I feel the same way

"I believe in coincidences. Coincidences happen every day. But I don't trust coincidences."

James Crocker

Noise?

A client of mine and I were discussing various options for a new corporation, resulting in the following exchange.

Me: "Have you considered bringing on other investors as silent partners?"
Client: "Yes, but I'm not going to do that. They could handle the investment part, but they're no good at silent."

[Quoted with the kind permission of the client.]

Some thoughts on things creeping north 2

"The Real Interrobang", a London blogger, has a keen eye for apt quotes. As you will recall a quoted comment on American policing prompted a blog post here last week. I stumbled across another today which continued that "I'm glad our police aren't like that! thought:

In my experience, serious commercial plane crashes are generally the result of a chain of very minor factors that align sufficiently to result in an accident. The apologies an compensation for the victims is certainly the decent thing to do, but the more telling difference here is that there is an enormous effort made by the airline, manufacturers and government to determine what caused the crash, and (often very expensive) remedial steps to prevent that problem from ever happening again. If police departments took this approach whenever they screw up and cause injury or death to innocent people, I would find it a lot easier to cut them some slack. I'm thinking that a good analogy here is the difference between private and commercial aviation. The accident rates for commercial carriers are so low that they are almost statistically insignificant, and are still trending down. The accident rates for general aviation (that is, amateur pilots like me) have been pretty static for many years. The sad thing is that the private pilots still regularly kill themselves because of rookie mistakes like failing to properly preflight an aircraft, or stalling and spinning from a low altitude. These would be analogous to the kinds of mistakes we're seeing the police make on these raids. In my opinion, law enforcement agencies in North America are still acting like amateurs despite the years of experience they should have amassed by now. If they took an approach that was more like commercial aviation, we would all be a lot safer, and probably more likely to trust police officers we interact with day to day.
"GXT, Dispatches from the Culture Wars, comments".

I honestly don't think that the "North American" descriptor is fair, simply because Canadian police forces are, in the main, still far superior to their American counterparts in their handling of the citizenry and in their respect for the law and proper process. No doubt my colleagues in the criminal bar might have some cutting things to say about some forces or invidudal police (and it is, for example, difficult to ignore the shocking institutional failings in the RCMP, problems which which seem to be ongoing) but the fact remains that we have a better chance of retaining excellent policing if we also note the many things they do right; I don't accept the notion that treating them as if they were indistinguishable from their oft deeply troubling and increasingly authoritarian American counterparts is at all productive or just.

True

In the long run, luck is given only to the efficient.

Helmuth von Moltke.(Molte the Elder is, in my opinion, one of the best sources of military quotes out there, probably because most of them can apply so effectively to day-to-day life.)

Some thoughts on things creeping north

I personally have a fairly high opinion of Canadian police in general. They are, taken as a breed, far more sensible, far less violent, far less paranoid and certainly far less hostile to the citizenry than their American counterparts who in many, many instances have spent the better part of the last three decades sliding downhill in their regard for the law or obedience to any limits on their authority.

I ponder this issue because when one looks south one sees the increasing use of the Taser to ensure "compliance". This is disturbingly often not about a response to someone genuinely resisting lawful arrest or being a threat to public or personal safety but more to do with not kowtowing rapidly or obsequiously enough to the officer's authority, whether or not the exercise of that authority is right or wrong, lawful or unlawful, rational or arbitrary. One commenter has noted,

I’m sure that [the Taser] makes the cops’ jobs easier and safer for themselves if they Tase more people instead of wrestling them to the ground; I don’t care. ... The police do not have a right to a completely submissive citizenry and they should be prevented from trying to create one.

-- Scarshapedstar, “Today in Tasering: And the Beat Goes On,” Correntewire, quoted at "You Still Can't Do That On Slashdot", "The Real Interrobang", August 11, 2008

That's the key, isn't it? A citizen should be compliant with the law, not necessarily with police authority. The latter is in service to the former, not synonymous with it and certainly not the determinant of it. Indeed, one of the hallmarks and safeguards of a truly free and just society is the ability of a citizen to stand up to an officer when the officer is wrong or breaking the law.

