2022 NLCA 5, 2022 NLCA 5

Michele Jacqueline Bowes (applicant/appellant) v. Christopher Allan Bowes (respondent) (19/104) Indexed as: Bowes v. Bowes 2022 NLCA 5 7 C.A.N.L.R. 237 Court of Appeal of Newfoundland and Labrador Hoegg, O’Brien and Butler JJ.A. January 20, 2022

Summary: The appeal involved issues of spousal and child support, division of matrimonial property and apportionment of debt following the breakdown of a marriage in the context of Mr. Bowes’ application for bankruptcy. The parties had five children between 2001 and 2009. The family relocated to Newfoundland and Labrador from Nova Scotia in February 2012 and separated on June 24, 2014. The parties had signed an Opting in and an Opting Out agreement in reference to the matrimonial home (only the Opting Out agreement was registered).

The principal issue before the Family Division at trial in January 2017 was whether Ms. Bowes would be permitted to relocate with the children to the province of Nova Scotia. The Trial Judge denied the application to relocate and made child and spousal support orders in a decision filed July 6, 2017. Child support was ordered payable by Mr. Bowes based on an offset calculation. Retroactive child support for the period before the previous child support order was in place was denied based on deposits made by Mr. Bowes into an account from which Ms. Bowes regularly withdrew money as necessary.

A compensatory spousal support order was made in favor of Ms. Bowes. The trial judge requested that the parties file written submissions on itemized issues being claimed. Submissions were filed on October 31, 2017 and November 2, 2017, and no further appearances were made. The July 6, 2017 decision was silent on costs. Two years later the Trial Judge released a decision on the financial and property issues (November 4, 2019). Ms. Bowes’ notice of appeal was restricted to errors of fact and law in relation to the division of property and the apportionment of debt. Ms.

Bowes’ factum raised issues concerning spousal support and claimed the trial judge erred in denying retroactive child support. Held: Appeal allowed in part. ___________________________________ Application for leave to appeal filed, 40124 (May 11, 2022) Butler J.A. (Hoegg and Goodridge JJ.A. concurring): Given the bifurcated nature of the Trial Judge’s decision it would be unfair to restrict Ms. Bowes to the issues identified in her notice of appeal (paragraphs 27-30).

Ms. Bowes applied to submit three additional pieces of evidence under Rule 37 of the Court of Appeal Rules , NLR 38/16 . Four criteria must be met before additional evidence will be received on appeal, (1) it could not, with due diligence, have been adduced at trial, (2) it must be relevant in the sense that it bears upon a decisive or potentially decisive issue at trial, (3) it must be credible in the sense that it is reasonably capable of belief, and (4) it must be such that, if believed, it could reasonably, when taken with the other evidence adduced at trial, be expected to have affected the result.

New evidence was allowed, and one piece was considered as it was already before the trial judge (paragraphs 31-39). When dealing with matters which fall under both the Bankruptcy and Insolvency Act , RSC 1985, c. B-3 (“ BIA ”) and the Family Law Act , RSNL 1990, c. F-2 (“ FLA ”) careful consideration of the purposes of both pieces of legislation must be considered to achieve a fair result (paragraphs 40-42). Under the BIA unlike debts, on a bankruptcy, a bankrupt’s unsecured non-exempt assets vest in his Trustee for liquidation and distribution to creditors. Under

section 69.3 of the BIA third party claims “provable in bankruptcy” are stayed once the bankruptcy application is filed. Bankruptcy does not affect the rights of beneficial owners of property who may also file a claim under

section 81 of the BIA . The bankrupt’s net income is available for distribution to the creditors ( BIA , s. 69 ). Child and spousal support payments are considered non-discretionary expenses ( Surplus Income Directive , No. 11R2-2021 (March 10, 2021)). Support claims are not stayed or released on bankruptcy ( BIA , s. 121(4) ). There is a statutory obligation of good faith under

section 4.2 of the BIA (paragraphs 43-51). Two models address the division of family property, the equalization regime and the division of property scheme. Under the Family Law Act ,

section 8 addresses the division of the matrimonial home, while 18(1)(

c) defines matrimonial assets, with section 21(1) governing application to the courts for equal division, and

section 26 providing the court with the necessary powers. It follows that Ms. Bowes had a beneficial interest in any matrimonial home and a proprietary interest in any matrimonial assets. Ms. Bowes, with notice of Mr. Bowes bankruptcy, could have filed a proof of claim relative to any assets vested in Mr. Bowes’ Trustee (paragraphs 52-62). The trial judge did not err in providing no relief in respect of the matrimonial home to Ms. Bowes, despite Mr. Bowes’ bankruptcy and the steps taken by his Trustee, evidence did not establish a loss (paragraphs 63-73).

There was no evidentiary basis on which to substantiate Ms. Bowes’ claim against Mr. Bowes, in relation to the $75,000 Prince Edward Island Property that was lost due to default in payment, based on the grounds that he profited from the re-conveyance by the mortgage company (paragraphs 74-78). The trial judge properly divided certain matrimonial debts, including overdraft on a joint bank account, and joint VISA and interest payments on a line of credit (paragraphs 79-87).

The trial judge erred in ordering a discharged bankrupt to pay a debt owing to a creditor for which he was discharged instead of ordering it payable to Ms. Bowes (paragraphs 88-92). The trial judge erred in not granting relief in respect of repair costs in relation to two pieces of family property covered by an unregistered “Opting-In” agreement granting a one-half beneficial interest to Ms. Bowes and not granting relief in respect of debts existing at the time of separation subsequently paid by Ms. Bowes and undisclosed to Mr. Bowes’ Trustee in bankruptcy.

Courts have discretion to apportion debt incurred both during a marriage and where appropriate, after separation (paragraphs 93-102). The trial judge erred in denying Ms. Bowes’ request to adjust the spousal support order made before Mr. Bowes’ financial circumstances resulting from the bankruptcy were known and the matrimonial debts were apportioned, both of which impacted the financial situations of the parties (paragraphs 103-115).

The appropriate award as a result of the failure of the trial judge to clarify the method of payment for the matrimonial debts is by way of non-compensatory periodic spousal support, accounting for losses resulting from taxation (paragraphs 116-124). The behaviour of Mr. Bowes as a bankrupt entitled Ms. Bowes to a remedy to resolve the issue of her sole ownership of her vehicle as an equivalent trade to the vehicle retained by Mr. Bowes (paragraphs 125-129).

No error is established in the trial judge’s denial of Ms. Bowes’ retroactive child support request based on the fact-specific reason of theexistence of a joint bank account into which Mr. Bowes made significant deposits and from which Ms. Bowes made regular withdrawalsduring the relevant period (paragraphs 130-136). The trial judge erred in failing to properly characterize the time periods for which retro-active spousal support was owing (paragraphs137-154). Pursuant to rule 58 of the Court of Appeal Rules, Ms. Bowes being largely successful in the appeal was awarded costs.

The trial judge’sdisposition of no order as to costs was not disturbed given divided success at trial (paragraphs 155-162). Cases cited: Squires v. Squires, 2021 NLCA 30 S.M.K. v. R.K., 2014 BCSC 2216 Century Services Inc. v. Canada (A.G.), 2010 SCC 60, [2010] 3 S.C.R. 379 Schreyer v. Schreyer, 2011 SCC 35, [2011] 2 S.C.R. 605 Balyk v. Balyk, (ON SC), [1994] O.J. No. 764, 113 D.L.R. (4th) 719 (Ont. Gen. Div.) Reid v. Reid, 2018 NLSC 33 Fleming v. Fleming, 2009 NLUFC 2 Martin v. Martin (1998), (NL CA), 168 Nfld. & P.E.I.R. 181 (Nfld. C.A.) Simmons v. Simmons, 2016 NLCA 28 Greenglass v.

Greenglass, 2010 ONCA 675 Katz v. Katz, 2004 MBCA 85 Ness v. Ness, (MB KB), [1998] M.J. No. 470, 133 Man. R. (2d) 7 (Man. Q.B. (Fam. Div.)) Swan v. Leslie, 2011 ONSC 6879 Marche v. Marche, 2009 NLTD 34 TenHoeve v. TenHoeve, [2009] O.J. No. 1423, 176 A.C.W.S. (3d) 449 (Ont. S.C.J.) D.B.S. v. S.R.G., 2006 SCC 37, [2006] 2 S.C.R. 231 Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269 Colucci v. Colucci, 2021 SCC 24 Hevey v. Hevey, 2021 ONCA 740 Statutes considered: Divorce Act, RSC, 1985, c. 3 (2nd Supp.),

section 15.2 Family Law Act, RSNL 1990, c. F-2, sections 8, 18(1)(c), 21, 26, 33 Bankruptcy and Insolvency Act, RSC 1985, c. B-3, sections 4.2, 68, 69.3, 121(4), 136(d.1), 178(1) Regulations considered: Federal Child Support Guidelines, SOR/97-175,

section 9(

c) Rules considered:

Court of Appeal Rules , NLR 38/16, rules 37 , 58 Texts considered: Lloyd W. Houlden, Geoffrey B. Morawetz & Janis P. Sarra, The 2021 Annotated Bankruptcy and Insolvency Act (Toronto: Thomson Reuters Canada, 2021) Ann C. Wilton & Noel Semple, Spousal Support in Canada (Toronto: Carswell, 2011) Articles considered: Janis P. Sarra & Susan B. Boyd, “Competing Notions of Fairness: A Principled Approach to the Intersection of Insolvency Law and Family Property Law in Canada”

(2011) Annual Review of Insolvency Law 207 Janis P. Sarra & Susan B. Boyd, “Out in the Cold: Schreyer v. Schreyer ’s Call for Law Reform” (2011) 27:1 Canadian Journal of Family Law 97 Other: Surplus Income Directive , No. 11R2-2021 (March 10, 2021) Spousal Support Advisory Guidelines (July 2008) Counsel: Michele Jacqueline Bowes appearing on her own behalf; Robert F. Fedder, for the respondent. The application and appeal were heard on May 19, 2021 before Hoegg, O’Brien and Butler JJ.A.

