Family Property Law and Divorce in Canada

• The doctrine of resulting trust allows a non-titled spouse to have an interest in the matrimonial home based on direct contributions to the home's purchase price.

Property Law and Family Dissolution

• Family property laws in Canada evolved following divorce reforms in the late 1970s.
• Statutory reforms aimed to address inequalities where women lacked legal entitlements to family assets upon divorce, despite their contributions.
• The goal was to create equality in property distribution.

Accessible Divorce and Reform of Family Property

• The 1968 Divorce Act introduced no-fault divorce, increasing divorce rates.
• This rise in divorce rates highlighted the need for equitable property distribution laws.
• Before reforms, family property titles were often held solely by husbands, leaving women without assets after divorce.
• The 1980s reforms in Quebec established a default sharing of gains regime.

Murdoch v Murdoch

• Murdoch v Murdoch (1973) was crucial in shaping trust doctrines in family law.
• Mrs. Murdoch's contributions were not recognized as financial contributions.
• The outcome prompted widespread legal reform, including recognition of constructive trusts for property sharing in marriages

Cohabiting Couples, Unjust Enrichment, and Constructive Trust

• Trust doctrines extended to cohabiting couples.
• Married couples gained statutory rights in the 1970s, cohabiting partners were initially excluded.
• The Supreme Court recognized constructive trusts for cohabiting partners in Rathwell and Pettkus v Becker(1980).
• Later rulings upheld distinctions between married and cohabiting couples for property division, maintaining provincial discretion.

Pettkus v Becker, 2 SCR 834

• The Supreme Court of Canada established the modern test for constructive trusts in unjust enrichment cases.
• A common-law spouse significantly contributed to her partner's farm but wasn't legally entitled to a share upon separation.
• The Supreme Court held that denying her a share would result in unjust enrichment.
• A constructive trust was imposed to grant the spouse an equitable interest in the property.

Property as Part of Economic Readjustment

• Property distribution, spousal support, and child support form an economic re-adjustment package upon marriage breakdown.
• Property division is rigid, while support payments can be adjusted.
• Legal classifications (property vs. support) may have financial consequences

Property as a “Final” Arrangement

• Property division is typically final and non-variable, unlike spousal and child support.
• Property division is retrospective
• Support is forward-looking based on future needs.

Property and Presumption of Equal Sharing

• Early reforms granted formal equality but did not recognize women's unpaid contributions.
• Equal division laws aimed to ensure substantive equality.
• Equitable remedies remain limited in achieving substantive equality.

Defining a "Spouse" for Family Property

• S 1(1) FLA (Part I) defines "spouse" as two persons married to each other or who entered a voidable or void marriage in good faith.
• S 29 of FLA (Part III) has a wider definition of "spouse" for support, including cohabiting couples
• The definition in s 1(1) was challenged under s 15 in Nova Scotia (AG) v Walsh

Law Reform Recommendations and Legislative Reform

• The Ontario Law Reform Commission (OLRC) recommended extending matrimonial property rights to cohabiting couples in 1993.
• This was recommended because of:
  • Functional similarities between married and cohabiting couples
  • Reasonable expectations of family members
  • The need to compensate for economic contributions
  • The connection between family law and social assistance
• Some provinces extended property-sharing to cohabitants unless they opt out, while others maintain legal distinctions.

Charter Challenges About Cohabitating Couples

• The Supreme Court of Canada has ruled on cases challenging differential treatment between married and cohabiting couples.
• In Miron v Trudel (1995), distinguishing between married and cohabiting couples for insurance benefits violated section 15 of the Charter.
• In M v H (1999), restricting spousal support to married couples was discriminatory
• In Nova Scotia (AG) v Walsh (2002), the Supreme Court upheld excluding cohabiting couples from property-sharing protections
• The court argued that individuals freely chose whether to marry

Nova Scotia (AG) v Walsh

• Examined if excluding cohabiting couples from property-sharing laws was discriminatory under the Charter.
• The majority ruled cohabiting couples voluntarily choose not to marry which means they accept different legal consequences.
• Justice Bastarache said legislation should respect autonomy and choice, rather than imposing property-sharing.
• Dissent argued this ignored economic vulnerabilities of cohabiting partners, and constituted discrimination.

