“Every moment is a fresh beginning” – T.S Eliot, The Cocktail Party
Its fair to say that when T. S. Eliot wrote this famous line from his Tony Award winning play The Cocktail Party, he wasn’t exactly thinking about unmarried couples involved in property disputes that raised complex legal concepts such as resulting trust, unjust enrichment or joint family ventures.
However, the decision of G.M.C v. A.M.F (2018) ONSC 2704 hits on some of the biggest misconceptions in family law; concerns that strikes fear in all individuals living with their common law spouse. They are, at best, fair questions that apparently seem to allude even lawyers at times as this case demonstrates.
I. Basic Background
G.M.C. (the “Applicant”) and A.M.F., (the “Respondent”) met in 2011. The evidence pertaining to the commencement of their cohabitation conflicted in that he maintained she did not, in fact, move in with him prior to purchasing the property in dispute because she frequently returned home to her parents. He testified at trial that she refused to live in his house (the “Kitchener residence”) as it was his formal matrimonial home, did not receive her mail there and continued to live with her parents.
Conversely, the Respondent insisted she was purchasing groceries, owned joint bank accounts and was involved with the schooling and activities with his child from his previous marriage. In her mind, they had been cohabiting for a number of years toward a common family goal.
What wasn’t in disputed was the fact that the parties eventually purchased a home together (the “Wilmot residence”). The Applicant accepted an offer to purchase of his previous home he solely owned for $305,000 wherein both parties agreed that his equity or net sale proceeds would be $116,000. Prior to closing the property, he further arranged bridge financing, pledging the proceeds of his former home and remained solely liable for the mortgage.
At the time of the transaction, the Applicant had contributed $116,000 toward the purchase of the new home and the Respondent contributing $5,000 from a first-time home owner’s loan.
Interestingly enough, the lawyer handling the real estate transaction apparently had no actual discussion with the parties as to how they would hold title except for one simple email he sent to the Respondent:
“I am assuming that you want to hold title as joint tenants (so if one of you passes away, the other becomes fully entitled to the property). If I’m wrong about this please let me know.” (para. 30)
This email was forwarded to the Applicant who responded as follows:
“Yes to joint names on title, it also means that if you kill me off, you will need to pay off my debt bitch.” (para. 31)
On this basis, the real estate lawyer registered the Wilmot residence with both parties as joint owners. After moving in on July 2014, the Respondent started depositing her salary into their joint account, they obtained a joint line of credit to finance renovations and purchased a series of other items for the home together.
Unfortunately, even the birth of their son in 2015 could not save this relationship as the parties separated in October 2016. Now, the real cocktail party began.
II. Position of the Parties
The Applicant’s position at trial was that he was the beneficial owner of the Wilmot residence and therefore entitled to all the sale proceeds. He testified that he had two specific conversations with his co-purchaser Respondent that he wanted to protect his money in the house for his young son if something should happen to him.
He further explained to the Court that while he was content with her acquiring ownership of the house in the event of his death and understood that the balance of life insurance policy proceeds he recently obtained would go to her, he was adamant that he did not intend to gift her with the sale proceeds from his former Kitchener matrimonial home.
The Respondent’s position was that the net proceeds of sale should be divided equally. She explained how the parties’ finances were sufficiently integrated so as to conclude a joint family venture existed. While she acknowledged during her testimony that he never specifically said he was “gifting” her with respect to his interest, she believed that his representations to her to the effect that purchasing Wilmot property would be a “fresh start” for them to begin as a family. On this basis, she argued that he had, in fact, intended to gift her with these proceeds.
1. Is the conduct of the parties a relevant factor in this matter?
2. Did the Respondent rebut the presumption of resulting trust and establish that the Applicant had gifted his interest in the property?
3. Was the Applicant unjustly enriched? If so, what remedy should the court apply?
IV. Determination of the Court
Justice D.J. Gordon for the Ontario Superior Court dismissed the relevance of the first issue as being a non-factor in this matter. To the credit of counsel, they wisely choose to avoid leading conduct evidence which clearly had no bearing on the result of this matter.
The solicitor for the Applicant submitted to the court that the principles of resulting trust and unjust enrichment should be combined for the purposes of this matter. The basis for this understating was a reference within the leading Supreme Court decision of Kerr v. Baranow (2010) SCC 10 toward the term “general rule,” to mean that it should not apply in every case.
Justice D.J. Gordon for the Ontario Superior Court quickly dismissed this submission by reminding counsel that the concepts of unjust enrichment and resulting trust are two distinct concepts that have important implications, especially when assessing the evidence in a matter such as this. Justice Gordon explain at paragraph 68:
“Further, resulting trust and unjust enrichment are different principles. By combining them, as Mr. Kelly proposes, the result would be to use impermissible evidence on post transfer events, relevant only to unjust enrichment, to establish intent at the time of the transfer regarding resulting trust. “ (para. 68)
Justice Gordon reminds counsel that its not the events which follow the transfer that are relevant in this discussion but rather at the time of the transfers. As he correctly points out,
“Evidence as to integration of finances and other such matters after July 2014 (separation date) cannot be used to establish prior intent unless there is an indication of a subsequent gift.” (para. 78)
This distinction is important and should not be conflated with other legal concepts such as unjust enrichment as it has a direct bearing on what precisely guides the court when evaluating what evidence is most relevant.
