Stein v. Stein, 2008 SCC 35, [2008] 2 SCR 263

                                                 SUPREME COURT OF CANADA

Between:

Wayne Stein

Appellant

and

Malka Stein

Respondent

Coram: McLachlin C.J. and Bastarache, LeBel, Deschamps, Fish, Abella and Rothstein JJ.

______________________________

Stein v. Stein, [2008] 2 S.C.R. 263, 2008 SCC 35

Wayne Stein                                                                                                                       Appellant

v.

Malka Stein                                                                                                                     Respondent

Indexed as:  Stein v. Stein

Neutral citation:  2008 SCC 35.

File No.:  31704.

2008:  February 1; 2008:  June 12.

Present:  McLachlin C.J. and Bastarache, LeBel, Deschamps, Fish, Abella and Rothstein JJ.

on appeal from the court of appeal for british columbia

Family law — Divorce — Family assets — Division of contingent liability — Whether British Columbia Family Relations Act precludes division between spouses of contingent family liabilities which cannot be valued at time of trial — Family Relations Act, R.S.B.C. 1996, c. 128, ss. 56, 65, 66.

The husband and wife separated in 2003 after 12 years of marriage during which the wife remained home to care for the parties’ two children.  In the ensuing divorce action, family assets worth $1.7 million were divided equally, and the wife was awarded support based on the husband’s income of over $200,000 per annum.  The trial judge also ordered that the husband’s contingent tax liabilities associated with his tax shelters, the extent and timing of which are unknown, should be shared equally by the spouses on an “if and when” basis, since they both benefited from them.  The Court of Appeal set aside this order on the ground that the British Columbia Family Relations Act (“FRA”) precluded the creation of a freestanding order apportioning debt between the spouses, and ordered that the husband would be solely responsible for the contingent liability.

Held (Abella J. dissenting):  The appeal should be allowed.

Per McLachlin C.J. and Bastarache, LeBel, Deschamps, Fish and Rothstein JJ.: The fact that a reapportionment will occur at some stage in the future, after the liability has crystallized, does not necessarily involve the creation of a “freestanding order”, nor does it violate a plain reading of the FRA.  Nothing in the FRA precludes an order dividing between spouses a contingent liability which cannot be valued at the time of trial.  Although it is clear that debt is not to be divided between spouses, the FRA places no temporal limits on a division of assets, and once subject to an initial division, s. 66 allows a court to make orders requiring a spouse to “pay compensation” to the other spouse “for the purpose of adjusting the division” of assets at any time.  Further, while s. 65 permits a court to vary the presumptive 50 percent asset division where it would be “unfair”, having regard to the factors enumerated in s. 65(1), including the “liabilities of a spouse”, none of the other factors militate in this case in favour of requiring only one of these parties to bear responsibility for those liabilities.  Moreover, fairness requires that both assets and debts, even those that cannot be precisely valued at the time of separation, be considered upon the breakdown of a marriage, in recognition that spouses jointly contribute to not only the accumulation of assets, but also to debts incurred for family‑related costs.  Since the trial judge found that both parties obtained significant assets and were financially stable after the division of assets, and that the wife would soon be self‑sufficient, fairness requires both spouses to assume responsibility for contingent liabilities associated with tax shelters from which they have each derived benefit, notwithstanding that the husband may be better positioned to remain economically independent in the event that the taxes become payable. However, in the event that the impact of the future liability on one of the parties results in an unfairness, that individual may apply to the court for adjustments. [5-6] [10-12] [17] [20]

