Tag: unjust enrichment
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.
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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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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.
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.
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When someone passes away, their executor is responsible for paying out of the estate any debts and liabilities for which the deceased was responsible. However, when there is debt for which two or more people are jointly liable, who becomes responsible when one of the joint debtors dies?
In the case of a joint debt, presumably all joint debtors will have taken responsibility and signed for that debt. Accordingly, when one joint debtor dies, the other joint debtors will be responsible for the full amount of the debt.
This obligation to pay the full amount of a joint debt is between the debtor(s) and the creditor. The creditor can thus seek repayment from either joint debt holder, or, after the death of one joint debtor, from the surviving debtors. As between the debtors themselves, however, there may be remedies for a situation in which one joint debtor is made to pay the full debt, without contribution from the other joint debtor. This may arise upon the death of one of the joint debtors if the Estate refuses to pay back any of the debt.
The courts have held that if liability for joint debt is shared, but only one debtor is ultimately made to pay the full amount of the debt, there may be an equitable remedy available. In Parrott-Ericson v Stockwell, 2006 BCSC 1409, the court stated that, even if there is no specific arrangement between the estate and the survivor who becomes responsible for a joint debt, “equity will impose that obligation in order to avoid unjust enrichment. That is the usual rule, because ordinarily there is unjust enrichment if the liability is not shared.”
In that particular case, unjust enrichment was not found. The joint debt in question was a line of credit secured against two properties owned jointly by the Deceased and his surviving spouse. The line of credit had been used to acquire the properties. Upon the death of the Deceased, the spouse took sole title to the properties by right of survivorship, and she also became liable for the balance of the line of credit. The court held that, although normally the estate would be unjustly enriched in this situation, as the spouse was receiving the entire benefit of the properties, it was not unjust that she be responsible for the full amount of the loan relating to that property.
Ultimately, the answer to this question may not be completely straightforward. Ensure that responsibility for joint debt is clear as between any joint debtors to ensure that you are not liable to pay the full amount of a joint debt after someone’s death, and that you have recourse to claim contribution from the deceased’s estate if necessary.
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Today on Hull on Estates, Moira Visoiu and Paul Trudelle discuss an article presented at the OBA entitled Restitution for the Elderly Client, which looks at ways in which the law of Restitution, and the principle of unjust enrichment, can be particularly helpful for elderly clients who seek to recover assets that were transferred inadvertently.
Should you have any questions, please email us at firstname.lastname@example.org, or leave a comment on our blog page.
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Equitable remedies are pushing the boundaries of just what kind of claims may be made against an estate. The most apparent beneficiary of this willingness of the Courts to expand the scope of such relief would appear to be common law spouses (see the recent decision of the Supreme Court of Canada in Kerr v. Baranow and our recent blog on the case).
In the October 2011 issue of Canadian Lawyer there is a good article on this whole issue entitled "Common Law Couples – til death do they part." The author gives, in part, a summary of some of the legislation in other provinces as it has evolved to provide for common law spouses:
- In Alberta, there is the Adult Interdependent Relationships Act and other legislation that "provide surviving spouses and common law partners the same rights to claim support from the estate and share in the deceased estate on intestacy [with the exception of the Dower Act]."
- In Manitoba, "major legislative amendments were proclaimed in 2004 such to create The Common-Law Partners’ Property and Related Amendments Act…Now in Manitoba, a common law partner is able to claim a share of a person’s estate if they’ve died without a will."
- In Saskatchewan, "the Wills Act, 1996, The Administration of Estates Act, The Intestate Succession Act, 1996, The Dependants’ Relief Act, 1996, and The Family Property Act all treat married and common law couples who have cohabited for not less than two years the same,” says Maria Markatos, Crown counsel with the Ministry of Justice’s Public Law Division in Regina.
David M. Smith – Click here for more information on David Smith.
The recent Supreme Court of Canada case of Kerr v. Baranow recognized common law relationships and gave guidance on the appropriate approach to address property and compensation claims in such relationships.
Unlike married spouses, there is no legislative scheme for common law couples to determine property division upon the breakdown of a relationship.
Following a relationship breakdown, one common law partner may claim that the other would be "unjustly enriched" if permitted to retain certain property without some kind of monetary compensation or without some sort of ownership interest in the land or investment. Typically, the aggrieved partner advances a “resulting trust” claim.
The Supreme Court decided that, to establish an unjust enrichment claim, the claimant must show: (i) that there was a joint family venture and (ii) that there is a link between his or her contributions and the accumulation of wealth. Whether there is a “joint family venture” depends on such factors as:
- mutual effort (i.e. whether the parties worked collaboratively towards common goals);
- economic integration (i.e. joint bank account/ sharing of expenses or common savings);
- actual intent express or inferred; and
- priority of the family (i.e. detrimental reliance on the relationship, by one or both parties, for the sake of the family).
David M. Smith – Click here for more information on David M. Smith.
