Gosse v. Sorensen-Gosse, 2011 NLCA 58

Editor’s Note: Corrigendum released on September 19, 2011. Original judgment has been corrected with text of corrigendum appended . Date: 20110914 Docket: 10/99 Citation: Gosse v. Sorensen-Gosse 2011 NLCA 58 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN : STEPHEN GOSSE APPELLANT AND : KIM SORENSEN-GOSSE RESPONDENT Coram: Wells, Barry & White, JJ.A. Court Appealed From: Supreme Court of Newfoundland and Labrador Trial Division (F) 200502U0068 Appeal Heard: June 15, 2011 Judgment Rendered: September 14, 2011 Reasons for Judgment by Wells, J.A. Concurred in by: Barry and White, JJ.A.

Counsel for the Appellant: Jean Dawe, Q.C. Counsel for the Respondent: Wayne Bruce and Ruth Trask Wells, J.A.: [ 1 ] On an application, made in January, 2005 before the Unified Family Court (“UFC”), a decision was rendered as to the division of interest in a matrimonial home, other matrimonial assets and business assets, and as to child support obligations for the parties’ then nine year old daughter, consequent upon the divorce of the parties following eighteen years of marriage. The appellant (“Mr. Gosse”) appeals that decision and raises ten specific issues.

For convenience, I will, as the UFC judge did, refer to the respondent as Ms. Sorensen. BACKGROUND [ 2 ] The UFC judge succinctly summarized the background facts. It is convenient to simply repeat her

summary: [2] Mr. Gosse and Ms. Sorensen were high school sweethearts. They married in July 1990 after a long courtship. Both Ms. Sorensen and Mr. Gosse had obtained university degrees several years before they married. [ 3 ] Mr. Gosse and Ms. Sorensen initially lived in Torbay in a home Mr. Gosse’s father built for them. In 2002, they sold this home

and moved to their current matrimonial home in a new subdivision near Torbay. In 1994 their only child Hilary was born. [ 4 ] At the time of their marriage, Mr. Gosse was working full time as a high school teacher in St. John’s and Ms. Sorensen was teaching dance privately through the Sorensen School of Dance (SSDL) which she established in 1986. Initially Ms. Sorensen taught dance after school hours on school properties in the eastern area of St. John’s.

In 1991 she began operating out of leased premises in Coaker’s Meadow Plaza on Torbay Road and in 1997 she incorporated the dance school and moved it to its own premises in the same area of town. Mr. Gosse continued to teach in the same high school and he is now a department head there. He has also worked part- time over the years as a performer with a local musical theatre company and has done some private tutoring work. [ 5 ] The parties separated on March 31, 2004. Mr.

Gosse left the matrimonial home and moved in with his parents where he lived for approximately three months, after which he rented an apartment in his brother’s home. In 2006, Mr. Gosse took up residence with Ms. Tara Madden at her home in St. John’s. He and Ms. Madden have lived together since then. They subsequently moved to a larger home, where they are still living. In November 2007, Mr. Gosse and Ms. Madden blessed Hilary with a baby brother, Alex. [ 6 ] Ms. Sorensen and Hilary remained in the matrimonial home after Mr. Gosse left and Ms. Sorensen still resides there.

Pursuant to a joint custody order of this Court, made approximately a year after the parties separated, Hilary spends half of her time with her mom and half of her time with her dad, Ms. Madden and her brother. Mr. Gosse and Ms. Sorensen divorced in 2008. PRIOR PROCEEDING [3] Because of the nature of the issues involved in this appeal, it is neither necessary nor helpful to separately detail, at this stage, all the issues before the UFC judge that are challenged on appeal or the decisions she made.

It is more convenient to set out, to the extent necessary, the detail of those issues, and her decisions, in the course of analysis of the issues on appeal. [4] In general terms, notwithstanding the passage of more than eighteen months between the time of appraisals of the matrimonial home and the rendering of her decision, and indications of significantly increasing real estate values, the UFC judge refused Mr. Gosse’s request that she provide for re-evaluation at the time Mr. Gosse would be paid for his share of the matrimonial home being retained by Ms. Sorensen. She also declined to order payment to Mr.

Gosse of occupational rent to reflect the fact that Ms. Sorensen had exclusive occupation of the matrimonial home for the nearly six year period from the date of separation on March 31, 2004 to the date of her decision, December 29, 2009, and was continuing to occupy it. [5] The UFC judge also rejected Mr. Gosse’s claim for entitlement to share in Sorensen School of Dance Limited (“SSDL”), a corporation wholly owned by Ms. Sorensen as a business asset. However, Mr.

Gosse was found to be entitled to a cash payment to reflect his interest in the proceeds of a jointly owned $18,000.00 Canada Savings Bond that had been invested in the business. The UFC judge also rejected Mr. Gosse’s claim to be entitled to a share of an amount, shown on the records of SSDL as “due to shareholders”. [6] With respect to child support issues, the UFC judge imputed income to Ms. Sorensen to reflect a portion of certain legal fees, cell phone expenses and vehicle expenses incurred by SSDL but of personal benefit to Ms. Sorensen. She declined to impute, as income of Ms.

Sorensen, the amount of the pre-tax corporate profit of SSDL. She also declined to add to the amount shown as pre-tax income of SSDL, the amount of certain other payments made and capital cost allowance expensed. [ 7 ] Following the filing of the reasons for judgment, the parties made a further application to the UFC judge to deal with “certain issues which were, through accident or error either incorrectly stated in the Trial Decision or omitted”. An order clarifying those issues was rendered on June 9, 2010.

Amongst other matters, in that order, the UFC judge declined to order pre-judgment interest and ordered post-judgment interest from and after July 9, 2010. Mr. Gosse appeals those decisions. ISSUES ON APPEAL [ 8 ] Although the grounds of appeal were expressed somewhat differently in the notice of appeal, and set out in a different order, I will list them here substantially as they were expressed in Mr. Gosse’s factum, and in the order in which the parties argued them at the appeal hearing. [ 9 ] The first four are issues in respect of which the Family Law Act , R.S.N.L. 1990, c.

F-2 (“ Family Law Act ”) is the determining law. They are: Issue One: Did the trial judge err in law in ordering that Ms. Sorensen could acquire Mr. Gosse’s half interest in the matrimonial home upon paying him half the equity based on a value arrived at by averaging 2 appraisals performed in May of 2008, rather than requiring her to pay half the equity based on the fair market value at the time of her payment? Issue Two: Did the trial judge err in law and in fact, in declining to order occupational rent, and in finding the rental value to be only $1900.00 per month?

Issue Three: Did the trial judge err in law in awarding Mr. Gosse only $18,000 for his contribution to Ms. Sorensen’s business assets, without regard to, or knowledge of the actual value of the assets, or should the award have been based on a percentage of the value of Ms. Sorensen’s business assets? Issue Four: Did the trial judge err in law and in fact in ordering that Mr. Gosse receive only $3,616 in respect of Ms.

Sorensen’s “Due to Shareholders Account”, instead of half the separation date balance of same? [ 10 ] Resolution of a further five issues is dependent upon the provisions of the Divorce Act , R.S.C. 1985, c. 3 (“ Divorce Act ”) and the federal Child Support Guidelines , SOR/97-175 (“ Guidelines ”). These include:

Issue Five: Did the trial judge err in law in declining to add any portion of the pre-tax corporate income of Ms. Sorensen’s company, SSDL, to her income for the purpose of calculating her child support obligation, and did the trial judge err in declining to increase that pre-tax corporate income by capital cost allowance deducted in respect of the real property owned by SSDL? Issue Six: Did the trial judge err in law in adding only 75% of the legal fees paid by Ms. Sorensen’s company for this litigation (grossed up appropriately for taxes) to her income and only 50% of the vehicle and cell phone charges?

