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

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

If spouses are able to agree on how their property and debts will be divided, they can make a separation agreement setting out the terms of their agreement. However, if they can't agree the court will make an order dividing their property and debt for them after court proceedings are started.

==Introduction==

Part 5 of the ''Family Law Act'' talks about the division of family property and family debt between spouses. It says what counts as shared family property and family debt, and which property is excluded from family property. It talks about when family property and family debt can be divided unequally and the circumstances in which excluded property may be divided between spouses. Part 6 talks about how pensions, which Part 5 says are family property, get divided between spouses. This is how Part 5 works...

Interestingly, there isn't a section that out and out says "the court should make orders dividing family property and family debt equally"; you have to figure this out from s. 81, which says that each spouse should have half of the family property and family debt, and from s. 94, which says that the court can make orders dividing family property and family debt.

Here's a step-by-step guide to Part 5. The discussions that follow will go into things in more detail.

<blockquote>To divide property and debt under the ''Family Law Act'', you first have to figure out whether you're a "spouse" as defined by s. 3(1)(a) or 3(1)(b)(i). You must either be married or have lived with your partner in a marriage-like relationship for at least two years.</blockquote>

'''Step Two'''

<blockquote>Now you have to figure out whether there's ''another court'' somewhere outside of British Columbia that has the authority to make an order affecting you, your spouse and your property. Most of the time the answer to this question will be no, however if:</blockquote>

<blockquote>there may be a problem. If another court can make an order, you then have to figure out whether the courts of British Columbia should be hearing your case or not under s. 106.</blockquote>

<blockquote>Property and debt that you got ''after you separated'' is generally the separate property of each spouse, with two main exceptions:</blockquote>

:#debt incurred after separation to maintain family property is family debt.

<blockquote>Property you got ''during your relationship'' is generally family property, except for certain kinds of property that are excluded from family property. These include:</blockquote>

<blockquote>Property and debt that you got ''before your relationship'' is generally excluded property and personal debt.</blockquote>

<blockquote>Finally, you have to think about whether there's a reason to share in some or all of the ''excluded property''. Excluded property can be divided if there's property outside of British Columbia that ought to be family property but can't easily be divided or if it would be "significantly unfair" not to share excluded property bearing in mind the factors listed in s. 96(b). If there's no reason to share excluded property, carry on. If it there is a reason to share that property, then you've got to figure out what a fair division looks like; good luck.</blockquote>

Under the ''Family Law Act'', a person with standing as a "spouse" under s. 3 may apply, within the two-year time limit in s. 198, for a division of property under s. 94(1). Where another court may also make an order for the division of property, the court here must first determine whether it should go ahead under s. 106 and, if so, it must next determine what law it should apply under s. 108. However, where no other court may make an order respecting property, the court here may make orders dividing property and debt under Part 5 of the act without any more complications.

The usual order under Part 5 is an order that decides which property is family property and which debt is family debt, and then divides them both equally. However, in some circumstances the court can divide family property and family debt unequally; in others the court can even divide excluded property between spouses.

A spouse who is married or has lived with his or her spouse in a marriage-like relationship can start a court proceeding in British Columbia and ask for orders about the division of property and debt. There's no rule which says that a person who starts a court proceeding in British Columbia must live in British Columbia, but there must be some sort of connection with this province and the court proceeding. Maybe the other spouse lives here. Maybe the property or debt is here. Maybe British Columbia is where the spouses lived for most of their relationship. Either way, there must be some connection between the court proceeding and British Columbia.

However, where another court might be able to make orders about the same people and the same property, the court here must decide:

#if it should make orders, the law it should apply in dividing the property and debt.

''You should skip this discussion if no court other than the court of British Columbia can make orders about you, your spouse and your property.''

In other words, the court here can make an order if:

#if there is a "real and substantial connection" between this province and the proceeding.

In other words, there is a "real and substantial connection" between this province and a court proceeding, which may let the court here make orders about the division of property and debt, if:

#the court proceeding includes a claim under the ''Divorce Act'' (the reason for this factor is that the ''Divorce Act'' requires a spouse to have lived in the province where he or she makes a claim under the act for at least one year before the court proceeding is started).

This is a little harder to boil down, but these factors essentially ask the court to think about what is cheapest, fastest and fairest for the spouses and requires the least number of court proceedings.

''You should skip this discussion if no court other than the court of British Columbia can make orders about you, your spouse and your property.''

Section 108 is just as complicated as s. 106 was, but this is what it all comes down to.

#under s. 108(5), if neither of the first two circumstances apply, the law the court must use is the "applicable internal law."

In other words, the "applicable internal law" that should be used to divide property and debt between spouses is:

#if the spouses never lived together, the law of the place where the spouse making the claim for the division of property normally lives.

In the right circumstances, the "applicable internal law" could be the ''Family Law Act''!

Section 97 is the key to Part 5 of the ''Family Law Act'' and gives the court its general power to make orders about the division of property and debt. Under this section, the court may:

#make orders transferring property to a spouse.

Under s. 97, the court can make whatever orders are needed to equally divided family property and family debt between spouses, whatever extra orders are needed to divide family property and family debt unequally under s. 95 and whatever extra orders are needed to divide excluded property under s. 96.

