(FAMILY DIVISION)
Citation: Prothro v. Short, 2013 NSSC 360
Date: 20131108
Docket: 1201-65640
Registry: Halifax
Between:
Catherine Doris Prothro
Petitioner
v.
Kevin Brent Short
Respondent
Judge: The Honourable Justice Deborah Gass
Heard: April 3, 4, 5, 8, 9 & 10, 2013, in Halifax, Nova Scotia
Written Submissions: May 8, 2013
Counsel: Douglas Sealy and Amanda Dillman, for the applicant
Judith Schoen and Kevin MacDonald, for the respondent
By the Court:
[1] This decision is the result of a divorce proceeding held April 3, 4, 5, 8, 9 & 10, 2013.
[2] The issues to be determined are the division of matrimonial assets, the determination of the status of certain assets (business v. matrimonial) and their valuation. In addition, the petitioner seeks spousal support.
[3] The parties appeared to have agreed on an equal division of the net value of jointly owned land and rental properties after the payment of tax and disposition costs. Whether the properties are to be sold, bought out by one party, or exchanged between them appears to be unresolved however.
[4] A significant issue is the business asset known as “The Manor”, which includes the adjacent lot and house at 353 Pleasant Street, Dartmouth.
[5] As well, the issue of a home in Porter’s Lake, which was inherited by Ms. Prothro is in dispute.
[6] The parties disagree on a number of facts and the court has made a number of findings of these disputed facts based on the evidence provided.
[7] They disagree on the length and nature of their relationship.
[8] At the outset, they disagreed on the ultimate net value and disposition of some of their jointly owned properties, but during the course of the proceedings, counsel were able to resolve that disagreement.
[9] They disagree on the contributions made by the petitioner towards non-matrimonial assets.
[10] They disagree on the characterization of some of the assets.
DIVORCE:
[11] The parties married September 4, 1997 and separated in or around July, 2010. There were no children of this marriage. The procedural and jurisdictional grounds for a divorce have been established and the ground for divorce, being permanent breakdown of the marriage by virtue of the fact they were living separate and apart since July, 2010 and were living apart at the time of the commencement of this proceeding and have been separated for a period exceeding one year immediately preceding the date of this decision, has been established. The divorce is granted.
COROLLARY RELIEF:
Classification of Properties:
34 Mill Lake Road, Porter’s Lake:
[12] This was the petitioner’s parents home which Ms. Prothro eventually inherited.
[13] The parties met in the late eighties when the respondent, an American citizen, was living in the United States. He began to come frequently to Nova Scotia to visit the petitioner. When he retired from the U.S. Air Force, he eventually moved to Nova Scotia, in around 1993.
[14] At the time, the petitioner lived with her son and her mother in her parents’ home at 34 Mill Lake Road in Porters Lake.
[15] Early in Mr. Short’s arrival from the U.S. he stayed with Ms. Prothro and her mother at her mother’s home in Porters Lake. It is significant to note that this was before they married. In or around 1994, renovations were undertaken at 353 Pleasant Street, the house adjacent to the Manor, and from that point on, Mr. Short’s main involvement was at that property. His primary residence eventually became 353 Pleasant Street, from about 1996 forward, although he spent occasional weekends at Ms. Prothro’s mother’s home.
[16] The petitioner’s mother eventually moved from Porter’s Lake into “the Manor” in 1998 where she remained as a resident until her death in 2006. It was only then, in 2006, that Ms. Prothro received the property at 34 Mill Lake Road from her mother’s estate. The parties separated in 2010.
[17] Given all of the evidence, I am satisfied that this property at 34 Mill Lake Road does not constitute the matrimonial home. The amount of time the respondent spent there was in significant dispute. The preponderance of evidence suggests that any substantial time spent there was before the parties married, when it was clearly the property of Ms. Prothro’s mother. The evidence suggests his primary residence became 353 Pleasant around 1996, some ten years before Ms. Prothro inherited her mother’s house.
