FOR STUDENT USE ONLY NOT FOR COMMERCIAL SALE

1980-81

Cases and Materials on Restitution

Edited By

John D. McCamus Associate Professor of Law

Osgoode Hall Law School

and

Peter D. Maddaugh of the Ontario Bar

1980 - 81 Edition

• ,•f I

Osgoode Hall Law School of York University

Pa rt I I I

L I,

Ii

l" . i!

i.

(ii)

Restitutionary Remedies ..... ....... ...... .......... ...... 827

827 A. Common Law Remedies

(i) Tracing Property other than Money . ... ... . . .... 827 (ii) Tracing Money . . .. . .. . . . . . . . .. . . . . . . . .. . . . .. . .. 842

B. Equitable Remedies ... .. ... ... .. ... . .. .. .. . . . ... . .... . 857

(i) The Constructive Trust ... ... ... . ... ... , .. .. , .. 857 (ii) The Equitable Lie~ ..... . . ... .. . ... . ....... .. .. 929 (iii) Tracing in Equity.. .. .. .. .. . . ...... ...... . . ... 951

C. Concurrent Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986

(i) Subrogation .. .. . . .. . .. .. . . . . . .. . . . . .. . . .. .. .. . 986 (ii) Contribution . ............ . . ..... . . .. , ......... 1069

(ii i )

·r , ,

Cases and Materials on Restitution

Table pf Contents

PART I Introd~ctory Materials

Introduction ........ ; . .. . . .... . ..... . .. . . . . ....... ..... . . Samek, Unjust Enrichment , etc . . . . ....... . .. . . .. . .. . .. .. . . Restatement of Res ti tut ion .. . . . ........ . . ............ . . . . Mose? v. McFarlan . .. , .... ........ . . . .. . ...... ... . .. . .. ... . Sinclair v. Brougham . . .... . ..... ... . . .. . . . .. ~ . . .......... . Orakpo v. Manson Investments Ltd . . .. .... . .......... . .. . . . Deglman v. Guaranty Trust Co. . . ...... . ............. .. . . . . Saint John Tugboat v. Irving ' Refinery . ................ .. .

l 2. 4

13 17 30 32 40

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 ..... . ........... 43

(a) An Honest Mistake

Kelly v. Solari . . .. . . . . .. .. .. .. . . . . .. . . . .. . . . 49 Cl ark v. Eckroyd . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

{b) Between the Parti.es

Note . ........ .... , . .. .......... , . , . . . . . . . . . . . . 57

{c) A Supposed Obligation to Pay

Larner v. London County Council ...... .. . . . . . 57 Lady Hood of Avalon v. MacKinnon . . .. .... ... . 59

(d) No Eq~ity in the Defendant to Retain Payment

Krebs v. World Finance Co. Ltd ......... .. . . . R. E. Jones v. Wari ng & Gill ow Ltd . ..... . ... . Purity Dairy Ltd. v. Collinson . ... . ........ . Deutsche Bank v. Beriro .. .... .......... ... . . United Overseas Bank v. Jiwani ....... . . . .. . . Rural Municipality of Storthoaks v. Mobil Oil Canada Ltd ...... .. ..... .. . . .. . ... .

63 67 78 90 92

94

~----------

2.

(iv)

(e) A Restatement

Barclays Bank v. W.J. Simms Son and Cooke Ltd. . ... ............................. .

B. Mistake of Law

O'Grady v. City of Toronto

(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 . ................ 1 • • • ••• • ••

(b) Excepti~ns to the Ru le in Equity

Note .. . ....... . ... .. ................. ... ... . Eadie v. Township of Brantford .. . ..... . .... . Keddy v. Power .......... ... . . .............. . Rogers v. Ingham .......... . ........ .. ... . .. .

C. Reco.very of Other Benefits Conferred Under Mi stake

(i) Recovery of Land Conveyed

Devald & Devp ld v. Zigeuner & Zigeuner ..... . Riverlate Properties v. Paul . , . . ..... ... ... .

(ii ) Improvements to L~nd and Chattels I i ; •

Greenwood v. Bennett et a 1 .................. .

