Martin v Martin, 2016 ABQB 425

Court of Queen’s Bench of Alberta Citation: Martin v Martin, 2016 ABQB 425 Date: 20160803 Docket: 4808 011968 Registry: Medicine Hat Between: Donna Lee Martin Plaintiff - and - Timothy Grant Martin Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice D.K. Miller _______________________________________________________ Background [ 1 ] The issue to be decided in this case is whether the share bonuses received by Timothy Martin from his employer should be classified as part of his income or as matrimonial property.

Virtually all other property issues between the parties have been resolved by way of agreement. The classification of share bonuses has implications for the issue of spousal support.

[ 2 ] The parties were married on May 26 th , 1984 while Donna Martin was finishing grade 12 and when Timothy Martin was 24 years of age and becoming established as a land surveyor working for Midwest Surveys Inc. The parties separated in August 2011 and were divorced in March 2015. At the time of the divorce all three of their children were self-supporting. [ 3 ] During the course of the marriage the parties had what some would call a “traditional” marriage partnership.

Donna Martin took care of all household duties including cooking, cleaning, laundry, raising and attending to the children and their various school and extracurricular activities. Timothy Martin was the provider and bread winner and took care of all outside household concerns. [ 4 ] There is no doubt that Timothy Martin is a good provider and an excellent father to his children. Donna Martin expressly stated so. [ 5 ] There were some attempts by Donna Martin to work outside the home but her income was minimal.

Her ability to work was hampered due to her health issues which involved a back injury from a 1993 motor vehicle accident. She has just recently been able to manage the pain and challenges arising from that injury. She is able to work now, however, she has been outside of the workforce for virtually all of her adult life. This has been due to her homemaking and child rearing responsibilities and due to her health concerns. Her non-involvement in the paid labour force has been with the approval of Timothy Martin, at least until the separation in 2011.

While he did not oppose her getting some work, it did adversely affect his tax position and he was content to have her not earn any outside income. [ 6 ] The family enjoyed a very comfortable and enviable lifestyle. Travel was a big part of their activities. This was true when the children were at home. After the children left home, that lifestyle seemed to be enhanced. Travel seems to have been led by Donna Martin as she travelled several times per year with the family and took trips overseas and south on her own with increasing frequency.

This started in and around 1995 as the family got established financially and as the children got older. Both parties I believe would agree that they moved from a “saving phase” to a “consuming phase” as a family in about the mid-1990’s and about the time they moved into the current matrimonial home. [ 7 ] The family’s lifestyle and the accumulation of substantial net worth was due to the very hard work Timothy Martin performed for his employer Midwest Surveys Inc.

Timothy Martin was able to dedicate his time and loyalty to his employer due to the fact that Donna Martin devoted herself fully to raising the children and taking care of all domestic responsibilities. [ 8 ] Timothy Martin worked for Midwest Surveys Inc. for about 35 years. During the early time with the company he worked hard in terms of self-study to obtain his Alberta Land Surveyor (ALS) designation in 1988 and his Canada Land Surveyor (CLS) Commission in 1993. Timothy Martin resigned from Midwest Surveys Inc. on April 29 th , 2016, literally on the very eve of trial.

There is a valid reason for this resignation which will be discussed below. [ 9 ] For illustrative purposes Donna Martin’s income in the years leading up to the year of separation is as follows: Line 150 Employment 2003 $7,079.57 $6,505.10 2004 $7,161.28 $6,293.30 2005 $3,745.61 $2,351.44 2006 $3,565.00 Nil 2007 $5,582.52 Nil (Note: $4,458.82 taxable capital gain) 2008 $3,703.72 Nil (Note: $4,458.82 taxable capital gain) 2009 $5,548.88 $4,595.29 2010 ($11.18) Nil 2011 $2,500.01 Nil (Note: $2,500.01 taxable gain) [ 10 ] Timothy Martin’s annual income with salary, salary bonus and share bonus broken down over the years is as follows: Year Total Salary Salary Bonus Share Bonus 2003 $365,277.00 $133,360.85 $13,814.20 $217,901.95 2004 $521,991.00 $145,120.91 $20,402.13 $356,467.96 2005 $473,960.00 $103,543.78 $10,222.78 $310,193.44

2006 $682,581.00 $162,560.27 $17,876.39 $502,144.34 2007 $405,809.00 $164,612.00 $6,311.76 $237,884.39 2008 $277,550.00 $165,273.35 $1,441.64 $110,835.01 2009 $157,093.00 $157,093.00 NIL NIL 2010 $362,108.00 $157,093.00 $10,478.57 $183,501.29 2011 $596,596.00 $157,093.00 $28,758.69 $398,959.25 2012 $797,248.00 $172,183.96 $28,800.00 $596,264.04 2013 $776,230.37 $167,054.80 $33,600.00 $567,780.92 2014 $957,176.22 $34,000.00 $740,807.77 2015 $761,175.98 $169,830.00 $22,400.00 $568,945.98 * Between 2003 and 2008 and 2013 the “salary” and total amounts may include modest taxable capital gains (or in 2005, losses), and taxable benefits and not just base salary.

