Traci Reid Applicant And: Dwayne Reid Respondent, 2018 NLSC 33

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR FAMILY DIVISION Citation : Reid v. Reid , 2018 NLSC 33 Date : February 13, 2018 Docket : 201204F0327 Between: Traci Reid Applicant And: Dwayne Reid Respondent Before: Justice Laura A. Mennie Place of Hearing: Corner Brook, Newfoundland and Labrador Dates of Hearing: February 27 – 28, 2017; March 1 – 3, 2017; September 13 – 14, 2017; and November 28, 2017

Summary: The parties were married for 13 years. Mrs. Reid became ill early in the marriage and was unable to work. The couple relied on Mr. Reid’s income. From approximately 1997 to 2007, Mr. Reid was employed with a business. In 2007, he purchased 50 percent of the shares of the business. The parties separated in August 2011. In 2013, Mr. Reid purchased the remaining shares in the company. Mrs. Reid applied for a division of matrimonial property, compensation for her interest in the business and spousal support on both a prospective and retroactive basis. Mr. Reid agreed that Mrs.

Reid was entitled to spousal support but disagreed as to the amount of his income for support calculations. Mr. Reid made a claim for occupational rent. Held: Mrs. Reid was entitled to spousal support on a go forward basis in the amount of $5,456 per month as well as retroactive support. The Court attributed 75 percent of the company’s pre-tax corporate income to Mr. Reid. The Court also held that Mrs. Reid had an interest in the business and was entitled to compensation. The matrimonial property was divided. Mr. Reid was ordered to make an equalization payment to Mrs. Reid.

The claim for occupational rent was dismissed.

Appearances: Melissa May Appearing on behalf of Traci Reid Donald Gallant, Q.C. Appearing on behalf of Dwayne Reid Authorities Cited: CASES CONSIDERED: Ellis v. Ellis, 1999 NSCA 31; Selbstaedt v. Selbstaedt, 2004 NSSF 110; Fleming v. Fleming, 2009 NLUFC 2;Mitchell v. Mitchell, 2007 NLTD 155; Abbott v. Abbott, 2002 NSSF 39; Cameron v. Cameron (1995), N.S.R. (2d) 124, 58 A.C.W.S. (3d) 263 (N.S. S.C.), aff’d (1996), N.S.R. (2d) 156, 62 A.C.W.S. (3d) 531 (N.S. C.A.); McFarlane v. McFarlane, 2016 ABCA 183;Linke v. Linke, 2015 ABCA 367; Arthur v.

Arthur (1985), (NS SC), 67 N.S.R. (2d) 323, 31 A.C.W.S. (2d) 427 (N.S.S.C.(TD)); Casey v. Casey, 2013 SKCA 58; MacDonald v. MacDonald (1993), 1993 ABCA 106 , 39 A.C.W.S. (3d) 1167, 10Alta. L.R. (3d) 20 (Alta.C.A.); Gosse v. Sorensen-Gosse, 2011 NLCA 58; Snook v. Snook, 2010 NLCA 57; Brandl v. Rolston, 2013 BCCA 235; Baum v. Baum (1999), (BC SC), 182 D.L.R. (4th) 715, 94 A.C.W.S. (3d) 114 (B.C.S.C.); Kowalewich v.Kowalewich, 2001 BCCA 450; Hausmann v. Klukas,

(2009) BCCA 32, leave to appeal refused [2009] S.C.C.A. No. 135; Brophy v.Brophy (2002), (ON SC), 116 A.C.W.S. (3d) 899, 32 R.F.L. (5th) 1 (Ont. Sup. Ct.); White Burgess Langille Inman v.Abbott and Haliburton and Co., 2015 SCC 23; Bracklow v. Bracklow, (SCC), [1999] 1 SCR 420; and Burton v. Griffin,2017 NLTD(F) 22. STATUTES CONSIDERED: Family Law Act, R.S.N.L. 1990, c. F-2; Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.); and Federal ChildSupport Guidelines, SOR/97-175 REASONS FOR JUDGMENT Mennie, J.: INTRODUCTION [1] On July 30, 2012, Mrs.

Reid filed an Originating Application wherein she sought an order for spousal support and division ofmatrimonial property as well as an order requiring Mr. Reid to maintain her on his medical and dental insurance health plan. In hisResponse, Mr. Reid agreed to an equal division of matrimonial property; however, the parties disagreed on the valuation of some itemsand the nature of some of the outstanding debts. Mr. Reid also agreed to pay spousal support but disagreed with Mrs. Reid’s assessmentof his income.

He would not agree to ensure ongoing medical insurance coverage. [2] This matter has been before the court for over five years. The trial lasted seven days. I do not intend to review all of theevidence presented. It is necessary, however, at the outset, to provide a brief overview of the facts with a focus on two specific areas:Mrs. Reid’s health and the evolution of Mr. Reid’s relationship with a company called Western Woodworks. This review is necessary inorder to provide some factual context for the issues I must ultimately determine.

I will then set out the issues, outline any additionalevidence that I have considered, discuss the applicable law and finally provide my analysis and conclusion. background [3] Mr. and Mrs. Reid were married on August 22, 1998. The couple had no children. They resided in Deer Lake throughout themarriage and each party continues to do so today. At the date of their marriage, Mr. Reid was employed as an engineer with thecompany, Western Woodworks, which was owned at the time by a Mr. Roy Whalen. Mrs. Reid was also employed from time to time. [4] Mrs. Reid became ill early in the marriage.

Finding a diagnosis proved quite challenging. In 2008, the couple travelled to theMayo Clinic in Rochester, United States, for a diagnosis and treatment. In 2009, the Reids hired a private doctor in Toronto, Dr. EricHatashita. With the assistance of Dr. Hatashita, Mrs. Reid was referred to various other specialists in Ontario. The Reids decided thatMrs. Reid should live in Toronto so that she could access the medical services with greater ease. Mrs. Reid stayed in Toronto for aboutthree years. Over the course of the three years she rented various condominiums. Mr.

Reid remained in Deer Lake due to hisemployment; however, he would visit his wife in Toronto almost every second weekend. [5] Despite the medical services she was receiving in Toronto, Mrs. Reid was not getting better. After she underwent an

unsuccessful surgery in Toronto, the Reids returned to New York where Mrs. Reid underwent a further operation at the New York Presbyterian Hospital. [ 6 ] As a result of the various tests and consultations, Mrs. Reid has been diagnosed with a number of conditions. These conditions are described by Dr. Hatashita in a letter dated September 4, 2013. [1] He stated: . . . Ms. Reed’s (sic) medical condition, symptoms and diagnoses are very complicated.

She has had a long history of uncontrolled abdominal pain probably attributed to a rare condition called Sphincter of Oddi dysfunction, uncontrolled lower back pain with evidence of sacroiliitis, absent menstrual periods due to an abnormal hormonal level of prolactin, (now normalizing,) jaw, face and head pains attributed to temporal mandibular joint pains, and ulcerative colitis presently controlled with medication. She is also suffering from a chronic pain condition and fibromyalgia.

She was investigated at the Mayo Clinic in 2008 and was also found to be suffering from a thyroid condition at that time as well. . . . [ 7 ] And further: . . . Unfortunately, she has not improved from her most disabling medical problems which are the abdominal pain, low back pain, face and jaw pains, chronic pain syndrome and fibromyalgia. Her ulcerative colitis and thyroid conditions are under control thankfully. She is completely disabled from work due to these uncontrolled medical conditions for the last few years. [ 8 ] Seeking out this diagnosis was quite costly for the parties.

The services of a private physician were approximately $3,300 per year. Condominium rentals in Toronto ranged from $2,200 to $5,000 per month. The cost associated with treatment received in the United States amounted to tens of thousands of dollars. As well, the parties were incurring duplicate living expenses when Mrs. Reid was living in Toronto and Mr. Reid in Deer Lake. In addition, there were significant travel costs. [ 9 ] As Mrs. Reid had not worked since 2003, the couple relied solely on Mr. Reid’s income. Mr. Reid is an engineer.

In 1997 he was hired by Roy Whalen, owner/operator of Western Woodworks, a company which manufactured roof trusses in Deer Lake, NL. Mr. Reid testified that during the first season he worked for Mr. Whalen, he was paid $13 or $14 dollars per hour. In his second season, he earned approximately $500 per week. In his third season, around the spring, 1999, Mr. Whalen and Mr. Reid entered into a profit sharing arrangement whereby he would continue to receive his weekly pay but, in addition, he would receive five percent of the company’s profit. In 2000, he received 10 percent. Mr.

