2011 NBCA 49, 2011 NBCA 49

COURT OF APPEAL OF NEW BRUNSWICK 117-10-CA PAUL McKINNON APPELLANT PAUL McKINNON APPELANT - and - - et - HELEN DIANE McKINNON RESPONDENT HELEN DIANE McKINNON INTIMÉE McKinnon v. McKinnon, 2011 NBCA 49 McKinnon c.

McKinnon, 2011 NBCA 49 CORAM: The Honourable Justice Larlee The Honourable Justice Quigg The Honourable Justice Green CORAM : L’honorable juge Larlee L’honorable juge Quigg L’honorable juge Green Appeal from a decision of the Court of Queen’s Bench: August 18, 2010 Appel d’une décision de la Cour du Banc de la Reine : Le 18 août 2010 History of Case: Historique de la cause : Decision under appeal: Unreported Décision frappée d’appel : Inédite Preliminary or incidental proceedings: N/A Procédures préliminaires ou accessoires : s.o.

Appeal heard and judgment rendered: April 14, 2011 Appel entendu et jugement rendu : Le 14 avril 2011 Reasons delivered: May 19, 2011 Motifs déposés : Le 19 mai 2011

Reasons for judgment by: The Honourable Justice Larlee Motifs de jugement : L’honorable juge Larlee Concurred in by: The Honourable Justice Quigg The Honourable Justice Green Souscrivent aux motifs : L’honorable juge Quigg L’honorable juge Green Counsel at hearing: For the appellant: Carley J. Parish For the respondent: Mary Ann Holland Avocats à l’audience : Pour l’appelant : Carley J. Parish Pour l’intimée : Mary Ann Holland THE COURT The appeal is dismissed with costs of $2,500. LA COUR L’appel est rejeté avec dépens de 2 500 $.

The judgment of the Court was delivered by LARLEE, J.A. [ 1 ] This is an appeal by Paul McKinnon from an unreported decision of a Judge of the Court of Queen's Bench dated August 18, 2010, whereby he directed an equal division of marital property and excluded a property which was the subject of a prenuptial agreement, pursuant to the provisions of the Marital Property Act , S.N.B. 1980, M-1.1. [ 2 ] Paul McKinnon and Helen [Northrup] McKinnon were married in 1989. At that time Ms. McKinnon had one child and Mr. McKinnon had four. They subsequently had three children together.

The children are now independent adults. In August 2007 the couple separated. In November 2009, a judge of the Court of Queen’s Bench granted them a divorce. [ 3 ] Prior to marrying, Ms. McKinnon lived on a family property, the “Northrup Property” (793 Rte. 845, Kingston, New Brunswick), which had been in her family for 200 years. At the time of their marriage, Ms. McKinnon had a mobile home, a barn, two horses, goats, sheep and chickens on the property. [ 4 ] In 1986, the couple began co-habiting prior to marriage. Ms. McKinnon moved into a house Mr. McKinnon had acquired in 1972 (“the Hill Road Property”).

At that time, Ms. McKinnon bought a parcel of land adjacent (“the second Hill Road Property”), and also obtained the Northrup Property from her mother. In order to obtain the Northrup Property, Ms. McKinnon had to abide by a condition precedent. She had to prove she had a prenuptial agreement with Mr. McKinnon in which he waived all marital property rights to the property. [ 5 ] The couple moved to the Northrup Property after Mr. McKinnon sold the Hill Road Property. He used proceeds from this sale, as well as borrowed funds, to build a garage on the Northrup Property for his commercial use. In 1991, Mr.

McKinnon was involved in a workplace accident and was considered to be permanently disabled by the Workplace Health , Safety and

Compensation Commission. Even after he became permanently disabled, he continued to use this garage as either a hobby shop for autorepairs or a commercial business venture on the property. [6] To cover the costs of building the garage, the parties negotiated a mortgage, upon which Mr. McKinnon wasthe signatory. As Mr. McKinnon had no personal interest in the property, Ms. McKinnon executed a lease of the garage to him for a termof 15 years at a nominal rental of $1.00 per year. The mortgage was renegotiated in 1990, and to receive funding from N.B. Housing, ithad to be held in both names. Mr.

McKinnon asserts this mortgage “cancelled” the prenuptial agreement. [7] In 2002, Mr. McKinnon purchased 114 Perry Point Road and 120 Perry Point Road with funds he receivedfrom an inheritance. Both these properties were held in joint tenancy with Ms. McKinnon. Mr. McKinnon’s contention is that Ms.McKinnon had little to do with those properties, and that he paid the taxes, the insurance, and did all the repairs and maintenance. [8] The trial judge upheld the prenuptial agreement and did not divide the Northrup property. He divided allother marital property equally. [9] Mr.

