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Unjust Enrichment: Granger v. Granger

#Family #Property #Division, #Partition and #Sale, #Unjust #Enrichment, #Constructive #Trust, #Title #Dispute, #Undue #Influence, #Power of #Attorney, #Family #Court #Trial, #Civil #Court #Trial, #Appeal”

*Granger v. Granger, 2016 ONCA 945

“J lived with his mother, K, in the family home for 30 years. He claimed that he looked after K and the house and that K initially promised him that he would have half the house on her death and later promised him that he would have the entire house when she died. In 2012, exercising a power of attorney given to her by K, J’s sister H transferred title to the house to herself and K as joint tenants. K and H brought an application for a writ of possession to evict J from the house. J brought a counter application challenging H’s power of attorney and seeking a beneficial interest in the property. The trial judge, sitting as the application judge, found that K was competent and dismissed J’s allegation of undue influence. He granted K and H’s request for an order evicting J. He ordered a trial of an issue as to whether K and H held their interests in the property for J by way of constructive trust, or whether J was entitled to damages for his financial and other contributions to the property and to K’s care and maintenance. He ultimately dismissed J’s claims. J appealed.

Held, the appeal should be allowed.

The trial judge erred in his application of the test for unjust enrichment by fail- ing to allocate properly the burden of proof in a case that involved the mutual conferral of benefits. He took into account the benefits conferred by K on J at the benefit/detriment stage of the analysis by considering whether J had conferred a “net benefit” on K. The benefits conferred on a claimant should ordinarily be considered at the defence/remedy stage of the analysis, where the defendant bears the burden of proof. (In limited cases, mutual benefit conferral can be considered at the juristic reason stage of the analysis to the extent that it provides relevant evidence of the existence of a juristic reason for the enrichment.) There was no reason to interfere with the trial judge’s conclusion that J failed to establish that he conferred a benefit on K by giving her money over the years. However, J had established that he conferred the benefit of his personal domestic services on K. The evidence established that J contributed $438,113 in domestic services to K and enriched her in that amount. He suffered a corresponding deprivation. K and H did not point to any juristic reason for the enrichment. K failed to establish that she conferred an offsetting benefit on J in the form of rent-free accommodation. She testified that she never expected to receive rent from J. Moreover, the trial judge did not make a finding that J did not pay rent. In effect, he found himself unable to determine whether the evidence showed that rental payments had been made. As he placed the burden of proof on J, he was not satisfied that rent had been paid. However, at that stage, the burden should properly have been placed on K. J’s claim for unjust enrichment was made out. He was entitled to equitable damages in the amount of $438,113.

The trial judge’s emphatic findings at trial about H’s domineering and bullying nature and her influence over K were inconsistent with his earlier findings on J’s application that there was no evidence that H exerted undue influence on K. Accepting those trial findings as fresh evidence, the dismissal of J’s application should be set aside, the application should be allowed and H’s power of attorney should be revoked.

Proprietary estoppel

………… in Clarke v. Johnson, [2014] O.J. No. 1481, 2014 ONCA 237, 371 D.L.R. (4th) 618, the trial judge set out the following test for a claim of proprietary estoppel:
(i) the owner of the property induces, encourages or allows the claimant to believe that he/she has or will enjoy some right or benefit over the property;
(ii) in reliance upon his/her belief, the claimant acts to his detriment to the knowledge of the owner; and
(iii) the owner then seeks to take unconscionable advantage of the claimant by denying him/her the right or benefit which he/she expected to receive.

The correct approach: Kerr v. Baranow

..The more nuanced allocation is explained by the Supreme Court of Canada in Kerr v. Baranow, [2011] 1 S.C.R. 269, [2011] S.C.J. No. 10, 2011 SCC 10. Cromwell J., writing for a unanimous court, focused directly on mutual benefit conferral and explained at what point in the analysis it should be considered. He stated that, generally, mutual benefit conferral is to be considered at the defence or remedy stage. In limited cases, it “can be taken into account at the juristic reason stage of the analysis, but only to the extent that it provides relevant evidence of the existence of a juristic reason for the enrichment”: para. 109.

