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

{{JP Boyd on Family Law TOC|expanded = assets}}

This chapter will review some important initial steps that should be taken to secure family assets, the restraining orders that can stop family assets from being disposed of, the problems posed by third party claims such as debts and bankruptcy, and how assets located outside British Columbia can be protected.

This chaper will also review some of the steps available to unmarried couples to protect property.

It may seem at bit neurotic to be worrying about assets when your relationship is falling apart, but this is precisely the time to be concerned. It certainly is not the case that every spouse is busy squirrelling money away in Switzerland or Antigua, or hatching plans to transfer the title of the family home to a loan shark from Las Vegas, but there are certain steps you should take regardless of how well you think you know your spouse. There is, as they say, no sense in bolting the barn door after the horses are gone. It is quite reasonable to take steps to protect your own interests and it is only prudent that you should do so.

Firstly, you might want to take a careful, but not too obvious, tally of what each of you own. This might be difficult if you and your spouse keep separate bank accounts and maintain your own investments, but make your best efforts. A list of the RRSPs, stocks, investments, bonds, GICs, cars, properties, and bank accounts you have may prove to be extemely useful. Even if you can't get all the account details, a record of the names of the financial institutions which are sending your spouse mail can be extremely useful. The How do I ? section has more tips about preparing for separation.

Once you have separated and an action has started, make sure a triggering event happens as soon as possible. A triggering event crystallizes each spouse's presumptive one-half interest in the family assets as tenants in common and can be critical to protect your one-half of the property from creditors, bankruptcy, or court orders made in unrelated actions. The four triggering events, which are described in more detail in the first chapter of this section, Family Assets, are:

While it's always a good idea to consult with a lawyer if you have a family law problem, be especially sure to do so if you're not certain whether a triggering event would be helpful or harmful.

Registering an interest in real property will stop the asset from being sold and may stop the asset being borrowed against. The two most common ways to do this are by filing a Certificate of Pending Litigation under the Land Title Act or an Entry under the Land (Spouse Protection) Act with the Land Title and Survey Authority.

Where real property is involved and an action has started, you should register a CPL, formerly called a lis pendens, against the title of the property at the Land Title and Survey Authority. As long as you have asked for a CPL in your Notice of Family Claim or Counterclaim and made a claim for the division of family assets, you will be entitled to register a CPL. The effect of a CPL is to announce to anyone interested in the property, such as a mortgagee or a creditor or a potential buyer, that ownership of the property may change as a result of the litigation, discouraging the sale or the use of the property as collateral.

You can file for your CPL at the same time as you file your Notice of Family Claim or Counterclaim. The registry will stamp your CPL and you must take the stamped CPL and file it in the Land Title and Survey Authority together with a copy of your Notice of Family Claim or Counterclaim.

If, for some reason, you cannot obtain a CPL, you may be able to file an Entry with the Land Title and Survey Authority against the title of the matrimonial home under the provincial Land (Spouse Protection) Act. The Entry will prevent the your spouse from transferring, selling, leasing or making a gift of the family home without your consent.

The protection an Entry gives is only available to married spouses. The protection will end when an order for divorce is pronounced and the parties are no longer "spouses." An Entry under the Land (Spouse Protection) Act only protects the family home, not any other property the couple might own.

Married spouses who have made 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. 63 of the Family Relations Act. The notice 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 removing the notice.

Areas where the court form offers a choice or where you must supply information are indicated in burgundy text.

A restraining order is a court order requiring someone to do something or to not do something. A typical restraining order relating to family assets reads something like this:

This choice bit of legalese boils down to this: unless the Respondent comes to an agreement with the Claimant or the court makes another order, the Respondent is not allowed to sell any property or use that property as collateral for a loan or a mortgage. An order on terms like these is usually all that will be necessary for most couples in most circumstances. It covers real property located in British Columbia as well as personal property located in British Columbia and beyond.

The easiest way for married spouses to obtain a financial restraining order is to apply for an order under s. 67 of the Family Relations Act. This section states that:

This restraining order is only available to married couples. Unmarried couples can get a similar sort of order under Rule 12-4 of the Supreme Court Family Rules.

Rule 12-4 of the Supreme Court Family Rules gives the court the authority to make a general restraining order, also called an injunction, to force someone to do something or not do something. The same authority is given to the court by s. 39 of the provincial Law and Equity Act. This can include, for example, a restraining order identical to that provided for in s. 67 of the Family Relations Act; you're just not asking for the order under that particular act, you're asking for it under the Law and Equity Act or the rules of court.

