The Family Law Act, section 85 states:
85 (1) The following is excluded from family property:
(a) property acquired by a spouse before the relationship between the spouses began;
(b) inheritances to a spouse;
(b.1) gifts to a spouse from a third party;
(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
(i) loss to both spouses, or
(ii) lost income of a spouse;
(d) money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for
(i) loss to both spouses, or
(ii) lost income of a spouse;
(e) property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;
(f) a spouse’s beneficial interest in property held in a discretionary trust
(i) to which the spouse did not contribute, and
(ii) that is settled by a person other than the 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.
The Family Law Act, section 96 states:
Division of excluded property
96 The Supreme Court must not order a division of excluded property unless
(a) family property or family debt located outside British Columbia cannot practically be divided, or
(b) it would be significantly unfair not to divide excluded property on consideration of
- the duration of the relationship between the spouses, and
- a spouse’s direct contribution to the preservation, maintenance, improvement, operation or management of excluded property.
There have now been 5 decisions of the BC Supreme Court since the new Family Law Act was proclaimed and one decision of the BC Court of Appeal.
BC Supreme Court Decisions
Two of the decisions F.(V.J.) V. W.(S.K.), 2015 BCSC 593 (now upheld on appeal) and Wells v. Campbell, 2015 BCSC 3 say that the exclusion is lost if property is placed in joint names because of the presumption of advancement. The presumption applies unless it is rebutted by showing an intention not to gift the property.
Three of decisions these decisions say that the exclusion is not lost:
- Pearson v. Graham, 2016 BCSC 671
- G.(P.) v. G.(D.), 2015 BCSC 1454
- Remmem v. Remmem, 2014 BCSC 1552
These decisions are summarized by Mr. Justice Jenkins in Pearson v. Graham at paragraphs 58 to 65:
[58] Mr. Tretiak for Mr. Pearson refers the court to the decision of Remmem v. Remmem, 2014 BCSC 1552 (CanLII), as authority for the proposition that the purchase of property by joint owners with the proceeds of the sale of excluded property does not reduce the amount of the exclusion for the spouse that brought the property into the relationship. Stating such at para. 48, Mr. Justice Butler further explains:
[48] . . . . . The property provisions of the FLA are intended to be a complete code so that there is no need to examine the intention of the parties at the time of a transfer of excluded property to joint tenancy. To come to the opposite conclusion would bring uncertainty and a level of inequality into a property division structure that was intended to treat married and unmarried spouses equally and to provide for a greater level of certainty.
[59] Mr. Justice Butler then referred to a paper by Scott L. Booth, “Selected Tracing Issues Under the Family Law Act” (Paper delivered at Continuing Legal Education Seminar, The Family Law Act: Everything You Always Wanted to Know, Vancouver, 29 July 2013), [unpublished], which referred to the Alberta decision of Barnett v. Barnett, 2007 ABCA 357 (CanLII), where excluded property was traced into jointly held property as a result of the application of the presumption of advancement. After discussing Barnett, Butler J. continues:
[50] The FLA contains no provisions dealing with the presumption of advancement between spouses which would suggest that the presumption still applied. However, as noted by Mr. Booth, the presumption would raise a number of problems when applied under the scheme of the FLA including:
a) The presumption only applies to married spouses and so gratuitous transfers between married and unmarried spouses would be treated differently [This point is less convincing given the seeming acceptance of the application of the doctrine to marriage-like relationships, though I would note such acceptance seems to be limited to BC: see McNamara v. Rolston, 2013 BCSC 2115 (CanLII)at para. 13; B. v. S.C., 2015 BCSC 2136(CanLII)at para. 87].
b) The presumption is at odds with and would thus limit the utility of the tracing provisions. Property . . . . . placed in joint names is clearly derived from excluded property and so it is easy to trace the full amount of the exclusion. Unlike the presumption of advancement, tracing does not depend on the parties’ intentions. The application of the presumption and an examination of whether property was gifted is at odds with the simply concept of tracing.
c) When applied, the presumption of advancement would significantly reduce the value of the exclusion to the donor spouse.
d) Further, if half of the excluded property is a gift to the donee spouse, shouldn’t he or she be able to claim that his or her half of the property is excluded?
