Vancouver Estate Litigator- Life Insurance and Unjust Enrichment

Trevor Todd and Jackson Todd have over sixty years combined experience in handling estate disputes including those involving unjust enrichment and life insurance policies

Moore v Sweet  (2018) 3 SCR 303

 

A person named as an irrevocable beneficiary of a life insurance policy doesn’t always have a right to keep the insurance money, the Supreme Court has confirmed. A third party may have a right to the insurance money if there has been “unjust enrichment.”

FACTS

Mr. Moore bought a $250,000 life insurance policy in 1985, while he was married to Ms. Moore. Ms. Moore was named the sole beneficiary, which means that she would get the money if Mr. Moore died. The Moores separated in 1999 and divorced in 2003. Until 2000, the Moores paid the $507.50 premium each year out of their joint bank account. In 2000, Ms. Moore and Mr. Moore verbally agreed that Ms. Moore would pay all of the yearly premiums. In exchange, Mr. Moore would keep Ms. Moore on the policy as the sole beneficiary. From 2000 on, Ms. Moore paid the premiums herself.

In 2000, Mr. Moore moved in with Ms. Sweet. Soon after, he made her the “irrevocable” beneficiary of the policy, even though he had agreed to keep Ms. Moore named as sole beneficiary. He didn’t tell Ms. Moore that he made this change.

Ontario’s Insurance Act sets out the rules for insurance policies. It says an insured person can name another person (or group of people) as the beneficiary of their life insurance policy. That other person can be named either a “revocable” beneficiary or an “irrevocable” beneficiary. “Revocable” beneficiaries can be removed from a policy at any time. They don’t have to agree, or even be informed that they are being removed. Ms. Moore was a “revocable” beneficiary. “Irrevocable” beneficiaries, like Ms. Sweet, can only be removed if they agree to it.

Ms. Moore only found out that she had been removed as the beneficiary when Mr. Moore died in 2013. At this point, she sued Ms. Sweet for $250,000, the value of the policy. She argued that Ms. Sweet got a benefit at her expense, and there was no legal basis for it. This kind of situation is called “unjust enrichment.” Ms. Moore asked the court to put the money in a “constructive trust,” a common request when unjust enrichment happens. A constructive trust means someone has to hold certain property for someone else’s benefit.

Both Ms. Moore and Ms. Sweet agreed that the verbal agreement between the Moores was a contract. The question was whether the Insurance Act gave Ms. Sweet legal basis to keep the money in spite of that.

The trial judge ruled in favour of Ms. Moore, saying Mr. Moore had given her rights to the policy through their verbal agreement. The Court of Appeal disagreed. It said that while Ms. Moore should get back all the money she paid for the premiums (about $7,000), Ms. Sweet should get to keep the rest of the money.

The majority at the Supreme Court ruled in favour of Ms. Moore. The fact that Ms. Sweet was an irrevocable beneficiary of the policy wasn’t enough for her to be allowed to keep the money. The Insurance Act set out how beneficiaries could be named, but it didn’t say that naming a new beneficiary would automatically override other people’s rights from previous agreements. Courts already said that other people could have rights to an insurance policy no matter who was actually listed on it. This could be through a contract or by the concept of “equity” (rules of fairness). Those people could claim the insurance money on some legal or “equitable” (fair) basis, like unjust enrichment. The majority also noted that Ms. Sweet would have received nothing if Ms. Moore ever stopped paying. For those reasons, the majority said that Ms. Moore should get the insurance money under a constructive trust.

This case was about what happens when someone has a pre-existing right to an insurance policy, but someone else is named as the irrevocable beneficiary. The majority said that in this case, the beneficiary was unjustly enriched and could not keep the insurance money.

 

                  The Courts Reasoning Based on Unjust Enrichment

 

Unjust Enrichment

[35]                          Broadly speaking, the doctrine of unjust enrichment applies when a defendant receives a benefit from a plaintiff in circumstances where it would be “against all conscience” for him or her to retain that benefit. Where this is found to be the case, the defendant will be obliged to restore that benefit to the plaintiff. As recognized by McLachlin J. in Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762, at p. 788, “At the heart of the doctrine of unjust enrichment . . . lies the notion of restoration of a benefit which justice does not permit one to retain.” 

[36]                          Historically, restitution was available to plaintiffs whose cases fit into certain recognized “categories of recovery” — including where a plaintiff conferred a benefit on a defendant by mistake, under compulsion, out of necessity, as a result of a failed or ineffective transaction, or at the defendant’s request (Peel, at p. 789; Kerr, at para. 31). Although these discrete categories exist independently of one another, they are each premised on the existence of some injustice in permitting the defendant to retain the benefit that he or she received at the plaintiff’s expense.

[37]                          In the latter half of the 20th century, courts began to recognize the common principles underlying these discrete categories and, on this basis, developed “a framework that can explain all obligations arising from unjust enrichment” (L. Smith, “Demystifying Juristic Reasons” (2007), 45 Can. Bus. L.J. 281, at p. 281; see also Rathwell v. Rathwell, [1978] 2 S.C.R. 436, and Murdoch v. Murdoch, [1975] 1 S.C.R. 423, per Laskin J., dissenting). Under this principled framework, a plaintiff will succeed on the cause of action in unjust enrichment if he or she can show: (a) that the defendant was enriched; (b) that the plaintiff suffered a corresponding deprivation; and (c) that the defendant’s enrichment and the plaintiff’s corresponding deprivation occurred in the absence of a juristic reason (Pettkus v. Becker, [1980] 2 S.C.R. 834, at p. 848; Garland, at para. 30; Kerr, at paras. 30-45).  While the principled unjust enrichment framework and the categories coexist (Kerr, at paras. 31-32), the parties in this case made submissions only under the principled unjust enrichment framework. These reasons proceed on this basis.

[38]                          This principled approach to unjust enrichment is a flexible one that allows courts to identify circumstances where justice and fairness require one party to restore a benefit to another. Recovery is therefore not restricted to cases that fit within the categories under which the retention of a conferred benefit was traditionally considered unjust (Kerr, at para. 32). As observed by McLachlin J. in Peel (at p. 788):

The tri‑partite principle of general application which this Court has recognized as the basis of the cause of action for unjust enrichment is thus seen to have grown out of the traditional categories of recovery.  It is informed by them.  It is capable, however, of going beyond them, allowing the law to develop in a flexible way as required to meet changing perceptions of justice.

[39]                          Justice and fairness are at the core of the dispute between Michelle and Risa, both of whom are innocent parties. Moreover, and to complicate matters, resolution of this dispute requires this Court to consider the elements of an unjust enrichment claim as they apply in a context that involves several parties. Pursuant to her Oral Agreement with Lawrence, Michelle paid around $7,000 in premiums to the Insurance Company between 2000 and 2013 in exchange for the right to remain named as beneficiary of the policy. When Lawrence passed away, however, the insurance proceeds (which totalled $250,000) were payable by the Insurance Company not to Michelle, but to Risa — the person whom Lawrence had subsequently named the irrevocable beneficiary, contrary to the contractual obligation he owed to Michelle. The result of this arrangement was that Risa’s enrichment was significantly greater than Michelle’s out-of-pocket loss. Moreover, Risa was entitled to receive the proceeds from the Insurance Company by virtue of her designation as irrevocable beneficiary, pursuant to ss. 190 and 191 of the Insurance Act.

[40]                          These unusual circumstances raise two distinct questions respecting the law of unjust enrichment. First, what is the proper measure of Michelle’s deprivation, and in what sense does it “correspond” to Risa’s gain? Second, does the legislative framework at issue provide a juristic reason for Risa’s enrichment and Michelle’s corresponding deprivation — and if not, can such a juristic reason be found on some other basis? I will deal with each of these questions in turn.

