Restitution
Professor Lionel Smith, Winter 2008, Monika Rahman
I. INTRODUCTION...............................................................................................................................3
(I) INTRODUCTION TO UNJUST ENRICHMENT: THE NATURE OF THE SUBJECT......................................................3
Lord Denning, “Book Review” (1967), 83 LQR 277 (CBp.3) ................................................................................................ 4
Deglman v. Guaranty Trust Co. of Canada, [1954] SCR 725 (CBp.5) ................................................................................... 4
(II) HISTORICAL DEVELOPMENT ..............................................................................................................7
Peel (Regional Municipality) v. Canada, [1992] 3 SCR 762 (CBp.9) ................................................................................... 13
(III) STRUCTURE OF THE SUBJECT .......................................................................................................... 15
Lionel Smith, “The Province of the Law of Restitution” (1992) 71 Can. Bar. Rev. 672 (CBp.29) ....................................... 15
Rosenfeldt v. Olson (1986), 25 DLR (4th) 472 (B.C.C.A.) (CBp.42) .................................................................................... 16
(IV) THE CANADIAN APPROACH ........................................................................................................... 17
Garland v. Consumers’ Gas Co. (2004), 237 DLR (4th) 385 (SCC) (CBp.262) ..................................................................... 18
Kingstreet Investments Ltd. v. New Brunswick, [2007] 1 S.C.R. 3 (online) ....................................................................... 20
II. JURISTIC REASONS ....................................................................................................................... 21
(I) DONATIVE INTENT/GIFT ................................................................................................................. 21
(a) Conditional Intent ..........................................................................................................................................21
Clarke v. Moir (1987), 82 NSR (2d) 183 (CBp.194) ............................................................................................................ 21
(b) Unconscientious Receipt ................................................................................................................................23
Pettkus v. Becker, [1980] 2 SCR 834 (CBp.237) ................................................................................................................ 23
(II) CONTRACT ................................................................................................................................. 25
(a) Never Made Because of Illegitimate Pressure or Doesn’t Materialize ..........................................................25
Stoltze v. Fuller, [1939] SCR 235 (CBp.122) ...................................................................................................................... 25
Magical Waters Fountains Ltd. v. Sarnia (City) (1990), 74 OR (2d) 682 (CBp.198) ........................................................... 26
Magical Waters Fountains Ltd. v. Sarnia (City) (1992), 8 OR (3d) 689 (CBp.204) ............................................................. 27
(b) Unenforceable; Voidable ...............................................................................................................................28
Ennis v. Klassen, [1990] 40 DLR (4th) 321 (CBp.109) ........................................................................................................ 29
(c) Discharged by Frustration ..............................................................................................................................30
(d) Discharge for Breach: Money Paid ................................................................................................................31
Palachik v. Kiss, [1983] 1 SCR 623 (CBp.216) .................................................................................................................... 31
Rover Intl. Ltd. v. Cannon Film Sales, [1989] 3 All ER 423 (CA) (CBp.222) ........................................................................ 32
(e) Discharge for Breach: Services Rendered.......................................................................................................33
Sumpter v. Hedges, [1898] 1 QB 673 (CA) (CBp.228) ....................................................................................................... 35
Kemp v. McWilliams (1978), 87 DLR (3d) 544 (Sask CA) (CBp.229) .................................................................................. 35
Campbell, Albo, Low Ltd. v. Black (1995), 26 OR (3d) 111 (CBp.231) ............................................................................... 36
(III) DISPOSITION OF LAW ................................................................................................................... 37
Central Guaranty Trust Co v. Dixdale Mortgage Investment (1994), 24 OR (3d) 506 (CBp.87) ........................................ 38
Brook’s Wharf and Bull Wharf Ltd v. Goodman Bros, [1936] 3 All ER 696 (CBp.159) ....................................................... 39
(IV) OTHER VALID OBLIGATION ............................................................................................................ 40
Matheson v. Smiley, [1932] 2 DLR 787 (Man C.A.) (CBp.178) .......................................................................................... 41
(V) RISK-TAKING .............................................................................................................................. 42
Enron Mortgage Corp. (Trustee of) v. Enron (1998), 53 BCLR (3d) 24 (CBp.185) ............................................................. 43
Owen v. Tate, [1976] QB 402 (CA) (CBp.246) ................................................................................................................... 44
(VI) EVALUATION OF JURISTIC REASONS ................................................................................................. 46
Lionel Smith, “Public Justice and Private Justice: Restitution after Kingstreet” (WebCT) ................................................ 46
III. ENRICHMENT OF THE DEFENDANT ............................................................................................... 47
(I) OBJECTIVE BENEFIT ....................................................................................................................... 48
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(II) SUBJECT DEVALUATION ................................................................................................................. 48
(III) OVERCOMING THE PLEA OF SUBJECTIVE DEVALUATION: TESTS OF ENRICHMENT ......................................... 49
(a) Request and Free Acceptance ........................................................................................................................49
Kuny v. Wigle, [1994] AJ no. 331 (Prov. Ct.) (CBp.274)..................................................................................................... 49
Brisebois v. Modern Music Co. (1993), 50 ETR 305 (CBp.276) ......................................................................................... 50
(b) Incontrovertible Benefit .................................................................................................................................51
BP Exploration Co. (Libya) v. Hunt (No. 2), [1979] 1 WLR 783 (QB) (CBp.280) ................................................................. 52
Gidney v. Shank (1995), 101 Man. R (2d) 197 (CBp.281) .................................................................................................. 53
(c) Specific Restitution .........................................................................................................................................55
IV. CORRESPONDING DEPRIVATION.................................................................................................. 55
(I) INTRODUCTION ............................................................................................................................ 55
(II) TWO-PARTY PARADIGM ................................................................................................................ 56
Payer v. Peerless Plating Rack Co. (1994), 19 OR (3d) 105 (CBp.298)............................................................................... 56
(III) THREE-PARTY COMPLICATIONS ...................................................................................................... 57
(a) Plaintiff Deprived by Reimbursing a Third Party ............................................................................................57
R v. M. Geller Inc., [1963] SCR 629 (CBp.302) .................................................................................................................. 57
(b) Interceptive Subtraction ................................................................................................................................58
Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 SCR 426 (CBp.304) ............................................................... 59
Furncan Marine Ltd v. Ship MV Woodlands (Cargo Owners) (1994), 81 FTR 278 (CBp.319) ............................................ 62
Giffen, Lee & Wagner v. Zellers Ltd. (1993), 15 OR (3d) 387 (CBp.326) ........................................................................... 63
V. PERSONAL OR PROPRIETARY RESTITUTION ................................................................................... 63
(I) OBLIGATION VS. CONSTRUCTIVE TRUST .............................................................................................. 63
Peter v. Beblow, [1993] 1 SCR 980 (CBp.335)................................................................................................................... 66
(II) THE DOMESTIC CONTEXT ............................................................................................................... 70
VI. DEFENCES ................................................................................................................................... 71
(I) INTRODUCTION ............................................................................................................................ 71
(II) CHANGE OF POSITION ................................................................................................................... 72
Rural Municipality of Storthoaks v. Mobil Oil, [1976] 2 SCR 147 (CBp. 367) .................................................................... 72
Lipkin Gorman (a firm) v. Karpnale Ltd., [1991] 2 AC 548 (CBp. 370) ............................................................................... 73
Garland v. Consumers’ Gas Co. (2004), 237 DLR (4th) 385 (SCC) (CBp.373) ...................................................................... 73
RBC Dominion Securities Inc v. Dawson (1994), 111 DLR (4th) 230 (Nfld CA) (CBp.374) ................................................. 74
Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co-operative Ltd., [1994] 1 SCR 90 (CBp.381) ........... 78
REVIEW ........................................................................................................................................... 79
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I. Introduction
(I) INTRODUCTION TO UNJUST ENRICHMENT: THE NATURE OF THE SUBJECT
January 8, 2008
Hypothetical: a lady is a widow and her husband has recently passed away. She finds a life insurance
policy (a contract in which payments are made to beneficiary upon death). Contract provided for payment
of $1000. She presents policy to insurance company. When she is about to leave, employee of company
calls up the file and he finds out that the policy had lapsed; no one had paid the premiums required by the
policy. He yells “wait! We don’t owe you any money at all.” (Based on facts of Kelly v Solari (1841) 152
ER 24).
 Question: In a pre-legal way, does she have to give back the money?
o Arguments for widow: reliance, good faith, mistake of the teller, ownership of money has
passed along to her.
o Arguments for insurance: widow has no legal right to the money – no special rules apply
to widow. She is still in the office; she has not left. Therefore if she gives back the money
she is no worse off than if she walked in. She has suffered disappointment, but is no
worse off financially.
 Question: does she have an obligation to return the money; does she now owe them $1000.
 What if she leaves money and hands over money to a charity? She no longer has the money.
What if she accumulates debt prior to picking up the money thinking she was going to get the
money? In these cases she is now going to be worse off financially.
 LS: She did nothing legally wrong and we thus have no normative ammunition t make her worse
off. If the connection is strong enough we may say that if she now gives the money she will not
be worse off.
 Australian legal thinkers often argue that unjust enrichment is simply about unconscionability.
But this only makes sense if she has an obligation to give the money back; if she did not have to
give the money back there would be nothing wrong with keeping it. Explaining restitution in this
way does not tell us where the obligation comes from.
 Most people agree that the obligation does not necessarily arise out of any breach of contract or
any wrongdoing.
 Deglman v. Guaranty Trust Co. of Canada (p.7):
o The nephew could not enforce the promise that was made to him. However, the aunt had
received the benefit of the work the nephew had done. Work cannot be given back like
property, but the nephew recovered the value of the work he had done. He did not enforce
the promise, but he did establish that his aunt was under an obligation of restitution
imposed by law, not by consent.
o The effect is that the aunt (actually her estate) ends up no worse off: she received his
work worth $3,000 and had to give him $3,000 back. There is a contract in some sense
(though unenforceable) and something goes wrong with it. One side has performed and
the other has not; contract was frustrated. He is suing for the value of the house, but this
action fails because of statute. The court cannot therefore enforce promise that was made
for house. He gets the value of his services instead. Cannot be understood as enforcing an
expectation interest (a contract) since he did not get what was agreed to, but rather the
value of the services. Giving him his expectation interest would be running counter to the
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legislative or statutory interests (statute of fraud) that says contract is unenforceable.
Giving expectation interest comes to close to giving effect to the contract.

Storthoaks and Lipkin Gorman (p.367-372):
o In some cases, particularly where the defendant has parted with wealth in reliance on the
validity of the enrichment that later turns out to be an unjust enrichment, we can see that
the defendant would be worse off if full restitution was available. Unless a defendant has
committed a legal wrong, there is generally no justification for making him or her worse
off; hence the claim is lost to that extent. Note that this means that the loss is borne by the
plaintiff. In some cases this may, however, justify another claim by the plaintiff: the
plaintiff might be granted a claim against a donative recipient.
 The mere fact that the moneys were spent does not by itself make the defendant
worse off. The defendant must have incurred a detriment.
 Defendant must prove that they so altered its position as a result of the receipt of
the payments that it would be inequitable to require it to pay.
 Bona fide change of position as a defence to claims in restitution: where an
innocent defendant’s position is so changed that he will suffer an injustice if
called upon to repay, the injustice of requiring him to do so outweighs the
injustice of denying the plaintiff restitution. Ex. If the plaintiff pays money to the
defendant under a mistake of fact, and the defendant then, acting in good faith,
pays the money or part of it to charity, it is unjust to require the defendant to
make restitution to the extent that he has so changed his position.
 Restitution is different than estoppel in that requirement of a representation in
restitution is not necessary.
 LS: Lipkan Gorman pleaded as a case of “money had and received” – we see
them using old language and fitting facts within traditionally recognized
categories of recourse for UE (common counts once used in 1600s - see below
for more details on common counts.
Lord Denning, “Book Review” (1967), 83 LQR 277 (CBp.3)

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When Denning first started in the law, no one had ever heard of Restitution, but everyone knew
about “the money counts” – money had and received, money paid, and quantum meruit
But, “At length, judges began to perceive that, beneath all the old cases, there was concealed a
broad principle that no person should be allowed unjustly to enrich himself at the expense of
another.”
K and tort don’t cover all causes of action – Restitution is the third category
Law and equity have for 2 centuries their different ways of preventing unjust enrichment.
o CML had money counts or implied Ks
o Equity had constructive trusts or fiduciary relationships
o The book Denning is reviewing draws law and equity together as one coherent whole in
the field of Restitution – “At last the fusion of law and equity is seen to work.”
Deglman v. Guaranty Trust Co. of Canada, [1954] SCR 725 (CBp.5)
Jurisdiction
Facts
While attending technical school in Ottawa at age of 20, nephew lived with his aunt (Laura
Constantineau Brunet) on Besserer Street. Aunt made promise for the transfer of her
house if the nephew “would be good to her and do such services for her as she might from
time to time request during her lifetime”. The nephew did do the services. Agreement failed
for lack of formality (according to s.4 of the Statute of Frauds, a contract for sale of land
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Issues
Holding
Reasoning
Comments
must be in writing) which could not be saved by the judicial exception for what is known as
“part performance.”
Can the nephew be compensated for unjust enrichment?
Yes.
Rand J (+2):
 The facts here are the classical case against which the Statute was aimed. The truth of
the facts are irrelevant. Equity intervenes only in circumstances that are no present here.
 However, nephew can recover for services rendered on the basis of a quantum meruit
since services were not given gratuitously.
 “The statute in such a case does not touch the principle of restitution against what would
otherwise be an unjust enrichment of the defendant at the expense of the plaintiff... it
would be inequitable to allow the promisor to keep both the land and the money and the
other party to the bargain is entitled to recover what he has paid. Similarly it is in the case
of services given.”
Cartwright J (+3):
 I agree with my brother Rand that the rspdt is entitled to recover the value of services
rendered. This right is based not on the oral contract (i.e. obligation by consent) but on an
obligation imposed by law.
 Lord Wright said in Fibrosa Spolka (1943): “It is clear that any civilized system of law is
bound to provide remedies for cases of what has been called unjust enrichment or unjust
benefit, that is to prevent a man from retaining the money of or some benefit derived from
another which is against conscience that he should keep....”
 The obligation belongs to a third category (restitution or quasi-contract) – i.e. distinct from
K and tort, but resembling K.
 Challenges reasoning in old cases – where there is an express K that turns out to be
unenforceable by reason of Statute of Frauds, no other K can be implied from the doing of
acts in performance of the unenforceable K.
 Restitution means giving back. Restitution of services cannot be made specifically;
it must always be made in money. Note that the aunt did not commit any legally
wrongful act since the promise was unenforceable.
 In this case, the court had to consider whether the Statute of Frauds excluded any
claim in unjust enrichment. This kind of question arises frequently in UE caes.
Whenever an UE issue arises because of a statutory imperative, the question also
arises whether the legislature intended to exclude any claim in UE. Intention almost
always has to be gathered by inference.
Note from Smith on WebCT (re readings for January 8, 2008):
In today's class, we discussed a hypothetical based on Kelly v Solari (1841) 152 ER 24. I was very
pleased with the quality of the discussion. Although we did not discuss the assigned readings, the cases
you read are direct illustrations of the principles we discussed.
In Deglman, the nephew could not enforce the promise that was made to him. However, the aunt had
received the benefit of the work the nephew had done. Work cannot be given back like property, but the
nephew recovered the value of the work he had done. The effect is that the aunt (actually her estate) ends
up no worse off: she received his work worth $3,000 and had to give him $3,000 back.
You also read extracts from Storthoaks and Lipkin Gorman. In some cases, particularly where the
defendant has parted with wealth in reliance on the validity of the enrichment that later turns out to be an
unjust enrichment, we can see that the defendant would be worse off if full restitution was available.
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Unless a defendant has committed a legal wrong, there is generally no justification for making him or her
worse off; hence the claim is lost to that extent.
Note that this means that the loss is borne by the plaintiff. In some cases this may, however, justify
another claim by the plaintiff: as we touched on in class, the plaintiff might be granted a claim against a
donative recipient.
January 10, 2008
Slides on WebCT
Last class there was a good discussion about the mistaken payment problem with a widow.

Implications for tort
o The person who becomes liable does so without having done anything that counts as a
legal wrong.
o There is no legal wrong that triggers the duty to make restitution.
o Could argue that if you’ve received a mistaken payment, it’s wrong not to give it back.
o Could say this is all about unconscionability, which is what some distinguished
Australian scholars say. This only makes sense if the widow has an obligation to give the
money back. You can’t decide her conduct is blameworthy unless you’ve already decided
she has to give the money back.
o Can’t explain that she has to give the money back because she has done something
wrong, then she’s done something wrong because she hasn’t given the money back –
going in logical circles
o Difficult to explain an obligation under law that does not imply any wrongdoing

E.g. Degelman-like Fact Pattern:
o There was a contract in one sense, and then something goes wrong with it. One party
commits a serious enough breach that the K is discharged. One side has performed,
however. Or the K was frustrated, for e.g.
o In these cases we’ll be thinking about restitution claims.
o Party sues for the value of the promise – value of the house. Unenforceable b/c of the
statute of frauds.
o It’s one thing to say can’t enforce her side of the bargain, but now the question is can I
get back what I did – are we going to let her keep the value of my performance? The
performance was only received on the basis of the K’l oblgn.
o Doesn’t make sense to have a clause that says “if this K is unenforceable, we will return
the value of the performance” because if the K is unenforceable, this clause is
unenforceable too!
o So even if we’re working in a K’l setting, it doesn’t help.

E.g. Life insurance claim case:
o There’s no defence the defendant can raise along the lines of the dft’s own good faith or
innocence. What if it was the plaintiff’s own carelessness that led to the unenforceability
of the K?
o Mont-Royal case and other readings introduce the defence of change in position
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(II) HISTORICAL DEVELOPMENT
If we look at the historical development of the common law, we’ll understand why this area of law hasn’t
had a long tradition. Let’s picture ourselves in England at the dawn of the common law – 13th century –
you have the royal courts (created by the King, King appoints the judges, under administration of
Crown). What’s important to remember is that these were not the only courts deciding cases. As part of
the feudal system, every lord is required to have his own court. It was the job of the lords to resolve the
disputes among their tenants in local courts.
The King has an obligation to do justice throughout his jurisdiction; next in line were the barons, and then
the lords. The lords have the same obligation on a smaller scale. The royal courts were extraordinary –
you don’t go for petty, ordinary disputes. That’s what the local courts were for.
The pleadings in the royal courts were governed by forms of action – e.g. writs. Forms of action were a
vehicle for getting your case adjudicated. From the mid 13th century you had effectively had a (closed) list
of the kinds of claims that were allowed to be made. Each writ was a “package” and might have different
rules about, for example, how you proved your case. In this era, title to land could be established through
battle. Let’s say a little bit about some of these packages.
 If you wanted to enforce a promise in the royal courts, could only do so if you had a deed – a
covenant under seal. Unsealed promises were enforceable in local courts.
 For wrongs, you had the writ of trespass, and others for the recovery of land, for example
 Private legal history tells us that unjust enrichment comes in at the end. During this time,
something like UJ was enforced using account and debt.
o Account – as a lord you could bring an account against your bailiff to make sure that the
amount he gave you was correct
o Debt – proprietary claim – if you didn’t give me a bag of oats that I paid for, you say,
“that’s my bag of oats, it’s mine, give it to me”
Later, between 1400 and 1600, new writs were developed. E.g.:
 Assumpsit – Assumpsit was a sub-category of trespass. It literally means “he undertook” (and
wrongfully failed).
o This developed for plaintiffs who had informal contracts, but wanted to bring a
proceeding in the King’s court. So the court’s accepted, initially only in the case of
special relationships (e.g. horse shooters that did bad jobs, ancient doctors)
o Parol promises – by the end of this period, this develops into the law of enforceability of
parol promises. Parol promises usually refers to deeds but can also be informal contracts.
 Consideration – Requirement of consideration evolves near the end of this period and beginning
of 17th century (N.B. not if seal  action in covenant)
Indebitatus Assumpsit I

Imagine I owe you 50 pounds and I don’t pay you. There is an action in debt arising by consent.
There’s a problem with the action in debt. If you bring an action in trespass, it would be in front
of a jury that came from the place where the dispute took place. In debt, there is no jury; instead
issues were resolved by wager of law (dfdt swore he didn’t owe the money and had to find 11
people that were willing to swear he was telling the truth.

This made sense because back in 1348, the idea of lying under oath was unthinkable. However,
by the 17th century, you had people hanging around willing to swear under oath for the right sum
of money. The clever lawyer realizes that, yes, there’s a debt, but if there’s a debt, that means the
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dfdt promised to pay the debt, so could use writ of assumpsit. This way, can get a jury. Some
resisted this and said that if you have a debt, it should be brought in the action of debt.

Indebitatus assumpsit means, if he is indebted, he promised to pay. So you would need a debt
followed by an (explicit) promise. Originally, debts belong to court of common pleas (?) while
trespass belongs to the King’s bench. (Court of Common Pleas was a common law court in the
English legal system before the reforms of the Judicature Act 1873.) It starts to look a bit strange
if in some cases where, just b/c you hadn’t heard someone say “I promise to pay the debt”, you
can’t bring it in assumpsit.

Slade’s Case (1602) was argued over a period of 5 years. It was argued in front of a joint panel of
the two courts. It was decided that every debt imports a promise to pay.

A legal fiction is created  plaintiff pleads the promise, defendant cannot deny it. But
remember none of the lawyers or judges were fooled by the legal fiction, they were the architects
of it! A promise had to be “in the record” in order for them to be comfortable with the use of
indebitatus assumpsit. The historian Milsom has said that, “the aim of fictions is to keep records
straight.” He’s the guy who figured out that all the cases about shooting horses were negligence
cases.
Evolution of indebitatus assumpsit
 The original indebitatus assumpsit cases that we started with were cases where the debts were
consensual, and the fiction is the subsequent promise to pay  fictional implied promise
 Later, underlying the debt could be one which arose by operation of law. E.g. case of the
mistaken payment. A good example is the sale of goods or services where there might or might
not have been a genuine agreement to pay a reasonable price. Very often sale of goods and
services can be discussed without explicit discussion of a price.
o E.g. A person walks into a store needing a harness, and the store clerk says fine, and they
choose a harness.
o Everybody agrees that the guy has to pay the price
 Later yet, we see mistaken payments. We can see how claims for mistaken payments are not that
different from a claim for implied obligation to pay for a product in a store, which is not that
different from a debt arising by operation of the law.
o As the law of mistaken payments progressed, the above stuff was still going on... around
the time that debt arose by operation of law, additional categories started being added.
January 15, 2007

As we said last class – someone could bring a suit in assumpsit to enforce a debt, and in
indebitatus assumpsit where the law would enforce an implied promise to pay.

NOTE: Deglman was about Statute of Frauds, which was passed in 1677 – within memory of
Slade’s Case. Bits of the Statute of Frauds are still enforced (e.g. sale of goods must be in writing
in some places), especially that the K for the disposition of land still has to be in writing.

Statute of Frauds in some ways was enacted in response to assumpsit because it was too easy to
assert that someone promised to pay you a debt.
The Common Counts I
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
From 1600 to 1800 we see the evolution of the “common counts” – these were subspecies of
indebitatus assumpsit and ways of recognizing that a debt was owed.
 Quantum meruit  as much as we deserved. This is a claim you bring for services
rendered.
 E.g. Deglman  he’s got payment for services performed for the Aunt. However
this was not based on an explicit promise. In fact the contract was strictly
unenforceable.
 Quantum valebat  as much as it was worth. These are claims for the value of goods.
 Money had and received to the use of the plaintiff  You the plaintiff had basically
given the dfdt money and it was held to your “use”. The word “use” is being used here in
the way that it was used in ancient trust language/
 I.e. the dfdt held the money but it was really held for me the plaintiff the whole
time
 In modern times, there’s no ambiguity – this is an obligation imposed by
operation of law
 Money paid by the plaintiff to the use of the dfdt –
 E.g. plaintiff leaves his carriage at dfdts house and the dfdt’s landlord is owed
rent, and comes along and seizes of it. Landlord had right to possess stuff on
premises when they weren’t paid, even if it didn’t belong to tenant! Clearly
defendant is enriched but plaintiff is now short a carriage. Ptf didn’t pay an
money to dfdt so can’t claim in money had and received.
 Aside: This is different from subrogation where the plaintiff steps into the shoes
of the landlord and has a claim against the defendant. In unjust enrichment the
plaintiff has a direct claim against the defendant without having to “step into
shoes” of someone with a direct claim.
Common Counts II

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Remember, in all these common counts, plaintiff pleads, “being indebted he promised to pay.”
Plaintiff always has to prove the debt, even if he doesn’t have to prove the promise. It had to be a
claim for an amount of money.
There was legal doctrine governing the availability of the common counts. It discussed what
would be good reasons for implying a debt AND a promise.
 I.e. when were the common counts available? What justifies implying a debt?
 In particular, the question becomes, when does the payment of money become to the
defendant’s or plaintiff’s use?
Moses v. Macferlan (1760)
 We’ll see this case referred to all the time
 Lord Mansfield, famous commercial judge in the 18th century, attempted to explain when you can
have an action for money had and received:
o “...it lies for money paid by mistake; or upon a consideration which happens to fail; or
for money got through imposition, (express, or implied;) or extortion; or oppression; or
an undue advantage taken of the plaintiff’s situation, contrary to laws made for the
protection of person under those circumstances.”
o Note: prehistoric use of “consideration”, i.e. a reason for a K. Back then past
consideration was good consideration.
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
At this point and into the 19th century assumpsit was in the law of contract.

Note that even the modern cases use the old language. Lipkin Gorman was successfully pleaded
as money had and received! Lawyers still want to put things into recognized categories.
Legacy

Before 19th century there were law texts. They didn’t just read cases! But the old texts would be
incomprehensible to us. There would be a category, e.g. assumpsit, and then a list of cases.
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This began to change in 19th century when common law texts on the modern plan were written.
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All the common counts were thus understood as “part of” the law of promises/contracts
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In the civilian tradition there was something known as “quasi-contract” since the times of
Justinian.
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Sinclair v. Brougham [1914] AC 398  if there was no express promise to pay, then we cannot
have a implied promise to pay. The fact that unjust enrichment claims were imposed by law was
hidden by the fact that they was put forth as implied promises.
Equitable Contribution:
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Constructive trusts: root in uses
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Some of these constructive trusts arose as hidden unjust enrichment claims. “Not only do you
owe me $100, but you hold it in trust for me.”
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This came from equity.

Recall in Moses, Mansfield was giving a list of defects of money payments that made the money
payments recoverable in the law. Equity added some elements to this list.

