Paul v. Pumple

2013 BCSC 1279 Paul v. Pumple IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Paul v. Pumple, 2013 BCSC 1279 Date: 20130719 Docket: 09-0880 Registry: Victoria Between: Susan Elaine Stacey Paul Claimant And Brian David Pumple Respondent Before: The Honourable Mr. Justice Goepel Reasons for Judgment Counsel for the Claimant: R.N. Stewart, Q.C. The Respondent appearing in person on his own behalf: B.D. Pumple Place and Dates of Trial: Victoria, B.C. February 18-22, 2013 February 25-28, 2013 March 1, 2013 Place and Date of Judgment: Victoria, B.C. July 19, 2013 INTRODUCTION [1] This is a family law proceeding. The parties formed a relationship in 1996. They married on December 10, 1997, and separated on December 27, 2007. On the last day of trial, I pronounced an order for divorce [2] The parties have two children, Isabelle, age 14, and Erika, age 13. Mr. Pumple consents to an order awarding Ms. Paul custody of both children pursuant to the provisions of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.). [3] Following the parties' separation, they entered into a separation agreement dated April 24, 2008 (the "Agreement"). By its terms the Agreement was intended to be a final settlement of the parties' respective rights concerning property owned jointly and/or separately by them and a final settlement of the issues of custody, access, guardianship and support. In this proceeding, Mr. Pumple seeks to set aside the Agreement. The main issue in this litigation is whether the Agreement should be set aside in whole or in part and if it is set aside, the orders that should thereafter follow with respect to the division of property, child support and spousal support. BACKGROUND A. Overview [4] To put the submissions concerning the Agreement into context it is necessary to review in some detail events prior to and consequent to the signing of the Agreement. This will include a review of the parties' personal background, the assets the parties brought into, acquired and disposed of during the relationship, the parties' living arrangements, the parties' business activities, the negotiations leading to the signing of the Agreement, the terms of the Agreement and certain events that have taken place subsequent to the signing of the Agreement. B. Personal Background [5] When the parties commenced their relationship in 1996, Ms. Paul was 33 years and Mr. Pumple was 42. Ms. Paul was a widow. Her first husband was killed in an airplane accident in 1992. Mr. Pumple had no prior marriages. [6] Ms. Paul is now 49 years old. She received a Bachelor of Arts in Arts and Economics in 1986. She subsequently took courses at the Justice Institute in negotiation and dispute resolution and some specialized forestry courses. Between 1987 and 1994 she worked as a consultant in the forest industry in matters concerning aboriginal land claims, land use planning, and resource management. [7] In 1996 she acquired a woodlot license. When her relationship commenced with Mr. Pumple her work was mainly devoted to managing the implementation of the woodlot license. [8] Mr. Pumple is presently 60 years old. He is a high school graduate. In his 30s he spent a year at university and a year at college. He did not graduate. While he does not have a continuous work history, he has worked throughout his adult life at various trades and occupations. He has operated saw mills, operated heavy equipment, worked as a carpenter, boat finisher, renovator, logger and tree planter. He has bought and sold several properties. B. The Assets i. Assets Brought into the Relationship [9] Both parties brought assets into the relationship. It is common ground that before marrying, they had orally agreed that in the event of their subsequent separation, each would withdraw from the relationship with the assets they had at the beginning of it. The parties did not consider what would happen if an asset owned at the beginning of the relationship was sold and the proceeds were used to purchase another asset or the proceeds were contributed to the relationship. [10] Ms. Paul owned the following assets when the parties married: A. 1889 Maple Bay Road, Duncan, B.C. ("Maple Bay"). This was a revenue property. It contained a house with two rental suites yielding an income of approximately $1500 per month. During the marriage the rental income was used for family purposes. The assessed value of the property was $203,200.00. The property was subject to a mortgage of approximately $127,000. B. 4513 Lambourne Drive, Cobble Hill, B.C. ("Lambourne"). Ms. Paul occupied Lambourne as her family residence. The assessed value was $156,300. There was no mortgage on the property. For several years during the marriage Lambourne was the family residence. C. Flett Road, Duncan, B.C. ("Flett Road"). This property comprised of 33 acres of forested property in the Agricultural Land Reserve. The property was purchased for $350,000 in December 1994. The property was dedicated as the private property contribution to the woodlot license. Pursuant to the terms of the woodlot license, the property could not be used for any purpose other than approved logging. The assessed value of the property (as agricultural property) was $20,000. During the marriage Mr. Pumple built a pond on the property. D. Woodlot License #1557 (the "Woodlot License"). The Woodlot License permitted Ms. Paul to harvest timber from Crown land. There were significant obligations associated with the ownership of the Woodlot License. During the marriage both parties were actively involved in harvesting timber from the Woodlot License. E. RRSPs (1) Altimira #764 $6,142.97 (2) Dynamic #144 $9,927.81 Total: $16,070.78 F. Investments (1) Altimira #267 $10,779.92 (2) Dynamic #301 $6,729.63 Total: $17,509.55 G. Vehicle - truck $4,000.00 [11] Mr. Pumple owned the following assets when the parties married: A. 1037 Khenipsen Road, Duncan, B.C. (the "K Road Property"). Mr. Pumple bought the K Road Property on October 15, 1991. The property consists of some 27 acres. There is a small cabin on the property. When the relationship started Mr. Pumple resided in the cabin. The appraised value of the property on October 30, 1997, was $170,000. The property was subject to a mortgage of $64,000. When Mr. Pumple moved into the Lambourne residence the cabin was rented out to third parties. The rental income was used for family purposes. B. 520 Roberts Street, Ladysmith, B.C. ("Roberts Street') This was a revenue property. The rental income was approximately $600 per month. Mr. Pumple purchased the property in 1994 for $79,500. The assessed value in 1997 was $98,600. The property was sold in September 1999 for $80,000. There was a mortgage for $65,000 registered