Source: https://www.deborahtoddlaw.com/tracing-2/
Timestamp: 2019-04-23 05:57:46+00:00

Document:
a spouse’s direct contribution to the preservation, maintenance, improvement, operation or management of excluded property.
There have now been 5 decisions of the BC Supreme Court since the new Family Law Act was proclaimed and one decision of the BC Court of Appeal.
Two of the decisions F.(V.J.) V. W.(S.K.), 2015 BCSC 593 (now upheld on appeal) and Wells v. Campbell, 2015 BCSC 3 say that the exclusion is lost if property is placed in joint names because of the presumption of advancement. The presumption applies unless it is rebutted by showing an intention not to gift the property.
 . . . . . The property provisions of the FLA are intended to be a complete code so that there is no need to examine the intention of the parties at the time of a transfer of excluded property to joint tenancy. To come to the opposite conclusion would bring uncertainty and a level of inequality into a property division structure that was intended to treat married and unmarried spouses equally and to provide for a greater level of certainty.
a) The presumption only applies to married spouses and so gratuitous transfers between married and unmarried spouses would be treated differently [This point is less convincing given the seeming acceptance of the application of the doctrine to marriage-like relationships, though I would note such acceptance seems to be limited to BC: see McNamara v. Rolston, 2013 BCSC 2115 (CanLII)at para. 13; B. v. S.C., 2015 BCSC 2136(CanLII)at para. 87].
b) The presumption is at odds with and would thus limit the utility of the tracing provisions. Property . . . . . placed in joint names is clearly derived from excluded property and so it is easy to trace the full amount of the exclusion. Unlike the presumption of advancement, tracing does not depend on the parties’ intentions. The application of the presumption and an examination of whether property was gifted is at odds with the simply concept of tracing.
d) Further, if half of the excluded property is a gift to the donee spouse, shouldn’t he or she be able to claim that his or her half of the property is excluded?
 Mr. Justice Butler then identified two consequences arising from these issues; the most relevant is that certainty of the property division scheme of the FLA would be defeated; exclusion would require considering not only how the property was brought into the relationship, but on subsequent dealings with it and the parties’ intentions in those transactions. This exercise would be difficult and would require significant court time: see Remmem at para. 51.
 I find that Mr. Wells at the time he transferred the Hornby Property into joint tenancy he did so as a gift to Ms. Campbell. At that time, the relationship was intact and there was no evidence to suggest that it was failing. The transfer of an interest in the Hornby Property was a perfected inter vivos gift and the gift cannot be revoked: see for example the comment of Madam Justice Newbury in Bergen v. Bergen, 2013 BCCA 492 (CanLII) at para. 41. Ms. Campbell as a result obtained legal and equitable interest in the property. I do not read the Act as altering the law of inter vivos gifts. Accordingly, I cannot see how Ms. Campbell can be denied the entirety of her interest in the property, subject to the division of family property under s. 95(1).
 In my view the presumption of advancement operates in this case. . . .
 After reference to Butler J.’s discussion of the effect of the FLA on the presumption, Masuhara J. determines the decision in Remmem was limited to the facts as the court concluded the tracing provisions, as applied in the case, were so applied without considering or applying the presumption of advancement: Wells at para. 37. Conceding certain problems are raised by its continuance, Masuhara J. considered that the presumption was neither explicitly extinguished in the act, nor was intention eliminated from the considerations, given that the definition of “property” in the Act includes a beneficial interest “unless a contrary intention appears”; from these points, he concluded the FLA did not displace the presumption of advancement or the effect of an inter vivos gift resulting in joint tenancy: Wells at paras. 38-42. Excluded property thus relates to property which was held by a spouse prior to the relationship and in which an interest in title was not transferred to the other during the relationship: Wells at para. 43. Given his finding that the transfer of interest to Ms. Campbell was perfected, she obtained an interest in the otherwise excluded property.
Section 85(1)(g) is a tracing provision that is similar in construction to s. 84(1)(b). The intent appears to be that excluded property will remain excluded property despite its use or conversion from one form to another.
With regard to this quote, the position that the presumption is of no application in the context of an action under the FLA accords better with the overall scheme and objectives of the act: see also P.G. v. D.G., 2015 BCSC 1454 (CanLII) per Fenlon J. (as she then was) at paras. 41-89.
 I thus conclude that the proceeds of sale from the Centre St. property was “property derived from property or the disposition of property referred to in any of paragraphs (a) to (d)” which includes, as per s. 85(1)(a), property acquired by a spouse before the relationship between the parties began.
 Were the doctrine of advancement to apply, I also find the explanation of Mr. Pearson as to the agreement reached between him and Ms. Graham at the time the property was purchased to be a credible and realistic explanation for having registered title to the Inn in their joint names. As of 2008, the parties had been living together in a marriage-like relationship for three years, during which time Ms. Graham had not been gainfully employed and had few assets save for a small inheritance from her mother’s estate. On moving to Terrace, she contributed a relatively minor share of the effort that went into operating and maintaining the Inn. It would have been an extremely unwise decision of Mr. Pearson to gift one-half of his only major asset to his then partner. That it was also unwise for Mr. Pearson to make this arrangement without documentation to that effect makes it no less believable. Mr. Pearson’s intention was thus to retain the value of the excluded property invested in the Inn. The presumption of Mr. Pearson having made a gift to Ms. Graham would then be rebutted by the evidence of the oral agreement.
The Court of Appeal in V.J.F. v. S.K.W. a.k.a. S.K.F., 2016 BCCA 186 recently upheld the trial judge’s decision in F.(V.J.) V. W.(S.K.), 2015 BCSC 593.
 With all due respect to the contrary view, I conclude that the new FLA scheme does not constitute a “complete code” that “descends as between the spouses” and eliminates common law and equitable principles relating to property. Rather, the scheme builds on those principles, preserving concepts such as gifts and trusts, and evidentiary presumptions such as the presumption of advancement between spouses. Thus I find that the gift of (slightly less than) $2 million made by Mr. F. to Ms. W. became her property and was “property owned by at least one spouse” under s. 84, as opposed to “property derived from the disposition of [excluded] property” within the meaning of s. 85. At the time the definitions are applied – the date of separation – the fact Mr. F. had originally received the $2 million as a gift was no longer relevant. He lost the exclusion when he voluntarily and unreservedly directed that the West 33rd property be transferred to Ms. W. and ‘derived’ no property from that disposition.
 I acknowledge that judges may in some cases have to determine whether transfers of excluded property that may have taken place years before, were gifts or not. This seems likely to occur most often in cases where inherited property is transferred by the heir to his or her spouse or into joint names. (Of course, the presumption of advancement was invented as a way of resolving such questions where the evidence is unclear or equivocal.) That said, there are means by which the inheriting or recipient spouse can protect against ‘losing’ the exclusion. Subject to other relevant provisions of the FLA, for example, the transferor can require the transferee to acknowledge that no gift of the excluded property (or its value) is intended.

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