2012 QCCA 519, 2012 QCCA 519

Droit de la famille — 12595 2012 QCCA 519 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-021443-114 (500-12-305741-104) DATE: MARCH 20, 2012 CORAM: THE HONOURABLE FRANÇOIS PELLETIER, J.A. ALLAN R. HILTON, J.A. RICHARD WAGNER, J.A. C. C. APPELLANT – Plaintiff v. W. G. RESPONDENT – Defendant [COMPANY A] and X RESPONDENTS – Garnishees JUDGMENT [ 1 ] THE COURT : On the appeal from the judgment of the Superior Court, District of Montreal (the Honourable Mr. Justice Kevin Downs) rendered on January 21, 2011 that dismissed the appellant C.

C.'s contestation of negative declarations of garnishees; [ 2 ] For the reasons of Hilton, J.A., with which Pelletier and Wagner, JJ.A agree, [ 3 ] DISMISSES the appeal, without costs. FRANÇOIS PELLETIER, J.A. ALLAN R. HILTON, J.A. RICHARD WAGNER, J.A. Mtre Andrew H. Heft ANDREW H. HEFT, AVOCATS-ATTORNEYS For the appellant Mtre Allan Adel ARCHAMBAULT ADEL TRUDEL For the respondent Mtre Glen M. Derstenfeld BARON ABRAMS For the respondents – garnishees

Date of hearing: January 19, 2012 REASONS OF HILTON, J.A. I INTRODUCTION [ 4 ] This is an appeal from a judgment that dismissed an amended contestation of negative declarations of two garnishees in response to separate seizures of salaries and wages pursuant to

article 641 C.C.P. The seizures were effected in execution of an interim spousal support order. The appeal concerns the legal characterization of the weekly amount of money provided to the respondent W. G., the defendant in the Superior Court, by his son X, one of the garnishees and the sole owner of the other garnishee, [Company A]. II PROCEEDINGS AND FACTS [ 5 ] In her contestation of the negative declarations, the appellant C. C. contended that, despite his alleged retirement from the company he founded in the 1950s, Mr.

G. continued to work for it, and that the money he was receiving from his son was in payment of salary that was subject to seizure. After a day of hearing and the testimony of five witnesses, the motions judge concluded, in a very brief oral judgment, that the "evidence had not been convincing" and that "[t]he Plaintiff has not proved on balance of probabilities the allegations to sustain the amended motion in contestation of negative declarations of Garnishees". [ 6 ] Ms. C. inscribed in appeal as of right against this judgment.

Despite the fact that this appeal arises in the context of a divorce case, the judgment that is the object of the appeal was rendered in a matter concerning execution. Ms. C. therefore required leave to appeal from a judge of this Court pursuant to subsection 3 of the second paragraph of

article 26 C.C.P . [1] Such leave was never sought. [ 7 ] That being said, the Court has the residual discretion in such circumstances to grant leave nunc pro tunc . [2] It did so at the hearing after counsel's argument on this issue, principally because the reasons of the motions judge did not make any specific findings of fact that formed the basis of his conclusion in law. [3] This gave Ms.

C.'s appeal the appearance of being serious and indicated that it raised issues that warranted an examination by the Court. [4] Leave was accordingly granted to her nunc pro tunc . [ 8 ] Since the evidence the motions judge heard and the conclusions he drew therefrom may have an indirect bearing on subsequent proceedings between the parties, I believe it is useful to review some of the more salient facts that formed the basis of his disposition of the matter. Ms. C. no longer argues, however, that Mr. G. was still employed by the company at the time each of the garnishees filed their negative declarations.

Instead, her argument is principally addressed to alleging a debtor-creditor relationship between the garnishees and Mr. G. arising out of the sale of his shareholdings in the company. [ 9 ] In my reasons in the contempt judgment, [5] I described the underlying facts as follows: [2] Mr. G. and Ms. C. were married in 1989. It was a second marriage for each of them following the death of Mr. G.'s first wife and Ms. C.'s divorce from her first husband. When they married, they were respectively 57 and 46 years old. Their common domicile was established in the home in which Mr.

