NOVA SCOTIA COURT OF APPEAL
Citation: Gill v. Hurst, 2011 NSCA 100
Date: 20111101
Docket: CA 338209
Registry: Halifax
Between:
Christopher Valentino Gill
Appellant
v.
Christine Mary Hurst
Respondent
- and -
Wickwire Holm
Appellant
v.
Christine Mary Hurst and Christopher Valentino Gill
Respondents
Judges: Fichaud, Farrar and Bryson, JJ.A.
Appeal Heard: June 3, 2011, in Halifax, Nova Scotia
Held: Appeal of Mr. Gill dismissed; appeal of Wickwire Holm allowed per reasons for judgment of Bryson, J.A.; Farrar, J.A. concurring; Fichaud, J.A., dissenting on the appeal of Wickwire Holm.
Counsel: Timothy G. Daley, Q.C., for the appellant, Christopher Valentino Gill, respondent on Wickwire Holm appeal;
Bradford G. Yuill, for the respondent, Christine Mary Hurst, on both appeals
Kenzie MacKinnon and Lori Hill for the appellent, Wickwire Holm
Reasons for judgment:
Introduction
[1] This is a consolidated appeal. Mr. Gill has appealed the decision of the Honourable Justice Cindy Bourgeois (2010 NSSC 366) alleging errors in her findings of credibility, her division of matrimonial property, and her allocation of support. The law firm Wickwire Holm was Mr. Gill’s former legal counsel in this case. After their relationship with Mr. Gill terminated, Wickwire Holm obtained a judgment for its fees against Mr. Gill. The firm appeals Justice Bourgeois’ decision which postpones its judgment to a matrimonial award in favour of Ms. Hurst. Ms. Hurst cross-appeals Justice Bourgeois’ finding that costs awarded to Ms. Hurst against Mr. Gill should not be deducted from the sale proceeds of the matrimonial home.
Facts
[2] Mr. Gill and Ms. Hurst met in Newfoundland in 1989 and began a common law relationship shortly thereafter. They were married on August 5, 1995. They have spent most of their time together in Nova Scotia. Since 1991, they have resided in Truro.
[3] Mr. Gill has two children from a prior marriage. Mr. Gill and Ms. Hurst have one child who was born on June 20, 1996.
[4] In 1993 Ms. Hurst opened a physiotherapy clinic in Truro, known as Fundy Trail Physiotherapy Clinic, which she still operated at the time of trial and which served as the sole source of income for the family. Mr. Gill participated in the setting up of the clinic and worked there for a period of time. The parties separated in 2008. Although Mr. Gill has an interest in music and has pursued a career in that field, it has not been lucrative and the family has relied on Ms. Hurst’s earnings.
[5] Following their separation, there were numerous interim proceedings culminating in the dismissal of Mr. Gill’s appeal for custody of the child of the marriage (2010 NSCA 98).
[6] Wickwire Holm acted as solicitors for Mr. Gill during the early part of the divorce proceedings. The firm was removed as solicitors for Mr. Gill and then obtained a Small Claims Court judgment against him which was recorded under the Land Registration Act, S.N.S. 2001, c. 6 (“LRA”). Mr. Gill was a joint tenant with Ms. Hurst in the matrimonial home at the time. That home was subsequently sold and the proceeds held in trust pending determination of priority to the sale proceeds.
[7] At trial the issues were:
(a) whether Mr. Gill had a claim to the Fundy Trail Physiotherapy Clinic, and if so, how it should be valued;
(b) the value and division of matrimonial assets;
(c) child support;
(d) spousal support for Mr. Gill, if any, and its duration;
(e) the priority of the Wickwire Holm judgment; and
(f) costs.
[8] Following a 10-day trial which began in September 2009 and concluded in April 2010, the trial judge dismissed Mr. Gill’s claim to an interest in the physiotherapy clinic, ordered that Ms. Hurst receive half the proceeds from the sale of the matrimonial home, together with an equalization payment of $46,328.11, in priority to the judgment of Wickwire Holm; awarded the balance of sale proceeds to Wickwire Holm in partial payment of its judgment against Mr. Gill; ordered Ms. Hurst to pay spousal support of $2,200 a month to Mr. Gill, terminating in May 2012; ordered support and maintenance from Mr. Gill to Ms. Hurst for the child of $216 per month based on imputed income to be set off against spousal support payable by Ms. Hurst to Mr. Gill; and awarded Ms. Hurst costs of $5,000.
[9] Mr. Gill has appealed, alleging the following errors by the trial judge:
1. unreasonable findings of credibility;
2. unreasonable findings of fact;
3. failing to find that Mr. Gill had a claim to the physiotherapy clinic business;
4. imputing too much income to Mr. Gill and too little to Ms. Hurst;
5. awarding too little spousal support and for too brief a period;
6. awarding costs against Mr. Gill.
In addition, the issues arising from the Wickwire Holm appeal and Ms. Hurst’s cross-appeal are:
1. the priority of the Wickwire Holm judgment;
2. the fund out of which the costs award should be paid.
Standard of Review
[10] It is well settled that questions of fact and mixed questions of fact and law without an extricable question of law, are reviewed on the basis of palpable and overriding error, (Housen v. Nikolaisen, 2002 SCC 33).
[11] This Court has commented on the standard in the context of matrimonial disputes. In Edwards v. Edwards, [1994] N.S.J. No. 361 (C.A.) (Q.L.), the Court cautioned against revisiting factual issues:
53 ...This court is not a fact finding tribunal. That is the role of the trial judge. Ours, as has been said many times, is a more limited role. We are charged with the duty of reviewing the reasons of the trier of fact with a view of correcting errors of law and manifest errors of fact. The degree of deference accorded to the trial judge with respect to factual findings is probably no higher anywhere than it is in matters relating to family law. Hart, J.A. put it well when he said on behalf of this court in Corkhum v. Corkhum[sic] (1989), 20 R.F.L. (3d) 197 at 198:
"In domestic matters the trial judge always has a great advantage over an appellate court. He sees and hears the witnesses and can assess the emotional aspects of their testimony in a way that is denied to us. Unless there has been a glaring misconception of the facts before him or some manifest error in the application of the law, we would be unwise to interfere."
[12] In MacLennan v. MacLennan, 2003 NSCA 9, this Court referred to the standard of review in cases dealing with property division and spousal support:
[9] In both support and division of property cases, a deferential standard of appellate review has been adopted: Corkum v. Corkum (1989), 20 R.F.L. (3d) 197 (N.S.C.A.); MacIsaac v. MacIsaac (1996), 150 N.S.R. (2d) 321 (C.A.); Roberts v. Shotton (1997), 156 N.S.R. (2d) 47 (C.A.). The determination of support and division of property requires the exercise of judicial discretion. Provided that the judge of first instance applies correct principles and does not make a palpable and overriding error of fact, the exercise of such discretion will not be interfered with on appeal unless its result is so clearly wrong as to amount to an injustice: Heinemann v. Heinemann (1989), 91 N.S.R. (2d) 136 (S.C.A.D.) at 162; LeBlanc v. LeBlanc, [1988] 1 S.C.R. 217 at 223 ‑ 24; Elsom v. Elsom, [1989] 1 S.C.R. 1367 at 1374 ‑ 77; Hickey v. Hickey, [1999] 2 S.C.R. 518 at paras. 10 ‑ 13.
[13] Appeal courts must give considerable deference to the exercise of discretion by a trial judge in family disputes (Elsom v. Elsom, [1989] 1 S.C.R. 1367, at p. 10). In Hickey v. Hickey, [1999] 2. S.C.R. 518, L’Heureux-Dubé J., writing for the majority, explained the court’s approach in the context of support orders:
12 There are strong reasons for the significant deference that must be given to trial judges in relation to support orders. This standard of appellate review recognizes that the discretion involved in making a support order is best exercised by the judge who has heard the parties directly. It avoids giving parties an incentive to appeal judgments and incur added expenses in the hope that the appeal court will have a different appreciation of the relevant factors and evidence. This approach promotes finality in family law litigation and recognizes the importance of the appreciation of the facts by the trial judge. Though an appeal court must intervene when there is a material error, a serious misapprehension of the evidence, or an error in law, it is not entitled to overturn a support order simply because it would have made a different decision or balanced the factors differently.
ISSUE 1 - Credibility
[14] Although described as a discrete issue on appeal, the credibility point permeates Mr. Gill’s other grounds of appeal. Essentially, he argues that the judge should have believed him and not Ms. Hurst and, as a result of that fundamental error, she erred in resolving many of the other issues under appeal.
[15] In R. v. W.(R.), [1992] 2 S.C.R. 122 at pp. 131-132, the Supreme Court of Canada described the special and privileged position of the trial judge on matters of credibility:
It is thus clear that a court of appeal, in determining whether the trier of fact could reasonably have reached the conclusion that the accused is guilty beyond a reasonable doubt, must re‑examine, and to some extent at least, reweigh and consider the effect of the evidence. The only question remaining is whether this rule applies to verdicts based on findings of credibility. In my opinion, it does. The test remains the same: could a jury or judge properly instructed and acting reasonably have convicted? That said, in applying the test the court of appeal should show great deference to findings of credibility made at trial. This Court has repeatedly affirmed the importance of taking into account the special position of the trier of fact on matters of credibility: White v. The King, [1947] S.C.R. 268, at p. 272; R. v. M. (S.H.), [1989] 2 S.C.R. 446, at pp. 465‑66. The trial judge has the advantage, denied to the appellate court, of seeing and hearing the evidence of witnesses. However, as a matter of law it remains open to an appellate court to overturn a verdict based on findings of credibility where, after considering all the evidence and having due regard to the advantages afforded to the trial judge, it concludes that the verdict is unreasonable. [Emphasis Added]
[16] In this case, the trial judge recognized the central role of credibility in resolving many of the issues before her. She explicitly instructed herself on this topic and referred to appropriate jurisprudence such as F.H. v. McDougall, 2008 SCC 53 and Baker-Warren v. Denault, 2009 NSSC 59. Denault quotes from R. v. Gagnon, 2006 SCC 17 and R. v. R.E.M., 2008 SCC 51 regarding the difficulty in always articulating the precise reason for preferring the evidence of one witness over that of another (para. 18-20).
[17] Fundamentally, Mr. Gill attacks the trial judge’s credibility findings because she did not dismiss Ms. Hurst’s evidence in light of her admission that she had signed Mr. Gill’s tax returns. During oral argument counsel emphasized that the trial judge’s failure to address these transgressions should cause the court to re-assess credibility across the board. When pressed by the court, he provided no jurisprudential support for this proposition.
