Brown v. Puxley, 2016 NSSC 193

SUPREME COURT OF Nova Scotia FAMILY DIVISION Citation: Brown v. Puxley , 2016 NSSC 193 Date: 2016-09-12 Docket: 1201-067079 SFHD No. 086349 Registry: Halifax Between: Jocelyn Anne Brown Petitioner v. David George Puxley Respondent Judge: The Honourable Justice Carole A. Beaton Heard: April 27, 2015 and June 3, 2016, in Halifax, Nova Scotia Written Release: September 12, 2016 Counsel: Sarah L. Harris for the Petitioner Kenzie MacKinnon, Q.C. for the Respondent on April 27, 2015 and self-represented on June 3, 2016 By the Court: Background [ 1 ] The parties began cohabitation August 1, 1990.

They entered into a cohabitation agreement on July 29, 1991 which agreement provided it would survive their marriage and continue in effect as a marriage contract (“the Contract”) pursuant to the Matrimonial Property Act , R.S.N.S. 1989 c. 275. They were married on August 22, 1994 and separated on February 28, 2013. A Divorce Petition was filed on May 30, 2013. Partial Minutes of Settlement were signed in September 2013. [ 2 ] A divorce trial began April 27, 2015. On the first day of trial the Court heard evidence which met the requisite burden under the Divorce Act , RSC 1985, c.3 to support a divorce judgement.

Counsel for the Petitioner is instructed to prepare and submit the Divorce Order. [ 3 ] The trial adjourned for later completion, but in the ensuing months several intervening events (not necessary to recount here) resulted in it not being completed until June 3, 2016. [ 4 ] Shortly prior to commencement of the trial and during the intervening period the parties were able to reach further agreements on certain issues of corollary relief.

Partial Minutes on the matters agreed to are to be appended to and referenced as part of the Corollary Relief Order, to be prepared by Counsel for the Petitioner, which Order will also reflect the results of this decision. [ 5 ] The corollary relief issues which remain in dispute pertain to the

interpretation and application of

Section 4 of the Contract, specifically: i. Whether there are monies owed by Ms. Brown (“the Wife”) to Mr. Puxley (“the Husband”) pursuant to the wording of clause 4(

f) of the Contract; and ii. Whether there are monies owed by the Husband to the Wife equating to certain earnings in his RRSP account?

[ 6 ]

Section 4 of their Contract set out in detail the parties’ property ownership arrangement: SEPARATE PROPERTY REGIME (

a) All property now held in the name of either Brown or Puxley, or subsequently acquired by either one of them, shall belong exclusively to that person, and shall forever be free of any claim by the other. (

b) All property now held in the names of both Brown and Puxley or subsequently acquired by both of them, shall belong to Brown and Puxley, jointly, each as to a Fifty Per Cent (50%) interest. (

c) In the event that Brown and Puxley cease cohabiting, the property which they now own jointly shall be divided equally between them. If they are unable to agree on how the property should be divided, all the jointly owned property shall be sold and the proceeds of such sale shall be divided equally between them. (

d) In the event of death, estates of deceased parties shall participate in property division to the same extent as the deceased would have had death not occurred but the parties ceased cohabiting. Thereafter, assets of the deceased will be distributed according to the deceased’s will or, if no will exists, the Intestate Succession Act . (

e) Schedule “A’ to this Agreement sets out an inventory of property. It is intended to be complete. Both parties agree that it reflects a full, correct and complete picture of their private and joint property as of the date of this Agreement. Should omissions come to light, recognized methods (e.g., receipts, witnesses, etc.) shall be used to establish ownership.

f) Normally the party paying for a new acquisition is the owner. Records of transactions shall normally be used to establish the owner. As has been the practice since August 1, 1990, Brown or Puxley, or both, shall maintain a record of purchases/expenditures which are exceptions to the above norm. Purchases, from time to time, by Brown or Puxley may be made, either wholly or partially, on behalf of the other. In such cases the extent of ownership by the other will be indicated by the record. This record includes an account of moneys [ sic ] owed by one to the other.

