Canada: Granger v. Granger – Unjust Enrichment Where There Has Been A "Mutual Conferral Of Benefits"

Unjust enrichment is a legal concept based on the general equitable principle that no person should be allowed to profit at another's expense without a legal reason for doing so. The burden is on the plaintiff to prove: 1) an enrichment of the defendant, 2) a corresponding deprivation of the plaintiff and 3) the absence of a juristic reason for the enrichment. Once proven, the burden shifts to the defendant to show that there is some other valid reason to deny the recovery by the plaintiff. What happens though when there is a claim by the defendant of a "mutual conferral of benefits", where it is argued that the plaintiff has also benefitted from the circumstances?

In the recent case of Granger v. Granger, 2016 ONCA 945, the Ontario Court of Appeal clarified the approach to be taken in such cases. It declared that the nuanced approach taken by the Supreme Court of Canada ("SCC") in Kerr v. Baranow, 2011 SCC 10 ("Kerr"), to unjust enrichment cases involving mutual conferral of benefits is the general approach and does not solely apply to the narrow facts of joint family ventures, as was the case in Kerr. Generally under this approach, mutual conferral of benefits should not to be taken into account until the burden has shifted to the defendant in the defence/remedy stage. In very limited circumstances, mutual conferral of benefits can be taken into account to show the parties reasonable expectations in proving the absence of a juristic reason for enrichment. Under no circumstances, however, should it be taken into account in the first two branches of the unjust enrichment test.

Background

The family home was purchased in 1981 and Katarina Granger ("Katarina") held title in her name alone. Shortly after his father deserted the family in 1984, Katarina's son John dropped out of school and lived with his mother in the home for the next 30 years. John's position was that Katarina wanted him to live with her to look after her and the house. For doing so, she promised to give him half of the house upon her death. Later, after Katarina helped her daughter, Helena Granger ("Helena"), purchase another property, Katarina promised John the entire house upon her death. In 2012, Helena's marriage broke up, and she moved back into Katarina's house. Helena, exercising a continuing power of attorney for property, transferred title to the house to Katarina and herself as joint tenants.

Helena and Katarina sought an order to evict John and his common law wife, Margaret, from the home. John brought a counter-application seeking a beneficial interest in the property. Ultimately, the trial judge dismissed John's claim.1 John appealed on the two main issues of whether the trial judge erred in denying John's claim based on either proprietary estoppel or unjust enrichment.2 Juriansz J.A., writing for a unanimous court, quickly rejected the ground of appeal based on proprietary estoppel because John never claimed a present interest in the home, but asserted that he would receive an interest upon the death of Katarina. Accordingly, the claim based on proprietary estoppel failed.

Juriansz J.A. then addressed John's unjust enrichment claim, providing a very thorough review of the test for unjust enrichment in light of a "mutual conferral of benefits" claim. John argued that the trial judge erred in his application of the test for unjust enrichment by failing to properly allocate the burden of proof in a case that involved the mutual conferral of benefits.

John had the onus of proving the three elements of unjust enrichment: 1) an enrichment of Katarina; 2) a corresponding deprivation to John; and 3) the absence of a juristic reason for the enrichment.

Burden on John to establish that he conferred a benefit on Katarina

First, John needed to establish that he conferred a benefit on Katarina. Because Katarina claimed that John benefited from living rent-free in the home for 30 years, the trial judge placed the onus on John to prove that he conferred a "net benefit" on Katarina as the legal owner of the home. This finding meant that, taking into account the benefit that he provided Katarina and the benefit that he received from living in the house, John had to establish that he provided a larger benefit than he received from living in the house. The trial judge concluded that he did not meet this burden. He found that John enjoyed free accommodation in the house with an approximate value of $250,000 to $350,000, and that the financial contributions made by John did not surpass this amount. He also found that, although domestic services are capable of supporting an unjust enrichment claim, any services that John provided to Katarina would not satisfy the first element of the unjust enrichment test on a "net analysis." The trial judge arrived at these conclusions without making any specific factual findings about the amount or value of the services provided by John.

Juriansz J.A. held, however, that the trial judge "failed to recognize that where the defendant claims a set-off because of the mutual exchange of benefits, the allocation of the burden of proof is more nuanced."3 He explained that the more nuanced approached is found in Kerr where Cromwell J., writing for a unanimous SCC, focused directly on mutual benefit conferral and explained that it is generally considered at the defence or remedy stage; and in very limited circumstances, it can be taken into account at the juristic reason stage of the analysis, but only to shed light on the parties' reasonable expectations. Cromwell J. further affirmed that this approach is consistent with the quantum meruit origins of the fee-for-services approach and with the straightforward economic approach to the benefit/detriment analysis that has been consistently followed by the SCC. He emphasized that this nuanced approach should be taken where the alleged enrichment consists of services. He further stressed that, provided the services confer a tangible benefit on the defendant, they will generally constitute an enrichment and corresponding deprivation; however, whether the deprivation was offset by benefits flowing to the claimant from the defendant should not be addressed in the first two steps of the unjust enrichment test.

Katarina's counsel argued that this nuanced approach to mutual benefit conferral applied only to the particular context of the Kerr case, which was a joint family venture. Juriansz J.A. disagreed and gave five reasons why the approach is intended to be of general application to mutual conferral of benefit cases.

