cases and materials on restitution edited by peter d. maddaugh
TRANSCRIPT
. . ''
Cases and Materials on Restitution
Edited by
John D. McCamus Dean
Osgoode Hall Law School
and
Peter D. Maddaugh of the Ontario Bar
1983 - 84 Edition
FOR STUDENT USE ONLY NOT FOR COMMERCIAL SALE
1983 - 84
Osgoode Hall Law School of York University
( i i )
Part I II Restitutionary Remedies ....... .. .. ..... .. . ......... .. .. . . A. Common Law Remedies ...... .... . .................... . .. .
(i) Tracing Property other than Money .......... .. . (ii) Tracing Money .................. . ...... . .. . . .. .
B. Equitable Remedies .... . ... . .................... .. . .
(i) The Constructive Trust . .............. ... . . . . . (ii) Th . b . e Equ1ta le Lien ................... . .. . . . .. . (i1·1·) T . . racing in Equity ...................... .. . ..
C. Concurrent Remedies .... . ......... . .... .... . ... . . . . . . .
(i) Subrogation ........ . ... . .. . .. . ........... . ... . {ii) Contribution .......... .. ..... . ......... . . . ... .
.~
927
927
927 942
957
957 989 990
1004
1004 1077
(iii )
Cases and Materials on Restitution
. Table of Contents
PART I Introductory Materials
Introduction . ........... . ................. . ..... . ....... . Samek, Unjust Enrichment, etc ......... . . .... . .... . . ..... . Restatement of Restitution . ............................. . Moses v. McFerlan . . ............ . . . .. . .......... ....... . Sinclair v. Brougham .......................... . ..... . . . Deglman v. Guaranty Trust Co ............................ . Saint John Tugboat v .. · Irving Refinery .......... . ... . . . . . Pettkus v. Becker ................ . ............ . .......... .
l 2 4
13 17 31 35 38
PART II THE SUBSTANTIVE GROUNDS FOR RESTITUTIONARY RELIEF
1. RESTITUTION OF BENEFITS CONFERRED UNDER MISTAKE
A. Mistake of Fact
Royal Bank of Canada v. The King .. ........ .. ..... 55
(a) An Honest Mistake
Ke 11 y v. So 1 a r i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Clark v. Eckroyd .. . . .. . .. . .. .. .. .. . .. . .. .. .. 64
(b) Between the Parties
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(c) A Supposed Obligation to Pay
Larner v. London County Counci 1 . . • . . . . . . . . . . 69 Lady Hood of Avalon v. MacKinnon . ........ .. . 71
{d) . No Equity in the Defendant to Retain Paym_~ .~!
Krebs v. World Finance Co. Ltd. . . . . . . . . . . 75 R.E .. Jones v. Waring & Gil low Ltd. . . . . . . 79 Deutsche Bank v. Beriro .... . .... ··· ····· · ·· · 90 Unfted Overseas Bank v. Jiwani ... ......... · · 92 Rural Muni'cipality of Storthoaks v. Mobil Oil Canada Ltd ..... . ......... . ...... . · 94
••
(iv}
(e) A Restatement
Barclays Bank v. W.J. Simms Son and Cooke Ltd . .... ... ... ............. ...........
B. Mistake of Law Bilbie v. Lumley and Others . 0' Grad C · t f T • • • · · • · · · • · · · • • · · · · · · y v. 1 y o oronto .... . . ............ .... .
(a) Distinguishing Between Mistakes of Law and Fac t
Eaglesfield v. Marquis of Londonderry . ..... . Macfarlane and Wellington Hotel v. Kennedy .. George (Porky) Jacobs Enterprises Ltd . v. City of Regina .. . ............... .. ...... .
(b} Exceptions to the Rule in Equity
Note .. ... . ........... ..... . .. . ............. . Eadie v. Township of Brantford . .. .......... . Keddy v. Power .......... . ... .. ..... . .... ... .
(c) A Restatement?
Hydro-Electric Commission of Nepean v. Ontario Hydro ..... . .......... . . . ........ .
C. Recovery of Other .Benefits Conferred Under Mistake ( i ) Improvements to Land
Montreuil v. Ontario Asphalt Co .. ...•.•..... (ii ) Improvements to Chattels
Greenwood v. Bennett et al . •......... . ... •••
2. RESTITUTION OF BENEFITS CONFERRED UNDER INEFFECTIVE TRANSACTIONS
(i) Informality
Deglman v. Guaranty Trust Co .. .. ..... ...... . Sigvaldson v. Hitsman . ....... .. .... .. ...... . McCall um. v. MacKenzte ... .. ...... . .... . .. .
