Mr Jason W. Neyers,
Law Clerk, Ontario Court of Appeal.

Dear Mr Neyers,

To your Replication to my Plea to your Declaration, I rejoin as follows.

In case it has not already become apparent, I confess to sharing (for the reasons he gives) the scepticism expressed by Dr Evans in his e-missive of the 2^nd inst. I have an additional general objection to the judicial attempts to introduce restitution to English law as a head of rights and obligations, instead of letting it continue to be recognized only as an occasional remedy. Without the demonstration of incuria and without the warrant either of statute or of any other objective indication that the custom of the Realm has changed, these attempts involve the House of Lords in departing both from its own previous decisions and from longstanding precedents of previously undoubted authority decided in the lower courts. Respectfully applying the words of Lord Campbell, L.C., in Beamish v. Beamish and respectfully adopting the arguments of Parker, Q.C., in Cassell & Co v. Broome, I deprecate the Practice Statement (Judicial Precedent) for its unconstitutionality. Respectfully applying the words of the Earl of Halsbury, L.C., in London Street Tramways v L.C.C., I deprecate the Statement also for its inconvenience in generating uncertainty and, on the authority of Lord Coke, its consequent illicitness. Should this inconvenience and illicitness not be eliminated, it must surely follow that English law will lose its attraction to merchants. The Lords of Appeal seem to me to be putting this jurisdiction in danger of forfeiting its lucrative commercial arbitrations and litigation.

I do not know what, in your view, are "the common law rules that are not considered part of contract and tort". I suspect them to comprise those relating to the action for money had and received. Like Lord Goff of Chieveley (and quite apart from the inconvenient lack of constitutional propriety), I respectfully deny the effectiveness of the House of Lords' purported overruling of Sinclair v. Brougham in Westdeutsche Bank v. Islington L.B.C. The point did not arise for decision and so could not form part of the ratio decidendi. Moreover, the Common Law's dependence, in the action for money had and received, on the implication of a contract is consistent with its fundamental principles. Unlike the arbitrary concept of unjust enrichment advocated by Lord Browne-Wilkinson, in the Westdeutsche Bank case, basing obligations on undertakings is compatible with the rule of law and the liberty of the subject. Under the rule of law the subject is free to do and to keep whatever he wishes, save what the law is known to forbid him to do or to keep. "Pacta sunt servanda", as a corollary of "modus et conventio vincunt legem", is one of the law's notorious principles. An allegation of unjust enrichment begs the question, which provisions of the law the enrichment infringes.

The implied contract giving rise to the use, whereon the action for money had and received depends, always comprises what must be the implicit promise of an honest and reasonable (and hence the presumed intention of every) man, in the circumstances. The making and acceptance of every payment (whether or not for value) requires the agreement of the payer and payee. Suppose, for instance, the officious bystander to have suggested to the maker and the receiver of a payment, as honest and reasonable men, that they include in their agreement the following express term:

Surely he must have received the testy response, "Oh, of course!"

In Donoghue v. Stevenson, Lord Atkin said:

The moral which I draw from these words is that simplism combines fatally with generalization in two ways: it so extends the general as to take insufficient account of the peculiar requirements of the particular; and it takes the particular as in every respect an exemplar of the general. That, in his paraphrase of the parable of the Good Samaritan, Lord Atkin himself exceeded his function is, in my respectful submission, implicit in the speech of Lord Simon of Glaisdale in Lupton v. F.A. & A.B. Ltd, where he refers to the distinction drawn in Farr v. Butters Bros & Co.

Lord Atkin's warning applies as well to the academic as to the practitioner. The approach proper to both is founded on the fundamental characteristic of English law, which was identified by Prof. René David, in his Traité Élémentaire de Droit Civil Comparé, and which gives it particularity and hence its precision:

Only when one has identified their particular relationship (be it banker and customer, banker and borrower, vendor and purchaser of land, insurer and insured against fire, assurer and assured of a life, neighbours, doctor and patient, solicitor and client, owner and possessor of an asset, etc.) can one discover what (if any) are the obligations owed by the defendant to the plaintiff, arising out of contract, tort or trust as affected (if at all) by agency or property. Viscount Simonds made the same point in Lister v. Romford Ice & Cold Storage Co., in his reference (however tentative) to status. It explains why Sir Mackenzie Chalmers and Sir Frederick Pollock drew separate bills to govern bills of exchange, the sale of goods, marine insurance and partnership. It justifies Chitty's having written not on "Contract", but on "Contracts" and likewise Clerk and Lindsell on "Torts".