Reid’s profit share increased each year thereafter until 2007. [ 10 ] In 2007, Mr. Whalen offered Mr. Reid the opportunity to purchase 50 percent of the shares of Western Woodworks for the sum of $284,000. To assist Mr. Reid with the purchase, Mr. Whalen gifted Mr. Reid the sum of $245,244. Mr. Reid used these funds to pay off the mortgage that he and Mrs. Reid had secured against their matrimonial home situated at 191 Nicholsville Road, Deer Lake. The mortgage payout was approximately $158,761. Mr. Reid and Mrs.

Reid then obtained a RBC Homeline Line of Credit (hereinafter referred to as the “RBC Homeline”) in the amount of roughly $332,000, secured by the matrimonial home. Mr. Reid withdrew funds from the RBC Homeline and completed the purchase of 50 percent of the shares in Western Woodworks. As a 50 percent owner in the company, Mr. Reid no longer received any weekly remuneration. Instead he and Mr. Whalen would discuss his pay entitlement every December. Both Mr. Reid and Mr. Whalen testified that despite Mr. Reid’s ownership of one-half of the shares, Mr. Whalen had the final say as to how much Mr.

Reid would personally receive on an annual basis. [2] [ 11 ] Given that Mr. Reid received his income only once a year, he and Mrs. Reid had to develop a system which would allow them to meet their daily expenses. The parties adopted a practice whereby all of their living expenses, including medical expenses, were paid as they became due with a CIBC Aventura Visa Infinite credit card (hereinafter referred to as the “Visa”). They would then use the RBC Homeline to pay off the monthly Visa balance. Each December, upon receiving his share of the company’s profits, Mr.

Reid would pay off the RBC Homeline. [ 12 ] In 2009, the parties’ RBC Homeline had almost reached its limit. This was due to many factors including Mrs. Reid’s ongoing medical expenses, the parties’ decision to maintain two homes in two different provinces and their choice to live a rather affluent lifestyle. [3] When Mr. Whalen became aware of the situation he decided to loan Mr. Reid the sum of $284,000 via his company, Central Woodworks. The loan, dated January 5, 2009, was not secured against the Reids’ matrimonial home.

It bore interest at the bank prime lending rate and was to be repaid in equal annual installments of $28,400, commencing January 5, 2010. The loan was payable upon demand with 30 days written notice. [4] Mr. Reid applied the loan proceeds to the balance outstanding on the parties’ RBC Homeline. [ 13 ] On August 9, 2011, the Reids separated. Mrs. Reid returned from Toronto in November of that same year and recommenced living in the matrimonial home. She testified that Mr.

Reid agreed to pay the expenses associated with the house: i.e. utilities, insurance, and as well as her living expenses which included hotel accommodations and air fare related to her continued and frequent travel to Toronto for medical appointments. [ 14 ] Mrs. Reid filed an Originating Application with this Court on July 30, 2012. On October 10, 2012, Mr. Reid filed an Interim Application requesting, among other things, an order for the sale of the matrimonial home and a spousal support order in Mrs. Reid’s favor for $3,000 per month. In her Response, Mrs.

Reid sought support in the amount of $5,895 per month as well as an order that Mr. Reid continue to pay the costs associated with her medical treatment and to continue her medical and dental insurance. She would not agree to the house being sold at the price suggested. With her consent, however, the Court made an order requiring her to arrange for a new appraisal.

[ 15 ] On November 13, 2012, one day before the Interim Application was heard by the Court, Mr. Whalen terminated Mr. Reid’s employment. On the date scheduled for the interim hearing, the parties agreed to an order whereby Mr. Reid would pay spousal support in the amount of $4,000 per month subject to a review in three months. It was also agreed that Mr. Reid would maintain medical and dental coverage for Mrs. Reid. [ 16 ] On December 6, 2012, Mr. Whalen gave Mr. Reid written notice on behalf of Central Woodworks of its intention to call in the balance of the loan it had given him in October 2009.

As a result, in January 2013, Mr. Reid used the RBC Homeline to pay Central Woodworks the balance of the loan being $205,000. A few days later Mr. Whalen offered to sell the remaining shares of Western Woodworks to Mr. Reid for $1,716,000. Mr. Reid accepted his offer and agreed to pay the selling price over a period of seven years with annual payments of $250,000 plus six percent interest. The purchase of the remaining shares was not finalized until April 30, 2013.

The parties sold their matrimonial home on May 1, 2013 for $625,000. [ 17 ] The parties returned to court later in May 2013 as a result of an Interim Application filed by Mrs. Reid seeking an order for support in the amount of $8,124 per month, an order requiring Mr. Reid to continue to pay Dr. Hatashita’s fee and an order that he maintain Mrs. Reid on his health insurance. After a hearing, the Court granted the relief requested by Mrs. Reid except that spousal support was set at $3,300 per month.

It has remained at this monthly amount ever since. issues [ 18 ] With this background information in mind, the issues I must determine are as follows: a. What is the appropriate division of the matrimonial property, including debts? b. Is Mrs. Reid entitled to a share of the business asset, Western Woodworks, pursuant to

section 29 of the Family Law Act , R.S.N.L. 1990, c. F-2? c. What is Mr. Reid’s income for the purposes of spousal support? d. What amount of spousal support is payable by Mr. Reid to Mrs. Reid on a go forward basis and for how long? e. What amount of spousal support is payable by Mr. Reid to Mrs. Reid on a retroactive basis? a. What is the appropriate division of the matrimonial property, including debts? [ 19 ] The matrimonial property consisted of the matrimonial home as well as a number of assets and debts. The parties sold the matrimonial home after separation for the sum of $625,000.

The RBC Homeline, which had a balance of $301,296.14, was paid in full out of the proceeds of the sale. The remainder of the funds, $312,654.96, was placed in trust at a law firm in Deer Lake. On October 13, 2016, the Court made an interim order permitting the sum of $28,609 to be released to each of the parties for the purposes of paying their legal fees and paying for costs incurred in the preparation of the respective cases for trial. The balance of $264,425.82 remains in trust. At trial, Mr. Reid requested that those monies be equally divided between the parties. Mrs. Reid disagreed.

She argued that the RBC Homeline debt of $301,296.14, which was paid out of the proceeds of sale, was not a matrimonial debt. Mrs. Reid submitted that $205,000 of the $301,296.14 represented a business debt owed by Mr. Reid for the loan Mr. Whalen gave him via Central Woodworks in 2009. Mrs. Reid maintained the remainder of the $301,296.14, approximately $96,296, represented the parties expenses after separation. She argued that as Mr. Reid had agreed to pay for her expenses as support “in kind” he was responsible for the full amount. [ 20 ] In relation to the nature of the $205,000 debt due to Mr. Whalen, Mr.

Reid testified that the loan from Central Woodworks was solely for the purpose of allowing the Reids to pay off the RBC Homeline which was dangerously close to the limit. He submitted that unless the Homeline was available to them, they would no longer be able to use their Visa to pay their monthly expenses as had always been their practice. On cross-examination it was suggested to Mr. Reid that he reported the loan to the Canada Revenue Agency as a share purchase. Mr. Reid denied this. In his testimony he stated that there was no business aspect to the loan whatsoever.

He did admit that he used the RBC Homeline to pay off the loan without discussing it with Mrs. Reid beforehand. [ 21 ] Mr. Roy Whalen testified in support of Mr. Reid’s characterization of the loan. He testified that he loaned Mr. Reid the money “to help him out with some bills.” In terms of repayment, Mr. Whalen confirmed that Mr. Reid was to pay the sum of $28,400 a year until paid in full. The contract, however, did allow Mr. Whalen to call in the loan with 30 days written notice. [ 22 ] Mrs. Reid maintained that the $205,000 represented the balance of the loan due to Mr. Whalen.

She testified on direct that this was a business debt not a matrimonial debt. On cross-examination, however, Mrs. Reid admitted that she was aware that Mr. Whalen had loaned them, while they were married, the sum of $284,000 to help them pay off the balance on the RBC Homeline. She also acknowledged her understanding that the balance of the loan had to be paid out of the sale proceeds upon the sale of the matrimonial home. [ 23 ] As for the remainder of the amount due on the RBC Homeline, approximately $96,296, both Mr. and Mrs.

Reid agreed that this figure represented the parties’ living expenses after separation until the first spousal support order was put in place in November 2012. They disagreed, however, on what portion each should pay. Mrs. Reid testified that when the parties separated, Mr. Reid agreed to pay for all of her living expenses. As a result, Mrs. Reid continued to use her Visa as she had always done during the marriage. As there was no formal spousal support order in place at the time, Mrs. Reid assumed that Mr.

