Resulting Trust: Property Law and Divorce

• The doctrine of resulting trust allows a non-titled spouse to have an interest in the matrimonial home based on direct financial contribution to the purchase price.
• The "doctrine of resulting trust" automatically creates a trust when someone transfers property to another person without payment.
• The legal title holder is considered to be holding the property in trust for the benefit of the original owner, unless there is clear evidence of a gift intended.

Property Law and Family Dissolution

• Family property laws in Canada evolved in response to divorce reforms in the late 1970s.
• Statutory reforms addressed disparities where women, who contributed to family assets, were often left without legal entitlements upon divorce.
• The changes aimed to create equality in property distribution.

Accessible Divorce and the Reform of Family Property

• The 1968 Divorce Act introduced no-fault divorce, leading to rising divorce rates and the need for equitable property distribution laws.
• Before reforms, the title to family property was often in the husband's name, leaving women without assets post-divorce.
• The 1980s saw reforms in Quebec, which established a default sharing of gains regime.

Murdoch v Murdoch: A Reform Catalyst

• Murdoch v Murdoch (1973) was instrumental in shaping trust doctrines in family law.
• Mrs. Murdoch sought recognition of her financial contributions to her husband’s property but was denied because her unpaid labor was not considered a financial contribution.
• The case led to widespread legal reform, including recognition of constructive trusts for property sharing in marriages.

Cohabiting Couples, Unjust Enrichment, and the Constructive Trust

• Trust doctrines were extended to cohabiting couples, who were initially excluded from statutory rights granted to married couples in the 1970s.
• The Supreme Court in Rathwell and Pettkus v Becker (1980) recognized constructive trusts for cohabiting partners.
• Later rulings (Nova Scotia (AG) v Walsh, Quebec (AG) v A) upheld the distinction between married and cohabiting couples for property division, maintaining provincial discretion.

Leading Case: Pettkus v. Becker

• The Supreme Court of Canada established the modern test for constructive trusts in family law and unjust enrichment cases.
• The plaintiff made significant contributions to her partner’s farm but was not legally entitled to any share of the property upon separation.
• Denying her a share would result in unjust enrichment, and a constructive trust was imposed to grant her an equitable interest in the property.

Organization of Chapter

• Examines the history of marital property, Supreme Court decisions on the definition of "spouse," and the equality objectives of family law.
• It also discusses Ontario's Family Law Act and the use of unjust enrichment in cohabitation property disputes.

The Social Context for Family Property

• Examines the broader economic implications of property and support decisions in family law.
• Highlights how laws evolved to reflect social expectations of equality in marriage and cohabitation.

Property as Part of an Overall Economic Re-Adjustment Package

• Property distribution, spousal support, and child support collectively create an economic re-adjustment package upon marriage breakdown.
• While property division is more rigid, support payments can be varied.
• The Supreme Court has recognized that 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
• This distinction is important in negotiations, as property is treated retrospectively (based on past contributions), while support is forward-looking (based on future needs).

Property and the Character of a Presumption of Equal Sharing of Marital Gains

• Contrasts formal and substantive equality in property division.
• Early reforms granted formal equality but failed to recognize women's unpaid contributions.
• Equal division laws were introduced to ensure substantive equality, although equitable remedies (e.g., unjust enrichment) remain limited in achieving this goal.

Defining a "Spouse" for Family Property: The Significance of Marriage or Cohabitation

• S 1(1) FLA (Part I) defines "spouse" as either of two persons who are married to each other or have entered into a marriage that is voidable or void, in good faith.
• The definition of "spouse" in s 29 of FLA (Part III) refers to support and includes cohabiting couples.
• The definition of spouse (s 1(1)) was challenged under s 15 in Nova Scotia (AG) v Walsh.
• Many unmarried heterosexual couples function similarly to married couples, pooling financial resources, providing emotional support, and raising children.
• Provincial laws regulate economic consequences in marriage, they should also apply to cohabiting couples to ensure equitable treatment.

