Protecting Property and Debt in Family Law Matters: Difference between revisions

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


It's sometimes necessary to take steps to protect family property, family debt and excluded property until an agreement or order dividing assets between a couple is made. Failing to take steps to protect property can sometimes result in an asset being sold, lessened in value, used as collateral for a loan, moved to another jurisdiction, or being seized by a trustee in bankruptcy or a creditor. Most of the time it only becomes important to protect assets after a couple have separated.
This page will review some important initial steps that should be taken to secure family property and family debt, the restraining orders that can stop family property 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 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.
==Initial Steps==


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 isn't 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's fairly reasonable to take steps to protect your own interests and in most cases you probably should.


==Initial Steps==
===Take Stock of Property and Debt===


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 and owe. 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 bank accounts, RRSP and investment accounts, cars, properties, loans, lines of credit and credit cards you have may prove to be extremely useful. Even if you can't get all the account details, a record of the names of the financial institutions that are sending your spouse mail can be extremely useful.  


===Survey the Family Assets===
===Make it Clear that You've Separated===
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.


===Get a Triggering Event===
Once you've decided that your relationship can't continue, and you're sure that it can't continue, you need to separate. This doesn't mean that you and your spouse need to move into separate homes, but you need to announce your decision and you should probably do it in writing so that you have a record of the date of 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:
Under the provincial ''Family Law Act'', when separation happens each spouse takes a one-half 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. This can be critical to protect your share of the family property from creditors, your spouse's bankruptcy or court orders made in other court proceedings.  


a court's declaration that the parties have no possibilty of reconciling;
There are only a few times when a separation is a bad idea, usually when the effect of separation will limit a claim to one-half of the family property when there's a good chance that it might be more. Say, for example, that a spouse is in poor health and dying when the parties separate. The effect of separation may mean that a surviving spouse will get no more than half of the deceased spouse's estate when the spouse might have received more than half as surviving joint tenant.
the execution of a separation agreement;
a court's declaration that the marriage is a nullity; and,
an order for the parties' divorce.
There are only a few times when a triggering event is a bad idea, usually when the triggering event will cap an claim to one-half, when there's no chance that the claim will be less than one-half an a good chance that it might be more. Say, for example, that one spouse is in poor health and dying when the other spouse gets a triggering event. The triggering event means that the surviving spouse will get no more than half of the deceased spouse's estate when the survivor might have received more than half under wills and estates law.


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.
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 separating would be helpful or harmful.


===Register an Interest in Real Property===
===Register Your Interest in Property===


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.
Registering an interest in real property will stop the property from being sold and may prevent the property from 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.


also mobile homes, manufcutres homes, ppsa
====Entries under the ''Land (Spouse Protection) Act''====


====Certificates of Pending Litigation under the Land Title Act====
Married spouses and unmarried spouses may file an ''entry'' on the title of the property the family home under the provincial ''Land (Spouse Protection) Act''. The entry will prevent a spouse from transferring, selling, leasing or making a gift of the family home without the knowledge and approval of the spouse filing the entry.
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.
The great thing about these entries is that you can get one whether court proceedings have started or not. This is an ideal way to protect yourself if you only have a slight concern about your relationship or the trustworthiness of your spouse, but don't have the need to begin a proceeding just yet. The downside, of course, is that entries under this act only protect the single property that is or was used as the family home.


====Entries under the Land (Spouse Protection) Act====
====Certificates of Pending Litigation Under the ''Land Title Act''====


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.
Where a court proceeding has started in the Supreme Court, a ''certificate of pending litigation'', formerly called a ''lis pendens'', can be registered against the title of any property owned by you and your spouse 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 property, you will be entitled to register a CPL.  


The interesting thing about Entries under the Land (Spouse Protection) Act is that you can get one whenever you like as long as you are married, whether litigation has started or not. This is an ideal way to protect yourself if you only have a slight concern about your relationship or the trustworthiness of your spouse, but don't intend to sue him or her just yet.
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. This discourages and usually prevents the sale or the use of the property as collateral.


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.
You can file 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.


====Notices under the Family Relations Act====
====Notices and Financing Statements under the ''Family Law Act''====


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.
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.


D. Downloads
A ''financing statement'' can be filed in the 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.
The links below will open sample documents in a new window. You will require Adobe Acrobat Reader to view these files, a free program available for download from Adobe Software.