As Justice Gordon points out, this case is the classic example of a resulting trust: Party A contributions $160,000 to the purchase price while Party B only contributes $5,000. Yet both parties legally hold the property equally as joint tenants. In situations such as this, the operations of equity automatically trigger a presumption of a resulting trust in favor of the Respondent in that the Applicant is merely holding his interest for his behalf.
In order for the Applicant to successfully claim an equal share of the proceeds of sale, the Respondent has to rebut the presumption and establish that the Applicant intended to “gift” his interest to her in this respect. This is not an easy task as it calls upon the court to determine his intention at the time of the transfer.
After considering all the evidence, including the credibility of the parties as the only witnesses in the case, Justice Gordon concluded that the Respondent failed to rebut the presumption in this matter.
While the Applicant presented as an “angry individual,” this did not detract from the fact that he never told the Respondent he intended to gift her his interest. This fact was specifically acknowledged by her during trial.
Instead, the basis of her argument resolved around the idea that both herself and the Applicant had contemplated a “fresh start,” including marriages as a joint family unit. It was her understanding that they understood her contribution to mean that they were sharing a common goal of being a family.
However, Justice Gordon reminds us that her intention is not relevant; it is the Applicant’s intention at the time of transfer that matters. Despite the finding that his intention was unclear, the fact remained that the Respondent failed to convince the Court that he clearly intended a gift. As such, her claim failed in this respect.
With regards to unjust enrichment, Justice Gordon reiterates the test within Kerr for such a claim to be successful:
“The elements in unjust enrichment are:
(a) An enrichment or benefit to one party;
(b) A corresponding deprivation to the other; and
(c) the absence of a juristic reason for the enrichment
As the parties in this matter were not married, Justice Gordon further explained how the joint family venture was to be considered in matters such as this:
“In Kerr, Cromwell J. introduced the concept of a “joint family venture” to identify the nature of those domestic relationship involving a joint effort, or partnership, where the parties jointly contribute towards a common goal. Relevant factors to consider include mutual effort, economic integration, actual intent and priority of family. Unjust enrichment is said to reflect the reality of a joint family venture where there has been a disproportionate retention of assets.” (para. 70)
The Respondent was able to convince the Court that a joint family venture was established by July 2014. In addition toward having a child together, the parties had integrated their bank accounts and were working together toward a common family goal.
However, her argument failed to past the first step of the test as Justice Gordon held the Respondent failed to establish that the Applicant received an enrichment for the following reasons at paragraph 83 – 84:
“In my view, the contributions of A.M.F. prior to July 2014, both financial and in other forms, were offset by the benefits received. She did not have rental or other household expense. Her housing expense on her own would have exceeded her contributions. A.M.F had no liability for the mortgage of the property. She was able to make contributions to her registered retirement savings plan.”
When the benefit offset the contribution, there can be no unjust enrichment. See: Peters v. Swayze, 2018 ONCA 189 (ONCA. Such is the case here until July 2014.” (para. 83 – 84)
Justice Gordon concluded the matter in finding that there was a resulting trust and no unjust enrichment. He ordered that the remaining net sale proceeds, $110,909.20 plus accumulated interest, be paid to the Applicant.
V. Final Thought
Had these parties simply retained a family lawyer to draft a basic cohabitation agreement, a court action likely would not have even been commenced in the first place. It never ceases to amaze this authour how case facts such as these continue to be litigated in family courts today. Counsel acting for parties in situations as these case facts owe it to their clients to at least recommend speaking with a family lawyer to discuss the benefits a cohabitation agreement to avoid this from occurring.
Furthermore, the fact that a senior counsel with over 20 years experience would just assume that both parties actually understood the legal implications of joint ownership despite being in a common law relationship received well deserved condemnation from Justice Gordon who, without making a determination on the issue, alluded to the probability that this entire trial “likely” would have never happened had the lawyer performed the services expected of a reasonably competent lawyer practicing in real estate. In the end, no amount of poetic justice will ever convince a judge of Ontario that just because one party made some contribution to the purchase of a property that they are automatically entitled to an equal division upon separation. The only fresh beginning in this matter is the fact that there’s an upcoming trial for custody, access and a whole other host of family law issues that won’t involve these property issues. They are just step closer to toward another avoidable cocktail party.
Jon is a family lawyer practicing exclusively in all areas of family law with Jaskot Family Law in Burlington, Ontario
This article is intended for informational purposes only. Its does not constitute legal advice nor does it create a client/solicitor relationship. For more information or if you require legal assistance, please contact us at www.jaskotfamilylaw.ca for more information.