Issue Seven: Did the trial judge err in law in ordering Mr. Gosse to pay the table amount of child support for the first. 2.5 months of 2005 although over the entire 2005 calendar year Mr. Gosse had Hilary in his care more than 40% of the time, i.e., there was a shared parenting arrangement in place as defined by

section 9 of the Guidelines ? Issue Eight: Did the trial judge err in law and in fact in making an order respecting overpayment of school fees given the provisions of

section 7 of the Guidelines as to sharing of “Special Expenses”, and given the absence of any evidence as to this amount? Issue Nine: Did the trial judge err in law by failing to order any child support from and after December 31st, 2008? [ 11 ] Resolution of the tenth issue depends upon application of the provisions of the Judgment Interest Act , RSNL 1990, c. J-2 (“the Judgment Interest Act ”). It is: Issue Ten: Did the trial judge err in law by ordering, in her supplementary Order made on June 9th, 2010, that: (

i) post-judgment interest would not commence until 30 days thereafter; (ii) that no pre-judgment interest was to be paid? LAW [ 12 ] It will be necessary, of course, to consider specific statutory provisions and authorities in the course of analysis of the issues. However, it is convenient, at this stage, to identify principles that would be generally applicable to most, if not all, of the issues raised on the appeal. (

a) Statutory provisions [ 13 ] The provisions of Parts I and II of the Family Law Act are particularly relevant. Those provisions must be interpreted and applied in the context of the stated purposes of the Family Law Act as set out in sections 5 and 19 .

Section 5 reads: 5. The purpose of Parts I and II is to reform the law with respect to matrimonial property in order to (

a) recognize the contribution made by each spouse to a marriage; (

b) give a ½ interest in the matrimonial home to each spouse ; (

c) provide for the deferred sharing of most other property acquired during a marriage; and (

d) provide for judicial discretion in sharing business assets built up by a spouse during a marriage.

Section 19 describes the specific purpose of

Part II. It provides: [19] The purpose of this

Part is to recognize that child care, household management and financial support are the joint responsibilities of the spouses and that there is a joint contribution by each of the spouses, financial and otherwise, that entitles each spouse to an equal division of the matrimonial assets acquired during the course of the marriage. (Emphasis added) [ 14 ] The Divorce Act makes special provision for child support.

Section 15.1 , amongst other things, provides: 15.1

(1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to pay for the support of any or all children of the marriage. ….

(3) A court making an order under subsection (1) or an interim order under subsection (2) shall do so in accordance with the applicable guidelines. ….

(5) Notwithstanding subsection (3), a court may award an amount that is different from the amount that would be determined in accordance with the applicable guidelines if the court is satisfied (

a) that special provisions in an order, a judgment or a written agreement respecting the financial obligations of the spouses, or the division or transfer of their property, directly or indirectly benefit a child, or that special provisions have otherwise been made for the benefit of a child; and (

b) that the application of the applicable guidelines would result in an amount of child support that is inequitable given those special provisions.

(6) Where the court awards, pursuant to subsection (5), an amount that is different from the amount that would be determined inaccordance with the applicable guidelines, the court shall record its reasons for having done so. (Emphasis added) [15] The Guidelines set out very specific provisions for allocation, between divorcing spouses, of financial responsibility for childsupport. However, guideline 1 does express, in general terms, the objectives. It provides: 1. The objectives of these Guidelines are (

a) to establish a fair standard of support for children that ensures that they continue to benefit from the financial means of both spousesafter separation; (

b) to reduce conflict and tension between spouses by making the calculation of child support orders more objective; (

c) to improve the efficiency of the legal process by giving courts and spouses guidance in setting the levels of child support orders andencouraging settlement; and (

d) to ensure consistent treatment of spouses and children who are in similar circumstances. [16] I do not consider it necessary to discuss the Judgment Interest Act in general terms. The appropriate specific provisions areaddressed in the analysis of the interest issue. It is helpful, however, to simply observe that the general principle reflected in the statuteis that the court shall award pre-judgment interest unless it is satisfied that it is just not to do so. (

b) Standard of review [17] There is no dispute between the parties as to the general appellate standard of review. Questions of law are reviewed on astandard of correctness. As to questions of fact, or mixed law and fact, the Court will not interfere with the decision of the trial judge inthe absence of palpable and overriding error, unless there is an extricable principle of law at issue, in which case the standard for thatissue is correctness. [18] Many of the statutory provisions, particularly those of the Family Law Act, confer discretion on the UFC judge to make therequired decisions.

The extent to which this Court may or may not intervene in the exercise of such discretion is raised in the argumentof Ms. Sorensen in respect of many of the issues on appeal. The standard of review to be applied to decisions made by a trial judge inconsequence of exercising statutorily conferred discretion was discussed in Moray Seafoods Limited v. Nasco Canada, 2006 NLCA 29,256 Nfld. & P.E.I.R. 219. In that case, this Court noted the view it earlier expressed in Langor v.

Spurrell (1997), (NL CA), 157 Nfld. & P.E.I.R. 301, and reviewed a trilogy of earlier cases in this Court, between the same parties, and arising out ofrelated circumstances, that dealt with appellate review of the exercise of judicial discretion. In Moray, this Court expressed the followingviews: [13] … Counsel cites Langor v.

Spurrell (1997), (NL CA), 157 Nfld. & P.E.I.R. 301 (NLCA), and quotes GreenJ.A. (as he then was), at paragraph 33 as deciding: Rule 57.20(1)(a) [now rule 57.23(1)(a)] provides that this court may, on appeal, amend, set aside or discharge any order appealed from“except one made in the proper exercise of such discretion as belongs to the court”.

The court will therefore only interfere with adiscretionary order where the judge who made it has exceeded his or her jurisdiction or has failed to apply or has misapplied anapplicable principle or made a palpable and overriding error in his or her appreciation of the facts, or the failure to interfere wouldotherwise cause a manifest injustice. … … [16] … In Bank of Montreal v. H.O. House Ltd. (1976), 10 Nfld. & P.E.I.R. 392; Bank of Montreal v. H.O. House Ltd. (1978),14 Nfld. & P.E.I.R. 407; and Bank of Montreal v. H.O.

House Ltd. (1978), 15 Nfld. & P.E.I.R. 33, the Court established the standardfor appellate review of decisions based on judicial discretion. [17] In the first, the 1976 decision, the Court considered a challenge by the Bank of Montreal to the court reviewing the ex partedecision of a Trial Division judge to grant an order for attachment before judgment.

Gushue, J.A. (later C.J.N.) wrote, at paragraphs 5-6: … It is thus obviously at the complete discretion of the judge whether or not such an order should be made, and it is because of theexercise of this judicial discretion that counsel for the Bank maintains that the order of Mahoney, J., in this instance is not reviewable bythis Court. While at the hearing of the argument on this point I found myself inclined to lean towards the Bank’s position, after due consideration Iam convinced that this position is not a tenable one.

This Court always has the right to review orders made by other courts, whether theybe discretionary orders or not. The reason for this is that there is always the possibility that the judge making such an order may haveexceeded his jurisdiction or may otherwise have wrongfully exercised his discretionary powers.

In other words, appeal courts mustalways be able to look at the “ground rules” by which the judge was to be guided, and if he did not properly follow these ground rules,then his order may be subject to reversal or variance. (Emphasis added) Wrongfully exercising discretionary powers would, of course, include failing to apply or misapplying an applicable principle of law ormaking a palpable and overriding error in appreciation of the facts. [18] The underlined passage addresses explicitly the issue raised by Labrador Shrimp as to whether “[it is] appropriate for [Moray] to

challenge the Applications Judge’s findings of fact and/or inferences of fact … on the basis of the Applications Judge’s

interpretation ofthe evidence as a whole”. Because appeal courts can always look to see if a judge has followed the ground rules by which the judge wasto be guided, it cannot be inappropriate for an appellant to challenge a judge’s findings of fact or inferences of fact. Nothing in Langorv. Spurrell, [(1997), (NL CA), 157 Nfld. & P.E.I.R. 301] on which Labrador Shrimp relies, alters the viewexpressed by Gushue J.A. and underlined in the above excerpt.