(1)           Risa’s Enrichment and Michelle’s Corresponding Deprivation

[41]                          The first two elements of the cause of action in unjust enrichment require an enrichment of the defendant and a corresponding deprivation of the plaintiff. These two elements are closely related; a straightforward economic approach is taken to both of them, with moral and policy considerations instead coming into play at the juristic reason stage of the analysis (Kerr, at para. 37; Garland, at para. 31). To establish that the defendant was enriched and the plaintiff correspondingly deprived, it must be shown that something of value — a “tangible benefit” — passed from the latter to the former (Kerr, at para. 38; Garland, at para. 31; Peel, at p. 790; Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75, [2004] 3 S.C.R. 575, at para. 15). This Court has described the enrichment and detriment elements as being “the same thing from different perspectives” (Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, [2012] 3 S.C.R. 660 (“PIPSC”), at para. 151) and thus as being “essentially two sides of the same coin” (Peter, at p. 1012).

[42]                          The parties in the present case do not dispute the fact that Risa was enriched to the full extent of the $250,000 by virtue of her right to receive the insurance proceeds as the designated irrevocable beneficiary. The application judge found as much (at para. 27), and this finding is not contested on appeal.

[43]                          In addition to an enrichment of the defendant, a plaintiff asserting an unjust enrichment claim must also establish that he or she suffered a corresponding deprivation. According to Professor McInnes, this element serves the purpose of identifying the plaintiff as the person with standing to seek restitution against an unjustly enriched defendant (M. McInnes, The Canadian Law of Unjust Enrichment and Restitution (2014), at p. 149; see also Peel, at pp. 789-90, and Kleinwort Benson Ltd. v. Birmingham City Council, [1997] Q.B. 380 (C.A.), at pp. 393 and 400). Even if a defendant’s retention of a benefit can be said to be unjust, a plaintiff has no right to recover against that defendant if he or she suffered no loss at all, or suffered a loss wholly unrelated to the defendant’s gain. Instead, the plaintiff must demonstrate that the loss he or she incurred corresponds to the defendant’s gain, in the sense that there is some causal connection between the two (Pettkus, at p. 852). Put simply, the transaction that enriched the defendant must also have caused the plaintiff’s impoverishment, such that the defendant can be said to have been enriched at the plaintiff’s expense (P. D. Maddaugh and J. D. McCamus, The Law of Restitution (loose-leaf ed.), at p. 3-24). While the nature of the correspondence between such gain and loss may vary from case to case, this correspondence is what grounds the plaintiff’s entitlement to restitution as against an unjustly enriched defendant. Professor McInnes explains that “the Canadian conception of a ‘corresponding deprivation’ rightly emphasizes the crucial connection between the defendant’s gain and the plaintiff’s loss” (The Canadian Law of Unjust Enrichment and Restitution, at p. 149).

[44]                          The authorities on this point make clear that the measure of the plaintiff’s deprivation is not limited to the plaintiff’s out-of-pocket expenditures or to the benefit taken directly from him or her. Rather, the concept of “loss” also captures a benefit that was never in the plaintiff’s possession but that the court finds would have accrued for his or her benefit had it not been received by the defendant instead (Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805, at para. 30). This makes sense because in either case, the result is the same: the defendant becomes richer in circumstances where the plaintiff becomes poorer. As was succinctly articulated by La Forest J. in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, at pp. 669-70:

When one talks of restitution, one normally talks of giving back to someone something that has been taken from them (a restitutionary proprietary award), or its equivalent value (a personal restitutionary award).  As the Court of Appeal noted in this case, [the respondent] never in fact owned the [disputed] property, and so it cannot be “given back” to them.  However, there are concurrent findings below that but for its interception by [the appellant], [the respondent] would have acquired the property.  In Air Canada . . . , at pp. 1202-03, I said that the function of the law of restitution “is to ensure that where a plaintiff has been deprived of wealth that is either in his possession or would have accrued for his benefit, it is restored to him.  The measure of restitutionary recovery is the gain the [defendant] made at the [plaintiff’s] expense.” (Emphasis added.)  In my view the fact that [the respondent in this case] never owned the property should not preclude it from the pursuing a restitutionary claim: see Birks, An Introduction to the Law of Restitution, at pp. 133-39.  [The appellant] has therefore been enriched at the expense of [the respondent]. [Emphasis in original.]

While Lac Minerals turned largely on the defendant’s breach of confidence and breach of fiduciary duty, the above comments were made in the context of La Forest J.’s analysis of the tripartite unjust enrichment framework as it was applied in that case. My view is thus that these comments are applicable to the analysis in the present case.

[45]                          The foregoing also indicates that the corresponding deprivation element does not require that the disputed benefit be conferred directly by the plaintiff on the defendant (see McInnes, The Canadian Law of Unjust Enrichment and Restitution, at p. 155, but also see pp. 156-83; Maddaugh and McCamus, The Law of Restitution, at p. 35-1). This understanding of the correspondence between loss and gain has also been accepted under Quebec’s civilian approach to the law of unjust enrichment:

The theory of unjustified enrichment does not require that the enrichment pass directly from the property of the impoverished to that of the enriched party . . . . The impoverished party looks to the one who profited from its impoverishment.  It is then for the enriched party to find a legal justification for its enrichment.

 

(Cie Immobilière Viger Ltée v. Lauréat Giguère Inc., [1977] 2 S.C.R. 67, at p. 79; see also Lacroix v. Valois, [1990] 2 S.C.R. 1259, at pp. 1278-79.)

[46]                          Taking a straightforward economic approach to the enrichment and corresponding deprivation elements of the unjust enrichment framework, I am of the view that Michelle stands deprived of the right to receive the entirety of the policy proceeds (for a value of $250,000) and that the necessary correspondence exists between this deprivation and Risa’s gain. With respect to the extent of Michelle’s deprivation, my view is that the quantification of her loss should not be limited to her out-of-pocket expenditures — that is, the $7,000 she paid in premiums between 2000 and 2013. Pursuant to her contractual obligation, she made those payments over the course of 13 years in exchange for the right to receive the policy proceeds from the Insurance Company upon Lawrence’s death. In breach of his contractual obligation, however, Lawrence instead transferred that right to Risa. Had Lawrence held up his end of the bargain with Michelle, rather than designating Risa irrevocably, the right to payment of the policy proceeds would have accrued to Michelle. At the end of the day, therefore, what Michelle lost is not only the amount she paid in premiums. She stands deprived of the very thing for which she paid — that is, the right to claim the $250,000 in proceeds.

[47]                          To be clear, therefore, Michelle’s entitlement under the Oral Agreement is what makes it such that she was deprived of the full value of the insurance payout. In other cases where the plaintiff has some general belief that the insured ought to have named him or her as the designated beneficiary, but otherwise has no legal or equitable right to be treated as the proper recipient of the insurance money, it will likely be impossible to find either that the right to receive that insurance money was ever held by the plaintiff or that it would have accrued to him or her. In such cases, the properly designated beneficiary is not enriched at the expense of a plaintiff who had no claim to the insurance money in the first place — the result being that the plaintiff will not have suffered a corresponding deprivation to the full extent of the insurance proceeds (Love v. Love, 2013 SKCA 31, 359 D.L.R. (4th) 504, at para. 42).

[48]                          My colleagues, Gascon and Rowe JJ., approach Michelle’s loss differently. They take the position that unjust enrichment cannot be invoked by a claimant to protect his or her “contractual expectations against innocent third parties” (para. 104). While they agree that the Canadian principle against unjust enrichment operates where a plaintiff has lost wealth that was either in his or her possession or that would have accrued for his or her benefit, they take the position that “awards for expected property have generally been where there was a breach of an equitable duty”, and they distinguish that situation from cases where the plaintiff held “a valid contractual expectation” of receiving certain property (para. 104).