E.g. Law of undue influence (“duress light”). There’s no threat or force but the decision-maker
somehow abdicates her decision-making power to someone else. The person making the decision
hasn’t really made her own decision and was under the persuasive influence of someone else
o
So a transfer deemed “defective” for undue influence was purely done so for equitable
reasons
Academic Contribution:

The current form of the law of restitution emerged in the United States before anywhere else in
the CML world
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Courts in places like Louisiana recognized the claim

According to Andrew Cull, everyone in Harvard ran around assuming that unjust enrichment was
the source of a claim though no one else knew what he was talking about

1937: the American Law Institute released the “Restatement of the Law of Restitution”

o
Coined it the law of “restitution”
o
Reads sort of like a code with articles
1966: Goff and Jones wrote the first book outside the U.S. that asserted that there was such a
subject
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
1985: Birks wrote a book (The Law of Restitution) that triggered a huge wave of legal
commentary and writing on the subject

2003: Birks II (Unjust Restitution) – renounced everything he said in the first book and set out a
whole new approach. The approach he set out is closest to approach of Canadian common law.
He died in 2004.

The ALI started to do a Second Restatement in the 1980s but it fizzled out and now they’re
working on a “Third” Restatement.
Canadian Common Law

Deglman was the first Canadian case that explicitly said that there is a claim in unjust enrichment.

Pettkus v. Becker (1980)
o Much more prominent acceptance than Deglman
o Common law spouse that claiming some of profit of business that “wife” contributed to
o Case accepted that Becker had a claim in unjust enrichment
o Offered a clear formulation of the cause of action in unjust enrichment and a three part
test which previously had been found in the minority judgement of a 1977 case
o The three part test was re-affirmed in Peel.
o Since Pettkus, instead of the plaintiff’s being required to prove a positive reason for
reason for restitution, like a mistake, now there would be restitution unless a juristic
reason could be established. Juristic reasons are the opposite of restitution reasons; they
are reasons for keeping enrichments

Three part test from Pettkus:
o Enrichment of defendant
o Corresponding deprivation of plaintiff
o No juristic reason for the enrichment and corresponding deprivation

Most important thing about Peel is what it tells us about the relationship between the history and
this test.
o This test is sort of like Donoghue v. Stevenson – taking previously pigeon-holed
categories and bringing them under a general principle
o We still have those categories but they come under the principled approach now.
o Some of the categories came from common counts, some from equity, and they all
contribute to the three part test.
Next class we’ll start with Peel, and then we’ll move on to internal organization. Next week’s Tuesday
class we’ll assess the Cdn formulation which is different from the rest of the CML world.
January 17, 2008
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Supreme Court doesn’t always distinguish properly between Equity (e.g. in the legal sense) and
equity (i.e. general word that means fairness, etc.).

Equitable often means that the judge has a discretion in a formal sense – e.g. specific performance
and injunctions are discretionary remedies.
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
However, Lord Mansfield used to use the word equity a bit loosely this way. use used to say the
action of money had and received is like a bill in equity (the form you used to launch an action in
equity). Mansfield was an early fusionist.

