Court File and Parties
COURT OF APPEAL FOR ONTARIO DATE: 20230621 DOCKET: C70381
Pepall, van Rensburg and Harvison Young JJ.A.
BETWEEN
Omer Madi Applicant (Appellant)
and
Sarah King Respondent (Respondent)
Counsel: Erin Lepine, for the appellant Lisa Sharp, for the respondent
Heard: May 19, 2023
On appeal from the order of Regional Senior Justice Calum U. C. MacLeod of the Superior Court of Justice, dated January 26, 2022, with reasons reported at 2022 ONSC 569.
Harvison Young J.A.:
A. Overview
[1] This appeal arises out of high-conflict divorce litigation between the parties which culminated in a roughly eight-day trial. On this appeal, the appellant father raises three issues. The first issue is whether the trial judge erred in his treatment of the post-valuation date increase in the value of the matrimonial home, to which the appellant held sole title. The second issue is whether the trial judge erred in determining the income of both parties for child support purposes. The third issue is whether the trial judge erred with respect to his s. 7 expense order.
[2] At trial, the issues included parenting, the primary residence of the child, the determination of both parties’ income, s. 7 expenses, and equalization. Certain issues, including spousal support, had already been settled. The parties had also agreed on the value of all but two assets for equalization purposes.
[3] The trial judge established a parenting schedule which provided for the child, born in August 2015, to be resident with the appellant father more than 60% of the time. This aspect of the order is not appealed.
[4] The appellant father makes a number of submissions. First, he submits that the trial judge erred in dividing the post-separation increase in the value of the matrimonial home equally between the parties. Second, he submits that the trial judge erred in imputing income to him to reflect continuing contributions he was found to be making to his father’s business. He also submits that the trial judge erred in setting the respondent mother’s income too low for child support purposes. Finally, he submits that the trial judge erred in limiting s. 7 expenses to agreed upon extracurricular activities and asks this court to order that the child’s s. 7 expenses also include, among other things, childcare expenses.
[5] For the reasons that follow, I would allow the appeal to the extent that the trial judge’s order provides that the net post-separation increase in the value of the matrimonial home should be divided equally between the parties. However, I would dismiss the appeal from the trial judge’s determination of the parties’ incomes. To the extent that any confusion remains with respect to the respondent’s share of s. 7 expenses, the parties ought to seek clarification from the trial judge or have the order varied on consent.
B. The Matrimonial Home
[6] The parties married in 2014 and bought a house that became the matrimonial home. In circumstances that will be discussed further below, title was taken in the name of the appellant alone. Although they separated in November 2019, the parties continued to live in the matrimonial home together until May 2020. They agree the matrimonial home had a value of $672,500 on the valuation date, which was the date of separation under s. 4(1) of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), but that it was sold for $860,000 in September of 2020. They disagree as to the respondent’s right to share in the increase in the value of the matrimonial home after the date of separation.
(1) The trial judge’s reasons
[7] The trial judge held that the $187,500 post-separation increase in the value of the matrimonial home was to be divided equally between the parties on the basis that the house had been held in trust by the appellant for both parties.
[8] The trial judge stated that the basis of the respondent’s claim was her belief “that she was always promised and always told that they were buying a house together and that she would be an equal owner”, which she considered “to be a form of security in the event the marriage broke down.”
[9] It was clear that the parties planned to buy a house together. As the trial judge summarized:
[105] While there was no binding marriage contract, it is clear that the parties planned to buy a house together and it was their intention that the Respondent would be an equal owner. They told each other and their lawyer that they were buying a house together. To be clear, buying a house together in this context did not involve the Respondent contributing to the purchase price. All of the resources to purchase the home came from the Applicant or his family or were borrowed. The Respondent did not contribute any funds to the purchase.
[10] There is no dispute that the respondent wanted to be “on title” but not on the mortgage. She was clear that she did not want to contribute to or have any responsibility for the mortgage. The appellant advised their real estate lawyer of her wish. The lawyer’s evidence at trial confirmed this, and he explained that he had advised the parties that they could not have the respondent on title if she was not also a principal debtor under the mortgage because the bank would not permit it. In the result, title was placed in the appellant’s name alone. The respondent signed a spousal consent for the mortgage, which was necessary as the house was to be a matrimonial home.
