An issue has arisen regarding whether or not a spouse loses their right to claim excluded property when the property is placed in joint names. Section 84 of the Family Law Act sets out the definition of family property and Section 85 sets out which property is excluded:
Family property
84 (1) Subject to section 85 [excluded property], family property is all real property and personal property as follows:
(a) on the date the spouses separate,
(i) property that is owned by at least one spouse, or
(ii) a beneficial interest of at least one spouse in property;
(b) after separation,
(i) property acquired by at least one spouse if the property is derived from property referred to in paragraph (a) (i) or from a beneficial interest referred to in paragraph (a) (ii), or from the disposition of either, or
(ii) a beneficial interest acquired by at least one spouse in property if the beneficial interest is derived from property referred to in paragraph (a) (i) or from a beneficial interest referred to in paragraph (a) (ii), or from the disposition of either.
(2) Without limiting subsection (1), family property includes the following:
(a) a share or an interest in a corporation;
(b) an interest in a partnership, an association, an organization, a business or a venture;
(c) property owing to a spouse
(i) as a refund, including an income tax refund, or
(ii) in return for the provision of a good or service;
(d) money of a spouse in an account with a financial institution;
(e) a spouse’s entitlement under an annuity, a pension, a retirement savings plan or an income plan;
(f) property, other than property to which subsection (3) applies, that a spouse disposes of after he relationship between the spouses began, but over which the spouse retains authority, to be exercised alone or with another person, to require its return or to direct its use or further disposition in any way;
(g) the amount by which the value of excluded property has increased since the later of the date
(i) the relationship between the spouses began, or
(ii) the excluded property was acquired.
(2.1) For the purposes of subsection (2) (g), any increase in value of a beneficial interest in property held in a discretionary trust does not include the value of any property received from the trust.
(3) Despite subsection (1) of this section and subject to section 85 (1) (e), family property includes that part of trust property contributed by a spouse to a trust in which
(a) the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment,
(b) the spouse has a power to transfer to himself or herself that part of the trust property, or
(c) the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse.
Excluded property
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.1
In a previous blog I summarized the B.C. Supreme Court decision of Remmem v. Remmem, 2014 BCSC 1552. This decision stated that if one spouse owns a piece of property before a new relationship begins and then puts the other spouse on title as a joint tenant, the spouse does not lose the ability to claim the excluded property.
There is a second decision now from the B.C. Supreme Court, Wells v. Campbell, 2015 BCSC 3 which contradicts the Remmem decision and states that the exclusion is lost:
[19] The key issue is whether Ms. Campbell is entitled to an equal division in the entirety of the Hornby Property or only that portion which has appreciated in value since the relationship began (the “Appreciated Value”). As mentioned, the value of the Hornby Property at the start of the relationship was $185,000 (the “Start of Relationship Value” or “SRV”).
[20] There is also an issue as to whether Mr. Wells is entitled to an equalization payment in a vehicle purchased by Ms. Campbell. The division of other family property is not in issue as the parties have agreed on the division or the method of division.
[21] In respect to the Hornby Property, Mr. Wells’ position is that Ms. Campbell is entitled to an equal share of the Appreciated Value of the Hornby Property only. He concedes that the Appreciated Value is family property but submits that the Start of Relationship Value is excluded property under s. 85(1)(d) of the Act; and that any entitlement to the excluded property must be established by Ms. Campbell on the basis that it would be significantly unfair not to divide the excluded property based on the considerations set out in s. 96(b). Mr. Wells’ position is premised on the fact that he owned the Hornby Property prior to the relationship and as a result, under s. 85(1), it is excluded property.
[22] Ms. Campbell’s position is that the Hornby Property in its entirety is family property and that she is entitled to one-half of the value of the Hornby Property without deduction of the SRV.
[23] I do not agree that the SRV is excluded property in this case.
[24] I start by noting the definitions surrounding excluded property.
