Holik v. Holik, 2011 ABQB 672

Court of Queen ’ s Bench of Alberta Citation: Holik v. Holik, 2011 ABQB 672 Date: 20111128 Docket: 4803 148850 Registry: Edmonton Between: Krystyna Holik Plaintiff - and - Boleslaw Holik Defendant Editorial Notice: On behalf of the Government of Alberta personal data identifiers have been removed from this unofficial electronic version of the judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice R.P.

Marceau _______________________________________________________ Introduction.............................................................................................................................. Page: 2 Background............................................................................................................................. Page: 3

Issues.. Page: 7 1. Has Boleslaw converted property of All Steel by use of the company credit card? Page: 7 2. Have either Eryk or Krys appropriated money by using the All Steel VISA card for personal expenses?........................................................................................................................ Page: 8 3. Title to the Buck Lake cabin............................................................................. Page: 9 4. Bonuses......................................................................................................... Page: 10 (

a) Has Boleslaw paid Eryk Holik wages and bonuses from All Steel which were excessive and represent dissipation?......................................................................... Page: 11 (

b) Has Boleslaw paid Krysztof Bukczynski wages and bonuses from All Steel which were excessive and represent dissipation?................................................................... Page: 15 (

c) Has Boleslaw paid himself wages and bonuses from All Steel which were excessive and represent dissipation?........................................................................................ Page: 16 6. Should All Steel ’ s loss of $550,779.00 after tax for the year ending in 2010 be charged to Boleslaw as dissipation?.................................................................................................... Page: 17 7. What is the value of All Steel Craft Fabricators Ltd. at date of trial?.................

Page: 18 Conclusion............................................................................................................................. Page: 20 Directions............................................................................................................................... Page: 20 Costs..................................................................................................................................... Page: 21 Introduction [ 1 ] During the week of October 3, 2011, I heard the trial which was both a divorce action and an action for division of matrimonial property.

In the course of the trial I granted a divorce judgment. At the conclusion of the trial I gave a decision with respect to parenting. I also directed that, in lieu of child and spousal support, the salary of $8,000.00 per month be paid to Krystyna Holik ( “ Krystyna ” ) by All Steel Craft Fabricators Ltd. ( “ All Steel ” ), a corporation wholly owned by the Defendant Boleslaw Holik, continue until the end of February 2012. I remained seized with the matter of child and spousal support. [ 2 ] In the matrimonial property action, I valued the 2011 Acura owned by Krystyna at $50,000.00.

The parties had agreed to divide the household furnishings without the intervention of the Court. They also agreed on the value of certain real properties. Both parties wish to purchase the matrimonial home which they agreed was worth $572,000.00 with no mortgage. I directed a sealed bid process with the bids of each of the parties to be opened on October 31, 2011 at 2:00 p.m. The highest bidder would buy the other ’ s half interest in the home. If Boleslaw was the successful bidder, he would pay the bid price to Krystyna and Krystyna would not have to give up possession until 45 days after she received payment.

If Krystyna is the successful bidder, she will simply remain in possession and her bid price will be deducted from her share of the matrimonial property. This was a long-term marriage and no party argued that division of matrimonial property should not be into equal shares. That is my direction. Background [ 3 ] In order to frame the principal issues between the parties in the matrimonial property action it is necessary to set out certain

facts, some of which have been obtained from the Agreed Statement of Facts and the balance from the evidence. 1. The Plaintiff and the Defendant were married on the 30th day of July, 1982 at the City of Edmonton, in the Province of Alberta. 2. The Parties continued to reside in the matrimonial home until the end of October 2009, but they in fact separated in 2007. 3. The Plaintiff filed a Statement of Claim for Divorce and Division of Matrimonial Property with the Queen's Bench of Alberta, Judicial District of Edmonton on February 25, 2009. 4. The Parties have three children.

Only one, A.H., is a child of the marriage. The three children were born in 1981 (Sylvester ), 1983 (Eryk), and 1998 (A.H.). 5. The Defendant was born on August 22, 1939 in Poland. He is presently 72 years of age. The Plaintiff was born on May 1, 1959 in Poland. She is presently 52 years of age. 6. The Defendant was previously married to Irena Holik in 1966. They had two children from this marriage, Mark (born in 1966) and Jerry (born in 1968). 7. The Defendant grew up in Poland, and after graduating high school he joined the Polish military where he remained for a period of ten years from 1959 to 1969.

After leaving the military, he worked until 1973 for a shipping company in Poland. The Defendant lived in Canada on a working visa for one year and then in 1975 emigrated to Canada with his former wife and two children. 8. After immigrating to Canada, he worked for a company named Krup, which later became North West Group. He remained with this company until late 1989, which is when he began his own company named All Steel Craft Fabricators Ltd. [ “ All Steel ” ]. The Defendant had a business partner for the first year that All Steel was in business.

However, the partnership later dissolved, and the Defendant has been the sole owner of All Steel since approximately 1990. All Steel was incorporated on February 19, 1991 and the Defendant is the sole shareholder of All Steel. 9. When the Plaintiff was 21, she obtained an equivalent education of grade 12, having taken eight years of school. She then took an additional five years of technical school in construction trades as a construction technician. That trained her to prepare payrolls, time sheets, and similar office work. 10.

The Plaintiff worked at a vocational school from May of 1980 until September of 1980, when she took a leave of absence for three months to come to Edmonton to visit family, She stayed in Canada for approximately six months. 11. The Defendant met the Plaintiff while she was visiting family in Edmonton. The Plaintiff became pregnant with their first child, Sylvester. The Plaintiff emigrated to Canada with Sylvester on July 2, 1982 and the Parties were married on July 30, 1982. 16. After the Plaintiff arrived in Canada, she attended school to learn English and stayed at home until around 1985.

At that point Sylvester was less than four years of age, and Eryk was less than two years of age. The Plaintiff had no previous English language skills when she arrived in Canada in 1981. She enrolled in a 20-week program in 1983 at Alberta Vocational College. 17. Eryk began working for All Steel after he left high school in 2001, but received his high school diploma in 2004. He is currently a Journeyman structural steel and plate fitter as well as a Journeyman ironworker. 18.

