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The Marital Property Act - What Is a Family Asset?

January 6, 2022

New Brunswick

,

Canada

Issue

Is a personal injury settlement considered a marital asset that is subject to equal division upon separation?

Conclusion

The Marital Property Act provides for a presumptive statutory right to an equal division of all marital assets. Section 2 recognizes marriage as an equal economic partnership. It gives equal status to joint responsibilities of spouses whether they are child care, household management or financial provision. These joint responsibilities of spouses are recognized to be of equal importance in assessing the contributions of the respective spouses to the acquisition, management, maintenance, operation or improvement of marital property. The contribution of each spouse to the fulfillment of these responsibilities entitles each spouse to an equal share of the marital property and imposes on each spouse, in relation to the other, the burden of an equal share of the marital debts. In a nutshell, the statute provides for orderly and equitable settlement between equals upon marriage breakdown. (Yorke v. Yorke)

Section 1 of the Marital Property Act defines “family assets” as “… property, whether acquired before or after marriage, owned by one spouse or both spouses and ordinarily used or enjoyed for shelter or transportation or for household, educational, recreational, social or aesthetic purposes by both spouses or one or more of their children while the spouses were cohabiting”. (Yorke v. Yorke)

Although the general scheme of the Act provides for a presumption of equality, s. 7 of the Act provides six criteria to be considered if the Court is of the opinion that a division of the marital property in equal shares would be inequitable: any agreement other than a domestic contract; the duration of the period of cohabitation under the marriage; the duration of the period during which the spouses have lived separate and apart; the date when the property was acquired; the extent to which property was acquired by one spouse by inheritance or by gift; or any other circumstances relating to the acquisition, disposition, preservation, maintenance, improvement of the property. (Yorke v. Yorke)

A personal injury award is not a family asset if it is for pain and suffering and loss of amenities of life because the award in essence is personal.

Amounts paid for past wage loss may not be a family asset if they have not been applied to cover normal day-to-day expenses. The implication is payments to cover a past wage loss will be considered a family asset if any portion of those assets have, in fact, been used for "a family purpose". (McNamee v. McNamee)

Amounts received to cover future wage losses are paid to replace the spouse's expected contributions to the family coffers. Future wage loss settlements are inherently different from past wage losses because, generally, it is not possible to predict whether the spouse will avoid drawing upon this pool of funds for future day-to-day expenses. (McNamee v. McNamee)

In D.T.W. v. H.L.W., the wife recieved a personal injury settlement of approximately $150,000. The parties purchased various items and paid various bills with the proceeds of the personal injury settlement. They also used a portion of the settlement to purchase recreational property in Murray Beach, New Brunswick. The wife deposited her personal injury settlement into the joint account and then used the funds to purchase items for the family. DeWare J. concluded that unequal division was inappropriate in the circumstances.

In McNamee v. McNamee, the wife argued that all monies paid to her from a personal injury settlement and remaining in the joint account or GICs should be excluded as a family asset. Noble J. held that the amount of the award that was attributable to damages for pain and suffering was not marital property and not divisible on marriage break-up. However, funds intended to compensate for future loss of wages were marital property and must be divided.

In Duguay v. Duguay, the settlement proceeds were only for pain and suffering as the wife was unemployed at the time of the accident. Boisvert J. concluded that the settlement funds received by the wife did not constitute a family asset as defined by the Marital Property Act.

Law

Section 2 of the Marital Property Act, SNB 1980, c M-1.1 provides for the presumption of equal division of the share of the marital property as follows:

2 Child care, household management and financial provision are joint responsibilities of spouses and are recognized to be of equal importance in assessing the contributions of the respective spouses to the acquisition, management, maintenance, operation or improvement of marital property; and subject to the equitable considera-tions recognized elsewhere in this Act the con-tribution of each spouse to the fulfillment of these responsibilities entitles each spouse to an equal share of the marital property and imposes on each spouse, in relation to the other, the burden of an equal share of the marital debts.