Periodic settling of this account is taken by both parties to be evidence that the account is correct. [ 7 ] As a preliminary matter I find there is no merit to the Wife’s assertion that the Contract was unduly harsh or unconscionable or that she was disadvantaged by the circumstances of its execution or its terms. The very marginal evidence on the point satisfied me that at the relevant time both parties were mature adults who had each secured independent legal advice before signing the Contract, and none of its terms were unreasonably weighted in favour of one party to the disadvantage of the other.

Issue No. 1 - Does the Wife owe money? [ 8 ] The evidence of both parties established that their practice from the time of their cohabitation in 1990 forward to 1999 was that the Husband kept a meticulous and detailed record of each and every of their respective purchases and expenditures. The Wife would provide her records (e.g. receipts, statements) to the Husband, and for several of those years, he also had on-line access to all her accounts. The parties would periodically review the Husband’s accounting and agree on it, and an equalization payment would then be made to ensure an equal sharing of expenses.

This is the same process described in clause 4(

f) of the Contract. In fact, it was always the Wife who owed monies to the Husband as a result of the periodic settling of accounts. [ 9 ] While the parties disagreed in their evidence as to the frequency of their settling of accounts, they did agree it occurred periodically from August 1, 1990 to May 6, 1999. The Husband ceased the regular periodic settling exercise at the time he began to supervise construction of the parties’ new home. After May 1999 the practice was that the Husband would pay most expenses from his funds and then ask the Wife for a contribution when he needed additional monies or was experiencing a shortfall. This became the pattern, despite the contents of clause 4(

f) of the Contract. During the period from May 1999 until shortly prior to the parties’ separation in 2013, based on that modified practice, the Wife continued to believe she was paying half of all expenses. [ 10 ] The Husband relies on clause 4(

f) of the Contract in support of his claim that monies are owed to him by the Wife pursuant to their periodic settling practice identified in that clause, although an up-to-date account for settling was only completed by the Husband shortly prior to trial. [ 11 ] Both parties testified there were occasional discussions after May 1999 (when periodic settling ceased) concerning: finances, record-keeping and accounting, and several requests over the years by the Wife to have the Husband resume the earlier practice of periodic settling of accounts.

The parties disagreed sharply in their evidence as to both the frequency of the Wife’s requests and the reasons the Husband gave for not continuing or resuming the practice, but they agree that after May 1999 he was unwilling to devote to the task the “many hours” (as the Husband testified) that it required. It is apparent the Husband continued to retain statements, receipts and financial records/paperwork, because by the the time the matter came to trial, he had produced for the Court a detailed record documenting and capturing: 1.

Four years (“the 954 days”) of the total nine year period during which regular settling of accounts was performed.

2. A voluminous reconstruction of the parties settling account (“the main spreadsheet”) spanning from 1999 to the date of separation, accomplished by referencing records of the parties’ purchases and expenditures, and their payments and contributions thereto, which the Husband had retained, along with his use of additional records provided by the Wife in early 2015. [ 12 ] While the exact figures provided in his evidence were different from those presented in argument, I understand the Husband to be relying on the 2015 settling of accounts he performed for the retroactive period (to 1999) in support of his claim the Wife owes him the following sums pursuant to clause 4(

f) of the Contract: i. $71,155.00 (the final figure at page 163 of the main spreadsheet – Exhibit “A” of Court Exhibit No. 11); ii. $33,143.00 representing the Wife’s equal share of mortgage payments the Husband paid on their behalf; iii. $57,782.00 representing the Wife’s equal share of their home construction costs; iv. $7,500.00 representing the Wife’s equal share of their mutual commitment of $15,000 to their church’s fundraising campaign. [ 13 ] Ultimately, the Husband did agree that within the last year of the ligation there were certain contributions the Wife asserted had been made by her which he could not disprove ($22,243.00) which would therefore properly adjust the total of the amounts listed above to $147,337.00.

Positions on the Husband’s Claims i. and iv. [ 14 ] The Husband argued that clause 4(

f) of the Contract required the parties to share each and every conceivable type of cost, ranging from, for example, mortgage payments to restaurant tips, and all purchases of durable goods and items, because when written in 1991 the Contract language simply reflected the practice the parties already had in place. He argued that the word “purchases” in clause 4(

f) refers to “durables” and the word “expenditures” refers to “goods and services and consumables”. The Husband submitted that the parties’ obligation pursuant to clause 4(

f) to settle the account periodically was never changed or altered, despite the parties not continuing the settling of accounts after May 1999, but now that the record has been updated by him the Wife’s payment to him is due. [ 15 ] The Husband combined documentation both parties had produced or generated to perform the most recent settling, although the Wife argued she did not have all the documentation necessary to enable an accurate settling, for which she partly blamed the Husband for withholding records from her.

