FAMILY PROPERTY DIVISION

On March 18, 2013, the law in British Columbia will change with the new Family Law Act and the Courts will be required to divide all property, that is not excluded property, “equally” between the spouses (or common law partners) unless it is “significantly unfair” to do so. This is a change from the old legislation, which only required that it be “unfair.” What does this change really mean? It may be difficult to know until the Court begins to make decisions in this regard, however, decisions in other provinces may provide some hints.

One of the first questions our clients frequently ask us is: “How do you divide marital property between spouses after a divorce or breakdown of a common law relationship in British Columbia?” Division of property following a divorce, regardless of whether those spouses are actually married or are living in a common law relationship, is determined according to legislation enacted by the provincial government. Currently, in BC, this legislation is called the Family Relations Act. However, on March 18, 2013, a new law will come into force in British Columbia called the Family Law Act. One of the many changes that will take place relates to the division of property.

In every province in Canada, there is the basic starting point that assumes that property acquired or created during a marriage or common law relationship should be divided equally. This presumption of a 50/50 split, however, has many exceptions, and how these exceptions are defined varies from province to province. In addition to the exceptions, each province also allows for an “unequal division” of property on the basis of what is “fair” or “unfair” after taking several other factors into consideration.

(It is also important to note that the word “property,” in this context, can include every kind of property or asset of the spouses or common law partners including: real estate, stocks, bonds, RSP’s, cash, investment accounts, businesses and business assets, inheritances, trusts, pensions, boats, cars, airplanes, livestock, jewelry, furniture, and pretty much anything else of value.)

Under the “old” BC Family Relations Act, section 65 allowed the Courts to divide property un-equally between the parties as follows:

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,

(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,

the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.

Under section 95 of the “new” Family Law Act, which comes into effect on March 18, 2013, the law will be changed to:

95. Unequal division by order

(1) The Supreme Court may order an unequal division of family property or family debt, or both, if it would be significantly unfair to

(a) equally divide family property or family debt, or both, or

(b) divide benefits as required under Part 6 [Pension Division].

(2) For the purposes of subsection (1), the Supreme Court may consider one or more of the following:

(a) the duration of the relationship between the spouses;

(b) the terms of any agreement between the spouses, other than an agreement described in section 93 (1) [setting aside agreements respecting property division];

(d) whether family debt was incurred in the normal course of the relationship between the spouses;

(e) if the amount of family debt exceeds the value of family property, the ability of each spouse to pay a share of the family debt;

(f) whether a spouse, after the date of separation, caused a significant decrease or increase in the value of family property or family debt beyond market trends;

(g) the fact that a spouse, other than a spouse acting in good faith,

(i) substantially reduced the value of family property, or

(ii) disposed of, transferred or converted property that is or would have been family property, or exchanged property that is or would have been family property into another form, causing the other spouse’s interest in the property or family property to be defeated or adversely affected;

(h) a tax liability that may be incurred by a spouse as a result of a transfer or sale of property or as a result of an order;

(i) any other factor, other than the consideration referred to in subsection (3), that may lead to significant unfairness.

(3) The Supreme Court may consider also the extent to which the financial means and earning capacity of a spouse have been affected by the responsibilities and other circumstances of the relationship between the spouses if, on making a determination respecting spousal support, the objectives of spousal support under section 161 have not been met.

The obvious question is what is the difference between “unfair” and “significantly unfair”? The current assumption is that this change in the legislation is meant to signal to the Courts that an unequal division of property should only occur in exceptional circumstances, and that it is a much higher threshold to cross. Nevertheless, exceptional circumstances are often what lead parties to Court in the first place, so we are still left with this question of what exactly does the term “significantly unfair” mean?

In Ontario, pursuant to §5(6) of the Family Law Act, the Court is required to divide family property equally unless doing so would be “unconscionable”. This term is also used in Nova Scotia and New Brunswick. Black’s Law Dictionary defines an “unconscionable bargain” as: “A contract which no man in his senses, not under delusion, would make, on the one hand, and which no fair and honest man would accept on the other.” Another possible definition is: “A bargain or contract which is clearly unfair, exorbitant, harsh, contrary to common sense or good conscience.”

