Moore v. Sweet

Moore v. Sweet
Collection
Supreme Court Judgments
Date
2018-11-23
Neutral citation
2018 SCC 52
Report
[2018] 3 SCR 303
Case number
37546
Judges
Wagner, Richard; Abella, Rosalie Silberman; Moldaver, Michael J.; Karakatsanis, Andromache; Gascon, Clément; Côté, Suzanne; Brown, Russell; Rowe, Malcolm; Martin, Sheilah
On appeal from
Ontario
Notes
Case in Brief
SCC Case Information
Decision Content
SUPREME COURT OF CANADA
Citation: Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303
Appeal Heard: February 8, 2018 Judgment Rendered: November 23, 2018 Docket: 37546
Between:
Michelle Constance Moore
Appellant
and
Risa Lorraine Sweet
Respondent
Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ.
Reasons for Judgment: (paras. 1 to 96)
Joint Dissenting Reasons: (paras. 97 to 144)
Côté J. (Wagner C.J. and Abella, Moldaver, Karakatsanis, Brown and Martin JJ. concurring)
Gascon and Rowe JJ.
Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303
Michelle Constance Moore Appellant
v.
Risa Lorraine Sweet Respondent
Indexed as: Moore v. Sweet
2018 SCC 52
File No.: 37546.
2018: February 8; 2018: November 23.
Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ.
on appeal from the court of appeal for ontario
Equity — Restitution — Unjust enrichment — Remedy — Constructive trust — Husband and wife separating and entering into contractual agreement pursuant to which wife will pay husband’s life insurance policy premiums in order to remain named sole beneficiary of policy — Husband subsequently naming new common law spouse as beneficiary without wife’s knowledge — Insurance proceeds payable to common law spouse on husband’s death despite wife having continued to pay premiums — Whether common law spouse unjustly enriched at wife’s expense — If so, whether constructive trust is appropriate remedy.
Insurance — Life insurance — Beneficiary designation — Wife designated as revocable beneficiary of husband’s life insurance policy — After separation, wife agreeing to continue to pay policy premiums to maintain beneficiary designation — Husband subsequently designating new common law spouse as irrevocable beneficiary without wife’s knowledge — Insurance proceeds payable to common law spouse on husband’s death — Whether designation of common law spouse as irrevocable beneficiary in accordance with statute precludes recovery for wife with prior claim to benefit of policy — Insurance Act, R.S.O. 1990, c. I.8, ss. 190, 191.
During L and M’s marriage, L purchased a term life insurance policy and designated M as revocable beneficiary. They later separated, and entered into an oral agreement whereby M would pay all of the policy premiums and, in exchange, L would maintain M’s beneficiary designation. Unbeknownst to M, L subsequently designated his new common law spouse, R, as the irrevocable beneficiary of the policy. When L passed away, the proceeds were therefore payable to R and not to M. At the time of L’s death, his estate had no significant assets. M, who had paid about $7,000 in policy premiums since separation, commenced an application regarding her entitlement to the $250,000 policy proceeds. The application judge held that R had been unjustly enriched at M’s expense and impressed the proceeds with a constructive trust in M’s favour. The Court of Appeal allowed R’s appeal and set aside the judgment of the application judge.
Held (Gascon and Rowe JJ. dissenting): The appeal should be allowed.
Per Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown and Martin JJ.: R was enriched, M was correspondingly deprived, and both the enrichment and deprivation occurred in the absence of a juristic reason. Therefore, a remedial constructive trust should be imposed for M’s benefit.
A constructive trust is understood primarily as an equitable remedy that may be imposed at a court’s discretion. A proper equitable basis, such as a successful claim in unjust enrichment, must first be found to exist. A plaintiff will succeed on the cause of action in unjust enrichment if he or she can show three elements: (1) that the defendant was enriched; (2) that the plaintiff suffered a corresponding deprivation; and (3) that the defendant’s enrichment and the plaintiff’s corresponding deprivation occurred in the absence of a juristic reason.
Regarding the first element, the parties do not dispute the fact that R was enriched to the full extent of the insurance proceeds in the amount of $250,000, by virtue of her right to receive them as the designated irrevocable beneficiary of L’s policy.