The following judgment was filed on January 20, 2022 by Butler J.A. for the Court. ______________________________________________________________ Butler J.A.: INTRODUCTION [ 1 ] This appeal involves issues of spousal and child support, division of matrimonial property and apportionment of debt following the breakdown of a marriage and Mr. Bowes’ application for bankruptcy. [ 2 ] The parties were married on February 24, 2001 and had five children born between 2001 and 2009.

The family relocated to this province from Nova Scotia in February 2012 and separated on June 24, 2013. [ 3 ] The principal issue placed before the Family Division at a trial that was held in January 2017 was whether Ms. Bowes should be permitted to move with the children back to the province of Nova Scotia.

Of the 43-page decision filed on July 6, 2017, the judge dedicated 37 pages to the parenting issues (the “2017 Decision”). [ 4 ] The application to relocate was denied and the judge then considered what child and spousal support orders were appropriate. [ 5 ] Based upon the shared parenting arrangement, the judge ordered Mr. Bowes to pay child support of $2,352 per month and Ms. Bowes to pay child support of $829 per month for a net monthly payment to Ms. Bowes of $1,623 effective August 1, 2017. The judge’s calculation of the offset was incorrect. The net amount payable was $1,523 per month.

The judge ordered special expenses to be shared proportionately (77 percent by Mr. Bowes and 23 percent by Ms. Bowes). [ 6 ] There had been a prior child support order for $2,380 per month made on an interim basis on February 6, 2015 but it did not address the period between the parties’ separation on June 24, 2013 and February 6, 2015. [ 7 ] For this period, the judge declined retroactive child support on the basis that Mr. Bowes had regularly deposited significant amounts of money into the parties’ joint bank account from which Ms. Bowes withdrew as necessary. [ 8 ] The judge ordered Mr.

Bowes to pay $370 per month in spousal support on a compensatory basis for seven years effective August 1, 2017 but denied any retroactive award. There was therefore no spousal support paid between the parties’ separation on June

24, 2013 and August 1, 2017. [ 9 ] One paragraph only of the judge’s decision was dedicated to the remaining financial and property issues which had been addressed during the 6-day trial. The judge concluded: [161] Whereas I find that the evidence respecting the financial and property issues to be confusing and unhelpful to the Court, I require that counsel for the parties prepare written submissions on itemized issues being claimed.

These written submissions must be submitted by November 1, 2017. [ 10 ] The submissions were filed on October 31 and November 2, 2017 respectively and no further appearances were made. [ 11 ] The 2017 Decision was silent as to costs. [ 12 ] The judge released a second decision on the financial and property issues two years later on November 4, 2019 (the “2019 Decision”). The judge:

(1) Ordered Mr. Bowes to repay Ms. Bowes $1,344.63 for having taken and sold a washer and dryer that were gifted to her post- separation;

(2) Denied Ms. Bowes’ claim for unjust enrichment in relation to repair costs incurred for the Pennywell Road property (matrimonial home) and Prince Edward Island cottage;

(3) Ordered that Mr. Bowes (

a) repay Ms. Bowes for half of the overdraft on a Royal Bank chequing account; (

b) repay Ms. Bowes one half of the accumulated interest payments on a Royal Bank line of credit and one half of the joint VISA; and (

c) assume one half of the balance owing on the principal of the line of credit and make arrangements with the bank to repay his share of that debt;

(4) Denied Ms. Bowes’ claim for compensation in relation to her Canada Student Loan and made no order respecting other debts claimed by Ms. Bowes to be matrimonial;

(5) Denied any adjustments to the spousal support ordered on July 6, 2017;

(6) Denied any relief in relation to a Prince Edward Island cottage;

(7) Made no order respecting the Pennywell Road property or the 2008 Saturn motor vehicle; and

(8) Made no order for costs on the basis that each of the parties had been significantly successful on the major issues. BACKGROUND [ 13 ] The family’s relocation to Newfoundland and Labrador resulted in the sale of their primary residence in Nova Scotia and the “porting” of the mortgage on it to the purchase of a property at Pennywell Road, St. John’s. A cottage in Prince Edward Island registered in Mr. Bowes’ name alone remained unsold. [ 14 ] Mr. Bowes came to Newfoundland and Labrador in November 2011 and was responsible for all arrangements for the sale and purchase of the properties. Ms.

Bowes relied entirely on her husband for these financial arrangements. Ms. Bowes and the five children, then four to eleven years of age, travelled to St. John’s in February 2012. [ 15 ] The documents relied upon by Ms. Bowes respecting the Pennywell Road property show that the house was registered to Mr. Bowes only. The solicitor’s invoices were not helpful as they reflected a purchase price of $225,000, a mortgage advance of $213,750 and costs needed from the client to close the transaction of $13,478. However, the Toronto Dominion mortgage statement showed that mortgage funds of $219,628.12 were advanced.

It is therefore not clear how much of a downpayment was made on the Pennywell Road home. [ 16 ]

Section 33 of the Family Law Act, RSNL 1990, c. F-2 , allows a person to enter into an agreement to vary or exclude the application of the provisions of the Act that deal with the matrimonial home and matrimonial assets. These agreements are commonly referred to as “Opting-In” and “Opting-Out” agreements. [ 17 ] On the day of the purchase, the parties signed both an Opting-Out and an Opting-In agreement respecting the Pennywell Road property. However, only the Opting-Out agreement was registered. A title search would suggest that the home was the sole property of Mr.

Bowes but, as between the parties, the unregistered Opting-In agreement gave Ms. Bowes a one half interest. [ 18 ] After the parties separated, each spouse had occupancy of the Pennywell Road home at different times. While Ms. Bowes resided in this property between December 2013 and October 2014, a water main burst and caused significant damage necessitating repairs the costs of which exceeded insurance coverage. This expense was paid by Ms. Bowes from funds advanced to her by her mother. [ 19 ] In March 2014, Ms.

Bowes filed an Originating Application for divorce, child and spousal support, custody, access and division of matrimonial property. [ 20 ] In October, 2014, Mr. Bowes made application for a bankruptcy order under the Bankruptcy and Insolvency Act , RSC 1985, c. B-3 (the “ BIA ”). The mortgagees on both the Pennywell Road property and the Prince Edward Island property were identified as secured creditors. Due to default in payment, at the request of the respective banks, Mr. Bowes’ Trustee in Bankruptcy conveyed Mr.

Bowes’ interest in the properties to the mortgagees. [ 21 ] Both deeds executed by Janes and Noseworthy Ltd., Trustee in Bankruptcy for the Estate of Mr. Bowes refer to consideration of

$1,200 paid by the respective mortgagees to Janes and Noseworthy. This was described in the evidence as a fee for registration and transfer. [ 22 ] This Court was not referred to evidence establishing that Ms. Bowes was notified of the particulars on the loss of the Pennywell Road property. [ 23 ] Ms. Bowes acknowledged that the mortgagee on the Prince Edward Island property had notified her of its intent to seek recovery from her. In response, she engaged a lawyer who confirmed that Ms. Bowes’ name was neither on the deed nor the mortgage.

She ultimately had no exposure (Transcript, January 18, 2017, at 29-30). [ 24 ] Paragraph 8 of Ms. Bowes’ submissions filed following the judge’s 2017 Decision suggested that the Prince Edward Island cottage had been valued by Mr. Bowes’ Trustee as equivalent to the mortgage outstanding ($52,500). It was subsequently sold by the mortgage insurer for $61,525.29. The evidence did not establish whether Mr. Bowes had ever received any benefit from this sale, but it is clear that Ms. Bowes did not. [ 25 ] In the post-separation period and while Ms.