[18] Ms. Hurst candidly admitted that she had signed Mr. Gill’s name to tax returns and even attempted to replicate his signature but said that Mr. Gill had no interest in financial matters. He denied this and claimed that he always wanted to “meet with the accountant”. The trial judge was obviously aware of Ms. Hurst’s signing of the tax returns because the oral evidence on this covers more than 10 pages of transcript and she commented on it during oral argument (Appeal Book, Volume V, p. 1915 and 1917). Although Mr. Gill argues that these tax returns resulted in a “tax advantage” to Ms. Hurst’s physiotherapy business, this was only because that business was financing Mr. Gill’s music endeavours. Moreover, by making more money available, it was of advantage to the family as a whole including Mr. Gill who relied on Ms. Hurst for most of his financial needs. Certainly there was no suggestion that the tax returns themselves were improper or inaccurate.
[19] The fact is that the trial judge had to assess credibility on all the evidence of this ten day trial and she did so in the context of each issue addressed by her. There is simply no merit to the argument that the trial judge erred in her credibility findings because Ms. Hurst signed Mr. Gill’s tax returns – an act that benefited all concerned.
2. Unreasonable Findings of Fact
[20] Mr. Gill submits that the trial judge made a number of “unreasonable” findings of fact throughout her decision. Many of these arguments are better addressed under the substantive topics to which they relate (i.e., claim for interest in the business; claim for compensation; etc.). However, it will be convenient to make some general comments now with respect to this ground of appeal.
[21] As set out in paragraphs 11 and 12 above, this Court has emphasized many times that it is not for a court of appeal to retry a case or revisit factual findings of a trial judge, provided that there was evidence to support them. Absent “palpable and overriding error” which means an obvious mistake with respect to material evidence, the court will not interfere with findings of fact by a trial judge.
[22] By way of one example of his challenges to the judge’s factual findings, Mr. Gill takes strong exception to her conclusion that he did not draw a salary from the physiotherapy business because he was attempting to avoid child support obligations. The trial judge explained:
[31] Mr. Gill's claim seeks compensation from the commencement of the Clinic business in 1993. Ms. Hurst testified that upon set up of the business, she received accounting advice that Mr. Gill should be placed on the company ledger as receiving a salary. I accept her evidence in this regard, as such is a common strategy to legitimately lessen the tax consequences to the family income as a whole. This was not done. I further accept Ms. Hurst's evidence and find as a fact, that Mr. Gill specifically wanted to not appear as receiving a salary, as this would result in the payment of child support for the benefit of his two children in Newfoundland. Nancy was born in 1985, and moved to Truro to reside with her father and Ms. Hurst in 1997. Her brother Michael was born in 1983 and remained in the care of his mother in Newfoundland. From the evidence, I find that Mr. Gill purposefully avoided a documented income for a number of years, when his children in Newfoundland would have been entitled to child support. For Nancy, this appears to be 4 years (1993 to 1997), and for Michael, a minimum of 6 years and likely longer (1993 to the age of 16 or beyond). Mr. Gill is now seeking $25,000 for each of those years, reflective of the wages he asserts he should have been paid from the Clinic business. There is no indication that if successful in his claim, that Mr. Gill intends to retroactively address the issue of unpaid child support which would otherwise have accrued during that time period.
[23] In making the foregoing finding, the trial judge accepted the evidence of Ms. Hurst and rejected that of Mr. Gill. This was a credibility call for the trial judge to make. Moreover, it had a reasonable foundation. It is typical for small businesses to split incomes between spouses who are employed in the business to reduce the overall tax burden on a family. It would not make sense to have Ms. Hurst earn all the income from the business and pay tax at the highest marginal rate on that income in the absence of some other compelling reason to do so. Ms. Hurst testified that Mr. Gill did not want to receive an income because he did not want that income used to pay child support. This was consistent with Mr. Gill’s failure to have any regular employment during the relevant period. The trial judge’s finding here was within her purview. It is not for this Court to disturb that finding.
[24] Similar comments can be made with respect to Mr. Gill’s complaints that it was unreasonable for the trial judge to divide the family furniture equally; that it was unreasonable to find that Mr. Gill retained jewellery; that the price for the sale of Mr. Gill’s motorcycle was unreasonably low; that Mr. Gill was delaying achieving financial independence and that the assessment of Ms. Hurst’s annual income was unreasonably low. Some of these findings will be discussed in greater detail under headings that follow. In each instance, there was evidence upon which the trial judge could make the findings that she did. To repeat, it is not for this court to revisit factual findings by a trial judge simply because one party is unhappy with those findings. The appeal court lacks the advantages of a trial judge in seeing and observing witnesses. Unless factual findings are clearly unreasonable, appeal courts have no basis for intervention (R. v. W.(R.), para. 15 above).
3. Claim to Fundy Trail Physiotherapy:
[25] Mr. Gill’s claim to an interest in this business was founded upon s. 18 of the Matrimonial Property Act, R.S.N.S. 1989, c. 275 (“MPA”):
18 Where one spouse has contributed work, money or moneys worth in respect of the acquisition, management, maintenance, operation or improvement of a business asset of the other spouse, the contributing spouse may apply to the court and the court shall by order
(a) direct the other spouse to pay such an amount on such terms and conditions as the court orders to compensate the contributing spouse therefor; or
(b) award a share of the interest of the other spouse in the business asset to the contributing spouse in accordance with the contribution,
and the court shall determine and assess the contribution without regard to the relationship of husband and wife or the fact that the acts constituting the contribution are those of a reasonable spouse of that sex in the circumstances.
[26] Mr. Gill notes that s. 18 uses the word “shall” in connection with assessing the contribution of a spouse to the acquisition, management, maintenance, or improvement of a business asset regardless of the spousal relationship. But his argument assumes acceptance of his evidence and rejection of Ms. Hurst’s evidence – in effect, reversing the trial judge’s findings of the worth of that evidence. The trial judge weighed the evidence of Mr. Gill and Ms. Hurst when deciding the nature and extent of Mr. Gill’s contribution to the physiotherapy business:
[33] ...I accept his evidence, supported by that of Ms. Hurst that he was heavily involved in the set up of the Clinic, most notably overseeing the construction. Similarly, I accept that Mr. Gill did, once operational, participate in the running of the Clinic by virtue of answering telephones and other administrative duties. However, with respect to the extent of Mr. Gill's activities, I prefer the evidence of Ms. Hurst over that provided by him. I find that his activities were not managerial in nature, but secretarial. Further, I accept Ms. Hurst's evidence that although attending at the Clinic daily, Mr. Gill often did not attend to the duties expected of him. I have considered the evidence of a number of witnesses who testified as to the extent of Mr. Gill's activities at the Clinic. All were occasional visitors, and not in a position to be fully cognizant of the day to day activities undertaken in the Clinic. [Emphasis added]
[27] The trial judge elaborated on why Mr. Gill’s claim for an interest in the business should be rejected:
[34] As noted above, Mr. Gill was not paid a salary from the Clinic, however, the determinative issue is whether he received compensation for his efforts. It is clear from the evidence, that many expenses which would not be considered as “business” in nature were paid from Clinic funds. This included family vacations, household expenses and larger purchases. Mr. Gill received the benefit of these withdrawn business funds as much as Ms. Hurst did.
[35] I find that these were expenditures which were made in lieu of Mr. Gill drawing a formal wage from the business. He received compensation for his labour, and it was intentionally structured in a form which would lessen the potential of attracting a request for child support. Section 18 does not, in my view, require that a contributing spouse be paid in direct wages in order to consider that they have been compensated for their efforts. The provision must be interpreted in a manner which reflects the multitude of situations in which spouses structure their affairs. Just as a spouse can be considered to have contributed to a business in a number of ways, there can be various means in which a spouse can receive corresponding compensation. I find Mr. Gill was compensated adequately in relation to his efforts by virtue of various personal and family expenses being paid from the business, and such was in lieu of receiving a regular wage.
[36] Should my above analysis be in error and in particular my view that the payment of family expenses can be considered to be in lieu of wages, I consider in the alternative, the relevance of Mr. Gill's music career expenditures. It is not disputed that significant funds were paid from the Clinic business towards the development and enhancement of Mr. Gill's music career. Although substantial, the evidence is not precise as to the exact total of the expenditures, nor the revenue recouped. I have considered carefully Ms. Hurst’s evidence, the documentary evidence, as well as the evidence of Ms. Leier who undertook a review of the music expenditures and receipts on Mr. Gill's behalf.
[37] I am satisfied that the “net” amount paid from the Clinic business towards Mr. Gill’s music career is, at a minimum, $90,000.00. Mr. Gill, according to his evidence, is building upon and still receiving the benefit of these funds by virtue of his ongoing commitment to pursue a career as a singer/songwriter. If he is able to achieve success in his endeavours, it is clear that Ms. Hurst will not be able to reap the benefit of the moneys diverted from her business.
[38] I cannot accept the argument advanced by Mr. Gill that these funds should not be taken into account when considering his claim to the Clinic as a business asset. Surely, if a spouse can claim for money or moneys worth invested to the benefit of a business asset, it is only equitable to consider moneys withdrawn to the detriment of that business. The $90,000.00 withdrawn from the Clinic which was applied to Mr. Gill's music endeavours, more than compensated him for the efforts he expended at the Clinic. In my respectful opinion, Mr. Gill has been significantly over‑compensated in relation to his efforts.
[39] I find that Mr. Gill's claim pursuant to Section 18 of the Matrimonial Property Act is without merit for the reasons outlined above.
[28] While it may be that the business funding of family vacations and the like cannot properly be considered as Mr. Gill’s “compensation”, (because it arises from his spousal status), the trial judge made it clear that Mr. Gill received substantial benefits by way of contribution to his music career which the trial judge assessed minimally at $90,000. At the end of the day it was the trial judge’s responsibility to weigh the evidence and consider whether Mr. Gill was owed any compensation over and above what he had already received. She did that and it is not for this Court to intercede.
4. Imputing Income
[29] Discussion of this topic must be prefaced by these findings of the trial judge:
[97] I find that Mr. Gill, to date, has not been meeting his obligation to improve his own financial circumstances in order to achieve self‑sufficiency. His evidence, in many respects, was troublesome due to inconsistencies, most notably that relating to his employment attempts and present financial circumstances. ...
[98] However, during the course of his viva voce evidence in April, he acknowledged that he had only had a single preliminary meeting with Ms. Dorrington‑Price, and did no further follow‑up with her to pursue career training opportunities. Mr. Gill further acknowledged that since September of 2009, he had made no further attempts to seek employment opportunities. His affidavit evidence was misleading.
[99] As opposed to putting an effort towards finding employment, Mr. Gill in accordance with his own evidence, spent three to four months working “full‑time” on a CD which was released shortly before Christmas 2009. ...
[100] It is difficult to contemplate why Mr. Gill, who asserts he is in dire need of financial support, would place his re‑employment efforts on the “back burner” [and] devote hours of labour to a project which will financially benefit[s] Ms. Leier. The Court questions whether Mr. Gill and Ms. Leier were forthright in their evidence regarding the financial arrangements between them. It is clear that Mr. Gill is choosing to make decisions which serve to delay his financial self‑sufficiency and prolong his dependency on Ms. Hurst. His actions are not reasonable, and I find that he is purposefully under‑employed.
