As innovative as the decision might seem, Kerr v. Baranow represents nothing more than a renovation and modernization of the law of unjust enrichment.1 The cause of action is relatively well-established, as is its analysis. The Supreme Court of Canada has merely tweaked or reinforced each step of the original analysis.
Yet only relatively recently is the general public catching up to the notion that unmarried couples have both statutory and common law claims. The Defendant’s lawyer’s initial challenges arise partially from the general public’s slowly evolving recognition of this claim, and accordingly, the client management issues that can result.
Also, when the Supreme Court releases a landmark decision in a controversial area, it will be for lower courts, over many years, to work out the details. Uncertainty and unpredictability continues to surround the evaluation of unjust enrichment claims. As a result, the Defendant’s lawyer’s efforts toward advising their client, including the exploration of settlement options, have not yet been greatly assisted by the Alberta courts.
1. THE UNJUST ENRICHMENT DEFENDANT
The challenges for counsel defending an unjust enrichment claim begin early. Often you are advising a person who has taken steps to avoid exposure they believed to be restricted to those less fortunate than them – legally married couples confronted with divorce.
There are any number of reasons that couples elect to cohabit as opposed to marry. Many couples have done so purposefully, unlike those for whom it is merely a precursor to marriage, or those for whom the option of legal marriage is temporarily unavailable.
In many cases, your client has resisted the urge toward a legal union in an effort to promote personal financial planning, and not without their own version of sacrifice and commitment. Perhaps they perceive that they have suffered the associated stigma. They have committed to keep their finances distinct and separate. They have kept their property in their sole name. Some of them have meticulously recorded, documented and catalogued the parties’ acquisitions and contributions throughout the relationship to mitigate the risk of any “blurred lines” drawn between stakes in property in the event of separation.
You are now advising them that, with the evolution of the common-law, notwithstanding these efforts, they face much of the same exposure that they would have had they been legally married. That message is not usually well-received.
Given that even many legally married spouses are unaware of their full exposure on divorce, one can imagine how abrupt and steep the litigation learning curve is for unmarried spouses. Their resentment might even lead to some revisionism as it relates to the history of their relationship. Those who were once committed domestic partners, upon hearing legal advice, are somehow transmogrified into roommates, “friends with benefits”, platonic cost-sharing partners or even landlords and tenants.
From the outset, the Defendant’s lawyer should proceed with caution. It is critical for the Defendant’s lawyer to avoid being lured into attempts to characterize the relationship and explore the legitimacy of the claim on mere intuition or their own perception of “fairness”. If nothing else, the analytical framework is at least becoming clear enough that one could apply the facts at hand, evaluate the available supporting evidence and put themselves in the position of the trier of fact.
2. PRELIMINARY CONSIDERATIONS: “EARLY CHECKPOINTS”
A. Financial Disclosure and Production
If you are acting for a client who cohabited as an alternative to legal marriage in an aim toward mitigating their exposure, you are likely acting for a client who is highly protective of their personal financial information. Throughout the course of their relationship, they might have attempted to ensure that their spouse was largely kept in the dark about their personal finances.
One of your first challenges will be conveying to your client their obligation toward financial disclosure and production.
Some have debated whether proof of an unjust enrichment claim should come before financial disclosure. As long as the claimant can allege the foundation of a claim, disclosure and production is compellable. The Defendant cannot insist on the claimant establishing entitlement before complying with disclosure and production.
As held by the Court of Appeal in Mustard v. Brache: As earlier noted, the respondent agrees that financial records disclosing the current value of the property would be relevant in the event that the court imposes a constructive trust. For reasons earlier set out, this is no answer as the information is relevant and material to the selection of the remedy. However, even in the absence of that reason, the fact that such information will be relevant and material if a constructive trust is declared, and the court must then give appropriate directions as to division of the property, is sufficient reason of itself for the production of the documents. There is no justification for bifurcating the case into two stages by first determining whether there has been an unjust enrichment and then later determining the appropriate remedy for such unjust enrichment. Accordingly, since the issues raised in the pleadings encompass the claim for a constructive trust and division of the property, all the relevant and material information must be disclosed for purposes of the trial.  In summary, whether or not Mustard can establish unjust enrichment or whether Brache may succeed in his counterclaim are matters yet to be decided. However, the issues and claims raised by the pleadings for determination at trial means the information sought by Mustard through the production of records is relevant and material.2
Also, the Defendant’s lawyer may want to asses more traditional defences early, and perhaps somewhat out-of-sequence in the unjust enrichment analysis. Although these issues may not operate as ammunition for a Summary Judgment application, their existence might colour the file accordingly, and ideally, establish some leverage from the outset:
Generally, Alberta courts accept that limitation periods do apply to unjust enrichment claims in the family law context and that the limitation period begins at the date of separation.3 However, determining the date of separation may not be as simple of an issue as it appears.
In Johansson v. Fevang, Justice Ouellette held that the applicable date of separation was an issue that had to be determined at trial. Counsel for the husband argued that the relevant limitation period began when the relationship of the parties ended. The wife argued that given that the parties were adult interdependent partners within the meaning of the Adult Interdependent Relationship Act,4 the remedy of a constructive trust did not arise until the parties became “former adult interdependent partners as defined in s. 10 of the Act.5 Specifically, under s. 10, one of the ways parties become former adult interdependent partners is to live separate and apart for more than one year, with the intention that the relationship not continue.
Justice Ouellette made no determination on what the applicable separation date was and stated, “there is very little, if any, case law which specifically sets out the point at which a limitation period begins to run in a constructive trust action”.6 This case points to the possibility of a one year gap by which to argue that the standard two year limitation date could be extended by a year after the parties separate by operation of s. 10 of the AIPA. The limitation period on an unjust enrichment claim has also been the subject of summary judgment applications. Courts do not appear to take the limitation period defence lightly. According to the Alberta Court of Appeal’s decision in Rehwald v. Kibsey, summary judgment applications and those applications that are not labelled as such but nonetheless seek relief in the nature of a summary judgment require adherence to the rules and tests set out in the Rules of Court.7 In Rehwald, the Court of Appeal allowed an appeal and overturned a decision in which an unjust enrichment claim was determined to be statute barred. The Court of Appeal decided that it was not appropriate for the chambers judge to issue “declaratory relief” in what amounted to a summary dismissal of an unjust enrichment claim without having required the procedural steps required by a summary judgment application.