[49]                          My view is that it is not useful, in the context of unjust enrichment, to distinguish between expectations based on a contractual obligation and expectations where there was a breach of an equitable duty (see my colleagues’ reasons, at para. 104). Rather, a robust approach to the corresponding deprivation element focuses simply on what the plaintiff actually lost — that is, property that was in his or her possession or that would have accrued for his or her benefit — and on whether that loss corresponds to the defendant’s enrichment, such that we can say that the latter was enriched at the expense of the former. As was observed by Professors Maddaugh and McCamus in The Law of Restitution, one source of difficulty in these kinds of disappointed beneficiary cases is

a rigid application of the “corresponding deprivation” or “expense” element as if it requires that the benefit in the defendant’s hands must have been transferred from, or constitute an out-of-pocket expense of, the plaintiff. . . . [R]estitution of benefits received from third parties may well provide a basis for recovery.  In this particular context, the benefit received can, in any event, normally be described as having been received at the plaintiff’s expense in the sense that, but for the mistaken failure to implement the arrangements in question, the benefit would have been received by the plaintiff. [Emphasis added; p. 35-21.]

I agree. In this case, given the fact that Michelle held up her end of the bargain, kept the policy alive by paying the premiums, did not predecease Lawrence, and still did not get what she actually contracted for, it seems artificial to suggest that her loss was anything less than the right to receive the entirety of the insurance proceeds.

[50]                          From this perspective, it is equally clear that Risa’s enrichment came at Michelle’s expense. It is not only that Michelle’s payment of the premiums made Risa’s enrichment possible — something which the application judge found to be the case: “The change of designation, and [Risa’s] later receipt of the proceeds of the Policy, would not have been possible but for [Michelle’s] performance of her obligations under the agreement” (para. 48). What is more significant is that Risa’s designation gave her the statutory right to receive the insurance proceeds, the necessary implication being that Michelle would have no such right despite the fact that she had a contractual entitlement, by virtue of the agreement with Lawrence, to remain named as beneficiary. Because Risa received the benefit that otherwise would have accrued to Michelle, the requisite correspondence exists: the former was enriched at the expense of the latter.

[51]                          My colleagues also dispute this proposition. They say that any deprivation suffered by Michelle is attributable to the fact that she lacks the practical ability to recover anything against Lawrence’s insolvent estate. The result, in their view, is that what Risa received — a statutory entitlement to the proceeds — is different than what Michelle lost — which they characterize as the ability to enforce her contractual rights against Lawrence’s estate (para. 111). Again, I disagree; since Risa was given the very thing that Michelle had contracted to receive and was otherwise entitled to receive (given that she held up her end of the bargain), it seems evident to me that Risa was enriched at Michelle’s expense. To be clear, it is not simply that Risa gained a benefit with a value equal to the amount of Michelle’s deprivation. Rather, what Risa gained is the precise benefit that Michelle lost: the right to receive the proceeds of Lawrence’s life insurance policy. I would also add that the insolvency of Lawrence’s estate simply means that Michelle would be unable to recover the value of her loss by bringing an action against Lawrence’s estate in breach of contract; it does not affect her ability to bring an unjust enrichment claim against Risa. The fact that a plaintiff has a contractual claim against one defendant does not preclude the plaintiff from advancing his or her case by asserting a separate cause of action against another defendant if it appears most advantageous (Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, at p. 206).

[52]                          I would therefore conclude that the requisite enrichment and corresponding deprivation are both present in this case. The payability of the insurance proceeds by the Insurance Company for Risa’s benefit did in fact impoverish Michelle “to the full extent of the insurance payout in [Risa’s] favour” (Court of Appeal decision, at para. 208 (Lauwers J.A., dissenting)).

[53]                          In light of this, the Court of Appeal’s order — which was made on the consent of the parties, and which requires that $7,000 of the proceeds be paid to Michelle and that the balance be paid to Risa — cannot be upheld on a principled basis.  If there is a juristic reason for Risa’s retention of the insurance money, then Michelle’s claim will necessarily fail and Risa will be entitled to the full $250,000. If there is no such juristic reason, however, then Michelle’s unjust enrichment claim will succeed and she will be entitled to a restitutionary remedy totalling that amount.

(2)           Absence of Any Juristic Reason

[54]                          Having established an enrichment and a corresponding deprivation, Michelle must still show that there is no justification in law or equity for the fact that Risa was enriched at her expense in order to succeed in her claim. As observed by Cromwell J. in Kerr (at para. 40):

The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason.  To put it simply, this means that there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention “unjust” in the circumstances of the case . . . . [Emphasis added.]

[55]                          This understanding of juristic reason is crucial for the purposes of the present appeal. The third element of the cause of action in unjust enrichment is essentially concerned with the justification for the defendant’s retention of the benefit conferred on him or her at the plaintiff’s expense — or, to put it differently, with whether there is a juristic reason for the transaction that resulted in both the defendant’s enrichment and the plaintiff’s corresponding deprivation. If there is, then the defendant will be justified in keeping or retaining the benefit received at the plaintiff’s expense, and the plaintiff’s claim will fail accordingly. At its core, the doctrine of unjust enrichment is fundamentally concerned with reversing transfers of benefits that occur without any legal or equitable basis. As McLachlin J. stated in Peter (at p. 990), “It is at this stage that the court must consider whether the enrichment and detriment, morally neutral in themselves, are ‘unjust’.”

[56]                          In Garland, this Court shed light on exactly what must be shown under the juristic reason element of the unjust enrichment analysis — and in particular, on whether this third element requires that cases be decided by “finding a ‘juristic reason’ for a defendant’s enrichment” or instead by “asking whether the plaintiff has a positive reason for demanding restitution” (para. 41, citing Garland v. Consumers’ Gas Co. (2001), 57 O.R. (3d) 127 (C.A.), at para. 105). In an effort to eliminate the uncertainty between these competing approaches, Iacobucci J. formulated a juristic reason analysis that proceeds in two stages.

[57]                          The first stage requires the plaintiff to demonstrate that the defendant’s retention of the benefit at the plaintiff’s expense cannot be justified on the basis of any of the “established” categories of juristic reasons: a contract, a disposition of law, a donative intent, and other valid common law, equitable or statutory obligations (Garland, at para. 44; Kerr, at para. 41). If any of these categories applies, the analysis ends; the plaintiff’s claim must fail because the defendant will be justified in retaining the disputed benefit. For example, a plaintiff will be denied recovery in circumstances where he or she conferred a benefit on a defendant by way of gift, since there is nothing unjust about a defendant retaining a gift of money that was made to him or her by (and that resulted in the corresponding deprivation of) the plaintiff. In this way, these established categories limit the subjectivity and discretion inherent in the unjust enrichment analysis and help to delineate the boundaries of this cause of action (Garland, at para. 43).

[58]                          If the plaintiff successfully demonstrates that none of the established categories of juristic reasons applies, then he or she has established a prima facie case and the analysis proceeds to the second stage. At this stage, the defendant has an opportunity to rebut the plaintiff’s prima facie case by showing that there is some residual reason to deny recovery (Garland, at para. 45). The de facto burden of proof falls on the defendant to show why the enrichment should be retained. In determining whether this may be the case, the court should have regard to two considerations: the parties’ reasonable expectations and public policy (Garland, at para. 46; Kerr, at para. 43).

[59]                          This two-stage approach to juristic reason was designed to strike a balance between the need for predictability and stability on the one hand, and the importance of applying the doctrine of unjust enrichment flexibly, and in a manner that reflects our evolving perception of justice, on the other.

(a)          First Stage — None of the Established Categories Applies in These Circumstances

[60]                          The first stage of the Garland framework asks whether a juristic reason from an established category operates to deny recovery. Michelle submits that none of these categories applies in the circumstances of this case. Risa takes the position that the Insurance Act required the proceeds of the policy to be paid exclusively to her as the validly designated beneficiary, such that the applicable legislation constitutes a juristic reason to deny the recovery sought by Michelle.