From 2009 to 2011 inclusive the total income may include modest amounts of other income such as capital gains, investment income or taxable benefits. [ 11 ] Midwest Surveys Inc. is a privately held employee owned company. In order to own shares in Midwest one must be an employee. Timothy Martin first acquired 100 equity shares (Class C, Series 1) in July 1984 shortly after the parties married.

At the time of separation in August 2011 Timothy Martin owned 59,459 Class C, Series 1 shares and subsequent to the separation he purchased more shares such that as of early 2016 he owned 60,002 Class C, Series 1 shares. [ 12 ] The Class C, Series 1 equity shares are valued each year at the Annual General Meeting of the shareholders and at that time a price for transferring those shares is set. [ 13 ] The current Unanimous Shareholders Agreement effective May 15 th , 2010 provides that 75% of the holders of Class C, Series 1 shares must agree on the value per share.

If there is not the requisite 75% agreement as to the value of shares, then the auditors of the company shall establish the transfer price in a final and binding manner.

Customarily the Board of Directors of Midwest Surveys Inc. makes a recommendation on the price of the shares to the Annual General Meeting and that price is then approved. [ 14 ] The Board of Directors arrives at its recommended price for the shares based on the five year average of earnings before interest, tax, depreciation and amortization for the four previous years and the current year’s expected results. [ 15 ] There are slightly more than 100 shareholders holding just under a million Class C, Series 1 issued shares. [ 16 ] Since the separation Timothy Martin’s ownership of the shares constituted the single largest shareholder and was only one of six shareholders that held more than 2.5%.

Nevertheless, he was not able to exert any control over the voting process. [ 17 ] The current value of the Class C, Series 1 equity shares as of March 2016 is $25.50 per share. [ 18 ] According to the Unanimous Shareholders Agreement upon retirement Timothy Martin must be paid the value of his shares over a period of time of not more than five years, and he is generally paid out over five equal annual installments. [ 19 ] The employment contract that Timothy Martin was recently obliged to sign in April 2015 provided that his position was reduced to a Land Surveyor Project Manager and that he was required to dispose of 20,002 of his 60,002 shares.

The first of five annual payments for those shares was $102,110.20 received on February 3 rd , 2016. He was allowed to hold the remainder of his shares or sell the remainder of his 40,000 shares during the currency of his employment contract. However, with his recent retirement he is now obligated to sell the balance of his 40,000 shares and receive payment over the next five years. [ 20 ] The total value of all of Timothy Martin’s Class C, Series 1 equity shares is $1,530,051.00.

The adjusted cost basis for all his shares is $283,840.54. [ 21 ] Both the salary bonus and the share bonus are paid from a pool or fund based on the performance of the corporation and that fund is determined after the calculation of earnings for the bonus period and after that amount is taken from those earnings and are retained by the corporation. [ 22 ] The Board of Directors disperses a “salary bonus” to all employees of Midwest Surveys Inc. who have been employed for over a year.

This salary bonus is paid on a basis determined by the Board in each bonus period and is based on the overall performance of the corporation and exceptional individual performance or office performance is also a criteria.

[23] The remaining portion of the bonus pool is paid to the shareholders proportionate to their holdings of Class C, Series 1 equityshares and is distributed two times per year. In May of each year the share bonus is declared based on the last two quarters of the yearprevious and in November of each year the share bonus is based on the first two quarters of the current year. [24] On rare occasions bonuses may not be paid.

That occurred in year 2009, the year following the serious economic downturnand there is an early indication that such bonuses will not be paid in the year 2017. [25] For illustrative purposes in the 10½ years between 2003 and 2013 Timothy Martin received over $3.3 million in total bonuses,both salary bonuses and share bonuses, over and above his base salary. [26] Immediately following the separation in August of 2011 Timothy Martin paid all household expenses, as his was the onlyincome. In December of 2011, Donna Martin began to receive $3,340.00 tax free every month.

This was initially informal, but continuedpursuant to a without prejudice Consent Order filed December 19, 2013. [27] Commencing in 2012 and continuing up to and including 2015, Timothy Martin also paid Donna Martin two annual paymentsof $12,500.00 each from the share bonus payment he received. She has therefore received an additional $25,000.00 in 2012, 2013, 2014,and 2015.

In 2016 Donna Martin has received a payment of $12,500.00 over and above Court ordered spousal support. [28] In the December 19, 2013 Consent Order, Timothy Martin also agreed to pay Donna Martin’s property taxes, home insurance,home security and Blue Cross premiums. [29] All payments are on a tax free basis to Donna Martin in order to take advantage of the marginal tax rates of each party,thereby achieving additional net monies for each. [30] On April 14, 2016, Justice Horner granted what is perhaps best termed a preservation order.

Noting that the trial had beenadjourned, she directed that pending trial, Donna Martin was entitled to a 50% ownership interest in all shares held by Timothy Martin inMidwest Surveys Inc. To accomplish this, she directed that all shares owned by Timothy Martin were attached. She also directed thefollowing: 1. That one half of all sale proceeds from any share sale be paid to Donna Martin; 2. That Timothy Martin stood as Donna Martin’s trustee to the extent of one half of his shareholdings; 3.

That Timothy Martin was directed to advise Midwest Surveys Inc. to pay Donna Martin’s counsel one half of any dividend,bonus, or other monies payable in respect of the shares, and that if Timothy Martin received any such monies he was directed to pay themto Donna Martin’s counsel immediately; 4.

