Common Law Spouses and Division of Property Ushering in a New State of the Law

On February 18, 2011 the Supreme Court of Canada (hereinafter the “SCC”), established new precedent with its decision in Kerr and Baranow and Vanesse and Seguin (hereinafter collectively “K & B and V & S”), extending the entitlement of common law spouses vis-a-vis each other’s property at time of separation.

The Law in Ontario

Legislatively in Ontario, legally married separating spouses are entitled to an equal division of property accumulated during the marriage pursuant to the Family Law Act (hereinafter the “FLA”). The FLA, however, does not extend the same entitlement to common law spouses. The FLA, in effect, excludes common law spouses from the matrimonial property sharing regime prescribed by the Act. The state of the law has therefore always been rather clear in terms of distinguishing between the rights of married versus common law spouses with respect to a division of property at the time of separation.

Traditionally, a common law spouse seeking to share in assets accumulated during the relationship had to establish a nexus between contributions made to the accumulated assets (whether monetarily or through services rendered) and the specific asset claimed against. Absent a clear link between an asset and contribution made thereto, a claim would either be outright denied or compensated financially using a “fee for services rendered” model.

The Law after K & B and V & S

The decision in K & B and V & S changes the law in this respect with the advent of the SCC coined concept of the “family joint venture“. The concept of a family joint venture is easy enough to grasp and most people readily envision the inner workings and realities of a traditional family consisting of one adult who fulfills the role of the bread winner and the other

who fulfills the homemaker’s role. The SCC’s decision is premised on an appreciation of this concept and the concept itself is ultimately premised on common sense reasoning. There is, after all, a clear distinction between a common law couple which live together but carry on separate lives as far as finances and a couple which resolve to fulfill different roles in a team like spirit in order to achieve a common end; an end which necessitates that one of the spouses sacrifices income for the benefit of the family.

Overall Impact

In a nutshell, the overall impact is that the division of property between separating common law spouses now has the potential to mimic the equalization of net family property scheme under the FLA. In no way, however, does the SCC’s decision result in an automatic presumption that all common law spouses are functioning as a “joint family venture“. Each case will be determined based on the specific facts of the relationship in question. Proper legal advice is encouraged and should be sought as there are vehicles such as marriage contracts and co-habitation agreements (regularly employed by our firm) which serve to contractually establish a customized division of property in the event of separation. These contracts, in turn, serve to minimize the reach of both the FLA as well as new judge made law.