Reid was using his income to pay her support “in kind”. [5] She testified that she was unaware that he was using the parties’ RBC Homeline to pay the credit card balance each month. Mrs. Reid argued that in all of these circumstances requiring her to pay 50 percent of the approximately $96,296 remaining on the RBC Homeline was in effect asking her to “fund” her own support. [ 24 ] Mr. Reid disagreed. He testified that Mrs. Reid resided in the matrimonial home from the date of separation until the house sold, approximately 18 months.

During that time, he submitted that he paid for all of the expenses associated with the matrimonial home and as of November 16, 2012 paid spousal support in the amount of $4,000 per month in addition. Moreover, in February 2012, he made

a payment on the RBC Homeline in the amount of $20,000. Mr. Reid suggested that any debt that had accumulated on the RBC Homeline post-separation should be considered as joint matrimonial debt. On cross-examination, Mr. Reid confirmed that he was paying Mrs. Reid’s living expenses with the parties’ RBC Homeline. It was suggested to Mr. Reid that by using the RBC Homeline, Mrs. Reid was essentially paying for her own support. Mr. Reid did not agree. When it was suggested to him, however, that he in fact was not paying Mrs.

Reid’s expenses but rather the expenses were being paid for by the value of the home, he concurred. [ 25 ] With respect to the actual amount each party incurred on the Visa, Mr. and Mrs. Reid agreed as to the expenses each incurred on the Visa from the date of separation until August 27, 2012 with the exception of three billing periods. I will briefly review the evidence presented in this regard and set out my finding. [ 26 ] For the billing period of August 28, 2011 to September 27, 2011, Mr. Reid suggested that Mrs. Reid had incurred expenses of $8,637.42.

He reached this figure by deducting an expense of $6,998.44 on his Visa and attributed it to Mrs. Reid. [6] The expense represented an amount due the New York Presbyterian Hospital for medical services provided to Mrs. Reid. On cross-examination, Mr. Reid agreed that these services were provided pre-separation and should be divided between the parties. As a result, for the billing period of August 28, 2011 to September 27, 2011, I have determined that Mr. Reid charged a total of $8,703.28 to the Visa and Mrs.

Reid, $5,138.20. [ 27 ] The second billing period for which the parties figures were in issue was the period December 28, 2011 to January 27, 2012. Mr. Reid suggested that he charged $5,639.07 to the Visa whereas Mrs. Reid charged $6,239.08. In her final submissions, Mrs. Reid indicated that she only spent $4,170.80 and Mr. Reid spent $7,707.26. I have reviewed the Visa bill in question. The cause of the difference appears to be Mr. Reid’s treatment of the property tax bill for the matrimonial home. He attributes the full amount of the bill, $4,136.57, to Mrs. Reid.

I have concluded that the property tax bill was a matrimonial debt which should have been equally apportioned between the parties. As a result, for the billing period December 28, 2011 to January 27, 2012, I have determined that Mr. Reid charged $7,707 and Mrs. Reid charged $4,170.51 [ 28 ] The third billing period in issue is June 28, 2012 to July 27, 2013. Both parties agree that $62.36 should be attributed to Mr. Reid and $273.84 to Mrs. Reid. The parties disagree as to whether these amounts represent a credit or a debit.

I have reviewed the Visa invoice in question and I am satisfied that these figures represented credits. [ 29 ] Upon reviewing the evidence and the transaction records I conclude that for the period from the date of separation until August 27, 2012, each party charged the following expenses to the Visa: Chart 1 Expenses charged by each party to the Visa from date of separation to August 27, 2012 (Rounded) BILLING PERIOD MR. REID MRS.

REID August 9 to August 27, 2011 $442 $3,300 August 28 to September 27, 2011 $8,703 $5,138 September 28 to October 27, 2011 $737 $14,377 October 28 to November 27, 2011 $2,064 $7,783 November 28 to December 27, 2011 $2,364 $10,759 December 28, 2011 to January 27, 2012 $7,707 $4,171 January 28 to February 27, 2012 $6,294 $6,180 February 28 to March 27, 2012 $2,239 $4,427 March 28 to April 27, 2012 $241 $4,176 April 28 to May 27, 2012 $43 $7,276 May 28 to June 27, 2012 $1,155 $4,589 June 28 to July 27, 2012 - $62 (credit) - $274 (credit) July 28 to August 27, 2012 0 $476 TOTAL $31,927 $72,378 [ 30 ] I will now review the applicable law.

The law [ 31 ] The law with respect to the matrimonial home and division of matrimonial assets is set out in the Family Law Act . Sections 8 , 19 and 21 state 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. . . .

19. The purpose of this

Part is to recognize that child care, household management and financial support are the jointresponsibilities of the spouses and that there is a joint contribution by each of the spouses, financial and otherwise, that entitles eachspouse to an equal division of the matrimonial assets acquired during the course of the marriage. 21.

(1) Where (

a) a petition for divorce is filed; (

b) a marriage is declared a nullity; (

c) the spouses have been separated and there is no reasonable prospect of the resumption of cohabitation; or (d) 1 of the spouses has died, either spouse is entitled to apply to a court to have the matrimonial assets divided in equal shares, notwithstanding the ownership of theseassets, and the court may order that division. . . . [32] Despite the existence of provincial legislation governing the division of property upon a marriage breakdown, the term“matrimonial debt” is not defined. The term has, however, been interpreted by the courts. In Ellis v.

Ellis, 1999 NSCA 31, the NovaScotia Court of Appeal considered the appropriate division of marital assets and debts. The court defined “matrimonial debt” as followsat paragraph 31: 31 "Matrimonial debt" is not a term defined in the Matrimonial Property Act. The only reference to debts in the Act is in s. 13 whichdirects that a judge, in determining whether an equal division of assets would be unfair or unconscionable, may take into account "theamount of the debts and liabilities of each spouse and the circumstances in which they were incurred".

Our courts have developed apolicy of classifying debts as "matrimonial" or otherwise as an aid to deciding which party should bear responsibility, or receive credit inthe division of assets. In Bailey v.

Bailey (1990), (NS SC), 98 N.S.R. (2d) 9 (N.S.C.A.), Roscoe, J., as she then was,wrote at p. 14: ... in determining which, of all of the debts listed by the parties in this action, should be allowed as matrimonial debts, I must considerwhether they were incurred for the benefit of the family unit, whether they are ordinary household debts and if they were incurred afterthe separation, whether they were necessary to meet basic living expenses or preserve matrimonial assets and the overall consideration iswhether the debts were reasonably incurred. [33] In Selbstaedt v.

Selbstaedt, 2004 NSSF 110, Dellapina, J. cited the following definition of matrimonial debt at paragraph 37: 37 Campbell, J. in Larue, supra, referring to the decision of Williams, J. in Grant, supra, summarized the definition of matrimonial debtas follows: I agree with Justice Williams'

summary in Grant, supra, of the judge made definition of "matrimonial debt" which includes but is notlimited to debt incurred for the benefit of the family unit, during the marriage, for ordinary household family matters reasonably incurredand, if incurred after separation, necessary for basic living expenses or to preserve matrimonial assets. The debt must be capable of legalenforcement.

To that definition I would add the obvious comment that debts which are incurred for the purpose of acquiring a non-matrimonial asset or for non-family purposes would not be matrimonial in nature. (Paragraph 40) [34] In Fleming v. Fleming, 2009 NLUFC 2, Fry, J. discussed the onus of proof as regards to whether a debt was a matrimonial orfamily debt.

She stated at paragraph 13: 13 Unlike assets accumulated during the course of the marriage which are presumed to be matrimonial assets unless excluded by one ofthe exemptions, debts incurred during the course of the marriage are generally presumed to be "non-matrimonial" unless provenotherwise. The individual who seeks to have the debt included in the equalization

schedule must show that the debt was incurred forfamily or matrimonial purposes and the debt is capable of legal enforcement. . . .

[35] A similar approach was taken by Handrigan, J. in Mitchell v. Mitchell, 2007 NLTD 155 at paragraphs 52 and 53. See alsoAbbott v. Abbott, 2002 NSSF 39 at paragraph 46. [36] Whether post separation debt is matrimonial debt depends on the purpose for which it was incurred. If incurred for the solebenefit of one of the parties, it is unlikely to be classified as matrimonial debt. In Cameron v. Cameron (1995), N.S.R. (2d) 124, 58A.C.W.S. (3d) 263 (N.S. S.C.), aff’d (1996), N.S.R. (2d) 156, 62 A.C.W.S. (3d) 531 (N.S.

