In Suen v. Suen, 2016 BCCA 107, the Court of Appeal for British Columbia applied the doctrine of unjust enrichment in the context of a complex family dynamic. The litigation was commenced to determine beneficial entitlement of a father and his adult son to a home they held as joint tenants. I recently discussed the concept of joint tenancy and the benefits that this form of ownership can bestow. Joint tenancy is often the chosen form of concurrent ownership for family holdings, in many cases for estate planning purposes. This is unsurprising, as the legal fiction of a unified singularity composed of more than one person may fit comfortably in a family context. Unfortunately, however, unity can be fragile and families are not always happy. The Suen v. Suen matter demonstrates that families must be very cautious about imprecise agreements and “loose” financial arrangements – when it comes down to it, the parties may have very different expectations and ideas about the true legal situation.
Facts in Suen v. Suen: Complicated family finances
The family’s financial position was always a difficult one. Albert, the father, was a poor money manager, losing large amounts gambling, running up debts on his credit cards, and borrowing money from relatives. Albert was the sole owner of a home in Burnaby. When Albert’s son Andy graduated from university in 1998, he began to contribute to family expenses by paying an amount equivalent to the mortgage payment on the Burnaby home. By the early 2000s, Andy was paying not only the mortgage on the Burnaby home, but also many of the family expenses. From 2002 to 2004, Andy paid all expenses related to the home. Albert promised to give Andy title to the Burnaby home, but title was never transferred.
In January 2004, the Burnaby home was sold with net proceeds of approximately $260,000. Albert and Andy purchased a home in Richmond for $440,000 with title taken by Albert and Andy as joint tenants. The Richmond property was financed using the proceeds of sale of the Burnaby home, plus $10,000 from Andy’s savings. The balance of the funds came from a mortgage, for which Andy assumed sole responsibility. Albert agreed to pay $500 per month toward expenses once the parties occupied the Richmond home, but he stopped making those payments after only a few months and made no further contributions. Between 2004 and 2009, Albert continued to spend beyond his means and Andy would pay off his debts. By 2009, relations between father and son were very strained, and the litigation was commenced. In 2011, Albert moved out of the Richmond home. Andy and his wife continued to reside there.
Rebutting the presumption of equal equitable interest
Joint tenants are presumed to have equal equitable interests in property, subject to that presumption being rebutted. The central issue to be determined in Suen v. Suen was whether the statutory presumption of indefeasible title as to the joint ownership of the Richmond property was rebutted by either of the parties. There are three considerations for determining this issue:
- the operation of a resulting trust which may be inferred where no value is given for a legal interest;
- the operation of an agreement between the parties that is contrary to the registered legal title; or
- taking into account the underlying equitable interests between the parties (eg., considerations that arise in claims for unjust enrichment).
The first consideration did not apply in this case, nor did the second, as the court found that the 2002 agreement to give Andy title to the Burnaby home did not rise to the level of a binding and enforceable contract or trust. Thus, the matter fell to be determined by application of the principles of unjust enrichment. The concept of unjust enrichment is a flexible one, and that remedies may include constructive trusts over proprietary interests or monetary damages.
BC Supreme Court used too broad of scope in its unjust enrichment analysis
The trial judge treated the situation as one in which the parties’ interests in the Richmond property remained static, at 50% each, and dealt with Andy’s greater financial contributions by providing him with a monetary remedy instead of a greater proportional entitlement to the property itself (reasons are indexed as 2013 BCSC 1615). The judge looked at all aspects of the parties’ relationship, and considered all of their financial dealings after the acquisition of the Richmond property in his assessment of unjust enrichment. The resulting order was complex and required the Richmond property to be sold and the proceeds equally divided. Albert and Andy would both be required to pay off the mortgage, while each would be responsible for his own portion of the line of credit. Albert would then be required to compensate Andy for his unjust enrichment in an amount in excess of $136,000. Both parties appealed.
Court of Appeal for BC finds presumption rebutted; imposes constructive trust
On appeal, Justice Groberman held that the trial judge’s approach to the matter, which assumed that the parties would continue to each be entitled to 50% of the equity in the Richmond property, was inconsistent with the findings as to the intentions and expectations of the parties. Further, by assuming such an entitlement, the judge was forced into an unnecessarily complex exercise, involving partially compensating Andy for mortgage payments he had made.
Albert made a contribution to the acquisition of the property in 2004, and then made no further contributions. As such, his entitlement was most easily assessed by asking what proportion of the Richmond property’s value he paid for in 2004. The property was purchased in 2004 for $433,000. The mortgage financing that was needed for the purchase was approximately $170,000. Andy took full responsibility for the mortgage. The parties’ total equity in the property therefore was approximately $263,000. Albert’s entitlement was half that, which amounted to about 30% of the property’s total market value. Andy’s half-interest in the equity at the time of purchase was in recognition of his contributions to the Burnaby home, and of his financial contributions to his father in the previous six years. The appropriate remedy was a declaration that the parties’ interests in the Richmond property were held on a constructive trust, such that Albert is entitled to 30% of the current market value, and Andy is entitled to the other 70% of the market value and is also liable to pay off the mortgage on his own.
Appeal court narrows the unjust enrichment analysis
Justice Groberman found that the parties led the trial judge astray by leading evidence concerning expenditures by Andy for such things as cable TV, gas, electricity, security services, Internet, groceries and personal debts. Whether or not Albert was unjustly enriched by Andy’s payments for those items, they were factually unrelated to their equity interests in the Richmond property. The parties seemed to have forgotten that the litigation concerned their equitable interests in a piece of property rather than the totality of their financial and social dealings with one another.
Of the various sums that the trial judge included in the unjust enrichment adjustment, the only ones clearly connected with the maintenance or preservation of the Richmond property were the payments for municipal taxes (totalling $18,752 for the years 2004-2011) and for home insurance ($7,690 for the same period). Given that Albert’s equity interest in the property was 30% of its market value, he received a benefit equal to 30% of those payments – a value of approximately $7,900. Albert was enriched by Andy’s payment of that amount, which should have been paid by Albert. There was no juristic reason for the enrichment (recall that there are three elements governing claims for unjust enrichment: an enrichment or benefit to the defendant, a corresponding deprivation of the claimant, and the absence of juristic reason for the enrichment: Kerr v. Baranow, 2011 SCC 10 at para. 32). Accordingly, in addition to the constructive trust remedy, Albert was required to pay the amount of $7,900 to reimburse Andy for the unjust enrichment.
The remaining expenditures – notably those for electricity, gas, and home security services – may have served to preserve the home from damage, but that was merely an ancillary benefit of those expenditures. They were undertaken to ensure the comfort of the home’s occupants, for their safety, and to protect their belongings. Thus it was not is appropriate to include any of those items in the assessment of unjust enrichment with respect to the Richmond property. That is not to say that such expenditures can never be considered in an unjust enrichment claim; rather, in this case they were factually unrelated to their equity interests in the Richmond property.
Bottom line on unjust enrichment between joint tenants
Normally, it is safe to presume that joint tenants own property in equal shares; however, when there is a breakdown in the relationship between joint tenants, the joint tenants can ask the court to determine each party’s equitable interest in the subject property via the doctrine of unjust enrichment. Central to the court’s consideration of the parties’ respective equitable interests is the determination of each party’s contribution towards the value of the subject property, wherein a constructive trust is imposed on the property in favour of the parties in proportion to their respective contributions to the property.