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The Matrimonial Property Act of Saskatchewan - A Choosing in Action

September 2, 2021

Alberta

,

Canada

Issue

Is a chose in action matrimonial property for the purposes of matrimonial property division?

Conclusion

The Matrimonial Property Act does not define “property”.

The law in Alberta is that a chose in action is matrimonial property. (McCulloch v. McCulloch)

Very few Alberta cases were identified that considered the treatment of a cause of action. However, guidance may be gleaned from how the Courts in other jurisdictions have considered the matter.

A chose in action is an inchoate right sufficient to constitute family property within the meaning of The Family Property Act of Saskatchewan. (Carruthers v Carruthers)

In Mitchell v. Mitchell, the wife was in receipt of monthly payments under the then Worker’s Compensation Act arising from the death of her first husband in a work-related accident. Under the terms of that legislation, those payments were terminated when she re-married in 1984. In 1993, following their separation, Mr. and Mrs. Mitchell entered into a separation agreement that purported to divide all of their property and release all claims each had to the property of the other. Subsequently to the parties' separation, as a result of a class action commenced in 1995, provisions of the Workers Compensation Act were found to be contrary to s. 15 of the Canadian Chart of Rights and Freedoms. As a result, the wife received a lump sum payment of over $226,000, of which over $150,000 was related to payments that should have been made to her during her marriage. The husband commenced an action against the wife claiming a division of family assets to take into account these monies. The trial judge awarded the husband a share of the lump sum payment received by the wife, and this order was upheld on appeal. Lambert J.A. found that the wife’s right to the payment was a chose in action which, unbeknownst to her, existed at the time of the Separation Agreement and was subject to division between the parties.

In Hannigan v. Hannigan, the parties were married for 14 years. When the husband joined the company Prime, he was promised a 30% interest in the company. However, that arrangement was never reduced to writing. The husband argued that, at most, his interest in Prime as of September 1991 could be described as a chose in action. He submitted that such a chose in action could not be said to give him a legal or beneficial interest in Prime until realized, and that his interest was not realized until 1996 when he succeeded in obtaining a share of the proceeds of sale of Prime to Ikon. Prowse J.A. followed Mitchell v. Mitchell and found that a chose in action can be a family asset. The husband's interest in Prime, which became a chose in action in September 1991, was a family asset.

In Teather v. Kawashima, the wife was one of 417 female nurses who were part of a lawsuit seeking retroactive pay and adjustment pension entitlement arising out of an allegation that they had been paid less for equal work based upon their gender (the "Walden lawsuit"). In 2012, a few years after the parties had separated, the wife received net proceeds arising from the litigation of $176,594. The Court, following Hannigan v. Hannigan, found that the husband had an enforceable right in respect of the Walden lawsuit at the time they negotiated the minutes. Therefore the wife held 1/2 the net proceeds of the Walden lawsuit in trust for the husband.

In McGrail v. McGrail, a loan was characterized a chose in action which was rightly considered property within the meaning of the BC Family Law Act.

Law

The Matrimonial Property Act, RSA 2000, c M-8 does not define “property.” Section 7 provides:

7(1) The Court may, in accordance with this section, make a distribution between the spouses of all the property owned by both spouses and by each of them.

(2) If the property is

(a) property acquired by a spouse by gift from a third party,

(b) property acquired by a spouse by inheritance,

(c) property acquired by a spouse before the marriage,

(d) an award or settlement for damages in tort in favour of a spouse, unless the award or settlement is compensation for a loss to both spouses, or

(e) the proceeds of an insurance policy that is not insurance in respect of property, unless the proceeds are compensation for a loss to both spouses,

the market value of that property at the time of marriage or on the date on which the property was acquired by the spouse, whichever is later, is exempted from a distribution under this section.

