Restitution McCamus

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					                              Restitution – McCamus, 2001


The Common Law Side of Restitution
The common counts of indebtedness:
   1. money had and received – writ
   2. money paid – to 3rd parties
   3. quantum meriut – value of services
   4. quantum valibal – value of goods

Moses v McFerlan – money had & received
   Moses endorsed Jacob's notes over to McFerlan (as a matter of convenience) on
      agreement that he would not be liable if the notes failed. McFerlan went against his
      word and sued Moses when he was unable to collect on the notes. Moses appealed -
      his claim (and writ) was money had and received
   Deft gets right to enforce against the person who wrote the note
   Has 2 options: sue for breach of K and for damages (expectation interest) or sue
      for restitution (money had & received)
   Plaintiff can successfully argue money had and received in cases where money had
      been conferred as a result of fraudulent misconduct, mistake, compulsion, etc. for a
      total failure of consideration.
   Defendant can then argue the equitable defences of why it would be unfair for the
      plaintiff to recover. Mansfield says that there can be concurrent liability in contract
      or quasi-contract but you can't collect twice.
   The dft, upon the circumstances of this case, is obliged by the ties of natural
      justice and equity to refund the money
   The point of restitution is to give people back their money that they lost due to
      unconscionable equitable fraud

  1. Mansfield goes against Slade's Case
  2. Writ of indebitatus assumpsit is the modern source of quasi-contract and includes
     money had and received, money paid (where paid to a third party and where the
     defendant benefits), quantum meruit (claim for the value of services rendered) and
     quantum valebat (claim for the value of goods supplied).
  3. Mansfield also deals with Dutch and Warren where there was a contract between the
     parties, yet the plaintiff desired a restitutionary remedy. In Dutch and Warren there
     was a contract for the purchase of shares. The defendant failed to deliver and the
     plaintiff wanted his money back (the value of the shares had dropped).
     Restitutionary remedy amounted to 262 pounds, whereas the contractual remedy
     (expectancy) was only 175 pounds. The court in Dutch and Warren said the plaintiff
     was limited to the contractual measure of relief - you can't do better in quasi-contract
     than you can do in contract. In Moses, Mansfield says that there can be concurrent
       liability in contract or quasi-contract but you can't collect twice. (McCamus does
       not agree with the judgment in Dutch and Warren).

Sinclair v Brougham – concept of subrogation used to allow restitution
    Building society (credit union) decided to operate as a bank (w/out a charter) –
       ultra vires business crashes, taking legitimate businesses with it (loses
       innocent/legitimate Ks $)
    Parties involved: business society, its members, depositors, legitimate creditors,
       and ultra vires creditors
    If the money had gone from the depositors to legitimate creditors – would allow
       these Ks – concept of subrogation – (society) would owe creditors money anyway
           o BUT how do you know what monies actually were used to pay the
                legitimate creditors?
    Concern is to protect the assets of its members – members were already in the
       whole for money so the payment makes them no worse off – depositors can get
       restitution and become new creditors, if necessary
    Concept of Fiduciary relations: Ds of the BS may have F’y obligation to the
       depositers – this is wrong (McCamus)! Give an equitable property interest to get
       depositors money back – doesn’t make sense
    Sinclair and Brougham gives us a sense of the worst features of English
       restitutionary doctrine.
    Subrogation = substitution of one party for another with the transfer of rights and
    Sinclair and Brougham is the high water mark in the opposition to Mansfield in
    Mansfield would argue that there is no implied contract here, but there is an implied
       obligation imposed to prevent unjust enrichment.
    The argument in Sinclair is that implied contracts are a subset of actual contracts,
       whereas in Moses Mansfield explains it as a different theory of liability with nothing
       to do with contract or contractual capacity.
    It's bizarre to say that the building society directors had a fiduciary duty to the
       depositors - wasn't their duty actually to the members?
    At common law, where a corporate director misappropriates a corporate opportunity,
       he would own the asset. As a constructive trustee of the company he could be
       ordered to give it back.
    The idea of proprietary rights to the money is a real fairy story.

Deglman v Guaranty Trust – recognition of the idea that a restitution claim is a
separate claim (ie statute of frauds does not apply)
    nephew lived with aunt – during that time she said that if he would be good to her
       and do such services as she might request, she would provide for him in her will
       and, in particular, she would leave him one of the houses; the one which they
       were not residing in
    The nephew took his aunt on automobile trips, ran errands and did the chores
     around both houses – the aunt dies intestate
   At trial, nephew recovered the house – pltf D (other next of kin) appealed to the
   Crt found that the acts of the nephew were not related to a K specifically
     connected to the premises in question – thus, as there was no agreet in writing, the
     Stat of frauds defeated the nephews claim under the oral K
          o K is relevant – to the extent that it shows both parties intended that there
             be compensation (ie that the services were not a gift – which could act as a
             defense to a claim for restitution)
   Nephew, however, recovered on a quantum meruit basis for services rendered –
     the services were not given gratuitously and the deceased derived the benefit from
     them – even though the K itself was not enforceable, to prevent an unjust
     enrichment, there was an obligation on the estate of the deceased to pay the fair
     value of those services
   Claim in restitution succeeds
   Deglman is an example of an ineffective transaction where the parties believe they
     are entering into a valid contract.
   In real estate cases there is a part-performance exception to the general rule that
     renders the contract unenforceable under the Statute of Frauds.
   We start the "restitutionary machinery" going when we discover their is an
     unenforceable contract and that someone has profited as a result.
   In Deglman the defendant might have tried the Sinclair argument - since the express
     contract is invalid under the law, the implied contract (to pay for services rendered)
     must be as well. Thus the quantum meruit argument is not valid. The SCC takes
     Mansfield's argument - we are not implying a contract, rather we imply an obligation
     at law.

St. John Tugboat – inference of a contract
     Plaintiff provided tugboat service to the defendant. The parties had an oral
       agreement, and after the agreement expired the plaintiff continued to provide the
       service. The defendant refused to pay, saying the agreement was no longer in force -
       the plaintiff argued it was extended by implication.
     Behavior that implies you agree
     Communication of acceptance can be done by saying nothing
     Objective test: what a reas person would be thinking re the conduct – whether
       accepted or not
     If one acts such that a reasonable person would believe he is consenting to the terms
       proposed by that person, and that person enters into a contract with him based on
       that belief, he will be bound as if he intended to agree to those terms. Circumstances
       give rise to an inference that the defendant accepted the terms.
     Crt: mere failure to disown responsibility to pay compensation for services
       rendered is not of itself always enough to bind the person who has had the benefit
       of the services – BUT HERE the deft chose neither to discontinue the service nor
       to complain about the charge – the dft was taken to have known that the tug was
       being kept standing by for the dfts use and that the pltf would have expected to be
       paid for the service
      Crt concluded that: the defts conduct was sufficient acceptance of the pltfs offer

   Three categories - express contracts, implied-in-fact contracts, inferred-in-law
     contracts. Inferred-in-law contracts are not contracts at all and should be considered
     as being part of the new law of restitution (more appropriately called obligations
   In Deglman the express contract was unenforceable and the implied contract could
     not exist in this case. The court found an obligation imposed-at-law to allow
     recovery and prevent unjust enrichment.
   In St. John the parties conduct allowed for an implied-in-fact contract.

Townsview Properties – profiting from wrongs
    Unjst enrichment may be divided into:
          o UE by subtraction – moneys paid $ received; or
          o UE by wrong doing – Townsview case
    Construction co encroached on the pltfs adjacent property in an attempt to save
      the deft co 7-11k
    Actual damage done to property (cost to cure) = 1k
    Pltf sue on the basis of a continuing trespass and asked for punitive/exemplary
      damages in the amount that the dft saved/made from trespassing
    Alternative: Restitutionary remedy – waiver of tort – if s/o intentionally commits
      a tort and a incurs a profit as a result, the wronged party ought to be able to collect
      that profit – ie waive the tort and sue in assumpsit (restitution) for the entire
      amount of the profit

   Townsview Properties is an example of profit by a wrongdoer.
   plaintiff should have brought a restitutionary claim since the defendant would have
     normally required a licence to use the property.
   this was a benefit conferred on the defendant at the expense of the plaintiff.
   there was no direct correlation between the profit made and the exemplary damages.
     If you want to take the profit out of tortious conduct then these damages should
     erode he whole profit.
   Peter Birks: Two kinds of unjust enrichment cases 1- by subtraction - money paid
     by mistake 2- by wrongdoing. Birks suggests that only those wrongdoing claims that
     involve a subtraction on the plaintiff's part should allow for a restitutionary remedy.
     (McCamus doesn't like this approach because the profit taking cases would simply

Pettkus v Becker – equity’s equivalent to Deglman – constructive trust as
restitutionary remedy
      Common law spouse contributed to the up keeping of the property and helped him
       to save income and maintain his bookkeeping practice, which provided the
       ‘family’ income
      Having found that an unjust enrichment existed, there was no reason not to apply
       a constructive trust to recognize B proprietary interest in the property acquired –
       the fact that the [arties were not married was no bar: the parties’ lives and
       economic well-being were fully integrated
      There was a connection btw the acquisition of the property claimed and the
       corresponding deprivation
      Bs indirect contribution of money and direct contribution of labor were clearly
       linked to the acquisition of the property
      The extent of the interest must be proportionate to the contribution – direct and
       indirect (here ez party worked continuously, unremittingly and sedulously in the
       joint effort, thus split 50/50)
      NB: best defense to the constructive trust is to show that there was no intention to
       share the property

   prior to Petkus and Becker the beneficial entitlement to matrimonial property was
     via the resulting trust - it had to be shown that the parties shared a common
     intention that property was to be shared equitably.
   Constructive trust is just a fictional trust, much like quasi-contract is a fictional
     contract. Both exist to reverse unjust enrichment.
   Trusts - a creation of the courts of equity. The trustee takes title to the assets for the
     benefit of a third party. It's not considered a contract since the third party
     beneficiaries have no contractual rights.
   Express Trust: result of certain consensual agreements - trustee agreed to the job and
     courts imply duties to protect beneficiaries, and remedies.
   Resulting Trust: even if the parties hadn't discussed the arrangement of a trust, in
     certain situations the court will assume it was there intention that a trust exist.
   Theory of obligation - when one contributes toward the purchase of an asset, they
     intended it to be jointly held, even though the title is taken at common law in the
     name of only one party.
   Petkus and Becker is the Donahue and Stevenson of restitutionary law.
   Prior to Laskin's dissent in Murdoch the linking of a constructive trust and unjust
     enrichment was unheard of.
   Dickson tried to get his views accepted in Rathwell but he was in the minority at that
   To establish a constructive trust there must be an unjust enrichment and the
     enrichment must have some causal link to the asset.
   Ontario Law Reform Commission wants to replace the constructive trust with a
     statutory scheme in family law situations that establishes forced sharing.
   Note that in Deglman the relief for services rendered is quantum meruit, whereas in
     Petkus its the constructive trust. Yet both plaintiff's had an expectation of an interest
     in the asset.
      Deglman was not an equity case. Rather it is a case of recovering the value of
       services rendered under a contract which is unenforceable. Those cases were dealt
       with in the courts of common law in quantum meruit claims and has nothing to do
       with equity or constructive trusts. Prior to the invention of the law of restitution, the
       plaintiff in Deglman could never have recovered an interest in the asset - that may
       not be the case today.
      No Juristic Reason (third branch of the unjust enrichment test): no agreement
       or contract. It looks like Dickson is saying that you can always recover when you
       transfer a benefit to the other party.

Murdoch v Murdoch – for the principle of constructive trust to succeed (from
    The facts must display an enrichment;
    A corresponding deprivation; and
    The absence of any juristic reason for the enrichment (such as a contract or
      disposition of law)

Contract Law:
Expressed contracts
Implied in fact contracts
Implied in law contracts (imposed obligations) --------------
Trust Law:                                                       ==\ the restatement of
Expressed trusts                                                 ==/ restitution & UE
Implied in fact trusts                                           =
Implied in law trusts (constructive trusts) --------------------



A) Mistake of fact
    Can one get out of a K b/c of a mistake?
Palmers categories of mistake: people can be mistaken wrt:
   1. mistaken assumption – reason for entering into K – mistake about current facts
      (ie about the thing itself that you are K’ing for)
   2. misunderstanding – (Rafles v Wickelhouse) misunderstanding as to the thing
      K’ed about
   3. mistake in integration – made a mistake in drafting – remedy, if available =
      remedy of rectification (not to be covered in course)
   4. mistake in performance – ie paid twice – independent of K in sense that
      over/mis performed, which was not required by K – no concern that want to get K
   rewritten or set aside - #4 is distinguished from the first 3 – the defendant in #4
   has no legitimate expectation to keep/make a claim for money as would in #1-3

Royal Bank v The King – (case on way out…) - $ paid where no K’ual obligation to
 no K of any kind relating to payment (would be #4 situation otherwise)
 in order for court to order recovery of payment, cant worry about expectation of K
 non K’ual mistake problem
 requirements for recovery:
               i. payment must be an honest payment
                      1. court said: yes in this case
              ii. the mistake is as between parties
                      1. ex. cashed cheque turns out to be NSF – bank asks for $
                           back via mistake btw parties – or is it?
                      2. in this case, was the mistake btw the bank and R (person
                           wrote the cheque and made mistake) and not the province?
                      3. court said: that the province adopted the action of the party
                           making the mistake, thus the mistake was btw the prov and
                           the bank – became party by holding $ all the while
                           knowing they didn’t deserve it
             iii. must be obligated to pay – must be a liability mistake – wrt fact
                  which, if true, would make me liable to make payment – ex. if
                  believed supplier didn’t pay yesterday (but did), must make you
                  liable to pay
                      1. bank argued that some money was owed to the province
                           (by R), but the bank has no obligation to pay that money
                           for or on behalf of him, thus there is no liability mistake
                      2. court said: the money was deposited into a trust a/c used
                           for payment to be made to the province (from/on behalf of
                           the bank), thus the bank was obligated – banks have an
                           internal a/c where funds are deposited into for the purpose
                           of eventually paying the funds out to the province
             iv. is there any equity in the defendant to retain the payment – can
                  you collect from them
 is there an equitable defense – argument against the bank recovering? Crt - NO
        $ was owed to the province anyway (from R – had a debt to the province)
               i. but bank has no obligation to pay that debt
        estoppel issue: estoppel by representation – if you represent something to
          be the truth and another party relies on that statement (to their detriment),
          you are precluded from denying (the truth of) that statement, any time
               i. but here, the bank did not say anything to the province – so
                  reliance could not be related to the representation (or lack thereof)
An Honest Mistake
Kelly v Solari – carelessness (negligence) is irrelevant in determining whether
restitution is possible via mistake of fact
     Widow forgot that her husband’s life insurance policy lapsed and submitted a
        claim and was paid by the ins co under mistake of fact
     four elements were satisfied, but court determined that the mistake made by the
        ins co was not only an honest one, but a careless one
     court still allows recovery (by ins co): negligence is not a reason for restricting
        recovery for a (careless) mistake of fact - and letting other party become
        ‘richer’ – would lead to UE (policy reason)
     if actually knew all the facts and erred wrt law (whether was obligated to pay the
        $/not), then there would be no recovery – no recovery for mistake of law
     if money was paid without concern/regardless of the truth of the fact, then there
        would be no recovery – no recovery for reckless mistake of fact
     Carelessness and forgetfulness will not preclude recovery. You can be mistaken,
        you can be forgetful, & you be careless - but if you make the payment intentionally
        & recklessly, not caring what the facts are and intending the person to have the
        money in any event then you are precluded from recovering (e.g., you can't recover a

Clark v Eckroyd – negligence is relevant where there is a duty (to take care) owed
    Defendants shipped freight to the plaintiffs, but misaddressed the package - the
       carrier placed them into storage. The plaintiff paid the invoice. Carrier eventually
       sold the goods to pay the storage charges. Plaintiff eventually realized the goods
       were never received and sued.
    all parties here were careless – dft try to argue negligent estoppel (cant sue under
       negligence if you were negligent yourself)
    careless mislabeling of goods lead to loss
    plaintiff’s negligence is relevant (contrary to Kelly) if it gives rise to estoppel and
       there is detrimental reliance (by the dft on the plaintiffs actions/negligence – ie if
       dft suffers a loss) – BUT need to show that the pltf had a duty of care (not to be
       careless) owed to the defendant
    court held: dft (seller) started the whole thing (by mislabeling the goods), thus
       should swallow the loss – estoppel not an issue
    They qualified Kelly by adding that the receiver must not be placed in a worse
       position than if the money was not paid. The defendant's argument was that if the
       money had not been received they would have verified delivery with the carrier and
       recovered the goods - thus payment led to a detrimental change in position on the
       part of the shipper - the court rejected this saying that the shipper's carelessness led
       to the mistake in the first place.
    aside: if the pltf (purchaser) was careful but the dft (seller) was negligent (ie Kelly
       case) would the seller be able to retain the $ - negligence would become relevant
       if the court was to find that the seller had a duty to take care (which probably
       would) and thus be unable to retain the $
Between Parties
Was the mistake of such a nature that the $/property never passed to the person and thus
the person effectively stole the property?

Chambers v Miller – the manner of mistake must be between the immediate parties
    pltf presented a cheque drawn on the dft bank and was paid – while counting $ at
     the counter, the teller discovered he had erroneously looked at the wrong a/c and
     that there was NSF in the a/c actually drawn on
    teller had the pltf seized and the $ taken from him without consent
    dft (bank) argued self-help was permissible since money had and received would
     have been lain against the pltf to recover the mistaken payment (pltf sued for
     assault and false imprisonment – argued bank had no right)
    court said that the mistake was not between the client and the bank, but rather the
     bank and the account holder (thus no claim for money had and received)
    A claim in money had and received was not found to lie here. The mistake was
     exclusively that of the bank and not between the parties. The teller's mistake did
     not prevent the passage of property to the plaintiff, and so the bank officials had no
     right to imprison the plaintiff.
    The real issue in Chambers and Miller is whether the bank can say - That's our
     money! Give it back!
    This case seems to confuse the proprietary interest in money had and received with
     civil liability for money paid under a mistake.
    In money had a received cases there is an obligation to return an equal amount of
     currency to the plaintiff, but not necessarily the same bills. This is because the
     property in the original bills passes to the receiver.
    Is Chambers and Miller really a property case? Is this a situation where the mistake
     creates a situation where property was never meant to pass to the plaintiff?
    Chambers and Miller confuses a property question with a question regarding
     recovery of money had and received. The result has been that courts now
     requires the complainant to demonstrate that the mistake is between the two
     parties to the transaction.

Confederation Life Assoc v Merchants Bank – exception to the rule in Chambers
    pltf overpaid contractor on an interim advance under a mtg on his building in the
      course of its construction
    the contractors paid the monies into their account with the dft bank – the bank
      then applied a portion of the monies to the contractors overdraft (debt), but
      suspecting that an error had been made, place the balance of the monies into a
      special account to await further developments
    contractor went bankrupt, and the pltf sued the bank for the overpayment
    court held that the plaintiff could recover (despite the mistake not having been
      made between the immediate parties – it was made between the pltf and the
      contractor – stems from Royal Bank case – bank adopted the action of the party
      making the mistake
A Supposed Obligation to Pay
The obligation to pay must be legally equitable or moral, thus a moral obligation to pay is
good enough (Aiken v Short: In order to entitle a person to recover back money paid under
a mistake of fact, the mistake must be as to a fact which, if true, would make the person
liable to pay the money; not where, if true, it would merely make it desirable that he should
pay the money.) – in order for money to be given back, must be a mistaken fact which if
true would make you liable for payment (excludes gifts) (Larner v London:
     The money were paid under a mistake of fact and should be repaid to the LCC
         unless it led the appellant to detrimentally change his position for the worse. The
         appellant's argument that he had changed his position for the worse by spending the
         money on living expenses was no defence, unless there was some fault on the part
         of the payer. It was the appellant's misrepresentation, which led to the mistake, and
         he could not avoid liability merely because he spent the money. Although the LCC
         was not legally obligated to make the payments, they were under the mistaken belief
         that they were morally obligated to make the payments.

