How ‘excluded’ is your excluded property? Think twice before you share ownership of your property.

A recent decision, Venables v. Venables, 2018 BCSC 1736, explains how to divide family assets and debts following the breakdown of a relationship, where one party brought an excluded property into marriage and then shared said property ownership with his spouse.

In this case the parties were married on August 1, 2009, and separated in early November 2016. Ms. Venables is 60 years old and has been employed full-time as a community health worker. Mr. Venables is 54 years old and is employed as a truck driver and equipment operator.  Ms. Venables is expected to earn approximately $37,000 in 2018, and Mr. Venables is expected to earn approximately $65,000. One of the issues the court had to determine was whether the family home was excluded property or family property.

 

Prior to the parties’ marriage, Mr. Venables owned a number of assets, but most importantly he owned a home. Between 2008 and 2016, the parties completed very substantial renovations to the home. In 2013, Mr. Venables transferred title of the home into the names of both parties with parties registered on title as joint tenants. Mr. Venables allegedly shared the ownership of the family home to “simplify things” in case of a tragedy and also to claim a higher home owner’s grant when Ms. Venables turned 65. Ms. Venables did not pay Mr. Venables any money in consideration for the transfer. Ms. Venables considered the transfer to be a gift. The question the court had to determine whether the family home was excluded property of Mr. Venables or a family property that should be divided equally between the parties.

 

The court set out basic principles in relation to the division of family property under Part 5 of the Family Law Act, S.B.C. 2011, c. 25, [FLA]:

 

1. All real and personal property that is owned by at least one spouse at the time of separation is family property unless it is excluded property: ss. 84 and 85;

 

2. Family property includes any increase in the value of excluded property since the later of the date the relationship between the parties began or the acquisition of the excluded property: s. 84(2)(g);

 

3. Excluded property includes property acquired by a spouse before the relationship began, inheritances to a spouse, gifts to a spouse from a third party, and any property derived from such property: s. 85(1);

 

4. The onus of proving that property should be excluded is on the party advancing that claim: s. 85(2);

 

5. Family property is to be divided equally unless it would be “significantly unfair” not to do so: ss. 81 and 95; and

 

6. Excluded property is not subject to division unless it would be “significantly unfair” not to do so: s. 96.

 

 

The Court of Appeal has recently recognized that the law in this area is “in a state of flux”: Pisarki v. Piesik, 2018 BCCA 326 at para. 26. However, the Honourable Mr. Justice Marchand provided a useful overview of the case law regarding this area of law:

 

[60] In V.J.F., the husband had received a $2 million dollar gift from a third party, which was excluded property. The husband purchased a property with the excluded property and placed the new property exclusively in the wife’s name to protect himself from creditors. The Court of Appeal upheld the decision of the trial judge that this was a gift to the wife and therefore lost its status as excluded property. At para. 70, Newbury J.A. held “it would be hypocritical at best if Mr. F. were able to assert at separation that the gift to his then wife is effectively meaningless as between them, but that as against creditors the asset was put beyond their reach.”

 

[61] In H.C.F., a variety of property was in dispute, including property owned by the husband at the start of the relationship (the “Leger Property”). The husband sold the Leger Property during the relationship and applied the net proceeds from the sale of that property (approximately $240,000) to the “Connaught Property” that he held as a joint tenant with his wife. At paras. 183-184, Voith J. concluded that the husband was entitled to the $240,000 as excluded property and held that the presumption of advancement had no ongoing application under the FLA. Voith J. did not conduct a fact-specific inquiry into whether any portion of the $240,000 used to pay down the mortgage or complete renovations was a gift from the husband to the wife.

 

[63] In C.J.B. v. A.R.B., 2017 BCSC 1682 at paras. 386-387, Gray J. held that, whether or not the presumption of advancement has ongoing application, property derived from excluded property retains its character and may itself be excluded, even if the derived property is transferred into joint tenancy. The transfers into the joint names of the parties at issue did not appear to have any tax or income-splitting advantage. Gray J. did not conduct a fact-specific analysis into whether the husband intended a gift.

 

[64] Finally, in S.E.V. v. T.M.V., 2018 BCSC 30 at para. 96, Abrioux J. concluded that, rather than apply a presumption, the proper approach was to consider the transferor’s intention. At paras. 100-101, Abrioux J. conducted a fact-specific inquiry and determined that each party intended to give 50% of their property to the other. Even though certain funds could be traced to the sale of excluded property, Abrioux J. considered all of the parties’ property to be family property and divided it equally. In the alternative, at para. 104 Abrioux J. found that it would be significantly unfair not to divide the funds at issue equally.

 

In this case the court determined that the family home was family property, despite Mr. Venables advancing an excluded property claim. The court followed the reasoning in the S.E.V. v. T.M.V., 2018 BCSC 30 decision and the V.J.F. v. S.K.F., 2016 BCCA 186 decision. The court focused on Mr. Venables’ intentions at the material time, namely the time of the transfer of the home into joint tenancy. He transferred the property because he wanted to simplify the estate administration upon his death and he also wanted to derive a financial benefit for the couple by reducing property taxes once Ms. Venables turned 65. Similar to the V.J.F. v. S.K.F case, Mr. Venables could not have his cake and eat it too. He cannot be stating to the property taxation authority that he had given Ms. Venables an interest in property, meanwhile also stating before this court that this is not what he intended. Also, Mr. Venables provided evidence that “he did not want to be that guy” and he wanted to provide for Ms. Venables. He established RRSPs and TFSAs in her name. Mr. Venables also had gone through separation and was already aware that family property is subject to division. Lastly, Mr. Venables thought that Ms. Venables “deserved” an interest in the property. She worked very hard on improving the property and had made financial and other contributions to the financial position of the parties. For all of these reasons, the court ruled that the family home is family property and Ms. Venables is entitled to half of the home.

 

Division of family property and family debt is a lot more nuanced and complicated than you may expect. Call Vancouver Family Lawyers at 604.264.5550 and we will be happy to provide you with a case evaluation.

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