Short marriages and unequal family property division disputes after separation are becoming more frequently. Short marriages, where one party brought significant property into a “marriage like” or marriage relationship, present unique challenges for family law clients and their lawyers. The case law on unequal division in this cases is somewhat disparate. The recent Supreme Court of Canada dismissal of a leave application from the BC Court of Appeal with costs against a husband trying to get more than half the gain on property he brought into a short marriage clarifies matters in BC. MacLean Law has one of Canada’s largest family law teams including one of Canada’s largest Mandarin and Cantonese speaking family law departments.
At MacLean Law we focus on high net worth income and substantial family property disputes and we know the strategies for seeking or defending against short marriages and unequal division of property disputes.
Key Takeaway For Short Marriages and Unequal family Property Division 1 877 602 9900
In today’s blog our founder, Lorne MacLean, QC explains the rules so you have a key understanding of what your options in short marriages and unequal family property division cases are.
The key takeaway for short marriages and unequal family property division disputes is that market gains unconnected to the sole efforts by one party after separation will not likely result in unequal division of the gain after the starting exclusion of property value brought by one spouse to the relationship. The concept is that both parties benefit from the windfall gain if property goes up through market conditions and it is not significantly unfair for this to happen.
How Do Short Marriages and Unequal Family Property Division Cases Work? 1 877 602 9900
It is really important for family clients and their lawyers to focus on what the legal test for unequal division of property is in short marriages. In prior legislation, unequal division could be obtained if it was unfair to divide family assets equally. Under the Family Law Act (that became effective in March 2013) the government tried to reduce the claims for unequal division and the costs and court time involved with these disputes by creating a new regime. This new scheme excluded the sharing of the value of property that parties brought to their relationship and then equally divided only the gain unless it would be significantly unfair to do so. However, in Vancouver’s and Canada’s fast rising real estate market windfalls could still result to the spouse who did not bring family property to the relationship as well as to the spouse that did. Should the windfall be shared equally?
In a recent BC Appeal Court decision of Banh v. Chrysler, 2022 BCCA 74 the husband and his lawyers were unsuccessful in supporting a trial judge’s unequal division of property that had a modest gain of $750,000 above the value of assets he brought into the relationship as at the date of trial. The parties had a nearly 4 year long relationship but the parties were married for only 2 years. To accomplish an unequal division a Judge can use an earlier date for valuation ( property was worth less the earlier the date under current conditions) or divide the gain unequally. So what happened?
Sole Contribution Can Mean Unequal Division But Windfall gains Likely Not 1 877 602 9900
The key factor on whether unequal division of the husband’s pre relationship assets was whether the gain was related to rising real estate values as opposed to significant efforts to increase the value by one spouse after separation. In a nutshell, our highest court held, after deciding the husband had been compensated for his efforts managing real estate rental properties that the gain should be split equally:
[64] Can the two‑year marriage of the parties justify the judge’s decision to disentitle Ms. Chrysler to any of the post‑separation growth in the value of Victoria Properties A and B? In my view, the answer is no. Two years is not so compellingly short that the duration of the relationship alone justifies an unequal division of family property.
Where Did The Husband’s Argument Fail On Short Marriages and Unequal Family Property Division? 1 877 602 9900
At trial the husband argued and the Judge seemingly accepted the following factors:
- the short duration of the marriage;
- the fact that Ms. Chrysler was not the owner of any of Mr. Banh’s rental properties;
- Mr. Banh’s essentially exclusive efforts to develop, manage and maintain the rental properties;
- the considerable growth in the value of the rental properties that occurred primarily after the parties separated;
- financial advances made by Mr. Banh to Ms. Chrysler prior to and during their marriage; and
- Ms. Chrysler’s “unilateral” setting of a trial date three and a half years after the parties separated.
[16] The judge referenced several cases identified by counsel in support of the following propositions:
- The court “should be cautious [before] departing from the default of equal division in an attempt to achieve perfect fairness”: citing L.G. v. R.G., 2013 BCSC 983;
- “[W]hile the court has discretion to choose a different date, there must be compelling evidence to depart from the mandated valuation date in the FLA”: citing Rudyak v. Bekturova, 2018 BCCA 414; and
- There must also be compelling evidence “to disentitle one property owner from the benefit of an increased value brought on by market forces, but for no other direct effort of the other party”: citing Lodhi v. Khan, 2019 BCSC 398.
