2019 NLCA 78, 2019 NLCA 78

Shoal Investments Limited (first appellant), Paro Enterprises Limited (second appellant), and NuVision Foods Inc. (third appellant) v. Annette Murphy (first respondent) and Rodney Murphy (second respondent) (16/70) Indexed As: Shoal Investments Ltd. v. Murphy 2019 NLCA 78 5 C.A.N.L.R. 225 Court of Appeal of Newfoundland and Labrador Green, Harrington* and O’Brien JJ.A. December 23, 2019

Summary: This matter involved the separation and divorce of Annette Murphy and Rodney Murphy. Mr. Murphy owned one hundred percent of the shares of two companies, Paro Enterprises Limited and NuVision Foods Inc. Paro and NuVision held the legal titles to three properties (Huntley Drive, Thorburn Lake, and Florida). Paro and NuVision held other assets, including other real estate holdings. After the parties’ separation but before the commencement of court proceedings, Mr. Murphy purported to sell all of his shares in Paro and NuVision to Shoal Investments Limits, a company wholly owned by Mr. Kevin King.

Following the transfer of shares to Shoal, Mr. Murphy made an assignment in bankruptcy. Ms. Murphy commenced court proceedings claiming a half-interest in the three properties held by the two companies, arguing that the three properties were matrimonial homes. In addition to the three properties, Paro and NuVision held other assets including other real estate holdings. Ms. Murphy claimed she was entitled to a share of the business assets on the basis that she assisted in their management, maintenance and operation. At trial, the judge found in favour of Ms.

Murphy regarding her claims in respect of the matrimonial homes and the business assets. The trial judge held that Shoal, Paro and NuVision were jointly and severally liable with Mr. Murphy. The companies appealed the decision of the trial judge, arguing that there was no basis to find Shoal, Paro and NuVision jointly and severally liable with Mr. Murphy. Held: Appeal allowed, in part.

Green J.A. (O’Brien J.A. concurring): A matrimonial home held in one spouse’s name or in the name of a corporation cannot be disposed of, or the shares in the corporation disposed of, in a manner that would defeat the claiming spouse’s rights. There is no obligation on the part of the claiming spouse to establish any improper behaviour, such as a fraudulent conveyance. The claiming spouse’s continuing rights to the property arise from the nature of the indefeasibility of the spouse’s proprietary interest created as a legal interest under the Family Law Act (paragraphs 26-55).

The trial judge did not err by not finding that Ms. Murphy was disabled from following her interest in the three matrimonial homes into the companies once ownership of them changed from Mr. Murphy to Shoal. Once she acquired her rights in the matrimonial homes, those interests were indefeasible, even as against third parties, unless Ms. Murphy consented to the relinquishment of those rights (paragraphs 56-57). The trial judge erred by ordering Shoal and NuVision jointly and severally liable to Ms. Murphy in relation to the Thorburn Lake and Florida properties.

There was no basis under the Family Law Act for holding other corporate entities that were holders of the title liable. Paro held title in relation to the Thorburn Lake and Florida properties, and had already purported to sell the properties to third parties. As such, Ms. Murphy was entitled to a monetary remedy equal to a half-interest in the value of the sale of the properties. Whatever value these properties presented remained with Paro and not in Mr. Murphy’s personal name. It was therefore appropriate to find Mr. Murphy and Paro jointly and severally liable to Ms.

Murphy in relation to the Thorburn Lake and Florida properties (paragraphs 58-61).

The trial judge did not err in ordering NuVision to convey its half of the equity in the Huntley Drive property to Ms. Murphy. Ms.Murphy sought an order that NuVision sell its half-interest in the property to her; the trial judge agreed with this approach. For thepurposes of remedies under the Family Law Act, a corporation holding title to a matrimonial home is to be treated as if the title holderwas the other spouse. The corporate veil can and should be pierced for this purpose (paragraphs 62-66).

Business asset claims are determined solely on the basis of the contribution by the claiming spouse to the acquisition, management,maintenance, operation or improvement of the asset in question. Unlike the case of matrimonial homes, a contributing spouse has noproprietary interest in any of the other spouse’s business assets until such time as a court so orders (paragraphs 77-94). There was no error in the trial judge’s finding that Ms. Murphy made a significant contribution to the acquisition, management,maintenance, operation and improvement of the business enterprises owned by Mr.

Murphy, and that she was therefore entitled tocompensation under

section 29 of the Family Law Act. However, the trial judge erred in finding Shoal, Paro and NuVision jointly andseverally liable in relation to the business assets claim. The remedy provided by

section 29 is expressly limited to a personal claimagainst a spouse or a proprietary claim against an asset owned by the spouse (paragraphs 95-103). From a pleading perspective, there was nothing at trial or on the appeal that would have prevented Ms. Murphy from making an unjustenrichment claim. It cannot be said that Shoal, Paro or NuVision would have been taken by surprise or would have been otherwiseprejudiced by the trial judge including in his analysis a consideration for a claim against Paro and NuVision for unjust enrichment.

Thatbeing said, an unjust enrichment claim must be made against the recipient of the enrichment; in this case, that was Paro and NuVision,not Shoal. Regarding the claim of fraudulent conveyance, the pleadings and how the case developed would have led Shoal, Paro andNuVision to realise that they were potentially in jeopardy with respect to a possible remedy based on a finding that the shares wereimproperly transferred contrary to the Fraudulent Conveyances Act.

As such, neither Shoal, Paro nor NuVision would face any prejudiceby addressing issues relating to the unjust enrichment claim and the Fraudulent Conveyances Act claim on appeal (paragraphs 104-143). The trial judge had found that Mr. Murphy had deliberately tried to put his assets out of reach of Ms. Murphy and declared bankruptcyspecifically to assist in achieving that purpose. The trial judge also found that the controlling shareholder of Shoal was complicit inrestricting Paro and NuVision to deprive Ms. Murphy of compensation for a claim for a share in the business assets.

As such, it was notinappropriate to allow a claim in unjust enrichment directly against Paro and NuVision so as to enable substantial justice to be done. Eachcompany can be held liable in respect to the benefits conferred on that company (paragraphs 144-155). The agreement between Mr. Murphy and Shoal to put the business assets beyond reach of Ms. Murphy, in which Shoal was complicit,clearly affected Ms. Murphy’s position. Both Mr. Murphy and Shoal should therefore be liable to account to Ms. Murphy for the amountby which she was deprived as a result of the transaction. By holding Shoal and Mr.

Murphy jointly and severally liable as a remedy forfraud in equity, it was not necessary to decide whether a similar result was an appropriate remedy under the Fraudulent ConveyancesAct. It was sufficient to say that Mr. Murphy and Shoal made the transaction with the intent to defeat, hinder, delay or defraud Ms.Murphy of her claims, thereby justifying joint and several liability under principles of fraud in equity (paragraphs 156-182).

With respect to the matrimonial homes, while the trial judge erred with respect to the valuation of the Thorburn Lake and Floridaproperties, he did not err as to the valuation of the Huntley Drive property. There was no basis to find that the trial judge had erred withrespect to the valuation of the business assets, nor Ms. Murphy’s entitlement under

section 29. As for the unjust enrichment claim, Parowas ordered to pay Ms. Murphy $325,428 and NuVision was ordered to pay Ms. Murphy $183,054 (paragraphs 183-224). Cases cited: Paro Enterprises v. Murphy, 2015 NLCA 33 Debora v. Debora (2006), (ON CA), 275 D.L.R. (4th) 698 (Ont. C.A.) Murrin v. Murrin (1981), 41 Nfld. & P.E.I.R. 314 (Nfld. S.C.) Walsh v. Canadian General Insurance Co. (1989), (NL CA), 77 Nfld. & P.E.I.R. 118 (Nfld. C.A.) Gosse v. Sorenson-Gosse, 2011 NLCA 58, 311 Nfld. & P.E.I.R. 76 Hudson v. Simoni, 2017 NLTD(F) 6 Rawluk v. Rawluk, (SCC), [1990] 1 S.C.R. 70 (S.C.C.) Hart v.

Hart (No.2) (1985), (NL SC), 60 Nfld. & P.E.I.R. 280 (Nfld. U.F.C.) Bursey v. Bursey (1975), 8 Nfld. & P.E.I.R. 504 (Nfld. S.C.)

