1. Consolidated Practice Direction concerning the Estates List in Toronto Region effective July 1, 2014.
http://www.ontariocourts.ca/scj/practice/practice-directions/toronto/estates/
Commencing July 1, 2014, the new Practice Direction for matters on the Estates List in the Toronto Region will be in effect.
A Summary of the changes made follows below:
- Part I: The Estates Office - no changes;
- Part II: Principles Guiding the Estates List - no changes;
- Part III: Matters heard on the Estates List - no changes;
- Part III A.: Transfers of matters to the Estates List - section 7 has changed; Requests to transfer matters commenced outside the Toronto Region to the Estate List, used to be governed by Rule 13.1.02, but they are not governed by Part III of the Consolidated Provincial Practice Direction. The relevant paragraphs of Part III of the Consolidated Provincial Practice Direction are reproduced below:
48. A high volume of requests to transfer civil proceedings to another county, often in another Region, are being received in the Central East, Central West, Central South and Toronto Regions. Counsel frequently seek to transfer a case, on consent. While the transfer may be appropriate in the circumstances of the case, the onus rests with the moving party to satisfy the court that a transfer is desirable in the interests of justice, having regard to the factors listed in rule 13.1.02(2)(b). It is not sufficient to bring a transfer motion orally, on consent, or to file a consent for an order to transfer a case to another county under rule 13.1.02..
49. The moving party must file a Notice of Motion with a supporting affidavit, as required under rule 13.1.02(2). The moving party's affidavit must address the factors listed in rule 13.1.02(2)(b) and, as part of the relevant matters, must identify the current stage of the proceedings (i.e., whether further motions are anticipated in the proceeding, whether a pre-trial has occurred or is scheduled, and whether mediation has been held) and why the proceeding was originally commenced in the originating county. The affidavit should also address the estimated length of trial, whether it is a jury trial, and the number of parties and counsel.
50. Counsel are not required to provide affidavit evidence about the availability of judges and court facilities in the other county to satisfy factor (viii) under rule 13.1.02(2). This factor shall be addressed by the Regional Senior Judge in the Region where the motion is brought, after consulting with the local administrative judge or Regional Senior Judge for the other county.
51. The Regional Senior Judge, or his or her designate, will hear all motions to transfer. To allow the Regional Senior Judge to promptly determine all such motions, they shall be brought in writing. Responding parties are strongly encouraged to file and rely exclusively on written submissions to allow the motion to be heard and fully determined in writing. If an oral hearing becomes necessary, the motion shall be heard by teleconference arranged through the Office of the Regional Senior Judge in the Region where the motion is brought. In addition to filing motion material pursuant to the Rules, all parties on a motion to transfer are encouraged to submit an electronic, scanned version of their motion materials, saved as a PDF file and submitted on a USB stick appropriately tagged or marked indicating the court file number. This will facilitate the ability of the Regional Senior Judge to efficiently dispose of these motions, without the delay inherent in physical file transfers.
Administrative Matters - Courtrooms and Gowning - paragraph 9 has been amended to provide that Counsel need not gown for 9:30 Appointments.
Administrative Matters - Estates List Documents and Forms - no changes.
Scheduling matters on the Estates List:
- Paragraph 11, has been amended to provide that "9:30 Appointments take place in Chambers and deal with minor and/or unopposed matters. Counsel are not required to gown. Contested matters and applications or motions are conducted in open court commencing 10:00 a.m."
- Paragraph 12, has been amended to do away with the old online scheduling system (OSCAR). Instead the Practice Direction now provides that 9:30 Appointments or Hearing dates can be done through the Estates Office.
- Paragraphs 13 and 14 remain the same with the exception of the fact that the new Practice Directions have replaced references to "Scheduling Appointments" with reference to "9:30 a.m. Appointments".
- Paragraph 15 is unchanged.
Scheduling Matters on the Estates List - subsection B: Passing of Accounts Applications - paragraphs 16 through 21 have not changed. In particular, paragraphs 17 and 18 continue to specify the difference in procedure as between passing of accounts applications in which no request for increased costs has been filed (addressed in paragraph 17) and proceedings in which a request for increased costs has been file and served (paragraph 18).
