Demystifying final - SSRN

For the final version, see (2007), 45 Canadian Business Law Journal 281-304

Demystifying Juristic Reasons Lionel Smith∗

I. Why Juristic Reasons?

In the great case of Deglman v. Guaranty Trust Co. of Canada,1 the Supreme Court of Canada followed the lead of United States law and recognized that in the common law, unjust enrichment is a source of obligations. In the great case of Pettkus v. Becker,2 the Court rationalized this development by providing a framework that can explain all obligations arising from unjust enrichment. Such obligations arise where there has been an enrichment of the defendant, a corresponding deprivation of the plaintiff, and where there is “no juristic reason” for the enrichment and the deprivation. So far as I have been able to tell, this phrase was an original contribution of Dickson J. (as he then was) to the common law of unjust enrichment.3 Recently, in Garland v. Consumers’ Gas Co.,4 the

James McGill Professor of Law, Faculty of Law, McGill University. The ideas in this paper were first presented to the Oxford B.C.L. Restitution seminar in May 2005, and then to the 36th Annual Workshop on Commercial and Consumer Law in Banff in October 2006. I am grateful for the comments that helped me to sharpen my ideas, and for the suggestion of the session Chair at the Workshop, that if this paper fell into the hands of judges it should bear the warning, “Don’t try this at home.” I hope the final version is not in need of such a label. My particular thanks go to Robert H. Stevens for his intellectual generosity during many conversations 1 Deglman v. Guaranty Trust Co. of Canada, [1954] S.C.R. 725, [1954] 3 D.L.R. 785. 2 Pettkus v. Becker, [1980] 2 S.C.R. 834, 117 D.L.R. (3d) 257. 3 He first used it in a minority judgment in Rathwell v. Rathwell, [1978] 2 S.C.R. 436, 83 D.L.R. (3d) 289. It was used in a totally different context (the defence of intoxication to a charge of murder) by Lord Simon in D.P.P. v. Majewski, [1977] A.C. 443, 478. In L. Smith, “The Mystery of ‘Juristic Reason’” (2000), 12 Supreme Ct. L. Rev. (2d) 211 (reprinted in L. Smith, ed., Ruled by Law: Essays in Memory of Mr. Justice Sopinka (Toronto, LexisNexis Butterworths, 2003)), at pp. 215-9, I offered some speculation as to the reasons for Dickson J.’s choice of words. In Garland v. Consumers’ Gas Co., [2004] 1 S.C.R. 629, 237 D.L.R. (4th) 385, at para. 40, Iacobucci J., writing for the Court, opined that the use of this phrase was calculated to ensure that the ∗

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Court has confirmed that in common law Canada, the law of unjust enrichment is to be governed by an inquiry into whether there is a juristic reason. We are no longer to be guided by the question whether there is some positive reason—for example, mistake or “failure of consideration”—to undo the enrichment and corresponding deprivation. We are to ask whether there is a juristic reason—for example, contract, disposition of law, donative intent, or other obligations5—that justifies the enrichment and corresponding deprivation. Hereafter, I will refer to the now-rejected approach as the approach through “reasons for restitution”, to contrast it with the approach through juristic reasons.

The goal of this paper is to begin to develop a theory of juristic reasons. There is a prior question, however, that we should always ask before trying to solve this, or any, problem. Why does it matter? It matters because it concerns our intellectual approach to the central question in this field of law. On either approach, we will need to figure out whether defendants were enriched, and whether plaintiffs have suffered the corresponding deprivation; and on either approach, we will need to worry about defences. But the central question in unjust enrichment is, which enrichments are unjust or unjustified? The approach we adopt to address that central question will affect how we teach and learn the subject, and how cases are argued and resolved. The two different approaches are different ways of knowing when enrichments are unjust.

test for unjust enrichment was not purely subjective. Similarly, in Pacific National Investments Ltd. v. Victoria (City), [2004] 3 S.C.R. 575, 245 D.L.R. (4th) 211, at para. 23, Binnie J., writing for the Court, said that this phrase “…emphasizes that ‘unjust’ is to be addressed as a matter of law and legal reasoning rather than a freefloating conscience that may risk being overly subjective.” It is not clear that the achievement of these laudable goals required the re-orientation of the inquiry into whether an enrichment is unjust. 4 Garland v. Consumers’ Gas Co., [2004] 1 S.C.R. 629, 237 D.L.R. (4th) 385. 5 This is the list from Garland, ibid., para. 44.

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In his last book, Peter Birks advocated an approach through absence of juristic reasons.6 This was a significant change for him, because he had for years argued against any move in this direction. Indeed, it was he who definitively organized and systematized the common law’s traditional approach through reasons for restitution.7 What was the motivation for his change of heart? He did not mention Pettkus, but he actually suggested that the English cases had already moved in the same direction.8 Peter was no slave to case law, though, and if he had thought any such trend was wrong, he would have continued to say so. The fact is that he thought the juristic reasons approach was better because it was analytically cleaner.9

It is not entirely clear whether the Supreme Court of Canada was motivated by a similar idea in Garland. Writing in 2000, after Pettkus but before Garland, my view was that the Court had pointed in the direction of juristic reasons in 1980, but no firm commitment had been made, and the cases were in a state of disarray as a result.10 I did not think either approach was better or worse as a matter of abstract justice, but I suggested that in the interests of legal certainty and continuity, since there was no compelling reason to change, no change should be made. In Garland, however, the Court seemed to take the view that the change had already taken place in the line of cases beginning with Pettkus.

6

P. Birks, Unjust Enrichment, 2nd ed. (Oxford, Oxford University Press, 2005), esp. chs. 5-6. He called it an approach through “absence of basis” but I do not wish to explore here the conceptual differences between absence of juristic reason and absence of basis. 7 P. Birks, An Introduction to the Law of Restitution, rev. ed. (Oxford, Clarendon Press, 1989), chs. IV-IX. 8 Birks, supra, footnote 6, at pp. 108-113. In Deutsche Morgan Grenfell Group Plc v. I.R.C., [2006] U.K.H.L. 49 the House of Lords said that it was not necessary to decide whether Birks was correct on this point. 9 Ibid. at p. xiii (“the better method”), 113 (the approach is “clean” and gives a “shorter … route” to the right answer). 10 Smith, supra, footnote 3.

The only thing left to do was to clarify the road ahead. In this paper, I will suggest that more clarification will be required to make juristic reasons work.11

At the outset, however, I would like to map out the claims that I will make. In Part II, I will attempt to set out an understanding of the approach through juristic reasons. Does it amount to a substantively different way of looking at whether an enrichment is unjust, or is it only a difference in emphasis and, perhaps, procedure? I will proceed provisionally on the footing that it is a substantively different approach, having more in common with the civil law of unjust enrichment than with the common law’s traditional approach. In Part III, however, by examining the civil law of unjust enrichment, I will make the claim there is no legal system that operates on a “pure” juristic reasons approach, without regard for reasons for restitution. In Parts IV and V, I will make the claim that unless substantial parts of the common law are supposed to have been overturned by Garland, the list of juristic reasons in Garland must be taken with a large grain of salt. Just as in the civilian world, a pure juristic reasons approach does not work. Garland tells us that an obligation is a juristic reason, but I will argue that in many important cases, an enrichment may be conferred pursuant to an obligation but be, nonetheless, an unjust enrichment. My conclusion, in Part VI, is that in the end, the two approaches are not that different after all. There will be differences in how cases are argued and pleaded; there may be differences in how law school courses and textbooks are organized. But the underlying principles that make enrichments just or unjust do not change.

