MISTAKE

FACT

Test: (Goff in Barclays Bank [affirmed by SCC in BMP Global])

“(1) If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (2) His claim may however fail if… (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or Unintended gifts? recoverable Lady Hood of Avalon: rescinded unequal deed to equalize inheritance shares to two daughters

(b) the payment is made for good consideration, in particular if the money is paid to discharge and does discharge a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt; or Receiving binding consideration?  a good defense to a mistakeKrebs v World Finance: chattel mortgage paid on stolen car (worthless security interest since no property passes); fact that it was valueless consideration is not relevant, but perhaps contract can be set aside

(c) the payee has changed his position in good faith or is deemed in law to have done so.” Modest improvements? reasonable evidence lowered bar (Philip Collins Ltd)

BANKS

• Stop payment order? illegitimate debt can be charged back; bank has no authority and failed to follow instructions
  • Barclay’s Bank: mistake of the bank, acted without mandate; payee gave no consideration to bank for payment; possible subrogation, from Sinclair, for Canada for banks to chargeback
• NSF cheque? bank considers insufficient funds a request for credit; not recoverable (Lloyd’s Bank Plc)
  • Good recovery for computer data entry errors (RBA Dominion Securities)
• Forged cheque? two innocent parties, bank and recipient, and must figure which innocent party must suffer, so leave the loss with the bank (Price v Neal: banks should know the signature of customers)
  • BMP Global: false representative made deal for forged 900k cheque; mistake of fact implied in the contract; Simms test (mistake caused payment; defense if payment is irrelevant, contractual, or change of position); no finality of payment (recipient is not a holder in due course or detrimental reliance)

LAW

• Reform: Started with Dickson dissent (in Hydro Electric), adopted by La Forest (in Air Canada v British Columbia)
  • Test: causation (but-for) test for mistake leading to moneys paid

Traditional rule defended (no recovery): Interpretation of Contract (Rogers v Ingham: no recovery based on finality in dispute resolution)Interpretation of Case Law Interpretation of Legislation (R v Beaver Lamb & Shearling: fur tax; must challenge the fee instead of voluntarily accepting authority’s interpretation; legislation must be possible to challenge)   Any party assume risk of error?

Exceptions (understood as mistake of fact): Marital or other personal status (Eaglesfield)Mistake on the existence of law is a mistake of fact (George (Porky) Jacobs Enterprises)Payment to an officer of the court (Ex p. James) and vice versaPrivate rights (Cooper v Phibbs) Payment to a public authority under duress: really no alternatives? (Eadie v Township; ultra vires bylaw tax)

Modern Ultra vires legislation (Kingstreet Investments) La Forest denies to protect public treasury (Hydro Electric):Denied if subsequent legislation Calls for reform; internally inconsistent policy by punishing lawful actors”Passing on” the burdens of taxes may also apply (Air Canada v British Columbia) Not applicable to public authorities Rejected (Kingstreet Investments), but needs reform Mistake in transfer other than direct payments? (MacFarlane and Wellington Hotel v Kennedy: paid your taxes)Swap transactions (Kleinwort Benson Ltd. v. Lincoln County Council: no “passing on” defense available)

GOODS/SERVICES

Test: (Third Restatement) Canadian adoption of Restatement (Re Central Guaranty Trust v. Dixdale)

[Benefits Other Than Money] A person who confers on another, by mistake, a benefit other than money has a claim in restitution as necessary to prevent the unjust enrichment of the recipient. Such a transaction ordinarily results in the unjust enrichment of the recipient only to the extent that:

(a) specific restitution is feasible;

(b) the benefit is subsequently realized in money or its equivalent;

(c) the recipient has revealed a willingness to pay for the benefit; or

(d) the recipient has been spared an otherwise necessary expense

Discharging another’s obligation by mistake (Carleton v City of Ottawa)Discharge of debt by creditor (Central Guaranty Trust Co v Dixdale) Improvements to another’s land (Montreauil v Ontario Asphalt)Problem of forced investment (Olchowy v. McKay; owner saw trespasser making improvements without interfering; acquiescence) Uncertainty: possible problem of forced investment (Estok v Heguy: tended land without request, so no benefit; bad result)Improvements to chattel (Greenwood v Bennett)Change of position and estoppel available (Kenora Hydro Electric Commission v Vacationland)

Defenses

Change of Position (Restatement [affirmed by SCC in Storthoaks])

The right of a person to restitution from another because of a benefit received is terminated or diminished if, after the receipt of the benefit, circumstances have so changed that it would be inequitable to require the other to make full restitution.