against the property in May 1995. [12] At the time of the marriage, Mr. Pumple had no investments or RRSPs. He had a vehicle of nominal value. Other than the mortgages on the K Road Property and Roberts Street, he had no personal debt. ii. Sale and Purchase of Real Estate Assets During the Marriage [13] During the marriage some real estate assets were sold and one real estate asset, being property at 864 Cherry Point Road ("Cherry Point"), was purchased. [14] Mr. Pumple sold Roberts Street on September 30, 1999. The sale price was $80,000. Mr. Pumple received the net sale proceeds of approximately $15,000. Mr. Pumple retained these funds and used them to pay personal debts. The proceeds of sale were not contributed to the payment of family expenses. [15] Maple Bay was subdivided into two lots, one of which contained the existing house. The subdivision costs were in excess of $50,000. Mr. Pumple participated in various aspects of the subdivision. He estimates the value of his services at $13,000. Ms. Paul suggests that his services were worth less than $5,000. [16] The Maple Bay lot with the house was sold in January of 2005 for $239,409.95. The sale proceeds were disbursed to pay off an existing mortgage of $87,202.63 which had been obtained to pay part of the purchase price of Lambourne. Of the balance of the proceeds of $151,226.61, $122,678.39 were used to pay out the balance of a line of credit against Lambourne. The line of credit had been used to purchase a saw mill and related equipment. The balance of $28,548.22 was advanced to Courtland Resources Ltd. ("Courtland") to pay ongoing business expenses. [17] Lambourne was sold on April 29, 2005, for net sale proceeds of $248,567.10. $202,822.43 of the proceeds were used to assist in the purchase of Cherry Point. $20,400.00 was paid on the line of credit and the balance $25,344.67 was paid directly to Ms. Paul. [18] Cherry Point was purchased in May 2005 as the new family home. The purchase price was $460,000. The property is 13 acres with a home and a barn. The house and barn were in a deteriorated state at the time of purchase and needed significant upgrading. To finance the purchase, a mortgage of $260,000 in the name of Ms. Paul and Mr. Pumple was taken out. The balance of the purchase price came from the proceeds of the sale of Lambourne. Mr. Pumple made no contribution to the purchase price of Cherry Point except for his execution of the mortgage. [19] Cherry Point was registered in the joint name of the parties. Ms. Paul says that this was done at the request of Mr. Pumple and on the understanding that she would acquire a one-half interest in the K Road Property. Mr. Pumple denies making that promise. [20] The second Maple Bay lot was sold in February 2006 for $147,000. $120,000 of the net sale proceeds was used to pay down the mortgage on Cherry Point while the balance was advanced to Courtland as a shareholder's loan. iii. Other Assets Acquired During the Marriage a. Courtland Resources Ltd. [21] The parties incorporated Courtland in August 2001. Mr. Pumple and Ms. Paul each held 50% of Courtland's share. After its incorporation, Courtland became the vehicle through which the parties carried out their business activities. All revenues and expenses went through Courtland. Monies in the Courtland account were regularly transferred to personal accounts and then used to pay family expenses. b. The Hitachi Excavator [22] In September 2001 Courtland entered into an agreement to lease for purchase an Hitachi Excavator (the "Excavator") for $149,709.05 inclusive of tax. The Excavator was used to assist in the operation of the Woodlot License. The Excavator was paid off within 18 months from log sales from the Woodlot License. c. The Sawmill [23] In order to process the lumber on the Woodlot License more efficiently and to increase the revenue generated from it, Ms. Paul proposed the purchase of a sawmill which would be used to mill timber harvested from the Woodlot License. Mr. Pumple had previous experience operating a sawmill. She saw the sawmill as a source of employment for Mr. Pumple and believed it would produce income to assist the family. Ms. Paul perceived that the sawmill would operate under the Courtland umbrella. She and Mr. Pumple would be joint venturers in the sawmill business. [24] After research, various enquiries and advice from third parties, Ms. Paul and Mr. Pumple could not agree on the choice of sawmills. Mr. Pumple insisted on purchasing the FGM sawmill (the "FGM Mill"). Ms. Paul testified that she told Mr. Pumple that she would refuse to continue with the joint venture if he insisted on the FGM Mill. She says she told Mr. Pumple she would lend him the money so he could purchase the FGM Mill on his own account. [25] Mr. Pumple agrees that Ms. Paul did not want to purchase that particular sawmill, but denies that the parties agreed that Mr. Pumple would purchase the sawmill for his own account with money that Ms. Paul would lend him. He says that the FGM Mill was purchased and then operated as a joint venture. [26] The cost to purchase the sawmill and related equipment was approximately $125,000. It is common ground that Ms. Paul borrowed that sum on her line of credit that was secured against Lambourne. Ms. Paul deposited the funds into the Courtland bank account and wrote cheques on the Courtland account to purchase the FGM Mill and related equipment. [27] After the purchase the FGM Mill was carried on the books of Courtland as an asset. The FGM Mill operated under the name Eco Select Timber ("Eco Select"). Most of the timber milled by the FGM Mill came from the Woodlot License. [28] The revenue of Eco Select was reported as revenue of Courtland. Total revenue invoiced by Eco Select between 2005 and 2007 was $28,391.58. All the expenses of the sawmill business were paid by Courtland. There was no internal separation in the books of Courtland between Courtland and Eco Select. [29] Ms. Paul testified that the FGM Mill was operated under Courtland for administrative convenience only. In this regard, she notes that most of the sales by Eco Select were from lumber milled from the Woodlot License. She says there was no necessity to maintain separate accounts because the revenues generated from the FGM Mill were to be received and used by the family. [30] The question of ownership of the FGM Mill is a major issue in the litigation. I will return to the question of the sawmill ownership in discussing the challenge to the Agreement. C. Residences During the Marriage [31] Between December 1997 and May 2005, the parties resided in Ms. Paul's Lambourne home. When Mr. Pumple moved to Lambourne he rented out the K Road Property. Between May 2005 and the date of separation (December 27, 2007), the parties resided at Cherry Point. [32] Since separation, Ms. Paul and the children have lived at Cherry Point while Mr. Pumple has returned to the K Road Property where he resided prior to commencement of the relationship. D. Business Activities During the Marriage i. Blackfish Floating Camp [33] In the fall of 1997, Mr. Pumple proposed establishing a business to provide the float camp service to coastal silvicultural crews. During the summer season the float camp would be used to provide a lodge service to eco-tourism chartering companies. The float camp would provide accommodation and food services to a maximum of 12 persons. [34] The plan was proposed by Mr. Pumple. Ms. Paul encouraged it. In October 1997, the floating camp facility was purchased for $45,000. Subsequent renovations to the facility were then carried out. To acquire the funds to purchase the facility, Mr. Pumple took out a $40,000 second mortgage on the K Road Property. Ms. Paul contributed $25,000 or $30,000. Mr. Pumple testified that this was a joint venture. Ms. Paul does not agree with that characterization. She says that she supported Mr. Pumple's plan and lent him $25,000 to $30,000 to start the business. She says she was to be repaid from revenues. [35] In the result, the business was not successful. In September 2000, the float home was sold for $80,000. The bill of sale indicates that the sellers were both Mr. Pumple and Ms. Paul. The proceeds from the sale allowed each to recoup their financial investment in the project. It is not necessary for the purpose of these reasons to determine whether or not the floating camp was to be operated as a joint venture or solely by Mr. Pumple. ii. The Woodlot License. [36] Harvesting the Woodlot License was the main business venture in which Ms. Paul and Mr. Pumple were engaged throughout their relationship. Extensive preparatory work was necessary before timber could be harvested. This included surveying external boundaries, mapping and flagging potential harvest areas, taking inventory of the property, preparing road layouts and road construction. It is common ground that both Ms. Paul and Mr. Pumple were involved in this work although they disagree in regard to specific contributions. Once the timber was harvested it had to be milled or sold. [37] Mr. Pumple had little interest in financial matters. Ms. Paul looked after the finances with the assistance of an accountant who determined amounts that should be declared as income each year. iii. Income of the parties [38] During the parties' relationship Mr. Pumple was not employed by any third parties. His work efforts were directed to the unsuccessful efforts to develop the Black Fish floating camp as a viable business, the Woodlot License and the FGM Mill. Mr. Pumple testified that he worked some 335 days between 1998 and 2007 on the Woodlot License. This works out to approximately 37 days a year. He also testified that he worked approximately 100 days between 2004 and 2007 operating the FGM Mill. This works out to approximately 28 days a year. In addition Mr. Pumple did some work on the Maple Bay subdivision, did some renovations at Lambourne and constructed ponds at Flett Road and Cherry Point. [39] Ms. Paul, while acknowledging that Mr. Pumple worked on the Woodlot License and the FGM Mill, suggests that his time estimates are exaggerated. She says there were substantial periods of time when Mr. Pumple was not working at all. She says his failure to be employed on a full time basis was a matter of ongoing contention in their relationship. [40] Ms. Paul looked after the family finances. She kept Courtland's books and did almost all the administration work for Courtland and Eco Select. Mr. Pumple had minimal involvement in financial matters. [41] Ms. Paul was also actively involved in the management of the Woodlot License and did some physical work on the Woodlot License. Her work included assisting in surveying the boundaries, doing the inventory, setting cut blocks and planting. [42] Throughout the relationship, Ms. Paul was also the primary caregiver to the children. From 2005 to 2008 she home schooled the children. . [43] The parties' income tax returns indicate that both parties earned limited amounts during the marriage. Their Line 150 incomes during the marriage are as follows: YEAR MS. PAUL MR. PUMPLE 1997 9,326 38,656 1998 12,436 22,701 1999 (8,199) (1,384) 2000 10,626 11,212 2001 1,313 (10,010) 2002 N/A 33,270 2003 34,488 38,104 2004 12,824 10,156 2005 13,294 8,000 2006 11,011 8,000 2007 13,773 0 [44] The evidence suggests that the income tax returns do not accurately reflect the parties' earnings. Ms. Paul testified that Courtland's accountant would determine the amounts the parties should declare each year in income. Some $67,000 was paid into "wage" accounts in the names of their children. Those funds were intended to be used for the children's education (the "Education Fund'). Many of the parties' personal expenses appear to have been paid by Courtland. E. The Separation Agreement [45] Throughout its duration, the parties' relationship was volatile in nature. There were elements of physical and mental abuse. The evidence of abuse, however, was not developed to any extent in the course of the trial, and I am not in a position to make any findings concerning those allegations. [46] The parties first separated in June 2005. There were periods of reconciliation after that separation. There was a significant separation between December 2006 and February 2007. The final separation occurred on December 27, 2007. [47] When the parties separated in December 2006, they began to discuss the terms of a separation agreement. Following their final separation on December 27, 2007, they resumed negotiations that had started at the time of the earlier separation. Neither party was represented by a lawyer. [48] The Agreement was premised on the parties' intention that they would each retain their respective pre-marriage assets and their desire to provide ongoing financial support for their two children. In recognition of his uncertain financial future, Mr. Pumple agreed to establish a $250,000 trust fund (the "Trust Fund") which would be used to finance his ongoing financial obligations to his children. To fund the trust, Mr. Pumple planned to subdivide and then sell some or all of the K Road Property. [49] Mr. Pumple's child support obligations were to be covered by the interest earned on the Trust Fund. When the children ceased being children of the marriage, any balance remaining in the trust would be paid back to Mr. Pumple. [50] Consistent with the understanding that the parties had made at the time of the marriage, the parties agreed that they