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Jun

23

Common Law Breakup – (Part 1) What are your rights?

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to ending a common law relationship, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. If you’re looking for a cohabitation agreement that avoids creating financial obligations on the parties and terminates when the parties get married, then check out our legal forms + video guides. You can contact me directly if you need a lawyer.

Here, I’ll be talking briefly about some things you should consider if you are in a common law relationship and want to end it. The first thing you should realize is that non-married spouses are NOT treated the same as married spouses when it comes to PROPERTY. Indeed, the Ontario Family Law Act does not give non-married spouses the right to equalize their net family property.

Note: Think of net family property as the net accumulation of wealth of the parties during their marriage. You don’t include certain things – such as property a spouse had before entering into the marriage. Nor do you include other things, such as inheritances or the matrimonial home (which is dealt with separately). You can include or exclude certain assets through a prenuptial agreement or marriage contract. That’s the starting point. Then, when you’ve figured out the value of all of these things, you divide that equally between the spouses. This is what is meant by an equalization of net family property.

So how is property dealt with in the breakdown of a common law relationship? Well, since the Family Law Act won’t govern these situations, you need to look elsewhere to get ideas. To begin, there could be a private contract between the spouses concerning jointly owned property. This private contract could be oral or in writing. Sometimes, however, one spouse may have simply acquired and maintained property on their own. Will the other spouse have any interest or entitlement to some or all of that property? Believe it or not, in certain circumstances, the courts have used EQUITABLE doctrines to say YES! Those equitable doctrines include, but are not limited to, UNJUST ENRICHMENT and CONSTRUCTIVE AND RESULTING TRUST claims.

Hollaway v. Devenish
In Hollaway v. Devenish, [2009] O.J. No. 5008, the Ontario Superior Court of Justice reviewed the law when it came to the equitable doctrines of unjust enrichment and constructive and resulting trust claims in the context of a common law relationship breakdown. Here’s what C.W. Hourigan J. wrote:

Legal Framework

48 As was made clear by the Ontario Court of Appeal in Wylie v. Leclair (2003), 64 O.R. (3d) 782 (Ont. C.A.), there is no presumption that the net family property of common law spouses should be equalized upon the breakdown of the relationship. Thus the parties are both making claims to property relying upon doctrines unjust enrichment, resulting trust and constructive trust. Before considering their respective claims, it is useful to review the current status of the law in these areas.

49 The Ontario Court of Appeal in the very recent decision Belvedere v. Brittain Estate, 94 O.R. (3d) 655 (2009), considered the issues of unjust enrichment, constructive trust and resulting trust in the context of a common law relationship. At issue in that case was a claim made by the plaintiff for a share of the defendant’s RRSPs. The trial judge, [2007] O.J. No. 3067, found that there had been an unjust enrichment and determined that the plaintiff was entitled to a constructive trust in the RRSPs. The court’s analysis of these issues is instructive for the purposes of the case at bar:

[38] In Becker v. Pettkus, [1980] 2 S.C.R. 834 (S.C.C.) at p. 848, the Supreme Court of Canada set out a three part test for a finding of unjust enrichment.

(1) an enrichment enjoyed by the defendant;

(2) a corresponding deprivation suffered by the plaintiff; and

(3) the absence of a juristic reason for the enrichment.

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[44] In my view, the categories of deprivation as found by the trial judge are not sufficient to establish a claim for unjust enrichment. Although Ms. Belvedere may have suffered a small loss to transfer her Air Canada Shifts, this practice allowed her to maintain her benefits and seniority with Air Canada. I also note that Ms. Belvedere was on leave from her job at the time she began cohabiting with Mr. Brittain, and so she could not be said to have given up “active work” with Air Canada as a result of commencing that relationship.

