Equity - Constructive Trusts II. Bakhsh v. Merdad
In Bakhsh v. Merdad (Ont CA, 2022) the Court of Appeal contrasted a constructive trust real property claim with an FLA equalization claim:
The claim is not an equalization claim nor is it statute-barred. Lesko v. Lesko
 Next, is Ms. Bakhsh’s equitable trust claim in fact an equalization claim under the FLA and is it therefore barred by the two-year limitation period set out in s. 7(3)(a) of the FLA?
 Absent any evidence as to the law of limitation of actions in Saudi Arabia, it appears to be common ground that Ontario law would apply. If Ms. Bakhsh’s claim is not an equalization claim, the ten-year limitation period under s. 4 of the Real Property Limitations Act, R.S.O. 1990, c. L.15, would apply and the respondent’s action would not be statute-barred. This court’s decision in McConnell v. Huxtable, 2014 ONCA 86, 118 O.R. (3d) 561, supports the application of the ten-year limitation period under the Real Property Limitations Act to family law constructive trust claims.
 It is clear in our view that Ms. Bakhsh’s claim is not a thinly veiled attempt to dress up an equalization claim as an equitable trust claim. Rather, Ms. Bakhsh seeks to impose a resulting or constructive trust over the condominium property that she financially maintained and in respect of which she seeks a declaration of sole beneficial ownership. Indeed, Mr. Merdad does not suggest that the claim represents an abuse of process but rather that any claim involving the former spouses’ property acquired during the marriage is necessarily an equalization claim under the FLA and is now statute-barred under s. 7(3)(a). According to Mr. Merdad, the FLA and its rules provide a complete code for equalization of property claims between spouses and former spouse.
 We disagree with Mr. Merdad’s submission that all property claims between spouses or former spouses must necessarily be equalization claims. And it does not follow that the expiration of time to bring an equalization claim entails the expiration of a constructive or remedial trust claim. Equalization claims and equitable trust claims remain distinct.
 The FLA equalization provisions do not deal with property, per se, but, rather, with the equitable calculation, division, and distribution of the value of net family property. Here, Ms. Bakhsh brings forward an equitable trust claim and not a claim for equalization of the value of the parties’ net family property. A claim of ownership is distinct from a claim for a share in property value; an equitable trust claim addresses the former and the equalization regime of the FLA covers only the latter: McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at para. 59.
 The equalization provisions of the FLA also do not preclude an equitable trust claim respecting property. Section 10(1) of the FLA expressly permits a court application for a determination between spouses or former spouses “as to the ownership or right to possession of particular property, other than a question arising out of an equalization of net family properties” and the court may “declare the ownership or right to possession”, as the respondent has claimed, among other remedies. Importantly, the two-year limitation period in s. 7(3)(a) of the FLA applies only to an application based on subsections 5(1) or (2) and not to the determination of a question of ownership between spouses set out in s. 10(1) of that Act.
 The appellant’s reliance on the Supreme Court of Canada’s decision in Rawluk v. Rawluk, 1990 CanLII 152 (SCC),  1 S.C.R. 70, is, respectfully, misplaced. Rather, it supports Ms. Bakhsh’s position.
 At issue in Rawluk was whether the doctrine of constructive trust could be applied to determine the ownership of assets of married spouses under the provisions of the FLA or whether the remedy was abolished and superseded by the equalization of matrimonial property and other provisions under the FLA. Mrs. Rawluk claimed a one-half interest in the matrimonial property by way of a remedial constructive trust.
 The Supreme Court in Rawluk confirmed that the FLA incorporated the constructive trust remedy that could be used in the matrimonial property context to allocate proprietary interests and that the FLA did not constitute an exclusive code for determining the ownership of matrimonial property: at pp. 89-91, 93 and 97. While the doctrine of constructive trust can be used to settle questions of ownership for the purpose of determining the net family property of each spouse, this function is “totally distinct from the process of determining how the value of matrimonial property should be distributed under the equalization process”: at p. 93.
