Supreme Court Judgments

Rawluk v. Rawluk, [1990] 1 S.C.R. 70

 

Harry Phillip Rawluk     Appellant

 

v.

 

Jacqueline Dorothy Rawluk      Respondent

 

indexed as:  rawluk v. rawluk

 

File No.:  20736.

 

1989:  October 6; 1990:  January 25.

 

Present:  Dickson C.J. and Wilson, La Forest, L'Heureux‑Dubé, Sopinka, Cory and McLachlin JJ.

 

on appeal from the court of appeal for ontario

 

    Family law ‑‑ Property ‑‑ Constructive trust ‑‑ Wife contributing to accumulation of assets held in husband's name ‑‑ Family Law Act, 1986 providing for equal division of value of family assets as determined on valuation day ‑‑ Assets appreciating significantly after valuation day ‑‑ Whether or not the constructive trust applicable where the Family Law Act, 1986 provides a remedy for unjust enrichment ‑‑ Family Law Act, 1986, S.O. 1986, c. 4, ss. 4(1), 5(6), 10(1), 14, 64(1), (2), (3).

 

    Trusts and trustees ‑‑ Constructive trust ‑‑ Family assets ‑‑ Family Law Act providing for equal division of value of family assets as determined on valuation day ‑‑ Assets appreciating significantly after valuation day ‑‑ Whether or not the constructive trust applicable where the Family Law Act, 1986 provides a remedy for unjust enrichment.

 

    The Rawluks were married in 1955 and lived and worked together for twenty‑nine years.  They had a farm and a farm equipment sales and service business.  In the early years of their marriage, the wife cared for their children and looked after farm chores.  By the early 1960s, she was also assisting with customers in the shop of the farm implement business.  In 1969, the wife assumed a major role in its operation and maintained her involvement in all aspects of the farming operation.  She contributed to the assets the parties acquired during the marriage.  At the time of separation in 1984, the Rawluks held a number of properties, all but one of which were registered in the name of the husband.  The Family Law Act, 1986 provided that family assets be valued and divided equally.  The valuation date here was the date of separation.  In the years between separation and the trial of the action, the value of these properties increased dramatically.  The trial judge and the Court of Appeal held that the property in question was impressed with a constructive trust which gave the wife a beneficial half interest in the property at the time of separation and therefore entitled her to participate as owner in the value of the property after separation.  At issue here is whether or not the constructive trust finds application where the Family Law Act, 1986 already provides a remedy for the unjust enrichment complained of.

 

    Held (La Forest, Sopinka and McLachlin JJ. dissenting):  The appeal should be dismissed.

 

    Per Dickson C.J. and Wilson, L'Heureux‑Dubé and Cory JJ.:  Far from abolishing the constructive trust doctrine, the Family Law Act, 1986 incorporates the constructive trust remedy as an integral part of the process of ownership determination and equalization established by that Act.  As a general rule a legislature is presumed not to depart from prevailing law without expressing its intentions to do so with irresistible clearness.  But even aside from this presumption, the Family Law Act, 1986 intended to both recognize and accommodate the remedial constructive trust.

 

    Before property can be equalized under s. 5 of the Family Law Act, 1986, a court is required by s. 4 to determine the "net family property" of each spouse on the valuation date.  "Property" is defined as "any interest, present or future, vested or contingent, in real or personal property" and accordingly includes not only legal but beneficial ownership.  The remedial constructive trust therefore should be included in the list of equitable principles or remedies that may be used to calculate the beneficial ownership of net family property.  It can be recognized as having come into existence from the time when the unjust enrichment first arose, even though it is judicially declared at a later date.

 

    The distinction between ownership and a share on equalization is more than an exercise in judicial formalism.  It involves conceptual and practical differences for ownership which encompass far more than a mere share in the value of property.

 

    Where the property at issue is one to which only one spouse has contributed, it is appropriate that the other spouse receive only an equalizing transfer of money.  But where both spouses have contributed to the acquisition or maintenance of the property, the spouse who does not hold legal title should be able to claim an interest in that property by way of a constructive trust and realize the benefits that ownership may provide.  The imposition of a constructive trust recognizes that the titled spouse is holding property that has been acquired, at least in part, through the money or effort of another.

 

    Under the Act a court is, as a first step, required to determine the ownership interests of the spouses.  It is at that stage that the court must deal with and determine the constructive trust claims.  The second step requires that the equalization be calculated.  The third step requires that the court assess whether equalization is unconscionable, pursuant to s. 5(6).  This step in the process must be kept distinct from the preliminary determinations of ownership.

 

    Section 10 of the Family Law Act, 1986 reinforces the Act's emphasis on the importance of individual ownership, even within a regime of deferred sharing.  A spouse can apply to a court to determine a question of ownership or possession prior to equalization, and thus to assert some degree of control over matrimonial property during cohabitation.  It would be inconsistent to deny a spouse the same remedy when it is sought after a separation.

 

    Section 14 specifically refers to the doctrine of resulting trust.  It is not intended to specifically preserve that trust, and by implication abolish all other non‑express trusts, but rather is intended to modify the resulting trust doctrine as it applies in the context of the Family Law Act, 1986.  The combination of these modifying provisions and the legislature's silence on the subject of remedial constructive trust indicate that the constructive trust is maintained in an unmodified form.

 

    The constructive trust remedy can be utilized by unmarried cohabitants.  It would not only be inequitable but would also contravene the provisions of s. 64(2) if married persons were precluded by the Family Law Act, 1986 from utilizing the doctrine of remedial constructive trust which is available to unmarried persons.

 

    Per La Forest, Sopinka and McLachlin JJ. (dissenting):  The doctrine of constructive trust is not a property right but a proprietary remedy for unjust enrichment.  The availability of other remedies for the unjust enrichment must accordingly be considered before declaring a constructive trust.  The doctrine of constructive trust should not be applied in this case because the Family Law Act, 1986 provides a remedy for the unjust enrichment of the husband to the detriment of the wife.

 

    The fundamentals of the Canadian approach to constructive trust in relation to unjust enrichment are:  (1) its purpose is to remedy an unjust enrichment; (2) it is remedial rather than substantive; and (3) it is but one of many remedies that may be available to correct unjust enrichment.  A plaintiff should exhaust his personal remedies before the remedy of constructive trust is imposed.

 

    In Canada the constructive trust, at least in the context of unjust enrichment, is a remedy and not a doctrine of substantive property law.  It does not arise automatically when the three conditions set out in Pettkus v. Becker are established.  Rather, the court must go on to consider what other remedies are available to remedy the unjust enrichment in question and whether the proprietary remedy of constructive trust is appropriate.  The doctrine of constructive trust does not permit the court to confer retrospectively a property interest solely on the basis of contribution of one spouse and enrichment of the other.  A further inquiry must be made to determine if the remedy of constructive trust is necessary or appropriate given the presence of another remedy.

 

    Given an unjust enrichment arose from the fact that the property to which the wife contributed was in the husband's name, the Family Law Act, 1986 provides a remedy which makes it unnecessary to resort to the doctrine of constructive trust.  Both the statutory remedy and the remedy of constructive trust are directed to the same end.  The Act provides for the equalization to be accomplished by a payment of money based on the value of the property at the time of separation (a remedy in personam) while the doctrine of constructive trust would give a beneficial interest in the land which persists to the date of trial (a proprietary remedy).

 

    The Family Law Act, 1986 provides complete compensation for the wife's contribution to the date of separation.  Any disproportionate enrichment must occur because of the increase in value due to changing market conditions after that date. But that does not constitute an unjust enrichment under the principles set forth in Pettkus v. Becker, given that the wife made no contribution after that date.  As a matter of legal principle, given the fact that the Legislature provided a remedy for the unjust enrichment which would otherwise have occurred, it is not for this Court to impose an additional equitable remedy aimed at correcting the same wrong.  To graft the remedy of constructive trust to the statutory scheme would pose practical problems, add uncertainty and promote litigation, and perhaps adversely affect the rights of third parties.

 

    The suggestion that the wife should not be in a worse position than had the parties not been married is met by the fact that the Legislature, acting within the proper scope of its authority, chose to confine the Act to married persons.

 

    The fact that a married person might be able to obtain a declaration of constructive trust before but not after separation is not anomalous.  The equalization provisions of the Act provide an alternative remedy to which the spouse becomes entitled upon separation.  The fact that that remedy may not be as advantageous in some cases as the remedy of constructive trust does not justify the court in altering the doctrine of constructive trust.

 

    Very different provisions govern the division of marital property in the various provinces.  There can be no simple or universally applicable answer to the question of whether the doctrine of constructive trust will apply in a statutory context:  in each case, the circumstances of the case and the efficacy of alternative remedies conferred by the applicable legislation must be examined to ascertain whether, in that situation, a declaration of constructive trust should be declared.

 

Cases Cited

 

By Cory J.

