Rawluk v. Rawluk

Rawluk v. Rawluk
Collection
Supreme Court Judgments
Date
1990-01-25
Report
[1990] 1 SCR 70
Case number
20736
Judges
Dickson, Robert George Brian; Wilson, Bertha; La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Cory, Peter deCarteret; McLachlin, Beverley
On appeal from
Ontario
Subjects
Family law
Trust
Notes
SCC Case Information: 20736
Decision Content
Rawluk v. Rawluk, [1990] 1 S.C.R. 70
Harry Phillip Rawluk Appellant
v.
Jacqueline Dorothy Rawluk Respondent
indexed as: rawluk v. rawluk
File No.: 20736.
1989: October 6; 1990: January 25.
Present: Dickson C.J. and Wilson, La Forest, L'Heureux‑Dubé, Sopinka, Cory and McLachlin JJ.
on appeal from the court of appeal for ontario
Family law ‑‑ Property ‑‑ Constructive trust ‑‑ Wife contributing to accumulation of assets held in husband's name ‑‑ Family Law Act, 1986 providing for equal division of value of family assets as determined on valuation day ‑‑ Assets appreciating significantly after valuation day ‑‑ Whether or not the constructive trust applicable where the Family Law Act, 1986 provides a remedy for unjust enrichment ‑‑ Family Law Act, 1986, S.O. 1986, c. 4, ss. 4(1), 5(6), 10(1), 14, 64(1), (2), (3).
Trusts and trustees ‑‑ Constructive trust ‑‑ Family assets ‑‑ Family Law Act providing for equal division of value of family assets as determined on valuation day ‑‑ Assets appreciating significantly after valuation day ‑‑ Whether or not the constructive trust applicable where the Family Law Act, 1986 provides a remedy for unjust enrichment.
The Rawluks were married in 1955 and lived and worked together for twenty‑nine years. They had a farm and a farm equipment sales and service business. In the early years of their marriage, the wife cared for their children and looked after farm chores. By the early 1960s, she was also assisting with customers in the shop of the farm implement business. In 1969, the wife assumed a major role in its operation and maintained her involvement in all aspects of the farming operation. She contributed to the assets the parties acquired during the marriage. At the time of separation in 1984, the Rawluks held a number of properties, all but one of which were registered in the name of the husband. The Family Law Act, 1986 provided that family assets be valued and divided equally. The valuation date here was the date of separation. In the years between separation and the trial of the action, the value of these properties increased dramatically. The trial judge and the Court of Appeal held that the property in question was impressed with a constructive trust which gave the wife a beneficial half interest in the property at the time of separation and therefore entitled her to participate as owner in the value of the property after separation. At issue here is whether or not the constructive trust finds application where the Family Law Act, 1986 already provides a remedy for the unjust enrichment complained of.
Held (La Forest, Sopinka and McLachlin JJ. dissenting): The appeal should be dismissed.
Per Dickson C.J. and Wilson, L'Heureux‑Dubé and Cory JJ.: Far from abolishing the constructive trust doctrine, the Family Law Act, 1986 incorporates the constructive trust remedy as an integral part of the process of ownership determination and equalization established by that Act. As a general rule a legislature is presumed not to depart from prevailing law without expressing its intentions to do so with irresistible clearness. But even aside from this presumption, the Family Law Act, 1986 intended to both recognize and accommodate the remedial constructive trust.
Before property can be equalized under s. 5 of the Family Law Act, 1986, a court is required by s. 4 to determine the "net family property" of each spouse on the valuation date. "Property" is defined as "any interest, present or future, vested or contingent, in real or personal property" and accordingly includes not only legal but beneficial ownership. The remedial constructive trust therefore should be included in the list of equitable principles or remedies that may be used to calculate the beneficial ownership of net family property. It can be recognized as having come into existence from the time when the unjust enrichment first arose, even though it is judicially declared at a later date.
The distinction between ownership and a share on equalization is more than an exercise in judicial formalism. It involves conceptual and practical differences for ownership which encompass far more than a mere share in the value of property.
Where the property at issue is one to which only one spouse has contributed, it is appropriate that the other spouse receive only an equalizing transfer of money. But where both spouses have contributed to the acquisition or maintenance of the property, the spouse who does not hold legal title should be able to claim an interest in that property by way of a constructive trust and realize the benefits that ownership may provide. The imposition of a constructive trust recognizes that the titled spouse is holding property that has been acquired, at least in part, through the money or effort of another.