In this sample, our fictitious Claimant, Jane Doe, is putting a CPL against the title to a piece of property and filing an entry against the title of the family home under the Land (Spouse Protection) Act. Normally you would do one or the other, but not both.
==Financial Restraining Orders==


Land Title Act Form 33: Certificate of Pending Litigation
A ''restraining order'' is an order of the Supreme Court requiring someone to do something or to not do something. A typical restraining order relating to family assets reads something like this:
Land (Spouse Protection) Act Form A: Affidavit in support of entry
Land (Spouse Protection) Act Form B: Application for Entry
These sample documents are just that: samples. While they represent a more or less accurate picture of how Jane Doe might fill out her forms, they may not be applicable to your situation. Use them as a reference only together with the official court form. This CPL is the form used where the underlying property claim is made under the Family Relations Act. The form for unmarried couples is demonstrated at the bottom of this page.


Areas where the court form offers a choice or where you must supply information are indicated in burgundy text.
<blockquote><tt>The Respondent shall be and is hereby restrained from disposing or encumbering, or attempting to dispose of or encumber, the family property and other property at issue without the express written agreement of the Claimant or the further order of this Honourable Court.</tt></blockquote>


==Restraining Orders==
In other words, unless the Respondent comes to an agreement with the Claimant or the court makes another order, under a restraining order like this the Respondent is not allowed to sell any real property or personal 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 and will cover real and personal property in British Columbia and personal property outside of British Columbia.


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:
Remember that the Provincial Court does not have the power to make orders affecting property, including restraining orders about property.


"the Respondent shall be and is hereby restrained from disposing or encumbering, or attempting to dispose of or encumber, the family assets and other assets at issue without the express written agreement of the Claimant or the further Order of this Honourable Court."
===Restraining Orders Under the ''Family Law Act''===
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.


===Section 67 Restraining Orders===
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:


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:
<blockquote><tt>(1) On application by a spouse, the Supreme Court must make an order restraining the other spouse from disposing of any property at issue under this Part or Part 6 until or unless the other spouse establishes that a claim made under this Part or Part 6 will not be defeated or adversely affected by the disposal of the property.</tt></blockquote>


(1) On application by a party to a proceeding under this Part or Part 6, the court must make an order restraining another party to the proceeding from disposing of a family asset or any other property at issue under this Part or Part 6 until or unless the other party establishes that a claim made by the applicant under this Part or Part 6 will not be defeated or substantially impaired by the disposal of that family asset or other property.
(2) On application by a party to a proceeding under this Part or Part 6, the court may make an order for the possession, delivery, safekeeping and preservation of a family asset or other property at issue under this Part or Part 6.
(3) The court may make an order under this section before notice of the application is served on the other party or may order that notice of the application be served on the other party.
(4) On application by a party to a proceeding under this Part or Part 6, the court may vary or rescind an order made under this section on terms it considers appropriate.
A couple of important points about this section deserve mention.
A couple of important points about this section deserve mention.


The order must be granted on the application of a party, unless the application respondent can show that there are enough assets that the applicant's claim to the property won't be frustrated if the application respondent happens to sell some of the assets.
*The order ''must'' be granted on a party's application, unless the other party can show that there are enough assets that the applicant's claim to the property won't be frustrated if he or she happens to sell some of the assets.
The order can be made ex parte, without the other party knowing of the application.
*The order can be made without the other party being given notice of the application.
The order includes not just "family assets" but all assets at issue, which might include, for example, a claim against something which isn't usually considered a family asset, like an inheritance.
*The order includes not just family property but all "property at issue", which might include excluded property.
This is a powerful order and should probably be obtained whenever a claim is being made for the division of assets. Again, this is a matter of simply being prudent. You may have no cause to believe that your spouse would do something that would jeopardize your interests, but it almost always pays to be cautious.


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.
This is an important order and should probably be applied for whenever a claim is being made for the division of property. Again, this is a matter of simply being prudent. You may have no cause to believe that your spouse would do something that would jeopardize your interests, but it almost always pays to be cautious.


===Other Sources of Restraining Orders===
===Restraining Orders Under the Rules of Court===


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.
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 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.


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.
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 some 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:


==Debts, Bankruptcies and Third Party Claims==
#you have a reasonable claim against assets owned by your spouse;
#your spouse has disposed or encumbered his or her 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.


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:
=== Restraining Orders Under the ''Law and Equity Act''===


obtain a s. 57 declaration, or another kind of triggering event;
Section 39 of the provincial ''Law and Equity Act'' does pretty much the same thing as Rule 12-4 of the Supreme Court Family Rules. Section 39 says this:
register a CPL against all real property in which your spouse has an interest; and,
obtain a financial restraining order under s. 67 of the Family Relations Act, s. 39 of the Law and Equity Act or Rule 12-4 of the Supreme Court Family Rules.
These remedies are discussed above. This segment will discuss the nature of the threat posed by debts, bankruptcies and third party claims.


