Horch v Horch, 2017 MBCA 97

Citation: Horch v Horch, 2017 MBCA 97 Date: 20171003 Docket: AF16-30-08569 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Holly C. Beard Madam Justice Diana M. Cameron Mr. Justice Christopher J. Mainella BETWEEN : ) R. A. Horton and ) R. J. Hocken FRANCES MARY HORCH ) for the Appellant ) (Petitioner) Respondent ) L. I. Z. Pinsky and ) J. A.

Schofield - and - ) for the Respondent ) KENNETH EDWARD HORCH ) Appeal heard: ) February 6, 2017 (Respondent) Appellant ) ) Judgment delivered: ) October 3, 2017 On appeal from 2012 MBQB 343 ; 2014 MBQB 89 ; and 2015 MBQB 213 MAINELLA JA Introduction and Issues [ 1 ] The appeal and cross appeal raise issues regarding the equalization of family property on marriage breakdown, retroactive child support and costs. Family Property Issues [ 2 ] During their marriage, the parties made a decision to make an investment in publicly traded trust units (later to become shares) (generally hereafter the shares).

These appreciated over time and also generated monthly income both before and after the separation. Once the parties separated, the shares engendered conflict and lengthy litigation because of disagreement over how to apportion the shares, the increase in their value and the monthly income. [ 3 ] Both appeals challenge how the judge dealt with the petitioner’s entitlement to the post-separation appreciation of the shares and the monthly income. The issues relate to the interplay between the law of unjust enrichment, the equitable remedy of a constructive trust and The Family Property Act , CCSM c F25 (the FPA ).

The relevant provisions of the FPA are attached as an appendix to my reasons. [ 4 ] The judge found that the investment was a joint family venture resulting in an unjust enrichment to the respondent despite the respondent being the sole owner. To address the unjust enrichment from the post-separation appreciation of the shares, he granted the petitioner a statutory remedy under section 14(2) of the FPA in the form of an unequal division of the value. After the parties separated, the respondent equally shared the monthly income from the shares with the petitioner for three years.

Thereafter, he kept all of the monthly income. The judge found that the respondent’s decision to keep all of the monthly income was a second form of unjust enrichment. He ordered,

pursuant to the law of unjust enrichment and restitution, a monetary award in the amount of one half of the total after-tax value of the income from the shares in favour of the petitioner. [ 5 ] In his appeal, the respondent argues that the judge erred in his exercise of discretion to order an unequal division under the FPA . As part of this submission, he questions whether an unequal division can occur in relation to only one asset. His position ultimately is that the petitioner is entitled to one half of the value of the shares as of the date of separation, plus interest.

He also submits that the judge erred in finding that there was an unjust enrichment because he kept all of the monthly income beginning three years after the separation. He says that the petitioner had no entitlement to any share in the post-separation monthly income of the shares as he was the sole owner.

He argues that the petitioner’s family property rights were restricted to those set out in the FPA and, therefore, the monetary award based on the law of unjust enrichment and restitution was an error and, ironically, amounted to an unjust enrichment in favour of the petitioner. [ 6 ] In her cross appeal, the petitioner says that the judge erred by not awarding her the equitable remedy of a constructive trust for a one-half beneficial interest in the shares for the unjust enrichment relating to their appreciation post-separation.

She submits that the statutory remedy granted under the FPA is inadequate and that the respondent has been unjustly enriched again by the appreciation of the shares after the valuation date the judge used for determining the FPA equalization award. She has filed a motion in this Court asking to adduce further evidence as to the particulars of the sale of the shares which she asks be compelled from the respondent. Retroactive Child Support Issues [ 7 ] The petitioner claimed retroactive child support for the parties’ teenage daughter for the 37 months before she became an independent adult.

The judge granted retroactive child support for only two months based on an agreement he held existed between the parties. The petitioner says that the judge erred in concluding there was an agreement to depart from the Child Support Guidelines Regulation , Man Reg 58/98 (the Guidelines ). Costs Issues [ 8 ] The petitioner also challenges the judge’s decisions as to costs and his application of the principle of proportionality. The judge was of the view that success was divided during matrimonial proceedings and his three costs orders reflected that conclusion. The petitioner says that this was an error.

She argues that, over the course of the litigation, she was the successful party and, therefore, should have been awarded costs throughout. She submits that one of the reasons that the litigation dragged on for over five years, at great expense to her, is because the judge’s conduct of the proceedings was disproportionate.

She says that, if he had given greater attention to the principle of proportionality, there would have been a quicker outcome in this case with less expense to her. [ 9 ] For the following reasons, I would dismiss the appeal of the respondent and the motion for further evidence of the petitioner and would allow the cross appeal of the petitioner, in part, on the issues of retroactive child support and costs. Background [ 10 ] The parties, both chartered accountants by profession, married in 1985 and separated in 2007.

Their daughter was age 14 at the date of separation and lived with the petitioner following the separation, until January 2011. History of the Family Property Dispute [ 11 ] The respondent worked for a Winnipeg-based aviation company. In 2004, he was given the opportunity as an employee to invest in the Exchange Industrial Income Fund (the fund) before its initial public offering. The fund had acquired the aviation company. The parties together made the decision to make the investment which was paid for using a joint bank account that was funded by a joint line of credit secured by the family home.

The intention of the parties was to “make money” from the investment over the long term. The respondent believed that this was a “safe investment” because the family’s earnings and the income the shares would generate would cover the cost of borrowing. He also believed that the shares would jump in price after the initial public offering. [ 12 ] The investment was for 14,803 Class A trust units with a cost of $7.60 each for a total of $112,502.80. The respondent was the sole owner, and monthly distributions, later to become dividends (the monthly income), were paid in his name.

The parties agree that the shares fall within the definition of a commercial asset under the FPA (see section 1(1) ). [ 13 ] The amount borrowed for the shares against the joint line of credit was paid off prior to their separation in 2007 using, in part, the monthly income from the shares and the parties’ salaries.

The judge found that, although the respondent had the higher salary, the proportion of contributions by each party towards paying off the investment loan could not be determined because the joint line of credit was used for multiple purposes. [ 14 ] The fair market value of the shares at the date of separation in 2007 was $11.65 each for a total of $172,454.95. [ 15 ] In 2009, the fund changed its structure from a business-income trust to a corporation. The trust units were converted into common shares, leaving the respondent owning 14,803 shares of the Exchange Industrial Corporation.

The monthly income, now in the form of dividends, remained the same. [ 16 ] The monthly income was 12.5¢ per share at the time of separation in 2007 and rose over time to 16¢ per share as of November 2015 when the shares were sold. The yearly income, without considering income tax consequences, was somewhere between approximately $22,000 and $28,000. [ 17 ] For the tax years 2004 and 2007-2009 and for the first 11 months of 2010, the monthly income was claimed 50% each by the parties for income tax purposes.

For the tax years 2005-2006, the petitioner claimed 100% of the monthly income to minimize taxes as her income was less than the respondent’s. For December 2010 and for the tax years 2011-2014, the respondent claimed 100% of the monthly income. Claim of Retroactive Child Support [ 18 ] After the separation, the parties had a practice whereby the petitioner would receive the respondent’s cheque for the monthly income from the shares, deposit it, keep half of the amount for herself and then pay the respondent the other half, less an amount she deducted

for childcare expenses. The petitioner sent the respondent an itemized statement of the childcare expenses paid each month. These deductionstotalled $20,879.48 over the course of 35 months starting in January 2008. In December 2010, the respondent made the unilateral decision toretain all of the monthly income from the shares. [19] The parties agree that, for the purposes of determining child support, the respondent’s imputed income was $85,000 per year.

Although the Manitoba table of the Guidelines prior to December 31, 2011, would have set child support at $721 per month based on therespondent’s income, the petitioner claimed that the respondent should have been paying her $750 per month in table child support (37 months x$750.00 = $27,750). She argues that there were

section 7 expenses under the Guidelines for the daughter relating to private school fees,counselling and medication/healthcare expenses. According to her figures, the respondent owes her $14,609.71 in retroactive child support,taking into account the monies she kept from his share of the monthly income from the shares. [20] The respondent says that he has overpaid child support.