would each retain the assets that they owned at the start of the marriage. Ms. Paul would retain the Woodlot License, Flett Road, her investments and her car. Mr. Pumple would retain the K Road Property. Taking into account that the proceeds from the sale of Lambourne had been used to pay the down payment on Cherry Point and the proceeds of the sale of the Maple Bay lot had paid down the Cherry Point Road mortgage and that Mr. Pumple had made no financial contribution to the purchase of Cherry Point, the parties agreed that Ms. Paul should retain Cherry Point as her own property. [51] During the negotiations, Mr. Pumple believed he should be compensated for his sweat equity "contributed during their relationship". Particularly in this regard, he wanted compensation for his assistance with the Maple Bay subdivision, the construction of the Flett Road pond, his work on the Woodlot License, and his contributions to improvements at Cherry Point. Ms. Paul in turn took the position that if Mr. Pumple was to receive such compensation she in turn should be compensated for her child care and administrative duties. Ms. Paul says that in the course of negotiations Mr. Pumple ultimately gave up his compensation claim. This is denied by Mr. Pumple. [52] During the negotiations, there were discussions concerning an indebtedness of $125,000. Ms. Paul says the $125,000 concerned the money she says she lent Mr. Pumple so he could purchase the FGM Mill. Mr. Pumple says Ms. Paul told him that the $125,000 represented one-half of Courtland's indebtedness. [53] The Agreement was dated and executed on April 24, 2008. In advance of the Agreement being signed, the parties executed three land transfer documents. On February 13, 2008, Mr. Pumple signed two mortgages in favour of Ms. Paul on the K Road Property, one for $125,000 (the "debt mortgage") and one for $250,000 (the "trust fund mortgage"). On March 14, 2008, Mr. Pumple transferred to Ms. Paul his interest in Cherry Point. The land transfer transfer documents are an integral part of the Agreement. [54] The mortgages were drafted by Ms. Paul and the parties signed the mortgages before a notary public. Mr. Pumple says that he understood the debt mortgage represented 50% of Courtland's indebtedness. There is nothing on the mortgage agreement itself which references the basis of the $125,000 principal. [55] In regard to the trust fund mortgage, as prepared by Ms. Paul, it contained the following words: This mortgage will be paid immediately upon the sale of the above property and/or sale of any subdivided lots that are created from the main property. The intent is to provide the resources to create a trust account that will provide for child support payments for Pauline Isabelle Pumple and Erika Elise Pumple. [56] Mr. Pumple says that he did not know he was signing mortgages that would be registered against title to the K Road Property. Ms. Paul says the notary public, Mr. English, who took the parties' signatures, explained the mortgages in detail. [57] Under Mr. English's signature are found the stamped words "Attested only, without prejudice as to form and substance. No advice or opinion rendered." Mr. English, unfortunately, died prior to the trial. [58] Mr. Pumple says he did not read the Agreement. Ms. Paul says that the parties worked together on drafting the Agreement and that Mr. Pumple was fully aware of all of its terms. [59] By its terms, the Agreement was intended to be a final settlement of the parties' property rights and of the issues of custody, access, guardianship and support. In regard to custody, access and guardianship, the parties agreed that Ms. Paul would have sole custody of the children while Mr. Pumple would have reasonable access on weekday evenings and on one weekend day. The parties were to be joint guardians. Mr. Pumple agreed to pay child support in the approximate sum of $800 per month. As set out in clause 9 of the Agreement, the parties estimated that the trust fund would generate that amount in interest. Clause 9 reads: Once the lot sells on Khenipsen Road a trust or joint account will be created and $250,000 will be invested in a secure guaranteed investment that will provide approximately $800 per month in child support payments. The husband/wife have agreed that this method of child support payment is preferable given the husband plans to retire and regular employment will likely be sporadic. However, if the husband becomes employed or his financial situation improves for any reason then the husband will increase support payments based on the federal/provincial child support tables. [60] The parties agreed that there were no present special expenses but to the extent the same occurred, they would discuss and make agreement as to the amount and duration. [61] In regard to assets and liabilities, it was agreed that the husband would retain certain personal items, the FGM Mill and the K Road Property less the value of the debt mortgage and the trust fund mortgage. Ms. Paul was to retain certain personal items, her vehicle, her RRSPs, Cherry Point, the Woodlot License and Flett Road. The Agreement noted that the matrimonial home had been sold and the proceeds divided. Ms. Paul testified that that clause was inserted as recognition that Mr. Pumple had already transferred to Ms. Paul his interest in Cherry Point. [62] The Agreement made specific reference to Courtland and indicated that the parties had not determined how the assets and liabilities of Courtland would be divided. The main asset was the Excavator. Courtland's expenses included various expenses dealing with the Woodlot License and some $47,500 owed to Ms. Paul. [63] In the Agreement, Ms. Paul did not seek spousal support. F. Post-Separation History [64] Ms. Paul was in a motor vehicle accident on May 6, 2010. A medical legal report suggests that as a result of the accident she suffered a closed head injury which has caused cognitive defects. The medical report also suggests that she suffers from post-traumatic stress disorder due to episodes of domestic violence during her relationship with Mr. Pumple. I note that Ms. Paul has commenced an action for damages arising out of the motor vehicle accident and an action against Mr. Pumple for damages for assault. [65] At this time, due to her continuing disabilities, Ms. Paul is not able to work outside the home. She receives a disability pension of $12,188.00 a year. She also has a small survivor's pension of $2,531.00 per annum arising from the death of her first husband. She is in significant debt and has increased her line of credit borrowings to approximately $90,000. She also has credit card debt in excess of $28,000 and has borrowed almost $30,000 from family and