Garland v. Consumers' Gas Company Ltd., 2001 CanLII 8619 (ON CA)

Garland v. The Consumers' Gas Company Limited; Toronto Hydro-Electric System Limited, Intervenor [Indexed as: Garland v. Consumers' Gas Co.]

57 O.R. (3d) 127

[2001] O.J. No. 4651

Docket No. C34248

Court of Appeal for Ontario

McMurtry C.J.O., Borins and MacPherson JJ.A.

December 3, 2001

An appeal of this judgment to the Supreme Court of Canada (Iacobucci, Major, Bastarache, Binnie, LeBel, Deschamps and Fish JJ.) was allowed on April 22, 2004 (2004 SCC 25).

Restitution -- Unjust enrichment -- Benefit -- Absence of juristic reason for enrichment -- Gas utility charging late payment penalties pursuant to authorization given by Energy Board -- Charges contrary to criminal interest rate provisions of the Criminal Code -- Plaintiff bringing intended class action for repayment of late payment penalties -- Receipt of charges not constituting benefit upon which to base claim for unjust enrichment -- Board authorization being juristic reason for enrichment -- Claim for unjust enrichment dismissed on motion for summary judgment.

Gordon Garland commenced an intended class proceeding against Consumers' Gas Company Limited ("CG"), a natural gas public utility, seeking payment of $112 million. His claim was that CG had been unjustly enriched by charging and collecting late payment penalties from consumers since 1981. He alleged that the charges were illegal as contrary to the criminal interest rate provisions of s. 347 of the Criminal Code, R.S.C. 1985, c. C-46. The question of the illegality of the charges was considered first and, reversing the judgments of the lower courts, the Supreme Court of Canada ruled that s. 347 did apply to the late payment penalties. The Supreme Court remitted the case to the Superior Court of Justice for a determination of whether CG had a defence to the proposed class action based on the facts that the rates charged by CG were regulated by the Ontario Energy Board and CG was prohibited from selling its gas except in accordance with an order of the Board.

On motions for summary judgment by both parties, Winkler J. dismissed CG's arguments that it had a "regulated industries defence" or a defence based on s. 15 of the Criminal Code, which insulates from criminal liability acts in obedience of a de facto sovereign authority. However, Winkler J. ruled that Garland's claim should be dismissed with costs because: (1) it was an impermissible collateral attack on the orders of the Board; (2) the Board's orders were a valid juristic reason for the alleged unjust enrichment; and (3) s. 18 of the Ontario Energy Board Act, R.S.O. 1990, c. O.13 (now s. 25 of the Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Schedule B ("OEBA")) insulated CG from liability.

Garland appealed and, in the appeal, Toronto Hydro-Systems, which was a defendant in similar proceedings, was granted leave to intervene. The Law Foundation of Ontario was a party to the appeal by virtue of rule 12.04(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 because it was responsible for paying the costs award. It asked that the costs award be overruled.

Held, the appeal on the merits should be dismissed and the appeal as to the costs award should be allowed.

Per McMurtry C.J.O. (MacPherson J.A. concurring): In reaching his conclusion that Garland's claim should be dismissed as an impermissible collateral attack on the Board's authority, Winkler J. reasoned that the Board had exclusive jurisdiction and the court did not have jurisdiction to entertain the plaintiff's claim. This reasoning was incorrect. There was no collateral attack. Garland was not challenging the merits or the legality of the Board order and was not attempting to raise a matter that had been dealt with in a Board hearing. The proposed class action was not a collateral attack but rather was based on the principles of unjust enrichment and raised issues over which the courts have jurisdiction and the Board did not.

Winkler J. was wrong in concluding that what is now s. 25 of the OEBA, formerly s. 18, provided grounds to dismiss Garland's action. Section 25 provides that an order of the Board is a defence to any proceedings insofar as the act or omission that is the subject of the proceeding is in accordance with the order. Legislative provisions restricting a citizen's rights of action attract a strict interpretation. It is unreasonable to assume that the legislature would have contemplated that an order of the Board could mandate criminal conduct. While the wording was very broad, it could not be interpreted to provide a defence to an action for restitution arising from a Board order authorizing conduct that is contrary to the Criminal Code.

Section 15 of the Criminal Code also did not provide a defence for CG. The defence is largely irrelevant in modern times, and Winkler J. was correct in rejecting it.

The "regulated industries defence", which has been considered in cases regarding the application of federal competition law to provincially regulated industries, did not provide a defence for CG. The cases did not support the proposition that a party operating in a regulated industry can act directly contrary to the Criminal Code.

However, Garland's unjust enrichment claim was not valid. The elements of this claim are: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of a juristic reason for the defendant's enrichment. It was conceded, however, that Garland suffered a deprivation. He failed to establish the other two elements of the claim. The receipt of late payment penalties did not confer a benefit on CG. While normally the receipt of money is a benefit, it was necessary to consider the role played by the charges in the regulatory context of the case. Had a lower amount of revenue been recoverable from the late payment penalties, then the amount recovered in other rates would have been higher in order to recoup the overall revenue requirements of CG. The receipt of the penalty charges was not an enrichment capable of giving rise to a restitutionary claim.

Assuming, however, that this analysis was wrong and the receipt of the payments was an enrichment, there was a juristic reason for the enrichment. Moral and policy questions are properly considered under the juristic reason branch of the claim. It was necessary to consider not only what is fair to the plaintiff but also what is fair to the defendant. In this regard, it was necessary to consider the statutory regime in which CG operated. It would be contrary to the equities of this case to require CG to repay late-paying customers all late payment charges collected since 1981, which a provincial authority ordered it to collect and which were taken into account by the Board in making its rate orders. Accordingly, Garland's action and his appeal should be dismissed.

Turning to the matter of costs, there were several circumstances that warranted overturning the order that Garland should pay costs. First, the effect of this order is to require him to pay the costs of his successful appeal to the Supreme Court of Canada. Second, although CG was ultimately successful, it failed on five of the defences it raised. Finally, the proceedings raised novel issues. These factors warranted each party bearing its own costs.

Per Borins, J.A. (dissenting): The appeal should be allowed and the judgment summarily dismissing Garland's claim should be set aside. In the context of the appellate review of a summary judgment, the issue in this appeal was whether the motion judge erred in law or made a material error in the appreciation of the facts in finding: (1) that CG sustained a benefit through the receipt of the late payment penalties and (2) that the rate orders of the Board constituted a juristic reason that permits CG to retain the payments. In this regard, there was no reason to interfere with the finding that Consumers' Gas obtained a benefit or was enriched. The motion judge found that as a result of the each late payment penalty, the company had more money that it had previously and was enriched. This finding was supported by the evidence and the authorities and was not based on a material error in the appreciation of the facts. However, the motion judge erred in law in finding that the rate orders of the Board constituted a juristic reason for CG's retention of the late payment penalties. In making this finding, the motion judge failed to consider the effect on the rate orders of the Supreme Court of Canada's decision that the charges in interest within the meaning of s. 347 of the Criminal Code and is subject to the law's prohibition against requiring or receiving interest at a criminal rate. In light of the court's decision, the rate orders ceased to have any legal effect and could not provide a juristic reason for the enrichment. Moreover, to conclude that the rate orders constituted a juristic reason permitted the orders of a provincial regulatory authority to override federal criminal law and would remove a substantial reason for compliance with s. 347. To say that the rate orders permitted CG to retain the late payment penalties would be to achieve a result contrary to the federal paramountcy doctrine and to the authorities that have applied s. 347 in relation to commercial obligations. And, it would be to permit CG to profit from its own wrongdoing.

APPEAL from a judgment of Winkler J. (2000), 2000 22630 (ON SC), 185 D.L.R. (4th) 536 granting a motion for a summary judgment dismissing an action in an intended class proceeding.

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Michael McGowan and Barbara L. Grossman, for appellant. Mark M. Orkin, Q.C., for appellant The Law Foundation of Ontario. Fred D. Cass, for respondent. Alan H. Mark and Julie Rosenthal, for intervenor Toronto Hydro-Electric System Ltd.

MCMURTRY C.J.O. (MACPHERSON J.A. concurring): --

Introduction

1This appeal arises from an intended class proceeding started in 1994 by the plaintiff, Gordon Garland, against the gas distribution company, Consumers' Gas Company Limited ("Consumers' Gas" or "CG"). The plaintiff seeks a restitutionary payment of $112 million, representing late payment penalties ("LPPs" or "LPP") paid by over 500,000 of CG's customers since 1981. The plaintiff's personal claim is for the sum of $75, representing the approximate amount that he and his wife paid in LPPs to Consumers' Gas. The plaintiff also seeks declaratory relief in the form of a declaration that the LPP charged by Consumers' Gas offends s. 347 of the Criminal Code, R.S.C. 1985, c. C-46, is illegal, and need not be paid by the proposed plaintiff class. The rates and payment policies of Consumers' Gas, including its LPP, are governed by the Ontario Energy Board ("Board").

2The basis for the intended class action is the plaintiff's contention that s. 347 of the Criminal Code, which came into effect on April 1, 1981, [See Note 1 at end of document] applies to the LPP. Section 347 makes it an offence to receive a payment at a criminal rate of interest, which is defined as an effective annual rate of interest that exceeds 60 per cent. CG's customers who fail to pay their gas bills by a specified due date are charged an LPP of five per cent of the unpaid charges for the month. Actuarial evidence indicates that the vast majority of late-paying customers pay their bills within a time period during which the interest rate represented by the LPP is greater than 60 per cent per year.

3The issue raised by the plaintiff as to whether s. 347 of the Criminal Code applies to the LPP charged by Consumers' Gas has already proceeded through the courts. In 1998, the Supreme Court of Canada accepted the plaintiff's contention that s. 347(1)(b) of the Criminal Code applies to the LPP: Garland v. Consumers' Gas Co., 1998 766 (SCC), [1998] 3 S.C.R. 112, 165 D.L.R. (4th) 385. The Supreme Court remitted the case to the Ontario Court (General Division), now the Ontario Superior Court of Justice, for a determination of the validity of various defences raised by CG to the proposed class action. These defences are premised on the fact that the Board prescribes the LPP in its rate orders.

4Justice Winkler presided over these proceedings. In a decision dated April 19, 2000 and now reported at (2000), 2000 22630 (ON SC), 185 D.L.R. (4th) 536 (Ont. S.C.J.), he determined that there are three reasons why the plaintiff's proposed action cannot succeed, even though s. 347 applies to the LPP:

1. The action constitutes an impermissible collateral attack on the orders of the Board, which authorized the LPP charged by CG.

2. The plaintiff's claim for restitutionary relief cannot succeed because the Board's orders represent a valid juristic reason for the enrichment created by the LPP.

3. Section 18 of the Ontario Energy Board Act, R.S.O. 1990, c. O.13 [now s. 25 of the Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sched. B] insulates CG from liability.

5Winkler J. ordered that the action be dismissed.

6The plaintiff asks this court to set aside Winkler J.'s decision. He also seeks leave to appeal Winkler J.'s decision dated May 15, 2000 (reported at [2000] O.J. No. 1684), in which costs of the action were awarded to Consumers' Gas to be paid by the plaintiff on a party and party basis.

7Toronto Hydro-Electric Systems ("Toronto Hydro") was granted leave to intervene in this appeal as a friend of the court. Toronto Hydro's interest in the proceeding arises from its position as a defendant in two other proceedings under the Class Proceedings Act, 1992, S.O. 1992, c. 6 involving issues related to late payment charges. Toronto Hydro supports the position of CG that the plaintiff's action was properly dismissed by the motions judge.

8The Law Foundation of Ontario is a party to this appeal by virtue of rule 12.04(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. It is providing the plaintiff with funding for this action and is thus responsible for paying the costs award. The Law Foundation asks this court to overrule the costs award against the plaintiff.

9For the reasons that follow, I do not agree with Winkler J.'s ruling that the plaintiff's action is a collateral attack on the Board orders, nor do I agree that the provisions of the Ontario Energy Board Act constitute a bar to the proposed class action. I would also allow the plaintiff's appeal from Winkler J.'s costs order. However, I agree with Winkler J.'s holding that the plaintiff's claim for restitutionary relief, which is based on the principle of unjust enrichment, cannot succeed. I am of the view that two of the three elements of the cause of action for unjust enrichment cannot be established by the plaintiff.

Factual Background

10Consumers' Gas is regulated by the Board pursuant to the Ontario Energy Board Act, 1998 ("OEBA") and the Municipal Franchises Act, R.S.O. 1990, c. M.55. Section 36(1) of the OEBA [See Note 2 at end of document] prohibits CG from selling its gas except in accordance with an order of the Board. Section 126(1)(c) makes it an offence for CG to impose rates and charges other than those approved by the Board. [See Note 3 at end of document Section 36(2) of the OEBA [See Note 4 at end of document] provides that the Board may make orders approving or fixing just and reasonable rates for the sale of gas. "Rate" is defined in s. 3 to mean "a rate, charge or other consideration and includes a penalty for late payment". The Board typically holds rate hearings on an annual basis at which it sets the rate that CG may charge for gas, including the LPP.

11From 1981 to 1989, the Board's rate orders pertaining to CG included the following LPP clause:

PENALTY FOR LATE PAYMENT

When payment in full is not made within sixteen (16) days of the date of mailing, or hand delivery of the bill, a penalty of five per cent (5 [per cent]) of the current amount billed shall be levied. Where payment is made by mail, payment will be deemed to be made on the date postmarked.

12From 1989 onwards, the Board orders have contained or adopted by reference the provisions of the CG's Handbook of Rates and Distribution Services, which states with respect to the LPP:

Payment in full should be received by the Company, or by an institution authorized by the Company to accept payments on its behalf, on or before the due date specified in the monthly bill, which date is at least ten (10) days (sixteen (16) days in the case of Rates 1, 2, 6 and 9), after the date of rendering the bill. A penalty of five (5) per cent of the unpaid portion of the current amount billed shall be added to the amount due if payment is not received as outlined above. When payment is mailed, the penalty will be added if the postmark on the envelope containing such payment is later than the due date.

13The Board implemented the LPP in 1975 following an application by CG. The Board observed that the primary purpose of the LPP is to encourage customers to pay their bills promptly, thereby reducing the cost to CG of carrying accounts receivable. The Board concluded that such costs, as well as collection costs related to late payments, should be borne by the customers that caused them. The Board rejected the alternative of imposing a daily interest charge on overdue accounts, concluding that it would not provide sufficient incentive to pay bills on a timely basis and might result in higher collection costs. The Board recognized that if a bill is paid shortly after the due date, the LPP can be shown to represent a very high rate of interest: see Garland v. Consumers' Gas Co. Ltd., supra, at pp. 119-20 S.C.R.

