Law Times

Law Times • July 7, 2014 Page 7 www.lawtimesnews.com COMMENT Appeal clarifies criteria for proprietary estoppel, constructive trust By richarD Guy For Law Times he Court of Appeal of Ontario recently clarified the criteria required to establish proprietary estoppel and fashion a construc- tive trust remedy at least with respect to camps in Northern Ontario. You have to know that any decision that starts off with the following preamble is going to be a good read and Justice Sarah Pepall does not disappoint: "A cot- tage, a camp, a cabin, a country house, a ranch: these are the different names given to second homes across Canada. No matter the description, Canadian's affin- ity for their recreational properties is deep, abiding, and renowned. This appeal involves such a recreational property, a camp located on Lake Penage near the city of Sudbury in Northern Ontario. The appellant, Mar- tha Johnson, owns the camp. Her former son-in-law, the respondent Donald Clarke, occupies the camp. He contributed funds and resources to the camp and, over the course of decades, has become emotionally attached to it. When he sought to bar his son from the camp, his mother-in-law sought to bar him. The trial judge deter- mined that the appellant owns the camp, but that the respondent has an equitable right to use the camp dur- ing his lifetime." In Clarke v. Johnson, Clarke took the position that his mother-in-law couldn't revoke, as she purported to do, his licence to occupy his camp. Faced with the undisput- ed fact that he did not own the land, Clarke put forward the argument that he had an equitable right to continue to operate the camp based on unjust enrichment and proprietary estoppel. Writing for the appeal court, Pepall upheld the trial judge's finding that the revocation of Clarke's licence would result in an unjust enrichment to his mother-in- law. She upheld the trial judge's determination that a claim for proprietary estoppel had been established. She reviewed the British jurisprudence dating back to 1866. She referred to the seminal case of Wilmott v. Barber that established a five-part test for proprietary estoppel and gave approval to the view that those "five probanda" are "a valuable guide." Pepall acknowledged that there had been a retreat from the five probanda in Britain and confirmed three elements a party must now prove: en- couragement or acquiescence; detrimental reliance; and unconscionability. Turning to the jurisprudence in Canada, Pepall noted that the doctrine of proprietary estoppel had received somewhat uneven treatment. In contrasting the Ontario case law in Schwark v. Cutting and, more recently, Tiny (Township) v. Battaglia with the B.C. jurisprudence, Pep- all noted a retreat in that jurisdiction from the five pro- banda due to their attendant inf lexibility. She summarizes the principles governing proprietary estoppel based on the modern approach to include the following: proprietary estoppel may form the basis of a cause of action and it is not essential to satisfy the five probanda. Instead, a party must establish three elements: • The owner of the land induces, encourages or allows the claimants to believe they have or will enjoy some right or benefit over the property. • In reliance upon that belief, the claimants act to their detriment with the knowledge of the owner. • The owner then seeks to take unconscionable advan- tage of the claimant by denying the expected right or benefit. In addition, detriment includes expenditures, but the court may also consider countervailing benefits. At the same time, reliance may be express or inferred and, if an inequity arises, the court has a broad discretion to fashion an appropriate remedy. In this particular case, the Court of Appeal upheld the trial judge's decision citing that there was evidence based on the five probanda available to him to fash- ion the result he did. Although he did not expressly address the five probanda, he did expressly identify and apply the modern approach to proprietary estoppel and, in that regard, relied on the second articulation of the test as discussed by the court in Schwark. The trial judge found the mother-in-law had induced and encouraged her son-in-law to believe he would own the camp; the son-in-law, in reliance, had contributed significantly to the construction, maintenance, and improvement of the camp with her knowledge; and denying him use of the camp was unconscionable. The remedy fashioned by the trial judge was to grant the son-in-law an irrevocable licence to occupy the camp until his death and, furthermore, the right to regulate its usage. In upholding the decision of the trial judge, Pepall found this was an appropriate and minimally intrusive equitable remedy so as to do justice in difficult familial circumstances. In determining monetary damages were inadequate and the imposition of a constructive trust was neces- sary, the relief granted by the court ref lected the legiti- mate expectation of the parties and confirmed what the trial judge had said was true: "The attachment between a person and his or her camp is unique and not easily described. Over time there comes to be an emotional attachment borne of the surrounding beauty, the invest- ment of sweat equity, and the memories of time spent with family and friends. When one has been allowed to develop the attachment over the course