Per Abella J. (dissenting): The trial judge’s order is a freestanding obligation, if and when it becomes due, inappropriately made outside and subsequent to the division of assets.  It is manifestly unfair to the wife within the meaning of s. 65 of the FRA, since it disregards the dramatic disparity in the financial circumstances, sophistication, and experience of the spouse. The trial judge failed to take account of the economic consequences of the division of labour in the parties’ household, including the wife’s absence from the paid workforce for 12 years, as required by the FRA.  Further, he failed to recognize that despite having retrained as a film animator following separation, her prospects were far from certain.  In contrast, the husband’s ample earnings, financial capacity, and business experience placed him in a far better position than the wife to accommodate a potential tax liability. Courts should strive to avoid undermining the goal of attempting to preserve an economic equilibrium between the resulting households.  Here, the equal application of a potentially substantial contingent tax burden creates a genuine risk that the wife’s and the children’s standard of living will be significantly lower than that of the husband and unfairly interferes with her ability to make personal and financial decisions for herself and the children with a sufficient degree of certainty and security. [22-23] [25-30] [32-36]

Cases Cited

By Bastarache J.

Referred to:  Young v. Young, [1993] 4 S.C.R. 3; Mallen v. Mallen (1992), 65 B.C.L.R. (2d) 241; Rutherford v. Rutherford (1981), 23 R.F.L. (2d) 337; Grove v. Grove, [1996] B.C.J. No. 658 (QL); Webb v. Webb (1994), 135 N.S.R. (2d) 161.

By Abella J. (dissenting)

Danish v. Danish (1981), 33 B.C.L.R. 176; Tearle v. Tearle, [1985] B.C.J. No. 1241 (QL); Moore v. Moore, [1988] B.C.J. No. 740 (QL); Mallen v. Mallen (1992), 65 B.C.L.R. (2d) 241; McAlister v. McAlister, [1996] B.C.J. No. 150 (QL); D.G.A. v. K.J.A., [2003] B.C.J. No. 2711 (QL), 2003 BCSC 1736; G. (J.S.) v. G. (A.G.) (2005), 20 R.F.L. (6th) 143, 2005 BCSC 1457; Murdoch v. Murdoch, [1975] 1 S.C.R. 423; Rathwell v. Rathwell, [1978] 2 S.C.R. 436; Moge v. Moge, [1992] 3 S.C.R. 813; Toth v. Toth (1995), 13 B.C.L.R. (3d) 1; Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24; Clarke v. Clarke, [1990] 2 S.C.R. 795; Best v. Best, [1999] 2 S.C.R. 868.

Statutes and Regulations Cited

Family Relations Act, R.S.B.C. 1996, c. 128, ss. 56(1), (2), 65(1), 66(1), (2).

Authors Cited

Thompson, D. A. Rollie.  “Rules and Rulelessness in Family Law:  Recent Developments, Judicial and Legislative” (2000‑2001), 18 C.F.L.Q. 25.

APPEAL from a judgment of the British Columbia Court of Appeal (Saunders, Levine and Thackray JJ.A.), [2006] 11 W.W.R. 119, 230 B.C.A.C. 100, 380 W.A.C. 100, 56 B.C.L.R. (4th) 245, 36 R.F.L. (6th) 13, [2006] B.C.J. No. 2020 (QL), 2006 CarswellBC 2214, 2006 BCCA 391, setting aside, in part, the decision of Romilly J., [2005] B.C.J. No. 1447 (QL), 2005 CarswellBC 1535, 2005 BCSC 939.  Appeal allowed, Abella J. dissenting.

Georgialee A. Lang and Benjamin J. Ingram, for the appellant.

Susan G. Label and Marie‑France Major, for the respondent.

The judgment of McLachlin C.J. and Bastarache, LeBel, Deschamps, Fish and Rothstein JJ. was delivered by

[1]     Bastarache J. — This appeal raises a question of statutory interpretation.  In particular, the Court is required to determine whether the Family Relations Act, R.S.B.C. 1996, c. 128 (“FRA”), precludes an order dividing between divorcing spouses a contingent liability which cannot be valued at the time of trial.  The relevant provisions of the FRA are as follows:

56    (1)   Subject to this Part and Part 6, each spouse is entitled to an interest in each family asset on or after March 31, 1979 when

. . .

(c)   an order for dissolution of marriage or judicial separation . . .

respecting the marriage is first made.