14Because the LPP is a one-time charge, the effective rate of interest that it represents depends on when the customer pays an overdue bill. The actuarial evidence presented by the plaintiff shows that the vast majority of late-paying customers pay within a time period during which the interest rate represented by the LPP is greater than 60 per cent per year.

15The intervenor, Toronto Hydro, has been regulated by the Board since the OEBA was amended in 1998, previously having been regulated by Ontario Hydro. Like CG, Toronto Hydro levied an LPP in the amount of five per cent of the amount of a customer's bill. Beginning in July 2000, however, Toronto Hydro stopped levying this LPP and with the Board's approval began charging interest at the rate of 1.5 per cent per month on overdue amounts.

16This is the second appeal to this court, in the second round of interlocutory proceedings related to the proposed class action. The first round began in 1995 when both parties moved for summary judgment before Winkler J. The plaintiff had also brought a motion for certification of a class proceeding pursuant to the Class Proceedings Act and a motion seeking a preservation order. By agreement, the issue whether s. 347 of the Criminal Code applies to the LPP was argued first. The parties agreed that if s. 347 did not apply, the action could not succeed.

17The relevant parts of s. 347 of the Code state:

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.

(2) In this section"credit advanced" means the aggregate of the money and the monetary value of any goods, services or benefits actually advanced or to be advanced under an agreement or arrangement minus the aggregate of any required deposit balance and any fee, fine, penalty, commission and other similar charge or expense directly or indirectly incurred under the original or any collateral agreement or arrangement;

"criminal rate" means an effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds sixty per cent on the credit advanced under an agreement or arrangement;

"interest" means the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit under an agreement or arrangement, by or on behalf of the person to whom the credit is or is to be advanced, irrespective of the person to whom any such charges and expenses are or are to be paid or payable, but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage transaction, any amount required to be paid on account of property taxes;

(3) Where a person receives a payment or partial payment of interest at a criminal rate, he shall, in the absence of evidence to the contrary, be deemed to have knowledge of the nature of the payment and that it was received at a criminal rate.

(7) No proceedings shall be commenced under this section without the consent of the Attorney General.

18After hearing argument on the application of s. 347, Winkler J. adjourned the balance of the hearing. In reasons reported at (1995), 1995 7164 (ON SC), 22 O.R. (3d) 451, 122 D.L.R. (4th) 377 (Gen. Div.), he held that s. 347 did not apply to the LPP and dismissed the entire action. He concluded that the payment of the LPP could not give rise to an offence under s. 347 because it was a voluntary act within the meaning of the Supreme Court of Canada's decision in Nelson v. C.T.C. Mortgage Corp., 1986 14 (SCC), [1986] 1 S.C.R. 749, 29 D.L.R. (4th) 159, affg (1984), 1984 572 (BC CA), 16 D.L.R. (4th) 139, 59 B.C.L.R. 221 (C.A.). His decision was affirmed by this court on the basis that Nelson was dispositive: (1996), 1996 1022 (ON CA), 30 O.R. (3d) 414, 155 D.L.R. (4th) 671 (C.A.).

19In a majority judgment written by Major J., the Supreme Court of Canada overturned this court's decision and decided the threshold issue in favour of the plaintiff. The majority held that the LPP imposed by CG represents interest charges within the meaning of s. 347(2). It then ruled that s. 347(1) (a) is not applicable to the LPP because the contracts between CG and its customers do not on their face require the payment of interest at a criminal rate. However, in its central ruling, the majority rejected the view that payment of the LPP is a voluntary act within the meaning of Nelson. Major J. concluded that the receipt by CG of the LPP falls within the scope of s. 347(1)(b).

20The next round of proceedings in this action took the form of another set of competing motions for summary judgment, which were also heard by Winkler J. He held a case management conference at which time he expressed his preference for hearing the issues arising from the motions in instalments. Counsel accordingly agreed to limit the next hearing to the following six issues:

(i) whether the plaintiff is entitled to a preservation order;

(ii) whether the plaintiff has a valid claim for restitution;

(iii) whether s. 18 of the former OEBA [now s. 25 of the OEBA] is a complete defence to the action;

(iv) whether the "regulated industries defence", which provides that a valid regulatory statute cannot be contrary to the public interest, is a complete defence to the action;

(v) whether s. 15 of the Criminal Code, which insulates from criminal liability acts in obedience to laws of a de facto sovereign authority, provides a complete defence to the action; and

(vi) whether the action is an impermissible collateral attack on the orders of the Board.

21It was contemplated that there would be two further hearings to deal with the balance of the issues, including whether the plaintiff was entitled to declaratory and injunctive relief.

22Further hearings were not held, however, because Winkler J. again dismissed the plaintiff's action. He held that there were three reasons the plaintiff's action could not succeed:

(i) The plaintiff's claim is an impermissible collateral attack on the orders of the Board.

(ii) Section 18 of the former OEBA [now s. 25] insulates CG from liability.

(iii) The claim for restitutionary relief cannot succeed because the Board orders that approved the LPP represent a valid juristic reason for the enrichment created by the LPP.

23Winkler J. rejected the regulated industries defence and the defence based on s. 15 of the Criminal Code. In light of the disposition dismissing the action, he considered it unnecessary to deal with the plaintiff's request for a preservation order.

Issues

24I would frame the issues on this appeal as follows:

1. Do the courts have jurisdiction to entertain the proposed claim against CG or does the Board have exclusive jurisdiction over this dispute?

2. Does s. 25 of the OEBA constitute a defence to the class action?

3. Does s. 15 of the Criminal Code afford a defence to the claim?

4. Does the "regulated industries defence" afford a defence to the claim?

5. Do the class members have a valid claim to restitution of the LPPs collected by CG?

6. Is the plaintiff entitled to a preservation order?

7. Should this court decide the plaintiff's claims for declaratory and injunctive relief?

8. Did the motions judge err in awarding costs of the action to CG?

Analysis

Issue 1: Do the courts have jurisdiction to entertain the proposed claim against CG or does the Board have exclusive jurisdiction over this dispute?

25Winkler J. held that the plaintiff's claim is an impermissible and inappropriate collateral attack on the Board's rate orders. The source of the Board's jurisdiction over the essence of the plaintiff's action, according to the motions judge, lies in the Board's exclusive jurisdiction to fix the LPP as part of its rate-setting function under the OEBA. The LPP was sanctioned by the Board and is an inextricable part of the rate for gas: a variation of the LPP will affect revenue levels of the utility company, which in turn will affect the determination of the appropriate rate. The motions judge concluded that the courts have no jurisdiction to entertain the plaintiff's claim, since the legislature has given exclusive jurisdiction over rates, including penalties for late payment, to the Board. In this regard, s. 19(6) of the OEBA states: "The Board has exclusive jurisdiction in all cases and in respect of all matters in which jurisdiction is conferred on it by this or any other Act."

Winkler J. ruled that the plaintiff should have availed himself of the appeal and review mechanisms available under the OEBA to challenge the Board orders directly rather than bringing his complaint to the courts. He concluded at p. 562 D.L.R.:

[T]his matter, while framed as a private dispute between two contractual parties, is in reality an impermissible collateral attack on the validity of OEB [Board] orders. The LPPs arise out of the Board's orders and are an inextricable part of the rates set at the Board hearings. It would be inappropriate for the court to engage in an extensive analysis and interpretation of matters that fall squarely within the jurisdiction and authority of the OEB. Since the LPPs are authorized by the OEB, the Board is in the best position to deal with the LPPs and with the plaintiff's request. Whether the plaintiff should be granted a remedy, and the manner in which that remedy should be effected, are all matters of policy over which the Board has exclusive jurisdiction. The decision of the Supreme Court with respect to the validity of the LPPs in light of section 347 of the Criminal Code, provides the Board with ample legal guidance to deal with the matter.

26The motions judge said, in the alternative, that, even if the court had jurisdiction to deal with the matter, he would decline to exercise this jurisdiction and would defer the matter to the Board to allow it to address the effects of the illegal LPPs in whatever manner it deems appropriate.

27I would first observe that the motions judge's alternative holding overlooks that the Board has exclusive jurisdiction in respect of all matters in which it has jurisdiction, pursuant to s. 19(6) of the OEBA. Accordingly, there can be no issue of concurrent jurisdiction in the courts and the Board.

28The nature of the claim and the basis for the relief sought in this class action are derived from principles of restitution: the essential character of the dispute concerns a restitutionary issue arising from the receipt by CG of LPPs for the past 20 years. The proposed class action is not a collateral attack on the rate orders of the Board but rather is a claim based on unjust enrichment for the return to CG's customers of moneys that the plaintiff says were illegally collected and retained by CG. As such, the action raises an issue over which the courts have jurisdiction.

29This case is distinguishable from R. v. Consolidated Maybrun Mines Ltd., 1998 820 (SCC), [1998] 1 S.C.R. 706, 158 D.L.R. (4th) 193 and R. v. Al Klippert Ltd., 1998 821 (SCC), [1998] 1 S.C.R. 737, 158 D.L.R. (4th) 219, which were cited by the motions judge. In those cases, the appellants were the subject of orders made by provincial regulatory authorities which the appellants had failed to obey. Rather than make use of the available statutory right to appeal those orders to the appropriate administrative tribunal, the appellants instead chose to attack the merits of the orders in subsequent penal proceedings instituted against them because of their lack of compliance. The Supreme Court of Canada concluded that such a course of action was an impermissible collateral attack on the administrative orders having regard to the following factors: the wording of the statute under the authority of which the order was issued, the purpose of that legislation, the availability of an appeal, the kind of collateral attack in lig ht of the expertise of the tribunal and the penalty on a conviction for failing to comply with the order.

30Unlike in Maybrun Mines and Klippert, in the instant case, the Board's orders were not directed at the plaintiff and there is no issue of non-compliance on the plaintiff's part. The motions judge did not note this significant distinction before considering the Maybrun factors as to whether a collateral attack is permissible. The Board orders bind CG and that fact may undermine or provide a defence to all or part of the plaintiff's restitutionary claim, as will be discussed below. But the fact that the intended defendant is bound by the order of a provincial regulatory authority does not mean that the plaintiff's action is a collateral attack on the order. The plaintiff has not challenged the merits or the legality of the Board order in his statement of claim. Rather, the plaintiff is seeking restitution of moneys collected from him by a party acting under the authority of the Board order. In these circumstances, the collateral attack doctrine does not apply.

31The decision in Sprint Canada Inc. v. Bell Canada (1997), 1997 12379 (ON SC), 79 C.P.R. (3d) 31 (Ont. Gen. Div.), affd (1999), 1999 3296 (ON CA), 86 C.P.R. (3d) 285, 116 O.A.C. 296, relied on by the motions judge, is also distinguishable. There, the collateral attack doctrine was applied to dismiss an action at common law brought by the plaintiff, Sprint Canada, for damages arising from the very complaint that had been the subject of a detailed hearing before the Canadian Radio-television and Telecommunications Commission ("CRTC"). In dismissing the action, MacPherson J., then sitting in the Ontario Court (General Division), observed that Sprint's proposed action covered the same subject matter as did the CRTC decision. He also noted that Sprint could have sought "damages-like" compensation from the CRTC, pursuant to its very broad jurisdiction to grant relief under s. 60 of the Telecommunications Act, S.C. 1993, c. 38. That section provides: "The Commission may grant the whole or any portion of the relief applied for in any case, and may grant any other relief in addition to or in substitution for the relief applied for as if the application had been for that other relief." Having forgone this opportunity, Sprint could not later seek compensation in a different forum. In upholding MacPherson J.'s decision, this court agreed that Sprint's action raised the same issue that had been before the CRTC and was thus an impermissible collateral attack on the CRTC's decision.

32In contrast, the plaintiff here is not attempting to raise a matter that has been dealt with in a Board hearing. Also, unlike in Sprint, it is not at all clear that the Board has statutory power to make the type of compensatory order sought by the plaintiff. Section 36(2) of the OEBA permits the Board to "make orders approving or fixing just and reasonable rates for the sale of gas . . .". Section 23 permits the Board in making an order to "impose such conditions as it considers proper" and provides that "an order may be general or particular in its application." But the Board's jurisdiction to fix rates for gas and to set penalties for late payment does not empower it to impose a restitutionary order of the type sought by the plaintiff. The Board's power to fix rates is forward-looking, while the subject matter of this dispute is primarily about an alleged unjust enrichment related to the level at which the LPP has been set since 1981.

33The conclusion that the plaintiff's action is not an impermissible collateral attack is supported by the fact that the statutory scheme of the OEBA does not contemplate resolving the dispute between the class members and CG, nor does it provide an adequate adjudicative mechanism for resolving the private law claim that is prompted by the Board's rate order. While the Board's practice permits an individual to apply for intervenor status at rate hearings, nothing in the OEBA permits a member of the public to commence a proceeding before the Board. The Board's Rules of Practice and Procedure provide that anyone who is not a party to a Board proceeding must obtain leave from the Board to bring a motion to review or rehear any matter or to vary any Board order. [See Note 5 at end of document] It is open to the Board at a rate hearing to refuse a request by members of the public to raise the issue of receiving compensation from CG for its receipt of illegal LPPs since 1981.

34Allowing the plaintiff to bring this action in the courts does not encroach on the Board's exclusive jurisdiction over setting the LPP. Regardless of the success of the plaintiff's claim for restitutionary relief, the Board will need to design a new penalty for late payments that does not have the capacity to result in a contravention of s. 347(1)(b). The Board, quite properly, has advised that it will await the court's resolution of these proceedings before addressing the LPP issue: see Board statement in E.B.R.O. 499 (30 November 1998).

Issue 2: Does s. 25 of the OEBA constitute a defence to the class action?

35Section 25 of the OEBA states:

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.

36Section 18 of the former OEBA is to the same effect:

18. An order of the Board is a good and sufficient defence to any action or other proceeding brought or taken against any person in so far as the act or omission that is the subject of such action or other proceeding is in accordance with the order.