The Plaintiff continues to reside in the Matrimonial Home after separation pursuant to an Order that was granted by the Honourable Justice L.D. Acton on September 30, 2009 (the “ Acton Order ” ). The Acton Order stated that the Plaintiff was to have exclusive

possession of this home, and the Defendant had to vacate the Matrimonial Home by the end of October of 2009. 19. Both All Steel and Holik Holdings have been valued by Ms. Pisko, a certified business valuator. Her initial report was completed in 2009. Her second report was completed in September of 2010 and her most recent report was completed on September 27, 2011. A critique report of Ms. Pisko's most recent report has been prepared by Mr. Robert McNally and completed on December 15, 2010. Mr. McNally prepared further calculations which were presented to the Court as Exhibit 13. 20.

Throughout the existence of All Steel, the Defendant has had a VISA account in the company name. He has used the company ’ s VISA card for both company and personal expenses. His son Eryk, as an employee, has had a company credit card which he has only usedfor company expenses. Another key employee, Krysztof Bukczynski, has also had a company VISA which he has used solely for company expenses, mainly gasoline. 21. Earnings of Krystyna Holik.

Krystyna was paid wages from All Steel as follows: 2006 $20,000 2007 $69,600 ($5,800.00/mo.) 2008 $77,000 ($6,416.66/mo.) 2009 $49,703 2010 $96,000 ($8,000.00/mo.) 2011 $96,000 ($8,000.00/mo.) 2012 Jan & Feb - $8,000.00/mo. [ 4 ] I am satisfied on the evidence there were no services rendered by Krystyna which would warrant this wage. It was originally paid as part of a distribution to Krystyna of corporate profits earned by the family ’ s corporation. On the 24 th of June, 2009, Justice Graesser granted an order which in paragraph four was recited:

(4) That the Defendant shall continue to pay to the Plaintiff her monthly salary of $6,000.00 per month. In the event that the net salary, after deduction for taxes, is less than $4,400.00 per month, then the Defendant shall provide to the Plaintiff by way of interim spousal support and amount equal to the difference between $4,400.00 net and the amount of the net salary per month. [ 5 ] She was paid $46,000.00 by All Steel for the 2009 calendar year.

While I am dealing with that order, I note that paragraph five orders that the Plaintiff and Defendant shall each receive the sum of $25,000.00 from the joint Servus bank account with the balance to be held until further order or agreement. The only significance of this is that Krystyna withdrew substantial sums from the joint account, including $60,000.00 to purchase an Acura motor vehicle, all without further order of the Court.

Given the numerous allegations by Krystyna that Boleslaw hid assets, wrongfully paid bonuses from the company to employees, used the corporate VISA to pay personal expenses (and did not account to the company for same), entered into a scheme whereby the Defendant is alleged to actually own Eryk ’ s cabin at Buck Lake, it is noteworthy that Krystyna completely ignored paragraph five of the court order of June 24, 2009. In many matrimonial property actions removing about $100,000.00 from a joint bank account would have serious consequences.

Not so here where the Defendant, as sole owner of All Steel, has control of the bulk of the matrimonial assets and Krystyna would be owed far more than the $50,000.00 of the Defendant ’ s share, which she grabbed.

[ 6 ] On September 30, 2009, Justice Verville ordered payment in lieu of spousal support of a monthly salary of $8,000.00 commencing November 1, 2009. Child support was reserved.

That order was continued by Justice Manderscheid on March 16, 2011, and effectively continued by me at the conclusion of the trial until the end of February, 2012. [ 7 ] Krystyna has had other earnings from employment and investments, but given my finding she is entitled to one-half of the matrimonial property, and my decision to address spousal and child support at a later time, her income from other employment is simply one more reason to direct an equal division of matrimonial property.

Her income is relevant to the matter of child and spousal support which has been reserved until the matrimonial property decision has been effected. [ 8 ] Continuing to other relevant facts: 22. Earnings of Boleslaw Holik from All Steel taken from his income tax returns are: 2006 $175,000 2007 $171,205 2008 $286,000 2009 $134,250 2010 $271,000 2011 incomplete Boleslaw is the general manager and the sole owner of All Steel. For the last several years his main workplace role has been as the production manager assembling the steel at the company ’ s shops. 23.

Earnings of Eryk (age 27): 2007 $ 88,690 includes bonus of $15,000 2008 $131,540 includes bonus of $30,000 2009 $365,925 includes bonus of $300,000 2010 $282,293 includes bonus of $200,500 2011 incomplete

Eryk is the son of the Defendant and the Plaintiff. He is a journeyman platework fitter and a journeyman ironworker. He has for several years been the on-site foreman/hands-on crew chief. In other words, he is the person who sees that the steel is properly erected on the building site. 24. Earnings of Krysztof Bukczynski ( “ Krys ” ): 2007 $373,871 includes bonus of $300,000 2008 $420,110 includes bonus of $333,430 2009 $373,983 includes bonus of $300,000 2010 $80,564 includes bonus of $1,000 2011 incomplete Krys is 59 years of age.

Before coming to Canada in 1989, he obtained the equivalent of our Grade 12 education, then he earned his Masters Degree in structural engineering after five years at the University Polytechnic in Poland. He started working with Boleslaw in 1993. He has overseen payroll and still has some role in that, but his main involvement for many years has been to study drawings, submit bids to general contractors, and if the job is awarded, to oversee the preparation and submission of shop drawings.

It appears the actual erection of the steel is the only aspect of the whole operation in which Krys is not involved; he is probably required to interpret the drawings for Boleslaw and Eryk for shop production, where necessary. Issues : 1. Has Boleslaw converted property of All Steel by use of the company credit card? [ 9 ] Boleslaw readily agrees that he has for many years used his company VISA to pay for minor expenses of the company; gasoline, parts, as well as his regular personal expenses.