The second element focuses on what the plaintiff actually lost and on whether that loss corresponds to the defendant’s enrichment, such that the latter was enriched at the expense of the former. The measure of deprivation is not limited to the plaintiff’s out‑of‑pocket expenditures or to the benefit taken directly from him or her. Rather, the concept of loss also captures a benefit that was never in the plaintiff’s possession but that the court finds would have accrued for his or her benefit had it not been received by the defendant instead. This element does not require that the disputed benefit be conferred directly by the plaintiff on the defendant. In this case, the extent of M’s deprivation is not limited to the $7,000 she paid in premiums. She stands deprived of the right to receive the entirety of the insurance proceeds, a value of $250,000. It is also clear that R’s enrichment came at M’s expense. Not only did M’s payment of the premiums make R’s enrichment possible, but R’s designation gave her the statutory right to receive the insurance proceeds. Because R received the benefit that otherwise would have accrued to M, the requisite correspondence exists: the former was enriched at the expense of the latter.
To establish the third element, it must be demonstrated that both the enrichment and corresponding deprivation occurred without a juristic reason. The juristic reason analysis proceeds in two stages. The first stage requires the plaintiff to demonstrate that the defendant’s retention of the benefit at the plaintiff’s expense cannot be justified on the basis of any of the established categories of juristic reasons, such as disposition of law or statutory obligations. A plaintiff’s claim will necessarily fail if a legislative enactment justifies the enrichment and corresponding deprivation. In this case, a beneficiary designation made pursuant to ss. 190(1) and 191(1) of the Insurance Act does not provide a juristic reason for R’s enrichment at M’s expense. Nothing in the Insurance Act can be read as ousting the common law or equitable rights that persons other than the designated beneficiary may have in policy proceeds. The legislature is presumed not to depart from prevailing law without expressing its intention to do so with irresistible clearness. While the Insurance Act provides the mechanism by which beneficiaries become statutorily entitled to receive policy proceeds, no part of the Act operates with the necessary irresistible clearness to preclude the existence of contractual or equitable rights in those proceeds once they have been paid to the named beneficiary. Furthermore, the Insurance Act provisions applicable to irrevocable beneficiary designations do not require, either expressly or implicitly, that a beneficiary keep the proceeds as against a plaintiff in an unjust enrichment claim, who stands deprived of his or her prior contractual entitlement to claim such proceeds upon the insured’s death. Accordingly, an irrevocable designation under the Act cannot constitute a juristic reason for R’s enrichment and M’s deprivation. Neither by direct reference nor by necessary implication does the Insurance Act either foreclose a third party who stands deprived of his or her contractual entitlement to claim insurance proceeds by successfully asserting an unjust enrichment claim against the designated beneficiary — revocable or irrevocable — or preclude the imposition of a constructive trust in circumstances such as these. Therefore, no established category of juristic reason applies.
Once the plaintiff has successfully demonstrated that no category of juristic reason applies, a prima facie case is established and the analysis proceeds to the second stage. At this stage, the defendant must establish some residual reason why the enrichment should be retained. Considerations such as the parties’ reasonable expectations and moral and policy‑based arguments come into play. In the present case, it is clear that both parties expected to receive the proceeds of the life insurance policy. However, the residual considerations favour M, given that her contribution towards the payment of the premiums actually kept the policy alive and made R’s entitlement to receive the proceeds upon L’s death possible.
Once each of the three elements of the cause of action in unjust enrichment is made out, the remedy is restitutionary in nature and can take one of two forms: personal or proprietary. A personal remedy is essentially a debt or a monetary obligation and can be viewed as the default remedy for unjust enrichment. In certain cases, however, a plaintiff may be awarded a remedy of a proprietary nature. The most pervasive and important proprietary remedy for unjust enrichment is the constructive trust. Courts will impress the disputed property with a constructive trust only if the plaintiff can establish that a personal remedy would be inadequate; and that there is a link between his or her contributions and the disputed property. Ordinarily, a personal award would be adequate in cases such as this one where the property at stake is money. In the present case, however, the disputed insurance money has been paid into court and is readily available to be impressed with a constructive trust. Moreover, M’s payment of the premiums was causally connected to the maintenance of the policy under which R was enriched. A constructive trust to the full extent of the proceeds should therefore be imposed in M’s favour.
Per Gascon and Rowe JJ. (dissenting): There is disagreement with the majority that M has established a claim in unjust enrichment on these facts and therefore, that a constructive trust should be imposed.
M had a contract with L to be maintained the named beneficiary of his life insurance policy while she paid the premiums. However, this contract does not create a proprietary or equitable interest in the policy’s proceeds and simply being named as a beneficiary does not give one a right in the proceeds before the death of the insured. The right to claim the proceeds only crystalizes upon the insured’s death. Further, as a revocable beneficiary, M had no right to contest L’s redesignation of R as an irrevocable beneficiary outside of a claim against L for breach of contract. Thus, at the time of L’s death, the only rights that M possessed in relation to the life insurance contract were her contractual rights.