He says that, because the petitioner had no entitlement to any of themonthly income from the shares after the separation, the portion of the monthly income she received for approximately three years exceeded hischild support obligations under the Guidelines. Alternatively, he says that, if she were entitled to a half share of the monthly income, her figuresare unreasonable because they inflate the amount of

section 7 expenses. He says that, based on the Guidelines, after he is credited with themonies kept by the petitioner from his share of the monthly income, his outstanding child support obligation would be approximately half ofwhat the petitioner is claiming. Relevant Events in Family Court [21] The petition for divorce and corollary relief was filed in the spring of 2010. The petition included a request for child supportunder the Divorce Act, RSC 1985, c 3 (2nd Supp) and the Guidelines, as well as an equal division of assets under the FPA. There was no requestfor spousal support.

After their family law trial, the parties ultimately reached an agreement with respect to the division of all of their otherassets aside from the shares. Based on that settlement, the respondent paid the petitioner $507,706.18, plus interest of $54,306.84. [22] Just prior to the commencement of the trial in 2011, the fair market value of the shares was $20.61 each for a total of$305,089.83. The position of the petitioner was that the respondent had been unjustly enriched by the appreciation of the shares since theseparation and by his unilateral decision in December 2010 to keep all of the monthly income.

She amended her petition to include a request foran accounting and a monetary award for one half of the monthly income of the shares, as well as a declaration that she was the beneficial ownerof one half of the shares or, alternatively, an order transferring one half of the shares to her. The legal basis for this new relief was simply statedas “The Law of Trusts” in the pleading. The petition was not amended as to the relief sought under the FPA.

The petitioner continued to requestan equal division of the family property. [23] The petitioner did not seek the statutory remedy of an unequal division (see section 14(2) of the FPA) in the amended petitionbecause she says that her then counsel (not Mr.

Pinsky or Ms Schofield) advised her that the FPA “did not provide an adequate remedy and wasinappropriate to the factual situation.” The petitioner claims that her counsel at the time advised her that seeking both an equitable and astatutory remedy for the alleged unjust enrichment of the respondent would “only muddy the waters”. [24] The family law trial took place over several days in the fall of 2011. During the trial, the judge granted the parties a divorce bya divorce judgment. He delivered his decision as to the family property and retroactive child support issues on December 21, 2012.

On thatdate, the fair market value of the shares was $25.85 each for a total of $382,657.55. [25] In terms of the family property dispute, the judge considered the factors relating to an action for unjust enrichment mentionedin Kerr v Baranow, 2011 SCC 10, in light of the evidence and then concluded that the respondent had been unjustly enriched in two ways (atpara 35): The shares were acquired by the husband on May 6, 2004 as part of a “joint family venture”. Both the husband and the wife contributed to theacquisition of the shares. These shares have appreciated in value since the date of separation.

There is no juristic reason for the husband toreceive the entire benefit of the appreciation in value of the EIC shares since the date of separation. Since December 1, 2010, the husband hasreceived all the monthly dividends from the shares and the wife has received no dividends. There is also no juristic reason for the unequaldistribution of dividends between the husband [and] the wife since December 1, 2010. In the circumstances, there are two forms of unjustenrichment that have benefitted the husband.

It is unjust to allow the husband to receive the entire benefit from the post-separation appreciationin [the] value of the shares that were acquired as part of a “joint family venture”. It is also unjust to allow the husband to enrich himself byretaining the entire ongoing income from the shares from December 1, 2010 to the current date.

The issue that remains concerns thedetermination of the appropriate remedy for the unjust enrichment. [26] On the question of a remedy for the unjust enrichment, the judge considered the interplay between the FPA and the law ofconstructive trusts in light of this Court’s decision in Gallant v Gallant, (MB CA), 1998 CarswellMan 477 (CA), leave toappeal to SCC refused, 148 Man.R. (2d) 157 (note).

He reasoned that remedies regarding unjust enrichment in a family law context under theFPA and in equity are parallel; accordingly, based on Gallant, the FPA “provides the appropriate remedy to correct unjust enrichment where aspouse or common law partner does not share post-separation appreciation” (at para 46) of a commercial asset. [27] The judge, however, refused to grant the petitioner relief for the respondent’s unjust enrichment as to the appreciation of theshares because her pleadings were inadequate on the basis of r 70.31(3) of the Manitoba, Court of Queen’s Bench Rules, Man Reg 553/88 (theQB Rules): Relief to be claimed 70.31(3) Subject to subsection 24.3(1) of the Child Support Guidelines Regulation, Manitoba Regulation 58/98, a court shall grant only reliefthat has been claimed in a pleading and shall deal with each claim for relief by granting an order (

a) for the relief claimed;

(

b) dismissing the claim for relief; (

c) adjourning the claim for relief; or (

d) allowing the claim for relief to be withdrawn by a party. [ 28 ] The judge concluded that, because the petitioner had not sought the correct statutory relief in her petition, as amended, in the form of an unequal division (see section 14(2) of the FPA ), he could not deviate from her request in her petition for an equal division of the value of the shares. [ 29 ] The judge did, however, remedy the unjust enrichment of the respondent keeping all of the monthly income from December 2010, by a restitutionary monetary award.

He stated (at para 47): It has been determined that, taking into account that the EIC shares were acquired as part of a “joint family venture” and there is no juristic reason for the husband to retain all the dividends since December 1, 2010, there is a second form of unjust enrichment. The FPA , and s. 14(2) in particular, does not provide a remedy to the wife with respect to this unjust enrichment. The remedy of constructive trust is an alternative to consider. However, this proprietary remedy is not required. Taking into account the dicta in Kerr v.

Baronow , it is apparent that a monetary award that measures the extent of the unjust enrichment retained by the husband is sufficient for remedying the unjust enrichment.

In the circumstances, the wife is entitled to receive a monetary award equal to 50% of the total after-tax value of the dividends that have been received by the husband from December 1, 2010 to the current date. [ 30 ] On the question of retroactive child support, the judge concluded that, until the respondent decided to keep all of the monthly income (December 2010), he had satisfied his child support obligations by allowing the petitioner to deduct childcare expenses from his share of the monthly income.

He stated (at para 49): Taking a holistic approach to the facts of this case, there is no need to examine the issue of whether the husband underpaid or overpaid child support for the period from January 1, 2008 to November 2010.

Although not without discord, the husband paid and the wife received monthly contributions that were paid out of the husband’s share of the EIC dividend income in amounts that the parties explicitly or implicitly agreed upon. [ 31 ] The judge limited his award of retroactive child support to two months in the table amount under the Guidelines for December 2010 and January 2011 ($721 per month for a total of $1,442). [ 32 ] During the proceedings, the judge made three costs orders. The first costs order related to the trial.

The judge declined to make an order of costs for the trial because, in his view, there was “divided success” (at para 28).

He reasoned that, while the petitioner was successful as to equal sharing of the monthly income post-separation, the respondent was successful, based on the defective pleading of the petitioner, that the date of separation be used to value the asset and there was mixed success as to the petitioner’s claim to retroactive child support. [ 33 ] In the spring of 2013, prior to the judgment being entered, the petitioner moved for an order to file a further amended petition to seek an unequal division pursuant to section 14(2) of the FPA .

That motion was heard in December 2013, and the judge delivered his decision on April 30, 2014. On that date, the fair market value of the shares was $18.57 each for a total of $274,891.71. [ 34 ] The judge granted the petitioner leave to amend her pleadings to claim an unequal division. He also ordered that no costs be awarded in relation to the motion to amend the petition. In his view, the petitioner was wholly responsible for the delay in seeking the correct relief relating to her claim.

The judge noted that, had the petitioner accepted the respondent’s submission at trial that unjust enrichment due to post-separation appreciation of any asset should be dealt with under the FPA instead of pursuing the equitable remedy of a constructive trust, the motion to amend the pleadings would have been unnecessary. [ 35 ] In the spring of 2014, the petitioner filed her re-amended petition for divorce which sought unequal division pursuant to section 14(2) of the FPA . Proceedings as to the unequal division were delayed for approximately one year thereafter for several reasons.

