Colleagues:

 

The Supreme Court of Canada has issued an important decision on unjust enrichment—and, in the process, on some relationships between common law, equity and statutes. Below is an edited and simplified version of the headnote in Moore v Sweet, 2018 SCC 52, followed by my own brief comment. Restitution scholars, including members of this listserv, are cited by both the majority and dissenting judges.

 

Lawrence and Michelle Moore were married but later separated, after which Lawrence ended up living with Risa Sweet as his common-law spouse. During the Moores’ marriage, Lawrence had bought a term life insurance policy and designated Michelle as revocable beneficiary. They later separated, and entered into an oral agreement whereby Michelle would pay all of the policy premiums and Lawrence would maintain Michelle’s beneficiary designation. Unbeknownst to Michelle, Lawrence later designated Risa as the irrevocable beneficiary of the policy, as he was allowed to do under the relevant provisions of Ontario’s Insurance Act. When Lawrence died, the proceeds were therefore payable to Risa. At the time of Lawrence’s death, his estate had no significant assets, so even if Michelle had a contractual claim against the estate (and everyone agreed that she did), it wouldn’t have been worth pursuing. Michelle, who had paid about $7,000 in policy premiums since separation, brought an application regarding her entitlement to the $250,000 policy proceeds, which the insurer paid into court pending resolution of the case. The Ontario Superior Court held that Risa had been unjustly enriched at Michelle’s expense and impressed the proceeds with a constructive trust in Michelle’s favour. The Court of Appeal, 2:1, allowed Risa’s appeal, except as to the $7,000 that Michelle had paid in premiums, and set aside the application judge’s decision. The Supreme Court, 7:2, reversed the Court of Appeal and restored the original decision, albeit on somewhat different reasoning.

 

The SCC applied the three-part test for a cause of action in unjust enrichment in Canada, viz,: (i) the defendant was enriched; (ii) the plaintiff suffered a corresponding deprivation; and (iii) the defendant’s enrichment and the plaintiff’s deprivation occurred in the absence of a juristic reason. The main legal questions in dispute were whether there was correspondence between enrichment and deprivation and whether the Insurance Act provided the juristic reason for the deprivation.

 

On the first question, the majority held that the measure of deprivation isn’t limited to the plaintiff’s out‑of‑pocket expenditures or to the benefit taken, but includes a benefit that was never in the plaintiff’s possession but that would have accrued to the plaintiff—in this case, the insurance proceeds— had it not been received by the defendant instead. On the second question, the majority held that while the Insurance Act provides the means by which beneficiaries become statutorily entitled to receive policy proceeds, “no part of the Act operates with the necessary irresistible clearness to preclude the existence of contractual or equitable rights in those proceeds once they have been paid to the named beneficiary.” Absent any other policy reasons for allowing the enrichment to stand (see the two-part test on this point), the majority decided that a remedial constructive trust was the appropriate remedy, especially as the disputed proceeds had been paid into court and were readily available to be impressed with a trust.

 

The dissenting judges did not view there to be a corresponding deprivation and enrichment. Risa’s enrichment, they held, was not at Michelle’s expense because it didn’t depend on Michelle’s deprivation. What Risa received (a statutory entitlement to proceeds) differed from Michelle’s deprivation (the inability to enforce her contractual rights), which were “not two sides of the same coin.” The dissenting judges also held that even if there were a corresponding deprivation and enrichment, the Insurance Act gave the necessary juristic reason. Citing the statute’s legislative history and purpose, they noted that an insured may designate an irrevocable beneficiary under a life insurance policy, thereby providing special protections to that beneficiary, who from then on has a right in the policy itself: “the insurance money is not subject to the control of the insured or to the claims of his or her creditors, and the beneficiary must consent to any subsequent changes to beneficiary designation.”

 

This is a case in which all the judges acknowledged that Lawrence had wronged two women by misleading them on the question of who would get his insurance money on his death. As between competing visions of fairness, the Court came down on the side of the woman who had kept the policy in force by making the premium payments over an extended period. Certainty is sacrificed, though perhaps only in “the circumstances of this case” or others like it. It will be interesting to see if there is any push for a legislative amendment as a result of the decision. Also, the Court makes no comment on the access-to-legal-services aspect of the case, but I couldn’t help but reflecting that if Michelle had had only an hour of competent legal advice, she would have insisted on being made the irrevocable beneficiary before agreeing to continue making the premium payments. Which could have avoided this litigation altogether and could have avoided Risa having being misled by Lawrence.

 

Yours truly,

 

JOHN C. KLEEFELD  Dean and Professor, Faculty of Law University of New Brunswick PO Box 4400 41 Dineen Drive Fredericton NB Canada E3B 5A3   506.453.4635 john.kleefeld@unb.ca http://www.unb.ca/faculty-staff/directory/law/kleefeld-john.html

/unblaw @UNBLaw | @UNBKleefeld

 

Dispute Resolution: Readings and Case Studies, 4th edition (Emond): https://bit.ly/2ybrPMS

“Write a Wikipedia Article for Law School Credit — Really?” (Journal of Legal Education): https://bit.ly/2O59SKQ