Some people argue that since unjust enrichment comes from equity, this means it should be
allowed according to judicial discretion. In Peel this is exactly what the SCC said we CAN’T do.
The Municipality tried this kind of reasoning in Peel. Some have argued that perhaps it should be
called unjustified enrichment to discourage these kinds of claims.
Fact Pattern Exercise
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Two neighbours (plaintiff and dfdt), with a fence dividing their land. The dfdt finds an entrance to
a beautiful underground cave on his property. Two-thirds of cave is under the plaintiff’s land, one
third is under dfdt’s land. Dfdt starts business bringing visitors to the cave and makes a lot of
money. Plaintiff finds out, checks a few textbooks and starts chattering on about unjust
enrichment. The plaintiff, in a pecuniary sense, is no worse off than at the beginning of this
situation, but the defendant is much wealthier.
Possible claims:
o Unjust enrichment by wrongdoing?  Wrongdoing is trespass
o Enrichment came from the plaintiff’s patrimonial entitlements (i.e. from the property
itself) – derivation from something the law has already decided the plaintiff has the rights
to (i.e. fruits of property). In this way the wealth in the dfdt’s pocket can be seen to have
come from plaintiff.
o May be able to turn this into a compensation case – “If I’d known about this, I would’ve
rented the land underground to the plaintiff, or would have charged more.”
Note: a trust arises b/c the person holding property has the obligation to transfer the benefit of
that property to someone else – trust is equity’s way of looking at that obligation
Let’s look at this in the framework of the current test:
o There is enrichment of the defendant
o There doesn’t seem to be any corresponding deprivation of the plaintiff
o No need to move on to step three.
These facts come from Edwards v. Lee’s Administrators (citation on p.457). Sometimes called
Kentucky Caves case.
This case is an exemplar in Peter Birk’s change of opinion. Previously, he would have seen this
as an unlawful gain/compensation case. But in his new book he takes a wider view and says that
if the enrichment came from something that’s mine, then it should be seen as an enrichment that
comes at my expense which the law should see as an unjust enrichment.
Smith doesn’t like this latter view because the only reason such an action would get off the
ground is because there has been an infringement by the defendant of the plaintiff’s legal rights.
Smith’s article we were supposed to read for today is his elaboration of why the Old Testament
was right. There has to be a transfer for there to be a deprivation.
This course is structured on that approach. This is the majority view.
German law is so committed to compensation approach that forces them to use Birks’ approach.
The ambiguity of unjust enrichment
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In this case we’re concerned with unjust enrichment by transfer/by subtraction, etc.
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
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See Slides for January 17, 2008
Unlike wrongful conduct, unjust enrichment can only justify reversal of transfer:
o Hence plaintiff’s loss (deprivation”) is crucial
o The response is reversal of the transfer
o Limited to lesser of loss and gain
So deprivation of plaintiff is essential but without transfer, there is no deprivation and there is no
loss.
So Birks’ conclusion leads to the possibility of having deprivation without a loss
In England they sometimes say “at the expense of the plaintiff” – more amenable to Birks’ view.
They don’t necessarily care if there is a deprivation at all as long as there is some kind of
connection.
“Unjust enrichment” by wrongdoing  i.e., when there is a transfer of wealth from a third party
to the defendant which connects the defendant with the plaintiff through some wrongful act. Most
of the cases are through property wrongs. LS doesn’t think this is really UE
Peel (Regional Municipality) v. Canada, [1992] 3 SCR 762 (CBp.9)
Jurisdiction
Facts
Issues
Holding
Reasoning
Between 1974 and 1982, Peel District Family Court ordered a number of juveniles to be
placed in group homes and ordered the municipality to pay the homes the cost of
supporting them pursuant to s.20 of the Juvenile Delinquents Act. The municipality
successfully challenged the courts power to place the juveniles in “group homes” under s.20
(as opposed to the other options listed), but agreed with the province to keep paying the
children’s maintenance costs and refrain from recovering immediately pending negotiations
for a cost-sharing agreement. The federal government was not included in any of the
municipality's protests or the negotiations.
Later, the authority of the Family Court to place juveniles in group homes under s.20 was
affirmed in another case, but on appeal, the SCC struck down s. 20(2) so far as it purported
to authorize the imposition of the financial cost of the disposition on a municipality. The
municipality commenced proceedings to seek restitutions from the provincial and federal
government. The actions were pursued in the Ontario court system and federal court
system respectively. In both cases, the trial court ordered the government to make
restitution, but the appeal courts found that the municipality had failed to meet the elements
of a claim in restitution.
Can Peel Municipality be reimbursed for their payments?
No, the defendants did not receive a benefit. There can be no recovery on the basis of
justice or fairness alone.
McLachlin J (for the whole Court except Lamer CJ):
Overview
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There are three sets of tensions in the law of restitution:
1. Theoretical – between the category approach (does the case fit into any of the
categories of cases where previous recovery has been allowed?) and the
“principled approach” which looks for criteria said to be present in all UE cases:
(1) benefit to the defendant; 2) a corresponding detriment to the plaintiff; and
3) the absence of any juridical reason for the dfdt’s retention of the benefit
(Pettkus v. Becker (1980)). In this case the municipality seeks a principled
approach to be applied while the govts argue this case doesn’t fall w/in a category.
2. Jurisprudential – Categories are predictable, but some think that in some cases the
court should be able to make decisions based on the equities of the case before
them.
3. Philosophical-policy – traditional reluctance was based on robust individualism, but
the new approach shrinks from the harsh consequences of individualism and seeks
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to effect justice where fairness requires it. In this case, the municipalities emphasize
the injustice of its situation.
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McLachlin chooses “a middle path”. Then she goes through the history of restitution.
No recovery lies in unjust enrichment without a benefit which has enriched the
defendant. The difficulty in this case lies in establishing that the payments conferred a
"benefit" on the federal and provincial governments which represent an unjust retention
or enrichment.
A benefit may be “positive” (e.g. payment of money) or “negative” (e.g. dfdt was spared
an expense which he would have been required to undertake).
In this case, the category of recovery that most closely fits the facts is “payment under
compulsion of law.” It must be shown in these cases that the ptf’s payments discharged
the defdant’s liability. If no liability has been discharged, it is irrelevant that the plaintiff
has incidentally conferred some benefit on the dfdt. An incidental benefit does not itself
give rise to any right to be recouped.
In this case, neither the federal nor provincial gov’t were under obligation for the care of
these children. So there was no legal liability on either government.
Alternatively, there may be relaxation on the traditional requirement of discharge of
legal obligation which may be effected through the concept of an “incontrovertible
benefit”, limited to situations where it is clear on the facts (on a BoP) that had the
plaintiff not paid, the defendant would have done so.
An incontrovertible benefit is an unquestionable benefit that is demonstrably apparent.
It must be more than a secondary collateral benefit, i.e. an incidental benefit.
The benefit conferred here is not incontrovertible because neither level of government
was shown to have gained a demonstrable financial benefit or to have been saved an
inevitable expense. Nor is it "unquestionable"; the federal and provincial governments
were under no legal obligation, and it was neither inevitable nor likely that, in the
absence of payment by the municipality, they would have made such payments. An
entirely different scheme could have been adopted.
The fact that the municipality's payments furthered Canada's general interest in the
welfare of its citizens or the effective regulation of criminal conduct by minors is an
insufficient "correlative link" upon which to found recovery even on the application of
the broader `incontrovertible benefit' doctrine.
Admitting recovery here would extend the concept of benefit in the law of unjust
enrichment far beyond the restoration of property, money, or services unfairly retained.
Recovery could occur wherever a payment had been made under compulsion of law
which has an incidental beneficial effect of a non pecuniary nature.
Furthermore, even where the legal tests for recovery are clearly not met, however,
recovery cannot be awarded on the basis of justice or fairness alone. A middle path
requires adhering to legal principles, but recognizing that those principles must be
sufficiently flexible. Such flexibility is found in the Pettkus test and recovery cannot be
predicated on the bare assertion that fairness so requires.
Even if justice were basis of recovery, in this case it would not require recovery.
Restitution, more narrowly than tort or contract, focuses on re-establishing equality as
between two parties, as a response to a disruption of equilibrium through a subtraction
or taking. Fairness must embrace not only the situation of the claimant, but the position
of those from whom payment is claimed. It is far from clear that ordering payment to
the municipality would be fair to the federal and provincial governments and the
taxpayers who would ultimately foot the account.
Comments
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(III) STRUCTURE OF THE SUBJECT
Lionel Smith, “The Province of the Law of Restitution” (1992) 71 Can. Bar. Rev. 672 (CBp.29)
 A claim for UE can arise where there is neither a K’l obligation or any legal or equitable wrong
creating an action in tort – e.g. it’s an independent cause of action.
 In Canada, what must be proved is: 1) an enrichment of the defendant; 2) a corresponding
deprivation on the part of the plaintiff; and 3) an absence of juristic reason for the enrichment
o In England they say there needs to be 1) an enrichment of the defendant; 2) at the
expense of the plaintiff; and 3) the enrichment is unjust.
o The third element says that there must be a legally recognized reason that the transfer
should be reversible
o Some judges have been wary of the use of the word “unjust”, stating that it is an
unstructured invitation to administer idiosyncratic impressions of justice.
o Unjust enrichment means “reversible” enrichment, not “unfair” enrichment.
 Restitution is the response to a successful claim in UE
o Restitution can be implemented by a money award or declaration of constructive trust, by
an accounting of profits, and possibly more exotic mechanisms (like the equitable lien).
 There has been conceptual confusion between restitution for wrongs and restitution as a
response to a claim in UE, because of the way the claim in UE was set out in the Restatement of
the Law of Restitution as: “A person who has been unjustly enriched at the expense of another is
required to make restitution to that other.”
o This wording gives rise to two sets of events – imposition of restitution where UE has
been established, and imposition of restitution where the plaintiff has established that the
dfdt committed a wrong against the plaintiff and procured some profit thereby
o The ambiguity of the wording “at the expense of” can mean “transfer or wealth” or “by
subtraction”, but can also mean “by doing wrong to”.
 Therefore, there are actually two distinct parts of the law of restitution:
o (a) claims that the defendant must disgorge some gain achieved through a wrong against
the plaintiff (“disgorgement for wrongdoing”) and
o (b) claims that the defendant must make restitution of a benefit received from the plaintiff
(“autonomous” or “subtractive unjust enrichment”).
o In disgorgement for wrongdoing, the plaintiff builds her claim on the wrongful conduct of
the defendant. The plaintiff need not show a loss; her entitlement to the gain is based on
her being the victim of the wrong.
o By contrast, in a claim in autonomous unjust enrichment, the plaintiff needs to show that
the defendant's gain corresponds to a deprivation on the part of the plaintiff. Moreover,
such a claim does not depend on any wrongdoing; it is based on an autonomous cause
of action.
 What Smith is calling disgorgement for wrongs is normally (inaccurately) called restitution for
wrongs
o Definitions of restitution connote a return to an earlier state  giving something back to a
person who has been deprived of something, so that they are put back to where they
were
o Disgorgement means to give up what has been wrongfully appropriated. This makes
more sense in relation to wrongs.
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Rosenfeldt v. Olson (1986), 25 DLR (4th) 472 (B.C.C.A.) (CBp.42)
Jurisdiction
Facts
Issues
Holding
Reasoning
Comments
BCCA
The parents of 7 children killed by Olson seek to claim against a $100,000 trust fund for
Olson’s wife and son to satisfy judgments in their favour, pursuant to the Family
Compensation Act, launched after Olson’s convictions. The $100,000 was paid by the
RCMP to Olson in exchange for information about the location of the bodies of 11 children
he had killed.
Could the parents claim against the $100,000 on the basis of UE?
No, there was no corresponding deprivation of the plaintiffs.
Hinkson JA:
 The trial judge found that Olson benefitted as a result of the UE of Joan Olson and
observed that it is a principle of our law that it is contrary to public policy that a man
should be allowed to claim a benefit resulting from his own crime. Since the AG of BC and
RCMP were not going to recover the moneys, the TJ thought he should prevent the result
by exercising the equitable jurisdiction of the court.
 However, the payment was not made as compensation for the deaths of the children but
in exchange for evidence.
 The payment did not deprive the plaintiffs of money which, if it had not been paid to the
trustee, would have properly been payable to the plaintiffs. Thus, the payment did not
result in any corresponding deprivation. It is clear that the plaintiffs have no claim to have
the $100,000 restored to them on the basis of UE.
 This case shows that it’s important to understand whether a claim is one for restitution
based on UE or whether it is one for disgorgement based on wrongful conduct.
 Smith asks if the plaintiffs might have succeeded if their claim had been understood as
one for the disgorgement of the profits of wrongdoing?
January 22, 2008
In the Restatement of the Law of Restitution, the authors (Scott and Seedy?) took all the stuff on
constructive trusts and put it in the Restatement and said this is part of the law of Restitution now. They
saw themselves as taking an important historical step, taking all the money counts from CML and taking
the stuff about constructive trusts from Equity and put it all in Restitution. ALI didn’t allow them to make
up a new legal word, so they took an old world, and gave it a new flavour (neologism).
In the case of “Unjust Enrichment”, it is restitution that is justified. Contrast with “Wrongdoing”.
Wrongdoing
 When people commit a wrong, usually what we think about is compensation.
 Wrongdoing can justify:
o Disgorgement – taking away the defendant’s gain, even if greater than the plaintiff’s loss
(you achieved this gain by doing something wrong, so we’re going to make things right,
even if the defendant’s gain exceeds what the plaintiff originally lost).
o Compensation – making good the plaintiff’s loss, even if greater than the defendant’s
gain (reverse of disgorgement). If we’re rewarding the extra loss to the plaintiff, then this
is compensation.
o Punitive Damages – to “punish” someone for doing something wrong
o Nominal – e.g. for trespass, plaintiff might not have suffered any real loss, but will get
some nominal amount of money.
 In all these cases, the wrong is separate from what we do about it.
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 In the case of mistaken payment, it will never generate a right to consequential loss. In other
words, if the plaintiff has missed some profitable opportunity because of being out of pocket,
that’s too bad for them (i.e. plaintiff’s loss is greater than dfdt’s gain).
o Compensation looks only to what loss the plaintiff suffered.
o You could say that in a mistaken payment case, you say, it’s a sort of compensation from
the plaintiff’s perspective. But this is not accurate, because you also have to look at the
defendant’s gain.
 What’s interesting about UE is that the justification for restitution lies in the transfer – a court is
not just measuring the claim, it constitutes the claim.
 Some people argue that you can have restitution of UE without necessarily having any loss
suffered by the plaintiff. Some people disagree that the law of UE is only the law of defective
transfers.
o If you’re in this school of thought, you may not agree that it’s useful to talk about
disgorgement. E.g. Andy Burrows would call what Smith calls disgorgement for wrongs
“restitution for wrongs”.
o Smith insists that the distinction is important.
o This is an ongoing disagreement.
Practical Effects
 Wrongdoing can allow disgorgement of gain that exceeds plaintiff’s loss
 And also: consequential loss, punitive damages
 Defences might be different
 Litigation rules: Limitations of actions; conflict of laws
(IV) THE CANADIAN APPROACH
Next thing to consider: How do you answer the question posed by the third element of the cause of
action?
 Until Pettkus, the question would have been “was the enrichment an unjust enrichment”?
 The SCC reformulated it as “There has to be no juristic reason for the enrichment or deprivation”
o Recall in Moses v. Macferlan (1760) -- “...it lies for money paid by mistake; or upon a
consideration which happens to fail; or for money got through imposition, (express, or
implied;) or extortion; or oppression; or an undue advantage taken of the plaintiff’s
situation, contrary to laws made for the protection of person under those circumstances.”
o This is a list of problems with keeping the money – i.e. why the enrichment is unjust
 The SCC reformulation turns the inquiry the other way – juristic reasons are reasons why the
transfer is okay
 In Garland, the court had an opportunity to say that we didn’t mean to turn everything on its head
in common law Canada – but it didn’t say that! It said, no, we really meant what we said in
Pettkus.
o This is why our course outline looks different from the table of contents of the textbook
So what are juristic reasons? We’ll look at the following:
 Donative intention
 A contract
 Risk-taking
 Finally we’ll evaluate the “juristic reason” approach. Smith isn’t sure it’s a good idea.
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Kingstreet Investments  perfect juristic reason – tax statute was void! But SCC says, no, this isn’t an
UE case, it’s a constitutional law case. Confused the issue more. We’ll return to this later in the term.
Next time we’re moving on gift.
Garland v. Consumers’ Gas Co. (2004), 237 DLR (4th) 385 (SCC) (CBp.262)
Jurisdiction
Facts
Issues
Holding
Reasoning
From Ontario
Section 347 of the Criminal Code made it an offence to charge interest in excess of 60%
interest per year. The Ontario Energy Board established a pricing scheme which contained
a late payment penalty (LPP) provision which effectively allowed Consumers’ Gas Company
to charged more than 60% interest. The plaintiff took the dfdt all the way to the SCC which
held the penalty did contravene s. 347 in 1998. Remarkably, the dfdt continued to enforce
the LLP scheme for another three years. The plaintiff seeks repayment of the amount
retained between 1998 and 2001.
1) Should Cdn law maintain the “absence of juristic reason” articulation of the third step, or
move towards the “unjust factors” type test? 2) Is the enrichment of the defendant
reversible?
1) No, maintain that test; 2) Yes, the amount in excess of 60% interest from 1994 onwards
Iacobucci J:
 For an action in UE to succeed, there must be an absence of any juristic reason for the
enrichment.
 England has formulated this differently. English courts require “that the enrichment be
unjust.”
 Professor L Smith argues that this Canadian approach is difficult because the plaintiff to
prove a negative – the absence of a juristic reason for the dfdt to keep the enrichment. He
argues that we should adopt the British model where the plaintiff must show a positive
reason why it would be unjust for the dfdt to retain the benefit.
 We will keep the distinctive Cdn approach to juristic reasons but we can construe it in a
manner that is responsive to Smith’s criticism.
 The approach is the following:
1. The plaintiff must show that no juristic reason from an established category exists to
deny recovery. By closing the list of categories, Smith’s objection is answered. The
established categories of juristic reasons include contract, disposition of law, donative
intent, and other valid common law, equitable or statutory obligation. If there is no
juristic reason from an established category, then the plaintiff has made out a prima
facie case under the third step of the UE test.
2. Though a prima facie case has been made out, this is rebuttable where the defendant
can show that there is another reason to deny recovery. Therefore there is a de facto
burden of proof placed on the dfdt to show why the enrichment should be retained. This
provides for a category of residual defence.
 As part of the dfdt’s attempt to rebut, the court should have regard to two factors: 1) the
reasonable expectations of the parties and 2) public policy considerations.
 Once these factors are considered, it may be that the court will (i) find a new category of
juristic reason is established; (ii) find that there was a juristic reason to deny recovery only
in these particular circumstances or (iii) that there was no juristic reason for the
enrichment. In the latter case, recovery will be denied.
Application in this case:
 In this case, the OEB orders creating the LLPs do not justify the enrichment under the
“disposition of law” category because though the OEB orders are intra vires the province
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by virtue of 92(13), s.347 of the CC is intra vires the federal government and since it is
impossible for Consumers’ Gas to comply with both, the provincial law is inoperative to
the extent of the conflict as per the paramountcy doctrine.
 Second stage of the test  re, reasonable expectations, because Consumers’ Gas is
operating in a regulated environment, their reliance on OEB orders should be given some
weight. From 1981-1994, Consumers’ Gas’ reliance on the inoperative OEB orders
provides a juristic reason for the enrichment (1981 is when criminalization of interest in
excess of 60% occurred; 1994 is when the first action was commenced).
 However, as a matter of public policy, a criminal should not be permitted to keep the
proceeds of their crime. When Consumers’ Gas was put on notice of the serious
possibility that it was violating the Criminal Code in charging the LLPs, it could have
requested OEB to change the rate structure.
 Appellant entitled to restitution of the portion of monies paid in excess of 60 percent.
Comments
January 24, 2008
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Funny that in Garland the amount to be returned is calculated from 1994 – i.e. when Consumers’
Gas was put on notice. Seems to be a result of the second stage of the test.
So Iacobucci J says the plaintiff has the initial burden to show that none of the closed categories
apply.
Defendant is on the spot for the second stage. We haven’t got to the defences yet, but it’s kind of
like a defence. Smith doesn’t like when the SCC articulates things like the “reasonable
expectation” and “public policy” test. It’s like saying, the enrichment is unjust as long but it’s still
okay.
Smith’s not exactly sure what “reasonable expectations of the party” means. Sounds good, who
would argue with that? But what does it really mean?
In Kingstreet, it seems by rejecting the fiscal chaos thing they kicked out public policy
considerations.
Note in this case the court seems to be talking about subjective reasonable expectations.
What worked in Garland (i.e. starting the restitution at 1994) would not work in a normal
mistaken payment case. Normally the amount to be returned would be the amount from the
moment of the unjust transfer.
Here it seems like the reasonable expectations reasoning is used to mitigate the harsh results.
If we had ordered Consumers’ Gas to pay ALL the money back, seems like the result is very
harsh on Consumers’ Gas. However we can justify these harsh results by saying that the
defendant is not really any worse off than they were in the first place.
This works as long as we’re careful about using the defence of change in position. We can use
this defence to filter through this detrimental reliance type problems.
In the evolution of this law, we’ve chosen to protect reliance through change in position. In
Garland it’s a bit strange how reliance is not a juristic reason in part 1 (me: why would it have
been?) but then it is in part two.
The final irony is that we’ve ended up protecting reliance without calculating the quantum (i.e. in
a less finely tuned way than would be done under change in position), whereas in the second
extract of the case (which we haven’t read yet) the court says you can’t protect reliance by using
change of position because can’t use the defence of change of position when you’ve acted in a
criminal way.
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Re, reasonable expectations, normally it means what is reasonable in society’s eyes, i.e.
objectively. In Garland, the SCC seemed to proceed in a way that suggested it was subjective
reasonable expectations.
Kingstreet Investments Ltd. v. New Brunswick, [2007] 1 S.C.R. 3 (online)
Jurisdiction
Facts
Issues
Holding
Reasoning
The plaintiff paid money as taxes and it turned out that the taxing statute
was unconstitutional and void
Bastarache J:
 The Crown cannot retain money that it has collected without statutory authority. This
affirmation of the primacy of the constitutional order also led the Court to abolish the
putative doctrine of “fiscal chaos”. This was a theory that money paid under a taxing
statute that turned out to be void should be irrecoverable, in order to avoid fiscal chaos
 The Court also disposed of the defence of “passing on”
 A claim to recover undue taxes is not a claim in unjust enrichment, and moreover, a claim
in unjust enrichment is not available to the plaintiff.
 Also the claim to recover undue taxes excludes the making of a claim in unjust
enrichment
Why an Unjust Enrichment Framework is Inappropriate
 Restitution is a tool of corrective justice, one that restores a pre-existing equilibrium
 We have restitution for wrongdoing and restitution for unjust enrichment. This is not a
case of wrongdoing; furthermore, while unjust enrichment may sometimes be available
against public bodies, the analytical framework of unjust enrichment was inappropriate to
this case.
 Why? First, “a technical interpretation of ‘benefit’ and ‘loss’ is hard to apply in tax recovery
cases.”
 Second “… in the context of this case, the unjust enrichment framework adds an
unnecessary layer of complexity to the real legal issues.”
 The Garland approach is, as one can see, very complex; it requires that courts look only
to proper policy considerations.
 “Actions for recovery of taxes collected without legal authority and actions of unjust
enrichment both address concerns of restitutionary justice, but these remedies developed
in our legal system along separate paths for distinct purposes. The action for recovery of
taxes is firmly grounded, as a public law remedy in a constitutional principle stemming
from democracy’s earliest attempts to circumscribe government’s power within the rule of
law. Unjust enrichment, on the other hand, originally evolved from the common law action
of indebitatus assumpsit as a means of granting plaintiffs relief for quasi-contractual
damages.”
 Finally “…in Quebec our Court has expressed the view that actions for recovery of
illegally collected taxes could be brought by the more simple route that I suggest (e.g.
constitutional remedy?). In its opinion, such claims could be brought under art. 1491 of the
Civil Code of Québec.”
 NOTE: “[c]laims of unjust enrichment against the government may still be appropriate in
certain circumstances.
Application of the Doctrine of Protest and Compulsion
 Where a claim is founded on the lack of legislative authority for the collection of money,
compulsion and protest are irrelevant; and this is so whether the taxing statute is ultra
vires, or whether it was valid but did not properly apply to the plaintiff.
Monika Rahman
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 Under the principle that there can be no taxation without legislative authority, if the Crown
had no right to collect the money, then it must be returned.
 “In cases not involving payments made to public authorities pursuant to unconstitutional
legislation or the misapplication of an otherwise valid law, my view is that courts should
insist on proof of compulsion in fact. The mere fact that the payment was made in protest
should be neither necessary nor sufficient to establish compulsion. Protest may
accompany a voluntary payment (in order to protect a hypothetical restitutionary
entitlement), and compulsion may occur without any evidence of formal protest. Insisting
on compulsion in fact is more principled and ensures that all similarly situated persons will
be treated equally, regardless of protest.
Comments
II. Juristic Reasons
(I) DONATIVE INTENT/GIFT
(a) Conditional Intent
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In Clarke, we have an elderly man who gives all his money to his niece. The only candidate for
what might be a juristic reason is donative intention. In the end, however, there seems to have
been a condition on the gift.
There is mention of an inequality problem, though there is no mention of capacity.
This is sort of like the situation where your nephew says he’s getting married and you give him
money but then the wedding gets called off.
It wouldn’t be unimaginable to think about this situation in contractual terms.
But you can make a gift that’s not an absolute gift – i.e. strings attached. Here we had qualified
donative intention.
In CVL, a gift is a contract.
Clarke doesn’t promise that he’s going to stay – so he’s not breaching any contract. And Moir
doesn’t promise he can live there forever. That’s why this isn’t a contract situation.
Important point  If we think about our paradigm case of mistaken payment, most of these cases
involve somebody paying money because they think they owe it, and someone receiving money
because they think their owed it.
o However, there are other types of mistaken payment cases. I’m trying to transfer money
to your bank account but I make a mistake in filling out the account number and it goes to
someone else I don’t know.
We know for a fact that what is motivating his gift is to make them take care of him. Imagine that
they didn’t realize that this was the motivation for his gift. In the case of a wrong bank account
number, you can get your money back even though the mistake was something they had no idea
about. Could that reasoning apply here?
o The judge says “I find there was a mutual understanding.”
Clarke v. Moir (1987), 82 NSR (2d) 183 (CBp.194)
Jurisdiction
Facts
Nova Scotia Trial Division (I think)
After his wife died, Clarke, an elderly man, asked to live with his niece in Nova Scotia in
exchange for all of his money and possessions. The relationship soured after 16 months
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Issues
Holding
Reasoning
Comments
and the plaintiff sought recovery of his money, including proceeds from the sale of a house
that he had owned in the US. The court held that the parties had not created a binding K b/c
they had not sufficiently settled the terms.
Is there a juristic reason to let Moir keep the money?
No, it would be unconscionable b/c of the unequal relationship between the parties.
However there is counter-restitution for expenses.
Judge:
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There was an agreement here that Moir would look after her uncle the rest of his life.
There is no evidence that he was pressured to leave.
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To have a gift of money, along with the giving of the money there must be the intention
that it should be the property of the donee. Mr. Clarke did not retain control over the
money except in his belief that he would be looked after for the rest of his life.
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If the intention of Mr. Clarke was to part with all the money permanently regardless of
what happened in the future, it would be inappropriate to invoke the law of restitution.
However that is not the case here (here it’s conditional intention).
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Also if the condition upon which the gift was made is unfulfilled because of the donor’s
wrongdoing, then it would be wrong to turn to restitution. Here it was not a rational
reasoned decision for Mr. Clarke to leave.
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“Cases of unjust enrichment must be subject to controls to avoid subjective exercise of
judicial discretion.” The dfdt must receive a benefit at the plaintiff’s expense in
circumstances that it would be unjust to allow the defendant to retain that benefit.
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Judge looks to volition, which may be seen in the conduct of the defendant and unjust
enrichment cases will generally fail if the person who received the benefit did not
request it, want it, acquiesce in its receipt and cannot return it.
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However here there was an unequal (albeit innocent) relationship in the parties, and so
it would be unconscionable for Mrs. Moir to retain all the funds now that Mr. Clarke will
not live with them.
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Nonetheless, there is counter-restitution of benefits received by the plaintiff so the
judge allows Moir to keep money for expenses related to Clarke’s care, and money for
time and inconvenience.
This is a case of conditional intention where the plaintiff intends at the outset to confer a
benefit upon the defendant and intends the latter to retain the benefit only if some condition
is satisfied. If that expectation is disappointed then the basis for the enrichment fails and the
transfer becomes reversible.
January 29, 2008
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Last class we were talking about Clarke v. Moir.
The way the law has been framed in Canada has changed A “juristic reason” makes the
enrichment a just enrichment. When the defendant is liable it is because there was no juristic
reason. This makes all the cases look a little bit different and how we view the whole subject.
Makes it hard to categorize the cases.
Clarke – it was not a gift per se because it was a conditional intention.
Think about the mistaken payment type case – if it was my mistake, I would win even if the
defendant didn’t know about my mistake. But compare with the Clarke type case – would this
argument if the giver, the uncle, had it in his mind as a kind of secret condition (e.g. only known
to him). Will a private “condition” allow recovery, since a private “mistake” does? NO.
Why is this the case? The condition must be known to both people.
It seems like we’re drawing a distinction between a mistake made in the present (mistaken
payment) and a mistaken prediction – i.e. a mistake about the future. In the case of a
misprediction, why do we strike the balance differently and favour the defendant? Unless we say
it’s because as plaintiff you’re taking a risk. If you want to keep strings on things that are
effective into the future, then the string has to be mutually understood.
Monika Rahman
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Could see this is an issue of individual choice in private law – in the case of mistaken payment,
there is no choice being made per se, but with a conditional intention situation, you are make a
choice to take a risk, and so you would want the other party involved to be aware
You have to conclude that both parties must subjectively know of this condition (and we’re not
talking about Ks, so we could call it a “basis” for the transfer). You don’t need an explicit
conversation about it, but some subjective knowledge takes away the risk-taking element.
In the CVL all gifts are contractual, however a gift (of property) is recoverable due to ingratitude
of the donee. So there’s one misprediction that allows recovery.  In Justinian times, there were
particular types of ingratitude, but in QC in gratitude has been generalized.
Note that Mr. Clarke did not get all his money back. There was counter-restitution. He was
benefiting from living at his niece’s place.
Note that there’s a difference between counter-restitution and money that was essentially “thrown
away”
(b) Unconscientious Receipt
Pettkus:
 There was growing consensus that it was a social wrong for a common law spouse not to get any
interest in something they contributed to
 Note that the least regulated province for unmarried couples is Quebec but Quebec has the
highest proportion of stable common law couples
 The solution in Pettkus was a constructive trust based on UE
 What has since happened is that the SCC articulated two distinct stages  the UE test and then
the second stage is to find the dfdt liable to pay money, OR a constructive trust is created
 This case creates the idea of “no juristic reason”. The court in explaining why Pettkus is liable
uses the “free acceptance” reasoning
 The only way Pettkus could use the juristic reason type reasoning is by saying Becker gave him
all these services. But the court clearly doesn’t accept this.
 You could say that these assets are transferred on the understanding that there’s a cohabitational
relationship that is assumed to continue. Things didn’t turn out the way it’s expected, rather like
Clarke v. Moir.
CBp237:
 The first set of reasons for restitution focuses on the plaintiff’s state of mind. Relief is available
because the transfer was the product of vitiated or conditional intention (even if the defendant
wrongfully created the impairment, by, for example, putting a gun to the plaintiff’s head, or knew
of the impairment).
 The second set of reasons looks at the defendant’s state of mind. Relief is available because the
dfdt unconscientiously received or retained a benefit.
Pettkus v. Becker, [1980] 2 SCR 834 (CBp.237)
Jurisdiction
Facts
Rosa Becker and Lothar Pettkus were together in a common law relationship for 19 years.
Over this period Pettkus ran a successful beehive operation and purchased three rural
properties (one of which was sold) where business was conducted. Over the 19 years,
Becker supported Pettkus for 5 (accelerating his savings) and worked with him on the farm
to build up the business for 14 years, all the while unpaid. When the relationship fell apart
Becker attempted to claim a one-half interest in the lands and beehive business. She
claimed that since her income went towards supporting Pettkus while he got his beehive
business off the ground, she was entitled to a share in the business. In the alternative, she
Monika Rahman
Page | 23
Issues
Holding
Reasoning
Comments
argued that there was a constructive trust of the assets which belonged to her on the basis
of unjust enrichment.
Was the enrichment unjust?
Yes, it was freely accepted. Pettkus should have known Becker had a reasonable
expectation in receiving one-half interest.
Dickson J:
 The principle of UE is rooted in “natural justice and equity”. The great advantage of
ancient principles of equity is their flexibility: the judiciary is thus able to shape these
malleable principles so as to accommodate the changing needs and mores of society, in
order to achieve justice. The constructive trust is a useful tool in the judicial armoury.
 It is not enough for the Court simply to determine that one spouse benefited at the hands
of another and then to require restitution. It must also be evidenced that the retention of
that benefit would be unjust in the circumstances.
 Miss Becker believed she had some property interest and Mr. Pettkus seems to have
recognized one too since he paid her modest compensation. There is no evidence
showing that all her work was being performed gratuitously. He freely accepted the
benefits conferred upon him.
 [W]here one person in a relationship tantamount to spousal prejudices herself in
the reasonable expectation of receiving an interest in property and the other person
in the relationship freely accepts benefits conferred by the first person in
circumstances where he knows or ought to have known of that reasonable
expectation of receiving an interest in property, it would be unjust to allow the
recipient of the benefit to retain it.
 There is no problem of causal connection here. Her contribution was sufficiently
substantial and direct as to entitle her to a portion of profits realized upon sale of one of
the properties and an interest in the other two properties and the business.
 It is not every contribution which will entitle a spouse to a one-half interest, but in this
case any difference in quality or quantum of contribution is small. Ontario CA decision of
even division upheld.
 The free acceptance concept was formulated by Goff and Jones, who today state:
“[A person] will be held to have benefited from services rendered if he, as a
reasonable man, should have known that the plaintiff...expected to be paid for
them, and yet he did not take a reasonable opp’ty open to him to reject the
proferred services. Moreover in such a case, he cannot deny that he has been
unjustly enriched.”
 Free acceptance has been used in commercial contexts.
 Note that it is difficult to classify a person’s conduct as unconscientious when he
honestly (though unreasonably) accepted a benefit in the belief that it was being
offered free of charge. The defendant doesn’t have the option of restoring the
benefit in specie and the law seems to disregard the plaintiff’s carelessness.
January 31, 2008
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Last time we were looking at Pettkus, the first case where the “no juristic reason” approach was
articulated (MR: go back and find the specific line!)
Unjust enrichment has served as a non-statutory solution to disputes between unmarried couples
because the SCC decided in some case that it is constitutional to statutorily distinguish between
married and unmarried couples in these matters
Even married couples that have statutory division of property provisions can use UE.
The crucial passage in Pettkus about free acceptance also refers to reasonable expectations – we
can ask, does this mean her subjective reasonable expectations? Or does it mean what reasonable
people would expect?
Monika Rahman
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
It seems doubtful that she could have subjectively had such expectations. We wouldn’t want her
success to depend on what she thought during the relationship.
(II) CONTRACT
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All claims in UE have at the foundation that the plaintiff’s intention to enrich the defendant was
somehow undermined, vitiated, falsified, etc. by other factors.
A contract to transfer money for whatever reason is clearly a juristic reason for the enrichment.
The contract itself might be void, for e.g. in Deglman.
(a) Never Made Because of Illegitimate Pressure or Doesn’t Materialize
Stolze:
 Stolze was a jury trial at first instance, so there are no findings of fact or reasoning. Makes it
difficult on appeal to determine principles of law.
 In this case, Stolze and the other defendants are trying to say that there was a contract – i.e. a
settlement because of Fuller’s wrongdoing.
Stoltze v. Fuller, [1939] SCR 235 (CBp.122)
Jurisdiction
Facts
Issues
Holding
Reasoning
Respondent, Fuller was a director in Reliance Lumber Company and owned one-tenth of its
stock (worth $30K). Stoltze was president of the company. On March 16, 1936, the Fuller
turned over his shares in the company and resigned. A couple of weeks later Fuller’s lawyer
requested return of the shares or their value because the transfer had been obtained by
duress. According to Fuller, whose story the jury believed, upon returning from a business
trip Stolze and the two other appellants were there, had changed his lock, and threatened
prosecution for mismanagement for giving business to his son. They said “you ought to be
in gaol, and that is where we are going to send you; and your friend Arthur Moxon agrees.”
Moxon was the company solicitor, a man of very high standing in his profession. Fuller
claims to have agreed because he was very well seen in the community and was afraid of
the disgrace of it all. Stolze’s version was that after a one hour meeting, Fuller asked what
he could do to set the “mess” he had created straight and then agree voluntarily to hand
over the stocks.
Should there be restitution of the $30,000?
Yes, the respdt was maliciously and unlawfully deprived of his property by duress and
coercion.
Davis J:
 The threat to prosecute is not in itself an illegal act where a just and bona fide debt
actually exists. The appellant claims that the transaction was merely the legitimate
compromise of a claim for damages for breach of duty.
 The effect of the jury’s findings is that there was an intentional design on the part of the
appellants to obtain from Fuller a transfer of his shares without consideration, and that it
was obtained by menaces and illegal extortion. This is a sufficient answer to the argument
that a mere threat in itself is not unlawful.
 Whether or not the remedy of the respondent was properly laid as an action in
conspiracy, the substance of the claim was that Fuller was maliciously and unlawfully
deprived of his property by duress and coercion.
Comments
Magical Waters:
Monika Rahman
Page | 25
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The problem for the plaintiff in a case like this is that it all mostly done in a pre-contractual
framework.
Gautreau finds that the parties passed the point wherefrom there was a shared understanding that
the work that’s being done is not gratuitous and beyond proposal preparation
On appeal, Gautreau is overturned. They pretty much agree on the law but they don’t find that the
magical point where preparation for a K turns into something else
If you take the “municipal employee is a nobody” idea to its extreme, it’s as though the
municipality could never be liable as long it was an employee without delegated power. Smith
thinks that more attention should have been paid to this at both levels.
Maybe Brenner should have been held liable. On appeal, he wasn’t found liable either.
Next Tuesday, what was the juristic reason in the appeal Magical Waters case?
Magical Waters Fountains Ltd. v. Sarnia (City) (1990), 74 OR (2d) 682 (CBp.198)
Jurisdiction
Facts
Issues
Holding
Reasoning
Gen. Div.
Sarnia had a flooding and pollution problem in one of its parks. A city official asked the
plaintiff, Magical Waters, if it could propose a solution. In due course, it did, and provided
detailed recommendations, plans and specifications. In summer of 1985, Siemon was
asked by Brenner (Director of Parks and Recreation) if he had any ideas on how to solve
the problems and they discussed a proposal. In October 1986 Siemon was asked for
solutions to the flooding and contamination problems and wanted them for early spring.
From this point on Siemon devoted a whole winter to the plans. Plans were revised after
another rep said there were further problems. Between 1986 and spring 1987 there was
discussion of compensation. Before putting the work to use, the problem cleared up and
the work provided by Magical Waters was not needed or used. When the plaintiff asked to
be paid for its work, the city refused and said that it wasn’t liable because there was no
contract. The work had not been authorized by by-law as required by the Municipal Act,
RSO 1980, c. 302.
Was Magical Waters owed restitution for the preparation of plans since the K failed to
materialize?
Yes.
Gautreau J:
 The actual manner of compensation was not clear and is not important. What is important
and clear is that both parties reasonably expected that Siemon would be compensated in
some form or another and he relied on this in doing his work.
 The city did use the plaintiff’s work to seek Ministry of Environment approval so the job
could proceed.
 Gautreau did not accept much of Mr. Brenner’s testimony, which suggested that he didn’t
know why Siemon was doing all this work. Gautreau finds that he knew Siemon was doing
this work, and also encouraged it. He also appears to have requested a cheque for $5000
to be paid to the plaintiff.
 Municipal corporations are not immune to the law of restitution: its principles apply to
them in the same way that tort principles apply to them.
 The denial of freedom of choice is the reason for denying recovery to a volunteer, absent
an incontrovertible benefit. However, In this case the city had a choice to accept or reject
the plaintiff’s services and it not only accepted them but requested them.
 Although it is true that if a person expends time and money to prepare a proposal in
speculation of a contract and the K fails to materialize, he may not get any relief. But if the
work goes beyond the work normally involved in preparing a proposal, with mutual
understanding that the work is not being done gratuitously, then recovery should be
available (Lacey v. Davis, 1957, England).
 I think the city behaved unconscionably. It requested services, received them, and then
Monika Rahman
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Summary
refused to pay for them.
It is one thing for a volunteer to bestow a benefit; it is quite another when the recipient
seeks it out, knowing that the bestower is not doing it for charity but is doing it because he is
asked to and because he expects to be compensated.
Magical Waters Fountains Ltd. v. Sarnia (City) (1992), 8 OR (3d) 689 (CBp.204)
Jurisdiction
Issues
Holding
Reasoning
Gen. Div (Div. Ct) (on appeal)
Was Magical Waters owed restitution for the preparation of plans since the K failed to
materialize?
No, the work was done as a proposal in speculation of being awarded a K.
The Court:
 The powers conferred on a municipal corporation are required to be exercised by Council
via by-law. It is an error in law to say that “the city behaved unconscionably”, because a
staff member cannot bind the municipal corporation, unless authority has been so
delegated by by-law or resolution of Council.
 Furthermore, this situation is not that of work beyond that normally involved in preparing a
proposal.
 Lacey can be distinguished on two grounds: There was no mutual belief and
understanding that Magical Waters would get the K; nor was there evidence that Magical
Waters did any work beyond the proposal stage (vs. Lacey where they actually bought
bricks).
 Fridman and McLeod write in Restitution that “In order to ground recovery, it is not
sufficient that the plaintiff must show that he has rendered work and services as a result of
some conduct on the defendant’s part. The plaintiff must demonstrate a proximate causal
relationship between the defendant’s conduct and conferment of the benefit by the
plaintiff.” Here that is not the case.
Comments
February 5, 2008
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The reasoning that led to the identification of a juristic reason in Magical Waters (i.e. no K)
seems to suggest that a municipality can never be held liable.
Pacific National Investments Ltd. v. Victoria (City), [2004] 3 S.C.R. 575 – a property investment
company made K’l arrangements w/city that city would adopt certain zoning by-laws and the
company would do certain things like create parks etc. The political structure of city council
changed and the new council changed the zoning. Initially was presented as a breach of K claim
which failed (couldn’t sue for expectation costs), and so tried to sue in UE since city had benefit
of a part of K without counter-arrangement being fulfilled. City tried to argue that as a matter of
public policy shouldn’t have to pay but SCC said yes you do have to pay.
(http://csc.lexum.umontreal.ca/en/2004/2004scc75/2004scc75.html)
So we know that SCC doesn’t think you can just go around making these arrangements w/o
paying when you breach the K.
What is the implication of the decision that has disallowed the K claim for the law of UE at large?
You could imagine a statute that was worded in such a way that intended not only to deny the K
claim but also to deny any claim at all.
o Imagine a case with a licensing regime for building – building must have necessary
licensing otherwise K is void. Then imagine if unlicensed builder tries to recover for
work done; the claim in K is precluded. Does he have a claim in UE? A court might say,
well, the statute’s purpose is to disallow claims of these kinds of builders, so maybe no.
Monika Rahman
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o
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One day the legislators of the CML world will actually address issues of UE specifically.
CVL countries have addressed this specifically. In CML, becomes an issue of
interpretation.
This issue comes up in lots of cases. If some rule takes away the K claim, we have to decide if
that rule is designed to take away the claim in UE as well.
How might we explain Magical Waters with the juristic reason terminology?
o Is there a juristic reason in the pre-contractual “agreement” to do preliminary work with
the understanding it might not amount in anything (risk-taking)?
o Maybe in a regular call for tender situation, there is a juristic reason, but in this case,
you’d really have to take a very objective approach to intent in order to say that Magical
Waters could not have expected the K/payment.
Peter Birks had a famous example where two ppl live in a building one above the other. The one
below during the winter reduces the heating bill of the person above because heat rises.
Smith wants to either stretch donative intent or create a new juristic reason for “work done in
preparation of a K” to cover situations like this.
(b) Unenforceable; Voidable
Revisiting Deglman:
 What do we do with a case of an unenforceable K? Smith thinks Garland did not overrule
Deglman, which means that an unenforceable K is not a juristic reason.
 Cases like these aren’t that different from a natural obligation in CVL – you do have an
obligation do something. Just b/c K is void or unenforceable for some random reason, doesn’t
mean you shouldn’t have any claim for your deprivation.
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When we have a voided K, we act as though there never was a K.
When a K is frustrated, we have perfectly good K formation but something unforeseeable
happens to frustrate the K.
In induced mistake cases, there is a defect in the moment of agreement. Not every defect allows
you to avoid a K
What we also need for the K to be voidable for mistake is that one party created the mistake in the
mind of the other party. If a misrepresentation was made, then this K can be revoked.
Ennis v. Klassen:
 The contract suddenly disappeared, so it follows quite neatly using the Garland framework that
there must be restitution (and the car goes back) because there is no longer a juristic reason for
the transfer.
 Ennis could have sued for breach of a contract. If he could say that one of the terms of the K was
that the car was a 733i,
CBp.108-9:
 A contract provides a juristic reason for enrichment, and so restitution is not possible unless the K
can be rescinded or rectified.
 Spontaneous mistake is usually not sufficient reason to set aside a K, though equity may take a
wider view and treat the K as voidable when common law would not (Great Peace Shipping)
Monika Rahman
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 If a mistake is induced, it is possible that the contract may be rescinded. The dfdt cannot rely
upon the “objective theory of the K” (i.e. that the dfdt is entitled to rely on things as they
reasonably appear”) if he is responsible for the plaintiff’s mistake
 Induced mistakes caused in four ways:
o Fraudulent misrepresentation (can also give rise to compensation for breach of duty owed
to plaintiff)
o Negligent misrepresentation (can also give rise to compensation for breach of duty owed
to plaintiff)
o Innocent misrepresentation (not a wrong so only response is restitution)
o Non-disclosure (where there is a duty to disclose) (might be a wrong, but usually only
gives rise to restitution and not compensation)
Ennis v. Klassen, [1990] 40 DLR (4th) 321 (CBp.109)
Jurisdiction
Facts
Issues
Holding
Reasoning
Man. CA
Klessen sold a car to Ennis. The car had been advertised as a BMW 733i; on the back of
the car it said 733. It was in fact a BMW 728 which was less luxurious and had a smaller
engine, and was not usually available for lacking certain safety features required in Canada.
After discovering it was not a 733, Ennis sought rescission of the sale. Klessen provided
documents showing the car was a 728 and not a 733 and refused to refund Ennis’ money.
The TJ concluded there was no fraud
Can the contract to purchase the car be rescinded?
Yes, the misrepresentation was fundamental, and Ennis exercised the right to rescine within
a reasonable amount of time. Trial judge overturned. Klessen has to pay Ennis his money
back plus interest. The interest are not damages but a statutory entitlement. Ennis has to
get his sales tax from the province himself.
Huband JA:
 Where there has been an innocent rather than a fraudulent misrepresentation, the plaintiff
may still be entitled to rescission. In the absence of fraud, however, the plaintiff is not
entitled to additional damages.
 The misrepresentation must be fundamental or substantial in nature.
 In this case, the misrepresentation about the model of BMW cannot be said to be known
and accepted by Ennis, even if Klassen did show and tell Ennis that the engine is not fuel
injected and see the car’s qualities for himself.
 Furthermore, I cannot accept that the misrepresentation was not of a fundamental nature.
It goes to the root of the contract as Ennis was led to believe he was buying a certain type
of BMW at a fair retail prise for the advertised model.
Issue Two:
 Although traditionally in equity, the right to rescind would be lost if the the contract is
executed and delivery complete, there are cases that show that 1) where the K of sale is
for something that isn’t land, the purchaser can rescind as long as it is exercised with
reasonable promptitude after the K is executed (this being a matter of fact); and 2) where
the restriction is displaced where the misrepresentation constitutes an error in
substantialibus.
 In this case, the right to rescind is justified following the first category of cases. The
plaintiff stopped using the car as soon as the misrepresentation became known, and
payment of sales tax and registration is not considered affirmation of the contract the way
that driving the car around knowing the misrepresentation would have been.
 The rationale for this exception is because, while with the sale of land the purchaser has
ample time to check whether representations made by the seller are true or not, the same
reasoning does not hold for sale of chattels.
 Lord Denning gives support for the principle that rescission may be available as a remedy
Monika Rahman
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for misrepresentation on a sale of a chattel after the K has been executed in Leaf v.
International Galleries (1950). In that case, the buyer tried to sue for rescission 5 years
after buying a painting and realizing it wasn’t by Constable, which the court held was too
long. In that case the other two judges neither accepted nor rejected Denning’s general
statement of the principle, but proceeded on the assumption that the remedy was
available w/in a reasonable time.
 In Canada, several cases seem to adopt the Denning position. I would adopt this position
because it is consonant with sound legal principles
Obiter on “error in substantialibus”
 Judge is sort of sceptical about the way that this has been used to allow rescission after
the K has been executed. Even where the K has not yet been executed, an innocent
misrept gives rise to rescission only where the misrep is substantial in nature. This means
there was never acceptance. This reasoning makes more sense than looking for reasons
to rescind after execution.
Ratio
Where a misrepresentation induces a person to purchase a chattel an equitable remedy
should be available in spite of execution of the contract where the purchaser’s conduct has
been reasonable, and where the absence of an equitable remedy will produce an unfair
result. Rescission ceases to be unavailable where the K has been accepted, which in most
instances will mean after the passage of a reasonable period of time for the purchaser to
determine whether representations are true.
(c) Discharged by Frustration
CBp.209:
 A K may be frustrated if a change in circumstances makes performance impossible or impractical
or eliminates the purpose of the K from either party’s perspective.
 The parties are released from the duty to perform obligations, but may create a problem wrt
benefits already conferred and obligations already incurred
 Traditionally, the law let losses lie where they fell. The results were unsatisfactory.
o E.g. in Cutter v. Powell (1795), the plaintiff’s husband had died serving on a voyage and
the claim for quantum meruit was denied on the basis that the K was an “entire contract”
that had not been fully performed.
o In Chandler v. Webster (1904, KB), when the ceremony of Edward VII was cancelled,
the plaintiff who had rented a room from where he would watch the coronation wanted
the money he already paid back, and the dfdt wanted the amount still due. The court held
that the frustration “froze” the parties rights and obligations as they existed at the moment
of frustration and so dfdt was entitled to receive money and the plaintiff was denied
recovery.
 Things got better with Fibrosa (1943), where an English company couldn’t deliver a machine to a
Polish company because German forces occupied Poland. The House of Lords allowed the claim
on the basis of total failure of consideration.
 There were still problematic because:
o you needed total failure of consideration;
o the issue of accrued, but unfulfilled, obligations still meant that a party could be required
to make payments despite frustration;
o still had the problem of “wasted expenditures” (money spent in performance of the
obligation that did not result in a benefit to the defendant);
o and the “entire contract” rule remained for non-monetary benefits
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 Dissatisfaction with the CML rules led to legislative reform in both England and Canada
See Frustrated Contracts Act, RSO 1990, F.34; Frustrated Contracts Act, RSBC 1996, C. 166.
Missing Notes: February 7, 12, 14
(d) Discharge for Breach: Money Paid
CBp.215
 The party in breach generally does not have the power to bring a K to an end.
 The innocent party has a right, but not an obligation, to discharge the agreement if the breach is
serious (e.g. if it pertains to a condition or innominate term that is treated as a condition rather
than a warranty)
 Regardless of whether the right of discharge is available, the innocent party is entitled to K’l
relief under an action for breach of contract
 The cases in this section (discharge for breach generally) deal with situations where a K has been
discharged for breach and one of the parties is complaining that she conferred a benefit w/o the
anticipated counter-performance. We divide the discussion into: money paid (by innocent party or
by party in breach) & services rendered (by innocent party or by party in breach).
Money Paid by Innocent Party
Palachik v. Kiss, [1983] 1 SCR 623 (CBp.216)
Jurisdiction
Facts
Ontario to SCC
Frank Kiss and Margaret Palachik were married in Nov 1966 when he was 66 and she was
67. He had meagre assets but she had considerable inherited assets. They were married
for 12 years but Mrs. Kiss left him out of her will. Her estate included the property in which
they had lived for almost 11 years but was registered in her name. In March 1968 the
couple bought a home for $31,500 but Mr. Kiss could not afford half so title was in Mrs.
Kiss’s name and an oral understanding was reached that he would pay his wife $100 per
month until he paid half the purchase price whereupon he would acquire a one-half interest
in the property. Initial payments were forgiven in exchange for partitioning and painting the
upper floor. After that payments cont’d until Dec 1978 when Mrs. Kiss’s health began to
deteriorate and she refused further payment saying “You work hard on me.” Mr. Kiss was
36 months short of paying his one half of the purchase price when she died.
Mr. Kiss also did various work like renovations, showing premises to tenants, the laundry
and cleaning, extensive maintenance work on the property, and built a sun porch and
garage. Mrs. Kiss paid household expenses, taxes, heating, insurance, hydro etc.
Issues
Holding
Reasoning
At trial the TJ compensated him for services and returned him his payments with interest.
On appeal the result was affirmed by on grounds on of constructive trust.
1) Can the return of Mr. Kiss’s monthly payments and compensation for his contribution to
the property be supported on the grounds of a constructive trust? 2) Can a constructive trust
be imposed in the face of the K between the parties or does the K preclude it?
Wilson J:
 The evidence shows that Kiss’s entitlement to a transfer of one-half interest was not to
arise until the last payment was made. There was no common intention to accrued
interest in the property.
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 Although a resulting trust requires common intention that the non-titled spouse was to
have an interest, in Pettkus v. Becker (1980), this court held that a constructive trust was
available as a remedial tool in the absence of a common intention.
 Palachik argues that the contract is a juristic reason for the enrichment and it would
inconsistent with the K to find an interest in the property accruing to Kiss. The TJ found
the K to be entire. However, a constructive trust can be imposed on the payments and
whether the respondent can establish an interest in the property itself is immaterial.
 But can the trust be imposed despite the K? In Fibrosa Spolka (1943), an innocent party
to a breach of K can recover payments in quasi-contract if shows that the K was breached
by the other party or was frustrated by circumstances beyond his control and that the
result of the frustration was a total failure of consideration.
 In this case, the requirements for this kind of relief are met. Mr. Kiss’s efforts to continue
to make payments were frustrated by his wife’s refusal to accept them, by her serious
illness, and her subsequent death.
 The appellant also argues that there was not a total failure of consideration here b/c Mr.
Kiss had the opportunity to acquire an interest in the property on advantageous terms.
 Consideration has two senses in K law – that which is given or promised to bring a
binding K into existence, and also, consideration describes the performance of the
promise and it is in the latter sense that a total failure of consideration – or absence of
performance – will give rise to a claim in quasi contract.
 The relevant question is: Has the respondent received the benefit of the payee’s
performance in exchange for which he made the payments. NO.
 Furthermore, Mr. Kiss’s joint possession and occupancy is not consideration because it
was pursuant to the marriage and not the K.
 Finally the appellant argued that the oral agmt was not enforceable under the Statute of
Frauds and not saved by the doctrine of part performance. This doesn’t hold up either
given that such a claim was successful in Deglman. In Deglman itself, Rand J says: “in
the simple case of part or full payment in money as the price under an oral K...it would be
inequitable to allow the promisor to keep both the land and the money and the other
party...is entitled to recover what he has paid.
 Therefore this is a clear case of money paid for a specific purpose which was not
achieved and through no fault of the respondent. The right is to the return of the money
per se, not to an interest in the property or compensation in respect of such an interest. It
does not matter whether one characterizes Mr. Kiss as a constructive trustee or declares
him entitled to the return of his money in quasi-contract.
Comments
Money Paid by Party in Breach
 Restitution may be available for money paid by the party in breach however the value of that
right might be offset by the damages due to the innocent party as a result of the breach.
Rover Intl. Ltd. v. Cannon Film Sales, [1989] 3 All ER 423 (CA) (CBp.222)
Jurisdiction
Facts
England
Proper Films concluded a K with Thorn-EMI to show certain movies on TV in Italy after they
were released in the cinemas. The licence granted was to show 9 films for a total licence
fee of $1.8 million, payable in three instalments. There was a provision in the K that in the
event of a failure to pay any instalment, the K would become null and void. The first two
instalments were paid in 1985, but in 1986 Cannon took over Thorn-EMI and the relations
b/w the parties deteriorated and there was some litigation... During those proceedings the
third instalment became payable and so Proper’s solicitors wrote a letter saying that the
remaining $900K would be paid into a joint account, pending the outcome of the action.
Cannon did not accept this and treated the K as null and void.
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Is Cannon entitled to claim the last instalment on the ground of Proper’s breach
notwithstanding that they rescinded the K? Proper denies liability to pay the final instalment.
Issues
Holding
Reasoning
Kerr LJ:
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Comments
February 19, 2008
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This is the 6th class where we look at contracts. These are situations where people are obliged to
confer benefits under a contract but then have to give them back!
Let’s step back for a moment and look at the big picture. We’ve been approaching this stuff using
the SCC’s framework in Garland. Part of what we’re doing here is looking at how we can’t take
Garland overly seriously. E.g. Fuller – gift under duress ceases to operate as a juristic reason.
We’re trying to look at contract this way too. E.g. In Magical Waters we had to modify Garland
again in the context of contract.
We always have to add more detail and marginal notes to Garland in order for it to work and in
order for it to be consistent with the law it’s purporting to restate. Can’t just say that oh well, you
have a benefit for K’l reasons and so you don’t have a claim in UE. It’s not that simple.
Later we will look at this big picture again in the class on Evaluation of Juristic Reasons.
The claim in UE is affected by the terms of the contract – by the bargain itself, even if we can get
rid of it.
o E.g. an explicit deposit that will be lost by the person paying it if they back out of the K.
If they then breach and the K is discharged, they can’t get their money back and we say
that this person doesn’t have a claim in UE even though the K is discharged. But you
can’t turn a deposit into a punishment or penalty.
Last class we also looked at the distinction b/w the Proper claim in the Rover case, where Proper
was allowed to get out of a payment of money even though it breached the K (similar to Dies
where the buyer was allowed to recover part of the price even though it breached). On the other
side is the Hyundai Heavy Industries case of the House of Lords – instalment payments for the
building of a ship. The result is diff’t – customer breached the K after one of the instalments
comes through and tries to get out of paying the instalment. The HoL says you do have to pay the
instalment that was due before the K was discharged.
o Distinction – in the shipbuilding case the nature of the bargain was these instalments are
earned as the different stages of building are reached. Whereas in Proper the money
should only have been received along once the
o There’s a difference b/w payment becoming contractually due and whether it’s been
earned or not.
o Entire obligations vs. severable obligations – e.g. Cutter v. Powell. In some
circumstances, the enrichment cannot be allowed to subvert the K that was made and was
frustrated. The understanding of the bargain was services for the whole voyage.
The cases we looked at for today look at discharge for breach for services rendered.
(e) Discharge for Breach: Services Rendered

