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The Surfing Ninjas In association with Arnold – Guest Productions Present Restitution – Spring 2005 Prof. “Mad-dog” Maddaugh 1 Table of Contents: 0.0 Index 01 Restitution at Common Law 1.0 1.1 2.0 3.0 4.0 Introduction Historical Background Restatement of the Law of Restitution: Underlying Principles English History of Restitution Slade’s Case Common Counts Moses v. Macferlan Sinclair v. Brougham Recent English Law on Restitution Canadian History of Restitution Deglman v. Guaranty Trust Co. of Canada Petkus v. Becker General / Tripartite Principle Traditional v. General Principle Approach Peel (Regional Municipality) v. Ontario Unjust Enrichment, Benefits & Subjective Devaluation Planche v. Colburn William Lacey Ltd. v. Davis Corresponding Deprivation Absence of Juristic Reason Gidney v. Shank Mack v. Canada (Attorney General) Garland v. Consumers’ Gas Co. Mistake of Fact Royal Bank v. The King Royal Bank v. The King 4 Essentials Analysis Kelly v. Solari Chambers v. Miller Jones v. Waring & Gillow Ltd. Larner v. London County Council Hood of Avalon (Lady) v. Mackinnon Patterson Motors v. Reily Krebs v. World Finance Co. Ltd. Change of Position Storthoaks (Rural Municipality) v. Mobil Oil Canada Ltd. RBC Dominion Securities Inc. v. Dawson Garland v. Consumers’ Gas Co. Improvements Made to Another’s Land Montroya v. Ontario Asphalt Nicholson v. St. Denis Greenwood v. Bennett Olchowy v. McKay Central Guarantee Trust Co. v. Dixdale Mortgage Investment Corp. Mistake of Law Origins to Mistake at Law Bar Bilbie v. Lumley Eadie v. Township of Brantford Kelly v. Solari 07 07 07 07 08 08 08 08 08 09 09 09 09 09 10 10 10 11 11 11 11 11 11 12 12 12 12 13 13 13 13 14 14 14 14 14 15 15 15 15 16 16 16 16 17 17 17 17 2 5.0 6.0 7.0 Township of Nepean v. Ontario Hydro Exceptions to the Traditional Rule George (Porky) Jacobs Enterprises Ltd. v. City of Regina Mistakes as to Private Rights Cooper v. Phipps Payment to Public Authorities Under Duress Eadie v. Township of Brantford Payments Under Ultra Vires Legislation Air Canada v. British Columbia Canadian Pacific Airways v. British Columbia The Nature of the Operative Mistake Ignorance of the Law David Securities Property Ltd. v. Commonwealth Bank of Australia Failure to Predict Overruling of Doctrine Kleinwort Benson Ltd. v. Lincoln City Council Statute that Retroactively Repeals a Tax that was Payable Commissioner of State Revenue v. Royal Insurance Australia Ltd. Limitations on the Right to Recover Public Authorities Colore Officii Compulsion Air Canada v. British Columbia Woolwich Equitable Building Society v. Inland Revenue Commissioners Re Eurig Estate Passing On Defence Air Canada v. British Columbia Canadian Pacific Airlines v. British Columbia Allied Air Conditioning v. British Columbia Ineffective Transactions Lack of Capacity (Mental) Lack of Capacity (Minors) Ultra Vires Contracts Hammersmith Westdeutsche Landesbank Girozentrale v. Islington L.C.B. Illegality Holman v. Johnson St. John Shipping Corp. v. Joseph Rank Ltd. Kiriri Cotton Co. Ltd. v. Dewani Kingshott v. Brunskill Still v. Minister of National Revenue Illegality Exceptions Want of Authority Hazelwood v. West Coast Securities Ltd. Mistake in Assumption Smith v. Hughes Bell v. Lever Bros. Solle v. Butcher Great Peace Shipping Ltd. v. Tsavliris Salvage (International) Ltd. Mistake of Terms Mistake of Terms (Lack of Privity) Bolton v. Jones Mistake of Terms (Non Est Factum) Marvco Color v. Harris Mistake of Terms (Mistake of Identity) Ingram v. Little Lewis v. Avery Mistake of Terms (Ambiguity) 17 17 18 18 18 18 18 18 18 19 19 19 19 19 19 20 20 20 20 20 20 20 21 21 21 21 21 22 22 22 22 22 22 22 23 23 23 23 24 24 24 24 25 25 25 25 26 26 26 27 27 27 27 27 27 28 28 3 Raffles v. Wichelhaus Hobbs v. Esquimalt & Nanaimo Railway Frustration (Discharge for Breach) Fibrosa Spolka Akcyjna v. Fairbain Lawson Combe Barbour Ltd. Frustration (Recovery of Other Benefits) Parsons Bros. Ltd. v. Shea Frustration (British Columbia Frustrated Contracts Act) 8.0 Criminal Acts 9.0 Waiver of Tort Restitutionary Approach Attorney General v. Guardian Newspapers Ltd. Murder & Denial of Benefits Re Johnson Murder & Denial of Benefits (Life Insurance) Demeter Brissette Estate v. Westbury Life Insurance Co. Irwin Estate v. Cumis Life Insurance Co. Oldfield v. Transamerica Life Insurance Co. of Canada Murder & Denial of Benefits (Joint Tenancy) Schobelt v. Barber Principle of Intent Leggatte v. Smith OMERS v. Young Gray v. Barr Canadian Indemnity Co. v. Walken Machinery & Equipment Ltd. Co-operative Fire & Casualty v. Saindon Mutual of Omaha Insurance Co. v. Stats Straight Profit from Crime Rosenfeldt v. Olson Attorney General v. Blake Wrotham Park Estate Co. Ltd v. Parkside Homes Ltd. Surrey County Council v. Bredero Homes Arbutus Park Estates Ltd. v. Fuller Lamine v. Dorell United Australia Ltd. v. Barclays Bank Ltd. Interference with Contractual Relations Federal Sugar Refining v. United States Sugar Equalization Board Trespass to Property Phillips v. Homfray Daniel v. O’Leary Strand Electric & Engineering Co. Ltd. v. Brisford Entertainments Ltd. Restitution v. Punitive Damages Olwell v. Nye & Nisson Co. Edwards v. Lee’s Administration 10.0 Compulsion Duress Duress (Threat of Violence) Duress of Goods Maskell v. Horner Skeate v. Beale Abuse of Process Stoltz v. Fuller Practical Compulsion Knutson v. Bourkes Syndicate Peter Cuat v. Ilkens Construction Morton Construction Ltd. v. Hamilton Municipal Spraying & Contracting Ltd. v. Newfoundland 28 28 28 29 29 29 29 29 29 29 30 30 30 30 30 30 30 31 31 31 31 31 31 32 32 32 32 32 33 33 33 33 34 34 34 34 34 34 35 35 35 35 35 36 36 36 36 36 37 37 37 37 37 37 37 38 38 4 Colore Officii George (Porky) Jacobs Enterprises Ltd. v. City of Regina Eadie v. Township of Brantford Economic Duress D&C Builders v. Rees The Siboen & The Sibotre The Atlantic Baron Pau Onu v. Lao Yiu Long Director of Public Prosecution v. Lynch Universal Sentinel Euig Luck Economic Duress in Canada Lister v. Dunlop Stott v. Merit Investment Corp. 38 38 38 39 39 39 39 39 40 40 40 40 40 40 Restitution in Equity 11.0 12.0 13.0 Undue Influence Allcard v. Skinner Public Trustee v. Skoretz O’Sullivan v. Management & Music Agency Royal Bank of Scotland v. Ettridge Geffen v. Goodman Estate Breach of Fiduciary Duty The Fiduciary Relationship Pre-Cam Exploration v. MacTavish Standard Investments v. C.I.B.C. International Corona Resources Ltd. v. Lac Minerals Ltd. Hodgkinson v. Simms Scope of Fiduciary Duty Courtwright v. C.P.R. Schaeffer v. Chodoes McLeod & More v. Sweezey Duty of Loyalty Guerin v. Canada Conflict Rule Bray v. Ford Reading v. Attorney General Profit Rule Regal (Hastings) Ltd. v. Gulliver Peso Silver Mines v. Cropper Canadian Aero Services v. O’Malley Fiduciary Liability Boardman v. Phipps Guinness Plc v. Saunders Proprietary Remedies Lister v. Stubbs Attorney-General for Hong Kong v. Reid Breach of Confidence Prince Albert v. Strange Coco v. A.N. Clark (Engineers) Ltd. International Corona Resources Ltd. v. Lac Minerals Ltd. Attorney General v. Guardian Newspapers Ltd. Mixed Inventions Seager v. Copydex Right of Privacy Douglas v. Hello! Ltd. 40 40 41 41 41 41 42 42 42 42 43 43 43 43 44 44 44 44 44 44 45 45 45 45 45 45 46 46 46 46 46 46 46 47 47 47 47 47 48 48 5 14.0 15.0 16.0 Campbell v. MNG Ltd. Breach of Confidence Remedies Cadbury Schweppes Inc. v. FBI Foods Ltd. Just Cause (Excuse) Defence Church of Scientology v. Kaufman Woodward v. Hutchins Unconscionable Transactions Waters v. Donnelly Harry v. Kreutziger Griesshammer v. Ungerer & Miami Studios of Dancing Gaertner v. Fiesta Dance Studios Ltd. Lloyds Bank Ltd. v. Bundy Schroeder Music Publishing v. Mccaulay Osorio v. Cardona Officiousness Necessitous Intermeddling Great Northern Railway v. Swaffield Hastings v. Semans Village Matheson v. Smiley Re. Rhodes Preservation of Property Nicholson v. Chapman Re. Pike Sherrin v. Haggerty Maccelsfield Corps. v. Great Central Railway Preservation of Credit Fulfillment of Another’s Duty Self-Serving Intermeddling Norton v. Haggett Self-Serving Intermeddling (Law Profession) Felton v. Finley Compulsory Discharge Moule v. Garrett Legal Compulsion Arising at Common Law Legal Compulsion Arising by Statute Brook’s Wharf & Bull Wharf Ltd. v. Goodman Bros. Peel (Regional Municipality) v. Ontario Practical Compulsion Harris v. Carnegie Limitations of Recovery Carleton (County) v. City of Ottawa Owen v. Tate Canada (Attorney General) v. Becker Gifts J.B.C. Consulting Inc. v. Gray 48 48 48 49 49 49 49 49 50 50 50 50 51 51 51 52 52 52 52 52 53 53 53 53 53 53 54 54 54 54 54 54 55 55 55 55 55 56 56 56 56 56 57 57 57 Remedies 17.0 Constructive Trusts & Equitable Liens The Constructive Trust English Law and Constructive Trust Keech v. Sanford Hussey v. Palmer Canadian Use of Constructive Trust Schobelt v. Barber Petkus v. Becker International Corona Resources Ltd. v. Lac Minerals Ltd. 57 57 58 58 58 58 58 59 59 6 18.0 19.0 20.0 Creditor in Invitum Chase Manhattan Bank N.A. v. Israel-British Bank (London) Ltd. Ellingsen (Trustee of) v. Hallmark Ford Sales Ltd. Constructive Trust & Profit from Wrongdoing Soulos v. Korkontzilas Attorney-General for Hong Kong v. Reid When does the Constructive Trust Arise Rawluk v. Rawluk The Equitable Lien Glavasky v. Stadnick International Corona Resources Ltd. v. Lac Minerals Ltd. Equitable Compensation Nocton v. Lord Ashburton Guerin v. Canada Hodgkinson v. Simms Canson Enterprises Ltd. v. Boughton & Co. Tort v. Equitable Compensation in a Fiduciary Relationship Norberg v. Wynrib M (K) v. M (H) Tracing Tracing at Law Tracing at Law (Money) Taylor v. Plummer Banque Belge pour L’Etranger v. Hambrouke Lipkin Gorman (a firm) v. Karpnale Tracing in Equity Re. Diplock Chase Manhattan Bank N.A. v. Israel-British Bank (London) Ltd. Lowest Intermediate Balance Rule Clayton’s Case Hallet’s Case Re. Oatway James Roscoe (Bolton) Ltd. v. Winder Competing Beneficial Owners Re. Walter J. Schmidt Ontario Securities Com’n v. Greymac Credit Corp. Law Society of Upper Canada v. T.D. Bank Subrogation, Contribution, & Indemnity Subrogation Traders Realty Ltd. v. Huron Heights Shopping Plaza Ltd. Banque Financiere de la Cite v. Parc (Battersea) Ltd. Contribution Whitham v. Bullock Re. Wawanesa Insurance Co. Spiers & Son Ltd. v. Troup Schnurch v. Ploeger Indemnity Brook’s Wharf & Bull Wharf Ltd. v. Goodman Bros. Carleton (County) v. City of Ottawa 59 60 60 60 60 60 60 61 61 61 61 62 62 62 62 62 63 63 63 63 63 63 64 64 64 64 65 65 65 65 65 66 66 66 66 66 66 67 67 67 67 67 68 68 68 68 68 68 69 7 RESTITUTION AT COMMON LAW INTRODUCTION Under the ‘General Law of Obligations’, restitution fits in thus… Common Law Tort Restitution Promises ought to be kept One ought not injure one’s neighbour Source of the duty is from the parties Source of duty is imposed by law Expectation interest being protected (distributive justice as opposed to corrective justice) Reliance interest is protected (reverse of contract) Look to position of plaintiff to see what the expectation interest is Again look to plaintiff to see to what degree the plaintiff has been harmed One ought not to be unjustly enriched at the expense of another Like tort, duty is imposed by law (i.e. law says you may not be unjustly enriched at the expense of another) Also concerned with Reliance interests, but a particular type: reliance where the benefit has flowed into the defendant’s hands = restitution interest Look to defendant to see how much the defendant has been benefited and it is this ‘benefit’ that the defendant has to disgorge back to the plaintiff HISTORICAL BACKGROUND Restatement of the Law of Restitution: Underlying Principles Two Americans, Scott & Seavey looked around at all the cases for a common thread to bring them all together, what they found, they labelled either ‘quasi-contract’ (common law) or ‘constructive trusts’ (equity) or together as ‘restitution’. From this, they wrote the first definitive work called the “Restatement of Restitution” (1937), from which they set out 3 basic principles… 1 A person unjustly enriched must make restitution to another Implies there is a ‘benefit’ to the defendant (thus, identify what this is) That the benefit has been conferred at the expense of the plaintiff, and That it is ‘unjust’ for the defendant to retain that benefit gained at the expense of the plaintiff. 2. A person who officiously (through assertion of authority or interference) confers a benefit upon another is not entitled to restitution (key is to identify officiousness) 3. A person is not permitted to profit by his own wrongdoing at the expense of another. English History of Restitution Long ago, actions developed to recover assets lost to unjust enrichment (ex. law of conversion, covenant, debt, detinue, and account) were used in one court only: the Court of Common Pleas At some point, the King’s Bench, in desiring to compete with the Court of Common Pleas for control of debt actions, starting taking on cases in ‘deceit’ from which developed two important principles: 1. Assumpsit: literally meaning “an undertaking” The defendant promised me something (assumpsit) and didn’t deliver, thus deceiving other party out of their property Extended to permit the recover of benefits conferred by mistake, under compulsion or under a void K where the consideration had totally failed 2. Indebitatus Assumpsit: “being indebted, he afterwards assumed” Guy admits he owes the other money, and promises a second time to repay – a promise on a promise. 8 Slade’s Case (1602) England Facts: Case on appeal to Exchequer Held: The assembled judges decide that they will henceforth imply the promise of assumpsit. Comment: Therefore, it is no longer necessary to prove the defendant implied a second time to pay. In entering into Assumpsit to begin with, there is a continuous promise to pay. Common Counts Prior to Slade’s Case, assumpsit was an action on the writ (i.e. couldn’t fit it into a standard form writ because you had to explain the situation which gave rise to the problem) but with the decision in Slade’s Case (re. implied automatically), there was no longer a need to state the individual case to obtain another writ. Therefore, indebitatus assumpsit becomes a generalized writ – latter broken down into sub-groups called the 4 ‘common counts’ 1. Money Had & Received: claim brought by A against C who was paid money by B who stole it from A 2. Money Paid: A has paid some third party (C) to the benefit of B Ex. A pays B’s taxes, money goes to taxing authority (C), but B has gotten the direct benefit of having his taxes paid 3. Quantum Meruit: where not money but services, under express or implied K, have been bestowed upon the defendant for which he hasn’t paid, the plaintiff is said to be able to recover for a ‘reasonable’ price for services rendered 4. Quantum Valebut: where goods have been delivered but not paid for, in which the plaintiff claims the defendant promised to pay fair market value for the goods delivered. These actions apply equally to consensual transactions and non-consensual transactions (i.e. contractual v. statutory) Moses v. Macferlan (1760) England Facts: Plaintiff had endorsed four promissory notes to defendant, but between the parties, defendant had said that the notes were endorsed without prejudice (i.e. I won’t sue you, only the maker of the notes if there is a default). Defendant is not true to his word, he sues plaintiff on the notes as the endorser in the Court of Conscience & under the rules of procedure, the Court cannot hear the oral evidence about holding plaintiff harmless – so defendant wins. Plaintiff approaches King’s Bench to recover those monies from defendant under notion of unjust enrichment. Held: Where there was no possibility of imputing a promise to pay on the part of the parties/defendant (plaintiff, at this point), court granted recovery in an action for money had and received. Comments: Case heard by Lord Mansfield & gave rise to expression ‘quasi-contract’ The analysis was accepted for the next few years until we started to distinguish between contracts implied in fact (these are actual Ks), and contract implied in law (Ks are not consensual at all – the obligation to repay is because it is unjust to retain the monies or benefits that have been received). Sinclair v. Brougham (1914) England (HL) Facts: This case involved a claim for money had and received by public depositors to recover their deposits against a building society that was carrying on ultra vires transactions as a banking business, the Birbeck Bank. The building society went into liquidation and once the outside creditors have been paid off, there are not enough funds to satisfy both the remaining depositors and shareholders. Held: Common law action of monies had and received denied. Haldane L.C. responds with; “…how can we imply a K here if to do so would be ultra vires?” Comments: This case is considered to be the low water mark of Restitutionary law and is a thorn in the side of English jurisprudence until 1993 and Woolwich Equitable Building Society v. Inland Recent English Law on Restitution The classic English work on restitution is a book by authors Goff & Jones (Lord Goff, and Jones – professor emeritus Oxford University) Restitution wasn’t really recognized as a separate and distinct area of law in England until 1993 in the decision of Woolwich Equitable Building Society v. Inland, but is now thriving 9 Canadian History of Restitution Canada’s history begins with Deglman v. Guaranty Trust Co. of Canada (1954) on the common law side, and Petkus v. Becker (1980) on the equity side Today, Canada has the most developed law of restitution in the commonwealth (much influenced by US) Deglman v. Guaranty Trust Co. of Canada (1954) Canada (SCC) Facts: Involves an ‘ineffective transaction’ and ‘unjust enrichment’. Nephew, at request of Aunt performed various services to Aunt in expectation of a promise from her to gift him the house next door when she passed away. However, since this promise revolved around land, it HAD to be in writing as per the Statutes of Frauds. In this case, it was purely an oral undertaking. She dies and will doesn’t leave the house, in writing, to nephew and he brings suit. SCC faced with essentially the same argument as in Sinclair v. Brougham. Specifically, how can we imply a K if to do so would be contrary to the statute of frauds? Held: SCC answers by saying that they are not enforcing an oral K here. Instead, restitution is relied upon. Plaintiff does not get the house next door, but instead receives compensation for value of benefits/services provided/received (quantum meruit). Comments: One of the exceptions to the Statute of Frauds is notion of ‘part performance’. Nephew argued, in part, that he met the requirements of part performance, but SCC held narrow view that part performance had to be unequivocally irrevocably to the land in question (i.e. repairing/working/maintaining land/property) and so part performance can’t be relied upon here. Thus the SCC, wanting to compensate the plaintiff nonetheless, saw they could apply a restitutionary claim here. This is the point in which Canada recognizes restitution as a third action in the arena of obligations. Interesting question: what if services rendered exceed in value the chattel/property in question? Answer: market value governs as limitation on reward. Petkus v. Becker (1980) Canada (SCC) Facts: Case of divorce and division of assets. Plaintiff supported defendant at early stages of marriage when he had little to no income. Plaintiff later aids in establishment and running of a successful honey farm, purchase of house, etc. albeit, all titles are in the name of defendant. Held: Constructive trust awarded & recognized as a restitutionary remedy by SCC. Court found it was unjust that she should be shut out even though legal title is wholly registered in his name, given her substantial contributions. Dickson J. says that; “…the principle of unjust enrichment lies at the heart of constructive trust. Constructive trust is a remedy imposed on equitable grounds in order to prevent unjust enrichment.” Comments: This is where we see the principles of Deglman v. Guaranty Trust Co. of Canada accepted on the equity side. The SCC had to reject the concept of ‘resulting trusts’ which imply an intention to create a trust (i.e. basically trusts implied ‘in fact’; you look at conduct of parties and from the conduct you are able to determine that they intended to create a trust) Constructive trusts are trusts implied in law; they are imposed to prevent an unjust enrichment. It says that relief should be granted even though the parties had not formulated an intention to share ownership of the property (i.e. no resulting trust present) Dickson J. sets out the 3 principles (called the ‘tripartite approach’) that underlie a restitutionary claim in Canada (still good law)… 1. There must be an enrichment 2. There must be a corresponding deprivation, and 3. There must be the absence of any juristic reason for the enrichment GENERAL / TRIPARTITE PRINCIPLE Traditional v. General Principle Approach Even after Petkus v. Becker, the traditional common law/category approach is still important. Look at the traditional categories to see if unjust enrichment is being alleged before the courts If the traditional categories aren’t able to identify unjust enrichment, and it looks like this is new ground… Then apply the tripartite (general) approach from Petkus v. Becker 10 This does not get rid of the old traditional categories and replace them with the general principle approach, rather, the old categories ‘inform’ the general principles; they give content to the general principles by looking at the traditional categories of how unjust enrichment was handled. Peel (Regional Municipality) v. Ontario (1992) Canada (SCC) Facts: Federal statute governing juvenile delinquents included a provision that said young offenders, placed in homes in the municipality in which they lived, gave responsibility for financing those stays on that particular municipality. Peel (Regional Municipality) argued that this legislation was ultra vires. An earlier court decision agreed that the legislation was ultra vires, and now the plaintiff brings suit for return of their money. The claim here is not ‘money paid and received’ but ‘money paid’. Held: No legal liability on behalf of the provinces to support these payments and therefore no unjust enrichment. Also fails tripartite test. Comments: By the time the case reached the SCC, the plaintiff had conceded they had not discharged a legal liability of either government, therefore the suit changed from no longer being within the traditional side of unjust enrichment analysis, and now goes into applying the tripartite principles (per. Petkus v. Becker) Turns on first part of test, whether the defendant had been “genuinely or incontrovertibly benefited by the conferral in question”; MacLachlin J. says ‘no’ and points out that this was not certainly an ‘inevitable expense’. Unjust Enrichment, Benefits & Subjective Devaluation Two major policy reasons courts don’t like unjust enrichment are… 1. Windfall: it is unjust for a defendant to reap a windfall at the plaintiff’s expense, and Also called “unjust enrichment by subtraction” (Peter Birks) The plaintiff’s loss is equivalent to the defendant’s gain The restitutionary remedy is to ‘restore’ to the plaintiff what they are out of pocket 2. Profit: the defendant ought not be able to profit for their wrongdoing Example: breach of fiduciary duty for self gain Some suggest the remedy here be called ‘disgorgement’ ‘Profit’ is a parasitic concept because the wrong must be established at the beginning, carry through to the profit making, and only then can disgorgement be used In Canada, we don’t distinguish between ‘restoration’ and ‘disgorgement’, since Petkus v. Becker, we simply refer to these types of remedies as restitutionary remedies. Benefits tend to fit into two popular categories… i) Money: an obvious one, if you’ve got it, then it is a benefit to you ii) Goods & Services: a little more difficult, we can divide the problem into different aspects if we look at how those goods & services arrived in the hands of the defendant… If they were requested, then we presume them to be beneficial irrespective of whether or not they produced wealth in the defendant’s hands If they were asked for, then they are beneficial (per. Deglman v. Guaranty Trust Co. of Canada where the services were instantly a benefit to the Aunt because she asked for them) ‘Subjective devaluation’ happens where we have an unrequested benefit (i.e. someone paints your house at night unknown to you, and then demands payment the next day) whereby money or services hold no value and do no constitute a benefit if the defendant he/she did not ask for them or they hold absolutely no value to the defendant. Two exceptions to subjective devaluation are… (1) Negative benefits: if the benefit consists of an expenditure that otherwise would have to be made, then that is deemed to be a benefit, and (2) If the benefit can be turned to value, it is deemed to be readily realizable Planche v. Colburn (1831) England Facts: Author was asked to write a few chapters for a book, which he did. The publisher decided not to publish the book and refused to pay the author accordingly. Held: Author recovered on basis of quantum meruit Comments: One might argue the publisher received no benefit, but the courts said otherwise, that those chapters were requested & produced and decision not to go ahead doesn’t take away from the fact that it was a benefit 11 William Lacey Ltd. v. Davis (1957) England Facts: Builder prepares documents at the request of owner, who later shelves the project and refuses to pay for now useless documents. Held: Builder must be paid. Comments: Same line of reasoning as Planche v. Colburn Corresponding Deprivation Dixon J. in Petkus v. Becker says that corresponding deprivation means a “…causal connection between the plaintiff’s loss and the plaintiff’s gain.” ‘Corresponding’ doesn’t necessarily have to mean ‘matching’ or ‘equivalent’ Petkus v. Becker: the market value of the wife’s services in Petkus falls far short of the increased value of the farm that was the object of the case of which she was awarded the ½ interest in the farm. Here, the plaintiff’s loss is not equal in monetary gain to the plaintiff’s gain. Absence of Juristic Reason Two leading examples of juristic reason are… 1. A contract, or 2. Some disposition of law Courts have tackled this in two ways (per. Garland v. Consumers’ Gas Co.) a. Some courts have looked at it quite literally (i.e. is there a reason why the defendant ought to keep the enrichment), or b. Does the plaintiff have a positive reason for demanding restitution (i.e. why should the defendant be required to disgorge the benefit he/she has received. If there is a statutory obligation to enrich the defendant, then this is a pretty strong defence against a claim for restitution (per. Mack v. Canada AG) Gidney v. Shank (1996) Canada (ManCA) Facts: Old beat-up canoe stolen. Purchaser, unaware it being stolen, invest out-of-pocket to restore canoe. Restored canoe worth significant money. Police seize canoe as part of investigation & return it to original owner. Plaintiff sues in restitution under unjust enrichment. Held: Court ruled that relief will only be available where the owner of the improved chattel consents or acquiesces to the improvements. Comments: This is murky logic – be warned against citing!!! Mack v. Canada (Attorney General) (2001) Canada (OntSC) Facts: Plaintiffs brought action against government of Canada for damages and other remedies arising out of Head Tax imposed on Chinese immigrants between 1885 and 1923 pursuant to successive Chinese Immigration Acts. Plaintiffs based claim in part on doctrine of unjust enrichment; Government enriched by Head Tax and Chinese immigrants suffered corresponding deprivation. Held: Chinese Immigration Acts constituted juristic reason for enrichment Comments: Unjust enrichment will not be established in any case where enrichment of the defendant at the plaintiff’s expense is required by law Only if the transaction can be found to be unenforceable for a reason recognized either in law or in equity, can the possibility of a restitutionary claim for the benefit conferred be entertained. Garland v. Consumers’ Gas Co. (2001) Canada (OntCA) Facts: Defendant charging annualized interest of approx. 60% for late payments on consumers. Class action brought alleging unjust enrichment. Defendant argued that the late payment profits were actually ‘passed on’ to their customer’s in the form of reduced rates and, thus the defendant received no benefit. Defendant also cited juristic reason for scheme showing that they took their direction, and were simply complying with instructions, from the Ontario Energy Board. 