11

I acknowledge the assistance I have derived from Mitchell McInnes’s analysis of the case. See, e.g., M. McInnes, “Making Sense of Juristic Reasons: Unjust Enrichment after Garland v. Consumers’ Gas” (2004), 42 Alberta L. Rev. 399.

II. What Are Juristic Reasons?

What are juristic reasons, and what is the nature of the approach through juristic reasons? In Garland, Iacobucci J. said, for the Court:12

… the proper approach to the juristic reason analysis is in two parts. First, the plaintiff must show that no juristic reason from an established category exists to deny recovery. By closing the list of categories that the plaintiff must canvass in order to show an absence of juristic reason, Smith’s objection to the Canadian formulation of the test that it required proof of a negative is answered. The established categories that can constitute juristic reasons include a contract (Pettkus v. Becker13), a disposition of law (Pettkus, supra), a donative intent (Peter v. Beblow14), and other valid common law, equitable or statutory obligations (Peter, supra). If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis. Those who are familiar with the case law in common law Canada might have been a little surprised that there were any established categories, but it is true that these categories had been mentioned in earlier decisions. Again, if the objective was to produce a closed list, it 12

Garland, supra, footnote 4, para. 44. I have expanded the citation of the cases. In this paper I have not discussed the second stage of the Garland analysis, which takes account of “the reasonable expectations of the parties” and “public policy considerations”: ibid., at para. 46. McInnes, supra, footnote 11, shows that there are serious difficulties here as well. The matters that the Court took into consideration in this second stage are exactly the same things that are considered in other parts of the analysis (the so-called first stage, and the inquiry into defences). The Court decided (at paras. 49-53) that the provincial regulatory regime under which the defendant functioned could not be a juristic reason because it was inconsistent with paramount federal law. Then, under the rubric of reasonable expectations and public policy, the very same issues regarding whether the illegal regulatory regime could justify enrichment came back into consideration (paras. 55-61). Surprisingly, the defendant was excused from making restitution between the coming into force of the relevant federal law in 1981, and the time in 1994 when the proceedings were commenced. This was said (at para. 60) to be because the defendant could reasonably rely on the regulatory regime until proceedings were commenced. But the Court has already decided that the void regulatory regime does not justify enrichment; the question of reasonable reliance by the defendant is one that is usually addressed under the defence of change of position. Never in unjust enrichment are you allowed to keep an enrichment just because you thought, when you got it, that it was rightly yours; you may, however, be allowed to keep it if you actually changed your position in the good faith belief that it was yours (McInnes, supra, footnote 11, at pp. 422-4). Reasonable reliance by the defendant is protected by that defence; ironically, the Court went on to say that the defence was not available in Garland (para. 66). 13 Supra, footnote 2. 14 Peter v. Beblow, [1993] 1 S.C.R. 980, 101 D.L.R. (4th) 621.

is hard to see that this was accomplished when one item on the list is “other obligations”. But I leave that aside.

The goal in this section is to make sense of the idea of juristic reasons. We should be able to say what they are, not individually but all together. What are we doing when we take the juristic reasons approach? The old approach based on reasons for restitution involved a long list of reasons like mistake, compulsion, failure of basis, free acceptance. The reasons for restitution were descriptions of primary facts: that is, things that happen in the world and can be proved by evidence. A mistake is a fact.15

One approach to juristic reasons would just be to say that there is no juristic reason when there is a reason for restitution. Writing before Garland, I argued that Canadian common law should stay with the approach of reasons for restitution. In an effort to suggest how this could be done in the light of the test as formulated in Pettkus, I suggested that “ ‘absence of juristic reason’ must be understood to mean ‘a positive reason for reversing the defendant’s enrichment.’ ”16 The idea was that we could continue with the reasons for restitution approach, and use the phrase “absence of juristic reason” simply to express the conclusion dictated by that approach. Of course, that would not really be a different approach at all. It would be the traditional approach, with “absence of juristic reason” serving only a kind of rhetorical function. Since Garland, the Supreme Court of Canada

15

Each reason for restitution could, however, be controlled or delimited by rules of law, such as the old rule that there was no recovery for a mistake of law but only a mistake of fact. But primary facts are at the core of each reason for restitution. 16 Smith, supra, footnote 3, at p. 244.

has expressed some approval of this suggestion, but only in the context of applying the Garland approach, an approach that is not consistent with the suggestion.17

For juristic reasons to exist as an intellectual category, we have to be able to describe them in a positive way.18 A common approach is to think of juristic reasons as legal (not factual) figures that come from outside the law of unjust enrichment.19 A contract is a juristic reason. It is the law of contract formation that tells us whether or not there is a contract. Then, this determines any issue that might be raised under the rubric of unjust enrichment. Since the contract stands as a juristic reason, it justifies enrichments conferred under it. On this view, juristic reasons could be described as “legal institutions or figures, from outside the law of unjust enrichment, that justify enrichments.”

This would represent an approach that is genuinely different from reasons for restitution. It is sometimes called a civilian approach.20

III. A Civilian Approach

17

See Pacific National Investments Ltd. v. Victoria (City), [2004] 3 S.C.R. 575, 245 D.L.R. (4th) 211, at [23]. Note however the reference at para. [31] in that case to mistake, which is a reason for restitution. This is discussed below in footnote 30 and the accompanying text. 18 Birks noted that there could be “limited reconciliation” between the two approaches: Birks, supra, footnote 6, at pp. 116-7; but this is part of a section (at pp. 113-7) entitled “No Possibility of Integration”. He clearly thought the approaches were substantively different. 19 See for example Thomas Krebs who translates Ernst von Caemmerer, writing in 1954 on the part of German unjust enrichment law dealing with purposive transfers by the plaintiff: “The actual reasons for restitution lie outside the law of unjust enrichment. The law of restitution would otherwise be overburdened.” T. Krebs, Restitution at the Crossroads: A Comparative Study (London, Cavendish, 2001) at p. 213. See also McInnes, supra, footnote 11, at p. 402: “… the civilian model … delegates much of the work to other areas of law.” 20 See for example McInnes, ibid. at p. 402; Birks, supra, footnote 6, at pp. 102-3, and passim; see also Garland at [47] (where, however, my own comments on this point are inaccurately summarized).