That Timothy Martin and Midwest Surveys Inc. were prohibited from dealing with the shares held in trust for Donna Martinwithout Court Order or the consent of Donna Martin, save and except that Midwest Surveys Inc. was at liberty to complete the sharepurchase for Timothy Martin’s shares, provided that Donna Martin’s portion of the proceeds was paid to her counsel; 5. That any funds received by Donna Martin’s counsel were to be held in trust pending determination of the tax payable.

Halfof any tax payable by Timothy Martin was to be paid by Donna Martin’s counsel to Timothy Martin as Donna Martin’s share of the taxliability; 6. That if the parties were unable to agree upon the tax payable, they could return to the Court for further direction, and themonies would continue to be held in trust; 7. That if Timothy Martin was required to make any payment to Midwest Surveys Inc. for a shareholder contribution or onaccount of a guarantee, Donna Martin was required to pay or account for half of the payable amount; and, 8.

That Midwest Surveys Inc. was to be served with a copy of the Order, and was to give Donna Martin notice, as would begiven to any other shareholder. [31] The Order of Justice Horner is without prejudice to the assertion of any interests in the shares or payments made as a result ofshare ownership, and all such issues are to be dealt with at the trial. She also directed that any funds received by either party pursuant tothis Order were to be accounted for in determination of the overall interests of the parties.

Defendant Timothy Martin’s Argument [32] Timothy Martin takes the position that the share bonus, which has always been paid as T-4 income and never as a dividend,should be classified as income and not as matrimonial property. He contends that it should only be accounted for in terms of determiningif any retroactive spousal support is payable.

If used for any other purpose, Timothy Martin claims that further distribution wouldconstitute double-dipping, and is to be avoided as per the Supreme Court decision in Boston v Boston, 2001 SCC 43 , [2001] 2SCR 413. [33] Put another way, Timothy Martin argues that the share bonus has already been used as part of income to set the monthlyspousal support payments to Donna Martin at the tax-free amount of $3,340.00.

If the share bonuses are now considered a divisiblematrimonial asset, then the amount Timothy Martin has paid for spousal support must be re-assessed, and potentially reduced. [34] Timothy Martin also disputes that the share bonus is simply paid out automatically as a benefit of property ownership. Henotes that if the share owner was on leave, they did not receive the bonus; that if the share owner was found to be performing negligentlyor poorly the share bonus could be withheld; that at least once the share bonus was differentially paid to share owners based on the

performance of a particular branch of Midwest Surveys Inc.; and that Timothy Martin himself undertook great stress and long hours, and has suffered depression and other health issues, as a result of the extreme effort he put into his employment. Thus, overall, he claims that the income derived from the share ownership is more discretionary than it may originally appear. [ 35 ] This argument is said to be supported by M(DG) v M(KM) , 2002 ABQB 225 , where one of the key indicia of whether the monies paid were classified as income was said to be that the payment was “in exchange for effort” (para 89).

Timothy Martin says that because the share bonus was paid as T-4 income, and explicitly as an incentive for the employees to exert effort, it is inconceivable that the share bonus could be characterized as an asset distributable as matrimonial property. [ 36 ] Timothy Martin says that, “To suggest that shared contribution before the separation should entitle a retired and non-working spouse to half of the income of the unretired spouse working many hours with significant effort would be perverse.” [ 37 ] On the issue of whether additional retroactive spousal support should be paid, Timothy Martin claims that any additional support payable should be at the low end of the range.

He states that his bona fide retirement should be a major consideration. He also says a wide range of factors, which he gives as the following, must be taken into account: 1. There is no evidence Donna Martin has ever had to dip into capital or savings to meet her needs, and her comfortable financial situation is confirmed by the fact she has taken numerous holidays since the separation and has not actively sought employment. 2. There is no allegation of misconduct by Timothy Martin, and in fact, he advanced funds for Donna Martin’s legal fees, and so that she could purchase a new vehicle. 3.

Neither party holds blame for delay in having support and property issues finalized. 4. While Timothy Martin admits he has some funds from which to pay retroactive support, there is further evidence that it should be at the low end in that he has been living an extremely frugal lifestyle, and he is likely not to be employed in the future. [ 38 ] From 2012 to 2015, Timothy Martin paid $71,828.20 in yearly spousal support. This was tax free. When grossed up for tax, the equivalent amount would be $91,245.29 per year.

Timothy Martin argues that because Donna Martin has had exclusive possession of the matrimonial home, and he has paid for all the taxes and upkeep, he should be credited with having provided an additional $1,000.00 per month, making the total grossed up spousal support paid per year $103,245.29. [ 39 ] While Donna Martin was previously injured, the medical evidence is that her injury has been repaired and she is medically able to work.

Timothy Martin’s position is that she has made no effort to obtain employment, and therefore, she should be imputed a yearly income of $33,400.00, based upon the average earnings of a receptionist in Alberta based on information from Alberta Occupations and Educational Programs. [ 40 ] The parties separated in 2011. From 2011 to 2015, Timothy Martin’s average yearly income, based on his combined sources from his salary, salary bonus and share bonus, was $777,600. This is substantially higher than his income during the marriage, due to significantly higher share bonuses being paid.

