2020 QCCA 226, 2020 QCCA 226

Droit de la famille — 20172 2020 QCCA 226 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-028030-195 (500-12-327801-159) DATE: February 11, 2020 CORAM: THE HONOURABLE JACQUES CHAMBERLAND, J.A. ALLAN R. HILTON, J.A. MARK SCHRAGER, J.A. K. S. APPELLANT – Defendant v. J. B. RESPONDENT – Plaintiff JUDGMENT [ 1 ] On appeal from a judgment rendered on November 27, 2018 by the Superior Court, District of Montreal (the Honourable Mr.

Justice Gérard Dugré), granting a divorce petition and adjudicating corollary relief. [ 2 ] For the reasons of Justice Schrager, with which Justices Chamberland and Hilton concur, THE COURT: [ 3 ] ALLOWS the appeal in part for the purpose of modifying the judgment of the Superior Court as follows: [3.1] Paragraphs 82

a) and 109 of the judgment are struck out; [3.2] Paragraph 89 of the judgment is struck out and substituted by the following: Family Vehicle [89] GRANTS to Plaintiff continued exclusive ownership and use of the 2010 Lexus ES350 motor vehicle currently registered in her name, and ORDERS Respondent (Plaintiff) to pay Appellant (Defendant) $10,750; [3.3] Paragraph 82

b) of the judgment is struck out; [3.4] Paragraph 111 is amended by striking out the figure $23,481 and replacing it by $1,519; [3.5] Paragraph 81 of the judgment is struck out and replaced by the following: [81] ORDERS that the net proceeds from the sale of the family residence be divided equally between the parties, after payment to the Appellant (Defendant) of $41,664; [ 4 ] The whole without costs given the nature of the case. JACQUES CHAMBERLAND, J.A. ALLAN R. HILTON, J.A. MARK SCHRAGER, J.A. Mtre Joseph Neudorfer SARNA NEUFORFER For Appellant

Mtre Stewart Litvack ROBINSON SHEPPARD SHAPIRO For Respondent Date of hearing: January 23, 2020 REASONS OF SCHRAGER, J.A. [ 5 ] This is an appeal from a judgment rendered on November 27, 2018 by the Superior Court, District of Montreal (the Honourable Mr. Justice Gérard Dugré), [1] granting a divorce petition and adjudicating corollary relief. The custody and support orders for the children are not in issue in the appeal.

The division of the family patrimony and partnership of acquests, as well as a lump sum awarded in favour of the wife (“Respondent” in appeal) and other financial matters are the subject matter of the appeal. [ 6 ] The judgment is, unfortunately, poorly structured and lacking in factual content and explanation to allow for a full understanding of the various conclusions and orders. [2] Four issues require the Court’s intervention. Given the record and the discretionary nature of many of the subjects, the other grounds of appeal do not warrant appellate intervention. I.

THE FACTS [ 7 ] The parties were married in [Country A], on April 1, 2002 at a time when they were domiciled in Quebec, so that the applicable matrimonial regime is partnership of acquests. This is common ground in the appeal. [ 8 ] Towards the end of 2004, the couple decided to return to City A and start a business.

Thus, the company, [Company A] (“[Company A]”) was incorporated. [ 9 ] They agreed that Respondent would be a stay-at-home mother until their child (born in [...] 2004) reached two and a half years of age. [ 10 ] Two other companies were created during the marriage, [Company B] and [Company C] (an investment company). [ 11 ] During the marriage, both Appellant and Respondent were employed in the family businesses. [ 12 ] The parties separated on July 28, 2015 and Respondent filed divorce proceedings on August 13, 2015. [ 13 ] Several interim orders were issued by the Superior Court including one by Justice Corriveau on October 22, 2015 granting custody of the couple’s three children to Respondent and ordering Appellant to pay support to her and the children and granting Respondent exclusive use of the family residence. [ 14 ] On April 26, 2016, given Respondent’s full time employment, the parties agreed to suspend the spousal support. [ 15 ] On October 6, 2016, the Superior Court approved the parties’ agreement to reduce Appellant’s support payments for the children.

The parties also agreed to an equal division of the payments necessary to repay their line of credit. [ 16 ] On June 14, 2017, Justice Collier ordered joint custody of the children and adjusted support payments accordingly. He noted Respondent’s lack of diligence in failing to inscribe the case for trial, observing that she seemed content with the status quo of custody of the children and living in the family residence. II.

