Disposition costs in valuing family assets

Willie v. Willie, 2013 BCCA 318 deals with the often confusing issue of when disposition costs ought to be considered in valuing family assets.  The British Columbia court said in valuing family assets, costs of disposition should not be deducted if they are hypothetical or speculative, and thus unlikely to be incurred:

  

[11]        The case relied on by the chambers judge, Wheatley v. Oliver 1996 CanLII 3285 (BC CA), (1996), 21 B.C.L.R. (3d) 209, 133 D.L.R. (4th) 729 (C.A.), endorsed the widely accepted principle that, in valuing family assets, costs of disposition should not be deducted if they are hypothetical or speculative, and thus unlikely to be incurred. In Wheatley, the trial judge divided the matrimonial home on a 60/40 basis in favour of the husband, and ordered that it be sold unless the husband purchased the wife's interest within 60 days. The husband had continued to reside in the home since separation and the trial judge reasonably assumed he would purchase the wife's interest, but deducted $25,000 from its value as notional real estate commission. This Court overturned that deduction because there was no evidence the husband intended to sell the property to a third party. In doing so, it followed its earlier decision in Vetter v. Vetter 1994 CanLII 1229 (BC CA), (1994), 8 R.F.L. (4th) 290, 50 B.C.A.C. 14. There, the matrimonial home had been equally divided and the husband purchased the wife's interest. The main issue was the equalization of their interests as the husband had obtained the benefit of an increase in market value between the valuation date and the transfer. After dealing with that issue the Court stated:

[22]      Before making an order with respect to the home, however, it is necessary to deal with the learned trial judge's order that a notional real estate commission be deducted from the value of the home in the event the husband purchased the home. In my view, there was no justification for such an order in this case since it is clear that the husband intended to continue to live in the home and would not, therefore, incur such an expense. The effect of that order was to further devalue the wife's interest in the home.

[12]        The appellant accepts the general rule that disposition costs will not be deducted unless they are likely to be incurred. She argues, however, that these cases are distinguishable because they deal with the valuation of family assets for the purpose of apportionment. She says in this case valuation and apportionment of the family assets took place in 2008, as reflected in the 2008 consent order. As a result, these cases have no application and the trial judge erred in following them. She maintains the deduction of commission from the sale price here is not speculative or hypothetical, as the 2008 order states clearly that real estate commission is to be payable on the sale of the matrimonial home, and the respondent is only entitled to the net profit after that deduction.

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[17]        I am not convinced that, in accomplishing that end, the failure of the chambers judge to deduct a notional commission was unfair to the appellant. It is abundantly clear there were no actual costs of disposition. Nor was there any evidence to suggest she might sell the home in the foreseeable future.