Under the Act a court is, as a first step, required to determine the ownership interests of the spouses. It is at that stage that the court must deal with and determine the constructive trust claims. The second step requires that the equalization be calculated. The third step requires that the court assess whether equalization is unconscionable, pursuant to s. 5(6). This step in the process must be kept distinct from the preliminary determinations of ownership.
Section 10 of the Family Law Act, 1986 reinforces the Act's emphasis on the importance of individual ownership, even within a regime of deferred sharing. A spouse can apply to a court to determine a question of ownership or possession prior to equalization, and thus to assert some degree of control over matrimonial property during cohabitation. It would be inconsistent to deny a spouse the same remedy when it is sought after a separation.
Section 14 specifically refers to the doctrine of resulting trust. It is not intended to specifically preserve that trust, and by implication abolish all other non‑express trusts, but rather is intended to modify the resulting trust doctrine as it applies in the context of the Family Law Act, 1986. The combination of these modifying provisions and the legislature's silence on the subject of remedial constructive trust indicate that the constructive trust is maintained in an unmodified form.
The constructive trust remedy can be utilized by unmarried cohabitants. It would not only be inequitable but would also contravene the provisions of s. 64(2) if married persons were precluded by the Family Law Act, 1986 from utilizing the doctrine of remedial constructive trust which is available to unmarried persons.
Per La Forest, Sopinka and McLachlin JJ. (dissenting): The doctrine of constructive trust is not a property right but a proprietary remedy for unjust enrichment. The availability of other remedies for the unjust enrichment must accordingly be considered before declaring a constructive trust. The doctrine of constructive trust should not be applied in this case because the Family Law Act, 1986 provides a remedy for the unjust enrichment of the husband to the detriment of the wife.
The fundamentals of the Canadian approach to constructive trust in relation to unjust enrichment are: (1) its purpose is to remedy an unjust enrichment; (2) it is remedial rather than substantive; and (3) it is but one of many remedies that may be available to correct unjust enrichment. A plaintiff should exhaust his personal remedies before the remedy of constructive trust is imposed.
In Canada the constructive trust, at least in the context of unjust enrichment, is a remedy and not a doctrine of substantive property law. It does not arise automatically when the three conditions set out in Pettkus v. Becker are established. Rather, the court must go on to consider what other remedies are available to remedy the unjust enrichment in question and whether the proprietary remedy of constructive trust is appropriate. The doctrine of constructive trust does not permit the court to confer retrospectively a property interest solely on the basis of contribution of one spouse and enrichment of the other. A further inquiry must be made to determine if the remedy of constructive trust is necessary or appropriate given the presence of another remedy.
Given an unjust enrichment arose from the fact that the property to which the wife contributed was in the husband's name, the Family Law Act, 1986 provides a remedy which makes it unnecessary to resort to the doctrine of constructive trust. Both the statutory remedy and the remedy of constructive trust are directed to the same end. The Act provides for the equalization to be accomplished by a payment of money based on the value of the property at the time of separation (a remedy in personam) while the doctrine of constructive trust would give a beneficial interest in the land which persists to the date of trial (a proprietary remedy).
The Family Law Act, 1986 provides complete compensation for the wife's contribution to the date of separation. Any disproportionate enrichment must occur because of the increase in value due to changing market conditions after that date. But that does not constitute an unjust enrichment under the principles set forth in Pettkus v. Becker, given that the wife made no contribution after that date. As a matter of legal principle, given the fact that the Legislature provided a remedy for the unjust enrichment which would otherwise have occurred, it is not for this Court to impose an additional equitable remedy aimed at correcting the same wrong. To graft the remedy of constructive trust to the statutory scheme would pose practical problems, add uncertainty and promote litigation, and perhaps adversely affect the rights of third parties.
The suggestion that the wife should not be in a worse position than had the parties not been married is met by the fact that the Legislature, acting within the proper scope of its authority, chose to confine the Act to married persons.
The fact that a married person might be able to obtain a declaration of constructive trust before but not after separation is not anomalous. The equalization provisions of the Act provide an alternative remedy to which the spouse becomes entitled upon separation. The fact that that remedy may not be as advantageous in some cases as the remedy of constructive trust does not justify the court in altering the doctrine of constructive trust.