The Plaintiff was able to identify a couple of purchases with Boleslaw ’ s VISA at hardware/lumber stores which were taken by Boleslaw to Eryk ’ s cabin and used in building the cabin. Boleslaw admitted that he occasionally did purchase items for the cabin. The question on this issue is whether Boleslaw properly accounted to the corporation for all personal items purchased with the company VISA. Allan Roswell, All Steel ’ s accountant and a chartered accountant since 1974, gave evidence. He indicated that there was a meeting between himself, the parties and the solicitors at his office in August 2010.

All records of All Steel for five years were available in five boxes. That included bank statements, cancelled cheques, invoices, VISA statements for Krys ’ card, Boleslaw ’ s card and Eryk ’ s card. Invoices relating to cheques concerning payables and VISA payments were available. It appears Krystyna and her counsel wished to take the records with them; that was refused. Thereafter, they wished to obtain copies at the Defendant ’ s expense. [ 10 ] In the end result, a letter was sent by Mr.

Roswell to counsel for Krystyna on September 28/2010 indicating the records were available at his office and could be viewed at anytime. Neither counsel nor Krystyna ever went to Mr. Roswell ’ s office although the payroll clerk at All Steel eventually sent one year ’ s VISA bills along with documentation showing that on a monthly basis, the payroll clerk went through Boleslaw ’ s VISA bills and charged back to his shareholders ’ loan the items that she identified as personal expenses.

Where she was unsure, she conferred with Boleslaw and then made the allocation in accordance with the code numbers (shareholders ’ loan or other category). [ 11 ] Although the records were not completely understandable they were sufficient to show that for that year regular charge backs were made to Boleslaw ’ s account. I find no documentation to support the allegation that Boleslaw wrongfully converted funds of the company. If any documentation exists and has been missed then that is the fault of the Plaintiff who had access but failed to review all the necessary records.

It is not an answer that a proper review would have required a forensic audit costing in excess of $30,000.00. The

simple answer is that when serious allegations are made concerning the honestly of individuals, it may indeed require work and money to prove the allegations. When the work is not done and the money not spent, then, as here, the trier of fact is left only with evidence of a personal charge back system and no evidence of wrongdoing. An inordinate amount of the court ’ s time was used to pursue this allegation concerning Boleslaw ’ s use of the VISA. All that came to nothing because there was no evidence of wrongdoing.

Any allegation that Boleslaw owes money to All Steel for funds misappropriated through use of the VISA is dismissed. 2. Have either Eryk or Krys appropriated money by using the All Steel VISA card for personal expenses? [ 12 ] On this item, the only questionable transaction the Plaintiff was able to put before the court was that on some days there was more than one gas purchase at the same service station. I guess the suggestion was that since Eryk and Krys each had a company vehicle, they must be fuelling other vehicles as well.

Eryk adamantly denied he used the credit card for non-company purposes; Krys did so as well and explained that he would often take one truck with a portable welder to a service station for fuelling of both the truck ’ s fuel tank and the welder ’ s fuel tank. He would then take the other truck and fuel its tank and the welder ’ s tank. That seemed to be the only misconduct alleged with respect to VISA bills. Perusing Eryk and Krys ’ VISA bills show that they involve small amounts (around $500 per month) and are mostly for gasoline and some charges at restaurants.

These charges are modest and seem to be for meals on the road. I conclude there was no evidence that Eryk or Krys misused the company credit cards.

A general review of the credit card and bills should, by itself, have allayed any suspicions. [ 13 ] Given Krystyna ’ s bare allegations in her viva voce evidence, none of which she could substantiate either misuse of credit cards or cheques paid on false invoices (of which no evidence was presented), I conclude that Krystyna, as she says, does not trust the Defendant to the point where she, in a very paranoid way, seeks to attribute some wrongdoing on the part of the Defendant. She pursued this course of action despite a near total lack of evidence.

As a result, the evidence of Eryk and Krys on this point had to be heard and that prolonged the trial. 3. Title to the Buck Lake cabin [ 14 ] Generally, the allegation is that Boleslaw had an arrangement with their son Eryk to have Eryk take title to the Buck Lake land and build a cabin there with funds and labour provided by Boleslaw. The following evidence was adduced In support of this allegation of a hidden or resulting trust: (

a) On September 4, 2009, Eryk purchased [...] Plan 082 1591 in the County of Wetaskiwin No. 10 for $138,095.00. There is no mortgage registered against the title as of the 3 rd of October, 2011. Eryk testified he used his money, saved over his years of work to purchase this property for cash and his father did not supply any of the funds. For much of his work history Eryk had lived at home with free room and board. There was no evidence led to contradict Eryk ’ s explanation. Eryk produced two bank drafts for the payments. (

b) A number of photographs of a partially completed, rather large cabin were taken by Krystyna on August 2011 and filed as evidence. No evidence of cost of the improvements was given by the Plaintiff. However, Eryk put in evidence his record of cheques for the project, which total $202,894.00. That amount includes the lot purchase. Eryk also gave evidence that his uncle, his father and his friends contributed free labour for the project. Eryk and his father made the ornate iron work on the fence and railings.

This ornate work is a hobby of Boleslaw ’ s and I note some very ornate iron work installed by Boleslaw many years ago at the matrimonial home. Eryk also said he engaged services of journeymen where he did not have the expertise. These journeymen usually worked for cash on weekends.

I think one has to accept that there is a healthy underground economy of that kind in this country and it partially explains what appears to be a substantially complete cabin for a reasonably small outlay of cash documented by cheques. [ 15 ] The only small diversions from All Steel are that some scrap metal was used for the ornate iron work and some extra wood from a finished project was taken from All Steel ’ s yard. No one placed a value on these materials.

I have no evidence to determine that value and in consideration of the whole lawsuit, the amount is probably quite negligible. [ 16 ] I note that Boleslaw ’ s work and any monetary contribution to the cabin is his business, i.e., he is free to work on the cabin without the cabin becoming his. Similarly he is free to contribute his own money, not that of the company.

