How Common Law Spouses Split Property – Part 1

The Supreme Court of Canada decided the most important family law cases since 1992 this year, in Kerr v. Baranow and Vanasse v. Seguin. The Court recognized common law relationships and gave much needed guidance on the appropriate approaches to address property and compensation claims in “common law” relationships.

Unlike married spouses, there is no legislative scheme for non married couples to determine the appropriate “property division” upon the breakdown of a relationship. A non-married partner can only rely on judge-made law, known as the “common law”.

Following a relationship breakdown, one common law partner typically claims that his or her partner, the defendant, would be unjustly enriched if permitted to retain property certain property, such as land or investments, in the defendant’s name, without some kind of monetary compensation or without some sort of ownership interest in the land or investment. Typically, the aggrieved partner advances a “resulting trust” claim and/or a “constructive trust” claim.

At the heart of the “resulting trust” claim was thought to be the parties’ “common intention”. The plaintiff typically argued something along the lines of “we always intended that the property would be ours”, notwithstanding that the defendant owns title to the property in issue. At trial, evidence would be lead of events during the relationship from which a Canadian Court would be asked to infer that as between the spouses, they both owned the property. However, the Supreme Court made clear in Baranow that this type of resulting claim is doctrinally unsound. The traditional resulting trust claim, according to the Court, is when the initial property owner has transferred the property to another’s name and is asking for it back. In that situation, it is the intention of the initial owner at the time of the initial transfer that matters. Our highest Court made clear that it is inappropriate for a Trial Court to proceed on a detailed fact finding mission of events during the relationship of the parties’ intention.

For the “constructive trust” claim, it has been well known since the 1980’s that a Canadian non-married partner must establish three things: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment.

A successful constructive trust claim can result in a monetary award or a proprietary award. In most cases, a monetary award is considered sufficient. Over time, it has become apparent that the question of quantum (i..e how much) is an difficult consideration. This was made plain in the Baranow appeal.

Historically, Canadian Courts would often be faced with a moment by moment account of relationships. Claimants argued for compensation for efforts or benefits afforded to a defendant, much like a fee-for-service approach. A defendant often responded, attempting to demonstrated all of the benefits he or she gave to the plaintiff. The Court then faced dueling benefits claims.

A typical example is the common law couple, living in a home owned by one partner for a lengthy period of time (i.e. twenty years), with the non-titled owner giving his or her partner $1000 each month towards expenses. Is the contribution in lieu of rent or should the contributor receive some compensation, particularly in a lengthy relationship where there was little equity in the home at the outset and now the home is paid for and quite valuable?

Should Courts allow a dueling of the benefits given and received (i.e. monies paid and housing) and attempt to determine any award or alternatively should the Court look to the value survived in the home (i.e. the equity).

The Supreme Court of Canada rejected the notion that all monetary awards for unjust enrichment claims must be evaluated on a fee-for-service approach known as a quantum meruit basis.

Instead, the Supreme Court dictated that to establish an unjust enrichment claim where one party would otherwise retain a disproportionate share of accumulated assets, the claimant must show (a) that there was a joint family venture and (b) that there is a link between his or her contributions and the accumulation of wealth. Where these two requirements are met, the Supreme Court made clear that the monetary remedy should be calculated by determining the claimant’s proportionate contribution to that accumulated wealth.

Further, the Court stated that whether there is a “joint family venture” must be proven based on the relevant circumstances of each case. The Court set out a list of non-exhaustive factors which should be considered:

(a) mutual effort (i.e. whether the parties worked collaboratively towards common goals);

(b) economic integration (i.e. joint bank account, a sharing of expenses or common savings);

(c) actual intent express or inferred; and

(d) priority of the family (i.e. detrimental reliance on the relationship, by one or both parties, for the sake of the family).

With this new test, the Supreme Court has chartered a new course for common law relationships. For non-married spouses, the relationship itself has, in our view, been recognized. Also, and while there may not be a presumption of an equal partnership, akin to the presumption in Part I of Ontario’s Family Law Act, the Court has recognized that for many non-married partners, they are partners in name and now the law.

In our next edition of the Advisare, we will review the facts of the Baranow case, the application of the “joint venture” approach and how the Court can determine the award.