Date: 19980416 Docket: 28305 Registry: Prince George IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN: SUSANNE ANITA LEISNER PLAINTIFF AND: STEVEN KEITH RUSSELL DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE MEIKLEM Counsel for the Plaintiff: C. Keith Aartsen Counsel for the Defendant: Cameron E. Harrison Place and Date of Trial: Prince George, B.C. December 11 and 12, 1997 INTRODUCTION AND ISSUES [1] The parties, both age 38 as of the date of trial, met and started dating in 1984, conceived a child in November 1985, and commenced living together in a rented duplex in the early summer of 1986. The first of two children was born in August 1986 and the second in February 1990. Following the birth of their first child, they looked for a house to purchase, and on June 30, 1987 Mr. Russell completed the purchase, in his name alone, of the home which is the subject of this action. The parties separated in September 1993, there not having been any marriage or promise of marriage. [2] Ms. Leisner's statement of claim pleads firstly an agreement amounting to an express trust for an undivided one half interest in the home and other assets, including RRSP investments. She alternatively seeks a constructive trust remedy in respect of unjust enrichment arising from her contributions towards the acquisition, maintenance and improvement of the home. The contributions claimed include labour contributed directly to maintenance and improvements, direct monetary contribution towards improvements and household expenses, and indirect contributions of housekeeping and child rearing duties. Quantum meruit is also pleaded. [3] Mr. Russell's position is that there is no express trust and that Ms. Leisner specifically agreed orally never to claim an interest in the home. In respect of the unjust enrichment claim he argues that performance of the household and child rearing responsibilities did not contribute to the acquisition, maintenance or improvement of the property. He further argues that Ms. Leisner was better off when the relationship ended, and has suffered no deprivation. FINDINGS OF FACT [4] Ms. Leisner did not make any contribution, either directly or indirectly, to the initial acquisition of the house. The house was purchased at a price of $73,000, with the funds for the downpayment coming from an $8,000 loan from Mr. Russell's father, who was repaid from an inheritance Mr. Russell received when his mother passed away. Ms. Leisner attended at the conveyancing solicitor's office with Mr. Russell and was asked if she wanted her name on the title, and she responded in the negative. It seems there was little, if any, prior discussion between the parties about that possibility, and at trial they each provided reasons why Ms. Leisner's name was not placed on title. Ms. Leisner testified that she did not want to go on title and incur the mortgage debt because she wanted to retain her independent credit worthiness. She said it was her understanding, based on the experiences of her mother and sister, that if she was on title with a man, she would need his permission to borrow money. Mr. Russell said he was not sure the relationship would last and he had misgivings about her dysfunctional background and did not trust her. [5] There was no subsequent express declaration of trust in respect of any interest in the house, and it is clear that Ms. Leisner's pleading that there was an express agreement that she would beneficially own a one half interest is unfounded. The strongest her evidence was on this issue was that Mr. Russell made no assertions during their co-habitation to the effect that the house was his alone. [6] After the house was purchased, it is not disputed that Ms. Leisner supplied her labour in assisting in renovations and painting. Funds in the approximate amount of $3,000 from the sale of her car were spent on flooring in July/August 1991. Mr. Russell disputes that these funds should be credited to Ms. Leisner because they were within the amount in excess of $10,000 that she told Mr. Russell he could have if he sold the car for more than $10,000, but which she did not pay. [7] The full proceeds of the sale of the car were $14,000 and were received in the form of a cheque to Mr. Russell, who had become the registered owner of the car earlier as an accommodation. The proceeds were deposited in a joint account of the parties and disbursed by Ms. Leisner to pay personal debts, the flooring in question, and to purchase a large television, which Ms. Leisner kept at the time of separation. [8] Mr. Russell argues that since Ms. Leisner did not pay him the surplus over $10,000 that she promised to, the approximately $3,000 she spent on the house was really his money rather than hers. I do not accede to that argument. It appears on the evidence that Ms. Leisner's comment was at best a gratuitous promise; Mr. Russell does not assert that it was an agreed sales commission or that any other valuable consideration was provided. Mr. Russell received the entire proceeds of $14,000 by cheque payable to himself, which he cashed at the drawer's bank and then deposited in the form of cash and bank drafts to the parties' joint account, even though they each maintained individual accounts. These actions were apparently not accompanied by any further discussion of Ms. Leisner's promise, if it was that, and Mr. Russell certainly had the necessary control of the funds to ensure he received the surplus. The most reasonable inference is that Mr. Russell at that time declined to take the benefit of the gift that had been offered previously. Although one might speculate that Ms. Leisner would have been