Garland v. Consumers' Gas Co.

Garland v. Consumers' Gas Co.
Collection
Supreme Court Judgments
Date
2004-04-22
Neutral citation
2004 SCC 25
Report
[2004] 1 SCR 629
Case number
29052
Judges
Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.
On appeal from
Ontario
Subjects
Action
Notes
SCC Case Information: 29052
Decision Content
Garland v. Consumers’ Gas Co., [2004] 1 S.C.R. 629, 2004 SCC 25
Gordon Garland Appellant
v.
Enbridge Gas Distribution Inc., previously known as
Consumers’ Gas Company Limited Respondent
and
Attorney General of Canada, Attorney General for Saskatchewan,
Toronto Hydro‑Electric System Limited, Law Foundation
of Ontario and Union Gas Limited Interveners
Indexed as: Garland v. Consumers’ Gas Co.
Neutral citation: 2004 SCC 25.
File No.: 29052.
2003: October 9; 2004: April 22.
Present: Iacobucci, Major, Bastarache, Binnie, LeBel, Deschamps and Fish JJ.
on appeal from the court of appeal for ontario
Restitution — Unjust enrichment — Late payment penalty — Customers of regulated gas utility claiming restitution for unjust enrichment arising from late payment penalties levied by utility in excess of interest limit prescribed by s. 347 of Criminal Code — Whether customers have claim for unjust enrichment — Defences that can be mounted by utility to resist claim — Whether other ancillary orders necessary.
The respondent gas utility, whose rates and payment policies are governed by the Ontario Energy Board (“OEB”), bills its customers on a monthly basis, and each bill includes a due date for the payment of current charges. Customers who do not pay by the due date incur a late payment penalty (“LPP”) calculated at five percent of the unpaid charges for that month. The LPP is a one-time penalty, and does not compound or increase over time. The appellant and his wife paid approximately $75 in LPP charges between 1983 and 1995. The appellant commenced a class action seeking restitution for unjust enrichment of LPP charges received by the respondent in violation of s. 347 of the Criminal Code . He also sought a preservation order. In a previous appeal to this Court, it was held that charging the LPPs amounted to charging a criminal rate of interest under s. 347 and the matter was remitted back to the trial court for further consideration. As the case raised no factual dispute, the parties brought cross-motions for summary judgment. The motions judge granted the respondent’s motion for summary judgment, finding that the action was a collateral attack on the OEB’s orders. The Court of Appeal disagreed, but dismissed the appellant’s appeal on the grounds that his unjust enrichment claim could not be made out.
Held: The appeal should be allowed. The respondent is ordered to repay LPPs collected from the appellant in excess of the interest limit stipulated in s. 347 of the Code after the action was commenced in 1994 in an amount to be determined by the trial judge.
The test for unjust enrichment has three elements: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment. The proper approach to the juristic reason analysis is in two parts. The plaintiff must show that no juristic reason from an established category exists to deny recovery. The established categories 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 that there is another reason to deny recovery. Courts should have regard at this point to two factors: the reasonable expectations of the parties and public policy considerations.
Here, the appellant has a claim for restitution. The respondent received the monies represented by the LPPs and had that money available for use in the carrying on of its business. The transfer of those funds constitutes a benefit to the respondent. The parties are agreed that the second prong of the test has been satisfied. With respect to the third prong, the only possible juristic reason from an established category that could justify the enrichment in this case is the existence of the OEB orders creating the LPPs under the “disposition of law” category. The OEB orders, however, do not constitute a juristic reason for the enrichment because they are inoperative to the extent of their conflict with s. 347 of the Criminal Code . The appellant has thus made out a prima facie case for unjust enrichment.
The respondent’s reliance on the orders is relevant when determining the reasonable expectations of the parties at the rebuttal stage of the juristic reason analysis even though it would not provide a defence if the respondent was charged under s. 347 of the Code. However, the overriding public policy consideration in this case is the fact that the LPPs were collected in contravention of the Criminal Code . As a matter of public policy, criminals should not be permitted to keep the proceeds of their crime. In weighing these considerations, the respondent’s reliance on the inoperative OEB orders from 1981-1994, prior to the commencement of this action, provides a juristic reason for the enrichment. After the action was commenced and the respondent was put on notice that there was a serious possibility its LPPs violated the Criminal Code , it was no longer reasonable to rely on the OEB rate orders to authorize the LPPs. Given that conclusion, it is only necessary to consider the respondent’s defences for the period after 1994.