..Cromwell J. explained the reason for this approach. He explained, at para. 110, that not addressing mutual benefits at the benefit/detriment stage of the analysis “is consistent with the quantum meruit origins of the fee-for-services approach and, as well, with the straightforward economic approach to the benefit/detriment analysis which has been consistently followed by this Court”. At para. 112, he added that “[r]efusing to take mutual benefits into account at the benefit/detriment stage is also supported by a straightforward economic approach to the benefit/detriment analysis which the Court has consistently followed”.

..Cromwell J. stressed that this approach should be used where the alleged enrichment consists of services. He said, at para. 113: “Provided that they confer a tangible benefit on the defendant, the services will generally constitute an enrichment and a corresponding deprivation. Whether the deprivation was counterbalanced by benefits flowing to the claimant from the defendant should not be addressed at the first two steps of the analysis” (emphasis added).

..Cromwell J. went on to state that mutual benefit conferral may in some cases be considered at the juristic stage of the analysis but only to shed light on the parties’ reasonable expectations. He explained, at para. 115: “given that the purpose of the juristic reason step in the analysis is to determine whether the enrichment was just, not its extent, mutual benefit conferral should only be considered at the juristic reason stage for that limited purpose”.

..First, the structure of Kerr itself confirms this view. At paras. 80-100, Cromwell J. outlines the proper approach to a claim for monetary relief based on unjust enrichment in a joint family venture. Where a joint family venture has led to wealth generation, the remedy should be calculated based on the share of those assets proportionate to the claimant’s contributions. Then, at paras. 101-108, Cromwell J. addresses the difference between that situation and one where relief must be calculated on a “fee-for-services” basis. Both may involve mutual benefit conferral. In the joint family venture context, the analysis takes mutual benefit conferral into account in assessing relative contribution to the joint assets. By contrast, in the fee-for-services approach, mutual benefit conferral is taken into account in the manner outlined at paras. 109-15 — namely, it is taken into account as a “set-off”, typically at the defence stage of an unjust enrichment analysis.

…Second, Cromwell J. explicitly draws on non-family case law in explaining why mutual benefits should not be taken into account at the “benefit/detriment” stage of the analysis. At para. 112, Cromwell J. holds as follows: “Refusing to take mutual benefits into account at the benefit/detriment stage is also sup- ported by a straightforward economic approach to the benefit/detriment analysis which the Court has consistently followed. Garland is a good example” (emphasis added). At para. 113, he goes on to state that although Garland dealt with payment of money, the same approach should apply where the alleged enrichment consists of services. These references to Garland v. Consumers’ Gas Co. (1998), 40 O.R. (3d) 479, [1998] 3 S.C.R. 112, [1998] S.C.J. No. 76 and the court’s “straightforward economic approach” make it clear that Cromwell J. viewed his comments regarding the appropriate point at which to consider offsetting benefits as having a more general application outside of the family context.

…Third, scholarly commentary suggests that Cromwell J.’s comments regarding the appropriate stage of the analysis to consider offsetting benefits apply outside the family context. In P.D. Maddaugh and J.D. McCamus, The Law of Restitution (loose-leaf), Vol. II (Toronto: Canada Law Book, 2016), the authors point to “housekeeper” cases as an example of where Cromwell J.’s comments would apply, at 34:700. They explain as follows:
Where, in the typical case, a housekeeper is persuaded by an elderly gentle- man to provide him with housekeeping services until his death on the basis of an unenforceable promise that he will leave his home by will to the housekeeper, housekeepers have been allowed to bring successful quantum meruit claims for the reasonable value of the services rendered in the expectation of compensation. In such a case, it might be argued that the free room and board, if any, provided by the deceased could constitute a mutual benefit that ought to be taken into account in reducing the award. The correct analysis of such a problem, in our view, would turn on whether the room and board provided to the housekeeper was understood by the parties to constitute partial compensation for the services rendered. If the parties did indeed have such an understanding, it seems inescapable that the value of that benefit should be deducted from the ultimate fee-for-services award. If, on the other hand, the parties’ understanding was that the room and board was being provided gratuitously and that the only compensation for the services rendered would be the home, no deduction would be appropriate, in cases where the facts concerning the parties’ intentions on this point were less than clear, the Court would be confronted with a difficult factual determination…