Section 7 of the Marital Property Act, SNB 1980, c M-1.1 provides the Court the ability to make an unequal division, having regard to enumerated considerations:

7 Notwithstanding sections 2, 3 and 4, the Court may make a division of marital property resulting in shares that are not equal if the Court is of the opinion that a division of the marital property in equal shares would be inequitable, having regard to

(a) any agreement other than a domestic con-tract,

(b) the duration of the period of cohabitation under the marriage,

(c) the duration of the period during which the spouses have lived separate and apart,

(d) the date when the property was acquired,

(e) the extent to which property was acquired by one spouse by inheritance or by gift, or

(f) any other circumstances relating to the ac-quisition, disposition, preservation, mainte-nance, improvement or use of property render-ing it inequitable for the division of marital pro-perty to be in equal shares.

In Yorke v. Yorke, 2011 NBCA 79 (CanLII), Larlee J.A. set out the legal principles relevant to the equal division of marital property under the Marital Property Act as follows:

[11] Like all other common law provinces in Canada, New Brunswick’s Marital Property Act provides for a presumptive statutory right to an equal division of all marital assets. Section 2 recognizes marriage as an equal economic partnership. It gives equal status to joint responsibilities of spouses whether they are child care, household management or financial provision. These joint responsibilities of spouses are recognized to be of equal importance in assessing the contributions of the respective spouses to the acquisition, management, maintenance, operation or improvement of marital property. The contribution of each spouse to the fulfillment of these responsibilities entitles each spouse to an equal share of the marital property and imposes on each spouse, in relation to the other, the burden of an equal share of the marital debts. In a nutshell, the statute provides for orderly and equitable settlement between equals upon marriage breakdown.

[12] The definition of family asset also plays a role in this decision. The Act, at section 1, defines “family assets” as “… property, whether acquired before or after marriage, owned by one spouse or both spouses and ordinarily used or enjoyed for shelter or transportation or for household, educational, recreational, social or aesthetic purposes by both spouses or one or more of their children while the spouses were cohabiting”.

[13] Section 6 of the Act provides for the exclusion of a family asset where it was acquired before the spouses married, if, in the discretion of the Court, it would be unfair and unreasonable to the owner to include the family asset in the division of marital property. The Court must take into account the circumstances of the case as well as one or more of the three following considerations: no substantial contribution by the non-owning spouse to the family asset; the cohabitation of the spouses was of short duration; and the spouses had an agreement, arrangement or understanding.

[14] Although the general scheme of the Act provides for a presumption of equality, s. 7 of the Act provides six criteria to be considered if the Court is of the opinion that a division of the marital property in equal shares would be inequitable: any agreement other than a domestic contract; the duration of the period of cohabitation under the marriage; the duration of the period during which the spouses have lived separate and apart; the date when the property was acquired; the extent to which property was acquired by one spouse by inheritance or by gift; or any other circumstances relating to the acquisition, disposition, preservation, maintenance, improvement of the property.

[15] It is recognized in the case law that there is a heavy onus on a spouse who tries to prove that an equal division under the Act is “inequitable”. Other provinces use the following terms: unconscionable, grossly unfair, grossly unjust, injustice, and unjust. Some of the factors to be considered in s. 7 require an assessment of subjective evidence such as the contribution of the spouse. Others require an objective assessment such as the length of time the spouses cohabited.

[...]

[18] This Court has endorsed the primacy of equal division in recent caselaw. In R.B. v. I.B., 2005 NBCA 38, 282 N.B.R. (2d) 358, the parties were married for 6 years, but had cohabited for 11 years. The trial judge held that because the respondent had paid $28,000 for land prior to ever meeting the appellant, it was only just and equitable that this amount be accounted for and/or be reimbursed to the respondent before any division of net proceeds or sale of the property. In so doing, the trial judge made an unequal division of the marital property: the wife would be entitled to $16,000 and the husband $44,000 on a sale of the property at the estimated value of $60,000. This Court concluded the judge failed to take into account the substantial contribution of the wife vis-à-vis that of the husband with respect to the land, a family asset, acquired before marriage by the husband, per s. 6 of the Marital Property Act. The contributions of the parties were equal and there was thus no basis for making an unequal division. Ryan J.A. stated:

