How to Split Property for Common Law Spouses Part 2
In this issue of the Advisare, we highlight the considerations in determining how to split property among separating common law partners now that Canadian lower Courts are applying the most influential Supreme Court case of the last decade namely Kerr v. Baranow and Vanasse v. Seguin.
From the Supreme Court of Canada, we know that:
- The law of unjust enrichment and remedial constructive trust are available to common law partners;
- The remedy is generally a monetary award as opposed to a property interest;
- The award should be proportionate to the claimant’s contributions;
- There is no presumption of property sharing in a common law relationship;
- The approach to calculating an award will generally depend on whether the parties were engaged in a “joint family venture (JFV);”
- To find a JFV, we must consider (a) mutual effort, (b) economic integration, (c) actual intent and (d) priority of the family;
- If the partners actually lived in a JFV, the claimant’s contributions must be linked to the generation of wealth in order to share in that wealth; and
- The extent of the “share” is “not an exact science” but rather is a “reasoned exercise of judgment.”
How will that judgment be exercised? One must consider the Vanasse case. Vanasse involved a couple who lived together for twelve years and had two children together. While both parties spent part of the relationship gainfully employed, Ms. Vanasse left her employment to follow Mr. Seguin to another province, allowing him to pursue a business opportunity. Following the move, the couple had children and Ms. Vanasse stayed at home to care for them and maintain the household. During this time, Mr. Seguin worked long hours and travelled extensively for his business. He later sold his shares in the business for which he received approximately $11,000,000.
Following separation, Ms. Vanasse claimed Mr. Seguin was unjustly enriched and she sought a one-half interest in Mr. Seguin’s investment assets stemming from the sale of his business. Ms. Vanasse argued that it was not fair for Mr. Seguin to exclusively retain all of the funds from the sale of the business, when she provided her domestic and childcare services which allowed him to focus his time and energy into building the business.
The Supreme Court found that Ms. Vanasse and Mr. Seguin were involved in a joint family venture. The couple worked collaboratively towards common goals and pooled their resources and efforts for the welfare of their family. During the time in which Mr. Seguin was pursuing his business venture, Ms. Vanasse was almost entirely responsible for the household and the children, according to the Court.
The Court gave considerable weight to the length of the relationship, the couple’s decision to have and raise children and their intention to be married. The Court also noted the integration of the parties’ finances. The Court found that Ms. Vanasse relied on the relationship to her detriment in order to prioritize the family. She gave up a lucrative career to care for the children and the household. The Court also found that there was an obvious link between Ms. Vanasse’s contributions to the household and Mr. Seguin’s accumulation of wealth, solidifying Ms. Vanasse’s unjust enrichment claim. Without Ms. Vanasse’s assumption of the domestic responsibilities, Mr. Seguin could not have spent the time and effort in building up the company.
The main issues in Vanasse were how Ms. Vanasse’s contributions should be measured and what type of award ought to be given. The Court awarded Ms. Vanasse $1.2 Million dollars. This was found to be the proportion of Mr. Seguin’s wealth that was due to Ms. Vanasse’s efforts as an equal contributor to the family venture during the period in which she was unemployed and caring for the children and the household.
Since Vanasse, the calculations of unjust enrichment claims by Canadian Courts in the context of separating common law couples have been fact specific and, at times, inconsistent. The Courts have awarded varying amounts of relief ranging from nothing to one half of the parties’ respective increases in wealth. In an attempt to understand which partnerships are likely to receive some form of relief for contributions made during the partnership, a basic concept should be kept in mind at all times: “equity presumes bargains, not gifts.” So, “nothing is for nothing” unless it is expressly a gift. Viewed in this context and absent an agreement between the parties, the presence of some or all of the following factors suggest an award will be made, assuming a claimant’s contribution can be linked to the accumulation of wealth during the relationship:
- A lengthy and stable relationship;
- Partners that work together towards collective goals;
- Partners that pool their assets and income and show little concern for “accounting;”
- Partners that have children together;
- Partners that adopt roles, such as a homemaker, that allow their partner to accumulate wealth;
- Partners that hold themselves out as married-like spouses; and
- Partners that prioritize the relationship to other activities (i.e. leaving the workforce to raise children)
From the opposite perspective, factors that point towards no or little compensation on a breakdown of a common law partnership include:
- Partners that have explicitly addressed the impact of a separation in a domestic contract;
- Partners that maintain separate assets, separate bank accounts and agree to and make contributions to expenses in an consistent, provable fashion; and
- Partners that otherwise make their expectations plain from their words and acts.
It is no easy task to predict how a Court will make a reasoned exercise of judgment, but the presence of a few or more of these factors will go a long way to determine the appropriate remedy.