THE JUDGMENT [ 17 ] The judge ordered an equal partition of the family patrimony as of the date of separation (July 28, 2015). [ 18 ] The furnishings were awarded to Respondent in consideration of $15,000 and the family car was awarded to her without compensation. [ 19 ] The judge ordered the immediate sale of the house, which required a further order by a judge of this Court.

The parties informed the Court at the appeal hearing that the house was sold and the proceeds are being held in the notary’s trust account, though the Court has not been made aware of the sale price, which the judgment in appeal pegs at a minimum of $775,000. The judge refused to compensate Appellant as co-owner of the house for Respondent’s exclusive use of it.

He also refused to deduct from the value of the house, for the benefit of Appellant, the amount of two sums received as a gift or loan from Appellant’s family and allegedly used to pay down the mortgage loan. [ 20 ] The partnership of acquests consisted primarily of a condominium apartment held as an investment and the value of the aforementioned companies as determined by a business valuator, less the amount of certain debts. On division, the judge determined that

Appellant owed Respondent $81,581.34, which would be paid from Appellant’s share of the proceeds from the sale of the family residence. [ 21 ] The judge refused to award any compensation to Appellant for the management of a condo held by the couple as an investment. [ 22 ] Lastly, the judge awarded $50,856 to Respondent as a lump sum alimentary payment. III. GROUNDS OF APPEAL [ 23 ] The grounds of appeal drafted by Appellant take up the various awards and orders of the judgment outlined above:

(1) Did the trial judge commit a palpable and overriding error in findings of fact by ordering Appellant to pay to Respondent an alimentary lump sum payment in the amount of $50,856, net of taxes?

(2) Did the trial judge err in law by dismissing Appellant's claim for compensation of half the value of the family car in the amount of $10,750?

(3) Did the trial judge commit a palpable and overriding error in findings of fact by dismissing Appellant's claim to deduct from the net value of the family patrimony, in favour of Appellant, a gift from his parents in the amount of $71,900 and the added value of $33,793?

(4) Did the judge commit a palpable and overriding error in findings of fact by dismissing Appellant’s claim to deduct from the net value of the family patrimony, in favour of Appellant, monies from Appellant's sister in the amount of $50,000?

(5) Did the trial judge commit a palpable and overriding error in findings of fact by dismissing Appellant's claim for compensation in the amount of $900 per month, for a total amount of $26,100, resulting from the exclusive use and enjoyment of the former family residence by Respondent and her parents since their separation?

(6) Did the trial judge commit a palpable and overriding error in findings of fact by ordering that the amount of $23,481 (representing 50% of the difference in the amount that the parties respectively withdrew, following their separation, from the jointly held CIBC line of credit) should be deducted from Appellant's share of the net proceeds from the sale of the family residence and remitted to Respondent?

(7) Did the judge err in law by dismissing Appellant's choice made in virtue of

Article 481 C.C.Q. and ordering him to pay to Respondent the sum of $81,581.34, representing the equalization of the parties' respective acquests?

(8) Did the judge err in law and commit a palpable and overriding error in findings of fact by dismissing Appellant's claim for compensation of the administration fee related to the condominium at [...], City A, jointly owned by the parties, in the amount of $150 per month, for a total amount of $4,050, as well as the reimbursement of expenses in the amount of $986.93 in relation to the same condominium? [ 24 ] I will deal with each ground individually, except (3) and (4), which are treated together. IV.

DISCUSSION 4.1 Did the trial judge commit a palpable and overriding error in findings of fact by ordering Appellant to pay to Respondent an alimentary lump sum payment in the amount of $50,856, net of taxes? [ 25 ] The judge reasoned as follows: [41] (…) After a marriage of 13 years, a lifestyle of $13,610.31 per month, and three children, the Court concludes that a lump sum should be granted to Plaintiff to ensure a smooth transition for a period of three years. Her monthly deficit amounts to $1,412.69.

Then, an amount of $50,856.00 should be sufficient for Plaintiff to get back on her feet after the breakdown of the marriage. The Defendant has clearly the means to pay such a lump sum. (…). [ 26 ] Respondent defends the order, saying that the judge exercised his discretion under

Section 15.2 of the Divorce Act [3] based on the monthly deficiency in Respondent’s budget and his analysis of Appellant’s means to pay based on the latter’s income as well as

assets accumulated during the marriage. Given the absence of any manifest and overriding error, Respondent concludes that there is no justification for this Court to intervene. [ 27 ] Respondent is incorrect. The order is tainted by manifest error.