First, he stated that the structure of Kerr itself confirms this view. In Kerr, Cromwell J. explained that where a joint family venture has resulted in the generation of wealth, the remedy should be calculated based on the share of those assets proportionate to the complainant's contributions. Accordingly, it is at the remedy stage where mutual benefits are taken into account. Cromwell J.  then went on to address the difference between that situation and the fee-for-services case. In the latter, mutual benefit conferral is taken into account at the defence/remedy stage as well, but typically as a set-off instead of as a proportion of contribution.

Second, Juriansz J.A. noted that Kerr explicitly draws on non-family case law in explaining why mutual benefits should not be taken into account at the benefit/detriment stage of the analysis. Not taking the mutual benefits into account at the benefit/detriment stage is supported by the straightforward economic approach to the benefit/detriment analysis which the SCC has consistently followed. Although this approach often applies to the payment of money, it should also apply when the enrichment consists of services. As such, Cromwell, J. made it known that applying the offsetting benefits in the defence/remedy stage and not at the detriment/benefit stage of the analysis was intended to have a broader application outside of the family joint venture context.

Third, Juriansz J.A. asserts that scholarly commentary also suggests Cromwell J.'s approach in Kerr applies outside of the family law context, citing P.D. Maddaugh and J.D. McCamus, The Law of Restitution (loose-leaf), Vol. II (Toronto: Thomson Reuters, 2016).

Fourth, provincial appellate courts have applied Kerr outside of the family law context on many occasions.

Fifth, and finally, Juriansz J.A. reasoned that applying the same approach in family venture and non-family venture cases promotes the "overall doctrinal coherence of the law of unjust enrichment."4 He noted that in Kerr, Cromwell J. conveyed that there should not be a separate line of authority for "family" cases within the law of unjust enrichment, but that the rights and remedies for unjust enrichment should be the same for all cases.

Juriansz J.A. concluded that the trial judge erred in immediately considering whether John had conferred a "net benefit" on Katarina; instead, he should have only considered whether John conferred a benefit on Katarina. He found that John had discharged the onus of proving that he conferred a benefit on Katarina through the services that he provided her through the years. He found that the services had value, were a benefit to Katarina, and that John was not under a legal obligation to perform the services. An expert report was produced during the trial that put a value of $438,113 on the services that John provided over the years. Katarina did not produce a contradictory report. In addition, the trial judge did not accept Katarina and Helena's blanket denial that John made any contributions, and did not reject the evidence John gave regarding his estimated hourly work over the 30 years. Applying these findings to the evidence, Juriansz J.A. concluded that John contributed $438,113 in domestic services to Katarina, enriching her in that amount.

Was there a corresponding deprivation to John?

In a case involving the provision of personal services, the party who provided the personal services suffered a corresponding deprivation of their own time and effort. Accordingly, Juriansz J.A. found that John suffered a corresponding deprivation of $438,113.

Was there a juristic reason for the enrichment?

The established categories of juristic reason include contract, disposition of law, donative intent and other valid, common law, equitable or statutory obligations. John testified that the reason he provided the services was Katarina's promise that if he did so, he would receive half of the house upon her death. This reason falls outside of the established categories of juristic reason to permit Katarina to retain the benefit. Accordingly, the burden shifted to Katarina to show that there was a juristic reason outside of the established categories for her to retain the benefit. Katarina, however, did not meet this burden. Accordingly, John has established a prima facie case of enrichment.

Did Katarina confer off-setting benefits on John?

Once a prima facie case of enrichment was established, utilizing the Kerr framework, the onus then fell on Katarina to establish a valid defence or reason to limit the requested remedy. This stage is where evidence of mutual conferral of benefits can be considered. Katarina alleged the off-setting benefit to John that he lived in rent-free accommodation for 30 years. The trial judge properly concluded that the value of the accommodation was between $250,000 and $350,000. He erred, however, in treating the value as proof of an off-setting benefit. Katarina had the onus of proving that rent-free accommodation was provided. Juriansz J.A. explained that by initially considering whether John provided a "net benefit" to Katarina, he placed the burden to prove that rent was paid on John. Under the proper analysis, whereby the mutual benefit is considered during the defence part of the analysis, the onus was on Katarina to prove that John did not pay rent. The evidence showed that Katarina never expected John to pay rent and the trial judge did not make a finding that John did not pay rent. As such, Juriansz J.A. concluded that Katarina did not satisfy her burden of proving an off-setting benefit conferred on John.

Conclusion

Juriansz J.A. concluded that the trial judge's dismissal of John's application for equitable damages should be set aside and replaced with an order granting John's claim in the amount of $438,113.

Footnotes

1 Granger v. Granger, 2015 ONSC 6238.

2 This decision also included John's appeal from the trial judge's decision in Granger v. Granger, 2015 ONSC 1711, where the validity of a continuing power of attorney for property held by Helena in favour of Katarina was upheld. This part of the case will not be discussed in this article except to say that the Ontario Court of Appeal revoked the power of attorney in favour of Helena due to a finding of undue influence by her on Katarina and required that Helena account for her management of Katarina's property.

3 See para. 37.

4 At para. 49.

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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