From common-law spouse claims to fiduciary breaches — understanding when Ontario courts impose constructive trusts and how to quantify the remedy.
Constructive trust is one of equity's most powerful and flexible remedies. Unlike an express trust (created by agreement) or a resulting trust (implied by contribution), a constructive trust is imposed by law to prevent unjust enrichment — giving the plaintiff a proprietary interest in specific assets rather than merely a personal claim against the defendant.
This guide explains the three-part unjust enrichment test after Kerr v Baranow, when courts will grant a proprietary remedy instead of a monetary award, how to trace misappropriated assets, and the key applications in Ontario family law and commercial disputes.
The Supreme Court of Canada consolidated the unjust enrichment doctrine in Kerr v Baranow [2011] SCC 10. All three elements must be established.
The defendant received a benefit — money, property, services, or assumption of debt
Note: Broadly interpreted; includes free labour, mortgage payments, home improvements
The plaintiff suffered a loss or provided something of value without compensation
Note: Loss corresponds to the enrichment; not necessarily equal in amount
No legal basis justifies the defendant retaining the enrichment at the plaintiff's expense
Note: Established reasons: contract, gift, testamentary disposition, statutory requirement
The third element — absence of juristic reason — involves a two-step analysis after Garland v Consumers' Gas Co [2004] SCC 25:
Establishing unjust enrichment does not automatically entitle the plaintiff to a constructive trust. The court must determine whether the facts justify a proprietary remedy (constructive trust) or whether a personal remedy (monetary award) is adequate.
| Remedy | Type | When Granted | Effect |
|---|---|---|---|
| Constructive Trust | Proprietary | Defendant insolvent; special value; direct link to specific property | Plaintiff holds an equitable interest in identified property; priority over creditors |
| Monetary Award | Personal | Default remedy; no special reason for proprietary remedy | Judgment debt; no priority in insolvency |
| Quantum Meruit | Personal | Services rendered without compensation | Market value of services; assessed at time of trial |
| Joint Family Venture | Proprietary/Personal | Common-law spouses who pooled efforts over time (Kerr v Baranow) | Proportionate share of wealth accumulated through joint efforts |
Tracing is the process of following misappropriated assets through a series of transactions to identify what the plaintiff can claim. It is a prerequisite to a proprietary remedy — the plaintiff must trace their original asset into the specific property or fund against which they seek a constructive trust.
Available where property remains in its original form or is exchanged for identifiable substitute. Cannot trace through mixed funds.
Available where there is a fiduciary relationship or misappropriation. Can trace through mixed funds using the lowest intermediate balance rule.
Where trust money is mixed with the defendant's own money, equity allows tracing into the mixed fund. The plaintiff can claim a proportionate share.
A bona fide purchaser for value without notice of the equity takes free of the constructive trust. This defence defeats the tracing claim.
The plaintiff can only trace up to the lowest balance the fund reached after the mixing — if the defendant dissipated all funds at some point, the tracing fails.
Some courts permit a constructive trust over the defendant's general assets where specific tracing is impossible but assets were demonstrably increased by the wrongdoing.
| Context | Application | Leading Case |
|---|---|---|
| Common-Law Spouses | Partner claims interest in family home or assets on breakdown; unjust enrichment for unpaid domestic contributions | Kerr v Baranow [2011] SCC 10 |
| Fiduciary Breach | Trustee or director diverts assets to themselves; beneficiary traces proceeds into acquired property | Soulos v Korkontzilas [1997] 2 SCR 217 |
| Business Relationships | Business partner misappropriates partnership assets; investor claims trust over specific investment proceeds | Lac Minerals Ltd v International Corona Resources [1989] 2 SCR 574 |
| Real Property | Plaintiff contributes to purchase price or mortgage; legal title in defendant's name alone | Peter v Beblow [1993] 1 SCR 980 |
| Solicitor-Client Relationships | Solicitor receives secret commission or acts in conflict; client traces proceeds | Hodgkinson v Simms [1994] 3 SCR 377 |
| Matrimonial Home | Married spouse claims constructive trust where Family Law Act equalization is inadequate or excluded | Various Ontario Superior Court decisions |
In Kerr v Baranow, the Supreme Court introduced the joint family venture doctrine for long-term domestic partnerships. Where former common-law spouses have been engaged in a joint family venture — pooling their efforts, resources, and lives toward shared goals — a constructive trust (or monetary award) based on proportionate contribution may be granted.
Under Kerr v Baranow [2011] SCC 10, the three elements are: (1) an enrichment of the defendant, (2) a corresponding deprivation of the plaintiff, and (3) the absence of a juristic reason for the enrichment. The juristic reason analysis considers established categories (contract, gift, disposition of law) and a residual category based on reasonable expectations of the parties and public policy.
A proprietary remedy (constructive trust) is granted when a monetary award would be inadequate because: (1) the defendant is insolvent, (2) the specific property has special value to the plaintiff, or (3) the plaintiff made a sufficiently direct contribution to the acquisition or preservation of specific property. A mere causal link to a fund or asset is insufficient — the connection must be direct.
An institutional constructive trust arises automatically by operation of law upon the occurrence of certain events (e.g., a fiduciary breach), regardless of judicial recognition. A remedial constructive trust is a discretionary remedy imposed by a court to reverse unjust enrichment. Canada (unlike England) recognizes both but primarily uses the remedial constructive trust as a flexible equitable remedy.
Yes. Unjust enrichment and constructive trust claims are available in Ontario family law matters, particularly for unmarried (common-law) spouses. Married spouses are generally governed by the equalization of net family property regime under the Family Law Act, but may still bring unjust enrichment claims for specific assets. Common-law spouses outside the Family Law Act may rely on constructive trust to claim an interest in a partner's property.
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