Resulting Trusts, Unjust Enrichment, Joint Family Ventures: Common Law Spouses and Division of Property
An Ontario court recently addressed claims of resulting trust, unjust enrichment, and joint family venture in the context of the breakdown of a common law relationship where the parties had contributed unequally to the purchase of a home but were both on title as joint tenants.
Common Law Relationship
The parties at issue lived together and had a child, but never married.
The mother argued the relationship began in September 2011, whereas the father argued that relationship began in July 2014 (when the couple purchased a home together). Separation occurred in October 2016.
A major issue following separation became splitting the value of the family residence.
The Family Residence
The couple purchased a home together in July 2014. The father contributed $116,000 from the sale of his former residence, and the mother contributed $5,000 from her RRSP. The remainder of funding came from a mortgage.
After separation, the family home was sold in December 2016. After paying the mortgage and other expenses, just over $140,000 remained in trust, pending the resolution of this dispute.
At issue was whether the proceeds of the house should be divided based on the proportions the parties originally provided for purchase, or whether proceeds should be divided equally.
Since the parties never married, the property provisions in the Family Law Act (FLA) do not apply in this case. Instead, the principles of trusts derived from common law apply.
These principles were originally developed to resolve commercial or financial disputes. As modern romantic relationships evolved from traditional marriage to various other iterations, courts began to apply these principles to domestic relationships.
The court in this case noted:
Application of same to domestic relationships is far more complex and not always with a satisfactory result. However, in the absence of legislation, it is all we have. The law has developed in this area of family law… [t]he focus, then, in this dispute is with consideration of resulting trust and unjust enrichment. Evidentiary findings, despite their difficulty, become determinative having regard to the requisite legal principles.
In a landmark case, the Supreme Court of Canada reviewed the principles of resulting trust and unjust enrichment as they applied to unmarried individuals in domestic relationships. The dispute in that case involved, like this one, two partners who had unequally contributed to the purchase of a home but were listed as joint tenants on title.
The Supreme Court noted that the underlying notion behind the resulting trust is that it is imposed:
…to return property to the person who gave it and is entitled to it beneficially, from someone else who has title to it. Thus, the beneficial interest ‘results’ (jumps back) to the true owner.
In domestic relationships, such as common law partnerships, resulting trusts result in two types of situations: a) gratuitous transfer of property from one partner to the other (i.e. a gift) and b) joint contribution by two partners to the acquisition of property, title to which remains in the name of only one person.
The actual intention of the grantor (in this case, the father) becomes the governing consideration. The law generally presumes that the grantor intended to create a trust, rather than make a gift, and the onus (i.e. responsibility ) is on the person receiving the transfer to demonstrate that a gift was actually intended.
The Supreme Court noted that the law of unjust enrichment has been the primary vehicle through which to address claims of inequitable distribution of assets after the breakdown of a domestic relationship.
In general, the elements of unjust enrichment are:
- An enrichment or benefit to one party;
- A corresponding deprivation to the other party;
- The absence of a juristic reason for that enrichment.
Joint Family Venture
The Supreme Court also introduced the notion of “joint family venture” to describe those domestic relationships which involve a joint effort of both parties contributing towards a common goal.
Relevant factors to consider when analyzing a joint family venture include mutual effort, economic integration, actual intent, and priority of family.
Unjust enrichment reflects the reality of a joint family venture where there has been a disproportionate retention of assets.
The court noted that the facts in this case established a classic situation of resulting trust. The father had contributed $116,000 to the purchase of the family home, whereas the mother had contributed $5,000. Both parents were listed on title as joint tenants. The onus was therefore on the mother to establish that this had been a gift from the father.
The court noted that the evidence offered by each part was “less than persuasive”. Their relationship had involved conflict, frequent arguments, suspicion, and high emotion. The court ultimately concluded that the mother had failed to establish that the father had intended the house as a gift. Therefore, the presumption of resulting trust was not rebutted.
In coming to this conclusion, the court noted, among other things, that:
- there was a “certain logic” in the father’s desire to protect his investment, but no findings could be made with respect to any discussions the parties may have had regarding the financing of the home, and therefore the intention of the father (i.e whether or not the home was a gift) was unclear;
- the mother had agreed that the father had never said that the home was a gift. There had only been a discussion about a “fresh start”, likely initiated by the father, but this talk about “fresh start” does not demonstrate intention to provide a gift;
- the mother had argued that she believed that the parties had both contributed to the home with the common goal of being a family and eventually getting married, however, evidence about her intention was not relevant as it did not establish the intention of the father.
The court concluded that the parties had begun their cohabitation in September 2011. Despite the father’s attempts to diminish the mother’s role in his life prior to their purchase of the home, it was clear that she had been living at his house (other than brief returns to her parents’ home following arguments). The mother contributed to the relationship financially as well as with household chores and child care.
During the period of cohabitation, the mother estimated that her financial contribution averaged $700 monthly (including for groceries). The father, on the other hand, paid the mortgage, utilities, and other costs of the home, along with family and household expenses. He court noted that his contribution was “substantially more than [the mother’s]”.
The court found that, prior to the purchase of the home in 2014, the mother’s contributions (both financial and otherwise) were offset by the benefits she received. She did not have rental or other expenses, had no liability for the mortgage or the property, and was able to contribute to her RRSP.
The court noted that caselaw has established that when a party’s benefit offsets their contribution, there can be no unjust enrichment. This was the case here until the purchase of the home in 2014.
However, a joint family venture commenced when the home was bought, as the “evidence was overwhelming” that the test for same had been met: the parties were working towards a common goal, economic integration occurred, a child was born.
The court went on to assess unjust enrichment and noted that after taking into account the return of the parties’ initial investment, almost $20,000 remained, reflecting the increase in the equity value of the home. While this could be identified as an enrichment, the father conceded that this amount should be shared equally. As such, in the absence of enrichment, the remaining factors did not apply. The court therefore concluded that there was no unjust enrichment.
If you have questions about the financial implications of cohabitation or a common law relationship, or are in a common law relationship that is ending or has ended, contact Financial Litigation. We advise high-income earners, professionals, business owners and their spouses and help them proactively manage their wealth and protect their assets. To schedule a consultation, call 416-769-4107 x1 or contact us online.