12 Held: Claim for unjust enrichment dismissed based on juristic reasoning. Comments: It turns out that the Canada Criminal Code makes it an offence to charge someone this much interest anyway. MISTAKE OF FACT As a doctrine of K law, mistake serves a completely different purpose… a. Parties so far apart in thinking of matter that no K came into being to being with, or b. The mistake is so serious, that the K should be torn up and not proceeded upon However, once we rescind the K, it may be restitutionary law we turn to in order to return any benefits wrongly obtained. Now, consider how mistake is treated in restitution; where there is no K involved at all (re. either none to begin with, or K gotten rid of through legal wrangling), here the operative rule is basically thus… 1. Has the mistake caused the payment, or 2. But for the mistake, would the payment have been made? Should one party waive all inquiry into the situation, then that party has assumed the risk of mistake and should bear the cost(s) If the parties agree to outright settlement, then that agreement/settlement of a claim (provided we have voluntary submissions to an honest claim), then there is no longer any restitutionary remedy available to either party. Royal Bank v. The King (1931) Canada (ManKB) Facts: Rogue, in executing a complex fraud, makes representations to bank manager that payments of monies are to be directed to provincial coffers when, in fact, it should have gone to municipalities. The municipalities sue the bank for restoration and the bank now seeks restitution for the mistaken payments made to the provinces. The court is left to decide, out of two innocent parties, who should bear the loss. Held: Court finds all 4 requirements (see ‘Comments’) met Comments: This case is considered a landmark Canadian case because it set out 4 essentials (only 1 & 4 valid today!) for recovery in money paid under mistake of fact… 1. The mistake must be an honest mistake 2. The mistake must be between the parties 3. The mistake must give rise to an obligation to pay, and 4. There is no moral or equitable reason why the defendant should retain the money At the end of the day, the real question to ask is “was there an operative mistake that caused the payment to be made”? If so, then the recipient is open to use various defences (i.e. estoppel, change in position, etc.) Royal Bank v. The King 4 Essentials Analysis 1. The mistake must be an honest mistake An ‘honest mistake’ is a genuine bona fide belief that certain facts exist which really don’t. There was no doubt that the bank honestly thought the rogue owed this money to the province, however, this fraud would likely have been uncovered had there been even a minimal inquiry. Even so, the courts finds this not to be a bar, citing Kelly v. Solari In a contest between a careless payor and a windfall recipient, the courts favour the careless payor because a disgorgement of the windfall doesn’t prejudice the recipient. Kelly v Solari (1841) England Facts: Man insured his life and then proceeded to die. Widow paid benefit by insurance company. Only later, the insurance company discovers that the policy had lapsed and no payment was due. Held: They were nevertheless entitled to recover, 'however careless the party paying may have been, in omitting to use due diligence to enquire into the fact' Comments: This case was one of mistake of fact Widow required to repay even though widow had a clean conscience and the insurance company was careless. 13 2. The mistake must be between parties NO LONGER GOOD LAW (see Jones) The recipient must in some way be a party to the mistake, either as inducing it, or as responsible for it, or connected with it Court said that the province, in accepting the rogue’s payments, was not only ratifying the rogue’s action as an agent for the province, but by refusing to return the monies, they had adopted rogue’s actions as their own (for reasoning see Chambers v. Miller) Chambers v. Miller (1862) Canada (Nova Scotia) Facts: Customer of the bank writes out a cheque to be cashed. The account, however, is NSF. The teller, looking at the wrong account believes there to be sufficient funds and cashes the cheque. Before the guy can leave the bank, the teller finds the mistake and demands the monies back. Guy refuses and guards called in to wrestle back the money. Held: The court concluded that money had and received would not have laid here since the mistake is not between the parties, but was entirely on the head of the teller who looked at the wrong account. Comments: Court notes that payment was complete when the customer obtained possession of the money. Jones v. Waring & Gillow Ltd. (1926) England (HL) Facts: Fraud case. Rogue buys 5000p of furniture by passing off a bad cheque. Furniture company, Waring threatens to seize furniture back. Rogue, scheming, goes to Jones party and convinces them of this great deal in car trading. However, to reserve their place in the ‘deal’, Rogue asks Jones for 5000p to be made out to Waring. Fraud discovered and rogue sent to jail. There turns out to be no recovery and the two innocents made to bear the loss. Jones, in an attempt to recover their money, commences this trial against the defendant. Held: The payer may still succeed notwithstanding the fact that the payee is unaware of the mistake or that the mistaken belief results from the payer’s own negligence. Comments: Deals with money paid under a mistake of fact The House of Lords basically says that of these two parties, clearly the naivety of Jones caused this problem to begin with, but nevertheless, based on Kelly v. Solari it was an honest mistake, and allows recovery. 3. The mistake must give rise to an obligation to pay NO LONGER GOOD LAW The mistake must be such that the facts impose an obligation to make the payment (Barclays Bank v. WJ Simms) Larner v. London County Council (1949) England (KB) Facts: The London County Council told employees who went off to fight in the war, that in return for their service to their country, they would make up the difference between their service pay and their current County salary provided, that the County, be notified of any service pay raises so they could adjust accordingly. The rogue in this case was promoted several times, with service pay increases, but didn’t notify the County & continued to collect inflated sum. Held: Payments were not ‘mere gratuities’ bur rather a ‘matter of duty’ and thus were recoverable Comments: Denning case Defence put forward that these were ‘voluntary payments’ and as such, could be kept free from restitutionary remedy; a notion soundly rejected by Denning. Hood of Avalon (Lady) v. Mackinnon (1909) England Facts: Lady Hood had two daughters and wanted them looked after equally in her estate and drew a settlement to that effect. What she had forgotten, is that her late husband had settled a portion of the estate already on one of the daughters, the result was that one daughter had considerably more then the other in total. Held: The court said her intent was clear and therefore 50/50 split of whole estate between daughters Comments: Court again cites Kelly v. Solari maxim that there was an entitlement to recover, 'however careless the party paying may have been, in omitting to use due diligence to enquire into the fact' 14 4. There is no moral or equitable reason why the defendant should retain the money The classic defence here is estoppel… Representation in present fact, made in knowledge that it may be relied upon by other party, and, is in fact relied upon to the detriment of representee (see Pattison Motors v. Reily) The reason this doesn’t succeed in Royal Bank v. The King is because the judge finds no representation made by bank in any way to province that this was their money; in other words mere payment insufficient to support estoppel unless there is a duty on payor to make careful keeping of accounts (see Jones v. Waring & Gillow Ltd.) Consider too, where the defendant has made expenditures, based on the receipt of the benefit, that he would otherwise not have made, an argument can be made that he/she should be able to keep the benefit Patterson Motors v. Reily (1962) ? Facts: Widow trades in dead husband’s car for new one on assurance from dealer that husband’s insurance would pick up outstanding payments on old car. Held: The dealer is estopped to sue for outstanding payments when insurance refuses to pay. Krebs v. World Finance Co. Ltd. (1958) Canada (BCCA) Facts: Situation again of a rogue and two innocents. Rogue sells stolen car to Krebs. Rogue had taken out chattel mortgage with World Finance using the car as collateral. Krebs assumes mortgage when buying car and pays it off to get clear title to car. The true owner comes along and claims the car back. Rogue gets sent to jail & Krebs sues World Finance for amount he paid them to clear up the mortgage. Held: Relief denied. The plaintiff in this case chose to pay off the loan & was under no obligation to do so. Comments: Court is saying, as between these two parties, the plaintiff got what he bargained for. He paid to discharge the mortgage, and he got a discharge of the mortgage. This case, on analysis, can be correctly solved using the doctrine of ‘change of position’ Change of Position If a payment is made to party and that party thinking that money is rightfully theirs spends that money, and the true owners come calling for it back, then is it equitable that the party has to find some way of getting that money back? Answer is ‘no’. If you have ‘changed your position’ on that money, then that is a good defence. In other words, the right of the plaintiff to recover mistakenly paid monies to the defendant is terminated or diminished if the defendant’s position has changed as a result of the receipt of the money, and giving it back would prejudice the def. However, as soon as you realize you are getting money you know you aren’t owed, then you are estopped from spending it. Change in position is a pro tanto defence meaning only the money you have spent in change of position is unrepayable, but if there is money left over still, that money is owed (per. RBC Dominion Securities Inc. v. Dawson) as opposed to estoppel, which is a complete defence such that if you plead estoppel, then nothing has to be repaid, Storthoaks (Rural Municipality) v. Mobil Oil Canada Ltd. (1976) Canada (SCC) Facts: Plaintiff had leased oil drilling lands to defendant to which defendant had to pay royalties to municipality. Defendant abandons the leases (which they had a right to do under lease), but in abandoning these leases, the Operations department neglects to tell the Account department to stop paying royalties on leases. By the time the mistake is found, some $31k is overpaid to the municipalities. Mobil sues to recover mistaken payments. Held: Defence offered up by municipality of change of position no good in this circumstance. Comments: Change of position wasn’t allowed here for municipality because one of the requirements of change of position is that you must truly change your position; there must be a special use of the money, not simply on the day to day stuff you would have spent your money on anyway. This was the case in which the SCC recognized change in position as a good defence in restitutonary actions even though it failed here. SCC also confirms Kelly v. Solari in that negligence is not a bar to recovery in mistake in payments RBC Dominion Securities Inc. v. Dawson (1994) Canada 15 Facts: Defendant, mistakenly given shares in a profitable company, sells those shares and uses proceeds to buy fancy pants furnishings. Held: Defendant relieved of responsibility Comments: Although, as a matter of general principle, the recipient must establish that the expenditure made with the mistakenly given money is in some way extraordinary, an undue burden to prove this cannot be imposed. I.e. Dawson didn’t have to prove that these purchases were of an extraordinary nature, just that she likely wouldn’t have bought all that stuff but for the mistakenly given shares given to her. Garland v. Consumers’ Gas Co. (2001) Canada (OntCA) Facts: Defendant charging annualized interest of approx. 60% for late payments on consumers. Class action brought alleging unjust enrichment. Defendant argued that the late payment profits were actually ‘passed on’ to their customer’s in the form of reduced rates and, thus not only did the defendant receive no benefit, but that this was a ‘change in position’. Defendant also cited juristic reason for scheme showing that they took their direction, and were simply complying with instructions, from the Ontario Energy Board. Held: Change in position can never be claimed as a defence by a wrongdoer (re. interest rates infringed Canadian Criminal Code); must come to mistake honestly. Comments: English decision on this is Lipman v. Goreman (England’s Deglman v. Guaranty Trust Co. of Canada) Improvements Made to Another’s Land Canadian law has been stingy in giving any relief to the mistaken improver in land. Generally speaking, traditional relief was only available where… 1. The improver mistakenly believed he was to be or, about to become, the owner of the land (re. mistake as to title), or 2. If the true owner encouraged or acquiesced to the improvements. The court now goes beyond this and uses the unjust enrichment argument to prevent the true owner from receiving a windfall… The true owner of the land, knowing the improver is under a misapprehension, cannot passively sit back and let the improver spend his time and capital, and then not reimburse. The full implications of the unjust enrichment principles have not been fully adopted by Canadian courts thus far. Montroya v. Ontario Asphalt (1922) Canada Facts: This case involves a piece of property, extending out into a lake, which was leased to the defendant for 10 years with an option to purchase. Built into the lease was a requirement that the defendant was to build a dock on the property. The defendant spends $80k in building a substantial dock & factory for their asphalt operations; no doubt with an eye to purchasing property. It turns out that Montroya did not have fee simple in property, only a life estate with remainder to his children so that when he died, the land would go to his kids. Ont. Asphalt, upon become aware of this, nonetheless continues to build on the land. Defendant attempts to bargain with kids, but the kids wouldn’t budge and eventually when Montroya dies, Ont. Asphalt refuses to turn over property. The kids sue for ‘ejectment’ and ‘mense profits’ (re. rental value that they should get from a trespasser for using their land while they are out of possession). Held: Court reduces the claim to zero, by deducting the improvements (or set off the amount of the improvements) from what defendant owed for mense profits. Comments: This case illustrates the traditional common law approach Had the plaintiffs sued in equity, it would have been open to defendant to claim full value of improvements made Also, in equity, a defendant (ed. though not in this particular case) can have used the Doctrine of Acquiescence (considered a ‘active action’) and sue for the value of the improvements Doctrine of acquiescence: the true owner stands by watching the mistaken party make improvements and doesn’t intervene or warn mistaken party, then equity deems that true owner to have accepted those improvements on their behalf and is liable for cost Nicholson v. St. Denis (1975) Canada (OntCA) 16 Facts: True owner of house sells to a party on instalment (i.e. title doesn’t pass until last payment is made). The conditional purchaser of the house orders aluminium siding and rock facing from plaintiff to spruce the place up. Work is done and, in the process, plaintiff makes no inquiry as to the true owner of house. Conditional purchaser defaults on home instalments to true owner, skips town, and leaves the plaintiff out of pocket for improvements. The builder sues the true owner for ‘improvements’ to property. The defendant argued that he wasn’t liable since he didn’t request or acquiesce to improvements, and that given the choice, he wouldn’t have requested said improvements. Held: Relief denied. Mistake did not relate to plaintiff’s mistaken ownership of the land in question. Comments: Today, this case would be argued under ‘subjective devaluation’ Greenwood v. Bennett (1972) England Facts: A stolen car makes its way into the hands of the plaintiff, who then repairs the vehicle. The true owner eventually comes along and claims the car back. The plaintiff wants to be reimbursed for improvements made to the car. Held: Denning said; “Defendant should not be allowed to be unjustly enriched by an innocent purchaser, the innocent purchaser should be allowed recover the value of the improvements done to it through a restitutionary claim.” Comments: Denning case in which he sets out the fact that K relationships have nothing to do with restitution (re. you don’t need a contractual relationship to apply unjust enrichment) Olchowy v. McKay (1996) Canada (SaskQB) Facts: Bank forecloses on a property to which there is a right of first refusal to purchase the property assigned to the plaintiff. Plaintiff got enough money together and made arrangement to purchase. Unfortunately the plaintiff’s finance company failed to notify bank of intent & right of first refusal lapses. The plaintiff, a farmer, having needed to get seed in and going, started work on putting in his crops before deal fell through. The defendant saw the plaintiff working his land and, upon learning that the right of first refusal had not been exercised, buys the land. Plaintiff sues defendant for unjust enrichment because he did all the work to get the crop going, which at harvest yielded $4k profits. Held: No unjust enrichment (complicated case – see Comments) Comments: Example of unjust enrichment analysis gone wrong! Judge in this case, mixes up his order for analysis – beginning with the tripartite approach first, instead of beginning with the category approach & then going on to the tripartite approach (see Peel v. Ontario). Question in tripartite analysis, came down to the third principle of the tripartite approach, namely, was there an absence of juristic reason for the enrichment? Judge finds that this matter revolved around, since there was an interest in land and since the plaintiff didn’t register a lien on the land, the defendant was then entitled to title free & clear. So, judge then goes to category approach… and on the question of whether the defendant had received a benefit, concludes that any ‘benefit’ has to have ‘incontrovertibly’ benefited the other party in the sense that an that an expense the defendant would otherwise have inevitably endured has been saved, or, in the sense that the defendant has received a benefit which, though not one which the def would have freely decided to invest, has now been converted into a monetary benefit. Finally, judge gets down to analysis of statutory provisions and talks about the “Improvements to Land & Title Act” and focuses on words “…there must be lasting improvements to that land” and concludes that the Canola crop doesn’t qualify. However, the judge does concede that the earlier work of removing rocks was a lasting improvement and thus provides some relief ($420.00) for that work to the plaintiff. Central Guarantee Trust Company v. Dixdale Mortgage Investment Corporation (1994) Canada (OntCA) Facts: There’s a rental property with various mortgages. 1st mortgage is on Central Guaranty, 2nd mortgage is to Dixdale, and 3rd mortgage to Stanco. CG takes over Financial Trust and in discharging various mortgages and it accidentally discharged its own mortgage on this property. The 2nd and 3rd mortgagors didn’t want to sell the property. Market for said properties is really weak, so Dixdale keeps the payments alive so the property doesn’t default and get sold. Eventually, the market picks up, and Dixdale exercises his power of sale, trying to sell to another party for approx. $400 000, which in turn would give them a profit of $282 000 that they otherwise would not have been entitled to. This is because the 1st mortgage was accidentally paid off by CG. Dixdale appears to be unjustly enriched by the amount of the discharge of CG’s mortgage. Held: Court concludes it is unjust for Dixdale to retain money in dispute Comments: Court moved immediately to principle approach because no categories existed for a proper category analysis 17 Court determines that onus of proving a juristic reason seems to lie with the plaintiff This is a case by enrichment by windfall, not an enrichment by wrongdoing MISTAKE OF LAW Traditional Rule (now overruled, see Air Canada v. British Columbia): money paid under mistake of law is not recoverable Policy for Traditional Rule: if the payor has assumed the risk of error in making the payment in order to resolve a dispute or to avoid an anticipated dispute, the money is not recoverable to the payor. Origins to Mistake at Law Bar Bilbie v. Lumley (1802) England Facts: Insurance Company insures ship that is subsequently captured in the Napoleonic wars and policy is paid out. However, the insurance company, after having seen a letter with the sailing dates of said ship, and having known that the French fleet was in the area, had a chance to have assessed whether it was going to insure prior to all this happening. At the time of the filing for insurance payout, insurance directors had letter in hand and still paid out on policy. Held: Judge ruled that with no precedent for mistake in law, not knowing the law is no defence. Therefore, no recovery. Comments: This case stands for why mistake of law treated different then mistake of fact The results here can be defended on the basis that the error related to a matter that the insurer should have raised at the time of payment. The insurer had all the relevant docs. By paying the payee, the insurer is waiving further inquiry and assuming the risk. The foundation of the rule that there is no recovery for mistake at law is itself a mistake at law (MD) This doctrine was rejected in Canada with Air Canada v. British Columbia Eadie v. Township of Brantford (1967) ? Facts: n/a Held: n/a Comments: Spence J. comments, “…it is of course a trite principle that money paid under the mistake of law cannot be recovered” thus telling us that up to this point, this doctrine went unquestioned. Kelly v. Solari (1841) Place Facts: Insurer pays off on policy that had lapsed. Clerk had earlier noticed the mistake, but still no correction was made prior to payout. Held: Recovery allowed. Comments: The court interpreted this mistake as a mistake of fact and thus allowed recovery. If the payment is made by a party by waiving all inquiry into the truthfulness of the facts, then that “voluntary payment” is binding (MD) If to settle a dispute about some matter, a payment is made to basically get the matter resolved and off the table (i.e. settlement) then we have a common law policy to uphold the finality of such arrangements Township of Nepean v. Ontario Hydro (1982) Canada (SCC) Facts: Ontario Hydro developed scheme for charging municipalities for hydro across the province which consisted of portion of fixed charge related to capital expenditures and user charges which were weighted differently for different municipalities. New municipalities had to pay a higher fee then older ones on theory that older ones had paid more over time for capital expenditures. Nepean opposes this scheme and wants their ‘overpayments’ back. Held: Even though Ontario Hydro statute was found to be ultra vires, case thrown out under ‘mistake of law’ Comments: This case, and particularly the vigorous dissent by Dickson CJ in which he dismisses the mistake of law argument, set the stage for Air Canada v. British Columbia 18 Exceptions to the Traditional Rule Because the mistake at law doctrine was way to broad, so many exceptions developed that they just about outnumbered the rule. Mistake as to Foreign Law: treated same as mistake of fact Mistake Concerning Personal Status: again, treated same as mistake of fact Mistake as to Personal Rights: see Cooper v. Phipps Mistakes Induced by Wrongful Conduct Mistake as to Public Authority: if the Crown is the one making the mistake, then it is not barred from recovery, but if it was the citizen who made the mistake, then they were SOL In Pari Delicto: or ‘equally at fault’, used in the negative when one party is not equally at fault as compared to other party Another way to get around mistake at law, was to argue for mistake of fact instead as this greatly increased the chance at recovery (see Kelly v. Solari) George (Porky) Jacobs Enterprises Ltd. v. City of Regina (1964) Canada (SCC) Facts: Porky was a wrestling promoter in Regina. The City charged promoters to put on fights. During two raises in the fees, the City was negligent in their drafting and forgot to add “per day”. By default, because of this mistake, the fees defaulted to annual charges. Porky, unaware of this, continued to pay ‘per day’. Upon realizing his mistake, he sues the City to get his overpayments back. Held: Recovery allowed to proceed on basis of mistake of fact, not mistake of (or, as to the existence of) law Comments: Court ended up using ground for relief of ‘compulsion’ to reimburse poor ole’ Porky In circumstance of duress or compulsion, our courts (Canada) have been willing to lower the threshold and provide an exception to this mistake of law doctrine Mistake as to Private Rights Cooper v. Phipps (1867) England (HL) Facts: Question of ownership of land in which a lease was made to a person for a tenancy for life on a piece of property, only to learn after the fact that he was already the true life tenant of the property. Held: Recovery allowed Comments: Court held this was a mistake as to private rights Payment to Public Authorities Under Duress Eadie v. Township of Brantford (1967) Canada Facts: Plaintiff wants to develop his land. The township imposes some rigid restrictions to meet and plaintiff refuses to submit. Not long after, he gets pretty sick and has to be moved to a hospital in the city. His wife wants to move closer to hospital to be with him and so he acquiesces to demands of township in order to sell property. The bylaws he was contesting were later found to be ultra vires. Plaintiff files to get his mistakenly paid money back. Township argues mistake of law. Held: The court says that the principle of mistake of law v. recovery is good except for several exceptions, one of which, duress, works for recovery in this case Comments: Couldn’t argue Porky Jacobs because plaintiff knew of the existence of the bylaws. Eadie was under duress to accede to the townships demands because of his wife and his illness. The duress threshold was really lowered in this case. It was used as a devise to get around the bar to recover of mistake of law rule. Payments Under Ultra Vires Legislation Air Canada v. British Columbia (1989) Canada (SCC) Facts: Air Canada was paying out fuel tax that was based on an ultra vires law. The Government of British Columbia realised this and instead enacted a retroactive law that allowed them to keep the mistakenly received tax. 19 Held: In the end, the SCC denies relief and allows province to keep gains because of retroactive legislation. Comments: However, SCC does say also that payments under an ultra vires statute do not constitute "compulsion". Before a payment will be regarded as involuntary there must be some natural or threatened exercise of power Obiter by minority that monies paid under mistake of law is recoverable provided that the mistake caused the payment in question (adopted in Canadian Pacific Airlines v. British Columbia). Canadian Pacific Airlines v. British Columbia (1989) Canada Facts: Province charging CP Air a liquor tax on those small bottles of booze while flights are in British Columbia airspace. Held: SCC allows monies paid under mistake of law (Bilbie v. Lumley overruled) Comments: This was the sister decision to Air Canada v. British Columbia Court found that the legislation was in fact valid, only it didn’t apply to airlines thus rendering it a misapplication of the legislation/tax. The only mistake matters is an operative mistake, doesn’t matter what kind, just ask: did the mistake cause the payment to be made? Thus, this case stands for the abolishment of the mistake of law bar here in Canada THE NATURE OF THE OPERATIVE MISTAKE The modern test permits recovery where it can be said that the mistake caused the payment in question to be made. It is a question of ‘operative mistake’. Ignorance of the Law This is where we have an ‘absence of knowledge about the law’ in the first place (i.e. complete unawareness of existence of the law altogether) Example: the law says you don’t have to pay. You pay, and only afterwards discover this law saying you didn’t have to pay to begin with. Can you get it back? David Securities Property Ltd. v. Commonwealth Bank of Australia (1992) Australia Facts: Both parties were unaware of a statutory provision that rendered a payment that was already made void. Held: The court rejects the mistake of law distinction (re. mistake of law v. mistake of fact) as being unrecoverable. Comments: This is the key decision in such circumstances The court says that for recovery here you must honestly believe there to be an absence in the law and that absence mistakenly made you pay something. Failure to Predict Overruling of Doctrine Example: Suppose you make a payment, you’ve looked at all the case law and it supports making the payment, and a week later, the SCC overturns that reason for payment… can you get it back? Because this situation usually arises in the context of settlements, traditionally there has been no recovery However, what if it is not a ‘settlement’ issue… Kleinwort Benson Ltd. v. Lincoln City Council (1999) England (HL) Facts: At the time, municipalities, in an effort to raise extra funds, were dealing heavily in derivatives (i.e. a form of upfront borrowing in which a lump sum was paid immediately to the municipality and repaid to loaner over time). It turns out that thanks to a decision called Hammersmith, all of that borrowing was found to be ultra vires; municipalities found not to be allowed to deal in derivatives, so millions owed were simply kept by municipalities and all of these banks were left hanging. Question in the court turned on; was the banks failure to realize these statutes would be determined to be ultra vires a mistake of law? Held: When the courts overturn a doctrine, they are simply declaring what the law has always been. This creates retroactivity. So, since the banks in these situations where ‘mistaken’ in their beliefs that these laws were intra vires, this ‘mistake’ was an operative mistake and so recovery is not barred. Comments: 20 In this particular case, the House of Lords took the occasion to declare the mistake of law doctrine as no longer operative in the United Kingdom & overrules Bilbie v. Lumley Statute that Retroactively Repeals a Tax that was Payable Commissioner of State Revenue v. Royal Insurance Australia Ltd. (1994) Australia Facts: These were taxes (stamp duties) that were