[11] The trial judge declined to find that the respondent was purposely misled. He also rejected the submission that the appellant would be unjustly enriched by receipt of the post-valuation date increase in the value of the matrimonial home, noting that “[he] contributed all of the funds used to purchase the property and paid the mortgage and household expenses both during the marriage and post-separation.”
[12] However, the trial judge accepted the respondent’s evidence that she still thought that they owned the house “together” and was surprised to find out that she was not on title. He continued to set out his conclusion that the net proceeds of the sale of the house should be equally divided:
[115] My basis for concluding that the net proceeds of the actual sale should be divided equally is not based on a finding of unjust enrichment but rather is predicated on the reasonable expectations of the Respondent. She believed the property would be jointly owned. The Applicant encouraged her to believe they were buying the house together. They viewed it as their home. The Applicant would have put the Respondent on title but for the advice from counsel that the bank would not allow it. Under these circumstances I find that the Applicant held the title in trust for both parties. It is just and equitable that the actual proceeds of sale be divided equally – subject to the adjustments and advances which have already been agreed upon. [Emphasis added.]
[13] Significantly, the footnote to this paragraph reads as follows:
I agree with counsel for the Respondent that in these circumstances there is a promissory estoppel. Cowper-Smith v. Morgan, 2017 SCC 61, [2017] 2 SCR 754.
[14] The appellant argues that the trial judge erred in ordering that the home was the subject of a trust for a number of reasons. First, he argues that the trial judge conflated promissory and proprietary estoppel in his reasons, neither of which can apply to the facts of this case. Second, and relatedly, he submits that the trial judge erred in basing his finding upon the “reasonable expectations of the Respondent”. He further argues that even if the proprietary estoppel test had been met, the remedy was not appropriate as it was not proportional to the detriment suffered by the respondent.
[15] The respondent submits that the test for proprietary estoppel is met. She argues that the trial judge merely made a clerical error in referring to promissory estoppel and did not otherwise conflate the doctrines. The respondent was promised an equal share of the matrimonial home in lieu of a written Mahr, she relied on that promise in foregoing the Mahr, and this reliance was detrimental to her to the extent that she was deprived of the post-separation increase in the value of the home.
(2) Law and analysis
[16] I agree with the appellant that the trial judge erred in conflating the legal principles at play, and that proprietary estoppel could not be applied in this case.
[17] The starting point for any consideration of property division and entitlement following separation is the applicable statutory scheme. Section 5(7) of the FLA sets out the purpose of equalization and makes clear that the Act is intended to address the financial unfairness that would otherwise routinely arise from marriage breakdown: Martin v. Sansome, 2014 ONCA 14, 118 O.R. (3d) 522, at para. 63.
[18] One important feature of the equalization scheme is the special status it accords to the matrimonial home, which is always included in the net family property of the titled spouse(s). However, the scheme does not give a non-titled spouse the right to share in property arising after the date of separation. A non-titled spouse may still seek to share in the post-separation increase in the value of the matrimonial home by making a claim for unequal division under s. 5(6) of the FLA, or a distinct ownership claim such as an equitable trust claim: Bakhsh v. Merdad, 2022 ONCA 130, at paras. 15-16.
[19] In McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at para. 66, this court stated that, “in the vast majority of cases, any unjust enrichment that arises as the result of a marriage will be fully addressed through the operation of the equalization provisions under the Family Law Act”. The high threshold of unconscionability that is required under s. 5(6) to depart from the presumptive equal sharing of value makes clear that the intent of the legislation is “not to alleviate every situation that may be viewed as in some ways unfair or inequitable”: Ward v. Ward, 2012 ONCA 462, 111 O.R. (3d) 81, at para. 25. The Act’s scheme for property sharing upon marriage breakdown is intended to promote predictability and thereby discourage litigation. If courts were to deviate from the scheme of the Act wherever it gave rise to an unfair result, this would have the undesirable effect of encouraging parties to litigate their claims: Ward, at para. 25.
