Tag: constructive trust

10 Dec

Are remedial constructive trusts available on the basis of “good conscience”?

Nick Esterbauer Estate & Trust, Litigation, RRSPs/Insurance Policies Tags: , , , , , , , , , 0 Comments

The Supreme Court of Canada’s recent decision in Moore v Sweet provided meaningful clarification on the Canadian law of unjust enrichment and, in particular, the juristic reason analysis.

As it made a finding of unjust enrichment, it was not necessary for the Court to consider the second issue before it, being whether, in the absence of unjust enrichment, a constructive trust could nevertheless be imposed in the circumstances on the basis of “good conscience”.

In 1997, the Supreme Court released its decision in Soulos v Korkontzilas.  That case considered situations that may give rise to a constructive trust remedy.  In referring to the categories in which a constructive trust may be appropriate, which were noted to historically include where it was otherwise required by good conscience, Justice McLachlin (as she then was) stated as follows:

I conclude that in Canada, under the broad umbrella of good conscience,  constructive trusts are recognized both for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation…Within these two broad categories, there is room for the law of constructive trust to develop and for greater precision to be attained, as time and experience may dictate.

Since 1997, Soulos and the above excerpt have been interpreted inconsistently by scholars and courts of appeal throughout Canada.  Some consider Soulos to restrict the availability of constructive trust remedies to only situations where there has been a finding of unjust enrichment or wrongful conduct, while others favour a more liberal interpretation.

The appellant in Moore v Sweet sought, in the alternative to a remedy on the basis of unjust enrichment, a remedial constructive trust with respect to the proceeds of the life insurance policy on the basis of good conscience.  In choosing not to address this issue, Justice Côté (writing for the Majority) stated as follows:

This disposition of the appeal renders it unnecessary to determine whether this Court’s decision in Soulos should be interpreted as precluding the availability of a remedial constructive trust beyond cases involving unjust enrichment or wrongful acts like breach of fiduciary duty. Similarly, the extent to which this Court’s decision in Soulos may have incorporated the “traditional English institutional trusts” into the remedial constructive trust framework is beyond the scope of this appeal. While recognizing that these remain open questions, I am of the view that they are best left for another day.

It will be interesting to see if and when the Supreme Court ultimately chooses to determine “the open questions” regarding the availability of the remedial constructive trust.  Until then, it appears that some debate regarding the circumstances in which it may be imposed will remain.

Thank you for reading.

Nick Esterbauer

26 Nov

Moore v Sweet: Hull & Hull LLP at the Supreme Court of Canada

Hull & Hull LLP Beneficiary Designations, Litigation, News & Events Tags: , , , , , , , , , 0 Comments

Earlier this year, we argued the appeal in Moore v Sweet before the Supreme Court of Canada.  On Friday, the Court released its decision, which has provided what, in our view, was necessary clarification of the juristic reason component of the test for unjust enrichment.  The Supreme Court has also confirmed the circumstances in which a constructive trust remedy is appropriate within the context of unjust enrichment.  Our firm was pleased to argue the appeal at the Supreme Court in February 2018 and to learn on Friday of our client’s success in the reversal of the split decision of the Ontario Court of Appeal.

The facts of the case were relatively straightforward: The appellant had previously been married to the deceased.  Around the time of their separation, the appellant and the deceased entered into an oral agreement whereby the appellant would remain the designated beneficiary for the life insurance policy on the deceased’s life on the basis that she would continue to pay the related premiums.  The appellant paid the premiums on the life insurance policy until the deceased’s death approximately 13 years later, while, unbeknownst to the appellant, the deceased named his new common law spouse (the respondent), as irrevocable beneficiary of the policy soon after the oral agreement was made.  At the time of his death, the deceased’s estate was insolvent.

At the application hearing, Justice Wilton-Siegel awarded the appellant the proceeds of the life insurance policy on the basis of unjust enrichment.  The respondent was successful in arguing before the Ontario Court of Appeal that the designation of an irrevocable beneficiary under the Insurance Act was a “juristic reason” that permitted what was otherwise considered the unjust enrichment of the respondent at the appellant’s expense.  The appellant was subsequently granted leave to appeal to the Supreme Court of Canada.