The Husband maintained that if there were records belonging to the Wife which were not included in his calculations that information was not in his possession and could have been provided by the Wife.

The Husband urged that the most recent settling of accounts he has generated is a reliable cumulative reflection of what would have been the case had he continued the earlier practice of periodically maintaining the account beyond May 1999, and as such the Court can rely upon it. [ 16 ] The Wife argued it was bad faith for the Husband to have not provided an accounting prior to separation so that she could have avoided accumulating “massive” debt to him.

Further, the Wife objected to the settling being performed many years after 1999, as she lost the opportunity for a timely correction or contradiction of a complete record, and should not be expected to rely on the account the Husband has most recently generated, without either party having the benefit of all of her records.

Positions on Husband’s claims ii. and iii. [ 17 ] The Wife was adamant in her evidence that she had always understood the Husband had reimbursed himself from their mortgage proceeds for those costs of their new home construction ( circa 1999) which he alone had incurred prior to the mortgage having been taken out. She testified that she had “asked repeatedly to sit down and go through that to get a

summary of what the cost of the house was, and he never produced anything formally about what the cost of the house was.” The Wife testified she would be “astonished” if the mortgage proceeds had only ever covered those costs incurred by the Parties or either of them after it was taken out. [ 18 ] The Wife also expressed her concern that she did not see in the details of the Husband’s calculations any credit to her for monies from her savings that were applied toward the cost of the home.

She agreed that the Husband’s documentation identified the total home cost as $238,000.00 (plus or minus) and that there were mortgage proceeds of $123,017.00 but argued “it doesn’t account for the money from my RRSP, my savings that were put in. And there was a time sometime after where he talked about that we had put in an unequal amount. And I did put lump sums onto the mortgage that weren’t matched by him”.

The Wife was prepared to agree with Counsel for the Husband on cross-examination that the sum of her savings and RRSP contributions would not total $57,782.00 or half of $123,017.00 in any event. [ 19 ] The Husband did not disagree with the Wife’s evidence that she may have contributed from her savings toward the cost of the house however his assertion was that at the time he would have matched those amounts from his savings. He indicated that when monies were sourced by the parties’ equal contribution he “would not bother to record it”.

The Husband’s position was that it was “inconceivable” that the Wife would have no idea of the costs associated with building and maintaining their home. [ 20 ] The Wife also objected to the Husband having presented his monetary claim concerning the home well after his filed Statement of Property (in which he claimed she owed him $3,000), and well after resolving the issue of division/equalization of the matrimonial home, during which time he had not suggested there were additional monies owed to him by the Wife. Is Clause 4(

f) of the Contract Enforceable? [ 21 ] The Wife argued that the intent of clause 4(

f) of the parties’ Contract cannot now be fulfilled as its terms were not followed. The Husband argued it would be unconscionable and a hardship to him if the Wife was permitted to be unjustly enriched by having had the benefit of the monies owed to him pursuant to that clause.

[ 22 ] The Husband objected to the possibility of being “penalized” for the parties’ joint failure to perform a periodic settling that either spouse was permitted to perform under the Contract. He maintained because there was no timeline specified in clause 4(

f) for settling, it could be performed days, weeks, months or years later, and had it been updated more frequently the Wife would have paid over time, in smaller installments, what she now owes him. It was the Husband’s position that the language “purchases/expenditures” used in clause 4(

f) clearly relates to more than simply acquiring property, and also includes expenditures. [ 23 ] The Husband testified that “… I was intimate with paragraph 4(

f) of the Marriage Contract and I always assumed that these costs would be equalized”. The Husband asserted his generosity would never extend to forgiveness of a sum of the size he says the Wife now owes him and his practice of keeping of a record of even the smallest of expenditures would illustrate that he was never prepared to forgive such a sizeable debt. [ 24 ] The Wife submitted the Husband cannot now rely, many years later, on the strict wording of the contract and a settling of accounts performed much after the fact, and further that he has lost the ability to rely on or enforce clause 4(

