Soulos v. Korkontzilas et al., (1997) 212 N.R. 1 (SCC)

• Judge: McLachlin, Iacobucci and Major, JJ.
• Court: Supreme Court (Canada)
• Case Date: May 22, 1997
• Jurisdiction: Canada (Federal)
• Citations: (1997), 212 N.R. 1 (SCC);JE 97-1111;[1997] ACS no 52;9 RPR (3d) 1;[1997] SCJ No 52 (QL);212 NR 1;100 OAC 241;71 ACWS (3d) 194;1997 CanLII 346 (SCC);46 CBR (3d) 1;17 ETR (2d) 89;32 OR (3d) 716;[1997] 2 SCR 217;EYB 1997-00862;146 DLR (4th) 214

Soulos v. Korkontzilas (1997), 212 N.R. 1 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Fotios Korkontzilas, Panagiota Korkontzilas and Olympia Town Real Estate Limited (appellants) v. Nick Soulos (respondent)

(24949)

Indexed As: Soulos v. Korkontzilas et al.

Supreme Court of Canada

La Forest, Sopinka, Gonthier, Cory,

McLachlin, Iacobucci and Major, JJ.

May 22, 1997.

Summary:

Soulos was interested in purchasing a property. His real estate broker, Fotios Korkontzilas, was a gratuitous agent for Soulos, expecting his fees from the vendor. Rather than deliver Soulos' offer to the vendor, he arranged for the purchase of the property in his wife's name. Soulos sued, requesting that his agent be declared a con­structive trustee of the property.

The trial judge, in a decision reported at 4 O.R.(3d) 51, refused to make the dec­laration. Soulos appealed.

The Ontario Court of Appeal, Labrosse, J.A., dissenting, in a decision reported 84 O.A.C. 390, allowed the appeal. Korkontzilas et al. appealed.

The Supreme Court of Canada, Sopinka and Iacobucci, JJ., dissenting, dismissed the appeal. Korkontzilas was required to convey the property to Soulos, subject to appro­priate adjustments.

Brokers - Topic 3153

Duties of broker to principal - Real estate brokers - Where agent purchases property - [See second Trusts - Topic 2308 ].

Trusts - Topic 2308

Constructive trusts - Circumstances when imposed - Soulos was interested in pur­chasing a property - His real estate broker, Korkontzilas was a gratuitous agent for Soulos, expecting his fees from the vendor - Rather than deliver Soulos' offer to the vendor, he arranged for the purchase of the property in his wife's name - Because Korkontzilas purchased the property at market price, Soulos suf­fered no damages - Soulos sued, request­ing that Korkontzilas be declared a con­structive trustee of the property - The Supreme Court of Canada held that a constructive trust over property could be imposed even though there was no unjust enrichment - Korkontzilas was required to convey the property to Soulos, subject to appropriate adjustments.

Trusts - Topic 2308

Constructive trusts - Circumstances when imposed - A trial judge held that a real estate broker breached his fiduciary duty to a client in buying a property himself, but that a constructive trust was not an appropriate remedy because the broker had not been enriched - The broker had pur­chased the property for market value, which value had actually decreased from the time of the purchase to the time of the action - The Supreme Court of Canada held that "... the constructive trust may apply absent an established loss to con­demn a wrongful act and maintain the integrity of the relationships of trust which underlie many of our industries and insti­tutions." - See paragraph 14.

Trusts - Topic 2308

Constructive trusts - Circumstances when imposed - The Supreme Court of Canada stated that "... a constructive trust may be imposed where good conscience so requires. The inquiry into good conscience is informed by the situations where con­structive trusts have been recognized in the past. It is also informed by the dual reasons for which constructive trusts have traditionally been imposed: to do justice between the parties and to maintain the integrity of institutions dependent on trust-like relationships. Finally, it is informed by the absence of an indication that a constructive trust would have an unfair or unjust effect on the defendant or third parties, matters which equity has always taken into account. Equitable remedies are flexible; their award is based on what is just in all the circumstances of the case." - See paragraph 34.

Trusts - Topic 2308

Constructive trusts - Circumstances when imposed - The Supreme Court of Canada stated that "... in Canada, 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. While cases often involve both a wrongful act and unjust enrichment, constructive trusts may be imposed on either ground: where there is a wrongful act but no unjust enrichment and corresponding deprivation; or where there is an un­conscionable unjust enrichment in the absence of a wrongful act, as in Pettkus v. Becker ... Within these two broad cate­gories, there is room for the law of con­structive trust to develop and for greater precision to be attained, as time and ex­perience may dictate." - See paragraph 43.

Trusts - Topic 2308

Constructive trusts - Circumstances when imposed - The Supreme Court of Canada identified four prerequisite conditions, which generally should be satisfied, for the imposition of a constructive trust based on wrongful conduct: "(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." - See paragraph 45.

Trusts - Topic 2344

Constructive trusts - Basis for imposition - Breach of confidence or fiduciary re­lationship - [See second Trusts - Topic 2308 ].

Trusts - Topic 2346

Constructive trusts - Basis for imposition - Unjust enrichment - [See fourth Trusts - Topic 2308 ].

Cases Noticed:

Becker v. Pettkus, [1980] 2 S.C.R. 834; 34 N.R. 384, refd to. [paras. 16, 66].

White, Fluhman and Eddy v. Central Trust Co. and Smith Estate (1984), 54 N.B.R.(2d) 293; 140 A.P.R. 293; 17 E.T.R. 78 (C.A.), refd to. [para. 24].

Carl-Zeiss-Stiftung v. Smith (Herbert) & Co. (No. 2), [1969] 2 Ch. 276 (C.A.), refd to. [para. 29].

