Common Law Relationships: Constructive Trust and Unjust Enrichment

In its decision of Kerr v. Baranow, the Supreme Court of Canada held that, upon the breakdown of the relationship, unmarried persons cohabiting in a common law relationship may have a claim for family property pursuant to the law of unjust enrichment.  Indeed, this decision represents a step forward for unmarried cohabiting spouses in family property claims especially in light of the lack of rights afforded to common law spouses under provincial family law statutes such as Ontario’s Family Law Act.

In defining the test to be applied for determining whether or not a unjust enrichment claim could succeed, the Supreme Court rejected the old approach which was to determine whether the spouses had a “common intention” that the non-title holding spouse would share in the property or assets upon a breakdown of the relationship.  In setting out the new approach, the Court revisited its seminal decision in Pettkus v. Becker in which the Court developed a 3 part test to determine whether or not an unjust enrichment has occurred at law.  This approach was adopted in Kerr and the 3 part test considers the following: (1) enrichment of the Defendant by the Plaintiff; (2) a corresponding deprevation suffered by the Plaintiff; and (3) the absence of a juristic reason for the enrichment.  With respect to the third requirement, the Plaintiff must show no juristic reason to deny recovery.

If the three requirements are satisfied, then a prima facie unjust enrichment is made out.  The onus then shifts to the Defendant to demonstrate, for example, that the benefit dnjoyed by the Defendant was offset by benefits conferred on the Plaintiff by the Defendant.  In the alternative, the Defendant may argue that it was the intention of the parties to maintain separate finances and, therefore, no unjust enrichment occurred.

If the Defendant cannot rebut the unjust enrichment claim, then the concern of the Court turns to the nature of the remedy, which is restitutional.  There are two remedies that may be fashioned by the Courts.  First, monetary damages may be awarded pursuant to the unjust enrichment.  The Supreme Court in Kerr ruled that, when quantifying the amount of monetary damages to be awarded as a remedy, the Court must use the “value survived” approach.  The value survived approach quantifies the amount by which the spouses’ wealth has increased during the course of their relationship.  The second remedy of constructive trust will be appropriate where monetary damages are not adequate and there is a link between the contribution (enrichment) made by the Plaintiff and the property arguably subject to the trust.

The decision of the Supreme Court in Kerr represents a step forward in defining the property rights of common law spouses upon dissolution of their relationship.  It confirms that common law spouses may have a claim in property or assets upon separation.  However, it still remains that common law spouses do not enjoy statutory property rights and the right to equalization of net family property as married persons do.

If you have any questions or concerns regarding your rights and responsibilities, you are encouraged to sseek legal advice.  The content on this page is not legal advice and is for informational purposes only.  If you have any questions regarding family law, you may contact Mr. Turner directly at 905-447-1498 or by email at dale@turnerlawpc.ca

Dale Turner

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