Johansson was also an application for summary judgment and given the complexity of the issues of the date of separation and whether the Plaintiff’s constructive trust claim had been properly commenced, Justice Ouellette found that there were genuine issues to be tried.
Defence counsel should be cautious with a limitation argument. A limitation period may not be suitable as an issue for summary judgment given the fact-specific nature of when a limitation period is engaged.
When a Plaintiff knew or ought to have known of a claim is not necessarily as at the date of separation – the limitation period may be suspended where there has been misconduct by the other party. The Alberta Court of Appeal dismissed an appeal in Ambrozic v. Burcevski and confirmed that in circumstances where there has been fraudulent concealment of a material
fact, the usual limitation period of two years and the ultimate limitation period of ten years is suspended until the Plaintiff “ought to have discovered the facts material to the claim”.8 In that case, the parties had been divorced 28 years before the wife of the Defendant sued for unjust enrichment on work she had done in dealing with properties that were registered in the Plaintiff’s name. The trial Judge held that one-third of certain farmland in the husband’s name was held in trust for the wife on the merit of her unjust enrichment claim. On appeal, the Court of Appeal held that, in the unjust enrichment claim, the wife was not barred by operation of the Limitations Act. The Plaintiff had no cause to suspect that her ex-husband had been concealing her interest to his properties and even though she became a realtor after the divorce, she had no cause to search the titles of her ex-husband’s property “without a reason to think she would find anything”.9
A domestic contract between the parties that sets out terms of property division upon separation hardly operates as the “be-all and end-all” of a defence to unjust enrichment. You are not in summary judgment territory.
As discussed, many clients are surprised to learn of their exposure arising from the end of a cohabitation. You can imagine how incredulous they will be upon learning that a contract might not operate to offer them the expected full answer and defence to a claim.
As will be reviewed in more detail later, a contract is merely another component evaluated within the context of the unjust enrichment analysis.
3. KERR v. BARANOW: AN OUTLINE
In Kerr, Justice Huddart provided an outline of an unjust enrichment claim as follows:10
(c) Absence of juristic reason for the enrichment:
(i) Established Category, prima facie case
· Disposition of Law
· Donative Intent
· Other valid common law, equitable or statutory obligations
(ii) Reason to Deny Recovery
· Public Policy Considerations
· Legitimate Expectations
· Potential New Category
Changes of position; estoppel; statutory defences; laches and acquiescence; limitation periods; counter-restitution not possible
(e) Choice of Remedy
(i) Is a monetary remedy sufficient?
(ii) Is a constructive trust required (or equitable damages for the value of the trust interest)?
(f) Quantification of the Remedy
(i) Value received (quantum meurit basis)
(ii) Value survived (proportionate share basis) – Set-Off (equitable and legal) – Pre-Judgment Interest
As can be expected, not every claim would require an analysis of each and every step. The Defendant’s lawyer should find themselves discriminatingly picking their battles. For example, a Defendant may concede enrichment and corresponding deprivation, but emphasize that there was juristic reason.
A good number of these steps are yet to be judicially considered in Alberta. In any event, what follows is a basic exploration of the available defences to unjust enrichment, supporting evidence, and where available, judicial treatment.
4. DEFENDING AGAINST A FINDING OF UNJUST ENRICHMENT
A. Benefit and Deprivation
Typically, the benefit to the Defendant will be the most difficult component of the claim to challenge. Contributions can be direct or indirect, financial or non-financial. Particularly with long term relationships, a benefit will be relatively easy to find, and if so, a corresponding deprivation will typically follow.
The Supreme Court of Canada set the bar on this issue in Pettkus v. Becker.11 Justice Dickson (as he then was) promptly found that these first two elements were satisfied on the facts:
“Mr. Pettkus has had the benefit of 19 years of unpaid labour, while Miss Becker has received little or nothing in return”.12
Echoes of Pettkus are heard by the Court in Lemoine v. Griffith13:
An Enrichment Were the parties enriched by their relationship? I think this cannot seriously be questioned. Indicators of mutual effort include that Connie and Jamie lived together for 14 years in a relationship analogous to husband and wife. They had a child. Connie prioritized and contributed to the family’s livelihood by her provision of “domestic services.” She cooked and cleaned. She kept the home and stayed home to raise their child. Her presence, and the services she provided particularly with regard to running the home and providing child care, made it possible for Jamie to do the work that he did, over the years, as a farmer. She contributed even more directly to the family unit in relation to their home on the “home half,” supervising and pitching in on the renovations. Specifically, she broke cement, carried rock, and did all the designing, painting and staining work herself, plus assisted with the landscaping.  In addition, Connie contributed to Jamie’s farming undertakings by helping out with daily with chores, particularly during calving and harvesting times. She looked after the family’s horses and despite having no personal experience of farming, pitched in when and where she could. It is perhaps of note that Casey, her daughter, did so as well. I have no doubt that the parties intended to be and were economically integrated.  I find that Jamie was enriched by Connie’s contributions to their relationship. His net worth would not have increased as it did without Connie’s efforts and assumption of responsibilities.
A Corresponding Deprivation As to deprivation, again Connie’s situation is not very different from the classic case of a spouse who leaves the work force, partially or completely, in order to support his or her family in non-financial terms. Once again, the main difference is that Connie is not afforded the protection given spouses under the Matrimonial Property and Divorce Acts.14
This illustrates the nature of the evidence that the Plaintiff will have to offer to meet the evidentiary burden of benefit and deprivation:
- Stability and duration of the relationship;
- Itemizing of domestic services;
- Assistance with renovations and improvements;
- Income contribution to the household; and
- any other sacrifice warranting compensation.