While M would have a claim against L’s estate for breach of contract, the estate’s lack of assets has rendered any such recourse fruitless. Instead, M’s claim is to reverse the purported unjust enrichment of R. In an action for unjust enrichment, a plaintiff must show that their deprivation corresponds to the defendant’s enrichment. The correspondence between the deprivation and the enrichment, while seemingly formalistic, is fundamental. Correspondence is the connection between the parties — a plus and a minus as obverse manifestations of the same event — that uniquely identifies the plaintiff as the proper person to seek restitution against a particular defendant.
In this case, it is clear that but for M’s payments, the policy would have lapsed, and but for L’s breach of contract, M would have been the beneficiary at the time of his death. But these facts are not enough to establish that the deprivation and the enrichment are corresponding. R’s enrichment was not at the expense of M because R’s enrichment is not dependent on M’s deprivation. What R received (a statutory entitlement to proceeds) is different from M’s deprivation (the inability to enforce her contractual rights) — they are not two sides of the same coin.
Even if a corresponding deprivation could be established, M’s claim in unjust enrichment would fail at the first stage of the juristic reason analysis, because the Insurance Act establishes a juristic reason for R’s enrichment. Section 191(1) of the Insurance Act provides that an insured may designate an irrevocable beneficiary under a life insurance policy, and thereby provide special protections to that beneficiary. From the moment an irrevocable beneficiary is designated, they have a right in the policy itself: the insurance money is not subject to the control of the insured or to the claims of his or her creditors, and the beneficiary must consent to any subsequent changes to beneficiary designation. As it is undisputed that R was the validly designated irrevocable beneficiary of the policy, she is entitled to the proceeds free of the claims of L’s creditors.
The fact that M had an agreement with L for the proceeds of the policy pursuant to which she paid its premiums does not undermine the presence of this juristic reason. As M’s rights are contractual in nature, she is a creditor of L’s estate and thus, by the provisions of the Insurance Act, has no claim to the proceeds. The Insurance Act explicitly protects irrevocable beneficiaries from the claims of the deceased’s creditors and provides that the insurance proceeds do not form part of the insured’s estate. Thus, the Insurance Act precludes the existence of contractual rights in those insurance proceeds.
The Insurance Act’s legislative history further supports R’s retention of the insurance proceeds notwithstanding M’s claim. The provisions of the Insurance Act were designed to protect the interests of beneficiaries in retaining the proceeds and provide no basis whatsoever for a person paying the premiums to assume she would have any claim to the eventual proceeds. The Insurance Act is deliberately indifferent to the source of the premium payments and renders the actions of the payers irrelevant as far as the beneficiaries are concerned.
In immunizing beneficiaries from the claims of the insured’s creditors, the Insurance Act does not distinguish between types of creditors. Creditors of the insured’s estate simply do not have a claim to the insurance proceeds. There is no basis to carve out a special class of creditor who would be exempt from the clear wording of the Insurance Act. Neither M’s contributions to the policy, nor her contract with L are sufficient to take her outside the comprehensive scheme and grant her special and preferred status.
Even if the Insurance Act did not establish a juristic reason for R’s enrichment, the policy considerations at the second stage of the juristic reason analysis weigh against allowing M’s claim of unjust enrichment. It is an unfortunate reality that a person’s death is sometimes accompanied by litigation that can tie up funds that the deceased intended to support loved ones for a significant period of time, adding financial hardship to personal tragedy. In an attempt to ensure that life insurance proceeds could be free from such strife, the Ontario legislator empowered policy holders to designate an irrevocable beneficiary under s. 191(1) of the Insurance Act. Such a designation ensures that the proceeds can be disbursed free from claims against the estate, giving certainty to insured, insurer and beneficiary alike. This provision should be given full effect.
Cases Cited
By Côté J.