When officers feel that they have a right to Taser somebody who is problematic -- as in the Robert Dziekański case, where four trained, fit, young and armoured RCMP officers Tasered and killed one middle aged man -- as opposed to a genuine threat then we have a disturbing Americanization of our police methods of problem-solving. [Note: I'm forty-four and of about the same height, weight and build as Mr. Dziekański was. It will be a sad, sad day for policing when it takes more than one or two unarmed officers to subdue me or somebody like me, so much so that the use of four officers was ludicrous and the use of Tasers was monstrous.]

Police work is often dangerous, but so is giving men guns, Tasers and body armour and sending them out amongst their fellow citizens. The key to a democratic society is the balancing of our need for safety and policing with our need to be free citizens. For the most part we've balanced that in Canada, thanks in great deal to the good sense of the individual coppers involved. I'd hate to see that go. I like the Americans fine, but I don't want their society and I certainly don't want their policing problems and, frankly, I don't think that any sane person does.

A non-profit board risk management checklist

Sitting on a non-profit board: A risk management checklist for lawyers
© 2010 Lawyers’ Professional Indemnity Company.

Serving as a director of a charitable or not-for-profit corporation can be a rewarding but potentially risky experience. A director can be held personally liable for his or her own actions or failures to act, as well as jointly and severally liable with the other members of the board of directors.
Directors with specialized knowledge and expertise, such as lawyers, are held to a higher standard of care. LAWPRO’s standard professional liability insurance policy provides coverage only for the “professional services” that a lawyer provides as a lawyer. It does not provide coverage for liability arising as a result of a lawyer’s actions as a director.

Accordingly, here are some questions you should ask yourself before serving as a director on the board of a charity or not-for-profit organization.

1. How well do I know this organization? Does it engage in activities that have an especially high risk of attracting legal liability?

2. What are my motivations for joining this board – business, personal, community service, etc.?

3. Will I be able to devote my time and energy to ensure that I fully meet my obligations in this role?

4. Do I understand the risks and responsibilities that come with directorship? Am I aware of the statutory and common law liabilities that I may be exposed to?

5. Does my firm have a policy regarding its lawyers serving on the boards of charities and not-for-profits?

6. Is the charity or not-for-profit organization a client of my firm? If so, does my firm have a policy regarding its lawyers serving on the boards of charities and not-for-profits that are clients of the firm?

7. Will the charity or not-for-profit organization agree to indemnify me for liability arising out of my role as director?

8. Does the charity or not-for-profit organization maintain directors and officers (D&O) insurance to protect me from personal liability arising out of my role as director?

9. If so, what are the details of this D&O insurance? What policy terms, conditions and exclusions are likely to apply? What are the limits of liability per claim and in the aggregate?

10. Is there an outside director liability (ODL) insurance policy in place that may respond to claims against me arising out of my directorship? If not, should I purchase such insurance, whether from the Canadian Bar Insurance Association (CBIA) or through my insurance broker?

11. Is there any other insurance in place or optional coverage that may be purchased that may cover my activities as director? Have I consulted my insurance broker? (Note: LAWPRO’s optional excess insurance policy does not provide incidental D&O coverage, but some excess professional liability insurance policies may do so. If so, does that coverage “drop down” to afford primary protection?)

GAAR

Every now and again an acronym is also onomatopoetic, and I would think that "GAAR" qualifies. The acronym means the "General Anti-Avoidance Rule" and the onomatopoeia comes with the noise made by a taxpayer who has had a tax plan disallowed by the Canada Revenue Agency [CRA] under the GAAR despite the plan's technical compliance with the tax laws.

What is the GAAR, according to the CRA?

