Novak v. Novak, 2020 NSCA 26

Nova Scotia Court of Appeal Citation: Novak v. Novak , 2020 NSCA 26 Date: 20200313 Docket: CA 489467 Registry: Halifax Between: Albert Novak Appellant v. Michele Novak Respondent Judge: The Honourable Justice J.E. (Ted) Scanlan Appeal Heard: January 15, 2020, in Halifax, Nova Scotia Subject: Divorce. Parenting. Child Maintenance. Division of Property. Misapprehension of Evidence.

Summary: The trial judge misapprehended evidence related to the parties’ agreement on parenting arrangements. He ordered sole custody to the respondent and based retroactive and prospective child maintenance on the respondent having sole custody. The trial judge also made material errors in determining the values of properties to be divided. Result: Appeal allowed and matter to be heard by a different judge. Costs at trial set aside. Costs on appeal granted to the appellant in the amount of $6,000. The parenting agreement that existed prior to the trial restored pending retrial.

This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 9 pages. Nova Scotia Court of Appeal Citation: Novak v. Novak , 2020 NSCA 26 Date: 20200313 Docket: CA 489467 Registry: Halifax Between: Albert Novak Appellant v. Michele Novak Respondent

Judges: Van den Eynden, Scanlan and Beaton, JJ.A.Appeal Heard: January 15, 2020, in Halifax, Nova ScotiaHeld: Appeal allowed per reasons for judgment of Scanlan, J.A.; Van den Eynden and Beaton, JJ.A. concurring. Counsel: Laura A. McCarthy, for the appellant Stephen J. Jamael, for the respondent Reasons for judgment: [1] On January 15, 2020, the Court rendered a unanimous oral decision setting aside the Corollary Relief Judgment arising froman unreported written decision of Justice Robert M. Gregan of the Supreme Court of Nova Scotia (Family Division), dated March 31,2019.

The parties were advised that written reasons would be delivered at a later date. These are those reasons. Background [2] The parties were married on December 31, 2001. There are three children of the marriage; approximate ages 17, 14 and 12. The youngest child has a number of disabilities that have affected him since birth. The respondent worked as a registered nurse, part-time or full-time, during the marriage.

More recently she has been in receipt of Canada Pension and a disability pension because, formedical reasons, she is no longer able to work. [3] The appellant had full-time employment during the early stages of the marriage. For many years he has been self-employed inthe real estate development and construction business. More recently he has acquired or built a number of residential rental units. [4] There is a disagreement as to when the parties separated but there were agreements post separation as to parenting of thechildren.

Financial issues including child support and division of matrimonial property and assets remained unresolved. Issues: [5] The notice of appeal raises a number of issues including the parenting arrangement for the children, retroactive and prospectivechild support, imputing of income for the purpose of calculating child support, valuation and division of matrimonial assets, and that thetrial judge misapprehended or failed to consider material facts. [6] I am convinced the trial judge did fail to consider relevant evidence, and misapprehended material facts.

Standard of Review [7] In the family law context the Supreme Court of Canada gave direction on the misapprehension of evidence in Van de Perre v.Edwards, 2001 SCC 60 at paras. 9-16. This was succinctly summarized by the Prince Edward Island Court of Appeal in O.(P.D.) v. W.(S.L.), 2009 PECA 13 , 2009 PECA13 at paras. 38-40: [38] In reviewing the decision of a trial judge involving custody, an appellate court is to employ a narrow scope of review. Because ofits fact-based and discretionary nature, a trial judge must be given considerable deference by an appellate court when such a decision isreviewed.

The narrow scope of appellate review precludes an appellate court from delving into a custody case in the name of the bestinterests of a child where there is no material error. A court of appeal is not in a position to determine what it considers to be the correctconclusions from the evidence; that is the role of the trial judge. An appellate court may intervene only where there has been a materialerror in law or a misapprehension of the evidence or the conclusions drawn from it. [39] The approach to appellate review requires an indication of a material error.

If there is an indication that the trial judge did notconsider relevant factors or evidence, this might indicate that he did not properly weigh all the factors. In such a case, an appellate courtmay review the evidence proffered at trial to determine if the trial judge ignored or misdirected himself with respect to relevantevidence. However, omissions in the reasons will not necessarily imbue the appellate court with jurisdiction to review the evidenceheard at trial.

The test is that an omission is only a material error if it gives rise to the reasoned belief that the trial judge must haveforgotten, ignored, or misconceived the evidence in a way that affected his conclusion. Without this reasoned belief, the appellate courtcannot reconsider the evidence. [40] That is a synopsis of the directions of the Supreme Court of Canada on standard of review applicable to the present case in Van dePerre v. Edwards 2001 SCC 60, at paras. 9-16; applied in Bourgeois v. Plante 2009 PECA 12 per Murphy J.A.

[ 8 ] It is not just any misapprehension of evidence that warrants appellate intervention. The appellant must demonstrate that there was a material misapprehension of the evidence that could reasonably have affected the result. As noted in D.M. v. S.J. , 2019 BCSC 850 in the criminal law context this test was articulated in R. v. Loher , 2004 SCC 80 at para. 2 : [2] … The misapprehension of the evidence must go to the substance rather than to the detail. It must be material rather than peripheral to the reasoning of the trial judge.