Applied: Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629; Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269; Shannon v. Shannon (1985), 50 O.R. (2d) 456; distinguished: Reference re Goods and Services Tax, [1992] 2 S.C.R. 445; Gladstone v. Canada (Attorney General), 2005 SCC 21, [2005] 1 S.C.R. 325; referred to: Soulos v. Korkontzilas, [1997] 2 S.C.R. 217; Peter v. Beblow, [1993] 1 S.C.R. 980; Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762; Rathwell v. Rathwell, [1978] 2 S.C.R. 436; Murdoch v. Murdoch, [1975] 1 S.C.R. 423; Pettkus v. Becker, [1980] 2 S.C.R. 834; Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75, [2004] 3 S.C.R. 575; Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, [2012] 3 S.C.R. 660; Kleinwort Benson Ltd. v. Birmingham City Council, [1997] Q.B. 380; Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805; Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574; Cie Immobilière Viger Ltée v. Lauréat Giguère Inc., [1977] 2 S.C.R. 67; Lacroix v. Valois, [1990] 2 S.C.R. 1259; Love v. Love, 2013 SKCA 31, 359 D.L.R. (4th) 504; Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; Garland v. Consumers’ Gas Co. (2001), 57 O.R. (3d) 127; Saskatchewan Crop Insurance Corp. v. Deck, 2008 SKCA 21, 307 Sask. R. 206; Richardson (Estate Trustee of) v. Mew, 2009 ONCA 403, 96 O.R. (3d) 65; Rawluk v. Rawluk, [1990] 1 S.C.R. 70; Gendron v. Supply and Services Union of the Public Service Alliance of Canada, Local 50057, [1990] 1 S.C.R. 1298; KBA Canada Inc. v. 3S Printers Inc., 2014 BCCA 117, 59 B.C.L.R. (5th) 273; Bank of Montreal v. Innovation Credit Union, 2010 SCC 47, [2010] 3 S.C.R. 3; Chanowski v. Bauer, 2010 MBCA 96, 258 Man. R. (2d) 244; Central Guaranty Trust Co. v. Dixdale Mortgage Investment Corp. (1994), 24 O.R. (3d) 506; Zaidan Group Ltd. v. London (City) (1990), 71 O.R. (2d) 65, aff’d [1991] 3 S.C.R. 593; Sorochan v. Sorochan, [1986] 2 S.C.R. 38.
By Gascon and Rowe JJ. (dissenting)
Air Canada v. British Columbia, [1989] 1 S.C.R. 1161; Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574; Love v. Love, 2013 SKCA 31, 359 D.L.R. (4th) 504; Holowa Estate v. Stell‑Holowa, 2011 ABQB 23, 330 D.L.R. (4th) 693; Richardson (Estate Trustee of) v. Mew, 2009 ONCA 403, 96 O.R. (3d) 65; Roberts v. Martindale (1998), 55 B.C.L.R. (3d) 63; Milne Estate v. Milne, 2014 BCSC 2112, 54 R.F.L. (7th) 328; Ladner v. Wolfson, 2011 BCCA 370, 24 B.C.L.R. (5th) 43; Schorlemer Estate v. Schorlemer (2006), 29 E.T.R. (3d) 181; Steeves v. Steeves (1995), 168 N.B.R. (2d) 226; Gregory v. Gregory (1994), 92 B.C.L.R. (2d) 133; Shannon v. Shannon (1985), 50 O.R. (2d) 456; Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629; Peter v. Beblow, [1993] 1 S.C.R. 980; Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, [2012] 3 S.C.R. 660; Cie Immobilière Viger Ltée v. Lauréat Giguère Inc., [1977] 2 S.C.R. 67; Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75, [2004] 3 S.C.R. 575; Rathwell v. Rathwell, [1978] 2 S.C.R. 436; Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762; Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269; Soulos v. Korkontzilas, [1997] 2 S.C.R. 217; Pettkus v. Becker, [1980] 2 S.C.R. 834; Chanowski v. Bauer, 2010 MBCA 96, 258 Man. R. (2d) 244; Fraser v. Fraser (1995), 9 E.T.R. (2d) 136; Ontario Teachers’ Pension Plan Board v. Ontario (Superintendent of Financial Services) (2004), 70 O.R. (3d) 61; Snider v. Mallon, 2011 ONSC 4522, 3 R.F.L. (7th) 228; Bielny v. Dzwiekowski, [2002] I.L.R. ¶I‑4018, aff’d [2002] O.J. No. 508 (QL); Kang v. Kang Estate, 2002 BCCA 696, 44 C.C.L.I. (3d) 52; Ladner Estate, Re, 2004 BCCA 366, 40 B.C.L.R. (4th) 298.
Statutes and Regulations Cited
Act to secure to Wives and Children the benefit of Assurances on the lives of their Husbands and Parents, S. Prov. C. 1865, 29 Vict., c. 17, ss. 3, 5.
Act to Secure to Wives and Children the Benefit of Life Insurance, S.O. 1884, c. 20, s. 5.
Insurance Act, R.S.O. 1960, c. 190, ss. 164(1), 165.