Lowe v Wells Fargo – where there is no legal obligation to pay, may get recovery if
not to allow such would be immoral
    son, employed by the dft co, was accused of losing a package entrusted to his care
    his father paid the loss to the dft co to preserve the family honor and name
    upon discovery that the son was entirely blameless, the father sued for recovery
        under mistake
    court held that although the father was not obligated to pay, recovery should be
        granted - b/c to disallow such would be morally wrong – payment made in
        reliance that the dft accusation was true – would lead to UE

Lady Hood of Avalon v MacKinnon – if forget and act under assumption = mistake
    pltf made mistake about gift - Lady Hood had a trust fund apportioned to her two
      children. She gave each child a share, forgetting that her husband had already given
      one child a share, thus exceeding trust funds. She brought a claim in equity to have
      the latter gift rescinded as a mistake of fact. (At common law this would have been a
      money had and received claim.)
    court gives her relief
    Relief should be granted in equity by a recision of the deed of settlement. The payee
      was in possession of money which he ought not be allowed to retain. There was no
      equity in the defendant to retain the payment.
    equity – rescission on a deed – since transferred property via deed, ask for
      rescission of the deed
    can get rescission even though transfer was intended as a gift
    In Dominion Bank and Union Bank (1898 SCC) Duff said that the defendant may
      escape repayment of money received if "there is something in the conduct of the
      payer or the transaction itself or its legal incidents making it inequitable that
      the defendant should be compelled to restore what he has received".
      Money's paid voluntarily or as a gift under a mistake of fact are recoverable in
       Canadian law and that this constitutes a further reason for rejecting the suggestion
       that recovery of money's paid under a mistake is only available when the mistake
       pertains to a fact which, if true, would render the plaintiff liable to the defendant to
       make the payment.

No Equity in the Defendant to Retain Payment
Krebs v World Finance – no restitution where there is a K and consideration has
been paid
    stolen car is purchased from thief (by K) – before sale, thief uses the car as a
       security interest – puts lien against it
    K agreed to buy the car by (voluntarily) paying off the debt to the financier
       (removing the lien)
    The true owner finally locates the car and takes the car back – K is out of his $
       paid to the financier and tries to get his money back by arguing mistake of fact
    The defendant (financier) argue that it wasn’t his mistake
    K argues that he got no consideration for the payment – this argument did not
       work b/c the financier never promised that the mortgage/lien was a valid one –
       they promised that they would discharge the car from the charge in exchange for
       the payment, which they did
    Krebb mistakenly believed that the finance company had an enforceable charge on
       the car, but even if that were true, he would have been under no obligation to pay the
       finance company any money -he could have bought the car subject to the lien. The
       court rejected the trial judge's finding of a failure of consideration as it had no
       application to a voluntary payment Krebb made to the finance company.
    There is a mistaken fact as to who is the real owner of the car, but the contact
       between the financier and K is valid
           o This is not a Kelly v Solari situation, in which there was no contract/deed
                – here there is a contractual obligation

   There was no liability for Krebb to pay off the mortgage - the court say it as a
     voluntary payment.
   The trial judge said there was a failure of consideration, but is this true? The finance
     company did, after all, release the (worthless) chattel mortgage.
   The real problem in this case is the contract issue of whether the agreement entered
     into by the parties is vitiated by the mistake as to ownership. Thoughtful analysis of
     that question was obscured by reliance on the liability mistake requirement.

RE Jones v Waring & Gillow – no recovery where payment leads to detrimental
reliance – estoppel by representation
     Bodenham was a rogue. Waring sold goods to Bodenham for $5,000 down and
       subsequent monthly payments. Bodenham's cheque bounced and Waring
       repossessed the goods. Bodenham went to Jones and told them he was looking for
       distributors for a new car manufacturer he represented. He sold them the fictitious
     rights for $5,000 which he informed them to forward to Waring, the supposed
     backer of the project. He then used the $5,000 to get his furniture back. When the
     plot was uncovered, Waring once again repossessed the goods and offered Jones the
     $5,000 back, less repossession and depreciation charges. Jones sued to recover the
     entire $5,000. Waring argued estoppel, claiming detrimental reliance by giving back
     the furniture on receipt of the cheque.
   There has to be a representation made – the mere making of a monetary payment
     is not enough to allow estoppel by representation
   The mere making of a payment does not in itself constitute a representation that the
     recipient is entitled to the amount in question unless the payer can be said to be
     under an obligation to inform the payee of the true state of his account. Jones made
     no representations to Waring, and accordingly the plea of estoppel must fail.
   If such representation were implied, then all mistake of payments would have the
     effect of denying the representor the ability to change the facts, which would
     preclude recovery
   Waring had not relied upon any representation made by Jones and their change in
     position was brought about by Bodenham, not Jones. The cheque alone was not
     sufficient in inducing Waring to believe Jones was indebted to them.
   in general, estoppel is a complete defence. But what about where one's reliance is
     less than the amount lost? In Jones the defendant proposes to limit his defence to his
     actual loss - but the doctrine does not demand this.
   Why not allow estoppel to work only to the extent that you have relied on the
     misrepresentation? This would be a sensible limit to the doctrine, but English judges
     still think it is a full defence.
   estoppel by representation is still around - but arguably it shouldn't be a full defence.
   Arguments for a full defence? If we say that detrimental reliance is a partial
     defence, then you place a burden on the recipient to keep track of everything they
     did with the mistaken payment.

The Doctrine of Change in Position: US Doctrine (which gets incorporated in CAD
law in Barkclays)
    Section 142 of the Restatement of the Law of Restitution states:
                  (a) Right of restitution is terminated or diminished if, after the
                        receipt of the benefit, circumstances have so changed that it
                        would be inequitable to require the other to make full
                         Defense to the extent that change in circumstance caused
                            the detriment
                         Differs from estoppel in that estoppel requires a
                            representation (this doesn’t) & the right to restitution can
                            be diminished (ie where payment > detrimental reliance)
                  (b) Change of circumstances may be a defense or a partial defense
                        if the conduct was not tortuous and he was no more at fault for
                           his receipt, retention or dealing with the subject matter than
                           was the claimant.

Municipality of Storthoaks v Mobil – use of the change in position doctrine to bar
    Mobil had entered into several lease agreements with the municipality enabling them
       to do exploratory drilling for oil. The agreements stipulated they pay royalties for
       any oil found and that they could terminate the leases at any time. Mobil abandoned
       a particular well, but the accounting department was not informed. As a result,
       Mobil mistakenly continued to pay Storthoaks ($38,000). Mobil sought a refund
       from Storthoaks - Storthoaks argued the over-payments were made voluntarily with
       full knowledge of the facts and that it would be inequitable to require them to repay
       the money.Court adopts the US restatement (cited above) – change in position
    Municipality has a problem with this b/c:
            o They would have to show that some differ course of conduct followed the
               overpayment (ie that the municipality spent more money – that $ - due to
               their belief that they were entitled to the overpayment)
            o They would have to show this change in position was made before gaining
               knowledge of the overpayment – that is, that they were in fact overpaid
    Knowledge of one agent in a company will not be imputed to another agent who was
       responsible for the overpayment.
    If the municipality is to avoid repayment they must establish that they materially
       changed their circumstances as a result of the receipt of the money - ordinary
       expenditures will not constitute such a change. For the defence of change of
       position to be successful, the municipality must show that they undertook special
       projects in reliance of the moneys and this was not the case.
    If the municipality wishes to estop Mobil from seeking repayment, they must show
       that they acted to their prejudice on representations made by Mobil. Since they are
       unable to do so they are obligated to repay.

   Canadian and US courts only allow the defendant to raise the change of position
     defence when something different is done in reliance of the payment - defendant
     must show they would never have carried out certain activities but for the mistaken
   change of position differs from estoppel in that:
                          1. no representation is required
                          2. it is only a partial defence to the extent that one changed their
   Note that in this case the taxpayers repaying the money may not be the same ones
     would got it in the first place.

A Restatement of the Law of Restitution wrt Mistake of Fact
Barclays Bank v Simms - Bank misses stop payment and pays out on the cheque –
monies paid under mistake of fact – Test for recovery:
1. Did the mistake cause the payment? (Kelly v Solari - Widow forgot that her
husband’s life insurance policy lapsed and submitted a claim and was paid by the ins co
under mistake of fact)
     Carelessness and forgetfulness will not preclude recovery. You can be mistaken,
        you can be forgetful, & you be careless - but if you make the payment intentionally
        & recklessly, not caring what the facts are and intending the person to have the
        money in any event then you are precluded from recovering (e.g., you can't recover a
     Where there is a K, in order to recover, must get rid of the K (it must be invalid)
2. If yes, recoverable subject to the following defenses:
(a) Recovery is barred where there was intent that person have money whether the fact be
true or false (waiver rule);
     Or deemed in law to have been intended – not very helpful – comes from
        ‘gaming’ cases which barred ‘bookies’ from coming to court to get recovery for
(b) Recovery is barred where the payment is made for good consideration;
     Can still ask: should the K be set aside, despite having received good
     Krebs v World of Finance: stolen car/lien
(c) Recovery is barred where the defendant has suffered a change in position
     Adoption of the US Restatement of the Law of Restitution, s. 142 (1) & (2)
     Royal Bank v The King; Clark v Eckroyd:(2) the dft was at fault b/c mislabeled
        the goods – if at fault > than the pltf, cant keep the $, must hand it over – in the
        case where both are equally at fault (or too hard to tell) courts will determine the
        initiator to be at fault, as in this case, pltf started it, thus cannot recover.
     Larner v London: (1) couldn’t show that they had in fact changed their position –
        didn’t alter their spending due to the overpayment & (2) they were also at fault
     Lady Hood v MacKinnon; RE Jones v Waring: partial defense didn’t work in this
        case, but should have
(d) Recovery is barred where recovery would go against public policy.

   Goff looks at all the earlier authorities and demolishes the old doctrine. He
     demolished mistake between the parties and offers a new model: Did the mistake
     cause the payment in question? If so, there is a prima facie right to recovery.
   Was there a cause and effect relationship between the mistake and the payment?
   How would the prior cases be decided under the restatement?

       Royal Bank and the King       Originally the bank failed under the four-part test
       enunciated in that case.
       1.     honest mistake?                       yes
       2.     between parties?                      yes
       3.     liability mistake?            yes
       4.     Equity in the defendant?      no
       Under Barclays Bank the result could be different. Firstly, the mistake clearly
       caused the payment, thus there would be prime facie recovery. Now the exceptions:
Mistake caused payment?                                      yes
1.      intent to have money in all events?         no
2.      payment made for good consideration?        no
3.      defendant changed position?                 yes - only made an $80 claim
        on a $1000 bond - change in position amounted to $920.
4.      public policy argument?                              no
Therefore, the bank could argue that they should recover at least $80, since change
in position is only a partial defence.

Kelly and Solari        Insurance company was able to force the widow to return the
benefits. Would Goff agree?
Mistake caused payment?                                      yes
1.      intent to have money in all events?         no
2.      payment made for good consideration?        no
3.      defendant changed position?                 no
4.      public policy argument?                              no?
Therefore the insurance company should recover.

Clarke and Eckroyd Plaintiff pays invoice for goods never received and court allows
recovery. Would Goff agree?
Mistake caused payment?                                      yes
1.     intent to have money in all events?           no
2.     payment made for good consideration?          no
3.     defendant changed position?                   yes, but the payee caused the
       problem by mislabelling the package. Most agree that if your own
       negligence causes your change in position than you will be precluded from
       using the change in position defence.
4.     public policy argument?                               no
Therefore the payer should recover.

Larner v. London County Council City makes extra payments for soldier who fails
to inform them of his true rate of pay. Court allowed recovery. Would Goff agree?
Mistake caused payment?                                       yes
1.      intent to have money in all events?            no
2.      payment made for good consideration?           no
3.      defendant changed position?                    yes, but the payee caused the
        problem by failing to inform the council of his true rate of pay. Most agree
        that if your own negligence causes your change in position than you will be
        precluded from using the change in position defence. As well, ordinary
        expenses will not constitute a change in position.
4.      public policy argument?                               no
       Storthoaks and Mobil Oil Court allows Oil company to recover a mistaken payment
       made to the municipality. Would Goff agree?
       Mistake caused payment?                                   yes
       1.      intent to have money in all events?       no
       2.      payment made for good consideration?      no
       3.      defendant changed position?               no, ordinary expenses will not
               constitute a change in position.
       4.      public policy argument?                           no
       The oil company recovers.

       Jones v. Waring The furniture case. Money was mistakenly paid to furniture
       company on behalf of rogue. Court allowed recovery on the grounds that there was
       no liability mistake - would Goff agree?
       Mistake caused payment?                                          yes
       1.      intent to have money in all events?              no
       2.      payment made for good consideration?             no
       3.      defendant changed position?                      Yes - it incurred expenses to
               repossess the furniture a second time and the furniture also depreciated as a
       4.      public policy argument?                                  no
       Therefore, a partial defence. Liability mistake is irrelevant in Goff's analysis.

Problems with Cheques –Barclays Bank v Simms
In cases involving negotiable instruments, the debt is discharged only when there is an
authorized payment.
     Stop Payments:
            o Bank cannot debit the account (if & when the bank does so, they are in
                breach of K)
            o The payment is not authorized
            o Debt is not discharged b/c the payment is not authorized, thus can get
     NSFs:
            o Bank can debit the account
            o The payment is authorized b/c when a cheque is NSF there is an implied
                request for credit
            o Debt is discharged, thus no recovery
     Problem – someone will be unjustly enriched: if there is a debt owed, the debtor
        gets a free ride; if no debt is owed then the recipient gets unjustly enriched by
        receiving $ not owed
     Solution – in the US via UCC – courts use subrogation to make all 3 parties party
        to the same lawsuit – give money back to avoid unjust enrichment
     CAD courts achieve the same effect – by allowing the bank to debit the a/c
        where there is an obligation owed to the recipient – if not owed, bank will not be
     able to debit the a/c – similar to US solution which decreases the number of
     lawsuits in order to recover the debt
   In the old Canadian cases the view with countermanded cheques was that there was
     no recovery as the mistake was not between the parties. This is not the case in
     Goff's analysis.
   The US Uniform Commercial Code entitles the bank to subrogate itself to the
     position of the parties to decide who owes who and recover the money where
   account holder owes the merchant - bank debits the account holder
   account holder doesn't owe the merchant - bank recovers from the merchant
   Canadian cases seem consistent with US position, although this has not been
     explicitly expressed.
   Three considerations which might defeat recovery:
         1. intention to pay in any event
         2. payment made for good consideration (Krebb and World Finance)

Does Change in Position replace Estoppel?
    Where only use/lose part of the money, you (as the dft) would want to argue
      estoppel (in representation) as it would operate as a complete defense – keep all
      the money (need to have both a clear rep and detrimental reliance); BUT
    Change in position gives the remedy of a partial defense (Mobil case), which
      imposes a burden on the deft to show detrimental reliance (no rep required)

B) Mistake of Law – clarifies Kelly v Solari and the recovery of payments
to the Crown
The General Rule
Bilbie v Lumley and Others - Cat recover if you knew all the facts – every man is
taken to know the law
     Claim against insurance company – paid out after making mistake that they
        shouldn’t have made (was negligent)
     They didn’t realize that they had a defense against payment under the policy
     They were aware of all the facts (or at least should have been)
     Similar to Kelly v Solari BUT no recovery here
     Why: because
            o there was no K in Kelly, no relationship between the parties, but there was
               a K here – the mistake was re a clause in the K that was a defense to
               payment (not so convincing an argument);
            o it would be unfair/unjust to allow them to recover on a payment on an
               honest claim that was made after there was ample time to inquire and such
               inquiry had actually taken place (stronger argument – see restatement)
     ignorance of the law is no excuse is a criminal doctrine applied out of context here.
     Ellenborough asked whether the plaintiff's counsel knew of any case "where if a
        party paid money to another voluntarily with full knowledge of all the facts of the
       case he could recover it back again on account of his ignorance?" The plaintiff's
       counsel didn't know of any so Lord Ellenborough refused recovery.
      Compare Bilbie and Lumley with Kelly and Solari - facts are very similar. In Bilbie
       the letter is in fact disclosed and all of the material is put before the insurer at the
       time the payment is made out. In Kelly the insurer failed to note the policy lapsed.
      Bilbie and Lumley is nonsense that caused 200 years of stupidity.
      We're told Bilbie and Lumley is a mistake of law case - you knew all the facts but
       were mistaken about the law, whereas Kelly v. Solari is a mistake of fact case.
      It is not clear in Bilbie that all the facts are known.
      The answer might be that in one case the error is of a kind we might be prepared to
       saddle the insurance company with. They should take certain things into account
       when the demand is made. There is a desire for finality when payments are made.
       On the other hand Kelly may merely be a clerical error (weak reasoning that tries to
       distinguish to similar cases)
      Mistakes relating to foreign laws are considered mistakes of fact not captured by
       Bilbie and Lumley.

O’Grady v City of Toronto – Money paid out under a mistake of law cannot, in any
case, be recovered – it is the one permanent exception to the right of relief for mistake
    O paid taxes on property that the UofT leased
    After making out the leases, the University Act was passed which precluded the
       University property from being taxed
    Nether the plaintiff nor the defendant had knowledge of the change in law and the
       plaintiff continued to pay taxes on the assumption that hey were liable and due (as
       they were before)
    No recovery b/c: Payment made voluntarily - Money voluntarily paid to a corp.
       under a claim of right, without fraud or imposition, for an illegal tax, license or
       fine, cant without statutory aid be recovered back from the corp., either at law or
       at equity, even though such tax, license or fine could not have been legally
       demanded or enforced.
           o Exception to the exception – where the ignorance of the law is not of the
               general or ordinary law of the country but of some private right or jus &
               where it is inequitable for the party who received the money to retain it (ie
               cases of fraud on the part of the dft or where he has actively mislead the
               pltf and in cases where fid’y relns btw parties)
 another example of the general rule - a rule saddled with exceptions so take O'Grady
   with a truck-load of salt.

Distinguishing Between Mistakes of Law and Fact
Eaglesfield v Marquis: When you state the facts and state a conclusion of law so as to
distinguish between facts and law, the man who knows the facts is taken to know the law;
BUT when you state that as a fact which no doubt involves (as most facts do) a
conclusion of law, that is still a statement of fact and not a statement of law. Ex. “women
is credit worthy b/c she married rich” – the fact that the marriage is valid is a conclusion
of law – but if the necessary facts required to determine whether that conclusion is valid
is not given, then on those words, the representation that she is rich is a statement of fact
and not a statement of law.
 In other words: Mistakes with respect to one's personal status does not involve a
    question of law, but rather a question of fact. When you state a fact which no doubt
    involves a conclusion of law, that is still a statement of fact and not a statement of law.
 Canadian courts have held that mistakes concerning the validity of a marriage
    constitutes mistake of fact and not mistake of law. Clelland and Clelland (1944).
 If you can argue that a mistake of law is really a mistake of fact, then you can slip past
    the Bilbie and Lumley rule.

