Unjust Enrichment

An Article by Len Fishman

(NOTE: This article was written for a Law Society of Manitoba 
Continuing Legal Education Seminar on March 5, 1996
 and has not been updated)

(Table of Contents)

C. Unjust Enrichment

1. The Wrong

An unjust enrichment occurs where one party gains a valuable, typically financial, advantage from another without colour of right. Where a bank mistakenly puts money in an account, or a merchant pays the wrong account, the recipient has no right to retain the windfall. Similarly, where someone performs work for another, expecting compensation, or another form of reward, there might be an unjust enrichment if the recipient fails to deliver an equitable recompense. The defendant has gained something, taken advantage, or feathered his nest, and there is no lawful reason for it.

Where the plaintiff has supplied personal effort, provided consumables, or paid for other expenses for the family, the link to the property, which might have also been contemporaneously acquired in the defendant's name, is not direct enough to justify a resulting trust. Clearly, there has been a valuable contribution and, equally clearly, there has been a benefit to the defendant. To have her purchase interest recognized in these circumstances, the plaintiff must seek a finding of unjust enrichment and satisfy a court that a constructive trust should be the remedy.

We consider in this paper two broad categories where the remedy of unjust enrichment has application in family law: the first is direct, perhaps the only relief in the tantamount to spousal situation; and the second is as a supplement to the rights provided to the lawfully wed by The Marital Property Act.

First, we will take a brief look at the factual progression of the caselaw.

2. Some of the Cases

The most important of the recent cases in the family law context are, in chronological order:

Pettkus v. Becker

Rosa Becker who won her case in the Supreme Court of Canada, but twenty years later had still not collected her judgment, recently committed suicide apparently penniless. In the first five years of their 20 year union, she supported Lothar Pettkus while he saved to acquire a bee farm. She then worked with him side by side for 14 years in the enterprise. The property was acquired solely in his name and on separation he took the benefit of the proceeds.

The Supreme Court of Canada held that he held his assets in trust for her as to one half, imposing a constructive trust because of the unjust enrichment.

Sorochan v. Sorochan

After a de facto marriage of 42 years, from 1940 to 1982, during which Mary Sorochan performed all of the domestic duties, looked after the family's six children and worked long hours on the mixed farming operation, often maintaining sole responsibility for it, improving and preserving it, while Alex Sorochan worked elsewhere for extended periods as a salesman, she claimed an interest in the farm.

Prior to the relationship, title to the property was in the joint names of Mr. Sorochan and his brother. In 1951, when the brothers partitioned the land, she was asked to sign conveyancing documents purporting to bar her dower in the brother's portion. When she had asked Alex, after the birth of their first child in 1941, to marry her he responded "later on" and, in 1971, when she asked him to place part of the property in her name he refused.

The Supreme Court of Canada held that by her efforts she had maintained and preserved the property which but for her might have gone into decline and been lost altogether. It upheld the trial court's mixed award of one-third of the land acquired and a lump sum of $15,000.00 if paid quickly and $20,000.00 if not. The total value of the award amounted to something less than half of the value. The high court also deleted the lower court's provision that the land be held in trust for her children, reasoning that it was hers to deal with.

Rawluk v. Rawluk

The parties were married for 29 years before their permanent separation. They ran a farm equipment business, a family farm which the husband acquired shortly after marriage when his father died, and their own farm. The business had been acquired two years prior to marriage by the husband. The wife played a major role in the business, actively assisted in the farm operation, and assumed full responsibility for the home and care of their three children.

In addition, the wife contributed $7,000.00 of her inheritance to their enterprise. Wanting some independence, she enrolled in night school and 10 years before separation took a part-time job. The outside employment, as a nursing assistant, was thus restricted as he complained about her absence from the business operations. After separation the property, all taken and held in the husband's name with the exception of the cottage property put in her name for tax purposes, dramatically increased in value.

In addition to her claim for an unequal division under the Ontario Family Law Act, 1986 (hereafter the "F.L.A."), she sought a constructive trust to share as a property owner in the increase in value. A major hurdle was the argument that the F.L.A., with its statutory remedies, had supplanted the law of equity.

