Oxford University Comparative Law Forum
Unjust Enrichment Understood as Absence of Basis: a
Critical Evaluation with Lessons from Canada
Chris D. L. Hunt*
(2009) Oxford U Comparative L Forum 6 at ouclf.iuscomp.org | How to cite this article
Table of contents
In England, the cause of action for unjust enrichment requires the
claimant to satisfy four elements:
- That the defendant has been enriched;
- that the enrichment was at the claimant's expense;
- that the enrichment was unjust; and
- that there is no recognized defence.1
There is a vigorous debate among legal scholars about how best to
characterize the third of these elements. Broadly speaking, there are
two approaches to the 'unjust' question: The civilian approach, which,
having regard to the claimant's purpose in transferring a benefit,
enquires whether there is a valid legal basis justifying the
defendant's retention of an enrichment; and the common law
approach, which considers whether the claimant can demonstrate a
positive ground for the reversal of the defendant's
In his final Book, Professor Peter Birks drew on a series of ultra
vires interest rate 'swaps' cases as evidence that English law had
in fact reoriented from the traditional common law approach to a
While this view has not been endorsed by the majority of academics,3 and is
inconsistent with subsequent judicial dicta,4 the question as to
whether English law should in the future embrace a civilian model
remains a "live" one.5
Much has been written about the merits and demerits of shifting to a
civilian analysis. By and large, this valuable body of scholarship has
evaluated the question from a theoretical perspective by considering
the hypothetical application of a civilian model operating in England.
This paper enters the debate from a different perspective: It analyses
the jurisprudence in Canada, subsequent to that jurisdiction's shift
from the traditional common law approach to a civilian one. Canada's
experience with its civilian 'juristic reasons' model thus provides
valuable and concrete lessons for jurists as to the wisdom of
considering any similar shift in England.
This paper has three parts. In section I, I set out the competing
models of unjust enrichment. In section II, I briefly review some of
the academic literature to demonstrate that the supposed economy of
Birks' 'absence of basis' civilian model is superficial in some
respects and dangerous in others. This is an important point, since the
primary argument in favor of a civilian approach is its alleged economy
and elegance when compared with the traditional unjust factors. I then
discuss three 'structural' problems inherent in absence of basis which
contribute to confusion and inevitable error. In section III, I
consider the law of unjust enrichment in Canada, demonstrating that the
'structural' problems identified in section II have manifested in the
Canadian courts confusing the jurisprudence. The Canadian experience
thus serves as a cautionary tale about the dangers a common law system
faces when moving from the unjust factors approach to a civilian model.
Throughout this paper I argue that English law should not abandon the
current approach to unjust enrichment by adopting an absence of basis
model. Such a fundamental reorientation should not be undertaken unless
strong justifications are offered. In the short term at least, this
shift must create uncertainty, increase litigation costs, contribute to
errors and injustice6
and undermine the security of transactions.7 Any justification must
of necessity point to serious inadequacies in the existing model or
real advantages in the new model. Below, I argue that neither of these
criteria is satisfied.
I. Two Legal Frameworks: Unjust Factors and Absence
As mentioned, there are, broadly speaking, two approaches to the
'unjust' question: the civilian approach, which, having regard to the
claimant's purpose in transferring a benefit, enquires whether there is
a valid legal basis justifying the defendant's retention of
an enrichment; and the common law approach, which considers whether the
claimant can demonstrate a positive ground for the reversal
of the defendant's enrichment.
Birks explains the basic analytical structure of the civilian
conception of 'unjust' as follows:
[Civilian models] begin from the proposition that
every enrichment at another's expense either has an explanation known
to the law or has not. Enrichments received with the purpose of
discharging an obligation or, if without obligation, to achieve some
other objective as for instance the making of a gift, the satisfaction
of a condition, or the coming into being of a new contract. The
outcomes succeeding, the enrichment is sufficiently explained. An
enrichment which turns out to have no such explanation is inexplicable
and cannot be retained. The recipient is not entitled to it.8
The common law approach, in contrast, requires the claimant to
establish an 'unjust factor' which serves to invalidate the transfer
and justify restitution. The main grounds of restitution under the
unjust factors approach (the 'traditional approach') were identified in
Moses v Macferlan by Lord Mansfield:
[This action] lies for money paid by mistake; or upon
a consideration which happens to fail; or for money got through
imposition (express or implied) or extortion; or oppression; or an
undue advantage taken of the plaintiff's situation, contrary to laws
made for the protection of persons under those circumstances.9
Through rigorous analysis of this and other early cases, Birks
developed what became the 'orthodox view' of the English law of unjust
enrichment, in which the notion of injustice derives from various
unjust factors which he grouped under three heads: claimant-oriented,
defendant-oriented and policy- oriented. Claimant-oriented grounds of
restitution concern those unjust factors that, when viewed from the
claimant's perspective, reveal either an absence of intention (theft),
vitiated intention (mistake), or qualified intention (failure of
consideration). Defendant oriented grounds of restitution concern those
unjust factors that, when viewed from the defendant's perspective,
demonstrate some form of exploitation such as undue influence,
unconscionable conduct, or free acceptance. Policy-oriented grounds of
restitution are grounded in the principle that public policy considers
the benefit was transferred in an unjust circumstance and should be
In his final book, Birks rejected the unjust factors approach that
he had pioneered and, drawing on principle and precedent, argued that
an essentially civilian model is to be preferred.11 Birks' new 'absence
of basis' approach is framed with elegant simplicity. He writes:
A single proposition covers every case: an enrichment
at the expense of another is unjust when it is received without
If this sounds too good to be true, it is; absence of basis involves
more than a single proposition. Birks explained absence of basis by
grouping unjust enrichments into two categories: participatory and
non-participatory. The former was then subdivided into voluntary and
obligatory enrichments. Non-participatory enrichments (where the
claimant has no control over the transfer) are prima facie
unjust as there is no explanatory basis.13 Obligatory enrichments are transfers
designed to discharge an obligation. If there is indeed a valid
obligation which is discharged, then there is an explanatory basis. If
not, then prima facie restitution should be awarded.14
Voluntary enrichments are transfers made without obligation but in
order to achieve some outcome. If this purpose is achieved, there is an
explanatory basis for the defendant's retention. If it is not achieved,
then prima facie restitution should be awarded.15
Of course, stated thus absence of basis is conclusory: it tells us
that if the basis upon which the enrichment was transferred
fails (or does not exist in the first place), then retention of said
benefit is prima facie unjust. Absence of basis does not,
however, explain why the basis fails. For this we still need
to consider the traditional unjust factors. Birks explained the
interaction between the traditional approach and absence of basis by
analogy to a pyramid which he argued provided a "limited reconciliation"16 between
A pyramid can be constructed in which, at the base,
the particular unjust factors such as mistake, pressure, and undue
influence become reasons why, higher up, there is no basis for the
defendant's acquisition, which is then the master reason why, higher up
still, the enrichment is unjust and must be surrendered.17
Despite Birks' assertion that a "limited reconciliation" was possible,
it must be emphasized that the "profound"18 differences between these two legal
frameworks means a choice between them must be made. Indeed, Birks
himself acknowledged that absence of basis could not be regarded as
simply another unjust factor since it cuts across the entire list of
factors and so, logically, they must stand under, not beside, absence
Elsewhere Birks asserted that because unjust factors and absence of
basis are "two entirely different methods" of determining whether
enrichment is unjust, these approaches "cannot be mixed or merged". 20
As mentioned, unjust factors are reasons for reversing enrichments,
whereas absence of basis inquires whether there are valid reasons for
the recipient to retain them. Smith notes the significant implications
that follow from the very different orientations of these approaches:
There is a tremendously important issue here. On it
turns the whole orientation of the law of unjust enrichment. A list of
reasons for reversing enrichments will look very different from a list
of reasons for keeping them. 21
These differences reflect the very different historical and
conceptual approaches of common and civilian legal systems more
generally. McInnes observes:
Unjust factors traditionally were employed within the
common law and, true to that system's basic orientation, inductively
operate from the bottom. The specific reasons for restitution evolved,
piecemeal and over a prolonged period, on the basis of practical
Juristic reasons, in contrast, traditionally operated within civilian
jurisdictions and, true to that system's basic orientation, deductively
operate from the top down. At root, there is only ever one reason for
restitution: a transfer occurred without legal basis.22
Thus, Edelman concludes that because the civilian and common law
approaches are "antithetical inquiries", and because "methodology is
important to clarity of the law", it is not sensible to have both
approaches operating simultaneously.23 From a practical perspective, this
must be right. We must choose between these two frameworks, for any
mixing of them threatens chaos,24 as is evident from the mixed
approach adopted in Canada.25
That a choice must be made follows also from the reality that
absence of basis and the traditional approach do not always produce the
same results. Before discussing four examples of differing results, it
is worth first observing that the two approaches will typically lead to
the same conclusion in the following general circumstances:26
- Payments made under liability mistakes of fact;
- Payments made under void contracts;
- Benefits conferred in anticipation of a contract that does not
- Payments consequent to an ultra vires demand by a
- Compulsory discharge of another's liability.
Having said this, it must be emphasized that absence of basis is
broader than the traditional unjust factors. Unless strong defences are
crafted, its logic will arguably result in restitution in the following
general circumstances that were foreclosed under the traditional
- Incidental benefits conferred on the defendant while the claimant
pursues his own self interest;
- officious unrequested improvers of another's property;
- payments made under protest while doubting liability (which does
- mispredictions regarding the future.27
Below, I briefly discuss each example.
(i) Incidental Benefits
Incidental benefits arise where the claimant, in pursuit of his own
self interest, happens to enrich the defendant. Classic examples here
are where C improves his own land which results in an increase in value
to D's land, or where C heats his home and the escaping heat warms D's
apartment located above. Normatively, there should be no question of
restitution in these examples.28 This result is reached easily under
the traditional approach as there is simply no reason, no unjust
factor, permitting recovery of an enrichment conferred voluntarily.29
Logically, however, absence of basis would regard D's retention of
these incidental benefits 'unjust' (as there is no legal ground
justifying retention by D)30; and to avoid recovery it must
either adopt artificial reasoning31 or specific defences32.
(ii) Unrequested Improvers of Another's Property
Whether a claimant who improves another's property without being
requested to do so can claim a restitutionary remedy from the owner
under the traditional approach is not straightforward. If the claimant
is aware: (i) that the property improved is not his, (ii) that there
has been no request for improvement by the owner, (iii) and that no
obligation exists to improve it, then he cannot be said to be labouring
under a mistake.33
Subject to what is said below, there is no unjust factor, and therefore
no unjust enrichment. And properly so: an officious improver should not
be able to recover in these circumstances as he is a risk- taker,
hoping to be compensated but willing to take the chance he may not be.34
However, a claimant in this circumstance could still point to the
unjust factor 'free acceptance' to ground a claim if: (i) the defendant
had an opportunity to reject the benefit before it was provided, (ii)
the defendant knew the claimant expected to be compensated and (iii)
the defendant failed to avail himself of the opportunity to reject the
improvement at the time it was performed.35 The defendant's conscious receipt of
a benefit conferred by the claimant in these circumstances makes his
retention of any enrichment unjust. Additionally, if the claimant was
in fact mistaken (i.e. thinking he was in fact the owner of the
property), then he could potentially obtain a restitutionary remedy so
long as he is able to establish an enrichment to the defendant and the
latter is not able to 'subjectively devalue' the service.36 The
point, for our purposes, is to witness the nuances under the
traditional approach; it draws distinctions depending on the knowledge
and behaviour of both parties when fashioning a restitutionary response.37 The
same cannot be said for a civilian model. Under that approach, each of
these situations is treated the same, for in each case the
determinative question is whether a valid legal ground exists to
justify the defendant's retention of enrichments conferred at the
claimant's expense. In each case, there is no legal ground. Retention
of the benefit is prima facie unjust.
