DATE: 20060327

DOCKET: C44178, C44802

COURT OF APPEAL FOR ONTARIO

SHARPE, ARMSTRONG and BLAIR JJ.A.

B E T W E E N:

DARIUSZ GORECKI

Andrew F. Camman and Marcus A. Lennox, for the appellant

Plaintiff

(Appellant/Respondent in cross-appeal)

• and -

ATTORNEY GENERAL OF CANADA

Barney Brucker and Matthew Sullivan, for the respondent

Defendant

(Respondent/Appellant in cross-appeal)

Heard: March 20, 2006

On appeal from the order of Justice Helen A. Rady of the Superior Court of Justice dated August 17, 2005.

SHARPE J.A.:

[1] In this proposed class action, the appellant asserts a claim for interest on a lump sum retroactive payment of $60,830.81 for a Canada Pension Plan (“CPP”) disability pension. The appellant claimed that he was entitled to a disability pension as of October 1995. His claim was initially denied. After proceeding through various levels of appeal and review, the appellant settled his claim with the Minister of Human Resources and Development more than six years after the date of injury. The settlement was incorporated in an order of the Pension Appeals Board (“PAB”) that made no provision for interest. The appellant received his lump sum payment in October 2001.

[2] The statement of claim asserts several causes of action in support of the interest claim: breach of an express, implied or resulting trust; breach of fiduciary duty; unjust enrichment; constructive trust; and, the inherent right of the Superior Court to award interest.

[3] The respondent Attorney General of Canada moved to strike the statement of claim under Rule 21 on grounds of jurisdiction and standing and on the ground that the claim discloses no reasonable cause of action. The motion judge rejected the Attorney General’s jurisdiction and standing arguments, but did strike out the claims based on breach of trust, breach of fiduciary duty and unjust enrichment as disclosing no reasonable cause of action. She refused to strike out the claims based on constructive trust and the inherent power of the Superior Court to award interest.

[4] The appellant appeals the dismissal of the breach of trust, breach of fiduciary duty and unjust enrichment claims. However, in oral argument the appellant abandoned his appeal from the dismissal of the claims for breach of express, implied or resulting trust. The Attorney General’s appeal to the Divisional Court (“the cross appeal”) against the order allowing the claims based on constructive trust and the inherent power of the superior court to award interest to proceed to trial was transferred to this court to be heard with the main appeal.

[5] It is common ground that the CPP is a comprehensive statutory scheme designed to provide contributors and their families with certain minimum levels of income in the event of retirement, death, or disability. The benefits payable, the contributions required, and the terms of entitlement are specified in the Canada Pension Plan, R.S. 1985, c. c-8 (the “Act”). The CPP is funded entirely by the contributions made by employees and employers and all funds are pooled with no individual accounts. CPP funds can only be used to pay benefits and administer the plan; transfers to or from other government accounts are prohibited. If a claim for a CPP benefit is denied, the Act provides a scheme of appeals to: (1) the Minister; (2) the Review Tribunal; (3) the Pension Appeals Board; and, (4) judicial review before the Federal Court of Appeal. The Act makes no provision for the payment of interest on benefits, although it does provide for interest in the case of under- or over-payment of contributions (see ss. 21(6), 34(2), 38(7), 108(2)(f)). Section 60(1) provides that no benefit can be paid unless the benefit has been approved under the Act.

ANALYSIS

I. The Appeal

(1) Breach of fiduciary duty

[6] I agree with the motion judge’s conclusion that it is plain and obvious that the action cannot succeed on the allegations of breach of fiduciary duty. The relationship between the Crown and the appellant flows entirely from the terms of the CPP and the statutory definition of that relationship bears none of the hallmarks of a fiduciary duty. The CPP confers no discretion on the Crown to act for the benefit of the appellant. The Crown does not undertake to administer CPP funds for the appellant’s benefit. The only duty that the CPP imposes on the Crown or that the Crown assumes is the public law duty to fulfill the statutory terms of the CPP. This cannot be the source of a fiduciary duty owed to the appellant.

(2) Unjust enrichment

[7] I also agree with the motion judge that it is plain and obvious that the claim for unjust enrichment cannot succeed. Given the nature of the CPP and the isolation of its funds from other government accounts, it is difficult to see how there could be an enrichment attributable to the Crown. In any event, the terms of the Act provide a juristic reason for any enrichment. The CPP is a complete statutory code that makes no provision for the payment of interest on benefits where there is a delay between the date on which the beneficiary became entitled to the benefit and the date on which the benefit was paid. It has been held that where a comprehensive statutory scheme does not provide for the payment of interest by the Crown, no interest is payable: see Zaidan Group v. London (City) (1990), 1990 2624 (ON CA), 64 D.L.R. (4th) 514 (Ont. C.A.), aff’d 1991 53 (SCC), [1991] 3 S.C.R. 593; Gladstone v. Canada 2005 SCC 21, [2005] 1 S.C.R. 325. Finally, “[i]t is settled jurisprudence that interest may not be allowed against the Crown, unless there is a statute or a contract providing for it.”: Canada v. Carroll, 1948 29 (SCC), [1948] S.C.R. 126 at 132.

