Western Canada Business Litigation Blog

The Remedy of “Money Had and Received.”

Posted in Civil Litigation
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Over the years, the courts have developed various remedies to allow for the recovery of money in circumstances where fairness simply demands it. These remedies arise in situations where there is no legal or contractual relationship between the parties that might otherwise ground such a claim.  Situations like this arise where one person pays another sums of money under the mistaken belief that the funds are lawfully owed. This happens when a bank makes a mistake and credits your account with funds they were supposed to pay to someone else or where they put an extra zero on the amount of a deposit.  In order to address such cases, and relying on equitable principles, the courts developed restitutionary remedies such as “unjust enrichment” and “money had and received.” These remedies are what the press often derisively call “judge made law.”

“Unjust enrichment” is available where there has been an enrichment of one party, a corresponding deprivation of the other and there is “an absence of juristic reason for the enrichment.” This type of situation arises, for example, where someone pays money or otherwise bestows value to another by mistake or on mistaken grounds. Provided the recipient has not, in good faith, materially changed their legal position as a consequence of receiving this benefit, the courts will order the transferred value repaid. Cases of this type often hinge on whether there is a “juristic reason” for the original payment. A “juristic reason” includes things like contract, a gift or voluntary disposition, a statutory requirement or a disposition imposed by law, such as transfer to a joint tenant on death.

One recent example of a successful unjust enrichment claim involved a dispute over the purchase of real property. Based on an asserted promise that the defendants would transfer the property to the plaintiffs once they qualified for financing, the plaintiffs paid various expenses for the defendant’s benefit such as the mortgage and property taxes. They also did renovations on the property at their own expense. The property was never transferred and the plaintiffs sued to get their money back. The court found unjust enrichment applied because “there was no reason in law or justice” for the defendants to retain the benefits conferred by the plaintiffs.

“Money had and received” is a slightly different remedy and applies in different circumstances. It is available where a payment or transfer of value takes place voluntarily but is made “under the compulsion of urgent and pressing necessity.” These situations usually arise where the parties are operating under a mistake or disagree over the nature or amount of an obligation to pay: for example, whether tolls are lawfully owing for the use of a bridge or whether the amounts calculated and paid under a complicated contract are accurate. The law will not rescue a plaintiff where they voluntarily make payment and are knowledgeable about the underlying facts. In order to recover in a claim for “money had and received,” a plaintiff must establish that, in making the subject payments, they had no practical alternatives but to do so. Whether that is actually so is a very fact dependent analysis and includes an assessment of the reasonableness of the plaintiff’s conduct when measured against any other available alternatives. The courts describe this “practical compulsion”: was the plaintiff practically compelled to pay where no reasonable alternative was available.

The principle of money had and received was applied in a recent case in which there was a dispute over the proper rate payable under a complicated contract for the supply of gas. The gas supplier told the customer that if they did not pay the rate demanded, the gas would be cut off. The customer disagreed with the rate but, to avoid having no gas in the short term, paid the rate demanded.  The customer subsequently sued arguing that they paid more than they were contractually obliged to pay and, given the threat to cut off the gas supply, had acted under practical compulsion. The court agreed and they recovered $824,888.13.

If you are out of pocket because of a mistake or because you felt there was no practical alternative other than to pay money to someone, these remedies may be of assistance to you. They are remedies developed over centuries by judges to address situations of unfairness or mistake. These judge made remedies can provide an effective tool to recover funds in appropriate circumstances.