Great-West Life Assurance Company v. King, 2013 ABQB 529

Court of Queen ’ s Bench of Alberta Citation: Great-West Life Assurance Company v. King, 2013 ABQB 529 Date: 20130916 Docket: 1204 00551 Registry: Grande Prairie Between: The Great-West Life Assurance Company Plaintiff - and - William Anton King and Jonathan Victor King Defendants _ ________________________________________ ______________ Reasons for Judgment of W. S. Schlosser , Master in Chambers _________________________________________ ______________ [ 1 ] This is an application for

summary dismissal of a life insurer’s claim for funds mistakenly paid to the Defendants. There are two issues: 1. Whether the claim was started in time; and, 2. Whether the evidence discloses an estoppel , or a change of position , such that there is no merit to the Plaintiff’s claim. [ 2 ] In 1984, Bill King (the Father) took out a policy of insurance on his own life. Then, in 1987, Roseanne King (the Mother) was added as an insured. Their relationship soured. In 2003, the Mother filled out a beneficiary designation change form to change the beneficiary from the Father to the two sons, William Anton King and Jonathan Victor King. Mother and Father were divorced in 2005.

The Mother died in November 2009. The Plaintiff then paid life insurance proceeds of over $125,000.00 to each son. Now, four yearslater, the insurer wants the money back. [3] From the insurer’s perspective, the trouble began when the Father sought payment just under a year after the Mother died.The Plaintiff looked into the matter.

It realized the Mother, while she may have been a beneficiary under the policy, was not the ownerof it and did not have the power to alter the beneficiary designation from the Father to the sons. [4] The Plaintiff sent a demand to the sons for a return of the money February 16, 2012 but the sons refused. The insurer paidout the Father’s claim the following December. [5] The Defendants are applying for

summary dismissal on the basis that the September 19, 2012 Statement of Claim is out oftime: being more than two years after the payment to the sons. The Applicants further argue that even if the limitation in

section 3 of theLimitations Act does not end the claim, I should invoke

section 10 of the Act and the equitable doctrine of laches to find a shorter period.The sons say that they have meritorious defences (estoppel and change of position) and that the action should be dismissed on that basisalone. Limitations [6]

Section 3 of the Limitations Act provides: 3(1) Subject to

section 11, if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, or (b) 10 years after the claim arose. whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of theclaim. [7] In this case, the injury was not the mistaken payment but the refusal to give the money back once the error was detected.Once the Defendants refused to do this, all of the elements of section 3(1)(

a) had been met and the clock began to run. [8] In this case, the payments were made December 4, 2009. Although the Statement of Claim wasn’t filed until September 19,2012, it was the failure to respond to the demand letter dated February 16, 2012, that started the clock. [9] I note that in a restititutionary context the third element of the test; ‘warrants bringing a proceeding’ is further qualified inthat a proceeding may not be warranted until all of the elements of the equitable cause of action are present: Salna v. Awad, 2011 ABCA20, at paras. 29, 30.

For a claim based in unjust enrichment, this would require the presence of an enrichment, a deprivation and theabsence of a juristic reason for the enrichment: Garland v. Consumer Gas Co., 2004 SCR 25. However, this qualification does not startthe clock earlier in this case because there is no injury, or no injury attributable to the conduct of the Defendants until the Defendantsassert a better right to the funds. The qualification in Salna that applies to equitable causes of action does not affect the other tworequirements of section 3(1)(

a) of the Limitations Act. Laches [10] In 681210 Alberta Ltd. v. Hunter, 2012 ABCA 83, our Court of Appeal observed (at paras. 31-33): [31] . . The Supreme Court of Canada discussed laches in M (

K) v. M (H), (SCC), [1992] 3 SCR 6, 96 DLR (4th) 289.Speaking for the court, LaForest J. noted , at 77-78: A good discussion of the rule and of laches in general is found in Meagher, Gummow and Lehane, supra, at pp. 755-765, where theauthors distill the doctrine in this manner, at p. 755: It is a defence which requires that a defendant can successfully resist an equitable (although not a legal) claim made against him if he can

demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (

a) acquiesced in the defendant’s conductor (

b) caused the defendant to alter his position in reasonable reliance on the plaintiff’s acceptance of the status quo, or otherwisepermitted a situation to arise which it would be unjust to disturb. Thus there are two distinct branches of the laches doctrine, and either will suffice as a defence to a claim in equity. What is immediatelyobvious from all of the authorities is that mere delay is insufficient to trigger laches under either of its two branches.