C.A.), the court defined post separation debtat paragraphs 23 and 24[7]: 23 Indebtedness is either personal, business or matrimonial. 24 Personal indebtedness is indebtedness normally incurred post the separation of the parties for the sole benefit of the party incurringsuch indebtedness. . . . [37] However, as the court stated in Ellis, some post-separation debt may be matrimonial if it was incurred for living expenses or topreserve a matrimonial asset. The court in Arthur v. Arthur (1985), (NS SC), 67 N.S.R. (2d) 323, 31 A.C.W.S. (2d)427 (N.S.

S.C.(TD)) provided an example at paragraph 28: 28 What of debts incurred after separation? Generally speaking, these debts should not be considered in determining if it would be unfairto simply divide assets equally. However, there are exceptions.

For example, if the spouse having custody of the children while awaitingthe hearing of the divorce proceedings (including an application for division of property under the Matrimonial Property Act) was notreceiving adequate maintenance from the non-custodial spouse and had to borrow funds or incur debts to maintain the children, then itwould seem obvious that it would be unfair to ignore this factor. Analysis: Nature of the $205,000 debt due Mr. Whalen [38] Both Mr. Reid and Mrs. Reid testified at trial that the purpose of the 2009 loan from Mr. Whalen was to pay off their RBCHomeline. Mr.

Whalen agreed with this description. The Reids acknowledged that the balance of the RBC Homeline consisted of thetotal of the balances owing on their respective Visa cards which they used each month to pay for their living expenses when they weremarried. When I consider all of the evidence I am satisfied that the loan from Central Woodworks to Mr.

Reid in 2009 in the amount of$284,000 was solely “incurred for the benefit of the family unit, during the marriage, for ordinary household family matters reasonablyincurred. …” I am also satisfied, based upon a review of the loan documentation, the debt was capable of legal enforcement. I concludethat the debt due Central Woodworks was a matrimonial debt for which Mrs. Reid was 50 per cent responsible. Her argument that thedebt balance of $205,000 should not have been paid from the proceeds of sale from the matrimonial home must fail.

Analysis: The nature of the remaining balance on the RBC Homeline [39] As I have already noted, after separation the parties continued to use the Visa, and subsequently the RBC Homeline, to pay fortheir living expenses and personal expenses which for Mrs. Reid included expenses related to her medical condition. In counsel’swritten submissions on behalf of Mrs. Reid, it was suggested that although generally each party should be responsible for their individualpost- separation expenses, Mrs. Reid should not in light of Mr. Reid’s agreement to pay her expenses as spousal support “in kind”.Counsel on behalf of Mr.

Reid submitted that the combined total of each party’s post-separation expenses was a matrimonial debt whichshould be divided equally. [40] When I consider the facts of this case, I conclude that that remaining balance on the RBC Homeline, which was paid off usingthe sale proceeds from the matrimonial home, was not a matrimonial debt. As neither party incurred the debt for the benefit of the other,it is, in principal, not divisible. Each party should therefore bear their own expenses. The Court must, however, consider Mrs. Reid’sposition that she should not have to pay for her post-separation expenses given Mr.

Reid’s agreement to cover same during theapplicable timeframe when there was no formal spousal support order in place. [41] Mr. Reid has never disputed Mrs. Reid’s entitlement to spousal support given her medical challenges. He was well aware thatshe had no source of income prior to or upon separation. I am satisfied the parties agreed that from the date of separation until November2012, the date of the first formal spousal support order, Mr. Reid would pay support “in kind” by taking care of all Mrs. Reid’s monthlyexpenses.

These expenses included the expenses associated with the home i.e. heat, light, insurance as well as the cable bill and hermonthly credit card bill. For Mr. Reid to suggest to the Court now that those costs are a matrimonial debt subject to division between theparties is irreconcilable with his testimony and previous affidavits filed during the course of this matter wherein he maintained that hehad supported Mrs. Reid since separation despite the absence of a formal support order until November 2012. In reaching thisconclusion, I acknowledge that Mrs. Reid’s expenses were significant.

There is no evidence before me, however, that the parties agreedto any particular budget or restrictions. There was also no suggestion that Mrs. Reid was attempting to dissipate the assets. [42] Based on all of the evidence, I am satisfied that Mr. Reid is responsible for the expenses that Mrs. Reid incurred on the RBCHomeline as spousal support in kind. As a result, Mr. Reid shall pay his expenses and Mrs. Reid’s expenses in the amounts set out inChart 1.

Analysis: Division of other matrimonial assets and debts [43] With respect to the remaining matrimonial assets and debts, the parties agreed on many of the values to be attributed to these.With respect to an equalization payment, however, the parties disagreed. Mrs. Reid submitted that she only received assets valued at$5,500 whereas Mr. Reid received a combination of assets and debts valued at $47,660.60. For his part, Mr. Reid argued that Mrs.

Reidretained assets valued at $25,000 while he received assets valued at $33,459.19. [44] The items, the value of which the parties could not agree, consisted of furniture that had been taken from a condominium inToronto, hockey equipment, a Bose stereo and a GMC Sierra truck. During his testimony, Mr. Reid testified that he also retained some

condo furniture and hockey equipment. He stated that the condo furniture was valued at about $2,500 and the hockey equipment at $200.Mrs. Reid did not testify as to the value she would place on these items. She did indicate in her sworn property statement that the condofurniture was valued at $9,507.40. Mr. Reid was not cross-examined with respect to his valuation of the two items. Mrs. Reid did notpresent any evidence at trial in support of her position. In the circumstances, I have decided to attribute to Mr. Reid the amount of $2,700for the condo furniture and hockey equipment [45] The parties agreed that Mr.

Reid retained two other assets: a Bose surround sound system and a GMC Sierra. In her swornproperty statement, Mrs. Reid values the Bose system at $2,000. While she listed the GMC Sierra, she indicated that its value wasunknown. In his property statement, Mr. Reid values the Bose system at $500 and stated that the GMC was a company vehicle. [46] Neither party was questioned about the value of the Bose system in direct or cross-examination. Without evidence to supportthe position each took in their property statements with respect to its value, the Court is being asked to guess.

As I do not think that is anappropriate way of proceeding, I have decided not to include a value for the Bose stereo in my calculations with respect to theequalization of assets. [47] With respect to the GMC Sierra, Mr. Reid testified on cross-examination that it was the only vehicle he owned at the date ofseparation. He stated that the truck was worth $5,000. He was not re-examined on this point. In the circumstances, I have concluded thatthe amount of $5,000 should be added to the value of the matrimonial assets retained by Mr.

Reid. [48] Based on the evidence at trial, I have concluded that the parties retained the following at the date of separation: Chart 2 Division of Assets and Debts upon Separation (Rounded) MR. REID MRS.

REIDRBC Savings Account $27,761 Furniture $25,000BMO Investment Chequing Account $1,866 Treadmill $500BMO Primary Chequing Account $202 Scotiabank TFSA $5,002 Scotiabank Power Savings $5,182 Contents sold from matrimonial home $1,000 Golf clubs $1,000 Snowmobile $8,000 Snowmobile trailer $2,500 Exercise equipment $5,000 BMO Line of Credit - $1,406 CIBC Adventura Visa Infinite card - $23,137 BMO Mastercard - $10 Condo furniture $2,500 Hockey equipment $200 GMC Sierra $5,000 TOTAL $40,660 $25,500 [49] Mr. Reid shall pay to Mrs.

Reid an equalization payment in the amount of $7,580 ($40,660 less $25,500 = $15,160/2 = $7,580). [50] Before setting out my final conclusion on the appropriate division of the matrimonial property, I have one other issue I mustconsider. Mr. Reid is seeking occupational rent for the period of time Mrs. Reid occupied the matrimonial home: November 2011 toApril 2013. Mr. Reid’s claim for occupational rent was not specifically pleaded. In MacDonald v. MacDonald (1993), 1993 ABCA 106, 39 A.C.W.S. (3d) 1167, 10 Alta.

L.R. (3d) 20 (Alta.C.A.), the Alberta Court of Appeal held that a claim for occupational rentcould not be brought unless it was identified in the statement of claim. Given our Court of Appeal’s position that the right tooccupational rent arises by virtue of statute, Mr. Reid’s failure to claim it is likely not detrimental. The timeliness of a claim foroccupational rent can be considered however in assessing whether exceptional circumstances exists upon which the court should exerciseits discretion to deny an award. I would note that Mr.

