Elsom v. Elsom, [1989] 1 S.C.R. 1367

Sheila Elizabeth Elsom Appellant

v.

Norman Dennis Elsom Respondent

indexed as: elsom v. elsom

File No.: 20350.

1989: February 22; 1989: May 18.

Present: Dickson C.J. and Wilson, La Forest, L'Heureux-Dubé, Sopinka, Gonthier and Cory JJ.

Family law -- Matrimonial property -- Division of family assets ‑‑ Trial judge awarding wife 25 per cent of the family assets -- Court of Appeal reducing wife's share -- Whether Court of Appeal erred in interfering with trial judge's discretion -- Family Relations Act, R.S.B.C. 1979, c. 121, s. 51.

The parties divorced after nine years of marriage. All the assets, whether used for family purposes or for business purposes, were brought to the marriage by the respondent. Because of the appellant's indirect contribution through her management of household and child rearing responsibilities, respondent's business property was included in the family assets pursuant to s. 45(3)(e) of the Family Relations Act. The trial judge, when valuing and apportioning the family assets, considered the factors enunciated in s. 51 of the Act and concluded that the appellant was not entitled to an equal share of the family assets and awarded her a 25 per cent interest in the property which amounted to $ 1,450,000. The Court of Appeal set aside the order and held that the trial judge erred in failing to consider and compare each spouse's contribution to each individual asset. The Court found that the factors of the case required a separate consideration of the "business" and "domestic" assets and awarded the appellant 10 per cent of the "business" assets and 50 per cent of the "domestic" assets. In the result, the value of appellant's share of the family assets was reduced to $ 681,200.

Held: The appeal should be allowed.

The Court of Appeal erred in interfering with the trial judge's exercise of his discretion under s. 51 of the Act. An appellate court is justified in intervening in a trial judge's exercise of his discretion only if the trial judge misdirects himself or if his decision is so clearly wrong as to amount to an injustice. Here, there was no indication of misdirection in the trial judgment. Section 51 confers a discretion on the Supreme Court of the province to depart from the rule of equal division of family assets expressed in s. 43 of the Act where, having regard to the criteria set out in s. 51, equal division would be unfair. While s. 51 permits an assessment of individual items of property, that section does not require such an assessment and there is no requirement that "business" assets be considered separately from "domestic" assets. Nor does s. 51 require the court to effect a division of property that it feels is proportionate to the contribution each spouse has made to the particular assets or groups of assets. Further, there was no indication of injustice in the trial judgment. The Court of Appeal did not find that the trial judge erred as to the facts of the case or that he either considered irrelevant factors or failed to consider relevant factors.

Cases Cited

Applied: Harper v. Harper, 1979 CanLII 168 (SCC), [1980] 1 S.C.R. 2; referred to: LeBlanc v. LeBlanc, 1988 CanLII 96 (SCC), [1988] 1 S.C.R. 217.

Statutes and Regulations Cited

Family Relations Act, R.S.B.C. 1979, c. 121, ss. 43, 45, 46, 51.

APPEAL from a judgment of the British Columbia Court of Appeal (1987), 1987 CanLII 2969 (BC CA), 13 R.F.L. (3d) 231, allowing in part respondent's appeal from a judgment of Locke J., [1985] W.D.F.L. 1578, [1985] B.C.W.L.D. 2710, awarding the appellant a 25 per cent interest in the family assets. Appeal allowed.

Thomas R. Berger, for the appellant.

B. A. Crane, Q.C., for the respondent.

//Gonthier J.//

The judgment of the Court was delivered by

GONTHIER J. -- This case raises, once again, the question of the proper exercise of a trial judge's discretion under provincial matrimonial property legislation, in this case the Family Relations Act, R.S.B.C. 1979, c. 121, to order other than equal division of matrimonial property between spouses on the breakup of their marriage.

Facts and Proceedings

The parties to this appeal have been engaged in litigation since 1979. The history of that litigation and the factual circumstances of the parties' marriage, separation and divorce are lengthy and complex. I will therefore confine myself to a recitation of the facts and proceedings pertinent to the issue raised by this case.

The parties married in 1970 and separated in 1979. The respondent, Mr. Elsom, owned a number of companies, all involved in land development in the lower mainland of British Columbia. The respondent's business interests were all initially financed by a British company which he controlled and were all in place before he met the appellant.

