Monday, December 03, 2012

Kerr v. Baranow: SCC Makes Headway in Family Law Unjust Enrichment Claims

The Supreme Court of Canada's February 2011 decision in Kerr v. Baranow highlighted the entitlements of cohabiting, but unmarried spouses in in family property claims.  The Court's ruling on resulting trust and unjust enrichment claims will have positive reverberations for cohabiting partners, a group that is not currently recognized under any of Canada's provincial matrimonial property regimes. 

Prior to this decision, resulting trust claims could only be successful if it was clear that a “common intention” existed between the parties that the non-title holding spouse would retain a property interest. The Court concluded that the notion that a “common intention” could be imputed to the parties through their conduct was fanciful.  It pronounced this theory as “doctrinally unsound,” holding it could no longer play a role in Canadian domestic property disputes. As such, the court recognized that the law of unjust enrichment and the remedial constructive trust are more appropriate legal devices to be applied upon the breakdown of common-law relationships.

The Court reviewed its landmark 1980 decision in Pettkus v. Becker, which clearly set out the three key elements which must be shown in order to succeed on an unjust enrichment claim. First, the claimant must show an enrichment of the defendant by the plaintiff, that the conferral of this enrichment was to the detriment of the plaintiff, and there was an absence of a juristic reason for the deprivation. This last element means that there are no grounds, in either law or justice, for the defendant to retain the benefit conferred by the plaintiff and takes into consideration the legitimate expectations of both parties. 

Kerr v. Baranow also shed needed light on issues which had previously muddied claims for unjust enrichment. 

For example, one thorny issue in unjust enrichment claims was how to treat a mutual conferral of benefits in the relationship. A responding spouse might argue that the provision of reciprocal benefits constitutes evidence that there has been no enrichment, insofar as the other spouse has similarly retained benefit. However, Justice Cromwell’s unanimous decision resolved this potential pit-fall by rejecting a discussion of mutual benefits at the benefit/detriment stage and more appropriately considering it at the defence/remedy step. 

Baranow was therefore able to argue by way of defence or counterclaim that Kerr was unjustly enriched by the domestic and personal care services he provided after she suffered a serious stroke. However, he was precluded from arguing that his enrichment by Kerr due to her contributions toward the home, household expenses, and domestic work was effectively cancelled by the reciprocal benefit he provided to her..

The most  important holding in the decision relates to quantifying unjust enrichment claims based on the contribution that non-title holding spouses make to the accumulation of assets during the relationship. 

Previously, unjust enrichment claims were calculated based on a fee-for-services approach which essentially treated the spouse, commonly the woman, as hired help. As a result, these claims often left the title-holding spouse with a disproportionately high share of the assets when the other spouse’s contribution was calculated on a “quantum meruit” or “value received” basis.

As Justice Cromwell explained, this approach has historically disenfranchised women given that the dollar-for-dollar value of domestic services is far exceeded by the accretion in wealth that these contributions facilitate. Justice Cromwell took a decidedly progressive stance: 
“...in my view, where both parties have worked together for the common good with each making extensive, but different, contributions to the welfare of the other and, as a result, have accumulated assets, the money remedy for unjust enrichment should reflect that reality.”
The Court further ruled that monetary remedies need not be calculated on a “quantum meruit” basis but, rather, must be addressed on  a “value surviving” approach that takes into account how a spouse’s contribution increased the overall value of the property. 

A new term - Joint Family Venture - was articulated by the Court as applicable to discussion of a more equitable approach to valuing how contributions like domestic services and child care enable one spouse to pursue more lucrative pursuits by virtue of the other spouse’s unpaid work. In assessing whether the parties economic endeavours and the wealth accumulated during cohabitation can be characterized as a “joint venture” the Court looks at whether the couple worked collaboratively towards common goals, the extent to which their finances were integrated, as well as their actual intentions and priorities

The court's four-pronged test for establishing a Joint Family Venture - mutual effort, economic integration, actual intent and the priority of the family - establishes a very important precedent that addressed the considerable uncertainty of prior jurisdiction on trust claims in family law matters.  As a result, spouses who would otherwise have been deterred from pursuing a remedy will now have a considerably greater likelihood of success.


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