friends. In addition, she has borrowed some $67,000 from the Education Fund. [66] Following the separation, Mr. Pumple milled some timber for Ms. Paul. The parties are not in agreement whether he was paid for that work. [67] The Excavator has remained at Cherry Point in the custody of Ms. Paul. Mr. Pumple requested use of the Excavator to assist in preparing the K Road subdivision. Ms. Paul refused. She was concerned that Mr. Pumple might damage the machine and noted that Mr. Pumple did not have liability or equipment insurance. [68] Subsequent to the signing of the Agreement, Mr. Pumple, with Ms. Paul's assistance, took some steps to subdivide the K Road Property. While he had initially hoped to subdivide the K Road Property into four lots, Mr. Pumple subsequently was advised that because of its topography it was only going to be possible to subdivide the K Road Property into two lots. Mr. Pumple estimates that the cost to complete the subdivision will be between $80,000 and $100,000. [69] The K Road Property is presently assessed at $535,000. It is, however, charged with the debt and trust fund mortgages that were signed in February 2008 totalling $375,000. Mr. Pumple testified that because of the mortgages he has been unable to borrow the funds he requires to carry out the subdivision. [70] Mr. Pumple has been employed periodically since separation. He has earned a modest income. He suffered a significant shoulder injury in 2010 which will likely limit his future employment prospects in his area of experience. While Mr. Pumple suggested at trial that he is capable of earning somewhere between $30,000 and $40,000 per year, his earning history suggests otherwise. Mr. Pumple's income during 2009 - 2012 is as follows: 2009 0 2010 $20,411 2011 $39,183 2012 $22,655 [71] Mr. Pumple left his employment in January 2013 and at the time of trial was unemployed. His average annual earnings for the years 2010, 2011 and 2012 is $27,416. Pursuant to the provisions of the Federal Child Support Guidelines, S.O.R./97-175 (the "Guidelines") an income of that amount would lead to monthly child support obligations of $430. [72] In the months following separation, Mr. Pumple paid no child support. He commenced making child support payments in varying amounts in February 2008. As of the start of trial he had paid $17,530 in child support. Based on the $800 amount set out in the Agreement, child support arrears as of February 1, 2013, total $32,070. If child support payments were based on Mr. Pumple's three year average income, his obligations under the Guidelines would have been $26,660, leaving arrears of $9,130. [73] Ms. Paul home schooled the children from 2005 to 2008. In September 2008 to June 2009, the children attended Cobble Hill Elementary School. In September 2009, both children were enrolled in private school. Isabelle went to Queen Margaret's while Erika attended Evergreen. In 2009, Ms. Paul paid Isabelle's tuition of $7,499 at Queen Margaret. Mr. Pumple paid Erika's tuition of $3,850 at Evergreen. [74] Erika continued at Evergreen for three years. The second two years of her enrollment Ms. Paul paid her fees. Erika then joined her sister at Queen Margaret's. [75] Other than Isabelle's tuition in Grade 6, Ms. Paul's parents have paid both girls' tuition at Queen Margaret's and have agreed to continue to do so until they graduate. The parents have made it clear, however, that they will not be responsible for any of the post-secondary education of either girl. Ms. Paul acknowledges that the girls' post-secondary education is to be paid from the Education Fund. [76] There is limited evidence concerning the children's special expenses. In the Agreement, the parties recognize that special expenses may occur and made specific reference to health care, orthodontics and private education. Isabelle has required orthodontic treatment at a cost of $6,250. There is also a reference in Ms. Paul's financial statements that Ms. Paul has been paying for various matters including piano and singing lessons, swimming lessons, school camps, skiing lessons and first aid/leadership for Isabelle and Erika at a cost of $358 per month. In this proceeding, Ms. Paul seeks reimbursement for those expenditures. [77] In June of 2009, Mr. Pumple sold the FGM Mill for $41,000. He did not account to Ms. Paul for the proceeds. POSITION OF THE PARTIES [78] In his opening statement, Mr. Pumple indicated that he was seeking to set aside the Agreement, the two mortgages on the K Road Property and the transfer agreement in regard to Cherry Point. He advised that he was seeking compensation for the work he had done on the Woodlot License and other properties throughout the relationship which he claimed had unjustly enriched Ms. Paul. He sought an order that he be entitled to use the Excavator to assist in doing the necessary work to complete the subdivision on the K Road Property. He indicated that Ms. Paul had had use of the Excavator since separation. [79] In his closing submission, Mr. Pumple's position had somewhat modified. In regard to the Agreement and the mortgages, his main complaint was with regard to the debt mortgage. Mr. Pumple says that Ms. Paul had represented to him that the $125,000 represented one-half of Courtland's indebtedness. He says there was no loan between himself and Ms. Paul. He did acknowledge in his closing submissions that Ms. Paul is entitled to be reimbursed for one-half of her contribution towards the purchase of the FGM Mill and is further entitled to one-half the proceeds of the disposition of the mill. [80] Mr. Pumple acknowledges that he agreed to create a $250,000 fund for his children's support and education. He says he remains prepared to do so. He says, however, that it was never the intent that Ms. Paul would have exclusive control of the Trust Fund. He asks that the Trust Fund mortgage be removed against the K Road Property. He says unless that occurs he will be unable to obtain the necessary financing to subdivide the K Road Property, and without the subdivision he is unable to provide the necessary monies for the Trust Fund. He agrees that upon sale of the K Road property $250,000 should be put in trust for the benefit of the children. He says payments from the Trust Fund should be by agreement of himself and Ms. Paul. [81] Mr. Pumple now says he makes no claims against the Woodlot License, Flett Road or Cherry Point. He continues to claim, however, that he should be compensated for work he did on those properties. He continues to seek an order that the Excavator be transferred to his use for the next four years. [82] Ms. Paul submits that the Agreement operates fairly and should be upheld in its entirety. She submits that Mr. Pumple