.,

Cases and Material s on Restitution

FOR STUDENT USE ONLY NOT FOR COMMERCIAL SALE

1982 - 83 .

Edited by

John D. McCamus Dean

Osgoode Hall Law School

and

Peter;D, Maddaugh of the Ontario Bar

1982 - 83 Edition

Osgoode Hall Law School of York University

' 'I

Part I II

(ii )

Restitutionary Remedies · · • · · · · · · · · • · • · · · · · · · · · · · · · · · · · · ·.

Common

( i ) ( i;)

Law. Remedies . ... · · • · · · · · · · · · · · · · · · · · · · · · · · · · · ·

Tracing Property other than Money ·····•······· Tracing Money ....••.. . ....•.. . ... . ............

B. Equitable Remedies . · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·

(i) The Constructive Trust · ··· · ··················· ( ii) The Equitable ~ien · · · · · · · .... · · · .. · .. · .... · · · · (iii) Tracing in E.qu1ty ······ · ··········· • ··········

c. concurrent Reme.d~ es · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · .

(i) Subrogation .. · · · · · · · · · · ·· · · · · · · · · ·· · ·· · · · · · · · · (ii) Contribution ·· · ·· · ·· ·· · · · · · · · · ·· · ·· · · · · · · · · · · ·

I I

.;!'

)'

9p 9.?,7

927 942

957

957 989 9~0

1004

1004 10.77

PART I

PART II

( i ii ) . .. , .

Cases and Materials on Restitution

Table of Contents

Introductory Materials

Introduction . . . . .....•................................... Samek, Unjust Enrichment, etc ..... .. ......... . .......... . Restatement of Res ti tut ion ....... . .... . ................ . .

l 2 4

Moses v. McFerl an . . .. . .. . ......•......................... Sinclair v. Brougham ...•.•...•...... . ..... . ....... . . . ... . Deglman v. Guaranty Trust Co. . ........ . ................. . Saint John Tugboat v. 'Irving Refinery ............... .. . . . Pettkus v. Becker ...................... . ......... . ...... .

13 17 31 35 38

THE SUBSTANTIVE GROUNDS FOR RESTITUTIONARY RELI EF

l . RESTITUTION OF BENEFITS CONFERRED UNDER MISTAKE

A. Mistake of Fact

Royal Bank of Canada v. The King............. . ... 55

(a) An Honest Mist9ke

Kelly v. Solari ...... . .... . ............. ... . Clark v. Eckroyd ........................ .. ..

(b) Between the Parties

61 64

Note .... . ..... . ................... · · · · · · · · · · 99

(c) A Supposed Obligation _:o Pay

Larner v. London County Council . . . . . . . . . . . . . 69 Lady Hood of Avalon v. MacKinnon . . . . . . . . . . . . . 71

(d) No Equity in the Defendant to Retain Payment

Krebs v. World Finance Co. Ltd. . . . . . . . . . . . . . 75 R. E. Jones v. Waring & Gil low Ltd. . . . . . . . . . . 79 Deutsche Bank v. Beriro ............... . .... · 90 United 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. . . ..... . ........................ · . 106

B. Mistake of Law Bilbie v. Lumley and Others ················~····· )lB O'Grady v. City of Toronto . . . . .. . ................ 119

(a) Distinguishing Between Mistakes of Law and Fact

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 . . .. ...................... . . . .

(~) A' Restatement? Hydro-Electric Commission of Nepean v. Ontario Hydro .......... . ..•.•............. ·

C. Recovery of Other Benefits Conferred Under ~istake . (i) Improvements to Land

Montreuil v. Ontario A$phalt Co ........ . ....... .

(ii) Improvements to Chattels Greenwood v. Bennett et a 1 ............ ... . ... .

2. RESTITUTION OF BENEFITS CONFERRED UNDER INEFFECTIVE TRANSACTIONS

(i) Informality

Deglman v. Guaranty Trust Co . .............. . Sigvaldson v. Hitsman ........ ............... • Kinzie v. Harper ............................ . Harrison v. Wrights Limited . ................. .

