Garland v. Consumers' Gas Co., 2004 SCC 25, [2004] 1 SCR 629

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 juristic reason, it is problematic because it requires the plaintiff to prove a negative, namely the absence of a juristic reason.  Because it is nearly impossible to do this, he suggests that Canada would be better off adopting the British model where the plaintiff must show a positive reason that it would be unjust for the defendant to retain the enrichment.  In my view, however, there is a distinctive Canadian approach to juristic reason which should be retained but can be construed in a manner that is responsive to Smith’s criticism.

43                               It should be recalled that the test for unjust enrichment is relatively new to Canadian jurisprudence.  It requires flexibility for courts to expand the categories of juristic reasons as circumstances require and to deny recovery where to allow it would be inequitable.  As McLachlin J. wrote in Peel, supra, at p. 788, the Court’s approach to unjust enrichment, while informed by traditional categories of recovery, “is capable,  however, of going beyond them, allowing the law to develop in a flexible way as required to meet changing perceptions of justice”.  But at the same time there must also be guidelines that offer trial judges and others some indication of what the boundaries of the cause of action are.  The goal is to avoid guidelines that are so general and subjective that uniformity becomes unattainable.

44                               The parties and commentators have pointed out that there is no specific authority that settles this question.  But recalling that this is an equitable remedy that will necessarily involve discretion and questions of fairness, I believe that some redefinition and reformulation is required.  Consequently, in my view, the proper approach to the juristic reason analysis is in two parts.  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, Smith’s objection to the Canadian formulation of the test that it required proof of a negative is answered.  The established categories that can constitute juristic reasons include a contract (Pettkus, supra), a disposition of law (Pettkus, supra), a donative intent (Peter, supra), and other valid common law, equitable or statutory obligations (Peter, supra).  If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis.

45                               The prima facie case is rebuttable, however, where the defendant can show that there is another reason to deny recovery.  As a result, there 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 in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery.

46                               As part of the defendant’s attempt to rebut, courts should have regard to two 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.  In other cases, a consideration of these factors will suggest that there was a juristic reason in the particular circumstances of a case which does not give rise to a new category of juristic reason that should be applied in other factual circumstances.  In a third group of cases, a consideration of these factors will yield a determination that there was no juristic reason for the enrichment.  In the latter cases, recovery should be allowed.  The point here is that this area is an evolving one and that further cases will add additional refinements and developments.

47                               In my view, this approach to the juristic reason analysis is consistent with the general approach to unjust enrichment endorsed by McLachlin J. in Peel, supra, where she stated that courts must effect a balance between the traditional “category” approach according to which a claim for restitution will succeed only if it falls within an established head of recovery, and the modern “principled” approach according to which relief is determined with reference to broad principles.  It is also, as discussed by Professor Smith, supra, generally consistent with the approach to unjust enrichment found in the civil law of Quebec (see, for example, arts. 1493 and 1494 of the Civil Code of Quebec, S.Q. 1991, c. 64). 

(ii)  Application

48                               In this case, the only possible juristic reason from an established category that could be used to justify the enrichment 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 rendered inoperative to the extent of their conflict with s. 347  of the Criminal Code .  The plaintiff has thus made out a prima facie case for unjust enrichment.

49                               Disposition of law is well established as a category of juristic reason.  In Rathwell, supra, Dickson J. gave as examples of juristic reasons “a contract or disposition of law” (p. 455).  In Reference re Goods and Services Tax, [1992] 2 S.C.R. 445 (“GST Reference”), Lamer C.J. held that a valid statute is a juristic reason barring recovery in unjust enrichment.  This was affirmed in Peter, supra, at p. 1018.  Most recently, in Mack v. Canada (Attorney General) (2002), 60 O.R. (3d) 737, the Ontario Court of Appeal held that the legislation which created the Chinese head tax provided a juristic reason which prevented recovery of the head tax in unjust enrichment.  In the leading Canadian text, The Law of Restitution, supra, McCamus and Maddaugh discuss the phrase “disposition of law” from Rathwell, supra, stating, at p. 46:

. . . it is perhaps self‑evident that an unjust enrichment will not be established in any case where enrichment of the defendant at the plaintiff’s expense is required by law.

