">
For married couples in Ontario, the equalization scheme set out in the Family Law Act is the presumptive scheme for dividing property. In some situations, courts may depart from this framework, but equalization is intended to address the economic consequences of a marriage. But spouses may seek to obtain value from property outside equalization through an unjust enrichment claim, enabling them to benefit from increases in property values after separation. But courts have emphasized that, in most cases, the equalization process will fully address any unjust enrichment arising from a marriage.
Applicant Attempted to Claim Post-Separation Increase in Property Value
In Schmutz v. Schmutz, the parties had been married but separated in December 2020. The only question was whether the applicant had an unjust enrichment claim to a property that her late husband legally owned. During their family proceedings, the parties completed equalization of net family property, resulting in the husband’s estate paying the applicant an equalization payment of $34,116.92. The husband solely owned the property in question; however, it was originally financed in part by a $3000 joint loan. Also, the applicant’s father loaned the husband $227,345.75 to construct buildings on the property. The principal was paid off, but no interest was paid on the loan. Additionally, the applicant was the breadwinner, while the husband operated a repair shop on the property, earning a modest income, sometimes none.
The property was ultimately sold for $1,250,000. However, the value of the property increased between the valuation date and the date of its sale by $194,212. The applicant sought a 50% share of this increase on a joint family venture basis, amounting to $97,106. The applicant argued that throughout their 40-year relationship, she financially supported the acquisition and maintenance of the property, and that the husband was enriched through her contributions. She claimed these contributions were a financial deprivation to her.
The respondent Estate Trustee argued that this was not a case in which the remedy of a joint family venture for unjust enrichment applied. Instead, it was suggested that the equalization regime set out in the Family Law Act (FLA) governed the division of family property for married spouses. It was also pointed out that under section 5(6), there is already a provision to depart from the presumptive equal division of net family property between the spouses. But the respondent argued that in the majority of cases, any unjust enrichment arising during a marriage will be addressed through the equalization provisions.
Ontario Court Confirms Equalization Generally Resolves Economic Claims Between Married Spouses
Before proceeding with the unjust enrichment analysis, the first consideration was whether the parties were married. The judge noted that when individuals cohabit outside of a marriage, unjust enrichment claims can arise. But these claims do not typically arise in the same manner when the parties are married. The judge looked to the authorities, suggesting that courts cannot consider unjust enrichment and equalization separately; they must consider whether an equalization payment removes the need for an additional monetary or proprietary award.
This is consistent with the Ontario Court of Appeal’s finding in McNamee v. McNamee. There, the Court determined that “the vast majority of cases, any unjust enrichment that arises as the result of a marriage will be fully addressed through the operation of the equalization provisions under the Family Law Act”.
Justice Spurgeon found that the respondent’s position was preferred. The parties had a long marriage, and the equalization process set out in the FLA was intended to address the economic aspects of their relationship. The judge found that there was no reason to depart from the presumptive property calculations in the FLA, which provided an equal division of the increased value of the total family wealth during the marriage. Additionally, the judge felt that adding an unjust enrichment claim to the existing net family property calculations was inappropriate given the “unexceptional nature of the economic dynamics” between the parties.
Overall, there was no need to undertake an unjust enrichment analysis. Nevertheless, the judge proceeded beyond this threshold issue and considered the matter through the unjust enrichment framework.
Court Reviews the Legal Test for Unjust Enrichment in Family Law Cases
The judge proceeded to examine whether the applicant could prove an unjust enrichment. Kerr v. Baranow set out the elements of an unjust enrichment claim. First, the claimant needs to show that the respondent has been enriched. The claimant must have given a benefit to the respondent, which the respondent retained. The second element requires the claimant to demonstrate that they suffered a corresponding deprivation. As Kerr makes clear, the “loss is material only if the defendant has gained a benefit or been enriched”.
The third element of the claim requires that there be no juristic reason for the enrichment. The court must determine that there is no reason in law or justice for the respondent to retain the benefit. In Kerr, the Supreme Court of Canada identified a two-step test. First, the court considers the established categories of juristic reasons which exist and permit the respondent to retain the benefit and deny the claimant’s recovery. These arise from a gift, a contract, a disposition of law, or other valid common law, equitable, or statutory obligations. At step two, if there are no categorical juristic reasons, the court then considers the reasonable expectations of the parties, and whether there are any public policy considerations that may indicate whether recovery should be denied.
Family Law Act Equalization Framework Took Priority Over Additional Property Claim
Looking at the facts of the case, the judge agreed that, during the course of the marriage, the husband may have been materially enriched, with the applicant suffering a corresponding deprivation. There were various indications of a potential unjust enrichment. In particular, the applicant made a greater contribution covering household expenses, and also assumed loans to purchase property and pay off tax arrears. There was also the non-payment of interest on a loan from the applicant’s father.
However, when it came to any juristic reason for the husband to retain the material benefit at the applicant’s detriment, there was a clear reason to do so because of the statutory obligation for the equalization of net family property.
The judge explained that the FLA equalization provisions reflect a public policy determination that “marriage is an equal economic partnership and the net accretion of wealth gained between the date of marriage and the date of separation within that partnership should be divided equally, subject to specific exceptions”. In this case, in the net family property calculations, the property was listed as being owned exclusively by the husband. The judge explained that this affected the relative value of the family wealth held by the parties up to the separation date. And if the applicant’s claim for one-half interest in the property had been acknowledged within the net family property calculations, the obligation for the husband to make an equalization payment could have been diminished or even reversed.
Overall, the applicant was trying to obtain value for the property outside the equalization calculations and after the separation date. The judge found that in the absence of exceptional circumstances, which did not exist in this case, the applicant’s proposal conflicted with the FLA framework. And this was a legal justification for maintaining the status quo. Consequently, her unjust enrichment claim failed.
Navigating Property Division & Equalization Claims in Windsor-Essex? Contact Johnson Miller Family Lawyers
Property division disputes can become complex when spouses seek compensation beyond Ontario’s equalization framework. Whether your matter involves unjust enrichment claims, family property disputes, post-separation asset increases, or equalization payments under Ontario’s Family Law Act, experienced legal guidance is essential.
At Johnson Miller Family Lawyers, our skilled family law team assists clients with high-value property disputes, equalization calculations, constructive trust claims, unjust enrichment allegations, and complex financial issues arising from separation and divorce. We provide strategic, practical advice tailored to the realities of modern family litigation. To schedule a confidential consultation, please contact us online or call 519-973-1500.