McKinnon argues that the decision of the trial judge is in error for three reasons: 1) He erred in law by failing to properly consider the effect of the appellant’s inheritance funds on the purchase of 114 and 120Perry Point Road, and thereby concluding the respondent’s contribution entitled her to half of these properties; 2) He failed to consider the appellant’s contribution to the mortgage on the Northrup property and the effect it should have on thedivision of this asset; and 3) He erred in dividing the appellant’s tools and equipment, by failing to consider that various items were part of his inheritance andnot subject to division. [10] With regard to the standard of review applicable to an appeal from a division of assets made pursuant to theMarital Property Act (legislation conferring discretion on a judge to divide property), we can intervene and review the facts only if thetrial judge has misdirected herself or himself or if the decision is so clearly wrong as to amount to an injustice (Milton v.

Milton, 2008NBCA 87, 338 N.B.R. (2d) 300, para. 14). See also Elsom v. Elsom, (SCC), [1989] 1 S.C.R. 1367, [1989] S.C.J. No.48 (QL), at 1375. [11] On the first issue, the trial judge equally divided the two properties on Perry Point Road even though they hadbeen acquired using funds which had been inherited by Mr. McKinnon barely four years previous to the separation.

The property at 114Perry Point Road was rented by the parties’ daughter and, on the face of it, that would bring it within the definition of a family asset.Similarly, 120 Perry Point Road was used as a summer cottage by the parties and that brings it within the same definition. [12] In applying s. 7 of the Act the trial judge took into account the five specific factors and the catchall provision tobe considered when looking at whether an equal division of the marital property would be equitable in the circumstances.

Section 7reads as follows:

7 Notwithstanding sections 2, 3 and 4, the Court may make a division of marital property resulting in shares that are not equal if the Court is of the opinion that a division of the marital property in equal shares would be inequitable, having regard to (

a) any agreement other than a domestic contract, (

b) the duration of the period of cohabitation under the marriage, (

c) the duration of the period during which the spouses have lived separate and apart, (

d) the date when the property was acquired, (

e) the extent to which property was acquired by one spouse by inheritance or by gift, or (

f) any other circumstances relating to the acquisition, disposition, preservation, maintenance, improvement or use of property rendering it inequitable for the division of marital property to be in equal shares. 7 Nonobstant les articles 2, 3 et 4, la Cour peut répartir les biens matrimoniaux en parts inégales si elle estime qu’une répartition en parts égales serait inéquitable, compte tenu

a) de l’existence d’une entente, autre qu’un contrat domestique,

b) de la durée de la cohabitation pendant le mariage,

c) de la durée de la période pendant laquelle les conjoints ont vécu séparés,

d) de la date d’acquisition des biens,

e) de la mesure dans laquelle les biens ont été acquis par un seul conjoint par voie d’héritage ou de donation,

f) de toutes autres circonstances liées à l’acquisition, l’aliénation, la préservation, l’entretien, l’amélioration ou l’utilisation des biens qui rendraient inéquitable leur répartition en parts égales. [ 13 ] In his s. 7 analysis, the trial judge considered the following facts: (1) although the money to buy the properties came from an inheritance, that was not the only consideration; (2) there was no agreement with respect to the two properties; (3) the couple had been together for a period of more than 21 years; (4) the period of separation was relatively short; (5) the parties separated in August 2007, and the divorce petition was filed in December 2007; and (6) both properties are held in joint tenancy. [ 14 ] The trial judge comments the purpose of s. 7(

e) of the Act is to exclude from equal distribution, money acquired by inheritance that is extraneous to the family budget. The appellant takes exception to the trial judge’s findings that Mr. McKinnon expended his inheritance on something the family could ill-afford and the parties were on a relatively tight budget and the family needed his financial support at the time of purchase. The appellant argues that this finding is inconsistent with the trial judge’s comment based on the respondent’s testimony that the couple could have used their own money to buy the properties, but decided to use Mr.

McKinnon’s inheritance to purchase them. It is obvious that the trial judge struggled with the conflicting accounts of evidence from the parties. He states: It would be difficult to find the

interpretations of financial and property holdings of two people to be more disparate than those as set out in this brief review of what was significantly longer testimony. I have had the benefit of the witnesses’ explanations and I have reviewed the exhibits. Where there is a discrepancy between the position of the Petitioner and that of the Respondent, I have looked for objective evidence to provide guidance. Without repeating all of the explanations set out above, I must say that, Mr. McKinnon’s position on most points is contravened not only by Ms.