The respondent cannot avail itself of any defence. The change of position defence is not available to a defendant who is a wrongdoer. Since the respondent in this case was enriched by its own criminal misconduct, it should not be permitted to avail itself of the defence. Section 18 (now s. 25) of the Ontario Energy Board Act should be read down so as to exclude protection from civil liability damage arising out of Criminal Code violations. As a result, the defence does not apply in this case and it is not necessary to consider the constitutionality of the section.
This action does not constitute an impermissible collateral attack on the OEB’s orders. The OEB does not have exclusive jurisdiction over this dispute, which is a private law matter under the competence of civil courts, nor does it have jurisdiction to order the remedy sought by the appellant. Moreover, the specific object of the action is not to invalidate or render inoperative the OEB’s orders, but rather to recover money that was illegally collected by the respondent as a result of OEB orders. In order for the regulated industries defence to be available to the respondent, Parliament needed to have indicated, either expressly or by necessary implication, that s. 347 of the Code granted leeway to those acting pursuant to a valid provincial regulatory scheme. Section 347 does not contain any such indication.
The de facto doctrine does not apply in this case because it only attaches to government and its officials in order to protect and maintain the rule of law and the authority of government. An extension of the doctrine to a private corporation regulated by a government authority is not supported by the case law and does not further the doctrine’s underlying purpose.
A preservation order is not appropriate in this case. The respondent has ceased to collect the LPPs at a criminal rate, so there would be no future LPPs to which a preservation order could attach. Even with respect to the LPPs paid between 1994 and the present, a preservation order should not be granted because it would serve no practical purpose, because the appellant has not satisfied the criteria in the Ontario Rules of Civil Procedure, and because Amax can be distinguished from this case. A declaration that the LPPs need not be paid would similarly serve no practical purpose and should not be made.
Cases Cited
Applied: Peter v. Beblow, [1993] 1 S.C.R. 980; explained: Pettkus v. Becker, [1980] 2 S.C.R. 834; Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762; referred to: Garland v. Consumers’ Gas Co., [1998] 3 S.C.R. 112; Sprint Canada Inc. v. Bell Canada (1997), 79 C.P.R. (3d) 31; Ontario Hydro v. Kelly (1998), 39 O.R. (3d) 107; Mahar v. Rogers Cablesystems Ltd. (1995), 25 O.R. (3d) 690; Berardinelli v. Ontario Housing Corp., [1979] 1 S.C.R. 275; Sharwood & Co. v. Municipal Financial Corp. (2001), 53 O.R. (3d) 470; Rural Municipality of Storthoaks v. Mobil Oil Canada, Ltd., [1976] 2 S.C.R. 147; RBC Dominion Securities Inc. v. Dawson (1994), 111 D.L.R. (4th) 230; Rathwell v. Rathwell, [1978] 2 S.C.R. 436; Reference re Goods and Services Tax, [1992] 2 S.C.R. 445; Mack v. Canada (Attorney General) (2002), 60 O.R. (3d) 737; Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161; M & D Farm Ltd. v. Manitoba Agricultural Credit Corp., [1999] 2 S.C.R. 961; Transport North American Express Inc. v. New Solutions Financial Corp., [2004] 1 S.C.R. 249, 2004 SCC 7; Oldfield v. Transamerica Life Insurance Co. of Canada, [2002] 1 S.C.R. 742, 2002 SCC 22; Lipkin Gorman v. Karpnale Ltd., [1992] 4 All E.R. 512; Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77, 2003 SCC 63; Wilson v. The Queen, [1983] 2 S.C.R. 594; R. v. Litchfield, [1993] 4 S.C.R. 333; Attorney General of Canada v. Law Society of British Columbia, [1982] 2 S.C.R. 307; R. v. Jorgensen, [1995] 4 S.C.R. 55; Reference re Manitoba Language Rights, [1985] 1 S.C.R. 721; Amax Potash Ltd. v. Government of Saskatchewan, [1977] 2 S.C.R. 576.
Statutes and Regulations Cited
Civil Code of Quebec, S.Q. 1991, c. 64, arts. 1493, 1494.
Constitution Act, 1867, ss. 91(19) , (27) , 92(13) .
Criminal Code, R.S.C. 1985, c. C-46, ss. 15 , 347 .