Snook v. Snook, 2010 NLCA 57, 301 Nfld. & P.E.I.R. 113 Montreal Trust Co. of Canada v. Hickman, 2001 NFCA 42, 204 Nfld. & P.E.I.R. 58 Murphy v. Murphy, 2014 NLTD(F) 15 Quinlan Brothers Ltd. v. Coady, 2013 NLCA 31, 336 Nfld. & P.E.I.R. 75 Regal Realty Ltd. v. Pentagon Holdings Ltd., 2013 NLCA 45, 338 Nfld. & P.E.I.R. 66 Chesterfield v. Janssen (1750), 2 Ves. Sen. 125 Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269 Economical Mutual Insurance Co. v. Bank of Nova Scotia, 2015 NLCA 29, 367 Nfld. & P.E.I.R. 297 Peter v. Beblow, (SCC), [1993] 1 S.C.R. 980 (S.C.C.) Canadian Imperial Bank of Commerce v.

Boukalis, (BC CA), [1987] 3 W.W.R. 505, 11 B.C.L.R. (2d) 190 (B.C.C.A.) Miller v. Debartolo-Taylor, 2015 ONSC 2654 Pirbhai v. Rani, 2012 ONSC 345 Cabaniss v. Cabaniss, 2009 BCSC 1478, 74 R.F.L. (6th) 352 Lee v. Lee and Snelgrove (1978), (NL SC), 19 Nfld. & P.E.I.R. 60, 4 R.F.L. (2d) 318 (Nfld. Dist. Ct.) Kashyap v. Canadian Imperial Bank of Commerce (1997), (NL CA), 148 Nfld. & P.E.I.R. 200 (Nfld. C.A.) McGuire v. Ottawa Wine Vaults Co. (1913), (SCC), 48 S.C.R. 44 (S.C.C.) Horwood Lumber

(1974) Limited v. Snow (1977), 19 Nfld. & P.E.I.R. 71 (Nfld. S.C. T.D.) Guthrie v. Abakhan & Associates Inc., 2017 BCCA 102, 411 D.L.R. (4th) 639 Carew v. Power and Melvin (1984), 47 Nfld. & P.E.I.R. 251 (Nfld. Dist. Ct.) Cruise Connections Canada v. Szeto, 2015 BCCA 363 Ridler v. Ridler (1984), 51 Nfld. & P.E.I.R. 19 (Nfld. U.F.C.) Hudson v. Simoni, 2017 NLTD(F) 6 Hart v. Hart (No. 3) (1986), 60 Nfld. & P.E.I.R. 287 (Nfld. U.F.C.) Dobbin v. Dobbin, 2009 NLUFC 11, 284 Nfld. & P.E.I.R. 6 Way v. Latilla, [1937] 3 All E.R. 759 Hugh’s Contracting Ltd. v.

Stevens, 2015 BCCA 401, 381 B.C.A.C. 33 Lou Petit Trucking Ltd. v. Petit, (MB CA), [1990] 3 W.W.R. 252, 69 D.L.R. (4th) 258 (Man. C.A.) Statutes considered: Family Law Act, RSNL 1990, c. F-2, sections 5, 6(3), 8, 10(1)(a), 12, 14, 18, 21, 22, 26, 29 Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 Fraudulent Conveyances Act, RSNL 1990, c. R-24, sections 2(b), 3, 4 Registration of Deeds Act, 2009, SNL 2009, c. 10.01, sections 7, 37 Judgment Enforcement Act, SNL 1996, c. J-1.1,

section 170 Rules considered: Supreme Court Family Rules, rule F4.06(3) Rules of the Supreme Court, 1986, rule 14.11(1)(

a) Texts considered: Ziff, Principles of Property Law (Scarborough, ON: Carswell, 1993) Halsbury’s Laws of Canada – Debtor and Creditor (2018 Reissue), HDC-109 G.W. Keeton, An Introduction to Equity (London: Sir Isaac Pitman & Sons Ltd, 6th Ed. 1965) Counsel: R. Paul Burgess Q.C. and Judy Manning, for the appellants; Tony St. George, for the first respondent; Appearing on his own behalf, the second respondent. The appeal was heard on June 15, 2018 before Green, Harrington* and O’Brien JJ.A. The following judgment was filed on December 23, 2019 by Green J.A. for the Court. *Harrington J.A. took no

part in the judgment pursuant to section 15(3) of the Court of Appeal Act , SNL 2017, c. C-37.002 . ______________________________________________________________ Green J.A.: [ 1 ] This appeal concerns questions involving the scope of the remedies available under the Family Law Act, RSNL 1990, c.

F-2 , as well as outside of the Act, that are available to a spouse for division, or compensation in respect of, matrimonial homes and business assets where it is alleged that the other spouse, through various corporate mechanisms and property transfers, has attempted to put those assets out of the reach of the claiming spouse.

Context [ 2 ] At the time of separation of the spouses in this case (they have been subsequently divorced), the legal titles to three properties (Huntley Drive, Clarenville; Main Road, Thorburn Lake; and Marathon Drive, Seminole, Florida) claimed by the wife, Annette Murphy, to be matrimonial homes were held in one of two companies, Paro Enterprises Limited and NuVision Foods Inc. The husband, Rodney Murphy, held one hundred percent of the shares of each of those companies.

In addition to holding title to the claimed matrimonial homes, Paro and NuVision held considerable other assets, including other real estate holdings. They were actively operated as business enterprises of Mr. Murphy. Ms. Murphy claimed she was entitled to a share in those businesses on the basis of work she did for them in respect of their management, maintenance and operation. [ 3 ] Following the parties’ separation but before Ms. Murphy commenced court proceedings against her husband, Mr.

Murphy purported to sell all of his shares in Paro and NuVision to Shoal Investments Limited, a company wholly owned by one Kevin King who had been, as described by the trial judge, “a constant presence in Mr. Murphy’s business life for more than two decades” (Trial Decision, paragraph 76). The total consideration paid for all of the shares in each company was $1,000 per company. The trial judge characterized these amounts as “nominal” (paragraph 77).

He later determined that the net asset value of the properties owned by the two companies, excluding the three claimed matrimonial homes, to be over two and a half million dollars. [ 4 ] Following the transfer of the shares to Shoal, Mr. Murphy made an assignment in bankruptcy. Although the information provided to the Court as to the details of the bankruptcy was sketchy, it appears that the trustee in bankruptcy took no action to challenge the share transfers under the preference provisions in the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 or by way of the Fraudulent Conveyances Act , R.S.N.L. 1990, c.

R-24. [ 5 ] Subsequent to the acquisition of the Paro and NuVision shares, but after Ms. Murphy had commenced action against Mr. Murphy and Shoal, Shoal caused Paro to sell two of the claimed matrimonial homes to unrelated third parties. Although there was some indication in the evidence that the purchaser of one of the properties had connections to Kevin King, the owner of Shoal, the trial judge did not conclude that these transactions were anything other than bona fide and for substantial consideration. At the time of one of these transactions, Paro was not a named defendant in the proceeding commenced by Ms.

Murphy. By the time of the other transaction, however, the proceeding had been amended to include Paro and NuVision as defendants. [ 6 ] Ms. Murphy claimed entitlement to a half-interest in the three claimed matrimonial homes notwithstanding that title was held in either Paro or NuVision rather than by Mr. Murphy directly. She alleged that those homes were transferred to Shoal by means of Mr. Murphy’s sale of the shares of those companies to Shoal without her consent and that the transfers were ineffective to deprive her of her

rights. [7] With respect to the business assets (the value of shares held in Paro and NuVision, less the value of the claimed matrimonialhomes), Ms. Murphy claimed a share in them or compensation related to them based on her asserted contribution and effectively took theposition that it did not matter that the ownership of the shares had been transferred to Shoal. The Trial Judge’s Decision [8] At trial, claims by Ms. Murphy in respect of matrimonial homes, matrimonial assets, business assets and spousal support weredealt with. The judge found in favour of Ms.

Murphy regarding her claims in respect of the matrimonial homes, matrimonial assets andbusiness assets. He made certain compensatory awards in her favour as well as some consequential proprietary orders respecting one ofthe matrimonial homes. He did not limit liability for the awards respecting the matrimonial homes and business assets as against Mr.Murphy only. He made Shoal, Paro and NuVision jointly and severally liable with Mr. Murphy to Ms. Murphy for the satisfaction of theawarded payments. This Appeal [9] Although Mr. Murphy filed a notice of appeal (Court file # 2016 01H 0072), he did not pursue it.