Rather, the doctrineconsiders whether the delay of the plaintiff constitutes acquiescence or results in circumstances that make the prosecution of the actionunreasonable. Ultimately, laches must be resolved as a matter of justice as between the parties, as is the case with any equitable doctrine. [32] The Manitoba Court of Appeal considered this passage in Rivergate Properties Inc. v. West St.

Paul (Rural Municipality), 2006MBCA 76, 205 Man R (2d) 230, and summarized its effect this way, at para. 53: Thus, the Supreme Court has made it clear that the defence of laches entails the notion of delay combined with either (

a) evidence ofconduct revealing that the plaintiff acquiesced in the alleged wrongful act in a way that leads reasonably to the inference that the plaintiffwaived its right to a remedy, or (

b) evidence that, in reliance on the status quo, the defendant altered its position in a way that constitutesprejudice, or evidence that through its delay, the plaintiff permitted circumstances to arise that it would be unjust to disturb. Therefore,delay will not afford an effective defence until the defendant is able to establish prejudice or other evidence of potential injustice. [33] In short, laches applies to the delay in either instituting or prosecuting the claim, but there must be more than mere delay.

Theplaintiff must show either acquiescence to the point of waiver, or prejudice or other potential injustice caused by the delay in prosecutingthe lawsuit. In our view, neither was established.

i) Acquiescence and Waiver [11] The Plaintiff’s claims are all based in equity. However, there is no evidence that the Plaintiff acquiesced to the point ofwaiving its right. In fact the opposite is true. The Plaintiff acted promptly when it realized its mistake, first by issuing a demand and thenby issuing a Statement of Claim. We cannot count the time from when the ineffective change of beneficiary designation was made, orfrom when the funds were mistakenly paid.

Ignorance of the mistake and acquiescence (much less waiver) are two different things. [12] Although it would be tempting to impose an obligation upon the insurer to have detected the mistake and have acted quicklyto correct it, to do so would really be to approach the problem from an oblique angle.

We would be dealing with the issue of how thepayors negligence figures into things indirectly, through the limitations argument, rather than directly, from the perspective of whetherthis should form an equitable defence to the claim on its merits. [13] It is natural to think that the negligence of the payor might afford a defence. In this case, the Plaintiff might have detected theerror when the Mother purported to change the beneficiary designation back in 2003. If they had been careful, they could havedetermined that she did not have the power to do this.

The might also have discovered the error when they reviewed the file at about thetime they were called upon to pay out the policy. [14] Unfortunately, carelessness of the payor is usually not a defence and it is of no help to these Defendants. (e.g. Kelly v.

Solari(1831) ER 24, Maddaugh and McCamus, The Law of Restitution, Loose Leaf, Toronto, Canada Law Book 2013, 10:300.10 and the casescited there “Maddaugh.”) If we were to impose the doctrine of laches and say that the Plaintiff had acquiescence or waived its rights to aremedy through its own carelessness we would indirectly be reviving an equitable defence that has generally been rejected as a defenceon the merits by the decided cases.

This argument is tempting because these considerations seem natural and compelling in context butthe Court ought not to do indirectly what it will not do directly. ii) Altered Position [15] The same sort of considerations apply to the second branch of the test. Asking whether the Plaintiff’s conduct, “caused theDefendant to alter his position in reasonable reliance on the Plaintiff’s acceptance of the status quo, or otherwise permitted a situation toarise which it would be unjust to disturb”, goes straight to the heart of the estoppel and change of position defences.

Here, again, it is myview that the problem ought to be approached directly, not indirectly under the guise of a limitations defence. The Merits

i) Estoppel and Change of Position [16] It is useful to begin by speaking in general terms, though I concede that this area of the law is continually evolving and whatmight be true today might not necessarily be true tomorrow. [17] All of the Plaintiff’s claims are equitable or restitutionary. The central defences are estoppel and change of position. Estoppelrequires a representation of fact and detrimental reliance (perhaps unlike a promissory estoppel which may only require reliance).Change of position, as a defence to the restitutionary claim, is somewhat more versatile.

It does not require a representation per sebeyond the mistaken payment. The payee can be one step removed from the payor and still set up a defence. [18] It no longer seems to matter whether a mistake of fact or a mistake of law actuated the mistaken payment (see the companioncases: Canadian Pacific Airlines Ltd. v. British Columbia (SCC), [1989] 1 SCR 1133 and Air Canada v. BritishColumbia (SCC), [1989] 1 SCR 1161).

