Executive Summary: Key Legal and Evidentiary Issues

• Legality of the Small Claims Court adjudicator’s application of the three-part unjust enrichment test, particularly the “absence of juristic reason” requirement
• Effect of unauthorized engagement of a contractor by an insurance agent who lacked authority from both the insurer and the property owner
• Whether remediation work done without the property owner’s knowledge or consent constitutes an “incontrovertible benefit” warranting restitution
• Role of the parties’ reasonable expectations and public policy in determining if it is “against all conscience” for the property owner to retain the benefit
• Limits on appellate review in Small Claims appeals, confining the Supreme Court to questions of law while accepting the adjudicator’s factual findings
• Appropriateness of the adjudicator’s reliance on moral judgments about the landlord’s conduct rather than on the proper legal framework for juristic reason

Facts and background

Hurricane Fiona struck Nova Scotia in the fall of 2022 and caused significant damage across the region, including flooding in residential properties in Halifax. One such property belonged to Qiao Jing (Jane) Chen, who owned a rental house where approximately four inches of water accumulated in the basement. Ms. Chen was a landlord and property owner who notified her insurance agent of the flooding. However, she did not intend to file an insurance claim under her policy.

Despite the absence of an insurance claim, the insurance agent took it upon himself to contact Rainbow International Restoration of Halifax, a restoration and remediation contractor, to attend to the flooded basement. The agent was aware that no claim would be submitted and did not have authority from the insurer to open or manage a claim on Ms. Chen’s behalf. Critically, he also had no authority from Ms. Chen to hire a contractor or authorize any work at the property.

Rainbow International responded to the agent’s request and attended at Ms. Chen’s property on September 27, 2022. Without having any direct communication with Ms. Chen, Rainbow proceeded to perform drying and remediation work in the basement. The work included drying out the premises and repairing or remediating damage to doors, baseboards, and walls. Rainbow did not speak with Ms. Chen before starting or during the performance of the work. The company did not receive an insurance claim number and knew it did not have authorization from any insurer.

Contact information for Ms. Chen only became available to Rainbow around October 6, by which time the remediation work had already been completed. Even then, Rainbow did not immediately reach out to her, and when it eventually did, Ms. Chen reacted negatively. She was unhappy that work had been done on her property without her authorization and did not cooperate with Rainbow’s efforts to secure payment of the invoice.

The insurance agent who had initiated contact with Rainbow did not step in to resolve the payment dispute or accept responsibility for the invoice. Left unpaid, Rainbow commenced a proceeding in the Small Claims Court of Nova Scotia to recover the unpaid account in the amount of $5,793.78 for the work performed. Ms. Chen defended, maintaining that she had never authorized Rainbow to enter her property or carry out the work.

The Small Claims Court decision

The Small Claims Court adjudicator, Darrel Pink, accepted that there was no contract between Ms. Chen and Rainbow. He found that Rainbow had performed the work on the “apparent authority” of the insurance agent, but that the agent, in fact, had no authority to bind Ms. Chen and no authority from any insurer to authorize the remediation. The adjudicator expressly described the parties as “strangers” and confirmed that there was no contractual relationship.

Despite the lack of contract, the adjudicator held that Rainbow’s claim was properly grounded in unjust enrichment. Applying the traditional three-part test, the adjudicator concluded that Ms. Chen had been enriched by receiving a dry, remediated basement which restored the unit to a livable condition, that Rainbow suffered a corresponding deprivation by performing the work and going unpaid, and that there was no juristic reason for Ms. Chen to retain the benefit without paying.

In support of this conclusion, the adjudicator reasoned that Rainbow “did nothing wrong,” followed its usual business practices, and responded promptly and professionally to a regional emergency in the aftermath of a major storm. He emphasized the severe impact of Hurricane Fiona on the region and the urgent need for remediation services, suggesting that Rainbow’s response was socially and commercially reasonable given the crisis conditions.

In contrast, the adjudicator criticized Ms. Chen’s conduct, remarking that she had not behaved as a “prudent landlord” and had done nothing to address the flooding in her rental property. He viewed her as having adopted an unreasonable stance, effectively waiting for someone else to shoulder the responsibility. On this basis, he concluded that she should not receive a “free ride” by benefiting from Rainbow’s work without paying for it.

The adjudicator therefore found that the elements of unjust enrichment were met and that there was no juristic reason preventing recovery. He ordered Ms. Chen to pay Rainbow the full amount of the invoice, $5,793.78, plus $322.40 in costs, for a total award of $6,116.18 in favor of Rainbow.

The appeal to the Supreme Court of Nova Scotia

Ms. Chen appealed the Small Claims Court decision to the Supreme Court of Nova Scotia under section 32(1) of the Small Claims Court Act. She appeared self-represented. The appeal was limited to questions of law; the Supreme Court could not reweigh evidence or make fresh findings of fact, but was required to accept the adjudicator’s factual findings and review only whether the law had been correctly identified and applied.

On appeal, Ms. Chen’s grounds were effectively distilled into a single issue: whether the adjudicator erred in law in his application of the test for unjust enrichment, in particular the “juristic reason” component. Both parties accepted, and the appeal court judge agreed, that questions of law in this context are reviewed on a correctness standard. The court emphasized that it is not sufficient that a decision be simply reasonable; an error in identifying or applying the law will justify intervention.

Justice Mona Lynch noted that the basic three-part unjust enrichment framework was correctly stated: the claimant must establish (a) the defendant’s enrichment, (b) the claimant’s corresponding deprivation, and (c) that the enrichment and deprivation occurred in the absence of a juristic reason. The adjudicator’s findings that Ms. Chen’s property was improved and that Rainbow incurred a deprivation were not disturbed; the appeal turned on the third element.

