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.
The Supreme Court of Canada recently refused leave to appeal a decision of the Quebec Court of Appeal that raises the issue of whether old age should be considered as a factor during sentencing.
The appellant had been convicted of fraud, conspiracy to commit fraud, and laundering the proceeds of crime at the direction of or in association with a criminal organization. A prior appeal regarding the conviction itself had been dismissed by the Quebec Court of Appeal.
The Lower Court recognized the role of the appellant as a directing mind of a criminal organization and the losses suffered by the government as a result of his fraudulent acts. The Court had stated that age, even if it could be taken into account, was “only one factor among many”, which “cannot have a determinative impact because of the great number of aggravating factors”.
The appellant subsequently sought leave to appeal his four-year prison sentence. The appellant asserted that, at 81 years of age and in a poor state of health, his sentence ought to be replaced with a conditional sentence to be served in the community or otherwise limited in duration to allow him the prospect of life after prison.
The Quebec Court of Appeal summarized the law as it relates to the consideration of age during sentencing as follows (at paras 38, 39, 42, 43):
The advanced age of an accused must be taken into account when determining a sentence, as Chief Justice Lamer indicated in R. v. M. (C.A.)…
The age factor must, however, be considered in light of the health of the offender as it relates to his life expectancy. Consequently, the mere fact that an accused is elderly is not, in and of itself, a mitigating factor in determining a prison sentence, unless the evidence reveals that he has little chance of serving the sentence before passing away. This is increasingly true with the general aging of the Canadian population and the raised probability of longer life expectancies.
As a result, if at the time a sentence is imposed, the offender’s state of health does not suggest that he is unlikely to complete the sentence before his demise, the judge then has the necessary discretion to impose an appropriate sentence in light of all the usual factors and criteria…
It is possible that an offender’s state of health deteriorates following sentencing. This possibility increases with the age of the offender. The sentencing judge may not, however, speculate on this subject and must determine the sentence in accordance with the evidence before him when it is rendered…
The Court nevertheless considered the prison sentence to be appropriate, notwithstanding the expectation of the appellant that he may not survive it. The Supreme Court agreed with the reasons of the Quebec Court of Appeal.
With Canada’s aging population, cases like this, in which an individual convicted of a crime is elderly and/or in a poor state of health, can be expected to increase in frequency. The Supreme Court has confirmed that (for the time being at least), while age is a factor to be considered during sentencing, it is merely one to be assessed among others, rather than being determinative of the issue.
Thank you for reading.
The facts in the new Supreme Court of Canada decision on trustee duties were previously set out in last Tuesday’s edition of this blog.
Valard Construction Ltd. v. Bird Construction Co. arose from a commercial matter in which Valard was a subcontractor in a construction oilsands project where Bird was the general contractor. Bird was the trustee of a labour and material payment bond that could have been available for Valard’s claim for unpaid invoices if notice of claim was given to the surety within a fixed time limit. Valard claimed against Bird when Bird failed to disclose the existence of the bond to Valard within the relevant time period.
Justice Brown, for the majority, found that Bird had a fiduciary duty to disclose the bond to Valard even though Valard did not explicitly ask about the existence of the bond until it was too late. In order to determine whether a breach of trust occurred, Justice Brown went on to consider what was required of Bird in order to discharge its duties to Valard because “the question is not what Bird could have done in this case, but what Bird should reasonably have done in the circumstances of this case to notify beneficiaries such as Valard of the existence of the bond” (paragraph 29). In concluding that the duty was breached in this instance, paragraph 26 is particularly instructive for the analysis:
Like all duties imposed upon trustees, the standard to be met in respect of this particular duty is not perfection, but rather that of honesty, and reasonable skill and prudence. And the specific demands of that standard, so far as they arise from the duty to disclose the existence of a trust, are informed by the facts and circumstances of which the trustee ought reasonably to have known at the material time. In considering what was required in a given case, therefore, a reviewing court should be careful not to ask, in hindsight, what could ideally have been done to inform potential beneficiaries of the trust. Rather, the proper inquiry is into what steps, in the particular circumstances of the case — including the trust terms, the identity of the trustee and of the beneficiaries, the size of the class of potential beneficiaries and pertinent industrial practices — an honest and reasonably skillful and prudent trustee would have taken in order to notify potential beneficiaries of the existence of the trust. But, where a trustee can reasonably assume that the beneficiaries knew of the trust’s existence, or where practical exigencies would make notification entirely impractical, few, if any, steps may be required by a trustee.
