[1]               The Appellant Karafiat was an employee of a company run by the Respondents. His employment was terminated and he was owed money for wages and severance.

[2]               In June 2001, Franklin Webb entered into an agreement with the Appellant to secure the indebtedness. He signed a Promissory Note in the Appellant’s favour and agreed that the Appellant could file a caveat against the matrimonial home of the Respondents. There is no dispute that the female Respondent was not informed of the arrangement and did not sign off on her dower rights.

[3]               In October of the same year, title to the matrimonial home, which had been in the male Respondent’s sole name, was transferred to the Respondents as joint tenants. About a month earlier, the Respondents had asked the Appellant to postpone his interest on the title so as to facilitate the registration of a mortgage in favour of the Alberta Treasury Branches from whom financing was sought. The Appellant agreed. The consideration for the postponement was payment to the Appellant of $2,997.76 and an agreement to pay the balance of the indebtedness pursuant to a repayment schedule which the Respondents furnished to the Appellant.

[4]               Two years later, the Respondents filed for bankruptcy. Their sworn statements acknowledged  the secured claim of the Appellant. A year later (2004) ATB foreclosed. The surplus of $57,808.97 was paid to the trustee in bankruptcy. The dispute is with respect to those monies.

[5]               The Respondents maintain that the female Respondent’s dower rights survive all of the foregoing events and that because she at no time consented to the arrangement entered into by her husband, and at no time expressly acknowledged the requirements set out in the Dower Act, the Appellant is not entitled to his claim as a secured creditor in the Respondents’ respective bankruptcies.

[6]               In November 2010, Shelley J. heard a trial of an issue. In February 2011, she concluded that the Appellant’s interest was not valid and that his caveat be discharged from title.

[7]               The Appellant argues estoppel premised on the conduct of the female Respondent. That argument, in my opinion, is without merit. The case law makes clear that estoppel will rarely, if ever, apply relative to dower rights. An historical review of estoppel relative to dower rights is set out in the judgment of Shannon J. in Martens v. Burden (1974), 1974 CanLII 222 (AB KB), 45 D.L.R. (3d) 123 (citing Overland v. Himelford (1920), 1920 CanLII 493 (AB CA), 15 Alta. L.R. 332, 2 W.W.R. 481, 52 D.L.R. 429 (C.A.); Reddick v. Pearson, 1948 CanLII 459 (AB KB), [1948] 2 W.W.R. 1144; Parslow v. Moore, 1930 CanLII 468 (AB KB), [1930] 2 W.W.R. 340, 4 D.L.R. 750; Pinsky v. Wass, 1953 CanLII 71 (SCC), [1953] 1 S.C.R. 399, 2 D.L.R. 545; Meduk v. Soja, 1958 CanLII 34 (SCC), [1958] S.C.R. 167, 12 D.L.R. (2d) 289; British American Oil Co. v. Kos, 1963 CanLII 107 (SCC), [1964] S.C.R. 167, 46 W.W.R. 141, 42 D.L.R. (2d) 426; Maritime Electric Co. v. General Dairies Ltd., 1937 CanLII 293 (UK JCPC), [1937] A.C. 610, [1937] 1 W.W.R. 591, 1 All E.R. 748, 1 D.L.R. 609, reversing 1935 CanLII 27 (SCC), [1935] S.C.R. 519, 4 D.L.R. 196 and Rose v. Dever, 1971 CanLII 961 (MB CA), [1972] 2 W.W.R. 431, 7 R.F.L. 118, 26 D.L.R. (3d) 462). Shannon J. explained at pp. 135-136:

[8]               The Appellant contends that both Respondents acknowledged the existence of the Appellant’s interest when the Appellant postponed his interest in the lands. The argument is that the purpose of the Act is the protection of the non-owning spouse from the disposition of the homestead without knowledge or permission. The Appellant maintains that both knowledge and permission are made out on the facts of this case.

[9]               The reasons for judgment in the Court below make clear that it is not de rigeur that the failure to execute a dower release inevitably extinguishes the interest of a third party who claims a valid disposition of the matrimonial property. Rather, the question is whether or not the evidentiary foundation provides support for the assertion that the spouse whose dower interest is engaged has released that interest in full appreciation of the import of the Act relied upon by the claimant.