II. Cross Appeal

(1) Constructive trust

[8] The motion judge found that as the constructive trust is an evolving remedy it would be inappropriate to conclude at the pleading stage that it is plain and obvious that the appellant’s claim could not succeed. In my view, the motion judge erred in law in reaching this conclusion.

[9] The motion judge relied on Soulos v. Korkontzilas 1997 346 (SCC), [1997] 2 S.C.R. 217, where the McLachlin J. held, at para. 43, that “there is room for the law of constructive trust to develop”. She also stated at, para. 35, that the imposition of a constructive trust cannot be based merely upon “what might seem ‘fair’ in a general sense” and that any expansion of the doctrine must rest “on a reasoned, incremental development of the law on a case-by-case basis.” McLachlin J. stated, at para. 43, that “under the broad umbrella of good conscience, constructive trusts are recognized both for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation.” Accordingly, there are two possible ways of acquiring a constructive trust: first, by establishing unjust enrichment; and, second, by demonstrating the type of wrongful conduct by the defendant that is capable of giving rise to a constructive trust. As I have rejected the claim of unjust enrichment, the appellant can only succeed in his constructive trust claim by satisfying the wrongful conduct test.

[10] McLachlin J. identified the type of wrongful conduct that will give rise to a constructive trust in the absence of unjust enrichment, at para. 45, as having four conditions which generally should be satisfied:

(1) The defendant must have been under an equitable obligation, that is, an obligation of the type that courts of equity have enforced, in relation to the activities giving rise to the assets in his hands;

(2) The assets in the hands of the defendant must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff;

(3) The plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties and;

(4) There must be no factors which would render imposition of a constructive trust unjust in all the circumstances of the case; e.g., the interests of intervening creditors must be protected.

[11] As I have already explained, the Crown is under no equitable obligation in relation to CPP benefits. Nor, for reasons already explained, does the Crown owe the appellant any equitable obligation or duty of loyalty. As the claim for interest relates to a claim for a statutory benefit, it is difficult to see any basis for the assertion of a proprietary remedy. Finally, it would be unjust to impose a constructive trust in the face of a comprehensive statutory scheme that precludes the award of interest.

[12] In my view, it is plain and obvious that the claim for interest based upon constructive trust cannot succeed.

(2) Inherent power of the Superior Court to award interest

[13] The motion judge found that it was not plain and obvious “that a freestanding claim for interest pursuant to the Court’s equitable jurisdiction cannot succeed.”

[14] The appellant implicitly acknowledged that the Act does not allow for interest when he settled his claim and had it incorporated in an order of the PAB without advancing any claim for interest. Counsel acknowledged in oral argument that the PAB has no authority to award interest: see Canada (Minister of Human Resources and Development) v. Néron, [2004] F.C.J. No. 156 (T.D.). To uphold a freestanding right to claim interest in the present case would be contrary to the Act and to the orderly administration of justice. It would lead to a fragmented jurisdiction requiring claims for benefits to proceed before the PAB, but allowing parallel proceedings for interest on such claims before the Superior Court.

[15] Any power that the Superior Court has to award interest must arise from contract, statute, the rules of court, or from a common law or equitable principle: see Billes v. Parkin Partnership Architects Planners (1983), 1983 1810 (ON CA), 40 O.R. (2d) 525 (C.A.); Toronto (City) v. Toronto Terminals Railway Co. (1999), 1999 9291 (ON CA), 45 O.R. (3d) 481 (C.A.). The motion judge relied on Hayden Warehouses and Storage Limited v. The City of Toronto 1955 108 (ON SC), [1955] O.R. 258 (H.C.J.) for the proposition that it is within the equitable jurisdiction of the Superior Court to award interest “where payment of a just debt has been withheld and it is fair and equitable that the defaulting party should make compensation by way of interest.” I agree with the respondent Crown’s submission that a claim for a statutory benefit does not amount to a claim in debt to which a claim for interest attaches.

[16] The case of Manitoba v. Air Canada (1978), 1978 2210 (MB CA), 86 D.L.R. (3d) 631 (Man. C.A.), aff’d [1990] 2 S.C.R. 303, dealing with interest on payments compelled by a statute found to be ultra vires the province has no application here. The mere fact of delay in payment could not in law render the actions of the Crown ultra vires in the present case.

CONCLUSION

[17] In the end, the appellant’s claim rests on the assertion that it is ‘unfair’ that he should have to wait for six years to receive his CPP disability pension, yet not be paid interest.

[18] Fiduciary duty, unjust enrichment, constructive trust, and inherent power to award interest are elastic principles, but they do have limits and they cannot be stretched to remedy each and every claim of ‘unfairness’, particularly where the alleged unfairness arises by virtue of the precise terms of an Act of Parliament. The comment of Major J. in Gladstone, supra, at para. 12 is apposite: “[t]his may seem unfair given that the proceeds in the case at bar were held for a number of years. If so, it is for Parliament to correct it.”

[19] Accordingly, I would dismiss the appeal, allow the cross appeal and dismiss the action. If the parties are unable to agree as to costs, they may address their submissions to us in that regard in writing.

“Robert J. Sharpe J.A.”

“Robert P. Armstrong J.A.”

“R.A. Blair J.A.”

RELEASED: March 27, 2006