(iii) Doubting Payor of Non-Existent Debt
Under the traditional approach, a claimant who, in order to avoid a
contractual penalty, makes a payment under protest in response to a
defendant's bona fide request, but at the time doubts the
money is actually due, cannot recover in the event that it turns out
the money was not in fact due (unless compulsion can be established).38 Again,
this is rationalized either on the basis that no unjust factor exists
(doubt being different from mistake) or that the claimant is a
In contrast, under the absence of basis approach restitution would prima
facie be allowed as there is no legal basis for the defendant's
retention of the enrichment.40
Several authors have illustrated a further inconsistency. Under the
traditional approach, the law draws a fundamental distinction between a
mistake as to a present fact and a misprediction as to the future. The
former, if causal of a transfer, is an unjust factor that can ground
recovery. The latter, however, does not constitute a mistake and will
not provide for recovery.41
Again, the distinction here is based on sound policy: "The claimant who
has made the misprediction bears the risk as to future events
Under absence of basis, this distinction is lost: Mispredictions as to
future events would result in recovery.43
II. The Superficial Elegance of Absence of Basis
The most common argument in favour of a civilian model is based on
its supposed elegance and economy when compared to the unjust factors
The civilian approach, it is said, has a "surgical simplicity", for the
question is "always the same": What, if any, was the basis of the
The unjust factors approach, in contrast, is said to be untidy for it
involves needless duplication.46
Several authors have demonstrated, quite convincingly, that these
criticisms leveled against the traditional approach are unwarranted and
that the alleged elegance of the civilian approach is superficial.
(i) Unnecessary Duplication
An oft-cited example of the inelegance of the traditional approach
is that the analysis often requires unnecessary duplication. In the
case of mistake, for instance, the court must first inquire whether the
mistake is sufficiently fundamental to invalidate the contract (in
contract law) and then inquire whether the mistake was causative (in
unjust enrichment law) in order to obtain a restitutionary remedy. The
civilian approach is said to be cleaner, for once mistake vitiates the
basis of the transfer, restitution follows automatically.
Chen-Wishart rejects this argument as a false contrast. It looks to
the form rather than the substance of each approach, because (i) under
either model a claimant must first establish the vitiating factor in
contract law before restitution can be awarded, and (ii) since mistake
as a vitiating factor is narrower in contract law than it is as an
unjust factor in unjust enrichment, "satisfaction of the former will
automatically satisfy the later". As a result:
Nothing is saved by the apparently more economical
German approach [which is exemplary of an absence of basis model] and
nothing is added by the apparent duplication of the English approach.47
Furthermore, arguments based on the apparent elegance and purity of
the German system, owing to its single rule, are, as Edelman observes,
"highly artificial" for they simply push difficult questions into other
areas of the law - areas, to be sure, where they do not belong:
...[I]f absence of basis... existed only from the time
the contract no longer existed there would be a large gap in the
[English] law... [For instance], in what part of private law should the
rules governing undue influence be classified? As Birks said, a power
to avoid a contract is 'not granted by contract and cannot be said to
arise from [its] own effect...[it] arise[s] from the enrichment
rendered unjust by the invalidity of the contract under which it was
This is an important point. Under the German Civil Code, unjust
enrichment plays a very limited and defined role within a larger, fully
integrated "master plan" for the whole of private law.49 Unjust enrichment is
not so confined in England's common law system; it mingles in other
areas, which means "adopting an absence of basis approach cannot be
confined to the unjust enrichment taxonomy".50 Adjacent areas of law
will need to accommodate the change, something many commentators fear
threatens to be messy.51
Sheehan highlights another aspect of German law which further
illustrates that it is not as elegant as may first appear, making the
comparative inelegance of unjust factors ring hallow. Because the logic
of legal grounds reasoning permits restitution of the doubting payor's
discharge of a non-existent obligation,52 German law creates a specific
defence (that the payor knew the money was not due) which operates,
much like risk-taking in the common law, to deny recovery.53 Sheehan
correctly observes that "the defence of knowledge brings in many of the
same questions as the unjust factor of mistake under a different
guise", which results, inevitably, in the unjust factors asserting
themselves into the legal grounds analysis thereby undermining the
model's supposed economy.54
(ii) Difficulties Removed or Submerged
Edelman's point, above, is relevant here also. A codified system,
like Germany's, can remove difficult questions (about factors
vitiating a contract, for instance) from the law of unjust enrichment
by pushing them to other areas (such as contract law). Unjust
enrichment law thus ostensibly becomes a simpler and smaller subject;
but arguments as to its elegance are artificial because these difficult
questions must still be answered, just in a different place.55
The Birksian absence of basis scheme, however, is more problematic
than a codified civilian system, because these difficult questions,
which must still be answered,56 are not pushed out of the law of
unjust enrichment through sharp 'codal' distinctions; instead they
lurk, submerged, at the base of his pyramid. Virgo puts it
best when he writes:
...Birks' pyramidal analysis of the unjust
factors...suggests something elegant when in fact it is unwieldy. The
analogy with a pyramid is misplaced. The better analogy is with an
ice-berg, where nine-tenths of the object is hidden below the surface.57
The point, for our purposes here, is to notice that (i) not only is
absence of basis not in fact as elegant as it seems since it must still
have regard to unjust factors, but (ii) that it may also be dangerous,
since difficult questions are obscured rather than confronted openly.
Burrows illustrates this latter point with reference to gifts, arguing
that submerging complicated questions about the circumstances in which
gifts should be invalid "...does not help a judge faced with
deciding... whether (for instance) there should... be restitution of a
gift which the donor wishes to recover because he has made it
mistakenly believing that the recipient was poor or shared his
Virgo makes a similar point in the context of risk-taking and its
relationship to the unjust factor of mistake, which both operate at the
base of Birks' pyramid.59
This creates potential for confusion, since, by virtue of being
submerged, rather than addressed head on, the risk-taking issue can be
The need to consider risk-taking and its relationship to mistake also
undermines the ostensible elegance of absence of basis.61
(iii) Artificial Reasoning
The ostensible elegance of the Birksian scheme is further undermined
by its resort in places to artificial modes of reasoning. Two examples
illustrate the point.
As we saw above, Birks employed the concept of 'grudging' gift to
explain denying restitution for incidental benefits conferred while the
plaintiff pursues his own self interest. This rationale is problematic
for three reasons. First, on its face, it does not accord either with
the current law of gifts62
or with the lay person's understanding of a gift: In the escaping heat
example, how can one be said to make a gift if they are not aware of
the transfer, cannot control it, or do not desire it?63 Certainty of the law
is not advanced by such artificial concepts. The second point follows
from the first: Because the notion of gift is non-intuitive and
problematically wide, applying the concept requires inelegant mental
gymnastics. As Barker explains, with reference to the escaping heat
example (where 'B' is the claimant):
[Birks'] explanation...constructs as a reason against
liability ('B intended a gift') what is actually the absence of a
positive reason in favour of it (B's consent to the provision of a
benefit did not fail). Not only is this confusing, it seems a
protracted way of getting the common law back to its own, very simple
Third, from a taxonomical perspective, it is curious that gift is
employed under both of Birks' primary categories of division
(participatory and non-participatory enrichments).65 Such wide deployment
of the concept must surely rob it of any precise legal scope and
threatens to undermine its practical application. This is not a trivial
quarrel, for Birks relies on this problematic notion of gift throughout
his text to rein in the pyramid's expansionary momentum.
Several authors have also argued that Birks' approach to voidable
and terminable contracts is "unnatural".66 Birks drew a distinction between
contracts which are void (a nullity), and those that were merely
voidable or terminable in the future.67 Regarding the latter, he asserted
that once a contract was terminable or voidable by one party (due to a
repudiatory breach or misrepresentation inducing the contract,
respectively), then, at that point, the basis of any transferred
benefit was absent, despite the reality that the claimant had not yet
exercised his power to terminate or avoid the contract.68 Virgo highlights the
artificiality of this reasoning when he writes: "But surely the
contract remains effective until terminated or rescinded and
constitutes a continuing basis for the defendant's receipt of the
An additional artificiality emerges: As Birks himself expressly
this logic works only one way, meaning that it is only from the
victim's standpoint that there is an absence of basis. That there can
simultaneously be an absence of basis and a presence of basis,
depending on the party viewing it, is highly artificial and further
undermines the pyramid's ostensible elegance.71
(iv) Three 'Structural' Problems with Absence of
Basis Borne out in Canada
It is my purpose here to outline in brief three 'structural' issues
related to the absence of basis model. I will then consider, in section
III of this paper, the extent to which these three issues have become
problematic in the Canadian jurisprudence, rendering it confused and
leading to inevitable error.
Role of Unjust Factors Problematic
As we saw above, the unjust factors lurk at the base of Birks'
pyramid. The claimant's intention in transferring a benefit also
Thus, we saw that in the case of voluntary enrichments, we must
consider, first, what purpose the claimant sought to achieve and then,
second, whether it was in fact achieved. If such purpose is achieved,
there is an explanatory basis; if not, then prima facie
unjust enrichment is established.73 However, in determining
whether the claimant's purpose was achieved and in explaining
why in the circumstances it may not have been, we will usually have to
consider the traditional unjust factors.74 Above, I argued that this reasoning
undermines the pyramid's ostensible elegance and may be dangerous
because it obscures, rather than openly confronts, difficult issues.
An additional problem arises - one that has, as will be discussed
below, posed particular trouble for the juristic reasons test in
Canada: the interaction between unjust factors and absence of basis
often confuses the analysis, for in some cases courts award restitution
on the ground that there is no basis75, while in other cases the analysis
suggests the reason for restitution is actually the presence of an
In this latter group of cases, employing the phrase 'absence of
juristic reason' is simply an expression of the conclusion reached
under the traditional approach.77 As a result, at times it appears
both approaches (civilian and traditional) are operating
simultaneously. But, as discussed in section I, above, this cannot be.
The two approaches are inconsistent and a choice between them must be
made. Arguably, this confusion, resulting from simultaneous application
of the two approaches, is an inevitable product of adopting in a common
law system an absence of legal grounds analysis which still draws upon
the explanatory power of unjust factors. Indeed, it is this confusion
between the two approaches that prompts Tang to observe that absence of
basis reasoning represents an "unsatisfactory half-way house between a
civilian model of unjustified enrichment and the unjust factors
Nature of Basis Unclear
A second structural problem is that the nature of basis is unclear.
It is obvious, of course, that the viability of any scheme based on
absence of legal grounds depends, fundamentally, on clarity as to what
those grounds consist of.79
Yet Birks was not able to draft a comprehensive list of bases. This
represents a major structural deficiency in the pyramid's construction,80 which
undermines its supposed elegance and taxonomical purity.