[10]           It follows that the relevant inquiry in this case is whether the act of seeking and obtaining a postponement of interest from the Appellant satisfies the evidentiary and legal tests.

[11]           Insofar as the evidentiary foundation is concerned, the statement of affairs of Carmen Rose Webb lists the Appellant as an unsecured creditor for $16,234 and as a secured creditor for $23,766 (see p. A53 of the Extracts of Key Evidence of the Appellant). In my view, that evidence is irrelevant. The assertions by the Respondent in their bankruptcy statement are a result of the legislative requirement that they make full disclosure. Albeit under oath, the statements do not go to validity which is, of course, a question of law and is not properly the subject of a sworn deposition.

[12]           The request for the postponement is dated September 12, 2001 on the letterhead of Randall C. Heil Professional Corporation (at p. A123 of the Appellant’s Extracts of Key Evidence) who, at the material time, was acting for both Mr. and Mrs. Webb. It reads, in part:

[13]           Section 2 of the Dower Act, RSA 2000, c. D-15 prohibits disposition of the homestead of a married person without the consent in writing of the spouse:

[14]           The requirement of consent is set out in s. 4 of the Dower Act. Sections 4(1), (2) and (5) are engaged in the instant appeal. They read as follows:

[15]           Also applicable to a resolution of the competing arguments are ss. 3(2)(a), 11(1) and 25(2) of the Dower Act. They provide:

[16]           It is trite law in Alberta that the spouse who is said to have consented to a disposition must have had both an awareness of his or her dower rights at the time and intended to give them up.

[17]           In Senstad v. Makus, 1977 CanLII 201 (SCC), [1978] 2 S.C.R. 44, the Court differentiated between consent and acknowledgement. The Dower Act does not provide that a written consent is no consent unless acknowledged under s. 6. The Court made clear that there is an obligation on the spouse of a married person who executes a consent to acknowledge that consent, but the absence of an acknowledgement does not, of itself, detract from the prima facie validity of that consent. That said, the Court made clear that if there is not a s. 6 acknowledgement, the validity of the spouse’s consent may be challenged. The Court stated at p. 60:

[18]           In the case at bar, there is no evidence in the record establishing that Ms. Webb took an active role in either securing the ATB financing or engaging in the postponement of the Appellant’s alleged interests. There is no evidence that Ms. Webb turned her mind to her dower rights, nor that she consented to their release in connection with the transaction with the Appellant. The transfer of the title into joint tenancy, the postponement of the Appellant’s caveat, the foreclosure proceedings, and the documentation relative to the bankruptcies, do not assist the Appellant.

[19]           In reliance upon s. 3(2)(a) of the Dower Act, the Appellant argues that once the transfer of title to joint tenancy occurred, the pre-existing dower interest was thereby fully extinguished because, pursuant to the enactment, the land ceased to be the homestead of Ms. Webb. I disagree. That the transfer referred to in s. 3(2)(a) of the Dower Act must be to a third party and not to the married person’s spouse (either solely or jointly with the married person) is made clear by the wording of s. 11. It would make absolutely no sense whatsoever to afford to the spouse the right to claim damages when the title to the property has been transferred into either the spouse’s name solely or jointly with the married person.

[20]           It is clear that had the Appellant attempted to foreclose on his mortgage prior to the time that the title to the property was registered in the names of Mr. and Mrs. Webb jointly, he would have failed: Kos, supra. It is therefore anomalous to say the least that Mrs. Webb’s ability to successfully resist foreclosure, or any other form of enforcement on the part of the Appellant, should be diminished by virtue of the fact that she subsequently obtained a superior interest in the title to the lands in question. This further underscores and supports the chambers judge’s interpretation that s. 3(2)(a) of the Dower Act only applies to a transfer to a third party and not a transfer  by Mr. Webb into the names of himself and Mrs. Webb jointly.