[101] ...although I accept that Mr. Gill does have some health concerns, there is no evidence before the Court which suggests that Mr. Gill is precluded from gainful employment because of his physical or mental health. ...
[30] While Mr. Gill argues in his factum that he was reasonably unemployed owing to health and education reasons, the judge rejected his evidence.
[31] The trial judge found that given all the circumstances, including Mr. Gill’s past office and business management experience it was reasonable to impute to him an annual income of $25,000. There is no basis to challenge this modest imputation of income by the trial judge to Mr. Gill.
5. Spousal Support
[32] After referring to s. 15.2(4)(6) of the Divorce Act, R.S.C. 1985, c. 3, as well as leading jurisprudence (Shurson v. Shurson, 2008 NSSC 264, citing Bracklow v. Bracklow, [1999] 1 S.C.R. 420 and Moge v. Moge (1992) 43 R.F.L. 345 (S.C.C.), the trial judge went on to find that Ms. Hurst’s income had been overstated for the last number of years owing to subsidization of the family’s lifestyle. Although the trial judge “fixed” Ms. Hurst’s income at $80,000 a year, she did not use this figure in any mathematical way to set spousal support:
[105] With incomes of $80,000.00 and $25,000.00 respectively, there is still a current disparity in income which justifies continuing support to Mr. Gill. I have considered the ranges suggested by application of the Spousal Support Advisory Guidelines. Given the circumstances before the Court, I find it more appropriate to consider a quantum reflective of the various unique features of this matter.
She then went on to order that Ms. Hurst pay spousal support to Mr. Gill of $2,200 a month from November 1, 2010 to May 1, 2012. In this context, she considered Mr. Gill’s capacity to earn an income as well as the need for him to become financially self sufficient. These were proper considerations.
[33] In his factum, Mr. Gill argued that he had “conferred a benefit” on Ms. Hurst by increasing the value of the matrimonial home. He refinished the basement of that home and personally estimated the increase in property value of doing so at $100,000. No expert evidence was adduced in support of Mr. Gill’s lay assessment of the value of his contribution. There was no evidentiary foundation to draw such a generous conclusion about the value of his efforts. The trial judge did not err in giving this argument short shrift.
6. Costs
[34] Costs are notoriously within the discretion of the trial judge. Of course, that discretion must be exercised judicially; but if that occurs, this Court will not interfere (Barkhouse v. Wile, 2011 NSCA 50).
[35] Ms. Hurst argued before the trial judge that Mr. Gill unreasonably and unnecessarily complicated and delayed the proceedings resulting in a financial detriment to Ms. Hurst. For his part, Mr. Gill argued that Ms. Hurst should bear some responsibility for delay arising from disclosure issues. The trial judge accepted that this argument had merit.
[36] In concluding that a cost award was appropriate, the trial judge relied on Ms. Hurst’s success in relation to two key issues which occupied significant court time – parenting arrangements and Mr. Gill’s claim to an interest in the physiotherapy business. The trial judge also found fault with Mr. Gill for failing to implement an earlier interim order for sale of the matrimonial home which increased expenses to Ms. Hurst who was obliged to maintain the home and Mr. Gill’s occupancy of it. In making what can only be described as a token award of $5,000, the trial judge was fully aware of the modesty of Mr. Gill’s resources.
[37] Ms. Hurst cross-appeals on the issue of the source of costs. She says that these should not come from the money in trust. She cites no authority. She argues that Wickwire Holm unfairly benefits because not taking costs from trust funds means there is more money available to pay its judgment. But this was a discretionary decision for the trial judge. There is no obvious link between costs and trust money. And there is no good reason why an award of costs should take priority over an existing judgment – which would be the effect of what Ms. Hurst seeks.
[38] The trial judge did not err in the exercise of her discretion, either with respect to the amount of costs or her refusal to make them payable from the money held in trust.
7. Priority of the Wickwire Holm judgment
[39] Wickwire Holm was retained by Mr. Gill in July 2008 to represent him in the divorce proceedings initiated by Ms. Hurst. Wickwire Holm acted for Mr. Gill until March 2009 and was removed as solicitors of record on May 5, 2009.
[40] Subsequently, Wickwire Holm applied to the Small Claims Court for taxation of its account with Mr. Gill. After a lengthy hearing, Wickwire Holm’s account was taxed at $67,405.23. Although Mr. Gill retained counsel and vigorously resisted the Small Claims Court taxation, Ms. Hurst was not notified of that hearing nor did she participate in it.
[41] Judgment was entered on July 27, 2009. Mr. Gill failed to pay Wickwire Holm which recorded the judgment under the LRA on August 5, 2009.
[42] In her decision, the trial judge determined that Mr. Gill should pay Ms. Hurst an equalization payment owing to the matrimonial assets he received and the matrimonial debts which she assumed. After payment of the Canada Revenue Agency indebtedness, the sum of $136,314 remained in trust. Ordinarily, this would be divided equally between joint tenants. But the equalization payment meant that the first $46,328.11 would be paid to Ms. Hurst and the balance then divided equally. At the appeal hearing, counsel for Wickwire Holm advised the Court that Wickwire Holm – as a judgment creditor – consented to the sale of the matrimonial home on the basis that its position as a judgment creditor would not thereby be prejudiced.
[43] The trial judge endorsed Ms. Hurst’s concern that giving effect to the Wickwire Holm judgment would effectively require her to pay for a significant portion of Mr. Gill’s legal fees:
[64] Ms. Hurst’s concern in relation to the Wickwire Holm judgment was that it would very likely have the practical effect of forcing her to pay for a significant portion of Mr. Gill’s legal fees. Based on the determinations made earlier in this decision with respect to the required equalization of matrimonial assets and debts, this concern was well founded
The trial judge concluded at para. 78:
[78] Lawyers are entitled to be reasonably paid for the services they provide to clients, and Wickwire Holm cannot be faulted for wanting to be so compensated by Mr. Gill. However, it would create a fundamentally unfair and potentially chaotic situation if the lawyer or former lawyer of one spouse could find themselves in the midst of matrimonial litigation, in a better security position to matrimonial assets than the other spouse who may, as in the present case, be deserving of the encumbered asset, or its value.
[44] Wickwire Holm says that prior to the trial judge’s unequal division of proceeds of the matrimonial home, Mr. Gill was an owner of that home as a result of the parties’ joint tenancy. Accordingly, when Wickwire Holm recorded its judgment, it acquired a charge over Mr. Gill’s interest in the home. That charge arises as a matter of law under s. 66 of the LRA which provides in part:
66 (1) A judgment is a charge as effectually and to the same extent as a recorded mortgage upon the interest of the judgment debtor in the amount of the judgment.
(2) A judgment against one joint tenant does not sever the joint tenancy.
(3) A judgment against one owner of an interest does not extend to or bind the interests of the other owners.
. . .
(6) A judgment that is removed from the roll ceases to bind or be a charge upon any parcel in the registration district.
[45] The LRA represented a shift in Nova Scotia from a notice system (the previous Registry Act) to a title system. In Nova Scotia (Attorney General) v. Brill, 2010 NSCA 69, Fichaud J.A. explains the change:
[162] By s. 20, "a parcel register is a complete statement of all interests affecting the parcel". This is subject to the exceptions expressly noted in the LRA, such as overriding interests and challenges to the contents of the parcel register that may be resolved by the Registrar General and the Court. By s. 6, the Crown is bound, as is everyone. Section 73(1)(a) states that an actual reservation or exception in an actual initial Crown grant overrides, but says nothing about a dispute whether there was an initial Crown grant.
[163] The LRA involves the mirror, curtain and insurance principles of land title systems. These mean, respectively, that the register should accurately reflect the title, the register is the only source of title information, and there is indemnity to those who suffer a loss because of a flaw in the land registration system. Anger & Honsberger, ¶ 30:40.30. MacIntosh, Nova Scotia Real Property Practice Manual, ¶ 16‑2.
[164] In C.P.R. and Imperial Oil Ltd. v. Turta, [1954] S.C.R. 427, at p. 443, Justice Estey for the majority adopted this passage from an earlier decision:
The cardinal principle of the statute is that the register is everything and that, except in cases of actual fraud in the part of the person dealing with the registered proprietor, such person, upon registration of the title under which he takes from the registered proprietor, has an indefeasible title against the world.
Justice Estey continued (pp. 443‑444):
The foregoing preamble and quotations, as well as others to similar effect, emphasize that the Torrens system is intended “to give certainty to the title” as it appears in the land titles office.
[165] I agree that the parcel register under Nova Scotia's LRA would have in rem effect against the world, including the Crown, subject to the exceptions expressly prescribed in the LRA. I agree that there is no such exception, expressed in the LRA, governing a dispute whether there was an initial Crown grant. I also agree that, by s. 37(9), the standards under the MTA or common law, including the common law of marketable title, are among those that may generate the parcel register.
[46] As a result of s. 66 of the LRA, the Wickwire Holm judgment represented a valid charge on Mr. Gill’s joint interest in the matrimonial home. The question becomes whether the Court can displace that charge or impair its priority.
[47] Ms. Hurst and Mr. Gill owned the matrimonial home as joint tenants. At law, joint tenancy requires four “unities” (Harry D. Anger, John D. Honsberger & Anne Warner La Forest, Anger and Honsberger Law of Real Property, 3rd ed., Vol. 1 (Aurora, Ont: Canada Law Book, 2006), at para. 14:20.10):
1. “Unity of title” meaning that all joint tenants take under the same instrument;
2. “Unity of interest” whereby each joint tenant must have interests that are identical in nature, extent and duration;
3. “Unity of possession” in claiming that each joint tenant is entitled to an undivided possession of the whole property and that no part of the property is held separately to the exclusion of any other joint tenant;
4. “Unity of time” in claiming that the interest of each joint tenant vests at the same time.
[48] The MPA supplants the common law presumption of advancement from husband to wife with a presumption of resulting trust.
Presumption respecting ownership between spouses
21 (1) The rule of law applying a presumption of advancement in questions of the ownership of property as between husband and wife is abolished and in place thereof the rule of law applying a presumption of a resulting trust shall be applied in the same manner as if they were not married, except that
(a) the fact that property is placed or taken in the name of spouses as joint tenants is prima facie proof that each spouse is intended to have on a severance of the joint tenancy a one‑half beneficial interest in the property; and
(b) money on deposit in a chartered bank, savings office, loan company, credit union, trust company or other similar institution in the name of both spouses shall be prima facie proof that the money is on deposit in the name of the spouses as joint tenants for the purposes of clause (a).
[49] Neither spouse claimed that anything other than a half interest each was intended by their joint ownership of the matrimonial home. Absent an overt challenge, the legal interest enjoyed by the parties in their deed is valid and enforceable and s. 21 is not engaged.
