R. v. Hayes, 2019 QCCA 1732

Droit de la famille — 192047 2019 QCCA 1732 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-028062-198 (500-12-329919-165) DATE: October 8, 2019 CORAM: THE HONOURABLE MARIE-FRANCE BICH, J.A. DOMINIQUE BÉLANGER, J.A. JOCELYN F. RANCOURT, J.A. B. C. APPELLANT – Plaintiff v. D. N. RESPONDENT – Defendant JUDGMENT [ 1 ] On November 19, 2018 (notice of judgment dated December 17, 2018), thereafter corrected on January 30, 2019 (notice of judgment dated February 14, 2019), the Superior Court, district of Montreal (the Honourable Mr.

Justice Gregory Moore), granted a divorce between the parties, ordered the respondent to pay arrears for child support, declared that the shares held by the respondent in [Enterprises A] (“[Enterprises A]”) were a gift from his father and, therefore, private property within the meaning of art. 450, para.

(2) C.C.Q. , dismissed the appellant’s application for a compensatory allowance and rendered various accessory orders. [1] [ 2 ] The appellant asks the court to set aside this judgment and order a new trial, for the following reason: 3. On or about May 17, 2019, Appellant was informed that most of Respondent's testimony was not recorded due to a clerical error, which is clearly an error of the court for which the parties, and particularly, the Appellant should not be prejudiced. This will greatly affect Appellant's right to appeal the Superior Court decision. 4.

Appellant is requesting that a new trial be ordered as this Honorable Court will never have the opportunity to know and appreciate what Respondent said to the Trial Judge on the following issues, all of which have a direct impact on the matters raised by the present appeal: his explanation about how he received his shares in [Enterprises A], his undeclared income, the undeclared amounts on the financial statements of [Enterprises A], his work hours, his explanation about where the funds were procured to purchase [Enterprises A]. [ 3 ] The main question raised in appeal is indeed that of the status of the shares held by the respondent in [Enterprises A], and the appellant submits that the respondent’s full testimony is key in determining this issue.

She contends that these shares are not private property but acquests, whose value should be equally divided between the parties as at the date of the application for divorce. Alternatively, should a new trial not be ordered despite the missing part of the respondent’s testimony, she invites the Court to declare that said shares are acquests and to proceed to divide their value as at that same date. Subsidiarily, she argues that she is entitled to a compensatory allowance, which the trial judge erroneously denied her. [ 4 ] Should the Court order a new trial?

Article 300, para. 1 C.C.P. requires that “[d]epositions by witnesses [be] recorded so that the testimony can be preserved and reproduced.” The recording of such depositions and the transcripts thereof are often of primary importance in the appeal process, especially in fact-related matters, and, in their absence, the right to appeal may be seriously jeopardized, thus justifying a new trial, albeit not in every case. Indeed, as L’Heureux-Dubé, J. wrote in R. v. Hayes , for the majority: A new trial need not be ordered for every gap in a transcript.

As a general rule, there must be a serious possibility that there was an error in the missing portion of the transcript, or that the omission deprived the appellant of a ground of appeal. [2] [ 5 ] In Godbout v. R. , [3] our colleague Chamberland, J.A. took a similar approach: [100] L'appelant plaide enfin que l'absence de notes sténographiques le matin du 10 décembre 2009 l'a peut-être privé d'un moyen d'appel, ou de la possibilité de mieux étayer son moyen d'appel, ou, enfin, de la possibilité de découvrir une erreur de droit. [101] Ce moyen d'appel doit être rejeté.

Il est acquis que le caractère incomplet d'une transcription ne justifie pas toujours l'intervention de la Cour d'appel. De façon générale, cette intervention ne sera justifiée qu'en présence d'une possibilité sérieuse que la

partie manquante de la transcription contienne une erreur ou que cette défaillance ait privé l'appelant d'un moyen d'appel. Chaque cas est

donc un cas d'espèce et il faut examiner le contexte dans lequel la défaillance s'inscrit [reference omitted]. [ 6 ] Although both Hayes and Godbout were criminal law cases, their teachings are not restricted thereto. For instance, in Canadian Union of Public Employees, Local 301 v.