In fact that decision of the trilogy is one of the decisions relied upon byGreen J.A. to support the principles respecting exercise of judicial discretion, that he expressed in Langor v. Spurrell. [19] In the second of the trilogy, the 1978 decision, reported at 14 Nfld. & P.E.I.R. 407, the Trial Division judge had declined tovacate an earlier ex parte order permitting registration of a Nova Scotia judgment obtained by Bank of Montreal against H.O. HouseLimited.

Gushue J.A. speaking of the determination by the trial judge, at paragraphs 29-31, said: … The law is quite clear that as long as he had any valid grounds for finding as he did, this is all that was necessary. He was thenproperly exercising his judicial discretion, and his order should not be upset. Lord Sterndale, M.R. stated in the case of Ritter v. Godfrey, [1920] 2 K.B. 47: The discretion must be judicially exercised, and therefore there must be some grounds for its exercise, for a discretion exercised on nogrounds cannot be judicial.

If, however, there be any grounds, the question of whether they are sufficient is entirely for the judge at thetrial and this Court cannot interfere with his discretion.” (His reference to “this Court” is to an appellate court). Further, in the case of Donald Campbell & Co. v.

Pollack, [1927] A.C. 732, Viscount Cave stated at page 812 (in a reference to ajudge’s exercising his discretionary power on the matter of costs in an action): but when a judge, deliberately intending to exercise his discretionary powers, has acted on facts connected with or leading up to thelitigation which have been proved before him or which he has himself observed during the progress of the case, then it seems to me thata Court of Appeal, although it may deem his reasons insufficient, and may disagree with his conclusions, is prohibited by the statutefrom entertaining an appeal on it. (Emphasis added) [20 In the third of the trilogy, the 1978 decision, reported at 15 Nfld. & P.E.I.R. 33, the Court was hearing an appeal against an orderstriking out certain paragraphs of the defence and ordering that the counterclaim be struck out.

Gushue J.A., at paragraphs 33-34, wrote: … I would not necessarily agree that the claims were “intricately interwoven”, but, bearing in mind the general proposition that acounterclaim is a cross action and need not necessarily have any connection with the claim itself, I would say that I agree with theargument of counsel for the appellant to the extent that, with respect, I do not think I would have completely struck the counterclaim hadthe application been made to me at first instance.

However, the above point is made not because I feel that the appeal must be allowed, but, to the contrary, to emphasize that, despite myview, the appeal must be dismissed. It is not for a judge of appeal to substitute his opinion for that of a judge at first instance merelybecause he holds a different opinion, and this proposition of law is of substantially greater relevance where the order or judgmentappealed from is one which is made by the trial judge in the exercise of his judicial discretion.

To quote once more from the judgment(as I have already done in another matter involving these same two litigants) of Lord Sterndale, M.R., in the case of Ritter v. Godfrey,[1920] 2 K.B. 47: The discretion must be judicially exercised, and therefore there must be some grounds for its exercise, for a discretion exercised on nogrounds cannot be judicial. If, however, there are any grounds, the question of whether they are sufficient is entirely for the judge at thetrial and this Court cannot interfere with his discretion. (Emphasis added) [21] The principles, respecting exercise of discretion, expressed in Langor v.

Spurrell, are, in the main, a simpler expression of theprinciples to be found in the Bank of Montreal v. H.O. House trilogy. As such they lack some of the detail beneficial to considerationof the issues in this appeal, particularly those principles underlined in the excerpts from the trilogy quoted in the preceding paragraphs. Essentially those principles have been relied upon by this Court in numerous decisions since then, including Langor v. Spurrell andvery recently in Diamond Estate v. Robbins 2006 NLCA 1 , [2006] N.J. No. 3 (QL); 2006 NLCA 1… [19] To that expression of principles, I would add one caveat.

While courts and judges tend to speak in terms of discretion being“conferred” by statute, in all but exceptional cases the discretion is not so much conferred upon courts as it is entrusted to courts to giveeffect to the purposes of the statute, as explicitly stated in, or reasonably to be inferred from, its provisions. Therefore, the reasoning onwhich its exercise is based cannot be informed by the evidence alone. It must be consistent with furtherance of the statutory purpose. Itcertainly cannot be inconsistent with it.

This, and the foregoing, are the principles which must guide this Court in its review of those ofthe decisions of the UFC judge that were made in the exercise of statutorily conferred discretion. ANALYSIS Issue 1: Valuation of the matrimonial home (

a) Decision of the UFC Judge [20] In her decision the UFC judge referred to the evidence that, as at May, 2008, the month prior to commencement of the trial,Mr. Gosse’s appraiser (Cantwell) appraised the home at $500,000 and Ms. Sorensen’s appraiser (Roche) appraised it at $475,000. She

noted that there was only a 5% difference between the two appraisals and noted the general agreement of the appraisers that such adifference was considered quite acceptable within the industry. She then decided: [19] In the circumstances of this protracted and acrimonious litigation, I am not prepared to order that the matrimonial home beappraised again to ascertain a completely current valuation. Neither am I prepared to take judicial notice of global or local economicconditions affecting real estate values in the St.

John’s area of this province as was suggested by one of the parties… [20] I have determined that the best approach in this case is to split the difference between the two appraisals and therefore I find thevalue of the matrimonial home to be $487,500.00. [21] The parties have agreed that the equity in the matrimonial home is to be split evenly. As Ms. Sorensen has indicated a desire toremain in the home and buy out Mr.

Gosse’s interest, I order that she has the option to do so by paying him one-half of the differencebetween $243,750 (one-half of the home’s value) and the remaining payout due on the mortgage, which method was jointly proposed bythe parties in their final submissions. This option is exercisable within 60 days of the date of this judgment.

If the parties are not able tomeet this 60 day deadline, and cannot otherwise agree, one of them may apply to the Court for further direction. [21] The clarification order dated June 9, 2010 and filed on July 7, 2010 amongst other things, ordered that “paragraph 21 of theTrial decision is revised” to read: The parties have agreed that the equity in the matrimonial home is to be split evenly. As Ms. Sorensen has indicated a desire to remainin the home and buy out Mr.

Gosse’s interest, I order that she has the option to do so by paying him one half of the difference between$487,500.00 (the home’s value as determined herein) and the remaining payout due on the mortgage on the date of conveyance. A corresponding revision was made to paragraph 155 of the reasons for decision which summarized the UFC judge’s decision on theissues. The final order after trial, dated December 29, 2009 but not filed until July 7, 2010, included these corrections. (

b) Argument of Mr. Gosse [22] In respect of this ground of appeal, Mr. Gosse emphasizes the public policy objective of ensuring that each spouse receives thebenefit of a one-half interest in the matrimonial home. He relies on

section 8 of the Family Law Act, legislating that ownership of thematrimonial home is a joint tenancy, as well as the fact that, under the title document, he is a joint tenant, to support the proposition thathis status as joint tenant entitles him to one half of the value of the matrimonial home as at the time of its disposition. Mr. Gosse’s factumcites Ridler v.

Ridler (1984), 51 Nfld. & P.E.I.R. 19 (Nfld.U.F.C.) as authority for the proposition that joint tenants “should benefit fromany increase in value to the point of adjudication or sale”. [23] His factum also refers to sub-section 31(2) of the Family Law Act and argues that, as joint owners by deed, it must be taken tohave been intended by them that each spouse is entitled to have a half beneficial interest on severance of the property. It is thensubmitted that the joint tenancy has not been severed and will not be severed until Ms. Sorensen pays Mr. Gosse and Mr. Gosse transfershis interest in the title to her.

Requiring Mr. Gosse to sell at less than one-half of the value at the time of severance, is not consistent, hisfactum asserts, with the purpose of the Family Law Act set out in sections 5 and 19. [24] It is also argued by Mr. Gosse that, in addition to entitlement on the basis of title and the statutory requirement for equaldivision of the interests of the parties in the matrimonial home, he is entitled to rely on the decision of the Supreme Court of Canada inRawluk v.

