2012 NBCA 11, 2012 NBCA 11

COURT OF APPEAL OF NEW BRUNSWICK 54-11-CA PAUL MURRAY BROWN (Applicant) APPELLANT PAUL MURRAY BROWN (Requérant) APPELANT - and - - et - MEGAN LOUISE BROWN (Respondent) RESPONDENT MEGAN LOUISE BROWN (Intimé

e) INTIMÉE Brown v. Brown, 2012 NBCA 11 Brown c. Brown, 2012 NBCA 11 CORAM: The Honourable Justice Larlee The Honourable Justice Bell The Honourable Justice Green CORAM : L’honorable juge Larlee L’honorable juge Bell L’honorable juge Green Appeal from a decision of the Court of Queen’s Bench: March 17, 2011 Appel d’une décision de la Cour du Banc de la Reine : Le 17 mars 2011 History of case: Decision under appeal: 2011 NBQB 92 (Unreported) Preliminary or incidental proceedings: Court of Appeal [2011] N.B.J. No. 169 (QL) 2010 NBCA 5 [2009] N.B.J.

No. 222 (QL) Historique de la cause : Décision frappée d’appel : 2011 NBBR 92 (Inédite) Procédures préliminaires ou accessoires : Cour d’appel [2011] A.N.-B. n o 169 (QL) 2010 NBCA 5 [2009] A.N.-B. n o 222 (QL) Appeal heard: September 14, 2011 Appel entendu : Le 14 septembre 2011

Judgment rendered: February 16, 2012 Jugement rendu : Le 16 février 2012 Reasons for judgment by: The Honourable Justice Bell Motifs de jugement : L’honorable juge Bell Concurred in by: The Honourable Justice Larlee The Honourable Justice Green Souscrivent aux motifs : L’honorable juge Larlee L’honorable juge Green Counsel at hearing: For the appellant: Paul Murray Brown appeared in person For the respondent: W.S. Reid Chedore Avocats à l’audience : Pour l’appelant: Paul Murray Brown a comparu en personne Pour l’intimée : W.S. Reid Chedore THE COURT The appeal is allowed in part.

The appellant’s arrears are reduced to $4,138.04. There will be no order of costs. LA COUR Accueille l’appel en partie. L’arriéré alimentaire de l’appelant est réduit et passe à 4 138,04 $. Ni l’une ni l’autre

partie n’est condamnée aux dépens. The judgment of the Court was delivered by BELL J.A. I. Introduction [ 1 ] Mr. and Ms. Brown were married on June 23, 1972, in Saint John, N.B. They separated on March 26, 2001, and were divorced on December 6, 2005. They have two children, Taylor Reid Brown, born on November 3, 1984, and Hilary Paige Brown, born on June 19, 1990. [ 2 ] Mr. Brown’s employer terminated his employment in October, 2001 and provided him with severance benefits amounting to $338,000.00. Those benefits terminated a year later on October 27, 2002. During his notice period Mr.

Brown commenced a consulting business. On December 4, 2002 the parties entered into a domestic contract which provided, among other things, that Mr. Brown would pay spousal support of $2,360.00 per month and child support of $940.00 per month based upon anticipated income of $125,000.00. Both child and spousal support could be varied in the event of a material change in circumstances. [ 3 ] Mr. Brown’s consulting business performed reasonably well during the first year of operation. The motion judge concluded that Mr. Brown earned $108,088.00 in 2003.

Thereafter, his business can be described as a financial failure, which led

to his eventual bankruptcy. In October, 2007, he commenced employment with IBM Canada, earning $130,700.00 per annum. In a motion heard in the Court of Queen’s Bench, Family Division on March 9, 2009, Mr. Brown contended he experienced a material change in circumstances since entering into the domestic contract and requested a reduction in spousal and child support arrears. He also claimed that effective June, 2007, Hilary was residing with him. Child support payments, he argued, should therefore be discontinued effective that date. A.

The first decision in the Court of Queen’s Bench [ 4 ] In an unreported decision rendered March 27, 2009 the motion judge concluded Hilary resided with Mr. Brown from June, 2007 to August, 2008. As a result, Mr. Brown’s outstanding child support payments were reduced by $14,100.00 ($940.00 per month, for 15 months). In that same decision, the motion judge rejected Mr. Brown’s contention there was a material change in circumstances and refused to reduce the support payable to Ms. Brown. The Court ordered Mr. Brown pay arrears of $118,865.00. B. The first decision of the Court of Appeal [ 5 ] Mr.