(2)   The interest under subsection (1) is an undivided half interest in the family asset as a tenant in common.

. . .

65    (1)   If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to

(a)   the duration of the marriage,

(b)   the duration of the period during which the spouses have lived separate and apart,

(c)   the date when property was acquired or disposed of,

(d)   the extent to which property was acquired by one spouse through inheritance or gift,

(e)   the needs of each spouse to become or remain economically independent and self sufficient, or

(f)    any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse,

the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.

. . .

66    (1)   In proceedings under this Part or Part 6 or on application, the Supreme Court may determine any matter respecting the ownership, right of possession or division of property under this Part, including the vesting of property under section 65, or under Part 6 and may make orders that are necessary, reasonable or ancillary to give effect to the determination.

(2)   Without limiting subsection (1), the court may do one or more of the following in an order under this section:

(a)   declare the ownership of or right of possession to property;

(b)   order that, on a division of property, title to a specified property granted to a spouse be transferred to, or held in trust for, or vested in the spouse either absolutely, for life or for a term of years;

(c)   order a spouse to pay compensation to the other spouse if property has been disposed of, or for the purpose of adjusting the division;

(d)   order partition or sale of property and payment to be made out of the proceeds of sale to one or both spouses in specified proportions or amounts;

(e)   order that property forming all or a part of the share of either or both spouses be transferred to, or in trust for, or vested in a child;

(f)    order that a spouse give security for the performance of an obligation imposed by order under this section, including a charge on property and may order that the spouse waive or release in writing any right, benefit or protection given by section 23 of the Chattel Mortgage Act, R.S.B.C. 1979, c. 48, or section 19 of the Sale of Goods on Condition Act, R.S.B.C. 1979, c. 373;

(g)   if property is owned by spouses as joint tenants, sever the joint tenancy.

. . .

[2]        The trial judge in this case divided over $1.7 million of assets between the parties, who were married for 12 years.  During the marriage, Mr. Stein, the appellant, provided for the family financially, while Mrs. Stein, the respondent, cared for the home and the parties’ two children.  Upon divorce, the trial judge ordered an equal division of assets between the parties.  As a result, Mrs. Stein was granted ownership of the family home, while Mr. Stein kept his interest in the family business.  Both parties received significant interests in the family’s bank accounts, investments, and RRSPs.

[3]        The trial judge also considered the debts and liabilities which had accrued during the marriage.  He adjusted the assets going to Mrs. Stein to account for the debt, which would remain in the name of Mr. Stein.  He then determined that both parties had benefited during the marriage from the tax shelters registered in the appellant’s name and that any contingent liability arising from these investments ought therefore to be equally divided between the parties.  Uncontested expert evidence indicated, however, that it was impossible to quantify the tax shelters, which were not yet wound up.  The judge thus ordered that the parties would “share equally in any liability related to the reassessment or winding up of the tax shelters” ([2005] B.C.J. No. 1447 (QL), 2005 BCSC 939, at para. 48).

[4]        The Court of Appeal overturned this order and held that the FRA precludes the kind of “freestanding” division of debt performed by the trial judge ((2006), 56 B.C.L.R. (4th) 245, 2006 BCCA 391).  It determined that the speculative nature of the liability prevented a rational adjustment of the property to account for the potential liability, and that Mr. Stein would thus be solely responsible for the contingent liability.  Mr. Stein appeals that finding to this Court.

[5]        In my view, this appeal ought to be allowed.  The FRA does not preclude an order dividing between spouses a contingent liability which cannot be valued at the time of trial, and this is not a case where the fact that both parties benefited from the tax shelters that could give rise to the contingent liabilities is outweighed by other factors.  The trial judge found that both Mr. and Mrs. Stein are financially stable, and that both benefited from these tax shelter instruments.  As a result, fairness requires restoration of the original order that the contingent debt be shared equally between the parties.  I explain this conclusion more fully below.