Reid did not present any evidence in support of his claim other than his estimatethat the matrimonial home, which was approximately 3000 square feet, could have been rented for $2,500 per month. He based hisopinion on the fact that upon leaving the home, he rented a 2000 square foot, furnished cottage in a nearby community at a rate of $2,200per month. The issue of occupation rent was not addressed in direct examination of Mrs.

Reid.[8] On cross-examination, however, Mrs.Reid agreed when counsel suggested to her that had the matrimonial home been rented fully furnished, rent of $2,500 per month was anappropriate assessment. [51] This province’s Court of Appeal considered the issue of occupational rent in its decision of Gosse v. Sorensen-Gosse, 2011NLCA 58. The Court held that the Family Law Act not only authorizes the ordering of occupational rent,

section 8 mandates it. TheCourt of Appeal stated at paragraphs 60 and 61: 60 It is paragraph (

b) of sub-section 15(1) that authorizes a court to “direct a spouse, to whom exclusive possession is given underparagraph (a), to pay the periodic or other payments to the other spouse or surviving spouse as prescribed”. The substantive provisionthat not only authorizes the ordering of occupational rent but, in my view, mandates it, is

section 8. Subsection (1) of that

section is set

out in paragraph 31 above but it is convenient to re-state it here: Notwithstanding the manner in which the matrimonial home is held by either or both of the spouses, each spouse has a ½ 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 . (Emphasis added) Consistent with requiring that each spouse have a ½ interest in the matrimonial home, that subsection requires that each spouse “has the same right of use, possession and management of the matrimonial home as the other spouse”. 61 Neither that specific right nor the general statutory objective expressed in paragraph (

b) of

section 5 to “give a ½ interest in the matrimonial home to each spouse” can be achieved, where one spouse continues in possession of the matrimonial home to the exclusion of the other spouse unless that other spouse, is paid occupational rent to compensate that spouse for the equal “right of use, possession, and management” which that spouse cannot exercise because the occupying spouse has exclusive possession. The wide discretion referred to by the UFC judge, in reliance on the excerpt from Harvey v.

Harvey set out in paragraph 46 above, is not wide discretion as to the whether or not, in general terms, occupational rent is to be paid. The only way to achieve the objective of the statute is to provide for occupational rent or some other offsetting compensation. The wide discretion is as to whether there are exceptional circumstances that would justify declining to award such rent, and as to the factors to be taken into account in determining the amount or amounts, if any, that may be offset against it.

That discretion must, nevertheless, be exercised judicially, in the context of achieving the objective mandated by the statute. It cannot be arbitrary. [ 52 ] A s the above passages indicate, Mr. Reid must receive occupational rent given Mrs. Reid’s occupation of the matrimonial home unless there are exceptional circumstances that would justify not awarding same. [ 53 ] Mrs. Reid resided in the matrimonial home for a period of 18 months. During this time, Mr. Reid paid all of the expenses relative to the property. In addition, he had to pay for his own accommodations. As stated in Gosse , Mr.

Reid had the same right of use, possession and management of the property as Mrs. Reid As a result, he is entitled to compensation unless I find that there are exceptional circumstances which warrant the Court exercising its discretion not to make such an award. [ 54 ] Mr. Reid’s claim for occupational rent must be considered in light of his commitment, which he acknowledged, to support Mrs. Reid as of the date of separation. Mr. Reid testified that he and Mrs. Reid agreed that he would pay the expenses associated with the matrimonial home while she was occupying it. Mr.

Reid did not set forth a claim for occupational rent in his original pleadings. Nor did he raise it in either of the two Interim Applications which were heard by the Court, one of which he brought seeking an order concerning the matrimonial home. If Mr. Reid had intended to enforce his right to occupational rent, notwithstanding his agreement to pay for Mrs. Reid’s living expenses, he should have made that clear to her at the beginning of her sole occupation of the home. Had he done so, Mrs.

Reid could have decided in a timely fashion whether it was in her best interests to seek alternate, cheaper accommodations or to immediately seek a court order for spousal support and/or exclusive possession of the home. If she had pursued a spousal support order upon separation, the claim to occupational rent may have been considered at the same time.

While the Court likely would not have adjudicated the claim on its merits at an interim hearing, the parties and/or the Court would have been in a better position to determine the appropriate amount of support had it considered occupational rent as an additional expense for Mrs. Reid and additional income for Mr. Reid. [ 55 ] When I consider the facts of this case, I am satisfied that exceptional circumstances exist which require me to exercise my discretion not to award occupational rent. In light of Mr. Reid’s agreement, upon which Mrs.

Reid relied and conducted herself, to pay for her living expenses and those associated with the home, it would be unfair at this late date to make such an award. [9] Doing so would effectively amount to taking spousal support away from Mrs. Reid despite Mr. Reid’s earlier agreement to pay same.

Conclusion: Issue 1 [ 56 ] In light of the foregoing analysis, I have concluded that the matrimonial property which includes the proceeds from the sale of the matrimonial home should be distributed as follows: Chart 3 Distribution of Proceeds of Sale from the Matrimonial Home (Rounded) Selling price of property and adjustment from property, water and sewer tax [10] $627,906.10 Less costs associated with the sale $10,355 Owing to parties $617,551 Owing to each other $308,775

MR. REID MRS. REID $308,775 $308,775Less ½ loan due CentralWoodworks - $102,500Less ½ loan due CentralWoodworks - $102,500 Less money withdraw per courtorder - $28,609Less money withdraw per courtorder - $28,609 Less Mrs. Reid’s Visa - $7,237 Less Mr. Reid’s Visa - $31,989 Plus payment on Line of Credit $20,000 Due to Mr. Reid $158,440Due to Mrs. Reid $177,666 b. Is Mrs. Reid entitled to a share of the business asset, Western Woodworks, pursuant to

section 29 of the Family Law Act?[11] [57] Mrs. Reid testified that although she had never provided any work or services to Western Woodworks she was entitled to becompensated for her contribution to Mr. Reid’s acquisition of 50 percent of Western Woodwork’s shares in 2007. Evidence presented [58] As I outlined in paragraph 10 herein, in 2007 Mr. Whalen offered to sell to Mr. Reid 50 percent of the shares of WesternWoodworks for the sum of $284,000. To assist Mr. Reid in financing the purchase, Mr. Whalen gave Mr. Reid the sum of $245,244. Mr. Reid used this money to pay off the parties’ mortgage. Mr. and Mrs.

Reid then obtained the RBC Homeline which was securedagainst the matrimonial home. Mr. Reid used the RBC Homeline to finance his purchase of the shares. In doing so, approximately$38,756 of “new” debt (the cost of the shares ($284,000) less the monies gifted by Mr. Whalen ($245,244)) was placed on the parties’RBC Homeline. [59] Mrs. Reid argued that as a result of that transaction, she contributed to the acquisition of the shares in the business in two ways:First, by allowing Mr.

Reid to use the equity in the matrimonial home to finance his acquisition of the shares, she placed her interest inthe matrimonial home at risk until the RBC Homeline was paid in full in 2009. Second, by using the RBC Homeline to pay theadditional $38,756 needed to conclude the purchase of the shares, she in effect made a direct financial contribution to their acquisition. [60] Mr. Reid disagreed. He argued that when Mr. Whalen gave him the $245,244, the matrimonial home was already subject to amortgage in the approximate amount of $158,761. He used the gifted monies to pay off the parties’ mortgage.

He suggested thereforethat while he used the RBC Homeline to assist in paying for the shares, there was very little change in the risk associated with thematrimonial home. On cross-examination, however, Mr. Reid agreed that he used the equity in the matrimonial home to raise the$38,756 needed to close the deal and, in doing so, he placed both his and Mrs. Reid’s interest in the home at risk. The law [61]

Section 29 of the Family Law Act provides for distribution of business assets upon dissolution of a marriage: 29 Where one spouse has contributed work, money or money’s worth in respect of the acquisition, management, maintenance, operationor improvement of a business asset of the other spouse, the contributing spouse may apply to the court and the court shall by order (

a) direct the other spouse to pay an amount that the court orders to compensate the contributing spouse; or (

b) award a share of the interest of the other spouse in the business asset to the contributing spouse in accordance with the contribution, and the court shall determine and assess the contribution without regard to their spousal relationship or the fact that the acts constitutingthe contribution are those of a reasonable spouse in the circumstances. [62] In Snook v.

