The Ontario Court of Appeal recently grappled with the important question of when a common law partner’s claim for a constructive trust interest in a home may or may not be allowed.

What Happened?

The parties were common law partners who had cohabited for 15 years, from 2000 to 2015. At no time did the parties have joint bank accounts or joint savings. The woman was on the man’s benefits from work, and she and her daughter were on the man’s car insurance as secondary drivers.

For the first two years of their relationship, the parties lived in an apartment together. In 2002, the parties moved into a property that the man had acquired around the time the parties began living together (the man had taken title to a property that he had owned with his former spouse). There was no equity in the home.

By 2005, the parties had amassed a lot of debt, and they decided to consolidate the combined debt with a loan for $57,290. The man was the borrower and the woman co-signed the loan.

When the carrying costs of the loan became too great, the man refinanced the debt with a consolidation mortgage on the home in the amount of $187,568. After the lender and other legal expenses were paid, the man received $19,000 from the proceedings of the mortgage.

In 2016, the property was worth between $260,000 and $320,000, and the balance owing on the mortgage was approximately $157,000.

After the parties separated, the woman brought a claim for a constructive trust interest in the home. In 2017, her claim was dismissed.

The woman appealed the dismissal of her claim.

The Woman’s Claim

The woman claimed that she had established unjust enrichment entitling her to half the increase in the equity of the home as a joint family venture. Specifically, the woman asserted that she was entitled to half the equity in the home on the basis of her contributions during cohabitation, including that she paid half the monthly mortgage costs of $1,000; paid the phone, internet and cable; bought food; and cleaned the home and did work in the garden. The woman’s argument was that her contributions benefitted the man and increased the value of the home.

The Legal Principles

The Supreme Court of Canada set out the law on unjust enrichment arising from a common law relationship in Kerr v. Baranow:

The court: (i) determines if there has been an unjust enrichment, by determining whether the defendant has been enriched and the claimant has suffered a corresponding deprivation; if so then (ii) there must be no reason in law or justice for the defendant to keep the benefits conferred by the claimant.

If an unjust enrichment has been established, the concept of a “joint family venture” becomes relevant when considering a remedy. In considering whether a joint family venture exists, the court must consider:

• Mutual effort: did the parties pool their efforts and work towards a common goal?
• Economic integration: how extensively were the parties’ finances integrated?
• Actual intent: did the parties intend to have their lives economically intertwined?
• Priority of the family: to what extent did the parties give priority to the family in their decision making?

The claimant bears the onus of establishing whether there has been unjust enrichment and a joint family venture.

The Court’s Decision

The court noted that the trial judge found that the woman had not established unjust enrichment. In coming to this conclusion, the trial judge noted that:

• The woman was never on title to the home and never financially liable for the mortgage on the home.
• The woman did not pay for capital repairs, insurance or property taxes.
• The $500 that the woman paid per month was essentially rent.
• Although the woman paid for the phone, internet and cable, she and her daughter were the ones who primarily used these services.
• There was no evidence about how much the garden increased the value of the home (and in any case, gardening was just a hobby for the woman).

The court explained that, having found there was no unjust enrichment, the trial judge was not required to consider whether a joint family venture existed in this case. In any event, the trial judge noted that the parties each earned relatively the same amount of money and lived separately in the home (they did not pool their resources, integrate their financial lives or demonstrate an intention to combine their finances).

The court concluded that the trial judge did not err in fact or in law, and dismissed the woman’s appeal.

Lessons Learned

Particular legal principles come into play when common law partners separate and are looking to divide their assets. If you have any questions about your separation, contact Gelman & Associates. Our goal is to provide you with the information and resources necessary to make informed decisions about your family law matters. In addition to our firm’s handbook on separation and divorce and numerous web-based resources, we give all prospective clients a comprehensive family law kit during their initial consultation, which includes detailed information and resources to help individuals understand and navigate the separation and divorce process.

Conveniently located in six offices throughout Ontario, our offices are easily accessible by transit and off-highway. Our phone lines are open Monday to Friday from 8:00 a.m. to 8:00 p.m. Call us at (416) 736-0200 or 1-844-736-0200, or contact us online for an initial consultation.