Very different provisions govern the division of marital property in the various provinces. There can be no simple or universally applicable answer to the question of whether the doctrine of constructive trust will apply in a statutory context: in each case, the circumstances of the case and the efficacy of alternative remedies conferred by the applicable legislation must be examined to ascertain whether, in that situation, a declaration of constructive trust should be declared.
Cases Cited
By Cory J.
Considered: Murdoch v. Murdoch, [1975] 1 S.C.R. 423; Sorochan v. Sorochan, [1986] 2 S.C.R. 38; Rathwell v. Rathwell, [1978] 2 S.C.R. 436; Pettkus v. Becker, [1980] 2 S.C.R. 834; referred to: Thompson v. Thompson, [1961] S.C.R. 3; Trueman v. Trueman (1971), 18 D.L.R. (3d) 109; Pettitt v. Pettitt, [1969] 2 All E.R. 385; Gissing v. Gissing, [1970] 2 All E.R. 780; Hussey v. Palmer, [1972] 1 W.L.R. 1286; Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426; Nuti v. Nuti (1980), 28 O.R. (2d) 102; Vedovato v. Vedovato (1984), 39 R.F.L. (2d) 18; Thoreson v. Thoreson (1982), 137 D.L.R. (3d) 535; Leatherdale v. Leatherdale, [1982] 2 S.C.R. 743; Seed v. Seed (1986), 5 R.F.L. (3d) 120; Leslie v. Leslie and Clyde (1987), 9 R.F.L. (3d) 82; Cowan v. Cowan (1987), 9 R.F.L. (3d) 401; Re Corless and Corless (1987), 58 O.R. (2d) 19; Benke v. Benke (1986), 4 R.F.L. (3d) 58; Leonard v. Leonard, [1987] O.J. No. 1488, unreported; Goodyear Tire & Rubber Co. of Canada v. T. Eaton Co., [1956] S.C.R. 610.
By McLachlin J. (dissenting)
Hussey v. Palmer, [1972] 1 W.L.R. 1286; Murdoch v. Murdoch, [1975] 1 S.C.R. 423; Pettitt v. Pettitt, [1970] A.C. 777; Gissing v. Gissing, [1971] A.C. 886; Rathwell v. Rathwell, [1978] 2 S.C.R. 436; Pettkus v. Becker, [1980] 2 S.C.R. 834; Sorochan v. Sorochan, [1986] 2 S.C.R. 38; McDonald v. McDonald (1988), 11 R.F.L. (3d) 321.
Statutes and Regulations Cited
Family Law Act, 1986, S.O. 1986, c. 4, ss. 4, 5, 10, 14, 64.
Family Law Reform Act, R.S.O. 1980, c. 152, s. 8.
Family Law Reform Act, 1978, S.O. 1978, c. 2.
Authors Cited
Bogert, George Gleason, and George Taylor Bogert. The Law of Trusts and Trustees, 2nd ed. St. Paul, Minn.: West Publishing Co., 1979.
McClean, A. J. "Constructive and Resulting Trusts -- Unjust Enrichment in a Common Law Relationship -- Pettkus v. Becker" (1982), 16 U.B.C. Law Rev. 155.
McLeod, James. Annotation to Benke v. Benke (1986), 4 R.F.L. (3d) 58.
Ontario. Law Reform Commission. Report on Family Law, Part IV. Toronto: Law Reform Commission, 1974.
Oosterhoff, A. H. and E. E. Gillese. A. H. Oosterhoff: Text, Commentary and Cases on Trusts, 3rd ed. Toronto: Carswells, 1987.
Paciocco, D. M. "The Remedial Constructive Trust: A Principled Bases for Priorities over Creditors" (1989), 68 Can. Bar Rev. 315.
Pettit, Philip H. Equity and the Law of Trusts, 4th ed. London: Butterworths, 1979.
Scott, Austin Wakeman. Law of Trusts, vol. 5, 3rd ed. Boston: Little, Brown & Co., 1967.
Scott, Austin Wakeman, and William Franklin Fratcher. The Law of Trusts, vol. 5, 4th ed. Boston: Little, Brown & Co., 1989.
Waters, D. W. M. Law of Trusts in Canada, 2nd ed. Toronto: Carswells, 1984.
Waters, Donovan. Comment (1975), 53 Can. Bar Rev. 366.
