In Fredericks Alter Ego Trust v Downer 2019 BC SC 963 the court dismissed a claim brought for unjust enrichment, and a constructive trust to be imposed upon property that was owned by the Fredericks Alter Ego Trust.
The deceased settled an alter ego trust shortly before her death, and transferred the property into the trust that provided that upon her death, the property would be distributed to her grandchildren, her daughter and the residue equally between her two other children.
The trustees wanted to sell the property, but was met by a court claim by the Downers who stated that they had a beneficial interest in the property based on the equitable doctrine of unjust enrichment, resulting in the imposition of a constructive trust on the property for their benefit.
The Downers had purchased the property in 1991 and built a home on it, but in 1997 faced foreclosure proceedings. Title was transferred from the Downers to the Fredericks in late October 1997, who then took out two mortgages and made the payments on them, while the Downers continued to live in the property rent-free from 1997 to 2008.
At some point renovations were added to make a basement rental suite, although the parties could not agree on their respective contributions.
In 2007 Ms. Fredericks attempted to sell the property, but received a letter from the Downers lawyer informing her that the Downers considered that they had a proprietary interest in the property.
The facts became more complicated when Ms. Fredericks sold the initial property and purchased another, and the Downers moved into that property in 2008 and continued to live in the property to the present until the court in this decision ordered them to vacate the property and declared the alter ego trust as the sole owner of the property.
Section 23(2) of the Land Title act 1996, creates a presumption that a person registered on title is the legal and equitable owner of that property. Thus the Downers and the burden of rebutting that presumption.
The court found that what had occurred was that the Downers transferred title to the Surrey property to the Fredericks in exchange for the Fredericks clearing their debts, assuming new mortgages on the Surrey property in their own names, making the mortgage payments and other payments related to that property, such as insurance, taxes upkeep and investments, while also permitting the Downers to live in the Surrey property rent-free.
The court stated that it order to succeed in their claim to a beneficial interest in the Surrey property, the Downers must establish that the Fredericks received a benefit from the Downers in circumstances where it would be against all conscience for them to retain that benefit “ Moore v Sweet 2018 SCC 52 at para.35.
The Downers were required to prove the well-established elements of unjust enrichment and show:
1) that the Fredericks were enriched ( they were)
2) that they suffered a corresponding deprivation; ( they did)
3) there was no juristic reason for the enrichment. ( there was a juristic reason a contract)
The third element requires the Downers to show that there was no justification in law or equity for the enrichment and corresponding deprivation.
The court however found that there was in existence a contract or agreement, and that it became a juristic reason, so that the Downers did not in fact have an equitable interest in the property, and thus their claim for unjust enrichment and the imposition of a constructive trust on the Surrey property could not stand.