Both parties bring important assets to any marriage, some fixed, some aesthetic, some transitory. These constitute the foundation upon which the marriage builds, exists, survives or fails. In the normal circumstance, as here, the contributions of each are equal. [para. 45]

See O'Brien v. O'Brien Estate (1990), 1990 CanLII 11505 (NB CA), 111 N.B.R. (2d) 271, [1990] N.B.J. No. 1027 (C.A.) (QL) (leave to appeal to the S.C.C. refused, [1991] S.C.C.A. No. 6 (QL) in which Ryan J.A. stated the recurrent theme of the Marital Property Act is an equality in the division of assets with consideration for unequal divisions in certain cases: “To have vested the marital home solely in Mr. O'Brien, exhausting the principal asset of Mrs. O'Brien's estate, would run counter to the spirit and intent of the Act in the circumstances of this case” (p. 283). See also Hogan v. Hogan (1991), 1991 CanLII 3978 (NB CA), 115 N.B.R. (2d) 343, [1991] N.B.J. No. 331 (C.A.) (QL) where Ryan J.A. states:

Nowhere in the case before us on appeal do we find a justification by the trial judge, if one exists, for a departure from the general principle of an equal division in respect of the pension assets. [para. 12]

See as well McKinnon v. McKinnon, 2011 NBCA 49, [2011] N.B.J. No. 165 (QL), affirming Noble J., who directed an equal division of marital property and excluded a property which was the subject of a prenuptial agreement after a 20- year marriage.

[19] An examination of the New Brunswick jurisprudence on marital property applications from the last 10 years reveals that, first and foremost, marriage is an equal economic partnership. Marital contributions, namely financial provision and household management, share equal status. Equal financial contributions are not a prerequisite to equal division of the property. Common exceptions to equal division result from peculiar circumstances: dissipation of assets; unequal contribution; short, second or late marriage and inherited property. In long-term marriages, the marital home will generally be subject to an equal division. In the absence of mingling or co-mingling of an account, that is, if an account is kept absolutely separate and not used for the household, it may be excluded from division. When one looks objectively at the affairs of the parties, what matters is whether their money was mingled with the household accounts or, put another way, whether the money was spent on acquiring goods or paying the expenses for the family. As the statute stipulates, a family asset is one used or enjoyed for shelter or transportation or for household, educational, recreational, social or aesthetic purposes by both spouses. The focus in marital property applications cannot be on a balancing of financial contributions. Simply espousing at trial: “what is mine is mine and what is yours is yours” does not qualify as “an agreement, arrangement or understanding that the use of the family asset by the non-owning spouse or any of their children would not prejudice any rights of the owning spouse to the family asset” (s. 6(e)). It takes something more than that to affect the presumptive statutory right to an equal division of marital assets.

In D.T.W. v. H.L.W., 2018 NBQB 71 (CanLII), the wife recieved a personal injury settlement of approximately $150,000. The parties purchased various items and paid various bills with the proceeds of the personal injury settlement. They also used a portion of the settlement to purchase recreational property in Murray Beach, New Brunswick. The wife deposited her personal injury settlement into the joint account and then used the funds to purchase items for the family. DeWare J. concluded that unequal division was inappropriate in the circumstances:

[13.] As a result of the July 2009 motor vehicle accident, the respondent received a personal injury settlement. Once the lawyer fees and disbursement were paid, the respondent received a check in the amount of $157,518.52 on August 30, 2013. This check was deposited into the joint account of the parties.