Scheduling Matters on the Estates List - subsection C: Applications involving Wills where an Order Giving Directions is required - paragraphs 22 through 24 have not changed with the exception of the removal of reference to "Scheduling Appointments" and the use instead of "9:30 Appointments".
Scheduling Matters on the Estates List - subsection D: Guardianship Applications - paragraphs 25 through 28 have not changed with the exception of the removal of references to "Scheduling Appointments" and the use instead of "9:30 Appointments".
Scheduling Matters on the Estates List - subsections E, F & G: have not changed with the exception of the removal of references to "Scheduling Appointments" and the use instead of "9:30 Appointments".
Contested Matters - General - subsection A. Confirmation of Application and Motions: paragraph 38 has been amended to provide that Confirmation Forms must be filed at least 3 days in advance of the 9:30 Appointment or the hearing. To be clear, the previous Practice Directions required 2 days and the new Practice Directions require 3 days. This is in keeping with the change of procedure and new court forms that were implemented in November of 2013.
Contested Matters - General - subsection B. Urgent Applications or Motions - has not changed.
Contested Matters - General - subsection C. Pre-Trial Conference and Trial Dates - has not changed, with the exception of the removal of references to "Scheduling Appointments" which have been substituted by "9:30 Appointments".
Contested Matters - Estates - subsection A. Orders Giving Directions: General, paragraphs 44 through 46 have not changed. We note that the Practice Directions continue to provide that Orders Giving Directions should address, where applicable, the issues to be decided.
Contested Matters - Estates - subsection B. Orders Giving Directions: Contested Passing of Accounts, this section has not changed.
Mandatory Mediation - Rule 75.1 - paragraphs 48 through 50 have not changed with the exception of removal of "Scheduling Appointments" and the use of "9:30 Appointments" instead.
Materials for use of the Court - no changes have been made to subsections A. General Requirements and B. Multiple-appearance Proceedings: Records for use at the Hearing.
Materials for use of the Court - subsection C. Multiple-appearance Proceedings: On-going Endorsements/Orders Record - has not changed; the party who starts a case is still required to keep an up-to-date Endorsements/Orders Record.
Materials for use of the Court - subsection D. Compendium of Documents - has not changed.
Materials for use of the Court - subsection E. Factums and Short Statements of Issues - has not changed. In particular, the Court continues to be greatly assisted by factums on contested matters or where a large volume of materials is filed in support of an unopposed matter, even though in the circumstances the Rules do not mandate the filing of a factum.
Materials for use of the Court - subsection F. Evidence at Trial - has not changed.
Matters without a Hearing - paragraphs 66 to 68 have not changed.
Costs - no change.
Applications for the Appointment of Guardians under the Substituted Decisions Act or Children's Law Reform Act - has not changed.
- Parts XIII (Settlements Affecting Parties under a Disability), XIV (Applications under Part V of the Succession Law Reform Act) and XV (Family Law Act Elections) - have not changed.
This new Practice Direction is dated, April 11, 2014 and is "endorsed by the Honourable Madam Justice Heather J. Smith of the Superior Court of Justice for Ontario and the Honourable Mr. Justice Geoffrey B. Morowitz, Regional Senior Judge for the Superior Court of Justice, Toronto Region.
Notably, the Principles Guiding the Estates List on all proceedings are:
a. The time and expense devoted to a proceeding should be proportionate to what is at stake in the proceeding; and,
b. Co-operation, communication, civility and common sense should prevail amongst all parties and counsel.
2. Costs:
(i) Cohen Estate v. Cohen, 2014 ONSC 3441 (CanLII)
http://canlii.ca/t/g79cl
In this decision of the Honourable Mr. Justice Stinson, His Honour determined costs with respect to the setting aside of an order which had granted default judgment.
The motion brought by the moving party failed, with the responding party having complete success. In this case, the court applied the "loser pays" rule ordering that the applicant should pay the costs of the respondent.