APPEAL from a judgment of the Ontario Court of Appeal (1987), 61 O.R. (2d) 637, 10 R.F.L. (3d) 113, dismissing an appeal from Walsh J. (1986), 55 O.R. (2d) 704, 3 R.F.L. (3d) 113. Appeal dismissed, La Forest, Sopinka and McLachlin JJ. dissenting.
Malcolm C. Kronby, Q.C., for the appellant.
Melanie A. Manchee, for the respondent.
//Cory J.//
The judgment of Dickson C.J. and Wilson, L'Heureux-Dubé and Cory JJ. was delivered by
CORY J. -- At issue in this appeal is whether the doctrine of constructive trust can be applied to determine the ownership of assets of married spouses under the provisions of the Family Law Act, 1986, S.O. 1986, c. 4.
Factual Background
Jacqueline and Harry Rawluk were married in 1955 when Harry Rawluk was 24 years old and Jacqueline was 21. For the next 29 years, until they separated permanently in 1984, the Rawluks worked together in two business operations. The first was a farm machinery sales and service business. The second was a cash-crop and livestock farming operation carried on at different times and in different places throughout the marriage.
Two years prior to the marriage Mr. Rawluk had bought a New Holland Farm Equipment franchise for the region of Newmarket, north of Toronto. He also farmed a modest rented acreage on a cash-crop basis. Shortly after the marriage Mr. Rawluk's father died. The spouses then took over the farm that had been run by his parents.
For the first few years of the marriage Mrs. Rawluk devoted most of her time to raising the couple's three children and performing a wide range of farm chores. During the early 1960s, however, she began helping her husband in the farm machinery shop. In 1964 the Rawluks moved to a new family farm on a twenty-three acre parcel in Newmarket. Five years later, the farm machinery operation was moved to this farm when the building that had housed the business burned down. From that time on, Mrs. Rawluk played a large role in running the farm machinery business. She performed all the bookkeeping functions, did most of the invoicing and banking and operated the parts department. At the same time, she maintained her active involvement in all aspects of the farming operations. In addition to the usual daily farm chores, she took care of birthings, needling and feeding of the animals, did the employee payroll and bookkeeping, assisted with augering wheat and helped to transport employees and crops at harvest.
Throughout the late 1950s and 1960s the Rawluks acquired a number of parcels of land. In 1958 they purchased two lots on Faulkner Avenue, in the Township of Whitchurch-Stouffville, adjoining a lot the husband had bought before the marriage. In 1963 they bought a cottage property in Haliburton. In the same year they acquired a nine-acre parcel in Newmarket that was used primarily as farmland but also to store equipment from the machinery business. In 1964 they acquired the matrimonial home farm, located adjacent to this nine-acre parcel. In 1966 they bought another ten-acre parcel near Sharon, Ontario. Title to all these properties was registered in Harry Rawluk's name except for the cottage which was originally in joint tenancy until Mr. Rawluk transferred it into his wife's name for tax purposes.
The money required to buy these properties and run the businesses came from a single bank account. Over the years the account was virtually always maintained in the husband's name. The sole exception was during a span of about one year when the husband converted it to a joint account, a period that coincided with Mrs. Rawluk's decision to put $7,000 of her inheritance from her mother's estate into the business operations.
Much of the cash generated by property rents and machinery sales never reached the bank account. For many years the spouses deposited and stored the cash in a teapot in a china cabinet in their home. Both husband and wife, as their cash requirement dictated, dipped into this teapot. Unfortunately this casual arrangement became a source of friction and discord. Mrs. Rawluk complained that her husband was miserly and that she was unable, without an argument, to use any money to satisfy the needs of herself and her children. Mr. Rawluk, on the other hand, viewed his wife as a spendthrift who turned too readily to the teapot.
Spurred on by a desire to gain an independent income, Mrs. Rawluk went to night school in the early 1970s and qualified as a registered nursing assistant. In 1974 she worked full-time at a Newmarket hospital. Mr. Rawluk complained about her absence from the business operations. As a result, from 1975 until just before the Rawluks' first separation, she worked only part-time, mostly in the evenings, so that she could continue her previous work in the farming and farm machinery businesses.
The Rawluks first separated in early 1982 when Mr. Rawluk left the home. In the fall of that year they reconciled and Mr. Rawluk returned. During that year Mr. Rawluk gave up his farm machinery franchise and devoted much of his time to attending auction sales, particularly of antiques. Mrs. Rawluk continued her nursing at the hospital in Newmarket, but now on a full-time basis. By the late spring of 1984 the Rawluks' relationship had significantly deteriorated. On June 1, 1984 they agreed that they were, in fact, living separate and apart under the same roof.
