Written Reasons by:
The Honourable Madam Justice Prowse

The Honourable Mr. Justice Mackenzie
The Honourable Madam Justice Proudfoot

[1] Mr. Shannon is appealing from the decision of a trial judge, pronounced October 2, 1997, awarding him $20,000 from the proceeds of sale of a home registered in the name of Ms. Gidden in which the parties had lived in a marriage-like relationship for 13 years. He is not appealing from that aspect of the decision awarding Ms. Gidden an interest in his Canadian Armed Forces superannuation pension, pursuant to the Pension Benefits Division Act, S.C. 1992, c. 46, Sch. II.

[2] Mr. Shannon submits that the trial judge erred in his application of the principles of unjust enrichment in:

(1) finding that the equity in the home to be shared between the parties was $47,900, rather than $77,900;

(2) deducting the value of the home at the commencement of the relationship from the value to be shared between the parties;

(3) failing to take into account all of the assets of the parties in determining the amount to be paid to Mr. Shannon; or, alternatively, failing to declare a constructive trust with respect to the balance of the parties' assets.

[3] Mr. Shannon and Ms. Gidden commenced living together in 1981. At that time, Mr. Shannon was 37 years of age and a Warrant Officer in the Armed Forces. Ms. Gidden was 29 years of age and employed as an interpreter for the deaf at a local school. Each had three children from prior relationships: Mr. Shannon's children were aged 16, 12 and 10, and Ms. Gidden's children were aged 10, eight and four.

[4] The trial judge described the assets which the parties brought into the relationship at paras. 12 and 13 of his reasons:

I am not going to summarize all of the assets the parties had at the time they commenced their cohabitation, but I do say this in the main. The plaintiff [Mr. Shannon] came to the relationship with the net proceeds of sale from his matrimonial home, two thousand to four thousand, depending on the view of the evidence, the interest in a future military pension (he of course was not retired in 1981), some chattels, a vehicle, some debt, and employment at that time, and of course, three children.

The defendant [Ms. Gidden] came to the relationship with the occupancy and the right to obtain title to the home, the subject matter of these proceedings, which is a large five-bedroom home. She had a vehicle, she had furnishings, she had some employment, and she was receiving child maintenance. And, of course, she had her three children with her in that residence.

[5] Mr. Shannon and his children moved into the home which was then registered in the name of Ms. Gidden and her former husband. Shortly thereafter, Ms. Gidden purchased her former husband's interest in the home by way of a lump sum payment of $30,000, secured by a mortgage which was guaranteed by Mr. Shannon.

[6] With the exception of brief periods when Mr. Shannon was upgrading his skills or suffering ill health, both parties were employed outside the home throughout their relationship. Mr. Shannon took early retirement from the military in 1984, but shortly thereafter he found other employment and continued to work until the parties separated.

[7] The parties pooled their incomes from all sources and both participated in household tasks and in the upbringing of the children. As the trial judge stated at para. 14 of his decision:

The parties appear to have conducted their financial affairs jointly, that is, they pooled funds for their everyday living expenses, food, accommodation, clothing, transportation, maintenance and care of the children, and holidays in that respect. There was some suggestion that the majority of [Mr. Shannon's] pension cheque, after he retired, was used to retire the loan with reference to his vehicle, but in turn, that vehicle was used in many respects for family purposes. So in all aspects, [Mr. Shannon] and [Ms. Gidden] acted as a family unit.

 

[8] At the time the parties separated, they had two main assets: Mr. Shannon's military pension and Ms. Gidden's equity in the home registered in her name. Mr. Shannon also had RRSPs valued at approximately $26,500 (before tax). Ms. Gidden had approximately $17,000 in RRSPs and an employment pension accumulated during the relationship. It is undisputed that Mr. Shannon's military pension was worth considerably more than Ms. Gidden's employment pension.

[9] In 1997, the home was sold. The proceeds of sale after discharge of the outstanding mortgage were approximately $257,000. This fund was the principal focus of Mr. Shannon's claim for a constructive trust at trial.

[10] At trial, Mr. Shannon sought a one-third interest in the proceeds of sale of the matrimonial home on the basis of his direct and indirect contributions to the home. The contributions he relied upon included the following: labour he expended in renovating and maintaining the home, funds he provided to assist in paying the mortgage and other family expenses, and indirect contributions consisting of child care and housekeeping services. He conceded that Ms. Gidden was entitled to a greater share of the proceeds of sale because she had brought the home into the relationship.