[14.] The parties purchased various items and paid various bills with the proceeds of the respondent’s personal injury settlement. These items include:

2013 Dodge Caravan

$33,218.25

1999 Chevrolet Silverado

$25,411.00

Payment of vehicle for respondent’s son, B.W.1

$5,000.00

Payment of Jeep Compass loan

$10,993.67

Purchase of camp property

$31,000.00

Purchase of 2006 Yamaha Grizzly ATV

$5,800.00

Extended warranty on the van/truck

$8,000.00

Payment to respondent’s son B.W.2

$5,000.00

Roof on the house

$10,000.00

TOTAL

$134,422.92

[15.] The parties used a portion of the insurance settlement to purchase a recreational property in Murray Beach, New Brunswick. This property was purchased from Cameron Murray, who testified at trial. The parties are in agreement that they had come across the Murray Beach property simply by driving around and seeing a sign posted. They were interested in purchasing several acres and following the negotiations with Mr. Murray, arrived at a deal for $31,000.00. There was a camp building on the property which Mr. Murray initially wanted to keep. Mr. Murray had planned to move the camp off of the lot prior to the purchase. The $31,000.00 purchase price pertained solely to the 14-acre property and not the camp on the site.

[...]

[51.] In the present matter, there is no doubt that as a result of the respondent’s ownership of the marital home prior to cohabitation, her personal injury settlement and her inheritance, the parties were able to acquire significant personal assets and pay all of their debts. The parties were married for over five years (March 2011 – June 2016) and had cohabitated for two years prior to marriage. In considering Section 7 of the Marital Property Act in conjunction with the jurisprudence on point, an unequal division cannot be accorded solely on the basis of a “short” marriage.

[52.] Further, it is clear that the parties pooled their resources and paid their bills accordingly. When the respondent did receive her personal injury settlement and then her inheritance, these amounts were also deposited into the joint account and then used to purchase items for the family. The fact that the applicant’s employment earnings were far less substantial than the respondent’s personal injury settlement and inheritance is not determinative of the issue. Both parties deposited all of their available revenues into the joint account from which all the bills were paid. There was never any division in terms of the parties’ respective revenues.

[53.] In assessing the totality of the circumstances, it is difficult to arrive at a determination that an unequal division is appropriate in the circumstances. That said, looking at the matter holistically and in the spirit of the jurisprudence that has considered the issue, it appears reasonable that the marital home be treated differently than the balance of the marital property. The respondent and her first husband purchased the home in 1995. The respondent had owned the property for 14 years prior to the applicant moving in. Further, the outstanding mortgage was down to $17,000.00 when it was paid off by the parties in December 2013. In my view, it is appropriate to award the respondent an unequal division in respect to the marital home pursuant to Section 7 of the Marital Property Act.

In McNamee v. McNamee, 2011 NBQB 203, the wife argued that all monies paid to her from a personal injury settlement and remaining in the joint account or GICs should be excluded as a family asset. Noble J. held that the amount of the award that was attributable to damages for pain and suffering was not marital property and not divisible on marriage break-up. However, funds intended to compensate for future loss of wages were marital property and must be divided:

150 On October 2nd, 1999 Ms. McNamee was injured in a car accident. She received a settlement cheque in the amount of $262,367.85 in full settlement for her injuries from the accident. Included in Exhibit P-2 at Tab 9 and Tab 10 are letters from the solicitor representing Ms McNamee in this claim. In the correspondence, he made it clear there had been no final determination of the amount to be attributed to pain and suffering in this claim or the amount to apply to lost income. Having said this, the solicitor established his calculation of the value of each heading to make up this settlement.

151 According to the solicitor, in this case, the claim for future loss of income was estimated at $275,990. This represented 74.59% of the $370,000.00 settlement amount paid to the firm on August 24, 2001. After the deduction for the fees and disbursements to the law firm (including 15% HST) the total amount of the settlement cheque paid to Ms. McNamee was the $262,367.85.