 As a result, we reject the appellant’s submission that Ms. Bakhsh’s claim is an equalization claim that is statute-barred. The motion judge was correct to conclude that the two-year limitation period under the FLA, which applies to equalization claims, does not apply to Ms. Bakhsh’s claim.
In Lesko v. Lesko (Ont CA, 2021) the Court of Appeal set out basics of constructive trusts:
 If a party establishes the three elements of a claim for unjust enrichment – enrichment, corresponding deprivation, and lack of juristic reason – the remedy can take one of two forms: a personal (or monetary) award or a proprietary award: Kerr, at paras. 46, 55; Moore v. Sweet, 2018 SCC 52,  3 S.C.R. 303, at para. 89. The framework in which a court should assess the appropriate remedy was summarized by this court in Martin v. Sansome, 2014 ONCA 14, 118 O.R. (3d) 522, at para. 52:. Vellenga v. Boersma
In this way, the framework established in Kerr requires the court to ask the following questions: A monetary award is the default remedy and should suffice in most cases to remedy the unjust enrichment: Kerr, at para. 47; Moore, at para. 89. In Kerr, the Supreme Court of Canada clarified that monetary awards for unjust enrichment could be quantified in two ways. First, a monetary award may be calculated on a quantum meruit or “fee-for-service” basis – the value of the claimant’s uncompensated services. Second, a monetary award may be calculated on a “value survived” basis, by reference to the overall increase in the couple’s wealth during the relationship: Kerr, at paras. 49 and 55.
1) Have the elements of unjust enrichment – enrichment and a corresponding deprivation in the absence of a juristic reason – been made out?;
2) If so, will monetary damages suffice to address the unjust enrichment, keeping in mind bars to recovery and special ties to the property that cannot be remedied by money?;
3) If the answer to question 2 is yes, should the monetary damages be quantified on a fee-for service basis or a joint family venture basis?; and,
4) If, and only if monetary damages are insufficient, is there a sufficient nexus to a property that warrants impressing it with a constructive trust interest?
 The concept of joint family venture helps courts to quantify the monetary remedy where a claim of unjust enrichment has been made out. Where the evidence shows that the domestic arrangements under which the unmarried parties have lived amounted to a joint family venture, monetary damages should be calculated on the value survived basis, namely on the basis of a share of the wealth generated in the joint family venture proportionate to the claimant’s contributions: Kerr, at para. 102. If there was no joint family venture, monetary damages calculated on a quantum meruit basis are likely appropriate.
 The proprietary remedy of constructive trust in a property requires a claimant to show two things: that monetary damages are inappropriate or insufficient to remedy the unjust enrichment; and the claimant’s contribution was linked to the acquisition, preservation, maintenance, or improvement of the disputed property. The required link has been variously described as demonstrating a “sufficiently substantial and direct” link, a “causal connection”, a “nexus” or a “clear proprietary relationship”: Kerr, at paras. 50-51, 78; Moore, at para. 91. The extent of the constructive trust interest should be proportionate to the claimant’s contributions: Kerr, at para. 53; Moore, at para. 91.
In Vellenga v. Boersma (Ont CA, 2020) the Court of Appeal set out the basics of a constructive trust for wrongful conduct:
 In Soulos, at para. 45, the Supreme Court outlined four conditions that should generally be satisfied where a court imposes a constructive trust for wrongful conduct:. Naegels v. Robillard
(1) The defendant must have been under an equitable obligation, that is, an obligation of the type that courts of equity have enforced, in relation to the activities giving rise to the assets in his hands;
(2) The assets in the hands of the defendant must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff;
(3) The plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties; and
(4) There must be no factors which would render imposition of a constructive trust unjust in all the circumstances of the case; e.g., the interests of intervening creditors must be protected.