The current appeal, which isseparately brought by Shoal, Paro and NuVision, challenges the conclusions and reasoning of the trial judge insofar as they affectliability which he imposed on those companies. Although Mr. Murphy was named as a respondent on this appeal along with Ms.Murphy, he filed no materials and did not otherwise participate except as an observer in the courtroom. [10] The current appeal therefore only concerns the claims in respect of the claimed matrimonial homes and the business assetsinsofar as liability was imposed on Shoal, Paro and NuVision.

Specifically, the appellants challenge the following determinations asexpressed by the trial judge in paragraph 175 of his judgment and reproduced as part of the formal order: It is hereby ordered that: 1. Paro Enterprises Limited, NuVision Foods Inc., Shoal Investments Limited and/or Rodney Murphy pay Annette Murphy$190,949.78 for her interest in the properties situate Main Road, Thorburn Lake, NL ($90,949.78) and 7296 Marathon Drive Seminole,Florida USA ($100,000) and Annette Murphy quitclaim to the registered legal owner(

s) of those properties her right, title and interest tothem. 2. NuVision Foods [Inc.] (or the registered legal owner of the property) convey the property at 92 Huntley Drive, Clarenville, NL toAnnette Murphy, free and clear of any and all encumbrances, for which she forfeits her share of the equity in the property valued at$56,309 and pays from her overall share of the equity in their three matrimonial homes (being the Thorburn Lake property, the SeminoleFlorida property and the 92 Huntley Drive property) an equal amount to purchase the remainder of the equity in the 92 Huntley Driveproperty. 3.

Paro Enterprises Limited, NuVision Foods Inc., Shoal Investments Limited and/or Rodney Murphy pay Annette Murphy$508,448.32 for her twenty percent (20%) interest in the business assets of Paro Enterprises Limited and NuVision Foods Inc. … 7. Paro Enterprises Limited, NuVision Foods Inc., Shoal Investments Limited and/or Rodney Murphy pay Annette Murphy’s costs tobe taxed on a party and party basis under Column III of the Scale of Costs. 8.

Paro Enterprises Limited, NuVision Foods Inc., Shoal Investments Limited and/or Rodney Murphy are jointly and severally liablefor all amounts directed above to be paid by “Paro Enterprises Limited, NuVision Foods Inc., Shoal Investments Limited and/or RodneyMurphy”. [11] The effect of item #8 is to make it clear that the liability of the three appellants in item #1, dealing with matrimonial homes, anditem #3, dealing with business assets, was to be joint and several with Mr.

Murphy. [12] The appellants also appeal the costs disposition at trial which also made Paro, NuVision and Shoal’s liability for costs co-incident with that of Mr. Murphy. Consent Order Pending Appeal [13] Shortly after filing the notice of appeal, the appellants applied to this Court for a stay of the judgment pending the hearing of theappeal. Ms. Murphy responded by expressing concern, amongst other things, that if a stay of enforcement were granted withoutconditions, Mr.

King and Shoal could operate Paro and NuVision in the period pending appeal in a manner that might be prejudicial toher interests if she were ultimately successful on the appeal. In particular, they might dispose of assets in the real estate portfolio whichthey had indicated they intended to do. [14] Following argument in front of Harrington J.A., the parties agreed to an order by consent dated July 28, 2016 (the “OrderPending Appeal”) which placed some restrictions on the manner of disposal of real property held by Paro and NuVision.

Sales ofproperty were permitted to proceed but the net proceeds of sale less closing costs were to be held in trust by one of the law firmsinvolved in the transaction until further order. Notice of each sale and an accounting in relation thereto was to be given to Ms. Murphy,and Paro and NuVision were not permitted to further encumber any of the remaining real estate assets. [15] Further, a pre-judgment lis pendens which had been registered by Ms.

Murphy in the Registry of Deeds relating to the HuntleyDrive and Thorburn Lake properties was to remain in place (see this Court’s previous judgment describing the circumstances relating tothis matter: 2015 NLCA 33 , 2015 NLCA33; application for leave to appeal to Supreme Court of Canada dismissed, [2015]

S.C.C.A. No. 401). [ 16 ] In addition, Ms. Murphy was permitted to continue to occupy the Huntley Drive property, thus continuing a pre-judgment order of the trial judge (October 16, 2013) but, in contradistinction to the trial judge’s order, which placed responsibility on Ms. Murphy for payment of mortgage, insurance and taxes, the appellants became responsible for payment of such matters henceforth. [ 17 ] Ms. Murphy was also to be paid the sum of $50,000 by the appellants.

Although the Order does not expressly say so, it is apparent that this payment was to be on account of any resulting liability remaining after the appeal. The order did not, however, specify which category of liability, nor which of Shoal, Paro or NuVision, was to receive the credit against any ultimate liability. Against those factual developments, the appeal proceeded. Issues on Appeal [ 18 ] The essential challenge to the trial judgment by Shoal, Paro and NuVision is in respect of the ruling that those companies be held jointly and severally liable with Mr. Murphy to satisfy the judgment.

In essence, the appellants submit that there is no basis in law, and certainly no legal basis articulated by the trial judge, for holding that there should be joint and several liability, or any liability for that matter. [ 19 ] The specifics of the argument differ according to the type of property being dealt with.

The appellants challenge the applicability of the provisions of the Family Law Act dealing with claims to matrimonial homes and business assets in circumstances where title to such properties and assets is, at the time of trial, held by a person or corporate entity who is not one of the spouses and where there is no legal nexus, such as the application of the Fraudulent Conveyances Act , which, they submit, was neither pleaded nor relied on at trial, between the defendant spouse and the third party title holder. [ 20 ] The appellants also assert that the trial judge failed to address Ms.

Murphy’s claims to business assets outside of the Family Law Act , which is where they say they should have been analyzed and dealt with, in view of the inapplicability of the Act , by considering the application of the principles of unjust enrichment and remedial constructive trust.

They further assert that, although this would have been an appropriate avenue of analysis, the appeal record is not adequate for this Court to make any rulings in this regard. [ 21 ] In essence, the appellants assert that the trial judge, without legal foundation, attempted a form of “piercing the corporate veil” in circumstances where that doctrine has no application. [ 22 ] Failing those arguments, the appellants submit in the alternative that even if the appellants or some of them are to be fixed with liability, the trial judge made palpable and overriding errors in his valuations of the assets in question. [ 23 ] For the purposes of analysis on this appeal, the following questions are engaged: (

a) The extent of applicability, if at all, of the Family Law Act , especially ss. 8 and 6(3) , to the matrimonial home claims against the appellants; (

b) The extent of applicability, if at all, of s. 29 of the Family Law Act to the business assets claims against the appellants; (

c) The degree, if at all, to which the pleadings may restrict the ability of the court to address the claims against the appellants, in particular, claims of unjust enrichment and under the Fraudulent Conveyances Act ; (

d) The application of the principles of unjust enrichment and the remedy of constructive trust to determining liability of the appellants; (

e) The adequacy of the appeal record to enable this Court to make determinations of liability on the basis of the Fraudulent Conveyances Act and unjust enrichment; (

f) The degree, if any, to which the trial judge may have made errors in his calculations of values of the assets in question and, by extension, in the ultimate size of the monetary awards made against the appellants; Of course, costs both at trial and on appeal are also always in issue. [ 24 ] Discussion and analysis of the foregoing matters will provide a roadmap for resolution of this appeal. [ 25 ] The standard of appellate review with respect to item (

f) is one of palpable and overriding error. Items (

d) and (e), assuming the principles are applicable, are matters of first impression for this Court because the trial judge did not deal with them. The other items involve either questions of law or mixed law and fact where the legal question is clearly extricable; hence they are reviewable on a standard of correctness. Considerations (

a) Matrimonial Home Claims 1. Scheme of the Family Law Act [ 26 ] The appellants submit that the scheme of the Family Law Act only allows for a claim by a spouse in respect of a matrimonial home to be made against the other spouse. They further submit that where title to a property that would otherwise be a matrimonial home is held by a corporation and that corporation disposes of the property to a third party, the spouse claiming an interest in the property cannot claim the property, or the value, against the third party transferee. [ 27 ] In light of these submissions, it is necessary to review the scheme of the Act as it relates to matrimonial homes and to identify the

nature and extent of the interest that a spouse has in such property. [28] Unlike the matrimonial property legislation in some other Canadian jurisdictions, which have adopted a deferred sharing regimein relation to all matrimonial property including a matrimonial residence, the Act creates an immediate and indefeasible proprietaryinterest on the part of each spouse in any property that meets the definition of “matrimonial home” in the Act from the moment thedefinition factually applies, not when it is declared by a court. That definition provides: 6

(1) In this Part [Part I – Matrimonial Home] (a) “matrimonial home” means the dwelling and real property occupied by a person and his or her spouse as their family residence andowned by either or both of them… [29] The key to the definition’s application is the occupation by the spouses as their “family residence,” a phrase that is not furtherdefined in the Act. In addition, the property must be “owned by either or both” of the spouses. This is reinforced by s. 8(1), the provisionwhich defines the nature of the interest each spouse receives.