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[46] With regard to Ms. Belvedere’s provision of domestic services, it is clear that such services are capable of forming the basis for a claim in unjust enrichment: see Becker v. Pettkus at p. 849 and Sorochan v. Sorochan, [1986] 2 S.C.R. 38 (S.C.C.) at pp. 44-5. That said, it is equally clear that the conferring of a benefit does not, by itself, constitute unjust enrichment: see Lovsin v. Hodgins (2008), 39 E.T.R. (3d) 170 (Ont. C.A.) at para. 7. Rather, what is required, and what the trial judge failed to do in this case, is to balance the benefits conferred and received by the parties to determine whether the claimant’s contribution is sufficient to entitle her to compensation.

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[49] Given my conclusion that the trial judge erred in finding that Mr. Brittain had been unjustly enriched, it follows that he erred in finding a constructive trust in Ms. Belvedere’s favour. However, even if unjust enrichment had been made out in this case, there are two reasons why a constructive trust would not have been an appropriate remedy.

[50] First, a constructive trust is available as a remedy for unjust enrichment only where monetary damages are inadequate: see Peter v. Beblow, [1993] 1 S.C.R. 980, at p. 997. In this case, had unjust enrichment been established, monetary damages would clearly have been an adequate remedy. At the time of his death, Mr. Brittain’s estate was valued at approximately $6 million. There were more than adequate funds to compensate Ms. Belvedere for her claim of unjust enrichment.

[51] Second, in addition to the above requirement, there must be a link between the contribution that founds the action and the property in which the constructive trust is claimed: Peter v. Beblow at p. 988: see also Sorochan at p. 50. In this case, Ms. Belvedere did not contribute, directly or indirectly, to Mr Brittain’s RRSPs, and whatever potential interest she might arguably have had would, in any event, be limited to Mr. Brittain’s last two payments of $13,500 per year during the time of the cohabitation.

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[56] I have already found that the trial judge erred in finding unjust enrichment and imposing a constructive trust. However, even if a claim for unjust enrichment, payable in monetary damages, had been made out, in my view the amount awarded to Ms. Belvedere was patently unreasonable.

[57] Where damages are the remedy for unjust enrichment, the trial judge ought to proceed on a “value received” approach: see Bell v. Bailey (2001), 203 D.L.R. (4th) 589 (Ont. C.A.) at para. 38. In this case, the services Ms. Belvedere provided that arguably merit compensation were domestic labour, Air Canada travel and health benefits, and use of her family’s Florida condominium.

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[59] When the various services and benefits provided by Ms. Belvedere are viewed in their totality and balanced with the benefits received by her from Mr. Brittain, it is not possible to attribute a value to them of $1,750,000. Counsel for the appellant submitted that the trial judge effectively awarded damages at a rate equivalent to $2,500 per day of cohabitation. While this may not be the appropriate way of looking at the matter, it does place a different perspective on the trial judge’s award.

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[62] Counsel for Ms. Belvedere submits that the trial judge’s award of $1,750,000 may be justified by the application of the doctrine of resulting trust. She cites Rathwell in support of this proposition. I do not accept her submission. In Rathwell, the court restricted the application of the doctrine to those circumstances where the claimant actually contributed to the acquisition or improvement of the asset over which the resulting trust is claimed. Dickson J. said at p. 451:

If at the dissolution of a marriage one spouse alone holds title to property, it is relevant for the court to ask whether or not there was a common intention, or agreement, that the other spouse was to take a beneficial interest in the property … It is relevant and necessary for the courts to look to the facts and circumstances surrounding the acquisition, or improvement, of the property. If the wife without title has contributed, directly or indirectly, in money or money’s worth, to acquisition or improvement, the doctrine of resulting trusts is engaged. An interest in the property is presumed to result to the one advancing the purchase moneys, or part of the purchase monies.

[63] As discussed above, Ms. Belvedere made no such contribution to the acquisition of or improvement of the RRSPs.