It seems clear, then, that valid legislation can provide a juristic reason which bars recovery in restitution.

50                               Consumers’ Gas submits that the LPPs were authorized by the Board’s rate orders which qualify as a disposition of law.  It seems to me that this submission is predicated on the validity and operability of this scheme.  The scheme has been challenged by the appellant on the basis that it conflicts with s. 347  of the Criminal Code  and, as a result of the doctrine of paramountcy, is consequently inoperative.  In the GST Reference, supra, Lamer C.J. held that legislation provides a juristic reason “unless the statute itself is ultra vires” (p. 477).  Given that legislation that would have been ultra vires the province cannot provide a juristic reason, the same principle should apply if the provincial legislation is inoperative by virtue of the paramountcy doctrine.  This position is contemplated by Borins J.A. in his dissent when he wrote, at para. 149:

In my view, it would be wrong to say that the rate orders do not provide [Consumers’ Gas] with a defence under s. 18 of the OEBA because they have been rendered inoperative by the doctrine of federal paramountcy, and then to breathe life into them for the purpose of finding that they constitute a juristic reason for [Consumers’ Gas’s] enrichment.

51                               As a result, the question of whether the statutory framework can serve as a juristic reason depends on whether the provision is held to be inoperative.  If the OEB orders are constitutionally valid and operative, they provide a juristic reason which bars recovery.  Conversely, if the scheme is inoperative by virtue of a conflict with s. 347  of the Criminal Code , then a juristic reason is not present.  In my view, the OEB rate orders are constitutionally inoperative to the extent of their conflict with s. 347  of the Criminal Code .

52                               The OEB rate orders require the receipt of LPPs at what is often a criminal rate of interest.  Such receipt is prohibited by s. 347  of the Criminal Code .  Both the OEB rate orders and s. 347  of the Criminal Code  are intra vires the level of government that enacted them.  The rate orders are intra vires the province by virtue of s. 92(13) (property and civil rights) of the Constitution Act,   1867 .  Section 347  of the Criminal Code  is intra vires the federal government by virtue of s. 91(19) (interest) and s. 91(27) (criminal law power). 

53                               It should be noted that the Board orders at issue did not require Consumers’ Gas to collect the LPPs within a period of 38 days.  One could then make the argument that this was not an express operational conflict.  But to my mind this is somewhat artificial.  I say this because at bottom it is a necessary implication of the OEB orders to require payment within this period.  In that respect it should be treated as an express order for purposes of the paramountcy analysis.  Consequently, there is an express operational conflict between the rate orders and s. 347  of the Criminal Code  in that it is impossible for Consumers’ Gas to comply with both provisions.  Where there is an actual operational conflict, it is well settled that the provincial law is inoperative to the extent of the conflict (Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161, at p. 191; M & D Farm Ltd. v. Manitoba Agricultural Credit Corp., [1999] 2 S.C.R. 961).  As a result, the Board orders are constitutionally inoperative.  Because the Board orders are constitutionally inoperative, they do not provide a juristic reason.  It therefore falls to Consumers’ Gas to show that there was a juristic reason for the enrichment outside the established categories in order to rebut the prima facie case made out by the appellant.

54                               The second stage of juristic reason analysis requires a consideration of reasonable expectations of the parties and public policy considerations. 

55                               When the reasonable expectations of the parties are considered, Consumers’ Gas’s submissions are at first blush compelling.  Consumers’ Gas submits, on the one hand, that late payers cannot have reasonably expected that there would be no penalty for failing to pay their bills on time and, on the other hand, that Consumers’ Gas could reasonably have expected that the OEB would not authorize an LPP scheme that violated the Criminal Code .  Because Consumers’ Gas is operating in a regulated environment, its reliance on OEB orders should be given some weight.  An inability to rely on such orders would make it very difficult, if not impossible, to operate in this environment.  At this point, it should be pointed out that the reasonable expectation of the parties regarding LPPs is achieved by restricting the LPPs to the limit prescribed by s. 347  of the Criminal Code  and also would be consistent with this Court’s decision in Transport North American Express Inc. v. New Solutions Financial Corp., [2004] 1 S.C.R. 249, 2004 SCC 7.