The GAAR is really just Part XVI "Tax Avoidance" of Canadian Income Tax Act, (ss. 245 and 246).

In that Part the government creates the concept of an "avoidance transaction", which it defines as "a single transaction or one that is a part of a series of transactions where the single transaction or the series results directly or indirectly in a tax benefit, unless the transaction is carried out primarily for bona fide purposes other than to obtain the tax benefit". (CRA IC88-2, "General Anti-Avoidance Rule - Section 245 of the I.T.", an information circular "to provide guidance with respect to the application of the general anti-avoidance rule". )

What exactly is the GAAR, in non-legalese?

The best description I've ever seen is that provided by Osgoode Hall Law Student Mr. Ankur Bhatt:

A fundamental tenet of Canadian tax law...is that a taxpayer is entitled to make any lawful arrangement that he or she sees fit in order to reduce his or her liability to tax. The General Anti-Avoidance Rule (”GAAR”), at s. 245 of Canada’s Income Tax Act, has greatly confused this once-clear principle. While “tax evasion” is the general term for efforts to not pay taxes by illegal means, what is known as “tax avoidance” is the otherwise not illegal navigation of the tax regime to reduce tax payable. The GAAR, as its name would suggest, stands as a general damper on the latter. The rule entails that, even if one follows to the letter the (other) rules as laid out, the government may feel fit to disregard such compliance and levy the tax that it deems would otherwise have been payable had such (other) rules not been taken advantage of. Specifically, the benefit of a tax avoidance transaction may be denied if, pursuant to s. 245(4), the transaction constitutes a “misuse” or “abuse” of the tax-related provisions it utilized.

Noted tax law scholar Vern Krishna related the gist of general anti-avoidance legislation at a recent lecture competition:

The law allows you to do something. You do it according to the law, and take advantage of the law, and then somebody says, “No… that was not very nice. You went too far.” And you say, “How far is ‘too far’?” And [they] say, “Well, we’ll tell you when we find out.” (Laughter.) But you say, “I need to know, because I need to plan in advance!” And they say, “No, you’ll find out in the fullness of time.” (Laughter.)

Thus, general fairness concerns of uncertainty, unpredictability, and retroactivity arise. Furthermore, having to do with but a property interest, general anti-avoidance legislation is not subject to Charter scrutiny under s. 7. As expected, the courts are left to divine the meaning of “misuse” and “abuse” under s. 245(4), demarcating the line between valid and non-valid arrangements of financial affairs.

[The quote is from "Copthorne Holdings: “Series of transactions” under the GAAR", "The Court", Osgoode Hall Law School, February 2nd, 2010. The "s.7" reference is to Section 7 of the Charter of Rights and Freedoms, which states: "7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice".]

A problem: two not-in-sync SCC cases

The Supreme Court of Canada is there, amongst other reasons, to clarify the law. Unfortunately it has done rather the opposite on the GAAR.

In 2005 the Court, (in Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601) "effectively sanctioned the well-worn practice of tax avoidance, saying transactions structured to minimize what is owed to Caesar, as it were, don't per se constitute a breach of the law" ["General Anti Avoidance Rule - GAAR - CRA Loses Catch-All Case", Wednesday, October 26, 2005 from The Globe and Mail, reprinted at "Canada Offshore"], permitting "aggressive" tax planning. (Truth be told, such complex plans are rarely available to small businesses, who even more rarely have the time, volume of gross income, or piles of cash to hire the platoons of hyper-specialist tax accountants and lawyers necessary to even come up with the avoidance schemes.)

