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Standing - Family. Karatzoglou v. Commisso
In Karatzoglou v. Commisso (Ont CA, 2023) the Court of Appeal considered an appeal of a dismissal of a partial summary judgment motion in an NFP divorce matter. These quotes address the motion judge's finding that the wife lacked standing to allege that the husband's mother held real property in trust for him for NFP purposes:[9] The motion judge concluded that there was no evidence of a trust of any sort (express, resulting, or constructive) with respect to either property. In any event, he also concluded that Rosetta lacked standing to pursue the trust claims against Lisa. He dismissed Rosetta’s claims against Lisa.
[10] The motion judge adopted the reasoning in Morris v. Nicolaidis, 2021 ONSC 2957, at para. 38, where McGee J. states:A claim that a third person holds property in trust for a non-titled spouse, or that a non-titled spouse has a beneficial interest in property, or a monetary claim arising from the acquisition, maintenance or use of that property can only arise from the personal, direct deprivation of the non-titled spouse. An equalization claim is, at best, an indirect legal interest. It is therefore insufficient to confer standing to a person to make a trust claim on behalf of a non-titled spouse or former spouse. ....
[14] I conclude that the appeal must fail for two reasons. Each reason independently is fatal to the appeal. ... Second, a person does not have standing to advance a trust claim on behalf of a former spouse for equalization purposes. Consequently, summary judgment, as authorized by the Family Law Rules, O. Reg. 114/99, r. 16, was appropriate.
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(2) Rosetta does not have standing
[22] The motion judge concluded that Rosetta lacks standing to advance a trust claim on behalf of Philip. He commented that, although he was not bound by Morris, he found it persuasive and relied on it. He considered Rosetta's submission that Morris should be restricted to trust claims based on resulting or constructive trust principles and wrote, at para. 34, “I disagree. Regardless of whether the scope of Morris should be so restricted, this is simply not an express trust case.”
[23] I agree with the motion judge that there was no evidence of an express trust. Furthermore, there is no reason to restrict the Morris principles as suggested by the appellant.
[24] In my view, Morris accurately sets out the law. A person does not have standing to advance a trust claim on behalf of a former spouse for equalization purposes. In so concluding, I adopt the reasoning of McGee J. in Morris, at paras. 32-33 and 36-40:At the heart of this motion is an interesting question. Can a person advance a trust claim on behalf of a former spouse in order to increase that spouse’s net family property and consequently, benefit the person’s claim for, or defense to an equalization payment?
A claim for a constructive trust is a claim in equity that is privately held. It is not a public interest claim. The common law principle relating to private interest standing states that “one cannot sue upon an interest that one does not have.” (Watson, McKay & McGowan, Ontario Civil Procedure, at §11 Standing to Sue).
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Can an equalization claim create a direct personal legal interest that confers standing to make a trust claim on behalf of a spouse or a former spouse?
I find that it cannot. An equalization payment cannot change the titled or beneficial ownership of property between spouses. The equalization scheme in Ontario is not based upon a division of property, but rather, it recognizes a spouse’s non-financial contributions to a marriage by equalizing the increase in value in each party's net family property between the date of marriage and the date of separation, subject to variation per section 5(6) of the Family Law Act.
A claim that a third person holds property in trust for a non-titled spouse, or that a non-titled spouse has a beneficial interest in property, or a monetary claim arising from the acquisition, maintenance or use of that property can only arise from the personal, direct deprivation of the non-titled spouse. An equalization claim is, at best, an indirect legal interest. It is therefore insufficient to confer standing to a person to make a trust claim on behalf of a non-titled spouse or former spouse.
Even trust claims between married persons are exceptional because "[i]n the vast majority of cases any unjust enrichment that arises as a result of the marriage will be fully addressed through the operation of the equalization provisions of the Family Law Act," see Martin v. Sansome, [2014 ONCA 14, 118 O.R. (3d) 522, at para. 64.] Writing for a unanimous court, Justice Hoy envisions in Martin, supra, that it will be a rare case in which monetary damages for unjust enrichment cannot be adequately addressed by an equalization payment; and in those cases, a variation of share per section 5(6) of the Family Law Act, should be invoked before consideration of a trust claim.
Although not in evidence here, there may be a situation in which a meritorious trust claim is not advanced by a non-titled spouse. In such a case, the other spouse cannot step into the non-titled spouse’s shoes and advance the claim himself because he has no direct personal legal interest in the trust claim; but he could seek to vary the equalization between he and the non-titled spouse if the resulting payment is found to be unconscionable per section 5(6) of the Family Law Act. [25] In summary, a non-titled spouse cannot assert a trust claim against a third party on behalf of a spouse for equalization purposes.
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