An Ontario court recently ordered that a man who was found to have gifted his former common-law spouse a 50% interest in the home they had lived in together had to either buy out the former spouse’s half interest, or the home had to be sold and profits divided equally if he wanted to resolve the property dispute between them.

The Original Arbitration Decision

The former partners (Mr. Griffith and Ms. Davidson) had been living common law for approximately 8-10 years in a home that they owned as joint tenants. After the relationship ended, Griffith argued that he was entitled a resulting trust of Davidson’s joint interest in the home since Griffith had paid the $10,000 deposit and had made all payments on the home (including mortgage, tax, and insurance).

The parties attempted to resolve the dispute out of court, in front of an arbitrator. The arbitrator had concluded that the presumption of resulting trust applied in this instance, and that Davidson had failed to prove that Griffith intended to gift her the interest in the property (and had therefore failed to rebut the presumption).

The arbitrator’s decision was based primarily on a finding that Griffith had put the title to the home in both his name and Davidson’s name for estate planning purposes, so that Davidson would receive the property as survivor in the event of his death. The arbitrator concluded that this did not establish that Griffith had intended to gift Davidson 50% interest in the property, and that:

Joint tenancy is a legitimate estate planning tool used in many circumstances where an outright gift of property is not intended.

The arbitrator ordered Davidson to convey her interest in the home to Griffith within 30 days. Davidson appealed to the Superior Court, arguing that the arbitrator had misapplied the law.

The Court Decision

Justice Donohue disagreed with the arbitrator’s decision, and noted that the arbitrator had made several errors in law.

Gift or Trust?

Justice Donohue found that the arbitrator had wrongly concluded that since a person can change their estate plan, they can also unilaterally revoke a joint interest in property if they change their mind about that joint interest. This was incorrect for a number of reasons.

Firstly, the intention of the parties at the time of the purchase of the home was the relevant time frame to determine whether there was an intention to make a gift, or the intention to grant a trust. The facts that were relevant to Griffith’s intention were as follows:

  • The parties had dated for 21 years prior to buying the home;
  • Griffith had intended to marry Davidson;
  • Davidson was not employed when they bought the home;
  • Griffith had paid the full down payment on the home ($10,000);
  • Griffith understood the significance of a joint tenancy title;
  • Griffith understood that if he died before Davidson, the whole property would devolve to her;
  • The mortgage was in both of their names;
  • Griffith had stated that he put both names on the title in the “expectation that [they] would cohabit as a couple”.

The court concluded that based on these facts, the arbitrator had made a palpable and overriding error. Griffith’s intention had been to gift the property to Davidson, and this intention was well-supported. The court noted:

When a gift is not expressed to be conditional at the time it is given, the fact that the donor comes to regret the gift based upon an unexpected turn of events cannot cause an otherwise absolute gift to morph into a conditional one.

Unjust Enrichment

Having found that Griffith intended to gift the property to Davidson, Justice Donohue also considered whether Davidson had been unjustly enriched.

Griffith had always paid all costs of the home as Davidson was not employed for most of the relationship. Davidson argued that she would pay some bills when she was working and able to contribute, but that her contributions to the home were that of a homemaker, and were largely not monetary.

The court noted that the principle of unjust enrichment does not apply where there is a gift. Quite simply, if the intention of a gift is found, that gift is the reason for the enrichment of the person receiving it. Therefore, Davidson had not been unjustly enriched as a result of receiving the joint title to the property as a gift.

Had Davidson Already Been Paid for Her 50% Interest?

The final question Justice Donohue considered was whether Griffith had already paid Davidson for her half of the interest in the home.

Griffith had argued that he had already made payments towards Davidson’s joint interest. In 2005, Griffith had wanted to be removed as guarantor on Davidson’s line of credit. He paid $23,000 to clear that debt, and almost $10,000 later that same year to clear additional debts. Despite making these payments on Davidson’s behalf, there was no evidence that Griffith had intended that this was to go towards buying Davidson’s interest in the home. In 2007, Griffith paid Davidson $30,000 so that she would leave the home. However, as with the previous debt payments, there was no indication that this payment was intended to be put towards buying Davidson’s interest in the home.

On this last point, the court agreed with the arbitrator’s assessment that these payments had to be treated as gratuitous payments, and

… Griffith may have hoped that [Davidson] would transfer title or move out as a result of these payment but no contract was established requiring her to do so at the time.

Consequently, the court concluded that Davidson had not been paid for her interest in the home.

Davidson’s appeal was allowed. The court directed that Griffith could buy out Davidson’s half interest within 60 days of a joint appraisal of the property, or the house could be sold and the proceeds divided equally.

Lessons Learned

Unlike married couples, common law couples are not entitled to equalization of family property following the end of their relationship. In general, each common law partner is entitled only to whatever they brought into the relationship or whatever they acquired during the relationship, including debts. However, anything purchased jointly will generally be divided.

A common law partner who believes that they are entitled to equal property division, or to a share in a family home, can make a claim for a constructive trust or unjust enrichment. A trust gives a beneficiary a right to property, such as a home. An unjust enrichment claim can result in a monetary award.

Trusts litigation, particularly in the context of common law relationships, is complex and very fact specific. If you are in a common law relationship and have questions about your property rights, particularly after the end of a relationship, you should consider consulting a lawyer with significant experience in family and estates law.

At Gelman & Associates, our experienced lawyers provide clients with the information they need to make informed decisions about the division of property.  Serving offices throughout Aurora, Barrie, Downtown Toronto, Mississauga, North York and Scarborough, our offices are easily accessible by transit and off-highway. In order to be accessible to clients and prospective clients, our phone lines are open Monday to Friday from 8 AM to 8 PM. Call us at (416) 736-0200 or  1-844-736-0200 or contact us online for an initial consultation.