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TRUSTS - Constructive trusts - Judicial recognition of constructive trust - Unjust enrichment

Friday, November 23, 2018 @ 1:31 PM  

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Appeal from a judgment of the Ontario Court of Appeal setting aside a decision concluding that the proceeds of an insurance policy were payable to Michelle Constance Moore. Michelle Constance Moore (Michelle) and the owner of the insurance policy at issue, 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. 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 $250,000 policy proceeds were payable to Risa and not to Michelle. The application judge 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. The Ontario Court of Appeal allowed Risa’s appeal and set aside the judgment of the application judge.

HELD: Appeal allowed. The parties did not dispute the fact that Risa was enriched to the full extent of the $250,000 by virtue of her right to receive the insurance proceeds as the designated irrevocable beneficiary. Michelle lost not only the amount she paid in premiums, she stood deprived of the very thing for which she paid, the right to claim the $250,000 in proceeds. It was clear that Risa’s enrichment came at Michelle’s expense. It was not only that Michelle’s payment of the premiums made Risa’s enrichment possible. In light of this, the Court of Appeal’s order could not be upheld on a principled basis. Nothing in the Insurance Act could be read as ousting the common law or equitable rights that persons other than the designated beneficiary might have in policy proceeds. The statute required that the Insurance Company pay Risa, but it did not give Risa a right to keep the proceeds as against Michelle, whose contract with Lawrence specifically provided that she would pay all of the premiums exclusively for her own benefit. Michelle’s entitlement to the insurance proceeds as against Risa was neither precluded nor affected by the operation of the Insurance Act, with the result that this case fell outside the category of disposition of law as a juristic reason to permit Risa to retain the life insurance proceeds. Because Risa was designated after Lawrence and Michelle entered into their oral agreement, her expectation could not take precedence over Michelle’s prior contractual right to remain named as beneficiary, regardless of whether Risa knew that this was actually the case. Because the three elements of the cause of action in unjust enrichment were made out, the Court ordered a restitutionary remedy, imposing a constructive trust to the full extent of those proceeds in Michelle’s favour.

Moore v. Sweet, [2018] S.C.J. No. 52, Supreme Court of Canada, R. Wagner C.J. and R.S. Abella, M.J. Moldaver, A. Karakatsanis, C. Gascon, S. Côté, R. Brown, M. Rowe and S.L. Martin JJ., November 23, 2018. Digest No. TLD-November192018011-SCC