09 June 2017

Can the date of separation be used for valuation of family property in British Columbia?


The humorous subtitle to this article is "Why the heck does he/she get to benefit from the mortgage payments I made on the house since he/she left?" 


Most often in separation and divorce, couples manage their finances in an informal way for months and sometimes even years before they venture in to see a lawyer and have a formal separation agreement drawn up.  Many times, one party has moved out and the other party has stayed in the family residence, one party pays the mortgage and the other party pays their rent and their own bills and so on.  It is not surprising, therefore, that the person who has been in the family home thinks they alone should be able to benefit from their payments, so when they meet with their lawyer they often expect that the value of the family home will be the date that their spouse moved out.  This is not so, says the Family Law Act
Section 87 of the FLA requires, unless an agreement or order provides otherwise, that the value of family property be based on fair market value at the date of trial: 

Valuing family property and family debt:
87        Unless an agreement or order provides otherwise and except in relation to a division of family property under Part 6,

                        (a) the value of family property must be based on its fair market value, and
                   
    (b) the value of family property and family debt must be determined as of the date
                         
(i) an agreement dividing the family property and family debt is made, or
                         
(ii) of the hearing before the court respecting the division of property and family debt.
However, the court does have discretion to order an alternative date for valuation in order to avoid significant unfairness relating to a spouse’s post-separation contribution.   In the case of Bamford v. Mulyati, 2017 BCSC 945 CLICK HERE the 83 year old Claimant applied to divorce his 51 year old wife after she fled the country with his first (deceased) wife’s jewelry in 2013.  The family property consisted of the increase in value of the Claimant’s pre-marital investments and his claim to the Court was for reapportionment in his favour based on significant unfairness due to post separation contributions to those assets. 

The Bamford case referenced the case of Slavenova v. Ranguelov, 2015 BCSC 79 HERE to support the claim for valuation at the date of separation.  From paragraph 53:  “the FLA provides two alternate routes to address potential unfairness that may arise from a party’s post-separation contributions, namely s. 87 and s. 95.  Under s. 95 a court can order reapportionment to address any “significant unfairness” that may arise from an equal division of property and debt in light of the spouse’s post-separation contribution.  Alternatively, under s. 87 the Court may depart from the date of hearing or agreement as the valuation date.”

Madam Justice Morellato in the Bamford case agreed that the date of separation should be the date of valuation, as she found that a significant unfairness had arisen because Ms. Mulyati had not made any contributions towards the family property since her ‘sudden departure’ in 2013.  A review of the cases makes it clear that it does take a set of very unique facts for the Court to Order valuation at the date of separation. In the case of K.A.L. v. K.J.L. 2017 BCSC 651 HERE the Claimant had remained living in the family residence and was responsible for making mortgage payments.  The family residence had increased in value since separation, and the Claimant said it would be unfair for her to share that with the Respondent.  The Court looked at the financial arrangement, which as with most separated couples, involves a complicated web of payments by each party to support the family in the immediate months and years post separation, stating at paragraph 286:  “In my view, there should be compelling evidence to depart from the standard valuation date as the date of trial thereby disentitling one property owner the benefit of the increase in value of property which is brought about by market forces and not as a result of direct effort of the other party.”  And at Para 289:  “  I am persuaded by these comments to conclude that a change in valuation date from the norm should certainly be the exception and should only be ordered if it would be significantly unfair to do otherwise. 
See also Jaszczewska v. Kostanski, 2016 BCCA 286 (CanLII), HERE at para. 39, the British Columbia Court of Appeal discusses the general rule that parties should share in post‑separation increase in value of property independent of the parties’ respective contributions to post‑separation increase in value.
[39]      Also, because family property is generally valued on the date of the hearing, the parties will presumptively share in any post-separation increases in the value of family property. Once again, because of s. 81, this entitlement exists independent of the parties’ respective contribution to the post-separation increase in value.

 

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