Montreal (City) , [4] L’Heureux-Dubé, J., writing for a unanimous Supreme Court, explained the following (the context being that of cases conducted before administrative tribunals): 81 In the absence of a statutory right to a recording, courts must determine whether the record before it allows it to properly dispose of the application for appeal or review. If so, the absence of a transcript will not violate the rules of natural justice. Where the statute does mandate a recording, however, natural justice may require a transcript.

As such a recording need not be perfect to ensure the fairness of the proceedings, defects or gaps in the transcript must be shown to raise a “serious possibility” of the denial of a ground of appeal or review before a new hearing will be ordered . These principles ensure the fairness of the administrative decision-making process while recognizing the need for flexibility in applying these concepts in the administrative context. [Emphasis added] [ 7 ] This rule was applied in G.T. v.

Centre de santé et de services sociaux du Suroît , [5] where the absence of a recording of the depositions, and, consequently, the impossibility of obtaining the transcripts thereof, were considered an insurmountable obstacle to the full exercise of the right of appeal, wherefore a new trial was ordered (the trial judge, in that case, having also committed a number of apparent and serious errors). [ 8 ] In the present case, the fact that part of the respondent’s testimony is missing does not imperil the appellant’s rights before this Court and does not deprive her of any ground of appeal (nor does it impair the respondent’s ability to counter the appellant’s contentions).

The transcripts found in the appellant’s memorandum, including, most significantly, that of the pre-trial examination of the respondent, together with the documentary evidence reproduced in both parties’ memorandums, allow the Court to fully grasp the arguments of the parties, as well as the facts and issues at stake. On this point, the respondent argues that: 65. Appellant’s argument that the Court of Appeal [will] “ never have the opportunity to know and appreciate what Respondent said……. ” is no more than speculation that the transcript might give her something to argue in appeal.

It is submitted that this falls well short of satisfying the test. [ 9 ] The Court agrees and concludes that a new trial is unnecessary. [ 10 ] Are the 45 shares held by the respondent in [Enterprises A] since 1999 acquests or private property? Art. 459 C.C.Q. (which is not mentioned in the judgment under appeal) states that: 459. Tout bien est présumé acquêt, tant entre les époux qu’à l’égard des tiers, à moins qu’il ne soit établi qu’il est un propre. 459.

All property is presumed to constitute an acquest, both between the spouses and with respect to third persons, unless it is established that it is private property. [ 11 ] It was thus the respondent’s burden to establish, on a balance of probabilities (art. 2804 C.C.Q. ), that the shares in question were private property (in the present case under art. 450, para.

(2) C.C.Q. ), and to rebut the presumption, established by art 459 C.C. Q. , that they were acquests . [ 12 ] Has he discharged his burden? In the Court’s opinion, he has not, and, in concluding otherwise, the judgment under appeal ignored an unequivocal documentary evidence and misapprehended the requirements of art. 1824 C.C.Q. [ 13 ] [Enterprises A] came into existence on February 22, 1999, at the initiative of the respondent’s father (H.) and the latter’s sister (A.), although the respondent was closely associated with the enterprise.

From the beginning, he was to be (and actually became) one of the directors of the company and one of its original shareholders.

In this dual capacity, he participated in the initial and preliminary resolutions necessary to set up the company. [6] [ 14 ] According to one of these resolutions, 45 shares were to be issued in his name, 5 in H.’s name, 5 in A.’s name and 15 in the name of each of A.’s three children. [7] And so it happened: the respondent, his aunt and his three cousins all subscribed for their shares, as confirmed by a document appended to the initial resolution of the shareholders of [Enterprises A], entitled “Organization of the Company,” effective on February 22, 1999: [8] To: LES ENTREPRISES A – [Enterprises A] I, the undersigned, D.

N., hereby subscribe for forty-five

(45) Class A Shares of the Capital stock of your company. Montreal, February 22 nd 1999. (Signature ) D. N. To: LES ENTREPRISES A – [Enterprises A] I, the undersigned, A. K. hereby subscribe for five

(5) Class A Shares of the Capital stock of your company. Montreal, February 22 nd 1999.

(Signature ) A. K. To: LES ENTREPRISES A – [Enterprises A] I, the undersigned, M. K. hereby subscribe for FIFTEEN

(15) Class A Shares of the Capital stock of your company. Montreal, February 22 nd 1999. (Signature ) M. K. To: LES ENTREPRISES A – [Enterprises A] I, the undersigned, A. K. hereby subscribe for FIFTEEN

(15) Class A Shares of the Capital stock of your company. Montreal, February 22 nd 1999. (Signature ) A. K. To: LES ENTREPRISES A – [Enterprises A] I, the undersigned, D. K. hereby subscribe for FIFTEEN

(15) Class A Shares of the Capital stock of your company. Montreal, February 22 nd 1999. (Signature ) D.