In 2009, however (in Lipson v. Canada, 2009 SCC 1, [2009] 1 S.C.R. 3) "the Supremes" (as they are often cheekily known) stood for instead of against application of the GAAR: "The approach to determining whether a transaction resulted in a misuse and an abuse for the purposes of s. 245(4) of the Act required the court to first interpret the provisions at issue to determine their essential object, spirit and purpose. The second step in the s. 245(4) analysis was to determine whether the avoidance transaction frustrated the object, spirit or purpose of the provisions. Where a tax benefit resulted from a series of transactions, any individual transaction became relevant in ascertaining whether it gave rise to an abuse of the provisions of the Act. The GAAR applied even where abuse was an indirect result of a transaction. Thus, a court had to refer to the `overall result' of the transactions, rather than the `overall purpose', which may incorrectly imply that the taxpayer's motivation or the purpose of the transaction was determinative."

There are two things of interest to me in the Lipson decision.

First, the decision was an odd and narrow (4-2-1) split decision with a short bench of seven, made without the benefit of the Chief Justice MacLachlan, who is arguably the Court's best tax specialist: please see "Supreme Court Hands CRA Biggest Ever GAAR Victory In A Cliff-Hanger", (19 January 2009, Article by William I. Innes, Chia-yi Chua and Carman R. McNary, Fraser, Milner, Casgrain, LLP) for further details and commentary.

Second and worse: unlike the Canada Trustco case, Lipson was an "aggressive" tax plan that was created by ordinary taxpayers: a taxpayer and his wife who structured a loan transation for a family residence using financing arranged around the purchase of shares in a family corporation; the share loan was $562,500 and the mortgage was $562,500. (Please see the Lexis-Nexis/Quicklaw Digest for the Lipson case to obtain a useful summary. The explanatory quotation above is from that Digest.) Canada Trustco, by contrast, was a "complex sale-leaseback transaction" of high value and potentially wide application. I can't shake the concern that one judicial standard is being applied to rich corporate taxpayers while a more rigid and demanding one is being applied to ordinary people. What will be of interest will be to see whether the harsher Lipson standard will be applied to future corporate tax arrangements such as the one found in Canada Trustco; if it is then the class bias concern will be negated. What will also be worth following is whether or not the law will alter course for a third time: it is possible that the SCC will accept a GAAR case to clarify any uncertainty.

Until the matter is clarified, however, I will be wary of an American-style tax standard where the tax avoidance tune is okay if done with complex scores played by expensive orchestration, and impermissible if done in simple chords.

What can you do to avoid a problem?

If you are engaged in aggressive tax planning, one option is to go to the CRA, where "Revenue Canada, Taxation will issue advance rulings with respect to the application of the general anti-avoidance rule to proposed transactions and will publish summaries of the facts and rulings in those cases that will provide further guidance where the rulings themselves are not published. In order to ensure that the rule is applied in a consistent manner, proposed assessments involving the rule will be reviewed by Revenue Canada, Taxation Head Office." One should, however, consult with a tax law and accounting specialists to ensure that (a) the proposed tax arrangement meets the laws as they stand, and (b) whether it is prudent to obtain a predetermination at all.


Further reading:

"Anti-Avoidance Provisions, Including GAAR" - CA School of Business

"The Year in GAAR", Fasken Martineau Taxation Group presentation by Alan Schwartz and Louis Tasse

Quite. So.

TD Bank CEO Ed Clark [made]the following comments ... at a TD Ameritrade management conference in Florida last week:

"It will astound you, but there's a group called the Canadian Council of Chief Executives and we had a meeting two weeks ago, and almost every single person said, 'Raise my taxes, get this deficit done.' "

Nothing warms the hearts of Canadians more than hearing the CEO of a major corporation, especially a bank, calling on the government, as if on behalf of all Canadians, to "raise my taxes."

"CEOs unite for GST hike", Terence Corcoran, Financial Post. Saturday, February 13, 2010

When can you not fire an employee?

Well, the truth is you can fire any employee at any time for any reason .... if you are willing to pay the price that a court may award that employee for wrongful dismissal or such other cause of action. Most small business naturally don't have that kind of convenience money, and have better things to spend it on even if they did.

One of the better known and well-published labour law lawyers is Mr. Howard Levitt of Lang Michener, LLP.