G. had lived with his first wife and raised the two children of that marriage, X and Y. Subsequent to a change of their matrimonial regime in 1992 from partnership of acquests to separation of property, Mr. G. transferred ownership of the matrimonial home to Ms. C.. [3] On September 13, 2010, Ms. C. initiated divorce proceedings against Mr. G.. The conclusions of the most recently amended proceeding in the record of this Court dated February 15, 2011 show that Ms.

C. is seeking, amongst other conclusions: • monthly support payments of $6,350 or alternatively a lump sum payment of $300,000 to be satisfied by her retention of ownership of the family residence, its contents and an automobile that had been used by the parties; • a compensatory allowance of $200,000; • an order for Mr. G. to reimburse an outstanding mortgage loan on the family residence in the amount of $55,000; • an order for Mr. G. to reimburse an outstanding joint line of credit in the amount of $15,000 that is secured by a second mortgage on the family residence; • an order that Mr.

G. renew the household furniture garnishing the family residence to the extent its current value corresponds to the gifted sum of $75,000; • a declaration that there be an unequal division of the family patrimony. [4] The interim alimentary pension that Mr. G. was first ordered to pay was determined by Gibeau, J. shortly after the initiation of proceedings. It was for $500 per week plus the household expenses relating to the family residence. At the same time, Mr. G. was ordered to vacate the family residence.

The amount of the support payment was adjusted upwards on October 19 from $500 per week to $1,200 per week. The reason given by Gibeau, J. to justify her order was as follows: CONSIDERING that the financial statut (sic) quo that existed during the marriage shall be maintained on an interim basis after the

institution of the legal proceedings. [5] As is typically the case with interim orders, Gibeau, J. did not hear any testimony and relied solely on the written materials and argument presented to her. That order has been successively renewed. It was in force when the trial of the contempt proceedings occurred in May of 2011, as it was when this appeal was heard in January of 2012. [References omitted.] [ 10 ] After the parties' respective exhibits for the proceedings were produced by consent, Ms.

C.'s counsel called two witnesses, X and his client. [ 11 ] X first acknowledged that an extract from the website of the company that was on line when the interim order of Gibeau, J. was rendered specifically mentioned that Mr. G. "can still be seen five or more days a week working the customer service desk and meeting some of the thousands of people who come through their doors every year" and that he "is going to keep his 'hands on' for a while longer." [ 12 ] X then explained that before 1983, the three shares of the company were owned by Mr. G., his mother (Mr. G.'s now deceased wife), and his grandfather.

In 1983, when he was 18 years old, he acquired the share of his grandfather and, in 1988, his sister, Y, acquired the share of their mother. In 2004, Mr. G. sold half of his share to X and the other half to his daughter Y for $215,000 ($107,500 from each child) payable on demand.

This purchase price was based upon an independent evaluation carried out by the Royal Bank, but X's counsel admitted that this evaluation report "[was] not an evaluation of shares […but rather] an evaluation only of the building and land, which is the major asset of the company". [ 13 ] Since the disposal of his only share in the company in 2004 and until October 28, 2010, Mr. G. continued to spend much of his time at the business, sometimes as much as 60 hours a week. His presence did not involve him doing any useful work, but only " [m]enial tasks", such as greeting customers.

In fact, according to X, his father was removed from the payroll of the company in 2004 or 2005. From then on, the weekly amount of around $1,100 to $1,200 that Mr. G. received came from the personal income of X and Y. Until 2007, these amounts constituted instalments on the purchase price of the share they acquired from their father.

