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V.J.F. v S.K.W. (2016 BCCA 186)

Case at a glance
CaseV.J.F. v S.K.W.
Citation2016 BCCA 186
CourtBC Court of Appeal
Year2016
TopicProperty Division
Central questionWhat happens if you gift excluded property to your spouse in BC?

Key takeaways {#takeaways}

  • In 2016, gifting excluded property to your spouse destroyed the exclusion — the gift became divisible family property.
  • Since 11 May 2023, section 85(3) reverses that result: exclusions now survive transfers between spouses.
  • The Family Law Act builds on ordinary property law — it is not a self-contained "complete code."

V.J.F. v S.K.W. at a glance {#summary}

Under today's Family Law Act, gifting excluded property to your spouse no longer destroys the exclusion: since May 2023, section 85(3) says the exclusion survives transfers between spouses. But V.J.F. v S.K.W. decided the opposite under the earlier law — the husband's $2 million gift became family property — and it still matters for older separations.

Most people assume a gift or inheritance stays theirs if the marriage ends. The excluded property rules seem to promise exactly that. Mr. F. received $2 million from the estate of the late owner of the company he worked for — excluded property, no one disputed it. Then he used it to buy a Vancouver lot and put the title in his wife's sole name to shield it from creditors. When the marriage ended, the Court of Appeal held the exclusion was gone. The money was hers by gift, and it was divided equally.

The facts {#facts}

Mr. F. and Ms. W. married in 2004. He was a senior executive with a property development company; she left paid work in 2005 to raise their three children. The company's owner, referred to as M.I., treated him almost like a son and brought him into an "inner circle" of trusted advisors. As a director of several companies in the group, Mr. F. worried about personal liability for claims that might surface later.

M.I. died of cancer in June 2011. Before his death, he decided to give $2 million to each member of his inner circle to protect them against potential creditor claims. Mr. F. received his $2 million from the estate and deposited it into his personal bank account. The trial judge found this was a gift by way of inheritance — excluded property when he received it. Nobody challenged that finding on appeal.

Here is where it went wrong for him. The couple wanted a new family home on West 33rd Avenue in Vancouver. In December 2011, Mr. F. used most of the $2 million (over $1.68 million plus closing costs) to buy the property — and directed that title go into his wife's name alone, to keep the asset beyond the reach of any future creditors. He also transferred $236,895 to her account for pre-construction costs, and used the rest to pay off the mortgage on their Richmond home (just over $37,000), a car loan and credit cards. He had done the same thing before: in 2010, he transferred the Richmond house into her sole name for the same reason.

The couple separated in early 2013, with only the foundation of the new house built. They finished construction (about $1.5 million) and sold the property for $3.55 million later that year. Two million dollars of the sale proceeds went into a trust account while the courts decided whose money it was.

The legal issues {#issues}

The Family Law Act, S.B.C. 2011, c. 25 ("FLA") says spouses presumptively share family property equally, but section 85 excludes certain property — including inheritances and gifts from third parties. Section 85(1)(g) extends the exclusion to "property derived from" excluded property or its disposition.

Trial judges in BC had split into two camps. One line of cases (Remmem v Remmem; P.G. v D.G.) said the FLA is a "complete code": once property is excluded, it stays excluded, and you can trace it through any transfer — even a gift to your spouse. The other line (Wells v Campbell) said ordinary property law still applies: a gift is a gift, and what you gave away belongs to the other spouse.

The Court of Appeal had to decide:

  1. Did Mr. F. actually gift the $2 million to Ms. W.?
  2. Does section 85(1)(g) preserve the exclusion when excluded property is gifted to the other spouse?
  3. Does the presumption of advancement — the old rule that a transfer from husband to wife is presumed to be a gift — still operate under the FLA?
  4. If the money was family property, would equal division be "significantly unfair" under section 95?

What the court decided {#decision}

The Court of Appeal (Newbury J.A., with Tysoe and Groberman JJ.A. agreeing) dismissed the appeal on April 28, 2016. The $2 million was family property, divided equally.

The gift was a gift. Mr. F.'s own evidence was that he put the property in his wife's name to protect his family from creditors. The court applied a long-standing principle, quoting Lord Denning in Tinker v Tinker: a husband "cannot have it both ways." He cannot tell creditors the property belongs to his wife and tell the divorce court it is really his. The finding of a gift did not even need the presumption of advancement — his testimony was clear (paras. 52–53).

The tracing provision did not save him. Section 85(1)(g) protects "property derived from" the disposition of excluded property. A gift, by its nature, is made for nothing in return. Mr. F. "derived" no property from giving the money away, so there was nothing for the exclusion to attach to (para. 68). And the FLA measures family property at the date of separation — by then, the West 33rd property was owned by Ms. W. (para. 69).

The FLA is not a "complete code." The court rejected the idea that a new property regime "descends" between spouses at separation, wiping out ordinary concepts of ownership, gift and trust. Section 104(2) says rights under Part 5 are "in addition to and not in substitution for" rights under equity or other law. The FLA builds on the common law; it does not replace it (paras. 71–74).

The presumption of advancement survived (in 2016). Absent clear words abolishing it, the presumption continued to apply under the FLA (para. 77).

Equal division stood. The court accepted that the very specific purpose of M.I.'s gift — protecting Mr. F. from future director liability — might have supported an unequal division. But "significantly unfair" is a high bar, and it was not met (para. 81).

