Property Division under a Common-Law Relationship as Contrasted to a Marriage

With respect to the division of property for couples living in a common-law relationship, the  Supreme Court of Canada in December of 2002 denied common-law couples the right to share property upon the breakup of the relationship which property sharing is enjoyed by married couples. The Supreme Court of Canada in  Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269 overturned their own decision from 2002 and laid down what is today the law concerning a division of property in a common-law relationship. The court stopped short of providing the same rights to share property as married couples enjoy, imposing a substantial burden on common-law couples claiming against the property of the other party upon Separation.

On the breakdown of a common-law relationship property disputes are effectively decided on the basis of unjust enrichment. One party may make a claim that they are enriched by the other through work or contribution of monies. Accordingly, one party is claiming that they suffered a deprivation while the other party enjoyed the benefit.  Further, there must be no juristic reason that the other party should retain the benefit.

The Supreme Court of Canada in Kerr v. Baranow, the Court set out the guidelines for determining unjust enrichment cases in the context of a common-law relationship where there has been a joint family venture. If a joint family venture is found, the court may find that one party has been unjustly enriched on the basis that he/she has retained an unequal share of the property accumulated during the relationship. An unequal or as the court described it, a disproportionate share means a share that is disproportionate to that person’s contributions when compared to the other party’s contributions.

The factors that the Court looked at to determine whether there had been a joint family venture during the relationship are whether the couple made mutual efforts, worked collaboratively toward common goals, the extent to which their financial affairs were integrated, their actual intentions to share (or not to share) and the priority they gave to the family in their decisions.

The Court found that where there was a joint family venture, it was appropriate to consider the enhancement to the other person’s wealth. The Court wrote at paragraph 100:

  1. The monetary remedy for unjust enrichment is not restricted to an award based on a fee-for-services approach.
  2. Where the unjust enrichment is most realistically characterized as one party retaining a disproportionate share of assets resulting from a joint family venture, and a monetary award is appropriate, it should be calculated on the basis of the share of those assets proportionate to the claimant's contributions.
  3. To be entitled to a monetary remedy of this nature, the claimant must show both (a) that there was, in fact, a joint family venture, and (b) that there is a link between his or her contributions to it and the accumulation of assets and/or wealth.
  4. Whether there was a joint family venture is a question of fact and may be assessed by having regard to all of the relevant circumstances, including factors relating to (a) mutual effort, (b) economic integration, (c) actual intent and (d) priority of the family.

Accordingly, you can now obtain some relief with respect to the division of property as a common-law couple upon separation, but certainly not without expensive litigation and what may be difficult proofs or evidence to provide to prove your claim.

I am not advocating marriage over common-law relationship but certainly if you anticipate sharing property with your spouse only a marriage gives guarantees provided by statute with respect to division of property. If you decide to live in a common-law relationship and want those self-same guarantees you must enter into a cohabitation agreement before or very early on in the common-law relationship. 

Steps must be taken to protect your respective interests in addition to a cohabitation agreement if you are living common-law or a marriage contract if you intend to marry.

Cohabitation Agreement/Marriage Contract

Remember that signing a cohabitation agreement or a marriage contract is like insurance. You simply ignore it and stick it in a drawer unless you are unfortunate enough to have your cohabitation or marriage end. A cohabitation agreement or a marriage contract attempts to predetermine all issues of the separation without having to go to court.

Wills

There are no automatic rights to share property on the death of one party in a common-law relationship so Wills must be produced contemporaneously with a cohabitation agreement. An existing Will becomes void upon marriage. Click here as to why you should have a Will.

Powers of Attorney

Clearly if you are entering into a marriage or a common-law relationship, you need Powers of Attorney for both Property and Personal Care. Your partner or spouse is your first line of defence should you become ill and by naming your partner or spouse as your power of attorney you give them the ability to care for you during your incapacity. Click here as to why you should have a Power of Attorney.

Life Insurance

This may be the easiest way to leave specific amounts of money to children of previous relationships. If the child or children are named beneficiaries then upon your death the money passes without the need to "probate" or even have a Will and passes tax free.

Pensions and RRSPs

The above comments as to life insurance also apply to naming a beneficiary in your RRSP or Pension Plan but taxes may be payable.

Protection of Assets

One of the clear benefits of a cohabitation agreement or a marriage contract is to agree that what is yours is yours and what is hers is hers. At worst, a cohabitation agreement or a marriage contract results in delineation of your assets. If you are married in Ontario, upon separation you divide your Net Family Property unless you have a marriage contract. The procedure for dividing property at the end of a common-law relationship is as described above unless you have a cohabitation agreement.

While I have attempted here to simplify and summarize property division as it relates to common-law relationships and marriages, the fact remains that this is a very complex and difficult area of law.  However, with my almost 40 years of experience, knowledge and understanding of this area of law, I can help you to obtain the best possible results, whether you have entered into a cohabitation agreement or a marriage contract or not.

March 2015