Business Investments Unequally Divided Due to Lack of Contribution

When parties get a divorce, they must divide their family property. Family property may include business investments that the parties held during the marriage. In some situations, one of the parties may have been more involved with managing the business investments during the marriage and acquired them before the marriage began. This is significant, as one of the factors for unequal division of family property is the extent to which each party contributed to the family assets. If one of the parties contributes more to a family asset, they may receive a greater proportion of the family assets when they are divided at trial. Conversely, suppose a party contributed very little or nothing to the value of the family assets compared to the other party. In that case, they may receive a smaller proportion of the family assets. 

This post will discuss the factors the court will consider if the family property is divided unequally. We will pay particular attention to the parties’ contribution to the family assets as a factor for unequal division. In Hamani v. Hamani, 2023 ABKB 360, the court ordered that the wife receive 30% of the family’s value since she contributed little to its value. We will provide helpful takeaways for parties facing unequal division of family property. 

When will the court order unequal division of family property?

As a starting point, the court must determine what falls under the category of family property. Generally, any property or assets owned by either party at the time of trial will be considered family property to be divided, even if the property is only in one of the party’s names. 

There may also be exempted property, which is not considered family property to be divided. According to the Family Property Act (formerly the Matrimonial Property Act), s.7(2), there are certain categories in which property may be exempted, either in part or entirely. Some examples include property owned by one party before the marriage, inherited property, and settlement proceeds of a tort claim. However, the value of the growth of the exempt property would be considered family property, so it is important to ensure that valuations of the family property are available for the appropriate dates.

Once family property and their values have been determined, the parties are generally each entitled to 50% of the family property unless the court finds that there are reasons to order unequal division. 

Factors for unequal division of family property

The court must consider the factors set out in s. 8 of the Family Property Act to determine if unequal division of family property should be ordered. There are some general categories that the court will consider:

1. The contributions of parties towards the family property during the marriage and after separation; 
2. The income, earning capacity, liabilities, obligations, property, and other financial resources of each party at the time of marriage and at trial; 
3. The duration of the marriage; 
4. Whether any of the parties acquired the property after separation and
5. Whether any of the parties dissipated any of the family assets.

We will focus on the contribution factors. In particular, the court will consider:

1. Contribution of each party towards the marriage and the welfare of the family, including acting as homemaker or parent; 
2. Contribution, financial or otherwise, to the acquisition, conservation, improvement, operation, or management of a business, farm, enterprise, or undertaking that is owned or operated by one or more parties; 
3. Contribution, financial or otherwise, made directly or indirectly by or on behalf of a party to acquire, conserve, or improve the property.

Contributions can come in many different ways, and we will discuss an example below to illustrate how a court may analyze contributions to the business investments of the parties. This would in turn, influence the court’s decision on unequal division, if suitable in the circumstances.

Court orders unequal division of parties’ business investments due to lack of contribution 

In the Hamani case, the court ordered unequal division of the parties’ business investments, as there was evidence that the wife did not contribute to the property. 

The parties were married for six years. Before the marriage, the wife did not have any assets. Also, she did not acquire any assets during the marriage alone. Before the marriage, the husband was the sole director and shareholder of two companies. He continued being these companies’ sole director and shareholder at the date of trial. He also owned three properties before the marriage and purchased another five years after separation. 

The court looked to the contributions of the parties to determine how to divide the family property, which included the husband’s interests in the companies. The court found that the wife did not do all of the housekeeping and parenting during the marriage and that this was a shared role between the parties. The court also did not accept the wife’s evidence that she had begun maintaining their home once she later realized that her husband owned it. There was no evidence that the wife contributed financially or otherwise to the acquisition or conservation of the properties owned by the husband, including the apartment where they lived during the marriage.

The wife did not work during the marriage. The court found that it was understandable that she did not work during the marriage. She was originally from Brazil, and the parties later moved to France. The wife did not speak French, so it took a lot of work for her to find a job. 

Later on, the parties moved to Edmonton. The wife did not speak English, so the court understood that she was focusing on her English courses. 

The husband also did not work during the marriage. He did not have a language barrier that prevented him from working, nor any other reason. He simply worked on managing and growing his investments. The court concluded that the parties had simply decided to live off the husband’s investments during the marriage. 

After separation, the parties could no longer afford to continue living off the husband’s investments. The court found that as it was six years since the separation, there was no reason why the wife was not working, considering that she also had a marketing degree from Brazil and spoke enough English to obtain a job after the separation. 

The court concluded that the wife had contributed very little to the marriage. After considering the other factors, the wife was only entitled to 30% of the family assets.

Mincher Koeman Lawyers Can Assist with Matrimonial Property Division Involving Business Investments

During a marriage, parties may have built up business investments, which may need to be divided as family property upon a divorce. The valuation and division of property held by a family business is a complex matter that is highly specific to the circumstances of the case, so you should speak with one of our family law lawyers at Mincher Koeman, who are experienced in assisting business professionals and entrepreneurs with issues involving property division. Our Calgary family law lawyers are dedicated to finding the best resolution for you after your divorce.

To book a consultation, please contact us online or by phone at 403-910-3000.