 

    Considered:  Murdoch v. Murdoch, [1975] 1 S.C.R. 423; Sorochan v. Sorochan, [1986] 2 S.C.R. 38; Rathwell v. Rathwell, [1978] 2 S.C.R. 436; Pettkus v. Becker, [1980] 2 S.C.R. 834; referred to:  Thompson v. Thompson, [1961] S.C.R. 3; Trueman v. Trueman (1971), 18 D.L.R. (3d) 109; Pettitt v. Pettitt, [1969] 2 All E.R. 385; Gissing v. Gissing, [1970] 2 All E.R. 780; Hussey v. Palmer, [1972] 1 W.L.R. 1286; Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426; Nuti v. Nuti (1980), 28 O.R. (2d) 102; Vedovato v. Vedovato (1984), 39 R.F.L. (2d) 18; Thoreson v. Thoreson (1982), 137 D.L.R. (3d) 535; Leatherdale v. Leatherdale, [1982] 2 S.C.R. 743; Seed v. Seed (1986), 5 R.F.L. (3d) 120; Leslie v. Leslie and Clyde (1987), 9 R.F.L. (3d) 82; Cowan v. Cowan (1987), 9 R.F.L. (3d) 401; Re Corless and Corless (1987), 58 O.R. (2d) 19; Benke v. Benke (1986), 4 R.F.L. (3d) 58; Leonard v. Leonard, [1987] O.J. No. 1488, unreported; Goodyear Tire & Rubber Co. of Canada v. T. Eaton Co., [1956] S.C.R. 610.

 

By McLachlin J. (dissenting)

 

    Hussey v. Palmer, [1972] 1 W.L.R. 1286;  Murdoch v. Murdoch, [1975] 1 S.C.R. 423; Pettitt v. Pettitt, [1970] A.C. 777; Gissing v. Gissing, [1971] A.C. 886; Rathwell v. Rathwell, [1978] 2 S.C.R. 436; Pettkus v. Becker, [1980] 2 S.C.R. 834; Sorochan v. Sorochan, [1986] 2 S.C.R. 38; McDonald v. McDonald (1988), 11 R.F.L. (3d) 321.

 

Statutes and Regulations Cited

 

Family Law Act, 1986, S.O. 1986, c. 4, ss. 4, 5, 10, 14, 64.

 

Family Law Reform Act, R.S.O. 1980, c. 152, s. 8.

 

Family Law Reform Act, 1978, S.O. 1978, c. 2.

 

Authors Cited

 

Bogert, George Gleason, and George Taylor Bogert.  The Law of Trusts and Trustees, 2nd ed.  St. Paul, Minn.:  West Publishing Co., 1979.

 

McClean, A. J. "Constructive and Resulting Trusts -- Unjust Enrichment in a Common Law Relationship -- Pettkus v. Becker" (1982), 16 U.B.C. Law Rev. 155.

 

McLeod, James.  Annotation to Benke v. Benke (1986), 4 R.F.L. (3d) 58.

 

Ontario.  Law Reform Commission.  Report on Family Law, Part IV.  Toronto:  Law Reform Commission, 1974.

 

Oosterhoff, A. H. and E. E. Gillese.  A. H. Oosterhoff:  Text, Commentary and Cases on Trusts, 3rd ed.  Toronto:  Carswells, 1987.

 

Paciocco, D. M.  "The Remedial Constructive Trust: A Principled Bases for Priorities over Creditors" (1989), 68 Can. Bar Rev. 315.

 

Pettit, Philip H.  Equity and the Law of Trusts, 4th ed.  London:  Butterworths, 1979.

 

Scott, Austin Wakeman.  Law of Trusts, vol. 5, 3rd ed. Boston:  Little, Brown & Co., 1967.

 

Scott, Austin Wakeman, and William Franklin Fratcher.  The Law of Trusts, vol. 5, 4th ed.  Boston:  Little, Brown & Co., 1989.

 

Waters, D. W. M.  Law of Trusts in Canada, 2nd ed.  Toronto:  Carswells, 1984.

 

Waters, Donovan.  Comment (1975), 53 Can. Bar Rev. 366.

 

    APPEAL from a judgment of the Ontario Court of Appeal (1987), 61 O.R. (2d) 637, 10 R.F.L. (3d) 113, dismissing an appeal from Walsh J. (1986), 55 O.R. (2d) 704, 3 R.F.L. (3d) 113.  Appeal dismissed, La Forest, Sopinka and McLachlin JJ. dissenting.

 

    Malcolm C. Kronby, Q.C., for the appellant.

 

    Melanie A. Manchee, for the respondent.

 

//Cory J.//

 

    The judgment of Dickson C.J. and Wilson, L'Heureux-Dubé and Cory JJ. was delivered by

 

    CORY J. -- At issue in this appeal is whether the doctrine of constructive trust can be applied to determine the ownership of assets of married spouses under the provisions of the Family Law Act, 1986, S.O. 1986, c. 4.

 

Factual Background

 

    Jacqueline and Harry Rawluk were married in 1955 when Harry Rawluk was 24 years old and Jacqueline was 21.  For the next 29 years, until they separated permanently in 1984, the Rawluks worked together in two business operations.  The first was a farm machinery sales and service business.  The second was a cash-crop and livestock farming operation carried on at different times and in different places throughout the marriage.

 

    Two years prior to the marriage Mr. Rawluk had bought a New Holland Farm Equipment franchise for the region of Newmarket, north of Toronto.  He also farmed a modest rented acreage on a cash-crop basis.  Shortly after the marriage Mr. Rawluk's father died.  The spouses then took over the farm that had been run by his parents.

 

    For the first few years of the marriage Mrs. Rawluk devoted most of her time to raising the couple's three children and performing a wide range of farm chores.  During the early 1960s, however, she began helping her husband in the farm machinery shop.  In 1964 the Rawluks moved to a new family farm on a twenty-three acre parcel in Newmarket.  Five years later, the farm machinery operation was moved to this farm when the building that had housed the business burned down.  From that time on, Mrs. Rawluk played a large role in running the farm machinery business.  She performed all the bookkeeping functions, did most of the invoicing and banking and operated the parts department.  At the same time, she maintained her active involvement in all aspects of the farming operations.  In addition to the usual daily farm chores, she took care of birthings, needling and feeding of the animals, did the employee payroll and bookkeeping, assisted with augering wheat and helped to transport employees and crops at harvest.

 

    Throughout the late 1950s and 1960s the Rawluks acquired a number of parcels of land.  In 1958 they purchased two lots on Faulkner Avenue, in the Township of Whitchurch-Stouffville, adjoining a lot the husband had bought before the marriage.  In 1963 they bought a cottage property in Haliburton.  In the same year they acquired a nine-acre parcel in Newmarket that was used primarily as farmland but also to store equipment from the machinery business.  In 1964 they acquired the matrimonial home farm, located adjacent to this nine-acre parcel.  In 1966 they bought another ten-acre parcel near Sharon, Ontario.  Title to all these properties was registered in Harry Rawluk's name except for the cottage which was originally in joint tenancy until Mr. Rawluk transferred it into his wife's name for tax purposes.

 

    The money required to buy these properties and run the businesses came from a single bank account.  Over the years the account was virtually always maintained in the husband's name.  The sole exception was during a span of about one year when the husband converted it to a joint account, a period that coincided with Mrs. Rawluk's decision to put $7,000 of her inheritance from her mother's estate into the business operations. 

 

    Much of the cash generated by property rents and machinery sales never reached the bank account.  For many years the spouses deposited and stored the cash in a teapot in a china cabinet in their home.  Both husband and wife, as their cash requirement dictated, dipped into this teapot.  Unfortunately this casual arrangement became a source of friction and discord.  Mrs. Rawluk complained that her husband was miserly and that she was unable, without an argument, to use any money to satisfy the needs of herself and her children.   Mr. Rawluk, on the other hand, viewed his wife as a spendthrift who turned too readily to the teapot.

 

    Spurred on by a desire to gain an independent income, Mrs. Rawluk went to night school in the early 1970s and qualified as a registered nursing assistant.  In 1974 she worked full-time at a Newmarket hospital.  Mr. Rawluk complained about her absence from the business operations.  As a result, from 1975 until just before the Rawluks' first separation, she worked only part-time, mostly in the evenings, so that she could continue her previous work in the farming and farm machinery businesses.

 

    The Rawluks first separated in early 1982 when Mr. Rawluk left the home.  In the fall of that year they reconciled and Mr. Rawluk returned.  During that year Mr. Rawluk gave up his farm machinery franchise and devoted much of his time to attending auction sales, particularly of antiques.  Mrs. Rawluk continued her nursing at the hospital in Newmarket, but now on a full-time basis.  By the late spring of 1984 the Rawluks' relationship had significantly deteriorated.  On June 1, 1984 they agreed that they were, in fact, living separate and apart under the same roof.

 

    After the couple's first separation Mrs. Rawluk had begun proceedings under The Family Law Reform Act, R.S.O. 1980, c. 152.  She sought an unequal division of family assets and a division of non-family assets and additionally or alternatively brought her claim under s. 8 of that Act.  That action, suspended following reconciliation, was reactivated in 1984.  At the trial that took place in 1986, Mrs. Rawluk requested a distribution of matrimonial property under the Family Law Act, 1986 which had come into force on March 1, 1986.  The spouses disagreed as to what each owned on June 1, 1984 which, pursuant to s. 4 of the Act, became the valuation date.

