Timothy Gronfors. Associate, Family Law.


As a playful means for highlighting millennials’ preference for spending on luxuries rather

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than saving for essentials, a recent BBC article has developed the satirical ‘avocado toast index’.

Using statistics from across the globe, the index calculates how many years it will take to afford a down-payment on a house by merely forgoing a daily ‘smashed avocado-on-toast’ breakfast. And good news Mexico City millennials – your abstinence from avocado toasts will yield you a home in 9 short years!

Leaving aside whatever superfluous financial priorities millennials may (or may not) have, the article does highlight a chilling reality: prospective first-time home buyers are struggling to crack today’s market. For many young couples, this real estate crunch has necessitated a turn to family members for financial assistance.  

But what happens to that financial contribution if the couple separates? Was it intended as a gift or a loan? Is the parent entitled to a repayment? How these questions are answered can have a massive impact on the resulting property distribution.

But let’s take a step back and narrow the parameters. As a starting point, let’s assume that our hypothetical couple, John and Jane, are common law partners (there are very distinct rules on matrimonial homes and property division for married couples).  Let’s further assume that after losing out on a number of bidding wars that resulted in sales above listing price, John and Jane realize that they’ve been priced out of the market and that their pre-approval for a mortgage will not suffice. Thankfully, Jane’s father has come to the rescue; he’s willing to contribute $30,000 towards the down-payment, which will in turn allow the couple to qualify for a larger mortgage.

In an ideal world, Jane and John take their new financing, purchase their dream home, and live  happily ever-after but, unfortunately, Jane and John end up separating five years down the road and are forced to sell the home. Jane subsequently contends that $30,000 from the net sale proceeds should be paid back to her father. John alleges that the $30,000 was a gift to them as a young couple with no strings attached.

The Supreme Court of Canada has established two possible ‘presumptions’ when dealing with such gratuitous transfers (i.e. where a transfer is made without consideration). Unless the transfer is specifically from a parent to their child, the presumption is that the transfer was a bargain rather than a gift, meaning that it must be repaid. In our circumstance, while it was Jane’s father that made the gratuitous payment, Jane was an adult when she received it meaning that the presumption will be that the $30,000 was a loan/bargain. Because presumptions are simply starting points, John will have the onus of proving otherwise and that the $30,000 was a gift.

To add a further wrinkle to our scenario, let’s assume that when John and Jane accepted the $30,000, their bank sent out a commitment letter outlining that as a condition for receiving the funds, all three parties must sign a ‘gift letter’ clearly stating that the $30,000 is not a loan. Later, in the subsequent court battle, John produces this letter as evidence that the $30,000 was intended to be a gift. While the outcome of any one case will depend on all the surrounding facts, in decisions such as Crepeau v Crepeau the courts have found that a bank ‘gift letter’ is insufficient evidence to rebut the presumption of a bargain/loan. As in Crepeau, the finding may well be that such a ‘gift letter’ was executed solely for the purpose of obtaining the mortgage approval with no true intention to gift.

A recent Globe and Mail article by Josh O’Kane pointed out that while slightly more than 1/3 of Canadian millennials now own a home, nearly two-fifths received financial assistance from their parents to do so. Whether it’s from a parent, relative, or friend, home buyers receiving gratuitous transfers can benefit immensely from the assistance of a qualified family lawyer. There are various mechanisms, such as a cohabitation agreement, which can give the parties peace of mind in knowing that their intentions are properly delineated and help avoid a costly court battle down the road.  

Barrie Hayes, Partner, Family Law

The Family Law Act provides a statutory framework for the equalization of family property upon separation. The framework essentially exits out from the equalization the value of property the spouses owned on the date of marriage, and any property the spouses received from third parties; inheritances, life insurance policies, and certain civil judgments during the marriage.

The spouses deduct, from the value of their respective family assets at date of separation, any outstanding debt which then produces the spouses’ respective net family properties. In the event that one spouse has  net family property which is greater than the other spouse’s net family property, the spouse with the higher net family property owes a monetary payment to the other spouse equal to one half of the difference in the two net family properties.

