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Simon Shields, LLB

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Civil Procedure - Pleadings - Issues Outside of the Pleadings

Reasons - Issues Outside of the Pleadings

Equity - Unjust Enrichment

Moore v Sweet (Ont CA, 2017)

In this case the Court of Appeal commented as follows when reversing a lower court judgment that applied law that was unpleaded:
[39] This Court has made it clear on a number of occasions that lawsuits are to be decided within the boundaries of the pleadings (i.e., the documents framing the issues), and based on findings and conclusions that are “anchored in the pleadings, evidence, positions or submissions of any of the parties”. Otherwise, they are “inherently unreliable” and “procedurally unfair, or contrary to natural justice”. When a judge steps outside of the case as it was “developed by the parties” to decide a given issue, the parties are deprived of the opportunity to make submissions and to “address that issue in the evidence.” See Rodaro, at paras. 60-63; Labatt Brewing, at paras. 5-7; 460635 Ontario Ltd. v. 1002953 Ontario Inc. (1999), 1999 CanLII 789 (ON CA), 127 O.A.C. 48 (C.A.), at para. 9; A-C-H International Inc. v. Royal Bank of Canada (2005), 2005 CanLII 17769 (ON CA), 254 D.L.R. (4th) 327 (Ont. C.A.).
It also discussed the elements of the equitable doctrine of unjust enrichment, particularly the element of 'no juristic reason for the enrichment', as follows:
[92] Further, the application judge failed to apply the required two-step analysis to the juristic reason assessment. There is no dispute that “[a]t the heart of the doctrine of unjust enrichment lies the notion of restoring a benefit which justice does not permit one to retain”: Kerr, at para. 31, citing Peel, at p. 788. Courts, however, have been careful to guard against the remedial constructive trust turning into a completely unprincipled, open-ended remedy, the application of which depends on a particular judge’s subjective view of what is unjust or goes against good conscience – or, to put it in its classic formulation, that is dependent “upon the length of the Chancellor’s foot”. In Canada, the Supreme Court has developed the “absence of juristic reason” as a mechanism for instilling a principled approach to the remedy.

[93] Iacobucci J. addressed this point in Garland, at para. 40:
It is not of great use to speculate on why Dickson J. in Rathwell, supra,[4] expressed the third condition as absence of juristic reason but I believe that he may have wanted to ensure that the test for unjust enrichment was not purely subjective in order to be responsive to Martland J.’s criticism in his reasons that application of the doctrine of unjust enrichment contemplated by Dickson J. would require “immeasurable judicial discretion” (p. 473). The importance of avoiding a purely subjective standard was also stressed by McLachlin J. in her reasons in Peel, supra, at p. 802, in which she wrote that the application of the test for unjust enrichment should not be “case by case ‘palm tree’ justice”.
[94] In continuing with his careful analysis of the juristic reason element of unjust enrichment in Garland, Iacobucci J. acknowledged the need for courts to be able to expand the categories of juristic reason in order that the concept not become too inflexible. At para. 43 he wrote:
As McLachlin J. wrote in Peel, supra, at p. 788, the Court’s approach to unjust enrichment, while informed by traditional categories of recovery, “is capable, however, of going beyond them, allowing the law to develop in a flexible way as required to meet changing perceptions of justice”. But at the same time there must also be guidelines that offer trial judges and others some indication of what the boundaries of the cause of action are. The goal is to avoid guidelines that are so general and subjective that uniformity becomes unattainable.
[95] In the following paragraphs, Iacobucci J. then articulated the two-step analysis that Canadian courts are required to engage in when considering the juristic reason element. At paras. 44-46, he said:
The parties and commentators have pointed out that there is no specific authority that settles this question. But recalling that this is an equitable remedy that will necessarily involve discretion and questions of fairness, I believe that some redefinition and reformulation is required. Consequently, in my view, the proper approach to the juristic reason analysis is in two parts. First, the plaintiff must show that no juristic reason from an established category exists to deny recovery. By closing the list of categories that the plaintiff must canvass in order to show an absence of juristic reason, Smith’s objection to the Canadian formulation of the test that it required proof of a negative is answered. 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 a prima 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. [Emphasis added.]
[96] This approach was re-affirmed in Kerr, at paras. 43-44, and in Pacific National, at paras. 22-26.
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