Assets that are owned only by your spouse, or by both of your as joint tenants, may be vulnerable to your spouse's creditors and in the event of his or her bankruptcy. Say, for example, your spouse has put up his or her car as collateral for a loan. You would normally be entitled, on divorce, to one-half the car's value as a family asset. If your spouse defaults on the loan, the car can be seized and you could find, especially where there are few other assets, that you can get no compensation for your interest in the car's value, even if you helped your spouse with the loan payments or the downpayment.
<blockquote><tt>(1) An injunction ... may be granted ... in all cases in which it appears to the court to be just or convenient that the order should be made. </tt></blockquote>
<blockquote><tt>(2) An order made under subsection (1) may be made either unconditionally or on terms and conditions the court thinks just. </tt></blockquote>
<blockquote><tt>(3) If an injunction is requested either before, at or after the hearing of a cause or matter, to prevent any threatened or apprehended waste or trespass, the injunction may be granted if the court thinks fit, whether the person against whom the injunction is sought is or is not in possession under any claim of title or otherwise or, if out of possession, does or does not claim a right to do the act sought to be restrained under any colour of title, and whether the estates claimed by both or by either of the parties are legal or equitable.</tt></blockquote>


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.
This section gives the court a fairly broad authority to make an injunctions where the injunction is justified. Much like injunctions under Rule 12-4, you will have to show that:


===Creditors===
#you have a reasonable claim against assets owned by your spouse;
#your spouse has disposed or encumbered his or her 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.


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:
===Applying for Restraining Orders Without Notice===


seize any asset put up as collateral on the loan;
The court can only make orders, including restraining orders, when a court proceeding has been started. When there is an urgent problem, as might be the case if a spouse is threatening to sell or move an asset, applications for injunctions and restraining orders can be made on little or notice to the spouse and sometimes before the spouse has even been notified of the court proceeding.
sue the debtor for the amount owing;
put a lien on property owned by the debtor;
garnish the debtor's wages;
force the sale of the debtor's property to meet the debt; or,
register a judgment against the debtor's property.
Any one of these remedies can harm the interest the other spouse has in what would otherwise be a family asset, even if the other spouse had nothing to do with how or why the debt was incurred.


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.
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 required 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 ''Morin v. Morin'' this resulted in a spouse having the injunction cancelled and getting special court costs of the application.


===Third Party Claims===
==Debts, Bankruptcies and Third Party Claims==


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.
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, 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:


As we've discussed, both spouses have a prima facie interest in all family assets, including those owned only by the other spouse. A third party claim or entitlement can result in the loss of an asset or in the loss of value of an asset. By the time the family assets are divided, without a triggering event or restraining order, those assets might very well be in the hands of someone else and no longer be available for division.
#separate, to convert the ownership of all property to a shared ownership with your spouse as tenants in common;
#register a CPL against all real property in which your spouse has an interest; and,
#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.


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.
The problem here is that property that is owned only by your spouse, or by both of you as joint tenants, may be vulnerable to your spouse's creditors and in the event of his or her bankruptcy. Say, for example, your spouse has put up his or her car as collateral for a loan. You would normally be entitled to one-half the car's value as a family property, assuming the car was bought during your relationship. If your spouse defaults on the loan, the car can be seized and you could find, especially where there are few other assets, that you can get no compensation for your interest in the car's value once the lender's default fees and legal fees are added on.


===Bankruptcy===
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. 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.


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.
===Creditors===


If an asset is a family asset, the transfer of the asset to the trustee may deprive the non-bankrupt spouse of any interest he or she might have in that asset and, since the owning spouse is bankrupt, he or she won't have other financial resources from which to compensate the non-bankrupt spouse for the lost interest.
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. 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.
#seize any asset put up as collateral on the loan;
#sue the debtor for the amount owing;
#put a lien on property owned by the debtor;
#garnish the debtor's wages;
#force the sale of the debtor's property to meet the debt; or,
#register a judgment against the debtor's property.