The petitioner’s lawyer passed away in the spring of 2014. Extensive negotiations between the parties to settle the dispute were unsuccessful. In January of 2015, the petitioner discharged her new lawyer and decided to act in person. Finally, the parties could not agree on the facts as to the tax consequences of the appreciation of the shares, necessitating a contested hearing with expert evidence from a chartered accountant. The judge decided that the contested hearing would proceed using a valuation date of June 30, 2015.

On that date, the fair market value of the shares was $20.22 each for a total of $299,316.66. [ 36 ] The hearing as to the unequal division occurred on November 12, 2015. The expert’s evidence was unchallenged. His calculations are set out in detail at paras 21-26 of the judge’s reasons. In

summary, the judge concluded that, based on the record before him, the net after-tax value of the shares as of the date of separation in 2007 was $160,644.38 and it was $259,525.31 as of the 2015 valuation date. As part of his finding regarding the 2015 valuation, the judge used the historical effective tax rate for the respondent of 21.3% as opposed to a projected rate of 23.2% that the respondent wanted to use based on his expected 2015 income.

The judge explained his decision to use the lower tax rate, which was favourable to the petitioner, by noting that the respondent has a “discretion” (at para 24) to manipulate the sources of his income each year. The expected 2015 income of the respondent was much higher than it had been historically.

Accordingly, the judge concluded that the lower tax rate was “a more accurate measure of the contingent tax liability” (at para 25) for calculating the taxes owed for the capital gains. [ 37 ] The parties came to an agreement that one half of the after-tax value of the monthly income from the shares for the period of December 2010 to December 2015 was $58,748.45. Unfortunately, the final order the judge signed in 2016 as to the monetary award to compensate the petitioner for the respondent’s retention of all of the monthly income after December 2010 is at odds with his reasons delivered

in 2012 and 2015. The final order states: 7.0 THIS COURT ORDERS pursuant to the Law of Constructive Trusts that: 7.1 KENNETH EDWARD HORCH pay FRANCES MARY HORCH 50% of the total after-tax value of the dividends which KENNETHEDWARD HORCH received from the 14,803 EIC shares from December 1, 2010 to December 31, 2015 in the amount of $58,748.45. [emphasis added] [38] As previously mentioned, in his reasons, the judge accepted that a claim of unjust enrichment had been made out and that amonetary award was the appropriate remedy. The judge rejected the equitable remedy of a constructive trust.

Paragraph 7.0 of the final ordershould have read, “THIS COURT ORDERS pursuant to the Law of Unjust Enrichment and Restitution that: . . .”. [39] On November 12, 2015 (which was a Thursday), the judge was told that the shares were in the possession of the respondent’sstock broker for the purpose of sale, but had not yet been sold. In an affidavit filed in this Court on the petitioner’s motion for further evidence,the respondent deposes that the shares were sold “soon after” the November 12th hearing. [40] On November 16, 2015, counsel for the respondent informed the petitioner that the shares had been sold.

By way of letter tothe petitioner dated November 19, 2015, counsel for the respondent confirmed that his firm had received the sum of $100,000 from the sale ofthe shares on November 17, 2015, and that the petitioner picked up his firm’s trust cheque payable to her in that sum on November 18, 2015,which represented an interim payment towards the marital assets still in dispute. [41] On December 22, 2015, the judge delivered his decision as to the request for an unequal division.

He determined that thealmost $100,000 appreciation of the shares over the seven-and-one-half-year period after the separation was entirely the result of the stockmarket; the respondent had done nothing to contribute to the appreciation. Relying in particular on section 14(2)(

g) of the FPA, he decided thatit would be “clearly inequitable” (at para 37) to award the petitioner an equalization payment based on the 2007 net after-tax value of the shareswith interest (which would have worked out to be $103,133.19). Rather, he decided that the petitioner’s entitlement was one half of the after-taxvalue of the shares as of the 2015 valuation date. He determined that amount to be $129,762.66 (at para 38). [42] In order to reach that result, the judge awarded the petitioner approximately 80.8% of the after-tax value as of the date ofseparation in 2007.

The respondent was awarded approximately 19.2% of the after-tax value as of the date of separation, plus all of the post-separation appreciation to the current date of valuation in 2015.

The judge explained, “The result is that the wife and the husband share equallyin the value of the shares at the date of separation and their post-separation appreciation in value” (at para 40). [43] As previously mentioned, the judge also set the monetary award for the petitioner’s 50% share in the after-tax value of themonthly income for the period of December 2010 to December 2015 at $58,748.45. [44] The parties again could not agree on costs and a contested hearing was held. The petitioner attempted to revisit the judge’sprevious two costs orders.

She presented a proposed bill of costs for all of the litigation for costs, disbursements and taxes totalling $28,492.82. [45] The judge declined to revisit his prior costs orders. He concluded that the petitioner was largely successful at the unequaldivision hearing but that the respondent had been prejudiced by the conduct of the litigation. In his third costs order, he set costs on the unequaldivision hearing in favour of the petitioner in the amount of $2,500 all inclusive. [46] The final order concluding proceedings in family court was signed on March 14, 2016.

Petitioner’s Motion for Further Evidence on the Appeal [47] After the signing of the final order, the petitioner requested the respondent’s 2015 income tax return and notice of assessmentto determine the sale price of the shares in November 2015, the proceeds of the transaction and the tax owed. The respondent refused therequest on the basis of relevance. [48] Not surprisingly, this disagreement resulted in further litigation, but now in this Court. After the notices of appeal were filed,the petitioner filed a motion to introduce further evidence on the appeal.

The notice of motion requests that this Court order the respondent todisclose his 2015 income tax return, his 2015 notice of assessment and the particulars as to the date on which he made an order to sell the sharesand the actual sale date. The motion for further evidence was adjourned by a chambers judge to be decided by the panel hearing the appeals. [49] At the hearing of the appeals, counsel for the respondent advised the Court that there was a very small window based on therecord in which the shares could have been sold on the Toronto Stock Exchange between November 12 and 16, 2015.

Given that the high andlow range of possible sale prices for shares is publicly available for that period of time, there is no mystery that the shares appreciated betweenvaluation in June 2015 and sale in November 2015. Standard of Review—Family Law Orders [50] A family law order is entitled to “considerable deference” on appeal and is to be reviewed only for “material” error (Hickey vHickey, (SCC), [1999] 2 SCR 518 at para 10; and Van de Perre v Edwards, 2001 SCC 60 at para 15).

Accordingly, the orderappealed will be respected absent an error in principle, a significant misapprehension of the evidence, or where the award is clearly wrong (seeHickey at para 11; and DBS v SRG; LJW v TAR; Henry v Henry; Hiemstra v Hiemstra, 2006 SCC 37 at para 136). Harmless error will not resultin the order being set aside.

The appellate court also will not reconsider the evidence or interfere with the judge’s findings of fact unless thereasons demonstrate palpable and overriding error or an omission that gives rise to a reasoned belief that the judge forgot, ignored ormisconceived the evidence in a way that affected the result (see Van de Perre at para 15). Family Property Issues Background—The FPA and the Law of Unjust Enrichment and Constructive Trusts

Introduction [51] Before turning to address the merits of the appeal and cross appeal on the family property issues, some background to the FPAand its interplay with the law relating to an action for unjust enrichment and the equitable remedy of a constructive trust is necessary, given thearguments made by the parties. [52] In the absence of family property legislation, it is now well settled that issues as to financial and property rights arising fromthe breakdown of a marriage or other domestic relationship can be resolved by a common-law action in unjust enrichment (see Pettkus v Becker, (SCC), [1980] 2 SCR 834 at 850-51; Kerr at para 30; and Donovan WM Waters, Mark Gillen & Lionel Smith, eds, Waters’Law of Trusts in Canada, 4th ed (Toronto: Thomson Reuters, 2012) at ch 10.II, G, 5, online: <https://nextcanada.westlaw.com/Browse/Home/TextsandAnnotations/EstatesTrustsSourceTextsandAnnotations/WatersLawofTrustsinCanada>).

Older case law, such as Murdoch v Murdoch, (SCC), [1975] 1 SCR 423 at 438-39, which suggested that a resulting trust couldarise in a domestic situation where there was a common intention that the beneficial interest in property not belong solely to the owner, was laidto rest by Kerr (see paras 15, 24-29; and Wills v Kennedy, 2015 NBCA 31 at para 17).