He recently wrote a Law Note on "Dealing with Malcontents" in the workplace.

In that article he recommends a number of key points that employers "should consider ... before firing staff for subordination"

Is the order lawful? ...
How reasonable is the directive? ...
Is the instruction within the employee’s job functions? ...
Is the order clear? ...
Is it related to a significant issue? ...
Is there a reasonable excuse? ...

The full article is well worth a read.

Why do we have law at all?

"Law is born from despair of human nature."

José Ortega y Gasset

A good writer ponders a bad jury

“In the McFarland case, the defendant set up a plea of insanity and succeeded in proving himself a fool. And he was acquitted by a jury of his peers.”

Ambrose Bierce,
in a comment on a San Francisco case.

An interesting thought on statutory limitation

I’ve often thought there out to be a quota on the size of a state’s entire statutory code. Something on the order of 10-20 million characters. This would include not only the laws, but any rule or regulation created by any state agency (often published in something called an Administrative Code).

Those laws and rules would only get to be so large, and then, before anything new was added, they’d have to get rid of something else. The legislature would also be responsible for figuring out each agency’s “budget”, that is, how many characters that agency could use for its rules.

If this were in effect, maybe they’d keep only what was really important.

Commenter "Ahcuah" at theagitator.com, an American libertarian website, January 2nd, 2010

Sanity on Social Policy

"I don't believe that suffering is morally edifying. I'm in favor of more happiness and less suffering wherever possible, which is apparently a radical position."

"KevinBaker", Shakesville, comments, h/t to "The Real Interrobang"

What is believed?

"People who would not believe a High Priest if he said the sky was blue, and was able to produce signed affidavits to this effect from his white-haired old mother and three Vestal Virgins, would trust just about anything whispered darkly behind their hand by a complete stranger in a pub."

Terry Pratchett, from the novel Maskerade.

The wisdom of crowds can be overrated.

"The IQ of a mob is the IQ of its most stupid member divided by the number of mobsters."

Terry Pratchett, from the novel Maskerade.

Separation Agreements: Full Disclosure and Fair Dealing

The Supreme Court of Canada in Rick v. Brandsema has recently clarified the law regarding what is and isn't fair in the negotiation and contents of a separation agreement.

The SCC headnote found at Canlii gives an excellent summary (the numbers in square brackets being the relevant paragraph of the SCC judgment; the hyperlinks are by the author of this blog):

The parties married in 1973 and separated in 2000. During their 29 years together, they had five children and acquired a dairy farm in which they were equal shareholders, as well as other real property, vehicles and RRSPs. The parties were intermittently represented by lawyers and also used the services of mediators during their negotiation of a separation agreement. Approximately a year after their divorce, the wife sought to set aside the agreement on the grounds of unconscionability or, in the alternative, a reapportionment order under s. 65 of British Columbia’s Family Relations Act.

The trial judge found that the agreement was unconscionable because the husband had exploited the wife’s mental instability during negotiations and had deliberately concealed or under‑valued assets. This resulted in the wife receiving significantly less than her entitlement under the Act, despite the fact that it was the parties’ express intention to divide their assets equally. As a result, the trial judge made an order awarding the wife an amount representing the difference between the negotiated equalization payment and the amount she was entitled to under the Act. The Court of Appeal disagreed with the trial judge’s conclusions about the extent of the wife’s vulnerabilities and concluded that, in any event, they were effectively compensated for by the availability of counsel. [The wife appealed that BCCA decision to the Supreme Court of Canada and won.]