(ii) Illegality
106
118 ·11 9
121 122
126
128 129 135
139
159
176
31 182 185
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
(v)
., . (a) Enforcement of Collateral Rights
Bowmakers v. Barnet Instruments ....... .. ... . Belvoir Finance v. Stapleton .. ..... ... .... . .
(b) Exceptions to the General Rule Denying Restitution Kiri ri Cotton Co. Ltd. v. Dewani ....... .... . Hasiuk v. Oshanek ................. . . . ... .. . . Steinberg v. Cohen ......................... . Kasumu and Others v. Baba-Egbe . ... . ..... .. . . Sidmay Ltd. et al . v. Weh ttam Investments Ltd. Ciz v. Hauka ...... ....... ...... ..... .. . . ... . Berne Developments Ltd. v. Haviland et al . . . Bigos v. Boustead ........ .. ................ .
(c) The Rise and Fal1 of Subrogation
Congresbury Motors v. Anglo-Belge Finance Orakpo v. Manson Investments ... . .. . ..... . . . .
(iii) Incapacity
(a) Ultra Vires Contracts
Note ....... . . .. ..... ..................... .. . Trades Ha l l Co. v. Erie Tobacco Co . ........ . Breckenridge Speedway et al. v. The Queen
(b) Mental Incompetence
Note . . .... . ... . ... . ..... . ... ... ........ .... . Wi 1 son v. The King ... ..... .... . .. ... .. . . .. . .
(c) Minors' Contracts
Note .. . . . . .. .... ... . ... . .. .. . ..... .. ... .. .. . R. Leslie Limited v. Shei l l ................ . Murray v. Dean .... ... ................. .. ... . Bo~Lassen v. Josiassen . ... . . . . . ............ .
(iv) Want of Authority
Craven-El lis v. Canons Ltd ... . ............ . . Hazelwood et al. v. West Coast Securities Ltd.
(v) Misrepresentation
(a) Executed Contracts
197 203
209 215 218 229 236 247 251 263
270 27 5
281 283 297
317 318
338 341 355 356
361 365
Leaf v. International Gal l eries . .. . .. .. ..... 373 Bevan v. Anderson et al. ........ . . . ....... . . 377 Misrepresentation Act (U.K.) .. .. ..... . . ... . . 387 The Business Practices Act (Ont.) .. .. ... . . 388
' l
,i ! 1 l j
1 I
(vi)
(b) Consequential Relief, Indemnity
Wiley et al. v. Fortin et al.
(vi) Mistake and Uncertainty
(a) Mistake
Note .................... . . . . . ..... . .. . . . . . . · Boulton v. Jones .. .. ................. . .... . Cooper v. Phibbs ........... . ......... . .... . Solle v. Butcher ....... . . .. ... .... ...... .. . McCarthy Milling Co. Ltd. v. Elder Packing Co. Ltd . ....... . .... . ..... . . . James More & Sons Ltd. v. University of Ottawa ... .. ............ . .... . .
(b) Uncertainty
Estok v. Heguy ..... . .. . .. .. .......... . .. . .
(vii) Discharge by Breach
(a) The Rights of the Innocent Party
Hunt v. Silk .. . ............. . . . ........ ... . Planche v. Colburn and Another ........ .... . .
{b) The Rights of the Party in Breach
Sumpter v. Hedges .. .. .... . · ........ . ... . . Fairbanks Soap Co. Ltd. v. Sheppard ..... ... . Stockloser v. Johnson ... : .............. .. .
(viii) Frustration
The Frustrated Contracts Act (Ont.) ~ . ... ... . The Frustrated Contracts Act (B.C.) ..... ... . Parsons v. Shea ... . ......... . . . . . ....... . .. . Angus v. Scully . . . .. ........ . .... . .. . ... ... . B.P. Exploration Co. v. Hunt (No. 2) . . ... . . .
{ix) ~nticipated Contracts and Gifts
(a) Contracts
Brewer Street Investments v. Barclays Wooll en
(b) Gifts
Rowe v. Public Trustee .................. . .
393
397 398 400 405
412
417
428
432 436
436 438 442
447 449 452 457 458
499
506
3.
(vii )
., .