The lack of clarity as to basis is exacerbated by the non-intuitive,
abstract manner of its expression.81 Burrows observes that the pyramid's
intuitive appeal contrasts unfavourably with the traditional approach:
[A] virtue of the common law as opposed to civil law
[is] that most of the unjust factors are readily explicable to
non-lawyers...[T]he 'I did not mean to give' scheme of unjust factors,
broken down into 'no consent', 'vitiated consent', and 'qualified
consent', is beautifully simple and clear. In contrast, an absence of
basis approach is not readily understandable... because it immediately
entails a legalistic explanation in order to understand what is meant
by 'basis' and, in turn, 'invalidity'.82
Uncertainty of basis is further undermined by the manner in which
Birks employs the concept. This was illustrated above with reference to
'grudging gifts' and to the operation of basis in the context of
voidable contracts. It is further evidenced by Birks' treatment of
which he argued afforded the defendant a moral defence.84 Several problems can
be identified with this. First, the scope and operation of a natural
obligations defence is unclear. Second, it is unclear why,
conceptually, natural obligations should be regarded as defences and
not bases in their own right. Indeed, Dannemann observes that while
classifying natural obligations as defences makes sense under the
traditional approach, under absence of basis they are better understood
as legal grounds justifying retention of enrichments.85 He draws a convincing
analogy to the logic of gifts:
Just as the doctrine of consideration is directed
against the enforcement of a gratuitous promise but not against its
voluntary execution, so the rules on limitation of claims [for
instance] are directed against the enforcement of obligations after a
certain time has passed, not against the voluntary execution of such
obligations. In both situations the unenforceable obligation provides
the basis which allows the recipient to keep the enrichment.86
Of course, whether natural obligations are regarded as defences or
bases has practical implications for the onus of proof. This is
especially significant because (i) not only is the list of natural
but, furthermore, (ii) there is no agreement on how to evaluate whether
a putative natural obligation should operate to block a claim.88
Thus, if natural obligations are regarded as bases, which seems
plausible, then a claimant is faced with the difficult task of
identifying all possible natural obligations, and showing why none
apply - a task that approaches the impossible given the two problems
just identified. Conversely, if natural obligations are treated not as
bases but as defences, the conceptual clarity as to what constitutes a
basis under Birks' pyramid is further undermined, given the logical
parallel between natural obligations (which Birks treats as not being
and gifts (which he says are bases).
As I discuss in section III, below, these aspects of uncertainty of
basis have posed considerable difficulty for the juristic reasons test
It is arguable that, on a more general level, this lack of clarity
as to basis is inevitable in any common law system due to their shared
history and mode of reasoning. As mentioned above, common law reasoning
develops incrementally, from the bottom up, rather than deductively,
from the top down. This is reflected in the logic of the unjust
factors; but absence of basis calls for an analytical orientation
unlike that applied to any other area of private law. It is thus not
surprising the concept of juristic reason has proved difficult for
common lawyers and judges to apply in Canada, and we should expect no
easier transition if this foreign mode of reasoning is adopted in
Furthermore, the task of listing all possible bases is inherently
more difficult, and less certain, in a common law as opposed to
civilian system due to its non-codified nature and tendency to expand
through analogy. The situation in Canada would seem to confirm this.
There, the unjust factors approach (founded on English jurisprudence)
has been supplanted by a civilian framework. Despite the shift, the
common law foundation continues to assert itself in the new test, as is
evident by the Supreme Court's insistence that new categories of
juristic reasons (i.e. legal grounds or bases) may be established as
further cases "refine" the "evolving" test.90 Thus, Birks' failure
to identify every legal basis appears to be an inevitable feature of
legal grounds reasoning operating in a common law jurisdiction.
Expansionary Tendencies Shifting Work to
A third structural problem can be identified. The ostensible
simplicity of absence of basis creates an expansionary momentum. As has
been observed, with reference to the absence of legal grounds approach
[T]he main dilemma with general provisions 'is that
with them one tends to get more than one has bargained for: their
wording will often cover more than it should'.91
Indeed, this observation is especially relevant to Birks' pyramid
given its lack of clarity as to basis and artificial reasoning
(discussed above). Two other features of the absence of basis militate
in favour of inevitable expansion: Its civilian orientation that looks
to reasons justifying retention, rather than reversal, of benefits
received; and the abstract expression of absence of basis itself.
According to Barker:
The potential price of this powerful combination of
abstraction with a reversed justificatory orientation is the
overexpansion of restitutionary rights.92
Birks was aware of this expansionary potential and attempted to
control it with "vigorous defences"93 and through the creation of
artificial bases (such as "grudging-gifts"). We have already explored
the problems associated with the latter device. But what of Birks'
defences? Before considering these, two preliminary points must be
made. First, as the analysis is shifted toward defences they obviously
assume an increasingly important gate-keeping function within the
overall unjust enrichment action.94 As a result, their failure to
operate effectively threatens to undermine commercial certainty.95 Second,
it is important to note that crafting defences is no simple task.
According to Krebs, it took German jurists and academics nearly fifty
years to work out a patchwork of defences and even now there remains
"considerable controversy" over their operation in certain contexts.96 The
non-codal nature of England's common law system, coupled with its
piecemeal bottom-up evolution, suggests that the task of developing a
comprehensive list of defences would be a great deal more difficult
here than in Germany. These observations alone are strong
recommendations against shifting to an absence of basis approach.
Two broad categories of defences employed by Birks are of particular
concern. The first is what he calls stultification:
If without good reason an action in unjust enrichment
were to contradict a considered position elsewhere, the unreasoned
contradiction would stultify the law. This danger is averted by raising
a defence to a claim in unjust enrichment which would otherwise be
Stultification is problematic for the same reasons Birks' basis is:
(i) it is hopelessly vague and abstract, (ii) is much wider than the
orthodox defences under the traditional approach,98 and (iii) it
represents a non-exhaustive super-category without each example
As mentioned above, Birks also relied on the concept of natural
obligations to provide defences. In addition to the problems
highlighted above, the efficacy of natural obligations is further
undermined by its apparent inconsistent interaction with the concept of
stultification. For example, we saw above that Birks endorsed Lord
Mansfield's list of natural obligations for use as defences, which
includes contracts during infancy.100 This means that minors cannot
recover enrichments transferred to adults during infancy even when the
minor subsequently avoids the contract. However, it is difficult to see
why this rule does not undermine (i.e. stultify) the protective policy
animating the rule that minors may avoid contracts for non-necessities.101 It
is here that the concept of stultification devolves into conceptual
anarchy. On the one hand, it would seem that not allowing the minor to
recover would stultify the protective policies allowing him to avoid
the contract; yet, on the other hand, according to Birks:
The law of unjust enrichment would itself be
stultified if the criteria which normally identify an unjust enrichment
were allowed...to compel restitution of an enrichment which was not
unjust. The claimant cannot say that the money was not due if, behind
the technicalities of the law, there was still a moral obligation to
Thus, if we allow restitution we stultify the law of unjust
enrichment; but if we provide a natural obligations defence to the
adult, we stultify the policies protecting minors. Moreover, Birks'
subsequent assertion that minors must make restitution to adults seems
to further undermine these protective policies.103
III. Absence of Juristic Reason in Canada: a
In section I, I argued that a choice must be made between absence of
basis and the traditional approach. One legal system cannot employ both
approaches simultaneously without risking chaos, since they are
'antithetical inquires' that employ different reasoning and in some
cases yield different results. In section II, we saw that the supposed
economy and elegance of absence of basis is superficial in some
respects and dangerous in others. We also considered three 'structural'
problems inherent in the absence of basis model which I argued confuse
the analysis and will likely cause judicial error.
In this section, I consider the law of unjust enrichment in Canada,
which provides a cautionary tale about the dangers a common law system
faces when moving from the traditional approach to a civilian model.
While many of the problems plaguing the Canadian jurisprudence stem
from its uniquely framed 'juristic reasons' test, and are due also to
the inconsistent application of same, I will argue, with reference
primarily to the three 'structural' issues identified above, that these
difficulties are, on a more general level, likely to emerge whenever a
civilian model is transplanted suddenly into a common law system.
(i) A Short History of a Troubled Jurisprudence
Historically, Canada followed the traditional unjust factors
approach. Then, inexplicably, Dickson J., in the Supreme Court of
Canada, expressed in Rathwell v Rathwell the third element
of the test as requiring proof of "absence of any juristic reason for
This phrase had not appeared previously in the body of unjust
enrichment jurisprudence or in the academic literature.105 Initially, this
reformulation was of little practical consequence; few jurists noticed
the phrase, and fewer still believed it was intended to transform the
law of unjust enrichment.106 However, two years later, in Pettkus
v Becker, Dickson J. expressed the requisite elements of unjust
enrichment as consisting of:
...[a]n enrichment, a corresponding deprivation and
absence of juristic reason for the enrichment... The common law has
never been willing to compensate a plaintiff on the sole basis that his
actions have benefited another... It must, in addition, be evident that
the retention of the benefit would be "unjust" in the circumstances.107
Again, commentators were not sure what to make of this. As McInnes
observes, with reference to the above formulation:
...[It] appears to pull in both directions. The
traditional common law theory is reflected in the Court's insistence
that there must be...something unjust in the defendant's retention of
the benefit. A civilian analysis is suggested by the reference to the
absence of any juristic reason...108
Also, confusingly, a juxtaposition of Rathwell and Pettkus
revealed contrasting lessons: The examples of juristic reasons in Rathwell
('contract or disposition of law') are reasons justifying retention
of benefits, whereas in Pettkus, despite the reference to
'juristic reasons', liability was in fact imposed pursuant to the
unjust factor free acceptance, which is a reason for reversing
Two lines of authority subsequently developed. The majority of cases
continued to follow the unjust factors approach (either ignoring the
concept of juristic reasons entirely or simply invoking the label after
following the traditional approach), while others employed a truly
This confused blending of approaches occasionally developed even within
the same case, as different members of the Supreme Court followed
different conceptual paths - although without commentating that these
approaches were not the same.111 A consequence of all this was not
only doctrinal incoherence112, but also the emergence of a list
of juristic reasons, developed ad hoc from the bottom up,113
without any organizing logic as would exist in a codified civilian
In an influential article published in 2000, Smith reviewed this
troubled jurisprudence and concluded that it was "totally unclear as a
matter of authority" whether Canadian law was "oriented towards reasons
for keeping enrichments...or whether it remains, despite some
terminological confusion, committed to the view that the plaintiff must
show a reason for reversing... [enrichments]".114
The simultaneous application of both approaches created an
intolerable situation. Certainty in the law was undermined as litigants
were unable to anticipate with any degree of confidence which approach
would be followed and therefore how to frame their arguments.115 We
can speculate that transactional costs must have increased as complex
legal memoranda would be required for hitherto straightforward cases.
Counsel would be less inclined to settle before trial and more likely
to advise disappointed litigants to appeal unfavourable judgments.
(ii) The Purported Clean Up
The Supreme Court addressed this inconsistency in Garland v
Consumers' Gas Co.116
The unanimous Court reformulated the 'unjust' question as follows:
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,...[the] objection that it require[s] proof
of a negative is answered. The established categories that can
constitute juristic reasons include a contract ..., a disposition of
law ..., a donative intent ..., and other valid common law, equitable
or statutory obligations...
If there is no juristic reason from an established category, then the
plaintiff has made out a prima facie case...
The prima facie case is rebuttable, however, where the
defendant can show there is another reason to deny recovery. [T]here is
a de facto burden of proof placed on the defendant to show
the reason why the enrichment should be retained. This stage of the
analysis thus provides for a category of residual defence...
As part of the defendant's attempt to rebut, courts should have regard
factors: the reasonable expectations of the parties, and public policy
considerations. It may be that when these factors are considered, the
court will find that a new category of juristic reason is established...117
(iii) The Continuing Mess
Despite the Court's effort to clarify the test, it continues to
suffer from structural deficiencies similar to Birks' absence of basis
model: (i) Uncertainty of basis; (ii) unclear role for unjust factors;
and (iii) expansionary tendencies shifting work to vague defences.
Furthermore, the reasoning employed is no more elegant than that
followed under the traditional approach. These issues will be discussed
Most fundamentally, notwithstanding a concerted effort to
"construe...[the test] in a manner that is responsive to...criticism",118 the
concept of juristic reason remains hopelessly vague. The Court's
efforts to clarify it by closing the list of juristic reasons are
unsatisfactory. First, this goal is obviously undermined as the list is
Second, the list is uncertain as the examples given are themselves
vague since they encompass both legal and non-legal grounds. This is
confusing: While the label 'juristic' implies 'legal', the phrase
'donative intent' is not necessarily so, either ostensibly120 or
in the manner it is applied.121 Thus, as in Birks' model, we have
a lack of clarity as to basis, for the operational concept (juristic
reason) is open-ended, encompass both legal and non- legal grounds, and
is expressed at a high level of abstraction.