generous enough at the time to consider the flooring a replacement gift, there was no evidence to that effect, and that argument was not made. [9] Mr. Russell testified that there was no agreement between he and Ms. Leisner in respect of compensating her for her homemaking services, although he insisted there was an express agreement during their co-habitation that she would take no interest in the house. After the separation Ms. Leisner signed a declaration, dated February 3, 1994, that all ownership of the house was Mr. Russell's and she would "not include said lot, house, outbuildings in any settlement between myself and Steve during, before or after any court hearing". [10] Ms. Leisner testified that she prepared and signed the February 3, 1994 declaration under duress, to relieve herself of pressure from threats, some express, others implied. Mr. Russell denied linking the document to contesting custody of one of the children and said she simply provided it to him on his request. There was no consideration passing and no reliance by Mr. Russell to his detriment and it would appear this waiver is not binding upon Ms. Leisner, but in any event, I do not find it necessary to decide the duress issue, because of the view which I will later express on the appropriate remedy in this case. [11] Ms. Leisner said Mr. Russell generally did not give her any money for anything and only paid a single sum of $200 for groceries once near the beginning of the co-habitation. This is difficult to reconcile with her evidence that from 1986 until she obtained full time employment in January 1992 (a period of 5 1/2 years) her earned income sources comprised 7 months of employment at $8.00 per hour, 9 months of Employment Insurance of $600.00 per month, 4 months of employment at $10.00 per hour, and $1,700 from a student loan (over and above tuition costs). Nevertheless Mr. Russell conceded on cross- examination that Ms. Leisner spent more from her own earned funds than he did on household groceries and clothing for the children. He said he did give her money for groceries, but gave no estimate of how much, and I infer this was not a regular contribution. [12] She did perform household and child rearing duties, and Mr. Russell admitted that apart from a drinking problem, she was a good mother. He agreed on cross-examination that she did the majority of the cooking, cleaning and laundry, even at those times she was working outside the home. The evidence conflicts on the relative contributions of the parties to lawn- mowing and outside yard maintenance, with Mr. Russell saying he did 80% of it, and Ms. Leisner saying she did most of it. I find she probably did half of the outside maintenance over the course of a year. [13] By Ms. Leisner's account, Mr. Russell spent all his time working, sleeping, or on the golf course, where he enjoys, by his own admission, a very low handicap. Undoubtedly there is some exaggeration in her account, but clearly there was not a rich family life. Mr. Russell was not a family man and from the derogatory portions of his testimony about Ms. Leisner it is obvious that he had serious reservations about committing himself to a traditional relationship. Questioned about their respective intentions on cross-examination, he said, according to my notes, that Ms. Leisner was "her own individual too," and that "she probably expected to live there forever, and I would have been o.k. with that if she had cleaned up her drinking act". Asked about the subject of marriage, his response was a rhetorical question: "Would you marry a prostitute"? [14] Neither party know much about the other's income or financial during their co-habitation situation, and there was very little pooling of funds for joint expenditure. In 1992 and 1993, Ms. Leisner reported earnings of $19,092 and $20,466 respectively. Mr. Russell's earnings were $49,000 in 1992. Mr. Russell was able to save and contribute to an RRSP each year, accumulating $9,871.79 as of 1993. He also took an annual golfing holiday on his own. Counsel for Mr. Russell concedes there is arguably a more significant nexus between Ms. Leisner's contributions of homemaking duties and the RRSP asset than in respect of the house. [15] The house was appraised at $122,000 as at September 20, 1993, the date of separation. The 1993 assessed value was $108,000. The subsequent assessments for 1994, 1995 and 1996 were $123,300, $136,200 and $136,500 respectively. There was another appraisal, as at April 1995, of $135,000 by the same appraiser. ANALYSIS [16] The plaintiff cited Peter v. Beblow (1993) 77 B.C.L.R. 1 (S.C.C.) for a discussion of fundamental principles in applying unjust enrichment to common-law spousal property claims and Boomhower v. Kalicum (unreported) April 1996 Nanaimo Registry No. 08350 and Lazark v. Belcher (unreported) January 1997 Cranbrook Registry No. 4822 as specific applications of those principles to facts similar in several respects to the case at bar. [17] The defendant cited Plattig v. Robillard (1995) 16 R.F.L. (4th) 222 where the trial judge was upheld on appeal in dismissing a constructive trust claim in a case where he found no contribution by the plaintiff to the increase or maintenance of the defendant's assets, and the defendant's assets remained unchanged while the plaintiff left the relationship in substantially better financial shape than when she entered it. [18] The defendant suggests that the plaintiff has not suffered any deprivation because she entered the relationship without a job and during the relationship obtained schooling and thereby gained employability as a bookkeeper. [19] The elements required to establish