Bowes had occupancy of the Pennywell Road property, her parents purchased her a washer and dryer. The evidence established that this was a gift to her and was not a matrimonial asset. However, prior to the loss of the Pennywell Road property, Mr. Bowes sold both appliances. On these facts, the judge ordered that Mr. Bowes should pay Ms. Bowes the full value of these items ($1,344.63). While Ms. Bowes raised this issue in her factum, it was merely to draw the Court’s attention to the fact that the amount remains unpaid. [ 26 ] There was significant unsecured joint debt disclosed on Mr.

Bowes’ application for bankruptcy. This included the balances outstanding on the parties’ line of credit, their VISA credit card and an overdraft on their bank account. Matrimonial debt that was not jointly held (including Ms. Bowes’ Canada Student Loan) was not disclosed on Mr. Bowes’ list of creditors. What occurred in relation to the unsecured debts is discussed later in this decision. Issues on Appeal [ 27 ] Ms. Bowes’ notice of appeal was filed on December 4, 2019 and was restricted to errors of fact and law in relation to the division of property and apportionment of debt. However, Ms.

Bowes’ factum raised several issues related to spousal support and also claimed that the judge erred in denying retroactive child support. [ 28 ] Ms. Bowes alleged that the judge erred in his 2019 Decision in denying an adjustment to the spousal support awarded in the 2017 Decision which had been given before the division of the parties’ assets and apportionment of their debts. In essence it was asserted that the apportionment of debts would have informed the condition, means, needs and other circumstances of each of the parties and was a required consideration under

section 15.2(4) of the Divorce Act , RSC, 1985, c. 3 (2nd Supp .), and

section 9 (

c) of the Federal Child Support Guidelines, SOR/97-175 . [ 29 ] In the unusual circumstances of having the judge’s decision bifurcated between two sets of reasons delivered in July 6, 2017 and November 4, 2019, it would be unfair to restrict Ms. Bowes’ appeal to the property and debt issues identified on the notice of appeal. Mr. Bowes had knowledge of Ms. Bowes’ broadened list of issues when he received her factum in November 2020. His factum was filed on April 23, 2021 and addressed each of the issues that had been raised by Ms. Bowes. There would be no prejudice to Mr. Bowes to allow Ms.

Bowes to pursue her spousal and child support grounds of appeal given that they are connected to the errors alleged on the division of property and apportionment of debt. [ 30 ] This Court will therefore address on this appeal whether the judge erred: 1. In making no order respecting the Pennywell Road property (matrimonial home); 2. In denying Ms. Bowes any remedy in relation to the loss of the Prince Edward Island cottage; 3. In relation to the matrimonial debts, by: (

a) ordering Mr. Bowes to repay Ms. Bowes $1,023.11 for one half of the overdraft on the joint chequing account; (

b) ordering that Mr. Bowes repay Ms. Bowes one half of the accumulated interest payments on a Royal Bank line of credit and $979.48 for one half of the balance on the joint VISA; (

c) ordering that Mr. Bowes assume one half of the balance owing on the principal of the line of credit and make arrangements with the bank to repay his share of that debt; (

d) denying Ms. Bowes any remedy for repair costs associated with the Pennywell Road property and Prince Edward Island cottage, the payment of Ms. Bowes’ Canada Student Loan and in making no order respecting other debts claimed by Ms. Bowes to be matrimonial; and (

e) denying Ms. Bowes’ claim for adjustments to the spousal support ordered in the 2017 Decision in light of the debt Ms. Bowes had shouldered and the economic circumstances in which Ms. Bowes was left following Mr. Bowes’ bankruptcy. 4. In making no order respecting the 2008 Saturn motor vehicle; 5. In the commencement date of child support; and 6. In the calculation and commencement date of spousal support.

Application for ADDITIONAL Evidence under rule 37 of the Court of Appeal Rules [ 31 ] Ms. Bowes applied to submit additional evidence pursuant to rule 37 of the Court of Appeal Rules, NLR 38/16 , and this application was addressed at the commencement of the appeal hearing. She sought to have this Court consider records establishing payments on both her Canada Student Loan and interest on the parties’ joint line of credit as well as particulars of the purchase of the parties’ home at Pennywell Road, St. John’s. [ 32 ] This Court recently stated the law respecting the submission of additional evidence in Squires v.

Squires , 2021 NLCA 30 : [30] Generally, four criteria must be met before additional evidence will be received on appeal: (1) it could not, with due diligence, have been adduced at trial; (2) it must be relevant in the sense that it bears upon a decisive or potentially decisive issue at trial; (3) it must be credible in the sense that it is reasonably capable of belief; and (4) it must be such that, if believed, it could reasonably, when taken with the other evidence adduced at trial, be expected to have affected the result, see Coles v.

Coles , 2014 NLCA 3 , 345 Nfld. & P.E.I.R. 357 at para. 4 , and rule 37(3) of the Court of Appeal Rules . [ 33 ] On appeal, Mr. Bowes agreed to the filing of the records related to the payment of interest on the parties’ joint line of credit. [ 34 ] Ms. Bowes’ Canada Student Loan was conceded by Mr. Bowes at trial to have been a matrimonial debt and the judge acknowledged that Mr. Bowes would ordinarily be responsible for 50 percent of it. However, the judge concluded that it “somehow disappeared” and that he had “no evidence” as to how that happened. He declined to consider it. [ 35 ] The records that Ms.

Bowes seeks to enter as additional evidence on this issue reflect that her Canada Student Loan was paid in full between July 6, 2017 and November 4, 2019 (being the dates of the two decisions the judge made following the hearing held in January 2017). As such, Ms. Bowes has established that her Canada Student Loan records were unavailable at the hearing held in January 2017 and were “relevant in the sense that they bear upon a potentially decisive issue at trial”. [ 36 ] Further, the records identify Ms.

Bowes and her Social Insurance Number on letterhead of the Government of Canada, National Student Loans Service Centre (NSLSC) and refer to the dates of disbursement and payment of the loan. These records are therefore credible and such that, if believed, could have affected the result. [ 37 ] The Canada Student Loan records therefore meet the test for admission of additional evidence stated in Squires . [ 38 ] The records respecting the home at Pennywell Road are not additional evidence. These records were filed with the Family Court prior to trial and form part of the record.

It is therefore appropriate to consider them on this appeal. [ 39 ] In

summary, Ms. Bowes’ application to submit additional evidence on this appeal respecting her payment of both her Canada Student Loan and interest on the joint line of credit account, is allowed. These records, and those respecting the purchase of the home at Pennywell Road which were before the judge at trial, will be considered on this appeal. Bankruptcy and Family Law Intersection Introduction [ 40 ] For a comprehensive review of the Canadian bankruptcy process, the differing objectives of bankruptcy and family law and the inequitable results that can arise when the two intersect, see Janis P. Sarra & Susan B.

Boyd, “Competing Notions of Fairness: A Principled Approach to the Intersection of Insolvency Law and Family Property Law in Canada”

(2011) Annual Review of Insolvency Law 207. [ 41 ] There is a tension between Bankruptcy and Family Law. As stated in “Competing Notions of Fairness”, at 207-208: Insolvency law and family law in Canada are both aimed at important public policy goals. The Bankruptcy and Insolvency Act ( BIA ) allows financially distressed individuals to shed specified debts and have a ‘fresh start’ in terms of their income earning capacity, at the same time that it ensures an effective and organized debt collection mechanism for creditors of that insolvent debtor.

Family law is aimed at the equitable sharing of the economic consequences of the dissolution of marriage … and, where relevant, the allocation of responsibilities for children.

Its objective is to ensure that the division of property and the allocation of ongoing support obligations reflect the contributions that individuals have made to the family unit and will continue to make to children, as well as economic hardship and the capacity to provide ongoing support. [ 42 ] The challenge, when bankruptcy and family law issues intersect is how to realize the purpose of each piece of legislation while still achieving a fair result.

The identified objectives of each piece of legislation have reduced prospects of being met if a coordinated response is not taken to the bankruptcy and family property division/support proceedings and/or if the bankrupt does not act in good faith with respect to the bankruptcy proceedings ( BIA , s. 4.2(1) ). This is particularly true when full disclosure is not given and notice is not provided to the non-bankrupt spouse. The Bankruptcy and Insolvency Act RSC 1985 c.

B-3 [ 43 ] “ The Bankruptcy and Insolvency Act ( BIA ) provides a mechanism for the orderly liquidation of a bankrupt’s estate and the distribution of the value of the assets in that estate to the bankrupt’s creditors.” (Lloyd W. Houlden, Geoffrey B. Morawetz and Janis P.

Sarra, in The 2021 Annotated Bankruptcy and Insolvency Act (Toronto: Thomson Reuters Canada, 2021), at page 1). [ 44 ] Some of the general bankruptcy principles of relevance to this case addressed in Competing Notions of Fairness, at 255-256, are stated below. [ 45 ] On a bankruptcy, the applicant/bankrupt’s unsecured non-exempt assets vest in his Trustee in Bankruptcy for liquidation and

distribution to creditors. Debts do not vest in the Trustee ( S.M.K. v. R.K. , 2014 BCSC 2216 ). [ 46 ] The Trustee has the dual responsibility of representing the bankrupt as well as general creditors in the administration of the estate and should ensure full disclosure of assets and debts (the latter referred to as claims “provable in bankruptcy”). [ 47 ] While third party claims “provable in bankruptcy” are stayed once the bankruptcy application is filed ( BIA , s. 69.3 ), bankruptcy does not affect the rights of beneficial owners of property.

