During a divorce, the parties must address how to divide their matrimonial property. In some cases, there are significant assets involved. The value of those assets could have also increased significantly during the marriage such that they are extremely valuable by the time of trial. For instance, it is common for real estate to increase its value over time, even if little is done to grow its value. Therefore, it is important to consider the date at which matrimonial property is valued. The valuation date can have a significant impact on property division and what each party is entitled to, especially if there is an equalization payment to be made by one of the parties.
This post will discuss the law surrounding valuation dates for matrimonial property division in Alberta, including any exceptions that may apply. In particular, we will examine the case, Ma v. Xu, 2023 ABKB 346, which discussed an exception to the general rule for valuation dates and provides insights into when a court may depart from this rule. For parties with significant assets involved in matrimonial property division, this post provides important takeaways, including how to prepare appropriate evidence to meet the standards.
Generally, matrimonial property is divided based on the value as of the date of trial.
According to section 7 of the Matrimonial Property Act (now the Family Property Act):
7(1) The Court may, in accordance with this section, make a distribution between the spouses of all the property owned by both spouses and by each of them.
(3) The Court shall, after taking the matters in section 8 into consideration, distribute the following in a manner that it considers just and equitable
(a)the difference between the exempted value of property described in subsection (2), referred to in this subsection as the “original property”, and the market value at the time of trial of the original property or property acquired
In other words, the property owned at the date of trial is relevant to property division, as the parties may not own the same property as they did at the date of separation.
In order for the court to properly exercise its discretion to divide property equally or unequally, the court needs to understand the value of the property at the time of trial. The date of trial is also relevant as the trial judge is asked to consider the increase in value of exempt property from the date of separation to the date of trial.
This rule was confirmed in the Alberta Court of Appeal case, Hodgson v. Hodgson, 2005 ABCA 13. Before that case, some case law suggested a court could deviate from the date of trial as the valuation date if some sort of unfairness would occur. However, in Hodgson, the Court of Appeal confirmed that a judge was to deal with unfairness in the division based on the factors set out in section 8 of the Matrimonial Property Act.
There is an exception to the general rule that the parties divide matrimonial property at the date of trial. The parties can agree to divide their property at another date if they enter into a formal agreement that meets the requirements set out in sections 37 and 38 of the Matrimonial Property Act.
In some cases, the value at the date of trial may not be available. For instance, there may be a long delay in hearing the trial since separation and existing valuations may need to be updated. If significant assets are involved, valuation report updates may be costly.
For instance, in the Ma v. Xu case, the parties used a valuation date different from the date of trial.
In this case, the parties were married for 11 years. They had one child together. The parties separated in 2012, but the husband did not leave the matrimonial home until 2016. Various overseas assets were subject to matrimonial property division.
The wife had obtained valuations of the properties as of the date that the husband moved out of the matrimonial home in 2016. The husband had previously agreed that this date should be used as the valuation date for matrimonial property. By the end of the trial, however, the wife suggested that another date could be used to value the property but that she was prepared to rely on the 2016 valuation date.
The only evidence available regarding the valuations of the properties was for 2016 and 2017. The court found that it was unfair to rely on a date other than 2016, as this was agreed upon by the parties when the trial began. While the parties did not have a formal agreement to use the 2016 valuation date, the court found that they agreed to use that date at the beginning of the trial, and an agreement between parties can be grounds to depart from valuation at the date of trial.
The general rule is that the court must use the date of trial as the valuation date for matrimonial property division. An exception to this rule would be if the parties agreed to adopt another valuation date. Generally, if the parties agree to use a date that is different from the date of trial, then the court will proceed with that date even if one of the parties later does not agree, as seen in the Ma v. Xu case. Therefore, it is important to consider if the parties agree to a valuation date other than at trial, as this will guide what expert evidence should be produced regarding the valuation of the properties. Otherwise, the parties will need to prepare expert evidence to value the properties as of the date of trial.
Upon a divorce, the division of matrimonial property is often one of the key issues to be addressed. In order to do so, there needs to be appropriate evidence of the value of the property to be divided, which can vary depending on the valuation date. The valuation and division of matrimonial property 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 parties with issues involving property division. Our Calgary family law lawyers are dedicated to finding the best resolution for you after your divorce.
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