Re: Innocent party  e.g. In Cutter, if he had been thrown off the ship, then maybe he could
bring a claim for quantum meruit.
Monika Rahman
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Services Rendered by Innocent Party (CBp. 227)
 Having discharged a K for breach, the innocent party can use an action in UE to recover the value
of services rendered
 DeBernardy v. Harding (1853), 8 Ex. 822  the classic case. Dft had K with ptf to sell tickets to
the viewing Duke of Wellington’s funeral procession overseas. The plaintiff incurred expenses
but before tickets were sold the dfdt breached. The court recognized the ptf’s right to discharge
the K and allowed him to claim restitutionary relief on a quantum meruit basis for the value of
services.
 Problem: sometimes the ptf’s claim in restitution is higher than the benefit the ptf would have
received if the K had been performed (i.e. a bad bargain)! Can the ptf use UE to escape the
consequences of a bad deal?
Services Rendered by Party in Breach
 Traditionally the rule is that while a party in breach may be entitled to recover money paid, there
is no relief for services rendered... but it’s more complicated than that.

Very broadly speaking, these cases seem to be saying that you can recover subject to the principle
of entire obligations.
o Sumpter was an entire K and the plaintiff abandoned it before it was substantially
complete
o E.g. The conclusion in Black is reached even though the terms of the K said the money
didn’t have to be paid until later. Some of it had already been earned
o In Kemp v. McWilliams – when the dfdt refused the further advance, the ptft had no
option but
 The reasoning of “the work was of benefit to the owner and so she should pay” is
a bit weird since these claims could not even get off the ground without some
benefit being shown! The little list by Sankey of when a builder can recover is
not very helpful.
 This case doesn’t seem to take into account the entire obligation theory.