A decree nisi was granted to the parties by judgment of the Supreme Court of British Columbia on March 17, 1982, reported at (1982), 1982 CanLII 535 (BC SC), 35 B.C.L.R. 293. By the same judgment, Locke J. held that the family assets subject to division between the parties pursuant to s. 45 of the Family Relations Act (the "Act"), included the respondent's "business" property. Although the appellant had performed some "girl friday" work for certain of the respondent's companies, Locke J. did not find this work amounted to a direct contribution to the business interests of the respondent. However, she had made an indirect contribution through her management of household and child rearing responsibilities, and this indirect contribution brought the respondent's "business" property within the definition of family assets in s. 45(3)(e) of the Act. The judgment of Locke J. was confirmed on appeal. The judgment of the Court of Appeal is reported at (1983), 1983 CanLII 692 (BC CA), 49 B.C.L.R. 297, 3 D.L.R. (4th) 500, 37 R.F.L. (2d) 150.

The matter came again before Locke J. for valuation of the family assets and apportionment of the property between the spouses. The respondent is legal owner of virtually all the property, both that used primarily for family purposes and that used primarily for business purposes. Locke J. departed from the prima facie rule of 50/50 division between the spouses enunciated in s. 43(2) of the Act, and awarded a 25 per cent interest in the property to the appellant, which amounted to $1,450,000. The respondent appealed again from the judgment of Locke J., this time with success. The Court of Appeal set aside the order of the Supreme Court and ordered the respondent to pay to the appellant the amount of $681,200. The appellant appealed to this Court.

Relevant Statutory Provisions

The Family Relations Act addresses entitlement to family assets on the breakup of a marriage in Part 3 of the Act, which includes ss. 43 to 51. Section 43 establishes the principle that each spouse is entitled to an undivided one-half interest in the family assets. Section 45 defines "family asset" to be, in general, property owned by either or both spouses that is used for a family purpose. Included in the definition of "family asset" by s. 45(3)(e) is:

(e) a right, share or an interest of a spouse in a venture to which money or money's worth was, directly or indirectly, contributed by or on behalf of the other spouse.

Section 46(1) provides that where property owned by one spouse to the exclusion of the other is used primarily for business purposes and where the other spouse has made no direct or indirect contribution to the acquisition of the property or operation of the business, the property is not a family asset. Section 46(2) states that an indirect contribution includes savings through effective management of household or child rearing responsibilities by the spouse who holds no interest in the property. In the case at bar, the respondent's business property was included in the family assets pursuant to s. 45(3)(e) because of the appellant's indirect contribution.

Section 51 provides for judicial reapportionment where, inter alia, the principle of equal division of property enunciated in s. 43 would be unfair.

For convenience, I reproduce the pertinent statutory provisions:

43. (1) Subject to this Part, each spouse is entitled to an interest in each family asset on or after March 31, 1979 when

(a)a separation agreement;

(b)a declaratory judgment under section 44;

(c)an order for dissolution of marriage or judicial separation; or

(d)an order declaring the marriage null and void

respecting the marriage is first made.

(2) The interest under subsection (1) is an undivided half interest in the family asset as a tenant in common.

(3) An interest under subsection (1) is subject to

(a)an order under this Part; or

(b)a marriage agreement or a separation agreement.

(4) This section applies to a marriage entered into before or after this section comes into force.

45. (1) Subject to section 46, this section defines family asset for the purposes of the Act.

(2) Property owned by one or both spouses and ordinarily used by a spouse or a minor child of either spouse for a family purpose is a family asset.

(3) Without restricting the generality of subsection (2), the definition of family asset includes

(e)a right, share or an interest of a spouse in a venture to which money or money's worth was, directly or indirectly, contributed by or on behalf of the other spouse.

(4) The definition of family asset applies to marriages entered into and property acquired before or after March 31, 1979.

46. (1) Where property is owned by one spouse to the exclusion of the other and is used primarily for business purposes and where the spouse who does not own the property made no direct or indirect contribution to the acquisition of the property by the other spouse or to the operation of the business, the property is not a family asset.

(2) In section 45 (3) (e) or subsection (1), an indirect contribution includes savings through effective management of household or child rearing responsibilities by the spouse who holds no interest in the property.

