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

Jump to navigation Jump to search
m
Line 17: Line 17:


#someone who is married or was married to someone else, or
#someone who is married or was married to someone else, or
#someone who is or was living in a "marriage-like relationship" with someone else for at least two years.  
#someone who is or was living in a ''marriage-like relationship'' with someone else for at least two years.  


People who lived together for less than two years are ''not'' spouses for these parts of the ''[[Family Law Act]]'', whether they've had a child together or not.
People who lived together for less than two years are ''not'' spouses for these parts of the ''[[Family Law Act]]'', whether they've had a child together or not.
Line 32: Line 32:
The ''[[Family Law Act]]'' talks about three things when it comes to dividing property and debt: ''family property'', ''excluded property'', and ''family debt''.  
The ''[[Family Law Act]]'' talks about three things when it comes to dividing property and debt: ''family property'', ''excluded property'', and ''family debt''.  


All property owned by either or both spouses at the date of separation is ''family property'' unless it is ''excluded property''. Family property includes things like real property, bank accounts, pensions, business, debts owing to a spouse, and so forth. Family property is presumed to be shared equally between spouses, regardless of their use of or contribution to that property.
All property owned by either or both spouses at the date of separation is family property unless it is excluded property. Family property includes things like real property, bank accounts, pensions, business, debts owing to a spouse, and so forth. Family property is presumed to be shared equally between spouses, regardless of their use of or contribution to that property.


''Excluded property'' is any property that is excluded from the pool of family property to be split between spouses. This includes the property a spouse owned before the date of marriage or the date the spouses began living together, whichever is earlier, plus certain kinds of property acquired during the spouses' relationship, including:
Excluded property is any property that is excluded from the pool of family property to be split between spouses. This includes the property a spouse owned before the date of marriage or the date the spouses began living together, whichever is earlier, plus certain kinds of property acquired during the spouses' relationship, including:


*property that was bought with the property brought into the relationship,  
*property that was bought with the property brought into the relationship,  
Line 42: Line 42:
Excluded property is presumed to remain the property of the spouse who owns it, but the increase in value of the excluded property becomes family property and is shared.
Excluded property is presumed to remain the property of the spouse who owns it, but the increase in value of the excluded property becomes family property and is shared.


All debt incurred by either or both spouses from the date of marriage or the date the spouses began living together, whichever is earlier, to the date of separation is ''family debt''. Responsibility for family debt is presumed to be shared equally between spouses, regardless of their use of or contribution to that debt.
All debt incurred by either or both spouses from the date of marriage or the date the spouses began living together, whichever is earlier, to the date of separation is family debt. Responsibility for family debt is presumed to be shared equally between spouses, regardless of their use of or contribution to that debt.


===Beginning and ending a spousal relationship===
===Beginning and ending a spousal relationship===
Line 67: Line 67:
Although many people move out when they separate, some couples separate and remain living under the same roof. A physical separation is not necessary to separate; there must simply be an intention to end both the relationship and the intimacies that go along with it. Often the <span class="noglossary">decision</span> to separate is made by both spouses, but it only takes one spouse decide to end a relationship, and one spouse's <span class="noglossary">decision</span> to separate doesn't require the consent of the other spouse.
Although many people move out when they separate, some couples separate and remain living under the same roof. A physical separation is not necessary to separate; there must simply be an intention to end both the relationship and the intimacies that go along with it. Often the <span class="noglossary">decision</span> to separate is made by both spouses, but it only takes one spouse decide to end a relationship, and one spouse's <span class="noglossary">decision</span> to separate doesn't require the consent of the other spouse.


Section 3(4) of the act says this:
Section 3(4) of the ''Act'' says this:


<blockquote><tt>(a) spouses may be separated despite continuing to live in the same residence, and</tt></blockquote>
<blockquote><tt>(a) spouses may be separated despite continuing to live in the same residence, and</tt></blockquote>
Line 157: Line 157:
===Jointly-owned assets===
===Jointly-owned assets===


Where a couple are both on the title of an asset, whether the family home, a car or a bank account, they are each assumed to have an equal interest in the asset. When one party refuses to give the other his or her share of that asset, it is open to that person to start a court proceeding for either:
Where a couple are both on the title of an asset, whether the family home, a car or a bank account, they are each assumed to have an equal interest in the asset. When one party refuses to give the other their share of that asset, it is open to that person to start a court proceeding for either:


#an order for the sale of the asset and the division of the proceeds of the sale, or
#an order for the sale of the asset and the division of the proceeds of the sale, or
#an order for payment in compensation for his or her interest in the asset.
#an order for payment in compensation for their interest in the asset.