Change of circumstances may be a defence or a partial defence if the conduct was not tortious and he was no more at fault for his receipt, retention or dealing with the subject matter than was the claimant.

• Negligence does not preclude recovery for mistaken payment (Kelly v Solari)
• Estoppel? (all or nothing) relies on statement or representation inducing conduct and detrimentally relies due to material change in circumstances (R.E. Jones v Waring)
  • SCC: switch from estoppel to change of position (General Dairies)
  • Estoppel perhaps inappropriate for mistaken payment (RBC Dominion Securities)
• Criminals? change of position not allowed (Garland) but allowed for innocent third parties (Karpnale)
  • Negligence may also preclude change of position
    • Clark v Eckroyd: initiating the mistake bars the change of position defense
    • look for good faith or moral turpitude

 

Benefits Conferred by a Third Party upon the Defendant

(Restatement Third: 48): If a third person makes a payment to the defendant to which (as between claimant and defendant) the claimant has a better legal or equitable right, the claimant is entitled to restitution from the defendant as necessary to prevent unjust enrichment.

Test? Consideration/bona fide purchaser? Change of position? Breach of fiduciary duty? Constructive notice? (Citadel General Assurance v Lloyds Bank: third party must not be participant to the breach or have knowledge of misconduct)

• Direct recovery? Allowed in America, not yet established in Canada
  • Argue from English case (Clarke v Shee and Johnson: lottery ticket)
  • Case law suggest physical tracing of money, but this seems too onerous (Re Diplock)
  • Possible equitable subrogation without knowledge requirement
• Marriage dissolution and insurance? good recovery (Moore v Sweet: insurance goes into the wrong hands)
  • Pettkus analysis fails: legislation should not be a good juristic reason (Roberts v Martindale)
• Proprietary interest: courts track title, but no link necessary
• Tax benefits and consistency with statutory scheme
  • James More & Sons v U of Ottawa: buildings contract and tax refund on building material 
• Money stolen for gambling: expansion of change of position to include reasonable expectation (Lipkin Gorman v Karpnale; playboy)
  • Third party disgorgement: change of position available (Karpnale)

Necessitous Intervention

Good restitution for services and supplies in intervention (Matheson v Smiley)

Four conditions to assume power: practical impossible to get the principal’s instructions; necessary to act for the principal’s best interest; bona fide concern for the principal; reasonable in the circumstances

• Preservation of property? less favorably treated: unclear if owner truly requests and whether policy reasons are strong (Nicholson v Chapman; timber carried away by tide)

Restitution from Public Authorities

Kingstreet: Monies paid under ultra vires is recoverable, but unclear on defence; Bastarache J

• Other monies paid maybe recoverable through mistake or compulsion (Woolwich)
  • Ultra vires contract (PNI)
• Overpayment of an entitlement like license, service, etc. (Roxborough)
• Overpayment for tax; “no taxation without representation” (Kingstreet Investments; passing-on not a good defense)
  • Narrow reading by SCC (Elder Advocates of Alberta Society)

Remedies

• Constructive trust? (Lac Minerals)
  • Give priority in case of bankruptcy; accounts for value accrual; (Soulos) frustration of acquiring specific property; moral quality of the defendant act; impossibility of an accurate evaluation; uniqueness of property
• Subrogation? fictional (type b subrogation) E.g. Sinclair, illegal contract cases, incapacity
  • Pay money to a defendant, problem getting money to get to a defendant because they paid off debts; payer stepping into the shoes of the payee (Banque Financiere)
• Tracing? a device to get a remedy; race into the substituted asset or follow assets to a third party (Chase-Manhattan)
  • When does tracing arise? In English law, fiduciary breach and third parties; in America and Canada, any restitution case
  • Mixing limitation (LSUC v TD)