As Professor Waters explains, when dealing with disputesas to matrimonial and cohabitational property outside of a statutory scheme, “we are now in the age of unjust enrichment” (Waters at chapter10.II, G, 5). [53] A successful unjust enrichment claim in the domestic context requires proof of: (1) an enrichment of the defendant; (2) acorresponding deprivation of the claimant; and (3) an absence of a juristic reason for the enrichment (see Pettkus at p 848; and Kerr at para 32).

Liability is strict if the criteria are proven, absent the defendant establishing a bar or defence to eliminate or reduce his or her remedialobligation (see Mitchell McInnes, The Canadian Law of Unjust Enrichment and Restitution (Markham: LexisNexis, 2014) at 4, 24; and Wilsonv Fotsch, 2010 BCCA 226 at paras 39-45).

Remedies for unjust enrichment take the form of either a monetary award or a proprietary remedy(e.g. a trust, a lien or subrogation) (see Kerr at para 46; and AH Oosterhoff, Robert Chambers & Mitchell McInnes, Oosterhoff on Trusts: Text,Commentary and Materials, 8th ed (Toronto: Carswell, 2014) at 720-21). [54] A cause of action for unjust enrichment is firmly rooted in the common law; it is not an equitable doctrine although equitableprinciples have affected its development (see Peel (Regional Municipality) v Canada; Peel (Regional Municipality) v Ontario, (SCC), [1992] 3 SCR 762 at 786-88; Graham Virgo, The Principles of the Law of Restitution, 3rd ed (Oxford: Oxford University Press, 2015) at45-51; Charles Mitchell, Paul Mitchell & Stephen Watterson, eds, Goff & Jones The Law of Unjust Enrichment, 8th ed (London, UK: Sweet &Maxwell, 2011) at paras 1-06 to 1-08; and McInnes at pp 31-45). [55] The most obvious aspect of the relationship between the principles of equity and unjust enrichment lies in the question of theappropriateness of a proprietary remedy, usually being a constructive trust (see Peter v Beblow, (SCC), [1993] 1 SCR 980 at995-97).

According to the law of constructive trusts, an action for unjust enrichment is one situation where the equitable remedy of aconstructive trust is available to prevent persons “from retaining property which in ‘good conscience’ they should not be permitted to retain”(Soulos v Korkontzilas, (SCC), [1997] 2 SCR 217 at para 17; and Oosterhoff, Chambers & McInnes at p 711).

ProfessorMcInnes explains that sometimes an equitable remedy is necessary in a situation of unjust enrichment in the same way that an injunction may begranted in a tort claim, being that damages are an inadequate remedy in the particular circumstances (see McInnes at p 32). [56] Manitoba has family property legislation in the form of the FPA that is designed, as my colleague, Beard JA, observed in Stuartv Toth, 2011 MBCA 42, “to treat all Manitobans fairly and equally in the family law context” (at para 19). (For a discussion of the Manitobalegislation and its history beginning with The Marital Property Act, RSM 1987, c M45, see the comments of Greenberg J in James G McLeod &Alfred A Mamo, eds, Matrimonial Property Law in Canada (Toronto: Thomson Reuters, 2016) vol 2 (loose-leaf updated 2010, release 7), atM-1 to M-3). [57] The FPA is a comprehensive statute designed to settle family property disputes and to ultimately remedy financial and propertyinequities arising from marriages or common-law relationships.

The central feature of the FPA is the right of each spouse or common-lawpartner to an accounting and equalization of assets (see

section 13). [58] Four other features of the legislation are noteworthy for the purposes of this appeal. First, sections 3-12 of the FPA set out aregime as to what assets the FPA applies to, with the presumption being that it applies to “every asset” of a spouse or common-law partnerexcept where exempted from the application of the FPA (section 3). Second, there is judicial discretion to order an unequal division of the valueof assets (see

section 14). Third, the FPA has clear rules as to how property rights are affected. Subject to specific listed exceptions, the FPAdoes not vest title to, or an interest by, one spouse or common-law partner in the property owned by the other (see section 6(1)). However, aspart of an equalization award, a family court does have the power to affect property rights by ordering the transfer of property from one spouseto another to satisfy an equalization award (see

section 17(b)). Finally,

section 18 of the FPA provides a mechanism and a broad discretion forfamily judges to address questions or disputes as to the operation of the statute or breaches of it. Equalization of Family Property under the FPA [59] By virtue of the FPA, Manitoba is an equalization jurisdiction for the purpose of the sharing of family property on breakdownof a marriage or common-law relationship. Under the equalization model, it is the value of the property that is shared, as opposed to theproperty itself.

The general intent of the FPA is that the value of family property be shared equally (see Rotzetter v Rotzetter, 1985CarswellMan 192 at para 26 (CA)). [60] After the process of accounting and valuation of each party’s inventory of assets, there is a presumptive equal division of thetotal value of the assets, as opposed to a division of property or beneficial interests. Jointly owned assets are presumptively not part of theequalization calculation (see

section 10 of the FPA; and Lamont-Daneault v Daneault, 2003 MBCA 111 at paras 33-41, 78-83). At the end ofthe equalization process, a monetary debt is owed by the party with the higher value of assets to the other party for one half of the differencebetween the value of the two inventories of assets. The relationship is one of debtor/creditor. Satisfaction of the debt based on the accountingoccurs by an order for payment of the amount (in lump sum or installments); a transfer, conveyance or delivery of assets; or a combination of thetwo (see

section 17 of the FPA; and, generally, Schreyer v Schreyer, 2011 SCC 35 at paras 13-18). [61] A party can seek relief from a perceived unfairness arising from the presumption of an equal division of the value of the assetsby seeking an order under the FPA for an unequal division. Unlike Ontario’s legislation (the Family Law Act, RSO 1990, c F3), the FPA createstwo different standards for granting an unequal division which turn on the nature of the asset in dispute. If the asset is a “family asset” (section1(1) of the FPA), the discretion of the court to order an unequal division is reserved for extraordinary circumstances (financial or otherwise), as

the text of the statute refers to a “grossly unfair or unconscionable” threshold (section 14(1) of the FPA; see also Rotzetter at paras 22-25). Obviously, this language emphasizes the interests of certainty and predictability over those of flexibility.

Similar statutory language in section5(6) of the Family Law Act has been interpreted to mean that a family court will only order unequal division where an equal division of thevalue of the assets would produce a result that would “shock the conscience of the court” (Serra v Serra, 2009 ONCA 105 at para 47). [62] In contrast, if the asset is a “commercial asset” (section 1(1) of the FPA), as is the case here, the discretion of the family courtto order an unequal division is broader as the legislation uses the “clearly inequitable” threshold (section 14(2) of the FPA).

Judicial discretionis, however, not unfettered. The legislative presumption of equal sharing of a commercial asset should not be departed from lightly absent acompelling inequity that is manifest on the record (see Gifford v Gifford, 1981 CarswellMan 252 at para 4 (QB), varied on other grounds 1981CarswellMan 195 (CA); and Rotzetter at para 26).

The Decisions of Rawluk v Rawluk and Gallant v Gallant [63] Historically, the relationship between equity and other legal principles has been based on the premise that equitable doctrinescannot operate in plain inconsistency with other sources of law, such as statute or the common law. Equitable rules are of a “secondary orsupplementary nature” (John McGhee, ed, with the contributions of Stuart Bridge et al, Snell’s Equity, 33rd ed (London, UK: Sweet &Maxwell, 2015) at para 1-002).

This theme has historically been captured by the expression, admittedly imprecise as it may be in practice, that“equity follows the law” (McGhee at para 5-005; and Eileen E Gillese, The Law of Trusts, 3rd ed (Toronto: Irwin Law, 2014) at 17). [64] In Rawluk v Rawluk, (SCC), [1990] 1 SCR 70, the Supreme Court of Canada discussed the interplay betweenequitable principles and family property legislation in Ontario. In Rawluk, farm properties owned by the husband rose in value between the dateof separation and the date of trial.

Like the FPA, the Ontario legislation set the date of separation as the default date of valuation for thepurposes of equalization. As previously discussed, the discretion of an Ontario court under the legislation to order an unequal division of anytype of asset is limited to situations of unconscionability (see pp 93-94). [65] The Supreme Court of Canada was unanimous that the wording of Ontario’s legislation did not oust the equitable remedy of aconstructive trust in favour of the wife, so that she could participate in the gain in value of the properties to the date of trial.