In this case, Justice Brown found that Bird could have reasonably discharged its duties by posting notice of the bond on its information board and that some method of notice was required of the company to notify beneficiaries like Valard with a caveat. The caveat being that, in some circumstances, nothing could be required to discharge this duty where industry practice and knowledge would render notice unnecessary.
Interestingly, what was or was not industry practice in this case was the question that divided the Court. For Justice Karakatsanis‘ dissenting opinion, she would have dismissed the appeal because Bird was not under an obligation to inform Valard beyond responding accurately when asked because this type of bond was common in this industry in her view.
Thanks for reading!
The Supreme Court of Canada released a decision last Thursday that is a must read for estates and trusts practitioners. Interestingly enough, Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, arose from a commercial matter.
Bird was a general contractor for a construction project. When Bird subcontracted with Langford, Langford was required to obtain a labour and material payment bond which named Bird as trustee of the bond. If Langford was delinquent in paying its contractors, the bond would permit the contractor to sue and recover from Langford’s surety on the condition that notice of the claim must be made within 120 days of the last date in which work was provided to Langford. Langford became insolvent and some of Valard’s invoices went unpaid. Unfortunately, Valard was not notified of the existence of the bond and did not inquire about whether there was a bond in place until after the 120 day notice period. The surety denied Valard’s claim and Valard sued Bird for breach of trust. This matter was dismissed at first instance by the Alberta Queen’s Bench, dismissed again by the Alberta Court of Appeal, and finally reversed by the Supreme Court of Canada (with a dissent from Justice Karakatsanis).
Justice Brown for the majority (per McLachlin C.J., as she then was, Abella, Moldaver and Rowe J.J.) found that Bird had a fiduciary duty to disclose the terms of the trust, i.e. the bond, to Valard notwithstanding the fact that the express terms of the bond did not stipulate this requirement. Justice Brown was clear that “While the ‘main source’ of a trustee’s duties is the trust instrument, the ‘general law’ which sets out a trustee’s duties, rights and obligations continues to govern where the trust instrument is silent” (para.15). Justice Brown then went on to say that a beneficiary’s right to enforce the terms of the trust is precisely what keeps the trustee from holding the “beneficial as well as legal ownership of the trust property” (para. 18). Otherwise, no one would have an interest in giving effect to the trust.
With this logic in mind, Justice Brown developed the following framework at paragraph 19,
“In general, wherever “it could be said to be to the unreasonable disadvantage of the beneficiary not to be informed” of the trust’s existence, the trustee’s fiduciary duty includes an obligation to disclose the existence of the trust. Whether a particular disadvantage is unreasonable must be considered in light of the nature and terms of the trust and the social or business environment in which it operates, and in light of the beneficiary’s entitlement thereunder. For example, where the enforcement of the trust requires that the beneficiary receive notice of the trust’s existence, and the beneficiary would not otherwise have such knowledge, a duty to disclose will arise. On the other hand, “where the interest of the beneficiary is remote in the sense that vesting is most unlikely, or the opportunity for the power or discretion to be exercised is equally unlikely”, it would be rare to find that the beneficiary could be said to suffer unreasonable disadvantage if uninformed of the trust’s existence.”
Thanks for reading and more to follow later this week on Valard Construction Ltd. v. Bird Construction Co.
I was able to attend a recent CPD program by the Advocate’s Society titled “Supreme Court of Canada Advocacy.”
A powerful keynote address was presented by the Honourable Madam Justice Suzanne Côté of the Supreme Court of Canada. Justice Côté’s remarks included an inside look at what lies behind the Supreme Court of Canada’s “big mahogany doors,” as she so eloquently phrased it. The Honourable Marshall Rothstein, Q.C., then spoke about the unwritten rules to getting leave to appeal.