==Dealing with Assets outside British Columbia==
Any one of these remedies can harm the interest the other spouse has in what would otherwise be family property, even if the other spouse had nothing to do with how or why the debt was incurred. The effect of separation can help to shield the other spouse's presumptive one-half interest in the family property from creditors and limit their ability to recover to the half of the property owed by the debtor 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.
===Third Party Claims===


There is an exception to this general rule, but bear with me, this is all a bit complex.
Your spouse might be liable for damages or debt to someone in a court proceeding unrelated to your relationship. Your spouse may also have made a deal with someone outside the family that concerns the family property. These people may have a legitimate claim against the family property. 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.


The Supreme Court of British Columbia can make an order requiring a person to do or not do something when that person accepts the authority of the court, even where that person lives outside the province.
As we've discussed, both spouses have a presumptive interest in the family property, including property only by the other spouse as long as it qualifies as family property. A third party claim or entitlement can result in the loss of an asset or in the loss of value of property. By the time the family property are divided, without separation or restraining order, the assets might very well be in the hands of someone else and no longer be available for division.
A persona is deemend to have "accepted the authority of the court" by responding to a law suit. Once an out-of-province Respondent files a Response to Family Claim in reply to the Claimant's Notice of Family Claim, he or she has accepted the jurisdiction of the court to deal with the litigation. This is called "attorning to the jurisidiction."
When someone attorns to the jurisdiction of the courts of British Columbia, they submit to the court's authority. The court still doesn't have the jurisdiction to make orders about things located outside the province, but it does have the jurisdiction to make orders about the person located outside the province. This is called "in personam jursidiction."
A court with in personam jurisidiction over someone can make orders requiring the person to do or not do things involving certain kinds of things located outside the province, such as assets like bank accounts, stocks, investment accounts and similar assets that aren't real estate. These assets are called "movable assets."
Whether a court has in personam jurisidiction 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 is called an "immovable asset."
The Provincial Court of British Columbia lacks the jurisdiction to deal with people, personal property and real property locted outside the province.
The upshot of all of this is the following general rules:


the courts of British Columbia cannot deal with real property located in other provinces or outside of Canada;
===Bankruptcy===
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,
the Provincial (Family) Court cannot deal with out-of-province issues at all.
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.
 
===Real Property===


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.
When someone declares bankruptcy, the ownership of his or her property is transferred to a trustee in bankruptcy. 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 his or her 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.


The courts of this province will, however, usually compensate a spouse for an interest in out-of-province property by reapportioning the property that the court can deal with, property located inside British Columbia, to compensate for the property that it can't deal with. Here's an example:
If an asset is family property, the transfer of the asset to the trustee may deprive the other spouse of any interest he or she might have in that asset and, since the owning spouse is bankrupt, he or she may not have any other financial resources from which to compensate the non-bankrupt spouse for the lost interest.


Spouse A has a farm in Flin Flon, Manitoba worth $50,000. Spouse A and Spouse B both own the family home in Vernon, British Columbia worth $100,000. Assuming both properties are family assets and the court was to divide the family assets equally, 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.
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.
Since the court can't make an order requiring the sale or transfer of the property in Flin Flon, an equal division of the assets in the jurisdiction would give each spouse $50,000, half the value of the family home, but this would short Spouse B of his interest in the farm. To avoid this unfairness, the could simply reapportion the family home in Vernon in favour of Spouse B, and give him a $75,000 share rather than an equal share.
This would reapportion the value of the property the court can deal with (the family home) to compensate Spouse B for the interest Spouse B ought to have in the property the court can't deal with (the farm). Spouse A is still left with half of the family assets, as she remains the sole owner of the farm, $50,000, and gets a $25,000 share of the family home, for a total property interest of $75,000.
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 United Kingdom case in which the relief was first granted, Mareva Compania Naviera S.A. v. International Bulkcarriers S.A.) To qualify for this order, you must:


show a strong case for your entitlement to a share of those assets;
==Protecting Property Outside British Columbia==
show that there is a real risk that the other party will dispose of those assets before a final order is made; and,
guarantee that you will make good any harm the other party suffers if the order is made.
Mareva injunctions are available to married and unmarried couples.


===Financial Assets===
This issue is a bit difficult, so please bear with me. The law that deals with the division of property between spouses in this province is the ''Family Law Act''. Because the jurisdiction of the government of British Columbia is generally limited to the province of British Columbia, the government cannot usually make laws that affect people and things located outside of British Columbia. For the same reason, the courts of British Columbia usually only have the jurisdiction to deal with things located inside the province of British Columbia.


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.
There are some exceptions to these general rules.