The Court,however, split deeply on what role the constructive trust plays in relation to an equalization claim under the Ontario legislation. [66] In the majority decision, Cory J stated, “far from abolishing the constructive trust doctrine, the Family Law Act, 1986incorporates the constructive trust remedy as an integral part of the process of ownership determination and equalization established by that Act”(at pp 89-90). Before the equalization process can take place, ownership interests have to first be determined which can occur by way ofimposing a constructive trust (see pp 90-94).

If imposed, the beneficial interest in the property is considered to be owned by the claimant “fromthe time when the unjust enrichment first arose” (at p 91). [67] In her dissenting judgment, McLachlin J (as she then was) questioned the necessity of resorting to equitable remedies when thelegislation provided relief from an unjust enrichment of one spouse arising from the marriage. She raised three concerns. First, the Ontariolegislation allowed for an unequal division of assets, thereby calling into question the necessity of equitable relief.

Next, a constructive trustwas not appropriate in the facts of Rawluk because there was no unjust enrichment post-separation. Finally, in her view, allowing parallelstatutory and equitable remedies created uncertainty, promoted unnecessary litigation and might disrupt the interests of third parties (see pp 110-111). [68] In Gallant, this Court discussed the implications of Rawluk as to the interplay between the equitable remedy of a constructivetrust and Manitoba’s family property legislation.

The background in Gallant was that shares owned by the husband in a private corporationsignificantly declined in value between the date of separation and the date of trial. The husband sought the statutory remedy of an unequaldivision or, alternatively, that a constructive trust be imposed against his wife, making her the beneficial owner of half of his shares. Thisconcept is referred to as a “reverse constructive trust” (see Waters at

chapter 11.II, E). [69] The majority of the Court of Appeal explained that the result in Rawluk was a function of the unique wording of the familyproperty legislation in Ontario. The Court also agreed with the obiter in the dissenting decision in Rawluk that allowing the parallel remedy of aconstructive trust opens up the odd debate of a reverse constructive trust, where a trust is imposed on a party who does not seek it because anasset owned by his or her spouse declines in value post-separation.

The majority explained that Rawluk had a more limited impact on familylaw in Manitoba than Ontario because Manitoba’s legislation provided broader remedies to address significant changes in asset values post-separation. Huband JA commented (at para 10): It is not for me to say that the majority decision was wrong and the minority reasons were correct in the Rawluk case with respect to the Ontariolegislation. I do observe, however, that the existence of parallel remedies, each of a completely separate nature, creates uncertainty andpromotes litigation.

Moreover, the use of a remedial constructive trust seems out of joint when it is invoked to cure a decrease in the value ofassets rather than an increase. That happened in a case which preceded Rawluk; namely, McDonald v. McDonald (1988), (ON SC), 11 R.F.L. (3d) 321 (Ont. H.C.), where the value of certain farm property and equipment owned by the husband diminishedsubstantially between valuation date and trial.

We see the strange spectrum of a constructive trust being declared not at the behest of thebeneficiary wife, but on behalf of the trustee husband in order to deny the wife what (apart from a s. 5(6) argument) she would otherwise beentitled to under the Family Law Act, 1986. Given the broader discretionary power given to the court under s. 14(2) of The Marital Property Act in Manitoba, in my opinion we need notconsider any alternative remedy, and the legal gymnastics of resort to an inappropriate parallel remedy can be avoided in this jurisdiction.

Hence, the Court, at the outset of the hearing, indicated that the husband would be given a remedy under s. 14(2) or not at all. [70] The difference between the majority and the dissenting decision of Monnin JA in Gallant turned not on the impact of Rawlukto Manitoba family law, but on whether, on the facts of that case, the husband’s situation was one where an order of an unequal division of theshares of the private corporation for the purposes of equalization was appropriate.

The majority concluded that it was because the husband wasnot a controlling shareholder, there was no real market for the shares and, in the face of declining market conditions for the company, there wasnothing he reasonably could do to sell his shares until many years after the separation with his wife. In his dissent, Monnin JA disagreed. Hewarned against rewarding “delay and [possible] scheming” (at para 56) by the spouse owning an asset by granting him or her an unequaldivision of an asset just because the asset declined in value after separation.

[71] In

summary, Gallant accepted the applicability of the majority decision in Rawluk that the availability of a claim for a remedialconstructive trust had not been foreclosed by The Marital Property Act (now the FPA). The Court found that, due to the differences between theOntario family property legislation under consideration in Rawluk and the Manitoba legislation, a claim for a remedial constructive trust wasless likely to succeed in Manitoba than in Ontario. In the result, it determined that, on the facts in Gallant, the only available remedy was underthe legislation.

Gallant, interpreted in a manner consistent with the reasons in Rawluk and the later jurisprudence, as set out in paras 72-81herein, remains the law in Manitoba and should be followed in this case. What Does Rawluk Mean to Family Law in Manitoba Currently? [72] One of the consequences of Rawluk is that, as occurred here, a litigant can attempt to circumvent family property legislationthrough a claim for the equitable remedy of a constructive trust or reverse constructive trust.

The wording of the FPA does not prohibit a partyfrom seeking a remedial constructive trust in a family property dispute; the only common-law jurisdiction in Canada where a legislature hastaken that drastic step is Prince Edward Island (see the Family Law Act, RSPEI 1988, c F-2.1, section 15(1)). Given human nature, there is anobvious temptation to make such claims when there is a significant change in value one way or the other in family property post-separation.

Since Rawluk was decided, the Supreme Court of Canada’s decisions in Peter and Kerr have clarified further the role of the constructive truston the breakdown of a domestic relationship. [73] In Peter, McLachlin J (as she then was), in her majority decision, confirmed that, when resort is had to general legal orequitable principles to resolve a gap in family law, the principles of those other sources of law are to be respected, albeit with a degree offlexibility to meet the specific needs of the family law context (see Peter at pp 987, 996-97). This view was later confirmed in Kerr (at para 34).

McLachlin J also warned in Peter that general legal and equitable principles are not a tool for a family court to simply order whatever result itbelieves is fair in a given case (at p 988): There is a tendency on the part of some to view the action for unjust enrichment as a device for doing whatever may seem fair between theparties. In the rush to substantive justice, the principles are sometimes forgotten. Policy issues often assume a large role, infusing suchstraightforward discussions as whether there was a ‘benefit’ to the defendant or a ‘detriment’ to the plaintiff.

On the remedies side, therequirements of the special proprietary remedy of constructive trust are sometimes minimized. As Professor Palmer has said: ‘The constructivetrust idea stirs the judicial imagination in ways that assumpsit, quantum meruit and other terms associated with quasi-contract have never quitesucceeded in duplicating’ (George E. Palmer, The Law of Restitution, vol. 1, at p. 16). Occasionally the remedial notion of constructive trust iseven conflated with unjust enrichment itself, as though where one is found the other must follow.

See also Peel (Regional Municipality) at pp 802-3; and Moore v Sweet, 2017 ONCA 182 at para 92. [74] Another consequence of Peter and Kerr is that the first remedy to be considered on a successful action for unjust enrichment isalways a monetary award in restitution as opposed to an equitable remedy, such as a constructive trust.

To obtain a constructive trust, a claimantmust demonstrate that monetary compensation is inadequate and that there is a direct connection between the contribution that founds the claimof unjust enrichment, which must be substantial in nature, and the property in which the constructive trust is sought (see Peter at pp 988, 997,999-1000; and Kerr at paras 47, 51). [75] In Peter (at pp 987-88), the majority endorsed the comments of La Forest J in Lac Minerals Ltd v International CoronaResources Ltd, (SCC), [1989] 2 SCR 574, regarding the remedy of a constructive trust.

The comments made in Lac Mineralswere in the context of claims of breach of confidence and fiduciary duty, not an unjust enrichment action. La Forest J concluded that the remedyof a constructive trust is reserved for only rare situations when a monetary award would not be adequate.