[11] Mr. Shannon also sought a rollover of approximately $9,000 from Ms. Gidden's RRSPs to an RRSP in his name to achieve what he estimated to be a 50 percent interest in the total value of the RRSPs and the present value of Ms. Gidden's employment pension. As earlier noted, his military pension was subject to division under the Pension Benefits Division Act. Ms. Gidden's pension was not subject to a similar division since Mr. Shannon did not fall within the definition of spouse in the Pension (Municipal) Act, R.S.B.C. 1996, c. 355.

[12] Ms. Gidden's position at trial was that she should retain the proceeds of sale of the matrimonial home and that Mr. Shannon should retain his full military pension. In the alternative, she claimed a share by way of constructive trust in all assets in his name.

[13] The trial judge found that Ms. Gidden had been unjustly enriched at the expense of Mr. Shannon, primarily as a result of the direct contributions he had made to the home in terms of labour and capital. The trial judge did not take Mr. Shannon's indirect contributions in terms of housekeeping and parenting into account in determining the extent of Mr. Shannon's entitlement to a share of the sale proceeds. He stated that these factors did not "loom large" in his decision, apparently on the basis that any contributions Mr. Shannon made in that regard were offset by similar contributions made by Ms. Gidden. The trial judge also stated that Mr. Shannon's contributions to the maintenance and improvement of the home "may not be considered great" and were not "financially significant in terms of the [home] or any [sic] relation to any other asset of [Ms. Gidden]."

[14] Upon finding that Mr. Shannon had met the requirements of a claim for unjust enrichment, the trial judge imposed a constructive trust upon the proceeds of sale of the property. In determining the extent of Mr. Shannon's interest in the proceeds of sale, the trial judge deducted the full assessed value of the home at the time cohabitation commenced, without regard to the $30,000 mortgage on the property. He then deducted the amount owing on the mortgage at the time of sale. (The mortgage had grown significantly over the years because the parties were living beyond their means.) These calculations resulted in a net amount of $47,000, of which he found Mr. Shannon was entitled to $20,000, or approximately 43 percent.

[15] At the conclusion of the trial judge's oral reasons for judgment, counsel for Mr. Shannon drew to his attention the fact that he had failed to take the original $30,000 mortgage into account in determining the value of the home at the commencement of cohabitation. The trial judge declined to vary his order to take account of this factor. It is common ground on this appeal that he erred in failing to do so.

[16] The trial judge declined to offset Mr. Shannon's interest in his pension against Ms. Gidden's interest in the home as suggested by Ms. Gidden's counsel. Rather, he applied the formula set out in the Pension Benefits Division Act in awarding Ms. Gidden a share of Mr. Shannon's pension. Counsel advised that the value of Ms. Gidden's interest in that pension is expected to be approximately $13,500, attributable to the three years the parties lived together prior to Mr. Shannon's retirement.

[17] Although the trial judge did not expressly find that the parties' interests in their other assets were offsetting, that is the effect of his ruling that each of the parties retain the other assets in his or her own name.

[18] The primary focus of this appeal was on the manner in which the trial judge divided the proceeds of sale of the home. Ms. Gidden's counsel conceded that the trial judge's finding that Ms. Gidden had been unjustly enriched at Mr. Shannon's expense was supported by the evidence. He also conceded that the trial judge had erred in failing to take into account the $30,000 mortgage in determining the value of the property at the time cohabitation commenced. He further submitted that the trial judge had erred in imposing a constructive trust over the proceeds of sale of the property without first considering whether a monetary remedy would be adequate. Despite these errors, counsel for Ms. Gidden submitted that the result achieved by the trial judge was fair and that it should not be disturbed on appeal.

[19] Although not strictly necessary to my analysis, it is interesting to compare the result in this case with the corresponding result had the parties been married. Based on the findings of the trial judge, it is not unreasonable to conclude that Mr. Shannon would have been entitled to an equal division of all "family assets", including the home. In that event, his share of the proceeds of sale of the home would have been approximately $127,000.

[20] This disparity in result is undoubtedly arising in other jurisdictions as the legislatures struggle with the issue of whether, and to what extent, the benefits (and burdens) of matrimonial legislation should be shared by couples in marriage-like, same-sex, and other "domestic" relationships. In that regard, I note that the B.C. legislature has seen fit to permit couples in marriage-like and same sex relationships to "opt in" to the Family Relations Act regime for the division of property upon the breakdown of their relationship. (See Family Relations Act, R.S.B.C. 1996, c. 128, s. 120.1.) The B.C. Law Institute has also recommended proposed legislation to extend the benefits consequent on marriage breakdown to a broader range of "domestic partners". (See British Columbia Law Institute, Report on Recognition of Spousal and Family Status (British Columbia: Queen's Printer, November 1998.)