of decades, and has directed personal and financial resources to the property in the reasonable belief that it would continue, it is unconscionable to deny that benefit." Who could disagree? LT Richard Guy is a lawyer in Sudbury, Ont. u SPEAKER'S CORNER Time for Wynne to lead on Ontario's pressing needs hile the rest of Ontario starts heading off to the cottage, the legislature is back to work and there's lots to do. With so many bills stalled in the pre- viously minority house, the newly mint- ed Liberal majority will waste little time reintroducing and pushing through legislation that died on the order paper when the election began. Front and centre, of course, will be the budget act that NDP Leader An- drea Horwath finally balked at and that brought about the election. We're entering new territory, po- litically speaking. Premier Kathleen Wynne won both her seat and a popular mandate returning her to the premier's office. She has a mandate to govern and it's time to step up and demonstrate the leadership qualities she fussed about during the campaign. She won't have to cosy up to Hor- wath and the NDP and she won't have Progressive Conservative Leader Tim Hudak to kick around anymore. She will, however, likely face an even more vociferous group of Conservative MPPs in opposition because at least some of them will be looking to score points as they jockey for a run at their party's leadership. There are several bills on deck and among the priorities is bill 138, the end- ing coal for cleaner air act, that bans the use of coal for electricity generation. It's more of a political statement than any- thing since cement and steel plants in Ontario will still use coal. Ironically, coal remains a viable, plentiful, and ac- cessible fuel if burned with the appropriate emissions controls as Saskatchewan is about to demonstrate with its $1.35-billion renovation of the 110-megawatt Bound- ary Dam Unit 3 plant that's in the test phase now. The eff luent controls are to capture 90 per cent of carbon dioxide emissions along with sulphur dioxide and nitrous oxide. It sounds promising, but Ontario won't be following suit for purely political reasons. We might also get long-overdue changes in Bill 51, the security for courts, electricity generating facilities, and nuclear facilities act, that would repeal the Public Works Protection Act and amend the Police Services Act with respect to court security. The legislation would cancel that infuriating and sneaky Public Works Protection Act that allowed the secret designation of parts of downtown To- ronto as public works during the G20 meetings of 2010. The upshot was po- lice then assumed broad powers to stop, question, and demand identification and accountability from anyone walk- ing by even if they were five metres away. As public outrage grew and with close scrutiny of the wording of the act, we learned it prescribed no such zone and police could only chal- lenge those attempting to enter. Police had to back off in response. Then there's the Ontario retirement pension plan. From the scant details in the budget background papers, it targets the 66 per cent of Ontarians who don't have a workplace pension plan. The proposal would impose a payroll tax of 1.9 per cent on employers and a 1.9-per-cent levy on income up to a maximum of $90,000 on workers who don't have a workplace pension plan. It's necessary, the Liberals say, be- cause many Ontarians aren't saving enough and those who do have mutual fund investments are seeing them erod- ed by those nasty 2.4-per-cent man- agement expense ratio fees. Since pen- sion fund overheads are much lower, a pooled approach, the thinking goes, would do better by returning 40 per cent more over 40 years. That's the theory. But the arguments in the Ministry of Finance's policy paper gloss over details such as how those who work for themselves would contribute, how long people would have to con- tribute before they could collect, what the age threshold is, whether there's a discounted payout option as with the Canada Pension Plan at age 60, which investments the arm's-length manage- ment board would be able to make, and whether the rules would bar it from tak- ing on Ontario government debt as an investment. The government expects the pension plan to collect $3.5 billion a year and be in place a few years from now. There's also an impact on existing pension plans, so the government has pledged "to consult with all stakeholders." All of this will take time, so the timeline could be ambitious. Meanwhile, the shadow of a $300-bil- lion debt and $12.5-billion deficit looms large. The majority victory gives Wynne the political capital at the outset to not only catch up on the party's legislative agenda but also to walk the talk about holding the line on wage increases and controlling spending. Even Wynne ac- knowledges there's going to have to be some tightening. The next big test will be how quickly she's willing to ditch her conciliatory tone and hold the line with the same public sector unions that worked so hard to support her and help her win that majority. That, too, is leadership. LT Ian Harvey has been a journalist for 35 years writing about a diverse range of issues including legal and political affairs. His e-mail address is ianharvey@rogers. com. T Queen's Park Ian Harvey W

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