He explained the inadequacy of amonetary award this way (at p 678): “[A] constructive trust should only be awarded if there is reason to grant to the plaintiff the additionalrights that flow from recognition of a right of property.” [76] In Lac Minerals, a constructive trust was awarded in lieu of monetary compensation partly to address priority rights forbankruptcy purposes and also because the uniqueness of the property in question (a mining property) made valuation of it virtually impossible.

In Peter (at p 999) and Kerr (at para 52), the Supreme Court of Canada also noted that, in addition to certain property rights that may arise in agiven case, monetary compensation may be insufficient in a domestic situation of unjust enrichment where collection of the monetary award isunlikely. [77] In Kerr, the Supreme Court of Canada also simplified the quantification of monetary awards in a case of unjust enrichmentwhere one party retains a disproportionate share of an asset resulting from a joint family venture.

In such cases, “[t]he monetary award forunjust enrichment should be assessed by determining the proportionate contribution of the claimant to the accumulation of the wealth” (at para81). A monetary award for unjust enrichment is therefore not limited to a fee-for-services approach. [78] The effect of this reasoning brings into doubt the utility of a constructive trust when the FPA can provide monetarycompensation that addresses inequities arising from a marriage or common-law relationship.

Since Rawluk and Gallant, Manitoba family courtshave accepted that the FPA is not a complete code that ousts common-law or equitable remedies; however, the approach that has been followedis that, if the FPA provides an adequate remedy in the particular circumstances, there is no reason to look to a parallel proceeding, such as anaction for unjust enrichment seeking a constructive trust (see Babcock v Babcock, 1999 CarswellMan 315 at paras 16-17 (QB); Lasko v Lasko,2009 MBQB 332 at paras 20, 22; and Dubois v Dubois, 2015 MBQB 13 at para 49). [79] The principle arising from Rawluk that asset ownership must be established first before the equalization process can begin is afair and uncontroversial point.

The FPA recognizes that parties can have legal or equitable interests in property (see section 1(1)). It is notuncommon in complex cases for such problems to arise in relation to whether a beneficial interest is subject to equalization under the FPA (see,for example, Spiring v Spiring, 2004 MBQB 55). The idea is no different than saying the FPA does not apply to an asset because it falls withina statutory exemption despite the presumption in

section 3 (e.g. a gift or inheritance). The FPA provides a judicial mechanism (section 18) andan onus provision (section 22) to govern such matters. In such proceedings, the family court makes a declaration regarding whether the party hasan interest in an asset or whether the asset is exempt from the FPA, and the equalization process adjusts to the consequences of thatdetermination. [80] However, the suggestion that Rawluk also effectively gives claimants a choice of remedies between constructive trust andequalization, to suit their advantage, is not an accurate reflection of the current law. A constructive trust is a discretionary remedy; it is not asubstantive right (see Waters at

chapter 11.1, B; and Sorochan v Sorochan, (SCC), [1986] 2 SCR 38 at 47). As discussed, caselaw since Rawluk has placed limitations on when a constructive trust may be imposed in a claim for unjust enrichment. It is an error of law to

impose a constructive trust without a determination that monetary compensation is inadequate in the given circumstances ( see Martin v Sansome , 2014 ONCA 14 at paras 57-61 ). The difficulty for a family law claimant relying on Rawluk for the imposition of a constructive trust is that they will have no chance of success unless they can demonstrate that there are additional property rights at issue in relation to the asset that cannot be monetized, and that they made a direct and substantial contribution towards the asset tied to the unjust enrichment claim (see Lac Minerals ; Peter ; and Kerr ). Such situations will be unusual, to say the least. [ 81 ] In

summary, the case law since Rawluk alleviates the fear of some that constructive trusts can be readily resorted to for “case by case ‘palm tree’ justice” ( Peel (Regional Municipality) at p 802) instead of obtaining relief under the FPA . Constructive trusts play an important role in recognizing property rights in certain domestic circumstances; however, they can only be imposed on a principled basis, not simply because a claimant wants one or the family court believes it will provide a fair result in the given circumstances.

The Respondent’s Appeal Order of Unequal Division— Section 14(2) of the FPA [ 82 ] The respondent has appealed the judge’s order under section 14(2) of the FPA granting the petitioner an unequal division of the shares. The principles to consider in the exercise of discretion under section 14(2) of the FPA when there is a change in value of a commercial asset between the date of separation and the date of trial were considered in detail in Gallant .

Three factors are important to keep in mind. [ 83 ] First, to meet the threshold of “clearly inequitable” in section 14(2) of the FPA , the change in value must be substantial; the presumption of equal division should not be departed from because of a “trivial [matter]” ( Gallant at para 14 ). The FPA is designed to provide certain and predictable outcomes and dissuade the expense of litigation. [ 84 ] A second consideration is the liquidity of the asset and the ability that the owning spouse or common-law partner had to dispose of it post-separation ( see Gallant at paras 14, 29 ).

While a party’s “conduct” is not a factor to weigh on an unequal division ( section 14(3) of the FPA ), prudent financial decision making is expected by the owner of an asset. Financial decisions of one spouse or common-law partner should not unfairly impact the other’s equalization claim under the FPA . By use of a clear formula in the FPA based, in default, on the date of separation (

section 16 of the FPA ), parties have a clear and reasonably predictable method of ascertaining their family property obligations ( see Gallant at paras 49-55 ).

Also, section 6(1) of the FPA gives the owner of an asset, subject to certain exceptions, broad powers to deal with or otherwise dispose of it even if the equalization process is not completed. [ 85 ] Accordingly, if there is a realistic market for an asset, a family court may have little sympathy for a claim that an asset has substantially declined in value post-separation because of a risk its owner voluntarily assumed (see Gutheil v Gutheil , 1983 CarswellMan 47 at para 9 (QB) ; and Nassar v Nassar , 1984 CarswellMan 168 at paras 18-19 (QB) ).

In such circumstances, the family court is faced with the scenario of sharing the “reversal of fortune” with the innocent non-owning spouse or common-law partner ( LeVan v LeVan , 2008 ONCA 388 at para 79 ). Care, however, must be taken as market forces can work against even prudent owners when market decline is as a result of systemic forces or a downturn in the economy generally ( see Serra at para 65 ).

A related caution for the family court is that it should not be quick to ignore the legislated date of valuation simply because assets have appreciated in line with market conditions over the course of lengthy family litigation. Valuation hindsight is an unattractive submission, no matter who makes it. I will say more about this on the cross appeal. [ 86 ] A final consideration is whether the overall result is “just, fair and equitable in the circumstances” ( Serra at para 71 ).

The family judge must base his or her decision on a cumulative evaluation of the relevant circumstances in the particular case, as section 14(2) of the FPA requires. The weight the family judge assigns to a particular circumstance in coming to his or her decision will not lightly be interfered with on appeal ( see Housen v Nikolaisen , 2002 SCC 33 at para 23 ). [ 87 ] After reviewing the judge’s reasons as a whole in light of the record and the parties’ submissions, I see no basis to disturb his decision to order an unequal division of the value of the shares under section 14(2) of the FPA .

His finding that there was a compelling inequity in valuing the shares as of the date of separation was reasonably open to him on the record. The market value of the shares rose from $172,454.95 at the date of separation to $299,316.66 at the date of valuation, approximately seven and one-half years later. Such an increase in value can reasonably be said to be substantial in light of the economic circumstances of the parties. The asset here was liquid and was at all times owned by the respondent. He did nothing post-separation to contribute to the increase in value of the shares, except to not dispose of them.

Finally, I see no difficulty with the ultimate result here. The judge’s reasons demonstrate that he took a careful and thoughtful look at the decision to purchase the shares in light of the circumstances of the marriage, financial and otherwise. What is important on the facts here is that the parties’ dispute was limited to the change in value of only one publicly traded security, not the investment portfolios they each held.

It cannot be said that the judge was being asked to ignore the statutory valuation date set by the FPA simply because the stock market generally rose between the time of separation and the completion of the trial. [ 88 ] One point of clarification is necessary regarding the relevance of the judge’s finding of unjust enrichment to his decision to impose an unequal division under section 14(2) of the FPA . A claimant for an unequal division does not have to frame his or her pleadings or submissions in light of the law of unjust enrichment as set out in Pettkus and Kerr .

