Case reference: Rawluk v. Rawluk, [1990] 1 S.C.R. 70
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Family law Property Constructive trust Wife contributing to accumulation of assets held in husband’s name Family Law Act, 1986 providing for equal division of value of family assets as determined on valuation day Assets appreciating significantly after valuation day Whether or not the constructive trust applicable where the Family Law Act, 1986 provides a remedy for unjust enrichment Family Law Act, 1986, S.O. 1986, c. 4, ss. 4(1), 5(6), 10(1), 14, 64(1), (2), (3).
Trusts and trustees Constructive trust Family assets Family Law Act providing for equal division of value of family assets as determined on valuation day Assets appreciating significantly after valuation day Whether or not the constructive trust applicable where the Family Law Act, 1986 provides a remedy for unjust enrichment.
The Rawluks were married in 1955 and lived and worked together for twenty nine years. They had a farm and a farm equipment sales and service business. In the early years of their marriage, the wife cared for their children and looked after farm chores. By the early 1960s, she was also assisting with customers in the shop of the farm implement business. In 1969, the wife assumed a major role in its operation and maintained her involvement in all aspects of the farming operation. She contributed to the assets the parties acquired during the marriage. At the time of separation in 1984, the Rawluks held a number of properties, all but one of which were registered in the name of the husband. The Family Law Act, 1986 provided that family assets be valued and divided equally. The valuation date here was the date of separation. In the years between separation and the trial of the action, the value of these properties increased dramatically. The trial judge and the Court of Appeal held that the property in question was impressed with a constructive trust which gave the wife a beneficial half interest in the property at the time of separation and therefore entitled her to participate as owner in the value of the property after separation. At issue here is whether or not the constructive trust finds application where the Family Law Act, 1986 already provides a remedy for the unjust enrichment complained of.
Held (La Forest, Sopinka and McLachlin JJ. dissenting): The appeal should be dismissed.
Per Dickson C.J. and Wilson, L’Heureux Dubé and Cory JJ.: Far from abolishing the constructive trust doctrine, the Family Law Act, 1986 incorporates the constructive trust remedy as an integral part of the process of ownership determination and equalization established by that Act. As a general rule a legislature is presumed not to depart from prevailing law without expressing its intentions to do so with irresistible clearness. But even aside from this presumption, the Family Law Act, 1986 intended to both recognize and accommodate the remedial constructive trust.
Before property can be equalized under s. 5 of the Family Law Act, 1986, a court is required by s. 4 to determine the “net family property” of each spouse on the valuation date. “Property” is defined as “any interest, present or future, vested or contingent, in real or personal property” and accordingly includes not only legal but beneficial ownership. The remedial constructive trust therefore should be included in the list of equitable principles or remedies that may be used to calculate the beneficial ownership of net family property. It can be recognized as having come into existence from the time when the unjust enrichment first arose, even though it is judicially declared at a later date.
The distinction between ownership and a share on equalization is more than an exercise in judicial formalism. It involves conceptual and practical differences for ownership which encompass far more than a mere share in the value of property.
Where the property at issue is one to which only one spouse has contributed, it is appropriate that the other spouse receive only an equalizing transfer of money. But where both spouses have contributed to the acquisition or maintenance of the property, the spouse who does not hold legal title should be able to claim an interest in that property by way of a constructive trust and realize the benefits that ownership may provide. The imposition of a constructive trust recognizes that the titled spouse is holding property that has been acquired, at least in part, through the money or effort of another.
Under the Act a court is, as a first step, required to determine the ownership interests of the spouses. It is at that stage that the court must deal with and determine the constructive trust claims. The second step requires that the equalization be calculated. The third step requires that the court assess whether equalization is unconscionable, pursuant to s. 5(6). This step in the process must be kept distinct from the preliminary determinations of ownership.
Section 10 of the Family Law Act, 1986 reinforces the Act’s emphasis on the importance of individual ownership, even within a regime of deferred sharing. A spouse can apply to a court to determine a question of ownership or possession prior to equalization, and thus to assert some degree of control over matrimonial property during cohabitation. It would be inconsistent to deny a spouse the same remedy when it is sought after a separation.