Justice Coté, writing for the Majority, agreed that the test for unjust enrichment was flexible and permits courts to use it in the promotion of justice and fairness where required by good conscience.  The Court clarified that the juristic reason permitting an unjust enrichment needs to justify not only the enrichment of one party but also the corresponding deprivation of the other party.  While the irrevocable beneficiary designation may have required the payment of proceeds for the policy to the respondent, it could not be considered as also requiring the appellant’s deprivation of the proceeds to which she was entitled under the oral agreement.  The Court found that a designation of an irrevocable beneficiary under the Insurance Act precludes claims by creditors of an estate, but it does not state “with irresistible clearness” that it also precludes a claim in unjust enrichment by a party who has a contractual or equitable interest in the proceeds.

While reaching the opposite result, the dissent acknowledged that this was a difficult appeal, in which both parties were innocent and had strong moral claims to the proceeds of the life insurance policy.

We thoroughly enjoyed the opportunity to argue this case before the Supreme Court of Canada earlier this year and look forward to following the role of this decision in further developments in the Canadian law of unjust enrichment.

Thank you for reading.

Ian M. Hull
Suzana Popovic-Montag
David Morgan Smith

08 Jun

Richardson v. Mew Revisited

Suzana Popovic-Montag Beneficiary Designations, RRSPs/Insurance Policies Tags: , , 0 Comments

Richardson v. Mew is a significant decision of the Ontario Court of Appeal in the context of life insurance policies and claims alleging unjust enrichment.

Mr. Richardson had divorced his first wife, Ms. Mew, and had been required by separation agreement to have her designated the beneficiary of a life insurance policy until 1995. Thereafter, he had left the beneficiary designation unchanged.

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Soon after his second marriage, Mr. Richardson became incapable to manage his property.

Mr. Richardson’s second wife, Ms. Ferguson, acted under his power of attorney and, among other things, made payments of premiums on the insurance policy on his behalf.

On Mr. Richardson’s death, Ms. Ferguson sought the assistance of the Court, claiming Ms. Mew had been unjustly enriched.

The Court of Appeal found in favour of Ms. Mew. In its judgment, the Court found that the provisions of the Insurance Act constituted a juristic reason for Ms. Mew’s enrichment. As was previously blogged on this website, the trial judge had also considered rectification and whether Ms. Ferguson could have changed the beneficiary designation in her capacity as attorney for property. The rectification issue was not pursued before the Court of Appeal. The Court of Appeal agreed with the application judge that an attorney for property could not make what amounted to a testamentary disposition.

Thanks for reading.

Suzana Popovic-Montag

27 Jun

Two Roads Still Diverged

Hull & Hull LLP Estate & Trust Tags: , 0 Comments

In England and Wales, a decision of the Chancery Division, which seemed to suggest the adoption of something akin to the Canadian approach to the remedial constructive trust in joint tenancy disputes, has been reversed by the Court of Appeal (as reported in the STEP Trust Quarterly Review).

In Jones v Kernott [2010] EWCA Civ 578, a man (Kernott) and a woman (Jones) (not married) had purchased a house together in joint tenancy. The relationship ended, and the lower Court awarded Jones a ninety per cent interest in the residence: she made the down payment, and paid the vast majority of the payments due on the mortgage (after the relationship ended and the man left).  Moreover, after separation, Kernott paid nothing towards the support of their children.  Kernott appealed this decision on the grounds that, as a joint owner, and in the absence of any evidence (especially the absence of a cohabitation agreement) to the contrary, he was entitled to an equal fifty per cent share in the house.

The decision of the Court of Appeal (Kernott v. Jones [2009] WTLR 1771) essentially concludes that, in this type of case and in the absence of evidence of actual intention, the Court does not properly have jurisdiction to invoke an equitable remedy. Fairness can not be considered to alter the rights of a joint tenant to a fifty per cent interest in  property unless there is some evidence of intention to the contrary. Put another way, it can not be presumed, in the complete absence of evidence of intention, that joint tenants have a shared intention that each should have a "fair and just share" other than fifty percent.

