Dividing Property & Debt in Family Law Matters
If a couple are able to agree on how their property and debts will be divided, they can make a separation agreement summarizing the terms of their settlement. However, if they can't agree, one or either of them will likely start court proceedings and the court will make an order dividing their property and debt for them.
This section talks about how property and debt are divided between spouses by the court through court orders made under the Family Law Act, and by spouses through separation agreements. It also discusses when excluded property can be shared between spouses, when family property can be divided unequally, and when the court can make orders about property located outside British Columbia.
- 1 Introduction
- 2 Orders for the division of property and debt
- 2.1 Determining jurisdiction
- 2.2 Property and debt inside British Columbia
- 2.3 Property and debt outside British Columbia
- 3 Separation agreements for the division of property and debt
- 4 Resources and links
Whether you're able to settle how property and debt are going to be shared by agreement, or if you're going to need a court order, it's important to understand how the Family Law Act works. If you're going to start a court proceeding, the court will be required to divide property using the rules set out in the Act; if you're going to be able to settle your property issues, the Act will be used to measure the fairness of your agreement if either of you ever tries to get out of the agreement in the future.
How the Family Law Act divides property and debt
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 shared family debt, and which property is excluded from family property and is supposed to remain the separate property of the owner. It talks about when family property and family debt can be divided unequally, and the circumstances in which excluded property may be shared between spouses. Part 6 talks about how pensions, which count as family property under Part 5, get divided between spouses.
This is how Part 5 works:
- Section 97(2)(a): This section says that the court can make declarations concerning the possession and ownership of property and can make orders that may be necessary to give effect to such declarations.
- Section 106: This section says when the courts of British Columbia have the authority to divide property and debt if there is another court that can also make orders dividing property and debt between the same spouses.
- Section 81: This section states the basic principle that when spouses separate, each spouse takes a one-half interest in family property as a tenant in common, and each becomes responsible for one-half of the family debt.
- Sections 84 and 85: These sections tell you how to figure out which property is family property and which property is excluded property.
- Section 94(1): This section gives the court the authority to make orders for the division of property and debt between spouses.
- Sections 95 and 95: These sections say when the court may divide excluded property between spouses and when it may divide family property unequally.
- Section 109(1): This section allows the court to make orders for the ownership and division of property outside of British Columbia.
Interestingly, there isn't a section that explicitly 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.
Dividing property and debt under the Family Law Act
Here's a step-by-step guide to Part 5. The discussions that follow will go into things in more detail.
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.
If you're not a spouse, stop and read the discussion in the introductory section of this chapter, Property & Debt, about the property rights of people who aren't spouses. People who don't qualify as spouses are entitled to share in property that they both own, and may have an interest in property only one of them owns under the common law relating to trusts and equity.
Next you need to look at any cohabitation agreement or marriage agreement that you may have signed earlier in your relationship to see whether it talks about property or debt.
If you have an agreement about property, stop. Section 94(2) says that you cannot apply for a division of property if there's a written agreement about property or debt until that agreement is set aside. Accordingly, if you have an agreement about property that you want to vary or set aside, you must seek an order for the court.
Next you have to check that you're making your claim within the time limits set out in s. 198(2). Married spouses must bring their claims for the division of property and debt within two years of the date of their divorce or a declaration that their marriage is a nullity; unmarried spouses must bring their claims within two years of the date of their separation.
If you're outside the time limits, stop. Talk to a lawyer to confirm that you're out of time and ask about whether you're within the limitation period to ask for an interest in property under the common law relating to trusts and equity.
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:
- you and your spouse lived somewhere else for a long time,
- there is a court action commenced in another jurisdiction seeking the same or similar relief,
- you have property outside of the province, or
- you have a cohabitation agreement or a marriage agreement that requires the laws and courts of another place to be used,
there may be a problem. If another court can make an order, you then have to figure out under s. 106 whether the courts of British Columbia should be dealing with your proceeding at all.
If your case is better dealt with by another court, stop because you'll need to start a court proceeding there. If not, you can continue here.
Now you have to start sorting what you have into family property and family debt, and excluded property and personal debt. Start from the assumption that everything you have is family property and family debt and then work backwards.
Property and debt that you got after you separated is generally the separate property or separate obligation of each spouse, with two main exceptions:
- property bought after separation with family property is also family property (i.e. if the source of the funds used to buy the property can be traced back to family property) , and
- debt incurred after separation to maintain family property is family debt.
Property you got during your relationship is generally family property, except for certain kinds of property that are excluded from family property. These include:
- gifts from a third party, unless they are gifts to both spouses,
- certain court awards,
- certain insurance payments,
- certain trust property, and
- excluded property which is then gifted by one spouse to the other.