Where real property is jointly owned, it is possible to make a claim under the provincial ''[http://canlii.ca/t/848q Partition of Property Act]''. Section 2 of this act says that:
Where real property is jointly owned, it is possible to make a claim under the provincial ''[http://canlii.ca/t/848q Partition of Property Act]''. Section 2 of this act says that:
Line 174: Line 174:
Where a person who is not a spouse believes that he or she should have an interest in property owned only by the other person, a claim against that property can only be made under the common law, specifically the law of equity and the law of trusts.
Where a person who is not a spouse believes that he or she should have an interest in property owned only by the other person, a claim against that property can only be made under the common law, specifically the law of equity and the law of trusts.


The essential point of this sort of claim is that the non-owning party has, or should be considered to have, a stake in property owned by the other party. The non-owning party's interest in that property is said to be held ''in trust'' for the non-owning party by the person who owns the property on paper. The non-owning party is the beneficiary of that trust and should be entitled to receive compensation for his or her interest in the property under the trust.
The essential point of this sort of claim is that the non-owning party has, or should be considered to have, a stake in property owned by the other party. The non-owning party's interest in that property is said to be held ''in trust'' for the non-owning party by the person who owns the property on paper. The non-owning party is the beneficiary of that trust and should be entitled to receive compensation for their interest in the property under the trust.


There are three kinds of trust claim that may be made:
There are three kinds of trust claim that may be made:


*a constructive trust,
#a constructive trust,
*an express trust, and
#an express trust, and
*a resulting trust.
#a resulting trust.


A ''resulting trust'' happens when the behaviour of the parties will let the court infer the existence of a trust relationship; an ''express trust'' is a trust relationship that people intentionally enter into; and, a ''constructive trust'' is imposed in order to compensate someone for their interest in property when the interest can't be paid out immediately. Resulting and constructive trusts are the most common kind of trusts involved in family law disputes about property.
A ''resulting trust'' happens when the behaviour of the parties will let the court infer the existence of a trust relationship; an ''express trust'' is a trust relationship that people intentionally enter into; and, a ''constructive trust'' is imposed in order to compensate someone for their interest in property when the interest can't be paid out immediately. Resulting and constructive trusts are the most common kind of trusts involved in family law disputes about property.
Line 190: Line 190:
A resulting trust can be created in the following circumstances:
A resulting trust can be created in the following circumstances:


*one party loans or gives money to the other party to allow him or her to buy an asset, and the person buying the asset owns the asset in his or her name alone, or
*one party loans or gives money to the other party to allow them to buy an asset, and the person buying the asset owns the asset in their name alone, or
*one party transfers property to another without payment.
*one party transfers property to another without payment.


In each case, the person who transfers the money or asset to the other party is said to retain an interest, called a ''beneficial interest'', in the property even though the property is held by the other party in his or her name alone. In a court proceeding based on a resulting trust, the person making the claim, the ''claimant'', is asking for compensation for his or her beneficial interest in the property owned by the ''respondent'', the person against whom the claim is brought.
In each case, the person who transfers the money or asset to the other party is said to retain an interest, called a ''beneficial interest'', in the property even though the property is held by the other party in their name alone. In a court proceeding based on a resulting trust, the person making the claim, the ''claimant'', is asking for compensation for their beneficial interest in the property owned by the ''respondent'', the person against whom the claim is brought.


====Unjust enrichment and constructive trusts====
====Unjust enrichment and constructive trusts====


A constructive trust is called ''constructive'' because the claimant is asking the court to create or impose a trust on the respondent where there wasn't one before. According to the Supreme Court of Canada's decision in the 1980 case of [http://canlii.ca/t/1mjv ''Pettkus v. Becker''], [1980] 2 S.C.R. 834, one of the most important cases on constructive trusts, the court will impose a trust on a respondent where the claimant is able to show that the respondent has been ''unjustly enriched'' as a result of the claimant's labour or other services. Unjust enrichment is shown by proving that:
A constructive trust is called constructive because the claimant is asking the court to create or impose a trust on the respondent where there wasn't one before. According to the Supreme Court of Canada's decision in the 1980 case of [http://canlii.ca/t/1mjv ''Pettkus v. Becker''], [1980] 2 S.C.R. 834, one of the most important cases on constructive trusts, the court will impose a trust on a respondent where the claimant is able to show that the respondent has been ''unjustly enriched'' as a result of the claimant's labour or other services. Unjust enrichment is shown by proving that:


#the respondent was enriched as a result of the claimant's contributions,
#the respondent was enriched as a result of the claimant's contributions,
Line 203: Line 203:
#there is no legal reason for the respondent's enrichment.
#there is no legal reason for the respondent's enrichment.