Brown appealed the March 27, 2009, decision to this Court, essentially raising two issues. First, he claimed the evidence on the motion demonstrated that Hilary was residing with him from June, 2007, to the date of the motion hearing, namely, March 9, 2009, and that his child support obligations should have been reduced accordingly. On that issue, Robertson J.A., for a unanimous court, in Brown v. Brown 2010 NBCA 5 , 353 N.B.R. (2d) 323 concluded as follows: The first ground of appeal relates to the motion judge’s factual finding that Mr. Brown’s daughter was presently residing with her mother, Ms. Brown.

I have not been persuaded that the motion judge made a palpable and overriding error in coming to that factual determination. [para. 46] [ 6 ] Second, Mr. Brown claimed the motion judge erred in narrowly framing the issue with respect to spousal support arrears. Essentially, the motion judge concluded the only issue before him was whether Mr. Brown’s support obligations should be reduced or eliminated because of Ms. Brown’s tardiness in pursuing enforcement measures. Mr.

Brown argued that other issues, most notably a material change in his circumstances from 2004 to 2007 should have been considered by the motion judge. This court agreed. Robertson J.A. wrote: Applying the legal framework outlined above, hindsight tells us the motion judge should have asked whether the evidence presented by Mr. Brown established a material change in circumstances tied to the period of retroactivity. [para. 47] The matter was then remitted to the motion judge for a hearing and determination in accordance with this Court’s reasons for judgment. C.

The second decision of the Court of Queen’s Bench [ 7 ] At the re-hearing of the matter before the motion judge on September 17, 2010, Mr. Brown contended: (

i) there was a material change in his circumstances, (ii) a change in Ms. Brown’s circumstances and (iii) that the motion judge erred in his earlier conclusion that Hilary was living full-time with Ms. Brown after August, 2008. In a decision reported at 2011 NBQB 92 , 369 N.B.R. (2d) 228 the motion judge concluded he had no jurisdiction to revisit the issue of Hilary’s living accommodations before March 9, 2009. As for Mr. Brown’s contention that Ms. Brown’s circumstances had changed, the motion judge concluded that, although Ms.

Brown’s income had increased since the execution of the domestic contract, the increase was not “sufficiently significant” to lead to a variation of support. [ 8 ] With respect to Mr. Brown’s income, the motion judge concluded there was no change in circumstances in

2004, but there was a change in 2005, 2006 and 2007. Child and spousal support payments were reduced accordingly. In assessing the extent of Mr. Brown’s change in circumstances or lack thereof, the motion judge included corporate income in 2004, disregarded corporate income/losses from 2005 to 2007 and included Mr. Brown’s collapsed Registered Retirement Saving Plans (RRSPs) into income for each of 2004, 2005, 2006 and 2007. It is important to note those collapsed RRSPs constituted part of the division of marital property between Mr. and Ms. Brown at the time of the divorce. II. Issues [ 9 ] Mr.

Brown contends the trial judge erred as follows: 1. Concluding he lacked jurisdiction to address the issue of Hilary’s residence; 2. Adding corporate profits to his personal income for support purposes in 2004 but refusing to take corporate losses into consideration in later years; 3. Adding Mr. Brown’s collapsed RRSPs to his personal income for support purposes when they constituted redemption of his capital obtained through the division of marital property. 4. Failing to take into consideration Ms. Brown’s changed circumstances. III. Analysis A. Hilary’s Place of Residence and Ms.

Brown’s changed circumstances (Grounds of Appeal 1 and 4) [ 10 ] The motion judge and this Court have already dealt with the matter of Hilary’s residence up to March 9, 2009. The motion judge was correct when he concluded this Court did not interfere with his first decision in that regard. If Mr. Brown wishes to bring a motion contending a change in circumstances regarding Hilary’s residence after March 9, 2009, he is free to do so. However, for the period up to that date, the courts have already spoken and the matter is functus . I would dismiss this ground of appeal. [ 11 ] With respect to Ms.