Debate was had over the need for a script. Most panelists supported coming prepared with a script but cautioned against being married to it. When it comes to answering questions, advocates should see this as an opportunity to get off their script and engage in a dialogue with the bench. As Justice Côté points out, an oral argument is not supposed to be a monolog.
After discussion on the power of oral advocacy, the discussion shifted to the importance of the written argument. Although the factum is a critical component of any appeal, parties are under no obligation to reach the maximum page length. It was suggested that some of the most successful arguments can be made in 25 pages or less.
In addition to the factum, the Condensed Book can be a vital tool for advocates appearing before the Supreme Court. Under the Supreme Court rules, the Condensed Book may contain a two page outline of the oral argument. Preparing the this two page outlines forces advocates to truly narrow down their key points.
The panelists also spoke about the important role interveners can have in a case. Within the confines of a 10 page factum, and 5 minutes of oral argument, an intervenor can illustrate why a matter is of public interest, and provide supplemental answers to questions posed to the parties by the Justices. Interveners can play a critical role, and should not be overlooked.
Finally, the panel highlighted the power of a moot. Practice moots are one of the most valuable tools an advocate can use to prepare their case. The Supreme Court Advocacy Institute offers moot sessions where participants have the opportunity to moot their case before a panel of experienced litigators and retired justices.
Thanks for reading,
Last week, we discussed Cowper-Smith v Morgan, and considered when the presumption of undue influence is rebutted by legal advice. Today, we discuss the availability of the doctrine of proprietary estoppel in the circumstances of this case (the issue which the Supreme Court of Canada (“SCC”) has granted leave to hear on appeal from the British Columbia Court of Appeal (“BCCA”)).
The trial decision found that the son of the deceased, Max, had relied to his detriment on a promise made by his sister Gloria. Gloria had enticed Max to return from England to care for his ailing mother in her home by entering into an agreement to, among other things, sell Max her 1/3 interest in the home that she would inherit on her mother’s death. On the mother’s death, Gloria reneged. The trial judge, on the basis of proprietary estoppel, directed that Max was entitled to buy Gloria’s share of the property.
The BCCA decision (Smith J. dissenting on the proprietary estoppel finding), found that Max had not met the test in order to apply the doctrine. In short, the BCCA found that the remedy of proprietary estoppel could not arise as a result of assurances given by Gloria (a non-owner) with respect to her future intentions.
It is the question of whether the doctrine of proprietary estoppel applies in these circumstances that will be considered by the SCC.
The full facts of the case can be found in last week’s blog.
The Availability of Proprietary Estoppel
The BCCA applied the elements of the modern doctrine of proprietary estoppel as (in para 73 of the decision):
- an assurance or representation by the defendant that leads the claimant to form a mistaken assumption or misapprehension that he or she has an interest in the property at issue;
- a causative connection between the assurance or representation and the claimant’s reliance on the assumption such that the claimant changes his or her course of conduct;
- a detriment suffered by the claimant that flows from his or her reliance on the assumption, which causes the unfairness and underpins the proprietary estoppel; and
- a sufficient property right held by the defendant that could be transferred to satisfy the right claimed by the claimant.
In Ontario, the modern approach was established in the case of Schwark v Cutting, 2010 ONCA 61. Three factors must be present for proprietary estoppel:
- the owner of the land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the property;
- in reliance upon this belief, the claimant acts to his detriment to the knowledge of the owner; and
- the owner then seeks to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive.
The Matter for Debate
The BCCA found, in a 2-1 decision, that the doctrine of proprietary estoppel did not apply. The BCCA found that the trial court unreasonably expanded the scope of the doctrine by finding that Max could rely on Gloria’s assurance that he could buy her 1/3 interest in the property.
The majority found that Gloria’s assurance did not equate to unconscionable conduct: her obligations arose solely based on her mother’s actions and death and, as such, Max never had a proper basis to rely on Gloria’s promise: the property was not hers to give away at the time the assurance was made.