Section 81 of the BIA provides for persons claiming “any property, or interest therein, in the possession of a bankrupt person at the time of the bankruptcy”, to file a proof of claim stating grounds and particulars. [ 48 ] The Trustee is bound by the terms of any contract between the spouses (separation agreement or Opting In-Out agreement) but can challenge as a preference (or transfer under value) any agreement negotiated within twelve months of the bankruptcy. [ 49 ] As to income, the Trustee determines any deductions to which the bankrupt is entitled.

The bankrupt’s net income is required to be paid to their bankrupt estate and is available for distribution to the creditors ( BIA, s. 68 ).

Child and spousal support payments are considered non-discretionary expenses ( Surplus Income Directive , No. 11R2-2021 (March 10, 2021)). [ 50 ] Support claims are not stayed or released on bankruptcy ( BIA, s. 121(4) ) and property that does not vest in the Trustee in Bankruptcy is available for support obligations. [ 51 ] While the requirements of appropriateness, good faith, and due diligence are baseline considerations in insolvency proceedings ( Century Services Inc. v.

Canada (A.G.) , 2010 SCC 60 , [2010] 3 S.C.R. 379 , at para. 70 ), a statutory duty of good faith arose as a result of the 2019 amendment to the legislation ( BIA, s. 4.2 ). The Family Law Act RSNL 1990, c. F-2 [ 52 ] While each province and territory has legislation addressing the division of family property, it is not uniform. As explained in Schreyer v. Schreyer , 2011 SCC 35 , [2011] 2 S.C.R. 605 , some jurisdictions adopted an equalization model and others, a division of property model.

A critical distinction that affects insolvency of a spouse was addressed by the Court in Schreyer : [15] The equalization model involves a valuation of the family assets and an accounting. The value of the assets is then divided between the spouses, usually in equal parts, although family courts have a limited discretion to order an unequal division. The valuation and the division give rise to a debtor-creditor relationship in the sense that the creditor spouse obtains a monetary claim against the debtor spouse. But the assets themselves are not divided.

Each spouse retains ownership of his or her own property both before and after the breakdown of the marriage. Neither acquires a proprietary or beneficial interest in the other’s assets. Assets are transferred only at the remedial stage, as agreed by the parties or as ordered by the family court in exercising its discretion, as a form of payment or execution of the judgment… The division of property schemes, on the other hand, give rise to a proprietary or beneficial interest in the assets themselves, not just in their value… [ 53 ] As discussed by Janis P. Sarra and Susan B. Boyd in “Out in the Cold: Schreyer v.

Schreyer ’s Call for Law Reform” (2011) 27:1 Canadian Journal of Family Law 97, the equalization regimes (Ontario, Quebec, Manitoba, Northwest Territories, Nunavut and Prince Edward Island) can seriously prejudice the marital property claims of a non-bankrupt spouse on the bankruptcy of the other spouse. [ 54 ] In addition, within the division of property scheme jurisdictions (including Newfoundland and Labrador) there are a number of differences in the statutory language which affects when a property interest arises. “These differences in the vesting of a proprietary interest can be highly significant, depending on when the bankruptcy is declared, an event that is largely in the control of the bankrupt spouse” (“Out in the Cold”, at 107). [ 55 ] One key distinction between the two regimes is that in division of property jurisdictions (including Newfoundland and Labrador) the non-bankrupt spouse’s property claim is not “provable in bankruptcy” and is neither stayed nor discharged on bankruptcy. [ 56 ] This province, like Saskatchewan, Alberta, Nova Scotia, New Brunswick, the Yukon and British Columbia, has adopted a division of property regime, but with a unique provision for the matrimonial home which is addressed in sections 8(1) and (2) of the Family Law Act , as follows: 8.

(1) Notwithstanding the manner in which the matrimonial home is held by either or both of the spouses, each spouse has a 1/2 interest in the matrimonial home owned by either or both spouses, and has the same right of use, possession and management of the matrimonial home as the other spouse has. (2) Subsection (1) creates a joint tenancy with respect to the matrimonial home. [ 57 ] Subject to the exceptions listed in sections 18(1)(c)(i) – (vii) of the Family Law Act , none of which is relevant to this case, matrimonial assets are defined in section 18(1) (

c) to include: … all real and personal property acquired by either or both spouses during the marriage… [ 58 ] Respecting procedure, pursuant to section 21(1) of the Family Law Act , Ms. Bowes was entitled “to apply to a court to have the matrimonial assets divided in equal shares, notwithstanding the ownership of these assets, and the court may order that division.” [ 59 ] Finally, in terms of remedies, the powers of the court are addressed in

section 26 as follows: 26. In an application made under

section 21 , the court may order (

a) that the title to a specified property granted to a spouse be transferred to or held in trust for that spouse for the period, or absolutely, as the court may decide;

(

b) the partition or sale of a property; (

c) that payment be made out of the proceeds of a sale ordered under paragraph (

b) to 1 or both spouses, and the amount of thepayment; (

d) that a property forming part of the share of either or both spouses be transferred to or held in trust for a child to whom a spouse mustprovide support; (

e) that either or both spouses give the security, including a charge on property, that the court orders, for the performance of an ordermade under this section; and (

f) that 1 spouse pay to the other spouse the amount that is set out in the order in order to provide for the division of the property, and may make other orders or directions that are ancillary to the application. [60] It follows from these statutory provisions that on her application to divide assets, Ms. Bowes had a beneficial interest in anymatrimonial home, and the right to claim a proprietary interest in any matrimonial assets. [61] The effect of section 21(1) of the Family Law Act on Mr. Bowes’ bankruptcy was that (unlike the situation in Schreyer), Ms.Bowes was not a creditor. Ms.

Bowes’ application for division of assets was not a claim provable in bankruptcy and it was not stayed onMr. Bowes’ application for bankruptcy. Had she received notice of Mr. Bowes’ application under the BIA, and been advised of her rightto do so, Ms. Bowes’ could have filed a proof of claim relative to any assets which the Trustee considered had vested in him on behalf ofMr. Bowes (BIA,

section 81). [62] In these circumstances, there was no impediment to Ms. Bowes’ application for division of matrimonial assets and apportionmentof matrimonial debts. It was reasonable to expect that Ms. Bowes’ rights would have received greater protection than those of a non-bankrupt spouse in an equalization jurisdiction (compare for example Schreyer and Balyk v. Balyk, (ON SC), [1994]O.J. No. 764, 113 D.L.R. (4th) 719, at 723-724 (Ont. Gen. Div.)). As will become apparent, this expectation did not bear out.

ANALYSIS Issue 1: Whether the Judge Erred in Making no Order Respecting the Pennywell Road Property (Matrimonial Home) [63] Ms. Bowes appeals the judge’s failure to provide any relief for the loss of this property. [64] The effect of the parties’ Opting-In Agreement and

section 8 of the Family Law Act was, as between the parties, to give Ms.Bowes a one half interest in the Pennywell Road property, arising at the time of its purchase and without the necessity of a specificdivision or a court order. [65] A spouse making application for bankruptcy is obliged to disclose his marital status to the Trustee in Bankruptcy. When, ashere, the bankrupt is separated and family property and support claims are in process, the Trustee should recognize that under the FamilyLaw Act (unless there is a valid agreement affecting the non-bankrupt spouse’s rights), the non-bankrupt spouse: - has a proprietary interest in any matrimonial home (Family Law Act,

section 8); and - has the right to claim a beneficial interest in all matrimonial assets (however held or registered) entitling the non-bankrupt spouse tothe right to a declaration of a proprietary interest (sections 21 and 26). [66] The Trustee should give notice of the bankruptcy to the non-bankrupt spouse and inform him/her of their right to file a proof ofclaim against any non-exempt assets of the bankrupt. [67] The evidence supports that the Trustee understood that the parties were married but separated. This fact alone should havecaused him to consider beneficial ownership of Pennywell Road.

The Trustee’s testimony at trial was that he could not recall if title wasregistered in Mr. Bowes’ name alone or whether he had been aware of either the Opting-Out or Opting-In agreement. This Court was notreferred to any evidence to suggest that the Trustee had taken any steps or made any enquiries on the ownership of this home. [68] The evidence does not assist in whether Ms. Bowes knew she could have filed a proof of claim, supported by affidavit, pursuantto

section 81 of the BIA, claiming an interest in this property in Mr. Bowes’ name. [69] The Trustee appears to have proceeded on the basis that the Pennywell Road property was Mr. Bowes’ asset and had no value. However, I note that page 2 of Mr. Bowes’ bankruptcy application suggested that he had only a one half interest in this asset: “The Toronto-Dominion Bank – Pennywell Road, St. John’s, NL (1/2 Int.) (market assessment/to give up).” [70] It is clear that on the request of the mortgagee, the Trustee conveyed Mr. Bowes’ interest to the bank in consideration only of aregistration and transfer fee of $1,200.