An ''interim order'' is a temporary order made after a court proceeding has started and before it has wrapped up with a trial or a settlement. Under s. 88, a spouse can apply to court for an interim order about property at any time until a final order or a final agreement has been made about the division of property and debt.

Under s. 89, the court can make an order for the interim distribution of some of the family property to pay for:

#the cost of expert's reports, like needs of the child assessments under s. 211, property assessments or business valuation.

Under s. 90, the court can make an order that one spouse have the exclusive right to live in the family home and use the property kept at the family home. The court will make these orders if it's no longer possible for the spouses to share the home and if the convenience to the spouse who's staying in the home outweighs the inconvenience to the spouse who's being made to leave.

Under s. 91(2)(a), the court make make other orders "for the possession, delivery, safekeeping and preservation of property". This might include orders that a spouse must return personal property to the other spouse or that a spouse will have the sole use of personal property, like a car that's necessary to go to work or take the kids to school.

Under s. 91(1) and (2), the court can make some really important orders that are intended to freeze the any property that is at issue in the court proceeding, including family property and property that might be excluded property, until the property is finally divided by an order or an agreement.

A couple of important points about this section deserve mention.

#the order includes not just "family property" but all property in dispute, including property that might be excluded property.

This is a powerful order and you should probably think about asking for this order if you are asking for a share of property. This is just a matter of 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.

Under s. 81(a) of the ''Family Law Act'', "spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution"; under s. 81(b) each spouse's share of the family property is presumed to be an "undivided half interest" and each spouse is "equally responsible for family debt". Section 97 gives the court the ability to make whatever orders are necessary to divide family property and family debt between spouses.

<blockquote><blockquote><tt>(b) after the date of separation, if incurred for the purpose of maintaining family property.</tt></blockquote></blockquote>

Under s. 95(1) of the ''Family Law Act'', the court may divide family property or family debt unequally, but only if an equal division would be "significantly unfair". It's hard to say what "significantly unfair" means, because the ''Divorce Act'' doesn't use this phrase and the old ''Family Relations Act'' only talked about things that are just ''unfair'' and things that are ''grossly unfair''. It seems reasonable to assume that under the new ''Family Law Act'', something that is "significantly unfair" is ''more unfair'' than something which is just "unfair" yet is ''less unfair'' than something that is "grossly unfair".

This provision will apply when there is an obvious need for spousal support to be paid by the person who would normally be required to pay it doesn't have the surplus income from which it could be paid. In such a case, the spouse in need of support might get more of the family property to make up for the support that can't be paid.

Under s. 96 of the ''Family Law Act'', the court may not make an order dividing excluded property between spouses except in two situations, if there's property outside the province that can't be divided under s. 109, discussed below, or if it would be "significantly unfair" not to divide the excluded property in light of the length of the spouses' relationship of one spouse's contributions to excluded property owned by the other spouse:

As we saw in the discussion about s. 95, it's hard to say what "significantly unfair" means. I expect that something which is "significantly unfair" is more unfair than something which is just "unfair" yet is less unfair than something that is "grossly unfair".

Division 6 of Part 5 of the ''Family Law Act'' has a complicated test that the court must apply to determine whether it can and should make orders dividing property and debt between spouses when another court could also make orders about the same people and the same property; this was discussed earlier in this page under the heading "Determining Jurisdiction". If the court decides that it can make orders, it can, in certain circumstances, also make orders about property located outside the province under s 109(2):

To put this another way:

#under s. 109(2)(b)(ii) and (iii) and s. 109(3), the court can make orders about which spouse should be able to possess or own property outside the province and orders transferring property outside the province between spouses.

A separation agreement is contract which records a settlement of the issues which arise when a relationship ends. Separation agreements can be an effective and inexpensive way of settling things, however the terms of the agreement must be fair and the parties must be able to get along well enough to negotiate the deal and then put it into action it when it's done.

In other words, in making an agreement about the division of property and debt, spouses can divide unequally the things they're supposed to divide equally, divide things they're not supposed to divide and not divide things that are supposed to be divided. As long as you both agree, you can do pretty much whatever you want in a separation agreement.

Under s. 93 of the ''Family Law Act'', an agreement about the division of property and debt must be:

#signed by each spouse in the presence of someone else as a witness.

Section 94(2) says that the court cannot make an order dividing property or debt in the face of an agreement on property and debt until it has set aside those parts of the agreement. As a result, if a spouse is unhappy with the terms of a separation agreement on property or debt, the spouse must first ask the court to set aside the agreement and second ask for an order about the division of property and debt.

Family law agreements are private contracts reached between two people. While family law agreements can be attacked and enforced on the principles of contract law, the court will usually give considerable weight to family law agreements. Without proof of some serious problem like duress or coercion, or some other issue, the court will treat the agreement as representing the honest and informed intentions of the parties to settle their dispute.

Because of the importance the court will usually give to an agreement, it can sometimes be necessary to attack the agreement itself under the law that applies to contacts. An agreement might be found to be invalid for one or more of the following reasons:

All of these arguments are based on the law of contracts, not on a particular piece of legislation.  

The ''Family Law Act'' provides some important rules about agreements dealing with property and debt. First, under s. 94(2), the court cannot make an order dividing property and debt if there is an agreement about property and debt until the agreement is set aside. Second, under s. 93, two tests are set out to help the court decide when an agreement on property and debt should be set.