Ineffective Transaction

Illegality Traditional bar on restitution by Lord Mansfield in Holman v Johnson; must separate restitution issue from unenforceability of contract (St John Shipping)McCamus: doesn’t like Birks’ illegality as a defense; shouldn’t the burden be on the plaintiff (Kim v Choi)   Modern Test: (McCamus)
(1) the claimant is a member of the class of persons that the prohibition or policy rendering the agreement unenforceable is designed to protect, or,   -protected class? (Kiriri Cotton Co: Denning: recover illegal “key money” from landlord)   -remedy options? rescind agreement to the effect of restitution (Sidmay) OR allow illegal agreement to stand to protect innocent party	(2) the claimant’s conduct can be excused by the fact that the claimant’s decision to enter the agreement was made under a mistake or as a result of duress, fraud, oppression or other forms of wrongdoing by the other party, or,   -Mistake of fact? (Idle-O Apartments Inc; tenant under illegal lease made improvements)   -Not in pari delicto? fraud, oppression, duress, etc.  (Mohamed v Alaga; Somali translator in illegal fee splitting) -Ontario (Koliniotis; Sharpe: not guilty of sufficient “moral turpitude”) and Austrailia (Equuscorp)	(3) the claimant made a decision to withdraw from the transaction before its illicit object has been achieved, [locus ponenitentiae?] or,   -Patel v Mirza: insider trading; illegality never materialized -What counts as a change of heart? Does it apply to impossibility? (Bigos v Boustead; frustration of contract is not repentance)	(4) although the claimant is a perpetrator of the unlawful conduct, (a) the granting of restitution would not significantly undermine, frustrate, stultify or conflict with the policy underlying the rule or prohibition that renders the transaction illegal, or -St John Shipping v Rank: Devlin; overloaded cargo contrary to Merchant Shipping Act; however, fails to recognize independent restitutionary claim   (b) the withholding of restitutionary relief would constitute a disproportionate sanction for the wrongdoing committed by the claimant. Nelson v Nelson
Collateral claims? meritorious exceptions on policy grounds (Tinsley; lovers contributing and welfare fraud; Goff: unclean hands, but she doesn’t have to mention illegality in claim)Find an alternative claim: tort (Saunders v Edwards) or property (Bowmakers v Barnet; no need to mention illegality; Denning allows property passage)Imply collateral contracts for illegal contracts Property passage? protects third party as long as policy objective compliant (Singh v Ali; rationale to protect innocent third-party purchasers) Perpetrator: unintentional, trivial, barely guilty? Ponzi scheme? restitution from net winners to net losers (Den Haag Capital v Correia)

Mistake/Misunderstanding and Uncertainty Test: did any party assume the risk? (Re Hall and Hall) Look at facts   Operative mistake, “common fundamental misapprehension” then equitable recission (Goff in Grist v Bailey) Pettkus tripartite analysis is inadequate in address problem of forced investment
Mistake in assumption (term problem): severable term?Integration; (bad writingres extinction; existence (Strickland v Turner) res sua; ownership	Misunderstanding (formation problem)Unsuccessful acceptance? (Boulton v Jones)Mistake as to the nature of the transaction induced by the other party: non est factum, or mind of the signor did not accompany the signature (Marvco Color Research Ltd v Harris)Mistake of identity induced by the other party? (Lewis v Averay) Agreements which fail for ambiguity: limited to quantum meruit at market price or equitable lien (Raffles v Wichelhaus)	CertaintyCommon law sufficient certainty; equity insufficient certainty because common misapprehension of fact/right, so voidable in equity (Denning in Solle v Butcher: leased flat assuming no rent control)Equity preferred: common mistake in fundamental assumption (The Great Peace; oddly rejects equity; ship 410 miles away instead of 35 miles; narrow and unsatisfying “impossibility” test)Canada prefers equity over common law (Miller Paving v G. Gottardo Construction) Proprietary relief? (in flux) Common law mistake will render property transfer ineffective (injures innocent third-party) equity better protects third-parties (bona fide purchaser)

Informality Contract for interest in land, but no writing?Deglman: good claim for quantum meruit; however, unenforceable contracts would block implied contract claimsRepudiated contract set a limit on quantum? Look at intention and whether restitution undermines policy (Pavey & Matthews v Paul)Instrumental to maintaining property or expectation to acquire property interest Possible constructive trust (Palachik) Possible restitution without recission (Abella in Rick v Brandsema)

Frustration Doctrine: benefits (not work done) conferred before frustration are recoverable (Parsons v Shea) but obligations after the frustration vanish; prima facie case for recovery, then rebuttable claim for any loss of value from frustration   Fact Trigger: English law gives courts discretion to assign loss (Frustrated Contract Act)Ontario follows thisBC statute splits losses, unless a party agreed to burden risk   Specific Cases: Is it impossibility of performance or change of purpose?