 

    Under the Family Law Act, 1986 deferred sharing regime, equalization of matrimonial property is calculated according to the value of the property at valuation date.  As of the valuation date of June 1, 1984, the Newmarket farm and machinery lot had been valued at $400,000 and the Sharon property at $139,000.  In the Rawluks' case the value of the matrimonial property, particularly the Newmarket home farm and machinery lot, had increased dramatically by the time of the trial in 1986 and has continued to do so since then.  In order to share in one-half of the increase in value, Mrs. Rawluk claimed by way of a remedial constructive trust a beneficial one-half interest in the home farm and machinery lot and the Sharon property.

 

    There can be no doubt that the industry and dedication of Mrs. Rawluk was such that they would, apart from the Family Law Act, 1986, entitle her to have her proprietary interest in the properties in issue recognized.  Indeed it is conceded by the appellant that the facts of this case would support a declaration of constructive trust unless, as he contends, the remedy is abolished and superceded by the Family Law Act, 1986.  As an owner, Mrs. Rawluk would be entitled to a share in the property to the extent of its value as of the date of trial.

 

The Judgments Below

 

Supreme Court of Ontario (1986), 55 O.R. (2d) 704, 3 R.F.L. (3d) 113

 

    At trial, Walsh J. held that a remedial constructive trust could be imposed by the court to determine the ownership of assets of married spouses under the Family Law Act, 1986.  He determined that the Family Law Act, 1986 requires a court to decide issues of ownership prior to equalizing net family property.  He held that in determining ownership a court must look to both legal and beneficial interests, including an interest arising by means of constructive trust.  He observed that it was unlikely that the Ontario legislature would deny married spouses a remedy that they would have had if unmarried.  Having decided that the constructive trust doctrine survived the enactment of the Family Law Act, 1986, he found that the facts supported a declaration of constructive trust with regard to the Newmarket home farm and machinery lot and awarded Mrs. Rawluk a one-half interest in the contested property.

 

Ontario Court of Appeal (1987), 61 O.R. (2d) 637, 10 R.F.L. (3d) 113

 

    The Court of Appeal affirmed Walsh J.'s decision.  It decided that the provisions of the Family Law Act, 1986 far from superceding the constructive trust, appear to incorporate that doctrine into the process of determining ownership and equalizing net family property.  The Act's provisions, it was said, clearly direct a court to determine ownership prior to ordering equalization.  Accordingly, the constructive trust remedy should be applied as a part of the first step of ownership determination.  The court reviewed several provisions of the Act in order to demonstrate that to deny the constructive trust remedy to married spouses in Ontario would create inconsistencies and inequalities.  The court declined to decide whether a constructive trust can be forced upon a beneficiary to require that person to share in a decline in the value of property following valuation date.  It simply noted that s. 5(6) of the Act might be used in such a situation to award an amount that differs from the standard equalization payment.

 

Position of the Appellant

 

    The appellant contended, however, that the equalization provisions of the Family Law Act, 1986 supercede and implicitly abolish the remedy of constructive trust as it applies to the division of matrimonial property held by married persons in Ontario.

 

The Historical Background

 

    The issue presented by this appeal arises from a unique convergence of common law and statutory provisions, both of which are of relatively recent origin.  The Canadian law of trusts with regard to matrimonial property was only in its infancy when the Ontario Law Reform Commission first proposed a matrimonial property regime of deferred equal sharing in its 1974 Report on Family Law (Ontario Law Reform Commission, Report on Family Law, Part IV, 1974, at p. 55).  The Ontario legislature used that Report as a model for the provisions of the Family Law Act, 1986 but declined to expressly clarify the relationship between the provisions of the Act and the doctrine of constructive trust, as it had evolved during the late 1970s and early 1980s.

 

(a)The Doctrine of Constructive Trust and Its Application in Matrimonial Cases

 

    The evolution of the remedial constructive trust doctrine in Canada and its application to the division of marital property can be traced through a series of well-known decisions of this Court beginning with the dissenting reasons of Laskin J. (as he then was) in Murdoch v. Murdoch, [1975] 1 S.C.R. 423, and culminating in Dickson C.J.'s decision for a unanimous Court in Sorochan v. Sorochan, [1986] 2 S.C.R. 38.   The doctrine developed when it appeared that the traditional approach to resolving property disputes was inappropriate and inequitable when applied to situations of marital breakdown.

 

    Prior to Murdoch v. Murdoch, supra, Canadian trust law offered few avenues for a non-titled spouse to gain an interest in matrimonial property held in the name of the other spouse.  In the absence of an express trust or a contract a spouse had to establish the existence of a resulting trust.  In order to do this the applicant spouse was required to show that he or she had made a contribution to the purchase price of the property and, as well, that there was a common intention that the non-titled spouse should have a beneficial interest in that property. 

 

    The elements of "contribution" and "intent" essential to a finding of resulting trust were elusive concepts that were not infrequently molded so that they could be adapted to matrimonial property cases.  In Thompson v. Thompson, [1961] S.C.R. 3, this Court had denied a wife a beneficial interest in property held by her husband on the grounds that she had made no financial contribution to the property's acquisition.  However, Judson J., writing for the majority, noted at p. 14 that the Court might properly exercise its discretion in awarding a resulting trust "when there is no financial contribution when the other attributes of the matrimonial partnership are present".  His statement was used by the Alberta Court of Appeal in Trueman v. Trueman (1971), 18 D.L.R. (3d) 109, as authority for the principle that an indirect contribution was sufficient to raise a resulting trust.

 

    Under the traditional English view the constructive trust was regarded as a substantive institution very similar to an express trust.  It was only applied in very narrow circumstances.  In Pettitt v. Pettitt, [1969] 2 All E.R. 385, and Gissing v. Gissing, [1970] 2 All E.R. 780, the House of Lords emphasized the need for courts to find an actual or presumed intention on the part of the parties before they could reallocate property interests pursuant to trust doctrine.  In discussing trust doctrine the House of Lords used the phrase "implied, resulting or constructive trust" without making any distinction among the three.  At the same time, however, the Court of Appeal had granted judicial recognition to a "new model" constructive trust that could be imposed, in the words of Lord Denning M.R. in Hussey v. Palmer, [1972] 1 W.L.R. 1286 (C.A.), at p. 1290, "whenever justice and good conscience require it".

 

    In the United States, on the other hand, the constructive trust had long been recognized not as an institution, but as a broad restitutionary device that could be invoked in a wide variety of situations to compel the transfer of property to a claimant by the defendant in order to prevent the unjust enrichment of the title holder.  As stated in Scott, The Law of Trusts, vol. 5  (4th ed. 1989), at p. 304:

 

    A constructive trust arises where a person who holds title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it.

 

    In the Murdoch v. Murdoch case Mrs. Murdoch had claimed a beneficial interest in a ranch held in her husband's name basing her claim on a resulting trust arising from her contributions of money and labour.  A majority of this Court denied her claim, applying a resulting trust analysis and following the House of Lords' judgments in Pettitt v. Pettitt, supra, and Gissing v. Gissing, supra.

 

    Laskin J., in dissent, would have held in the wife's favour.  He based his decision primarily on the ground that the constructive trust could be interpreted as an equitable instrument, the purpose of which was to prevent unjust enrichment.  He wrote at p. 454:

 

    The appropriate mechanism to give relief to a wife who cannot prove a common intention or to a wife whose contribution to the acquisition of property is physical labour rather than purchase money is the constructive trust which does not depend on evidence of intention.

 

Although Laskin J. did not expressly adopt the American approach, his reasons indicate that he was closely aligned to it.  For example, in the same paragraph in which he first suggested that a constructive trust should be applied to the Murdochs' situation, Laskin J. relied on citations from the writings of Professor Scott and the reasons of Cardozo J. to help define the doctrine.

 

    In Rathwell v. Rathwell, [1978] 2 S.C.R. 436, Mrs. Rathwell had made a direct financial contribution to the acquisition of the disputed farmland and the majority were content to use a resulting trust analysis to award a one-half interest to the wife.  Dickson J. (as he then was) enlarged upon the concept of constructive trust.  Writing for Laskin C.J. and Spence J., he held that Mrs. Rathwell could succeed on the basis of either a resulting trust or a constructive trust.  At p. 455, Dickson J. reiterated the equitable foundations of this doctrine and defined the requisite elements for a finding of constructive trust:

 

    The constructive trust ... comprehends the imposition of trust machinery by the court in order to achieve a result consonant with good conscience.  As a matter of principle, the court will not allow any man unjustly to appropriate to himself the value earned by the labours of another.  That principle is not defeated by the existence of a matrimonial relationship between the parties; but, for the principle to succeed, the facts must display an enrichment, a corresponding deprivation, and the absence of any juristic reason  -- such as a contract or disposition of law -- for the enrichment.

