Should courts in BC divide gains on property differently if it was an active or passive gain?
Are you aware our new BC Family Law Act has specific sections allowing for BC unequal property division? Such unequal property division can occur if an equal division of family property would be significantly unfair. How does this scheme work and on what basis?
The recent divorce involving billionaire US oil tycoon Harold Hamm went largely in his favour when he said his role as CEO of Continental Resources was minor. He received substantial unequal property division in his favour of the 18 billion dollar net worth made by him during his marriage to his wife. He won because the court found his billion dollar gains were made passively due to market conditions that saw oil prices skyrocket and these same gains had little to do with his role as CEO or his wife’s efforts during the marriage. His wife received only 6 percent or roughly $1 billion of the gain that was far less than experts expected.
In some US equitable distribution states, active appreciation that results from marital efforts is marital property while passive appreciation remains separate property. Courts look on appreciation as a result of marital efforts as active, and appreciation as result of market forces or third-party efforts as passive.
Unequal Division Of Family Property In BC Based On Market Gains Not Efforts
One can easily see how Vancouver’s booming real estate market could result in massive gains totally unconnected to the couple’s efforts. BC has no specific differentiation for active or passive gains on property but we wonder if one spouse might succeed in getting a significantly greater than half share of the gain if the house they brought into a short marriage shot up in value. BC unequal property division cases call for a careful analysis and novel arguments by experienced lawyers. Our new Family Law Act is still developing in this area and cutting edge strategies may result in significant savings to a separating spouse.
We went back and found a BC Supreme Court decision of Mr. Justice Truscott in Williams v Killey that unequally divided a passive gain on a piece of land brought into a short 3 year long common law relationship by the husband. Firstly, under the BC Family Law Act the starting value of the land is already excluded and only the gain is normally up for division as family property. In this case the court decided that both the starting value was not shareable and the gain of $107,173 made during the period of cohabitation would be unequally divided 85/15 in the husband’s favour.
Here is what the court said:
[67] Section 95 is the re-apportion section of the FLA. Here under s. (a), the duration of the common law relationship between the parties is to be considered, which was approximately three and one-half years. Under s. (i), the only other factor applicable would appear to be one that results in significant unfairness.
[68] The respondent’s cases I consider to be a lot more helpful than the claimant’s cases and they put the contribution of a spouse in a short term relationship as being valued at 10-15% of property.
[69] The claimant here did contribute significantly to the household expenses and to the preservation and maintenance of the townhome. I consider it would be significantly unfair to her for her efforts to be denied any part of the increase in the townhome which was due only to market forces while she resided there.
[70] I award the claimant 15% of the $107,173 increase in net value of the townhome during their relationship time.
If you seek unequal division of family property it pays to have a lawyer who can make the passive versus active gain argument. Call us today toll free to meet with us at any of our 4 offices located in downtown Vancouver, South Surrey, Kelowna and Fort St John BC. 1-877-602-9900.