Given the present landscape, Rubin v. Gendemann15 stands out as a stark sign post to defence counsel that as low as the bar may be, the existence of these two elements should never be taken for granted: The appellant contends that the trial judge erred in finding that the appellant’s contributions were so little as to disentitle her to any share in the respondent’s properties, particularly the increase in value of the Butchart Drive home. Indeed, it is her submission that in all circumstances the provision of domestic services is an enrichment with a corresponding deprivation. She submits that it is an error in law to value a contribution as “zero”. Although no authority is cited for this proposition, the appellant submits that this can be inferred from the Supreme Court’s decision in Kerr. We disagree. The Supreme Court in Kerr stated that it is the “unpaid provision of services (including domestic services)” that is the relevant consideration (at para 42). At no point in the judgment does the court say that the provision of domestic services in all cases grounds a claim for unjust enrichment.  Considerable evidence was adduced regarding the appellant’s contributions, both financial and non-financial, to the respondent’s properties. The trial judge found, contrary to the appellant’s submissions, that the appellant had provided no financial contribution to any of the properties and that her non-financial contributions to the various vacation properties was no more than what would be expected of a “thoughtful guest”. The appellant characterizes this statement as a fallacy, as the appellant was not a guest. The trial judge did not find that she was a “guest”. Rather, she accepted the evidence of the respondent and other witnesses that much of the housekeeping at the vacation properties was done by house cleaners or by the guests, and that meals were a joint effort. The appellant made much the same contribution as the guests. The documentary evidence also established that it was the respondent who paid for contractors to do work at the vacation properties and that he paid for dinners at restaurants and take out meals. The two properties to which the appellant contributed were the Seclusion Bay property where the appellant connected the three owners by email, kept a file of expenses, arranged a house cleaner and booked flights. The trial judge characterized this as de minimis. The second was the Scottsdale property where the appellant created a Yahoo calendar to assist with the use of the property, a task which took about 10 minutes per year.  The trial judge also considered the appellant’s non-financial contributions to the Butchart Drive home. She meticulously analyzed the appellant’s domestic contributions including the nanny’s role in the household, the appellant’s meal preparation, the appellant’s entertainment services, the appellant’s other housekeeping duties, and her alleged email/secretarial services. She also considered the appellant’s claim that she took care of the respondent’s mother. The evidence of the nanny/housekeeper, of the respondent and of other witnesses refuted the claims asserted by the appellant. Although the appellant may have subjectively believed that she had made significant contributions, the trial judge was required to assess these contributions objectively based upon all of the evidence. The trial judge’s finding that the respondent was not enriched by the appellant’s contributions is amply supported by the record and her conclusion is entitled to appellate deference.  Although the appellant characterizes the trial judge’s decision as resulting in her receiving nothing from the respondent, this ignores the trial judge’s finding that the appellant expended none of her income throughout the relationship for day-to-day expenses, resulting in a benefit to her of over $120,000 at December 2008. She received a further $118,958.93 from the date of separation to the date of trial. All of this was tax-free. This increased her net worth by 350 per cent even with a lengthy period of unemployment during the period of cohabitation, while the respondent’s net worth increased 290 per cent. The trial judge observed that if anyone had a claim for unjust enrichment, it was the respondent who chose not to pursue such a claim.  Although the trial judge was not required to consider the third stage of the unjust enrichment analysis, whether there was any juristic reason to permit the respondent to retain the benefit, she observed that the appellant received several benefits. All of the appellant’s travel costs and those of her children were paid by the respondent. She resided for free during the period of cohabitation, leaving her free to spend her income and child support payments as she chose. Her net worth increased more than that of the respondent. She deducted expenses on her tax returns as business expenses associated with working at home, that were actually paid by the respondent. She sought, obtained and pocketed reimbursement from her ex-husband for section 7 expenses which the respondent had paid. She had the use of housekeeping services from mid 2006 paid for by the respondent.  In conclusion, we discern no error in the trial judge’s application of the law of unjust enrichment or her conclusion that the appellant did not confer a benefit on the respondent.16
In Kerr, the Supreme Court of Canada stated that “[w]hile determining the proportionate contributions of the parties is not an exact science, it generally does not call for a minute examination of the give and take of daily life”.17 However, the following excerpt from Rubin should disabuse us all of any notion that defence counsel’s evidence can ever be too detailed when defending an unjust enrichment claim: The appellant submits that the trial judge erred in admitting evidence of the conduct of the parties. She submits that this evidence was not relevant to a claim of unjust enrichment. She points to six particular pieces of evidence. In our view each was relevant to a fact in issue. The respondent adduced evidence from the nursing home in which his mother resided to show that there was no record of the appellant logging in. One of the ways in which the appellant alleged that she had provided a benefit to the respondent was by providing consistent care to his mother. This evidence was clearly relevant. Another benefit which the appellant claimed to have provided was through entertaining the respondent’s friends and family. The appellant challenges the relevance of evidence given by those friends that they were made to feel unwelcome by the appellant and stopped visiting as a result. Again, the evidence was relevant. The appellant contends that evidence that third parties contributed labour without pay to a vacation property was irrelevant. But, this evidence was relevant to refute her claim that she had provided those very services. The trial judge commented adversely on the appellant’s deceit regarding her qualifications. She held herself out in her curriculum vitae and on business cards as having a Bachelor of Science degree and did not. Her qualifications were relevant to her claim for spousal support. The trial judge commented upon the amount that the appellant spent during the relationship. The appellant challenges its relevance. However, this evidence was relevant both to the appellant’s alleged financial contribution to the relationship and to her budget associated with her claim to spousal and child support. The appellant contends that evidence of clothing given to a friend was not relevant, but again this related to her reasonable needs in the context of her claim for spousal support.18
B. Absence of Juristic Reason for the Enrichment:
Even where a Court finds that there was unjust enrichment and corresponding deprivation, the defence can claim that there is a juristic reason for the enrichment to remain. At this stage, the Court must determine that there is no reason in law for the Defendant’s retention of the benefit conferred by the Plaintiff, thereby rendering the retention unjust in the circumstances.