Arguably, the first of these problems is inevitable in any common
law system due to its non-codal nature and incremental evolution over
time. It is simply not possible to close the list of bases. Indeed, Garland
recognizes this by making express provision for the recognition of new
There is potential for chaos here, since in Canada new juristic reasons
are created by reference to public policy and the parties' reasonable
expectations. The latter consideration, which threatens inappropriately
to introduce an expectation interest in the law of unjust enrichment,123 is
not part of Birks' model. But policy considerations are relevant to
Birks' scheme at the defence stage.124 It is here that a common danger
presents itself: New bases for retention will be snuck through the back
door as trial judges justify retention of enrichments by reference to
the unworkable defence of 'policy'.125 That Birks regards policy not as a
basis but as a defence is of little practical significance - as a
matter of precedent, once a 'policy' defence is recognized in one case,
it will likely operate as a basis (in effect, if not in name) for
retention of enrichments in future cases.126
The second problem identified above (uncertainty as to legal
expression of basis) may also be inevitable. For instance, both schemes
(Birks and Canada) utilize the concept of gift to control the
expansionary momentum of legal grounds reasoning. But, if gift were
applied in a technical legal sense it would be too narrow to
effectively serve this purpose. As a result, both schemes take an
elastic, non-legal approach to the concept, applying it, for instance,
to deny recovery for transfers of services.127 Reliance on these
unnatural concepts undermines the intuitive coherence and logical
elegance of legal grounds reasoning and contributes to uncertainty as
to what constitutes a valid basis.
A further problem has emerged, one foreseen by Virgo: Submerging the
issue of risk-taking means it can easily be missed.128 This point is
related to the concept of gift in both schemes. Because both models use
gift in an unnaturally wide manner to control the momentum of legal
grounds, the concept stands so close to risk-taking there is a danger
judges will employ it instead129. This is problematic, since the
concepts are not equivalent in scope.
Consider Peter v Beblow, in which restitution was awarded
for the provision of domestic services by a wife to her partner over a
twenty year period. The Supreme Court rejected a juristic reason
defence of gift on the basis that, factually, "[t]he central element of
a gift at law - intentional giving to another without expectation of
remuneration - is simply not present".130 By focusing on gift, the Court
erred. Had risk- taking been the issue, the Court could have denied
recovery because although the wife provided services in the hope and
expectation of sharing in the family property, she was willing to run
the risk that a proprietary right might not arise and is therefore
deemed to have acted officiously.131 Thus, we see that by inadvertently
replacing risk- taking with the more stringent standard of donative
intent, the Supreme Court has unwittingly expanded the scope of
This is a major criticism of the Canadian approach, but one that
could also apply to Birks' model. If judges under Birks' scheme applied
'gift' in a legal sense (intention to transfer property without
expectation of remuneration) in place of risk- taking, then, logically,
this same expanded scope of recovery would result. Neither escaping
heat nor the busker's services would constitute legal gifts. Thus, we
see a common problem between these models: The concept of gift is
required to rein in the legal grounds reasoning, but it is an
unsatisfactory substitute for risk- taking. Applied properly (meaning
legally) and it (gift) will not prevent recovery, but applied in the
Birksian 'grudging' manner and it devolves into fictitious nonsense and
undermines the pyramid's reasoning.
A solution would be to take a narrow legal view of gift and bring
risk-taking clearly to the fore as a bar in its own right.132 But
this begs the question: why chance the above confusion when risk-
taking already operates in this suggested manner under the traditional
An additional problem has emerged. As commentators predicted, the
abstract, non-intuitive concept of juristic reason has been difficult
to apply in practice. Consider the following two cases.
In Campbell v Campbell133 the Ontario Court of Appeal
suggested that a 'moral obligation' was a juristic reason justifying
the retention of benefits a mother received in the form of improvements
to her farm performed by her sons. While Birks would not likely have
endorsed this suggestion,134 judges can easily fall into this
mode of reasoning when applying absence of basis, given its foreign
orientation and abstract manner of expression. Indeed, even Birks,
famous for taxonomical rigour, himself twice refers to natural
obligations as "moral" when discussing their continued relevance under
absence of basis.135
The potential for chaos is amplified when we recall that natural
obligations could logically function as either defences or bases in
their own right,136
and that there is no agreement among commentators as to the continued
relevance of Lord Mansfield's proposed list of natural obligations nor
is this list necessarily closed.
In Pacific National Investments v Victoria (City) 137 the
Supreme Court and the British Columbia Court of Appeal took very
different views as to what constituted a juristic reason. PNI, a
commercial land developer, contracted with Victoria to develop the
City's harbour. The City granted PNI residential zoning rights to the
land; in exchange, PNI agreed it would spend $1.08 million to develop a
portion of this land as park land for public use. In the next municipal
election, officials hostile to the development were elected to City
Council. They downgraded the zoning permission granted to PNI,
rendering the development less profitable. However, PNI had already
developed much of the park land. PNI initially commenced an action for
breach of contract, which was dismissed on the basis that since City
Council cannot bind a subsequent Council on matters of zoning, the
initial contract with the first council was ultra vires its
statutory capacity. This decision, removing the contract, cleared the
way for the unjust enrichment claim.
PNI next sued in unjust enrichment to recover the money it expended
on these improvements. The Court of Appeal denied recovery, on the
basis that the legislative capacity to downgrade the zoning permission
provided a juristic reason. Southin J.A., for a unanimous Court of
[T]he juristic reason for what the [City] did... is
that the Legislature had conferred upon it the power to do the act of
downzoning. The bylaw is of the same force and effect as if it had been
enacted by the Legislature itself and provides a complete answer to any
and all claims arising out of it.138
The unanimous Supreme Court took a very different view. Citing the
above passage, Binnie J. held:
With respect, this argument presupposes that the claim
for unjust enrichment "arose" out of the down-zoning. However, the
claim for unjust enrichment does not depend on the down-zoning. It
depends on the fact that the City has obtained $1.08 million worth of
extra works and improvements at [PNI's] expense to which, after ...
[the ultra vires determination], the City has no legitimate
It is difficult to imagine such confusion arising under the
traditional approach, where the focus of PNI's claim would be either
failure of consideration or mistake as to the City's legal capacity.
But, as predicted by commentators, the focus on juristic reasons
confuses the analysis and leads to inevitable error. Given the extreme
cost of conducting an appeal to the Supreme Court, and the paucity of
cases it grants leave to hear, such errors will typically go
uncorrected, causing serious injustice to the parties.
Unclear Role for Unjust Factors
Although the Supreme Court did not sketch a pyramid, the unjust
factors are nonetheless as relevant to Garland as to Birks'
absence of basis; in most cases they must be considered to explain why
a purported juristic reason does not exist.140 This has created
confusion in the subsequent jurisprudence, which suggests a collective
judicial cognitive dissonance. As judges charge ahead with the civilian
orientation they continue to look backwards to derive explanatory power
from the traditional approach. In Chambers' words: "The shift from
unjust factors to absence of basis has been difficult. Courts seem
unsure what to do with the pre-Garland authorities".141 As a
result, the unjust factors inevitably bubble up to the surface,
resulting in a hybrid of civilian principles lying atop, at a higher
level of abstraction, what continues to be a common law claim. This has
resulted in what McInnes describes as "the restitutionary equivalent of
Frankenstein's monster" which is "doomed to disaster".142
Consider the following examples, which happen to be the only times
the Garland approach has been considered by the Supreme
Court. In PNI,143 (facts summarised above), the
Supreme Court began on a strong footing. It affirmed the Garland
and then observed, correctly, that the City's previous appeal, which
resulted in the contract being declared ultra vires, "knocked
out of contention the juristic reason (the contractual provision)"
justifying retention of the benefits the City received to the park land.145
Following the logic of absence of basis, this should have ended the
matter (subject to defences). However, Binnie J., writing for the
Court, then said this:
[T]he trial judge found that the ultra vires
arrangements rested on a common mistake. Both the City and [PNI]
assumed the City had the legal authority to make zoning commitments the
City did not possess. The finding of common mistake is important to the
appellant's claim...If there had been just the ultra vires transaction
without the added element of common mistake, it would have been a
different case and the outcome would not necessarily be the same.146
Mistake, of course, is an unjust factor. It has no role to play in
the absence of juristic reasons inquiry - except to explain, in certain
cases, although not in PNI itself, why there is no juristic
reason. Once the basis of the transfer is removed, the presence of an
unjust factor is irrelevant. The reference to mistake is, in this
respect and at this stage in the analysis, inconsistent with the Garland
framework. It is also inconsistent with the application of the Garland
test in Garland itself.
Garland involved a claim in unjust enrichment to recover
moneys paid to the defendant gas company. The company charged Garland
late penalty fees for several years under authority of provincial
legislation ('Ontario Energy Board Orders'). The OEB Orders were
declared invalid for violating criminal interest rate provisions in the
federal Criminal Code. By virtue of the constitutional doctrine of
federal paramountcy, the provincial OEB Orders were deemed ultra
Regarding the issue of unjust enrichment, the Court in Garland
held that since the juristic reason upon which these late penalties
were collected was no longer legally valid, then, subject to defences,
restitution should follow. As McInnes observes, although there were
several potential unjust factors the Court could have used to justify
restitution (mistake as to validity of the authority and failure of
consideration, for instance148), the Court did not in any way
rely on these.
Garland and PNI are analogous in that plaintiffs
in each case expended money pursuant to an obligation that, by virtue
of the doctrine of ultra vires, did not exist. In Garland,
the ultra vires nature of the transaction was itself a
complete justification for reversing the enrichment, but in PNI
the Court emphasized the need for the additional unjust factor of
mistake. The Court's different treatment of the same legal question
(only months apart) reveals the confusion wrought by the application of
the new approach to unjust enrichment. Indeed, this confusion may be
inevitable, when an unfamiliar civilian framework lacking explanatory
power is transposed upon a common law foundation.149
The Supreme Court's next consideration of juristic reasons is
similarly troubling. Kingstreet Investments Ltd v New Brunswick150
involved an action in unjust enrichment for the recovery of taxes which
were declared ultra vires the provincial legislature on
Although applying the Garland framework to a case of undue
taxes should be "extremely straightforward",152 Bastarache J.,
writing for the Court, dealt with the case under separate
constitutional principles on the grounds that an "unjust enrichment
framework is inappropriate".153 As Smith notes, this is an
especially bizarre statement since "[m]any of the Supreme Court of
Canada's most important and formative decisions on the law of unjust
enrichment have involved claims against governments...to recover taxes".154
That aside, three other statements of Bastarache J. merit closer
attention here, for they bear on the practical (un)workability of the Garland
approach, notwithstanding the Court's refusal to actually apply it in Kingstreet.