Macfarlane and Wellington Hotel v Kennedy –
   Plaintiff's lease required here to pay property taxes. She mistakenly paid the
      defendant landlord's taxes as well.
   If a person pay money under a mistake as to the law, or as to the legal effect of the
      circumstances under which it is pad, but with full knowledge of the facts, he
      cannot, at common law, recover it back
   The court argued that the plaintiff was aware of all the facts and had misconstrued
      the contract. Thus this was a mistake of law for which there was no recovery.
   If a tenant pay his LL’s (landlord) property tax, and afterwards pay his rent in full,
      without claiming, as he might have done, any deduction on account of the
      payments he has made, it has been held he cant afterwards recover from his LL
      the moneys so paid
   Means of knowledge is not necessarily knowledge BUT the possession of the
      means of knowledge by the party who paid the money can be regarded only as
      affording a strong observation to the jury to induce them to believe that he had
      actual knowledge of the circumstances, though there is no conclusive rule of law
      that the means of knowledge = knowledge itself
   Accordingly, where it appears that money has been paid by the pltf to the deft,
      under a bona fide forgetfulness of facts which disentitle the latter to receive it,
      such money may be recovered back in an action for money had & received
   Typical example of a large body of cases, which apply the mistake of law doctrine to
      the misinterpretation of one's contractual obligations.
   This is not your typical mistaken payments case. The landlord's obligation to pay
      her municipal taxes were discharged. This is a case of money had and received (an
      unjust enrichment)
   The whole problem with this case is that people don't always realize who has
      benefited and at whose expense.

(Porky) Jacobs Ent. V City of Regina – mistake as to existence of law is a mistaken
fact – recovery: exception to the general rule!
     Licensing by-law taxed wrestling via a licensing fee, originally per annum
    Was subject to many amendments, most of which specified the change to be per-
     day, except for the last amendment, which omitted the words per-day
   saving provision in the act that stated that where otherwise specified, all fees are
   Porky paid the fees as required by the license inspector on a per-day basis, rather
     than a per-annum basis as required by statute
   Porky makes claim for the difference in what he paid and what was due:
         o Under a mutual mistake of fact; &
         o Under compulsion – possible exception to no recovery wrt mistake of law
   Was the mistake of fact or law: mistake of fact – the by-laws never purported to
     stipulate for a per-day fee. There was no mistake either of fact or of law in
     respect of what the by-laws actually said – the mutual mistake of fact here was as
     to the existence of one or more by-laws calling for a license fee on a per-day
     basis. Both the license inspector and Porky believed that such by-laws existed in
     fact but they did not actually exist at all, so the mistake is one as to the fact of
     the existence of the by-laws and not one of interpretation of the by-laws that
     in any way purported to stipulate for a per-day fee.
   Was there compulsion: the payments were made under compulsion of urgent and
     pressing necessity and not voluntary – allow recovery
   a crazy case that shows the tricks the court will do to get past Bilbie and Lumley.

Exceptions to the Rule in Equity
Eadie v Township of Brantford – exception to mistake of law doctrine where
compulsion is a factor
    The plaintiff was ill and needed to sell his property. A severance property tax was
       assessed under what was later determined to be an ultra-vires by-law. The plaintiff
       sought recovery for money paid.
    Action for repayment of monies paid under a mistake of law
    Distinguished from Porky case in that dealt with mistake of fact, BUT similar to
       case in that it dealt with a matter of payment under urgent and pressing
       necessity – the by-law did exist which purported to permit the payment of
       such fee as was demanded by the respondent (Brantford) but that by-law was
       subsequently sound illegal and quashed
    Exception to mistake of law doctrine: money paid to such person as a court
       officer under a mistake of law may be recovered – money paid to Brantford on the
       insistence of its Clerk-treasurer, whose position was equated to that of a highly-
       placed civil servant in a government dept or an officer of the court, and it was
       highly inequitable (if not dishonest) for Brantford to insist on the retention –
       should be repaid
    Inequality btw parties – ‘practical compulsion’ – the Crown is and should
       always be the stronger party – they make an enforce the laws
    plaintiff was entitled to have returned to him the money paid under compulsion and
       in mutual mistake of law. A practical compulsion was alone necessary.
    This weakens the doctrine of mistake of law
    Problem in analysis: if compelled, then must have understood that was not
     obligated to make the payment - implying that a mistake re such payment was
     actually not made
   Policy Consideration: inequality in parties – compulsion – protect those who are
     weak, old and sick – so court will let the compulsion exception slide
   the duress element of this case was the basis for recovery
   Eadie also gave birth to the idea that recovery may be allowed when it is the
     defendant who has the principle burden of understanding and interpreting the law -
     Dickson agrees with this in Nepean and Ontario Hydro.
   The duress was also accepted in George (Porky) Jacobs.
   Maybe we can extend the Ex-Parte James line of authority to cover municipalities or
     public authorities generally.
   It is arguable that where a claim is made against a public authority, relief will be
     granted even in absence of an "urgent and pressing necessity". In Eadie, Spence was
     of the opinion that the requirement is not that stringent and it would be sufficient to
     establish that the plaintiff was under a "practical compulsion" to proceed.
   The compulsion need not result from the threatened action of the authority, but can
     result from the personal circumstances of the plaintiff, which makes it desirable to
     proceed with the payment yet undesirable to litigate.

Keddy v Power – expanding the grounds for ‘practical compulsion’
    Mistaken belief that there was no will
    Gave the defendants half of the estate on the mutual belief that there was no will
      and that the were, therefore, entitled to it
    Transferred deed to property
    The court has the power to relieve against mistakes in law as well as against
      mistakes in fact if there is any equitable ground which makes it (under the
      particular facts of the case) inequitable that the party who received the money
      should retain it
    Common mistakes in this case:
          (1) There was no will that could be found; &
          (2) That the defts were entitled to a half interest in the estate
    (1) was a mistake of pure fact and (2) is one which whether a mistake of pure fact
      or not was of a character impelling a court of equity to grant relief
    dfts lwyer threatened pltf that would take whatever legal proceedings necessary to
      compel the pltf to administer the estate – court deemed this to be compulsion
    for the dfts to retain such money paid to them by the pltf under either mistake
      would be against conscience – highly inequitable

A Restatement?
    The most attractive basis on which to fashion a restatement is a recognition of the
      fact that the central reason for denying money paid under a mistake of law is the
       same as that for payments made under a mistake of fact and that no useful purpose is
       served by distinguishing the two situations.
      According to Dickson's dissent in Nepean and Laforest decision in Air Canada the
       position in Canada is arguably that the mistake of law doctrine no longer exists, but
       is absorbed under the mistake of fact doctrine - if the mistake caused the payment
       and none of the usual defences are available.

Hydro-Electric Commission of Napean v Ontario Hydro – restatement of the doctrine
of mistake of law
     Where people settle an honest claim by making a payment, they are precluded
       from recovering that payment on the basis that it was made under a mistake of
     distinction between Kelly v Solari & Bilbie cases: where the pltf has an ample
       opportunity to investigate the legitimacy of the claim, any subsequent payment
       made to close the claim cannot be recovered
     is there a real need for a separate doctrine of mistake of law?
           o accommodation of the restatement in Barclays – no real need to have
               separate doctrine of mistake of law – uses Barclays in both cases
           o distinction between mistake of law doctrine and UE doctrine no longer
               makes sense – there is an UE in each case (whether mistake of fact or law)
               – no real need to have separate doctrine of mistake of law – use UE
               doctrine in all cases
     Defenses to recovery (argued by OH):
           (1) change in position (Mobil test)- where the defendant can show that he
               has changed his position on reliance of the mistaken payment to his
               detriment – OH argued that they did not receive a benefit – they passed on
               the & right away – defense did not work here b/c they could not show that
               they gave the money away b/c they had it – they decided to give the
               money away before they decided to collect it – change in position defense
               will only apply where the actual payment has a causal role
           (2) scrambled eggs defense – article 18 of the (US) restatement of restitution
               wrt recovery of tax payments states that a court may consider whether
               restitution would disrupt fiscal administration or result in undue public
               hardship & Illustration 19 prevents recovery where the public would be
               burdened with the obligation of the repayment – Dixon rejects this
               defense – OH argued that they were unable to repay the payment (b/c they
               had already given it away to other municipalities) and that an order of
               such would require them to increase rates which would be to the detriment
               of the ratepayers – would be unfair to order recovery – Dixon says that
               this is a means test and that it is irrelevant – the court should not care
               where the money comes from in determining whether recovery should be
               allowed or not (ie. in tort actions plaintiffs are not allowed to enter
               insurance policies held as evidence to influence the courts decision)
           (3) equity is against recovery – the ties of natural justice and equity are
               against Napean claiming the money back at this point in time – they
               should have known what the statute said and should have implemented it
                correctly – this was ultimately their fault, and it would be inequitable to
                allow recover at this time (come back to this later when look at public
                authorities – see abolition of the doctrine below)

Abolition of the doctrine of mistake of law
Air CAD v Ontario (Liquor Control Board) – recovery against gov’t despite mistake
of law.
     allowed recovery of “gallonage” fees paid to the liquor control authority on
        transactions not covered by taxing legislation

Kleinwort Benson Ltd v Lincoln County Council – recovery against gov’t despite
mistake of law
    moneys paid on the erroneous belief that the transaction was valid (when they
      were not – ultra vires) were recovered

C) Recovery of Other Benefits Conferred Under Mistake – no single
doctrine or rule – look to the cases:

Improvements to Land – ex. build garage on neighbor’s property

Statutory Rule: (s37of the Betterment Statute) if you make an improvement to land under
the belief that the land is yours, the court may order, where it deems just:
                       (a) that you get a lien against the land equal to the value of the
                           improvement; OR
                       (b) a compulsory purchase of the land (either forced upon the
                           improver or sought by the improver)

Montreuil v Ontario Asphalt Co. – sets out the common law and equitable doctrines
with respect to improvements made to land
    Company entered into a lease with an option to purchase. They spent $80,000
       improving the land. They later learned that the plaintiff only had a life estate and got
       a court order that got them specific performance for the balance of the life estate and
       abatement for the balance of the fee simple estate. When the life estate holder died,
       the defendant continued to hold the land. The plaintiff got an order for ejectment for
       their remainder and mesne profits. Defendant argued that under the Betterment
       Statute a person who makes lasting improvements on land under the belief that it is
       his own is entitled to a lien thereon for the enhanced value given it by such
       improvements or may retain it on making compensation to the owner.
    cannot invoke the statute b/c the trespassers did not have a mistaken belief as to
       the ownership of the property they improved – they held possession under a lease,
       with the option to take legal title in the future – even if they claim that they
       elected the option to tale legal title, they impliedly admit to knowledge that
       ownership was not theirs
    thus, must look to common law and equity for a remedy wrt the improvements
Common law:
Active Protection – not available at common law

Passive Protection – where the legal owner sues for mesne profits (fair occupational rent
for the time during which the trespasser occupies the land)
     A bona fide occupant is allowed to mitigate the damages in the action brought
        by the rightful owner by offsetting the value of his permanent improvements
        made in good faith, to the extent that the rents and profits claimed.

Equitable Doctrine of acquiescence:
Based on the Maxim of Equity: he who seeks equity must do equity

Active Protection – where the true/legal owner is suing the trespasser/improver for
     Essential elements required for a man to be deprived his legal rights:
       1. pltf must have made a mistake as to his legal rights
       2. pltf must have expended some money or must have done some act (not
           necessarily upon the property) on the faith of his mistaken belief
       3. the possessor of the legal right must know of the existence of his own right
           which is inconsistent with the right claimed by the plaintiff (necessary)
       4. the possessor of the legal right must know of the plaintiffs mistaken belief of
           his right (if not, there is no obligation for him to assert his own rights)
       5. the possessor of the legal right must have encouraged the plft in his
           expenditure of money or other acts which he has done, either directly or by
           abstaining from asserting his legal right
        where all these elements exist, there is a fraud of such kind that will entitle the
           court to restrain the possessor of the legal right from exercising it, but nothing
           short if this will do.
        And when the case is clear and the circumstances are such that complete
           justice cant otherwise be done, the court may allow the person whose
           expenditure he had encouraged to retain the property, making such
           compensation to the owner as may be fair

Passive Protection – where the trespasser/improver sues the legal owner for the value of
the improvement
     The plaintiff must compensate the improver for the value of improvements made
       under a mistake of title. Although this protection of the improver's interest is
       passive, it is of potentially of greater value then the set-off available at common law
       (since there is no limitation with respect to mesne profits).
     An expectation of acquiring title is sufficient to support a claim for an
       allowance in respect of improvements made while it was reasonably
       entertained. Carelessness in inquiring/investigating before such expenditures are
       made does not disentitled them to relief so long as the mistake was bona fide the
       fact that it may have been due in part to carelessness does not debar the
       defendants from redress
      When expenditure for improvements was made, the defendants had determined to
       exercise their option to purchase – they made improvements in the full belief that
       they could, o the expiry of the lease, acquire title to the land from their lessor. In
       this they were mistake – a mistake in title, which brings them within the equitable

   The receipt of non-monetary benefits may not constitute a benefit in any meaningful
     sense to the recipient - in such cases the recipient is not unjustly enriched and
     granting relief would be inappropriate.
   Betterment statutes say where you have mistakenly improved the value of the land
     of another, you can recover the value of the improvement or can, at the court's
     discretion, have the land transferred to you.
   The mistaken improvements to land doctrine is narrower than that of mistaken
     payments. You must believe that you're the owner of the land - intending to
     purchase is insufficient.
   Even in such situations the improver is allowed an active claim for the value of the
     improvements only in situations amounting to a constructive fraud.
   Apart from such cases the improver can only receive passive protection - as a
     defendant he might be able to claim a set-off or other equitable relief for the value of
     improvements made.
   Even though the courts are fused, you can't ask for equitable relief as a defence to a
     common law claim
   Equity can be particularly helpful in situations like this - the fact that the OAC
     thought it had an option to purchase is enough to engage equity.

Campbell v Campbell – 1999 On CA – unsolicited benefits cant be recoverable
   Two sons operating family farm
   When father died, left milk quota to sons and farm property to wife
   Sons decide to make improvements to the farm (was run-down)
   Mother probably didn’t consent to the improvements, as she was sick – mentally
   Some years later, the sons decide to sell of their milk quota and they ask their
     mother to pay them for the improvements – she refuses – they sue her for
     recovery of the value of improvements – don’t succeed:
   They knew they didn’t own the farm
   No evidence that a mistake of fact caused the transfer (improvements)
   Theory of non-solicited benefits not being recoverable stems from law student’s
     article re bilateral relations

Improvements to Chattels
Greenwood v Bennett – improvements to chattel may be recoverable
    Car owned by B (car dealer) who was going to sell the car, which was worth btw
    Needed some repairs, so B entrusted it to S who agreed to do the said repairs for
    Instead of doing the repairs, S used the car for his own purposes – took it on the
     road and smashed it – severely damages
    S decided to sell it in its damaged state to the garage owner H for $75 (its worth in
     the damaged state)
    H bought it in good faith, not knowing that S never in fact owned the car
    H did some major repairs himself ($226 in labor and materials) & then sold it to a
     finance co who sold it to P for $450
    Issue is who gets the car – B, H or P (P later drops claim)
    H agrees that legal title of the car in B, but wants to get paid for the work did to
    A man is not entitled to compensation for work done on the goods or
     property of another unless there is a contract, express or implied, to pay for
     it – where the person knows or ought to have know that the property does
     not belong to him – BUT when he honestly believes himself to be the owner of
     the property and does the work in that belief, he should be compensated for
     that work.
    This claim would amount to the value added to the chattel and would equal the
     passive protection the improver would have had the owner sought equitable recovery
     of the chattel. This active claim would be on the basis of restitutionary principles -
     he who receives equity should do equity.
    It would be unjust if B took the car and also the value of the improvements that
     were done to it without paying for them
    The plaintiffs should not be allowed to unjustly enrich themselves at his expense
    Other considerations: the fact that B never asked for these repairs to be done is
     irrelevant – B could now sell the car for $450, which he would be unable to get if
     H had not fixed the car – the fact that the car was not in need of such repairs when
     he gave it to S is irrelevant wrt this issue at bar – however, B could have a
     separate claim against S for the difference ($226) b/c B could have sold the car
     prior to accident for similar price and only have paid $75 for repairs.
1.   If you sue Harper in conversion, how much can you recover?
          o The value of the asset he bought from Searle = £75?
          o The value of the asset he sold to Prattle = £450 - value of improvements?
     Bennett would want to claim at the point of highest value.
2.   If you sue Prattle in detinue, you recover the asset.
          o Prattle would sue the hire-purchase company for breach of condition, who
             would sue Harper (Denning didn't like that suing in detinue led to a different
             result than conversion - he found it unjust and ruled that Harper should be
             allowed to go after Bennett for the value of services rendered. This would
             yield the same result as in conversion.)

Active and Passive Claims in Improvements to Chattels Cases
    An active claim is a cause of action where the improver may assert as a plaintiff.
1.   At common law - In Greenwood and Bennett, Lord Denning took the view that the
     improver may have an active claim. This claim was necessary to eliminate the
     anomaly regarding damages which accrue under claims in conversion and detinue.
     Since the owner had already had the asset restored, Denning held that the one who
     improved the asset under a mistake of title had an active claim to recover the value
     of the improvements - the same value he would have recovered had the owner gone
     after the equitable relief of specific delivery.
.    Denning's conclusion is soundly based on unjust enrichment analysis.

    passive protection is used as a defence if the owner commences an action against the
1.    At common law - If the owner brings a claim for damages for wilful interference
      against the improver in trespass or conversion, the improver may be able to claim
      the value added by his efforts in mitigation of, or as a deduction form, damages
      claimed in the full measure of the value of the improved chattel.
2.    In equity - If the owner seeks the equitable relief of specific delivery of the chattel
      from the good-faith improver, the plaintiff must compensate the improver for the
      value of improvements made under a mistake of title.

Discharge of a Secured Interest
Re Central Guaranty Trust v Dixdale – uses article 9(1)(d) of the US restatement
    Mistaken discharge of mortgage - the bank registers it on title
    The owner of the house sells the property, and pays the 2nd and 3rd mortgages (not
      yet discharged) with the proceeds, keeps the excess proceeds
    Bank makes a claim for the balance of the mortgage under mistaken payment
    Bank gets to recover:
    Value had been given to the recipient – the recipient has been spared an otherwise
      necessary expense
    The discharge of the mortgage was as if the bank had paid the recipients cask
      amount - for no reason
    They had an otherwise necessary expense – after sale of the house, they had to
      settle the 2nd and 3rd mortgages b/c they have a mtg K that states such is necessary
      – same is true for the 3rd mortgage, K makes them obligated - only they did not
      b/c of the banks mistake

A restatement: wrt Benefits Other than Money – article 9 of the US Law Institute
(1) a person who confers on another, by mistake, a benefit other than money has a claim
in restitution as necessary to prevent the unjust enrichment of the recipient. Receipt of a
non-money benefit normally results in unjust enrichment if and to the extent that:
                        (a) specific restitution is feasible (at the time of the demand for
                            recovery/avoids the detrimental reliance problem);
                         (b) the benefit is realized in money or its equivalent (Greenwood v
                             Bennett – if not, place a lien on the property);
                         (c) the recipient has revealed a willingness to pay for the benefit
                             (previous intention to ‘get the work done’); OR
                         (d) the recipient has been spared an otherwise necessary expense
                             (Central Guarantee v Dixdale – or necessary repairs: had to
                             have done them – still difficulties: where choice to do them is
                             an issue, still choice to repair or not).
(2) liability in respect of a non-money benefit conferred by mistake may exceed the
demonstrable enrichment of the recipient only if:
                         (a) the recipient had notice of the complainant’s mistake, yet
                                failed to take reasonable steps to avert the resulting transfer
                                (Montreuil v Ont Asphalt – recover for cost of
                                improvement); OR
                         (b) the recipient contributed substantially to the claimant’s
                                mistake (tort damage type of calculation).

   To what extent is the contract, albeit an unenforceable contract, relevant to the resolution
    of the restitutionary claim?
        o quantum of relief?
        o contract shows there was no gift
        o no problem with who asked for the services
   Many statutes make informal contracts invalid. Can restitutionary relief be permitted
    without undermining the policy of the statutes.