Once the purchase price was paid, X and Y continued to provide money to their father to support him financially to maintain the standard of living to which he had been accustomed. [ 14 ] X denied receiving valuable consideration in the form of services from his father in exchange for these weekly payments. Instead, he said the payments reflected the moral duty he felt towards Mr. G. in light of the latter's generosity to him, his family and Y. [ 15 ] On October 29, 2010, X and his father signed a loan agreement, the purpose of which was to consider all money he paid to Mr. G. as a loan. [6] [ 16 ] Ms.

C.'s counsel also attempted to show a continuing interest of Mr. G. in the company because of life insurance policies it held on the life of Y and Mr. G.. X testified that the insurance proceeds of $1,018,165.79 the company received in early 2010 following the death of Y was used for purposes other than making any payments to Mr. G.. He admitted, however, having used some of the proceeds to pay his father's line of credit, a credit card debt and the balance owing for the purchase of a car registered in the name of Ms. C..

X also admitted that the company purchased Y's new car that she had bought shortly prior to her death and, until October 28, 2010, allowed Mr. G. to use it at the company's expense. [ 17 ] X also admitted that the company holds an insurance policy on the life of the father. This policy was subscribed before the sale of his father's interest in the company pursuant to a request to that effect by Goodyear, the company's franchisor. Despite Mr. G.'s retirement, this policy remained in place in order to guarantee debts that were owed to Goodyear at that time of the sale.

The policy, however, terminated subsequent to the hearing before the motions judge upon Mr. G. becoming 80 years old. [ 18 ] Ms. C.'s testimony was of little value to the issue the motions judge had to decide. She affirmed that during the entire period of the marriage, Mr. G. would go to the business five or six days each week for up to twelve hours per day, and that each week he brought money home in an envelope. Since her husband was terrible with money, she handled the family finances. She also said that in driving by the business premises in the evening after October 28, 2010, she had seen Mr.

G. there on two occasions. She also claimed that Mr. G. had told her more than once that he still had part of the company. [ 19 ] That was the evidence on which Ms. C.'s contestation rested. [ 20 ] Mr. G.'s counsel called the company's external accountant, its bookkeeper at the premises, X and Mr. G.. [ 21 ] R. D. is a chartered accountant and has been the company's external external accountant since 1989. He affirmed that Mr. G. has had no financial interest in the company since 2004, and has received no remuneration from it since 2005.

Since the death of Y in 2009, the sole directing mind of the company has been X. [ 22 ] He prepared the evaluation that established the purchase price for Mr. G.'s sale of his shareholding in 2004 at $215,000, for which he declared a capital gain on his income tax returns that year. He also prepared the evaluation of Y's interest in the company following her death, which was for a considerably greater sum.

He explained the difference between the two by negotiations concerning the operating franchise with Goodyear, better cost controls X initiated, and a major upswing in business brought about by provincial legislation requiring Quebec drivers to have four winter tires on their cars during that season. [ 23 ] He acknowledged in cross-examination that he is not an expert in business evaluation, and that the sale by Mr. G. of his shares in 2004 to his children was between related parties for which there had been no negotiations. Mr. G. had wanted to transfer the shares for no value but Mr.

D. told him he could not do so because of tax implications, hence the need to establish a purchase price. Mr. G.'s main objective had been to ensure that the company would remain in his son's hands.

[ 24 ] E. Ca., the company bookkeeper, affirmed that Mr. G. is not employed by the company and that the company does not owe him any money. Since October 28, 2010, he had come to the premises on three to five occasions for insignificant periods of time, such as to pick up things. Prior to that date, his presence at the premises would involve serving some customers, but since he speaks no French and is not technically inclined, he would carry out tasks such as filling the photocopier with paper (often jamming it in the process) and putting staples in staplers.

Since he ceased to come to the company on a daily basis, no one has been hired to replace him. [ 25 ] X then testified to explain what money he makes available to his father. He pays his monthly rent of $1,399 in a seniors' home, his legal fees, the monthly minimum on his credit card, and $300 per week of pocket money to enable him to buy food, medicine or whatever else he requires. He also purchased the furnishings and other accessories for his father's residence. [ 26 ] X also confirmed the testimony of E. Ca. as to the infrequency of Mr.