Municipal Franchises Act, R.S.O. 1990, c. M.55.
Ontario Energy Board Act, R.S.O. 1990, c. O.13, s. 18.
Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sch. B, s. 25.
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 45.02.
Authors Cited
Constantineau, Albert. A Treatise on the De Facto Doctrine. Toronto: Canada Law Book, 1910.
Fridman, Gerald Henry Louis. Restitution, 2nd ed. Scarborough, Ont.: Carswell, 1992.
Goff of Chieveley, Robert Goff, Baron, and Gareth Jones. The Law of Restitution, 6th ed. London: Sweet & Maxwell, 2002.
Lange, Donald J. The Doctrine of Res Judicata in Canada. Markham, Ont.: Butterworths, 2000.
Maddaugh, Peter D., and John D. McCamus. The Law of Restitution. Aurora, Ont.: Canada Law Book, 1990.
McInnes, Mitchell. “Unjust Enrichment — Restitution — Absence of Juristic Reason: Campbell v. Campbell” (2000), 79 Can. Bar Rev. 459.
Smith, Lionel. “The Mystery of ‘Juristic Reason’” (2000), 12 S.C.L.R. (2d) 211.
Ziegel, Jacob S. “Criminal Usury, Class Actions and Unjust Enrichment in Canada” (2002), 18 J. Cont. L. 121.
APPEAL from a judgment of the Ontario Court of Appeal (2001), 57 O.R. (3d) 127, 208 D.L.R. (4th) 494, 152 O.A.C. 244, 19 B.L.R. (3d) 10, [2001] O.J. No. 4651 (QL), affirming a decision of the Superior Court of Justice (2000), 185 D.L.R. (4th) 536, [2000] O.J. No. 1354 (QL). Appeal allowed.
Michael McGowan, Barbara L. Grossman, Dorothy Fong and Christopher D. Woodbury, for the appellant.
Fred D. Cass, John D. McCamus and John J. Longo, for the respondent.
Christopher M. Rupar, for the intervener the Attorney General of Canada.
Thomson Irvine, for the intervener the Attorney General for Saskatchewan.
Alan H. Mark and Kelly L. Friedman, for the intervener Toronto Hydro‑Electric System Limited.
Mark M. Orkin, Q.C., for the intervener the Law Foundation of Ontario.
Patricia D. S. Jackson and M. Paul Michell, for the intervener Union Gas Limited.
The judgment of the Court was delivered by
1 Iacobucci J. — At issue in this appeal is a claim by customers of a regulated utility for restitution for unjust enrichment arising from late payment penalties levied by the utility in excess of the interest limit prescribed by s. 347 of the Criminal Code, R.S.C. 1985, c. C-46 . More specifically, the issues raised include the necessary ingredients to a claim for unjust enrichment, the defences that can be mounted to resist the claim, and whether other ancillary orders are necessary.
2 For the reasons that follow, I am of the view to uphold the appellant’s claim for unjust enrichment and therefore would allow the appeal.
I. Facts
3 The respondent Consumers’ Gas Company Limited, now known as Enbridge Gas Distribution Inc., is a regulated utility which provides natural gas to commercial and residential customers throughout Ontario. Its rates and payment policies are governed by the Ontario Energy Board (“OEB” or “Board”) pursuant to the Ontario Energy Board Act, R.S.O. 1990, c. O.13 (“OEBA”), and the Municipal Franchises Act, R.S.O. 1990, c. M.55. The respondent cannot sell gas or charge for gas-related services except in accordance with rate orders issued by the Board.
4 Consumers’ Gas bills its customers on a monthly basis, and each bill includes a due date for the payment of current charges. Customers who do not pay by the due date incur a late payment penalty (“LPP”) calculated at five percent of the unpaid charges for that month. The LPP is a one-time penalty, and does not compound or increase over time.
5 The LPP was implemented in 1975 following a series of rate hearings conducted by the OEB. In granting Consumers’ Gas’s application to impose the penalty, the Board noted that the primary purpose of the LPP is to encourage customers to pay their bills promptly, thereby reducing the cost to Consumers’ Gas of carrying accounts receivable. The Board also held that such costs, along with any special collection costs arising from late payments, should be borne by the customers who cause them to be incurred, rather than by the customer base as a whole. In approving a flat penalty of five percent, the OEB rejected the alternative course of imposing a daily interest charge on overdue accounts. The Board reasoned that an interest charge would not provide sufficient incentive to pay by a named date, would give little weight to collection costs, and might seem overly complicated. The Board recognized that if a bill is paid very soon after the due date, the penalty would, if calculated as an interest charge, be a very high rate of interest. However, it noted that customers could avoid such a charge by paying their bills on time, and that, in any event, in the case of the average bill the dollar amount of the penalty would not be very large.