This Court was not referred to any evidence that Ms. Bowes had notice of this transaction at thattime. [71] Notwithstanding these facts, Ms. Bowes’ evidence at trial was that at the time of separation she had a realtor provide anevaluation of this property and that its value was “pretty much or maybe around the same amount that [was] owed on it” (Transcript,January 16, 2017, at 25). [72] In light of Ms. Bowes’ evidence on the lack of equity in the home, it has not been established that, despite Mr. Bowes’bankruptcy and the steps taken by his Trustee, Ms. Bowes suffered a loss respecting this asset.

The evidence does not support herentitlement to relief respecting the Pennywell Road property.

[ 73 ] No error is disclosed in the judge’s failure to make an order respecting the Pennywell Road property. I would therefore dismiss Ms. Bowes’ appeal on this ground. Issue 2: Whether the Judge Erred in Denying Ms. Bowes any Remedy in Relation to the Loss of the Prince Edward Island Cottage [ 74 ] Mr. Bowes’ Property Statement sworn May 5, 2014 referenced the Prince Edward Island property as being held in joint tenancy with a value of $75,000 (Appeal Book, at 343). [ 75 ] However, as previously stated, Ms.

Bowes received correspondence from the mortgagee respecting the default in payment and in response she engaged a Prince Edward Island lawyer. The lawyer advised that Ms. Bowes’ name was neither on the deed nor the mortgage (Transcript, January 18, 2017, at 29-31) and Ms. Bowes was not pursued further in relation to this debt. [ 76 ] Nevertheless, Ms. Bowes asserts that after the property was lost due to default in payment, it was reconveyed by the mortgage company for greater consideration and she seeks compensation from Mr. Bowes. [ 77 ] This Court was not referred to any evidence that supported Ms.

Bowes’ belief that Mr. Bowes had benefitted from the reconveyance. [ 78 ] I conclude that the judge did not have an evidentiary basis to provide a remedy to Ms. Bowes for the loss of this property and no error is established in the judge’s denial of relief. I would dismiss this ground of appeal. Issue 3: Whether the Judge erred in Relation to the Matrimonial Debts [ 79 ] The bankruptcy of a spouse following marriage breakdown but before resolution of the property and support issues between the spouses will inevitably complicate an already stressful situation.

It can also have serious financial consequences for the non-bankrupt spouse. This case is a sad example. [ 80 ] The parties held significant joint debt which Mr. Bowes’ disclosed on his application for bankruptcy but they had incurred other financial obligations in Ms. Bowes’ name which were not disclosed. The effect of his discharge was that Mr. Bowes was relieved of all liability for the disclosed joint debts and each of these creditors has pursued Ms. Bowes for the entire balance. As will be apparent, Ms.

Bowes has eliminated two of the three joint debts as well as other matrimonial debt which was incurred in her name alone. 3 (a): Overdraft on Joint Bank Account [ 81 ] It was established at trial that the overdraft was $1,958.96 when Mr. Bowes made his application for bankruptcy. Interest accumulated on this balance until it was paid in full by Ms. Bowes on October 24, 2014. The amount she paid was $2,046.22 (Appeal Book, at 207-208 and 287-288). [ 82 ] No error is established in the judge’s conclusion in the 2019 Decision that Mr. Bowes owed Ms.

Bowes $1,023.11 to reimburse her for this debt. [ 83 ] However, in her November 2017 submission, Ms. Bowes sought an adjustment to the spousal support ordered in the 2017 Decision to address the apportionment of debt. The judge gave no consideration to the form of payment which was appropriate given Mr. Bowes’ bankruptcy and the economic circumstances of the parties on marriage breakdown, an essential objective of any spousal support order ( Divorce Act,

section 15.2(6) ). The form of payment is addressed in Issue 3(e). 3(b): Joint VISA and Interest Payments on the Line of Credit [ 84 ] The evidence also established that the parties’ joint VISA account had a balance of $1,928.58 when Mr. Bowes made application for bankruptcy. Ms. Bowes made two interest only payments on the VISA card of $48.58 on October 29, 2014 and $48.10 on December 1, 2014.

She eliminated most of the debt on December 3, 2014 with a payment of $1,859.25 and then made a final payment (interest) of $21.86 in February 2015 for a total of $1,977.79 (Appeal Book, 209-213). [ 85 ] The judge ordered Mr. Bowes to pay Ms. Bowes $979.48 for half of this debt. The correct figure was $988.90; otherwise no error is established in the judge’s order respecting this debt. [ 86 ] Similarly, between October 2014 and April 2017 Ms. Bowes paid $5,918.21 on the joint line of credit (Appeal Book, at 258) and the judge ordered that Mr. Bowes reimburse Ms. Bowes for one half.

No error is established in the judge’s order respecting this debt. [ 87 ] As was the case on the overdraft, the judge gave no consideration to the form of repayment to Ms. Bowes for these debts she had paid. This will also be addressed in Issue 3(e). 3(c): Balance Owed on the Line of Credit [ 88 ] The evidence at trial and additional evidence received on appeal confirmed that the parties’ line of credit had a balance of $30,127.84 when Mr. Bowes made application for bankruptcy.

The balance outstanding on the line of credit at the time of the appeal hearing was established at $37,413.51, a balance which increases by $4.70 daily. [ 89 ] The Royal Bank of Canada (“RBC”) has corresponded with Ms. Bowes and indicated its intention to pursue payment of this balance from her. Mr. Bowes acknowledges that it is a matrimonial debt and that he is responsible for one half of it notwithstanding that his liability to RBC was eliminated on his discharge from bankruptcy. [ 90 ] The judge ordered that Mr.

Bowes assume one half of the balance owing on the principal and make arrangements with the bank to repay his share of that debt.

[ 91 ] This was an error of law. The judge could not require Mr. Bowes to repay any creditor whose claim was provable in bankruptcy and from which debt Mr. Bowes had been discharged. The effect of Mr. Bowes’ discharge from bankruptcy was that this order is unenforceable by RBC and does not assist Ms. Bowes. The appropriate order was for payment by Mr. Bowes to Ms. Bowes. [ 92 ] I would therefore allow this ground of appeal. The amount to be paid for the outstanding line of credit and the appropriate form of payment to Ms.

Bowes for all debts she has paid or assumed is addressed in Issue 3(e). 3(d): Repair Costs Associated with the Pennywell Road Property and Prince Edward Island Cottage, Ms. Bowes’ Canada Student Loan and Other Debt Claimed by Ms. Bowes as Matrimonial [ 93 ] Ms. Bowes established at trial that there were other significant debts in two categories for which the judge either denied relief or made no order. [ 94 ] The first was debts existing in Ms. Bowes’ name at the time of separation and subsequently paid by Ms. Bowes. To the extent that any of these remained outstanding at the time of Mr.

Bowes’ bankruptcy (with the exception of his estimate of a Harvey’s Oil account in the amount of $2,000.00), they were undisclosed to his Trustee (Appeal Book, at 232, 233 and 373). [ 95 ] The second category was the bills Ms. Bowes paid for maintenance and repair of the Pennywell Road and Prince Edward Island properties post-separation. [ 96 ] I summarize the two categories of debt and the date on which the evidence established that Ms.

Bowes had made payment on each, in the table below: Creditor Amount Owing Paid Canada Student Loan $3,707.52 April 2017 Heatec Systems Inc. 760.25 March 24, 2014 Home Depot 311.74 56.35 54.15 January 21, 2014 February 20, 2014 April 22, 2014 TD Insurance * 23.56 25.08 March 19, 2015 November 6, 2014 WalMart 121.78 39.18 March 19, 2014 March 27, 2014 Canadian Tire 138.62 January 28, 2014 C.A. Hubley Plumbing 200.40 90.40 857.34 February 7, 2014 March 11, 2014 October 10, 2014 T. R.

Lawn Care 273.60 684.00 239.40 September 28, 2014 March 24, 2014 October 27, 2014 Concrete Services 3,164.00 3,593.40 February 24, 2014 Tops to Floors 504.92 October 22, 2014 Campbell’s Plumbing 545.30 142.50 By Ms. Bowes’ parents directly Painting Commission 700.00 March 24, 2014 NL Light and Power 398.84 January 16, 2015 Harvey’s Oil 747.81 November 24, 2014 – February 23, 2015 Total 17,380.04 * An additional amount of $261.99 was asserted by Ms.

