1. Defining UE:
1. Unjust Enrichment is a source of legal obligations
· Unlike contractual obligations, they are not consensual.
· Unlike extra-contractual obligations, a remedy for unjust enrichment is not generated by a wrongdoing.
· Ex: I pay you twice by accident. The law of UE says I must return the money. This is not because the contract says I must, or because it is a wrongdoing to get paid money you are owed. Rather, it is because it would be unjust for you to keep it.
2. Restitution is not a source of legal obligations, it is a remedy, for breach of an obligation arising in UE. Restitution is the response of the law to the recognition of a right arising from an unjust enrichment of the defendant by the plaintiff.
3. The law of unjust enrichment reverses defective transfers of wealth.
4. There are a multitude of reasons why the law determines a transfer of wealth to be defective: ex: Mistake, compulsion, pressure of circumstances, failure of basis, etc.
5. The law of UE has roman, civilian roots. It was only recently recognized by the Common Law.
6. The main difference between the two systems is that the Common law responds to an unjust enrichment through the recognition of either a personal or proprietary (the CT) right. The Civil law responds only through the recognition of a personal right.
7. Restitution in specie: Granting a proprietary right
· The opposite approach is restitution by providing the plaintiff with the economic value of the transferred good or service in the form of a personal right.
2. The Structure of UE
· This framework was set out by Dickson C.J. in Petkus v. Becker:
1. An enrichment of the defendant: The defendant must have received something into his or her patrimony.
· Simple if enrichment is in the form of a transfer of money from the plaintiff to the defendant.
· More complicated if:
a. Enrichment consists of saving defendant from having to make an expenditure: i.e. Peel.
b. If the defendant no longer has the money (Change of Position)
2. A Corresponding Deprivation of the plaintiff: The plaintiff must show that he has suffered a loss to his or her patrimony.
· Simple if the enrichment comes from the plaintiff’s pocket.
· More complicated if:
a. The deprivation comes as a result of a wrongdoing by the defendant: Ex: I’ll give you 5,000$ to smash John’s car. The damage caused is around $1,000. John has a claim against you, but for how much? He was only deprived of $1,000, but should he not be entitled to $5,000? Should he get the value of the defendant’s enrichment, or the value of his impoverishment?
· The problem with allowing recovery for unjust enrichment arising from a wrongdoing by the defendant, is that it only works for some torts/breaches.
· Ex: Efficient breach of contract: I am entitled to my expectation for the beach, but not to the gain you receive as a result of the breach. You have been enriched, and I have suffered a loss. The problem is that I have only lost my expectation interest, whereas you have been enriched to that extent, plus a profit (if the breach was really efficient). The deprivation does not really correspond to the deprivation.
· The reason is that in these cases, the enrichment has not come from the plaintiff’s pocket, so the value of the deprivation and enrichment do not necessarily have to match. I.E. it does not work where the enrichment comes via a third hand.
b. Deprivation/Enrichment via a third hand:
· Ex: The president of a company gambles away the company funds at a casino. The shareholders sue the casino in UE (they clearly have no case in tort since there has been no wrongdoing). The HL allowed the claim. The problem is that the enrichment came via the hands of a third party, interposed between the plaintiff and the defendant.
c. Passing On: In these cases, via pricing, the plaintiff has passed on the loss to another party. This usually arises in the tax context, where the subject of the tax raises prices to cover the value of the tax, effectively shifting the burden onto the consumer. This seems to be a valid defense in Canada.
3. Absence of Juristic Reason for the enrichment and corresponding deprivation:
· The problem with this formulation is that it is ambiguous. Does the plaintiff have to show why restitution should be granted (Reason for Restitution) or that there is no reason why restitution should not be granted (Absence of a juristic reason)?
· The name of the cause of action suggests an absence of juristic reason approach. Quebec Civil law adopts this approach, but it is not clear whether or not the Common Law does. According to Smith, Dickson did not mean to orient us towards an AJR model, rather, an R4R model, but just framed it the way he did to sound more technical/scientific.
Deglman v. Guaranty Trust Co. of Canada, 1954, S.C.C., p. 5
· Deglman, while at school, agreed to perform services for his aunt during the course of his studies, in exchange for her making provision for him in her will, and specifically, leaving him the ownership of an apartment.
· Deglman performed the services, but was not mentioned in his aunt’s will.
Issues: Can he recover damages in UE?
Held: Yes. Deglman receives the monetary value of his services.