payable on insurance premiums. In the mid 1980s these stamp duties were repealed and were no longer payable. However, there was one type of premium that was not included in the statute by oversight and thus remained on the books. Royal Insurance missed out on all the legislation and continued to pay out stamp duties on all policies during this period. When they finally realize their mistake and come to get their money back, they recover the normally repealed taxes under straight mistake of fact, but what bothered the court is how do they get back the one premium that was forgotten and remained on the books? Held: Court, with difficulty, did come to decision that this was a mistake of fact too and allows retroactive recovery. Comments: The doctrine of operative mistake would not apply because this is literally not a mistake. Limitations on the Right to Recover The same defences that are available to mistake of fact can be use for mistake of law (i.e. passing on defence, change of position defence, etc.) PUBLIC AUTHORITIES Public authority cases recognize an imbalance of power and misuse thereof There are 3 ways in which restitution from public authority arises: 1. Being taxed for something which should be free, or overpayment of tax for conferral of benefit 2. Taxing statute can be ultra vires, or intra vires (i.e. misconstrued or misapplied) 3. Contract entered into can be beyond the capacity of the public authority Colore Officii A large number of public authority cases fall under the doctrine of colore officii Colore officii: under the ‘colour of office’ or where a public official charges a fee he ought not to for providing a service/license or overcharges for the same This doctrine has been extended to apply to all public authorities (i.e. Crown corporations), or indeed any monopolistic supplier of goods (i.e. gas companies, railways, etc.) Lord Goff (see Woolwich Equitable Building Society v. Inland Revenue Commissioners) points out that these cases are grouped under the ‘compulsion’ label primarily because there is an implicit threat coming from the state, through their agent, a public official, saying basically if you don’t apply with the request you won’t get what you want/need. Colore officii does NOT apply to ultra vires payments (Air Canada v. British Columbia) unless it is paid under compulsion (George (Porky) Jacobs Enterprises Ltd. v. City of Regina) There are policy considerations against granting this type of relief that say that to do so may overburden the public purse (re. ‘fiscal chaos’) Compulsion There are two types of cases under compulsion: 1. The Traditional Duress Doctrine Duress can take the form of duress of person, and/or goods, and Duress can involve public authorities The duress has an urgent and pressing necessity (or ‘practical compulsion’) 2. The Lower Threshold Duress Doctrine Where a person’s personal circumstances were considered instead of just relying on the traditional outside influences (see Eadie v. Township of Brantford) Called lesser test of ‘urgent necessity’ Air Canada v. British Columbia (1989) Canada (SCC) 21 Facts: Air Canada was paying out fuel tax that was based on an ultra vires law. The Government of British Columbia realised this and instead enacted a retroactive law that allowed them to keep the mistakenly received tax. Held: SCC rules that mistake of law bar still exists but only when applying to ultra vires statutes NOT paid under compulsion. Court also decides that legislation enacted retroactively to prevent recovery of ultra vires payments is valid (re. public policy considerations). Comments: This case relates to the non-recovery of payments made under primary legislation which is ultra vires in the federal constitutional sense. LaForest J. for the majority said that Air Canada did not prove requisite ‘compulsion’ element Wison J. in dissent argues that citizens should be able to presume that the laws they are paying under are valid and it risks upsetting the system if taxpayers have to go around investigating the validity of laws before they make payments Woolwich Equitable Building Society v. Inland Revenue Commissioners (1993) England (HL) Facts: a building society (mortgage company) was required to pay a particular tax which it thought from the beginning was unlawful. They resisted making payments as long as possible, but at the end of the day, after discovering they were along among building societies protesting this particular tax, and starting to fear for their reputation in the market place, paid the tax under protest (i.e. duress) reserving the right to sue. By the time they finally paid, there were heavy penalties for late payment coming due. Sure enough, they are vindicated and the statute is declared ultra vires. Plaintiff sues not to recover monies paid, which was duly reimbursed, but for interest on that money from the time it was paid. Defendant argues that payments returning monies were made ex gratia (re. gratuitously or made to avoid litigation) and since they were under no obligation to do so, why should they also cough up the interest. Held: The Woolwich principle – moneys paid under unauthorized taxation measures initiated by an executive are prima facie recoverable without having to resort to mistake, compulsion, colore officii, etc. Comments: The House of Lords took the bold step to say there is a general right to recover unlawful payments made to a public authority… it is basically without qualification This is not a mistake case: plaintiff was not paying thinking these taxes were intra vires, they said from the outset that these were ultra vires and therefore traditional authorities were of no help here This case deals with ultra vires executive action in the form of promulgating regulations beyond the statutory authority conferred on the executive to do so. Re. Eurig Estate (1998) Canada (SCC) Facts: This case was a challenge to newly introduced NDP changes to probate fees. Court concludes that these are taxes and not unconstitutional because they are direct taxes. But since it is a requirement under our Constitution that taxes be passed by the legislature (i.e. no taxation without representation), and since these taxes were passed by Cabinet only, then this was ultra vires. Held: SCC found ‘compulsion’ element and used this to grant relief Comments: Where there is an ultra vires unlawful statute, court will stretch to find compulsion to grant relief Passing On Defence Passing on is only a defence to taxes paid under mistake of law Air Canada v. British Columbia (1989) Canada (SCC) Facts: Air Canada was paying out fuel tax that was based on an ultra vires law. The Government of British Columbia realised this and instead enacted a retroactive law that allowed them to keep the mistakenly received tax. Government also argued that the plaintiff was ‘passing on’ these costs by way of increased fares to passengers and thus had suffered no loss or expense. Held: SCC says that had they not found the legislation to be retroactively valid, they would have granted that defence to the government and stopped Air Canada for recovery Comments: Also see Canadian Pacific Airlines v. British Columbia Canadian Pacific Airlines v. British Columbia (1989) Canada Facts: Province charging CP Air a liquor tax on those small bottles of booze while flights are in British Columbia airspace. Held: Court concludes that it was the liquor tax was passed on to customers thus refuses to grant relief to plaintiff 22 Comments: The booze tax was basically a tax on the consumer and the plaintiff was acting simply as an agent collecting that tax on behalf of the government. Court says that this is a clear example of ‘passing on’ Plaintiff could not recover the liquor tax because they (plaintiff) were not themselves deprived. Allied Air Conditioning v. British Columbia (1999) Canada (BCCA) Facts: contractor who regularly tendered on air conditioning contracts for airplanes gave his bids as lump sums. The taxes may or may not have been included in his bid. The defendant charges plaintiff for unpaid taxes and argues that he was clearly passing on taxes to customer by way of charging higher prices. Held: Court concluded that the onus is on plaintiff to show that the tax was to their detriment and that they had not passed it on. Comments: Ties into second part of Petkus v. Becker test (deprivation) INEFFECTIVE TRANSACTIONS There has been some confusion here because courts have traditionally been hesitant to enforce restitution where a contract has gone awry. In reality, restitution is a completely separate matter. In this case, we are not looking to enforce the expectation aspect of the contract, but rather, we are forcing the defendant to disgorge a benefit In other words, we are not enforcing the contract, but rather compensating individual for what is owed to them in restitution (see Deglman v. Guaranty Trust Co. of Canada) Lack of Capacity (Mental) General rule: Contracts with person(s) of mental incompetence are voidable, not void ab initio, and benefits must be returned. There are several exceptions to this general rule… Where the party is not aware of the mental incompetency when making the contract Where there is a supplier of necessaries Lack of Capacity (Minors) Situation in which one party is below the age of majority The common law is so complex here, that most jurisdictions have passed legislation dealing with it. Should there be no such legislation, then the general rule of Lack of Capacity (Mental) would apply: contracts with person(s) of minor standing are voidable, not void ab initio, and benefits must be returned. Ultra Vires Contracts This issue came back to life in 1991 with the English decision in Hammersmith Some public authorities and municipalities in Canada (i.e. creatures of statute who only have authority statute gives them and nothing else) will be ultra vires if they go outside powers conferred upon them by statute Hammersmith (1991) England (HL) Facts: municipality involved in interest rate swap scheme (i.e. derivatives with a front-end load so municipalities got an up front payment of cash and then had to pay back in instalments over time) that was ruled ultra vires by the courts. Because the legislation was ruled invalid, the municipalities tried to avoid paying the monies back. Held: House of Lords confirms that these transactions were ultra vires and that there is no requirement to pay back Comments: In Canada, we don’t have an ultra vires problem because all our corporate statutes have ‘natural person’ power so they can do anything an actual person can do. Westdeutsche Landesbank Girozentrale v. Islington L.C.B. (1996) England (HL) Facts: Similar to Hammersmith. Held: “Those who are caught in the trap of advancing money under ultra vires borrowing contracts will not be denied relief.” In personum restitutionary relief granted. However, compound interest not awarded Comments: 23 3 problems faced the courts: 1. Total Failure of Consideration: in this case, four repayment instalments had already been made to the bank(s), thus there was ruled to be partial performance, so no failure of consideration could apply 2. Restitution at Common Law: restitution at common law is not available (see Sinclair v. Brougham) to recover monies paid under an ultra vires transaction 3. Compound Interest: the banks claimed for compound interest Court ruled that in an ultra vires situation, what we have is an absence of consideration, not a failure of consideration problem (i.e. there can’t be consideration in an ultra vires situation) You no longer have to imply a contract to get restitutionary relief Effectively overrules Sinclair v. Brougham Illegality Central fallacy of these decisions is that enforceability of the contract and restitutionary relief have been collapsed into one problem. This is incorrect. We must keep them separated. That is to say, you can hold a contract unenforceable but still grant restitutionary relief. Holman v. Johnson (1775) England Facts: n/a Held: Losses lie where they fall when it comes to illegality Comments: Basically, the courts will not get involved in any suit that involves illegality or immorality Question left unanswered is that what about where even if a contract is seen as unenforceable, is there still an action in restitution? Answer in St. John Shipping Corp. v. Johnson Rank Ltd. St. John Shipping Corp. v. Johnson Rank Ltd. (1957) Place Facts: Case where a container ship was grossly overloaded. By virtue of overloading the ship, it turns out that the shipping company turned an additional profit of 2295p. Upon receiving their bill for carriage, the owners of the goods resisted payment on grounds that the ship owner should not profit from his wrongdoing. Hence we have the shipping company as plaintiff trying to recover the outstanding amount of the bill, which the defendant is arguing is not payable because of illegality. Held: Judgement for the plaintiff Comments: Trial judge should have upheld the contract and then allowed the defendant to claim for the unjust enrichment the plaintiff got from overloading the ship. Doing so would have required the courts to acknowledge that the restitutionary element can be segregated out from the contract action and preserved. It is important in illegality cases to identify the public policy reasons behind the agreement and keep it separate from the restitution part of the problem. In this case, the courts decided that to allow this to stand for sake of illegality would be to allow illegality to be too broadly interpreted and lead to chaos in the contract world The inquiry into each case must be one of determining whether the policies underlying the rule (law) that renders the agreement unenforceable would also be well served by the denial of restitutionary relief and then assessing the desirability of doing so in light of general policy. In this case, the analysis would be: was the 100p per inch penalty sufficient or is the extra windfall so unjust as to warrant restitutionary relief? In other words… identify the public policy and if granting restitution does not detract from that policy, then restitution should be allowed. Kiriri Cotton Co. Ltd. v. Dewani (1960) Uganda (HL) Facts: In a city where rental demand is very high and supply is meagre, landlords were in habit of charging ‘key money’ (re. bribes) to those on waiting lists so as to ensure them a tenancy. The government, in response, passes a statute prohibiting landlords from doing charging ‘key money’. In this case, the landlord had demanded ‘key money’ from a prospective tenant who now wants it back. Held: The court held that the underlying policy objectives would be hindered rather than furthered by a refusal to allow restitutionary relief Comments: Neither contracting party thought they were doing anything illegal or wrong, therefore an example of misstate of law 24 Are they in pari delicto (re. equally at fault)? If yes, then no recovery. However, here the landlord tenant rules were set up to protect the tenant so the landlord has greater burden to follow law correctly, and therefore they are not equally at fault thus tenant gets restitution measure because they are a member of the collected class of the statute. Kingshott v. Brunskill (1953) Canada (OntCA) Facts: Under Ontario statute, apples had to be graded before they could be sold to the public. The plaintiff, a farmer, sells his lot of apples to the defendant, also a farmer, who had the equipment to grade apples. Defendant pulls a fast one, gets apples, claims illegal contract and doesn’t pay for the apples. Held: In favour of plaintiff. Contract enforceable. Comments: Court looked at the policy reasons behind the statute. It found that the purpose of statute was to protect the public once the apples got to market so to hold this particular contract as unenforceable doesn’t make sense (i.e. doesn’t speak to the purpose of the statute) Still v. Minister of National Revenue (1997) Canada (CA) Facts: Housekeeper who came to Canada from the US without a work permit, yet works for some time and in the process pays out UI premiums. When she became unemployed, filled for UI payments, yet rejected. Plaintiff wants to receive payments. Held: Plaintiff entitled to payments. Comments: Court of Appeal says that illegality of contract does not void the contract Court adopts policy analysis approach as advocated in St. John Shipping Corp. v. Johnson Rank Ltd. The purpose of the immigration act was to preserve jobs for Canadians and has nothing to do with UI. Since the statute does not mandate unenforceability, why should the court. Illegality Exceptions Mistake of Fact: this is a defence to illegality doctrine Parties not In Pari Delicto: where the other party in the transaction has been guilty of some wrongdoing, parties are not equally at fault. Where a party is among a member of the collected class of a statute (see Kiriri Cotton Co. Ltd. v. Dewani ) Where a party backs out from the illegal transaction because they change their mind and don’t want to go through with it. Must be before the contract is begun Passive Protection: the wrongdoer is in a passive situation and there is a future opportunity for restitution. Example: Money lending cases. Traditionally, courts have taken a very strict interpretation of wording of money lending contracts, so if the wrong date was written on the loan, the agreement is void and unenforceable. This would leave the lendor who had lent the money under the agreement with the technical default without recourse to get money back. However, if in the future, the borrower goes to court for some other reason (i.e. discharging loan or whatever), the court will only do this if the borrower pays the lendor back his money first. Want of Authority Agency cases where agent (B) acts outside the scope of their authority in coming to an agreement with A who may be led to believe that they (A) have entered into a valid contract with B’s principle C. These agreements will be void for want of authority unless: 1. C ratifies contract, or 2. Is bound by the doctrine of apparent or ostensible authority (i.e. Where a person by words or conduct represents to a third party that another has authority to act on his behalf, he may be bound by the acts of that other as if he had in fact authorized them.) Remedies for want of authority cases include: If the agreement is void, then A can sue for false representation of authority. The measure of damages will be the value of the lost bargain Alternatively, where A has conferred benefits on either B or C, A may be entitled to recover the value of those benefits in restitution Where the benefits have been conferred directly on C by A, and C accepts with the knowledge that A expects payment, C may be taken to have ratified the agreements and would therefore be liable on the contract, and 25 If A pays money to B, then B will be liable in restitution to restore the money to A, UNLESS (1) a change of position defence can be established or either (2) payment went to C or (3) other dealings with C to B’s detriment, with B having entered into on the assumption that the payment was good and valid. Hazelwood v. West Coast Securities Ltd. (1974) Canada (BCSC) Facts: Rogue employee, working for the defendant, had complicated lending and borrowing scheme going. He would take new client’s money, deposit into defendant’s account, use portion thereof to pay off debts to defendant, and remainder went towards balancing other client’s accounts that were in the red. Defendant pleads innocence on idea that they didn’t know where the money was coming from and, not only that, they weren’t benefited. Held: Court rules there was a benefit to defendant and restitution allowed. Comments: Today, all you need show is receipt of the benefit, it doesn’t matter what happens to it afterwards. Change of position occurred, not in repayment of debt, but in repayment of older clients who were tricked by rogue Mistake in Assumption Mistake in Assumption: occurs when the parties make a “false assumption concerning some matter relevant to the decision to enter into the agreement”. Example: A buys land thinking there is gold on it. B makes no such representation. There is no gold on the land. Unilateral mistake and therefore no relief. However, what if B knows A is proceeding under a false assumption (see Smith v. Hughes)? In Canada, there would be no relief. Thus at common law, the restitutionary relief available in this context would be quasi-contractual claims for money had & received (i.e. quantum merit and quantum valebat) In equity, the contract will be rendered voidable and the restitutionary remedy in these cases has traditionally been rescission. When it comes to innocent misrepresentation, the equitable remedy is two-fold: i. Void ab initio: the contract is torn up from the beginning and considered never to have existed, and ii. Restitutio in integrum: parties are put back in the position they were in prior to the contract having being entered into Equity is the best option for a plaintiff and for policy reasons (see Solle v. Butcher), it is best to make a contract voidable in equity because: It protects third parties A “common misapprehension as to a fundamental matter” is easier to prove than “non-existence of the subject matter” Smith v. Hughes (1871) England (QB) Facts: Plaintiff approached an agent of the defendants with oats to sell. He brought with him a sample of the oats for sale and left them with the agent. The next day, the agent called back and said he would buy all the oats the plaintiff had on him. The plaintiff sent over immediately sixteen quarters of oats. The agent, not realizing before that the plaintiff was selling ‘new’ oats, and the agent only wanting ‘old’ oats, tried to give them back but the plaintiff would have none of it. The defendant refused to pay. Held: The plaintiff’s silence as to whether the oats were ‘new’ or ‘old’ even given if he may have known that the buyer only wanted ‘old’ oats, does not discharge the buyer from the contract. Comment This case hinges on an objective test on what would a reasonable person understand from the words being used? In US law you cannot stand by knowing the other party is disillusioned and make a deal. Today we do find instances where silence can be a ‘representation’ particularly where representor is considered an expert in said field and has bulk of knowledge about product. Bell v. Lever Bros (1932) England (HL) Facts: Executives paid generous severance packages in lieu of fulfilling contract term when positions eliminated. Employer discovers afterwards that they had been engaged in insider trading while with the company. Knowledge of this fact prior would have allowed the company to dismiss them with cause without reasonable notice or severance package. Company argued that severance K was based on mistaken assumption that employment K was valid but really, company says, it had already been breached by the insider trading. 26 Held: Relief denied. Court ruled that there had been no mistake as to the essential quality of the contract Comments: Case at common law. Here, the court found that the mere fact that employer had cause to fire didn’t make the contract invalid. General Rule → Void a K where there is a mistake of both parties and the mistake as to the essential quality makes the thing entirely different from what it was believed to be or it results in the destruction of the identity of the subject matter. Solle v. Butcher (1950) England (KB) Facts: In era of rent control, landlord can apply to government to increase rents. Plaintiff checks if house is subject to rent control and reports to defendant that it is exempt. Both parties enter into K on this basis; after about 2 years their friendship ceases. Plaintiff then finds out that house is subject to rent control and that he has been paying too much rent. Held: if the parties were under a common misapprehension either as to facts to as to their relative and respective rights, provided the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault then the K can be set aside in equity. Comments: General Rule → Where parties have made a mistaken assumption with respect to the fundamental fact and neither party was at fault, then relief should be granted. Fault determines who ought to bear the risk taking into account knowledge, position to avoid risk etc…. Three-fold test: 1. Has to be a common misapprehension about some fact 2. Must be a ‘fundamental mistake’ (i.e. an operative mistake, use the ‘but for’ test), and 3. The plaintiff must not be at fault in causing the mistake. Could have used (Bell) to provide a result but doesn’t b/c if relied upon (Bell) then would have to declare the K void which would have significant ramification on tenants around the country (floodgates) Instead uses equity which will find an operative mistake and relieve a party if: Can do so without injustice to a 3rd party Unconscionable or unreasonable to allow the party to avail themselves of the mistake because of; fraud, material misrepresentation (i.e. innocent misrepresentation), mistake by one of parties with respect to the identity/existence of subject matter, common misapprehension parties with respect to the facts or relative rights, etc. Since this is an equitable remedy, the court can impose terms. The Great Peace Shipping Ltd. v. Tsavliris Salvage (International) Ltd. (2002) England (CA) Facts: The ship Cape Providence was sailing in the Indian Ocean when it suffered massive structural damage. The owner hires the defendant salvage company to rescuer her. The defendant inquires as to any merchant vessels in the vicinity of the ship Cape. He is told that the plaintiff’s ship, the Great Peace is only 35 miles away and can get to the Cape in 12 hours. The defendant enters into an agreement with the owners of the Great Peace to divert their charter and go to the rescue of the Cape. The K stipulates an agreed upon daily rate and a promise to pay a 5-day minimum cancellation fee. It turns out that both parties were mistaken and the Great Peace is actually 410 miles away. Defendant cancels K with owner of the Great Peace and later refuses to pay 5-day minimum cancellation fee. Held: Court of appeal denies defendant relief and allows plaintiff’s claims. In doing so, the court of appeal deliberately overrules Solle v. Butcher saying that Denning had no right to ‘invent’ equity in the situation. Comments Overrules Solle v. Butcher in England, however Solle v. Butcher still good law in Canada. Defendant argued ‘mistake of fact’ (per Bell v. Lever Bros.) 3 points of concern with this ruling: 1. Great debate as to whether the court of appeal can overrule itself – argument holds that it can’t, only a higher court can overrule a lower court decision. 2. No discussion of the merits of equitable grounds 3. The decision narrows even further Bell v. Lever Bros. Mistake of Terms Mistake of Terms: the subject matter does not exist & there is no ‘meeting of the minds’ 27 Example: A and B both think land contains gold and B sells land to A with this in mind. No gold. We now have a common mistake so contract treated as though it never came into existence. At common law, mistake renders contract void, particularly if the parties were mistaken as to the existence of the subject matter of the contract, as illustrated in these examples: Res extincta: where goods have perished before delivery, or never existed in the first place, and Res sua: basically, you can’t contract for goods because you already own them (see Cooper v. Phipps) Mistake of Terms (Lack of Privity) A makes offer to B which is accepted by C (which, in turn, produces no K) Bolton v. Jones (1857) England Facts: Case involved plaintiff purchasing merchandise from a company called Brocklehurst. On that very day, Brocklehurst was sold to defendants and defendants didn’t tell plaintiff that they had bought out Brocklehurst and proceeded to fill out the order. Plaintiff refused to pay. Held: Court accepted argument that because the plaintiff contracted with Brocklehurst and it wasn’t Brocklehurst, but the defendant who filled the order, then example of misunderstanding – formation of contract does not take place because offer and acceptance goes awry. Comment No privity between the parties Mistake of Terms (Non Est Factum) You are agreeing to enter into a different transaction than what you thought you were entering into Example: you think you’re signing an autograph, but instead you’re guaranteeing a loan Marvco Color v. Harris (1982) Facts: The rogue induces one person to sign a document, the full impact of which the signer doesn’t understand, and the rogue then uses the document to gain something form another innocent party. Held: The defendants, in executing the security without the simple precaution of ascertaining its nature in fact and in law, have nonetheless taken an intended an deliberate step in signing the document and have caused it to be legally binding upon themselves. Comment What we have here is an adoption of a new rule added to non est factum: namely that carelessness, negligence, will not be a good defence to non est factum. Any person who fails to exercise reasonable care in signing a document is precluded from relying on the plea of non est factum as against a person who relies upon that document in good faith and for value. Mistake of Terms (Mistake of Identity) A is dealing with whom he thinks is B, but is in fact C (in most cases, a rogue) Ingram v. Little (1961) England (QB) Facts: We have the sale of a car. The purchaser held himself out as someone else with financial resources, showed the plaintiff an account at a certain bank, and plaintiff went ahead and sold him the car. Guy was a rogue, a fraud, and didn’t come through with payments. Plaintiff demands return of car, but by then car had been sold to a third party. Held: Court finds no contract (identity fraud), thus no title had passed and thus third party loses car back to plaintiff. Comment Common law rule on innocent third party purchase Overruled by Lewis v. Avery These cases often illustrate problem of third party rights (sanctity of ownership v. sanctity of contract) Our law has been moving towards preferring security of transaction over security of title If the court concluded that the initial owner A contracted with the rogue B thinking that he was C, there would be no valid initial contract and the initial owner recovers. However, if the court concluded that A made a mistake about the attributes of B, for example believing that B was an honest person with sufficient resources to pay for the goods, there would be a valid contract and the innocent purchaser from the rogue gets to keep the goods. 