37The motions judge held that even if the plaintiff is right that the claim against CG is not an impermissible collateral attack on the Board's rate order, s. 18 nonetheless bars his action because CG acted in compliance with the Board's order in applying the LPP. In coming to this conclusion, the motions judge rejected the plaintiff's submission that permitting CG to rely on s. 18 in this instance is contrary to the intention of the Ontario legislature because it effectively permits CG to retain the proceeds of crime. The motions judge considered it a misnomer to refer to proceeds of crime in civil proceedings and commented that no criminal proceedings have been contemplated. In addition, he did not accept the plaintiff's submission that interpreting s. 18 as barring the plaintiff's claim interferes with the federal power over criminal law and interest. He concluded that any interference is clearly an incidental effect and does not go to the pith and substance of s. 18. Finally, the motions judge reje cted the plaintiff's argument that CG cannot rely on s. 18 because it did not strictly comply with the Board orders. He found that CG acted in strict compliance with the central elements of the Board orders in setting the LPP rate at five per cent and in imposing that penalty 16 days after the payment is due.

38Before this court, the plaintiff placed considerable weight on the argument that CG failed to act in accordance with the Board orders and, thus, cannot rely on s. 18 because that section makes a Board order a defence to a proceeding only "insofar as the act or omission that is the subject of the proceeding is in accordance with the order" (emphasis added by the plaintiff). The plaintiff argues that the Board orders required that the postmarks on payments made by mail had to be checked to determine if the LPP applied. The plaintiff points to evidence that since 1991, the Canadian Imperial Bank of Commerce ("CIBC") has processed bill payments on behalf of CG and does not individually check the postmarks on payments by mail, except for those of large volume billing customers. The CIBC service manual states the following with respect to ordinary payments:

The system will determine whether a payment is late or on- time based on the system processing date, the due date on the remittance stub and the grace period table. Initially, the grace period table will be set for 3 business days for all mail.

39Before 1991, CG processed bills itself and the plaintiff contends that it developed a practice of allowing a variable grace period of up to three business days before imposing the LPP, rather than checking the postmarks of each payment sent by mail. The state of the evidentiary record regarding the practice before 1991 does not permit a finding on this point, since there is also evidence suggesting that CG did examine postmarks between 1981 and 1991.

40CG is also said to depart from the Board orders by waiving the LPP for all "Golden Age Service" customers and for about 650 other customers who are experiencing financial difficulties. The Board has not specifically authorized either waiver program.

41In my view, the non-compliance argument does not affect the applicability of s. 25 of the OEBA in this case. In waiving the LPP, CG was refraining from receiving interest that was capable of contravening the Criminal Code. This form of non- compliance does not assist the proposed plaintiff class. In applying a three-day grace period, CG may on occasion have imposed the LPP even though the postmark on the payment was in compliance with the due date prescribed by the Board order. This scenario is possible because a delay in mail delivery could have exceeded the three-day grace period.

42I do not agree with the plaintiff that the non- compliance by CG with this element of the Board's order destroys the foundation for its s. 18 defence. The evidence does not show the frequency with which CG imposed the LPP when it should not have. Moreover, the essence of the plaintiff's complaint is not that CG imposed the LPP when the repayment period had not elapsed, but that the LPP is illegal even when it is applied in accordance with the Board order. It does not follow that because on occasion CG may have failed to be in strict compliance with the Board's order, it is not entitled to rely on s. 18 for the instances when it did comply.

43The plaintiff next submits that there is no precedent for interpreting a general provision like s. 18 of the OEBA as a bar to civil claims resulting from criminal acts. He further argues that the wording of s. 18 would need to be more explicit to be read as barring civil recovery in the circumstances of this case.

44In response, Consumers' Gas points to the Divisional Court's decision in Union Gas Ltd. v. Dawn (Township) (1977), 1977 1042 (ON SC), 15 O.R. (2d) 722, 2 M.P.L.R. 23, where that court interpreted the OEBA as indicating the legislature's intent to vest the Board with the widest powers to control the supply and distribution of natural gas to the people of Ontario "in the public interest". The Divisional Court concluded that s. 18 of the former OEBA precludes a municipality from enacting a by-law that would affect the production, transmission or storage of natural gas.

45But Union Gas does not speak to whether s. 18 was intended to act as a defence to a civil action arising from conduct prohibited by the Criminal Code. The provincial legislature has constitutional jurisdiction to place restrictions on the right of members of the public to bring civil proceedings. Examples of the exercise of this jurisdiction are found in provincial statutes prescribing limitation periods and in provisions prohibiting proceedings for damages against Crown employees for acts done in good faith in the execution or intended execution of duty: see, for example, Agricorp Act, 1996, S.O. 1996, c. 17, Sched. A, s. 9(1); Building Code Act, 1992, S.O. 1992, c. 23, s. 31; Child and Family Services Act, R.S.O. 1990, c. C.11, s. 15(6).

46Legislative provisions restricting a citizen's rights of action attract a strict interpretation. This principle is based on the authority of Berardinelli v. Ontario Housing Corp. (1978), 1978 42 (SCC), [1979] 1 S.C.R. 275 at p. 280, 90 D.L.R. (3d) 481, where Estey J. said the following about interpreting a limitation period:

Section 11 [of the Public Authorities Protection Act], being a restrictive provision wherein the rights of action of the citizen are necessarily circumscribed by its terms, attracts a strict interpretation and any ambiguity found upon the application of the proper principles of statutory interpretation should be resolved in favour of the person whose right of action is being truncated.

47In Ukrainian (Fort William) Credit Union Ltd. v. Nesbitt, Burns Ltd. (1997), 1997 1411 (ON CA), 36 O.R. (3d) 311, 152 D.L.R. (4th) 640 (C.A.), leave to appeal granted [1998] 1 S.C.R. vii, 228 N.R. 97n, declared moot January 18, 1999 (S.C.C. Bulletin 1999 at 117), Osborne J.A., as he then was, concluded that the principle articulated by Estey J. applies not only to a limitation period, but also to a statutory provision that limits the right to sue.

48It is unreasonable to assume that the legislature would have contemplated that an order of the Board could mandate criminal conduct. I do not agree with the motions judge's conclusion at p. 571 D.L.R. that s. 18 "directly contemplates the issue before the court in this action". The wording of s. 18 is very broad, but I am unwilling to interpret it as providing a defence to an action for restitution arising from a Board order authorizing conduct that is contrary to the Criminal Code.

49The appellant argues that even if the legislature intended s. 25 to bar civil claims based on a contravention of the Criminal Code, the paramountcy doctrine would render s. 25 ineffective to achieve that result. He contends that there is an express contradiction between s. 347 of the Criminal Code and s. 25 of the OEBA as contemplated in Multiple Access Ltd. v. McCutcheon, 1982 55 (SCC), [1982] 2 S.C.R. 161, 138 D.L.R. (3d) 1, stating in his factum that "the legal system cannot simultaneously provide that interest in excess of 60 [per cent] cannot under any circumstances be received (under federal law) and that the receipt of such interest is either permissible or required (under provincial law)."

50Were CG to rely on s. 25 as a defence to criminal proceedings brought under s. 347 of the Code, I agree that the doctrine of paramountcy would apply and s. 25 would be ineffective to the extent that it purported to serve as a defence to the charge of receiving interest at a criminal rate. However, in the civil context, s. 25 of the OEBA does not have the effect of legalizing the receipt of interest at a criminal rate, but only speaks to the scope of civil proceedings that may be commenced in relation to a Board order. There is no operational inconsistency between the two provisions.

51While I find that s. 25 should not be read to bar recovery in the unusual circumstance of this case, I do not base this conclusion on the paramountcy doctrine, but rather on the principles of statutory interpretation that call for a narrow interpretation of provisions that purport to limit citizens' rights of action.

Issue 3: Does S. 15 of the Criminal Code afford a defence to the claim?

52Only Toronto Hydro makes submissions related to s. 15 of the Criminal Code. That provision states:

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.

53According to Toronto Hydro, the s. 15 defence recognizes that an act which is expressly ordered by governmental authority cannot be criminal. Toronto Hydro argues that since CG was acting in obedience to the Board orders and the OEBA in collecting the LPP, its conduct was not illegal in light of s. 15.

54I would not give effect to such a broad reading of s. 15. The annotation to this provision in E.L. Greenspan & M. Rosenberg, eds., Martin's Annual Criminal Code 2001 (Aurora, Ont.: Canada Law Book, 2001) states at p. 48:

This provision is of quite limited application and provisions similar to it were originally enacted in England to protect persons serving the King de facto who might turn out to be on the wrong side of a civil war, and to make it clear that it was not treason to the successful claimant to the throne to have faithfully served the then reigning monarch.

55The annotation makes it clear that the defence is largely irrelevant in modern times. I agree with the motions judge that s. 15 is of no assistance to CG.

Issue 4: Does the "regulated industries defence" afford a defence to the claim?

56Case law applying the "regulated industries defence" deals with statutory interpretation regarding the application of federal competition law to provincially regulated industries: Canada (Attorney General) v. Law Society of British Columbia, 1982 29 (SCC), [1982] 2 S.C.R. 307, 137 D.L.R. (3d) 1; Reference re Farm Products Marketing Act (Ontario), 1957 1 (SCC), [1957] S.C.R. 198, 7 D.L.R. (2d) 257; Ontario Boys' Wear Ltd. v. Ontario (Advisory Committee), 1944 7 (SCC), [1944] S.C.R. 349, 82 C.C.C. 129; R. v. Cherry, 1937 145 (SK CA), [1938] 1 D.L.R. 156, 69 C.C.C. 219 (Sask. C.A.); R. v. Chung, 1929 263 (BC CA), [1929] 1 D.L.R. 756, 40 B.C.R. 512 (C.A.); Industrial Milk Producers Assn. v. British Columbia (Milk Board), 1988 9411 (FC), [1989] 1 F.C. 463, 47 D.L.R. (4th) 710 (T.D.); R. v. Simoneau (1935), 1935 288 (QC CQ), [1936] 1 D.L.R. 143, 65 C.C.C. 19 (Que. C.S.P.). In my view, none of these cases support the submission of CG and Toronto Hydro that a party operating in a regulated industry can act directly contrary to the Criminal Code.

57The cases applying the "regulated industries defence" have determined that there is essentially no conflict between the operation of federal anti-combines legislation, which encourages general competition, and provincial legislation regulating a particular industry. The operation of each of the legislative regimes has been held to be clearly in the public interest. The regulated industries cases do not deal with a situation where a provincial regulatory authority made an order which results in a private company acting in a way that violates the Criminal Code. Accordingly, these cases are of no assistance to CG.

Issue 5: Do the class members have a valid claim to restitution of the LPPs collected by CG?

58In his statement of claim, the appellant frames his case for monetary relief on the basis of the cause of action of unjust enrichment: "Consumers' Gas has been unjustly enriched at the expense of the Class and the Class is therefore entitled to restitution of all Late Payment Penalties paid to Consumers' Gas." The motions judge held that the plaintiff's claim for restitution cannot succeed. He applied the three-part test from Peter v. Beblow, 1993 126 (SCC), [1993] 1 S.C.R. 980 at p. 987, 101 D.L.R. (4th) 621 for determining whether the plaintiff had demonstrated the elements of unjust enrichment:

(i) an enrichment of the defendant;

(ii) a corresponding deprivation of the plaintiff; and

(iii) an absence of a juristic reason for the defendant's enrichment.

59The parties concede that the plaintiff suffered a deprivation. They differ on whether the other two elements are satisfied.

60The motions judge agreed with the plaintiff that there was an enrichment: as a result of each LPP, Consumers' Gas has more money than it had previously and, accordingly, is enriched. He went on to conclude at p. 574 D.L.R. that the third element was not satisfied because the Board orders represent a valid juristic reason for the enrichment:

In Canada (Attorney General) v. Confederation Life Insurance Co. (1995), 1995 7097 (ON SC), 24 O.R. (3d) 717 (Gen. Div.), Justice Blair defines a "juristic reason" as "some underlying justification grounded in a legal or equitable base". The defendant seeks and receives LPPs from its customers pursuant to and in compliance with OEB [Board] orders. The orders specifically authorize the defendant to charge the 5 [per cent] penalty. I find that the OEB orders are the juristic reason for the enrichment. Neither the plaintiff nor any other party has sought to challenge these orders, and as discussed above, the orders are valid and binding if and until such time when they are reversed or invalidated. By framing his case in such a way as to avoid challenging the rate orders directly, the plaintiff has placed himself in a position where he cannot meet the third element of the test for unjust enrichment, namely the absence of a juristic reason for the enrichment.

61CG argues that the motions judge erred in finding an enrichment. The plaintiff argues that he erred in finding that the Board orders are a juristic reason for the enrichment. Both issues will be considered in turn.

(A) Was CG enriched?

62The enrichment criteria of the action for unjust enrichment was considered by the Supreme Court of Canada in Peel (Regional Municipality) v. Canada, 1992 21 (SCC), [1992] 3 S.C.R. 762, 98 D.L.R. (4th) 140. McLachlin J. for the majority states at p. 789 S.C.R. that the word "enrichment" connotes a tangible benefit. McLachlin J. observes that the payment of money is an example of conferring a benefit on a defendant. She further states [at p. 790 S.C.R.] that "without a benefit which has 'enriched' the defendant and which can be restored to the donor in specie or by money, no recovery lies for unjust enrichment." To be enriched in a manner that would support restitutionary relief"[t]he thing which is given must have been received and retained by the defendant" (at p. 788 S.C.R.).

63CG argues that in the circumstances of this case, the payment of the LPP to CG is not an enrichment capable of giving rise to a restitutionary claim. CG cites the following statement from the Supreme Court's decision in Garland, supra, at p. 142 S.C.R.: "It is clear that Consumers' Gas neither encourages late payments nor seeks to profit from them". This observation is said to reflect the evidence that the income from the LPP does not increase returns to CG or otherwise benefit the shareholders of CG on a forecast basis.

64In my view, the receipt of LPPs did not confer a benefit on CG and thus cannot support a finding of enrichment in the regulatory context of this case. I accept that, ordinarily, the receipt of money will constitute an enrichment: see Maddaugh and McCamus, supra, at pp. 38 and 44 and G. Jones, ed., Goff & Jones: The Law of Restitution, 5th ed. (London: Sweet & Maxwell, 1998) at p. 16. In Peter v. Beblow, supra, at p. 990 S.C.R., McLachlin J. observes that the Supreme Court of Canada "has consistently taken a straightforward economic approach to the first two elements of the test for unjust enrichment".