Quebec (AG) v A (2013 SCC 5)

• Challenged Quebec’s Civil Code excluding cohabiting spouses from spousal support and property
• There was a 5-4 split on test for discrimination (s 15)
• Civil Code provisions were upheld under s 1
• Quebec is the only province where cohabiting people in conjugal relationships are not entitled to spousal support

Judicial Reasoning in Quebec (AG) v A

• Some judges found that excluding de facto spouses from spousal support and property division laws was discriminatory.
• McLachlin CJ recognized discrimination but ruled it was justified, as Quebec preserved freedom of choice for couples not to marry.
• Abella J dissented, arguing the exclusion violated equality rights and couldn't be justified.
• LeBel J defended Quebec’s dual legal regime, stating the law protected autonomy via marriage or civil union.
• The court upheld Quebec Civil Code’s exclusion of de facto spouses from property-sharing laws.
• It found the exclusion of spousal support to be unconstitutional, marking a partial victory for equality rights.

McLachlin CJ’s Perspective

• McLachlin CJ emphasized that Quebec’s approach allowed individuals to structure their relationships freely
• She said that cohabiting partners could choose to marry if they wanted legal protections.

Abella J’s Critique

• Abella J criticized the law for failing to protect vulnerable partners, particularly those economically dependent on their spouse.
• She argued that freedom of choice was unrealistic for those unable to choose marriage due to dependency or power imbalances.

Division of Matrimonial Property

• Part I of the FLA establishes a scheme of deferred sharing of wealth accumulated during the marriage
• Spouses are entitled to an equal share of the total financial product of the marriage.
• The Act seeks to avoid disputes about who contributed what by deeming that there is equal contribution for all marriages
• Part 2 addresses special treatment of the matrimonial home, only applies to married persons
• The equalization scheme deals with value and obligations but doesn't affect title
• It results in one spouse owing debt to the other (equalization) and the value of the property is divided.

Principles Regarding Equalization of Value

• Section 5(7) describes the purpose of equalization to recognize that child care, household management, and financial provision are joint responsibilities.
• Equal contribution, whether financial or otherwise, by the spouses when assuming these responsibilities, entitles each spouse to equalization of net family properties.
• The Act tries to avoid the issue of determining who contributed what by deeming that in all marriages there is equal contribution to joint responsibilities.

How to define a "Spouse" for Family Property

• Common-law relationships should have legal recognition and protection, where many unmarried couples function like married spouses by pooling resources and raising children.

Law Reform Recommendations and Legislative Reform

• In 1993, the Ontario Law Reform Commission (OLRC) recommended extending matrimonial property regimes to cohabiting couples.
• The recommendation was partially based on functional similarities between married and unmarried couples for economic fairness.

Charter Challenges About Cohabitating Couples and Property at Separation

• In Miron v Trudel (1995) and M v H (1999), the Supreme Court ruled that the differential treatment of cohabiting couples infringed Charter equality rights.
• However, in Nova Scotia (AG) v Walsh (2002) the court ultimately upheld the exclusion of unmarried couples from the Matrimonial Property Act.

The Process of Equalization in Ontario

• The Ontario Family Law Act (FLA) provides a structured way to divide family property at marriage breakdown.
• Ontario uses an equalization of value approach rather than dividing property outright.

Defining the Equalization Amount: Principles and Processes

Steps to Calculating Equalization

• Determine the valuation date
• Determine the property owned by each spouse on the valuation date (V date), minus debts and liabilities
• Determine if any property is excluded by s. 4(2)
• Deduct the property owned by each spouse on the marriage date (M date), minus debts and liabilities
• Calculate the net family property (NFP) for each spouse; determine ½ difference between greater and the lesser amounts (5(1))
• Assess any claim under s 5(6) for more than ½ difference

FLA Part I

• Part I and Part II dealing with special treatment of MH only apply to married persons
• The spouse with the greater amount pays half the difference compared to the spouse with the lesser amount.
• Section 5(1) talks about equalization where the spouse whose net family property is the lesser of the two is entitled to one-half the difference between them

Triggering Events

• Equalization happens:
  • When divorce is granted
  • When marriage is declared a nullity
  • When spouses are separated with no reasonable prospect they will resume cohabitation

Some Basic Principles Concerning Equalization in the FLA

• The FLA applies unless spouses opt out via contract
• Special rules apply to the Matrimonial Home: spouses cannot exclude it from division
• The surviving spouse can elect equalization or inherit under a will after death or divorce

Step 1: Determining the Valuation Date (V Day)

• Means the earliest of the following dates:
  • The date the spouses separate and there is no reasonable prospect that they will resume cohabitation
  • The date a divorce is granted
  • The date the marriage is declared a nullity
  • The date one of the spouses commences an application based on subsection 5 (3) that is subsequently granted
  • The date before the date on which one of the spouses dies leaving the other spouse surviving

Improvident Depletion of NFP

• Exception to earliest of 5 valuation dates under 5(3)
• When spouses are cohabiting, if there is a serious danger that one spouse may improvidently deplete NFP, the other spouse may have the difference between the NFP divided as if the spouses were separated and there were no reasonable prospect that they would resume cohabitation
• Allows a spouse to protect portion of family assets.
• This provision applies for equalization before separation but can't get again unless oyu put it into a domestic contract