Snook, 2010 NLCA 57, this province’s Court of Appeal considered the same question before me: Does a spouse, inallowing a mortgage to be secured against the matrimonial home for purposes solely in relation to a business asset of the other spouse,contribute “work, money or money’s worth”? In that case, the wife sought compensation for her interest in the husband’s fishingenterprise. She agreed that while she had not been involved in the management or operation of the business, she did allow a mortgage onthe matrimonial home to secure a loan for the business.

The Court of Appeal stated at paragraph 9: 9 A mortgage was placed on the matrimonial home to secure a loan when the fishing enterprise was first established. During the hearingin this Court, Mr. Snook conceded that participation in the mortgage would constitute a contribution by Ms. Snook to the business asset. I agree. A collateral mortgage on a couple’s home to secure a loan for a business operated by one spouse involves an assumption ofpersonal risk by both spouses since, if the business should fail prior to discharge of the mortgage, loss of the home is a potentialconsequence (Franey v.

Franey (1997), (NL CA), 148 Nfld. & P.E.I.R. 181 (NLCA), at paragraphs 40 to 42). Thetrial judge did not err in considering the collateral mortgage to be a contribution to the business asset in this case. [63] Based on the foregoing, I am satisfied that by allowing Mr. Reid in 2007 to use the equity in the matrimonial home to financehis acquisition of shares in Western Woodworks, which included borrowing $38,756, Mrs. Reid directly contributed to the business

asset. The question now is whether the Court should make an order under

section 29 (

a) or (

b) of the Family Law Act . In Snook , the court stated at paragraph 31: 31 The question, then, is whether an order should be made under paragraph (

a) or (

b) of

section 29 of the Act. In making this decision, the extent and nature of Ms. Snook’s contribution must be considered. Generally, where the contribution is small and does not involve participation by the spouse in the management or operation of the business, an award of compensation under paragraph (

a) would be appropriate. . . . [ 64 ] Given that the RBC Homeline was paid in full within a relatively short period of time, the relatively small contribution of $38,756 when compared to the overall value of the business assets and the fact that Mrs. Reid did not participate in the management and operation of Western Woodworks, to award her a share in the business assets would not be appropriate. I will, as a result, order that Mrs.

Reid be compensated for the shares that were purchased in 2007 using the equity in the parties’ matrimonial home in an amount representing their fair market value on the date of separation. [ 65 ] Determining a proper amount by which to compensate Mrs. Reid is an imprecise exercise as it is very difficult to quantify the risk she assumed.

As both parties agreed that in 2007 they contributed $38,756 of the $284,000 required to buy 50 percent of the shares of Western Woodworks, I will use that figure as the basis for my calculations. [ 66 ] It is not in dispute that the first 50 percent of the shares of Western Woodworks was purchased for $284,000. It is not in dispute that of that amount the parties contributed $38,756. By my calculations, that contribution equates to 13.6 percent of the value of the shares.

To determine the value of the $38,756 contribution at the date of separation, I would need evidence concerning the value of the business at that time. No evidence was presented on the valuation of the business. The facts do, however, reveal that the value of the shares increased dramatically because in 2013, some six years later, Mr. Reid paid $1.716 million for the remaining 50 percent of the shares. Using these figures, albeit crudely, I have determined that the value of the shares increased by approximately $238,667 per year ($1.716 million - $284,000 = $1,432,000 divided by six years).

As a result, on the date of separation in 2011, the shares purchased for $284,000 were worth approximately $1,238,668. As stated, the parties contributed $38,756 of the $284,000 or 13.6 percent of the value of the shares (13.6 percent of $1,238,668 is $168,459). Mrs. Reid is entitled to one-half of the increased value or $84,230. Conclusion: Issue 2 [ 67 ] I will therefore order payment of $84,230 to compensate Mrs. Reid for her contribution towards the acquisition of the initial 50 percent of Western Woodworks shares. c. What is Mr. Reid’s income for the purposes of spousal support? [ 68 ] Mr.

Reid acknowledged that Mrs. Reid was entitled to support since the date of separation. The issue is what is Mr. Reid’s income for the purposes of spousal support? Mr. Reid argued that his income is as set out in Line 150 of his annual T1 general income tax return with an adjustment to reflect his personal cell phone and vehicle costs paid for by the business. Mrs. Reid submitted that Mr. Reid’s income includes his Line 150, plus adjustments, plus the pre-tax corporate income of the business. Much evidence was presented in support of each party’s position.

For this issue, I think it is helpful to consider the applicable law first. The law [ 69 ] Mrs. Reid’s claim for spousal support has been brought pursuant to

section 15.2 of the Divorce Act , R.S.C., 1985, c. 3 (2nd Supp.) . Subsections 15.2(1) , 15.2(4) and

section 15.2(6) states as follows: Spousal support order 15.2

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

(4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including (

a) the length of time the spouses cohabited; (

b) the functions performed by each spouse during cohabitation; and (

c) any order, agreement or arrangement relating to support of either spouse. Objectives of spousal support order

(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should (

a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (

b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;

(

c) relieve any economic hardship of the 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. [ 70 ] Once the issue of entitlement to spousal support is decided, the court generally applies the Spousal Support Advisory Guidelines (hereinafter referred to as the “ SSAG ”) to determine a range of spousal support. The SSAG determine the quantum of spousal support payable based on a number of factors, most importantly, the parties’ incomes. The starting point for a determination of income is the Federal Child Support Guidelines , SOR/97-175. [12]

Section 15 states that a spouse’s annual income is determined in accordance with sections 16 to 20 .

Section 20 has no bearing on the issue before me. The remaining sections read as follows: Determination of annual income 15

(1) Subject to subsection (2), a spouse’s annual income is determined by the court in accordance with sections 16 to 20. Agreement

(2) Where both spouses agree in writing on the annual income of a spouse, the court may consider that amount to be the spouse’s income for the purposes of these Guidelines if the court thinks that the amount is reasonable having regard to the income information provided under

section 21. Calculation of annual income 16 Subject to sections 17 to 20, a spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with

Schedule III. Pattern of income 17

(1) If the court is of the opinion that the determination of a spouse’s annual income under

section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years. Non-recurring losses

(2) Where a spouse has incurred a non-recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the spouse’s annual income under

section 16 would not provide the fairest determination of the annual income, choose not to apply sections 6 and 7 of

Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate. Shareholder, director or officer 18

(1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the spouse’s annual income as determined under

section 16 does not fairly reflect all the money available to the spouse for the payment of child support, the court may consider the situations described in

section 17 and determine the spouse’s annual income to include (

a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or (

b) an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation’s pre-tax income. Adjustment to corporation’s pre-tax income

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm’s length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances. Imputing income 19

(1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:

(

a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required bythe needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse; (

b) the spouse is exempt from paying federal or provincial income tax; (

c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada; (

d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines; (

e) the spouse’s property is not reasonably utilized to generate income; (

f) the spouse has failed to provide income information when under a legal obligation to do so; (

g) the spouse unreasonably deducts expenses from income; (

h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate thanemployment or business income or that are exempt from tax; and (

i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust. Reasonableness of expenses

(2) For the purpose of paragraph (1)(g), the reasonableness of an expense deduction is not solely governed by whether the deduction ispermitted under the Income Tax Act. [71]

Section 16 provides that a spouse’s annual income is to be determined using the sources set out under “Total Income” on theT1 General Tax form. If, however, the court is of the opinion that the utilization of

section 16 would not be the “fairest determination”of income, the onus of which is on the party seeking support, it can use an alternate figure as determined under

section 18 or

section 19. [72] In Baum v. Baum (1999), (BC SC), 182 D.L.R. (4th) 715, 94 A.C.W.S. (3d) 114 (B.C.S.C.) the courtdescribed the purpose of

section 18 as follows at paragraph 28: 28 Valid corporate objectives may differ from valid child support objectives. The purpose of s. 18 is to allow the court to "lift thecorporate veil" to ensure that the money received as income by the paying parent fairly reflects all of the money available for thepayment of child support. This is particularly important in the case of a sole shareholder as that shareholder has the ability to control theincome of the corporation. . . . [73] In Gosse, the court made the following comment about

section 18 at paragraph 91: 91 Guideline 18 makes specific provisions for a circumstance where a spouse is a shareholder, director or officer of a corporation, andthe court is satisfied that the spouse's T1 Income Tax Form does not fairly reflect all the money available to the spouse for the paymentof child support. Where those two circumstances exist, a second major factor must be considered: whether the Court should add "all orpart of the pre-tax income of the corporation". [74] In Kowalewich v.

