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Brahm D. Siegel

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Ask a Divorce Lawyer: 2011 Case of The Year: Kerr v. Baranow

Posted: 02/20/2012 12:42 am

Brahm Siegel is a Toronto family law and divorce lawyer, mediator and arbitrator. He will answer your questions on all aspects of family law. Write to him at bsiegel@nathenssiegel.com.

In Ontario, we don't divide property between married persons literally in half or "in specie." Instead, we have a law that states whichever spouse's net worth has increased more than the other's during the marriage must pay an amount of money to that spouse to make life equal. That payment is, in Ontario, called an "equalization payment." As a result, legal ownership rarely makes a difference since even if one spouse owns all of the parties' assets, s/he will wind up making a large equalization payment which has the effect of, well, equalizing the parties' net worth.

But what about folks who are not legally married? What if both of them contribute to the wealth but everything is in only one person's name? Since unmarried couples have no right to sue for property or "equalization" in Ontario (and many other provinces except Nova Scotia and Saskatchewan), is there any recourse for the non-titled party?

The short answer is "yes," and one of the most important cases in 2011, Kerr v. Baranow, clarifies exactly the correct approach in such matters.

Heard by the Supreme Court of Canada in April 2010, released almost a year later in February 2011 and penned on behalf of the Court by Mr. Justice Cromwell, the case is an extremely eloquent and lucid treatise on the law of "unjust enrichment."

At the heart of unjust enrichment is the notion of restoring a benefit that justice does not allow a person to retain over another. Under longstanding Canadian law, a plaintiff has a claim for unjust enrichment where s/he can establish these three things:

  • an enrichment or benefit to the defendant;
  • a corresponding deprivation by the plaintiff; and
  • the absence of a juristic reason for the enrichment.

Under the first two criteria, the plaintiff must show that she gave something to the defendant which he received and retained. The benefit need not be retained permanently but the defendant must have benefited or been enriched as a result of it. The benefit may be positive or negative (meaning something that but for the benefit would have resulted in the defendant incurring an expense) and must be capable of compensation by money or property.

Under the third criteria, the plaintiff must show there is no reason in law or justice why the defendant should retain the benefit. For example, a valid contract between the parties (like a cohabitation agreement or marriage contract) allowing the defendant to retain the benefit would, on its face, appear to constitute a juristic reason.

Before Kerr v. Baranow, successful plaintiffs in unjust enrichment cases were compensated via a "fee for service" method called "quantum meruit." This involved a highly unsatisfactory and unscientific method of trying to calculate the value of the service or services provided by the plaintiff which benefited the defendant and led to the unjust enrichment and contrasting it with the impact the value of said contributions on the current value of the property in question. In Kerr v. Baranow, the Court does away with this notion and instead replaces it with a different approach, one called the "joint family venture."

The concept is simple enough. Where the contributions of both parties over time result in an accumulation of wealth, the unjust enrichment occurs following the breakdown of the relationship when one party retains a disproportionate share of the assets which are the product of their joint efforts. In contrast to the traditional analysis, the required link between the contributions of the plaintiff and a specific property may not exist, but as long as there is a clear link between the joint efforts of the parties and the accumulation of wealth, a claim for unjust enrichment may be made out. Consequently, regardless of who actually owns the property in question, when the parties have engaged in creating wealth in a common enterprise, the wealth created during the period of cohabitation will be treated by the Court as the fruit of their domestic financial relationship and not solely the property of the titled spouse.

The Court's elimination of the need to show a contribution to a specific property represents a broadening of the parameters of the claim and has led many lawyers and commentators (yours truly included) to presume that we will now see more claims of unjust enrichment in the future.

Of course, proving a joint family venture may not be as simple as some think. Whether or not the proper facts can be mustered to prove such a claim will be a challenge for some. Whether or not the couple was working together for the same economic goals, whether their economic lives were integrated and whether they had the same priorities are all questions of fact a trial court will have to satisfy itself before a finding of JFV can be made. In addition, the Court was careful to note that mere cohabitation does not, under the law of unjust enrichment, entitle a party to a share of the other's property or to any remedy in the absence of proof of contribution. In addition, simply because a joint family venture is established does not mean the non-titled spouse will receive 50 per cent of a specific property or 50 per cent of all the total of the parties' assets. The Court always retains the ability to select a certain percentage.

It will be interesting in the years ahead to see how lower courts interpret the concept of "joint family venture". The one thing, however, that all family lawyers seem to agree on is that Kerr v. Baranow was the most significant family law case decided by the Supreme Court in 2011 and that it is a well-written decision that must be carefully read anytime a claim for unjust enrichment is asserted. I commend it to you all.

Have a question about family law? Ask Brahm at bsiegel@nathenssiegel.com.