[21] In the meantime, we must accept the law as it currently exists, as must Mr. Shannon. In that regard, it is common ground that the leading case dealing with the principles of unjust enrichment and constructive trusts in the area of family law is Peter v. Beblow, [1993] 1 S.C.R. 980. There, Madam Justice McLachlin, speaking for the majority, set forth the fundamentals of a claim of unjust enrichment in the following passage at pp. 987-8 of the decision:

The basic notions are simple enough. An action for unjust enrichment arises when three elements are satisfied: (1) an enrichment; (2) a corresponding deprivation; and (3) the absence of a juristic reason for the enrichment. These proven, the action is established and the right to claim relief made out. At this point, a second doctrinal concern arises: the nature of the remedy. "Unjust enrichment" in equity permitted a number of remedies, depending on the circumstances. One was a payment for services rendered on the basis of quantum meruit or quantum valebat. Another equitable remedy, available traditionally where one person was possessed of legal title to property in which another had an interest, was the constructive trust. While the first remedy to be considered was a monetary award, the Canadian jurisprudence recognized that in some cases it might be insufficient. This may occur, to quote La Forest J. in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, at p. 678, "if there is reason to grant to the plaintiff the additional rights that flow from recognition of a right of property". Or to quote Dickson J., as he then was, in Pettkus v. Becker, [1980] 2 S.C.R. 834, at p. 852, where there is a "contribution [to the property] sufficiently substantial and direct as to entitle [the plaintiff] to a portion of the profits realized upon sale of [the property]." In other words, the remedy of constructive trust arises, where monetary damages are inadequate and where there is a link between the contribution that founds the action and the property in which the constructive trust is claimed.

 

[22] As earlier stated, the trial judge found that Ms. Gidden had been unjustly enriched by Mr. Shannon's contributions to the property and concluded that a constructive trust over a portion of the proceeds of sale of the home was the appropriate remedy.

[23] In my view, however, the trial judge failed to appreciate that a finding of unjust enrichment could be made and a remedy provided, without the necessity of imposing a constructive trust. His misunderstanding in that regard is reflected in the manner in which he phrased the issue before him. At para. 26 of his reasons, he stated:

That leads to the most contentious issue, and that is, has the plaintiff established on a balance of probabilities that he is entitled to a share or an interest in the home proceeds. In order to succeed, the plaintiff must establish that he is entitled to the benefit of the remedy of constructive trust.

 

[24] As is evident from the passage I have quoted from Peter, supra, at para. 21 of these reasons, a constructive trust will only be imposed as a remedy for unjust enrichment if a monetary remedy is found to be insufficient. Certainly, if there are third party interests or enforcement issues involved, the imposition of a constructive trust, as opposed to a mere monetary award, is a more effective remedy. In this case, however, there was no suggestion that third party interests or enforcement concerns were at issue. Further, the home had been sold such that the only property to which the constructive trust could attach was the proceeds of sale. Those proceeds had been paid into trust on terms which protected any monetary award payable to Mr. Shannon. In these circumstances, I am satisfied that the appropriate remedy in this case would have been a monetary award based on unjust enrichment principles without recourse to the imposition of a constructive trust. In the result, however, the trial judge's error in terms of choice of remedy had no practical effect on the outcome of his decision, since he made a monetary award in any event.

[25] A more significant issue is whether the trial judge erred in deducting Ms. Gidden's equity in the property at the commencement of cohabitation from the sale proceeds in determining the amount to be divided between the parties. In my view, he did not. His approach in that regard is consistent with that taken by this Court in Pickelein v. Gillmore, [1997] 5 W.W.R. 595. That was also a case of a 13-year "marriage-like" relationship which included children from previous relationships and a pooling of financial resources. As here, each of the parties sought compensation for his or her contributions to the acquisition, improvement and maintenance of assets in the name of the other. Amongst other conclusions, this Court held that the trial judge had erred in failing to consider the value of the property brought into the relationship by each of the parties in determining the appropriate monetary award for unjust enrichment. The Court also concluded, as I have in this case, that the trial judge erred in granting a proprietary remedy to the parties without first considering the sufficiency of a monetary award to compensate for the unjust enrichment.