Property that you got before your relationship is generally excluded property that only you will keep, unless you have gifted it to your spouse. The increase in the value of the property you brought into the relationship is family property even where the original amount remains excluded. You will likely remain responsible for debt you brought into the relationship.
Next you need to figure out what everything is worth and where it is. This will be the hard part.
For excluded property and personal debt, what you need to know is:
- What was the value of each asset on the date immediately before you began to live together or got married, whichever came first?
- For property acquired during the relationship, when did you acquire each asset and what was it worth when you received it?
- Was it a gift to you or you and your spouse together?
- What did you do with your property during your relationship? Is it still around? Did you sell it and buy something else?
- Did you gift it to your spouse?
- Do you still have any debts from before your relationship started? If so, how much did you owe on the date you began to live together or got married, whichever was first?
- Have you incurred any new debt after the date of your separation? Did you add to any debts incurred during your relationship after separation? If so, how much new debt have you racked up?
For family property and family debt, you need to know:
- What is the value of each asset now?
- Did you buy any family property using the proceeds of sale of excluded property? If so, how much did you put toward the purchase of the family property?
- Is there any property that was bought after separation with family property? If so, what is the value of those assets?
- What are the debts owed by you, by your spouse, or by both of you, and how much is owing now?
- If new debt was incurred after the date of separation, was any of it incurred to pay for family property? It so, how much new debt was spent on family property?
Now that you've got the numbers worked out, you may want to think about whether an equal division of family property and family debt would be "significantly unfair," bearing in mind the factors listed in s. 95(2), which includes but is not limited to the duration of relationship and whether a spouse, after the date of separation, caused a significant decrease or increase in the value of the family property or family debt beyond market forces. If it wouldn't be significantly unfair, then split the family property and family debt equally and go on with your life. If it would be significantly unfair, then you've got to figure out what a fair split looks like and I wish you the best of luck sorting this out in a speedy manner.
Finally, you may also want 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.
Orders for the division of property and debt
Under the Family Law Act, a person who is 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 person who qualifies as a spouse under s. 3 of the Family Law Act can start a court proceeding in British Columbia and ask for orders about the division of property and debt. There's no rule that 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 dividing property and debt or leave those issues for the other court, and
- if it should make orders, the law it should apply in dividing the property and debt.
Determining whether the court should make orders
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.
When another court might be able to make orders about the same people and the same property, s. 106(2) provides the rules to help the court here determine when it may make orders dividing that property between those people under Part 5:
(2) Despite any other provision of this Part, the Supreme Court has authority to make an order under this Part only if one of the following conditions is met:
(a) a spouse has started another proceeding in the Supreme Court, to which a proceeding under this Part is a counterclaim;
(b) both spouses submit, either in an agreement or during the proceeding, to the Supreme Court's jurisdiction under this Part;
(c) either spouse is habitually resident in British Columbia at the time a proceeding under this Part is started;
(d) there is a real and substantial connection between British Columbia and the facts on which the proceeding under this Part is based.
In other words, the court here can make an order if:
- the claim about property was made by a counterclaim in the court proceeding,
- both spouses agree that the court should make orders about property and debt,
- either spouse normally lived here when the proceeding started, or
- there is a "real and substantial connection" between this province and the proceeding.
Section 106(3) helps to explain what "real and substantial connection" means:
(3) For the purposes of subsection (2) (d), a real and substantial connection is presumed to exist if one or more of the following apply:
(a) property that is the subject of the proceeding is located in British Columbia;
(b) the most recent common habitual residence of the spouses was in British Columbia;
(c) a notice of family claim with respect to the spouses has been issued under the Divorce Act (Canada) in British Columbia.
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 property is here,
- the spouses last lived together here, or
- 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 they make a claim under the act for at least one year before the court proceeding is started).
As if this wasn't complicated enough, even if the court can make an order because one of the s. 106(2) conditions are met, under s. 106(4) the court can refuse to make orders for the division of property and debt. Section 106(5) says what the court must take into account in deciding to refuse to make orders:
(5) In determining whether to decline jurisdiction under subsection (4), the court must consider all of the following:
(b) the relative convenience and expense for the spouses and their witnesses;
(c) if section 108 [choice of law rules] applies, the law to be applied to issues in the proceeding;
(d) the desirability of avoiding multiple proceedings or conflicting decisions in different courts or tribunals;
(e) the extent to which an order respecting property or debt
(i) made in another jurisdiction would be enforceable in British Columbia, and
(ii) made in British Columbia would be enforceable in another jurisdiction;
(f) the fair and efficient working of the Canadian legal system as a whole;
(g) any other circumstances the court considers relevant.
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 will require the least number of court proceedings.
