Coming into force on March 2013, the Family Law Act, SBC 2011 c 25 (“FLA”) dramatically changed the family law landscape in British Columbia. In addition to reducing the amount of judicial resources spent determining family property and debt under the former act, the goal of the new legislation is to make the law simpler, clearer, easier to apply and easier to understand for married and unmarried couples. The FLA is designed to conform more closely to the public’s expectation of fairness in relation to property and debt.
One of the largest changes respecting family law in BC is the shift from determining family property under the “family purpose” model to a formulaic excluded property model with less judicial discretion. Under the former Family Relations Act, RSBC 1996 c128, the determination and division of family property was a two-stage process: First, identifying the property subject to division; and Second, determining if that property had been “ordinarily used for a family purpose” and whether equal division would be unfair (see VJF v. SKW, 2016 BCCA 186 at paragraph 5). After the FLA, all real and personal property owned by one or both spouses at the date of separation is family property and presumptively divided equally unless the asset in question is specifically excluded or such a division would result in significant unfairness. The FLA also has new features with respect to property division including new presumptive rights for unmarried spouses, and specific provision for the responsibility for and payment of debts incurred during spousal relationships.
The FLA differs greatly from the law in other jurisdictions and the consequences for a breakdown of a relationship vary greatly depending on the jurisdiction. This article compares and contrasts family law legislation in BC and Oregon with respect to property division, debt, and common law couples.
1. Property Division: Balancing Certainty and Fairness
Commenting on the legislative goal of certainty in regulating the breakdown of relationships, the BC Supreme Court in Asselin v. Roy, 2013 BCSC 1681 notes that the broad judicial discretion available under the Family Relations Act has been replaced with a more formulaic approach to the identification and division of family property.
The FLA uses the excluded property model and presumptively divides family property equally between spouses. It defines family property as everything in either spouse’s name or owned for their benefit on the date of separation except for “excluded property”. It defines excluded property as property acquired by a spouse before the relationship between the spouses began, inheritances, gifts to a spouse from a third party, some settlement or damage awards, and some insurance monies. If a spouse uses his or her excluded property to acquire other property that other property remains excluded but it is up to the spouse who makes that claim to prove its exclusion and its value. Once a spouse has proven that property owned by them on the date of separation is their own excluded property (and not family property), the excluded property must not be divided unless the court finds that it would be significantly unfair not to do so.
In BC, the spouse who seeks division of the excluded property must demonstrate that it would be significantly unfair not to divide it. In so-determining, BC courts have held that the significant unfairness must be compelling or meaningful such that the consequences of not dividing the excluded property would be so weighty as to produce an unjust or unreasonable result. The FLA states that the court may only consider two factors when dividing excluded property: the length of the spouses relationship; and the non-owning spouse’s direct contributions to the specific excluded property. With respect to contribution, the direct contributions of the non-owning spouse must be significant. Modest contribution will not be enough. Thus far, BC courts have held that such things as pledging credit and working for a company without pay are significant contributions which may warrant a division of excluded property. (see Andermatt v. Tahmasebpour, 2015 BCSC 1743; VJF v. SKW, 2015 BCSC 593; and JB v. SC, 2015 BCSC 2136)
Under the FLA once family property has been determined there is a presumption of equal division. That presumption fails if the court determines that an equal distribution would be significantly unfair. BC Courts have defined “significant unfairness” as compelling, meaningful, and more than simply differing financial contributions. The court considers such things as the length of the relationship, any agreements between the spouses, and a spouse’s contribution to the career potential of the other spouse, the origins of the property, the spouses reasonable and legitimate expectations with respect to the property during the relationship, third party contributions to the property and a spouse’s known intention with respect to the property. The spouse seeking an unequal division of the family property bears the onus of demonstrating significant unfairness. (see Remmem v. Remmem, 2014 BCSC 1552 and Slavenova v. Rangeulov, 2015 BCSC 79)
In keeping with the legislative goal of certainty for family litigants the court in LG v. RG, 2013 BCSC 983, noted that the courts should avoid departing from the presumptive equal division under the FLA to achieve “perfect fairness”. Specifically, “it is only when an equal division brings consequences sufficiently weighty to render an unequal division unjust or unreasonable”that the court should consider unequal division of property.