 

    The validity of the doctrine of constructive trust was accepted by a majority of this Court in Pettkus v. Becker, [1980] 2 S.C.R. 834.  In this decision Dickson J. extended the constructive trust principle to a common law relationship, awarding Mrs. Becker a one-half interest in the farmlands and a bee-keeping business developed by herself and Mr. Pettkus.  Although the minority found a contribution of both money and labour sufficient to support a resulting trust, Dickson J., for the majority, emphasized that the trial judge had found no common intention and that the Ontario Court of Appeal had not overruled that finding.  Dickson J. commented upon the artificiality and inadequacy of the resulting trust, quoting at p. 843, with approval, Professor Donovan Water's comment that the "discovery" of an implied common intention is a "mere vehicle or formula" for achieving equity, "a constructive trust approach masquerading as a resulting trust approach" (Waters (1975), 53 Can. Bar Rev. 366, at p. 368).  His reasons clearly demonstrate the broad and equitable nature of the remedial constructive trust and its applicability to any property dispute.

 

    The importance of Pettkus v. Becker was emphasized in Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426.  At p. 471 Dickson C.J. stated:

 

    The constructive trust has existed for over two hundred years as an equitable remedy for certain forms of unjust enrichment....  Until the decision of this Court in Pettkus v. Becker, the constructive trust was viewed largely in terms of the law of trusts, hence the need for the existence of a fiduciary relationship.  In Pettkus v. Becker, the Court moved to an approach more in line with restitutionary principles by explicitly recognizing constructive trust as one of the remedies for unjust enrichment.

 

    Subsequently, this Court has made it clear that the constructive trust remedy will also apply to circumstances where a spouse has contributed not to the acquisition of property but to its preservation, maintenance or improvement.  In Sorochan v. Sorochan, supra, a woman was awarded an interest in a farm owned by her common law spouse of 42 years on the basis of the labour she had contributed over the years to preserving and maintaining the farm, performing domestic labour and raising the parties' six children.  Dickson C.J., writing for a unanimous Court, reiterated the three-part test requiring an enrichment, a corresponding deprivation and the absence of any juristic reason therefor.  In light of the particular facts of the case, he concentrated on defining the requirement for a causal connection between the deprivation and the property involved.  He wrote at p. 50:

 

    These cases reveal the need to retain flexibility in applying the constructive trust.  In my view, the constructive trust remedy should not be confined to cases involving property acquisition.  While it is important to require that some nexus exist between the claimant's deprivation and the property in question, the link need not always take the form of a contribution to the actual acquisition of the property.  A contribution relating to the preservation, maintenance or improvement of property may also suffice.  What remains primary is whether or not the services rendered have a "clear proprietary relationship", to use Professor McLeod's phrase.  When such a connection is present, proprietary relief may be appropriate.  Such an approach will help to ensure equitable and fair relief in the myriad of familial circumstances and situations where unjust enrichment occurs.

 

    These cases show that in Canada the doctrine of remedial constructive trust has been accepted for almost a decade as an important remedial device whose prime function is to remedy situations of unjust enrichment.  It is clear that at the time that the Family Law Act, 1986 was enacted, the constructive trust was widely recognized as the pre-eminent common law remedy for ensuring the equitable division of matrimonial property.  The validity and importance of the remedy designed, as it is, to achieve a measure of fairness between married persons and those in a marital relationship, must have been well known to the framers of the legislation.  It would seem unlikely that they would, without a precise and specific reference, deprive parties of access to such an equitable remedy.

 

(b)  The Ensuing Legislation

 

(i)  The Family Law Reform Act

 

    In Rathwell v. Rathwell, supra, Dickson J. had observed at p. 443 that "Canadian legislatures generally have given little or no guidance for the resolution of matrimonial property disputes".  Within two years of that decision all nine common law provinces had enacted legislation aimed at the resolution of these disputes.  The Family Law Reform Act, 1978, S.O. 1978, c. 2, was passed by the Ontario legislature in 1978.   It provided for a division of family assets under s. 4 and created under s. 8 a statutory version of the constructive trust remedy.  Section 8 granted courts a discretionary power to compensate spouses who did not have title to the property for contributions made towards the acquisition, maintenance or improvement of non-family assets.

 

    Courts across Canada reached varied conclusions with regard to the relationship between the constructive trust doctrine and its statutory equivalent found in a number of provincial statutes.  In Nuti v. Nuti (1980), 28 O.R. (2d) 102, J. Holland J. determined that a wife was entitled to a beneficial interest in her husband's property under both s. 8 and the constructive trust doctrine.  He wrote at p. 115:

 

    Following the passage of the Family Law Reform Act, 1978, the cases in this Province largely follow the dictates of the statute rather than trust concepts.  It may be that the language employed in s. 8 bears close resemblance to that in Rathwell.  However, I do not read s. 8 as removing from consideration the common law.  The plaintiff may avail herself of the common law relating to constructive trust or the rights granted under s. 8.

 

In Vedovato v. Vedovato (1984), 39 R.F.L. (2d) 18, the British Columbia Supreme Court reached a similar decision with regard to its equivalent statutory provisions.  Although the wife in that case was ultimately unsuccessful in raising a constructive trust, the court held at p. 21 that:

 

... a trust action can properly proceed independent of the Family Relations Act and even, as in this case, where the action with respect to family assets under the provincial legislation was dismissed.

 

On the other hand, in Thoreson v. Thoreson (1982), 137 D.L.R. (3d) 535, Cameron J.A., writing for the Saskatchewan Court of Appeal, stated at p. 544:

 

    As thus modified by statute, the common law principles of trust were still available in limited circumstances but, in my opinion, their application in this case -- particularly in view of the reach of the statutory discretion -- was neither required, nor helpful.

 

    The issue of the relationship between s. 8 of The Family Law Reform Act, 1978 and the common law constructive trust doctrine was touched upon but not determined in this Court's decision in Leatherdale v. Leatherdale, [1982] 2 S.C.R. 743.  In that case Mrs. Leatherdale had sought a division of non-family assets either under s. 8 of The Family Law Reform Act, 1978 or alternatively on the basis of the doctrines of resulting or constructive trust.  Laskin C.J., writing for the majority, expressly declined to decide whether the trust doctrines had survived the enactment of The Family Law Reform Act, 1978.  He stated at p. 760:

 

    It remains to say that the disposition made here on the basis of specific statutory provisions of the only assets that were in issue leaves no room to consider the application of constructive or resulting trusts.  Whether these institutions survive The Family Law Reform Act in other circumstances need not be considered here.

 

Although it appears that the majority of provincial courts, including Ontario, found that a spouse could claim an interest in property either by means of a constructive claim or pursuant to the pertinent legislation, the issue was thus never resolved by this Court.

 

(ii)  The Family Law Act, 1986

 

    In 1986, the Family Law Reform Act was replaced by the Family Law Act, 1986.  In contrast to s. 8 of the Family Law Reform Act, the provisions of the Family Law Act, 1986, did not attempt to duplicate the constructive trust remedy.  Instead, the statute provided that all property should be equalized upon separation through the transfer of money from the title-holding or owning to the non-owning spouse.

 

    Prior to this case the trial courts in Ontario have followed one of two approaches in deciding whether these equalization provisions implicitly abolish the use of the constructive trust in the matrimonial property context.  The majority of the decisions followed the reasoning of Walsh J. in the case at bar even before it was affirmed by the Ontario Court of Appeal:  see Seed v. Seed (1986), 5 R.F.L. (3d) 120; Leslie v. Leslie and Clyde (1987), 9 R.F.L. (3d) 82; Cowan v. Cowan (1987), 9 R.F.L. (3d) 401, and Re Corless and Corless (1987), 58 O.R. (2d) 19.  This approach was rejected, however, in two lower court decisions: Benke v. Benke (1986), 4 R.F.L. (3d) 58, and Leonard v. Leonard, [1987] O.J. No. 1488, unreported.

 

    The reasoning set forth in the Benke decision was adopted by the appellant.  In that case, the wife had claimed an interest in her husband's farm on resulting or constructive trust principles.  The trial judge denied her claim, holding that the constructive trust could not be applied in the context of the Family Law Act, 1986 and that the facts did not support a finding of resulting trust.  In his opinion, the Family Law Act, 1986 fully addressed the question of unjust enrichment between spouses by providing for monetary equalization based on the value of property at the time of separation.  As he stated at p. 78:

 

What Laskin J. (in Murdoch) declared to be "the better way" is now in place.  The less adequate way was the doctrine of constructive trusts, and that less adequate way should no longer be available to, in effect, change the date of valuation whenever, either because of deflation or inflation, it suits the interests of one of the spouses to seek to advance it.  If, in the total scheme of things, some injustice continues, it will be an injustice that arises from the application of an act of the legislature, and it will be for the legislature to correct it.

 

This position has been criticized.  As Professor James McLeod comments in his Annotation to Benke v. Benke, at p. 60:

 

    In the end, cases such as Benke v. Benke ... reflect an unwillingness on the part of the judiciary to investigate the realities of a relationship.  It is easier to strictly apply an equal division in all cases than to determine whether such division is fair to the particular parties.  It is easier, but is it fair?

 

    I prefer the approach taken by Walsh J. and the Ontario Court of Appeal.  In my view, far from abolishing the constructive trust doctrine, the Family Law Act, 1986 incorporates the constructive trust remedy as an integral part of the process of ownership determination and equalization established by that Act.

