Dividing a Business When Going Through Divorce in BC

When a couple owns a business, property division can be difficult. However, BC Courts have dealt with it extensively - here are the basic regarding businesses and divorce.


Business storefronts in quaint town

Division of Family Property – Venture & Business Assets 

Louise and Don have been married for 18 years.  For the first 7 of those years Louise worked at a Whitespot while Don went to medical school.  Don now works at the University of Victoria medical health center walk-in clinic.   Their marriage has broken down and Louise is arguing that Don’s medical degree is a family asset and she is entitled to a half-interest as per section 56 of the Family Relations Act.[1]  However, there is no specific provision in the FRA that allows Louise to do this.  Under sections 58 and 59 of the FRA business assets are considered family assets they are owned by one spouse and not used primarily for business to the exclusion of the other spouse.[2]

The following types of assets have been held to be “business assets:”

  • Patent rights[3]
  • Farm land and operations [4]
  • Professional practices (ie. Medical or Law)[5]

It is important to note that there is a difference between a medical practice and a medical degree.  Where a spouse owns a professional practice, or shares in the partnership or professional management company, this property may be divided and valued like any other business.  However, professional qualifications, like Don’s medical degree, are not tangible assets that a value can be placed on.  Courts have generally held that these are not property within the meaning of ss. 58 and 59 and as such, Louise has no claim against Don’s training.[6]

As the BC Court of Appeal reasoned in Samson v. Samson, the earnings from employment cannot be treated as property and are more properly classified as income.  The trend in family law has been to deal with contributions made by spouses towards higher education and professional degrees through spousal support rather than the division of property.[7]  Therefore, it would make more sense for Louise to bring evidence of her endeavors to assist Don with his career in a spousal support action.

 Can licences ever be considered family assets?

There are some circumstances where a licence may be considered a family asset.  For example in Seymour a commercial fishing licence was considered a family asset that was divisible as property.  The BC Superior Court maintained that it generated income for a family that was distinct from other intangibles such as a university degree or professional qualification.[8]  The court determined the fishing licence had no personal quality, and could be used by anyone.  It was distinguished from a medical licence which was only valuable in the hands of the person who it was awarded to.  Where the value of a licence can be transferred, it may be considered a family asset.[9]

Similarly, a milk quota was also to be a family asset.  It was ordinarily used for a family purpose and had potential for marketability and profit, which meant that it could be valued.[10]

What about contributions to a family business?

Suppose instead of being a medical doctor, Don was a used car salesman and owned his own business.  Louise attended the office every now then and while she was there she would greet the customers.  She also liked graphic design and would often make signs for the windows of the showroom advertising sales.  Now that the couple has divorced, Louise is seeking to establish that Don’s business was a family asset.

In order to characterize business assets as family assets, the burden will rest on Louise to demonstrate that she has made a direct or indirect contribution to the operation.  Direct contributions include:

  • Paid or unpaid work in the business
  • Contribution of family assets
  • Permission of the use of family assets to acquire or maintain the business asset
  • Assumption of risk (ie. Mortgaging a family asset or guaranteeing a loan)[11]

Indirect contributions can include any contribution other than household management or child-rearing.[12]  The bar for direct or indirect contributions is fairly low.  For example, in O’Bryan v. O’Byran the family business was a restaurant.  The plaintiff’s primary responsibility was homemaking and child-care, but she also brought floral arrangements to the restaurant.  This was considered sufficient to be a contribution.[13]  Likewise, in Piercy v. Piercy the BC Superior Court found that entertaining was sufficient indirect contribution to a family business.[14]  In 2002, the BC Superior Court determined that a wife’s contribution through occasional attendance at trade shows, answering of phones, and filling and capping bottles for a beverage company was sufficient contribution to a business.  The court maintained that while “it was apparent that her participation was minimal, she did contribute.”[15]

Therefore it is reasonable to assume that Louise’s participation in Don’s business through her graphic design and customer service would be considered a contribution. The business would be considered a family asset, of which Louise would be entitled to half through the Family Relations Act.

 


[1] Family Relations Act, RSBC 1996, c 128, s. 56.
[2] Ibid., ss. 58-59.
[3] Coulthard v. Coulthard (1984), 38 R.F.L. (2d) 78 (B.C.S.C.).
[4] Laxton v. Laxton (1981) 26 B.C.L.R. 57 (S.C.), Rev’d in part (1982) 41 B.C.L.R. 194 (C.A.).
[5] Wilson v. Wilson (1982) 27 R.F.L. (2d) 424 (B.C.S.C.).
[6] Samson v. Samson (1996) 26 R.F.L. (4th) 333 (B.C.C.A.).
[7] Moge v. Moge (1992) 43 R.F.L. (3d) 345 (SCC); De Beeld v. De Beeld (1999) B.C.C.A. 515.
[8] Seymour (1992) 71 B.C.L.R. 218 (S.C.).
[9] Ibid.
[10] Verschurr (1992) 72 B.C.L.R. (2d) 397 (C.A.).
[11] Family Relations Act , ss. 58-59.
[12] Ibid.
[13] O’Bryan v. O’Bryan (1996) B.C.J. No. 1125 (S.C.).
[14] Piercy v. Piercy (1991) 31 R.F.L. (3d) 187 (B.C.S.C.).
[15] O’Keefe v. O’Keefe (2002) B.C.J. No. 485 (S.C.).


Reply