In Kerr, the discussion of the mutual benefit issue in a fee-for-services con- text is quite focused on the juristic reason test from the Garland calculus and the perceived problem of determining precisely where the mutual bene- fits would be taken into account in the Garland calculus. For Cromwell J., the correct approach in this context would be not to consider the mutual benefits provided by the defendant at the “benefit/detriment” phase of the Garland analysis. One would simply ask whether a benefit was conferred and, if so, whether there was a corresponding deprivation suffered by the plaintiff. Mutual benefits provided by the defendant might be relevant, in the Court’s view, in the juristic reason stage of the analysis. The fact that parties had agreed to exchange benefits might be relevant in establishing what the “reasonable expectations” of the parties are, a factor which, as noted above, might be relevant in that context.

(Emphasis added)

….Fourth, provincial appellate courts have applied Kerr out-
side the family context on many occasions: see, for example,
Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., [2011] O.J. No. 2476, 2011 ONCA 418, 278 O.A.C. 216, at paras. 44-57; Aviva Insurance Co. of Canada v. Lombard General Insurance Co. of Canada (2013), 116 O.R. (3d) 161, [2013] O.J. No. 2851, 2013 ONCA 416, at paras. 47-60; Clarke v. Johnson, [2014] O.J. No. 1481, 2014 ONCA 237, 318 O.A.C. 186, at paras. 62-72; Haigh v. Kent, [2013] B.C.J. No. 1873, 2013 BCCA 380, 364 D.L.R. (4th) 544, at paras. 31-48; Economical Mutual Insurance Co. v. Bank of Nova Scotia, [2015] N.J. No. 189, 2015 NLCA 29, 367 Nfld. & P.E.I.R. 297, at paras. 27-41.

…Of particular note on this point is the decision in Watson v. Bank of America Corp., [2015] B.C.J. No. 1775, 2015 BCCA 362, 79 B.C.L.R. (5th) 1. Watson was a class action certification case. Merchants proposed to certify a class to sue credit card companies for costs imposed by their credit card infrastructure. They advanced various causes of action, including unjust enrichment. One of the defence arguments against certification was that the plaintiffs would not be able to demonstrate a “net” harm to the merchants because of various offsetting economic effects: paras. 162-65.

…The court analyzed the significance of this argument with respect to the unjust enrichment claim, at paras. 175-81. Interestingly, the defendants attempted to use Kerr to support their offset argument. They relied on Cromwell J.’s comment, at para. 104, that mutual enrichments may be considered at the juristic reason stage “to the extent that the provision of reciprocal benefits constitutes relevant evidence of the existence (or non-existence) of juristic reason for the enrichment”. The court rejected this argument. The court noted [at para. 179] that the defendants “overstate the import” of the comments made in Kerr, a family case. But it nevertheless held, relying on Garland, that the appropriate stage to consider offsetting benefits is at the second stage of the analysis, where the defendants would bear the onus of proof.

…Fifth, and finally, applying the same approach in family venture and non-family venture cases promotes the overall doctrinal coherence of the law of unjust enrichment. Cromwell J.’s decision in Kerr was itself an attempt to harmonize various strains of the unjust enrichment jurisprudence. As he noted, at para. 33, “there is and should be no separate line of authority for ‘family’ cases developed within the law of unjust enrichment”. Rather, the rights and remedies for unjust enrichment should be the same for all cases.

…At the final stage of the prima facie case of enrichment analysis, the plaintiff must show that the enrichment did not occur pursuant to an established category of juristic reason. These categories include contract, disposition of law, donative intent, and other valid, common law, equitable or statutory obligations. If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis: Kerr, at para. 43. The de facto burden of proof then switches to the defendant to show there is a reason why the enrichment should be retained because in all the circumstances there is another reason to deny recovery even though the case falls outside the existing categories of juristic reason: Kerr, at para. 44. Cromwell J., at para. 114, stressed that the analysis of juristic reason at this stage is not to determine the value of the enrichment or whether reciprocal benefits should be set off against the enrichment. At this stage, the limited role of considering reasonable expectations is to reveal whether there is a reason for the defendant to retain the enrichment. Generally, reciprocal benefits are to be considered at the defence/remedy stage…”

*source: Ontario reports

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