There is an artificial distinction between the 3 topics to follow:

Deglman v Guaranty Trust (supra) – services rendered are recoverable
notwithstanding unenforceability of a K
    oral agreement to leave nephew house didn’t comply w/ statute of frauds
    nephew lived with aunt – during that time she said that if he would be good to her
      and do such services as she might request, she would provide for him in her will
      and, in particular, she would leave him one of the houses; the one which they
      were not residing in – The nephew took his aunt on automobile trips, ran errands
      and did the chores around both houses – the aunt dies intestate
    Plaintiff sought to enforce the contract, in the alternative he sought quantum meruit -
      the value of services rendered.
    At trial, nephew recovered the house – pltf D (other next of kin) appealed to the
      SCC: Claim in restitution succeeds
    The services were not performed gratuitously and were contractual in nature - it
      would be inequitable to allow the promisor to keep the land and the value of the
    services. The nephew should get the value of the services (quantum meruit) from
    the aunt's estate.
   the nephew's recovery is not based in contract, but in an obligation imposed by law.
    The remedy must be one that prevents unjust enrichment.

Related issues:
 Issues from case that relate to Informality:
 Should the K price impose an upper limit for the value received?
       o Ie Where the services rendered exceed the value of the house
       o General rule: is that there is no reason to impose such a limit: if UE, then
           should be able to recover the amount equal to such enrichment
       o Exception: seems unreasonable not to impose such a limit in this case b/c
           the nephew committed to supply the services regardless of the time or
           extent demanded – he could have continued to do so for the next 20 years,
           in which case would have exceeded the value of house with certainty
       o Scott v Pattison – excess (market) value of services can be awarded
                 Employment K was unenforceable (due to some defect) -
                    Employer paid everything that they were obligated to under the
                    employment K, but they were not given sick pay, which was an
                    industry ‘regular’ benefit – employer sued for excess:
                 CA allowed excess market value (over the K price) to be paid out
                    to the employer
 Does the rule (services rendered are recoverable notwithstanding unenforceability
   of a K) apply to any legal requirement that a K must be in writing, or is it limited
   to the statute of frauds?
       o Ie. Other statutes, s. as the CPA requires writing – s 19: consumer Ks are
           not binding unless they are in writing and signed by the K’ing parties
       o The case does not speak to this issue – result is that no one knows for sure
       o Argument against: wrt the CPA - it undermines the purpose of the
           statutory scheme – to protect weaker/vulnerable parties – the statute makes
           it an offence to fail to have it it writing – therefore it would be an illegality
           issue, if any, and the rule in Deglman wouldn’t apply
       o McCamus’ General Rule: look to the purpose of the particular statute – if
           restitutionary relief is inconsistent with the objective of the statute, then
           the statue will overrule and the rule will not apply
 What if the plaintiff did not fully perform his obligation?
       o Ie. If he stopped providing services, can he still recover for the value of
           the services rendered?
       o Policy reason: in Deglman, the house was the only asset that the aunt had,
           so to force her to pay for the services rendered would be grossly unfair
       o RE – P&S of land – Per who pays deposit and latter refuses to go ahead
           with the K and demands deposit back: cases go both ways:
                 not able to recover deposit unless there was a total failure of
                    consideration - The fact that the K is unenforceable does not
                        necessarily make it a total failure (of consideration) if the Ver
                        wiling to go fwd
                       able to recover deposit where the K is unenforceable b/c if the K
                        was enforceable it would not be true to say that the person in
                        breach has no restitutionary right – therefore it shouldn’t be the
                        case wrt unenforceable Ks that the breaching party has no right –
                        ought to be able to recover
   purpose of the Statute of Frauds is prevent perjury and encourage accurate
     documentation of transactions.
   Deglman is the leading authority that restitutionary relief for quantum meruit can be
     obtained for a contract rendered invalid under the Statute of Frauds.
   In this case the SCC expressly adopted the unjust enrichment principle and the
     underlying rationale for restitutionary relief.
   Rather than adopting the reasoning in Sinclair and Brougham (which would seem to
     say that if the express contract was unenforceable there could be no implied contract,
     the court took the approach of Moses and McFerlan, that there was an obligation
     imposed by law as a result of the unjust enrichment.

Significance of the Unenforceable Contract
 The unenforceable agreement does not serve as the basis for the obligation imposed, but
   it does retain some significance.
1.      the fact that a benefit was conferred under a contract (albeit ineffective) establishes it
        was not conferred as a gift.
2.      The contract price contained within the ineffective agreement can help establish the
        value the parties placed on the benefit conferred
        .       The general rule appears to be that the defendant, having repudiated the
                contract can't set up the contract price as a limit to the plaintiff's recovery.
3.      The existence of the ineffective contract gets around the Greenwood and Bennett
        problem of whether the defendant actually wanted these services anyway.
4.      There is no subjective valuation problems, as in the mistaken improvements cases.

General approach is that there is no recovery – relief denied in K and in restitution
(Holman v Johnson)
Property will not pass via illegal Ks (exception = Denning in Belvoir case)

Unenforceable Ks:
 Criminal Ks: Ks in conflict with statutory authority of some kind; to commit a tort;
   to buy something to use for unlawful purpose; Ks which may be valid in creation may
   be unenforceable if performed illegally;
 Ks contrary to public policy: K’ing to remarry w/out divorce; pre-determined
   separation Ks; precluding marriage Ks; promoting sexual immorality; interfering with
   judicial process; to oust the jurisdiction of the courts; to deceive public authorities (ie
   transactions to deceive banks); sale of honors; trading w/ enemy (war); restrict
   personal liberty (ie I will work for you forever); Ks in restraint of trade

   the general rule at common law is that money paid and benefits conferred under
     illegal contracts cannot be recovered in a quasi-contractual restitutionary claim.
   For Lord Mansfield, the same considerations that make the court unwilling to
     enforce the agreement are sufficient basis to deny other forms of relief.
   Today, there are exceptions to the general rule which permit recovery, generally to
     parties who are not for one reason or another fully implicated in the illegality at
   the threshold question is whether the agreement itself is unenforceable.

The Enforceability Issue
St. John Shipping v Rank – look to purpose of statute and consequences of denying
     Illegal to overload ship – they did – liable to pay fine – still made good b/c extra
       cargo produced income that exceeded the fine ~ 3k
     Cargo owners withheld the 3k under the claim that the pltfs performed the K in
       such as way as to infringe the Act, they committed an illegality which prevents
       them from enforcing the K at all – the dfts claim that they were not obliged to pay
       any freight, and thus cannot be sued for withholding the balance.
     Pltfs sue for recovery of the balance
     2 general principles:
           o a K which is entered into with the object of committing an illegal act is
               unenforceable. Must be intent to break the law at the time that the K was
               made. If intent is mutual, then the K is not enforceable at all; where intent
               unilateral, it is unenforceable by the innocent party. Look to the acts
               committed – are they prohibited by statute?
           o court will not enforce a K which is expressly or impliedly prohibited
               by statute. If the K is of this class, it doesn’t matter what the intent of the
               parties is – K is unenforceable whether the parties meant to break the law
               or not. Look to K – is the K prohibited by statute?
     Test: whether it is the terms of the K or the performance of it that is called in
       question, the test is just the same: is the K, as made or as performed, a K that is
       prohibited by the statute?
     Here, the pltf does an illegal act in performance of a legal K
     Where the consideration and the matter to be performed are both legal, the pltf is
       not precluded from recovering by an infringement of the law, not contemplated by
       the K, in the performance of something to be done on his part.
     So, in order to bar recovery, dfts must show that the act of the pltf went counter to
       the objective of the statute:
     Purpose of the statute is to promote the safety of life and property at sea – was
       passed for the benefit of cargo owners among others
     Thus the fundamental question is whether the statute means to prohibit the K:
    Unless you get a clear implication of this sort, a court ought to be very slow to
     hold that a statute intends to interfere with the rights and remedies given by the
     ordinary law of K.
   Look to the true construction of the statute, having regard to its scope and its
     purpose, and to the inconvenience, which would follow from any other
   Pltfs are entitled to recover their freight without deduction if the goods are
     delivered substantially the same as when loaded – that they were carried safely –
     delivered safely
   For a right to money or property to be unenforceable, the money or property must
     be identifiable as something to which, but for the crime, the pltf would have no
     right or title. This cannot be said in this case – they supplied what they ked for –
     how do they know what cargo precisely was the cargo that was in excess of the
     prescribed limit? They don’t.
   The right to claim freight from the dfts was not brought into existence by a crime;
     the crime affected only the total amount of freight earned by the ship.
   Pltfs recover the 3k
   Devlin's analysis - Was it a contract to commit a crime? No. Therefore we will hold
     the contract enforceable if it is a desirable add-on to the statutory scheme. We
     should look at the sanctions available in the statute and ask - are they adequate?
   The plaintiffs have committed a crime - should they be entitled to enforce the
     contract? Why not render the contract unenforceable, but allow the ship owner to
     recover a reasonable value of services rendered (less the profits?)
   Devlin appears to have an implied contract view of the nature of quasi-contract
     liability. Perhaps an implied contract theory underlies Holman and Johnson - if the
     express contract is unenforceable, the implied contract can't be enforceable either -
     this may be why Devlin doesn't look into a quantum meruit remedy.
   Devlin seems to say:
         o if a contract is executed, it is enforceable if the plaintiff is trying to recover
              the contract price
         o if a contract is executory, it is not enforceable and the party aware of the
              illegality can pull out without penalty.

Enforcement of Collateral Rights
Bowmakers v Barnet Instruments –
    The plaintiff purchased tools and delivered them to the defendant under three
      separate hire-purchase arrangements. The initial purchases and subsequent
      agreements were all unenforceable. The defendant stopped making the required
      payments and resold the tools under agreements 1 & 3 and refused to return the tools
      covered under agreement 2.
    Held: The plaintiff was entitled to sue in conversion for all three tools.
    In order to grant relief to the plaintiff for conversion, the court assumed that property
      in the tools had passed to the plaintiff under the initial agreement.
      With respect to the tools retained by the defendant, the only basis of recovery would
       appear to be non-performance of the illicit contract - thus making it difficult to
       sustain the argument that the plaintiff is not relying on the illicit contract to establish
       the cause of action.
      it is unlikely that the enforcement of a collateral claim as the basis of restitutionary
       relief for a party in pari delicto where, on policy grounds, such relief seems

Belvoir Finance v Stapleton – enforcement of rights despite K being illegal
    B leased cars which they purchased brand new with the aid form the finance co
    They had an agreement, that if and when B sold the cars, they would remit a
       ‘settlement figure’ to BF
    B became dishonest, and began selling the car to purchasers (without notifying
       BF) and pocketing the proceeds – they would keep making payment to BF in the
       interim to avoid suspicion
    B finally went into liquidation, and BF was unable to recover anything from them
    They sued the purchaser of the cars and recovered a small amount (probably
       profit made), as that innocent purchaser had resold the cars
    They now sue S, the salesman who sold the cars to the innocent purchaser, for
    Seeing that S (then the assistant manager) sold the cars, he would be undoubtedly
       liable to BF, whether he was party to the fraud or not – save for a defense which
       is to be considered
    S argues that the finance company acquired the cars unlawfully and cannot
       recover owing to their own illegality.
    K of sale (by the dealers to BF) was illegal as well as the hire-purchase agreement
       (by BF to B).
    General proposition (from Singh v Ali): when 2 persons agree together in
       conspiracy to effect a fraudulent or illegal purpose – and one of them transfers
       property to the other in pursuance of the conspiracy – then, so soon as the K is
       executed and the fraudulent or illegal purpose is achieved, the property (be it
       absolute or special) which has been transferred by the one to the other remains
       vested in the transferee notwithstanding its illegal origin.
    Proposition applies even where the transferee has not taken possession of the
       property, so long as the title to it has passed.
    The dealers, who sold the car to BF, cannot claim it back from anyone – they have
       received their price and are out of the picture;
    B, who resold the car illegally to the Per, cannot claim it from him or anyone else
       – they have received their price too;
    The only person who can claim it is BF, who have paid for it and not been repaid
       – although they obtained the car under an illegal K, nevertheless, inasmuch as the
       K was executed and the property passed, the car belonged to BF and they can
       claim it.
    Once title is in BF, the rest is clear: B were bailees of the car – by reselling it,
     they did an act inconsistent with the bailment. They converted it to their own use,
     so they and their salesman (S) are liable in conversion. He may or may not have
     been party to the fraud: but it doesn’t matter – he is liable in conversion.
   What Denning was really doing here was enforcing the illegal contract - however the
     result is acceptable.
   this case is authority that title should pass in deficient contracts, although the
     grounds for recovery are not restitutionary in nature - the claim is for conversion.

Exceptions to the General Rule Denying Restitution
    These exceptions generally rest on the moral innocence of the claimant.
There are exceptions to the rule (from Holman v Johnson) of no recovery:
   1. Mistaken about the (underlying) facts that create the illegality (Oom v Bruce case
       – enters into K with Russian – not known was an enemy – K unenforceable – but
       can get restitution);
   2. Where the claimant is a victim of fraud, oppression or duress (Steinberg and
   3. Where the contract is illegal due to a statute and the claimant is within the protected
       class of persons (the parties are not in equal fault) (Kiriri Cotton case);
   4. Where the object of the contract is illegal, but the claimant has abandoned the
       purpose - locus poenitentiae (Doctrine of repentance)– if able to repent, in time –
       before illegal purose has been substantially perfomred, can get restitution for
       value (Taylor and Bowers, Bigos and Boustead - requires true repentance);
   5. Where the illegal transaction falls into the Money Lenders Act exceptions;
   6. Public policy exceptions – Where the denial of relief would lead to unjust
       enrichment of the defendant. Take an analysis of St. John case and apply

Kiriri Cotton Co. v Dewani – restitution allowed where parties are not in equal fault
     D rented a flat from K – in order to get the flat, he had to pay a 10k premium,
        which he had to borrow
     He then alleged that the premium was illegal as being in contravention of the Rent
        Restriction Act and brought an action to recover the amount
     At the time of the transaction, neither party though that there was any illegality.
     The premium was in fact illegal b/c a premium could be charged on business
        premises only – not residential
     Court allowed restitution for the plaintiff for two reasons:
        1. The claimant was not in pari delicto; &
        2. The claimant was within the class of persons protected by the statute rendering
        the agreement illegal.
     The illegal transaction had been fully executed, which would have deprived the
        pltf of recovery unless he could show that he and the deft were not in pari delicto
        – in equal fault
    Purpose of the Rent Restriction Act was to protect tenants from exploitation by
     LL during housing shortages – by charging the premium (whether to a poor tenant
     or rich tenant), the LL is exploiting
   Thus to not allow recovery would be counter to the objective of the statute.
   An example of the protected class exception.
   There may be a different result when the statute is violated at the incentive of the

Steinberg v Cohen –
     Defendant extorted money from the plaintiff, threatening to call police and have him
       prosecuted for an alleged criminal offence. Plaintiff paid $100 and gave a $400
       chattel mortgage. Plaintiff wanted his money and mortgage returned.
     Declaration of the nullity of the mtg was allowed BUT Recovery for the cash
       payment was disallowed b/c:
           o The payment was regarded as a completed transaction; &
           o For policy reasons: if the court did not set it aside for its illegality, they
               would be enabling him to enforce what he couldn’t directly, indirectly –
               the pltf would have to pay to have his title to his chattels cleared
           o The court recognized the inconsistency of permitting relief against the
               chattel mtg which was allowed on the grounds that the parties were not in
               equal fault (hence was voidable at the option of the mtgor)
     Payment is not recoverable as it was paid by “a party to the conspiracy” - to defeat
     Cant get money back – the mtg is unenforceable and the K is illegal
     This is an example of the oppression exception.
     This case highlights a problem with the exceptions - illegality cases seem to depend
       on who pleads the case.
     If the plaintiff is "nice" they get to recover, but where both parties are bad actors the
       court may be tempted to let things lie.

Menard v Genereux – if party to the illegality, wont get any restitutionary relief
   a 23k deposit and a promissory note were advanced by the purchaser under what
     is ultimately held to be an illegal agreement of purchase and sale
   the pltf (Per) sued to recover both the note and the deposit
   claim was dismissed - The judge felt bound by the general rule which favours not
     interfering with what is already done but stopping further injustice. Judge would
     have liked to apply the unjust enrichment principle, but felt the result would be the
     same since the deposit was paid to the trustee bound by the law of trusts to return it.
   NB: judge was of the view that were he not bound to so hold (Steinberg case), he
     would be inclined to give effect to an unjust enrichment analysis in favor of the
   However, the actual result in this case is not inconsistent with the UE analysis –
     as the deft would not be able to enforce the note, the pltf would indirectly be
     relieved of the obligation (unenforceable). Also, since the deposit was given to
     the trustee, it might be that the trustee is required by law of trusts to return the
     deposit to the Per (pltf)
   An unsatisfactory case - seems to say if you hand over the money you lose it, but if
     you don't hand it over you keep it.
   if you are involved in the illegality then no recovery.

Maddaugh & McCamus: The Law of Restitution – UK cases interpreting Money
Lenders’ Act – although doctrine developed unsatisfactory, does have some influence on
CAD decisions: a money lender may get recovery of advanced moneys despite K
being unenforceable due to illegality
    money is advanced by a money lender who is unregistered or unlicensed or who
       has failed to adequately document the transaction
    the borrower, as plaintiff, seeks recognition in some form of the unenforceability
       of the agreement and the lender, as defendant, seeks to impose repayment of the
       moneys advanced as a condition of the plaintiff’s relief
    only in Lodge v National Union Investment Co. did the defendant enjoy success
       on this point: the pltf had borrowed money from an unregistered moneylender and
       sought recovery of securities pledged to secure the loan on the ground that the
       loan was “void for illegality” – the pltf recovered the securities BUT was obliged,
       as a condition of such relief, to repay the moneys advanced.
    Lodge has since been narrowly distinguished but never directly overruled:
    Chapman v Michaelson: borrower from an unregistered moneylender sought a
       declaration (in equity) that the mtg given as security was illegal and void – pltf
       did not have to repay b/c the declaration was not truly equitable – it could have
       been achieved at CL – equity forces people to do/change things; whereas the CL
       gives damages – an action for a declaration is permitted in CL courts – thus the
       money lender will not get passive protection (as did in Lodge, despite being
       virtually the same facts)
    Cohen v Lester: borrower sought to recover jewellery pledged as security for a
       loan from a registered moneylender under an agreement rendered unenforceable
       for failure to supply a memorandum of agre’t in prescribed form – recovery was
       granted – Lodge was distinguished in that the K in Lodge was illegal & void, but
       the K in this case was only unenforceable (NB Uk use of term illegal = crime is

Kasumu and Others v Baba-Egbe –
    Moneylender who had taken a mortgage on borrower's premises foreclosed and took
     over the property, receiving rents and profits. The borrower sought to declare the
     mortgage void because the lender forgot to date the document. Borrower sought to
     recover the premises and rents.
    The court allowed relief and refused to apply Lodge on the grounds that the Nigerian
     statute was different from the UK one. The judge argued that to allow relief would
     be in conflict with the statute.
Barclay v Prospect Mtgs –
    Kasumu did not overrule Lodge, but didn’t apply it b/c of s. 19(4) of the
      Moneylenders Ordinance:
    Any money lender who fails to comply with any requirement of this section shall
      not be entitled to enforce any claim in respect of any transaction in relation to
      which the default shall have been made
    Moneylenders Act is similar to the statute of frauds (which allows for restitution)

Sidmay v Wehttam Investments –
    The Plaintiff seeks a declaration that the mortgage is void as the defendant is
      precluded from acting as a money lender under the Loan and Trust Corporations
    Court develops series of tests wrt moneylenders cases:
          o If illegality – then Lodge applies
          o If unenforceable – other 2 cases
    Party claiming for relief cant get recovery unless you can show that you are a
      member of a protected class of persons for whose protection the illegality of the
      contract was created
    The respondents in this case are not persons for whose protection the prohibition
      in the Loan and Trust Corp’ns Act was enacted
    Idea of having to be part of a protected class stems from having to be a good guy
    So only if in a protected class, can you come forward; if a crime has been
      committed, the moneylender must give money back
    Assumption 1 – the mtg btw the parties is void so far as both parties is concerned
          o (Moneylender Act cases) The pltf mtgor is entitled to ask the court for
              relief only if he is within the class of persons for whose benefit the statute
              is intended to operate
          o No relief here – (1) the plintiff is not w/in the class of thise for whose
              benefit the statute ws enacted – although innocent or ignorant, it was party
              to an executed illegal transaction and ex turpi causa non oritur actio (an
              action does/can not arise out of illegal or immoral consideration); & (2)
              the pltf is not a mere amateur in borrowing money on the security of real
              estate any more than the dft is an amateur lender – nor is it in the position
              of having parted w/ property w/out the dft having performed its side of the
              bargain – where the parties have bargained at an arms length and have
              each performed, the court may properly leave them where they are.
    Assumption 2 – the statutory prohibition is not one which touches the pltf
      borrower (as in this case)
          o Statute is directed against the dft alone – the pltf is not forbidden to
              borrow on the secy of real estate BUT the dft is forbidden to lend
          o Thus, it would be unreas to refuse the courts aid to an innocent borrower
              such as the pltf if it sought, for ex, to redeem the mtg’ed property, or if it
              sought to assert any K remedies against the lender
          o Restitution can be allowed as long as there is a giving and a taking back
      Inconsistency? The innocent party in (1) doesn’t have to give back $ but does in
       (2) – doesn’t seem right
      McCamus says – take St. John case and apply it to restitution question – don’t
       allow free rides unless it serves some statutory purpose – court likes to give

Berne Developments v Haviland – right way to analyze the problem…
    But, McCamus not convinced that the result is right
    Plaintiff builder convinced defendant to buy a condo. Scam called for defendants to
      assume a $25k mortgage with Canada Trust and pay the other $15k to Berne's sister
      company. Without the scam the defendants couldn't qualify for the Canada Trust
      mortgage so they failed to disclose the second mortgage. The defendant was unable
      to make the payments and Berne then sought to enforce the mortgage agreement.
    Illegality – the K was structured to mislead 3rd party (bank)
    Should be able to recover – shouldn’t be able to geta free house b/c of the sellers
      illegal K
    To allow the defendant to keep the house and not make the payments would amount
      to an unjust enrichment. The judge refused to enforce the mortgage, but insisted that
      the defendants return the principle to the plaintiff.
    5th exception: even where the pltf is not equally in fault (so a bad person) you
      will be able to recover when the court balances public interest with private
      interest (UE)
    First case where the illicit plaintiff gets to recover under the unjust enrichment
    relief allowed even though the plaintiff hatched a crooked deal
    recovery should be allowed where it would not offend the policy underlying the
      legislation making the transaction illegal.