fully understood the terms of the Agreement. She submits that child support should be set at $800 as per the Agreement and Mr. Pumple should be ordered to pay all existing arrears. She also seeks reimbursement for special expenses she has paid on behalf of the children. [83] In support of her submissions that the Agreement operated fairly, Ms. Paul, in her closing submissions, presented calculations that set out the value of the parties' assets at the time of marriage, time of separation and time of trial. Those calculations show that at the date of marriage Ms. Paul had assets valued at $291,924 while Mr. Pumple's assets were valued at $139,600. This represented an approximate split of 67/33 in Ms. Paul's favour. [84] At the time of the Agreement the parties' assets were worth $1,035,144. Under the Agreement, Ms. Paul received assets valued at $680,144 while Mr. Pumple received assets valued at $355,000. This represented an approximate split of 65/35 in Ms. Paul's favour. [85] As of the date of trial, the assets were valued at $1,041,485. Ms. Paul's assets were valued at $621,285, while Mr. Pumple's assets were valued at $420,200. This represents an approximate split of 60/40 in favour of Ms. Paul. The reason for the change of values since the signing of the Agreement is that the K Road Property has increased in value while the Cherry Point property has decreased. I would note that in the calculations no value was assigned to the Woodlot License. DISCUSSION A. Findings of Fact [86] Before giving consideration to issues that have arisen in this proceeding, it is first necessary to make certain findings of fact in relation to evidence which is in dispute. The major dispute revolves around the purchase of the FGM Mill. Mr. Pumple says the parties agreed to operate the FGM Mill as a joint venture. Ms. Paul says that although that was the original intention, once Mr. Pumple insisted on purchasing the FGM Mill her role became that of lender and that the FGM Mill was to be operated by Mr. Pumple for his own account. [87] I do not accept Ms. Paul's evidence. While Ms. Paul did provide the funds necessary to purchase the FGM Mill, the evidence does not support her contention that she lent money to Mr. Pumple to purchase the FGM Mill and that Mr. Pumple then operated the FGM Mill for his own account. [88] Ms. Paul controlled the family finances. She borrowed $125,000 against her line of credit to obtain the funds that were used to purchase the FGM Mill and related equipment. She did not, however, pay that money directly to Mr. Pumple, which is what one would expect if in fact she was advancing him that money as a personal loan. Rather, the money was advanced to Courtland as a shareholder's loan. Ms. Paul then wrote the necessary cheques to purchase the equipment on the Courtland account. [89] The FGM Mill and equipment was all carried on Courtland's books. Courtland depreciated the asset from time to time for tax purposes. All revenue and expenses went through Courtland. The income from the FGM Mill's operation was not assigned to Mr. Pumple. [90] I do not accept Ms. Paul's evidence that Courtland was used for the purposes of administrative convenience. I find that the FGM Mill was purchased by Courtland and was operated for the mutual benefit of Ms. Paul and Mr. Pumple. They were entitled to share in both the rewards and losses arising from the sawmill operation. [91] I accept Mr. Pumple's evidence that when he signed the debt mortgage he understood that the $125,000 represented his share of Courtland's losses. It was Ms. Paul who knew and understood the Courtland books and he relied on Ms. Paul's advice to him concerning Courtland's debt position. [92] I do not accept Mr. Pumple's evidence that he was unaware that the debt mortgage and the trust fund mortgage would be secured against the K Road Property. He was familiar with mortgages and I find that he knew the legal consequences of signing those documents. [93] Considerable evidence was led concerning the work that Mr. Pumple did on the various properties. While the parties agree that Mr. Pumple did some work, their evidence differs as to the amount of work done and the value of that work. More importantly, they do not agree whether Mr. Pumple waived his claim for compensation for his "sweat equity" before signing the Agreement. [94] On this question, I prefer the evidence of Ms. Paul. I find that Mr. Pumple was well aware when he signed the Agreement that he would not be entitled to further compensation for work he may have done on any of the subject properties. Such work was his contribution to the greater family good. Ms. Paul was making similar contributions including her work on managing the Woodlot License, assisting in the preliminary work on the subdivision of the K Road Property and home schooling the parties' children. [95] The parties worked together for the common good and each made significant but different contributions to the benefit of the other. As noted in Aleksich v. Konradson (1995), 5 B.C.L.R. (3d) 240 (C.A.) at para. 33 "the valuation of the non-monetary contributions of parties in circumstances such as these cannot be accomplished with mathematical precision". [96] I find that each party contributed in their own way to benefit the family. While I accept that in their negotiations Mr. Pumple asserted a claim for compensation, he ultimately waived that claim. Paragraph 15 of the Agreement reads: This agreement adequately and completely provides for the present and future needs of the Husband and the Wife, and each covenants and agrees that the arrangement herein described constitutes a full, complete, and final settlement of all rights, causes, claims and demands with respect to support and property. [97] Given this conclusion, I need not consider or determine the actual value of Mr. Pumple's services. DISCUSSION A. Marriage Agreements [98] Pursuant to s. 56 of the Family Relations Act, R.S.B.C. 1996, c. 128 (the "FRA"), each spouse is entitled, subject to the terms of a marriage agreement, to an undivided one-half interest in all family assets. In this case, it is common ground that the K Road Property, Cherry Point, Flett Road, the Woodlot License, and Courtland are family assets. [99] Section 61 of the FRA allows the parties to enter into a marriage agreement to divide their assets as they see fit. By definition, a marriage agreement includes an agreement in writing for the division of family assets on the dissolution of a marriage. A marriage agreement is binding upon the parties subject to the right of the court pursuant to s. 65 of the FRA, to modify the marriage agreement in certain specified circumstances. The Agreement is a marriage agreement. [100] The Supreme