Recall Clarke v. Moir – we look to the understanding of the parties and you can see the same idea
in these contract cases. E.g. in Deglman – do either of these parties understand that he’s doing
this work as a gift? No they both understood that he was doing these things as his part of the
bargain that would generate a counter-performance.
o Most claims in UE, when you strip away the legal terms, arise because we conclude that
the plaintiff did not intend fully to confer this enrichment (gratuitously?). We can
immediately see that if I had a K’l obligation to confer the benefit it doesn’t make sense
that I didn’t mean you to have the enrichment. One of the functions of K is to commit
yourself to conferring the benefit.
o With a K, it gets complicated, b/c can’t say I didn’t mean for you to have this benefit. On
the other hand, if we apply this mutual understanding reasoning, it’s also true that we
both knew that the reason I’m giving you the money is b/c I’m going to get the use of the
room on the big day – i.e. not making a present.
o When we remember that as a fact of our subjective understanding of what the K was.
o So say the K is discharged and I say I want my money back and I put it in Deglman-like
terms – we both knew when I gave it to you it was for a particular reason and now the
basis for why I gave you that money has vanished!
o But the Ks we’ve been looking at have performances that go both ways. If it’s a K’l
obligation that corresponds to a counter-performance, these cases seem to say you can’t
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point to only half of a bilateral bargain as a juristic reason. E.g. in coronation case
example – can’t say I get to keep the money b/c there was a K’l obligation while ignoring
the fact that I gave you the money on an understanding that it was to rent the room for a
particular purpose.
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
What about situations where the K is still relevant? E.g. this obligation was entire. Those kinds of
K’l terms can be understood as still informing this logic of the factual shared understanding on
the basis of which performance was made.
o E.g. in Cutter v. Powell, even thought the K ceases to exist b/c of the frustrating event,
the parties understood that he was going to get the money for working the whole voyage
so you can’t turn around and ask for part of the money. There are still factual realities that
can be brought into account to understand whether the shared understanding was ___ or
not.
If the money hasn’t been earned, there’s no explanation for why you should keep it (like Clarke v.
Moir). If the money has been earned, you can keep the money.
Sumpter v. Hedges, [1898] 1 QB 673 (CA) (CBp.228)
Jurisdiction
Facts
Issues
Holding
Reasoning
England
Ptf promised to build two houses and stables for ₤565. Ptf performed ₤333 worth of work
and received some payment and then announced he couldn’t finish the project. The dfdt
finished the job himself in part w/some materials left behind by the ptf and discharged the K.
The TJ awarded the ptf relief wrt materials left behind but not for ptf’s services.
Was the plaintiff entitled to recover for work done on a quantum meruit basis?
No.
Collins LJ:
 In this case the ptf abandoned the K and the dfdt had no choice but to complete the
project.
 If the ptf had merely broken his K in some way that didn’t give the dfdt the right to treat
him as abandoning the K, and then the dfdt went and finished the work himself, the ptf
might have been able to sue on a quantum meruit on the basis that the dfdt had taken the
benefit of the work. But that’s not the case here.
 In some cases the ptf can raise the inference of a new K where he abandons the K. This
is only in circumstances where the ptf gave an option to the dfdt to take or not take the
benefit of the work done.
 Since in this case the work was done on land, the dft has no option of taking the benefit of
the work or not, and there are no other fact on which to ground an inference of a new K.
 The mere fact that the dfdt is in possession of what he can’t help keeping is not grounds
for such an inference.
Comments
Kemp v. McWilliams (1978), 87 DLR (3d) 544 (Sask CA) (CBp.229)
Jurisdiction
Facts
Saskatchewan Court of Appeal
Ptf entered into K with dfdt to paint the house for $550. The plaintiff asked for a $40
advance, which the dft gave him, and then asked for another advance to be able to buy
paint and continue the K, which the dfdt refused. The pltf left the job ¾ done. The dfdt then
got her (inexperienced) boarder to complete the job, which cost her $335.93. The ptf
testified that he offered to leave the job temporarily to do another one and then proceed with
those earnings.
Monika Rahman
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Issues
Holding
Reasoning
Can the pltf (who left the job ¼ undone) claim in quantum meruit?
Yes.
Brownridge JA:
 If the contract is an entire one, and the plaintiff abandons it before it is completed or
substantially completed, then ptf can’t claim in quantum meruit. However in this case the
TJ found that it was substantial completion since it was ¾ done.
 A builder is entitled to claim for services unless 1) the work is of no benefit to the owner;
2) the work he has done is entirely different from work he was K’d to do; 3) he has
abandoned the work and left it unfinished. (H. Dakin & Co v. Lee, 1916, KB)
 Lord Cozens-hardy stated that saying “I cannot finish it because I have no money” is
abandonment of the K and prevents the builder from making any claim unless there be
some other circumstances leading to a different conclusion.
 In this case, if the dfdt did not wish to make a further advance (which she was not obliged
to do), she could have supplied the paint and deducted the necessary costs to enable the
work to proceed. The ptf really had no choice but to stop the work.
 The work was of material benefit to the dfdt and since he completed the major portion, the
TJ was right to allow him to claim in quantum meruit.
 The counter-claim by the dft was not allowed since she used an inexperienced person
who used more paint than necessary to finish the job.
Comments
Campbell, Albo, Low Ltd. v. Black (1995), 26 OR (3d) 111 (CBp.231)
Jurisdiction
Facts
Issues
Holding
Reasoning
General Divisin
Mrs. Black hired a company to provide a appraisal of her husband’s assets. The parties
agreed on an hourly rate but that payment would be deferred until after the litigation was
complete. After a substantial amount of work was done, the ptf breached the K by
demanding immediate payment. The dfdt discharged the K on that basis.
As the repudiating party, can the ptf claim payment for services rendered on a quantum
meruit basis?
Yes
Chapnik J (orally):
 It is clear that an innocent party can claim on a quantum meruit basis.
 Termination of a K by repudiation does not bring the non-existence of the K; it only
terminates future performance and therefore leaves intact rights of action that may accrue
as a consequence of the breach. This is difft from misrepresentation which is viewed as
rescission ab initio.
 What are the rights of the repudiating party? In the context of moneys paid, if such money
is given as a guarantee for full performance, it cannot be recovered if the purchaser that
wrongfully repudiates. If it is part payment of price, then the moneys are recoverable.
 Where payment is due for services rendered on an ongoing or partial basis, the party for
whose benefit the services were performed must make allowance for the services
received. By the same token, a party who renders services may go without payment for
them if the K is “entire” with payment due upon completion.
 The present agreement is not entire. It was not set out as a lump sum due on completion.
The implicit terms of the K included entitlement by the Pltf of an inchoate right to payment
for services by instalments notwithstanding the deferral of the actual payment date. This
obligation was acknowledged by the dfdt by receipt of the monthly invoices w/o complaint.
 Therefore the pltf can prove the value of its work (on a BoP) as the basis of a claim in
quantum meruit.
 No damages were sustained by Mrs. Black. Though the pltfs did not provide her with a
report, she was not charged for one. Any damages for duplication of effort have been
taken into consideration in my overall assessment.
Comments
Monika Rahman
Page | 36
February 21, 2008
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In all the cases we’ve looked at – with bilateral obligations – if the thing gets voided there can be
restitution both ways, but if it gets discharged for breach or frustration, then this is prospective
and doesn’t void the thing retroactively.
However, my obligation doesn’t stand on its own; it’s part of a bilateral bargain. Since the K is
discharged makes sense to say, in a Clarke v. Moir sort of way, “We both knew that this was part
of a bargain even though the reason for the enrichment may have vanished now; even though
there was a K’l obligation on me to enrich you, it’s still right to say that it’s an unjust
enrichment.”
So K’l obligations are not always juristic reasons. If the other party has been released of
responsibility, then the obligation that was on the plaintiff is no longer a juristic reason.
Take the example of renting the room to view the coronation. If we said that the money is not
refundable even though the K has been frustrated, it just doesn’t seem to make sense.
Can understand issue of entire/separable Ks through this sense. E.g. Cutter – if it was part of the
understanding that he was to work the whole voyage, and that part of the understanding failed to
materialize, then makes more sense to deny recovery.
(III) DISPOSITION OF LAW
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In Deglman-type cases the question arises of whether allowing recovery is going against the
statute.
In the textbook, the case that follows right after Deglman called Wilson v. First County Trust is
there to provide a contrast. The lender lends money to the plaintiff... something happened as a
result of which the security interest was void, K was void but she still had the money. The lender
says at the least I should get the money back. The statute had such a strong disciplinary effect on
House of Lords that they say, no, you can’t get the money back.
The intention of Parliament was to have a deterrent to not ignore these formal requirements.
There is an UE claim to be made with regard to GST. There was an intervener in House of
Commons representing small businesses that said that it forces all the merchants to collect money
on behalf of the feds, account for it, and all w/o compensation.
o Why does the feds get the benefit of the work these businesses are doing – you’re being
enriched without having to have tax collectors. SCC denied this claim b/c it was intention
of Parliament. Disposition of law.
Central Guaranty Trust:
 Note: The judge is John Laskin, son of Bora Laskin.
 Not a mistaken payment, but a mistake was made by Central Guaranty Trust which mistakenly
discharges the mortgage (i.e. mistakenly steps out of line)
 Mortgage is like a line-up – person with first mortgage is paid first and then when they’re paid
off, the next person in line can collect.
 This case exemplifies carelessness of the plaintiff and innocence of the defendant.
 There was no evidence of any detriment b/c of the discharge.
 Some people in the case seemed to think that there was not enough consideration of the fact that
this type of situation is exactly what is provided for by the statute – i.e. the rationale for registry
as providing notice. Some thought the dfdt’s lack of knowledge argument was dismissed too
quickly.
Monika Rahman
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
However I thought that a registration has to be a manifestation of the intention of the party and so
a mistake like this should allow for recovery.
Central Guaranty Trust Co v. Dixdale Mortgage Investment (1994), 24 OR (3d) 506 (CBp.87)
Jurisdiction
Facts
Issues
Holding
Reasoning
Ontario Court of Appeal
CGT had a first mortgage on a rental property and Dixdale had a second mortgage. By
mistake CGT registered a discharge on its first mortgage even though the mortgage loan
had not been repaid. Dixdale’s mortgage went into default and so they sold the property.
After the sale, Dixdale became aware of CGT’s discharge, but it conceded that it did not rely
on the discharge to its detriment. CGT claims an equitable interest in the sale proceeds to
the extent of the money owing on its first mortgage.
Is the effect of priority of registration in the Registry Act a juristic reason for Dixdale’s
enrichment?
No.
Laskin JA:
 This is not a typical mistake of fact case because CGT did not make the payment under a
mistake of fact. However, the fact that the case doesn’t fall within an established head of
recovery doesn’t preclude relief.
 The categories of restitution are never closed (like negligence). A plaintiff can recover
benefits retained by the dfdt in circumstances making the retention unjust.
 In this case the enrichment was payment to Dixdale which was owed to CGT and so
there has been a “corresponding deprivation”. Dixdale received a windfall benefit as a
result of CGT’s mistake.
 Therefore whether CGT can recover depends on whether there is an absence of any
juristic reason for Dixdale’s enrichment (e.g. whether it would be unjust to allow Dixdale to
retain the money).
Does the Registry Act provide a juristic reason?
 Under the statute, registration of CGT’s discharge gives Dixdale priority under the statute.
Dixdale also argues that registration of the discharge constituted notice that CGT no
longer had security in the property for its indebtedness (ss. 70(1), 71, 74(1)).
 However, the statute alone is not dispositive of this appeal. In an appropriate case, the
court may give effect to the principle of UE despite the terms of a statute (e.g. Deglman
where the Statute of Frauds rendered an oral K unenforceable)
 Goff and Jones state that courts will have to decide whether recognition of a claim will
frustrate the policy of a particular statute (disallowing claims) or common law rule. In this
case, CGT’s claim is not expressly prohibited by the Act. Nor does Laskin infer from the
recognition of subrogation claims any intention to preclude CML relief in other
circumstances.
 At the level of principle, the issue is whether recognizing CGT’s claim undermines the
purpose of the statute to protect people who rely on the abstract. However, here Dixdale
did not rely on its priority of registration when selling the property. Therefore the Act does
not preclude CGT from restitution.
 Lambton Lumber (1979, ONCA) can be distinguished because in that case, the second
mortgage was registered after the discharge of the first mortgage. Here the CGT
discharge was registered after Dixdale registered so when Dix took its mortgage it had
knowledge of an instrument affecting the property. Besides, Lambton might be decided
differently now in light of the developments of the law of UE.
What about Dixdale’s lack of knowledge of the mistake?
 If it had known of CGT’s mistake that would further strengthen CGT’s claim for relief;
however, Dixdale’s ignorance of the mistake is not relevant.
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What about CGT’s negligence?
 CGT’s negligence does not disentitle it from recovery. In cases of money paid under
mistake of fact, the payor’s carelessness does not preclude relief. In competing the
interests of a negligent claimant and an innocent recipient of windfall enrichment, I prefer
the interest of the claimant since the recipient cannot demonstrate prejudice in being
required to relinquish the disputed funds.
Comments
Brook’s Wharf:
 Statute says that the person who imports the goods is liable to pay the duty and also says that
warehousemen compelled to pay the duties under s. 85. The statute doesn’t rank the parties as
between themselves.
 So the question is does this mean that the warehousemen have no recourse against the importer if
he pays? Or does it mean that the warehouseman is kind of like a guarantor and therefore can
recover from the person who is primarily liable? If you conclude the latter, then you can
understand the case as revealing an unjust enrichment.
 After reading week we will look at a few more juristic reasons and then try to make sense of it all.
Brook’s Wharf and Bull Wharf Ltd v. Goodman Bros, [1936] 3 All ER 696 (CBp.159)
Jurisdiction
Facts
Issues
Holding
Reasoning
England, Court of Appeal
Ten packages of squirrel skins imported from Russia by the defendants were stored in the
warehouse of the plaintiffs and stolen on the night of Sept 7-8, 1934. The plaintiffs as
bonded warehousemen were compelled by law at the demand of the Customs to pay the
duties on those packages out of their own money. The dfdts refused to pay plaintiffs for that
purpose. The plaintiffs now claim that as between themselves and the dfdts, the dfdts are
primarily liable for the duties. The dfdt counterclaimed for the value of the furs on the ground
that they were stolen due to the plaintiff’s negligence.
Can the warehousemen recover the duties?
Yes.
Lord Wright MR:
 The dfdt’s counterclaim fails as the plaintiff’s took reasonable and prudent precautions.
 In Leake on Contracts, the principle is stated that: where the plaintiff has been compelled
by law to pay money that the dfdt is ultimately liable to pay such that the latter obtains the
benefit of the payment by the discharge of his liability, the dfdt is held to be indebted to
the plaintiff.
 This principle has been applied in a great variety of circumstances. It is analogous to the
case of payment by a surety which has the effect of discharging the principal’s debt and
which then gives a right of indemnity against the principal.
 In Moule v. Garrett (LR 7 Ex 101) the original lessee was compelled to pay for a breach of
a repairing covenant, however he was entitled to recover the amount from a subsequent
assignee since the breach was due to the default of the assignee and the payment by the
lessee was under legal compulsion which relieved the assignee of liability.
 In Dawson v. Linton (1822), a tax was due from the landlord but there was power to
enforce payment by the tenant. The plaintiff-tenant was entitled to repayment since the
tax must ultimately fall on the landlord.
 Note: these statements of principle do not ground the obligation in implied contract or
constructive or notional contract. The obligation is imposed by the court in the
circumstances of the case and on what the Court decides is just and reasonable having
regard to the relationship of the parties. It is a debt constituted by the act of the law, apart
from any consent or intention of the parties.
 In this case, the dfdts would be unjustly benefited at the cost of the plaintiffs if the latter,
who received no extra consideration and made no express bargain, should be left out of
Monika Rahman
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pocket by having to discharge what was the dfdt’s debt.
 The duties were due from the importer and the Customs Act did not remove this liability
when the warehousemen paid the duties as they were compelled to do under s. 85. The
payment relieved the importer of his obgs but the liability primarily rested on the dfdts as
between the plaintiff and dfdt. The dfdt obtained the benefit of the payment by the
plaintiffs and was discharged from the duties which otherwise would have been payable
by them.
Comments
March 4, 2008
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Iacobucci was probably thinking about statutory provisions when he said that disposition of law
can relieve dft of obligation to transfer enrichment back.
Seems like in Wilson and ?, courts are saying that if the statute reveals legislative intention then
the dfdt should be able to keep the enrichment
If the court in Central Guarantee Trust had said that no, the purpose behind the registry system is
the most important issue and so enrichment shouldn’t be returned, then that would have been an
example of this
In Brook’s Warf, both the owner of the goods and the warehousemen were liable to pay the tax so
the issue becomes can the latter recover the payment from the former?
This pattern of case is not confined to statutory contexts. Smith is trying to put the existing law
into the grammar of Garland – e.g. disposition of law as a juristic reason.
(IV) OTHER VALID OBLIGATION
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This is a bit of a catch-all category. Smith isn’t sure that it adds anything to our understanding
Other obligation is not exactly in line with the objective of closing the list of juristic reasons
(which was what Iacobucci purportedly did in Garland to address Smith’s problem with proving
a negative)
o This looks a lot like still having to prove a negative
o Smith isn’t sure how good an objection he made anyway. Even if there were an unlimited
# of juristic reasons, the facts of the litigation probably narrow down the possible options
CVL still has the concept of the management of the business of another – well someone
altruistically tries to look after someone else’s affairs and the CCQ provides solutions for these
situations
Example of loss-shifting without wrongdoing (i.e. plaintiff becomes liable w/o having done
anything wrong)
Compulsion by Circumstances (CBp.177)
 Should your neighbours be liable to reimburse you if you call a plumber to fix a leak which has
led to flooding in their basement while they were away? So when there’s an emergency, should
the interveners always be entitled to reimbursement from the aiding party?
 Proof of enrichment is important when it is an unrequested benefit.
 The saving of an unnecessary expense is clearly a benefit. But what about the rewards received
by maritime salvors?
 Another issue is the identification of the unjust factor. Birks suggests it is moral compulsion – the
consciences of decent people compel them to render assistance, so it’s a form of non-voluntary
transfer.
Monika Rahman
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 But there is no concern of vitiation of consent whether dealing with professional salvors. Is the
unjust factor a public policy to encourage rescue?
 If reimbursement is available in these cases, is it based on unjust enrichment or something else?
Matheson v. Smiley, [1932] 2 DLR 787 (Man C.A.) (CBp.178)
Jurisdiction
Facts
Issues
Holding
Reasoning
Manitoba Court of Appeal
Smiley tried to kill himself with a shotgun. His friends found him lying on the floor and called
Dr. Condell, who, deciding this was a case for a surgeon, brought in Matheson. Smiley was
taken to the hospital and Dr. Matheson did what he could to reduce the effects of the injury
but was unsuccessful. He now claims $150 from the estate of Smiley for his professional
service. Note, it’s mostly the amount of the charge that the estate challenges but they deal
with the broader issue as well.
Is the estate compelled to pay Matheson for his services to Smiley?
Yes.
Robson JA:
 Doctors are entitled to recover charges for professional aid to patients under the Medical
Act (1913). There must also be the ordinary requisites of an enforceable K or some other
legal obligation to pay.
 Though Smiley was conscious, he was in such an extreme condition that it’s hard to say
there was a request for services and that a contract was formed.
 However, it is not reasonable to say that in such circumstances a person in such a plight
should be allowed to die without reasonable means to secure his recovery. Surely the
person to pay should be the person for whose benefit the service is rendered. I hardly
think it is an answer to say in any case there was no hope.
 Common law declares it to be a duty what is invariably done upon human impulse. In
Metropolitan Asylum District v. Hill (1881) Lord Blackburn stated that those with the
charge of a helpless are under a legal obligation to do what is necessary for the
preservation of the sick person.
 In Re Rhodes (1980), there was a discussion how liability might be found in such
circumstances on the basis of implied contract (in that case the claim was denied b/c the
moneys were paid voluntarily by relatives without thought of recoupment).
 In light of Lord Blackburn’s words, it is no defence that Smiley had showed disfavour to
saving himself.
 As for the reasonableness of the charge of $150, the TJ thought it was not the short
length of time that was significant but the skill and services rendered.
 Authorities said that to determine the fee, must look not only to standing of the physician
but also the earning power of the patient. In this case no evidence was given wrt the
latter and since the TJ found $150 was reasonable based on the evidence, then we can’t
overturn that finding on appeal.
Comments
March 6, 2008
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One strategy for these cases is to say these are not UE cases at all
The other strategy is to say that we have to nuance Garland – if the obligation isn’t a consensual
one or there is no bargain (e.g. b/w the doctor and Smiley).
o Why do we impose this obligation? Because we want doctors to treat people in these
situations. But it doesn’t follow that he has to do it for free.
The problem seems to be that we don’t know if Smiley wanted the treatment. But in this
particular type of case, is that really the point? This is not like a mistaken payment case. We look
at benefits objectively – i.e. is this an incontrovertible benefit?
Monika Rahman
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(V) RISK-TAKING
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The squeegee man is Smith’s fave example of the officious intervener. If we’re not careful with
the law of UE, we might end up obliged to pay them!
The car driver cannot really say that they didn’t want their window clean, and all they can say is
that they didn’t want this service at the moment.
In German UE law, they use the concept of “absence of a legal ground” in which case the benefit
has to be returned. They don’t let the squeegee man claim either but they do it by way of a
defence – “if the plaintiff knew that there was no legal ground then they can’t have a claim.”
o E.g. they took a risk
If we think back to Magical Waters, we can see how we can explain it this way – the man knew
that he might not get paid for the preparatory work he was doing.
Enron:
 When a company goes bankrupt, one person is put in charge to take care of all the creditors and to
liquidate the assets and divide up the proceeds among creditors.
 What if you had lent your watch to someone who goes bankrupt 4 days later – you stand apart
from the creditors (it’s not a priority claim per se) because you can go back and say “that’s my
watch”.
 If a bankrupt person/corporation holds assets in trust, it’s like the case of the watch. The
beneficiary isn’t a prior claimant but stands apart from the creditors. A new trustee will be
appointed, assets transferred to new trustee, and then the trust continues
 The trust assets do not transfer to the trustee in bankruptcy (the guy taking care of the creditors,
usually a chartered accountant), just the legal assets. So the new trustee taking care of trust assets
is a different trustee – the judicial trustee.
 The trouble in a case like Enron, what happens if you have a corp that goes bankrupt and it turns
out that a very large part of the assets are held in trust? That was the nature of the business that
was going on – mortgages were being invested, and the investments were held in trust as were the
mortgages that were subsequently purchased using the investment proceeds.
 A trustee in bankruptcy gets paid first (because otherwise no one would ever do it!).
 In respect to these trust assets, the other rules of bankruptcy don’t really apply – beneficiaries sit
outside the bankruptcy process. The judicial trustee knows that they will get paid first (like the
trustee in bankruptcy).
 What you have in Enron is a group of people who are themselves investors in this trust and they
don’t know for sure how well the trust was run, where the money went, who has it, etc. The
investors then elect a Lender’s Committee and they purport to authorize payment for the work
done by the Committee.
o Not all investors were at the vote – the majority of those present at the vote did
o The Committee members are wanting to be paid out of the trust assets however the terms
of the trust don’t say anything about this
o So who should pay for this work? Should it be paid out of the trust assets?
 The main issue becomes whether the court has jurisdiction to put a charge on the trust assets for
the Committee members’ remuneration
o The judge concludes that there is jurisdiction to allow payment out of trust assets even
though the terms of the trust
 The Berkeley’s Applegate seems to be the exception – so if you’re getting paid out of trust assets
the court can put a charge on them, if you’re floating around in the water waiting to save someone
who can get paid, but if you [insert Berkeley’s facts] you can’t get paid.
Monika Rahman
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Enron Mortgage Corp. (Trustee of) v. Enron (1998), 53 BCLR (3d) 24 (CBp.185)
Jurisdiction
Facts
Issues
Holding
Reasoning
British Columbia Supreme Court
In 1997 Enron’s mortgage broker’s licence was suspended. Enron pooled funds from diff’t
investors, lent that money, and held the security for the loans in trust for the investors.
When Enron’s business was suspended, the court appointed Price Waterhouse as Judicial
Trustee for Enron’s trusts for its investors. The investors elected a Lenders Committee and
it was decided that they’d be paid a “reasonable amount” for the time they devote to the
committee. The committee applied to the court for a charge over the trust assets to secure
payment of their expenses and remuneration at $33/hour.
1) Does the Court have jurisdiction to create a charge against the trust assets? 2) Is the
Committee entitled to payment for their services?
1) Yes 2) Yes, but only in relation to work done communicating to Enron’s investors,
...ETC.
Tysoe J:
 The Committee’s mandate falls into three basic functions:
1. Communications between the Judicial Trustee (Price Waterhouse) and the
investors (the most significant task) – the Committee has simplified
communications and less time will be required by PW;
2. Working with PW and the Court to further the best interests of the Enron – this
work sometimes increases the trust assets’ value or reduces the amount of PW’s
costs against them;
3. Pursuing litigation to offset shortfalls on the Enron loans
 It is certainly fair for the members of the Committee to be paid a reasonable amount, but
the question is WHO should pay for the remuneration and expenses?
 The Court does have the jurisdiction to order that trust assets be charged with the
remuneration and expenses of a third party if the work done by the third party is of benefit
to the trust property or is necessary for the management and preservation of the trust
assets. This general principle is extracted from authorities showing:
 That the Court can rely on inherent jurisdiction to order debtor companies to pay
costs of creditors companies, or to create a charge on the debtor’s assets to
secure the accounts of suppliers providing goods or services during the period of
reorganization (under the Companies Creditors Arrangement Act)
 That though a court has no power to authorize receivership expenses at the
expense of prior mortgagees (Kowal, 1975), there are exceptions to this rules,
including that the receiver’s expenses to preserve/realize/improve assets for the
benefit of all interested parties (including secured parties) will be given priority
over secured priorities if there are compelling and urgent reasons
 In Consortium Construction Inc. (1992), the Ont CA held that receivership costs
could be paid from trust assets which were beneficially owned by the investors
where necessary for the management and preservation of trust assets. Carthy JA
relied on Re Berkeley Applegate (1989, England) where it was stated that a court
has discretion to require allowance be made for costs incurred in connection with
administration of a trust property, and that this discretion would be exercised
sparingly where the work had not been done by the person with the equitable
interest and if it was for the benefit of the trust property.
 The Court does therefore have jurisdiction to charge the trust assets, and can do so wrt
remuneration and expenses related to #1 and #2 (the latter to the extent that value is
increased or costs are decreased). #3 does not aim to benefit the trust assets or relate to
their administration and so can’t be remunerated.
 However, there is not enough evidence to award based on #1, and #2 will have to be
dealt with on a case-by-case basis since it’s premature to assess what benefit the
Committee’s efforts will be to the trust assets.
Monika Rahman
Page | 43
Comments
 In Re Berkeley Applegate (Investment Consultants) Ltd., [1988] 3 All ER 71, the services of a
liquidator were compared to a salvage. Can we say a liquidator or receiver acts under any form of
compulsion?
Owen v. Tate, [1976] QB 402 (CA) (CBp.246)
Jurisdiction
Facts
Issues
Holding
Reasoning
In 1965, the defendants obtained a loan from Lloyd’s Bank. The loan was secured by a
legal mortgage on the property of Miss Lightfoot. Miss Lightfoot had cohabited with a Mr.
Russell, now deceased, who had a dispute with the defendants concerning money. In 1969
Miss Lightfoot became concerned that her deeds were being held by the bank to secure the
dfdt’s loan, and the plaintiff, her former employer, helped her get the deeds back by
guaranteeing payment of all money due by the dfdts to the bank, limited to ₤350.
The plaintiff did not consult the dfdts before doing this. The bank did not tell the dfdts who
the guarantor was, and proceeded to release the deeds, which they were entitled to do,
despite strong protests from the dfdts (as evidenced in a letter). However, two letters from
1970 show that the defendants were pressing the bank to clear their overdraft by recourse
to the money deposited by the plaintiff. The bank called in the debt.
Is the plaintiff entitled to recover the ₤350 from the defendants?
No.
Scarman LJ:
 There are two well-known general rules that are relevant here, and this case requires us
to consider the interaction of the two. The first is “If the payment is regarded by the law as
voluntary, it cannot be recovered.” That is, if A voluntarily pays B’s debt, B is under no
obligation to repay A.”
 The second general rule was stated in Brook’s Wharf: “...one man [ptf here], who is
compelled to pay money which another is bound by law to pay [dfdt here], is entitled to be
reimbursed by the latter.”
 There are exceptions to both of these rules. Wrt the first, judges have often implied a
request or an authority to make a payment from the circumstances.
 Wrt the second, certain conditions must be satisfied to succeed: 1) the plaintiff must show
he was compelled to make the payment; 2) that he did not officiously expose himself to
the liability; 3) that his payment discharged a liability of the defendant; 4) that both he and
the dfdt were subject to a common demand by a 3P for which the dfdt was primarily
responsible.
 There are two stages to consider when reconciling the two principles – whether there was
an antecedent request and whether the guarantor was compelled by law to pay. Counsel
for the dfdts concentrated on the former, and the plaintiffs the latter.
 We must look to all circumstances to see if a right of indemnity arises. If, for instance, the
plaintiff has conferred a benefit on the dfdt behind his back where the beneficiary has no
option but to accept, it is highly likely the courts will say there is no right of recovery. But if
the plaintiff has made the payment where the law imposes the obligation on him, then
clearly a right of indemnity does arise. Not every case will be so clear cut.
 The fundamental question to ask is whether in the circumstances it was reasonably
necessary in the interest of the volunteer or the person for whom the payment was made,
or both, that the payment be made – whether in the circumstances it was “just and
reasonable” that a right of reimbursement should arise.
 In this case, the plaintiff was a volunteer when he assumed the obligation to confer a
benefit on Miss Lightfoot. Counsel for the plaintiff argues that the dfdts could have told the
bank not to take recourse to the deposit, and the letters from 1970 show that the dfdts
eventually adopted the transaction.
Monika Rahman
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 However, the dfdts did lose the security of Miss Lightfoot’s deeds through circumstances
out of their control, and they had to put up with a security which had been substituted by
the plaintiff w/o their consent. We cannot criticize the dfdts for making the best of the
situation in which they found themselves without choice. Therefore by giving weight to
both phases of the transaction, we can conclude that the plaintiff’s case fails.
Stephenson LJ:
 There may be cases where a guarantee given without any antecedent request by the
debtor gives rise to an obligation in law for the debtor to repay the guarantor, because
there may be cases where it is unjust that the debtor should be enriched. But these
circumstances are not sufficient. The plaintiff was not under such constraint as should
justify indemnification.
Ratio
Omrod LJ:
 The two rules can be reconciled with the question of whether the plaintiff is truly a
volunteer in the proper sense of the word, or whether he has been compelled to make the
payment.
 It seems that the dfdt’s position was worsened by the intrusion of the plaintiffs and
therefore it is right to take a cautious view towards volunteers.
If without an antecedent request a person assumes an obligation or makes a payment for
the benefit of another, the law will, as a general rule, refuse him a right of indemnity. But if
he can show that in the circumstances of the case there was some necessity for the
obligation, then the law will grant a right of reimbursement if in all the circumstances it was
just and reasonable to do so.
 Did the plaintiff’s claim fail b/c the dfdt’s enrichment was not unjust or because the dfdt was not
really enriched at all?
 Note that concerns about officious interveners are often dealt with through the notion of
enrichment. However, there are situations where the dfdt was enriched and in these cases the law
operates by seeking reasons for restitution like mistake or compulsion which excludes officious
interveners as a matter of logic.
Review Magical Waters Fountains (CBp.198).
March 11, 2008
Owen v. Tate (1976)
 People have been arguing about Owen v. Tate for almost 30 years now.
 This case gives us an example to consider the difference between talking about reasons for
restitution to plaintiff vs. absence of juristic reason.
 In the latter Cdn framework, can say that this plaintiff was a bit of a risk taker – a juristic reason
for dfdt to keep enrichment
 Note that Peter Birks thought that this case was wrong and thought that Mr. Owen should have
been able to recover.
 In class, some people think that it shouldn’t matter who is guaranteeing the debt – their
interchangeable. Others think that you should be able to choose who you deal with and since the
dfdt didn’t want Mr. Owen to guarantee, then they didn’t
 Since Mr. Owen became the secondary debtor to the bank, wouldn’t the dfdt be liable to Mr.
Owen as per Brook’s Warf?
 A creditor can assign a debt to another creditor. Can protect the debtor to make sure they’re not
harmed by this so the debtor doesn’t lose any defences they may have against the original creditor
Monika Rahman
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o
o
o
o
So in the law of assignment we’ve decided that it’s okay for debtors to find out that they
have a new creditor
If Mr. B wants to buy Mr. A’s debt, then he becomes Mr. A’s creditor. This is different
than when Mr. B gratuitously pays Mr. A’s
Peter Birks thought that this case was wrong and that the plaintiff should have won
because the creditor should have control and be able to change the guarantor if it wishes.
He would also have said that Mr. Owen could have just taken an assignment and that
would have been unimpeachable as a structure
You can take an assignment of the debt without the debtor’s consent but you can’t pay
another person’s debt for them without their consent.
(VI) EVALUATION OF JURISTIC REASONS
Lionel Smith, “Public Justice and Private Justice: Restitution after Kingstreet” (WebCT)
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A defendant who has not done anything wrong cannot be required to render compensation: he cannot
be forced to bear the burden of a loss that has initially fallen on the plaintiff.
Nor can such a defendant be required to render disgorgement: he cannot be forced to give up to the
plaintiff a gain that he has acquired from some other source.
He can, however, sometimes, rightly be required to render restitution: he can be forced to give up
wealth which he received by a transfer from the plaintiff, so returning both of them to their pretransaction holdings
In Garland the Court reaffirmed the third step of the Pettkus test: In the first stage, the plaintiff has to
show that there is no juristic reason (e.g. contract, gift, etc.) for the defendant’s enrichment. If the
plaintiff succeeds in meeting her burden here, there is a second stage in which the defendant may yet
prevail by persuading the court that there is, after all, a juristic reason governed by “the reasonable
expectations of the parties, and public policy considerations”, even though it is not one that is not on
the basic list in the first stage
This was a significant re-orientation of the law. Take one of the traditional reasons for restitution –
mistake. In the old law, a plaintiff trying to recover money would have to prove the mistake. This is not
at all the same thing as showing that the payment was not legally due. A mistake is a primary fact;
whether a payment was due is a conclusion of law.
So in the first stage the question is: Was the payment legally due? If not, then there should be
restitution unless the plaintiff was making a gift.
In Kingstreet, the SCC held that a claim to undue taxes was not a claim in unjust enrichment. In the
traditional CML approach where the plaintiff had to show a reason for restitution, if the plaintiff thinks
the tax is validly imposed, this could a mistake of law supporting a claim in unjust enrichment.
Alternatively, if the taxing authority makes an illegitimate threat in order to collect the tax, the money
may be recoverable on the ground of compulsion. But a plaintiff might fall outside of these categories.
In a British case called Woolwich, the House of Lords relied on an article by Peter Birks where he
said that a taxpayer should have a claim as of right to recover taxes collected without statutory
authority, and this argument was in favour of a claim in unjust enrichment. At the time, Birks was of
the view that all examples of the legal response of restitution were generated by unjust enrichment.
However in Kingstreet, Bastarache, presumably to bolster the holding that restitution of undue taxes
is not restitution for unjust enrichment, referred to Woolwich and observed: “Without even referring to
unjust enrichment, Lord Goff held, at p. 172, that restitution was available as a matter of “common
justice”.
But Lord Goff, like Peter Birks and most other people, thought that restitution and unjust enrichment
were two sides of the same coin.
In Kingstreet, the SCC agreed with Birks’ later thoughts that there can be restitution for wrongs.
Smith, and some others, prefer to speak of disgorgement for wrongdoing, in order to distinguish
“giving up” (disgorgement) from “giving back” (restitution) since a wrongful act is not required to justify
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restitution.
Before Kingstreet, the Woolwich principle was always understood to be an independent reason for
restitution, like mistake or compulsion. It was qualitatively different, of course, in that most reasons for
restitution represent defects in the plaintiff’s voluntariness as regards the enrichment. The Woolwich
principle, by contrast, engages public law values.
It would have been very easy to include the Woolwich principle into the Garland UE framework  i.e.
“without a statutory authority, there is no juristic reason for the payment of the taxes.”
Re, technical concept of “benefit” and loss is hard in tax recovery cases. This is unconvincing. It is
easier to apply in tax recovery cases than in almost every other case. The loss is a payment of
money, and the benefit is the receipt of that money. The SCC has already taught us that we should
take “a straightforward economic approach to the first two elements of the test for unjust enrichment”;
and that policy issues arise elsewhere.
Re, unnecessary layer of complexity of considering UE: particularly after Garland, the application of
the UE framework to a case of undue taxes is extremely straightforward. Since the statute was void,
there is no juristic reason for the government’s enrichment
The whole Quebec CCQ 1491 thing – this is the ordinary provision that private citizens use against
one another for mistaken and compelled payments! How is this same as the more “simple”
constitutional remedy?
So it seems that the Court was able to avoid dealing with Garland, but it has made the law
inconsistent. There can be restitution for unjust enrichment, and that is sometimes available against
public bodies, but there is also public law restitution for undue taxes, and this is not founded on UE.
This is weird b/c we don’t say that sometimes there is public law compensation that isn’t founded on
tort! In Canada we do not have “constitutional torts” – ordinary private law is applicable, perhaps
modified for public bodies – so why should we have constitutional restitution?
Even more troubling is the idea that a claim to recover undue taxes excludes a claim in UE. This is a
different proposition than saying undue taxes is not a claim in UE but the Court in Kingstreet seems to
assume that the reasons for the first proposition necessary imply the second. The claim should not be
excluded.
It is an ordinary principle of law that public bodies can always be held responsible under private law. It
is true that special considerations may apply when private law is deployed in public law situations, but
these considerations are not treated as inconsistent with the use of normal private law categories; on
the contrary, they are considered within the private law categories.
Finally, re: compulsion – the statement that “courts should insist on proof of compulsion in fact” is
inconsistent with Garland, since compulsion is a reason for restitution and not on the list of juristic
reasons. Theoretically all a plaintiff who made a payment under threat should have to show is that
there was no contract, no donative intent, no disposition of law, and no other valid obligation (i.e. no
juristic reason).
Is the Court signalling an intention to abandon the Garland approach, and go back to reasons for
restitution?
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Paradoxically, SCC said restitution for undue taxes is not a case of UE but constitutional
restitution
Private law claims are available against the state. In Peel the municipality had to use private law
which is very consistent with Kingstreet where it became a matter of public law
It’s an easy case to fit into the Garland framework and so Smith put Kingstreet into his big chart.
At the beginning of next class we’ll tie up juristic reasons and move on to Enrichment.
III. Enrichment of the Defendant
March 18, 2008

The concern is often expressed that we must not take away the defendant’s freedom of choice
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
Is this the same as saying that we must not make the defendant worse off?
Possible solutions:
 Specific restitution
 Request
 Free Acceptance
 Incontrovertible Benefit
Introduction CBp.271
 Enrichment determines whether the dfdt received something for which he may be held liable, and
if the plaintiff has satisfied other elements of the claim, it determines the quantum of recovery.
 The enrichment element also serves to protect the defendant’s freedom of choice.
 The issue can be understood by considering three questions:
o Did the dfdt receive an objective benefit?
o Did the dfdt subjectively devalue that benefit?
o Did the plaintiff overcome that subjective devaluation?
(I) OBJECTIVE BENEFIT
CBp.271
 There is no enrichment without an objective benefit to the dfdt – a benefit with a market value.
 In Peel, McLachlin uses the phrase “tangible benefit” – i.e. the possibility of reasonably precise
monetary valuation.
 In Peter v. Beblow (1993, SCC), McLachlin stated that courts have “consistently taken a
straightforward economic approach to the first two elements of the action in UE.”
 A benefit may be positive (e.g. payment of money) or negative (e.g. dfdt spared an expense
which he would have been required to undertake, like the discharge of a legal liability) (Peel)
 Peel provides an example where the claim failed for want of an objective benefit. McLachlin
noted that many of the options open to the Family Court would not have involved expenses for
the fed’l and prov’l governments and so the plaintiff’s payments had not provided the dfdts with
negative benefits.
o Furthermore, the fed’l govt’s political benefit and the prov’l govt’s moral benefit did not
constitute the requisite economic benefit.
(II) SUBJECT DEVALUATION
CBp.273
 The dfdt is protected by the concept of subjective devaluation. The question is not whether the
defendant subjectively valued the benefit but whether the defendant exercised a choice to assume
financial responsibility for that benefit.
o Recall in Peel where McLachlin J explained that the CML was founded on a philosophy
of robust individualism which expected every person to look out for their own interests
and placed a premium on the right to choose how to spend one’s money.
 Bowen LJ said in Falcke v. Scottish Imperial Insurance Co (1886), “Liabilities are not to be
forced upon people behind their backs any more than you can confer a benefit upon a man against
his will.”
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(III) OVERCOMING THE PLEA OF SUBJECTIVE DEVALUATION: TESTS OF ENRICHMENT
CBp.274
 In addition to showing an objective benefit, the plaintiff must also overcome the plea of
subjective devaluation by demonstrating that liability would not intolerably infringe on the dfdt’s
freedom of choice
 There are three possibilities:
o Request and Free Acceptance
o Incontrovertible Benefit
o Specific Restitution
(a) Request and Free Acceptance
Request
 A request suggests an active choice exercised by the defendant