50 On the issue of a constructive trust, regard should also be had to Peter v. Bedlow, 1993 CanLII 126 (S.C.C.). In that case the applicant was claiming an interest in the home that her common law spouse brought into the relationship on the basis of domestic services that she contributed without compensation to her partner during their common law relationship:

The basic notions are simply enough. An action for unjust enrichment arises when three elements are satisfied: (1) an enrichment; (2) a correspondent deprivation; and (3) the absence of a juristic reason for the enrichment. These proven, the action is established and the right to claim relief made out. At this point, a second doctrinal concern arises: the nature of the remedy. “Unjust enrichment” in equity permitted a number of remedies, depending on the circumstances. One was a payment for services rendered on the basis of quantum meruit or quantum valebat. Another equitable remedy, available traditionally where on person was possessed of legal title to property in which another had an interest, was the constructive trust. While the first remedy to be considered was a monetary award, the Canadian jurisprudence recognized that in some cases it might be insufficient. This may occur, to quote La Forest J. in Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (S.C.C.), [1989] 2 S.C.R. 574, at p. 678, “if there is a reason to grant to the plaintiff the additional rights that flow from recognition of a right of property”. Or to quote Dickson J., as he then was, in Pettkus v. Becker, 1980 CanLII 22 (S.C.C.), [1980] 2 S.C.R. 834, at p. 852, where there is a “contribution [to property] sufficiently substantial and direct as to entitle [the plaintiff] to a portion of the profits realized upon sale of [the property].” In other words, the remedy of constructive trust arises, where monetary damages are inadequate and where there is a link between the contribution that founds the action and the property in which the constructive trust is claimed.”

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This Court has held that a common law spouse generally owes no duty at common law, in equity or by statute to perform work or services for her partner. As Dickson C.J., speaking for the Court put it in Sorochan v. Sorochan, supra, at p. 46, the common law wife “was under no obligation, contractual or otherwise, to perform the work and services in the home or on the land.” So there is no general duty presumed by the law on a common law spouse to perform work and services for her partner.

51 The respondent relies upon Maloney v. Maloney [1993] O.J. No. 2724 (Ont. Gen. Div.). In that case the court found that the plaintiff had an entitlement to a share of the defendant’s business on the basis of a resulting trust. In reaching that conclusion the court held:

[45] In Pettkus v. Becker, [1980] 2 S.C.R. 834, Dickson J. clarified further the issue of intent because difficulties had arisen in subsequent cases in applying the doctrine of common intent in matrimonial property disputes. At p. 843, he stated:

The sought-for “common intention” is rarely, if ever, express; the courts must glean ‘phantom intent’ from the conduct of the parties. The most relevant conduct is that pertaining to the financial arrangements in the acquisition of property. Failing evidence of direct contribution by a spouse, there may be evidence of indirect benefits conferred: where, for example, one partner pays for the necessaries while the other retires the mortgage loan over a period of years, Fibance v. Fibance, [1957] 1 All E.R. 357.

[46] Dickson J. went on to state at p. 844:

Although the resulting trust approach will often afford a wife the relief she seeks, the resulting trust is not available, as Professor Waters points out, (at p. 374): “where the imputation of intention is impossible or unreasonable”. One cannot imply an intention that the wife should have an interest if her conduct before or after the acquisition of the property is “wholly ambiguous”, or its association with the alleged agreement “altogether tenuous”. Where evidence is inconsistent with resulting trust, the court has the choice of denying a remedy or accepting the constructive trust.

[47] As can be seen, in distinguishing between resulting and constructive trusts, much attention has been given to the issue of intention and how it is to be determined. However, there is no suggestion that contribution of some sort to the acquisition or maintenance of property, whether direct of [sic] indirect, is not required.

[48] In the case before me, I have no difficulty in concluding that the plaintiff has proved that she is entitled to an equal interest in the company by way of a resulting trust. I conclude that the plaintiff has established that a common intention existed that the parties own the pet shop business together and that they become equal shareholders in the company.