[21]            The invalidity of the Appellant’s claim when first asserted and registered as a caveat is not in dispute. In my opinion, that invalidity persists throughout the subsequent chain of events. The failure to properly correct the initial omission to address dower rights is not cured by either the transfer to joint tenancy or the mortgage disposition. In my view, Mrs. Webb’s dower right did not cease when title was transferred to herself and Mr. Webb jointly. Rather, the doctrine of merger would have the effect of extinguishing her dower rights with respect to her undivided one half interest in the title but her dower rights would continue to exist in what is now Mr. Webb’s undivided one half interest. The postponement is also of no assistance to the Appellant mindful that there is absolutely no evidence in the record to demonstrate that anyone, least of all Ms. Webb, turned their mind to the question of dower rights. In so holding, I must not be taken to have said that the transfer to joint tenancy did not result in a diminution of the dower interest of Ms. Webb given that the property was now jointly held by the spouses. Nonetheless, Ms. Webb enjoyed a dower interest prior in time and continued to have such an interest following the title transfer. Section 25(2) of the Dower Act makes that clear.

[22]           Bank of Montreal v. Pawluk (1994), 1994 CanLII 9002 (AB KB), 158 A.R. 97 lends support to the proposition that dower rights continue to exist in a joint tenancy of spouses. The Court held at para. 52:

[23]           The appeal must be dismissed.

[24]           The issue on this appeal is whether the appellant’s secured interest in land is defeated by operation of the Dower Act, RSA 2000, c. D-15.

[25]           The respondent Franklin Webb acknowledged an indebtedness to the appellant through a promissory note for $47,500 plus interest dated June 12, 2001. The promissory note included a provision:

[26]           In October of 2001, the respondent Franklin Webb transferred the property to himself and his spouse, the second respondent in this appeal, and thereafter they held the property as joint tenants. In November of 2001, the respondents, as joint tenants, granted a mortgage to the Alberta Treasury Branches.

[27]           Because the property was then held in joint tenancy, no separate dower release was required on the Alberta Treasury Branches mortgage because of s. 25(2) of the Act:

[28]           On October 31, 2003, both of the respondents made an assignment into bankruptcy. In October of 2004, the Alberta Treasury Branches foreclosed on the mortgage, resulting in a surplus of $57,809 being paid to the Trustee in Bankruptcy. The Trustee concluded that the appellant’s charge on the property was invalid because of the absence of the dower consent, and disallowed his secured claim. A Registrar in Bankruptcy directed a trial of an issue, and the trial judge agreed with that conclusion: Re Webb, 2011 ABQB 89, 49 Alta LR (5th) 119.

[29]           The interpretation of the Dower Act, and its application to a fixed set of facts, raise issues of law, and the standard of review is correctness: Housen v Nikolaisen, 2002 SCC 33 at para. 8, [2002] 2 SCR 235.

[30]           The appellant raises a number of arguments on appeal. In particular he argues that Carmen Webb’s dower interest in the property ended when the respondent Franklin Webb transferred the property to himself and her as joint tenants, because of the operation of s. 3(2)(a) of the Act:

[31]           The purpose of the Act is to protect the spouse of the owner of the homestead. The most important protections are the ability to prevent the disposition of the homestead, and an entitlement to a life estate in the homestead if the owner dies. The Act  was never intended to protect, or reorder the priorities of creditors of the owner, although admittedly in some instances it might have that effect. It is also clear that failure to comply with the Act does not render the underlying transaction void: Schwormstede v Green Drop Ltd. (1994), 1994 ABCA 259 (CanLII), 155 AR 302 at para. 39, 22 Alta LR (3d) 89 (CA)  (Schwormstede #2). The provision rendering non-compliant transactions null and void was removed from the statute in 1948. If the dower rights are discharged at a later date, the underlying transaction can still be effective. The Act must be interpreted with these principles in mind.

[32]           The parties referred the Court to a number of cases where noncompliance with the Dower Act was raised before the subject transaction closed. It has always been the law that the non-consenting spouse can block the disposition of the homestead before the transaction is completed. Those cases are, however, of limited assistance here, because in this case the title was in fact transferred to the two respondents, and that transfer was registered. On its face, s. 3(2)(a) only applies on “registration” of the disposition.