Incapacity (ultra vires contract) Traditional bar (Sinclair v Brougham) on restitution can be overturned on policy grounds; denying restitution would harm protected class (e.g. corporations acting in excess of power given by statute harming shareholders); Canada can arrive at this by unjust enrichment analysis, but this tripartite analysis is not sufficient (flesh out policy rationale) Not sure about monies lent Goff obiter in Westdeutsche: interest rate swap; overruled Sinclair; Somewhat favorable about goods and services PNI v Victoria; ultra vires promise to downzone; recovery of value of improvement, even if subjectively valuelessPossible collateral relief and proprietary relief (property passes under ultra vires contract)

Want of Authority third party acting on behalf of a principal but beyond the scope of their authorityHazlewood:agent induced mortgage invested from client to reduce debt to employer; two innocent partiesDebts: fictional subrogation (Sinclair)Goods and servicesCraven-Ellis: unrequested but necessary; claimed quantum meruit Necessary services, fiduciary obligation and undermining policy of fiduciary Guinness v SaundersIf they give to principal, then good change of position defence

Discharge for Breach failure to perform obligations – of sufficient severity and must be condition rather than warranty – can give rise to render contract void ab initio; innocent party’s alternative way of remedy (expectation damages can be lower or harder to prove) Fact trigger: Requested but unprofitable serves: quantum meruit (Planche v Colburn: abandoned book project) Release fee and price of a right/obligation (Morris-Garner; rights can be characterized as an asset; notional release fees and Wrotham Park damages) Case specific: Contract price as a limit: innocent party completely performed unprofitable contract for supply of goods/services, and defendant refuses to pay contract price, and plaintiff prefers to recover true value in restitutionary claim Party in default? recovery of value absence liquidated damagesForfeiture clause must not be penal; unconscionable that seller retains money (Denning in Stockloser)Partial performance? restitution should be available Possible problem: doctrine of “entire” contracts (value is the lump sum not partial work); doctrine of substantial performance trying to patch restitution problem (Fairbanks Soap Co.)Material benefits retained at the plaintiff’s expense is unjust (Kemp v McWilliams)Contract price as a limit on partial performance (Restatement Third)

Anticipated Contracts and Gifts belief in good contract but actually future contract Check: objective intent, reasonable expectation, requested/beneficial services   Offeror communicates offer with a benefit attachedOfferee confers benefit in anticipation Shared expectation is often sufficient even if terms are vague   Case Specific: Retracting gifts? no restitution If plaintiff withdraws from negotiation, then weaker claim Reasonable expectation of a gift for value: good claim (Rowe v Public Trustee)

Recovery of Profits of Wrongdoing

Criminal and Quasi Criminal Acts Possible revision on traditional bar: (American) disgorgement for intentional crimes but perhaps not unintentional crimes (Gray v Barr) Alternative: harmful effect, aim with obtaining some benefit (public policy: disincentive of crime) Fact Triggers: Intentional killing and slayer rule (Re Johnson)Extension of slayer rule to other crimes and quasi-crimes; must be linked to crime (Rosenfeldt v Olson: info leading to arrest for dead kids) Profits being claims by victims (Ontario’s Prohibiting Profiting from Recounting Crimes Act)Criminal Code s 738 provides restitution but not disgorgement Case specific: Contractual insurance in slayer case is overcome by policy and implied term (Schobelt v Barber)NCR or proceeds separate from crime should not deny recovery (Dhingra) Breach of contract? Material and opportunistic; legitimate interest test (AG v Blake)