Combining the same sources, his average yearly income, while married and together from 2003 to 2010 was $405,875.00. [ 41 ] Timothy Martin cautions that support ought not be directed based on the payor’s post-separation income where that income is not reflective of the marital standard of living. He states that when the payor’s post-separation success has nothing to do with any contribution from the payee, the law is clear that the payee should not share in the post-separation increased income: C(DB) v W(RM) , 2006 ABQB 905 .

While the economic impact on the payee is a critical factor in the analysis, nor can the impact on the payor be ignored. The breakdown of the marriage must be balanced on both, not just one side. For this reason, to assess retroactive support, Timothy Martin argues the court should not simply look to his income, but to the lifestyle the parties enjoyed prior to separation.

To assess spousal support based on the higher income would be to award Donna Martin while she was enjoying a life of retirement while Timothy Martin continued to work in circumstances of great effort and stress. [ 42 ] Timothy Martin suggests that retroactive support be assessed on the basis of his five-year average income before the separation, or the period 2007 to 2011. During that time, his average yearly income was $359,831.00. Using this amount, the Spousal Support Advisory Guidelines suggest a monthly support range of $10,200.00 to $13,500.00.

When the amount for use of the matrimonial home is factored in, Timothy Martin claims to have been paying Donna Martin $103,245.00 yearly, or $8,603.00 monthly. [ 43 ] Donna Martin’s budget shows expenditures of $6,682.00 per month, or $80,181.00 per year. This includes yearly savings and vacation of $20,000.00.

Therefore, claims Timothy Martin, Donna Martin’s needs are more than being met, which suggests an amount closer to the lower end of the Spousal Support Advisory Guidelines is appropriate. [ 44 ] The parties are also unable to utilize any retroactive support adjustment payment to gain a tax advantage, and therefore the parties agree any lump sum payment will have to be reduced as a result.

Timothy Martin suggests the discount should be 35% of the lump sum amount. [ 45 ] Using the lower end of the guidelines ($10,201.00) and what Timothy Martin claims to have paid thus far ($8,603.77), results in a monthly shortfall of $1,597.23. He claims that over the last 52 months the total shortfall is $81,458.52, which, when discounted for income tax, results in an actual shortfall of $52,948.04. This is the amount Timothy Martin agrees to pay for retroactive spousal support. He maintains that, because he is now unemployed, there is no spousal support obligation past May 1, 2016.

He does concede entitlement to spousal support but quantum is nil and duration is not applicable at this time. [ 46 ] Timothy Martin provided a rebuttal brief after receiving the brief of Donna Martin. It simply points out that under the federal Child Support Guidelines “income” includes all sources of income under the “total income” on the T1 General Tax form, including dividends. To now treat any such income as a matrimonial asset would be contrary to the Guidelines.

Plaintiff Donna Martin’s Argument [47] Like Timothy Martin, Donna Martin first addressed the issue of whether the share bonus should be classified as distributableproperty or income. Donna Martin describes how the salary bonus and share bonus payments to Timothy Martin are calculated. UnlikeTimothy Martin, Donna Martin claims there is no element of personal performance involved in whether a shareholder receives a sharebonus; the only issue for payment is the number of paid-up shares the shareholder owns.

While acknowledging that the share bonus ispaid as T4 income, not T5 dividend income, Donna Martin points out the ordinary dictionary definition of “dividend”: “a sum of moneyto be divided among shareholders especially that paid by a company to shareholders”.

This definition is said to support Donna Martin’sargument that the share bonus payments since separation are a return on investment and therefore distributable as property. [48] The parties agree that the shares owned by Timothy Martin are joint matrimonial property, and that, if Timothy Martin wasnot working, the Unanimous Shareholders Agreement would compel him to sell his shares. Donna Martin also agrees that if TimothyMartin stops working, there is no share bonus. However, he kept working, and as a result, Timothy Martin has received over $2.5 millionin share bonuses.

Because Timothy Martin made no earlier attempt to pay Donna Martin her share value, she shared in the risk that theshare value would decrease. Along the same lines, she should now receive the benefit of share ownership. [49] Donna Martin acknowledges the case authority on whether a bonus is distributable property or income is mixed. Severalcases are referenced: -Nickerson v Nickerson, (1990), (AB KB), 107 AR 308: The wife received bonuses from a private companycontrolled by her father.

Kryczka J found these were a gift, not distributable property. -Miller v Miller, 2004 ABCA 257: The company was sold but the husband agreed to stay working for the new owners; he got salary anda performance bonus after 5 years, which would be based on how the company performed after the sale. The Court of Appeal upheld thetrial judge’s decision that the five-year bonus was not divisible property. This is the appeal of M(DG) v M(KM), the case relied upon byTimothy Martin and referenced in the

summary of his submissions. -Gardiner v Gardiner, (1996), (AB KB), 191 AR 139 (ABQB): The bonuses, determined annually, were paid toemployees and tied to company performance.

Those paid after separation were found not to be divisible because the recipient played norole in determining if they were paid and had no control over them. -Kremp v Kremp, (1989), 1989 ABCA 247 , 23 RFL (3d) 164 (ABCA): The bonus was earnings and found to be divisible, butDonna Martin gives no information on the basis on which it was paid. -Chalmers v Chalmers, (1994), (BC SC), 2 RFL (4th) 446 (BCSC): Two times in 29 years the husband received abonus for his and his company’s performance; the second one was received after separation.