Insurance Act, R.S.O. 1990, c. I.8, Part V, ss. 171(1) “beneficiary”, 172(1), 190, 191, 195, 196(1), 200.
Succession Law Reform Act, R.S.O. 1990, c. S.26, ss. 58, 72(1)(f).
Authors Cited
Birks, Peter. Unjust Enrichment, 2nd ed. Oxford: Oxford University Press, 2005.
Burrows, Andrew. The Law of Restitution, 3rd ed. Oxford: Oxford University Press, 2011.
Goff & Jones: The Law of Unjust Enrichment, 9th ed. by Charles Mitchell, Paul Mitchell and Stephen Watterson. London: Thomson Reuters, 2016.
Maddaugh, Peter D., and John D. McCamus. The Law of Restitution, loose‑leaf ed. Aurora, Ont.: Canada Law Book, 2004 (updated December 2017, release 20).
McInnes, Mitchell. The Canadian Law of Unjust Enrichment and Restitution. Markham, Ont.: LexisNexis Canada, 2014.
McVitty, Edmund Hugh. A Commentary on the Life Insurance Laws of Canada. Toronto: Institute of Chartered Life Underwriters of Canada, 1962 (loose‑leaf).
Norwood on Life Insurance Law in Canada, 3rd ed. by David Norwood and John P. Weir. Toronto: Carswell, 2002.
Smith, Lionel. “Demystifying Juristic Reasons” (2007), 45 Can. Bus. L.J. 281.
Smith, Lionel. “Restitution: The Heart of Corrective Justice” (2001), 79 Tex. L. Rev. 2115.
Smith, Lionel D. “Three‑Party Restitution: A Critique of Birks’s Theory of Interceptive Subtraction” (1991), 11 Oxford J. Leg. Stud. 481.
Virgo, Graham. The Principles of the Law of Restitution, 3rd ed. Oxford: Oxford University Press, 2015.
Waters’ Law of Trusts in Canada, 4th ed. by Donovan W. M. Waters, Mark R. Gillen and Lionel D. Smith. Toronto: Carswell, 2012.
APPEAL from a judgment of the Ontario Court of Appeal (Strathy C.J. and Blair and Lauwers JJ.A.), 2017 ONCA 182, 134 O.R. (3d) 721, 409 D.L.R. (4th) 312, 65 C.C.L.I. (5th) 175, 32 C.C.P.B. (2nd) 254, [2017] O.J. No. 1129 (QL), 2017 CarswellOnt 2958 (WL Can.), setting aside a decision of Wilton‑Siegel J., 2015 ONSC 3914, [2015] O.J. No. 7761 (QL), 2015 CarswellOnt 20995 (WL Can.). Appeal allowed, Gascon and Rowe JJ. dissenting.
Ian M. Hull, Suzana Popovic‑Montag and David M. Smith, for the appellant.
Jeremy Opolsky and Jonathan Silver, for the respondent.
The judgment of Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown and Martin JJ. was delivered by
Côté J. —
I. Overview
[1] This appeal involves a contest between two innocent parties, both of whom claim an entitlement to the proceeds of a life insurance policy.
[2] The appellant, Michelle Constance Moore (“Michelle”), and the owner of the policy, Lawrence Anthony Moore (“Lawrence”), were former spouses. They entered into a contractual agreement pursuant to which Michelle would pay all of the policy’s premiums and, in exchange, Lawrence would maintain Michelle as the sole beneficiary thereunder — and she would therefore be entitled to receive the proceeds of the policy upon Lawrence’s death. While Michelle held up her end of the bargain, Lawrence did not. Shortly after assuming his contractual obligation, and unbeknownst to Michelle, Lawrence designated his new common law spouse — the respondent, Risa Lorraine Sweet (“Risa”) — as the irrevocable beneficiary of the policy. When Lawrence passed away several years later, the proceeds were payable to Risa and not to Michelle.
[3] Should these proceeds be impressed with a constructive trust in Michelle’s favour? A majority of the Ontario Court of Appeal found that they should not. I disagree; in my view, Risa was enriched, Michelle was correspondingly deprived, and both the enrichment and the deprivation occurred in the absence of a juristic reason. In these circumstances, a remedial constructive trust should be imposed for Michelle’s benefit. I would therefore allow the appeal.
II. Context
[4] Michelle and Lawrence were married in 1979. Together, they had three children. In October 1985, Lawrence purchased a term life insurance policy from Canadian General Life Insurance Company, the predecessor of RBC Life Insurance Company (“Insurance Company”). He purchased this policy, with a coverage amount of $250,000, and initially designated Michelle as the beneficiary — but not as an irrevocable beneficiary. The annual premium of $507.50 was paid out of the couple’s joint bank account until 2000.