Where the law stands now. The BC Legislature has reversed the central holding of V.J.F. for cases governed by the amended statute. Amendments made by S.B.C. 2023, c. 12, in force 11 May 2023 (confirmed on the official Table of Legislative Changes), added two key provisions. Section 85(3) now says the exclusion "applies despite any transfer of legal or beneficial ownership of the property from a spouse to the other spouse." Section 81.1 now bars both the presumption of advancement and the presumption of resulting trust between spouses. Section 96 was also re-enacted with a wider list of factors for dividing excluded property, including the terms of any agreement about a transfer. So under the current FLA, transferring excluded property into your spouse's name does not, by itself, destroy the exclusion. V.J.F. remains relevant to separations and transfers governed by the earlier law, and its broader point — that the FLA works alongside ordinary property law — was not touched by the amendments. Which version of the law applies to a particular separation can depend on timing; that is a question to raise with a lawyer.

What happens if you gift excluded property to your spouse in BC? {#the-test}

Under the law as V.J.F. stated it in 2016: you lose the exclusion. A true gift transfers ownership completely. Because you receive nothing back, there is no "derived" property for section 85(1)(g) to protect, and at the date of separation the asset belongs to your spouse. It falls into the pool of family property and is presumptively split equally.

Under the current statute (for matters governed by the 2023 amendments): the exclusion survives the transfer. Section 85(3) says so directly, and section 81.1 removes the gift presumption that helped sink Mr. F.'s claim.

Two things did not change:

  • The onus is on you. Section 85(2) puts the burden of proving an exclusion on the spouse claiming it. Bank records, estate documents and a clear paper trail matter as much as ever.
  • Growth is shared. Even where an exclusion holds, the increase in the property's value during the relationship is family property under section 84(2)(g).

The numbers {#numbers}

Figures below are taken from the judgment.

Item Amount
Gift to Mr. F. from M.I.'s estate (June 2011) $2,000,000
Used to buy the West 33rd Avenue property (Dec. 2011) over $1.68 million plus closing costs
Transferred to Ms. W. for pre-construction costs $236,895
Richmond mortgage paid off just over $37,000
Construction cost of the new house about $1.5 million
Sale price of West 33rd (late 2013) $3.55 million
Sale proceeds held in trust at trial $2,124,700
Agreed value of the Richmond property at trial about $1.5 million

How the court worked through the transfer:

Step Question Answer in V.J.F.
1 Was the asset excluded property when received? Yes — a $2 million gift by way of inheritance (unchallenged)
2 Was there a genuine gift to the other spouse? Yes — title placed in her name to defeat future creditors; no interest reserved
3 Does s. 85(1)(g) trace the exclusion through the gift? No — the donor "derived" no property from a gratuitous disposition
4 Whose property is it at the date of separation? The recipient spouse's — so it is family property under s. 84
5 Is equal division "significantly unfair" (s. 95)? No — the high threshold was not met; equal division upheld

What this means if you're separating in Surrey {#bc-impact}

If you brought an inheritance, a gift from family, or pre-relationship savings into your marriage, the way that money moved between accounts and names can decide who keeps it. V.J.F. is the cautionary tale: creditor-proofing, estate planning and simple generosity all involve putting assets in a spouse's name, and under the pre-2023 law that choice could cost the exclusion entirely.

For separations governed by the current statute, section 85(3) offers real protection — but it does not do your record-keeping for you. You still have to prove where the money came from and where it went. Statements, transfer records and estate paperwork should be gathered early, not reconstructed years later.

Timing matters too. Whether your file is analysed under the V.J.F. approach or the amended FLA is not something to guess at. It is worth getting advice before you make decisions based on either rule — see divorce in BC for how property division fits into the wider process.

The cleanest protection remains an agreement. Newbury J.A. herself pointed out (para. 78) that a transferring spouse can require the other to acknowledge that no gift is intended. A properly drafted separation agreement — or a marriage or cohabitation agreement made earlier — can record exactly what is excluded and what happens to it. If you and your spouse are close to agreement, family mediation is often a faster way to settle these questions than court.

How a lawyer uses V.J.F. {#in-practice}

  • Framing the file by date. The first question on any exclusion claim involving a transfer between spouses is which law governs. For older transfers and separations, V.J.F. may control; for matters under the amended FLA, section 85(3) changes the starting point.
  • Testing exclusion claims. V.J.F. confirms the onus under section 85(2) sits on the spouse claiming the exclusion. A lawyer builds — or attacks — the documentary trail: source of funds, account movements, land title records.
  • The "both ways" problem. Where a client moved assets into a spouse's name for creditor protection, V.J.F.'s adoption of Tinker v Tinker still resonates: courts are unsympathetic to a spouse who says one thing to creditors and another in family court.
  • Interpretation arguments. The holding that the FLA "builds on" common law and equity rather than replacing them remains good law and is cited well beyond gifting cases.
  • Prevention. The judgment itself suggests the fix: written acknowledgments and agreements at the time of a transfer, so intention never has to be litigated.

Frequently asked questions {#faq}

My spouse put my inheritance money toward a house in both our names. Have I lost the exclusion?

It depends on which version of the law applies and on the evidence. Under the current FLA, section 85(3) preserves an exclusion despite a transfer between spouses, and section 85(2) still requires you to prove the money's origin. For older separations, the V.J.F. analysis may apply instead. Get advice on your specific dates and paper trail.

Does the increase in value of excluded property get shared?

Yes. Even where an exclusion holds, section 84(2)(g) of the FLA makes the growth in value of excluded property during the relationship family property, which is presumptively shared equally. The exclusion protects the original value, not the gain.

Can a court ever divide property that stays excluded?

Yes, but only narrowly. Section 96 says a court must not divide excluded property unless property outside BC cannot practically be divided, or it would be "significantly unfair" not to divide it, considering the length of the relationship and the factors now listed in that section. In V.J.F., the trial judge found the threshold would have been met even if the $2 million had stayed excluded — though the Court of Appeal did not need to rule on that alternative. Support obligations are a separate analysis — see child support in BC.

References {#references}

Read the decision itself: V.J.F. v S.K.W., 2016 BCCA 186