Law Reform Recommendations and Legislative Reform

• The Ontario Law Reform Commission (OLRC) in 1993 recommended extending matrimonial property rights to cohabiting couples, recognizing their functional similarities with married couples.
• The four main policy rationales were:
  • Functional similarities between married and cohabiting couples.
  • Reasonable expectations of family members.
  • The need to compensate economic contributions.
  • The connection between family law and social assistance.
• Some provinces have extended property-sharing regimes to cohabitants unless they opt out, while others maintain legal distinctions.

Charter Challenges About Cohabitating Couples and Property at Separation

• The Supreme Court of Canada has ruled on multiple cases challenging differential treatment between married and cohabiting couples under the Charter of Rights and Freedoms.
• Miron v Trudel (1995) found that distinguishing between married and cohabiting couples for insurance benefits violated section 15 of the Charter.
• M v H (1999) held that restricting spousal support entitlements to married couples under Ontario’s Family Law Act was discriminatory.
• Nova Scotia (AG) v Walsh (2002) involved a cohabiting woman's unsuccessful challenge to her exclusion from property-sharing protections under Nova Scotia’s Matrimonial Property Act (MPA).

Nova Scotia (AG) v Walsh

• Examined whether excluding cohabiting couples from property-sharing laws was discriminatory under the Charter.
• The majority ruled that cohabiting couples voluntarily choose not to marry and thus accept different legal consequences.
• Justice Bastarache emphasized that the legislation should respect autonomy and choice, rather than imposing an automatic property-sharing regime on unmarried couples.
• The dissent argued that this distinction ignored the economic vulnerabilities of cohabiting partners, particularly women, and constituted discrimination.
• Majority stated that some cohabitants have chosen not to marry, and not to take on the obligations ascribed to persons who choose that status, indicating it's a choice.
• The dissent argued that the needs of married and unmarried cohabitants are often functionally equivalent, emphasizing the need for legal protection.

Quebec (AG) v A (2013 SCC 5)

• Involved a challenge by a cohabiting spouse to exclusion in Quebec’s Civil Code from access to spousal support and property. On issue of test for discrimination (s 15), there was a 5-4 split, overruling analysis of test in Walsh.
• However, Civil Code provisions were ultimately upheld under s 1.
• Quebec is the only province where cohabiting people in conjugal relationships are not entitled to spousal support.
• Raised questions about equality under section 15 of the Charter due to the exclusion of common-law partners from spousal support and property division laws.

Judicial Reasoning in Quebec (AG) v A

• Some judges found that the exclusion of de facto spouses (common-law partners) from spousal support and property division laws was discriminatory under section 15 of the Charter.
• McLachlin CJ recognized the discrimination but ruled that it was justified under section 1, as the Quebec legislature had a legitimate objective in preserving freedom of choice for couples who chose not to marry.
• Abella J strongly dissented, arguing that the exclusion of de facto spouses from legal protections violated equality rights and could not be justified.
• LeBel J defended Quebec’s dual legal regime, stating that the law protected autonomy by allowing couples to opt into formal legal protections through marriage or civil union.
• McLachlin CJ emphasized that Quebec’s approach allowed individuals to structure their relationships freely but acknowledged the negative impact on economically vulnerable spouses.
• Abella J strongly criticized the law, arguing that it failed to protect the most vulnerable partners, particularly those who were economically dependent on their common-law spouse.
• The Court ultimately upheld the Quebec Civil Code’s exclusion of de facto spouses from property-sharing laws but found the exclusion of spousal support to be unconstitutional.

Division of Matrimonial Property

• Part I of the FLA establishes a scheme of deferred sharing of wealth accumulated during the marriage.
• Principle: both spouses make a vital and essentially equal contribution to the family unit & the acquisition of wealth by the unit, even if in practice they don’t make equal, it will be divided equally.
• By deeming that all marriages contribute equally, the act avoids the onerous and task of determining who contributed what to the marriage and all contributions are equal.
• Part 2 provides special treatment of the matrimonial home.
• Both of these parts only apply to married persons.
• The equalization scheme doesn't affect title; it deals with value, resulting in an obligation.
• The spouses leave the marriage with property they are entitled to and a debt that is owed by one spouse the other (equalization); it's the value of the property that is divided.