In Naegels v. Robillard (Div Ct, 2020) the Divisional Court considered a constructive trust issue in a joint family venture context:
 Mr. Robillard submits that the trial judge erred in holding that Ms. Naegels contributed 35% to the accumulation of family wealth as part of a joint family venture. He argues that no evidence linked Ms. Naegels’ contribution to the joint family venture with the accumulation of wealth. He submits that “there must at least be a disproportionate responsibility of household domestic labour in addition to or giving up something tangible such as a job for the sake of the other spouse and this results in the ability of that spouse to increase wealth.”. Moore v. Sweet
 That is not a requirement for establishing unjust enrichment in the context of a joint family venture as explained in Kerr v. Baranow, 2011 SCC 10. A joint family venture is characterized by a relationship in which the contributions of both parties have resulted in an accumulation of wealth. In Kerr v. Baranow, at para. 89 the Court identified four non-exhaustive factors to be considered in determining whether the parties have engaged in a joint family venture: (i) the mutual efforts of the parties, (ii) their degree of economic integration; (iii) their actual intent during the relationship, and (iv) the prioritization of the family unit in decision-making. A finding of joint family venture must be grounded in the evidence. Once the court has found that a joint family venture exists, in order to justify a remedy in unjust enrichment the court must then find that one party has retained a disproportionate share of the assets which are the product of their joint efforts: Kerr v. Baranow, para. 60. The trial judge conducted her analysis in accordance with the analytical framework established in Kerr v. Baranow.
In Moore v. Sweet (SCC, 2020) the Supreme Court of Canada sets out the role of constructive trust as a equitable remedy, not just one for unjust enrichment:
 A constructive trust is a vehicle of equity through which one person is required by operation of law — regardless of any intention — to hold certain property for the benefit of another (Waters’ Law of Trusts in Canada (4th ed. 2012), by D. W. M. Waters, M. R. Gillen and L. D. Smith, at p. 478). In Canada, it is understood primarily as a remedy, which may be imposed at a court’s discretion where good conscience so requires. As McLachlin J. (as she then was) noted in Soulos:. Reiter v. Hollub
. . . under the broad umbrella of good conscience, constructive trusts are recognized both for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation. . . . Within these two broad categories, there is room for the law of constructive trust to develop and for greater precision to be attained, as time and experience may dictate. [Emphasis added; para. 43.] What is therefore crucial to recognize is that a proper equitable basis must exist before the courts will impress certain property with a remedial constructive trust. The cause of action in unjust enrichment may provide one such basis, so long as the plaintiff can also establish that a monetary award is insufficient and that there is a link between his or her contributions and the disputed property (Peter v. Beblow, 1993 CanLII 126 (SCC),  1 S.C.R. 980, at p. 997; Kerr v. Baranow, 2011 SCC 10,  1 S.C.R. 269, at paras. 50-51). Absent this, a plaintiff seeking the imposition of a remedial constructive trust must point to some other basis on which this remedy can be imposed, like breach of fiduciary duty.
B. Appropriate Remedy: Imposition of a Constructive Trust
 The remedy for unjust enrichment is restitutionary in nature and can take one of two forms: personal or proprietary. A personal remedy is essentially a debt or a monetary obligation — i.e. an order to pay damages — that may be enforced by the plaintiff against the defendant (Sorochan v. Sorochan, 1986 CanLII 23 (SCC),  2 S.C.R. 38, at p. 47). In most cases, this remedy will be sufficient to achieve restitution, and it can therefore be viewed as the “default” remedy for unjust enrichment (Lac Minerals, at p. 678; Kerr, at para. 46).