Waiver of Tort  elects for a claim in restitution (disgorgement may give more than tort damages); analysis should focus on benefit of wrongdoer than punishment Cannot prove tort damages (Atlantic Lottery)May allow a “leapfrog” claim by indirect purchase (Pro-sys v Microsoft)Measure of recovery? at plaintiff’s expense or general benefit (may lead to windfall)? American answer depends whether intentional or unintentional; Canada may be moving this wayNegligence is questionable Unclear which torts apply: injury? Profit? McCamus: nature of conduct that is discouragedProperty torts? (e.g. trespass): good grounds for disgorgement (Olwell v Nye & Nissan Co)Punitive damages as a placeholder for waiver of tort

Breach of Fiduciary Duties Undertaking and reasonable expectation to act on someone’s interest or loyal conduct (Galambos v Perez: secretary at law firm advancer her own funds) Test? (Hodgkinson v Simms) is there a fiduciary relationship? (looking after property, positions and office, vulnerability)Is there a duty? scope of duty (McLeod and More v Sweezy: agreed to stake minerals, but found other goods and returned later) Is there a breach? (conflict between personal interest and principal’s interest; no profit from info) Is there liability from breach? (e.g. added risk to principal; but not so far as being the insurer for the principal) Fact Trigger: Principal need not suffer loss (Reading v AG)Confidential information and constructive trustee/proprietary restitution (Lac Minerals Ltd)

Abuse of Confidence equity provides sui generis relief absent fiduciary or contractual duty; damages are main remedy (disgorge exceptional) Test? (Lac Minerals) information must be of confidence, circumstances generate obligation, and unauthorized use of info to detriment   Agreement never formed but used info during negotiations (Saltman Engineering Co)Paparazzi (Campbell v MGN)Commercial valuable (Coco v Clark)

Compulsion duress vitiates consent by coercing will Practical (economic) compulsion (Knutson v Bourkes)Canadian law is in flux, but mistake of law coupled with compulsion is good recovery (Eadie v Township of Brantford)No disgorgement award yet (Peele v Canada)Threaten property rights or seizure of property (e.g. government) or compulsion by mistake (George (Porky) Jacbons Enterprises)

Refusal to Share Spousal Assets on Separation reasonable expectation and the causal connection to SUPLUS WEALTH Fact Trigger: Domestic services and contribution to assets of family enterprise (Peter v Beblow)Joint family venture (mutual effort, economic integration, actual intent, priority of family); remedy may be personal or proprietary (Kerr v Baranow)

 

 

SCC

Test: “an enrichment, a corresponding deprivation and the absence of any juristic reason for the enrichment.” (Dickson in Pettkus)

Test for juristic reason: (McCamus 2-step; Iacobucci in Garland) absence of juristic reasons establishes prima facie case, then the burden moves to the defendant.

• To show an absence of juristic reason, PLAINTIFF must show there’s no gift, contract, “disposition of law” (i.e. statutory entitlement, like paying certain taxes or expropriating land), and no other “common law, equitable, or statutory reason for the transfer”

To rebut prima facie case, DEFENDANT must then establish reasonable expectation or public policy for why they should keep it.

Freestanding Cause of Action

• Starting points for unjust enrichment are quasi-contracts and restitution authorities. Beyond this are consistency with principles underlying the authorities.
  • SCC understands it as a gap filler and law reformer, but judges and lawyers understand it as a new rule.
  • Peel v Canada (McLachlin): category approach: does the case fit any previous categories for recovery?
  • Bhasin v Hrynew: existing liabilities are not replaced by the unjust enrichment principle.

Revision

• Eisenberg’s criteria: satisfy social conduct, stability and exceptions, criticized by academics and judges, new inconsistent doctrine
• RA Samek (1969): A legal conceptual scheme should be judged based on simplicity and utility
  • three functions: systematizing, developmental, and social

Mechanics

Issue Identify the topic and general doctrine skeleton Frame the issue Traditional bar? Novel or issue in flux? RuleTreatment of issue: jurisdiction and authoritydistinguish issue on the facts Contextualize doctrine and policy rationaleidentify gaps or problematic jurisprudence ApplicationArgument based on facts ambiguities and alternative explanationsProfs views and agreeing jurisprudence quote and explain ConclusionAddress alternative and assess argument strength possible remedies argue both sides

STAY CALM, else MEDITATE   1.preliminary notes and identify issues (refer to short summary and cases)   2.answer the question, use long summary >note gaps and counterarguments   3.final hour: note gaps, read facts again, patch >read out loud and edit