 

Provisions of the Family Law Act, 1986 Which Indicate That the Constructive Trust Doctrine Should Continue to Play a Role in Determining the Assets of Spouses and Their Division

 

    It is trite but true to state that as a general rule a legislature is presumed not to depart from prevailing law "without expressing its intentions to do so with irresistible clearness" (Goodyear Tire & Rubber Co. of Canada v. T. Eaton Co., [1956] S.C.R. 610, at p. 614).  But even aside from this presumption, when the structure of the Family Law Act, 1986 is examined and the ramifications of a number of its provisions are studied, it becomes apparent that the Act recognizes and accommodates the remedial constructive trust.

 

    At the outset, the Act's preamble recognizes not only the need for the "orderly and equitable settlement of the affairs of the spouses", but also "the equal position of spouses as individuals within marriage" and the fact that marriage is a "form of partnership".  These fundamental objectives are furthered by the use of the constructive trust remedy in appropriate circumstances.  It provides a measure of individualized justice and fairness which is essential for the protection of marriage as a partnership of equals.  Thus the preamble itself is sufficient to warrant the retention and application of this remedy.

 

    In addition, various provisions of the Act lead to the same conclusion.

 

(a)  Sections 4 and 5

 

    Sections 4 and 5 of the Family Law Act, 1986 create a two-step property division process that emphasizes the distinction between the determination of legal and equitable ownership and the equalization of net family property.  These sections require a court first to determine individual "ownership piles" and then to equalize the spouses' assets by ordering the spouse with the larger ownership pile to pay money to the spouse with the smaller pile.

 

    Before property can be equalized under s. 5 of the Family Law Act, 1986, a court is required by s. 4 to determine the "net family property" of each spouse.  Under section 4(1) this is defined as "the value of all property . . . that a spouse owns on the valuation date".  "Property" is defined in the same subsection as "any interest, present or future, vested or contingent, in real or personal property".  This all-encompassing definition is wide enough to include not only legal but beneficial ownership.  The appellant has conceded that "property" as defined under s. 4(1) includes a beneficial interest arising from an express or resulting trust.  I see no reason why the remedial constructive trust should not be included in the list of equitable principles or remedies that may be used to calculate the beneficial ownership of net family property.

 

    It is important in this respect to keep in mind that a property interest arising under a constructive trust can be recognized as having come into existence not when the trust is judicially declared but from the time when the unjust enrichment first arose.  As Professors Oosterhoff and Gillese state, "the date at which a constructive trust arises ... is now generally accepted to be the date upon which a duty to make restitution occurs" (Oosterhoff and Gillese, A. H. Oosterhoff: Text, Commentary and Cases on Trusts (3rd ed. 1987), at p. 579).  Professor Scott has stated in Law of Trusts, op. cit., at pp. 323-24, that:

 

The beneficial interest in the property is from the beginning in the person who has been wronged.  The constructive trust arises from the situation in which he is entitled to the remedy of restitution, and it arises as soon as that situation is created. ... It would seem that there is no foundation whatever for the notion that a constructive trust does not arise until it is decreed by a court.  It arises when the duty to make restitution arises, not when that duty is subsequently enforced.

 

I agree completely with the position taken on this issue by the authors of these helpful texts.

 

    As well in Hussey v. Palmer, supra, at p. 1290 (quoted by Dickson J. in Rathwell v. Rathwell, supra, at p. 455), Lord Denning M.R. noted that a constructive trust "may arise at the outset when the property is acquired, or later on, as the circumstances may require".  As a result, even if it is declared by a court after the parties have already separated, a constructive trust can be deemed to have arisen when the duty to make restitution arose.  It should therefore be considered as part of the property owned by the beneficiary at valuation date.

 

    It must be emphasized that the constructive trust is remedial in nature.  If the Court is asked to grant such a remedy and determines that a declaration of constructive trust is warranted, then the proprietary interest awarded pursuant to that remedy will be deemed to have arisen at the time when the unjust enrichment first occurred.  But, as Professor Scott makes clear, the fact that the proprietary interest is deemed to have arisen before the remedy was granted is not inconsistent with the remedial characteristics of the doctrine.

 

    The distinction between a share in ownership and a share in property value through an equalizing transfer of money is more than an exercise in judicial formalism.  This distinction not only follows the two-step structure of the Family Law Act, 1986 but reflects conceptual and practical differences between ownership and equalization.  Ownership encompasses far more than a mere share in the value of property.  It includes additional legal rights, elements of control and increased legal responsibilities.  In addition, it may well provide psychological benefits derived from pride of ownership.  Where the property at issue is one to which only one spouse has contributed, it is appropriate that the other spouse receive only an equalizing transfer of money.  But where both spouses have contributed to the acquisition or maintenance of the property, the spouse who does not hold legal title should be able to claim an interest in that property by way of a constructive trust and realize the benefits that ownership may provide.  The imposition of a constructive trust recognizes that the titled spouse is holding property that has been acquired, at least in part, through the money or effort of another.  The non-titled spouse's constructive trust interest in this property is distinct from the right to an equalizing share of property value that is derived not from an independent property right but from the status as a married person.

 

(b)  Section 5(6)

 

    Section 5(6) of the Family Law Act, 1986 allows a court to "award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable".  The Court of Appeal observed that if a post-valuation date increase or decrease in property values is significant enough to render a simple equalization unconscionable, a court might utilize s. 5(6) to remedy the resultant inequities.  I need not and do not express any opinion as to whether s. 5(6) could be used in that way or whether the Court of Appeal's observation is correct.  I have assumed solely for the purposes of argument that s. 5(6) might be available in some cases as an alternative remedy for dealing with post-valuation date changes in value.  Even so, the section does not have the effect of supplanting the constructive trust remedy.  The constructive trust is used in the matrimonial property context to allocate proprietary interests, a function that is totally distinct from the process of determining how the value of matrimonial property should be distributed under the equalization process.

 

    Under the Act a court is, as a first step, required to determine the ownership interests of the spouses.  It is at that stage that the court must deal with and determine the constructive trust claims.  The second step that must be taken is to perform the equalization calculations.  Once this is done, a court must assess whether, given the facts of the particular case, equalization is unconscionable.  The section 5(6) analysis, even if it could be considered, would be a third step -- a last avenue of judicial discretion which might be used in order to bring a measure of flexibility to the equalization process.  This step in the process, if it could be used, would have to be kept distinct from the preliminary determinations of ownership.

 

(c)  Section 10

 

    Section 10 of the Family Law Act, 1986 reinforces the Act's emphasis on the importance of individual ownership, even within a regime of deferred sharing.  This section allows a spouse to apply to a court to determine a question of ownership or possession prior to equalization, and thus to assert some degree of control over matrimonial property during cohabitation.  Section 10(1) provides that:

 

    10.--(1) A person may apply to the court for the determination of a question between that person and his or her spouse or former spouse as to the ownership or right to possession of particular property, other than a question arising out of an equalization of net family properties under section 5, and the court may,

 

                            (a)declare the ownership or right to possession;

 

                            (b)if the property has been disposed of, order payment in compensation for the interest of either party;

 

                            (c)order that the property be partitioned or sold for the purpose of realizing the interests in it; and

 

                            (d)order that either or both spouses give security, including a charge on property, for the performance of an obligation imposed by the order,

 

                            and may make ancillary orders or give ancillary directions.

 

    The creation under s. 10 of a proprietary remedy that can be commenced during cohabitation provides further evidence that the Ontario legislature could not have intended the provisions of the Family Law Act, 1986 to completely supersede the remedial constructive trust.  Section 10 enables non-titled spouses to assert control over matrimonial property during cohabitation to the extent that their beneficial interests entitle them to do so.  Even if the appellant's argument that the Family Law Act, 1986 equalization provisions replace the constructive trust remedy were to be accepted, this would not prevent a deserving spouse from obtaining a declaration of constructive trust in his or her spouse's property during cohabitation pursuant to s. 10.  Certainly such an application will not necessarily be followed by separation and equalization of property.

 

    Since a spouse can thus obtain a constructive trust remedy prior to separation, it would be inconsistent to deny a spouse the same remedy when it is sought after a separation.  To take such a position would encourage spouses to apply for a constructive trust interest early in a marriage, perhaps thereby creating unnecessary marital stress, fostering costly litigation and penalizing those spouses who waited until separation to enforce their common law rights.  It is unlikely that the legislature intended a spouse's rights to depend on whether or not a constructive trust had been declared before or after the separation.

 

(d)  Section 14

 

    Section 14 contains the Family Law Act, 1986's only explicit reference to trust doctrine.  It provides that:

 

    14. The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between husband and wife, as if they were not married, except that,

 

    (a)the fact that property is held in the name of spouses as joint tenants is prima facie proof that the spouses are  intended to own the property as joint tenants; and

 

    (b)money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a).

 

    The appellant argues that the provisions of s. 14 expressly preserve the doctrine of resulting trust and by implication abolish all other non-express trusts.  I cannot accept that contention.  Section 14 is, I believe, intended not to specifically preserve but rather to modify the resulting trust doctrine as it applies in the context of the Family Law Act, 1986.  If anything, the combination of these modifying provisions and the legislature's silence on the subject of remedial constructive trust supports the view that the constructive trust is maintained in an unmodified form.