[5] In December 1999, Michelle and Lawrence separated. Shortly thereafter, they entered into an oral agreement (“Oral Agreement”) whereby Michelle “would pay the premiums and be entitled to the proceeds of the Policy on [Lawrence’s] death” (Superior Court decision, 2015 ONSC 3914, at para. 13 (CanLII)). The effect of this agreement was therefore to require that Michelle remain designated as the sole beneficiary of Lawrence’s life insurance policy.
[6] In the summer of 2000, Lawrence began cohabiting with Risa. They remained common law spouses and lived in Risa’s apartment until Lawrence’s death 13 years later.
[7] On September 21, 2000, Lawrence executed a change of beneficiary form designating Risa as the irrevocable beneficiary of the policy. Risa testified that Lawrence did so because he did not want her to worry about how she would pay the rent or buy medication, and wanted to make sure that she would be able to continue living in the building where she had resided for the preceding 40 years.
[8] The change in beneficiary designation was made through, and after consultation with, Lawrence’s insurance broker, who also happened to be Michelle’s brother-in-law. The new designation was recorded by the Insurance Company on September 25, 2000. Although Lawrence did not change the beneficiary designation surreptitiously, he did not advise Michelle that she was no longer named as beneficiary.[1]
[9] Michelle and Lawrence entered into a formal separation agreement in May 2002. This agreement dealt with a number of issues as between them, but was silent as to the policy and anything related to it. They finalized their divorce on October 3, 2003.
[10] Pursuant to her obligation under the Oral Agreement, and without knowing that Lawrence had named Risa as the irrevocable beneficiary, Michelle continued to pay all of the premiums on the policy until Lawrence’s death. By then, a total of $30,535.64 had been paid on account of premiums; about $7,000 had been paid since 2000.
[11] Lawrence died on June 20, 2013. His estate had no significant assets.
[12] Michelle was advised by the Insurance Company that she was not the designated beneficiary of the policy on July 5, 2013, around two weeks after Lawrence’s death. On February 12, 2014, Michelle commenced an application seeking the opinion, advice and direction of the Ontario Superior Court of Justice as to her entitlement to the proceeds of the policy. Pursuant to a court order dated December 19, 2013, the Insurance Company paid the proceeds of the policy into court pending the resolution of the dispute.
[13] Part V of the Insurance Act, R.S.O. 1990, c. I.8, sets out a comprehensive scheme that governs the rights and obligations of parties to a life insurance policy. It applies to all life insurance contracts “[d]espite any agreement, condition or stipulation to the contrary” (s. 172(1)), which means that the parties cannot contract out of its provisions.
[14] Of particular relevance for the purposes of this appeal are the provisions of the Insurance Act that deal with the designation of beneficiaries. A “beneficiary” of a life insurance policy is defined as “a person, other than the insured or the insured’s personal representative, to whom or for whose benefit insurance money is made payable in a contract or by a declaration” (s. 171(1)). A beneficiary designation therefore identifies the intended recipient of the proceeds under the life insurance policy upon the death of the insured person, in accordance with the terms of the policy.
[15] Part V of the Insurance Act recognizes two types of beneficiary designations: those that are revocable and those that are irrevocable. A revocable beneficiary designation is one that can be altered or revoked by the insured without the beneficiary’s knowledge or consent (s. 190(1) and (2)). An irrevocable beneficiary designation, by contrast, can be altered or revoked only if the designated beneficiary consents (s. 191(1)). When a valid irrevocable beneficiary designation is made, s. 191 of the Insurance Act makes clear that the insurance money ceases to be subject to the control of the insured, is not subject to the claims of the insured’s creditors and does not form part of the insured’s estate.
[16] It is clear that the interest of an irrevocable beneficiary is afforded much more protection than that of a revocable beneficiary; the former has a “statutory right to remain as the named beneficiary entitled to receive the insurance moneys unless he or she consents to being removed” (Court of Appeal decision, 2017 ONCA 182, 134 O.R. (3d) 721, at para. 82). The legislation contemplates only one situation where insurance money can be clawed back from a beneficiary, regardless of whether his or her designation is irrevocable: to satisfy a support claim brought by a dependant against the estate of the now-deceased insured person (Succession Law Reform Act, R.S.O. 1990, c. S.26, ss. 58 and 72(1)(f)). No such claim has been brought in this case.
