In Moore v. Sweet, 2017 ONCA 182, the Ontario Court of Appeal considered whether the appellant, Risa Sweet, or the respondent, Michelle Moore, was entitled to the proceeds of an insurance policy on the life of Lawrence Moore (the "Policy").
Ms. Moore was named as beneficiary of the Policy during her marriage to Mr. Moore, and all Policy premiums were paid out of an account held in their joint names. After their separation, Mr. Moore moved in with Ms. Sweet, with whom he lived until his death. During that time, Ms. Moore continued to pay the Policy premiums in accordance with an oral agreement between her and Mr. Moore that she would remain the beneficiary of the Policy. Despite this agreement, Mr. Moore revoked the designation of Ms. Moore and irrevocably designated Ms. Sweet as beneficiary under the Policy.
The application judge ruled in favour of Ms. Moore on the basis of unjust enrichment due to equitable assignment. In a split decision, the Court of Appeal overturned the decision. The two central issues raised on the appeal related to equitable assignment and unjust enrichment.
Writing for the majority, Blair J.A. held that the application judge erred in finding that the oral contract took the form of an equitable assignment to Ms. Moore of Mr. Moore's equitable interest in either the proceeds of the Policy or the entire interest in the policy in exchange for the payment of future premiums. As Ms. Moore had not relied on or otherwise brought forward the principle of equitable interest, Blair J.A. found that it was procedurally unfair for the application judge to base his finding on that principle. It also deprived the parties of the ability to make a proper record relating to it, thereby rendering the result inherently unreliable.
As there was no equitable assignment, Blair J.A. considered whether the claim for unjust enrichment could otherwise stand or, if not, whether a remedial constructive trust could be found on some other "good conscience" basis in the circumstances. He found that while there may have been an enrichment (Ms. Sweet's receipt of the Policy proceeds) and a corresponding deprivation (Ms. Moore's inability to receive the Policy proceeds despite having paid the Policy premiums), there was a juristic reason[1] for the enrichment. Specifically, the irrevocable beneficiary designation provided a juristic reason justifying the receipt by Ms. Sweet of the insurance proceeds. Blair J.A. further held that the application judge failed to apply the required two-step analysis to the juristic reason assessment. Specifically, in assessing whether there is a juristic reason for an enrichment, the court is required to consider (i) the reasonable expectations of the parties, and (ii) public policy considerations.
After concluding that there was no unjust enrichment, Blair J.A. considered whether a constructive trust is available in circumstances where, even with no unjust enrichment and no wrongful act, good conscience requires it. He concluded that there was nothing in the circumstances of the case that would provide the basis for a "good conscience" constructive trust when the facts did not support such a trust based on unjust enrichment or wrongful act. Accordingly, he did not determine whether this third category of constructive trust was available.
While the legal analysis set out in the decision is much more complex, it was essentially for these reasons that Blair J.A. allowed the appeal and set aside the judgement below. He found that Ms. Moore was entitled to the return of the premiums that she paid following her separation from Mr. Moore, with interest. Ms. Sweet was entitled to the rest.
It is clear that Blair J.A. was sympathetic to Ms. Sweet's situation; Ms. Sweet is disabled and impecunious whereas Ms. Moore has, at the very least, a house in Mississauga. Also relevant to his decision was the fact that the proceeds of the Policy were initially designated to Ms. Moore after separation for child support, which Ms. Moore no longer needed.
However, it is problematic that the majority found that an irrevocable beneficiary designation on the Policy constituted a juristic reason for Ms. Sweet's enrichment. If, regardless of any prior agreement (written or oral) requiring one separated spouse to designate life insurance to the other, the owner of the policy can properly irrevocably designate a different beneficiary, then life insurance can no longer be used reliably in family law settlements, especially where the owner of the insurance has no other substantial assets accessible through a claim made against the individual's estate. In addition, the decision is problematic because it permitted Ms. Moore to receive a portion of the proceeds of the Policy, despite the fact that the policy had been irrevocably designated to Ms. Sweet.
Lauwers J.A., dissenting, noted that while an insurance beneficiary designation may constitute a juristic reason for enrichment, as a result of the oral agreement between Ms. Moore and Mr. Moore, the irrevocable designation was no longer Mr. Moore's to make. Therefore, it should not constitute a juristic reason for enrichment. In the view of the author, the position of the dissent was the correct position at law.
The decision in this case will have important implications for the circumstances in which a constructive trust is available as a remedy if it stands. As of April 19, 2017, no application for leave to appeal had been filed. However, the deadline for filing an application for leave to appeal to the Supreme Court of Canada is the beginning of May. Accordingly, it is possible that the Supreme Court will hear the case and provide further commentary on an interesting area of the law.
Footnotes
1 A disposition of law or statutory obligation.
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