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UNJUST ENRICHMENT - Remedies - Recovery of benefits

Thursday, May 21, 2020 @ 9:06 AM  

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Appeal by the defendant from trial judgment requiring her to return $300,000 to the respondent based on unjust enrichment. The unjust enrichment arose from a scheme that the trial judge concluded was intended to deceive immigration authorities for the respondent to obtain resident status in Canada. As part of the scheme, the respondent agreed to purchase a restaurant from the appellant and to pay the operating expenses of the restaurant to the appellant. The appellant misrepresented the operating expenses. When the respondent challenged the accuracy of the expenses, the scheme collapsed, and the appellant terminated the respondent’s immigration application. While the appellant did not challenge the trial judge’s conclusion that the payment made in respect of the overstated expenses met the test for an unjust enrichment, she argued that the transaction was tainted by an illegal purpose, and the doctrine of illegality thus barred recovery by the respondent. The respondent cross‑appealed the decision dismissing her unjust enrichment claim with respect to the payment made to purchase the restaurant on the basis that the contract relied on by the trial judge as a juristic reason for retention of the funds was an unconscionable contract.

HELD: Appeal and cross-appeal dismissed. The trial judge committed no error in refusing to apply the doctrine of illegality to this case. The claim for restitution of moneys received as part of a transaction tainted by illegality was fundamentally different from the enforcement of an illegal contract. An unjust enrichment claim did not permit litigants to profit from their wrongdoing but restored the status quo ante. Illegality barred an otherwise valid claim in unjust enrichment only when restitution would defeat or frustrate the policy underlying the illegality, leading to inconsistency in the law and thereby undermining the integrity of the legal system. In this case, restitution of the funds wrongfully obtained by the appellant would not frustrate the policy behind the statutory prohibition against misleading immigration authorities. No inconsistency in the law arose from the trial judgment. The court was not being asked to assist a party to an illegal scheme to receive a benefit from conduct that was illegal under public law. The effect of the order was that the respondent would have her own funds restored to her, and the appellant would be prevented from being unjustly enriched by her misrepresentations. The defence of illegality did not apply to prevent restitution of wrongfully retained funds in these circumstances. The claim of unconscionable contract was not made out. The trial judge made no findings that there was substantial unfairness in the agreement to purchase the restaurant. Although the respondent led evidence that the fair value of the restaurant was significantly less than the purchase price she paid, the trial judge concluded that her purchase of the restaurant was intended to advance her residence application and that she did not rely on any statements of the appellant concerning the profitability of the restaurant. Based on these findings, the trial judge did not err in failing to set the purchase agreement aside as an unconscionable transaction.

Kim v. Choi, [2020] B.C.J. No. 462, British Columbia Court of Appeal, R.J. Bauman C.J.B.C., J.J.L. Hunter and G.B. Butler JJ.A., March 24, 2020. Digest No. TLD-May182020007