In Moore, the facts were as follows:
- Michelle and Lawrence were married. During the marriage, Lawrence purchased a term life insurance policy with a coverage of $250,000. Michelle was designated as the beneficiary.
- After approximately 20 years of marriage, Michelle and Lawrence separated and, eventually, divorced.
- During the separation, they entered into an oral agreement contemplating that Michelle would pay the premiums and would be entitled to the proceeds of the life insurance upon Lawrence’s death. Pursuant to the oral agreement, Michelle paid the insurance premiums from the time of the separation to the date of Lawrence’s death 13 years later. The eventual formal separation agreement between Michelle and Lawrence was silent on the policy of insurance and the oral agreement on the payment of the policy’s premiums.
- During the separation, Lawrence began to reside with his new common-law spouse, Risa. Shortly thereafter, Lawrence executed a change of beneficiary designating Risa as the irrevocable beneficiary of the policy. This was not known to Michelle.
The Court History
Pursuant to the oral agreement and her understanding that she was the beneficiary of the policy, Michelle claimed the proceeds of the life insurance from the insurer. She, however, was advised that Risa was the beneficiary.
Ontario Superior Court of Justice
Michelle brought an application to determine her entitlement to the insurance proceeds. The Ontario Superior Court of Justice ordered the insurer to pay the proceeds of the policy into court pending resolution of the dispute.
Wilton-Siegel J. held that Risa was unjustly enriched at Michelle’s expense. His Honour impressed the proceeds with a constructive trust in favour of Michelle.3
Ontario Court of Appeal
On appeal, the Court of Appeal for Ontario set aside the judgment and ordered that the proceeds of the insurance policy be paid to Risa and that the premiums paid by Michelle be reimbursed to her.4
Supreme Court of Canada
In considering Michelle’s appeal for restitution, the Supreme Court of Canada applied the principled framework for the test for unjust enrichment as follows:
- The defendant was enriched;
- The plaintiff suffered a corresponding deprivation; and
- The defendant’s enrichment and the plaintiff’s corresponding deprivation occurred in the absence of a juristic reason.5
The majority of the Supreme Court of Canada found that stages 1 and 2 of the test were “the same thing from different perspectives” or “essentially two sides of the same coin”.6 As such, the court held that “… what Risa gained is the precise benefit that Michelle lost: the right to receive the proceeds of Lawrence’s life insurance policy.”7
Test for a Juristic Reason
As for the third stage in the test, the court observed that “[a]t its core, the doctrine of unjust enrichment is fundamentally concerned with reversing transfers of benefits that occur without any legal or equitable basis.”8 Based on the two-stage analysis in Gardland v. Consumers’ Gas Company Ltd. (2001), CanLII 8619 (ON CA),9 the court is to undertake the following analysis:
- The plaintiff is to demonstrate that the Defendant’s retention of the benefit cannot be justified on the basis of the “established categories of juristic reasons;10
- If the plaintiff is successful, he or she establishes a prima facie case and the analysis proceeds to the defendant attempting to rebut the plaintiff’s prima facie case by showing that there is some residual reason to deny recovery.
Consequently, the burden of proof shifts to the defendant.11
Stage 1: Retention Cannot Be Justified
Under the first stage, the court analyzed Michelle’s contractual claim vs. Risa’s statutory claim pursuant to the Insurance Act. The court concluded as follows:
… I am still not persuaded that s. 191 of the Insurance Act can be interpreted as barring the possibility of restitution to a third party who establishes that this irrevocable beneficiary cannot, in good conscience, retain those monies in the face of that third party’s unjust enrichment claim. To borrow the words of Professors Maddaugh and McCamus, ‘the fact that the insurer is directed by statue, implicitly if not directly, to pay the insurance monies to the irrevocable beneficiary, does not preclude recovery by the other intended beneficiary where retention of the monies by the irrevocable beneficiary would constitute an unjust enrichment’ (The Law of Restitution, at p. 35-16).12
Stage 2: Can Defendant Rebut Plaintiff’s Prima Facie Case?
Under the second stage, the court analyzed Michelle’s oral contract vs. Risa’s irrevocable beneficiary designation. The court concluded as follows:
As a final point, it appears to me that the residual considerations that arise at this stage of the Garland analysis favour Michelle, given that her contribution towards the payment of the premiums actually kept the insurance policy alive and made Risa’s entitlement to receive the proceeds upon Lawrence’s death possible. Furthermore, it would be bad policy to ignore the fact that Michelle was effectively tricked by Lawrence into paying the premiums of a policy for the benefit of some other person of his choosing.13
The remedy for unjust enrichment is restitutionary. It can be personal (e.g., order for payment of damages) or proprietary (e.g., enforcement against property). Often proprietary restitution takes the form of a constructive trust, which is awarded when the plaintiff meets the following:
- A personal remedy would be inadequate; and
- The plaintiff’s contribution that founds the action is linked or causally connected to the property over which a constructive trust is claimed.14
The court concluded that Michelle’s payment of the premiums maintained the policy. Risa’s right as the designated beneficiary deprived Michelle of her contractual entitlement to the proceeds of the life insurance. Therefore, the court imposed a constructive trust to the full extent of the proceeds in favour of Michelle.
The decision of the Supreme Court of Canada in Moore v. Sweet is critical to understanding many areas of Canadian law, including insurance, estates, contracts, construction of statutes, damages etc. For the purpose of unjust enrichment, it would be prudent to recall, among others, the following:
- The doctrine of unjust enrichment is flexible.
- Both litigants should be aware that each may bear the burden of proof.
- Separation agreements may not be conclusive and family law lawyers should verify insurance designations.
- Compliance with the Insurance Act and the policy of insurance may not determine the irrevocable beneficiary’s entitlement.
- Constructive trusts are not the default remedy for unjust enrichment claims, but an exception to the default rule.
- https://www.wagnersidlofsky.com/unjust-enrichment-guide/, https://www.wagnersidlofsky.com/unjust-enrichment-in-estate-context/, https://www.wagnersidlofsky.com/juristic-reason/, https://www.wagnersidlofsky.com/defences-unjust-enrichment/, https://www.wagnersidlofsky.com/constructive-trust-remedy-unjust-enrichment/, https://www.wagnersidlofsky.com/unjust-enrichment-in-estates-litigation/ ↵
- Moore v. Sweet, 2018 SCC 52 https://www.canlii.org/en/ca/scc/doc/2018/2018scc52/2018scc52.html?autocompleteStr=moore%20v.%20sweet&autocompletePos=1 ↵
- Moore v. Sweet, 2015 ONSC 3914 https://www.canlii.org/en/on/onsc/doc/2015/2015onsc3914/2015onsc3914.html?resultIndex=3 ↵
- Moore v. Sweet, 2017 ONCA 182 https://www.canlii.org/en/on/onca/doc/2017/2017onca182/2017onca182.html?resultIndex=2 ↵
- Moore v. Sweet, 2018 SCC 52 at para 37 ↵
- Ibid. at para 41 ↵
- Ibid. at para 51 ↵
- Ibid. at para 55 ↵
- Garland v. Consumers’ Gas Company Ltd., 2001 CanLII 8619 (ONCA) https://www.canlii.org/en/on/onca/doc/2001/2001canlii8619/2001canlii8619.html?autocompleteStr=garland%20v.%20consumers%27&autocompletePos=5 ↵
- I.e., contract, disposition of law, donative intent and other valid common law, equitable or statutory obligations. ↵
- Moore v. Sweet, 2018 SCC 52 at para 58 ↵
- Ibid. at para 78 ↵
- Ibid. at para 87 ↵
- Ibid. at para 91 ↵