Supreme Court of Canada – Decision regarding property division for common law couples

family-law

November 02, 2011

Kerr v. Baranow, 2011 SCC 10, outlines the Supreme Court of Canada's approach to property division for common law spouses. In contrast to married couples, there is no legislation to assist common law couples with distribution of property at the time of breakdown of the relationship. Furthermore, in the case of common law couples, there is no presumption that assets will be divided equally at the time of separation.

K and B separated after a common law relationship of 25 years. K claimed for property in B's name pursuant to the law of resulting trust and unjust enrichment. B counterclaimed for compensation for assistance he provided to K after she suffered a debilitating stroke, pursuant to unjust enrichment.

The Vanasse v. Seguin appeal involved common law spouses who separated after a 12 year relationship. Initially, the parties pursued their respective careers. Subsequently, V sacrificed her employment in order to relocate for the purpose of S's expanding business and to raise two children and look after the household. Eventually, when S sold the business, he assisted with the domestic duties.

Traditionally, the principles of resulting trust and unjust enrichment have been applied to common law property distribution claims. In Kerr v. Baranow, the SCC affirmed that in most cases, the law of resulting trust has no further application to common law property distribution claims. Usually, the finding of a "common intention" between common law spouses regarding property ownership is an artificial construction.

Alternatively, unjust enrichment and the remedial constructive trust as applied in Pettkus v. Becker,  [1980] 2 SCR 834, are the correct principles to apply to these cases. The three elements of unjust enrichment are:

  • an enrichment of the Defendant by the Plaintiff;
  • a corresponding deprivation of the Plaintiff; and
  • the absence of juristic reason for the enrichment (juristic reasons: donative intent, contract between the parties or disposition of law – and the categories of reasons are not closed).

A monetary award is usually sufficient in a case of unjust enrichment. However, in the example of domestic services provided by a common law spouse, it is not appropriate to calculate the monetary award based on a quantum meruit or fee-for-service basis. Often, the unjust enrichment occurs when the spouses contibute to a "joint family venture". In order to determine if a joint family venture exists, a Court must examine whether there has been mutual effort towards common goals, economic integration of the couple's finances, actual intent to share in the wealth created and prioritization of the family. Each spouse's contributions cannot be determined by a set-off of quantum meruits

Finally, the SCC affirmed that a Defendant's Counterclaim should be assessed at the defence or remedy stage rather than at the juristic reason stage of the unjust enrichment analysis. Usually, the Defendant's Counterclaim will not suffice to provide a juristic reason for the Defendant's enrichment.

In Kerr, the SCC found that the British Columbia Court of Appeal erred in dismissing K's claim for unjust enrichment and ordered a new Trial on that issue. K's appeal from the dismissal of her resulting trust claim was dismissed. The SCC affirmed the Order for a hearing of B's Counterclaim.

In Vanasse, the SCC allowed the appeal and restored the Order of the Trial Judge who had correctly determined that there was a joint family venture (without using this term) and tied V's contibution globally to the growth of the family assets.

This decision from the SCC regarding distribution of property on the breakdown of common law relationships, provides important direction for family law lawyers and their clients.