1. Rand J.:
a. Refuses to apply the doctrine of part performance, a recognized exception to the Statute of Frauds.
b. The contract cannot be enforced because it is not in writing. The Statute of Frauds prevents the courts from recognizing a transfer of land that is not in writing.
c. “There remains the question of recovery for the services rendered on the basis of a quantum meruit. On the findings of both courts below the services were not given gratuitously but on the footing of a contractual relation: they were to be paid for. The statute in such a case does not touch the principle of restitution against what would otherwise be an unjust enrichment of the defendant at the expense of the plaintiff. This is exemplified in the simple case of part or full payment of money as the price under an oral contract; it would be inequitable to allow the promissory to keep both the land and the money and the other party to the bargain is entitled to recover what he has paid. Similarly is it in the case of services given.”
2. Cartwright J.:
a. “I agree with the conclusion of my brother Rand that the respondent is entitled to recover the value of these services from the respondent administrator. This right appears to me to be based, not on the contract, but on an obligation imposed by law.”
b. Quotes Fibrosa, “It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of common law which has been called quasi-contract or restitution.”
c. Refuses to hold that the parties had an implicit contract to pay Deglman the monetary value of his services in the event that the contractual transfer of land did not take place.
1. Note that the court refused to apply the doctrine of part performance, which would have achieved the same result. It preferred to recognize the law of UE instead
2. Note that the remedy granted is the monetary value of the services, not the property. The court is not prepared to do this, since it would effectively mean enforcing the contract, which it was not prepared to do. The obligation enforced here was not contractual, but founded in UE.
3. Note that Cartwright J. clearly states that the source of the obligation is not a breach of contract, or a tortuous wrongdoing, but rather an independent source of liability; namely, UE.
4. The distinction between restitution and compensation: In contract or tort, you grant compensation, i.e. force the defendant to give something up because he or she has committed a wrong or breached his contractual obligations. This ‘hurts’ the defendant much more than forcing the defendant to return something he has been given by the plaintiff, because he has to delve into his bank account to do so. When restitution is ordered, the defendant does not have to delve into his patrimony. He merely has to give back what he has been given by the plaintiff. Restitution merely put the parties back into the position they were in before the transaction. No one is any worse off. For this reason, restituti
b. Unjustified Enrichment: This is more scientific. This is what Dickson J. meant by “unjust enrichment” in Petkus. This formulation implies that there is a list of reasons to consult in determining whether a transfer should be reversed.
c. Why does it matter:
i. The Rule of Law: We want the law to be predictable.
ii. Justice/Fairness/Consistency: Like cases should be treated alike. The only way to ensure consistency is to provide judges with guidelines for determining when the remedy of restitution should be granted.
d. Note that in Peel, McLachlin rejects Peel’s argument that to deny recovery would simply be “unfair”. She states that there must be a body of doctrine for us to consult, so that the law will be predictable. She basically determines that what Dickson meant in Petkus in presenting the three part test was not to recognize a general discretion to reverse unjust transfers, but rather, a power to reverse transfers that were not justified, given the catalogue of established cases and principles governing UE, or in other words, the family of reasons for restitution.
· The Families of Reasons for Restitution:
1. I didn’t mean you to have it/Plaintiff-sided Unjust Factors/Defects of Consent: Examples include, mistake, compulsion, inequality of bargaining power.
2. It would be bad of you to Take it/Defendant-sided Unjust Factors/Free Acceptance:
3. Mom says give it back/Policy Based Restitution: Ex: Payment of a tax under an invalid statute: Restitution is granted on the basis of a policy that there should be no taxation without representation, i.e. legislative sanction.
II. Distinguishing Unjust Enrichment and Profitable Wrongdoing:
· Two types of UE have been recognized:
1. Unjust Enrichment by Transfer/Subtraction: The defendant’s enrichment came directly out of the pocket of the plaintiff.
2. Unjust Enrichment by Wrongdoing: The defendant’s enrichment came to the plaintiff via a third party.
3. The two types have four things in common:
a. The defendant is enriched.
b. The legal system is unhappy about it, i.e. believes it is unjust.
c. The plaintiff is impoverished. I.E. the enrichment is at the expense of the plaintiff.
d. The defendant has to surrender the gain, either in the form of its economic value (money) or in specie.
4. The two types are different in three ways:
a. Subtractive UE is autonomous: It doesn’t depend on the existence of a wrongdoing by the defendant. UE by Wrongdoing, like tort, and breach of contract, is dependent on a WD by the defendant.
b. In UE by wrongdoing, no deprivation of the plaintiff needs to be shown.
c. No reason for restitution needs to be shown: The wrongdoing is reason enough for allowing the claim in UE.
5. Does it matter whether both are really UE?
a. The texts cover both.
b. The English formulation covers both
c. However, Smith believes that they are fundamentally different things. The source of the obligation in UE is an unjust enrichment of the defendant to the detriment of the plaintiff. The source of the obligation in UE by WD is a wrongdoing by the defendant.