With respect to the scale of costs, Stinson J., opined that ordinarily an order of costs is made on a partial indemnity basis. "Only in exceptional cases it is appropriate to depart from that rule. Such cases include situations where the underlying conduct of the party is egregious or where allegations of fraud or other reprehensible conduct are made against an opponent but not proven".[1] His Honour was of the view that both such circumstances were applicable to the motion before him. The applicant sought to set aside an order on the basis of fraud, misrepresentation and other misconduct. That conduct, the court opined would warrant an order for substantial indemnity costs. [2]
Moreover, Stinson J., referred to the applicant as having made numerous unsupported and unsupportable allegations of misconduct as against the responding party including allegations of illegal activity, misleading the court and failure to provide evidence in support of such allegations.
Accordingly, in the result, the court ordered the moving party to pay costs on a substantial indemnity basis.
(ii) Columbos v Columbos, 2014 ONSC 2263 (CanLII)
http://canlii.ca/t/g6jvk
The Honourable Madam Justice Healey made an order as to costs in the disposition of the trustee's motion for summary judgment and application for vacant possession of property owned by the deceased estate.
At the outset it is important to note that the estate trustee was entirely successful in the proceedings.
In rendering her decision, Healey J., opined that the estate had total success.
- "The estate had total success;
- The respondents obtained no relief from the court, other than an indulgence to permit them to attempt to recover the value of improvements to the property, if any, through a reference;
- The respondents presented insufficient evidence to support any position advanced by them;
- The positions taken by the respondents were therefore unreasonable;
- The respondents failed to admit facts which should have been readily admitted;
- The amount of experience and hourly rates charged by counsel;
- The importance of these proceedings to the estate, which should not be understated, as the results achieved now permit the trustee to proceed with the administration of the estate, which had been stalled by the proceedings taken by the objectors." [3]
As such, stating that in appropriate circumstances, costs in estates matters should be awarded against the unsuccessful litigants, particularly where one of the circumstances is where untenable positions are taken by a party, the court found it an appropriate circumstance to award full indemnity costs payable by the unsuccessful respondents.
Her Honour did order that the costs were to be paid to the estate as a set off against the amounts due to the respondent beneficiaries, noting the option to the respondents to pay the costs at an earlier date to avoid accrual of post judgment interest which will run on the cost award.
As authority to support the full indemnity costs payable, Her Honour cited the case of Smith Estate v. Rotstein, [2010] O.J. No. 3266, 2010 ONSC 4487, 59 E.T.R. (3d) 279, and appealed as [2011] O.J. No. 5898, 2011 ONCA 833 with costs reconsidered following the Court of Appeal at [2012] O.J. No. 3375, 2012 ONSC 4200, 79 E.T.R. (3 d) 165.
(iii) Feinstein v. Freedman, 2014 ONCA 446 (CanLII)
http://canlii.ca/t/g77v3
Feinstein v. Freedman, 2014 ONCA 205 (CanLII)
http://canlii.ca/t/g6c7r
The Court of Appeal released its reasons and additional reasons and this January 2014 decision focuses solely on the costs of the appeal of litigation regarding the proper administration of the Riva Freedman Trust in an application regarding the appointment of a successor trustee. At first instance, Justice Parfett dismissed the cross-application and ruled on the application for advice and directions and ordered that costs of all parties should be paid out of the estate.
The Appellants appealed the order of the application judge and sought leave to appeal the cost award made by the application judge.
In reasons dated March 12, 2014, http://canlii.ca/t/g6c7r, the two appeals, and the motions for leave to appeal the costs awards were dismissed.
This is a decision on costs where the parties were unable to agree on the quantum of costs associated with the appeals and as such costs were determined on written submissions to the court.
Paragraphs 5 -11 address the positions of the parties with respect to their costs followed by an analysis on the entitlement to costs at paragraphs 12 - 20.
The court addressed by way of first consideration, the question of whether the loser-pays regime should apply or whether costs should be paid out of the estate.
The court stated at paragraph 13 that:
"The loser-pays regime generally applies to estate litigation, such that successful parties are entitled to have their reasonable costs paid by the unsuccessful parties and that costs are usually only payable from an estate where the litigation arose out of the actions of the testator or was reasonably necessary to ensure the proper administration of the estate: McDougald Estate v. Gooderham, [2005] O.J. No. 2432 (C.A.), at paras. 78, 80, 85, 91; and Vance Estate v. Vance Estate, 2010 ONSC 4944 (CanLII), 2010 ONSC 4944, at para. 4. We found no error in the application judge's finding that the litigation enured to the benefit of the Estate and in her consequential ruling that costs should be paid from the Estate."
