Wilson V. Fotsch, 2010 BCCA 226: Unjust Enrichment and Reciprocal Benefits

Contract in an Unjust Enrichment and Reciprocal Benefits court case

This case involved a common law relationship in which the parties were not married. The husband brought a claim for a declaration of constructive trust for a portion of the wife’s property. The common-law wife appealed from the husband’s successful application for a declaration of constructive trust. The parties began cohabiting in 1995 and separated in 2002. At the time the parties began living together, the wife owned a property with her mother, and her 50% interest was valued at $25,000. The wife subsequently purchased her mother’s interest and the parties lived in the home. The husband claimed to have made significant contributions, particularly in labour and improvements, to the property. He also worked in the wife’s janitorial business. In 2001 the wife sold the house for $129,900 and purchased a development property on Portage Road for $219,900. She obtained bank and other financing for the balance of the price. The husband claimed that he had contributed significant labour in improving the property and working on permits for subdivision. Throughout the relationship, the wife had worked two jobs and paid most of the family’s expenses. The husband was also employed, but his wages were not contributed to the family resources. The husband claimed a one-half interest, by constructive trust, in the Portage Road property. He also claimed an interest in the wife’s pension from her employment as a teacher’s aid. The trial judge awarded the husband $99,091, which represented a 20 per cent share in the Portage Road property. He found that there had been an unjust enrichment and corresponding deprivation, as the evidence established that the husband had contributed to the wife’s ability to purchase the Portage Road property. The husband had also been largely supported by the wife throughout the relationship. However, the husband had not established any claim to the wife’s pension benefits, as he had not contributed in any way to her teaching career.

The Court of Appeal allowed the appeal in part. The order was set aside and substituted with an award of $7,310, less interest on $2,300 from 25 October 2006 to 1 May 2008, the date as of which the trial judge made her award and on which she released her reasons for judgment. The evidence supported the trial judge’s finding that the husband had established both benefit to the wife and detriment to himself, primarily by way of his contribution of labour and services to the improvement of the first property, and the absence of a juristic reason for that enrichment. However, the trial judge erred in her apportionment of the increased net value of the Portage Road property. An award of 7.5 per cent accorded more appropriately with the arrangement the parties made early in their relationship and with which both lived, without serious complaint, throughout their relationship. The equity to be divided was $510,107, of which $38,260 was attributable to the unjust enrichment. The legal fees loan ($14,650) and the value of the carpet cleaner at $2,300 were to be deducted from the award, the former as a legal debt and the latter as an equitable set-off. The husband acknowledged a net profit of $14,000 from his misappropriation of two cleaning contracts. That was a reasonable amount to set off against the award. By his misappropriation of the contracts, the husband deprived the wife of an income stream that was rightfully hers. Disgorgement of his profit after an allowance for the work he performed was a reasonable set-off.

This case involves a relationship where the plaintiff had made substantial contributions to the couple’s lifestyle, while the defendant failed to provide any assistance to their financial means, or household responsibilities.
The main issue in this case was how reciprocal benefits, those received from the inherent nature of a marriage-like relationship, are to be taken into consideration when applying the principle of unjust enrichment to a common law relationship. When individuals are in a marriage-like relationship, their contributions may be in the form of financial support or through providing the necessities to run a functional household.

The Court of Appeal in this case stated the proper approach when assessing whether an individual has been unjustly enriched involves evaluating whether a benefit has actually occurred outside of these reciprocal actions. A benefit may be illustrated where a payment of money or delivery of services has been provided to the benefit of the defendant, or the defendant has saved an inevitable expense by being in the relationship. For example, in this case, the common law wife owned the property and the business which the husband depended on. She provided significant amounts of loaned funds for the husband’s mortgage and legal fees, and conducted the majority of the household responsibilities. The husband did not contribute to the family’s assets, or expenses, and while he had performed maintenance on the wife’s property, the court found the wife was minimally enriched by his contributions.

If a benefit has been found, the court will consider whether one party suffered detriment on behalf of the other party receiving the benefit. This evaluation also excludes reciprocal benefits as deprivation may derive from a transfer of wealth by the plaintiff to the defendant, as may occur through full-time devotion of one’s labor and earnings without compensation, or with less than complete remuneration. In this case, the wife had provided the husband with a home, a job, and payment of expenses while the husband contributed minimally to the wife’s livelihood and business ventures.

Finally, if the court finds there has been enrichment, the plaintiff must then show there was no reason to allow the enrichment. The defendant may provide an explanation to the contrary by showing why the enrichment was reasonable. Circumstances that may prove the defendant was entitled to the enrichment involve the court considering the reasonable and legitimate expectations of the parties within the relationship. Courts should be mindful of the way the parties conduct their affairs within their relationship when looking at whether their expectations provide a legitimate reason for a defendant to retain enrichment. However, the court should consider whether the defendant has taken advantage of the plaintiff, and whether they knew they were failing to fulfill their responsibilities within the relationship as the plaintiff may have had expected a contribution in return.

This case provides an important caution for those seeking a share in the property of their common law spouse. The benefit provided by the contributions of the plaintiff spouse must be more than just the reciprocal benefits expected in any marriage-like relationship in order to establish a constructive trust.