Determining the law to apply when the court may make orders
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.
Assuming, then, that the court here has decided that it has the authority to make orders for the division of property and debt because one of the s. 106(2) factors is met, and that it hasn't decided to refuse to make orders anyway under s. 106(4), the next thing to figure out is the law that the court should use in deciding how the property and debt should be divided under ss. 107 and 108. That law could be the law of British Columbia, namely Part 5 of the Family Law Act, or it could be the law of another place.
Section 108 is just as complicated as s. 106, but what it all comes down to is this:
- under s. 108(3), if the spouses have an agreement that says the law of a particular place must be used, the law the court must use is the law of that particular place,
- under s. 108(4), if the spouses first together lived in a place that divides property like the Family Law Act divides property, the law the court must use is the law of the place where the spouses first lived together,
- under s. 108(5), if neither of the first two circumstances apply, the law the court must use is the "applicable internal law."
Section 107 says how you figure out what the "applicable internal law" is:
The applicable internal law for the purposes of section 108 [choice of law rules] is
(a) the internal law of the jurisdiction in which the spouses had their most recent common habitual residence,
(b) if the jurisdiction under paragraph (a) is outside Canada and is not the jurisdiction most closely associated with the relationship between the spouses, the internal law of the jurisdiction that is most closely associated with the relationship between the spouses, or
(c) if the spouses did not have a common habitual residence, the internal law of the jurisdiction in which the spouse making an application for an order under this Part was most recently habitually resident.
In other words, the "applicable internal law" that should be used to divide property and debt between spouses is:
- the law of the place where the spouses most recently lived together,
- the law of the place where the spouses lived together the longest, or
- 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!
Property and debt inside British Columbia
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 decisions about any issue concerning the ownership, possession, or division of property or debt,
- make any order necessary to divide property or debt,
- declare who should own or possess property,
- make a spouse pay compensation if or she has sold or transferred property that should have been shared,
- require the sale of a property and payment to the spouses from the proceeds of the sale,
- make one spouse be responsible for debt,
- require the sale of property to pay debt, and
- make orders transferring property to a spouse.
Under s. 97, the court can make whatever orders are needed to equally divide 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.
Paying for dispute resolution processes
Under s. 89, the court can make an order for the interim distribution of some of the family property to a party to pay for:
- the cost (i.e. legal fees) of the court proceeding,
- the cost of another dispute resolution process, like mediation, arbitration, and collaborative settlement processes, and
- the cost of expert's reports, like needs of the child assessments under s. 211, property appraisals, or business valuation.
In practice, the court will usually make an order for an interim distribution for legal fees if the court feels it is necessary to "level the playing field" between spouses. By making such an order, the court tries to ensure that the spouse who has all the money and can afford a lawyer does not have an advantage over the spouse who does not have as much money and may not be able to afford to pay for a lawyer without an interim distribution for legal fees.
Use of property
Under s. 90, the court can make an interim order that one spouse have the exclusive right to live in the family home and use the property (i.e. household contents and furnishings) 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. Usually, if there are children (especially young children), the spouse who has primary care of the children will be the spouse who remains in the family home because the children require stability and security of remaining in the family home.
Under s. 91(2)(a), the court can make other interim 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.
Financial restraining orders
Under s. 91(1) and (2), the court can make some really important interim orders that are intended to freeze 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.
(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 [Pension Division] 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.
(2) The Supreme Court may make one or more of the following orders:
(b) for the purpose of protecting the applicant's interest in property from being defeated or adversely affected,
(i) prohibiting the other spouse from disposing of, transferring, converting, or exchanging into another form, property in which the applicant may have an interest, or
(ii) vesting all or a portion of property in, or in trust for, the applicant.
A couple of important points about this section deserve mention:
- the order must be made when a spouse asks for it, unless the other spouse can show that there are sufficient assets so that the claim to the property won't be frustrated if they happen to sell some of the assets,
- the order can be made without giving the other spouse notice of the application, and
- the order includes not just "family property" but all property in dispute, including property that might be excluded property.
This is a powerful interim 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.
Rule 12-4 of the Supreme Court Family Rules gives the court the authority to make a general restraining order, called an injunction, to require 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. See this chapter's section on Protecting Propery & Debt for more information.
Dividing property and debt equally
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.
Section 84 says what family property is:
(1) Subject to section 85 [excluded property], family property is all real property and personal property as follows:
(a) on the date the spouses separate,
(i) property that is owned by at least one spouse, or
(ii) a beneficial interest of at least one spouse in property;
(b) after separation,
(i) property acquired by at least one spouse if the property is derived from property referred to in paragraph (a) (i) or from a beneficial interest referred to in paragraph (a) (ii), or from the disposition of either, or
(ii) a beneficial interest acquired by at least one spouse in property if the beneficial interest is derived from property referred to in paragraph (a) (i) or from a beneficial interest referred to in paragraph (a) (ii), or from the disposition of either.