It begins: “Notwithstanding the manner in which the matrimonial home isheld by either or both of the spouses…” (Emphasis added). [30] The trial judge ruled that each of the three properties in question was occupied by Mr. and Ms. Murphy as their family residenceduring their married life. There is no basis for concluding that the trial judge made a palpable or overriding error with respect to thatconclusion. The appellants do assert, however, that the definition and other provisions of

Part I of the Act nevertheless do not applybecause the title to each of the properties was held by either Paro or NuVision and not by “either or both” of Mr. Murphy or Ms.

Murphy.They say this is especially important in this case because by the time the claims to the homes were litigated, the ownership of thecompanies had no connection with either of the spouses, the shares in Paro and NuVision having been transferred to Shoal. [31] The definition of matrimonial home and the other provisions of the Act employing that phrase must, however, be read in light ofsubsection 6(3) which provides: The ownership of a share or an interest in a share of a corporation entitling the owner to the occupation of a dwelling unit owned by thecorporation shall be considered to be an interest in the dwelling unit for the purposes of subsection (1). [32] Where it applies, this allows a court to look behind corporate title-holding and determine that a property that would otherwisemeet the “family residence” test is nevertheless to be treated as a matrimonial home for the purpose of spousal claims to it.

On a narrowconstruction, one might be tempted to say that this subsection should only apply where the shares in question have attached to them aspecific condition that allows the shareholder to occupy the corporately-owned dwelling unit. That would be the position in corporatelaw.

If it is not an incident of share ownership (a right or condition attached to the share itself) that there is an automatic right to use oroccupy a particular corporate asset, the mere holding of a share in the corporation will not entitle a shareholder to access to any asset.Share ownership and property ownership or use are divorced. [33] In the context of matrimonial property law, however, a more tenuous connection between share ownership and use andoccupation of corporate property is recognized. In Debora v.

Debora (2006), (ON CA), 275 D.L.R. (4th) 698 (Ont.C.A.) the Ontario Court of Appeal, interpreting a provision almost identical to section 6(3) of our Act, held that if an owner of shares in acorporation has a controlling interest that would enable him or her to vote the shares so as to give him or her a right of residence, that issufficient for a provision like section 6(3) to operate. To give it a narrower, corporate-based

interpretation would defeat the desired effectof the legislation (Debora, paragraphs 21- 30). One of the purposes of our Act is stated in

section 5(

b) to be to “give a half-interest in thematrimonial home to each spouse.” Thus, if a dwelling unit satisfies the factual criterion of being occupied by spouses as their “familyresidence” a half interest in that unit should be assured to each spouse regardless of whether the title is held directly by one or both of thespouses or a corporation controlled by one of the spouses. [34] The trial judge referred to the Debora decision in his judgment and relied on it.

He was correct to do so. [35] It also does not matter, for the purpose of application of section 6(3), when title to a matrimonial home is placed in the corporatevehicle.

It could have been before the parties were married, with the couple subsequently moving in and living there (the case of theHuntley Drive property); it could be after they were married and after they personally acquired and lived in the property as a matrimonialhome before transferring it to the corporation, provided they continued to live in it as a matrimonial home after transfer to thecorporation (the case of the Thorburn Lake property); or it could be after they were married where one spouse purchased it in his namebut later transferred it to a corporation and then the parties commenced to live in it as a family residence (the case of the Floridaproperty).

The key in each case is the use and occupation of the property by the spouses as a family residence sometime during theirmarriage. Once that occurs, it does not matter if the title is held in a corporation so long as the corporation is effectively the alter ego ofone of the spouses. [36] It should also be noted that use and occupation of the corporate property does not have to be continuous in order to continue toqualify as a matrimonial home.

With respect to each of the three properties in this case, there were short periods where the dwellingswere rented to others and rental income was generated, presumably for the corporations concerned. That fact would, of course, berelevant to a judge’s determination whether each property had the character of a family residence but ultimately it is the overall generalcharacterization that matters. The trial judge heard evidence on this point and ultimately ruled that the level of rental activity did notdetract from the general character of the properties as matrimonial homes.

He made no palpable or overriding error in that regard. [37] If a property meets the definition of matrimonial home,

section 8 provides:

(1) Notwithstanding the manner in which the matrimonial home is held by either or both of the spouses, each spouse has a ½ interestin the matrimonial home owned by either or both spouses, and has the same right of use, possession and management of the matrimonialhome as the other spouse has. (2) Subsection (1) creates a joint tenancy with respect to the matrimonial home.

[38] To re-emphasize a point made earlier, although subsection (1) refers to ownership and title being held by “either or bothspouses”, that phrase must be read in conjunction with subsection 6(3) to accommodate the concept that title holding by a corporationcontrolled by one or both spouses is regarded as the equivalent of it being held by a spouse directly. [39] The nature of the “half interest” that arises the moment the dwelling acquires the nature of a family residence is, according tosubsection 8(2), a joint tenancy with its right of survivorship in the surviving spouse on death of the other (s. 8(5)(a)).

The interestcreated is not, however, a true joint tenancy as it exists at common law. This point was made by Noel J. in the early case of Murrin v.Murrin (1981), 41 Nfld. & P.E.I.R. 314 (Nfld. S.C.). The reason is that all of the so-called “four unities” of interest, title, possession andtime may not be present in this statutorily-created joint tenancy. [40] Furthermore, as pointed out by Noel J., the legislation, in what is now

section 10(a), provides that a spouse shall not dispose of ormortgage an interest in a matrimonial home “unless … the other spouse consents by signing the instrument of disposition or mortgage.” That is different from a common law joint tenancy, where a joint tenant could by his or her unilateral act sever the joint tenancy anddispose of his or her half interest, thereby creating a tenancy in common (but not a joint tenancy, because there would no longer be aunity of title or time) between the remaining tenant and the new owner of the other interest.

In that sense, as Professor Ziff points out inhis text, Principles of Property Law (Scarborough, ON: Carswell, 1993) at p. 255, fn 19, the statutory interest in Newfoundland andLabrador is more akin to the old form of concurrent ownership known as tenancy by the entireties. [41] I recognize that in Walsh v.

Canadian General Insurance Co. (1989), (NL CA), 77 Nfld. & P.E.I.R. 118(NFCA), a case dealing with an insurable interest under a fire insurance policy, Goodridge, C.J.N. stated at p. 121 that a statutorymatrimonial joint tenancy “is no different than a joint tenancy existing at common law.” However, I believe what he was focusing onwere the legal effects of the statutory joint tenancy once created in relation to the type and extent of the interest vested in each spouse forthe purpose of potential recovery by one spouse under a fire insurance policy where the other spouse was disentitled to recover by virtueof being the arsonist.

Indeed, it is clear that Goodridge C.J.N. did recognize other differences between the common law and statutoryjoint tenancy in his discussion of the restrictions in the statute on the ability of the statutory joint tenant unilaterally to sever the tenancyand dispose of his or her half interest. [42] Accordingly, the better view is to regard the joint tenancy created by the Act as unique to its own circumstances.

While thereference to joint tenancy in the Act can be informed as to its meaning and effect from the notion of common law joint tenancy, legalincidents of the latter that are inconsistent with the statutory requirements must give way to what the statute expressly or implicitlydictates. [43] In this context, it should also be noted that although the Act refers to restrictions on a spouse being able unilaterally to dispose ofan interest in a matrimonial home, that requirement must also be read in light of section 6(3).

The effect is that if title to a matrimonialhome is held by a corporation, because the husband is notionally to be regarded as still having an interest in the home, the husband isprevented from voting his shares in any way (including appointing a third party director or officer for such purpose) that would have theeffect of depriving the other spouse of her “interest” in the home, including the transfer of title, by sale, to any other person.