However, no legal system of which I am aware has a law of unjust enrichment that functions entirely on the basis of juristic reasons in this sense. Roman law reversed some enrichments on the ground that they were conferred sine causa or “without legal cause”, and this survives in the modern civilian tradition. Scots law still uses the concept of sine causa.21 German law considers enrichments to be unjust where they are conferred “without legal ground”, while French law (and the many systems that are tied to it by tradition) may consider enrichments to be reversible where they are conferred without legal cause. In Quebec, the recodification that took effect in 1994 restates this in terms of “justification”.22

But in all of these cases, this is only part of the story. The claim for enrichments sine causa (called the condictio sine causa) was only one among many enrichment claims in Roman law, and far from the most important.23 Other claims were founded on reasons for restitution, like mistake or failure of consideration.24 This remains true in South African

21

W.J. Stewart, The Law of Restitution in Scotland (Edinburgh, W. Green/Sweet & Maxwell, 1992), at pp. 1401; C. Ashton et al., Fundamentals of Scots Law (Edinburgh, Thomson/W. Green & Son Ltd., 2003), at pp. 2889, 293. My claims about the law of Scotland and (later) South Africa must be taken with a grain of salt, because the structure of unjust enrichment in these two uncodified jurisdictions is a matter of current debate: see N. Whitty and D. Visser, “Unjustified Enrichment” in R. Zimmermann, D. Visser, and K. Reid, eds., Mixed Legal Systems in Comparative Perspective: Property and Obligations in Scotland and South Africa (Oxford, Oxford University Press, 2004) 399 at pp. 410-7; M. Hogg, “Unjustified Enrichment in Scots Law Twenty Years On: Where Now?” [2006] R.L.R. 1 at pp. 8-15. 22 Civil Code of Québec, arts. 1493-4. 23 For discussion, see R. Zimmermann, The Law of Obligations: Roman Foundations of the Civilian Tradition (Cape Town, Juta & Co., 1990), ch. 26. 24 The most famous and influential list of reasons for restitution in the common law is in Lord Mansfield’s judgment in Moses v. Macferlan (1760), 2 Burr. 1005, 97 E.R. 676 (K.B.). Sir William Evans was the first scholar of the law of unjust enrichment in the common law (see especially his Essay on the Action for Money Had and Received in W.D. Evans, Essays (Liverpool, 1802), reprinted in [1998] R.L.R. 1). He was a great admirer of Lord Mansfield (W.D. Evans, A General View of the Decisions of Lord Mansfield in Civil Causes, 2 vols. (Liverpool, 1803)) but he was also learned in the civil law. In an appendix to his influential 1802 translation of Robert-Joseph Pothier’s Traité des obligations (originally published in 1761), Evans set out in two columns the famous sentences from Moses v. Macferlan on one side, and opposite each sentence, a more or less exact equivalent from the Digest of Justinian, the sixth-century compilation of legal writings dating from the classical period of Roman law. See R.-J. Pothier, A Treatise on the Law of Obligations, or Contracts, trans.

law and in the systems of the French family, and probably in Scotland as well. In those systems, to recover a mistaken payment, you have to prove a mistake.25 This creates a rather awkward fit between the condictio sine causa and the other claims, because analytically it would seem to subsume all of the others.26 The German codification went the furthest in the direction of creating a general enrichment action, founded on the absence of legal ground, in the place of the multiplicity of actions known to Roman law. Even in Germany, however, “absence of legal ground” is far from the whole story.27 It is the governing idea only in those cases where the plaintiff has purposively enriched the defendant. Admittedly this is a very important category of cases. But it does not include, for example, cases in which the plaintiff improves the defendant’s property thinking it belongs to the plaintiff (or knowing it does not, but hoping the defendant will not ask for it back). It does not include the discharge of another’s debt under a guarantee. It does not include enrichments of which the plaintiff is wholly unaware, as where a defendant is able secretly to abstract value from the plaintiff. It does not even include benefits

W.D. Evans, 2 vols. (London, Joseph Butterworth, 1806), at pp. 379-381. There are many other editions of this translation, with different paginations; the passage in question is in Appendix XVIII. For more detail on Roman law influences in Moses, see P. Birks, “English and Roman Learning in Moses v. Macferlan” (1984), 37 C.L.P. 1 and the paper by my co-panelist, Mitchell McInnes [CITE]. 25 For South Africa: D. Visser, “Unjustified Enrichment” in R. Zimmermann and D. Visser, eds., Southern Cross: Civil Law and Common Law in South Africa (Oxford, Oxford University Press, 1996) 523 at pp. 52833. For France: Code civil, arts. 1376-7. For Quebec: Civil Code of Québec, arts. 1491-2. For Scotland: Stewart, supra, footnote 21, at pp. 122-35; David M. Walker, Principles of Scottish Private Law, 4 vols., vol. II (Oxford, Clarendon Press, 1988), at pp. 507-8. 26 Zimmermann, supra, footnote 23, at pp. 854-7, 871-3. For a modern example of this awkward fit, the Civil Code of Québec, art. 1554 provides, “Every payment presupposes an obligation; what has been paid where there is no obligation may be recovered.” But where there has been a mistaken payment, the claim must be made under arts. 1491-2, which require proof of mistake or compulsion. 27 See B.S. Markesinis, W. Lorenz, and G. Dannemann, The Law of Contracts and Restitution: A Comparative Introduction (Oxford, Clarendon Press, 1997), at pp. 713-8 and 740-1; Krebs, supra, footnote 19, ch. 11, especially at p. 210 where Walter Wilburg, the founder of the modern German understanding of unjust enrichment, is quoted as saying that it was a fundamental error to think that all of unjust enrichment could work on the system of absence of legal cause.

conferred under a valid contract that is later discharged for breach.28 And even where “absence of legal ground” is the governing idea, reasons for restitution can be important.29 To take one example: even if there is no legal ground for a purposive enrichment, the defendant can defend by showing that the plaintiff was not mistaken when he enriched the defendant.30

The implications of this for common law Canada are not clear. Presumably we are not expected to resurrect the Roman classification of enrichment claims, which was partly dictated by the absence of a general principle in Roman law that any agreement could take effect as a contract. Are we to import the French or Quebec system, in which there is one set of rules for ‘payments’ (meaning an effort to discharge an obligation owed to the defendant31) and other sets of rules for other kinds of enrichments? That division is

28

See Markesinis et al., supra, footnote 27, at p. 716; R. Zimmermann, “Restitution After Termination for Breach of Contract: German Law After the Reform of 2002” in A. Burrows and Lord Rodger of Earlsferry, eds., Mapping the Law: Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006) 323 at pp. 326-7; S. Meier, “No Basis: A Comparative View” in A. Burrows and Lord Rodger of Earlsferry, eds., Mapping the Law: Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006) 343 at p. 345. We will return to this (see, infra, footnote 41 and accompanying text). 29 H. Scott, “Restitution of Extra-Contractual Transfers: Limits of the Absence of Legal Ground Analysis” [2006] R.L.R. 93. 30 BGB §814. Gerhard Dannemann’s translation in the German Law Archive online at reads: “What has been performed for the purpose of fulfilling an obligation cannot be claimed back if the person who performed knew that he was not obliged to perform…”. There may be an echo of this provision in Pacific National Investments Ltd. v. Victoria (City), [2004] 3 S.C.R. 575, 245 D.L.R. (4th) 211, in which the Court applied the Garland approach (which makes no mention of mistake) but also said, at para. 31, that the common mistake on which the parties operated was important to the holding that a claim in unjust enrichment was available. 31 Civil Code of Québec, art. 1553: “Payment means not only the turning over of a sum of money in satisfaction of an obligation, but also the actual performance of whatever forms the object of the obligation.” Recovery of payments that were not due is under arts. 1491-2, while other enrichments are governed by arts. 1493-6. Only the latter set of articles uses a juristic reason approach. Other articles govern improvements to another’s property in one’s possession (arts. 955-64 for immovables; arts. 973-5 for movables), and payment of another’s debt (arts. 2356-9 in the context of sureties; arts. 1656-9 otherwise). Note the suggestion in R. Zimmermann, Roman Law, Contemporary Law, European Law: The Civilian Tradition Today (Oxford. Oxford University Press, 2001) at pp. 115-117, with reference to German law, that it was a mistake to codify the rules on improvements to another’s property separately from the general law of unjust enrichment.

usually understood to have arisen largely by historical accident.32 Or should we, instead, adopt the German division between “performances” (meaning a deliberate act of enrichment) and other enrichments?33 That division is based on an academic interpretation of a particular legislative text.34