Analysis

A.    Division of Contingent Liabilities Under the FRA

[6]        The FRA states that when a marriage ends, each spouse is presumptively entitled to a half interest in the family assets (FRA, s. 56(1) and (2)).  No mention is made about the division of debt, although the Act does allow a court to vary the 50 percent asset division where this presumptive position would be “unfair” having regard to a number of factors (FRA, s. 65(1)).  One of the enumerated factors which may render an equal division of assets unfair is the “liabilities of a spouse” (FRA, s. 65(1)(f)).

[7]        In Young v. Young, [1993] 4 S.C.R. 3, this Court endorsed a finding by Southin J.A. of the British Columbia Court of Appeal that

[t]he court cannot make a spouse jointly liable to a creditor for a debt of the other spouse, no matter for what purpose it was incurred, or, in the absence of some contractual foundation, make one spouse liable to indemnify the other, either in whole or in part, for a liability of the latter. [pp. 133-34]

This conclusion is consistent with the FRA and confirms that debt itself may not simply be divided between spouses.

[8]        In this case, the Court of Appeal correctly held that the structure of the FRA precludes “creating a freestanding obligation between the parties for a debt” (para. 23). The court also concluded, however, that dividing a liability that will crystallize in the future necessarily involves the creation of such a freestanding order.  The result of this finding is that anytime a liability cannot be valued at the time of the initial division of assets, it cannot be taken into account by the court, as any order relating to a future division will always be deemed a “freestanding order” rather than a “reapportionment of assets”.  In my view, this conclusion creates a barrier to the fair distribution of assets between spouses and also contradicts a plain reading of the FRA.

[9]        It seems self-evident that, generally speaking, both assets and debts need to be considered in order to ensure fairness upon the breakdown of a marriage.  As the British Columbia Court of Appeal noted in Mallen v. Mallen (1992), 65 B.C.L.R. (2d) 241:

. . . the equality of treatment of the spouses as required by the scheme of the Act is intended to be a true equality in real terms, and not an artificial equality reached by ignoring some of the facts and emphasizing others. In order to bring about a true equality it is necessary that debts and other liabilities of the spouses at the time of the triggering event and earlier be examined in a way that will illustrate the true relationship between the debts, on the one hand, and the attainment of equality and fairness, on the other.  [para. 5]

[10]    Indeed, the term “family debt” has evolved in the jurisprudence out of a recognition that spouses jointly contribute to not only the accumulation of assets, but also debt.  Although the phrase has no statutory significance, it has been used with increasing regularity by trial courts (particularly in British Columbia) to describe “a liability of either or both of the spouses which has been incurred during the marriage for a family purpose” (Mallen, at para. 26).  The very existence of the term “family debt” underlines the reality that in order to ensure fairness, both debts and assets must be considered after the breakdown of a marriage.

[11]    In my view, the fact that it is not feasible to precisely value an asset or debt at the time of separation does not alter the principle that the complete financial situation of both spouses needs to be considered in order to ensure a just result.  In the context of assets, courts have concluded that spouses have a right to claim an interest even where the asset itself is “inchoate, contingent, immature, or not vested” (Rutherford v. Rutherford (1981), 23 R.F.L. (2d) 337 (B.C.C.A.), at p. 342.  See also Grove v. Grove, [1996] B.C.J. No. 658 (QL) (S.C.), and Webb v. Webb (1994), 135 N.S.R. (2d) 161 (S.C.)).  I believe the same approach ought to apply to debts — the principle of fairness requires that debts be considered even where they cannot be fully valued at the time of separation.

[12]    A plain reading of the FRA leads to this same conclusion.  Although it is clear that debt is not to be divided between spouses, the FRA does not place any temporal limits on the division of assets.  Nor does it state that once assets have been subject to an initial division, a reapportionment cannot occur at some point in the future.  To the contrary, s. 66(1) allows a court to make orders that are “necessary, reasonable or ancillary” to give effect to a determination about the division of property, and s. 66(2)(c) specifies that this may include ordering a spouse to “pay compensation” to the other spouse “for the purpose of adjusting the division”.  In my view, this provision clearly anticipates that an “adjustment of the division” will occur at some point in time after the initial division of assets has already occurred.  Further, the requirement that one spouse will “pay compensation” to the other spouse indicates that a future reapportionment of assets can take the form of payment from one party to the other.  Thus, where fairness necessitates “adjusting” the division of assets at any time, s. 66(2)(c) allows the court to order that payment occur.