Court of Canada in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303 [Miglin], Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550 [Hartshorne] and Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295 [Rick] has provided guidance as to how marriage agreements should be considered when they come before the court. [101] The three cases emphasize the importance of respecting the parties' rights to decide for themselves what constitutes for them in the circumstances of their marriage mutually equitable sharing. The parties should be generally free to decide for themselves what bargain they are prepared to make: Miglin at para. 73; Rick at para. 45; Hartshorne at para. 36. [102] In examining a marriage agreement, the court should first look to the circumstances of negotiation and execution to determine whether there is a reason to discount the agreement: Miglin at para. 4. If the court is satisfied regarding the conditions under which the agreement was negotiated, it must next determine the extent to which the agreement takes into account the factors and objectives of the FRA and whether the agreement reflects an equitable sharing of the economic consequences of the marriage and its breakdown: Miglin at para. 84. [103] Judicial deference to a marriage agreement is premised upon the integrity of the bargaining process. In Rick, the court said at paras. 46-48: 46 This contractual autonomy, however, depends on the integrity of the bargaining process. Decisions about what constitutes an acceptable bargain can only authoritatively be made if both parties come to the negotiating table with the information needed to consider what concessions to accept or offer. Informational asymmetry compromises a spouse's ability to do so (Leskun v. Leskun, 2006 SCC 25, [2006] 1 S.C.R. 920, at para. 34; Marcia Neave, "Resolving the Dilemma of Difference: A Critique of 'The Role of Private Ordering in Family Law'" (1994), 44 U.T.L.J. 97, at p. 117; Penelope E. Bryan, "Women's Freedom to Contract at Divorce: A Mask for Contextual Coercion" (1999), 47 Buff. L. Rev. 1153, at p. 1177). 47 In my view, it flows from the observations and principles set out in Miglin that a duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the result of negotiations undertaken in these uniquely vulnerable circumstances. The deliberate failure to make such disclosure may render the agreement vulnerable to judicial intervention where the result is a negotiated settlement that is substantially at variance from the objectives of the governing legislation. 48 Such a duty in matrimonial negotiations anchors the ability of separating spouses to genuinely decide for themselves what constitutes an acceptable bargain. It also helps protect the possibility of finality in agreements. An agreement based on full and honest disclosure is an agreement that, prima facie, is based on the informed consent of both parties. It is, as a result, an agreement that courts are more likely to respect. Where, on the other hand, an agreement is based on misinformation, it cannot be said to be a true bargain which is entitled to judicial deference. [104] In the circumstances of this case, the lack of proper disclosure concerning the debt mortgage renders the Agreement subject to judicial intervention. Ms. Paul looked after the parties' finances. Mr. Pumple was dependent upon her for financial advice. Mr. Pumple was misled concerning the basis of the debt mortgage. He was led to believe by Ms. Paul that the $125,000 represented one-half of Courtland's outstanding indebtedness, and on that basis he agreed to sign the debt mortgage. I find that the Agreement must be varied as set out below to properly reflect an equitable sharing of the economic consequences of the marriage and its breakdown. B. The Debt Mortgage [105] Mr. Pumple signed the debt mortgage because Ms. Paul led him to believe it represented his share of Courtland's indebtedness. It did not. [106] Ms. Paul suggested in argument that if I found that the FGM Mill was in fact operated as a joint venture then Mr. Pumple should reimburse her $83,000, representing one-half of the purchase price of the FGM Mill together with one-half of the sale proceeds which he received. She said the debt mortgage should remain in force with the principal sum reduced to $83,000. Mr. Pumple basically agreed with this submission. He acknowledged that if the FGM Mill was a joint venture he was obligated to reimburse Ms. Paul. [107] I find that the FGM Mill operated as a joint venture. Mr. Pumple must reimburse Ms. Paul for one-half of the purchase price of the FGM Mill together with one-half of the sale proceeds which he received. The debt mortgage should be rectified. The principle indebtedness should be reduced to $83,000. B. The Trust Fund Mortgage [108] With regard to the Trust Fund, Mr. Pumple has at all times been prepared to establish the trust in favour of his children. I note that this was not something he was obliged at law to do. While Mr. Pumple was and remains prepared to establish the Trust Fund, the trust fund mortgage has had the unintended consequence of making establishment of the Trust Fund impossible. Because of the mortgage, Mr. Pumple cannot obtain the financing necessary to subdivide the K Road Property. [109] The trust fund mortgage was the vehicle that the parties used to secure the funding of the Trust Fund. It is not, however, an essential term of the trust. [110] In order to secure the funds necessary to establish the Trust Fund, the trust fund mortgage must be set aside and I so order. In its place, I direct that upon sale of the K Road Property or a portion thereof, $250,000 will be put in an interest bearing account to be held for the benefit of the children until the children are no longer children of the marriage. Any interest earned on the account will be credited to child support payments. The principal of the Trust Fund is to be used to pay any shortfalls in child support, special expenses and other needs of the children. When the children cease being children of the marriage, any balance remaining in the Trust Fund will be paid to Mr. Pumple. [111] The trust account will be in the name of both Mr. Pumple and Ms. Paul. Expenditures from the account will require their joint agreement. If they cannot agree, the parties should appoint an independent third person to make the decision. If they cannot agree on a third person, they can apply to the court and the court will appoint the third person. [112] I appreciate that Mr. Pumple requires financing to subdivide the K Road Property. He will be authorized to place a mortgage on the K Road Property to a maximum of $100,000. That mortgage will take priority over the debt mortgage. [113] Mr. Pumple