RESTITUTION OF BENEFITS CONFERRED UNDER INEFrECTIVE TRANSACTIONS

(i) Informality

Deglman v. Guaranty Trust C9 . . ............ . . Sigvaldson v. Hitsman ...................... . Kinzie v. Harper ..... . . . ........ .... ....... . Harri son v. Wrights Limited ........... . ... ..

(ii) Illegality

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

106

118

120 121

124

125 126 127 130

136 139

14&

32 154 157 159

160

(v)

(a) Enforcement of Collateral Rights

Bowmakers v. Barnet Instruments .... .. ...... . Belvoir Finance v. Stapleton ............... .

(b) Exception~ to the General Rule Denying Restitution

Kiriri Cotton Co. Ltd. v. Dewani . . ......... . Kasumu and Others v. Baba-Egbe ............. . Hasiuk v. Oshanek ........ .. .. . .. ...... ..... . Steinberg v. Cohen . . ............ ...... ..... . Sidmay Ltq . et al. v. Wehttam Investments Ltd. Ciz v. Hauka ... .. .............. .. ....... . .. . Bi gos v. Boustead ............ .. ... .... . .... .

(iii) Incapacity

(a) Ultra Vfres 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

Nott:! .•............ .... ...................... R. Leslie Limited v. Sheill ................ . Murray v. Dean ..... .. ...................... . Bo~Lassen v. Josiassen .... .. ........ ....... .

(iv) Want of Authorit~

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

(v) Misrepresentation

(a) Executed Contracts

Leaf v. International Galleries , ........ , . . . Bevan v. Anderson et al . .. ........... . ..... . Misrepresentation Act (U.K.) . 1 • • • •• ••••• • •••

The Business Practices Act (Ont.) ....... ... .

161 167

173 179 186 189 199 210 214

221 223 237

257 258

278 281 295 296

301 305

313 317 327 328

. .... ..

(vi )

{b) Consequential Relief, Indemnity

Wiley et al. v. Fortin et al. . ......... ... . . (vi) Mistake and Uncertainty

(a) Mistake

Note . .. .... ... . ... . ..... . . . .. . .. ..... . .. . . . . Bou 1 ton v. Jones .... . . . ... ... . .... . . . ... . .. . Cooper v. Phibbs .... . .. . . .. ... .... ... . . . . . . . Sol le v. Butcher . .... . . .. . •. ...... ... ... . . .. McCarthy Milling Co. ~td . v. Elder p·acking Co. Ltd .... . .. ....... .. ... ... . James More & Sons Ltd. v. University of Ottawa ... . .. . . . ..... . . . . . .. . . .

(b} Uncertainty

~stok v. Heguy

(vii) Discharge PY Breach

(a) The Rignts of the . In~ocent Pa~ty

Hunt v. ~ilk . .. . ..... . . . . . .. .. , . . ... .. . . ... . Pl anche v. Co 1 burn and Another .. ..... . . . . • : .

(b) The Rights of the Party in Breach

Sumpter v. Hedges .... . ..... ... . ... , . ....... . Fairbanks Soap Co. Ltd. v. Sheppard ........ . Stockloser v. Johnson ····~·· i · ·· · ·· ·· · ······ .

(viii) Frustration

The Frustrated Contracts Act (Ont.) . •. .... .. The Frµstr~ted Contracts Act (B .C. ) ... ... .. . Parsons v. Shea .•. . . .. ... . ... .... .... . .. . , . . Angu·s v. Scully ... . . , ..... . ..... . . .. , , . . . . . . B. P. Exploration Co . v. Hunt (No. 2) . . . . . .•.

(ix) Anticipated Contracts and Gifts

(a) Contracts

Brewer Street Investments v. Barclays Woollen

(b) Gifts

333

337 338 340 345

352

357

368

372 375

376 378 382

387 389 392 397 398

439

Rowe v. Public Trustee . ..... . ... . . . . .. . . .. .. 446

(vi i )

' , 'I' I

3. 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

(b)

(c)

United Australia Ltd. v. Barclays Bank Ltd~ . Mahesan v. Malaysian Gov•t Housing Society ..