65While it is true that CG received money in the form of LPPs, I am of the view that it is necessary to consider the role played by the LPP in the regulatory context of this case to decide whether CG has been thereby enriched. Under the regulatory scheme in which CG operates, the Board approves at rate hearings the rates that may be charged by CG for the transmission, distribution and storage of gas. These rates are designed to recover CG's overall revenue requirement. The greater the amount of the revenue requirement that is recovered by LPPs, the lesser the amount of the revenue requirement that needs to be covered by the other rates. Had a lower amount of revenue been recoverable through the LPP, then the amount to be recovered in other rates would have been higher in order to recoup the overall revenue requirement. The enrichment that follows from the receipt of LPPs is passed on to all CG customers in the form of lower gas delivery rates. I am thus of the view that the receipt of LPPs by CG did not constitute an enrichment capable of giving rise to a restitutionary claim.

66I do not think that this analysis involves a departure from a straightforward economic approach to enrichment. Rather, it is a recognition of the role of the Board in regulating the overall revenue of Consumers' Gas. Nonetheless, in the event that I am wrong in my analysis of enrichment, I will go on to consider the absence of juristic reason branch of the analysis and will assume for these purposes that the receipt of LPPs constituted an enrichment.

(B) Absence of juristic reason for the enrichment

67The plaintiff cites Lord Denning's decision in Kiriri Cotton Co. Ltd. v. Dewani, [1960] A.C. 192, [1960] 1 All E.R. 177 (P.C.) for the proposition that in cases where a statutory scheme renders a transaction unenforceable, recovery in restitution is allowed where the plaintiff can establish that the statutory scheme was enacted for the protection of persons in the plaintiff's situation, provided that the plaintiff is not in pari delicto with the defendant. The Kiriri Cotton decision established an exception to the general rule at common law that restitution is not available to a party to an agreement rendered unenforceable by reason of illegality: see Holman v. Johnson (1775), 98 E.R. 1120, [1775-1802] All E.R. Rep. 98. The plaintiff argues that since the policy of s. 347 is to protect members of the public from having to pay usurious interest, it would violate that policy to allow CG to retain the LPPs collected in contravention of s. 347(1)(b) and, thus, restitution must be ordered.

68The Supreme Court of Canada established in Peter v. Beblow, supra, at p. 990 S.C.R., that moral and policy questions are properly considered under the juristic reason branch of the inquiry: "It is in connection with the third element -- absence of juristic reason for the enrichment -- that such considerations may more properly find their place. It is at this stage that the court must consider whether the enrichment and detriment, morally neutral in themselves, are 'unjust'." The concept of injustice in the restitutionary context was elaborated by McLachlin J. in Peel, supra, at p. 804 S.C.R.:

First, the injustice lies in one person's retaining something which he or she ought not to retain, requiring that the scales be righted. Second, the required injustice must take into account not only what is fair to the plaintiff; it must also consider what is fair to the defendant. It is not enough that the plaintiff has made a payment or rendered services which it was not obliged to make or render; it must also be shown that the defendant as a consequence is in possession of a benefit, and it is fair and just for the defendant to disgorge that benefit.

69The plaintiff's argument assumes that restitution is necessary to give effect to the policy represented by s. 347(1) (b). However, as pointed out by McLachlin J., the required injustice for purposes of the juristic reason branch of the unjust enrichment analysis must consider not only what is fair to the plaintiff, but also what is fair to the defendant. In this regard, it is necessary to consider the statutory regime in which CG operates and the policy considerations that arise from the existence of this regime.

70Consumers' Gas was required by statute to apply the LPP. Failure on its part to abide by a Board rate order constitutes an offence under the OEBA. The Board orders, the vires of which have not been challenged by way of judicial review or otherwise, required the collection of LPPs by Consumers' Gas. While it is true that CG could have asked the Board to modify the LPP structure, the decision as to whether the LPP was part of a just and reasonable rate for gas lay with the Board and the Board's order in this regard was binding on CG. The overall rate structure designed by the Board was based on the LPP as a component of CG's revenue requirement. It would be contrary to the equities of this case to require Consumers' Gas to repay to late-paying customers all LPPs collected since 1981, which a provincial regulatory authority ordered it to collect and which were taken into account by the Board in making its rate orders. Moreover, were CG now required to repay the LPPs received since 1981, the cost implications would affect all of CG's customers, including the vast majority who consistently pay their accounts on time. These considerations of public policy arising from the defendant's position as a regulated utility company lead me to conclude that there is a juristic justification for the enrichment conferred by the LPPs.

71Accordingly, even if the LPPs constitute an enrichment, I would hold that the plaintiff's claim for restitution based on the action of unjust enrichment cannot succeed because it is not fair and just to require Consumers' Gas to disgorge the benefit represented by the LPPs.

Issue 6: Is the plaintiff entitled to a preservation order?

72By Notice of Motion dated September 26, 1994, the plaintiff sought an interim preservation order directing CG to hold, as stakeholder, all LPPs that it receives pending the resolution of this action, but with a right to use those sums for business purposes in the interim. In the event that the plaintiff's action were successful, CG would be obliged to repay the LPPs with interest. The motions judge postponed the hearing of the preservation order motion pending his decision on the applicability of s. 347 of the Criminal Code. The issue of the preservation order was again raised in the second round of summary judgment proceedings. The motions judge found it unnecessary to deal with the issue in light of his decision to dismiss the plaintiff's action.

73The appellant contends before this court that even if he is unsuccessful in his claim for restitution, the preservation order would serve a practical purpose in the event he is successful in demonstrating that CG cannot enforce payment of the LPPs. The preservation order would ensure that LPPs collected during the litigation process would be refunded.

74My finding that there is no basis for ordering CG to make restitution of the LPPs that it has collected makes it unnecessary to deal at any length with the request for a preservation order since this finding applies to LPPs collected both before and after this action was commenced. The plaintiff's claim for declaratory and injunctive relief, which is discussed below, does not alter this result. In addition, I would refuse to grant the preservation order sought by the plaintiff on the basis it would serve no practical purpose, considering that the requested order would give CG the right to spend the moneys at stake. As the Supreme Court of Canada held in Amax Potash Ltd. v. Saskatchewan, 1976 15 (SCC), [1977] 2 S.C.R. 576 at p. 598, 71 D.L.R. (3d) 1:

The dollars which the appellants pay to the respondent will not be same dollars which the appellants will get back if they are successful. It the meantime, the respondent will have the use of the dollars. All of this is inapposite to the preservation of property . . . [s]uch 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.

Issue 7: Should this court decide the plaintiff's claims for declaratory and injunctive relief?

75In his statement of claim, the plaintiff requests a declaration that LPPs offend s. 347 of the Criminal Code, are illegal and void and need not be paid by the proposed class. The plaintiff also seeks an interim, interlocutory and permanent injunction restraining CG from imposing the LPP and from terminating the supply of gas to any member of the class for failure to pay the LPP. Before this court, the appellant did not press his claim for an injunction restraining CG from terminating the supply of gas to any member of the class for failure to pay LPPs.

76As noted above, at a case management conference before the motions judge, it was agreed that the issue whether the plaintiff is entitled to prospective relief would be adjudicated at a later date. 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.

77While the issue of prospective relief was not one of the six issues raised in this round of summary judgment proceedings, the motions judge did refer to it, indicating that he would have refused to grant such relief. He referred to the plaintiff's request for a permanent injunction and declaration as "clearly illustrative of the fact that the plaintiff's action is a collateral attack on the Board orders, and not a simple case in contract, as described by the plaintiff". The parties have addressed the prospective relief issue before this court and I am of the view that it is appropriate to deal with it.

78If this court were to grant the declaratory and injunctive relief requested in the statement of claim, the respondent CG would be placed in an untenable position in that complying with the court's order would mean disregarding a valid and subsisting Board order. It would appear that in light of this fact, the appellant makes the following concession: "At an absolute minimum the court should order Consumers Gas to stop collecting illegal LPPs effective when the current Board Order expires." CG submits that Board orders do not expire and thus any declaratory or injunctive relief would still conflict with the existing Board order. It also argues that any declaration would interfere with the Board's exclusive jurisdiction to determine the issue at first instance. While CG is technically correct that Board orders do not have an expiry date, there can be no dispute that the Board generally reviews its rate orders on an annual basis: see Garland v. Consumers' Gas (2000), 2000 22630 (ON SC), 185 D.L.R. (4th) 536 at p. 557.

79In light of the resolution of all of the issues in this action by the Supreme Court of Canada and by this court, the Board will need to address an alternative mechanism for applying late payment penalties forthwith. Accordingly, I would refrain from granting the declaration requested by the plaintiff.

Issue 8: Costs

80An appellate court should not readily interfere with a judge's discretionary order for costs. However, I agree with the position of the appellant and the Law Foundation of Ontario that the order granting CG its costs of the action on a party and party basis is unreasonable and must be set aside.

81The motions judge made no order as to costs following the hearing on the s. 347 issue: see (1995), 1995 7179 (ON SC), 22 O.R. (3d) 767. In arriving at this decision, he considered the factors identified in s. 31(1) of the Class Proceedings Act regarding the exercise of his discretion with respect to costs:

31(1) In exercising its discretion with respect to costs under subsection 131(1) of the Courts of Justice Act, the court may consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest.

82The motions judge agreed with the plaintiff that this was a test case with similar cases dependent on the outcome. He also agreed that the case raised novel points of law, including whether the LPP violated s. 347 of the Criminal Code and whether s. 347 had any application to transactions involving the sale of goods and services without an accompanying loan of money. In addition, he accepted that the case involved a matter of public interest considering that almost all Ontario residents are serviced by electric and/or gas utilities, most of which impose a late payment penalty on overdue accounts.

83There are several circumstances that warrant overturning the motions judge's cost order against the appellant following the second round of proceedings. First, the effect of this order is to unreasonably require the appellant, who was successful in his appeal to the Supreme Court of Canada, to pay the costs of that appeal to CG. Second, although CG was ultimately successful in defending the action, it was unsuccessful on two of the defences that it raised in the court below and three of the defences that it pressed on this appeal. Finally, the factors identified in s. 31(1) of the Class Proceedings Act and found by the motions judge to be present in the first round were also present in the second round. These proceedings involved novel issues including whether the doctrine against collateral attack applies in this case and whether there is a juristic reason for an enrichment where the enrichment consists of payments that are capable of representing a criminal rate of interest.

84When taken together, these factors warrant each party bearing its own costs.

Disposition

85I would dismiss the plaintiff's appeal from the motions judge's order dismissing his action. I would grant the appellant leave to appeal from the motion judge's order awarding Consumers' Gas the costs of the action and allow the appeal. For the reasons given above, this is not an appropriate case for costs either here or below.

86BORINS J.A. (dissenting): -- I have had the opportunity to consider the reason of McMurtry C.J.O. I agree with his resolution of six of the eight issues presented by this appeal. However, I am unable to agree with his resolution of the issue that he has characterized as: "Do the class members have a valid claim to restitution of the LPPs collected by CG?" Nor am I able to agree with his disposition of the appellant's appeal from the costs awarded by the motion judge. For the reasons that follow, I would allow the appeal, set aside the judgment dismissing the appellant's claim and order that the respondent's motion for summary judgment be dismissed with costs of the motion and the appeal.

87The principal relief sought by the appellant in his statement of claim is "$112 million in restitutionary payments" for LPPs paid by him and the class members to CG which, it is alleged, CG received contrary to s. 347(1)(b) of the Criminal Code. The appellant's claim for restitution is founded upon the principle of unjust enrichment. It is clear from the Canadian jurisprudence that to succeed in his claim the appellant must satisfy the three subordinate principles of the general principle of unjust enrichment: (1) the existence of a benefit or an enrichment gained by the defendant; (2) that the defendant gained the benefit or the enrichment at the plaintiff's expense; and (3) the absence of any juristic reason for the defendant's enrichment.

88The appellant and the respondent each moved for summary judgment in late 1994. The respondent requested an order dismissing the appellant's claim. The appellant requested, inter alia, a declaration that the LPPs offend s. 347 of the Criminal Code and are illegal and void and need not be paid by the class members and judgment based on the declaration, awarding the class members restitutionary payments of $85.7 million, or such other amount as the court may determine. In February 1995, Winkler J. held that the LPPs did not offend s. 347. As the Chief Justice has indicated, in October 1998, the Supreme Court of Canada reached the opposite conclusion. As a result, the hearing of the parties' motions for summary judgment and other relief continued in March 2000, when the first seven issues outlined in para. 24 of the Chief Justice's reasons were argued before Winkler J., who allowed the respondent's motion. This resulted in the judgment from which this appeal is taken, and which reads as follows:

THIS COURT ORDERS AND ADJUDGES that this action be and hereby dismissed.

THIS COURT ORDERS that the plaintiff pay the defendant its costs of this action to be assessed on a party and party basis.

89As I will explain, on the motion for summary judgment, the parties agreed, as there were no factual disputes, that the motion could be decided under rule 20.04(4) which permits the court to resolve questions of law when such questions are the only genuine issues arising in a motion for summary judgment under Rule 20. Therefore, for the respondent to succeed in its motion for summary judgment, it was required to satisfy the motion judge on the basis of the evidence in the record, and as a matter of law, that either it had not gained a benefit through the receipt of the LPPs it received from the class members, that it had not gained the benefit at the expense of the class members, or, if it had gained a benefit at the expense of the class members, there existed a juristic reason which permitted it to retain the benefit.

90Before both the motion judge and this court, the parties agreed that the appellant had suffered a deprivation as a result of paying the LPPs. Although the motion judge found that CG was enriched as a result of its receipt of the LPPs, he found that the rate orders of the Ontario Energy Board ("OEB") constituted "the juristic reason for the enrichment" as the orders remained "valid and binding if and until such time when they [were] reversed or invalidated". On the basis of the latter finding, the motion judge granted the summary judgment.

91In my view, there is no reason to interfere with the finding of the motion judge that CG had gained a benefit through the receipt of the LPPs. However, as I will explain, in my opinion, the motion judge erred in law in finding that the rate orders of the OEB constituted a juristic reason for the benefit.

92The issues to be resolved in this case are far from simple. There are, in my opinion, three areas of law, each in their developmental stages in this country, which converge in the resolution of this appeal. They are: (1) the nature and purpose of class proceedings; (2) restitution based on the principle of unjust enrichment; and (3) the effect on commercial obligations of a finding that interest payable under a contract offends the charging or receipt of interest payable at a criminal rate prohibited by s. 347 of the Criminal Code. In my view, these three areas cannot be considered in isolation and must also be considered in the context of the general principles of appellate review. In reaching the conclusion that CG has failed to demonstrate, on the basis of the evidentiary record before the motion judge, that as a matter of law the appellant's claim for restitution based on unjust enrichment cannot succeed, I have endeavoured to apply each of these areas of the law.

