Difference between revisions of "Protecting Property and Debt in Family Law Matters"

If you own your home in joint tenancy with your former spouse, there is no reason to sever the joint tenancy in order to protect your interest in the home. The reason for that is because under s. 81(b) of the provincial ''[[Family Law Act]]'', when separation happens each spouse takes a one-half interest in all family property as tenants in common, regardless of how the property was owned before separation, and becomes responsible for one-half of all family debt.   

Spouses who have made a cohabitation agreement, a marriage agreement, or a separation agreement dealing with real property can file a ''notice'' of the agreement against the title of the property with the Land Title and Survey Authority under s. 99 of the ''Family Law Act''. A notice can be filed whether court proceedings have started or not, and will prevent the other spouse from transferring, selling, leasing, or otherwise dealing with the property without the voluntary cancellation of the notice or a court order.

A ''financing statement'' can be filed in the [http://www.bcregistryservices.gov.bc.ca/bcreg/pprpg/ppinfo.page Personal Property Registry] against a manufactured home under s. 100. This will stop the manufactured home from being transferred, and any new debts registered against the manufactured home will come in second to the spouse's interest under the financing statement.

Most of the time, people don't stop paying the mortgage or cut off the electricity to the former family home when they move out. However, it can be very tempting to do this when emotions are running high, when there's not enough money to pay rent at the new place plus rent for the old place, or when the BC Hydro <span class="noglossary">account</span> at the former family home is in the name of the person who needs to arrange for the electricity to be hooked up at their new place. The court is not likely to make orders under s. 226 when there's not enough money to pay for everything, but it will step in where someone is acting out of spite or malice.

The easiest way for married and unmarried spouses to obtain a financial restraining order is to apply for an order under s. 91(1) of the ''Family Law Act''. This section says that:

Rule 12-4 of the [http://canlii.ca/t/8mcr Supreme Court Family Rules] gives the court the authority to make a general restraining order, also called an ''injunction'', to make someone to do something or not do something. The potential scope of these restraining orders is very broad, and can include, for example, a restraining order identical to that provided for in s. 91 of the ''Family Law Act'' as well as an order stopping someone from racking up debt by drawing on credit cards and lines of credit.

#you have a reasonable claim against assets owned by your spouse,

#your spouse has disposed of or encumbered their assets or is likely do so, and

#the inconvenience that will be suffered by your spouse as a result of the injunction is less severe than the inconvenience you will suffer if the injunction isn't granted.

It's important to know that if you are applying for an injunction or restraining order without notice to the other spouse, the court will require that you make full and complete disclosure of ''all'' of the relevant facts, even of those facts that aren't in your favour. If it is discovered that you haven't made full disclosure, the court can set aside the injunction, make an award of costs against you, or make an award of damages to compensate the other party for any inconvenience caused by the injunction. In a 1986 Supreme Court case called ''[http://canlii.ca/t/213m5 Morin v. Morin]'', 1986 CanLII 896 (BCSC), this resulted in a spouse having the injunction cancelled and getting awarded special court costs of the application.

Apart from the possibility that your spouse will be less than forthright in dealing with the family property and family debt, you may also need to protect your interest in those assets from claims made by creditors and third parties, and against the possibility of your spouse's bankruptcy or your spouse racking up further debt. These issues can be dealt with, for the most part, by ensuring that you:

#obtain a financial restraining order under one or more of s. 91 of the ''Family Law Act'', s. 39 of the ''Law and Equity Act'' or Rule 12-4 of the Supreme Court Family Rules.

Your spouse's creditors or trustee in bankruptcy will not usually be able to seize assets held only in your name, or your interest in property as a tenant in common, unless you are responsible for your spouse's debts for some reason, like having co-signed or guaranteed a loan, or having used a secondary credit card on your spouse's <span class="noglossary">account</span>. Although, under the ''Family Law Act'' both spouses are responsible for the debts incurred during their relationship, this obligation is only between spouses and doesn't give any extra rights to creditors.

Creditors have a wide range of remedies available to them when a debtor fails to live up to the conditions of a loan, a line of credit or a credit card. Among other things, a creditor can:

A trustee in bankruptcy cannot take property that doesn't belong to the bankrupt. If the spouses separate before the bankruptcy, only the bankrupt's one-half interest in the family as a tenant in common will go to the trustee.