[61]                          The main issue at this stage of the analysis is therefore whether a beneficiary designation made pursuant to ss. 190(1) and 191(1) of the Insurance Act — which, when coupled with Lawrence’s insurance policy, makes it clear that Risa is the one to whom the insurance proceeds are payable — provides a juristic reason for Risa to retain those proceeds in light of Michelle’s claim to the money. Put differently, the question can be framed as follows: is there any aspect of this statutory framework that justifies the fact that Risa was enriched at Michelle’s expense? If so, Michelle’s claim will necessarily fail.

[62]                          My colleagues dispute this proposition. In their view, it is sufficient to show that there is some juristic reason for the fact that the defendant was enriched, and there is thus no need to demonstrate that the enrichment and the corresponding deprivation occurred without a juristic reason. With respect, this proposition is at odds with the clear guidance provided by this Court in Kerr (para. 40, reproduced at para. 54 of these reasons) and disregards the work already done by the recognized categories of juristic reasons identified in Garland. Each of these categories points to a relationship between the plaintiff and the defendant that justifies the fact that a benefit passed from the former to the latter. To focus exclusively on the reason why the defendant was enriched is to ignore this key aspect of the law of unjust enrichment.

[63]                          Two categories of juristic reasons might be said to apply in the circumstances of this case: disposition of law and statutory obligations. Disposition of law is a broad category that applies in various circumstances, including “where the enrichment of the defendant at the plaintiff’s expense is required by law, such as where a valid statute denies recovery” (Kerr, at para. 41 (emphasis added)). The statutory obligations category operates in a substantially similar manner, precluding recovery where a legislative enactment expressly or implicitly mandates a transfer of wealth from the plaintiff to the defendant. Although there is undoubtedly a degree of overlap between these two distinct categories, what matters for the purposes of this appeal is that a plaintiff’s claim will necessarily fail if a legislative enactment provides a reason for the enrichment and corresponding deprivation, so as to preclude recovery in unjust enrichment. As Professors Maddaugh and McCamus note in The Law of Restitution:

. . . it is perhaps self‑evident that an unjust enrichment will not be established in any case where enrichment of the defendant at the plaintiff’s expense is required by law.  The payment of validly imposed taxes may be considered unjust by some but their payment gives rise to no restitutionary right of recovery. [Emphasis added; footnotes omitted; p. 3-28.]

[64]                          The jurisprudence provides ample support for this proposition. Among the issues in Reference re Goods and Services Tax, [1992] 2 S.C.R. 445 (“GST Reference”), was whether suppliers registered under the Excise Tax Act ,  R.S.C. 1985, c. E-15 , that incurred costs in collecting the Goods and Services Tax on behalf of the federal government could recover those costs from the government on the basis of restitution. For a majority of this Court, Lamer C.J. answered this question in the negative:

Under the GST Act the expenses involved in collecting and remitting the GST are borne by registered suppliers.  This certainly constitutes a burden to these suppliers and a benefit to the federal government.  However, this is precisely the burden contemplated by statute.  Hence, a juridical reason for the retention of the benefit by the federal government exists unless the statute itself is ultra vires. [Emphasis added; p. 477.]

[65]                          A similar issue arose in Gladstone v. Canada (Attorney General), 2005 SCC 21, [2005] 1 S.C.R. 325. In that case, the respondents were charged under the Fisheries Act, R.S.C. 1970, c. F-14, for harvesting and attempting to sell large quantities of herring spawn. The Department of Fisheries and Oceans seized and sold the herring spawn, and the appellant Crown in Right of Canada held the proceeds pending the outcome of the proceedings. The proceedings were eventually stayed and the net proceeds paid to the respondents. Because the Crown refused to pay interest or any other additional amount, however, the respondents sought restitution in the amount of $132,000, on the ground that the Crown had been unjustly enriched by its retention of the proceeds during the time of seizure. Writing for a unanimous Court, Major J. denied that claim on the following basis:

Here, Parliament has enacted a statutory regime to regulate the commercial fishery.  It has provided an extensive framework dealing with the seizure and return of things seized. This regime specifically provides for the return of any fish, thing, or proceeds realized.  This was followed.  Interest or some other additional amount might have been gratuitously included, but it was not.  The validity of the Fisheries Act was not, nor could have been, successfully challenged.  Therefore, the Act provides a juristic reason for any incidental enrichment which may have occurred in its operation. As a result, the unjust enrichment claim fails. [para. 22]

In short, it was Major J.’s position that the statutory regime, by specifying what had to be returned, made it clear that anything falling outside of the specified categories was to be retained by the Crown.  In other words, the Fisheries Act stipulated that, in certain circumstances, a benefit would be retained by the Crown.

[66]                          These cases are examples of situations where a statute precluded recovery on the basis of unjust enrichment. It is to be noted that in each case, recovery was denied because the legislation in question expressly or implicitly required the transfer of wealth between the plaintiff and the defendant and therefore justified the defendant’s retention of the benefit received at the plaintiff’s expense. It is in this way that the applicable legislation can be understood as “denying” or “barring” recovery in restitution and therefore as supplying a juristic reason for the defendant’s retention of the benefit.

[67]                          What, then, should we make of ss. 190(1) and 191(1) of the Insurance Act? The former permits the insured to identify the person to whom or for whose benefit the insurance money is payable when the insured passes away. Coupled with the insurance contract, it directs the insurer to pay the proceeds to the person so designated. The latter provides that such a designation may be made irrevocably.

[68]                          Given the fact that a statute will preclude recovery for unjust enrichment where it requires (either explicitly or by necessary implication) that the defendant be enriched to the detriment of the plaintiff, the provisions of the Insurance Act may therefore provide a juristic reason for the beneficiary’s enrichment vis-à-vis any corresponding deprivation that may have been suffered by the insurer at the time the insurance money is eventually paid out. For this reason, an unjust enrichment claim brought by the insurer against the designated beneficiary (revocable or irrevocable) would necessarily fail at this stage; the rights and obligations that exist in that context — both statutory and contractual — justify the beneficiary’s enrichment at the insurer’s expense (Saskatchewan Crop Insurance Corp. v. Deck, 2008 SKCA 21, 307 Sask. R. 206, at paras. 47-54).

[69]                          A valid beneficiary designation under the Insurance Act has also been found to constitute a juristic reason that defeats a third party’s claim for the entirety of the death benefit in circumstances where that party paid some of the premiums under the erroneous belief that he or she was the named beneficiary. In Richardson (Estate Trustee of) v. Mew, 2009 ONCA 403, 96 O.R. (3d) 65, the deceased had maintained his first wife as the designated beneficiary under a life insurance policy. His second wife, who did not have a contractual right to be named as beneficiary, wrongly believed that he had executed a change of beneficiary designation in her favour, and paid some of the policy premiums — initially from a joint bank account she shared with the deceased and later from her own bank account. She sought the imposition of a constructive trust in her favour over the policy proceeds, arguing that there was no juristic reason for the first wife’s enrichment. Even accepting that the second wife could be said to have suffered a corresponding deprivation, the Ontario Court of Appeal upheld the motion judge’s finding that a valid beneficiary designation under the Insurance Act amounted to a juristic reason that defeated the second wife’s claim for the insurance money that was payable to the first wife. I would observe that the claimant in that case sought a constructive trust over the entire death benefit, and not merely the return of any payments made on the basis of her erroneous belief; the Court of Appeal did not decide whether she would be entitled to the return of those payments, and that question is not before us today.