[13]    In sum, it is my view that the FRA does not preclude an order dividing between spouses a contingent liability which cannot be valued at the time of trial.

B.  Ensuring Fairness in Accordance With the FRA

[14]    As has been discussed, the FRA does not require that debts be divided equally between separating or divorcing spouses, and the presumptive position is that only assets will be divided on an equal basis.  Although this presumptive division may be changed to take into account the “liabilities of a spouse”, the Act enumerates a number of other factors which may also contribute to a situation of unfairness.  In my view, each of these factors must be considered and weighed when evaluating whether deviation from the standard 50/50 division is appropriate.

[15]    Section 65(1) states that the presumptively equal division of assets may be varied where such a division is “unfair” having regard to:

(a)    the duration of the marriage,

(b)   the duration of the period during which the spouses have lived separate and apart,

(c)    the date when property was acquired or disposed of,

(d)   the extent to which property was acquired by one spouse through inheritance or gift,

(e)    the needs of each spouse to become or remain economically independent and self sufficient, or

(f)    any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse . . . .

[16]    Many trial courts have recently determined that “family debts”, which are incurred for maintenance costs relating to the family, should be considered when determining reapportionment of assets.  I agree that, where a debt has been incurred for use within the family unit, it is more likely appropriate to reapportion assets to account for that debt than if it were accumulated solely for use outside of the marriage.  The presence of debt (regardless of whether it is “family debt”) is only one factor mentioned under s. 65(1); however, and it is, in my view, necessary for a judge to consider all of the relevant factors in order to determine whether or not the presumptive division of assets leads to unfairness.

C.  Application to This Case

[17]    The Court of Appeal held that, in this case, it was inappropriate to allocate 50 percent of the contingent liability to Mrs. Stein in part because Mr. Stein is better positioned to remain economically independent and self-sufficient.  I agree with the Court of Appeal that this is a relevant consideration in determining whether reapportionment of assets is appropriate, but disagree with its ultimate conclusion on the issue.  As noted by the trial judge, both Mr. and Mrs. Stein will have “significant assets after the division of assets in this case” (para. 49), as more than $1.7 million in assets were divided between the parties.  The judge also found that Mrs. Stein has successfully retrained to enter the animation industry and is likely to become “self-sufficient in the near future” (para. 56).  Thus, although Mr. Stein does generate more income than Mrs. Stein, both spouses were found to be financially stable at the time of the division of assets and, in my view, this is not a case where an unfairness results from requiring both spouses to assume responsibility for contingent liabilities related to tax shelters from which they have each derived benefit.  None of the other factors enumerated in s. 65(1) of the FRA militate in favour of requiring only one of these parties to bear responsibility for the liabilities; fairness thus requires that they share in this burden.  Of course, in the event that there are significant changes in the circumstances of one of the parties, or if the impact of the future liability on one of the parties results in an unfairness, it is open for that individual to apply to the court for adjustments.  Currently, however, it appears as though an equal division of this liability is the fair result.

[18]    I wish to be clear that the liability that must be split between the parties is net of any profit received from ownership or sale of the instruments. Thus, in the event that Mr. Stein receives some revenue from the tax shelters that does not translate into an increase in child or spousal support payments, this revenue will be subtracted from the liability owing before it is split between the parties.  Further, in the unlikely scenario that a profit is realized upon the winding-up of the instruments, that too shall be split between the parties.  Mrs. Stein is responsible for one half of the liabilities associated with these tax shelters, but she is equally entitled to one half of any proceeds they generate.  I believe this netting principle is implicit in the reasons of the trial judge, but wish to make it absolutely explicit here.