 

(e)  Section 64(2)

 

    Section 64 of the Family Law Act, 1986 provides that:

 

                            64.--(1)  For all purposes of the law of Ontario, a married person has a legal personality that is independent, separate and distinct from that of his or her spouse.

 

     (2)                   A married person has and shall be accorded legal capacity for all purposes and in all respects as if he or she were an unmarried person and, in particular, has the same right of action in tort against his or her spouse as if they were not married.

 

     (3)                   The purpose of subsections (1) and (2) is to make the same law apply, and apply equally, to married men and married women and to remove any difference in it resulting from any common law rule or doctrine.

 

    Although the necessary purpose of this section, as stated in subs. (3), is to equalize the legal rights of married men and married women, subs. (2) expressly declares that married persons shall have the same legal capacities as unmarried persons.  Ever since this Court's decision was rendered in Pettkus v. Becker, supra, it has been clear that the constructive trust remedy can be utilized by unmarried cohabitants.  It would not only be inequitable, but would also contravene the provisions of s. 64(2) if married persons were precluded by the Family Law Act, 1986 from utilizing the doctrine of remedial constructive trust which is available to unmarried persons.

 

Conclusion

 

    The review of the cases decided by this Court from Murdoch v. Murdoch, supra, to Sorochan v. Sorochan, supra, demonstrates the importance that has been attached to the use of the remedy of constructive trust to achieve a division of property that is as just and equitable as possible.  A marital relationship is founded on love and trust.  It brings together two people who strive and sacrifice to attain common goals for the benefit of both partners.  When it is terminated and acquired assets are to be divided, then in this of all relationships the concept of fairness should predominate in making decisions as to ownership.  This was the fundamental equitable principle underlying the application of the constructive trust remedy to matrimonial cases.  Where the application of the principle would achieve the goal of fairness it should not be discarded unless the pertinent legislation makes it clear that the principle is to be disregarded.

 

    The Family Law Act, 1986 does not constitute an exclusive code for determining the ownership of matrimonial property.  The legislators must have been aware of the existence and effect of the constructive trust remedy in matrimonial cases when the Act was proposed.  Yet neither by direct reference nor by necessary implication does the Act prohibit the use of the constructive trust remedy.  Indeed, the foregoing review of the provisions of the Act supports the view that the constructive trust remedy is to be maintained.   The Act's two-step structure and its individual provisions indicate that the constructive trust remedy still has an important role to play in the determination of matrimonial property disputes in Ontario.  The application of the remedy in the context of the Family Law Act, 1986 can achieve a fair and just result.  It enables the courts to bring that treasured and essential measure of individualized justice and fairness to the more generalized process of equalization provided by the Act.  That vital fairness is achieved by means of a constructive trust remedy and recognition of ownership.

 

    In this case fairness requires that the dedication and hard work of Jacqueline Rawluk in acquiring and maintaining the properties in issue be recognized.  The equitable remedy of constructive trust was properly applied.

 

    I would therefore dismiss the appeal with costs.

 

//McLachlin J.//

 

    The reasons of La Forest, Sopinka and McLachlin JJ. were delivered by

 

    MCLACHLIN J. (dissenting) --

 

I. Introduction

 

    This case raises the issue of the balance between constructive trust as a remedy for unjust enrichment and statutory schemes for the division of matrimonial property.

 

    The facts may be briefly stated.  Mr. and Mrs. Rawluk were married in 1955 and lived and worked together for twenty-nine years.  They had a farm and a farm equipment sales and service business.  In the early years, the wife cared for the three children and looked after farm chores.  By the early 1960s, she was also assisting with customers in the shop of the farm implement business.  In 1969, when this business moved to the home farm, the wife assumed a major role in its operation.  In addition to operating the parts department, she did all the bookkeeping and most of the invoicing and banking.  With all this, she maintained her involvement in all aspects of the farming operation.  There can be no doubt as to Mrs. Rawluk's contribution to the assets the parties acquired during the marriage.

 

    Those assets consisted mainly of real estate.  At the time of separation in 1984, the Rawluks held a number of properties, all but one of which were registered in the name of the husband.  In the years between separation and the trial of the action, the value of these properties increased dramatically.

 

II.  The Issues

 

    The Ontario Family Law Act, 1986, S.O. 1986, c. 4, sets up a scheme providing for the division of family property as of the valuation date (in this case, the date of separation).

 

    The husband contends that the amount he must pay to the wife to equalize their positions must be based on the value of the property in his name at the valuation date.  Any increment in values thereafter would be solely to his credit.

 

    The wife submits that she has a constructive trust over the properties giving her a beneficial half-interest in them at the time of separation, and entitling her to participate as owner in the increase in value of the property after separation.

 

    The trial judge and the Court of Appeal held that the property in question was impressed with a constructive trust which gave the wife a beneficial half interest in the property at the time of separation.

 

    It is not disputed that apart from the statute, this would be an appropriate case for the court to declare a constructive trust entitling the wife to a half-interest in the property.  This leaves the question of whether the Family Law Act, 1986 changes the situation.

 

    The answer to this question depends on the answer to two sub-issues.  The first concerns the nature of the doctrine of constructive trust.  Is it a concept of substantive property law, automatically vesting in the wife a half-interest in the property at the time of separation?  Or is it a remedial device, to be applied only where other remedies for unjust enrichment are unavailable or inadequate?

 

    If the doctrine of constructive trust is a remedial device, the further question arises of whether the doctrine should be applied where a statute already provides a remedy for the alleged unjust enrichment.

 

    As I see the problem, the issue in this case is not whether the Family Law Act, 1986 ousts the remedy of constructive trust.  I agree with Cory J. that it does not.  In my view, the real question which must be answered is whether the doctrine of constructive trust, as it has been developed by this Court, finds application where a statute already provides a remedy for the unjust enrichment complained of.

 

III. Decision on the Issues

 

    I would answer the questions posed above as follows.

 

1.  The doctrine of constructive trust, as it has developed in Canada, is not a property right but a proprietary remedy for unjust enrichment; as such, the availability of other remedies for the unjust enrichment must be considered before declaring a constructive trust.

 

2.  The doctrine of constructive trust should not be applied in this case because the Family Law Act, 1986 provides a remedy for the unjust enrichment of the husband to the detriment of the wife.

 

IV. Discussion

 

1.  The Nature of the Constructive Trust in Canada: Substantive or Remedial?

 

    An express trust is one which arises from the intention of the settlor or trustee.  A constructive trust is one imposed apart from the wishes of the settlor, by operation of law.

 

    In England, the traditional doctrine of constructive trust recognizes a series of categories in which the law imposes on one person the obligation to hold property in trust for another, usually in cases of fraud, mistake and fiduciary relationships.  Lord Denning has gone further, stating a constructive trust may be imposed "whenever justice and good conscience require it":  Hussey v. Palmer, [1972] 1 W.L.R. 1286, at p. 1290.  Thus there are two schools of thought in England.  The first school of thought, the "traditional" view, would limit the scope of the trust to existing, recognized constructive trust situations and would not extend the application of the trust to the equitable division of property between contesting parties.  It rejects the notion of a trust based on justice and good conscience.  The second school of thought is expressed in the "new model" set forth by Lord Denning in Hussey v. Palmer.

 

    The traditional English view, which does not recognize the constructive trust as a general remedy for unjust enrichment, but sees it as an obligation attaching to property in certain specified circumstances, holds that a constructive trust is a property right, just like any other trust.  Thus Pettit, in Equity and the Law of Trusts (4th ed. 1979) states at p. 46:

 

...the constructive trust is a substantive institution.  It is in principle like any other trust, the difference lying in the mode of creation.  Express trusts and constructive trusts are two species of the same genus.

 

    In Canada, we have not followed the traditional English view of the constructive trust as a limited doctrine applying in limited, clearly defined cases.  Rather, we have moved toward the American view of the constructive trust as a general equitable remedy for unjust enrichment.  This development is of relatively recent standing.  In Murdoch v. Murdoch, [1975] 1 S.C.R. 423, the majority of this Court agreed with the House of Lords' decisions in Pettitt v. Pettitt, [1970] A.C. 777, and Gissing v. Gissing, [1971] A.C. 886.  Laskin J. (as he then was) dissented, one of his grounds of dissent being that the constructive trust could be interpreted as an equitable remedy based on the principle of preventing unjust enrichment.  Similarly, in Rathwell v. Rathwell, [1978] 2 S.C.R. 436, support for the remedial constructive trust remained a minority viewpoint (espoused by Dickson J. (as he then was), Laskin C.J. and Spence J. agreeing).  Finally, in Pettkus v. Becker, [1980] 2 S.C.R. 834, the minority opinion of Rathwell v. Rathwell became the majority opinion, and the concept of constructive trust as a general remedy for unjust enrichment was adopted in Canada.