Bigos v Boustead – (genuine) repentance can lad to recovery
    Parties entered into an illegal agreement to avoid currency controls. The Italian
       would provide support for the plaintiff's wife and child while in Italy, and the
       plaintiff would repay him in English currency when the Italian was in England. The
       claimant pledged securities to secure promise of repayment. The Italian money was
       not made available and the claimant sought recovery of the pledged securities.
    if you are a party to the illegal K (ie bad guy) but you have a change of heart and
       try to unravel the K, you are repenting and can get your money back
    (bad guy) brings an action to recover value of security pledged for an illegal K
    repented, changed his mind
    The court denied recovery on the grounds that it was frustration of the agreement
       and not true repentance that led to the plaintiff's change of heart. The court looked at
       Taylor and said that the locus poenitentiae exception could only apply where there
       was true repentance and abandonment of the illegal purpose before its performance,
       not where the purpose was frustrated by external intervention.
       it has to be a genuine change of heart before it can be shown that the scheme will
        not work – if repent after the scheme is shown cant work, it will be too late for
        recovery – ie where partial achievement of the objective

Aside: Bill 155 - Provincial Act wrt Organized Crime (civil) – if engage in unlawful
activity and acquire profit directly or indirectly from these activities, the profit will go to
the crown and the crown has the discretion to redirect the profits to the owner of the
property/profits if there are such people. The consequence is that anyone who
contravenes an act would have to disgorge the profit that arises there from.

Ultra Vires Contracts
     doctrine renders void for lack of capacity any K entered into by a corp. entity
       acting in excess of the powers conferred upon it by the statutory authority or its
     S 15 of the OBCA: no act is invalid b/c it is ultra vires to its articles BUT a SH
       can challenge a transaction entered into & upon such challenge (in court) a
       restraining order can be obtained setting aside the transaction and granting
       compensation – restitution
     Private sector: protects SHs from having assets dissipated in ‘illegal’ (ultra vires)
     Public sector: protect taxpayers from gov’t spending money when unauthorized
     Courts don’t seem to differentiate in cases – treat the 2 as similar/same

Westdeutsche v Islington -
   Swapping int rate business
   Municipality sues saying the K was UV
   K not fully perfomed
   TJ bound by Sinclair case – no recovery for money had and received
   But refers to old cases about UV annuities – those who receive $ under an UV K
      can be sued for recovery of that money – must pay back
   Thus, should be able to recover here too b/c K is like an annuity
   Sinclair case gets shrunk down to its very facts and is effectively overruled in a
      practical sense although not technically

(Goff’s theory from Westdeutsche v Islington) Claims against the UV actor for:
           1. money lent are not recoverable (Sinclair case) – in CAD, should recover
           2. other moneys paid can be recovered (Re Phoenix Assurance - pple pay $
               for UV ins K - $ paid for premium are recoverable) – don’t like indirectly
               enforcing the UV K
           3. services rendered are not recoverable - don’t like indirectly enforcing the
               UV K – there are cases against this in CAD
           4. goods delivered are not recoverable - don’t like indirectly enforcing the
               UV K – there are cases against this
Breckenridge Speedway v The Queen -
    Plaintiffs borrowed money from defendant. Following a dispute, the parties reached
      a compromise: plaintiff agreed to transfer property interests to defendant and
      defendant agreed to reduce indebtedness. Plaintiff later sued to set aside
      compromise agreement and to recover property interests on ground that enabling
      legislation of defendant was ultra vires. Defendant counterclaimed for repayment.
    The ultra vires nature of the agreement renders it unenforceable but then a claim in
      restitution lies. However, where the defence to a claim by an ultra vires actor has
      detrimentally changes his position in reliance of the ultra vires agreement, it would
      be unjust to allow the ultra vires actor to fully claim.
    Property passes to the UV actor – this protects the SHs, for ex. and assumes it
      passes to the other party (the non UV actor). If the property does not pass, then
      the pltf would have a proprietary claim and can sue for value of the property,
      which effectively turns the pltf into a secured creditor – this is unfair and too
      complicated – the claim should be in personum
    If only claim is proprietary, there would be no claim for services rendered –
      which is what the Sinclair case held – bad decision
    NB: this doesn’t mean that property does not pass ever – ie statute makes it illegal
      to sell reserve property – Band sells property to Mobil oil – it wouldn’t be
      consistent with the objective of the rule for property to pass – thus there is an
      exception in cases such as this
    A defendant should be entitled to a pro tanto defence of change of position to extent
      of detrimental reliance. While such a defence conflicts with the purpose of the ultra
      vires doctrine to protect assets, the injustice of allowing the creator of the problem to
      escape unscathed must surely outweigh that purpose.
    Furthermore, such a defence encourages corporations to be more careful so as to not
      enter ultra vires transactions. To that extent is pursues the purpose of the doctrine.

(From Breckenridge Speedway v The Queen) Claims Brought by the UV actor for:
    1. money lent are recoverable
    2. other moneys paid are recoverable (Re Phoenix)
    3. services rendered are recoverable
    4. goods delivered are recoverable
     policy urges all should be recoverable – makes no sense to say otherwise – don’t
       give people free rides and UE

Application of St. John v Rank: whether to allow recovery (restitution) in cases of UV
or contrary to statute depends on whether allowing such would be contrary to the
objective of the statutory scheme. McCamus says that this is the proper analysis wrt
these types of cases.

Want of Authority

The law of Agency: agent acts on behalf of another pursuant to being authorized to do so
           - relationship is contractual in nature
           -   deals with relationships btw principals and agents
           -   we will be dealing with situations in which a 3rd party enters into a K with
               principal by dealing with its agent who is acting outside the scope of his
               authority. The law of agency says that:
                    i. principal can ratify the K – becomes a binding K btw he and the
                       3rd party;
                   ii. agency by estoppel – ostensible authority – becomes a binding K if
                       reasonable in normal course of business to assume that the agent
                       had such authority; or
                  iii. agent is liable for damages in tort – where the agent misreps his
                       authority to bind principal and 3rd party and causes injury to a
                       party, remedy is damages against agent

Craven-Ellis v Canons – when should recover for value of unsolicited services
    Plaintiff entered into an agreement to supply services to a company. He thought he
      was dealing with authorized directors, but the company's articles made it such that
      their position as directors had expired. The agreement was void and the defendant
      company declined to pay for the services rendered. The plaintiff claimed the value
      of the services in quantum meruit. The company argued that the actions of the
      unqualified directors were not the actions of the company, and that since the express
      contract was invalid, no implied contract could be inferred.
    Judgment given for quantum meruit (value of services) in respect of all services
      rendered by the pltf to the company until he was dismissed
    The plaintiff was successful in his claim. Liability on the part of the defendant was
      not imposed under the implied contract theory, but rather "by a rule of law, and not
      by an inference of fact arising from acceptance of services or goods". The Court
      also noted that if the plaintiff had not carried out the services, the defendant would
      have had to have someone else carry them out.
    The dfts were in a dilemma here:
    If the K was an effective K by the co, they would be bound to pay the
      remuneration provided for in the K; BUT
    If the K was a nullity and not binding either on the pltf or the dfts, there would be
      nothing to prevent the inference which the law draws from the performance by
      the pltf of services to the co, and the cos acceptance of such services, which, if
      they had not been performed by the plaintiff, they would have had to get
      some other to carry out.
    Thus the co has to pay for what are necessary services – if they didn’t hire these
      (former) Ds to do it, they would have had to hire some other.
    Restitutionary relief never rests on an implied contract.
    It is unclear whether the Court would have allowed recovery in the absence of a
      conscious acceptance of the services by someone whose knowledge was attributed
      to the company.
    Case seems to indicate that if there was an "unofficious conferral of benefits", then
      restitution will be permitted in the unrequested benefits were inevitable
      Where the contract of supply is void for want of authority, the supplier may
       recover the value of goods & services supplied (subject to the usual defences) if
       they have been requested or accepted by P in the knowledge that they are to be
       paid for, or alternately if the payment for goods & services was an inevitable
       expense and the plaintiff has not acted officiously.
      If the expense was not inevitable but the defendant has turned the benefit to account,
       then the plaintiff should be able to recover to the extent that the defendant is
      Court found the services were necessary, like in Greenwood and Bennett.
      As a general rule we don't force people to buy things they don't want. We may,
       however, allow recovery in three circumstances:
       1.       Where services were necessary and the supplier doesn't act officiously
       2.       Where a benefit was realized - Greenwood and Bennett
       3.       Where a benefit is realizable - implied lien.

Hazlewood v West Coast Securities – confirms restitutionary claim for $ paid on lack
of authority
     Hunter, was an employee defendant stockbroker. He entered into an agreement with
       the plaintiff on the defendant's behalf, whereby money's received from the plaintiffs
       were to be held in trust by the defendant firm and ultimately advanced to third party
       borrowers. Hunter fraudulently misrepresented these funds to the defendant as his
       own and deposited them into the defendant's general account. The defendant used
       much of the funds to cover Hunter's debts to them, the rest to pay off some of
       Hunter's other creditors. (The defendant had no legal obligation to do this but wanted
       to help Hunter out). Hunter had no authority to make the agreement with the
       Plaintiff, the defendant had not agreed to repay the funds and had no idea of their
     Pltf claim to recover the money held
     McCrindle v London Scottish Canadian: defendant company must make
       restitution even though it had not authorized the particular act b/c the agent had
       acted not on his own behalf, but on behalf of and for the benefit the dft co which
       had the benefit and placed the agent in its place to do that class of acts.
     United Africa v Saka Owoade: dft co must make restitution b/c the goods had
       been entrusted to the servents and converted while they were acting within the
       scope of theoir employment and in the course of carrying out the business in
       which the emplyer was engaged.
     Neither case is of authority here, as the circumstances vary significantly in this
     Goff & Jones Law of Restitution: where money is obtained from the pltf, usually
       by the dft’s agent but without the dft’s authority, and that money is applied for the
       dft’s benefit, by the deft or its agent, the dft will be bound in equity to recoup the
       plaintiff to the extent that the money has been so applied.
     In this case, there is no doubt that:
           o The plaintiffs did not intend the money be a gift to the dft
         o The money got into the hand of the dft co by the wrongful acts of H – then
              fraudulently representing that the money was his own money and using it
              for his own uses
   There is no need to find an expressed/implied K – the obligation is a creation of
     the law, just as much as an obligation in tort. The obligation belongs to a 3rd
     class, distinct from either K or tort, though it resembles K rather than tort
   If the obligation is imposed by law, and rests on K (a promise to pay), or tort
     (when the question of property in the moneys wrongfully converted by H would
     arise), then it seems to matter not that there was not a K between the pltf and the
     dft here, or that the property in the money in the technical sense may not be
   Court held that the company was not liable as principals on the transactions
     entered into by H BUT the pltf was entitled to restitution of that portion of the
     money that had gone to the company to reduced Hs debt – for the company would
     be unjustly enriched if they were permitted to retain money that the plaintiff had
     never intended to be theirs
   The dft should pay to the pltfs an amount = to those portions of the various
     advances of which it has had the benefit and which it would otherwise be unjustly
     enriched as against the plaintiffs.
   Wrt the portion of the advances used to pay other creditors of H, o otherwise
     spent or dissipated by H, clearly the dft has had no benefit and, although these
     moneys may have passed through its general account it has not retained them or
     been enriched by them.
   Defense of change of position applies wrt amount to other creds, as the dft
     company would never have paid the other creditors with the money had it not
     been advanced by the pltf (via Hs fraud) to it.
   Judge held that money's used to reduce Hunter's indebtedness to the defendant
     represented an unjust enrichment, but moneys paid to the defendant's clients did not.
   Hazlewood makes it clear that if the money finds its way into the hands of the
     Principal, it's recoverable.
   Goff & Jones: where money is obtained by the P to its benefit, even if by an agent
     acting without authority, the principal is bound in equity to repay the third party.
   The property need not be traceable for the third party to succeed.
   The argument might have been made that the defendant could argue the defence of
     change of position, i.e., the defendant gave up a debt claim against Hunter, but they
     would have to show an unusual expenditure to get the change of position defence to

Freedman v D. Thomson – estoppel to deny capacity of another to act as ones agent
    Purchaser has undertaking from seller that he can take possession and make
      renovations to building – to be paid out of the rents, from the owner of the
    Per stipulated that contractors would have to sign lien waivers – they signed Ks
      drawn up on the sellers letterhead
      Contractor thought he was entering into a K with the owner of the building, but
       the person who signed (the prospective purchaser) had no authority
      Deal with the Per fell through, renovations had been done
      Value has been conferred – contractors sue the owner (original seller) for payment
       for those renovations and win
      No restitution – when got lien waiver signed, your name was on it, therefore
       representing that you were the owner of the building and thus you have to pay for
      One permitting himself to be falsely described as owner of the building thereby
       becomes liable for value of improvements.

Mistake & Uncertainty

Palmers’ 4 kinds of mistakes:
1.    Mistake in integration – drafting – not covered in course
2.    Mistake in Performance – ie overpayment cases…

3.      Mistaken Assumption – where there is a mistake as to an underlying fact, despite
a binding K existing.

The General Rule from Smith v Hughes is that where a party is mistaken wrt
quality/value of goods, they cannot get out of the K unless,
           - both parties are mistaken, or
           - the other (non-mistaken) party understands the other (mistaken) party’s
               mistaken assumption wrt a contractual term,
- Where the 2 exceptions occur, then the mistaken party can get out of the K – the other
   (knowing) party cannot acceptant the offer/K.

I. At Common Law: mistake as to the existence of the subject matter
Res extincta – where you enter into K for P&S of object, which you think is in existence,
but isn’t, the K is void – common/shared mistake as to a term of the K – that the thing
K’ed for exists. McRae v Australia Disposal: court said that the seller was in breach b/c
promised that there was a boat, when in fact three was not

II. At Equity: mistake as to the ownership of the subject matter
Res sua – where you enter into a K for P&S of object that you already own, the K is
unenforceable. Cooper v Phibbs: buy fishery, which was already his own. K was
unenforceable – possessor had to pay occupational rent (for time occupied property) and
(true) owner had to pay for the improvements that were made to the land.

NB: in these cases, the K is void at common law – no K exists. Thus a claim for
restitution for money can be achieved at common law. However, if your claim for
restitution includes forcing a person to do something, then equity will step in as it did in
the Cooper case
III. Mistake as to a fundamental term of the K
Where mistake wrt matter, which, if true, means that the subject matter is totally different
from that which was K’ed for, the mistake is said to be so fundamental to the K that the K
is unenforceable.
Bell v Lever Bros: settlement K of dismissible employees – mistake as to whether could
have fired employees or not, which induced the settlement K – court held that Bell got
what they paid for – the settlement K was valid – no fundamental mistake: it got rid of
the employees as it knew it would; nothing more, nothing less

Sole v Butcher – independent doctrine of mistake in equity
    Tenant charged too much for rent under the Rent Act
    Both parties thought that was allowed to – was mutual mistake
    Denning shrinks the common law doctrine to I & II and treats Mistake (III)
       as a matter of equity.
    Test for voidable K due to mistake:
       (i)     there is a common misapprehension that was fundamental - mistake
               radically changed subject matter – fundamental mistake (yes)
       (ii)    the party attempting to set aside K was not at fault (no)
       (iii) it would be unconscionable not to set aside K (yes)
    the K is voidable at equity with terms:
            o Tenant should be offered new lease at a fair market price; &
            o Tenant has to be willing to pay appropriate amount for occupancy enjoyed
               thus far
    Denning effectively narrows the common law application to cases where no 3

       party is involved.
    Denning – application of test of mistake for voidable K shd be confined to
       instances where mistake is common btwn parties (but where only 1 party is
       mistaken about fundamental matter - Smith - there is no relief & caveat emptor);

The following case is in its own separate class!
James More & Sons v University of Ottawa – restitution may be allowed despite the K
dealing with the matter at issue
    Contractor hired by university to build
    K says contractor swallows any tax increase and that the U is to benefit from any
       tax decrease
    Taxes increase
    New law provides that universities get tax credit payments for increases paid wrt
    U gets the benefit from the contractor paying the taxes
    The categories of restitution are never closed: restitution will be allowed in cases
       of UE wrt binding Ks which deal with the matter at issue within its self
    Where a court, on proper grounds, holds that the doctrine of restitution is applicable,
       it is not necessary to fit the case into some exact category, apparently established by
       a previous decision, giving effect to the doctrine. Just as the categories of
       negligence are never closed, neither can those of restitution. Here, the defendant has
       been enriched by the refund. The enrichment was at the plaintiff's expense because
       but for plaintiff's payment of tax, there would be no refund.
      Court must have implied a term.