Rawluk, [1991] 1 S.C.R. 70, to claim “by way of a remedial constructive trust a beneficial one-half interest in the[matrimonial] home …”, in respect of any increase in value between the date of the earlier evaluation and the time of disposition. Hesubmits that this Court has followed that approach in Martin v. Martin (1997), (NL CA), 168 Nfld. & P.E.I.R. 181(NLCA). [25] Mr. Gosse emphasizes, that the evidence before the UFC judge indicated that, at the time of the hearing of the application, thereal estate market in the area was in the throes of rapid increase.

In particular, his counsel refers to the evidence of the appraiser JohnCantwell, who said: The market right now is on fire… Right now there is a huge shortage, a shortage of inventory and there is a huge demand. So whatwe’ve got now is a seller’s market… 2004, actually, was probably the busiest year we had in business since I’ve been in the business, but2008 is crazy. [26] Relying on that evidence, counsel submits that the UFC judge erred in law by refusing Mr. Gosse’s request for re-appraisal “toascertain a completely current valuation”.

As a result, it is submitted, she failed to exercise her discretion judicially. In Mr. Gosse’sfactum, it is submitted that: The effect of this ruling is to allocate to [Ms. Sorensen] all the growth in value of the matrimonial home between May, 2008 and somedate still not determined on which [Ms. Sorensen] actually pays [Mr. Gosse] for his half interest in the matrimonial home. Given therapid rise in real estate values over the last few years it is obvious that [Ms. Sorensen] will benefit substantially from this ruling. Theresult is to divide this asset unequally in favour of [Ms. Sorensen]. (

c) Argument of Ms. Sorensen [27] Ms. Sorensen argues that the evidence before the UFC judge was as to the value of the matrimonial home immediately beforethe trial. Thus, she submits, the UFC judge acted judicially in using those valuations and opting to split the difference between the twovery close appraisals. [28] With respect to

section 31 of the Family Law Act, providing that each party is intended to have half beneficial interest inproperty on severance of the property, Ms. Sorensen’s factum cites a website, called “The People’s Law Dictionary”, as authority for theproposition that severance may be defined as “separating by court order”. It is then submitted that Mr. Gosse’s legal entitlement does

not crystallize on the date of sale. Rather, she argues, it has already been fixed in the court order after trial and, thereafter, he is entitledonly to post-judgment interest on the court determined value until his share is paid. [29] In her factum, Ms. Sorensen also argues that it would have been unreasonable for the UFC judge to order yet another valuationwhen there had already been several in the months and years leading up to the trial.

It is submitted that there is absolutely no evidencebefore the court “as to the after-trial market value of the matrimonial home” and no evidence to suggest that a post-trial appraisal isnecessary. Ms. Sorensen argues that this Court must assess the reasonableness of the UFC judge’s findings in the context of the evidencethat was admitted at trial. [30] With respect to the constructive trust argument, Ms. Sorensen’s factum submits that because there is no evidence of anyincrease in value since the trial, there is no need to impose a constructive trust. It is also submitted that, as Mr.

Gosse did not plead theremedy of constructive trust and it was not argued at trial, that remedy is not now available to him. Miles v. Conkin (1996), (BC CA), 24 R.F.L. (4th) 211 (B.C.C.A.) is cited as authority for the proposition that Mr. Gosse cannot, on appeal, rely on analleged entitlement that was not raised in the trial pleadings. (

d) Conclusion respecting the valuation of the matrimonial home issue [31] Subsections (1) and (2) of

section 8 of the Family Law Act provide: 8.

(1) Notwithstanding the manner in which the matrimonial home is held by either or both of the spouses, each spouse has a ½ interest inthe 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. [32] Considered in the context of the objective stated in paragraph (

b) of

section 5, set out in paragraph 13 above, that the law isbeing reformed in order to “give a ½ interest in the matrimonial home to each spouse”, those two subsections of

section 8 make clearthat: it doesn’t matter in whose name title is held or the manner in which it is held, the matrimonial home is to be held as a joint tenancy;each spouse has a one-half interest in it; and, “has the same right of use, possession and management of the matrimonial home as theother”. In addition, the UFC judge found that “[t]he parties have agreed that the equity in the matrimonial home is to be split evenly”.

Thus, in addition to the agreement of the parties, the UFC judge in this case was required by law to render decisions related to sharingthe benefit of the matrimonial home in such a manner as to achieve, subject only to any exception permitted by the statute, the statedpublic policy objective of equality between the spouses.

To be exercised judicially, an exercise of discretion in the process of renderingsuch a decision must produce a result reasonably consistent with that objective. [33] Achieving reasonable equality is not difficult where disposition of the matrimonial home is by sale to a third party and the netproceeds will be divided equally between the former spouses.

However, where, as here, it is agreed that there is to be equal sharing inthe benefit but it is also agreed that one party will transfer his or her interest to the other, upon being paid the value of that one-halfinterest, achieving the objective of equality is more difficult.

The Family Law Act makes no specific provision for a court to order onespouse to transfer his or her interest in a matrimonial home to the other, nor, if the parties agree that such a transfer should be made butare unable to agree on compensation to the transferring party, is there any specific provision enabling the court to establish thecompensation. [34]

Section 14 sets out “Court powers re disposition” and

section 15 sets out “Court powers re possession”. The relevant portionsread: 14.

(1) The court may by order, on the application of a spouse or other person having an interest in property, (a) … (

b) authorize the disposition or mortgage of a matrimonial home where the spouse whose consent is necessary (i) … (ii) … (iii) is unreasonably withholding consent, subject to the terms and conditions that the court considers desirable; … 15.

(1) The court may by order, on the application of a spouse, (

a) direct that 1 spouse be given exclusive possession of a matrimonial home, or part of it, for life or for the lesser period that thecourt decides and, in addition, may release other property that is a matrimonial home from the application of this Part; (

b) direct a spouse to whom exclusive possession is given under paragraph (

a) to pay the periodic or other payments to the otherspouse or surviving spouse that are prescribed; … (

e) authorize the disposition or mortgage of the interest of a spouse in a matrimonial home who has not been granted exclusivepossession. …

(3) The court may only make an order for exclusive possession of the matrimonial home under subsection (1) or (2) where, in the opinion of the court, (

a) other provision for shelter is not adequate in the circumstances; or (

b) it is in the best interests of a child to make the order. [ 35 ] In my view it would not be unreasonable to construe subsection 14(1) as empowering a court to order disposition of the matrimonial home by one spouse to the other and setting “the terms and conditions”, including compensation to be paid, “that the court considers desirable”. In particular, it would not be unreasonable where the parties are agreed that such a transfer should be made but are unable to agree on compensation to the transferring spouse.

However, conformity with the objectives of the Family Law Act would require the Court to employ a process that would ensure that the transferring spouse received an equal share of the fair market value of the matrimonial home at the time of transfer. Without such a requirement most spouses would insist on a third party sale in order to obtain one-half of the fair market value. [ 36 ] Where title is to be transferred to one of the spouses, the fair market value has to be determined and, obviously, that value is subject to change over time depending on economic circumstances.

The difficulty is exacerbated where, as here, the trial is conducted at varying times over a period spanning many months and the rendering of a decision may take several months beyond that. In such circumstances, achieving the statutory objective of equality as between the spouses requires that a judge give consideration to the probable result, in terms of market value, at the likely point in time when the order being made will be implemented.

While this may not result in achieving perfect equality, it will, at least, avoid marked unfairness and come as close to achieving the equality mandated by the Family Law Act as is practicable in the circumstances. [ 37 ] In this case the trial was conducted during 23 days over a period from early June, 2008 to early March, 2009, and the decision of the UFC judge was filed on December 29, 2009. Thus, the decision of the UFC judge was made nearly twenty months after the date of the appraisals by Mr. Cantwell and Mr. Roche. In addition, because of the order of the UFC judge, Ms.