First, as part of his justification for why unjust enrichment is an
inappropriate framework for ultra vires tax cases, Bastarache
J. sets out the Garland framework in brief and then observes
that "[it] is, as one can see, very complex".155 Second, Bastarache
J., like Binnie J. in PNI, alludes to the continued relevance of an
unjust factor. In obiter, while discussing the abolition of
the distinction between mistake of fact and mistake of law, Bastarache
J. states: "There can be no doubt that the ordinary principles of
unjust enrichment continue to apply in cases of payments made pursuant
to mistake of law".156
Moreover, when discussing the relevance of unjust enrichment principles
for recovery of payments made under protest in the non-governmental
context, Bastarache J. states: "[M]y view is that courts should insist
on proof of compulsion in fact".157
Compulsion, of course, is an unjust factor. It has no place in the
civilian framework set out in Garland.158 Likewise, the
reference to 'ordinary principles' applying to mistake of law
confusingly draws upon pre-Garland unjust factors. What are we
to make of these statements? Some commentators have suggested the Court
is having second thoughts about Garland,159 but this is
unlikely - if the Court wanted to revise Garland, surely it
would have said so expressly. The more likely, if unfortunate,
explanation is that the Court is confused by its own test,160
finding it easier to avoid its application even at the cost of creating
a novel, and doctrinally questionable, principle of constitutional
Indeed, the Supreme Court is not the only appellate court having
difficulty transitioning from the traditional approach to the civilian
model. Consider, for example, the New Brunswick Court of Appeal's
reasoning in the same Kingstreet Investments Ltd v New Brunswick162
case, before the matter was appealed further to the Supreme Court. The
majority held the defences of change of position and passing on were
available for claims based on mistake but not for those grounded on
compulsion. But such distinctions, based on unjust factors, should not
be relevant post Garland where absence of juristic reason is
the basis for liability. As Chambers notes:
There may well be a good justification for treating
those two [above] situations differently, but [post Garland]
it will have to depend on something other than the unjust factor, such
as the defendant's knowledge of the absence of basis for the enrichment.163
All of this confusion, I suggest, is inevitable when we consider the
powerful combination of forces inherent in absence of basis: (i) a
sudden 180 degree inversion of the legal paradigm, from reasons for reversing
to reasons for retaining enrichments that (ii) expresses
organisational concepts at high levels of abstraction, but (iii) still
draws on the previous law for explanatory power, (iv) requires
deductive 'top down' reasoning unfamiliar to the common lawyer, and (v)
does not benefit from a carefully integrated, fully defined set of
principles by virtue of its operation in a non-codal legal system. This
surely is a recipe for inevitable error.
The Supreme Court's most recent restitutionary foray is perhaps the
most perplexing example of its tendency to draw upon unjust factors. BMP
Global Distribution Ltd v Bank of Nova Scotia164 is a case of
complicated facts. What follows is a simplified version concentrating
on the Court's reliance on the unjust factor mistake of fact. BMP
entered an agreement with a rogue, Mr. Newman, whereby Newman was to
pay $1,200,000 for the right to distribute BMP's crockery in the United
States. Newman paid BMP $900,000, in the form of a cheque, as a first
installment. The cheque turned out to be a forgery. It was drawn on an
account held by an unrelated entity (First National) from an account
First National held at the Royal Bank of Canada (RBC). RBC drew the
money from First National's account and forwarded the funds to an
account held by BMP at the Bank of Nova Scotia (BNS). Upon discovery of
the forgery, RBC requested BNS to freeze the funds in BMP's account.
Deschamps J., writing for a unanimous Supreme Court, noted that the
question as to whether BNS had a right (vis a vis BMP) to restrain
these funds and return them to RBC turned, in the first instance, on
whether RBC was entitled to recover the funds it transferred pursuant
to the forged cheque.165
Deschamps J. answered this question in the affirmative: RBC's prima
facie right derived from a "straightforward"166 application of the
test for "mistake of fact" articulated by Goff J. (as he then was) in Barclays
Bank Ltd v W.J. Simms & Cooke (Southern) Ltd.167
What is troubling here is not this conclusion (which is undoubtedly
correct under the traditional approach, and would also be reached
easily under an absence of basis/juristic reasons analysis), but rather
the method. The unanimous Supreme Court examines the case using an
unjust factor without once mentioning Garland or juristic
reasons. Whether by accident or design, the unfortunate (albeit
implicit) effect of BMP Global Distribution is to return
Canada's jurisprudence to its troubled pre-Garland state,
wherein both approaches to unjust enrichment apparently operate
interchangeably. Compounding the misfortune, the Court failed to
provide any guidance as to which model operates under which
circumstances. Absent some guidance from the Court, how is the
conscientious lawyer to proceed in future cases? As a matter of
precedent, similar cases should be plead according to Deschamps J.'s
unequivocal, clear and exclusive reliance on "the doctrine of mistake
Logically, however, "[u]nless the Supreme Court... expressly indicates
an intention to reverse or confine Garland,... it would be
wrong to assume that the new juristic reason model of restitutionary
relief covers anything less than the whole of its natural territory",
which must include mistaken payments as the "paradigm [example] of
Shifting Work to Problematic Defences
We have seen that legal grounds reasoning is expansionary by nature.
It requires comprehensive defences to limit its overly broad scope of
recovery. Common law systems have difficulty here: By virtue of their
non-codal nature, they cannot draft fully integrated and comprehensive
lists of specific defences at the front end. True to their basic
orientation, they must develop incrementally over time. This poses
obvious problems for adopting absence of basis: Expanded recovery
appears, in the short term at least, inevitable.170
Ironically, even if a high court were to draw up a comprehensive
list of defences at the front end (similar to that operating under the
German Code), its very existence would go some way toward undermining
the simplicity and purity of absence of basis, which is the major
argument in favour of its adoption. How is an absence of basis model
buttressed by a hotch potch list of fact specific defences
any more elegant, pure or simple than the traditional approach with its
eclectic list of unjust factors? The untidiness, it seems, is simply
moved from the front door to the back.
To rein in the expansionary momentum both Garland171 and
create a flexible super-category of defence based on 'policy'
considerations. This is the only solution for a common law system, but
it is very problematic.
First, and most fundamentally, 'policy' as articulated by Garland
and Birks is hopelessly vague. Such an ambiguous concept, unless
tightly defined, must be difficult to apply consistently. The ambiguity
is exacerbated by history: Under the traditional approach, 'policy'
favouring restitution is an unjust factor173, whereas under
juristic reasons and absence of basis, policy favouring retention
is a defence.174
This has created confusion in the Canadian courts; and may very well be
inevitable, since, as we have seen, the unjust factors continue to
inform legal grounds reasoning, meaning the traditional jurisprudence
In Garland the Supreme Court was clear that 'policy'
favouring retention of benefits is a residual defence, not a ground of
However, a mere three pages later, the Court, while considering said
policy defence, looks also to policies in favour of restitution:
[T]he overriding public policy consideration in this
case is the fact that the [late penalty fees] were collected in
contravention of the Criminal Code. As a matter of public
policy, a criminal should not be permitted to keep the proceeds of his
crime...[A]llowing Consumers' Gas to retain the [penalty fees]...would
let... [it] profit from a crime and benefit from its own wrongdoing.176
Similarly, in PNI, the Court, under stage two of Garland,
again looks to policies supporting restitution:
[It is not]... good public policy to have
municipalities making development commitments, then not only have them
turn around and attack those commitments as illegal and beyond their
own powers, but allow them to scoop a financial windfall at the expense
of those who contracted with them in good faith. This is precisely the
sort of unfairness that the doctrine of unjust enrichment is intended
This confusion is compounded in Kingstreet. As part of his
case for why unjust enrichment is an inappropriate framework for
obtaining recovery of ultra vires taxes, Bastarache J., for
the Court, states:
The Garland approach is, as one can see,
very complex; it requires that courts look only to proper
policy considerations. By proper policy considerations, I mean only
those that have traditionally informed the development of
restitutionary law. [emphasis original] 178
Exacerbating the ambiguity, Bastarache J. gives two examples of
public policy to illustrate the point. The first concerns a policy
defence raised by La Forest J. in Air Canada v British Columbia,179 to
the effect that protection of the treasury should immunize the
government from claims for restitution of unconstitutional taxes. The
second example concerns the policy identified in Garland -
that criminals should not be permitted to profit from their crimes.180
According to Bastarache J., the former is not an appropriate
consideration under stage two of Garland, but the latter is.
But this cannot be correct. As we saw, under the second stage of the Garland
test, policies serve as residual defences, not as grounds of
restitution. Consequently, whether one ultimately accepts La Forest
J.'s proposed defence in Air Canada, it cannot be doubted
that it is precisely the type of consideration relevant under the
second stage of the juristic reasons analysis. Conversely, as we saw
above, the principle that criminals should not be permitted to profit
from their crimes is a policy in favour of recovery - it most
emphatically does not fall to be considered as a residual defence.
The above survey demonstrates the danger of incorporating a vague
policy defence in an absence of basis scheme that must of necessity
continue to draw on the traditional unjust factors for explanatory
power. It seems inevitable that in such a model judges will forget that
'policy' now plays the opposite role it once did. The result is not
only doctrinal confusion and uncertainty in the law, but also
unfairness to litigants. The latter point has a very practical
implication: Knowing which policies are relevant (i.e. those favouring recovery
versus retention of enrichments) influences the manner in
which the parties frame their pleadings and discharge their respective
Poorly decided cases frustrate focused legal argument in subsequent
cases and contribute to further uncertainty in the law. A vicious cycle
A final problem with this vague 'policy' defence threatens to be the
most significant: In applying stage two of Garland the
Supreme Court has now taken 'policy' to mean 'fairness'. Consider
Bastarache J.'s justification in Kingstreet for rejecting La
Forest J.'s proposed defence in Air Canada:
Considerations related to preserving the public purse
do not properly fall within the second branch of the juristic reasons
analysis, which is more concerned with broad principles of fairness.182
Not only are such statements hopelessly vague, but they threaten to
undermine the modern respectability of unjust enrichment that Birks
spent his academic career striving to achieve. If such reasoning were
adopted in England, the following dicta of Lord Goff may soon become
more relevant to students of legal history than to scholars of unjust
The recovery of money in restitution is not, as a
general rule, a matter of discretion for the court. A claim to recover
money at common law is made out as a matter of right; and even though
the underlying principle of recovery is the principle of unjust
enrichment, nevertheless, where recovery is denied, it is denied on the
basis of legal principle.183
IV. Summary and Conclusion
In section I, I contrasted the traditional approach to unjust
enrichment with Birks' absence of basis model. I argued that a choice
must be made between these models, for they are fundamentally different
orientations that employ different reasoning and in some cases yield
different results. In section II, I examined the corpus of academic
literature to demonstrate that the supposed economy and elegance of
absence of basis is superficial in some respects and dangerous in
others. I argued that absence of basis contains three 'structural'
problems (unclear role for unjust factors; nature of basis unclear; and
expansionary tendencies shifting work to defences) which contribute to
confusion and inevitable error. In section III, I considered the law of
unjust enrichment in Canada, illustrating that it provides a cautionary
lesson about the dangers a common law system faces when moving from the
traditional approach to a civilian model. I demonstrated, in
particular, that the 'structural' problems inherent in absence of basis
have manifested in the Canadian jurisprudence, causing uncertainty and
Clearly, the Canadian position is unsatisfactory. After dramatically
reorienting the law toward juristic reasons in Garland, the
Supreme Court's subsequent forays have made perplexing, and
inconsistent, references to the traditional approach. Consequently, it
is not clear whether, or to what extent, the pre-Garland
jurisprudence remains relevant under the juristic reasons framework. We
should expect no easier transition in England if absence of basis were
adopted in that jurisdiction.
In light of the above, we must conclude that adopting absence of
basis in England would be a grave mistake. Arguments in favour of its
adoption are not persuasive, and criticisms of the traditional approach
are not compelling. McInnes suggests that if courts choose to reorient
the law, "they are obliged to devise a system that is at least as good
as ... [the one] they reject".184 I would take this further. Change
for change's sake cannot be countenanced, because any transition will
undermine certainty and destabilise the security of commercial
transactions. Errors are inevitable as courts grapple with the new
approach. In a common law system, details will have to be "hammered out
on the anvil of concrete cases".185 Such fundamental reorientation of
the law is not justified unless the move promises significant
advantages. Absence of basis does not. It is an inferior model.
Moreover, even if we ignore its deficiencies, and assume it is as good
as the traditional approach, the fundamental reality is that absence of
basis is "not about helping judges to do things they want to do but
need theoretical help with. It is simply about applying [arguably]
better labels to well understood results".186 This cannot
justify reorienting the law. Thus, the strongest argument against
absence of basis is a practical one: Adopting it is "the juridical
equivalent of starting with a greenfield site, [requiring] one part of
a legal system [to] turn its back on its historical and conceptual
while inevitably suffering the growing pains such a shift necessarily
entails. Such a move must not be undertaken without good reason. It is
also a recipe for disaster, as the Canadian experience confirms.
