#6736 - Regional Municipality Of Peel V. Canada - Commercial Remedies BCL

The Regional Municipality of Peel v. Canada

Facts

The Family Court judges in the Peel District directed a number of juveniles be placed in “group homes”, pursuant to s. 20(1) of theJuvenile Delinquents Act(which provided for placement with an individual or an institution), rather than rely on placement by the Children's Aid Society. The judges ordered the municipality, pursuant to s. 20(2) (which authorizes a family court judge to order a municipality to contribute to the support of a juvenile) to pay theper diemrate that each group home charged for the care of the child. The municipality paid the amount under these orders though an ex gratiapayment was made to the municipality by the province.

Municipality challenged the authority of family court judges to direct such payments to be made by it. The authority of the Family Court judges to place a juvenile in the custody of a named person at the group home, as opposed to the group home itself, was later confirmed in a parallel proceeding before the lower court. On appeal, however, this Court struck down s. 20(2) so far as it purported to authorize the imposition of the financial cost of the disposition on a municipality.

The municipality commenced these proceedings for restitution from the provincial and federal governments as regards payments made under orders made by the family Court judges.

Holding

Unjust Factors Approach v. Lack of juristic basis approach

The first set of tensions is theoretical. There are two distinct doctrinal approaches to restitution at common law. The first is the traditional "category" approach. It involves looking to see if the case fits into any of the categories of cases in which previous recovery has been allowed, and then applying the criteria applicable to a given category to see whether the claim is established. The second approach, which might be called the "principled" approach, developed only in recent years. It relies on criteria which are said to be present in all cases of unjust enrichment: (1) benefit to the defendant; (2) corresponding detriment to the plaintiff; and (3) the absence of any juridical reason for the defendant’s retention of the benefit: Pettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834.

The arguments before us reflect these distinct doctrinal approaches. The municipality, finding it difficult to bring its case within the traditional categories, emphasizes the general "principled" approach to unjust enrichment, asking that the court apply those general principles in an expansive fashion. The federal and provincial governments, on the other hand, argue that the municipality must fail because it is unable to bring itself within a recognized category of recovery.

Philosophy behind incontrovertible benefit theory

The third set of tensions lies on the philosophical policy level. The traditional reluctance of the law to permit recovery to a plaintiff who had provided non-contractual benefits to another was founded on a philosophy of robust individualism which expected every person to look out after his or her own interests and which placed premium on the right to choose how to spend one's money. As one nineteenth century judge (Pollock, C.B. in Taylor v. Laird (1856), 25 L.J. Ex. 329, at p. 332) put it: "One cleans another's shoes; what can the other do but put them on?" The new approach of general principle, on the other hand, questions the merits of this view and the quality of justice which it entails. It shrinks from the harsh consequences of individualism and seeks to effect justice where fairness requires restoration of the benefit conferred.

The arguments before us reflect this tension too. The municipality emphasizes the injustice of its situation; the federal and provincial governments argue that they never voted to spend their money on supporting these children in group homes and assert that the municipality's situation is the unfortunate but occasionally inevitable by product of a federal system where legislatures from time to time are found to have exceeded their powers.

Benefit/Enrichment

The difficulty lies not in establishing that the plaintiff made payments which might potentially attract the doctrine of unjust enrichment. The difficulty lies rather in establishing that the payments conferred a "benefit" on the federal and provincial governments which represents an unjust retention or enrichment. As Professors Goff and Jones note: "In restitution it is not material that the plaintiff has suffered a loss if the defendant has gained no benefit." (See Goff and Jones, The Law of Restitution, supra, at p. 16.) As already noted, the concept of restoration of a benefit retained without juristic reason lies at the heart of the doctrine of unjust enrichment. The word "restitution" implies that something has been given to someone which must be returned or the value of which must be restored by the recipient. The word "enrichment" similarly connotes a tangible benefit. It follows that without a benefit which has "enriched" the defendant and which can be restored to the donor in specie or by money, no recovery lies for unjust enrichment.

To date, the cases have recognized two types of benefit. The most common case involves the positive conferral of a benefit upon the defendant, for example the payment of money. But a benefit may also be `negative' in the sense that the benefit conferred upon the defendant is that he or she was spared an expense which he or she would have been required to undertake, i.e., the discharge of a legal liability.

It is useful to begin by looking at the sort of benefit required for recovery under the category which fits most closely with the facts in this case, that of payment made under compulsion of law. The courts have consistently held that for a benefit to be established in this class of case, it must be shown that the plaintiff's payments discharged the defendant's liability.

No Discharge of Legal Liability

The municipality acknowledges that it cannot meet the test for benefit in the category of payment under compulsion of law, nor indeed, in any of the traditional categories of recovery. The requirement that the plaintiff have discharged the defendant's legal liability is simply not met in the sense required by the traditional tests. There was no constitutional obligation on either the federal or provincial government to provide for the care of these children; as the courts below noted, the power to legislate does not give rise to an obligation to legislate. Nor were the federal or provincial governments under a statutory or legal liability to provide for the care of the children. The provincial statutes relied on by the municipality as evidence of the province's obligation generally create a discretion in the province to finance the acquisition or construction of institutions for the care of children and in some cases to finance the operation of these institutions in cooperation with others. The benefit which the federal government is said to have received is the care of `prisoners' which it might otherwise have had to provide itself (even though they are not obliged to, provincial prisons house many persons convicted of federal offences), and a more general "political" benefit of having the goals of its legislation furthered. The benefit which the province is said to have received is the discharge of responsibilities which it might have undertaken because conscience required that someone do so. So there was no legal liability on either government as required by the traditional tests.

Negative Liability other than discharge of legal liability

The question thus reduces to this: how should "benefit" in the general test for recovery for unjust enrichment be defined? More particularly, can it encompass payments which fall short of discharging the defendant's legal liability?

We have been referred to no cases in Canada or the commonwealth where a "negative" benefit has been found in the absence of an underlying legal liability on the defendant.

Notwithstanding the absence of authority, some scholars (Goff and Jones, Maddaugh and McCamus) perceive a `whittling away' of the hard and fast rule barring recovery absent proof of a defendant's legal obligation to undertake the expense or perform the act which the plaintiff claims to have accomplished on the defendant's behalf. They suggest that where the plaintiff has conferred on the defendant an "incontrovertible benefit" recovery should be available even in the absence of a defendant's legal liability. An "incontrovertible benefit" is found in the gain of "a demonstrable financial benefit" or the saving of an "inevitable expense".

It is thus apparent that any relaxation on the traditional requirement of discharge of legal obligation which may be effected through the concept of "incontrovertible benefit" is limited to situations where it is clear on the facts (on a balance of probabilities) that had the plaintiff not paid, the defendant would have done so. Otherwise, the benefit is not incontrovertible.

Incidental blow-by is excluded: While not much discussed by common law authorities to date, it appears that a further feature which the benefit must possess if it is to support a claim for unjust enrichment, is that it be more than an incidental blow by. A secondary collateral benefit will...