COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Schnogl v. Blazicevic,

 

2005 BCCA 575

Date: 20051117


Docket: CA032404

Between:

Heinz Schnogl

Respondent

(Plaintiff)

And

Branko Blazicevic, or in the alternative John Doe,

Representative of the Estate of Richard Balen, and the

Estate of Richard Balen

Appellant

(Defendant)


 

 

Before:

The Honourable Madam Justice Prowse

The Honourable Mr. Justice Braidwood

The Honourable Mr. Justice Hall

Oral Reasons for Judgment

J.E. Rogers

Counsel for the Appellant

P.J. Reimer

Counsel for the Respondent

Place and Date:

Vancouver, British Columbia

17 November 2005

 

[1]                PROWSE, J.A.: This is an appeal from the decision of a trial judge, made October 18, 2004, awarding Mr. Schnogl a 90% undivided interest as tenant in common of property in Vancouver held by the estate of Richard Balen, who died October 29, 1998.  The award was based on a constructive trust, applying the principles of unjust enrichment  set forth in Garland v. Consumers’ Gas Co. , [2004] 1 S.C.R 629, 2004 SCC 25, and the cases referred to therein.  The monetary value of the award as of the date of trial was approximately $441,000.  The value of the estate at that date was approximately $618,000, excluding a further property in Croatia in which the estate may hold an interest.

[2]                It was conceded by counsel for the estate at trial that Mr. Schnogl had established the first two elements of unjust enrichment, namely, an enrichment of Mr. Balen (and, through him, his estate) through the provisions of monies and services, and a corresponding deprivation of Mr. Schnogl.  The critical issues at trial were whether there was a juristic reason for the enrichment and, if unjust enrichment was established, the nature and extent of the remedy. 

[3]                The chambers judge found there was no juristic reason for the enrichment.  That finding is challenged on this appeal.  In the event this Court upholds the finding of unjust enrichment, the appellant submits that the trial judge should have granted a monetary remedy, rather than imposing a constructive trust.  In the further alternative, the appellant submits that if a constructive trust was appropriate, the extent of the trust should have been considerably less.

[4]                The trial judge made extensive findings of fact and credibility in detailed reasons for judgment.  His reasons may be found at 2004 BCSC 1335.   Since the first two elements of unjust enrichment are not in issue, I will refer only briefly to the factual background in order to provide context for the issues raised on appeal.

[5]                In 1977, Mr. Schnogl became a tenant in the basement suite of Mary and Richard Balen for modest rent.  Prior to that, he and Mr. Balen had been friends for several years.  The relationship between Mr. Schnogl and the Balens soon grew increasingly close, to the extent that it was described by Mr. Schnogl and other witnesses as being more akin to family than to landlord and tenant.  This relationship continued for over 20 years until Mr. Balen died in 1998. 

[6]                From the beginning, Mr. Schnogl, who was 20 years younger than the Balens, performed maintenance work about the house and yard, in some cases at his own expense, and he also provided services of a personal nature.  The extent of these services increased as each of the Balens grew older and their health began to fail.  In that regard, Mrs. Balen became ill in 1983 and died in 1986.  Thereafter, Mr. Schnogl continued to assist Mr. Balen until Mr. Balen fell ill in the summer of 1998.

[7]                The evidence of Mr. Schnogl and other witnesses, which was accepted by the trial judge, is that Mr. and Mrs. Balen encouraged Mr. Schnogl to continue to live with and to assist them by telling him that he would ultimately inherit their house.  The trial judge found that Mr. Schnogl passed up two opportunities to purchase his own property in the early 1980s in the reasonable expectation that he would inherit the Balen property. 

[8]                Two months prior to his death in October 1998, Mr. Balen took steps to provide for Mr. Schnogl in his will.  He attended a lawyer and gave instructions which provided, amongst other things, that Mr. Schnogl be entitled to live in the property for 10 years, at which time the property should be sold and the proceeds divided equally between the Salvation Army and the University of British Columbia.  He also provided for a specific bequest to Mr. Schnogl of $10,000.  Mr. Balen was suffering from cancer at that time and never took steps to execute the will, a draft of which was admitted into evidence. 

[9]                The only will in existence for Mr. Balen at the time of his death was one made in 1973.  At that time, Mr. and Mrs. Balen each made wills providing that all of their property was to go to the other.  Upon the death of the surviving spouse, the estate was to be divided, with half to go to Mrs. Balen’s brothers in Croatia and the other half to go to Mr. Balen’s parents, with a gift over to Mrs. Balen’s brother, Branko Blazicevic, the executor of Mr. Balen’s estate.    

[10]            In December 1998, Mr. Schnogl filed a caveat in the Land Title Office claiming an interest in the property by way of constructive or resulting trust.  He commenced the underlying action by writ filed on February 22, 1999.