[60] Mr. Justice Butler then identified two consequences arising from these issues; the most relevant is that certainty of the property division scheme of the FLA would be defeated; exclusion would require considering not only how the property was brought into the relationship, but on subsequent dealings with it and the parties’ intentions in those transactions. This exercise would be difficult and would require significant court time: see Remmem at para. 51.
[61] Mr. Boyd for Ms. Graham cited in reply the decision of Wells v. Campbell, 2015 BCSC 3 (CanLII), where Mr. Justice Masuhara, after considering the reasons for judgment in Remmem, came to a different conclusion and found that the FLA did not displace or extinguish the presumption of advancement or the effect of an inter vivos gift which resulted in a joint tenancy. In Wells, the parties were elderly and had enjoyed a relationship of 22 years before separation. Mr. Wells had owned property on Hornby Island prior to the commencement of his relationship with Ms. Campbell in 1991 or 1992. The parties married in July 1992. Following health issues suffered by Mr. Wells, in 2008 he transferred the Hornby Island property into joint tenancy with Ms. Campbell. The parties separated in January 2013. Mr. Justice Masuhara noted that Mr. Wells had failed to plead or argue a contrary intention to his transfer of the Hornby Property into joint tenancy than to effect a gift: Wells at para. 31. As a result, Mr. Justice Masuhara continues:
[32] I find that Mr. Wells at the time he transferred the Hornby Property into joint tenancy he did so as a gift to Ms. Campbell. At that time, the relationship was intact and there was no evidence to suggest that it was failing. The transfer of an interest in the Hornby Property was a perfected inter vivos gift and the gift cannot be revoked: see for example the comment of Madam Justice Newbury in Bergen v. Bergen, 2013 BCCA 492 (CanLII) at para. 41. Ms. Campbell as a result obtained legal and equitable interest in the property. I do not read the Act as altering the law of inter vivos gifts. Accordingly, I cannot see how Ms. Campbell can be denied the entirety of her interest in the property, subject to the division of family property under s. 95(1).
[33] In my view the presumption of advancement operates in this case. . . .
[62] After reference to Butler J.’s discussion of the effect of the FLA on the presumption, Masuhara J. determines the decision in Remmem was limited to the facts as the court concluded the tracing provisions, as applied in the case, were so applied without considering or applying the presumption of advancement: Wells at para. 37. Conceding certain problems are raised by its continuance, Masuhara J. considered that the presumption was neither explicitly extinguished in the act, nor was intention eliminated from the considerations, given that the definition of “property” in the Act includes a beneficial interest “unless a contrary intention appears”; from these points, he concluded the FLA did not displace the presumption of advancement or the effect of an inter vivos gift resulting in joint tenancy: Wells at paras. 38-42. Excluded property thus relates to property which was held by a spouse prior to the relationship and in which an interest in title was not transferred to the other during the relationship: Wells at para. 43. Given his finding that the transfer of interest to Ms. Campbell was perfected, she obtained an interest in the otherwise excluded property.
[63] The decisions in Remmem and Wells, are, in my opinion, irreconcilable. However, I tend to agree with the findings of Mr. Justice Butler in Remmenand the referenced article by Scott L. Booth to the effect that the provisions of the FLA dealing with property would limit the effect of the tracing provisions included in the FLA. I also note commentary in an explanation from the Ministry of Justice entitled “Family Law Transition Guide” issued by the Continuing Legal Education Society of British Columbia, 2014 update, in which it is stated at p. 3-126:
Section 85(1)(g) is a tracing provision that is similar in construction to s. 84(1)(b). The intent appears to be that excluded property will remain excluded property despite its use or conversion from one form to another.
