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Avoid These Excluded Property Mistakes

Lorne MacLean, KC and his team of Vancouver excluded family property lawyers at MacLean Law help you avoid these excluded property mistakes. Mistakes involving family property, excluded property and gains made on excluded property can cost people millions if they are not careful. A recent BC Court of Appeal case is a cautionary tale for separating spouses claiming they have property that should not be divided.

Our highly rated and experienced Vancouver excluded family property lawyers warn you to:

  • plead your excluded property claim;
  • retain documents to prove your excluded property claim;
  • don’t transfer excluded property into another spouse’s name without documents defining your intention;
  • be credible on the stand in proving your excluded property claim.

Contact us on these issues if you have questions.

You are likely wondering: what is excluded property anyways and is all or part of it not shared?

Excluded property includes, property brought into by a spouse at the beginning of a relationship, plus any inheritances, personal gifts, and certain court awards, settlements and insurance payments received during the relationship. Excluded property also includes debts acquired before a relationship begins. The starting value of excluded property is not divided at the end of the relationship but any gain is. Post separation acquired property that isn’t bought with family property is also not shared. Post separation efforts by a spouse on family property can also receive special treatment. The concept is joint effort, regardless of who did more valuable work or contributed more during the marriage, is the focus and monies from before marriage or gifts during marriage to one spouse alone are not part of the joint effort so should not be divided.

Vancouver Avoid These Excluded Property Mistakes 604 602 9000

Avoid These Excluded Property Mistakes

In Brazinski v. Brazinski, 2023 BCCA 359 a husband who:

  1. represented himself;
  2. failed to plead an exclusion of pre-relationship property and ICBC damage monies; and
  3. failed to have proper evidence to meet the onus of proving such an exclusion was denied any exclusion of property he said he had before marriage or received as damages in an ICBC injury settlement.

was denied all relief and had to share money that could well have been his property alone if he had followed the correct procedures.

This case points out why hiring savvy lawyers like Lorne MacLean KC will help you avoid these excluded property mistakes.

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[35] …..Pleadings serve to define the issues for trial and guide the court in determining the admissibility and relevance of evidence. A party making a claim under Part 5 of the FLA (including claims for excluded property, s. 85) is required to make that claim in their pleadings and file Part 3 of Form F8 which should contain sufficient particulars of the financial claims being advanced: Supreme Court Family Rules, Rule 5-1(10)–(14). The failure of a party to properly advance an excluded property claim in their pleadings would normally mean that the court will not entertain it at trial. Of course, a judge has the discretion to grant an amendment at trial to permit such a claim to be advanced, taking the interests of justice and fairness to the parties into account.

[37]         Part 5 of the FLA sets out the rules governing property division. Spouses are entitled to an undivided half interest in all family property regardless of their respective use or contribution, subject to an agreement or order and except as set out in Parts 5 and 6 of the FLA. The definition in s. 84(1)(a) of family property is extremely broad and establishes a “communal pot” from which only excluded property is removed: V.J.F. v. S.K.W., 2016 BCCA 186 at para. 8.

[38]         Section 85 of the FLA defines property that is excluded from family property and provides in part:

(1) The following is excluded from family property:

(a) property acquired by a spouse before the relationship between the spouses began;

(c) a settlement or an award of damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for

(ii) lost income of a spouse;

(g) property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).

(2) A spouse claiming that property is excluded property is responsible for demonstrating that the property is excluded property.

[39]         The test for establishing a claim to excluded property is set out in Shih v. Shih, 2017 BCCA 37. Justice Kirkpatrick, for the Court, rejected the argument that the provisions of the FLA demand “precision” or “mathematical certainty” in the standard of proof to establish a claim to excluded property. Noting that parties who were in a lengthy relationship may have difficulty providing proof of exclusion where documents may have been destroyed or memories dimmed, she stated:

[42]      In my opinion, the proper test for establishing a claim to excluded property under s. 85 of the FLA is the same as in any civil case — proof on a balance of probabilities. The requirement of certainty and precision in my view improperly tips the standard closer to the criminal standard of proof beyond a reasonable doubt.

[43]      I do not quarrel with the proposition that, in order for a party to establish excluded property, he or she must do so with clear and cogent evidence. If documentary evidence is not available, the party bearing the onus of proof will need to testify as to their recollection of the transactions in dispute. That evidence will be scrutinized for credibility.

[44]      However, in balancing the evidence as a whole, the trial judge must be permitted to draw reasonable inferences from evidence that is less than certain or precise in order to do justice between the parties.

[40]         Like the lengthy relationship of the current parties, where excluded property has been sold and other properties have been purchased and placed in the name of one spouse or both spouses, determining whether property that was once excluded remains so is difficult. This is because s. 85(1)(g) provides that “property derived from property or the disposition of property referred to in any of paragraphs (a) to (f)” is also excluded property. As explained in V.J.F., whether excluded property once owned by one spouse remains excluded will involve examination of the parties’ intentions at the time that property was transferred to determine if a gift was intended. These intentions must also be examined to consider if the presumptions of advancement and resulting trust apply in the particular circumstances.

[41]         I note that the FLA was amended by the Family Law Amendment Act, S.B.C. 2023, c. 12, which received Royal Assent on May 11, 2023, subsequent to the trial decision in this matter. The amendments provide that the presumptions of advancement and resulting trust must not be applied in questions respecting ownership of property as between spouses (s. 81.1), and that, if property is excluded, “the exclusion applies despite any transfer of legal or beneficial ownership of the property from a spouse to the other spouse” (s. 85(3)). Pursuant to the transitional provision, those amendments do not apply to a pre-existing proceeding (s. 24) and, accordingly, do not apply here.

[42]         Whether a judge erred in failing to find that an excluded property claim was established requires this Court to review findings of credibility and fact. The standard of review is deferential; findings of fact should not be set aside unless it is shown that the judge made a palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33 at paras. 10, 28. The application of a legal standard to a set of facts is a question of mixed fact and law, subject to a palpable and overriding error, unless it can be shown that the judge made an error of law that is readily extricable: at para. 36.

[43]         The standard of review for findings of credibility is also deferential. Deficiencies in a trial judge’s credibility analysis will rarely merit intervention on appeal: Nole v. Seymour, 2023 BCCA 329 at para. 19. In R. v. Gagnon, 2006 SCC 17, the Court explained why a high degree of deference is afforded to credibility findings:

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Vancouver excluded family property lawyers
Fraser MacLean, high net worth family and excluded property division lawyer

The takeaway for clients wishing to Avoid These Excluded Property Mistakes is to hire a family lawyer that focuses on the area and has a track record of winning the big family property exclusion cases.

MacLean Law is one of the largest Western Canadian family Law Firms and was a finalist for Canadian Family Law Firm of The Year this year. Our firm of Vancouver excluded family property lawyers handle high net worth financial cases and international family law matters involving valuation and division of assets spread across the world as well as child parenting and guardianship issues.