The common law of unjust enrichment is usually understood to be more unified than this.35 Of course, particular configurations may require the development of particular principles as a matter of justice. For example, we might well say that a plaintiff who confers an enrichment on the defendant pursuant to the plaintiff’s contract with a third party should have a claim only against the third party, on the ground that the plaintiff has voluntarily chosen to deal with that person and to take the credit risk involved.36 But it is much harder to see how we can import categorizations of cases that are based on the particular codal texts and historical experiences of other systems. The Garland approach is in line with the unity of unjust enrichment. It does not purport to draw distinctions 32

The only one of the Roman claims to which R.-J. Pothier devoted sustained attention was condictio indebiti, the claim for a payment that was not owing. Pothier’s work was very influential in the process of French codification, especially in the law of obligations. The result was that the condictio indebiti was codified, along with miscellaneous claims such as those mentioned for Quebec in the previous note; but the Code civil did not provide any general action for unjust enrichment. See J.P. Dawson, Unjust Enrichment: A Comparative Analysis (Boston, Little, Brown, 1951) at pp. 95-8; K. Zweigert and H. Kötz, Introduction to Comparative Law, trans. T. Weir, 3d ed. (Oxford, Clarendon Press, 1998) at pp. 545-6. This required the French courts to develop a broader action, of a subsidiary character, for other cases. For this they relied on an obscure Roman law claim, actio de in rem verso, and commentary upon it that developed during the second life of Roman law in precodification Europe. See Zimmermann, supra, footnote 23, at pp. 883-4; Dawson, ibid., at pp. 98-107. 33 Krebs, supra, footnote 19, reviews (at pp. 226-36) some efforts to dislodge this interpretation in the 1960s and 1970s, but concludes that these efforts were not persuasive. Zimmermann, supra, footnote 23, at p. 891, says that “the matter can for all practical purposes be regarded as settled.” 34 On the other hand, some scholars of Scots law have argued for the adoption of the German scheme: see Whitty and Visser, supra, footnote 21, at pp. 411-3; Hogg, supra, footnote 21, at pp. 8-15. McInnes, supra, footnote 11, at pp. 410-1, suggests that a distinction between purposive and non-purposive transfers may be needed to move forward from Garland. See also J. Gordley, Foundations of Private Law: Property, Tort, Contract, Unjust Enrichment (Oxford, Oxford University Press, 2006) who suggests (at ch. 19) that the German scheme reflects the underlying logic of unjust enrichment. 35 Not everyone agrees, however. See for example S. Hedley, Restitution: Its Division and Ordering (London, Sweet & Maxwell, 2001), who rejects any unifying principle of unjust enrichment. 36 We will return to this below.

between different kinds of enrichments or different motivational states on the part of the plaintiff.37

The Garland approach is, however, like the civilian systems in a different way. It is also mixed, as between juristic reasons and reasons for restitution. I say this because one item on the Garland list of juristic reasons is “donative intent” on the part of the plaintiff. That is not a legal figure or institution from outside the law of unjust enrichment.38 It is a question of primary fact. If donative intent is a juristic reason, how does the plaintiff show that this juristic reason was not present (as is his burden under Garland)? He must show that he did not have such an intent. Perhaps he does this by showing that his intention was vitiated, by mistake or compulsion; or by showing that it was conditional, as in the claim that used to be called a failure of consideration. If so, then we will find that in many cases (those where there is no contract or other obligation, and no relevant disposition of law), nothing has changed.

37

Sonia Meier, whose arguments played a role in persuading Peter Birks to change his approach (Birks, supra, footnote 6, at p. xiii, p. 113 note 21) now cautions that Birks’s approach cannot be applied to all of the law of unjust enrichment: Meier, supra, footnote 28, at p. 361. 38 In the civil law, part of the ground covered by donative intent would already be covered by contract, since gifts are considered contracts. However, this generalization does not apply to everything a common lawyer would call a gift. The contract of gift refers to a gratuitous transfer of real rights. The gratuitous lending of a thing, movable or immovable, for a period of time, is not a gift in the civilian sense (although it might be another kind of contract). The same is true of the gratuitous conferral of services. The release of a debt is not a gift, and probably is not a contract. On this question, see G. Dannemann, “Unjust Enrichment as Absence of Basis: Can English Law Cope?” in A. Burrows and Lord Rodger of Earlsferry, eds., Mapping the Law: Essays in Memory of Peter Birks (Oxford, Oxford University Press, 2006) 363, esp. at pp. 364-7. More significantly, the civilian solution here arguably obscures more than it clarifies. To say a gift is a contract makes sense inasmuch as it is has legal effects, and there is an element of agreement. But a pure gift (one which does not impose any charge on the donee) does not create obligations (and for this reason actually seems to be outside the definition of a contract in the Civil Code of Québec, art. 1378: “A contract is an agreement of wills by which one or several persons obligate themselves to one or several other persons to perform a prestation”). It is not at all obvious that the rules for setting aside gifts should be the same as the rules for setting aside bilateral bargains. For one civilian example of how gifts differ from bilateral bargains, we can note that in Quebec, a promise to make a gift may be enforceable, but if it is breached, only the reliance and not the expectation interest is protected: Civil Code of Québec, art. 1812.

Conversely, we must address the case of the deliberate risk-taker. I wash the windows of your house, knowing perfectly well that I have no obligation to do so, and then I sue you in unjust enrichment for the price. Assume you are enriched; perhaps it is a commercial building and the windows must be kept clean, and I can prove that I have saved you $500 by my work. Shall we allow a claim? No system does. There is no reason for restitution. But it is hard to find a juristic reason, in the sense of a legal figure from outside the law of unjust enrichment. There is only the primary fact that the plaintiff knew what he was doing. We could solve this by a rather strained understanding of donative intent: this plaintiff made a “grudging gift”.39 Or we could add another juristic reason, along the lines of “deliberate risk-taking”.40 Either way, this case requires an appeal to the facts, not to juristic reasons.

The conclusion of this section is that if juristic reasons are defined as “legal institutions or figures, from outside the law of unjust enrichment, that justify enrichments”, then no existing legal system uses a pure juristic reason approach. The next section argues that even where a juristic reason approach is used, its application has to be more nuanced than Garland suggests.

IV. Obligations Don’t Always Justify Enrichments A. 1.

39

Two-Party Cases Contractual Obligations

See for example Birks, suipra, footnote 6, at p. 158. But note Birks, supra, footnote 7, at p. 102, arguing that risk-takers are in a separate category from gift-givers. 40 Or we could call it a defence: see supra, footnote 30.

Let us turn then to the items on the list that seem to represent the core of the civilian approach, in which a legal figure from outside the law of unjust enrichment simply ‘tells’ the law of unjust enrichment whether an enrichment is justified or not. My claim in this section is that no legal system actually operates in this way, nor should it, even in those situations where the analysis does proceed by reference to juristic reasons or legal grounds or legal cause.