RECOVERY OF THE PROFITS OF WRONGDOING
(i) Criminal and Quasi-Criminal Acts
Note . .. . ........... . .... . ... . ..... ......... . Re Johnson ........ .... .. ..... .. .... .. . ... .. . Schobelt v. Barber ................ ... ...... . Gray v. Barr . .. ..... . .. . . . .......... . ...... .
(ii) Waiver of Tort
Note .. .. ........ . ........... . . ... . ... . . . ... .
(a) The Election Problem
United Australia Ltd. v. Barclays Bank Lt d. Mahesan v. Malaysian Gov't Housing Society ..
(b) The Scope of the Doctrine
Phillips v. Homfrey ............ . ........ .. . bani el v. O'Leary .......... . ........... .. . . .
(c) The Measure of Recovery
Olwell v. Nye & Nissan Co .
(iii) Compulsion
(a) Duress
Note ... .. . . . .. . . . . .. ................. . .. . . . . Skeate v. Beale ......................... ... . Fuller v. Stoltze .. . ......... . . . ..... ...... .
{b) Practical Compulsion
512 513 520 525
532
533 560
567 580
582
586 588 592
Knutson v. Bourkes Syndicate ............ ... . 606 Peter Kiewet Sons Co. of Canada Ltd. et al . v. Eakins Construction Ltd. . . . . .. .. . . . . . . . . 611 The 'Siboen' and the 'Sibotre' . . . . . . . . . . . . . . 620 North Ocean Shipping v. Hyundai . . . . . . . . . . . . . 623 Pao On et al. v. Lan Yiu et al. . . . . . . . . . . . . . 633 Morton Construction v. City of Hamilton . . . . . 642 George (Porky) Jacobs Enterprises Ltd. v. City of Regi'na . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4 8 Eadie v. Township of Brantford . . ..... . ... . . . 649
I 1,
i .{ I
(viii)
(c) Undue Influence
Note ............ . ....... . ..... . ........... · . McKenzie v. Bank of Montreal et al ........ . .
(iv) Breach of Fiduciary Duties
(a)
(b)
(c)
Note . .......... . ................. . .. .. ..... .
Establishing a Fiduciary Relationship
Midcon Oil and Gas Ltd. v. New British Dominion Oil Co. Ltd ..... . ............. . . . . . Jirna Ltd. v. Mister Donut of Canada Ltd ... . Pre -Cam Exploration & Development Ltd. et al. v. McTavish et al . . ... . .... . ..... .. .. . ..... .
The Duty of Loyalt~
Mcleod and More v. Sweezy . . . . . . . . . . . . . . . . . . . Breach of the Duty of Loyalty
Reading v. Attorney-General . . . . . . . . . . . . . . . . . Canadian Aero Services Ltd . v. O'Malley .. . ..
(d) Liability for Breach of the Duty of Loyalty
Note .... . .......... . ...... . ........ . .. . .... .
(v) Unconscionable Transactions
Waters v. Donnelly .... . . . .... . ............. . Gaertner v. Fiesta Dance Studios ... . ....... .. Clifford Davis Management Ltd. v. WEA Records Ltd. . . .. . ..... . .............. . .. . Morrison v. Coast Finance Ltd . . ...... . .. . .. .
(vi) Other Fo.rms of Equitable Wrongdoing
Unsworth v. Grant ........................... (a) Hiding Behind The Statute of Frauds
Note . ...................... . ......... . ..... .
(b) Dishonoured Undertakings: Interests in Land
Note . . ..... . .. . ...... . ..................... . Bi nions v. Evans . . . . . . . . . . . . . . . . . . . . . . . . . . .
667 ti83 .
694
698
703
708
723
725 731
734 737
742
751
753 754
4 .
5 .
(ix)
(c) Dishonoured Undertakings: Restrictive Covenants
Note ... . .... . .... . . • . .. ........ .- .... .. ·.:;' :. ~ ·~ .. 758 Canadian Brotherhood of Railway and General Workers v. B.C. Airlines Ltd ........... . ... .
(d) Abuse of Confidence
Saltman Engineering Co. Ltd. v. Campbell Engineering Co. Ltd .................... . ... .
(e) Refusal to .Share Spousal Assets on Separation
Rathwe11 v. Rathwell .... . ....... . .......... . Pettkus v. Becker ...... . ....... . .. . ....... . .
