Oct 7, 2019

Martin v Sansome, 2014 ONCA

Martin v. Sansome, 2014 ONCA 14 (CanLII)

Facts: dispute related to the validity of domestic K & ownership of non-operating farm in the family of M (husband) for 180yrs; separated 2007 after 18yr relationship; after 8yrs & 1 child, couple found themselves in financial difficulty; M’s parents (owners of the farm) offered to let couple stay on & manage farm on condition that they marry à after 3yr “proving period” couple would be able to buy farm; right b4 purchase, S discovered her name would not be on title & she would have to sign domestic K waiving all rights to farm – reasons given: (i) b/c of her prior debts, she wouldn’t qualify for a mortgage & she would have no financing to fund purchase and (ii) M’s parents church (Mennonites) became involved in the sale & they wanted this condition; S sent to other lawyer for independent counsel, but lawyer was effectively blind & could not review document w/ her; S eventually singed

· TJ found circumstances surrounding the execution of domestic K & result were unconscionable

o B/t purchase of farm & separation, S had contributed all her funds to the joint betterment of the family interests

o Even after S dealt w/ outstanding debts, M refused to have her name put on title

Issue(s): Did TJ err in concluding that M was unjustly enriched & concluding that S was entitled to a 50% interest in farm via CT?

Holding: Yes, TJ did err in impressing the farm w/ CT in favour of S & by not equalizing the parties’ NFP

· M to pay EP of $390,646.77 + pre & post-judgment interest

Court:

The Domestic Contract

· M effectively concedes that TJ did not err in setting aside the domestic K

o S. 56(4)(b) FLA provides that “[a] court may, on application, set aside a domestic contract or a provision in it… if a party did not understand the nature or consequences of the domestic contract”

o TJ rightly determined that S had no independent legal advice & held mistaken belief that it did not matter whether her name was on the property or not à demonstrating that S “did not understand the nature or consequences of the domestic contract”

§ The fact that she realized that K was not good for her does not mean she understood either its nature or consequences

Unjust Enrichment & Constructive Trust

· Framework:

o S. 10(1) FLA provides for determination of questions of title b/t married spouses (including consideration of beneficial interests in property arising pursuant the imposition of a remedial CT)

o Pursuant Rawluk, statutory scheme of equalization does not completely supersede the remedial CT

§ B4 property can be equalized under FLA, court must determine NFP (this exercise requires 1st that all questions of title be settled)

o Pursuant Kerr, if unjust enrichment (UE) is established, the first remedy to consider is always a monetary award

§ The impression of a proprietary remedy (normally CT on property) will occur only if the plaintiff satisfies the court that a monetary award would be insufficient in the circumstances AND that there is a sufficiently substantial & direct link b/t his/her contributions & the acquisition, preservation, maintenance or improvement of the disputed property

§ Kerr also abolished the dichotomy b/t quantum meruit damages & proprietary remedy, noting that “… when the parties have been engaged in a [JFV], and the claimants contributions to it are linked to the generation of wealth, a monetary award for unjust enrichment should be calculated according to the share of the accumulated wealth proportionate to the claimant’s contributions. In order to apply this approach, it is first necessary to identify whether the parties have, in fact, been engaged in a [JFV]”

· THERE IS NO PRESUMPTION THAT WEALTH WILL BE SHARED EQUALLY

§ Court should ask the following questions:

· 1. Have the elements of UE – enrichment & a corresponding deprivation in the absence of a juristic reason – been made out?

· 2. If so, will monetary damages suffice to address UE, keeping in mind the bars to recovery & special ties to the property that cannot be remedied by money?

· 3. If the answer to 2 is yes, should the monetary damages be quantified on a fee-for-service basis or a JFV basis?; AND

· 4. If, and only if monetary damages are insufficient, is there a sufficient nexus to a property that warrants impressing it w/ a CT interest?

TJ’s reasons:

· Clear & persuasive evidence of JFV from 1988 until separation as well as nexus b/t S’s deprivation & the farm

o Person does not have to make an actual financial contribution to purchase of property to have a CT in that property

Parties’ Submissions

· M: TJ’s reasons almost completely silent on issue of UE & do not address why CT was appropriate in the circumstances, or why, if CT is appropriate, S is entitled to ½ interest

o M submits that any remedy for UE should reflect fact that farm was financed, up to almost 42%, by what TJ found were gift to M ($119k) & advance against inheritance ($90k), both received after marriage

· S: evidence supports TJ’s finding of JFV

Analysis:

· TJ failed to 1st consider whether M was unjustly enriched

o Although, it is clear, from the reasons read as a whole, that TJ found UE in this case

§ S contributed homemaking, child care & other support services for the duration of the relationship; she worked on the farm, made improvements to the house; her salary helped finance the household & she provided funds to M

· M was enriched by her contributions & there is no juristic reason for his enrichment & her corresponding deprivation

· TJ’s main error was, having found UE, he failed to consider first avenue of remedy, monetary award & went instead to finding a nexus to the farm

o Once UE has been found, the court must first consider the sufficiency of a monetary remedy

§ Most cases, $$$ will be sufficient to address UE (McNamee v McNamee, 2011 ONCA)

§ Only when monetary award is inappropriate or insufficient, and the plaintiff can ALSO demonstrate a sufficiently substantial and direct link or causal connection b/t her contributions & the acquisition, preservation, maintenance or improvement of the property, that the court may make a proprietary award by impressing the property w/ a CT

· Onus on claimant to show monetary damages = insufficient

o Court must take into account the probability of recovery, as well as whether there is a reason to grant plaintiff the addition rights that flow from recognition of property rights in determining whether damages would be insufficient in the circumstances

o S did not lead any evidence or make any submissions that a monetary award would be insufficient

o Recoverability (of monetary award) is not an issue, as M can use property as security

· Para. [66] “In my view, if unjust enrichment as the result of a marriage has been found, and it has been determined that monetary damages can suffice, the aggrieved party’s entitlement under the equalization provisions of the FLA should first be calculated. Where appropriate, s. 5(6) of the FLA, which provides for an unequal division of net family properties where equalization would be unconscionable, should be invoked”

Equalization:

· S’s submission of calculated monetary award is based on the assumption that the entire farm = MH

o M submits that any remedy for UE should reflect fact that farm was financed, up to almost 42%, by what TJ found were gift to M ($119k) & advance against inheritance ($90k), both received after marriage

§ These facts should be considered when calculating monetary damages on the basis of JFV

· S. 4(2)(5) FLA – an otherwise excluded asset that is invested in the MH loses its status as an excluded asset

o However, where the MH is found not to extend to the entire property, a gift/inheritance that can be clearly traced into a part of the property that is not the MH would allow that portion of the property to be excluded from the NFP as set out in s. 4(2)(5)

§ S. 4(3) places onus for proving an exclusion from NFP on person claiming it

Ratio:

1. Domestic contract can be set aside if one party did not understand its nature or consequences

2. A MH may not extend to the entirety of the property on which the MH is on

a. Where the MH is found not to extend to the entire property, a gift or inheritance that can be clearly traced into a party of the property that is NOT the MH, would allow that portion of the property to be excluded from the NFP

i. Onus on establishing exclusion rests on individual claiming exclusion