Common Law Relationships and Exempt Assets

In a recent case out of the Court of Appeal, the uncertainty surrounding financial separation in common law relationship was again reinforced.

In the case of Strigl v. Howden, 2018 ABCA 337, Howden appealed the final order arising out of a morning chambers application, in which Justice Inglis Ordered the sale of a jointly held property and the return of a downpayment amount to Strigl.  Strigl and Howden had been cohabitating for four years in Howden’s home, where Strigl was not required to contribute to any operating expenses in relation to that home.  However, the parties ultimately chose to purchase a new home together, and Strigl placed the amount of $115,980 into the property as a down payment.

The parties separated prior to moving into the new home together and Howden ultimately took possession of the home with her daughters.  Strigl applied for the sale of the house and payment of the first $115,980 in equity from the net sale proceeds as reimbursement for his down payment.  In hearing this Application, Justice Inglis characterized Strigl’s downpayment as exempt property, and granted Strigl’s application.

On Appeal, the Court overturned this Order on the basis of a number of errors made by the Chambers’ Justice.  Primarily, the Court held that Justice Inglis erred by finding that Strigl’s downpayment was not “exempt” property as the parties had never been married – exempt property is a category of property that is only found within the Matrimonial Property Act, and only applies to married couples.  The Court of Appeal affirmed that it is trite law that property held b couples outside of marriage continues to be governed by the law of trusts, and that their rights flow from the Law of Property Act. The Court also held that the Chambers’ Justice erred by finding that Howden could not raise the grounds of constructive and resulting trust as defence, but had to advance such on a cross-application.  The Court of Appeal clarified that any defendant can resist any application by filing evidence, and raising a genuine issue through such evidence without the necessity of bringing a cross-application.  As such, and as was concisely stated by the Court of Appeal, no litigant is required to commence a separate action to advance defences to an action against their property.

While the decision of the Court of Appeal is confirmatory of how common-law and matrimonial property issues are still distinct, and a solid reminder that cross-applications are not always necessary if the grounds being pled are in the nature of a defence, the Court of Appeal did make an odd off-hand comment that needs consideration in the context of “exempt” property.  In addition to the identified errors of the Chambers’ Justice, the Court also held that the Justice Inglis should have considered that the fact of Howden’s name on title to the new home could communicate an intention of Strigl to have gifted half of the down-payment to Howden.  This manner of determining whether the contributions of one party to a jointly held property are “gifted” to the other party on title is common in how “exempt” property is dealt with under matrimonial property actions when one party shares an exempt asset.

While nothing in the Matrimonial Property Act sets out the exempt property shall be dealt with in such a manner when shared, it is nonetheless become to default manner in which the Courts tend to deal with shared exempt property.  However, it becomes a question for consideration as to whether that should be the default position in common law relationships when one party contributes more than the other to jointly held property.  If common law parties do not have the right to claim “exempt” property, perhaps any contributions made to shared property by each party should not be viewed with the same lens as “exempt” property is, and rather the analysis should instead focus on the question of whether and how the law of trusts would apply in such a case.  It is a question that there is no clear answer for, and perhaps the Court will have to address such at some time to provide clarity to parties who unequally contribute to jointly held property.

The lawyers at Mincher Koeman LLP have a wealth of experience in dealing with property issues, whether parties are married or in a common-law relationship.  If you need assistance with your property matter, give us a call at (403) 910-3000, or email us at reception@mincherkoeman.com.