Section 67 orders are discussed above. Inside British Columbia, a s. 67 order will stop a spouse from dealing with everying that qualifies as a family asset, including real property. Outside British Columbia, a s. 67 restraining order will only stop a spouse from dealing with movable assets, such as RRSPs, stocks, bank accounts, chattels and so forth.
*The Supreme Court of British Columbia can make an order requiring a person to do or not do something when that person accepts the authority of the court, even where that person lives outside the province.
*A person is deemed to have accepted the authority of the court by responding to a court proceeding. Once an out-of-province Respondent files a Response to Family Claim in reply to the Claimant's Notice of Family Claim, he or she has accepted the jurisdiction of the court to deal with the litigation. This is called ''attorning'' to the jurisdiction.
*When someone attorns to the jurisdiction of the courts of British Columbia, they submit to the court's authority. The court still may not have the authority to make orders about things located outside the province, but it does have the authority to make orders about the person located outside the province. This is called "''in personam'' jurisdiction".
*A court with ''in personam'' jurisdiction over a person can make orders requiring the person to do or not do things involving certain kinds of things located outside the province, such as assets like bank accounts, stocks, investment accounts and similar assets that aren't real estate. These assets are called ''movable assets''.
*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 court can be reluctant to issue a s. 67 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. The Court of Appeal however, in a 2002 case called Boyd v. Boyd (no relation), confirmed that the court can make in personam restraining orders which are effective against movable assets located outside the province.
The upshot of all of this is the following general rules:


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.
#the courts of British Columbia generally cannot deal with real property located in other provinces or outside of Canada;
#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,
#the Provincial Court cannot deal with out-of-province issues at all.


==Unmarried Couples and the Protection of Assets==
However, the ''Family Law Act'' contains some provisions that are meant to give the court ''in rem'' jurisdiction out of province under certain circumstances and, if those circumstances are met, allow the court to make an order restraining a person from disposing of property located outside the province. Although it remains to be seen how effective this legislation will be in imposing on the authority of another jurisdiction, the act's out of province restraining orders are discussed below.


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.
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.


On the bright side, two restraining orders are available to both married spouses and unmarried couples, which can have an effect much like s. 67 orders. Rule 12-4 of the Supreme Court Family Rules gives the court the authority to make a general restraining order, also known as an "injunction," to force someone to do something or not do something. The same authority is given by s. 39 of the provincial Law and Equity Act. (Section 67 restraining orders are discussed in much detail above.)
===Immovable Property: Real Property===


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.
====The General Rule====


===Injunctions===
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.


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:
The courts of this province will, however, usually compensate a spouse for an interest in out-of-province property by reapportioning the property that the court can deal with, property located inside British Columbia, to compensate for the property that it can't deal with. Here's an example:


the person applying for the order has a reasonable claim against the other person's assets;
Spouse A has a farm in Flin Flon, Manitoba worth $50,000. Spouse A and Spouse B both own the family home in Vernon, British Columbia worth $100,000. Assuming both properties are family assets and the court was to divide the family assets equally, 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.
the person who owns the assets has disposed or encumbered those assets, or is likely to sell or encumber those assets; and,
Since the court can't make an order requiring the sale or transfer of the property in Flin Flon, an equal division of the assets in the jurisdiction would give each spouse $50,000, half the value of the family home, but this would short Spouse B of his interest in the farm. To avoid this unfairness, the could simply reapportion the family home in Vernon in favour of Spouse B, and give him a $75,000 share rather than an equal share.
the inconvenience suffered by the owner as a result of the injunction is less severe than the inconvenience the applicant will suffer if the injunction isn't granted.
This would reapportion the value of the property the court can deal with (the family home) to compensate Spouse B for the interest Spouse B ought to have in the property the court can't deal with (the farm). Spouse A is still left with half of the family assets, as she remains the sole owner of the farm, $50,000, and gets a $25,000 share of the family home, for a total property interest of $75,000.
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.
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.'') To qualify for this order, you must:
 
===The Law and Equity Act===
 
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:
 
(1) An injunction ... may be granted ... in all cases in which it appears to the court to be just or convenient that the order should be made.
(2) An order made under subsection (1) may be made either unconditionally or on terms and conditions the court thinks just.
(3) If an injunction is requested either before, at or after the hearing of a cause or matter, to prevent any threatened or apprehended waste or trespass, the injunction may be granted if the court thinks fit, whether the person against whom the injunction is sought is or is not in possession under any claim of title or otherwise or, if out of possession, does or does not claim a right to do the act sought to be restrained under any colour of title, and whether the estates claimed by both or by either of the parties are legal or equitable.
This section gives the court a fairly broad authority of make injunctions where such injunctions are justified. Much like injunctions under Rule 12-4, you will have to show that:


you have a reasonable claim against the other person's assets;
#show a strong case for your entitlement to a share of those assets;
the other person has disposed or encumbered his or her assets or is likely do so; and,
#show that there is a real risk that the other party will dispose of those assets before a final order is made; and,
that the inconvenience suffered by the owner as a result of the injunction is less severe than the inconvenience you will suffer if the injunction isn't granted.
#guarantee that you will make good any harm the other party might suffer if the order is made.
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.