After the couple's first separation Mrs. Rawluk had begun proceedings under The Family Law Reform Act, R.S.O. 1980, c. 152. She sought an unequal division of family assets and a division of non-family assets and additionally or alternatively brought her claim under s. 8 of that Act. That action, suspended following reconciliation, was reactivated in 1984. At the trial that took place in 1986, Mrs. Rawluk requested a distribution of matrimonial property under the Family Law Act, 1986 which had come into force on March 1, 1986. The spouses disagreed as to what each owned on June 1, 1984 which, pursuant to s. 4 of the Act, became the valuation date.
Under the Family Law Act, 1986 deferred sharing regime, equalization of matrimonial property is calculated according to the value of the property at valuation date. As of the valuation date of June 1, 1984, the Newmarket farm and machinery lot had been valued at $400,000 and the Sharon property at $139,000. In the Rawluks' case the value of the matrimonial property, particularly the Newmarket home farm and machinery lot, had increased dramatically by the time of the trial in 1986 and has continued to do so since then. In order to share in one-half of the increase in value, Mrs. Rawluk claimed by way of a remedial constructive trust a beneficial one-half interest in the home farm and machinery lot and the Sharon property.
There can be no doubt that the industry and dedication of Mrs. Rawluk was such that they would, apart from the Family Law Act, 1986, entitle her to have her proprietary interest in the properties in issue recognized. Indeed it is conceded by the appellant that the facts of this case would support a declaration of constructive trust unless, as he contends, the remedy is abolished and superceded by the Family Law Act, 1986. As an owner, Mrs. Rawluk would be entitled to a share in the property to the extent of its value as of the date of trial.
The Judgments Below
Supreme Court of Ontario (1986), 55 O.R. (2d) 704, 3 R.F.L. (3d) 113
At trial, Walsh J. held that a remedial constructive trust could be imposed by the court to determine the ownership of assets of married spouses under the Family Law Act, 1986. He determined that the Family Law Act, 1986 requires a court to decide issues of ownership prior to equalizing net family property. He held that in determining ownership a court must look to both legal and beneficial interests, including an interest arising by means of constructive trust. He observed that it was unlikely that the Ontario legislature would deny married spouses a remedy that they would have had if unmarried. Having decided that the constructive trust doctrine survived the enactment of the Family Law Act, 1986, he found that the facts supported a declaration of constructive trust with regard to the Newmarket home farm and machinery lot and awarded Mrs. Rawluk a one-half interest in the contested property.
Ontario Court of Appeal (1987), 61 O.R. (2d) 637, 10 R.F.L. (3d) 113
The Court of Appeal affirmed Walsh J.'s decision. It decided that the provisions of the Family Law Act, 1986 far from superceding the constructive trust, appear to incorporate that doctrine into the process of determining ownership and equalizing net family property. The Act's provisions, it was said, clearly direct a court to determine ownership prior to ordering equalization. Accordingly, the constructive trust remedy should be applied as a part of the first step of ownership determination. The court reviewed several provisions of the Act in order to demonstrate that to deny the constructive trust remedy to married spouses in Ontario would create inconsistencies and inequalities. The court declined to decide whether a constructive trust can be forced upon a beneficiary to require that person to share in a decline in the value of property following valuation date. It simply noted that s. 5(6) of the Act might be used in such a situation to award an amount that differs from the standard equalization payment.
Position of the Appellant
The appellant contended, however, that the equalization provisions of the Family Law Act, 1986 supercede and implicitly abolish the remedy of constructive trust as it applies to the division of matrimonial property held by married persons in Ontario.
The Historical Background
The issue presented by this appeal arises from a unique convergence of common law and statutory provisions, both of which are of relatively recent origin. The Canadian law of trusts with regard to matrimonial property was only in its infancy when the Ontario Law Reform Commission first proposed a matrimonial property regime of deferred equal sharing in its 1974 Report on Family Law (Ontario Law Reform Commission, Report on Family Law, Part IV, 1974, at p. 55). The Ontario legislature used that Report as a model for the provisions of the Family Law Act, 1986 but declined to expressly clarify the relationship between the provisions of the Act and the doctrine of constructive trust, as it had evolved during the late 1970s and early 1980s.