 

    The new concept of constructive trust now prevailing in Canada differs from the traditional English concept in two respects.  The first is its foundation in the concept of unjust enrichment.  As Professor Waters, in Law of Trusts in Canada (2nd ed. 1984), at p. 385 puts it:

 

...though the constructive trust remains in common law Canada a collection of liability situations, it now has a theme.  The constructive trust in the area of spousal or quasi-spousal property "arises...out of inequitable withholding resulting in an unjust enrichment," [quoting from Dickson J. in Rathwell v. Rathwell], and this is the theme, the basis of the defendant's liability.

 

The new concept eliminates the need to find recognizable categories in which the constructive trust can be applied, relying instead on the more general concept of unjust enrichment arising from a contribution by one to property held in the name of the other to the detriment of the contributing party.

 

     The second main difference between the traditional English concept of trust and the doctrine now accepted in Canada is the remedial nature of the Canadian doctrine.  The trust is not viewed as an institution but as a remedy, as a means of compelling a person to surrender an unjust enrichment: see Scott, Law of Trusts, vol. 5 (3rd ed. 1967), at p. 3416, {SS} 462.1), Waters, op. cit., at p. 388.

 

    While some writers suggest that the development of a remedial constructive trust in Canada has, for all purposes, eliminated the presence of "institutional" constructive trusts (see for example McClean, "Constructive and Resulting Trusts -- Unjust Enrichment in a Common Law Relationship  -- Pettkus v. Becker" (1982), 16 U.B.C. Law Rev. 155) other authors argue that the constructive trust that is used to remedy unjust enrichment is not the only type of constructive trust (see, for example, Paciocco, "The Remedial Constructive Trust:  A Principled Basis for Priorities over Creditors" (1989), 68 Can. Bar Rev. 315).  Because the facts in the present case involve allegations of unjust enrichment (and thus the type of constructive trust used to remedy unjust enrichment), it is not necessary for the purpose of this appeal to decide if other types of constructive trusts have been abolished.  The discussion which follows focusses on an analysis of constructive trusts as developed in response to unjust enrichment.

 

    Although the constructive trust is remedial, that is not to say that the remedial concept of constructive trust does not give rise to property interests.  When the court declares a constructive trust, at that point the beneficiary obtains an interest in the property subject to the trust.  That property interest, it appears, may be taken as extending back to the date when the trust was "earned" or perfected. In Hussey v. Palmer, in a passage referred to by Dickson J. in Rathwell v. Rathwell and relied on by the Court of Appeal in this case, Lord Denning postulated that the interest may arise at the time of declaration or from the outset, as the case may require.  Scott views the trust as being in force from the outset, with a discretion in the court as to whether it should be enforced: Scott, op.cit., {SS} 462.2.  Another American scholar regards it as coming into existence only on an order being made, but having retrospective operation: Bogert, The Law of Trusts and Trustees (2nd ed. 1979) {SS} 472.

 

    The significance of the remedial nature of the constructive trust is not that it cannot confer a property interest, but that the conferring of such an interest is discretionary and dependent on the inadequacy of other remedies for the unjust enrichment in question.  The doctrine of constructive trust may be used to confer a proprietary remedy, but does not automatically presuppose a possessory property right.  Thus, even where the tests for constructive trust are met -- unjust enrichment, corresponding deprivation, and no juridical justification for the enrichment and justification -- the property interest does not automatically arise.  Rather, the court must consider whether other remedies to remedy the injustice exist which make the declaration of a constructive trust unnecessary or inappropriate.

 

    The foundation of constructive trust in unjust enrichment and its essentially remedial nature have been emphasized and re-emphasized by this  Court.  Dickson J. stated in Pettkus v. Becker, at pp. 850-51, and repeated in Sorochan v. Sorochan, [1986] 2 S.C.R. 38:

 

The equitable principle on which the remedy of constructive trust rests is broad and general; its purpose is to prevent unjust enrichment in whatever circumstances it occurs. [Emphasis added.]

 

    The remedial nature of the notion of constructive trust was repeatedly emphasized by Dickson C.J.  In Rathwell v. Rathwell, at p. 444, he said:

 

    On the legal front, acceptance of the notion of restitution and unjust enrichment in Canadian jurisprudence...has opened the way to recognition of the constructive trust as an available and useful remedial tool in resolving matrimonial property disputes. [Emphasis added.]

 

Similarly, in Pettkus v. Becker, at pp. 847-48, Dickson J., after positing unjust enrichment as the basis of the remedy, confirmed its remedial nature:

 

    The principle of unjust enrichment lies at the heart of the constructive trust.  "Unjust enrichment" has played a role in Anglo-American legal writing for centuries.  Lord Mansfield, in the case of Moses v. Macferlan (1760), 2 Burr. 1005, put the matter in these words: "...the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money".  It would be undesirable, and indeed impossible, to attempt to define all the circumstances in which an unjust enrichment might arise.... The great advantage of ancient principles of equity is their flexibility:  the judiciary is thus able to shape these malleable principles so as to accommodate the changing needs and mores of society, in order to achieve justice.  The constructive trust has proven to be a useful tool in the judicial armoury.

 

    In Sorochan v. Sorochan, Dickson C.J., after quoting both these passages, suggested that the remedy of constructive trust does not follow automatically from establishment of the three criteria set out in Pettkus v. Becker.  A further inquiry is required to determine if other remedies are available, and if so, whether the remedy of constructive trust remains appropriate.  The Chief Justice wrote, at p. 47:

 

    The constructive trust constitutes one important judicial means of remedying unjust enrichment. Other remedies, such as monetary damages, may also be available to rectify situations of unjust enrichment.  We must, therefore, ask when and under what circumstances it is appropriate for a court to impose a constructive trust. [Emphasis added.]

 

    These passages establish the fundamentals of the Canadian approach to constructive trust in relation to unjust enrichment.  First, the doctrine has as its purpose the remedying of unjust enrichment.  Second, it is remedial rather than substantive.  Finally, the remedy of constructive trust is but one of many remedies that may be available to correct unjust enrichment.  Before applying it, the court must consider whether, given other available remedies, the remedy of constructive trust remains necessary and appropriate in the case before it.

 

    This brings us to the issue raised in this case.  Given that the doctrine of constructive trust, as it has developed in Canada, is remedial, what is the relationship of the remedy of constructive trust to other remedies for unjust enrichment?  While Dickson C.J. alludes to this issue in Sorochan v. Sorochan, little Canadian jurisprudence exists on the question.  In these circumstances, it may be useful to have regard to the American experience.  (This approach is advocated by Waters, op cit., who writes, at p. 392, "if this analysis is not early developed, and Canadian eyes remained trained on English precedents rather than the law of restitution in the United States, so that the constructive trust is conceived solely in its generic sense, there is a danger that this trust could indeed become the `wild card in the pack'.")

 

    The American law on constructive trusts, as set out in the Restatement of Restitution, recognizes the panoply of remedies for unjust enrichment and the need for the court, in considering a claim for constructive trust, to select among them.  As a general rule, the remedies which operate in personam must be brought first -- for example, actions for money had and received, quantum meruit and account.  As Waters, op. cit., states at p. 391,

 

Only when these actions are inadequate, ... are American courts willing to entertain the equitable proprietary remedies, the constructive trust and the equitable lien. [Emphasis added.]

 

And, at p. 393, Waters counsels caution in applying the remedy of constructive trust where other personal remedies lie:

 

    It is already clear from the English experience with the "new model" constructive trust that, if this remedy is employed where personal remedies would suffice, it threatens to upset the operation of other doctrines.

 

Waters goes on to point out the dangers associated with conferring possessory rights on a plaintiff and concludes:

 

...let us reflect on the consequences of declaring a proprietary right to remedy the situation.  It can produce unregistered and unregistrable interests capable of binding the land in the hands of immediate title holders, and successors taking with notice.

 

    Thus I arrive at this point.  Without denying the importance of the remedy of constructive trust, it must be remembered that it may be only one of several remedies for unjust enrichment.  It must also be remembered that as a proprietary remedy, its imposition may interfere with the operation of other doctrines and the exercise by others, including third parties, of the rights attendant on their interests in the property made subject to the trust.  For these reasons, it may be wise to insist that a plaintiff have exhausted his or her personal remedies before imposing the remedy of constructive trust.

 

    Against this background, I return to the first of the two questions I posed at the outset.  Is the doctrine of constructive trust as it has developed in Canada a substantive doctrine of trust, automatically conferring a property interest where the basic criteria for the trust are made out?  Or is it a remedy, to be applied where necessary to remedy unjust enrichment?

 

    The answer must be that in Canada constructive trust, at least in the context of unjust enrichment, is not a doctrine of substantive property law, but a remedy.  It follows that a constructive trust cannot be regarded as arising automatically when the three conditions set out in Pettkus v. Becker are established.  Rather, the court must go on to consider what other remedies are available to remedy the unjust enrichment in question and whether the proprietary remedy of constructive trust is appropriate.

 

    Neither of the courts below approached the matter in this way.  Both the trial judge and the Court of Appeal assumed that the doctrine of constructive trust gave the wife a beneficial half-interest in the property, the only question then being whether the statute took that right away.  My colleague, Cory J., takes a similar approach, stating that the Family Law Act, 1986 incorporates the constructive trust remedy "as an integral part of the process of ownership determination" at p. 000.