Reasons for Judgment of the Motion Judge

93The reasons of the motion judge are reported at (2000), 2000 22630 (ON SC), 185 D.L.R. (4th) 536. At pp. 549-50 D.L.R., the motion judge referred to the role of the court on a summary judgment motion set out by this court in Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 954 (ON CA), 38 O.R. (3d) 161 at p. 173, 156 D.L.R. (4th) 222, and continued:

The Supreme Court of Canada recently considered the test for summary judgment under Rule 20 of the Ontario Rules of Civil Procedure, in Guarantee Co. of North America v. Gordon Capital Corp. (1999), 1999 664 (SCC), 178 D.L.R. (4th) 1. The Court concluded at page 10 [para. 27] that"[t]he appropriate test to be applied on a motion for summary judgment is satisfied when the applicant has shown that there is no genuine issue of material fact requiring trial, and therefore summary judgment is a proper question for consideration by the court". See also, V.K. Mason Construction Ltd. v. Canadian General Insurance Group Ltd. (1998), 1998 14615 (ON CA), 42 O.R. (3d) 618 (C.A.); and Transamerica Occidental Life Insurance Co. v. Toronto- Dominion Bank (1999), 1999 3716 (ON CA), 44 O.R. (3d) 97, 173 D.L.R. (4th) 468 (C.A.).

In the case at bar, since both parties are seeking summary judgment, there is general agreement that there are no factual disputes regarding the subject issues. The controversial matters are essentially issues of law that may be decided on this motion according to rule 20.04(4). All parties agreed that summary judgment was the proper procedure for determination of the issues on this motion.

Disposition

In my view this is an appropriate case for summary judgment under rule 20.04(4). On the undisputed facts, the plaintiff's claim cannot succeed in law. I find that there is no serious issue to be tried. With respect to the defences raised by Consumers' Gas and Toronto Hydro, I find that neither the "Regulated Industries Defence", nor section 15 of the Criminal Code provides Consumers' Gas with a good and complete defence against the plaintiff's action. I do find, however, that the plaintiff's claim is an impermissible collateral attack, and as such, cannot proceed. Further, I find that section 18 of the OEBA provides the defendant with a complete defence to the plaintiff's action. For both these reasons, the defendant's motion for summary judgment succeeds, and the plaintiff's claim is dismissed.

While it is unnecessary for me to determine the validity of the plaintiff's claim for restitution, I nonetheless have concluded that there is a juristic reason for the enrichment, and as such, the claim for restitution cannot succeed. A juristic reason has been defined as a legal or equitable underlying justification for the enrichment. I agree with the plaintiff that there has been both an enrichment and a corresponding deprivation, but I cannot accede to the submission that there is no juristic reason to support such an enrichment. It is clear that the OEB orders represent a valid juristic reason for the demand and receipt of the late payment penalties.

94Because the motion judge found that the appellant's claim could not succeed as it represented "an impermissible collateral attack" on the rate orders of the OEB which permitted CG to collect LPPs from its customers, and because he also found that s. 18 of the Ontario Energy Board Act, R.S.O., c. O.13 ("OEBA") provided CG with a complete defence to the appellant's claim, he provided brief reasons on what he described as "the validity of the plaintiff's claim in restitution". His reasons, in full, are found on p. 574 D.L.R.:

While I have found that the plaintiff's claim is an impermissible collateral attack and is barred by section 18 of the OEBA, I will, nonetheless, deal with the validity of the plaintiff's claim for restitution. The courts have found that unjust enrichment exists when the plaintiff establishes the following: (1) that there has been an enrichment of the defendant; (2) that there has been a corresponding deprivation of the plaintiff; and (3) that there is an absence of a juristic reason for the defendant's enrichment. See Peter v. Beblow, 1993 126 (SCC), [1993] 1 S.C.R. 980 at 987, 101 D.L.R. (4th) 621.

In the case at bar, the parties conceded that the plaintiff did suffer a deprivation; however, they disagreed with respect to factors (1) and (3). While both the plaintiff and the defendant made extensive submissions with respect to whether Consumers' Gas benefits from the collection of the late payment penalties, I find that the defendant did and continues to benefit from the payment of the LPPs. Simply stated, as a result of each LPP received by Consumers' Gas, the company has more money than it had previously and accordingly is enriched.

While the plaintiff has satisfied me that there has been a benefit to Consumers' Gas and a corresponding detriment to Mr. Garland, there is a juristic reason for such an enrichment. In Canada (Attorney General) v. Confederation Life Insurance Co. (1995), 1995 7097 (ON SC), 24 O.R. (3d) 717 (Gen. Div.), Justice Blair defines a "juristic reason" as "some underlying justification grounded in a legal or equitable base". The defendant seeks and receives LPPs from its customers pursuant to and in compliance with OEB orders. The orders specifically authorize the defendant to charge the 5 [per cent] penalty. I find that the OEB orders are the juristic reason for the enrichment. Neither the plaintiff nor any other party has sought to challenge these orders, and as discussed above, the orders are valid and binding if and until such time when they are reversed or invalidated. By framing his case in such a way as to avoid challenging the rate orders directly, the plaintiff has placed himself in a position where he cannot meet t he third element of the test for unjust enrichment, namely the absence of a juristic reason for the enrichment.

95Before leaving the motion judge's reasons, I wish to observe that in deciding the parties' motions for summary judgment on the basis that the only genuine issues for trial were issues of law based on undisputed facts, the motion judge did what the parties requested and acted within the power provided by rule 20.04(4). In this respect, this case is distinguishable from Kilpatrick v. Peterborough Civic Hospital (1998), 1999 3725 (ON CA), 44 O.R. (3d) 321, 174 D.L.R. (4th) 435 (C.A.) in which material facts were in dispute, and is akin to what took place in Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 2000 16991 (ON CA), 51 O.R. (3d) 641 at p. 658, 195 D.L.R. (4th) 135 (C.A.), leave to appeal refused [2001] S.C.C.A. No. 63, and Cronk v. Canadian General Insurance Co. (1995), 1995 814 (ON CA), 25 O.R. (3d) 505 at p. 538, 128 D.L.R. (4th) 147 (C.A.).

Standard of Review

96The standard of review to be applied by this court in considering an appeal from a summary judgment is stated in Mastercraft Group Inc. Investment Collections Actions (Re) (1995), 1995 931 (ON CA), 123 D.L.R. (4th) 161 at p. 168 (Ont. C.A.):

The judge is not to find facts but, rather, to examine the evidence to see if it is reasonably capable of raising a genuine issue for trial. The reasons, however, should be examined in their context. In these circumstances, we think the proper course is to examine the evidence relied upon by the appellants to see if it is capable of giving rise to a genuine issue respecting the conclusions of the motion judge.

97In Van de Perre v. Edwards, 2001 SCC 60, the Supreme Court of Canada took the occasion to remind appellate courts of the narrow scope of appellate review. Although Van de Perre was a custody case, there is no doubt that what was said by Bastarache J. on behalf of the court has general application. He drew on what was said by the Supreme Court of Canada on an issue of support in Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518, 172 D.L.R. (4th) 577. At para. 11, Bastarache J. applied the following passage from the reasons of L'Heureux-Dubé J. in para. 12 of Hickey:

Though an appeal court must intervene when there is a material error, a serious misapprehension of the evidence, or an error in law, it is not entitled to overturn a support order simply because it would have made a different decision or balanced the factors differently.

98Bastarache J. added in para. 13 that "an appellate court may only intervene in the decision of a trial judge if he or she erred in law or made a material error in the appreciation of the facts." Because the British Columbia Court of Appeal had transgressed in its review of the decision of the trial judge, Bastarache J. found that it was "necessary for [the Supreme Court of Canada] to state explicitly that the scope of appellate review does not change because of the type of case on appeal" (para. 14). In para. 15, Bastarache J. cautioned that an appellate court cannot reconsider the evidence relied on by a trial judge unless it appears that, in considering the evidence, he or she committed a material error. For example, if there is an indication that the trial judge did not consider relevant factors or evidence, this will constitute a material error "if it gives rise to the reasoned belief that the trial judge must have forgotten, ignored or misconceived the evidence in a way that affected his conclusion".

99This court has stated that the narrow scope of appellate review applies where the entire record before a trial judge or a motion judge consists of documentary or written evidence. See Equity Waste Management of Canada Corp. v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3d) 321, 40 M.P.L.R. (2d) 107 (C.A.).

Issue

100Based on the foregoing, the issue in this appeal is whether the motion judge erred in law or made a material error in the appreciation of the facts in finding: (1) that CG sustained a benefit through the receipt of LPPs paid by the class members, and (2) that the rate orders of the OEB that authorize CG to charge a 5 per cent LPP constitute a juristic reason that permits CG to retain the LPPs.

The Nature and Purpose of Class Proceedings

101Although the notion of class actions is not new to Ontario law, it is only in recent years that the Ontario legislature has provided specific legislation concerning class proceedings. Rule 75 of the former Rules of Practice, and its predecessors, which are derived from Order 16, Rule 9 of the Rules of the Supreme Court, 1883, in England, provided for a form of class action known as a representative action. However, based on the 1988 Report on Class Actions of the Ontario Law Reform Commission which recommended a comprehensive procedure for class actions, in 1992 Ontario enacted the Class Proceedings Act, 1992, S.O. 1992, c. 6 which came into force on January 1, 1993. The intention of the Ontario legislature is clear. Class actions may be brought and shall be certified if the conditions in s. 5(1) of the Act are met.

102In Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, 201 D.L.R. (4th) 385, a case which concerned an application by the defendants for an order striking out the plaintiffs' claim to sue in a representative capacity under Rule 42 of the Alberta Rules of Court (which is similar to former Rule 75 in Ontario), McLachlin C.J.C. reviewed the history and functions of class actions. At pp. 397-98 D.L.R., McLachlin C.J.C. summarized the nature and purpose of class proceedings:

The class action plays an important role in today's world. The rise of mass production, the diversification of corporate ownership, the advent of the mega-corporation, and the recognition of environmental wrongs have all contributed to its growth. A faulty product may be sold to numerous consumers. Corporate mismanagement may bring loss to a large number of shareholders. Discriminatory policies may affect entire categories of employees. Environmental pollution may have consequences for citizens all over the country. Conflicts like these pit a large group of complainants against the alleged wrongdoer. Sometimes, the complainants are identically situated vis-à-vis the defendants. In other cases, an important aspect of their claim is common to all complainants. The class action offers a means of efficiently resolving such disputes in a manner that is fair to all parties.

Class actions offer three important advantages over a multiplicity of individual suits. First, by aggregating similar individual actions, class actions serve judicial economy by avoiding unnecessary duplication in fact-finding and legal analysis. The efficiencies thus generated free judicial resources that can be directed at resolving other conflicts, and can also reduce the costs of litigation both for plaintiffs (who can share litigation costs) and for defendants (who need litigate the disputed issue only once, rather than numerous times): see W.K. Branch, Class Actions in Canada (1998), at para. 3.30; M.A. Eizenga, M.J. Peerless and C.M. Wright, Class Actions Law and Practice (1999), at 1.6; Bankier, supra, at pp. 230-31; Ontario Law Reform Commission, Report on Class Actions (1982), at pp. 118-19.

Second, by allowing fixed litigation costs to be divided over a large number of plaintiffs, class actions improve access to justice by making economical the prosecution of claims that would otherwise be too costly to prosecute individually. Without class actions, the doors of justice remain closed to some plaintiffs, however strong their legal claims. Sharing costs ensures that injuries are not left unremedied: see Branch, supra, at para. 3.40; Eizenga, Peerless and Wright, supra, at 1.7; Bankier, supra, at pp. 231-32; Ontario Law Reform Commission, supra, at pp. 119-22.

Third, class actions serve efficiency and justice by ensuring that actual and potential wrongdoers do not ignore their obligations to the public. Without class actions, those who cause widespread but individually minimal harm might not take into account the full costs of their conduct, because for any one plaintiff the expense of bringing suit would far exceed the likely recovery. Cost-sharing decreases the expense of pursuing legal recourse and accordingly deters potential defendants who might otherwise assume that minor wrongs would not result in litigation: see "Developments in the Law -- The Paths of Civil Litigation: IV. Class Action Reform: An Assessment of Recent Judicial Decisions and Legislative Initiatives" (2000), 113 Harv. L. Rev. 1806, at pp. 1809-10; see Branch, supra, at para. 3.50; Eizenga, Peerless and Wright, supra, at 1.8; Bankier, supra, at p. 232; Ontario Law Reform Commission, supra, at pp. 11 and 140-46.

(Emphasis added)

Restitution Based on Unjust Enrichment

103This is not the occasion to enter into a lengthy discussion of the legal principles that apply to restitution based on unjust enrichment. Clearly, there is no need to do so as entire treatises have been written on the subject, notably, Goff and Jones, The Law of Restitution, 5th ed. (London: Sweet and Maxwell, 1998), and in this country, Maddaugh and McCamus, The Law of Restitution (Aurora, Ont.: Canada Law Book, 1990). However, some consideration of the authorities is necessary because a simple statement of the three elements of unjust enrichment, as articulated by Dickson J. in Pettkus v. Becker, 1980 22 (SCC), [1980] 2 S.C.R. 834 at p. 844, 117 D.L.R. (3d) 257, belies the difficulties that often attend upon the determination of these elements in individual cases. In my view, the discussion that follows provides support for my conclusion that the motion judge erred in concluding that CG had established the absence of a genuine issue for trial on whether CG was unjustly enriched by t he payment of LPPs by the class members.

104It is helpful to repeat Dickson J.'s articulation of the elements of unjust enrichment in Pettkus at p. 844 S.C.R. [from Rathwell v. Rathwell, 1978 3 (SCC), [1978] 2 S.C.R. 436 at p. 455]:

As a matter of principle, the court will not allow any man unjustly to appropriate to himself the value earned by the labours of another. That principle is not defeated by the existence of a matrimonial relationship between the parties; but, for the principle 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.

In Sorochan v. Sorochan, 1986 23 (SCC), [1986] 2 S.C.R. 38 at p. 44, 29 D.L.R. (4th) 1, Dickson C.J.C., on behalf of the Supreme Court of Canada, repeated in similar terms this statement of the three elements of the principle of unjust enrichment.