===Certificates of Pending Litigation===
====The ''Family Law Act''====


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.
Under s. 109(2)


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.
===Movable Property: Financial Assets===


D. Downloads
Where a spouse has accepted the court's authority, 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''. Movable property includes things like like bank accounts, stocks, investment accounts and similar assets that aren't real estate and can be taken or transferred from place to place.
The link below will open a sample document in a new window. You will require Adobe Acrobat Reader to view this file, a free program available for download from Adobe Software.


In this sample, our fictitious Claimant, Jane Doe, is putting a CPL against the title to a piece of property owned by her partner, John Smith.
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.


Land Title Act Form 31: Certificate of Pending Litigation
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 ''Boyd v. Boyd'', the Court of Appeal confirmed that the court can make ''in personam'' restraining orders which are effective against movable assets located outside the province.
This sample document is just that: a sample. While it represents a more or less accurate picture of how Jane Doe might fill out her form, it may not be applicable to your situation. Use it as a reference only together with the official court form. This CPL is the form used where the underlying property claim is not made under the Family Relations Act.


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


==Further Reading in this Chapter==
==Further Reading in this Chapter==

Revision as of 15:31, 27 March 2013

This page will review some important initial steps that should be taken to secure family property and family debt, the restraining orders that can stop family property 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.

Initial Steps

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 isn't 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's fairly reasonable to take steps to protect your own interests and in most cases you probably should.

Take Stock of Property and Debt

Firstly, you might want to take a careful, but not too obvious, tally of what each of you own and owe. 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 bank accounts, RRSP and investment accounts, cars, properties, loans, lines of credit and credit cards you have may prove to be extremely useful. Even if you can't get all the account details, a record of the names of the financial institutions that are sending your spouse mail can be extremely useful.

Make it Clear that You've Separated

Once you've decided that your relationship can't continue, and you're sure that it can't continue, you need to separate. This doesn't mean that you and your spouse need to move into separate homes, but you need to announce your decision and you should probably do it in writing so that you have a record of the date of separation.

Under the provincial Family Law Act, when separation happens each spouse takes a one-half 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. This can be critical to protect your share of the family property from creditors, your spouse's bankruptcy or court orders made in other court proceedings.

There are only a few times when a separation is a bad idea, usually when the effect of separation will limit a claim to one-half of the family property when there's a good chance that it might be more. Say, for example, that a spouse is in poor health and dying when the parties separate. The effect of separation may mean that a surviving spouse will get no more than half of the deceased spouse's estate when the spouse might have received more than half as surviving joint tenant.

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 separating would be helpful or harmful.

Register Your Interest in Property

Registering an interest in real property will stop the property from being sold and may prevent the property from 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.

Entries under the Land (Spouse Protection) Act

Married spouses and unmarried spouses may file an entry on the title of the property the family home under the provincial Land (Spouse Protection) Act. The entry will prevent a spouse from transferring, selling, leasing or making a gift of the family home without the knowledge and approval of the spouse filing the entry.

The great thing about these entries is that you can get one whether court proceedings have started or not. This is an ideal way to protect yourself if you only have a slight concern about your relationship or the trustworthiness of your spouse, but don't have the need to begin a proceeding just yet. The downside, of course, is that entries under this act only protect the single property that is or was used as the family home.

Certificates of Pending Litigation Under the Land Title Act

Where a court proceeding has started in the Supreme Court, a certificate of pending litigation, formerly called a lis pendens, can be registered against the title of any property owned by you and your spouse 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 property, 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. This discourages and usually prevents the sale or the use of the property as collateral.

You can file 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.

Notices and Financing Statements under the Family Law Act

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 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.

Financial Restraining Orders

A restraining order is an order of the Supreme Court requiring someone to do something or to not do something. A typical restraining order relating to family assets reads something like this:

The Respondent shall be and is hereby restrained from disposing or encumbering, or attempting to dispose of or encumber, the family property and other property at issue without the express written agreement of the Claimant or the further order of this Honourable Court.