[20] It stands to reason that a similar logic applies to constructive trust claims made in the course of divorce proceedings. While the determination of ownership precedes equalization, constructive trust claims made in this setting must be approached in a contextual fashion that gives weight to Ontario’s chosen legislative scheme. Ultimately, the court must be satisfied that the arrangement between the parties is not already meant to be captured by the FLA regime. For example, a shared understanding between two spouses that they are buying a matrimonial home “together” has to be understood with reference to a non-titled spouse’s FLA entitlements upon marriage breakdown. As discussed further below, it may not, on its own, constitute an unambiguous promise that the non-titled spouse would continue to be entitled to their share of the increase in value of the property after separation.
[21] In this appeal, the only specific doctrine that was argued in support of the constructive trust claim was proprietary estoppel. The respondent does not challenge the trial judge’s finding that there was no unjust enrichment.
[22] As a preliminary issue, I agree with the respondent that the trial judge’s reference to “promissory” estoppel in the footnote was a simple clerical error. Promissory estoppel was not argued before the trial judge and could not apply to these circumstances because it “can be used only as a shield and not a sword”: Doef's Iron Works Ltd. v. Mortgage Corp. Canada Inc.. I am satisfied that the trial judge intended to refer to proprietary estoppel.
[23] That said, having found that there was no unjust enrichment, the trial judge erred in basing his finding that the appellant held the matrimonial home in trust on the respondent’s “reasonable expectations”. That is because the reasonable expectations of a party are relevant to the test for unjust enrichment but not to the test for proprietary estoppel. The test for unjust enrichment has three elements: (1) the enrichment of one party, (2) a corresponding deprivation by the other party, and (3) an absence of juristic reason for the enrichment: Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, at para. 30. As the Supreme Court explained in Garland, at para. 46, the reasonable expectations of the parties may be considered at the last stage. This last stage has no analog in the test for proprietary estoppel.
[24] Relatedly, having concluded that proprietary estoppel was the only remaining basis for the respondent’s constructive trust claim, the trial judge erred in failing to set out or apply the conditions for the application of the doctrine.
[25] The leading case governing proprietary estoppel is the Supreme Court’s decision in Cowper-Smith. That decision, which was not a family law case, set out the following test, at para. 15:
An equity arises when (1) a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over the property; (2) the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and (3) the claimant suffers detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word. [Citations omitted.]
[26] The claimant must establish all three elements of the test: Cowper-Smith, para. 23.
[27] The first stage of the test requires a clear and unambiguous promise: Cowper-Smith, at para. 26. The appellant submits that there was no representation or assurance made to the respondent that she would share in any post-separation increase in value of the matrimonial home. He testified that he did not agree to a Mahr agreement according to which he would give the respondent a house, although he did initially expect that she would be on title. While the appellant’s evidence was that he was merely referring to Canadian family law in saying that the respondent would be entitled to half of the value of the home during the time they were married, there is nothing in the trial judge’s reasons to indicate whether he accepted this aspect of the appellant’s testimony. There is no evidence other than this statement to indicate whether either party contemplated the issue of post-separation change in value.
[28] As already mentioned, I would be cautious about equating the parties’ shared understanding or the respondent’s expectation that they were buying the house “together” to a “clear and unambiguous promise” that the respondent would be treated as a titled owner, and, as such, would share in any post-separation increase in the value of the home. Married spouses have unique legal entitlements, including the right to the equalization of net family properties in the event of marriage breakdown. Importantly, a matrimonial home is always included in the net family property of the titled spouse(s), even if it was acquired before the marriage. In that sense, it would be the expectation of any spouse to be entitled to half of the value of the matrimonial home up until the date of separation. In this context, the “clear and unambiguous promise” relied on to meet the test for proprietary estoppel must go beyond what is already contemplated by the FLA’s equalization scheme. While the trial judge did not make the necessary factual findings to determine whether such a representation was made here, it is not necessary to resolve this question on the facts of this case because the respondent cannot satisfy the remaining elements of the test.
[29] The second element of the test requires the claimant to show that she relied on the representation “by doing or refraining from doing something, and [her] reliance is reasonable in all the circumstances”: Cowper-Smith, at para. 15. The respondent argues that she relied on the promise of shared ownership of the matrimonial home in giving up a written Mahr agreement, which would have given her financial protection upon marriage breakdown.
