Eric, Lola, and division of property

This week, the Supreme Court of Canada will revisit the issue of whether common-law spouses are presumptively entitled to an equal division of family property:

They’re known as “de facto spouses.” Partners in a paperless marriage. Or, in this case, plain old Eric and Lola.

But there’s almost nothing ordinary about the tale of a 51-year-old Quebec billionaire businessman and a former Brazilian model, whose messy legal battle could change life for millions of Canadian couples.

Their case, which reaches the Supreme Court of Canada [this] Thursday, is expected to decide whether common-law spouses have the same rights as married couples to support and sharing of property after a break-up.

While the case is likely to have its greatest impact in Quebec, legal experts predict that if Lola succeeds in her landmark challenge, eight other provinces and territories that deny property rights to unmarried spouses, including Ontario [and Nova Scotia – DJP], will be forced to rethink their legislation.

As a starting point, common-law spouses should have the right to both alimony and an equal share in property, argue lawyers for the Women’s Legal Education and Action Fund (LEAF), an intervenor in the case.


Looming over the case is a 2002 decision by the Supreme Court involving Susan Walsh, a Nova Scotia woman who sought a share of her late common-law husband’s assets. In that case, the court’s 8-1 majority upheld a section of Nova Scotia’s Matrimonial Property Act, which gives only married people a share in a partner’s property.

The court said excluding common-law couples was a way of respecting their decision to avoid marriage because of the legal obligations that go along with it.

LEAF argues it is time to revisit the Walsh decision, saying the court in 2002 did not have the benefit of social science research that shows when people move in together, they aren’t motivated by legal considerations.

In fact, North American research over the past decade has shown that most couples who live together are under the mistaken impression they already have the same rights as married couples.

Via @John_Magyar.

Don’t cosign that loan

Econoblogger Megan McArdle explains why cosigning on a partner’s or relative’s loan is almost always a very, very bad idea:

I mentioned in my last post that cosigning loans is risky.  How risky?  According to the FTC, depending on the type of the loan, as many as three out of four primary borrowers default on their obligations, leaving the cosigner to pay.  This is, after all, why they need a cosigner: they’re not good credit risks, either because they have too much debt already, or because they don’t pay their bills on time.
If you think that they really need the money, and that you’re not just helping someone dig themselves even deeper into financial irresponsibility, then my advice is to just give them the money.
Give them the money?  I can’t possibly afford to do that!
Well, my friend, given the default rates of primary borrowers, that is what you’re doing when you cosign–with the additional cost of origination fees, interest payments, late fees, collection fees, a black mark on your credit report, and probably, a destroyed relationship.
When the primary borrower defaults, you’re on the hook, not just for the loan, but for any late charges or collection fees that may have accrued.  If it’s a car, the repo man will sell it for cheap at auction, and then sue you for the difference–there are no “non-recourse” auto loans.  Meanwhile, your credit will be trashed.  Contracts don’t always include notice requirements for the secondary borrower, so you may not even find out about late payments until it’s in collections.
Even if they pay, the full amount of the outstanding loan will be counted against your debt-to-income ratios for the purposes of both calculating your credit score, and obtaining loans for yourself, since after all, you are responsible for paying it off.  That may hamper your ability to get a mortgage or other financing.
If you can’t afford to pay off the loan, then–no matter how much you love them, how great your need, or how much you want to believe they will pay–you must “just say no”.
Read the whole thing.  After the breakdown of a common-law relationship, debts accrued by either party are not necessarily divisible – but it seems like every such case I’ve worked on involves one party co-signing a loan for his or her ex, and now finding out the hard way that they’re on the hook for it.

“Unjust enrichment” and common-law relationships

In Nova Scotia, divorcing individuals are automatically entitled to an equal division of matrimonial property (and debts), with a few recognized exceptions such as business assets and gifts.

For those emerging from a common-law relationship, however, it’s not that simple.  If you seek a share of your former partner’s property, you must establish your entitlement to same in court.

One way to do so it to establish that your former partner was unjustly enriched at your expense – that is, he or she accumulated money and property while you sacrificed by, say, leaving your employment to stay home and care for the children.  A recent Supreme Court of Canada decision clarifies the law regarding this doctrine:

The Supreme Court delivered a unanimous decision regarding the Vanasse and Seguin case and a second case from British Columbia. The court ruled that a person deserves fair compensation for making a sacrifice, such as giving up a career, in support of a partner, when he or she is engaged in a “joint venture” as a common-law couple.

“In my view, where both parties have worked together for the common good, with each making extensive, but different, contributions to the welfare of the other and, as a result, have accumulated assets, the money remedy for unjust enrichment should reflect that reality,” wrote Justice Thomas Cromwell.

“The money remedy in those circumstances should not be based on a minute totting up of the give and take of daily domestic life, but rather should treat the claimant as a co-venture, not as the hired help.”


Hunter Phillips, representing Seguin, said that he was disappointed by the ruling, which he believes has loosened conditions for calculating a monetary reward for unmarried couples in a case of “unjust enrichment.”

This concept of “unjust enrichment” is considered to be defined by a case when one spouse is allowed to accumulate wealth because of an arrangement or sacrifice made by the other partner. But Phillips added that the decision does not guarantee automatic joint property rights for all common-law couples.

“There’s a common misconception amongst the public that a common-law marriage means that after some period of cohabitation, there’s automatic property rights,” said Phillips. “That is wrong and that (Supreme Court) decision doesn’t change that at all.”

A concise summary of the case is posted at the excellent Toronto Family Lawyer Blog.  Full decision, in PDF format, here.