[70]                          At issue in this case, however, is whether a designation made pursuant to ss. 190(1) and 191(1) of the Insurance Act provides any reason in law or justice for Risa to retain the disputed benefit notwithstanding Michelle’s prior contractual right to remain named as beneficiary and therefore to receive the policy proceeds. In other words, does the statute preclude recovery for a plaintiff, like Michelle, who stands deprived of the benefit of the insurance policy in circumstances such as these?  In my view, it does not. Nothing in the Insurance Act can be read as ousting the common law or equitable rights that persons other than the designated beneficiary may have in policy proceeds. As this Court explained in Rawluk v. Rawluk, [1990] 1 S.C.R. 70, at p. 90, the “legislature is presumed not to depart from prevailing law ‘without expressing its intentions to do so with irresistible clearness’” (see also Gendron v. Supply and Services Union of the Public Service Alliance of Canada, Local 50057, [1990] 1 S.C.R. 1298). In KBA Canada Inc. v. 3S Printers Inc., 2014 BCCA 117, 59 B.C.L.R. (5th) 273, for example, the British Columbia Court of Appeal found that the Personal Property Security Act, R.S.B.C. 1996, c. 359, provided a “complete set of priority rules” that was “designed to replace convoluted common law, equitable and statutory rules that beset personal property security law with complexity and uncertainty” (paras. 27 and 21, citing Bank of Montreal v. Innovation Credit Union, 2010 SCC 47, [2010] 3 S.C.R. 3). In those circumstances, there was no “room for priorities to be determined on the basis of common law or equitable principles” (para. 22). By contrast, while the Insurance Act provides the mechanism by which beneficiaries can be designated and therefore become statutorily entitled to receive policy proceeds, no part of the Insurance Act operates with the necessary “irresistible clearness” to preclude the existence of contractual or equitable rights in those insurance proceeds once they have been paid to the named beneficiary.

[71]                          The reasoning put forward by McKinlay J. (as she then was) of the Ontario High Court of Justice in Shannon v. Shannon (1985), 50 O.R. (2d) 456, is particularly instructive in this regard.  Like Michelle, the plaintiff in Shannon was the former spouse of an insured person who had contractually agreed to maintain the plaintiff as the sole beneficiary of the life insurance policy in his name and “not to revoke such beneficiary designation at any time in the future” (p. 458). Shortly thereafter, and in breach of his contractual obligation, the insured person surreptitiously changed the beneficiary designation in favour of his niece and nephew. He passed away several years later, and when the plaintiff discovered the change in beneficiary designation, she commenced an action asserting her entitlement to the proceeds of her former spouse’s insurance policy. McKinlay J. found in her favour and made the following observations (at p. 461):

It would appear from s. 167(2) [i.e. the predecessor of s. 190(2) of the Insurance Act] that the insured may at any time before the filing of an irrevocable declaration alter or revoke an existing designation by way of a declaration.

 

The position of the defendant is that this is precisely what the insured did, and that any finding of the court of a trust in favour of the plaintiff would have the effect of the court’s attempting to overrule a clear statutory provision.

 

But the Insurance Act provides a statutory framework for the protection of the insured, the insurer and beneficiaries; equity imposes duties of conscience on parties based on their relationship and dealings one with another outside the purview of the statute. When he concluded the separation agreement with his wife, the deceased bound himself to maintain the policy in good standing, which he did; he also bound himself to maintain it for the benefit of his wife, which he did not. [Emphasis added.]

[72]                          Shannon therefore supports the proposition that while the Insurance Act may provide for the beneficiary’s entitlement to payment of the proceeds, it “does not specifically preclude the existence of rights outside its provisions” (p. 461). Similarly, in Chanowski v. Bauer, 2010 MCBA 96, 258 Man. R. (2d) 244, the Manitoba Court of Appeal recognized that courts have readily accepted that contractual rights to policy proceeds may operate to the detriment of named beneficiaries:

Generally, the courts have imposed remedial constructive trusts in factual circumstances where the deceased has breached an agreement regarding life insurance benefits. These have arisen most commonly in cases where the husband executed a separation agreement promising to retain his former wife as the beneficiary of his life insurance policy and, in contravention of that promise, before his death, the deceased changed the designation of his beneficiary to that of his present wife or another family member. [para. 39]

[73]                          Accepting that contractual rights to claim policy proceeds can exist outside of the Insurance Act, can an irrevocable designation under the Insurance Act nonetheless constitute a juristic reason for Michelle’s deprivation? In my view, it cannot. This is because the applicable statutory provisions do not require, either expressly or implicitly, that a beneficiary keep the proceeds as against a plaintiff, in an unjust enrichment claim, who stands deprived of his or her prior contractual entitlement to claim such proceeds upon the insured’s death. By not ousting prior contractual or equitable rights that third parties may have in such proceeds, the Insurance Act allows an irrevocable beneficiary to take insurance money that may be subject to prior rights and therefore does not give such a beneficiary any absolute entitlement to that money (Shannon, at p. 461). Put simply, the statute required that the Insurance Company pay Risa, but it did not give Risa a right to keep the proceeds as against Michelle, whose contract with Lawrence specifically provided that she would pay all of the premiums exclusively for her own benefit. Neither by direct reference nor by necessary implication does the statute either (a) foreclose a third party who stands deprived of his or her contractual entitlement to claim insurance proceeds by successfully asserting an unjust enrichment claim against the designated beneficiary — whether revocable or irrevocable — or (b) preclude the imposition of a constructive trust in circumstances such as these (see Central Guaranty Trust Co. v. Dixdale Mortgage Investment Corp. (1994), 24 O.R. (3d) 506 (C.A.); see also KBA Canada).

[74]                          On this basis, the applicable Insurance Act provisions are distinguishable from other legislative enactments that have been found to preclude recovery, such as valid statutory provisions requiring the payment of taxes to the government (see GST Reference, at pp. 476-77; Zaidan Group Ltd. v. London (City) (1990), 71 O.R. (2d) 65 (C.A.), at p. 69, aff’d [1991] 3 S.C.R. 593). In that context, the plaintiff’s unjust enrichment claim must fail because the legislation permits the defendant to be enriched even when the plaintiff suffers a corresponding deprivation. The same cannot be said about the statutory framework at issue in this case, however; there is nothing in the Insurance Act that justifies the fact that Michelle, who is contractually entitled to claim the policy proceeds, is nevertheless deprived of this entitlement for Risa’s benefit.

 

BC Estate Lawyer – Was There a Settlement?

Trevor Todd and Jackson Todd have over sixty combined years of estate litigation which often includes issues such as was there a settlement?

In Hutton v. Hutton, 2020 BCSC 2046, the Honourable Chief Justice Hinkson reviewed various authorities which dealt with summary applications, brought in an action to enforce agreements to compromise that same action. At para. 30, he concluded that he could properly enforce a settlement agreement and grant a stay of proceeding through such motion if he were to find that there was a binding settlement agreement.

Essential Terms
[20] The question then remains—was there a settlement agreement between these parties?

[21] Again, reference to the Hutton case provides recent and persuasive authority on such assessment. At paras. 31–33, Hinkson C.J.S.C. says:

Is there an Enforceable Agreement between the Parties?

[31] The burden of proving the existence of a settlement agreement is on the party seeking to enforce or rely on it: Salminen v. Garvie, 2011 BCSC 339 [Salminen] at para. 26. The standard of proof required is on the balance of probabilities.

[32] To determine if a settlement agreement is enforceable, the court must consider whether the parties reached agreement on all essential terms. In Fieguth v. Acklands Ltd. (1989), 59 D.L.R. (4th) 114 (B.C.C.A), [Fieguth] Chief Justice McEachern stated at 121:

… The first question is whether the parties have reached an agreement on all essential terms. There is not usually any difficulty in connection with the settlement of a claim or action for cash. That is what happened here and as a settlement implies a promise to furnish a release and, if there is an action, a consent dismissal unless there is a contractual agreement to the contrary, there was agreement on all essential terms.