While the Canadian law has moved since the landmark case of Pettkus v. Becker to fashion equitable remedies for someone in the position of Jones, a cohabitation agreement (regardless of jurisdiction) would still seem the best way to avoid any question as to the intention of the parties. See this link for an interesting discussion by Donovan Waters of the different evolution of Canadian law (and which inspired this blog’s title).

 

David M. Smith – Click here for more information on David Smith.   

03 Jun

McMillan v. Johnson (Estate)

Hull & Hull LLP Common Law Spouses, Estate & Trust, Litigation Tags: , , , , , , 0 Comments

The recent B.C. Court of Appeal decision of McMillan v. Johnson (Estate) 2011 BCCA 48, deals with the valuation of an unjust enrichment claim of a long-time common law wife against the estate of her deceased common law husband. 

The couple lived together for almost 40 years and both contributed to a family fishing business, of which the deceased was the sole shareholder.  The deceased did not properly provide for his wife and although she would have had a claim under the Wills Variation Act, she was out of time and so claimed a constructive trust against the only valuable asset in the estate, a $2.4 Million shareholder’s loan owed to the deceased by the fishing business. 

The trial below proceeded summarily and rather than declaring a constructive trust, the trial judge awarded the wife a monetary remedy of 50% of the value of the loan ($1.2 Million). 

On appeal the estate argued that the value should have been assessed at 50% of the market value of the company at the time of trial, which would reflect the decline in the fishery since death, and that the judge erred in awarding the book value of the loan valued as at the date of death. The estate led no evidence of the actual value of the company at trial and sought to introduce this as fresh evidence on appeal.

The appeal was allowed and a new trial ordered on the question of the value of the loan and the company as at the date of the new trial.  Fresh evidence as to the value of the company was not allowed. The judge intended to award a monetary remedy in lieu of a proprietary remedy, and therefore the valuation date should have been the date of trial.   

If you are interested in a more in depth consideration of the case law on constructive trusts, unjust enrichment and quantum meruit, and whether/when an in personam monetary remedy or proprietary remedy is appropriate, you should refer to the decision for some helpful comment on these issues.  

 

Sharon Davis – Click here for more information on Sharon Davis

28 Oct

Will Challenge Litigation – Part 11 – Hull on Estate and Succession Planning #136

Hull & Hull LLP Hull on Estate and Succession Planning, Hull on Estate and Succession Planning, Litigation, Podcasts, PODCASTS / TRANSCRIBED, Show Notes Tags: , , , , , , , , , , , , , , , 0 Comments

 

Listen to Will Challenge Litigation – Part 11

This week on Hull on Estate and Succession Planning, Ian and Suzana talk about the differences between quantum meruit and propriety estoppel. As with any add-on claims, the courts require solid corroboration. They also discuss claims of resulting trust and claims of constructive trust.

If you have any comments, send us an email at hullandhull@gmail.com or leave a comment on our blog.

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12 Sep

The All-Powerful Constructive Trust

Hull & Hull LLP Estate & Trust Tags: , , , , , , 0 Comments

In Langston v. Landen, a recent decision of the Ontario Court of Appeal, one of three co-executors of an estate having a value of some $24 million (in the words of the Court) "managed to shunt the other two executors to the sidelines.  He started to loot the estate."  Among Landen’s transgressions was his use of estate assets to purchase a home in Forest Hill which he had put in his wife’s name.  On a motion for summary judgment, Justice Greer had imposed a constructive trust on the house for the benefit of the estate.

Landen’s wife appealed.  However, the Court easily concluded that the fact that legal title was in her name was irrelevant in circumstances in which the entire purchase proceeds came from the estate.  Adopting a quote from the Reasons for Decision of Justice Greer, the Court stated: "Since the money came from Landen in his capacity as a fiduciary, the constructive trust or express trust flows from him and the money can be traced from him to the house purchase and renovation." 