[50] Before analyzing the trial judge’s decision it will be useful to remind ourselves of the interplay between the law of property generally, and the laws relating to matrimonial property, more specifically. A helpful gloss on that relationship is supplied by Robert A. Klotz, Bankruptcy, Insolvency and Family Law, 2nd ed., looseleaf (2007 – Release 1) (Scarborough, Ont: Thompson Carswell, 2001), ch. 4 at p. 4-21:
The timing problem is a function of our system of property law and the deferred sharing scheme underlying most provinces’ matrimonial property laws. Since the Married Women’s Property legislation in the nineteenth century, the law has treated families as consisting of individual members, rather than as a single juridical personality. The debts incurred by one spouse are not, in general, enforceable against the other. Each spouse is free, during the marriage, to dispose of or alienate his or her property (with limitations on the matrimonial home). More crucially, each is free to borrow or conduct business on the strength of his or her assets, in effect utilizing his or her equity in the home as justification for creditor confidence in the promise to repay. As against third parties, and indeed the whole commercial world, the fact of marriage has minimal effect on property rights — at least until dissolution. This is noted in a passage from an English case [Pettitt v. Pettitt, [1991] Ch. 142 (C.A.) at p. 157, per Lord Upjohn]
[In the absence of any relevant statutory provision] the rights of the parties [to a marriage] must be judged on the general principles applicable in any court of law when considering questions of title to property, and though the parties are husband and wife these questions of title must be decided by the principles of law applicable to the settlement of claims between those not so related, while making full allowance in view of the relationship. [Emphasis Added]
[51] The balancing of property and matrimonial interests was described by the Ontario Law Reform Commission prior to the 1986 enactment of the Family Law Reform Act (p. 4-23):
Third-party creditors should be protected in their dealings with husbands and wives. The Commission’s recommendations with regard to the matrimonial property regime are intended solely to protect the spouses, and not to prejudice the position of third parties who may deal with them. The fact that spouses are subject to the matrimonial regime or another should not in any way affect the rights of those who transact business with them. Third parties should be as fully protected when dealing with spouses who are governed by the matrimonial property regime as they are when dealing with husbands and wives who are separate as to property. It is therefore recommended that all legitimate third-party creditors rank ahead of the creditor-spouse. In other words, the spouses will be deferred creditors, so that all third party creditors must be paid before the creditor-spouse. [Quoted from Klotz, supra] [Emphasis added]
[52] This sentiment was echoed in the 1992 Ontario Law Reform Commission Report on Family Property Law (at p. 128).
[53] In rejecting Wickwire Holm’s priority, the trial judge said:
[71] It would have been clear relatively early in the litigation between the parties, that based on the positions being advanced by the parties, that the matrimonial home, or the proceeds of sale, may be divisible other than equally. As joint owners, each party presumptively had a one‑half legal interest in the home. However, this does not preclude either from asserting a further equitable claim, resulting in the legal presumption of equal ownership being altered. At the conclusion of the proceedings, this is precisely what resulted. Ms. Hurst has been found to be entitled to not only her legal “share” but a greater proportion due to her equitable claim.
[54] Thereafter, the trial judge referred to ss. 8, 9 and 10 of the MPA and commented:
[75] In my view, the above statutory provisions are reflective of the Legislature’s intention to afford the interest of spouses in the matrimonial home with a high level of protection against unreasonable encumbrance or dissipation. Wickwire Holm asserts that the present encumbrance is appropriate and enforceable as it was ordered by the Small Claims Court and thus falls within Section 8(1)(c).
It will be convenient to address these reasons under discrete categories.
Nature of Ms. Hurst’s interest and when it arose:
[55] In deciding against the priority of Wickwire Holm’s judgment, the trial judge distinguished the Supreme Court’s decision Maroukis v. Maroukis, [1984] 2 S.C.R. 137. In Maroukis, the parties owned the matrimonial home in joint tenancy. In 1978 they separated and the wife applied for division of family assets under the Family Law Reform Act of Ontario. In July 1979 the Bank of Nova Scotia obtained judgment against Mr. Maroukis for outstanding unpaid loans. In October, 1979 the trial judge ordered that the matrimonial home be vested in Ms. Maroukis. The judge purported to vest the home in her as of October 1978, which was the date of separation, effectively clearing the property of the judgments recorded against the husband’s interest in the home, subsequent to separation.
[56] The Supreme Court held that until a vesting order was made, a spouse merely had a personal right under the Act to apply for a division of family assets. The Act itself did not grant or create any proprietary rights, (also see Sager v. Bradley (1984), 63 N.S.R. (2d) 386 (S.C.A.D.) and R. v. Surette (1993), 123 N.S.R. (2d) 153 (N.S.C.A.), at para. 6). A claim for division of matrimonial assets is not an interest in property that can be registered under the LRA’s predecessor Registry Act (Church v. Forbes and Church (1983), 60 N.S.R. (2d) 211; also see: Blades and Quinlan v. Atwood (1990), 95 N.S.R. (2d) 348; Downie v. Fitzgerald et al. (1984), 65 N.S.R. (2d) 122 (S.C.A.D.)).
[57] Any judgments against a joint tenant filed prior to a court vesting order attach to the interest of that tenant. In Malhotra v. Malhotra (1983), B.C.J. No. 2249 (Q.L.), the British Columbia Court of Appeal makes this clear:
14 Section 52(2)(b) of the Family Relations Act empowers the Court to order that title to a specified property in the name of one spouse vest in the other spouse. That order has the effect of a conveyance. But conveyance of such title is subject to registered charges under the Land Title Act. In this case the wife could not acquire, by vesting order or otherwise, an interest greater than that which her husband held at the date of the registration of the order. The interest of the husband was subject to the judgments registered against him in the Land Title office. Any interest of the husband vested in the wife must be subject to those judgments. The appeal of Goult, McElmoyle & Wilson must be allowed. [Emphasis added]
[58] It is clear that Ms. Hurst acquired no proprietary interest in Mr. Gill’s joint tenant interest until the trial judge so decided on October 10, 2010. Wickwire Holm’s judgment was recorded August 5, 2009.
Notice:
[59] In determining that Ms. Hurst’s claim to Mr. Gill’s portion of the sale proceeds of the matrimonial home should have priority over the Wickwire Holm judgment, the trial judge also found that Wickwire Holm had “notice” of Ms. Hurst’s potential claim to an unequal division of the matrimonial home:
[76] I find the reasoning adopted in Barnes compelling. Although here Mr. Gill and the judgment creditor did not endeavour together to encumber a matrimonial asset to secure legal fees, the end result is the same. I also find that Maroukis, supra, is distinguishable, as Wickwire Holm was fully aware of the litigation between the parties and the potential that the matrimonial home, or its value, may ultimately be divided unequally between the parties. In the circumstances of this case, I order that the Wickwire Holm judgment shall only attach to Mr. Gill's remaining equitable interest in the matrimonial home, namely, those funds remaining in trust after payment of Ms. Hurst’s one‑half share and equalization payment.
[60] With respect, the reliance on Barnes (2006 ABQB 855) is misplaced. Barnes was not a dispute arising from a statutory right to a division of matrimonial assets. Rather, in Barnes, the husband claimed that he had actually purchased the vehicle on which security had been granted by Mrs. Barnes and therefore he was the equitable owner. Leaving aside any presumption of advancement, this would make Mrs. Barnes a trustee of the vehicle under a resulting trust for Mr. Barnes. The court quite properly concluded that the extent of Mr. Barnes’ equitable (i.e. proprietary) interest in the vehicle was a matter to be determined at trial. Since the law firm knew that Mr. Barnes claimed an interest in the vehicle, the law firm was not a “bona fide creditor” without notice and could not claim a security interest in the property free and clear of the interest of Mr. Barnes – whatever that interest may ultimately have been. Barnes can be explained on traditional property principles – the law firm could not acquire a greater security in the vehicle than Mrs. Barnes actually owned. The law firm was not a “bona fide creditor” because it was aware of Mr. Barnes’ equitable claim to the motor vehicle, prior to taking judgment. In this case, Ms. Hurst could have no interest until the court granted one. She had no prior existing equitable property interest.
[61] In para. 71 of her decision, quoted in para. 53 above, the trial judge confuses equitable and statutory rules as they apply to property ownership. In effect, she says that the presumption of joint ownership can be changed by a statutory exercise of discretion creating an unequal division of assets.
[62] It is important in this case to distinguish between statutory and equitable discretion. Courts do not have an equitable jurisdiction to rearrange existing property rights in the absence of known property principles (ie., as in a resulting trust arising from the purchase of property by another). In contrast to this equitable jurisdiction, the MPA does give courts a statutory jurisdiction to alter property interests to achieve an appropriate balancing of assets and liabilities between the parties.
[63] The difference between statutory and equitable discretion is important for priorities. When a court recognizes an equitable interest in property, it recognizes an existing right of which others can have prior notice (as in Barnes). Not so with a division of assets under the MPA. In that case, no property right arises until the court so orders (see para. 56 above). The presumption of equal ownership in s. 21 of the MPA is a presumption of the donor's intention (Kerr v. Baranow, 2011 SCC 10, paras. 17, 18, 24) and does not anticipate a potential change of ownership based on an unequal division of assets under the Act. Rather, it is a rebuttable presumption relating to the existing property rights of the parties (see discussion of Hallett J. in Levy v. Levy Estate (1981), 50 N.S.R. (2d) 14).
[64] Although it was not argued, it would certainly be inappropriate for legal counsel to obtain a judgment by the misuse of confidential information. In Noble China Inc. v. Cheong, [1999] O.J. No. 5030, a creditor had obtained judgment against the husband that remained unsatisfied. He transferred residential property to his wife immediately prior to the arbitration that resulted in the judgment. The creditor subsequently brought a fraudulent conveyance proceeding against the wife. Acting on information obtained at discovery, the creditor served a notice of garnishment on the bank where the husband and wife held a joint account from which the property expenses were paid. Because the creditor had breached the implied undertaking rule, the garnishment order was set aside. But no such conduct is alleged against Wickwire Holm in this case. Nor is there any evidence of a breach of confidentiality.
Did Mr. Gill encumber the matrimonial home?
[65] Ms. Hurst cannot rely on s. 8 of the MPA to allege that Mr. Gill somehow encumbered his interest in the matrimonial home, in breach of that section. Section 8 contemplates some positive act by an owner that grants an interest to a third party. That is prohibited by s. 8:
8 (1) Neither spouse shall dispose of or encumber any interest in a matrimonial home unless
(a) the other spouse consents by signing the instrument of disposition or encumbrance, which consent shall not be unreasonably withheld;
(b) the other spouse has released all rights to the matrimonial home by a separation agreement or marriage contract;
(c) the proposed disposition or encumbrance is authorized by court order or an order has been made releasing the property as a matrimonial home; or
(d) the property is not designated as a matrimonial home and an instrument designating another property as a matrimonial home of the spouses is registered and not cancelled.