6 The appellant Gordon Garland is a resident of Ontario and has been a Consumers’ Gas customer since 1983. He and his wife paid approximately $75 in LPP charges between 1983 and 1995. In a class action on behalf of over 500,000 Consumers’ Gas customers, Garland asserted that the LPPs violate s. 347 of the Criminal Code . That case also reached the Supreme Court of Canada, which held that charging the LPPs amounted to charging a criminal rate of interest under s. 347 and remitted the matter back to the trial court for further consideration (Garland v. Consumers’ Gas Co., [1998] 3 S.C.R. 112 (“Garland No. 1”)). Both parties have now brought cross-motions for summary judgment.
7 The appellant now seeks restitution for unjust enrichment of LPP charges received by the respondent in violation of s. 347 of the Code. He also seeks a preservation order requiring Consumers’ Gas to hold LPPs paid during the pendency of the litigation subject to possible repayment.
8 The motions judge granted the respondent’s motion for summary judgment, finding that the action was a collateral attack on the OEB order. He dismissed the application for a preservation order. A majority of the Court of Appeal disagreed with the motions judge’s reasons, but dismissed the appeal on the grounds that the appellant’s unjust enrichment claim could not be made out.
II. Relevant Statutory Provisions
9 Ontario Energy Board Act, R.S.O. 1990, c. O.13
18. An order of the Board is a good and sufficient defence to any proceeding brought or taken against any person in so far as the act or omission that is the subject of the proceeding is in accordance with the order.
Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sch. B
25. An order of the Board is a good and sufficient defence to any proceeding brought or taken against any person in so far as the act or omission that is the subject of the proceeding is in accordance with the order.
Criminal Code, R.S.C. 1985, c. C‑46
15. No person shall be convicted of an offence in respect of an act or omission in obedience to the laws for the time being made and enforced by persons in de facto possession of the sovereign power in and over the place where the act or omission occurs.
347. (1) Notwithstanding any Act of Parliament, every one who
(a) enters into an agreement or arrangement to receive interest at a criminal rate, or
(b) receives a payment or partial payment of interest at a criminal rate,
is guilty of
(c) an indictable offence and is liable to imprisonment for a term not exceeding five years, or
(d) an offence punishable on summary conviction and is liable to a fine not exceeding twenty‑five thousand dollars or to imprisonment for a term not exceeding six months or to both.
III. Judicial History
A. Ontario Superior Court of Justice (2000), 185 D.L.R. (4th) 536
10 As this case raised no factual disputes, all parties agreed that summary judgment was the proper procedure on the motion. Winkler J. found that the appellant’s claim could not succeed in law and that there was no serious issue to be tried. In so finding, he held that the “regulated industries defence” was not a complete defence to the claim. On his reading of the relevant case law, the dominant consideration was whether the express statutory language afforded a degree of flexibility to provincial regulators. Section 347 affords no such flexibility, so the defence is not available.
11 Nor, in Winkler J.’s view, did s. 15 of the Criminal Code act as a defence. Section 15 was a provision of very limited application, originally enacted to ensure that persons serving the Monarch de facto could not be tried for treason for remaining faithful to the unsuccessful claimant to the throne. While it could have a more contemporary application, it was limited on its face to actions or omissions occurring pursuant to the authority of a sovereign power. As the OEB was not a sovereign power, it did not apply.
