Gather the evidence before advancing unjust enrichment claims

By Staff

Common-law partners need to have the evidence to back up unjust enrichment claims post-separation, says Toronto family lawyer Michael Stangarone, who acted for the successful respondent opposing trust claims in a recent arbitration.

Stangarone, partner with MacDonald & Partners LLP, acted for a client resisting an attempt by her ex-partner to acquire an interest in her properties by claiming they had been engaged in a “joint family venture” during the relationship.

He tells that the arbitrator’s decision, delivered following a two-week hearing, provides a valuable and comprehensive overview of the law concerning trust claims and unjust enrichment.

The former partner of Stangarone’s client sought a constructive trust interest in various pieces of her real estate, as well as the proceeds from sales and rental income generated by her properties in Canada and China.

“His big problem was that he jumped straight to constructive trusts and joint family ventures, which are remedial by nature,” Stangarone explains. “Before you get there, you need to prove unjust enrichment, and he wasn’t able to do that.”

The common-law test for unjust enrichment has three elements — requiring the claimant to show not only that the opposite party was enriched, but also that they suffered a corresponding deprivation, and that there was no “valid juristic reason” for the enrichment.

In family law cases, it’s often a tough and lengthy task for a former common-law partner to marshal evidence, including receipts, invoices and other documents, to make a case that their ex received a benefit from their involvement, Stangarone says.

“From a practical point of view, if counsel can’t gather enough to prove the contribution, they need to think twice about whether to run an unjust enrichment claim,” he adds. “The cost consequences can be devastating if you don’t get it right.”

In dismissing all of the man's trust claims, the arbitrator awarded over $300,000 in costs against him.

According to the arbitration award, the pair met in Toronto and were in a relationship between 1996 and 2011, but never married, though the nature of their union throughout that period was disputed.

The decision explains how a landmark Supreme Court of Canada (SCC) ruling confirmed that an unjust enrichment claim can succeed in the context of a common-law partnership in situations where both parties contribute to an accumulation of wealth, but one party retains a disproportionate share of the assets after the breakup. In proven cases, the SCC decision says claimants are entitled to monetary remedies calculated on a value-survived basis.

The SCC also addressed the issue in a more recent judgment, in which a 7-2 majority of the nation’s top court ruled that the common-law partner of a deceased insurance policyholder was unjustly enriched when she was named its beneficiary, even though the dead man’s ex-wife had been paying the premiums for more than a decade.

The ruling overturned a majority decision by Ontario’s Court of Appeal, which found that the deceased provided a valid juristic reason for his common-law wife to receive the $250,000 payout by designating her the irrevocable beneficiary under the policy.

In Stangarone’s case, the arbitrator found the man failed to show that he made any contribution to the properties the woman purchased, or that they were in business together. In addition, evidence from various professionals confirmed that she was the directing mind when it came to the renovation and upkeep of the buildings, and so his case fell at the first hurdle of the unjust enrichment test.

“She has received no benefit from [him] in relation to the acquisition, maintenance and improvement of real property purchased by her in Toronto,” the arbitrator concluded.

The woman’s case was also aided by the arbitrator’s conclusions on the credibility of the parties. He found that the “version of facts” given by Stangarone’s client was “more reliable as a reflection of the reality that the parties lived during the relevant period.”

“[The man’s] evidence was vague and based on speculation, rather than fact, and the ‘facts’ produced were often ones that were a reconstruction of a theory, rather than grounded in reality,” the arbitrator added.

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