[Emphasis added]
[66] The prohibition in s. 8 uses the active verbs “dispose” and “encumber”, referring to spousal conduct. All other subsections of s. 8 merely describe when that otherwise prohibited spousal conduct is effective to dispose of, or encumber an interest in a matrimonial home. For example, ss. (a) sanctions a disposing or encumbering when the “other spouse” signs the “instrument of disposition or encumbrance”. Legal and commercial practice has evolved to accommodate this subsection by the use of spousal releases and affidavits. This language and practice does not capture the acts of a third party who records a judgment under the LRA. To imply that third party judgments are caught by s. 8 merely because a creditor knows that a debtor owns a matrimonial home creates two classes of judgment creditors: those enjoying secured priority under s. 66 of the LRA and those whose security can be compromised by the court because they knew that their debtor owned a matrimonial home. So, typically, a trades person working on a matrimonial home could lose priority while a credit card company, ignorant of the debtor’s matrimonial home, would not. The trial judge’s interpretation is unsustainable because:
(a) it does violence to the clear language of s. 8;
(b) it is inconsistent with the jurisprudence interpreting similar sections in other jurisdictions (paras. 67-70 below);
(c) it ignores the policy that favours commercial creditors over spousal creditors (paras. 50 and 51 above); and
(d) it creates different classes of secured creditors.
[67] In this case, Wickwire Holm obtained a charge on the matrimonial home owing to the statutory effect of registering its judgment under the LRA. This is not a step or an act taken by Mr. Gill – indeed he aggressively resisted the Small Claims Court proceeding. Rather, Wickwire Holm enjoys its charge as a matter of law. Section 8 of the MPA has no application. In Maroukis, the Supreme Court also dealt with this argument. Section 42 of the Family Law Reform Act prohibited a spouse from disposing or encumbering any interest in the matrimonial home without, amongst other things, the consent of the other spouse. Faced with a similar argument to that advanced by Ms. Hurst here, the Supreme Court said (p. 144):
...Furthermore, the prohibition in s. 42 is against a disposition or an encumbrance of an interest in a matrimonial home by a spouse. Giving those words their plain meaning in the context in which they are used in s. 42, it is my opinion that they cannot be extended to include an execution taken by creditors of one to the parties to the marriage.
[68] To like effect are Bank of Montreal v. Bray (1997), 36 O.R. (3d) 99 (C.A.), and First City Trust Co. v. McDonough (1993), 15 O.R. (3d) 586 (Ont. Gen. Div.), where Borins J. said:
16 ...It is not the indirect results of commercial transactions which s. 21(1) seeks to engage but rather direct transactions relating to the matrimonial home such as the sale or mortgaging by a spouse of his or her interest in the matrimonial home without the consent of the other spouse. ...
First City was followed by Wells J. (as he then was) in Enterprise Newfoundland and Labrador Corp. v. Kawaja (1997), 153 Nfld. & P.E.I.R. 230.
[69] Bray and McDonough were followed in Ferguson v. Ferguson, [1994] O.J. No. 1975 which upheld a judgment by lawyers against one of the litigants. The court in Ferguson did not consider that the status of the lawyer-creditors disentitled them to a priority with respect to their judgment obtained prior to the division of proceeds of the matrimonial home.
[70] There are at least two recent decisions which treat a judgment as an encumbrance which offends statutory prohibitions against encumbrance, similar to s. 8(1) of the MPA. In Boyd v. Boyd, [2008] O.J. No. 180 (Q.L.), the solicitor of the husband obtained a judgment and registered it against the matrimonial home. In Boyd, the solicitor’s lawsuit for fees was not opposed by the husband. At paras. 19 and 21, the trial judge expressed his concerns:
19 ...The potential mischief in permitting such encumbrances is obvious. Unscrupulous litigants could agree to an encumbrance by a non arm's length nominee. Inflated accounts for legal services to which the spouse has no access could shield assets from equalization or anticipate fees to provide a "war chest" for litigation to the disadvantage of the untitled spouse in the litigation about the very subject matter of the encumbranced property. The scope of the illegitimate use of this mechanism to defeat spousal claims is curtailed here only by my lack of nefarious imagination.
. . .
21 I am not persuaded by the argument that the Applicant's best position on equalization is covered by the remaining proceeds. Even if that be so in this case, which I do not find but accept for the purposes of argument, the principal[sic] that a lawyer and client can agree to encumber the matrimonial home, in an amount which they estimate leaves sufficient for equalization, invites disaster even if they estimate in good faith. Regrettably, there is plenty of not so good faith in matrimonial litigation.
[71] Similarly, in Walduda v. Bell, [2004] O.J. No. 3071, the wife’s sister loaned her large sums to finance litigation against her husband. The judge found that the wife could not repay these loans and indeed that this was never intended by the wife or her sister, who obtained a registered judgment which was unopposed by the wife. The judge concluded that the judgment was not an arm’s length transaction and so constituted an “encumbrance” contrary to the intent of the Ontario equivalent of s. 8 of the MPA. The judgment was set aside.
[72] Neither Boyd nor Bell – assuming that they are correctly decided – can assist Ms. Hurst here because those judgments were either not arm’s length (Bell) or not resisted (Boyd and Bell), so could be construed as acts of the spouse encumbering an interest in the matrimonial home. In this case, Mr. Gill actively opposed his solicitor’s attempt to obtain judgment. His position cannot be assimilated to that of a supine debtor who colludes with his creditor in obtaining a judgment that subsequently encumbers his property.
[73] Section 10(1)(d) of the MPA empowers the court to set aside a disposition or encumbrance on terms:
10 (1) The court may by order, on the application of a spouse or any other person having an interest in property,
d) direct the setting aside of any disposition or encumbrance of an interest in a matrimonial home and the revesting of the interest or any part of the interest upon such terms and subject to such conditions as the court considers appropriate.
This section has been invoked to set aside a mortgage obtained by one spouse in breach of s. 8(3) of the MPA: Agirman v. Bank of Nova Scotia, 2003 NSCA 70. Although s. 10(1)(d) captures more than a breach of s. 8 of the MPA, it is not a license to rearrange the property interests of third parties, absent a breach of the Act, inequitable conduct or other wrongdoing. That would be inconsistent with the policy reasons that give priority to third party creditors over spouse creditors (paras. 50 and 51 above). For reasons set out in para. 63 and following, the Wickwire Holm judgment did not involve inequitable conduct or wrongdoing by the firm or constitute a breach of s. 8 by Mr. Gill. Accordingly, the remedial power of s. 10 is not engaged.
Notice to Ms. Hurst:
[74] The trial judge also found that s. 8(1)(c) of the MPA required that Ms. Hurst be given notice of Wickwire Holm’s Small Claims Court taxation:
[75] ...However, Ms. Hurst was unaware of the Small Claims Court proceeding. It is my view that Section 8(1)(c) requires not only the opportunity for both spouses to be permitted to make representations to the Court considering an order of disposition or encumbrance, and secondly, the Court itself must be fully cognizant that it is making an order which is specifically intended to have that result.
[75] While such notice may have been prudent, it is not clear how its absence prejudices the Wickwire Holm judgment. Ms. Hurst had no interest in Wickwire Holm’s taxation. Moreover, the taxation and consequent judgment did not, for the reasons already expressed, constitute a disposition or encumbrance within the meaning of 8(1)(c). It was not her bill that was in issue. It was not her existing interest in the matrimonial home that could be affected by the judgment. The Small Claims Court would have no jurisdiction to refuse Wickwire Holm its judgment or to prevent Wickwire Holm from recording it under the LRA.
[76] In my view, there are only three bases upon which the position of Ms. Hurst could have been vindicated here: either as a matter of property law; as a matter of matrimonial legislation; or, as a matter of equity. The first does not assist because Ms. Hurst had no property interest until the trial judge made an unequal division of the proceeds of the sale of the matrimonial home. The second does not assist because the MPA itself does not permit the retroactive rearrangement of property interests to the detriment of third parties; and the third does not assist because Wickwire Holm had no notice of any proprietary interest of Ms. Hurst prior to registration of its judgment and had otherwise done nothing inequitable (i.e., misuse of confidential information) in obtaining that judgment.
[77] Wickwire Holm raised the potential for commercial mischief if its judgment were set aside. But the trial judge was not concerned about any general ill effect of denying Wickwire Holm its priority:
[77] With respect to the view expressed by Mr. MacKinnon to the contrary, this determination will not throw the usual course of business transactions into chaos when attempting to enforce legitimate judgments against matrimonial assets. In the vast majority of instances, judgment creditors will be bona fides, with no knowledge of looming matrimonial disputes. Other than in exceptional circumstances, as the Court faced in this instance, the enforcement of judgments will continue in the usual course.
[78] But here is the problem: Of what, precisely, did Wickwire Holm have notice? Certainly, it had no notice of a property interest because none arose until the actual decision was made. At best, the firm had notice of a potential claim (none was actually asserted) to an unequal division of the matrimonial home that may or may not have succeeded. But that cannot be enough which is why, absent a breach of the MPA or fraud, parties need take no notice of claimed interests – proprietary or not – that have not been recorded under the LRA. And are we to say that “equity” requires that such knowledge binds the conscience of Wickwire Holm? Then why not anyone else who knows – or who disputing spouses choose to tell? Why not other creditors who become – or are made aware – of the claim? Spousal disputes are notorious for acrimony and bad behaviour – freezing a spouse’s credit by informing his or her creditors of a matrimonial dispute would simply be another means of exerting undue pressure at the instance of unscrupulous spouses.
[79] If Wickwire Holm loses priority of its judgment because it knew of the possibility of an unequal division of the matrimonial assets, all creditors would face the same risk when told of a matrimonial dispute. They could no longer rely on recorded ownership of property under the LRA or otherwise. This could have the unfortunate effect of retarding credit to spouses when, arguably, they most need it. Absent a breach of the MPA or misconduct of some kind, there is no principled basis by which to “red-circle” lawyers alone in such a class of creditors.
[80] It may be argued that the effect of upholding the Wickwire Holm judgment is to do indirectly what cannot be done directly, because Mr. Gill could not grant his lawyer a mortgage over his interest in the matrimonial home without Ms. Hurst's consent, as that would contravene s. 8 of the MPA. But this consequence does not flow directly from Mr. Gill’s conduct, but rather because the MPA itself only proscribes a party actively encumbering his or her interest in the matrimonial home. That proscription does not extend to a third party doing so by virtue of the statutory effect of the LRA. Again, this is consistent with the legislative policy of balancing property interests generally with those arising out of matrimonial property legislation (see paras. 50 and 51 above).
[81] Similarly, the trial judge’s concern that giving priority to the Wickwire Holm judgment results in Ms. Hurst “paying” Mr. Gill’s legal fees, focuses on the practical and indirect effect of that priority, rather than on its legal basis. The corollary of this argument is that Wickwire Holm is “paying” Mr. Gill’s equalization amount to Ms. Hurst. With respect, Mr. Gill’s means or lack thereof cannot determine the priority of judgments which have acquired secured status under the LRA, or be a principled basis for impairing that security or priority by the exercise of judicial discretion under s. 10(l)(d) of the MPA. So, for example, an unpaid plumber, electrician or other creditor would be entitled to record a judgment and thereby acquire a secured interest in Mr. Gill’s joint tenancy under s. 66 of the LRA. Lawyers are not excluded from this class of creditors simply by virtue of their profession.