(2) Without limiting subsection (1), family property includes the following:
(a) a share or an interest in a corporation;
(b) an interest in a partnership, an association, an organization, a business or a venture;
(c) property owing to a spouse
(i) as a refund, including an income tax refund, or
(ii) in return for the provision of a good or service;
(d) money of a spouse in an account with a financial institution;
(e) a spouse's entitlement under an annuity, a pension, a retirement savings plan or an income plan;
(f) property, other than property to which subsection (3) applies, that a spouse disposes of after the relationship between the spouses began, but over which the spouse retains authority, to be exercised alone or with another person, to require its return or to direct its use or further disposition in any way;
(g) the amount by which the value of excluded property has increased since the later of the date
(i) the relationship between the spouses began, or
(ii) the excluded property was acquired.
Section 86 says what family debt is:
Family debt includes all financial obligations incurred by a spouse
(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate, and
(b) after the date of separation, if incurred for the purpose of maintaining family property.
Dividing property and debt unequally
Under s. 95(1) of the Family Law Act, the court may divide family property or family debt unequally, but only if equal division would be "significantly unfair"in the context of the factors mentioned in s. 95(2). Recent court decisions explain that the unfairness must be "weighty, meaningful or compelling." A judge can only order an unequal division of family property where the result of equal division would be so unfair as to be unjust or unreasonable. It is highly unlikely that a court would find the circumstances to be "significantly unfair" merely because one spouse worked during the marriage and the other spouse did not.
Section 95(2) provides a list of factors considered when deciding if equal division of property and debt is significantly unfair:
(2) For the purposes of subsection (1), the Supreme Court may consider one or more of the following:
(a) the duration of the relationship between the spouses;
(b) the terms of any agreement between the spouses, other than an agreement described in section 93 (1) [setting aside agreements respecting property division];
(c) a spouse's contribution to the career or career potential of the other spouse;
(d) whether family debt was incurred in the normal course of the relationship between the spouses;
(e) if the amount of family debt exceeds the value of family property, the ability of each spouse to pay a share of the family debt;
(f) whether a spouse, after the date of separation, caused a significant decrease or increase in the value of family property or family debt beyond market trends;
(g) the fact that a spouse, other than a spouse acting in good faith,
(i) substantially reduced the value of family property, or
(ii) disposed of, transferred or converted property that is or would have been family property, or exchanged property that is or would have been family property into another form, causing the other spouse's interest in the property or family property to be defeated or adversely affected;
(h) a tax liability that may be incurred by a spouse as a result of a transfer or sale of property or as a result of an order;
(i) any other factor, other than the consideration referred to in subsection (3), that may lead to significant unfairness.
In some cases judges find that the unequal contribution of one person, along with other factors, warrants unequal division. In other cases, unequal contribution is not enough to establish "significant unfairness."
Under s. 95(3), the court can also take into account issues relating to spousal support in deciding whether to divide family property and family debt unequally:
(3) The Supreme Court may consider also the extent to which the financial means and earning capacity of a spouse have been affected by the responsibilities and other circumstances of the relationship between the spouses if, on making a determination respecting spousal support, the objectives of spousal support under section 161 [objectives of spousal support] have not been met.
This provision will apply when there is an obvious need for spousal support to be paid, but the potential payor doesn't have the surplus income from which to pay. In this situation, the spouse in need of support might get more of the family property to make up for the support that can't be paid. See the chapter on Spousal Support for more information about when spousal support might be payable.
Dividing excluded property
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 or one spouse's contributions to the excluded property owned by the other spouse. Section 96 says this:
The Supreme Court must not order a division of excluded property unless
(a) family property or family debt located outside British Columbia cannot practically be divided, or
(b) it would be significantly unfair not to divide excluded property on consideration of
(i) the duration of the relationship between the spouses, and
(ii) a spouse's direct contribution to the preservation, maintenance, improvement, operation or management of excluded property.
As we saw in the discussion about s. 95, it's hard to say what "significantly unfair" means. I expect that something that is "significantly unfair" is more unfair than something which is just "unfair," yet is less unfair than something that is "grossly unfair."
