Canadian courts can award constructive trusts in a variety of contexts, including as a remedy for unjust enrichment and in response to wrongful acts like fraud and breach of fiduciary duty. It also appears that the circumstances under which a constructive trust may be awarded are not closed. As noted by Justice McLachlin, the former Chief Justice of the Supreme Court of Canada, in Soulos v. Korkontzilas, 1997 CanLII 346, “a constructive trust may be imposed where good conscience so requires”, under circumstances she describes as “diverse”.
Because constructive trusts are a proprietary remedy, they can be very appealing compared to monetary remedies like damages. The recipient of a constructive trust over property will hold the beneficial interest in that property, even though legal title is held by someone else. There are benefits that accompany an interest in property that other remedies simply cannot provide. For example, if adefendant goes bankrupt, a plaintiff with a damages award will be treated like other creditors, likely only receiving a fraction of the amount that the court ordered the defendant to pay. If a plaintiff is instead awarded a constructive trust, the plaintiff will continue to be entitled to the asset or property subject to the trust, regardless of the defendant’s indebtedness. Another benefit of a constructive trust is that if the value of the property subject to the trust increases, the plaintiff who holds the beneficial interest will receive that increase in value. The value of a monetary judgment, on the other hand, is fixed.*
In light of the benefits associated with constructive trusts, it is not surprising that litigants wish to expand the circumstances under which constructive trusts can be awarded, as noted in my colleague Nick Esterbauer’s recent blog post, Revisiting the Basics of Trust Law: Constructive Trusts.
In fact, leave to appeal to the Supreme Court of Canada has been sought with respect to a recent Ontario Court of Appeal decision, Sase Aggregate Ltd. v. Langdon, 2023 ONCA 554, in which the court refused to award a constructive trust to help the plaintiff recover stolen funds, despite finding that the plaintiff was a victim of fraud to the tune of over $2.1 million. While this case does not arise in a wills and estates context, and instead deals with remedies for fraud and money laundering, anyone who practices in the area of trusts may want to take note of this case should the Supreme Court of Canada choose to grant leave to appeal.
Before seeking leave to appeal to the Supreme Court, the plaintiff applied to the Court of Appeal of Ontario for a stay of its decision, and provided a bit of insight into the arguments it intends to raise before the highest court in the land: see Sase Aggregate Ltd. v. Langdon, 2023 ONCA 644. The plaintiff’s position is that the Ontario Court of Appeal is applying the law of constructive trusts in relation to unjust enrichment more narrowly than other appellate courts in Canada, namely the Supreme Court of Canada and the British Columbia Court of Appeal, and in a manner that negates the principle of good conscience,and that it is in the public interest for the Supreme Court to address this inconsistency.
The Court of Appeal granted a stay of its decision, finding that the proposed appeal met the threshold and raised a “legitimate debate as to the proper scope of the constructive trust remedy”.
The Supreme Court of Canada has not yet issued a decision as to whether leave will be granted, but it will be interesting to see whether the Court takes this opportunity to revisit the law governing constructive trusts and provide further clarification of the circumstances under which such a trust may be imposed.
Thank you for reading, and have a great day,
* These benefits are addressed in Oosterhoff et. al., Oosterhoff on Trusts, 9th ed. (Toronto: Carswell, 2019) at 754-755.