Sorenson would have a sixty day option, that would extend the delay period for a further two months. The period of time, between the date of the appraisals before the court and the transfer and payment date that the UFC judge could reasonably anticipate, is approaching two years. In the ordinary course, it would be reasonable for the UFC judge to expect the possibility of significant change in value over that period of time. In addition, the evidence before the UFC judge from one of the appraisers (Cantwell) indicated that “the market right now is on fire and what we got now is a seller’s market”.

The evidence of the other appraiser (Roche) was that “The market is hot. It is a high demand market. It’s a sellers’ market in most areas”. [ 38 ] Ms. Sorensen’s argument that it would have been unreasonable for the trial judge to order yet another valuation must be rejected. Not only did she have the evidence of Mr. Cantwell, excerpted in paragraph 25 above, she had the confirming evidence of Mr. Roche, the appraiser called by Ms. Sorensen. She did not have to take judicial notice of the economic conditions affecting real estate values in St. John’s which she indicated she refused to do.

She had the direct evidence of the appraisers. The UFC judge erred in the exercise of her discretion, by failing to take account of the underlying purpose of the legislation and by failing to consider her decision in the context of the evidence of the two appraisers as to the state of the market and the probable impact of that between the effective date of their appraisals and the date when her decision would probably be implemented. [ 39 ] I would also reject the argument of Ms. Sorensen, that the “severance of the property” referred to in

section 31 of the Family Law Act means separating by court order. The website called “The People’s Law Dictionary” is not an authority on which this Court can rely nor does that website suggest what Ms. Sorensen asserts. It defines severance in the context of bifurcation such as separating trials or issues in a trial. Severance in the context of

section 31 is not of that nature. [ 40 ] Even on Ms. Sorensen’s definition of severance, as “separating by court order”, severance did not occur either on the filing of the reasons of the UFC judge on December 29, 2009 or the filing of the final order on July 7, 2010. Neither ordered severance of interest or transfer of title. Each gave Ms. Sorensen “the option to buy” by paying Mr. Gosse the defined amount within 60 days after judgment, which must be taken to be the filing of the final order on July 7, 2010. That did not occur. While the evidence indicates that a draft conveyance was tendered by Ms.

Sorensen, the evidence also indicates that Ms. Sorensen could not meet the payment because the bank would not loan the necessary funds while the matter was under appeal. That argument of Ms. Sorensen must, therefore, be rejected. [ 41 ] In any event, the Supreme Court of Canada in Rawluk has approved “the use of the remedy of constructive trust to achieve a division of property that is as just and equitable as possible”. That Court stated clearly that, in the case of termination of marriages, “of all relationships the concept of fairness should pre-dominate in making decisions as to ownership”.

This Court has followed that approach in Martin , and will follow it here. [ 42 ] I would also reject the argument of Ms. Sorensen that, as Mr. Gosse did not plead the remedy of constructive trust, and it was not argued at trial, it is not now available to him. To begin with, Miles v. Conkin , cited by Ms. Sorensen, is not authority for the proposition put forward by counsel for Ms. Sorensen. The very limited comment on the issue, by the British Columbia Court of Appeal, appears at paragraph 10 of that case.

It is that: … It is to be observed that the plaintiff did not advance a claim of constructive trust in the pleadings or at trial. There was therefore no finding in the court below that the defendant was enriched or that the plaintiff suffered a deprivation. It is not, therefore, authority for the proposition that if an issue of constructive trust is not raised and addressed at trial, it cannot be addressed on appeal.

The constructive trust argument here is raised to address the potential unjust enrichment occurring in the more than twenty month period between the date of appraisals and the date of trial decision, and any further delay that would occur between the date of decision and the date of implementation.

Thus, constructive trust was not and could not have been an issue at trial. [ 43 ] For all of the foregoing reasons, I conclude that the UFC judge erred in law by failing to exercise her discretion in a manner that would ensure compliance with the requirements of the Family Law Act , to achieve a benefit for each spouse that is as close to equal

as is practicable in the circumstances, in respect of the real value of the matrimonial home. In circumstances where, instead of theproperty being sold to a third party one of the spouses is to acquire it, and there are stale appraisals, a trial judge should order valuationas at the date of anticipated transfer of title if one of the parties requests it and there is some indication of, or potential for, significantchange of value. Such an indication was clearly given in the evidence of both Mr. Cantwell and Mr. Roche.

Faced with that evidence,the appraisals ought to have been considered stale at the time that the UFC judge rendered her decision. Achieving the objectivemandated by the Family Law Act required up to date evaluation. The UFC judge erred by refusing Mr. Gosse’s request to provide for it. Mr.

Gosse’s appeal on this ground must be allowed, and the decision of the UFC judge, with respect to the division of the interest in thematrimonial home, must, therefore, be set aside. [44] The Court would urge the parties to make every possible effort to establish the current value of the matrimonial home, withoutundue delay and expense, either by direct discussion and agreement or by appraisals and agreement as to resolution of any difference inthe appraisals. That value should be determined as close as practicable to the anticipated date of transfer from Mr.

Gosse to Ms.Sorensen of his one-half interest, which date shall, if Ms. Sorensen chooses within thirty days from the filing of these reasons to provideand provides Mr. Gosse with written notice of her intention to purchase Mr. Gosse’s interest, be within thirty days from the delivery toMr. Gosse by Ms. Sorensen of the notice of intention to purchase. The price to be paid to Mr.

Gosse for his one-half interest shall beone-half of the difference between the finally determined value and the total of the mortgage principal and interest then outstanding, withthe usual adjustment, if necessary, for municipal tax, which the evidence indicates is included in the mortgage payments. Failingagreement between the parties, as to the basis for appraising value, or upon other disagreement, at any time prior to or after the purchasedate determined as indicated above, either party may apply to the Court. Issue 2: Occupational Rent (

a) Decision of the UFC judge [45] The UFC judge described the issue before her in the following manner: [23] Mr. Gosse requests the Court to order that Ms. Sorensen pay him occupational rent for the benefit of living in the matrimonialhome since their separation. Mr. Gosse agrees to pay his share of the mortgage and other expenses related to the matrimonial homeprovided he shares equally in its value and receives occupational rent. As indicated above, he will share equally in the value of thematrimonial home. Mr. Gosse’s position is that his share of the mortgage and other expenses which Ms.

Sorensen has paid while shehas been occupying the home is less than the occupational rent she ought to pay him and he is therefore due the difference by way of acash payment from Ms. Sorensen. She then concluded that: [24] The Court can order that occupational rent be paid to a non-occupying spouse by a spouse who has remained in the matrimonialhome after separation in order to remedy an inequity which could result to the non-occupying spouse. The authority to awardoccupational rent in appropriate cases flows from

section 26 of the Family Law Act. Such an award is discretionary. The principlesgoverning the payment of occupational rent in family law in this jurisdiction are summarized in the cases referenced below. [46] One of the authorities to which the UFC judge referred is Harvey v. Harvey (2000), (NL SC), 190 Nfld. &P.E.I.R. 214 (Nfld.U.F.C.).

From paragraph 67 of that decision, she referred to the following: … the law, as I see it, insofar as occupational rent is concerned, gives the Court wide discretionary latitude to award or not to awardoccupation rent, based upon a full examination of the facts and circumstances of each particular case. [47] The UFC judge decided this matter after considering the two primary aspects of the issue: the rental value of the matrimonialhome from and after the date of separation; and, the entitlement of Mr. Gosse to receive it.

She decided that the monthly rental valuewas $1,900.00 and explained her reasoning in the following manner: [30] Evidence as to the rental value of the matrimonial home was provided to the Court by John Cantwell for Mr. Gosse and KenCasey for Ms. Sorensen. As indicated above, Mr. Cantwell is a property appraiser. Mr. Casey is a licensed property realtor withexperience in renting executive properties in the St. John’s area. He was qualified as an expert in property leasing. Mr. Casey’sevidence is that since 2007, the matrimonial home would rent for $1,700 per month unfurnished to $2,100 per month furnished.

