2018 QCCA 1765, 2018 QCCA 1765

Droit de la famille — 182245 2018 QCCA 1765 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-027007-178 (500-04-065817-158) (500-12-328460-153) DATE: October 22, 2018 CORAM: THE HONOURABLE NICOLE DUVAL HESLER, C.J.Q. YVES-MARIE MORISSETTE, J.A. ROBERT M. MAINVILLE, J.A. G. C. APPELLANT – Plaintiff v. P. G. [COMPANY A] [COMPANY B] [COMPANY C] [COMPANY D] [COMPANY E] [COMPANY F] THE P. G. FAMILY TRUST N o 1 THE P. G.

FAMILY TRUST N o 2 [COMPANY G] [COMPANY H] RESPONDENTS – Defendants JUDGMENT [ 1 ] The trial judge was seized with having to decide on the merits various monetary claims by the Appellant against her former husband and companies and trusts under his sole control. [ 2 ] The marriage was of long duration and was a traditional marriage in that the Appellant was a stay at home mother of two. The Respondent was thus able to devote long hours to his businesses, which were begun in association with the father of the Appellant. [ 3 ] The trial judge found that the Respondent is worth 75 million dollars today.

She pronounced the divorce of the parties, ordered the separation of the family patrimony, allowed a claim of the Appellant resulting from another judgment of the Superior Court and dismissed all her other claims, including that of a compensatory allowance. [ 4 ] The refusal of a compensatory allowance is the only issue before the Court. [ 5 ] The trial judge was of the opinion that a compensatory allowance cannot serve to redistribute the value of assets among spouses who have opted for a matrimonial regime of separation of assets, that the fact that the Respondent benefited from the opportunity to start a business with the father of the Appellant was not a justification for a compensatory allowance, that there was no impoverishment of the Appellant as a result of the marriage and that her contribution to the domestic life of the household and the care of the children did not amount to anything unusual.

Finally, she stated that had the Appellant benefited from the amount which was denied her, she would have been unable to make it grow. [ 6 ] The latter comment must be understood in the context of the creation of a trust set up for fiscal reasons and other considerations

in 2003, whereby the parties exchanged their shares in a corporation “pursuant to subsection 51(1) of the Income Tax Act (Canada) and under the equivalent sections of the Taxation Act (Quebec) .” [1] [ 7 ] There were several closing documents and they provide for an adjustment should the amount received in exchange for the shares not reflect their true market value. Thus the Memorandum of Agreement signed by the Appellant [2] contains the following provision: 4.

It is the intention of the Parties hereto that the present exchange of the Subject Shares to be effected such that the sum of the aggregate issue price of the First Lot Consideration Shares and the aggregate issue price of the Second Lot Consideration Shares equal the fair market value (FMV) of the Subject Shares having regard to all of the relevant factors applicable in the circumstances.

However, if at any time a final determination is made that the present fair market value of those Subject Shares which have been exchanged for the First Lot Consideration Shares is greater or less than the fair market value as herein stipulated, then the Parties agree to adjust the number of the issue price of the First Lot Consideration Shares such that the aggregate issue price thereof will be likewise adjusted by an amount corresponding to the amount of such excess or shortfall .

Similarly, if at any time a final determination is made that the present fair market value of those Subject Shares which have been exchanged for the Second Lot Consideration Shares is greater or less than the fair market value as herein stipulated, the Parties agree to adjust the number or the issue price of the Second Lot Consideration Shares such that the aggregate issue price thereof will be likewise adjusted by an amount corresponding to the amount of such excess or shortfall . [Underlining added] [ 8 ] The same document provides that a determination of such fair market value made by a judgment of a court of competent jurisdiction constitutes a final determination if not appealed. [ 9 ] The trial judge determined as a finding of fact that the shares in question had been undervalued (at $5,000,000) when the trust was set up and that they were worth $8,500,000 at the time. [ 10 ] However, the trial judge did not consider the resulting shortfall to the Appellant in deciding that the latter was not entitled to a compensatory allowance. [ 11 ] It bears mentioning as well that the evidence shows that the parties’ children encountered severe problems in their growing up years and that the Appellant was a devoted and caring mother. [ 12 ] The Appellant’s tax returns also show that she would have been able to make the amount of her above described shortfall grow had she received it at the time. [ 13 ] In Lacroix v.

Valois , Gonthier J., speaking for the Supreme Court of Canada, emphasized that the issue of a compensatory allowance must be viewed with “special flexibility”: In general, therefore, analysis of the factual and legal aspects of a compensatory allowance situation calls for special flexibility. I think it is quite understandable that it should differ somewhat from that applicable to other areas such as civil liability, where the requirement of a causal link, for example, is relatively strict.

It is worth noting in this regard that the traditional concept of causality is not applied in cases of unjust enrichment. […] [ 14 ] Applying this principle to the case at hand, it is clear that the Court below should have taken into consideration that a clear mistake occurred regarding the value of the shares of the Appellant when she agreed to exchange them in the context of the 2003 trust transaction above described.

This factor alone, in our unanimous opinion, justifies a compensatory allowance in the amount of the shortfall. [ 15 ] The Court accepts the calculation of the Appellant regarding the amount of her loss ($1,750,500).

The Court is also of the view that had it not been for the marriage, the appellant would have sought and obtained the payment of the amounts owed to her as of the buy-back of her shares on October 26, 2011, and would have fructified these amounts by at least the legal interest rate. [ 16 ] As a result, the Appellant is entitled to a compensatory allowance which we determine at the amount of $2,985,931.23, representing (

a) the above-mentioned loss of $1,750,500, (

b) interest on this amount at the legal rate for the period of October 26, 2011 (date of the share buy-back) to October 16, 2018 (the date of the hearing before this court) ($610,277.05), and (

c) interest at the legal rate on the other amounts owed to her as of the share buy-back ($2,499,500 and $650,000) for the period of October 26, 2011 (date of the share buy-back) to October 15, 2015 (date of the effective payment of these amounts to the Appellant) ($625,154.18). [ 17 ] The Court also finds that the Respondent was enriched by the same amount since he has sole control of the companies and trusts joined as parties to the present proceedings. [ 18 ] All other grounds of appeal are dismissed and need not be addressed.

FOR THESE REASONS, THE COURT: [ 19 ] ALLOWS the appeal, in part; [ 20 ] ADDS the following conclusion to the conclusions of the trial judge: ORDERS the Respondent to pay to the Appellant, by way of compensatory allowance, an amount of $2,985,931.23, with daily interest thereon calculated at the legal rate as of October 17, 2018.

[ 21 ] THE WHOLE without legal costs. NICOLE DUVAL HESLER, C.J.Q. YVES-MARIE MORISSETTE, J.A. ROBERT M. MAINVILLE, J.A. Mtre Joanne Biron Mtre Stéphanie Tremblay Mtre Emily Kissel MILLER THOMSON S.E.N.C.R.L. Mtre Jean Lortie McCARTHY TÉTRAULT For appellant Mtre Linda Schachter Mtre Tamar Ajamian DEVINE SCHACHTER POLAK Mtre Karim Renno RENNO VATHILAKIS INC. For respondents Date of hearing: October 16, 2018