12 Winkler J. found that the proposed action was a collateral attack on the OEB’s orders. The OEBA indicated repeatedly that the OEB has exclusive control over matters within its jurisdiction. In addition, interested parties were welcome to participate in OEB hearings, and OEB orders were reviewable. The appellant did not avail himself of any of these opportunities, choosing instead to challenge the validity of the OEB orders in the courts. Winkler J. found that, unless attacked directly, OEB orders are valid and binding upon the respondent and its consumers. The OEB was not a party to the instant proceeding and its orders were not before the court. Winkler J. noted that the setting of rates is a balancing exercise, with LPPs being one factor under consideration. Applying Sprint Canada Inc. v. Bell Canada (1997), 79 C.P.R. (3d) 31 (Ont. Ct. (Gen. Div.)), Ontario Hydro v. Kelly (1998), 39 O.R. (3d) 107 (Gen. Div.), and Mahar v. Rogers Cablesystems Ltd. (1995), 25 O.R. (3d) 690 (Gen. Div.), Winkler J. found that the instant action, although framed as a private dispute between two contractual parties, was in reality an impermissible collateral attack on the validity of OEB orders. It would be inappropriate for the court to determine matters that fall squarely within the OEB’s jurisdiction. Moreover, this Court’s decision in Garland No. 1 with respect to s. 347 provided the OEB with ample legal guidance to deal with the matter.
13 In case he was incorrect in that finding, Winkler J. went on to find that s. 18 of the OEBA provided a complete defence to the proposed action. He held that s. 18 was constitutionally valid because it did not interfere with Parliament’s jurisdiction over interest and the criminal law, or, to the extent that it did, the interference was incidental. Although the respondent did not strictly comply with the OEB order in that it waived LPPs for some customers, this did not preclude the respondent from relying on s. 18.
14 In case that finding was also mistaken, Winkler J. went on to consider whether the appellant’s claim for restitution was valid. The parties had conceded that the appellant had suffered a deprivation, and Winkler J. was satisfied that the respondent had received a benefit. However, he found that the OEB’s rate order constituted a valid juristic reason for the respondent’s enrichment.
15 Having reached those conclusions, Winkler J. declined to make a preservation order, as requested by the appellant, allowed the respondent’s motion for summary judgment and dismissed the appellant’s action. By endorsement, he ordered costs against the appellant.
B. Ontario Court of Appeal (2001), 208 D.L.R. (4th) 494
16 McMurtry C.J.O., for the majority, found that Winkler J. was incorrect in finding that there had been an impermissible collateral attack on a decision of the OEB because the appellant was not challenging the merits or legality of the OEB order or attempting to raise a matter already dealt with by the OEB. Rather, the proposed class action was based on the principles of unjust enrichment and raised issues over which the OEB had no jurisdiction. As such, the courts had jurisdiction over the proposed class action.
17 McMurtry C.J.O. further found that s. 25 of the 1998 OEBA (the equivalent provision to s. 18 of the 1990 OEBA) did not provide grounds to dismiss the appellant’s action. He did not agree that the respondent’s failure to comply strictly with the OEB orders made s. 25 inapplicable. Instead, he found that while s. 25 provides a defence to any proceedings in so far as the act or omission at issue is in accordance with the OEB order, legislative provisions restricting citizen’s rights of action attract strict construction (Berardinelli v. Ontario Housing Corp., [1979] 1 S.C.R. 275). The legislature could not reasonably be believed to have contemplated that an OEB order could mandate criminal conduct, and even wording as broad as that found in s. 25 could not provide a defence to an action for restitution arising from an OEB order authorizing criminal conduct. He noted that this decision was based on the principles of statutory interpretation, not on the federal paramountcy doctrine.
18 Section 15 of the Criminal Code did not provide the respondent with a defence, either. It was of limited application and is largely irrelevant in modern times. As for the “regulated industries defence”, it did not apply because the case law did not indicate that a company operating in a regulatory industry could act directly contrary to the Criminal Code .
19 Nonetheless, McMurtry C.J.O. held that the appellant’s unjust enrichment claim could not be made out. It had been conceded that the appellant suffered a deprivation, but McMurtry C.J.O. held that the appellant failed to establish the other two elements of the claim for unjust enrichment. While payment of money will normally be a benefit, McMurtry C.J.O. found that the payment of the late penalties in this case did not confer a benefit on the respondent. Taking the “straightforward economic approach” to the first two elements of unjust enrichment, as recommended in Peter v. Beblow, [1993] 1 S.C.R. 980, McMurtry C.J.O. noted that the OEB sets rates with a view to meeting the respondent’s overall revenue requirements. If the revenue available from LPPs had been set lower, the other rates would have been set higher. Therefore, the receipt of the LPPs was not an enrichment capable of giving rise to a restitutionary claim.