Kowalewich, 2001 BCCA 450, the court discussed the use of pre-tax corporate income when calculatingincome for support purposes. It stated at paragraph 54: 54 The Guidelines allow a court to include all of the pre-tax income of a corporation for the most recent taxation year in a spouse’sannual income for Guideline purposes. They do not require it. I am not persuaded they make the inclusion of all pre-tax income thedefault position. [75] In Hausmann v. Klukas, 2009 BCCA 32, leave to appeal refused [2009] S.C.C.A.

No. 135, the British Columbia Court ofAppeal considered which party bore the onus to satisfy the court that none, or at least not all, of a corporation’s pre-tax income should beused in calculating the payor’s income. The court stated at paragraphs 51 and 52: 51 While the purpose and application of s. 18 were outlined in Kowalewich, this Court has not heretofore established an onus test. Somepost Kowalewich authorities from this province, however, have concluded that there is an "emerging presumption" that pre-tax corporateincome will be assumed to be available to a payor unless evidence is led to the contrary.

These authorities state that the onus in thecircumstances is on the payor. As discussed in Jeffery v. Motherwell, 2006 BCSC 140, 36 R.F.L. (6th) 377, at para. 13: Kowalewich has been applied on other occasions by judges of this court and is binding authority.

One of those cases Bartkowski v.Bartkowski (2003), 2003 BCSC 490 , 37 R.F.L. (5th) 242 (B.C.S.C. [In Chambers]), albeit dealing with very different factualcircumstances in that the payor contended that his line 150 income was inflated to take advantage of tax benefits, the court said thisabout the authorities post Kowalewich: I am of the view that these cases reveal an emerging presumption that the corporation's pre-tax income will be assumed to be available tothe shareholder payor for the payment of child support unless compelling evidence is led by the payor spouse to support the conclusionthat re-investment is necessary to sustain the company as a viable enterprise. ... (para. 51)

The onus is on the payor to provide the necessary evidence that the corporation's pre-tax income is not available to the payor. The courtshould not have to ferret out the necessary information from inadequate or incomplete financial disclosure. While Bartkowski says theevidence of the payor must be compelling, I prefer to use the word clear when discussing the necessary evidence of businesscircumstances as the former word might be taken to suggest a higher standard of proof than is called for by Kowalewich. 52 I respectfully agree with the above comments in Jeffery v.

Motherwell. [76] A court’s decision to use all or some of the pre-tax corporate income when determining a payor’s income for support purposesis subject to its discretion. In Brophy v. Brophy (2002), (ON SC), 116 A.C.W.S. (3d) 899, 32 R.F.L. (5th) 1 (Ont.Sup. Ct.), the court set out some considerations that judges should keep in mind when exercising this discretion. The court stated atparagraphs 36 and 37: 36 Counsel have presented me with much jurisprudence relating to when a court should exercise its discretion to include corporate pre-tax income to a paying spouse's income.

After examining those cases, the following considerations and questions emerge from the caselaw as those to be taken into account by the court in coming to the decision of whether to exercise its discretion or not. 1. Because of the separate legal entity of the corporation, should there be a general reluctance by the court to automatically attributecorporate income to the shareholder? 2. Is there a business reason for retaining earnings in the company? 3. Is there one principle shareholder or are there other bona fides arm's length shareholders involved? 4.

What is the historical practice of the corporation for retaining earnings? 5. What degree of control is exercised by the spouse over the corporation? (See Beeching v. Beeching (1998), (SK KB), 40 R.F.L. (4th) 15 (Sask. Q.B.); Rudulier v. Rudulier (1999), (SK KB), 182 Sask. R. 23; Baum v. Baum (1999), (BC SC), 182 D.L.R. (4th) 715; Denbok v. Thuet(2000), [2000] O.J. No. 4671, 101 A.C.W.S. (3d) 956 (S.C.J.); Bowen v. Bowen (2001), [2001] O.J. No. 480, 103 A.C.W.S. (3d) 367(S.C.J.); Yeo v.

Yeo (1999), (PE SCTD), 43 R.F.L. (4th) 408. 37 Finally, if the court were to decide to exercise its discretion to include corporate profits in the income of the paying spouse for supportpurposes, the extent to which those profits are included is also left to the court's discretion to be determined by the individual facts of thecase. (See Kowalewich v. Kowalewich (2001), 2001 BCCA 450 , 19 R.F.L. (5th) 330 (B.C.C.A.); Dunham v. Dunham (1998),[1998] O.J. No. 4758, 84 A.C.W.S. (3d) 294 (O.C.G.D.); Tauber v. Tauber (2001), (ON SC), 18 R.F.L. (5th) 384(S.C.J.); Blackburn v.

Elmitt (1997), (BC SC), 34 R.F.L. (4th) 183 (B.C.S.C.); Desjardins v. Desjardins (1998),[1998] B.C.J. No. 1173, 79 A.C.W.S. (3d) 773 (B.C.S.C.); Giene v. Giene (1998), 1998 ABQB 961 , 234 A.R. 355 (Q.B.);Westworth v.

Westworth (1999), 1999 ABCA 294 , 1 R.F.L. (5th) 186 (Alta.C.A.).) As can be seen from these cases, the courtshave added different portions of corporate income, or none of the portion of corporate income, according to the particular facts of thecase. [77] In Kowalewich, the court emphasized the necessity for judicial caution when exercising its discretion as to whether to attributeall, part or none of the pre-tax corporate income to a payor.

It stated at paragraph 58: 58 It seems to me regard should also be had to the nature of the company's business and any evidence of legitimate calls on its corporateincome for the purposes of that business. Justice Drake cautioned about not killing the goose who lays the golden eggs. Monies neededto maintain the value of the business as a viable going concern will not be available for support purposes.

In my view they should not beincluded in determining annual income. . . . [78] In exercising its discretion, the Court should keep firmly in mind that imputing income to a payor by using the pre-taxcorporate income is really a theoretical exercise.

The Court of Appeal in Gosse described the process as follows at paragraph 94: 94 Neither imputing pre-tax corporate income to a shareholder, nor adjusting the amount shown as pre-tax corporate income to offsetnon-cash expensing, in the course of establishing the basis for calculating child support obligations under the Guidelines, requires thecorporation to alter its financial records or its business decisions in any manner. It does not require the actual transfer of any of itsfinancial resources to the sole shareholder. That remains a decision of the corporation, as guided and directed by the sole shareholder.

Imputing is only a theoretical exercise for the purpose of making "the fairest determination" of an income level by which to judge the level of responsibility the shareholding spouse should have for child support, when compared with the income level of the other spouse. The corporation is not a party to the action and no order is directed at the corporation.

In the case of a sole shareholder, the effect is, essentially, to ignore the corporate structure, for Guidelines income assessment purposes only, and treat the shareholding spouse in the same manner as that spouse would be treated if the business were carried on in the name of that spouse personally. . . . [ 79 ] In light of the foregoing, I must consider the following three issues: (

i) Does determining Mr. Reid’s income pursuant to

section 16 of the Guidelines fairly reflect all of the money available to Mr. Reid for support purposes? Evidence presented [ 80 ] Mr. Reid provided the Court with his personal income tax information for the years 2011 to 2016 inclusive. His reported Line 150 income as set out in his T1 Income Tax form for each of these years was as follows: • 2011 - $156,000; • 2012 - $78,000; • 2013 - $66,040; • 2014 - $82,452; • 2015 - $83266; and • 2016 - $84,826. [ 81 ] Mr. Reid testified that the above amounts were the only income available to him since the date of separation.

He stated that he used this income to support his two young children and his second wife [13] , describing his financial situation as “paycheck to paycheck”. On cross-examination, however, Mr. Reid’s evidence suggested otherwise. For example, he acknowledged that since separation he has built two homes without having access to the monies held in trust from the sale of Mr. and Mrs. Reid’s matrimonial home. The first home was sold for a profit of approximately $150,000 - $200,000. Mr. Reid testified that the second home in which he currently lives is assessed by the Town of Deer Lake at roughly $850,000.

This home is subject to a mortgage of just over $400,000. Mr. Reid also agreed that since he and Mrs. Reid separated, he has continued to travel with his children and second wife. He testified that since his separation from Mrs. Reid in August 2011, he has travelled to Argentina, Jamaica, New York City, Bora Bora, Toronto, Montreal, and in September 2017, Ireland. When asked by the Court if the $3,300 per month spousal support he is paying to Mrs. Reid pursuant to the court order was also paid out of his Line 150 income, he indicated yes. Conclusion [ 82 ] When I considered Mr.