[18] If I am wrong in this determination, then I would conclude that s. 13 of the Matrimonial Property Act applies and that given the date, manner and acquisition of the property, an equal division of this asset would be unfair and thus 100% of it is attributable to Ms. Prothro.
[19] However, having determined that this is not a matrimonial asset, the court still might make a division, since even an exempt property may be subject to division if factors substantiate such a division under s. 13.
[20] It is accepted that he did do significant work to the home over the years. However, from the evidence, whatever work he did there was compensated with free room and board, provided by Ms. Prothro’s mother. He was receiving a nominal pension and the parties were not married at the time. Even though Ms. Prothro had power of attorney for her mother, the property was not inherited by Ms. Prothro until 2006, less than four years before separation.
[21] This asset is Ms. Prothro’s alone and under all the circumstances is exempt from division.
Jointly held land and rental properties:
[22] The parties acquired together a number of properties.
[23] As previously mentioned, there was disagreement at the outset of the proceedings but ultimately it was agreed that Mr. Short’s share of the net value of the jointly owned rental properties is $435,396.52.
[24] There is disagreement as to the manner of disposition of the properties. Ms. Prothro would like to buy out Mr. Short and Mr. Short would like to keep some of the properties. The buyout by Ms. Prothro is ordered, unless the petitioner is unable to do so or the parties are able to agree on an alternative method of disposition: ie. sale of properties and division of proceeds accordingly, or the division and exchange between the parties of the properties in accordance with the equalization figure. If there is no agreement to a disposition alternative to the buyout, then the properties shall be sold, and the proceeds distributed according to the agreed upon amount.
The Manor:
[25] When the parties first met, the petitioner and her mother were operating a home for special care, Pleasant View Foster Villa, Woodside Manor Ltd., known as “The Manor”. This is a 30 bed, post-psychiatric level I care facility licensed by the Department of Community Services at 350 Pleasant Street.
[26] The petitioner’s parents had owned and operated this facility from 1965 to 1977 and following her father’s death the petitioner herself, along with her mother, were running it together. When her mother became ill, the petitioner operated the Manor under a power of attorney until it became her business when the common shares of the Manor were issued to her in about 1999. At no time did Mr. Short own any part of the company.
[27] Mr. Short became involved in the business, working with the residents and making improvements to the facility and its operation. He was not a paid employee at the outset but eventually was formally employed.
[28] Although he was not a salaried employee before the year 2000 he received for his work, free accommodation and rental income from 353 Pleasant Street, and the funds for the purchase of a truck.
[29] After the year 2000, Mr. Short received a salary of between $39,000 - $43,000 per year, in addition to other benefits provided by the Manor, including the use of furniture and equipment. He did not pay rent, but received rental income. The cost of his utilities were covered by the Manor, and it appears that other benefits were obtained at company expense.
[30] There is distinct disagreement between the parties as to the condition of the premises and the care the residents were receiving before Mr. Short became involved. His evidence is that the business was in a very poor financial and physical condition. His assessment was that the care the residents received was questionable and through his involvement the business was greatly improved.
[31] In November of 2011 his employment was terminated with eight week’s pay in lieu of notice and he was served with notice to quit the adjacent premises at 353 Pleasant Street.
[32] Mr. Short argues that he was not adequately compensated for his contribution to the business, which he characterized as being substantially more than that of a paid employee.
[33] In the early years, even before he was a paid employee of the Manor, Mr. Short was very involved with the residents of the Manor and their activities. He initiated a garden and organized trips to the Valley to procure produce and to take the residents berry picking. He canned fresh vegetables from the garden, and was responsible for the general maintenance and upkeep of the Manor.
[34] It is clear from the evidence that he was held out as a person in authority at the Manor, holding some managerial role, although Ms. Prothro was the person who administered the financial and business side of the operation, engaging with government, doctors, social workers, and financial institutions.
353 Pleasant Street:
[35] This property is adjacent to the Manor and is owned by the Manor. It had been occupied by relatives of Ms. Prothro and was virtually destroyed by them. The Manor covered the operating costs of this property. It had been acquired for overflow clients and was fixed up and occupied by Mr. Short. The evidence is clear that the property had been “trashed” and that over the years Mr. Short worked to make it habitable, at a significantly reduced costs from what otherwise would have been paid for contracted labour.
