Friday, March 07, 2014

New BC Family Law Act - No More Palm Tree Justice for Unmarried Couples


Last year, British Columbia wholly revamped its family law legislation with a new approach that has serious implications for common-law spouses, whether desired or not.   The B.C. Family Law Act, S.B.C. 2011, c. 25, came into force on March 18, 2013, and replaced the province’s 32-year-old Family Relations Act.  
Perhaps the the weightiest change in the law was its new definition of “spouse,” which includes both married couples and those who have lived with another person “in a marriage-like relationship” for a period of at least two years.  

Depending on the specific circumstances and intentions of unmarried individuals, this represents either a welcome change or state intrusion into domestic affairs that should really be deferred to the wishes of the parties themselves.  As the Supreme Court of Canada had astutely noted in Kerr v. Baranow, "while domestic partners might not marry for a host of reasons, one of them may be the deliberate choice not to have their lives economically intertwined." 

The New B.C. Law

BC's new definition of spouse is set out in section 3 of its Family Law Act, while its approach to  equal division of marital assets and debt is found in section 81:
3  (1) A person is a spouse for the purposes of this Act if the person
(a) is married to another person, or
(b) has lived with another person in a marriage-like relationship, and
(i)  has done so for a continuous period of at least 2 years, or
(ii)  except in Parts 5 [Property Division] and 6 [Pension Division], has a child with the other person.
(2) A spouse includes a former spouse.
(3) A relationship between spouses begins on the earlier of the following:
(a) the date on which they began to live together in a marriage-like relationship;
(b) the date of their marriage.
(4) For the purposes of this Act,
(a) spouses may be separated despite continuing to live in the same residence, and
(b) the court may consider, as evidence of separation,
(i)  communication, by one spouse to the other spouse, of an intention to separate permanently, and
(ii)  an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.

Equal entitlement and responsibility

81  Subject to an agreement or order that provides otherwise and except as set out in this Part and Part 6 [Pension Division],
(a) spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and
(b) on separation, each spouse has a right to an undivided half interest in all family property as a tenant in common, and is equally responsible for family debt.

Only Assets and debt that are accumulated during the period of cohabitation are subject to division.  Assets  that were accumulated before cohabitation commenced are excluded in the new BC law:

Excluded property

As a result, whether the newly dubbed “spouses” like it or not, assets that accumulated during their marriage-like relationship will be subject to an equal division without any burden of proving equitable principles under the common law.  Whether this was a deliberate decision motivated by a concern for preserving the proprietary rights of common law couples or a more practical interest in judicial economy is unknown.  

What is important to note is that property claims arising out of common law relationships were reportedly taking up as much as 25% of the court’s time.  With this new legislation and its formulaic approach to property division, the family law docket will no doubt be cleared of cases that would otherwise drag on indeterminately.

The Common Law Approach
Previously, under the old BC law, individuals were left with no prescribed statutory entitlements following the dissolution of a common-law relationship, regardless of the number of years they had cohabited or the degree of their contributions to the assets.  Without the legal protections afforded to their married counterparts, common law spouses had no other means for asserting a family property claim other than the equitable principles of constructive trust and the claim to an interest in a joint family venture ushered in by Pettkus v. Becker, [1980] 2 S.C.R.834 and Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R.269.

Ontario continues to follow this equities-based approach.  

Under common law, in order to prove that a spouse is entitled to an interest in an asset arsing from a joint family venture, he or she has the burden of demonstrating: i) the mutual effort of the parties; ii) their degree of economic integration; iii) their actual intent during the relationship; and iv) the prioritization of the family unit in decision-making.  

In most cases, a monetary remedy will be deemed sufficient to remedy the unjust enrichment as opposed to a proprietary interest.  

