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Equity - Proprietary Estoppel

Equity - Unjust Enrichment

Granger v. Granger (Ont CA, 2016)

In this case the Court of Appeal below reviews the two equitable principles of (1) proprietary estoppel and (2) unjust enrichment (restitution).

Propriety estoppel is a principle which may operate to grant a beneficial property interest in real estate without express documentation (eg. a deed or written contract):
[24] Relying on this court’s decision in Clarke v. Johnson, 2014 ONCA 237 (CanLII), 371 D.L.R. (4th) 618 (C.A.), 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 restitution issue focussed on the onus of proof, and the treatment of ancillary benefits accruing to the claimant as they effect the primary claim:
[37] As the trial judge emphasized, the burden of establishing the conferral of an enrichment, a corresponding deprivation, and the absence of an established juristic reason for the enrichment all lie upon the claimant. However, he failed to recognize that where the defendant claims a set-off because of the mutual exchange of benefits, the allocation of the burden of proof is more nuanced.

c. The correct approach: Kerr v. Baranow

[38] The more nuanced allocation is explained by the Supreme Court of Canada in Kerr v. Baranow, 2011 SCC 10 (CanLII), [2011] 1 S.C.R. 269. 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.

[39] 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 “refusing 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.”

[40] 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).

[41] 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.”

d. The Kerr approach applies here

[42] Counsel for the respondent urged in oral argument that Cromwell J.’s comments in Kerr regarding the appropriate analytical approach to mutual benefit conferral applied only to the particular context of a joint family venture. I do not agree. While Kerr and its companion case Vanasse v. Seguin did involve joint family ventures, Cromwell J.’s comments at paras. 109-115 are intended to be of more general application. I say this for five reasons.

[43] 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. 109-115 – namely, it is taken into account as a “set off”, typically at the defence stage of an unjust enrichment analysis.

[44] 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: “[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. 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 CanLII 766 (SCC), [1998] 3 S.C.R. 112 and the court’s “straightforward economic approach” make it clear that Cromwell J. viewed his comments regarding the appropriate point at which to consider off-setting benefits as having a more general application outside of the family context.

[45] Third, scholarly commentary suggests that Cromwell J.’s comments regarding the appropriate stage of the analysis to consider off-setting benefits apply outside the family context. In P.D. Maddaugh and J.D. McCamus, The Law of Restitution (loose-leaf), Vol. II (Toronto: Thomson Reuters, 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 gentleman 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 context is quite focused on the juristic reason test from the Garland calculus and the perceived problem of determining precisely where the mutual benefits 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].

[46] Fourth, provincial appellate courts have applied Kerr outside the family context on many occasions: see, for example Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2011 2011 ONCA 418 (CanLII), ONCA 418, 278 O.A.C. 216, at paras. 44-57; Aviva Insurance Company of Canada v. Lombard General Insurance Company of Canada, 2013 ONCA 416 (CanLII), 116 O.R. (3d) 161, at paras. 47-60; Clarke v. Johnson, 2014 ONCA 237 (CanLII), 318 O.A.C. 186, at paras. 62-72; Haigh v. Kent, 2013 BCCA 380 (CanLII), 364 D.L.R. (4th) 544, at paras. 31-48; Economical Mutual Insurance Company v. The Bank of Nova Scotia et al., 2015 NLCA 29 (CanLII), 367 Nfld. & P.E.I.R. 297, at paras. 27-41.

[47] Of particular note on this point is the decision in Watson v. Bank of America, 2015 BCCA 362 (CanLII), 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 off-setting economic effects: paras. 162-165.

[48] The court analysed the significance of this argument with respect to the unjust enrichment claim at paras. 175-181. Interestingly, the defendants attempted to use Kerr to support their off-set 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 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 off-setting benefits is at the second stage of the analysis, where the defendants would bear the onus of proof.

[49] 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.

[50] For all these reasons, the principle in both family and non-family cases of mutual benefit conferral is that any alleged off-setting benefits should be considered at the defence/remedy stage of the analysis where the defendant bears the onus of proof.

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