Foreign Property Sale Creates Confusion Following Separation feature image

Foreign Property Sale Creates Confusion Following Separation

When a family goes through a divorce or separation, the division of marital property is an important step, though one that can sometimes cause conflict between the parties. This is an issue perhaps more common for high-net-worth individuals. Not all property or assets are required to be included in a division of property, though. A recent decision from the Court of Queen’s Bench of Alberta sheds some light on how the courts look at situations where there are questions about how property that is exempt is valued in this process, and what happens when that money from the sale of that property is spent.

Land is sold, but for how much?

The parties were married for close to 20 years when they separated in mid-2019. The parents were married in Pakistan but made their life together in Canada, where the father had lived prior to their marriage.

The father owned a piece of property that was purchased by his grandfather. He owned the property along with his siblings. The property, which he owned before the parties were married, was exempt under Alberta’s Matrimonial Property Act. This means that the funds from the property, which was sold in 2014 are not subject to division between the father and the mother. The question, though, was how much the property was sold for.

The property was purchased by the father’s grandfather. The father’s share of the property was 25% since it was to be divided amongst him and his siblings. The property was located in Pakistan, and the value of it seemed to change drastically over the years. The father said that at the time of their marriage, the property would have been valued at $1 million. However, terrorist activity in the area resulted in a loss of value. The father reported that when the property was finally sold, it only fetched the equivalent of $72,732 CND.

However, when the mother hired a lawyer in Pakistan to obtain paperwork related to the house sale, she discovered that it was actually sold for almost seven-times what the husband originally claimed, meaning his share of the over $500,000 CND was actually $126,027.

Father uses funds from property sale to purchase shares

The father claimed he used the money to purchase shares of his employer’s company. The shares were sold after the couple separated. While it is accepted that if the money used to purchase the shares was made with the funds from the property sale, that portion of the share sale would be exempt from the division of property (but the growth in value would not be exempt).

The issue before the Court of Appeal is whether the father is entitled to an exemption of $126,027.

The father argued the full amount should be considered exempt since the actual value of his share of the property sale was $126,027. The mother, meanwhile, states that the original sale price should be used and that the amended deed lacks reliability.

The court agreed with the mother, stating that the reliability of the documents related to the sale of the property was compromised. The court found that the only clear outlining of the sale price on any documentation is for the lower amount. While the father tried to show some evidence to the contrary, the court was not convinced, as the father was unable to produce any reliable evidence. As a result, the father was only found to be entitled to an exemption of just $18,183 rather than the $126,027 he was seeking.

HMC Lawyers are committed to protecting your rights. If you have recently separated from your spouse, or are going through the process of a divorce, speak to one of our family lawyers about division of property issues to ensure that you are properly protected. Call 1-800-480-3534 or contact us online to make an appointment. We represent clients primarily in Calgary and surrounding areas.

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