The court found it not distributable property. -Morash v Morash, 2003 NSSC 63: Part of the husband’s severance package included a bonus, which was payment for execution of anon-compete agreement, and for other obligations.

The judge found it was not distributable property. -Macdonald v Macdonald, 2002 BCSC 1453: The court found that the bonus related to pre-separation employment was distributableproperty and the portion post-separation was income. [50] Donna Martin argues these cases suggest that any bonus paid post-separation is income only if it is related to the employee’s,and perhaps the company’s, performance. In the case of Timothy Martin, Donna Martin argues that he was fully compensated for hisemployment efforts by his salary and salary bonus, and the share bonus is a benefit of property ownership.

Because it is property, she istherefore entitled to half the net value. [51] Using a tax rate of 39% results in $1,574,213.03 net dollars. So Donna Martin’s share, half of that amount, is claimed as$787,106.52. [52] Donna Martin acknowledges receipt of $25,000.00 in 2012, 2013, 2014 and 2015, and agrees that this can be characterized asspousal support, pre-payment of her share bonus entitlement, or even a combination of both. [53] Spousal support was then addressed. Donna Martin accepts that Timothy Martin is now unemployed and the UnanimousShareholder’s Agreement dictates that his shares must be redeemed.

She accepts that at present, while she has an entitlement to spousalsupport, there is nothing actually payable. Therefore Donna Martin requests that her right to claim mid-range spousal support whenTimothy Martin returns to work be preserved. The issue for this decision is therefore whether any retroactive spousal support is payable. [54] Donna Martin concedes that the amount of support payable rests in part on whether the Court characterizes the share bonus asincome or property. However, either way, she argues that this long-term marriage means that each spouse is entitled to roughly the samestandard of living.

She relies on Chutter v Chutter, 2008 BCCA 507, and Fisher v Fisher, 2008 ONCA 11, to argue that the fact that therecipient spouse has achieved a degree of self-sufficiency does not end compensatory support. The ability to meet basic needs does notequate to self-sufficiency. [55] For the purposes of assessing proper support, Donna Martin argues that Timothy Martin’s annual income should be set at$200,000.00. She argues that no income should be imputed to her. She states this is reasonable because she was out of the work force forso long and her education was so out-dated by the time of separation.

However, if any income is attributed to her, it should be no morethan $20,000.00. [56] Attached to Donna Martin’s brief are several calculations of potential spousal support scenarios. She concedes that if thecurrently-uncharacterized payments of $25,000.00 per year are included with spousal support, then she has received appropriate support.But if they are characterized as partial payment of the share bonus, then she has not received appropriate support.

[ 57 ] Donna Martin also filed a rebuttal brief after reviewing Timothy Martin’s written submissions. The argument that Donna Martin is attempting to double-dip is soundly rejected. Her position is that the net amount of the share bonus is distributable property, to be divided equally between the parties; and that spousal support should then be determined based on Timothy Martin’s income, which includes his salary, salary bonus and taxable benefits only. [ 58 ] The argument that the share bonus was in any way tied to Timothy Martin’s performance is also strongly refuted.

Donna Martin points to portions of the Agreed Statement of Facts and to Timothy Martin’s questioning, both of which indicate that the share bonus is paid based solely on the proportionate share of share ownership. She also argues that there is evidence that Timothy Martin’s performance was not considered satisfactory, which is why he eventually resigned.

Yet despite Midwest Survey Inc.’s dissatisfaction with his performance, he still received the share bonus. [ 59 ] Donna Martin states that the shares were purchased with the fruits of the marriage and the return on the share investment now must also be shared as fruits of the marriage. [ 60 ] Donna Martin does not seem to dispute Timothy Martin’s argument that a proper consideration when setting spousal support is the standard of living enjoyed by the parties during the marriage. What she does dispute is that there has been any change between the pre and post-separation standards of living.

She also disputes that Timothy Martin should be credited anything for occupation rent, noting it was not pled. Oral Submissions [ 61 ] The parties reiterated their positions in oral argument. [ 62 ] Counsel for Timothy Martin confirmed the only outstanding issue between the parties was how to treat Timothy Martin’s income since the separation, and therefore, what the appropriate level of spousal support is for Donna Martin between the time of separation and Timothy Martin’s retirement.

He stated there were two positions on this argument. [ 63 ] First, Timothy Martin’s counsel argued it was untenable that someone would form a business, own shares in it, and then have to pay 50% of all income to their spouse. He stated the cases referred to by Donna Martin were cases where the court was distributing dividend income without any real analysis of what that leads to, and what it leads to is an obvious problem of double-dipping. [ 64 ] This is illustrated by the child support guidelines.

If child support was payable, the calculation of the amount would have included all sources of Timothy Martin’s payments as income. This would have included even dividend payments, if the share bonus had been paid as dividends. To then have to pay another 50% of that income as distributable property is double-dipping.