[25] In s. 83(4) of the Act, “property” is defined as including “a beneficial interest in property unless a contrary intention appears.” [Emphasis added]
[26] In s. 84(1), “family property” is defined as “all real property and personal property.” It also includes the amount by which the value of excluded property has increased since the later of the date the relationship began or the excluded property was acquired.
[27] In s. 85 “excluded property” is stated to be property, inheritances, gifts to a spouse from a third party, an award of damages, money paid or payable under an insurance policy, property held in trust for the benefit of a spouse, a spouse’s beneficial interest in property held in a discretionary trust that is settled by a person other than the spouse.
[28] I note that the term “excluded property” self describes itself as property and that “property “is described as real or personal property and includes a beneficial interest. It is questionable then as to whether a “value” in property falls within the definition of excluded property. Next, in respect to family and excluded property, the items described as such are things (e.g. gifts, inheritances, money) or recognized interests and not a value as argued by Mr. Wells. The only exception appears to be where there has been an appreciation in value of excluded property after the start of a relationship. In such a situation the appreciation is considered family property. Other than appreciation, it is apparent that property is viewed distinct from value. Interestingly, depreciation in value is not considered family property.
[29] As a result, it would seem that value appears to be different from property and does not constitute excluded property.
[30] Regardless of the forgoing, more importantly to my conclusion is that, notwithstanding the fact that Mr. Wells owned the Hornby Property prior to the start of the relationship, the overriding fact is that he transferred the property into joint tenancy with Ms. Campbell in 2008. As is well known, a joint tenant in a property holds an undivided equal share in all of that property. With a severance of the joint tenancy, which is the case here, each party retains a divided equal interest in the property as tenants in common.
[31] It is significant that Mr. Wells’ has not raised a contrary intention behind his transfer of the Hornby Property into joint tenancy. A contrary intention behind the transfer was neither pleaded nor argued. Further, there has been no other issue raised such as undue influence, fraud, or involuntariness which would serve to negate the transfer. Though Mr. Wells deposes that he was bullied into the transfer, I see this as a recasting of history. Mr. Wells it appears went to see a lawyer to discuss his affairs which led to Ms. Campbell becoming joint tenant in the Hornby Property. He obviously had the benefit of legal advice when he transferred the property to joint tenancy. He transferred the Hornby Property in the face of his earlier “marriage” agreement with Ms. Campbell regarding property as well as other dispositions of the property to Ms. Campbell in wills or contemplated to be in his wills. He also had the benefit of the anger from one of his daughters upon her learning that he had placed Ms. Campbell onto the title of the property. He did nothing to change what he had done.
[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. If the presumption of resulting trust were operative, again, I find that the evidence is sufficient to rebut the presumption.
[34] I note again that Mr. Wells selected a summary trial as the mode for resolving the issues in this case. Had intention been an issue it is apparent that a summary trial mode would not have been selected by Mr. Wells.
[35] I have considered the cases handed up by counsel for Mr. Wells to support the position that the Start of Relationship Value is excluded property: Dhillon v. Gaba, 2014 BCSC 1474 (CanLII); Asselin v. Roy, 2013 BCSC 1681 (CanLII), and Remmen v. Remmen, 2014 BCSC 1552 (CanLII). These first two cases focused on differentiating the monies contributed towards property prior to the start of the relationship or during it; but did not discuss the effect of a gift made or joint tenancy created during the relationship.
[36] In Remmen, excluded property and a joint tenancy are discussed and in that case the joint tenancy was held not to have reduced the value of the excluded property. It held that the property division provisions of the Act were “intended to be a complete code so that there is no need to examine the intentions of the parties at the time of the 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”.
[37] Certain problems if intention were relevant to the issue when applied under the scheme of the Act were identified:
a) The presumption only applies to married spouses and so gratuitous transfers between married and unmarried spouses would be treated differently.
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 of advancement and an examination of whether property was gifted is at odds with the simple 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, should not he or she be able to claim that his or her half of the property is excluded?