Principles re Equalization of Value

• Child care, household management, and financial provision are the joint responsibilities of the spouses.
• Inherent in the marital relationship is equal contribution, whether financial or otherwise, by the spouses to the assumption of these responsibilities, entitling each spouse to the equalization of net family properties, subject only to the equitable considerations set out in subsection (6)

The Ontario Law Reform Commission (OLRC) recommended extending matrimonial property regimes to cohabiting couples

• Identifies policy reasons for the recommendation, including functional similarities between married and unmarried couples and economic fairness.
• Some provinces (like British Columbia) have since revised their laws, while others, including Nova Scotia, have not

Charter Challenges

• In Miron v Trudel (1995) and M v H (1999), the Supreme Court ruled that differential treatment of cohabiting couples infringed Charter equality rights.
• Examines Catherine Walsh’s constitutional challenge in Nova Scotia (AG) v Walsh (2002 SCC 83).
• While the Nova Scotia Court of Appeal found discrimination, the Supreme 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 method for dividing family property at marriage breakdown.
• Unlike other provinces, Ontario uses an equalization of value approach rather than dividing property outright.

Defining the Equalization Amount: Principles and Processes

• The following steps are used to determine the equalization amount:
  • Determine the valuation date
  • Determine the property owned by each spouse on the valuation date
  • Deduct debts and liabilities from property
  • Determine if any of the spouse’s property is excluded by s. 4(2)
  • Deduct the property owned by each spouse on the marriage date
  • Deduct the property owned by each spouse on the marriage date
  • Minus debts and liabilities from property
  • Calculate the net family property (NFP) for each spouse.
  • Determine ½ difference between greater and the lesser amounts
  • Assess any claim under s 5(6) for more than ½ difference

Part I FLA - Section 5(1)

• Stipulates that the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.
• Triggering events for equalization including when divorce is granted
  • When marriage is declared a nullity
  • When spouses are separated and there is no reasonable prospect that they will resume cohabitation -6) Where a surviving spouse,
• (a) is the beneficiary,
• (i) of a policy of life insurance, as defined under the Insurance Act, that was taken out on the life of the deceased spouse and owned by the deceased spouse or was taken out on the lives of a group of which he or she was a member, or
• (ii) of a lump sum payment provided under a pension or similar plan on the death of the deceased spouse;

Some Basic Principles Concerning Equalization in the FLA

• The FLA applies unless spouses opt out via contract.
• Special rules apply for the Matrimonial Home and spouses cannot exclude it from division.
• The surviving spouse can elect equalization or inherit under a will if there is death or divorce

Step 1: Determining the Valuation Date (V Day) - FLA, s. 4

• Valuation date (V day) is 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 5(3)

• This is an exception to earliest of 5 valuation dates
• 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.
• Permit a spouse to protect portion of family assets and this provision applies for equalization before separation but cannot get again unless you put it into a domestic contract

Examples of V Day Determinations: The Relevance of Discretion?

• Courts exercise discretion in determining valuation date when separation is gradual.
  • Oswell v Oswell (1992) – A deteriorating marriage justified setting V day months before formal separation and trial judges the discretion to determine valuation date is when evidence of deterioration in marriage over time.
  • Tokaji v Tokaji (2016) – Separate finances, cohabitation status, and tax returns were factors considered by the court.
  • Caratun v Caratun (1987) – The court ruled separation date as when one spouse leaves with no intent to return.

Marriage and Equal Shares: FLA, s. 5(7)

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

Approaches to Property Sharing: Sharing the Property or Sharing Its Value?

• Provinces like British Columbia divide property, while Ontario uses an equalization of value model, ensuring fairness without altering ownership.

Family Property at Marriage Breakdown in Ontario: The "Equalization of Value" Approach

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

Section 4(1) defines Property means

• any interest, present or future, vested or contingent, in real or personal property. It includes:
  • Property including property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favor of himself or herself.
  • Property disposed of by a spouse but over which the spouse has, alone or in conjunction with another person, a power to revoke the disposition or a power to consume or dispose of the property.
  • In the case of a spouse’s rights under a pension plan that have vested, the spouse’s interest in the plan including contributions made by other persons.