The Scope 9f the Doctrin·e

Phillips v. Homfrey ..... ... . . . .. . .... . .. .. . . Daniel v. O'Leary . .. . ... . . . . ...... . . .. ..... .

The Measure of Recover~ ' .

Olwell v. Nye & Nisson Co .

(iii) Compulsion

(a) Duress

Note . .. . ... r ••••••• • ••• • • • • •••••• • •••••• ·~· • •• Skeate v. Beale .......•... . ..... ... . . . . ..... Fuller v. Stoltze . ...... .. ... .. . .. . .. . .... . .

/ (b) Practical Compulsion '

VKnutson v. Bourkes Syndicate .. . . . ... . .•... .. £/Peter Kiewet Sons Co. of Canada Ltd . et al .

v. Eakins Construction Ltd . ..... ... . . . . ... . . The 1 Siboen 1 ~nd the 1 Sibotre 1

••••••••••••• •

North Ocean Shipping v. Hyundai , . . . .. . . ... . . Pao On et al . v. Lan Yiu et al ... . ... ... ... . Morton Construction v. City of Hamilton . . .. .

i/George (Porky) Jacobs Enterprises Ltd . y. City of Regina , . .. . .... . ... ... . ... . . .... .

[/Eadie v. Township of Brantford . . .. . .. . . . ... .

452 453 460 465

472

473 500

507 519

521

525 527 531

545

54~ 558 568 571 580

586 589

(viii)

(c) Undue Influence

Note • ...... . ..... .... ........ . . ... ... . ..... . McKenzie v. Bank of Mo ntreal et al . . .... . .. .

(iv) Breach of Fiduciary Duties

Note ........ . •.................. ... ........ .

(a) Esta.bli shing a Fi duciary Relationship

Midcon Oil and Gas Ltd. v. New British Dominion Oil Co. Ltd .... ... .... . . ... . .... . . .

V'Jirna Ltd. v. Mister Donut of Canada Ltd . . . . Pre-Cam Exploration & Development Ltd. et al . v . Mc Ta vi sh et a l , . . . . . . , . . . . . . . . . . . . . . . . . . .

(b) The Duty of Loya lty

Mcleod and More v. Sweezy

(c) Breach of the Duty pf Loyalty

vkeadi ng v. Attorney-Genera 1 . .. ... . ... .. . . .. . Peso Si lver Mi nes Ltd. v. Cropper . .. . , ... .. . Canadian Aero Services ltd . v. O'Malley .... .

(d) Liabili ty for Breach of th.e Duty qf Lqyalty

597 600

609

610 626

637

641

646 650 676

Note .. . . . . .. . .. .............. . . ..... , . . . . . . . 691

{v) Unconscionable Transactions

Waters v. Donnelly .... ... . ................. . Gaertner v. Fi esta Dance Studios ........... . Clifford Davis Management ltd. v. WEA Records Ltd. . ............ . .. . .. ... . .... .

(vi) Other Forms of Equitabl e Wrongdoing

Unsworth v. Grant .. ........... . .......... . . .

(a) Hiding Behind The St ate of Frauds

Note .. ... • ... ,. ..... .. ....... ............ . . , .

{b) Di shonoured Undertakings: Interests in Land

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

692 698

701

709

718

no 721

(ix)

• • ·1 •

(c) Dishonoured Undertakings : Restrictive Covenants

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

4. UNREQUESTED BENEFITS AND THE VOLUNTEER

Fe 1 ton v. Fin 1 ey . ............. . .. .. .. . ... . .......... . Nicholson v. St. Denis et al .............. .. ... , .... . Mechanical Contractors Association of Ottawa v. J. G. Riva rd Ltd. . .... . ...... , .... ... . .... . ..... , . .

(a) The OfffciOl.lS. Intermeddler

Norton v. Haggett .......... . ...... ... . . . ... . Fal cke v. Scottish Imperial Insurance Co ... . Owen v. Tate et a 1 . . ....... , .. . . ... ........ .

