Introduction

In British Columbia family law, the division of property often becomes a contentious issue when one spouse enters the relationship with significant assets. Under the Family Law Act (FLA), the value of assets brought into a relationship is generally "excluded property," but the increase in that value during the relationship is considered "family property" subject to equal division. A recent decision by the Court of Appeal for British Columbia, Paletar v. Paletar, 2026 BCCA 41, serves as a critical reminder of the high threshold required to depart from this presumption of equal division.

This post analyzes the Court's reasoning in Paletar, specifically regarding Section 95 of the FLA and the concept of "significant unfairness," and offers practical implications for spouses in similar circumstances.

Case Background and Key Facts

The case involved Patrik Paletar (the Appellant) and Mayalyn Paletar (the Respondent). The parties began a cohabiting relationship in May 2017, married in August 2019, and separated in March 2022. The relationship lasted nearly five years and produced two children.

When the relationship began, Mr. Paletar was 42 and already owned a home in Maple Ridge and a commercial strata unit in Port Coquitlam (the "PoCo Shop"). Ms. Paletar was 28 and, following the birth of their first child, became a full-time homemaker and caregiver. Mr. Paletar was the sole income earner and operated businesses out of the PoCo Shop.

At trial, it was conceded that the equity in the properties at the start of the relationship ($685,866 for the home and the full value of the shop) was Mr. Paletar's excluded property. However, due largely to market forces, the value of these assets increased significantly during the relationship. The increase in equity for the home was approximately $1.08 million, and the shop increased by $1.07 million. The trial judge ordered this growth—totaling roughly $1.75 million—to be divided equally. Mr. Paletar appealed, seeking an 80/20 division in his favour.

The Legal Issue: Significant Unfairness

The central issue on appeal was whether the trial judge erred in failing to find that equal division of the property growth would be "significantly unfair" under Section 95 of the FLA. Mr. Paletar argued that the cumulative effect of several factors warranted an unequal division:

  • The relatively short duration of the relationship (five years).
  • The fact that the family property was generated entirely by his pre-existing excluded assets.
  • The "exponential" increase in value due to market forces rather than joint effort.
  • The disparity in financial contributions.

The Court's Decision and Reasoning

The Court of Appeal, in a unanimous decision written by Justice Warren, dismissed the appeal and upheld the equal division. The Court reaffirmed that the discretion to depart from equal division is "significantly constrained." The term "significant unfairness" creates a high threshold that requires something objectively unjust or unreasonable, not merely unfair.

The Role of Excluded Property

The Court rejected the argument that the origin of the assets should drive the division of their growth. Justice Warren noted that the FLA regime already accounts for the origin of assets by allowing the owning spouse to keep the starting value as excluded property. In this case, Mr. Paletar retained the value of the assets as they stood in 2017. The Court cited Lamoureux v. Hedquist, 2025 BCCA 438, to emphasize that pre-relationship contributions are rarely a basis for unequal division of the growth, as the owning spouse is already protected by the exclusion of the base value.

Indirect Contributions and Market Forces

Mr. Paletar argued that because the growth was driven by market forces and his financial inputs, equal division was unfair. The Court disagreed, highlighting the nature of modern relationships as partnerships. Citing Venables v. Venables, 2019 BCCA 281, the Court reiterated that spouses are not required to contribute directly to an asset to be entitled to a share of its growth. Ms. Paletar's role as a homemaker and primary caregiver to two children constituted a valid contribution to the family partnership, justifying her entitlement to the increase in value.

Duration of Relationship

While the relationship was only five years, the presence of two children and the nature of the parties' roles weighed heavily against the Appellant. The Court distinguished this case from others where short relationships led to reapportionment, noting that those cases often involved no children or less integrated financial lives.

Implications for BC Family Law

Paletar v. Paletar reinforces the certainty and predictability intended by the Family Law Act. It sends a clear message that the "significant unfairness" exception in Section 95 is a safety valve for extreme cases, not a tool to adjust division based on precise financial accounting of who contributed what.

For legal practitioners and parties, this decision confirms that market-driven increases in the value of excluded property will generally be shared equally, even in medium-length relationships, particularly where there are children and a division of labour (breadwinner vs. homemaker).

Practical Advice for Property Owners

The outcome of this case highlights the risks of relying on judicial discretion and the "significant unfairness" test to protect asset growth. Specifically:

This decision serves as a stark reminder that in British Columbia, a marriage or marriage-like relationship creates a powerful economic partnership where the default rule—equal sharing of gains—is difficult to displace.

  • Cohabitation and Marriage Agreements: The only reliable way to prevent the sharing of growth on excluded property is to enter into a written agreement (prenup or cohabitation agreement) that specifically opts out of the FLA's property division regime regarding asset growth.
  • Understanding Excluded Property: Property owners must understand that while their initial investment is generally safe (if it can be traced), the appreciation of that asset becomes family property the moment the relationship becomes "marriage-like" (usually after two years of cohabitation or upon having a child).
  • Documentation: Accurate valuation of assets at the start of the relationship is vital. In Paletar, the parties agreed on the starting values, which simplified the exclusion of the base amount. Without such evidence, even the excluded portion could be at risk.