[ 17 ] I refer to the judgment of Associate Chief Justice Wittmann (as he then was) in M.A.B. v. R.D.P 2007 ABQB 438 and the cases cited therein that deal with dissipation of matrimonial property. As I have said, as far as the cabin is concerned the only evidence of dissipation is the steel and wood taken from All Steel, the value of which is negligible. Any claim that the Defendant has dissipated matrimonial property by using it to fund the purchase or building of the cabin is dismissed. [ 18 ] Some time was spent by the Plaintiff in trying to establish this dissipation.

In the first place, the evidence did not amount to anything above a suspicion. No real effort was made to trace funds or assets, yet the answers of Eryk and Boleslaw were required to meet the allegation that there was an aura of suspicion about the transaction. This also unnecessarily used up trial time. 4. Bonuses [ 19 ] The first allegation is that the bonuses paid at the direction of Boleslaw to himself, to his son Eryk and to the employee Krys in 2007, 2008, 2009 and 2010 were exorbitant and amounted to dissipation on the part of Boleslaw.

These allegedly excessive bonuses diminished the value of All Steel because otherwise those funds would have been retained by the corporation. Krystyna ’ s position is that if any bonus payments amount to dissipation of matrimonial property then she is entitled to one-half of the after-tax amount. [ 20 ] I agree this is the best way to treat any excessive bonuses as the recipients of the bonuses have paid income tax on the bonuses.

The result would be approximately the same if the money was returned to the corporation, the corporation paid the tax resulting from an increase of profits for the relevant year, and then the remaining excess bonus was paid out to both Boleslaw and Krystyna. This bonus would be added to their incomes and would then be taxed at 39% since any additional income would be taxed at that rate. [ 21 ] There is a second aspect to this argument. Krystyna relies on the opinion of Dr. Alexander Jenkins, an expert labour economist, for the argument that the bonuses were excessive.

However, Brenda Pisko, an expert business valuator, in estimating the value of All Steel has calculated the economic value of each of Boleslaw, Eryk and Krys to the corporation and lowered the value of All Steel accordingly. Mr. McNally, also an expert business valuator, has relied upon the Jenkins report to criticize the economic values attributed to these three employees as being excessive. The Plaintiff ’ s argument is that the Pisko values should be adjusted by lowering the economic values attributed to Boleslaw, Eryk and Krys in the Pisko report. Doing so would increase the value of All Steel.

I will deal with this second aspect as a separate issue. [ 22 ] Under Section 7(3) of the Matrimonial Property Act , R.S.A. 2000, c. M-8 [the “ MPA ” ], the Court is required to make a distribution which is “ just and equitable ” taking into consideration the matters in

section 8 of the MPA .

Section 8(

l) of the MPA includes as a matter to be taken into consideration whether “ a spouse has dissipated property to the detriment of the other spouse. ” In Metz v. Metz 2004 ABQB 528 , 368 A.R. 35 , Maloney J. at para. 37 wrote: [37] Dissipation is another word for waste. Merely disposing of property is not dissipation. It is well established that to show dissipation there must be an element of bad faith or neglect. Foolish economic decisions, reckless or spiteful spending, pursuit of an illusory financial objective or squandering money on addictions are all examples taken from Alberta cases. (

a) Has Boleslaw paid Eryk Holik wages and bonuses from All Steel which were excessive and represent dissipation? [ 23 ] Dr. Jenkins performed an occupational earnings analysis for Eryk and Krys, but not for Boleslaw. He described Eryk as a journeyman platework fitter born October 29, 1983, and the son of the owner of All Steel, Boleslaw. He also described him as journeyman platefitter with some involvement as a platework fitter foreman/supervisor.

According to Statistics Canada 2006 Census: Employment Income by Occupation, Gender, Age, Highest Level of Schooling, and Province, an Alberta male platework fitter ’ s average earnings would be $46,634.00 at Eryk ’ s age in 2007 increasing to $47,700.00 at Eryk ’ s age in 2010. The same Census would place a platework fitter foreman/supervisor at $81,705.00 at Eryk ’ s age in 2007 to $82,013.00 at his age in 2010. Dr. Jenkins then incorporated a construction wage inflation index relative to the 2005 survey year and produced the following table:

Year Eryk ’ s Age Eryk ’ s Actual Earnings “ Average ” Platework Fitter Journeymen Earnings “ Average ” Platework Fitter Foreman Earnings “ Average ” of Platework Fitter Journeymen and Foreman Earnings 2007 23.68 $88,690 $52,833 $92,509 $72,671 2008 24.68 $131,542 $55,455 $96,551 $75,998 2009 25.68 $365,926 $59,055 $102,176 $80,616 2010 26.68 $244,720 $60,285 $103,651 $81,968 [ 24 ] Dr. Jenkins then made the following comments: 5.

As indicated by the above table, Eryk had 2007 earnings of $88,690 which were about 22% above the “ Average ” of Platefitter Journeyman and Foreman earnings of $72,67l, which could be explained by a combination of his working more than average hours and the fact that his father was his ultimate employer.

However, in 2008, Eryk's earnings were significantly (73%) in excess of the “ Average ” of Platefitter Journeyman and Foreman earnings, $131,542 versus $75,998 --- which cannot be explained by a combination of one year of career incrementation (0.4% between age 23 and 24) and construction wage inflation (4.2% between 2007 and 2008), especially after noting that the Alberta construction employment index declined by about 1% between 2007 and 2008. 6.

In 2009, Eryk's earnings were dramatically, more than four times, in excess of the “ Average ” of Platefitter Journeyman and Foreman earnings, $365,926 versus $80,616 --- which is even more inexplicable given the modest rate of career incrementation (0.4 % per annum between age 24 and 25) and construction wage inflation (5.7% between 2008 and 2009), especially after noting the significant 5% decline in the Alberta construction employment index between 2008 and 2009. In addition, Eryk's 2009 earnings of $365,926 were also about five times the 2009 Alberta Wage and.