Property and debt outside British Columbia
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 section 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):
(2) For the purposes of dividing extraprovincial property, the Supreme Court, on application by a spouse, may make an order to do one or more of the following:
(a) instead of dividing the extraprovincial property,
(i) require property or family debt within British Columbia to be substituted for rights in the extraprovincial property, or
(ii) require a spouse who has legal title to the extraprovincial property to pay compensation to the other spouse;
(b) if the court is satisfied that it would be enforceable against a spouse in the jurisdiction in which the extraprovincial property is located,
(i) preserve the extraprovincial property,
(ii) provide for the possession of the extraprovincial property,
(iii) require a spouse who has legal title to the extraprovincial property to transfer all or part of the spouse's interest in the extraprovincial property to the other spouse, or
(iv) provide for any other matter in connection with the extraprovincial property;
(c) if the court is satisfied that it would be enforceable in the jurisdiction in which the extraprovincial property is located, provide for non-monetary relief.
To put this another way:
- under s. 109(2)(a), the court can divide family property here unequally to compensate for property outside the province, just like how the court can divide excluded property for the same reason under s. 96(a),
- under s. 109(2)(b)(i), the court can make a kind of restraining order to stop the property outside the province from being sold, just like how the court can make restraining orders about property inside the province under s. 91(1), and
- 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.
Separation agreements for the division of property and debt
A separation agreement is a contract that records a settlement of the issues that 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 reasonable, 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.
The ways that a separation agreement can deal with the division of family property and family debt are virtually unlimited. Under the Family Law Act, each spouse is presumed to keep the property they brought into the relationship and share in the property bought during the relationship as well as the increase in the value of any property brought in. Although spouses are presumed to be each half responsible for any debt incurred during the relationship, you can make whatever other arrangements you want, as long as both spouses agree to those arrangements and they're reasonably fair. In fact, s. 92 says this:
Despite any provision of this Part but subject to section 93 [setting aside agreements respecting property division], spouses may make agreements respecting the division of property and debt, including agreements to do one or more the following:
(a) divide family property or family debt, or both, and do so equally or unequally;
(b) include as family property or family debt items of property or debt that would not otherwise be included;
(c) exclude as family property or family debt items of property or debt that would otherwise be included;
(d) value family property or family debt differently than it would be valued under section 87 [valuing family property and family debt].
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.
The effect of a valid agreement
When spouses have written, signed and witnessed an agreement about the division of property and debt, s. 94(2) of the Family Law Act says that the court cannot make an order about the division of family property, excluded property, or family debt, unless the parts of the agreement that deal with property and debt are set aside by a court order. This gives agreements on the division of property and debt a lot more protection against later court challenges than was provided to agreements under the old Family Relations Act.
Making a valid agreement
Under the Family Law Act, an agreement about the division of property and debt may be oral or written. However, it is highly recommended that the agreement be in writing so that there is less chance of a dispute over the terms of the agreement.
There are requirements about the validity of agreements that are part of the common law of contracts. These are discussed in a little more detail further on in this section, but for a more thorough discussion you should look at the Family Law Agreements chapter.
It is also highly recommended that each spouse obtain independent legal advice (i.e. hiring a lawyer (separate lawyers) to explain and give advice about the terms of the agreement) before signing the agreement to ensure that each spouse understands the nature, circumstances, terms and the effect of the agreement, especially if one spouse has a limited understanding of the English language or has limited education.
It is also important to ensure that each spouse has properly and fully disclosed all assets and debts in the spouse's name in the agreement. An agreement that says "mine is mine and yours is yours" without proper disclosure may not be upheld by the court if one spouse seeks to set it aside or vary it.
Asking the court to set aside an agreement
Section 94(2) says that the court cannot make an order dividing property or debt in the face of a written and witnessed 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 and contract law
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 contracts. An agreement might be found to be invalid for one or more of the following reasons:
- one of the parties was forced to enter into the agreement,
- one party was too much under the influence or control of the other party in consenting to the terms of the agreement,
- the agreement is fundamentally unfair, or
- one party lied to the other party or hid information from that party, and these misleading representations were the basis on which the other party signed the agreement.
All of these arguments are based on the law of contracts, not on a particular piece of legislation.
Agreements on property and debt and the Family Law Act
The Family Law Act provides two tests to help the court decide when an agreement on property and debt should be set aside. Under the first test, at s. 93(3), the court must look at the situation of the parties when they were negotiating and executing the agreement. The court is required to consider whether these circumstances existed when the parties were making their agreement:
(a) a spouse failed to disclose significant property or debts, or other information relevant to the negotiation of the agreement;
(b) a spouse took improper advantage of the other spouse's vulnerability, including the other party's ignorance, need or distress;
(c) a spouse did not understand the nature or consequences of the agreement;
(d) other circumstances that would under the common law cause all or part of a contract to be voidable.
The last part of this test, at subsection (d), is about whether there is a defect under the law of contracts that might make the agreement void or voidable. The other parts of the test are all about the fairness of the parties' negotiations.