 In certain cases, however, a plaintiff may be awarded a remedy of a proprietary nature — that is, an entitlement “to enforce rights against a particular piece of property” (McInnes, The Canadian Law of Unjust Enrichment and Restitution, at p. 1295). The most pervasive and important proprietary remedy for unjust enrichment is the constructive trust — a remedy which, according to Dickson J. (as he then was),
is imposed without reference to intention to create a trust, and its purpose is to remedy a result otherwise unjust. It is a broad and flexible equitable tool which permits courts to gauge all the circumstances of the case, including the respective contributions of the parties, and to determine beneficial entitlement.(Pettkus, at pp. 843-44)
 While the constructive trust is a powerful remedial tool, it is not available in all circumstances where a plaintiff establishes his or her claim in unjust enrichment. Rather, courts will impress the disputed property with a constructive trust only if the plaintiff can establish two things: first, that a personal remedy would be inadequate; and second, that the plaintiff’s contribution that founds the action is linked or causally connected to the property over which a constructive trust is claimed (PIPSC, at para. 149; Kerr, at paras. 50-51; Peter, at p. 988). And even where the court finds that a constructive trust would be an appropriate remedy, it will be imposed only to the extent of the plaintiff’s proportionate contribution (direct or indirect) to the acquisition, preservation, maintenance or improvement of the property (Kerr, at para. 51; Peter, at pp. 997-98).
In Reiter v. Hollub (Ont CA, 2017) the Court of Appeal discusses principles of the restitutionary doctrine of unjust enrichment, particularly whether the remedy should be monetary or proprietary (a constructive trust), in the context of a claim against the increased equity of a home owned by the other partner in a common law relationship:
(1) Applicable principles. Professional Institute of the Public Service of Canada v. Canada (Attorney General)
 In Kerr v. Baranow, at para. 31, Cromwell J. recognized 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”. Since the Supreme Court’s 1980 decision in Pettkus v. Becker, 1980 CanLII 22 (SCC),  2 S.C.R. 834, unjust enrichment principles have been available to support claims made by domestic partners upon the breakdown of their relationship.
 The test for unjust enrichment is well-settled. To establish unjust enrichment, the person advancing the claim must prove three things:
1. An enrichment of or benefit to the defendant;
2. A corresponding deprivation of the plaintiff; and
3. The absence of a juristic reason for the enrichment.
 There are two steps to identifying whether there is a juristic reason for the responding party to retain the benefit incurred. First, the court must consider whether the case falls within a pre-existing category of juristic reason, including a contract, a disposition of law, donative intent, and other valid common law, equitable or statutory obligations: Kerr, at para. 43. If a case falls outside one of these established categories, the reasonable expectations of the parties and public policy considerations become relevant in assessing whether recovery should be denied: Kerr, at para. 44.
 In Kerr v. Baranow, at para. 46, the Supreme Court outlined two possible remedies where unjust enrichment is established – a monetary award or a proprietary award. The court counselled, at para. 47, that the first remedy to consider is always the monetary award and that, in most cases, a monetary award is sufficient to remedy the unjust enrichment.
 To obtain a proprietary award, the person advancing the claim based on unjust enrichment must demonstrate that monetary damages are insufficient and that there is a sufficiently substantial and direct causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property: Kerr, at paras. 50-51. A minor or indirect contribution will not suffice.
 The court held that there are two different approaches to valuation for a monetary award: Kerr, at para. 55. First, a monetary award may be based on a quantum meruit, value received or fee-for-services basis. Second, a monetary award may be based on a value survived basis. This is where the joint family venture analysis becomes relevant.
 To receive a monetary award on a value survived basis, the claimant must show that there was a joint family venture and that there was a link between his or her contributions to the joint family venture and the accumulation of assets and/or wealth: Kerr, at para. 100. Whether there is a joint family venture is a question of fact to be assessed in light of all of the relevant circumstances, including the four factors noted above – mutual effort, economic integration, actual intent and priority of the family: Kerr, at para. 100.
 Justice Cromwell was careful to note that cohabiting couples are not a homogenous group: Kerr, at para. 88. The analysis must therefore take into account the particular circumstances of each relationship. The emphasis should be on how the parties actually lived their lives, not on their ex post facto assertions or the court’s view of how they ought to have done so: Kerr, at para. 88.