105It would appear from the development of the Canadian law of unjust enrichment that it has been the element of juristic reason that has driven the result reached in most cases. While courts have generally decided the elements of deprivation and enrichment by applying a literal formulation of these terms, courts are divided in their analytical approach to "juristic reason". 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. See L. Smith"The Mystery of 'Juristic Reason'" (2000), 12 S.C.L.R. (2d) 211 at pp. 219-29. This was recognized by McLachlin J. in her reasons for judgment in Peel (Regional Municipality) v. Canada, [supra], in which she emphasized the various tensions inherent in the law of restitution, pointing out at p. 804 S.C.R. that the law of res titution is aimed at re-establishing an equilibrium between an individual who has suffered a loss and an individual who has enjoyed an unjustifiable gain. At pp. 784-86 S.C.R., she stated that the 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.

106Similar views were expressed earlier by Dickson J. in Pettkus when he observed at pp. 847-48 S.C.R.:

The principle of unjust enrichment lies at the heart of the constructive trust. "Unjust enrichment" has played a role in Anglo-American legal writing for centuries. Lord Mansfield, in the case of Moses v. MacFerlin (1760), 2 Burr. 1005, put the matter in these words: ". . . the gist of this kind of action is that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money". It would be undesirable, and indeed impossible, to attempt to define all the circumstances in which an unjust enrichment might arise . . . . The great advantage of ancient principles of equity is their flexibility: the judiciary is thus able to shape these malleable principles so as to accommodate the changing needs and mores of society, in order to achieve justice.

(Emphasis in original)

107In Peel, McLachlin J. completed her analysis at pp. 788-89 S.C.R.:

At the heart of the doctrine of unjust enrichment, whether expressed in terms of the traditional categories of recovery or general principle, lies the notion of restoration of a benefit which justice does not permit one to retain. As Goff and Jones, supra, put it at p. 12: "Most mature systems of law have found it necessary to provide, outside the fields of contract and civil wrongs, for the restoration of benefits on grounds of unjust enrichment". Thus for recovery to lie, something must have been given, whether goods, services or money. The thing which is given must have been received and retained by the defendant. And the retention must be without juristic justification, to quote Dickson J. in Pettkus v. Becker.

The tri-partite principle of general application which this Court has recognized as the basis of the cause of action for unjust enrichment is thus seen to have grown out of the traditional categories of recovery. It is informed by them. It is capable, however, of going beyond them, allowing the law to develop in a flexible way as required to meet changing perceptions of justice.

It follows from this that the traditional categories of recovery, while instructive, are not the final determinants of whether a claim lies. In most cases, the traditional categories of recovery can be reconciled with the general principles enunciated in Pettkus v. Becker, supra. But new situations can arise which do not fit into an established category of recovery but nevertheless merit recognition on the basis of the general rule.

(Emphasis added)

Benefit to the Defendant

108Although restitution is most typically available to restore a benefit that a defendant has subtracted from a plaintiff"the notion of 'benefit' is notoriously elusive": M. McInnes"Incontrovertible Benefits in The Supreme Court of Canada: Peel (Regional Municipality v. Canada; Peel (Regional Municipality) v. Ontario" (1994), 23 C.B.L.J. 122 at p. 123. However, Maddaugh and McCamus, supra, suggest at p. 38:

[W]here the benefit in question is constituted by moneys paid to the defendant by the plaintiff . . . or where it is constituted by profits acquired through the defendant's wrongful breach of a duty owed the plaintiff, the existence of a benefit in the defendant's hands is likely to be both palpable and non-contentious.

109Goff and Jones at p. 16 state: "The most common example of a benefit is money, which has the peculiar character of a universal medium of exchange. The receipt of money is therefore a benefit to the recipient." They add at p. 27:

Money claims rarely present any problem of valuation if the plaintiff simply seeks to make the defendant personally liable to make restitution . . . . His assets have been increased to that extent, and that is the value of his benefit.

110While the payment of money by the plaintiff to the defendant will seldom pose any difficulty for the court in determining whether the defendant has achieved a benefit as that term has been interpreted in the case law, other forms of "benefits" may present more difficult analytical problems. Both Goff and Jones (at pp. 16-27) and Maddaugh and McCamus (at pp. 38-44), in discussing the nature of a benefit, illustrate the range of problems encountered by the courts in determining whether a defendant has obtained a benefit.

111Each treatise provides a helpful summary of the considerations that apply in answering what is a benefit. Goff and Jones state on p. 16:

A restitutionary claim is for the benefit, the enrichment, gained by the defendant at the plaintiff's expense; it is not one for loss suffered. As will be seen, in English law the concept of benefit is not synonymous with that of objective enrichment (in the sense that the wealth of the defendant has increased), but also embraces expense saved and "requested for performance."

Whether a plaintiff's claim is successful may depend on the nature of the benefit conferred. Different principles govern claims arising from the payment of money from claims based on the receipt of services or the delivery of goods. Moreover, at one time it was thought that a plaintiff had to demonstrate that the defendant had gained a positive, as distinct from a negative, benefit. Today few would deny that the saving of expense is a legal as well as an economic benefit. So, if you use my electrical equipment without my consent you must compensate me for its use even though I may never have used it; and it has been long recognised that the essence of a claim for contribution or recoupment is that the plaintiff has discharged the defendant's duty to make a payment to a third party.

112Maddaugh and McCamus state at p. 44:

In summary, discernment of the existence of a benefit will pose little difficulty in cases where money has been paid to the defendant or where the benefit has been conferred under an ineffective transaction or acquired by the defendant acting in breach of a duty owed to the plaintiff. Such difficulties as do arise are best resolved by adopting the notion that requested services constitute a benefit whether or not they produce wealth in the defendant's hands and by application of the concept of incontrovertible benefit. The range of the kinds of items that might be considered to be benefits in the requisite sense is no more limited than the range of benefits that could be the subject-matter of a bargain. Relief has been granted both for the transfer or acquisition of items that constitute wealth in the defendant's hands and for benefits in the form of saved expense.

(Emphasis added)

The Absence of any Juristic Reason for the Defendant's Benefit

113As I have indicated earlier, Dickson J. in Pettkus at p. 844 S.C.R. described the third element of unjust enrichment as "the absence of any juristic reason -- such as a contract or disposition of law -- for the enrichment". In Campbell v. Campbell (1999), 1999 2294 (ON CA), 43 O.R. (3d) 783, 173 D.L.R. (4th) 270 (Ont. C.A.), in which this court considered the concept of juristic reason, the court observed at p. 791 O.R., p. 278 D.L.R.:

Perhaps the most difficult requirement to apply is the absence of a juristic reason for the enrichment. It has been left to the judiciary to give shape and content to the concept of juristic justification, and to develop its limits. Ultimately, it is up to the courts to determine when there is justification for an enriched defendant to retain the benefit based on the circumstances of each case.

114In my view, what the case law discloses is that term "juristic reason", although connoting a reason for an enrichment designed to have, and capable of having, a legal effect, has also taken on the meaning of whether the defendant's acceptance or retention of a benefit under the circumstances of the case, would make it inequitable for a defendant to retain the benefit. To Dickson J. in Pettkus at p. 848 S.C.R.: "It must, in addition [to the first two elements of unjust enrichment], be evident that the retention of the benefit would be 'unjust' in the circumstances of the case." To McLachlin J. in Peter v. Beblow, [supra], at p. 990 S.C.R., p. 645 D.L.R.: "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 vary with the situation before the court." She added that a fundamental concern will always be the legitimate expectation of the parties.

115In commenting on the concept of juristic reason in a relatively early article"The Emergence of Unjust Enrichment as a Cause of Action and the Remedy of Constructive Trust" (1988), 26 Alta. L.R. 407 at p. 451, Professor Litman foreshadowed the Supreme Court's approach to this concept:

In formulating juristic justification, the primary focus of the courts should be the narrow question of fairness as between the parties. Courts should consider whether, having regard to the particular circumstances giving rise to an enrichment and to subsequent events, it is fair for the defendant to retain the benefit . . .

116It is in Peel, at pp. 803-04 S.C.R., that McLachlin J. highlighted the core meaning of juristic justification for retaining a benefit:

This is not to say that the concepts of justice and equity play no role in determining whether recovery lies. It is rather to say that the law defines what is so unjust as to require disgorgement in terms of benefit, corresponding detriment and absence of juristic reason for retention. Such definition is required to preserve a measure of certainty in the law, as well as to ensure due consideration of factors such as the legitimate expectation of the parties, the right of parties to order their affairs by contract, and the right of legislators in a federal system to act in accordance with their best judgment without fear of unforeseen future liabilities.

Additionally, conscience and fairness may play a role in the development of the relevant legal principles. When questions arise as to the scope of the principles, the balance of equities between the parties may determine the outcome. Thus Maddaugh and McCamus (The Law of Restitution (1990)"Compulsory Discharge of Another's Liability"), considering a series of cases where the defendant shared a legal liability for the payment made with the plaintiff, opine at p. 740 that "[s]o long as that benefit is bestowed by a plaintiff in circumstances such that the defendant cannot, in all good conscience, retain it, restitutionary relief ought to be awarded." But this is quite different from the assertion that "good conscience" is the only requirement for recovery.

The concept of "injustice" in the context of the law of restitution harkens back to the Aristotelian notion of correcting a balance or equilibrium that had been disrupted. The restitutive form of justice is distinct from the analysis particular to tort and contract law, in the sense that questions of duty, standards, and culpability are not a central focus in restitution. Speaking in highly general terms, Stevens suggests that contract and tort claims deal with punitive or distributive measures, whereas restitution claims deal with an "unusual receipt and a retention of value" ("Restitution, Property, and the Cause of Action in Unjust Enrichment: Getting By With Fewer Things (Part I)" (1989), 39 U.T.L.J. 258, at p. 271; see also Wingfield"The Prevention of Unjust Enrichment: or How Shylock Gets His Comeuppance" (1988), 13 Queen's L.J. 126, at p. 134). Thus, restitution, more narrowly than tort or contract, focuses on re-establishing equality as between two parties, as a respo nse to a disruption of equilibrium through a subtraction or taking. This observation has dual ramifications for the concept of "injustice" in the context of restitution. First, the injustice lies in one person's retaining something which he or she ought not to retain, requiring that the scales be righted. Second, the required injustice must take into account not only what is fair to the plaintiff; it must also consider what is fair to the defendant. It is not enough that the plaintiff has made a payment or rendered services which it was not obliged to make or render; it must also be shown that the defendant as a consequence is in possession of a benefit, and it is fair and just for the defendant to disgorge that benefit.

(Emphasis added)

117Although Professor Smith may not agree with my characterization of how Canadian jurisprudence has come to view and apply the element of juristic reason, he has, in his thorough and helpful article, analyzed the various approaches Canadian courts have taken in applying this element in the resolution of individual claims. There is much to be said for his observation at the outset of his article at p. 211:

It is not at all clear that anyone knows the meaning of 'juristic reason'. Certainly, no judge appears even to have attempted an exhaustive definition.

Indeed, to Professor Smith, at p. 215, it is not entirely clear why Canadian common law was given the "juristic reason" formulation in Pettkus. At p. 219, he opines:

It seems possible that Dickson C.J.C. chose the formulation "absence of juristic reason" rather than "unjust" in order to emphasize that the matter under consideration was not one to be resolved by the conscience of the judge, but rather by doctrine; in other words, by legal reasoning.

118I would agree with this observation. It is to be remembered that in Pettkus at p. 844 S.C.R., in describing the third element of unjust enrichment, Dickson J. used the words "the absence of any juristic reason -- such as a contract or disposition of law" (emphasis added). In using the examples of a contract or a disposition of law to illustrate the meaning of a juristic reason, it is my respectful opinion that Dickson J. was referring to a reason that has a legal effect, and is capable thereof. A contract undoubtedly has legal effect, and a judge's ruling or decision is commonly referred to as a disposition.

119This interpretation of juristic reason, in my view, conforms with the test applied in England when restitution is claimed on the ground that the defendant was unjustly enriched at the expense of the plaintiff. The first two elements of unjust enrichment are the same in England and Canada. However, in England the third element of unjust enrichment is stated differently: if it would be unjust or unfair to order restitution, the claim should fail. This element was explained by Lord Goff of Chieveley in Lipkin Gorman (a firm) v. Karpnale Ltd., [1991] 2 A.C. 548, [1992] 4 All E.R. 512 (H.L.). In that case, the plaintiff, a firm of solicitors, sought to recover from the defendant gambling club money stolen from the firm by one of its partners, and used to fund his gambling at the club. The club advanced several grounds in support of its position why it would be unfair to hold it liable to the solicitors. In rejecting the club's position, at p. 578 A.C., Lord Goff of Chieveley stated:

I accept that the solicitors' claim in the present case is founded upon the unjust enrichment of the club, and can only succeed if, in accordance with the principles of the law of restitution, the club was indeed unjustly enriched at the expense of the solicitors. The claim for money had and received is not, as I have previously mentioned, founded upon any wrong committed by the club against the solicitors. But it does not, in my opinion, follow that the court has carte blanche to reject the solicitors' claim simply because it thinks it unfair or unjust in the circumstances to grant recovery. The recovery of money in restitution is not, as a general rule, a matter of discretion for the court. A claim to recover money at common law is made as a matter of right; and even though the underlying principle of recovery is the principle of unjust enrichment, nevertheless, where recovery is denied, it is denied on the basis of legal principle.

(Emphasis added)

120Lord Goff of Chieveley continued at p. 578 A.C., in a statement which I will return [to] later in my reasons:

It is therefore necessary to consider whether Mr. Lightman's submission can be upheld on the basis of legal principle. In my opinion it is plain, from the nature of his submission, that he is in fact seeking to invoke a principle of change of position, asserting that recovery should be denied because of the change in position of the respondents, who acted in good faith throughout.

121For the purpose of these reasons, the real value of Professor Smith's analysis of "juristic reason" is to be found in its illustration of the absence of a uniform judicial application of the concept and the presence of some unanswered questions in its application. In addition, he points out that there are defences available that must be considered even if unjust enrichment is established, such as the defence of change of position, recognized by the Supreme Court of Canada in Storthoaks (Rural Municipality) v. Mobil Oil Canada Ltd., 1975 156 (SCC), [1976] 2 S.C.R. 147, 55 D.L.R. (3d) 1, and relied on by the respondent in this appeal.

122One of the important issues considered by Professor Smith is whether the Canadian law of unjust enrichment is oriented towards reasons for keeping enrichments, or whether it is committed to the view that the plaintiff must show a reason for reversing the transfer of wealth. His conclusion is that the position is totally unclear as a matter of authority.