20 In case that conclusion was wrong, McMurtry C.J.O. went on to find that there was a juristic reason for any presumed enrichment. Under this aspect of the test, moral and policy questions were open for consideration, and it was necessary to consider what was fair to both the plaintiff and the defendant. It was therefore necessary to consider the statutory regime within which the respondent operated. McMurtry C.J.O. noted that the respondent was required by statute to apply the LPPs; it had been ordered to collect them and they were taken into account when the OEB made its rate orders. He found that it would be contrary to the equities in this case to require the respondent to repay all the LPP charges collected since 1981. Such an order would affect all of the respondent’s customers, including the vast majority who consistently pay on time.
21 The appellant argued that a preservation order was required even if his arguments on restitution were not successful because he could still be successful in arguing that the respondent could not enforce payment of the late penalties. As he had found no basis for ordering restitution, McMurtry C.J.O. saw no reason to make a preservation order. Moreover, the order requested would serve no practical purpose because it gave the respondent the right to spend the monies at stake. He dismissed the appeal and the appellant’s action. In so doing, he agreed with the motions judge that the appellant’s claims for declaratory and injunctive relief should not be granted.
22 As to costs, McMurtry C.J.O. found that there were several considerations that warranted overturning the order that the appellant pay the respondent’s costs. First, the order required him to pay the costs of his successful appeal to the Supreme Court of Canada. Second, even though the respondent was ultimately successful, it failed on two of the defences it raised at the motions stage and three of the defences it raised at the Court of Appeal. Third, the proceedings raised novel issues. McMurtry C.J.O. found that each party should bear its own costs.
23 Borins J.A., writing in dissent, was of the opinion that the appeal should be allowed. He agreed with most of McMurtry C.J.O.’s reasons, but found that the plaintiff class was entitled to restitution. In his opinion, the motions judge’s finding that the LPPs had enriched the respondent by causing it to have more money than it had before was supported by the evidence and the authorities. Absent material error, he held, it was not properly reviewable.
24 However, Borins J.A. found that the motions judge had erred in law in finding that there was a juristic reason for the enrichment. The motions judge had failed to consider the effect of the Supreme Court of Canada decision that the charges amount to interests at a criminal rate and that s. 347 of the Criminal Code prohibits the receipt of such interest. As a result of this decision, Borins J.A. felt that the rate orders ceased to have any legal effect and could not provide a juristic reason for the enrichment. A finding that the rate orders constituted a juristic reason for contravening s. 347 also allowed orders of a provincial regulatory authority to override federal criminal law and removed a substantial reason for compliance with s. 347 . Thus, he held that allowing the respondent to retain the LPPs was contrary to the federal paramountcy doctrine.
25 According to Borins J.A., finding the OEB orders to constitute a juristic reason would also be contrary to the authorities which have applied s. 347 in the context of commercial obligations. This line of cases required consideration of when restitution should have been ordered and for what portion of the amount paid. Finally, it would allow the respondent to profit from its own wrongdoing.
26 Borins J.A. was not sympathetic to the respondent’s claims that its change of position should allow it to keep the money it had collected in contravention of s. 347 , even if it could have recovered the same amount of money on an altered rate structure. He also noted that, in his opinion, the issue of recoverability should have been considered in the context of the class action, not on the basis of the representative plaintiff’s claim for $75. Borins J.A. would have allowed the appeal, set aside the judgment dismissing the appellant’s claim, granted partial summary judgment, and dismissed the respondent’s motion for summary judgment. The appellant would have been required to proceed to trial with respect to damages. He would also have declared that the charging and receipt of LPPs by the respondent violates s. 347(1) (b) of the Criminal Code and that the LPPs need not be paid by the appellant, and would have ordered that the respondent repay the LPPs received from the appellant, as determined by the trial judge. He would also have ordered costs against the respondent.
27 It should be noted that on January 9, 2003, McLachlin C.J. stated the following constitutional question:
Are s. 18 of the Ontario Energy Board Act, R.S.O. 1990, c. O.13, and s. 25 of the Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sched. B, constitutionally inoperative by reason of the paramountcy of s. 347 of the Criminal Code, R.S.C. 1985, c. C-46 ?
As will be clear from the reasons below, I have found it unnecessary to answer the constitutional question.
IV. Issues
28 1. Does the appellant have a claim for restitution?
(a) Was the respondent enriched?
(b) Is there a juristic reason for the enrichment?
2. Can the respondent avail itself of any defence?
(a) Does the change of position defence apply?
(b) Does s. 18 (now s. 25) of the OEBA (“s. 18/25”) shield the respondent from liability?