B.A (Mount Allison University), LL.B (University of Manitoba), LL.M
(Cambridge), Ph.D Candidate in law (Gonville & Caius College,
Cambridge). I would like to thank Graham Virgo for his insights on an
earlier draft of this paper. I would also like to thank Gerhard
Dannemann and an anonymous reviewer for their helpful comments.
Financiere de la Cite v Parc (Battersea) Ltd  1 AC 221 at
227 per Lord Steyn and at 234 per Lord Hoffmann.
Birks, Unjust Enrichment (2d.), (Oxford: Oxford University
Press, 2005), Ch. 5.
Most leading academics do not accept that England has already moved to
a civilian framework (see A. Burrows, 'Absence of Basis: The New
Birksian Scheme', in Mapping the Law: Essays in Memory of Peter
Birks, Andrew Burrows and Lord Rodger of Earlsferry (eds.),
(Oxford: Oxford University Press, 2006), Ch. 2; G. Virgo, The
Principles of the Law of Restitution (2d) (Oxford: Oxford
University Press, 2006) 128; R. Stevens, 'The New Birksian approach to
Unjust Enrichment' (2004) 12 RLR 260 at 271; J. Edelman, 'The Meaning
of 'Unjust' in the English Law of Unjust Enrichment', (2006) European
Rev Private L, 326.
See Deutsche Morgan Grenfell v Inland Revenue Commissioners
 UKHL 49, in which each judge in the House approached the unjust
enrichment action by looking for a positive ground of restitution, and
none adopted a civilian analysis.
Virgo, 'Demolishing the Pyramid-the Presence of Basis and Risk-Taking
in the Law of Unjust Enrichment', (2008) unpublished draft paper, p.2,
noting that in Deutsche Morgan Grenfell v Inland Revenue
Commissioners Lord Walker (para. 158) did recognise that it might
be appropriate to consider adopting Birks's civilian absence of basis
approach in the United Kingdom in the future.
McInnes, 'Making Sense of Juristic Reasons: Unjust Enrichment After
Garland v. Consumers' Gas', (2004) 52 Alta. L Rev 400.
Virgo, Principles (n 3) 129.
Birks (n 2) 103. The approach codified in German Law provides:
"He who obtains something through someone else's performance or in
another way at his expense without legal cause, is obligated to make
restitution to the other. This obligation arises also where the legal
cause later disappears or where the result contemplated by the legal
transaction is not attained.' See Section 812(1) of the German Civil
Code (Bürgerliches Gesetzbuch, abbreviated 'BGB'),
translated by T. Krebs, Restitution at the Crossroads: A
Comparative Study (Cavendish: London, 2001) Ch. 11. An English
Translation of the BGB is available at: http://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb.html#BGBengl_000P812
An English language compilation of BGB provisions specifically related
to restitution is available at: http://www.iuscomp.org/gla/statutes/BGBrest.htm
It should be noted that civilian systems are not monolithic;
differences exist among them.
v Macferlan (1760) 2 Burr 1005; 97 ER 676.
For a summary of Birks' three categories of unjust factors, see Virgo, Principles,
(n 3) 119-124.
Birks (n 2) xii dramatically writes: "[A]lmost everything of mine now
needs calling back for burning".
Birks (n 2) 116.
Birks (n 2) 129. These are primarily concerned with theft or where the
claimant is ignorant of the defendant being enriched at the claimant's
Birks (n2) 129. This category covers cases of payments made under
liability mistakes, money paid pursuant to void contracts, and of taxes
demanded by public authorities acting ultra vires. Other
circumstances invalidating the obligation under this head include undue
influence, illegitimate pressure, and compulsion: see p.136.
Birks (n 2) 129. This category covers payments made in anticipation of
contracts, and for the purpose of creating a trust or making a gift.
Birks (n 2) 116.
Birks (n 2) 116.
McInnes characterizes this choice as "the most profound shift
imaginable within the law of unjust enrichment": 'Taxonomic Lesson for
the Supreme Court of Canada', in Structure and Justification in
Private Law, C. Rickett and R. Grantham, (eds), (Oxford: Hart
Publishing, 2008), 92.
Birks (n 2) 114.
Birks (n 2) 44.
L. Smith, 'The Mystery of 'Juristic Reason'' (2000) 12 SCLR (2d), 214.
See also T. Krebs, 'In Defence of Unjust Factors', in Unjustified
Enrichment: Key Issues in Comparative Perspective, D. Johnston and
R. Zimmermann, (eds.), (Cambridge: Cambridge University Press, 2002),
M. McInnes, 'Making Sense', (n 6) 402. See Krebs, 'Unjust Factors', (n
21) 99 for a colouful explication of the same point.
J. Edelman, 'Meaning of 'Unjust', (n 3) 326. For other expressions of
the incompatibility of the two approaches, see Burrows, 'Basis', (n 3);
G. Dannemann ,'Unjust Enrichment as Absence of Basis: Can English Law
Cope?'; and S. Meier, 'No Basis: a Comparative View', in Mapping
the Law: Essays in Memory of Peter Birks, Andrew Burrows and Lord
Rodger of Earlsferry (eds.), (Oxford: Oxford University Press, 2006).
Burrows, 'Basis' (n 3) 33.
Smith observes that much of the confusion in Canadian unjust enrichment
law stems from the fact that it blended a civilian and an unjust
factors approach: Smith, 'Mystery' (n 21) 243. I discuss this in detail
in Section III.
Burrows, 'Basis' (n 3) 36-44. See also: Birks (n 2) 44; Stevens,
'Birksian Approach' (n 3) 272.
Virgo takes issues with the fifth example, above, arguing that in such
legal compulsion cases the "restitutionary claim against the defendant
cannot be analysed in terms of absence of basis, because the claimant
has discharged a real legal liability owed to the defendant's
creditor": G. Virgo, 'Pyramid' (n 5) 8. Birks justified restitution
under absence of basis by characterising the enrichment to the
defendant in such circumstances as a by-benefit: "The discharged debtor
can offer no explanation at all as to why he should retain his
enrichment... [T]here was no reason at all why [the defendant] should
reap the by-benefit": Birks (n 2) 159. The difference here between
Birks and Virgo lies in whether the explanatory basis must exist
between the claimant and defendant (Birks) or if it is sufficient if it
exists as a basis for payment between a claimant and a third party
(paid on behalf of the defendant). In my view, absence of basis can
justify the defendant's retention of the benefit on the simple grounds
that the claimant's purpose in transferring the funds was fulfilled.
Regardless of whether the Birks or the Virgo position is to be
preferred on this question, the debate itself reveals a fundamental
flaw in the absence of basis model, namely the lack of clarity as to
what constitutes a basis. This is discussed fully in Section II.
This is not an exhaustive list. For instance, Dannemann asserts that
absence of basis has difficulty preventing restitution for a variety of
non-contractual enrichments (such as lending one's car): Dannemann,
'English Law' (n 23) 364-67; and Virgo argues that Birks' analysis
suggests it would allow recovery for partial failure of consideration:
Virgo, 'Pyramid' (n 5) 4-8.
Indeed, Edelman observes that no legal system applying either a
civilian or the traditional approach awards recovery in these
circumstances: Edelman, 'Meaning of Unjust' (n 3) 320.
Edelman, 'Meaning of Unjust' (n 3) 321. See also the dicta of Lord
Halsbury in Ruabon Steamship Co v The London Assurance 
AC 6, 10, rejecting in principle that a man who cut down trees on his
own land could seek contribution because this act improved the latter's
Burrows, 'Basis' (n 3) 44; Edelman, 'Meaning of Unjust' (n 3) 319-21;
L. Smith, 'Demystifying Juristic Reasons', (2007) 45 Can Bus LJ 291. It
is noteworthy that even Baloch, one of the few commentators supportive
of absence of basis, acknowledges the obstacle by-benefits posed to
this theory: T. Baloch, 'The Unjust Enrichment Pyramid', (2007) 123 LQR
Birks opted for the artificial reasoning approach, identifying a basis
for retention by characterizing by-benefits as "grudging gift(s)":
Birks (n 2) 159. Meier rejects Birks' explanation here as "not entirely
convincing", but then offers an equally exotic explanation for the
heating example: "The best explanation seems to be that D's enrichment
is not at C's expense. Causation alone is not enough...Heat which
escapes a flat is not attributed to the owner of the flat or to the
person generating it; it belongs to no one", Meier, 'No Basis' (n 23)
356. However, even if Meier's reasoning is accepted, it would not
account for the incidental benefit conferred on D in the land
improvement example, for surely C's labour belongs to him. Sheehan has
argued that in neither the heating nor the improvement to the
neighbour's land examples would absence of basis necessarily result in prima
facie unjust enrichment. According to Sheehan, in neither case is
there a "putative purpose" to the transfer which then fails, and
therefore no prima facie right to restitution arises: D.
Sheehan, 'Unjust Factors or Restitution of Transfers Sine Causa',
(2008) Oxford U Comparative L Forum 1 at ouclf.iuscomp.org, text after
note 128. In my view, Sheehan's argument fails to take into account
that, unless Birks' notion of grudging gift is invoked, unjust
enrichment may still arise under the non-participatory category of
enrichments. The lack of agreement here as to whether these examples
lead to prima facie recovery under a civilian model
highlights the uncertainty of its application.
Meier notes that "[o]ne of the problems which German authors faced
after the Code introduced a general enrichment action (similar to
absence of basis) was to explain why not every incidental benefit can
be recovered as being without legal ground": Meier, 'No Basis' (n 23)
355-6. Krebs notes that it took German jurists "almost a half century"
to work out a delicate balance of defences and distinctions to limit
the inherent expansionary nature of the German 'without legal ground'
provision: Krebs, 'Unjust Factors' (n 8) 80. In Canada, the
expansionist tendencies of 'no juristic reason' have been controlled
through the ambiguous defenses of 'policy' and 'reasonable
expectations', Garland v Consumers' Gas Co.  1 SCR 629,
discussed in Section III.
M. McInnes, 'Unjust Enrichment, Juristic Reasons and Palm Tree Justice:
Garland v. Consumers' Gas Co.', (2004) 41 Can Bus L J 120.
See Virgo, Principles (n 3) 144.
See Virgo, Principles (n 3) 85-6, citing, among other cases, Rowe
v Vale of White Horse DC  EWHC 388, in which Lightman J
explicitly recognised the previously controversial doctrine of free
Virgo, Principles (n 3) 85 and 70-2; Meier, 'No Basis' (n 23)
The phrase 'restitutionary response' is borrowed from Chen-Wishart, who
uses it to argue that the protective policies underlying certain unjust
factors help explain whether a change of position defence should be
available to certain defendants, and that this sensitivity to fact is
lost under an absence of basis approach: see M. Chen-Wishart, 'In
Defense of Unjust Factors: A Study of Rescission for Duress, Fraud and
Exploitation', in Unjustified Enrichment: Key Issues in
Comparative Perspective, D. Johnston and R. Zimmermann, (eds.),
(Cambridge: Cambridge University Press, 2002), p.160; published also as
(2000) Oxford U Comparative L Forum 2 at
CTN Cash and Carry Ltd v Gallaher Ltd  4 ALL ER 714
(CA). If the payment is a tax liability, however, not a purported
contractual obligation, then the 'policy' unjust factor is engaged and
restitution will be available: Woolwich Equitable Building Society
v Inland Revenue Commissioners  AC 70 (HL).
