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Mistaken Payments in Australian Law — Property, Restitution and Trusts

Australian law answers three distinct questions about money paid by mistake: whether property in the money passes to the recipient (which matters in crime), whether the payer can recover the value of the payment in restitution, and whether the payer can assert a proprietary claim — critical when the recipient is insolvent. A different leading case answers each.

Does property pass? Ilich v R

In Ilich v R (1987) 162 CLR 110, money was overpaid in a bundle of cash. The High Court held that, in the case of money, property generally passes on delivery notwithstanding a mistake — even a mistake as to the amount paid — subject only to narrow exceptions for fundamental mistakes, such as the identity of the recipient. Because property in the overpayment had passed, retaining it was not stealing under the Western Australian Criminal Code. The case is the standard authority on property in mistakenly paid money.

Can the payer recover? AFSL v Hills

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 is the High Court’s modern statement on restitution of mistaken payments. Payments procured by a fraudster reached creditors of the fraudster’s companies, who in good faith treated genuine debts as discharged. The Court held recovery was barred: the recipients had given good consideration and had irreversibly changed their position. The decision also reorients Australian restitution analysis toward equitable notions of conscience rather than a free-standing “unjust enrichment” cause of action.

A proprietary claim in insolvency: Wambo Coal v Ariff

Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589 addresses the position when the mistaken payee becomes insolvent. White J held that where the recipient’s conscience is affected — relevantly, once the recipient knows the payment was made by mistake and that it has no entitlement to the money — the money is held on trust for the payer. A trust gives the payer priority over the recipient’s unsecured creditors, which is why the case is heavily cited in insolvency practice.

Key authorities

Related doctrine guides

This guide was generated by Barrister AI from the primary authorities linked above. It is general information, not legal advice — verify every proposition against the linked judgments before relying on it. Open any case above to read the judgment, or try Barrister AI free to research across the full knowledge graph of Australian legal principles.