[26] In finding that the trial judge did not err in deducting the original equity which Ms. Gidden brought into the relationship from the amount to be shared between the parties, I wish to make it clear that this approach may not be appropriate in all cases. For example, there may be situations in which the value of the property in issue does not increase significantly in value despite substantial contributions to the maintenance and improvement of the property by the party claiming the unjust enrichment. In such a case, the equity brought into the relationship will be a lesser consideration in determining the remedy to be imposed. Each case will depend on its own facts and the choice of remedy by the trial judge will not be interfered with except in the case of identifiable error.

[27] This brings me to the next stage of this analysis, which raises the question of whether the trial judge otherwise erred in determining the amount to which Mr. Shannon was entitled by way of remedy. In answering this question, it is necessary to identify the manner in which the trial judge approached this issue.

[28] Although it is not entirely clear from his reasons, it appears that the trial judge adopted the "value survived" approach to the assessment of the appropriate award, rather than the "value received" approach. In Peter, supra, Madam Justice McLachlin discussed the difference between these approaches at pp. 998-9 of the decision:

Before leaving the principles governing the remedy of constructive trust, I turn to the manner in which the extent of the trust is determined. The debate centres on whether it is sufficient to look at the value of the services which the claimant has rendered (the "value received" approach), or whether regard should be had to the amount by which the property has been improved (the "value survived" approach). Cory J. [in minority reasons] expresses a preference for a "value survived" approach. However, he also suggests, at p. 1025, that "there is no reason why quantum meruit or the value received approach could not be utilized to quantify the value of the constructive trust." With respect, I cannot agree. It seems to me that there are very good reasons, both doctrinal and practical, for referring to the "value survived" when assessing the value of a constructive trust.

From the point of view of doctrine, "[t]he extent of the interest must be proportionate to the contribution" to the property: Pettkus v. Becker, [[1980] 2 S.C.R. 834] at p. 852. How is the contribution to the property to be determined? One starts, of necessity, by defining the property. One goes on to determine what portion of that property is attributable to the claimant's efforts. This is the "value survived" approach. For a monetary award, the "value received" approach is appropriate; the value conferred on the property is irrelevant. But where the claim is for an interest in the property one must of necessity, it seems to me, determine what portion of the value of the property claimed is attributable to the claimant's services.

 

 

[29] It is important to note that Madam Justice McLachlin was discussing the concepts of "value received" and "value survived" in relation to the remedy of constructive trust. Here, I have concluded that the appropriate remedy was a monetary award. A question which arises, therefore, is whether it is open to the Court to take the value survived approach in determining the extent of a monetary remedy? This question was answered in the affirmative by this Court in Pickelein, supra. There, this Court found that a monetary award was an adequate remedy for unjust enrichment, without the imposition of a constructive trust. The Court went on to value the monetary award by applying the value survived approach. Under the heading "The Valuation of the Award", Madam Justice Huddart, speaking for the Court, stated at paras. 32 and 35-6:

The facts of this case force a consideration of the relative contributions to the current net worth of both parties, not only by them and by market forces, but also by third parties. Without an examination of the total contributions to the properties, a just award cannot be determined.

* * *

Academic writers agree that the choice of a value survived approach to the valuation of a contribution, with a security order where necessary, is preferable to the value received approach and does not require the imposition of a constructive trust (see M.M. Litman, "The Emergence of Unjust Enrichment as a Cause of Action and the Remedy of Constructive Trust" (1987-88) 26 Alta. L.R. 407 at 466-67; P. Birks, An Introduction to the Law of Restitution (Oxford: Clarendon Press, 1989), c. 3, 11; M. Neave, "Three Approaches to Family Property Disputes-Intention/Belief, Unjust Enrichment and Unconscionability" in T.G. Youdan, ed., Equity, Fiduciaries and Trusts (Toronto: Carswell, 1989)247).

In Marcia Neave's essay, supra, she states that when a personal remedy is granted in an unjust enrichment case, a value survived approach to valuation of the claimant's contributions is appropriate when those contributions have assisted the legal title holder of property to acquire, retain or improve that property, and the property has increased in value. Neave says that in such an instance, "it seems appropriate for the remedy to reflect this increase in value" (at 255). Peter Birks, in his text on the law of restitution, supra, examines the value survived approach in depth. He states quite clearly that while proprietary remedies cannot be valued using the value received approach, "it must instantly be said that that proposition cannot be turned around. That is, nothing entitles one to say that claims to value surviving must be in rem" (at 77).

