THE RECOVERY OF MISTAKEN PAYMENTS
REVISITING THE DOCTRINE OF RELATIVE FAULT
When a payment is mistakenly made, ought the relative blameworthiness of the two parties, the payer and the payee, in relation to the mistake affect whether the payment can be recovered by the payer? In Canada, the leading case on payments by mistake of fact is BMP Global v Bank of Nova Scotia, where the Supreme Court of Canada held that the basic rule on recovering mistaken payments was properly articulated by Goff J. in Barclays Bank v WJ Simms Son, as the Simms test. This article examines the salient issues surrounding the Simms test, namely, how it has been applied by the courts in Canada and in other common law jurisdictions. Some judges and scholars have argued that the introduction of fault into the mistaken payments regime is supported by the long-standing proposition that among two innocent parties, justice requires the party who was in a position to detect the fraud or prevent the loss to bear its burden. The article takes up this argument, revisiting authorities that have laid down the maxim of the “two innocent parties” and examining the extent to which this maxim has influenced the decisions made by Canadian courts. I argue that carelessness, in the sense of neglect or lack of reasonable care, has no application to the Simms test, and that the “two innocent parties” proposition was developed in relation to negotiable instruments and non est factum to address concerns that differ from those raised by mistaken payments. I further submit that introducing fault into the analytical framework for mistaken payments brings unwarranted complexity as it invites the court to determine what would be ex aequo et bono without any precise guide.
Keywords:BMP Global, carelessness, change of position, Simms test, two innocent parties, mistake, non est factum, payment fraud, recovery of mistaken payments, relative fault, Blameworthiness, restitution
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