51. Where the provisions for division of property between spouses under section 43 or their marriage agreement, as the case may be, would be unfair having regard to

(a)the duration of the marriage;

(b)the duration of the period during which the spouses have lived separate and apart;

(c)the date when property was acquired or disposed of;

(d)the extent to which property was acquired by one spouse through inheritance or gift;

(e)the needs of each spouse to become or remain economically independent and self sufficient; or

(f)any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse,

the Supreme Court, on application, may order that the property covered by section 43 or the marriage agreement, as the case may be, be divided into shares fixed by the court. Additionally or alternatively the court may order that other property not covered by section 43 or the marriage agreement, as the case may be, of one spouse be vested in the other spouse.

Decisions of the Courts Below

The Supreme Court of British Columbia

Two issues were before the Supreme Court of British Columbia for resolution: valuation of family assets and division of those assets. Much of Locke J.'s unreported decision of July 2, 1985 addresses the question of valuation of the property, a question which is not at issue before this Court.

Locke J.'s reasons for judgment on the second issue, the determination of the spouses' respective shares in the family assets, can best be summarized by the citation of certain extracts found at p. 52 of his decision:

. . . by being a satisfactory wife and mother except in very exceptional circumstances the wife makes an indirect contribution and there is therefore a prima facie entitlement in an asset in a sense that any necessary nexus is established.

. . . I commence from the 50% premise of s. 43 and go directly to s. 51 and each heading and recite a minimum of facts with needed reference to the law as I understand it.

Locke J. then examined each of the factors enunciated in s. 51 of the Act in the context of the facts of the case before him and the relevant case law. He listed the factors he considered relevant to the exercise of his discretion pursuant to s. 51, at pp. 57-59:

These parties lived together for 9 years before separation and neither of them were youngsters. It is not obvious that the marriage is so short that one must immediately come to the conclusion that a 50% division is unfair. But as I follow the train of thought in the authorities, in the case of a long marriage with a continuing contribution by the wife, even if only indirect, it becomes more difficult to displace the 50% rule, without something more.

I consider the following factors:

1.There was a "same dwelling" marriage of 9 years with a decree nisi after 12 years, which is -- I think some distance from what the ordinary middle-class family regards as some standard of stability.

2.All the assets were acquired prior to the arrival on the scene of Mrs. Elsom. I will not repeat her activities since that time.

3.Any increase in value either came from Elsom's own assets or an inheritance interest or were generated from a business apparatus all in place prior to the marriage.

4.She did not in fact make any measurable direct contribution to the money-making business.

5.She has not in fact made any contribution of any kind since separation in 1979 except to look after the boy, who was and is the subject of a custody and access struggle, and as to this there has I think been an emotional drain on both parties.

Locke J. stated his conclusion on p. 59:

It is my finding that under all the circumstances such as this it is unfair that the wife should share equally in the family assets. In my view twenty-five percent is fair. Slightly rounded, this amounts to $1,450,000.00.

The Court of Appeal

The Court of Appeal, although it did not say so in so many words, held that Locke J. had misdirected himself: (1987), 1987 CanLII 2969 (BC CA), 13 R.F.L. (3d) 231. Macfarlane J.A. for the Court stated that s. 51 of the Act (at p. 238):

. . . requires the court to consider the facts with respect to individual assets, and, in effect, to compare the contribution made by each spouse to each asset . . . . Therefore, if the factors of the case require separate consideration of the business and domestic assets, as they do here, then that approach should be taken.

The Court of Appeal found that Locke J. erred in failing to apply the principle of comparison of each spouse's contribution to each individual asset (at p. 238):

Had that approach been applied in this case I think that the judge would have concluded that the wife should have a much smaller share of the business assets than of the domestic assets.

In the opinion of the Court of Appeal:

. . . the facts indicate that a 25 per cent share in the business assets was disproportionate to the wife's indirect contribution to those assets. I think that a fair share, having regard to criteria contained in s. 51, would be 10 per cent.

However, because the appellant had been concerned on a daily basis with the "domestic" assets, the Court of Appeal held that a 50 per cent share of those assets was fair. In the result, the value of the appellant's share of the family assets was reduced from $1,450,000 to $681,200.

Issue

Did the Court of Appeal err in interfering with the trial judge's exercise of his discretion under s. 51 of the Act to effect a reapportionment of property between the parties?

Analysis

Courts of Appeal should be highly reluctant to interfere with the exercise of a trial judge's discretion. It is he who has the advantage of hearing the parties and is in the best position to weigh the equities of a case. The principle of non-interference has been emphasized by this Court in a number of cases concerning the division of family property. In Harper v. Harper, 1979 CanLII 168 (SCC), [1980] 1 S.C.R. 2, the Court did interfere with the discretion of the trial judge, but only because the trial judge had acted on certain irrelevant considerations and the Court of Appeal had been misled on a matter of evidence by one of the parties. Chief Justice Laskin for the majority wrote at p. 18:

[A]n appellate Court, and especially an ultimate Court, should ordinarily refrain from interfering with the exercise by a trial judge of the type of broad discretionary jurisdiction conferred by s. 8 of the Family Relations Act . . . .

