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Difference between revisions of "Property and Debt in Family Law Matters"
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Property and Debt in Family Law Matters (view source)
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Under the provincial ''Family Law Act'', each spouse is presumed to keep what he or she brought into their relationship and to share in the things they acquire during their relationship. The same rules apply about debt; spouses are presumed to share responsibility for the debts that accumulated during their relationship. The federal ''Divorce Act'' doesn't talk about the division of property or debt. | Under the provincial ''Family Law Act'', each spouse is presumed to keep what he or she brought into their relationship and to share in the things they acquire during their relationship. The same rules apply about debt; spouses are presumed to share responsibility for the debts that accumulated during their relationship. The federal ''Divorce Act'' doesn't talk about the division of property or debt. | ||
This page provides an introduction to the division of property and debt between spouses and how the property rules of the ''Family Law Act'' are different from the | This page provides an introduction to the division of property and debt between spouses and how the property rules of the ''Family Law Act'' are different from the ''Family Relations Act'', the rules about property that apply to couples who are not spouses, and some of the income tax issues that can come up when dividing property. The pages that follow will go into the rules about the division of property and debt in a lot more detail. | ||
==Dividing Property and Debt under the ''Family Law Act''== | ==Dividing Property and Debt under the ''Family Law Act''== | ||
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#the date of ''separation'' for unmarried spouses. | #the date of ''separation'' for unmarried spouses. | ||
===Family Property, Excluded Property and Family 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''. | The ''Family Law Act'' talks about three things when it comes to dividing property and debt, ''family property'', ''excluded property'' and ''family debt''. | ||
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spouses become, effective as of | spouses become, effective as of | ||
==non-spouses== | |||
Unmarried Couples and the Division of Assets | |||
Unmarried couples cannot make a claim for the division of assets through the Family Relations Act. When an unmarried couple owns an asset jointly, like the title to a house or a car, they are presumed to be equally entitled to share in the value of that property. Where a person makes a claim against an asset owned only by the other, he or she will have to prove an entitlement to that asset through the principles of the common law. | |||
A. 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 make a claim under the principles of equity for either: | |||
the sale of the asset and the division of the proceeds of the sale; or, | |||
a payment in compensation for his or her interest in the asset. | |||
This sort of claim can be handled by either the Supreme Court or the Provincial (Small Claims) Court, although Provincial Court has a limit on the value of the claim it can handle. | |||
Where real property is jointly owned, it is possible to make a claim under the provincial Partition of Property Act. Section 2 of this act says that: | |||
(1) All joint tenants, tenants in common, coparceners, mortgagees or other creditors who have liens on, and all parties interested in any land may be compelled to partition or sell the land, or a part of it as provided in this Act. | |||
(2) Subsection (1) applies whether the estate is legal or equitable or equitable only. | |||
This act allows a co-owner, including someone with only an equitable interest in the property, potentially including an interest under the law of trusts as discussed below, to apply for an order that the property be sold and the proceeds of the sale divided. | |||
B. Individually Owned Assets | |||
Where a person believes that he or she has a claim to assets owned only by the other person, a claim against those assets can only be raised under the principles of the common law, specifically, the law of trusts. | |||
The Provincial Court does not have the jurisdiction to hear claims based on the law of trusts. Claims like this must be made in the Supreme Court. | |||
The essential point of a trust 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. | |||
There are three kinds of trust claim that may be made: | |||
a constructive trust; | |||
an express trust; and, | |||
a resulting trust. | |||
Put simply, a resulting trust arises when the conduct of the parties gives rise to or implies the trust relationship; an express trust is a trust relationship that people intentionally enter into; and, a constructive trust is imposed by the court where one party has gratuitously contributed to an asset and suffered a loss to the direct benefit of the other party. Resulting and constructive trusts are discussed in more detail below. | |||
Needless to say, trust law can be complex. If you find yourself in a situation where your only claim to an asset or a share of an asset is through trust law, it is recommended that you hire a lawyer to handle your claim. | |||
C. Resulting Trusts | |||
A resulting trust can be created in the following circumstances: | |||
one party loans or gives money to the other party to allow in or her to buy an asset, and the person buying the asset owns the asset in his or her name alone; or, | |||