28 Lewis v. Avery (1971) England Facts: Plaintiff sells car to scam artist. Scam artist then sells car to third party. Held: Denning M.R. dismisses the claim of the original owner and protects the innocent purchaser even though there was a mistake as to the ‘identity’ of the rogue. Denning concludes you have to make a distinction that the plaintiff, in dealing with defendant (scam artist) intended to deal with that person opposite him regardless of whom they said they were and thus there was a meeting of the minds and thus a contract. Concludes that title does pass and third party can claim bona fide purchaser defensive in rescissionary action. Comments: Bona Fide Purchaser defence (equity) A confers property to B who then turns around and confers property to C At common law, title may or may not pass… if B is a thief then title doesn’t pass and thus C has no title and A can claim property back from C In equity however, so long as C is bona fide, doesn’t know of wrong doing by B and has given value and is without notice of the fraud, then C will be protected… BUT it ONLY applies in equity so one has to have an equitable claim to defend (doesn’t work in common law where it is an action for conversion of return of property) Mistake of Terms (Ambiguity) Raffles v. Wichelhaus (1864) England Facts: defendant contracted to buy cotton shipped from India; was supposed to arrive in on a boat called “Peerless” in Oct., but came on another boat called “Peerless” in Dec. Defendant refused shipment on second boat claiming the K was for the shipment on the first boat. Held: No recovery because ambiguity with respect to fundamental term. Comment: K never existed because parties had no meeting of minds. Subjective test used to determine true ambiguity = what each individual party thought, not a reasonable person in the same position Hobbs v. Esquimalt & Nanaimo Railway (1899) Canada Facts: Vendor thought he was selling land without mineral rights, buyer thought he was getting mineral rights. Held: reasonable person interpretation of ‘land’ includes mineral rights so buyer gets land and minerals. Comment: If you were to apply Raffles v. Wichelhaus, then you would find no agreement because parties were never of one mind. Therefore there was never any K (dissenting opinion). Clearly was an important term of the K and both parties acknowledging ambiguity. Court applies objective test to determine what ‘land’ would have meant to a reasonable person and finds that it would have included mineral rights. Inclusion of mineral rights isn’t only plain meaning, it is also the appropriate meaning for these circumstances because seller was at fault Objective Reasonable Person approach is now the accepted method of interpretation Applying reasonable person approach, buyer is unfairly surprised if he doesn’t get what he reasonably expected to get (land w/ mineral rights) and seller is unjustly enriched b/c got price seller was willing to pay for land and minerals but only had to give up land. Frustration (Discharge for Breach) This is where we have a K and at some point a breach occurs which is so serious that it excuses the other party from performing. The K is stopped, not rescinded, at the time of the breach but rather we are repudiating or discharging for breach. At the time of the breach, the non-defaulting party can… a. Elect to sue for damages, or b. Stop performance and sue for any benefits that have been conferred c. Sue for expectation interest The party at fault can also sue for any benefits conferred 29 Where there is an outside event, the courts generally follow Fibrosa Spolka Akcyjna v. Fairbain Lawson Combe Barbour Ltd. unless there is legislation governing such a situation. Fibrosa Spolka Akcyjna v. Fairbain Lawson Combe Barbour Ltd. (1943) England (PC) Facts: The appellants, a Polish company purchased from the respondents’ machinery that was to be delivered to Poland. The appellants paid a deposit. War was declared and the appellant’s asked for the return of the deposit on that performance of the contract was now impossible. The respondents refused saying that they had already done considerable work on the machinery. Held: Deposit returned to plaintiff Comments: Court said plaintiff could recover money “had and received” provided they could show they suffered a total failure of consideration. MD believes that ‘total failure of consideration’ is crap and that wasted expenditure (re. losses) should be shared by all parties Decision not good law Canadian provinces where there are ‘Frustrated Contracts Acts’ Frustration (Recovery of Other Benefits) Parsons Bros. Ltd. v. Shea (1965) Canada (Nfld) Facts: Newfoundland court held that a heating contractor couldn’t recover the value of ductwork partially completed before the destruction of the building in question by fire. Held: Court said that the contractor could only be paid for benefits conferred, not for “work done” and thus the defendant had not received any ‘benefits’ because anything that was to take the form of benefits had been destroyed Comments: This is a bad decision MD says the preferable approach is to consider that all requested services constitute the conferral (and the obtaining) of a benefit in the required sense Frustration (British Columbia Frustrated Contracts Act) If 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 subsection (2), that loss must be apportioned equally between the party required to make restitution and the party to whom the restitution is required to be made. However, s.6 MD says is somewhat flawed in that it says the party performing should bear the loss, etc. but what about the party not performing, should it be required to choose to bear the risk (i.e. get fire insurance). CRIMINAL ACTS Overarching Rule: Nullus commodum capere potest de injuria sua propra which prohibits a party who is guilty of some form of wrongdoing from profiting as a result of such conduct. This result is pure in the arena of the Common Law, this prohibition is not found expressly within the Criminal Code, Insurance Act, Pension Plan legislation, etc. The rule extends to manslaughter, but does not apply if you kill but are not criminally responsible because of mental incompetence. Intention plays a key role in this area of law as the line is drawn at intentional wrongs. Restitutionary Approach There may not be the traditional restitutionary pattern of the defendant wrongdoer having a gain that matches a corresponding loss to the plaintiff, but rather there is still this enrichment at the plaintiff’s expense in the sense that a right of the plaintiff has somehow been infringed. Attorney General v. Guardian Newspaper Ltd. (1990) England (HL) Facts: Former MI-5 spy, Peter Wright, breaches his solemn oath and duty to the Crown by writing a best selling book called “Spy Catcher” based on his insider knowledge of the British spy game. Book was set to be published in Australia and US but not in England for the obvious legal reasons. To circumvent this, an Australian publisher agrees to sell his rights to the Guardian’s Sunday Times in UK who, in turn, publish weekly portions of the novel in their paper. Held: Injunction applied for to block publication by the crown fails as the information has already gotten “into the public domain” 30 Comments: One of England’s leading breach of confidence cases House of Lords does, however, confirm that (for our purposes here) a defendant is require to make restitution in respect of benefits acquired through his own wrongful act Murder & Denial of Benefits Courts have not hesitated as a matter of public policy to deny, at least a murderer, the ability to claim any benefits from his/her victim This theme follows through even if X kills Y then kills him/herself… X’s estate cannot claim under him. Re. Johnson (1950) Canada (ManKB) Facts: Husband shoots and kills his wife. In her will, she had left a substantial part of her estate to him. Held: Husband’s claim on estate denied. Comments: Public policy reason behind not letting a wrongdoer benefit from wrongdoing affirmed. Murder cannot benefit, nor can they cannot give away benefit(s) under K, gift or otherwise. Murder & Denial of Benefits (Life Insurance) Traditionally, where it is the murderer who has entered into the insurance K (re. opened a policy in someone else’s name… in this case, the victim), it has been held that there can be no recovery under the policy, regardless of who was named beneficiary. Demeter (1982) Canada (OntCA) Facts: Husband hires a hit man to murder his wife. Hit man successful. Issue before the courts was whether his daughter could claim life insurance policy with Dominion Life. Held: Ontario Court of appeal denies recovery because the policy in question was taken out by the wrongdoer. Comments: Daughter tried to argue that she wasn’t suing as someone stepping into criminal’s shoes, but as beneficiary of mother’s estate. Brissette Estate v. Westbury Life Insurance Co. (1992) Canada (SCC) Facts: Husband and wife take out a joint life insurance policy in which proceeds are to be paid to survivor. Husband murders wife and then tries to claim on policy. Held: No recovery. Comments: SCC states that regardless of innocence of wife as joint policyholder, because it was a joint policy and the murder was the other holder, the wrongdoing of one party becomes the wrongdoing for the purposes of all parties. Irwin Estate v. Cumis Life Insurance Co. (?) ? Facts: This case dealt with a group life insurance policy taken out by a credit union with the defendant. Husband and wife belong to plan. Husband murders wife and tries to claim under policy. Held: Claim allowed. Comments: When it comes to group policies, the claim will succeed because it wasn’t directly taken out by the wrongdoer, rather it is a K between the bank and the insurance company, not as between the husband/wife and the insurance policy. Oldfield v. Transamerica Life Insurance Co. of Canada (2002) Canada (SCC) Facts: Estranged husband had agreed to maintain the 3 life insurance policies on his life as part of separation agreement in lieu of paying child/spousal support. Husband makes his living being a ‘drug mule’. One such trip, his chips get cashed in, a baggie bursts while in his stomach, and he dies an excruciating death. The wife is the beneficiary and tries to claim. Held: The bar to recovery only applies to intentional loss and not accidentally events. Claim allowed. Comments: The court looks to Brissette Estate (which upon first glance would be cause to deny this claim), but distinguishes this case by virtue that the insured event here was not an intentional crime. 31 Murder & Denial of Benefits (Joint Tenancy) This rule is meant to cover situations in which one joint tenant murders another and thus comes into complete possession of property/chattel. Traditionally, there were 4 options available (today, courts will only use number 4): 1. Let the normal rule operate & allow jus acercendri to give the property to the wrongdoer This was unpalatable for public policy reasons 2. Deny the tenancy Courts says ‘no’ because it would amount to a forfeiture and Canada no longer practices forfeiture 3. Create rule where we presume the wrongdoer to have died immediately predeceasing his victim, thus allowing victims estate being able to claim the whole fee Again, court in Canada says this smacks of forfeiture, and won’t allow it without legislative action 4. Award a constructive trust in the property Take legal title, so no forfeiture, and hold it in constructive trust in favour of beneficiaries of the victim Borrows from US jurisprudence (writings of Austin Scott) This is the current rule used in these situations Schobelt v. Barber (1996) Canada (Ont) Facts: One joint tenant kills another. Held: Constructive trust awarded. Comments: Killer keeps the land he had before and holds victim’s portion in constructive trust for whoever would’ve acquired the land if victim had predeceased killer. This also potentially protects an innocent purchaser for value. Principle of Intent General Rule: whenever a party commits a wrongful act, serious or not, with the express motive of obtaining some benefit from his victim, that party ought not to be permitted to retain the benefit (MD). Therefore, harm to the victim must be intentional Leggatte v. Smith (1955) USA (South Carolina) Facts: Husband walks in on wife doing the nasty with lover. In a rage, husband grabs shotgun and takes aim at lover. Not being too good a shot, he misses the lover and instead kills his wife. Held: The court allowed the husband to recover as beneficiary of his wife’s estate. Comments: Court says he had no ‘intention’ to kill his wife OMERS v. Young (1985) Canada (OntHC) Facts: Elderly couple attending their anniversary celebration. The wife, a diabetic, has one too many and boozed to the gills decides to drive home. She is killed in an accident. Husband tries to claim her pension from Ontario Municipal Employees Retirement System. Held: Court denies relief. Comments: MD believes this decision to be wrong… he predicates this upon the notion that the wife had no ‘intention’ to kill herself Gray v. Barr (1971) England (CA) Facts: Another example of a husband discovering wife with lover. Husband grabs his trusty loaded double-barrelled shotgun and fires a warning shot in lover’s direction in order to scare him senseless. Instead, lover lunges at husband and in the ensuing tussle, the second barrel goes off smoking the lover. Held: In the criminal trial he is found not guilty of murder. However, in the civil trial, Denning finds that the dominant cause was so reckless that the act was seen as intentional so no recovery. Comments: n/a 32 Canadian Indemnity Co. v. Walken Machinery & Equipment Ltd. (1976) Canada (SCC) Facts: Defendant had sold a faulty crane to a contractor. The defendant, at the time of the sale, knew the crane was in bad need of repair. Crane collapses on the job causing massive economic loss. Held: Recovery denied. Comments: Court said that despite knowledge of defendant that the crane was in disrepair; this was nevertheless a mishap that the defendant did not ‘intend’ to have happen. To deny recovery in this case would be to defeat the very purpose of having indemnity insurance. Co-operative Fire & Casualty v. Saindon (1975) Canada (SCC) Facts: Guy mowing his lawn gets into a dispute with his neighbour. In a fit, he picks up his mower and points it at this neighbour. The neighbour puts up his hands to protect himself and gets mauled in the process. Saindon claims he only intended to ‘scare’ his neighbour and that the injury was an accident. Saindon tries to claim indemnity under the personal liability policy of his home insurance. Held: Court found in favour of the insurance company. Comments: Court found that to allow indemnity under the policy would contravene public policy. Court also found that the defendant’s actions were so egregious that the act was intentional (see also Gray v. Barr) Dissent by Laskin J. that recklessness does not prove intent Mutual of Omaha Insurance Co. v. Stats (1976) Canada (OntCA) Facts: Two sisters going along in a car. The one driving is piss drunk and kills herself in the ensuing accident. Sister who survives, though injured, tries to claim under her indemnity policy. Held: This was not intentional, but an accident. Comments: The sister’s right was not a derivative one… she had her own independent right to claim under the indemnity policy and is not ‘stepping into’ the shoes of the wrongdoer to make the claim in this case (see Oldfield v. Transamerica Life Insurance Co. of Canada) Upheld by SCC in 1978 Straight Profit from Crime A lot of this has to do with criminals writing books about their crimes and profiting thereto. In the US, they have the “Son of Sam” laws to prevent just such an occurrence. Rosefeldt v. Olson (1984) BCSC Facts: Clifford Olson, notorious child murderer, agreed to tell cops where he had buried some victims in exchange for $100k trust fund to look after his wife and child. It is generally conceded that without this swap, the case against him would have been difficult to prove. Victim’s families bring suit to try and get this money. Held: Suit fails. Olson family keeps the money. Comments: Court applies tripartite Petkus v. Becker test 1. Determines there had been a benefit 2. Rejects that there has to be a matching of defendant gain to plaintiffs loss, and 3. Discounts that the trust fund serves as juristic reason for retention of benefit Ultimately, the case is decided in the 2nd of the 3 tripartite tests: namely, has there been a corresponding deprivation to the plaintiff? Court says ‘no, its not the plaintiffs who are out of pocket here, but the cops who paid up this money Because the money was paid to secure the conviction and would not have otherwise gone to the victim’s families, is also a reason that one can find no corresponding deprivation to the plaintiff What is really being raised is the question of “…has the enrichment of the defendant really flowed from the crime?” In other words, was there sufficient causal connection between payment and wrongdoing that would allow us to describe this as a loss of the plaintiff? Court finds ‘no’ Test is a corresponding deprivation, not necessary a +/- equation, but there must still be a causal connection between the two. Undoubtedly, there was some public policy reasoning here too. 33 Attorney General v. Blake (2001) England (HL) Facts: While working for the British Secret Service, the defendant switches sides and becomes a double-agent for the Soviets. Obviously not so good at it, he is caught by the British, imprisoned, and escapes. He flees to Moscow where he decides to write a tell-all book about the British Secret Service and his ‘exploits’. The publisher agrees to pay him 150,000p for the work. England brings suit to recover those monies. At the time of the suit, the defendant had already received 60,000p from the publisher. Held: Crown was awarded the 90,000p outstanding to Blake because of the breach of K Comments: Blake’s crime was that he breached the Official Secret’s Act of England in writing his book. His disclosure constituted a breach of contract. The restitution approach was suggested by the Court of Appeal when it had imposed an injunction stopping the publisher from making the remaining payments Traditionally, to award damages here there would have to be a demonstrable loss to the plaintiff (i.e. usually expectation interest). However, the House of Lords breaks with this here and says that in any appropriate case, profits should be stripped from one who breaches a K MD likes this case because it says we don’t need to show a corresponding loss to the plaintiff to take the profits away from the defendant Wrotham Park Estate Co. Ltd v. Parkside Homes Ltd. (1974) England (CA) Facts: A builder has permission to build on a set track of land. Along with this permission is a restriction as to the number of houses the builder can erect. In this case, this was a restrictive covenant that ran with the land. The builder knowingly builds more homes then allowed. Held: Court finds no loss to the plaintiff. However, court does recognize that there has been a deliberate breach of covenant and that the wrongdoer should not be able to profit. Comments: Court awards 5% of all the profits to plaintiff on the theory that would’ve been the price for the holder of the covenant to give permission to build the houses This case has been followed in British Columbia (see Arbutus Park Estates Ltd. v. Fuller) Surrey County Council v. Bredero Homes (1993) England (CA) Facts: A builder has permission to build on a set track of land. Along with this permission is a restriction as to the number of houses the builder can erect. In this case, this was a contractual covenant that ran with the previous owner. Held: Court again finds no loss to plaintiff and award nominal damages of 2p Comments: Court distinguishes this case from Wrotham Park Estate Co. Ltd. v. Parkside Homes Ltd. on basis that the covenant in his case was a personal contractual covenant held by the previous owner. Arbutus Park Estates Ltd. v. Fuller (1976) Canada (BCSC) Facts: Defendant was a homeowner in a tightly regulated homeowner community. He decides (and does) to build a detached garage. However, for this development, if you wanted to build an addition to your house, the rules said you had to get the vendor’s approval. Needless to say, the defendant in this case ignored this rule. Held: Court orders defendant to pay the expense he saved by not having to have an architect prepare the plans for the garage. Comments: Court failed to find any damages and thought it absurd to order the garage torn down, hence the decision. WAIVER OF TORT The theory is that instead of suing in tort damages, you’re going to forgo that option and instead sue the tortfeasor in restitution seeking to recoup the benefits that the defendant has derived from the tortuous conduct The reasons to use waiver of tort are: a. Quantum: the measure of recovery may be higher in restitution then tort damages, particularly where the tortfeasor’s personal gain exceeds the quantum of damages that the plaintiff might recover in an action for tort. b. Limitations periods: it may be that the restitutionary limitation period is longer then the tort one, and c. Tort claims are not assignable, whereas restitution claims are 34 d. In rem: restitutionary claim may allow plaintiff to recover before any other creditors (re. cases of bankruptcy of the defendant) Today, in court, up to the point at which the judgement is rendered, the plaintiff is free to change their mind and sue in the other action. Personal torts (i.e. assault, battery, liable, false imprisonment, etc.) are, according to Lord Mansfield, the only torts not capable of waiver. MD says waiver of tort doctrine should extend to any case where tortious conduct has produced a profit to the wrongdoer. Lamine v. Dorell (1705) England Facts: The defendant was an executive de son tort (ed. one who pretends to have administration of an estate but lacks the authority to be so). Part of the estate constituted shares that the defendant sold at a handsome profit, part of which he kept for himself. Held: Court allows plaintiff to sue in assumpsit (i.e. the full sale price) and thus claim the profits Comments: The reason you wouldn’t want to sue the wrongdoer in tort in this case is that it would leave the wrongdoer, at the end of the day, with the profit. Court rationalizes this approach on implied agency basis: the plaintiff here has the option of treating the wrongdoer as his agent, ratify the sale and claim the proceeds What grew out of these cases was the theory that if you were ratifying the tortfeasor’s wrong and making him your agent, then you lost the ability to sue him in tort (overruled by United Australia Ltd. v. Barclay’s Bank Ltd.) United Australia Ltd. v. Barclay’s Bank Ltd. (1941) England (HL) Facts: A cheque, written to the plaintiff, ends up in the hands of a third party company who dishonestly endorses it to themselves and deposits it in their bank account at the defendant’s institution. Plaintiff sues third party for money had and received, but before any judgement could be rendered, the third party declares bankruptcy and thus no reason for plaintiff to continue in this action. Instead, plaintiff then turns around and sues defendant in tort for conversion, having deposited the money in their account. Defendant argues that plaintiff had earlier revoked their right to sue in tort. Held: Courts rules in favour of plaintiff saying that bringing a restitutionary action doesn’t distinguish your right to sue in tort Comments: Court recognizes that there is not actual waiver of the tort complained of as it is essential to a claim and explains why the enrichment is unjust. Court also recognizes that claims in restitution and in tort are not mutually exclusive, but rather provide alternative remedies that may be pursued concurrently. Court says that we don’t need to imply a K to allow a restitutionary claim Interference with Contractual Relations Federal Sugar Refining v. United States Sugar Equalization Board (1920) USA (NY) Facts: Plaintiff makes deal with country of Norway during wartime to ship 4,500 pounds of sugar at $6.60 per hundredweight. At the time, sugar exports required approval from the defendant, a one-man operation. The guy handing these out at the defendant refuses to grant plaintiff the necessary approvals. Instead, he incorporates and negotiates his own contract for sugar with Norway at $11 per hundredweight obtaining all the necessary approvals along the way. Held: Court strips defendant of all its profits. Comments: The tort here was interference with contractual relations Trespass to Property These cases really call for a division into two categories: 1. Restitution by subtraction where people go onto another’s property and extract resources then later are called to account for it, and 2. When interference with property is simply a trespass The courts have traditionally denied relief here because assumpsit was not an appropriate action to determine questions of title to real property / damages, and the plaintiff could generally point to no positive loss that had occurred. 35 Phillips v. Homfray (1883) England Facts: Defendant had been taking mineral off the plaintiff’s land and was also transporting them using the pathways and subterranean passages available on the plaintiff’s land. Plaintiff sues not only for the value of the minerals that were taken, but also for the use of the roads and passages that were on the plaintiff’s land. The problem was that the tortfeasor had died, so the claim is now being sought against the estate, but the classic rule is that personal actions die with the wrongdoer. This is why restitution is being brought into the action because it converts it into assumpsit. Held: Court held that plaintiff was entitled to recover minerals, but would not award damages for trespass because the plaintiff did not incur a “loss”. Comments: This case is no longer good law in Canada (see Daniel v. O’Leary) Ratio: wavier of tort does not lie to trespass in land at least where that trespass produces no positive value in defendants hands at the expense of the plaintiff Saving the defendant from making expenditure is just as beneficial as the defendant doing something that puts money in his pocket (MD). Daniel v. O’Leary (1976) Canada Facts: Defendant had hooked is home into the plaintiff’s sewage system without the plaintiff’s knowledge. Plaintiff sues to charge for service. Held: Court decides for plaintiff. When one accepts a service, one has to pay for it. Comments: This case overrules / rejects Phillips v. Homfray in Canada No real damage so tort is a bad option, but if you sue in Rest the wrongdoer has to pay for the services taken. Strand Electric & Engineering Co. Ltd. v. Brisford Entertainments Ltd. (1952) England Facts: Case of a theatre that was using lighting switchboards leased from the plaintiff. The theatre goes under and, the defendant, in trying to find a new buyer realizes it will be easier to do if they can show a ‘complete’ theatre, refuses to give them back. Action by plaintiff for return of lighting switchboards and compensation for defendant’s ‘continued use’. Defendant argues that plaintiff had no business lined up for the lighting switchboards anyway, so how could he be out of pocket. Held: Denning decides for the plaintiff. Comments: Where the defendant has obtained a benefit from his wrongdoing he must account for it, even though the plaintiff has lost nothing and suffered no damage (see Reading v. Attorney General) If the wrongdoer had asked to use the goods he would’ve had to pay for them. Conversely, he cannot benefit from not asking to use them. He cannot be better off from doing wrong than by doing a right. Restitution v. Punitive Damages The point of restitution is to prevent unjust enrichment, not to punish the defendant. With waiver of tort, we allow the recovery of the benefit from which the commission of the tort has brought the tortfeasor. If the defendant has committed a tort and has derived profits from it you can recover in restitution… it’s that simple! To date, in Canada, there has been no case that has conclusively allowed the plaintiff to sue in waiver of tort and receive the defendant’s profits. The US has allowed this (see Olwell v. Nye & Nissan, Edwards v. Lee’s Administrator ) On the exam, just say that this is the remedy that should be awarded and this is where the law is arguably going. Olwell v. Nye & Nissan (1946) USA (Wash) Facts: Case in Washington State in which the defendants had rented some premises from the plaintiff upon which was located an ‘egg washing’ machine not mentioned in the rent. There is a labour shortage at the time, so defendants use the egg washing machine for their day-to-day operations for several years. As a result, the defendants realize a handsome profit. Upon discovery of this tort of conversion, this action begins. Plaintiff sue for both the value of the rental use of the machine and the profits realized from its use. Held: Deliberate wrongdoing and full profits awarded. 