COMPULSORY DISCHARGE OF ANOTHER'S LIABILITY
Moul e v. Garrett .................................. . · . D & J Motors Ltd. v. Ellis .................. . ....... . Brooks Wharf and Bull Wharf Ltd. v. Goodman Bros . ... . County of Carleton v. City of Ottawa .. . ........ . ... . . General Security Ins. Co. of Canada v. Howard Sand & Gravel Co . Ltd ............. .. .. . .. . Lambert Implements Ltd. v. Parde11 et al. ...... .
UNREQUESTED BENEFITS AND THE VOLUNTEER
(a) Agency of Necessity
760
772
775 38
793 794 798 802
808 815
Hastings v. Village of Semans ........ 820
(b) Preservation of Life
Matheson v. Smiley .....•... . . . ... . ... Attorney-General for British Columbia v. Parklane Private Hospital Ltd .....
(c) Preservation of Property
Nicholson v . Chapman ............. . .. . Sherr in v. Haggerty ....... . .- ..... . • .. In re Pike ............. . ............ .
(d) Voluntary Discharge of Another ' s Obligation Norton v. Haggett ................... . Falcke v. Scottish Imperial · Insurance Co . ................ . ...... . Owen v. Tate et al ....•. .. . . ....... . .
(e) The Self-serving Intermeddler
824
828
835 837 841
843
845 857
Felton v. Finley ..•......• . .......... 864 Nicholson v. St. Denis et al . . ....... 870 Mechanical Contractors Association of Ottawa v. J.G. Rivard Ltd ..... . .. 874
l J . ! '
(x)
6. Restitutionary Liability of Public Authorities
W- 11. Wh. 1 1 am 1 te 1 y Ltd . v . R. . ... . ........ .. ...... . Mason v. New South Wales . ..... . ............ . ... . Hydro Electric Commission of the Township of Nepean v. Ontario Hydro . . ...... . . . .. .. . ........ . Amax Potash Ltd. v. Govt. of Saskatchewan .. .. . . .
PART III RESTITUTIONARY REMEDIES
A. COMMON LAW REMEDIES
Note .. ...... ... .. ... ............... .. .. .......... .... ( i ) Tracing Property other than Money
(a) Access io
Firestone Tire & Rubber Co. of Canada Ltd. v. Industrial Acceptance Corp . Ltd ..... . ... . Jones v. De Marchant ...... . ............... . .
(b) Confusio and Commixtio
Lawrie v. Rathbun
(c) Specificatio
Si l sbury and Calkins v. Mccoon and Sherman . .
(ii) Tracing Mone~
Note ...... . . . ....... . ... . .... . . . .......... . . Taylor v. Plumer ... .. ..... . . · .......... . . . ... . Banque Be l gue pour l ' Etranger v. Hambrouck ..
B. EQUITABLE REMEDIES
(i) The Constructive Trust
Note
(a) Those Arising out of Express Trusts
Ankcorn v. Stewart ............. . ... . .. . .... .
(b) Those Arising out of Other Fiduciary Relationships
Note . t ~ ••• ~ • , ••••• , • , •• • ••••• ~ ••• • • • ••••••• •
(c) Those Arising out of Fraud
McCormick v. Grogan .. . .... . ................ . Pahara et al. v. Pahara .................... .
878 881
889 916
927
928 931
935
939
942 943 947
957
959
. 962
964 965
(xi) • • ·f •
(d) The Constructive Trust as a General Remedy
Craddock Bros. v. Hunt .................... . Hussey v. Pa lmer ... . . ....... . .. . ..... . .. . . . Ra thwe 11 v. Ra thwe 11 ...... . .... . . . ........ . Pettkus v. Becker ... . ..... . ............... . Chase Manhatten Bank v. Israel -British Bank
(ii) The Equ i tabl e Lien
Note ..... .. ............................. . . . Montreuil v. Ontario Asphalt Co.
(iii) Tracing in Equity
969 975 775
38 979
989 159
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990
(a) When does the Right to Trac~ in Equity Ari se?
Re Hallett's Estate ...... .. .. . ... . ....... . Sinclair v. Brougham ...... ~ . .... . ......... . Nebraska National Bank v. Johnson .. .. ..... . Chase Manhatten Bank v. Israel-British Bank
(b) When will the Right to Trace in Equity be Lost?