This statutory framework provides a fairly focused, straightforward system for settling property issues between separating spouses.

Unfortunately the legislation only applies to legally married spouses. Common-law spouses have no recognition under the Family Law Act for property equalization.

Common-law spouses, in pursuing property issues arising from separation, have to resort to the common-law principle of unjust enrichment. Unjust enrichment will provide monetary relief to a common-law spouse if the common-law spouse can demonstrate that, through either financial or labour contributions made by the spouse, the other spouse was enriched by such contributions. The spouse pursuing unjust enrichment also has also to demonstrate that he/she suffered a deprivation by virtue of the contributions, and further that there was no legal reason justifying the contributions to the other spouse.

Cases dealing with unjust enrichment have increasingly recognized the claim and have broadened its application to common-law spouses.

The Supreme Court of Canada has recently advanced the unjust enrichment principle in creating the concept of a joint family venture in common law relationships. If a common-law relationship is determined to be a joint family venture, the law of unjust enrichment will compensate the contributing common-law spouse for the difference in the increase in assets between the two common-law spouses from the date of commencement of cohabitation until the date of separation.

Although the unjust enrichment principle greatly assists in providing fairness in dealing with property issues between separating common-law spouses, it lacks the precision and certainty provided by the Family Law Act to legal married spouses.

Other provinces in Canada have passed legislation which gives common-law spouses the same statutory property equalization rights as legal married spouses. Hopefully, over time, Ontario common-law spouses will be afforded the same statutory property entitlement.

Catherine Hyde, Paralegal

In recent years there has been an increase in separation of couples in the 55+ category.  It seems once the children have left and you start to notice an increase in the people you know in the obituaries, you ask yourself- is this all there is?  Thoughts of separation seep in.  Before saying you want to separate, consider some financial aspects of separation and possible lifestyle changes.

First make a list of what property you own including realty, bank accounts, investments and what debts you have.  Make a similar list for the assets and debts of your spouse.  Look at what your retirement income might be from private pensions and government pensions.   Armed with this information, make an appointment with a family law lawyer.  The lawyer should be able to provide advice on a broad basis as to what your entitlements might be on a property division and whether spousal support is a possibility, for whom, and in what quantum and duration.  All of this is subject to actual financial disclosure. 

Having all the facts you can weigh whether going it on your own is feasible.  The emotional issues and the financial reality must come together in making your decision. Counselling might be the answer for you. Attempting new things outside of your comfort zone might bring back the spark.  If not, and separation is the route, ensure you follow through with your lawyer to enter into a separation agreement that ensures you achieve an equitable settlement.  

Barrie Hayes, Partner

In many marriages the matrimonial home is the most significant family asset owned by the spouses. The Family Law Act (“FLA”), in dealing with equalization of net family property on separation, provides special treatment of the matrimonial home.

Whereas generally  a spouse may deduct from his or her net family property the (net) value of the property he or she brings into the marriage, this deduction of property does not extend to the matrimonial home. Further statutory exclusions from family asset inclusions such as inheritances or gifts from third parties do not extend to the matrimonial home.

In situations  where parents purchase a home for a child or grandchild, and wish to protect the home from being included in the equalization of net family property in the event of marriage breakdown consideration should be given to using a trust to protect the home from a potential FLA claim.

In the recent case of Spencer v Riesberry a home was purchased and was settled on a trust for the purchaser and her four children. Three additional properties where subsequently also settled on the trust. One of the terms of the trust was that any trust property distributed from it was not to form part of the recipient’s net family property for purposes of the FLA.

When one of the daughters who occupied one of the homes settled on the trust separated the court was asked to determine whether the daughter had an interest in the property sufficient to warrant a finding that the property was a matrimonial home. The Court of Appeal held that, unless the terms of the trust expressly provided otherwise, a beneficiary has no property interest in any specific asset of the trust, prior to or absent an appropriation of such assets to the beneficiary by the trustee.

The court considered the daughter’s dual role as beneficiary and as co trustee of the trust and held that occupying those positions did not provide the daughter with an interest in the home for the purposes of the FLA.

