Property Division Under FLA

Property Division Under FLA

December 05, 2013 By Terrence Laukkanen

On March 18, 2013, British Columbia’s Family Law Act (“FLA“) came into force. Under the new FLA, the law governing the division of property of unmarried individuals changed significantly. Previously, an unmarried party had to demonstrate a common law entitlement to contested assets on equitable grounds – unjust enrichment or constructive trust. Now, the definition of “spouse” has expanded to include unmarried parties who have resided together for more than two years in a relationship akin to marriage. S. 81 of the FLA states that as spouses, and in the absence of any agreement or order to the contrary, each has a presumptive right to an undivided half interest in all family property.

In the recent case of Bressette v Henderson, 2013 BCSC 1661, the court considered whether the new rules apply to claimants whose relationship would have met the new definition of spouse in cases where the relationship ended before those rules came into force.

Background

Kimberley Bressette and Joedy Henderson began dating in December 2004. They began living together at some point prior to October 2005, and the relationship ended as of February 5, 2012. Ms. Bressette brought a property claim shortly thereafter. At issue was the division of the property owned by one or both of the parties at the time they separated.

As the FLA was not yet in force at the time the litigation began, Ms. Bressette’s claim was originally based on constructive trust and unjust enrichment. Subsequent to March 18, 2013, she amended her claim to include reliance on the FLA, and in particular, her status as a spouse.

The court had little trouble determining that, had the FLA been in force during the relationship, the parties would be considered spouses. However, Mr. Henderson argued that the FLA could not possibly apply, given that the relationship ended before it came into effect.

“Does the new law apply or not?”

According to s. 252 of the FLA, unless the spouses agree otherwise, a proceeding respecting property division started under the former Act (the Family Relations Act) must be started or continued under that Act as if it had not been repealed. The court had difficulty applying this section to the present case, however, as under the old regime unmarried parties such as Ms. Bressette and Mr. Henderson were not considered spouses and therefore could not have brought a property proceeding under it.

While Mr. Henderson argued that the clear intention of the legislature must have been to exclude existing claims between separated couples from the provisions of the new FLA, the actual language of the section excludes only proceedings brought under the Family Relations Act, and does not exclude common law property proceedings such as Ms. Bressette’s, brought on the basis of unjust enrichment or constructive trust. The court wondered whether this indicated legislative intent to immediately confer benefits on unmarried spouses, but without full legal argument on the issue and with one party being unrepresented at trial, considered it improper to rule the applicability of the FLA to the parties. However, the court went on to decide that even if the new regime were to apply to the parties, it would not affect the outcome of the case.

Significant Unfairness and the Expectations of the Parties

Under s. 95 of the new legislation, the court may order an unequal division of family property if it would be “significantly unfair” to divide the family property in half. Ms. Bressette’s initial claim, for unjust enrichment, was an equitable one similarly based on fairness. The court noted that in the case law, a large part of determining fairness is the legitimate expectations of the parties.

Ms. Bressette and Mr. Henderson organized their relationship and financial affairs under the law as it existed at the time. According to the court, “the parties never considered or expected that there would be a new statutory regime applicable to the relationship during the course of the relationship.” Indeed, Mr. Henderson testified that he knew that different property regime laws applied to married couples as opposed to unmarried ones; this may be one of the reasons he chose not to marry. While the FLA applies the same property regime to married and unmarried spouses alike, the fact that this particular relationship ended before the regime came into being meant that neither party could change the relationship, or attempt to negotiate an agreement that addressed the presumptions of the new law.

Given this, the court ruled that even if the FLA were to apply, fairness demanded that the result be the same as if it did not. Under both the common law and the new legislation, the court ruled that Ms. Bressette was entitled to half of the family home in Kamloops and half of a Mexican timeshare purchased by the couple. All other property was considered solely owned, and was to remain with its named owner.

Going Forward: Problem Solved?

The applicability of the new FLA to unmarried couples whose relationships predate March 18, 2013, remains an open question. Although the FLA‘s two-year limitation period puts a hard cap on the number of potential claimants in the same situation as Ms. Bressette, there are also those whose relationships straddle that date whose status under the FLA is in doubt. For example, what of an unmarried couple who lived together for seven years but broke up on March 19, 2013?

While fully resolving the ambiguity in the law would require two parties with deep pockets willing to fully argue the issue through to trial, the Bressette decision does offer some guidance moving forward despite the fact that the court did not rule on the issue. Under the old common-law property regime, the court was to divide property in light of fairness and reasonable expectations. Under the FLA the court can divide property unequally so as to avoid unfairness. It is not surprising that, in the grey area between the two regimes, the court found that both converge to the same result.

Terrence Laukkanen is an Ontario lawyer, scholar and blogger. He occasionally writes for Predovic Family Law & Mediation, and his own blog can be read at www.terrencelaukkanen.com.

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