36 Comments: US approach is when the defendant is an innocent wrongdoer, then they must pay fair market value for the benefits / services received. When the wrongdoing is intentional and deliberate, then the plaintiff is entitled to a maximum of restitutionary relief, including any profits derived thereby. Edwards v. Lee’s Administrator (1936) USA (Kent) Facts: Case surrounding a famous tourist cave attraction in Kentucky. Here, a property line separates the cave between the defendant and the plaintiff to which the entrance was on the defendant’s property. Defendant realizes the commercial value, builds a hotel, and starts taking people on guided tours. Plaintiff finally wakes up and tells defendant that since he’s trespassing on plaintiff’s property part of the time, then he deserves a share of the profits. Plaintiff waives tort of trespass and sues ‘for profits’. Held: Court awarded net proceeds proportionally based on land use. Comments: This case appeared before restitution came to be known in its modern form and practice. In this case, the court was aware that the defendant was getting an unjust enrichment and wanted to do something about it, so the court turned to punitive damages. COMPULSION Also known as the common law doctrine of duress The key to why enrichment is unjust when it comes to compulsion is because it has been conferred by the plaintiff involuntarily. Thus if a benefit has been conferred involuntarily, it denotes lack of juristic reason and therefore fails the third part of the Petkus v. Becker tripartite test Unlike mistake the bestower usually knows all the relevant information and the recipient is usually guilty of some wrongful conduct in inducing the conferral of the benefit. This then brings the defendant within the principle that a wrongdoer shall not be permitted to profit from their wrongdoing. Duress Duress is old common law concept – it is a crime to extort benefits through threats of violence, and also tort of intimidation Basically, that kind of extortion or duress rendered a K voidable (in other words, one has to come to court to get a declaration of duress to get the K torn up) The original requirement for a finding of duress was that of coercion of will, that your volition had been overcome by the duress. This was very much tied into the necessity of a protest (i.e. not protesting is akin to transaction being voluntary) although today this carries much less weight in deciding a case. The illegality in duress is not in the making of the threat, but in demanding money for not doing the thing he is threatening Example: not illegal to call someone and say you will tell everyone their secret, but it is illegal to tell them you’ll remain quite for compensation. At the end of the day, the key now is an absence of real choice, an absence of ‘reasonable alternatives’ or, in other words, a coercion of will enough to vitiate consent so as the party is no longer acting as a free agent. Duress (Threat of Violence) Considered actual or threatened violence Test is subjective one… did it have the desired affect on the victim? Namely, did it extort what it was intended to extort? Duress of Goods Threats to a person’s property. 37 Maskell v. Horner (1915) England (KB) Facts: Plaintiff was carrying on business in the same vicinity as a local market. Market owner approaches plaintiff and demands he pay a fee to him to do business there. Plaintiff refuses, market owner seizes plaintiff’s goods, and eventually plaintiff pays fee so as to get goods back. Held: Relief granted Comments: Test laid down by Lord Redding: was the plaintiff making the payment under an urgent or pressing necessity? Court notes that it is important to be able to distinguish between cases of compromise (i.e. settlement) and compulsion Doctrine has been expanded not just to goods, but to threat of seizure of real property (see St. John v. Fraser Brace) Skeate v. Beale (1841) England Facts: Plaintiff seizes goods. Defendant, rather then pay to get them back, promises to pay plaintiff at a later date in return for their return. Defendant receives goods back, but then turns around and reneges on promise. Held: court rules that the defendant’s promise to pay is enforceable Comments: Theory is that if you actually hand over money, then the duress is serious. However, if you merely promise to do so and that promise elicits the desired result, then that isn’t sufficient distress (i.e. your will was not overridden) Abuse of Process Stoltz v. Fuller (1938) Canada (SaskCA) (SCC) Facts: The plaintiff, a general manager of a lumber company, gets locked in room alone with defendant, the president and CEO of same company, and threatened with criminal prosecution unless he (the plaintiff) signs over his minority share holding and resigns his position immediately. Held: SCC allowed recovery of the benefits because Fuller isn’t in pari delicto Comments: You can’t threaten criminal prosecution to settle a civil debt, with exception for a bona fide belief that criminal proceedings are warranted This is codified here in Canada by s.346(1) of the CCC Also, where the threat not to prosecute has induced the transaction and hence the agreement is voluntarily entered into, it will also be set aside because consideration for the agreement, namely to stifle a prosecution, is bad public policy. Again, in pari delicto bars recovery Practical Compulsion A common feature of such coercion is that the defendant may be unaware that the demand is not justified. Another is that often the pressure brought to bear is of an economic nature Knutson v. Bourkes Syndicate (1941) Canada (SCC) Facts: Revolves around the sale of a piece of land by a syndicate to a third party. The defendant, who is also one of the syndicate members, acquires and interest in the property and then approaches remaining syndicate members and demands sum of money to remove his interest so as sale to third party can go ahead. Otherwise, his interest will represent an encumbrance on the property and third party likely not to bite. Syndicate, realizing that they otherwise risk breach of k with third party, agree to defendant’s terms and pay him. Once deal with third party has been finalized, the syndicate turns around and sues defendant for return of monies. Held: Court rules in plaintiff’s favour. This, said the SCC, was enough to constitute a practical compulsion Comments: Court is not going to force a plaintiff to breach a K to meet unreasonable demands in order to recover Peter Cuat v. Ilkens Construction (?) Canada (SCC) Facts: Case involved a bridge building project in BC, in which the plaintiff was a sub-contractor responsible for pile driving. Contract was to drive piles to a certain depth to hold up the bridge. During construction, it is discovered that the initial depth called for was incorrect and that the piles would have to be driven deeper. The sub-contractor, upon hearing this objects on 38 basis that they had only priced their tender based on the earlier depth. Defendant responds to plaintiff that if they don’t go ahead and do what they are told, then the defendant will call in the bonding company. To the plaintiff. This would amount to ‘industrial murder’. Needless to say, under this threat, they go ahead and do the work and when the bridge is finished, the plaintiff sues for the extra work it did on a quantum merit basis Held: SCC denies relief. Comments: Court said that if plaintiff didn’t agree with interpretation of K, then it was up to them to stop work and sue. Morton Construction Ltd. v. Hamilton (?) Canada Facts: Plaintiff in the business of building sidewalks for the city of Hamilton. One particularly harsh winter, the sidewalks start to disintegrate under all the salt being used to melt ice. City tells plaintiff that they either replace the sidewalks, or they will never get work with the defendant again. Held: Court sides with defendant saying there is no quantum merit here. Comments: MD says this illustrates the fundamental mistake with duress; problem is not in making the threat, but demanding money for it. “The ordinary blackmailer… what he has to justify is not the threat, but the demand of money” (see Lord Atkin in Thorn Motor Company) Municipal Spraying and Contracting v. Newfoundland (1980) Canada (NfldSC) Facts: Contracting road works company retained to strip one road and use the strippings to lay a second road. Plaintiff completes the task. Province discovers that there are extra strippings left over and tells plaintiff to keep going until they run out of materials. Plaintiff refuses saying that they did not contract with the defendant for such work. Defendant tells plaintiff that if they don’t do as told, they will hire a third party to do this extra work and then bill the plaintiff for the costs. Plaintiff gives in, does the work, and then turns around and sues defendant, citing quantum merit and practical compulsion. Held: Decision for the plaintiff Comments: Looking at past precedence (see Morton Construction Ltd. v. Hamilton), court says that the province could threaten to never use plaintiff’s services again, but crossed the line when they used this threat to extort extra work. Colore Officii Doctrine dealing with public officials which is grounded in compulsion (see Woolwich Equitable Building Society v. Inland Revenue Commissioners) Stands for notion that if a public official asks for money to do a duty that they ought to do for free or asks for more then what is the prescribed amount, then the aggrieved party can sue to get back either the money or the extra as the case may be. George (Porky) Jacobs Enterprises Ltd. v. City of Regina (1964) Canada (SCC) Facts: Porky was a wrestling promoter in Regina. The City charged promoters to put on fights. During two raises in the fees, the City was negligent in their drafting and forgot to add “per day”. By default, because of this mistake, the fees defaulted to annual charges. Porky, unaware of this, continued to pay ‘per day’. Upon realizing his mistake, he continues to pay but sues the City to get his overpayments back. Held: Court found Porky was under a practical compulsion – he needed to hold wrestling matches and didn’t have time to go to court Comments: Recovery allowed to proceed on basis of mistake of fact, not mistake of (or, as to the existence of) law Mistake of law traditionally barred recovery, but if mistake of law AND compulsion were found, then recovery was in fact possible. Eadie v. Township of Brantford (1967) Canada (SCC) Facts: Plaintiff wants to develop his land. The township imposes some rigid restrictions to meet and plaintiff refuses to submit. Not long after, he gets pretty sick and has to be moved to a hospital in the city. His wife wants to move closer to hospital to be with him and so he acquiesces to demands of township in order to sell property. The bylaws he was contesting were later found to be ultra vires. Plaintiff files to get his mistakenly paid money back. Township argues mistake of law. Plaintiff argues compulsion back. Held: Plaintiff allowed to recover. 39 Comments: The SCC changes the ‘urgent and compelling’ test to the ‘no practical alternative’ test Eadie was under duress to accede to the townships demands because of his wife and his illness. The duress threshold was really lowered in this case. It was used as a devise to get around the bar to recover of mistake of law rule. Note the nature of the compulsion in this case… the compelling circumstances were completely extraneous to the dealings between the parties but the plaintiffs were still allowed to recover Economic Duress American term, describing the threat to breach K to gain an additional benefit to which one is obviously not entitled In Canada, the practical compulsion cases have been termed as ‘economic duress’ D&C Builders v. Rees (1966) England (CA) Facts: Debt outstanding to plaintiff but defendant offers to pay less to satisfy debt knowing that plaintiff is in danger of bankruptcy if they don’t get some money. Plaintiff says not full satisfaction; defendant contends that was binding promise that was relied upon. Commentary: Denning finds compulsion and says that the promise wasn’t voluntarily given b/c plaintiff was held ransom. The Siboen & The Sibotre (1976) England Facts: Shipping case. Two oil tankers on charter when the oil market tanks. The guy chartering the tankers misrepresents his assets to ship owner and tells him that unless the price of the charter is lowered, he will be forced to back out of their K. With the market the way it was, the ship owner needed any money he could get to continue to make his payments on the ships. Thus, he agrees to a lower price. The market subsequently recovers and the ship owner sues for return to the original rate, claiming economic duress. Held: Court concludes that the transaction happened within the normal business arena and was an example of commercial pressure and not one’s will being overborne. Comments: This case was the first recognition of economic duress in England The Atlantic Baron (1979) England Facts: Shipping case. Ship being built and in mid-project, the ship builder decides he’s not getting paid enough and demands 10% more. The purchaser is desperate for the ship, pays him, then protests the payment. Held: Relief to purchaser denied Comments: Court ruled that the purchaser didn’t protest fast enough thus, in essence, acquiescing to the ship builder’s price Pau Onu v. Lau Yiu Long (1980) England (PC) Facts: Involved an agreement to buy shares (re. a share x-change K), with a stipulation of a holding period of one year before any shares could be exchanged. One party, fearful that the share price would fall within that year, threatened to breach K unless they got a floor price (i.e. minimum price) guarantee when the year expired. Other party agrees. At the end of the year, the shares plummeted and the other party tried to resist the guarantee they earlier agreed to by arguing economic duress. Held: Privy Council rules this was simple exercise in commercial pressure and not economic duress Comments: Leading case on economic duress Lord Scarmen lists out the 4 factors in determining whether or not there has been economic duress: 1. Did the party protest at time K entered into 2. Was there an alternative course available to party 3. Did the party receive independent legal advice 4. After entering the K did the party take steps to avoid it England’s strict view of economic duress, namely that there must be a coercion of will has never been adopted in practical compulsion cases in Canada. In Canada, consider not whether will was overcome, but whether there was no practical alternative but to give in given the situation (re. lesser of two evils theory) 40 Director of Public Prosecution v. Lynch (1975) England (HL) Facts: n/a Held: n/a Comments: Case stands for notion that the will is not overcome, it is just that the plaintiff is forced to accept the lesser of two evils. Universal Sentinel (1983) England (HL) Facts: n/a Held: n/a Comments: This case took a long, hard look at what emerged from Pau Onu v. Lau Yiu Long Court determined that it is not the lack of will to submit but the victims intentional submission when he realizes that there is no practical alternative available to him. This signalled a clear movement away from ‘coercion of will’ to this practical alternative approach very reminiscent of our Canadian practical compulsion cases. Euig Luck (1992) England (HL) Facts: n/a Held: n/a Comments: Lawful conduct can be become illegitimate when it makes the pl enter into the K when he otherwise would not have Economic Duress in Canada The earliest case in Canada of acceptance of economic duress is… Lister v. Dunlop (1979) Canada (OntCA) Facts: n/a Held: n/a Comments: The court noted that restitution will be awarded when a benefit has been obtained by economic duress. Stott v. Merit Investment Corp. (1988) Canada (OntCA) Facts: Stott’s client buys securities on margin, client can’t cover margin and Stott sells of part of portfolio to cover short. Stott was ordered by supervisor to buy securities back. Client defaults again and Stott on hook for considerable sum. Company offers forbearance in return for Stott paying back sum over time. Stott claims no consideration b/c no forbearance b/c not good claim b/c he was never liable for the original loss. Stott also claims settlement induced by economic duress. Held: Court found agreement was voidable on grounds of economic duress, but plaintiff had waited too long to seek redress. Comments: Court recognizes economic duress as valid doctrine in Canada and adopts ‘no practical alternative’ test Economic Duress: when pressured party has no “realistic alternative” but to submit In this case, however, economic duress was found not to be the case because of Stott’s acquiescence by waiting so long to attack the settlement agreement and continuing to work for the defendant like everything was normal. RESTITUTION IN EQUITY UNDUE INFLUENCE This is where a party who occupies a position of trust and confidence might use that relationship in order to extract some advantage from an apparently unwilling victim In other words, subtle influence to gain an illegitimate end From undue influence flows fiduciary duty Allcard v. Skinner (1887) England (CA) Facts: n/a 41 Held: n/a Comments: This continues to be a leading case This case distinguishes two types of undue influence: 1. Actual Undue Influence: where the stronger has been guilty of some fraud or wrongful act expressly so as to gain some gift or advantage from the weaker The plaintiff has to show that the defendant unduly influenced him to his detriment 2. Presumed Undue Influence: where the stronger has not been guilty of any wrongful act, but has, through the relationship which existed between him and the weaker party, gained some gift or advantage for himself The onus is on the defendant to show that he didn’t exercise undue influence There are certain relationships where undue influence will always be presumed, such as trustee & beneficiary, doctor & patient, solicitor & client, guardian & ward, etc., but NOT husband & wife Even though you may not fall into an established recognized category, it is always open to you to prove a relationship of confidence and thus shift the onus to the other side to prove that undue influence was not used Public Trustee v. Skoretz (1973) Canada (BCSC) Facts: n/a Held: n/a Comments: BCSC applied presumption to operator of rest home with his dealings with an elderly patient In other words, the parties had been able to show that a trusting relationship had been developed between the two, and having established that relationship of trust, this shifted onus on rest home to show they had not taken advantage of patient O’Sullivan v. Management & Music Agency (1985) England (CA) Facts: Case of experienced music manager and inexperienced entertainer Held: n/a Comments: Court found a relationship of trust and confidence and thus onus shifted to manager to show he had not taken advantage of naïve entertainer in their K negotiations. Royal Bank of Scotland v. Ettridge (2001) England (HL) Facts: n/a Held: n/a Comments: House of Lords developed a classification system for undue influence as follows: Class 1: actual undue influence Class 2: presumed undue influence Class 2a: traditional categories Class 2b: relationship needing to be proved Geffen v. Goodman Estate (1991) Canada (SCC) Facts: has to do with property in the hands of someone who seems to be ga-ga and has made a will that leaves everything to her daughter, cutting out the other 3 family members and their children. Cut out family members want to persuade nut that everyone should be looked after, and in doing so they hire a lawyer to talk her into coming into “some other arrangement”. Indeed, not long after, a trust is entered into whereby she is now also going to look after the kids of her siblings. Question arises of whether undue influence had been exercised in coming to this arrangement. Held: Court found no undue influence Comments: Leading Canadian case to date 42 SCC here casts doubt on manifest disadvantage test, at least in non-commercial situations Wilson J. sets out approach as follows: 1. Plaintiff must establish: does this particular relationship allow for domination of 1 party over the other? 2. Plaintiff must establish: did the K create an unduly disadvantageous relationship to the plaintiff or was the defendant unduly benefited or both? 3. Now the onus moves to the defendant to rebut that there was no undue influence BREACH OF FIDUCIARY DUTY Courts of equity are concerned with the standard of loyalty owed to those who occupy a position of trust or confidence, this is expressed as a ‘duty to loyalty’ Duty to loyalty takes two forms: 1. The fiduciary shall not let their self-interest conflict with their principal, and 2. The fiduciary shall not use their position to make a profit for themselves Before redress for breach of fiduciary duty, the plaintiff must establish (see Canadian Aero Services v. O’Malley ) i. Is there a fiduciary relationship ii. What is the scope of that duty iii. What duties flow out of that relationship Then, and only then, can we ascertain if that duty has been breached iv. What is the appropriate remedy A claimant seeking restitution of benefits accruing to the defendant as a result of the breach of fiduciary duty has many equitable remedies available: rescission, an accounting of profits, a constructive trust, an equitable lien, a tracing order or even equitable compensation. The Fiduciary Relationship There are two types of identified fiduciary relationships: 1. The ameliorated group or traditional categories: there are now a host of relationships that are seen to be under this heading of fiduciary: agents, executor & administrator of estate, guardian and ward, attorney and client, promoter and investor, directors/sr. officers and the corporation, partners, joint venturers, the Crown and its servants, parent and child, spiritual leader and devotee, doctor and patient, and persons holding public office. These have been labelled as per se relationships 2. The other comprises those relationships that arise as a matter of fact out of the specific circumstances of the case. These are called de facto relationships Key to the fiduciary relationship is the idea of an ‘undertaking’ in that one party undertakes to act in the best interests of another party. This can take form of a K, but can also be purely gratuitous Pre-Cam Exploration v. MacTavish (1965) Canada (SCC) Facts: Defendant had been employed to go up and look at land in the north part of province. He was to take magnometer readings of the specific site he was sent to. He did that and recorded all his findings in logbook that he later gave over showing no readings of interest. The defendant then immediately resigned from his employment. It turns out that while the defendant was up there, he noticed that when he wandered under adjacent property the magnometer had gone wild. He, of course, goes back to this adjacent property, stakes claims in his own name and they turn out to be profitable. The lower courts had simply held that he had fulfilled his employment to the letter. Held: SCC disagrees and awards constructive trust in favour of his employer on grounds of breach of fiduciary duty Comments: SCC said that we don’t look to four corners of employment K to determine what his obligations were, it was clear he was sent up there to assess mineral potential of the area and was given confidential data to do so. He thus found out, in the course of performing his duty, something of value. SCC said he was under a duty to report all his findings in the ‘whole’ area Standard Investments v. C.I.B.C. (1985) Canada (OntCA) 43 Facts: Ellen & Cohen Co. were customers of the defendant and were planning a take over bid of Crown Trust. They come into the defendant’s bank and they are talking to the President of CIBC who promises them all the help necessary to assist them in their planned takeover of Crown Trust. Meanwhile, the Chairman of the Board at CIBC is influenced by some board members, including one who was a controlling shareholder of Crown Trust, to take a position in Crown Trust such that it would preclude them from taking part of any takeover bid – it would be a block. At that time, bank was limiting to purchasing a 10% interest in Crown Trust, so they did. So, the bank buys this 10% as a defence to take over bid. Conrad Black joins board of CIBC and gets financing from bank to buy a 25% block. At the end of the day, these blocks are sold to a Winnipeg interest and when all the chips are counted, Ellen & Cohen were only able to amass 32% of the stock and thus were shut out. When the share price finally settles, Ellen & Cohen had suffered a significant loss. Held: The court held the bank was in violation of its fiduciary duty Comments: Court determined that the defendant had crossed the line at some point from having that of a mere debtor-creditor relationship to that of fiduciary relationship. International Corona Resources Ltd. v. Lac Minerals Ltd. (1989) Canada (SCC) Facts: Case centres around the Hemlo area in northern Ontario which was very rich in gold deposits. The plaintiff, a jr. mining company had gotten very promising readings on the ‘Williams property’ but being a jr. mining company they didn’t have enough financing to develop. Instead, they sought to enter joint venture with Lac Minerals. In doing so, they had to disclose findings on the Williams property and failed to enter into a confidentiality K with the defendant. The joint venture fails and the defendant goes to the owner of the Williams property and out bids the plaintiff for the property. The plaintiff argued breach of fiduciary duty. Held: SCC, in a 3-2 decision, finds no fiduciary relationship here Comments: The fundamental aspect was that there was no ‘undertaking’ in that the defendant had never undertaken to do anything with regard to plaintiff Sopinka J. said that ‘vulnerability’ is an essential element of a fiduciary relationship in that a fiduciary relationship must have the following elements… Undertaking + Vulnerability (ability to inflict harm on another) + Reliance. This was more a breach of confidence case Hodgkinson v. Simms (1994) Canada (SCC) Facts: we have a chap in Vancouver who has been very successful as an investment dealer and he wants some investment advice, so he goes to a tax planning type (Sims) and after talking about what might be a good way to put his money to use, decides to invest in MURBs (Multi-Unit Residential Buildings). Not long after, the real estate market collapses and Hogkinson losses 350k. What Sims had failed to do was to disclose to Hogkinson that he had an interest in these MURBs (re. he had deals with developers that he got % interest in each MURB sale he made… called ‘bonus billing’). Hogkinson seizes upon this to get out of the deal. Held: SCC 4-3 decision that fiduciary relationship was present. Comments: This is not one of the traditional per se categories, but all the traditional elements of a fiduciary relationship seem to be present, especially the vulnerability aspect. LaForest J.’s central finding is “…evidence of a mutual finding that one party has relinquished his mutual interest and has agreed to act solely on the interest of the other.” In other words, ask whether one party reasonably expected that the other would act in their best interest and not their own Scope of Fiduciary Duty There are differing degrees of duty expected depending on the nature of the relationship. The greater the independent authority conferred the greater the trust relationship Courtwright v. C.P.R. (?) Canada Facts: Lawyer looking for job as legal counsel for CPR, has good interview and was hired. It was discovered later that at time of hiring he was under investigation by police for influence peddling. CPR found this out and they let him go. Held: Courts held that plaintiff had a fiduciary duty to disclose to prospective employer the existence and nature of the investigation and thus the employment k was allowed to be rescinded. Comments: 44 After the fact, he was later cleared of all charges. Schaeffer v. Chodoes (?) Canada Facts: lawyer disclosed to by client that he was having marital difficulties and may have to get a divorce. Wife, however, worked in the same law office of his lawyer and she, also realizing the marriage was on the rocks, got it on with his lawyer. Held: Court found that lawyer was in breach of fiduciary duty to client by having an affair with his wife Comments: I wonder if the lawyer billed for his time spent with wife? McLeod & More v. Sweezey (1944) Canada (SCC) Facts: Defendant was to stake and record minerals claims on land for this employer, the plaintiff. He was told in confidence where the area was located and off he went. After carrying out employer’s order, he reported back that there was no asbestos there. Later he quit and bought the adjacent land and sold it for profit. While he was goofin’ around, he had found chrome on that land. Held: Fiduciary reporting duty existed. Comments: Employer would reasonably expect to be told about the chrome that was found when he was looking for the asbestos. This was within the scope of duty that he’d undertaken to perform. Duty of Loyalty Duty of loyalty is usually expressed in two ways… 1. A fiduciary shall not let his self interest conflict with the interest of his principle (per ‘conflict rule’), and 2. A fiduciary shall not use his position to make a profit for themselves (per ‘profit rule’) Geurin v. Canada (1984) Canada (SCC) Facts: First Nations band wanted to lease their lands to a golf club and they wanted to do it on certain renewable terms (i.e. 610 years) but the Crown ignored these instructions and negotiated a far less advantageous lease agreement without consulting band as to terms. What was worse was that band was prevented from getting even a copy of the lease for 15 years. Held: Fiduciary relationship exists. Comments: This is example of classic fiduciary situation: undertaking to act on behalf of others Under federal statutes, Indians cannot deal with real property – they must surrender it to crown who will deal with third parties on their behalf/interests (aka. undertaking) At the end of the day, the damages in Guerin aren’t restitutionary, they are compensatory, for the loss of bargain – putting them