In other words, unless the Respondent comes to an agreement with the Claimant or the court makes another order, under a restraining order like this the Respondent is not allowed to sell any real property or personal 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 and will cover real and personal property in British Columbia and personal property outside of British Columbia.

Remember that the Provincial Court does not have the power to make orders affecting property, including restraining orders about property.

Restraining Orders Under the Family Law Act

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:

(1) On application by a spouse, the Supreme Court must make an order restraining the other spouse from disposing of any property at issue under this Part or Part 6 until or unless the other spouse establishes that a claim made under this Part or Part 6 will not be defeated or adversely affected by the disposal of the property.

A couple of important points about this section deserve mention.

  • The order must be granted on a party's application, unless the other party can show that there are enough assets that the applicant's claim to the property won't be frustrated if he or she happens to sell some of the assets.
  • The order can be made without the other party being given notice of the application.
  • The order includes not just family property but all "property at issue", which might include excluded property.

This is an important order and should probably be applied for whenever a claim is being made for the division of property. Again, this is a matter of simply being prudent. You may have no cause to believe that your spouse would do something that would jeopardize your interests, but it almost always pays to be cautious.

Restraining Orders Under the Rules of Court

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 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.

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 some 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:

  1. you have a reasonable claim against assets owned by your spouse;
  2. your spouse has disposed or encumbered his or her assets or is likely do so; and,
  3. 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.

Restraining Orders Under the Law and Equity Act

Section 39 of the provincial Law and Equity Act does pretty much the same thing as Rule 12-4 of the Supreme Court Family Rules. Section 39 says this:

(1) An injunction ... may be granted ... in all cases in which it appears to the court to be just or convenient that the order should be made.

(2) An order made under subsection (1) may be made either unconditionally or on terms and conditions the court thinks just.

(3) If an injunction is requested either before, at or after the hearing of a cause or matter, to prevent any threatened or apprehended waste or trespass, the injunction may be granted if the court thinks fit, whether the person against whom the injunction is sought is or is not in possession under any claim of title or otherwise or, if out of possession, does or does not claim a right to do the act sought to be restrained under any colour of title, and whether the estates claimed by both or by either of the parties are legal or equitable.

This section gives the court a fairly broad authority to make an injunctions where the injunction is justified. Much like injunctions under Rule 12-4, you will have to show that:

  1. you have a reasonable claim against assets owned by your spouse;
  2. your spouse has disposed or encumbered his or her assets or is likely do so; and,
  3. 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.

Applying for Restraining Orders Without Notice

The court can only make orders, including restraining orders, when a court proceeding has been started. When there is an urgent problem, as might be the case if a spouse is threatening to sell or move an asset, applications for injunctions and restraining orders can be made on little or notice to the spouse and sometimes before the spouse has even been notified of the court proceeding.

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 required 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 Morin v. Morin this resulted in a spouse having the injunction cancelled and getting special court costs of the application.

Debts, Bankruptcies and Third Party Claims

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, 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:

  1. separate, to convert the ownership of all property to a shared ownership with your spouse as tenants in common;
  2. register a CPL against all real property in which your spouse has an interest; and,
  3. 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.

The problem here is that property that is owned only by your spouse, or by both of you as joint tenants, may be vulnerable to your spouse's creditors and in the event of his or her bankruptcy. Say, for example, your spouse has put up his or her car as collateral for a loan. You would normally be entitled to one-half the car's value as a family property, assuming the car was bought during your relationship. If your spouse defaults on the loan, the car can be seized and you could find, especially where there are few other assets, that you can get no compensation for your interest in the car's value once the lender's default fees and legal fees are added on.

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. 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

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:

  1. seize any asset put up as collateral on the loan;
  2. sue the debtor for the amount owing;
  3. put a lien on property owned by the debtor;
  4. garnish the debtor's wages;
  5. force the sale of the debtor's property to meet the debt; or,
  6. register a judgment against the debtor's property.

Any one of these remedies can harm the interest the other spouse has in what would otherwise be family property, even if the other spouse had nothing to do with how or why the debt was incurred. The effect of separation can help to shield the other spouse's presumptive one-half interest in the family property from creditors and limit their ability to recover to the half of the property owed by the debtor spouse.

Third Party Claims

Your spouse might be liable for damages or debt to someone in a court proceeding unrelated to your relationship. Your spouse may also have made a deal with someone outside the family that concerns the family property. These people may have a legitimate claim against the family property. 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.

