05 December 2010

The Ins and Outs of Separation... Part IV:
Section 57 Declarations

Important Update: The Family Law Act was introduced on 14 November 2011 and contains a number of provisions which are critical to the comments made in this post. See my post "Family Law Act Introduced!" for more information.

A "section 57 declaration" is a judicial declaration, pursuant to s. 57 of the Family Relations Act, that a married couple have "no reasonable prospect of reconciliation with each other" and is often made when a couple have started a legal action. This sort of declaration probably seems a bit pointless, and it would be completely pointless except for s. 56 of the act:
  • s. 56(1) says that a married spouse is entitled to "an interest" in the family assets when declaration under s. 57 is made
  • s. 56(2) says that the interest is "an undivided half interest in the family assets as a tenant in common"
While a couple are married, the legal ownership of their assets is as the asset is owned. If the car is registered in Jane's name, it's Jane's car as far as ICBC, her creditors and her trustee in bankruptcy are concerned. Although s. 56 of the Family Relations Act says that Jane and John are each presumptively entitled to half the value of Jane's car (and s. 65 allows either of them to ask for more than half), the value won't distributed until trial or settlement. The effect of a s. 57 declaration is to divide the legal ownership of the car right away; it crystallizes each spouse's presumptive one-half interest in the family assets until the property is dealt with at trial or settlement.

The legal effect of a s. 57 declaration

As you likely guess, s. 57 declarations can be really important. The declaration:
  1. converts the ownership of property spouses own as joint tenants into equal ownership as tenants in common;
  2. where property is owned by only one spouse, vests a half interest in each spouse as tenants in common;
  3. fixes the pool of property available for distribution between the spouses; and,
  4. sets a date for the valuation of the property, including the presumptive termination date of each spouse's interest in the other spouse's pension.
Let me explain the bit about owning property as joint tenants and tenants in common. When two or more people own something as joint tenants, they all own the whole thing. There isn't one-half or one-quarter to point to and say "this part here is mine." When a joint tenant dies, his or her interest simply evaporates and the surviving joint tenants continue to own the whole property. When two or more people own something as tenants in common, however, they each own their individual slices of the pie. They can sell or borrow against their shares of the property as they each see fit, and when a tenant in common dies, his or her interest transfers to his or her estate, to be dealt with according to the tenant's will.

Let me also explain the bit about fixing the pool of property available for division. Although property acquired after the date of a s. 57 declaration often remains the separate property of the spouse who bought it, this isn't the case for property bought with a family asset. In general, if the new property is bought with a family asset, like a new car bought using the family car as a trade-in, the new property will also qualify as a family asset and be subject to division.

When you want a s. 57 declaration and when you don't

You would particularly want a s. 57 declaration if your spouse has lots of creditors who might want to seize your spouse's property or if your spouse is likely going to go bankrupt. Once a s. 57 declaration has been made, a creditor can only take your spouse's half of the family assets and only half will vest in your spouse's trustee in bankruptcy.

On the other hand, might not want a s. 57 declaration if your spouse is likely to die and you and your spouse own valuable assets, like the family home, as joint tenants. If your spouse dies while you are joint tenants, you would continue to own the whole property after your spouse's death; if you have a s. 57 declaration, you will own the property as tenants in common and after your spouse's death, you would keep your half of the property while your spouse's half would go to his or her estate.

The law about s. 57 declarations can be complicated, and you really must speak to a lawyer to get proper advice about when you should be asking for a s. 57 declaration and when you shouldn't.

Update: 9 January 2011

Curiously, I've just bumped into two cases which illustrate the importance of s. 57 declarations, both of which concern pensions.

In Peck v. Peck, the parties separated in 2003 but a divorce action didn't get started until 2009. The wife sought a share of the husband's pension, and the husband argued that her interest in his pension should have ended in 2003 when they separated, not six years later when a s. 57 declaration was made in the divorce action. The court held that there was no reason to depart from the asset division scheme set out in the Family Relations Act and divided the pension as of the 2009 triggering event.

Similarly, in Wong v. Wong, the parties separated in 2005 but a divorce action didn't get going until 2008. At the trial in 2010, the husband asked the court to value his pension from the date of separation, not five years later at the trial. The court held that there was no reason to depart from the usual practice of dividing the pension as of the triggering event. In this case, the triggering event was the divorce trial as there hadn't been an earlier s. 57 declaration.

Update: 13 January 2011

And yet another recent case in a similar vein!

In Johnston v. Johnston, the parties married in 1985 and separated in 2005. The wife received half of the husband's pension accumulating during this period, as well as during the five year period which elapsed between separation and trial as there had been no prior triggering event. (In a somewhat unusual circumstance, the court also awarded the wife a half share of the husband's pension which accumulated during the three years that the parties lived together before marrying.)

Future posts

Separation is a surprisingly broad topic. If there's a topic you'd like me to discuss, please say so in a comment to this post.