in the position they would have been in had the K been fulfilled in the way in which the band wanted Conflict Rule A fiduciary shall not let his self interest conflict with the interest of his principle It is not essential for the principal to show that he’s suffered a loss; this is not unjust enrichment by subtraction A fiduciary is not allowed to compete with his principal in the same business In s.33 of the British Columbia Partnership Act, it says if a profit made without the consent of the other partners, the partner has to disgorge such monies (aka. essentially a non-compete situation). As for bribes… if an agent receives a bribe, he must disgorge it to his Principal. The bribor can’t get the money back in the first place because it was an illegal K, and The bribee can’t keep the money because this is unjust enrichement, so the money has to go to the principal. Bray v. Ford (1896) England (AC) Facts: trustee case Held: a person in a fiduciary position is not allowed to make a profit (without permission) and he is not allowed to put himself in the position where his duties conflict. Comments: There is also ratification after the fact: the principal can say later that he ratifies what his agent did thus offering up a defence to this type of breach 45 Reading v. Attorney General (1951) England (CA) Facts: British army sergeant who rode his uniform off duty, hanging on to a lorry in wartime Cairo so it would not be inspected by police. Lorry was carrying contraband and he was accepting bribes to keep cops off. The British crown brought suit to get the money (20,000p) Held: Comments: Ruling by Denning in lower courts that this was there was no need to resort to fiduciary principle, but instead use straight agent principle not shared by Court of Appeal who raise it to fiduciary level by taking a broad view of what constitutes a fiduciary relationship This is truly unjust enrichment by wrongdoing – there is no subtraction on the part of the British crown at all, they never lost a nickel Both conflict AND profit rule at play here See similar line of reasoning in Blake v. Attorney General Profit Rule A fiduciary shall not use his position to make a profit for themselves Regal (Hastings) Ltd. v. Gulliver (1967) England (CA) Facts: a cinema company wanted to be sold as a going concern and to make the sale more attractive they wanted to buy two other cinemas and form a subsidiary/chain. To execute on said purchase, they needed financing. Bank agreed to finance but only if they were willing/could put up capitalization of at least 5000p. Other option was to get personal guarantees from each of Regal’s directors (ed. which the directors didn’t want to). In the end, the company could only muster 2000p so the deal was on the verge of falling through. In response, the directors held a meeting with the company solicitor and decided to put in 500p each, make up the spread, and do the deal. This gave them the upside of profit without being on the hook for guarantee. Held: Court said the deal only came to the men because of their position as directors of Regal and they couldn’t use this situation to make a profit for themselves despite the fact that the directors didn’t hurt the company; they only helped the company do what it otherwise couldn’t do. Comments: If the principle cannot take up the opportunity that is presented to it, then arguably there is no conflict between the principle’s interest and the fiduciary’s interest Peso Silver Mines v. Cropper (1968) Canada (SCC) Facts: n/a Held: court said if the principal has bona fide turned down the corporation’s opportunity then the directors are free to pursue it in their personal capacity. Comments: This case illustrated Canada’s narrow response to Regal (Hastings) Ltd. v. Gulliver Minority in this case argued that duty of loyalty continues until it no longer has meaningful interpretation. This was later affirmed in Canadian Aero Services v. O’Malley Canadian Aero Services v. O’Malley (1974) Canada (SCC) Facts: CanAero was in negotiations with government of Guyana to do mapping of country by airplane and as they negotiations were going on, a number of directors & sr. officers quit the company and formed their own and outbid CanAero for the K. CanAero turned around and sued for profits made on the K. Held: Court awards full accounting of profits Comments: Laskin says minority view in Peso Silver Mines v. Cropper was right way to go… duty of loyalty continues until it no longer has meaningful interpretation This bars a director or senior officer with pursuing a business opportunity and a resignation doesn’t let him do this after the employment is over. Alongside the conflict rule, we have the profit rule that even if the Principal couldn’t have earned that profit itself, the agent cannot go in there and take it for himself Fiduciary Liability Accounting of profits is an in personan remedy and the most prevalent award in fiduciary. 46 Accounting of profits is a personal judgement against the fiduciary to disgorge profits back to the principal There’s no need for the principal to show a loss Doesn’t matter if fiduciary acted bona fide with the best interest of principle in mind Doesn’t matter if principle couldn’t have taken up the opportunity Boardman v. Phipps (1967) England (HL) Facts: case where trustees were looking after an estate that had an investment in a company (Lester & Harris) that wasn’t doing well. The trustees got proxies from other trustees to attend general meeting of Lester & Harris to try and find out why the company wasn’t doing well. After attending the meeting, they decided the best thing to protect the trust would be to acquire the company and return it to profitability, but the trust didn’t have enough money to do the deal, so trustees bought it and got the company profitable again (thus benefiting the trust) and then sold it at a profit later for themselves as well. The estate sued to get at the profit made from the sale. Held: trustee and agents shall not retain a profit made in the course of or means of their office. Comments: Doesn’t matter that the principal has suffered no loss Guinness Plc v. Saunders (1990) Ireland (HL) Facts: Guinness wants to take over a competitor and a member of the board of directors, a lawyer, is appointed by a subcommittee of the board to negotiate the take over deal. The defendant goes through quite a bit of work to negotiate the deal… the problem is that under the articles of association of Guinness only the full board is empowered to approve remuneration of someone for an outside K. And so, we have a problem… namely that the K that fails for want of authority. Held: Court awards full accounting of profits and rejects defendants claim for and equitable allowance for services rendered Comments: The take over was successful and lawyer did a good job, acting in good faith, but nevertheless the HL finds that he put himself in a position where his self-interests conflicted with that of the corporation because we had a K where he stood to gain. Proprietary Remedies Lister v. Stubbs (1890) England (PC) Facts: Something to do with bribes, agent, and principle Held: n/a Comments: One of the problems with bribes cases was that you have the agent which receives the bribe and thus it becomes hard to argue that the principle had any proprietary interest in that bribe and thus a constructive trust remedy, it was held, was not available to the principle This has been overruled in Canada by Petkus v. Becker which determined that there doesn’t need to be a proprietary interest in the proptery to be awarded the plaintiff Attorney-General for Hong Kong v. Reid (1994) Hong Kong (PC) Facts: lawyer that worked for the government had been accepting bribes for fixing cases. He was caught and sentenced to jail and as part of his sentence, was ordered to repay the British Crown $3m. Of course this never gets collected, but he does have 3 properties in New Zealand. The property in question was being held in the name of his wife and solicitor. The Crown claimed proprietary constructive trust on those 3 properties in New Zealand. Held: Court says as soon as agent received bribe, it had duty to give over to principle and thus principle has interest in money and thus we can apply constructive trust Comments: In Canada the unjust enrichment is sufficient basis to award a constructive trust (see Petkus v. Becker) BREACH OF CONFIDENCE Doctrine, arising out of equity, goes back to 1848 Prince Albert v. Strange (1848) England 47 Facts: prince consort made etchings of royal family for his use only (private) and when he took them to get printed, the defendant began distributing copies Held: n/a Comments: Plaintiff sued under breach of confidence Coco v. Clark (1969) England (CC) Facts: Plaintiff had disclosed a new engine design to the defendant in the course of negotiations. The defendant was to manufacture the engines, but the deal fell through. Not too long after, the defendant company starts producing a dramatically similar engine. Plaintiff sues for breach of confidence. Held: n/a Comments: This could be in a fiduciary relationship, contractual relations or the absence of both. Court sets out (still good law) the 3 elements to determining breach of confidence: 1. The information itself must have the necessary quality of confidentiality about it 2. That information must’ve been imparted in circumstances importing an obligation of confidence, and 3. There must be an unauthorized use of that information to the detriment of the party communicating it International Corona Resources Ltd. v. Lac Minerals Ltd. (1989) Canada (SCC) Facts: Case centres around the Hemlo area in northern Ontario which was very rich in gold deposits. The plaintiff, a jr. mining company had gotten very promising readings on the ‘Williams property’ but being a jr. mining company they didn’t have enough financing to develop. Instead, they sought to enter joint venture with Lac Minerals. In doing so, they had to disclose findings on the Williams property and failed to enter into a confidentiality K with the defendant. The joint venture fails and the defendant goes to the owner of the Williams property and out bids the plaintiff for the property. The plaintiff argued breach of fiduciary duty. Held: SCC, unanimous about having a breach of confidence action here Comments: Canada’s leading breach of confidence case SCC applied 3-part Coco v. Clark test and finds that all 3 have been met SCC strips defendant of profits and uses proprietary constructive trust remedy (see Petkus v. Becker) as appropriate for cases of breach of confidence here in Canada Attorney General v. Guardian Newspaper Ltd. (1990) England (HL) Facts: Former MI-5 spy, Peter Wright, breaches his solemn oath and duty to the Crown by writing a best selling book called “Spy Catcher” based on his insider knowledge of the British spy game. Book was set to be published in Australia and US but not in England for the obvious legal reasons. To circumvent this, an Australian publisher agrees to sell his rights to the Guardian’s Sunday Times in UK who, in turn, publish weekly portions of the novel in their paper. Held: Injunction applied for to block publication by the crown fails as the information has already gotten “into the public domain”, but court does award an accounting of profits to the Crown Comments: One of England’s leading breach of confidence cases House of Lords confirmed that (for our purposes here) a defendant is require to make restitution in respect of benefits acquired through his own wrongful act, hence the award of an accounting of profits to the Crown Mixed Inventions Courts are loath to take all profits away because of partial contribution to new invention Seagar v. Copydex (1967) England (CA) Facts: Defendant has got confidential information and uses that as a basis, or springboard, to make further developments for his own invention, or take on it. This leaves the court to decide on this ‘mixed profit’ Held: he who has received info in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it w/o obtaining consent Comments: Denning case 48 Remedy seems to be that all you have to do is pay fair market value of that confidential information and the you are free and clear to keep profits Right of Privacy English law has never recognized the tort of invasion of privacy Douglas v. Hello! Ltd. (2001) England (CA) Facts: celebrity wedding of Michael Douglas to Catherine Zeta-Jones. Very hush-hush with no cameras allowed. Guests are searched for cameras, employees sign agreements not to take any pictures, and there is only one official outside publisher… magazine called OK. However, some trickster managed to take some pictures from the inside anyway and then sold them to rival rag magazine Hello! This was an application for an injunction. Held: Accounting of profits… Hello! had to pay for the amount they earned from publishing the photos. Comments: Court of Appeal recognized that no general right of privacy had yet been granted in English jurisprudence, but that they were getting ever closer Court is willing to extend doctrine of confidence into privacy area by indicating that it is no longer necessary to establish some pre-existing confidential relationship in order to invoke a breach of confidence claim. Campbell v. MNG Ltd (2004) England (HL) Facts: Naomi Campbell, ex-supermodel, is seen and photographed exiting from a Narcotics Anonymous meeting. Pictures appear next day in newspaper, along with a story about her drug abuse and rehab. Held: 1,000p in damages for pain and suffering awarded by House of Lords to plaintiff. Comments: Lower courts initially denied plaintiff relief on grounds that having told the public that she did not have a drug problem, there was a public record that had to be corrected. She had lied to the public. House of Lords reverses lower courts decision, that while agreeing with the public policy reasons for ‘outing’ her lies, to go further and publish a picture and details of that treatment, went over the line. HL says these are privacy issues that ought to be respected and weren’t. HL also went to the reas man test, “would a reasonable person, in Campbell’s shoes be upset by the publication of this information?” Breach of Confidence Remedies All breach of confidence cases begin with an injection Just about every kind of damage award is appropriate… If the duty arises in K, we can get expectation interest. Exemplary and punitive are allowed The user remedy is allowed, in that the “user” has to pay for the fair value of the information Constructive trust Equitable compensation Cadbury Schweppes Inc. v. FBI Foods Ltd. (1999) Canada (SCC) Facts: The Clamato licensing agreement between the parties precluded the defendant from making a competing product that used clams or seafood. Instead, the defendant made a very similar drink without clams or seafood, claiming use of a loophole, and went on to market the stuff for 5 years before some smarty-pants lawyer working for the plaintiff started looking into breach of confidence. Held: Comments: 3 part test in Coco v. Clark easily made out in this case Trial judge relied on Seager v. Copydex and assessed value of damages based on whether information was; very special, something special, or not very special. Court awarded equity compensation the object of which is to put the confider in as good a position as it would have been but for the breach. Overruled. Court of Appeal says the category analysis used by trial judge is all-wrong. CA calculates damages as what the plaintiff lost in revenue for the 12 months. CA also grants a permanent injunction. Overruled. SCC says the lower courts are all wrong. Real requirement is that plaintiff has to prove the sales they actually lost because there is a competitor in the market place. 49 Just Cause (Excuse) Defence Notion of public interest disclosure Basically, this defence was very narrowly applied (spec. disclosures of crime or wrongdoing), until Denning came along and gave it life “…provided that the disclosure is in the public interest” Church of Scientology v. Kaufman (1972) USA (NY) Facts: Plaintiff sued to enjoin disclosure of their methods by one of their ex-disciples Held: Injunction denied Comments: Judge said it was in the public interest to get this fraud exposed to the world Woodward v. Hutchins (1977) England (CA) Facts: Plaintiff, whose alias is “Tom Jones”, has a falling out with his manager, the defendant, who then turns around and publishes a randy account of all their sexual adventures. Plaintiff seeking to halt distribution of publication. Held: Court said that if person/plaintiff has history of seeking publicity of this nature anyway, then plaintiff shouldn’t be allowed to go after someone who is confirming this reputation Comments: Shortly before this all happened, the plaintiff had given an interview in Playboy UNCONSCIONABLE TRANSACTIONS These typically arise in a K situation where there is an inequality of bargaining power. Recognized (i.e. prima facie) categories of inequality of bargaining power include… Weakness of mind Illiteracy Drunkenness at time of the transaction (or crazy drunk all the time) ESL Old age Ignorance of rights (aka. Inexperience in business) Emotional distress Inability to comprehend Absence of independent advice Illness or physical defect that affects person from comprehending transaction Waters v. Donnelly (1884) England Facts: Plaintiff described by court as being weak minded and easily led. Defendant was a shrewd businessman. Plaintiff exchanges his peach orchard (worth 7k) for a stable (worth 5k) and asked to pay $700 on top of it. Plaintiff didn’t have extra money to pay the $700, so defendant arranges to have plaintiff mortgage his newly acquired property back to defendant at an interest rate of 9%. Held: If two persons, no matter whether a confidential relationship exists between them or not, stand in such a relation to each other that one can take an undue advantage of the other, whether by reason of distress, or recklessness, or wildness, or want of care, and when the facts show that one party has taken undue advantage of the other by reason of the circumstances mentioned, a transaction resting upon such unconscionable dealing, will not be allowed to stand. Comments What emerges are two essential conditions to trigger this doctrine: 1. There must be an unequal bargaining strength between the parties (re. Inequality in bargaining power) 2. Bargain struck must be improvident (i.e. stronger party has taken advantage of weaker party and exploited situation to his advantage.) Even if parties are unequal in bargaining strength, but deal is fair = deal with stand. If parties of the same strength but bargain seems unfair = deal with stand. Both elements 1 & 2 have to be present for doctrine to succeed Once 1 &2 are shown to be true, then onus shifts to stronger party to show the bargain was just and reasonable 50 Typically remedy sought is rescission in equity (rescissio ab initio) and any benefits conferred by a party will be given back. Harry v. Kreutziger (1978) Canada (BCCA) Facts: The plaintiff, described as someone with a grade 5 education agreed to sell his fishing boat to the defendant. The defendant is a businessman who knew the boat was worth substantially more because it had attached to it a coveted fishing licence. Held: Plaintiff recovered. Comment Lambert J.A.: questions as to whether use of power was unconscionable, an advantage was unfair or very unfair, a consideration was grossly inadequate, or bargaining power was grievously impaired… are really aspects of one question. Test for improvidence: is the transaction, seen as a whole, sufficiently divergent from community standards of commercial morality that it should be rescinded? Gresshammer v. Miami Studios (1958) Canada (ManCA) Fact: Plaintiff is a 24 year-old nurse. She entered into dancing lesson contract with the defendant. Defendant played upon her loneliness and romantic feelings to get her entering into enormous contract for a sum that was ½ or her annual salary. Held: At both trial court and CA the action was dismissed. Comments: It is not the function of courts to protect adults from ridiculous bargains. Gaertner v. Fiesta Studios (1972) Canada (BCSC) Fact: Young nurse decides to take dance lessons. Initial fee for 32 hrs was $126. She was induced over time to enter into 5 additional contracts for a sum in excess of $7200. Held: Court uses evidence given by former employees about fraudulent techniques used to ply upon naïve people (such as the plaintiff) to void a part of the contract and accorded $2500 in damages to the plaintiff. Comments: However, despite the fact that the court concluded that the defendants were an unscrupulous lot who prey on lonely people, he found no relief for the plaintiff for the $5000 of dance lessons, even if it was a ridiculous bargain. Court said they needed ‘actual fraud’ to have occurred before they could grant that type of relief Lloyds Bank v. Bundy (1975) England Facts: Defendant’s son has a company, and an existing relationship (incl. an overdraft) with the plaintiff bank. Son’s company gets into financial difficulty. Bank requires security for overdraft, and defendant, upon request of his son, signs 3 guarantees for ever-enlarging overdrafts (£1,500, then extra £3,500, then extra £5,000), eventually amounting to £11,000. The son’s company goes bankrupt. Defendant’s only asset is his house, worth £10,000. Bank wants the house. Held: Denning: guarantee unenforceable because of exploitation of unequal bargaining power (breach of trust) and undue influence. Comment: Leading case with relation to unconscionability Denning → Common thread runs through the separate categories of duress of goods, undue influence, unconscionable transactions, undue pressure, and salvage agreements. It is “unequal bargaining power”, which has 3 requirements: i. Must be unfair terms or inadequate consideration, ii. Must be unequal bargaining power, and iii. Must be influence or pressure brought to bear (express or implied pressure) Guarantees are an exception to rule of consideration – don’t need consideration to make it a binding contract Therefore is irrelevant that there was no consideration from son to dad But dad’s actual consideration is the psychological benefit of helping son. But consideration between bank and son’s company (indirectly dad) was grossly inadequate – last guarantee only got them an extra few months to build up debt. Two sources of inequality of bargaining power 1. Dad-Banker → evidence that dad relied on bank for information and the bank knew this. 51 2. Dad-Son → dad acting under pressure from son and bank should have recognized that natural affection between dad and son would be the source of undue pressure/influence on dad. Dad even said to bank manager “he’s my only son”. Schroeder Music Publishing v. Mccaulay (1974) England (HL) Facts: Macaulay, a songwriter, signed exclusivity contract with publisher (i.e. can’t sell songs to anyone else), but songwriter later regrets it and wants the contract voided. Held: K was unfair Comments: Key Point: restraint of trade is really all about unconscionability: inequality of bargaining power (Denning from Lloyds Bank v. Bundy) and unfair bargain Osorio (et al.) v. Cardona (1984) Canada Facts: Defendant and friends at racetrack betting on 6-race package. Plaintiff comes and sits near defendants. They begin to talk and discover they both are betting on same 6-race package. They jointly decide that their odds of winning the pot are greater if they agree to pool their tickets sharing winnings between all parties. Agreement included recognition that 50/50 split wasn’t fair given defendant had a ‘combination’ ticket, so it was decided that if defendant won, plaintiff and friends would get 20% of winnings. After 5th race, plaintiff’s ticket was no longer in the running. Defendant ends up holding winning ticket for $735k. Defendant puts off paying plaintiff. After plaintiff chases defendant around town for some time, defendant offers $60k in satisfaction. Plaintiff claims to have accepted $60k ‘for the moment’ and reserved right to go after balance – which he does. Defendant pleads 3 defences to the claim: 1. Agreement was a ‘wagering K’ therefore illegal 2. No legal intention to create a K relation 3. If (1) or (2) fail, in any event, there was a valid settlement ‘in full satisfaction’ Held: Plaintiff wins case. Court said with respect to 1-3 defences put forward: 1. Rejects argument that this was a wagering K by citing (Carbolic Smoke Ball) concluding that this was a ‘pooling agreement’ instead 2. Definitely intention to create binding K 3. Finds that defendant’s story was more believable then plaintiff’s in that plaintiff didn’t object to notion of accepting the $60k in ‘full satisfaction’ Comment McLachlin J. offered two grounds that allowed the plaintiff to win the case. First, economic duress (D. & C. Builders v. Rees) created when defendant told plaintiffs to either accept $60k or nothing at all. Second, unconscionability in the classic sense – there was an inequality of bargaining power leaving the weaker party at the mercy of the stronger party. “It was sufficiently divergent from community standards of commercial reality that it should be rescinded” Lamber J. in (Harry v. Kreitzecher). OFFICIOUSNESS Officiousness = “interference in the affairs of another not justified by the circumstances under which the interference takes place.” Example: guys paints your house at night while you’re asleep, unknown to you, and then shows up the next day and demands payment. An officious conferrer is not entitled to restitution The most popular form of officiousness is that of the ‘intermeddler’ (aka. gets involved in the affairs of another). Intermeddlers take on 3 types: 1. Necessitous Intermeddling: restitutionary relief may be provided when needed 2. Self-serving Intermeddling: evokes less sympathy, but could provide restitution, and 3. Officious Intermeddling: where there appears to be no sufficient excuse on grounds of necessity or self interest for the intervention other then motives we do not deem appropriate Courts have been reluctant to grant relief where benefits have been conferred through intermeddling. “Liabilities are not to be forced on people behind their backs, any more than you can confer a benefit on a man against his will”. The policy reasons against officious intermeddling are as follows: a. We’re fearful to allow recovery we will encourage intermeddling 52 b. It deprives and individual the free choice as to how he wants to invest his assets c. Obnoxious conduct by the plaintiff and loss of freedom of choice on the part of the defendant If the intermeddling is done gratuitously, then we call it a gift and defendant can use it as a defence to a restitutionary claim Necessitous Intermeddling Necessity: often arising in the context of emergency and is a good example when relief IS granted Courts have extended this to mental incompetence, drunkards, children as There has always been an exception in K law that even though these classes of persons do not have capacity to K, that suppliers of necessaries (i.e. food, shelter, medical, etc.) to such people ought to be encouraged – so we make the exception One of the earliest examples is ‘agency of necessity’ is a doctrine that grows out of the traditional doctrine of agency. If an agent finds themselves in an emergency situation, he is able to take actions beyond his scope of authority and still be able to bind his principle as a result of those actions Great Northern Railway v. Swaffield (1874) England Facts: Great Northern Railway was carrying a horse to a particular location and when they arrived, the receiving party was not there to pick it up. So, the stationmaster feed and sheltered horse for the night and it was picked up the next day. Held: The owner of the horse had to pay for those benefits Comments: The benefits conferred through the overnight feeding and sheltering of the horse weren’t requested, but nevertheless, they were needed in the situation This is an application of the agency of necessity 4 rules emerged from the court’s decision… 1. Must be practically impossible to get instructions on what to do from primary 2. Must be necessary to act as they did 3. Must be bona fide as action concerned 4. Must be reasonable and prudent in the circumstances Hastings v. Semans Village (1946) Canada (SaskCA) Facts: we have an indigent who is injured in a highway accident who is taken to local doctor who realizes she needs treatment and puts her in the nearby hospital. Needless to say, hospital wants compensation for its care and treatment of this indigent. Under the villages act, the village where the indigent resides is responsible for looking after the medical needs of the indigents, and Seemans Village is indeed the village where she resided. Is just happened that the doctor she was taken to, was the medical officer for the village of Seemans. Held: Village bound to provide relief. Comments: Court uses an agency analysis – doctor was agent of village & made emergency decision to provide treatment and was thereby able to bind his principle, the village of Seemans Matheson v. Smiley (1932) Canada Facts: man attempts suicide and becomes unconscious. Obviously it is hard to ask for his permission, etc. for certain medical treatment. Surgeon does all he can to save patient, but at the end of the day, dude croaks and surgeon sues for his services. Held: Comments: Court recognizes that implied K is going to be most difficult in these circumstances (re. patient not lucid) This is the antithesis of officious conduct The fact that the services were unsuccessful does not distract from this being a benefit in the restitutionary sense to the deceased It wasn’t requested, true, but it was under the circumstances and for grounds of public policy, was encouraged and thus a benefit in the requisite sense Re. Rhodes (1890) ? Facts: mental incompetent whose family kept him in an asylum for some time and when he died, the asylum sought compensation from the