That is not the test ( see Halliwell v Halliwell , 2017 ONCA 349 at para 66 ). Family judges applying the FPA should not engage in the joint-family-venture analysis discussed in Kerr ; that analysis is reserved for family property claims falling outside the FPA that are being determined by the common law. The relevant standard is set out in either section 14(1) (grossly unfair or unconscionable) or section 14(2) (clearly inequitable) of the FPA , depending on the nature of the asset.

In this case, the judge was faced with the unenviable task of sorting out principles of unjust enrichment, restitution, equity and family property legislation because of the manner in which the case was presented to him (a point I will return to later in these reasons). When he was asked to decide whether to order an unequal division of the asset, he properly limited his analysis to section 14(2) of the FPA . [ 89 ] The related submission of the respondent that an unequal division cannot be ordered in relation to only one asset, as opposed to all of the family property, is unpersuasive.

The respondent’s position is not supported by the wording of the FPA . The language of the FPA empowers the court to consider “any circumstances” it “deems relevant”, including “the nature of the assets” ( section 14(2) (g)) in making an order of unequal division. The situation here is that the parties simply could not reasonably settle the dispute as to the shares, despite efforts to do so, and their success in settling their remaining family property issues. The all-or-nothing argument of the respondent discourages settlement and would encourage needless litigation.

Such a perspective is not consistent with the principle of proportionality or the intent of the FPA . The Unjust Enrichment Claim—Monthly Income of the Shares [ 90 ] As previously mentioned, the judge resolved the petitioner’s claim of the alleged unjust enrichment resulting from the respondent keeping all of the monthly income of the shares after December 2010, by way of the law of unjust enrichment and a monetary award

in restitution based on Kerr, having found that the FPA did not apply to this asset. [91] As previously explained, the principle that emerges from Gallant and the later jurisprudence, and from the comprehensivenature of the FPA, is that family property disputes in Manitoba are to be determined by operation of the FPA except where the statute does notapply because the parties are not married or in a common-law relationship, as defined by that legislation, or in the exceptional case in which theFPA does not provide an adequate remedy.

To be clear, a claim in unjust enrichment is not to be used as an alternative to a claim under the FPA;rather, it is to be used when relief under the FPA is either not available or is not adequate. This will be a rare occurrence.

I agree with thefollowing statement in McNamee v McNamee, 2011 ONCA 533 (at para 66): [I]n the vast majority of cases, any unjust enrichment that arises as the result of a marriage will be fully addressed through the operation of theequalization provisions under the Family Law Act; the spouse who legally owns an asset will ordinarily share half its value with the otherspouse as a result of the equalization provisions under the Act.

See also Halliwell at para 71. [92] The judge explained that he took the unusual course of looking outside of the FPA in relation to the decision of the respondentto keep all of the monthly income of the shares after December 2010, because “the FPA, and s. 14(2) in particular, does not provide a remedy tothe [petitioner] with respect to this unjust enrichment” (at para 47). I agree. [93] In this case, the relevant date, according to

section 16 of the FPA, for the closing and valuation of the assets of the parties forthe purposes of the equalization process was the date of separation in 2007. The FPA is of no assistance to the petitioner in relation to themonthly income from the shares received by the respondent after December 2010 because those assets were acquired by him while he wasmarried to the petitioner but living separate and apart (see section 4(1)(

a) of the FPA). Given that the FPA did not provide any possibility ofrelief to the petitioner for this aspect of the family property dispute, I see no error in the judge turning to the law of unjust enrichment to decidethis aspect of her claim. [94] Resolution of unjust enrichment claims in the domestic context requires a family court to essentially undertake three broadareas of inquiry: (

i) Entitlement—remedial obligation established by proof of the three elements of an unjust enrichment, subject to any bar or defence tothe claim raised by the defendant; (ii) Choice of Remedy—monetary award or, if insufficient, appropriateness of imposing a constructive trust or other equitable remedy;and (iii) Quantification of the Monetary Award—method to be used is either fee-for-services approach or joint family venture model based ondetermining amount proportional to contribution.

See Wilson at para 11; Kerr at paras 31-125; and Martin at para 52. [95] In his appeal, the respondent takes issue only with the question of entitlement as to whether there was an unjust enrichment. Ifit was properly established at the trial, he does not challenge the judge’s choice of remedy or quantification of the monetary award. [96] A review of the judge’s reasons confirms that he turned his mind to each of the three elements of unjust enrichment. There areno bars or defences raised that would eliminate or reduce the respondent’s remedial obligations.

I see no errors in principle in the judge’sapproach or palpable and overriding errors in his conclusions that there was an unjust enrichment by the respondent retaining all of the monthlyincome from the shares after December 2010, given his finding that the decision to acquire the shares in 2004 was a joint family venture. [97] Not surprisingly, the judge focussed his attention on the “reasonable expectations of the parties” at the time the shares werepurchased in 2004 (at para 28).

It is noteworthy that the respondent is taking an opposite position as to his intention for purchasing the shares infamily court than he took previously with the tax authorities. In family court, the respondent is saying that he is the sole owner and thepetitioner is entitled to none of the monthly income of the shares. This contradicts his explanation of the arrangement for income tax purposes. He declared, before and after the separation, that one half of the income of the shares should be included in calculating the income of thepetitioner for income tax purposes.

The respondent’s clear declaration of intention to the tax authorities fatally undermines his position inresisting the claim of unjust enrichment as to the monthly income (see Dashevsky v Dashevsky, (MB KB), 1986 CarswellMan103 at paras 23-24 (QB); Schroeder v Schroeder, 2002 MBCA 1 at paras 19-21; and Fehr v Fehr, 2003 MBCA 68 at para 56).

As Freedman JAexplained in Fehr, “one cannot overlook what actually takes place, as it reflects what must be regarded as the true intention of the parties” (atpara 56; see also Kerr at para 94). [98] Finally, I see no merit in the remaining argument of the respondent that the petitioner has been unjustly enriched by receivingone half of the monthly income of the shares post-separation. The argument is largely rhetorical.

The judge correctly applied the law to thecircumstances regarding the purchase of the shares and made findings reasonably open to him as to the respondent’s legal obligations to thepetitioner in relation to the monthly income upon their purchase in 2004, that finding being that the shares and the income constituted a jointfamily venture. The fact that the petitioner kept half of the monthly income until December 2010 and the respondent was ordered by the judgeto pay half of the monthly income thereafter is of no moment.

The respondent’s legal obligation to the petitioner was the same over the entireperiod of time. [99] As previously noted, one of the elements of a successful claim of unjust enrichment is an absence of juristic reason for theenrichment. In Garland v Consumers’ Gas Co, 2004 SCC 25, the Supreme Court of Canada explained that “disposition[s] of law” and “othervalid common law, equitable or statutory obligations” (at para 44) are established categories of juristic reasons that will bar a claim for unjustenrichment.

See also Kerr at para 41. [100] In Hill Estate v Chevron Standard Ltd, (MB CA), 1992 CarswellMan 153 (CA), Huband JA explained theimportance of identifying an “explanation based upon law” that can justify the enrichment (at para 71): Decided cases are of little assistance in determining what is meant by “juristic reason.” It simply comes down to this: if there is an explanation

based upon law for the enrichment of one at the detriment of another, then the enrichment will not be considered unjust and no remedy, whether by constructive trust or otherwise, will be available. For example, there might be a contract between the parties under the terms of which an enrichment by one at the expense of the other is contemplated or justified. See also Gidney v Shank , 1995 CarswellMan 446 at paras 17-18 (CA) . [ 101 ] A court’s decision, order or judgment on a legal dispute that it is asked to decide and for which it has jurisdiction is a disposition of law.

The court’s decision—in this case, the findings of a joint family venture regarding the shares in question, and that the respondent would be unjustly enriched by retaining the resulting dividends without accounting for them to the petitioner—is a “legal explanation” for why the petitioner is enriched at the expense of the respondent. Accordingly, until lawfully set aside, that decision is a juristic reason that defeats any claim of unjust enrichment by the respondent.

To entertain an opposite view runs contrary to the doctrine of res judicata and would undermine the importance of having finality in litigation (see McInnes at p 962; Mitchell, Mitchell & Watterson at para 2-36; and Virgo at p 147).