The further consideration of the court was whether there was divided success such that no party should be entitled to its costs. In this regard, the court determined that a reduction to the amount of the costs awarded to the successful parties on the appeals would be appropriate, the court however was not prepared to order the parties should bear their own costs.
In summary, the court found that the 'loser-pays' regime should apply, and that the successful parties are entitled to their costs.
With respect to the scale of costs payable, the court opined that the presumptive rule is that costs are payable on a partial indemnity basis subject to exception for an award of costs on a higher scale. The court rejected the argument that costs ought to be paid on a higher scale. The court also opined that there was no basis for an award of costs on a substantial indemnity scale.
The court however determined that one of the parties was in a different position in that he had the duty as a trustee and accordingly awarded costs on a full indemnity scale for the estate trustee.
On the quantum of costs, the court applied the overriding principle in assessing costs, that they be fair and reasonable pursuant to Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at para 24.
Accordingly, the court in exercising its discretion regarding costs, made the following orders:
[26] In exercising our discretion regarding costs, the general principles enumerated in rule 57.01 are instructive. The most relevant factors here are that the issues raised on the appeal were of tremendous importance to the parties and that the factual and legal issues were complex. None of the parties could have reasonably expected that, if unsuccessful on the appeals, they would not be required to pay significant costs. We note that the full indemnity costs of the OCL were $97,581.
[27] We find that a reduction of the costs awarded to the successful parties should be made to reflect the fact that they were not successful in obtaining leave to appeal the costs award made by the application judge.
[28] The Three Siblings were primarily responsible for responding to the appeals. It is not surprising, therefore, that their costs are the highest claimed. In our view, the costs sought are somewhat excessive in all of the circumstances. We fix their costs at $70,000.
[29] The costs claimed by the Freedman/Prizant Grandchildren of $25,000 are entirely reasonable and shall be so ordered.
[30] We also find the full indemnity costs claimed by Mr. Feinstein in the amount of $31,148 are reasonable and an order will go for their payment.
[31] The costs claimed by Ms. Freedman Rotenberg are excessive. She played a relatively minor role on the appeals and should not be awarded more costs than the Freedman/Prizant Grandchildren. We fix her costs at $20,000.
[32] All amounts awarded are inclusive of fees, disbursements and HST, and shall be payable jointly and severally by the OCL and the Ben-Choreen Appellants.
3. Solicitor's Negligence, The Limitations Act and Summary Judgment
Rajmohan v Norman H. Solmon Family Trust, 2014 ONCA 352 (CanLII)
http://canlii.ca/t/g6r5h
In this matter, the appellant appealed an order of the motion judge dismissing a third party claim against the respondent on a motion for summary judgment. The appellant is the assignee of mortgages granted to the deceased, and the respondent the estate trustee of the estate. More than 2 years following the death of the deceased, the appellant filed its third party claim alleging solicitor's negligence.
The motion judge dismissed the claim on the basis that it was time-barred by section 38(3) of the Trustee Act, R.S.O. 1990 c. T.23, Section 38(3) of the Trustee Act, which provides as follows:
"an action against an executor or administrator of a deceased person shall not be brought more than two years after the death of the deceased"
Noted in this Court of Appeal decision, the parties agreed that the Trustee Act would bar the appellant's third party claim unless either of the doctrines of fraudulent concealment or special circumstances applied.
The motion judge determined that neither of these doctrines applied, and for that reason the Court of Appeal dismissed the appeal and notably, made the following comments with respect to fraudulent concealment:
Fraudulent Concealment
[3] The motion judge carefully considered the rationale and requirements of the doctrine of fraudulent concealment as set out by this court in Giroux Estate v. Trillium Health Centre 2005 CanLII 1488 (ON CA), (2005), 74 O.R. (3d) 341 (C.A.), aff'g 2004 CanLII 18056 (ON SC), (2004), 69 O.R. (3d) 689 (S.C.). Justice Moldaver stated, at para. 29, that the doctrine prevents "unscrupulous defendants who stand in a special relationship with the injured party from using a limitation provision as an instrument of fraud". As the motion judge observed in Giroux, three elements must be established to make out the doctrine:
a) the defendant and plaintiff are engaged in a special relationship with one another;
b) given the special or confidential nature of the relationship, the defendant's conduct amounts to an unconscionable thing for the one to do to the other; and
c) the defendant conceals the plaintiff's right of action (either actively, or as a result of the manner in which the act that gave rise to the right of action is performed).