Effectively,there is an obligation on the corporation not to act to dispose of any part of the title to any property that is a matrimonial home unless theother spouse’s consent, or disposition of that consent by a court as provided in the Act, is obtained. [44] To the extent that it is necessary for the other spouse to exercise rights as joint tenant and to seek a court order for division of thehome by partition or sale, the remedy may have to encompass an order against the corporation as the title holder in order to ensure thatthe spouse is not adversely impacted by the fact that the title is held by the corporation.

In effect, the spouse will be notionally treatedwith respect to her half-interest as a joint tenant with the corporation and can seek remedies accordingly. While it is true that at commonlaw, a corporation could not be a joint tenant because the right of survivorship would not operate properly, that does not matter for thepurposes of remedies under the Family Law Act due to the fact that the statutory joint tenancy is unique. [45] I pause here to consider – and reject – an alternative way to look at the effect of section 6(3).

It might be possible to regard theeffect of the subsection as, instead of allowing access to the dwelling for remedial purposes, it would amount to substituting the share(s)in question for the matrimonial home itself. That would mean that all rights to the home would instead only be exercisable against theshare(

s) so that the claiming spouse, through acquisition of a half-interest in the shares(s), would be able to exercise whatevershareholder rights there are to cause the corporation to continue to make the home available for family purposes. Thus it would be theshares that would be the focus of any proprietary claim. [46] This approach would not be in accord with the underlying intent of the legislation. The Act’s purpose is to give a half-interest inthe matrimonial home to each spouse (s. 5(a)). Substituting an interest in a share does not achieve this.

A right to have a share interestsold, transferred or divided is not the same as having a right to have the property itself sold, transferred or divided. There would notnecessarily be any correlation in the values of the share and the property itself. The corporation may also have other assets and liabilitiesthat make the share worth more or less than the individual dwelling. Furthermore, transferring rights from the home to the share wouldbe impractical.

It would effectively frustrate other remedies the claiming spouse might have, for example, the right to seek temporaryexclusive possession of the matrimonial home. Take this very case. Ms. Murphy sought and obtained from the court a temporary orderentitling her to possession of the Huntley Drive home which was owned by NuVision. It would have been small comfort to her to havean order for possession of a share certificate. Accordingly, I reject such an

interpretation of section 6(3). [47] It follows that it does not matter when a family residence is acquired by the corporation. Acquisition can be before or after theproperty acquired the status of matrimonial home, as between the affected spouses. Furthermore, once the property acquires the characterof a matrimonial home (regardless of whether title is held by one or both spouses directly or through a corporation where section 6(3)applies) each spouse has an indefeasible interest in it.

The corollary – reinforced by section 10(1)(a) – is that one spouse or a corporatetitle-holder cannot purport to dispose of all or any half-interest in the property without the consent of the other. [48] It further follows that it matters not that share ownership in the title-holding corporation may subsequently change. It is not shareownership that matters but ownership of the interest in the matrimonial home. The corporation still is the legal title-holder but for thepurpose of remedies under the Act, the title is regarded as being held between the other spouse and the corporation as statutory joint

tenants. In this way, the claiming spouse is not deprived of her statutory interest. [ 49 ] Consequently, the claiming spouse may follow the matrimonial home into the corporation and seek remedies against it that would put her in the same position as she would have been in if title had been held directly by one or both of the spouses.

A new owner of the shares of the corporation cannot be heard to object that he had nothing to do with the original spousal parties or that he entered the picture without any notice of the pre-existing spousal statutory interests or that the matrimonial interest somehow disintegrates as against the corporation once ownership of the corporation changes because of his or her lack of notice. An indefeasible legal interest in a matrimonial home created by the Act binds subsequent purchasers regardless of absence of notice.

It is only property interests recognized in equity that are subject to defeasance by a bona fide purchaser for value without notice. The only exception with respect to defeasance of legal interests is in the case of registerable interests that are unregistered under the Registration of Deeds Act, 2009 SNL 2009, c. 10 .01, as against a subsequent purchaser for valuable consideration without notice who first registers his instrument (see sections 7 and 37 ).

That legislation does not apply to statutorily-created property interests like the statutory joint tenancy in a matrimonial home because they are not created by instrument. [ 50 ] Thus, the statutory joint tenancy of the matrimonial home, once created, binds all third party transferees whether they are innocent and acting in good faith or not. The only protection a purported transferee of an interest in a matrimonial home has is to rely on

section 12 of the Family Law Act which reads: For the purpose of

section 10 [imposing restrictions on disposition without consent], an affidavit of the person making a disposition or mortgage of property stating (

a) that he or she is not a spouse at the time of making the disposition or mortgage; (

b) that the property disposed of or mortgaged has never been the matrimonial home of the person and his or her spouse; (

c) that the spouse of that person has released all rights to the matrimonial home by a separation agreement, marriage contract or a designation made under

section 9; or (

d) that where the person is not a spouse, he or she has not made a cohabitation agreement under

Part IV, is proof that the property is not a matrimonial home unless the person to whom the disposition or mortgage is made had actual or constructive notice to the contrary. [ 51 ] In the current case, that

section does not apply because there has been no purported transfer of the title of the homes. They remain in the corporate vehicles they have always been in. [ 52 ] Even if one could treat the transfer of the Paro and NuVision shares to Shoal as notionally a disposition of the homes to new owners, no affidavit that complies with

section 12 was prepared and delivered at the time of the share transfer. Indeed, it would not in the circumstances have been possible, consistent with the obligation of speaking the truth, to give such an affidavit stating that the properties were not occupied as matrimonial homes. Furthermore, given the trial judge’s finding that Kevin King, the sole shareholder of Shoal, was “complicit” in Mr. Murphy’s attempt to put the assets out of reach of Ms. Murphy (Judgment, paragraph 125), it can be concluded that Mr. King had at least constructive notice, in the sense of being put on inquiry, of the character of the properties as matrimonial homes and would not have been able to rely on a

section 12 affidavit even if one had been prepared. [ 53 ] It was suggested in argument that this would put an improper burden on a purchaser in a commercial share purchase. The purchaser of the shares would bear the complete risk that title to residential property forming part of the corporation’s assets would be subject to a spousal claim on the basis that the property was used at some time as a family residence.

I agree that this risk does exist; however, it is not appreciably different than the risk that any purchaser of shares must take with respect to unknown claims against or defects in title to any of the corporate assets. Due diligence on any purchase may involve examination of title to significant key assets and the obtaining of appropriate declarations, warranties and indemnities, supported by security if necessary, from the vendor with respect to such contingencies.

If the investigations are not undertaken and something later arises or if the warranties are proven to be false, the resulting loss suffered by the corporation could, depending on the nature of the share purchase agreement, be sought to be recouped from the share vendor. [ 54 ] The type of risk involved is inherent in any share purchase transaction.

A purchaser, faced with knowledge that one or more of the assets may be of a residential character should, to protect his or her interests in the transaction, inquire further as to whether the share vendor and any spouse of his or hers purported to use the property as a family residence at any point while the vendor was the controlling shareholder.

If as a result of such inquiry, it appears that was a possibility, further inquiries and, if necessary, waivers, warranties and indemnities may be indicated. [ 55 ] The conclusion from this analysis, therefore, is that the rights of a spouse to a matrimonial home held by a corporation in which the other spouse has a controlling interest at the time the character of the home as a family residence arises is not affected by the fact that the title is held by the corporation nor by any subsequent change in the ownership of the shares of the corporation.

The matrimonial home, whether held in the other spouse’s name or in the name of a corporation, cannot be disposed of, or the shares in the corporation disposed of, in a manner that would defeat the claiming spouse’s rights. Furthermore, there is no necessity on the part of the claiming spouse to establish any improper potentially claim-defeating behavior, such as a fraudulent conveyance, on the part of the other spouse as a basis for continuing the claim to the property.

The claiming spouse’s continuing rights to the property arise from the nature of the indefeasibility of the spouse’s proprietary interest created as a legal interest by statute. 2. Application to this Case [ 56 ] In concluding that each of the three claimed properties, (referred to hereinafter individually as the Huntley Drive, Thorburn Lake and Florida properties) were matrimonial homes, thereby entitling Ms. Murphy to continuing remedies in respect of them, the trial judge relied on two factors, best expressed in his judgment as follows:

[71] Overall, I find that the Huntley Drive, Thorburn Lake and Florida properties are matrimonial homes which the parties own as joint tenants and in which each has, using the wording from s. 8(1) of the Family Law Act , “…a ½ interest … and … the same right to use, possession and management … as the other spouse has.” Let me be clear about why I make this finding. I am not simply saying that the properties are matrimonial homes because they belonged to either NuVision or Paro Enterprises of which Mr. Murphy was the only shareholder and director. [72] Mr.