[19]    There is one final issue to be addressed.  At trial, the judge determined that $56,339.44 in taxes owed by Mr. Stein ought to be shared equally between the parties. He adjusted Mrs. Stein’s assets to account for her share of this liability.  His reasons do not mention that Mr. Stein had filed a notice of objection in regard to this tax assessment.  Mrs. Stein appealed this aspect of the judgment, claiming that the trial judge erred by failing to order reimbursement to her in the event that the tax objection is successful.  The Court of Appeal rejected this argument.  It said that because Mr. Stein will be solely responsible for the risk associated with the income tax shelters, it was appropriate for him to also receive any rewards connected with all future tax rulings (para. 32).  Although the decision of the Court of Appeal with regard to the $56,339.44 tax payment was not specifically appealed to this Court, it is evident that its conclusion on that point was directly linked to its finding on the tax shelters.  In light of my conclusion that the Court of Appeal erred in its assessment of the contingent liabilities associated with the tax shelters, I find that it is necessary to also revisit its related conclusion regarding the tax objection.  Given that the parties have each paid an equal share of the $56,339.44 tax assessment, and that they will also share equally in any liability resulting from either the winding-up of the tax shelters or any future tax reassessments relating to these instruments, I believe it is appropriate that any refund granted to Mr. Stein as a result of his objection ought to be shared with Mrs. Stein.  In argument before this Court, counsel for Mr. Stein agreed that fairness requires such a division, and an equal apportionment of both risk and reward is consistent with the netting principle I have discussed above.

Conclusion

[20]    In my view, this appeal should be allowed.  I believe the Court of Appeal erred in finding that the FRA prevented the contingent tax liabilities to be divided between the parties and erroneously concluded that the speculative nature of the liability made it impossible for a fair reapportionment of assets to occur.  The fact that this reapportionment will occur at some stage in the future, after the liability has crystallized, does not, in my view, violate a plain reading of the FRA.  As a result, I would restore the trial judge’s order that the parties shall share equally in any liability related to the reassessment or winding-up of all tax shelters, with the caveat that this division will be net of any revenue realized in respect of these instruments.

[21]             The appellant shall receive his costs in this Court.  Given that numerous issues decided in the courts below were not argued on appeal, this is not an appropriate case in which to order costs throughout.

The following are the reasons delivered by

[22]    Abella J. (dissenting) — This appeal turns on whether the imposition on both spouses equally of a contingent liability for tax shelters is “unfair” within the meaning of s. 65 of the Family Relations Act, R.S.B.C. 1996, c. 128.  The order was imposed by the trial judge as a freestanding obligation, if and when it became due, outside and subsequent to the trial judge’s division of assets.  It was imposed on the wife in addition to her liability for one‑half of the $93,339 in family debts.  The husband’s full ownership of the tax shelters was not disturbed and he was not required to credit his wife with one‑half of the value of the tax refunds he received in the amount of $43,323.  This approach obstructs an almost consistent interpretive stream flowing from British Columbia’s matrimonial property legislation, whereby indeterminate or contingent liabilities are rarely imposed on a more economically vulnerable spouse, or, if imposed, are usually accompanied by a reapportionment of assets in favour of that spouse to cushion the financial blow. (See, for example,  Danish v. Danish (1981), 33 B.C.L.R. 176 (C.A.); Tearle v. Tearle, [1985] B.C.J. No. 1241 (QL) (S.C.); Moore v. Moore, [1988] B.C.J. No. 740 (QL) (S.C.); Mallen v. Mallen (1992), 65 B.C.L.R. (2d) 241 (C.A.);  McAlister v. McAlister, [1996] B.C.J. No. 150 (QL) (S.C.); D.G.A. v. K.J.A., [2003] B.C.J. No. 2711 (QL), 2003 BCSC 1736; and G. (J.S.) v. G. (A.G.) (2005), 20 R.F.L. (6th) 143, 2005 BCSC 1457.)