Reid’s evidence on this issue, I am satisfied that he was less than candid in his account of the income he has available to him. He has asked this Court to accept that out of a gross annual income of approximately $85,000 he supports his current wife and children, pays $3,300 per month to Mrs. Reid in spousal support, travels regularly and has built two homes, in the second of which he has acquired approximately $400,000 in equity. His suggestion is preposterous. I conclude without reservation that Mr.

Reid’s Line 150 income as set out in his T1 Income Tax form does not fairly reflect all of the money available to him for the payment of spousal support. (ii) What is Mr. Reid’s income if the Court were to attribute to him the pre-tax income of Western Woodworks? Evidence presented [ 83 ] Ms. Nikki Robar, a Chartered Professional Accountant with Pricewaterhouse Cooper LLP, was retained by Mrs. Reid. After a voir dire , Ms. Robar was declared an expert by the Court on the quantification of guideline income for family law purposes. [ 84 ] Ms.

Robar prepared a very detailed financial report based upon her review of various documents, including Mr. Reid’s personal financial information as well as the corporate documentation provided by Western Woodworks. She testified that her calculations were guided by paragraphs 15 to 20 and

Schedule III of the Federal Child Support Guidelines . These sections require that one consider not only the payor spouse’s Line 150 income (hereinafter referred to as the “payor”) and

Schedule III adjustments but also, where the payor is a shareholder, the pre-tax income of the corporation. In determining Western Woodworks pre-tax corporate income, Ms. Robar testified that she considered, among other things, corporate attribution, the historical employee earning summaries, capital expenditures and corporate debt. In the end, Ms. Robar indicated that based on Mr. Reid’s Line 150 income, the

Schedule III adjustments and the actual adjusted pre-tax corporate income of Western Woodworks, he had the following income available for the calculation of spousal support: [14] Chart 4

Summary of Calculation of Guideline Income (Rounded) 2015 $486,000 2014 $450,000 2013 $349,000 2012 $199,000

2011 $458,000 [ 85 ] Ms. Robar was subject to vigorous cross-examination concerning the manner in which she arrived at the figures in Chart 4. In his closing submissions, counsel for Mr. Reid suggested that Ms. Robar was biased in favor of the Applicant. He further submitted that her report contained a number of errors because many of her conclusions were based on inaccurate assumptions or alternatively incorrect accounting methodology. As a result, Mr. Reid submitted that the Court should place little weight on Ms. Robar’s report. [ 86 ] Before addressing the various arguments raised by Mr.

Reid in support of his position that the Court cannot rely on the findings contained in Ms. Robar’s report, it is important to note at the outset that while Mr. Reid chose to challenge Ms. Robar’s accounting methodology, he also chose not to present any evidence concerning the proper accounting principles that he alleges Ms. Robar should have used in her Guideline income calculations. [ 87 ] Mr. Reid submitted that the Court should place little weight on the contents of Ms. Robar’s report for the following reasons: 1. Ms. Robar was biased in favor of Mrs. Reid [ 88 ] In Mr.

Reid’s closing submissions, upon reviewing the various errors which he alleged that Ms. Robar made in her report, he submitted that Ms. Robar had a bias in favor of the Mrs. Reid’s position. This concern was also raised during the voir dire on the issue of Ms. Robar’s ability to testify as an expert. In my oral decision at the conclusion of the voir dire, I referred to the Supreme Court of Canada’s decision in White Burgess Langille Inman v. Abbott and Haliburton and Co. , 2015 SCC 23 wherein the court discussed the standard for the admissibility of expert evidence.

In relation to the duty of the expert to the court, it stated at paragraph 32: 32 Underlying the various formulations of the duty are three related concepts: impartiality, independence and absence of bias. The expert's opinion must be impartial in the sense that it reflects an objective assessment of the questions at hand. It must be independent in the sense that it is the product of the expert's independent judgment, uninfluenced by who has retained him or her or the outcome of the litigation.

It must be unbiased in the sense that it does not unfairly favour one party's [page201] position over another. . . . [ 89 ] The burden is on the party opposing the admission of the expert’s testimony to show that there is a realistic concern that the proposed witness cannot fulfill his or her duty to provide evidence that is impartial, independent and unbiased (see paragraph 48, White Burgess ). It is not enough to simply assert or allege bias. [ 90 ] At the end of the voir dire I concluded that there was no evidence before me to show that there was a realistic concern that Ms.

Robar was unable to fulfill her duty to the Court. Upon reviewing all of the evidence in its totality, my position remains the same. While I acknowledge that Mr. Reid has concerns about some of Ms. Robar’s conclusions and methodology, he has not proven that those concerns are a result of bias. 2. Ms. Robar’s decision not to deduct the salary recorded for Roy Whalen for 2012 was an error. [ 91 ] According to the financial statements of the company, Yvonne Whalen, Roy Whalen’s wife, and Roy Whalen himself received a salary from Western Woodworks from 2009 to 2011. In 2012, only Mr.

Whalen was noted to have received remuneration. [15] When Ms. Robar prepared her report, she believed that the two employees in question were Yvonne Whalen and a Philip Whalen. Based on her understanding that neither individual actually worked for the company during that time frame, Ms. Robar concluded that the salaries were discretionary and, as a result, she added the salaries back when she calculated the annual corporate attribution. During Ms. Robar’s testimony, it became clear that she was unaware that Philip Whalen was actually Philip Roy Whalen, the original sole owner of Western Woodworks. Counsel for Mr.

Reid suggested to Ms. Robar that had she known she was considering a salary paid to Roy Whalen, she would never have added back his income. Ms. Robar did not agree. She stated that she would have done so in any event because the Guidelines require that salaries for persons with whom the business does not deal with at arm’s length must be added back to pre-tax income unless the payor can establish that the payments were reasonable in the circumstances. Ms. Robar testified that prior to completing her report, she asked Mr. Reid to provide her with an explanation as to why Mr.

Whalen received a salary in 2012 of $61,675 and further why he had indicated he was a “retired engineer” on a piece of correspondence. She testified that Mr. Reid provided her with very vague information which did not enable her to determine a market salary for the services Mr. Whalen provided. With this information she could not assess whether the expenditure was reasonable in the circumstances and therefore she added it back to the pre- tax corporate income of the business. [ 92 ] Mr. Reid argued that her decision to do so was an error.

He testified that although he became a 50 percent shareholder in the company in 2007, Roy Whalen continued to carry out the exact same role as he had prior to the sale of the shares: general manager of operations and the individual who decided how much income he and Mr. Reid would receive at year’s end. [ 93 ] The issue as to what role Mr. Whalen played in Western Woodworks after Mr. Reid bought 50 percent of the shares in 2007 arose several times during the hearing. As it is a prominent factor in my decision regarding whether to impute to Mr.

Reid pre-tax corporate income for the years 2012 to the present, it is perhaps best if I deal with the issue now. [ 94 ] Mrs. Reid argued that once Mr. Reid acquired 50 percent of the shares of Western Woodworks in 2007, he was legally entitled to and had access to 50 percent of the company’s pre-tax corporate earnings. In support, counsel for Mrs. Reid referred the Court to the company’s Minutes of Shareholders dated April, 30, 2007, and signed by Mr. Reid. [16] Pursuant to that document, Mr. Reid held 50 percent of the shares and the remaining shares were divided between Mr. Whalen’s wife and children. Mr.

Whalen owned no shares in Western Woodworks as of that date. [ 95 ] Mr. Reid testified that notwithstanding his acquisition of 50 percent of the shares in Western Woodworks in 2007, his position with the company did not change. He submitted that despite the share structure on paper, Mr. Whalen continued to make all of the decisions concerning Western Woodworks, including the amount of remuneration that Mr. Reid would receive each December, until the company was sold on April 30, 2013. Mr. Whalen corroborated this in his evidence. At Volume 3 of the transcript [17] , page 51, counsel for Mr. Reid asked Mr.

Whalen what impact, if any, did the transfer of shares to Mr. Reid in 2007 have on the day-to-day operations of Western Woodworks. The following exchange occurred:

Q. Did this give him any control over the company financially? A. . . . So in 2007, when I offered Dwayne the shares, he never once ever asked for them, never ever come on and mentioned it, and it was my idea to bring it up, and it was my idea to do it, and it was my idea the way it was done. When it was talked about, and Dwayne was 100 percent on the page that Roy Whalen is still involved in the company, and Roy Whalen is still calling the shots. . . . [ 96 ] And further at page 53: Q. My question to you, sir, was that could Dwayne access that money after the share transfer in 2007? A. No.

Dwayne signed cheques on the account for a load of lumber, as an example. But Dwayne had no access to his own money at all. If Dwayne needed money for himse

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