must take steps forthwith to proceed with the subdivision. If, within 18 months of the date of these reasons, the debt mortgage has not been paid and the Trust Fund established, Ms. Paul will be at liberty to apply for a sale of the K Road Property in its then existing state. C. Child Support [114] The Agreement contemplated that Mr. Pumple would pay approximately $800 per month in child support. That sum is the amount that a person earning $53,000 a year would pay under the Guidelines. The exact amount of child support payments was to be dependent on the interest actually earned on the Trust Fund. Mr. Pumple would only be obligated to make payments in addition to the earned interest, if his earnings under the Guidelines would lead to payments in excess of the interest earned. [115] The Trust Fund has of course not yet been established because Mr. Pumple has not been able to subdivide the K Road Property. I find that Mr. Pumple's obligation to pay child support in excess of his Guideline income is dependent upon the establishment of the Trust Fund. Until the Trust Fund is established Mr. Pumple should pay child support based on his actual income. As per the calculations set out at paras. 71-72, I find Mr. Pumple's income for Guideline purposes to be $27,146. Until the Trust Fund is established, I order Mr. Pumple to pay monthly child support of $430. Arrears of child support as of February 1, 2013, are $9,130. The arrears should be paid from Mr. Pumple's share of the sale of the K Road Property. [116] Once the Trust Fund is established, it will become the source of Mr. Pumple's child support payments. Child support shall be the greater of the monthly interest earned on the Trust Fund or $430. If, in the future Mr. Pumple earnings increase such that his obligations under the Guidelines would be greater than the interest earned on the Trust Fund, his monthly child support obligations will be increased to take into account his higher level of income. D. Special Expenses [117] In the Agreement, the parties recognized that special expenses may occur. They specifically named health care, orthodontics and private education. In regard to past special expenses, I find that Isabelle's Grade 6 tuition at Queen Margaret's of $7,499 and her orthodontic fees of $6,250 are special expenses and should be shared by the parties. Similarly, the parties should share in the cost of Erika's tuition at Evergreen. Based on the amounts that each party paid, Mr. Pumple would, in relation to Evergreen, owe Ms. Paul the sum of $1,925. [118] There was limited evidence led concerning the balance of the children's special expenses. While I agree that the various camps and lessons in which the children are and have been involved in are undoubtedly beneficial, that is not the test for special expenses. Special expenses must in part reflect the parties' income. At this point in time that income is limited. [119] It is also difficult in the circumstances of this case to determine a proper formula for dividing special expenses. As previously noted, both parties have limited income. If Ms. Paul succeeds in her outstanding litigation, her financial picture may change dramatically. In the interim, however, I am going to direct that the parties share special expenses equally. [120] Mr. Pumple should reimburse Ms. Paul for one-half of the orthodontic and Grade 6 Queen Margaret's School fees. He will also reimburse her one-half of one year's tuition at Evergreen. I further order Mr. Pumple to pay $100 per month in special expenses towards the activities that the children have been enrolled in over the last four years. That sum works out to $1,200 a year and for the four years post-separation totals $4,800. I find the arrears of special expenses are therefore: Orthodontic fees $3,125.00 Queen Margaret's School fees $3,749.50 Evergreen School fees $1,925.00 Activities $4,800.00 TOTAL: $13,599.50 [121] The arrears total $13,599.50. That sum will be paid from the capital of the Trust Fund when it is set up. [122] Until the trust fund is set up, Mr. Pumple will pay $100 a month in special expenses in addition to his monthly child support payments. Once the Trust Fund is established, Mr. Pumple's future share of special expenses will be paid from the capital of the Trust Fund. As previously noted, the first $67,000 of the children's post-secondary education expenses are to be paid from the Education Fund that Ms. Paul is to reimburse. The Trust Fund will not be responsible for any such costs until the Education Fund is exhausted. [123] Nothing in these reasons should be taken as foreclosing the possibility of additional special expenses in the future if same become necessary. E. The Excavator [124] Mr. Pumple seeks the right to use the Excavator for the next four years. His rationale is Ms. Paul has had control of the Excavator for the last four years and fairness dictates that he should now have equal opportunity to use the Excavator. [125] The difficulty with this submission is the Excavator is not the property of Ms. Paul. It is the property of Courtland. While Courtland has been dissolved, it has outstanding debts for logging taxes ($9,734.69 plus interest), GST ($6,977.54) and amounts due under the Woodlot License to restore logged areas ($17,500). Those debts must be paid in order if Ms. Paul is to continue to operate the Woodlot License. [126] Ms. Paul submits that the court should order the sale of the Excavator and that the proceeds in the first instance should go to pay the above debts. Any remaining balance should be divided equally. [127] I find that to be the appropriate result. The Excavator is not the property of either party. It is an asset of Courtland and in the first instance it should be sold to pay Courtland's outstanding indebtedness. I so order. F. Spousal Support [128] Ms. Paul did not claim spousal support in her initial proceedings. She did not claim spousal support under the Agreement. In submissions, she advised that if the Agreement was upheld she would not be seeking spousal support. While I have made some modifications to the Agreement, they do not significantly impact on Ms. Paul's financial situation. In these circumstances, I am not prepared to make any award for spousal support. COSTS [129] My tentative view is that there has been mixed success in this proceeding and each side should pay their own costs. The hearing fees should be split between them. If either party seeks a different costs award, they should make written submissions within 30 days of the date of these reasons. Any response submissions should be filed within 15 days thereafter. "R.B.T. Goepel J." _____________________________________ The Honourable Mr. Justice R.B.T. Goepel