Murphy’s control of these companies is important to my finding but equally important is how the parties occupied and used the three properties as their family residences, whether in the first (as with the Huntley Drive property), second (as with the Thorburn Lake property or third (as with the Florida property) ranks, in decreasing order of usage and primacy. [ 57 ] The judge placed emphasis, as he should have done, on the twin factors of usage as a family residence and the application of section 6(3). Together, they provide the gateway into fashioning a remedy in favour of Ms. Murphy.

Although the judge did not explain in his reasons why Ms. Murphy’s claim was enforceable against Paro and NuVision notwithstanding the change in ownership of the shareholdings from Mr. Murphy to Shoal, his conclusion can be explained on the basis of the analysis set out above (see paragraph 55). For those reasons, I reject the arguments of the appellants that the trial judge erred in not finding that Ms. Murphy was disabled from following her interest into the companies once ownership of them changed from Mr. Murphy to Shoal.

Once she acquired her rights in the matrimonial home, those interests were indefeasible – even as against third parties – unless she consented to relinquish these rights (or the provisions of

section 12 applied). [ 58 ] The judge went on and valued Ms. Murphy’s interest in each matrimonial home. He valued Ms. Murphy’s half of the equity in the Huntley Drive, Thorburn Lake and Florida properties at $56,309, $90,949.78 and $100,000 respectively. He declared her entitlement to these amounts.

Issues with respect to the correctness of these valuations will be dealt with later. [ 59 ] For the present, it is enough to say that in the case of the Thorburn Lake and Florida properties, Paro had already purported to sell the properties to third parties (I make no comment about the effectiveness of those sales without the consent or participation of Ms. Murphy; presumably, appropriate s.12 affidavits were obtained from a representative of Paro – whether accurate or not – and which the new purchasers, if innocent, might be able to shield behind). Ms.

Murphy could not therefore obtain a proprietary remedy against the properties by having them partitioned and sold. That had effectively already been done. What was left was a monetary remedy for their value. Half of the proceeds, however, represented Ms. Murphy’s interest in the two properties and she is entitled to them. It was not sufficient, therefore, to limit a monetary remedy to a judgment against Mr. Murphy. Whatever value these properties represented remained with Paro and not in Mr. Murphy’s personal name.

Paro, as the recipient of the properties’ value, represented by the sale proceeds, was an appropriate party to satisfy any judgment. [ 60 ] Furthermore, for the reasons given earlier, Ms. Murphy is, by virtue of section 6(3) , to be notionally regarded as being a joint tenant with Paro and should be entitled to a remedy against the other party on title. Accordingly, Ms. Murphy should be entitled to judgment for the value, whatever that may be, of her half interest in the Thorburn Lake and Florida properties against her spouse, Mr. Murphy, and also Paro on a joint and several basis.

As well, to the extent that Paro retains the sale proceeds of the homes either in their original form or as represented by subsequent investment in other identifiable assets, Ms. Murphy should be entitled to a constructive trust on those assets to enable her claim to be satisfied. To the extent to which the sale proceeds were transferred out of the company, and they can be effectively traced, Ms. Murphy might also have a claim against the party into whose hands the funds were transferred.

But that is not a matter which can be decided in the current proceeding. [ 61 ] Without assigning any reasons, the trial judge ordered that not only Mr. Murphy and Paro but also Shoal and NuVision should be jointly and severally liable to Ms. Murphy for the Thorburn Lake and Florida claims. In this he erred. There is no basis under the Family Law Act for holding liable other corporate entities that were not the holders of the title, to which section 6(3) could apply.

To that extent, I agree with the submissions of the appellants, though for different reasons than they advanced. [ 62 ] With respect to the Huntley Drive property, its title is still held in NuVision’s name. It is still subject to the Order Pending Appeal referred to previously which allowed Ms. Murphy, as against NuVision, to continue to occupy the property with the appellants paying mortgage, house insurance and property tax payments relating to it. The judge determined, for reasons previously explained, that Ms. Murphy was entitled to half of the equity in the home.

He valued her share at $56,309. [ 63 ] Unlike in the cases of the other two matrimonial homes, however, Ms. Murphy was not limited to a monetary judgment against her spouse and NuVision. In principle, she was entitled to seek a partition or sale of the property and receive payment of her half interest from the proceeds. For the same reasons as were applicable to the other properties, her remedies in that regard were limited to judgments against Mr. Murphy and NuVision (the title-holder), not Paro or Shoal. [ 64 ] Ms. Murphy, instead, sought an order that NuVision sell its half-interest in the property to her.

The judge agreed with this approach. In so doing he was acting within legal principle. This Court has recognized that a court dealing with how to divide the value of a matrimonial home between spouses may order one spouse to sell his or her half interest to the other provided a fair process is adopted to ensure that the transferring spouse receives an equal share of the fair market value of the property at the time of transfer: Gosse v. Sorenson-Gosse , 2011 NLCA 58 , 311 Nfld. & P.E.I.R. 76 at paragraph 35 .

This follows, the Court has said, from an expansive reading of section 14(1)(b)(iii) of the Family Law Act (and, I would add, from

section 26 dealing with the powers of the court respecting matrimonial assets which, by definition, include matrimonial homes for this purpose: Walsh v. Canadian General Insurance , per Goodridge C.J.N. at p. 121: “Section 19 [now s. 26 ] provides for the division by the court of matrimonial assets, including the matrimonial home , upon the separation of the spouses [emphasis added]). See also to like effect, Hudson v. Simoni , 2017 NLTD(F) 6, paragraphs 19-20. [ 65 ] The appellants submit, however, that this power should be restricted to situations where the holders of the statutory title are still the spouses, and not where the title is held by a corporation. In light of my

interpretation of section 6(3), and its application in this case, this submission has no merit. For the purpose of remedies under the Act , the corporation is to be treated as if the title holder was the other spouse. The corporate veil can and should be pierced for this purpose. Consequently, if the interests in the matrimonial home are to be regarded as a joint tenancy between the claiming spouse and the corporation, then to effectuate the spouse’s right to purchase the

other half-interest, an order can and should be made against the corporation. [ 66 ] I conclude therefore that the trial judge made no reversible error in deciding to order NuVision to convey its half of the equity in Huntley Drive to Ms. Murphy. [ 67 ] Two further things are to be noted, however, about the trial judge’s order. First, the order went further and required NuVision to transfer not only the equity in the property to Ms. Murphy but instead the whole of the property “free and clear of any and all encumbrances” (paragraph 175, #2).

In this case, the purchase price was calculated by reference to the equity in the property, i.e. Ms. Murphy was required to pay NuVision the value of NuVision’s equity ($56,309). Normally, if a person purchases the equity in a property, he or she will have to assume and be responsible for any mortgage that may be secured on the property.

If, on the other hand, the purchase is free and clear, the purchase price is calculated, not by reference to the equity, but to the full value and the mortgage is paid off out of the full sale proceeds prior to conveyance. [ 68 ] The judge did not give any reasons for ordering that the property be conveyed free and clear of all encumbrances upon payment only of a purchase price calculated by reference to equity. This calculation was not challenged on this appeal; it was not included as a ground of appeal in the notice of appeal nor was it raised or argued in the written materials or in oral argument.

It was not therefore a live issue. Accordingly, notwithstanding the unusual and unexplained nature of the order in this regard, I will deal with the matter on the basis of the judge’s determination. [ 69 ] Secondly, there appears to be a potential conflict in the manner in which the judge described the means whereby Ms. Murphy was to purchase NuVision’s equity in the property. In his reasons, he stated: [173] … Ms. Murphy’s half of the $112,618 equity in 92 Huntley Drive, or $56,309, will be deducted from the $247,258.78 that Ms.

Murphy would otherwise receive from Shoal Investments, Paro Enterprises, NuVision Foods and/or Mr. Murphy for her interest in their three matrimonial homes. In his final Order, he stated: [175] In the result, I order that: … 2.