123Closely related to this issue is the question on which party the burden lies to prove "absence of juristic reason". At p. 228 he states:

Normally, it is for the plaintiff to prove its cause of action, and for the defendant to prove any defences. If "absence of juristic reason" is understood as an element of the cause of action, then the plaintiff must prove it. The few judgments which have addressed this issue suggest that this is the correct analysis. And yet how can the plaintiff prove a negative? To prove that there is no juristic reason, one would need a closed list of such reasons; otherwise it would be impossible to be sure that none was applicable.

He opines that "the logic of the matter . . . suggests the opposite." The burden of proof is somewhat complicated in this case because the determination of the absence of juristic reason arose in the context of a motion for summary judgment in which the burden rested on the respondent to prove that there was no genuine issue for trial as to the existence of a juristic reason permitting it to retain the LPPs.

124Another issue addressed by Professor Smith is whether Canadian law should commit itself to a doctrine of "juristic reason", or whether it should continue to develop, as it has historically, by seeking to clarify those positive reasons which require that an enrichment must be reversed.

125Professor Smith provides a useful review of those courts that have taken the Pettkus formulation literally and have attempted to decide cases by finding a "juristic reason". Beginning at p. 220, he identifies the following factors that courts have considered as capable of constituting a juristic reason justifying a defendant's retention of benefits obtained at the plaintiff's expense:

(1) An express or implied legislative provision.

(2) Rules of property law.

(3) An intention on the part of the plaintiff to give the benefit of an enrichment to the defendant.

(4) An enrichment conferred under a subsisting contract between plaintiff and defendant.

(5) Public policy reasons.

(6) Officiousness in conferring a benefit.

126Just as some courts have found juristic reasons to allow defendants to keep enrichments, other courts, as Professor Smith states at p. 229, have proceeded "down another track, and are developing the law of unjust enrichment by examining factors that constitute reasons for restitution, that is, reasons to reverse enrichments". These factors include:

(1) Mistake in conferral of a benefit. (There is no longer a distinction between mistakes of fact and mistakes of law for the purpose of the law of unjust enrichment. See Air Canada v. British Columbia, 1989 95 (SCC), [1989] 1 S.C.R. 1161, 59 D.L.R. (4th) 161.)

(2) Where a defendant has accepted a benefit in circumstances in which he knew or ought to have known that the plaintiff expected recompense.

(3) A total failure of consideration, as in situations where a benefit is conferred under a contract which is later discharged or turns out to be unenforceable.

(4) Compulsion.

(5) Public policy reasons.

127Professor Smith is critical of the two paths which Canadian common law continues to follow in unjust enrichment and suggests that the time has come for firm guidance from the Supreme Court of Canada. The solution that he offers for solving "the mystery of juristic reason" is beyond the scope of these reasons. The value of Professor Smith's article lies in the charting of two fundamentally different approaches taken by the courts in respect to the core meaning "juristic reason".

The Effect of Section 347 of the Criminal Code on Commercial Obligations

128When this case was before the Supreme Court of Canada (1998 766 (SCC), [1998] 3 S.C.R. 112, 165 D.L.R. (4th) 385), in observing that while the ostensible purpose in enacting s. 347 was to aid in the prosecution of loan sharks, Major J. stated that it has developed a broader use. He said at para. 25 S.C.R., p. 396 D.L.R.:

However, it is clear from the language of the statute -- e.g., its reference to insurance and overdraft charges, official fees, and property taxes in mortgage transactions -- that s. 347 was designed to have a much wider reach, and in fact the section has most often been applied to commercial transactions which bear no relation to traditional loan- sharking arrangements. Although s. 347 is a criminal provision, the great majority of cases in which it arises are not criminal prosecutions. Rather, like the case at bar, they are civil actions in which a borrower has asserted the common-law doctrine of illegality in an effort to avoid or recover an interest payment, or to render an agreement unenforceable. For this reason, the provision has attracted criticism from some commercial lawyers and academics, and calls have repeatedly been made for its amendment or repeal. See, e.g., J.S. Ziegel"The Usury Provisions in the Criminal Code: The Chickens Come Home to Roost" (1986), 11 C.B.L.J. 233; Editorial (1994), 23 C.B.L.J. 321. Nevertheless, it is now well settled that s. 347 applies to a very broad range of commercial and consumer transactions involving the advancement of credit, including secured and unsecured loans, mortgages and commercial financing agreements.

129It is worth repeating that s. 347 describes the offence of charging or receiving a criminal interest rate. The offence is committed by anyone who enters into an agreement or arrangement to receive interest at a criminal rate, or who actually receives a payment or partial payment of interest at a criminal rate. Major J., at para. 53 S.C.R., p. 408 D.L.R., concluded that an LPP "is an 'interest' charge within the meaning of s. 347 and is subject to that law's prohibitions against requiring or receiving interest at a criminal rate" (emphasis added). He completed his reasons at p. 413 by finding that "the LPP charged by Consumers' Gas comes within the scope of s. 347 of the Criminal Code."

130As Major J. noted, s. 347 has come to play a significant role in commercial law. However, as Cullity J. observed in Transport North American Express Inc. v. New Solutions Financial Corp. (2001), 2001 28232 (ON SC), 200 D.L.R. (4th) 560 at p. 576 (Ont. S.C.J.)"the law governing the civil consequences of an offence under s. 347 is still in an early stage of its development". This is well illustrated by the cases in which recourse has been had to s. 347 to have a loan agreement or a mortgage declared illegal in requiring interest to be paid at a criminal interest rate. I will refer to three cases as illustrative of the recourse that has been had to s. 347 in commercial cases.

131One of the earliest cases subsequent to the enactment of s. 347 in 1980 is Nelson v. C.T.C. Mortgage Corp., supra, in which an action was brought by a mortgagor and the guarantors of the mortgage for a declaration that the mortgage was void because it charged a criminal rate of interest. The declaration was denied for the reason that the interest rate did not offend what was then s. 305.1 of the Criminal Code.

132The second case is William E. Thomson Associates Inc. v. Carpenter (1989), 1989 185 (ON CA), 69 O.R. (2d) 545, 61 D.L.R. (4th) 1 (C.A.), leave to appeal to the Supreme Court of Canada refused (1990), 65 D.L.R. (4th) viii. The issues in the case were: (1) whether guarantees of a loan were void because the effective rate of interest under the loan agreement exceeded the criminal rate of interest proscribed by s. 347; and (2) if so, whether the prohibited interest could be severed from the loan with the result that the principal loan was payable, thus permitting recovery of the full amount of each guarantee.

133With respect to the first issue, after tracing the history of s. 347 and its precursor, the Small Loans Act, S.C. 1939, c. 23, s. 2, and discussing the nature of the offence created by s. 347(1)(a), Blair J.A., at p. 550 O.R., p. 6 D.L.R., found that the effective rate of interest payable under the loan agreement was over 60 per cent and was proscribed by s. 347. He added: "There is no doubt that the [lender] committed an offence under s. 347(1)(a) by entering 'into an agreement or arrangement to receive interest at a criminal rate'."

134Blair J.A.'s conclusion on this issue is found on p. 551 O.R., p. 7 D.L.R.:

Since the respondent company [committed] the very offence prohibited by s. 347 of entering into an agreement to receive interest at a criminal rate, it follows that it cannot enforce payment of interest in civil proceedings. The ancient maxim ex turpi causa non oritur actio applies. The agreement to receive a criminal rate of interest is prohibited by statute and the courts have consistently held that such agreements are void and unenforceable: see S. Waddams, The Law of Contracts, 2nd ed. (1984), at p. 421. This principle was recognized by an early decision of the Supreme Court of Canada, cited with approval by Professor Waddams, in Bank of Toronto v. Perkins (1883), 1883 52 (SCC), 8 S.C.R. 603, where Ritchie C.J. said at p. 610:

It would be a curious state of the law if, after the Legislature had prohibited a transaction, parties enter into it, and, in defiance of the law, compel courts to enforce and give effect to their illegal transactions.

Strong J. expressed the principle even more forcefully at p. 613:

Whenever the doing of an act is expressly forbidden by statute, whether on grounds of public policy or otherwise, the English courts hold the act, if done, to be void, though no express words of avoidance are contained in the enactment itself.

(Emphasis added)

135On the second issue, Blair J.A. considered whether the loan agreement could be severed so that the agreement to repay the principal amount of the loan could be enforced even though the agreement to pay a criminal rate of interest was void. He concluded on the facts of the case and the considerations to which I will refer, that it was a proper exercise of the court's discretion that was in accordance with the principles governing the intervention of public policy to strike down illegal contracts, to enforce the payment of the principal amount of the loan and sever from the contract the provisions that resulted in the payment of a criminal rate of interest.

136In reaching this conclusion, Blair J.A. reviewed developments in the law that had resulted in a departure from an earlier view that public policy rendered entire contracts unenforceable if illegality was present, and concluded at p. 554 O.R., p. 10 D.L.R.:

In every case where a court is called upon to exercise its discretion in determining whether a contract is void for reasons of public policy, the exercise of that discretion must be guided by principles which command general acceptance. What principles apply and the weight to be given to them will depend on the circumstances of each case. In my opinion the four considerations referred to above are important in this case.

137The four considerations referred to by Blair J.A. were stated by him at p. 552 O.R., p. 8 D.L.R.:

The important question is whether public policy prevents the severance of the agreement because it is tainted by illegality. In deciding whether the agreements in this case are capable of severance and partial enforcement, a number of principles from the decided cases must be taken into account. They include the object and policy of s. 347; whether that object and policy would be subverted by a partial performance of the agreements; whether one or both parties intended to break the law; whether the parties were in an equal bargaining position and were professionally advised; and whether one party would be unjustly enriched if the contract were not enforced.

138At p. 554 O.R., p. 10 D.L.R., Blair J.A. expressed the opinion that the court has a broad discretion in determining whether a contract tainted by illegality under s. 347 is enforceable. He stated that this was to be decided on a case by case approach, adding at p. 556 O.R., p. 12 D.L.R.:

Whether or not a contract tainted by illegality is completely unenforceable depends upon all the circumstances surrounding the contract and the balancing of the considerations discussed above and, in appropriate cases, other considerations.

139Following the lead of this court in Thomson, it is not uncommon for the court to sever all or part of the interest tainted by s. 347 from the main loan obligation. One example of a case in which this court approved the severing of s. 347 tainted interest from a loan agreement and enforced payment of the principal amount of the loan is Milani v. Banks (1997), 1997 1765 (ON CA), 32 O.R. (3d) 557, 145 D.L.R. (4th) 55 (C.A.). Cullity J., in Transport North, went one step further. He reduced the illegal rate of interest to 60 per cent and enforced payment of the interest at the reduced rate. He thus read down the interest provision of the loan transaction in that case so that the criminal rate of interest would not be exceeded. See, also, Trillium Computer Resources Inc. v. Taiwan Connection Inc. (1994), 11 B.L.R. (2d) 1 (Ont. Div. Ct.).

140The third case is 677950 Ontario Ltd. v. Artell Developments Ltd. (1992), 1992 8646 (ON CA), 93 D.L.R. (4th) 334, 75 C.C.C. (3d) 343 (Ont. C.A.), affd 1993 94 (SCC), [1993] 2 S.C.R. 443, 82 C.C.C. (3d) 192, sub nom. Horvat v. Artell Developments Ltd. The issue in this case was whether an amount payable under a mortgage constituted a criminal rate of interest within the meaning of s. 347(1)(a). Blair J.A. found that it did. He concluded as follows at p. 345 D.L.R.:

Since the agreement to pay the sum of $1,300,000 provides for a "criminal rate" of interest in contravention of s. 347, it cannot, for reasons of public policy, as the Thomson case, supra, held, be enforced by a civil action.

141Stephen Antle's article"A Practical Guide to Section 347 of the Criminal Code -- Criminal Rates of Interest" (1994), 23 C.B.L.J. 323 contains a helpful review of the case law on s. 347 up to 1994. At p. 337, he provides the following assessment of the effect of s. 347 in commercial transactions:

Contravening s. 347 can also have important civil consequences. Entering into an agreement to receive a criminal rate of interest is an illegal act. The courts will not enforce payment of a criminal rate of interest. To do so would approve an illegal act, one prohibited by statute. It would also violate the principle that no one should profit from his own wrongdoing.

142The case law is helpful as it illustrates the evolving application of s. 347 on commercial obligations in circumstances where borrowers have resisted the repayment of debt obligations on the ground that the interest payable on their debts constituted a criminal rate of interest. This case, of course, is different as the class members seek to invoke s. 347 both to avoid payment of a contractual obligation and to recover money that they paid to CG that the Supreme Court of Canada has found to be tainted under s. 347(1)(b). In my view, the case law that has considered the effect of a contravention of s. 347 on commercial obligations is central to whether there is a juristic reason that permits CG to retain the LPPs. In this regard, the important feature of the cases is that the court will not permit a party to benefit from its own wrongdoing where a contractual obligation infringes s. 347, although it appears to be in the discretion of the court whether it will relieve against the payment of the entire amount of the tainted interest, or only the amount by which the interest exceeds 60 per cent per annum.

Conclusion

143Earlier in my reasons, I stated that central to the resolution of this appeal is the convergence of three areas of the law: (1) the nature and purpose of class proceedings; (2) restitution based on unjust enrichment; and (3) the effect of the infringement of s. 347 of the Criminal Code on the enforceability of commercial obligations. In reaching the conclusion that the appeal should be allowed, I have considered and endeavoured to apply a standard of review of the decision of the motion judge that is informed by these areas of the law. In doing so, it is my view that there is no reason to interfere with his finding the CG obtained a benefit, or was enriched, by the LPPs it received from the members of the plaintiff class. However, it is my opinion that the motion judge erred in law in finding that the rate orders of the OEB constituted a juristic reason for CG's retention of the LPPs.

144At the heart of the appellant's case, which is now buttressed by the decision of the Supreme Court of Canada, is the following proposition. As the LPPs received by CG are capable of constituting a criminal rate of interest contrary to s. 347(1)(b) of the Criminal Code, that part of the contract between CG and its customers under which they have agreed to pay LPPs is unenforceable, with the result that CG must make restitution to its customers for the total amount of the LPPs. The appellant contends that CG should not be permitted to profit from its breach of the Criminal Code. Moreover, the appellant places emphasis on the purpose of s. 347, which is to protect consumers from harsh interest rates. Although CG has been neither charged, nor convicted, of an offence contrary to s. 347(1)(b), the appellant seeks to uphold the established rule of public policy that no person should profit from his or her own wrongdoing. In Demeter v. Dominion Life Assurance Co. [ cf1] (1982), 1982 1766 (ON CA), 35 O.R. (2d) 560 at p. 562, 132 D.L.R. (3d) 248 (C.A.), MacKinnon A.C.J.O. described the rule of public policy:

The basic rule of public policy which is not disputed is that the courts will not recognize a benefit accruing to a criminal from his crime nor to anyone claiming through the criminal.