Section 14 specifically refers to the doctrine of resulting trust. It is not intended to specifically preserve that trust, and by implication abolish all other non express trusts, but rather is intended to modify the resulting trust doctrine as it applies in the context of the Family Law Act, 1986. The combination of these modifying provisions and the legislature’s silence on the subject of remedial constructive trust indicate that the constructive trust is maintained in an unmodified form.
The constructive trust remedy can be utilized by unmarried cohabitants. It would not only be inequitable but would also contravene the provisions of s. 64(2) if married persons were precluded by the Family Law Act, 1986 from utilizing the doctrine of remedial constructive trust which is available to unmarried persons.
Per La Forest, Sopinka and McLachlin JJ. (dissenting): The doctrine of constructive trust is not a property right but a proprietary remedy for unjust enrichment. The availability of other remedies for the unjust enrichment must accordingly be considered before declaring a constructive trust. The doctrine of constructive trust should not be applied in this case because theFamily Law Act, 1986 provides a remedy for the unjust enrichment of the husband to the detriment of the wife.
The fundamentals of the Canadian approach to constructive trust in relation to unjust enrichment are: (1) its purpose is to remedy an unjust enrichment; (2) it is remedial rather than substantive; and (3) it is but one of many remedies that may be available to correct unjust enrichment. A plaintiff should exhaust his personal remedies before the remedy of constructive trust is imposed.
In Canada the constructive trust, at least in the context of unjust enrichment, is a remedy and not a doctrine of substantive property law. It does not arise automatically when the three conditions set out in Pettkus v. Becker are established. Rather, the court must go on to consider what other remedies are available to remedy the unjust enrichment in question and whether the proprietary remedy of constructive trust is appropriate. The doctrine of constructive trust does not permit the court to confer retrospectively a property interest solely on the basis of contribution of one spouse and enrichment of the other. A further inquiry must be made to determine if the remedy of constructive trust is necessary or appropriate given the presence of another remedy.
Given an unjust enrichment arose from the fact that the property to which the wife contributed was in the husband’s name, the Family Law Act, 1986 provides a remedy which makes it unnecessary to resort to the doctrine of constructive trust. Both the statutory remedy and the remedy of constructive trust are directed to the same end. The Act provides for the equalization to be accomplished by a payment of money based on the value of the property at the time of separation (a remedy in personam) while the doctrine of constructive trust would give a beneficial interest in the land which persists to the date of trial (a proprietary remedy).
The Family Law Act, 1986 provides complete compensation for the wife’s contribution to the date of separation. Any disproportionate enrichment must occur because of the increase in value due to changing market conditions after that date. But that does not constitute an unjust enrichment under the principles set forth in Pettkus v. Becker, given that the wife made no contribution after that date. As a matter of legal principle, given the fact that the Legislature provided a remedy for the unjust enrichment which would otherwise have occurred, it is not for this Court to impose an additional equitable remedy aimed at correcting the same wrong. To graft the remedy of constructive trust to the statutory scheme would pose practical problems, add uncertainty and promote litigation, and perhaps adversely affect the rights of third parties.
The suggestion that the wife should not be in a worse position than had the parties not been married is met by the fact that the Legislature, acting within the proper scope of its authority, chose to confine the Act to married persons.
The fact that a married person might be able to obtain a declaration of constructive trust before but not after separation is not anomalous. The equalization provisions of the Act provide an alternative remedy to which the spouse becomes entitled upon separation. The fact that that remedy may not be as advantageous in some cases as the remedy of constructive trust does not justify the court in altering the doctrine of constructive trust.
Very different provisions govern the division of marital property in the various provinces. There can be no simple or universally applicable answer to the question of whether the doctrine of constructive trust will apply in a statutory context: in each case, the circumstances of the case and the efficacy of alternative remedies conferred by the applicable legislation must be examined to ascertain whether, in that situation, a declaration of constructive trust should be declared.
*source: Lexbox
