The Doctrine of Unjust Enrichment
Lawyers and laypeople alike may be aware of the equitable principle that no one should be able to profit from committing a wrongful act. The doctrine of unjust enrichment is similar and deals with transfers of property from one person to another where there is no valid reason to allow the transferee to retain the property. The doctrine has specific application in estates litigation.1 This blog post considers the manner in which the court has employed the doctrine in the context of estates.
Origins of Unjust Enrichment
The doctrine of unjust enrichment is a principle that has long been used by the court to deal with situations in which one party benefits at the expense of another without a valid legal reason for doing so. The doctrine was developed in English law as a doctrinally acceptable means of correcting perceived shortcomings in other areas of the law (e.g., where one party mistakenly makes a payment to another and then seeks the return of the money). In cases where contract and tort provided no clear recourse, the courts sought to develop a coherent legal model to address unjustified retention of benefits.2
The Supreme Court of Canada set out the test that must be satisfied for a plaintiff to succeed in the autonomous action in unjust enrichment. It is 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.3
Unjust Enrichment in Estates Litigation: Moore v. Sweet
The court has held that a party may bring an unjust enrichment claim against an estate on the basis that the deceased received an unfair benefit at the expense of the claimant without a valid juristic reason. This allows the court to remedy injustices that would otherwise occur if the deceased’s estate were to retain the benefit.
One prime area for such claims in the estates context is entitlement to life insurance proceeds, and two cases are of note.
The first case is Richardson Estate v. Mew.4 Here a man died leaving an ex-wife (and their children) and a second wife (and their children). He died in a long-term care facility as he developed Alzheimer’s Disease and required institutional care in his final years. The second wife managed his affairs using a Continuing Power of Attorney provided for that purpose. A question arose in respect of a life insurance policy payable to the first wife. It had been taken out originally when the deceased was married to his first wife and then made subject of a condition in the separation agreement between them that the first wife remain as beneficiary for a year (the end of his child care obligations). He told his second wife that he would designate her as the beneficiary at the end of the commitment under the separation agreement but never did so. Some few years later, the deceased became incapable of managing his affairs due to Alzheimer’s Disease. The costs of his care exhausted his retirement savings and the second wife assumed the costs of his care including paying the premiums due on the life insurance policy. It wasn’t entirely clear in the report of the judgement whether it was established as a matter of fact that the second wife did actually pay premiums with her own money and the suggestion was that if she did, the sum was relatively modest. In any case, the action was brought in unjust enrichment claiming a constructive trust over the policy.
The Court of Appeal held that while the first wife may have been enriched, there was no corresponding deprivation. Moreover, there was a juristic reason that allowed her to retain the enrichment – the contract of insurance. That is, the plaintiff might have a theoretical claim against the Estate for the premiums that she paid; ‘theoretical’ because she inherited the Estate. As against the designated beneficiary (the first wife), there was no claim in unjust enrichment as the contract of insurance constituted a good juristic reason for her to retain the insurance proceeds. The separation agreement may have contained a standard clause release or renouncing all claims against the other’s estate, but it is well recognized that the quality of title to insurance proceeds is unaffected where the policy continues to designate the former spouse as beneficiary upon death.
The second case is a Supreme Court of Canada decision that takes a more expansive view of deprivation. In Moore v. Sweet,5 3 SCR 303] a man made an oral agreement with his ex-wife; if she maintained the policy of insurance that he owned on his own life, she would be entitled to the proceeds of the insurance policy at his death. The ex-wife held up her end of the bargain and paid the premiums for 13 years. The man did not; he designated his second wife irrevocably of the policy as the beneficiary.6
While the Application Judge awarded the proceeds of the policy on the basis of unjust enrichment, but was overturned by the Court of Appeal, which found that the designation of an irrevocable beneficiary under the Insurance Act was a valid juristic reason for the benefit received.
In a 7-2 decision, the Supreme Court of Canada allowed the claimant’s appeal and clarified the law after Richardson Estate v. Mew. Here it was not merely that the first wife made payments on the policy (as in the earlier case), there was an oral agreement between her and the deceased that she would take the proceeds of the insurance policy after his death, and it on was this point that the Supreme Court of Canada held that the entitlement to a remedy arose. As Côté J. held for the majority, “[a]t the end of the day, therefore, what Michelle lost is not only the amount she paid in premiums. She stands deprived of the very thing for which she paid — that is, the right to claim the $250,000 in proceeds.”7 Thus, the irrevocable beneficiary designation under the Insurance Act was a valid reason for the insurer to make payment, but did not justify the second wife retaining the benefit of the insurance proceeds. The first wife was deprived, the second wife enriched, and there was no juristic reason that would allow the second wife to retain the insurance money.
Other Unjust Enrichment Claims in the Estates Context
The application of the doctrine of unjust enrichment in estates litigation has been applied in a flexible manner by the courts.