L. Smith, 'Public Justice and Private Justice: Restitution After
Kingstreet', (2008) 46 Can Bus L J 14. See also Lord Hope in Kleinwort
Benson v Lincoln City Council  2 AC 389 (HL) 410: 'A state
of doubt is different from that of mistake. A person who pays when in
doubt takes the risk that he may be wrong... whether the issue is one
of fact or of law".
Dannemann ,'English Law' (n 23) 374-5; Burrows, 'Basis' (n 3) at n 56.
The claimant may still be able to recover if the basis of the transfer
was communicated to the recipient and falls within the principles of
total failure of consideration: Meier, 'No Basis', (n 19), 352; and
Virgo, Principles (n 3) 144.
Virgo, 'Pyramid' (n 5) 7.
M. McInnes, 'Bases for Restitution: A Call for Clarity with Unjust
Factors', (1996) 10 J Contract L,77-8; and Virgo, 'Pyramid' (n 5) 7,
citing Birks' conclusion to this effect inBirks (n 2) 145.
See, for instance, R. Zimmermann, 'Unjustified Enrichment: The Modern
Civilian Approach', (1995) 15 Oxford J Legal Stud 403, 416; S. Meier,
'Unjust factors and Legal grounds' in Unjustified Enrichment: Key
Issues in Comparative Perspective, D. Johnston and R. Zimmerman,
(eds.), (Cambridge: Cambridge University press, 2002), 37; S. Meier and
R. Zimmerman, 'Judicial Developments of the Law, error iuris
and the Law of Unjustified Enrichment', (1995) 115 LQR. 556; and Birks
(n 2) 160.
Birks (n 2) 160.
Zimmermann, 'Unjustified Enrichment' (n 44) 416.
Chen-Wishart, 'Defense of Unjust Factors' (n 37) 163. See also Virgo,
Principles (n 3) 182-3: "[I]f the claimant's mistake was sufficient to
vitiate the contract it must follow that the claimant's mistaken belief
in the validity of the contract was the operating cause of his or her
payment to the defendant".
Edelman, 'Meaning of Unjust' (n 3) 322, citing Birks (n 2) 126.
Likewise, Stevens observes that English law, "...could not leave such
questions as when is pressure illegitimate' or 'does a
misrepresentation as to the future give rise to an absence of basis' to
be dealt with within contract law. First, such questions are still
conceptually part of the law of unjust(-ified) enrichment, although
they may arise in the context of contract. Second, books are not
written...on the law of non-contractual transfer. The law concerning
when it is possible to set gifts and other non-contractual transfers
aside must be dealt with in books on unjust enrichment. There is
nowhere else for them to go": Stevens, 'Birksian Approach' (n 3) 272.
J. Beatson, 'Restitution in Canada: A Commentary', in Restitution:
Past, Present & Future, W. Cornish, et al. (eds.), (Oxford:
Hart Publishing, 1998), 298.
Dannemann, 'English Law' (n 23) 376.
Beatson, 'Restitution in Canada' (n 49) 298; Dannemann ,'English Law'
(n 23) 376; Smith, 'Mystery' (n 21) 243; McInnes, 'Palm Tree' (n 33)
See Section I.
Sheehan, 'Transfers Sine Causa' (n 31) 11, citing s. 814 of
the German Civil Code.
Sheehan, 'Transfers Sine Causa' (n 31) 11.
"[A] scheme can be made to appear elegant if it no longer has to answer
many difficult questions": Burrows, 'Basis' (n 3) 47.
Virgo, 'Pyramid' (n 5) 9.
Virgo, 'Pyramid' (n 5) 9.
Burrows, 'Basis' (n 3) 46-7.
Virgo, 'Pyramid' (n 5) 9.
Virgo, 'Pyramid' (n 5) 9. This problem has emerged in Canada, as I
discuss in Section III.
"Even as regards the swaps cases Birks acknowledged that it would be
necessary to consider whether the claimant was mistaken when paying the
money...since this would indicate that the claimant had not willingly
taken the risk that the money was not due. But this emphasis on
risk-taking, which appears to incorporate aspects of the law concerning
the established grounds of restitution, undermines the elegant
pyramidal structure of Birks' approach to absence of basis. For, as
regards his analysis of the swaps cases, he asserted that the unjust
enrichment claim could be grounded simply on the invalidity of the
underlying transaction", Virgo, 'Pyramid (n 5) 9.
Which requires an intention to give and applies to transfers of
property not services.
Burrows, 'Basis' (n 3) 47.
K. Barker, 'Responsibility for Gain: Unjust Factors or Absence of Legal
Grounds? Starting Points in Unjust Enrichment Law', in Structure
and Justification in Private Law, C. Rickett and R. Grantham,
(eds.), (Oxford: Hart Publishing, 2008), 65.
Birks (n 2) 148 (gift appearing in its own right as a participatory
basis of enrichment) and 158 (gift serving to deny restitution in
context of non-participatory transfers).
Burrows, 'Basis' (n 3) 47; Meier, 'No Basis' (n 23) 349; Virgo,
'Pyramid' (n 5) 8; Stevens, 'Birksian Approach' (n 3) 272; Sheehan,
'Transfers Sine Causa' (n 31) 10.
Birks (n 2) 125-6.
Birks implicitly acknowledged that such logic was a necessary fudge to
fit absence of basis into the exiting legal framework: "If we were to
say that terminability and voidability were insufficient in themselves
and that the absence of valid basis only began from the termination or
the rescission, we would not be able to explain the origin of the
powers to terminate or avoid, which are not granted by contract and
cannot be said to arise from their own effects. These powers arise from
the enrichment rendered unjust by the invalidity of the contract under
which it was transferred", per Birks (n 2) 126.
Virgo, 'Pyramid' (n 5) 8. Similarly, Burrows writes: "[I]t is odd to
think of there being an absence of basis before termination or
rescission": ' Basis' (n 3) 47.
Birks (n 2) 126.
Meier, 'No Basis' (n 23) 349, is critical of making special exceptions
to the notion of basis for one party's right to recover.
Birks (n 2) 116.
Birks (n 2) 129.
So, while it is easy to say the claimant's purpose was to make a gift,
and likewise easy to say the gift was ineffective and therefore prima
facie unjust enrichment is established, in order to actually explain
why the gift was ineffective, and enable this legal determination,
we must have regard to mistake, undue influence or other unjust
factors. See W. Tang, 'Natural Obligations and the Common Law of Unjust
Enrchment', (2006) 6 Oxford U Commonwealth L J no. 2, 138.
Garland v Consumers' Gas Co. (2001), 208 DLR (4th) 494 (Ont.
Pacific National Investments Ltd v Victoria (City),  3
SCR 575, at para. 31.
This was the observation of Borins J.A., dissenting, in Garland v
Consumers' Gas Co. (2001), 208 DLR (4th) 494 (Ont. CA). As Smith
observes, such an approach is, of course, "...not really... a different
approach at all. It ...[is] the traditional approach, with 'absence of
juristic reason' serving only a kind of rhetorical function": Smith,
'Juristic Reasons' (n 30) 285.
Tang, 'Obligations' (n 74) 138.
Virgo, 'Pyramid' (n 5) 10.
Sheehan, 'Unjust Factors or Restitution of Transfers Sine Causa'
(n 31) 10.
Barker, 'Responsibility' (n 64) 63.
Burrows, 'Basis' (n 3) 47. Birks was aware of this criticism,
recognizing that, because setting out all the possible bases "verges on
the impossible", the concept of basis risks expression as "jejune
abstraction", which "has the unfortunate consequence that it leaves the
law of unjust enrichment abstract and further out of touch with the
Clapham omnibus", Birks (n 2) 127.
"Natural obligations" refers to the following bars to recovery listed
by Lord Mansfield in Moses v Macferlan (1760) 2 Burr 1005:
"...[M]oney paid by the plaintiff, which is claimed of him as payable
in point of honor and honesty, although it could not have been
recovered from him by any course of law; as in payment of a debt barred
by the Statute of limitations, or contracted during his infancy, or to
the extent of principal and legal interest upon an usurious contract,
or, for money fairly lost at play: because in all of these cases, the
defendant may retain it with safe conscience...".
Birks (n 2) 258.
Dannemann ,'English Law' (n 23) 368. Note that Tang takes the opposite
view, preferring to regard natural obligations as providing defences in
cases of gambling losses and payments of time-barred debts: Tang,
'Obligations' (n 74) 156.
Dannemann ,'English Law' (n 23) 368.
In Moses v Macferlan, Lord Mansfield identified four
categories of natural obligation (time-barred debt; contract made
during age of minority; usurious contract; gambling loss). Dannemann
accepts the first of these, rejects the second, and identifies a
possible third natural obligation (contracts not complying with
statutory formalities) that may exist depending on scrutiny of the
applicable legislation: Dannemann ,'English Law' (n 23) 369-72. Tang
recognizes only the first and fourth of Lord Mansfield's list of
natural obligations: Tang, 'Obligations' (n 74) 156. Birks seemingly
endorses the entire list proposed by Lord Mansfield: Birks (n 2) 258.
Birks, while acknowledging that natural obligations can become an
"unruly horse", does little to clarify the boundaries of the concept
when he writes, without elaboration, "the law of unjust enrichment
would be stultified if...[restitution were allowed in circumstances
where] behind the technicalities of the law, there was a moral
obligation to pay": Birks (n 2) 258. Tang proposes analyzing
"...whether the policies behind the doctrine or law which avoided the
obligation will be furthered by allowing or denying restitution" in
order to ascertain which of Lord Mansfield's list should be given
effect as a defence: Tang, 'Obligations' (n 74) 150. Dannemann appears
to take a similar approach: Dannemann ,'English Law' (n 23) 369-72.
Sheehan, in contrast, seems to focus on whether the underlying
unenforceable obligation is itself worthy of recognition (as in the
case of promises performed): D. Sheehan, 'Natural Obligations in
English Law'  L.M.C.L.Q. 172, 185-90.
Logically, Birks must be taken to implicitly reject treating natural
obligations as bases because he treats them as defences. This would not
be necessary if they were bases in their own right.
Garland v Consumers' Gas Co. (2001), 208 DLR (4th) 494 (Ont.
CA), para. 46.
Krebs, 'Unjust Factors' (n 21) 79, quoting B.S. Markesinis, W. Lorenz
and G. Dannemann, The German Law of Contract and Restitution (Oxford:
Clarendon Press 1997), 713.
Barker, 'Responsibility' (n 64) 63.
Birks (n 2) 113, 263-4.
Indeed, Birks acknowledged the shifting importance under absence of
basis from the third question (unjust) to the fifth (defences), Birks
(n 2) 113, 263. Krebs confirms that this has been the experience in
Germany: Krebs, 'Unjust Factors' (n 21) 79-80.
Virgo, Principles (n 3) 129.
Krebs, 'Unjust Factors' (n 21) 79-80. As McInnes observes, "[b]ecause
of the need for careful integration, wholesale adoptions [of defences]
from civilian jurisdictions...are simply out of the question": McInnes,
'Palm Tree' (n 33) 116.
Birks (n 2) 240.
Points '(i)' and '(ii)' are Virgo's: 'Pyramid' (n 5) 10.
Birks acknowledged that his examples of stultification are not
exhaustive (p. 240), "leave much to be desired" and "need tidying up"
(p. 263): Birks (n 2). It is beyond the scope of this paper to evaluate
the merits of individual examples of stultification identified by
Birks. Rather, it is the dangers of stultification as an open -ended,
policy- based super-category, which parallels the residual open-ended
'policy' category of defense created by the Supreme Court of Canada in Garland
v Consumers' Gas Co.  1 SCR 629, that will be examined here
and in Section III, below.
Birks (n 2) 258.
These policies aim to "protect...the minor from being taken advantage
of by unscrupulous adults and saving the minor from her own
imprudence": Tang, 'Obligations' (n 74) 143.
Birks (n 2) 258.
