constructive trust

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Unjust Enrichment, Equity and your Mother in Law

August 3, 2011 in Applications for the Opinion and Direction of the Court, constructive trust, Dependant Support Claims, Equity, Estate Litigation, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates, Wills by Charles Wagner | 2 comments

The average person goes to a lawyer because they just feel they were treated unfairly.  I read a case recently and thought long and hard about how the plaintiff, Mary Simonin, must have felt.  Her lawyer could not go to court and just say Mary was treated inappropriately.  We lawyers must apply the facts to legal doctrines and theories.  We rely on older cases to show that in similar circumstances the courts have granted damages to our clients.   So let’s go through the facts of this case, see why Mary felt she was treated unjustly, and look how the courts applied the law to her situation.

Mary, her husband Franco and their children lived on a farm owned by Mary’s mother in law.  They paid no rent.  Franco ran a construction company and used that company to renovate his mother’s farm.  He never charged his mother a penny for what amounted to over $200,000.00 worth of work. Instead, for between 30% and 50% of the cost of the improvements Franco billed his company’s other clients.

Franco died.  Six months later Mary and her children left the farm.  The mother sold the farm for $880,000 and gave $200,000 to her daughter.  Mary and her children got nothing.  Does that sound unfair to you?  It did to Mary.  Were Franco’s children also not entitled?  Didn’t Franco add value to the Property?  Were his children not entitled to the benefit of their father’s work?  The matter went to trial and was appealed (FN1).  One can surely understand how Mary felt cheated.  Let’s see how the courts dealt with her complaint in the legal context.

Mary’s lawyer argued that Franco’s estate had a quantum meruit claim for unjust enrichment(FN2).  Essentially, this Latin phrase describes a legal doctrine standing for the proposition that a person should be compensated for services or goods provided even if there was no legally enforceable contract.  Based on seminal cases such as Peter v. Beblow, 1993 CanLII 126 (S.C.C.), [1993] 1 S.C.R. 980 and Garland v. Consumers’ Gas Co., 2004 SCC 25 (CanLII), [2004] 1 S.C.R. 629 Mary’s lawyer argued that she should be compensated because Franco’s mother was enriched by virtue of the work done by Franco, that Franco suffered a corresponding deprivation for what he could have charged her and there was no juristic (legal) reason for Franco’s mother to get that work done for free.  The other side disagreed. 

While the trial judge and Ontario Court of Appeal agreed that Franco’s mother was enriched they did not believe that he suffered a corresponding deprivation.  In other words – he did not lose anything.  Firstly – it was his company not Franco that did the work.  Secondly the company was paid for the work already, albeit by other customers.  How could Franco have been deprived of compensation for his work if he was already paid for it by his other customers?    Finally – when addressing the third part of this test, that being the absence of a juristic reason for Franco’s mother to retain the benefit, the court pointed out that it was just and fair that the mother keep the benefits without paying for it.  After all, Franco and Mary lived on the property rent free.  They benefited from the renovations and most importantly they never indicated to Franco’s mother that there was any expectation at all of compensation for Franco’s work.

 Before leaving this case I want to address an interesting side point.  Ordinarily, a plaintiff cannot come to court seeking an equitable remedy & compensation for unjust enrichment, if she does not come to court with clean hands.  Even though Franco charged his clients for the work done on his mother’s farm the court did not hold that against Mary.  Why?  Because while improper, those actions were not immediately and necessarily related to the claim (FN3).

 This short review of the case law should not be taken as legal advice. Based on my experience in dealing with these cases, they often turn on the specific facts. If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.

 Charles B. Wagner is a partner at Wagner Sidlofsky LLP. This Toronto office is a boutique litigation law firm whose practice is focused on estate, commercial and tax litigation

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FN 1.    The Court of Appeal Decision is accessible on line at Simonin v. Simonin, 2010 ONCA 900 (CanLII) — 2010-12-24 and the trial decision can also be found on line at Simonin v. Simonin, 2008 CanLII 58155 (ON SC).

FN 2.   On our firm’s website I have provided a case scenario and some of the seminal cases dealing with the doctrine of unjust enrichment.  This might assist the reader in dealing with this issue and I refer you to this link http://www.wagnersidlofsky.com/quantum-meruit-claim.php

FN 3.  See paragraphs 56 -62 of the trial decision at Simonin v. Simonin, 2008 CanLII 58155 (ON SC).  As Daley J. stated at paragraph 62 “ As such, while the manner in which the renovation costs were paid for through Spancrest may have been improper, it is not immediately and necessarily related to the plaintiff’s claim of unjust enrichment.  In the result, I conclude that that arrangement does not bar the plaintiff from making the claim for a remedy based on alleged unjust enrichment.”