We often say that there can be no unjust enrichment claim within a valid contract. If the contract obliges the plaintiff to enrich the defendant, the enrichment cannot be an unjust enrichment. In fact, this is not correct. This is proven by the existence of claims for benefits conferred under valid contracts that are later discharged due to frustration or breach. It is a commonplace that neither frustration nor breach avoids a contract ab initio. These events do not arise out of defects in contract formation and do not undermine the contract as an agreement. They are subsequent events that release the parties from future obligations. So, imagine that the plaintiff and the defendant make a contract by which the plaintiff will buy the defendant’s car for $10,000, payable in advance. The plaintiff pays but the car is not delivered. The plaintiff chooses to treat the contract as discharged. Instead of suing for his expectation interest, he wants his money back. He is permitted to get his money back. This must be a claim in unjust enrichment. The obligation to return the money is not a term of the contract, except in an unusual contract (or by the wildest fiction). The obligation is imposed by operation of law, to reverse a transfer of wealth that is now revealed as defective. But notice that when the payment was made, the plaintiff was contractually bound to make it. If a contractual obligation is a juristic

reason, then there was a perfectly good juristic reason in our case.41 Even so, the enrichment was later revealed to be unjustified.

Of course, the juristic reason—the contractual obligation—was later discharged. But that does not solve our problem. We cannot say that if a juristic reason is discharged, it ceases to justify enrichments conferred under it. I borrow $100 from you and now I owe you $100. I pay the money. My obligation is discharged. Obviously I cannot say that this payment created an unjust enrichment. We need to look a bit harder.

This problem (and the exactly analogous situation of a frustrated contract) shows us that enrichments may be unjust even if they are conferred pursuant to valid contractual obligations. The law of contract does not tell us which enrichments are just, and which are unjust. Only the law of unjust enrichment tells us that. Other examples can be given. We might consider Deglman itself.42 The plaintiff nephew, Constantineau, performed his part of a bargain with his aunt by helping her from day to day. Whether deliberately or by inadvertence, she did not perform her part, which was to devise an estate in land to him. He could not enforce her promise because it was an oral promise to transfer an interest in land, and the Statute of Frauds43 made her contractual promise unenforceable. He was allowed, nonetheless, to recover the value of the services he had performed, as a claim in unjust enrichment. But it is basic contract law that a contract that falls foul of the Statute

41

German lawyers deny that this is a claim in unjust enrichment (see the references in footnote 28, supra). But the reason given is that there is a juristic reason for the enrichment; or, that the rules for contracts are in a different part of the Code. Both arguments fail to persuade, and indeed illustrate dangers of codification. 42 Supra, footnote 1. 43 Then R.S.O. 1950, c. 371, s. 4; now R.S.O. 1990, c. S.19, s. 4.

of Frauds is not void; it is only unenforceable.44 In other words, Constantineau had an obligation to do the work that he did. And yet—unless Garland is to be taken as having overruled Deglman, which is surely unthinkable—the obligation obviously did not count as a juristic reason.

Taking together the cases of contracts that are validly formed but that are discharged (for frustration or breach), or are unenforceable, we can formulate a proposition along these lines: a plaintiff’s obligation to confer an enrichment is not a juristic reason for that enrichment if (a) that obligation arose from a bilateral bargain and (b) the counterparty has now been released (by discharge or unenforceability) from making the counterperformance which was owed in respect of the obligation that the plaintiff performed. When those requirements are satisfied, the plaintiff can recover, even though he was unconditionally obliged to enrich the defendant at the time that he did so.45

Of course, this approach is largely a revival of the debate as to whether there has been a failure of basis or a failure of consideration, under the reasons for restitution approach.46 But it is true that even under reasons for restitution, it is assumed that an enrichment

44

G.H.L. Fridman, The Law of Contract in Canada (Toronto, Carswell, 1999) at p. 237: “There is no question that a contract within the Statute, even if not formally evidenced as set out in the Statute, is a valid contract, not one that is illegal, void or voidable.” 45 This can help us to understand cases such as the controversial Roxborough v. Rothmans of Pall Mall Australia Ltd. (2001), 208 C.L.R. 516. The plaintiff bought cigarettes in bulk from the defendant. Included in the price was an amount that both parties understood the defendant was liable to pay as a tax to the Crown. The taxing statute was later held to be void, before the defendant paid the tax. Here the contract between the parties was not even discharged or unenforceable; it was perfectly valid. Even so, the plaintiff recovered the amount paid to the defendant in respect of the void tax. We can see that the defendant was released (by the invalidity of the taxing statute) from its obligation to do that which the plaintiff’s contractual obligation presupposed. The result is a claim in unjust enrichment within a valid and enforceable contract. This case, if correct, shows even more strongly that questions of unjust enrichment are not simply resolved by legal entities ‘outside’ of it. 46 See for example the discussion in B. McFarlane and R. Stevens, “In Defence of Sumpter v. Hedges” (2002), 118 L.Q.R. 569.

conferred pursuant to an obligation to confer it is not recoverable. That proposition, which seems even more obviously true under juristic reasons, is simply not always true.

2.

Extracontractual Obligations

We can take a similar case, outside the law of contract. Garland says that an enrichment can be justified by “other valid common law, equitable or statutory obligations”. Usually, if the plaintiff is obliged by operation of law to enrich the defendant, the plaintiff cannot say that any enrichment so conferred is unjustified.47 But again, there are counterexamples. Imagine that the defendant has been hit by a car. He is brought, unconscious, to a doctor’s office. We can say that the doctor is obliged to treat the victim.48 If he refused to act, he would surely be liable. Let us assume he does act, and that the defendant is enriched by the services provided. Can the doctor recover? Not in contract, since the defendant was unconscious. It is a case of recovery in unjust enrichment. And yet the enrichment that was conferred was one that the plaintiff was obliged to confer.

When an obligation to enrich exists, we can usually say that the enrichment that is conferred is justified. That is because the source of the obligation, be it consent or not, generally operates as a justification for the consequent enrichment. But it is not always 47

Reference Re Goods and Services Tax, [1992] 2 S.C.R. 445, 94 D.L.R. (4th) 51 at pp. 476-7, 471-2. Compare Matheson v. Smiley, [1932] 2 D.L.R. 787 (Man. C.A.). Quite similar is Great Northern Ry. Co. v. Swaffield (1874), L.R. 9 Exch. 132, in which the defendant was liable to pay the plaintiff for the costs incurred by the plaintiff in caring for the defendant’s horse. Just as in Matheson the doctor had a duty to treat the patient, in Swaffield the court held that the plaintiff had a duty to incur the expenses; the duty could not have been owed to the horse, so presumably it was owed to the defendant. And yet the defendant had to repay the plaintiff. In these intervention situations, the duty does not necessarily operate as a juristic reason. In fact it often excludes a juristic reason because it helps the court to be sure that the plaintiff was not acting as a risk-taker.

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so. We do not always notice it, but the law of unjust enrichment has its own role to play. Just because a person is obliged to enrich another, it does not follow that the enriched person is entitled to retain the economic benefit of the enrichment so conferred.

B.

Three-Party Cases

In the law of unjust enrichment, two-party cases can be hard enough, but three-party cases can be diabolical. Here I wish only to raise some issues that will have to be addressed if the Garland approach is to succeed.49

One important category of cases involves those situations where more than one party is liable for the same obligation. For example, both a primary debtor and his guarantor are liable to the creditor. Assume the guarantor pays. Often he claims over against the primary debtor. The common law recognizes two such claims, even in the absence of any contractual relationship between the guarantor and the primary debtor.50 First, the guarantor has a subrogated claim in respect of the rights previously held by the creditor; secondly, the guarantor also has a direct claim in his own right against the primary debtor.51 The latter claim is (and arguably both claims are) based on unjust enrichment.52

49

One of the most thorough studies is D. Visser, “Searches for Silver Bullets: Enrichment in Three-Party Situations” in D. Johnston and R. Zimmermann, eds., Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 526. 50 There will be such a relationship if the guarantee was not gratuitous but was purchased by the primary debtor, as in the case of some performance bonds. Here the contract will provide for recourse against the primary debtor. 51 The distinctness of the two claims is illustrated in a number of ways. For example, the subrogated right cannot arise until the debt is paid in full, while the direct claim arises in respect of partial payment. 52 Similar is the case where the guarantee is imposed by law: Brook’s Wharf and Bull Wharf Ltd. v. Goodman Bros., [1937] 1 K.B. 534 (C.A.).

