Scott, A.C.J. Q.B.:— This is one of the first motions before the court in which we have been asked to apply Queen's Bench Rule 20.03. The facts briefly are that on November 18, 1986, the plaintiff received a third party demand from Revenue Canada with respect to its then employee, the defendant. The demand was in the amount of $5,362.91, and by its terms required the plaintiff to pay, up to that amount, sums due, owing and payable by the plaintiff to the defendant, to Revenue Canada. The notice clearly stated that failure to comply with the requirement to pay, in the above-noted circumstances, would render Canada Trust personally liable to pay.
At the time the requirement to pay was served, the defendant was owed the sum of $18,694 in back real estate commissions, which sum in fact was remitted within the period of the next 60 days by way of a series of partial payments to the defendant, without deduction. Thereafter, on February 3, 1987, at which time the defendant was no longer employed by the plaintiff and was owed no funds, the plaintiff paid the sum of $5,362.91 to Revenue Canada, as required by the third party notice. The plaintiff had inadvertently failed to note in its accounting records that the third party notice had been received; hence failed to deduct the agreed amount prior to paying the defendant, prior to his departure, all amounts due and owing.
The plaintiff now sues to recover this amount. Relying on the now-classic redefinition of unjust enrichment found in the recent Supreme Court of Canada decision of Pettkus v. Becker, [1980] 2 S.C.R. 834; 117 D.L.R. (3d) 257, and in particular the following quotations from Dickson, J. (as he then was) at page 848:
How then does one approach the question of unjust enrichment in matrimonial causes? In Rathwell I ventured to suggest there are three requirements to be satisfied before an unjust enrichment can be said to exist: an enrichment, a corresponding deprivation and absence of any juristic reason for the enrichment. This approach, it seems to me, is supported by general principles of equity that have been fashioned by the courts for centuries, though, admittedly, not in the context of matrimonial property controversies.
. . . It must, in addition, be evident that the retention of the benefit would be “unjust” in the circumstances of the case.
There is, says the defendant, no juristic reason for the retention of the benefit by the defendant, and it is unjust for him to do so.
The defendant, on the other hand, relies on traditional authority, which stands for the proposition that voluntary payments made by one individual in favour of another, in error, but without inducements or intervention by the beneficiary, does not entitle the payor to recover the funds from the payee (see the Saskatchewan Court of Appeal decisions in Barish & Co. v. Biss et al., [1925] 3 D.L.R. 738; [1925] 2 W.W.R. 518, McKissick, Alcorn, Magnus & Company, [1928] 3 W.W.R. 509; and Marsh v. Royal Bank of Canada, [1922] 1 W.W.R. 486; 63 D.L.R. 659.)
Counsel for the defendant asked that the application for summary judgment be dismissed. Although it is not contested by the defendant that at all material times the sum of $5,362.91 was owed by him to Revenue Canada, the defendant states he has been prejudiced by the plaintiffs voluntary payment, in that he might have been able to negotiate arrangements or terms for payment more satisfactory to him.
There is also the question whether the payment was made under a mistake of fact. In Dominion Securities Limited v. Toronto-Dominion Bank and Bodak (1983), 24 Man. R. (2d) 235, Simonsen, J. of this court had occasion to review the four essential conditions precedent for recovery of moneys paid under a mistake of fact. In so doing, he relied upon the judgment of Dysart, J. in Royal Bank of Canada v. Regem, [1931] 1 W.W.R. 709; [1931] 2 D.L.R. 685, which set forth the four essential conditions before money paid under an alleged mistake of fact could, in fact, be recovered. The four conditions noted are:
First, that the mistake is honest. There must be on the part of the person paying the money the genuine bone (sic) fide belief that certain facts exist which really do not exist. It is not what he ought to believe of what he ought to have learned. His laches or negligence will not of themselves affect his belief. Knowledge will not be imputed to him; however ample may be the means of knowledge which he has on hand, or however readily accessible these means may be, they do not constitute knowledge; and knowledge will not be imputed to him or inferred against him, unless he wilfully abstains from enquiry.
The second condition is that the mistake must be as between the person paying and the person receiving the money. In other words, the receiver must in some way be a party to the mistake, either as inducing it, or as responsible for it, or connected with it.
The third condition is that the facts, as they are believed to be impose an obligation to make the payment: Aiken v. Short (1856) 1 H. & N. 210, at 215, L.J. Ex. 321. This obligation must be legal or equitable or moral, as will appear from a reading of the cases already referred to. It is not enough that the compulsion must at least be practical
The fourth condition to recovery is that the receiver of the money has no legal or equitable or moral right to retain the money as against the payer. This proposition is not the exact converse of the third condition. The money may be owing to the receiver from a third person who has induced the payment, but the existence of such a debt is not enough to defeat recovery.