Salary Survey Edmonton combined Top Average of $71,755 for NOC 7263 Platework Fitters and NOC 7214 Platework Fitter Foremen. 7. In 2010, Eryk's earnings were somewhat less dramatically, but still three times, in excess of the “ Average ” of Platefitter Journeyman and Foreman earnings, $244,720 versus $81,968 --- which is again inexplicable given the modest rate of career incrementation (0.4% per annum between age 25 and 26) and construction wage inflation (1.3% between 2009 and 2010), noting the modest 1% increase in the Alberta construction employment index between 2009 and 2010. 8.

For the combined two-year period, 2009-10 and given the results of the above two paragraphs, Eryk's average annual earnings were $305,323 --- which value is about 3.75 times the “ Average ” of $81,292, with the excess being most likely explained by a transfer of income/wealth from ASCFL (his father's company) to Eryk, rather than Eryk's having had higher than “ Average ” work-hours and/or productivity. [ 25 ] The first criticism levelled at the Jenkins report by both Eryk and Krys was that no one, especially not counsel for the Plaintiff or Dr. Jenkins, asked them what their qualifications and duties were.

With respect to Krys, the failure to find out that he held a Masters degree from a university after five years post-secondary schooling in and of itself invalidates the Jenkins report as far as using a reasonable comparable from the 2006 Census. [ 26 ] Eryk gave evidence. It is clear that in every year he works a great deal of overtime. He also indicated that platefitter and platefitter foreman were quite inadequate descriptions of what he does.

He is not only a journeyman platefitter, but also a journeyman ironworker and most of the time it is his experience, training and hands-on work as an ironworker supervising ironworkers that is required as part of his onsite erection supervisor duties. He submitted a short job description as Exhibit 22 and I reproduce it below:

As a Site Supervisor I overlook and participate in every step of the erection process.

In addition to my job title as a Site Supervisor my job duties and responsibilities include but are not limited to; *Cleaning around the Shop *Grinding materials *Maintenance of equipment [ie] overhead cranes, doors, replacing bathroom fixtures, lights, forklift maintenance - essentially with anything that breaks down is looked at by me. *Seasonal Maintenance - In the summer months I mowed the grass around the shop - In the winter months I clear snow around the shop *I am capable of running or operating any piece of machinery/equipment we (All Steel) owns or rents [ie] forklifts, man lifts, spider cranes *I am certified and train other employees in the safety and operation of a forklift. *I transport materials to site via truck and trailer. *I do regular runs to collect fuel and propane for the equipment at All Steel *I often work late (overtime), Saturdays and on occasions worked on Sundays/Holidays in order to stay on

schedule with jobs. *Most of my time I am supervising 1 or more crews on numerous sites, overlooking and participating in the process and work required. *Often I am required to work out of town, meaning I must coordinate everything as usual in addition to accommodations, meals, etc. for our employees and anything else that may arise while out of town. *I attend pre-start up and safety meetings prior [t]o starting jobs *On a regular basis I am required to go on job sites and asses[s] what is required for the job prior to starting the work. [ie] take measurements prior to fabrication of materials, access on the job for machine and material, as well as conditions that are related to the site. *I am always on call and my cell phone is on 24-7. [ 27 ] Dr.

Jenkins recognized that Eryk ’ s status as the owner ’ s son justified some increase from the average earnings. He also recognized that working overtime also justified some increase from average earnings. Unfortunately his report is flawed because he did not realize that during the years that he addressed Eryk was qualified both as an ironworker and platefitter, and that he was a full time, hands-on supervisor who was almost solely responsible (reporting of course to his father) for the on-site erection of all of All Steel ’ s projects.

It was clear in evidence that Eryk is being groomed to take over general management of the company and probably ownership from his father. In my view, that justifies remuneration far above the averages used by Mr. McNally and in profitable years, a substantial bonus. [ 28 ] I note that in these same years Krystyna drew a salary from the company ranging from $69,600 in 2007 to $96,000 in each of 2009, 2010 and 2011, all without any contribution to the operation of the company. Yet she asks the Court to find her son unworthy of the wage and bonuses he has been paid during very profitable years of the company.

I recognize that she would likely have received from Boleslaw about the same net income by way of child and spousal support. [ 29 ] I note All Steel ’ s year end is July 31 st . The financial statements are prepared about three month later and then decisions are made about bonuses which must, for income tax purposes, be paid by February of the next calendar year. Mr. Roswell testified that when the financial statements are near completion, he meets with Boleslaw and obtains direction with respect to bonuses.

As far as Krys is concerned, that bonus for the last six years has been fixed as percentages of the gross profits after payment of regular salaries to Boleslaw, Eryk and Krys. There is one other change and that is that the profit is increased by one-half of the depreciation taken. One of the objectives of the bonuses is to reduce the income on which All Steel pays income tax to below $500,000.00 because a corporation with taxable income over $500,000.00 pays income tax at a higher rate than one with taxable income under $500,000.00.

I note the bonus paid in 2007 reflects the earnings to All Steel ’ s 2006 year end July 31 st . I note the contract revenue from 2006 to 2010 corporate year ends, direct costs, gross margin and the management salaries are:

2006 $ 2007 $ 2008 $ 2009 $ 2010 $ Contract Revenue 3,226,948 4,799,144 5,115,694 4,551,666 2,308,850 Direct Costs 2,289,280 3,346,085 3,537,460 3,155,730 2,559,584 Gross Margin 937,668 1,453,059 1,578,234 1,395,936 (250,734) 29.1% 30.3% 30.9% 30.7% -10.9% Management Salaries 318,200 780,090 873,544 715,599 196,500 [ 30 ] In 2007, Eryk ’ s bonus was $15,000.00 while Krys ’ was $300,000.00. For Eryk this is about a bonus of 20% above his hourly wage (including overtime).

In a year (2006), where contract revenue was over three million dollars and the gross margin was $937,668, it is arguable Eryk should have been paid more. In my view, this payment is a far cry from dissipation of company assets. [ 31 ] In 2008, when contract revenue for 2007 had gone from just over 3.2 million to 4.8 million and the gross margin went from $937,668.00 to $1,453,059.00, a doubling of Eryk ’ s bonus to $30,000.00 is not excessive and is arguably low. There is a problem, however, with the 2009 bonus of $300,000.00 which relates to the 2008 statement.