K. [ 15 ] H.’s subscription for 5 shares seems to be missing, but his signature appears on page 2 of the resolution, and the rest of the minute book of the company confirms that he held 5 shares in the capital stock of the company, which were issued and subscribed on February 22, 1999 as well. [ 16 ] The securities register confirms that, at all times, the respondent held 45 shares of [Enterprises A], which were issued to him directly by the company upon its incorporation. [9] His share certificate attests to it. [10] Furthermore, the company’s securities register (or its minute book in general) contains nothing that would indicate that these 45 shares may have been transferred from H. to the respondent, either in 1999 or afterwards. [11] The same is true of all the other shareholders of the company (H., A. and A.’s children). [ 17 ] Although he worked full time for the company until 2017, the respondent (who was appointed its president from the date of incorporation) did not invest any funds in it, insofar as his father and aunt financed it through various loans, including an initial loan of $104,500 each, as well as a hypothecary loan from another family company.

As a matter of fact, with the financing provided by H. and A. through these loans, [Enterprises A] was able to buy [Enterprises B] for $500,000 in 1999 and operated it until October 2017, repaying the hypothecary loan along the way [12] . On October 19, 2017, [Enterprises B] was sold to a third party for $1,710,000. [ 18 ] According to the trial judge, H. and A. incorporated [Enterprises A] for estate planning purposes: they would both put money into the company and their children, as shareholders, would benefit from any increase in the value thereof.

Things went as planned and, after the sale of [Enterprises B] in 2017, the 100 shares issued in 1999 were indeed worth no less than $963,971, an amount that will eventually be distributed to the shareholders. [13] [ 19 ] Finally, and to complete the picture, it must be noted that, per his 2008 will, H., who died in 2013, bequeathed his own 5 shares to his son, as well as “the loan owed by [Enterprises B] to myself in the actual sum of ONE HUNDRED AND FOUR THOUSAND, FIVE HUNDRED DOLLARS ($104,500) and/or any balance still owing to myself upon my death.” The transfer of these 5 shares is duly indicated in [Enterprises A]’s securities register, with all other necessary documents. [ 20 ] While on the subject, it must be pointed out that H.’s will does not substantiate the respondent’s contention that his father gave him his initial [Enterprises A] shares nor does it disprove it: its effect is neutral.

According to this will, H. left approximately $200,000 to each of his children, in property or money, as legacies by particular title. Only the respondent seems to have been left less (see above), but we do not know exactly how much [Enterprises A] owed to H. upon his death.

In addition, account must be taken of the fact that, three years before he made his will, H. gave $100,000 to his son (which was used to pay the hypothec on the parties’ former family residence, at the end of 2005). [14] All in all, the will is not useful in determining whether or not H. gave the disputed shares to the respondent. [ 21 ] At the time [Enterprises A] was incorporated, [15] the parties, who married in 1987, were still together (they separated in September 2004).

Their matrimonial regime was that of partnership of acquests, hence the following question: are the 45 shares of [Enterprises A] issued to the respondent in 1999 acquests, to be divided equally between the parties, pursuant to art. 449 C.C.Q. , or private property to be kept solely by the respondent, pursuant to art. 450, para.

(2) C.C.Q. ? It is not disputed that the 5 shares inherited by the respondent upon the death of his father are private property. [ 22 ] The judge concluded that the 45 shares were private property because they had been gifted to the respondent by his father. In

his view, as part of the estate planning referred to earlier, “H. gave the shares to Mr. N., who accepted them immediately, which satisfies the Civil Code ’s definition of a gift.” [16] [ 23 ] With all due respect, the Court cannot endorse this conclusion. [ 24 ] The documentary evidence is particularly clear: H. never held the 45 shares at stake, which were issued directly to the respondent, who subscribed for them personally.

Whether these shares were issued upon instructions from H. (and A.), whose juridical personality, incidentally, is not to be confused with that of [Enterprises A] (the actual issuer of the shares), is irrelevant, as is the fact that H. (and A.) may have intended some form of estate planning when they conceived the idea of setting the company up in this manner. The evidence does not reveal that H. (or A.) gave anything to the respondent in connection with the company – which they financed not through gifts but through loans – and neither does it show that H. paid for the shares issued to the respondent.