( i i ) Il le ga 1 i ty

Note . .. . ........... · ·. · . · · · · · · · · · · · · · · · · · · · ·

121 122

126

128 129 135

139

159

176

31 182 185 187

(v)

.. . ·.. '

(a} Enforcement of Collateral Rights

Bowmakers v. Barnet Instruments ............. 189 Belvoir Finance v. Stapleton ... ~ . ....... . ... 195

(b} Exceptions to the General Rule Qenying Restitution

Kiriri Cotton Co. Ltd. v. Oewani ............ 201 Kasumu and Others v. Baba-Egbe .. ... . ........ 207 Hasiuk v. Oshanek . .. ... ... .... . ....... ... ... 214 Steinberg v. Cohen ....................... ... 217 Sidmay Ltd. et al. v. Wehttam Investments Ltd. 227 Ciz v. Hauka .. .... .. ... .. . ... ... ... . . . ... . .. 238 Bigos v. Boustead ... ... ... ... ... ... .... ..... 242

(c) . The ' Ri~e · ana · fa11 or ·sabt6gation

Congres·b.ury Motors v. Ang 1 o-Be l ge Finance Orakpo v. Manson Investments ............... .

(iii) Incapacity

(a) Ultra Vires Contracts

Note .................. . .................. . . . Trades Hall Co. v. Erie Tobacco Co ......... . Breckenridge Speedway et al. v. The Queen .. .

(b) Mental Incompetence

Note ..................... . ................. . Wilson v. The King ......................... .

(c) Minors' Contracts

Note ....................................... . R. Leslie limited v. Sheill ................ . Murray v. Dean ..... . ....................... . Bo~Lassen v. Josiassen ..................... .

, (iv) Want of Authority

249 253

259 261 275

295 296

316 319 333 334

Craven-Ellis v. Canons Ltd. ............ ..... 339 Hazelwood et al. v. West Coast Securities Ltd. 343

' (v) Misrepresentation

(a) Executed Contracts

Leaf v. International Galleries ............ . Bevan v. Anderson et al .................... . Misrepresentation Act (U.K.) .......... . .... . The Business Practices Act (Ont.) .......... .

351 355 365 366

' .

(vi )

(b) Consequential Relief, Indemnity

Wiley et al. v. Fortin et al.

(vi) Mistake and Uncertainty

(a) Mistake

'!

371'

Note .. . . ....... .. ................ . ........ •·. 375 Boulton v. Jones •........... :. ... ........... 376 Cooper v. Phibbs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 Solle v. Butcher . .. .. .. .. .. .. .. .. .. .. . . . .. .. 383 McCarthy Milling Co. Ltd. v. Elder Packing Co. Ltd. ........... . .......... 390 James More & Sons Ltd. v. Uni ve.r's ity of Ottawa . . . . . . . . . . . . . . . . . . . . . . . . 395

(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

406

410 413

414 416 420

The Frustrated Cont~acts Act (Ont.) ... . . . .. . 425 The Frustrated Contracts Act (B.C.) .. . ..... . 427 Parsons v. Shea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 Angus v. Scully . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435 B.P . Exploration Co. v. Hunt (No. 2) ........ 436

(ix) Anticipated Contracts and Gifts

(a) Contracts

Brewer Street Investments v. Barclays Woollen 477

(b) Gifts

Rowe v. Public Trustee •....... ....... .... . .. 484

(vii ) ., .

3. RECOVERY OF THE PROFITS OF WRONGDOING

( i ) Criminal and Quasi-Criminal Acts

Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490 Re Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491 Schobelt v. Barber.... . ..................... 498 Gray v. Barr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503

(ii) Waiver of Tort

Note ................... . .......... ·. · .. · · · · · · 51 O

(a) The Ele:ttion Problem

United Australia Ltd. v. Barclays Bank Ltd. 511 Mahesan v. Malaysian Gov't Housing Society .. 538

(b) The Scope of the Doctrine

Phi 11 ips v. Homfrey . .. . .. .. .. . .. .. . . .. .. .. .. 545 Daniel v. O'Leary .. .. ..... .. . .. .. .. .... .. .. . 557

(c) The Measure of Recovery

Olwell v. Ny~ & Nisson Co.

(iii) ·compulsion

(a) Duress

559

Note ................................... ·. . . . 563 Skeate v. Beale . . . .. . . .. .. . . . . . . . . . . . . . . . . . . 565 Fuller v. Stoltze .. .. .. .. . .. .. . .. .. .. .. . .. .. 569

( b) Practical Compulsion·

Knutson v. Bourkes Syndicate . .. . .......... . . 583 Peter Kiewet Sons Co. of Canada Ltd. et al . v. Eakins Construction Ltd. . . . . . . . . . . . . . . . . . 587 The 'Si boen' and the 'Si bot re' . . . . . . . . . . . . . . 596 North Ocean Shipping v. Hyundai .. ... .. .. .. . . 599 Pao On et al. v. ·Lan Yiu et al. . . . . . . . . . . . . . 609 Morton Construction v. City of Hamilton . . . . . 618 George (Porky) Jacobs Enterprises Ltd . v. City of Regina .. .. .. .. .. .. .. . . .. . .. . . .. . . 624 Eadie v. Township of Brantford ..... . ........ 625

