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  • Writer's pictureJared Davies, Lawyer

The post-separation increase in the matrimonial home pursuant to Madi v. King, 2023 ONCA 443

Introduction


The recent Court of Appeal case of Madi v King delves into a situation where a non-titled spouse was awarded half the value of the post-separation increase in value of the matrimonial home based off principles of constructive trust and proprietary estoppel. The Appellant raises several issues on appeal.


Background


The first issue raised on appeal is whether the trial judge erred in dividing the post-separation increase in the value of the matrimonial home equally between the parties, despite it being solely in the Appellant’s name. Equalization does not generally allow for a non-titled spouse to share in the post-separation increase in the value of a matrimonial home unless there are special circumstances. The trial judge found the Respondent was entitled based off of proprietary estoppel as outlined below.


The Appellant argues that proprietary estoppel cannot be applied in this case and challenges the trial judge's finding in said regard.


Discussion and Outcome


The Court of Appeal says that the trial judge erred in finding a trust on the basis of the Respondent's reasonable expectation. Reasonable expectation may be relevant in the third factor of the unjust enrichment test, but unjust enrichment was not a finding of the trial judge. Reasonable expectation is not an element of the proprietary estoppel test which was used in the case to find the existence of constructive trust.


The Court of Appeal found “…the trial judge erred in conflating the legal principles at play, and that proprietary estoppel could not be applied in this case.” The test for proprietary estoppel was not met by the Respondent:


[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.


The Court of Appeal discusses the elements of proprietary estoppel and finds that the first element requires a clear and unambiguous promise. They said that the shared understanding between the parties that they were buying the house "together" does not necessarily constitute an unambiguous promise for the non-titled spouse to share in the post-separation increase in value. The court notes that the reasonable expectations of married spouses already encompass the entitlement to half of the value of the matrimonial home until the date of separation, as provided by the FLA's equalization scheme.


The second element of the test requires the claimant to show reliance on the representation by doing or refraining from something, but there is no evidence that the Respondent did or refrained from anything in reliance on any assurance by the Appellant. The court dismisses the argument that the Respondent relied on the promise of shared ownership by giving up a written Mahr agreement because of a lack of trial finding..


Furthermore, there is no evidence of any detriment suffered by the Respondent due to reliance on the assurance or expectation of equal ownership of the post-separation value in the matrimonial home. On the contrary, the Court of Appeal said that the Respondent benefitted from living in the house without paying rent or contributing to the mortgage for several months after separation.


The court concludes that the Respondent does not have a claim to the post-separation increase in the value of the matrimonial home in this particular case, as the Appellant was not unjustly enriched and the test for proprietary estoppel is not met. The Respondent's equalization entitlements under the FLA already account for the value of the matrimonial home up to the date of separation.


Conclusion


In this particular case, the appellate court allowed the appeal on the division of the post-separation increase in the matrimonial home. Understanding the intricacies of family law and the court's reasoning in such cases is crucial to ensuring a fair and just outcome.

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