G.'s presence at the company premises, but added that he told his father to stop coming by as of October 28, 2010 as a gesture to show the world he was neither employed by nor needed at the company. He also confirmed that his father has not been replaced by anyone at the company, which was not the case after Y passed away in 2009. [ 27 ] Prior to Y's death in November of 2009, he and his sister were providing their father $1,100 to $1,200 per week, which Mr. G. was turning over to Ms. C..

After Y's death, however, X began to exercise some control over his father's finances, which included taking possession of the couple's credit cards, paying some of their debts, and asking him to keep about half of what he was providing him for himself, knowing that his father would give the rest to Ms. C.. [ 28 ] In cross-examination, X confirmed that his father ceased to be on the company payroll in 2005, but he was confronted with a letter he signed in 2008 addressed to a bank in which he affirmed that the company employed Mr. G. at a weekly salary of $1,100.

His explanation for having done so was to facilitate both his father and Ms. C. obtaining a line of credit from the bank for some purchases they wished to make. He acknowledged the falsity of the letter to the bank insofar as the employment status of his father was concerned, but insisted on the accuracy of the fact that he and his sister were providing him $1,100 per week, which is what was important as far as he was concerned. [ 29 ] Mr. G.'s testimony added little to the overall scheme of things. He confirmed he had been going to the business regularly prior to stopping as of October 28, 2010.

He says he went because he liked being there, and felt guilty about taking money from his son without trying to do something for him. He acknowledged, however, that he overestimated his importance to the business by showing up as he did. III ANALYSIS [ 30 ] From all of the foregoing, I have no hesitation in concluding that as of the date of the seizures by garnishment, Mr. G. was not an employee of the garnishees [Company A] or X. Indeed, Ms. C. no longer contends that the company employs him.

The only credible evidence that affirms the contrary is X's letter to a bank in 2008 in which he stated that the company employed his father. Ms. C. was certainly entitled to rely on the content of that letter, [7] as was the bank, and there seems to be no doubt that the bank did rely on it. Nevertheless, assuming the accuracy of the content of the letter as of its date, the evidence is compelling that what the letter acknowledged insofar as Mr. G.'s employment status with the company was no longer true as of the date of the seizure by garnishment. The motions judge therefore properly dismissed Ms.

C.'s contestation of the negative declarations of the garnishees. [ 31 ] Since the seizures by garnishment were not taken pursuant to

article 625 C.C.P ., the garnishees were under no obligation to declare whatever they might owe to Mr. G. that was not in the nature of salary or wages. [ 32 ] Nevertheless, assuming a seizure by garnishment under

article 625 C.C.P . had also been served on them, the evidence was also lacking of any indebtedness of X or the company to Mr. G. arising out of a supposed undervaluation of his share in the company when it was sold to him and Y in 2004. Nor can it be said that this fully documented transaction on which Mr. G. was liable to pay capital gains tax was undertaken with a view to defrauding Ms.

C., since it occurred some six years prior to the initiation of divorce proceedings. [ 33 ] Moreover, even if it can be argued that the evaluation of the transaction was at less than fair market value, there was no evidence before the motions judge to enable him to determine by how much the purchase price was undervalued in 2004. Such evidence would have been necessary to allow a judge to determine the precise amount of the balance X owed Mr. G. in order to give meaningful effect to any such seizure by garnishment. [ 34 ] It is apparent from the evidence the motions judge heard that Mr.

G.'s day-to-day subsistence depends on money X provides him, whether in the form of paying for his accommodation and related expenses at a retirement home, or cash as pocket money. In doing so, the preponderance of that evidence shows that X is acting in a manner consistent with the obligation of support he owes his father that is contemplated by

article 585 C.C.Q ., and on no other basis. IV CONCLUSION [ 35 ] I would dismiss the appeal. In light of the circumstances of the parties, I would do so without costs. ALLAN R. HILTON, J.A.