Vancouver Unequal Division Of Excluded Property is a hot button Vancouver separation issue that our BC Court of Appeal has just dealt with for the first time. When an excluded property is placed in joint names, the exclusion from sharing just its starting value can often be lost and the full value of this asset may be shared equally. Since our new BC family property legislation did not exist until 2013 people before 2013 routinely put property – that would now be called “excluded” property in joint names. To their understandable consternation– jointly registered excluded property now turns out to be to their detriment on separation. But is “once a gift, always a gift”?
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In today’s blog, the Maclean Law father-son team of Lorne MacLean, QC and Fraser MacLean explain a blockbuster new BC Court of Appeal decision on the legal principles related to Vancouver Unequal Division Of Excluded Property.
The BC Court of Appeal has just rejected the notion that once it is discerned that a spouse had the intention to gift formerly‑excluded property to the other spouse, then that should end or at least seriously limit any consideration of that gifting spouse’s contributions when dividing family property that now includes the formerly‑excluded property. In Venables v Venables the BC Court of Appeal unequally divided formerly excluded property gifted to a spouse on the basis it would be significantly unfair not to do so and in the end, divided benefits from the marriage roughly equally between the spouses.
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In Venables v Venables the respondent owned a home before his spousal relationship with the appellant and inherited money during the relationship. He put the home and much of the money in the parties’ joint names during the relationship, without either party giving any thought to the consequences of marriage breakdown. The trial judge found that the formerly‑excluded property was gifted to the other spouse and thereby became family property under the Family Law Act. The judge then found that an equal division of family property would be significantly unfair. The judge reapportioned the family property, in effect returning to the respondent the starting pre‑marriage equity in the home. The wife appealed and lost. The BC Appeal Court held the Family Law Act does not preclude taking into account the origins of the property as formerly excluded when determining whether an equal division of family property would be significantly unfair.
Here is what the BC Court of Appeal ruled on the issue of Vancouver Unequal Division Of Excluded Property:
[108] When new legislation was proposed by way of the White Paper, the CBABC Working Group Response to White Paper highlighted what the CBABC Working Group saw as a problem apparent in the draft legislation, namely, the lack of clarity on what to do with the “intermingling of family and excluded property”. The CBABC Working Group did not submit that any one result would in all cases be fair, that is, that the spouse who initially owned the excluded property should either receive complete credit for it or no credit for it. It recommended that the tool of reapportionment be available in such cases to obtain a fair result (CBABC Working Group Response to White Paper, at 47–48).
[109] What then, can be made of the fact that the subsequently enacted FLA did not expressly state what would happen if excluded property became family property, because one spouse gifted the property to the other spouse?
[110] I do not read into the silence of the FLA on the issue that the legislators intended that, once a spouse gifts excluded property to the other spouse, there can be no reapportionment of what is now family property to take into account the origins of the property. In determining the answer to this question, nothing in the legislation dictates that the contributions of a spouse to formerly‑excluded property must be ignored in determining whether it would be “significantly unfair” to equally divide the family property.
[111] In other words, I do not accept the appellant’s argument that the sentiment “once a gift, always a gift” was intended to be reflected by the legislation. There is no language in the FLA that compels that result.
[112] In not expressly dealing with the question of what happens when excluded property becomes family property, but by providing for reapportionment if equal division of family property would be significantly unfair, the FLA left it open to the court to consider, as a factor justifying reapportionment, the origins of family property as formerly‑excluded property contributed by one spouse. The degree of attention paid to this factor will, as in all property division matters, depend on all the circumstances.
[122] I also see no error in the judge next considering, despite the gift, whether it would be significantly unfair to divide the family property equally, taking into account the respondent’s contribution of excluded property into the family property category.
[128] The judge concluded that it would be significantly unfair to allow the appellant to financially benefit significantly more from the relationship than the respondent, in light of the respondent’s disproportionate contributions of the formerly‑excluded property. Despite this, the judge did not “back out” all of the respondent’s contributions of excluded property from the division of family property. He reapportioned the division of family property so that each party would be “roughly equally better off as compared to when they entered the relationship” from a financial perspective (at para. 135).
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