Bowes to have been paid but no proof was presented to this Court (Appeal Book, at 220 and 294-297, and Transcript, January 18, 2017, at 33-34). (Appeal Book, at 220-222, 296-320, 322-323, 342; Transcript, January 18, 2017, at 8, 18 and 21) [ 97 ] While matrimonial debt is defined in the family property legislation of some jurisdictions, apportionment of debts is not the

subject of specific provision in the Family Law Act. This has not however prevented courts in this province from apportioning debtincurred both during marriage and where appropriate, after separation (see Reid v. Reid, 2018 NLSC 33, at para. 36; Fleming v. Fleming,2009 NLUFC 2, at para. 13; and Martin v. Martin (1998), (NL CA), 168 Nfld. & P.E.I.R. 181, at paras. 21-22 (Nfld.C.A.)). [98] Welsh J.A., writing for the majority in Simmons v. Simmons, 2016 NLCA 28, stated: [21] The Family Law Act does not deal specifically with the question of the division of debts upon dissolution of a marriage. However, itfollows from a reading of the Act as a whole and, in particular,

Part II regarding “Matrimonial Assets”, that the division of debts must beconsidered in light of the fundamental premise that marriage is an economic partnership. In Nova Scotia (Attorney General) v. Walsh,2002 SCC 83, [2002] 4 S.C.R. 325, Bastarache J., for the majority, explained: [46] ...

As a whole, then, the [Matrimonial Property Act] is designed to ensure the economic partnership between married persons byaffording protections to the non-title holding spouse both during the marriage and at its end, whether due to divorce or death. … [48] … Moreover, even the division of matrimonial assets brings with it significant obligations to the spouses.

The manner in which theproperty division is achieved is to calculate the total value of the matrimonial assets and subtract from that amount the total value of thematrimonial debts, without regard, in both cases, to the title in whom these assets or liabilities rest. Thus the [Matrimonial Property Act],by deeming all marriages to be economic partnerships, imposes a significant alteration to the status quo of an individual’s proprietaryrights and obligations. … [22] In Martin v. Martin (1998), (NL CA), 168 Nfld. & P.E.I.R. 181 (Nfld.

C.A.), Cameron J.A., for the Court,discussed the Court’s approach to the division of matrimonial debt: [21] There is no specific guidance provided by the Act on the treatment of debts arising during the course of the marriage. Morgan, J.A.,of this court said in Wells v. Wells (1988), (NL CA), 69 Nfld. & P.E.I.R. 186; 211 A.P.R. 186 (Nfld. C.A.), at 191: The Act makes no provision for the sharing of liabilities.

It would be inequitable, however, to saddle one spouse with the payment ofdebts incurred during the marriage from his or her one half interest in the matrimonial assets and make the other one half interest free ofdebt liability. That, in my view, could not have been the intention of the legislature. It does not follow, however, that all debts incurredduring marriage are automatically ‘family’ debts for which both parties are equally responsible.

Whether or not an income tax debt, orindeed any debt, has to be satisfied from matrimonial assets can only be determined on the facts of the particular case and the prevailingequities. The person seeking exemption from sole liability for debts must establish it. [22] … When one party assumes responsibility for certain joint expenses associated with the matrimonial home after a separation, thereis generally an accounting on sale or final resolution of their matrimonial property issues so that from the time of separation to sale theexpenses related to the property are shared.

There are, of course exceptions, which are dictated by, in the words of Morgan J.A., “theprevailing equities.” (Emphasis added.) [23] Applying these principles, a debt that is clearly joint will be shared, absent some overriding consideration. A debt incurred by oneparty that is not clearly a matrimonial debt must be analyzed to determine how it is to be characterized for purposes of the division ofproperty. For example, the fact that a credit card is held in one party’s name does not necessarily lead to the conclusion that the debtincurred was not a matrimonial debt.

The requirement for evidence will depend on the circumstances. [99] The principles stated in this jurisprudence permit the apportionment of these debts in this case. [100] The obligation to maintain and repair jointly owned assets does not cease on separation. The effect of the Opting-In agreementwas that Ms. Bowes had a one half beneficial interest in the Pennywell Road property. The expenses incurred by Ms. Bowes in relationto the flood at the Pennywell Road property were not discretionary. The repair was essential, particularly since the property wasoccupied by Ms. Bowes and the five children at the time.

It was not established that the remaining expenses associated withmaintenance of the Pennywell Road property were unreasonable. [101] As previously stated, the Prince Edward Island cottage was registered only to Mr. Bowes. Nevertheless, the evidence presentedto the judge established that Ms. Bowes paid the lawn care expenses and cost of flooring replacement after separation. It is immaterialthat the source of some payments may have been Ms.

Bowes’ parents. [102] I conclude that, with the exception of the debt for the painting commission, the judge erred in failing to apportion the debtsenumerated in the earlier Table equally between the parties. The painting commission debt is different because while Ms. Bowes paid it,she retained the painting. The evidence presented by Ms. Bowes established the nature of each expense as well as when and how shepaid each bill. I would allow this ground of appeal. The appropriate relief is addressed below. 3(e): Denying Ms.

Bowes’ Claim for Adjustments to the Spousal Support Ordered in the 2017 Decision in light of the debt Ms.Bowes had shouldered and the Economic Circumstances in which Ms. Bowes was left following Mr. Bowes’ Bankruptcy. [103] The judge had made final child and spousal support orders in his 2017 Decision before division of the parties’ assets andapportionment of their debts which he addressed two years later. In her November 2017 Further Submissions, Ms. Bowes sought anadjustment to the support ordered in the 2017 Decision. [104] In the judge’s 2019 Decision he stated:

[18] Adjustments to spousal support are not part of this matter and if the Applicant wishes to vary any award of spousal support or childsupport then she is to do so by an appropriate application. [105] This was an error of law. [106] As stated in Greenglass v. Greenglass, 2010 ONCA 675: [41]

Section 15.2(4) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), provides a list of circumstances to consider whendetermining spousal support. This list includes the means of the parties. When determining a party’s means, all pecuniary resources mustbe taken into account, including capital assets: Leskun v. Leskun (2006), 2006 SCC 25 , 34 R.F.L. (6th) 1 (S.C.C.) at para. 29. [42] In Hartshorne v.

Hartshorne, 2004 SCC 22 , [2004] 1 S.C.R. 550 at para. 56, Bastarache J., writing for the majority,comments on the approach taken by the trial judge in that case as follows: “Beames J. first awarded spousal support and thenreapportioned the family assets. In doing so, she considered the respondent’s need to become and remain economically independent andself-sufficient twice. This was an error in law.” … [44] … the amount of the equalization payment and the impact of any potential income-generating potential associated with theassets with which each party is left will almost invariably affect the support analysis.

As a matter of law, therefore, the calculation of thedivision of assets and resulting equalization payment must always precede any support analysis. [107] The relevant portions of

section 15.2 of the Divorce Act state: 15.2

(1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure orpay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for thesupport of the other spouse. …

(3) The court may make an order under subsection (1) or an interim order under subsection (2) for a definite or indefinite period or untila specified event occurs, and may impose terms, conditions or restrictions in connection with the order or interim order as it thinks fitand just. …

(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 anyobligation for the support of any child of the marriage; (

c) relieve any economic hardship of the spouses 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. [108] Until the judge could appreciate how Mr. Bowes’ bankruptcy had affected the parties’ respective financial circumstances, hecould not assess the parties’ respective means and needs. Nor could he identify any “economic advantages or disadvantages to thespouses arising from the marriage or its breakdown” or “relieve any economic hardships of the spouses arising from the breakdown ofthe marriage”.

The only spousal support order available to the judge in these circumstances was an interim order which would remain inplace until he could determine the property issues for which he had ordered additional written submissions. The spousal support orderfor $370 per month was made before the judge had the benefit of the briefs he had sought from counsel. This was an error. [109] The judge should have recognized the need to address the harm caused to Ms. Bowes on Mr. Bowes’ bankruptcy (seeCompetiting Notions of Fairness, at 266-267). [110] The evidence before the judge supported the conclusion that Ms.

Bowes shouldered the full burden of the three joint RBC debtsin addition to the other debts summarized in the earlier Table. This represented an economic hardship to her arising on the breakdown ofthe marriage for which she had been economically disadvantaged. In comparison, Mr. Bowes’ bankruptcy resulted in economicadvantage to him. He has been discharged from the joint debt as well as any debt in his name alone; he did not disclose his obligationfor the debt either in Ms.

Bowes’ name or incurred by her to his Trustee and therefore it was not considered on his bankruptcy. [111] The evidence supports the conclusion that Mr. Bowes owes Ms. Bowes $32,017.88 (plus ongoing interest on the line of creditbalance) to apportion the following debt: - overdraft $2,046.22 - VISA 1,977.79 - line of credit payments 5,918.21 - line of credit balance 37,413.51 - Canada Student Loan &

miscellaneous other debts listed in the Table - $17,380 less $700 painting commission 16,680.04 $64,035.77 [112] Ms. Bowes’ claim for adjusted spousal support in relation to the liability she had shouldered was addressed in the Appellant’sFurther Submissions, at paras. 13-17, filed with the judge on November 1, 2017 and was supported by Katz v.