Covers the majority of cases involving contracts that “went wrong”
Can Peel be explained by request?
Kuny v. Wigle, [1994] AJ no. 331 (Prov. Ct.) (CBp.274)
Jurisdiction
Facts
Issues
Holding
Reasoning
Comments
There is conflicting evidence regarding the formation of the K. It is clear that the plaintiff
supplied goods and services to the project.
Can the plaintiff recover on a quantum meruit basis?
Yes, on a quantum meruit basis the plaintiff can recover cost of materials and plaintiff’s
labour.
Woods J:
 The conflicting evidence makes it impossible for the Court to determine if there was a
meeting of the minds.
 But since the pltf supplied G&S, it seems an ideal situation to award quantum meruit.
 Court cites two cases:
 Plancé v. Colburn (1831) – When a special K is in existence, the plaintiff cannot sue on a
quantum meruit. However, it appeared that the work was finally abandoned (i.e. breach of
K); and the jury found that no new K had been entered into. Under these circumstances,
the plaintiff ought not to lose the fruit of his labour.
 Craven-Ellis v. Canons (1936) – The obligation to pay reasonable remuneration for the
work done when there is no binding K b/w the parties is imposed by a rule of law and not
by an inference arising from the acceptance of services or goods. There is no doubt that
the plaintiff was engaged to build the deck and did substantially complete it and only the
price was unsettled (e.g. the services were requested). The plaintiff is thus entitled to
recover cost of materials.
There was a request (i.e. the original K), so even if the work was abandoned, there was a
benefit to the dfdt that did not overcome freedom of choice.
CBp.275-6
 If there is an issue of a K (i.e. as a proxy/proof of a request), the plaintiff must therefore show that
the K did not truly exist, that is was set aside, or that it was discharged for breach.
o Sometimes the analysis is complicated. If a K is discharged for breach the value of
services can be claimed as a quantum meruit either in UE or in breach of K. Sometimes
it’s hard to determine the nature of the underlying claim.
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 The situation is also more complicated where the plaintiff performed requested services without
actually delivering an anticipated end product to the defendant (e.g. in Planché, the plaintiff only
delivered a single page of manuscript before the dfdt breached the K by abandoning the project)
 Some argue that pure services that neither create a marketable residuum (like building a house)
nor increases the recipient’s human capital cannot be an enrichment. This is not accepted in
Canada.
 If an action is framed in UE rather than K, then the plaintiff cannot enforce any price the dfdt may
have referred to in requesting the services
 Can a dfdt be held liable on the grounds that he subjectively valued something that is objectively
worthless? If so, how would the court quantify the value of the enrichment? (See Brenner v. First
Artists’ Management Ltd., [1993] 2 VR 221)
 A request is significant because it demonstrates that the defendant wanted a benefit and was
willing to pay for it.
 What if the dfdt wanted a benefit but wrongfully intended to obtain it without payment? Burrows
has proposed a “reprehensible seeking out” test alongside the request test – the dfdt cannot
wrongfully override the usual incidents of the market place.
Free Acceptance
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The language of free acceptance comes from Goff and Jones. You are required to pay for
improvements to land, for e.g., and the question is whether the dfdt is liable.
Whether or not free acceptance worked as a reason for restitution, can it work as a test of
enrichment?
Burrows: only shows indifference, not enrichment
o If FA, it must be a kind of estoppel
Burrows: “bargained-for” test + “reprehensible seeking out” test
o Again a kind of estoppel idea
The cases do not reflect the amount of detail that has appeared in academic theorizing.
Brisebois v. Modern Music Co. (1993), 50 ETR 305 (CBp.276)
Jurisdiction
Facts
Issues
Holding
Reasoning
Ontario General Division
Mr. Brisebois and his wife couldn’t afford a house so the dfdt company, which was owned
by Brisebois’s father-in-law, bought a house and took care of expenses in exchange for
$300/month and responsibility for maintenance and repairs. Eventually Brisebois became
successful and used a substantial amount of income to extensively expand and renovate
the house. His wife asked him to leave, the house was sold for $500K, and Brisebois is
suing in UE wrt improvements he had made. He sought restitution in the form of a
constructive trust.
Is Brisebois entitled to half the net proceeds of the house in constructive trust?
Yes (plus interest).
Boland J:
 This was not a landlord-tenant relationship (the Landlord-Tenant Act was not mentioned
in pleadings). The relationship between the parties was that of a special relationship
entered into by close members of a family unit.
 The evidence does support a finding that there was a constructive trust and therefore an
interest in the net proceeds of the sale.
 The three requirements of an UE claim are present here.
 The special relationship makes it unjust for the father-in-law to ignore the substantial
improvements made to the property by the plaintiff and to retain the entire benefit
obtained on the fortuitous sale of the matrimonial home.
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 The company has been considerably enriched by the time and money expended on the
property by the plaintiff, which the company and father-in-law gladly accepted.
 The plaintiff has been correspondingly deprived of time and money he spent improving
the property, and the oppty of investing in a property of his own. He also prejudiced
himself in the reasonable expectation of being able to live in this house indefinitely.
Comments
CBp.278
 Free acceptance can satisfy both the first and third elements of UE for Cdn courts; however, some
belief that it works better as a test of enrichment than injustice.
 Difficulties:
o Is it really fair to say that a dfdt sufficiently exercised a choice if he merely acquiesced in
its receipt? Is there thus a critical difference between request and free acceptance?
o Free acceptance can be satisfied as long as the dfdt either knew or should have known
(i.e. reasonable person test) of the plaintiff’s expectation of payment (Pettkus). Is it fair to
impose liability if the dfdt honestly believed, though unreasonably, that he was receiving
a gift? Keep in mind that a plaintiff is not usually held responsible for unreasonable
errors.
 Enrichment should be recognized only to the extent that the dfdt freely accepted a benefit. If the
plaintiff expected to be paid $500 but the dfdt reasonably believed the price was $300, subjective
devaluation should be available to the extent of $200.
(b) Incontrovertible Benefit



Includes money, services/improvements
IB if turned into money? E.g. Realizable financial gain (G&J) vs. realized financial gain (Birks)
o E.g. of realized gain – if the defendant worked on the canoe and then sold it for $2000
when it was only worth $100 – this has now turned into a financial benefit
Smith’s way of looking at enrichment is what amount of money are we okay with you letting go
of and still deciding you’re not worse off.
CBp.278-280
 While request and free acceptance overcome the plea of subjective devaluation by showing the
dfdt exercised choice to assume the risk of financial responsibility, incontrovertible benefit
overcomes the plea by virtue of the nature of the benefit itself.
 In Peel, McLachlin J explained: “An incontrovertible benefit is an unquestionable benefit, a
benefit which is demonstrably apparent and not subject to debate and conjecture. Where the
benefit is not clear and manifest, it would be wrong to make the dfdt pay, since he or she might
well have chosen to decline the benefit if given the choice.” (at 159)
o She adapted a passage from an article by Gautreau which pointed out that the principle of
freedom of choice loses its force if the benefit is incontrovertible. This is not the
antithesis of freedom of choice – incontrovertible benefit exists when freedom of choice
as a problem is absent.
 The Gautreau passage recognized three species of incontrovertible benefits:
o Money
o Realizable Financial Gain
o Discharge of Necessary Expense (we’re not reading on this)
 Other cases also suggest property subject to a claim of specific restitution as a species
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Money
BP Exploration Co. (Libya) v. Hunt (No. 2), [1979] 1 WLR 783 (QB) (CBp.280)
Jurisdiction
Reasoning
Comments
England?
Robert Goff J:
 The problem with restitution in respect of benefits such as goods or services is more
complex than in cases where the benefit is a money payment.
 Money has the peculiar character of a universal medium of exchange. By it sreceipt the
recipient is inevitably benefited (subject to problems like inflation, change of position, etc.)
 The loss suffered by the plaintiff is generally equal to the dfdt’s gain so that no difficulty
arises concerning the amount to be repaid.
 The same cannot be said by goods or services. Services cannot be restored, nor can
goods in many cases where they have been consumed or transferred.
 Furthermore the identity and value of the resulting benefit to the dfdt may be debatable.
 Robert Goff J outlines three reasons why money is an incontrovertible benefit: 1) it
is always valuable; 2) it is equally valuable regardless of who holds it; 3) it is
fungible
 Benefits other than money are: 1) not always valuable; 2) are not equally valuable
regardless of who holds them; and 3) are not necessarily fungible
Realizable Financial Gain
CBp.281
 Goods and services are generally enrichments only if they were requested or freely accepted.
Sometimes they can be incontrovertible benefits if they 1) create a realizable financial gain or 2)
discharge a necessary expense.
 It has been suggested in these situations it is as if the dfdt received money.
Gidney
 There is liability at trial and so this is an appeal
 With a clear mistake (and with the clear absence of any juristic reason) the only issue is
defendant’s enrichment
 In this case, instead of making a mistaken payment, he fixed a canoe. The defendant did not have
any knowledge of what was happening with his canoe so there was free acceptance and no
request. The previous cases, on the other hand, focus on request or acquiescence by the dfdt.
 But request and acquiescence are merely solutions for the enrichment problem. IB solves it
another way
 Otherwise there can be enrichment but no liability.
 Court of appeal judgement of Gidney is only mentioned in the note. CA says there is an absence
of a special relationship and therefore there is an absence of juristic reason.
 To say this is kind of weird b/c means you’d have no liability without free acceptance. You
couldn’t even have liability in a mistaken payment case if the money goes into the wrong
account.
 CA says if plaintiff was the dfdt, this case would be entirely different. What if the owner had to
bring a proceeding to obtain possession from the guy who bought the stolen canoe. You might be
able to resist giving back the object until compensated for the improvements. In the trial judgment
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the issue is framed as whether the plaintiff has an “active claim” as opposed to a passive claim
where you can resist restoring the object.
Gidney v. Shank (1995), 101 Man. R (2d) 197 (CBp.281)
Jurisdiction
Facts
Issues
Holding
Reasoning
Manitoba QB
In May 1983, the plaintiff purchased a canoe from Darryl Hedman. The canoe was in poor
condition at that time and he expended 100 hours to rebuild the canoe and $106.25 for
materials and $700 to have it professionally fibreglassed.
Unbeknownst to the plaintiff, the canoe had been stolen from Feuerstein. In November
1983, the RCMP seized the canoe and some random guy was convicted of theft. The canoe
was eventually returned to Feuerstein and at that time was worth $1906.25.
Can a plaintiff, who has made repairs to a chattel owned by someone else while he
mistakenly believed himself to be the owner of the chattel, recover from the original owner
compensation for those services where the original owner had no knowledge of the repairs,
had not consented or acquiesced to the repairs, and was not in a position to return those
services?
Yes.
Beard J:
 The dfdt had no opportunity to reject the repairs, which cannot be returned.
 The factor in this type of case which causes divergence of opinion among judges and
writers is that the original owner neither requested nor acquiesced to the services.
 One school of thought is that granting relief in this case would be forcing the dfdt to
invest resources in a service he may not have wanted and which may have no value
or benefit to him.
 Fridman suggests there should be no recovery where there has been no request or
acquiescence by the dfdt, but later in the same book he suggests the opposition
solution. Others (Maddaugh and McCamus) believe that in appropriate cases, relief
should be granted. Beard J agrees with the latter.
 Traditionally, the underlying reason for a requirement of an express request of
acquiescence relates to whether the services are truly a benefit to the dfdt, and whether it
is unjust to allow the dfdt to retain the services in a case where he had no opportunity to
reject or return them (Goff & Jones)
 Over the years the requirement for a request was relaxed if the dfdt was established
to have retained the services after having had a reasonable opportunity to reject
them, and if the dfdt had actual or presume knowledge that the services were meant
to be paid for.
 Maddaugh and McCamus suggest it may well be unjust to reject the claim without
asking if the defendant has been incontrovertibly benefited.
 Goff and Jones agree and define that a person has been IB’d if a reasonable person
would conclude that he has been saved an expense which he would otherwise
necessarily have incurred or where he has made, in consequence of the plaintiff’s
acts, a realisable financial gain. It is sufficient if the benefit is realisable. G&J say it
may not be unreasonable to compel a person to sell an asset which another has
mistakenly improved.
 The burden is on the plaintiff to show: 1) that he did not act officiously; 2) that the
particular defendant has gained a realisable financial benefit or has been saved an
inevitable expense, and 3) that will not be a hardship to the dfdt to make restitution.
 Fridman rejects the principle of incontrovertible benefit, relying on the Ontario CA case of
Nicholson (1975) where it was held that even though renovations improved the value of a
property, they were not necessary and the dfdt had not K’d the services on his own.
However, in that case Greenwood (1973) is distinguished as a case where the plaintiff
was under the mistaken belief that he was the owner of the property.
 Beard decides that the second approach (of M&M and G&J) is more in keeping with
underlying principles. If one is to follow Fridman, in situations where the plaintiff cannot
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establish that the dfdt requested or acquiesced in the provision of service, it will lose.
 If the plaintiff only has to prove an incontrovertible benefit, then courts can look at the
whole case and consider the equities of both parties, and not be hamstrung by a fixed rule
requiring a request or acquiescence.
 This is consistent with the basic policy of restitution law – to prevent an UE to one party at
the expense of another.
 Thus, there is no absolute rule that the defendant will not be held liable for services
rendered where he didn’t request or acquiesce. Rather, once the plaintiff has established
that the services were an incontrovertible benefit, the evidentiary burden will shift to the
dfdt to lead evidence that the incontrovertible benefit was not a benefit (and/or there are
other factors which would render it unjust to compensate the plaintiff).
Comments
Application
 The improvements to the canoe were clearly an incontrovertible benefit, and there was
clearly a corresponding deprivation.
 The defence has not led any evidence that the repairs were of new use or value to him.
 The “lack of juristic reason” requirement is met here by plaintiffs evidence that it was his
mistaken belief of ownership that caused him to undertake the repairs, and so there is no
juristic reason that would entitle the benefit to retain the benefit.
 The “fourth element” (?) – that it would be unjust for the dfdt to retain the benefit – is met
by the fact that the plaintiff undertook the repairs intending to benefit himself and not the
dfdt. The dfdt did not lead any evidence to suggest it would be unjust to order
compensation.
 Dfdt ordered to compensate the plaintiff for his out-of-pocket expenses being a total of
$806.25.
The Court of Appeal overturned this decision and said that the plaintiff-respondent could not
recover because there was no “special relationship” between the parties.
CBp.288-9
 In Greenwood v. Bennet, [1973] 1 QB 195 (CA), the defendant owned a Jaguar worth between
₤400-₤500. He gave it to Searle to repair for ₤85, and Searle screwed the car up and sold it for
₤75. That guy then sold it to the plaintiff who spent ₤226 on repairs. The police eventually found
the car, and the two parties commenced pleadings. The TJ awarded the car to the defendant, and
rejected the plaintiff’s claim for reimbursement of expenses. While appeal was pending, the dfdt
sold the vehicle for ₤400.
o The Court of Appeal unanimously overturned the trial decision. It confirmed that the dfdt
was the owner but said the plaintiff was entitled to ₤226 reimbursement.
o The judges split on the reasons for the conclusion. Three judges agreed that the plaintiff
only enjoyed a passive claim (if you’re gonna take my car, then you should pay me back),
while Denning thought that the plaintiff could actively claim restitution.
 In Greenwood, at least there was an actually realized financial gain, whereas the financial gain in
Gidney was merely realizable. Authorities are split on the issue of a realizable financial gain.
o Should it be enough that the dfdt COULD realize a financial gain? Or is reasonably likely
to do so? Or is certain to do so? Should the court impose a form of lien with suspended
operation until such a time as such financial gain is actually realized?
o Does it matter what kind of property has been improved? Is it appropriate to expect the
dfdt to sell certain types of property but not others?
 Note that in Greenwood, the plaintiff discharged a necessary expense. Could the same argument
be made for Gidney v. Shank?
 Assuming that freedom of choice is a central concern, is Beard’s reasoning fair? What if it was a
car that was originally worth $1000 but it was improved by the plaintiff and eventually worth
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$5000. Would the defendant really be restored to his position before the UE if he paid $4000?
Will the totality of his wealth be changed?
In light of Peel:
 Payment of Debt (in light of IB)  saving a legally necessary expenditure
 Saving a factually necessary expenditure?
o Peel accepted as a possibility but held inapplicable in that case
(c) Specific Restitution
CBp.295
 The receipt and retention of property may qualify as an incontrovertible benefit if the plaintiff
seeks specific restitution.
 This is different from services because they can’t be restored in specie and can only be
effectuated through payment of money – the dfdt must give up resources not directly acquired
from the plaintiff
 The situation is much different when recovering property, i.e. the very thing the dfdt should not
hold, and so the argument regarding freedom of choice is greatly attenuated.
IV. Corresponding Deprivation
(I) INTRODUCTION
CBp.297
 In UE claims, the plaintiff must show that the defendant’s enrichment corresponds to a
deprivation of the plaintiff. This element is usually uncontroversial.
o E.g. mistaken payment  payment is deprivation to person who paid it
o E.g. claim for services  deprivation of plaintiff who performed services
 The element is deprivation performs an important normative role. It’s not just about the quantum
of a claim. If there is wrongdoing, there may be damages that are measured neither by the gain of
the dfdt or the loss of the plaintiff. The question of whether a wrong was committed stands
analytically apart from the question whether any loss or gain resulted from that wrong.
 In UE, there is no such thing as a claim where the value of the claim is zero.
 If the dfdt’s gain is not equal to the plaintiff’s loss, the quantum of the claim is the lesser of the
two.
o A plaintiff’s loss in excess of any corresponding gain could be compensated only by
showing some wrongful act of the dfdt.
 In English cases, they say that the dfdt’s enrichment must be “at the plaintiff’s expense” (i.e.
calculate loss from plaintiff’s perspective)
o This formulation doesn’t sufficiently separate the idea of disgorgement of wrongful gains
and a cause of action in UE
o So in UE cases there may not be sufficient emphasis on whether the plaintiff actually
suffered a deprivation
o Some authors think this is correct, but this approach is contrary to the view set out above
– that the deprivation is essential to the normative foundation of the liability
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March 25, 2008
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Where you have only two parties, the corresponding deprivation (CD) question usually seems to
be pretty easy. When the court decides that the dfdt has received an enrichment, there isn’t much
concern in the caselaw about whether the plaintiff has suffered a CD.
If you’re like Smith and you think that it’s the TRANSFER that grounds a claim in UE -- you
might say a little more attention should be paid to the issue CD.
On the issue of whether it can always be seen as a transfer: there are kinds of cases where it’s
harder to see it as such.
E.g. Vincent v. Erie – A ship is tied up to a dock that belongs to someone else. The battering of
the storm means that the ship damages the dock. The ship is saved against possible sinking by
being tied up. We think the shipowner should compensate because of the lost something. But it’s
not a tort b/c we don’t want to say that in an emergency situation ppl shouldn’t be able to do this.
The simplest interpretation is that this is a case of trespass. In tort law we say it’s a qualified
privilege – privilege b/c you’re allowed to do this in an emergency and it’s not wrongdoing, but
qualified b/c you’re required to compensate.
o The ship was saved and so we can say that there’s damage. The enrichment did come
through a corresponding deprivation, i.e. at the plaintiff’s expense.
o Not so easy to see this kind of case as a transfer!
(II) TWO-PARTY PARADIGM
Payer v. Peerless Plating Rack Co. (1994), 19 OR (3d) 105 (CBp.298)
Jurisdiction
Facts
Issues
Holding
Reasoning
Ontario General Division
Peerless was owned and run by Milanese and Payer. In August 1988, Milanese purchased
Payer’s interest and became the sole owner. In the agreement that governed the buy-out
transaction, para (f) reads: “The vendor acknowledges and agrees that the Life Insurance
Policy or Policies on his life shall either be terminated by the corporation or maintained by
the vendor at his own expense.”
At a series of meetings between Payer, Milanese and others (including Payer’s wife),
certain arrangements were made. It turned out that premium payments on the Zurich Life
Insurance Policy continued to be debited from the Peerless bank account and when Payer
died in January 30, 1989, $100K was paid out to Peerless, the designated beneficiary.
Was Peerless unjustly enriched by payment of the $100K proceeds of the Zurich policy (and
therefore liable to make restitution to the plaintiffs)?
No, there was no deprivation notwithstanding Peerless’ enrichment.
Mackenzie J:
 While there has been an enrichment without juristic reason, I am not convinced on a BoP
there has been a corresponding deprivation.
 The mere fact that Peerless continued to pay the premiums on the policy through
inadvertence does not in and of itself constitute an economic deprivation.
 A passage in a letter by Mrs. Payer from April 1989 seems to suggest that at one of the
meetings Mr. Payer clearly expressed that it was not his desire to continue the policy
because they couldn’t afford it.
 The defendants requested the plaintiffs admit this passage however they did not respond
which means that the plaintiffs are deemed to admit the truth of that fact.
 In light of this fact, I am unable to find that there is any deprivation on the plaintiffs which
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Comments
has any correlation or linkage with the windfall received by Peerless.
 Since the evidence does not disclose any intent on the part of Payer to assume such
policy – and thus any potential benefits flowing therefrom – it can’t be said that the
plaintiffs have suffered economic deprivation or loss.
In the Court of appeal (1990), 37 OR (3d) 781, the judgment was varied but this part of the
decision was affirmed  “It would be inequitable for the Payer estate to obtain these
proceeds when Payer unequivocally renounced any interest in the policy, paid no premiums
thereon, and had no expectation of his estate receiving any proceeds therefrom.”
 BUT hadn’t Payer been paying the premiums for years before?!
(III) THREE-PARTY COMPLICATIONS
(a) Plaintiff Deprived by Reimbursing a Third Party
R v. M. Geller Inc., [1963] SCR 629 (CBp.302)
Jurisdiction
Facts
Issues
Holding
Reasoning
M. Geller is a sheepskin dealer, some of this material being dressed by Nu-Way Lambskin
Processors. Some random statute (the Income Tax Act I’m presuming) provides that a 25%
excise tax will be imposed on all dressed and dyed furs imported into Canada payable by
the importer, or all furs dressed or dyed in Canada, payable by the dresser or dyer at the
time of delivery to him.
Nu-Way had to pay tax in the sum of $20, 956.74 as a dresser. It was found that tax
imposed on dressed furs is illegal because sheepskin is not a fur falling within the meaning
of the Act. M. Geller reimbursed Nu-Way the sum. Both N and M claimed a refund. The TJ
dismissed N’s claim on the ground that it failed to apply for a refund within the prescribed
statutory period of two years, and maintained M’s claim since it was, in fact, M who paid the
tax. Her Majesty appealed.
Can M. Geller claim the amount of the tax that was paid by Nu-Way to the government,
having reimbursed Nu-Way?
No.
Taschereau J:
 It is clear that the tax paid by N was not legally owed. However the person obliged to pay
the tax is the dresser, and the person entitled to a refund is the dresser. In this case, the
tax was paid by N, and it was the sole person entitled to a refund.
 The respondent therefore has no legal claim. It is true that M. Geller reimbursed N, but
this payment does not give a right of action to M.
 The arrangements made between M. Geller and Nu-Way are of new concern to the
appellant. They are res inter alios acta.
 The Petition is therefore dismissed except as to an amount of $945.02 which was paid as
an excise on imports brought from the US and must be refunded.
Comments
M. Geller
 Federal excise tax on furs gave rise to a whole bunch of case in 50s and 60s. It was decided “furs”
did not apply to sheepskin so there were cases of plaintiffs wanting their money back.
 In this case the “dresser” that paid the tax was reimbursed by M. Geller who was ultimately liable
for the tax and effectively paid for it. If we assume that the Federal Crown is liable to pay the tax,
it’s clear they would have been liable to Nu-Wave.
Monika Rahman
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Issue: Does M. Geller, who reimbursed Nu-Wave, have a claim against the Crown?
Until Kingstreet, there was a defence of passing on. If the defence of passing on existed, NuWave wouldn’t have a claim in this situation because they’ve passed on. The (original) plaintiff
recouped the tax from their customer.
The defence of passing on should have worked against Nu-Way and then M. Geller’s claim
should have been permissible.
Refusal to allow M. Geller’s claim is a way of saying that the analysis should follow the reversal
of the original transaction. Makes sense to Smith and connects back to his transfer idea.
If you take this case to be law, then it was NW who suffered the corresponding deprivation.
NW was out of time – Smith doesn’t think that SCC intended to say that if NW had made a claim
in time then M. Geller would have a claim.
Problem is that what if NW has no reason to pursue litigation if they’re going to be reimbursed.
This poses a problem in practical terms since M. Geller is left with no rights and the Crown owes
this money.
Does M. Geller have a claim against NW that is completely independent from NW’s claim
against the Crown?
Geller reimbursed NW pursuant to a contractual obligation to do so.
In the Rothman case, something similar happened except it was cigarettes instead of sheepskin.
The reimbursement was paid exactly this way and effectively while the money was in the hands
of the cigarette manufacturer, it was decided that the tax was invalid. Presumably lots of people
got it back. The cigarette manufacturer collected this tax and then withheld it from the...? (see
flow chart for the case name and citation)
April 1, 2008 – discussed M. Geller again:
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Smith talked to his friend Mitchell about Geller
Could we see Geller as taking over the claim that NuWay had against the claim in a manner of
subrogation? This way we know Geller will get only as much as NuWay can get.
In today’s class – do you owe me an equivalent amount of money, like a debt, or do you hold in
trust the very enrichment that I gave to you which means that my rights would be slightly
stronger?
Subrogation means paying someone’s debt; in this case it would be taking over someone else’s
claim.
What if we say NuWay holds his rights against the Crown in trust for Geller? This kind of
reasoning emerges in cases of indemnity insurance as a way of explaining how to conceptualize
the result. E.g. if NuWay has this right but only as a trustee – i.e. for the benefit of Geller – which
means they have to let Geller use the right against the Crown
27 March 2008