Once those hurdles are surmounted, there is the further hurdle (the test is expressed as conjunctive rather than disjunctive) that the errors thus identified must play an essential part not just in the narrative of the judgment but "in the reasoning process resulting in a conviction". [ 9 ] As noted by Justice Ker in D.M. v. S.J . : [64] Transposed to the context of family law proceedings, a trial judge's misapprehension of the evidence will only vitiate the decision and underlying order if the error was a central element of the judge's reasoning process: Kane at para. 42.

In other words, the misapprehension must play an essential

part in the end result. … [66] A further legal principle that informs the analysis is that reasons for judgment must be read as a whole and not parsed or subjected to microscopic dissection: … [67] Finally, the best interests of the child remains the sole factor to be considered both at trial in the first instance and on appellate review.

Analysis [ 10 ] At the conclusion of the appeal hearing on January 15, 2020, the Court indicated the appeal was allowed and, pending retrial, an order would issue reinstating the co-parenting arrangement the parties had agreed to prior to and during the hearing before the trial judge. The parties each maintained throughout the trial that they had reached an agreement to maintain the ongoing pattern of co- parenting of the children. That same co-parenting agreement was referenced by the parties during pre-trial hearings before the trial judge on October 23, 2017 and December 4, 2017.

There was also an interim order issued January 23, 2018, confirming that co- parenting arrangement and a

schedule as to when the parenting would occur. Both parties confirmed at trial that their wish was to have the co-parenting agreement continue, subject only to a request by the respondent to have the results of an existing Voice of the Child Report (VOC) acknowledged in the co-parenting arrangement. This would give the older child flexibility in deciding when he was going to be at one home or the other. [ 11 ] Ms. Novak’s counsel said the following about custody to the trial judge: Custody had been agreed to, but the Petitioner would like the Voice of the Child Report information to be implemented.

The parties’ son Curtis is now a mature well adjusted, intelligent 16 year old, and does not want to be confined to either parents’ home at specific times or have to leave at a certain time. The Petitioner is seeking that Curtis is able to do this, and that Josh is able to as well, or when he reaches a certain age. [ 12 ] The trial judge noted at ¶19 of his decision that the parties had a shared custody arrangement but did not acknowledge the parties’ wish to continue the arrangement.

He suggested that even though there was a shared parenting agreement there was not an agreed parenting schedule. [ 13 ] At ¶59 the trial judge made an error in finding that day to day care and responsibility for all three children was with Ms. Novak, thereby overlooking the circumstances that existed prior to the parties January 23, 2018 interim hearing. [ 14 ] A trial judge has authority to refuse to accept the wishes of the parties in a custody dispute if persuaded it is contrary to the best interests of a child. In this case, however, the trial judge cited the parties’ inability to agree on a caregiving

schedule as evidence of their inability to cooperate in a shared parenting arrangement. This flies in the face of the agreement that had existed for some time and which the parties wanted to continue with only some slight modification to the

schedule as requested by the respondent concerning the children. [ 15 ] The ability of the parties to cooperate was reflected in the interim order and arrangements the parties had at the time of trial. For example, the appellant had constructed a house, specially equipped to meet the needs of the youngest child. The respondent moved into that house on a rent free basis. That suggests a degree of cooperation in the interests of the children. [ 16 ] The trial judge referenced Hammond v. Nelson , 2012 NSSC 27 and McCluskey v. Tobin , 2017 NSSC 234 .

In ¶71 of his decision the judge said in referencing Hammond : [71] As mentioned, this is similar to this case, where the parties agreed to shared custody on a trial basis, but have ultimately been unable to agree on a continuation of shared custody. [ 17 ] The record is replete with references whereby both parties and Ms. Novak’s counsel had requested the trial judge allow them to continue with the shared parenting agreement. This is not like the situation in Hammond where there was a trial period of shared custody and then the parties were unable to agree on a continuation.

Here the trial judge unfortunately misapprehended the history of the parenting arrangement post separation and the parties’ desire for it to continue with minor adjustments. [ 18 ] The record does not indicate the trial judge gave any indication to the parties that he was contemplating not endorsing their parenting proposal. In the case of Mr. Novak, he did not call evidence to prove there was 50/50 time share in parenting. Presumably both parties were unaware the custodial arrangement was in jeopardy.

If the judge was not convinced that the parenting arrangement was in the best interests of the children, and because it would have a substantial impact on prospective child support, the correct approach may

have been for him to advise the parties as to his concerns, giving the parties an opportunity to present additional evidence on the issue. Perhaps this approach was not adopted because the trial judge did not understand the past child care arrangement and the parties desire to continue with the shared parenting arrangement. [ 19 ] The failure to understand the existing arrangement that had been in place, and the parties’ wish to continue the shared parenting arrangement was a palpable, overriding material error, that affected the outcome.