The Rule in Clayton ' s Case ........... . .... . The Rule in Hallett's Case ........... ... . . . The Rule in Re Oatway . . . : . ..... .. ......... . The 'Lowest Intermediate Ba lance ' Rule .... . The Available Remedies . ...... . ... . ........ . Competing Beneficial Owners . ... . . . . . ...... . The Innocent Vol unteer ... . . . .. ............ .
C. CONCURRENT REMEDI ES
(i) Subrogation
Note ... . . . .. . . . .... . .......... . . . . . .. . .... .
(a) Subrogation of the Plaintiff to the Rights of the Payee Against a Third Party
Weldon v. Canadian Surety Co ...... ... . . ... . Bayda v. Canada North Dakota Land Co. Ltd . et a 1 . . ............ .. .... . ........ . ....... . Re Okotoks Mil li ng Co. Ltd ........ . ...... . Brown v. Mclean ...... . . . .. . . . .. . . . . . . . . . .. . Traders Realty Ltd. v. Huron Hei ghts Shopping Pl aza Ltd .... . .... . ... . ... .. ..... . ... . . . . . .
991 992 993 979
996 996 998 998
1000 1001 1002
1004
1006
1018 1020 1021
1025
(xii)
(b) Subrogation of the Plaintiff to the Rights of a Third Party Against the Payee ..
Bank of Nova Scotia v. Kelly . .. ....... . .. · · · Reversion Fund and Insurance Co. Ltd. v. Mai son Co sway, Ltd. . . . ........... · · · · · · · · · · · Congresbury Motors Ltd. v. Angl o-Belge Finance Co. Ltd . ... . .... · · · · · · · · · · · · · · · · · · · · Orakpo v. Manson Inv .. . ...... . . .. . . . ... · · · · ·
(c) The "Officious" Subrogee
Campbell Auto Finance Co. v. Warren ...... · · · Re Cleadon Trust Ltd ... . ..... . . .. . .. . . . . .. · ·
(ii) Contribution
Brook' s Wharf and Bull Wharf Ltd. v. Goodman Bros . . ..... . ..... . ... . · · · · · : · · · · · · · · Continent al Insurance Co. v. Prudential
.Insurance Co. Ltd. of England . . .. . .. .. ... · · ·
1028
1046
2 .70 275
1062 1069
798
1077
PART I ., .
Introduction
In historical terms , the practice of organizing legal rul es into collections which we look upon as "subjects" of the substantive l aw is a rel atively recent phenomenon. The rise and fal l of the medieval writ system and the reformul ation of the l aw q.evel oped by the courts of common 1 aw and equity into · tts modern form is properly the subject of a course in the history of Engl ish l egal doctrine. It is sufficient for our purposes to note simply that this evol utionary process did not proceed at the same pace in al l areas of the law. Al though it was easily seen that the rul es rel ating to the enforcement of undertakings coul d be useful ly brought together and described in one place, recognition of the uni ty of what we now view as tort law was a more difficult matter . In 1871, O.W. Holmes Jr . , greeted a new edition of Addison on Torts with this remark: ··we are incl ined to think that torts is not a proper subject for a law booK ft (Goff and Jones, p.5, n8). In 1931, Winfield offered a general defini tion of the nature of tortious l iability which has been widel y adopted. Interestingly, however, hi s approach was rejected by one contemporary reviewer in the fol l owing manner:
"The truth is that there cannot be a tort unti l there is a wrong for which a remedy by trespass'· case or detinue would have been given [i .e. , at common law prior to 1852]. The criteri on i s empirical, not a priori. But it enables one to give a perfect definiti on- per genus et differentiam A tort is a ci vi l wrong (that is tfie genus)-wh1ch 1s differentiated from other ci vi l wrongs (there is only one other : breach of contract) by reference to the remedies which the common law created. 11
P.A. Landon (1931), The Bel l Yard, Nov . , p. 32) .
It i s, of course, now generdlly recognized that the various sub- branches of the l aw of tort have more in common than . their historical origins in certain forms of action (See C.A. Wright, The Province and Function of the Law of Torts in Linden (ed.) Studies in Canadian Tort Law, p. 1).
The l aw of restitution has not yet achieved recognition of thi s kind . Some lawyers and juri st s would argue that t he di sparate strands of law and equity which have been woven together by the students of resti tuti onary law are simply not suffi ciently inter-rel ated to warrant treatment between the covers of one book . Indeed , even those who agree that it is sound to recognize and devel op a "subject" of thi s kind have not been able to reach agreement as to the boundaries of the subject or as to i ts most appropriate name. Accordingly,