f) because the parties were no longer following its terms by the end of the marriage. [ 25 ] The Court should always defer to the agreement parties make; absent vagueness of terms or unconscionability of a contract, its obligations should be preserved by avoiding interference. Hindsight may present the opportunity for “20-20 vision” but defeats the right of parties to contract in the first place. Nonetheless, the desire to recognize the integrity of the right to contract cannot displace the obligation of the Court to prevent an absurd result. [ 26 ] To the extent the wording of clause 4(

f) could be said to be support the Husband’s

interpretation of it, that is to say the Contract assigned “ownership” of not only personal property but consumables as well, the evidence of both parties is clear: they did not continue the practice identified in clause 4(

f) after 1999. The Wife testified that prior to studying for her Masters Degree (1999-2002) the parties had a number of conversations about whether or not she should take that step, and the Husband told her he would “pay the bills”. This evidence, which I accept, allows me to conclude the Wife understood and relied upon the decision of the parties that they would assume a different practice than the one set out in clause 4(

f) of the Contract. Clearly this practice did not require an exact settling of accounts to the last cent with resultant equalization payments, but rather meant that the Husband would manage and fund the parties’ expenses, with periodic contribution by the Wife. The actions of both parties support this conclusion, which is bolstered by the uncontradicted evidence of the Wife that the settling of accounts practice was maintained after 1999 exclusively for the lone purpose of equalizing expenses when the parties took vacations together.

This emphasizes that they were voluntarily treating all expenses save and except vacations in a different way than that set out in Clause 4(f), and were no longer settling them. [ 27 ] The Wife also advanced the alternative argument that clause 4(

f) of the Contract referred to property matters, whereas the parties’ practice of sharing incidental or non-property expenses over a period up to 1999 was only that. The Wife testified about her understanding that the text of clause 4(

f) related to the acquisition of property and did not bind the parties concerning expenses, despite their practice that the Husband would ask her for money and she would provide it. She distinguished between sharing of property as required by the contract and sharing of expenses. [ 28 ] The Wife testified she believed that she was paying half of expenses based on a pattern or habit she did not object to, as opposed to doing so as an obligation of the contract.

She agreed with Counsel for the Husband that expenditures for consumables were mixed into the record keeping and treated the same as purchases of property, and that pattern was followed for the first 9 years of the relationship. Clause 2(

b) of the Contract identified the parties were executing it to “… determine by agreement his or her rights and obligations with reference to the ownership of his or her property…” The title of

Section 4 introduced the concept of separate property and clauses 4(

a) to 4(

e) set out the specifics of property ownership, both in terms of identification of property and claims to it. [ 29 ] I am satisfied that clause 4(

f) created a contractual obligation that the parties engage in the tracking and settling of all of their expenditures, be they proprietary or not. This is the only logical explanation for the utility of clause 4(

f) because as far as property was concerned, other portions of clause 4 provided that each owned 50/50 any property they acquired together and each retained property held in their name alone; practically speaking, absent clause 4(

f) neither could “own” consumables despite recording expenditures. (To put it tritely, how can anyone “own” a restaurant meal, regardless of who pays for it?) [ 30 ] The final two sentences of clause 4(

f) read: “ This record includes an account of moneys (sic) owed by one to the other. Periodic settling of this account is taken by both parties to be evidence that the account is correct .” I am satisfied there is no ambiguity in the contract that would necessitate looking at the background or circumstances when the Contract was entered into ( Taylor v. Taylor , 2009 NSSC 380 ; Simmons v. Simmons ,

(2014) N.J. No. 102 (NLCA) ). Clause 4(

f) required the parties to track real and/or personal property purchases/expenditures, and included a requirement to track and periodically account for, in effect, “non-property” such as consumables and expenses. As stated above, it is abundantly clear from the evidence that the parties abandoned that process after May 1999. Each had the opportunity to continue to keep the clause 4(

f) record after that time (as the Contract said either could) but neither did so. [ 31 ] When the Husband put the Wife on notice he was no longer going to perform periodic settling of accounts, it did not leave the Wife in a situation whereby the contact could not be performed. She too had the right, pursuant to clause 4(f), to keep a record and perform a periodic settling. The responsibility did not belong to the Husband alone. In fact, the Wife did not keep the record and/or perform the periodic settling either, and so both parties effectively abandoned the settling practice.