[30] That argument cannot succeed in this case. There is no evidence that the respondent did or refrained from doing anything in reliance on any assurance by the appellant. She said she did not want the obligations associated with a mortgage and she did not assume any. She did not make any contributions to the mortgage or toward any of the expenses associated with the matrimonial home during the marriage or after separation. She did not give any evidence that she refrained from doing anything as a result of her belief that she owned half of the home. Nor is there any evidence that she would not have consented to the mortgage if she had understood that her name was not going on title that day.
[31] The record also does not support the respondent’s argument that she relied on the promise of ownership in the matrimonial home in giving up her right to a Mahr under Islamic law. The appellant testified that to his knowledge, his father had never met with the respondent’s father to discuss a Mahr. By contrast, the respondent testified that a Mahr was discussed when the parties had a wedding ceremony in Tunisia, but agreed that no agreement was ever reached. The trial judge found that the discussions of a Mahr agreement were “useful context” but that “[t]here was no binding contract”, that the appellant “would not have empowered his father to negotiate on his behalf” with the respondent’s father and that “[t]here was no marriage contract signed in Tunisia and no formal agreement to pay Mahar or to provide a home in lieu” (emphasis added).
[32] There is simply no finding by the trial judge that the respondent agreed to give up a written Mahr in reliance on a representation by the appellant that she would be on title once they bought a house, nor does the record support such a finding. To the contrary, the trial judge found that there was no agreement for the respondent to provide a house in lieu of a Mahr. The evidence is that there may have been some discussion of a Mahr, but that no agreement was ever reached. Neither of the parties testified that the Mahr negotiations fell through because of any specific agreement made by the appellant with respect to ownership of a future matrimonial home. The respondent did not “give up” a written Mahr in exchange for equal ownership of the matrimonial home. On this record, no Mahr agreement ever came close to crystallizing.
[33] The respondent further argues that signing the consent to a mortgage was reliance. Even if this were so, however, the respondent would have to establish a detrimental change in her position associated with this reliance.
[34] There is no evidence of any detriment suffered by the respondent by reliance on the assurance or expectation that she was an equal owner. She did not contribute either to the mortgage or to the expenses of running the home, nor did she change her position in any other material way. Notably, in the only Ontario case which appears to have applied the doctrine of proprietary estoppel to a post-valuation date increase in the value of the matrimonial home, the wife, who had thought she was on title, was registered on the mortgage and had contributed $120,000 to the purchase of the home, which the court found to have constituted detrimental reliance: Spadacini-Kelava v. Kelava, 2020 ONSC 7907, 52 R.F.L. (8th) 143, leave to appeal to Ont. C.A. refused, M52096.
[35] Here, not only was there no evidence of detrimental reliance, but the respondent received countervailing benefits in the sense applied in the case of Scholz v. Scholz, 2013 BCCA 309, 46 B.C.L.R. (5th) 98, at para. 33. Specifically, the appellant allowed her to continue to live in the house without paying rent or contributing to the mortgage for several months after they separated.
[36] I conclude that the respondent does not have any claim to the post-separation increase in the value of the matrimonial home. Her trust claim must fail because the appellant was not unjustly enriched, as found by the trial judge, and the test for proprietary estoppel is not met. Even if the appellant had represented to her that she would be an equal owner of the matrimonial home in the event of marriage breakdown, which is not clear on the record, there is simply no evidence that the respondent detrimentally relied on such a representation.
[37] There is no unfairness flowing from this result. The respondent’s equalization entitlements under the FLA already account for the value of the matrimonial home, to which she made no monetary contribution, up to the date of the parties’ separation.
C. The Parties’ Income
[38] The appellant’s income at trial was $160,000. The respondent asked the trial judge to impute to him an additional income of $9,600 to reflect the fact that he assists his father in running his business, work for which his father compensated the appellant before the parties separated. The evidence showed that for a period of time, the appellant’s father regularly paid him $803 per month for his assistance. While the appellant still helped his father run his rental properties, he no longer received compensation from him.
