Can a promise be enforceable against an estate? In a recent decision, the Ontario Court of Appeal considered the enforceability of promises, unjust enrichment, and proprietary estoppel.

What is Unjust Enrichment?

Unjust enrichment occurs when one person receives a benefit at the expense of another, in circumstances that the law sees as unjust.

To successfully claim unjust enrichment against another person, a claimant must prove three things:

  1. The person received a benefit;
  2. The claimant suffered a loss corresponding in some way to the benefit; and
  3. There was no juristic reason for the benefit and the loss.

A “juristic reason” is an acceptable reason under the law for the enrichment of one person at the expense of another. If there was a juristic reason for the enrichment, it was not “unjust”, and the courts will not provide a remedy.

What is Proprietary Estoppel?

Proprietary estoppel is an equitable doctrine that historically was used to prevent people from reneging on promises related to interests in land. Because proprietary estoppel is an equitable doctrine, it is always discretionary. The judge does not automatically rule in favour of a claimant just because the requirements for proprietary estoppel are met.

The Supreme Court of Canada has ruled that the following circumstances are required to establish proprietary estoppel:

  1. A representation or assurance is made to the claimant, on the basis of which the claimant expects that they will enjoy some right or benefit over property;
  2. The claimant relies on that expectation by doing or refraining from doing something, and their reliance is reasonable; and
  3. The claimant suffers a detriment due to their reasonable reliance, such that it would be unfair or unjust for the party that made the representation or assurance to go back on their word.

Intestate Deceased Allowed Son to Build House on Small Section of Land

In the recent case of Tomek v. Zabucovek, the parties were a separated couple. The property in question was a parcel of land owned by Zabukovec’s late father, Joseph Sr.

In the late 1980s, Joseph Sr. purchased a 15-acre wooded parcel of land. Shortly after buying the land, Joseph Sr. told his son (the party to this litigation) that he could have a small section of the land to build a family home. In 1988, the son and his wife (the other party in this case) proceeded to build a family home on the land and fully funded its design and construction. The couple borrowed $80,000 from Joseph Sr., a loan they eventually paid off in full.

Shortly after the house was completed, Joseph Sr. attempted to sever the lot from the rest of the property to convey it to his son. However, it turned out that a severance of the lot containing the son’s house was not possible. Given the inability to sever the lot, Joseph Sr. told his son not to worry as the land would be his when Joseph Sr. passed away. The son and his wife continued to make substantial improvements to the home over the next 30 years at their own expense.

From the time the house was constructed, the extended family treated the land as two separate parcels: the house with 1-2 acres of land surrounding it and the remaining acreage. Everyone in the extended family acted as if the house and its surrounding 1-2 acres belonged to the son and his wife.

In 2004, Joseph Sr. died interstate without any formal transfer of title to his son. Following the death, the son and his wife continued to reside in the home, pay taxes, and make improvements to the property. This arrangement only ended when they separated in 2011. The son, his brother, and Joseph Sr.’s wife were appointed the Litigation Administrator of Joseph Sr.’s estate.

Son and Wife Established Proprietary Estoppel at Trial

At trial, the son and his wife argued they had a beneficial interest in the property where their home was located through either a claim of unjust enrichment or proprietary estoppel. However, Joseph Sr.’s estate argued there was no agreement between Joseph Sr. and the son. It took the position that the son and his wife did not have a beneficial interest in the land, and their claim for a proprietary interest was statute-barred.

The trial judge ruled in favour of the son and his wife, finding the estate had been unjustly enriched by the house’s construction, improvement, and maintenance. This enrichment did not extend to the remainder of the property. The trial judge also found that the son successfully established proprietary estoppel regarding the house as follows:

  • Joseph Sr. made implied representations to his son that the son would obtain the benefit of the entire 1.13-acre parcel of land;
  • The son relied on the expectation that he would receive an interest in the property, and as a result, built a house for himself and his family on the land; and
  • The son suffered a detriment since he and his wife could have invested their money and time on a different property had they not believed they would receive an interest in the house they built.

By way of remedy, the trial judge relied on expert evidence to find that the property’s value was $813,000. She granted the son and his wife joint beneficial ownership of 75% of the property.

Court of Appeal Deferred to Trial Judge’s Discretion to Grant Proprietary Estoppel Remedy

The estate appealed, arguing the trial judge erred regarding the value of the land and failed to consider the contribution Joseph Sr. made to the construction of the son’s house.

The Court of Appeal agreed the trial judge erred in assessing the land value by apportioning the house’s total value to the son and his wife. However, it found that the estate failed to address the remedies available where proprietary estoppel has been proven.

The court acknowledged a judge’s significant discretion to craft an appropriate remedy in proprietary estoppel cases. As a result, the common law dictates that appellate courts should defer to a trial judge’s decision unless there is an error in principle or the decision is plainly wrong.

The Court of Appeal concluded there was evidence to establish that Joseph Sr. intended his son and daughter-in-law to receive both the house lot and the house as he brought an application to sever the lots. Therefore, the Court of Appeal determined it would not interfere with the trial judge’s decision.

Contact Derfel Estate Law in Toronto for Representation in Estate Disputes

At Derfel Estate Law, our experienced team of estate lawyers assists clients with a variety of estate disputes and assists with estate administration and probate matters. To find out how we can help you, contact us at 416-847-3580 or reach us online today.