[4] In the circumstances of the present case, the motion judge was satisfied that the solicitor-client relationship between Mr. Solmon and Mr. Chandran was sufficient to qualify as a "special relationship" within the meaning of Giroux. She also found that Mr. Chandran's omissions were only apparent on a review of his file and so the concealment requirement was satisfied as well. However, she found the unconscionability requirement was not met because Mr. Chandan's conduct was merely negligent and she would not characterize it as unconscionable.
[5] On appeal, the appellant submits that Mr. Chandran's negligent conduct flowed from a breach of his fiduciary duties to Mr. Solmon, and the serious breach of his fiduciary duties rendered his conduct unconscionable. The appellant argues that Mr. Chandran breached his fiduciary duty to Mr. Solmon by failing to obtain his written consent to the dual retainer as well as to the advancement of the mortgage funds when the conditions stipulated in Mr. Solmon's written instructions had not been satisfied.
[6] The argument, while effectively advanced, founders on the motion judge's findings of fact. The motion judge found that Mr. Solmon probably gave verbal approval to both the dual retainer and the advancement of the funds. Given these findings of fact, the motion judge was entitled to characterize Mr. Chandran's conduct in the circumstances as negligent, but not unconscionable.
[7] Further, we do not accept the appellant's alternative argument that these findings of fact reflect overriding and palpable errors by the motion judge. We cannot interfere with the inferences that the motion judge drew from the manner in which Mr. Chandran and Mr. Solmon had worked together in earlier transactions, and Mr. Solmon's considerable experience in the lending business. The Supreme Court, in Hryniak v. Mauldin, 2014 SCC 7 (CanLII), 2014 SCC 7, has recently stressed that deference is owed to a motion judge's findings of fact as well as findings of mixed fact and law made on summary judgment.
[8] The appellant further submits that the delay it experienced in gaining access to Mr. Solmon's client file constitutes a further breach of Mr. Chandran's fiduciary duties. Counsel argued that Mr. Chandran failed to obtain Mr. Solmon's written consent before leaving the file with the solicitor who took over Mr. Chandran's practice upon his retirement. We agree with the motion judge that the delay in making the file available was occasioned by the new solicitor's unilateral action. Neither Mr. Chandran nor the estate trustee caused that delay.
In the result the Court of Appeal was not persuaded that the motion judge made any reversible error in concluding that the doctrine of fraudulent concealment did not apply in the circumstances of this case.
Notably, on the Limitations Act issue the court stated as follows:
[10] The applicable limitation period is prescribed by the Trustee Act and not the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. The appellant submits the doctrine of special circumstances continues to be available and permits the court to add parties to an existing action after the expiration of the limitation period. Thus, it argues that because the plaintiff's action was commenced within two years of Mr. Chandran's death, the court could allow it to institute its third party claim after the expiration of two years. We do not agree. A third party claim is itself an action under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, s. 1.03(1). The doctrine of special circumstances, if it applies, does not allow a party to commence a third party claim after the expiration of a limitation period: Joseph v. Paramount Canada's Wonderland, 2008 ONCA 469 (CanLII), 2008 ONCA 469, 90 O.R. (3d) 401, at para. 28.
4. Defendant's Knowledge of Fraud Relevant to "Juristic Reason" Analysis in Unjust Enrichment Claim
Solarblue v. Aus - http://canlii.ca/t/g7cp0
In the recent case of Solarblue v. Aus [4], Justice McDermott concluded in an unjust enrichment claim arising from fraud, that actual or constructive knowledge of the fraud from which the unjustly enriched flowed is relevant to the analysis of the unjust enrichment test: "the absence of a juristic reason for the enrichment portion".
This decision arguably expands the recognized categories of juristic reason to include the defendant's knowledge or lack of knowledge in unjust enrichment claims arising from fraud.