[19] Estoppel and change of position defences are similar but they might have different consequences.

The main thing they have incommon is that the Defendant has the burden of showing why the funds ought not to be returned, and in order to do this the Defendant isobliged to prove: ‘prejudice’, ‘detriment,’ ‘unfairness,’ or ‘negative impact’; any of which are intended to describe, or be a means togauge the payee’s worsened position if the payor is allowed to go back on what they have said or done. (Estoppel by Representation, Spencer Bower, 4th edition, 2004 Lexus Nexis at p. 5 et seq. esp para. 1-2-5.) In the case of an estoppel, change of position can, itself,constitute detrimental reliance. [20] The modern approach to recovery of the mistaken payments is set out in Storthoaks (Royal Municipality) v.

Mobile CanadaLtd., (SCC), [1976] 2 SCR 147 and BMP Global Distribution Inc. v. Bank of Nova Scotia 2009 SCC 15 ,[2009] 1 SCR 504. [21] In the latter case, the Supreme Court of Canada (Deschamps, J. writing for the court at paras. 21-22) adopted the test stated byGoff J. in Barclays Bank Ltd. v. WJ Simms Son & Cooke (Southern) Ltd., [1979] 3 All ER 522: 1. If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled torecover it as money paid under a mistake of fact. 2. His claim may however fail if: (

a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so tointend; (

b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed tothe payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he isauthorised to discharge the debt; (

c) the payee has changed his position in good faith, or is deemed in law to have done so. (emphasis added) [22] The decided cases provide a range of remedies, with oddly differing results. First, an estoppel defence appears to provide anentire defence to the Plaintiff’s claim despite the fact that a portion of it might amount to an unjust enrichment. A change of position, onthe other hand, might only afford a pro tanto defence to that portion of the claim that it would be unfair or prejudicial to return. (e.g.Avon County Council v. Howett [1983] 1 WLR 605 (Eng. C.A.); RBC Dominion Securities Inc. v.

Dawson (1994) (NL CA), 111 DLR (4th) 230 (Nfld. CA.), and Maddaugh, 10:400:10 at p. 10-25 et seq., 10:500.30, p. 10-53-4 generally). Finally, if thePlaintiff’s claim is advanced as an unjust enrichment and a remedial constructive trust is sought, a defendant might also have to disgorgeprofits made with the mistakenly paid funds. [23] A change of position might permit a defendant to retain some or all of the funds. If change of position is used as thedetrimental reliance to found an estoppel defence, the defendant might be able to keep it all. A remedial constructive trust would meanpaying it back ‘with interest’.

Other than an overriding obligation to come to an equitable result (and perhaps the state of the pleadings)there seems to be no principled distinction in the use of these remedies. The decided cases are difficult to reconcile and the tensionbetween the remedies remains unresolved. [24] On one hand the range of remedies would be consistent with permitting a Plaintiff with concurrent causes of action to pick the cause of action that best suits their position (e.g. Central Trust v.

Rafuse, (1986) (SCC), 31 D.L.R. (4th) 481 (SCC) in alimitations context) but the potentially differing results does not sit well in an equitable context. [25] Both Storthoraks (at 164) and BMP Global (at para. 61) recognize change of position and estoppel as independent defences toa mistaken payment.

But the potentially different outcomes and the possibility of using estoppel to retain a portion of a mistaken paymentthat constitutes an unjust enrichment has caused a number of scholars to criticize the use of an estoppel remedy in this context (AndrewBurrows, The Law of Restitution Oxford: Oxford University Press, 2011 at 558; Maddaugh, 10:500.30 at p. 10-53, 10-54 and cf Goff and Jones, The Law of Unjust Enrichment, 8th ed., Sweet & Maxwell 30.08 and following). [26] The other odd thing about this area of the law is that it seems to favour bad behaviour.

If you and I were each mistakenly paid$100,000.00 and you prudently put the money into liquid investments and I spent it on riotous living, you would probably have to pay itback. I wouldn’t. One would expect equity to value prudence rather than profligacy. ii) How Much Detriment is Required? [27] As Millett put it: Both law and equity seek the same result, to do justice by refusing to allow a party to disappoint the legitimate expectations of another.But not all expectations are legitimate, and the law and equity do not necessarily draw the line in the same place. . . .

