Unjust Enrichment- Pension to Former Spouse Still Named as Beneficiary

Pension nest egg

The deceased designated a former spouse of 15 years as the beneficiary of his pulp and paper workers pension, despite the fact that the deceased and his former spouse ended their relationship before his death, and the Court still awarded the former spouse the pension by disposition of law as she remained the named beneficiary.

This fact pattern is actually very common in estate litigation. Parties even after the most acrimonious of divorces, often still forget to change the named beneficiary of a long forgotten insurance policy or even pension plan, and this can come back to haunt the estate of the deceased.

In 2011 the deceased and the former spouse had settled all matters arising out of the defendants family law action and by the terms of the final order, the defendant’s claim to any pension or pension benefits from an RRSP were dismissed.

The defendant subsequently learned that she remained a beneficiary under the deceased’s pulp and paper pension, and advised the deceased that he ought to remove her as beneficiary.

The deceased then signed a document entitled benefit application and change form, which was affected to change the name beneficiary related to the benefits available to him from his employer, but not to remove the defendant as a beneficiary of the pension.

A few days after settling the court action, the deceased committed suicide.

The former spouse was paid the lump sum pension, and the deceased estate sought a declaration that she had been unjustly enriched by the payment and  that the defendant held the proceeds in trust for the estate.

The court disagreed and awarded the pension to the former spouse.

This  decision, Wilson Estate v Wysoski 2014 BCSC 675 reviewed the facts , the will, of the pension designation, and applied the following legal principles to find that  the Supreme Court of Canada decision in Kerr v Baranow 2011 SCC 10, had clarified the law with respect to claims for unjust meant enrichment,  and in particular the requirement that the enrichment must have occurred  without a juristic reason, explaining that it restricts recovery to cases where ” there is no reason in law or justice for the defendants retention of the benefit conferred by the plaintiff “( para 41)

Legal Analysis of court awarding pension to former spouse

[26]    As set out in Garland v. Consumers’ Gas Co., 2004 SCC 25 at paras. 44-46, and affirmed in Kerr, there are two stages in the juristic reason analysis. First, the “plaintiff must show that no juristic reason from an established category exists to deny recovery” {Garland, para. 44). The established categories include contract, disposition of law, donative intent, or other valid common law, equitable or statutory obligations.

[27]    If the plaintiff can show that there is no juristic reason from the established categories that applies, then the plaintiff has made out a prima facie case of unjust enrichment. If there is a juristic reason from an established category, then the analysis ends there, as the enrichment is not “unjust”.

[28]    At the second stage, the defendant may rebut the prima facie case by showing that there is another reason to deny recovery. The burden at this stage is on the defendant, who may make arguments about “the reasonable expectations of the parties, and public policy considerations”. See Garland at para. 46.

[29]    The defendant argues that the deceased’s declaration on his union member card naming her as a beneficiary amounts to a legal entitlement to the funds. In other words, she says that the funds came to her by disposition of law, and that as such, there is a juristic reason for the enrichment.

[30]    Under the Pension Benefit Standards Act, R.S.B.C. 1996, c. 352, s. 34, a pre-retirement survivor benefit (the type of benefit claimed in this case) must be paid to a surviving spouse, or, where there is no surviving spouse, by way of lump sum payment to the designated beneficiary (see s. 34(l)(b)(i)). Where there is no valid designation of beneficiary, the benefit goes into the estate. If Ms. Wysoski is a validly designated beneficiary, then by operation of the statute, the enrichment was required by law and thus qualifies as disposition of law: Garland, para. 49.

[31]    There are a number of recent appellate decisions in Canada that have affirmed that where the defendant is the designated beneficiary for benefits flowing on death, that designation is a juristic reason denying the plaintiff recovery: see Chanowski v. Bauer, 2010 MBCA 96 at para. 47; Love v. Love, 2013 SKCA 31 at para. 42; and Richardson Estate v. Mew, 2009 ONCA 403 at para. 61. In Love, Richards J. A. (as he then was) said at para. 47:

Although it used the notion of “good conscience” as an umbrella way of describing the potential reach of constructive trusts, the Supreme Court was also careful to avoid inviting judges to impose such trusts whenever and wherever they believe justice requires.

That line of reasoning appears to apply to this case. Thus, there appears to be a juristic reason for Ms. Wysoski’s enrichment: she was the designated beneficiary.

[32]    However, the plaintiff says that “disposition of law” does not apply in this case. According to the plaintiff, because the Member Record Card names the defendant as the deceased’s spouse, when the defendant signed the consent order resolving the family law claim, she ceased to be a spouse and the disposition of the pension benefit became void.

[33]    I note that in the Notice of Civil Claim the plaintiff concedes that the defendant is the designated beneficiary. Her entitlement to the pension benefits arose, not because she was the deceased’s spouse at the date of his death, but because she remained the named beneficiary. A similar situation arose in Britton v. Klippenstein Estate, 2004 SKQB 165, aff d 2005 SKCA. There, Mr. Klippenstein had designated his common-law spouse as his beneficiary, as required by legislation. They then separated, but he never changed the designation of beneficiary. When Mr. Klippenstein died the estate argued that the ex-wife was no long a beneficiary because she was no longer the deceased’s spouse. The trial court disagreed, stating that Ms. Britton was entitled to the pension death benefits.