[11]             In his reasons for judgment, after confirming that the first two elements of unjust enrichment had been established on the evidence, the trial judge turned to the third element of unjust enrichment, namely the absence of a juristic reason for the enrichment.  In addressing that issue, the trial judge quoted from the reasons for judgment of Mr. Justice Iacobucci, speaking for the court, at paras. 44-47 of the Garland decision: 

[44]  …Consequently, in my view, the proper approach to the juristic reason analysis is in two parts.  First, the plaintiff must show that no juristic reason from an established category exists to deny recovery.  By closing the list of categories that the plaintiff must canvass in order to show an absence of juristic reason, Smith’s objection to the Canadian formulation of the test that it required proof of a negative is answered.  The established categories that can constitute juristic reasons include a contract (Pettkus, supra), a disposition of law (Pettkus, supra), a donative intent (Peter, supra), and other valid common law, equitable or statutory obligations (Peter, supra).  If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis.

[45]  The prima facie case is rebuttable, however, where the defendant can show that there is another reason to deny recovery.  As a result, there is a de facto burden of proof placed on the defendant to show the reason why the enrichment should be retained.  This stage of the analysis thus provides for a category of residual defence in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery.

[46]  As part of the defendant’s attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties, and public policy considerations.  It may be that when these factors are considered, the court will find that a new category of juristic reason is established.  In other cases, a consideration of these factors will suggest that there was a juristic reason in the particular circumstances of a case which does not give rise to a new category of juristic reason that should be applied in other factual circumstances.  In a third group of cases, a consideration of these factors will yield a determination that there was no juristic reason for the enrichment.  In the latter cases, recovery should be allowed.  The point here is that this area is an evolving one and that further cases will add additional refinements and developments.

[47]  In my view, this approach to the juristic reason analysis is consistent with the general approach to unjust enrichment endorsed by McLachlin J. in Peel, supra, where she stated that courts must effect a balance between the traditional “category” approach according to which a claim for restitution will succeed only if it falls within an established head of recovery, and the modern “principled” approach according to which relief is determined with reference to broad principles.  It is also, as discussed by Professor Smith, supra, generally consistent with the approach to unjust enrichment found in the civil law of Quebec (see, for example, arts. 1493 and 1494 of the Civil Code of Quebec, S.Q. 1991, c. 64).

[12]            At trial, and on appeal, counsel for the estate argued that a juristic reason for the enrichment could be found in the existence of a landlord/tenant relationship   In response to that submission, the trial judge stated (at para. 159) that while the relationship between Mr. Schnogl and the Balens may have started as one of landlord and tenant:

[159]  …it soon evolved into a different dynamic altogether involving the plaintiff [Mr. Schnogl] committing to a long term relationship with the Balens which incorporated care and attention not only to the property but also to the Balens themselves on an ongoing basis.  The plaintiff’s relationship with the Balens, particularly Richard after Mary’s death, was considerably more filial than contractual in its essential nature.

[13]            In my view, the evidence fully supports that finding and there is no basis for interfering with it.

[14]            Counsel for the estate also argued that there was evidence of donative intent on the part of Mr. Schnogl based on his testimony that at the time he rendered the services he did not expect to get paid for them.  The trial judge rejected this submission.  In his view, Mr. Schnogl’s evidence in that regard had to be placed in the context of the evidence of Mr. Schnogl and of other witnesses that the Balens had represented to Mr. Schnogl that if he continued to live with them and provide continued support to them they would leave their property to him.  In this context, it is clear that while Mr. Schnogl did not expect to receive payment for his services as he provided them, he did expect the Balens to carry out their promise to leave him their property by way of inheritance.  The trial judge found that Mr. Schnogl relied on those promises and, as a result, passed up opportunities to purchase his own home. 

[15]            I am satisfied that the trial judge’s finding that Mr. Schnogl did not have a donative intent which would preclude a finding of unjust enrichment is supported by the evidence.

[16]            Counsel for the estate also submits that the trial judge erred in imposing a constructive trust in these circumstances, rather than granting a monetary remedy.  He submits that there was not sufficient evidence linking the contributions of Mr. Schnogl to the property, and that those services which were linked to the property did not justify the imposition of a constructive trust.  The trial judge considered this submission and stated his conclusion at paras. 174 and 175, as follows:

[174]  It is my conclusion that there is a sufficiently strong link between the plaintiff’s contribution and the property to give rise to a constructive trust rather than simply a monetary award.  In particular, the Balens’ representations to the plaintiff which gave rise to his objectively reasonable expectation were as to his entitlement to the house, and, of course, the benefits he conferred on them were in connection with the house, both by making financial and physical contributions to its upkeep and maintenance and by living in it to provide them, particularly Richard Balen, with a source of companionship and activity related to the house. 

[175]  In these circumstances, I conclude there is a significant link between the plaintiff’s overall contribution and the property at issue that justifies the imposition of a constructive trust as opposed to a monetary award.