Beatty v. Guggenheim Exploration Co. (1919), 122 N.E. 378, refd to. [para. 29].

Neale v. Willis (1968), 19 P. & C.R. 836 (C.A.), refd to. [para. 30].

Binions v. Evans, [1972] Ch. 359 (C.A.), refd to. [para. 30].

Hussey v. Palmer, [1972] 1 W.L.R. 1286 (C.A.), refd to. [para. 30].

Neste Oy v. Lloyd's Bank PLC, [1983] 2 Lloyd's Rep. 658, refd to. [para. 31].

Elders Pastoral Ltd. v. Bank of New Zealand, [1989] 2 N.L.L.R. 180 (N.Z.C.A.), refd to. [para. 32].

Mogal Corp. v. Australasia Investment Co. (In Liquidation) (1990), 3 N.Z.B.L.C. 101, refd to. [para. 32].

Goldcorp Exchange Ltd. (In Receivership), Re, [1994] 2 All E.R. 806 (D.C.), refd to. [para. 32].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 33].

Meinhard v. Salmon (1928), 164 N.E. 545, refd to. [para. 38].

Ontario Wheat Producers' Marketing Board v. Wellandport Feed Mill Ltd. and Royal Bank of Canada (1984), 4 O.A.C. 391; 9 D.L.R.(4th) 729 (C.A.), refd to. [paras. 41, 67].

MacMillan Bloedel Ltd. v. Binstead (1983), 14 E.T.R. 269 (B.C.S.C.), refd to. [paras. 42, 68].

Bugoy Estate v. Bugoy, [1985] 2 S.C.R. 85; 61 N.R. 172; 44 Sask.R. 178, refd to. [para. 54].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14; 69 O.R.(2d) 287; 35 E.T.R. 1, refd to. [para. 54].

Canson Enterprises Ltd. et al. v. Boughton & Co. et al., [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1, refd to. [para. 54].

Brissette v. Westbury Life Insurance Co., [1992] 3 S.C.R. 87; 142 N.R. 104; 58 O.A.C. 10, refd to. [para. 61].

Syncrude Canada Ltd. et al. v. Hunter Engineering Co. and Allis-Chalmers Canada Ltd. et al., [1989] 1 S.C.R. 426; 92 N.R. 1, refd to. [para. 66].

Reading v. Attorney General, [1948] 2 All E.R. 27 (K.B.D.), affd. [1949] 2 All E.R. 68 (C.A.), affd. [1951] 1 All E.R. 617 (H.L.), refd to. [para. 69].

Canadian Aero Service Ltd. v. O'Malley, [1974] S.C.R. 592, refd to. [para. 69].

Boardman v. Phipps, [1965] 1 All E.R. 849 (C.A.), affd. [1966] 3 All E.R. 721 (H.L.), refd to. [para. 70].

Lee v. Chow (1990), 12 R.P.R.(2d) 217 (Ont. H.C.), refd to. [para. 80].

Authors and Works Noticed:

Birks, Peter, An Introduction to the Law of Restitution (1985), pp. 330, 338 to 343 [para. 37].

Dewar, John L., The Development of the Remedial Constructive Trust (1981), 6 Est. & Tr. Q. 312, pp. 317 [para. 18]; 322, 323 [para. 19]; 332, 333 [para. 23]; 334 [para. 19].

Dixon, John, The Remedial Constructive Trust Based on Unconscionability in the New Zealand Commercial Environment (1995), 7 Auck. U.L. Rev. 147, pp. 157, 158 [para. 32].

Goff, Robert and Jones, Gareth, The Law of Restitution (3rd Ed. 1986), pp. 61 [para. 26]; 643 [para. 37].

Goode, Roy, Property and Unjust Enrich­ment, in Essays on the Law of Restitu­tion (1991), generally [para. 45].

Litman, M.M., The Emergence of Unjust Enrichment as a Cause of Action and the Remedy of Constructive Trust (1988), 26 Alta. L. Rev. 407, pp. 414 [para. 24]; 415 [para. 28]; 416 [paras. 28, 40].

McClean, A.J., Constructive and Resulting Trusts -- Unjust Enrichment in a Com­mon Law Relationship -- Pettkus v. Becker (1982), 16 U.B.C.L. Rev. 156, pp. 167 [para. 44]; 168, 169 [paras. 26, 44]; 170 [paras. 21, 44].

Paciocco, David M., The Remedial Con­structive Trust: A Principled Basis for Priorities over Creditors (1989), 68 Can. Bar Rev. 315, pp. 318, 320 [para. 22].

Scott, Austin Wakeman, The Law of Trusts (3rd Ed. 1967), vol. V, pp. 3410, 3412, 3418 [para. 38].

Sealy, L.S., Fiduciary Relationships, [1962] Camb. L.J. 69, p. 73 [para. 19].

Waters, D.W.M., The Constructive Trust (1964), pp. 33 [para. 19]; 39 [para. 18].

Counsel:

Thomas G. Heintzman, Q.C., and Darryl A. Cruz, for the appellants;

David T. Stockwood, Q.C., and Susan E. Caskey, for the respondent.

Solicitors of Record:

McCarthy Tétrault, Toronto, Ontario, for the appellants;

Stockwood, Spies & Campbell, Toronto, Ontario, for the respondent.

This appeal was heard on February 18, 1997, by La Forest, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major, JJ., of the Supreme Court of Canada.

The judgment of the court was delivered in both official languages on May 22, 1997, and the following opinions were filed:

McLachlin, J. (La Forest, Gonthier, Cory and Major, JJ., concurring) - see paragraphs 1 to 52;

Sopinka, J. (Iacobucci, J., concurring), dissenting - see paragraphs 53 to 82.