56                               Consumers’ Gas’s reliance on the orders would not provide a defence if it was charged under s. 347  of the Criminal Code  because the orders are inoperative to the extent of their conflict with s. 347.  However, its reliance on the orders is relevant in the context of determining the reasonable expectations of the parties in this second stage of the juristic reason analysis.

57                              Finally, 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, a criminal should not be permitted to keep the proceeds of his crime (Oldfield v. Transamerica Life Insurance Co. of Canada, [2002] 1 S.C.R. 742, 2002 SCC 22, at para. 11; New Solutions, supra).  Borins J.A. focussed on this public policy consideration in his dissent.  He held that, in light of this Court’s decision in Garland No. 1, allowing Consumers’ Gas to retain the LPPs collected in violation of s. 347 would let Consumers’ Gas profit from a crime and benefit from its own wrongdoing.

58                              In weighing these considerations, from 1981-1994, Consumers’ Gas’s reliance on the inoperative OEB orders provides a juristic reason for the enrichment.  As the parties have argued, there are three possible dates from which to measure the unjust enrichment: 1981, when s. 347  of the Criminal Code  was enacted, 1994, when this action was commenced, and 1998, when this Court held in Garland No. 1 that the LPPs were limited by s. 347  of the Criminal Code .  For the period between 1981 and 1994, when the current action was commenced, there is no suggestion that Consumers’ Gas was aware that the LPPs violated s. 347  of the Criminal Code .  This mitigates in favour of Consumers’ Gas during this period.  The reliance of Consumers’ Gas on the OEB orders, in the absence of actual or constructive notice that the orders were inoperative, is sufficient to provide a juristic reason for Consumers’ Gas’s enrichment during this first period.

59                              However, in 1994, when this action was commenced, Consumers’ Gas was put on notice of the serious possibility that it was violating the Criminal Code  in charging the LPPs.  This possibility became a reality when this Court held that the LPPs were in excess of the s. 347 limit.  Consumers’ Gas could have requested that the OEB alter its rate structure until the matter was adjudicated in order to ensure that it was not in violation of the Criminal Code  or asked for contingency arrangements to be made.  Its decision not to do this, as counsel for the appellant pointed out in oral submissions, was a “gamble”.  After the action was commenced and Consumers’ Gas was put on notice that there was a serious possibility the LPPs violated the Criminal Code , it was no longer reasonable for Consumers’ Gas to rely on the OEB rate orders to authorize the LPPs. 

60                              Moreover, once this Court held that LPPs were offside, for purposes of unjust enrichment, it is logical and fair to choose the date on which the action for redress commenced.  Awarding restitution from 1981 would be unfair to the respondent since it was entitled to reasonably rely on the OEB orders until the commencement of this action in 1994.  Awarding restitution from 1998 would be unfair to the appellant.  This is because it would permit the respondent to retain LPPs collected in violation of s. 347 after 1994 when it was no longer reasonable for the respondent to have relied on the OEB orders and the respondent should be presumed to have known the LPPs violated the Criminal Code .  Further, awarding restitution from 1998 would deviate from the general rule that monetary remedies like damages and interest are awarded as of the date of occurrence of the breach or as of the date of action rather than the date of judgment.

61                               Awarding restitution from 1994 appropriately balances the respondent’s reliance on the OEB orders from 1981-1994 with the appellant’s expectation of recovery of monies that were charged in violation of the Criminal Code  once the serious possibility that the OEB orders were inoperative had been raised.  As a result, as of the date this action was commenced in 1994, it was no longer reasonable for Consumers’ Gas to rely on the OEB orders to insulate them from liability in a civil action of this type for collecting LPPs in contravention of the Criminal Code .  Thus, after the action was commenced in 1994, there was no longer a juristic reason for the enrichment of the respondent, so the appellant is entitled to restitution of the portion of monies paid to satisfy LPPs that exceeded an interest rate of 60 percent, as defined in s. 347  of the Criminal Code .