[82] Nor is it a question of whether the discretion in s. 10(1)(d) of the MPA might extend to affect third party creditors, but whether there is an appropriate basis to ignore the priority of a properly obtained judgment in this case. The trial judge’s decision to neuter Wickwire Holm’s judgment cannot be insulated by invoking her discretion regarding costs. Costs is a matter of entitlement, not collection. Impairing the priority of a judgment to effect a desired result cannot be a proper exercise of discretion because it confuses rights with remedies – and subordinates the former to the latter.
[83] I emphasize that here we are dealing with the priority of a judgment under the LRA in the context of a division of matrimonial assets. This is not a case where a judgment for maintenance and support (lump sum or otherwise) enjoys a priority over other judgments as provided for in the Maintenance Enforcement Act, S.N.S., 1994-95, c. 6.
Disposition
[84] In subordinating the Wickwire Holm judgment to a division of matrimonial assets, the trial judge erred in law. That error may well have affected the statutory exercise of her discretion when she divided matrimonial assets and liabilities. Accordingly, I would remit this matter to the trial judge to reconsider that division, in light of the priority of the Wickwire Holm judgment. The trial judge may wish to reallocate assets and liabilities, including setting off any sums otherwise payable to Mr. Gill against his indebtedness to Ms. Hurst.
[85] I would award costs to Ms. Hurst against Mr. Gill of $2,500.00 inclusive of disbursements. I would award Wickwire Holm costs of $1,500.00 inclusive of disbursements, $750.00 of which is to be paid by Ms. Hurst and $750.00 of which is to be paid by Mr. Gill as he also opposed the Wickwire Holm appeal.
Bryson, J.A.
Concurred:
Farrar, J.A.
Reasons of Fichaud. J.A., dissenting in part:
[86] I agree with the reasons of my colleague except where Justice Bryson would allow Wickwire Holm’s appeal. In my view, Wickwire Holm’s appeal should be dismissed. I will confine my reasons to that issue.
Background
[87] Wickwire Holm’s legal account is for post-separation legal fees related to the firm’s representation of Mr. Gill in his divorce litigation with Ms. Hurst. The parties separated in May, 2008, Ms. Hurst’s Petition for Divorce was filed in July, 2008, and Mr. Gill’s Answer and Counter-Petition was filed in August, 2008. Wickwire Holm acted for Mr. Gill until May 5, 2009, when the Court granted Wickwire Holm’s motion to withdraw. According to the taxation decision of the Small Claims Court Adjudicator, Wickwire Holm issued accounts dated August 31, 2008, September 30, 2008, October 31, 2008, December 31, 2008 and March 16, 2009, in amounts of $14,163.10, $18,394.78, $14,073.06, $23,372.13, and $12,951.12 respectively, less credits for some payments by Mr. Gill plus interest on overdue accounts. The Adjudicator ordered Mr. Gill to pay Wickwire Holm $67,405.23.
[88] The matrimonial dispute between Mr. Gill and Ms. Hurst went to trial beginning in September, 2009, continuing into 2010. The dispute was determined by Justice Bourgeois’ decision of October 8, 2010 (2010 NSSC 366). The judge granted the divorce, divided the assets and debts, provided for child and spousal support, and ordered Mr. Gill to pay costs of $5,000 to Ms. Hurst.
[89] The sale proceeds of the matrimonial home, $136,314, were held in trust. The judge divided matrimonial assets and liabilities equally between Mr. Gill and Ms. Hurst. But Ms. Hurst was directly responsible for most of the matrimonial debts, and Mr. Gill had cashed or taken the RRSP balance, the other principal matrimonial asset. This meant that the equal division of matrimonial net worth required Mr. Gill to make an equalization payment to Ms. Hurst of $46,328.11 from the sale proceeds of the matrimonial home. To reflect this equalization payment, the judge determined that Mr. Gill was entitled to $21,829 and Ms. Hurst to $114,485 from those sale proceeds, in addition to Ms. Hurst’s judgment for $5,000 costs against Mr. Gill.
[90] Ms. Hurst was never Wickwire Holm’s client. Wickwire Holm did not tax its accounts against Ms. Hurst, and gave her no notice of the taxation before the Small Claims Court. Wickwire Holm had the Small Claims Court issue an Execution Order on July 27, 2009, for $67,517.59 against the property of Mr. Gill. On August 5, 2009, Wickwire Holm registered its judgment against the property of Mr. Gill. Ms. Hurst was not given prior notice of the registration.
[91] The Land Registration Act, S.N.S. 2001, c. 6, s. 66(1) says:
66(1) A judgment is a charge as effectually and to the same extent as a recorded mortgage upon the interest of the judgment debtor in the amount of the judgment.
Also relevant is s. 66(3):
66(3) A judgment against one owner of an interest does not extend to or bind the interests of the other owners.
[92] It is clear that Wickwire Holm’s registered judgment charged Mr. Gill’s interest in the matrimonial home, but not Ms. Hurst’s interest.
[93] Wickwire Holm says that Mr. Gill’s interest was one-half of the matrimonial home or proceeds. In support of this conclusion, Wickwire Holm cites the Matrimonial Property Act, R.S.N.S. 1989, c. 275, s. 21(1)(a):
21(1) The rule of law applying a presumption of advancement in questions of the ownership of property as between husband and wife is abolished and in place thereof the rule of law applying a presumption of a resulting trust shall be applied in the same manner as if they were not married, except that
(a) the fact that property is placed or taken in the name of spouses as joint tenants is prima facie proof that each spouse is intended to have on a severance of the joint tenancy a one-half beneficial interest in the property.
[94] Wickwire Holm registered its judgment under the Land Registration Act on August 5, 2009, and submits that, from that date onward, its judgment encumbered one-half the matrimonial home’s value.
[95] Wickwire Holm contends that its charge is unaffected by later events, such as the Supreme Court of Nova Scotia’s ruling on October 8, 2010, in the divorce proceeding, that Mr. Gill’s interest in the $136,414 sale proceeds was only $21,829. As authority for that proposition, Wickwire Holm cites Justice McIntyre’s statement in Maroukis v. Maroukis, [1984] 2 S.C.R. 137, page 141-2:
The Act [Ontario’s Family Law Reform Act, R.S.O. 1980, c. 152] does not automatically confer any property interest in family assets. ... The vesting in a spouse of the specific property making up his or her respective share takes place upon the date the court order is made. There is no authority in the Act for an order retroactively vesting property in a spouse as the appellant contends and as Judge Luchak ordered.
In Maroukis, the Bank of Nova Scotia had judgments and executions against the husband for unpaid loans. After those executions, the trial judge in the matrimonial proceeding ordered that the matrimonial home had vested in the wife retroactively at a date before the Bank filed its execution orders. The Supreme Court of Canada confirmed the Court of Appeal’s order that the effect of the Bank’s execution orders was undiminished by the judge’s subsequently issued vesting order.
[96] If Wickwire Holm’s submission succeeds, then Wickwire Holm’s judgment of $67,517.59 against Mr. Gill, for Mr. Gill’s legal fees related to his divorce litigation with Ms. Hurst, would be paid by (1) $21,829.00 from Mr. Gill’s share of the sale proceeds of the matrimonial home plus (2) $45,688.59 from Ms. Hurst’s share of the sale proceeds from the matrimonial home. Instead of Mr. Gill paying $5,000 to Ms. Hurst for her litigation costs as the judge directed in her decision, Ms. Hurst would pay $45,688.59 toward Mr. Gill’s litigation costs.
[97] Wickwire Holm notified Justice Bourgeois, in mid-trial, that Wickwire Holm claimed, in priority to Mr. Gill and Ms. Hurst, those proceeds from the sale of the matrimonial home that were necessary to satisfy Wickwire Holm’s judgment against Mr. Gill (letter quoted below, para 142). The judge acting under ss. 8 and 10(1)(d) of the Matrimonial Property Act, that I will discuss later, partially set aside Wickwire Holm’s encumbrance to the extent that the judgment would encumber the portion of the proceeds that were payable to Ms. Hurst under the judge’s property division ruling between the spouses.
[98] Wickwire Holm appeals the judge’s ruling, to partially set aside its encumbrance, to the Court of Appeal.
[99] The assets other than the matrimonial home comprised mainly the RRSP balance, which the judge’s reasons say has been mostly cashed by Mr. Gill, and will not re-materialize, plus household items. Ms. Hurst is responsible for virtually all the matrimonial debts, third party liabilities that the court has no power to re-assign. If Wickwire Holm’s submission succeeds, then remitting the matter to the judge for re-allocation of the matrimonial net worth, as my colleagues suggest, would appear to be a sterile disposition.
Issues
[100] In my view, the first issue is - Did the Matrimonial Property Act give the judge the power to partially set aside Wickwire Holm’s encumbrance? If so - Did the judge exercise that power without appealable error?
[101] Given my colleagues’ view that the judge could not partially set aside Wickwire Holm’s encumbrance, there is a second issue - What was Mr. Gill’s interest that was attached by the registered judgment?
First Issue - Judge’s Power to Set Aside
[102] The issue turns on the interpretation of ss. 8 and 10(1)(d) of the Matrimonial Property Act and s. 66(1) of the Land Registration Act.
[103] Section 8 says:
8(1) Neither spouse shall dispose of or encumber any interest in a matrimonial home unless
(a) the other spouse consents by signing the instrument of disposition or encumbrance, which consent shall not be unreasonably withheld;
(b) the other spouse has released all rights to the matrimonial home by a separation agreement or marriage contract;
(c) the proposed disposition or encumbrance is authorized by court order or an order has been made releasing the property as a matrimonial home; or
(d) the property is not designated as a matrimonial home and an instrument designating another property as a matrimonial home of the spouses is registered and not cancelled.
(2) Where a spouse disposes of or encumbers an interest in a matrimonial home contrary to subsection (1), the transaction may be set aside by the other spouse upon an application to the court unless the person holding the interest or encumbrance acquired it for valuable consideration, in good faith and without notice that the property was a matrimonial home.
[Emphasis added]
[104] In Maroukis the Supreme Court considered provisions in Ontario’s Family Law Reform Act, R.S.O. 1980, c. 152. Ontario’s s. 42(1) said “[n]o spouse shall dispose of or encumber any interest in a matrimonial home unless” the other spouse consents or the court approves. Section 44(d) permitted the court to “direct the setting aside of any transaction disposing of or encumbering an interest in the matrimonial home contrary to subsection 42(1)”. Justice McIntyre for the Court (page 144) noted that the prohibition in s. 42(1) is “against a disposition or an encumbrance of an interest in a matrimonial home by a spouse”, then said:
Giving those words their plain meaning in the context in which they are used in s. 42, it is my opinion that they cannot be extended to include an execution taken by creditors of one of the parties to the marriage.