NuVision Foods (or the registered legal owner of the property) convey the property at 92 Huntley Drive, Clarenville, NL to Annette Murphy, free and clear of any and all encumbrances, for which she forfeits her share of the equity in the property valued at $56,309 and pays from her overall share of the equity in their three matrimonial homes an equal amount to purchase the remainder of the equity in the 92 Huntley Drive property. [ 70 ] In the first paragraph above-quoted, the judge appears to be saying (correctly) that if Ms.

Murphy were to keep her share of the equity instead of being compensated for it, the total amount she would otherwise be paid in respect of the three matrimonial homes (there now being only two for which she would be compensated) would have to be reduced by the value of her half-interest in the equity of Huntley Drive, $56,309. That would mean she would be entitled to payment in respect of the other two homes: $247,258 less $56,309, or $190, 949.

This is confirmed by the judge’s ultimate order (paragraph 175, item #1). [ 71 ] In the second paragraph, however, the judge appears to recognize (correctly) that in addition to reducing the total matrimonial home cash payment of $247,258.78 by $56,309, representing Ms. Murphy’s half-interest in the equity, she will also have to pay an additional $56,309 representing the half-interest of NuVision that she is purchasing. This seems to follow from the judge’s statement that Ms.

Murphy “forfeits her share of the equity … and pays from her overall share of the equity in their three matrimonial homes an equal amount to purchase the remainder of the equity …” (emphasis added), i.e. NuVision’s share. [ 72 ] The potential confusion arises with the reference to paying for NuVision’s share out of the “overall share of the equity in their three matrimonial homes.” That could be taken to mean that NuVision’s share was to be paid out of the total amount of $247,258 (the total amount of the equity in the three homes) whereas that amount would already have been reduced to $190,949 by reason of Ms.

Murphy having forfeited $56,309 of that amount because she was to keep her equity and not to be compensated for it.

To read the two paragraphs consistently, one must treat the reference in paragraph 175, item #2 to “their three matrimonial homes” as, instead to “their other two matrimonial homes.” The result would be that, after payment for NuVision’s share of the equity in Huntley Drive from the cash she was still entitled to for the other two matrimonial homes, the net amount she would be entitled to would be $190,949 less $56,309 for NuVision’s share, or $134,640. [ 73 ] The simpler way to express the payments due to Ms. Murphy, using the judge’s analysis, would be to say that Ms.

Murphy was owed $90,949 for the Thorburn Lake property plus $100,000 for the Florida property for a total of $190,949 but because Ms. Murphy owed NuVision $56,309 for the Huntley Drive property, the net amount to which she was entitled in respect of all three properties from the two companies, considered collectively, was $134,640. The result is the same. [ 74 ] Two other consequential aspects of this order, however, remain problematic. The first relates to the setting of the sale price.

That will be dealt with later in the general discussion relating to valuation. [ 75 ] The second problematic aspect relates to the manner of satisfaction of the purchase price (whatever it is determined to be) by Ms. Murphy. The trial judge determined that Ms. Murphy could pay the price by means of a reduction in the total amount she was due “from her overall share of the equity in [the] three [in fact, the two remaining] matrimonial homes” (Paragraph 175, item #2).

This convenient shorthand manner of accomplishing the payment would, of course, have worked on the trial judge’s remedial approach because all of the monetary payments which Ms. Murphy was due were the joint and several obligations of Paro, NuVision and Shoal. On my revised analysis, however, only Paro is liable (along with Mr. Murphy) for the value of Ms. Murphy’s interest in the Thorburn Lake and Florida properties and only NuVision (and Mr. Murphy) is liable in respect of Huntley Drive. Paro and NuVision cannot be treated as one entity for the purpose of inter-corporate credits.

[76] The same result, though not as tidy procedurally, can be achieved, however, by providing that Ms. Murphy can satisfy thepayment to NuVision by assigning to NuVision, out of the amount due her from Paro for the other homes, an amount equal to thepurchase price determined in accordance with this judgment, thereby leaving it to NuVision to collect the purchase price directly fromParo. Such a provision falls within the notion of the court “setting ‘the terms and conditions’, including compensation to be paid, ‘thatthe court considers desirable’ ” as explained in Gosse at paragraph 35.

Alternatively, of course, Ms. Murphy could pay the purchase pricedirectly if she has access to other sources of funds. (

b) Business Assets Claims 1. Scheme of the Act [77] As in the case of the matrimonial homes, the appellants submit that they could not be made subject to any awards in favour ofMs. Murphy in respect of business assets because those assets, represented by the shares in Paro and NuVision, were transferred to Shoalbefore Ms.

Murphy established any claim to them. [78] For the reasons already given, I have concluded that holding title to a matrimonial home in a corporation that is controlled by onespouse and transferring the shares in that corporation to a third party does not automatically defeat the other spouse’s claims. It does notfollow, however, that the same situation applies in respect of business asset claims. [79] The scheme of the Family Law Act operates differently in respect of claims to business assets.

It is therefore necessary toconsider the scheme of the Act as it applies to business asset claims. [80] Claims by one spouse to the other spouse’s business assets are dealt with on a contribution basis that is grounded in notions ofunjust enrichment. Business assets are defined by section 18(1)(

a) of the Family Law Act as “property primarily used or held for or inconnection with a commercial, business, investment or other income or profit producing purpose.” [81] It is important to differentiate business assets from matrimonial homes and other matrimonial assets in terms of how they aredealt with in the legislation. [82] In the case of matrimonial homes, the claim is, as we have seen, based on an automatic and immediate proprietary interestacquisition model founded on family usage. Each spouse acquires an indefeasible proprietary claim to the home.

Entitlement does notdepend on judicial discretion. [83] In the case of matrimonial assets, the claim is based on notions of deferred sharing where the claiming spouse’s entitlement andshare is determined by a court after the fact upon the occurrence of a triggering event such as separation or divorce as outlined in section21 of the Act. There is no proprietary claim arising from the marriage itself or from usage for family purposes.

Rather there is apresumption of equality of sharing but that is subject to variation by judicial discretion based on notions of gross injustice orunconscionability (s. 22). [84] The presumption of equal sharing requires the court to determine what property constituted matrimonial assets as of theoccurrence of the triggering event according to the definition of matrimonial assets contained in section 18(1)(

c) of the Act, then todetermine, according to traditional principles of property ownership, which of those assets is owned by which spouse and, finally, toachieve equalization by deciding which spouse has a balancing claim against the other. The process is generally described in Rawluk v.Rawluk, (SCC), [1990] 1 S.C.R. 70 in the context of the Ontario deferred property sharing regime. [85] As in the case of claims to matrimonial assets, claims to business assets likewise are determined, not on the basis of rightsconferred automatically by virtue of matrimonial status but, rather, by a court after the fact.

Unlike matrimonial assets claims, however,business assets claims are determined solely on the basis of contribution by the claiming spouse to the acquisition, management,maintenance, operation or improvement of the assets in question. There is no presumption of equality of sharing and no balancing ofclaims to equalization. [86] In the case of claims to both matrimonial assets and business assets, the spouse therefore has no right to any such assets that wereacquired in the other spouse’s name until a court orders a remedy.

Prior to that, each spouse only has a potential personal non-proprietaryclaim in respect of the assets. At best, it can be said that the claiming spouse has an inchoate right to sharing or compensation that onlymatures into a property interest if the court establishes both entitlement and share, applying the criteria set out in the legislation and thenonly if the court in its discretion grants a proprietary remedy to particular assets instead of making a compensatory order. [87] The key

section relating to claims to business assets is

section 29 which provides: 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 thecontribution, 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. [88] This provision reflects one of the purposes of the Act in

section 5(

d) which is to “provide for judicial discretion in sharingbusiness assets built up by a spouse during a marriage.” It is to be noted, however, there is no discretion as to whether a remedy shouldbe provided once a finding of contribution of work, money or money’s worth has been made. At that point, one of the remedies permittedby

section 29 must be granted (“the court shall by order…): Hart v. Hart (No.2) (1985), (NL SC), 60 Nfld. & P.E.I.R.

