Money Paid By Mistake (Money Had and Received)

Money Paid By Mistake (Money Had and Received) | Disinherited

Newman v Beta Maritime Ltd 2018 BCSC 1442 discussed the situation where money “had and received” is a cause of action which is available where money was paid by mistake, acquired by way of fraud or paid under duress.

The issue of the law relating to where money was paid by mistake was discussed in International longshore and Warehouse Union local 502 v Ford 2016 BCCA 226 at paragraphs 23-26 which stated:

“ as a cause of action, money had and received resembles and is related to the right of recovery for money paid under mistake”

At its most basic, money had and received is an action for the return of money which the defendant is received, but which the law says it would be unjust for him or her to keep. In Storthoaks v. Canada Ltd Oil Mobil 1976) 2SCR 147 , the Supreme Court of Canada discussed the rationale underlying the right to recover money had and received as a result of mistake. In explaining the rationale behind the right of recovery, the court relied on Kelly v Solari (1841) 152 E.R. 24 which stated in part:

“ I think that where money is paid to another under the influence of mistake, that is, upon the supposition that a specific fact is true, which would entitle the other to the money, but which fact is untrue, and the money would not have been paid if it had been known to the payer that the fact was untrue, an action will lie to recover it back, as it is against conscience to retain it; though demand may be necessary in those cases in which the party receiving may have been ignorant of the mistake. “

The court went on to clarify what is meant by circumstances were would be against conscience for the payee to retain money:

“ the court did not purport to limit the right to recover money paid under a mistake of fact to cases in which would be against conscience for the recipient of the money to retain it. What the judge said was that where money is paid on the supposition that a specific fact is true which would entitle the other to receive it, which fact is untrue and the money would not have been paid if the fact of been known to be untrue, it can be recovered and it is against conscience to retain it. In other words given the circumstances the court outlined, is against conscience for the recipient to keep the money paid.”

The claim for monies had and received is very similar to that of unjust enrichment, however the BC Court of Appeal has stated on several occasions that money had and received shall continue to be treated as a distinct cause of action, as was stated in the longshore case at paragraph 24.

The Supreme Court of Canada has held that banks were entitled to recover the funds from the plaintiff where money was paid under mistake of fact. The mistake was that the cheque was genuine. This is not a mistake relating to the plaintiff’s right to receive the funds; by all accounts the plaintiffs were entitled to receive funds would have received a forged cheque. The court concluded that it is not necessary for the mistake to relate to the recipient’s entitlement to receive the funds.

Trustees Breach of Duties Denied Fees

Trustees Breach of Duties Denied Fees

Zimmerman v McMichael Estate 2010 ONSC 2947 involved a passing of accounts hearing where a trustee was denied any compensation for his breach of duties as acting as trustee, denied fees, and ordered to re-pay $450,000  that he had pre-taken as compensation.

The trustee was denied fees as a result of innumerable improper actions after the death of the deceased. Prior to her death, the trustee had exercised complete control over her $5 million of property and finances using a power of attorney until her death.

Some of the improper findings on the part of the attorney used to deny him fees are as follows:

1) he did not display any skill or diligence in the administration of the trusts;

2) his conduct fell well below the standard expected of a trustee – he breached some of the most basic obligations of a trustee;

3) he failed to perform his most basic duty to properly account for the administration of the trusts and the accounts, he presented to the beneficiaries and the court were manifestly inaccurate, incomplete and false;

4) he deliberately obstructed the respondents in their attempts to obtain a proper accounting;

5) he failed to comply with court orders requiring that he properly respond to the objections to the accounts;

6) he made improper and unauthorized payments to himself, or for his benefit out of the trusts;

7) he mingled trust property with his own property and use the two interchangeably for his own purposes;

8) he pre-paid himself compensation of $450,000 without keeping any proper records for his alleged pre-takings or the calculation thereof, and without the consent of the beneficiaries.

9) The attorney was a lawyer and his shortcomings were in total breach of his fiduciary duties owed to his client

Accordingly, the court denied him any compensation for his services as attorney and trustee.

Duties of a trustee

An attorney using a power of attorney is a fiduciary whose powers and duties must be exercised and perform diligently, with honesty and integrity and in good faith, for the incapable persons benefit only.
An attorney who receives compensation for managing property must exercise that degree of care, diligence and skill that a person in the business of managing the property of others is required to exercise.

3 Principal duties of a trustee:

1) To carry out the terms of the trust with honesty and due care and attention;

2) to personally carry out the responsibilities entrusted to him or her and not to delegate those responsibilities;

3) to ensure that his own interest. Do not conflict anyway with his duty to the beneficiaries that he serves.

A trustee has an obligation to keep proper accounts. A trustee must keep a complete record of his or her activities and be in a position at all times to prove that he or she administered the trust prudently and honesty. He or she must have the accounts ready and give full information whenever required.

–Sandford v Porter (1889) OJ 43

A trustee must make a proper accounting as a condition precedent to being awarded compensation. Without a proper accounting. The court is unable to assess the conduct of the fiduciary and determine the compensation to which he or she is entitled where trustee has failed to keep proper accounts and to have been grossly indifferent to his or her fiduciary obligations, he or she may be disentitled to compensation.

An attorney who fails to retain receipts supporting substantial cash withdrawals or expenses charged against the incapable persons property has not adequately carried out his or her duties and will be held personally liable for the unsubstantiated withdrawals.

It is a basic principle of trust law that a trustee is not entitled to use the trust property for his or her own personal benefit. If the trustee cannot account for or explain disbursements or expenses charged against a trust, he or she is personally liable to the trust for those disbursements and expenses.

If a trustee has mixed his or her own funds with the funds being held for another, all of the property must be taken to be the others property until the trustee is able to prove what part of it is his or her own.

–Norman Estate (1951) OJ 501 (CA)

It is an inflexible rule of the court of equity that a fiduciary must not make a profit or to put himself or herself in a position where his or her interests or his or her duty conflict unless the trust instrument expressly so provides. As a fiduciary, an attorney for property is not entitled to exercise that power for his or her own benefit unless expressly authorized to do so.

The trustee, not the beneficiaries bears the onus of establishing that the management and disbursement of funds is consistent with the terms of the trust.

A trustee who improperly enjoys the benefit of trust assets without authority and allows non-beneficiary such as his family, to also benefit is liable to the trust for the amounts of the value of the benefits received.

–Langston V Landen affd 2008 ONCA 321

There is also authority for the proposition that the fees paid by a trustee in respect of the preparation of accounts must be borne by the trustee and deducted from the amount of compensation payable.

There is also authority for the proposition that where the trustee delegates the care and management of a trust to a professional, the professional fees incurred by the trust are deducted from the compensation paid to the trustee.