The Supreme Court of Canada, split 4:3, held that the F.L.A. remedy was insufficient to do justice to her claim. On a constructive trust application, in which she would have succeeded had there been no statute, her award would have been significantly higher than what the F.L.A. allowed. The court held, per Cory J. writing for the majority, that the Act did not oust the common law and that her claim could succeed. The F.L.A was found not to be a complete and exclusive code, but open to the equitable remedy which:

... enables the court to bring that treasured and essential measure of the individualized justice and fairness to the more generalized process of equalization provided by the Act.

Peter v. Beblow

In this case there was a common law relationship of some 12 years, from 1973 to 1985. Mr. Beblow, who worked out of town a fair amount, and who had previously lived common law and hired housekeepers to look after his two children, asked Ms. Peter to live with him and look after his children. Apparently child welfare authorities had let their interest in his child care arrangements be known.

She moved onto the Sicamous, B.C. property (hereafter "Sicamous") which he had purchased shortly before, with her 4 children. She looked after his children, and her own, until they moved out, first his and then hers. After the first year, she worked outside the home, contributing financially (although less than him) to the family's needs, and working in and around the home, improving it, gardening and raising chickens for the family's consumption.

Beblow drank and was abusive, which ultimately induced her to leave. During the union, to which she came with $100.00 in savings, she acquired a separate property which at the time of trial was worth about $6,500.00. He had a houseboat, a cabin cruiser, a van and had paid off the Sicamous mortgage. Sicamous was worth approximately $23,200.00.

By the trial, he had retired on his pension, partially accrued during cohabitation, and Sicamous stood vacant. The lower court, having found unjust enrichment, took a quantum meruit approach to analyze her deprivation, calculating the wages he would have had to pay her based on what he had paid a predecessor, then discounted it for the value of the accommodation she received. On this analysis he would have owed her $25,200.00.

Her work on the property itself, coupled with it being vacant led to the presumption that she had an emotional attachment to the property which he did not. Because he did not have the apparent means to satisfy such a restitutionary judgment, she was awarded all of Sicamous in an application of the constructive trust that the Supreme Court of Canada found was "eminently suitable".

3. The Test For Unjust Enrichment

The requirements for a finding of unjust enrichment, which are set out in these cases. They can be summarized as follows:

The exercise begins with an examination of the relationship of the parties and the roles they played. The plaintiff will argue that she has made a contribution, in a collaborative relationship, which ought to be recognized for compensation. She will ask for damages or an interest in the property. or both. The defendant may argue she has done nothing out of the ordinary and that she was compensated fairly during the relationship.

a. The Contribution:

The plaintiff's contribution may have taken the form of domestic services, such as housekeeping, child care, unpaid work in the defendant's business, yard work, repairs or renovations, and may also include financial or quasi-financial contributions such as the purchase of consumables for the family, raising animals or tending a garden for food.

Whether alone or in combination, these features are usually all untraceable in monetary terms. To complicate the analysis, routinely the provider of the service will have reaped a coincident and concurring benefit, such as shared meals, laundry, social comforts, the raising of her own children, security or other intangible, unquantifiable rewards of a shared life.

b. Enrichment:

The enrichment of the defendant is a simple concept. Has the defendant gained something, improved his lot, bettered himself, gotten ahead, as a result of the efforts of the plaintiff? The question will usually answer itself: the defendant will have visible assets, a piece of property, may have paid off a mortgage, may have improved his property, or may have had his property saved from ruin through neglect. Almost anything done for the defendant will enrich him in one way or another.

The question of enrichment is an objective one.

c. Deprivation:

The deprivation of the plaintiff is usually the other side of the enrichment coin, although not always as obvious. The plaintiff will have put herself out caring for the defendant's interests and in the process will have sacrificed her own opportunities, her energy, her free time, her future, her prospects.

Cory J., in Peter v. Beblow, summarizes the issue as follows, in the process creating a new presumption:

Particularly in a matrimonial or long-term common law relationship it should, in the absence of cogent evidence to the contrary, be taken that the enrichment of one party will result in a deprivation of the other.

d. No Juristic Reason:

The phrase, "no juristic reason", at once seems clear and yet elusive. It would seem to mean the same as "no lawful reason" or "not required by law". Cory J. approves of previous definitions in his judgment:

When a claimant is under no obligation contractual, statutory or otherwise to provide the work and services to the recipient, there will be an absence of juristic reasons for the enrichment.