Are Promises Enforceable?

June 10, 2011 in Applications for the Opinion and Direction of the Court, constructive trust, Elder Law, Equity, Estate Litigation, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates, Wills by Charles Wagner

Lora and Jeffrey started living together.  As their 23 month relationship grew stronger Jeffrey promised Lora that when he died Lora would get his RRSPs worth about $1,750,000 as long as they were still living together.  Jeffrey insisted that Lora sign a cohabitation agreement before he would keep his promise.  Before the agreement was signed Jeffrey died.  Was Jeffrey’s promise legally enforceable?  At trial Justice Brown of the Ontario Superior Court of Justice (FN1) decided that Lora would get the money.  Jeffrey’s estate appealed.

Lora sued the estate on a number of different grounds.  I would like to focus on one which the Ontario Court of Appeal (FN2) addressed – was Jeffrey’s promise legally enforceable under the doctrine known proprietary estoppel? Let’s start by defining some terms. 

Let’s assume Jeffrey made a promise to Lora. Proprietary estoppel is a legal doctrine which prevents Jeffrey from enforcing his legal rights with respect to property once he made a promise or representation not to do so.  This is applied if Lora relied on the representation/promise and would suffer if Jeffrey or his estate enforced his legal rights.  The court would force Jeffrey or his estate to keep the promise if it would be palpably unfair to allow him to strictly enforce his legal rights.  Proprietary estoppel is an example where courts will look to equitable doctrines to address unconscionable wrongs.

Sometimes courts will use equitable remedies, like proprietary estoppel, to address a situation where the application of strict legal rights would be unfair.  Under these circumstances the court may ignore a contract or a testamentary document and provide the plaintiff with a remedy.  By applying equitable principals courts will sometimes enforce promises.

The Ontario Court of Appeal in Schwark Estate v. Cutting(FN3) reviewed a number of causes of action and remedies through which a promise may be enforced.  In the course of that analysis the Court of Appeal summarized the essential elements of proprietary estoppel as follows:

  1.  the owner of land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the owner’s property;
  2. in reliance upon this belief, the claimant acts to his detriment to the knowledge of owner of the land; and
  3. the owner then seeks to take unconscionable advantage of claimant by denying him the right or benefit which he expected to receive.

So what does proprietary estoppel have to do with Lora and Jeffrey’s situation in the Belvedere v. Brittain Estate?  Lora’s lawyers raised a number of equitable arguments (FN4) which the court dismissed.  The Ontario Court of Appeal dismissed those arguments finding that Jeffrey’s estate was not unjustly enriched by Lora’s contributions and accordingly the trial judged erred in applying the doctrine of constructive trust.  At that point the court considered the alternative remedy of proprietary estoppel.

The first issue addressed by the Court was whether this doctrine of enforcing promises relating to land could be used to enforce promises relating to RRSPs.  The Ontario Court of Appeal noted that there is some controversy on this point, but it proceeded with the analysis on the assumption that it did apply. (FN5).  A key issue in enforcing such a promise is that Lora had to rely on it to her detriment.  Seeing that she did not rely on the promise and suffer any loss the court dismissed the proprietary estoppel argument.

So does that mean that promises are not legally enforceable?  Maybe.  The Ontario Court of Appeal decision makes room for such an argument if it meets the criteria set out in  Schwark Estate v. Cutting.   In an article published in the Estate and Trusts Quarterly, Ian Hull, a leading estate litigator stated (FN6), “While the doctrine of proprietary estoppel has deep roots in the British courts, the recent developments in the context of estates seem to point to a new and effective remedy available to claimants in the context of estate litigation”.

This short review of the case law should not be taken as legal advice. Based on my experience in dealing with these cases, they often turn on the specific facts. If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.

 Charles B. Wagner is a partner at Wagner Sidlofsky LLP. This Toronto office is a boutique litigation law firm whose practice is focused on estate, commercial and tax litigation

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FN1.  Belvedere v. Brittain Estate  2007 CanLII 32666 (ON S.C.), (2007), 45 R.F.L. (6th) 81. Justice E.R. Browne of the Superior Court declared that Ms Lora Belvedere was entitled to a constructive trust in Mr. Brittain RRSPs at the time of his death, to be satisfied by payment to Ms. Belvedere of $1,750,000.

FN2.   Belvedere v. Brittain Estate, 94 O.R. (3d) 655 (2009) OCA .  To access the case on line see  bit.ly/Belvedere/Brittain

FN3.  Schwark Estate v. Cutting, 2010 ONCA 61.  To access the case on line see http://bit.ly/Schwark

FN4.  Lora’s lawyers argued that the estate of Mr. Brittain was unjustly enriched and that the trial judge was correct in finding a constructive trust on $1,750,000 of the estate assets in favour of Lora.  Alternatively, Lora’s lawyers argued that the trial judge  should have considered the remedies of a “resulting trust” and or “proprietary estoppel”. 