[36] Although it falls under the category of a business asset, in these circumstances it was, or became the actual primary residence of one of the parties almost exclusively, with Ms. Prothro having little or nothing to do with these premises. It appears from the evidence that while Mr. Short did the work to make the property liveable for himself and others, the cost of the materials would have been borne by the business (the Manor) that owned it. The house was used for business purposes and he resided there to be close to the Manor. There was an intercom system between the two buildings and a telephone extension. Food supplies and sundry items for the Manor were stored in the residence at 353 Pleasant Street, and it became a repository for some business records.
[37] While it appears the original intent was for this residence to house overflow residents from the Manor, or to become a “small options” home, in fact it became Mr. Short’s residence from which he rented rooms to various tenants and kept the rent proceeds.
[38] In short, the property is a business asset to which he made a significant contribution, and from which he gained personal benefit.
Evidence Summary:
[39] Ms. Prothro acknowledges that Mr. Short was in charge of maintenance for the Manor from about 1994 -1995 and when he became a legal employee he went on to the business accounts as such. He was not officially an employee until August 15, 2000, but that he was involved in maintenance and upkeep informally before then. This arrangement was tied to his immigration status. During this time he was engaged with her in building their rental property investments.
[40] Their relationship was unusual, in that the parties rarely lived together, even when married, although he visited her at Porters Lake. By the time they married , it appears Mr. Short’s primary residence was at 353 Pleasant Street.
[41] The expenses of 353 Pleasant Street were covered by the Manor.
[42] Ms. Prothro was extensively cross-examined in this proceeding and while she acknowledged some accounting mistakes, the court did not find her to be deliberately misleading. She was forthright and not evasive in her evidence, describing as best she could the manner in which the business was set up and how it devolved to her eventually.
[43] She paid the taxes on the rental properties. The relationship between them deteriorated over time and in 2008 there was an altercation that resulted in a peace bond. They did try to reconcile and lifted the “no contact” provision so he could visit her at her home in Porters Lake.
[44] While he was living at 353 Pleasant Street he was on call overnights, but as their relationship deteriorated, so too did his involvement with the Manor. It became more difficult for staff to contact him when they needed assistance. It appears he became less involved in the physical maintenance of the property and Ms. Prothro had to hire outside help.
[45] When Ms. Prothro finally petitioned for divorce, she also terminated Mr. Short’s employment and attempted (unsuccessfully) to evict him from the house at 353 Pleasant Street.
[46] The court heard the evidence of Jackie Inness who has been employed by the Manor for many years and is in a supervisory role. She was the person who was “in charge” when Ms. Prothro was not there. In the first five to ten years of Mr. Short’s involvement with the Manor, her relationship with them both was good. She cleaned the house in Porters Lake for Ms. Prothro for a period of time and she also cleaned 353 Pleasant Street for Mr. Short for a time. Ms. Inness’ son worked on the properties at Mill Lake and the Manor Properties from time to time.
[47] She understood that Mr. Short lived in the house next door to be on call for the Manor.
[48] She verified that when Ms. Prothro terminated the employment of the foot care nurse whom the residents liked, she went to Mr. Short to see if he could persuade Ms. Prothro to hire her back. He was apparently unable to do so. The residents had a good relationship with Mr. Short and he was someone they turned to for assistance. She said they both made efforts but it appears he was very involved in a very positive way. He had a major role in the operation.
[49] The court heard the evidence of Peter Wilde, the accountant for the Manor. He explained the estate planning strategy in place for the ownership of the Manor. While in his experience, Mr. Short would ask more questions about the financial and tax implications of the operation, he described him as a concerned individual for his wife’s business. He did work to improve the business and he appeared to care deeply for the residents. He described Mr. Short’s efforts to reduce food costs with the garden and involving the residents in going to U-picks. His evidence supported the conclusion that he was heavily involved in the overall business.
