The McDonalds really had a farm… and on it was no exploitation

On September 28, 2017, the Supreme Court of Canada denied leave to appeal in McDonald v McDonald, 2017 BCCA 255, in which the B.C. Court of Appeal held that the unpaid labour of children in a family setting does not constitute unjust enrichment of the parents absent exploitation.[1]

In 1974, Samuel and Sylvia McDonald (the “McDonalds”) became owners of a dairy farm that had been in the McDonald family for over 100 years. The McDonalds had four children – Robert, Brian, Dean, and Julie (the “McDonald Children”) – who each performed unpaid farm chores until graduation from high school. The farm flourished, and the McDonalds incorporated McDonald Landing Farms Ltd. (the “Company”) in 1983. The Company acquired the farm assets in exchange for preferred shares with a value of approximately $900,000 and shareholders’ loans of $300,000. At the time of trial, the farm assets had a net value of $11,000,000.

Unlike the other McDonald Children, Robert remained on the farm full-time after high school, and began managing some aspects of the farm in the early 1980s. In 2000, the McDonalds decided to transfer the common shares in the farm and associated shareholders’ loans to Robert. They also revised their wills so that the estate of the survivor of them would be divided only between Dean, Brian, and Julie. None of the McDonald Children except for Robert knew about this inter vivos transfer.  After Samuel died in 2005, Sylvia also transferred her share of the 100-acre farmland parcel to herself and Robert as joint tenants.

In 2009, Dean, Brian, and Julie found out that all of the farm assets except the preferred shares of the Company (equating to roughly 10% of the farm’s value) had been transferred to Robert. In response, they commenced an action for unjust enrichment against their father’s estate for the unpaid labour that they had performed on the farm as children and teenagers.

The trial judge found that the McDonald Children had made a significant economic contribution to the farm as teenagers, allowing their parents to use the capital that they would have spent on paid labour to expand the farm instead. Therefore, the work constituted unjust enrichment for which there was no juristic reason (i.e., they had not signed an employment contract or intended for their labour to be a gift). The judge awarded each of Brian, Dean, and Julie damages in the amount of $350,000.

Sylvia, in her capacity as the executor of her late husband’s estate, appealed the decision.

The Court of Appeal overturned the trial judgement on public policy grounds, reasoning that the performance of chores by children in a family setting “fosters a sense of responsibility” and teaches children the importance of doing tasks without expecting compensation. The Court added that, while unjust enrichment principles should ensure that children are not subjected to exploitative work, the principles should not interfere with the ability of parents to assign chores. “Exploitative” work was characterized by the Court as providing “economic benefits to the parents that are grossly disproportionate to the benefits that the children have as members of the family,” or work that is detrimental to a child’s health or wellbeing.

As the McDonald Children had engaged in leisure and outside activities, and were not economically deprived or mistreated by their parents, the Court found that the work done by the plaintiffs as young children and teenagers did not amount to exploitation.

[1] Thank you to Catherine Provan, summer student, for her assistance with this case comment.