Unjust Enrichment, Equity and your Mother in Law

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, 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

FN 1.    The Court of Appeal Decision is accessible on line at http://www.canlii.org/eliisa/highlight.do?text=simonin&language=en&searchTitle=Ontario&path=/en/on/onca/doc/2010/2010onca900/2010onca900.html&searchUrlHash=AAAAAQAHc2ltb25pbgAAAAAAAAE , 2010 ONCA 900 (CanLII) — 2010-12-24 and the trial decision can also be found on line at http://www.canlii.org/eliisa/highlight.do?text=simonin&language=en&searchTitle=Ontario&path=/en/on/onsc/doc/2008/2008canlii58155/2008canlii58155.html&searchUrlHash=AAAAAQAHc2ltb25pbgAAAAAAAAE, 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  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.”