4.    Misunderstandings – Non es factum – enter into K thinking you are getting a
mtge when in fact you are signing a conveyance – no binding K – no consensus ad idem

Boulton v Jones - Can’t enforce payment where no K exists.
    Send in order to co – business was sold
    New owner accepts and delivers order – Per refuse to pay
    Restitution claim for value of benefits conferred – thought was binding K
    Per argues set-off against the old owner – he owed him money, thus he would
      have to pay for the owner
    Cant accept an offer aimed at some one else:
    Here the order in writing was given to A. Possibly, A might have adopted the act
      of the pltf (B) in supplying the goods, and maintained an action for their price.
      BUT since the pltf has chosen to sue, the only course the dfts could take was to
      plead that there was no K with him.
    When a K is made, in which the personality of the K’ing party is or may be of
      importance, as a K with a man to write a book, or the like, or where there might
      be set-off, no other person can interpose and adopt the contract
    In order to entitle the ptf to recover he must shew that there was a K with himself.
      The order was given to the pltf’s predecessor in business. The pltf executes it
      without notifying to the dfts who it was that was executing the order. When the
      invoice was delivered in the name of the pltf, it may be that the dfts were not in a
      situation to return the goods.
    Enter Subrogation – in order to prevent UE, seller can step into the shoes of the
      buyer and go after the original owner for the difference

Estok v Heguy – restitution may be awarded where there is an element of bad faith
by the dft
     Farmer takes possession of land with seller’s permission – K not enforceable for
       uncertainty in terms
     Farmer puts manure on ground to fertilize it
     seller gets out of the deal b/c realizes that he can get more money if he subdivides
       the property – takes advantage of the uncertainty formality
     farmer wants to recover value conferred (ie improved value of the land b/c
     Court allows recovery
     McCamus doesn’t think that there should be restitution here b/c there was no
       value conferred – he didn’t ask nor would he have anted the shot on the land
       the owner shouldn’t have to pay for it b/c he wasn’t a farmer – he wouldn’t have
        done so himself – it was not a necessary expense – & is of temporary value (if
        any) b/c the land is not used for farming
       Policy in favor of restitution: would be unfair to not allow restitution b/c the
        seller wants out for extremely ulterior motive – using uncertainty as an excuse –
        like acting in bad faith

Discharge by Breach

The Rights of the Innocent Party
    General rule: When enter into a losing K, you cant ask for out-of-pocket costs
      instead of expectancy (McRae Commonwealth)

Hunt v Silk – can, as result of breach, recover benefit/value rather than expectancy
    Landlord leased apartment and agreed to make repairs within 10 day period. The
       tenant paid deposit and enjoyed the house for 12 days. Landlord failed to make
       repairs, so tenant left and asked for his money back (restitutionary remedy)
    Where there is a breach of K it leads the other (innocent) party to treat the K as
       being unenforceable
    Allowed to recover value that the other (breaching) party received, provided that
       there has been a total failure of consideration – cant receive something in return,
       if so, cant get value/$ back
    Restitution was denied. In cases of money had and received the plaintiff is entitled
       to restitution only where there as been a total failure of consideration.
    NB: why not apportion loss? Ie if have 5 days occupancy (consideration), then
       deduct it from your recovery.
    The position in Hunt is that there must be total failure of consideration to disaffirm
       the contract and obtain restitution.
    Goff and Jones suggest that this case is actually one of waiver.
    In cases of receiving title (e.g., to a car), the fact that the would-be purchaser had use
       of it is not a benefit under the contract - failure to deliver title is a total failure of
    In Canadian situations, it is doubtful that the total failure of consideration
       requirement would be applied to money claims. Gibbons and Trapp Motors (1970) -
       interim enjoyment of the goods will not preclude the buyer from "rescinding" for
       repudiatory breach and claiming to recover money paid. If, however, the enjoyment
       is substantial, an appropriate deduction from the award will be made.

Boomer v Muir – where the value of services rendered exceeds the K price, recovery
of that (higher) value is allowed in quantum meriut
     Large windfall for the innocent party (pltf)
     Pltf miscalculated the price/cost that would be required to do a job
     Turns out the price was very low, and that the value of the job was much more
    Buyer of services breaches K
    Pltf recovers the value of services rendered
    Court ignores K b/c the other party was in breach – restitutionary theory is to say
     would have paid for service – leads to UE – thus must be able to recover it
   Goff & Jones: should not allow such recovery - the breach didn’t cause the loss,
     the miscalculation did; BUT there are no CAD cases that support their opinion
   A claim in restitution may prove to be more advantageous than a contractual claim
     for damages.
   where the innocent party has paid over money to a defendant and received nothing
     in return, the quantum of damages will not be limited to the contract price. In such a
     case the defendant has given nothing in return for the benefit but a broken promise.
     Hunt and Silk
   Where the innocent party may have partially performed an unprofitable contract of
     the supply of goods or services prior to discharge, the quantum of damages will not
     be limited to the contract price. Rather, the plaintiff can recover in quantum meruit
     for the full value of work supplied up to the breach. Boomer and Muir The total
     failure of consideration only applies to money had & received cases.
   Where the innocent party may have completely (or substantially) performed an
     unprofitable contract for the supply of goods or services and where the defendant
     refuses to pay the contract price it has been established in English, Canadian and
     American law that the contract price is the controlling quantum of damages. In such
     a case the plaintiff will not have the option of restitution.

Planche v Colburn – quantum meriut may be awarded even where no value has been
    Hired to write book in series, which got cancelled – book was ½ complete
    Author sues for value of services in quantum meriut
    Pltf argues: The services where requested in circumstances where the author
      expected to get paid = quantum meriut claim
    Counter argument: it is a detrimental reliance claim, that arise from breach of K –
      no wealth was provided from the services rendered
    Court held: There are a lot of services that don’t ever provide wealth (ie legal
      advice) & should be able to recover under UE – thus, not detrimental reliance
    Value is not always linked to pecuniary value
    To succeed in a restitutionary claim the innocent party must show that a benefit has
      been conferred upon the party in default.
    The defendants might have argued that the book had no value for them.
    The American restatement dealt with this problem by deeming the requested
      services to have a value. Essentially, an enrichment = money, goods, requested
      services - if you asked for it, you're enriched by it.
    in Planche we are really concerned with detrimental reliance calling out for relief -
      benefit should not be limited to hard value.
Posner’s Economic Theory (wrt breaching Ks):
    If you can breach K and make more money, then should do so b/c all (society)
      will be better off for it (economic efficiency).
    Victim of breach, therefore, should not be able to recover profits made by
      breaching party, as it would deter people from breaching Ks in an attempt to reach
      economic efficiency.

Wrotham Park Estate v Parkside Homes – accounting of profits wrt real property
   for social and economic reasons, the court refused to make a mandatory order for
      the demolition of houses built on land burdened with a restrictive covenant.
   The existence of the new houses did not diminish the value of the benefited land.
      BUT, the judge considered that if the pltfs were given a nominal sum, or no sum,
      justice would manifestly not have been done.
   So the court assessed the damages at 5% of the developers anticipated profit – this
      being the amount of money, which could reasonably have been demanded for a
      relaxation of the covenant.

Reading v Attorney General – profits recoverable where breaching party is fiduciary
    Fiduciaries may not put themselves in a position where their duty and interest
    They must not make any unauthorized profit – if they do, they are accountable
      whether the beneficiaries or persons to whom the fiduciary duty is owed suffered
      any loss by the transaction.

AG v Blake - recovery of profits made from breaching K; & where breaching party
is like a fiduciary
      Factors to consider in deciding whether an accounting of profits may be
             o The dft has obtained his profit by doing the very thing he contracted not to
             o The breach was cynical and deliberate;
             o The fact that the breach enabled the dft to enter into a more profitable K
                  elsewhere; or
             o The fact that by entering into a new and more profitable K the dft put it
                  out of his power to perform his K with the pltf.
      None of these facts would be, by itself, a good reason for ordering an account of
      However, the present case is exceptional:
      The undertaking (by Blake), if not fiduciary obligation, was closely akin to a
         fiduciary obligation, where an account of profits is a standard remedy in the event
         of breach.
      Had the information that he spilled still be confidential, an account of profits
         would have been ordered, almost as a matter of course.
      In the special circs of intelligence services, the same conclusion should follow
         even though the information is no longer confidential
      Most of the profits from the book derive directly from the extremely serious and
       damaging breaches of the undertaking by Blake (not to disclose). But for his
       notoriety as an infamous spy, his autobiography would not have commanded
       royalties of the magnitude that was paid.
      In any case, where there is almost a fiduciary duty, there should be recovery of

Continue with remedies of the innocent party…

1. UE by wrongdoing: (ie breach of a duty; trespass, etc.) can get restitution for
   expenses saved by the wrongdoer in committing the wrongful act. Townsend case:
   trespass on neighbor’s land; saved $ for doing so – restitution awarded for savings.
   Court should have constructed recovery rule such that would be an amount, which
   would have been contracted for instead of the wrongdoer committing the wrong/tort.
   What would have been the price he wrongdoer would have been willing to pay to get
   permission to do what he did.
2. deposits paid: can get restitution if total failure of consideration (Hunt v Silk);
3. construction partially completed:
        reliance claim: if losing K (Bowlay Logging v Domtar) reliance resulting in
           out of pocket expenses cannot be recovered – reliance is not an alternative –
           expectancy trumps reliance; BUT
        quantum meruit claim: can recover for value of work done [with K price
           being an upper limit (Goff & Jones): courts have not agreed with this latter
           point, nor have they rejected – US cases which allow to exceed K price]
4. completed work: other person fails to pay, can recover the K price (but cant sue for
   quantum meruit);
5. profit recovery: AG v Blake (breach of confidence): see above & notes mar 6…

Rights of the Party in Breach – only restitution claim

Sumpter v Hedges –
 builder quits part-way through project
 K said wouldn’t get paid ‘till K is finished (lump-sum K)
 Doesn’t make sense to say is an implied obligation to pay for work already done
 Cant force payment where defendant doesn’t have the ability to choose to keep
  the services rendered and if forced to keep them, but those that they choose to
  keep must be paid for (ie basement dug out and filled vs lumber left in front
 Policy: to give incentive to do what contracted/promised to do

NB: wrt $ - deposits cant be recovered, but pre-payments can be (remedy in favor of the
breaching party). So, in common law allow restitution for $ and sometimes for services.

Fairbanks Soap Co. v Sheppard -
 Can enforce K b/c completed it – substantial performance
 Allows person who fails to complete to sue for the K price
   Defendant has counter claim (in contract) for breach of warranty (ie completed with
    defects, but ~99% finished)

Stockloser v Johnson –
 Was there an agreement to forfeit the value
 Not always true that you cant get it back
 Ie – buy a piece of jewelry on installment and K says if miss 1 payment, the jeweler
   gets the jewelry back and you forfeit the moneys paid so far
 This would not be fair, as the jeweler would be over compensated
 Restitution is allowed to recover some of the payments, provided that:
   1. the arrangement is penal (in nature) – designed to force you to perform
       rather than estimate of amount of damage (ie: can design clause to
       compensate you but not penalize non-performance); or
   2. there is a reason why allowing the person to retain the money (ie the jeweler)
       would be unconscionable.

Hyundai Heavy Industries v Papadopolous & Hyundai: Shipbuilding v Pournaras
 K to build and buy boats
 H completes 50%, buyers breach and reject partially completed ship – claims for
  restitution of part payments made
 No restitution for part payments used to finance construction projects (started).
 To hold otherwise would leave the defendant with a ½ made boat and be out the costs
  incurred to make it.

 When performance of K is rendered impossible (US cases say where impractical)
 If the thing undertaken would be totally different than would have been if performed
   under original circumstances
 A K which is frustrated is said to be void from the time of frustration
 Where the benefit conferred was money, relief was available only where there had
   been total failure of consideration (Fibrosa v Fairbairn)
 Where goods or services have been provided, recovery for any divisible portion of
   the obligation to supply would be possible, but if the K is entire, recovery is
   precluded (in Eng at least) (Appleby v Myers) – should not be followed in CAD, as
   case rests on notions of implied K
 CAD provinces enacted (Ontario) Frustrated K Act as a result of the deficiencies in
   common law (p391-393):
   Section 3(1) – the sums paid or payable in pursuance of a K before the parties were
   (a) in the case of sums paid, are recoverable from him as money received by him for
       the use of the party by whom the sums were paid (Fibrosa case); &
   (b) in the case of sums payable, cease to be payable (other ½ of the Chandler case –
       kills it off)
   Section 3(2) – the party to whom sums of money were payable is able to recover
   money paid to them if they had incurred expenses in connection with the performance
   of the K not exceeding the amount of the expenses.
   Section 3(3) – if before the parties were discharged, any of them has obtained a
   valuable benefit other than the payment if money, the court, if it considers it just to do
   so in the circumstances, may allow the other party to recover from the party benefited
   the whole or any part of the value of the benefit (Parsons v Shea). The definition of
   benefit from section 5(4) BC reform (as adopted by other provinces): benefit
   means something done in fulfillment of k’ual obligations, whether or not the person
   for whose benefit it was done received a benefit.
   Section 5(1) – every party to a K is entitled to restitution for benefits created by his
   performance or part performances of the K.
   Section 5(2) – every party is relieved from fulfilling obligations under the K that
   were required to be performed prior to the frustration or avoidance but were not
   performed, except insofar as some other party to the K has become entitled to
   damages for consequential loss as a result of the failure to fulfill those obligations.
   Section 5(3) – where the circumstances giving rise to the frustration or avoidance
   cause a total or partial loss in value of a benefit to a party required to make restitution
   under sub (1), that loss shall be apportioned =’y btw the party required to make
   restitution and the party to whom such restitution is required to be made.

Anticipated Contracts and Gifts

‘The Architect case’ –
 invite architects to draw plans – then select one
 before K is entered into, ask for extra drawing to be used for getting financing
 architect does all this work only to discover that the project is not going to happen
 Issue: can the architect recover for all the work done?
 Depends on whether services were rendered under expectation of being paid
 If benefit of services received – restitution for quantum meruit
 Work done on proposal (bid) cannot be recovered unless there is a binding
   K/obligation to go fwd – otherwise work is deemed to be done gratuitously – the
   architect takes on that risk

Brewer Street Investments v Barclays Woollen –
 Plaintiffs began renovations on assumption that lease would be entered into with
   defendants. Defendants agreed to be responsible for cost of alterations. When no lease
   was concluded, defendants denied liability for the alterations and plaintiff now sues.
 Who cancels the project is relevant – ie. if the architect bails, then he will not be able
   to recover for quantum meriut.
Held:          (1) the undertaking of liability for alterations was not subject to condition
               that lease be concluded. Recovery allowed.
               (2) If either party was at fault, then the party at fault should pay for
               the alterations. But here, neither party is at fault.
               (3) The work was done for defendant's benefit and the plaintiff may
               thus recover to the extent that the plaintiff has not also benefited.
               (4) The defendants caused the lease negotiations to fail and thus,
               must pay for the alterations.
   McCamus said he could be convinced that this was a contract implied-in-fact, and
     that damages were the proper remedy.
   Approach set out in Brewer:
     (a)     is there a contract to pay for goods/services?
     (b)     if not, the party to blame for the failure of negotiations is liable
     (c)     if neither party is at fault, whoever requested goods/services is liable except
             to extent other party benefitted
   The initial determination of whether a contract to pay can be inferred is sound.
     However, absent such a contract, Brewer fails to tie recovery to whether the
     defendant has benefitted in fact. Given the recent trend towards the application of
     the unjust principle in this context (Walsh), it is submitted that the question of
     benefit is critical.

Promotovate v Toronto Star –
 Can recover for value conferred in situation where expect would receive
 Invited to offer ideas - was under the impression that if they would be used, he would
   receive compensation for the (for supplying the ideas that would be used)

Rowe v Public Trustee –
     Expectation that financial advantage follow the services rendered
     Was engaged to older man who died before they were wed
     Asks court to be awarded damages for the deceased’s breach of K to make a will
       – asks for the net value for the estate
     When looking for a home together (that was subsequently purchased) he said “all
       this will be yours”
     Was taken to be his intention to make a gift to her of the home – verified by the
     Continue page 412
     Held: Recover in quantum meruit requires an intention on plaintiff's part to be
       remunerated. Here, plaintiff anticipated remuneration and thus, recovery allowed.

   The rule in Rowe is that if there is a reasonable expectation of remuneration, the
     value of the services rendered can be recovered. It is true that in this context there
     can be a benefit to the defendant at the plaintiff's expense. However, as a general
     rule, the Rowe test is unsound.
   If the Court in Rowe was saying in effect that there was an understanding between
     the parties that the plaintiff would render services and in return defendant would
     make a gift to her, then relief must be premised on bargain. That being the case,
       relief should be contractual. On the other hand, if the Court in Rowe denies bargain,
       then the services rendered must be a gift. No restitutionary recovery should lie for
      Rowe can best be explained by resorting to Pettkus. Recovery is allowed because
       there is a near spousal relationship here. Likewise, recovery is allowed here because
       of the near spousal relationship. Such a distinction is policy sound because marriage
       is a contract albeit highly regulated. Accordingly, Rowe should be confined to
       matrimonial context.

Recovery of the Profits of Wrongdoing

Criminal and Quasi-Criminal Acts – ‘son of Sam’ laws which lift profits made from
criminal Acts

Direct Profits:
Re Johnson (1950) -
    A man killed his wife and then killed himself. She left here estate to him.
    Held: A person who commits a murder (someone claiming under him), should not
       be allowed to benefit from his criminal act. The husband should not be allowed to
       share in the wife's estate.

   This case was the Canadian confirmation of the UK case which developed the rule,
     Cleaver and Mutual Funds Life Ass'n (1892).
   to allow otherwise would be contrary to public policy
   includes the taking of property under life insurance policies or pension plans.

Schobelt v. Barber (1966)
    Husband and wife held property as joint tenants. Barber murdered Mrs. Barber.
      Mrs. Barber's sister sought an order denying Barber title as survivor. She claimed
      half interest in the parcel of land as her sister's next of kin.
    Held: Joint tenants rights are not brought into existence by the death of the other
      party, but are only enlarged (have an existing right to take property). The Judge held
      that four alternatives were available:
      1.       Allow the property to accrue to the survivor (murderer) under the accepted
               rules - this was seen as unacceptable.
      2.       Deny the operation of the jus accrescendi - this would involve the forfeiture
               of an existing right acquired at the time of creation of the joint tenancy.
      3.       Permit full interest to vest in the surviving murderer, but deem his victim to
               die after him. This would allow the wrongdoer to take the whole property
               during his lifetime, but it would go to his wife's heirs upon his death. This
               would still involve a forfeiture of interest.
      4.       Apply the normal rules, but make the wrongdoer a constructive trustee of the
               undivided 1/2 interest in favour of the victim's heirs or trustees. This was
               the accepted alternative.
   husband can't share in wife's estate under her will or if she is intestate.
   constructive trust provides protection to the bona fide purchaser for value. If
     husband didn't have property he would have no title to pass onto the third party. The
     creation of the constructive trust allows the innocent purchaser's title the protection
     of the court of equity.
   constructive trust prevents unjust enrichment and is consistent with the laws of
   those claiming through the wrongdoer are also precluded from taking the benefit.
   where the wrongdoer is legatee under the victim's will, the property in question goes
     to the residue of the will
   if only way of getting to the estate is through the murder, then your claim is
     eliminated (Re Gore: murdered wife and children; grandparents on both sides make
     a claim for the estate – court held if held a relationship with the murderer: no; but if
     make an independent claim through a relationship with the children: yes)

   the implication that Cleaver applies to all crimes is too broad.
   As a general proposition, whenever a party commits a wrongful act, whether
     serious or not, with the express motive of obtaining some benefit from the
     victim, the party ought not be allowed to retain the benefit.

