Bradley v. Callahan, 2017 BCSC 2266

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Bradley v. Callahan, 2017 BCSC 2266 Date: 20171208 Docket: Vancouver Registry: E161000 Between: Norval Bradley Claimant And Edward James Callahan and Midwest Ventures Ltd. and C.M.S.T. Investments Ltd. Respondents Before: The Honourable Mr. Justice Smith Reasons for Judgment Counsel for the Claimant: P. Daltrop Counsel for the Respondents: J. MacInnis Place and Date of Hearing: Vancouver, B.C. November 24, 2017 Place and Date of Judgment: Vancouver, B.C.

December 8, 2017 [ 1 ] The parties were married in September 1997 and signed a marriage agreement dated September 11, 1997. They had lived together for at least five years before the marriage, although they do not agree on the date they began living together. [ 2 ] They separated in June 2014, and the claimant now seeks, among other things, division of extensive property holdings pursuant to the Family Law Act , S.B.C. 2011, c. 25 (“ FLA ”). The respondent counterclaims for division of property according to the terms of the marriage agreement.

In her response to the counterclaim, the claimant says the marriage agreement is void on a number of grounds. [ 3 ] The issue on this application is whether property issues in this action will be governed by the FLA or by the former Family Relations Act , R.S.B.C. 1996, c. 128 (“ FRA ”), which was in force at the time of the marriage agreement.

Both parties want that issue resolved before trial because it may affect the valuation dates to be used by an expert who has been jointly retained to give an opinion on the value of the property at issue. [ 4 ] The FLA came into force in 2013, replacing the FRA and establishing a new basis for division of property. Transitional provisions in the FLA include s. 252 , which reads: 252

(1) This

section applies despite the repeal of the former Act and the enactment of

Part 5 [Property Division] of this Act.

(2) Unless the spouses agree otherwise, (

a) a proceeding to enforce, set aside or replace an agreement respecting property division made before the coming into force of this section, or (

b) a proceeding respecting property division started under the former Act must be started or continued, as applicable, under the former Act as if the former Act had not been repealed. [ 5 ] The parties have agreed that the joint valuation expert will provide an opinion on the value of properties and debt as of the current date, the date of separation, and the date of marriage.

The claimant applies for an order that the expert also provide a valuation as of May 1, 1990, the date she says cohabitation began, and an order that the respondent pay the costs of that additional valuation in the first instance, subject to the direction of the trial judge. She also seeks a ruling that the FLA will apply to the division of property if the marriage agreement is set aside. [ 6 ] The respondent says that cohabitation did not begin until early 1992, but says that a valuation as at that date and/or 1990 would be a substantial and unnecessary expense.

He says the value of property when cohabitation began is irrelevant under the FRA , which must govern in this case. The respondent agrees that the issue of which statute applies should be determined before trial and before final

instructions are given to the valuation expert. [7] I agree that the question of which legislation applies is a pure legal issue that is not subject to any factual findings that may bemade at trial. It is in the interest of both parties to know before trial which legal regime governs and to avoid unnecessary expense inobtaining expert evidence. The trial is currently set for January 22, 2018, but counsel advise that it is highly unlikely to be ready toproceed on that date. [8]

Section 81 of FLA states that, on separation, each spouse has a right to an undivided half interest in all family property and isequally responsible for family debt. The definition of “spouse” in s. 3 includes a person who as lived in a “marriage -like relationship”with another for at least two years. [9] Family property is defined in ss. 84 and 85 to include all property owned by either spouse at the date of separation, subject tospecific exceptions. One of those exceptions relates to property that a spouse acquired before the relationship began.

In that case, familyproperty includes only the amount by which the property increased in value during the relationship. [10] Property division under the FRA was limited to married spouses. There was a presumptive equal division of “family assets”which were defined as property ordinarily used for family purposes.

Where property was owned by one spouse for primarily businesspurposes, it was a family asset only if the other spouse had made a “direct or indirect contribution” to its acquisition or operation.Indirect contribution included effective management of household or child rearing responsibilities. [11] The FLA therefore requires what is often a straightforward mathematical exercise, where the date a property was acquired andits value at that time may be highly relevant.

Where property was acquired before the relationship, as is apparently the case with at leastsome of the property at issue here, it is necessary to know what the property was worth when cohabitation began in order to identify theincreased value that is subject to division. [12] The FRA required more of a qualitative analysis that focused on the nature of the property and the relationship between theparties. The date a particular property was acquired generally became relevant only on issues of reapportionment under s. 65(1), whichreads: 65

(1) If the provisions for division of property between spouses under

section 56,

Part 6 or their marriage agreement, as the case maybe, would be unfair having regard to (

a) the duration of the marriage, (

b) the duration of the period during which the spouses have lived separate and apart, (

c) the date when property was acquired or disposed of, (

d) the extent to which property was acquired by one spouse through inheritance or gift, (

e) the needs of each spouse to become or remain economically independent and self sufficient, or (

f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity orliabilities of a spouse, the Supreme Court, on application, may order that the property covered by

section 56,

Part 6 or the marriage agreement, as the case maybe, be divided into shares fixed by the court. [13] Where parties had lived together before marriage, pre-marital contributions to an asset could be considered as one of the “othercircumstances” referred to in s. 65(1)(f): Piskor v. Piskor (1981), (BC SC), 27 B.C.L.R. 230 at 233, 20 R.F.L. (3d)141 (B.C.C.A.) [Piskor].