Now, even if there are problems with an agreement under s. 93(3), the court can still decide not to set aside the agreement if "it would not replace the agreement with an order that is substantially different from the terms set out in the agreement" under s. 93(4). In other words, if the court wouldn't make a different order than the arrangements the parties agreed to, it might just leave the agreement alone.
If there are no problems under s. 93(3), the second test, at s. 93(5), allows the court to set aside agreements that are "significantly unfair" taking into account:
(a) the length of time that has passed since the agreement was made;
(b) the intention of the spouses, in making the agreement, to achieve certainty;
(c) the degree to which the spouses relied on the terms of the agreement;
If the court sets aside an agreement under s. 93(3) or (5), the court will then make an order dividing property and debt between the spouses in place of the agreement.
- Canadian Bar Association BC Branch: Dividing property and debts
- Justice Education Society: Workbook for parents separated with children on dealing with finances
- Legal Services Society’s Family Law Website: How to divide property and debts
|This information applies to British Columbia, Canada. Last reviewed for legal accuracy by Helen Chiu, May 14, 2019.|
|JP Boyd on Family Law © John-Paul Boyd and Courthouse Libraries BC is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 2.5 Canada Licence.|
Normally referred to as the "Supreme Court of British Columbia," this court hears most court proceedings in this province. The Supreme Court is a court of inherent jurisdiction and is subject to no limits on the sorts of claims it can hear or on the sorts of orders it can make. Decisions of the Provincial Court are appealed to the Supreme Court; decisions of the Supreme Court are appealed to the Court of Appeal. See "Court of Appeal," "jurisdiction," "Provincial Court" and "Supreme Court of Canada."
A court established and staffed by the provincial government, which includes Small Claims Court, Youth Court and Family Court. The Provincial Court is the lowest level of court in British Columbia and is restricted in the sorts of matters it can deal with. It is, however, the most accessible of the two trial courts and no fees are charged to begin or defend a court proceeding. Small Claims Court, for example, cannot deal with claims larger than $25,000, and Family Court cannot deal with the division of family property or matters under the Divorce Act. See "judge" and "jurisdiction."
Something which can be owned. See "chattels" and "real property."
A contract intended to resolve all or some of the legal issues arising from the breakdown of a relationship and intended to guide the parties in their dealings with one another thereafter. A typical separation agreement is signed following a settlement reached through negotiations and deals with issues including guardianship, parenting arrangements, contact, support, the division of property and the division of debt. See "family law agreements."
A resolution of one or more issues in a court proceeding or legal dispute with the agreement of the parties to the proceeding or dispute, usually recorded in a written agreement or in an order that all parties agree the court should make. A court proceeding can be settled at any time before the conclusion of trial. See "action," "consent order," "family law agreements" and "offer."
A mandatory direction of the court, binding and enforceable upon the parties to a court proceeding. An "interim order" is a temporary order made following the hearing of an interim application. A "final order" is a permanent order, made following the trial of the court proceeding or the parties' settlement, following which the only recourse open to a dissatisfied party is to appeal. See "appeal," "consent order," "decision" and "declaration."
A sum of money or an obligation owed by one person to another. A "debtor" is a person responsible for paying a debt; a "creditor" is the person to whom the debt is owed.
A term under the Family Law Act referring to property acquired by a spouse prior to the commencement of the spouses' relationship and certain property acquired by a spouse during the relationship, including gifts, inheritances, court awards and insurance proceedings. A spouse is presumed to be entitled to keep their excluded property without having to share it with the other spouse. See "family property," "gift," and "inheritance."
A term under the Family Law Act referring to property acquired by either or both spouses during their relationship, as well as after separation if bought with family property. Both spouses are presumed to be equally entitled to share in family property. See "excluded property."
A legal proceeding in which one party sues another for a specific remedy or relief, also called an "action," a "lawsuit" or a "case." A court proceeding for divorce, for example, is a proceeding in which the claimant sues the respondent for the relief of a divorce order.
A term under the Family Law Act referring to debt owed by either or both spouses that accumulated during the spouses' relationship, as well as after separation if used to maintain family property. Both spouses are presumed to be equally liable for family debt.
In law, the right to have the control and use of a thing. One can have a right to the possession of a thing without owning it, as in the case of a car lease, or ownership without possession, as in the case of a landlord who rents an apartment suite. See "ownership."
A legal right to have and use a thing that is enforceable in court. See "possession."
Under the Divorce Act, either of two people who are married to one another, whether of the same or opposite genders. Under the Family Law Act, married spouses, unmarried parties who have lived together in a marriage-like relationship for at least two years, and, for all purposes of the act other than the division of property or debt, unmarried parties who have lived together for less than two years but have had a child together. See "marriage" and "marriage-like relationship."
