Imagine this: Veena’s eight-year marriage with Tom has now come to an end and they have been separated for over a year now. What happens to Veena’s home she had acquired before the relationship, which Tom and her lived in for five years? Does this property get divided equally amongst Veena and Tom?
I present to you, section 85 of the Family Law Act (the “FLA”).
Upon separation, each spouse is entitled to a one-half interest in each family asset (s. 81, FLA). “Family property” is all real and personal property owned by one or both spouses at the date of separation (s. 84, FLA), including real property, business interests, investments, money, and pensions (Williams v Williams, 2022 BCSC 517). To clarify, “real” property pertains to land while “personal” property includes property other than land.
Excluded Property Under Section 85 of the FLA
“Excluded property” is property that would otherwise be family property but is excluded under section 85 and therefore, is not to be divided. Excluded property includes the following:
- Property acquired before or after the relationship;
- Gifts to a spouse from a third party;
- Settlements or damage awards, except those compensating both spouses or replacing wages;
- Non-property-related insurance proceeds, except those compensating both spouses or replacing wages; and,
- Some kinds of trust property.
Section 85 applies to all married spouses and those unmarried spouses who have lived in a marriage-like relationship for at least two years. The person claiming that the property is excluded property must present “clear and cogent evidence” (Dearing v Dearing, 2022 BCSC 668; Shih v Shih, 2017 BCCA 37 at para 43) (“Dearing”). However, it is vital to note that any increases in value of excluded property during the relationship is considered family property (s. 84(2)(g), FLA).
The Case Law
There are a series of recent cases pertaining to excluded property under section 85 of the FLA. In February 2022, the BC Court of Appeal affirmed that excluded family property that increases in value from the date of marriage will be measured up until the date of the hearing, not the date of separation (s. 87, FLA; Banh v Chrysler, 2022 BCCA 74) (“Banh”). This means that parties share any post-separation increases in the value of family property (s. 87, FLA; Banh; Muraca v Dunsmore, 2022 BCSC 279) (“Muraca”). However, a judge may use their discretion to order a different date than that of the hearing to allow for unequal division of property. The legal concept of unequal division of family property is to be used if it would be “significantly unfair” to equally divide family property or family debt (s. 95(1), FLA) and this threshold, according to Justice Garson, is high to meet (Singh v Singh, 2020 BCCA 21). So, a judge has discretion to permit unequal division of property only if there is compelling evidence of significant unfairness should property be divided equally. Further, a judge must rely on factors within the scope of the FLA, such as subsection 95(2) to allow for unequal division, and not factors outside the FLA (Banh v Chrysler, 2022 BCCA 74).
Determining whether or not property is excluded from family property is important because if there is excluded property, only the increase in value of the excluded property over the course of the relationship is family property and will be divided equally. A car, for example, bought prior to a relationship which did not increase in value will not be considered family property (Muraca). Conversely, if property was acquired during the relationship, then that is family property subject to equal division between the parties (Dearing).
The BC Legislature intended to simplify family asset division by making the law clearer and thus, reducing judicial discretion. However, the courts have unfortunately interpreted section 85 in various ways and made it more complicated. In Banh, the lower court judge of the BC Supreme Court used their discretion to depart from valuing the parties’ properties at the date of the trial, and instead used the date of separation, relying on various factors not contemplated by the FLA legislation. Due to this error, Banh was taken to the BC Court of Appeal where the BC Supreme Court decision was overturned. Clearly, the solution by the BC legislature to reduce litigation and judicial discretion is not being solved entirely.
Given the above information, the answer to the proposed hypothetical in the introduction is the following: Veena’s property acquired before the relationship is excluded property and solely hers according to subsection 85(1)(a) of the FLA. However, any increase in the value of Veena’s excluded property during her eight-year relationship with Tom up until the trial hearing will be considered family property, and thus, divisible property (s. 84(2)(g), FLA).