The recent Ontario Court of Appeal decision in Symmons v. Symmons 2012 ONCA 747 noted that “unconscionable” within the meaning of s. 5(6) of the Family Law Act is a threshold that is exceptionally high and must “shock the conscience of the court.” Using such strong language, this most recent decision of the high Court of Ontario may signal that the threshold is virtually impossible to cross, except in the most extreme circumstances. But is that what is meant in the BC change of words from “unfair” to “significantly unfair”?

The Family Property Act of Saskatchewan requires an equal division of all family property unless doing so would be “unfair and inequitable.” However, the Oxford dictionary defines “unfair” as: ‘not based on or behaving according to the principles of equality and justice,’ and the same dictionary defines “inequitable” as: ‘unfair; or, unjust”, thereby rendering the a plain English reading of the Saskatchewan legislation as “unfair and unfair.” Clearly this is not much help.

In Alberta, section 7(3) of the Matrimonial Property Act states that “the Court shall, after taking the matters in section 8 into consideration, distribute the following in a manner that it considers just and equitable” [Emphasis added]. Section 8 refers to various contributions either spouse may have made to the property and/or its acquisition, conservation, improvement, as well as a number of other factors including the duration of the marriage, when the property was acquired (i.e. before or after the relationship), and whether it was a gift or inheritance. However, section 8 also includes the catch-all magic words “…any fact or circumstance that is relevant,” thus putting significant discretion back in the hands of the Courts.

We addressed some of these vagaries in the Alberta system one of our previous Blogs relating to the decision of Horne v. Horne, 334 D.L.R. (4th) 468. In Horne, the thorny issue for debate related to the wife’s contingent interest in her father’s estate. The lower Court trial judge had stated that:

the husband made no contribution to the acquisition, conservation or improvement of the contingent interest;
its existence had no link to the marriage partnership;
the parties did not “bank” on the wife receiving anything under the contingent interest, or seem to have considered it in structuring their financial lives;
the parties did not discuss the contingent interest; and,
that neither party had control as to how the trust was managed, invested or disbursed.

As a result of these factors the lower Court trial judge concluded that it would not be fair and equitable for the husband to be given any portion of the wife’s contingent interest in her father’s estate. The Alberta Court of Appeal confirmed this conclusion of the lower Court and then additionally noted that, notwithstanding its affirmation of the system of analysis used by the lower Court trial judge, since the contingent interest was more in the nature of an inheritance, (which are expressly exempt from distribution under the Alberta legislation), it was never actually brought into the matrimonial regime in the first place.

All of this leads us back to the question: what does it mean, here in British Columbia under the new Family Law Act which comes into force on March 18 2013, that “The Supreme Court may order an unequal division of family property or family debt, or both, if it would be significantly unfair [not to do so].” Will the Courts interpret significantly unfair to mean the almost impossibly high hurdle in Ontario, where unequal division only occurs when not to do so would “shock the conscious of the Court,” or will the BC Courts interpret this according to the more systematic process in Alberta, as established and affirmed in the decision of Horne v. Horne, (noted above)?

We will continue to update our readers as decisions are made by the BC Courts in the New Year, following the March 18 2013 enactment of the new Family Law Act.

It is frustrating that the law in is not uniform throughout Canada. This is especially true since each province applies varying legal standards that result in different criteria for the equal or unequal division of property and assets. As a result, we strongly recommend that you seek legal advice when faced with a division of property resulting from the breakdown of a marriage or common law relationship. The highly skilled and experience lawyers at MacLean Law are here to help in Calgary, Vancouver, Fort St John, Kelowna, Surrey, or anywhere else in British Columbia and Alberta. Please feel free to contact us now for an initial consultation or call us toll free at 1 877 602 9900.