Missed the point of some discussion about insurance and subrogation (Charles Mitchell
doctorate)
(b) Interceptive Subtraction
Hunter Engineering
 Intriguing story of corporate impersonation!
 Can Hunter US plausibly present itself as the one who suffered a corresponding deprivation?
Monika Rahman
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“Interceptive Subtraction” – coined by Birks – Birks referring dfdt has received an enrichment
from someone other than the plaintiff but the enrichment was on its way to the plaintiff and the
dfdt somehow intercepted it.
o Therefore can be seen as plaintiff’s enrichment at expense of the dfdt
o Birks would have used this theory to explain the Kentucky Caves case
Can say that the only person who legitimately should have received this profit margin was Hunter
US and that it was intercepted on its way to Hunter US
Syncrude ends up with the gearboxes without having to pay for them in a sense
Part of the price must have been project management – e.g. why are these engineering firms
involved in this at all? Because there’s an expertise on the part of the engineering companies –
they know which sub-Krs to go to, what to ask them to do...
o Smith thinks that that part of it is the part that Syncrude gets for free
Seems consistent with what the court did in Geller, which is to say that in the absence of unusual
circumstances, something something
Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 SCR 426 (CBp.304)
Jurisdiction
Facts
Issues
Holding
Reasoning
•
Syncrude operates a multi-billion dollar synthetic oil plant and requires gearboxes to
motor conveyor belts that move sand. The gearboxes malfunctioned (Dickson holds
that Hunter US was liable for the failed gearboxes.
• Three years later, Syncrude needed 11 more gearboxes and was approached by
defectors from Hunter US, who said they represented the Canadian subsidiary, Hunter
Canada. They were actually incorporated independently and had NO connection with
Hunter U.S. Any representations to that effect were fraudulent misrepresentations.
• Hunter Canada gives a K’l warranty (more onerous quality obligations) that Hunter US
would not have given.
• Syncrude becomes aware that Hunter Canada has been making fraudulent
misrepresentations – they don’t want to pay Hunter Canada and then later find out that
they have to pay Hunter US (pending resolution of litigation b/w HC and HUS). But they
still want the gearboxes!
• Syncrude enters into two Ks – 1) with Aco who was being subcontracted by Hunter
Canada to make the gearboxes, to produce them for the same price; 2) Established a
trust fund into which Syncrude put monies that would have been payable to Hunter
Canada. Aco was to be paid out of that fund, and any profit Hunter Canada would have
made was to be payable to the successful party in the litigation b/w the two Hunters.
• However, the terms of the trust contemplate that that profit margin can be paid over to
Hunter US if Hunter US provides the same warranty. Under the terms of the trust,
stipulates that if Hunter US is unwilling to assume those quality obligations, then that
money goes back to Syncrude.
• Hunter US wins vis-à-vis Hunter Canada (as a passing-off action – tort of pretending to
be someone else)
• Hunter US still hadn’t assumed the quality obligations and so they end up in litigation
with Syncrude over who gets the pot of money which contains the profit, plus interest
on the amount of this principal.
Can the law of constructive trust be extended to reach, for the benefit of Hunter U.S.,
monies held under a trust agreement, to which Hunter U.S. was not a party, entered into by
Syncrude under these unusual circumstances?
No. Syncrude is entitled to the principal of the trust fund and the interest accrued.
Dickson CJC (+ La Forest, with McIntyre agreeing on this issue):
 There was no basis in law or in equity for awarding the trust fund to Hunter U.S. Hunter
U.S. was not entitled to those moneys under the terms of the trust agreement. It did
nothing for Syncrude to assist in producing the gears contemplated by the Hunter Canada
Contract. The drawings used by Aco in manufacturing those gears were given by
Monika Rahman
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Syncrude and were properly in Syncrude's possession. There was no breach of copyright
or theft. Hunter U.S. did not satisfy the criteria necessary to establish a constructive trust.
There was no unjust enrichment.
Traditionally CT was used to provide a remedy to claimants alleging that others had made
profits at their expense where the claimant could show the existence of a fiduciary
relationship. In Pettkus, the Court found that a CT could remedy unjust enrichment.
As between Hunter U.S. and Hunter Canada, Hunter U.S. would have been allowed to
claim any profits made by Hunter Canada under the traditional doctrine of constructive
trust. Hunter Canada stood in a fiduciary relationship to Hunter U.S. and equity will not
permit the fiduciary to profit at the expense of the principal. The test for unjust enrichment
enunciated in Pettkus v. Becker, too, would be satisfied since Hunter Canada would be
enriched to the amount of profit it would have received from Syncrude, at the expense of
Hunter U.S., and there would be no juristic reason to justify the enrichment.
The relations between Hunter Canada and Syncrude were regulated by contract. Where
a party has entered a contract misled by fraudulent misrepresentations, the contract is
voidable at the instance of the innocent party. Syncrude was entitled accordingly to
rescind its contract with Hunter Canada and retain the money it would have paid under
that contract. As between Hunter U.S. and Syncrude, Syncrude is entitled to retain the
money. Their only connection is Hunter Canada.
The result of Syncrude’s decision to terminate the Hunter Canada K and HC’s
acceptance of the termination is that HC is no longer entitled to any payment under the K.
The fact that Hunter Canada was not entitled to the money precluded any claim by
Hunter U.S. because that claim only arose as a result of Hunter Canada's actions.
To find unjust enrichment in favour of Hunter US on monies held by Syncrude wold be to
found an entitlement deriving from K’l entitlement of HC that no longer exists.
Hunter U.S. was not a party to the trust agreement and consistently refused to honour the
warranty and service obligations stipulated in the trust agreement. Syncrude was under
no obligation to accept the offer made by Hunter U.S. To found a restitutionary remedy in
favour of Hunter U.S. would be tantamount to compelling Syncrude to contract with
Hunter U.S. Further, if the claim of Hunter U.S. were to prevail, Hunter U.S. would be
enriched and Syncrude would suffer a corresponding deprivation for no juristic reason.
Syncrude created the trust fund, no doubt from an abundance of caution, and should not
be put in a worse position than if it had merely rescinded its contract with Hunter Canada.
The establishment of the fund was not an admission that the moneys belonged to either
Hunter Canada or Hunter U.S. Its purpose was to ensure that someone would promptly
assume the warranties.
Wilson J (+ L’H-D):
 The trust fund did not need to be disposed of according to the terms of the trust
agreement. The trust terms were not agreed upon by either Hunter U.S. or Hunter
Canada. Since Syncrude was no longer prepared to acknowledge, as it was in 1978, that
the profit margin was payable to one of these two parties, entitlement to the trust fund
should be decided on the equitable principles governing unjust enrichment.
 Syncrude's entitlement was limited to working gearboxes at the price agreed upon and
any additional money arising out of the circumstances (such as interest income on money
initially intended to pay Hunter Canada), once repair costs were paid out of the fund,
would constitute enrichment.
 Hunter U.S. would be correspondingly deprived of the interest income it would have
earned on the contract for the supply of the additional 11 mining gearboxes under the
Hunter Canada contract. No contractual link for the causal connection between
contribution and enrichment needed to be proved. There was sufficient causal connection
in the fact that Hunter U.S. first offered to assume the whole Hunter Canada contract and
later, after it won its case, was prepared to offer Syncrude the warranty terms under which
the original 32 gearboxes were supplied. Syncrude had been willing to pay the profit
margin to Hunter U.S. in 1978 and could not argue now that it had no need of Hunter U.S.
Monika Rahman
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Comments
So the majority says that that there is no claim at all because while Syncrude is enriched,
the “deprivation” of Hunter US is not corresponding b/c of the lack of causal connection
between the two parties. The evidence is extremely unclear but it seems that Hunter US did
not assume the obligations of the warranty. The minority seems to be saying that the
creation of the trust fund established this causal connection.
Subsidiarity: Plaintiff’s Contract with a Third Party
CBp.319
 Imagine the owner of the land retains a general K’er to build a building; the general K’er
contracts with subK’ers. Assume the general K’er becomes insolvent and cannot pay the
subK’ers. Can they sue the landowner for the work performed in UE?
 Using the traditional approach, the subK’er would not be able to show a reason for restitution –
no mistake, only a misprediction as to the solvency of the general K’er.
o In Nicholas (Ont CA), there was a reason for restitution – mistake of fact – but the claim
was denied.
 In civilian systems, UE is subsidiary to other claims. In German law, the idea of subsidiarity
serves to deal with the third-party K situation. The rule is that if a person deliberately confers an
enrichment pursuant to a K, the only person who can be sued (in K or UE) is the K’l
counterparty. The justification is that if a person has voluntarily assumed risks inherent in a K, he
should not be able to get around those risks by finding another dfdt.
Furncan:
Facts
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ICE owns the vessel and they chartered it to
Tightlinks. Tightlinks charters a vessel for a long period of time and then tries to make money by
contracting out.
They make a contract of carriage with
Meteor paper to move cargo to Romania. Furncan is hired as stevedores?
Tightlinks runs out of money (goes
insolvent) before the bill of lading is issued and Tightlinks tell ICE that it’s breaching its K. ICE
immediately takes control of the ship and is not bound to honour the K’l obligations made by
Tightlinks.
Meteor has been released from the K with
TL but they did pay ICE for the movement of the cargo (but not for the work that Furncan did).
Furncan has done the work – the ship is full
– and they haven’t been paid. They get a judgement in their favour against TL but it’s not very
helpful since TL is insolvent.
Issue
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Does Furncan have any claim in UE against
Meteor?
Held: No
German rule: Sorry, you took a risk and you
shouldn’t get a bonus defendant
Monika Rahman
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Furncan Marine Ltd v. Ship MV Woodlands (Cargo Owners) (1994), 81 FTR 278 (CBp.319)
Jurisdiction
Facts
Furncan is a stevedoring company. Furncan is suing Meteor Paper, the owner of the cargo
of woodpulp on board of the MV Woodlands, for services rendered in loading cargo on
board the ship in Saint John.
International Capital Equipment (ICE) owns the MV Woodlands. ICE entered into a time
charter with Tight Links. Tight Links’ agent contracted with Furncan’s agent for various
companies, including Furncan, to load various cargoes on to the ship. On Jan 2, 1991
Meteor K’d with Tight Links for carriage of woodpulp to Romania. There were never any
negotiations between Meteor and Furncan. Meteor agreed to pay freight costs when bills of
lading were signed. Tight Links instructed to Meteor’s agent to pay Furncan, which started
loading the woodpulp on Feb 8, 1991. In the meantime, Tight Links financial position
collapsed and on Feb 26, 1991 they notified ICE they were breaching their K.
Issues
Holding
Reasoning
The Master of the vessel notified Furncan that he was withdrawing his authorization to sign
bills of lading. Thus, at no time did Furncan ever issue a bill of lading. Meteor’s lawyers
informed Furncan’s lawyers that it would not pay any freight to Furncan. At that point, it was
not certain that the voyage would be made to Romania. Eventually Meteor K’d with ICE for
ICE to carry the cargo, but the agreement did not provide for payment of Furncan’s
stevedoring charges. Furncan was never paid and is suing Meteor on the basis that
representations were made by Meteor’s agent that Furncan would be paid once the cargo
was loaded. At this time Furncan knew that Tight Links had no money to pay for its
services.
Can Furncan claim in UE from Meteor Paper?
No, Furncan K’d with Tight Links and no UE claim can be made against Meteor Paper.
Dubé J:
 In Chitty on Contracts, it states that restitution ought to be denied when the plaintiff
conferred the benefit while performing an obligation which he owed to a third party or
otherwise while acting involuntarily in his own self-interest.
 In Atlas Cabinets (BCCA, 1990), the court held that UE cannot be applied
indiscriminately in all scenarios, and that what is UE in a matrimonial situation may
not be in a commercial setting.
 In McClaren (1984, FCTD), Muldoon J referred to a “special relationship” which
seems to be the sine qua non of success, but is not an inevitable guarantee of
success.
 In Voth Bros. Cost. (1988, BCCA), court held that plaintiff’s loss was caused by
business risks (insolvency of a party).
 Based on the evidence, Dubé J decides that evidence does not show that Meteor Paper
made any outright representation that it would pay for Furncan’s stevedoring services in
any event. These representation were merely to the effect that once a bill o flading was
issued, the freight monies would be assigned to Furncan. This never came to pass.
 Meteor eventually K’d with ICE, who charged a higher freight than the price Meteor had
agreed to with Tight Links. In these negotiations, the fate of Furncan had not been
discussed.
 Furncan is left with a claim against TL – Furncan has obtained a default judgment against
Tight Links, but has yet to pursue this claim (because they’re insolvent).
 Because of the higher freight Meteor paid, it cannot be said that Meteor benefitted from
Tight Links’ cancellation. Although Furncan has suffered deprivation, it has not
established enrichment. And it has not proved that it relied on blanket representations by
Metero that it would pay no matter what happened.
 There was no “special relationship” between F and M that can sustain a claim of unjust
Monika Rahman
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enrichment (me: i.e. no reason why it would be unjust? What is this special relationship
business?). I must find that Furncan’s loss resulted from a business risk.

Comments
Notes, CBp.326
 Dubé J said Meteor Paper was not enriched; however, it had had the benefit of the stevedoring
services that were clearly of value to it, and these services were provided by Furncan.
 Dubé J also said that Furncan’s loss resulted from a business risk – this looks like the basis of the
German idea of subsidiarity.
 What if the plaintiff’s K was void, and not merely breached by the third party? The German
doctrine applies even here, however the plaintiff might have a UE claim against the 3P.
April 1, 2008

Note the Zellers case is there mainly to show CML hasn’t worked out a clear rule with what to do
when plaintiff has enriched a third party pursuant to the plaintiff’s K with someone else
Giffen, Lee & Wagner v. Zellers Ltd. (1993), 15 OR (3d) 387 (CBp.326)
Jurisdiction
Facts
Issues
Holding
Reasoning
Ontario, General Division
The plaintiff, a law firm, is suing for payment of its account of professional fees of $3,220.06
which was rendered more than 8 years prior. Giffen, Lee was retained by Zellers’ insurer to
defend an action which had been brought against Zellers by a customer who slipped and
fell in a store. After a settlement was reached, Giffen, Lee rendered its account to the
insurer who had become insolvent in the meantime.
Thereafter Giffen, Lee dealt with Zellers which 1) instructed GL to accept the settlement; 2)
paid the settlement to GL in trust to be forwarded to the claimant’s counsel; 3) instructed GL
to get a release from the plaintiff customer. GL told Z it had an outstanding account with the
insolvent insurer before Z authorized them to complete the settlement. Z has paid them for
the later work, but refuses to pay the earlier account.
Is Zellers liable for the account rendered to its insolvent insurer for the prior work done by
Giffen, Lee?
Yes
McCombs J:
 When Zellers elected to avail itself of the benefit (i.e. the tentative settlement) achieved
as a result of Giffen, Lee’s labour, Zellers was enriched.
 Zellers argues that the K Zellers had with the insurers is a juristic reason – Zellers never
K’d with GL. Besides, Z paid premiums to the insurance company, in part to be protected
from such claims.
 In my view, there is no juristic reason. Once Zellers made the decision to adopt the
benefit of the settlement achieved by GL, it became liable to pay for the work done to
achieve that benefit.
Comments
V. Personal or Proprietary Restitution
(I) OBLIGATION VS. CONSTRUCTIVE TRUST
Monika Rahman
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CBp.333
Personal vs. Proprietary
 There is a question of how making restitution will be brought about.
 Personal restitution – E.g. in the case of a mistaken payment of $100, can say the defendant now
owes the plaintiff $100, creating a debt
o You can repay the $100 from any money you may have – doesn’t have to be the money.
o Disadvantage for plaintiff – if defendant is insolvent, claim for restitution may be
devalued or worthless
o At CML, a claim for restitution was always a claim for debt arising by operation of law
 Proprietary right – plaintiff asserts the money had remained hers all along. This raises the
question of whether the plaintiff remained the owner all along, despite the mistaken transfer.
o Alternatively the plaintiff could sue in conversion, detinue or chattel trespass. A question
is whether the plaintiff could alternatively sue in UE, abandoning her property right.
o There is a debate at CML about whether the dfdt can be said to have enriched, and the
relationship between UE law and legal property rights
o CVL systems don’t allow the option of suing in UE – use it only when it’s needed
 However, the property still passes in the transfer, unless there is a mistake as to the identity of the
transferee or subject matter of the transfer.
o If the property has passed, the only argument available seems to be that the dfdt now has
an obligation, or debt, to make restitution of an equivalent sum.
o Of course the enrichment might not have included any property transfer at all (e.g.
services, plaintiff pays dfdt’s debt)
Constructive Trust
 Even if the property passes, the law may say that the defendant holds that property on trust for the
plaintiff – a trust arising by operation of law
o Usually understood to be a constructive trust, but some argue that it’s a resulting trust b/c
it operates to return property to its original owner.
 Where there’s a trust – the property belongs beneficially to the plaintiff, even if dfdt is legal
owner. This trust claim is tied to specific property, unlike a debt claim.
 Chase Manhatten (England, 1981):
o Held: Plaintiff has priority claim over other creditors b/c the property available to
creditors doesn’t include trust property
o Implicit in holding: Plaintiff can trace property into its proceeds. So she must try to find
the transferred property and if she cannot do so, she can establish a trust on traceable
proceeds.
o She can claim a common law obligation for any shortfall
 Another advantage: Plaintiff can take benefit of any rise in the property’s value, i.e. she has a
claim to the benefit of particular property, whether its value has gone or up or down.
 Trust claims also have longer limitation periods
In Pettkus v. Becker, the SCC did not clearly distinguish between a claim in UE and the remedy of CT.
Peter v. Beblow is the leading case for availability of proprietary relief for a claim based on the cause of
UE. It marks clear recognition that a constructive trust is only one possible remedy for UE.

Once we’ve decided that there has to be restitution, there are different ways, or “modalities”, of
how this is to be done.
Monika Rahman
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
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Say I’ve made a mistaken payment to you $100, and you owe me $100. That means you can pay
out of any assets you have and I am the creditor. A successful claim in UE makes the plaintiff a
creditor.
There are two other ways of looking at the liability
o The dfdt holds the property received in trust for the plaintiff – a trust arising as an
operation of law, e.g. a constructive trust. The plaintiff would argue that money remained
hers all along.
 This is proprietary restitution
o The dfdt may have only an obligation to repay the $100, but it maybe that it’s treated as a
secured obligation. Like a lien. There’s no trust as such. You owe me $100 and I get an
extra right – I get a lien on the $100.
 This is personal restitution
Implications
 There are procedural issues related to what kind of claim you make
 The facts that generate a trust claim have no temporal limitation. I have a present right in relation
to the thing/money you hold in trust for me.
 Also a trust claim will usually give rise to a claim for compound interest for the lapsed time
 The property in question also may have risen in value. That’s the logic – the beneficial interest in
it carries all the value of the asset in trust. This is very different than just being owed an amount
of money.
 If the dfdt is not solvent, both the secured obligation (lien) or trust situations improves the
plaintiff’s situation
When did the Trust Come Into Being?
 Remedial view of a constructive trust is that it’s a kind of gravy remedy for a trust that already
existed. The other approach is saying that the judge is creating the trust – i.e. there wasn’t a trust
all along.
o A lot of ink has been spilled on this matter, mainly out of a concern about the insolvency
o If property is held in trust, creditors cannot get at it
o So if you think the constructive trust occurs when the facts occur – then you say that has
effects on the creditor but that’s just how things work. The person had this trust interest
before the insolvency
o If you see it as the judge as sort of lifting the plaintiff out of the pool of other unsecured
creditors and putting them in a different, special, category, it raises questions about
o Judges don’t have discretion to rank creditors; they are ranked by law.
o We have no real trend from the cases. Even judges who say the trust is created by judicial
action say that it’s retroactive to when the facts happened.

SCC has given us some other signals on what has happened – how do you decide whether you
have a constructive trust? Let’s look at the framework that emerged over years and then that will
lead us into Peter v. Beblow.
April 3, 2008
Framework for Proprietary Restitution
 Illustrated in many cases, e.g. Sorochan v. Sorochan (1986)
 First  establish unjust enrichment
 Then: money award or constructive trust? (equitable lien?)
Monika Rahman
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

o A trust is not an amount of money, it’s a right in relation to certain assets
With a piece of property, the amount owed is secured with a lien on the house. E.g. even if you
sell the house instead of paying what the judgment ordered, the plaintiff will have an interest in
the property and will affect the subsequent purchaser
What are the conditions:
o Other remedies are inadequate (e.g. an order to pay money is inadequate)
o Direct link to property claimed (e.g. the very property transferred; or traceable proceeds)
 Look at the situation through your equity spectacles and see that a particular
piece of property is in fact in issue
 Traceable – e.g. you can actually trace a mistaken payment to a certain person
and so the exact amount in the account is yours – can impose a trust on
someone’s bank account
o Some cases: consideration of interests of third parties (other creditors)
 E.g. Lac Minerals – can see this as a breach of confidence case where a
constructive trust is imposed.
o The SCC hasn’t talked about this kind of case (Clarke v. Moir?) in the context of a
constructive trust – if you could get a constructive trust in that kind of case we would
have heard about it a long time ago.
 Robert Chambers has written about this
o In Soulos what they said is that what you need is an equitable obligation between parties
Peter v. Beblow, [1993] 1 SCR 980 (CBp.335)
Jurisdiction
Facts
In April 1973, the respondent asked the appellant to live with him on the Sicamous property,
purchased by the respondent in 1971. They lived together with their 6 children (from
different marriages) for 12 years. During this time the appellant acted as the wife of the
respondent and stepmother to his children. The appellant, cooked, cleaned, washed
clothes, looked after the garden, work on improvement projects on the property, raised
chickens for the family, shovelled snow, chopped wood, etc. Both contributed to the
purchase of groceries and household supplies, though the respondent contributed a greater
share. She worked part-time every year except the first year. He worked more or less fulltime throughout the relationship.
Before the appellant moved in, the resp had hired housekeepers. The TJ accepted the
applt’s testimony that the resp had asked her to live with him b/c he needed someone to
take care of the children.
During the course of the relationship, the appellant purchased and sold one home (profit:
$5500), and bought another property for $6500. Respondent was able to pay off the
mortgage on the Sicamous property in 1975 and to buy a houseboat and a van. In 1987, the
property’s assessed value of $23,200. The resp began to drink heavily and became
verbally and physically abusive to the appellant. The appellant claimed the resp was
unjustly enriched as a result of work she had performed without pay and sought a
constructive trust on the Sicamous property, or monetary damages as compensation.
Issues
The trial judge found that the respondent had been enriched, that appellant had not been
compensated, and that there was no juristic reason for the enrichment. He awarded the
appellant the Sicamous property.
Is the provision of domestic services during 12 years of cohabitation in a CML relationship
sufficient to establish the proprietary link required before the remedy of constructive trust
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can be applied to redress the UE of one of the CML spouses?
Holding
Reasoning
To what extent must the remedy of constructive trust be applied in terms of amount or
proportion?
1) Yes. 2)
Cory (+ L’H-D & Gonthier):

In a marriage or a long-term relationship, it should be taken, absent cogent evidence to
the contrary, that the enrichment of one party will result in a deprivation to the other.

The constructive trust remedy may be applied where a spouse, including common law
spouse, has contributed to the preservation, maintenance or improvement of property
but not directly to its acquisition. Respondent here conceded being enriched by
appellant's work and contributions.

A person cannot be expected to forego compensation or an interest in the property in
return for contributions made merely because that person loved the other person in the
relationship.
 There need not be any evidence of a promise to marry or to compensate.
 "Spousal services" given by one party to the other in the relationship should be
taken as being given with the expectation of compensation absent evidence to the
contrary.
 The nature and duration of the relationship, as well as the contribution made,
should be considered.
 Relief in the form of a personal judgment or property interest should adequately
reflect the fact that the unpaid services of one party to the relationship enhanced
the income earning capacity and the ability of the other to acquire assets.

In a family relationship, the contribution need not be directly linked to a specific
property in order to permit the imposition of a constructive trust.
 This remedy need not be as rigorously limited in a family situation as it is in a
commercial context because the expectations of the parties in the two situations
are very different.
 The constructive trust accords well in a family situation in that the parties to the
relationship expect to receive on dissolution of the relationship, not a fee for
services based on market value, but rather a fair share of the property or wealth
accumulated through joint effort. The grant of a constructive trust may be
inappropriate, however, where the rights of bona fide third parties would be
affected.

In a quasi marital relationship where the rights of third parties are not involved, the
choice between a monetary award and a constructive trust will be discretionary and
should be exercised flexibly.
 The decision as to which property (if there is more than one) should be made the
subject of a constructive trust is also a discretionary one. It too should be based on
common sense and a desire to achieve a fair result for both parties.
 Situations may occur where an award for a monetary sum may be the most
appropriate remedy.
 A number of considerations exist: (a) whether the plaintiff's entitlement is relatively
small compared to the value of the whole property in question; (b) whether the
defendant is able to satisfy the plaintiff's claim without a sale of the whole property
in question; (c) whether the plaintiff has a special attachment to the property in
question; (d) what hardship might be caused to the defendant if the plaintiff
obtained the rights flowing from the award of an interest in the property.

Two methods can be used to evaluate the contribution of a party in a relationship:
value received (the amount the defendant would have had to pay for the services on a
purely business basis) and value surviving (a portion of the assets actually
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accumulated by the couple on the basis of the contributions made by each).
 Although value surviving has been traditionally employed in cases of constructive
trust, the value received approach could be used to quantify the value of the
constructive trust. The remedy should be flexible.
 Nevertheless, the value surviving approach is often the preferable method. It
is usually more equitable and most closely accords with the expectation of the
parties as to the division of jointly acquired assets.
 It also avoids the difficult task of assigning a precise dollar value to domestic
services. Instead, the contributions of the parties can more accurately be
expressed as a percentage of the accumulated wealth existing at the termination of
the relationship.

Application: Here, the imposition of a constructive trust was the more appropriate
remedy because a monetary award would be impracticable since respondent was
retired and living on a War Veteran's Allowance.
McLachlin J (+ La Forest, Sopinka & Iacobucci):
 The appropriate remedy – a monetary award or the imposition of a constructive trust –
must only be decided once an unjust enrichment giving rise to restitution is established.
The constructive trust is available (1) where monetary damages are inadequate and
where there is (2) a link between the contribution that founds the action and the property
in which the constructive trust is claimed.
 In determining whether an unjust enrichment exists, policy considerations are to be
considered under the head of absence of juristic reason for the unjust enrichment.
 Services given on the voluntary assumption of the role of wife and step mother give
rise to a remedy based on unjust enrichment. Generally, a common law spouse
owes no duty at common law, in equity or by statute to perform work or services for
the other party to the relationship. Homemaking and childcare services may, in a
relationship, give rise to equitable claims against the other party.
 It is not unfair for a recipient of indirect or non financial contributions to be forced to
provide recompense for those contributions. Domestic services cannot logically be
distinguished from other contributions.
 The test as to whether there is an unjust enrichment without juristic reason is
flexible and the factors to be considered vary. No obligation arose here from the
parties' circumstances and the elements giving rise to a legal gift were not present.
 Equity finds a role where an injustice without a legal remedy exists. The courts can
use the equitable doctrine of unjust enrichment to remedy the situation even
though the legislature has chosen to exclude unmarried couples from the right to
claim an interest in the matrimonial assets on the basis of contribution to the
relationship.
 A direct link between the contribution and the property is essential for a
constructive trust to arise, whether the situation be commercial or family. Unjust
enrichment cases need not be categorized as commercial and family; no special rule
exists for family cases.
 Clarity and doctrinal integrity mandate that the basic principles governing the rights
and remedies for unjust enrichment remain the same for all cases.
 Even in a family situation, dispensing with the link between the services rendered
and the property claimed to be subject to the trust would be inconsistent with the
proprietary nature of the constructive trust.
 Insufficiency of a monetary award in a family situation, however, is usually linked to
the fact the claimant's efforts have given him or her a special link to the property
and give rise to a constructive trust.
 Although a minor or indirect contribution is insufficient to give rise to a constructive
trust, the amount of the contribution governs the extent of the constructive trust
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once the threshold amount is met.
 In assessing the value of a constructive trust, the "value survived" approach (the amount
by which the property has been improved) is preferable to the "value received" approach
(the value of the services which the claimant has rendered).
 Where the claim is for an interest in the property, the portion of the value of the
property claimed and attributable to the claimant's services must be determined.
The practical difficulty of calculating with mathematical precision the value of
particular contributions to the family property favours a "value survived" approach.
 The appellant's proper share of all the family assets – the house, houseboat, van, War
Veteran's Allowance and a lot purchased by appellant – must be calculated. Her
contribution to the family enterprise was considerable for it saved the respondent large
sums of money which were used to pay off the mortgage and to accumulate family assets.
The house reflected a fair approximation of the value of the appellant's efforts in acquiring
the family assets.
Comments
Notes: CBp.354
 Relief by way of constructive trust also arises where dfdt must surrender a gain acquired by a
wrongful act. See Soulous v. Korkontzilas, [1997] 2 SCR 217 where the SCC distinguished trusts
for UE from trusts over the profit of wrongdoing. Does it make sense to have two tests?
 Might it be the case that a trust should be imposed for a mistaken transfer, but not where a
transfer is made subject to a mutually understood basis and the basis later fails? (something to do
with intention of the parties)
Equitable Lien
 Most security interests are consensually created but equity has always contemplated that they
may arise by operation of law  a lien or charge.
 The charge allows the holder to obtain a court order for the sale of the charged asset, and the
payment of the secured obligation out of the proceeds.
o Surplus goes to the owner of the charged asset.
o Any deficiency remains an unsecured debt.
 Therefore an intermediate remedy between an obligation and a trust  a defendant is personally
obliged to make restitution but this obligation is secured by a lien or charge on some property,
usually the property transferred or its traceable proceeds.
o Is this what Cory J meant when he said, “the value received approach could...be utilized
to quantify the value of the constructive trust.”
 Conceptually a trust can’t be quantified by an amount of money, but you can have a debt of a
certain amount of money owing to you that is secured by a proprietary interest in a house. For,
e.g. a mortgage.
 This proprietary interest would survive the insolvency of the debtor, and secured creditors rank
ahead of unsecured creditors, but a security interest is not a free-standing interest like legal or
beneficial interest under a trust.
 See page 356 for examples of where a lien was imposed.
o Note in the examples that the lien might secure more of the deprivation, in cases where a
trust asset has decreased in value, or might be a more equitable solution, such as where a
trust would have allowed the beneficial owner to sell property to be repaid, or where it is
not yet determined whether there would be benefit from services rendered.
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Peter v. Beblow
 Issue: Can domestic services support a claim?  Yes
 Even if legislation for married couples only?  Yes
 Is there a difference between “family cases” and “commercial cases”?  Split
1. Minority: Family cases are different regarding CT
 First step of CT test: Inadequacy of money order: should not be rigorously
applied  Parties do not think in terms of money rewards, but rather sharing
 Direct link to property claimed: should be relaxed  Contribution “seeps”
through all assets
 Measure: could be done by value received, rather than value surviving  Would
that be more like a lien?
 Could you have a trust in the value received? Majority disagrees with
that. Might have been better if you deal with it like a lien. Secures your
right in an asset and still linked to a particular dollar amount, but it’s not
a share.
2. Majority: No difference between family cases
 In family cases need inadequacy of money awards, and direct link
 And on measurement: for a CT, use value surviving only
 But then what does the majority do on the issue of direct link?  The majority
judgement basically ends up doing what it just said you should not do and does
essentially what the minority wanted.
 Treat all family assets as a “family enterprise”, like a single asset. This is
basically what the minority says!
 Plaintiff gets house as half of the enterprise
 Is this a showing of direct link?
 Smith agrees with the minority here.
(II) THE DOMESTIC CONTEXT

