Canada: The Second Opinion: Limitation Periods And Unjust Enrichment - Clarity And Complexity From The ONCA

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

A recent ruling of the Ontario Court of Appeal, McConnell v. Huxtable , 2014 ONCA 86, provides useful clarification of two potentially complex questions — (1) The limitation period applicable to a claim for a constructive trust based on unjust enrichment, and (2) the sometimes confusing overlap between the Ontario Limitations Act, 2002 and the Ontario Real Property Limitations Act.

The appeal flowed from a family law dispute.  The male appellant had owned a number of properties (held in his own name) during the time the parties were a couple.   The female respondent argued that she had contributed to the acquisition and maintenance of these properties, and should be able to claim either a proprietary interest in them, or monetary compensation in lieu thereof.

The respondent was aware of this potential claim in 2007, but did not commence an action until 2012, five years later.

This raised the key question:  What limitation period applies to a claim for a remedial constructive trust over real property – or financial compensation in lieu of such a trust – based on an allegation of unjust enrichment?  Three alternatives were acknowledged:

  1. If the respondent's claim was subject to the general two-year limitation period under s. 4 of the Limitations Act, 2002, her claim was already statute-barred.
  2. Alternatively, if her claim was governed by the ten-year limitation period — applicable to actions for "an entry or distress, recover any land or rent" — under s. 4 of the Real Property Limitations Period, her action had been commenced in time.
  3. In the final alternative, if a legislative gap existed, and the claim did not fall under either of these statutes, there was no applicable limitation period, and her claim would also be permitted to go forward.

The motions judge had ruled that the claim for a constructive trust (or monetary compensation) based on unjust enrichment was not statute-barred, as it either fell within the Real Property Limitations Act, or was not subject to any limitation period.

The Court of Appeal rejected the possibility of a "legislative gap," but agreed that the applicable limitation period was the ten-year period under s. 4 of the Real Property Limitations Act, which provides (inter alia) that:

No person shall bring an action to recover any land, but within ten years next after the time at which the right to bring such action first accrued to the person bringing it.

The Court identified three questions which needed to be answered in determining whether the respondent's claim fell under s. 4 (see para. 15):

The central question raised by this appeal is whether a claim for unjust enrichment in which the claimant asks the court to impose a constructive trust upon the respondent's real property is an action to recover any land...: (1) is the respondent's claim an "action", (2) is the action to "recover", and (3) is the action to recover "land"?

The Court of Appeal concluded that all three answers could be answered in the affirmative.  First, the present claim was clearly "an action."

Secondly, although it couldbe argued that an action seeking a constructive trust does not literally constitute a claim "to recover" something, when s. 4 is read in light of the Real Property Limitations Act as a whole, there is justification for extending the word to a claim for constructive trust.

Finally, the Court turned to the meaning of "an action for recovery of land" (as used in s. 4), which it characterized as the "central question at issue in this appeal."  It was not immediately apparent that the respondent's claim for a constructive trust based on unjust enrichment was an action "for recovery of land."  However, based on a sweeping analysis of the constructive trust remedy for unjust enrichment, as well as a purposive and contextual interpretation of the Real Property Limitations Act (as well as the Limitations Act, 2002), the Court concluded that the claim fell within this category.

Interestingly, the Court concluded that the respondent's alternative claim for monetary compensation (in lieu of a constructive trust) was also governed by the ten-year limitation period — applicable to an "action to" — under the Real Property Limitations Act, and not the two-year limitation period applicable to "claims" under the Limitations Act, 2002.

The Court of Appeal was careful to confirm that its analysis and conclusion was not limited by the fact that it arose in a family law context (at paras. 33 & 34):

...[A]lthough this is a family law case, the determination of the limitation period issue will have ramifications beyond family law. The resolution of the limitation period issue cannot turn on the fact that this is a family law case. ....

....[I]n my view, the resolution of the strictly legal question as to the application of the Limitations Act, 2002 and the Real Property Limitations Act turns on the interpretation of the relevant provisions of those Acts. The issue of whether the Real Property Limitations Act applies to a claim for a constructive trust will be the same whether the equitable claim for an interest in land arises out of a domestic relationship or a purely business transaction.

As the Court acknowledged, constructive trust claims (alleging unjust enrichment) may be subject to different limitation period depending on the nature of the claim — i.e., claims directed at real property will be subject to the ten-year limitation period under the Real Property Limitation Act, while claims addressing personal property (whether tangible or intangible) may be subject to the two-year period under the Limitations Act, 2002. 

Counsel (on both sides of an unjust enrichment claim) will wish to bear this possibility in mind.

As a post script, the Court helpfully confirmed that the general limitation period under the Limitations Act, 2002 is presumptively applicable to all equitable claims not governed by another statute.

To view original article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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