The Facts
A fraudster was hired by the plaintiff, a U.S. corporation, to find solar energy facilities in Ontario to purchase and sell at a profit. The fraudster, who had committed fraud and declared bankruptcy previously, advised the plaintiff that he had negotiated a contract with a company called "Kawartha Power Corp." and that he needed a deposit of $750,000.00. The fraudster asked the plaintiff to advance the funds through a bank account belonging to a numbered company of which the fraudster's common-law wife was the sole director and shareholder. That same day the fraudster executed an agreement on behalf of the numbered company with the plaintiff which stated that the numbered company would act as an agent of the plaintiff.
Some or most of the $750,000.00 deposited into the numbered company's account was used to renovate three properties owned by the wife, who suffered from cognitive and memory impairments as a result of an accident in 2008. The wife had owned these properties prior to starting a relationship with the fraudster in 2010.
The fraudster eventually admitted to the plaintiff that "Kawartha Power Corp." did not exist. The plaintiff commenced a claim against the fraudster, his wife, and the wife's numbered company for fraud, conspiracy and unjust enrichment.
The wife defended the claim arguing that she had no knowledge of the fraud, was told by the fraudster that he was using her numbered company's account for tax reasons and thought the money was an advance on a commission owed to the fraudster from a transaction he had closed.
The fraudster's defence and counterclaim were struck by the court for failing to comply with a contempt order.
Mareva Injunction
In November 2013 the plaintiff brought a successful motion for a mareva injunction and certificates of pending litigation on the wife's three properties.
The wife's motion to set aside the mareva injunction was dismissed.[5] In determining that the plaintiff had made out its prima facie case of unjust enrichment, warranting the mareva injunction, Justice Mackinnon noted that "there is no requirement that a defendant in an unjust enrichment claim have knowledge of the fraud or conspiracy by which he or she was unjustly enriched." [6]
He also stated that there was a "strong inference" that the wife "knew or ought to have known" that the $750,000 was fraudulently obtained - the fraudster was a bankrupt, she knew he had never received such a large amount before, her explanation that her account was used for tax deferral made no sense, and she did not question the fraudster as to why he signed an agreement on behalf of her company. [7]
Juristic Reason: Relevancy of Knowledge of Fraud
The plaintiff brought a summary judgment motion seeking a declaration that the wife was unjustly enriched and a remedial constructive trust against the three properties owned by the wife.
As an adjournment was sought by the wife to review disclosure that had just been provided, the Court was asked by counsel to decide the narrow issue of whether the wife's knowledge of the fraud under which the funds were paid was a relevant factor to be considered as part of the plaintiff's claim for unjust enrichment.
Justice McDermott observed that the first two parts of the test for unjust enrichment were met in this case:
(1) the defendant was enriched; and
(2) there was a corresponding detriment;
(3) the third element on whether there was an absence of a juristic reason for the enrichment was in dispute.
The court summarized the required analysis for the third element:
1. Firstly the court should determine whether there was a juristic reason under which the funds were paid under the established categories such as contract, gift or statute. If there is no juristic reason for payment of the funds, the Plaintiff has made out a prima facie case for a finding of unjust enrichment.
2. If, however, none of these established categories are applicable, the prima facie case remains rebuttable where there is "another reason to deny recovery." In such a case, the court may review "all of the circumstances of the case" to determine whether there is a further reason to deny recovery.
3. Where the Plaintiff has established a prima facie case by showing that none of the established categories apply, the burden is then on the Defendant to prove that there is a further reason to deny recovery beyond those established categories.
4. In rebutting the prima facie case for a finding of unjust enrichment, the court is to have regard for two factors, being "the reasonable expectations of the parties, and public policy considerations." Unlike the established categories of juristic reasons for payment of the funds, the categories for the second part of the test are not closed and an examination of these two factors may allow the court to "find that a new category of juristic reason is established." The court makes it clear that "that this area is an evolving one and that further cases will add additional refinements and developments." [8]
Quoting from Kerr v. Baranow [2011] S.C.R. 269 the court observed that "at the juristic reason stage of the analysis, the court may take into account the legitimate expectations of the parties... and moral and policy-based arguments about whether the particular enrichments are unjust". [9]
The wife admitted that in her situation there was no "established category" of juristic reason for her to keep the funds, as there was no contract, gift or applicable statute. She agreed that it was up to her to prove on a balance of probabilities "another reason to deny recovery." This is where, she argued, her knowledge or lack of knowledge of the fraud was both relevant and necessary. [10]
The plaintiff countered that there was no need to determine the state of the defendant's knowledge of the fraud to determine unjust enrichment. This was not a claim for recovery under the doctrine of knowing receipt where actual or constructive knowledge of the fraud was necessary for finding liability.