[17]            Again, I am satisfied that it was open to the trial judge to exercise his discretion on the facts as he found them to make an order of constructive trust.

[18]            The issue which is more troublesome is whether the trial judge erred in the extent of the trust he imposed.  As earlier noted, he imposed a constructive trust to the extent of 90% of the property.  We were advised that this interest translated to a value of approximately $311,000 at the date of Mr. Balen’s death and approximately $441,000 as of the date of trial.  Counsel for the estate notes that this is a greater interest than even Mr. Balen contemplated giving Mr. Schnogl shortly before his death as evidenced by his unexecuted will.  Counsel also submitted that it is disproportionately high when compared with the awards in some of the other authorities to which we have been referred.

[19]            Counsel for Mr. Schnogl, on the other hand, submitted that the evidence would have justified a constructive trust over the whole of the property given the nature and extent of the services Mr. Schnogl performed, the promises made to him that the house would be his as a result of those services, and the fact that he gave up opportunities to purchase a home in the same area of Vancouver – an opportunity which is effectively foreclosed to him given the housing market in Vancouver.  

[20]            The trial judge dealt with this issue at para. 177 of his reasons, where he stated:

[177]  In the present case, taking into account the representations made by the Balens, the objectively reasonable expectation of the plaintiff given those representations and his contribution, and given the nature of his contribution including the payment of money, the provision of care and attention to the house and yard, as well as his personal care for Mary Balen during the illnesses preceding her death, his companionship to Richard Balen over the following 12 years and his assistance to Richard Balen during his illness in the last months of his life, and given the overall 20 year duration of his contributions, I would set his interest in the house at 90% of its value.  I accordingly award him a 90% undivided interest as tenant in common of the property.  As the plaintiff’s interest is effective as of the date of Richard Balen’s death, he is entitled to his proportionate share of the rental revenues since that date, offset by hydro payments and property taxes in proportion to his interest.

[21]            In determining whether the trial judge erred in awarding Mr. Schnogl a 90% interest in the property, I do not lose sight of the fact that these cases are essentially fact-driven.  For that reason, it is of limited assistance to compare awards in one case with those in another.  Trial judges are given considerable leeway to tailor an award to fit the precise circumstances before them.  In this case, however, I am satisfied that the trial judge’s determination did not adequately take into account the fact that Mr. Schnogl continued to work full-time during the time that he provided his services to the Balens, and that he continued to benefit from a significantly reduced cost of room and board during the time he lived with them.  While the services he rendered were extensive and prolonged, and while he gave up the valuable opportunity to purchase his own residence, the extent of the unjust enrichment obtained by Mr. Balen must take into account these additional factors. 

[22]            The only case to which I will refer in that regard is Clarkson v. McCrossen Estate (1995), 3 B.C.L.R. (3d) 80, [1995] B.C.J.  No. 542 (Q.L.) (B.C.C.A.) upon which counsel for Mr. Schnogl placed particular reliance.  There, this Court upheld a monetary award of $125,000 for unjust enrichment in circumstances in which a stepdaughter made great personal sacrifices over many years to care for her stepfather in reliance on a promise that she would eventually inherit his property.  She, too, gave up an opportunity to purchase a home on the basis of that promise.  By the time of trial, the house had been sold and the claim was for a monetary award.  The award made, when taken together with a $1,000 bequest provided to the plaintiff in her stepfather’s will, amounted to approximately 63% of the value of the property and approximately 45% of the overall value of her stepfather’s estate.  This Court dismissed the appeal of the stepfather’s second wife seeking to set aside the award and the cross-appeal of the plaintiff seeking to increase it.  While that case does not purport to set a high water mark for awards in cases of unjust enrichment (nor could it), it does place the award in this case in a broader context, as do some of the other authorities referred to by counsel.

[23]            In my view, the extent of the constructive trust imposed in these circumstances is out of proportion to the enrichment of Mr. Balen and his estate, and the corresponding deprivation suffered by Mr. Schnogl.  It is also disproportionate to the awards made in other cases, including the Clarkson decision, bearing in mind their disparate facts.   

[24]            Without detracting from the fact that Mr. Schnogl is entitled to a substantial award to reflect the factors set forth in the paragraph from the trial judge’s reasons quoted at para. 20, above, I am satisfied that a constructive trust to the extent of a 66 2/3% undivided interest in the property would be more appropriate and still generous. 

[25]            I would, therefore, allow the appeal, set aside the order of the trial judge awarding Mr. Schnogl a constructive trust over 90% of the property and substitute an order that Mr. Schnogl be entitled to a constructive trust to the extent of 66 2/3% of the property as tenant in common with the estate. 

[26]            BRAIDWOOD, J.A.: I agree.

[27]            HALL, J.A.: I agree.

[28]            PROWSE, J.A.:  An order will be made in those terms.

 

“The Honourable Madam Justice Prowse”