Unjust Enrichment and Constructive Trusts

Unjust enrichment involves an enrichment of the defendant, a corresponding
deprivation to the plaintiff, and the absence of any juristic reason for the
enrichment: Kerr v. Baranow, 2011 SCC 10 at paras. 36-45.

Nouhi v. Pourtaghi, 2019 BCSC 794:

[20] A constructive trust is sufficient to sustain a registration of a certificate of
pending litigation. Madam Justice Dickson (as she then was) said as follows
in Jacobs v. Yehia, 2015 BCSC 267:

[24] “An estate or interest in land” may include both legal and equitable
interests. The test is not to be narrowly defined, but the mere fact that a
claim relates to land does not convert it into a claim for a proprietary
interest: Montgomery v. Klassen, [1996] B.C.J. No. 1739 (B.C. S.C.),
para. 22; Seville Properties Ltd. v. Coutre, 2005 BCSC 1105 (B.C. S.C.).

[25] Where funds are obtained through wrongful means and can be
traced to the acquisition or improvement of land, the court may impose a
remedial constructive trust sufficient to sustain a CPL. In addition, the
claim for tracing may, in and of itself, justify an equitable charge on land
for purposes of supporting a CPL: Meola, para. 9; Drunker Inc. v. Hong,
2011 BCSC 905, paras. 19, 22 and 36; Samji (Trustee of) v. Chatur, 2013
BCSC 1915 paras. 60-64; Lament v. Constantini, [1985] B.C.J. No. 2988

[26] Constructive trusts are equitable remedies available for acts such as
fraud and unjust enrichment….

Jacobs was decided in 2015. The holding that “wrongful means” can be
the basis for a remedial constructive trust, if wrongful means is broader than
unjust enrichment and breach of fiduciary duty, has been overtaken by the
decision of the Court of Appeal in BNSF Railway Company v. Teck Metals Ltd.,
2016 BCCA 350.

In that case, Madam Justice Newbury reviewed the
development of the constructive trust in Canada in order to consider whether
constructive trusts were only available to remedy unjust enrichment and breach
of fiduciary duty or whether they were also available on a wide, substantive or
institutional basis.

[22] Newbury, J.A. quoted from the Court of Appeal in Atlas Cabinets and
Furniture Ltd. v. National Trust Co., [1990], 45 B.C.L.R. (2d) 99 (C.A.) in which
Lambert J.A., at 108, described the difference between the two types of
constructive trusts as follows:

A substantive constructive trust is to be distinguished from a remedial
constructive trust. In a substantive constructive trust, the acts of the

parties in relation to some property are such that those acts are later
declared by a court to have given rise to a substantive constructive trust
and to have done so at the time when the acts of the parties brought the
trusts into being…. In a remedial constructive trust, on the other hand,
the acts of the parties are such that a wrong is done by one of them to
another so that, while no substantive trust relationship is then and there
brought into being by those acts, nonetheless a remedy is required in
relation to the property and the court grants that remedy in the form of a
declaration which, when the order is made, creates a constructive trust by one of the parties in favour of another party….

Newbury, J.A. concluded that in Canada, a remedial constructive trust is
available to remedy unjust enrichment and breach of fiduciary duty. She also
held that it is open to the court to develop the law pertaining to substantive
constructive trusts on a case-by-case basis “where good conscience so
requires”: BNSF at paras. 55-56 citing Soulos v. Korkontzilas, [1997] 2 S.C.R.
217 at para. 34.

Recommended Posts