Cohabitational Unjust Enrichment and the Small Claims Court

By Robert Lefebvre

Subject: Article for Deputy Judges and others re Kerr and Baranow: submitted for general distribution by Deputy Judge Robert Lefebvre

  • Important new Judge made law: Kerr and Baranow
  • Impact on cohabitation law
  • Impact on Domestic Contracts
  • Impact on the Small Claims Court

A recent decision by the Supreme Court of Canada in a case is thought to be a game changer case in regard to the law of unjust enrichment as it relates to both married couples and common-law couples getting together or separating across Canada.

Traditionally lawyers could advise their clients involved in common-law relationships that common-law spouses don’t have property rights under Ontario’s Family Law Act. In the event of the separation of a common-law couple, the courts would deal with the issues of custody, access and support of children, spousal support in proper cases and issues involving jointly owned property, yet the common law spouses would find that there was no claim to be made against property in the name of one spouse but not in the name of the other spouse, unless a common “intention trust” could be proved. Hard evidence, that the parties both intended the property to be beneficially owned by both spouses, despite that fact that they kept the title in one name only, made these high risk and therefore costly claims to pursue.

The Supreme Court of Canada has enunciated a new interpretation of unjust enrichment arising from a set of facts that they label a “Joint Family Venture.” It is suggested, whether the family is a married couple or a common-law couple, that if they have lived together for a fairly substantial period of time and during that time one spouse has accumulated greater wealth or more property than the other, the common law (or equity) is now interpreted to say there will be a remedy when one spouse has been “unjustly impoverished” by the termination of the relationship and the other spouse has been “unjustly enriched.” Now, for the first time in most of Canada (common law people in Saskatchewan already had some rights) it appears that if the evidence supports a finding that there was a joint family venture that resulted in one spouse having a disproportionately large share of the assets owned by the spouses and one having a disproportionately small share of the assets, a court remedy might be available to financially compensate, in a proper case. The decision of the Supreme Court of Canada is complicated and necessitates a careful reading to understand the new rights. No fixed test is adopted; some arrears of consideration are set out, yet in a non-exclusive way.

No doubt new cases, as they come along, will fine tune and clarify exactly when a joint family venture exists and will help everyone, lawyers and the public, more fully understand whether or not the remedy helps or hurts them.

The Supreme Court of Canada states that the unjust enrichment remedy is not to be a dollar value that is based on repaying the party for what their contribution, labour or work on a project, which lawyers call a quantum meruitclaim, but on the resulting enrichment.

This new interpretation of rights can also apply to married persons, but in the common law or non-married cohabitational situation the impact is new, innovative and edgy. For married people, involved in a Joint Family Venture, it means that even after a married person’s property rights claims have calculated under either the Divorce Act or the Family Law Act, there may still be an unjust enrichment claim and this matter should be addressed in all separations and divorces. It also means when unmarried people co-habit, and separate, if they can show the joint family venture resulted in an increase in the wealth of the couple, and that increase is disproportionately large for one and disproportionately small for the other, the newly defined remedy which we might call cohabitational unjust enrichment might be pursued and may result in compensation for the party who has the “short end!” Although time will tell how we prove the existence of a joint family venture, it is very possible that many rights, including pensions, built up during short, medium and long term relationships, could be the subject of an unjust enrichment claim where the family, working together, built up rights or value in one person’s name.

This has immediate interest to real people on the following basis:
  1. Now, more than ever, a co-habitation agreement should be considered before entering into any type of common-law relationship. In addition to the old rules that indicated that your income could be attacked for spousal support or child support, it is now possible that your solely owned assets could be attacked, whether it is your company, your pension, your business, or your real property.
  2. Although there is no hard and fast rule, I would suggest that if a relationship involving co-habitation stretches beyond a month you should be cautioned to enter into a co-habitation agreement to deal with your mutual intentions, and your willingness to enter into the agreement and to accept some or none of the potential economic impact of cohabitation and sharing of responsibilities. It will be important for the lawyers who draw cohabitation and marriage contracts to make sure that the releases included in the agreement are wide enough to exclude both statutory claims, and release these newly interpreted rights arising from unjust enrichment. The parties to a co-habitation agreement might also define what is and what is not a joint family venture for them. Documenting the couples agreement in a proper, lawyer composed, contract may help interpret when the line is crossed into a “joint family venture” in the day to day working out of homecare, child care, business ventures, or creative endeavours. It is very likely that independent legal advice; proper written disclosure (of assets and income) and the degree of balance in the finished contract will affect the contract’s ultimate enforceability.