(b) Agency of Necessity

Hastings v. Village of Seman~ ............... (c) Preservation of Life

Matheson v. Smi 1 ey ...... . .... . . . .......... . . Attorney-General for British ·Columbia v. ·Parklane Private Hospital Ltd ... . . . . .... .

(d) Preservation of Property '

Nicholson v. Chapman . ..... ....... , .... .. ... . Sherrin v. Haggerty .................... . . .. . In re Pike· ······ ··· : ····· ·· ···· ·· · ··,····· ·

?· COMPULSORY DISCHARGE OF ANOTHER'S LIABILITY

Maule v. Garrett .... ...... .............. ..... ... .... . D & J Motors Ltd. v. Ellis . . .. . ......... ... ..... . . . . . §.rooks Wharf and Bul l Wharf Ltd. v. Goodman Bros . ... .

i/County of Carleton v. City of Ottawa .... .. .......... . General Security Ins. Co. of Canada v. Howard Sand & Gravel Co. Ltd ...... ......... . . . ...... . Lambert Implements Ltd. v. Pardell et al ......... ... .

725

727

739

742 748

752

757 759 771

777

781

785

792 794 798

800 801 805 809

815 822

PART III RESTITUTIONARY REMEDIES

A. COMMpN LAW REMEDIES

( x )

Note .. , ........ . ........................ .... . ....... .

( i ) Tracing Property other than Money

(a) Accessio

Firestone Tire & Rubber Co . of Canada Ltd . v. Industrial Acceptance Corp . Ltd ... . ... .. . Jones v. De Marchant ...... . . .... . . . .... . . . . .

(b) Confusio and Commixtio

Lawrie v. Rathbun .... .. ...... .... ...........

(c) Specificati9

Silsbury and Calkins y. Mccoon and Sherman ..

(ii) Tracing Money

Note ...... . .............. · · · · · · · · · · · · · · • · · · · Taylor v. Plumer ....... . .... .. .. ..... •.... . .

·sanque Belgue pour l 'Etranger v. Hambrouck ,.

B. EQUITABLE REMEDIE~

(i) The Con structive Trust

Note ................... . ... . .... . ... . . ~ .. . .. . ... .

(a) Those Arising out of Express Trusts .. .

Ankcorn v. Stewart ... •.... . ... ... .... ...... .

(b) Those Arising out of Other Fiduciary Relationships

827

828 831

835

899

842 843 847

857

859

Banque Romande v. Mercantile Bank of· Canada . 863

(c) Those Arising out of Fraud

McCormick v. Grogan .. . .•.. . . .. . ...... .. .... . 873 Pahara et al, v. Pahara . . . .... . ... . ......... 874

(xi)

., . (d) The Constructive Trust as a General Remedy

Craddock Bros. v. Hunt .......... , .... . ..... . Hussey v. Palmer .... . . .. .. . . .. .......... ... . Murdock V i Murdock ... .. . .. .. ..... . .. ... . . .. . Rathwel l v. ·Rathwel l ....................... . Chase Manhatten Bank v. Israel-Briti sh Bank .

(ii) The Equitable Lien

Note .. . ... . ... . . . .. ... . ..... . ......... ...... . Montreuil v. Ontario Asphal t Co ... .... . .... . Gl avasky v. St1,1dnick , . ... . .. · . ....... , ..... .. Dickman v. Dickman .. . ...... . .... . ... . .. .. . . .

(iii) Tracing in Equi t~

878 884 888 902 919

929 929 941 946

Note ...... . .. . .. . · . . . . . . . . . . . . . . . . . . . . . . . . . . . 951

(a) When does the Right to Trace in Equity Ari se?

Re Ha 11 et t ' s Es ta te . . . . . • . . . . . . . . . . . . . . . . . . Sincl air v. Brougham .. : ........... , .•.. . .... Nebraska National Bank v. Johnson ..... ... .. . Deeks-Lafarge Ltd. v. Milne et al .......... . Roblin v. Jackson ······· ~ · · ······· ··· ···· · ·· Goodbody et al . v. Bank of Montreal ........ . Merchants Express Co. v. Morton . ......... .. . Re Blackhawk Downs ·Inc. and Arnold et al ... .