B.      Defences

62                               Having held that the appellant’s claim for unjust enrichment is made out for LPPs paid after 1994, it remains to be determined whether the respondent can avail itself of any defences raised.  It is only necessary to consider the defences for the period after 1994, when the elements of unjust enrichment are made out, and thus I will not consider whether the defences would have applied if there had been unjust enrichment before 1994.  I will address each defence in turn.

(a)   Change of Position Defence

63                               Even where the elements of unjust enrichment are made out, the remedy of restitution will be denied where an innocent defendant demonstrates that it has materially changed its position as a result of an enrichment such that it would be inequitable to require the benefit to be returned (Storthoaks, supra).  In this case, the respondent says that any “benefit” it received from the unlawful charges was passed on to other customers in the form of lower gas delivery rates.  Having “passed on” the benefit, it says, it should not be required to disgorge the amount of the benefit (a second time) to overcharged customers such as the appellant.  The issue here, however, is not the ultimate destination within the regulatory system of an amount of money equivalent to the unlawful overcharges, nor is this case concerned with the net impact of these overcharges on the respondent’s financial position.  The issue is whether, as between the overcharging respondent and the overcharged appellant, the passing of the benefit on to other customers excuses the respondent of having overcharged the appellant.

64                               The appellant submits that the defence of change of position is not available to a defendant who is a wrongdoer and that, since the respondent in this case was enriched by its own criminal misconduct, it should not be permitted to avail itself of the defence.  I agree.  The rationale for the change of position defence appears to flow from considerations of equity.  G. H. L. Fridman writes that “[o]ne situation which would appear to render it inequitable for the defendant to be required to disgorge a benefit received from the plaintiff in the absence of any wrongdoing on the part of the defendant would be if he has changed his position for the worse as a result of the receipt of the money in question” (Restitution (2nd ed. 1992), at p. 458).  In the leading British case on the defence, Lipkin Gorman v. Karpnale Ltd., [1992] 4 All E.R. 512 (H.L.), Lord Goff stated (at p. 533):

[I]t is right that we should ask ourselves: why do we feel that it would be unjust to allow restitution in cases such as these [where the defendant has changed his or her position]?  The answer must be that, where an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution.

65                               If the change of position defence is intended to prevent injustice from occurring, the whole of the plaintiff’s and defendant’s conduct during the course of the transaction should be open to scrutiny in order to determine which party has a better claim.  Where a defendant has obtained the enrichment through some wrongdoing of his own, he cannot then assert that it would be unjust to return the enrichment to the plaintiff.  In this case, the respondent cannot avail itself of this defence because the LPPs were obtained in contravention of the Criminal Code  and, as a result, it cannot be unjust for the respondent to have to return them.

66                              Thus, the change of position defence does not help the respondent in this case.  Even assuming that the respondent would have met the other requirements set out in Storthoaks, supra, the respondent cannot avail itself of the defence because it is not an “innocent” defendant given that the benefit was received as a result of a Criminal Code  violation.  It is not necessary, as a result, to discuss change of position in a comprehensive manner and I leave a fuller development of the other elements of this defence to future cases.

(b)   Section 18/25 of the Ontario Energy Board Act

67                               The respondent raises a statutory defence found formerly in s. 18 and presently in s. 25 of the 1998 OEBA.  The former and the present sections are identical, and read:

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.

I agree with McMurtry C.J.O. that this defence 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 we do not have to consider the constitutionality of the section.