[33]           On a plain reading, s. 3(2)(a) supports the position of the appellant. It states that, upon registration of the transfer from the respondent Franklin Webb to the respondents as joint tenants, the homestead rights “ceased”. In support of this interpretation are obiter comments in Senstad v Makus, 1977 CanLII 201 (SCC), [1978] 2 SCR 44, 17 NR 361.

[34]           In Senstad the spouse had consented to the disposition of the homestead, but had not signed a further acknowledgment of her consent as required by the Act. Her husband, the vendor, refused to close the transaction in reliance on what is now s. 2 of the Act:

[35]           In interpreting the Act, the Court in Senstad noted at pp. 58-9:

[36]           While Senstad dealt with what is now s. 2 of the Act, the Court also noted at p. 56 the effect of what is now s. 3(2)(a):

[37]           The comments in Senstad about s. 3(2)(a) are obiter, but there is nothing in them to suggest that the operation of that section is somehow different when the property is transferred to the spouse with the dower rights. That would certainly be inconsistent with the principles underlying the Land Titles Act, which treat all transfers and titles equally. The two statutes should be interpreted in a complementary manner: Green Drop Ltd. v Schwormstede (1990), 1990 ABCA 133 (CanLII), 74 Alta LR (2d) 161 at p. 166, 106 AR 143 (CA) (Schwormstede #1). In this case the respondents essentially argue that s. 3(2)(a) applies to all transfers, except transfers to a spouse. In other words, upon a transfer to anyone, the dower rights “cease” under s. 3(2)(a), but not if the transfer is to the spouse. There is no principle of statutory interpretation that would warrant such an interpretation, and it is inconsistent with the principles of interpretation of the Dower Act set out in Senstad.

[38]           In para. 17 of her reasons, the chambers judge accepted the argument that s. 3(2)(a) only refers to transfers to third parties. In other words, a transfer to the spouse holding the dower rights does not trigger cessation of the homestead rights, but a transfer to any other person would. The chambers judge did not identify anything in the wording of s. 3(2)(a) to support this interpretation, nor any prior case law to that effect. She reasoned, however, that that was the consequence of the decision in Bank of Montreal v Pawluk (1994), 1994 CanLII 9002 (AB KB), 158 AR 97, 21 Alta LR (3d) 410. In Pawluk it was argued that there can be no dower rights in a joint tenancy. Pawluk held that was not the case, relying in part on s. 25(2). Since that section deems that a transfer by joint tenants includes a consent to disposition of dower rights, it must follow logically that there were dower rights in the joint tenancy to begin with.

[39]           Pawluk does not, however, resolve this appeal. There are indeed dower rights in a joint tenancy, but they are different dower rights. Prior to the transfer only the respondent Carmen Webb had dower rights, in the title held by the respondent Franklin Webb. After the transfer, there were new dower rights by both Carmen Webb and Franklin Webb, in the new jointly owned title. While Pawluk is right that there are dower rights in a joint tenancy, they are two different dower rights than the one that existed prior to the transfer. The only way that can logically occur is if the dower rights initially owned by the respondent Carmen Webb “ceased” on the transfer to herself and her husband, and the new dower rights came into being immediately thereafter. Otherwise, there is no statutory source for the mechanism by which the respondent Carmen Webb notionally lost her dower rights in one half of the property. Section 3(2)(a) is the only provision in the Act that can effect that result; there is no other section that provides for the metamorphosis of Carmen Webb’s initial dower rights in the whole title, into Carmen and Franklin Webb’s new dower rights in each other’s property interest.

[40]           The same result would have to arise if Franklin Webb transferred his entire interest to Carmen Webb. Since Carmen Webb cannot have dower rights in her own title, they must have terminated on the transfer, leaving room for the emergence of Franklin Webb’s dower rights in the new transferred title. It follows that s. 3(2)(a) must be interpreted based on its plain meaning, namely that it applies to all transfers, including transfers to a spouse.

