On January 31, 2014, the Court of Appeal released a very important decision clarifying the law regarding the limitation period for bringing equitable claims for real and personal property. This judgement is a crucial read for both family lawyers and family law litigants, as well as anyone else who may have an equitable claim to property.

Procedural History

The Respondent Wife, Ms. McConnell, and Appellant Husband, Mr. Huxtable, were in a relationship from 1993/1994 to 2007, but did not marry or have children. During the course of the relationship, the Appellant bought and sold two houses and owned a third at the time the parties’ relationship ended.  The Appellant paid all costs associated with the properties, which were solely in his name.

The Respondent Wife brought an action for unjust enrichment seeking a remedial constructive trust in a property owned by the Appellant Husband and in the alternative, a monetary award. The Respondent was admittedly aware that she had potential claims against the Appellant, including a claim for unjust enrichment and a remedy of constructive trust, by June 2007. Nevertheless, the Respondent did not commence an action until February 2012, over four years after her claim was discovered.

In response, the Appellant Husband brought a motion for summary judgment pursuant to s. 16 of the Family Law Rules. The Motions judge held that the Real Property Limitations Act applied, or alternately, that there was a legislative gap and there was no limitation period for this action.

The issue before the Court of Appeal was whether the limitation period had lapsed on her claim. The Court was left to determine which of the following limitation periods applies:

1. the general two-year limitation period in the Limitations Act, 2002; or
2. the ten year limitation period in s .4 of the Real Property Limitations Act.

In the alternative, the Court could decide that neither Act applies, leaving a legislative gap such that there is no statutory limitation period.

Background: Equitable Claims

Common law (non-married) spouses do not have rights under Parts I and II of the Family Law Act, which deal with equalization of net family property and the matrimonial home. That being said, over time, the courts developed equitable remedies to assist litigants who were prejudiced by the unfairness that this can create. As a result, an unmarried spouse may bring an equitable claim for a constructive trust in both real and personal property owned by their common law spouse (married spouses may also have equitable claims).

In order to bring a claim for unjust enrichment and seek the equitable remedy of constructive trust, a party must demonstrate:

1. an enrichment of or benefit to the defendant;
2. a corresponding deprivation of the plaintiff; and
3. the absence of a juristic reason for the enrichment.

Once a court determines that an unjust enrichment has resulted, it may order either a proprietary or monetary remedy, being either the property in question, or some sum of money commensurate with how much the defendant has been unjustly enriched.
The Court’s Analysis

On appeal, the Appellant took the position that, as developed in Canada, a constructive trust is “merely a remedy, not an independent claim” and “therefore, the claim in this case is for unjust enrichment and not an action for recovery in land.”

In the end, the three judge Court of Appeal panel disagreed with the Appellant and sided with the Motions judge that a claim for unjust enrichment in which the claimant seeks a remedial constructive trust in another party’s property is “an action to recover any land” within the meaning of s. 4 of the Real Property Limitations Act. Citing the motions judge, the Court explained:

A party seeking an ownership interest by way of constructive trust must plead and then prove facts establishing entitlement to it. The fact that a claimant must prove enrichment of the other party and a corresponding deprivation of the claimant, with no juristic reason for the enrichment in order to establish a constructive trust, and must also show that damages alone are insufficient and only a proprietary remedy is adequate, does not alter the fact that the claimant has asked the court from the beginning to award an interest in land. To me, all this means is that the claimant has to plead and prove those key elements, usually called “material facts” in litigation, to justify the order sought. It should not matter how many material facts there are or whether the entitlement to land requires a two-step analysis, so long as the application makes a claim of entitlement to ownership of land.

Contrary to the Appellant’s submissions, the Court of Appeal further held that the Legislature intended the Real Property Limitations Act to apply to both express and other types of trusts, including constructive trusts.

Ultimately, the court was of the opinion that the Respondent was making a claim for recovery of land in the sense that she sought to obtain land by judgment of the court. “That the court might provide her with the alternative remedy of a monetary award does not take away from the fact that her claim is for a share of the property.” As such, the ten year limitation period in the Real Property Limitations Act applied, and therefore the Respondent’s claim was not barred by the limitation period. The Court of Appeal further agreed with the motions judge that the Respondent’s alternative claim for a monetary award was sheltered under s. 4 and also had a ten year limitation period.

Conclusion

This case is important for the following reasons:

1. It clarifies that the limitation period for equitable claims in real property is ten years, whereas equitable claims for all other property is governed by the general two year limitation period contained in the Limitations Act, 2002;
2. The point at which the limitation period starts to run is the date of separation of the parties. Accordingly, parties wishing to make an equitable claim to personal property must act rather quickly following the date of separation;
3. This case may apply to married spouses; in the instance where the limitation period for equalization has lapsed, a spouse may still have an equitable claim to real property (as the limitation period is ten years).