Prior tothen, it would have been slightly higher. He said the local market does not pay for high-end home leasing. Rather, the market for suchproperties has been major companies coming to Newfoundland and Labrador to do business. He said that allowances must be made forvacancies and rental agency fees, which are generally the first month’s rent plus expenses (advertising, preparing the lease agreement,tenant visits, etc.) and he opined that it has been very difficult to maintain a high-end lease with the same tenants over the last four years.

He said that the time it usually takes to rent high-end properties varies from a week to ninety days, and that corporate tenants generallylike to be on serviced city lots and close to the private schools. Mr. Cantwell, on the other hand, testified that between $2,500 and $3,500per month is a fair market rental value for the matrimonial home. Both witnesses allowed for minor rental market fluctuations over theperiod of time involved. [31] I prefer and accept the evidence of Mr. Casey on the rental value of the matrimonial home. This is because Mr.

Casey hasconsiderable actual experience in renting executive properties in the St. John’s area. Mr. Cantwell admitted little to no experience inrenting property regardless of its value or location. Accordingly, I am not convinced that the rental market for large executive homesoutside of St. John’s city limits commands the high rents suggested by Mr. Cantwell. In this regard, I observe that rental markets andreal estate markets are different, and their respective fluctuations are not necessarily linked. [32] As the matrimonial home was not fully furnished when Mr.

Gosse left (the parties had only lived there twenty-two months) andhe took some of the household furniture in the summer of 2004, I find $1,900 to be the monthly rental value of the matrimonial homefrom the date of separation. [48] With respect to Mr. Gosse’s entitlement she decided:

[36] Considering the factors recognized in the case law, the agreement of the parties to share the extraordinarily increased equity of their home and all of the other factors noted in the above paragraphs, I exercise my discretion to decline to award Mr. Gosse occupational rent. In my view, any net rental income arguably due Mr. Gosse is well offset by the above-noted factors and he suffers no inequity. There will also be no payment to Ms. Sorensen by Mr.

Gosse for his share of the post-separation mortgage and expenses she has incurred regarding the home… The “above noted factors” which the UFC judge decided would “well offset” the monthly rental were listed by her as: 1) Mr. Gosse left the matrimonial home on March 31, 2004 with little to no notice to Ms. Sorensen; 2) Hilary was eight years old when her parents separated. She lived in the matrimonial home with her mother with access to her father for nearly a year after her parents separated; 3) Mr.

Gosse paid none of the expenses associated with the operation and maintenance of the matrimonial home between when he left and the present date except for his payment of $2154.00 towards the mortgage in 2004 and his share of the insurance in place on the home when he left; 4) Mr. Gosse is sharing equally in the extraordinary increase in value of the matrimonial home since the parties separated; 5) Mr.

Gosse has incurred accommodation expenses following his departure from the matrimonial home; 6) the monthly rental value of the matrimonial home is higher than the total monthly mortgage payments on the home; 7) vacancy rates and rental agency fees over the five year period following separation would likely diminish the rental value of the matrimonial property in the hands of the non-occupying spouse; 8) rental income is taxable and would thereby be diminished in the hands of the non-occupying spouse; 9) Ms.

Sorensen has paid all costs associated with the matrimonial home since the parties separated (save for the $2,154.00 referenced in paragraph 3 above) including those related to the mortgage, insurance, utilities, day-to-day maintenance and small improvements; and 10) Ms. Sorensen has not been able to cover all of her monthly living expenses (including those associated with occupying and maintaining the matrimonial home) without monthly financial support from her family. (

b) Argument of Mr. Gosse [ 49 ] With respect to rental value, Mr. Gosse argues that the evidence of John Cantwell was more reliable than that of Mr. Ken Casey, called by Ms. Sorensen, because it was based on various data sources generated for rental value, in the data base maintained by his firm of professional property appraisers, and does not simply rely on the personal experience of one individual. As against that he submits that the evidence of Mr. Casey was based only on his personal experience and therefore reflected a very narrow perspective. He submits that the evidence of Mr.

Cantwell ought to have been given more weight by the UFC judge and argues that the rental values should be found to be $2,500.00 per month up to June, 2008 and asks the Court to give directions as to how it is to be determined for the period of occupation subsequent to June, 2008. [ 50 ] Mr. Gosse argues that one of the UFC judge’s reasons, that “Mr. Gosse left the matrimonial home on March 31, 2004 with little or no notice to Ms. Sorensen”, reflects a fault consideration which is contrary to law.

He also submits that a review of the record will show that he sought to have the matrimonial home dealt with several times between the separation date and trial date, even to the point of bringing an application for its sale or acquisition by Ms. Sorenson, which she opposed. Therefore, he submits, as she chose to remain in the matrimonial home rather than rent it to a third party or sell it, and has had the benefit of his equity and credit for the past number of years, occupational rent is the appropriate remedy. (

c) Argument of Ms. Sorenson [ 51 ] With respect to rental value Ms. Sorenson argues that the UFC judge made no palpable or overriding error in her assessment. She weighed the evidence of Mr. Cantwell, called by Mr. Gosse, as well as the evidence of Mr. Ken Casey, called by Ms. Sorensen, and concluded that Mr. Casey’s evidence was the more reliable because of his considerable expertise in renting executive properties in the greater St. John’s area. Ms. Sorensen emphasizes the evidence of Mr.

Casey that the potential market for this type of home is limited and those interested would likely be deterred by the location of a relatively rural home. [ 52 ] With respect to Mr. Gosse’s entitlement to occupational rent, Ms. Sorensen argues that the UFC judge did not deny occupational rent on the basis of any consideration of fault on the part of one of the spouses, and lists nine factors that she submits the UFC judge took into account. Generally, these reflect the factors listed by the UFC judge and set out in paragraph 48 above. Ms. Sorensen refers to the excerpt from Harvey v.

Harvey quoted in paragraph 46 above, and argues that a trial judge has a wide discretion to take into account the entirety of the circumstances of this unique case and then make a finding of whether occupational rent was appropriate. (

d) Conclusion as to occupational rent [ 53 ] In fairness to the UFC judge, the difficulty of determining the fair rental value in the face of conflicting evidence must be recognized. On its face, however, $1,900.00 per month does appear to be a very low rental for a $500,000.00 residential property, in a real estate market that “right now is on fire” or is “a sellers’ market in most areas”, as the appraisers agreed. In fact, it barely exceeds the

total of the mortgage payments, municipal tax and insurance premium, which the evidence establishes to be about 1,814.00 per month. That would leave a cash flow of only $86.00 per month which appears to be incredibly low on the equity in a $500,000.00 property in a “sellers market” that is described as being “on fire”, even after recognizing the benefit to both parties of the reduction in the mortgage principal. That ought to have been a strong indication to the UFC judge that the evidence of Mr.

Casey, as to rental values, may have some flaws, and, in the circumstances, exercising her discretion in reliance upon it could, in the context of the Family Law Act , result in unequal treatment of the spouses and an injustice to Mr. Gosse. [ 54 ] At a rental value of $1,900.00, Mr. Gosse’s immediate return on the spouses’ joint equity in the matrimonial home would be $43.00 per month; Ms. Sorensen’s immediate return would be exclusive possession of what must be a quite substantial and comfortable residence. The inequity is patent. Ms.

Sorensen would have that substantial and comfortable residence and it is probable that Mr. Gosse’s $43 would not be sufficient to rent a very small room in an inexpensive boarding house. By exercising her discretion in the manner in which she did, the UFC judge produced a result that is inconsistent with the result that is mandated by the Family Law Act , and in particular sections 5 and 8 of that statute. In my view, failure of this Court to interfere would cause a manifest injustice (see Moray Seafoods v. Labrador Shrimp at paragraph 18 and Langor v. Spurrell at paragraph 31 ). Accordingly, Mr.