unjust enrichment are: the enrichment of Mr. Russell, a corresponding deprivation of Ms. Leisner, and the absence of any juristic reason for the enrichment. I find these elements are established. Ms. Leisner's domestic services over seven years of housekeeping and child care were services of monetary value to Mr. Russell and he was enriched by her providing the majority of the food and clothing expenses for their children. There is little connection to the property from these domestic services, but Ms. Leisner's financial contribution and labour in the renovations and painting and her yard work were directly connected to the upkeep and maintenance of the property. [20] Ms. Leisner was able to take college courses during the parties' cohabitation, and she was, in a sense, either enriched or was able to ameliorate the economic dislocation that often goes along with providing long term domestic and child care services. However, this did not measurably reduce the value of her domestic services to Mr. Russell or monetary contribution by him, and was achieved without direct financial contribution from him. Her educational betterment during the relationship was not the result of any services provided by Mr. Russell and he suffered no corresponding deprivation. The bare fact that a spouse providing domestic services has gained some betterment during a relationship should not negate or set off an unjust enrichment claim, in respect of those services unless it is accompanied by a deprivation of the other spouse. THE APPROPRIATE REMEDY [21] As established in Peter v. Beblow (op. cite, at page 14) The first step in determining the proper remedy for unjust enrichment is to determine whether a monetary award is insufficient and whether the nexus between the contribution and the property described in Pettkus v. Becker has been made out. In my view there may well be a sufficient nexus to the property made out in this case, but I do not find that a monetary award is insufficient, either in the sense that there is a likelihood it will not be paid, or that Ms. Leisner has a special interest in the property itself. She specifically declined an interest in the property at the time it was acquired, and her declaration that she would not seek an interest in it after the separation does at least negate a claim of special interest that would otherwise be relevant to the choice of remedy. [22] I think a monetary award is sufficient. Mr. Russell has a good income with long term employment and his equity in the house in question is now approximately $90,000 - $100,000, over and above a mortgage of approximately $48,500. He of course has the above-mentioned RRSP asset, which he says he has both added to and drawn upon. [23] What should be the valuation of the monetary award? Although the majority judgment in Peter v. Beblow suggests that a `value received' approach is appropriate for a monetary award, it acknowledges that that approach involves a practical problem of balancing benefits and detriments and reference is made to those that suggest it is the least attractive approach in most family property cases. In this case I simply do not have sufficient evidence to permit me to place a finite monetary value on the domestic services component of Ms. Leisner's contribution, such as was done at the trial level in Peter v. Beblow, where housekeeping was valued at $350 per month (and then reduced by 50% for benefits received by the plaintiff). [24] In my view the only practical approach for this case, and I think the most reasonable and fair one in any event, where there is no evidence of profligate spending or waste, is to establish the monetary award at the same level as the `value survived' approach would produce if I had determined constructive trust to be the proper remedy. This hybrid approach involves notionally apportioning the assets accumulated during the relationship on the basis of the contributions made by each party, and awarding monetary judgment to the plaintiff equal to the value of her apportioned share. [25] The basic approach of awarding a constructive trust interest proportionate to contribution is discussed at page 13 of the above cited report of Peter v. Beblow: the next question is the extent of the contribution required to give rise to a constructive trust. A minor or indirect contribution is insufficient. The question, to quote Dickson C.J. in Pettkus v. Becker, supra, at p. 852, is whether "[the plaintiff's] contributions [was] sufficiently substantial and direct as to entitle her to a portion of the profits realized upon sale of the . . . property." Once this threshold is met, the amount of the contribution governs the extent of the constructive trust. As Dickson C.J. wrote in Pettkus v. Becker, supra, at pp. 852-53: Although equity is said to favour equality, as stated in Fathwell, it is not every contribution which will entitle a spouse to a one-half interest in the property. The extent of the interest must be proportionate to the contribution, direct or indirect, of the claimant. Where the contributions are unequal, the shares will be unequal. [Emphasis added.] Cory J. advocates a flexible approach to determining whether a constructive trust is appropriate; an approach "based on common sense and a desire to achieve a fair result for both parties" (at p. 28 [p.32]). While agreeing that courts should avoid becoming overly technical on matters which may not be susceptible of precise monetary valuation, the principle remains that the extent of the trust must reflect the extent of the contribution. [26] A question arises as to whether the award should be based on the value of accumulated