Ontario Unjust Enrichment — Enrichment, Deprivation, and Juristic Reason

Foundation — The Three-Part Test

Unjust enrichment is an independent cause of action in Canadian common law. The Supreme Court of Canada confirmed the three-part test in Garland v Consumers' Gas Co[2004] 1 SCR 629 (Iacobucci J), building on Pettkus v Becker [1980] 2 SCR 834:

All three elements must be established on a balance of probabilities. The third element — absence of juristic reason — bears the most litigation. In Garland, the Supreme Court adopted a two-stage juristic reason analysis.

Juristic Reason Analysis — Two Stages

The Garland two-stage juristic reason analysis:

First stage: the plaintiff must show the absence of a juristic reason from the recognized categories. The established categories of juristic reason are:

• •A valid contract between the parties governing the transfer — a bargained-for exchange provides the juristic reason for enrichment
• •A disposition of law — statutory authority, a court order, or a legal rule that requires the transfer
• •A donative intent — a gift freely given without expectation of return (the plaintiff must have intended to confer a benefit gratuitously)
• •Other established categories that the courts have recognized as providing a legal basis for retaining the enrichment

If the plaintiff establishes the absence of a recognized juristic reason, the analysis proceeds to the second stage: the defendant may rebut by establishing that there is a residual juristic reason why retention of the enrichment would not be unjust. At the second stage, the court considers the reasonable expectations of the parties and public policy considerations.

The two-stage analysis replaced the earlier "unjust factors" approach (listing specific grounds like mistake, failure of consideration, compulsion). Canada now follows the "absence of juristic reason" unified approach rather than the English category-based approach.

Enrichment and Benefit

Enrichment must be an objective benefit to the defendant — something the defendant actually received and retained. A benefit that the defendant would not have freely sought (an "incontrovertible benefit") is more readily established than a "subjective devaluation" — services that the defendant did not request and may not value.

The defence of "change of position" is recognized in Canada (Bank of America Canada v Mutual Trust Co [2002] 2 SCR 601): if the defendant changed their position in good faith in reliance on the benefit received, they need not make restitution to the extent they would be worse off if required to repay. This is a partial defence — restitution is reduced, not eliminated.

The "passing on" defence — where the defendant passed the enrichment on to a third party — was rejected by the Supreme Court in Kingstreet Investments Ltd v New Brunswick (Finance) [2007] 1 SCR 3 for claims against the Crown for ultra vires taxes. Its application in private law remains unsettled in Canada.

Quantum Meruit

Quantum meruit ("as much as he deserved") is a claim for the reasonable value of services rendered where no contract governs the relationship, or where the contract has failed. It is a specific application of unjust enrichment to service benefits.

Quantum meruit arises in several circumstances:

• •Failed contract — where a contract is void (e.g., unenforceable for lack of writing under the Statute of Frauds), the value of services rendered may still be recoverable
• •No contract formed — where the parties operated on a mutual understanding that compensation would be paid but no binding contract was concluded
• •Part performance beyond contract scope — work performed beyond the contract terms where the additional work was accepted and benefited the defendant
• •Contract terminated for breach — the innocent party may claim in quantum meruit for services rendered before termination as an alternative to damages

The measure of quantum meruit is the reasonable market value of the services — not the contract price and not the defendant's subjective valuation. Expert evidence on market rates is typically required for significant claims.

Constructive Trust as Remedy

The primary remedy for unjust enrichment is personal (in personam) — a monetary award for the value of the unjust enrichment. However, where the enrichment can be traced to specific property, the court may impose a constructive trust — a proprietary (in rem) remedy giving the plaintiff an interest in that specific property.

Pettkus v Becker [1980] established the constructive trust remedy for unjust enrichment in the family context. The Supreme Court confirmed in Soulos v Korkontzilas[1997] 2 SCR 217 that constructive trust in Canada serves two functions: (1) unjust enrichment constructive trust (proprietary remedy where in personam remedy inadequate); (2) good conscience constructive trust (for fiduciary breaches, fraud, and other wrongs).

The test for constructive trust as remedy (Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574): (1) the defendant was unjustly enriched; (2) there is a link between the enrichment and specific property; (3) a monetary remedy is inadequate (e.g., because the property is unique, or because the defendant is insolvent). The constructive trust operates from the date of the unjust enrichment, giving the plaintiff priority over the defendant's creditors.

Unjust Enrichment in Family Law

Unjust enrichment is the primary common law remedy for property division between unmarried (common law) spouses in Ontario. Unlike married spouses who have statutory equalization rights under the Family Law Act Part I, unmarried spouses must rely on unjust enrichment or resulting trust to claim a share of property acquired during cohabitation.

Kerr v Baranow [2011] 1 SCR 269 is the leading Supreme Court case on unjust enrichment in family relationships. The Court introduced the "joint family venture" concept: where two people cohabit in a domestic partnership characterized by (1) mutual effort; (2) economic integration; (3) actual intent (words and conduct); and (4) priority of the family, the unjust enrichment remedy may be assessed on a proportionate share of the wealth accumulated during the relationship — the "value survived" approach — rather than on a service-by-service basis.

Contributions recognized for unjust enrichment in family cases: homemaking, childcare, renovation work on the family home, financial contributions to mortgage payments, contribution to a business, and indirect contributions that enabled the other party to focus on wealth-building activities.

Donative intent as juristic reason: courts are cautious about finding that family contributions were intended as gifts. In long-term relationships where both parties contributed to a joint enterprise, the presumption of donative intent is weakened — the reasonable expectation is that contributions will be recognized.

Commercial Unjust Enrichment

In commercial contexts, unjust enrichment is frequently raised where:

• •Payment under mistake — money paid under a mistaken belief that it was owed, whether mistake of fact or (now recognized in Canada) mistake of law (Peel (Regional Municipality) v Canada [1992] 3 SCR 762)
• •Recovery of ultra vires taxes — taxes collected under an invalid statutory provision are recoverable from government without proof of compulsion (Kingstreet [2007])
• •Benefits under failed agreements — where a joint venture or partnership fails, contributions made in anticipation of the venture may be recoverable in unjust enrichment
• •Subrogation — where a guarantor pays a debt, they are subrogated to the creditor's rights against the principal debtor (a form of unjust enrichment claim)

Limitation Periods

Unjust enrichment claims in Ontario are subject to the Limitations Act 2002two-year basic period (s.4), running from the date the claimant knew or ought to have known of the claim. The 15-year ultimate period (s.15) applies.

For claims arising out of family relationships, the discovery date may be delayed until the relationship ends — particularly where the enriched party controlled the family finances and the deprived party was unaware of the asset accumulation that occurred. Courts have applied the discoverability principle generously in family unjust enrichment cases.

Constructive trust claims (proprietary remedies) have historically attracted a longer limitation period argument — some courts have applied laches rather than Limitations Act periods to purely equitable remedies. Ontario courts are increasingly applying the Limitations Act 2002 to constructive trust claims as well.