68                               McMurtry C.J.O. was correct in his holding that legislative provisions purporting to restrict a citizen’s rights of action should attract strict construction (Berardinelli, supra).  In this case, I again agree with McMurtry C.J.O. that the legislature could not reasonably be believed to have contemplated that an OEB order could mandate criminal conduct, despite the broad wording of the section.  Section 18/25, thus, cannot provide a defence to an action for restitution arising from an OEB order authorizing criminal conduct.  As a consequence, like McMurtry C.J.O., I find the argument on s. 18/25 to be unpersuasive.

69                               Because I find that it could not have been the intention of the legislature to bar civil claims stemming from acts that offend the Criminal Code , on a strict construction, s. 18/25 cannot protect Consumers’ Gas from these types of claims.  If the provincial legislature had wanted to eliminate the possibility of such actions, it should have done so explicitly in the provision.  In the absence of such explicit provision, s. 18/25 must be read so as to exclude from its protection civil actions arising from violations of the Criminal Code  and thus does not provide a defence for the respondent in this case.

(c)   Exclusive Jurisdiction and Collateral Attack

70                               McMurtry C.J.O. was also correct in his holding that the OEB does not have exclusive jurisdiction over this dispute.  While the dispute does involve rate orders, at its heart it is a private law matter under the competence of civil courts and consequently the Board does not have jurisdiction to order the remedy sought by the appellant.

71                               In addition, McMurtry C.J.O. is correct in holding that this action does not constitute an impermissible collateral attack on the OEB’s order.  The doctrine of collateral attack prevents a party from undermining previous orders issued by a court or administrative tribunal (see Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77, 2003 SCC 63; D. J. Lange, The Doctrine of Res Judicata in Canada (2000), at pp. 369‑70).  Generally, it is invoked where the party is attempting to challenge the validity of a binding order in the wrong forum, in the sense that the validity of the order comes into question in separate proceedings when that party has not used the direct attack procedures that were open to it (i.e., appeal or judicial review).  In Wilson v. The Queen, [1983] 2 S.C.R. 594, at p. 599, this Court described the rule against collateral attack as follows:

It has long been a fundamental rule that a court order, made by a court having jurisdiction to make it, stands and is binding and conclusive unless it is set aside on appeal or lawfully quashed.  It is also well settled in the authorities that such an order may not be attacked collaterally —  and a collateral attack may be described as an attack made in proceedings other than those whose specific object is the reversal, variation, or nullification of the order or judgment.

Based on a plain reading of this rule, the doctrine of collateral attack does not apply in this case because here the specific object of the appellant’s action is not to invalidate or render inoperative the Board’s orders, but rather to recover money that was illegally collected by the respondent as a result of Board orders.  Consequently, the collateral attack doctrine does not apply.

72                               Moreover, the appellant’s case lacks other hallmarks of collateral attack.  As McMurtry C.J.O. points out at para. 30 of his reasons, the collateral attack cases all involve a party, bound by an order, seeking to avoid the effect of that order by challenging its validity in the wrong forum.  In this case, the appellant is not bound by the Board’s orders, therefore the rationale behind the rule is not invoked.  The fundamental policy behind the rule against collateral attack is to “maintain the rule of law and to preserve the repute of the administration of justice” (R. v. Litchfield, [1993] 4 S.C.R. 333, at p. 349).  The idea is that if a party could avoid the consequences of an order issued against it by going to another forum, this would undermine the integrity of the justice system.  Consequently, the doctrine is intended to prevent a party from circumventing the effect of a decision rendered against it.

73                               In this case, the appellant is not the object of the orders and thus there can be no concern that he is seeking to avoid the orders by bringing this action.  As a result, a threat to the integrity of the system does not exist because the appellant is not legally bound to follow the orders.  Thus, this action does not appear, in fact, to be a collateral attack on the Board’s orders.

(d)   The Regulated Industries Defence

74                               The respondent submits that it can avail itself of the “regulated industries defence” to bar recovery in restitution because an act authorized by a valid provincial regulatory scheme cannot be contrary to the public interest or an offence against the state and, as a result, the collection of LPPs pursuant to orders issued by the OEB cannot be considered to be contrary to the public interest and thus cannot be contrary to s. 347  of the Criminal Code .