(viii)

(c) Undue Influence

Note ............•............ , . . . . . . . . . . . . . . 630 McKenzie v. Bank of Montreal et al. . . . . . . . . . 6~;l

(iv) Breach of Fiduciary Duties

Note . . . . . . . . . . . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.2 .: 1

(a) Establ ishing a Fiduciary Relationship

Midcon Oil and Gas Ltd . v. New British

(b)

Domini on Oi 1 Co. Ltd. . •..... .... . . .......... Jirna Ltd. v. Mister Donut of Canada Ltd . ... Pre-Cam Exploration & Development Ltd. et al. v. Mc Ta vi sh et a 1. . . ....................... .

I

The Duty of Loyalty

Mcleod and More v. Sweezy

(c) Breach of the Duty of loyalty

Reading v. Attorney-General .............. .. . Peso Silver Mines Ltd. v. Cropper ......... . . Canadian Aero Services Ltd. v. O'Malley ... , .

( d) Li abi 1 i ty for Breach of the Duty of Loya l.tx

Note . . ........ . .... . .... . . . .............. . . .

(v) Unconscionable Transactions

643 ~59

670

674

679 683 708

723

Waters v. Donnelly . .............. . ...... ... . 725 Gaertner v. Fi es ta Dance Studios . . . . . . . . . . . .. 731 Clifford Davis Management Ltd. v. WEA Records Ltd. . . . . . . . . . . . . . . . . .. . . . . . . . 734 Morrison v. Coast Finance Ltd. . . . . . . . . . . . . . . .737

(vi) Other Forms of Equitable Wrongdoing

Unsworth v. Grant ..................... . ...... (a) Hiding Behind The Statute of Frauds

Note ....................................... .

(b) Dishonoured Undertakings : Interests in Land

Note ................... .. . .. . .. ............ . Binions v. Evans . . ...................... . .. .

742

751

753 754

(ix)

.,. (c) Dishonoured Undertakings: Restrict~ve . ~ovenants

Note ............... • ......... .. . .• .......... 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 Sp6us·al Assets on Separation

Rathwel 1 v. Rathwel 1 ....................... . Pettkus v. Becker .......................... .

4. COMPULSORY DISCHARGE OF ANOTHER'S LIABILITY

Maule 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. Parde 11 et a 1 . . ...... .

5. UNREQUESTED BENEFITS AND THE VOLUNTEER

Felton v. · Finley ............. .. ......... ... . ....... . . Nicholson v. St. Den-is et al . . ........ .. ... . ........ . Mechanical Contractors Association of Ottawa v. J.G. Rivard Ltd ............ . .. .. .............. . . . .

(a) The Officious Intermeddler

Norton v. Haggett .......................... . Falcke v. Scottish Imperial Insurance Co ... . Owen v. Tate et al . . ... .... . . . ............ . .

(b) Agency of Necessity·

Hastings v. Village of Semans

(c) Preservation of Life

Matheson v. Smiley ... . ..................... . Attorney-General for British Columbia v. Parklane Private Hospital Ltd .... . .. . ... .

(d) Preservation of Property

758

760

772

775 38

793 794 798 802

808 815

820 826

830

835 837 849

855

859

863

Nicholson v. Chapman .. .......... .. .......... 870 Sherrin v. Haggerty .. ...... .. . . . . ...... .. . . . 872 In re Pike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 876

____________ _, _______ - -

,,

(x)

6. Rest i tutionary Liability of Public Authorit ies

William Whitely Ltd. v. R ........ .... ...... -. ... . Mason v. New South Wales ... . ........ . .. .. ...... . Hydro El ectric 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)

... ... ....... ... ..... ... ..................... .... Traci ng Property other than Mone~

(a) Accessio

Firestone· ~ire & Rubber Co. of Canada Ltd. v. Industrial Acceptance· Corp. Ltd ......... . Jones v. De Marchant ....... .. .. . .. ......... .

(b) Confusio and Commixtio·

Lawrie v. Rathbun . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) Specificatio

Silsbury and Calkins v. Mccoon and Sherman . .

(ii) Tracing Money

Note .......... .. ......... ·.· · · · · · · · · · · · · · ··· · Taylor v. Plumer ... . ... . .. ... ... . ......... . . Banque Belgue pour l'Etranger v. Hambrouck ..

