On marriage breakdown, many spouses ask: “Is family property divided equally after separation?” The answer is that family property and debt is divided equally after separation unless it is significantly unfair to do so. This is known as the presumption of equal division of family property and debt and the strength of the presumption was reinforced by changes made to the Family Law Act, S.B.C. 2011, c. 25 in 2013.
The question that follows is when would equal division be “significantly unfair”? In other words, when is unequal division of family property or debt appropriate? For example, one of the spouses may claim that they are entitled to unequal division because they contributed more to the value of the family property. That was precisely the situation in Jaszczewska v. Kostanski, 2016 BCCA 286. The spouses lived together in marriage-like relationship for 10 years. Following their separation, the husband tore down family home and constructed new home on the property, which greatly increased in value. The trial judge found that at separation, the property was worth $1,350,000, and at trial the property was worth $2,750,000. There was an increase in net equity post-separation of $860,000.
The trial judge concluded that an equal division would be significantly unfair given the husband’s considerably greater contribution to the accumulation of family property. The new residence built by the husband enhanced the value of the property significantly beyond market trends post-separation. The trial judge divided the total value of family property unequally in favour of the husband. Both parties sought to set aside the order, but the Court of Appeal agreed with the trial judge’s reasoning and allocated 70% of the value of the family property to the husband to address the unfairness. (The husband was not entitled to 100% of the increase in value because construction of the new house was financed by the equity in the land itself, which was family property in which the wife had an undivided half interest in at separation.)
At para. 42 of the Jaszczewska decision, the Court of Appeal noted that the meaning attaching to the test of “significant unfairness” is yet to be developed in the case law; at this point, the best the Court could assert was that “reapportionment will require something objectively unjust, unreasonable or unfair in some important or substantial sense.”
While “significant unfairness” warranting unequal division was found on the facts in Jaszczewska, the Court of Appeal made a clear statement that the 2013 reform of the Family Law Act was intended to limit the circumstances in which a departure from the presumption of equal division of family property could be justified. Under the new Family Law Act, the court retains discretion to depart from equal division, but there is a more stringent test for such a departure: family property is to be divided equally unless it is “significantly unfair” (rather than just “unfair” to do so, which was the test under the old Family Relations Act). The purpose of this legislative reform was intended to simplify the division of family property and make it more certain, predictable, and fair.
Section 81 of the FRA sets out the presumption of equal division: spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution.
Section 95 of the FRA defines both the test (“significantly unfair”) and the factors for a court to consider in exercising its discretion to order unequal division of family property or debt. The determination of whether equal division would be significantly unfair is now guided by a more precise identification of relevant factors than was found under the old family law legislation. Under the old legislation, a court could consider circumstances relating to the acquisition, preservation, maintenance, improvement or use of property in exercising the discretion to depart from equal division of family property. With the 2013 reform, Legislature purposefully chose not to include relative contribution as a factor in s. 95.
It was clear to the Court that if relative contribution to the acquisition, preservation, maintenance or improvement of family property during the relationship was intended to be a significant factor or one frequently relied on in justifying the conclusion that the equal division of family property is significantly unfair, Legislature would have said so (para. 43). Allowing relative contribution to become a regular consideration in the context of s. 95 would create uncertainty and complexity, which would be contrary to the legislative objectives that underlie the new FLA division of property regime.
Having said that, the Court at para. 44 acknowledged that the list of factors in s. 95(2) is not a closed list; Legislature recognized that there may be factors other than those listed that could ground significant unfairness and included in s. 95(2)(i) the discretion to consider “any other factor […] that may lead to significant unfairness.” Accordingly, “one cannot read the FLA as abolishing unequal contribution as a factor that may be relevant to reapportionment, although the circumstances in which it may be considered and relied on are intended to be much constrained.”
Jaszczewska was not a case of reapportioning in light of relative contributions arising during their relationship; rather it was grounded in s. 95(2)(f), which allows the court to consider “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”. The husband designed and built a new residence on the property that enhanced the value of the property beyond market trends; the court found that the increase in value was significant and was caused by the husband after the relationship had ended. In these circumstances, the facts clearly supported reapportionment in favour of the husband as equal division of property would be significantly unfair.
The presumptive rule is that family property is divided equally after separation unless it would be “significantly unfair”. The use of “significantly unfair” in s. 95 of the FRA was meant to constrain the exercise of judicial discretion in departidivng from an equal division of family property and debt. The removal of “relative contribution” as a specific factor for consideration was intended to limit the circumstances in which a departure from equal division of family property could be justified because of unequal contributions to its acquisition, preservation, maintenance or improvement made during the relationship.
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