75                               Winkler J. held that the underlying purpose of the defence, regulation of monopolistic industries in order to ensure “just and reasonable” rates for consumers, would be served in the circumstances and as a result the defence would normally apply.  However, because of the statutory language of s. 347, Winkler J. determined that the defence was not permitted in this case.  He wrote, at para. 34, “[t]he defendant can point to no case which allows the defence unless the federal statute in question uses the word ‘unduly’ or the phrase ‘in the public interest’”.  Absent such recognition in the statute of “public interest”, he held, no leeway for provincial exceptions exist. 

76                               I agree with the approach of Winkler J.  The principle underlying the application of the defence is delineated in Attorney General of Canada v. Law Society of British Columbia, [1982] 2 S.C.R. 307, at p. 356:

When a federal statute can be properly interpreted so as not to interfere with a provincial statute, such an interpretation is to be applied in preference to another applicable construction which would bring about a conflict between the two statutes.

Estey J. reached this conclusion after canvassing the cases in which the regulated industries defence had been applied.  Those cases all involved conflict between federal competition law and a provincial regulatory scheme, but the application of the defence in those cases had to do with the particular wording of the statutes in question.  While I cannot see a principled reason why the defence should not be broadened to apply to cases outside the area of competition law, its application should flow from the above enunciated principle.

77                               Winkler J. was correct in concluding that, 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 Criminal Code  granted leeway to those acting pursuant to a valid provincial regulatory scheme.  If there were any such indication, I would say that it should be interpreted, in keeping with the above principle, not to interfere with the provincial regulatory scheme.  But s. 347 does not contain the required indication for exempting a provincial scheme. 

78                               This view is further supported by this Court’s decision in R. v. Jorgensen, [1995] 4 S.C.R. 55.  In that case, the accused was charged with “‘knowingly’ selling obscene material ‘without lawful justification or excuse’” (para. 44).  The accused argued that the Ontario Film Review Board had approved the videotapes, therefore it had a lawful justification or excuse.  This Court considered whether approval by a provincial body could displace a criminal charge.  Sopinka J., for the majority, held that in order to exempt acts taken pursuant to a provincial regulatory body from the reach of the criminal law, Parliament must unequivocally express this intention in the legislative provision in issue (at para. 118):

While Parliament has the authority to introduce dispensation or exemption from criminal law in determining what is and what is not criminal, and may do so by authorizing a provincial body or official acting under provincial legislation to issue licences and the like, an intent to do so must be made plain.

79                               The question of whether the regulated industries defence can apply to the respondent is actually a question of whether s. 347  of the Criminal Code  can support the notion that a valid provincial regulatory scheme cannot be contrary to the public interest or an offence against the state.  In the previous cases involving the regulated  industries defence, the language of “the public interest” and “unduly” limiting competition has always been present.  The absence of such language from s. 347  of the Criminal Code  precludes the application of this defence in this case.

(e)   De Facto Doctrine

80                              Consumers’ Gas submits that because it was acting pursuant to a disposition of law that was valid at the time — the Board orders — they should be exempt from liability by virtue of the de facto doctrine.  This argument cannot succeed.  Consumers’ Gas is not a government official acting under colour of authority.  While the respondent points to the Board orders as justification for its actions, this does not bring the respondent into the purview of the de facto doctrine because the case law does not support extending the doctrine’s application beyond the acts of government officials.  The underlying purpose of the doctrine is to preserve law and order and the authority of the government.  These interests are not at stake in the instant litigation.  As a result, Consumers’ Gas cannot rely on the de facto doctrine to resist the plaintiff’s claim.

81                               Furthermore, the de facto doctrine 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 that is simply regulated by a government authority is not supported by the case law and in my view does not further the underlying purpose of the doctrine.  In Reference re Manitoba Language Rights, [1985] 1 S.C.R. 721, this Court held, at p. 756, that:

There is only one true condition precedent to the application of the doctrine: the de facto officer must occupy his or her office under colour of authority.

