The “In Law Suite” (Unjust Enrichment)

The "In Law Suite" - Unjust Enrichment

A common source of estate litigation is the contribution of funds towards an “ in law suite”, that ultimately does not work out over time, and the in-laws sue to recover the monies that they contributed to their child, and his or her spouse’s home. Typically the agreement is that the parent would be allowed to live in the home for life in consideration for the contribution of funds for the renovation.

This factual scenario occurred in MacKinnon v. Donauer 2017 BCCA 437 , where the mother “in-law” brought a claim in resulting trust and unjust enrichment for the sum of $150,000 contributed to her daughter and son-in-law for the purchase of a new house containing a basement in law suite.
The agreement between the parties was that the mother could live in the suite rent-free for as long as she wished. After the expiration of nine years the relationship deteriorated and the mother-in-law moved out.

The mother-in-law brought court action for the $150,000 that she had invested in the property and sought a declaration of entitlement to a proportionate equitable interest therein, and sale, or a similar remedy for unjust enrichment.

The trial judge dismissed both claims, but the Court of Appeal allowed the claim of unjust enrichment and ordered the parties to agree on a sum of money or to return to court.

Essentially, the Court of Appeal allowed the mother-in-law’s claim to succeed on the basis of unjust enrichment, holding that the family arrangement constituted a juristic reason for the benefit received by the defendant children.

On an objective basis it was not reasonable for the defendants to retain the entire benefit of the plaintiff’s contribution.

The court ordered that a monetary judgment in an amount to be determined by the court below was appropriate, based on the Supreme Court of Canada decision of Nishi v. Rascal trucking 2013 SCC

The appeal court stated that in normal circumstances, the court would calculate a monetary judgment with reference to the mother-in-law’s life expectancy when she moved in, and would multiply 29% of the fair market value of the house at the date of trial by a fraction the denominator of which would be the number of years the children could have expected the mother-in-law to be in the house from the date when she moved in, and the numerator of which would be that number 9. The court would then adjust for contingencies arising on the evidence that was before the court at trial, including the contingency she would have left the suite during her lifetime for health reasons for example.

The court largely followed the English Court of Appeal case of Hussey v. palmer (1972) EWCA CIv.1, 1 WLR 1286 (CA), which had similar facts.

In the Hussey decision, a woman well over 70 years of age, had a daughter who was married to Mr. Palmer. When Mrs. Hussey had to sell her house because it was condemned, Mr. & Mrs. Palmer invited her to come to their house and live with them. Since it was too small Mrs. Hussey contributed monies for an extension which included a bedroom. After 15 months they could not live in harmony any longer and Mrs. Hussey went and lived elsewhere. Finding she was in need of money she eventually made a claim against her daughter and son-in-law, claiming she had loaned the money, while the children argued that she had made a gift.

The English Court of Appeal allowed her appeal on the basis that the claim was more in the nature of a constructive trust, as opposed to a resulting trust, and by whatever name it is described, it is a trust imposed by law, whenever justice and good conscience require it.

The court cited various cases in which a trust has been imputed or imposed for the benefit of a person who has contributed towards the purchase of a house in the absence of an agreement between the parties, and in the absence of any evidence of an intention to create a trust. The court found this case fell within the principles of those cases, stating it would be “entirely against conscience” if Mr. Palmer were to retain beneficial ownership of the entire house and not allow Mrs. Hussey any interest in it or charge upon it.

The court also followed the decision of Campbell v. McClelland (1995) 57 A CWS 663 (BCSC) where a grandmother moved into her grandchildren’s home, and contributed funds totaling $60,000 to pay the mortgage and to renovate a basement suite, in the expectation that she would have a permanent home there. That relationship also did not work out, and the grandmother sued for the return of her funds and succeeded.

The court found that there was no juristic reason for the enrichment of the grandchildren, and the corresponding deprivation of the grandmother had been shown, thus making a claim for constructive trust.

The court in Campbell stated:

“The test is an objective one. Objectively, it cannot be said that there was a legitimate expectation that the McClelland should benefit financially to Mrs. Campbell’s detriment. I do not accept that the parties expectations were that Mrs. Campbell would relinquish forever a major portion of her limited resources with no expectation that the funds should be repaid her that she would receive something of equal value to her, namely a secure and permanent home.”

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