Section 15.2 of the Divorce Act definitely grants discretion and the case law [4] provides that the respective means and needs of the parties are to be considered. Such an award is appropriate to rebalance the financial hardship of divorce, [5] including an allowance for a spouse to return to the work force with a view to attaining financial independence, so that the judge’s view of the purpose, i.e., to permit Respondent “to get back on her feet”, is not a mischaracterization of the case law. [ 28 ] However, the facts do not indicate that such an award is appropriate in this case.

Contrary to the judge’s finding, Respondent did not merely work “sporadically” in the family business since the eldest child reached two and a half years of age (in 2006). While she took a year’s maternity leave upon the birth of each of the other two children, her pay slips in 2015 indicate full time employment (or at least considerably more than “sporadic” work) with earnings comparable to those of Appellant. Upon separation, she left the business but found new employment generating a similar salary within three months, so that by the time of the trial the parties’ earnings were similar.

She was 44 years of age on the date of the judgment. Her parents were living with her and the children. Accordingly, the need to get Respondent “back on her feet” is not consonant with the facts of this case. [ 29 ] As for Appellant’s means to pay, the record indicates that his revenue and assets are comparable to those of Respondent, so that the parties find themselves in the same financial situation after the divorce. I underline that half the net worth of the businesses was awarded to Respondent on the partition of the acquests. [ 30 ] This misapprehension of the facts by the judge in the application of

Section 15.2 of the Divorce Act constitutes an error of principle justifying the intervention of this Court to correct the situation by rebalancing the financial impact of the divorce. [6] Consequently, the award will be set aside. 4.2 Did the trial judge err in law by dismissing Appellant’s claim for compensation of half the value of the family car in the amount of $10,750? [ 31 ] The judge awarded the car, part of the family patrimony, to Respondent without financial compensation because of the fact that “she requires a vehicle for her to transport the minor children and that Defendant will be retaining his Audi Q7 owned by [Company A].” [ 32 ] Having found that the family patrimony should be equally divided, the judge erred in not accounting for the value of the automobile simply because Respondent needs it. [ 33 ] Moreover, the judge was wrong again in justifying the award on the basis that Appellant has the use of a car owned by one of the companies.

The value of that car appears on the financial statements of [Company A], so that it was considered in the valuation of the company used to divide the acquests.

In other words, Appellant is already compensating Respondent for the company car, so that, in effect, he is unfairly penalized by not receiving one half of the value of the car forming part of the family patrimony, which Respondent retains. [ 34 ] This error is one of principle and is manifest and overriding, such that it cannot be justified, as Respondent asserts, as the exercise of judicial discretion. [ 35 ] Thus, Appellant will be credited in the division of the family patrimony with $10,750, which is one half of the market value of the car put in evidence at the trial. 4.3 Did the trial judge commit a palpable and overriding error in findings of fact by dismissing Appellant’s claim to deduct from the net value of the family patrimony, in favour of Appellant, a gift from his parents in the amount of $71,900 and the added value of $33,793? 4.4 Did the judge commit a palpable and overriding error in findings of fact by dismissing Appellant’s claim to deduct from the net value of the family patrimony, in favour of Appellant, monies from Appellant’s sister in the amount of $50,000? [ 36 ] The judge’s explanation for not allowing the deductions in favour of Appellant is clearly lacking, indeed practically non- existent.

In the result, however, there is no overriding error regarding the gift from Appellant’s parents, but the money received from Appellant’s sister requires the Court’s intervention. [ 37 ]

Article 418 C.C.Q. provides for the deduction in favour of one spouse of an amount received by donation or inheritance that is used to acquire assets in the family patrimony. The burden of proving such use is on Appellant. Moreover, the case law reflects that depositing such funds in an account used for other purposes may constitute or be indicative of an implicit renunciation of the credit sought under

Article 418 C.C.Q. [7] [ 38 ] The family home was purchased in December 2007. The documentary evidence confirms Appellant’s testimony on the balance of probabilities that his parents gave him US$60,000 (or CAN$71,900) in January 2009.

However, after the deposit in Appellant’s bank account there was no demonstration that the money was paid to the hypothecary creditor to reduce the mortgage loan. [ 39 ] The statement of the mortgage loan discloses receipt by the creditor (in addition to regular monthly payments) of $30,000 on November 4, 2009, $12,671.72 on April 3, 2010 and $10,000 on September 3, 2010, but these amounts cannot be tied to the donation from Appellant’s parents on the basis of the documentary evidence. [ 40 ] Regarding the monies Appellant received from his sister, the documentary evidence discloses a $50,000 deposit on September

16, 2013 to a bank account held jointly by Appellant and his sister shortly after her arrival in Canada. Appellant contends that this is a loan or gift from his sister that was applied to the balance of the mortgage loan relating to the family home. The statement relating to this bank account indicates that on December 3, 2013, $37,200 was transferred to “IBB Québec Regional Mortgage Centre” although the mortgage statement in the record covers the period from January 1, 2008 to December 3, 2010 only and so does not indicate receipt of the funds.

