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Restitution (Specific) - Against Government. R. v. Travelers Insurance Company of Canada
In R. v. Travelers Insurance Company of Canada (Ont CA, 2024) the Ontario Court of Appeal allowed a Criminal Code property forfeiture appeal by an insurance company against the Crown, here alleging a restitutionary/constructive trust claims by subrogation [under CCC 462.37(2.01)] (comment: a constructive trust is a proprietary restitutionary remedy):[10] I would allow the appeal. The restitution and forfeiture provisions of the Criminal Code do not transform the Crown into a guarantor or trustee of claims. Even the Crown’s erroneous failure to put the Xpertdoc claim forward and bring it to the sentencing judge’s attention does not sustain Travelers’s claim of an unjust enrichment and a constructive interest in the forfeited property. However, it is the Crown’s erroneous omissions, in combination with the near certainty that restitution of the Xpertdoc claim would have been made, that amount to unjust enrichment supporting the requisite proprietary interest by way of a constructive trust in favour of Travelers. The Crown received monies that, but for the Crown’s erroneous omissions, should and would have been paid as restitution to Travelers in satisfaction of its subrogated Xpertdoc claim. As a result of the forfeiture, the Crown was unjustly enriched to the detriment of Travelers and without juristic reason. Those particular circumstances give rise to a constructive trust in favour of Travelers.
[11] The application judge erred in her application of s. 462.42 to the particular circumstances of this case. She erroneously characterized Travelers as being in the position of an ordinary creditor. This caused her to fail to give effect to her findings that support a constructive trust in favour of Travelers. These findings included that the Crown was aware of the Xpertdoc claim and had erroneously failed to put it before the sentencing judge, and, had it done so, the Xpertdoc claim, like the Thibert claim and other claims before the sentencing judge, would have received restitution beyond only the ransom payment. In these circumstances, the Crown erroneously received monies that should have gone to Travelers. As a result, the application judge erred by mischaracterizing Travelers’s claim as a claim for restitution rather than an interest in the property forfeited. She erred in finding that there was no claim for unjust enrichment in this case.
[12] This case turns on its unique facts: the Crown received monies that, but for the Crown’s errors, should have been paid to Travelers. Travelers therefore had the requisite proprietary interest in the seized proceeds of crime by way of a constructive trust. Travelers should therefore be granted relief from forfeiture beyond the ransom amounts already ordered by the application judge.
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[28] This case turns on its unusual and particular facts. As I shall explain, the application judge erred in failing to give effect to her factual findings and misapprehended the nature of Travelers’s status and its interest in the forfeited property. As a result, the application judge erred in finding that Travelers had no proprietary interest in the forfeited proceeds. I am also of the view that the application judge took an unduly restrictive approach to the scope of her discretion and failed to consider and apply the overall purpose of the relief from forfeiture provisions to all the relevant circumstances, especially the erroneous exclusion of Travelers’s restitution claim from the sentencing judge’s consideration and the failure to give Travelers the requisite notice of the Crown’s forfeiture application.
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(ii) Travelers has an interest in the property forfeited by way of a constructive trust
[42] I start with the question of whether Travelers has the requisite “interest in property that is forfeited” under s. 462.42(1) of the Criminal Code. An “interest in property that is forfeited” has been interpreted to mean “a person who has title or is entitled to possession” of the property in question: Tatarchuk, at para. 4. An “interest in property that is forfeited” can be by way of a constructive trust imposed because of an unjust enrichment: e.g., 1431633 Ontario Inc., at paras. 44, 64. As the Supreme Court instructed in Pettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834, at pp. 850-51: “The equitable principle on which the remedy of constructive trust rests is broad and general; its purpose is to prevent unjust enrichment in whatever circumstances it occurs.”
[43] Moreover, Travelers would have the requisite “interest in property that is forfeited” under s. 462.42. The Crown fairly acknowledges that for the purpose of unjust enrichment, the concept of “loss” may capture a benefit that was never in Travelers’s possession but that would have accrued to its benefit had it not been received by the Crown instead. The Crown submits, however, that there was no unjust enrichment because the Crown was not enriched by the non-ransom amounts to the corresponding deprivation of Travelers. Even if that were the case, it is the Crown’s position that there is a juristic reason barring any claim the appellant may have for unjust enrichment.
[44] The test for unjust enrichment that gives rise to a constructive trust, as set out in Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, at para. 30, is as follows: 1) Was there an enrichment of the Crown through the forfeiture of the monies that Travelers maintains should and would have been paid to Travelers absent the Crown’s admitted and erroneous omissions?; 2) Was there a corresponding deprivation suffered by Travelers?; and 3) Is there an absence of juristic reason for the Crown’s enrichment? . Professional Institute of the Public Service of Canada v. Canada (Attorney General)
In Professional Institute of the Public Service of Canada v. Canada (Attorney General) (SCC, 2020) the Supreme Court of Canada considered whether restitution can apply against government [it could], and that enrichment can take the form of 'relief from a negative' [it can]:(2) Unjust Enrichment
[148] 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).
[149] 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, [2004] 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), [1993] 1 S.C.R. 980, at p. 988).
[150] 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).
[151] 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), [1986] 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”.
[152] 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.
[153] 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.
[154] 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.
[155] 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.
[156] 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.
[157] 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.
[158] 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.
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