The unfairness of this proposition is said to be especially heightened in this case where Donna Martin contributed nothing to Timothy Martin’s welfare post-separation. [ 65 ] Second, Timothy Martin’s counsel urged the court to consider the parties’ pre-separation standard of living, not post- separation, when setting the appropriate level of spousal support. In this case, Timothy Martin’s income was significantly higher over the last three years than at any time during the marriage. Therefore, spousal support should be set based on lifestyle expectations during the relationship.

The impact on the paying spouse cannot be ignored. [ 66 ] Again, Donna Martin did nothing to contribute to the increased earnings while Timothy Martin was working in a highly- stressful position, in which he had added stress because he was being forced out of the company at the same time he was being forced to lay off friends and coworkers. [ 67 ] Because Timothy Martin is no longer employed, the understanding of his counsel is that he will no longer receive any share bonus.

But if the Court determines share bonuses are divisible and is concerned about further payments, any order granted could direct the split of any future share bonuses. Counsel also confirmed that if Timothy Martin obtains employment in the future, Donna Martin is entitled to support in an amount to be determined. [ 68 ] Donna Martin’s counsel commenced argument by addressing the double-dipping issue. Counsel for Donna Martin states that it doesn’t matter how the income tax legislation characterizes the payment. The child support guidelines are also not relevant because there are no children.

Here, the money has come from shares owned by both, but only Timothy Martin had control of the shares. And there is ample case law that says money can be looked at in two ways. Donna Martin acknowledges it would be double-dipping if she argued that after paying her half of the share bonus she then argued that all the T4 money Timothy Martin received in a year should be used for calculating spousal support. But that is not what Donna Martin is arguing. [ 69 ] It is now known by Donna Martin that Timothy Martin received a severance bonus. $18,242.62 will be used to pay out a leased vehicle.

It is agreed by the parties that Donna Martin is entitled to 50% of that amount. Donna Martin takes the position that the remainder, net $51,757.38, is property, and should also be divided equally. [ 70 ] As to the argument that Donna Martin should not share in the post-separation income increase because she did nothing to contribute to it, her counsel argues that neither did Timothy Martin.

The increase is almost entirely due to do to an increase in the share bonus payment. [ 71 ] Counsel for Donna Martin also confirmed that the first payment on the share redemption has been made; half went to his client, and half to Timothy Martin. Timothy Martin still has capital gains exemption, but there will be taxes he has to pay. However, counsel for Donna Martin has agreed that she will have to contribute to the tax owed by Timothy Martin, and counsel are confident they will work out the details when the tax details are known.

However, for clarity, counsel agree that there could be a clause in the order that any tax payable on the share redemption will be shared equally between the parties, and in the event of disagreement, either party can seek further direction from the court.

Analysis of the Share Bonus [ 72 ] It appears that there is no clear and decisive authority in how the share bonuses of Timothy Martin are to be treated. It seems that each case referenced by the parties has a unique fact situation, making a blanket ruling difficult. [ 73 ] I note in the case of Devlin v Devlin , 2014 ABQB 616 , Hillier J dealt with a similar situation albeit a much shorter marriage and not a first marriage for either party. The parties were married 10 years (2001 to 2011). They had no children together but both had children from previous relationships.

The husband lived on a farm, and was a long-term employee and shareholder of a road construction business (Carmacks). The wife was a long-time nursing attendant who reduced her hours to part-time due to health issues, the fact they didn’t need two incomes, and the husband’s desire that she be home more. Hillier J found that she did help with the farm and the raising of the defendant’s children (first wife deceased) but not to the extent she claimed. [ 74 ] From 2001 to 2005 the husband generally received dividends on his Carmacks shares of less than $10,000.00.

In the next few years the amount jumped significantly: $25,000.00 in 2006, $50,000.00 in 2007, and $124,000.00 in 2008. [ 75 ] The dividends received up to and including 2007 were mostly used to purchase more shares. [ 76 ] The husband then received over $700,000 per year in 2009 and 2010, and nothing in 2011 (the last year of marriage). The company was then sold and the shareholders paid out by dividend.

The husband received $1.7 million in 2012, $280,000.00 in 2013, and $197,000.00 in 2014. [ 77 ] The husband still owned some shares, but their value of $23,000.00 was held in escrow to address contingent liabilities from the sale of the company, and he argued they should really be assessed no value. [ 78 ] The monies remaining (and traceable) from dividend payments were in a portfolio fund worth $2.6 million.

Hillier J treated this as a matrimonial asset, and found there were several reasons why an equal division was not appropriate: 111 However, the shares purchased prior to 2007 were acquired without any contribution or contemplation of Plaintiff, most of them well prior to relationship, and after the Defendant's many years of service, resulting in promotion to general supervisor which he achieved without the Plaintiff's support. Those pre-marriage shares represent roughly 60% of the total number of shares he owned after 2007.

More importantly, the more recent significant and final dividends were the result of the sale of the company. They reflected the contributions of employees and shareholders, such as the Defendant, which built up the value over the life of the company. In my view, it would be entirely unjust and inequitable for the Plaintiff to receive an equal portion of the fruit of the shares which largely reflected the Defendant's investment of time, energy and money prior to their relationship. 112 Determining the appropriate apportionment in this case is not an exact science.

One way to approach the facts in this case is to consider the percentage of the Defendant's related career during which the parties were married. The 11 year marriage represents approximately 25% of the Defendant's 40 years with Carmacks and its successor to date. If this were a pension, she would accordingly be entitled to a maximum of 1/8 of the ultimate value of the pension. However, the Defendant has not retired and his considerable assets flowing from his investment in the business will continue to grow.