The dissenting opinion of Justice Smith proposed a solution to this dilemma by noting that, because of her cognitive deterioration, there was no possibility that the mother would have changed or rescinded the transactions that conveyed the property to Gloria on her death. As such, “Gloria’s ownership of the Property by the right of survivorship and the Declaration of Trust was therefore certain, despite not actually being owned by Gloria at the time of the promise to Max.”
It will be interesting to see how the SCC approaches this issue.
Thanks for reading,
Other Articles You Might Enjoy
A successful application for leave to appeal to the Supreme Court of Canada (“SCC”) is an uncommon occurrence. It is therefore of considerable interest to the estates bar that leave to appeal from a decision of the British Columbia Court of Appeal (“BCCA”) has been granted in the case of Cowper-Smith v. Morgan.
The case touches on important aspects of both undue influence and proprietary estoppel. It was in respect of the BCCA’s decision finding against the availability of proprietary estoppel as a remedy that leave was granted and we will all eagerly await the pronouncement of the SCC in due course. While the issue of proprietary estoppel in the case will be the subject of next week’s blog, the analysis of the BCCA as it relates to undue influence makes for interesting reading.
Elizabeth Cowper-Smith had three children, a daughter, Gloria, and two sons, Max and Nathan.
2001 – Upon obtaining legal advice, Elizabeth transferred her home and investments into joint tenancy with Gloria and executed a Declaration of Trust providing for Gloria to receive the assets “absolutely” upon her death. This transfer left her estate devoid of any significant assets.
2002 – Notwithstanding the Declaration of Trust, Elizabeth executed a Will leaving 1/3 of her estate to each of her children.
2007 – Gloria asked Max to return home from England in order to care for Elizabeth. Gloria offered Max the right to purchase a 1/3 interest in the home as an incentive.
Gloria reassured her brothers that the property transfer into joint tenancy with her was done simply to help manage the mother’s affairs. Upon Elizabeth’s death, however, Gloria said the transferred assets were hers.
British Columbia Superior Court Decision (2015 BCSC 1170)
Max and Nathan brought an action against Gloria alleging that Gloria exerted undue influence on Elizabeth. Max also sought a declaration that, on the basis of proprietary estoppel, he was entitled to purchase Gloria’s 1/3 interest in the house. At trial, the judge found that Gloria’s true intentions were located in her 2002 will.
British Columbia Court of Appeal Decision (2016 BCCA 200)
Gloria submitted on appeal that independent legal advice provided to Elizabeth was adequate to rebut the undue influence.
The appeal was allowed in part. The legal advice given to Elizabeth was inadequate to rebut the presumption of undue influence; however, Max did not acquire a right to purchase Gloria’s 1/3 share by promissory estoppel (again, the SCC has granted leave to appeal this latter finding).
Issue 1: Undue Influence
The trial judge, upheld by the BCCA, ruled in favour of Max and Nathan, and set held that the property was impressed with a trust for the benefit of the estate: the presumption of Gloria’s undue influence was not rebutted. This is an interesting finding, as Elizabeth obtained her own legal advice prior to executing the transfers to Gloria. Independent legal advice can be used to rebut presumptions of undue influence, if the independent legal advice qualifies as “informed advice”.
In applying Geffen v Goodman Estate,  2 SCR 353, the trial judge found a potential for domination inherent in the relationship between Gloria and Elizabeth, that gave rise to the presumption of undue influence.
The test for Gloria to rebut the presumption of undue influence was established in Geffen:
- An “examination of the nature of the transaction[s]”;
- A finding of whether the donor entered into the transactions as a result of her “own full free and informed thought”; and
- A “meticulous examination of the facts.”
The BCCA agreed with the trial judge’s conclusion that, based on this test, Gloria was not able to rebut the presumption of undue influence. Despite the fact that Elizabeth went to two lawyers, the court found that Gloria and her husband had advised the lawyers that Max and Nathan were trying to take Elizabeth’s property. Moreover, Gloria was present at some of the meetings with the lawyers. Lastly, the lawyers relied on the false information from Gloria and failed to adequately provide “informed advice” and otherwise probe for the existence of undue influence.
Thanks for reading,
Other Articles You Might Enjoy: