Unjust Enrichment Dismissed Against Trust

Unjust Enrichment Dismissed Against Trust

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.

The Law

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.

Equity and Clean Hands

Kim v Choi 2019 BCSC 437 involved a plaintiff seeking the equitable remedy of restitution against unscrupulous immigration consultants and discussed the necessity of coming to court with “clean hands” based on the legal doctrine of “ex turpi causa”.

Closely related to ”clean hands”, the doctrine of “ ex turpi causa non oritur action” which means no cause of action will arise from a base cause. The law presumptively will not lend its assistance to a person who is tainted by illegality.

Traditionally, the doctrine has been applied rigidly, but that approach in recent years has been relaxed and the public policy analysis now requires a balancing test. That is not to say that the court will likely provide relief for an aggrieved party to an illegal agreement.

In JTL v RGL 2010 BCSC 1233 at paragraphs 113 – 116 the court reviewed the rationale for “ex turpi causa” and stated that the doctrine rested on the need to preserve the integrity of the judicial system.

The court pose the practical question as whether it would be manifestly unacceptable to fair-minded or right-thinking people that a court should lend assistance to a plaintiff who has defied the law

The court continued that the doctrine was justified were allowing the plaintiff’s claim would introduce inconsistency into the fabric of the law either by permitting the plaintiff to permit from a legal or wrongful act or evade the penalty prescribed by criminal law . Hall v Hebert (1933) 2 SCR 159.

In Daemore v Von Windheim 2011 BCSC 1523, the court refused to grant restitution where one party has secured an unjust windfall acquired through illegal activity.

The facts in that case are interesting. The parties were married and had for years engaged in criminal activities. The wife and specialized in credit card fraud, mortgage fraud and money laundering, whereas the husband preferred to involve himself in prostitution and drug trafficking.

The court held that even if there was a windfall or unjust enrichment, those considerations did not outweigh the parties unlawful conduct.

The Daemore comments are helpful, and confirming the modern approach of providing some discretion as to whether the doctrine of ex turpi caqusa should be invoked. That discretion depends on the particular circumstances.

The balancing exercise to Maine statutory policy against the desire to prevent a windfall or unjust enrichment claim was illustrated in Tsoi v Lai 2012 BCSC 1082 where the court held that the concerns of a windfall or unjust enrichment overrode his concern about illegality.

In Tsoi the plaintiff sought to recover monies that he had advanced to the defendant, who operated a gambling business, and legally loaned money to his gamblers at exorbitant interest rates. That type of business was illegal under the criminal code.

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.

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.”

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.

Occupational Rent Ordered For Non Vacating Son

Occupational Rent Ordered For Non Vacating Son

An order for occupational rent of $42000 per month was ordered against a son who had lived with his mother and who effused to vacate the estate asset home for ten months after his mother’s passing in Fileppelli Estate 2017 ONSC 4923.

The Court also ordered that the son vacate the property.

I agree with the views of Justice Daley in Bergmann v. McMahon, 2010 ONSC 993, at paras. 37-39, that occupation rent is akin to a claim for unjust enrichment. Mr. Filippelli was clearly enriched by being able to occupy Goldsboro and the Applicants were deprived of both the occupancy of and the use of the property as well as rental income that could have been generated from it. There was no juristic reason for the enrichment received by Mr. Filippelli. I note that Daley J. at para. 7 also found that the property taxes represented a liability of the estate.

21 Furthermore, as stated by Justice Low in Broos v. Broos, 2009 CanLII 68463 (Ont. S.C.) (at paras. 5 and 15), in a similar fact situation, where she found there was no justification for the respondent’s continued occupation of the estate property, she ordered that he vacate the property within 30 days. She found that by not paying compensation to the estate the respondent had denied the estate the opportunity to realize rental income and that he had benefited to the detriment of the beneficiaries. It does not appear that Low J. was asked to order occupation rent.

22 In the circumstances, as we are talking about rent going back to October 2016, I order that the occupation rent payable be $2,000 per month for a total of $20,000 for the period October 2016 to September 2017 inclusive. I also order that Mr. Filippelli pay the pest control services cost in the amount of $282.50 as clearly that was required because of the way in which he was maintaining (or I should say not maintaining) the property. The report from the City states that Goldsboro was not being kept free of rodents on the main floor cupboards and in the laundry room in the basement. This corroborates the evidence of the Applicants that Mr. Filippelli is not keeping the property clean.

Unjust Enrichment Disallowed For Family Workers

Unjust Enrichment Disallowed For Family Workers

The BC Appeal Court in McDonald v McDonald 2017 BCCA 255 disallowed an award for unjust enrichment for various children who worked on the family farm for years without compensation, finding that “chores” amounted to a juristic reason to refuse a claim for unjust enrichment. The appeal Court in essence said that there must be “exploitation” before there can be a valid claim for unpaid child labour in a family endeavor.

During their childhood and teen years, the plaintiffs performed unpaid work on their parents dairy farm. They continued to work on the farm (on salary) for parts of their early adulthood. Eventually, the parents transferred the farm assets into a corporation. Many years after the plaintiffs ceased to work on the farm, they learned that their parents transferred the shares in the corporation to their brother, except for redeemable preferred shares representing about 10% of the farm’s value. Their own inheritances were to be limited to those preferred shares.

The plaintiffs commenced an action for unjust enrichment in respect of work they had performed on the farm. The judge accepted that they had valid claims in unjust enrichment, but only for the unpaid work they performed as teenagers. He awarded each of the plaintiffs $350,000, less any amount they received in preferred shares. The defendants appealed.

Held: appeal allowed. The work performed by the plaintiffs was in the nature of chores. As a matter of public policy, chores performed by children in a family setting do not, absent indicia of exploitation, attract a right to compensation under the doctrine of unjust enrichment. In any event, the judge’s assessment of damages was the product of palpable and overriding error. Properly assessed, the transfer of the preferred shares would fully compensate the plaintiffs even if the judge’s unjust enrichment analysis were sustainable.


[64]         In Garland v. Consumers Gas Co., 2004 SCC 25, Iacobucci J. summarized the basic requirements for an unjust enrichment claim as follows:

[30]      As a general matter, the test for unjust enrichment is well established in Canada. The cause of action has three elements: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment (Pettkus v. Becker, [1980] 2 S.C.R. 834, at p. 848; Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762, at p. 784).

[65]         The parties accept the judge’s finding that the farm work performed by the plaintiffs during their teenage years conferred a benefit on the defendants. They also accept that the work constituted a corresponding deprivation to the plaintiffs. The issue with respect to unjust enrichment is whether there is a juristic reason for the enrichment.

[66]         The nature of the an absence of juristic reason test was also discussed in Garland:

[44]      [T]he proper approach to the juristic reason analysis is in two parts. First, the plaintiff must show that no juristic reason from an established category exists to deny recovery. By closing the list of categories that the plaintiff must canvass in order to show an absence of juristic reason, [the] objection to the Canadian formulation of the test that it required proof of a negative is answered. The established categories that can constitute juristic reasons include a contract (Pettkus, supra), a disposition of law (Pettkus, supra), a donative intent (Peter [Peter v. Beblow, [1993] 1 S.C.R. 980]), and other valid common law, equitable or statutory obligations (Peter, supra). If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis.

[45]      The prima facie case is rebuttable, however, where the defendant can show that there is another reason to deny recovery. As a result, there is a de facto burden of proof placed on the defendant to show the reason why the enrichment should be retained. This stage of the analysis thus provides for a category of residual defence in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery.

[46]      As part of the defendant’s attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties, and public policy considerations. It may be that when these factors are considered, the court will find that a new category of juristic reason is established. In other cases, a consideration of these factors will suggest that there was a juristic reason in the particular circumstances of a case which does not give rise to a new category of juristic reason that should be applied in other factual circumstances. In a third group of cases, a consideration of these factors will yield a determination that there was no juristic reason for the enrichment. In the latter cases, recovery should be allowed. The point here is that this area is an evolving one and that further cases will add additional refinements and developments.