McKinnon’s position but also by the explanations of others in the written exhibits, and, in many instances, by his own testimony. [para. 61] [ 15 ] In any event, there was evidence to support the fact that the parties were on a tight budget. Mr. McKinnon testified that after being the primary income earner, he suffered a workplace accident in 1994, went on long term disability, and was

unable to work. [16] It perhaps should be emphasized that this was not a first marriage for Mr. McKinnon. He was aware of theeffect of domestic contracts under the Act, yet he did nothing to protect his inheritance from a possible future division. Quite theopposite, he put the deed to the two properties in joint tenancy (see Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550).Relying on Hogan v. Hogan (1991), (NB CA), 115 N.B.R. (2d) 343, [1991] N.B.J. No. 331 (C.A.) (QL), the trialjudge did not see an inequity arising as a result of the enforcement of the basic rule of equal division.

I can see no reason to interfere inthe exercise of the trial judge’s discretion. [17] On the second issue, the trial judge found that the prenuptial agreement regarding the “Northrup Property” wasa valid domestic contract. There was evidence on which he could base that decision: Ms. McKinnon was only able to obtain this propertyfrom her mother after she proved that Mr. McKinnon had executed the prenuptial agreement. The trial judge then examined s. 41 of theAct which reads as follows: 41 The Court may disregard any provision ofa domestic contract (

a) if the domestic contract was made beforethe coming into force of this Part and was notmade in contemplation of the coming intoforce of this Part; or (

b) if the spouse who challenges theprovision entered into the domestic contractwithout receiving legal advice from a personindependent of any legal advisor of the otherspouse; where the Court is of the opinion that toapply the provision would be inequitable inall the circumstances of the case. 41 La Cour peut ignorer toute clause d’uncontrat domestique dont l’application serait, àson avis, inéquitable dans les circonstances enl’espèce

a) si le contrat domestique a été conclu avantl’entrée en vigueur de la présente

partie sanstenir compte de cette éventualité; ou

b) si le conjoint qui conteste la clause aconclu le contrat domestique sans les conseilsjuridiques d’une personne indépendante duconseiller juridique de l’autre conjoint. [18] In applying that

section (relying on Kay v. Kay (1999), (NB CA), 215 N.B.R. (2d) 291,[1999] N.B.J. No. 289 (C.A.) (QL)) the trial judge correctly determined that, on its plain meaning, it gives discretion to disregard theprovisions of a domestic contract where one of the two preconditions has not been fulfilled and, then only if the Court finds an inequity.The trial judge noted the agreement was executed seven years after the Act came into force. There was no evidence it was executedwithout independent legal advice. On the question of inequity, the trial judge rejected Mr.

McKinnon’s argument that his labours on theproperty were sufficient to justify a claim to an interest in the property. He concluded that Ms. McKinnon granted Mr. McKinnon a 15year lease to place and operate a garage on the property to ensure that the work done by Mr. McKinnon during this period was furtherremoved from the law of trusts to the law of contracts. He also found the structure was either started or continued to be built after Mr.McKinnon suffered his injury in 1991. Furthermore, the judge rejected Mr. McKinnon’s contention that the N.B.

Housing mortgage(which required both parties’ signatures) effectively annulled the domestic contract. The trial judge concluded that although the mortgagedocument could alter the priorities in title to the property, a financial agreement cannot, by implication, adversely impact upon a contractdefining domestic relations in which the financial institution is not a party and in which it has no interest. I agree. The mortgagedocument was not capable of providing Mr. McKinnon with an interest in property which he had previously relinquished in a prenuptialagreement. This case is similar to Rademaker v.

Rademaker, 2002 NBCA 47, 251 N.B.R. (2d) 177. Mr. McKinnon has not put forth anypersuasive argument by which this Court would have authority to set aside any provision of the domestic contract. This ground of appealis without merit. [19] The determination of the third issue, which dealt with the division of tools and equipment, turned on anassessment of the credibility of Mr. McKinnon. His testimony was largely discounted by the judge.

On a consideration of the factorsunder s. 7 of the Act, including the fact that some of the tools and equipment were inherited, the trial judge chose not to exercise hisdiscretion and make an unequal division. There is no basis on which this aspect of the decision can be reversed.

[ 20 ] Since the appellant has not been successful in demonstrating an error on the part of the trial judge, I would dismiss the appeal with costs to the respondent, fixed in the amount of $2,500. ____________________________________ M.E.L. LARLEE, J.A. WE CONCUR: ___________________________________ KATHLEEN A. QUIGG, J.A. ____________________________________ BRADLEY V. GREEN, J.A.