With regard to this quote, the position that the presumption is of no application in the context of an action under the FLA accords better with the overall scheme and objectives of the act: see also P.G. v. D.G., 2015 BCSC 1454 (CanLII) per Fenlon J. (as she then was) at paras. 41-89.
[64] I thus conclude that the proceeds of sale from the Centre St. property was “property derived from property or the disposition of property referred to in any of paragraphs (a) to (d)” which includes, as per s. 85(1)(a), property acquired by a spouse before the relationship between the parties began.
[65] Were the doctrine of advancement to apply, I also find the explanation of Mr. Pearson as to the agreement reached between him and Ms. Graham at the time the property was purchased to be a credible and realistic explanation for having registered title to the Inn in their joint names. As of 2008, the parties had been living together in a marriage-like relationship for three years, during which time Ms. Graham had not been gainfully employed and had few assets save for a small inheritance from her mother’s estate. On moving to Terrace, she contributed a relatively minor share of the effort that went into operating and maintaining the Inn. It would have been an extremely unwise decision of Mr. Pearson to gift one-half of his only major asset to his then partner. That it was also unwise for Mr. Pearson to make this arrangement without documentation to that effect makes it no less believable. Mr. Pearson’s intention was thus to retain the value of the excluded property invested in the Inn. The presumption of Mr. Pearson having made a gift to Ms. Graham would then be rebutted by the evidence of the oral agreement.
BC Court of Appeal Decision
The Court of Appeal in V.J.F. v. S.K.W. a.k.a. S.K.F., 2016 BCCA 186 recently upheld the trial judge’s decision in F.(V.J.) V. W.(S.K.), 2015 BCSC 593.
Madam Justice Newbury in her reasons for judgement in V.J.F. v. S.K.W. a.k.a. S.K.F. states a follows:
[74] With all due respect to the contrary view, I conclude that the new FLA scheme does not constitute a “complete code” that “descends as between the spouses” and eliminates common law and equitable principles relating to property. Rather, the scheme builds on those principles, preserving concepts such as gifts and trusts, and evidentiary presumptions such as the presumption of advancement between spouses. Thus I find that the gift of (slightly less than) $2 million made by Mr. F. to Ms. W. became her property and was “property owned by at least one spouse” under s. 84, as opposed to “property derived from the disposition of [excluded] property” within the meaning of s. 85. At the time the definitions are applied – the date of separation – the fact Mr. F. had originally received the $2 million as a gift was no longer relevant. He lost the exclusion when he voluntarily and unreservedly directed that the West 33rd property be transferred to Ms. W. and ‘derived’ no property from that disposition.
[77] In the absence of a clear statement abolishing the presumption of advancement, I also conclude that it continues to apply under the FLA (although I would not necessarily refer to it as a “right” within the meaning of s. 104). Had the Legislature intended to abolish the presumption, it would have been an easy thing to so state, as other provinces have done. It would also be an easy matter to provide, or perhaps clarify, that the presumption applies to common law as well as formal marriages and even that it should apply to gifts from a wife to her husband, not just the reverse. (See Donavan Waters, Mark Gillen and Lionel D. Smith, Waters’ Law of Trusts in Canada (4th ed., 2012) at 413;J.B. v. S.C., supra, at paras. 85-7; Lawrence v. Mulder, supra, at paras. 66-75; Kerr v. Baranow 2011 SCC 10 at para. 20.)
[78] I acknowledge that judges may in some cases have to determine whether transfers of excluded property that may have taken place years before, were gifts or not. This seems likely to occur most often in cases where inherited property is transferred by the heir to his or her spouse or into joint names. (Of course, the presumption of advancement was invented as a way of resolving such questions where the evidence is unclear or equivocal.) That said, there are means by which the inheriting or recipient spouse can protect against ‘losing’ the exclusion. Subject to other relevant provisions of the FLA, for example, the transferor can require the transferee to acknowledge that no gift of the excluded property (or its value) is intended.
