Valid Court Action: Illegality vs. Equity

Illegality vs. Equity

Kim v Choi 2020 BCCA 98 is one of the few cases to deal with whether an illegal act can still allow a valid court action through equity, with the court holding that that a claim for restitution based on unjust enrichment that derived from an illegal contract will not be barred by illegality, unless the restitution would defeat or frustrate the policy underlying “ illegality”.

The plaintiff had wanted to immigrate to Canada with her young children and purchased an unprofitable restaurant from the defendant. The plaintiff paid $380,000 to the defendant for what was supposedly inventory and operating costs, and brought action against the defendant based on a finding of unjust enrichment, and was awarded 300,000 Korean won.

The defendant had shut down the restaurant and ceased his residency sponsorship of the plaintiff and her children. The defendant appealed and argued illegality of the immigration scheme but the appeal was dismissed.

A claim for restitution based on unjust enrichment that derived from an illegal contract will not be barred by illegality, unless the restitution would defeat or frustrate the policy underlying illegality.

In this case, the restitution would not permit the plaintiff to profit from the immigration scheme, but would unwind that part of that transaction, which would otherwise result in unjust enrichment of the defendant.

Illegality

The doctrine of illegality was expressed in the Latin phrase ex turpi causa non oritur actio that was founded on public policy that one should not profit from an illegal contract or tort.

“No court will lend its seed to a man who found his action upon in a moral or an illegal act” stated the court in Holman v . Johnson (1775) 98 E.R. 1120.

The rule in Holman was intended to be a flexible one, but ossified into an absolute rule that if the contract was either expressly or impliedly prohibited by statute, it was void ab initio.

The modern approach to illegality, however recognizes the unfairness that could result from strict adherence to the classical model, and develop means of providing relief in appropriate situations.

The modern approach stated in the Choi case is that contractual or statutory illegality does not create an absolute bar to equitable relief, including a claimant quantum meruit, where recovery on that basis would not be contrary to public interest.

The court held that an absolute bar on quantum meruit recovery creates an injustice that is unacceptable when considered in light of the public policy informing the statutory prohibition against champertous agreements the policy is to protect the administration of justice from abuse.

Tort Claims

With respect to tort claims for compensatory damages, in Hall v Hevert (1993) 2 SCR 159 the Supreme Court of Canada stated: A plaintiff’s immoral or illegal conduct will act as a bar to recovery only in limited circumstances.

The court’s power to invoke the doctrine lies in its duty to protect the integrity of the legal system, and is exercisable only where such concern is in issue. The concern is in issue where a damage award in a civil suit would, in effect, allow a person to profit from illegal or wrongful conduct, or would permit an evasion or rebate of a penalty prescribed by the criminal law.

The underlying idea is that the law refuses to give by its right hand what it takes away with its left. It follows that, as a general rule, the ex turpi causa principle will not operate in tort to deny damages for personal injury, since tort suits will generally be based on a claim for compensation, and will not seek damages as profit for illegal or immoral acts.”

Quantum Meruit Denied: Contract Illegal

Quantum Meruit Denied: Contract Illegal

Lindsay v Ambrosi 2019 BCCA 442 denied a realtor’s claim for quantum  meruit on the basis that since he was not licensed under the Real Estate Services Act (RESA), he was statute barred from any remuneration in relation to real estate services.

The realtor unsuccessfully argued that he was entitled to compensation based on quantum meruit for the real estate services he provided at the request of the appellants, and that the appellants benefited from. He contended that, in spite of the statutory prohibition in section 3 of the RESA, it remained open to the court to determine the consequences of his statutory breach based on equitable principles in order to avoid the appellants been unjustly enriched by his services.

The appeal court held that the trial judge erred in following the realtor’s argument, and that there was a statutory prohibition that could not be waived or altered by the courts stating that the realtor was not entitled to remuneration if he was not licensed to practice real estate.

The court found that the realtor services were illegal and followed precedent King v. Rosenberry 1972 BCJ 357, services performed under an illegal contract cannot form the basis of the claim for quantum meruit.

The court reviewed the doctrine of illegality and found that historically it was divided into two categories:

a) common-law illegality and
b) statutory illegality

The courts have more recently found the classical approach to illegality to be incoherent and unprincipled and consequently began to develop the modern approach to illegality.

This approach was paraphrased by Saunders, J In Berne Development LTD v Haviland (1983) , 40 OR238, as one that “balanced the need to preserve public policy by not enforcing illegal agreements against the need to prevent unjust enrichment by denying recovery.”

Caregiver Services: Quantum Meruit

Caregiver Services: Quantum Meruit

A care giver was awarded $273,000 for care giving services provided to her mother for five years in Tarantino v Galvanometer 2017 3535 for quantum merit (fees for services).

A claim for quantum meruit is simply one of the established categories of unjust enrichment. (Kerr v Baranow 2011 SCC 10)

It is a claim that there has been unjust enrichment, and that the remedy should be a monetary remedy calculated on the basis of fee for services rather than a proprietary remedy such as constructive trust over a specific property.