Emerging Issues Regarding “Property”

• The definition of property in section 4 of Ontario’s Family Law Act (FLA) includes a broad range of interests.
• Courts have debated whether certain assets, such as professional degrees, pension entitlements, and beneficial ownership, should be considered property for equalization purposes.
• The legal framework has evolved to clarify the inclusion of certain proprietary interests.

Reproductive Material as Property

• The case of JCM v ANA (2012 BCSC 584) raised the issue of whether sperm straws are property. The court ruled that since the parties treated them as property (purchased them), they should be divided accordingly.
• This ruling contrasts with the common law principle that a human body and its substances are not capable of being owned.
• The Royal Commission on Reproductive Technology previously recommended against commodifying human reproductive materials, leading to federal legislation prohibiting their sale.

Case: SH v DH (2018 ONSC 4506, 2019 ONCA 454)

• A dispute arose over an embryo after a couple separated.
• The trial court ruled the embryo was property and subject to division under the FLA.
• The Ontario Court of Appeal overturned the decision, ruling that Canada’s regulatory framework (Assisted Human Reproduction Act and its regulations) imposed a consent-based rather than a contract-based approach to embryo ownership
• The ruling emphasized that donor consent can be withdrawn at any time, even if contracts exist.

Pets as Property

• Courts generally consider pets personal property, though they recognize the emotional attachment.
• In Baker v Harmina (2018 NLCA 15), the court refused to recognize joint ownership of a pet under traditional property principles.
• The dissenting opinion suggested that pets are different from inanimate objects and that ownership decisions should consider more than just who paid for the animal.

Property and Professional Degrees in Family Law - Caratun v Caratun (1992, ONCA)

• The case concerned whether a professional degree or licence (e.g., a dental licence) constitutes property under Ontario’s Family Law Act (FLA).
• The trial court initially ruled that Dr. Caratun’s dental licence was property and that his wife, who had contributed to his education and immigration, was entitled to compensation.
• The Ontario Court of Appeal overturned this ruling, holding that a professional licence is not property because:
  • It is non-transferable.
  • It depends on the future labour and personal efforts of the holder.
  • Valuing it for equalization purposes would be too speculative.

Compensation Instead of Equalization

• Instead of treating the licence as property, the court awarded compensatory spousal support to Mrs. Caratun for her financial and personal sacrifices.

Policy Issues with Treating Degrees as Property

• Courts have resisted recognizing professional degrees and licences as property due to concerns about fairness, valuation, and legal precedent.
• Linton v Linton (1988) reaffirmed that a right to work should not be classified as property.

Future Income Streams and Contingent Interests as Property

• Courts have struggled with whether future income streams and contingent interests should be considered property under Ontario’s Family Law Act (FLA).
• While professional degrees and licences are generally not treated as property, some future interests in income-producing assets have been recognized as property.

Key Cases:

- Brinkos v Brinkos (1989 ONCA)
    - A wife had a life interest in a trust fund set up by her father.
    - Court of Appeal ruled that the life interest in the trust was "property" for equalization purposes
    - Gifts received after marriage (such as additional deposits into the trust) were excluded from net family property
- DaCosta v DaCosta (1992 ONCA)
    - A husband had a contingent inheritance interest in an estate that would be distributed after the death of the last surviving heir.
    - The court ruled that the contingent interest was "property" under the FLA and should be included in equalization.

Discretionary Trusts and Property Rights

• Discretionary trusts give trustees the authority to determine how funds are distributed, meaning beneficiaries do not have a guaranteed or vested right.
• Borges v Santos (2017 ONCJ 651): A woman sought child support garnishment from her ex-partner’s trust fund, but the court ruled the trust was discretionary, so the beneficiary had no proprietary interest in it.
• This decision distinguished discretionary trusts from fixed or life interests, reinforcing that not all trust interests are "property" under the FLA.