In Kerr, the Supreme Court of Canada cited Garland v. Consumers Gas. This decision had established a two stage test in establishing the presence or absence of a juristic reason for not providing a remedy in an unjust enrichment case. At paragraph 43 of Kerr: In Garland, the Court set out a two-step analysis for the absence of juristic reason. It is important to remember that what prompted this development was to ensure that the juristic reason analysis was not “purely subjective”, thereby building into the unjust enrichment analysis an unacceptable “immeasurable judicial discretion” that would permit “case by case ‘palm tree’ justice”: Garland, at para. 40. The first step of the juristic reason analysis applies the established categories of juristic reasons; in their absence, the second step permits consideration of the reasonable expectations of the parties and public policy considerations to assess whether recovery should be denied:
First, the plaintiff must show that no juristic reason from an established category exists to deny recovery. . . . The established categories that can constitute juristic reasons include a contract (Pettkus, supra), a disposition of law (Pettkus, supra), a donative intent (Peter, supra), and other valid common law, equitable or statutory obligations (Peter, supra). If there is no juristic reason from an established category, then the plaintiff has made out aprima facie case under the juristic reason component of the analysis.
The prima facie case is rebuttable, however, where the defendant can show that there is another reason to deny recovery. As a result, there is a de facto burden of proof placed on the defendant to show the reason why the enrichment should be retained. This stage of the analysis thus provides for a category of residual defence in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery.
As part of the defendant’s attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties, and public policy considerations. [paras. 44-46]19
At this stage, the war would be waged on the validity of any existing contracts between the parties, the most tangible example of “juristic reason”.
Lemoine offers a cautionary tale for defence counsel, armed with a domestic contract, who might be tempted to put “all of their eggs in one basket”. In this case, the parties had cohabited for 14 years and had one child. They were engaged, but never married. The husband was a farmer whose net worth was deemed to have increased by approximately $3.7 million throughout the relationship as a result of various land transactions. The Court found that by staying home to raise a child, assisting in renovations and contributing to farming undertakings, the Plaintiff had conferred a benefit on the Defendant.
That case involved a Cohabitation Agreement that had been:
- Prepared by a lawyer;
- Signed by both parties, with independent legal advice;
- Included schedules of the parties’ respective assets; and
- With each party waiving any entitlement to the other’s property or any increase in value
The Plaintiff challenged the validity of the Agreement on grounds that included:
- Inadequate Financial Disclosure;
- Undue Influence & Duress; and
- Inadequate Legal Advice.
On the matter of duress and undue influence, Justice Hunt-McDonald held as follows: The problem in this instance is that what Connie thought she was signing was a waiver of all rights to claim against the farming partnership only. To be even more specific, she was told she had to waive all potential claims she might one day make with regard to Griffith Farms. That was, moreover, the requirement that Jamie and his father had entered into under their partnership agreement. While I recognize that this would have brought significant pressure to bear on Connie, I do not think that it amounted to duress.  Undue influence is an equitable doctrine that seeks to protect people from victimization by those they rely on. The focus of the legal enquiry centres on “the ability of one person to dominate the will of another, whether through manipulation, coercion, or outright but subtle abuse of power.” Goodman Estate v. Geffen, 2. SCR 353 at 377, per Wilson J.  The equitable defence of undue influence arises in two sets of circumstances. The first is where evidence can be adduced to prove that actual influence was exerted, unduly, in order to gain agreement to a particular transaction. Strong persuasion is not sufficient. The second is a presumption of undue influence that arises from the nature of the relationship between the parties, particularly at the time the transaction is being negotiated and carried out.  I consider that undue influence was at play in the circumstances surrounding the signing of the agreement. Connie was told the agreement was only with regard to the partnership. She was told she would have to leave the farm if she did not sign. She never got an advance copy of the agreement to review, she was taken to Jamie’s lawyers’ offices where his lawyer “went through” the agreement, in Jamie’s presence, and then she was sent off with a complete stranger who spent approximately 15 minutes with her before she signed the agreement.  Having established that factors of pressure amounting to undue influence were at play in the circumstances surrounding the execution of the agreement, it falls to the defendant to try to remove that taint so as to justify enforcement of the agreement. The most usual way is to show that the claimant entered into the agreement knowingly, voluntarily, and with a full understanding of what was being given up. This can be achieved by establishing that the claimant had sufficient business sophistication to understand the implications of the agreement yet chose to enter into it anyway or, instead, proving that the claimant had access to, and took advantage of, independent legal advice.20
On the matter of independent legal advice, the Court held that the Plaintiff’s lawyer had fallen woefully short of the requisite standard of care. The Court set the Agreement aside. The Plaintiff had made out a prima facie case for absence of juristic reasoning.
As we await the Lemoine Appeal decision, the grounds of which included the Court’s holding on “absence of juristic reason” it remains to be seen whether counsel for the Defendant can preserve their juristic reason argument, even with a questionable contract signed under dubious circumstances.
Kuehn v. Kuehn dealt with the validity of a Prenuptial Agreement.21 In that case, a Prenuptial Agreement was presented to the wife one hour before the wedding, and was signed with no independent legal advice. The Trial Judge set aside the Agreement and found it to be unenforceable for the purposes of matrimonial property division.
On Appeal, the Court held that an unenforceable Agreement may still be relevant to the ultimate distribution of matrimonial property in accordance with section 8(g) of the Matrimonial Property Act.22
At Paragraph 36, the Court quoted from the Court of Appeal’s decision in Corbeil v. Bebris:
“I prefer reconciliation based upon a moderated sense of the notion of enforceability. In my view, the judge cannot simply adopt and apply the agreement in the face of non‑compliance with the statutory formalities of execution. To do that would be to flout the statute. But neither does the judge pretend the agreement never happened. The judge, rather, assesses the impact of the agreement on the parties, as one of the facts in their lives and thus one of the circumstances made relevant by s. 8. That impact may be minimal or it may be significant. Difficulties may arise in applying that distinction. It is no reason to obliterate the distinction, because that too will present difficulties and raise the spectre of unjust results.”