FN5.  See paragraph 67 of  Belvedere v. Brittain Estate, 94 O.R. (3d) 655 (2009) OCA.  To access the case on line see bit.ly/Belvedere/Brittain

FN6.  Ian Hull and Suzana Popovic-Montag’s article “Proprietary Estoppel — An Innovative Claim Against the Assets of an Estate can be found in the Estate and Trust Reports, 3rd series 2009.  The cite is 55 E.T.R. (3d) 44.

May 16, 2011 Seminar – Bnai Brith Seminar – “Financial Predators and the Elderly – Banton v Banton.”

May 1, 2011 in Applications for the Opinion and Direction of the Court, Capacity, Challenging the Validity of Wills, constructive trust, Dependant Support Claims, Elder Law, Estate Litigation, Executors / Trustees, Fraud, Wills by Charles Wagner

The Estate and Trusts Group, Lawyers Division Bnai Brith and the adult education committee of Shaarei Shomayim are sponsoring a continuing legal education seminar entitled “Financial Predators and the Elderly – Banton v Banton.” 

In this case the 88 year old George Banton fell in love with a 32 year old waitress named Muna. He married Muna and made a new will that disinherited his children.  Virtually all contact with his kids stopped.  At the time Mr. Banton was depressed, terminally ill, and mentally unwell. On hearing that their father was certified as incapable and that Muna, had withdrawn $10,000 from his account, George’s sons used their power of attorney to transfer George’s money into an irrevocable inter vivos trust under which they and CIBC Trust Corporation would be the trustees.  The trust allowed the money to be used for George’s during his life and would go to his children after his death.

When George died his children challenged the new Will and the validity of the marriage to the much younger Muna.  She challenged the sons’ creation of the trust.  The fact situation in Banton v Banton underscores the risk to the elderly of being victimized by financial predators who look to marry a vulnerable older person as a means to take away their money and disinherit their children.  To quote the judge in the Banton case, “I have no doubt at all that this influence was deliberately exerted to enable her to obtain control and, ultimately, the ownership of his assets…. After she consented to marry him, her influence became overwhelming and irresistible. The speed with which she was able to procure a will and a power of attorney in her favour is testimony to this as well as to his weak and vulnerable mental condition. …Thereafter, he was held incommunicado as far as his family were concerned…. I believe George Banton was a mere puppet, when he was not simply a bystander, during the guardianship proceedings.”

These continuing B’nai Brith legal education seminars have been going on for approximately four years.  Many members of B’nai Brith are professionals whose practice involves servicing senior citizens and their families.  B’nai Brith runs these seminars in order to meet present and future educational needs of our membership’s legal and accounting profession.  These seminars were inspired, in part, by legal problems of concern to the Jewish community as well as the community at large. 

To educate attendees these seminars feature some of Ontario’s premiere estate litigators.  These lawyers will be participating in mock court proceedings based on the fact scenario of  Banton v Banton.  Prior to the moot court Rachel Blumenfeld, an estate lawyer at Miller Thomson (bit.ly/rblumenfeld), will explain the legal options open to children wanting to protect elderly parents in second marriage situations. Thereafter Rabbi Joe Kanofsky of Shaarei Torah will speak from an ethical pastoral perspective about the obligations and choices to the children, parent and professionals when dealing with this type of scenario.  The Rabbi’s presentation can be used by lawyers towards fulfilling part of their mandatory 3 hours of continuing professional development related to professional responsibility, ethics and practice management.

 The judge for the moot appeal will be Jordan Atin (http://bit.ly/jordanatin).   Archie Rabinowitz (http://bit.ly/arabinowitz) and Kimberly Whaley (http://bit.ly/kwhaley) will be representing the Banton children and Ian Hull (http://bit.ly/ianhull) and Charles B. Wagner (http://bit.ly/cwagner) will be representing the waitress. 

Each attendee will receive a binder and a flash drive which will contain papers prepared by the lawyers about different aspects of the case as well as some actual court documents relating to Banton.  At the end of the seminar there will be a question and answer session from the panel and the participants.

 The seminar will be held Monday, May 16th, 2011 at Shaarei Shomayim 470 Glencairn Ave ON M5N 1V8.  Registration starts at 7:30 am. and the seminar starts at 8:00 a.m.  For information or to register, call Hyla Reichmann at (416) 633-6224, ext. 128, or email hreichmann@bnaibrith.ca .