(a)The Doctrine of Constructive Trust and Its Application in Matrimonial Cases
The evolution of the remedial constructive trust doctrine in Canada and its application to the division of marital property can be traced through a series of well-known decisions of this Court beginning with the dissenting reasons of Laskin J. (as he then was) in Murdoch v. Murdoch, [1975] 1 S.C.R. 423, and culminating in Dickson C.J.'s decision for a unanimous Court in Sorochan v. Sorochan, [1986] 2 S.C.R. 38. The doctrine developed when it appeared that the traditional approach to resolving property disputes was inappropriate and inequitable when applied to situations of marital breakdown.
Prior to Murdoch v. Murdoch, supra, Canadian trust law offered few avenues for a non-titled spouse to gain an interest in matrimonial property held in the name of the other spouse. In the absence of an express trust or a contract a spouse had to establish the existence of a resulting trust. In order to do this the applicant spouse was required to show that he or she had made a contribution to the purchase price of the property and, as well, that there was a common intention that the non-titled spouse should have a beneficial interest in that property.
The elements of "contribution" and "intent" essential to a finding of resulting trust were elusive concepts that were not infrequently molded so that they could be adapted to matrimonial property cases. In Thompson v. Thompson, [1961] S.C.R. 3, this Court had denied a wife a beneficial interest in property held by her husband on the grounds that she had made no financial contribution to the property's acquisition. However, Judson J., writing for the majority, noted at p. 14 that the Court might properly exercise its discretion in awarding a resulting trust "when there is no financial contribution when the other attributes of the matrimonial partnership are present". His statement was used by the Alberta Court of Appeal in Trueman v. Trueman (1971), 18 D.L.R. (3d) 109, as authority for the principle that an indirect contribution was sufficient to raise a resulting trust.
Under the traditional English view the constructive trust was regarded as a substantive institution very similar to an express trust. It was only applied in very narrow circumstances. In Pettitt v. Pettitt, [1969] 2 All E.R. 385, and Gissing v. Gissing, [1970] 2 All E.R. 780, the House of Lords emphasized the need for courts to find an actual or presumed intention on the part of the parties before they could reallocate property interests pursuant to trust doctrine. In discussing trust doctrine the House of Lords used the phrase "implied, resulting or constructive trust" without making any distinction among the three. At the same time, however, the Court of Appeal had granted judicial recognition to a "new model" constructive trust that could be imposed, in the words of Lord Denning M.R. in Hussey v. Palmer, [1972] 1 W.L.R. 1286 (C.A.), at p. 1290, "whenever justice and good conscience require it".
In the United States, on the other hand, the constructive trust had long been recognized not as an institution, but as a broad restitutionary device that could be invoked in a wide variety of situations to compel the transfer of property to a claimant by the defendant in order to prevent the unjust enrichment of the title holder. As stated in Scott, The Law of Trusts, vol. 5 (4th ed. 1989), at p. 304:
A constructive trust arises where a person who holds title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it.
In the Murdoch v. Murdoch case Mrs. Murdoch had claimed a beneficial interest in a ranch held in her husband's name basing her claim on a resulting trust arising from her contributions of money and labour. A majority of this Court denied her claim, applying a resulting trust analysis and following the House of Lords' judgments in Pettitt v. Pettitt, supra, and Gissing v. Gissing, supra.
Laskin J., in dissent, would have held in the wife's favour. He based his decision primarily on the ground that the constructive trust could be interpreted as an equitable instrument, the purpose of which was to prevent unjust enrichment. He wrote at p. 454:
The appropriate mechanism to give relief to a wife who cannot prove a common intention or to a wife whose contribution to the acquisition of property is physical labour rather than purchase money is the constructive trust which does not depend on evidence of intention.
Although Laskin J. did not expressly adopt the American approach, his reasons indicate that he was closely aligned to it. For example, in the same paragraph in which he first suggested that a constructive trust should be applied to the Murdochs' situation, Laskin J. relied on citations from the writings of Professor Scott and the reasons of Cardozo J. to help define the doctrine.