It cannot be said that Consumers’ Gas was a de facto officer acting under colour of authority when it charged LPPs to customers.  Consumers’ Gas is a private corporation acting in a regulatory context, not an officer vested with some sort of authority.  When charging LPPs, Consumers’ Gas is engaging in commerce, not issuing a permit or passing a by-law.

82                               In rejecting the application of the de facto doctrine here, I am cognizant of the passage in Reference re Manitoba Language Rights, at p. 757, cited by the intervener Toronto Hydro and which, at first glance, appears to imply that the de facto doctrine might apply to private corporations:  

. . . the de facto doctrine will save those rights, obligations and other effects which have arisen out of actions performed pursuant to invalid Acts of the Manitoba Legislature by public and private bodies corporate, courts, judges, persons exercising statutory powers and public officials. [Emphasis added.]

83                               While this passage appears to indicate that “private bodies corporate” are protected by the doctrine, it must be read in the context of the entire judgment.  Earlier, at p. 755, the Court referred to the writings of Judge A. Constantineau in The De Facto Doctrine (1910), at pp. 3-4.  The following excerpt from that passage is relevant:

The de facto doctrine is a rule or principle of law which . . . recognizes the existence of, and protects from collateral attack, public or private bodies corporate, which, though irregularly or illegally organized, yet, under color of law, openly exercise the powers and functions of regularly created bodies . . . . [Emphasis added.]

In this passage, I think it is clear that the Court’s reference to “private bodies corporate” is limited to issues affecting the creation of the corporation, for example where a corporation was incorporated under an invalid statute.  It does not suggest that the acts of the corporation are shielded from liability by virtue of the de facto doctrine. 

84                               This view finds further support in the following passage from the judgment (at p. 755):

That the foundation of the principle is the more fundamental principle of the rule of law is clearly stated by Constantineau in the following passage (at pp. 5-6):

Again, the doctrine is necessary to maintain the supremacy of the law and to preserve peace and order in the community at large, since any other rule would lead to such uncertainty and confusion, as to break up the order and quiet of all civil administration.  Indeed, if any individual or body of individuals were permitted, at his or their pleasure, to challenge the authority of and refuse obedience to the government of the state and the numerous functionaries through whom it exercises its various powers, or refuse to recognize municipal bodies and their officers, on the ground of irregular existence or defective titles, insubordination and disorder of the worst kind would be encouraged, which might at any time culminate in anarchy.

The underlying purpose of the doctrine is to preserve law and order and the authority of the government.  These interests are not at stake in the instant litigation.  In sum, I find no merit in Consumers’ Gas’s argument that the de facto doctrine shields it from liability and as a result this doctrine should not be a bar to the appellant’s recovery.

C.  Other Orders Requested

(a)   Preservation Order

85                               The appellant, Garland, requests an “Amax-type” preservation order on the basis that the LPPs continue to be collected at a criminal rate during the pendency of this action, and these payments would never have been made but for the delays inherent in litigation (Amax Potash Ltd. v. Government of Saskatchewan, [1977] 2 S.C.R. 576).  In my view, however, a preservation order is not appropriate in this case.  Consumers’ Gas has now ceased to collect the LPPs at a criminal rate.  As a result, if a preservation order were made, there would be no future LPPs to which it could attach.  Even with respect to the LPPs paid between 1994 and the present, to which such an order could attach, a preservation order should not be granted for three further reasons: (1) such an order would serve no practical purpose, (2) the appellant has not satisfied the criteria in the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and (3) Amax can be distinguished from this case.

86                               First, the appellant has not alleged that Consumers’ Gas is an impecunious defendant or that there is any other reason to believe that Consumers’ Gas would not satisfy a judgment against it.  Even if there were some reason to believe that Consumers’ Gas would not satisfy such a judgment, an Amax-type order allows the defendant to spend the monies being held in the ordinary course of business — no actual fund would be created.  So the only thing that a preservation order would achieve would be to prevent Consumers’ Gas from spending the money earned from the LPPs in a non-ordinary manner (for example, such as moving it off-shore) which the appellant has not alleged is likely to occur absent the order.