[...]
The singularly emotional environment that follows the disintegration of a spousal relationship means that the negotiation of separation agreements takes place in a uniquely difficult and vulnerable context. Special care must therefore be taken to ensure that the assets of the former relationship are distributed through a process that is, to the extent possible, free from informational and psychological exploitation. Where exploitation results in an agreement that deviates substantially from the objectives of the governing legislation, the resulting agreement may be found to be unconscionable and, as a result, unenforceable. [1] [44] [47]

While parties are generally free to decide for themselves what bargain they are prepared to make, decisions about what constitutes an acceptable settlement can only authoritatively be made if both parties come to the negotiating table with the information they need to consider what concessions to accept or offer. This requires that there be a duty on separating spouses to provide full and honest disclosure of all relevant financial information in order to help protect the integrity of the negotiating process. This duty not only anchors the ability of separating spouses to genuinely decide for themselves what constitutes an acceptable bargain, it helps ensure the finality of agreements. An agreement negotiated with full and honest disclosure and without exploitative tactics will likely survive judicial scrutiny. [45‑49]

Whether defective disclosure will justify judicial intervention, however, will depend on the circumstances of each case, including the extent of the misinformation and the degree to which it may have been deliberately generated. [49]

There is no reason to disturb the trial judge’s conclusion that the separation agreement was unconscionable. His findings about the husband’s defective disclosure and exploitation of his wife’s known mental vulnerabilities, support the conclusion. Although in some cases professional assistance will effectively compensate for vulnerabilities, in this case the trial judge concluded that the wife’s mental instability left her unable to make use of such assistance. [2] [6] [27-28] [31] [36] [58‑60] [62]

The husband’s failure to make full and honest disclosure, his knowledge that the negotiations were based on erroneous financial information, as well as his exploitation of what he knew to be his wife’s profound mental instability, resulted in a negotiated equalization payment that was $649,680 less than the wife’s entitlement under the Family Relations Act. In these circumstances, the trial judge was entitled to award this amount to compensate the wife for the loss caused by the unconscionable bargain. [6] [27-28] [31] [53] [63] [69]

The Canadian Centre for Policy Alternatives Weighs looks at the HST

The Canadian Centre for Policy Alternatives is "an independent, non-partisan research institute concerned with issues of social, economic environmental justice. Founded in 1980, the CCPA is one of Canada’s leading progressive voices in public policy debates".

CCPA recently examined the recently-approved Harmonized Sales Tax (HST)and concludes that the "majority of Ontarians won’t be worse off when the [HST] is implemented. Not A Tax Grab After All: A Second Look at Ontario’s HST examines the Ontario government’s HST plan and finds it's virtually revenue neutral when viewed as part of a total tax package that includes increased sales and property tax credits and a significant decrease in personal income tax rates".

To read CCPA's full paper in PDF format you can right-click and download it from here.

Other Camberwell House posts with further information on the HST:
"The HST and you"
"HST Transitional Rules"

Quantum Meruit

“Quantum meruit” is Latin for “as much as he deserves”. It refers to how the court determines what a party is owed for work done for another in one of two main cases: where there is no contract (and thus an unjust enrichment case) or where there is a contract but there are no express terms governing payment, (which can be an oral contract, or a written contract which is silent or unclear as to payment). If the right to payment is established by the court then, “in such circumstances, the Courts award reasonable remuneration to the person who has rendered the services”, [Dictionary of Canadian Law, (3d ed.)].

It is important that the rendering of services by one person to another has to be to one who has requested such services “or freely accepted them with the knowledge that they are not rendered gratuitously." [Gill v. Grant (1988), 30 E.T.R. 255 at 271 (B.C.S.C.) per Rowles J.] The rationale for this two-way-street is obvious: one should not be forced by a court to pay for services which one had neither requested nor knowingly accepted.

A very neat summary of what must be present to win a claim based soley on quantum meruit are found in Summers v. Harrower, 2005 CanLII 50261 (Ont S.C.J.), ¶ 11:

1. there was a contractual relationship between the parties;
2. the parties agreed that certain work was to be done but failed to agree on all aspects of the contract, for example, the price to be paid;
3. the defendant accepted the work;
4. both parties had or should have had in the circumstances an expectation that the work was not being rendered gratuitously; and
5. the payment sought was reasonable remuneration for the work done.

