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.
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One would be forgiven if at first instance they did not see any connection between Justin Trudeau’s recent selection of his cabinet and trust law. While most of the attention has been placed on the background of the new appointees, and of their immediate tasks at hand, there is a (however small) connection to the trust world, as many of the newly appointed Ministers and their staff are rushing to place their assets into blind trusts.
At its most simple, a blind trust can be thought of an individual relinquishing control over their assets, and providing them to a trustee to manage them on their behalf. The trustee has complete discretion over how to invest the individual’s assets, with the beneficiary being provided with no information regarding how the investments are being held, and the beneficiary having no say in how the funds are managed. As the beneficiary has no idea what their funds are invested in, the theory is that they would not be inclined to enact government policy which would favour their own investments, and that they would be able to avoid a conflict of interest.
In accordance with the federal Conflict of Interest Act, a “reporting public office holder”, which is defined as including a Minister of the Crown, a “ministerial adviser”, as well as a member of the “ministerial staff” who works on average 15 hours or more a week, must within 120 days of their appointment either sell all “controlled assets” in an arm’s length transaction, or place such assets into a blind trust. Any assets which are placed into a blind trust have annual reporting requirements, with the trustee having to file an annual report to the Conflict of Interest and Ethics Commissioner regarding the ongoing management of the blind trust.
In the context of the recent federal election, the most attention was placed on the recently elected Toronto Centre MP, Bill Morneau, who was appointed as Minister of Finance. As Mr. Morneau himself reportedly has a stock portfolio in excess of $30 million, and with his appointment as Minister of Finance would have a significant influence and impact upon the financial sector, some attention was paid to the transition of his investment portfolio likely into a blind trust. Justin Trudeau himself previously moved his own investments into a blind trust following his appointment as leader of the Liberal Party in 2013.