Common Law Relationships and Division of Assets

The Family Law Act R.S.O. 1990, c. F. 3 only applies to couples who satisfy the definition found in s. 1(1) relating to equalization of net family property.

Definitions 1. (1) In this Act, “spouse” means either of two persons who, (a) are married to each other, or (b) have together entered into a marriage that is voidable or void, in good faith on the part of a person relying on this clause to assert any right. (“conjoint”)
Polygamous marriages (2) In the definition of “spouse”, a reference to marriage includes a marriage that is actually or potentially polygamous, if it was celebrated in a jurisdiction whose system of law recognizes it as valid.

So, what happens to property acquired during a common law relationship when the individuals separate? Normally, property is owned by the individual who holds legal title to it and is distributed on that basis. There is no net family property calculation or equalization payment contemplated in common law situations where there is a separation.

If you were/are in a common law relationship and you feel as though you should be entitled to an interest in or compensation for any contributions made to the acquisition, preservation or maintenance of property then you may do the following:

• Ask your partner to pay you back for any contributions, both financial and non-financial, that you have made towards the property, or
• If your partner does not agree to pay you back then you may go to court and make one of the following claims:
  • resulting trust
  • constructive trust
  • unjust enrichment

Resulting Trust

A resulting trust arises when one individual pays for (or helps pay for) a piece of property yet legal title is vested in another individual. It would seem unfair to not allow the individual who funded the acquisition, in whole or in part, to retain some interest in the property. Therefore, he or she becomes the beneficial interest holder and it is presumed that the legal title holder is the trustee for the beneficial interest holder.

When the separation occurs, the interest equal to the contribution is returned which means that the courts may order that it is either jointly owned or fully owned by the spouse who paid for it.

The Supreme Court of Canada, in a 1980 decision, stated that a resulting trust will be found when the court is satisfied that there is a common intention, ascertained by the words or conduct of the parties, that the beneficial interest would not belong solely to the spouse in whom the legal estate was vested but was to be shared between them in some proportion or other.

In summary, a resulting trust is a rebuttable presumption that, at the time when the contributions were made and accepted, the parties both intended that there would be a resulting trust in favor of the donor to be measured in terms of the value of the contributions made. Clear evidence indicating a “common intention” would be where purchase money is taken from a joint bank account into which both spouses have deposited funds.

Constructive Trust

A constructive trust allows an individual to share in the value of property (or acquire an interest in it) even though he or she does not hold legal title. This is due to the fact that the individual has contributed to the value of the property through work, money, etc., making it unfair to deprive him or her from a share in the value, or increase in value, of the property.

Unlike a resulting trust, there is no need to find evidence of a common intention to establish it. Courts will only impose a constructive trust when the test enunciated by the Supreme Court of Canada in 1980 is satisfied. The test is premised on the principles of unjust enrichment:

1. there must be the enrichment of one of the spouses
2. a corresponding deprivation of the other spouse, and
3. no juristic or legal reason for the enrichment. You should note that a legal reason would be:
• making a gift
• presence of a contract

Once the three factors have been satisfied the next step involves showing a causal connection between the contribution made and the property. If this connection is proven then a constructive trust will result.

Must ask: “Was her/his contribution sufficiently substantial and direct as to entitle her to a portion of the profits realized upon the sale of property X and/or an interest in property X?”

You should be aware of the fact that a contribution does not always take the form of a contribution to the actual acquisition of the property because a contribution relating to the preservation, maintenance, or improvement of the property may suffice.

The extent of the interest must be proportionate to the contribution of the spouse claiming a constructive trust. Where the contributions are unequal, the shares will be unequal.

The contributions may be either financial or non-financial. A non-financial contribution may be any one of the following (but is not limited to):

• taking care of children so that the other spouse may earn an income and purchase the property in question.
• taking full responsibility for all the domestic chores (i.e. cooking, doing laundry, cleaning) so that the other spouse may focus on his or her profession resulting in an increase in income and acquisition of property.

However, in order for these to constitute contributions for the purposes of a constructive trust, it is necessary that no compensation was given or else the spouse has no claim.

Unjust Enrichment

Lastly, if all else fails, or if it is impossible to prove a connection between the contribution made and the property in question (usually due to the fact that the relationship is of a short duration) then a simple claim for unjust enrichment may be made.

Here, the courts will apply the three aforementioned principles of unjust enrichment to try and remedy a fundamentally unfair situation where as a result of one individual’s efforts the other will end up with a benefit. The deprived party will get the value of their contribution. Otherwise known as quantum meruit, this is the amount that the benefitted party would have had to pay for the contributions made. Remember that a common law spouse is under no obligation to render services to a partner and so there is a presumption that such services will be compensated.