[67]         It is common ground that none of the established categories of juristic reason for enrichment are present in this case: the plaintiffs did not have contracts of employment with the defendants during their teen years, nor did they manifest an intent that their work on the farm constitute a gift. Their work was not performed pursuant to a statutory or equitable obligation.

[68]         The defendants contend, however, that as a matter of public policy, work done by a teenager for a family enterprise should not be accorded a remedy in unjust enrichment absent extraordinary circumstances. In their factum they express the policy as follows:

Virtually all children, particularly as they get older, are expected to contribute to the family enterprise in one fashion or another, whether it is doing chores inside the house, painting a fence, mowing the lawn or helping in the family business. It seems likely that much of the work done by teenagers will provide some economic benefit to their parents. In exchange, however, their parents provide them with the necessities of life such as food and shelter and provide them with the opportunity to learn life skills which they can take with them into adulthood. To afford teenagers the right to sue their parents for work done as teenagers simply because it is of benefit to the parents sets a dangerous precedent and ignores the substantial benefits which teenagers receive from their parents at that age.

[69]         The plaintiffs dispute the idea that there is any public policy reason why teenaged children doing work for their parents should be excluded from unjust enrichment remedies. Among other things, they point out that children (including teenaged children) are a vulnerable group. Where parents exploit their children for economic gain, it is important that the children have a civil remedy.

[70]         Despite their contrasting arguments, there is, in fact, a great deal of common ground between the parties. The plaintiffs accept that not every chore done by a teenager (even if it has some economic value to the parents) will found a claim in unjust enrichment. At some level, it is a normal societal expectation that children (particularly older children) will assume responsibility for household tasks. They do not have a legal entitlement to be paid every time they perform routine chores.

[71]         On the other hand, the defendants accept that in extraordinary circumstances, a teenager will be entitled to compensation. At some point, parental demands on teenagers to perform unpaid chores will exceed the level of societal tolerance and be properly characterized as exploitative. It is obvious that there is no public policy in favour of allowing parents to engage in the economic exploitation of their children.

[72]         The question, then, is not whether public policy and reasonable societal expectations can provide a juristic reason to deny an unjust enrichment to a teenager in respect of unpaid chores. Clearly they can. Rather, the question is the articulation of the public policy. How far does the juristic reason extend?

[73]         The parties have cited a few cases in which courts have denied unjust enrichment claims for work done by children for their parents: Strudwick v. Strudwick Estate (1996), 21 R.F.L.(4th) 185 (B.C.S.C.); Kreeft v. Kreeft (2001), 39 ETR (2d) 233 (B.C.S.C.); Oliver v. Blais (November 21, 2014), Winnipeg PR10-01-84749, (Man. Q.B. Gen. Div.), affd 2015 MBCA 99, leave to appeal refd [2015] S.C.C.A. No. 515. They also cite Antrobus v. Antrobus, 2009 BCSC 1341, rev’d on quantum only, 2010 BCCA 356, wherein an unjust enrichment claim that included compensation for unpaid labour during the plaintiff’s teenage years succeeded.

[74]         While these cases have limited precedential value, all recognize that, as a general rule, the fact that work giving rise to an enrichment, was performed by a child or teenager in the context of family chores constitutes a juristic reason to deny recovery for unjust enrichment. In Oliver v. Blais, the trial judge noted:

[21]      [C]ases demonstrate familial obligations arising between farming parents and their children have been recognized as a juristic reason for justifying enrichment. Farming parents have a legitimate expectation that their children will participate in the chores and activities necessary to make the family farm viable. To find, in the absence of special circumstances, that a child’s contribution to the maintenance of the family farm gives rise to an interest in the farm would undermine normal farm family relationships.

[75]         While the court allowed a claim for unjust enrichment in Antrobus, the trial judge observed that unjust enrichment claims will not, as a matter of course, accrue to a teenager performing a reasonable level of domestic chores:

[185]    It is part of family life that family members assist one another – perhaps pitching in to help out younger siblings or aging parents, or helping with meal preparation and household chores. Children, teenagers and young adults living with their parents are often expected to do their share in keeping the household running. Working together for the common good of the family, spending time to help other family members, without any expectation of monetary compensation, is generally part of the meaning of a family. It is not the norm, and the law does not contemplate, that family members will do a forensic accounting during their lifetimes and make sure that no one was disadvantaged in the overall exchange of services.

