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Equity - Remedies - 'Mutual Benefit Conferral'. Kerr v. Baranow
In Kerr v. Baranow (SCC, 2011) the Supreme Court of Canada considered the factor of 'mutual benefit conferrals' in the determination of restitution remedies:F. Mutual Benefit Conferral
(1) Introduction
[101] As discussed earlier, the unjust enrichment analysis in domestic situations is often complicated by the fact that there has been a mutual conferral of benefits; each party in almost all cases confers benefits on the other: Parkinson, at p. 222. Of course, a claimant cannot expect both to get back something given to the defendant and retain something received from him or her: Birks, at p. 415. The unjust enrichment analysis must take account of this common sense proposition. How and where in the analysis should this be done?
[102] The answer is fairly straightforward when the essence of the unjust enrichment claim is that one party has emerged from the relationship with a disproportionate share of assets accumulated through their joint efforts. These are the cases of a joint family venture in which the mutual efforts of the parties have resulted in an accumulation of wealth. The remedy is a share of that wealth proportionate to the claimant’s contributions. Once the claimant has established his or her contribution to a joint family venture, and a link between that contribution and the accumulation of wealth, the respective contributions of the parties are taken into account in determining the claimant’s proportionate share. While determining the proportionate contributions of the parties is not an exact science, it generally does not call for a minute examination of the give and take of daily life. It calls, rather, for the reasoned exercise of judgment in light of all of the evidence.
[103] Mutual benefit conferral, however, gives rise to more practical problems in an unjust enrichment claim where the appropriate remedy is a money award based on a fee-for-services-provided approach. The fact that the defendant has also provided services to the claimant may be seen as a factor relevant at all stages of the unjust enrichment analysis. Some courts have considered benefits received by the claimant as part of the benefit/detriment analysis (for example, at the Court of Appeal in Peter v. Beblow (1990), 1990 CanLII 418 (BC CA), 50 B.C.L.R. (2d) 266). Others have looked at mutual benefits as an aspect of the juristic reason inquiry (for example, Ford v. Werden (1996), 1996 CanLII 1210 (BC CA), 27 B.C.L.R. (3d) 169 (C.A.), and the Court of Appeal judgment in Kerr). Still others have looked at mutual benefits in relation to both juristic reason and at the remedy stage (for example, as proposed in Wilson). It is apparent that some clarity and consistency is necessary with respect to this issue.
[104] In my view, there is much to be said about the approach to the mutual benefit analysis mapped out by Huddart J.A. in Wilson. Specifically, I would adopt her conclusions that mutual enrichments should mainly be considered at the defence and remedy stages, but that they 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 (para. 9). This approach is consistent with the authorities from this Court, and provides a straightforward and just method of ensuring that mutual benefit conferral is fully taken into account without short-circuiting the proper unjust enrichment analysis. I will briefly set out why, in my view, this approach is sound.
[105] At the outset, however, I should say that this Court’s decision in Peter does not mandate consideration of mutual benefits at the juristic reason stage of the analysis: see, e.g., Ford, at para. 14; Thomas v. Fenton, 2006 BCCA 299, 269 D.L.R. (4th) 376, at para. 18. Rather, Peter made clear that mutual benefit conferral should generally not be considered at the benefit and detriment stages; the Court also approved the trial judge’s decision to take mutual benefits into account at the remedy stage of the unjust enrichment analysis.
[106] In Peter, the trial judge found that all three elements of unjust enrichment had been established. Before Ms. Peter and Mr. Beblow started living together, he had a housekeeper whom he paid $350 per month. When Ms. Peter moved in with her children and assumed the housekeeping and child-care responsibilities, the housekeeper was no longer required. The trial judge valued Ms. Peter’s contribution by starting with the amount Mr. Beblow had paid his housekeeper, but then discounting this figure by one half to reflect the benefits Ms. Peter received in return. The trial judge then used that discounted figure to value Ms. Peter’s services over the 12 years of the relationship: [1988] B.C.J. No. 887 (QL).
[107] The Court of Appeal, at (1990), 1990 CanLII 418 (BC CA), 50 B.C.L.R. (2d) 266, set aside the judge’s finding on the basis that Ms. Peter had failed to establish that she had suffered a deprivation corresponding to the benefits she had conferred on Mr. Beblow. The court reasoned that, although she had performed the services of a housekeeper and homemaker, she had received compensation because she and her children lived in Mr. Beblow’s home rent free and he contributed more for groceries than she had.
[108] This Court reversed the Court of Appeal and restored the trial judge’s award. The Court was unanimous that Ms. Peter had established all of the elements of unjust enrichment, including deprivation. Cory J. (with whom McLachlin J. agreed on this point) made short work of Mr. Beblow’s submission that Ms. Peter had not shown deprivation. He observed, “As a general rule, if it is found that the defendant has been enriched by the efforts of the plaintiff there will, almost as a matter of course be deprivation suffered by the plaintiff”: at p. 1013. The Court also unanimously upheld the trial judge’s approach of taking account of the benefits Ms. Peter had received at the remedy stage of his decision. As noted, the trial judge had reduced the monthly amount used to calculate Ms. Peter’s award by 50 percent to reflect benefits she had received from Mr. Beblow. McLachlin J. did not disagree with this approach, holding at p. 1003 that the figure arrived at by the judge fairly reflected the value of Ms. Peter’s contribution to the family assets. Cory J., at p. 1025, referred to the trial judge’s approach as “a fair means of calculating the amount due to the appellant”. Thus, the Court approved the approach of taking the mutual benefit issue into account at the remedy stage of the analysis. Peter therefore does not support the view that mutual benefits should be considered at the benefit/detriment or juristic reason stages of the analysis.