(3) The Court shall, after taking the matters in section 8 into consideration, distribute the following in a manner that it considers just and equitable:

(a) the difference between the exempted value of property described in subsection (2), referred to in this subsection as the “original property”, and the market value at the time of the trial of the original property or property acquired

(i) as a result of an exchange for the original property, or

(ii) from the proceeds, whether direct or indirect, of a disposition of the original property;

(b) property acquired by a spouse with income received during the marriage from the original property or property acquired in a manner described in clause (a)(i) or (ii);

(c) property acquired by a spouse after a decree nisi of divorce, a declaration of nullity of marriage, a judgment of judicial separation or a declaration of irreconcilability under the Family Law Act is made in respect of the spouses;

(d) property acquired by a spouse by gift from the other spouse.

(4) If the property being distributed is property acquired by a spouse during the marriage and is not property referred to in subsections (2) and (3), the Court shall distribute that property equally between the spouses unless it appears to the Court that it would not be just and equitable to do so, taking into consideration the matters in section 8.

In McCulloch v. McCulloch, 2003 ABQB 432 (CanLII), the Court summarized the law in Alberta with respect to the division of a chose in action as follows:

[46] The law in Alberta has been since McAlister v. McAlister (1982), 1982 CanLII 1234 (AB QB), 41 A.R. 277 (Q.B.) and Herchuk v. Herchuk (1983), 1983 ABCA 200 (CanLII), 35 R.F.L. (2d) 327 (Alta. C.A.) that a chose in action is matrimonial property. [...]

In D.G.M. v. K.M.M., 2002 ABQB 225 (CanLII), the parties were married for 11 years. During the marriage, the husband granted the wife a promissory note and mortgage in the amount of $104,080 in May 1991 with interest to be paid thereon at a rate of 11% per annum. The mortgage was registered on the title to the matrimonial home. No payments were demanded or made on that mortgage at any time prior to separation. The husband claimed that the promissory note and mortgage were now statute-barred. The Court found that the wife was entitled to an exemption of $165,000:

[66] I therefore accept K.M.M.’s evidence over that of D.G.M. as to the purpose for the preparation of the promissory note and mortgage. He may have intended the documents to have no application to any potential matrimonial property claim he had but he had the obligation to make that limitation clear to K.M.M. and he did not do so. He was the one who took the responsibility for instructing counsel and for the preparation, execution and registration of these documents. He is estopped from raising any lack of intention on his part to create legal obligations of the scope K.M.M. intended by his failure to raise his lack of intention directly with her, thereby leaving her in the position where she believed her exemption was fully protected by the promissory note and mortgage. She acted on that reliance to her detriment, for if he had told her that he did not intend these documents to protect her exemption from his own potential matrimonial property claim, she could have requested him to enter into an agreement which did so and, if he refused, could have pursued other action to clarify the matter.

[67] D.G.M.’s counsel made a vigorous argument to the effect that the promissory note and mortgage were now statute-barred. It is not necessary to consider that issue for the purpose of determining this claim because any statutory limitation period would not bar consideration of these instruments as bearing on the presumption of advancement. An agreement between parties which may otherwise be statute-barred by the time the parties separate may nonetheless be considered by a Court when construing a matrimonial property claim under s. 8 of the MPA. The cases cited by D.G.M.’s counsel in which loans and promissory notes were ignored in distributing matrimonial property all dealt with monies loaned by third parties; see Wolff v. Wolff (1985) 1985 CanLII 2358 (SK CA), 37 Sask. R. 19 (C.A.); Wagner v. Wagner [1987] S.J. No. 346, pages 2-3; Schroeder v. Schroeder [2000] M.J. No. 452, para. 7, 9; Burke v. Burke 1987 CanLII 6944 (MB QB), [1987] M.J. No. 329, pages 2-4; Russell v. Russell 1999 CanLII 12313 (SK CA), [1999] S.J. No. 645, para 113-114 (Sask. C.A.). None dealt with the treatment to be given to an agreement between the parties themselves and whether the passage of time should exclude that agreement from consideration under s. 8 of the MPA.