Brown’s circumstances, Mr. Brown contends the motion judge applied an incorrect test when he said “I consider the issue before me is Mr. Brown’s income and not Ms. Brown’s income”. Certainly, Mr. Brown is correct if the motion judge failed to consider the means and needs of Ms. Brown in assessing whether there was a material change in circumstances. However, a complete reading of the decision, within context, demonstrates the motion judge did consider Ms. Brown’s circumstances. At paragraph 34, he observed that any motion for a variation based upon Ms. Brown’s income alone would not have been successful.

He also concluded that “her financial improvement over the years is not sufficiently significant” to justify a variation. In reaching these conclusions, the motion judge considered Ms. Brown’s standard of living during the course of the marriage, the terms of the domestic contract and her income from 2004 to 2009. The motion judge’s consideration and application of those factors demonstrates no error of law, nor any palpable and overriding factual error. I would therefore dismiss this ground of appeal. B.

Corporate Profits/Losses and RRSP Income (Grounds of Appeal 2 and 3) [ 12 ] There is considerable jurisprudence which supports the notion that the corporate veil may be pierced for purposes of determining marital property and support payment issues ( Milton v. Milton , 2008 NBCA 87 , 338 N.B.R. (2d) 300 ; B.S. v. L.S. , 2011 NBCA 7 , 368 N.B.R. (2d) 281 ; MacDougall v. Boivin , 2004 NBQB 48 , [2004] N.B.J. No. 24 (QL) ). Mr. Brown contends the motion judge erred in his analysis by including corporate income in 2004 but disregarding corporate losses in other years.

With respect, based upon the evidence before the motion judge, I disagree. Mr. Brown was the controlling shareholder in his corporation. In 2004 he chose to leave a portion of the profits in the company rather than declare dividends to himself. The motion judge correctly concluded the undistributed corporate income should be taken into consideration for purposes of child and spousal support. As for the ensuing years, there was no evidence before the motion judge that Mr. Brown used personal resources to maintain the corporation’s liquidity.

In the event he had done so with the intent of returning the company to profitability in order to meet his spousal and child support obligations, Mr. Brown’s argument that corporate losses should be taken into account may have some merit. Absent such evidence, I would not

interfere with the motion judge’s conclusion in this regard. [ 13 ] Mr. Brown contends the motion judge also erred by including the collapsed RRSPs in his income. Mr. Brown says he cashed those amounts to support himself and his daughter during difficult financial times. Had he not experienced financial difficulty, he would have retained those RRSP accounts as capital upon which to retire. Furthermore, he says he obtained those RRSPs as part of the settlement with respect to the division of marital property and to now include them as income constitutes double recovery for Ms. Brown. Ms.

Brown does not challenge Mr. Brown’s assertion the marital assets were divided equally at the time of the divorce. [ 14 ] In Boston v. Boston , 2001 SCC 43 , [2001] 2 S.C.R. 413 , Major J., for the majority, described the “double recovery problem” as it relates to pensions and pension income in this way: The term "double recovery" is used to describe the situation where a pension, once equalized as property, is also treated as income from which the pension-holding spouse (here the husband) must make spousal support payments.

Expressed another way, upon marriage dissolution the payee spouse (here the wife) receives assets and an equalization payment that take into account the capital value of the husband's future pension income.

If she later shares in the pension income as spousal support when the pension is in pay after the husband has retired, the wife can be said to be recovering twice from the pension: first at the time of the equalization of assets and again as support from the pension income. [para. 34] [ 15 ] The Court’s answer to the dilemma is found in the following excerpt: It would be inequitable in this case to allow the wife to reap the benefit of the pension first on the division of assets and again as a source of income.

The wife received capital assets on equalization which she is saving and accumulating presumably for her beneficiaries. By contrast, the husband's only tangible asset, his pension, is diminishing. [para. 75] [ 16 ] This Court, in Chamberlain v. Chamberlain 2003 NBCA 34 , 259 N.B.R. (2d) 309 , acknowledged the general rule in Boston v. Boston that courts should avoid double recovery. That is, income generated from marital property which has already been divided should not be brought into income for purposes of determining the amount of support payable to a payee spouse.

For reasons which are not relevant to the present analysis, the payee spouse in Chamberlain successfully rebutted that general proposition. [ 17 ] Given the facts of this case, I would question whether the analyses found in Boston and Chamberlain have any application . In each of those cases, the payor spouse sought to reduce support payments upon accessing the income stream available from his pension. Mr. Brown never accessed an income stream from a pension.

