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
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
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
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
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
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
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)
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) --------------------
THE SUBSTANTIVE GROUNDS FOR RESTITUTIONARY RELEIF
I. RESTITUTION OF BENEFITS CONFERRED UNDER
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
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 $
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
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
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
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
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
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
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
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
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
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
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
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
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
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
(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
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 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
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
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.
THE FOUR MINUTE REVIEW OF PROPERTY LAW
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
HOW TO RECOVER THE BENEFITS OF MISTAKEN IMPROVEMENTS?
ACTIVE CLAIMS -
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.
NOTE THE PLAINTIFF MUST DO EQUITY TO GET EQUITY - THIS
PASSIVE CLAIM IS ONLY GOOD IN AN EQUITY SUIT.
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
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
(b) the recipient contributed substantially to the claimant’s
mistake (tort damage type of calculation).
II. RESTITUTION OF BENEFITS CONFERRED UNDER
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.
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)
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 –
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Recovery of the Profits of Wrongdoing
Criminal and Quasi-Criminal Acts – ‘son of Sam’ laws which lift profits made from
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.
GO OVER CASE AND DOUBLE CHECK-IT
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
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
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
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
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
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.
1. PRACTICAL COMPULSION
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.
2. COMPULSION IN CONTEXT OF PUBLIC AUTHORITIES
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
See Restitutionary Liability of Public Authorities (Air Canada v BC)
3. COMPULSORY DISCHARGE OF ANOTHER'S LIABILITY
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
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.
REMEDY FOR BREACH OF FIDUCIARY DUTY OR CONFIDENTIALITY =
CONSTRUCTIVE TRUST = ALL PROFITS YIELDED TO PLAINTIFF LESS ANY $
SPENT IMPROVING THE PROPERTY AT PLAINTIFF'S BENEFIT
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
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
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
Soulos v Korkontzilas –
RE agent buys property for himself, despite clients interest in attaining the
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.
REMEDY FOR BREACH OF FIDUCIARY DUTY OR CONFIDENTIALITY =
CONSTRUCTIVE TRUST = ALL PROFITS YIELDED TO PLAINTIFF LESS ANY $
SPENT IMPROVING THE PROPERTY AT PLAINTIFF'S BENEFIT
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
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
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)
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
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
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
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
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
III. RESTITUTIONARY REMEDIES
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
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
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
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
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.
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
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 –