There was no evidence as to the expected ultimate value of his related investments on retirement. 113 I am also mindful that the unequal distribution in this respect relates only to RBC 532 and the RBC Management Portfolio which have grown considerably to total $2,664,314.20. The Defendant received, over the course of the marriage, in excess of $3,000,000 in dividends. Only a portion of those dividends were invested and grew within RBC 532 and the RBC Management Portfolio.

The Plaintiff has benefitted to some extent from dividends which were spent, and will benefit from an equal division of the dividends which were otherwise saved or invested by the Defendant. [ 79 ] Hillier J awarded the wife 25% of the account. [ 80 ] I note that the last three dividend payments came from the sale of the company, in other words, the sale of the shares. Therefore, it was not an income stream from the shares which Hillier J was considering, but most of the funds available for division represented the actual value of the shares themselves.

The issue was therefore division of the value of a sold asset, not an income stream. [ 81 ] Also, Sulyma J in Johnson v Johnson , 2005 ABQB 320 , similarly treated dividends from a physician husband’s professional corporation as matrimonial property. [ 82 ] Because of the unique circumstances of this case, the length of the marriage and the early treatment of the parties’ investment in shares it is clear that both the principle value of shares, and the bonuses derived from those shares, are matrimonial property. [ 83 ] Like Hillier J in Devlin v Devlin , I find that the share bonuses are akin to a pension.

I do not find that the payment of the share bonuses are discretionary. There is no concrete evidence that the share bonuses were contingent on Timothy Martin’s performance. The determination of payment of the share bonuses was clearly based on one’s proportional share of ownership not on one’s performance.

Timothy Martin received the share bonus towards the end of his employment notwithstanding that his employer may have been dissatisfied with his performance. [ 84 ] The reference to “dividends” as being part of income for child support purposes is unique to the regime of the Federal Child Support Guidelines , which are designed primarily to ensure a spouse cannot avoid appropriate child support obligations by adjusting his or her income downward. This inclusion in the Federal Child Support Guidelines is not determinative of the classification of dividends or share bonuses for all time and in all situations.

In this case there are no minor children resulting in child support payments. [ 85 ] In my view the starting point is the Matrimonial Property Act , RSA 2000, cM-8, and if an item is found to be an asset then the Matrimonial Property Act applies to the division of that asset. I am satisfied that the share bonuses as described in this case are quite

appropriately an asset, similar to what a dividend would be and not necessarily an income stream. Accordingly, it is therefore subject to the Matrimonial Property Act . The division of the share bonus should be then divided presumptively on an equal basis. Unlike in Devlin v Devlin there are no exemptions or reasons not to divide the share bonuses equally. [ 86 ] Accordingly, I direct that all share bonuses issued to Timothy Martin since the separation be divided equally between the parties.

However, prior to the transfer of the funds appropriate steps must be taken for the calculation of tax such that each party shall pay their appropriate and equal share of taxes. The division of the share bonuses that have been paid to Mr. Martin are of course subject to an equal and an appropriate amount of tax being paid by both parties.

The division order ensuring that each party pay the appropriate tax can be handled in a fashion similar to the sale of the shares of Timothy Martin previously ordered in this matter. [ 87 ] It is clear that the couple’s efforts during the early time of the marriage were to invest in the shares of Midwest Surveys Inc. and the return on those shares now must be treated as property of the marriage to be appropriately divided.

Timothy Martin shall receive credit for his advance payments made to Donna Martin, specifically the $51,372.48 to purchase her 2015 Toyota automobile and the $25,000.00 advanced for legal expenses. Also, the annual payments of $25,000.00 which were uncharacterized from 2012 to 2015 and the $12,500.00 paid in 2016 are clearly payments Timothy Martin made as a result of receiving the share bonus payments. He is entitled to credit for those payments as advance payments for property division. These payments are not to be considered spousal support.

Accordingly, the total of $2,580,677.10 in pre-tax “share bonuses” received from the date of separation to December 2015 plus any share bonus payments received in 2016 shall be adjusted for Timothy Martin’s tax liability and then equally divided post-tax between the parties. Timothy Martin shall then receive credit for his advance payments outlined herein along with the advance payments he paid for Donna Martin’s automobile and legal expenses.

Spousal Support [ 88 ] Having found that the annual payments made by Timothy Martin since 2012 of $25,000.00 are simply advance payments on the matrimonial property division, the adequacy of interim spousal support must now be addressed. I am of the view that an income must be imputed to Donna Martin going forward if an application for spousal support is made in the future. While I cannot tie the hands of any Justice hearing a future application dealing with quantum and duration it would seem to me that a $20,000.00 annual imputed income is not unreasonable.

However, it is unfair for this Court to make that assessment and bind a future Justice. [ 89 ] In the meantime however, it is within my purview to assess the issue of the adequacy of spousal support from time of separation to trial. I see no reason why an income of $20,000.00 should not be imputed to Donna Martin from the date of separation to trial. The family dynamic at the time of separation clearly was different from the previous years of the marriage. The children were all grown and self-supporting.

