British Columbia Family Law Blog

Mrs. Devick’s Remedy under the Act

[19]            The starting point for the issues raised in this appeal is the Act itself.  Under s. 58(2), if a corporation owns property which would be a family asset if owned by a spouse, the interest of the other spouse is normally in the shares in the company.  This principle applies where a petitioner spouse has made a direct or indirect contribution to such a company.  In Newson v. Newson (1993), 45 R.F.L. (3d) 115 (B.C.C.A.), Hinds J.A. said this at paras. 28-29:

Where a spouse has an interest in the shares in a company which carries on one or more businesses to which the other spouse has made a direct or indirect contribution, thus establishing a claim of a family asset, then, in the absence of exceptional circumstances, the value of the interest in the share in the company, rather than the value of the business of the company to which the other spouse has made a direct or indirect contribution, should be held to constitute a family asset…

If there is a power under the Family Relations Act to segregate assets out of a company into the hands of a shareholder, it is a power to be exercised sparingly. There may be adverse tax implications; the security available to suppliers and lenders not before the court may be put at risk; the value of the shares to a committed purchaser will be impaired; other unknown obligees may be prejudiced. It would not be just or prudent to segregate out corporate assets without evidence as to the potentially adverse consequences to the company and without hearing from unrepresented third parties who may be prejudiced.  [Emphasis added.]

I observe the concern for prejudice to third party suppliers and lenders is just as relevant here, especially in light of the ranch’s tenuous financial situation. 

[20]            Similarly, in Kurcz, supra, MacDonald J.A. held it was an error for a trial judge to have declared assets of a husband’s dental practice to be family assets. The asset, he held, was the shares in the company.

[21]            Mrs. Devick’s entitlement under s. 58(2) of the Act is to the shares of the Company, subject to compensation for unfairness arising from such an order.  This leads to Mrs. Devick’s argument that this Court should order compensation under s. 66(2)(c) of the Act to remedy the unfairness she must face because her shares in the Company lack marketable value, and her husband continues to live on the ranch and benefit from its substantial assets.

[22]            Mrs. Devick contends her former husband has sufficient assets to pay a compensation order.  The evidence discloses he had income of approximately $60,000 for the years 1998-2001.  He is paying monthly support of $1,500.  He was also required to pay a lump sum payment to the wife of $20,000 and to convey to her his interest in the house in Kamloops and his wife's RRSPs.  The trial judge said at para. 43:

...This form of payment of a lump sum recognizes the current financial situation of the husband, yet provides the wife with assets that she can convert to cash as she focuses on her education and re-training.

[23]            Section 66(2)(c) provides:

Without limiting subsection (1), the court may do one or more of the following in an order under this section:

* * *

(c)        order a spouse to pay compensation to the other spouse if property has been disposed of, or for the purpose of adjusting the division....

[24]            Stewart J. declined to make a compensation order, an exercise of his discretion as a trial judge.  However, in my view it would result in an injustice to Mrs. Devick for there to be no such order, and this Court therefore should intervene.

[25]            I agree with Lambert J.A. that a compensation order under s. 66(2)(c) of the Act is appropriate.  Mr. Devick, as Lambert J.A. observes, continues to benefit from the Company’s assets and to enjoy the ranch lifestyle, while Mrs. Devick does not. Mrs. Devick’s shares have no real value to her at the present time.  This results in a substantial unfairness to Mrs. Devick.

[26]            However, the order must also take into account the limits of Mr. Devick’s ability to pay.  As Southin J.A. observed in Blackett v. Blackett (1989), 22 R.F.L. (3d) 337 (B.C.C.A.), “[a] compensation order ought not to force the payor to borrow to the point of crippling himself with debt” (at 345).  Mr. Devick has limited income.  He is also paying significant maintenance to Mrs. Devick, an obligation which will continue for approximately four more years.  It would likely be difficult for him to raise significant funds on the Company’s assets.