[17] Part V of the Insurance Act also deals with the assignment of a life insurance policy. A life insurance contract entails a promise by the insurer “to pay the contractual benefit when the insured event occurs” (Norwood on Life Insurance Law in Canada (3rd ed. 2002), by D. Norwood and J. P. Weir, at p. 359). It can therefore be understood as creating a chose in action against the insurer, which is transferrable from one person to another through the mechanism of an assignment. The statute provides that where the assignee gives written notice of the assignment to the insurer, he or she assumes all of the assignor’s rights and interests in the policy. Pursuant to s. 200(1)(b) of the Insurance Act, however, an assignee’s interest in the policy will not have priority over that of an irrevocable beneficiary who was designated prior to the time the assignee gave notice to the insurer — unless the irrevocable beneficiary consents to the assignment and surrenders his or her interest in the policy.
[18] The relevant provisions of the Insurance Act read as follows:
190 (1) Subject to subsection (4),[2] an insured may in a contract or by a declaration designate the insured, the insured’s personal representative or a beneficiary as one to whom or for whose benefit insurance money is to be payable.
(2) Subject to section 191, the insured may from time to time alter or revoke the designation by a declaration.
. . .
191 (1) An insured may in a contract, or by a declaration other than a declaration that is part of a will, filed with the insurer at its head or principal office in Canada during the lifetime of the person whose life is insured, designate a beneficiary irrevocably, and in that event the insured, while the beneficiary is living, may not alter or revoke the designation without the consent of the beneficiary and the insurance money is not subject to the control of the insured, is not subject to the claims of the insured’s creditor and does not form part of the insured’s estate.
(2) Where the insured purports to designate a beneficiary irrevocably in a will or in a declaration that is not filed as provided in subsection (1), the designation has the same effect as if the insured had not purported to make it irrevocable.
200 (1) Where an assignee of a contract gives notice in writing of the assignment to the insurer at its head or principal office in Canada, the assignee has priority of interest as against,
(a) any assignee other than one who gave notice earlier in like manner; and
(b) a beneficiary other than one designated irrevocably as provided in section 191 prior to the time the assignee gave notice to the insurer of the assignment in the manner prescribed in this subsection.
(2) Where a contract is assigned as security, the rights of a beneficiary under the contract are affected only to the extent necessary to give effect to the rights and interests of the assignee.
(3) Where a contract is assigned unconditionally and otherwise than as security, the assignee has all the rights and interests given to the insured by the contract and by this Part and shall be deemed to be the insured.
. . .
III. Decisions Below
A. Ontario Superior Court of Justice (Wilton-Siegel J.) — 2015 ONSC 3914
[19] The application judge, Wilton-Siegel J., held that Risa had been unjustly enriched at Michelle’s expense, and therefore impressed the proceeds of the policy with a constructive trust in Michelle’s favour. He began his reasons by addressing a preliminary matter: the Oral Agreement that Lawrence and Michelle had entered into during their separation. He held that Michelle and Lawrence “each had an equitable interest in the proceeds of the Policy from the time that it was taken out” and that the Oral Agreement had effectively resulted in the “equitable assignment to [Michelle] of [Lawrence’s] equitable interest in the proceeds in return for [Michelle’s] agreement to pay the premiums on the Policy” (para. 17) (CanLII). According to the application judge, this equitable interest “took the form of a right to determine the beneficiary of the Policy” (para. 18).
[20] The application judge then turned to Michelle’s unjust enrichment claim. He found that the first two elements of the cause of action in unjust enrichment — an enrichment of the defendant and a corresponding deprivation suffered by the plaintiff — were easily met in this case: Risa had been enriched by virtue of her valid designation as irrevocable beneficiary, and Michelle had suffered a corresponding deprivation to the extent that she paid the premiums and to the extent that the proceeds had been payable to Risa “notwithstanding the prior equitable assignment of such proceeds to her” (para. 27). With respect to the third and final element — the absence of a juristic reason for the enrichment — the application judge held that Risa’s designation as beneficiary under the policy did not constitute a juristic reason that entitled her to retain the proceeds in the particular circumstances of this case (para. 46). This was because Risa’s entitlement to the proceeds would not have been possible if Michelle had not performed her obligations under the Oral Agreement, and because the Oral Agreement itself amounted to an equitable assignment of the proceeds to Michelle (para. 48).