We see again that an obligation is not necessarily a juristic reason: the guarantor enriches the primary debtor pursuant to an obligation to do so, but nonetheless the guarantor has a claim in unjust enrichment. Differently from the two-party cases discussed above, however, the obligation owed by the guarantor is owed, not to the primary debtor, but to the creditor. If the guarantor wanted to recover from the creditor, he would have to impugn the obligation in the guarantee in some way. But he does not have to do that to recover from the primary debtor. We might well be tempted to say that an obligation owed to someone other than the person enriched is not a juristic reason.53 But this is actually more complicated than it might seem. If I write a cheque payable to Mary, it is an order to my bank to pay money to Mary. The bank owes an obligation to me to pay money to Mary. It has no obligation to Mary. Presumably if the bank pays Mary, it is not allowed to demand the money back from her simply on the basis that it had no obligation to her to pay her the money.54 We might treat it as a case of risk-taking:55 the bank knew it had no obligation to Mary when it paid her. But then we have to be careful about guarantees again. We do not deny the guarantor’s claim against the primary debtor simply because the guarantor knew, when he signed the guarantee, that he was under no obligation to do so.

Before we try to solve this, we must make it more complicated by introducing another variation. Assume that A Co. makes a contract with B Co., which has chartered (leased) a ship. In the contract A Co. promises to load onto the ship cargo belonging to C Co. B Co. has promised C Co. to deliver the cargo overseas. A Co. loads the cargo, but B Co. 53

This was Birks’s explanation: Birks, supra, footnote 6, at pp. 158-9. If the bank was mistaken—probably about the balance of my account—it becomes much more difficult. 55 See text accompanying footnote 39, supra. 54

becomes insolvent before paying. C Co. makes a new contract with D Co., which is the owner of the ship, for the delivery of the cargo. A Co., unpaid, sues C Co. in unjust enrichment.56 This kind of case (and the bank case) may raise difficult questions about enrichment; we might want to know whether C Co. has already paid B Co. a price that included the cost of loading, or again whether it has now paid D Co. a price that included the cost of loading, or indeed both, or neither, before we decide whether C Co. was enriched.57 But it seems that there should be a right answer, as between the plaintiff and the defendant, to the question whether such a claim is possible in principle, before we worry about enrichment.

In a juristic reason environment, we might be tempted to say that A Co. has no claim against C Co. because A Co. conferred the enrichment pursuant to an obligation that it owed to B Co. We cannot necessarily turn this into a general principle, however. First, stated in that way it would seem to exclude the guarantor’s claim against the primary debtor. There is also a subtler problem. We have seen above that even in a bilateral contract situation, contractual obligations do not always count as juristic reasons. In particular, such an obligation does not preclude a claim in unjust enrichment if the counterparty has been released from counterperformance. So if we thought that the obligation of A Co. was the factor that excluded its claim against C Co., we would surely 56

This is a simplified version of the facts of Furncan Marine Ltd. v. MV Woodlands (The) (1994), 81 F.T.R. 278. Recovery was denied. Other situations where the same problem has arisen include (a) an occupier or tenant contracts for improvement on land or buildings belonging to another; when the occupier/tenant cannot pay, the builder sues the landowner/freeholder in unjust enrichment (See, e.g., Nicholson v. St. Denis (1975), 57 D.L.R. (3d) 699 (Ont. C.A.)); (b) a general contractor contracts with subcontractors for improvements on land or buildings; when the general contractor cannot pay, the subcontractor sues the landowner/freeholder in unjust enrichment (See, e.g., Haz-Mat Response Inc. v. Certified Waste Services Ltd., 910 P.2d 839 (Kan., 1996)). In (b) there is now usually a statutory lien remedy, but as Haz-Mat shows, this is not always true. 57 D. Rendleman, “Quantum Meruit for the Subcontractor: Has Restitution Jumped Off Dawson’s Dock?” (2001), 79 Texas L. Rev. 2055 at pp. 2073-4.

be bound to go on to say that, just as in two-party cases, this inhibiting factor would be removed in a case where the contract between A Co. and B Co. has been discharged, by breach or otherwise. That of course is the usual situation; the reason A Co. is looking for another defendant is usually that B Co., the contractual counterparty, is insolvent.

One argument to deny a claim in unjust enrichment by A Co. against C Co. is that A Co., by contracting with B Co., took the risk of B Co.’s insolvency, and should not be allowed to avoid that by having a claim in unjust enrichment against C Co. It might be argued that it is circular to say that A Co. took such a risk, since it took such a risk only if the claim in unjust enrichment against C Co. is denied.58 Let us here turn to the experiences of another system. German law has a clear rule that such claims are not possible. This is based on the reasoning that (in our example) A Co. chose voluntarily to deal with B Co., and cannot be allowed to avoid the implications of that choice by suing C Co.59 The result is that A Co.’s only claim is the contract claim against B Co. But the exclusion of the unjust enrichment claim is not based on A Co.’s obligation as such; German law denies the claim even if the contract between A Co. and B Co. is void. In such a case, again A Co.’s only claim is against B Co., but it will be a claim in unjust enrichment. Is this reasoning circular? I think not. The premise is not that A Co. took the credit risk of dealing with B Co.; rather, it is that A Co. dealt voluntarily with B Co., expecting and understanding that it would be paid by B Co. Those are facts that are not difficult to prove in this kind of case. It is a conclusion, not a premise, that A Co. took the credit risk 58

Rendleman, supra, footnote 57, at pp. 2074-6. For a fuller discussion in comparative perspective, see L. Smith, “Property, Subsidiarity and Unjust Enrichment” in D. Johnston and R. Zimmermann, eds., Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge, Cambridge University Press, 2002) 588 at pp. 602-4, 614-7 and D. Visser, supra, footnote 49, at pp. 542-52.

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of B Co.’s insolvency. The German result, moreover, is not based entirely on credit risk and insolvency; it is also based on the reasoning that A Co. should be bound to respect any defences that B Co. may have against it, defences that would not be available to C Co.