 

    I cannot share this approach.  In my opinion, the doctrine of constructive trust does not permit the court to retrospectively confer a property interest solely on the basis of contribution of one spouse and enrichment of the other.  A further inquiry must be made, namely:  whether, given the presence of another remedy, the remedy of constructive trust is necessary or appropriate.  I now turn to that question.

 

2.Whether The Doctrine of Constructive Trust Should be Applied in the Case at Bar

 

    This case poses the question of whether the doctrine of constructive trust should be applied where there exists a comprehensive statutory scheme providing a remedy for the situation where one spouse holds exclusive title to property to which the other spouse has contributed.

 

    The Family Law Act, 1986 sets up a comprehensive statutory scheme which recognizes the contributions of both spouses to the acquisition, preservation, maintenance or improvement of property during the marriage. It addresses the question of unjust enrichment between spouses by providing for a monetary equalization payment based on the value of the "net family property" at the valuation date, i.e., the time of separation: s. 5(1).

 

    The Act defines property broadly as including "any interest, present or future, vested or contingent, in real or personal property ...": s. 4.  "Net family property" is defined as meaning "the value of all the property... that a spouse owns on the valuation date..." after deducting debts and the value of the property at the time of marriage: s. 4.  The Act specifically requires the judge to apply the doctrine of resulting trust (s. 14), but makes no mention of constructive trust.  The Act permits the judge to depart from the principle of equal distribution and adjust the award in a variety of circumstances, including "any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property": s. 5(6)(h).

 

    The question may be put thus: given that there was an unjust enrichment arising from the fact that the property to which the wife contributed was in the husband's name, does the Family Law Act, 1986 provide a remedy, which makes it unnecessary to resort to the doctrine of constructive trust?  In my opinion, the answer to this question must be affirmative.

 

    Both the statutory remedy and the remedy of constructive trust are, on the facts of this case, directed to the same end.  The purpose of a constructive trust, as already discussed, is to permit a party without title to receive compensation for his or her contribution to the acquisition and maintenance of property standing in the other's name.  The purpose of the Family Law Act, 1986 is the same: it sets up a scheme to equalize the property holdings of each party to a marriage, regardless of who holds legal title.  The only difference for the purposes of this case is that the Family Law Act, 1986 provides for the equalization to be accomplished by a payment of money based on the value of the property at the time of separation (a remedy in personam), while the doctrine of constructive trust would give a beneficial interest in the land which persists to the date of trial (a proprietary remedy).

 

    If the doctrine of unjust enrichment is to be applied in this case, it is not for the purpose of rewarding the wife for her contribution to the property held in the husband's name, but for the purpose of permitting her to share in the increase in value of the property after separation. But this cannot support a claim for a constructive trust for two reasons.

 

    First, the Act contemplates the problem that assets may increase or diminish in value between the date of separation and trial; s. 5(6)(h) permits the trial judge to vary the equal division of property as at separation, on the basis of circumstances relating to the disposition or improvement of the property.  I agree with Cory J. that this step of the process is distinct from the preliminary determinations of ownership.

 

    Second, it would appear that the elements necessary to establish a constructive trust are not present where the enrichment occurs as a result of appreciation of the market value of the land after separation.  Under the statute, the wife already receives a payment sufficient to give her fifty percent of the family property, valued at the date of separation.  There is no unjust enrichment there.  What then of the fact that because of delays in obtaining judgment, the value of the property held in the hands of the husband increases pending trial?  True, this is an enrichment of the husband.  But there is no corresponding deprivation to the wife giving rise to an injustice.  The husband is not being enriched at her expense or because of her efforts.  In these circumstances, the first two requirements of a constructive trust posited in Pettkus v. Becker -- unjust enrichment of one party and corresponding deprivation of the other -- are absent.

  

    In the final analysis, the Family Law Act, 1986 provides complete compensation for the wife's contribution to the date of separation.  Any disproportionate enrichment must occur because of the increase in value due to changing market conditions after that date. But that does not constitute an unjust enrichment under the principles set forth in Pettkus v. Becker, given  that the wife made no contribution after that date.  As a matter of legal principle, the Legislature having provided a remedy for the unjust enrichment which would otherwise have occurred in this case, it is not for this Court to impose an additional equitable remedy aimed at correcting the same wrong.

 

    I add that application of the remedy of constructive trust to the statutory scheme may pose practical problems.  The scheme under the Act is relatively clear and simple; the basic rule is equality between the spouses, an equality effected by an equalization payment from one spouse to the other, based on the value of the property at the valuation date, usually the date of separation.  In most cases the parties can ascertain without difficulty what payment must be made, thereby settling their affairs without lengthy litigation.  Grafting the remedy of constructive trust on to this scheme would add uncertainty and promote litigation featuring detailed inquiries into how much each party contributed to the acquisition, preservation, maintenance and improvement of the property to the end of having the court declare a constructive trust in one of the parties.  Moreover, property rights which third parties have acquired in the interval may be adversely affected.  One returns to Professor Water's warning that to employ constructive trust where personal remedies suffice threatens to upset the operation of other doctrines.

 

    One must also consider the converse situation to that of this case -- the situation where instead of increasing in value after separation, the property loses value.  Is the amount recoverable by the spouse lacking title to be diminished accordingly?  One judge has said yes, imposing a beneficial constructive interest in the property on the wife as at separation, against her wishes and at the behest of the husband: McDonald v. McDonald (1988), 11 R.F.L. (3d) 321 (Ont. H.C.)  So we arrive at the anomaly of the equitable remedy of constructive trust's being applied against the wishes of the party found to have been unfairly treated, at the behest of the party who has been unjustly enriched.  What does this leave of the maxim that he who seeks the aid of equity must come with clean hands?  The fallacy at the root of such an approach is that of treating the remedy of constructive trust as though it were a property interest, which for the sake of consistency must be imposed regardless of the circumstances or of other remedies.

 

    It is suggested that the position of the wife should not be worse than it would have been had the parties not married.  The answer to this submission is that the Legislature, acting within the proper scope of its authority, has chosen to confine the Act to married persons.  Some Acts governing distribution of marital property apply to unmarried couples.  While it may be a ground for criticism of the legislation, the fact that a person covered by legislation may be treated less generously than someone not under the statute cannot give rise to a claim for unjust enrichment;  the doctrine of unjust enrichment does not go as far as that.

 

    My colleague, Cory J., suggests that s. 10 of the Family Law Act, 1986 shows that the legislators did not intend to oust the remedy of constructive trust.  In this regard, I reiterate that it is not my view that the doctrine of constructive trust is entirely ousted by the Act.  The equalization provisions of the Act, providing as they do a remedy for unjust enrichment in the equalization process, may preclude establishment of the conditions necessary to found a constructive trust after separation.  But in other circumstances, for example before separation, the requirements for a constructive trust may be made out.  It may be noted that s. 10 does not recognize automatic entitlement to property by way of trust or otherwise.  It is necessary to apply to the court for a declaration of the property interest sought.  At the time of that application, a court considering a request for a declaration of constructive trust would be required to consider whether, in view of the circumstances and the availability of other remedies, a constructive trust might appropriately be declared.

 

    It may seem anomalous that a married person might be able to obtain a declaration of constructive trust before but not after separation.  It must be remembered, however, that the equalization provisions of the Act provide an alternative remedy to which the spouse becomes entitled upon separation.  The fact that that remedy may not be as advantageous in some cases as the remedy of constructive trust does not justify the court in altering the doctrine of constructive trust.

 

    I cannot leave this question without alluding to the quite different provisions found in Acts regulating the division of marital property in provinces other than Ontario.  As Cory J. points out, the relationship between the constructive trust doctrine and its "statutory equivalents" has been variously treated in different jurisdictions.  While it is interesting to consider dispositions in other jurisdictions, it should be noted that the legislative provisions from province to province are not truly equivalent.  In particular, none of the provincial statutes governing the division of marital property, save that of Ontario, appears to have a statutorily fixed and inflexible valuation date, the feature of the Act which gives rise to the wife's grievance in this case.  There can be no simple or universally applicable answer to the question of whether the doctrine of constructive trust will apply in a statutory context:  in each case, the circumstances of the case and the efficacy of alternative remedies conferred by the applicable legislation must be examined to ascertain whether, in that situation, a declaration of constructive trust should be declared.

 

    In this case, I conclude that the remedy of constructive trust is neither necessary nor appropriate, given the remedies available under the Family Law Act, 1986.

 

V. Conclusion

 

    I would set aside the judgments of the Court of Appeal and the trial judge, and refer the matter back to the trial judge to determine whether an adjustment should be made under s. 5(6)(h) of the Family Law Act, 1986 to reflect the increase in value of the land held in the husband's name since separation, and to adjust the amount of the equalization payment due to the wife, on the basis that she is not entitled to a constructive trust vesting her with a beneficial half-interest in the property as at the date of separation.

 

    I would make no order as to costs in this Court or below.                                                Appeal dismissed with costs, LA FOREST, SOPINKA and MCLACHLIN JJ. dissenting.

 

    Solicitors for the appellant:  McMillan, Binch, Toronto.

 

    Solicitor for the respondent:  Melanie A. Manchee, Toronto.