Therefore, unless the judge’s decision as to the nature of the respondent’s obligations to the petitioner over the monthly income of the shares is reversed on appeal, which is not the case, his ruling fully answers in the negative the suggestion that the petitioner was unjustly enriched by receiving any of the monthly income of the shares post-separation. [ 102 ] The circular reasoning of the respondent can be addressed as follows.

One could ask the following: how could the petitioner be unjustly enriched at the expense of the respondent by receiving assets or compensation paid to her by the respondent because he would have been unjustly enriched by keeping them? Given there is a juristic reason in this matter from an established category, it is unnecessary to consider whether there is another reason to deny recovery by looking at the reasonable expectations of the parties and public policy ( see Garland at paras 45-46 ). [ 103 ] Accordingly, I would dismiss the appeal of the respondent.

The Petitioner’s Cross Appeal and Motion for Further Evidence The Judge’s Choice of Remedy for the Appreciation of the Asset [ 104 ] There are two difficulties with the petitioner’s argument that the judge erred in his choice of remedy and that she should have received the equitable remedy of a constructive trust in the shares to address the post-separation appreciation. [ 105 ] First, the judge was correct that section 14(2) of the FPA provided an adequate remedy of unequal division to address the petitioner’s complaint that valuing an asset at the date of separation, when it appreciates significantly by the time of trial, is unfair and amounts to an unjust enrichment of the title-holding spouse or common-law partner.

Also, contrary to her submission, I have not been convinced that the judge’s analysis was based on the idea that the FPA ousts all equitable remedies. That submission of the petitioner does not accurately reflect what the judge decided. His reasons were more nuanced. He stated (at para 46): In Gallant , the value of shares that were subject to division had decreased in value between the date of separation and the date of trial. In a majority judgment written by Justice Huband, the Court disapproved of the use of the remedy of constructive trust to remedy unjust enrichment in this circumstance.

The majority considered that, “. . . the existence of parallel remedies . . . creates uncertainty and promotes litigation”. As a result, the court adopted the remedy offered by s. 14(2) of The Marital Property Act as being appropriate to remedy unjust enrichment. The approach and the reasoning adopted by the Court of Appeal in Gallant where shares had decreased in value between the date of separation and the date of trial applies equally to the circumstance where shares have increased in value between those dates.

As a result, s. 14(2) of the FPA provides the appropriate remedy to correct unjust enrichment where a spouse or common law partner does not share post-separation appreciation in value of shares. [ 106 ] The ultimate result here is that section 14(2) of the FPA provided the parties with an equal share in the value of the shares to the date of valuation in 2015, some seven and one-half years after separation, thereby addressing the question of asset appreciation post-separation. That order has been upheld on appeal despite the respondent’s claim of error.

Because the FPA provided an adequate remedy to resolve the family property dispute, there is no need to look to a substitute body of law to resolve the dispute when the legislature has provided a comprehensive regime that provides greater certainty than judge-made law ( see Gallant ). [ 107 ] The other concern I have is that the nature of the asset here was not like the mine in Lac Minerals , where there was a limited market and an uncertain value.

The shares were publicly traded and there was no evidence presented that there were any unique property rights attached to the shares that required special recognition by the imposition of a constructive trust instead of monetary compensation. Additionally, at trial, the petitioner did not suggest that a monetary judgment was unlikely to be enforceable. [ 108 ] Ultimately, given the absence of any evidence that a monetary remedy was inadequate, there is simply no basis on the record here to impose a constructive trust ( see Peter at pp 988, 997, 999; Kerr at para 47 ; and Martin at paras 57-61 ).

A trial judge’s choice in deciding whether to impose an equitable remedy is a discretionary decision that must be afforded great deference on appeal ( see Soulos at para 54 ). I have not been persuaded that the judge made an error in principle, nor can I say that his decision as to his choice of remedy is clearly wrong. Claim of Unjust Enrichment Post-Valuation [ 109 ] The question of valuing the appreciation of the shares for unequal division was canvassed at an appearance on June 12, 2015.

As mentioned before, the parties had agreed that tax consequences needed to be taken into account in arriving at a value for the shares, but they could not agree on what those tax consequences were. The unequal division hearing was set for November 12, 2015. The judge noted that, because the matter had been in abeyance for a year, the figures related to the shares were out of date. He made the following comments as to the value of the shares for the purpose of an expert witness calculating the tax consequences: Now the issue just raised is the, the need to update the, the value of shares.

But taking into account that we also need to be directing our minds to obtaining evidence with respect to the tax ramifications, and it, it only seems reasonable that at some point we have to stop the clock. So that

when we’re getting expert opinion, we’re using the same value. And that seems reasonable.

Now taking into account the hearing is in November, taking into account we need to give an opportunity for expert evidence to, to be prepared, it seems to me that in addition to the May 28th, 2015 value, taking into account this is a proceeding taking place in June, that the parties also come to agreement with respect to the value of the shares as of June the 30th, 2015. [ 110 ] A careful review of the June 12, 2015 transcript confirms that neither party objected to the use of June 30, 2015, as the valuation date for the expert. [ 111 ] During the course of her submissions at the unequal division hearing on November 12, 2015, the petitioner told the judge that the price of the shares had risen to $24.52 each ($362,969.56).

She asked him to use that figure to make his decision. The respondent objected, pointing out that the Court had decided that the unequal division hearing would proceed on the basis of the June 30, 2015 valuation date. The petitioner replied by saying the June 30, 2015 date was “arbitrary” and “prejudices [her] position” because “the shares have gone up”.

The judge commented that, “[w]ithout setting a date of, as it turned out, June 30th, there’d be no way that the expert could have completed a report.” [ 112 ] The submission of the petitioner that the June 30, 2015 valuation date of the shares was an error is based entirely on valuation hindsight. Wisely, the judge resisted the temptation to speculate on the market in his analysis. The history of these proceedings shows the inherent danger of valuation hindsight. The price of the shares moved tens of thousands of dollars in different directions throughout the litigation.

Section 15(2) of the FPA required the family judge to use the fair market value of the shares for the purposes of equalization. He properly recognized that, given the dispute as to tax implications on the value of the shares and the outdated value of the shares, a figure had to be used to allow for the expert’s opinion. While there was no special significance to June 30, 2015, it appears from the record that it was a normal market day for the shares. There were no systemic or share-specific events that momentarily distorted the value of the shares. I don’t see an error in the approach taken by the judge.

Despite its simplicity, what is important is that it was fair to both sides as nobody had an advantage. [ 113 ] As Julien D Payne & Marilyn A Payne point out in Canadian Family Law , 6th ed (Toronto: Irwin Law, 2015), “[i]n determining fair market value as of the ‘valuation date’, . . . the court cannot invoke the benefit of hindsight” (at p 678). The judge properly rejected the petitioner’s submission to use the value of the shares on November 12, 2015.

Reliance on hindsight evidence fosters great uncertainty in the litigation process and its use is circumscribed to challenging the weight to be given to a valuation opinion as opposed to being the basis for a separate opinion as to value all together (see Ross v Ross , 2006 CarswellOnt 7786 at para 39 (CA) ; and Brown v Silvera , 2011 ABCA 109 at para 84 ).

I see no reversible error in the judge’s decision regarding the selection of a valuation date for the purposes of deciding the question of unequal division under section 14(2) of the FPA . [ 114 ] The related argument of the petitioner is that the respondent has been unjustly enriched by the judge’s use of June 30, 2015, because the shares appreciated thereafter.

That argument fails as there is a juristic reason to legally justify any benefit enjoyed by the respondent at the expense of the petitioner in relation to the June 30, 2015 valuation date for the shares. [ 115 ] As previously mentioned, according to Garland , a disposition of law, which includes a judge’s decision as to the parties’ statutory obligations and entitlements, is an established category of juristic reason that defeats a claim for unjust enrichment.

For similar reasons previously given, the judge’s order settling the petitioner’s entitlement to the value in the shares based on the FPA is a disposition of law that precludes her from making further claims against the respondent as to the appreciation in the value of the shares after separation. Unless the judge’s order is set aside on appeal, the matter is at an end. The petitioner cannot invoke valuation hindsight. There is a need for finality in litigation.

The operation of the FPA settles the entitlements and obligations of the parties as to the shares conclusively and for all time as of the valuation date o

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