145As I have stated, the scope of appellate review of the decision of a trial judge or a motion judge is narrow. As Bastarache J. stated in Van de Perre at para. 13"an appellate court may only intervene in the decision of a trial judge if he or she erred in law or made a material error in the appreciation of the facts." At p. 574 D.L.R. of his reasons, the motion judge found that "as a result of each LPP received by Consumers' Gas, the company has more money than it had previously and accordingly is enriched". In my view, the respondent, which challenged this finding, provided no reason to interfere with it. It is supported by both the evidence and the authorities, and is not based on a material error by the motion judge in his appreciation of the facts.

146However, I am satisfied that the motion judge erred in law in finding that the rate orders of the OEB providing for a 5 per cent LPP constitute a juristic reason entitling CG to retain the LPPs. He did so on the following ground, found at p. 574 D.L.R. of his reasons: "Neither the plaintiff nor any other party has sought to challenge these orders, and as discussed above, the orders are valid and binding if and until such time when they are reversed or invalidated."

147In finding that the rate orders constitute a juristic reason for CG's enrichment, the motion judge failed to consider the effect on the rate orders of the Supreme Court of Canada's decision that an LPP "is an 'interest' charge within the meaning of s. 347 [of the Criminal Code] and is subject to that law's prohibitions against requiring or receiving interest at a criminal rate" (para. 53 S.C.R., p. 408 D.L.R.). I have no doubt on the basis of the authorities that I have discussed that, but for the decision of the Supreme Court of Canada, the rate orders of the OEB would have constituted a juristic reason. However, given the decision of the Supreme Court of Canada, the rate orders ceased to have any legal effect insofar as they enabled CG to levy a 5 per cent LPP on the class members. Whether the rate orders were valid and binding because they had not been challenged by the plaintiff became irrelevant in the face of the Supreme Court's finding that the LPPs were tainted under s. 347(1)(b) of the Criminal Code. Thus, on the basis of that line of authority discussed by Professor Smith that seeks to take the Pettkus formulation of "juristic reason" literally, when the LPPs were found to come within the scope of s. 347 of the Criminal Code by the Supreme Court of Canada, the rate orders ceased to be a juristic reason justifying CG's enrichment.

148Moreover, to conclude that the rate orders constitute a juristic reason is to permit the orders of a provincial regulatory agency to override federal criminal law and would remove a substantial reason for compliance with s. 347. In this regard, I refer to the Chief Justice's observation in para. 34 of his reasons, with which I agree: "Regardless of the success of the plaintiff's claim for restitutionary relief, the [Ontario Energy] Board will need to design a new penalty for late payments that does not have the capacity to result in a contravention of s. 347(1)(b)." Apposite, as well, is the further observation of the Chief Justice in para. 48 of his reasons in holding that s. 18 of the OEBA does not constitute a defence to the plaintiff's claim, with which I also agree: "The wording of s. 18 is very broad, but I am unwilling to interpret it as providing a defence to an action for restitution arising from a Board order authorizing conduct that is contrary to the Criminal Code."

149The Chief Justice's conclusion that s. 18 of the OEBA does not serve as a defence to the appellant's claim by virtue of the Supreme Court of Canada's decision that the LPPs are capable of infringing s. 347(1)(b) of the Criminal Code is, of course, an application of the paramountcy doctrine. See, e.g., M & D Farm Ltd. v. Manitoba Agricultural Credit Corp., 1999 648 (SCC), [1999] 2 S.C.R. 961, 176 D.L.R. (4th) 585. Because there is a conflict between the rate orders of a provincial regulatory agency approving a 5 per cent LPP, which I observe was requested by CG, and federal legislation precluding CG's receipt of a 5 per cent LPP, the federal legislation will prevail according to the paramountcy doctrine. The conflict arises because to permit the provincial rate orders to prevail will displace the legislative purpose of Parliament. See Law Society of British Columbia v. Mangat, 2001 SCC 67, per Gonthier J. at paras. 23 and 69. For the same reason tha t the OEB rate orders are not an effective defence to the appellant's claim by virtue of s. 18 of the OEBA, they do not constitute a juristic reason for CG's enrichment. See, also, R. v. Jorgensen, 1995 85 (SCC), [1995] 4 S.C.R. 55, 32 C.R.R. (2d) 189. In my view, it would be wrong to say that the rate orders do not provide CG 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 CG's enrichment.

150A further consideration relevant to whether the rate orders of the OEB constitute a juristic reason is the body of case law that has considered the effect of a violation of s. 347 on the enforceability of commercial obligations. As part of this consideration, it may be necessary to determine the date from which restitution should be calculated -- for example, from when s. 347 was proclaimed in force in 1981, from when this action was commenced, from when the reasons for judgment of the Supreme Court of Canada were released, or from some other date. As well, there may be an issue whether restitution should be required for the entire amount of the LPPs, or only for the amount by which the LPPs exceed the annual criminal rate of interest of 60 per cent. This analysis reflects the line of cases which have approached the concept of juristic reason from the perspective of circumstances which would render it unfair or unjust for a defendant to retain a benefit.

151Relevant, as well, to the role of s. 347 in the determination of whether the facts of this case disclose a juristic reason for CG's enrichment is that s. 347 is in the nature of consumer protection legislation, its purpose being to protect consumers from paying exorbitant rates of interest. There is authority that appears to support the proposition that legislative purpose is a relevant factor for the court to consider in deciding whether to grant restitutionary relief. See: Pavey & Matthews Pty. Ltd. v. Paul (1987), [1986-87] 69 A.L.R. 577 (Aus. H.C.); Central Guaranty Trust Co. v. Dixdale Mortgage Investment Corp. (1994), 1994 1429 (ON CA), 24 O.R. (3d) 506, 121 D.L.R. (4th) 53 (C.A.); Safeway Shouldering Ltd. v. Nackawic (Town) (2001), 2001 NBCA 14, 196 D.L.R. (4th) 659 (N.B.C.A.).

152On the basis of the authorities that have considered the effect of s. 347 of the Criminal Code on commercial obligations, CG's customers are able to refuse payment of an LPP that results in the payment of a criminal rate of interest just as a mortgagor can refuse to pay interest on a mortgage at a rate that contravenes s. 347. Because the provision in a customer's contract by which he or she has agreed to pay a 5 per cent LPP on an overdue account is illegal by virtue of s. 347(1)(b), it cannot be enforced by CG. Subject to the considerations raised in para. 65, it is my opinion that it would be inequitable to permit CG to retain the LPPs.

153Analyzed slightly differently, CG cannot as against its customers retain the LPPs save by relying on the rate orders of the OEB by which CG levied LPPs on its customers if their account was not paid by its due date. Although, as the motion judge stated, the rate orders were valid and subsisting in the sense that they were issued under the authority of the OEBA and have not been set aside or otherwise declared to be invalid, the LPPs which they permitted CG to collect from its customers have been found to infringe s. 347(1)(b) of the Criminal Code. To say that the rate orders nevertheless permit CG to retain the LPPs would be to achieve a result that is both contrary to the federal paramountcy doctrine and the authorities that have applied s. 347 in relation to commercial obligations. Moreover, to do so would be to permit CG to profit from its own wrongdoing.

154In summary, therefore, there are two reasons why the rate orders of the OEB do not constitute a juristic reason for CG's retention of the LPPs. First, when the Supreme Court of Canada held that the LPPs come within the scope of s. 347 of the Criminal Code, the rate orders ceased to have any legal effect insofar as they enabled CG to levy a 5 per cent LPP on the class members. Second, on the basis of the authorities that have considered the effect of s. 347 on commercial obligations, it would be inequitable to permit CG to retain the LPPs as to do so would be to enable CG to profit from its own wrongdoing.

155Before this court, the respondent argued that if the appellant succeeds in his appeal, it should not be required to repay the LPPs on the ground that it had altered its position to its detriment in reliance on the OEB rate orders. This is known as the "change of position" defence which, as I have indicated, has been judicially recognized by the Supreme Court of Canada in Storthoaks. The defence was also recognized by the House of Lords in Lipkin Gorman in which it was described in the following way by Lord Goff of Chieveley at pp. 579-80 A.C.:

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. If the plaintiff pays money to the defendant under a mistake of fact, and the defendant then, acting in good faith, pays the money or part of it to charity, it is unjust to require the defendant to make restitution to the extent that he has so changed his position. Likewise, on facts such as those in the present case, if a thief steals my money and pays it to a third party who gives it away to charity, that third party should have a good defence to an action for money had and received. In other words, bona fide change of position should of itself be a good defence in such cases as these. The principle is widely recognized throughout the common law world.

I am most anxious that, in recognizing this defence to actions of restitution, nothing should be said at this stage to inhibit the development of the defence on a case by case basis, in the usual way. It is, of course, plain that the defence is not open to one who has changed his position in bad faith, as where the defendant has paid away the money with knowledge of the facts entitling the plaintiff to restitution; and it is commonly accepted that the defence should not be open to a wrongdoer. These are matters which can, in due course, be considered in depth in cases where they arise for consideration. They do not arise in the present case. Here there is no doubt that the respondents have acted in good faith throughout, and the action is not founded upon any wrongdoing to the respondents. It is not however appropriate in the present case to attempt to identify all those actions in restitution to which change of position may be a defence. A prominent example will, no doubt, be found in those cases where the plaintiff is seeking repayment of money paid under a mistake of fact; but I can see no reason why the defence should not also be available in principle in a case such as the present, where the plaintiff's money has been paid by a thief to an innocent donee, and the plaintiff then seeks repayment from the donee in an action for money had and received. At present I do not wish to state the principle any less broadly than this: that the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full. I wish to stress however that the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable that he should be called upon to repay, because the expenditure might in any event have been incurred by him in the ordinary course of things.

(Emphasis added)

In Lipkin Gorman it was found that the defence of change of position was not available to the respondent gambling club.

156The respondent submitted that the defence should be applied in this case on the basis of the following argument. The OEB, through its rate orders, designed a rate structure, including LPPs, to recover the revenue requirement of CG. The rate structure would have been different, and CG would have been in a different position, if CG had not been able to recover part of its revenue requirement through LPPs in accordance with the rate orders. Therefore, it would be inequitable to require CG to refund LPPs received since 1981 when it cannot go back and alter its rate structure to account for that loss of revenue.

157Although this argument is attractive, it is not available to the respondent as the LPPs upon which it relied as a component of its revenue requirement in its rate order applications to the OEB have been found by the Supreme Court of Canada to contravene s. 347(1)(b) of the Criminal Code. It is simply another way to attempt to justify the retention of the LPPs received in contravention of the criminal law. As Lord Goff of Chieveley has pointed out, the change of position defence should not be open to a wrongdoer. In Storthoaks, the Supreme Court of Canada refused to allow a municipality to make use of this defence when it clearly would have designed a different tax structure in order to meet its "revenue requirement" if it had recognized that it would not be able to retain the lease payments in issue in that case, even though the municipality could not later go back and alter its tax structure to account for its loss of revenue.

158There is a final factor that I believe it is appropriate to consider in determining whether CG has been unjustly enriched. I refer to the fact that this is a proposed class action, which accounts for my earlier review of the nature and purpose of class proceedings. I appreciate, depending on the result of this appeal, that the class proceeding remains to be certified. Nevertheless, I believe that at this stage of the proceedings, because this is a proposed class action, the determination of whether the class members are entitled to recovery should not be considered on the basis of the representative appellant's claim for $75. Rather, it should be considered in the context of a class proceeding, assuming that the proceeding is certified. In expressing this opinion, I appreciate that a motion for summary judgment is procedurally permitted before certification, and in a proper case, can provide a useful role in dismissing a case at an early stage where it is clear that a trial is unnecessary to resolve a significant issue.

159In my view, there are two features of class proceedings that have relevance to whether CG was unjustly enriched by the LPPs paid by the class members. First, a class action provides access to the courts for a group of persons who have been wronged by a defendant, none of whom could afford to sue separately. In this case, for example, it is unlikely that the appellant, or any other class member, who paid about $75 in LPPs could afford to sue CG separately.

160Second, class actions enforce the law by requiring a violator to bear the costs it inflicts on a class of consumers for its wrongful conduct, costs that it could otherwise avoid because, as in this case, each victim's injury is too small to warrant suit. There are two American cases, which parallel this case, that are frequently cited as illustrative of this point. In Daar v. Yellow Cab Co. (1967), 67 Cal. 2d 695, 443 P. 2d 732, the class members sought recovery of overcharges collected by the defendant's setting its taxicab meters to operate at rates higher than an ordinance had authorized. In State v. Levi Strauss & Co. (1986), 41 Cal. 3d 460, 715 P. 2d 514, recovery was sought of overcharges as a result of the defendant's unlawful pricing of its products.

Result

161For the foregoing reasons, I would allow the appeal, set aside the judgment dismissing the appellant's claim and order that the respondent's motion for summary judgment be dismissed. In addition, I would order:

(a) that there be a declaration that the charging and receipt of LPPs by Consumers' Gas violates s. 347(1)(b) of the Criminal Code and that LPPs need not be paid by the appellant;

(b) that the respondent repay the appellant the amount of the LPPs received from him, such amount to be determined by the trial judge.

The appellant is thus to have partial summary judgment in respect to liability and is required to proceed to trial in respect to the proof of damages.

162I would also award the appellant his costs of the motion, which are to include his costs of the partial summary judgment, and his costs of this appeal. I must point out that the Supreme Court of Canada allowed the appellant's appeal to that court "with costs in the cause". In the circumstances, failing agreement among counsel, I believe that the better course to follow is to provide counsel for the parties the opportunity to make submissions on interest and costs after judgment has been delivered. Accordingly, I will consider this award of costs to be provisional until counsel are heard from.

Order accordingly.

Notes

Note 1: Formerly s. 305.1 of the Criminal Code.

Note 2: Section 19(8) of OEBA, R.S.O. 1990, c. O.13 ("former OEBA").

Note 3: Section 34(1) of the former OEBA.

Note 4: Section 19(1) of the former OEBA.

Note 5: Rules 62.01 and 63.02 of the Board's Rules of Practice and Procedure.