Quantum meruit is a very useful principle of law, permitting recovery of funds where there is inadequate documentation but evidence of the agreement and the work done.

Latin and the law

This post started as an entry on the principle of quantum meruit, but the phrase itself got me to thinking about Latin words in the law. (The post on quantum meruit will have to wait until here.)

There was a time when reading law was an exercise in plowing through the classical educations of the British lawyers of a different era, a kind of penance paid by the rest of us for the sins of the teachers of countless generations of public school boys vigorously beaten into translations of the classics. Such educations produced a weird result where anything important had to be in Latin because, well, Latin was how educated people said important things and that was that. It also helped that such a forest of Latin stood as a code or in-language for the ruling classes which often excluded the entrepreneurial middle classes and definitely placed a comprehension barrier between the lower classes and their understanding of the net of laws that so severely and unfairly bound them. It's still surprising to realize that the study of English among Britain's educated classes was, until well into the 20th Century, often reserved for those children of privilege considered too slow for Latin and Greek. How idiotic such a fetishization of past millenia was is shown by the fact that Winston Churchill was shunted off into the study of English at Harrow because he was considered too dim for the classics. (The lad was once beaten when, told that a certain sentence construction would be used when addressing a table, blurted out, "but I never do!". Fortunately this early immersion in English eventually turned out to be for our societal benefit.)

Over the years Latin has, thankfully, largely dropped from frequent use in the law. Generations of lawyers have grown up without ever having picked up a Latin primer and I have a sneaking suspicion that the drop in the study of the classics is linked at least in important part to the end of corporal punishment in the schools: kids -- me, for one! -- probably have to be threatened with violence to waste time learning the endless, oppressive complexities of Latin grammar, an educational point recognized by the lads of Monty Python in this classic Life of Brian scene.

Reading a judicial decision from eighty years ago is an exercise in frustration, blocked as one is at every turn by a barbed wire tangle of Latin phrases which have perfectly acceptable English equivalents. Modern decisions are mercifully free of Latin, save where the term in question has become a term of art which is generally and instantly understood by lawyers to denote a specific thing, a word or phrase which one treats as an English word by adoption, like (non-legal) but instantly-comprehended words "blitzkreig", "bungalow" or "fait accompli". The law is better off for it.

Unjust Enrichment

Unjust enrichment is a doctrine for the compensation of one who has unjustly received a benefit from another in a manner that the law will correct. It is a principle of “equity”.

Thomson-Carswell’s Dictionary of Canadian Law (3d ed) neatly summarizes the doctrine:

“ An action for unjust enrichment arises when three elements are satisfied: (1) an enrichment; (2) a corresponding deprivation; and (3) the absence of a juristic reason for the enrichment.”

Each of these is required for the doctrine to be applied. Only when they are proven is the action established and the court able to grant compensation; from there the court goes on to determine what remedy will be applied: monetary compensation or a judgment finding a “constructive trust” which will result in an order that the claimant has an interest in or title to property.

An example of unjust enrichment would be two companies working together without a written contract on a building project where Company A owns the land and Company B contributes labour and building supplies. Co.A refuses to pay Co.B, so where is B’s remedy? It can allege an oral contract, yes. But it can also allege that Co.A is unjustly enriched. Co.A has been enriched to the value of the contributions in labour and supplies and through any increase in the value of the property. Co.B has suffered a corresponding deprivation, in that it has lost those contributions and the profit (the increase in value) which would have been provided if those contributions had been used elsewhere. Lastly, there is no juristic reason for what happened. If, for example, Co.A had been owed $1m by Co.B and B’s deprivation was roughly the same, Co.A could claim a set-off for that debt, which could be a juristic reason which may be upheld by the court.

For further reading and a discussion of the principle, please see the Duhaime page on unjust enrichment.