It warrants setting aside the custody provisions included in the Corollary Relief Judgment. It will be for the court on a retrial to determine what the parenting arrangements should be for the children. Child support [ 20 ] The errors related to the judge’s misunderstanding of the parenting arrangement had a cascading effect on the issues of retroactive and prospective child support. [ 21 ] The trial judge ordered retroactive lump sum child support in the amount of $89,332.47. That order must be set aside for several reasons.

The amount does not account for the shared parenting arrangement that existed prior to the divorce hearing, nor take into account the evidence that there were expenses paid for by the appellant when the children were in his care. [ 22 ] The trial judge imputed the appellant’s income for child support purposes to be $198,241.28. In making that calculation the trial judge appears to have simply looked at the book value of the appellant’s business and said that retained earnings were profit left in the company and, therefore, available to the father as income.

The judge made no allowance for the capital those businesses needed to continue operations. There also appears to have been a mathematical error in calculating the retained earnings accumulating in the companies on a yearly basis. [ 23 ] There was no consideration of the evidence that the appellant and his company would incur substantial tax consequences upon the transfer of a company-owned home into the respondent’s name, which the parties had agreed had a value of $305,000.00.

This error had a direct impact on the trial judge’s calculation of the appellant’s imputed income (and the subsequent division of assets) and the quantum of retroactive and prospective child support. [ 24 ] It will be for a judge on a retrial to determine what, if any, retroactive child support is owed once the co-parenting arrangement is properly considered, and the exercise of imputing income is reconsidered. Property matters [ 25 ] I am satisfied there were cascading errors that caused several distinct financial issues to bleed into and affect other aspects of the case.

It is for that reason I lump many of the issues together. [ 26 ] There appears to be no disagreement between the parties as to the trial judge’s characterization of the various assets as business versus matrimonial assets or property. There were errors made in the treatment of those assets. [ 27 ] In dividing the matrimonial and business assets the trial judge did not consider all of the debts related to those properties or businesses.

He also failed to consider the personal debt the appellant had incurred to finance some of the construction company projects and the tax implication for the company and the appellant resulting from the property transfer he directed from the appellant’s company to the respondent. [ 28 ] There was one aspect of the decision upon which the parties agree, that is the trial judge’s decision to award the respondent 21% of the equity in the appellant’s businesses. However, there were errors made in calculating the value of the respondent’s share of those businesses. For example, I refer to the 16-unit rental property.

It was, in part, built after the separation. The trial judge simply noted the mortgage appraisal for the completed building was $1.3 million and the mortgage was for $1.2 million, finding the equity was therefore $100,000, and he then allocated 21% of that equity to the respondent. [ 29 ] For some properties the trial judge said he was using the assessed or reassessed values as the basis for valuation.

If the assessed values were used, as the decision indicates, then there appears to have been a mathematical error in calculating the total values of the properties. [ 30 ] The trial judge purported to effect an equal division of some property without having evidence as to the value of those assets. I refer to the respondent’s pension which the judge offset against the value of household contents retained by the appellant. The judge had no valuation for any of those assets. [ 31 ] Prior to the trial, the appellant had asked the respondent to provide information as to the value of her pension.

She had a duty to disclose that information. Respondent’s counsel on appeal could offer no explanation as to why that valuation was not provided. In the absence of valuations it is impossible for this court to ascertain whether the trial judge actually effected the equal division he espoused. The respondent’s failure to disclose the value of her pension was easily remedied by an order dividing the pension at source so as not to inflict a potential inequity upon either party. [ 32 ] Some of the problems at trial fall at the feet of the parties. Mr. Novak dismissed his counsel shortly before the trial.

On the whole, the record reflects a less than clear picture as to the nature and extent of the appellant’s businesses. There were incomplete financial records and valuations put before the trial judge, all of which would have made the judge’s job more difficult. [ 33 ] Appellate counsel asked this Court, if possible, to make the appropriate divisions and calculations correcting errors or oversights as made by the trial judge. It is not possible for this court to make calculations as requested by the appellant, hence the direction for a re- trial . Costs

Costs in the trial below: [ 34 ] By way of an endorsement dated June 24, 2019 the trial judge ordered costs in the amount of $27,313 payable by Mr. Novak to Ms. Novak. That order for costs is to be set aside. The global costs of all trial proceedings will be determined by the judge hearing the re-trial. Cost on Appeal [ 35 ] The court asked the parties for their position on costs on this appeal.

The respondent indicated that if successful she would be seeking 40% of the $27,000 ordered in the first instance, saying also that if she was unsuccessful this Court should not award any costs to the appellant. [ 36 ] The appellant indicated that at trial he sought $15,000 in costs. He argued that 40% of that amount should be awarded to him if successful on appeal.

The court indicated on January 15, 2020, that costs in the amount of $6,000, inclusive of disbursements would be awarded to the appellant on this appeal. [ 37 ] Finally, this court would encourage the parties to seek a resolution by way of a judicially-assisted settlement conference or some other settlement process. I would not expect that either party wishes to go through an expensive trial again if it can be avoided. Disposition [ 38 ] The appeal is allowed and a new trial before a different judge is ordered. Scanlan, J.A. Concurred in: Van den Eynden, J.A. Beaton J.A.