Ontario Municipal Employee Pension Bd and Young (1985)
    Wife and husband went out drinking to celebrate their anniversary. Drunk wife got
       into an accident, killing the husband. The wife was convicted of criminal
    Held: The wife should be denied her husband's survivor's pension benefits arising
       out of his death.

   a bad decision - Judgement to deny benefits should relate to intention.
   US cases suggest if unintentional, then the principle is not engaged
   In this case, there was no intention, rather there was irresponsibility
   Court says culpable homicide disentitles her from pension
   Result is that the decision deprives dependants sources of income that they need to
     survive (ie children)

Public Trustee v Fraser –
    Schizo son murdered his mother in circumstances where (in the view of the court)
       the son was guilty of manslaughter on the grounds of diminished responsibility
    Test: whether the taking of a benefit by a person through his crime would be
       unconscionable as representing an unjust enrichment of that person so as to attract
       the public policy rule
      This entails not only ascertaining the nature of the crime, but also looking to the
       circumstances in order to evaluate the moral culpability to be attributed to the
      Son didn’t establish either such features of the crime or such lack of moral
       culpability as to displace the operation of the rule.
      Crime was of deliberate violence, although had reduced appreciation of the
       circumstances and susceptibility to the heat of the moment (via schizo)
      However, the evidence shows that he was aware of the nature of his acts and of
       the moral wrong-doing involved
      Thus, benefiting under the decease will = unconscionable benefit.

Gray v Barr – direct benefit from crime
    Should you be able to collect on insurance policy when murder?
    NO: chain of events kicked off by intentional criminal conduct
    Problem: depriving people of sources of income.

Statutory Treatment – Bill 155
    Proposed On statute, dealing with criminal remedies for organized crime – applies
       to any crime
    S3(1) forfeiture of such profits to the Crown unless the true/legitimate owners can
       be found, then the profits would go to them
    Ex. Case where a husband murders wife: receiving proceeds from murder is a
       criminal act under this statute
    Common law position is that the criminal should not get proceeds of crime, thus
       the statute supplants the common law rule: property is theoretically given to the
       criminal, but then is forfeited to the Crown
    Prior to Bill 155 there was a distinction between direct and indirect proceeds
       from crime

Indirect Profits:
Rosenfeldt v Olson -
     Not correctly decided, but the result is okay
     O was a serial killer (female children)
     O was also an informant: took money for revealing the murders (where bodies
     RCMP paid 100k to O in return for the location of the bodies of the deceased kids
     The parents of the deceased kids make a wrongful death claim for UE: profits
        (indirectly) from crime - Money should go to the victims’ families instead of the
     TJ agreed: money paid to Mrs O (at the request of O) and held on constructive
        trust for the victims families
     CA overturned the TJ: benefit was conferred without any deprivation to the
        victims families
           o Wrong, according to Birk’s article (p438):
           o Must be a benefit at the plaintiffs expense – expense is ambiguous –
               expense is subtractive and wrongful (no out of pocket cost – ie the victim
               of joke/tort/crime – this case)
      Effect of allowing recovery: deters criminals from receiving payments in
       exchange for information in the future
      Argument for disallowing recovery: don’t want to deprive police of this sort of
       ‘hail-Mary’ if it can be used to save lives, as it arguably did in this case.

The equivalent of US son-of-Sam laws = Ontario Victims Right to Proceeds of
Crime (p440a)
    Captures indirect profit from criminal misconduct
    S2(1): applies wrt K under which money is to be paid to an accused or convicted
       person or to a related person;
              (a) for the ise of recollections of the accused or convicted wrt a crime;
              (b) for the use of docs or other things in possession at any time of the
                   accused or convicted that may be related to a crime;
              (c) for an interview with the accused or convicted or with a related person
                   in which the person recounts matter relating to a crime;
              (d) for an appearance by the accused or convicted or related person, other
                   than an appearance to address victims groups or incarcerated persons.
    S6: person who gets judgment against convicted person can ask for payment of
       such from the Public Trustee who hold money received by the accused in trust.
    S8: the Public Trustee shall not make payment until five years and six months
       have elapsed after the Public Trustee first receives money under section 2
       relating to the crime.
    Moneys earned go to Tee - Victims can claim for wrongful death of children –
       take money from Tee – NB the money damages have a limitation (ie future
    S7: criminal can retain the remainder
    Statute’s main purpose is to protect creditors against criminal
    S5: statute of limitations are extended (wrt victims claim)

Waiver of Tort
   in general, in the context of tortuous wrongdoing, one can either go after a tort
      remedy, or waive the tort and go for restitution - e.g., go after the value of the
      converted chattel versus the profits made by the tortfeaser through the use of the
   there is concurrent liability, but you can only go after one remedy.
   waiving the tort may yield higher measure of relief.
   For types of torts that can be waved, see p 453

Phillips and Homprey (1866) – (older case) holds that one cannot waive the tort in cases
where the wrong is one of trespass to land.
   While it has been held that such waiver is unavailable for trespass (Phillips), the
     validity of such a limitation is suspect. There is no policy reason for distinguishing
     trespass from other torts. There is also contrary Canadian authority (Daniel).

Daniel v. O'Leary (1976) – recovery allowed in context of trespass where UE
(regardless of whether UE results from $ saved or $ made by the trespass)
     Defendant home-owner hooked into plaintiff developer's sewage system without
       plaintiff's agreement.
     Held: Recovery allowed in quantum meruit: when one accepts a service, the law
       implies a duty, neither in contract nor on an implied term of contract, but in unjust
       enrichment, to pay a fair and reasonable amount.

   The commission of tort may benefit a defendant at the expense of plaintiff in sense
     that duty owed to plaintiff has been breached. In such cases, it is generally possible
     to waive the tort and sue in restitution to disgorge the defendant of the benefit
   Some commentators have argued that waiver should be limited only to torts, which
     can be classified as anti-enrichment torts. However, such a limitation is unsound. A
     non-anti-enrichment tort such as negligence may confer benefit on a defendant in the
     sense that being careless can save costs.
   Accordingly, the better view is that waiver should be generally available.

Olwell v. Nye and Nisson (1946) – the measure of recovery
    Plaintiff sold a half interest in his corporation to the defendant. Plaintiff reserved
       title to egg-washing machine. Defendant used machine for 4 yrs. without consent.
       Plaintiff sued for reasonable value of use of machine.
    Calculation of profits:
            o The loss to plaintiff cant exceed what cost to buy machine which was
                trespassed upon
            o Reasonable rental value: expense recovered is the rental fee – calculate what
                the plaintiff would have charged the defendant to use the machine
            o How much would it have cost the defendant to hire employees to wash eggs
                manually (ie without the use of the machine), assuming that the defendant
                could not have bought or rented the machine
            o TJ awards an amount reflecting the last proposition, but the CA limits the
                amount of recovery to the amount claimed in the statement of claim
            o NB: where there is intentional misconduct, the highest way of calculating
                profit may be used to indemnify the plaintiff
    Held: Where the defendant tortfeaser has benefited by his wrong, the plaintiff may
       elect to waive the tort and sue in restitution. It is clear here that the defendant saved
       in labour cost by using the machine. There was therefore a benefit. Benefit was also
       at plaintiff's expense because the invasion of the plaintiff's right to exclusive use of
       the machine was a loss. Recovery allowed.
 If benefits are conferred under duress, the common law allowed the circumstances
  to vitiate the agreement - essentially no contract existed. The grounds for recovery
  generally fall into 4 categories:

1. Actual or Threatened Violence to the Person
 Earliest form of duress recognized at common law
 Whether the plaintiff’s will has been sufficiently overcome so that the benefit cannot
   be said to have been conferred voluntarily (Piper v Harris Manu)
 Doctrine extends beyond physical harm to include injury to reputation (Underwood v
 Also, the object of the harm or threat need not be the plaintiff himself, but someone
   for whose welfare he would be obviously concerned (Steinberg v Cohen)

2. Duress of Goods
 Doctrine of duress extended to cover injury to property rights
 Payments made to the defendant under actual or threatened seizure of the plaintiffs
   goods are recoverable in restitution (Pople v Town of Dauphin) [McCamus says that
   the K should be set aside as well)
 Doctrine also includes actual or threatened seizure of land (City of St. John case)
 However, a peculiar distinction has been made between cases where actual payment
   is made under duress of goods and where the plaintiff merely promises to pay. In the
   latter situation, such a K is enforceable (Skeate v Beale)

3. Abuse of Legal Process
 Another form of duress involves the improper invocation of legal process to obtain a
   benefit from the party so coerced (Stolze v Fuller)
 BUT, where the threat of prosecution is bona fide and the benefit is conferred in
   settlement of an acknowledged obligation rather than to stifle (suppress) the
   prosecution, the settlement will be upheld (Bow v Pfeiffer & Gilbert)
 What if threaten to sue on crummy merits b/c know defendant cant sustain the cost of
   litigation? No cases on point yet.

4. Payments Made to Obtain the Performance of some Public or Quasi-Public Duty
 Where the plaintiff pays money in order to obtain the performance of some duty
   which ought to have been rendered without charge, he may recover the payment in
   restitution. Such benefits are said to have been obtained colore officii (Hooker v
 The doctrine also applies to regain surplus payments demanded in excess of the
   proper charge (Little v Dundas and Waterloo)

   The Criminal Code also allows victims of crime to recover what is taken from them (see
   There are three inter-related problems in the compulsion doctrine:
       1.       Practical (economic) compulsion
       2.      Compulsion in context of public authorities
       3.      Compulsory discharge of another's liability.

     There is growing recognition that apart from duress, other forms of unwarranted
      pressure may vitiate the voluntariness of a transaction. This is true even in the
      context of commercial parties. Restitutionary relief is available in this context
      because the coercion is considered a wrongdoing.

Knutson v. Bourkes Syndicate (1941 SCC) -
    Plaintiffs held option to purchase lands held by defendant. Under the terms of the
      option, plaintiffs were to get title free from an interest held by X. Defendant
      acquired X's interest and demanded payment from plaintiffs to cover the acquisition.
      Plaintiffs believed their option entitled them to all the land, including X's interest, at
      the option price without further payment. However, for fear of secure title, the
      plaintiffs paid but under protest. Plaintiffs now sue to recover back additional
    Held: If a party pays to obtain possession of a thing to which he is entitled, the
      money so paid is not a voluntary but a compulsory payment and may be recovered
      back. Here, the payment was under compulsion. Recovery allowed.

Pao On v. Long – Economic Duress
Held: In determining where there is economic duress you examine these things:
                     (1) Did party protest?
                     (2) Was there an alternative course of action?
                     (3) Was there independent advice?
                     (4) Did party take timely steps to avoid?

   these are general guidelines for finding duress
   there must be coercion of the will as to vitiate consent, applies in commercial
     pressure if not a voluntary act; improvidence of the transaction
   didn't work with the facts of case there was alternative courses of action and there
     was no protest
   clearly there is a doctrine of practical compulsion, but its application is uncertain.

    Canadian courts have held that recovery is available against a public authority for
     monies paid under invalid demand (Eadie; George Porky Jacobs). Recovery has
     been grounded in practical compulsion. However, there is reason to believe that
     these cases do not stand for general principles of practical compulsion but only for
     special duress of public authorities.
      First, the cases were cases of both mistake of law and compulsion. It is difficult to
       see how mistake of law and compulsion can coexist. The former connotes voluntary
       payment and the latter connotes involuntary payment.
      Secondly, if compulsion is the underlying rationale, parties who resist a public
       authority will recover and those who comply will not recover. Such a rule is clearly
       contrary to public policy.
      Thirdly, in Eadie v. Township of Brantford, the compulsion arose not from the
       public authority's actions but from the personal circumstances of the plaintiff. An
       extension of such a broad rule is clearly undesirable.
      These cases seem to give a generous view of compulsion in the case of a truly
       abused party.
      See Restitutionary Liability of Public Authorities (Air Canada v BC)


Brook's Wharf and Goodman Bros. (1936)
    The defendants (fur importers) had stored them with the plaintiff, who operated a
       warehouse and who were by statute liable to pay the custom duties on such
       merchandise stored with them
    Having paid the duties, the plaintiff brought an action against the defendants on the
       ground that, as between themselves and the defendant, the defendant was primarily
    Held: Recovery is available to the plaintiff only where both parties are subject to a
       legally binding obligation, and the primary obligation is with the defendant.

   This is a different kind of test from the other types of compulsion – four elements
     that must be present:
         1. the plaintiff must be required by law to make a payment;
         2. the defendant must have an obligation to the plaintiff to pay (ie K’ual or
         3. the party that doesn’t make the payment must have the primary obligation to
             pay – making the plaintiff’s only secondarily obligated; &
         4. if the payment amounts to a compulsory discharge of another's liability then
             recovery is available.
   This seems to narrow. It seems ridiculous that if I pay you the money under
     practical compulsion I can recover, but if I pay off your liability where not required
     to by law I can't recover.

County of Carleton and City of Ottawa (1965 SCC)
    Municipal boundaries were redrawn. One municipality continued to provide
      services to an indigent person. The plaintiff municipality provided the services on
      the belief that the person still resided in the plaintiff's municipality. The plaintiff
       municipality sought to recover the value of the services rendered to this woman from
       the defendant municipality.
      Held: The plaintiff's conduct was occasioned by a genuine mistake. The defendant
       could not plausibly argue that the payments made did not constitute a benefit. The
       plaintiff discharged the defendant's statutory obligation and save the defendant from
       making an expenditure it otherwise would have made. The SCC allowed recovery
       under the unjust enrichment principle.
      Not necessary to show legal obligation, mistaken conferral of value leads to
       recovery – the other municipality had legal obligation, they are unjustly enriched b/c
       of the other municipality’s mistake
      NB: like mistaken payment? Was an inevitable expense for other municipality
       (obligated to pay law) – value conferred and receivable
      To get recovery, need legitimate reason to have conferred benefit – ‘officious

Peel (Regional Municipality) v Canada (1992 SCC) –
    Municipality required to pay for group home fee for juvenile delinquents - Law
       required payment if court so ordered (which they did)
    Municipality, protesting that the federal law was unconstitutional, paid – law was
       later found to be ultra vires
    Sued federal government and province for recovery of the moneys paid:
       compulsion to pay: Ordered to pay in family court, when the province was
       obligated to pay
    The appellant has failed to establish that its payments to the specified group
       homes covered an expense that the province “would have been put to in any
       event”, nor did it lead sufficient evidence by which to establish on a balance
       of probabilities that the province was saved an “inevitable or necessary
       expense”, whether factually or legally based.
    The appellant has, at most, shown that its payments may have relieved the
       province of some obligation or debt that might have arisen.

Breach of Fiduciary Duties

Establishing a Fiduciary Relationship
May be established via 3 ways:
A) The recognized list - based on their relationship and characteristics, including:
    principal/agent,      solicitor/client,  executor/beneficiary,  director/corporation,
        parent/child,          guardian/ward,        government/Aboriginal (see Guerin).

B) The open-ended category (Sopika from LAC Minerals) - A fiduciary relationship can
be established where three general characteristics seem to exist:
1)     the fiduciary has scope for the exercise of some discretion or power;
2)     the fiduciary can unilaterally exercise that power or discretion so as to affect the
       beneficiary's legal or practical interests; and,
3)     the beneficiary is peculiarly vulnerable to the fiduciary holding the discretion. The
       last feature is indispensable to the existence of the relationship.
   Critical feature (McCamus): was there a reasonable expectation that the “agent”
    would act in the “principal’s” (best) interest – did the person tak on an
    undertaking on your behalf?
   Wrong to say that vulnerability is key: not vulnerability in the sense f dependency or
    lack of bargaining power, rather vulnerability in the fact that there is an expectation that
    the other party is acting on your behalf and in your best interest (which can happen to
    both the rich and poor)

C) The "fake" or fictional fiduciary
    there are cases where the court wants to impose a particular remedy of constructive
      trusts. The traditional English doctrine required a fiduciary relationship to do so. In
      some cases courts have "stretched" to find a fiduciary relationship that was really a
    Chase Manhattan Bank - Facts: Bank paid $2M to another bank twice - once by
      mistake. The receiving bank went bankrupt before the money could be recovered.
      Held: The court held the receiving bank was in a fiduciary relationship with the
      sender bank. This allowed the proprietary remedy of the constructive trust, allowing
      the sender to "pull" the money out of the receiver's hands.
    In Lac, Laforest called this a fiction, the fiduciary relationship imposed only to grant
      the remedy of constructive trust.

International Corona v LAC Minerals (1989 SCC)
     Mining companies was in the middle of serious negotiation towards joint
       development of certain mineral claims. Plaintiff company giving confidential
       information about its explorations to defendant company. Defendant company
       purchasing mineral claims for self. Argued that they had breached a duty of
       confidentiality wrt to land and had also breached a fiduciary duty by buying the land
       out from under the plaintiffs.
     Held: The majority of the SCC held that no fiduciary duty existed. They then
       commented on whether a fiduciary "relationship" existed.
     No fiduciary duty arose here. These were two experienced corporations negotiating
       at arm's length - nothing warranted a special fiduciary relationship. One corporation
       was not dependant on the other. Each was an experienced mining company with
       access to expert advice. If the plaintiff placed itself in a dependant position, it did so
       gratuitously. The plaintiff could have included a provision to restrict the defendant
       from buying the land. To employ the "blunt tool" of the equitable fiduciary duty
       would be would be onerous to the deft here.
     HOWEVER: A breach of confidence occurred here. See Abuse of Confidence…
     La Forest tries to sum up the general principles under fiduciary duties: that they may
       vary with the situation, not compromise loyalty and a duty not to profit at the
       expense of the beneficiary.
     Wilson J. – Dissent - No ongoing fiduciary relationship arose between the parties by
       virtue only of their arm's length negotiations towards a mutually beneficial
       commercial contract for the development of the mine. A fiduciary duty, however,
       arose in Lac when it was made privy to the confidential information about the
       Williams property.
Guerin v The Queen – relationship between Abs and gov’t = fiduciary
    Federal officials want to lease reserve land for golf course – end up negotiating a
      less generous deal than the Abs wanted
    Court determined that government was a fiduciary, stemming from their sui-
      generous relationship: the Crown should have been looking after the land with the
      Abs best interest in mind; they have an obligation to act on behalf and for the best
      interest of the Abs.


Duty of Loyalty
Obligation to act on the other’s behalf, in their best interest and to:
           1. NOT enter into conflicts of interest; &
           2. NOT profit from their position.

McLeod and Moore v Sweezy -
   Hired s/o to go up north and find out of there is mineralization on a specific piece
     of property
   They found copper
   Scope depends on what the fiduciary has undertaken to do
   Check over case????????????????????????

Breach of the Duty of Loyalty

Reading v. Attorney General (1949)
    Plaintiff army officer uses position in army to help move illegal goods. Plaintiff
      accepts bribes. Bribes confiscated by Crown. Plaintiff seeks them back.
    A fiduciary relationship exists whenever:
               i) A principal entrusts to another an intangible or tangible to deal with for the
               benefit of the principal; or
               ii) A principal entrusts another with a job to perform and relies on that
               person to procure for the principal the best terms available.
    the crucial factor appears to be that though a non-commissioned officer would
      not normally be regarded as a fiduciary, the use of his uniform to deceive the
      authorities made him a fiduciary – thus as a fiduciary must a/c deliver profits
    NB: In this situation where a fiduciary relationship was created because ct felt it was
      necessary to grant the desired remedy – similar to category 3?

Keech v Sanford –
    Child has leasehold interest, which his Tee is looking after
      Tee lets the lease expire (the LL would not renew with the kid) and takes the lease
       for himself
      A Tee is the only person in the world that cannot take the lease (no matter that the
       LL refused to renew with the child)
      To allow the Tee to take advantage of the lease would compromise his duty to the
      This ensures that he will act in the child’s best interest

Liability for Breach of the Duty of Loyalty

Two ways of disgorging profits:
1. Accounting for profits: defendant proves how much was made and pays it to the
plaintiff – if the defendant goes broke, then the plaintiff becomes an unsecured creditor.
The claim is against the person, not the thing itself; or
2. Constructive trust: claim against the property itself, not the person – if the defendant
goes broke, take the property out of the defendants hands.