[50] Mr. Short denies many of the allegations against him and assertions by Ms. Prothro and Ms. Inness regarding his involvement with the Manor and where he lived. As for where he resided, it was his evidence that he was only at 353 for one to two days a week in 1997 - 1998 and that in the mid 2000's he was there during the week and at Porters Lake on weekends.
[51] He says his efforts brought the Manor up from conditional licenses for two to three months at a time to obtaining a full year license in 1997.
[52] He denied taking drugs from the Manor, or its residents; he denied threats, inappropriate behaviour with residents and staff; or having and displaying guns, as suggested by Ms. Prothro and Ms. Inness.
[53] He assumed he was being recognized legally as a co-owner of the Manor when the business was restructured. He says that he and Ms. Prothro viewed themselves and were viewed as a team. In his estimation, the Manor would unlikely have survived without his efforts.
[54] Ernie Smith gave evidence on the valuation of the business at 351 Pleasant Street, the facility itself. There were differing opinions of the value of the business, from share values of $250,000 to his appraisal of land and buildings of $446,000 to the appraisal of $665,000 as a business based on occupancy.
THE LAW:
[55] The governing legislation is the Matrimonial Property Act R.S.N.S. c. 275 and the following provisions:
2 (a) "business assets" means real or personal property primarily used or held for or in connection with a commercial, business, investment or other income‑producing or profit‑producing purpose, but does not include money in an account with a chartered bank, savings office, loan company, credit union, trust company or similar institution where the account is ordinarily used for shelter or transportation or for household, educational, recreational, social or aesthetic purposes;
. . .
3 (1) In this Act, "matrimonial home" means the dwelling and real property occupied by a person and that persons spouse as their family residence and in which either or both of them have a property interest other than a leasehold interest.
Property only partly used as matrimonial home
(2) Where property that includes a matrimonial home is used for other than residential purposes, the matrimonial home only includes that portion of the property that can reasonably be regarded as necessary for the use and enjoyment of the family residence.
Home owned by corporation
(3) The ownership of a share or an interest in a share of a corporation entitling the owner to the occupation of a dwelling owned by the corporation is deemed to be an interest in the dwelling for the purposes of this Section.
More than one matrimonial home
(4) A person and the persons spouse may have more than one matrimonial home. R.S., c. 275, s. 3.
"matrimonial assets" defined
4 (1) In this Act, "matrimonial assets" means the matrimonial home or homes and all other real and personal property acquired by either or both spouses before or during their marriage, with the exception of
(a) gifts, inheritances, trusts or settlements received by one spouse from a person other than the other spouse except to the extent to which they are used for the benefit of both spouses or their children;
(b) an award or settlement of damages in court in favour of one spouse;
(c) money paid or payable to one spouse under an insurance policy;
(d) reasonable personal effects of one spouse;
(e) business assets;
(f) property exempted under a marriage contract or separation agreement;
(g) real and personal property acquired after separation unless the spouses resume cohabitation.
Damages or insurance proceeds
(2) Notwithstanding clauses (b) and (c) of subsection (1), an award or settlement of damages in court or money being paid or payable under an insurance policy is a matrimonial asset to the extent that it is made, paid or payable in respect of a matrimonial asset.
Resumption of cohabitation
(3) For the purposes of clause (g) of subsection (1), spouses are deemed not to have resumed cohabitation where there has been a resumption of cohabitation by the spouses during a period or periods in aggregate not exceeding more than ninety days with reconciliation as its primary purpose.
Shares of corporation
(4) Where property owned by a corporation would, if it were owned by a spouse, be a matrimonial asset, then shares in the corporation owned by the spouse having a market value equal to the value of the benefit the spouse has in respect of that property are matrimonial assets. R.S., c. 275, s. 4.
. . .
Application for division of matrimonial assets
12 (1) Where
(a) a petition for divorce is filed;
(b) an application is filed for a declaration of nullity;
(c) the spouses have been living separate and apart and there is no reasonable prospect of the resumption of cohabitation; or
(d) one of the spouses has died,
either spouse is entitled to apply to the court to have the matrimonial assets divided in equal shares, notwithstanding the ownership of these assets, and the court may order such a division.