However, it did not stop there, as both parties chose to replace settling with another method of addressing expenses – the Husband was the payor and drew on both parties funds to manage “the business” of the household and lifestyle of the couple in their marriage.

The Wife relied on his undertakings and actions to her detriment in that she understood both parties were using a different methodology to share their expenses and she was contributing her equal share as time went on. [ 32 ] It is well settled law that contracts in the family law context have unique features that distinguish them from other types of contract, but they are still contracts at their core. In this case, each party effectively ignored (at best) or abandoned (at worst) their mutual obligation to periodic settling under the contract in failing to maintain the record contemplated in clause 4(f).

Neither party met that obligation; instead they adopted the new practice discussed above.

[ 33 ] For the Husband to now ask the Court to enforce clause 4(

f) of the agreement, so many years later, would be unfair, if not unconscionable, in addition to impossible once that clause of the Contract was abandoned. In addition, there is the added dimension that despite the Husband’s herculean efforts to recreate the record over fifteen years later, the Court cannot be assured that he has utilized all the records that would be needed to create a complete result.

This is not to suggest the Husband has attempted to intentionally deceive or deprive the Wife of records, but if the Wife has not been able to acquire all of her records, then the Husband has not had the benefit of all of them in his calculations. [ 34 ] What would be a reasonable amount of time to pass between periodic settlings of the parties’ account? Their contract did not define “periodic” or identify a timeframe. The evidence of the parties differed as to the frequency with which settling was done, but allows me to conclude that nothing exceeding a few months was the maximum duration until May 1999.

To suggest that the next periodic settling could be performed over fifteen years later regardless of the result for either party is grossly unfair if not unconscionable. Issue No. 2 – Does the Husband owe the Wife certain monies earned in his RRSP Account ? [ 35 ] The Wife claimed that at the time their mortgage was incurred, the Husband had profited from holding the mortgage loan inside his RRSP. The Wife claimed she is now owed a share of the difference between what the standard mortgage rate would have otherwise been and the interest the Husband earned inside his RRSP at an increased rate.

The Wife did not offer any specific evidence by way of numbers in support of her claim, although the Husband agreed on cross-examination his RRSP was collecting an average of $820 per month in mortgage interest over a five year period. [ 36 ] The Husband argued that pursuant to clause 4(

a) of the Contract the money earned in his RRSP was his sole property. I agree. Not only did the Contract carefully delineate between separate property ownership, but the central thrust of

part 4 of the Contract was to identify property as belonging to the person who financed its acquisition. Money earned by the Husband’s RRSP was his property alone as contemplated in clause 4(a). I am satisfied that as one of the parties to the contract the Wife would have known about the separate property regime at the time she agreed to fund the parties’ mortgage by borrowing against the Husband’s RRSP. Pursuant to the Contract the RRSP in the Husband’s name was his sole property; so too would any income earned inside the investment vehicle be his sole property. The parties did not modify in any way or abandon the rights and obligations they enjoyed under clause 4(

a) or any other of the paragraphs of

part 4 of the Contract, save and except paragraph 4(

f) thereto as discussed earlier herein. Conclusion [ 37 ] The parties abandoned clause 4(

f) of the Contract by their actions and cannot now resurrect the practice of periodic settling to permit the Husband to collect a sizeable equalization payment from the Wife. The Wife cannot seek reimbursement of a portion of funds earned in the Husband’s RRSP due to the absence of sufficient evidence as to quantum and due the intact and ongoing separate property regime provided for other than in clause 4(

f) of the Contract. [ 38 ] Counsel for the Wife shall prepare the Divorce Judgement and Corollary Relief Judgment. In the event the parties cannot agree on the matter of costs by September 30, 2016, the parties shall contact the Court Scheduling Office to request a one hour hearing on my docket to present oral argument on the issue. In that event, the Wife would be required to file her written argument, including identification of any offers to settle, ten days in advance and the Husband would be required to file the same five days in advance. Beaton, J.