B. Ontario Court of Appeal (Strathy C.J.O. and Blair J.A., Lauwers J.A. dissenting) — 2017 ONCA 182, 134 O.R. (3d) 721
[21] The Ontario Court of Appeal allowed Risa’s appeal and set aside the judgment of the application judge. It ordered that the $7,000 Michelle had paid in premiums between 2000 and 2013 be paid out of court to her and that the balance of the insurance proceeds be paid to Risa.
(1) Majority Reasons
[22] Writing for himself and for Strathy C.J.O., Blair J.A. held that it was not open to the application judge to find that the Oral Agreement amounted to an equitable assignment, since the doctrine of equitable assignment had not been placed in issue by the parties before him.
[23] Turning to Michelle’s unjust enrichment claim, Blair J.A. accepted the application judge’s finding that Risa was enriched. He found it unnecessary to resolve the issue of whether the corresponding deprivation element had been made out as he found there was a juristic reason justifying the receipt by Risa of the proceeds. Specifically, Blair J.A. held that the application judge had erred in his approach to the juristic reason element of the unjust enrichment framework — first, by failing to recognize the significance of Risa’s designation as an irrevocable beneficiary, and second, by failing to apply the two-stage analysis mandated by this Court in Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629. In Blair J.A.’s view, “the existence of the statutory regime relating to revocable and irrevocable beneficiaries . . . falls into an existing recognized category of juristic reason”, constituting “both a disposition of law and a statutory obligation” (para. 99).
[24] Blair J.A. declined to decide whether a constructive trust can be imposed only to remedy unjust enrichment and wrongful acts or can also be based on the more elastic concept of “good conscience”. He took the position that there was nothing in the circumstances of this case that put it in some “good conscience” category beyond what was captured by unjust enrichment and wrongful act.
(2) Dissenting Reasons
[25] In dissent, Lauwers J.A. agreed with the majority that the application judge had erred in relying on the equitable assignment doctrine. However, he disagreed with the majority as to the disposition of Michelle’s unjust enrichment claim and the propriety of imposing a constructive trust over the proceeds in these circumstances. He would therefore have dismissed the appeal.
[26] Lauwers J.A. began by considering this Court’s decision in Soulos v. Korkontzilas, [1997] 2 S.C.R. 217, and held that it leaves open four routes by which a constructive trust may be imposed: (1) as a remedy for unjust enrichment; (2) for wrongful acts; (3) in circumstances where its availability has long been recognized; and (4) otherwise where good conscience requires it. According to Lauwers J.A., in relation to the fourth route, the Soulos court anticipated that the law of remedial trusts would continue to develop in a way that accommodates the changing needs and mores of society.
[27] On the issue of unjust enrichment, Lauwers J.A. concluded that Michelle had made out each of the requisite elements and that a constructive trust ought therefore to be imposed over the proceeds in her favour. With respect to the corresponding deprivation element, he rejected the submission that Michelle’s financial contribution was the correct measure of her deprivation, and instead found that the asset for which she had paid and of which she stood deprived was the full payout of the life insurance proceeds — not just the amount she had paid in premiums.
[28] Lauwers J.A. also rejected the proposition that the applicable Insurance Act provisions provided a juristic reason for Risa’s retention of the proceeds. In his view, Michelle’s entitlement to the insurance proceeds as against Risa was neither precluded nor affected by the operation of the Insurance Act. He also held that a juristic reason could not be found based on the parties’ reasonable expectations or public policy considerations.
[29] Finally, regarding to the imposition of a constructive trust, Lauwers J.A. considered a number of other cases that involved disappointed beneficiaries. Noting that these cases fit awkwardly under the unjust enrichment rubric, he observed that:
. . . the disappointed beneficiary cases are perhaps better understood as a genus of cases in which a constructive trust can be imposed via the third route in Soulos — circumstances where the availability of a trust has previously been recognized — and the fourth route — where good conscience otherwise demands it, quite independent of unjust enrichment. [para. 276]
IV. Issues
[30] The issues in this case are as follows:
A. Has Michelle made out a claim in unjust enrichment by establishing:
(1) Risa’s enrichment and her own corresponding deprivation; and
(2) the absence of any juristic reason for Risa’s enrichment at her expense?
B. If so, is a constructive trust the appropriate remedy?
V. Analysis
[31] In the present case, Michelle requests that the insurance proceeds be impressed with a constructive trust in her favour. The primary basis on which she seeks this remedy is unjust enrichment. In the alternative, she submits that the circumstances of her case provide a separate good conscience basis upon which a court may impose a constructive trust.
[32] A constructive trust is a vehicle of equity through which one person is required by operation of law — regardless of any intention — to hold certain property for the benefit of another (Waters’ Law of Trusts in Cana