I understand that while Timothy Martin’s unemployment as of late April 2016 is acknowledged it may be somewhat ironic to impute some level of income to Donna Martin. However, I find that each of the parties’ health, both mental and physical are vastly different, and the roles in the marriage had changed drastically at the time of separation. Therefore it is not inconsistent in my view to impute a certain small amount of income to Donna Martin in the interim. The roles in the Martin family partnership started to vary at the time of separation.

That cannot be ignored by the Court in reviewing the adequacy of interim spousal support. [ 90 ] By imputing an income of $20,000.00 per year to Donna Martin and by her receiving approximately $3,900.00 per month spousal support tax free the result is that Donna Martin has a monthly income of $6,540.00 ($3,900.00 per month x 12 x 25% tax gross up plus $20,000.00 ÷ 12). [ 91 ] Her interim monthly budget is $6,682.00. This monthly budget includes items that Timothy Martin was specifically ordered to pay to a third party in the December 19 th , 2013 Consent Interim Spousal Support Order.

The budgeted items are property taxes, home insurance, Blue Cross premiums and home security expenses. These take almost $600.00 off her monthly budget. Donna Martin continued to live in the matrimonial home and continued to enjoy the lifestyle that she had pre-separation. While the actual spousal support without the share bonus payments maybe on the low end of the spousal support guidelines, the needs of Donna Martin have certainly been met. [ 92 ] Rarely does any spouse advance economically on separation on an interim basis.

However, one should expect that a spouse’s budgeted needs are met and on an interim basis Donna Martin’s needs have been met. It is important to remember that the purpose of “interim” (sometimes referred to as “temporary”) spousal support is designed to be in place until a final hearing takes place. In this case the result of the “final” hearing amounts to simply a finding of entitlement and nil quantum at this time given Timothy Martin’s employment. Nevertheless an interim or temporary order under s15.2(2) of the Divorce Act must be viewed in the context of the entire

section which includes the factors in s15.2(4) and the objectives in 15.2(6). This Court is satisfied that when the factors and objectives of s15.2 of the Divorce Act are considered and given the maintaining of the same lifestyle by Donna Martin on a post-separation basis I am not prepared to disturb or add to what the parties agreed to on an interim basis through a consent order some two years post-separation. [ 93 ] Timothy Martin left his employment at the end of April 2016. There is nothing untoward about his terminating his employment on the eve of trial.

The entire severance package received by Timothy Martin appears to be an income stream that extends beyond the termination of his employment of late April 2016, not matrimonial property. Accordingly, he shall continue to pay spousal support payments for May, June and July 2016 at the amount outlined in paragraph 1.

a) and

b) of my interim Spousal Support Order dated December 19 th , 2013. [ 94 ] As of the date of Judgment in this matter Timothy Martin is no longer employed and his obligation to pay spousal support is reserved after July 2016. It is clear that entitlement to spousal support continues to exist but having equally divided the share bonus payments there is no real income either from employment or other income that would justify an award of spousal support at this time. Accordingly, spousal support on a go forward basis is reserved and at any time when Timothy Martin resumes employment the issue of quantum and duration can be determined either by agreement or by Court application.

Conclusion [ 95 ] The parties have agreed that various recreational properties can be divided between the parties. All furnishings and personal property including vehicles are to be the property of the party in whose possession they were at the time of trial. Further, all RRSPs and RESPs are to be equalized and each party retains their interest in the TFSAs in their name.

As well, the matrimonial home is to be transferred to Donna Martin. [ 96 ] The two lines of credit that are in the parties’ joint names are to be solely the responsibility of Timothy Martin. [ 97 ] The ownership and proceeds of the sale of the Midwest Surveys Inc. shares are to be shared equally between Timothy Martin and Donna Martin on the basis of the terms and conditions outlined in the order of Justice Horner dated April 14 th , 2016. [ 98 ] While normally a final decision after a trial serves to cause the Justice to be functus , in this situation I am prepared to entertain any applications by counsel for the parties to settle the terms of the Judgment and deal with any consequential orders that may be necessitated for the purposes of income tax and other issues. [ 99 ] This matter was scheduled for a one day

Summary Trial that took place on the 3 rd May, 2016 and argument on the 23 rd June, 2016. I would note that normally the matrimonial issues that needed to be litigated in a case like this would take at least five days of trial. Both Counsel in this matter are to be commended for the tremendous amount of work and effort they invested in this file to refine the issues and ensure that only the most intractable issue that could not be agreed to by the parties was left for the Court to determine.

Typically family litigation is marred and obfuscated by a host of unrelated contentious and interpersonal issues between the litigants that have no bearing on the issues at hand. Counsel in this case did not allow any of those problems to enter the litigation. The Court expressly acknowledges the hard work that Counsel have invested in this file and thanks them for their professionalism. [ 100 ] It would appear that the Plaintiff Donna Martin would be entitled to costs and the parties can approach me directly to deal with that matter if they cannot reach an agreement.

Heard on the 3 rd day of May, 2016, and the 23 rd day of June, 2016. Dated at the City of Medicine Hat, Alberta this 3 rd day of August, 2016. D.K. Miller J.C.Q.B.A. Appearances: David Carter, Carter Law for the Plaintiff Robert G. Harvie, Huckvale LLP for the Defendant