[23]    Based on the dramatic differences in the financial circumstances, sophistication, and experience of the spouses, the trial judge’s equal apportionment of the contingent tax liability is, in my view, manifestly unfair to the wife.

[24]    The relevant provisions are:

65   (1)    If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to

(a)    the duration of the marriage,

                                                                            . . .

(e)    the needs of each spouse to become or remain economically independent and self sufficient, or

(f)     any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse,

the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.

[25] The overriding principle is, as the legislation stipulates, fairness.  Fairness in family law takes scrupulous account of the economic consequences of choices made by the spouses in the allocation of family responsibilities.  This philosophical trail started in Laskin J.’s dissent in Murdoch v. Murdoch, [1975] 1 S.C.R. 423, and found a clearing in Dickson J.’s majority opinion in Rathwell v. Rathwell, [1978] 2 S.C.R. 436.  The jurisprudential apex was Moge v. Moge, [1992] 3 S.C.R. 813.

[26] The product of this revolution in family law was the principle that the decision either to perform unpaid work on behalf of the family at home, or remunerative work outside the home, should receive equal recognition in assessing the economic consequences for a separating family.  The acknowledgement that both forms represent equal contributions to the family’s economy, was an attempt to rectify the traditional economic disadvantage and dependance that had attached to the spouse, usually the wife, who had performed a domestic, unremunerated role.  Fairness in family law came to mean, among other things, accommodating the reduced earning capacities of someone who had removed herself from the paid labour market on behalf of the family, and who, as a result, found re-entry several years later problematic.

[27] The fruits of this historical trajectory were insufficiently reflected in the trial judge’s order under appeal.  They were also absent in his reduction of the wife’s spousal support from the $3,000 she had been receiving on an interim basis, to $2,500.  He also limited her support to a period of 3 years.  That she should be expected to overcome the economic consequences of 12 years out of the paid workforce in only 3 years was completely unrealistic.  These errors in the quantum and time-limited aspects of spousal support were recognized by the Court of Appeal, which made the order more open-ended and raised her support to $4,200 per month in accordance with Spousal Support Advisory Guidelines.  While this aspect of the trial judge’s order is not being appealed, I mention it because it helps illuminate the unduly limited appreciation for the wife’s circumstances found in his order that she bear responsibility for one-half of the contingent tax liability.

[28] The economic disparity between the spouses is pronounced.  At the time of the separation, Malka Stein had been outside the paid labour force for 12 years, looking after the home and two children, one of whom requires extra attention.  For most of the years of the marriage, she had no personal bank account in her name, no secondary credit card under her husband’s credit card account and no money of her own. 

[29] After the separation, she completed training as an animator.  Her prospects in her new career are, based on the findings of the trial judge, far from certain.  He noted that she “seems well poised to join the booming animation industry”, “anticipates earning $30,000 to $40,000 annually if she secures full-time employment”, and that she “hopes to earn more if she can get contract work for her company” ([2005] B.C.J. No. 1447 (QL), 2005 BCSC 939, at para. 13 (emphasis added)).  This is not the vocabulary of financial security.

[30] On the other hand, Wayne Stein’s financial circumstances are stable and ample.  His total gross annual income is $233,675.  In addition to some investments, he owns one-quarter of a family business, an interest valued by the trial judge at $650,000.  An experienced businessman, he took care of all the household finances. The matrimonial home was registered in his name.

[31] The possibility of the disparity widening even further increases when one considers that the liability imposed on both spouses was uncertain, contingent and indeterminate.  In the words of Saunders J.A. in the Court of Appeal:

The debt is in relation to the tax shelters which were not valued, not even mentioned, in the division of assets ordered by the trial judge. . . .

. . . The evidence in this case establishes that the magnitude of the liability is highly speculative.  The record does not provide a basis for a rational adjustment of the property to account for this potential liability.

