by Bryan Gilmartin
Moore v. Sweet
has received a great deal of attention since its release in 2018. As an articling student with little more than a high-level understanding of the doctrine of unjust enrichment, I find this case offers a well-developed explanation of how it can be applied flexibly in order to achieve a result that is just in the circumstances.
Below is a discussion of the case with a particular focus on the application of the doctrine of unjust enrichment.
Lawrence Moore purchased a life insurance policy, making his wife, Michelle Moore, his designated beneficiary. The couple entered into an oral agreement with respect to the policy upon their separation in 1999. Pursuant to the agreement, Michelle would continue to pay the premiums to maintain the policy and would be entitled to the proceeds upon Lawrence's death.
After Lawrence began cohabiting with Risa Sweet, he designated Risa as the irrevocable beneficiary under the terms of the policy, thereby removing Michelle. Michelle continued to pay the premiums on the policy, pursuant to the agreement she had made with Lawrence up until his death in 2013. Michelle was informed that she was no longer the designated beneficiary of the policy and the proceeds were paid to Risa.
II. Decisions Below:
Michelle brought an application seeking the opinion, advice, and direction of the court with respect to her entitlement to the proceeds of the policy.
A. Ontario Superior Court of Justice - 2015 ONSC 3914 (Ont S.C.J.)
Wilton-Siegel J. ruled that if Risa were to receive the proceeds of the policy, she would be unjustly enriched at the expense of Michelle. Furthermore, the court did not accept the fact that Risa being an irrevocable beneficiary was a sufficient juristic reason for the enrichment. For this reason, the court held that the proceeds of the policy were held in constructive trust in favour of Michelle. Risa appealed this decision.
B. Ontario Court of Appeal - 2017 ONCA 182
The majority allowed the appeal and the decision of the Superior Court was set aside. The court ordered that Michelle be paid only the amount she had contributed towards the policy between the date of her oral agreement and the date of Lawrence's death (approximately $7,000). Risa was to receive the balance of the proceeds as the irrevocable beneficiary to the policy.
In its reasons, the majority accepted Risa's irrevocable beneficiary designation as a juristic reason sufficient to overcome a finding of unjust enrichment. Specifically, the majority stated, "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 statutory obligation."
C. Supreme Court of Canada
With respect to unjust enrichment, the issues before the court were:
A. Has Michelle made out a claim in unjust enrichment by establishing:
(1) Risa's enrichment and her own corresponding deprivation
(2) The absence of any juristic reason for Risa's enrichment at her expense?
Writing for the majority, Cote J. found that Risa was enriched, Michelle was correspondingly deprived and that both the enrichment and the deprivation occurred in the absence of a juristic reason. A remedial constructive trust was imposed.
The parties did not dispute the fact that Risa was enriched on account of receiving $250,000 by virtue of being an irrevocable beneficiary to the policy.
(ii) Corresponding Deprivation
In this case, the court held that Michelle was deprived of the right to receive the proceeds of the policy as a result of a clear correspondence between her deprivation and Risa's gain. This deprivation clearly exceeded her "out-of-pocket expenses," being $7000 she paid in premiums. Rather, the court noted that a corresponding deprivation focuses on what the plaintiff actually lost and how it relates to the defendant's enrichment. The court emphasized the fact that there must have been some causal connection between the loss and the gain to arrive at the conclusion that the defendant was enriched at the plaintiff's expense.
(iii) Juristic Reason
The court's reasoning was founded upon the two-stage analysis articulated by the Honourable Justice Iacobucci J. in Garland v. Consumers' Gas Co. First, a plaintiff must show that the enrichment obtained cannot be justified on the basis of any of the "established categories":
- a contract,
- disposition of law,
- donative intent, and
- other valid common law, equitable or statutory obligations
If any of these categories are applicable, the plaintiff's claim must fail. In this case, the majority found that these factors did not apply. Specifically, the court stated that "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 the policy proceeds."
Further, the court stated that even with an irrevocablebeneficiary designation, the Insurance Act cannot be interpreted as "barring the possibility of restitution to a third party who establishes that this irrevocable beneficiary cannot, in good conscience, retain those monies in the face of that third party's unjust enrichment claim."
As for the second stage, there is an opportunity to show some other residual reason to deny recovery. The court is to consider (1) the parties' reasonable expectations and (2) public policy. The argument was focused on the irrevocable beneficiary designation made pursuant to the Insurance Act and whether it justified Risa's enrichment at Michelle's expense.
It is clear in this case that both Michelle and Risa expected to receive the proceeds. Michelle, by way of the oral agreement, had a contractual right to remain the beneficiary of the policy. Risa, by contrast, expected to receive the proceeds by virtue of the fact that she was validly designated as the irrevocable beneficiary of the policy. In this instance, the court did not accept that Risa's claim could take precedent over Michelle's contractual right to remain as beneficiary.
The majority's analysis emphasized the flexibility of the doctrine of unjust enrichment. This flexibility was apparent in the application of the test in both the majority and dissenting opinions with specific regard to what constitutes a "corresponding" deprivation.
The dissenting opinion provides an interesting discussion about the meaning of "correspondence" as it relates to a "corresponding" deprivation. The dissent set out a hypothetical demonstrating that Michelle's claim ought to have been against Lawrence's estate, assuming that it had sufficient assets.
In this instance, Michelle may have laid claim to those assets for breach of contract and Risa would have kept the proceeds as an irrevocable beneficiary. It was on this point that the dissent could not find that there was a corresponding deprivation to accompany Risa's enrichment because, in this hypothetical, they would co-exist, meaning, Risa's enrichment would not be at Michelle's expense.
If the facts of the hypothetical were true, I would agree with the reasoning. But in my mind, it is too far removed from the facts of the case. This case arose because Michelle had no other viable avenue to enforce her agreement with Lawrence. True, in theory, she had a claim in breach of contract, but it would seem fair in the circumstances that the flexibility of the unjust enrichment doctrine served its purpose in this instance where no other viable option was available to right the wrong.
It seems important to consider how the flexibility of the doctrine of unjust enrichment will operate in practice going forward. Careful thought ought to be given in estate planning to avoid situations such as what has been discussed, especially in cases where there has been a relationship breakdown.
2017 ONCA 182 at para 99.
Moore v. Sweet, supra note 1 at para 30.
(2001), 57 O.R. (3d) 127 (Ont. C.A.).
Moore v. Sweet, supra note 1, at para 70.