[76]         The court found Antrobus to be an extraordinary case, both because of the crushing burden of chores that had been assigned to the plaintiff, and because she had been promised substantial compensation for doing the chores.

[77]         In general, we see the performance of chores by children in a family as positive. Such work fosters a sense of responsibility and of family. Ideally, in doing chores, children gain valuable work experience in an environment that is not overly competitive or taxing. They can learn and experience the importance of doing tasks for others without expecting monetary compensation.

[78]         These public policy considerations mean that the performance of unpaid chores by children in a family setting will not usually raise issues of unjust enrichment. There are, however, limits that must be observed. While unjust enrichment principles should not interfere with the ability of parents to assign routine chores to their children, they will ensure that children do not fall prey to exploitation.

[79]         The parties to this appeal have not, in argument, fully explored the issue of what boundaries ought to be applied in deciding when the law will grant unjust enrichment remedies in respect of chores performed by children. In the absence of full argument, it would be unwise for the court to attempt any exhaustive enumeration of what features might make chores exploitative. I would suggest, however, that exploitation may be characterized by economic benefits to the parents that are grossly disproportionate to the benefits that the children have as members of the family, or by work by the children that is manifestly detrimental to their health or wellbeing.

[80]         In the present case, the judge specifically found that the work assigned to the plaintiffs was not so extraordinary in the context of [a] farming household where the social norm [is] that all family members pitch in and perform chores for which strangers would have expected compensation. The judge noted that the children engaged in leisure and outside social activities. While the family lived frugally, there was no suggestion of economic deprivation, nor was it suggested that the children were treated by the parents as profit centres.

“Good Conscience” Constructive Trusts

"Good Conscience" Constructive Trusts

The Ontario Court of Appeal in Moore v Sweet 2017 ONCA 182 discussed the concept of constructive trusts that had been pronounced by the Supreme Court of Canada in the decision Soulos v. Korkontzillas 1997 2 SCR 217 in rejecting the claim of a named beneficiary of an insurance policy during her 20 year marriage to the deceased, who after separating from her, irrevocably named his new partner of 13 years as the beneficiary of the same insurance policy.

The wife  argued on appeal that she should remain the beneficiary of the insurance policy under the equitable principle of ” good conscience”, but the appeal court reversed the trial decision and held that she should be the beneficiary of the policy stating :

“There is nothing in the circumstances of this case that would provide the basis for a “good conscience” constructive trust when the facts do not support such a trust based on unjust enrichment or wrongful act, and it is therefore unnecessary to determine whether such a third category of remedial constructive trust continues to be available in view of the Supreme Court of Canada’s decision in Soulos v. Korkontzilas, [1997] 2 S.C.R. 217.”

The wife had not been made an irrevocable beneficiary designate which the insurance act treats as basically airtight and difficult to set aside.

Good Conscience” Constructive Trusts

100      There has been considerable debate in the jurisprudence and in academia about whether resort to the remedial constructive trust in Canada is now limited to two categories since the Supreme Court of Canada’s decision in Soulos — unjust enrichment and wrongful acts — thereby eliminating resort to a more elastic “good conscience” trust, i.e., one based on no more than a sense of fairness to the effect that it would be “against all good conscience” to deny a plaintiff recovery in the circumstances of a particular case. At the end of the day, Ms. Moore submits that good conscience is satisfied by giving effect to the oral agreement without which the Policy would not have continued to exist.1

101      It has long been accepted that equity is quintessential never-say-never terrain, and that concepts respecting its application develop with the times and to meet the needs of particular circumstances. This long-standing principle may work against establishing a completely closed set of categories as the foundation for imposing a remedial constructive trust.

102      At the same time, McLachlin J. was pretty clear in Soulos that, while a constructive trust “may be imposed where good conscience so requires” (para. 34), “[t]he situations which the judge may consider in deciding whether good conscience requires imposition of a constructive trust may be seen as falling into two general categories” (unjust enrichment and situations where property had been obtained by a wrongful act) (para. 36). It was her view that “[w]ithin 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” (para. 43). Rothstein J. re-affirmed this view in Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, [2012] 3 S.C.R. 660, at paras. 144-145.