The German rule, which may yet turn out to be the common law rule, cannot be explained on the basis that an obligation counts as a juristic reason. Perhaps it can be explained on the basis that risk-taking can serve as a juristic reason. This is a concept of which, it seems, we will have need in any event.60 The test comes when we go back to the guarantee case.61 The guarantor voluntarily entered into a binding obligation towards the creditor, by which he became bound to enrich the primary debtor should the latter default on his obligation. The reasoning based on voluntariness would seem to entail that the only claim of the guarantor should be against the creditor, the one with whom the guarantor dealt and to whom he was obliged. But remember that the premise of that reasoning was that the plaintiff dealt voluntarily with a third party, expecting and understanding that it would be paid by that third party; these are the facts that deny a claim in unjust enrichment against the defendant, even if the defendant was enriched. In 60

See text accompanying footnote 39, supra. Here German law does not help us, because the guarantor’s rights against the primary debtor are not understood as part of the law of unjust enrichment (Markesinis et al., supra, footnote 27, at pp. 371-80). There are some cases within unjust enrichment, in which a person has extinguished another’s liability otherwise than pursuant to a contract of guarantee; but again, these cases (under the rubric of Rückgriffskondiktion) are not part of the law of purposive transfers (Leistungskondiktion), to which belongs the rule that denies a claim where the plaintiff enriched the defendant pursuant to the plaintiff’s dealing with a third party. So, again, the German organization of the subject subsumes (and so hides) the principles that the unified common law of unjust enrichment must elucidate. We may leave the final word to Gerhard Dannemann (Markesinis et al., ibid., at p. 753): “Psychology tells us that persons who suffer from mania for cleaning—a recognized mental disorder apparently more commonly found in Germany—will have one dirty corner in their otherwise sparkling bright, spotless and germ-free house. If German law can properly be criticized for being unduly concerned with conceptual consistency, the Rückgriffskondiktion is best described as a mixture of potential, rare cases which genuinely fall outside the Leistungskondiktion, and of other cases which are placed within enrichment in another way in order to avoid the defence of §814 BGB, or in order to find a different defendant.”

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the case of the guarantee, there is no expectation of payment by the creditor in return for the obligation that is undertaken. This is why, typically, guarantees are executed as deeds. In many cases there is consideration and a deed is not required. In some cases, this consideration may be a nominal sum. In other cases, it is the genuine consideration that consists of the creditor’s forbearance from suing the primary debtor, where that debt is otherwise due. In these cases, the guarantor receives consideration, in the contractual sense, for the promise that he makes. But it does not seem fictional, to me at least, to say that in no sense does the guarantor (or the creditor) view this consideration as payment of the value of the obligation that the guarantor undertakes.62 The very nature of this obligation is that it is secondary and accessory to the primary debtor’s obligation.63 So even though the guarantor deals voluntarily with the creditor, the guarantor cannot be said to have acquired from the creditor the price (or the promise of the price) of the obligation undertaken by the guarantor. Whether there is contractual consideration or not, the obligation is an accommodation by the guarantor of the needs of the primary debtor. This is why the voluntariness principle does not quite reach so far as to say that the guarantor cannot claim over against the primary debtor.

This logic also helps us to understand why one of several co-guarantors can claim contribution from the others, whether or not he knew of them when he contracted with the guarantor.64 And the case is even stronger where there are multiple debtors of an 62

Where guarantees are purchased (as in the case of performance bonds) they are purchased by the primary debtor. If the creditor had purchased the guarantor’s promise to pay the creditor, we would probably not call it a guarantee; we would call it indemnity insurance or perhaps credit risk insurance. In this configuration, the indemnity insurer would not have a direct claim in its own right, based on unjust enrichment, against the primary debtor; it would have only its claim by way of subrogation to the rights of the insured creditor. 63 P. Birks, ed., English Private Law, 2 vols., vol. 1 (Oxford, Oxford University Press, 2000), at p. 454. 64 Ibid. at 463.

obligation arising by operation of law; for example, two joint tortfeasors. If one of them pays the victim all of the victim’s loss, there can be claim for contribution against the other. The fact that the tortfeasor who paid was obliged to pay is not a juristic reason that denies him a claim in unjust enrichment. Here, there is no element of voluntariness at all and so the risk-taking principle has no application either. As between them, the joint tortfeasors must bear the loss according to their proportionate responsibility.65

V. Enrichments Without Obligation May be Justified

Let us turn briefly to “disposition of law”, another juristic reason mentioned in Garland. If a benefit is conferred under a contract that later turns out to be void or unenforceable, there may be a question whether the benefit is recoverable as an unjust enrichment. In Pacific National Investments Ltd. v. Victoria (City),66 an enrichment was conferred pursuant to a contract that was void for non-compliance with statutory requirements. The court held that the enrichment was unjustified. In Wilson v. First County Trust Ltd.,67 an enrichment was conferred pursuant to a contract that was void for non-compliance with statutory requirements. Money was lent but the consumer protection formalities were not observed. Unlike in PNI Ltd. v. Victoria, the House of Lords held that the proper interpretation of this (very different) statutory regime was that no claim in unjust enrichment was permissible. The result was that the borrower did not have to repay even 65

Even in the case of obligations arising by operation of law, one of several co-debtors may be, among them, primarily liable for the whole sum, just as happens in a guarantee. This was the case in Brook’s Wharf, supra, footnote 52. 66 Supra, footnote 30. 67 Wilson v. First County Trust Ltd., [2004] 1 A.C. 816.

the principal of the loan. To explain this denial of a claim in unjust enrichment in the Canadian common law context, we would need to identify a juristic reason for the borrower’s enrichment. We might say that the juristic reason was a disposition of law.

The contexts were different and the results were different, but what the two cases have in common is an exercise of statutory interpretation. What was the question that the exercise had to answer? It was something like this: did the statute, properly construed, exclude a claim in unjust enrichment? This is a question is raised only after we determine the effect of the statute on the contract. The effect on the contract is probably easier because the statute is more explicit about that. But the point is that the question about unjust enrichment is a separate question. The answer to the contract question does not determine the unjust enrichment question.

The BGB, the German Civil Code, is a monument to careful drafting. Although there were some errors and some gaps, there were very few. Linguistic elegance was not as important as technical precision. The BGB does not use the same word in different senses, and it does not use different words to refer to the same idea. One example of this, often cited in comparative discussion with the common law, is the use of the word nichtig. If the BGB applies this word to a contract, everyone knows what it means. It means the contract is void, and that any benefits must be returned according to the provisions on unjust enrichment.68 This is sometimes cited as an example of the elegance of the approach based on an absence of legal ground. The solution comes from outside the law of unjust enrichment; the contract is void; there is no legal ground; restitution 68

See for example Krebs, supra, footnote 19, at pp. 21-2.

follows. I think this is inaccurate. More precisely, it is an example in which the legislature has already clearly answered both the contract question and the unjust enrichment question.69 It is as if in PNI v. Victoria, the Municipal Act said not only that the contract was ultra vires and void, but also went on to say that any benefits conferred must be returned. It is definitely better legislative practice to think about, and answer, both the contract question and the unjust enrichment question. But that does not mean they are the same question. And just because the legislature answers the unjust enrichment question, implicitly or explicitly, that does not mean that the answer comes from outside the law of unjust enrichment.

VI. Conclusion

Whether we go forward with juristic reasons or go back to reasons for restitution, the decision in Garland will have an important impact.70 Thinking about the implications of Garland helps us to better understand the independence of unjust enrichment, and the relationship between contract law and unjust enrichment. Even under reasons for 69

As Krebs clearly notes, several times: ibid. at pp. 22, 87-8, 186-8. Is it realistic to suggest that the Court might go back to reasons for restitution? There have been two unjust enrichment cases in the Supreme Court of Canada since Garland. In Pacific National Investments Ltd. v. Victoria (City), [2004] 3 S.C.R. 575, 245 D.L.R. (4th) 211, the Court treated the Garland approach as governing, but also referred to the importance of mistake, which is a reason for restitution. This is discussed above, at footnote 30and accompanying text. While the final version of this paper was being prepared, the Court released its decision in Kingstreet Investments Ltd. v. New Brunswick (Department of Finance), 2007 SCC 1. It has not been possible to discuss this difficult development in the present paper. On the present point, namely the viability of the Garland approach, one can only note that in Kingstreet the Court first says (at [34][40]) that a claim against a public body to recover undue taxes is not a claim in unjust enrichment, even though many of the Court’s leading cases on unjust enrichment are cases against public bodies to recover undue taxes. The Court describes the Garland approach as “very complex” (at [38]) and notes that while Garland allows for considerations of public policy, it is not relevant in Kingstreet because Kingstreet is not a case of unjust enrichment. Most confusingly for present purposes, the Court says (at [57]) that “[i]n cases not involving payments made to public authorities pursuant to unconstitutional legislation or the misapplication of an otherwise valid law, my view is that courts should insist on proof of compulsion in fact.” Compulsion is a reason for restitution, which does not figure in the Garland approach. The future is not at all clear.