Where valuable services are rendered without the existence of a contract and it is obvious those services were not intended to be gratuitous, the law will impose an obligation to pay for the value of the services without implying the contract or necessarily require the establishment of an employment relationship. (Deglman Guaranty Trust Co. Of Canada 1954 SCC 725)

The law of restitution stands apart from the law of contract. Obligation to restore benefits unjustly retained does not arise from there being any implied contract between the parties, but rests on an obligation imposed by law to prevent unjust enrichment.

3 elements of unjust enrichment:

To make a claim of unjust enrichment, the plaintiff must establish three elements:

  • an enrichment of or benefit to the defendant,
  • a corresponding depravation of the plaintiff,
  • and the absence of a juristic reason for the enrichment. (Kerr v Barnow at para. 32)

For enrichment or benefit, plaintiff must show that there was a benefit which has enriched the defendant and which can be restored to the plaintiff in specie or by money.

For a corresponding deprivation the plaintiff must show not simply that the defendant has been enriched, but also that the enrichment corresponds to a deprivation which the plaintiff has suffered.

Finally the plaintiff must show there is no reason in law or justice for the defendants retention of the benefits conferred by the plaintiff, making its retention unjust in the circumstances of the case. Juristic reasons include gift, contract or disposition of law.

As is often the case in estate litigation, a party can make a claim for quantum meruit against the estate of a deceased person for services rendered to the deceased during their lifetime. Deglman ibid.

A party seeking a claim for quantum meruit compensation should provide evidence establishing the value of the services rendered. This is often done by calling evidence of commercial caregiving services for their hourly rate which is often in the range of $25 per hour. In difficult and prolonged caregiving situations it may be advisable to seek the expert opinion of a Rehabilitation therapist.

In Tarantino the deceased required 24-hour care and a range of evidence was given to the effect that a caregiver charged on average $24 an hour, and RPN was $44 per hour, and a registered nurse $55 per hour.

The evidence of market rates for general attendant care and personal support workers was in the range of $24 per hour.

The plaintiff was awarded damages based on five years of 24 hour care which totalled $273,000 based on the Plaintiff being a personal support caregiver.

Quantum Meruit (Unjust Enrichment) For Care-Worker

Quantum Meruit (Unjust Enrichment) For Care-Worker

What is Quantum Meruit?

Tarantino v Galvano 2017 ONSC 3535 awarded the sum of $273,000 for caregiving services provided under the basis of a quantum meruit claim, namely a reasonable fee for services provided.

A quantum meruit claim is simply one of the established categories of unjust enrichment claims Kerr v Baranow 2011 SCC 10 at paragraph 74.

It is a claim that there has been an unjust enrichment, and that the remedy should be a monetary remedy calculated on the basis of fee for services rather than a proprietary remedy such as a constructive trust imposed over specific property.

Quantum meruit typically occurs when valuable services are rendered without the existence of a contract, and it is obvious those services were not intended to be gratuitous. The law will then impose an obligation to pay for the value of the services without implying a contract are necessarily require the establishment of an employment relationship. A party can make a claim for quantum meruit compensation against the estate of a deceased person for services rendered to the deceased person during their lifetime – Deglman v Guaranty Trust Co. of Canada 1954 SCR 725.

 

3 Elements of Unjust Enrichment

As quantum meruit is a form of unjust enrichment, a plaintiff alleging unjust enrichment must establish three elements:

  1. And enrichment of or benefit to the defendant;
  2. a corresponding deprivation of the plaintiff;
  3. the absence of a juristic ( legal) reason for the enrichment

A party seeking quantum meruit compensation should provide evidence establishing the value of the services rendered. Lata v Rush 2012 ONSC 4543.

Such evidence was provided in the Tarantino case that the average for general personal support worker in general attendant care was $24 per hour, and a registered nurse $55 per hour. The evidence was that an average pay for personal support workers was $15.40 per hour, which the court accepted and multiplied out over five years of care to total $273,000.

Determining Legal Fees When No Retainer Agreement is Present

Determining Legal Fees When No Retainer Agreement is Present

If a lawyer does not have a contingency fee agreement or retainer agreement then the courts will use various criteria to determine the appropriateness of the legal fees based on quantum meruit (a reasonable fee for services rendered).

One of the chestnuts in this area of law is the Court of Appeal decision from Saskatchewan – Yule v City of Saskatoon  1955 , 17 WWR 296 which adopted the criteria set out in Re Solicitor: 

11.  Re Solicitor (1920) 47 O.L.R. 522, supra.: the matters to be considered in arriving at a proper amount on the basis of a quantum meruit;  are:

1)  the extent and character of the services rendered,

2) the labour, time and trouble involved,

3) the character and importance of the litigation in which the services were rendered,

4) the amount of money or the value of the property involved,

5)  the professional skill and experience called for,

6) the character and standing in his profession of the counsel and

7) the results achieved.