With only months left until the new Family Law Act comes into effect we look at Gifts, Reapportionment and Unequal Division of Family Assets After Separation based on post separation efforts by one spouse and fairness. Call our top rated family property division lawyers now at any of our 4 offices across BC in vancouver, Surrey, Kelowna and Fort St John and Dawson Creek, BC to find out your rights under the old and new laws before it is too late.
The British Columbia Supreme Court, in C.W.Y.J. v. C.Y. (2012 BCSC 750), released another case awarding reapportionment of family assets in a family law proceeding. As discussed in previous blogs, the court appears to becoming more liberal with the criteria under which they will award reapportionment. The use of reapportionment has been discussed in: Whitfield v. Whitfield 2012 BCSC 965, R.E.Q. v. G.J.K. 2012 BCCA 146, Davies v. Davies 2012 BCCA 219, McIntire v. McIntyre 2012 BCCA 214 and Dyer v. Dyer 2012 BSCS 429. Under the Family Relations Act in British Columbia, equal property division between spouses in marriage dissolution is presumed; however, there are situation where such a division would be unfair, and, as a result, the property is reapportioned in favour of one spouse. In the present case, the court awarded a reapportionment of 70% of a valuable asset to one spouse; even though, the asset was purchased with monies gifted to the couple by the other spouse’s parents just two years prior.
The parties were married in Vancouver on July 5, 1998. Between 2003 and 2004, the claimant’s (Mr. Y) parents transferred a total of $1.385 million in cash to the parties. The respondent (Mrs. Y) and Mr.Y understood that the claimant’s parents expected them to use the money to acquire a home in Vancouver, to make investments for their future, to provide for the children’s education and to start a business. The court found that due to Mrs. Y’s efforts the parties acquired assets and made investments most notably buying and selling real estate and investing in mutual funds. Additionally, Mrs. Y “led the parties to their investment in a daycare business.” The parties invested $300,000 in the day care all from family funds.
The court found that Mr. Y’s strength lay in looking after the children on a daily basis, but that he did participate in the development of the daycare business. In September 2006, the parties separated pursuant to s. 57 of the Family Relations Act. When the parties separated, the daycare had been operational for 8 months. At the time of trial, the court valued Mrs. Y’s share of the daycare business at $418,500. The court looked at at section 65 (1) of the Family Relations Act on reapportionment.
65(1) If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to
(a) the duration of the marriage,
(b) the duration of the period during which the spouses have lived separate and apart,
(c) the date when property was acquired or disposed of,
(d) the extent to which property was acquired by one spouse through inheritance or gift,
(e) the needs of each spouse to become or remain economically independent and self sufficient, or
(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse
Mrs. Y relied exclusively on s. 65(1)(f) stating that the increased value of the asset was due to her hard work and effort increasing the value from zero to $900,000 in five years arguing that Mr. Y has not contributed to the “acquisition, preservation, maintenance, improvement or use”. Unfortunately for Mr. Y, he appeared on his own behalf without counsel; the court found that Mr. Y “offered no real answer to the respondent’s argument on this issue.”
The court ordered reapportionment of the daycare asset awarding 70% to Mrs. Y. This case appears to be quite remarkable and may have resulted due to Mr. Y’s lack of legal representation. In awarding reapportionment, the court seems to ignore that the $300,000 used to start the daycare came from a gift given to the couple by Mr. Y’s parents. Without Mr. Y, there would be no daycare. The court agreed with Mrs. Y’s argument that Mr. Y had not contributed to the “acquisition, preservation, maintenance, improvement or use”.
Firstly, Mr. Y clearly contributed to the “acquisition” of the asset. Secondly, the court stated that the parents gave the money to the couple so they could buy a business which they did, and that Mr. Y did participate in the development of the daycare business.Thirdly, Mr. Y’s role in taking care of the children is not mentioned in the reapportionment discussion. Lastly, it is the nature of a business to be worth zero before it begins to operate. The couple invested $300,000 with another partner to renovate a run-down building and open a daycare. Mr Y was involved until the parties separated. At the time of separation the business was worth $0, but the business had potential value hence the investment. It is difficult to see how equal division of the daycare would be tantamount to “unfair” under S. 65(1).
Recently, the court has been using reapportionment when convenient to avoid equal distribution. However, in the new Family law Act coming into effect soon reapportionment will be more difficult to obtain. Under the new Family Law Act, a Judge still has the ability to make an order apportioning an unequal share of Family Property between the spouses if it would be “significantly” unfair to equally divide the property. Under the old Act, equal division was just a presumption that could be rebutted taking into consideration the above listed factors; under the new Act, equal division is assumed unless it would be “significantly” unfair creating a much higher legal threshold. On the case at bar, it is unlikely that a judge would find that these facts are “significantly unfair.”
If you have any questions regarding division of assets or the new Family Law Act coming into effect March 2013 please call Maclean Law toll free at 1 877 602 9900 to book an appointment. The assets involved in reapportionment cases may have significant value such as real estate, stocks, companies and professional practices, and, as a result, it is important to have a lawyer who knows how to properly assess whether a claim for more or less than half of the value of these assets is prudent. It is crucial that you get the right legal advice to protect your assets and provide for your family. We have four offices across the province to service you located in downtown Vancouver, Surrey, Kelowna, and Fort St. John.