These types of restraining order are discussed more fully below, in the segments dealing with assets located outside British Columbia and with unmarried couples and the protection of assets.

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

Your spouse's creditors or trustee in bankruptcy will not usually be able 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 co-signing or guaranteeing a loan, or using a secondary credit card on your spouse's account.

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 triggering event can help to shield the innocent spouse's presumptive one-half interest in the family assets from creditors and limit their ability to recover to the other half of the family assets.

Your spouse might be liable for damages or debt to someone in a legal action unrelated to your divorce. Your spouse may also have made a deal with someone outside the family that concerns the family assets. Those people, people who are not parties to your action against your spouse, may have a legitimate claim against the family assets. The problem is that even though their claim or entitlement may be restricted to property owned by your spouse in his or her name alone, your interest in that property may be lost if a third party gets there first.

A triggering event can help to shield the innocent spouse's presumptive one-half interest in the family assets from third parties and limit their ability to recover to the other half of the family assets. A restraining order, in this case a restraining order against the third party, can temporarily suspend the third party's ability to realize their claim against the family assets.

When someone declares bankruptcy, the ownership of his or her assets is transferred to a trustee in banktruptcy. The trustee's job is to tally up the list of the bankrupt's debts and then sell as much of the bankrupt's property as is necessary to satisfy the creditors. This may include almost all property registered in the bankrupt's name, but will exclude a few specific assets like pensions, clothing and work tools.

A trustee in bankruptcy cannot take property that doesn't belong to the bankrupt. A triggering event obtained before bankruptcy will prevent the trustee from dealing with the other spouse's one-half interest in the family assets, including assets registered in only the name of the bankrupt spouse.

This issue is a bit difficult. The only piece of legislation which deals with the division of assets between married spouses in this province is the Family Relations Act. Because the jurisdiction of the government of British Columbia is limited to the province of British Columbia, the government cannot make legislation that effects people and things located outside of British Columbia. For the same reason, the courts of British Columbia only have the jurisdiction to deal with things located inside the province of British Columbia.

This area of the law is extremely complex, and you really should consider hiring a lawyer to help you whenever you have an interest in assets located outside the province.

Generally speaking, subject to the exception discussed below, there is nothing that can be done to stop someone from selling or otherwise dealing with real property located outside of British Columbia, even property that would normally qualify as a family asset. Usually, the only way to protect that asset from sale or being used as collateral is to start a law suit in the jurisdiction in which the the property is located.

Mareva injunctions are available to married and unmarried couples.

Where a spouse has accepted the court's authority, the court can make a restraining order stopping the spouse from disposing of liquid assets located outside of British Columbia under s. 67 of the Family Relations Act.

If a s. 67 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.

Unmarried couples are expressly excluded from the two parts of the Family Relations Act that deal with the division of property. Unfortunately, the most common and simplest way of protecting assets, a financial restraining order under s. 67 of the act, is in one of these parts.

Unmarried couples can also register a Certificate of Pending Litigation against the title of real property at the Land Title and Survey Authority in just the same way that married spouses can, but using a slightly different court form.

Rule 12-4 says little more that "the court can issue an injunction." A 1986 case of the British Columbia Court of Appeal, British Columbia v. Wale, offers a litle more guidance. In that case, the court held that someone applying for an injunction had to prove three things. In a family law context involving unmarried parties, these are that:

If you are applying for an injunction without notice to the other party, the court will required that you make full and complete disclosure of all of the relevant facts, even 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.

Section 39 of the provincial Law and Equity Act offers much the same relief as Rule 12-4 of the Supreme Court Family Rules. Section 39 reads, in part, as follows:

If you are applying for an injunction without notice to the other party, the court will required that you make full and complete disclosure of all of the relevant facts, even 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.

Where real property is involved and an action has started, an unmarried party can register a Certificate of Pending Litigation, formerly called a lis pendens, against the property at issue with the Land Title and Survey Authority. As long as you have asked for a CPL in your Notice of Family Claim or Counterclaim, you will be entitled to register this document in the Land Title and Survey Authority. The effect of a CPL is to announce to anyone interested in the property, such as a mortgagee or a creditor or a potential buyer, that the title to the property may change as a result of the litigation you are involved in.

Areas where the court form offers a choice or where you must supply information are indicated in burgundy text.

==Further Reading in this Chapter==