Court File and Parties

CITATION: Sutton Group Professional Realty Inc. v. Stone, 2010 ONSC 4040

COURT FILE NO.: 569/08

DATE: 20100719

SUPERIOR COURT OF JUSTICE - ONTARIO (DIVISIONAL COURT)

RE: Sutton Group Professional Realty Inc. v. Edward Lawrence Stone, 1522914 Ontario Inc. and Keith Macdowell

BEFORE: Justice Swinton

COUNSEL: Jeffrey Radnoff for the Plaintiff (Appellant) George F. Vella for the Defendants 1522914 Ontario Inc. and MacDowell

HEARD at Toronto: July 15, 2010

ENDORSEMENT

[1] The appellant appeals the decision of Master Graham dated October 31, 2008, refusing to grant leave to make most of the proposed amendments in a Further Amended Statement of Claim and refusing to order a Certificate of Pending Litigation (“CPL”).

[2] On this appeal, counsel for the appellant made it clear that there was no claim of an express trust being made. The amendments which he seeks to make are based on the remedy of constructive trust for unjust enrichment.

[3] The appellant has pleaded that the respondents were unjustly enriched because its agent introduced them to the purchaser of their land, but the agent was not paid a promised commission on the sale. It now claims the remedy of constructive trust respecting $173,840.00 of the purchase funds, which were deposited in the trust account of the defendant Mr. Stone, a solicitor. It also pleads knowingly assisting a breach of trust or knowingly receiving trust funds in breach of trust by a number of parties it proposes to add, as well as a tracing of the funds into land purchased by another numbered company.

[4] The issue before the Master was whether the facts as pleaded could possibly give rise to a finding by a trial court that a constructive trust should be imposed.

[5] The appellant argues that the Master erred by focussing on the case of Soulos v. Korkontzilas, 1997 346 (SCC), [1997] 2 S.C.R. 217, a decision in which the Supreme Court of Canada set out conditions generally necessary for the imposition of a constructive trust based on wrongful conduct. He argues that constructive trust is available as a remedy for unjust enrichment even without wrongful conduct by a fiduciary, and the Master failed to consider this argument.

[6] I am not satisfied that the Master erred in law in refusing leave to amend. I agree with his careful analysis of Soulos in the context of this case.

[7] However, I also accept the argument of the appellant that a constructive trust can also be based on unjust enrichment. Indeed, McLachlin J. said in Soulos (at para. 45) that the prerequisites for constructive trust based on unjust enrichment had been developed by the Supreme Court of Canada in Pettkus v. Baker, 1980 22 (SCC), [1980] 2 S.C.R. 834.

[8] The Supreme Court further discussed constructive trust based on unjust enrichment in Peter v. Beblow, 1993 126 (SCC), [1993] 1 S.C.R. 980. After a finding of unjust enrichment, a court must determine whether the proprietary remedy of a constructive trust is appropriate. In making that determination, the claimant must show a nexus between the deprivation suffered and the property in question. As the Court stated in Peter at para. 25:

… for a constructive trust to arise, the plaintiff must establish a direct link to the property, which is the subject of the trust by reason of the plaintiff’s contribution.

The Court made it clear that a constructive trust is to be found only where “monetary compensation is inadequate and there must be a link between the services rendered and the property in which the trust is claimed” (at para. 29).

[9] Thus, it is clear that a simple plea of unjust enrichment does not create a tenable plea for a constructive trust remedy.

[10] In the present case, the appellant seeks a constructive trust over part of the proceeds of sale of the land, but does not plead any facts to support a nexus between services which it rendered and the property in which the trust is claimed – that is, sale proceeds provided by the purchaser.

[11] As the Master observed at para. 17 of his endorsement, the relationship of a vendor and a real estate agent who is seeking to be paid commission is that of debtor and creditor. It is not a trust relationship.

[12] I reach the same conclusion as the Master: there is no tenable claim based on constructive trust, as pleaded, even if the constructive trust claim is based on unjust enrichment. The pleadings do not set out facts on which a court could conclude that a monetary remedy would be inadequate and a constructive trust should be found over part of the sales proceeds.

[13] The amendments related to the added parties are based on their knowingly assisting a breach of trust or knowingly receiving trust funds in breach of trust. If the claim for a constructive trust, as pleaded, is bound to fail, so, too, are the related claims against the proposed new parties bound to fail.

[14] Given the Master’s conclusions on the constructive trust claims, he correctly concluded that he need not address the request for a CPL.

[15] The appeal is dismissed. Costs to the respondent of the appeal and the motion before Jennings J. fixed at $6,000.00, inclusive of GST and disbursements.

Swinton J.

Released: July 19, 2010