The actual finding however appears to have been limited to the facts as the court concluded “that the tracing provisions in the FLA, at least when applied to the circumstances in this case, are to be applied without considering or applying the presumption of advancement between married spouses.”
[38] While I do not disagree certain problems can be presented; I am not persuaded that they lead to the conclusion that the Act displaces or extinguishes the presumption of advancement, or the effect of an inter vivos gift resulting in a joint tenancy. There is no explicit extinguishment in the Act, as has been done in other jurisdictions. See for example: Waters’ Law of Trust in Canada, 4th ed. [Waters’], at p. 414. In those other jurisdictions, the application of the presumption of resulting trust is required in questions of ownership of property between spouses. The legislation in those jurisdictions state where a property is held by the spouses as joint tenants, that fact is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants.
[39] In jurisdictions where the presumption is said to remain such as in this province, the authors of Waters’ state the presumption has arguably been reduced to no significance because of the comprehensiveness of the discretionary powers in the family property legislation to divide between married persons’ property owned by either or both of them. Significance is obviously not the same as extinguishment; and it is notable that the Act has narrowed the court’s discretion from its predecessor, the Family Relations Act.
[40] The view that the presumption of advancement has been rendered insignificant in British Columbia as opposed to extinguished, was expressed in the case of Zhu v Li, 2009 BCCA 128 (CanLII) at para. 51 et seq. by Madam Justice Neilson where she found that there was a basis for the presumption to operate in regard to certain of the properties in question in that case. While I note that the decision was made under the Family Relations Act, now repealed, I do not see anything in the present act which would lead to a different view regarding the presumption. See also M. Dhaliwal Holdings v. Pacific Blue Farms Ltd., 2014 BCSC 1482 (CanLII).
[41] Also, I note that the definition of excluded property includes gifts to a spouse from third party but does not include gifts between spouses.
[42] Further, intention has not been eliminated from the considerations, given that the definition of “property” in the Act includes a beneficial interest “unless a contrary intention appears.”
[43] It seems that the excluded property 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.
[44] Given my finding that the transfer of the interest to Ms. Campbell was perfected, I cannot see how a portion of her interest, i.e., her share in the Start of Relationship Value, can be considered excluded property. She in the holder of a legal and equitable interest in the property. Had the policy makers intended to alter the well-established concept of a joint tenancy and/or the presumption of advancement, they have done so explicitly as has been done in other jurisdictions. I do not accept that s. 85(1)(a) negates an intended disposition of an interest in land from one spouse to another. I note again that intention is a consideration under s. 83(1) of the Act; and that a gift between spouses is not included as an excluded property under s. 85(1). Further, the tracing provisions can still operate under different scenarios.
[45] Mr. Wells has not met the burden of establishing that the SRV is excluded property as required under s. 85(2). In my view, the entirety of the Hornby Property is family property based on the facts of this case. If a greater portion is sought by Mr. Wells, the route to do so by arguing that it would be significantly unfair under s. 95(1).
[46] Moving then to s. 95(1). Counsel for Mr. Wells in opposition to a potential claim by Ms. Campbell for unequal division of the Appreciated Value of the Hornby Property submitted that having regard to the significant length of the relationship and the needs of each party an equal division was warranted. My view is that the same argument would apply to the Hornby Property as a whole. On the evidence before me I cannot conclude that an equal division would be significantly unfair. As a result, I find that an equal division of the net proceeds from the sale of the Hornby Property each party is appropriate.2
In summary we now have two contradicting decisions from the B.C. Supreme Court. Because of this the law in this area remains uncertain and we may need to wait until a decision is handed down by the B.C. Court of Appeal in order to clarify the issue. I don’t believe that either the Remmem or the Wells decisions are being appealed so this may take a significant amount of time to be resolved.
1Family Law Act, [SBC 2011] CHAPTER 25
www.bclaws.ca/civix/document/id/complete/statreg/11025_01
22015 BCSC 3 Wells v. Campbell
www.courts.gov.bc.ca/jdb-txt/SC/15/00/2015BCSC0003.htm