At Paragraph 40, the Court held as follows: That evidence required the trial judge to assess the impact of the agreement on the parties. It is a circumstance made relevant by section 8(g). By dismissing the pre-nuptial agreement in its entirety and not assessing or weighing the factors under section 8(g), the trial judge erred in law and significantly misapprehended by omission the parties’ evidence in this area. It was an error in principle of failing to consider a relevant factor.23
An analogous argument has been advanced on the Lemoine v. Griffith appeal. Counsel for the Appellant argued that the same legal principle must be applied to claims for unjust enrichment where the parties entered into a domestic contract. Just as one cannot completely overlook a Prenuptial Agreement in an evaluation of Section 8 factors, one should not ignore an Agreement when assessing whether there is a juristic reason to deny or limit an unjust enrichment claim.
We shall have to wait to see whether the Court of Appeal agrees that this should not be an “all or nothing game”. This decision will undoubtedly have an impact on how lawyers defend unjust enrichment where contracts are involved.
It is worth noting that “contracts” are not isolated to domestic contracts. Leases may operate as juristic reason to possibly defeat an unjust enrichment claim. Unjust enrichment claims are frequently isolated to the house that a couple might have shared, but was owned by one party. There can be no reasonable expectation that a “tenant” would share in the increase in value of a “landlord’s” property. The lease might operate as sufficient justification for the owner to retain the benefit of the claimant’s contribution, financial or otherwise. Ideally, the lease would be seen to have set the terms of not only the commercial characterization of the parties, but also their expectations.
However, be aware that much like a domestic contract, the Court will scrutinize the lease, and the circumstances surrounding it. At best, a rental relationship might be a sufficiently compelling reason for the Defendant to retain a benefit. At worst, it will be viewed as a fraudulent document, misrepresentative of the nature of the parties’ relationship and their expectations.
In H. (K.G.) v. V. (S.L.), the parties had signed a Lease Agreement following the Defendant’s purchase of the house the parties ultimately shared.24 In dismissing the Lease Agreement as juristic reason, the Court had concluded that the lease was just another component of the parties’ ongoing effort to misrepresent the Plaintiff’s property interests, serving as a “smoke screen” against his ex-wife: After the purchase, KGH and SLV signed a one year lease with KGH as tenant and SLV as landlord. SLV signed it using her birth name “Blake”, not a subsequent married name. SLV said that the amount of rent stated in that lease to be paid by KGH to her, $1375.00 monthly, was never paid. She said that KGH told her to take that amount each month out of the money that went directly into their joint account from his employer, but she said that there was never enough left in their joint account after all their other expenses were covered. These included all his ongoing support and litigation costs.  KGH said the lease was a sham, contrived to leave the impression KGH’s expenses were much higher than they actually were, in order to deceive EH. He said SLV was a knowing party to this and that they understood between themselves that no rent was ever to be paid.  I find that the lease was a fabrication designed by them both to mislead, if not defraud, EH. If it was genuine, SLV would not have knowingly concealed her identity by signing as Suzan “Blake”. The lease was not renewed at the end of its year, even though KGH continued to reside in the property. This is consistent more with it being generated as a ruse than as genuine…
C. Other Reasons to Deny Recovery
With an absence of juristic reason, at the next step, the onus is on the Defendant to rebut the prima facie case by establishing that there is a juristic reason for them to retain the benefit that does not fall within the existing categories:
(i) Reciprocal/Mutually Conferred Benefits
As per the Court in Rubin: In this step of the unjust enrichment analysis, [sic] that the court may consider conferral of mutual benefits. This is a consideration of the extent to which the defendant has provided reciprocal benefits to the plaintiff. Justice Cromwell explains that reciprocal benefits would usually be considered at the defence and remedy stages of the analysis. Consideration of mutual benefit conferral has a limited role to play in the juristic reason analysis, but is not excluded. It should “only be considered to the extent that it provides relevant evidence of a juristic reason for the enrichment”: Kerr at para.104 and 109.25
Montgomery v. Schlender involved a couple whom had originally shared expenses while cohabiting in rented premises in the first version of their relationship.26 They then separated. After the parties reconciled, the Defendant purchased a home. The Plaintiff contributed to household expenses as she had before, and also helped with some home improvement projects. The Defendant threw the Plaintiff out after several years of cohabitation. The Defendant’s home had significantly increased in value. The Plaintiff brought a claim for unjust enrichment.
In seemingly blending the 2-part test for juristic reason, the Court held as follows: In my view there is a juristic reason in this case why Mr. Schlender should retain the benefit he obtained from Ms. Montgomery. The juristic reason is either within the first stage category, “contract” or it arises in the second stage, just and reasonable expectations inquiry. Further, there is an element of “mutual benefit conferral”, a concept discussed by Cromwell J. in Kerr (beginning at para 101), which is relevant in this context.  In my view and though it may seem a stark and cold assessment, the evidence did not establish that the relationship between Ms. Montgomery and Mr. Schlender was significantly more than that of housemates. In my view the only aspect of the relationship that suggests otherwise was its conjugal aspect and features associated with that aspect. In the context of the “juristic reason” analysis, that aspect does not have great significance.  The previously discussed contributions Ms. Montgomery made and which constitute a benefit to Mr. Schlender were made in the context of cohabiting housemates. It was part of the contract or bargain between them that she would do her share of the household chores, buy some of the groceries required for meals consumed in the house, and contribute to the household expenses by paying “rent”. It was probably not part of the bargain that she participate in the home improvement projects, but in my view she did so voluntarily in order to contribute to the improvement of the space she lived in – that is, as much for her own benefit as for Mr. Schlender’s.  In turn she received the benefit of the household chores Mr. Schlender did, which according to the evidence were approximately as extensive as those she did, the groceries he bought, the payment he made for household expenses, and the improvement of the space she lived in through his significantly greater effort in respect of household improvement. The bargain was that on these terms they each made reasonable, fair and offsetting contributions to the running of the house in which they lived.  Because it was a contract or bargain, and because the contributions of one, more or less matched the contributions of the other and were made on the basis that they were fair contributions, it would not be just to require Mr. Schlender to pay Ms. Montgomery the value of the benefit he received. In effect he has already done so by performing his side of the bargain which benefited her to the same extent that he benefited by her performance of her side of the bargain.  These considerations lead me to conclude that the bargain between them constitutes a juristic reason for Mr. Schlender retaining the benefit which has been established.27
As one would expect in any “cost sharing arrangement”, conjugal activity notwithstanding, each party would be benefitting from the relationship. The more established and identifiable that “bargain”, the more available the argument of mutually conferred benefits.