Katz, 2004 MBCA 85: [42] … We are satisfied that the burden on the wife to make additional payments to her father as a result of the husband’s bankruptcy isan economic hardship arising from the breakdown of the marriage, and as such, she is entitled to be compensated for that in the amountof $574.22 per month, as order by the motions judge. See Ness v. Ness (1998), (MB KB), 133 Man.

R. (2d) 7 (Man.Q.B.), which the motions judge referred to in his reasons, which held that bankruptcy of one spouse constituted an economicdisadvantage and hardship compensable by support to the other spouse. [113] In her November 2017 Submissions to the judge, at para. 16, Ms. Bowes proposed that periodic support (additional to the $370per month awarded in the 2017 Decision) of $330 per month for 6 years be awarded for the RBC debt alone (being $250 towards theprincipal and $80 for the line of credit interest). However, Ms.

Bowes did not suggest how the income tax she would have to pay on thissupport, should be addressed. [114] Mr. Bowes conceded at the appeal hearing that some of the debts Ms. Bowes has shouldered were matrimonial (primarily theRBC debt) and that he had not repaid her any amounts ordered in the 2019 Decision. Mr. Bowes’ factum stated that he was content tohave his obligation to repay Ms. Bowes for one half of these debts ordered as spousal support. Mr.

Bowes asserted that since he has nomeans to pay a lump sum, he also proposed increased spousal support but only in the amount of $130 per month until the line of creditwas repaid. Again, there were no submissions on the taxation issue. [115] I have earlier concluded that the judge erred in his 2019 Decision in ordering Mr. Bowes to repay RBC for one half of the line ofcredit, and in failing to apportion repair costs, Ms. Bowes’ Canada Student Loan and other debts which were established as matrimonial.

Related to these errors, the judge erred further in denying any adjustment to the spousal support he had ordered in the 2017 Decision. Until the debts were apportioned, Ms. Bowes’ financial circumstances were not known. I would therefore allow this ground of appeal. [116] In the circumstances, I conclude that the appropriate remedy for the judge’s failure to consider the economic consequences of themarriage breakdown (and in particular how Mr. Bowes’ bankruptcy affected Ms.

Bowes’ financial position) and his related refusal toadjust spousal support is an award of additional, non-compensatory periodic spousal support (as proposed by both parties). [117] Adjusting spousal support to compensate for debt borne by the non-bankrupt spouse is not without precedent. In addition to Katz,see Ness v. Ness, (MB KB), [1998] M.J. No. 470, 133 Man. R. (2d) 7, at paras. 7-11 (Man. Q.B. (Fam. Div.)), andSwan v. Leslie, 2011 ONSC 6879, at paras. 17-20.

I cite the relevant portions from Swan: [17] The fact that a dependent has been left with disproportionate liability for the parties’ joint debt obligations by reason of herspouse’s bankruptcy is a factor that the court can properly take into account in making an order for spousal support to relieve the wife’seconomic hardship. [18] In Freno-Link v. Link, 2001 BCSC 1723 , [2001] 23 R.F.L. (5th) 164, [2001] B.C.J.

No. 2710, the Court held that thehusband’s bankruptcy was a material change in circumstances warranting an increase in spousal support, the objective being to relievethe economic hardship that had resulted from the subsequent events. [19] In Bradley v. Bradley, (ON SC), [2000] O.J. No. 1734, 7 R.F.L. (5th) 270, the court recognized the wife’srepayment of the parties’ joint debt, from which the husband had been discharged from liability through his bankruptcy, as a part of thewife’s need and ordered spousal support to relieve her need. [20] In Taylor v. Taylor, (ON SC), [2004] O.J.

No. 4802, 10 R.F.L. (6th), the husband was ordered to paycompensatory support of $10,000.00 representing money paid by the wife to obtain a release of a joint debt that the husband had beendischarged from through bankruptcy. [118] The Spousal Support Advisory Guidelines (July 2008), (“SSAG”), permit accommodation for unusual facts in a specific claim. As

chapter 12.1 states: … When spouses separate, it is not always possible to adjust the household finances quickly. One of the spouses may have to bear largeand often unmovable (at least in the short run) expenses, most likely for housing or debts. In most instances, the ranges generated by theformulas will cover these exceptional cases, but there may be some difficulties where … property has not yet been divided.

Interimspousal support can be adjusted back to the formula amounts once a house has been sold or a spouse has moved or debts have beenrefinanced. [119] Within this jurisdiction a former husband’s assumption of full responsibility for the joint line of credit (intra alia) was consideredto be circumstances qualifying as an exception to the formulas (Marche v. Marche, 2009 NLTD 34). To similar effect see TenHoeve v.TenHoeve, [2009] O.J. No. 1423, 176 A.C.W.S. (3d) 449 (Ont. S.C.J.).

[ 120 ] As explained by Ann C. Wilton and Noel Semple in Spousal Support in Canada (Toronto: Carswell, 2011), at 623: Underpinning the Advisory Guidelines is a basic assumption that the parties have accumulated the typical family or matrimonial property for couples of their age, incomes and obligations, and that their property is divided equally under the matrimonial property laws. Significant departures from those assumptions may affect where support is fixed within the ranges for amount and duration. … Where one spouse assumes a disproportionate share of the family debts, it may be necessary to use the debt payment exception described below in

Chapter 12. But there will be other cases, not so severe, where the debt payments of one spouse will just be a factor pushing the amount higher or lower within the range, depending upon which spouse is paying the debts. [ 121 ] Additional spousal support was required to address the economic consequences to Ms. Bowes having shouldered these debts.

It should take the form of non-compensatory support and would be in addition to the $370 per month ordered by the judge. [ 122 ] Had additional non-compensatory spousal support been awarded following the trial, the judge would have been able to use the SSAG to assist in determining the tax consequences of its receipt to Ms. Bowes. [ 123 ] In these circumstances the tax gross-up must be estimated. It would be unreasonable to require the parties to return to the Family Division to have a precise calculation. [ 124 ] I would order Mr.

Bowes to pay non-compensatory periodic spousal support to address the $32,017.89 (plus one half of ongoing interest on the line of credit) owed to Ms. Bowes. A reasonable period for payment would be between 6 and 7 years and a reasonable rate would be $400 per month. However, since the periodic support will be taxable in her hands, the amount must be grossed up 25 percent for taxes for a total of $500 a month. It will be payable until Ms. Bowes has received the net equivalent of $32,017.89 plus one half of accumulated and ongoing interest on the RBC line of credit.

Issue 4: Whether the Judge Erred in Making No Order Respecting the 2008 Saturn [ 125 ] Ms. Bowes’ parents had purchased a Honda Civic motor vehicle for both parties during the marriage. On their separation, Mr. Bowes retained a Mazda, minivan and Ms. Bowes retained the Honda Civic. Despite the joint registration on the Honda Civic, Ms. Bowes subsequently traded it in on a 2008 Saturn Outlook on an equal trade basis (Transcript, January 18, 2017, at 34) and it was in her possession at the time of the trial. Ms. Bowes sought relief under

section 26 of the FLA relative to this vehicle. [ 126 ] The 2008 Saturn was disclosed by Mr. Bowes to his Trustee whose opinion was that the net realizable value of Mr. Bowes’ one half interest in it was $5,500. In comparison, the Trustee valued the net realizable value of Mr. Bowes’ one half interest in the Mazda minivan at zero on the basis that it was an exempt asset (Appeal Book, at 231-232). He also characterized Mr. Bowes’ employment benefits as exempt assets. [ 127 ] The Trustee wrote Ms. Bowes to confirm that Mr.

Bowes’ interest in the Saturn now vested in the Trustee and that the vehicle could not be sold but this Court was not referred to any evidence suggesting that Ms. Bowes was advised that she could make a proof of claim respecting this asset. Ms. Bowes’ evidence at trial was that Service NL continued to register the vehicle in her name alone on “the condition that this will all be resolved after trial” and that she had “difficulty every April renewing [her] automobile insurance with TD Meloche Monnex” (Transcript, January 18, 2017, at 37 and 54).

Further, she testified that “each time (she makes) enquiries about it” to the Trustee, “Mr. Penney keeps asking for larger and larger payments” (for transfer of the vehicle to her) and that he had “written TD Meloche Monnex saying that as a co-owner he doesn’t wish to have insurance on the vehicle” (Transcript, January 18, 2017, at 37 and 54). [ 128 ] I conclude that in these circumstances, the judge erred in failing to provide a remedy to Ms. Bowes respecting the Saturn. The effect of Ms.

Bowes’ application for bankruptcy was that the Mazda in his possession and his employment benefits were treated as exempt assets with no value. However, as between Mr. and Mrs. Bowes, they had value that should have been considered. Mr. Bowes was selective in the debt he disclosed to his Trustee. He failed to disclose the substantial debt incurred by his wife relative to properties he listed as his own. Mr. Bowes took possession of personal property of Ms. Bowes (washer and dryer) and sold it for his sole benefit. Ms. Bowes was left to shoulder significant debt that Mr.