[68] Because the MPA is designed to operate on dissolution of marriage, often at a time well beyond that specified in limitation legislation for the collection of debt, it cannot have been the intention of the Legislature to exclude from its operation agreements which create rights which, in another context, would be statute-barred. If the Legislature had intended that to be the case it would have expressly limited s. 8(g) of the MPA which allows Courts to consider the terms of any written or oral agreement between the parties when dividing matrimonial property. The failure to provide any express limit on agreements in s. 8(g) to those created at a certain date raises the implication that all agreements be considered, no matter when they were prepared.

[69] While the mortgage and promissory note have a face amount of $104,080, it is the fact that they were given and circumstances in which they were given which rebut the presumption of advancement in relation to the $160,000. Therefore, they rebut the presumption that K.M.M. intended to gift D.G.M. with one-half of her exempt $165,000, or the $82,500 used to pay down the mortgage.

[70] I reject the argument that because the $208,160 was initially deposited in a joint account all of the monies lost their exempt character. I find they were placed in the joint account merely to act as a conduit, similar to the deposit by D.G.M. of his condominium sale proceeds into that same account prior to his use of them to repay monies advanced by Milcorp to purchase the lot. The fact that neither of the Ms testified as to their intention in depositing those monies into a joint account, i.e. did not testify that they did not thereby intend to gift half the monies such as Mrs. Rosen testified in Rosen v. Rosen [1994] A.J. 753 (Alta. C.A.) does not bar such a finding; the other circumstances including the relatively immediate withdrawal of the exempt funds rebut the intention of a gift. In K.M.M.’s case, in any event, the promissory note and mortgage operate to rebut any intention of gift in relation to the deposit in the joint account as effectively as in relation to the paying down of the joint mortgage.

[71] In the result, K.M.M. is entitled to an exemption in the amount of $165,000.

In Hannigan v. Hannigan, 2007 BCCA 365 (CanLII), the parties were married for 14 years. When the husband joined the company Prime, he was promised a 30% interest in the company. However, that arrangement was never reduced to writing. The husband argued that, at most, his interest in Prime as of September 1991 could be described as a chose in action. He submitted that such a chose in action could not be said to give him a legal or beneficial interest in Prime until realized, and that his interest was not realized until 1996 when he succeeded in obtaining a share of the proceeds of sale of Prime to Ikon. Prowse J.A. followed Mitchell v. Mitchell and found that a chose in action can be a family asset. The husband's interest in Prime, which became a chose in action in September 1991, was a family asset:

[55] It is clear from the Mitchell decision that a chose in action can be a family asset. In Mitchell, Mrs. Mitchell’s chose in action was found to be a family asset on the basis that, had the monies been received as they should have been during the course of the marriage, they would have been ordinarily used for a family purpose, that is, as an asset to provide financial security for the family.

[56] In this case, based on the findings of the trial judge, Mr. Hannigan’s interest in Prime, which became a chose in action in September 1991, was a family asset because it was in the nature of a venture to which Ms. Hannigan had contributed monies or money’s worth within the meaning of s. 58(3)(e) of the FRA. While the trial judge did not expressly refer to Mr. Hannigan’s interest as a chose in action, he clearly stated at para. 52 of his reasons for judgment that, as of September 1991, Mr. Hannigan was “in a position to call upon Mr. Stoker to perform his end of the bargain”.

[57] Mr. Hannigan attempted to distinguish Mitchell on its facts, but was unable to distinguish it in principle. Nor did Mr. Hannigan actively pursue his argument that, assuming Mr. Hannigan had an enforceable interest in Prime at the time of the Separation Agreement, this interest did not constitute a venture within the meaning of s. 58(3)(e) of the FRA.