(2) The Correct Approach
[109] As I noted earlier, my view is that mutual benefit conferral 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. Otherwise, the mutual exchange of benefits should be taken into account at the defence and/or remedy stage. It is important to note that this can, and should, take place whether or not the defendant has made a formal counterclaim or pleaded set-off.
[110] I turn first to why mutual benefits should not be addressed at the benefit/detriment stage of the analysis. In my view, refusing to address mutual benefits at that point 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.
[111] An unjust enrichment claim based on a fee-for-services approach is analogous to the traditional claim for quantum meruit. In quantum meruit claims, the fact that some benefit had flowed from the defendant to the claimant is taken into account by reducing the claimant’s recovery by the amount of the countervailing benefit provided. For example, in a quantum meruit claim where the plaintiff is seeking to recover money paid pursuant to an unenforceable contract, but received some benefit from the defendant already, the claim will succeed but the award will be reduced by an amount corresponding to the value of that benefit: Maddaugh and McCamus (loose-leaf ed.), vol. II, at §13:200. The authors offer as an example Giles v. McEwan (1896), 1896 CanLII 108 (MB CA), 11 Man. R. 150 (Q.B. en banc). In that case, two employees recovered in quantum meruit for services provided to the defendant under an unenforceable agreement, but the amount of the award was reduced to reflect the value of benefits the defendant had provided to them. Thus, taking the benefits conferred by the defendant into account at the remedy stage is consistent with general principles of quantum meruit claims. Of course, if the defendant has pleaded a counterclaim or set-off, the mutual benefit issue must be resolved in the course of considering that defence or claim.
[112] 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. Garland is a good example. The class action plaintiffs claimed in unjust enrichment to seek restitution for late payment penalties that had been imposed but that this Court (in an earlier decision) found had been charged at a criminal rate of interest: see Garland v. Consumers’ Gas Co., 1998 CanLII 766 (SCC), [1998] 3 S.C.R. 112. The company argued that it had not been enriched because its rates were set by a regulatory mechanism out of its control, and that the rates charged would have been even higher had the company not received the late payment penalties as part of its revenues. That argument was accepted by the Court of Appeal, but rejected on the further appeal to this Court. Iacobucci J., for the Court, held that the payment of money, under the “straightforward economic approach” adopted in Peter, was a benefit: para. 32. He stated at para. 36: “There simply is no doubt that Consumers’ Gas received the monies represented by the [late payment penalties] and had that money available for use in the carrying on of its business. . . . We are not, at this stage, concerned with what happened to this benefit in the ongoing operation of the regulatory scheme.” The Court held that the company was in fact asserting the “change of position” defence (that is, the defence that is available when “an innocent defendant demonstrates that it has materially changed its position as a result of an enrichment such that it would be inequitable to require the benefit to be returned”: para. 63). This defence is considered only after the three elements of an unjust enrichment claim have been established: para. 37. Thus the Court declined to get into a detailed consideration at the benefit/detriment stage of the defendant’s submissions that it had not benefitted because of the regulatory scheme.
[113] While Garland dealt with the payment of money, my view is that the same approach should be applied where the alleged enrichment consists of services. 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. I turn now to the limited role that mutual benefit conferral may have at the juristic reason stage of the analysis.
[114] As previously set out, juristic reason is the third of three parts to the unjust enrichment analysis. As McLachlin J. put it in Peter, at p. 990, “It is at this stage that the court must consider whether the enrichment and detriment, morally neutral in themselves, are ‘unjust’.” The juristic reason analysis is intended to reveal whether there is a reason for the defendant to retain the enrichment, not to determine its value or whether the enrichment should be set off against reciprocal benefits: Wilson, at para. 30. Garland established that claimants must show that there is no juristic reason falling within any of the established categories, such as whether the benefit was a gift or pursuant to a legal obligation. If that is established, it is open to the defendant to show that a different juristic reason for the enrichment should be recognized, having regard to the parties’ reasonable expectations and public policy considerations.
[115] The fact that the parties have conferred benefits on each other may provide relevant evidence of their reasonable expectations, a subject that may become germane when the defendant attempts to show that those expectations support the existence of a juristic reason outside the settled categories. However, 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.
(3) Summary
[116] I conclude that mutual benefits may be considered at the juristic reason stage, but only to the extent that they provide evidence relevant to the parties’ reasonable expectations. Otherwise, mutual benefit conferrals are to be considered at the defence and/or remedy stage. I will have more to say in the next section about how mutual benefit conferral and the parties’ reasonable expectations may come into play in the juristic reason analysis.
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