In that year, contract revenue went up by about $300,000.00 and gross margin by less than $25,000.00. An increase of $270,000.00 to Eryk ’ s bonus cannot be justified solely on the basis of increased profits. I think the bonuses for Eryk for 2006 and 2007 year ends were probably low in light of the bonuses paid to Krys. Given the increasing role of Eryk, I do not see a bonus of $150,000.00 as being excessive. [ 32 ] However, what is of concern is the history of this particular year ’ s bonus.

The other adult son of the parties, Sylvester, has a law degree and was not active in the business of All Steel in 2006 or 2007. Boleslaw initially told Mr. Roswell the surplus earnings would be used for a bonus of $150,000.00 for each of Eryk and Sylvester. When it came time to pay the bonuses in 2008, Boleslaw changed his mind and declared a bonus of $300,000.00 for Eryk and none for Sylvester.

Boleslaw ’ s evidence was that the decision was made because Eryk was working hard and making the business successful while Sylvester was doing nothing in spite of the fact he had a law degree. [ 33 ] Nevertheless, the fact that $150,000.00 had first been decided on as Eryk ’ s bonus means it is difficult to justify doubling that bonus. Changing his mind about the bonus for Sylvester was something Boleslaw could do and did not have to justify to anyone. [ 34 ] However, doubling the bonus for Eryk was not economically justifiable.

I note, in context, that the parties evidence was that although they continued to live under the same roof, the parties were in fact separated in 2007. In light of the dynamics present at trial, Eryk clearly favoured by his father. Sylvester lived at home with his mother and A.H. Eryk was called by the Defendant; Sylvester was a witness for the Plaintiff. I conclude there was in this one instance a decision on the part of Boleslaw to excessively benefit Eryk to the prejudice of the Plaintiff. That is dissipation.

It is my ruling that rather than complicating the tax picture for Eryk, Boleslaw and possibly Krystyna, $45,750.00 (one-half of $150,000.00 less tax of 39%) is owed by Boleslaw to Krystyna to reverse the extra $150,000.00 of bonus paid to Eryk. This sum will be adjusted for in the final accounting. [ 35 ] With Eryk becoming more and more valuable to the company, I do not find Boleslaw ’ s declaration of the just over $200,000.00 bonus to Eryk for the 2009 year end was egregious or a dissipation of matrimonial property. In 2010, All Steel lost over $550,000.00 and no bonus was paid to Eryk. (

b) Has Boleslaw paid Krysztof Bukczynski wages and bonuses from All Steel which were excessive and represent dissipation? [ 36 ] I set out Krys ’ s qualifications and duties in paragraph 8, point 24. Suffice it to say that on all the evidence, he worked extremely hard for the company. In my view, his overseeing of payroll or office management is a small part of his work. However, his work as an estimator/bidder is a one-man job for a structural engineer all by itself. His work in the preparation and submission of steel construction design is easily a full-time position. I find it would be very difficult to replace him with only one person as he appears to have filled two full-time roles.

[ 37 ] Unlike the situation with Eryk, there is a presumption that the payments of bonuses to Krys are at arm ’ s length. There is no blood or marriage relationship between Boleslaw and Krys. The bonuses were made in the ordinary course of business and are not dissipation of matrimonial property. [ 38 ] Dr. Jenkin ’ s analysis of Krys ’ s employment and compensation is irrelevant and has no value. Dr. Jenkins was mistaken both as to Krys ’ role in All Steel and his formal qualifications. In his report of July 22, 2011, Dr.

Jenkins stated: It is my further understanding that Krys Bukczynski (currently aged 59) is employed by ASFL as its office manager, with some involvement in bidding/construction estimation. ” [ 39 ] He then points out that Krys was paid a $73,871.00 wage and $300,000.00 bonus in 2007; $420,110.00 in 2008 of which $333,430.00 was bonus; and, in 2009, $373,983 of which $300,000.00 was bonus. Dr. Jenkins compares Krys ’ earnings to the 2006 Census statistics of office managers with less than a Bachelor ’ s degree and construction estimators with less than a Bachelor ’ s degree.

Krys indeed does some office management, but he also does all the construction estimation and prepares bids for all of the jobs on behalf of the company. [ 40 ] When a bid is successfully, Krys oversees or prepares the shop drawings and the construction designs. He has a Master ’ s degree in structural engineering and most of his duties are the duties of a structural engineer. Not being aware of his real role in the company and not appreciating the Master ’ s degree in structural engineering makes the comparisons Dr.

Jenkins used quite meaningless. [ 41 ] More importantly, there is a legitimate business reason for the salary plus bonus arrangement which was negotiated at arm ’ s length. Boleslaw and Krys have had a strong business relationship since 1993, some 18 years. Krys, Boleslaw, and the accountant Mr. Roswell testified that about 10 years ago, Krys approached Boleslaw and wanted to be a shareholder in All Steel. Obviously, Krys wanted to share in the profits from the anticipated good years. On the other hand, Boleslaw was reluctant to have Krys as a part owner or half owner of his company.

Suffice it to say that many persons prefer to solely own their business enterprises for legitimate business reasons, including possible future breakup of the business relationship, and involvement of matrimonial property actions should one of the shareholders ’ marriages fail. [ 42 ] With a key employee as Krys, a profit-sharing scheme is surely the most logical alternative to partnership or co- ownership of shares in the corporation. That scheme was initially put in place about 10 years ago. With some hesitancy about when exactly changes were made, Mr.