152 The solicitor for Ms. McNamee in the injury case took into consideration advance payments and other adjustments to determine the amount Ms. McNamee received for loss of future income to be 71.25% of the total settlement. This is relatively close to the figure I suggest in the paragraph above. I accept his calculations to be more precise. Ms. McNamee's insurance settlement of $262,367.85 included an amount attributed for future loss of income of $186,937.00. The balance of $75,430.85 was for pain and suffering and expenses.

153 Counsel for Ms. McNamee in this matter argued all monies paid to Ms. McNamee from this settlement and remaining in the joint account or GIC's should be excluded as a family asset. If this is the outcome, all of the money would be attributed to Ms. McNamee. He cites the decision of Boisvert, J. in Duguay v. Duguay (2000), 231 N.B.R. (2d) 137 (N.B. Q.B.) to support this position.

154 With respect, Duguay was a case in which the injured wife was unemployed at the time of the accident and so there was no claim for loss of income. Her settlement claim was deposited to a joint account. Justice Boisvert drew a distinction between the settlement cheque for personal injury and a payment for a disability claim. However, Justice Boisvert made a specific determination:

35. (ii.) Analysis must be made of the economic impact of the injuries upon the family unit, and most specifically towards whether any component of the personal injury settlement is for past loss of wages. This is because the vast majority of case law deals with parties that have separated before the payment of any settlement as the result of any injuries suffered by one of the parties. If that settlement contains an element of past loss of wages, then that amount is property that should have been part of the family income and it is thus divisible.

(emphasis added)

155 Justice Boisvert appears to make it clear that there is a difference between monies paid for personal pain and suffering (not a family asset) and monies paid to replace income (a family asset).

156 Counsel also cited Garcia v. Garcia, 2004 BCSC 747 (B.C. S.C.) in which Wilson, J. cited, with approval, the position of the Court in Williams v. Follack (1986), 2 B.C.L.R. (2d) 298 (B.C. S.C.). In Williams, the court concluded:

[17] A personal injury award is not a family asset if it is for pain and suffering and loss of amenities of life because the award in essence is personal. The same can be said for compensation for past wage loss. Furthemore, it cannot be said that the past wage loss or a disability benefit can be categorized as "pensions" pursuant to s. 45(3)(d) of the Act. In order for such benefit to be characterized as family assets, the payments must be periodic and arise from a contributory scheme: Webb v. Webb, Vancouver No. A841804, 28th November 1985 (unreported) [now reported 70 B.C.L.R. 15, 49 R.F.L. (2d) 279]. In any event, the award received by the respondent in this case does not fall into the latter category.

[18] In this case the motor vehicle accident took place before the marriage, although at a time when the parties were cohabiting. However, the award was not made until after the date of separation. The proceeds were never used "for a family purpose". There is no evidence as to a future wage loss.

157 Williams, Garcia, and Duguay suggest amounts paid for past wage loss may not be a family asset if they have not been applied to cover normal day-to-day expenses. The implication is payments to cover a past wage loss will be considered a family asset if any portion of those assets have, in fact, been used for "a family purpose".

158 Amounts received to cover future wage losses are paid to replace the spouse's expected contributions to the family coffers. Future wage loss settlements are inherently different from past wage losses because, generally, it is not possible to predict whether the spouse will avoid drawing upon this pool of funds for future day-to-day expenses.

159 While counsel for Ms. McNamee was seeking to exclude all income derived from the insurance settlement, counsel for Mr. McNamee claimed the entire cheque should be considered a family asset. She submitted the case of Johnston v. Johnston, [2001] N.B.J. No. 251 (N.B. Q.B.) (particularly paragraphs 27-33) to support the proposition a personal injury settlement can fall be marital property even when awarded for pain and suffering only.

160 Johnston was a case in which the husband suffered minor injuries in a motor vehicle accident. He did not miss any significant time from work and received all of his settlement as general damages for pain and suffering. The settlement was deposited into an investment account where it remained collecting interest. The parties agreed the husband had never intended to use these funds for the family.