B. EQUITABLE REMEDIES

(i) The Constructive Trust

Note ....... . .. . ............. .. .... . ............ .

(a) Those Arising out of Express· Trusts

878 881'

889 916·

927•

928 931

935 .

942: 943. 947.:

957"

Ankcorn v. Stewart . ... . .... .......... ... . . ... 959

(b) Those Arising out of Other Fi duciary Relationships

Note . , ...... , . , .. . . . '! •• •• • , •• • • ••• • • • • • • • • • • • ' 9&2

(c) Those Arising out of Fraud

McCormick v. Grogan . . . . . . . . . . . . . . . . . . . . . . . . . 964 Pa hara et a 1. v. Pa hara .. .. . . . . . .. . . . .. . . .. . 965

(xi) • • ' f •

(d) The Constructive Trust as a General Remedy

Craddock Bros. v. Hunt ..... . .............. . Hussey v. Palmer . . . .... ........ ....... .... . Ra thwe 11 v. Ra thwe 11 .••.•... .. ..•••.•...... Pettkus v. Becker ......................... . Chase Manhatten Bank v. Israel-British Bank

(ii) The Equitable Lien

Note . .. . ... .. ....... .... . .. ....... . . ... . .. . Montreuil v. Ontario Asphalt ·co .. . . ... . ... .

(iii) Tracing in E9uity

969 975 775 38

979

989 159

: Note .:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990

(a~ When does the Right ·to Trace in Equity Arise?

Re Hallett's Estate .. ... ................. . Sinc lair v. Brougham ...... . ............... . Nebraska National Bank v. Johnson . .. .... . . . Chase Manhatten Bank v. Israel-Briti sh 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 Balance' Rule .... . The Available Remedies .. . . . ............... . Competing Beneficial Owners .. . . . ...... .. .. . The Innocent Volunteer . ... .. ......... ..... .

C. CONCURRENT REMEDIES

(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 al ..... . ... . .... . ........ . . .. ...... .. .. . Re Okotoks Mill i ng Co . Ltd ......... .. .... . Brown v. Mclean ... : ........... . ........... . Traders Realty Ltd. v. Huron Heights Shopping Plaza Ltd . . . ....... ............... . .. .. .. . .

991 992 993 979

996 996 998 998

1000 1001 1002

1004

l 006

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. Anglo-Belge Finance Co. Ltd ... . ... . ......... · · · · · · · · · · · · Orakpo v. Manson Inv ...... . ................ ·

(c) The "Officious" Subrogee

Campbell Auto Finance Co . v. Warren . .. . ... . · Re Cleiid.on Trust Ltd ................ · · · · · · · · ·

(ii) Contribution

Brook' s Wharf and Bull Wharf Ltd. v. Goodman Bros. . .................. . . · : . · · · · · · · Continental Insurance Co. v. Prudential Insurance Co. Ltd. of England ..... . ..... .

1028

1046

24·9 253

l 06'2 1069

798

1077

PART I

Introduction

In historical terms, the practice of organi zing legal rules into collections which we look upon as "subjects" of the substantive law is a relatively recent phenomenon. The rise and fall of the medieval writ system and the reformulation of the law pronounced by the courts of common law and equity into their modern form is properly the subject of a course in t he history of English l egal doctrine. It is sufficient for our purposes to note simply that this evolutionary process did not proceed at the same pace in all areas of the law. Although it was easily seen that the rules relating to the enforcement of undertakings could be usefully brought together and described in one place, recognition of the uni ty of what we now view as toft 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 inclined to t~jnk that torts is not a proper subject for a law booK" (Goff and Jones~ p. 5, n8). In 1931, Winfield offered a general definition of the nature of tortious liability which has been widely adopted. Interestingly, however, his approach was rejected by one contemporary reviewer in the following manner:

"The truth is that there cannot be a tort until 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 criterion is empirical, not a priori. But i t enables one to give a perfect definition-per genus et differentiam A tort is a civil wrong (that is The genus)--wh1ch 1s differentiated from other civil wrongs (there is only one other: breach of contract) by reference to the remedies which the common law created."

P.A. Landon (1931), The Bell Yard, Nov., p. 32).

It is, of course, now gener&lly 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.l).

The law of restitution has not yet achieved recognition of thi s kind. Some lawyers and jurists would argue that the disparate strands of law and equity which have been woven together by the students of restitutionary law are simply not sufficiently inter-related to warrant treatment between the covers of one book. Indeed, even those who agree that it is sound to recognize and deve.lop a "subject" of this kind have not been able to reach agreement as to the boundaries of the subject or as to its most appropriate name. Accordingly,