Notes about Pettkus v. Becker brings us back to the question of whether these co-habitational
cases are really best understood as unjust enrichment at all
CBp.359-62
 A high proportion of UE cases in common law Canada concern division of property on
breakdown of a matrimonial or cohabitational dispute. The law in this area developed through
various cases:
o Sorochan (1986, SCC)  CT can be imposed even over property held by one party
before the relationship began if the other party contributed to its preservation,
maintenance or improvement
o Rawluk (1990, SCC)  a CT can be imposed even though there is applicable legislation
regarding property division
o Peter v. Beblow (1993, SCC)  rejected the argument that legislature was implicitly
mandating no property sharing among unmarried couples (by excluding such couples
from the legislative regime for property sharing upon marriage breakdown)
 The legislation varies across Canada. In Nova Scotia the legislation does not apply to unmarried
cohabitating opposite-sex couples and so UE will be used in this area of law.
Do different principles govern cohabitational property disputes and other kinds of disputes?
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 The majority in Peter v. Beblow said no (the minority held it should be easier to obtain a CT in
the cohabitational dispute than a commercial dispute). But consider the following:
 In Peter v. Beblow itself, the majority set out a requirement for a CT that does not exist in
commercial cases  the plaintiff must have made a substantial contribution to the asset.
o Plaintiffs who have made smaller contributions seem to get money claims.
 Also, the majority said that, like in commercial cases, a direct link must be shown between the
plaintiff’s services (or transferred asset) and the asset over which the trust is being claimed.
o However, they then say the plaintiff was entitled to a trust on the basis that she made a
contribution to the “joint family venture  is this tracing into the particular asset?
o This looks a lot like the minority judgment saying the remedy of a trust is available on
the basis that the relationship is one of love and sharing!
 In Lac Minerals, La Forest stated that a constructive trust is not the appropriate remedy for a
majority of cases and that a personal money order is usually sufficient. In cohabitational property
disputes the courts also say that CTs are exceptional, but in fact, such awards are routine and
awarded much more often than money awards.
 Also note that the concept of a “reverse constructive trust” only seems available in cohabitational
settings. This is when a court orders that the other party is a co-owner under a CT, even though
the party may not wish to be.
o This is to deal with situations where an asset has fallen in value, and the spouse who
owns the asset may face a worse result under the statute than if the asset were co-owned.
o This is what happened Rawluk.
o A reverse CT shifts a loss from one party to another, however loss shifting cannot be
justified on the basis of UE!
It is therefore strongly arguable that cohabitational cases are and should be decided on principles that are
different from those that apply to UE generally. UE, with its logic of remedying defective transfers,
cannot provide the normative underpinnings of an asset-sharing regime.
 If they were simply about reversing transfers of wealth, the focus would be on accounting for
value of benefits  a type of quantum meruit claim calculating services on an hourly or monthly
rate.
 These cases are better understood as the breakdown of intimate relationships of sharing and
should focus on the fair division of remaining assets.
 The courts would have to recognize openly that there is CML jurisdiction to adjust property rights
of parties upon break-down of a long-term intimate relationship. This is probably what we wanted
to do with Pettkus, so we used UE creatively instead of taking a huge step and declaring the
power.
 Perhaps the minority judgment in Peter v. Beblow points the way to the future for a common law
doctrine of asset sharing, with UE only used in short-term relationships.
VI. Defences
(I) INTRODUCTION
CBp.365-6
 Once the plaintiff has established the elements of a claim to reverse UE, the defendant can then
invoke any applicable defences.
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 Defences weren’t as important when recovery was difficult, but as UE law is being expanded,
defences are playing an increasingly impt role.
Notes:
 There is a defence of limitation (i.e. prescription) – requires identifying the relevant limitation
period and determining when that period starts to run
o E.g. Royal Cdn Legion Norwood (1994), plaintiff discovered in 1987 that it was
mistakenly paying taxes since 1971 and sued in 1990. Court held that the claim was
subject to a 6-year limitation period, so plaintiff could only claim for 1984 forward
o Justified on the grounds that the facts had been known to the plaintiff since 1971 even
though the law had not. ???!!!
 The obligation to make restitutio in integrum is when the plaintiff must return any benefit he
received from the defendant to avoid being unjustly enriched himself.
o Some have argued that the plaintiff’s inability to make counter-restitution is therefore a
defence to a UE claim
o Counter-view: because a monetary value can always be placed on the plaintiff’s benefit,
counter restitution can always be made
 Incapacity may vitiate the plaintiff’s intention and therefore can be a ground for restitution. Some
have argued that a defendant’s incapacitation may operate as a defence (Cowern v. Nield, 1912)
o E.g. a minor induces the plaintiff to lend her money and then can’t pay it back. Should
incapacity be a defence?
(II) CHANGE OF POSITION
Rural Municipality of Storthoaks v. Mobil Oil, [1976] 2 SCR 147 (CBp. 367)
Jurisdiction
Facts
Issues
Holding
Reasoning
Mobil sent the municipality compensatory royalty cheques. The responsible employee at the
municipality did not notify Mobil’s production accounting section, which had sent the
cheques, about Mobil’s surrender of two of its leases, as the employee should have done.
The compensatory royalty payments were not discontinued and the overpayments
amounted to $31, 163.95. Mobil requested a refund but the municipality did not pay up, and
in fact the money was expended for municipal purposes. The municipality claimed it did not
have money to pay Mobil back.
Does the Municipality have the obligation to repay Mobil?
Yes, the city has not materially changed its circumstances as a result of receiving the $.
Martland J:
 Mobil does have a claim based on mistake of fact. However the Municipality can seek to
avoid repayment if it can show it had materially changed its circumstances as a result of
the receipt of the money.
 In this case there was not such a change in circumstances. There is no evidence of any
special projects or commitments being undertaken because of the receipt of these
payments. The mere fact that the moneys were spent does not, by itself, furnish an
answer to the claim for repayment.
 The municipality cannot say that it was deprived because it could have sought another
lessee b/c evidence shows that it was aware Mobil had surrendered its right. Furthermore
even if could have sought another lessee, they probably wouldn’t have found one b/c
Mobil had found too many dry holes and it would have been worthless.
 Argument of estoppel fails because the municipality did not act to its prejudice. There is
no authority for the proposition that where money is paid under a mistake of fact the payer
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Ratio
is stopped from recovering merely because it was spent.
Money paid to another under a mistake of fact is recoverable unless estoppel is established
or if the party who was mistakenly paid had materially changed its circumstances as a result
of the payment.
Comments
Lipkin Gorman (a firm) v. Karpnale Ltd., [1991] 2 AC 548 (CBp. 370)
Jurisdiction
Facts
Issues
Holding
Reasoning
Ratio
Solicitors trying to recover money from a client, a club. A thief stole the money from the
solicitor and paid it to the club (a charity?). The club arguing that it would be unjust or unfair
to hold them liable to the solicitors.
Is there a defence of change in position in the English law? Should the club, an innocent
donee, have to return the money to the solicitors?
Yes. No.
Lord Goff of Chieveley:
 The last point on which the defendant relied to defeat the solicitors’ claim for money was
in the form of an action of money had and received. The claim is not founded upon any
wrong committed by the club.
 The recovery of money in restitution is not a matter of discretion for the court. It is made
as a matter of right, even if the underlying principle of recovery is the principle of UE.
 There is a defence of change in position to claims of restitution. However, historically
there has only been partial recognition of such a defence.
 Usually in situations of change in situation estoppel has been used; however this does
not make sense b/c estoppel requires that one party make a representation which the
other party relies upon. But in cases such as the one at hand, there has been no
representation made, and thus estoppel is not appropriate to deal with the problem.
 Bona fide change of position should be a good defence in cases such as these where an
innocent defendant’s position is so changed that he will suffer an injustice if called upon to
repay or repay in full, this injustice outweighs the injustice of denying the plaintiff
restitution.
 For example, if the plaintiff pays money to the defendant under a mistake of fact, and the
dfdt then, acting in good faith, pays the money to a charity, it is unjust to require the dfdt to
make restitution to the extent that he has so changed his position. Cites Mobil Oil in
support. We can extend this reasoning to the situation at hand (e.g. a thief donates to an
innocent donee).
 This defence is not available to someone who changed their position in bad faith (for
example, if the dfdt paid away the money with knowledge of the facts entitling the plaintiff
to restitution) or a wrongdoer. The defence should be developed on a case by case basis.
The defence of change of position is available to a person whose position has so changed
that it would be inequitable in all circumstances to require him to make restitution, or
alternatively, to make restitution in full.
Comments
Garland v. Consumers’ Gas Co. (2004), 237 DLR (4th) 385 (SCC) (CBp.373)
Jurisdiction
Facts
Issues
Holding
Reasoning
Garland sued to recover late payment penalties unlawfully charged by Consumers’ Gas.
The defendant argued that it changed its position after having received the LPP.
Is the defence of change of position available to a defendant who is a wrongdoer?
No.
Iacobucci J:
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 The rationale for change of position flows from considerations of equity.
 Since change of position is intended to prevent injustice from occurring, the whole of the
plaintiff’s and defendant’s conduct during the course of the transaction should be open to
scrutiny to determine which party has the better claim.
 Where a defendant has obtained the enrichment through some wrongdoing of his own,
he cannot then assert that it would be unjust to return the enrichment
 The respondent in this case was enriched by its own criminal conduct – i.e. the LPPs
were obtained in contravention of the Criminal Code. Therefore it cannot be unjust for the
respondent to have to return them and it should not be permitted to avail itself of the
defence.
Comments
CBp.373
 Birks  the rationale for change of position defence lies in the logic of subjective devaluation. If
the defendant has used an enrichment to purchase benefits he or she otherwise would not
ordinarily have bought, allowing the plaintiff to recover effectively forces the defendant to pay for
unwanted benefits.
 Issues to consider:
o Is it a requirement that the defendant have detrimentally relied on the enrichment?
(Storthoaks) Should it be?
o What if the enrichment is stolen by a thief? (e.g. a change of circumstance!)
 What connection is required between the enrichment and the changed
circumstances?
o Is change of position only concerned with the steps taken by the dfdt after receipt of an
enrichment, or could steps before be relevant?
o Is fault of the plaintiff or dfdt relevant? Is Garland a case of the dfdt’s fault, or is the
unlawful conduct a different issue? (I would say it’s not a different issue, because the
wrongdoing is relevant to whether this equitable remedy is available)
o Does Lipkin Gorman offer guidance on the issue of whether change of position can be
used against a claim of restitution for wrongs?
April 8, 2008
RBC Dominion Securities Inc v. Dawson (1994), 111 DLR (4th) 230 (Nfld CA) (CBp.374)
Jurisdiction
Facts
Issues
Holding
Rosemary and Stephen Dawson purchased investments through RBC, a securities broker.
When Ms. Dawson received her statement for the period ending May 1, 1990, it said she
held 15,000 shares of Eureka, when it should have said 600. The value was stated as
$6750, when it should have been $270.
Ms. Dawson talked to an RBC broker who verified the facts in the statement based on
incorrect data in RBC’s computer.
Ms. Dawson then instructed RBC to sell her shares. She received $5069.74 - $4919.74
more than it should have been. RBC requested a refund by letter on July 26, 1990, when it
learned of its error and Ms. Dawson refused.
1. In the presence of the two defences of estoppel and change of circumstances, should
one prevail, and if so, which one?
2. Have the defendant-respondents a defence which would preclude RBC from recovering
part or all of the money paid by RBC to the Dawsons under a mistake of fact?
1. Change of circumstances; 2. Yes.
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Reasoning
Cameron JA:
 The defence of estoppel is an exclusionary rule of evidence and requires the defendant
to establish:
1. That the plaintiff made a representation to the defendant intending it be acted
upon, or failed to give accurate info when he had a duty to do so.
2. That the defendant relying on the representation, acted or failed to act, in the
belief the benefit was his
3. That the defendant altered his position to his detriment
 The representor is therefore precluded entirely from asserting facts contrary to his own
representation.
 [Me: This means that plaintiff is even precluded from arguing for repayment of any
“balance” that may be owed by the defendant (e.g. the extent to which he didn’t change
his position), because he is precluded from leading any evidence on the matter.]
 The necessity of a representation was in part what led to the development of the defence
of change of position. Storthoaks recognized the existence of this defence. It is available
if the dfdt can establish he materially changed his circumstances as a result of the receipt
of the money. Justice Martland adopted the American view expressed in the
Restatement.
 The restatement states the elements of the defence of change of position as:
1. The right of a person to restitution is terminated or diminished if, after receipt of
the benefit, circumstances have so changed that it would be inequitable to
require the other to make full restitution
2. Change of circumstances might be a full or partial defence if the conduct of the
recipient was not tortious and he was no more at fault for his receipt, retention or
dealing with the subject matter than was the claimant
3. Change of circumstance is NOT a defence if (a) the conduct of the recipient in
obtaining, retaining, or dealing with the subject matter was tortious, or (b) the
change occurred after the recipient had knowledge of the facts entitling the other
to restitution and had an opportunity to make restitution
In the presence of the two defences, should one prevail, and if so, which one?
 Cameron JA holds that it is a paradox that two defences, which would bring about two
very different results, may exist to an action for recovery of money paid under mistake of
fact. Therefore, he concludes that estoppel is no longer an appropriate method of dealing
with the problem. Why?
 In Avon County Council v. Howlett (1983, English CA), the court considered whether the
defence of estoppel could operate pro tanto, and concluded it could not – it is an all or
nothing defence. (though court did hold that it would not be applied in cases where it was
unconscionable for the dfdt to retain the enrichment) The court acknowledges the
possibility of injustice because the doctrine of estoppel defeats in its entirety an action
which would otherwise lie for recovery, e.g. where the sums sought to be recovered are
huge and don’t bear any relation to the small detriment.
 Goff & Jones said that estoppel should be able to operate pro tanto, but that the
appropriate defence would be change of position (so as not to defeat the plaintiff’s claim
in its entirety)
 Maddaugh & McCamus ask to what extent estoppel should exist if change of position is
around? A defence should only be available to the extent of actual injury, they say, and
while it would be perfect if estoppel could exist pro tanto, this would be a substantial shift
in the theory underlying the doctrine. Therefore, they argue that estoppel should only
independently exist where an express collateral representation by the payor results in
detrimental reliance.
 Based on this review, Cameron JA concludes that the change of position defence is the
one which most fairly balances the equities.
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Quantum in the Present Case
 The clearest example of change of circumstance is where the defendant has spent the
money, when he would not have otherwise, and has nothing to show for it – a donation to
charity or investment in a business that failed.
 However, the defence is not limited to these situations.
 Change of circumstance is not a defence if the change occurred after the recipient had
knowledge of the facts entitling the other to restitution.
 In Storthoaks, the defence was denied because the money hadn’t been used for any
special projects – it had been placed in a general account used to pay everyday
expenses. The mere fact that the monies were spent does not, by itself, furnish an
answer to the claim for repayment.
 Ms. Dawson spent the money on a bunch of stuff. The trial judge found that:
 Only the table and chairs were purchased after the receipt of the letter from RBC.
These are not covered by the defence.
 Ms. Dawson would have bought the chesterfield anyway. This is not covered by the
defence.
 The rest of it she would not have purchased had she not received the windfall from
the sale of stocks.
 Re, the chesterfield  clearly defence of change of circumstance is not established
 The appellant argues that Ms. Dawson has been enriched by an increase in the value of
her assets and should pay an amount representing this enrichment. However, the mere
fact that she continues to benefit from the enrichment does not defeat the defence of
change of circumstances. The TJ found that she changed her standard of living when she
would not have otherwise done so (special projects). These were not everyday expenses
(distinguishing Storthoaks).
 Evidentiary burden to establish defence is on defendant. Ms. Dawson was unable to be
precise about the purchase prices. Certainly the best evidence available should be
provided; however to require a private individual, who believed she was spending her
own money because of the plaintiff’s error, to prove her expenditures as if she were
claiming damages, would be most unfair.
 Thus the TJ was not in error in accepting and giving weight to the oral evidence of the
respondents and being satisfied with reasonable approximations.
Mr. Dawson’s Quantum:
 Mr. Dawson was earning $800 a month therefore paying off his Visa bill in its entirety was
not an ordinary expense – something he would not have otherwise done.
 However, he would have had to eventually pay back this debt and the $500 debt to his
family anyway, so equitable principles would support the return of the money. The
payment of the debt cannot be said to be to Mr. Dawson’s detriment.
Comments
Reliance
 E.g. mistaken payment into my bank account, and then I make a charitable donation the next day
thinking the money in my bank account was mine, but using my credit card. One of the
interesting things about the reliance position – the subsequent dis-enrichment of the defendant
doesn’t have to be the “same” money that was received from the plaintiff. The problem is created
by the reliance, not the specific wealth – seems to be respecting the defendant’s freedom of
choice.
RBC Dominion
 There was a corporate reorganization in respect to the securities that Dawson et al. Held. Had a
few shares in some company that were worth very little. The effect of the reorganization was that
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Dawson got shares of the new corporation. They were going to get one share of the new corp for
every 5 shares of the old corp.
Someone got mixed up with the numbers, Dawon et al. got five shares for every 1 share of the old
company
Dawson called the bank and said, is this right? Bank said yes, so Dawson spent the money on a
Chesterfield and a bunch of other furniture.
Illustrates interaction with the general law of estoppel – can Dawson rely on this communication
with the bank? Is the bank estopped from taking the money back?
Case also shows that how it’s going to work out in practice depends on how strict judges are
going to be about how true everything is. It’s not easy to establish the defence without all kinds of
documentary evidence.
A person can do what they want with their own money. The point of the defence is to protect the
person who thinks they’re spending their own money.
Problem arising is the extent to which the defendant is still enriched. Imagine there is a mistaken
payment of $500, and you buy a painting. Plaintiff
P381 – the note raises the argument that Ms. Dawson should still be liable for the increment of
the value of these things.
Issue of whether the thing you bought went up in value – goes back to whether you can create a
constructive trust – transfers ownership which give right to appreciation in value. This isn’t a
complete answer, however. The right is to have the ownership transferred – if the dfdt goes
bankrupt before the transfer, you’re in trouble.
Anything she purchased after she finds out about the mistake, she’s considered to be making a
choice. Two arguments for trying to counter the defence:
o At para 35 – table and chairs were purchased after learning about the mistake
o The Chesterfield she would have purchased anyway
The thing about change of position is that, even if we conclude that there was enrichment, there
might be facts that are separate from the enrichment, but can undermine liability.
There’s a case called Phil Collins Ltd v. Davis, [2000] 3 All E.R. 808. Phil Collins goes on tour.
15 musicians. 5 of them only played on some of the tracks which meant they were not entitled to
royalties on track where they didn’t play.
o Court says that TJ found that Dawson changed her standard of living when she would not
otherwise have done so. So the argument is that I can’t actually show what I’ve done with
it.
o In Phil Collins, the case seems to suggest that the lifestyle argument only works if you
spend all the money
o Smith: Within the logic of UE, and the person says I want to spend this windfall money
on a round-the-world trip, we would say that this person was definitely enriched. Would
we say that the enrichment is the price you were willing to pay in case the K turned out to
be void? Yes. But if the money is all gone, this is a defence.
 It seems that the logic that’s involved with the defence is different from the logic
that underlies the rest of UE law.
Me: Shouldn’t there be a duty to mitigate gains? Duty to mitigate losses – you might have suffered
(parallel: relied) but you have to have tried to minimize that loss (e.g. have to pay back the enrichment as
much as possible)
Relationship with Estoppel
 This issue is also raised in RBC.
 If there is a representation made, the person can’t deny the truth of the representation that the dfdt
relied upon.
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The way the estoppel argument would be built up is that Dawson would say, I phoned up and I
asked, is this right and they said, yes this is right.
o The logic of estoppel is that RBC is NOT ALLOWED to say that they made a mistake
o The whole basis of the claim is now kept out of court (e.g. mistaken payment)
o Means that even if she’d only paid $30 of the claim, she could keep all of it
Court in RBC says that the mere fact of the mistaken payment doesn’t turn it into a representation.
That’s why it’s crucial that Dawson actually called them up. This court does the same thing that
was done in the Phil Collins case which is to just take the availability of the defence away???
So estoppel is a very blunt tool – totally kills the claim. Some people argue that this defence
shouldn’t be available at all.
Two more points:
 First Point. Up to now we’ve been talking about the reliance approach. Second version of how the
dfdt can put together a normatively compelling defence of change of position.
 Facts: A person receives a mistaken payment of $100, goes to the bank takes it out, and he is
robbed on his way home. Is there a defence?
o Did he know the payment was mistaken when he took it out?
o Would he have taken the $100 out anyway?
o Smith: What if you know that it’s a mistaken payment and then put it into a separate
account, but then the Bank goes bankrupt. This is similar to a case on p.374 in note 5. So
the disaster affected the very money that affected the money the dfdt had. This version of
the defence takes into account the defendant’s conduct.
o In the reliance version, we don’t judge them on how they behave in relation to how they
like to spend money. You at least call into question whether the disaster was your fault.
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Second Point. Would the defence work differently in relation to certain types of claims?
The vast majority of claims we see in this context are founded on the volition of the plaintiff to
enrich the defendant – I didn’t mean for you to have it.
o There are certain cases, however, where the underlying reason restitution is ordered is
some other “public policy” type factor – e.g. payment of taxes that are not due.
o This is like the Kenora case.
Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co-operative Ltd., [1994] 1 SCR
90 (CBp.381)
Jurisdiction
Facts
Issues
Holding
Reasoning
Due to an error by Kenora Hydro, the Co-op was only billed for 50% of its electricity
consumption between 1979 and 1986. Kenora sued to recover the unbilled amount.
Is Co-op liable to Kenora?
No, the Co-op has changed its position in reliance of Kenora’s billing statements.
Major J (for majority):
 Application of the principles of restitution to the case at bar can be briefly summarized:
 A benefit in the form of electricity was conferred on the Co-op at the expense of Kenora
Hydro.
 The law of restitution normally would force the Co-op to return the value of the benefit to
Kenora.
 However the Co-op has a defence of change of position  they’ve proved that it acted to
its detriment in reliance on the billing statements for its own billing and budgetary
purposes. The value of the electricity no longer existed for the purposes of restitutionary
relief.
 Kenora conceded this fact.
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Comments
 The defence of estoppel is thus an expression of what the CML has considered to be
sufficient justification to release a dfdt from liability in the pursuit of fairness. Applying
these principles, the Co-op is no longer liable to Kenora.
 The majority seems to be blurring the distinctions between estoppel and change of
position.
 Both the majority and dissent (by Iacobucci) agreed that a statutory framework
might reveal a legislative policy to exclude the availability of the defence of change
of position. E.g. the policy was that Kenora Hydro should charge, and that
customers should pay, the same amount for electricity.
 The dissent thought that the policy had been sufficiently strongly expressed and
that it should override the CML defence, and that allowing the Co-op the defence
would undercut that policy. The majority disagreed and did not think that the policy
had priority.
 In Principal Group Ltd. v. Anderson (1997, Alta CA) policies inherent in the statutory
framework of the Bankruptcy and Insolvency Act were thought to override the
defendants’ right to use change of position when a bankrupt claimed UE against
various parties who had received funds from the bankrupt.
Review
April 10, 2008
Karen and Leonard own derelict ships moored in adjacent berths. The ships are basically identical. Both
ships are to be dismantled and scrapped. Karen contracts with Mark to dismantle Karen’s ship at a cost of
$50,000; Leonard contracts with Nancy to have Leonard’s ship dismantled at a cost of $40,000. Leonard
pays Nancy $10,000 in advance. By mistake, Mark dismantles Leonard’s ship instead of Karen’s.
Advise Mark.
The instruction is to advise Mark, so the main focus is the possible claims and liabilities of Mark. The
starting point is whether he has a claim against the person for whom he did work, and Nancy inevitably
comes in.
Any fact pattern problem can be organized in the way the questions in the course were organized. If you
frame the Q as whether X is liable to Y. What we’re wondering whether Mark can frame a claim against
Leonard, so we ask, was there an enrichment, was there a deprivation, was there any kind of juristic
reason, any defence?
Enrichment:
 Leonard received both an objective benefit and subjectively values it. He requested it from
Nancy, so clearly he subjectively valued it.
 Also incontrovertible benefit seems to include factually necessary benefits. Here we don’t have to
speculate whether he would have had to do it anyway, because we saw that Leonard had a K to
dismantle the ship.
 Leonard was willing to pay $40K  helps us to understand his subjective valuation of the
enrichment.
 If you consider this under corresponding deprivation for a moment, Smith would suggest that the
Canadian way of calculating quantum would be to look at lesser of two. The people who disagree
with that might focus on the defendant’s enrichment, which would still result in $40K.
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We have to think about the relationship between Leonard and Nancy too. Could deal with Nancy
by saying ‘everything is going to turn on this, so I’m gonna look at it first’. Or could deal with it
under Enrichment.
o Prima facie she has to give the $10K back. Under statutes, we no longer have to ask the
question of whether there was a total failure of consideration – you just have to give the
money back.
o In Ontario model its discretion, but it’s capped by the amounts payable
o But even since Fibrosa, there has been an evolution in the rules of total failure of
consideration...
o Her lost profit is not really awardable under this framework b/c it’s not a break of K –
there’s no fault in the relationship between L and N. The K was frustrated.
If this was a painting case, might have Leonard suing Mark for suing the house the wrong colour
or something.
Juristic Reason:
 The mistake story was a classic one in the reasons for restitution framework
 Still an easy case in the “no juristic reason” framework.
 We do have contracts in the story but nothing between Mark and Leonard
 Juristic reason cannot be defendant’s K with someone else
The Nancy Story Continues
 Now, if N has to give back the money and you have liability for $40K, we end up with a story in
which Nancy has lost something measured against the pre-frustration situation. She’s lost profit.
N might have a claim against Mark in unjust enrichment.
 The frustration conclusion does a lot of work – this is what happens when Ks get frustrated!
Smith doesn’t see any real injustice here.
 By the logic of the original claim, Mark could not have been enriched because if the original
claim was valid, he was just being put back into his original place, e.g. his loss was being made
up.
 Even if you were to entertain an interceptive subtraction case, case wouldn’t really get off the
ground b/c of the enrichment issue
 Note that it’s not obvious on the fact that Mark was careless in destroying L’s ship...
Another Variation
 If we look at it as though the K between Leonard and Nancy is NOT frustrated and has to pay her.
In that case M might have a claim against N. Can look at it like N had an obligation to discharge a
service and M did it for her.
 The deprivation from his side would be similar to situation with L.
 Enrichment – N has $40K in her pocket and hadn’t done any work. Seems he would have a claim
against her in the same amount that he had against L.
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