In family law, the quality of an unmarried couple's relationship that demonstrates their commitment to each other, their perception of themselves as a couple and their willingness to sacrifice individual advantages for the advantage of themselves as a couple; a legal requirement for a couple to be considered spouses without marrying. See "cohabitation," "marriage" and "spouse."
The legal principle under which courts are bound to follow the principles established by previous courts in similar cases dealing with similar facts; the system of justice used in non-criminal cases in all provinces and territories except Quebec.
An agreement signed by people who are or have begun to live together in a marriage-like relationship that is intended to govern their rights and obligations in the event of the breakdown of their relationship and, sometimes, their rights and obligations during their relationship. See "family law agreement."
An agreement signed by people who are planning on marrying or have married that is intended to govern their rights and obligations in the event of the breakdown of their marriage and, sometimes, their rights and obligations during their marriage. See "family law agreement."
The assertion of a legal right to an order or to a thing; the remedy or relief sought by a party to a court proceeding.
The legal termination of a valid marriage by an order of a judge; the ending of a marital relationship and the conjugal obligations of each spouse to the other. See "conjugal rights," "marriage," and "marriage, validity of."
In law, a pronouncement of the court about a fact or a state of affairs, such as a declaration that a marriage is void or that a person is the guardian of a child. Not to be confused with an order, which is a mandatory direction of the court requiring a party to do or not do something. See "order."
In family law, the decision of one or both parties to terminate a married or unmarried relationship; the act of one person leaving the family home to live somewhere else with the intention of terminating the relationship. There is no such thing as a "legal separation." In general, one separates by simply moving out, however it is possible to be separated but still live under the same roof. See "divorce, grounds of."
A person licensed to practice law in a particular jurisdiction. See "barrister and solicitor."
A time period after which someone may not make a claim because the right to do so has expired. The time for making a claim is set by legislation, and limitation periods will differ depending on the type of claim or the relationship between people making and defending the claim.
A court proceeding in which one party sues another for a specific remedy or relief, also called a "lawsuit" or a "case." An action for divorce, for example, is a court proceeding in which the claimant sues the respondent for the relief of a divorce order.
With respect to courts, the authority of the court to hear an action and make orders; the limits of the authority of a particular judicial official; the geographic location of a court; the territorial limits of a court's authority. With respect to governments, the authority of a government to make legislation as determined by the constitution; the limits of authority of a particular government agents. See “constitution."
In law, an order sought by a party to a court proceeding or application, usually as described in their pleadings. Where more than one order or type of order is sought, each order sought is called a "head of relief." See "action," "application" and "pleadings."
In law, the whole of the conduct of a court proceeding, from beginning to end, and the steps in between; may also be used to refer to a specific hearing or trial. See "action."
A duty, whether contractual, moral or legal in origin, to do or not do something. See "duty."
A person named in a court proceeding or joined to a proceeding who is neither the claimant nor the respondent. A third party may be joined to a proceeding where the respondent believes that the person has or shares some responsibility for the cause of action. See "action," "cause of action" and "party."
In law, a form of possession of property in which a "trustee" keeps and manages property for the benefit of another person, the "beneficiary," without owning that property and usually without acquiring an interest in that property other than as payment for their services. The trustee holds the property in trust for the beneficiary. See "constructive trust," "ownership," "possession" and "resulting trust."
A voluntary transfer of property from one person to another, without expectation of payment or reward. Gifts to one spouse do not usually qualify as family property, and are excluded from the pool of property to be divided. See "donee," "donor," "excluded property," and "family property."
An agreement to transfer the ownership of property from one person to another in exchange for the reciprocal transfer of something else, usually money. See "agreement."
Intentionally doing a thing; a law passed by a government, also called "legislation" or a "statute." See "regulations."
The geographic place where a person permanently lives. This is different from a person's "domicile" in that a person's residence is more fixed and less changeable in nature. A person's residence can also have an impact on a court's authority to hear and decide a legal action. See "domicile" and "jurisdiction."
Any order made prior to the final resolution of a court proceeding by trial or by settlement; a temporary, rather than permanent or final order. See "application" and "interim application."
The testing of the claims at issue in a court proceeding at a formal hearing before a judge with the jurisdiction to hear the proceeding. The parties present their evidence and arguments to the judge, who then makes a determination of the parties' claims against one another that is final and binding on the parties unless appealed. See "action," "appeal," "argument," "claim," "evidence" and "jurisdiction."
The processes used to conclusively resolve legal disputes including negotiation, collaborative settlement processes, mediation, arbitration and litigation.