Needless to say, [Enterprises A] did not donate them to the respondent. [ 25 ] The mechanism of an “estate freeze” was briefly referred to during the cross-examination of E. S., the accountant for the N. family’s businesses: Q. Okay. So isn’t it called an estate freeze to give future growth to your children? R. In a sense it could be.

I mean it’s not pure estate freeze, it’s estate planning that they thought ahead and said okay, you know, any future growth will definitely go to the… go to the kids, we don’t, you know, we don’t… you know, it’s not our intention that, you know, any future growth goes to, you know, goes to… Q. To who? A. Goes to H. and A..

They basically want the kids to participate in any future growth of the company. [17] [ 26 ] That H. and A. may have wanted to help their children is entirely plausible (and, indeed, they did help them, most notably by extending loans to [Enterprises A]), but there was no estate freeze in the corporate strategy they chose in order to put their intention to work.

Moreover, that they may have wanted their children to benefit from the future growth of [Enterprises A] does not mean that this was done or could be done irrespective of the rights of said children’s spouses under their matrimonial regime. [ 27 ] In short, on a balance of probabilities, the respondent failed to rebut the presumption established by art. 459 C.C.Q. , as the evidence does not support the contention that his father gave him the 45 shares which he held in [Enterprises A] from the date of its incorporation.

Contrary to the trial judge’s finding, there was no such gift and, certainly, no gift that would satisfy the requirements of either art. 1806 or para. 1 or 2 of art. 1824 C.C.Q. : 1806. La donation est le contrat par lequel une personne, le donateur, transfère la propriété d’un bien à

titre gratuit à une autre personne, le donataire; le transfert peut aussi porter sur un démembrement du droit de propriété ou sur tout autre droit dont on est titulaire. 1806. Gift is a contract by which a person, the donor, transfers ownership of the property by gratuitous title to another person, the donee; a dismemberment of the right of ownership, or any other right held by a person, may also be transferred by gift. La donation peut être faite entre vifs ou à cause de mort. Gifts may be inter vivos or mortis causa . 1824.

La donation d’un bien meuble ou immeuble s’effectue, à peine de nullité absolue, par acte notarié en minute; elle doit être publiée. 1824. The gift of movable or immovable property is made, on pain of absolute nullity, by notarial act en minute , and shall be published. Il est fait exception à ces règles lorsque, s’agissant de la donation d’un bien meuble, le consentement des parties s’accompagne de la délivrance et de la possession immédiate du bien.

These rules do not apply where, in the case of the gift of movable property, the consent of the parties is accompanied by delivery and immediate possession of the property. [ 28 ] There was no transfer of value from H.’s patrimony to that of the respondent or an actual divestiture of property by H. in favour of the respondent, [18] there was no notarial act and there was no actual delivery of property. [19] [ 29 ] Even though we may assume H. and A.’s good intentions towards their children, the manner in which [Enterprises A] was incorporated, structured and financed involved no gift, and, more specifically, no gift of the disputed 45 shares to the respondent.

At best, too many grey areas remain in the respondent’s narrative, and the evidence, on the whole, is not sufficient to rebut the presumption enacted by art 459 C.C.Q. [ 30 ] The 45 shares that the respondent subscribed for in February 1999 are thus acquests pursuant to art. 448 and 449 C.C.Q. [ 31 ] Which date should be used to evaluate the partition of the matrimonial regime, and the 45 shares held by the respondent?

The trial judge having concluded that the shares were private property, he did not explicitly examine this question, although, on the basis of the expert report, he concluded that: [33] The parties hired an expert to determine the value of [Enterprises A] in September 2004, when the parties separated ($170,596) and in October 2017, when [Enterprises B] was sold ($963,971). [reference omitted] [34] In 2004, Mr. N.’s 45 shares were worth $76,768. The 50% claimed by Mrs. C. is $38,384.

[…] [ 32 ] These assessments are not contested in appeal. [ 33 ] Art. 518 C.C.Q. reads as follows: 518. Le divorce emporte la dissolution du régime matrimonial. 518. Divorce carries with it the dissolution of the matrimonial regime. Les effets de la dissolution du régime remontent, entre les époux, au jour de la demande, à moins que le tribunal ne les fasse remonter à la date où les époux ont cessé de faire vie commune .