assets at the time of separation or the date of trial. Once again, in this case, the state of the evidence virtually determines the choice. Whereas there is an appraisal of the house as of the separation date and evidence of the value of the RRSP in December 1993, there is no hard evidence of market values at trial. It is difficult to draw an inference of present market value from the current assessed value, because whereas in 1993 the appraised value in September was $122/108 of the assessed value, in 1995, the appraised value (by the same appraiser) was $135/136 of assessed value. In this case therefore, I will utilize values as of the separation date and award interest, rather than make an award on the basis of values as of the trial date. I think it is the preferred approach to take with a monetary award in any event. [27] The defendant suggested in argument that if I awarded an interest to the plaintiff, I should only apportion the value of the house that exceeds the initial purchase price of $73,000, since this was all provided by Mr. Russell. That approach is attractive for its simplicity, since it avoids the necessity of weighing the $8,000 initial downpayment and the principal- reducing portion of Mr. Russell's mortgage payment as contributions against some portion of Ms. Leisner's contribution. [28] The difficulty with this suggested simple approach is that it is not fully valuing the asset accumulated during the relationship, which included the equity acquired by mortgage principal reduction as well as by increased market value. It apportions the equity due to the mortgage reduction entirely to Mr. Russell, and correspondingly takes out of the analysis of his contributions the principal portion of his mortgage payment. One is left with a valuation of assets accumulated during the relationship comprised (at least in respect of the house) of only market value increases. Logically, the proportionate assessment of the contribution of the domestic service claimant would be higher against this lower "value survived" than it would be against the higher "value survived" inclusive of the equity gained through mortgage reduction. [29] The suggested approach also places a fixed parity value, a dollar credit for a dollar paid, in respect of only one portion of a blended mortgage payment, whereas the balance of the payment obviously must be discounted somewhat. If Mr. Russell were to receive apportionment at par for the full amount he contributed for principal, interest and taxes and insurance from 1987 to September 1993, his apportionment would exceed $60,000, whereas the total value to be apportioned on the suggested approach is $122,000 minus $73,000 = $49,000. [30] The premise behind the unjust enrichment doctrine as applied to family property cases is that the unpaid services provided by the plaintiff have freed up earnings of the defendant which have accumulated or have been used to acquire assets. One cannot, in this case, say that Ms. Leisner's services and direct contributions did that only in respect of that portion of the mortgage payment going to interest and taxes, and not to the portion going to reduce principal. [31] Another way of expressing my conclusion that the defendant's submission is not acceptable is to observe that the assets to be compared at the outset and at separation are not a house worth $73,000 and a house worth $122,000; rather, they are: house equity initially worth $8,000, and finally worth $67,000 (the mortgage balance was approximately $55,000 in September 1993). The equity accumulated in the house during the relationship was thus $59,000. While it is true that the parties were co-habiting prior to purchasing the house, it cannot be argued that Ms. Leisner's services or earnings contributed in any way to the $8,000 downpayment made by Mr. Russell, which was, in effect, an advance on an inheritance. In addition, RRSP's of approximately $9,800 were accumulated, for a total accumulated asset pool of $68,800. [32] The final question to be answered is the extent of Ms. Leisner's contribution to the accumulation of this pool of assets. The inquiry need not be answered in absolute monetary terms on the approach I have adopted, but rather in terms of the extent of her contribution relative to Mr. Russell's contribution. [33] In the last two years of their relationship, notwithstanding that there was no formal pooling of income, Ms. Leisner's earned income was approximately 30% of the total family income. She still performed most of the cooking and cleaning chores, but not all of the child care previously provided. She was performing one half of the outside maintenance. Mr. Russell was providing 70% of the total family income and performing half of the outside maintenance. From Ms. Leisner's earnings came most of the groceries for the whole family and the children's clothing, which were not quantified in the evidence. From Mr. Russell's earnings he paid mortgage payments in the approximate amount of $800 per month inclusive of taxes. He also paid the house insurance and utilities. [34] In the first five years of the co-habitation Ms. Leisner's contributions in the form of earned income were proportionally smaller, but the child rearing contributions were greater. In my assessment, the conclusion which is fair to both parties is that over the whole of the relationship, the plaintiff's contribution to the accumulation of the asset pool was one third, and the defendant's was two thirds, of the total. [35] The plaintiff will therefore recover judgment for $22,933 together with interest at registrar's rates from September 20, 1993, and costs on Scale 3. "Meiklem, J."