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Kerr v. Barranow, 2011 SCC 10

In a decision that was just released today, February 18, 2011, the Supreme Court of Canada has made a ruling on the rights of common law couples with respect to property division upon separation. Unmarried couples in most provinces, including Ontario, are not entitled to the division of property or to the statutory methods of dealing with the financial consequences of the breakdown of the relationship as married couples are. In order to overcome this gap in legislative protections, there have been legal tests created through judge-made law which may aid unmarried parties with such issues. The legal mechanisms which have been put into place include the resulting trust and the action in unjust enrichment.

Resulting trusts arise from the transfer of property from one partner to another without due consideration for same or for property which the title is in the name of only one partner, but which both have contributed towards. If an individual has contributed to property, a legal interest will arise whether or not their name appears on the title for same. In addition, currently a resulting trust could arise solely based on the “common intention” of the parties and whether the party not on title was intended to have an interest in same. This principle has come under scrutiny and is not used often in the resolution of property disputes.

The Law of Unjust Enrichment is more commonly used in the resolution of property issues when unmarried couple separate. There is a three-step test which a party making a claim for unjust enrichment must meet before they will be granted with any award regarding same. The individual must show that that “he or she has given a tangible benefit to the defendant”, that this benefit to the other party led to a corresponding deprivation to the individual and that there is “no reason in law or in justice for the defendant’s retention of the benefit conferred.”

With respect to family law matters, the “provision of domestic services” may lead to a successful claim for unjust enrichment. Monetary awards are generally sufficient to remedy any successful unjust enrichment claim. However, as addressed in this pair of Appeals, there are two difficulties in determining the appropriate monetary amount to award as a remedy.

  1. If there has been a “mutual conferral of benefits,” it will be difficult for a Court to look back at each service rendered by one party to another. It is important to review both parties contributions of domestic services to the relationship and not just focus on the claimant’s contribution to determine whether there has been an unjust enrichment.
  2. Whether the monetary award should be calculated on a “value received” or “fee-for-services” basis, or whether it should be based on a “value survived” calculation. The “value-survived” basis looks to the overall increase to the couple’s wealth. This is because, “in some cases, a proprietary remedy may be required.  Where the plaintiff can demonstrate a link or causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property, and that a monetary award would be insufficient, a share of the property proportionate to the claimant’s contribution can be impressed with a constructive trust in his or her favour.

Based on the above difficulties it was clear to the Court that the law of unjust enrichment required clarification and as such, this was the main issue of these Appeals.

The court held that where a claim arises for unjust enrichment in the resolution of the financial aspects of the breakdown of a common law relationship, there is no need for a “dueling of quantum meruits.” Therefore, the “value survived” approach is the preferred approach, “where the unjust enrichment is best characterized as an unjust retention of a disproportionate share of assets accumulated during the course of a “joint family venture” to which both partners have contributed.” In other words, when an unmarried couple separates, the Court will look at the share of accumulated wealth of each party’s contributions to the financial aspects of the relationship and will determine the appropriate monetary remedy based on same.

In order to determine whether there has been a “joint family venture” which would necessitate the use of the “value survived” approach, the Court will have to look to the facts of the parties’ relationship and assess the mutual efforts of the parties, the economic integration of the parties’ relationship, actual intent of the parties and the priority of the family. In addition, “The more extensive the integration of the couple’s finances, economic interests and economic well‑being, the more likely it is that they have engaged in a joint family venture.  The actual intentions of the parties, either express or inferred from their conduct, must be given considerable weight.  Their conduct may show that they intended the domestic and professional spheres of their lives to be part of a larger, common venture, but may also conversely negate the existence of a joint family venture, or support the conclusion that particular assets were to be held independently.” In essence, the Court will have to look to the specifics of each relationship to determine whether the parties intended their partnership to be a “joint family venture” which would resemble the intentions of those who are married, or if they intended that their partnership be something different.

It was also held that in family law matters, the mutual exchange of benefits to each party should be taken into account when determining whether there was a juristic reason for the enrichment of one party to the detriment of the other. The mutual expectations of the parties will also have to be taken into account to show whether the retention of the corresponding benefits were just.

Overall, this decision is an important one for unmarried couples. It clarifies the test for unjust enrichment as it is to be met in order for one party to ensure that there is some remedy and/or monetary compensation for the contributions made to the relationship and any effects of the breakdown of the relationship. This decision brings common law partners one step closer to having the same rights upon relationship breakdown as married individuals do.