[27]            A just and equitable resolution would be for Mr. Devick to pay Mrs. Devick $125,000 compensation in exchange for Mrs. Devick’s surrender of 10 per cent of her total 25 per cent equitable interest in the Company’s shares.  Mr. Devick will have two years from the date of judgment to make the compensation payment. However, unlike Lambert J.A., I would not order Mr. Devick to pay interest on the amount he owes to Mrs. Devick.  I base this determination on the valuations considered by Lambert J.A.

[28]            Thus, Mrs. Devick will have a money judgment against Mr. Devick for part of the share interest in the Company awarded to her by the trial judge, and she will keep 15 per cent of the shares from which she may in the future realize some benefit.

Mrs. Devick’s Unjust Enrichment Claim Against the Company

[29]            Mrs. Devick also submits a remedy should be available to her for the unjust enrichment of the Company as it would be inconsistent with the development of the equitable doctrines of unjust enrichment and constructive trust developed by the Supreme Court of Canada in family law to refuse to compensate her for her work on the ranch.  She submits the Company was enriched both because of her domestic work and because of the farm work she did for the ranch.  She submits the deprivation arises from her decision to forego her career to work on the ranch with her husband.  She also submits she did not receive adequate compensation for the work she did on the ranch.  Finally, she argues there was no juristic reason for the enrichment because she was under no moral or legal obligation to provide services to the Company.  In the appellant’s submission, her reasonable expectation was to have an equal interest in the Company and to continue to live on the ranch.

[30]            The respondent Company argues not only that Stewart J. correctly found there was no unjust enrichment of the Company because there was a juristic reason for any enrichment of the Company because of the mutual exchange of benefits between the parties, but also there was no enrichment of the Company because the ranch did not increase in value due to the appellant’s efforts but rather because land in the area had appreciated in value.  The Company also submits there was no deprivation of the wife because she drew a salary and received benefits like a home, food, and vehicles while living on the ranch.  Additionally, the Company addresses the issue of remedy;  in the event this Court finds an unjust enrichment, it submits the appellant received adequate compensation for any work she did for the ranch or alternatively that any award in her favour should be monetary compensation in proportion to the extent of her nominal contribution.

[31]            It is clear that in addition to the division of family assets provided for in the Act, unjust enrichment—and constructive trust to remedy it—may “be available in circumstances where… there was no other way to redress the unjust enrichment and make a fair division of family assets”:  Anderson v. Anderson (1991), 3 B.C.A.C. 197 at 200.  Under s. 69(2) of the Act:

The rights under this Part are in addition to and not in substitution for rights under equity or any other law.

[32]            Canadian courts have adopted the equitable concept of unjust enrichment to remedy the injustice which occurs where one person makes a substantial contribution to the property of another person without compensation:  Peter, supra, at para. 2. The courts have in particular adapted it to family law cases to address problems arising during relationship breakdown.

[33]            As is obvious from the summary of the arguments of the parties summarized above, to establish an unjust enrichment, the claimant must prove an enrichment, a corresponding deprivation, and no juristic reason for the enrichment:  Peter, supra, at para. 3.

[34]            The complicating factor not addressed by the Supreme Court of Canada in the leading cases referred to by the parties—in particular Peter, supra, and Pettkus v. Becker, [1980] 2 S.C.R. 834—is that the ranch lands are held by the Company. It is common ground the doctrine of unjust enrichment is available outside the family law context.  However, the appropriate balance to be struck in a business relationship is not fairness, as in family law, but rather “honest dealing”: Atlas Cabinets and Furniture Ltd. v. National Trust Co. (1990), 45 B.C.L.R. (2d) 99 (C.A.).  The relationship between Mrs. Devick and the Company in this case is not purely commercial because the ranch in essence is a family venture, she would likely have had no relationship with it at all but for her role in the Devick family, and she likely would not have performed the work she did on the ranch for the compensation she did but for her family connections.  However, the standard to be applied is to some degree different, and, in my view, the interests of third parties who have relationships with the Company come into play.