(c) Is the appellant engaging in a collateral attack on the orders of the Board?
(d) Does the “regulated industries” defence exonerate the respondent?
(e) Does the de facto doctrine exonerate the respondent?
3. Other orders sought by the appellant
(a) Should this Court make a preservation order?
(b) Should this Court make a declaration that the LPPs need not be paid?
(c) What order should this Court make as to costs?
V. Analysis
29 My analysis will proceed as follows. First, I will assess the appellant’s claim in unjust enrichment. Second, I will determine whether the respondent can avail itself of any defences to the appellant’s claim. Finally, I will address the other orders sought by the appellant.
A. Unjust Enrichment
30 As a general matter, the test for unjust enrichment is well established in Canada. The cause of action has three elements: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment (Pettkus v. Becker, [1980] 2 S.C.R. 834, at p. 848; Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762, at p. 784). In this case, the parties are agreed that the second prong of the test has been satisfied. I will thus address the first and third prongs of the test in turn.
(a) Enrichment of the Defendant
31 In Peel, supra, at p. 790, McLachlin J. (as she then was) noted that the word “enrichment” connotes a tangible benefit which has been conferred on the defendant. This benefit, she writes, can be either a positive benefit, such as the payment of money, or a negative benefit, for example, sparing the defendant an expense which he or she would otherwise have incurred. In general, moral and policy arguments have not been considered under this head of the test. Rather, as McLachlin J. wrote in Peter, supra, at p. 990, “[t]his Court has consistently taken a straightforward economic approach to the first two elements of the test for unjust enrichment”. Other considerations, she held, belong more appropriately under the third element — absence of juristic reason.
32 In this case, the transactions at issue are payments of money by late payers to the respondent. It seems to me that, as such, under the “straightforward economic approach” to the benefit analysis, this element is satisfied. Winkler J. followed this approach and was satisfied that the respondent had received a benefit. “Simply stated”, he wrote at para. 95, “as a result of each LPP received by Consumers’ Gas, the company has more money than it had previously and accordingly is enriched.”
33 The majority of the Court of Appeal for Ontario disagreed. McMurtry C.J.O. found that while payment of money would normally be a benefit, it was not in this case. He claimed to be applying the “straightforward economic approach” as recommended in Peter, supra, but accepted the respondent’s argument that because of the rate structure of the OEB, the respondent had not actually been enriched. Because LPPs were part of a scheme designed to recover the respondent’s overall revenue, any increase in LPPs was off‑set by a corresponding decrease in regular rates. Thus McMurtry C.J.O. concluded, “[t]he enrichment that follows from the receipt of LPPs is passed on to all [Consumers’ Gas] customers in the form of lower gas delivery rates” (para. 65). As a result, the real beneficiary of the scheme is not the respondent but is rather all of the respondent’s customers.
34 In his dissent, Borins J.A. disagreed with this analysis. He would have held that where there is payment of money, there is little controversy over whether or not a benefit was received and since a payment of money was received in this case, a benefit was conferred on the respondent.
35 The respondent submits that it is not enough that the plaintiff has made a payment; rather, it must also be shown that the defendant is “in possession of a benefit”. It argues that McMurtry C.J.O. had correctly held that the benefit had effectively been passed on to the respondent’s customers, so the respondent could not be said to have retained the benefit. The appellant, on the other hand, maintains that the “straightforward economic approach” from Peter, supra, should be applied and any other moral or policy considerations should be considered at the juristic reason stage of the analysis.
36 I agree with the analysis of Borins J.A. on this point. The law on this question is relatively clear. Where money is transferred from plaintiff to defendant, there is an enrichment. Transfer of money so clearly confers a benefit that it is the main example used in the case law and by commentators of a transaction that meets the threshold for a benefit (see Peel, supra, at p. 790; Sharwood & Co. v. Municipal Financial Corp. (2001), 53 O.R. (3d) 470 (C.A.), at p. 478; P. D. Maddaugh and J. D. McCamus, The Law of Restitution (1990), at p. 38; Lord Goff and G. Jones, The Law of Restitution (6th ed. 2002), at p. 18). There simply is no doubt that Consumers’ Gas received the monies represented by the LPPs and had that money available for use in the carrying on of its business. The availability of those funds constitutes a benefit to Consumers’ Gas. We are not, at this stage, concerned with what happened to this benefit in the ongoing operation of the regulatory scheme.
