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July 2011 - view full issue
Supreme Court of Canada Clarifies Unjust Enrichment Principles
By Lauren Liang.
The Supreme Court of Canada has recently released an important decision which caps a recent trend to expand the meaning of "juristic reason" in the context of unjust enrichment claims and clarifies the calculation of compensation where unjust enrichment is found. Kerr v. Baranow,  S.C.J. No. 10 is a joint decision on two appeals, Kerr v. Baranow, 2009 BCCA 111 from British Columbia and Vanasse v. Seguin, 2009 ONCA 595 from Ontario. Although the decision was made in the context of a division of assets under family law, the principles set out may be equally applicable to estate claims, especially those made by a surviving common-law spouse.
To successfully claim unjust enrichment against another person, a claimant must prove three things:
- the person received a benefit,
- the claimant suffered a loss corresponding in some way to the benefit, and
- there was no juristic reason for the benefit and the loss.
"Juristic reason" means a reason/explanation based upon law for the enrichment of one at the detriment of another. If there was a juristic reason for the enrichment, then it was not "unjust" and the courts will not provide a remedy.
In Kerr v. Baranow, the couple separated after a common law relationship of more than 25 years during which each had contributed in various ways to the relationship. Ms. Kerr's unjust enrichment claim against the property was based on indirect contributions she had made. The trial judge awarded Ms. Kerr a third of the value of the home in Mr. Baranow's name that they had shared. The BC Court of Appeal set aside the trial judge's conclusion on the ground that Mr. Baranow's direct and indirect contributions for which he was not compensated, including caring for her after a debilitating stroke, constituted a juristic reason for any enrichment which he experienced at her expense. On appeal the Supreme Court of Canada was asked to rule whether the BC Court of Appeal erred in assessing Mr. Baranow's contributions as part of the juristic reason analysis, which cut short the analysis of Ms. Kerr's unjust enrichment claim.
In Vanasse v. Seguin, the couple separated after a 12-year common law relationship. The trial judge found that Mr. Seguin had been unjustly enriched at Ms. Vanasse's expense during the period in which their children were born, but found no unjust enrichment for the rest of the time that they cohabited. The trial judge awarded half of the value of the wealth accumulated during the period of unjust enrichment. The Court of Appeal set aside that award on the basis that the award should be calculated by determining the value of the services that each party had contributed, and setting them off against each other. Accordingly, the key issue on appeal to the Supreme Court of Canada was how to quantify a monetary award for unjust enrichment.
As the Court noted, an unjust enrichment analysis in domestic situations may be complicated by a mutual conferral of benefits, in the sense that each party contributes in various ways to the welfare of the other. The Court clarified that the presence of mutual benefits should not generally be considered a "juristic reason" which would prevent the claimant from maintaining an unjust enrichment claim. Instead, analysis of mutual benefits should be considered mainly at the defence and/or remedy stage, by setting off the value of benefits received against benefits conferred. Accordingly, the Court held that BC Court of Appeal erred in denying Ms. Kerr's unjust enrichment claim by considering the mutual conferral of benefits at the juristic reason stage of the analysis.
Once the claimant has established each of the three elements of unjust enrichment, then remedies may be either a constructive trust or a monetary award. The constructive trust is a remedy that gives the claimant an interest in property. In order for a constructive trust to be found, the claimant must demonstrate a causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property, and that a monetary award would be insufficient. If the claimant cannot demonstrate that a constructive trust is appropriate, then a monetary order is usually awarded instead. The Supreme Court of Canada clarified that in determining a monetary remedy for an unjust enrichment claim: a) the Court is not restricted to applying a fee-for-services approach, and b) where the unjust enrichment is best characterized as one party retaining a disproportionate share of assets resulting from a joint family venture, it should be calculated on the basis of the share of those assets proportionate to the claimant's contribution. On that basis, in the Vanasse v. Seguin appeal, the Supreme Court of Canada confirmed the quantum of the monetary award made by the trial judge.
The key points to remember are:
- In domestic situations, mutual conferral of benefits by the parties by itself will not deprive a party of an unjust enrichment claim. Rather, the benefits received by the unjust enrichment claimant may be used to reduce the award to which the claimant is entitled.
- When an unjust enrichment claim is established and both parties have made extensive but different contributions to the welfare of the other, and as a result, have accumulated assets, the monetary award is unlikely to be based on a minute by minute allotment of the give and take of daily domestic life, but rather on the claimant being a co-venturer.
Your Estate Matters is produced by the Wealth Preservation Group at Clark Wilson. The information and links in this newsletter should not be treated by readers as legal advice and ought not be relied upon without further, detailed legal counsel being sought.