This characterization of “housemates” may have indeed turned on the Court’s finding that the Plaintiff was found not to have been involved in the purchase of the house, or significantly contributed to the increase in value.
This can be seen as distinct from KGH where the parties pooled their finances and paid all household expenses out of these pooled resources. Also, the Plaintiff had called a witness whose testimony was not lost on the Court: ….. I accepted for the most part the evidence of their real estate agent, Mr. Gilbeault, specifically when he recalled having met with both parties on at least one of the house hunting outings, that their mortgage pre-approval was in both their names, and that they wanted a house with an assumable mortgage. He said that he assumed the parties were not brother and sister or landlord and tenant but were a couple, so could not inform the Court on that point.28
(ii) Public Policy Considerations
At the second step of the juristic reason analysis, the Court may take into account whether moral and policy‑based arguments show that the retention of the benefit by the Defendant is just.
Examples of these moral and policy-based arguments have been explored recently by Alberta courts.
In KGH, the Court was indeed satisfied that the Plaintiff had established unjust enrichment, particularly as it related to the Defendant’s house. However, the evidence had led the Court to conclude that both parties had been complicit in ongoing fraudulent transgressions undertaken to mischaracterize the Plaintiff’s financial position to his ex-wife. In awarding a sum to be paid into Court, and first made available to the Plaintiff’s ex-wife, the Court had concluded that neither party should be permitted to retain any benefit from this conduct:29 She [the Defendant] should not be allowed to retain the benefit of her dishonest purpose.  She also argues that KGH should not receive any of her enrichment because of his “discreditable conduct”. She says that as a matter of public policy therefore, pursuant to the second part of the juristic reason analysis, his claim should be denied.  On this point I agree with SLV. It would be similarly unjust for this court to allow KGH to achieve his dishonest purpose, particularly by means of the very legal system he deceived, undermined and abused.  Although KGH has asked the Court to grant him an equitable remedy, he has not come with clean hands. The equitable maxim of equity not being available to those coming to court without clean hands was summarized as follows in Spry’s The Principles of Equitable Remedies, 6th ed. (Toronto: Carswell, 2001) at pp. 245-246, cited with approval in Saskatchewan Wheat Pool v Feduk, 2003 SKCA 46 (CanLII), 2003 SKCA 46, at para 50, and in 1297835 Alberta Ltd. v Xtreme Coil Drilling Corp, 2010 ABQB 539 (CanLII), 2010 ABQB 539, at para 25 (emphasis added):
The maxims that a plaintiff in equity must approach the court with clean hands and that he who seeks equity must do equity are often used in a purely rhetorical manner in cases where the refusal of relief may better be justified on more precise grounds. So many cases where the absence of clean hands is referred to may be explained by the presence of fraud, or misrepresentation, or illegality, or a breach of contract leading to a lack of readiness or willingness on the part of the plaintiff to perform his obligations.
These matters have already received consideration…
Nonetheless there are cases that are not readily explicable on any of the more limited grounds that have already been considered here, where nonetheless the plaintiff is denied specific performance according to the settled practice of the courts of equity. It may be said of these cases that they fall into two main categories. In the first category, the plaintiff is shown to have materially misled the court or to have abused its process, or to have attempted to do so.
In the second category of cases are cases where the grant of relief that the plaintiff seeks would enable him to achieve a dishonest purpose and where in all the circumstances it appears to the court to be inequitable to grant the particular relief in question. These case may indeed be said to depend ultimately on a general principle that is directed against unconscionable conduct or the absence of clean hands. But whilst this general principle is susceptible of fresh applications in appropriate circumstances, care should be taken not to extend it to cases where, by implication, it has already been held not to apply.
In the first category, specific performance may be refused if the plaintiff is shown to have materially misled the court or to have abused its process or to have attempted to do so…
In the second category of cases the court is being asked to assist unconscionable conduct on the part of the plaintiff, either by enforcing a right already improperly obtained or by otherwise furthering unconscionable purposes. So it has been said, “No court of equity will aid a man to derive advantage from his own wrong, and this is really the meaning of the maxim.” But nonetheless the undesirable behaviour in question must involve more than merely a “general depravity”; it must have “an immediate and necessary relation to the equity sued for; it must be a depravity in a legal as well as in a moral sense.” An “immediate and necessary relation”, that is, the fact that the plaintiff seeks to derive advantage from his dishonest conduct in so direct a manner that it is considered to be unjust to grant him relief, has thus been insisted on in many situations. Here it is the second category that is engaged. Granting the relief KGH requests “would enable him to achieve a dishonest purpose”, to the extent that any of the enrichment in SLV’s hands that KGH might now receive actually should be EH’s. In all the circumstances it would be grievously inequitable to grant the claim without EH first having opportunity to claim against those monies. They may have come into SLV’s hands only because of KGH’s and SLV’s deceit. Equity is always discretionary. I am not prepared to exercise that discretion in a way that may permit KGH to derive any advantage from his wrongs against EH and against the very system of justice he asks now come to his aid.
Unjust enrichment is an equitable remedy, and as such, the claimant must approach the Court with clean hands. An exposure point for defence counsel may be the absence of clean hands on behalf of the Plaintiff, which could give you the same mileage as a public policy reason to deny recovery.
In Walraven v. Tanne, the parties had cohabited for nine years.30 During the course of the relationship, the Plaintiff had engaged in fraudulent activity against the Defendant as well as against the general public.
In recognizing the Plaintifff’s discreditable conduct, the Court concluded that this constituted juristic reason to deny the Plaintiff full recovery.