[105] Justice McIntyre apparently focussed on the active voice of “[n]o spouse shall dispose of or encumber” in Ontario’s s. 42(1), to conclude that only encumbrances authored by the spouse’s hand could be set aside. That would include a mortgage, but not a judgment. Nova Scotia’s s. 8(1) opens with similar wording - “[n]either spouse shall dispose of or encumber any interest in a matrimonial home”. The court’s power to set aside in Nova Scotia’s s. 8(2) applies only to an encumbrance that “contrary to subsection (1)”. If s. 8 was the only statutory provision on point then, on the authority of Maroukis, I would agree that Nova Scotia’s Matrimonial Property Act does not empower the judge to set aside Wickwire Holm’s judgment.
[106] But there are two significant differences between Ontario’s legislation that the Supreme Court discussed in Maroukis and Nova Scotia’s legislation in this case.
[107] First, in Maroukis, Justice McIntyre (pages 142-3) relied on s. 9 of the Execution Act, R.S.O. 1980, c. 146. Section 9 said the sheriff “may seize and sell the lands of the execution debtor”. Section 9 did not say that the judgment had the deemed effect of a mortgage. Section 66(1) of Nova Scotia’s Land Registration Act goes farther, and deems Wickwire Holm’s judgment to be a “charge as effectually and to the same extent as a recorded mortgage” (quoted above para 91). Wickwire Holm’s claim is premised on that deemed mortgage. Its counsel’s position in argument to Justice Bourgeois, was:
But we do have an interest ... that the legislature in this province says is equivalent to a mortgage in Chris Gill’s half interest, and we’re here to claim that.
A mortgage, unlike a judgment, is authored by the active hand of the mortgagor. In Maroukis, had the Bank of Nova Scotia held a mortgage instead of a mere judgment, then clearly the judge’s statutory power to set aside the encumbrance would have been in play. Justice Bourgeois’ power under s. 8 must be assessed from the perspective of a statutory deemed mortgage. Wickwire Holm embraces its deemed mortgage to claim priority under s. 66(1), while simultaneously manoeuvring to sidestep the mortgage concept and elude the judge’s setting aside power under s. 8.
[108] Second, Nova Scotia’s Matrimonial Property Act contains another provision with wording that was not in Ontario’s statute and that was not discussed in Maroukis. Nova Scotia’s s. 10(1)(d), under the title “Powers of court”, says:
10(1) The court may by order, on the application of a spouse or any other person having an interest in property,
(d) direct the setting aside of any disposition or encumbrance of an interest in a matrimonial home and the revesting of the interest or any part of the interest upon such terms and subject to such conditions as the court considers appropriate.
[Emphasis added]
[109] Section 10(1)(d)’s plain meaning would apply the court’s unrestricted power to “any ... encumbrance of an interest in a matrimonial home”. Section 10(1)(d) does not refer to the spouse’s conduct in an active voice - the statutory language that led the Court in Maroukis to exclude a judgment from the meaning of “encumbrance”. Section 10(1)(d)’s plain meaning does not require that the spouse - Mr. Gill - author the challenged encumbrance.
[110] Section 10(1)(d) also is broader than the legislation considered in later Ontario cases such as Bank of Montreal v. Bray (1997), 36 O.R. (3d) 99 (O.C.A.), which applied the current ss. 21(1) and 23(d) of the Family Law Act, R.S.O. 1990, c. F.3. Section 21(1) is similar to Nova Scotia’s s. 8(1). Section 23(d) says:
23 The court may ...
(d) direct the setting aside of a transaction disposing of or encumbering an interest in the matrimonial home contrary to subsection 21(1) and the revesting of the interest or any part of it on the conditions that the court considers appropriate.
[Emphasis added]
Nova Scotia’s s. 10(1)(d) omits the italicized wording of Ontario’s s. 23(d). Neither Ontario’s Family Law Reform Act, discussed in Maroukis, nor Ontario’s current Family Law Act has the simple unfettered wording of Nova Scotia’s s. 10(1)(d) that “[t]he court may ... direct the setting aside of any ... encumbrance of an interest in a matrimonial home ...” [emphasis added].
[111] Under Driedger’s “one principle” of interpretation, legislation should be read in its ordinary meaning and grammatical sense, harmoniously with its statutory context, scheme and legislative objective: R. v. Sharpe. [2001] 1 S.C.R. 45, para 33 [referring to E. A. Driedger, Construction of Statutes (2nd ed. 1983), p. 87]; Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, para 27. Before the Supreme Court of Canada formally endorsed Driedger’s approach, Justice McIntyre in Maroukis (page 144) interpreted s. 42(1)’s words “in the context in which they are used”.
[112] The context and scheme pertinent to Nova Scotia’s s. 8 includes s. 10(1)(d), a significant feature that was missing from the legislation considered in Maroukis. What is the effect of that feature?
[113] Clearly s. 10(1)(d) is available for a breach of s. 8(1). By empowering the court to set terms and conditions, s. 10(1)(d) fleshes out the Court’s power under s. 8(2) to set aside encumbrances that contravene s. 8(1): Agirman v. Bank of Nova Scotia, 2003 NSCA 70, para 15. Sections 8 and 10(1)(d) cannot be parsed separately or construed competitively. Under the “one principle” of statutory interpretation, they should be read consistently to divine the Legislature’s overall objective.
[114] Sections 8(1), 8(2) and 10(1)(d) refer to a “disposition or encumbrance”. A “disposition” may require the debtor spouse to sign a conveyance. But the question here is whether Wickwire Holm’s registered judgment is an “encumbrance”. Given that section 66(1) of the Land Registration Act says the registered judgment “is a charge ... to the same extent as a recorded mortgage”, clearly the registered judgment encumbers the property. So it is an “encumbrance”, unless the Matrimonial Property Act excepts the subset of encumbrances that were not authored by the debtor spouse. Such an exception would contradict s. 10(1)(d)’s prescription that the court may set aside “any encumbrance”. Reading ss. 8 and 10(1)(d) in tandem and consistently with s. 66(1)’s deemed mortgage to display the overall statutory scheme and legislative intent, there is no requirement in Nova Scotia’s Matrimonial Property Act - unlike Ontario’s differently worded legislation - that the challenged encumbrance be a conveyance actually authored by the debtor spouse. A recorded judgment, with the deemed effect of a mortgage, suffices.
[115] Mr. Gill incurred over $67,000 in legal fees over eight months to litigate this divorce. He knew payment was expected and did not pay. This led inexorably to the registered judgment and encumbrance. It is immaterial that he attended the taxation in Small Claims Court and contested some items of quantum. Mr. Gill was a sufficient protagonist in the encumbrance to satisfy the legislative intent behind ss. 8(1) and 10(1)(d).
[116] If Wickwire Holm’s proposition succeeds, the result will be that matrimonial net worth is divided substantially in favour of Mr. Gill. This would be a striking anomaly given Justice Bourgeois’ findings that Ms. Hurst made higher contributions to the assets, absorbed all the debts, and Mr. Gill cashed the only other substantial asset (the RRSP balance). The judge’s power to allocate matrimonial net worth in a divorce, under ss. 12-15, and ss. 8 and 10(1)(d) respecting the power to set aside encumbrances, and s. 21(a) upon which Wickwire Holm relies, are all in the Matrimonial Property Act. Under the “one principle” of statutory construction, a statute is to be interpreted as an internally consistent statutory scheme sourced in a harmonious legislative intent. Wickwire Holm’s position also would render futile Justice Bourgeois’ order for costs reimbursement between Mr. Gill and Ms. Hurst (discussed below paras 128-35). I find it hard to accept that the court should select, between two constructions of ss. 8, 10(1)(d) and 21 of the Matrimonial Property Act, the interpretation that would cause such havoc to the allocation of matrimonial net worth and costs reimbursement, under other provisions of the same statute.
[117] Justice Bourgeois quoted ss. 8 and 10(1)(d) then said:
[75] In my view, the above statutory provisions are reflective of the Legislature’s intention to afford the interest of spouses in the matrimonial home with a high level of protection against unreasonable encumbrance or dissipation.
[118] I agree that ss. 8 and 10(1)(d) together give the Court the discretion, subject to the exceptions and saving conditions I will discuss next, to set aside the encumbrance represented by a recorded judgment. The next questions are: (1) whether Wickwire Holm’s encumbrance is excepted by paras (a) through (d) of subsection 8(1); and, if not, (2) whether Wickwire Holm acquired the encumbrance “for valuable consideration, in good faith and without notice that the property was a matrimonial home” under the saving conditions of s. 8(2).
[119] Was Wickwire Holm’s encumbrance excepted by paras (a) through (d) of s. 8(1)? Ms. Hurst neither consented nor released her interest under s. 8(1)(a) or (b). There is no designation of another matrimonial home that would trigger s. 8(1)(d). Section 8(1)(c) recites an exemption where “the proposed disposition or encumbrance is authorized by court order”. The Small Claims Court’s order taxed the legal fees, resulting in the judgment, but did not “authorize the encumbrance” of the matrimonial home. The encumbrance was achieved by the mechanical act of registration under the Land Registration Act. Further, Ms. Hurst received no notice of the Small Claims Court proceeding or the impending registration of the judgment until after Wickwire Holm’s judgment was registered. It is difficult to conceive how an encumbrance of her interest in the matrimonial home could be validly “authorized” under s. 8(1)(c) by a court proceeding of which she received no notice. Wickwire Holm’s encumbrance is not excepted by paras (a) through (d), and offends s. 8(1).
[120] Section 8(2) says that an encumbrance contrary to s. 8(1) may be set aside “unless the person holding the interest or encumbrance acquired it for valuable consideration, in good faith and without notice that the property was a matrimonial home”. Justice Bourgeois found that Wickwire Holm had notice:
[76] ... Wickwire Holm was fully aware of the litigation between the parties and the potential that the matrimonial home, or its value, may ultimately be divided unequally between the parties.
This is a finding of fact, with no palpable or overriding error.
[121] Wickwire Holm’s knowledge derived from the firm’s activity in the divorce proceeding since the petition was filed. The firm had notice not just before taking or recording its judgment, but before performing the services that incurred the debt. The firm had access to the information concerning the spouses’ contribution to, and use of the assets, and their responsibility for the debts, that ultimately led to Justice Bourgeois’ order for an equalization payment from the sale proceeds of the matrimonial home. Section 12(1)(a) of the Matrimonial Property Act says that after a petition for divorce is filed either spouse is entitled “to have the matrimonial assets divided in equal shares, notwithstanding the ownership of these assets”. The judge’s unequal split of the proceeds from the matrimonial home was necessary to achieve that overall equal division of the matrimonial assets contemplated by s. 12(1)(a).
[122] Wickwire Holm was within arm’s length on the critical issue - knowledge that Mr. Gill’s interest in the matrimonial home or its proceeds would be subsumed in the overall allocation of matrimonial net worth in the divorce proceeding. That knowledge is inconsistent with the premise of Wickwire Holm’s claim - ie. that Mr. Gill’s exigible interest in the matrimonial home is one half despite any adjustment to that interest resulting from the overall equal allocation of property in the divorce proceeding.