He simply cashed in the capital he received in a marital property settlement, the fairness of which is not disputed. [ 18 ] Interestingly, the motion judge concluded the RRSPs should be included in Mr. Brown’s income for support purposes because they were not divided equally at the time of division. Respectfully, how one party chooses to take his or her share of the marital assets is of no moment.

In the event the payor spouse chooses to take all of the RRSPs and other pension assets and the payee spouse chooses to take the marital home and other non-income producing assets, the rules with respect to access to income from previously divided assets should not change. To hold otherwise would encourage ignoble tactics at the time of negotiating marital dispute settlements.

For example, a payee spouse might insist on taking only non-income producing assets with the expectation that he or she might later acquire a part of the payor spouse’s division through adjusted support payments. [ 19 ] Given these observations, I am of the view the collapsed RRSPs should not have been taken into income for purposes of calculating spousal or child support and would allow the appeal in this regard. As a result of all of the above, it is necessary to exclude Mr.

Brown’s RRSP income from his income for the years 2004 to 2007 and then determine whether there existed a material change in circumstances for each of those years. Rather than refer this matter once again to the Court of Queen’s Bench, I have, employing the other factual findings made by the trial judge, calculated the income available for support purposes for each of the years in question.

2004 Line 150 Income $ 40,459.00 RRSP Income < 23,633.00> Total Income for Support Calculation $16,826.00 2005 Line 150 Income $94,043.00 RRSP Income <32,267.00> Total Income for Support Calculation $61,776.00 2006 Line 150 Income $ 34,065.00 RRSP Income <19,462.00> Total Income for Support Calculation $14,603.00 2007 Line 150 Income $57,216.00 RRSP Income < 24,763.00> Total Income for Support Calculation $32,453.00 [ 20 ] I am satisfied those levels of income demonstrate a material change in circumstances for Mr. Brown and would reduce his spousal and child support arrears accordingly.

I am of the view the proper method of calculating Mr. Brown’s obligations in light of these adjustments is to apply the Federal Child Support Guidelines , SOR/97-175, and to determine the spousal support obligations under the Spousal Support Advisory Guidelines . I would also note that in 2004 and 2006, Ms. Brown’s reported income exceeded Mr. Brown’s, hence no spousal support would be owed by Mr. Brown in those years. I have therefore calculated Mr. Brown’s support obligations as follows: Year Mr. Brown’s Income Ms.

Brown’s Income Child Support (per month) Spousal Support (per month) Total Amount Support Obligation 2004 $16,826.00 $25,972.26 $143.30 0 $1,719.60 2005 $61,776.00 $34,919.76 $535.83 $116.00 $7,821.96 2006 $14,603.00 $21,077.24 $114.28 0 $1,371.96

2007 $32,453.00 $23,832.99 $283.76 0 $3,405.12 TOTAL $14,318.04 [ 21 ] In 2008 Mr. Brown earned $131,858.00. There is no indication on the record that this income is derived from collapsed RRSPs. Therefore, this Court owes deference to the motion judge’s finding that the contracted amount of child and spousal support is appropriate for the period from January 1, 2008 to October 1, 2008, namely, $29,700.00. [ 22 ] I would therefore calculate Mr. Brown’s total support obligation for the period in arrears, given his changed circumstances, to be $44,018.04 ($14,318.04 + $29,700.00). During this period of arrears, Mr.

Brown made some support payments: $11,800.00 in 2004 and $28,080.00 in 2005. These payments of $39,880.00 must be deducted from the amount otherwise due, to arrive at a final arrears amount of $4,138.04 ($44,018.04 - $39,880.00). V. Disposition and Costs [ 23 ] The appeal is allowed in part. The appeal is dismissed with respect to the motion judge’s order regarding Hilary’s residence, Ms. Brown’s circumstances and the treatment of corporate losses. The appeal is allowed with respect to the treatment of income from collapsed RRSPs. The support arrears owed by Mr. Brown are reduced to $4,138.04.

With respect to costs, I would note that success is divided. In the circumstances I would make no order of costs. _____________________________ B. RICHARD BELL, J.A. WE CONCUR: ____________________________ M.E.L. LARLEE, J.A. _____________________________ BRADLEY V. GREEN, J.A.