In the same case, Estey J. for the minority, dissenting in part, but only as to the share the wife should have in the matrimonial home, wrote at p. 24:

An appellate Court should be extremely reluctant to interfere with the exercise of a discretionary power by a trial judge. However, there are cases, and for the reasons given above I believe this is one, where justice demands that the exercise of discretion be reviewed.

If a judge proceeds on principle properly applicable to the facts of a case and makes a decision judicially, in the exercise of his discretion, this Court will not interfere. But, if it appears that a judge has misdirected himself, or that his decision is so clearly wrong as to amount to an injustice, the Court can and should review the facts upon which the judgment ought to be given. (Re Hull Estate per Laidlaw J.A., [1943 CanLII 113 (ON CA), [1943] O.R. 778 (C.A.)], at p. 785.)

The principles enunciated in the Harper case, supra, indicate that an appellate court will be justified in intervening in a trial judge's exercise of his discretion only if the trial judge misdirects himself or if his decision is so clearly wrong as to amount to an injustice. In my opinion, neither of these two circumstances are present in this case.

The Court of Appeal held that the trial judge had based himself on a wrong principle by failing to consider each asset individually and to compare the contributions of the spouses to that asset. I cite again the principle the Court of Appeal held to be correct (at p. 238):

. . . s. 51 . . . requires the court to consider the facts with respect to individual assets, and, in effect, to compare the contribution made by each spouse to each asset . . . . Therefore, if the factors of the case require separate consideration of the business and domestic assets, as they do here, then that approach should be taken.

While it is true that s. 51 of the Act does permit an assessment of individual items of property (see s. 51(c), (d), (f)), that section does not require such an assessment. For example, a comparison of each spouse's contribution to the various items of property among the family assets would not be of assistance in deciding if an equal division of the property would be unfair in view of a spouse's capacities or liabilities (s. 51(e), (f)). Certainly there is no requirement in the Act that "business" assets be considered separately from "domestic" assets. In the case at bar, both the "business" assets and the "domestic" assets are considered to be "family assets" as defined by s. 43 of the Act.

Nor does s. 51 of the Act require the court to compare the respective contributions of the spouses and to award to each a share proportionate to those contributions. Section 51 confers a discretion on the Supreme Court to depart from the rule of equal division of family assets expressed in s. 43 of the Act where, having regard to the criteria set out in s. 51, equal division would be unfair. The legislator has decided that each spouse is entitled, in general, to a one-half interest in family assets. This Court has stated in its recent decision in LeBlanc v. LeBlanc, 1988 CanLII 96 (SCC), [1988] 1 S.C.R. 217, at p. 222, that this principle of equal division must be respected. While the contribution of a spouse may, on the facts of an individual case, be relevant under s. 51, which refers in para. (f) to "any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property", s. 51 does not require the court to effect a division of property that it feels is proportionate to the contribution each spouse has made to the particular assets or groups of assets. While contribution of a spouse, direct or indirect, may be a governing consideration in determining which are family assets, this is not so in deciding their apportionment between the spouses where a number of other factors come into play.

An appellate court may find it necessary to intervene in the exercise of a trial judge's discretion where his decision is so clearly wrong as to amount to an injustice. However, in the case at bar, the Court of Appeal did not find that the manner in which the trial judge exercised his discretion amounted to an injustice. It did not find that Locke J. had erred as to the facts of the case (although it did correct a minor error in the valuation of one of the properties). It did not find that the trial judge had taken into consideration irrelevant factors or had failed to take into consideration relevant factors.

In my opinion, there is no indication in the trial judgment of either misdirection or injustice in the exercise of the trial judge's discretion under s. 51 of the Act which could justify the intervention of the Court of Appeal.

Conclusion

I would allow the appeal, reverse the judgment of the Court of Appeal, and restore the judgment of the trial judge. The appellant is entitled to costs in this Court and in the Court of Appeal.

Appeal allowed with costs.

Solicitor for the appellant: Thomas R. Berger, Vancouver.

Solicitors for the respondent: Gowling & Henderson, Ottawa.