Coming with “unclean hands” and trying to access equitable relief in family court

Equitable relief was created to address situations that the traditional common law could not. A resulting trust is a good example of equity. As mentioned in a previous post, a resulting trust can occur in several situations. If a party transfers property to another without any consideration or payment, traditional law would say that the recipient is the owner of that property simply by looking at title to the property. However, equity provides an opportunity for the transferor to argue that the property is really held in “trust” for the transferor such that the transferor is still the true owner, as a result of the intention that preceded the transfer. Constructive trust in another form of relief that can be created, for example, where one party renovates a jointly owned property alone, such that they should be compensated for that extra work. But should the transferor be entitled to such discretionary relief in the face of “bad behaviour”?

The Court of Appeal had this to say in Sorrento Developments Ltd. v Caledon (Town), [2005] OJ No 349 (Ont CA): It is a matter of discretion for the trial judge whether to refuse to grant equitable relief on the basis that a litigant has not come to court with clean hands. The Ontario Superior Court continued in Calver v Calver, 2019 ONSC 5418, [a]ny party seeking equitable relief in an action must be open to an examination of their own conduct and ethics throughout the relevant time period and transactions.

Several family cases have demonstrated the effects of “unclean hands”. For instance, in Piacenti v Thomson, 2018 ONSC 4108, the father was trying to get an unequal division of the home because of his extra additions. The court denied this relief:

Both parties are registered on title as joint tenants of the matrimonial home. Mr. Piacenti seeks an order for unequal division of the property with a view to purchasing Ms. Thomson's interest as determined by the court. He advances constructive trust and unjust enrichment arguments in support of his position. Mr. Piacenti points to the following: the use of his savings to fund the down payment on the home; his payment for a new water treatment system; the brevity of the marriage; and the brevity of the parties' cohabitation in the matrimonial home.

Constructive trust and unjust enrichment principles do not assist Mr. Piacenti. — Mr. Piacenti seeks to rely on equitable principles, but he does not come to this court with clean hands. In this regard, I emphasize his abusive behaviour toward Ms. Thomson, his self-help behaviour, and his delay in bringing the matter to trial.

As mentioned, equity-cases are very fact-specific and discretionary. Only a review of the entire case law could demonstrate which behaviours the court routinely finds to “taint” the hands of the party seeking equitable relief. The “clean hands” doctrine was rejected in Holtby v Draper, 2017 ONCA 932, for instance, where the court found that the fact the transferor transferred property to the transferee to defeat creditors did not actually constitute a bar to resulting trust. In other words, his hands were still "clean":

Ms. Draper also asserts that Mr. Holtby's motive in transferring his assets to Knapton, which was to defeat or delay creditors, is a bar to his resulting trust claim. She argues that Mr. Holtby is not entitled to the intervention of equity when he comes to the court without "clean hands", that is, when he entered into the transaction for an "illegal" purpose.

This argument was rejected at trial. The trial judge stated that he was not aware of any authority for the proposition that an illegal or improper purpose for a gratuitous transfer amounts to an automatic bar to the finding of a resulting trust. He referred to case law, including Nussbaum v. Nussbaum (2004), 9 R.F.L. (6th) 455 (Ont. S.C.J.), as suggesting otherwise.

I agree with Ms. Draper's submission that the transfer was designed to defeat specific creditors. However, I disagree that, read as a whole, the trial judge's reasons failed to recognize this fact and its implications for the issue of intent.

Obvious takeaways? Equitable relief is not accessible if a party comes with unclean hands. Only the court, in their sole discretion, and analyzing the highly contextual factors of each case, can decide if behaviour amounts to a party having “unclean hands” for the purposes of rejecting equity.