Limitation period for surviving spouse
(2) An application for the division of matrimonial assets shall be made by a surviving spouse within six months after probate or administration of the estate of the deceased spouse is granted by a court of probate and not thereafter.
Extension of time
(3) Notwithstanding subsection (2), where the court is satisfied that the surviving spouse did not know of the grant of probate or administration or did not have an adequate opportunity to make such an application, the court may extend the time for making the application but such an application shall relate only to matrimonial assets remaining undistributed at the date of the application.
Right of surviving spouse as additional right
(4) Any right that the surviving spouse has to ownership or division of property under this Act is in addition to the rights that the surviving spouse has as a result of the death of the other spouse, whether these rights arise on intestacy or by will. R.S., c. 275, s. 12.
Factors considered on division
13 Upon an application pursuant to Section 12, the court may make a division of matrimonial assets that is not equal or may make a division of property that is not a matrimonial asset, where the court is satisfied that the division of matrimonial assets in equal shares would be unfair or unconscionable taking into account the following factors:
(a) the unreasonable impoverishment by either spouse of the matrimonial assets;
(b) the amount of the debts and liabilities of each spouse and the circumstances in which they were incurred;
(c) a marriage contract or separation agreement between the spouses;
(d) the length of time that the spouses have cohabited with each other during their marriage;
(e) the date and manner of acquisition of the assets;
(f) the effect of the assumption by one spouse of any housekeeping, child care or other domestic responsibilities for the family on the ability of the other spouse to acquire, manage, maintain, operate or improve a business asset;
(g) the contribution by one spouse to the education or career potential of the other spouse;
(h) the needs of a child who has not attained the age of majority;
(i) the contribution made by each spouse to the marriage and to the welfare of the family, including any contribution made as a homemaker or parent;
(j) whether the value of the assets substantially appreciated during the marriage;
(k) the proceeds of an insurance policy, or an award of damages in tort, intended to represent compensation for physical injuries or the cost of future maintenance of the injured spouse;
(l) the value to either spouse of any pension or other benefit which, by reason of the termination of the marriage relationship, that party will lose the chance of acquiring;
(m) all taxation consequences of the division of matrimonial assets. R.S., c. 275, s. 13; revision corrected.
. . .
Contribution to business asset by spouse
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.
[56] I have determined that it is not necessary to valuate the Manor business to come to a conclusion.
[57] The court accepts the evidence that Mr. Short made a significant contribution to the improvement of the physical premises and the quality of life for its residents.
[58] He was paid a salary for his work. His role was more than that of a paid employee in that he co-managed the facility.
[59] He was however compensated in other ways for his work. He had the benefit of accommodation at 353 Pleasant Street where utilities were paid for, as well as a number of other personal expenses were covered by the business.
[60] He is however entitled to some further compensation for his contribution to the business.
[61] It is appropriate for Mr. Short to receive 85% of the net value of the business property at 353 Pleasant Street which is valued at $325,000, less disposition costs ($305,313).
Other Assets:
[62] The conclusion therefore, is that the only matrimonial assets subject to a presumptive equal division are those on which the parties disagree substantially as to their nature and value. Given the disparity in the evidence and inability to verify with any certainty the values attributed, a somewhat arbitrary determination of the assets for division is the only alternative.
[63] The 2011 SS Camaro was acquired post separation. There is no evidence to support a finding that the funds by which it was acquired rendered it a matrimonial asset and it is excluded from division.
[64] Thus, the following items will be considered as matrimonial property and subject to equal division:
MGA $10,000
BMW Z3 8,500
Ford Truck 2,000
Mercedes (1993) 7,000
Mercedes (1977) 15,000
Seadoos 10,000
1999 Boat/Trailer 8,000
60,500
÷ 2 = $30,250
[65] Each party will keep their own RRSP’s.