People who are recently separated from common-law relationships where one of the parties has gotten richer during the length of time that they co-habited or married couples who find themselves still feeling still short-changed after their rights have been calculated under the Family Law Act or the Divorce Act, might add to their requests a remedy for any unjust enrichment. If they are able to prove the joint family venture the law would indicate that they would succeed in their claim. Imagine the artist and his muse, the songwriter and his or her first hit, a Facebook, Google, Kodak or Xerox like development made, almost overnight with input from the new flame? Now think local, and everyday: A local flooring contractor gets a good business lead through a builder introduced to the contractor by his or her spouse leading to further contracts and more exposure?


How might this play out?

Could these claims be resolved in Small Claims Court?

In regard to non-married co-habitors it is with particular interest to note that this is not a family law remedy. As such, a Small Claims Court, where legal and equitable claims for up to $25,000.00 can be prosecuted with great costs and timesaving might be well utilized to access this remedy. The Ontario Superior Court of justice has unlimited jurisdiction, and it has the right to deal with all issues. The Ontario Superior Court of Justice has exclusive rights to deal with claims over $25,000.00 but the Ontario Small Claims Court, a division of the Ontario Superior Court of Justice has right to deal with many issues. One of the limits or exclusions to the Small Claims jurisdiction, in Ontario, is that it cannot deal with Family Law issues. An unjust enrichment claim, when not connected with an equalization claim or a divorce, custody claim or a support claim, is not in itself a Family Law claim. This is called an equitable remedy and case law clearly indicates that the Small Claims Court has jurisdiction to deal with equitable remedies and this equitable remedy could, in the author’s opinion, be prosecuted in Small Claims Court. The simplified procedure in Small Claims and the fact that no discovery costs are likely, and the speed with which parties get to trial in Small Claims Court, would make this an efficient way of processing smaller claims under this new interpretation of the law.

The claim would be equally applicable to same sex spouses and common-law spouses. Married spouses will almost always be better off to bring their claims in the Superior Court of Justice, so that the other issues could be dealt with at the same time. This new claim may reduce some of the family law traffic in the Ontario Court of Justice, (to be distinguished from both the Small Claims Court and the Ontario Superior Court of Justice) because even if the parties don’t have traditional property rights to pursue, if they have an unjust enrichment right to pursue and any custody, access, child support or spousal support issue to deal with, they claim will get one stop shopping in the Ontario Superior Court of Justice and their claim will less likely be a good fit with the statutory jurisdiction limits of the Ontario Court of Justice. If they have no issue left to deal with except unjust enrichment and the unjust enrichment amount is near or less than $25,000.00 the Small Claims Court might be an economically advantageous option for them.

Other suggested reading:
  • Embarking on the new joint family adventure; Domestic Contracts and Unjust Enrichment by Kelly Jordan 2011
  • 2011 Family Law Update for Estates and Trusts Lawyers by Daniel Melamed, C. S. and Lindsay G. Mills, 2011
  • Cohabiting and Unjust Enrichment by Professor John McManus, 2011
  • The Supreme Court of Canada reasons for judgment in the case Kerr v. Baranow can be read at

P.S. In the parts of Ontario where the Family Court has jurisdiction, Deputy Judge S. Bale has pointed out that in Jurisdictions where Family Law is provided by the Family Court, a division of the Ontario Superior Court of Justice, which by statute supplants the Jurisdiction of the Ontario Superior Court of Justice and the Ontario Court of Justice in all family law matters, the rules of that court establish that:

(a) the Family Law rules apply, and (b) a claim based on unjust enrichment made between people who have cohabited is in the exclusive jurisdiction of the Family Court, a division of the Ontario Superior Court of Justice. This would apply to a Kerr and Baranow Unjust Enrichment claim.

In Ontario this means:

(“Family Action shall be started in the Family Court in” ) The following counties:

  • Essex
  • Middlesex
  • Prescott and Russell
  • Renfrew
  • Simcoe
  • Stormont, Dundas and Glengarry

The following territorial districts:

  • Algoma
  • Cochrane
  • Kenora
  • Nipissing
  • Sudbury
  • Thunder Bay
  • Timiskaming
  • The area of the County of Welland as it existed on December 31, 1969
  • The Municipality of Chatham Kent
  • The City of Hamilton
  • The City of Ottawa
  • The Regional Municipality of Peel
  • The City of Greater Sudbury
  • The City of Toronto
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