Constructive Trusts — Protecting The Interests Of Common Law Spouses

The fact that there is no legislation that deals with property division for Ontario’s common law couples does not mean that common law couples are prohibited from applying for property division on separation. It means that in the absence of legislated rules as to how property is to be divided, common law couples in Ontario who wish to claim property division on separation must rely on the equitable doctrine of unjust enrichment to do so.

At Nathens, Siegel LLP, our lawyers have extensive experience navigating such claims for clients throughout the Greater Toronto Area though the equitable doctrine of unjust enrichment.

What Is Unjust Enrichment?

The application of unjust enrichment principles to common law relationships is highly subjective and relies on much judicial discretion. Unjust enrichment can occur when one party’s efforts have enriched the other spouse while depriving the non-titled spouse. For example, one spouse dedicated time, money and effort to renovate a home registered in the name of the other spouse, thus adding value. Upon separation, the non-titled spouse receives neither compensation nor ownership interest in the home.

The Difficulties In Making A Successful Claim

An unjust enrichment claim often requires an extensive and lengthy accounting of which party did what and who paid for what during the common law relationship, as well as establishing the original intention of the parties.

In the 2011 Supreme Court of Canada decision in Kerr v. Baranow, the Court set a number of principles to further define the law of unjust enrichment as applied to common law couples. Justice Cromwell uses the concept of “joint family venture” to determine whether an unjust enrichment claim should succeed.

In determining whether or not a “joint family venture” exists, the following factors should be considered, although not exhaustive:

• Mutual Effort: Have the parties worked together toward a common goal, and for how long?
• Economic Integration: How extensively were the couple’s finances, economic interests and economic well-being integrated?
• Actual Intent: Did the parties intend to form a joint family venture, either in word or action? Were they “equivalent to married?”
• Priority Of The Family: Did one party give up his or her employment for the common financial future of both of them? Is one party left in a worse position as a result of this action?
• Reasonable Or Legitimate Expectations: Did the parties expect that one party would benefit from the joint arrangement? Did any agreement exist to this effect?

Once a successful claim is established, courts must then define the remedy, which may be monetary compensation or a percentage ‘trust’ interest in property.

Cohabitation Agreements – A Wise Investment For
Common Law Couples

One key way that common law spouses can protect their financial interests is to have a cohabitation agreement in place setting out their expectations with respect to property division from the outset of their cohabitation.

Without such a cohabitation agreement, common law couples who go through a separation may very well face lengthy and very expensive court proceedings to determine whether a “joint family venture” exists, and if so, what the appropriate remedy may be.

Find Out If You Have A Case

Contact one of our offices in Mississauga or North York to discuss your case. Our initial consultations are offered at a reduced rate. We will conduct a thorough review, provide honest answers, and explain what we can do to help. Reach us by email or phone us at (416) 222-6980 ext. 2900 to arrange a meeting.