('b) !'Jhen wi 11 the Right to Tra~e in Egui ty be Lost?

The Rule in Cl ayton' s Case .... . ..... .... . .. . The Rule in Hall et t ' s Case ............. . ... . The Rule in Re Oatway ........ . .. . ... . ...... . The ' Lowest Intermediate Bal ance' Ru l e ..... . The Available Remedies .... •....... . .... . .... Competing Beneficial Owners .... . ..... . .. ... . The Innocent Volunteer .. ..... . ....... . ... .. .

C. CONCURRENT REMEDIES

(i) Subrogation I

952 953 954 956 962 967 972 974

978 978 980 980 982 983 984

Note .... , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986

(xii}

. ' . Weldon v. C~nadian Surety Co .. . . ........ . .. . Bayda v. Canada North Dakota Land Co. Ltd. etal . .. ... ... . ... . . .. .. .. .. . ~ ·· · · ··· · · · · ·· · Re Okotoks Milling Co . Ltd . ...... .. . .. ... .. . . Brown v. Mclean .. . ... ... . . .... . .. .. ....... . . Traders R~alty Ltd. v. Huron Heights Shopping Plaza Ltd .. . .. . ... . .......... . . .. . ...... ... .

(b} Subrogation of the Plaintiff to the Rights of a Third Party Against the Payee

B&nk of Nova Scotia v. Kelly ..... . ......... . Reversion Fund and Insurance Co. Ltd. v. Maison Cosway, Ltd .... .. , ..... , .. , ......... . Congresbury Motors Ltd. v. Anglo-Belge Finance Co. Ltd .. . .... .. .... ............... . Orakpo v. Manson Inv .... .. . . •. ............. .

(c) The 11 0fficious 11 Subrogee

9$8

l 000 1002 1003

1007

1010

1028

1044 1048

Campbell Auto Finance Co. v. Warren ., . .... . . 1054 Re Cleadon Trust Ltd . . .. .. . . . , , ....... .. .. . . 1061

(ii} Contribution

Brook's Wharf and· Bull Wharf Ltd. v. Goodman Bros. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805 Continental Insurance Co. v. Prudential Insurance Co . Ltd. of EngJand . . . . . . . . . . . . . . . 1069

PART I

.,.

lntroduction

In historical terms, the practice of organizing legal rules into collectipns which we look upon as 11subjects 11 of the substantive law is a relativelY. recent phenomenon . The rise and fall of the medieval writ system ana the refonnulation of the law pronounced by the courts of common law and equity into their modern form is properly .the subject of a course in the history of English legal doctrine. It is sufficient for our p~rposes 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 usef4lly brought together and described in one place, recognition of the unity of what we now view as tort law was a more difficult matter. In 1871, O,W. Holmes Jr., greeted a new addition of Addison on Torts with ~his remark: "We ar~ inclined to think that torts is not a proper subject for a law ~QOKft (Goff. and Jones, p.5, n8). In 1931, Winfiel~ offered a general definition of the nat4re of tortious liability which has been widely adopted. Interestingl~, however, his approach was rejected by one contemporary reviewer i~ 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 cri~erion . is e~pirical, not a priori. But it enables on~ to give a perfect definition-per genus et differ~ntiam A tort is a civil wrong (that is tne genus)--wh1ch is differentiated from other civi l wrongs (there is only one other: breach. of ~ontract) by referen~e to the remedies which the co1T1110n law created."

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

It is, of course, now generijlly recognized that the various sub-branches of the law of tort have more in common than their historical origins in certain fo~m~ of action (See C.A. Wright, The Province and Function of the Law of Tor ts in Linden (ed , ) Studies in Canadian Tort Law , p. l) .

The law of res ti tut ion has not y~t achieved recognition of this kind-. Many lawyers and jurists would argue th~t the disparate strands of law and equity which hav~ been woven together by the advocates of restitutionary law are simply not ~ufficiently inter-related to warrant treatment between the covers of one book . Indeed, even those who agree that it is sound to recognize and dey~lop a 11subje.ct 11 of this kind nave not been able to reach agreement as to the boundaries of the subject or a~ to its most appropriate name . Accordingly,