The effects of the dissolution of the regime, as between the spouses, are retroactive to the date of the application, unless the court makes them retroactive to the date on which the spouses ceased sharing a community of life . [Emphasis added] [ 34 ] The tribunal enjoys a certain discretion in this matter (similar to that arising from art. 417 C.C.Q. , in connection with the partition of the family patrimony), which must be exercised with respect for the principle of equity between the spouses and which must rest on the finding that “ l’interruption de vie maritale [est] irrévocable et surtout totale de sorte que les conjoints se considèrent et soient dorénavant, sous tous les aspects de la conduite de leur vie, parfaitement autonomes comme ils le seraient si un jugement avait consacré la rupture de leur mariage. ” [20] [ 35 ] In the present case, the parties separated in September 2004 and from then on “ceased sharing a community of life” within the meaning of art. 518 C.C.Q.

Although they stayed in contact after their separation, most notably because of their children, the parties were financially independent from each other thereafter. They most certainly were after 2005, when the respondent paid the hypothecary loans on the family residence (in which the appellant and the children lived at the time and continued to live), in the context of the divorce proceedings that had been instituted by the appellant in October 2004 (and which she did not pursue).

When the respondent, in 2009, transferred to the appellant, for $1, his share in what used to be the family residence, he simply confirmed the marriage breakdown which had occurred in September 2004, the parties having earned their own living and not shared expenses after that date (except those related to their children, to which the respondent sporadically contributed). [ 36 ] The fact that the appellant abandoned her 2004 divorce proceedings after the hypothecary loans on the family residence were paid, or that she waited 12 years after the separation before instituting the present proceedings [21] in order to claim the dissolution of the matrimonial regime and, more specifically, the value of the respondent’s shares is no indication that the parties were not living separate lives, in all economical respects, since September 2004. [22] [ 37 ] Consequently, the value of the 45 [Enterprises A] shares held by the respondent since 1999 must be established at the date on which the spouses ceased sharing a community of life, i.e., September 2004.

According to the expert report (exhibit P-8), with which the parties agree, the 100 shares issued by the company were then worth $170,596. The respondent’s 45 shares were thus worth $76,768.20, half of which ($38,384.10) is now owed to the appellant. [ 38 ] Is the appellant entitled to a compensatory allowance? Since the Court will allow the partition of the value of the shares, there is technically no need to decide the appellant’s claim for a compensatory allowance, which was presented as a subsidiary measure.

Considering, however, that the shares’ value is to be established in 2004, and not 2017, as the appellant would have preferred, a few words about the compensatory allowance may be necessary. [ 39 ] In that respect, the Court entirely agrees with the trial judge when he concluded that the respondent’s enrichment (which occurred after the parties ceased sharing a community of life) was not linked to any impoverishment of the appellant, especially in light of the fact that the former gave the latter his share of the family residence and more generally waived the partition of the family patrimony.

The criteria of art. 427 C.C.Q. , as interpreted and applied by the courts, not having been met, [23] the appellant was not entitled to a compensatory allowance and the trial judge did not commit any error of law or palpable and overriding error of fact in dismissing her claim.

FOR THESE REASONS, THE COURT: [ 40 ] ALLOWS the appeal in part; [ 41 ] SETS ASIDE and QUASHES para. 49 of the judgment under appeal; [ 42 ] DECLARES that the respondent’s 45 shares in [Enterprises A] (issued in 1999) were acquests, the value of which, established as at September 2004, must be divided equally between the parties; [ 43 ] ORDERS the respondent to pay $38,384.10 to the appellant, with interest at the legal rate and the additional indemnity (art. 1619 C.C.Q. ) as of February 19, 2016; [ 44 ] All other conclusions of the judgment under appeal are to remain as is; [ 45 ] THE WHOLE without judicial costs.

MARIE-FRANCE BICH, J.A.

DOMINIQUE BÉLANGER, J.A. JOCELYN F. RANCOURT, J.A. Mtre Sara-Lyna Julien Lombardo MARIA R. BATTAGLIA, AVOCATS For the Appellant Mtre Andrew H. Heft HEFT DROIT DE LA FAMILLE INC. For the Respondent Dates of hearing: September 26 and 27, 2019