[58] Mr. Hannigan did, however, challenge the trial judge’s finding that Mr. Stoker held Mr. Hannigan’s share in Prime in trust for him as of September 1991, arguing that there was no basis for finding an express, implied or constructive trust of the shares. The trial judge did not find that there was either an express or implied trust, but must have founded his conclusion on the basis of a constructive trust; that is, that as of September 1991 Mr. Stoker held 30% of the shares in Prime on a constructive trust for Mr. Hannigan. Mr. Hannigan submits that such a trust had not been pronounced as of the date of the Separation Agreement and that it was only when the judgment was pronounced that such a trust could arise.

[59] Since I am satisfied that Mr. Hannigan had an enforceable chose in action against Mr. Stoker as of September 1991 and that the chose in action was a family asset, namely, a venture within the meaning of s. 58(3)(e) of the FRA, it is unnecessary to decide the trust issue.

In Mitchell v. Mitchell, 2002 BCCA 327 (CanLII), the wife was in receipt of monthly payments under the then Worker’s Compensation Act arising from the death of her first husband in a work-related accident. Under the terms of that legislation, those payments were terminated when she re-married in 1984. In 1993, following their separation, Mr. and Mrs. Mitchell entered into a separation agreement that purported to divide all of their property and release all claims each had to the property of the other. Subsequently to the parties' separation, Subsequently, as a result of a class action commenced in 1995, provisions of the Workers Compensation Act were found to be contrary to s. 15 of the Canadian Chart of Rights and Freedoms. As a result, the wife received a lump sum payment of over $226,000, of which over $150,000 was related to payments that should have been made to her during her marriage. The husband commenced an action against the wife claiming a division of family assets to take into account these monies. The trial judge awarded the husband a share of the lump sum payment received by the wife, and this order was upheld on appeal. Lambert J.A. found that the wife’s right to the payment was a chose in action which, unbeknownst to her, existed at the time of the Separation Agreement and was subject to division between the parties:

[18] It would have been a remarkably prescient person who understood in April 1985, or at any time in Mr. and Mrs. Mitchell's marriage, that the law was going to be revealed to be that the termination of widows' benefits was unconstitutional, that any terminated benefit was going to have to be reinstated, and that a lump sum was going to have to be paid for the missed benefit payments during the period of termination. Certainly, neither Mr. and Mrs. Mitchell, nor their advisers, understood the state of the law when Mr. and Mrs. Mitchell made their separation agreement on 22 September, 1993.

[19] In the result, at the time of the separation agreement Mrs. Mitchell had an asset in the form of a chose in action representing her entitlement to the reinstatement of her monthly widow's benefit and her entitlement to a lump sum payment equal to the total of the missed monthly benefit payments throughout the period of benefit termination. As I have said, the part of the lump sum payment which accrued during the period from marriage to separation agreement was $156,833.75. The chose in action representing the entitlement to that amount arose during the course of the marriage. It did not arise when the Grigg case was decided or when the lump sum payment was received. It was an asset which arose and accumulated between the date of the marriage and the date of the separation agreement. When the payment was made the chose in action representing the entitlement was transformed into money but the asset consisting of the right to the money came into existence between the date of the marriage and the date of the separation agreement.

[20] The evidence and the finding of the trial judge was that all amounts in the businesses, in the house, and in the income of each spouse throughout the marriage were treated as family property or as family income. If the chose in action accumulating throughout the marriage and ultimately valued at $156,833.75 had been known to the parties during the marriage it would, no doubt, have been treated, like all their assets, as an asset used for a family purpose and therefore as a family asset under what is now s.58(2) of the Family Relations Act. The use of an asset to provide financial security and protection against erosion of income and other family misadventures in the future may constitute a present ordinary use for a family purpose, and does so in the circumstances of the parties' marriage arrangements in this case. See Tezcan v. Tezcan (1990), 1990 CanLII 8105 (BC SC), 44 B.C.L.R. (2d) 343 (B.C.S.C.); 1992 CanLII 1075 (BC CA), 62 B.C.L.R. (2d) 344 (B.C.C.A.); Folk v. Folk, [1993] B.C.J. No. 670 (B.C.S.C.); 1994 CanLII 1231 (BC CA), 99 B.C.L.R. (2d) 188 (B.C.C.A.); and Evetts v. Evetts (1996), 1996 CanLII 2712 (BC CA), 85 B.C.A.C. 19, at para. 23.

