Parties must show “unjust enrichment” to win claims in separations
Separated unmarried couples with family businesses and property may base their property division claims on the principle of constructive trust because the Ontario Family Law Act is largely not available to them, says Toronto family lawyer Doug Beamish.
“Although joint family ventures is something the courts are prepared to look at, you still have to form your claims based on constructive trust,” says Beamish, a partner with Basman Smith LLP.
Typically, those who were in a non-marital relationship take with them what they brought to the partnership and what is in their name. But, when it comes time to separate, they have no legislated rules to rely on, says Beamish.
In Ontario, the property provisions of the Family Law Act only apply to spouses who have been legally married or those who have entered into a voidable marriage, Beamish tells AdvocateDaily.com.
For couples who haven’t married, that leaves the trust principles to determine what happens to properties, in terms of who gets what. Someone involved in a common-law relationship seeking a portion of the other partner’s property may ask the court to impose constructive trust as a remedy.
But, Beamish points out, for that claim to be successful, they must demonstrate that their money, labour or their money’s worth was a factor in increasing the value of that property. The separating partner in a common-law relationship who makes a claim to their former spouse’s property must show a bona-fide and substantial unjust enrichment – that is, demonstrating that the other party gained as a result of their efforts and they should, therefore, be compensated.
”The onus on someone bringing this type of a claim is that it has to be a specific claim,” says Beamish.
However, he adds, the determination is a subjective one and is more art than science.
The principle of constructive trust can also be raised where the parties are legally married notwithstanding that the Family Law Act provides a formula for equalizing their property on marriage breakdown. In that case, the principle of constructive trust is applied to determine the respective interests that each of the parties have in the property before the formula under the Family Law Act for equalization is applied, Beamish says.
For example, Beamish represented a woman in a matter that went to arbitration. She had inherited a farm property during her long-time marriage. As this property was inherited, the value of it was largely excluded from equalization with her husband on marriage breakdown under the Family Law Act. However, the husband sought an equal share of the monies received by the wife on the expropriation and from the sale of a portion of the farm remaining after the expropriation based on constructive trust.
The husband unsuccessfully argued that his wife had been unjustly enriched by his actions taken by him when part of the farm had been expropriated for a highway, which he believed had substantially increased the value that the wife received in the expropriation process and sale of a portion of the farm that remained after the expropriation.
Beamish countered that the work of the lawyer who assisted the parties in the expropriation and settlement, and not anything that the husband had done, increased its value.
Beamish says for a constructive trust claim to be successful, the party must prove that he or she was deprived and the other party was unjustly enriched by the contributions made by the party claiming the constructive trust, whether the contributions were in the form of money or “money's worth” such as labour or other efforts. There also has to be no legal justification for the enrichment that one party has enjoyed as a result of the contributions of the other, Beamish says.