[66] Mr. Short acknowledged owing the Manor the sum of $34,000 representing the outstanding balance on a loan and the amounts already paid on his behalf since the termination of his employment. It is unclear from the evidence if, or where, this is factored into either party’s scenario. As well he acknowledged the tax liability debt for 2010. If not, then the payment to Mr. Short shall further be reduced to account for these acknowledged debts.
Spousal Support:
[67] Spousal support is governed by s. 15 of the Divorce Act:
15.2(1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse.
...
15.2(4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including
(a) the length of time the spouses cohabited;
(b) the functions performed by each spouse during cohabitation; and
(c)any order, agreement or arrangement relating to support of either spouse.
15.2(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should
(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
(c)relieve any economic hardship of the spouse arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
[68] This was a 13 year marriage, although the parties’ relationship goes back to 1993. It is difficult to ascertain when, or for how long, they actually lived together. It was a second marriage for both of them. The respondent came into the marriage with a small pension. Although it could be argued that the respondent is disadvantaged by the breakdown of the marriage given that his employment ended and he loses the revenue from the rental of the premises at 353 Pleasant Street and the ability to generate income using the Manor’s equipment, there is no evidence to suggest he is unable to work or to generate income from his own investments and exempt property, in addition to his pension, which has not been divided with the petitioner.
[69] The respondent has other assets which have not been affected by this decision and thus his need for spousal support is not substantiated.
[70] The claim for spousal support is therefore dismissed.
OTHER:
[71] Each party will retain the statues in contention in his or her possession unless they agree otherwise.
[72] Mr. Short will return the following items to Ms. Prothro forthwith:
- 4 chainsaws
- keys to the Manor vehicles
- Jewellery Box
- Remote Controls to 34 Mill Lake Road
- Small wooden chair from 353 Pleasant Street made by the petitioner’s grandfather
- the John Deere tractor and utility trailer
[73] Mr. Short will vacate the premises upon payment of sums ordered and Ms. Prothro will have the right to inspect the premises to ensure the property is in good order before the payout for 353 Pleasant Street is made.
CONCLUSION:
[74] The home at 34 Mill Lake Road is not a matrimonial home and is exempt from division.
[75] The rental properties and jointly owned properties shall be purchased by the petitioner for the sum of $435,396.52, representing the respondent’s interest in the properties as of December 31, 2012. There shall be a further adjustment from January 1, 2013 to the date of closing in accordance with paragraph a. of the submission of counsel for the petitioner which reads:
Ms. Prothro shall purchase the interest of Mr. Short in the properties known as 16, 22, 30, 38 Mill Lake Road, 350 Pleasant Street, and the three vacant lots located near Lake Egmont for a purchase price of $435,396.52, with this price inclusive of all adjustments between the parties to December 31, 2012. Counsel for both parties shall agree on a further adjustment to the purchase price from January 1, 2013 to the date of closing based upon rentals received by each party, deposits made to the joint rental account, and individual contributions made to the joint rental account (to make up for insufficient funds). If counsel are unable to agree to this calculation each shall submit a one page position letter detailing their views of the appropriate calculation to the Court within seven days of the date of the decision and the Court shall quantify this adjustment, resulting in a purchase price inclusive of all adjustments between the parties to the date of closing.
[76] The net value of the business asset at 353 Pleasant Street ($305,313) shall be divided unequally in favour of the respondent to reflect his use of this property and his contribution to the petitioner’s business of Pleasant View Villa, and the petitioner shall pay to the respondent the sum of $259,516.05, representing 85% of its value.
[77] From the payment of the above sums shall be deducted the sum of $30,250, representing the division of the other matrimonial items retained by the parties.
[78] Items referred to in para. 72 of this decision shall be returned in good order to the petitioner.
[79] The respondent’s claim against the business asset of 351 Pleasant Street, the Villa itself, is dismissed.
[80] The respondent’s claim for spousal support is dismissed.
[81] If claims have been overlooked, counsel are invited to make written submissions and I reserve the ability to determine whether such omission was deliberate, or if an oversight an addendum will be provided.
[82] Costs will be determined upon receipt of written submissions.
J.