There are two distinct mechanisms for valuing a monetary award.  The first is the "value survived" approach which determines the claimant's share in the increase in the overall value of the property that is directly proportional to his or her efforts.  The second approach is the "value received" approach (or quantum merit approach) which more or less treats the services provided by the claimant as that of hired help insofar as it is calculated based on a "fee-for-services" basis.  For obvious reasons, claimants are less desirous to have the latter approach used when it leaves one spouse with a disproportionate share of the assets.

The other available option as a remedy, and the one that is the most difficult to prove, is the constructive trust, or a "restitutionary proprietary award."   This award is appropriate where the claimant can prove a causal relationship between his or her contributions and the acquisition, preservation, maintenance, or improvement of the property.  

In Kerr and Baranow, Cromwell J. succinctly said the following about the rights of common law couples to claim an interest in property "cohabitation does not, in itself under the common law of unjust enrichment, entitle one party to a share of the other's property or any other relief.  However, where wealth is accumulated as a result of joint effort, as evidenced by the nature of the parties' relationship and their dealings with each other, the law of unjust enrichment should reflect that reality."  

With the passage of the new law, this statement is no longer applicable in British Columbia.  

The Change in BC

Judges have noted the dichotomy between the legal remedies that are available in common law property claims since the coming into force of the new legislation and how this compares to what has historically been awarded.  

In a BC appeal decided before the new law came into force, Ibbotson v. Fung, 2011 BCSC 1021, (heard on November 14, 2012), the appellate court affirmed a trial judge’s decision to award the Respondent a 25% interest in a home on the basis of a constructive trust.  The trial judge had ordered that the property be sold and the net proceeds of the sale apportioned on a 75/25 basis in order to account for the fact that the Appellant’s mother had made a significant gift towards the acquisition of the property.  The Appellant husband appealed on the basis that the property’s increase in value was attributed to inflation and therefore no direct link existed between the accumulation of wealth during the relationship and the Respondent’s contributions.  The Appeal judge affirmed the decision and found that a monetary remedy would be insufficient to reflect the degree of the Respondent’s contributions which were substantial and direct enough to sustain a proprietary award.   
“In my view, the findings of fact of the trial judge support the necessary and specific nexus between Ms. Ibbotson's contributions and the acquisition, maintenance, preservation and improvement of the Vancouver Property (paragraph 74).” Paragraph 48 of the judgment summarizes the particular circumstances of the parties and the fact-finding analysis that supported the decision.
  • In this case, the parties' were part way through a long-term relationship when the purchase occurred. They identified the opportunity together. Through their joint financial contributions and labour they made the Property habitable, and treated this major asset as a joint venture to which they both contributed over a long period, and to which Lindsay has continued to contribute to this day. When Lindsay made further improvements to the Property after separation, Henry just stood by. As I have said, he was aware of the improvements, but not necessarily consulted. In any event, he did not assert sole ownership to the Property at that time, or, for that matter, at any time during the period of ownership.
Ibbotson v. Fung underscores how BC’s new law translates into very distinct outcomes in terms of real numbers and dollars and cents. 

For example, if this case had been heard after the coming into force of the new legislation the Respondent would have received, by default, a 50% interest in the property.  

What’s more, this remedy would have been awarded with the added benefit of avoiding the high cost and inconvenience that inevitably confront litigants relying on the joint family venture doctrine.  It is an expensive exercise that is daunting for most litigants.  One should point out that the Respondent was forced to jump a very high hurdle in order to be entitled to a mere quarter interest in a property whereas a half-interest would be presumptively be awarded to a married woman simply because of her marital status and irrespective of her efforts and connections to the property. 
While the joint family venture has proved to be a doctrinally useful principle that has alleviated the inequity that otherwise prejudice and disenfranchise common law spouses, it has also resulted in ad-hoc and variable decision making that forces the evolution of the law to proceed on a case-by-case basis.  Its inherent unpredictability has deterred many common law spouses from bringing claims for a proportionate share in the accumulation of wealth that their efforts have helped build.  

Thus, the new BC legislation is promising for common law spouses who enter relationships with few assets and leave it with their partners financially better off.   
- Ana Kraljevic, Toronto
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