13 September 2013

Court Declines to Determine Application of FLA to Unmarried Spouses Separating Before Act

The recent Supreme Court case of Bressette v. Henderson involved a couple in an unmarried spousal relationship from 2004 to 2012 and a claim for the division of property. This facts of this case raise two problems that many lawyers have had to grapple with since the Family Law Act came into force on 18 March 2013:
  1. Do the property provisions of the new act apply to unmarried spouses who separated before 18 March 2013?
  2. Can a unmarried spouse who started a claim before 18 March 2013 amend her claim after that date to claim under the new act?
The first question is of critical importance as unmarried couples — spouses or not — were not entitled to an automatic interest in family assets under the old Family Relations Act and could only make claims to property held in just one person's name under the common law of trusts, which was complex and rarely yielded results close to what the couple would have had if they had been married.

Under s. 94 of the Family Law Act, however, spouses may apply for an order dividing property and debt. Section 3 defines "spouse" as including people who have lived in a marriage-like relationship for at least two years and people who used to be spouses. Section 198 says that an unmarried spouse must make a claim within two years of the date of separation. As a result, it would seem that if you meet the definition of spouse at s. 3 and you are within the time limit of s. 198, you may make a claim for the division of property under the new act.

The issue then narrows to this: if a new law gives you a right to make a claim against someone in certain certain circumstances, can you make that claim even though the circumstances occurred before the law came into effect? Think of it like this. Say a brand new law says that you can sue someone for reading your email. If the new law comes into effect in August, can you sue someone for reading your email in July?

Some of the answers lie in the provincial Interpretation Act. Section 4 of that act says that an act must be read as "commencing at the beginning of the day on which it comes into force." Section 3 says that if a new act says that it is meant to apply before it comes into force, then when the act comes into force it is retroactive to the date specified in the act. In other words, an act starts on the day it comes into force and had no earlier effect unless it says it has that effect.

In the case of the law about reading email, the law creates a new cause of action (a reason to sue someone) that didn't exist in July when the misconduct occurred. Unless the new act says that people can sue for instances of email-reading occurring earlier than August, you wouldn't be able to sue the person for reading your email in July.

The subtle difference about the Family Law Act is that the new cause of action it provides (unmarried spouses' right to sue for a share of family property) took effect on 18 March 2013 when the law came into effect, without any retroactive effect, but the definition of "spouse" captured people who were in a qualifying relationship on and after 18 March 2011. Let me put it another way. On 17 March 2013, an unmarried spouse couldn't sue for a share of the family assets, but on 18 March 2013 she could sue for a share of the family property, because that's when the new law came into effect along with its new definition of spouse and its new cause of action. However, the effect of the definition also captures unmarried spouses who were separated on or before 18 March 2013 and as a result, someone who met the definition of spouse on 18 March 2013 gained a new cause of action on that date, and the new act does not actually have a retroactive effect.

The second question is a bit different. If you started a court proceeding prior to 18 March 2013, can you change that claims you're making to include the new cause of action? Frankly, I don't see why not. Some might say "but that law never applied during our relationship," but that doesn't really matter; the government changed the law and if you're going to court that's the law that the court must apply, whether you meant it to or not. Others might say "but that wasn't the law when you started your claim," and that's the better argument. The idea here is that when you start a court proceeding against someone, the claim that you file in court sets out the full claim you are making and crystallizes the legal issues between the claimant and the respondent. However, the rules of the Supreme Court, say that you can change your claim as long as you do it a certain number of days before trial, and the reasons why people usually change their claims is to remove a legal issue or to add a legal issue, and so I'm not sure that this would get you anywhere.

As a result, I can't see why an unmarried spouse who starts a court proceeding before 18 March 2013 couldn't amend his or her claim to claim under the new act. The only restriction I can see is that the person would probably need to qualify as a "spouse" at the time the amendment is made.

By now you're probably asking why I've spent so much time babbling about my views on things when I started off talking about a case. The answer is that these questions were raised in the case:
"[120] The respondent argues that the FLA cannot possibly apply, given that the entire course of the parties' relationship was over before the new regime came into effect. The claimant says that it does apply."
However, the issues was not fully argued and, recognizing the significance of a decision on this point of law, the court commented that
"[131] I am concerned about deciding the issue of the applicability of the FLA in the absence of full legal argument."
and ultimately declined to do so. Her are Her Ladyship's helpful observations in this regard:
"[133] I have concluded that applying the 'significantly unfair' test [to unequally divided family property] in the unique circumstances of this case would lead me to the same conclusions I have reached with respect to the claimant's common‑law claim based on unjust enrichment. In other words, even if the FLA were to apply in this case, it would not change the result that I would reached based on the unjust enrichment cause of action.  
"[134] The unjust enrichment legal cause of action is based on fairness, or equity, and as such is intended to be flexible and to take into account the many varieties of relationships that may exist. An important factor running throughout the authorities in determining whether or not there has been unjust enrichment is the legitimate expectations of the parties. Here, if the FLA was applicable to these parties, it would be 'significantly unfair' to reach a different result than that based on the unjust enrichment remedy, given that the common‑law remedy is based on fairness and the legitimate expectations of the parties. Here the parties never considered or expected that there would be a new statutory regime applicable to the relationship during the course of the relationship. ... 
"[137] The fact is that neither party had the option of changing the relationship or reaching an agreement that would take into account the new statutory regime, the FLA, because their relationship had run its course before the new regime was brought into force. 
"[138] In addition to the above reasons, other factors I would consider under the FLA in reaching the conclusion that equal division of all family property would be significantly unfair would include the same factors I have considered in determining the unjust enrichment claim which I will now address, including: the duration of the relationship; the parties' intentions and expectations during the relationship; and the parties' respective direct and indirect contributions to the acquisition of property during the relationship."
This case is of primary utility, I think, for its concise summary of the law on trust claims to property and overview of the property provisions of the Family Law Act. It may also be useful for the court's conclusions on what constitutes "significant unfairness" under s. 95 of the act, however I would be hesitate to place too much emphasis on this aspect of the decision given the court's position on the application of the act.

My thanks to my former colleague, Thomas Wallwork, for bringing this interesting case to my attention.