of errors, which in this case is clear as a matter of fact and not put in issue. In those circumstances, which would be very uncommon indeed but were the case here, in my view the discretion would have been properly exercised to waive the overpayment.
I add therefore to my decision this, were I wrong on my analysis of the law above, I would nevertheless recommend in the context of the industrial dispute which bought this matter to the Commission that the discretion to waive the overpayment which was made to Ms Craig be so exercised. That recommendation need not be contained in the orders, but it stands.
PETER NEWALL
Commissioner
[2]
Amendments
08 March 2016 - Coversheet/Representation amended by deleting "Solicitors: Crown Solicitor (Respondent)"
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Decision last updated: 08 March 2016