So too, for the same reasons, the wife’s entitlement to any share of the property as the "matrimonial home" was negated.  Of passing interest to the profession was the Court’s additional conclusion that Justice Greer was well within her jurisdiction by imposing a vesting order on the house for the benefit of the estate in the absence of a motion seeking such relief. 

David M. Smith

 

 

06 Nov

Trust Claims and Non-Married Spouses – Hull on Estates Episode #84

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates, Hull on Estates, Hull on Estates, Podcasts, PODCASTS / TRANSCRIBED Tags: , , , , , , , , , , , , , , , , , , , , , , , , , 0 Comments

Listen to Trust Claims and Non-Married Spouses

This week on Hull on Estates, David Smith and Megan Connolly reference the case Belvedere v. Brittain Estate to discuss constructive trust claims made against an estate by a non-married spouse.

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27 Sep

How Much is a Constructive Trust Worth?

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In Hughes v Miller, the female plaintiff and the male defendant were never married but lived together in a spousal-type relationship for about 12 years. They originally lived on the defendant’s boat until 1993 before moving to an island. The agreement and expectation of the parties was that they would be equal owners of the island property. While the purchase money for the island property was put up by the plaintiff and her mother, the defendant’s contribution was to be in the way of material and expertise in building a permanent home on the property. However, the defendant only built a very basic cabin. 

In 1995, the defendant inherited property from his aunt. The plaintiff helped pay property taxes on the inherited property. Furthermore, as the defendant became ill in 1999, he ultimately contributed less to the parties’ expenses. 

The plaintiff sought a declaration of a constructive trust over the inherited property based on unjust enrichment. The plaintiff claimed she supported the defendant over the course of many years and that her financial contribution to the defendant enabled him, among other things, to pay taxes on the inherited property. Alternatively, she sought monetary compensation for the defendant’s enrichment. 

The defining feature of the case is that the inherited property came to the defendant by way of an inheritance. As noted by the British Columbia Court of Appeal, the case was different from the majority of cases where the parties lived together and jointly built up assets over many years. If, in fact, the plaintiff was entitled to any trust claim to the inherited property, such a claim would derive from what she did after the defendant inherited it.

However, the court found that it would not be appropriate to award the plaintiff a constructive trust remedy over the inherited property, having regard to her relatively sparse direct contributions to maintaining or improving the property after the defendant inherited it. A constructive trust is the appropriate remedy for unjust enrichment only where a monetary award is insufficient and where there has been a direct contribution to the property by the party seeking such a remedy. 

According to the court, spouse-like care and assistance, some personal and some financial, entitled the plaintiff to a monetary award based on unjust enrichment. In the circumstances, the court felt that an award to the plaintiff of one-third of the value of the property accruing to the defendant was fair.

Justin

05 Jan

Common Causes of Estate Litigation – Part II

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates Tags: , , , , , , 0 Comments

In considering causes of estate litigation sometimes you need not look further than to your extended family if the relationships within the extended family are acrimonious. 

An extended family can include a spouse, former spouse whether legal or common-law, children and their respective spouses (and former spouses), grandchildren and their spouses (and former spouses), siblings, nieces and nephews, extra-marital partners and other dependents, whether related to you or not. It is possible that any one of the above-noted people might bring a claim against the estate, or raise a dispute. Jealousy amongst family members and/or the anticipation or expectation that they are to or will receive all or a portion of the estate, however unwarranted, may lead to family members taking unreasonable positions with respect to claims they feel they have against the estate.

In making an estate plan then, it is critical to have any and all agreements that may affect your estate plan prepared before you die. These agreements could include separation, marriage, co-habitation, partnership, employment and shareholders agreements depending on the nature and make up of your estate.

While the secrets one has from a family may be extremely touchy, emotional or just difficult to disclose or deal with, their disclosure following death may lead to demands against the estate. An extra-marital relationship, an illness of whatever kind not known to the family, a relationship with a caregiver or promises made to caregivers regarding their compensation can be examples of such secrets. For instance, a friend or family member may be assisting with one’s errands or day to day care. If promises are made to the family friend or relative that they will be “looked after” upon one’s death, then they may make a claim against your estate following your death if their relationship with you and/or compensation is not clearly known.

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