37 While the respondent rightly points out that the language of “received and retained” has been used with respect to the benefit requirement (see, for example, Peel, supra, at p. 788), it does not make sense that it is a requirement that the benefit be retained permanently. The case law does, in fact, recognize that it might be unfair to award restitution in cases where the benefit was not retained, but it does so after the three steps for a claim in unjust enrichment have been made out by recognizing a “change of position” defence (see, for example, Rural Municipality of Storthoaks v. Mobil Oil Canada, Ltd., [1976] 2 S.C.R. 147; RBC Dominion Securities Inc. v. Dawson (1994), 111 D.L.R. (4th) 230 (Nfld. C.A.)). Professor J. S. Ziegel, in his comment on the Ontario Court of Appeal decision in this case, “Criminal Usury, Class Actions and Unjust Enrichment in Canada” (2002), 18 J. Cont. L. 121, at p. 126, suggests that McMurtry C.J.O.’s reliance on the regulatory framework of the LPP in finding that a benefit was not conferred “was really a change of position defence”. I agree with this assessment. Whether recovery should be barred because the benefit was passed on to the respondent’s other customers ought to be considered under the change of position defence.
(b) Absence of Juristic Reason
(i) General Principles
38 In his original formulation of the test for unjust enrichment in Rathwell v. Rathwell, [1978] 2 S.C.R. 436, at p. 455 (adopted in Pettkus, supra, at p. 844), Dickson J. (as he then was) held in his minority reasons that for an action in unjust enrichment to succeed:
. . . the facts must display an enrichment, a corresponding deprivation, and the absence of any juristic reason — such as a contract or disposition of law — for the enrichment.
39 Later formulations of the test by this Court have broadened the types of factors that can be considered in the context of the juristic reason analysis. In Peter, supra, at p. 990, McLachlin J. held that:
It is at this stage that the court must consider whether the enrichment and detriment, morally neutral in themselves, are “unjust”.
. . . The test is flexible, and the factors to be considered may vary with the situation before the court.
40 The “juristic reason” aspect of the test for unjust enrichment has been the subject of much academic commentary and criticism. Much of the discussion arises out of the difference between the ways in which the cause of action of unjust enrichment is conceptualized in Canada and in England. While both Canadian and English causes of action require an enrichment of the defendant and a corresponding deprivation of the plaintiff, the Canadian cause of action requires that there be “an absence of juristic reason for the enrichment”, while English courts require “that the enrichment be unjust” (see discussion in L. Smith, “The Mystery of ‘Juristic Reason’” (2000), 12 S.C.L.R. (2d) 211, at pp. 212-13). It is not of great use to speculate on why Dickson J. in Rathwell, supra, expressed the third condition as absence of juristic reason but I believe that he may have wanted to ensure that the test for unjust enrichment was not purely subjective in order to be responsive to Martland J.’s criticism in his reasons that application of the doctrine of unjust enrichment contemplated by Dickson J. would require “immeasurable judicial discretion” (p. 473). The importance of avoiding a purely subjective standard was also stressed by McLachlin J. in her reasons in Peel, supra, at p. 802, in which she wrote that the application of the test for unjust enrichment should not be “case by case ‘palm tree’ justice”.
41 Perhaps as a result of these two formulations of this aspect of the test, Canadian courts and commentators are divided in their approach to juristic reason. As Borins J.A. notes in his dissent (at para. 105), while “some judges have taken the Pettkus formulation literally and have attempted to decide cases by finding a ‘juristic reason’ for a defendant’s enrichment, other judges have decided cases by asking whether the plaintiff has a positive reason for demanding restitution”. In his article, “The Mystery of ‘Juristic Reason’”, supra, which was cited at length by Borins J.A., Professor Smith suggests that it is not clear whether the requirement of “absence of juristic reason” should be interpreted literally to require that plaintiffs show the absence of a reason for the defendant to keep the enrichment or, as in the English model, the plaintiff must show a reason for reversing the transfer of wealth. Other commentators have argued that in fact there is no difference beyond semantics between the Canadian and English tests (see, for example, M. McInnes, “Unjust Enrichment — Restitution — Absence of Juristic Reason: Campbell v. Campbell” (2000), 79 Can. Bar Rev. 459).
42 Professor Smith argues that, if there is in fact a distinct Canadian approach to