The gist of theclaim in equity is prejudice; equity will not permit a party who has stood by while another prejudices his position in the belief, created or

encouraged by him, that he has or will obtain a legal right, afterwards to deny that right. P. J. Millett (as he then was) in (1976) 92 LQR 342, at 346 [28] Unfairness, prejudice, detriment or negative impact themselves admit of degree but they resist precise quantification. [29] In Garland v. Consumers Gas Company, 2004 SCC 25 [2004] 1 S.C.R. 629, at 659 Iacobucci, J cited Lord Goff’s remarks inLipkin Gorman v. Karpnale Ltd., [1992] 4 All ER 512 (HL) at 533 where he said: It is right that we should ask ourselves: why do we feel that it would be unjust to allow restitution in cases such as these?

The answermust be that, where an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay or to repay infull, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution. [30] Mr. Justice Iacobucci’s judgment in Garland (at 658-660) left a fuller investigation of where to strike the balance to futurecases. Indeed, where the balance should be struck on any particular set of facts remains to be determined on a case-by-case basis.

It is thenature of equity to resist rigid boundaries and bright line rules. [31] Examples of the change necessary to actuate the defence in the estoppel context are canvassed in Estoppel by Representationat page 116 V.5.2 at page 249 and following (in the English context) and Maddaugh,

Chapter 10, generally. [32] The thing to be gleaned from the examples cited there is that the change does not have to be irreversible. However, it isprobably required to be extraordinary and the payee must demonstrate his innocence. The burden on the Defendant is not particularlyonerous (Maddaugh, 10:500.10 at page 10-37 and following). Given the possibility that a court of equity may require a partialrepayment, some kind of an accounting should be furnished, even though it may not be exact; especially if all of the money has not beenspent. Martland J. in Storthoaks at 166-167 citing Denning, LJ., in Lanrer v.

London County Council, [1949] 2 KB 683 at 688; RBC Dominion Securities Inc. v. Dawson (1994) (NL CA), 111 DLR (4th) 230 (Nfld CA). [33] I note that one of the oldest cases (Kelly v. Solari

(1841) ER 24) required the return of a mistaken payment under a lifeinsurance policy which had lapsed because some premiums had not been paid. The insurer was able to get the money back after themistake was discovered. iii) Evidence [34] It was necessary to canvass the foregoing in some detail because, in the end, this application comes down to the evidence. [35] The sons say in their Affidavits: WILLIAM KING 3. On or about November 11, 2009, my brother Jonathan King, my step-dad Rick Weir and I met with Ivan Buchholtz, a familyfriend who worked for the Plaintiff.

We were told that there were two policies of life insurance on my mom. I understood that my brotherand I were the beneficiaries of one, and my brother, my step-dad and I were the beneficiaries of the other. 5. Over the past few years, I have spent most of the money, using it for various things such as buying a vehicle, a quad, a home, andon other miscellaneous things for myself and my wife and 3 children. (emphasis added) JONATHAN KING. After repeating paragraph 3 (above) he says: 5.

Over the past few years, I have spent all of the money, using it for various things such as purchasing life insurance, paying fees inmoving the monies from one investment institution to another investment institution, paying tuition, and paying for living expenses. [36] We are invited to treat the representation made by the Plaintiff’s ‘employee’ as something that binds the Plaintiff and wouldfound an estoppel defence. Alternately, the evidence at paragraph 5 of each Affidavit suggests the type of change of position that mightfound a defence.

The trouble is if we measure the evidence against the decided cases, it falls just short of enabling us to summarilydismiss the claim. [37] It is crucial that the Court be able to weigh the evidence in order to determine where the balance should be struck and, to thisend, we require much greater detail. We need to know where the money went and how much, if any, is left. As a matter of form theDefendant need also establish good faith and their own innocence in the change of position, Garland supra at page. 658-660 andStorthoaks (above).

[ 38 ] The evidence suggests there may be at least a partial defence but there is not enough detail to determine the matter summarily. That is not to say that it could not be dealt with by way of

summary trial, or in a chambers application once the evidence is fleshed out. If necessary a procedural Order could be given to facilitate this. [ 39 ] The Defendants’ application is dismissed. Given all of the circumstances and especially the very unsettled state of the law, costs will be in the cause. Heard on the 18 th day of July, 2013. Dated at the City of Edmonton, Alberta this 16 th day of September, 2013. W. S. Schlosser M.C.C.Q.B.A. Appearances: James Neilson, Q.C. Parlee McLaws LLP for the Plaintiff Narnia King Kay McVey Smith & Carlstrom LLP for the Defendants