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restitution, contracts of course are important. A plaintiff usually cannot recover an enrichment conferred pursuant to a contractual obligation, even if a reason for restitution exists. Analysis of the relationship between contract law and unjust enrichment becomes more urgent under juristic reasons, because on its face the Garland approach says that a contract is a juristic reason and therefore, implicitly, that an enrichment conferred pursuant to a contractual obligation is never unjustified.

The analysis above shows that the question whether an enrichment was unjustified is separate from the question whether the plaintiff was required to confer it. The law of unjust enrichment is the body of law that tells us whether an enrichment was unjustified. Although it would be far more simple if unjust enrichment was just a tail to be wagged by the dog of the rest of the law, treating it in that way would be a backwards step.

Unjust enrichment as a separate body of law emerges relatively late in the development of legal systems. It operates as a kind of refinement upon decisions made by other parts of the legal system.71 And those other parts make their decisions first, historically and analytically. There would be no problem for unjust enrichment to solve in mistaken transfers if the effect of all mistakes was to prevent property from passing. Mistaken payors would have the same remedies that they have against thieves. But, we decide, many mistakes do not stop property from passing. Now we have a further question. Even though the property passed to the defendant, is there still a problem to be solved? As between the plaintiff and the defendant, ought the value to be restored? So it is with service cases. Even though my improvements to your property now belong to you, ought 71

Smith, supra, footnote 59 at pp. 610-3.

the value of the improvement to be paid to me? The initial allocations of property law, which necessarily involve multilateral considerations, sometimes need to be corrected inter partes by unjust enrichment.

As we have seen, though we have to look a bit harder, the same problem can arise with obligations. There may be an obligation to enrich someone, and yet we may consistently decide that the enriched person should properly make restitution.

The question answered by the law of unjust enrichment is whether, as between this impoverished plaintiff and this correspondingly enriched defendant, the economic benefit of the enrichment should properly be assigned to the plaintiff. That is the question to be answered, whether we are using reasons for restitution or juristic reasons. In most cases, we answer it by reference to whether the plaintiff fully intended to enrich the defendant, although sometimes there are wider considerations at stake. And when we consider the plaintiff’s intention, whether we are using reasons for restitution or juristic reasons, we must always remember that we have institutions, like the law of contract, that exist to allow people to commit themselves in advance to the intentional conferral of benefits, in such a way that they cannot freely change their minds. In the case of bilateral contracts, even though people cannot change their minds, what they commit to is a bargain that involves burdens and rewards. When the contract is terminated, it is no longer necessarily decisive because you cannot hold someone to their commitment in respect of a burden if they can no longer expect the concomitant rewards. In this sense, unjust enrichment may

well tell us that a defendant may not rightly retain an enrichment even though he had a perfect contractual right to receive it.

When Peter Birks organized the reasons for restitution, he concluded that they fell into three groups.72 He also thought that each group could be given a nursery school label.73 The first group included things like mistake, compulsion and failure of basis; these were variations on the theme that the plaintiff’s intention to enrich the defendant was vitiated or qualified. In nursery school terms, the plaintiff is saying, “I didn’t mean you to have it.” The second group was based on unconscientious receipt by the defendant; this did not require legal wrongdoing by the defendant. It was sometimes called “free acceptance”. The nursery school label was, “it was bad of you to take it.” It was difficult to defend as a category that was theoretically useful, and Birks eventually abandoned it.74 The third group included other reasons that Birks grouped under the heading “policy-motivated restitution”.75 The idea was that even though the plaintiff’s intention may have been perfect and the defendant had not acted badly, there might still be a reason for restitution. The best example was the constitutional principle that forbids taxation without legislative authority. The nursery school label was, “Mother says give it back.” Here “Mother” stands in the role of the law.

72

Birks, supra, footnote 7, at pp. 99-108. These were more often heard in seminars than seen in print. See however P. Birks and R. Chambers, Restitution Research Resource, 2 ed. (Oxford, Mansfield Press, 1997) at p. 2; P. Birks, “The Law of Restitution at the End of an Epoch” (1999), 28 U.W.A.L.R. 13 at p. 26. 74 Birks, supra, footnote 6, at pp. 105-6. The first edition (P. Birks, Unjust Enrichment (Oxford, Oxford University Press, 2003), at p. 92) has an additional sentence that specifically mentions his abandonment of unconscientious receipt in the face of criticisms that he found persuasive. Ironically, although Pettkus v. Becker, [1980] 2 S.C.R. 834, 117 D.L.R. (3d) 257 launched the approach through juristic reasons that now seems to have been confirmed, the case itself was decided on the basis of free acceptance, a reason for restitution. 75 Birks, supra, footnote 7, ch. IX. 73

Most juristic reasons are based on consent. This includes donative intention, whether qualified or not. It includes deliberate risk-taking by the plaintiff. It also includes all cases where voluntarily assumed obligations serve as juristic reasons. In all such cases, we can say that the juristic reason, as expressed by the defendant to the plaintiff, is a variation of “you meant me to have it.” Some juristic reasons lie outside of this, as where a statute expressly or implicitly requires that the defendant be allowed to retain the benefit of an enrichment, even though the plaintiff did not intend to enrich the defendant.76 In these cases, we can say that the juristic reason, as expressed by the defendant to the plaintiff, is, “Mother says I get to keep it.” Birks’s two categories still work under juristic reasons; they have merely been turned around grammatically.

The fundamental question does not change in the move from reasons for restitution to juristic reasons, nor do the elements of the answer, although there may be differences in the structure of the inquiry and the placement of the burden of persuasion. I have suggested that every legal system can and does mix the two approaches. Under reasons for restitution, account must be taken of obligations and other juristic reasons; under juristic reasons, account must be taken of mistake, failure of basis and other reasons for restitution. One might almost be tempted to say that in the end, there is really only one approach. I do not think that is quite right. Montreal is famous for lacking clearly defined commuter arteries. There are many equally good ways to get from my house to McGill University. On any given day, one route might turn out to be better than another, but not reliably so over many days. There are several routes that are different, but equally good.

76

Examples include the GST Reference, supra, footnote 47, and Wilson, supra, footnote 67.

The juristic reasons approach is not inherently better than reasons for restitution, but nor is it worse. It answers the same fundamental question, using a different analytical sequence. The approach as set out in Garland will need a lot of fine-tuning; it is only a rough beginning. It can, however, be made to work just as well as reasons for restitution ever did. The result, though, will not be a civilian approach. If it is informed by comparative experience, it may turn out to be a transsystemic approach, taking lessons from everywhere but blazing an original trail.