[33] In Apotex Inc. v. Allergan, Inc., 2016 FCA 155, at paras. 32–33, Mr. Justice Stratas phrased the test to determine if an enforceable settlement had been reached as follows:

[32] The court is to view the specific facts of the case objectively in light of the practical circumstances of the case and ask whether the parties intended to be legally bound by what was already agreed or, in other words, whether an “honest, sensible business [person] when objectively considering the parties’ conduct would reasonably conclude that the parties intended to be bound or not” by the agreed-to terms: G Percy Trentham Ltd v Archital Luxfer Ltd. (1992), [1993] 1 Lloyd’s Rep 25, 63 B.L.R. 44 (C.A.) at paras. 50 and 86; Ward at para. 61; Hughes v. City of Moncton, 2006 NBCA 83, 304 N.B.R. (2d) 92 at para 6. Put another way, looking not through the eyes of lawyers, but through the eyes of reasonable businesspeople stepping into the parties’ shoes, was there something essential left to be worked out? See Investors Compensation v. West Bromwich Building Society, [1998] I All E.R. 98; [1998] 1 W.L.R. 896 (H.L,); Chartbrook v. Persimmon Homes, [2009] UKHL 38, [2009] A.C. 1101; Re Sigma Finance, [2009] UKSC 2, [2010] 1 All E.R. 571. Another way of putting it is to ask how “a reasonable [person], versed in the business, would have understood the exchanges between the parties”: Bear Steams Bank pic v. Forum Global Equity Ltd., [2007] EWHC 1576 (Q.B.D. Comm.) at para 171.

[33] When courts find that there has been an agreement on essential terms, they will often imply non-essential terms into the agreement: McCabe, above at para 20; Fieguth, above; Hughes, above at para. 6. The lack of agreement on non-essential terms will not stand in the way of a finding of an agreement. Put another way, “it is not necessary that the original contract include all the ancillary terms that are already implicit in its content”: Ward, above at para. 54. “Even if certain terms of economic or other significance to the parties have not been finalized, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement”: RTS Flexible Systems, above at para. 45. For example, assuming an agreement on essential terms is otherwise in place, courts can imply terms concerning the granting of a release, the manner of payment and the timing of payment: Fieguth, above at para 21; Hodaie v. RBC Dominion Securities, 2012 ONCA 796 at para. 3; Imperial Oil Ltd. v. 416169 Alberta Inc., 2002 ABQB 386, 310 A.R. 338. Often these will be “mere formalities or routine language” Bawitko, above at p. 106.

Enforcing Oral Contracts

Stojka v Stojka 2023 BCCA 446 held that a binding  oral contract existed between two brothers with respect to a beneficial interest in a property.

The court reviewed the law re oral contracts and in particular amongst family members where the communications in the family context are often no more than statements of intent or wishes.

The question of whether a given requirement for the formation of a contract has been met “involves applying a legal standard to a set of facts and is therefore a question of mixed fact and law”: Housen v. Nikolaisen, 2002 SCC 33 at para. 26.

If a party to an oral agreement acts as though there were a binding contract or the other party relies on the agreement to their detriment the party is unable to rely of the lack of a written agreement as a defence: Le Soleil Hotel & Suites Ltd. v. Le Soleil Management Inc., 2009 BCSC 1303 at paras. 342–345 [Le Soleil];

• An enforceable agreement is reached where parties have reached a meeting of the minds and the parties express themselves outwardly in a manner that indicates an intention to be bound: Le Soleil at paras. 322–323;

• Reasonable certainty of the terms of the agreement are required: Le Soleil at paras. 339–340;

• The existence of an oral agreement is determined by applying the objective reasonable bystander test to consider how the promisor’s conduct would appear to a reasonable person in the position of the promise: Le Soleil at paras. 324–325;

• The party alleging the oral agreement must be able to prove its existence on the balance of probabilities: Bell v. Bell, 1998 CanLII 3194 at para. 14, [1998] B.C.J. No. 1457 (S.C.).

Family Verbal Agreement re Property Upheld

In Sojka v Sojka 2023 BCSC 52 the court upheld a verbal agreement made amongst family members as to the beneficial ownership of a parcel of property.

In Suenv Suen 2013 BCCA 313 the British Columbia Court of Appeal addressed agreements between family members:

[40] A contract is promissory in nature, that is, it is an undertaking by the promisor to do something for the promise in exchange for something. The exchange of promises is enforceable only if there is an agreement or consensus on the “existence, nature and scope of their [respective] rights and duties”
or the concept of a bargain, as an essential feature of the common law of contract at 8:

…what is an essential ingredient of a valid, enforceable, legally acceptable contract, is an agreement that can be called “serious,” that is, made with the kind of serious, binding intent that demarcates the casual promise, undeserving of legal recognition, from a promise which should be effective in law and should be obligatory on the future action, as well as the conscience of the promisor.

[42] The common law of contract is distinguishable from equitable or promissory estoppel where, absent consideration, reliance on a promise that is not fulfilled and gives rise to injury or damage, may be actionable. Consequently, if a promise is support only by “moral consideration”, it is generally not enforceable at common law:
The idea that moral justification could be the basis of a contract, for example, where a promise was made because of the familial relation of the parties, or out of “natural love and affection,” has long since been rejected by the common law (Fridman at 9).

[43] Communications in the family context are often no more than statements of intent or wishes. For a promise, in that context, to rise to the level of a binding enforceable contract there must be strict proof of the terms of the bargain including: the parties, the property, and the consideration. See McKenzie v. Walsh (1920), 61 S.C.R. 312 (S.C.C.), and Ross v. Ross (1957), [1958] O.R. 49, 11 D.L.R. (2d) 561 (Ont.C.A.)

The Court, in determining whether there is a verbal agreement, must apply the objective reasonable bystander test, and consider how the promisor’s conduct would appear to a reasonable person in the position of the promisee: Le Soleil at paras. 324–325. The party alleging the existence of a verbal agreement must prove its existence on a balance of probabilities: Bell v. Bell, 1998 CanLII 3194 at para. 14, [1998] B.C.J. No. 1457 (S.C.).

Where there is no written agreement between the parties but a verbal agreement is alleged, the credibility of each party is a key issue. Their evidence must be “tested against those facts that are not seriously in dispute and with the preponderance of the evidence and the probabilities surrounding the events”: Piga v. Uffelman, 2022 BCSC 983 at para. 14.

Contractual Certainty

The issue of whether a valid contract has ben formed or not arises from time to time in estate litigation.

The area is very fact specific but there are certain guidelines the courts will exercise in their attempt to find a binding contract.

The law on the level of certainty required to establish the existence of a contract was recently summarized in Ai Kang Yi Yuan Enterprises Corp. v. 1098586 B.C. Ltd., 2022 BCSC 1416:

[205] The test that governs whether the parties have formed an enforceable contract essentially involves answering two questions: (1) whether the parties objectively intended to enter contractual relations; and (2) whether they had reached agreement on essential terms that are sufficiently certain to enforce…

[206] The court’s determination of contractual intention is rooted in the facts and requires it to consider whether a reasonable third-party observer would conclude from all the circumstances, including the document itself, the circumstances underlying execution, and the parties’ subsequent conduct, that the parties intended to enter into binding legal relations…

[207] The case law recognizes that the above determinations are fact-driven…

[208] Critical to a determination of the nature of the December 5 Document in this case is the distinction between non-binding preliminary agreements to agree, agreements to enter into further agreements without binding intent, and agreements with binding intent that anticipate further documentation. This continuum was described by the Ontario Court of Appeal in Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 CanLII 2734 (ON CA), 79 D.L.R. (4th) 97 (O.N.C.A.) at 103–104:

As a matter of normal business practice, parties planning to make a formal written document the expression of their agreement, necessarily discuss and negotiate the proposed terms of the agreement before they enter into it. They frequently agree upon all of the terms to be incorporated into the intended written document before it is prepared. Their agreement may be expressed orally or by way of memorandum, by exchange of correspondence, or other informal writings.

The parties may “contract to make a contract”, that is to say, they may bind themselves to execute at a future date a formal written agreement containing specific terms and conditions. When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.

