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TRUSTS - Constructive Trusts - Unjust Enrichment

Thursday, April 13, 2017 @ 8:12 AM  

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Appeal by Sweet from a decision finding that the respondent was entitled to the proceeds of a policy of insurance on the life of the respondent’s former husband. The respondent and her former husband were married for more than 20 years and the respondent was the named beneficiary of the Policy during their marriage. She was not designated as an irrevocable beneficiary. Following the separation, the husband established a relationship with the appellant. The husband was a man of limited means, living in the post-separation period on a disability pension, and suffering from the disabilities associated with his physical, mental and substance abuse issues. The appellant was also disabled. They lived together in the appellant’s apartment until the husband’s death 13 years later. Shortly after the husband and the appellant began living together, and contrary to an oral agreement he had with the respondent, who continued to pay the premiums, the husband revoked the designation of the respondent as beneficiary and designated the appellant as the irrevocable beneficiary under the Policy. The application judge found the respondent was entitled to recover the policy proceeds on the basis of unjust enrichment. Although equitable assignment was not before the Court on the application, the application judge held that the oral contract between the respondent and her husband took the form of an equitable assignment to the respondent of the husband’s equitable interest in the proceeds of the Policy.

HELD: Appeal allowed. The respondent was entitled to the return of the $7,000 in premiums that she paid following the separation. Because it was neither placed in issue nor argued before him, the application judge erred in relying on the doctrine of equitable assignment and applying it on his own initiative. Since the record was not created on the basis that the parties had joined issue on the ground of equitable assignment, the application judge’s findings with respect to it were unreliable and must therefore be set aside. Absent equitable assignment or another exceptional circumstance to a similar effect, the provisions of the Insurance Act, pursuant to which the appellant was designated an irrevocable beneficiary, operated to provide a valid juristic reason for her receipt of the insurance proceeds, making a finding of unjust enrichment unavailable. The application judge failed to recognize the significance of the appellant’s designation as an irrevocable beneficiary and failed to apply the two-step analysis to the juristic reason assessment. His analysis was focused on the principles underlying equitable trusts without first considering whether there was an existing category of juristic reason that would justify the appellant’s receipt of the Policy proceeds. There was nothing in the circumstances of this 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.

Moore v. Sweet, [2017] O.J. No. 1129, Ontario Court of Appeal, G.R. Strathy C.J.O., R.A. Blair and P.D. Lauwers JJ.A., March 2, 2017. TLD-Apr102017014