Nonetheless, on a balance of probability it appears that $37,200 of the $50,000 Appellant received from his sister was applied directly to the mortgage loan. The judgment is silent on these facts and such omission constitutes a palpable and overriding error. [ 41 ] Appellant should receive, by way of deduction from the net proceeds arising from the sale of the family home, $37,200 increased by the corresponding increase in value of the home between December 2013 and July 2015 (the date of separation).

The municipal evaluation in 2017 was $710,700, albeit both parties declared that the value was $750,000 at the time of separation. The house was purchased in 2007 for $465,000. The file does not disclose any indication of the value in December 2013. The increase in value from purchase to separation is $285,000, or 61% over 7 ½ years.

On a straight line basis, this equates to approximately 8% per year, which while an imperfect methodology, is the best possible method for the Court to calculate the increase based on the record. [8] Thus, I would arbitrate the increase in value attributable to Appellant on the $37,200 contribution at 12% (for one and a half years), or $4,464.

Thus, Appellant should receive from the net proceeds of the family home $41,664 in addition to fifty percent of the remainder. 4.5 Did the trial judge commit a palpable and overriding error in findings of fact by dismissing Appellant’s claim for compensation in the amount of $900 per month, for a total amount of $26,100, resulting from the exclusive use and enjoyment of the former family residence by Respondent and her parents since their separation? [ 42 ] The judge refused to award such compensation because Appellant “himself voluntarily left the family residence and granted exclusive use of the house to Plaintiff and, more importantly, to the children.” [ 43 ] This is wrong in fact.

Appellant left the house following the receipt of a letter dated July 30, 2015 from Respondent’s attorney calling upon him to do so. This was followed by the interim judgment of Justice Corriveau of October 22, 2015, granting exclusive use of the home to Respondent. [ 44 ]

Article 1016 C.C.Q. provides that Appellant would have a right to compensation against his co-owner because of her exclusive use of the house. However, this rule is tempered in family matters. [9] Specifically, such indemnities have been held not to be due where the exclusive use by one spouse is the subject of a judgment and the spouse occupying the house has custody of the children, as is the case here. [10] [ 45 ] Moreover, on July 17, 2017, Justice Collier declared that Respondent should assume the payment of all expenses relating to the house.

If an indemnity were to be granted in favour of Appellant, all of the costs assumed by Respondent up to the date of trial would have to be taken into account, which would significantly dilute the claim. Also, Appellant concedes that Respondent’s parents contributed to the payment of these expenses. [ 46 ] Accordingly, although the judge’s decision regarding the matter is tainted with a palpable error of fact, it does not appear overriding given the other factors mentioned above and given the overall discretion which trial judges possess in such cases.

Therefore, it is not appropriate for the Court to intervene. [11] [ 47 ] At the hearing, counsel asserted an additional argument to justify this claim. Up until the couple’s separation, Respondent’s parents were living in a condominium apartment owned by the parties and paying rent of $900 per month. The lost rent (or half of it) should, according to Appellant, accrue to him. However, there is no documentary evidence in support of such claim, either in the form of a lease signed by the parents or efforts made to re-let the condo.

Again, no ground for intervention by this Court is made out. 4.6 Did the trial judge commit a palpable and overriding error in findings of fact by ordering that the amount of $23,481 (representing 50% of the difference in the amount that the parties respectively withdrew, following their separation, from the jointly held CIBC line of credit) should be deducted from Appellant’s share of the net proceeds from the sale of the family residence and remitted to Respondent? [ 48 ] The judge rejected Appellant’s position without further explanation than “[b]ased on the evidence, the Court agrees with the arguments put forward by Plaintiff [Respondent].” [ 49 ] It is clear that following the separation, Appellant and Respondent each withdrew, in the aggregate, from the account $66,962 and $20,000 respectively. [ 50 ] Appellant testified that $50,000 that he withdrew at the end of July 2015 went directly to the account of [Company A], which it used to pay creditors. [Company A]’s bank statements disclosed $50,000 received by the company through a transfer on August 6, 2015. [ 51 ] Accordingly, such amount would increase the worth of [Company A] in the evaluation accepted by the Court and would be accounted for in the payment Appellant was ordered to make as part of the equalization of the partnership of acquests. [ 52 ] It is not an answer for Respondent to assert that the companies were evaluated as at the separation in July 2015.