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 an action for the division of property based on a resulting trust, the Claimant seeks compensation for his or her beneficial interest in the property owned by the Respondent. The Respondent, on the other hand, can rebut the Claimant's claim by showing that the Claimant transfered the money or the asset as a gift. If the Respondent can show that the Claimant made a gift, the Claimant's claim will likely be defeated. | |||
D. Constructive Trusts | |||
This form of trust is the more common trust claim in family law. It is called a "constructive" trust because the Claimant is asking the court to create or impose a trust on the Respondent. According to the Supreme Court of Canada's decision in the 1980 case of Pettkus v. Becker, the seminal case on constructive trusts, three facts must be proven for a constructive trust claim to succeed: | |||
that the Respondent was unfairly enriched; | |||
that the Claimant was correspondingly deprived; and, | |||
that there is no legal reason for the Respondent enrichment. | |||
"Enrichment" means to have received a benefit or advantage, such as money or the benefit of unpaid labour. "Deprivation" means to have lost the value which might have been otherwise received for the benefit or advantage, such as the loss of the money or the wages which might have been paid for labour. The deprivation must "correspond" to the enrichment, in the sense that the Claimant was deprived of exactly the thing which the Respondent benefitted from. (Technically, if you can establish a deprivation with a corresponding benefit, you have established the Respondent's "unjust enrichment;" a constructive trust is the remedy imposed to cure an unjust enrichment.) | |||
There is one other case from the Supreme Court of Canada which is critical in understanding constructive trusts, a 1993 case called Peter v. Beblow. To get a proper understanding of the law relating to constructive trusts, you should read both Pettkus v. Becker and Peter v. Beblow. These decisions are available online from the court's website, a link to which is provided in the section Resources & Links. | |||
The following is an example of a typical situation in which a constructive trust could be found to try and explain this complex area of the law a little more plainly. Note that the circumstances in which courts have found there to be a constructive trust are fairly broad; this is just one example of a situation which might lead to a successful claim. | |||
Partner A moves into a home owned by Partner B. They live together in a marriage-like relationship, and A's role in the relationship is that of a homemaker while B works outside the home and brings home the bacon. Partner A also, out of the kindness of her heart, helps B with his web design company doing his books. | |||
Partner B doesn't pay A for A's labour; perhaps it's understood that A is helping out with a common cause, since B's company is what provides the family with its income, or perhaps A's help is just one of the things she does because she loves B. Either way, payment isn't offered and it's not asked for, as is often the case when people are in a committed relationship. | |||
Partner A's labour in the home, cooking, cleaning and tidying, allows Partner B to devote his time to the web design company, and saves him from having to hire a housekeeper and a cook, not to mention having to hire an office manager for the company. | |||
Partner A, on the other hand, is losing something. Partner A could have sold her services as a housekeeper, and launderer and a cook. Partner A could certainly have worked as an office manager for some other company. Furthermore, A has made a positive contribution to B's company and helped it thrive and prosper. | |||
Ten years pass. Partner B's company has grown in value, and the relationship comes to a tragic end when A discovers that B's trips to visit the internet service provider in Alberta were for both business and pleasure. | |||
In this example, Partner B was "unjustly enriched" by A's labour in the home and her contribution to the web design company, as he didn't have to hire an office administrator or a housekeeper. Partner A, on the other hand, lost out on ten year's worth of wages as an office administrator, and ten year's worth of wages as a housekeeper. Partner B was enriched by exactly the thing A was deprived of: her labour, and the financial value and benefit of her 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 value of the trust will often be determined by the court 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 Partner A's contributions to the company and to her labour in the home: what would it have cost to hire a housekeeper and a bookkeeper for four years; or, how much did B's company grow in value as a result of A's efforts? This is the beginning of fixing a dollar value on Partner A's interest in the company and in Partner B's house. Note that the amount the courts typically award to unmarried persons, in cases where a trust relationship is found, is usually a lot less than 50% precisely because of this mathematical calculation of enrichment and deprivation. | |||
Note also that the fact that a relationship was short may not prevent a decision that a party was unjustly enriched, particularly if the Claimant's contribution was substantial. In longer relationships, say more than six years or so, the courts have often awarded trusts equivalent to half the value of the assets, although there are exceptions where the awards have been both much lower and much higher. | |||
Again, trust claims are complex and the case law supporting and opposing such claims is massive. If you are unmarried and wish to claim against your partner's assets, it is highly recommended that you hire a lawyer to advance your claim for you. | |||