 While the four factors identified above are helpful to determine whether the parties were engaged in a joint family venture, there is no closed list of relevant factors: Kerr, at para. 89. The factors Cromwell J. suggested were not a checklist of conditions, but a useful approach to a global analysis of the evidence and examples of relevant factors that a court may take into account: Kerr, at para. 89.
In Professional Institute of the Public Service of Canada v. Canada (Attorney General) (SCC, 2020) the Supreme Court of Canada considered whether a constructive trust should be imposed over surplus government pension funds seized by the goverment, focussing on an unjust enrichment route to that remedy:
(1) Equitable Obligation. Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford)
 In order to succeed, the appellants must establish that they have an equitable interest in the actuarial surplus reflected in the Superannuation Accounts, as their legal interest is limited to their entitlement to statutorily defined benefits. They have not pursued their express trust argument on appeal; they have not argued that a resulting trust has arisen in their favour; therefore, a constructive trust is the only basis upon which an “equitable interest” might be recognized in the actuarial surplus (A.F., at para. 142).
 Since this Court’s decision in Soulos v. Korkontzilas, 1997 CanLII 346 (SCC),  2 S.C.R. 217, there have been two grounds on which a court can impose a constructive trust: (1) breach of an equitable obligation, and (2) unjust enrichment. The appellants have argued both in this appeal.
 In Soulos, McLachlin J. (as she then was) held that a constructive trust “may be imposed where good conscience so requires” (para. 34). In her view, good conscience might require the imposition of such a trust in two situations: (1) where property is obtained wrongfully by the defendant (such as by breach of fiduciary duty or breach of loyalty), or (2) where the defendant has been unjustly enriched.
 Regarding the first category, McLachlin J. identified four conditions which are generally required before a constructive trust for wrongful conduct may be imposed:
(1) The defendant must have been under an equitable obligation, that is, an obligation of the type that courts of equity have enforced, in relation to the activities giving rise to the assets in his hands; I have found that the government was not subject to a fiduciary obligation in relation to its management of the Plans, and the appellants have not argued that the government has breached any other equitable obligation that it had to the Plan members. The appellants’ argument fails on the first requirement of the Soulos test. I therefore turn to the other basis on which a constructive trust may be imposed: unjust enrichment.
(2) The assets in the hands of the defendant must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff;
(3) The plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties and;
(4) There must be no factors which would render imposition of a constructive trust unjust in all the circumstances of the case; e.g., the interests of intervening creditors must be protected. [Soulos, at para. 45]
(2) Unjust Enrichment
 As this Court found in Elder Advocates, it is possible to claim unjust enrichment against the government (provided the issue is not restitution for taxes paid under an ultra vires statute).
 In order to prove a claim in unjust enrichment, the plaintiff must establish: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment (Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75,  3 S.C.R. 575 (“Pacific National”), at para. 14). Where these elements are satisfied, the remedy of constructive trust may be available if (1) “monetary damages are inadequate”, and (2) “there is a link between the contribution that founds the action and the property in which the constructive trust is claimed” (Peter v. Beblow, 1993 CanLII 126 (SCC),  1 S.C.R. 980, at p. 988).
 As Binnie J. explained in Pacific National, at para. 15, “[a]n enrichment may ‘connot[e] a tangible benefit’ . . ., or it can be relief from a ‘negative’, such as saving the defendant from an expense he or she would otherwise have been required to make” (emphasis in original).
 Following this Court’s decision in Peter v. Beblow, the enrichment must correspond with a deprivation from the plaintiff. While the test for unjust enrichment is typically articulated as having three elements, it is important to recognize that the enrichment and detriment elements are the same thing from different perspectives. As Dickson C.J. suggested in Sorochan v. Sorochan, 1986 CanLII 23 (SCC),  2 S.C.R. 38, cited by Cory J. in his concurring reasons in Peter v. Beblow, at p. 1012, the enrichment and the detriment are “essentially two sides of the same coin”.
