In this case, the Nova Scotia Court of Appeal resolved a conflict between the Land Registration Act ("LRA") and the Matrimonial Property Act ("MPA") regarding the division of the matrimonial home between a law firm holding a charge against one divorced party's interest in the home, and that party's ex-spouse who was owed an equalization payment as a result of the divorce. The Court held that the law firm's charge took priority because the judgment creating the charge was entered prior to the judgment creating the equalization payment, and the trial judge could not displace the firm's charge or impair its priority through the exercise of its equitable discretion.
The dispute arose when the respondent's wife initiated divorce proceedings against him. The respondent retained Wickwire Holm, a law firm, to represent him in the proceedings, but later fired the firm. On July 27, 2009, Wickwire Holm had a judgment of $67,405.23 for unpaid legal fees entered against the respondent. On August 5, Wickwire Holm entered the judgment under the Land Registration Act, which gave the firm a charge over Mr. Gill's interest in the matrimonial home, held in joint tenancy with his wife. On October 10, 2010, the trial judge resolved the divorce proceedings, granting the respondent's wife a share of the respondent's joint tenant interest as part of an equalization payment.
Bryson, J.A. rejected the trial judge's determination that the respondent's ex-wife's claim to the respondent's joint tenant interest took priority over the Wickwire Holm judgment. The trial judge reasoned that the ex-wife's claim had priority because she had an equitable claim to the respondent's share, and she put Wickwire Holm on notice that she would be pursuing this claim. Noting that the ex-wife's proprietary interest in the respondent's joint tenant interest arose well after the Wickwire Holm judgment, Bryson, J.A. stated that the trial judge improperly exercised its discretion to rearrange existing property rights. The trial judge exercised equitable jurisdiction, but Bryson, J.A. held it did so improperly because equitable discretion requires that the court recognize a pre-existing property right. In divorce actions under the MPA, no such rights are created until the court makes an order creating the rights. Otherwise, there is a statutory presumption of equal ownership under the MPA.
In light of this determination, Bryson, J.A. held that the issue of whether notice was given to the ex-wife by Wickwire Holm was irrelevant.
Bryson, J.A. pointed out that the decision has the effect of allowing the respondent to grant his lawyer a mortgage over his interest in the matrimonial home indirectly, even though a direct granting of this interest is prohibited under the MPA. However, he reasoned that this prohibition under the MPA does not extend to blocking the statutory remedy granted under the LRA.
In dissent, Fichaud, J.A. characterized the respondent's actions in accruing debt to Wickwire Holm and allowing the law firm to register a charge against his interest in the matrimonial home as the creation of an "encumbrance" on the matrimonial home. Since the MPA, section 10(1)(d), grants the court discretion to set aside any such encumbrance, Fichaud, J.A. reasoned that the trial court was within its jurisdiction to set aside Wickwire Holm's claim in favour of the claim of the ex-wife. He would have dismissed Wickwire Holm's appeal.
November 1, 2011
Link to Decision
Kai Sheffield & Katerina Svozilkova
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