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BC Family Law: Post-Separation Change in Value of Family Property

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Under BC family law, separated spouses divide family property and family debt that existed at the date of separation, but the valuation date is usually the date of the hearing. The question that arose in Yip v. Yip, 2016 BCSC 1595 is whether the BC family law requires the court to conduct what almost amounts to a forensic audit of expenditures or changes in value in the years between the separation and the trial in order to achieve an appropriate division of family property and debt.

Facts in Yip v. Yip

The parties were married in 1992 and had three children now aged 11, 14, and 18. The husband, age 51, was employed as senior operations manager for a parking company and was the primary income earner throughout the marriage. The wife, age 48, earned some income cleaning houses and was primarily responsible for childcare. In November 2010, the husband moved into a basement suite in the family home in Coquitlam, BC, where he still lived at the time of trial. The wife and children continued to live upstairs. Prior to separation, the husband’s income was deposited into two joint lines of credit, from which all mortgage payments and household expenses, as well as almost all personal expenses, were paid. That arrangement continued unchanged from the date of separation in 2010 until the summary trial application was heard in 2016.

Presumption of equal division under BC family law

The court began its analysis by noting that under BC family law, the presumptive rule is that family property and debt are divided equally. The Court of Appeal recently confirmed in Jaszczewska v. Kostanski, 2016 BCCA 286 that the goal of the Family Law Act, S.B.C. 2011, c. 25 is to simplify division of family property and make it more certain and predictable than was the case under the former legislation. This was done in part by reducing the court’s discretion to depart from the presumptive equal division unless equal division would be “significantly unfair.”

How BC family law addresses post-separation changes in value of family property

Smith J. then discussed how the BC family law scheme applies to post-separation changes in value of family property:

[17]        In establishing a scheme under which property and debt, existing at the date of separation, is presumptively to be valued on the date of the hearing, the legislature clearly anticipated changes in value taking place between those dates. Significantly, it did not create an automatic right to an accounting of how those changes came about or how they might accrue to the benefit or detriment of one party or the other.

[18]        Section 95(2)(f) allows for an unequal division where one spouse has “caused a significant decrease or increase in the value of family property or family debt beyond market trends.” However, the necessary pre‑condition to an unequal division is a determination by the Court that equal division would be “significantly unfair” in the circumstances (s. 95(1)).

[19]        Changes in value may also be addressed through s. 87, which permits a date, other than the date of hearing, to be used as a valuation date, but that is also subject to a test of significant unfairness. […]

How BC family law applied to the facts in Yip v. Yip

This decision illustrates the difficulties that can arise from the fact that there are different kinds of “separation.” After parties separate physically, there is often a transition period during which their relationship of financial interdependence continues. It may be weeks or months before they get around to closing joint bank accounts, cancelling joint credit cards, and otherwise untangling their financial affairs. However, in Yip v. Yip, almost six years after they separated physically—by living in different parts of the same house—the parties still had not separated their economic lives. They retained joint lines of credit and joint credit cards, from which they both continued to pay household and personal expenses. There was no evidence of the parties taking any steps to separate their finances in even minor ways nor was there evidence of any discussions or plans to separate them until March 25, 2015, when the husband filed his notice of family claim. Even then, the parties were still functioning as a financial unit when they filed competing applications in July 2016.

Each spouse argued that this arrangement benefited the other disproportionately and sought an unequal division of family property and debt to compensate. Smith J. declined to depart from the presumption of equal division or engage in a detailed accounting of post-separation expenditures, finding that the circumstances demonstrated an implied agreement between these spouses with respect to their finances:

[25]        One of the factors to be considered under s. 95 is the terms of any agreement between the spouses (s. 95(2)(b)). I find that these parties must be taken by their conduct to have agreed to continue the financial arrangements that existed prior to their physical separation. Each had the benefit of access to the lines of credit for his or her own purposes or for family purposes. Each understood that they had no ability to control or restrict the other’s use of the lines of credit. It is not appropriate, reasonable, or practical for the parties to now ask the Court to review six years of expenditures in order to determine who may have obtained the greater benefit from that implied agreement.

[26]        I am not satisfied that equal division of family debt would be significantly unfair in these circumstances.

The bottom line on changes in value of family property under BC family law

BC family law recognizes that there may be changes in value of family property or debt between the date of separation and the date of trial. However, BC law does not provide an automatic right to an accounting of how those changes came about or how they might accrue to the benefit or detriment of one party or the other. “Significant unfairness” must be shown before the court will depart from applying the presumption of equal division or from using the date of trial as the valuation date.

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