On April 28, 2016 the British Columbia Court of Appeal came out with a decision called V.J.F. v. S. K. W., 2016 BCCA 186. This decision called into question how property is to be divided in BC upon the breakdown of a spousal relationship under the Family Law Act.
In this particular case, a husband and wife separated after 10 years together. The parties received 2 million from the sale of a property that was sold after they separated. This property was acquired entirely by funds given as a gift to the husband. However, the husband had transferred the property into the wife’s sole name before it was sold in order to protect it from creditors. The Court found that the proceeds of sale were no longer “excluded property” because in putting the property in the wife’s name, there was a presumed gift from the husband to the wife.
Why is this case important?
The Family Law Act came into force as new legislation in the Spring of 2013. This new legislation changed many things in the Law around property division. One of the changes was that the new legislation specifically defines “excluded property.” Excluded property is property that is excluded from division upon the breakdown of a spousal relationship. The most common types of property that fit into this list are:
- gifts to one of the spouses from a third party;
- property owned by one of the spouses prior to the start of the spousal relationship; and
- inheritances received by one spouse.
There are other types of property that are excluded as well. Please see section 85 of the Family Law Act and reference my previous Legal Alert article How Do We Divide Our Property if We Separate? The Basics of Property Division Under the Family Law Act for a detailed definition and explanation of excluded property.
This recent Court of Appeal decision is significant because it tells us that the Family Law Act is not a “complete code” and that property that starts out as excluded property can potentially lose the exclusion if something called the “presumption of advancement” applies. The presumption of advancement is a common law principle which operates in several areas of the law including trust, contract and family law. In the context of family law, the presumption of advancement means that a transfer of property from one spouse to the other constitutes a gift of a beneficial interest in the property unless there is clear evidence to the contrary.
What that means is that even if a spouse has property that would normally qualify as excluded property under the legislation, the spouse can lose the right to exempt it from division under the legislation if it is transferred into the other spouse’s name and possibly even if it is transferred into joint names.
This is a significant development in how the new legislation is being interpreted regarding property division.
This is a complex issue in the area of family law. If you are going through a separation or entering a new relationship and think that you have property that would be considered excluded property, we recommend that you consult a family lawyer to discuss your particular situation.