280 , per Cameron J. at paragraph 23. The discretion is limited to a choice of which remedy should be applied. [ 89 ] It is important to recognize, as the last sentence in

section 29 makes clear, that the spousal status of the contributing spouse or the normal expectations that might traditionally exist for a spouse to make unremunerated contributions to the business does not diminish the entitlement to a remedy under the section. Thus, the old notions of what is “not an unusual effort by any wife in Newfoundland” to contribute without expectation of reward and therefore not counting as entitling a spouse to a share in property (per Mifflin J. in Bursey v. Bursey (1975), 8 Nfld. & P.E.I.R. 504 at p. 507) no longer apply. [ 90 ] By the same token, the contribution that does qualify under

section 29 must be an already-unremunerated or inadequately (i.e. unfairly) remunerated contribution: Snook v. Snook , 2010 NLCA 57301 Nfld. & P.E.I.R. 113 at paragraph 28. Otherwise, a remedy under the

section would lead to double compensation. [ 91 ]

Section 29 is more limited with respect to business asset claims than the provisions respecting claims to matrimonial assets in a number of ways. First, there is no presumption of equal sharing. Secondly, entitlement to any degree of remedy depends on proof of some contribution of work, money or money’s worth. Thirdly, there is no discretion in the court to vary the amount of a share that would otherwise be indicated on the basis that such a result would be grossly unjust or unconscionable. [ 92 ] Fourthly, by its terms,

section 29 is restricted to claims made against spouses . The claim cannot be made against a corporate entity that might hold individual business assets. Unlike section 6(3) with respect to matrimonial homes and the corresponding section 18(3) with respect to other matrimonial assets, there is no provision which prevents a spouse from shielding against claims to business assets by use of a corporation holding those assets; in fact, holding business assets by means of a corporation can be expected to be a perfectly common arrangement.

Claims to business assets that are managed and operated as part of a corporate enterprise must therefore be made against the other spouse, with the spouse’s investment (shareholdings) in the corporation being regarded as the business asset.

The contributing spouse’s remedy is thus limited to a potential portion of the other spouse’s shareholdings or a monetary compensation from the spouse for the contribution. [ 93 ] It is worth emphasizing again that, unlike the case of the matrimonial home, the contributing spouse has no proprietary interest in any of the other spouse’s business assets until such time as the court so orders. The other spouse may dispose of those assets without the consent of the contributing spouse until the court orders otherwise either by an interim order under

section 30 or by a final order under

section 29 (although it is to be noted that a contributing spouse may in theory assert a business asset claim during married cohabitation before separation and thereby obtain appropriate restraining orders). [ 94 ] Exceptions to this conclusion could occur where a spouse purports to sell or transfer the business assets to which a contributing spouse might have a claim to a third party with intent to defeat, hinder, delay or defraud the contributing spouse within the meaning of fraudulent conveyance legislation, or within general principles pertaining to fraud, or where the contributing spouse might have a claim at common law or in equity against the corporate entity itself based on unjust enrichment. 2.

Application to this Case [ 95 ] Apart from the matrimonial homes, Paro and NuVision had significant real estate holdings which generated rental income, as well as several small retail and food businesses. With the exception of two apartment buildings (9 Country Road and 23 Marine Drive) which had their own building managers, Ms.

Murphy claimed she provided services, up to thirty-five hours a week, to most of the other rental and retail enterprises in the form of cleaning, sourcing furnishings and supplies, advertising and showing properties to prospective tenants and allowing her name to be used to support bank guarantees for mortgage financing. [ 96 ] Rejecting Mr. Murphy’s different characterization of the evidence and the suggestion that Ms.

Murphy had been adequately compensated for whatever services she provided to the businesses, the trial judge concluded: [114] I find that Annette Murphy contributed by her working for Paro and NuVision, or by providing money or money’s worth to the companies when it acquired properties, and then in helping Mr. Murphy to manage, maintain, operate or improve the business assets that belonged to Rodney Murphy through his ownership of Paro Enterprises and NuVision Foods. Ms. Murphy is entitled to compensation for her contribution to those businesses… … [120] Ms.

Murphy contributed extensively to the Paro and NuVision businesses. … It is worth noting … that Mr. Murphy regarded Ms. Murphy as so significant to his businesses that he actively petitioned her to return to them … [121] I find that Ms. Murphy’s contribution while quite significant was not co-extensive with Mr. Murphy’s influence in the businesses. His role was broader in scope… [123] Unlike the wives in [certain other cited cases], whose contributions to their spouse’s businesses were relatively small, Mr. Murphy would not have enjoyed the success he did without Ms. Murphy. [125] I award Ms.

Murphy twenty percent (20%) of the business assets that Mr. Murphy owned through the shares he held in Paro Enterprises and NuVision Foods when the parties separated. [ 97 ] No palpable or overriding error has been demonstrated in the judge’s treatment of the evidence in arriving at the conclusion that Ms. Murphy made a significant contribution to the acquisition, management, maintenance, operation and improvement of the business enterprises owned by Mr.

Murphy through Paro and NuVision, nor with respect to his conclusion that she was entitled to compensation for that contribution. [ 98 ] The trial judge went on, however, and decided that because the parties could never work in partnership it would be unrealistic to expect that Ms. Murphy should have a continuing share in the businesses. He therefore, after quantifying her interest in the businesses,

exercised the discretion conferred by

section 29 and converted that interest to fixed compensation pursuant to

section 29(

a) of the Act . (It might also have been added that because by the time of trial the shares in the companies had been transferred to Shoal, the only effective remedy against Mr. Murphy, absent any transaction-reversal order under fraudulent conveyance legislation, would have been to order compensation). I see no basis for concluding that the trial judge erred in principle in choosing the compensation remedy over the remedy of a share in the businesses. [ 99 ] The judge valued the businesses on a net asset value basis (excluding the matrimonial homes) as being worth $2,542,241.58.

Applying 20% to that figure, he calculated the amount of compensation Ms. Murphy should receive for her contribution to those businesses as they existed at the time of separation at $508,448.32. [ 100 ] In addition to holding Mr. Murphy liable for that amount, however, the trial judge also imposed liability on Shoal, Paro and NuVision on a joint and several basis. He gave no reasons for doing so. In imposing liability in this way, he erred in part. [ 101 ] The remedy provided by

section 29 is expressly limited to a personal claim against a spouse or a proprietary claim against the asset (in this case the shares) owned by the spouse. Ms. Murphy cannot assert a claim under that provision against the corporate bodies themselves that have benefitted from the contribution. Her claim is in respect of the shareholding held by the other spouse in those corporations. Thus, no remedy exists against Paro or NuVision under

section 29. Whether a claim can be maintained against those companies on the basis on common law unjust enrichment is a separate matter that will be dealt with later. [ 102 ] Furthermore, because the contributing spouse has no automatic proprietary interest in the business assets based solely on her contribution during the marriage, unlike in the case of a matrimonial home, there is no indefeasible property interest which can be followed into the hands of third parties which would justify maintaining claims against them in respect of that already-created property interest.

Thus, absent a finding of a fraudulent conveyance or operation of another transaction – defeating principle based on fraud generally, there was nothing to prevent Mr. Murphy transferring his shares in Paro and NuVision to Shoal. Accordingly, a remedy against Shoal also cannot be justified under

section 29. [ 103 ] It should be added, however, that it seems a possible

interpretation of the language used by the trial judge in characterizing the transaction between Mr. Murphy and Shoal and describing their involvement is that he regarded (although he did not expressly say so) the transaction as a fraudulent conveyance and attempted to fashion a remedy against Shoal on that basis. This is a matter to which I shall return. At this point, it nevertheless can be said that no remedy exists against Shoal solely on the basis of

section 29. (

c) Availability of Claims Outside of the Family Law Act [ 104 ] As noted above, the question remains as to whether the judge’s attempt to impose remedies against the appellants, especially Shoal, can be sustained on the basis of unjust enrichment or principles relating to fraudulent conveyances, or both. To do that, it is first necessary to examine the pleadings used in the Family Division in order to determine the scope of what was in issue in the litigation. This was a matter of some dispute on the appeal. 1. The Pleadings - Generally [ 105 ] The claim by Ms. Murphy in its final amended form named Mr.

Murphy, Shoal, Paro and NuVision as defendants. In accordance with the requirements for attenuated pleading in the Family Division rules of court (using an “originating application” in a pre-set format rather than a freely-constructed statement of claim) the claims made by Ms. Murphy in respect of property were described briefly as follows: 1. I hereby seek an order for the following: |x| Division of Matrimonial Property |x| Other ( specify) – per paragraph 7(

e) and 14 7. (

e) Other (provide details): [Shoal] is a corporate body duly incorporated under the laws of Newfoundland and Labrador and it is the sole shareholder of [Paro] and [NuVision]. [Mr. Murphy] has purportedly transferred all of the assets and/or shares of [Paro] and [NuVision] (which were solely owned by [Mr. Murphy

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