The decision of Simonsen, J. was applied by Oliphant, J. in the more recent case of Pearson v. Treleaven, [1987] 3 W.W.R. 276; 47 Man. R. (2d) 180. It is submitted by counsel for the defendant, and I agree, that the preconditions for application of the doctrine of mistake of fact do not exist in this case, firstly because the mistake of fact was not made as between the plaintiff and the defendant, but rather as between the plaintiff and Revenue Canada; furthermore, and more importantly, the first condition has not been met, in my opinion, because the moneys were not paid by the plaintiff under the mistaken belief in certain facts existing which did not in fact exist. By the time the payment was made, Canada Trust was, in fact, aware that they had, in error, paid the defendant all sums due, owing and payable to him. Given the tenor of the third party demand, and the consequences to the plaintiff in not remitting to Revenue Canada, the plaintiff at that point simply had no recourse but to remit.
We are left, then, with a claim for unjust enrichment and restitution. The principles surrounding the recovery of moneys paid under compulsion to a third party are well known and compendiously referred to in Hals. (4th) Vol. 9: Contract, under "Quasi Contract and Restitution”, commencing at para. 630. The compulsion may be founded on a rule of common law or upon statute. Generally, "where a person makes a payment in discharge of a liability incurred in consequence of his own negligence or breach of duty . . . no contract to indemnify him will be implied.” (Pitcher v. Bailey (1807), 8 East 171, [Hals., supra, para. 648]).
In Lambert Implements Ltd. v. Pardell (1964), 50 W.W.R. 310 (Alta. D.C.), Cormack, D.C.J. refused to permit a plaintiff to recover moneys mistakenly paid to the benefit of another because the so-called compulsion, in fact, arose out of a voluntary agreement entered into by the plaintiff. The case may be distinguishable on the grounds that the compulsion here is by operation of law, rather than by the voluntary agreement of the plaintiff, but in my opinion, the case is not applicable for reasons of a more fundamental nature.
In Brooks Wharf & Bull Wharf, Ltd. v. Goodman Brothers, [1936] 3 All E. Law R. Annotated 696 (C.A.) the court was concerned with a situation where a bonded warehouseman paid customs duties because it would have been an offence under statute if the sum due were not paid. The defendant importers were held liable to repay the plaintiffs.
In the reasons of Lord Wright, M.R. the obligation of the defendant to reimburse the plaintiff in the circumstances of that case was put on a very broad principle. The Master of the Rolls firstly referred to the case of Pownal v. Farrand (1827), 6 B & C 439, wherein Lord Tenterden, C.J. said, at page 443:
I am of opinion that he is entitled to recover upon the general principle, that one may, who is compelled to pay money which another is bound by law to pay, is entitled to be reimbursed by the latter.
Lord Wright then went on to say (at page 707):
These statements of the principle do not put the obligation on any ground of implied contract or of constructive or notional contract. The obligation is imposed by the court simply under the circumstances of the case and on what the court decides is just and reasonable, having regard to the relationship of the parties. . . .
All the court can say is what they ought as just and reasonable men to have decided as between themselves. The defendants would be unjustly benefited at the cost to the plaintiffs if the latter, who had received no extra consideration and made no express bargain, should be left out of pocket by having to discharge what was the defendant's debt.
This line of reasoning, in my opinion, is more in keeping with recent decisions in this country dealing with unjust enrichment and restitution. Ultimately, each case must depend on its own facts. The facts of this case, as noted beforehand, are simple and straightforward. In a nutshell, the question is whether the plaintiff should be deprived of the opportunity to recoup the payment made by it, solely for the benefit of the defendant, due to its internal accounting error. In my opinion, the plaintiff should be entitled to recover the payment made.
In the recent decisions of Air Canada v. Canada, [1989] 1 T.S.T. 2126, three of the six judges suggested that the law of mistake should be dealt with under the principles of unjust enrichment and restitution, and that recovery should generally be allowed in any case of enrichment at the plaintiffs expense caused by a mistake, subject to any available defences or equitable reasons for denying recovery. In my view, this is indicative of the extent to which the law in this area has developed over the past decade.
The three requirements set forth in Pettkus v. Becker, supra, have all been met. It is clear that the only genuine issue between the parties is a question of law, and that Rule 20.03(3) is applicable. The defendant has received a windfall as a result of an inadvertent oversight by the plaintiff's accounting personnel. The plaintiff was under a legal compulsion to pay the moneys to Revenue Canada on behalf of the defendant since it was indebted to the defendant in an amount sufficient to satisfy the third party demand at the time the demand was served, or within 90 days thereafter. There is no juristic or equitable reason for the enrichment. I do not accept that the defendant has been prejudiced as a result of the plaintiff honouring his legal obligation.
In the result, I would grant the plaintiff's application for summary judgment in the amount claimed, together with costs.
Application granted.