Bowes acknowledged should be apportioned but he provided no assistance to Ms. Bowes. He shirked his responsibilities, did not behave reasonably and Ms. Bowes was harmed financially. [ 129 ] In these circumstances Ms. Bowes is entitled to a declaration pursuant to sections 21 and 26 of the Family Law Act that she retain the 2008 Saturn that was the equivalent trade for the Honda Civic, free and clear of any claim by Mr. Bowes.

Issue 5: Whether the Judge erred in the Commencement date for Child Support [ 130 ] As explained in paragraph 6 herein, the period for which no child support was directly payable was June 24, 2013 to February 6, 2015. [ 131 ] The date of initiation of proceedings (or date of notice) is usually the effective date for the commencement or variation of child support ( D.B.S. v. S.R.G. , 2006 SCC 37 , [2006] 2 S.C.R. 231 , at paras. 118 , 121 and 125).

In this case that was March 24, 2014. [ 132 ] D.B.S. supports consideration of the recipient’s delay in seeking retroactive support, the payor’s conduct, the child’s circumstances and any hardship endured when addressing the appropriateness of a retroactive child support order (paras. 99-116). [ 133 ] The judge did not refer directly to these factors but for the reason stated below no error is established in his failure to do so.

[ 134 ] The judge’s reasons confirm that Ms. Bowes’ claim for retroactive child support, was denied for a fact-specific reason. The judge was satisfied that in the relevant period Mr. Bowes regularly deposited significant amounts of money into the parties’ joint bank account from which Ms. Bowes withdrew as necessary (2017 Decision, at para. 151). The judge concluded that it was difficult to separate out what portion of Mr. Bowes’ income was dedicated to child support in this period. [ 135 ] Although Ms.

Bowes claims that her ex-husband was also making withdrawals from this account for his own expenses in the relevant period, I conclude that the evidence and submissions before the judge did not allow for either a more precise accounting, or consideration of whether Mr. Bowes’ conduct was a relevant factor to consider on the issue of retroactive child support. [ 136 ] No error is established in the judge’s denial of retroactive child support for the period prior to February 6, 2015. Issue 6: Whether the Judge Erred in the Calculation and Commencement Date for Spousal Support [ 137 ] At trial, Mr.

Bowes acknowledged Ms. Bowes’ entitlement to spousal support on a compensatory basis “since it was agreed between them that [she] would remain at home caring and raising their five children while [Mr. Bowes] advanced his professional career” (2017 Decision, at para. 152). [ 138 ] Ms. Bowes had received $2,380 per month in child support as a result of an interim order on February 6, 2015 but had not received spousal support. Ms. Bowes sought retroactive spousal support at trial. The judge ordered compensatory spousal support of $370 per month for seven years effective August 1, 2017 but the judge denied Ms.

Bowes’ claim for retroactive spousal support. The sole reason given was that since Mr. Bowes had been paying $2,380.00 a month from February 2015 to August 2017 and the set off amount of child support was calculated in August 2017 to be $1,623.00 per month, the judge was of the view that Mr. Bowes was essentially paying combined child support ($1,623.00 per month) and spousal support ($757/mo.) during the term of the interim order (February 2015 – August 2017).

I have previously noted that the judge made a mathematical error and that the child support offset was $1,523 per month. [ 139 ] The judge misapprehended the facts. It was not until September 2015 that the transition to interim shared parenting began (Appeal Book, at 66, para. 10). The period during which Ms. Bowes had received the “equivalent” of spousal support was therefore September 2015 to August 2017. Further, the judge gave no consideration to the period between the parties’ separation (June 24, 2013) and the date of the Interim Order (February 2015). [ 140 ] In Kerr v.

Baranow , 2011 SCC 10 , [2011] 1 S.C.R. 269 , the Court endorsed consideration of the D.B.S. factors in the assessment of the appropriateness of retroactive spousal support but cautioned that these factors “must be considered and weighed in light of the different legal principles and objectives that underpin spousal as compared with child support” (para. 207). [ 141 ] The Court explained that unlike child support, spousal support entitlement is not automatic. Child support is the right of the child, and not the parent.

Child support depends largely on the income of the parent and not on a highly discretionary balancing of means and needs; further, concerns about notice, delay and misconduct generally carry more weight in relation to claims for spousal support (para. 208). [ 142 ] The modified D.B.S. factors to be considered on a retroactive spousal support claim are, the needs of the recipient, the conduct of the payor, the reason for the delay (if any) in seeking spousal support, and the hardship that the retroactive award may occasion on the payor. [ 143 ] The judge made no direct reference to these factors which I address below. [ 144 ] Ms.

Bowes’ request for spousal support was made on March 24, 2014. This was effective notice to Mr. Bowes and as previously stated, as a general rule, the default option for the effective date of any support order ( D.B.S. , at paras. 118, 121 and 125 ). [ 145 ] The evidence did not suggest that Ms.

Bowes’ conduct should impact the presumptive effective date. [ 146 ] As to hardship occasioned by the award, the Court in Kerr explained that the “focus of concern about conduct must be on conduct broadly relevant to the support obligation, for example concealing assets or failing to make appropriate disclosure” ( Kerr , at para. 212 , citing D.B.S. , at para. 106 ). [ 147 ] More recently, Colucci v. Colucci , 2021 SCC 24 , also supports a broad approach to blameworthy conduct albeit in a child-support context.

Failure to disclose relevant financial information, mere passivity or taking the path of least resistance, and the payor privileging their own interests over those of the child were all considered (paras. 41, 48-54 and 101). I agree that the “same imperatives apply when dealing with issues of retroactive spousal support…” ( Hevey v. Hevey , 2021 ONCA 740 , at para. 34 ). [ 148 ] I have already discussed Mr. Bowes’ failure to disclose the Opting-In Agreement to either the mortgagee or his Trustee, his separate failure to list numerous debts on his application for bankruptcy and his failure to assist Ms.

Bowes with the significant debt that she has shouldered since his bankruptcy. I consider his conduct to be broadly relevant to the spousal support obligation because it prejudiced Ms. Bowes’ financial situation as earlier explained. [ 149 ] As to the circumstances of the spouse seeking support, the Court in Kerr explained that: [212] …Consideration of the circumstances of the spouse seeking support, by analogy to the D.B.S . analysis, will relate to the needs of the spouse both at the time the support should have been paid and at present.

The comments of Bastarache J. at para. 113 of D.B.S. may be easily adapted to the situation of the spouse seeking support: “A [spouse] who underwent hardship in the past may be compensated for this unfortunate circumstance through a retroactive award. On the other hand, the argument for retroactive [spousal] support will be less convincing where the [spouse] already enjoyed all the advantages (s)he would have received [from that support]”.

As for hardship, there is the risk that a retroactive award will not be fashioned having regard to what the payor can currently afford and may disrupt the payor’s ability to manage his or her finances. However, it is also critical to note that this Court in D.B.S . emphasized the need for

flexibility and a holistic view of each matter on its own merits; the same flexibility is appropriate when dealing with “retroactive” spousal support. [ 150 ] At the time of trial, Ms. Bowes was 43 years of age. Although qualified as a teacher, she outlined at trial the inquiries she had made respecting availability of teaching positions in Newfoundland and Labrador and why she determined instead that she should retrain as an Emergency Medical Responder (EMR) at a cost of $3,620.00 (Transcript, January 16, 2017, at 11-17).

She was successful in obtaining work in this field as a part-time casual and at the time of trial was earning approximately $30,000.00 a year. However, Ms. Bowes explained that positions as EMRs are available only outside the St. John’s metropolitan area. Ms. Bowes therefore was required to work on the Southern Shore of the Avalon Peninsula. [ 151 ] Once the Pennywell Road property was lost, Ms. Bowes lived in various rental properties and both her financial and personal circumstances changed considerably (negatively) after the separation. [ 152 ] The judge failed to consider Ms.

Bowes’ claim to spousal support for the period between March 2014 (date of application) and September 2015 (change in parenting). This was an error. In this period, there was no evidence that either Ms. Bowes’ use of the joint account or the full amount of child support being paid while all five children were in Ms. Bowes’ care had provided Ms. Bowes with the equivalent of “the advantages she would have received from a spousal support order.” Further, as the Table referenced earlier confirms, it was subsequent to March 2014 that Ms.

Bowes shouldered the joint debt and other expenses that were required to be apportioned. [ 153 ] Consideration of the legal principles endorsed in Kerr and applied to the facts of this case support the making of a retroactive spousal support order for the period March 24, 2014 to September 28, 2015 (18 months). [ 154 ] The judge’s award of $370 per month should have included retroactive payments for the period March 24, 2014 to September 28, 2015. I would allow this ground of appeal. Ms. Bowes is entitled to retroactive compensatory spousal support of $6,660 for this period.

SUMMARY [ 155 ] In the circumstances of this family law claim, complicated by Mr. Bowes’ bankruptcy, the judge erred: (

a) In requiring Mr. Bowes to assume one half of the principal owing on the line of credit and make arrangements with the bank to repay his share of that debt. The judge could not require Mr. Bowes to re

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