Supreme Court Clarifies Applicability of Presumption of Advancement in Estate and Family Law

In recent years, family practitioners and estate litigators have struggled to confidently articulate the law regarding the effect of transfers of property into a spouse’s name.   Upon death or breakdown of the relationship, the answer to the question of whether the transfer was final depended on whether the common law presumption of advancement was alive and well or had breathed its last. The heart of the question has been under what circumstances, if any, could a transfer be effectively undone to return the value of the transferred property to the person who made the transfer.

In a judgment released today, P.G. v. D.G. 2015 BCSC 1451, the court has clarified that the presumption of advancement is overridden by the Family Law Act. Specifically, property falling under s. 85(1) is excluded from the pool of family property to be divided upon breakdown of marriage irrespective of whose name appears on title. “Excluded Property” includes pre-owned property, inheritances, third party gifts, and damages awards. In short, the court has applied the tracing provisions of the Family Law Act robustly so as to accomplish the intention of the legislature for separating parties to “keep what is theirs” but share the property and debt that accrued during their relationship. Intermingling of funds does not obviate the excluded status of the property.

The court expressly confined the reasoning to cases of relationship breakdown. Where the spousal relationship continues until death, the presumption of advancement applies and any property transferred during the relationship will be presumed to be transferred for all purposes. The donor’s estate has no claim to the value of the transferred property. This is the court’s clear statement:

[78]        …In my view, general property law, including the presumption of advancement, applies during the parties’ marriage. While the relationship continues, a transfer of real property from the husband’s sole name into joint tenancy gives the wife an undivided interest in that property. If the husband dies, the entire property vests in the wife and does not fall into the husband’s estate. If the house is put into the wife’s sole name, it is hers absolutely during the marriage and the husband’s creditors, absent a fraudulent conveyance, cannot pursue it because the husband has no interest in that property.

[79]        On marriage breakdown, however a new property rights regime descends as between the spouses, just as it did under the former FRA. The rights of third parties vis-à-vis the property held by the spouses remain unaffected (s. 82), but between the spouses, all changes. Whether property is held solely in the wife’s name, solely in the husband’s name, or jointly, it is all subject to the scheme of division created by Part 5 of the FLA(s. 84(1)). Some of that property is to be excluded under s. 85(1) and all the rest is presumptively to be applied equally regardless of whose name it is in at the date of separation.

[80]        Under this scheme it does not matter that one spouse during the marriage is presumed to have gifted property, whether excluded or otherwise to his or her spouse. There is a whole new regime once the marriage ends.

There is now limited discretion afforded to the courts to correct injustice as required by the stricter standard of “significantly unfair” in the FLA. In that light, it is this writer’s view that the court’s interpretation of the differential application of the presumption of advancement between marriages that have broken down and those that have not is a workable reconciliation of statutory and common law. It appropriately reflects the modern reality of marital finances while respecting the well-established concept of the presumption of advancement in property law generally.