In Rathwell v. Rathwell, [1978] 2 S.C.R. 436, Mrs. Rathwell had made a direct financial contribution to the acquisition of the disputed farmland and the majority were content to use a resulting trust analysis to award a one-half interest to the wife. Dickson J. (as he then was) enlarged upon the concept of constructive trust. Writing for Laskin C.J. and Spence J., he held that Mrs. Rathwell could succeed on the basis of either a resulting trust or a constructive trust. At p. 455, Dickson J. reiterated the equitable foundations of this doctrine and defined the requisite elements for a finding of constructive trust:
The constructive trust ... comprehends the imposition of trust machinery by the court in order to achieve a result consonant with good conscience. As a matter of principle, the court will not allow any man unjustly to appropriate to himself the value earned by the labours of another. That principle is not defeated by the existence of a matrimonial relationship between the parties; but, for the principle to succeed, the facts must display an enrichment, a corresponding deprivation, and the absence of any juristic reason -- such as a contract or disposition of law -- for the enrichment.
The validity of the doctrine of constructive trust was accepted by a majority of this Court in Pettkus v. Becker, [1980] 2 S.C.R. 834. In this decision Dickson J. extended the constructive trust principle to a common law relationship, awarding Mrs. Becker a one-half interest in the farmlands and a bee-keeping business developed by herself and Mr. Pettkus. Although the minority found a contribution of both money and labour sufficient to support a resulting trust, Dickson J., for the majority, emphasized that the trial judge had found no common intention and that the Ontario Court of Appeal had not overruled that finding. Dickson J. commented upon the artificiality and inadequacy of the resulting trust, quoting at p. 843, with approval, Professor Donovan Water's comment that the "discovery" of an implied common intention is a "mere vehicle or formula" for achieving equity, "a constructive trust approach masquerading as a resulting trust approach" (Waters (1975), 53 Can. Bar Rev. 366, at p. 368). His reasons clearly demonstrate the broad and equitable nature of the remedial constructive trust and its applicability to any property dispute.
The importance of Pettkus v. Becker was emphasized in Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426. At p. 471 Dickson C.J. stated:
The constructive trust has existed for over two hundred years as an equitable remedy for certain forms of unjust enrichment.... Until the decision of this Court in Pettkus v. Becker, the constructive trust was viewed largely in terms of the law of trusts, hence the need for the existence of a fiduciary relationship. In Pettkus v. Becker, the Court moved to an approach more in line with restitutionary principles by explicitly recognizing constructive trust as one of the remedies for unjust enrichment.
Subsequently, this Court has made it clear that the constructive trust remedy will also apply to circumstances where a spouse has contributed not to the acquisition of property but to its preservation, maintenance or improvement. In Sorochan v. Sorochan, supra, a woman was awarded an interest in a farm owned by her common law spouse of 42 years on the basis of the labour she had contributed over the years to preserving and maintaining the farm, performing domestic labour and raising the parties' six children. Dickson C.J., writing for a unanimous Court, reiterated the three-part test requiring an enrichment, a corresponding deprivation and the absence of any juristic reason therefor. In light of the particular facts of the case, he concentrated on defining the requirement for a causal connection between the deprivation and the property involved. He wrote at p. 50:
These cases reveal the need to retain flexibility in applying the constructive trust. In my view, the constructive trust remedy should not be confined to cases involving property acquisition. While it is important to require that some nexus exist between the claimant's deprivation and the property in question, the link need not always take the form of a contribution to the actual acquisition of the property. A contribution relating to the preservation, maintenance or improvement of property may also suffice. What remains primary is whether or not the services rendered have a "clear proprietary relationship", to use Professor McLeod's phrase. When such a connection is present, proprietary relief may be appropriate. Such an approach will help to ensure equitable and fair relief in the myriad of familial circumstances and situations where unjust enrichment occurs.
These cases show that in Canada the doctrine of remedial constructive trust has been accepted for almost a decade as an important remedial device whose prime function is to remedy situations of unjust enrichment. It is clear that at the time that the Family Law Act, 1986 was enacted, the constructive trust was widely recognized as the pre-eminent common law remedy for ensuring the equitable division of matrimonial property. The validity and importance of the remedy designed, as it is, to achieve a measure of fairness between married persons and those in a marital relationship, must have been well known to the framers of the legislation. It would seem unlikely that they would, without a precise and specific reference, deprive parties of access to such an equitable remedy.
