Property Division for Common Law Spouses
As we have discussed over the past several weeks, the rules pertaining to custody and access, child support, and spousal support are nearly identical for all separating couples. However, the rules of property division are very different depending on whether the former partners were married or common law. Last week, we discussed how property is divided between married partners upon separation. This week, we will discuss the very different (and much more complicated) set of property division rules used for former common law couples.
As a general rule, common law spouses will exit their partnership with whatever property they legally own. However, if one person appears to have a disproportionate share of property upon separation, there are legal remedies available to provide a fairer distribution.
Unlike with married partners, where property division rules are clearly defined in Ontario’s Family Law Act (RSO 1990, c F3), there is no simple formula for determining how much property each common-law spouse is entitled to. Unfortunately, this means it is much harder to predict what a judge will decide in these cases. However, there are some general legal principles that provide guidance as to if and how property should be split.
There are two main sets of principles that a judge can use to determine whether a person is entitled a portion of their former partner’s property. Once a judge finds entitlement, there are three possible remedies that can be used to provide a fairer distribution of property. Both the principles for entitlement and the remedies available are discussed below.
A resulting trust is the simplest form of entitlement, but unfortunately only applies to a limited number of circumstances. In most cases, it will not be sufficient to cover everything a person is entitled to when dealing with property division after the breakdown of a relationship. A resulting trust occurs when a person either:
- Directly contributed to the purchase of a specific property, but is not listed on the title or ownership document for the property.
Example: Both John and Jane contributed money to buy a house used by the family, but only John is registered as the owner.
- Transferred property they own to another person without receiving anything in return.
Example: John gives Jane $20,000 with the instructions “use this money to buy me a certain boat when it becomes available.” Jane never buys the boat and refuses to return the money to John.
Since resulting trusts only apply to monetary contributions, they are rarely used. Instead, most people will rely on unjust enrichment to claim a share of a former common-law spouse’s property.
To be successful in a claim for unjust enrichment, a person must show the court three things:
- Their former partner received a benefit. This benefit can be positive (Example: goods or services were received) or negative (Example: expenses were avoided).
Example: John owns a dairy farm. Both John and Jane work on the farm full time and neither has outside employment. Because of Jane’s work, John is able to forgo hiring additional staff. They live on a very minimal budget and reinvest the money earned from working together to upgrade the farm. Without Jane’s contributions, John’s business would be much smaller and less profitable.
- They suffered a corresponding loss. This loss suffered must be linked to the benefit received by the former partner.
Example: Because she works full time on the farm, Jane does not earn a personal income. Her and John limit their family spending so they can spend the profits of their labour upgrading the farm. Had Jane had a share in the farm ownership, worked outside the farm, taken normal employment income, or started a business of her own, she would have had the opportunity to earn money and have investments in her own name.
- There is no juristic reason for this enrichment. Established juristic reasons include:
- The intent of the person giving the benefit was to give a gift to his or her partner.
- The benefit was given pursuant to a contract.
- The benefit was given pursuant to a disposition of law. (Example: Court Order)
- The person providing the benefit was under a legal obligation to do so.
If there is no established juristic reason, the former partner who received a benefit (the opposing party) has the opportunity to show the court that:
- the legitimate expectations of the parties was that the person claiming unjust enrichment would get no share of the property; or
- that there is a public policy reason that the court should deny the unjust enrichment claim.
Unjust enrichment is considerably more useful than a resulting trust because the courts have stated that domestic services (Examples: Cooking, cleaning, childcare etc…) can be counted as providing a benefit.
Fee for Service
The fee for service approach is simple, it asks “What would the person have paid someone, other than his or her former partner, to perform the service?”. What is owed to the former partner is then calculated based on what a private company would charge for the same services.
A problem with this remedy is that one partner often provides a number of services that would be paid at minimum wage (Examples: Cooking, cleaning, childcare etc…). In many cases, this means that partner would be entitled to a very small sum of money in comparison to what the other partner owns. Therefore, most claimants will instead ask a judge to find a joint family venture.
Joint Family Venture (JFV)
A more modern approach to remedy unjust enrichment is the joint family venture (JFV). When a judge finds a JFV exists, he or she may award the claimant a certain amount of money calculated via a value survived approach. This means the judge will look at the overall increase in the parties’ wealth during their relationship, and determine how that wealth should be split between the parties.
To determine if a JFV exists, a judge must consider four factors. These factors are to be applied to evidence of how the couple acted during their relationship. These factors are:
- Mutual Effort – Did the parties work collaboratively towards common goals?
Indicators include: Pooling of effort, teamwork, deciding to have children together, and the length of the relationship.
- Economic Integration – What was the degree of economic integration versus independence of the parties?
Indicators include: The parties acted collectively, mutually, and prioritized the family over individual interests.
- Actual Intent – Did the parties intend to share the wealth they jointly created? Intentions can be expressed directly or can be inferred from conduct during the relationship.
Indicators include: The parties held themselves out to be in a relationship equivalent to marriage, shared expenses and accounting, had plans for distribution of wealth through wills or verbal discussion, and/or any other conduct that shows the parties saw themselves as domestic and economic partners.
- Priority of the Family – To what extent did the parties give priority to the family in their decision making? The judge must consider contributions both to the financial and domestic aspects of the partnership.
Indicators include: The spouses made financial sacrifices for the welfare of the family, or if one partner relied on the relationship to his or her detriment for the sake of the family. Even when both partners work, this factor can be found if a person relied on the relationship to his or her detriment.
Examples: A person relocating for their partner’s career, leaving the workforce for a period to raise children, or forgoing advancement for the benefit of the family.
The court has specifically stated that this are not a closed list and that judges may consider other factors they consider appropriate when determining whether a JFV exists.
If the judge determines a monetary payout is not enough, they can instead award a constructive trust.
A constructive trust is a remedy where the person claiming unjust enrichment is given partial or full ownership to their former partner’s property as opposed to a specific amount of money.
The court will award a constructive trust when:
- A monetary remedy is insufficient.
When a judge is determining if a monetary remedy is insufficient, they must look at:
- The probably the award will actually be paid.
- The claiming party has a special interest in the property arising from their contributions.
Examples: the claimant contributed to acquiring, preserving, maintaining or improving the property.
The constructive trust award will give the claimant a portion of the property based on their contributions to that specific piece of property. If the parties’ contributions are unequal, their share of the property will reflect this.
Example: Both John and Jane contribute to the acquisition, training and maintenance of a valuable show horse. Their daughter is currently riding the horse regularly and competing with it at a high level. The horse is legally owned by Jane alone. Using a JFV may force the sale of the horse, which neither John nor Jane want. A constructive trust would allow John to have partial ownership of the horse.
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