[39] The trial judge agreed with the respondent that additional income should be imputed to the appellant for support purposes to reflect the compensation he could obtain from his father for his assistance with his business. He concluded that none of the circumstances contemplated by s. 19(1) of the Federal Child Support Guidelines, SOR/97-175 applied, but that the appellant “would receive a monthly stipend if he asked for it and it is slightly suspicious that the monthly amount ceased at around the time of separation.” He accordingly added $9,636.00 to the appellant’s annual income, which affected the appellant’s proportionate share of the child’s s. 7 expenses.
[40] By contrast, the trial judge set the respondent’s income at $65,875 for child support purposes. He explained that although her current income was $79,309, “her contract only began on September 1st”, she had “earned only $52,710.00” the previous year, and her “previous attempts at employment were either terminated early or were not renewed in part due to the manifestation of her anxiety disorder.”
[41] The appellant argues that the trial judge erred in imputing additional income to him after having determined that none of the circumstances under s. 19(1) of the Federal Child Support Guidelines applied. The problem with this submission is that the list of circumstances set out under s. 19(1) is not exhaustive: Korman v. Korman, 2015 ONCA 578, 126 O.R. (3d) 561, at para. 48. Moreover, the trial judge’s findings, including the fact that the appellant continued to assist his father with his business and that he could easily obtain compensation for this work, are entitled to deference from this court. The appellant has not pointed to any palpable and overriding error of fact in the trial judge’s reasons on this issue. I see no basis to interfere with the trial judge’s exercise of discretion.
[42] The appellant also argues that the trial judge erred in averaging the respondent mother’s income for child support purposes. I disagree. The trial judge gave clear reasons for setting the respondent’s income lower than her current income. He noted that the respondent was employed on a contract that had begun only in September of that year, and that she had previously struggled to maintain employment due to her anxiety disorder. The trial judge’s findings of fact on this issue are entitled to deference and I see no palpable and overriding error warranting the intervention of this court.
D. The Section 7 expenses
[43] The trial judge ordered the respondent to pay “her proportion of s. 7 expenses which would be 28 percent of any reasonable extraordinary expenses.” He specified that “[f]or present purposes, this will be 28 percent of any agreed upon extracurricular activities for the child.”
[44] On appeal, the appellant father expressed concern that the mother would be or was objecting to contributing to certain expenses, such as childcare, and that the order is ambiguous in that it provides only for “agreed upon extracurricular activities”. In oral submissions, counsel for the respondent mother advised that this was not an issue and that she accepts that she is responsible for 28 percent of expenses such as childcare, medical, health and dental expenses. She highlighted that the draft order sought by the respondent at trial anticipated that she would be responsible for her proportionate share of these expenses. The respondent mother’s interpretation of the trial judge’s order was that he simply emphasized that the only extracurricular activities that would be shared under s. 7 were those that were agreed upon – not that all other types of s. 7 expenses were excluded.
[45] To the extent that the parties remain unclear about the interpretation to be given to this aspect of the order, the issue should be returned to the trial judge for clarification. If the parties are able to agree on its interpretation (which would be preferable and efficient), the order could be varied on consent.
[46] For that reason, I would dismiss the appeal from the s. 7 order and order that in the event that the parties are unable to agree as to its interpretation, the issue be returned to the trial judge for clarification.
E. Disposition
[47] The husband’s appeal from the trial judge’s order that the post-separation increase in the value of the matrimonial home be divided equally between the parties is allowed. The husband is entitled to the full post-separation increase in the value of the matrimonial home.
[48] The husband’s appeal from the trial judge’s order that income be imputed to him in the amount of $9,636 per year is dismissed.
[49] The husband’s appeal from the trial judge’s determination of the respondent’s income is dismissed.
[50] As conceded by the respondent, s. 7 expenses shall include but not be limited to the agreed upon extracurricular activities of the child. To the extent that any confusion remains from the trial judge’s order, the issue should be returned to him for clarification. If they agree on the interpretation of the order, the parties may also seek to vary the order on consent.
[51] As the appellant was mostly, though not completely, successful in this appeal, I would order costs in the amount of $10,000, payable by the respondent to the appellant.
Released: June 21, 2023 “S.E.P.”
“A. Harvison Young J.A.”
“I agree. S.E. Pepall J.A.”
“I agree. K. van Rensburg J.A.”