*Whether a court has in personam jurisdiction or not, it usually won't have jurisdiction over real property located outside the province. This kind of jurisdiction is called "''in rem'' jurisdiction." Real property and things attached to real property like buildings are called ''immovable assets''.

*the Supreme Court of British Columbia can deal with out-of-province assets that are movable, like RRSPs, stocks, bank accounts, chattels and what not, as long as the owner has attorned to the court's jurisdiction, and

<blockquote>Zygmunt has a farm in Flin Flon, Manitoba worth $50,000. Zygmunt and Ivan both own the family home in Vernon, British Columbia worth $100,000. Assuming both properties were bought after the relationship began and that both are family property, under an equal division each of the spouses would be entitled to $25,000 for the farm in Manitoba and $50,000 for the family home in British Columbia.</blockquote>

In truly exceptional circumstances, it is possible to get an order stopping someone from disposing of real property located outside the province with something called a "''Mareva'' injunction." A ''Mareva'' injunction will stop someone from selling or encumbering assets outside of British Columbia, providing that certain conditions are met. (The name of this order comes from an old English case in which the relief was first granted, ''Mareva Compania Naviera S.A. v. International Bulkcarriers S.A.'', [1980] 1 All E.R. 213) To qualify for this order, you must:

Under Division 6 of Part 5 of the ''Family Law Act'', the Supreme Court of British Columbia may, in certain circumstances, make orders about the ownership and division of property located outside British Columbia. If the court has the ability to make orders dividing property located outside the province, it may also make an order to preserve the property from being disposed of. Section 109(2)(b) says this:

<blockquote><blockquote><tt>(i) preserve the extraprovincial property ...</tt></blockquote></blockquote>

<blockquote><blockquote><tt>(iv) provide for any other matter in connection with the extraprovincial property;</tt></blockquote></blockquote>

The first stumbling block is to figure out whether the court can divide the out-of-province property, and that requires a difficult analysis under ss. 106, 107 and 108 of the Act. Assuming the court can make such orders, the next step is to find out whether the order would "enforceable against a spouse" in the place where the property is located. If the <span class="noglossary">answer</span> to both questions is yes, then the court may make an order for the preservation of the foreign property.

Where a spouse has attorned, the court can make a restraining order stopping the spouse from disposing of movable property located outside of British Columbia under s. 91 of the ''Family Law Act''. Inside British Columbia, a s. 91 order will stop a spouse from dealing with everything that is family property or other "property at issue," including real property. Outside British Columbia, a s. 91 restraining order will only stop a spouse from dealing with movable assets.

The court can be reluctant to issue a s. 91 order that is intended to deal with assets located outside the province, since in most cases the courts of British Columbia cannot make orders about things located outside the province. In a 2002 case called ''[http://canlii.ca/t/50dw Boyd v. Boyd]'', 2001 BCCA 535, the Court of Appeal confirmed that the court can make ''in personam'' restraining orders that are effective against movable assets located outside the province.

It is important to remember that a section 91 order is an "in personam" order, which means that it is only effective against the person whom the order is being made.  Accordingly, if your spouse has a significant amount of money in a bank account,  investment account or similar type of savings vehicle, and you are concerned that your spouse will transfer the monies somewhere else even if there is an order in place, then you should ensure that the financial institution where the accounts are being held are named in the notice of application, the financial institution is served with your application and that you seek specific relief vis-à-vis the financial institution.  Otherwise, the financial institution does not have any legal obligation to prevent your spouse from transferring assets out of the financial institution.

If a s. 91 order is not available for some reason, a ''Mareva'' injunction will have the same effect. However, ''Mareva'' injunctions are not granted automatically and you must satisfy the test described just above.

*[http://www.bcregistryservices.gov.bc.ca/bcreg/pprpg/ppinfo.page BC Personal Property Registry Website]

* [http://www.clicklaw.bc.ca/resource/1240 Canadian Bar Association BC Branch: Dividing property and debts]

* [http://www.clicklaw.bc.ca/resource/1529 Justice Education Society: Workbook for parents separated with children on dealing with finances]

* [http://www.clicklaw.bc.ca/resource/1639 Legal Services Society’s Family Law Website: How to divide property and debts]

 

{{REVIEWED | reviewer = [[Helen Chiu]], May 14, 2019}}