Where there is inducement, the plaintiff's remedy, in addition to unjust enrichment, may also be contractual or the defendant may find himself estopped by his representation.

In Manitoba, for those who are married The Family Maintenance Act creates a statutory duty of mutual support:

S. 4(1) Spouses have the mutual obligation to contribute reasonably to each other's support and maintenance.

The statute goes further to clarify how that contribution might consist of so-called normal domestic duties:

7(2) Any housekeeping, child care or other domestic service performed by a spouse for the family is a contribution to support and maintenance within the meaning of section 4 in the same way as if the spouse were devoting the time spent in performing that service in gainful employment and were contributing the earnings therefrom to support and maintenance.

Non-married spouses who live together for one year and have a child of the union are treated as if married by the terms of The Family Maintenance Act. Absent children, where they have lived together for 5 years or more "in a relationship in which the applicant has been substantially dependent upon the other for support" the support and related remedies of the Act apply.

These statutory provisions may provide the juristic reason. An interesting twist on this point is found in the Manitoba Court of Appeal case of Orobko v. Orobko, discussed more fully below, where the petitioner's dependence was used to deny her a half interest in the property, in respect of which she had made a direct, partial contribution, to its purchase. The court gave her some restitutionary compensation for her investment, a return of her contribution grossed up to compensate for the increases in real estate values over time.

It may be preferable as McLachlin J. wrote for the majority in Peter v. Beblow to consider the benefit-detriment analysis as part of the moral and public policy questions inherent in the question of juristic reason. She refers to the question of what were "the legitimate expectations of the parties" and said:

In family cases, this concern may raise the following subsidiary questions:

(i) Did the plaintiff confer the benefit as a valid gift or in pursuance of a valid common law, equitable, or statutory obligation which he or she owed to the defendant?

(ii) Did the plaintiff submit to , or compromise, the deendant's honest claim?

(iii) Does public policy support the enrichment?

e. The Defendant's Arguments:

The defendant has some important questions to raise. Were the services requested or induced? Did the defendant freely accept them? Did he have an opportunity to reject them? He may argue that what she did she did for love, without expectation of return. He may argue gift, that the services were rendered freely without any expectations, or strings attached. Had he known that accepting the services imposed a restitutionary obligation, he would not have accepted them.

He would say it was never discussed and that he had no idea that she was entitled to compensation. We were each independent, free-willed, self-determining adults, he would say, making our own choices and accepting the natural consequences. That's why we never married!

These arguments occasionally succeed, but mostly they are straw men. The defendant will know that the service has been rendered, and he surely accepted it. It will be difficult to argue with a straight face that the service was imposed without an opportunity for it to be declined, that he took no benefit of it or that it had no value. His best argument, short of proving that they actually agreed to something else, is that she was adequately compensated.

Cory J. again articulates a presumption in answer to these defenses:

However, in today's society, it is unreasonable to assume that the presence of love automatically implies a gift of one party's services to another. Nor is it unreasonable for the party providing the domestic labour required to create a home to expect to share in the property of the parties when the relationship is terminated. Women are no longer expected to work exclusively in the home. It must be recognized that when they do so, women forgo outside employment to provide domestic services and child care.

Overruling the Manitoba Court of Appeal's decision in Kwshywieski v. Kunka which turned on the absence of a promise to marry, he went further:

It is not necessary that there be evidence of promises to marry the claimant for the services provided. Rather, where a person provides "spousal services" to another, those services should be taken as having been given with the expectation of compensation unless there is evidence to the contrary.

The cases create a rebuttable presumption that, in a marital or quasi-marital context, services are rendered with the expectation of compensation and that the donee is aware of it.

Where the relationship is longstanding and marriage-like, the court will likely assume an inherent vulnerability. The relationship is readily seen as fiduciary, and the plaintiff helpless to assert her rights, susceptible to harm, and powerless to prevent the injurious exercise of discretion by the defendant.