With the cost of housing continuing to rise, spouses are beginning to finance their homes with outside assistance. For some families, this may include financing a home with another family member or friend. For the purposes of equalization of net family property, non-party rights can complicate spouses' claims in relation to the matrimonial home.
This recent decision from the Court of Appeal encourages spouses to be cognizant of their financing arrangements when purchasing a matrimonial home and to consider how various financing arrangements may impact their family law rights upon the dissolution of their relationship.
In 1999, the Respondent's mother provided her with a loan of approximately $70,000.00 to purchase a home in Maple, Ontario. The Respondent's mother was listed on title as a 50% owner of the home. The Appellant moved into the home in 2000. The home was sold in 2002, and the proceeds of sale were used to purchase a new matrimonial home in Brampton, Ontario. The Respondent's mother was again listed on title as a 50% owner of the new home.
In his pleadings, the Appellant did not claim that a constructive trust existed. However, he did advance this position at trial, claiming that the Respondent, by way of constructive trust, was the sole owner of the property. The basis of the Appellant's argument was that the Respondent's mother was merely a lender, and therefore her registration on title is not relevant to determining the value of the Respondent's share of the home.
The Respondent submitted that the Court lacked the jurisdiction to make a ruling against her mother's interest in the home because her mother had not been listed as a party to the proceedings.
The trial judge accepted the Respondent's argument, and stated that the Respondent mother's testimony at the trial was not the equivalent of being named as a party to the proceeding. As such, the Respondent was attributed with only 50% of the value of the matrimonial home for the purposes of equalization.
On appeal, the Appellant submitted that the trial judge erred in failing to consider his constructive trust claim against the mother. He claimed that the Respondent should be listed as the 100% owner of the matrimonial home, and that the $70,000.00 loan provided by the mother should be deducted from the value of the home before equalization. Essentially, the Appellant claimed that the Court could find that the Respondent was the sole owner of the home for the purposes of equalization without impeding upon the Respondent's mother's interests, which negates the necessity of her being listed as party to the proceedings.
The Court of Appeal rejected the Appellant's claim, and upheld the trial judge's finding that a claim could not be made against the Respondent's mother because she was not a party to the proceedings. The Court confirmed that property entitlements must be determined before they can be equalized. As such, a claim must be brought against the Respondent's mother to challenge her property entitlement before any claim can be made against same.
The ruling by the Court of Appeal in this case warns family law litigants that all individuals against whom you wish to make a claim must listed as a party to the proceedings. An individual's involvement with a trial as a witness does not mean that a claim may be made against them without first having been added as a party. It is important at the outset of litigation to consider all potential claims that you may wish to pursue.