However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract. . .

[260] Where there is an intention to contract, the court will make a significant effort to give meaning to that agreement. However, there are limits to how far a court can go; a court cannot create an agreement on essential terms where none exists…

[261] In Concord Pacific BCSC, Voith J. (as he then was), whose analysis was generally affirmed in Concord Pacific BCCA, helpfully summarized the principles that have developed in Canada, and BC more specifically:

[331] . . . The fact that parties may wish to contract, or that they believe they have entered into a binding contract, does not make it so. That belief or wish will engage other principles. It will likely cause the court to strive to assist the parties and to find meaning in the substance of their agreement: Hoban at para. 4. In Marquest Industries Ltd. v. Willows Poultry Farms Ltd. (1968), 1968 CanLII 581 (BC CA), 1 D.L.R. (3d) 513 (B.C. C.A.), the Court, at 517 — 518, said:

[E]very effort should be made by a Court to find a meaning, looking at substance and not mere form, and the difficulties in interpretation do not make a clause bad as not being capable of interpretation, so long as a definite meaning can properly be extracted . . . [I]f the real intentions of the parties can be collected from the language within the four corners of the instrument, the Court must give effect to such intentions by supplying anything necessarily to be inferred and rejecting what is repugnant to such real intentions so ascertained.

…

What constitutes an “essential” term in an agreement will depend on both the nature of the agreement and the circumstances of the case: Concord Pacific BCSC at para. 341; United Gulf Developments Ltd. v. Iskandar, 2008 NSCA 71 at para. 14. The key question to answer in analysing certainty of terms is whether the parties have agreed on all matters that are “vital or fundamental” to the arrangement, or whether they intended to defer legal obligations until a final agreement has been reached. What constitutes an essential term is fact specific. Different types of contracts may have different essential terms, though price is generally considered essential in most contractual contexts.

Settlement Agreements to Be Upheld

The bar to set aside a settlement agreement is a high one.

There is a great public interest in holding people to their bargains.

BC courts have repeatedly cited the principles set out by the British Columbia Court of Appeal in Robertson v. Walwyn Stodgell Cochran Murray Ltd. 24 BCLR (2d) 385 (BCCA), 1988 CarswellBC 120 at para 9, cited in Lessing Brandon & Company LLP v. Dyck and others, 2019 BCSC 2331 at para 43:

“The fact that the settlement agreement may not have been a desirable one from [one parties point of view], or the fact that they may have received poor advice from their lawyer, or the fact that they later changed their minds, cannot provide grounds for setting aside the settlement agreement, or for a refusal to enforce it […]

Sojka v Sojka 2018 BCSC 562 reviews the law with respect to enforcement of a settlement reached at a mediation where both parties were represented by counsel, and one party attempted to renege on the agreement by utilizing what the court regarded as “settler’s remorse.”

The plaintiff brought on a court application to enforce the minutes of settlement that were signed by the parties and their counsel, and relied upon S 8(3) of the Law and Equity act and the inherent jurisdiction of the court to enforce the terms of settlement, which the court in fact did.

The defendants in their attempt to renege on the settlement argued that they were mistaken as to certain evaluations of property at the mediation, which the court found was not in fact the case, finding that the minutes of settlement and release constituted a clear agreement between the parties.

The court followed the decision of Roumanis v Hill 2013 BCSC 1047 as to when the enforceability of a settlement agreement ought to be decided on a summary procedure.
The court stated:

The question of the proper procedure to adjudicate the enforceability of the settlement was addressed in Mackenzie v Mackenzie (1975) BCJ 1114 were the court reviewed the authorities and concluded that the court ought to enforce settlement upon application in the action of justice could be done by proceeding summarily.

The court found that there is a sound policy for the courts to enforce the terms of a valid settlement agreement as stated by the BC Court of Appeal in Robertson v Walwyn et al (1988) 24 BCLR )2d) 385 (BCCA):

“Justice affects both parties and requires a balancing of their interests. The fact that the settlement agreement may not have been a desirable one from the point of view of the Robertsons, or the fact that they may have received for advice from their lawyer, or the fact that the later change their minds, cannot provide grounds for setting aside the settlement agreement, or refusal to enforce it. And it would do scant justice to the interests of the defendants in this case to recognize the validity of the settlement agreement, and that it will ultimately prevail, but to refuse to enforce it at this time and in these proceedings.”

Hawitt v Campbell 1983 Carswell BC 199 (BCCA) set out that a court could refuse to exercise its discretion to perfect a settlement where:

1. There was a limitation on the instructions of the solicitor known to the opposite party;
2. There was a misapprehension by the solicitor making the settlement of the instructions of the client or the facts of the type that would result in an justice or make it unreasonable or unfair to enforce the settlement;
3. There was fraud or collusion;
4. There was an issue to be tried as to whether there was such a limitation, misapprehension, fraud or collusion in relation to the settlement.

Breach of Confidentiality Agreements

A breach of a confidentiality agreement may occasionally arise in estate litigation, particularly on behalf of the executor.

In order to found an action for breach of a confidentiality clause, the information in question must have the necessary quality of confidence.

A list of the factors to be considered confidential quality  is found in Foreman v. Chambers et al, 2006 BCSC 1244 at para. 61, citing Pharand Ski Corp. v. Alberta (1991), 80 Alta. L.R. (2d) 216 (Q.B.):

a) the extent to which the information is known outside the owner’s business;
b) the extent to which it is known by employees and other involved in the owner’s business;
c) the extent of measures taken by the owner to guard the secrecy of the information;
d) the value of the information to the owner and his competitors;
e) the amount of money or effort expended by the owner in developing the information; and
f) the ease or difficulty with which the information could be properly acquired or duplicated by others by their independent endeavours.

The mere assembly of publicly available facts by itself does not render the information confidential. Rather, the information must be difficult to assemble, assembled in an innovative manner or analysed in an innovative manner: Foreman at para. 65.

Interpreting Insurance Policies

Estate litigation occasionally involves the interpretation of coverage under a policy of insurance.

 

The general principles of interpreting insurance policies was discussed in Co-operators General Insurance Company v. Kane, 2017 BCSC 1720, as follows:

 

  1. a)    the general purpose of insurance is to protect an insured against losses arising from unforeseen and accidental actions: Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24 at paras. 68-69;

 

  1. b)    it is necessary to interpret insurance contracts as they would be understood by the average person applying for insurance, and not as they might be perceived by persons versed in the niceties of insurance law: National Bank of Greece v. Katsikonouris, [1990] 2 S.C.R. 1029 at 1043;

 

  1. c)     courts should interpret a contract of insurance as a whole: Progressive Homes Ltd. v. Lombard General Insurance Company of Canada, 2010 SCC 33 at para. 22, citing Scaleraat para. 71;

 

  1. d)    as contracts of adhesion, courts should prefer interpretations that are consistent with the reasonable expectations of the parties, and avoid interpretations that would give rise to an unrealistic result or that which would not have been in their contemplation at the time the policy was concluded: Progressive Homesat para. 23; Scaleraat para. 71; and

 

  1. e)    as contracts of adhesion, where there is an ambiguity which the rules of construction fail to resolve, courts will construe the policy contra proferentemagainst the insurer. A corollary of the contra proferentemrule is that coverage provisions are interpreted broadly, and exclusion clauses narrowly: Progressive Homes at para. 24; Scalera at para. 70.

 

These general interpretation principles apply equally to the duty to defend and exclusion clauses: Derksen v. 539938 Ontario Ltd., 2001 SCC 72 at para. 49.