 The “straightforward economic approach”, as described in Pacific National, to enrichment and detriment, is properly understood to connote a transfer of wealth from the plaintiff to the defendant (para. 20). As the purpose of the doctrine is to reverse unjust transfers, it must first be determined whether wealth has moved from the plaintiff to the defendant.
 Accordingly, the first inquiry is not whether the government was somehow enriched or benefitted by amortizing or removing the surpluses in the Superannuation Accounts. Rather, the question is whether the government was enriched at the appellants’ expense. Even if it could be shown that the government benefited in some way by reducing the stated financial obligations of Canada, it would not assist the appellants unless the gain corresponded to the appellants’ loss.
 As the Superannuation Accounts are mere accounting records, and do not contain assets in which the appellants have an interest, no enrichment and corresponding deprivation can be found in either (1) the government’s decision prior to April 1, 2000 to amortize the surpluses for accounting purposes under the FAA, or (2) Parliament’s decision to enact Bill C-78 to require the debiting of a portion of the surplus directly from the Accounts.
 The Court of Appeal found that there was no enrichment because “whatever benefit there was to such actions enured to all Canadian taxpayers” (para. 106). I do not understand the nature of the inquiry in the same way. The enrichment and corresponding deprivation elements ask whether there was a transfer of wealth from the plaintiff to the defendant. The fact that the defendant is a public body is irrelevant to whether such a transfer of wealth took place. Indeed, this reasoning would have the effect of insulating the government from any claim for unjust enrichment.
 The Court of Appeal indicated that there might have been a deprivation because the government’s actions “were detrimental to plan members if for no other reason than the fact that those actions apparently led to increases in plan member contribution rates” (para. 107). As I observed in connection with the issue of whether the Superannuation Accounts contained assets, the evidence does not support such an alleged deprivation.
 Further, if the increase in contribution rates did constitute a deprivation, the corresponding enrichment could only be the additional deductions taken from employee pay cheques following the rate hikes, and not the amount of the surpluses amortized and removed. But the appellants have sought a declaration that they have an equitable interest in the balances in the Superannuation Accounts as at March 31, 2000, and not the return of the increased contributions after Bill C-78 came into force. Accordingly, on the argument that increased contribution rates constituted a deprivation, there is no link between the alleged deprivation and the property right they seek, the return of the amortized surplus and subsequently debited surplus.
 I conclude that there was no enrichment and corresponding deprivation, and that the appellants have not established a prima facie case of unjust enrichment. The third branch of the test for unjust enrichment, the absence of a juristic reason for the enrichment, need not be analyzed.
In Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford) (Ont CA, 2016), where embezzled funds were spent in gambling, the Court of Appeal commented on the application of the doctrine of constructive trust in the context of embazzlement:
 Furthermore, in Soulos v. Korkontzilas, 1997 CanLII 346 (SCC),  2 S.C.R. 217, at paras. 34 and 43, the Supreme Court of Canada recognized that the remedy of a constructive trust could be imposed where required by good conscience, including both for wrongful acts like fraud and where there is unconscionable unjust enrichment:
It thus emerges that a constructive trust may be imposed where good conscience so requires. The inquiry into good conscience is informed by the situations where constructive trusts have been recognized in the past. It is also informed by the dual reasons for which constructive trusts have traditionally been imposed: to do justice between the parties and to maintain the integrity of institutions dependent on trust-like relationships. Finally, it is informed by the absence of an indication that a constructive trust would have an unfair or unjust effect on the defendant or third parties, matters which equity has always taken into account. Equitable remedies are flexible; their award is based on what is just in all the circumstances of the case.
I conclude that in Canada, under the broad umbrella of good conscience, constructive trusts are recognized both for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation. While cases often involve both a wrongful act and unjust enrichment, constructive trusts may be imposed on either ground: where there is a wrongful act but no unjust enrichment and corresponding deprivation; or where there is an unconscionable unjust enrichment in the absence of a wrongful act, as in Pettkus v. Becker, supra. Within these two broad categories, there is room for the law of constructive trust to develop and for greater precision to be attained, as time and experience may dictate.