Hence, in my respectful submission, the Canadian formulation of unjust enrichment as a cause of action for restitution starts in the wrong place. If the plaintiff claims an asset or its value from the defendant, he must do so on the basis of the latter's tort, or breach of contract, or breach of trust. According to what as an undergraduate and in practice I found to be the received wisdom, the plaintiff at law or in equity cannot begin to persuade a judge of the possibility of such a wrong without first establishing what is the relationship in which he stands to the defendant. It is in the nature of their relationship that the plaintiff must find the alleged right, whereof the defendant's alleged breach is the subject of the action. Thus possession is nine (or eleven) points of the law. For it requires a "juridical reason" to rebut the presumption expressed by the maxim, omnia praesumuntur solenniter esse acta, and the consequently presumed lawfulness of the defendant's possession. Without a prima facie case of the defendant's wrongdoing, no juridical reason or other explanation is required of the defendant's possession of anything.

Here, in my respectful submission, lay the roots of the Law Lords' errors when they were theorizing as to the basis of the council's liability in Westdeutsche. The errors were only obiter, because the sole issue before the House was how much interest was to be added to the money, which the council admitted it was liable to repay. The plaintiff had claimed the refund of money, which it had paid to the council, on the ground that the contract, under which the payment was made, was ultra vires the council. This was admitted; but the admission meant nothing, unless one asked what was the relationship between the parties. For in the relationship lay the explanation for the contract's being ultra vires. The relationship was that formed between a bank and a local government authority by an agreement to speculate with the latter's money. This relationship had ramifications. A local government authority does not exist for its own sake. Under the Local Government Act 1972, it is constituted for "the good rule and government" of those subject to its jurisdiction. On the true construction of the Act, this agreement was ultra vires because the council could not be free to speculate with resources held, not for its own benefit, but for that of its ratepayers and, as a corollary, of its legitimate creditors. Any recovery from the council of the money, paid to it by the other party to the speculation, needed to be consistent with this statutory protection of the interests of those dependent on the council. To allow such a recovery in an action for debt or for the execution of a trust constructed, whether institutionally or remedially, on the basis that the money had never ceased to be the other party's, would have lacked that consistency. It would mean the money could be recovered, whether or not this left the council in a worse position than if it had never received and spent the money. Of course, were this possible, the protection would be nugatory.

Conversely, as Lord Parker of Waddington implied in Sinclair v. Brougham, the availability of the constructive trusts, on which depend equitable tracing and subrogation, is proper in such circumstances. For without them the purpose of the ultra vires doctrine would be perverted, from shielding its subject against disadvantage, to allowing the subject a windfall. Tracing was not possible in Westdeutsche because the money received from the plaintiff had been paid into the council's overdrawn account with its regular bankers. On the other hand, there was no suggestion that the council had applied any money from any source to other than legitimate purposes. Accordingly (pace Hobhouse, J., at first instance) I respectfully submit that the plaintiff was entitled to be subrogated to the rights of the council's legitimate creditors, who had been paid with the money received from the plaintiff. With all due deference to Hobhouse, J., I cannot see that the cases cited by him warranted the burden of proof which he placed on the plaintiff. In any event, so far as I have discovered, the particular relationship between the plaintiff and the defendant council was ignored at the higher levels of the judicial hierarchy.

This generalization and simplism in the House of Lords are especially disappointing. They echo the similar errors as to the law of tortious negligence in Anns v. Merton L.B.C., which were corrected in Murphy v. Brentwood D.C. In the earlier case, Lord Wilberforce had said:

Following the Australian case of Shire of Sutherland v. Heyman, this two-stage test of liability was abandoned in Murphy. There, Lord Oliver of Aylmerton said:

Earlier, Lord Keith of Kinkel had adopted in preference to Lord Wilberforce's two-stage test Brennan, J.'s approach expressed in Shire of Sutherland v. Heyman:

The consolation of the history of Anns is that it does hold out the prospect of the correction of Westdeutsche, albeit after the lapse of ten more years.