''Enrichment'' means to have received a benefit or advantage, such as money or the benefit of unpaid labour or other services. ''Deprivation'' means to have lost the value that might have been otherwise received for the claimant's benefit or advantage, such as the loss of the money or the wages that might have been paid for labour or other services. The deprivation must ''correspond'' to the enrichment, in the sense that the claimant was deprived of exactly the thing from which the respondent benefited. If the claimant can show these things, he or she will have established that the respondent was ''unjustly enriched'' by his or her contributions, and the court may impose a constructive trust to fix the situation.
''Enrichment'' means to have received a benefit or advantage, such as money or the benefit of unpaid labour or other services. ''Deprivation'' means to have lost the value that might have been otherwise received for the claimant's benefit or advantage, such as the loss of the money or the wages that might have been paid for labour or other services. The deprivation must ''correspond'' to the enrichment, in the sense that the claimant was deprived of exactly the thing from which the respondent benefited. If the claimant can show these things, he or she will have established that the respondent was ''unjustly enriched'' by their contributions, and the court may impose a constructive trust to fix the situation.


(There are two other case from the Supreme Court of Canada that are critical in understanding constructive trusts, a 1993 case called ''[http://canlii.ca/t/1fs3f Peter v. Beblow]'', [1993] 1 S.C.R. 980, and a 2011 case called ''[http://canlii.ca/t/2fs3h Kerr v. Baranow]'', [2011] 1 S.C.R. 269 . To get a proper understanding of the law relating to constructive trusts, you should read all of ''Pettkus v. Becker'', ''Peter v. Beblow'', and ''Kerr v. Baranow''.)
(There are two other case from the Supreme Court of Canada that are critical in understanding constructive trusts, a 1993 case called ''[http://canlii.ca/t/1fs3f Peter v. Beblow]'', [1993] 1 S.C.R. 980, and a 2011 case called ''[http://canlii.ca/t/2fs3h Kerr v. Baranow]'', [2011] 1 S.C.R. 269 . To get a proper understanding of the law relating to constructive trusts, you should read all of ''Pettkus v. Becker'', ''Peter v. Beblow'', and ''Kerr v. Baranow''.)
Line 217: Line 217:
In this example, Lois was unjustly enriched by Frank's labour in the home and his contribution to the web design company, as she didn't have to hire an office administrator or a housekeeper. Frank, on the other hand, lost out on months of wages as an office administrator, and months of wages as a housekeeper. Lois was enriched by exactly the thing Frank was deprived of: his labour, and the financial value and benefit of his labour.
In this example, Lois was unjustly enriched by Frank's labour in the home and his contribution to the web design company, as she didn't have to hire an office administrator or a housekeeper. Frank, on the other hand, lost out on months of wages as an office administrator, and months of wages as a housekeeper. Lois was enriched by exactly the thing Frank was deprived of: his labour, and the financial value and benefit of his labour.


Once an unjust enrichment has been found, the court must determine what the appropriate remedy would be to compensate the applicant for his or her interest in the property. The court will often determine the value of the trust based on the value of the contribution made by the applicant to the property or the purchase of the property.
Once an unjust enrichment has been found, the court must determine what the appropriate remedy would be to compensate the applicant for their interest in the property. The court will often determine the value of the trust based on the value of the contribution made by the applicant to the property or the purchase of the property.


In the example above, a concrete value can be attached to Frank's contributions to the company and to his labour in the home: what would it have cost to hire a housekeeper and a bookkeeper during that period? Or, how much did Lois' company grow in value as a result of Frank's efforts? This is the beginning of fixing a dollar value on Frank's interest in the company and in Lois' house.
In the example above, a concrete value can be attached to Frank's contributions to the company and to his labour in the home: what would it have cost to hire a housekeeper and a bookkeeper during that period? Or, how much did Lois' company grow in value as a result of Frank's efforts? This is the beginning of fixing a dollar value on Frank's interest in the company and in Lois' house.
Line 230: Line 230:


*the money you get when you cash in an RRSP,  
*the money you get when you cash in an RRSP,  
*money received by a shareholder from a company as a dividend or from the sale of his or her shares,  
*money received by a shareholder from a company as a dividend or from the sale of their shares,  
*the interest you get from a loan you've made to someone else, and
*the interest you get from a loan you've made to someone else, and
*the profit realized from the sale or transfer of real property that isn't the family's principle residence.
*the profit realized from the sale or transfer of real property that isn't the family's principle residence.
Retrieved from "https://wiki.clicklaw.bc.ca/index.php?title=Property_and_Debt_in_Family_Law_Matters"