Are you married to your spouse, or do you live in a common law relationship? In British Columbia, the answer to that question largely determines the property rights and financial rights of parties when their relationship breaks down. For married spouses, comprehensive statutes such as the federal Divorce Act and the provincial Family Relations Act provide the starting point for division of property and other issues.
For common law spouses, however, only the judge-made common law applies to issues of property and finances. Historically, there were two major legal options for common law spouses: a “common intention” resulting trust, and an action in unjust enrichment.
On February 18, 2011, the Supreme Court of Canada released the decision of Kerr v. Baranow, 2011 SCC 10 (“Kerr”). In this decision, Mr. Justice Cromwell clarified the property and financial rights of common law couples.
1. The End of the “Common Intention” Resulting Trust in Family Law
In family law, the idea of the resulting trust was appealing because it recognized two common situations in common law relationships: first, where one spouse freely transfers property (a house or land are good examples) to the other spouse, and the other spouse doesn’t pay or otherwise reimburse his or her spouse for the property, and second, where two spouses or partners contribute jointly to the purchase or acquisition of property, but title to that property is in the name of one spouse only. In these situations, the law says that one spouse holds the property, or part of the property, in trust for the other spouse.
Mr. Justice Cromwell recognized that there were quite a few problems with the “common intention” resulting trust. The main problem was that the court could only find this type of trust when the words or actions of the parties satisfied the court that it was the parties’ common intention that the property did not belong solely to the spouse whose name was on title. Finding the necessary “common intention” could be very difficult and unfair to one of the parties. He concluded, at paragraph 29, that this type of trust “no longer has a useful role to play in resolving property and financial disputes” between common law spouses.
2. Unjust Enrichment
Since the “common intention” resulting trust had so many problems, Mr. Justice Cromwell found that the law of unjust enrichment is the better approach to take. To succeed in a claim of unjust enrichment, the claimant must show three things: an enrichment of one party, a corresponding loss to the claimant, and the absence of a juristic reason (for example, a juristic reason is a legal obligation like a contract, or the intent of a gift, or a statutory requirement that says the enrichment must occur).
Historically, a successful claim in unjust enrichment provided the claimant with one of two remedies: one, a constructive trust, or two, an award of money. The idea behind unjust enrichment is that one spouse provided the other spouse with a benefit during the relationship, and it would be unfair or unjust to allow the other spouse to retain that benefit after the relationship breaks down. For example, it is well-established in family law that a spouse who provides domestic services has a claim for unjust enrichment, because there is no duty on that spouse to perform domestic services, and those services are of great value to the other spouse.
The constructive trust remedy was first considered in the family law context in 1980, in the Supreme Court of Canada decision of Pettkus v. Becker, [1980] 2 S.C.R. 834 (“Pettkus”). Since Pettkus, spouses have used unjust enrichment more frequently than the “common intention” resulting trust because it is a more flexible approach and it offers a more practical remedy. Like the “common intention” resulting trust, the constructive trust recognizes the efforts of a spouse in acquiring or purchasing a specific piece of property and confers an interest in that property to the spouse, even though title to the property is only in the name of the other spouse.
Historically, if the claimant could not show that his or her contributions were linked to a specific piece of property, the court thought an award of money was more appropriate. Then the court had to answer the very difficult question of how to quantify or value that award: was the court supposed to determine the value of domestic services according to something like an hourly wage (the “fee-for-service” approach)? Or should the court look at all the property acquired during the relationship, value it, and award a portion of its value to the claimant?
In the recent Kerr decision, Mr. Justice Cromwell decided that the fee-for-service approach is inappropriate, mainly because it fails to recognize that “many domestic relationships are more realistically viewed as a joint venture to which the parties jointly contribute” (para. 29). Mr. Justice Cromwell emphasized the idea that the basis of unjust enrichment is one spouse’s “retention of an inappropriately disproportionate amount of wealth” when the parties “have been engaged in a joint family venture and there is a clear link between the claimant’s contributions to the joint venture and the accumulation of wealth” (para. 81).
To be clear, a “joint family venture” may include specific pieces of property, such as the family home, but it also includes other contributions and acquisitions, such as the promotion or development of one spouse’s business or a career, and the traditional domestic efforts of housekeeping and raising children.
Mr. Justice Cromwell thus offers us four main headings under which we should think about whether two common law spouses engaged in a joint family venture: mutual effort, economic integration, actual intent, and priority of the family. This is not a closed list, however, so the court is free to consider the unique facts of each case.
Lastly, Mr. Justice Cromwell considered the conferral of mutual benefits and where this consideration fits in an analysis of unjust enrichment. He recognized that in almost every relationship, spouses provide benefits to each other, and it was often argued that these mutual benefits are a juristic reason that should justify the enrichment and thus eliminate a spouse’s claim of unjust enrichment. Mr. Justice Cromwell stated that the fact that the defendant spouse provided services to the claimant spouse is not recognized as a juristic reason (para. 121). He also recognized the fact that it is reasonable for spouses to expect to confer and receive benefits, but this reasonable expectation is not, by itself, a juristic reason.
Instead, the court must consider whether the benefits that one spouse conferred to the other outweigh the benefits that spouse received in return. In considering the parties’ entire relationship, the court asks if it would be unjust and unfair for Spouse A to retain those benefits that Spouse B provided. When the benefits occur in the form of a joint family venture, for example, because Spouse A raised the children and maintained the family home, then the court may recognize the unfairness by giving Spouse A an award of money that represents his or her share of the joint family venture.