In the meantime the concept of unjust enrichment continues to distort the law. Thus, the doctrine of ultra vires is now being used not to protect local government authorities, but to save from bad bargains those who deal with them. This is evidenced by Kleinwort Benson Ltd v. Lincoln C.C. Again the allegation of unjust enrichment distracted the House of Lords from a consideration of the relationship between the parties. Because of the distraction the problem again was not seen to be one of constitutional law; and so Re K.L. Tractors Ltd was ignored. Assuming it was by way of subrogation, recovery by the Westdeutsche Bank from the Islington L.B.C. was proper. There the contract was still executory on both sides; and so the bank was at risk of the council's reprobating the transaction in reliance on the doctrine of ultra vires. The council could not complain if the bank anticipated that risk; for, by speculating with, and thereby imperilling, its money, the council was in breach of its statutory duty, owed to its ratepayers and legitimate creditors, to act prudently. Because of "the fundamental principle that one may not at the same time approbate and reprobate", the council could not approbate the contract by insisting that it continue in force for so long as it benefited the council while at the same time reserving, as it was bound to do, the right to reprobate the contract, if and when the balance swung the other way. In Kleinwort Benson Ltd v. Lincoln C.C., however, the contract had been discharged by performance, which had given the advantage to the council. There was, therefore, no necessary implication, let alone an expression, of any such reservation on the part of the council. "The fundamental principle" had, therefore, ceased to apply. Nor, because the doctrine of ultra vires should operate only to protect the council, could the plaintiff rely on the disadvantage, which it had suffered. Accordingly, in my respectful opinion, the decision in favour of the plaintiff bank was wrong.

I respectfully submit that, for all the reasons given above and, especially, because of the question which it begs, unjust enrichment is a concept fundamentally alien to the Common Law and Equity. It is as indigestible as those other civilian notions, which, in the wisdom of previous generations of judges, were deliberately rejected. We all still admire the learning as to the Latin classification of bailments displayed by Holt, C.J., in Coggs v. Bernard. Yet, as he himself perhaps anticipated, these days the law is concerned not with this classification, but with the particular circumstances, of the bailment. The skill which the bailee held himself out as possessing, the consideration (if any) which has moved from the bailor, the bailee, or both, and the terms of the agreement, all moderate what is to be deemed reasonable care on the part of the bailee. In McRae v. Commonwealth Disposals Commission Dixon and Fullagar, JJ., mentioned another such rejection:

A third lurks in the continuing relevance of consideration to the enforceability of a bill of exchange. Despite what I understand to have been Lord Mansfield's endeavours to incorporate the lex mercatoria concerning negotiable instruments holus-bolus into the Common Law, the most his brethren would concede was a reversal of the burden of proof.

Until recently unjust enrichment was seen as no more than part of one of those laws, which (because of the internationality of the church, of the high seas and of arms) England could not help but take for limited purposes from the civilians. Because of their alienism, they were before 1875 quarantined wholly in separate courts. Thereafter, until 1971, the Probate, Divorce and Admiralty Division of the High Court to a large extent assumed responsibility for the quarantine. Hence a salvor's right to be rewarded for work and labour done, and money expended, in preserving the property of another, despite the lack of any request, express or implied, by or on behalf of that other, is characterized as having nothing to do with the Common Law or Equity, whether concerning contracts or otherwise. It depends solely on the law uniquely applied in a court of admiralty. Other matters, previously so quarantined, were the inquisitorial procedures of divorce and probate courts. None of them, in my respectful submission, should even now be seen as models for ordinary English law. The attitude to the civil law of previous generations of H.M. Judges in England was, in my respectful submission, utterly vindicated by their success (compared with Continentals) in upholding the liberties of the subject, by the preference of merchants (as well from abroad as from home) for the law and courts of this country over those of the Continent and by the desire of the Scots to have their mercantile law largely assimilated to that of this country.

Lord Coke wrote ,

Coke was clearly of the opinion that the last sentence is as true of any one generation as of any one man. I very much wish that modern judges were so humble.

Yours sincerely,

Gordon Goldberg.