Proving "Excluded Property"

Section 85 (1) of the Family Law Act provides what is "excluded" family property. 

Section 85 (2) of the Family Law Act provides that "A spouse claiming that property is excluded property is responsible for demonstrating that the property is excluded property."

The case of Shih v. Shih, 2015 BCSC 2108 (CanLII) provides guidance as to the type of evidence one must provide to the court in order to prove an exclusion. Some general principles emerge from this case as follows: 

• generally speaking, a party asserting to exclude property is expected to produce documents showing the value of the property at the critical times and, where relevant to the claim, documents showing the movement of the property as it changes character from one asset to the other (see para 62); 
• notwithstanding the general expectation as set out in the preceding paragraph, documentary evidence is not invariably required - the type of evidence required will likely depend on the type of exclusion claimed (see paras 63 and 64);
• however, generally a broad brush or rough estimate approach to identifying excluded property is not appropriate as the party attempting to prove the exclusion must establish, on a balance of probabilities, the basis for and extent of the exclusion with precision (para 64); 
• depending on the nature of the claim, in the practical terms, it might be impossible for a party to meet the onus without documentary evidence; e.g., (a) if the exclusion is based on a bank accounts that purportedly preexisted the spousal relationship, then viva voce testimony of the balance of the bank account at a particular point in time several years earlier might be unreliable if not corroborated by a bank statement; (b) in contrast if the exclusion is based on an unusually memorable event, such as an inheritance, the court may conclude that viva voce testimony as to the value of the inheritance is reliable without corroborating documents (see para 64). 

In Shih, the wife was able to successfully claim her exclusions whereas the husband was not. Paragraphs 150 to 155 are reproduced below: 

Conclusions on Excluded Property

[150]     In summary, Ms. Shih established excluded property consisting of $164,933 of the $957,922.87 net sale proceeds from the Braemar house (Scott Schedule item #3), leaving $792,989.87 as family property to be divided; $153,687.86 from her Quadras McCurdy RRSP (Scott Schedule #11), leaving $21,368.61 as family property to be divided; and $45,487.50 in her RBC account at the time the parties separated (Scott Schedule item #12), which has since been spent.

[151]     In summary, Mr. Shih established that $29,493.35 of the Olympia Trust locked-in RRSP (Scott Schedule #14) is his excluded property, leaving a balance of $16,166.15 as family property to be divided.

[152]     The difference in the outcomes of the parties' respective claims to excluded property turns to some extent on the nature of the exclusions claimed by each of them.

[153]     Ms. Shih's claims were founded upon property she owned prior to the relationship and gifts from her parents.  The former was conceded by Mr. Shih, which left Ms. Shih in the position of having to prove that she received the gifts, their amounts, and the purposes to which they had been applied.  In the circumstances of this case, that was not particularly difficult for her to do, in large part because there were only a few gifts, they were given in memorable circumstances, and some of them were received relatively recently.  For the most part, she had documents that established the steps in the process of tracing the gifts into current assets.

[154]     In contrast, Mr. Shih claimed exclusions arising from property he owned prior to the relationship and these claims were not conceded by Ms. Shih.  He had to prove the value of particular assets that he held many years ago in circumstances where the values were not particularly memorable and, in some cases, such as the stock options and the equity in the West 4th Avenue condominium, not easy to discern.  In the result, it was not possible for him to prove the exclusions he sought without clear documentary evidence and, at least in respect of the equity in the West 4th Avenue condominium, expert evidence of historical value.

[155]     While sympathetic to the position Mr. Shih found himself in, the Family Law Act makes clear that the party claiming the exclusion bears the onus of establishing it, with precision.  For the most part, Ms. Shih met that onus and Mr. Shih did not.

Link to full case below: 

https://www.canlii.org/en/bc/bcsc/doc/2015/2015bcsc2108/2015bcsc2108.pdf

Link to Family Law Act below:

http://www.bclaws.ca/civix/document/LOC/complete/statreg/--%20F%20--/Family%20Law%20Act%20[SBC%202011]%20c.%2025/00_Act/11025_00.htm