[21] In reaching his conclusion that this asset was a family asset the trial judge approached the question somewhat differently than I have done. Some steps of his reasoning were attacked by the appellant. But it is not necessary for me to decide any of those issues as they are no longer relevant to my approach to the fundamental question in this appeal.

[22] The fact that the family asset represented by the entitlement to $156,833.75 was unknown to Mr. and Mrs. Mitchell during the marriage does not prevent it from being categorized as a family asset. It must be regarded as having been held for the family purpose of financial security in accordance with the practices of Mr. and Mrs. Mitchell. It was therefore a family asset.

In Teather v. Kawashima, 2016 BCSC 2231 (CanLII), the wife was one of 417 female nurses who were part of a lawsuit seeking retroactive pay and adjustment pension entitlement arising out of an allegation that they had been paid less for equal work based upon their gender (the "Walden lawsuit"). In 2012, a few years after the parties had separated, the wife received net proceeds arising from the litigation of $176,594. The Court, following Hannigan v. Hannigan, found that the husband had an enforceable right in respect of the Walden lawsuit at the time they negotiated the minutes. Therefore the wife held 1/2 the net proceeds of the Walden lawsuit in trust for the husband:

[122] I arrive at the same conclusion as the trial judge in Hannigan that each of the claimant and respondent here were operating under the common mistake that the claimant had no enforceable right in respect of the Walden litigation at the time they negotiated the Minutes.

[123] I find the situation of the deceased husband was similar to the wife in Hannigan. He was under acute pressure (self-imposed, perhaps) to resolve legal matters in Canada so as to be able to return to the U.S.

[124] He had insufficient information upon which to make an informed decision regarding the Walden litigation and, in fact, it was omitted entirely from the Minutes.

[125] The claimant, on the other hand, did not realize the significance of the result in the Federal court overturning the tribunal’s earlier decision.

[126] Each of the parties was mistaken as to the potential for success and, had they known the true state of affairs, a different resolution of the matrimonial action would have been the result.

[127] Accordingly I order that the claimant holds one half of the net proceeds of the Walden litigation in trust for the respondent’s estate subject to the claimant’s receipt of the $150,000 promised payment from the respondent’s estate.

In McGrail v. McGrail, 2016 BCSC 104 (CanLII), a loan was characterized a chose in action which was rightly considered property within the meaning of the BC Family Law Act:

[31] Subject to s. 85, which deals with excluded property, under s. 84(1), family property is all real property and personal property owned by at least one spouse on the date the spouses separate. Section 83(4) and s. 84(1)(a)(ii) provide that “property” includes beneficial interests. Thus, Mr. McGrail’s beneficial interest in the Nickyboy Trust could be family property. In addition, the trust documents disclose a loan from Mr. McGrail and Ms. Sens to the trust, which in my view as a chose in action is rightly considered “property” within the meaning of s. 84 FLA: Mitchell v. Mitchell, 2002 BCCA 327 at paras. 19 and 20; Hannigan v. Hannigan, 2007 BCCA 365, at para. 55.

In Carruthers v Carruthers, 2021 SKCA 52 (CanLII), the Saskatchewan Court of Appeal held that a chose in action is an inchoate right sufficient to constitute family property within the meaning of the Family Property Act:

[73] If Brent and Janice had a valid claim for unjust enrichment against Brent’s parents, that claim would, at law, be characterised as a chose in action or an inchoate right sufficient to constitute family property within the meaning of the FPA. In Tataryn, Cameron J.A., of this Court, found the pension benefit at issue constituted a chose in action and thus fell within the definition of matrimonial property in The Matrimonial Property Act, SS 1979, c M-6.1 (repealed). That Act was the predecessor of the FPA and contained the same definition for family property.

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