In contrast, the approach taken in Oregon rejects a formulaic approach and focuses on a discretionary determination of what is “just and proper in all the circumstances” to determine the appropriate division of property (see OR Rev Stat § 107.105 (through Leg Sess 2011)). In fact the Oregon Court of Appeals will only overturn a trial court’s division of assets if the trial court committed an abuse of discretion. Under the Oregon statute, “marital assets” are property acquired by the spouses during the marriage and are subject to a presumption that they were acquired with an equal contribution by the spouses. Unless there is evidence to the contrary or other considerations apply, marital assets are prima facie subject to an equal division between the parties. That same presumption does not apply to property brought into the marriage nor to assets acquired by gift, devise, bequest, operation of law, beneficiary designation or inheritance and continually held in a party’s sole name. (ORS 107.105)
Unlike BC’s FLA, under Oregon law it is presumed that the time for determining a just and proper division of property is the date of divorce, not the date of separation. However, if the parties have been financially independent and separated for a substantial period of time, then a court may use the separation date if it is “just and proper to do so”. Unlike the FLA, Oregon law does not presume that all property held by either spouse are marital assets. Where property is acquired by one spouse without any contribution from the other, absent other considerations such as comingling, it is “just and proper”that the spouse whose separate property it is keeps it.
The leading case on this issue is Marriage of Kunze, 92 P 3d 100, 337 Or 122 (2004) where the wife had a pre-relationship asset and received a number of assets via inheritance during the marriage. The court found that the wife had rebutted the presumption of equal contribution with respect to those assets as the husband had not contributed to them. Upon determining that they were not subject to division, the court went on to determine a just and proper division of property considering the question of comingling. The wife had placed one of the inherited assets into joint names with the husband. The court found with respect to one of the inherited assets that the wife’s comingling showed an intention that she would share it equally with the husband and divided that asset equally as between them. Oregon courts frequently engage in an asset by asset analysis to determine the just and proper allocation of that specific asset.
2. Debts incurred During the Relationship
Under the FLA “family debt”is defined as any debt incurred during the relationship and after the date of separation if it was incurred for the purpose of maintaining “family property”. With respect to debts incurred by the parties post-separation, the spouse who claims those debts are “family debts” must provide evidence that the specific debts were incurred to maintain “family property”. Under Oregon law there is no presumption of equal contribution to debt. Debt is considered on a case by case basis although debt that was incurred for family purposes will generally be divided equally while debt incurred for a spouse’s sole use will be that spouse’s sole responsibility.
3. Unmarried Spouses
Prior to the FLA, common law spouses were limited to using equitable remedies such as unjust enrichment and resulting trusts to advance a claim against a spouse’s interest in property upon a relationship breakdown. In a controversial move, the FLA extended the presumption of equal entitlement to family property and equal responsibility for family debt to those who have lived in a marriage-like relationship for more than 2 years or who are “common law” spouses.
In Oregon, common law marriage is not recognized at all and as such the presumption of an equal distribution of assets does not extend to unmarried parties who have lived together. Under Oregon law, such a division is governed only by contract law principles. This approach was taken by the Oregon courts in Beal v. Beal, 577 P 2d 507, 282 Or 115 (1978), where the court firstly looked to the parties’intentions in dividing the assets and where no evidence of intention could be found, the court drew inferences from the parties’ lifestyle to determine whether or not they intended a division of assets. In doing so, the court will consider the fact that they lived together, joint acts of a financial nature such as joint bank accounts, and pooling of resources.
thegoodfirm lawyer Kaila Dotten recently co-wrote an article in the Scrivener with Oregon lawyer Daniel Margolin. A copy of the article is found here: Scrivener Article. If you have any questions for Ms. Dotten please call 604-264-5550.