Test for Unjust Enrichment
As set out in recent blogs of my colleagues, the test for determining whether someone has been unjustly enriched is a “simple” three-part test where a party must prove the following:
- There has been an enrichment or benefit to a defendant;
- There has been a corresponding deprivation suffered by the plaintiff; and
- There is an absence of a juristic reason for the enrichment.
This blog is intended to look at the last part of the unjust enrichment test and what exactly the court means by “juristic reason” and what the courts have found such reasons to include.
“Juristic reason” means a reason/justification based upon law for the enrichment of one person at the detriment of another. If there is a juristic reason for an enrichment then it is not “unjust” and the court will not grant a remedy on the basis of unjust enrichment. Conversely, the absence of a juristic reason for the enrichment means that there is no compelling reason for the defendant to retain the benefit conferred by the plaintiff.
In Kerr v. Baranow,1 the Supreme Court of Canada noted that there are two steps to the juristic reasons analysis, including the following:
- The established categories of juristic reason must be considered; and
- In their absence, the court may still consider the reasonable expectations of the parties and public policy considerations to assess whether particular enrichments are unjust or not.
What are “established categories of juristic reason”?
The “established categories” of juristic reason are accepted causes of action in law or equity; for example, showing that the “enrichment” was intended to be a gift or arose from a contract. There is nothing unjust about a defendant retaining a gift of money, which was made to him or her by a plaintiff. A party may also be enriched by virtue of the operation of law, which generally includes circumstances where the enrichment is required by law, such as where a valid statute denies recovery.2 For example, “… the payment of validly imposed taxes may be considered unjust by some, but their payment gives rise to no restitutionary right of recovery.”3
“Public Policy Considerations”
The Supreme Court of Canada has made it clear that even if a party does not fall within a specific category of juristic reason, the court still retains the ability to find new or ad hoc juristic reasons based upon the unique facts of each individual case and that public policy reasons and the reasonable expectations of the parties may justify a party retaining an enrichment. At that stage, however, the de facto burden of proof is placed on the defendant to show the reason why the enrichment should be retained.4
Perhaps the most clear example of how public policy reasons have been used by the court to find that a party has been unjustly enriched is in respect of common law couples following the dissolution of their relationship. Unlike married couples, most provinces (including Ontario) do not provide for statutory financial and property rights on the breakdown of a common law marriage or domestic relationship. In recognition of the absence of the same statutory protections afforded legally married couples, the court has established that a party may be deemed to be unjustly enriched where there has been “… a disproportionate share of assets accumulated during the course of a ‘joint family venture’” by one of the common law spouses and a monetary award is insufficient.5 In essence, if a couple has embarked on a relationship akin to a “typical” marriage, those factual indicia will more likely lead to a conclusion that they have engaged in a joint family venture and, accordingly, the wealth should be divided equitably between them (akin to the statutory division of property granted to divorced couples). The “joint family venture” doctrine created by the Supreme Court of Canada within the law of unjust enrichment is important in telling us why one party must pay another, but also creates a model of law that can be developed in a principled and coherent manner.
Public Policy in Estates Litigation
In the context of an estates litigation, the Supreme Court of Canada considered the “public policy analysis” or “principled approach” for unjust enrichment.
In Moore v. Sweet,6 a life insurance policy was left behind by the deceased owner of the policy, Lawrence Anthony Moore (“Moore”). In the case, two innocent parties claimed an entitlement to the insurance proceeds. Moore’s ex-wife entered into a contractual agreement whereby even after their divorce she agreed to pay the premiums on his insurance policy in exchange for remaining the designated beneficiary on the policy. However, Moore later changed the designated beneficiary to his common law wife of 13 years, who was therefore entitled to receive the proceeds from the policy.
After not finding that there were any juristic reasons that fell within the “established categories”, the majority of the Supreme Court found that the policy reasons favoured the ex-wife, who had effectively been tricked into funding the life insurance policy, which then went to the benefit of the common law spouse. Accordingly, the court found that the common law spouse was unable to rebut the ex-wife’s prima facie case and, accordingly, the ex-wife made out each of the requisite elements of the cause of action in unjust enrichment.7
In Taylor Estate v. Stiles,8 Frank Stiles (“Stiles”) attempted to avoid repaying a loan to the estate on the basis that the estate had been unjustly enriched for the personal chores and services Stiles had rendered to the deceased before she passed away. Although the Nova Scotia Supreme Court found that the deceased had been enriched with a corresponding deprivation to Stiles, it found that there was a juristic reason for the enrichment, namely, a quid pro quo by the deceased, who enriched Stiles at her deprivation by way of very favourable financial loans to Stiles, which she advanced to him during her lifetime.9
Similarly, in Simonin v. Simonin,10 the Court of Appeal upheld the trial judgment dismissing the appellant’s claim for unjust enrichment. The appellant, Mary, as estate trustee for her late husband, Franco, claimed that Franco’s mother was unjustly enriched as a result of improvements made by Franco to the farm, which his mother owned. The Court of Appeal considered the “principled approach” to determine whether a juristic reason existed for the enrichment to have occurred. It found that the “reasonable expectations” of the parties had to be considered. The Court of Appeal, therefore, accepted that it was reasonable for the trial judge to conclude that there was never any expectation of compensation for the improvements undertaken and, accordingly, it was reasonable to permit Franco’s mother to retain the benefit without compensation.
Assessing whether there are juristic reasons to support an enrichment received by an individual is anything but “simple”. Given the factual considerations involved in determining whether a juristic reason exists, and in particular the amount of discretion available to the court to assess public policy considerations in making such a determination, it would be advisable to seek legal advice in assessing the viability of any such claim.
- Kerr v. Baranow, (2011) S.C.J. No. 10 at para. 40 ↵
- Kerr v. Baranow, (2011) S.C.J. No. 10 at para. 41 ↵
- 2004, Maddaugh and McCamus, The Law of Restitution p. 3-28 ↵
- Moore v. Sweet, 2018 SCC 52, (2018) 3 S.C.R. 303 at para. 63 ↵
- Kerr v. Baranow, (2011) S.C.J. No. 10 at para. 60 ↵
- 2018 SCC 52 ↵
- Moore v. Sweet 2018 SCC 52 at paras. 87-88 ↵
- 2004 NSSC 124 ↵
- Taylor Estate v. Stiles, 2004 NSSC 124 at para. 64 ↵
- 2010 ONCA 900 (CanLII) ↵