Unjust enrichment and the juristic reason analysis

The Supreme Court of Canada has described unjust enrichment as applying where a defendant receives a benefit in circumstances where, in equity and good conscience, it would be “against all conscience” for the defendant to retain that benefit. Modern unjust enrichment analysis is structured so that the first two elements—enrichment and deprivation—are largely economic in nature, while the third element, juristic reason, is where moral and policy considerations are considered.

Justice Lynch explained that the juristic reason inquiry is a two-stage process. First, the claimant must show that the defendant’s retention of the benefit cannot be justified by any established category of juristic reason, such as contract, a disposition of law, a gift (donative intent), or some other valid common law, equitable, or statutory obligation. If the claimant clears that hurdle, a prima facie case of unjust enrichment arises.

The second stage of the analysis shifts attention to whether there is some residual reason, having regard to the parties’ reasonable expectations and public policy considerations, that justifies the defendant’s retention of the benefit and thus defeats the unjust enrichment claim. This second stage prevents an overly mechanical application of the doctrine and anchors relief in fairness, expectations, and broader policy.

Justice Lynch held that the adjudicator correctly recognized that there was no contract between Ms. Chen and Rainbow and that none of the traditional categories of juristic reason—contract, disposition of law, donative intent, or other legally imposed obligations—applied to bar recovery. However, the adjudicator erred in law by stopping the inquiry there. He did not proceed to the second stage of the juristic reason framework to consider whether residual reasons grounded in expectations or public policy justified Ms. Chen retaining the benefit.

On the established factual findings, the court highlighted that Ms. Chen never authorized any work, never requested Rainbow’s services, and had no prior dealings with Rainbow. The insurance agent had no authority from her or from any insurer to hire Rainbow on her behalf. Rainbow knew that it had no contractual client—neither a property owner nor an insurer—yet chose to commence and complete the work, effectively taking on the risk of non-payment.

Against that backdrop, Justice Lynch rejected the characterization of the remediation as an “incontrovertible benefit” in the sense used by the Supreme Court of Canada, where a defendant clearly and unavoidably benefits from the plaintiff’s performance and would inevitably have accepted the benefit if properly informed. Here, Ms. Chen might well have declined the work entirely, might have chosen a different contractor, or might have negotiated different terms had she been given a choice. As such, the supposed benefit could not be deemed incontrovertible.

The adjudicator had focused heavily on his disapproval of Ms. Chen’s inaction after the flood, labeling her approach unreasonable and suggesting she was trying to shift all responsibility to others. Justice Lynch acknowledged those comments but found that they were not a proper foundation for bypassing the legal framework of juristic reason. The adjudicator had effectively punished Ms. Chen for not behaving as a “prudent landlord,” while downplaying Rainbow’s conscious decision to proceed with work despite knowing there was no client or authorization.

In Justice Lynch’s analysis, the proper consideration of reasonable expectations led to the opposite conclusion from that reached at first instance. Ms. Chen’s reasonable expectation was that significant work on her property would not be undertaken without her knowledge or authorization. Rainbow, meanwhile, was aware it had no contract and no authorized client, and proceeded at its own risk. In those circumstances, it was not “against all conscience” for Ms. Chen to retain any benefit arising from the unauthorized work; rather, public policy and reasonable expectations supported allowing her to do so.

Drawing on analogous jurisprudence, including a Manitoba case concerning unauthorized repairs to a stolen and later recovered canoe, the court emphasized that unjust enrichment typically requires some knowledge, consent, or acquiescence from the defendant. Where a property owner neither knows of nor agrees to the work, and where the claimant proceeds unilaterally, courts have been reluctant to impose payment obligations based purely on the fact that the property is improved.

Insurance context and policy terms

Although the underlying events arose in an insurance context—with Ms. Chen contacting her insurance agent and the agent then improperly involving Rainbow—there was no detailed discussion of specific insurance policy terms or clauses in the decision. The court noted that the insurance agent knew Ms. Chen did not intend to submit a claim and that he lacked authority to open or manage a claim with the insurer. However, the judgment did not analyze particular policy provisions such as coverage clauses, exclusions, conditions precedent, or loss settlement terms. The legal dispute was framed not as a coverage contest under the policy, but as a restitutionary claim between a contractor and a property owner who had never contracted with each other.

Accordingly, any insurance policy that Ms. Chen may have held functioned mainly as a factual backdrop: it explained why an insurance agent was involved at all, and highlighted that he exceeded his authority when he engaged Rainbow. The core legal issues remained grounded in unjust enrichment and the limits of liability for unauthorized work, rather than in interpretation of specific policy language.

Outcome of the appeal and monetary consequences

Having found that the adjudicator failed to apply the full two-stage juristic reason analysis and that, properly applied, the reasonable expectations of the parties and public policy supported Ms. Chen’s right to retain the benefit of the work without paying, Justice Lynch concluded that the adjudicator had erred in law. The Supreme Court of Nova Scotia allowed the appeal. The Small Claims Court judgment in favor of Rainbow, including the prior award of $6,116.18 (representing the invoice and costs), was set aside. No damages or restitution were ordered in favor of Rainbow. On costs of the appeal, the court held that Ms. Chen was entitled to recover her filing fee and her fees for service of the appeal from Rainbow, but the precise amounts of those costs were not established on the record and were not quantified in the decision, leaving the total monetary award in her favor incapable of exact determination on the face of the judgment.