103      I do not think it is necessary to resolve this debate for purposes of this appeal.

104      Most of the authorities in which courts have been willing to override a beneficiary designation can be explained on the basis of an agreement between one of the claimants and the insured that removed the insured’s ability to designate a later beneficiary.2 As noted earlier, Shannon involved a separation agreement in which the insured undertook to name his first spouse as a beneficiary irrevocably. In Bielny, the separation agreement required the insured to name the children of the first marriage as irrevocable beneficiaries. In Fraser v. Fraser, the trial judge found on the facts that the terms of the separation agreement requiring the insured to maintain the plaintiff as beneficiary were tantamount to an irrevocable designation.

105      Whether these authorities need to be re-examined in light of Soulos, as suggested in some authorities — see, for example, Love v. Love, 2013 SKCA 31, 359 D.L.R. (4th) 504 — is not something that need be determined here. As I have concluded above, it was not open to the application judge on this record to hold that the oral agreement between the Moores constituted an equitable assignment, or that it was tantamount to an irrevocable beneficiary designation.

106      Absent those considerations, I do not see anything in the circumstances of this case that would place it in some other “good conscience” category not caught with the rubric of either wrongful act (not asserted here) or unjust enrichment. For that reason, I do not see the need to resolve the foregoing debate about whether Soulos has restricted the categories for imposing a remedial constructive trust to unjust enrichment or wrongful act or whether there remains some additional “good conscience” basis.

107      Simply because wrongful act is not asserted, and unjust enrichment is unsuccessful, does not mean that some other “good conscience” basis must exist on the facts. To engage in such an exercise, on this record at least, it seems to me, would undermine the rationale for creation of the juristic reason element in the first place.

Unjust Enrichment in Common Law Relationships

Unjust Enrichment in Common Law Relationships

The Ontario Court of Appeal in Reiter v Hollub 2017 ONCA 186 reviewed the law of unjust enrichment and dismissed a 6 year common law spouse’s claim that she should share in the increase in the property value of the matrimonial home owned by her male spouse .

The appeal Court reviewed the law of unjust enrichment and in particular the Supreme Court of Canada’s decision in Kerr v Barranow 2011 SCC 10.

  1. The appellant, Jessica Reiter, appeals from the dismissal of her application for an interest in the increase in equity of a home owned by the respondent, Tiar Hollub, which she shared during their six year common law relationship.
  2. Ms. Reiter advanced her claim on the basis of unjust enrichment. She argued that she had contributed to the $410,000 increase in the net value of the home over the course of the relationship. She relied on contributions she made to common living expenses and to the maintenance and repair of the residence. She also relied on the fact that she had given Mr. Hollub a one-time payment of $5,000 toward the mortgage.
  3. Ms. Reiter also took the position that her relationship with Mr. Hollub amounted to a joint family venture as defined in Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269.
  4. The application judge held that Ms. Reiter was unable to establish a joint family venture to support the requested remedy. She found no evidence that would support a conclusion that Ms. Reiter’s contributions had led to an increase in the value of the property. The application judge also found that the evidence did not support a joint family venture as defined in Kerr v. Baranow. As to Ms. Reiter’s $5,000 payment toward the mortgage, the application judge held that although Mr. Hollub had been enriched to Ms. Reiter’s detriment as a result of this contribution, his retention of the payment was justified by the parties’ agreement to share living expenses.
  5. I see no reason to interfere with the application judge’s rejection of Ms. Reiter’s claim for a proprietary interest in the house. The application judge’s conclusions about the circumstances of Ms. Reiter’s contribution to expenses and about the nature of the relationship are entitled to deference. I would therefore dismiss that aspect of Ms. Reiter’s appeal. However, I would allow the appeal on the treatment of the $5,000 lump sum payment to Mr. Hollub.

In Kerr v. Baranow, at para. 31, Cromwell J. recognized that “[a]t the heart of the doctrine of unjust enrichment lies the notion of restoring a benefit which justice does not permit one to retain”. Since the Supreme Court’s 1980 decision in Pettkus v. Becker, [1980] 2 S.C.R. 834, unjust enrichment principles have been available to support claims made by domestic partners upon the breakdown of their relationship.