D. Choice of Remedy: Monetary v. Proprietary
If the Defendant is at the remedy stage, the Court has found that unjust enrichment has occurred. In Kerr, the Court affirmed the concept that the purpose of the remedy is for the Defendant to reverse the unjust enrichment, either by reimbursing the Plaintiff with money or a proprietary interest.
Monetary awards typically suffice, and if so, an interest in property will not be granted. For practical reasons, most Defendants will favour a monetary award. When a monetary award is inadequate, a proprietary award may be required. As per Kerr: The Court has recognized that, in some cases, when a monetary award is inappropriate or insufficient, a proprietary remedy may be required. Pettkus is responsible for an important remedial feature of the Canadian law of unjust enrichment: the development of the remedial constructive trust. Imposed without reference to intention to create a trust, the constructive trust is a broad and flexible equitable tool used to determine beneficial entitlement to property (Pettkus, at pp. 843-44 and 847-48). Where the plaintiff can demonstrate a link or causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property, a share of the property proportionate to the unjust enrichment can be impressed with a constructive trust in his or her favour (Pettkus, at pp. 852-53; Sorochan, at p. 50). Pettkus made clear that these principles apply equally to unmarried cohabitants, since “[t]he equitable principle on which the remedy of constructive trust rests is broad and general; its purpose is to prevent unjust enrichment in whatever circumstances it occurs” (pp. 850-51).  As to the nature of the link required between the contribution and the property, the Court has consistently held that the plaintiff must demonstrate a “sufficiently substantial and direct” link, a “causal connection” or a “nexus” between the plaintiff’s contributions and the property which is the subject matter of the trust (Peter, at pp. 988, 997 and 999; Pettkus at p. 852; Sorochan, at pp. 47-50; Rathwell, at p. 454). A minor or indirect contribution will not suffice (Peter, at p. 997). As Dickson C.J. put it in Sorochan, the primary focus is on whether the contributions have a “clear proprietary relationship” (p. 50, citing Professor McLeod’s annotation of Herman v. Smith 1984 CanLII 1238 (AB QB), (1984), 42 R.F.L. (2d) 154, at p. 156). Indirect contributions of money and direct contributions of labour may suffice, provided that a connection is established between the plaintiff’s deprivation and the acquisition, preservation, maintenance, or improvement of the property (Sorochan, at p. 50; Pettkus, at p. 852).  The plaintiff must also establish that a monetary award would be insufficient in the circumstances (Peter, at p. 999). In this regard, the court may take into account the probability of recovery, as well as whether there is a reason to grant the plaintiff the additional rights that flow from recognition of property rights (Lac Minerals, at p. 678, per La Forest J.).31
For those Defendants who favour a monetary award, the requirement to prove this “causal link” and “insufficiency of a monetary award” should give some comfort. These are not easy evidentiary burdens for the Plaintiff to meet, and there is no better evidence of this than the dearth of decisions in which a proprietary award was granted.
In most cases, a successful claim of unjust enrichment will attract a monetary remedy. The practical financial impact that awarding a proprietary interest might have on a Defendant will also be considered. As held in Lemoine: After reviewing the case law and the facts of this case, I find this is a case where a monetary award would be adequate and I decline to award Connie any interest in any of the lands Jamie owns. I am persuaded from Jamie’s evidence that he operates the six quarter sections as an integrated farming and ranching entity which would be unjust to split up. Connie should be able to provide for herself, the child and her horses with a monetary award.32
With respect to monetary remedy, as held by the Court in Rubin:
Only once those three things have been established must the court determine the remedy, Kerr, at para. 7, makes it clear that the old dichotomy of quantum meruit or constructive trust no longer exists where common law spouses collaborate.
Where both parties have worked together for the common good, with each making extensive, but different, contributions to the welfare of the other, and, as a result, have accumulated assets, the money remedy for unjust enrichment should reflect that reality. The money remedy in those circumstances should not be based on a minute totting up of the give and take daily domestic life, but rather should treat the claimant as a co-venturer, not as hired help.33
There are two means by which to value a monetary award for unjust enrichment. The “value survived approach” considers the value of the property in light of the claimant’s contributions, whereas the value received or quantum meurit approach considers the value of the services provided by the claimant.
The value survived approach was endorsed by Kerr. Where the unjust enrichment can be characterized as one party retaining a disproportionate share of assets resulting from a “joint family venture”, any monetary award is to be calculated on a share of those assets commensurate with the claimant’s contributions. This sharing of wealth may apply to all assets rather than only specific assets.
E. Joint Family Venture
As described by Cromwell J. in Kerr :
My view is that when the parties have been engaged in a joint family venture, and the claimant’s contributions to it are linked to the generation of wealth, a monetary award for unjust enrichment should be calculated according to the share of the accumulated wealth proportionate to the claimant’s contributions. In order to apply this approach, it is first necessary to identify whether the parties have, in fact, been engaged in a joint family venture.34
There is no presumption of a joint family venture. One can only be identified on the evidence, which is to be viewed under four headings:
(a) Mutual Effort;
(b) Economic Integration;
(c) Actual intent express or implied from the evidence; and
(d) Priority of the Family.
As further elaborated in Kerr, and with the benefit of reviewing the Alberta case law, there is little mystery in what the defence need challenge to avoid a finding of “joint family venture”:
- Length and stability of the relationship
- Placing each other in priority to extended family
- Joint Bank Accounts
- Pooling of Resources
- Joint Title to Property
- Plans for Property Distribution on death
- Covering each others’ periodic indebtedness
- Conferring benefits on each other
The joint family venture appears to be one of three vehicles by which to advance a claim. The others being quantum meruit and a claim for a share of specific property. The upside to the Defendant escaping a finding of “joint family venture” would be a characterization of one of the other two, and ideally, a mitigation of a Defendant’s exposure to a discretionary redistribution of wealth. You would expect your client to favour quantum meruit over paying the 30%-50% of increased wealth Alberta courts have quantified as a successful Plaintiff’s appropriate remedy.