As we've discussed, both spouses have a presumptive interest in the family property, including property only by the other spouse as long as it qualifies as family property. A third party claim or entitlement can result in the loss of an asset or in the loss of value of property. By the time the family property are divided, without separation or restraining order, the assets might very well be in the hands of someone else and no longer be available for division.

Bankruptcy

When someone declares bankruptcy, the ownership of his or her property is transferred to a trustee in bankruptcy. 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 his or her 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.

If an asset is family property, the transfer of the asset to the trustee may deprive the other spouse of any interest he or she might have in that asset and, since the owning spouse is bankrupt, he or she may not have any other financial resources from which to compensate the non-bankrupt spouse for the lost interest.

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.

Protecting Property Outside British Columbia

This issue is a bit difficult, so please bear with me. The law that deals with the division of property between spouses in this province is the Family Law Act. Because the jurisdiction of the government of British Columbia is generally limited to the province of British Columbia, the government cannot usually make laws that affect people and things located outside of British Columbia. For the same reason, the courts of British Columbia usually only have the jurisdiction to deal with things located inside the province of British Columbia.

There are some exceptions to these general rules.

  • The Supreme Court of British Columbia can make an order requiring a person to do or not do something when that person accepts the authority of the court, even where that person lives outside the province.
  • A person is deemed to have accepted the authority of the court by responding to a court proceeding. Once an out-of-province Respondent files a Response to Family Claim in reply to the Claimant's Notice of Family Claim, he or she has accepted the jurisdiction of the court to deal with the litigation. This is called attorning to the jurisdiction.
  • When someone attorns to the jurisdiction of the courts of British Columbia, they submit to the court's authority. The court still may not have the authority to make orders about things located outside the province, but it does have the authority to make orders about the person located outside the province. This is called "in personam jurisdiction".
  • A court with in personam jurisdiction over a person can make orders requiring the person to do or not do things involving certain kinds of things located outside the province, such as assets like bank accounts, stocks, investment accounts and similar assets that aren't real estate. These assets are called movable assets.
  • 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 upshot of all of this is the following general rules:

  1. the courts of British Columbia generally cannot deal with real property located in other provinces or outside of Canada;
  2. 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,
  3. the Provincial Court cannot deal with out-of-province issues at all.

However, the Family Law Act contains some provisions that are meant to give the court in rem jurisdiction out of province under certain circumstances and, if those circumstances are met, allow the court to make an order restraining a person from disposing of property located outside the province. Although it remains to be seen how effective this legislation will be in imposing on the authority of another jurisdiction, the act's out of province restraining orders are discussed below.

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.

Immovable Property: Real Property

The General Rule

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.

The courts of this province will, however, usually compensate a spouse for an interest in out-of-province property by reapportioning the property that the court can deal with, property located inside British Columbia, to compensate for the property that it can't deal with. Here's an example:

Spouse A has a farm in Flin Flon, Manitoba worth $50,000. Spouse A and Spouse B both own the family home in Vernon, British Columbia worth $100,000. Assuming both properties are family assets and the court was to divide the family assets equally, 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. Since the court can't make an order requiring the sale or transfer of the property in Flin Flon, an equal division of the assets in the jurisdiction would give each spouse $50,000, half the value of the family home, but this would short Spouse B of his interest in the farm. To avoid this unfairness, the could simply reapportion the family home in Vernon in favour of Spouse B, and give him a $75,000 share rather than an equal share. This would reapportion the value of the property the court can deal with (the family home) to compensate Spouse B for the interest Spouse B ought to have in the property the court can't deal with (the farm). Spouse A is still left with half of the family assets, as she remains the sole owner of the farm, $50,000, and gets a $25,000 share of the family home, for a total property interest of $75,000. 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.) To qualify for this order, you must:

  1. show a strong case for your entitlement to a share of those assets;
  2. show that there is a real risk that the other party will dispose of those assets before a final order is made; and,
  3. guarantee that you will make good any harm the other party might suffer if the order is made.

The Family Law Act

Under s. 109(2)

Movable Property: Financial Assets

Where a spouse has accepted the court's authority, 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. Movable property includes things like like bank accounts, stocks, investment accounts and similar assets that aren't real estate and can be taken or transferred from place to place.

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 Boyd v. Boyd, the Court of Appeal confirmed that the court can make in personam restraining orders which are effective against movable assets located outside the province.

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.

Further Reading in this Chapter

  • bulleted list of other pages in this chapter, linked

Page Resources and Links

Legislation

  • bulleted list of linked legislation referred to in page

Family Law Act, Divorce Act, Constutution Act 1867 at least

Links

  • bulleted list of linked external websites referred to in page