(b) The Ensuing Legislation
(i) The Family Law Reform Act
In Rathwell v. Rathwell, supra, Dickson J. had observed at p. 443 that "Canadian legislatures generally have given little or no guidance for the resolution of matrimonial property disputes". Within two years of that decision all nine common law provinces had enacted legislation aimed at the resolution of these disputes. The Family Law Reform Act, 1978, S.O. 1978, c. 2, was passed by the Ontario legislature in 1978. It provided for a division of family assets under s. 4 and created under s. 8 a statutory version of the constructive trust remedy. Section 8 granted courts a discretionary power to compensate spouses who did not have title to the property for contributions made towards the acquisition, maintenance or improvement of non-family assets.
Courts across Canada reached varied conclusions with regard to the relationship between the constructive trust doctrine and its statutory equivalent found in a number of provincial statutes. In Nuti v. Nuti (1980), 28 O.R. (2d) 102, J. Holland J. determined that a wife was entitled to a beneficial interest in her husband's property under both s. 8 and the constructive trust doctrine. He wrote at p. 115:
Following the passage of the Family Law Reform Act, 1978, the cases in this Province largely follow the dictates of the statute rather than trust concepts. It may be that the language employed in s. 8 bears close resemblance to that in Rathwell. However, I do not read s. 8 as removing from consideration the common law. The plaintiff may avail herself of the common law relating to constructive trust or the rights granted under s. 8.
In Vedovato v. Vedovato (1984), 39 R.F.L. (2d) 18, the British Columbia Supreme Court reached a similar decision with regard to its equivalent statutory provisions. Although the wife in that case was ultimately unsuccessful in raising a constructive trust, the court held at p. 21 that:
... a trust action can properly proceed independent of the Family Relations Act and even, as in this case, where the action with respect to family assets under the provincial legislation was dismissed.
On the other hand, in Thoreson v. Thoreson (1982), 137 D.L.R. (3d) 535, Cameron J.A., writing for the Saskatchewan Court of Appeal, stated at p. 544:
As thus modified by statute, the common law principles of trust were still available in limited circumstances but, in my opinion, their application in this case -- particularly in view of the reach of the statutory discretion -- was neither required, nor helpful.
The issue of the relationship between s. 8 of The Family Law Reform Act, 1978 and the common law constructive trust doctrine was touched upon but not determined in this Court's decision in Leatherdale v. Leatherdale, [1982] 2 S.C.R. 743. In that case Mrs. Leatherdale had sought a division of non-family assets either under s. 8 of The Family Law Reform Act, 1978 or alternatively on the basis of the doctrines of resulting or constructive trust. Laskin C.J., writing for the majority, expressly declined to decide whether the trust doctrines had survived the enactment of The Family Law Reform Act, 1978. He stated at p. 760:
It remains to say that the disposition made here on the basis of specific statutory provisions of the only assets that were in issue leaves no room to consider the application of constructive or resulting trusts. Whether these institutions survive The Family Law Reform Act in other circumstances need not be considered here.
Although it appears that the majority of provincial courts, including Ontario, found that a spouse could claim an interest in property either by means of a constructive claim or pursuant to the pertinent legislation, the issue was thus never resolved by this Court.
(ii) The Family Law Act, 1986
In 1986, the Family Law Reform Act was replaced by the Family Law Act, 1986. In contrast to s. 8 of the Family Law Reform Act, the provisions of the Family Law Act, 1986, did not attempt to duplicate the constructive trust remedy. Instead, the statute provided that all property should be equalized upon separation through the transfer of money from the title-holding or owning to the non-owning spouse.
Prior to this case the trial courts in Ontario have followed one of two approaches in deciding whether these equalization provisions implicitly abolish the use of the constructive trust in the matrimonial property context. The majority of the decisions followed the reasoning of Walsh J. in the case at bar even before it was affirmed by the Ontario Court of Appeal: see Seed v. Seed (1986), 5 R.F.L. (3d) 120; Leslie v. Leslie and Clyde (1987), 9 R.F.L. (3d) 82; Cowan v. Cowan (1987), 9 R.F.L. (3d) 401, and Re Corless and Corless (1987), 58 O.R. (2d) 19. This approach was rejected, however, in two lower court decisions: Benke v. Benke (1986), 4 R.F.L. (3d) 58, and Leonard v. Leonard, [1987] O.J. No. 1488, unreported.
The reasoning set forth in the Benke decision was adopted by the appellant. In that case, the wife had claimed an interest in her husband's farm on resulting or constructive trust principles. The trial judge deni