Partition of Property: Minority Interest

The Supreme Court has a discretion under the Partition of Property act to order a sale of a minority interest in co owned property.

The Supreme Court has a discretion under the Partition of Property act to order a  sale of a minority interest in co owned property.

Generally speaking, if a party owns 50% of property in co-ownership, and seeks the sale of the property, then, the court must order a sale unless there is good reason not to do so.

The Partition of Property act gives a broad discretion and allows the court to find remedies, which may contemplate sales to other parties, or valuations, or both.

In the situation where someone has less than a half interest in property, such as 25%, the party may still seek a court ordered sale of the property under the Partition of Property act, but the court in that situation has a far more broad discretion as to whether or not to order partition and sale.

In Haigh v. Kent 2016 BCSC 333, the plaintiff was the awarded a 25% beneficial interest in property on the basis of constructive trust as a remedy for unjust enrichment. The property was a 95 acre resort on beachfront property that had been owned by the family for several decades.

In previous litigation Haigh v. Kent 2012 BCSc 1361, the court found that the plaintiff had been unjustly enriched by his contributions of 20 years to the resort, and found a constructive trust in favour of the plaintiff was appropriate to the extent of a 25% ownership share in the property.
The property was found by the court to be valued at $1.65 million.

The property was rather unique and an order dividing such property into separate lots would be impractical and inequitable, so that an order for sale and distribution of proceeds would therefore seem to be view most appropriate remedy. However, such an order for sale would work serious hardship on the defendants who it had the property in the family for seven decades, and for generations.

The court therefore found that the appropriate remedy was to order that the plaintiff sell his interest in the property to the defendants pursuant to section 8 of the Partition of Property act.

The court found that the plaintiff was entitled to be paid 25% of the fair market value of the property as a resort, but was not entitled to share in the profits from the resort business, but no deduction should be made in relation to insurance premiums, commercial mortgage on the property or mortgage payments.

During the partition and sale trial, the court found that since the defendants constructively held a 25% ownership share in trust for the plaintiff, the plaintiff was therefore entitled to the legal interest in the trust property, and not just the beneficial ownership as the defendants had argued.

The court therefore concluded that the plaintiff was entitled to an order vesting in him legal title to an undivided 25% interest in the property.

Section 8 of the Partition of Property act states as follows:

1) In a proceeding for partition where, if this act had not been passed, an order for partition might have been made, then, if any party interested in the property involved request the court to order a sale of the property in a distribution of the proceeds instead of a division of the property, the court may order a sale of the property, and give directions.

2) The court may not make an order under subsection 1, if the other parties interested in the property, or some of them, undertake to purchase the share of the party requesting the sale.

3) If an undertaking is given, the court may order of valuation of the share of the property requesting the sale in the manner the court thinks fit, and may give directions.

The court stressed that the words “may be compelled” under the Partition of Property act, are discretionary, and the onus is on the parties who do not wish to suffer partition or sale to demonstrate to the court that the interests of justice are such that the order for partition and sale should not be made.

The fact remains that the discretion is broad and unfettered, and will turn on whether justice requires that such an order not be made. (Bradwell v Scott 2000 BCCA 576 at paragraphs 26 – 30)

The court also referred to section 7 of the Partition of Property act, which contemplates a proceeding for partition where the court concludes that because of the nature of the property involved, or any other circumstance, a sale and distribution of the proceeds would be more beneficial than division. Then, if a party so requests, the court may order the sale of the property and the distribution of the proceeds notwithstanding the objection of any other party.

The court concluded that it was satisfied that in this case, that an order for the division of the property would be neither equitable nor practical due to it’s uniqueness, and therefore the plaintiff should have the right to a monetary buyout of his 25% interest in the property.

The court ordered that the plaintiff was entitled to an undivided 25% in the property that should vested him in fee simple, and on the basis of section 8 of the act, the defendants were directed to purchase the plaintiffs undivided 25% interest on the basis of the appraised value.

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