Property division and common-law spouses – The principle of unjust enrichment

BY: VALERIE DYE

In Canada married couples who are divorcing divide their assets through the process of equalization. This is a process whereby both parties calculate their net family property by determining the value of property owned at the date of separation (valuation date) fewer debts and liabilities and excluding property owned before marriage (note that the matrimonial home is not excluded even if owned before marriage). The party who has the higher net family property pays half of the difference to the other party. The aim of equalization is to place both parties on equal footing so that they each leave the marriage with equal value in terms of assets.

Common-law spouses do not benefit from equalization. Unless a common-law spouse has legal ownership to a property there is not automatic claim to that property. For instance, if property is owned jointly by common-law couples then obviously both couples are entitled to that property. On the other hand, if property is owned only by one spouse the spouse who does not have legal ownership to that home is not automatically entitled to a share in that home unless that person can prove a tangible contribution toward the acquisition of that property.

This may seem unfair to common-law couples who have lived together for years and who may have contributed to the joint family venture which resulted in an enrichment of the couple. It is for this reason that the courts have allowed common-law couples to rely on the principle of unjust enrichment in order to benefit from a share in family property.  One spouse may claim that the other spouse will become unjustly enriched unless property that has been acquired is shared with the other spouse.

To prove unjust enrichment the common-law spouse who is claiming, must prove that the other spouse has become unjustly enriched, that the claimant has suffered some detriment and that there is no justifiable reason for the enrichment. In the famous case of Kerr v Baranow (2011) 1 SCR 269, the Supreme Court of Canada stated that the claimant ‘must show that he or she has given a tangible benefit to the defendant that the defendant received and retained’. The claimant must also have suffered some form of deprivation. This case also highlights the fact that the provision of domestic services may be seen as unjust enrichment since a common-law spouse has no duty to perform domestic services for the other. Such services are seen as a tangible benefit being conferred upon the family and may also be seen as a deprivation suffered by the spouse who performs those duties often without compensation.

The 2015 Ontario Superior Court Case of Gibson v Mead provides an example of domestic services being seen as an enrichment to one of the spouses. In that case, the common-law wife was a stay at home mother while the respondent obtained higher education and improved his employment income. The court determined that the elements of an unjust enrichment existed and that the wife was entitled to a share of the assets based on her contribution.

In determining whether a common-law spouse is becoming unjustly enriched to the detriment of the other spouse the court needs to carry out an analytical exercise to determine the nature, value, and reasons for the contributions made.  Thus, while common-law spouses are not automatically entitled to a share in the assets owned by the other spouse, they may still benefit from a share but only if they can prove that they made a contribution toward the acquisition of the assets.