Birks (n 2) 261-2.
Rathwell v Rathwell  2 SCR 436, 455. Dickson J. gave two
examples of juristic reasons, suggesting a civilian orientation:
"contract or disposition of law". Smith speculates that, ironically,
Dickson J. chose 'absence of juristic reason' rather than 'unjust' in
order to emphasize the reasoned basis of his decision and avoid
complaints of palm tree justice. See Smith, 'Mystery' (n 21) 219. This
speculation met with some approval by the Supreme Court in Garland
v Consumers' Gas Co.  1 SCR 629, para. 40.
P. Maddaugh and J. McCamus, The Law of Restitution, (looseleaf ed.),
(Toronto: Canada Law Book Inc., 2008), 3-24
P. Maddaugh and J. McCamus, Restitution (n 105) 3-26.
Pettkus v. Becker,  2 SCR 834, 847-8.
McInnes, 'Making Sense' (n 6) 403.
Smith, 'Mystery' (n 21) 217.
See Smith, 'Mystery' (n 21) ; McInnes, 'Making Sense' (n 6) ; and P.
Perell, 'A Survey of the Case Law About the Cause of Action for Unjust
Enrichment', (2004-5) 29 Advocates' Q. 458, for a discussion of these
two lines of authority pre Garland.
See, for instance, the reasoning of McLachlin J. (premising her
judgment on an absence of juristic reason) and Cory J. (basing his on
the unjust factor free acceptance) in Peter v Beblow  1
McInnes, 'Making Sense' (n 6) 405.
Smith has detailed the various juristic reasons that developed in this
pre Garland period, and shown why many of them, such as
'legitimate expectations' and 'the rules of property law' have no place
in unjust enrichment law: Smith, 'Mystery' (n 21) 220-8. See also
Perell, 'Unjust Enrichment' (n 110) for a list of juristic reasons.
Smith, 'Mystery' (n 21) 214.
McInnes, 'Making Sense' (n 6) 405.
 1 SCR 629.
Garland, paras. 44-6. It is beyond the scope of this paper to
consider all of the problems associated with this reformulation, such
as the insistence that unjust enrichment is an equitable doctrine and
that certain defences will operate in some cases but not in others
(without any guidance provided). For a criticism of these aspects, see
Smith, 'Juristic Reasons' (n 30) ; McInnes, 'Palm Tree' (n 33); and J.
Neyers, 'One Step Forward, Two Steps Back: Unjust Enrichment in the
Supreme Court of Canada', (2005) Lloyd's Maritime and Comm. L Q 435.
Garland, para 42.
As evidenced by the use of the word "includes" and the category of
"other obligations" on the list, Garland, para. 44. Recall
that Birks' list includes the residual category "other purposes", Birks
(n 2) 152.
Donative intent sits uncomfortably on the list of juristic reasons,
because while every other example is a legal figure outside
the law of restitution, it refers instead to a question of fact:
Smith, 'Juristic Reasons' (n 30) 290.
Garland cites Peter v Beblow  1 SCR 980 for recognizing
'donative intent' as a juristic category, but the phrase does not
appear in that case. Peter v Beblow instead uses the term
gift. Does donative intent mean legal gift? This is unclear. If the
terms are synonymous, then why invoke the vague concept of donative
intent? Furthermore, while the Court in Peter v Beblow
assumed that the provision of domestic services leading to enrichment
could be a gift if there was proof of intent to offer them
gratuitously, this does not accord with the current law of gifts which
is limited to gratuitous transfers of property: see Halsbury's Laws of
England, (4th ed.), vol. 20, 16; and Dannemann ,'English Law' (n 23)
366. Recall that Birks' use of 'grudging gift' is also inconsistent
with the law of gifts, as it applies to services and cases where the
transferor is ignorant of the transfer.
Garland, para. 46.
P. Birks, 'Misnomer', in Restitution: Past, Present & Future,
W. Cornish, et al. (eds.) (Oxford: Hart Publishing, 1998), 12; and M.
McInnes, 'Reflections on the Canadian Law of Unjust Enrichment: Lessons
From Abroad', (1999) 78 Can Bar Rev 430.
Birks (n 2) 116-7.
I will consider the unworkability of 'policy' when I discuss defences.
Indeed, under Garland once a policy defence is recognized
under the second branch of the test, it may become a juristic reason in
its own right, presumably falling in future cases under the first
branch, see Garland, para. 46.
Recall that Birks treats both a busker's services and escaping heat as
'grudging gifts' despite neither concerning the transfer of property:
Birks (n 2) 160 and 158, respectively. In Peter v Beblow the
Court contemplated the possibility that domestic services leading to
enrichment could be retained if there was proof of intention to gift
Virgo, 'Pyramid' (n 5) 9.
While Birks continued to view risk-taking as relevant to absence of
basis, his 'grudging gift' concept now seems to do much of that work.
The distinction between the concepts is problematically subtle.
Confusingly, while Birks treats escaping heat as a grudging gift, he
conflates gift and risk taking when discussing the officious busker:
"The busker wants to be paid but takes the risk of getting
nothing. The basis of his offering is not reciprocal payment but gift",
Birks (n 2) 158-60. It is a fiction to regard the busker as gifting his
services. As Virgo observes: "The real problem with the busker is that
he is a risk- taker and the notion of risk has become unacceptably
wrapped up with Birks' absence of basis analysis": Virgo, 'Pyramid' (n
Peter v Beblow  1 SCR 980.
Her failure to insist on adding her name to title in exchange for
providing services suggests her willingness to risk receiving nothing.
In other words, so long as she perceived, subjectively, that she may
not receive any proprietary interest in consideration for performing
household services, but continued to perform them in any event in the
mere hope of compensation, then risk-taking should operate to bar
recovery. In this respect, see Virgo, Principles (n 3) 40:
"Where the claimant can be considered to have taken the risk...[that]
the defendant may pay for the benefit without being obliged to do so,
it is not for the law of restitution to reallocate the risk so that the
defendant is required to make restitution... Where the claimant has
taken the risk he or she should be considered to have acted
Virgo, 'Pyramid' (n 5) 22.
(1999), 173 DLR (4th) 270, para. 43.
Tang reminds us that Birks was hostile to using the notion of morality
in the law of unjust enrichment, Tang, 'Obligations' (n 74) 146, citing
P. Birks, 'Annual Miegunyah Lecture: Equity, Conscience and Unjust
Enrichment' (1999) 23 MULR 1, 20-3.
Birks (n 2) 257-8. See Tang, 'Obligations' (n 74) 146.
Dannemann, 'English Law' (n 23) 368.
2004 SCC 75.
Pacific National Investments v. Victoria (City), 2003 BCCA
162, para 26.
PNI, para. 51.
For example, intent to contract was vitiated though mistake, or
donative intent was ineffective due to duress. See, McInnes, 'Making
Sense' (n 6) 409: 'Garland's absence of juristic reason necessarily
builds upon the types of consideration that historically served as
unjust factors". See also R. Grantham, 'Absence of Juristic Reason in
the Supreme Court of Canada', (2005) 13 RLR, 107.
R. Chambers, 'Canada', (2006) 14 RLR, 147.
McInnes, 'Palm Tree' (n 33) 107.
PNI was argued less than four months after Garland.
PNI, para. 13.
PNI, para. 31.
PNI, para. 31, emphasis mine.
Garland, paras. 49-53.
McInnes, 'Making Sense' (n 6) 405.
Grantham speculates that the reference to mistake in PNI is a
manifestation of the 'limited reconciliation' between unjust factors
and absence of basis embedded in Birks' pyramid: Grantham, 'Absence of
Juristic Reason' (n 140) 107.
 1 SCR 3.
Kingstreet, para. 4.
Smith, 'Kingstreet', n.35, 23.
Kingstreet, para. 31. There are many problems associated with
the Court's reasoning here, but, as they are unrelated to the
interpretation and application of the Garland framework, it
is beyond the scope of this paper to canvass them. For a fulsome
discussion, see Smith, 'Kingstreet' (n 39).
Smith, 'Kingstreet' (n 39) 22, citing, among others, Air Canada v
British Columbia,  1 SCR 1161.
Kingstreet, para. 38.
Kingstreet, para. 39.
Kingstreet, para. 58.
Smith, 'Juristic Reasons' (n 30) 301.
Grantham, 'Absence of Juristic Reason' (n 140) 106; Smith, 'Juristic
Reasons' (n 30) 301.
This is supported by the Court's reference to Garland as
'very complex', despite the fact that applying absence of basis to ultra
vires taxes is, as Smith notes, "extremely straightforward":
Smith, 'Kingstreet' (n 39) 23. It is also noteworthy that Bastarache J.
states (para. 36) that Garland was simply a 'restatement and
refinement" of previous Canadian jurisprudence, with reference to Peel
(Regional Municipality) v Canada,  3 SCR 762. This belies
what Garland really achieved and reveals a deep
misunderstanding either of Garland itself or of what came
before (or both). Indeed, as McInnes notes: "Garland was
momentous precisely because it replaced the common law model of unjust
enrichment with a civilian counterpart", M. McInnes, 'Restitution for
Ultra Vires Taxes', (2007) 123 LQR 368. See also Neyers, 'Two Steps
Back' (n 117) for a similar view that Garland was a "final
and forceful" break from the traditional approach.
Whereas the House of Lords in Woolwich Equitable Building Society
v Inland Revenue Commissioners  AC 7 employed constitutional
principles to establish a new policy based unjust factor, Kingstreet
is different because it removes the question from the law of unjust
enrichment alltogether. The implications of this are considerable,
including uncertainty as to what extent other principles from the law
of restitution would continue to apply, and, more seriously, the
possibility that in future situations the presence of a constitutional
remedy will stop a plaintiff from pursuing an otherwise available claim
in unjust enrichment: Smith, 'Kingstreet' (n 39).
(2005) 285 NBR (2d) 201.
Chambers, 'Canada' (n 141) 147.
2009 SCC 15
BMP, para. 23
BMP, para. 22
 3 All ER 522 Q.B., 541: "If a person pays money to another under
a mistake of fact which causes him to make the payment, he is prima
facie entitled to recover it as money paid under a mistake of
BMP, para. 52
M. McInnes, 'Forged Cheques, Tracing and Restitution in the Supreme
Court of Canada', (2009) 125 LQR 556.
Barker reminds us to consider the jurisprudence following the creation
of the tort of negligence, which also had an expansionary momentum and
non-comprehensive defences: Barker, 'Responsibility' (n 64) 65.
Recall that stage two of Garland creates a residual category
of defence based on public policy and the reasonable expectations of
the parties. The latter factor is doctrinally problematic. See McInnes,
'Palm Tree' (n 33). However, as it does not have an equivalent place in
Birks's scheme, it is beyond the scope of this paper to discuss it
See discussion in Section II, above.
Woolwich Equitable Building Society v Inland Revenue Commissioners
 AC 70 (HL).
Garland, para. 45; Birks (n 2) 116.
Garland, para. 45. Birks was equally clear that policies
favouring restitution are irrelevant to absence of basis and must be
supplanted, at the defence stage, by policies favouring retention:
Birks (n 2) 116
Garland, para. 57.
PNI, para. 57.
Kingstreet, para. 38.
 1 SCR 1161.
Kingstreet, para 38.
McInnes, 'Making Sense' (n 6) 413.
Kingstreet, para. 38.
Lipkin Gorman (a firm) v Karpnale Ltd  2 AC 548, 578.
McInnes, 'Palm Tree' (n 33) 133.
McInnes, 'Making Sense' (n 6) 400, citing Attorney General v Blake,
 AC 269 291 (HL).
S. Hedley, 'Unjust at Common Law: So Many Concepts, So Little Clarity',
(2006) 3 ERPL 407.
Beatson, 'Restitution in Canada' (n 49) 298-9.
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