Catherine Hyde, Family Law Clerk

I have recently been involved with a number of cases dealing with “Excluded Property” in order to determine whether certain items of property can be excluded from the “net family property” calculation.  To determine this one first needs to look at the Family Law Act

Section 4(2) of the Family Law Act provides that:

Excluded property

(2)  The value of the following property that a spouse owns on the valuation date does not form part of the spouse’s net family property:

  1. Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage.
  2. Income from property referred to in paragraph 1, if the donor or testator has expressly stated that it is to be excluded from the spouse’s net family property.
  3. Damages or a right to damages for personal injuries, nervous shock, mental distress or loss of guidance, care and companionship, or the part of a settlement that represents those damages.
  4. Proceeds or a right to proceeds of a policy of life insurance, as defined under the Insurance Act, that are payable on the death of the life insured.
  5. Property, other than a matrimonial home, into which property referred to in paragraphs 1 to 4 can be traced.
  6. Property that the spouses have agreed by a domestic contract is not to be included in the spouse’s net family property.
  7. Unadjusted pensionable earnings under the Canada Pension Plan. R.S.O. 1990, c.F.3, s.4 (2); 2004, c.31, Sched.38, s.2 (1); 2009, c.11, s.22 (5).”

The Act further states that onus to prove such a deduction or exclusion is on the person claiming it.

In order to exclude such property, you must first prove   that it was a gift from a third party (not your spouse), that it was received during the marriage and that it can be traced to an asset that you had on the date of separation.

If you received the asset by way of an inheritance, it will be necessary to review the Last Will and Testament  of the individual to determine whether the intention was to gift the asset to you and whether it is subject to the provisions of the Family Law Act or not.

Clearly there are many issues to be dealt with when considering whether or not you will be entitled to claim exclusion for certain property and how much you are entitled to claim. Your lawyer will best be able to explain to you the various issues and concerns relating to your specific assets that you are seeking to exclude.  Keeping complete records of any monies received and spent including bank statements, purchase receipts and investment statements, copy of correspondence from Estate lawyers, distribution statements, etc. will assist in tracing the assets to a valuation date asset.

Although you never anticipate that you are going to be divorcing and need such documentation it is simply a good financial step to take.

A recent Court of Appeal decision has caused considerable concern in relation to the certainty of the statutory provisions being applied to determine net family property equalization between legal married spouses.

Sections 4 and 5 of the Family Law Act have, to date, been viewed as all encompassing statutory direction in the division of net family property. The said provisions detail that all assets acquired by spouses from the date of marriage to the date of separation (save and except for certain assets which are excluded – i.e.: gifts from third parties, inheritances, life insurance proceeds and certain civil damages) are to be valued, reduced by outstanding liabilities, compared intra-spousally and any difference in value is to comprise the net family property equalization payment. Spouses receive a credit for the value of assets brought into the marriage and property acquired by spouses post separation are not to be considered in the equalization process.

As I have detailed in prior blogs, common law spouses who are not recognized for net family property equalization purposes in the Family Law Act have had to resort to the equitable principle of unjust enrichment in order to pursue property claims arising from common law family separation situations.

Family Law lawyers have not, in equalizing property between legally married spouses, considered or applied the unjust enrichment principle, but instead have relied on Sections 4 and 5 of the Family Law Act.

In the Macnamee case, the husband received shares of a company from his father by virtue of an estate freeze. The wife had, following the receipt of the husband’s shares, been actively involved in the operation and consequent growth in value of the corporation. The Court of Appeal held that the transfer of shares were, in fact, a gift from the husband’s father and, as such, were excluded from the husband’s net family property.

The Court of Appeal held that the unjust enrichment equitable principle was still available as a remedy for legally married spouses and remitted the case back to a re-trial on the issue of whether the wife’s contribution to the growth in value of the corporation should result in monetary relief to her from what would have statutorily been an excluded asset.

The Court of Appeal stated that in the vast majority of cases any unjust enrichment that arises as a result of the marriage will be fully addressed in the operation of the equalization provisions under the Family Law Act.

The decision has potentially opened the door for even more litigation in relation to net family property equalization.