When you get #2 rather than #1:
   No special relationship between parties is needed (not limited to fiduciary – ie
     Chase Manhatten case;
   No right of property needed to recognized – no pre-existing property right needed
     (on the plaintiffs behalf);
   Should be granted when is appropriate to confer advantages which come with
     proprietary interest onto plaintiff;
   Where appropriate for the plaintiff to benefit from a change (increase) in value of
     the property – fiduciary should be left with no profits;
   Where property in hands of the 3rd party and on way to principal, but fiduciary
     interferes and intercepts it;
   Where breach so severe – skunk v good-guy analysis: the good guy who increases
     the value of the property should get paid;
   Where the property is so unique (Soulous v Korkontzilas);
   Where difficult to evaluate the property (ie determine $ compensation/accounting)

Hong Kong v Reid –
   Was an agent of the government and took bribes for not prosecuting criminals and
      bought property with the money in New Zealand
   to prevent him from retaining the benefit of the bribe, the court imposes a
      constructive trust to give the benefit to the beneficial interest, the principal of the
      agency relationship

Soulos v Korkontzilas –
    RE agent buys property for himself, despite clients interest in attaining the
       particular property
    No UE here b/c property value plummets
    Court finds that three is UE whether or not the value of the property increases
      Good conscience issue: captures situations of UE and no UE
      Remedial constructive trust may be granted in situations where there is lack of UE
       There are 4 conditions which should be satisfied in order to grant the
       remedy of a constructive trust:
       1. The defendant must have been under an equitable obligation – one of the type
       that courts of equity have enforced in relation to the activities giving rise to the
       assets in his hands;
       2. The assets in the hands of the defendant must be shown to have resulted from
       deemed or actual agency activities of the defendant in breach of his equitable
       obligation to the plaintiff;
       3. The plaintiff must show a legitimate reason for seeking a proprietary remedy,
       either personal or related to the need to ensure that others like the defendant
       remain faithful to their duties; &
       4. There must be no factors, which would render imposition of a constructive
       trust unjust in all the circumstances of the case: ie, the interest if intervening
       creditors must be protected.

Canson Enterprises Ltd v Boughton –
    Where there is a breach of fiduciary duty which leads to no profits (in the hands
      of the fiduciary), the plaintiff may still sue the defendant to damages (loss)
      resulting from the breach of the duty

The Abuse of Confidence

La Forest from LAC Minerals - The test for whether there has been a breach of
confidence involves establishing three elements:
1) that the information conveyed was confidential;
2) that it was communicated in confidence;
3) that it was misused by the party to whom it was communicated.

International Corona v LAC Minerals (1989 SCC)
     The receipt of confidential information in circumstances of confidence establishes a
       duty not to use that information for any purpose other than that for which it was
       conveyed. If the information is used for such a prohibited purpose, the confider is
       entitled to a remedy to the extent of the detriment suffered.
     The information that Lac obtained from Corona was confidential - which gave rise
       to an obligation of confidence. Lac's acquisition of the property was a misuse of this
       information. The conventional remedies for breach of confidence are an accounting
       of profits or damages.


Saltman Engineering v Campbell Engineering – did we cover this case????????
Refusal to Share Spousal Assets on Separation

Everson v Rich – can recover value of domestic services where expectation of being
    Claim for property acquired during common law marriage based on unjust
      enrichment and constructive trust
    Cannot show the connection between the services rendered and the acquisition of
      the property – so no constructive trust; but
    Spousal services constitute a benefit conferred to the detriment of the provider.
      There is no judicial right to retain the benefit of these without compensation – so can
      recover the value of those services as compensation.
    Assessment of damages: Where monetary damages are awarded they may either be
      quantified with reference to:
              i) The market price of the services rendered; or
              ii) A proportion of the increase in value of the assets of the person
              unjustly enriched
    When a couple lives together (with out the promise of marriage) services are
      provided in the expectation of compensation – is this right?
          o Peter v Beblow: Live together for 12 years – she does housework –
              worked part-time as cook (in summers) – claimed to have done the
              majority of house work – then split up - UE b/c he benefited from services
              for free (to her detriment) – entitled to quantum meriut; or if there is
              causal connection between acquisition of house and services, then may gat
              portion of the house via constructive trust
          o Policy: possibility of unfair exploitation in circumstances where ‘your
              guard is down’ – living together w/in intimate relationship
    Result: Value of domestic services recognized in generating wealth to acquired
      property (Pettkus), & now value of domestic services where expectation of being
      compensated are to be recognized (motivated by policy).

Pettkus v Becker – can recover value of domestic services where such generated
wealth to acquired property
     Property acquired by one party (in his name) in circs where other party
       contributed to that acquisition or maintenance
     Held: Constructive trust on that portion of property which represents the value of
       that benefit to the extent that the things you did generated wealth wrt the
       acquisition of that asset
     Must show a causal connection between what you have done and the wealth that
       has accumulated
     NB: restitution not (just) for the value of the services rendered – compensation
       out of the wealth accumulated out of the marriage – taking a portion of that or the
       value surviving (the marriage): a claim to the excess wealth (proportionate to the
       value conferred in the acquisition of such wealth).
     Reasonable expectation of compensation – doesn’t have one as a factual matter
       here but married couples might have such an expectation
         o However, to do so would contradict the statute of frauds
      Why not make a claim for value via resulting trust?
         o Raffle v Raffle – Similar fact situation – reason why resulting trust doesn’t
             apply here is b/c need to show intention that what was done by the wife
             was to amount to a contribution wrt the property
         o Pettit case – domestic services can count as an equivalent to money wrt
             the acquisition of the property if it is the joint intention of the parties
         o Remedy in theses types of cases = pro rated value of value of services
             performed (which would be differ than the remedy in Pettkus)

Unrequested Benefits
A person who behave officiously confers a benefit upon another is not entitled to
restitution. Officiousness = interference in the affairs of other not justified by the
circumstances under which the interference takes place. People should not be forced to
deal with people they don’t want to – should not be obliged to pay for things they didn’t
ask for.

Matheson v Smiley –recovery for the value of benefit conferred for necessary
services – emergency situations
    Didn’t ask the doctor to provide services – was trying to commit suicide
    Doctor performs surgery, but patient later dies
    Doctor was under a duty to step-in & doctor expected to get paid
    Where emergency medical services are given even without a request, the person for
       whose benefit they are performed is obliged to compensate for them even if the
       services are not ultimately successful.
    Policy – allow recovery to encourage good works – those where there is an
       agency of necessity - must show that:
           o its impossible to get/give instructions,
           o situation is urgent,
           o agent must be acting in their best interest (bona fide), and
           o must act reasonable (make the appropriate repairs, don’t be excessive)
    if the above is satisfied, then not mere volunteers and can make a claim

Owen v Tate – failure to prove the emergency & necessity of the situation yields no
    Paying off debts voluntarily that T owed to the bank
    T mentioned to O that was in financial trouble w/ the bank – O goes in and
       guarantees the debt – bank goes after T but doesn’t have money, so they take it
       from O
    Nature of the benefit = discharge of another’s liability – compulsory discharge of
       another’s liability (Peel v CAD); discharged other’s obligation by mistake (County
       v Ottawa): being mistaken is just as good as being compelled = UE
    T claims that never wanted O to be guarantor – was officious
    Had no good reason for doing this – was officious and thus should get no
       recovery – a mere volunteer doesn’t get any restitutionary relief.
   Decision doesn’t seem right – was the debt paid off? Court assumes that it was.
   A debt will not be discharged unless the payment is authorized or ratified at a
    later point in time (old English cases: Barcklays Bank v Simms)
   If the debt had been discharged, then there is UE – why not ask him why he paid
    – maybe he had a set-off, maybe had good reason to do so
   If the bank had assigned the debt to O, O would be able to enforce against T – T
    would have no defense
   Maybe the answer to this case is subrogation:
         o creditor (bank)
         o debtor (T)
         o guarantor (O)
         o O should be able to step into the shoes of the creditor and go after the
            debtor (even thought the claim has been paid off)

Restitutionary Liability of Public Authorities

Traditional Doctrine: moneys paid under mistake of law (ie income taxes, generally) are
unrecoverable, unless duress…
1. Demand by a public official for a payment in return for granting of a favor, which you
are entitled to for free (or for persecuting on a lessor charge) - Steel v Williams – charged
fees that shouldn’t have charged – recovery allowable – doesn’t appear to require any
type of threat.
2. Where the entire scheme is ultra vires, then there is no entitled to the thing being
forced to pay high price. The more ultra vires it is, the more unlikely you would be able
to recover.

Mason v New South Wales – entire licensing statute is ultra vires
   Aside from any physical threat or duress, will not be entitled to recovery b/c
      shouldn’t have sought that license in the first place – ultra vires.
   When insisted on you getting these licensees, they impliedly threatened you

Porky Jacobs & Eadie case-
    The mere making of the demand by a public official constitutes duress
    Was entitled to license (Porky) and sub division of the property (Eadie) and they
      charged more
    So not very helpful (b/c entitlement) – what is the effect where overpay taxes?

Air Canada v British Columbia – getting rid of the mistake in law doctrine
     Pl pays tax under a statute later found unconstitutional. Pl seeks recovery of money
     Ultra vires taxes – mistake of law problem, not duress b/c no threats were made
     AC thought they were supposed to pay money
      Amex Potash – Government of Saskatchewan sought to deny recovery for payments
       made under an ultra-vires statute through its Judicature Act which read "such monies
       are not recoverable once paid"
           o Court held that legislation which denied taxpayers the ability to recover taxes
               paid under an ultra-vires tax legislation was itself ultra-vires.
           o gov’t said if want potash pay big-time for it:
           o Co make payment under protests – bring lawsuit and in the interim the law
               is held ultra vires
           o Potash co should get money back then, right?
           o No – private law issue – up to the court to determine whether recover or
               not – decide they cant recover – doesn’t make sense?
      Should be able to recover moneys paid under mistake of law
      Should be no distinction between mistake of law and mistake of fact and should
       allow recovery in any case of enrichment at the plaintiff’s expense provided the
       enrichment was caused by the mistake and the payment was not made to
       compromise an honest claim, subject of course to any available defenses or
       equitable reasons for denying recovery, such as a change in position or estoppel.
      But here, they didn’t get to recover b/c policy reasons:
           o The appellants, in all likelihood, passed on the burden of the UV taxes to
               their customers – the UE of the respondent was therefore not shown to be
               at the expense of the appellants; &
           o The general rule of recovery should, as a matter of policy, be reversed
               where the person unjustly enriched is a governmental body.
      NB: this is all obiter in this case – no subsequent case (yet) has used it to grant
      The rule of compulsion seems to requires that there is no practical choice but to
       pay in the circumstances, or to put oit another way, before a payment will be
       regarded as involuntary there must be some natural or threatened exercise of
       power possessed by the party receiving it over the person or property of the
       taxpayer for which he has no immediate relief than to make the payment.
      Summary: Where demand is UV – no recovery (Air CAD) subject to forms of
       duress (real/bad: serious threats); apart from UV, mistake of law doctrine is
       overruled, thus recovery; entitlement case (demand pay where entitled for free) –
       old rule prevails, as AC V BC doesn’t touch this issue – probably wont recover if
       the scheme is UV; can recover where there are threats of duress

Woolwich Building Society v IRC (HL) – court applies Air Canada v BC
   Payments of UV taxes were, b/c of the UV nature of the scheme, were
   The retention by the state of taxes unlawfully exacted is particularly obnoxious,
      b/c it is one of the most fundamental principles of our law
   Taxes should not be levied without the authority of Parliament; and full effect can
      only be given to that principle if the return of taxes exacted under unlawful
      demand can be enforced as a matter of right
   NB: court doesn’t reform the mistake of law doctrine – just recover moneys paid
      under UV law
Current state of the law in Canada wrt mistake of law is uncertain – likely to adopt
both AC v BC and Woolwich cases.

What if enter into UV K with the Crown?
   Look to Sinclair case – CAD courts ignore it
   Breckenridge Speedway – assume same rules apply – if benefits incurred by the
      Crown under UV agree’t, then should be recoverable
   ???????????????????????????????????????????????????????????


Hussey v Palmer – constructive trust as a general remedy
   Mother in law moves in and builds (unrequested) an addition in which she intends
      to live in until she dies
   Living arrangement doesn’t work out – she splits
   Court awards a constructive trust for the value of the house that is derived by the
      extension that she built – the increase in value.

Chase-Manhatten Bank v Israel British Bank – constructive trust
    Bank pays 2m twice (by mistake) – by the time they figure it out the defendant is
    Only entitled to what the insolvent bank can pay – become an unsecured creditor
    Bank would rather have a CT imposed b/c not subject to bankruptcy – int attaches
      to the property – follow the proceeds of the 2M
    In English law, has to be a fiduciary relationship – a CT is like a real trust, so
      need to find relationship similar to trust relationship = fiduciary relationship
    Dft argues Sinclair case – wasn’t really a fiduciary relation, which arise out of
      consensual arrangements
    This is a phony use of fiduciary relationship – LAC
    Continue on Apr 10

Tracing at Common Law
See note p729

Tracing in Equity
See notes p 766
    Can follow goods into the hands of the 3rd party unless he is a BPV without notice

When does the right arise: p767
   Eng courts say can only trace where there is a breach of a Fid’y relationship –
      assets have passed through the hands of a F’y
      Implication of this rule is that would not be able to trace in theft – in this situation,
       the T.O. retains title at CL – there is no equitable interest here
      US law: thief is subject to equitable tracing as well
      CAD: constructive trust is not restricted to F’y relationship – wrt tracing, don’t
       know the answer – probably makes sense to say that equitable tracing should be
       broadened as constructive trusts have

When is the right to trace lost?
   Where stuff gets into the hands of a BPV without notice;
   Monies dissipated – spent;
   Donee or innocent volunteer (ie has been given money and has changed his
      position) – ie decision to accrue real property – 3rd parties who haven’t paid for
      benefit they received;
   When you can no longer identify the stuff – if cant identify, then lose the right to
      trace - Mixed funds…

Re Claytons case: first in, first out except if the money is deposited on the same day
(then distribute proportionally) or the Tee designates the w/drawl as coming from a
particular trust
     If FIFO rule works against you, then can ignore it and assume right of withdrawal
       – the money withdrawn first is his money
     rule is considered unfair and overruled in OSC v Greymac

Re OSC v Greymac – tracing in equity – when right is lost
    trust company provided work for lawyers – large amounts of money went in and
      out – dissipated – victims are SHs and creditors of company
    some of the money went into other accounts that were visible/identifiable
    court refuses to apply Claytons case – shouldn’t apply here where have 2 nice
      guys competing - competing victims case
    held: apportion remaining $ among the trusts rather than applying the FIFO
      rule – may not be practical to apportion in some cases (court does not say what
      will do, doesn’t rule out the FIFO approach here)
    NB: if there was an amount of money in a/c from a trust earning interest longer
      than the other trust money, the court will take this in account when considering
      the amount of apportionment – other trust should not benefit from that interest

Re Hallett
 lawyer breached Fy obligation – was B with a life int and had title control of property
   and $ he held in trust for another person - dep funds into own a/c and later withdraws
   $ and spends it – died
 any withdrawal made is presumed to be of his money BUT where the balance in
   the a/c < trust amount, the B is only entitled to the lowest intermediate balance
   in the a/c – ex. a/c has 5k (Tee $), dep 10k (trust $); w/drw 12k = 3k; dep 2k = 5k
   (final bal): B cant claim all 5k, only entitled to 3k (lowest bal in a/c) – can claim other
   7k via personal remedy (would be in the same position as other unsecured creditors) –
   cant get equitable lien against the 2k b/c it was not tied to the trust property
    Exception – B can prove dep was intended to replenish the trust $; or can trace $
       out and $ in and show that they are the same property (ie it was used for an
    Re Oatway: mixed $ - w/drws and buys shares – spends rest of $ in account – dies
       – when money in the account is w/drawn for the purpose of an investment, it
       is presumed that the $ used was trust money (presumed he did it for the
       trust) – can trace money to the shres that he invested in – NB: in this case he had
       depleted the a/c, but if he had not deplete the a/c and there was enough $ in there
       to cover the amount of the trust, the a constructive trust would be imposed on that
       $ (in the a/c), rather than on the investment (so long as the money does not
       decrease to below the amt deposited)

LSUC v TD Bank – tracing in equity – when right is lost
   Solicitor missapprop trust finds (of clients)
   On a particular day, after there were no more misapprop’s, bank puts in money
     (non of which is stolen)
   Bank argues that can only get amount of money that was left in the account prior
     to the banks deposit – last remaining balance rule
   Bank so confident that they take the money out – before trial
   Court reject the lowest remaining balance rule – complicated in lawyers’ trust
   Very difficult to figure out – instead say that figure out money contributed into
     account, and give everyone a pro-rata claim on the remaining money the account
     (divided among every client and TD bank)
   Possible that TD get very little
   doesn’t think this case is decided correctly
   court thought that Greymac didn’t rely on the last remaining balance test – but
     they did - Was argued that trust co put all kinds of money into account and
     wanted pro-rata calculation, but court refused and applied the lowest remaining
     balance rule
   in Otario – Greymac says that lowest bal is rule - confirmed by SCC
   LSUC doesn’t follow rule wrt benefitial owners
   Whats the better rule? There is an argument for LSUC arg (very difficult) but he
     problem is that it is a proprietary remedy -
   If argue for the lowest blance rule – use greymay
   If argue against, use LSUC – very difficult

The remedy of Subroigation:
Ie ins co can step into the shoes of the victim and sue the tortfeaser – may be K’ed for or
provided by statute or provided by the CL.
Can also arise where guarantor pays off a creditor – have subrogated claim against the
principal debt – step into the shoes of the person paid and assert his claim against the
person who borrowed the money. Sometimes provided by K, or by common law.

Fictional subrogation:
St Clair – assert self into the shoes of a 3rd party creditor of the defendant and assert what
is infa ct a fiction subrogated claim against the payee for recovery if the loss suffered for
making payment. Ie lend money to UV building society business – BS uses $ to pay off
intra vires creditors – HoL said can step into the shoes of someone who has been paid off
and assert their dead claim against the payee. Didn’t work in St Clair b/c have to prove
that the money was actually used for that purpose (couldn’t in that case).

Someone who lends money to an infant to buy necessaries (school fees…) and the infant
uses the funds to pay the fees. K is unenforceable, bc of law of infants K, BUT the lender
can step into the shoes of the guy who was paid and assert right for payment.
Same can be said wrt persons who are deemed mentally incompetent.

   Loan unenforceable under the money lenders act – used the money to buy property
   Subrogate loan against the vendor of the property (who has been paid for the land) –
    only to the extent that the money was used in that way
   Fact that used to buy RE relevant bc? No policy reason justifying the claim.
   Doctrines depend on the intent of the parties- did they intend for this to be available =
    if there is a Kual obligation to spend the money in a particular way, then subrogation
    bc there is an implicit arrangement wrt use of money

Banque Financiere de la Cite v Parc – subrogation as a remedy
 Holding co (O) holds Park and Pool
 Park borrows $ from RBC and Pool and gives security
 Park decides to refinance mtg1 – talk to O to get more money
 O goes to BFC, and asks for money to go to Park
 Park uses it to pay off most of RBC mtg
 In return for loan, no secy was given – but got an undertaking from O that no one in
   group will hurt the BFC (comfort letter)
 O becomes insolvent – Tee tries to enforce (Pools) mtg against Park – bad news for
 BFC subrogates into the position of someone paid off – HoL: BFC can step into the
   shoes of RBC and assert their claim in priority to other debts only to the extent of the
   amount paid to RBC – RBC mtg was in priority to Pools debt
 Result is that BFC gets to become a secured creditor even though they didn’t take a
   security int
 Policy – decision rests on UE – Pool would be unjustly enriched - thus allow
 Obligation imposed to prevent UE – not implied Kual right (ie that would have
   existed between BFC and Park) – brings back subrogation as a remedy where UE –
   restitutionary remedy.

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