In his ground-breaking book Unjust Enrichment, the great English scholar Peter Birks introduces his subject by pointing to its mercurial development in the common law: “Of the subjects which form the indispensable foundation of private law, unjust enrichment is the only one to have evaded the great rationalization achieved since the middle of the 19th century… It’s fragments, obscurely named, were instead tucked under the edges of contract and trusts. The consequence is that even at the beginning of the 21st century unjust enrichment is still unfamiliar to most common lawyers”—Peter Birks, Unjust Enrichment.
Given the piecemeal and uneven development of the law of unjust enrichment in the courts, it is unsurprising that, arguably, the leading developments in unjust enrichment law have come from the academy. Seavey and Scott’s Restatement of the Law of Restitution in the 1930’s, Goff and Jones’ The Law of Restitution (1966), and Peter Birks’ An Introduction to the Law of Restitution (1985) and Unjust Enrichment (2003) developed the law of unjust enrichment by leaps and bounds. It was not until 1991 that the English courts recognised unjust enrichment when the House of Lords decided Lipkin Gorman v. Karpnale Ltd,  3 WLR 10.
So what is unjust enrichment law? Birks has provided a succinct definition, saying that “the law of unjust enrichment is the law of all events materially identical to the mistaken payment of a non-existent debt” (Unjust Enrichment). Such events arise regularly in the course of business disputes, and involve one party transferring value to another party in a defective way, such that the value must be retransferred. Yet this apparently straightforward subject matter has been hotly debated in the last 20 years, with the common law and civil law approaching the subject from opposite ends.
Indeed, although overlapping in large part, unjust enrichment in the common law context is different than unjust enrichment in the civil law context. While liability under both the civilian and common law systems requires the defendant to be enriched at the plaintiff’s expense, the civilian system requires this enrichment to be without an explanatory basis, whereas the common law requires the enrichment to be unjust. In other words, the civilian system imposes restitution on a defendant unless there is an explanatory basis for the enrichment, while the common law will not impose restitution unless there is an unjust factor involved.
It is important to understand this basic difference between the civil and common law systems because it is between these systems that Canadian unjust enrichment law appears to fluctuate. The leading Canadian case on unjust enrichment is Garland v. Consumers’ Gas Co., 2004 SCC 25 (“Garland”), and thus the Canadian jurisprudence on unjust enrichment may be divided into three sections: (1) Pre-Garland; (2) Garland; and (3) Post-Garland.
Historically, Canada followed the unjust factors approach consistent with the common law. However, in Rathwell v. Rathwell,  2 S.C.R. 436 (“Rathwell”), Dickson J. of the Supreme Court of Canada expressed the test as requiring proof of “absence of any juristic reason for the enrichment” (Rathwell). This choice of words was interesting because it seemed to adopt the civilian approach in which restitution is awarded where there is no explanatory basis for the enrichment. Despite the apparent similarity between the Rathwell language and the civilian approach, Canadian courts continued to use the unjust factors to determine liability in business disputes involving unjust enrichment.
In 1980 the Supreme Court, in Pettkus v. Becker  2 S.C.R. 834 (“Pettkus”), deployed an even more confusing version of the unjust enrichment test when Dickson J. discussed the requirements of the test in the following way: “In Rathwell I ventured to suggest there are three requirements to be satisfied before an unjust enrichment can be said to exist: an enrichment, a corresponding deprivation and absence of any juristic reason for the enrichment… 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 of the case’” (Pettkus).
This is problematic because the “absence of any juristic reason” language implies a civilian orientation in which restitution will be ordered unless there is an explanatory basis for the enrichment, while the requirement that “retention of the benefit” be “unjust in the circumstances” implies a common law approach in which restitution will not be ordered unless the enrichment is accompanied by an unjust factor.
Unsurprisingly, this formulation established further confusion because it seemed to draw upon elements of both the civilian and common law approaches, despite those approaches being in opposition to each other.
Following Pettkus, two competing lines of authority developed. Most cases continued to follow the traditional unjust factors approach, while others utilized the civilian model. Such confusion led Professor Lionel Smith to write, in 2000, that it was “totally unclear” 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]” (Lionel Smith, “The Mystery of ‘Juristic Reason’” (2000) 12 Sup. Ct. L. Rev. (2d) 211).