Roswell recalled the initial bonus was 10% then it rose to 15% and 6 years ago it became a sliding scale with the percentage increasing with the amount of profits. That formula, according to Mr. Roswell, was applied by him in calculating each year ’ s bonus. The company lost money in 2010 which partially explains the bonus of only $1,000.00 although there was some evidence that $10,000.00 may have been paid. I cannot understand why. I am completely satisfied the bonus arrangement with respect to Krys was a valid business arrangement and its payment was not dissipation of matrimonial property. (

c) Has Boleslaw paid himself wages and bonuses from All Steel which were excessive and represent dissipation? [ 43 ] It is clear that Boleslaw was the original driving force that built the steel fabricating business into what it is today. He is the sole owner of the business, but there is a presumption that matrimonial property is to be shared equally. The business is clearly matrimonial property. Between 2007 and 2010 calendar years, Boleslaw paid himself wages and bonuses as set out in para. 22 above in the amount of $862,455.00 which is an average of $215,613.75 per annum.

In the same period, Krys earned $1,248,528.00, an average of $312,132.00 per annum, roughly one-third more than Boleslaw. One would expect the general manager to be paid more than key employees. The wages and bonuses paid to Boleslaw compared to Krys indicates Boleslaw chose to take relatively low income from All Steel thereby leaving more cash in the company as retained earnings. [ 44 ] Keeping in mind that bonuses are paid in the calendar year following a July 31 st year end of the company, Boleslaw left income before taxes in All Steel in 2007 of $487,117.00.

In 2008, $514,524.00; in 2009 of $468,107.00 and there was a loss in 2010 of $550,779.00. As Mr. Roswell indicated the intention of the bonus payments was to ensure All Steel did not report over $500,000.00 of taxable income. I do not understand why there was $514,524.00 in income before taxes for 2008, but that is probably accounted for by averaging. It is obvious to me that if Boleslaw was trying to draw every last penny he could out of All Steel and dissipate the funds so

realized, as Krystyna strongly suggested to the Court, he would not have arranged to leave $1,237,398.00 in the company as retained earnings for the fiscal years ending in 2007, 2008 and 2009. Of course that was diminished by $550,779.00 because of the losses in the year ending in 2010. [ 45 ] I will deal next with the question of whether the losses amount to dissipation using the words quoted from Mahoney J ’ s judgment in Metz v. Metz (supra) : ... an element of bad faith.

Foolish economic decisions, reckless or spiteful spending, pursuit of an illusory financial objective or squandering money ... [ 46 ] However, I say categorically that the salaries paid to Boleslaw are probably much less than he could have justified in light of what was paid to an employee, Krys.

The fact he left considerable funds from the good years (during which he was separated from his wife and had to anticipate an action for 50% of the matrimonial property which includes All Steel) is evidence of an intention not to take all the money out of the company to diminish the share of matrimonial property for distribution to Krystyna. I find his wages for the years 2007 through 2010 were reasonable and did not amount to dissipation of All Steel ’ s funds. 6.

Should All Steel ’ s loss of $550,779.00 after tax for the year ending in 2010 be charged to Boleslaw as dissipation? [ 47 ] I have heard an explanation for the 2010 All Steel loss given by the accountant Mr. Roswell. Firstly, he points out that 2007 and 2008 were great years for the company. Krys, who was doing the bidding, indicated that in those years there was more work to go around than companies to do the steel erection so they could bid much higher and still get the jobs. This resulted in higher profits. Mr.

Roswell said that 2009 was still a good year, but that was because when the financial crisis, mainly in the U.S., hit in the fall of 2008. All Steel still had a large number of contracts that would not be completed until well into 2009. Mr. Roswell said that three things then contributed to the 2010 loss. [ 48 ] First, new building construction came to an abrupt halt at the end of 2008 and that is reflected in the drop in contract revenue from $4,551,666.00 in 2009 to $2,308,850.00 in 2010.

This is a drop of almost 50% year over year. [ 49 ] Secondly there was a project where All Steel had been selected to supply and erect the iron work. All Steel spent considerable money on the design drawings which I gather were partly outsourced. The building never got built and All Steel was left with a considerable loss on the project. [ 50 ] The third cause of the loss was that Boleslaw had, during the boom years, secured a source of skilled employees from Poland.

These were valuable employees particularly since in 2007 and 2008 there was a severe shortage of skilled workers in Alberta and Canada in almost every phase of the construction industry. Boleslaw decided to keep these employees when there was not much work and that cost the company and explains some of the loss. Mr. Roswell stated that in retrospect probably these employees were kept on too long, but at the time, fears of not being able to obtain skilled employees if economic good times returned were real. This explanation was basically uncontradicted.

I am completely satisfied all these events occurred and that the decision to keep the workforce working in hope of securing more work for them, while it cost the company, was one made by a responsible company owner believing it to be in the best interest of All Steel. This decision cannot be characterized as being made in bad faith nor one that is foolish. I conclude the 2010 loss cannot be characterized as dissipation of matrimonial property. 7. What is the value of All Steel Craft Fabricators Ltd. at date of trial? [ 51 ] Ms. Pisko prepared a report on September 10, 2010 for Boleslaw. On December 15, 2010, Mr.

McNally prepared a Limited Critique of the Pisko report. On September 27, 2011, Ms. Pisko updated her report. At trial, Mr. McNally submitted further calculations and his C.V. all marked as Exhibit 13. [ 52 ] My approach to the valuation prepared by Ms. Pisko is that if the valuation has not been seriously challenged by Mr.

McNally, I will adopt the approach and calculations of Ms. Pisko. There are two differences between the approaches of the two valuators. Mr. McNally has suggested a different discount rate from Ms. Pisko ’ s. Ms. Pisko explained why she chose the discount rate she did. Mr. McNally really did not try to justify the rate he chose or at least, he failed to satisfy me that Ms. Pisko ’ s explanation was not valid. I adopt the Pisko report on the matter of the discount rate. [ 53 ] This leaves the second issue on which the experts differ.

They both acknowledge that a prospective purchaser will lose the economic benefit of the key employees: Boleslaw, Krys and Eryk. The lower their economic value, the higher a price a purchaser will pay. The higher their economic value, the less the purchaser will be prepared to pay since the negative impact on the company of not having these employees is greater. Ms. Pisko adopted an annual economic amount for Boleslaw and Eryk of $300,000.00 ($150,000.00 each). For Krys, Ms. Pisko adopted a value of $220,000.00, which was initially disputed by Mr. McNally as he assumed Dr.