Though this is the correct reference date, the valuator had the financial statements and other data (such as inventory values) up until December 2015. In outlining his approach and methodology, he states the following in his report: A quick comparison between 31 st of July and 31 st December profit & loss shows that: - Most of the Company’s revenues are recorded during the second half of 2015 - Most of the Company’s operational expenses are recorded during the first half of 2015

This shall confirm, for an evaluation purpose, that a midyear evaluation is not relevant. Accordingly, I take as given that the $50 000 deposit to the credit of [Company A] was accounted for in the valuation of that company. [ 53 ] Thus and in effect, the judge ordered Appellant to pay twice. The error of fact is manifest and overriding, so that the $50,000 should be removed from the equation. Consequently, total withdrawals from the line of credit after the separation would be $36,962 ($16,962 plus $20,000).

Respondent would owe $1,519 ($20,000 less $18,481 (one half of $36,962)) to Appellant on the division of the partnership of acquests. 4.7 Did the judge err in law by dismissing Appellant’s choice made in virtue of

Article 481 C.C.Q. and ordering him to pay to Respondent the sum of $81,581.34, representing the equalization of the parties’ respective acquests? [ 54 ] The amount Appellant must pay will obviously be adjusted given the adjudication above, but the issue here is whether Appellant could acquit the debt by giving one half of the shares of the companies in payment of the obligation to equalize the acquests. [ 55 ] While the judge noted Appellant’s offer, he did not give effect to it, but provided no reasons.

Nonetheless, the refusal of such offer does not, in the circumstances, constitute a reviewable error, for the reasons which follow. [ 56 ] The choice of a spouse to pay cash or give property in payment in order to give effect to the partition of the family patrimony, as provided for in

Article 481 C.C.Q. , is not absolute nor unfettered by the exercise of judicial discretion. [12] Moreover and literally,

Article 481 C.C.Q. does not apply to the division of the acquests. [ 57 ] The value of the companies was in evidence as at the date of separation. However, there was no evidence of the value as at the proposed date of the execution of the payment obligations determined by the judgment.

Thus, simply ordering one half of the shares to be transferred could potentially be an underpayment or even an overpayment of the obligation to divide the acquests as at the date of separation. [ 58 ] Moreover, given the divorce, it would be inequitable, if not sinister, to force Respondent into business with Appellant by making her a 50% shareholder when she left the companies almost immediately following the separation.

The purpose of the exercise is to resolve the dispute, not to transform a divorce case into potential shareholder litigation. [ 59 ] This ground of appeal cannot succeed. 4.8 Did the Judge err in law and commit a palpable and overriding error in findings of fact by dismissing Appellant’s claim for compensation of the administration fee related to the condominium at [...], City A, jointly owned by the parties, in the amount of $150 per month, for a total amount of $4,050, as well as the reimbursement of expenses in the amount of $986.93 in relation to the same condominium? [ 60 ] The judge decided that “[t]here is no obligation for the Plaintiff [Respondent] to pay such administration fee to Defendant [Appellant] (…)”. [ 61 ] This is incorrect, since

Article 1019 C.C.Q. provides that co-owners share the “costs of administration and the other common charges related to the undivided property.” However, the record does not document the monetary claims of Appellant in this regard, so they cannot be granted. [ 62 ] Again, and although the curt reason expressed by the judge not to award these amounts is incorrect, the error does not appear overriding and so does not merit appellate intervention. V.

SUMMARY [ 63 ] In conclusion, in the corollary relief and the division of the family patrimony and the partnership of acquests, Appellant should benefit from the following credits and/or modifications to the judgment:

i) The $50,856 alimentary lump sum is not due, so that paragraphs 82

a) and 109 should be struck from the conclusions of the judgment; ii) The $10,750, for the family car is due by Respondent to Appellant, so that paragraph 89 of the judgment should be amended by striking the words “the whole without any compensation to Defendant” and replacing them with “and ORDERS Respondent (Plaintiff) to pay Appellant (Defendant) $10,750”; iii) The $1,519 owed by Respondent to Appellant on the partition of the acquests arising from the couple’s withdrawals from the line of credit results in the modification of paragraphs 82 b), which should be struck out, and 111, which should reflect an order for Respondent to pay Appellant $1,519; iv) Appellant should be paid from the net proceeds received from the sale of the family residence the sum of $41,664 in priority to the parties’ equal shares in the balance. [ 64 ] Given the nature of the case there should be no costs awarded in appeal.

[ 65 ] Accordingly, I propose that the judgment be overturned in part to reflect the foregoing. MARK SCHRAGER, J.A.