[123] Wickwire Holm was not red circled because it is a law firm, as my colleague suggests. Wickwire Holm, like any creditor who fails the saving conditions of s. 8(2), is subject to the sanctions prescribed by ss. 8(1) and 10(1)(d). Those conditions of s. 8(2) - that the creditor gave valuable consideration, and acted in good faith, without notice - are the safeguards against the floodgates spectre.
[124] The judge’s reasons said:
[77] With respect to the view expressed by Mr. MacKinnon to the contrary, this determination will not throw the usual course of business transactions into chaos when attempting to enforce legitimate judgments against matrimonial assets. In the vast majority of instances, judgment creditors will be bona fides, with no knowledge of looming matrimonial disputes. Other than in exceptional circumstances, as the Court faced in this instance, the enforcement of judgments will continue in the usual course.
[78] Lawyers are entitled to be reasonably paid for the services they provide to clients, and Wickwire Holm cannot be faulted for wanting to be so compensated by Mr. Gill. However, it would create a fundamentally unfair and potentially chaotic situation if the lawyer or former lawyer of one spouse could find themselves in the midst of matrimonial litigation, in a better security position to matrimonial assets than the other spouse who may, as in the present case, be deserving of the encumbered asset, or its value.
[125] I agree with those comments.
[126] Once Wickwire Holm’s encumbrance offended s. 8(1) and was not saved by s. 8(2), the judge had the discretion under s. 10(1)(d) to set aside the encumbrance on the terms and conditions she considered appropriate. She exercised that discretion by setting aside only to the extent that the judgment would encumber the portion of the proceeds that were payable to Ms. Hurst under the judge’s property ruling between the spouses, but leaving the judgment effective against the interest of Mr. Gill in those proceeds. This is a reasonable condition. Ms. Hurst was not Wickwire Holm’s client.
[127] I agree with Justice Bourgeois’ view (para 77, quoted above para 124) that this is an exceptional set of circumstances, to which I add the following comment.
[128] Wickwire Holm’s judgment is for Mr. Gill’s litigation costs during the matrimonial dispute in the Supreme Court that reached trial before Justice Bourgeois. Unlike other debts, a litigant’s obligation to reimburse her opponent for her opponent’s litigation costs is expressly, and by law, governed by the trial judge’s discretion. Civil Procedure Rules 77.01(1) and 77.02(1) say “The court deals with” reimbursable costs “as the judge is satisfied will do justice between the parties”.
[129] Justice Bourgeois determined the costs reimbursement that she felt would do justice between Mr. Gill and Ms. Hurst. Her reasons say:
[107] Ms. Hurst is seeking this Court to exercise its discretion and award costs in this proceeding against Mr. Gill. In his final oral submissions, Mr. Yuill outlined on his client’s behalf, the various applications before the Court, the adjournments, and several concerns in how the proceeding was conducted. At the heart of much of the submission was the view that Mr. Gill had unreasonably and unnecessarily complicated and delayed the proceedings to the financial detriment of Ms. Hurst. I view there being merit in much of what was advanced by Ms. Hurst’s counsel.
...
[112] Mr. Gill has at present, limited resources for the payment of a costs award. I do believe it is appropriate in the circumstances of this case to award costs against him in the amount of $5,000.00. I am fully aware that such amount is more symbolic than a real contribution towards the actual costs incurred by Ms. Hurst.
[130] If Wickwire Holm’s proposition succeeds, then Ms. Hurst will pay over $45,000 of Mr. Gill’s litigation costs. This would subvert the judge’s reasoned ruling that Ms. Hurst not pay costs to Mr. Gill and that Mr. Gill, for his conduct, reimburse Ms. Hurst’s costs by $5,000. In my view that proposition would contravene the intent of Rule 77.
[131] The Matrimonial Property Act’s preamble states that a purpose of the statute is “to provide in law for the orderly and equitable settlement of the affairs of the spouses upon the termination of a marriage relationship”. One of those matters to be settled equitably is the reimbursement of litigation costs between the divorcing spouses. Wickwire Holm’s proposition would contravene this purpose by upending the equitable settlement of that issue.
[132] On July 16, 2009, the Small Claims Court issued its judgment for Wickwire Holm’s legal accounts. The Adjudicator’s decision (Claim No. SCCH 310796) considered the reasonableness of Wickwire Holm’s invoices by referring briefly to the proceedings in the Supreme Court. The Adjudicator said:
The matter was made more complex by the Respondent’s spouse who would try to frustrate court orders.
The Adjudicator then quantified Wickwire Holm’s judgment at $67,405.23.
[133] It is useful to compare the Adjudicator’s words to those from Justice Bourgeois’ reasons (para 107) quoted above (para 129). Justice Bourgeois reached the opposite conclusion.
[134] In the Small Claims Court, the only persons to address the Adjudicator were Mr. Gill’s former counsel, Mr. Gill’s new counsel and Mr. Gill, who testified. Ms. Hurst, who was not given notice, had no opportunity to speak. The Adjudicator, responding to one-sided evidence, found that Ms. Hurst tried to “frustrate court orders” and made the matter “more complex”. These were orders of the Supreme Court of Nova Scotia. Unlike the Small Claims Court Adjudicator, Justice Bourgeois had the actual Supreme Court file with those orders and evidence of compliance history from both Mr. Gill and Ms. Hurst. Justice Bourgeois was of the view that it was Mr. Gill who had unreasonably and unnecessarily complicated and delayed the proceedings.
[135] Whether or not the Small Claims Court Adjudicator’s negative view of Ms. Hurst’s conduct significantly impacted the quantum of Wickwire Holm’s taxed legal fees isn’t the point. The vignette illustrates the error of allowing the Small Claims Court’s order, which by mechanical registration then creates a charge on the matrimonial home, to override the Supreme Court trial judge’s discretion on the reimbursement of litigation costs between the parties in that Supreme Court proceeding. The Supreme Court judge is dealt that trump card.
Second Issue - Mr. Gill’s Interest
[136] My colleagues accept that Mr. Gill’s interest, exigible under Wickwire Holm’s judgment, was one-half the proceeds of the matrimonial home. In my respectful view the extent of Mr. Gill’s interest has not been determined.
[137] At the hearing before Justice Bourgeois, Wickwire Holm’s counsel summarized his position:
Now, we are not asking for Christine Hurst’s interest in this property. She, until you issue a judgment in this matter, her interest in [sic - “is”?]a half interest of the proceeds of that sale. She had those, but subject to your decision, but we have no interest whatsoever in those. But we do have an interest ... that the legislature in this province says is equivalent to a mortgage in Chris Gill’s half interest, and we’re here to claim that.
[138] The legislation does not say conclusively that Mr. Gill had a half interest, and there has been no judicial determination that Mr. Gill had a half-interest in the matrimonial home under s. 21(1). Section 21(1)(a) says the joint tenancy is “prima facie proof” of an intent that each spouse have a one-half interest. But prima facie proof is subject to rebuttal, and only becomes conclusive proof after a judge rules that the prima facie case has not been rebutted. See Anne Warner La Forest, Anger & Honsberger Law of Real Property, loose-leaf, 3rd ed. (Aurora, Ont: Canada Law Book, 2010), paras 15.20.40(b) and (c).
[139] There was no trial of a s. 21(a) issue isolating the matrimonial home before Justice Bourgeois. That was because the entitlement between Mr. Gill and Ms. Hurst to the matrimonial home or its proceeds was subsumed into the normal divorce function of allocating the global matrimonial net worth, notwithstanding the ownership of any individual asset, under s. 12(1) of the Matrimonial Property Act (quoted above para 121). That function resulted in Justice Bourgeois’ order for an equalization payment from Mr. Gill to Ms. Hurst, leaving Mr. Gill’s interest at $21,829 from the $136,314 proceeds of the matrimonial home. The divorce trial before Justice Bourgeois was between Mr. Gill and Ms. Hurst, not Wickwire Holm. No pleading summoned the Supreme Court in the divorce trial to determine extraneous issues of resulting trust or rebuttal of a prima facie presumption isolating the matrimonial home under s. 21(1)(a).
[140] Property division in a divorce is cast as an allocation of the net balance resulting from all the matrimonial assets less all the matrimonial liabilities. The judge’s reasons usually address that global net balance. It is futile, in my respectful view, to search those reasons for clues whether or not an individual asset was intended to be held pre-divorce by one-half interests, or by a resulting trust, or whether a pre-divorce presumption for an individual asset was or was not rebutted. It is mistaken to assume that those reasons conclusively determine those pre-divorce interests to an individual asset.
[141] Justice Bourgeois’ reasons cite evidence that Ms. Hurst’s financial contributions substantially exceeded those of Mr. Gill, that Ms. Hurst absorbed all the debts, and that Mr. Gill cashed the other major asset, the RRSP balance. That disproportionate contribution by Ms. Hurst was the reason the judge ordered the equalization payment from the proceeds of the matrimonial home. No one knows how that evidence might affect a hypothetical trial respecting the possible rebuttal of the prima facie presumption under s. 21(a). That is because the s. 21 issue was not pleaded, litigated or determined in the proceeding between the divorcing parties.
[142] Wickwire Holm has filed a separate Appeal Book with the documents pertinent to its claim. The first correspondence from Wickwire Holm in this Appeal Book is a letter of November 13, 2009 from Wickwire Holm’s managing partner, Mr. Geoffrey Saunders, to counsel for Mr. Gill and Ms. Hurst, copied to Justice Bourgeois. Mr. Saunders’ letter says:
Our judgment against Mr. Gill was registered against the property and has not been released. We do not intend to release that judgment until it has been fully satisfied. That would include not only the face amount of the judgment but accrued interest.
[143] Nowhere in the processes before the Supreme Court or Small Claims Court was Ms. Hurst or her lawyer served with an originating or interlocutory notice from Wickwire Holm or anyone else, that her rights would suffer if she did not lead evidence that isolated the pre-divorce interests in the matrimonial home to rebut the prima facie presumption under s. 21(1)(a) or if she failed to obtain a court’s ruling that confirmed the rebuttal of the prima facie presumption.
[144] Wickwire Holm threads together a Small Claims Court proceeding of which Ms. Hurst received no prior notice, registration of the Small Claims Court’s judgment by an administrative act without prior notice to Ms. Hurst, and the absence of a ruling on s. 21(a) by the Supreme Court before whom the issue had not been pleaded. This flimsy cloth does not constitute a conclusive ruling under s. 21(a) whether or not the prima facie presumption has been rebutted.
[145] If Justice Bourgeois’ order partially setting aside Wickwire Holm’s judgment is overturned as my colleagues direct, then Ms. Hurst is entitled to have the extent of Mr. Gill’s interest in the matrimonial home squarely litigated and determined, and that matter should be remitted for proper pleading and trial.
Conclusion
[146] I would dismiss Wickwire Holm’s appeal, with costs of that appeal payable by Wickwire Holm to Ms. Hurst in the amount of $5,000.
Fichaud, J.A.