In law, a person named as an applicant, claimant, respondent or third party in a court proceeding; someone asserting a claim in a court proceeding or against whom a claim has been brought. See "action" and "litigant."
A dispute resolution process in which a specially-trained neutral person facilitates discussions between the parties to a legal dispute and helps them reach a compromise settling the dispute. See "alternative dispute resolution" and "family law mediator."
A dispute resolution process in which an arbitrator hears the evidence and arguments presented by the parties to a legal dispute and makes an award which resolves the dispute and is binding on the parties. See "alternative dispute resolution" and "family law arbitrator."
(AKA collaborative process) A dispute resolution process in which the parties to a legal dispute and their lawyers agree that they will make every effort to resolve the dispute through cooperative, transparent negotiations, with the assistance of counsellors and neutral experts in financial issues and children's issues as necessary, without going to court. See "alternative dispute resolution."
In family law, the dwelling occupied by a family as their primary residence. See "family property" and "real property."
Sending legal documents to a party at that party's "address for service," usually by mail, fax or email, called "ordinary service" in proceedings before the Supreme Court. Certain documents, like a Notice of Family Claim, must be served on the other party by personal service. Most other documents may be served by ordinary service. See also "address for service" and "personal service."
Chattels, goods, money; property other than real property. See "chattel" and "real property."
A party who brings an application to the court for a specific order or remedy. Usually refers to the party making an interim application, but in the Provincial Court can mean the person who starts a court proceeding. See also "court proceeding," "application respondent" and "interim application."
A phrase describing how property is held by one person for the benefit of another person who is ultimately entitled to the use or proceeds of sale of that property. Money held in trust is held in a lawyer's bank account on the lawyer’s promise not to use that money except as may be agreed.
A request to the court that it make a specific order, usually on an interim or temporary basis, also called a "chambers application" or a "motion." See also "interim application" and "relief."
An order which forbids a party from doing or not doing a thing. In family law, common restraining orders include stopping someone from travelling out of an area with the children, stopping someone from disposing of property, and stopping someone from harassing someone else. See "ex parte," "order" and "protection order."
A court order that someone not do or cease doing a thing; a restraining order. In family law, injunctions are often sought, for example, to stop someone from removing the children from a place, from disposing of assets or from harassing someone. See "application" and "ex parte."
A parcel of land and the buildings on that land. See "chattel," "ownership" and "possession."
In law, to formally deliver documents to a person in a manner that complies with the applicable rules of court. Service may be ordinary (mailed or delivered to a litigant's address for service), personal (hand-delivered to a person) or substituted (performed in a way other than the rules normally require). See "address for delivery," "ordinary service," "personal service" and "substituted service."
A person appointed by the federal or provincial government to manage and decide court proceedings in an impartial manner, independent of influence by the parties, the government or agents of the government. The decisions of a judge are binding upon the parties to the proceeding, subject to appeal.
Acting in an honest, truthful, open and fair manner, without the intent to deceive or defraud. Also known by the Latin phrase bona fide. See "bad faith."
In property law, the act of an owner of a thing giving ownership of that thing to another person, in exchange for money or other property in the case of a sale or in exchange for other rights in the case of a family law agreement. See "family law agreements," "ownership" and "sale."
Money paid by one spouse to another spouse either as a contribution toward the spouse's living expenses or to compensate the spouse for the economic consequences of decisions made by the spouses during their relationship.
In family law, an antiquated term referring to child support and spousal support. See "child support" and "spousal support."
In law, a document demonstrating ownership of a thing. See "ownership."
A step in a court proceeding in which each party advises the other of the documents in their possession which relate to the issues in the court proceeding and produces copies of any requested documents before trial. This process is regulated by the rules of court, which put each party under an ongoing obligation to continue to advise the other of new documents coming into their possession or control. The purpose of this step is to encourage the settlement of court proceedings and to prevent a party from springing new evidence on the other party at trial.
The branch of law dealing with the interpretation and enforcement of contracts. The principles of contract law are usually but not always applicable to family law agreements.
Evidence which establishes or tends to establish the truth of a fact; also, the conclusion of a logical argument. See "evidence" and "premises."
Forcing someone to do something though psychological or emotional pressure; a defence to the enforcement of a contract. If, for example, a separation agreement was entered into under duress, that may be a ground to dispute or set aside that agreement.
The use of force or intimidation, whether emotional or physical, to compel another person to do something; interference with another person's freedom of choice to obtain an outcome, action or behaviour.
An act; a statute; a written law made by a government. See "regulations."
In family law, the process by which an agreement is formed between the parties to a legal dispute resolving that dispute, usually requiring mutual compromise from the parties' original positions to the extent tolerable by each party. See "alternative dispute resolution" and "family law agreements."