As offered by Rollie Thomson in “Lovers in a Dangerous Time: Loose Ends after Kerr v. Baranow”:
At the remedy stage, the consideration of reciprocal benefits will depend on the starting point. If a joint family venture is found, then reciprocal benefits will be incorporated in determining the appropriate percentage of assets to fix the monetary award. Cromwell J. says this is not to be “a minute examination of the give and take of daily life”, but “the reasoned exercise of judgment in light of all of the evidence” From the case law, this appears to be a “ballpark” exercise, with the court working backwards from 50 per cent.
If a joint family venture is not found, however, then the claimant can still argue the fee-for-service approach to measuring his or her contribution. This is the “old” unjust enrichment at work, with all the joys of painstaking “relationship accounting” who did what when at what cost, the very “minute examination” that does not take place if a joint family venture is found.
Justice Cromwell tells us where, at what stage, to consider “mutual benefit conferral”, but he gives us no help on how to do it. He likes the approach of the B.C. Court of Appeal in Wilson v. Fotsch, “that mutual enrichments should mainly be considered at the defence and remedy stages, but that they can 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.”35
Also, as pointed out by Berend Hoivus in “Kerr v. Baranow: New Wine Into Old Bottles?”:
There are now two types of unjust enrichment claims that may arise at the end of a common-law relationship – one where a couple had a JFV and one partner retained a disproportionate share of the wealth generated by the JFV and the more traditional unjust enrichment situation where one partner provided unpaid services or contributed to a specific property held by the other. Should one differentiate between these claims at the outset of the unjust enrichment analysis or only in relation to the remedy? In other words, does the existence or absence of a JFV colour the entire unjust enrichment claim or only affect the remedy?36
We had previously explored “early checkpoints” that Defendant’s lawyers should consider. It is comforting to know that at least one other commentator remains uncertain as to whether the “joint family venture” test should be conducted sooner than later.
5. ALTERNATIVE DISPUTE RESOLUTION
Several notable commentators have spoken to the uncertainties and unanswered questions arising from the “Unjust Enrichment/Joint Family Venture” analysis. The broad evidentiary burden of proving a joint family venture rests with the Plaintiff, but the unreliability of a Court’s contextual analysis offers no more comfort to the Defendant. Also, insufficient direction has been given on how to quantify the appropriate remedy.
Recognition of these uncertainties inform our closing topic. This discussion would be incomplete without some discussion about negotiating these claims.
For reasons outlined earlier, your client may be protective of their financial assets. This often goes hand-in-hand with risk adversity. They may not be as enthusiastic as you to create “new law”. Settlement options should be fully explored.
The deficiencies of the unjust enrichment regime are caused by the complexity and unpredictability of its framework. The analysis is largely dependent on an apprehension of facts and accordingly, heavily dependent on judicial discretion.
For what it is worth, sympathy will not usually be on your client’s side. If defending a claim, they are usually in the higher net worth position, at least in terms of ownership. The option of exposing them to judicial bias by way of a Trial should be evaluated with caution. All the more so in circumstances where the relationship was lengthy, there are children, or where the discrepancy extends to incomes and future prospects.
Until unjust enrichment further evolves, Defendants’ lawyers should be earnest in attempts to marginalize any impediments to settlement. For example, as air-tight as a domestic contract might seem as evidence of juristic reason, there will be some utility in “suspending disbelief” and exploring settlement accordingly.
The law of unjust enrichment does not prescribe a presumption of equal sharing. Nor does mere cohabitation give rise to an entitlement to share in any of the other spouse’s property. Justice Cromwell in Kerr promoted an exercise of judicial discretion influenced by a nuanced and holistic view of each case on its merits. Bearing this in mind, counsel would be doing considerable service to their client by employing a similar approach, but in a far more manageable forum.
(1) 2011 SCC 10,  1 S.C.R. 269 [Kerr].
(2) 2006 ABCA 265, 397 A.R. 361 [Mustard].
(3) 2009 ABQB 573,  A.W.L.D. 468 [Johansson].
(4) SA 2002, c A-4.5
(5) Supra note 3 at 13.
(6) Ibid. at 14.
(7) 2010 ABCA 373,  A.W.L.D. 2199 [Rehwald].
(8) 2008 ABCA 194, 90 Alta. L.R. (4th) 247 [Ambrozic] at 25.
(9) Ibid. at 40.
(10) Supra note 1.
(11)  2 S.C.R. 834, 1980 CanLII 22 (SCC) [Pettkus].
(12) Ibid. at page 849.
(13) 2012 ABQB 685, 73 Alta. L.R. (5th) 276 [Lemoine].
(14) Ibid. at 117-120.
(15) 2012 ABCA 38, 58 Alta. L.R. (5th) 332 [Rubin].
(16) Ibid. at 17-22.
(17) Supra note 1 at 102.
(18) Supra note 15 at 23.
(19) Supra note 1 at 43.
(20) Supra note 13 at 131-135.
(21) 2010 ABQB 805,  A.W.L.D. 1515.
(22) 2013 ABCA 13,  A.W.L.D. 1824 [Kuehn].
(23) Ibid. at 36.
(24) 2013 ABQB 326,  A.W.L.D. 3815 [KGH].
(25) Supra note 15 at 72.
(26) 2012 ABQB 332, 70 Alta. L.R. (5th) 84 [Montgomery].
(27) Ibid. at 77-82.
(28) Supra note 24 at 28.
(29) Ibid. at 45-49.
(30) 2011 ABQB 210,  A.W.L.D. 3052 [Walraven].
(31) Supra note 1 at 50-52.
(32) Supra note 13 at 160.
(33) Supra note 15 at 64.
(34) Supra note 1 at 87.
(35) Rollie Thomson, “Lovers in a Dangerous Time: Loose Ends after Kerr v. Baranow” (Paper presented to the Unmarried & Unjust [Enrichment] Superconference, Calgary, 30 November 2012)[unpublished].
(36) Berend Hovius, “Kerr v. Baranow: New Wine Into Old Bottles?” (Paper presented to the Unmarried & Unjust [Enrichment] Superconference, Calgary, 30 November 2012)[unpublished].