In a recently released decision, the Ontario Court of Appeal once again tackled the issues of setting aside a domestic contract, unjust enrichment in the context of married spouse, and the remedial framework to be applied where either of the two is present.
In Martin v. Sansome, the Court was faced with a factual scenario that read like a first-year Family Law exam. The appellant, Delmer Martin, and the respondent, Linda Sansome, met in 1985, began cohabiting in 1988 and had a daughter the following year. In 1996, the two married but were separated in 2007. In 1999, the couple had agreed to buy the farm that the appellant had been raised on from the appellant’s parents. As members of the Mennonite church, the appellant and his parents agreed to follow the instructions of a church committee in executing the sale. Without the respondent’s knowledge and on the advice of the committee, the appellant’s lawyers ‘stroked out’ her name from the purchase agreement, effectively making the appellant the sole owner of the farm. The same day, the respondent was told that she was required to sign a marital contract, effectively waiving all proprietary rights to the farm. The respondent was sent to a lawyer who was, as the Court noted, “effectively blind” and “could not and did not read the domestic contract or review it.” After speaking with the lawyer for 20 minutes, the appellant signed the contract.
When the appellant applied for divorce in 2009, the respondent replied and asked the court, among other things, to set aside the marriage contract and apportion her a 50% interest in the farm. The trial judge accepted her argument that she neither understood the nature nor consequences of the contract, a ground on which a contract may be set aside under s.56(4) of the Family Law Act. The judge found that she had effectively received no independent legal advice and that she “held the mistaken belief that it did not matter whether her name was on the property or not and that it did not matter that she willingly signed a formal agreement.” She rejected that respondent’s argument that, as she knew the deal ‘was not good for her’ and still signed it, she should be bound by it. On appeal, the Court of Appeal upheld the trial judge’s decision.
Turning to the issue of unjust enrichment, the Court again reiterated the principles applicable in these cases. In the case of Rawluk, the Supreme Court noted that the matrimonial property regime in Ontario did not completely displace the remedy of constructive trust, and that a constructive trust may be appropriate in certain family cases to apportion equitable interests in real property. They next turned to Kerr which held that, where unjust enrichment has been proven in the familial context, a Court must determine whether a monetary award of damages would remedy the unjust enrichment. Only after determining that money is insufficient may a Court impose a constructive trust. Reiterating the framework developed in Kerr, the Court held that the Court must answer four questions before imposing a constructive trust:
- Have the elements of unjust enrichment – enrichment and a corresponding deprivation in the absence of a juristic reason – been made out?
- If so, will monetary damages suffice to address the unjust enrichment, keeping in mind bars to recovery and special ties to the property that cannot be remedied by money?
- If the answer to question 2 is yes, should the monetary damages be quantified on a fee-for service basis or a joint family venture basis?; and,
- If, and only if monetary damages are insufficient, is there a sufficient nexus to a property that warrants impressing it with a constructive trust interest?
In applying the framework, the Court of Appeal disagreed with the trial judge’s findings that there was unjust enrichment, and that a constructive trust was the appropriate remedy. While the Court of Appeal agreed that the elements of unjust enrichment had been identified, the Court disagreed that money would be an insufficient remedy in the circumstances, and turned to consideration of how to calculate such an amount. The Court of Appeal determined that if there is a finding of unjust enrichment and monetary damages suffice, the “aggrieved party’s entitlement under the equalization provisions of the Family Law Act should first be calculated.” Where the division would be unfair, the Court noted that s.5(6) of the Family Law Act allowed a court to order an unequal division of marital property. However, in this case, the Court determined that an equalization of the value of property would be sufficient, and thus allowed the appeal from the trial judge’s apportionment of a 50% equitable interest to the respondent and awarded her $390,000 in equalization.