17      The test for unjust enrichment is well-settled. To establish unjust enrichment, the person advancing the claim must prove three things:

  1. An enrichment of or benefit to the defendant;
  2. A corresponding deprivation of the plaintiff; and
  3. The absence of a juristic reason for the enrichment.

18      There are two steps to identifying whether there is a juristic reason for the responding party to retain the benefit incurred. First, the court must consider whether the case falls within a pre-existing category of juristic reason, including a contract, a disposition of law, donative intent, and other valid common law, equitable or statutory obligations: Kerr, at para. 43. If a case falls outside one of these established categories, the reasonable expectations of the parties and public policy considerations become relevant in assessing whether recovery should be denied: Kerr, at para. 44.

19      In Kerr v. Baranow, at para. 46, the Supreme Court outlined two possible remedies where unjust enrichment is established — a monetary award or a proprietary award. The court counselled, at para. 47, that the first remedy to consider is always the monetary award and that, in most cases, a monetary award is sufficient to remedy the unjust enrichment.

20      To obtain a proprietary award, the person advancing the claim based on unjust enrichment must demonstrate that monetary damages are insufficient and that there is a sufficiently substantial and direct causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property: Kerr, at paras. 50-51. A minor or indirect contribution will not suffice.

21      The court held that there are two different approaches to valuation for a monetary award: Kerr, at para. 55. First, a monetary award may be based on a quantum meruit, value received or fee-for-services basis. Second, a monetary award may be based on a value survived basis. This is where the joint family venture analysis becomes relevant.

22      To receive a monetary award on a value survived basis, the claimant must show that there was a joint family venture and that there was a link between his or her contributions to the joint family venture and the accumulation of assets and/or wealth: Kerr, at para. 100. Whether there is a joint family venture is a question of fact to be assessed in light of all of the relevant circumstances, including the four factors noted above — mutual effort, economic integration, actual intent and priority of the family: Kerr, at para. 100.

23      Justice Cromwell was careful to note that cohabiting couples are not a homogenous group: Kerr, at para. 88. The analysis must therefore take into account the particular circumstances of each relationship. The emphasis should be on how the parties actually lived their lives, not on their ex post facto assertions or the court’s view of how they ought to have done so: Kerr, at para. 88.

24      While the four factors identified above are helpful to determine whether the parties were engaged in a joint family venture, there is no closed list of relevant factors: Kerr, at para. 89. The factors Cromwell J. suggested were not a checklist of conditions, but a useful approach to a global analysis of the evidence and examples of relevant factors that a court may take into account: Kerr, at para. 89.

The Various Types of Trusts

The Various Types of Trusts

Warde v Slater 2017 BCSC 274 contains a discussion about the various types of trusts in deciding who owned the beneficial interest in the shares of a family business.

The decision quotes extensively from Waters on Trusts In Canada.

It is helpful to refer to the definition of a trust adopted as “one of the best” in Waters, Gillen and Smith: Waters’ Law of Trusts in Canada, 4th ed. 2012 (“Waters“) at p 3:

“A trust is the relationship which arises whenever a person (called the trustee) is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the benefit of some persons (of whom he may be one, and who are termed beneficiaries) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustees, but to the beneficiaries or other objects of the trust.”

The following passage from Waters at pp 394-395 is a useful comparison of the different kinds of trusts alleged.

The courts and the various legislatures of the common law world have sometimes used interchangeably the terms “implied trust”, “resulting trust” and “constructive trust”, and the terminology is therefore somewhat confusing

But essentially, while express trusts are those which come into existence because settlors have expressed their intention to that effect, constructive trusts arise not because of anyone’s expression of trust intent but because B ought to surrender property to A and this is the machinery the court employs in order to get B to do that. In between the express trust, a product of the settlor’s intention, and the constructive trust, a machinery imposed by law, are the implied trust and the resulting trust.