family’s estate. Held: Relief denied 53 Comments: Asylum never kept records of cost, asked for payment previously or evidence that they intended to be paid for this, so court said this was nothing more then a gift Preservation of Property English courts have not been sympathetic to preservation of property even in necessity circumstances Nicholson v. Chapman (1793) England Facts: Plaintiff’s timber, which was tied up on banks of Thames, broke loose and floated down river ending up on the tow path of an estate. The estate immediately employed the defendant to move it out of way because it was an obstruction and to preserve it. Defendant, who did this work, decided it was the same as salvage at sea, to which there was a long recognized claim to saving goods at sea in necessitous circumstances, particularly storms. Plaintiff asserts his property right in those goods and defendant claims ‘maritime lean’ on the goods for his salvage services. Held: Court rejects extension of maritime lean idea on grounds that the hazardous conditions we find at sea aren’t present inland Comments: The fear that is raised by the court is that should this case be decided differently, people will be encouraged to intermeddle (ex. cut ships loose and then chase after them and claim reward) Had an action for quantum meruit been brought for the services provided, the court may have lent a more sympathetic ear Policy: Salvage on land must go unrewarded unless it had been rendered at the invitation, express or implied of the owner. Use quantum meriut instead. Re. Pike (1888) Ireland Facts: a lady died and her house and its entire valuables were left unprotected. Two policemen who patrolled the area did extra work on the side to protect the property. Held: in personam claim allowed Comments: Court ruled that their duties were not officious Sherrin v. Haggerty (1953) Canada (Ont) Facts: cottage located on banks of Lake Ontario. That particular year saw huge storms and the cottage’s real estate agent sends telegram to owners in Florida saying that they are seeing serious erosion and the cottage owner should take notice. Owner says not to worry about it. Erosion continues until some 3 feet of cottage is overhanging the cliff and about to tumble into Lake Ontario. Neighbours bring up tractor to pull cottage back but forget about stone fireplace, which should have been cut out first since it was imbedded in foundation, so they pulled down half the cottage instead. Hahahahhaha Held: Court awards nominal damage award of $1 Comments: Here the court said that the trespass was for a necessitous reason (i.e. to pull back the cottage) but in so doing, one had to apply reasonable care, which the defendant(s) failed to do here Court decides that damages rendered by defendant(s) actions when compared to what would have happened to the cottage left unattended were pretty much the same (i.e. nil in both cases because cottage would have been destroyed anyways). Maccelsfield Corps. v. Great Central Railway (1911) England Facts: Railway Company was under statutory duty to keep bridge under repair, but they don’t. Plaintiff, who is the highway authority for the district, asks defendant to do repairs but they ignore the request. So plaintiff undertook to do repairs then sued for cost of doing so. Held: Court denies relief saying they acted voluntarily and were under to legal obligation to act Comments: MD believes that this case would be decided differently today on principle of necessity Preservation of Credit Example: where one pays off a debt of another so that person’s credit rating is not injured 54 Although this gets into area of Bills of Exchange, the underlying attitude of the mercantile courts was one of necessity in preserving the chaps credit and intervention out of altruistic reasons, not officiousness, and can certainly be compensated Fulfillment of Another’s Duty Necessity used for the justification of such cases Example: the old common law duty to bury the dead that if the local authority does not do so, then the next of kin are probably required to do so and anyone who does so for the reasons of necessity can be compensated for fulfilling that duty We can expand this into other areas like child support, elder support, etc. where a responsible person fails to do so and another has to step in to perform that service Self-Serving Intermeddling Basically, it’s a case where in the course of exercising one’s own self interest, you consequently confer a benefit on the defendant and now are seeking compensation/restitution for the value of that benefit so conferred Example: in making improvements to your land, you inadvertently improve someone else’s Norton v. Haggett (1952) USA (Ver) Facts: These guys have an argument in town council. The one fella’, having lost the argument and feeling vindictive goes to the land registrar and discovers other guy is indebted to local bank for the mortgage on his home. Loser goes to said bank, pays off the outstanding amount and thinks, a-ha, I’ve taken over the debt of my enemy and now I have the upper hand. Held: Comments: Despite the law of assignment in this case, the court does not recognize the change in creditors Court said, very simply, it was never understood by bank that this was an assignment of debt Officiousness can override the doctrine of assignment. Self-Serving Intermeddling (Law Profession) This is where courts have traditionally recognized claims for self-serving intermeddling… in litigation & the contribution lawyers may make to the process. General Rule: it is a general rule that if a fund/property is preserved/increased for benefit to others, then others can be called upon for cost of preserving that benefit Example: where this happens in litigation, proportional recovery of the fees will be recognized Turns on question of where benefit is indeed a benefit… turned to value or involves inevitable expenditure? Felton v. Finley (1949) USA (Ida) Facts: lawyer retained by two nephews to contest the uncle’s will. Lawyer to be paid 50% contingency fee. There were 4 other beneficiaries under the will the lawyer wanted to get involved in the litigation as well, but they all refused. The lawyer ended up winning, and the 4 take their increased share & the lawyer then sues the 4 for the value of the benefits he’s conferred upon them. Held: Lawyer loses for policy reasons Comments: This could be regarded as officious in the sense that he had made his deal with the two nephews, was pursuing his K with them as agreed, he understood that the others did not request/want his services, and therefore should have no claim against them… on the other hand, we do have the fact that they accepted the benefit (ed. albeit a benefit they are entitled to at law anyway) COMPULSORY DISCHARGE General Rule: a defence to the allegation that the benefit was officiously bestowed is that the conferrer was under compulsion to do so, UNLESS you have put yourself in position where you can be compelled to make the payment. Typically, what we are involved with is a 3 party situation where A pays to C, who is a creditor to B, and thus discharges B’s debt, B being indebted to C 55 The law in this area is a bit murky and complex… especially the question of when A pays C, does that payment in fact discharge B’s debt? The general view is only if B adopts or ratifies the payment, otherwise it does not have that effect and therefore no restitutionary claim would lie because B hasn’t benefited, his debt has not been paid off One of the clear exceptions to that rule is where there has been a compulsory discharge of that debt – courts have held that the debt is discharged presumably because of legal obligation on A to do so – that then confers benefit on B and suit in restitution is open to A to sue B for benefit conferred. This would be an action in money paid, not money had & received, and generally speaking the action we speak of is generally referred to as “indemnification” Bottom Line: most claims for reimbursement for conferrals of unrequested benefits are recoverable, except for gifts and officious conduct. Case by case Moule v. Garrett (1872) England Facts: a landlord and a tenant and part of the deed is a duty to repair. The subtenant in possession doesn’t do the repairs. Landlord sues tenant & tenant puts up suit against subtenant. Held: “Where the plaintiff has been compelled by law to pay for the defendant’s debt, money which the defendant was ultimately liable to pay, the defendant is indebted to pay the plaintiff.” (aka. money paid principle) Comments: 4 basic principles arising out of this case (ed. 1 & 3 considered outdated, 3 no longer good law in Canada, 4 is only one that counts today): 1. The plaintiff in order to succeed must establish that the compulsion under which he made the payment was a legal compulsion (re. arises mostly under statute) 2. Plaintiff must show that the payment to a 3P discharged a liability held by the defendant. 3. A plaintiff and a defendant are subject to a common liability to the third party but as between the two parties, the defendant is primarily liable (see Parallel Productions v. Goss Construction) 4. The plaintiff must not have officiously made the payment Legal Compulsion Arising at Common Law Legal compulsion at common law can arise in two ways… a plaintiff can discharge the defendant’s obligation to 3P if: i. Its involving guarantees or surety ships; and Example: A guarantees to C, B’s debt ii. Its involving assignment of leases (see Moule v. Garrett) Legal Compulsion Arising by Statute Brook’s Wharf & Bull Wharf Ltd. v. Goodman Bros. (1937) England Facts: plaintiffs were warehouseman and defendants were importing squirrel skins from Russia and storing them in the plaintiff’s bonded warehouse. While they are in the bonded warehouse, the goods are stolen. No fault of warehouseman shown or suggested. However, the import duties were still owed on the now stolen goods. Under the existing Customs & Consolidation Act if the goods can’t be accounted for, it is the warehousemen who have to pay the import duties. Plaintiff is suing defendant for indemnification. Held: Defendant had to pay plaintiff back. Comments: This was the first case in which the English court recognized the law of restitution Plaintiff was legally compelled to pay the taxes by statute, but the defendant got the benefit because his debt was discharged Court recognizes that this obligation was discharged under a legal liability, namely the statute This is not implied K, there is nothing consensual about the payment (see Moule v. Garrett) Peel (Regional Municipality) v. Ontario (1992) Canada (SCC) Facts: Federal statute governing juvenile delinquents included a provision that said young offenders, placed in homes in the municipality in which they lived, gave responsibility for financing those stays on that particular municipality. Peel (Regional Municipality) argued that this legislation was ultra vires. An earlier court decision agreed that the legislation was ultra vires, and now the plaintiff brings suit for return of their money. Both trial judges found on the basis of Moule v. Garrett, while both Courts 56 of Appeal overturned this on the ground that no legal liability of the defendant had been discharged. Went to SCC where plaintiff couldn’t prove its payments served to discharge an existing legal liability of the defendant, that the benefits were too indirect so Moule v. Garrett argument abandoned. Held: No legal liability on behalf of the provinces to support these payments and therefore no unjust enrichment. Also fails tripartite test. Comments: By the time the case reached the SCC, the plaintiff had conceded they had not discharged a legal liability of either government, therefore the suit changed from no longer being within the traditional side of unjust enrichment analysis, and now goes into applying the tripartite principles (per. Petkus v. Becker) Turns on first part of test, whether the defendant had been “genuinely or incontrovertibly benefited by the conferral in question”; MacLachlin J. says ‘no’ and points out that this was not certainly an ‘inevitable expense’. MacLachlin’s examination of the concept of ‘benefit’ comes to the conclusion that a benefit: a. Must be a clear, unquestionable benefit, and b. That it could be done in either of two ways… 1. Either a positive benefit has been conferred in terms of a ‘demonstrable financial gain’, or 2. In the negative sense, that the defendant has been saved an ‘inevitable expense’ It is on (2) that the plaintiff’s fail… there was no legislation that required it or any indication that they (aka. defendants) would pass such statute or make such expenditure Practical Compulsion You don’t need the legal compulsion aspect if you can prove practical compulsion. Harris v. Carnegie (1933) Canada (OntCA) Facts: the defendant had mortgaged their property and a firm of solicitors were managing it for them. The defendant’s were negligent in failing to pay municipal taxes, so the solicitors paid it for them and then sued the defendant to recover. Defendant said they paid if officiously, the defendant didn’t ask them to. Held: Ruling for the plaintiffs Comments: Court said plaintiff was compelled to pay, so action lies for money so paid (aka. practical compulsion) The plaintiff wasn’t acting officiously; they had an interest to protect Limitations of Recovery Question of: has X officiously put himself in position where X is now compelled to confer benefit on Y Carleton (County) v. City of Ottawa (1963) Canada (SCC) Facts: poor indigent living outside city of Ottawa in County of Carleton and under Homes for the Aged, the county has the legal obligation to put her in a home, but Carleton doesn’t have a home so they enter into agreement with county of Lennart which agrees to put up indigent for them. Around 1950, the City of Ottawa annexes part of the county of Carleton including were indigent lives. So technically, indigent becomes under care of City of Ottawa. However, due to oversight, indigent is forgotten about and Carleton continues to pay to County of Lennart. Some time later, they see the mistake and tell City of Ottawa they should have been paying and trial arises. Held: Plaintiff recovers Comments: Ottawa’s obligation came through statute whereby Carleton’s obligation came through K – but this didn’t stop the courts. SCC does a good job here – the restitutionary elements are identified front and centre and Hall CJ focuses on officiousness and says this is not officiousness here because Carleton was operating under ‘mistake’ which always vitiates officiousness Case affirms Moule v. Garrett Owen v. Tate (1976) England (CA) Facts: Defendant obtained bank loan and Ms. Lightfoot signed guarantee to bank. Ms. Lightfoot then sold the loan to the plaintiff without the defendant’s knowledge. When defendant did find out about this they protested. Bank called in the loan and 57 defendant told bank to get it from plaintiff. Plaintiff sued defendant for reimbursement (indemnification). Defendant argued that the plaintiff was a ‘volunteer’ and in Eng this mean officious intermeddler. Don’t use the word volunteer. Held: The court at the end of the day doesn’t hear enough evidence to be convinced that he had any reason to intervene in these affairs and then concludes he is a mere volunteer, officious, and therefore not entitled to recovery. Comments: This is the key English decision per officiousness Since the defendant protested the assignment, the court felt that the plaintiff made the payment to the bank voluntarily. Test for Officiousness: a broad approach required the court to look at all the circumstances in the case, and ultimately ask “…was it reasonably necessary in the interest of the volunteer that the payment be made?” Canada (Attorney General) v. Becker (1999) Alta CA Facts: involving the Canada student loan program. Under the statute the Gov. of Canada acts as a guarantor and encourages banks to make loans. Sure enough, Becker defaults, government pays bank, and then sues Becker for indemnification. It turns out that the limitation period had expired in suit against Becker. Held: (1) Court says this is not a subrogation claim, rather its an independent claim of indemnity, and (2) since this wasn’t officious therefore defendant had to pay the government back Comments: The court takes the opportunity to distinguish between subrogation and indemnification In subrogation the gov't is stepping into the shoes of the bank to sue Becker. There were good pubic policy reasons for the government to pay the bank back for Becker. Gifts Gratuitous, like officiousness constitutes a bar to Rest recovery J.B.C. Consulting Inc. v. Gray (2000) Canada (Ont) Facts: two partners who had a failed business, a judgement against them for $170k, they couldn’t pay it. One party stays in Ontario & the other goes to the US. The wife of the Ontario partner has her own business and hires legal counsel and they work out a deal with the judgement creditor to accept in settlement less then 50% of the amount & they do the deal. Now, JBC Consulting, which is wife’s firm, seeks ‘contribution’ from Grey of that amount. Held: Judgement against the defendant Comments: Judge does find that Grey certainly acquiesced in the benefit that was concerned and to judge this satisfied 3rd test in Petkus v. Becker What is key, is judge’s recognition that there was no element of compulsion in this case – we are simply into discharge of another’s liability – or a case of self-interest intermeddling The self-interest part rules out the officiousness part Stinson J. picks up on MacLaughlin’s invitation in Peel that these traditional categories in restitution can be expanded in light of tri-partied Petkus principle If you can defeat officiousness through arguments of mistake, self-interest, etc. then it is not just an officious intermeddler – but there is a reasonable necessity! REMEDIES CONSTRUCTIVE TRUSTS & EQUITABLE LEINS The Constructive Trust We are still in equity here Constructive Trusts: a general remedial device founded squarely on the principle of preventing UE. Constructive trusts may also include in rem (aka. proprietary remedies) in rem: grants a rights of ownership and creates a security interest in defendant’s asset. The English courts still regard the constructive trust as part of the substantive law of trusts The English jurisprudence has no real scheme to deal with constructive trust – there is not underlying principle or theme that binds all these cases together 58 The Americans, as per Restatement, regard constructive trust purely as a restitutionary remedy with prime aim of correcting an unjust enrichment In Canada in 1980 with Petkus v. Becker, the SCC definitely came down on the side of the Americans deciding that this was a remedy and not part of the substantive law of trusts Contracts Trusts Express Implied in fact Implied in law Express Implied in fact (called ‘resulting trusts’) Implied in law (called ‘constructive trusts’) In both implied in law categories, substantive parts of K & trust law are ignored… most important is ‘intention’ English Law & Constructive Trusts Because the English law has not really divorced the constructive trust from the substantive body of trust law, it still tends to view the constructive trust in trust terms (i.e. fiduciary responsibility central to the constructive trust in their mind) There are 3 main areas in which constructive trusts are intertwined with English jurisprudence… 1. Whenever a trustee breaches a trust, competes against a trustee in the same business, etc. all of those are instances in which a constructive trust may be awarded 2. Where strangers to a trust get involved. There are generally three possibilities; (a) To become a trustee de son tort whereby a stranger fulfills function of a trustee even though they aren’t the appointed trustee, (b) Knowing assistance (re. in a breach of trust) which requires actual knowledge, and (c) Knowing receipt (re. of trust property) whereby you knowingly get your hands on trust property and use it for your own benefit. This requires either actual or constructive knowledge (per reasonable person test). Typically, C involves a constructive trust, C involves an accounting of property, and A involves in personum remedy 3. Fraud where the most familiar example is proprietary estoppel. This is where one person represents to another that they will have an interest in some property belonging to the representor, then renege on that representation (see Errington v. Errington from 1st year) Keech v. Sanford (1726) England Facts: trustee who was to renew a lease for an infant beneficiary. The landlord refused to lease to the infant, so the trustee took up the lease himself on behalf of the beneficiary. Held: courts awarded a constructive trust for the infant and all the profits were accounted to the infants benefit. Comments: Court said he, as a fiduciary cannot do this because it would weaken his duty of loyalty, thus creating a grey area in the law Whenever the trustee breaches the trust, gains something for himself, a CT may be awarded. Considered a key early case in express trust Hussey v. Palmer (1972) England Facts: case where young couple invited the daughter’s mother to come live with them because she didn’t have much money. As a contribution to this new arrangement, she paid for an extension to their house so she could live there. After about a year, the daughter and mother couldn’t get along and the mother left the house. The question became, how do we deal with this 607p manifested as an extension to the house. Held: Court awarded proprietary remedy (aka. constructive trust) on the house in favour of the mother for 607p Comments: Denning says that a CT occurs where the legal owner cannot in good conscience keep the P, or he must share the P with the person who made it better Canadian Use of Constructive Trust Schobelt v. Barber (1996) Canada (Ont) Facts: One joint tenant kills another. 59 Held: Constructive trust awarded. Comments: Killer keeps the land he had before and holds victim’s portion in constructive trust for whoever would’ve acquired the land if victim had predeceased killer. This also potentially protects an innocent purchaser for value. Pre-Petkus v. Becker Petkus v. Becker (1980) Canada (SCC) Facts: Case of divorce and division of assets. Plaintiff supported defendant at early stages of marriage when he had little to no income. Plaintiff later aids in establishment and running of a successful honey farm, purchase of house, etc. albeit, all titles are in the name of defendant. Held: Constructive trust awarded & recognized as a restitutionary remedy by SCC. Court found it was unjust that she should be shut out even though legal title is wholly registered in his name, given her substantial contributions. Dickson J. says that; “…the principle of unjust enrichment lies at the heart of constructive trust. Constructive trust is a remedy imposed on equitable grounds in order to prevent unjust enrichment.” Comments: This is where we see the principles of Deglman v. Guaranty Trust Co. of Canada accepted on the equity side. The SCC had to reject the concept of ‘resulting trusts’ which imply an intention to create a trust (i.e. basically trusts implied ‘in fact’; you look at conduct of parties and from the conduct you are able to determine that they intended to create a trust) Constructive trusts are trusts implied in law; they are imposed to prevent an unjust enrichment. It says that relief should be granted even though the parties had not formulated an intention to share ownership of the property (i.e. no resulting trust present) International Corona Resources Ltd. v. Lac Minerals Ltd. (1989) Canada (SCC) Facts: Case centres around the Hemlo area in northern Ontario which was very rich in gold deposits. The plaintiff, a jr. mining company had gotten very promising readings on the ‘Williams property’ but being a jr. mining company they didn’t have enough financing to develop. Instead, they sought to enter joint venture with Lac Minerals. In doing so, they had to disclose findings on the Williams property and failed to enter into a confidentiality K with the defendant. The joint venture fails and the defendant goes to the owner of the Williams property and out bids the plaintiff for the property. The plaintiff argued breach of fiduciary duty. Held: SCC strips defendant of profits and uses proprietary constructive trust remedy (see Petkus v. Becker) as appropriate Comments: In trying to determine the elements necessary to have this declared a constructive trust, LaForest gets down to actual elements he feels is important to rights that flow from right of property: 1. It isn’t essential that the plaintiff show some prior property right in the subject matter The considerations he would point to is should there be a priority to the other plaintiff in bankruptcy 2. Should the plaintiff have the advantage of any increased profits/value that might occur to property 3. Has the defendant intercepted an advantage that otherwise would’ve come to the plaintiff 4. Is the moral quality of the defendant’s act something we should take into account 5. Is it possible to accurately evaluate the property and turn it into a damage aware, and 6. Is the property unique and therefore suggest that proprietary relief is necessary If all 6 aren’t met (particularly #6) then accounting of profits likely to be appropriate remedy In this case, all 6 were found to be met and thus the award of a constructive trust is handed down Creditor in Invitum Definition: an involuntary creditor Example: if X pays money to Y by mistake or under duress, X is a creditor for that money back, but X is an involuntary creditor – he didn’t get to chose to be a creditor of Y If Y goes bankrupt, why should X’s stuff go into the general pool, when X didn’t get to choose to be part of this? 60 Chase Manhattan Bank N.A. v. Israel-British Bank (London) Ltd. (1981) England Facts: 2 million dollars was paid into defendant’s account twice, second time by mistake. The recipient bank/defendant won’t give it back, then goes into bankruptcy. Chase wants to a special creditor, and not lumped in with all the other regular creditors. Held: Constructive trust awarded in favour of plaintiff Comments: The English court acknowledges that fact the plaintiff did not choose to be the defendant’s creditors and that the rest of the creditors would get a windfall if the court allowed the 2 million to be left in the pool to be divided up between all the creditors Being in England, the courts had to deal with the constructive trust as an ‘institution’, so they had to find a pre-existing fiduciary relationship… which they do by ‘massaging’ the law a bit Ellingsen (Trustee of) v. Hallmark Ford Sales (2000) Canada (BCCA) Facts: Vendor selling truck to purchaser. Truck to be used for logging operations by purchaser and needed it in a hurry. Question of financing and giving up old truck was going to take some negotiation with existing banks. Purchaser convinces vendor to part with truck before truck was financed and sure enough, financing fell through. Purchaser goes bankrupt and insolvency wants truck as part of estate to be liquidated. Held: Court says this was a conditional sale, condition was never satisfied, therefore sale never took place and title to truck never passed Comments: Constructive trust awarded and truck can be ‘lifted’ out of the bankruptcy proceedings Constructive Trust & Profit from Wrongdoing Constructive trust eligible here should preconditions set out in International Corona Resources Ltd. v. Lac Minerals Ltd. are met Soulos v. Korkontzilas (1997) Canada (SCC) Facts: Canadian case, real estate agent, the defendant, representing plaintiff interested in a particular property. A price is given by the vendor through the agent back to plaintiff, is not acceptable, and some haggling goes on. A fixed price is kinda’ determined and when it comes back to agent, rather then offer it to plaintiff, he buys it and puts it in wife’s name and tells plaintiff “…sorry, it didn’t work out”. Held: Comments: Clear case of breach of fiduciary duty In normal case, constructive trust would be typical remedy with property generally seen as ‘unique’ The problem in this case was that property values had plummeted so that the property was worth much less then at the time of the proposed transaction SCC says no unjust enrichment in this case as per the Petkus v. Becker tripartitie test, the plaintiff hasn’t been deprived of anything Therefore we don’t have a restitution case, and the court then debates whether constructive trust is a remedy outside of restitution (ed. MD disagrees saying this IS a restitution case) Attorney-General for Hong Kong v. Reid (1994) Hong Kong (PC) Facts: lawyer that worked for the government had been accepting bribes for fixing cases. He was caught and sentenced to jail and as part of his sentence, was ordered to repay the British Crown $3m. Of course this never gets collected, but he does have 3 properties in New Zealand. The property in question was being held in the name of his wife and solicitor. The Crown claimed proprietary constructive trust on those 3 properties in New Zealand. Held: Court says as soon as agent received bribe, it had duty to give over to principle and thus principle has interest in money and thus we can apply constructive trust Comments: In Canada the unjust enrichment is sufficient basis to award a constructive trust (see Petkus v. Becker) When does the Constructive Trust Arise Background: each province each now has a family law act to deal with Petkus v. Becker situation. Ontario’s statute is very simple, during the marriage, at the time of the separation, thereafter deemed to be the evaluation date, whoever has the excess will take half of that and transfer it to the other. 