The claimant relies on Piskor in submitting that the value of property at the date of cohabitation will be relevanteven if the FRA applies. [14] In my view, any recognition of pre-marital contribution under the FRA involved a general consideration of the nature and extentof that contribution in order to determine if a departure from the presumptive equal division was justified. I agree with counsel for therespondent that nothing in Piskor or the cases that followed it required precise valuation of property as at the date of cohabitation.

Thatvaluation will be required in this case only if the FLA applies. [15] The effect of s. 252 of the FLA was considered in Halliday v. Halliday, 2015 BCCA 82 [Halliday], where a divorced wifeapplied in 2014 to set aside portions of a 2009 separation agreement. The former husband argued that the application was out of time,relying on the two-year limitation period in s. 198 of the FLA.

The Court of Appeal said at paras. 42 and 43: [42] The effect of s. 252(1) of the FLA is to allow parties that would otherwise have been subject to the FLA property regime at thetime they filed their claim to proceed under the old FRA regime despite it having been repealed. In essence, s. 252(1) preserves the FRAregime as it concerns property division for any separation agreements that were finalized before the FRA was repealed, unless the partieselect to proceed under the FLA. [43] There is no evidence that the parties agreed that the dispute be governed by the FLA rather than the FRA.

Accordingly, anapplication such as that brought by the Wife to set aside or replace a separation agreement made before the FLA came into force anddealing with property division must be resolved under the FRA. Procedurally, this means that s. 198 of the FLA, the

section upon whichthe Husband relies, could not be used as a means of dismissing the Wife’s proceeding to set aside the property provisions of theSeparation Agreement. [My emphasis added]

[ 16 ] In McHale v. McHale Estate , 2015 BCSC 993 , the court was required to consider a marriage agreement in the context of a Wills Variation action. Madam Justice Harris said at para. 68: [68] The question of whether any legal duty is owed involves a consideration of the marriage agreement in the context of the claims that might otherwise be available under the applicable family law legislation. The question is whether the Family Relations Act or Family Law Act applies. [ 17 ] After citing the passage from Halliday referred to above, Harris J. concluded at para. 72: [72] In my view, this

interpretation of the effect of

section 252 applies equally to marriage agreements as to separation agreements, which were finalized before the Family Law Act came into force. Accordingly, I do not accept the defendants’ position that the Family Law Act applies to the consideration of the marriage agreement between the testator and the plaintiff. I agree with the plaintiff that it is the Family Relations Act which applies. [ 18 ] In her response to the counterclaim, the claimant pleads that the marriage agreement is void on a number of common law grounds, including duress, unconscionability, repudiation, and failure of conditions precedent.

She also seeks, in the alternative, a variation of the marriage agreement under s. 65(1) of the FRA . [ 19 ] The claimant argues that although s. 252 of the FLA refers to a proceeding to set aside an agreement, there was nothing in the FRA that provided for a marriage agreement to be set aside on common law grounds. The property division set out in a marriage agreement could only be varied on the basis of the factors set out in s. 65 .

The claimant therefore says that if the Court finds the marriage agreement to be void from the beginning on common law grounds, there will be no agreement to which either s. 252 or the FRA applies and property will be divided in accordance with the FLA . [ 20 ] The application of s. 65 to marriage agreements was considered by the Supreme Court of Canada in Hartshorne v. Hartshorne , 2004 SCC 22 [ Hartshorne ] .

The court said at para 44: …A contract governing the distribution of property between spouses reflects what the parties believed to be fair at the time the contract was formed ( presuming the absence of duress, coercion, and undue influence )… Thus, central to any analysis under s. 65(1) of the FRA is consideration of how accurately the parties predicted, at the time of contract formation, their actual circumstances at the time of distribution, whether they truly considered the impact of their decision and whether they adjusted their agreement during the marriage to meet the demands of a situation different from the one expected, either because the circumstances were different or simply because implications were inadequately addressed or proved to be unrealistic. [My emphasis added] [ 21 ] Later, in Rick v.

Brandsema , 2009 SCC 10 , the court commented at paras. 35 and 36 on the availability of common law remedies in a case involving a separation agreement: 35 As previously noted, the wife's claim was that the agreement was unconscionable and therefore unenforceable under the common law of contract. No one challenged the availability in British Columbia of the contractual defence of unconscionability.

If it was found to be enforceable, the wife's alternative claim was that the agreement was "unfair" pursuant to the lower threshold set out in s. 65 of the Family Relations Act and should be varied accordingly. 36 The trial judge found that the agreement was unconscionable. He was not, therefore, required to address s. 65 . This is consistent with the approach taken by British Columbia courts, which have generally proceeded on the basis that s. 65 presupposes the existence of a valid contract.

Only if the agreement is found to be enforceable, is its "fairness" assessed under s. 65 . (citations omitted). [ 22 ] Although the court in Hartshorne , at para. 39 , noted certain distinctions between marriage agreements and separation agreements, those distinctions are not relevant to the availability of common law remedies. [ 23 ] Therefore, although the FRA did not specifically refer to an agreement being set aside on common law grounds, it was open to argue that an agreement was unenforceable at common law and to seek either the presumptive equal division of family assets or an unequal division under s. 65 . [ 24 ]

Section 252 of the FLA refers to proceedings to “enforce, set aside or replace” an agreement made before the FLA came into force. Although the notice of family claim made no reference to any agreement, this proceeding became one to “enforce” an agreement when the respondent raised the issue in his counterclaim. The claimant’s response to the counterclaim also effectively made it a proceeding to “set aside” an agreement. [ 25 ] I find that this case falls squarely within s. 252 and must proceed under the FRA . The application to include valuation as of the date of cohabitation is dismissed, with costs in the cause. “Smith J.”