Background
The parties married in 2014 and bought a house that became their matrimonial home soon after. The title of the home was in the name of the husband alone. Although the parties separated in November 2019, the parties continued to live in the matrimonial home together until May 2020.
The parties agreed that the matrimonial home had a value of $672,500 on the
valuation date, which was the date of separation under s. 4(1) of the Family Law
Act, R.S.O. 1990, c. F.3 (“FLA”). However, the house was sold for $860,000 in September 2020.
At trial, the judge held that the $187,500 post-separation increase in the value of the matrimonial home was to be divided equally between the parties on the basis that the house had been held in trust by the husband for both parties. The husband appealed.
Issue
Did the trial judge err in his treatment of the post-valuation date increase in the value of the matrimonial home to which the husband held sole title?
Law and Analysis
The starting point for any consideration of property division and entitlement following separation is the applicable statutory scheme.
Section 5(7) of the FLA sets out the purpose of equalization and makes clear that the Act is intended to address the financial unfairness that would otherwise routinely arise from marriage breakdown: Martin v. Sansome, 2014 ONCA 14, 118 O.R. (3d) 522, at para. 63.
One important feature of the equalization scheme is the special status it accords to the matrimonial home, which is always included in the net family property of the titled spouse(s). However, the scheme does not give a non-titled spouse the right to share in property arising after the date of separation.
A non-titled spouse may still seek to share in the post-separation increase in the value of the matrimonial home by making a claim for unequal division under s. 5(6) of the FLA, or a distinct ownership claim such as an equitable trust claim.
In this appeal, the only specific doctrine that was argued in support of the constructive trust claim was proprietary estoppel.
The leading case governing proprietary estoppel is the Supreme Court’s decision in Cowper-Smith. That decision, which was not a family law case, set out the following test, at para. 15:
An equity arises when
- a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over the property;
- the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and
- the claimant suffers detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word.
Application
Regarding the first element of the test, the Court of Appeal held that it was not necessary to resolve this question on the facts of this case because the wife cannot satisfy the remaining elements of the test.
The second element of the test requires the claimant to show that she relied on the representation “by doing or refraining from doing something, and [her] reliance is reasonable in all the circumstances”: Cowper-Smith, at para. 15.
The wife argues that she relied on the promise of shared ownership of the matrimonial home in giving up a written Mahr agreement, an Islamic marriage contract, which would have given her financial protection upon marriage breakdown.
That argument does not succeed in this case. There is no evidence that the wife did or refrained from doing anything in reliance on any assurance by the husband. She said she did not want the obligations associated with a mortgage and she did not assume any. She did not make any contributions to the mortgage or toward any of the expenses associated with the matrimonial home during the marriage or after separation. She did not give any evidence that she refrained from doing anything as a result of her belief that she owned half of the home. Nor is there any evidence that she would not have consented to the
mortgage if she had understood that her name was not going on title that day.
Regarding the third element of the test, there is no evidence of any detriment suffered by the wife by reliance on the assurance or expectation that she was an equal owner. She did not contribute either to the mortgage or to the expenses of running the home, nor did she change her position in any other material way.
Conclusion
The Court of Appeal concluded that the wife does not have any claim to the postseparation increase in the value of the matrimonial home. Her trust claim must fail because the husband was not unjustly enriched, as found by the trial judge, and the test for proprietary estoppel is not met.