 

[30] Madam Justice Huddart went on in Pickelein, supra, to review numerous decisions of this Court and of the B.C. Supreme Court which illustrate the flexibility applied by the courts in determining fair compensation for unjust enrichment. She noted that long term marriage-like relationships would usually require the application of the value survived approach, at least in circumstances in which the property had appreciated in value.

[31] In Pickelein, supra, this Court also noted that the value received approach would have resulted in the dismissal of both parties' claims in that case since their contributions to the respective properties over the years had been equal. The value survived approach, on the other hand, enabled both parties to share in the increased value of the properties brought about by their joint contributions.

[32] In order to determine whether the trial judge erred in his application of the value survived approach to the determination of the amount to be awarded to Mr. Shannon, it is necessary to have regard to the direct and indirect contributions Mr. Shannon made to the property. Those may be summarized as follows:

(1) financial contributions, including the $2,000-$4,000 he brought into the relationship, his severance pay from the Armed Forces, and his employment and pension income over the years, all of which were used for family purposes, including mortgage payments and household improvements and maintenance;

(2) guaranteeing Ms. Gidden's mortgage to enable her to buy out her former husband's interest in the property;

(3) labour to maintain and improve the property, including: replacing the deck; renovating three bathrooms; painting the interior of the house on two occasions; removing old shakes from the roof; cleaning extensive ivy from the rocks on the property; putting top-soil on the front lawn and landscaping; installing light fixtures, wall switches and plumbing fixtures; removing and replacing wallpaper; assisting in painting the exterior of the house;

(4) assisting with household chores; and

(5) participating in the children's care and activities.

[33] As earlier noted, the trial judge treated Mr. Shannon's indirect contributions as inconsequential in determining the amount of the award and he referred to Mr. Shannon's more direct contributions as being relatively insignificant.

[34] Counsel for Ms. Gidden sought to uphold the trial judge's award by relying on the decision of this Court in Ford v. Werden (1996), 25 R.F.L. (4^th) 372. In that case, however, the parties had cohabited for only one year and had acquired separate assets and savings. In my view, the analysis engaged in by this Court in those circumstances is not helpful in analyzing the nature of the remedy in this case.

[35] In most of the cases to which we were referred, the party claiming an unjust enrichment had made contributions in the form of household and parenting services, but had made few, if any, financial contributions. In this case, Mr. Shannon contributed household services, money and labour over an extended period. In so doing, he gave up the opportunity of using his income and resources to purchase and improve his own property to provide for his future. It does not appear to me that the trial judge recognized the significance of the detriment suffered by Mr. Shannon in determining the appropriate monetary award. Nor am I able to find support for his conclusions that Mr. Shannon's direct contributions were insignificant, and his indirect contributions were inconsequential.

[36] In the result, I am satisfied that the trial judge erred in the manner in which he applied the value survived approach to the determination of the monetary award due to Mr. Shannon. Further, it is conceded that he erred in failing to take into consideration the $30,000 mortgage in assessing the equity in the property which Ms. Gidden brought into the relationship.

[37] Given the nature and extent of the direct and indirect contributions of Mr. Shannon to the home over the course of a 13-year relationship to which I have referred, I am satisfied that the appropriate monetary award for his contributions, based on a value survived approach, is $39,000. This represents one-half of the net proceeds of sale of the property ($257,000) less Ms. Gidden's equity in the property at the commencement of cohabitation ($179,000). I would, therefore, allow the appeal to the extent of substituting an award of $39,000 for the $20,000 figure arrived at by the trial judge.

[38] I am not persuaded that the trial judge erred in his disposition of the remainder of the assets. Although he did not elaborate on his reasons for ordering each of the parties to retain the assets in his or her own name or possession, it is apparent that he regarded the contributions made by the parties to these other assets to be roughly offsetting. I am unable to find that he erred in coming to that conclusion.

[39] I would allow the appeal to the extent of ordering Ms. Gidden to pay Mr. Shannon $39,000, rather than the $20,000 ordered by the trial judge. I would also award Mr. Shannon the costs of this appeal.

"The Honourable Madam Justice Prowse"

I AGREE:

"The Honourable Mr. Justice Mackenzie"

I AGREE:

"The Honourable Madam Justice Proudfoot"