61 Rawluk v. Rawluk (1990) Canada (SCC) Facts: Divorce case in Ontario in which it fell under the statutory authority mentioned above (see “Background”). Here, wife’s council says ‘hold it’, if we were applying constructive trust on property at time of valuation, then at time of judgement, if property has increased in value, then she is entitled to more. Court left to determine if first; is the statute all encompassing, or second, is the constructive trust option still available above and beyond statute Held: SCC holds that the constructive trust option was still available above and beyond the statute Comments: This case was a blip in development of remedial constructive trust until LeClair v. LeClair LeClair v. LeClair (1998) Canada (BCCA) Facts: husband and wife both contributing to matrimonial property, however, the property is in husbands name only. Husband dies and leaves property in will to children but not part of it to the wife. Wife wants to ‘upset the will’ using the argument that because she contributed, she was, through a constructive trust, entitled to 50% and as such, her husband had no authority to give away her share Held: Court says, upon analysis, there was no unjust enrichment taking place here because although she didn’t get a share of the property, she was compensated by getting lots of money (ed. assume equal or greater value then what she would have earned on 50% of property). Comments: Court, in its discussion of a constructive trust in this situation, and upon reviewing Rawluk v. Rawluk, come to the conclusion that… a. Constructive trust can’t arise until court declares it b. Once court decides that there’s a constructive trust, then court can apply it retroactively or prospectively This is the law vis-à-vis such circumstances today. The Equitable Lien Description: creates a charge on such an asset to secure payment of a judgment requiring the defendant to pay an amount of money Consider the property example: where the plaintiff has a choice of remedy… i. If property values are going up, then you ask for a constructive trust, but ii. If property values are going down, you ask for an equitable lien Glavasky v. Stadnick (1937) Canada (OntCA) Facts: Plaintiff had given money for the improvement of a church, on the security of a mortgage. The mortgage was defective, so the plaintiff couldn’t collect. Held: Court had option of granting a constructive trust, equitable lien, or both. Comments: He was also barred because usually you can’t get your money back if you put your money in another’s property, but “…where the owner of the property knows they’ll get the benefit of it, the person putting in the money is entitled to a lien”. International Corona Resources Ltd. v. Lac Minerals Ltd. (1989) Canada (SCC) Facts: Case centres around the Hemlo area in northern Ontario which was very rich in gold deposits. The plaintiff, a jr. mining company had gotten very promising readings on the ‘Williams property’ but being a jr. mining company they didn’t have enough financing to develop. Instead, they sought to enter joint venture with Lac Minerals. In doing so, they had to disclose findings on the Williams property and failed to enter into a confidentiality K with the defendant. The joint venture fails and the defendant goes to the owner of the Williams property and out bids the plaintiff for the property. The plaintiff argued breach of fiduciary duty. Held: Plaintiff got his property, but the court put an equitable lien on the plaintiff, such that the plaintiff had to pay the defendant for the money spent to set up the mine. Comments: Plaintiff had to give this back otherwise he’d be considered to have been unjustly enriched 62 EQUITABLE COMPENSATION The aim here is compensatory and is now being invoked by our courts, particularly the SCC, in a number of cases that at first glance seems restitutionary based Where equitable grounds for setting aside an agreement exists, but that remedy is unavailable for some reason, it may be possible to grant equitable compensation in lieu of rescission and lift the ill gotten gain away from the defendant Nocton v. Lord Ashburton (1914) England (HL) Facts: Involved a solicitor, who had a security on a 3P’s property. He gave careless advice to his client with the result that his client released some of his property and eventually the client wasn’t able to realize the debt owed to him in full and he suffered some personal loss. Held: Because the statute of limitations on a K action had run out, someone in House of Lords suggested equity… why shouldn’t a non-trustee fiduciary, such as a lawyer, be required to do same as trustee to making estate whole again Comments: Note: If a trustee in breach of trust injuries the trust estate, then the trustee is held strictly liability to make the trust estate whole. Equity called those actions (re. when you were making the estate whole again) restitution, and so sometimes courts talk about equity’s action of restitution when they only mean it in this trustee sense. They really mean “Restoration” with the aim being compensatory Today, this case would be handled in tort for negligent misrepresentation Guerin v. Canada (1984) Canada (SCC) Facts: First Nations band wanted to lease their lands to a golf club and they wanted to do it on certain renewable terms (i.e. 610 years) but the Crown ignored these instructions and negotiated a far less advantageous lease agreement without consulting band as to terms. What was worse was that band was prevented from getting even a copy of the lease for 15 years. Held: Court awards $10m to plaintiff(s) Comments: The court turns to Nocton v. Lord Ashburton as providing the appropriate remedy At the end of the day, the damages in Guerin aren’t restitutionary, they are compensatory, for the loss of bargain – putting them in the position they would have been in had the K been fulfilled in the way in which the band wanted This case is sui generis (aka. stands alone) Hodgkinson v. Simms (1994) Canada (SCC) Facts: we have a chap in Vancouver who has been very successful as an investment dealer and he wants some investment advice, so he goes to a tax planning type (Sims) and after talking about what might be a good way to put his money to use, decides to invest in MURBs (Multi-Unit Residential Buildings). Not long after, the real estate market collapses and Hogkinson losses 350k. What Sims had failed to do was to disclose to Hogkinson that he had an interest in these MURBs (re. he had deals with developers that he got % interest in each MURB sale he made… called ‘bonus billing’). Hogkinson seizes upon this to get out of the deal. Held: SCC 4-3 decision that fiduciary relationship was present. Comments: “…the proper approach to damages for breach of a fiduciary relationship is restitution, but equitable compensation was applied here because restitution couldn’t be” Equitable compensation is given when a court wants to put the plaintiff in as good a position as they were in before the breach. Nothing to do with taking away the defendant’s gain Canson Enterprises Ltd. v. Boughton & Co. (1991) Canada (SCC) Facts: This is a case where a syndicate of land developers are buying land from a party and think they are paying $525k as the proper price. There is a ‘flip’ whereby land is sold to vendor for $410k then resold to syndicate at $525. The problem is, there is lawyer caught in the middle and their failure is to disclose this ‘flip’ to the purchaser. Pretty straight up breach of fiduciary duty. What happens, however, is that now the syndicate has the land and they are building a warehouse on it and due to negligence of bad report by soil engineer, and pile driver’s poor job – the warehouse collapses and there are big losses. Even though those two parties are sued in negligence, they don’t have resources to cover all those losses. So syndicate comes back against lawyer for breach of fiduciary duty and raises equitable compensation trying to hold lawyer responsible for all the damages that occurred. 63 Held: LaForest finds on causation that breach of fiduciary duty ended when land was bought and thereafter, the plaintiff has to bear losses Comments: LaForest J. also said that equity and common law are more or less fused and its quite appropriate to draw upon common law principles to guide us in equitable compensation As such, foreseeability, remoteness, duty to mitigate should all be factored in to the remedy The court in Canada has certainly opened the door for non-trustee fiduciaries for doctrine from Nocton v. Lord Assholeburry Tort v. Equitable Compensation in Fiduciary Relationships When you borrow from one subject into another, you often injure the relationship. Norberb v. Wynrib (1992) Canada (SCC) Facts: doctor who had a patient who was addicted to drugs and he abused that dependency in demanding sexual favours in return for prescriptions fuelling her drug habit. This is a case in tort where we’re suing for injuries suffered by the plaintiff. But the plaintiff turns to fiduciary law because there appears to be consent to the sex, plus a concern with limited tort damages. Held: Court awards damages, but in tort, not under fiduciary law Comments: The court concludes that they could develop tort law to arrive at the same result, so they do, they get over the consent issue arriving at awarding appropriate damages MD worried about his use of the fiduciary principle to cure a problem that should be addressed purely in tort terms from the beginning M (K) v. M (H) (1992) Canada (SCC) Facts: This was a case of parental abuse and the injury is psychological. This was a 20-year-old complaint. Tort has limitation period problem. So they argue fiduciary relationship to get around the tort limitation. Held: n/a Comments: The court determines that tort law can be viewed as not begining to run until the plaintiff knows or realizes the damages, thus the court gets around the statute of limitations This case recognized that not only are monetary damages appropriate for breach of fiduciary duty, but non-monetary damages as well TRACING Tracing: following property from X’s hands to another Normally a variety of in personam claims will give adequate relief, but there may be circumstances where the party wants to recover the actual property (aka. tracing at law), or its product (aka. tracing in equity) that is now in the hands of the defendant. Property is usually straightforward because property is usually non-fungible Fungible: goods that are mutually interchangeable. Tracing at Law Generally, when it comes to property… 1. Plaintiff must first establish legal ownership to the property which the clt seeks to recover 2. Once legal ownership has been established, all clt has to do is identify the property, or its product, in the hands of the defendant Tracing at Law (Money) Also called res fungibilia The action of money had and received remains an in personam claim. The plaintiff doesn’t recover the specific money from the defendant, but money of its equivalent value. The onus is on the plaintiff such that the plaintiff must establish a proprietary interest in the money at the time it comes into the defendant’s hands… 64 This often requires that the plaintiff “follow” the money into the defendant’s possession or “trace” it into some substitute asset held by the defendant Test: if money has passed to a bona fide purchaser who has given value to it without notice that it was stolen or tainted, then it is untraceable… But if that condition is not met, there is no reason why money can’t be traced Problem is that it has to be identified (re. standing alone apart from other money in the mix) There are two common hurdles to recovery… 1. The Doctrine of Currency and the Problem of Mixing: Money, like any other fungible can be identified so long as it has not mingled with other money. If the money has mixed the right to proceed based on a “Proprietary” interest in the money will be lost. 2. Dissipation: if you take the money and blow it on, say, a good meal then the money is considered ‘gone’ Taylor v. Plumer (1815) England Facts: Defendant (broker) took the plaintiff’s money, converted it into doubloons and tried to leave the country. He gets caught leaving and plaintiff wants his money back. Defendant argued that it wasn’t the same money (aka. in the same form) in which he received it from the plaintiff, so the plaintiff was not entitled to it. Held: The court rules in favour of the plaintiff saying that it was still the plaintiff’s property because he could trace the money give to the defendant at each step in which it was converted into another type of asset. Comments: This case is meant to speak to substitute products (i.e. suppose money used to buy a car, which is then traded in for a car?) Court sums it up as follows: “…for the product of or substitute for the original thing still follows the nature of the thing itself, so long as it can be ascertained to be such”. Banque Belge pour L’Etranger v. Hambrouke (1921) England Facts: rogue forges employer’s cheques and deposits monies into his account, making withdrawals from time to time and making gifts of it to mistress who deposits into her bank account. These sums had travelled then through two bank accounts and the true owner of the money, upon discovering the fraud, wants their money back. Held: Plaintiff recovers Comments: This case was all about problem of suppose you deposit stolen money in a bank account – because of workings of bank, it IS mixed with all the other depositors assets, so therefore, is it considered to fall under ‘mixing’ within the Doctrine of Currency? When the money went into the bank, the depositor got a ‘chose en action’ namely a K right against the bank for that amount & when he turns that K into money again by making a withdrawal then we have a substitute product and then given to mistress (who is a volunteer, not a bona fide purchaser) and she too gets a ‘chose en action’ when it is then deposited into her bank account Court seemed to be impressed by the fact that the two accounts were otherwise empty – the only money ever in them was the stolen money Lipkin Gorman (a firm) v. Karpnale (1991) England Facts: A solicitor at the plaintiff’s firm stole money from the firm and gambled it away at the defendant’s Playboy Club. The plaintiff sued the defendant to recover the money. The key was to prove that the defendant had received the plaintiff’s money. Held: Partial recovery for plaintiff Comments: If you can trace your property into the hands of the defendant, you need only trace up to that point of time, then assert a personal claim for its value (aka. money had and received)… in other words, not seeking a ‘specific’ property The defendant was able to show that a change in position as a result of part of the money paid out to 3P’s so the plaintiff was only able to recover some of the money Here the casino was an innocent purchaser of value. Tracing in Equity If we understand that tracing is not a remedy per se, but simply a means to a remedy, then in equity we’re typically looking to award a constructive trust or an equitable lien 65 A constructive trust will be imposed on property if obtained by fraud Example: If X steals Y’s money and buys land with it, (and puts it in Z’s name), Z is a Constructive trustee for the benefit of Y Tracing in Equity is the process by which the plaintiff traces what has happened to his property, identifies the person who has handled or received it, and justifies his claim that the money which they handled or received can properly be regarded as representing his property (per. Boscawen v. Bajwa) The defendant doesn’t have to be a wrongdoer, he just has to be in possession of the chattel The only exception is the bona fide purchaser for value who has no notice of the plaintiff’s equitable interest (per. Thorndike v. Hunt) Re. Diplock (1948) England (CA) Facts: Diplock dies leaving an estate worth several million pounds for charitable institutions at absolute discretion of trustees. Money distributed to 139 different charities before next of kin brings suit that have will invalidated. Held: Court agrees to invalidate will saying it failed for uncertainty. Comments: Result is huge amount of funds distributed in breach of trust and now they have to go after these charities to get the money back English Rule: in order to trace, you have to show a pre-existing fiduciary relationship between the plaintiff and the party the misappropriated the money This has been followed by English courts ever since American Rule: yanks reject the English rule for the reason that when you have a fiduciary relationship, you have equitable title in true owner, while the agent/fiduciary has legal title. So when the agent gives the property away to X, all he has to give away is legal title, equitable title stays with the true owner. Canada’s Position: we follow the American position and say that there is no need to establish the Re. Diplock rule in order to trace in equity Chase Manhattan Bank N.A. v. Israel-British Bank (London) Ltd. (1981) England Facts: 2 million dollars was paid into defendant’s account twice, second time by mistake. The recipient bank/defendant won’t give it back, then goes into bankruptcy. Chase wants to a special creditor, and not lumped in with all the other regular creditors. Held: Constructive trust awarded in favour of plaintiff Comments: The English court acknowledges that fact the plaintiff did not choose to be the defendant’s creditors and that the rest of the creditors would get a windfall if the court allowed the 2 million to be left in the pool to be divided up between all the creditors Being in England, the courts had to deal with the constructive trust as an ‘institution’, so they had to find a pre-existing fiduciary relationship… which they do by ‘massaging’ the law a bit Questionable decision because they created a false fiduciary relationship to solve Lowest Intermediate Balance Rule Equity has developed some presumptions that allow us to trace through mixed funds Clayton’s Case (1816) Facts: not really a tracing case, although it is used as reference to such in this context. Involved disputes vis-à-vis withdrawals from active bank account. Held: Court said rule is “first in, first out” or “FIFO” rule Comments: The first dollar put in is the first in the order of withdrawal: the first dollar put in is the first in the order of withdrawal This ruling is now considered outdated (see James Roscoe (Bolton) Ltd. v. Winder) Hallet’s Case (1880) ? (CA) Facts: solicitor had sold securities without authority and had some 2000p of those receipts in his account. He dies and there is a balance of 3000p in his account. Problem was that if we apply Clayton’s Case, then the plaintiff’s money is used up first and the solicitor’s is preserved when it comes to distributing his assets Held: Presumption of rightful withdrawal rule created 66 Comments: Presumption of Rightful Withdrawal: you are presumed to use your own money first and leave the trustee’s money alone This ruling is now considered outdated (see James Roscoe (Bolton) Ltd. v. Winder) Re. Oatway (1903) Facts: trustee defrauds trust fund for around 3000p. Various deposits and withdrawals take place over time, but one particular one used to buy shares is, at end of the day, the only asset lying around. If we applied Clayton’s Case then there would be nothing to distribute. If we apply Hallet’s Case, the shares would have been purchased with wrongdoer’s money, so court develops new rule. Held: Presumption of ownership in favour of beneficiary Comments: Rule: if anything of value in estate, it is presumed to belong to beneficiary Good rule, but still trumped by James Roscoe (Bolton) Ltd. v. Winder and lowest intermediate balance rule James Roscoe (Bolton) Ltd. v. Winder (1915) England Facts: Defendant took 455p of plaintiff’s company’s money and put it in his own account. At time of defendant’s death, 350p remained in the account, but in the period following the theft and the death the account had dropped to 25p before recovering to the 350p. Held: The plaintiff could only claim the 25p Comments: The plaintiff couldn’t clearly show all the money was theirs. Lowest Intermediate Balance Rule: a plaintiff’s charge upon the account is limited to the lowest balance of the account during the intervening period The lowest intermediate balance rule is good law here in Canada and affirmed in Re. Norman Competing Beneficial Owners This is meant to address the question of what if the plaintiff’s funds are mixed with another persons or an innocent volunteer? Re. Walter J. Schmidt (1923) USA (NY) Facts: Case of mixing of two trust funds Held: Court rules the original beneficiaries should share pro rata Comments: Sharing done in proportion to their amounts Ontario Securities Com’n v. Greymac Credit Corp. (1986) Canada (OntCA) Facts: Trust money was stolen and had been deposited into 2 accounts. Over time, some of the funds were dissipated away. When all is discovered, at the end of the day the balance totalled less than the aggregate claim by the 2 beneficiaries. Held: Court decides to follow Re. Walter J. Schmidt’s pro rata approach Comments: Judge also seems to acknowledge lowest intermediary balance rule here as the court apportioned based on the lowest balance in the fund during the interval between the theft and the recovery Law Society of Upper Canada v. T.D. Bank (1995) Canada (OntCA) Facts: In approx 1 years time a solicitor had stolen $900,000 from his client’s trust funds at the TD bank. The account at its lowest rang in at $66,242. Before this was discovered, a land developer puts $173,000 into the trust account in compliance with a deal he is putting through. Once fraud/theft is uncovered, the land developer’s money is seized with all other remaining monies in the trust fund(s). The land developer doesn’t want to share his money (aka. pro rata) with all those that got screwed because of their money being stolen from the trust fund. He wanted all the others to share in the $66,000, not the aggregate amount. He claims the money was unblended. Held: Court disagrees and says it was a blended fund. Comments: Distinguishes Ontario Securities Com’n v. Greymac Credit Corp.’s approach to lowest intermediary balance rule as the court awards the biggest amounts to the two competing beneficial owners 67 OntCA said the lowest intermediary balance rule doesn’t apply in cases of competing innocent beneficiaries. MD totally disagrees with this decision saying that the judge was stupid in mixing all of these monies; the developer should’ve got his total amount out. SUBROGATION, CONTRIBUTION, AND INDEMNITY Subrogation Subrogation: basically, it means to put yourself in a another’s’ shoes and take over their legal rights as against a 3P Considered a remedy in both common law and equity It seems that subrogation exists to get rid of the problem of privity and UE. There are two types of subrogation… 1. Subrogation of the plaintiff into the shoes of the payee to go against the 3P. Example: the insurance pays the payee and then stands in the shoes of the payee to go against the tortfeasor. 2. Plaintiff goes into shoes of 3P to sue the payee. Example: a corporation (ultra vires) makes K to borrow money from a lendor and uses that money to pay off a mortgage. The lendor wants the money back, so it puts itself in the shoes of the mortgage person who got the money and sues the corporation to recover. The plaintiff goes into the shoes of the 3P mortgagee to sue the company, who was the payee (ed. huh?) When X loans money to Y and Y uses the money to buy stuff from Z (but Y wasn’t able to make K with Z but the K was for necessaries, so it stands) X is allowed to stand in the shoes of Z to recover his money. But note: X cannot recover interest on the loan he can only recover what Z would be able to recover and nothing more. X is not acting as a bank; he is in the shoes of Z so he only has Z’s rights. Even if Z was paid, the debt can be revived and becomes “unpaid” for the amount that Y has to pay X. Traders Realty Ltd. v. Huron Heights Shopping Plaza Ltd. (1967) Facts: the plaintiff bank paid off the taxes owing on the land and then sued the person holding the mortgage for recovery. The mortgage bank stood in the shoes of the city when they paid the taxes on the land. They weren’t proceeding under the mortgage; they were acting as the city in subrogation. Held: n/a Comments: By using subrogation the plaintiff jumped the line of creditors and gets paid back first. Banque Financiere de la Cite v. Parc (Battersea) Ltd. (1999) England (HL) Facts: The plaintiff was a Swiss bank; it was going to lend money to def#1. Def#1 had property and the first mortgage was held by Royal Trust Bank, the second mortgage was held by def#2. The reason Swiss bank was going to lend money was because Royal trust bank was going to give Swiss bank a letter postponement that lets the Swiss bank go ahead of them on the list of creditors. Something goes terribly wrong and complicated. Held: The HL gives the plaintiff the protection that the K would’ve provided had it been valid but no more Comments: HL puts transaction on one of mistake, had the bank know the K was ultra vires they would never have made that loan. HL said we will subrogate you to the position of the Royal bank, but only vis-à-vis the second defendant, not as against the world. This doesn’t revive the whole mortgage, it just bumped the plaintiff up the list ahead of one creditor Contribution Arises in both common law and equity Contribution: Where 2 persons are both liable to be sued for 1 sum, and one is sued and compelled to pay the whole amount. That person has the right to recover from the other liable party. This doctrine typically applies in the area of sureties (re. where two people are guaranteeing a debt). A must’ve paid off the whole of the debt before A can sue for recovery 68 It also finds favour in Co-insurers where someone will have insurance on property with more than one insurance company Example: suppose you have two insurers insuring property. There is a loss for X, and insurance company A pays it. It can then subrogate into my shoes and sue B for half the loss up to the policies limits Whitham v. Bullock (1939) England (KB) Facts: X leased land to Y for 3p. X also leased land to Z for 2p. The state wanted rent from both, buy Y refused to pay his portion. The state threatened to take the whole land away so Z was forced to pay his and Y’s share. Held: Z allowed to sue Y for the 3p that Z paid to the state. Comments: Leading case The court recognized there is no privity between the defendant and the plaintiff, but the defendant had to pay the plaintiff or unjust enrichment would occur. Re. Wawanesa Insurance Co. (1951) Facts: husband insured entire property while his wife insures, on her end, half the property with a separate insurance carrier. Fire happens; husband’s insurance company pays for it all. Held: Husband’s insurance company could only sue the wife’s insurance company for half of the property recovery Comments: The doctrine has general application be its purpose is to stop unjust enrichment Spiers & Son Ltd. v. Troup (1915) Facts: adjoining property owners had a wall that was built between the two properties. The local authority declares the wall dangerous and needs it to be torn down. An order went out against both property owners to tear down the common wall. The plaintiff follows through and now seeks recovery of 50% of that from the defendant(s). Held: the court grants relief on contribution Comments: Remember, the conduct must not be considered officious Schnurch v. Ploeger (1991) Canada (BCCA) Facts: 2 out of 3 business partners had paid $26,000 of a guaranteed debt (a mortgage). The property was foreclosed on and the 2 partners lost their partial payment. Held: the court allows the 2 partners to sue the 3rd partner for 1/3 of the $26,000 that was paid Comments: Normally the plaintiff’s would have to wait until the total debt was paid, but here something happened and only $68,000 was required to be paid, therefore the plaintiffs could sue. Indemnity Arises in both common law and equity Indemnity: Where 2 people are liable for the same debt, but the liability of 1 is primary, the person who is primarily may be ordered to indemnify the other Action of money paid Brook’s Wharf & Bull Wharf Ltd. v. Goodman Bros. (1937) England Facts: plaintiffs were warehouseman and defendants were importing squirrel skins from Russia and storing them in the plaintiff’s bonded warehouse. While they are in the bonded warehouse, the goods are stolen. No fault of warehouseman shown or suggested. However, the import duties were still owed on the now stolen goods. Under the existing Customs & Consolidation Act if the goods can’t be accounted for, it is the warehousemen who have to pay the import duties. Plaintiff is suing defendant for indemnification. Held: Defendant had to pay plaintiff back. Comments: This was the first case in which the English court recognized the law of restitution Plaintiff was legally compelled to pay the taxes by statute, but the defendant got the benefit because his debt was discharged Court recognizes that this obligation was discharged under a legal liability, namely the statute 69 Carleton (County) v. City of Ottawa (1963) Canada (SCC) Facts: poor indigent living outside city of Ottawa in County of Carleton and under Homes for the Aged, the county has the legal obligation to put her in a home, but Carleton doesn’t have a home so they enter into agreement with county of Lennart which agrees to put up indigent for them. Around 1950, the City of Ottawa annexes part of the county of Carleton including were indigent lives. So technically, indigent becomes under care of City of Ottawa. However, due to oversight, indigent is forgotten about and Carleton continues to pay to County of Lennart. Some time later, they see the mistake and tell City of Ottawa they should have been paying and trial arises. Held: Plaintiff recovers Comments: Ottawa’s obligation came through statute whereby Carleton’s obligation came through K – but this didn’t stop the courts. SCC does a good job here – the restitutionary elements are identified front and centre and Hall CJ focuses on officiousness and says this is not officiousness here because Carleton was operating under ‘mistake’ which always vitiates officiousness - THE END-