161 Grasier, J. compares the circumstances in this case with those in Duguay v. Duguay. He distinguishes this case because the monies were received during the relationship with no portion allocated to be family assets or for the benefit of the family:

[33] Upon review I have concluded that the damages do not represent a replacement of income lost either past, present or future, nor payment for any asset of a family nature that was lost or destroyed. There was a separate settlement with respect to the old truck. I have concluded therefore that since the parties had, to that point, lived together as a family since 1982, a period of some fifteen years, and did not in fact separate until almost three years later that it would not be equitable to conclude that because it was a settlement only for pain and suffering that it should not be considered as marital property. There was no evidence to indicate any disability or future problems as a result of the injuries. From the evidence I can only conclude that the injuries were minor, therefore I find that a fair and reasonable determination is to divide it on an unequal basis. I have therefore concluded that the wife shall be entitled to part of the award as a family asset and have determined that $5,000 should be the amount.

162 Justice Grasier made it clear that, if the funds had actually been compensation for pain and suffering, he would have excluded that amount from marital property. If the money had been attributed to loss of past, current or future income, to that extent he would have determined the money to be a marital asset. Finally, because the settlement cheque was for neither pain and suffering nor lost income, he accepted equity should guarantee some amount available for division between the parties.

163 In the case before me funds were ultimately divided between monies for actual pain and suffering and monies for replacement of income. I determine the award for pain and suffering is not marital property. This portion is not divisible on marriage break-up. The victim is the one that endures the physical pain and not the couple. Funds attributed to loss of past wages retained intac-t are not applied to family expenses and are not marital property. Funds intended to compensate for future loss of wages are marital property and must be divided.

164 Ms. McNamee received a cheque for $262,367.85. From that cheque $75,430.85 should be excluded from marital property as monies paid for pain and suffering. That amount together with the interest thereon accumulated since August 29, 2001 is attributed to Ms McNamee without division. The balance of the monies in the joint account derived from the proceeds of the settlement are marital assets and are to be divided.

In Duguay v. Duguay, 2000 CanLII 46965 (NB QB), Boisvert J. made the following observations about whether the insurance proceeds for a personal injury accident were divisible:

[14] Having reviewed the case law and the facts of this case, I conclude that the insurance proceeds are not subject to division. I agree with the arguments of applicant counsel as found in his Brief (paras. 35 to 43):

"35. An analysis of the cases analysing the proprietary nature of awards for damages for personal injury action reveal the following:

(i) There is a distinction between a disability plan and damages for personal injury. A disability plan or annuity provides a monthly income to an injured person which should be taken into consideration if there are issues of support to be determined.

(ii) Analysis must be made of the economic impact of the injuries upon the family unit, and most specifically towards whether any component of the personal injury settlement is for past loss of wages. This is because the vast majority of case law deals with parties that have separated before the payment of any settlement as the result of injuries suffered by one of the parties. If that settlement contains an element of past loss of wages, then that amount is property that should have been part of the family income and is thus divisible. "

"36. In her pleadings, the Applicant is seeking an Order under section 7 of the Marital Property Act for an exclusion of the net proceeds from the personal injury settlement [...]

"37. A section 7 Order is discretionary. In decisions from the Supreme Court, the New Brunswick Court of Appeal, and the Court of Queen's Bench of New Bruns-wick, it is clear that that discretion is fact driven, based on facts presented at Trial.

"38. It is the position of the Applicant that an equal division of the net proceeds from the personal injury settlement would be inequitable giving consideration to paragraphs 7(d) and (f) of the Marital Property Act. The property was acquired only a year and a half before the separation of the parties. Part of the property was converted to marital property in the purchase of the marital home. Both parties benefited from the use of the marital home, and the monthly income to sustain the family unit. "39. It must always be remembered that at the time of the accident, the Applicant was not working, and not contributing to the household expenses. There was no loss of her income from the period of the accident to the period of settlement, as she was in school at that time and would be in school for the balance of those years. Moreover, the Respondent did benefit from some of the money, in terms of the purchase of the marital home. The parties lived to together following the settlement of the claim,

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