[75] There are a number of factors in this case which lead me to conclude that it would be significantly unfair, having considered s. 95(2) of the FLA, to divide property at the date of trial. This was, at most, a two‑year marriage with a 21‑month period of cohabitation. From the time of separation to the unilaterally-chosen trial date, a date chosen long in the calendar with no consultation with Mr. Banh, there was a further gap of almost three and a half years. All added up, a division at trial would give the respondent the benefit of five and a half years of growth on assets from a two‑year marriage, five and a half years of benefit from assets that she did not manage or control or in any way contribute to based on a two‑year marriage.
The Court Of Appeal Rejected This Analysis As Justifying Short Marriages and Unequal Family Property Division 1 877 602 9900
The Court of Appeal noted however the high threshold of significant unfairness before unequal division of gains on excluded property can occur.
Post-Separation Growth in Value[45] On any fair reading of the judge’s reasons for judgment, he considered it significantly unfair for Ms. Chrysler to passively share in the tremendous growth in the equity of Victoria Properties A and B that occurred after the parties separated. Given that Mr. Banh alone had developed, managed and maintained the properties, the judge appears to have concluded that Ms. Chrysler was undeserving of a windfall. In my respectful view, the judge erred in reaching this conclusion for a number of reasons.
[46] First, the fact that Mr. Banh developed the rental properties is, in all the circumstances of the case, immaterial. Again, his prior ownership of the properties was conclusively dealt with under s. 85 of the FLA. As excluded properties, the equity in the rental properties at the date the parties married was not subject to division.
[47] Second, on the record, the increase in the value of Victoria Properties A and B was entirely due to market forces. On the authority of Jaszczewska, the post‑separation growth in the value of these properties plays a highly constrained role in the significant unfairness analysis.
[48] Third, it is unclear to me why the growth in the value of the properties after the parties separated should be viewed as a windfall to only one spouse. If an increase in the value of Victoria Properties A and B due to market forces amounts to a windfall, it is no less a windfall to Mr. Banh than to Ms. Chrysler.
[49] Finally, the judge’s award would result in readily identifiable unfairness to Ms. Chrysler. An award of 100% of the benefit of post‑separation growth to Mr. Banh means that Ms. Chrysler would be unable to access, use or earn any return whatsoever on her share of that family property for three and a half years. To illustrate the point, if Ms. Chrysler wished to invest her $72,500 award in the real estate market, her purchasing power would have declined very significantly from the date of separation to the date of trial due to market forces. On the facts of this case, that would be a very substantial loss.
[25] As noted by the judge, the property division regime under the FLA creates a presumption that family property, including the growth in value of excluded property, will be divided equally at the date of trial. That presumption may only be displaced if an equal division would be “significantly unfair”: see discussion in Venables at paras. 85–90.
[26] If an equal division would be significantly unfair, the legislation provides two remedies. The court may vary the date for division of family property under s. 87 or order an unequal division of family property under s. 95: Blair v. Johnson, 2015 BCSC 761 at para. 69; Slavenova v. Ranguelov, 2015 BCSC 79 at para. 53. A departure from the presumptive date for valuing family property “is effectively a reapportionment or an unequal division of family property”: Namdarpour v. Vahman, 2019 BCCA 153 at para. 59.
[27] The term “significant unfairness” creates a “high threshold”: V.J.F. v. S.K.W., 2016 BCCA 186 at para. 81, leave to appeal to SCC ref’d, 37091 (13 October 2016). In Singh, Garson J.A. provided the following helpful summary of various descriptions of the term:
[134] In summary, it is clear that the Legislature intended the general rule of equal division to prevail unless persuasive reasons can be shown for a different result: Jaszczewskaat para. 41. Reapportionment will require something objectively unjust, unreasonable, or unfair in some important or substantial sense. This is in contrast to the previous legislationwhere courts had discretion under s. 65 to reapportion property or debt where it would be simply “unfair” not to do so. The threshold for “significant unfairness” is high. There must be a real sense of injustice that would permeate the result if the court did not deviate from the presumptive equal division.
[28] When it comes to the court exercising its discretion to depart from valuing family property at the date of trial, this Court has held that it “should only be done where there is compelling evidence” to justify doing so: Rudyak at para. 35.
Contact Us Early On To Increase Your Chances Of A Positive Outcome 1 877 602 9900
If you have questions concerning Short Marriages and Unequal Family Property Division, it is critical you call us early on in your case. Lorne MacLean, QC and Fraser MacLean would be pleased to assist you in Vancouver. Call Keith Bracken in Victoria, Jesse Emmond in Kelowna and Robert McQueen in our Surrey office.