Relying on the SCC case of Garland v. Consumer's Gas Co. [2004] S.C.R. 629, McDermott J., concluded that the plaintiff does not have to prove that the wife had knowledge of the fraud. The onus was on the wife to prove that she did not have knowledge of the fraud and that this is, at least in part, a factor to be taken into account in determining whether there is some other jurisitic reason for the payment of the funds into her company's account. [11]
Both counsel cited cases where knowledge was found or not found to be necessary to a finding of unjust enrichment: Den Haag Capital LLC v. Correia where the defendants were ordered to return profits from what they thought were legitimate investments but was a Ponzi scheme of which they had no knowledge; and Cusimano v. D.A.D. Cosntruction Inc., where a wife was allowed to keep funds advanced to her by her common-law spouse from a fraud perpetrated against the plaintiff, as she had no actual or constructive knowledge of the source of the funds. [12]
Conclusion
McDermott J., observed that "the crux of the third element" is that unjust enrichment requires a finding of an enrichment that is "unjust", where the court considers the equities between the parties. Accordingly, "if the ultimate issue under the third part of the test is whether the enrichment was unjust, as part of the determination of the issue, the wife's knowledge of the fraud may be relevant to that determination". The defendant "should be permitted to lead evidence of her state of knowledge as a component of her defence to the claim for unjust enrichment and to give voice to her position that a finding of unjust enrichment is not warranted under the circumstances. It is entirely conceivable that this defendant's state of knowledge would be relevant in light of the defences raised by her, including change of position, lack of due diligence on the part of the Plaintiff and her actual lack of knowledge of the fraud". [13]
Justice McDermott concluded that:
I am determining in answer to the question raised on the motion, that there is no rule of law, as far as I can determine, that lack of knowledge of the fraud is never relevant to a finding of unjust enrichment. I am also making a finding that this Defendant's lack of knowledge (or her actual or constructive knowledge) of the fraud is relevant evidence which she is entitled to lead as part of her defence of there being a jurisitic reason for the money having been paid to her. This is especially so where this defendant alleges that she suffers from cognitive difficulties resulting from the 2008 motor vehicle accident. . . [emphasis in original] [14]
. . .The question posed was whether a finding of the Defendant's knowledge of the fraud was necessary to a finding of unjust enrichment. My answer to the question is that the Defendant's knowledge as to the source of the funds is relevant to a determination of unjust enrichment surrounding the third part of the test for unjust enrichment. And I also believe that it would be wrong to decide this case without being in a position to make a finding as to the knowledge of the Defendant as to [the] fraud committed on the Plaintiff. [emphasis added][15]
The court refused to grant a summary judgment in favour of the plaintiff and ordered a mini-trial to determine whether the wife could prove on a balance of probabilities that there is a juristic reason for the payment of the funds under the second part of the third element of the unjust enrichment analysis. The wife will be entitled to lead viva voce evidence as to her knowledge of the fraud.
The court did not say that knowledge is always relevant or necessary to a claim of unjust enrichment; Justice McDermott merely held that there is no rule saying knowledge is never relevant, implying that the relevancy of knowledge may be fact or case specific. In this case, it appears that the defendant's cognitive impairments played a role in Justice McDermott decision that knowledge of the fraud was relevant. It will be interesting to see how this case is interpreted going forward or on appeal and whether her lack of knowledge of the fraud is found to be a valid jurisitic reason for her to keep the funds.
[1] Cohen Estate v Cohen, para 4
[2] Cohen Estate v Cohen, para 5
[3] Columos v Columbos, para 4
[4] 2014 ONSC 3482 ("Solarblue")
[8] Supra note 1 at para. 22.
[12] Ibid. at paras. 29-31.