Improvements to Property
Clarke v. Johnson
The Court of Appeal for Ontario has held that a party, who contributes to a property owned by a family member, may secure their ongoing access to the property through an unjust enrichment claim.
In Clarke v. Johnson,8 the claimant built a cottage on property owned by his mother-in-law, which he maintained at his own expense and used for a period of 20 years. However, after forbidding his son from using the cottage following an argument, his former mother-in-law9 was displeased that her grandson would not be able to use the cottage. She barred the claimant from setting foot on the property. The lower court found that the claimant had established claims in unjust enrichment and proprietary estoppel and, interestingly, ordered that he had an irrevocable license to use the cottage rather than award monetary damages.10 On appeal, the Court of Appeal affirmed the ruling finding that the trial judge had crafted an appropriately narrow remedy, which was consistent with the parties’ reasonable expectations.
Cairns v. O’Neil
Where a claimant has been found to have established a claim for unjust enrichment arising from his or her contributions to a property owned by a family member in the absence of fair compensation or a juristic reason, the court may order that the claimant is entitled to monetary damages or an interest in the property pursuant to the doctrine of constructive trust.
In Cairns v. O’Neil,11 the parents sued their daughter and her spouse for possession of a property in which they had been residing with their children, but which was owned by the parents, for various loans and rental arrears. One of the arguments made in the counterclaim by the daughter and spouse was that the parents had been unjustly enriched by improvements done on the house by the daughter’s spouse. While the court held that various loans and arrears of rent were owed by the daughter to her parents, the court ordered that the value of the improvements on the house paid for by the daughter and her spouse should be “set off” against the other amounts owing. The amounts were held to include only the improvements, which added value to the property and not the amounts which may have improved the home for the daughter and spouse’s own use.
Brisebois v. Modern Music Co.
In Brisebois v. Modern Music Co.,12 the plaintiff claimed an interest in a property, which he had lived in with his ex-wife and children for 13 years and which was owned by his former father-in-law’s company. The father-in-law purchased the property through his company for his daughter and son-in-law’s use. They paid the company a monthly amount towards the carrying costs of the property and for repairs and maintenance. They, also, conducted significant renovations to the property at their own expense. After the breakdown of the marriage, the plaintiff moved out and the father-in-law’s company denied that he had any interest in the property.
At trial, the court held that the plaintiff had established his claim for unjust enrichment and that he was entitled to a quarter beneficial interest in the property or net proceeds of sale on the basis of constructive trust. The court found that the defendant company had been considerably enriched by the time and money expended on the property by the plaintiff. Similarly, the plaintiff suffered a corresponding deprivation. The defendant had not objected to the improvements or ever indicated that the plaintiff or his daughter had no interest in the property. In the court’s view the plaintiff, therefore, had a reasonable expectation of continuing to live at the property indefinitely and was entitled to an interest.
Services Provided to Family Members
The court has found that children may obtain a remedy against their parents’ estate(s) for work done on the understanding that they would eventually be compensated by the estate(s).
Antrobus v. Antrobus
In Antrobus v. Antrobus,13 a family’s eldest daughter brought a claim for unjust enrichment against her parents. She alleged that she did extensive work for her parents, including caring for her younger siblings and working in their business without compensation on the promise that she would inherit the entire Estate. After an argument, the parents transferred all of their assets into a trust for the benefit of themselves and their other children. The eldest daughter commenced a claim for unjust enrichment. After the lower court found in favour of the claimant, the British Columbia Court of Appeal affirmed the lower court’s finding of unjust enrichment but slightly reduced the award of damages in favour of the daughter.
Unjust enrichment is a powerful doctrine. As demonstrated in the cases reviewed above, the action in unjust enrichment can look closely at legal and equitable arguments that would justify the retention of a benefit at the expense of another. However, if the “juristic reason” offered by the defendant to keep a benefit obtained at the plaintiff’s expense lacks merit, it should be returned.
- See: https://www.wagnersidlofsky.com/estate-litigators/ ↵
- Priel, Dan, “The Law and Politics of Unjust Enrichment” (2013). Comparative Research in Law & Political Economy. Research Paper No. 15/2013 at pp. 11-12. ↵
- Moore v. Sweet, 2018 SCC 52 at para. 37. ↵
- 2009 ONCA 403 (Ont. C.A.). ↵
- Moore v. Sweet, 2018 SCC 52 (CanLII), [2018 ↵
- See also: Common Law Spouses and Estate Law https://www.wagnersidlofsky.com/articles-common-law-estate ↵
- 2018 SCC 52 (CanLII), (2018) 3 SCR 303 at para. 46. ↵
- 2014 ONCA 237. ↵
- The claimant had separated with his mother-in-law’s daughter but had been permitted to continue using the cottage. ↵
- The Court’s reason for this specific remedy was that monetary damages would be inadequate due to the “significant emotional attachment” that the claimant had towards the cottage. ↵
- 2018 ONSC 7472. ↵
- 1993 CarswellOnt 570 (Gen. Div.). ↵
- 2010 BCCA 356 ↵