Unjust Enrichment: Schnogl v. Blazicevic

Heinz Schnogl met and became friends with Mary and Richard Balen in about 1969. They were about 20 years his senior, and did not have any children.

The Balens had purchased a home on West 10th Avenue in Vancouver in 1967, for $12,000. In 1976 and 1977, they had their house renovated to include a basement suite. Mr. Schnogl, who was a journeyman plumber, did the plumbing and some other work for them. A year later he rented the suite.

Mr. Schnogl paid rent to the Balens, and half of the utility bills. He often ate with the Balens, and paid them for the food. He did the gardening, cut the grass, painted the trim on the house, repaired the fence, and other maintenance. He also spent money on the house, contributing $1,300 toward the replacement of the roof.

Over the years Mary Balen had health problems. In the 1980s she developed osteoarthritis, and required dialysis. Mr. Schnogl gave her messages to help with her respiration. When she was in the hospital, he drove Richard Balen to the hospital to visit her.

A couple of times, Mr. Schnogl considered moving out and buying his own home. Mr. Balen dissuaded him, telling him that someday the house on West 10th would be his.

Mary Balen died in 1986. Heinz Schogl continued to rent the suite from Mr. Balen, who died on October 29, 1998.

When Mr. Balen died, his last Will was dated July 9, 1973. It provided that if Mrs. Balen died before him, half of his estate would go to her brothers, and the other half to his parents, or if they were dead, his brother. Both Mr. Balens parents and his brother died before him, but his niece is entitled to the brother’s share.

Two or three months before he died, Mr. Balens went to see a lawyer about making a new Will. The lawyer drew up a will for him, leaving Mr. Schnogl $10,000, and the right to live in the house for ten years. However, Richard Balens never signed the new Will.

After Richard Balen died, Mr. Schnogl sued his estate. Mr. Schnogl claimed that there was a contract between them that in exchange for his services over the years, Mr. Balens promised to leave him the house. Alternatively, he argued that he should either get the house or monetary compensation based on the legal principles of unjust enrichment.

The court found that there was no contract in the circumstances.

To succeed in an unjust enrichment claim, Mr. Schnogl was required to prove the following three things:

1. Mr. and Mrs. Balen benefited or were enriched by his services and contributions to the house;
2. Mr. Schnogl suffered a corresponding deprivation; and
3. There was no juristic reason for the Balens’ enrichment.

Clearly, Mr. Schnogl’s services and money contributions enriched the Balens. He suffered a corresponding deprivation in that he contributed labour without pay, and money without reimbursement. He also gave up the opportunity to own his own home, and take advantage of Vancouver’s rising real estate prices.

It was the third element that was the most contentious. The executor of Richard Balen’s will argued that over the years Mr. Schnogl was charged a lower than market rent in exchange for his services. The services were, according to the executor, part of a contract between the Balens and Mr. Schnogl. If Mr. Schnogl were contractually obligated to do the maintenance and other services, then this would preclude Mr. Schnogl from getting anything from the estate. According to the executor, Mr. Schnogl already received the reduced rent, and this was a “juristic reason” for the enrichment.

In Schnogl v. Blazicevic, 2004 BCSC 1335, Mr. Justice Cullen, of the Supreme Court of British Columbia, rejected the executor’s argument. He found that although the relationship may have started out as a landlord and tenant relationship, it was not bound by it. Mr. Schnogl’s services included personal care that was not related to the house. The relationship took on more of a parent and child relationship.

The executor also argued that Mr. Schnogl’s services and other contributions were a gift, made without any expectation of reward, and that Richard Balen’s estate was not required to compensate him. The court also rejected this argument. The court found that the Balens had led Mr. Schnogl to expect that he would get an interest in the house.

The court awarded Heinz Schnogl a 90% interest in the house by granting Mr. Schnogl a remedial constructive trust. [Since I wrote this post, the Court of Appeal has reduced the award to a 66 2/3% interest in the house. See my post of December 15, 2005, on the Court of Appeal decision here.]

The house on 10th Avenue, in Vancouver, that the Balens bought in 1967 for $10,000 was appraised in January 2004, at $490,000.