As has been my mantra all week, Justice Cromwell, who delivered the reasons for the Court in Kerr v. Baranow & Vanasse v. Seguin, commented that for unmarried persons in domestic relationships in most common law provinces, judge made law is the only option for addressing the property consequences of the breakdown of those relationships.
A property interest by resulting trust arises where 1) there is a gratuitous transfer of property from one partner to the other, or 2) there is joint contribution by two partners to the acquisition of property, title to which is in the name of only one of them.
Added to this has been the “purely Canadian invention” of the “common intention” resulting trust, whereby a resulting trust could arise based solely on both partners having a common intention that one holds property for the beneficial interest of both. However, the Court declared that this concept was doctrinally unsound and should have no continuing role in the resolution of domestic property disputes.
A far better approach was to apply the law of unjust enrichment and the remedial constructive trust, which provide a much less artificial, more comprehensive and more principled basis to address property claims on the breakdown of domestic relationships. To be successful, a plaintiff had to establish 1) an enrichment of the defendant by the plaintiff 2) a corresponding deprivation of the plaintiff, and 3) the absence of a juristic reason for the enrichment.
The appropriate remedy for unjust enrichment will most often be monetary though there may be some circumstances in which a monetary remedy will be inadequate and a proprietary remedy is required.
When quantifying a monetary remedy, a quantum meruit approach should be applied and value assessed on a “value survived” basis, which is preferable to imposing a remedial constructive trust. To be entitled to a monetary remedy on a value survived basis, the claimant must show both that there was a joint family venture and that there was a link between his or her contributions and the accumulation of wealth.
This decision provides much guidance to courts in determining the property rights of unmarried partners and will no doubt prove instructive in cases where individuals die without having provided properly with respect to the property accumulated during their lifetime with a common law spouse.
Sharon Davis – Click here for more information on Sharon Davis.
In of Vanasse v. Seguin (the companion case to Kerr v. Baranow, heard at the same time) the common law couple was together for 12 years, from 1993 to 2005. For the first four years both parties pursued their careers. The common law wife (“wife”) then left her job to move to Halifax so the common law husband (“husband”) could pursue a business opportunity. Over the next three and a half years, their two children were born and the wife stayed at home to care for the family. The husband stepped down as CEO of the business he started and they returned to Ottawa in 1998, where they bought a home in both their names as joint tenants. In 2000, the husband received approximately $11 million for his shares in the business and from that time, until their separation in 2005, he participated more with the domestic chores.
The trial judge found that there was no unjust enrichment for the first and last periods of the couple’s cohabitation, but held that the husband had been unjustly enriched at the wife’s expense during the period in which the children were born and was entitled to half of the value of the wealth the husband accumulated during the period of unjust enrichment, less her interest in the home and RRSPs in her name.
The Ontario Court of Appeal set aside this award and directed that the proper approach to valuation was a quantum meruit calculation in which the value each party received from the other was assessed and set off, essentially treating the wife as an unpaid employee.
In the Vanasse appeal, the central problem was how to quantify a monetary award for unjust enrichment. The Supreme Court of Canada found that a monetary award for unjust enrichment need not, as a matter of principle, always be calculated on a fee-for-services basis, allowed the appeal, and restored the order of the trial judge.
Sharon Davis – Click here for more information on Sharon Davis.
The Supreme Court of Canada recently considered the property rights of common law spouses in the companion cases of Kerr v. Baranow & Vanasse v. Seguin. These cases required consideration of the following legal issues:
- The role of the “common intention” resulting trust in claims by domestic partners.
- Whether the monetary remedy for a successful unjust enrichment claim must always be assessed on a quantum meruit basis.
- Mutual benefit conferral in the context of an unjust enrichment claim and when this should be taken into account.
- The role the parties’ reasonable expectations play in the unjust enrichment analysis.
In Kerr v. Baranow, a common law couple in their late 60’s split after 25 years, during which time both partners worked and contributed to their mutual welfare. The common law wife (“wife”) claimed property on the basis of resulting trust and unjust enrichment. The common law husband (husband”) counterclaimed that the wife had been unjustly enriched by his housekeeping and personal assistance after she suffered a debilitating stroke.
The trial judge awarded the wife $315,000, (1/3 of the value of the home the couple shared, but which was in the husband’s name) by way of resulting trust and unjust enrichment, because the wife had provided $60,000 worth of equity and assets at the beginning of their relationship.
The B.C. Court of Appeal allowed the husband’s appeal because it found the wife did not make a financial contribution to the acquisition or improvement of the property, and ordered a new trial for the husband’s counterclaim.
The Supreme Court of Canada allowed the wife’s appeal from the dismissal of her unjust enrichment claim and ordered a new trial. Her appeal from the order dismissing her claim in resulting trust was dismissed. The order for a new hearing of the husband’s counterclaim was affirmed.
Tomorrow’s blog will cover the facts in Vanasse v. Seguin and in our last blog of the week we will explore the main issues discussed in relation to property rights of common law spouses in the context of these two cases.
Sharon Davis – Click here for more information on Sharon Davis.