87                               Second, the respondent submits that by seeking a preservation order the appellant is attempting to avoid Rule 45.02 of the Ontario Rules of Civil Procedure, the only source of jurisdiction in Ontario to make a preservation order.  The Rules of Civil Procedure apply to class proceedings and do not permit such an order in these circumstances.  Rule 45.02 provides that, “[w]here the right of a party to a specific fund is in question, the court may order the fund to be paid into court or otherwise secured on such terms as are just” (emphasis added).  The respondent submits that the appellant is not in fact claiming a specific fund here.  In the absence of submissions by the appellant on this issue, I am of the view that the appellant has not satisfied the criteria set out in the Ontario Rules of Civil Procedure and that this Court could refuse to grant the order requested on this basis.

88                               Finally, the appellant’s use of Amax, supra, as authority for the type of order sought is without merit.  The appellant has cited the judgment very selectively.  The portion of the judgment the appellant cites in his written submissions reads in full (at p. 598):

Apart from the Rules this Court has the discretion to make an order as requested by appellants directing the Province of Saskatchewan to hold, as stakeholder, such sums as are paid by the appellants pursuant to the impugned legislation but with the right to use such sums in the interim for Provincial purposes, and with the obligation to repay them with interest in the event the legislation is ultimately held to be ultra vires.  Such an order, however, would be novel, in giving the stakeholder the right to spend the moneys at stake, and I cannot see that it would serve any practical purpose. [Emphasis added.]

The Court in Amax went on to refuse to make the order.  So while the appellant is right that the Court in Amax failed to reject the hypothetical possibility of making such an order in the future, it seems to me that in this case, as in Amax, such an order would serve no practical purpose.  For these reasons, I find there is no basis for making a preservation order in this case.

(b)   Declaration That the LPPs Need Not Be Paid

89                               The appellant also seeks a declaration that the LPPs need not be paid.  Given that the respondent asserts that the LPP is no longer charged at a criminal rate, issuing such a declaration would serve no practical purpose and as a result such a declaration should not be made.

(c)   Costs

90                               The appellant is entitled to his costs throughout.  This should be understood to mean that, regardless of the outcome of any future litigation, the appellant is entitled to his costs in the proceedings leading up to and including Garland No. 1 and this appeal.  In addition, in oral submissions counsel for the Law Foundation of Ontario made the point that in order to reduce costs in future class actions, “litigation by installments”, as occurred in this case, should be avoided.  I agree. On this issue, I endorse the comments of McMurtry C.J.O., at para. 76 of his reasons:

In this context, I note that the protracted history of these proceedings cast some doubt on the wisdom of hearing a case in instalments, as was done here.  Before employing an instalment approach, it should be considered whether there is potential for such a procedure to result in multiple rounds of proceedings through various levels of court.  Such an eventuality is to be avoided where possible, as it does little service to the parties or to the efficient administration of justice.

VI.     Disposition

91                               For the foregoing reasons, I would allow the appeal with costs throughout, set aside the judgment of the Ontario Court of Appeal, and substitute therefor an order that Consumers’ Gas repay LPPs collected from the appellant in excess of the interest limit stipulated in s. 347 after the action was commenced in 1994 in an amount to be determined by the trial judge.

Appeal allowed with costs. 

Solicitors for the appellant:  McGowan Elliott & Kim, Toronto.

Solicitors for the respondent:  Aird & Berlis, Toronto.

Solicitor for the intervener the Attorney General of Canada:  Deputy Attorney General of Canada, Ottawa.

Solicitor for the intervener the Attorney General for Saskatchewan:  Deputy Attorney General for Saskatchewan, Regina.

Solicitors for the intervener Toronto Hydro‑Electric System Limited:  Ogilvy Renault, Toronto.

Solicitor for the intervener the Law Foundation of Ontario:  Mark M. Orkin, Toronto.

Solicitors for the intervener Union Gas Limited:  Torys, Toronto.