The term “implied trust” is commonly used for two situations. The first occurs where the intention to create a trust is not clearly expressed, but has to be discovered from indirect and ambiguous language. This is all that distinguishes such an implied trust from the express trust. A second common use is where one person has gratuitously transferred his property to another, or paid for property and had the property put into another’s name. The intention of the transferor or purchaser is implied to be that the transferee is to hold the property on trust for the transferor or purchaser. The implication arises out of the fact that Equity assumes bargains, not gifts, and requires the donee to prove that a gift was intended.

The term “resulting trust”, on the other hand, does not allude in any way to intention; it describes what happens to the property in question. It results or goes back to the person who, for reasons we shall examine, is entitled to call for the property. For example, because Equity does not assume gifts, the transferee holds title for the transferor or the one who provided the purchase money. In other words, in this “implied trust” situation the beneficial interest results, or goes back, to the transferor or purchaser. . . .

Distinguishing the resulting trust from the constructive trust is also not easy because the lines have been blurred. Sometimes the same facts allow both a constructive trust theory and a resulting trust theory to be deployed. . . .

There is even more overlap between resulting trusts and those constructive trusts which arise to reverse unjust enrichment. The reason is that both kinds of trusts typically perform the same function: they return property to the person from whom it came.

In Fulton v. Gunn [2008 BCSC 1159] for example, an interest in land was acquired by a son using purchase money that came from his mother. It was held that this created a resulting trust for the benefit of the mother; and it was also held in the alternative that the son had been unjustly enriched at the expense of the mother, and so held the property on constructive trust for her. To the extent that resulting trusts are seen as arising by operation of law, they are really just a sub- species of constructive trust. The distinction between resulting and constructive trusts is perhaps best put in this way – while constructive trusts have nothing to do with intention, express or implied, resulting trusts can be explained either on the basis of intention or imposition of law. . . .

10      As Waters makes clear (see also pp. 19-21), the terms “express” and “implied” refer to the intention of the alleged settlor. Intention may also be relevant to a resulting trust, but is irrelevant to a constructive trust. A constructive trust is one constructed by the law to enforce an obligation. It arises out of unjust enrichment and “good conscience”: Waters at p 23; Petkus v Becker, [1980] 2 SCR 834.

Thus, there can be only two sources of a trust obligation: the intention of a property owner to create a trust; or the imposition by the law of a trust obligation upon persons: Waters at p 478.

11      In my view, a resulting trust can be quickly eliminated from contention in this case. An essential characteristic is that the claimant, the would-be beneficiary, must have provided the property or equitable interest vested in the person bound by the trust: Waters at p 399. Neither Elaine nor Brian provided the property here in issue, the shares of (or proprietary interest in) Slatter Holdings, to Fern. If Fern holds that property in trust for either or both of Elaine or Brian, it must be because of an express or implied trust (intention), or because in the absence of such a trust, unjust enrichment and good conscience require that the law constructs a trust in order to enforce an obligation.

12      To demonstrate the creation of an intentional trust, the evidence must establish three certainties: certainty of intention to create the trust, certainty of the subject of the trust, and certainty of the trust object: Waters at p 140 and following; Tozer v Bank of Nova Scotia, 2012 NBCA 57 at paras 10-12. It is not necessary that the trust be set out fully in a document. It may be construed from conduct, or from documents and conduct taken together. See, for instance, Elliott (Litigation Guardian of) v Elliott Estate, [2008] OJ No 4941 (SCJ):

[30] This Court must consider all of the circumstances, including the words and conduct of Robert Elliott and Jean Elliott [the alleged settlors] to determine if certainty of intention exists.

13      Technical words are not required. As Waters put it at p 141:

There is no need for any technical words or expressions for the creation of the trust. Equity is concerned with discovering the intention to create a trust; provided it can be established that the transferor had such an intention, a trust is set up.

14      This is so whether the intentional trust is created by the settlement of property upon a trustee, or by declaration by the owner of property of an intention to constitute himself or herself a trustee of that property. Again, it is not necessary that the donor use the words, “I declare myself a trustee”. Words of any kind and even conduct are sufficient provided it is satisfactorily shown that the donor did in fact intend to constitute himself or herself a trustee: Waters at p 204.