Recently, the Government of Alberta clawed back money it had paid to individuals on the basis of mistake. The government determined that these individuals had been ineligible to receive the money. This story attracted attention because the government was demanding the return of money from people who had passed away.
The story raised the question of whether, and under what circumstances, one can demand the payback of money by others. It turns out that this question was addressed last year by the British Columbia Court of Appeal in International Longshore & Warehouse Union Local 502 v. Ford, 2016 BCCA 226 (CanLII), http://canlii.ca/t/grthf. This article describes that decision.
Robert Ford was a former union treasurer who embezzled some $1.7 million over seven years from his employer to support a gambling addiction. He was able to exploit a longstanding careless practice at work where blank cheques were signed in advance by the other officer.
He deposited almost $900,000 of this loot into two bank accounts he held jointly with his wife at the time, Teressa Prentice. The rest of the money was probably squandered through gambling. Since Ford was also managing the family finances, Prentice did not know about the stolen money intermixed with their joint accounts and used for regular expenditures.
The union obtained a civil judgment ordering Ford to repay the full amount he stole. Since that was unlikely to happen, the union turned to recover it from Prentice. It demanded Prentice pay back the $900,000 that she "had and received" on the basis that the law says it would be unjust for her to keep it.
In response, Prentice questioned the amount, said the claim was too late, and blamed the union's lax accounting controls. Her main argument, however, was that she was an innocent joint bank account holder who was unaware of her husband's fraud.
Prentice lost on summary trial of the case. She appealed to the British Columbia Court of Appeal. The case turned on whether Prentice had actually developed a detrimental reliance on the stolen funds. If she had genuinely thought that it was her money and had significantly and in good faith materially changed her circumstances to enjoy it, she would be entitled to keep it: Storthoaks v. Mobil Oil Canada Ltd., (SCC, 1976) http://canlii.ca/t/1z6hj.
The principle, which originates 170 years ago in England, is that it is unfair to force someone who received money mistakenly...