[34]    The Court of Appeal agreed, noting that the designation was valid when made and could only be invalidated by the deceased taking steps to change it.

[35]     The court also noted that the fact that a former spouse signed a release of claims in a settlement agreement was not waiver of entitlement to the pension benefits, stating that “[g]eneral expressions or clauses in settlement agreements ought not to be construed as depriving an beneficiary under a will or insurance policy” (para. 39, citing Vodden v. Vodden Estate (1983), 3 C.C.L.I. 252 (B.C.S.C.)). In Richardson the Ontario Court of Appeal expressed the same sentiment, at para. 55, saying a former spouse is entitled to take benefits on death, despite any agreement or order releasing claims against property, where they remain the designated beneficiary: para. 55. (See also: Hall Estate v. Hall (1985), 59 A.R. 272 (C.A.); Re Cochlan Estate (1969), 68 W.W.R. 287 and McLean v. G«//to,22 0.R.(2d)175.)

[36]    There is a decision of the British Columbia Court of Appeal that appears to support the plaintiffs position regarding the effect of the consent order. In Roberts v. Martindale (1998), 162 D.L.R. (4th) 475 (B.C.C.A.), the court imposed a constructive trust over life insurance proceeds which had been paid out to the deceased’s ex-spouse. In that case, the defendant had signed a separation agreement relinquishing all interest in the deceased’s property. The deceased intended to change the beneficiary on her life insurance policy and in fact believed she had done so; however, the actions she had taken were insufficient to make the change and Mr. Martindale, the ex-spouse, remained the designated beneficiary. At trial, the court held that a constructive trust was not appropriate as the beneficiary designation constituted a juristic reason for the enrichment, but found a resulting trust based on the deceased’s mistaken belief she had changed the named beneficiary to the plaintiff.

[37]     The Court of Appeal held that it was not appropriate to find a resulting trust based upon the deceased’s mistaken belief she had done all she had to do to change the named beneficiary, but found that Mr. Martindale held the property on constructive trust because it would be “against good conscience for the appellants to keep this money” as Mr. Martindale, in claiming the proceeds, breached the separation agreement. That “breach is sufficient… to call in the doctrine of the remedial constructive trust” (paras. 25-27).

[38]    In Tarr v. Tarr Estate, 2013 BCSC 1994 the court made a similar finding, but it was based on the clear words contained in the separation agreement made by the parties.

[39]    Roberts was decided prior to the recent Supreme Court of Canada decisions clarifying the law on unjust enrichment and constructive trust, particularly those decisions which clarified the application of the juristic reason analysis. The decision does not appear to fit with the analysis as set out in Garland.

[40]    It does not appear that the decision of the Supreme Court of Canada in Soulos v. Korkontzilas, [1997] 2 S.C.R. 217 was drawn to the court’s attention in Roberts. In that case the court dealt with a situation where there was no enrichment of the defendant that could give rise to a constructive trust based on unjust enrichment. Nevertheless, the majority held there was a constructive trust that was founded on the “wrongful conduct” of the defendant rather than his enrichment (para. 45). There are a number of pre-conditions that must be satisfied to issue this type of trust, including that the defendant “must have been under an equitable obligation … in relation to the activities giving rise to the assets in his hands” and the assets “must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff (ibid).

[41]    At para. 29 of Soulos, McLachlin J. for the majority said that a constructive trust is the “formula through which the conscience of equity finds expression.” She summarized her conclusion at paras. 43-44 where she said:

[43]     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. While cases often involve both a wrongful act and unjust enrichment, constructive trusts may be imposed on either ground: where there is a wrongful act but no unjust enrichment and corresponding deprivation; or where there is an unconscionable unjust enrichment in the absence of a wrongful act, as in Pettkus v. Becker, supra. 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.

[44]     The process suggested is aptly summarized by McClean, supra, at pp. 169-70:

The law [of constructive trust] may now be at a stage where it can distill from the specific examples a few general principles, and then, by analogy to the specific examples and within the ambit of the general principle, create new heads of liability. That, it is suggested, is not asking the courts to embark on too dangerous a task, or indeed on a novel task. In large measure it is the way that the common law has always developed.

[42]    The difficulty is that even if it could be found that the defendant here somehow breached the terms of the consent order it is not clear how that would qualify as a breach of an equitable obligation owed to the plaintiff. It is at most the breach of an order setting out the contract of settlement made between the parties. To find that the consent order operates as a revocation of the beneficiary designation under the pension plan runs contrary to the established authority that something more is required.

[43]    Further, Roberts is distinguishable on the facts. The consent order in this case does not clearly or specifically waive entitlements to the death benefits. It says only that claims “in this proceeding” (in other words, the family law proceeding) “are dismissed”. There is no discussion of entitlements to benefits arising on death or any benefits that might arise outside of the family law context. As such, it is difficult to conclude that Ms. Wysoski’s receipt of the death benefit is a breach.

[44]    I conclude that there is no unjust enrichment in this case. Whether or not Mr. Wilson intended to make a change to the beneficiary under his pension, he did not do so prior to his death. The defendant remained the validly designated beneficiary and thus took the benefit by disposition of law. Following the analysis as set out in Kerr, that is the end of the matter. Although perhaps an unfortunate outcome, the plaintiff has failed to prove that the enrichment is “unjust” as defined in law. Therefore, the plaintiffs claim must be dismissed.


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