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)

 

D. The Appropriate Remedy - Money or Land - Family or Commercial

A finding that the defendant has been unjustly enriched is the first step. The second is to determine the remedy. Given the ambiguous character of the constructive trust - is it a remedy in personam or one in rem - the courts have tended to approach the question of treatment cautiously.

In Rawluk, the minority took the position that the constructive trust is not a doctrine of substantive property, but a remedy for unjust enrichment. McLachlin J. held that the fact the statutory remedy may not be as advantageous did not justify altering the law of constructive trust. While not ruling it out for all purposes, she said only after the plaintiff has exhausted all of her personal remedies should the court turn its attention to the appropriateness of the constructive trust.

For the court to impose a constructive trust, it needs to be satisfied that there is a connection between the efforts of the claimant and the property. This connection however is not always going to be blatantly obvious. It can be as subtle as a recognition that one's work frees the other to create the wealth and savings that buy the asset. In Peter v. Beblow, Cory J., said:

It seems to me that in a family relationship the work, services and contributions provided by one of the parties need not be clearly and directly linked to a specific property. As long as there was no compensation paid for the work and services provided by one party to the family relationship then it can be inferred that their provision permitted the other party to acquire lands or to improve them.

Not every case of unjust enrichment will lead directly to the imposition of a constructive trust. The share will not always be equal. Dickson J, in Pettkus said:

Although equity is said to favour equality, as stated in Rathwell, it is not every contribution which will entitle a spouse to a one-half interest in the property. The extent of the interest must be proportionate to the contribution, direct or indirect, of the claimant. Where the contributions are unequal, the shares will be unequal.

Some cases will be satisfactorily disposed of by a money judgment. In Peter v. Beblow the court split on the question of when a constructive trust should be imposed and when a financial judgment would do.

Cory J., for the minority, would draw a distinction between the family cases and the commercial ones when determining the issue. He says:

The balancing of benefits conferred and received in a matrimonial or common law relationship cannot be accomplished with precision. Although it may well be essential in a commercial relationship to closely scrutinize the contributions made by each of the business partners to the acquisition of property, such an approach would be unrealistic and unfair in the context of a family relationship. Ordinarily, the trial judge will be in the best position to assess all the evidence presented and to estimate the contribution made by each of the parties. The nature of the relationship, its duration and the contributions of the parties must be considered. Equity and fairness should form the basis for the assessment.

Since the constructive trust creates a right in property and therefore priority over the legitimate claims of third party creditors, this is an additional feature that the court will consider. In the decision in Lac Minerals Ltd. v. International Corona Resources Ltd., La Forest J. concluded that the constructive trust should be utilized only where a monetary award would be insufficient, that is, in those cases where the plaintiff was entitled to the additional rights of property.

Cory J., in Peter v. Beblow, agreed with the contention in Lac but drew an interesting distinction:

I agree with my colleague that there is a need to limit the use of the constructive trust remedy in a commercial context. Yet I do not think the same proposition should be rigorously applied in a family relationship.

He would make an exception for those cases where the rights of bona fide third parties would be affected or might otherwise render it inappropriate to award a constructive trust. This distinction in the remedy available in a commercial context versus the family case, he reasoned, is rooted in what the parties would have contemplated which is very different. He writes that if couples were asked, at the commencement of the relationship, about their expectations, they would say:

... if the relationship were ever to be dissolved, they would expect that both parties would share in the assets or wealth that they had helped to create. Thus, rather than expecting to receive a fee for their services based on their market value, they would expect to receive, on a dissolution of their relationship, a fair share of the property or wealth which their contributions had helped the parties to acquire, improve, or to maintain.

McLachlin J., for the majority in Peter v. Beblow, took a more cautious approach, saying that "A special rule for family cases finds no support in the jurisprudence." Concerned that there must be a link between the services rendered and the property claimed, and that there was no necessity for a distinction between commercial an family cases, she warned:

In short, the concern for clarity and doctrinal integrity with which this court has long been preoccupied in this area mandates that the basic principles governing the rights and remedies for unjust enrichment remain the same for all cases.

In a commercial case, restitution is the first remedy we think of, for we have the notion that business is business and not a matter of the heart or conscience. If we are able to quantify the claim, the first impulse is to set the party back to his or her original position. In a family case, McLachlin J. would not impose a constructive trust unless a money judgment would be inadequate and there was a special link between the efforts and the property.

It is almost always difficult to quantify the contribution and therefore the resulting entitlement. In family cases, the marketplace analysis seems inappropriate for many reasons, not just the difficulty of quantification. While the parties cohabit they are each enjoying the benefits they are conferring on the other.

The give and take of communal life goes beyond the financial. There will likely be no records and no reasonable way of to assess the value of creating a home where children can be safely and responsibly raised to adulthood. The notional ledger card approach quickly breaks down. Constructive trust, an award directed to a sharing of the surviving net wealth of the parties, rather than a money award based upon the quantum meruit tally of contributions, will often seem more appropriate, particularly where the relationship is long term.

Unless the acquisition of the property is inextricably connected to the efforts of the petitioner, the court will usually shy away from the trust remedy. In Orobko v. Orobko, decided in 1992, that is prior to Peter v. Beblow, the Manitoba Court of Appeal appeared to prefer the damages approach even where a direct financil link to the acquisition of property was shown.

In Orobko, the parties lived together for 30 years, the first 4 years in rented accommodation. A house was purchased for $11,200 to which the petitioner contributed $500.00 of the $1,200.00 down payment. Findings by the trial judge were that she had contributed to the family's support by him living rent free in her accommodation for the first four years of the relationship and that, until her disabling accident, she contributed financially to the family, which enabled him to pay off the mortgage. The Court of Appeal, despite strong credibility findings against the respondent, overturned the trial judge's finding that the residence jointly occupied for 26 years belonged to each as to a half interest.

Quoting Davidson J., in Stanish v. Parasz, with approval, the court agreed that:

... the court must look at the reasonableness of the bargain - the quid pro quo. Perhaps, to some degree, it can always be said that there is an enrichment to the person receiving the household services, and a deprivation to the person that remains out of the work force for a period of time to provide the services, but there is not the absence of a juristic reason, if the party supplying the services is sufficiently compensated in return. The enrichment must be unjust. It must be against the conscience that the recipient should be allowed to retain the benefits without compensation.

The court found that the contribution had to be proportionate to the interest claimed, as a finding of constructive trust does not necessarily lead to a presumption of equal sharing. Pointing to the fact that the respondent supported her children, paid most of the expenses, and that the petitioner ultimately became dependent on him (as evidenced by the trial judge awarding support under The Family Maintenance Act) the court limited the remedy to the down payment she had supplied, which it grossed up for current real estate values to $3,000.00.

In Sorochan, as discussed above, the court saw no difficulty in making a combined property and money order. In Peter v. Beblow, the plaintiff received all of the property in which she claimed a constructive trust. Cory J. found this result acceptable on a quantum meruit basis, that is, compensation for the excess value she contributed, although he would normally prefer the value survived approach, and McLachlin accepted it on a value survived basis, taking into account all of the family property.