 

Other general principles that apply in relation to the duty to defend and exclusion clauses are:

  1. a)    an insurer is only required to defend a claim where the facts alleged in the pleadings, if proven, would require the insurer to indemnify the insured (i.e. the “pleadings rule”): Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49 at para. 28; Progressive Homesat para. 19; Lombard General Insurance Company of Canada v. 328354 B.C. Ltd., 2012 BCSC 431 at para. 21; Canadian Northern Shield Insurance Company v. Intact Insurance Company,2015 BCSC 767 at para. 18;
  2. b)    all that is necessary, in order to trigger the duty to defend, is the mere possibility that a claim falls within coverage under the insurance policy based on a review of the pleadings: Monencoat paras. 29-30; Progressive Homesat para. 19; Lombard at para. 23; Johnson v. Aviva Insurance Company of Canada, 2014 ABQB 688 at paras. 33-35;
  3. c)     where pleadings are not framed with sufficient precision to determine whether claims are covered by the policy, the duty to defend will be triggered where, on a reasonable reading of the pleadings, coverage can be inferred: Monencoat para. 31;
  4. d)    “the widest latitude should be given to the allegations in the pleadings in determining whether they raise a claim within the policy”: Scaleraat para. 75, citing Nichols v. American Home Assurance Co., [1990] 1 S.C.R. 801. This is consistent with resolving any ambiguity in favour of the insured: Monencoat paras. 31-32; Lombard at para. 24; Johnson at para. 33.

This interpretation exercise of the Policy concerns, to a large degree, the scope of Co-operators’ duty to defend the various causes of action raised in the Complaint. In Lombard, Justice Butler discussed the extent of an insurer’s duty to defend where numerous causes of action are alleged, some of which may be covered under the insurance coverage and some of which may not, as follows:

Where the pleadings allege numerous claims against an insured, some of which are covered and some are not, it is axiomatic that an insurer’s prima facie duty to defend arises only in respect of the claims which, if proved at trial, would trigger its duty to indemnify. However, the extent of the insurer’s responsibility to contribute to the costs of defending the action is a separate question that cannot always be determined according to the scope of its prima facie obligation.

It is well settled that where it is possible to distinguish between claims falling within and outside the policy coverage, the extent of an insurer’s defence obligation can be limited accordingly:  Continental Insurance Co. v. Dia Met Minerals Ltd. (1996), 77 B.C.A.C. 251. An insurer has no duty to defend claims which clearly fall outside the grant of coverage:  Progressive Homes at para. 19.

On these principles, the extent of an insurer’s defence obligation in a case involving a mix of covered and non-covered claims will depend primarily on the precision of the allegations in the pleadings and the operative language in the coverage provisions of the policy. In this respect, it is worth recalling that on a duty to defend application, any uncertainty is resolved in the insured’s favour.

Accordingly, in light of the various Causes of Action alleged in the Complaint, the governing principle here is that, unless all occurrences which potentially caused or contributed to the loss or damage are clearly and unambiguously excluded, coverage for the duty to defend will not be ousted. If there are different causes of action or theories of recovery, one of which is covered under the Policy, Co-operators is bound to defend those causes of action which, if proved, would be within the coverage: Progressive Homes at para. 54; Derksen at paras. 55-56, 67; Hartup v. BCAA Insurance Corp., 2002 BCSC 972 at para. 9; Miller v. Grain Insurance and Guarantee Co., 2005 SKQB 546 at paras. 15-18.

 

Breach of Contract

Issues involving an alleged  breach of contract occasionally occur in estate disputes, especially involving the executor.

A cause of action in breach of contract requires, as its foundation, the existence of a valid and enforceable contract.

The plaintiff must prove, on the balance of probabilities that:

 

  1. there was a mutual intention to create legal relations;
  2. consideration flowed in return for a promise;
  3. the essential terms of the alleged contract are sufficiently clear, on an objective assessment; and
  4. there was matching offer and acceptance of the terms of the contract.

See: Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd., 2021 BCSC 1092 at para. 22.

A determination of whether there is an enforceable contract involves a contextual analysis of all the material facts and circumstances: Oswald v. Start Up SRL, 2020 BCSC 1730 at para. 122; Berthin v. Berthin, 2016 BCCA 104 at para. 46.  Whatever the subjective intentions of the parties were is irrelevant: Oswald at para. 122; Berthin at para. 46.

The usual principles of contract formation apply.  That is, the court must analyze the evidence to determine whether, in all the circumstances, it is clear to the objective, reasonable bystander that the parties intended to contract, and whether the essential terms of that contract can be determined with a reasonable degree of certainty: Kuo v. Kuo, 2017 BCCA 245 at para. 38.

To determine whether a binding agreement was created vis-à-vis the parties’ manifest intentions, the court may consider their conduct leading up to, and following, the conclusion of the alleged agreement: Salminen v. Garvie, 2011 BCSC 339 at para. 28.  Where the alleged agreement contemplates the execution of a further formal contract or further negotiations to take place, the court must determine whether the parties intended to create a binding contract or whether they simply reached a basis for further agreement: Salminen at para. 32.

The analysis is an objective one: the mere perception on the part of one party that another has agreed to the terms of a contract is insufficient in law to support a finding that a contract has come into existence: Hammerton v. MGM Ford-Lincoln Sales Ltd., 2007 BCCA 188 at para. 23.

 

A party’s subjective intention is irrelevant and the court must instead determine the parties’ mutual intention based on “objective evidence of their conduct and the surrounding circumstances”: Leemhuis v Kardash Plumbing Ltd 2020 BCCA 99 at paras. 15-17;

While the existence of a binding and enforceable contract requires an intention to contract, it is not subjective intention that is relevant, but objective intention: Aubrey v. Teck Highland Valley Copper Partnership, 2017 BCCA 144 at para. 35; Rudyak v. Bekturova, 2018 BCCA 414 at para. 23.

The seminal case, Smith v. Hughes (1871), L.R. 6 Q.B. 597 at 607 stated:

“If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that [the] other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.”

This Court in Berthin v. Berthin, 2016 BCCA 104, put the requirement this way:

[46]      The test, of course, is not what the parties subjectively intended but “whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract”: see G.H.L. Fridman, The Law of Contract in Canada (6th ed, 2011) at 15. As stated by Mr. Justice Williams in Salminen v. Garvie 2011 BCSC 339:

The test for determining consensus ad idem at the time of contract formation is objective: it is “whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract”; it is “whether a reasonable… [person] in the situation of that party would have believed and understood that the other party was consenting to the identical term”: Fridman, supra, p. 15; see also Smith v. Hughes (1871), L.R. 6 Q.B. 597 at 607 adopted in St. John Tugboat Co. Ltd. v. Irving Refining Ltd., [1964] S.C.R. 614, 1964 CarswellNB 4 at para. 19, and Remington Energy Ltd. v. B.C. Hydro & Power Authority, 2005 BCCA 191 at para. 31, 42 B.C.L.R. (4th) 31. The actual state of mind and personal knowledge or understanding of the promisor are not relevant in this inquiry: Hammerton v. MGM Ford‑Lincoln Sales Ltd., 2007 BCCA 188 at para. 23, 30 B.L.R. (4th) 183, citing S.M. Waddams, The Law of Contracts, 5th ed. (Toronto: Canada Law Book Inc., 2005) at 103. … [At para. 27.]

In determining intention to contract, a court is not confined to the four corners of the agreement, but may look at “all the circumstances” or “all the material facts”: Langley Lo‑Cost Builders Ltd. v. 474835 B.C. Ltd., 2000 BCCA 365 at para. 21; Vancouver Canucks Limited Partnership v. Canon Canada Inc., 2015 BCCA 144 at para. 75; Lacroix v. Loewen, 2010 BCCA 224 at para. 36 (per Finch C.J.B.C.). In Langley, McEachern C.J.B.C. observed that McLachlin J. (as she then was) in Osorio v. Cardona (1984), 15 D.L.R. (4th) 619 (B.C.S.C.), considered “evidence of past agreements involving other parties, the circumstances in which the alleged agreement was made, and future actions and representations by both parties.”