Families often fall into patterns and routines; they are comfortable, stable, and predictable. They can also give rise to legal rights over land. The extent and enforceability of those rights will be put to the test following death or divorce. Such was the case in Tomek v Zabukovec, 2020 ONSC 2930.

Joseph Sr. (the “Deceased”) and his wife Mary had two sons, Joseph Jr. (the “Husband”) and Edward. In August 1988, the Deceased bought a 15-acre parcel of land in Caledon for $160,000. The Deceased hoped to be able to sever the land into lots, build houses, then sell it.

In September of 1988, the Deceased told his eldest son, the Husband, to take a section of the property for himself and build a family home for his wife, Judith (the “Wife”) and their growing family. Construction began soon after. However, the Deceased’s application to formally sever a 1.13-acre parcel where the Husband was building his house was denied – in March 1989, they learned that the lot had already been severed to the maximum amount allowed and no further severance would be permitted. The Deceased reassured the Husband by saying that the property would all be his one day.

By the summer of 1989, the Husband was running out of money for the construction of his family home. The Deceased mortgaged his own home to provide the Husband with a $80,000 loan to continue construction. The Husband eventually finished the house and paid back his father.

By the fall of 1989, the Husband and his family moved into their new home. Over the years, the Husband and Wife continued to upgrade their house. They also maintained the entire property, including managing the forest, and paid the property taxes and insurance.

In July 2004, the Deceased died without a will. At that time, his family assumed all of the Deceased’s assets passed to his wife, Mary. The Husband assumed that his mother would fulfill his father’s intentions and gift him the property when she passed away. Accordingly, the Husband encouraged his mother Mary to make a will.

Unfortunately, the Husband and Wife separated in 2011. As part of their divorce proceedings, they learned that the property remained in the Deceased’s name and did not automatically pass to Mary. As a result, they put forward a claim to have a beneficial interest in the property either through an unjust enrichment claim or through proprietary estoppel. The Deceased’s estate trustee denied their claim to an interest in the land.

In his reasons, Justice Fowler Byrne set out a thorough and clear summary of the law which can serve as a resource for all litigators.

Unjust Enrichment

As readers may recall, in order to prove unjust enrichment, the claimant must show (i) an enrichment to the Estate; (ii) a corresponding deprivation to the Wife and Husband; and (iii) absence of juristic reason for the enrichment.

In arguing that the Husband and Wife were not “deprived,” the Deceased’s estate trustee put forward that there was actually a net benefit to the Husband and Wife – even taking into consideration the money they put into the house and property upkeep, the Husband and Wife were still able to live more cheaply on the property than if they had to rent a house at market rates.

The Court rejected this argument, holding that this was not the correct approach to determining “deprivation.” Rather: “The value of unpaid labour lies at the heart of the analysis.”[1]

Proprietary Estoppel

The Court also rejected the estate trustee’s argument that there was a mutual conferral of benefits between the Deceased, Husband, and Wife. On that point, the Court held that any conferral of benefits is to be considered at the remedy stage, not in determining “deprivation.”

Having spent decades building the house and maintaining the property, the Court found that the Husband and Wife had been deprived, the Deceased enriched, and that there was no juristic reason for the enrichment. Accordingly, the Court held that unjust enrichment had been made out.

The Court also found that the elements of proprietary estoppel had been made out:

(1)        there were implied representations made by the Deceased to the Husband that he would obtain the benefit of the 1.13-acre parcel of land;

(2)        the Husband relied on his expectation of receiving an interest in the property by building a house for himself and his family on the property;

(3)        the Husband suffered a detriment – he and his Wife would have invested their money and time elsewhere if they did not believe that they would have an interest in the house they constructed.

Remedy

The Court then turned to the appropriate remedy. The Court held that while the Deceased funded the original purchase of the property, the Husband and Wife invested the most time and effort into improving and maintaining the property. Accordingly, the Court awarded them a 75% interest in the property through constructive trust and proprietary estoppel, with the remaining 25% remaining with the Deceased’s estate.

The Court put the Husband and Wife in charge of the sale of the property – once sold, they would be able to divide their 75% share of the net profits between them and finalize their divorce.

[1] at paragraph 43.