Gosse’s appeal on this ground is allowed and the decision of the UFC judge that the rental value of the matrimonial home is $1,900.00 per month, is set aside. [ 55 ] That being the case, this Court must establish the monthly rental that is justified on the evidence before the UFC judge. There is wide disparity in the opinions offered by the two experts. The UFC judge found that Mr. Cantwell valued the monthly rental at a low of $2,500.00 unfurnished and a high of $3,500.00 furnished. Mr.

Cantwell’s opinion was based on an assessment of the historical data for the rental market but he admitted that he had no personal experience with the rental market. The UFC judge found that Mr. Casey valued the monthly rental at a low of $1,700.00 unfurnished and a high of $2,100.00 furnished. His opinion was based solely on his personal experience. While it is agreed that the home was furnished, there is dispute as to the extent of the furnishings.

I would note that the median low rental value is $2,100.00 and the median high rental value is $2,800.00. [ 56 ] This Court is faced with the same dilemma as the UFC judge faced. However, I can find no basis for accepting the evidence of one expert to the exclusion of the other. Admittedly, I would have greater confidence in evidence that was based on an assessment of the historical record. However, there could be a rational explanation for the somewhat lower rental for a substantial residence in that particular area on the basis that Mr. Casey suggests. As well, the UFC judge found that both Mr. Cantwell and Mr.

Casey “allowed for minor rental market fluctuations” over the period of time involved. It would seem obvious that there would likely be some increase in the rental value between 2004 and 2010. In fact, the evidence of Mr.

Cantwell indicated just that. [ 57 ] Having no absolute basis for determining the rental, considering all of the evidence, taking into account the probable increase in rental value over the seven years involved, and considering practicality, warrants concluding that a monthly rental based on the average of the median-low and the median-high would come as close as practicable to achieving the equal treatment of the spouses that is mandated by the Family Law Act . The median-low being $2,100.00 and the median-high being $2,800.00 produces an average of $2,450.00.

I would accept that as the rental value of the matrimonial home, that the evidence supports, for the purpose of determining the amount of occupational rent. [ 58 ] With respect to the question of entitlement, I am not satisfied that the UFC judge correctly stated the law in the excerpts from her decision set out in paragraphs 45 and 46 above. Specifically, I do not agree that the authority to award occupational rent in appropriate cases “flows from

section 26 of the Family Law Act ”, or that the discretion of the trial judge is as wide as she suggests. [ 59 ]

Section 26 specifies the nature of the orders that may be made by the court on an application, pursuant to

section 21, for division of matrimonial assets. It identifies the nature of six specific orders that the court may make. While the UFC judge did not say so explicitly, one can only assume that she must have been thinking of paragraph (

f) of

section 26 which provides that the court may order “that one spouse pay to the other spouse the amount that is set out in the order in order to provide for the division of the property”. With great respect to the UFC judge, that is not a source of authority to order payment of occupational rent for a matrimonial home and I can find nothing else in

section 26 that could be said to be the source of such authority. The provisions of

section 26 are primarily procedural, in defining the nature of the orders the court may make, rather than substantive, and applies to matrimonial assets generally. [ 60 ] It is paragraph (

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

section 8. Subsection (1) of that

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

b) of

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

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

mandated by the statute. It cannot be arbitrary. [ 62 ] None of the ten factors, identified by the UFC judge and listed in paragraph 48 above, provide justification for depriving Mr. Gosse of his entitlement to benefit from his equal right to the “use, possession and management” of the matrimonial home, unless and until it is sold or transferred to Ms. Sorensen upon the payment to Mr. Gosse of one-half of the net value. Two of the reasons would support awarding occupational rent, three would bear on the extent to which occupational rent might be adjusted, with which principle Mr.

Gosse has expressed agreement, and the remainder are speculative, not supported by the evidence, or irrelevant. [ 63 ] By failing to exercise her discretion in the manner that would meet the requirements of the Family Law Act , and in particular, sections 5, 8 and 15, the UFC judge erred in the exercise her discretion. She ought to have ordered that Ms. Sorensen pay Mr. Gosse one-half the determined monthly rental value, less any amount or amounts properly to be offset against it. Mr. Gosse’s appeal on that ground must be allowed. The decision of the UFC judge, declining to award Mr.

Gosse occupational rent, is set aside and, in its place, it is ordered that Ms. Sorensen pay Mr. Gosse occupational rent as set out below.

As the UFC judge did not do so, this Court must determine the extent, if any, to which relevant factors warrant adjustment of that monthly rental. [ 64 ] In circumstances where the spouse out of possession leaves fairly suddenly, with little or no notice to the occupying spouse, it would seem reasonable to delay the start of occupational rental for a brief period in order for the party retaining possession to give consideration to the consequences of retaining possession or selling the matrimonial home and to make the necessary adjustments and arrangements in the event that it is to be retained.

This need not be a lengthy period and will, no doubt, vary with the circumstances in each case. In this case, bearing in mind the financial and business experience of Ms. Sorensen, we think that a period of three months would be ample. Accordingly, Ms. Sorensen will pay occupational rent to Mr. Gosse commencing July 1, 2004 and ending on the date of actual transfer of title to Ms. Sorensen by Mr. Gosse. [ 65 ] As stated above, this Court has determined the monthly rental value for the relevant period to be $2,450.00.

However, as the mortgage and municipal tax payments are structured on a bi-weekly basis, it is convenient and appropriate and, in all of the circumstances, not in any manner unfair to either of the parties, to calculate the occupational rent on the basis of bi-weekly periods. The bi-weekly equivalent of $2,450.00 per month is $1,130.77. The evidence indicates that the bi-weekly mortgage and municipal tax payment is $784.00. The annual insurance premium is $1,416.00 which results in a bi-weekly cost of $54.46. Thus the total bi-weekly costs of mortgage servicing, insurance and municipal tax is $838.46.

When that is deducted from the bi-weekly rental value of $1,130.77 the surplus to be shared equally by the spouses is $291.31, which I would round down to $290.00. In the result, Ms. Sorensen will pay Mr. Gosse one-half of that amount, $145.00, for every two week period from July 1, 2004 to June 30, 2011, a total sum of $26,390.00. As Mr. Gosse did pay $2,154 toward the mortgage and tax payments in 2004, and the above calculations give Ms. Sorensen full credit for all mortgage payments, Ms. Sorensen will also reimburse Mr. Gosse for the amount of $2,154.00.

She will also pay $145.00, in arrears, for every two week period from July 1, 2011 until the date of transfer of title from Mr. Gosse to Ms. Sorensen, with the first such payment deemed to have been due on July 14, 2011. Issue 3: Claim of Mr. Gosse to an interest in SSDL, the business asset of Ms. Sorensen [ 66 ] The UFC judge fully informed herself, on the basis of the evidence, of the nature of the business asset with which she was dealing. She wrote: [38] Ms. Sorensen has owned and operated the dance school since 1986. Her self-employment as a dance teacher was well established before she married.

The evidence is that she taught dance in various St. John’s area schools for approximately four years prior to her marriage. During this time her student enrollment steadily increased to over two hundred students. In the year after her marriage, she began operating her dance school out of leased premises in Coaker’s Meadow Plaza on Torbay Road. At the end of 1996, the school was incorporated as SSDL. Incorporation was motivated by tax advantages available to small businesses and the opportunity for Ms. Sorensen to avail of a small business loan to build her own studio.