((2006), 56 B.C.L.R. (4th) 245, 2006 BCCA 391, at paras. 25-26)

[32] As the Court of Appeal recognized, a husband earning almost a quarter of a million dollars annually, with the financial capacity to acquire more assets, is in a far better position to adjust to and accommodate a substantial tax liability than is his wife who will earn no more than $40,000.  The impact on Mr. Stein could undoubtedly be serious, but it would also be manageable.  The impact on his wife could well be the loss of the home in which she lives with the children.  Again, the observations of the Court of Appeal are apt:

. . . Mr. S[tein]’s income, and hence his ability to remain economically independent and self-sufficient, greatly exceeds Mrs. S[tein]’s, and is likely to do so in the future.  He is better placed, both financially and in knowledge, to handle future reassessments. [para. 27]

[33] Moreover, the equal imposition of this contingent tax liability takes insufficient account of the extent to which the wife’s ability to enjoy a relatively comparable standard of living will be affected (Toth v. Toth (1995), 13 B.C.L.R. (3d) 1  (C.A.), at paras. 66-67).  This flies in the face of s. 65(1)(e) of the Act, which states that provisions for division of property between spouses should take account of whether the division “would be unfair having regard to . . . the needs of each spouse to become or remain economically independent and self sufficient”.  The wife’s limited earning power and financial experience create a genuine risk that the equal application of a substantial tax burden will materially reduce her own and the children’s standard of living, a reduction from which she may not be able to recover financially.

[34] The uncertainty about the timing and extent of the liability also means that the wife cannot easily plan her own and the children’s financial future.  This contradicts the family law objective that members of the former family should, to the extent possible, “know their rights and obligations in advance, thereby permitting them to plan and live their lives, without fear of subsequent upset” (D. A. Rollie Thompson, “Rules and Rulelessness in Family Law: Recent Developments, Judicial and Legislative” (2000-2001), 18 C.F.L.Q. 25, at p. 28).  This Court, in Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24, at para. 57, recognized “the compelling policy goals of certainty, autonomy and finality” for divorcing spouses.  In Clarke v. Clarke, [1990] 2 S.C.R. 795, Wilson J. explained:

When selecting the appropriate method of distribution it is important to bear in mind that the primary goal of the legislation is to effect the adjustment of property in an equitable manner.  Of equal importance in some cases is the desire to sever the financial ties between the parties. [Emphasis added; p. 836.]

(See also Best v. Best, [1999] 2 S.C.R. 868, at para. 111.)

[35] While some issues, like custody and access, have an inherent fluidity that tracks a child’s evolutionary needs, and while support may vary if a material change in circumstances occurs, property matters can usually be ascertained with sufficient clarity to permit the parties to exit from a marriage with an economic map delineating clearly marked boundaries.  No matter the issue, subject always to the transcendent duty of fairness, the goal is to create enough certainty that each spouse can make personal and financial decisions about the future based on legitimate and enforceable expectations.

[36] This is not to say that a court can never make an order for an unravelling family that anticipates a financial contingency.  But what a court should strive to avoid, wherever possible, is doing so in a way that undermines the goal of attempting to preserve an economic equilibrium between the resulting households.  Sometimes this can be done by an equal distribution of burdens and benefits, and sometimes an equal distribution is destructive of that equilibrium.

[37] This is a case where the imposition of the equal responsibility for the tax liability, if and when it materializes, fails to recognize and accommodate the financial repercussions of the division of labour in the Stein household, unfairly disturbs the ability of the wife to plan and arrange her economic future, poses a significant threat to her ability to maintain her economic viability, and makes it far more likely that her and the children’s standard of living will be substantially lower than that of Mr. Stein.

[38] All this justifies the Court of Appeal’s decision to set aside the trial judge’s “if and when” order.  In my view, it was correct to do so.  I would dismiss the appeal.

Appeal allowed with costs, Abella J. dissenting.

Solicitors for the appellant:  Georgialee Lang & Associates, Vancouver.

Solicitor for the respondent:  Susan G. Label, Richmond, B.C.