Jenkins was correct in his assumption of the qualifications and duties of Krys. [ 54 ] In fact, Mr. McNally described Krys as belonging to a pool of engineering technologists. My understanding of the system in Alberta is that the Northern and Southern Institutes of Technology (NAIT and SAIT) and other institutions have courses in various disciplines loosely referred to as technologists in the engineering field. These courses may address different technologies which are aspects of engineering such as draftsmanship, design, surveying, materials testing, etc.

These courses usually lead to a certificate and can be one to two years in length. [ 55 ] I understand that in Alberta a professional engineer requires a minimum four year degree from a degree-granting university or institution. That degree is a Bachelor of Science in Engineering and I believe can be specialized into civil engineering, petroleum engineering, chemical engineering and structural engineering to name but a few subdisciplines with which I am familiar.

The Masters degree in structural engineering is far superior to that of a technologist and superior to that of a Bachelor of Science degree in structural engineering. Mr. McNally relied on the Jenkins report to calculate the economic worth of Krys. In addition, Mr. McNally, in his final estimate did not adjust Ms. Pisko ’ s figure of $220,000.00 for 2010 by 5% per year for Krys. [ 56 ] Further, since Krys has now moved to Vancouver Island and is only doing some work for All Steel via the internet, it is likely he would not be available to a purchaser of the business.

Thus, the business may be impacted even more negatively by his absence. [ 57 ] Ms. Pisko ’ s economic valuation for Boleslaw (referred to as Bob in her report) and Eryk is as follows:

d) The gross margin for 2010 and 2011 is adjusted to 25% to reflect the anticipated future gross margin to be achieved. This is less than in prior years as management does not believe that the prior levels are achievable in the near future due to increased costs and competition and the retirement of a key employee.

e) Wages to shareholder, spouse and son (Eryk) are adjusted to estimated economic amounts which are assumed to be $300,000.00 in 2010, decreased by 5% per prior year. The economic salary for Eryk was determined by reference to the Alberta Ironworkers (Structural) - Locals 720 & 725 for October 31, 2010. Based on 2,000 hours, salary and benefits would be approximately $118,000. We have assumed that based on Eryk ’ s additional duties, and economic salary of $150,000 would apply and that Bob Holik ’ s economic salary would also be $150,000 for a total of $300,000. (Pisko Report as at July 31, 2011) [ 58 ] Mr.

McNally adjusted Eryk ’ s economic salary downward to $84,427.00 for 2011 based on Dr. Jenkin ’ s use of the average between a journeyman platefitter and a platefitter foreman. This ignores the real role of Eryk as both a journeyman platefitter and a journeyman ironworker. His ability to manage more than one construction project without much (if any) supervision surely adds considerable value beyond that of a foreman, certainly a foreman who is not an ironworker. Mr. McNally reliance on the Jenkins report is in error given its serious misapprehension of Eryk ’ s qualifications and duties.

I adopt the approach of Ms. Pisko, which is an economic worth of $118,00.00, by reference to Alberta Ironworkers (Structural) Local 720 & 725 for October 31, 2010, with a further amount of $32,000.00 for his additional duties. [ 59 ] With respect to Boleslaw, Ms. Pisko used an economic value of $150,000.00 for 2010. This is less than what she placed as a value for Krys. If there is a criticism it would be that this amount is somewhat low; there is no justification for making Boleslaw ’ s contribution to the business less than Eryk ’ s. Mr. McNally ’ s adoption of foreman rates for Boleslaw only recognizes his

duties as a shop foreman and fails utterly to recognize the importance to the company of his lengthy experience, the general management and direction of the company, and that under his management he has built the business from scratch to what it is today. I will adopt Ms. Pisko ’ s figure of $150,000.00 for his economic salary as the bare minimum, although perhaps his age would suggest a figure at the low end, which I find this is. [ 60 ] Having made these findings, no adjustments are necessary to the Pisko report.

In her latest report (September 27, 2011) she valued Boleslaw ’ s 100% interest in All Steel at a low of $2,970,000.00, a high of $3,186,000.00 with a mid point of $3,078,000.00. Those figures provide for the tax taht would have to be paid to transfer the company assets to Boleslaw ’ s account. Conclusion [ 61 ] I adopt the mid-point of $3,078,000.00 as the value of Boleslaw ’ s 100% interest in All Steel for the purposes of the matrimonial property action. The parties agreed on the valuation of Holik Holdings prepared by Ms. Pisko with adjustments for the agreed upon values of the land in Holik Holdings Ltd.

I need not deal with this aspect nor with all the other values which have been agreed upon. Directions [ 62 ] The parties will prepare an agreed upon Matrimonial

Schedule of Property as between them which reflects the agreed upon values (including the value of the Cadillac if that is available) and the value of All Steel as found by me. This will be submitted to me by November 9, 2011 and will then be attached as

Schedule A to this judgment. [ 63 ] Boleslaw shall have until December 15, 2011 to decide whether to buy Krystyna ’ s 50% share of All Steel. If he decides to buy, he shall fund the purchase by January 31, 2012. If he decides to sell All Steel on the open market, he will list the company for sale by January 5, 2012, with a sales agency acceptable to Krystyna. If the parties cannot agree on a sales agency, they may come to me. I will remained seized with the divorce action so that spousal support and child support can be addressed when the division of matrimonial property is completed.

I will also remain seized with the matrimonial property action to be available to assist in the division of matrimonial property, if necessary. [ 64 ] This judgment will be released immediately to the parties but will not be filed until

Schedule A has been attached. Costs [ 65 ] Costs may be spoken to by contacting my judicial assistant. Heard on the 4 th day of October 2011 to the 7 th day of October and October 13 th , 2011. Dated at the City of Edmonton, Alberta this 4 th day of November, 2011.

R.P. Marceau J.C.Q.B.A. Appearances: David W. Ross, for the Plaintiff Renee R. Cochard, Q.C., Cochard Johnson for the Defendant

Schedule A