In 1997 a new studio was built further north on Torbay Road. The school has operated from that location since then. The evidence demonstrates that SSDL has continued to grow and prosper since its incorporation. She was also fully alert to the basis on which Mr. Gosse claimed an interest. She wrote: [42] Mr. Gosse bases his entitlement claim on several grounds. He claims to have contributed money to SSDL: (1) by way of an asserted interest in all of Ms. Sorensen’s earnings during marriage, on the theory that (

a) she used her matrimonial earnings for business purposes prior to incorporation; and (

b) that the retained earnings left in the corporation are really matrimonial earnings; and (2) by way of his one-half interest in Canada Savings Bonds standing in Ms. Sorensen’s name which Ms. Sorensen invested in the business at the time of its incorporation. Mr. Gosse also says he contributed work to SSDL in the form of periodic labour and money’s worth to SSDL by way of SSDL’s reliance on his financial means and credit worthiness in its financing of the new dance studio in 1997. [ 67 ] The UFC judge reviewed in detail each of the bases on which Mr. Gosse claimed an interest.

On the basis of that review, she concluded that: The chores Mr. Gosse performed at the school, doubtless meaningful and helpful at the time, were not regularly scheduled, substantial in time, effort or value, or essential to the administration, maintenance, or operation of the business. They were really in the nature of helpful gestures or good turns, for which compensation was never expected. She concluded that the only real contribution by Mr. Gosse was the use by Ms. Sorensen of a matrimonial Canada Savings Bond in an amount of just under $18,000.00 at an early stage of establishing the business. Noting that

section 29 of the Family Law Act permits a spouse being compensated for a contribution to a business asset by payment of a specific monetary amount or by being awarded a share in the business, she decided that “a compensatory award of money will adequately and fairly compensate Mr. Gosse”. Accordingly, she ordered that Mr. Gosse be paid $18,000.00 to reflect his one-half interest in the Canada Savings Bond together with an interest return. [ 68 ] I do not consider it necessary to review in detail the arguments of the parties on this issue. The argument presented by Mr.

Gosse is primarily a listing of the circumstances present in ten cases in which a UFC or other Trial Division judges made determinations

with respect to one spouse claiming an interest in the business asset of the other. However, nothing in the argument of Mr. Gosse demonstrates any error in law or any misapprehension of the evidence by the UFC judge. [ 69 ] The UFC judge was thorough in her assessment of the claim of Mr. Gosse, and the conclusions she reached were reasoned on the evidence and the law. There is, therefore, no basis on which this Court can justify interfering with the discretion exercised, or the conclusions drawn, by the UFC judge. Mr. Gosse’s appeal on this ground must be dismissed. Issue 4: Entitlement of Mr. Gosse to share in the amount shown as “due to shareholders” in the accounts of SSDL (

a) Decision of the UFC judge [ 70 ] The UFC judge identified the nature of this account and described the issue in the following comments: [81] The value of the Due to Shareholder Account held at SSDL on the date of separation was $47,726.46. This amount was adjusted on December 1, 2005 to include $7,232.00 which was owed to Ms. Sorensen because she had personally paid business car insurance for the years 2001 to 2004 inclusive. Mr. Gosse says the $54,958.46 in the Due to Shareholder account is a matrimonial asset and therefore he claims one-half of it. Ms.

Sorensen claims this account is her own property and is exempt from being classified as a matrimonial asset. [82] The Due to Shareholder account was opened in 1997 after the incorporation of SSDL. Records demonstrate that $81,277.13 had been advanced to the company at that time. Of the $81,277.13: $40,000 was a gift from Ms. Sorensen’s parents; $1,200 was advanced by Ms. Sorensen; and $40,077 was from CSBs Ms. Sorensen cashed and deposited of which $8,981.49 was owned by Mr. Gosse. [83] Mr. Gosse argues that because Ms.

Sorensen subsequently deposited to her credit moneys owed to her as a result of personally paying business bills with matrimonial money, Ms. Sorensen’s original exempt money is converted to a matrimonial asset and must be therefore shared with him. He also argues that the “first-in, first-out” accounting principle commonly used in commercial inventory pricing means that the $40,000 gift from Ms.

Sorensen’s parents to her business, having been essentially the first deposit to the account, has now been spent and that the remaining money, because it mixed with some matrimonial money, is all matrimonial money. [ 71 ] The UFC judge decided: [86] There is no question in my mind that the purpose for the deposit of monies to SSDL’s Due to Shareholder account was entrepreneurial. Specifically, it was to assist in obtaining bank financing for the new studio upon incorporation. I accept that the initial contribution of $81,277.13 to SSDL was Ms. Sorensen’s non-matrimonial money except for Mr.

Gosse’s $8,981.49 which is being returned to him as a result of this judgment. To my mind, the inclusion of Mr. Gosse’s $8,981.49 in the account does not change the character of the entire account. I also accept that once Ms. Sorensen withdrew money from this account and used it for family expenses or for the purchase of RRSPs during the marriage, the withdrawn money changed character and became matrimonial. Further, I accept that if Ms. Sorensen paid for business expenses with her matrimonial earnings during marriage, then money due to her in respect of those expenses is matrimonial money.

In this regard I view the $7,232.00 referred to in paragraph 81 as a matrimonial asset and find that half of it belongs to Mr. Gosse. However, I do not accept that the “first-in, first-out” commercial accounting principle has any relevance to ownership of this Due to Shareholder account. As a result, the UFC judge concluded that the $47,726.46 is a non-matrimonial business asset owned by Ms. Sorensen. (

b) Argument of Mr. Gosse [ 72 ] Mr. Gosse relies on the decision of the UFC in Nap v. Nap (17 February 1984), St. John’s No. F/83/454 and F/83/456 (Nfld.U.F.C.) in which Cameron J., as she then was, decided that: Because these accounts relate to a business asset it does not change their character. The interest of the parties in the company itself is a business asset and, therefore, exempt from matrimonial assets. The amount in the director’s account, like the salary to the parties, is income accumulated during the marriage which is properly classified as ‘matrimonial assets’.

Counsel also refers to other decisions of the UFC, or other judges of the Trial Division, approving of that approach. Essentially, Mr. Gosse is arguing that, as monies were advanced to the company and paid back at various times over the years, the accounting principle, “first in-first out”, should be applied to determine the source of the funds in the residual balance. On that basis, it is argued that as the total of advances by the shareholder, Ms. Sorensen, over the years was $109,166.27, and the total paid back was $61,439.81, the source of the differential should be considered to be Ms.

Sorensen’s matrimonial funds not the $40,000.00 gift to her by her parents which was the first amount advanced to SSDL. (

c) Argument of Ms. Sorensen [ 73 ] Ms. Sorensen argues that the first in-first out commercial accounting principle has no application in resolving family issues and, even if it were applicable, it would only be applied where the judge could not otherwise distinguish the source of the money in the account. In this case, she submits, the UFC judge was able to clearly identify the source of the funds and made allowance for the modest amount that originated with matrimonial funds that had not been returned. (

d) Conclusion respecting the due to shareholders account [ 74 ] I am not satisfied that the first in-first out accounting principle has any application here. It may be a reasonable, although arbitrary or mechanical, approach to management of commercial or industrial accounting, or for income tax purposes. However, where the statute directs, as the Family Law Act does, that one of the purposes of

Part II is to “provide for judicial discretion in sharing business

assets built up by a spouse during marriage”, such a mechanical accounting rule can be counterproductive. [ 75 ] The UFC judge, here, considered the sources of the funds and, on a reasoned basis in reliance on the evidence, she concluded that, of the original funds advanced from time to time to SSDL and recorded in the due to shareholder’s account, all but Mr. Gosse’s half share of the matrimonial Canada Savings Bond was Ms. Sorensen’s own non-matrimonial money. There is no basis for concluding that the UFC judge erred in law or misapprehended the evidence. Accordingly, Mr.

Gosse’s appeal on this ground must be dismissed. Issue 5: Imputing the SSDL pre-tax corporate income as income of Ms. Sorensen [ 76 ] Resolution of the questions arising on this ground of appeal depends upon the

interpretation and application of the Guidelines , in particular, guideline s 16 to 19, which provide: Calculation of annual income 16 . Subject to sections 17 to 20, a spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with

Schedule III. Pattern of income 17.

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

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

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

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

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

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

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

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

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

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

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

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

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

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