[49] The defendant told the plaintiff that they would have equal shares in the company. The plaintiff accepted that since she agreed to the borrowing of a substantial portion of the funds required for the establishment of the pet shop business on the security of their jointly held matrimonial home. If $4,000. was contributed to the company at the time of the establishment of the pet shop, those funds came out of the joint bank accounts of the plaintiff and the defendant. While the plaintiff had not been working outside her home in the five years prior to the establishment of the pet shop business, her earnings prior to that time had gone into the couple’s joint bank account.

[50] The plaintiff also had assumed a major role in housekeeping and child rearing during the couple’s co-habitation. Further, prior and subsequent to the establishment of the pet shop business, both parties contributed substantial labour to the business, first in setting up the business and then to running the business.

[51] The treatment of compensation to the plaintiff for her labour and the treatment of available cash in the business was also consistent with the defendant’s expressed intention that the plaintiff was to be an owner of the business and an equal shareholder. The plaintiff was not paid a set salary. Instead, available cash was used for income splitting by means of cheques which the defendant caused the company to issue to the plaintiff, which she in turn endorsed so that the defendant could deposit them in their joint account to be used for family needs or in the acquisition of other assets.

[52] When the move of the business to the second floor of the mall took place in 1990, the sum of $25,000. of the monies in the couple’s joint bank accounts, to which both the plaintiff and the defendant had contributed, was transferred to the company as a shareholders’ loan to be used for the expenses associated with the move.

[53] The imputation of a common intention is not impossible or unreasonable in this case. The conduct of the parties before and after the acquisition of the property is not ambiguous. The plaintiff made a substantial contribution to the acquisition of this asset both directly and indirectly in the ways I have outlined above. I find that the evidence is consistent with the defendant’s expressed intention as to ownership of the business and the equal shareholding of the plaintiff and the defendant in the business. Thus, the evidence is consistent with a resulting trust in favour of the plaintiff and I so find.

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[104] In the circumstances of this family, where the plaintiff and the defendant pooled their resources for the benefit of the family and to acquire assets, and where each has contributed in a substantial way, each has proved that, where any asset has been acquired during cohabitation in the name of only one of the plaintiff or the defendant, the one acquiring the asset would have been unjustly enriched. A monetary award would be insufficient. A nexus between the contributions of each of the plaintiff and the defendant and the various assets registered in the name of only one of the plaintiff or the defendant, the need for a constructive trust equal to one-half of the value of the asset has been proved.

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[114] Pensions and allowances have been divided in common-law spousal situations. See Thibert v. Thibert (1992), 66 B.C.L.R. (2d) 93 and Peter v. Beblow, supra. In the case before me, the evidence, to which I have already referred in connection with all other assets, also supports the plaintiff’s position that she should be awarded a one-half interest in that portion of the defendant’s pension attributable to the period of cohabitation, by way of a constructive trust. I should note that the plaintiff’s contribution to the defendant’s education is particularly relevant with respect to this asset as, without the education, the defendant would not have been in the same employment and would not have built up this pension. Accordingly, the remedy of constructive trust has been made out.

52 The applicant relies upon Reaney v. Reaney (1990), 28 R.F.L. (3d) 52 (Ont. S.C.) where Granger J. considered a claim of resulting trust regarding a pension that was accumulated by one party during the period of cohabitation:

During the period of cohabitation, Carol accumulated a pension from her employment with Bell Canada. There was no evidence that Reaney directly or indirectly contributed to the pension, or that there was any express or implied agreement or common intention between the parties that Reaney was to share in the pension and accordingly Reaney cannot obtain an interest in the pension on the basis of a resulting trust.

In the next blog, I’ll briefly review the unjust enrichment and constructive and resulting trust doctrines as they apply to common law breakdowns.

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cohabitation agreement ontarioCohabitation Agreement (Ontario) – Terminates Upon Marriage

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