Examples of V Day Determinations

• Discretion is a factor for courts when the separation is gradual
• Case examples:
  • Oswell v Oswell (1992) where trial judges have discretion to determine valuation date based on evidence of deterioration in marriage over time
  • Tokaji v Tokaji (2016) where the court considered factors like separate finances, cohabitation status, and tax returns
  • Caratun v Caratun (1987) where date of separation was when one spouse leaves with no intent to return

Marriage and Equal Shares

• Marriage creates a legal presumption of equal contributions to family property
• This justifies the default rule of equal property sharing unless gross contribution inequality is proven

Approaches to Property Sharing

• Provinces like British Columbia divide property
• Ontario uses an equalization of value model

Family Property at Marriage Breakdown in Ontario

• Ontario's Family Law Act ensures fairness through monetary equalization payments rather than property redistribution
• Judicial discretion is limited, except in cases of unconscionability

Defining the Equalization Amount

• Outlines steps to determine equalization payments:
  • Determine the valuation date (V Day)
  • Identify property owned by each spouse on V Day, minus debts and liabilities
  • Determine excluded property such as inheritances or gifts
  • Deduct the property owned by each spouse on the marriage date (m DATE), minus debts and liabilities
  • Calculate net family property (NFP) for each spouse; determine 1/2 difference between greater and lesser amounts (5(1))
  • Assess claims for additional adjustments if one spouse seeks more than half

Unequal Division of NFP

• S 5(6) talks about when a court may award an amount that is more or less than half the difference between the NFPs if equalizing would be unconscionable.

Section 5(6) Considerations

• A spouse’s failure to disclose debts or liabilities existing at date of marriage
• Debts or liabilities were incurred recklessly or in bad faith
• Part of a spouse’s NFP consists of gifts made by the other spouse
• A spouse’s intentional or reckless depletion of his or her NFP
• The amount a spouse would otherwise receive is disproportionately large in relation to cohabitation that is less than five years
• One spouse has incurred disproportionately larger debts or liabilities than the other spouse for support of the family
• A written agreement between the spouses that is not a domestic contract
• Any other circumstance relating to the acquisition, disposition, preservation, maintenance, or improvement of property
• Onus is on the person who is seeking it

Summary of Cases: Futia v Futia & Waters v Waters

• Futia v Futia
  • The parties were married for less than two years and there was religious and age differences between the spouses
  • The wife alleged physical and mental cruelty from the husband
  • The main asset was the matrimonial home, which was purchased and owned by the husband and had significantly increased in value.
  • The Legal Issue was the wife argued for unequal division of assets under section 5(6)(e) due to the short marriage
  • The court ruled that an unequal share in favor of the respondent/husband was appropriate where the wife was still entitled to 40% of the net equity in the home and cruelty will not impact the division of property
• Waters v Waters (1986)
  • The wife took care of all household duties and managed the couple’s financial affairs
  • Both spouses worked outside the home, and they had no children and the husband was an alcoholic
  • The wife sought unequal division of property where the court referenced section 5(7), stating that equal division does not require equally contributed spouses.
  • The court denied the request and pointed to section 5(7) which references deemed equal contribution as a matter of public policy and that departures from equal division should be uncommon

Some Basic Principles Concerning Equalization in the FLA

• Section 2(10) and the FLA as a Default Regime
  • The equalization scheme is a default framework from which couples can opt-out through contracts
• The Matrimonial Home
  • Special rules apply to the family home, which cannot be excluded from equalization even if it was owned by one spouse before marriage.
• Equalization at Death and Divorce
  • Section 5(2) allows equalization claims upon divorce and death; if a spouse dies, the surviving spouse can claim equalization or take under the will.

Determining the Valuation Date (V Day)

• Enforces a rigid approach, allowing courts little discretion to change this date for fairness reasons, defined as the earliest of:
  • Date of separation with no prospect of reconciliation
  • Date of a divorce order
  • Date of an order of nullity
  • Date when one spouse starts a legal claim for asset depletion
  • Date before the death of one spouse

Determining The Valuation Date Examples

• Courts must interpret when the relationship truly ended since separation is often a gradual process
• The court could consider factors like deterioration of the marriage
• The court must determin when one spouse decides to leave with no intent of returning, even if the other spouse still hopes for reconciliation

Explore the evolution of family property laws in Canada following the 1968 Divorce Act and subsequent reforms. Learn about addressing inequalities in property distribution and the impact of key cases like Murdoch v Murdoch. Understand resulting trusts and spousal interests in matrimonial homes.