[41]           Immediately before he transferred the title to himself and his spouse, the respondent Franklin Webb had a fee simple interest in the lands, and only his spouse had a dower interest. When he transferred the property to himself and his spouse as joint tenants, by operation of s. 3(2)(a) her dower interest in the homestead as reflected in the existing land title terminated. It is true that when a new title then issued (in joint names) each of the spouses acquired a new dower right in the joint interest of the other in the homestead, reflected by the new joint title that had been created in the land titles system. For the first time, the respondent Franklin Webb also had a dower interest in the homestead, because it was now also the homestead of his spouse. The legal character of the new homestead was however different, because it was now a jointly owned homestead. Section 3(2)(a) operates, in such a situation, to effectively terminate the dower rights of the one spouse in the old title, while recognizing dower rights by both parties in the new title.

[42]           Is there any policy reason to give s. 3(2)(a) anything other than its plain meaning? In this case, the respondent spouse’s entitlement to block the disposition of the homestead was waived when she signed the mortgage. When that led to the eventual foreclosure of the homestead, her right to a life estate after her spouse’s death was also gone. At this point in time, there is no residual right of the spouse that is being protected; all that is happening is that the appellant’s bona fide security interest in the homestead is being subordinated to the interests of other creditors. The Act is being used to defeat a “honest transaction”.

[43]           The spouse with dower rights is not harmed by this interpretation of the Act. Section 3(2)(a) terminates the dower interest in the homestead upon transfer, but does so safely because s. 4 requires the production of a waiver of dower rights when an instrument is registered at the Land Titles Office, and s. 4(6) requires the Registrar of Land Titles to be satisfied that dower rights are being respected before registering an instrument. Therefore, when an instrument is registered, it should be accompanied by an appropriate consent of the spouse, and the spouse’s rights are respected. Thereafter, in a case like this any further dispositions of the homestead will require the consent of both spouses, because they are now joint owners. The effect of s. 3(2) is also to protect a transferee of an interest in the homestead in the eventuality that a disposition is somehow registered without a proper dower release. In that respect s. 3(2) is consistent with and supports the indefeasability of titles under the Land Titles system. And if a transfer is improperly registered, the spouse is also protected by the statutory claim for damages against the transferring owner, and the Land Titles assurance fund.

[44]           The charge on the land previously granted to the appellant was not void. It was vulnerable because it was subject to the transferor’s spouse’s dower interest. When that dower interest ended upon the registration of the transfer of the land to herself and her husband as a joint tenants, the charge on the land, which was previously voidable, now became fully enforceable: Schwormstede #2 at para. 39. This did not result in any deprivation to the spouse, as she had now obtained a joint fee simple interest in the land, instead of her previous inchoate dower right. Her husband, the respondent Franklin Webb, had only succeeded in transferring to her such interest in the property that he had, which in equity was subject to the charge granted to the appellant. That was the state of the title when both spouses then jointly granted a mortgage to the Alberta Treasury Branches, and asked for a postponement of the charge.

[45]           This interpretation of s. 3(2) is supported by s. 25(2), which provides that when the two spouses granted the mortgage to Alberta Treasury Branches, “the execution of a disposition by them constitutes a consent by each of them to the release of their dower rights”. The exact extent of the “consent” that is deemed to occur is perhaps open to debate, but it must certainly extend to all components of the transaction. Here the appellant was asked to postpone his charge in favor of a mortgage that was consented to for dower purposes by both joint owners. There is no policy reason to interpret s. 3(2)(a) as allowing the two respondents to argue that they have waived their dower interests in favor of each other, and in favor of the Alberta Treasury Branches, but not in favor of the appellant. The effectiveness of the deemed consent to the mortgage only makes sense if s. 3(2) has, at this point, operated to terminate any dower interest that may have existed in titles prior to the one presently being dealt with.

[46]           In light of this conclusion, it is unnecessary to deal with the appellant’s other arguments, such as whether and when estoppel can prevent reliance on the Dower Act.

[47]           In summary, when initially granted the appellant’s charge was vulnerable because of the absence of a dower consent. However, the subsequent events terminated the dower interest in the title as it then stood, leaving the appellant’s charge fully enforceable. The appeal should accordingly be allowed, and the matter should be returned to the Court of Queen’s Bench for resolution of any other outstanding issues.