Garland v. Consumers’ Gas Co
The incoherence in the Canadian law of unjust enrichment was addressed head-on in Garland. There, Iacobucci J., on behalf of the Supreme Court of Canada, set out a newly reformulated test for the “unjust” requirement.
The new test would consist of two branches. At the first branch, the plaintiff must prove that the facts do not fall within an established category of juristic reason. Established categories included contract, disposition of law, donative intent and “other valid common law, equitable or statutory obligations” (Garland). If there is no juristic reason from an established category, then restitution is prima facie available.
At the second branch of the test, the defendant bears a de facto burden of proof to show some reason why the enrichment should be retained. At this stage, public policy and the parties’ reasonable expectations are important considerations (Garland).
What is notable about this judgment is that it shifts the analysis to a decidedly civilian orientation, yet unjust factors continue to be relevant in the sense that an unjust factor may explain the absence of an apparent juristic reason (Chris Hunt, “The Decline of Juristic Reasons? Unjust Enrichment and the Supreme Court of Canada”) (“Hunt”). This approach could be applied in a principled manner if the unjust factors were consulted only to determine the existence of a valid legal basis for the enrichment. Keeping unjust factors restricted in this way would acknowledge that the primary reason for restitution is the absence of basis and not the unjust factor itself. Unfortunately, in the Post-Garland era unjust factors have not been confined in such a way, with the result that unjust factors have been considered as primary, rather than secondary, reasons for restitution (Hunt).
Following Garland, the Supreme Court of Canada has, unfortunately, failed to consistently or coherently apply the test in a principled manner.
In Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75 (“PNI”) , the Court first determined, consistent with the Garland test, that there was no juristic reason for the enrichment in question. However, following this determination, Binnie J. (for the court) said that the enrichment resulted from a mistake common to the parties, and that this was important, as the absence of such mistake might have changed the outcome of the case. The problem with this is that mistake is an unjust factor, and so reference to it as such was unnecessary following the determination that there was no juristic reason for the enrichment (Hunt).
As in PNI, the Court, in Kingstreet Investments Ltd. v. New Brunswick (Department of Finance), 2007 SCC 1 (“Kingstreet”) , explained the necessity of proof of compulsion—an unjust factor—in actions for recovery of payments made under protest in a non-governmental context. Once again, such recourse to unjust factors is, under a strict application of the Garland test, unnecessary once it has been established that there is no juristic reason for the enrichment.
Finally, in B.M.P. Global Distribution Inc. v. Bank of Nova Scotia, 2009 SCC 15 (“B.M.P.”) , the Court exhibited perhaps “the most perplexing example of its tendency to treat unjust factors as master reasons for restitution” (Hunt). In this case, the unjust factor in question was mistake of fact. A rogue had caused the Royal Bank of Canada (“RBC”) to withdraw, on the basis of a forged check, money from a company’s account at RBC that was then forwarded to an account held by BMP at the Bank of Nova Scotia.
The Court ordered restitution on the basis that RBC was entitled, due to mistake of fact, to recover the funds it transferred pursuant to the forged check. The problem with this is that the Court analysed the case using an unjust factor (mistake of fact) without any consideration of Garland or juristic reasons (Hunt).
The Canadian law of unjust enrichment has developed in uneven fashion, making it difficult to predict how the courts will deal with business disputes involving unjust enrichment. Prior to Garland, the cases were split between the common law unjust factors approach and the civilian absence of basis approach. The Supreme Court of Canada attempted to rectify this situation in Garland, in which the Court set out a two stage test affirming the civilian model, while retaining the relevance of unjust factors as possible reasons for establishing absence of basis.
Unfortunately, the post-Garland jurisprudence has been confused. In PNI and Kingstreet, the Court relied upon unjust factors independent of the absence of basis analysis in contravention of a strict application of the Garland test. Worse still, in B.M.P., the Court determined restitution without even considering Garland or juristic reasons.
As a result, the Canadian law of unjust enrichment seems to be in sorry state, and would benefit from clear instruction, by the Supreme Court of Canada, as to the proper role of unjust factors in the absence of juristic reasons analysis.