O'Kane v Lillqvist-O'Kane, 2022 ABKB 661

Court of King’s Bench of Alberta Citation: O'Kane v Lillqvist-O'Kane, 2022 ABKB 661 Date: 20221004 Docket: 4801 156228 Registry: Calgary Between: Brian George Patrick O'Kane Plaintiff - and - Petra Marja Karita Lillqvist-O'Kane Defendant _______________________________________________________ Reasons for Judgment of the Honourable Justice Colin C.J. Feasby _______________________________________________________ Introduction and

Summary of Conclusions [ 1 ] Brian O’Kane and Petra Lillqvist met skiing in the Alps. Mr. O’Kane was from Australia and Dr. Lillqvist was from Finland. Canada was their compromise home. Mr. O’Kane built a successful real estate business and Dr. Lillqvist, unable to practice medicine in Canada, raised the couple’s two children and supported Mr. O’Kane’s business exploits. [ 2 ] After their relationship came apart in the summer of 2011, Mr. O’Kane and Dr. Lillqvist took to litigation. The litigation has been adversarial.

Among the Agreed Exhibits there are 20 orders of the Court dealing with issues ranging from disclosure to interim spousal support to advance costs. [ 3 ] The trial began in November 2021. It was scheduled for one week. Counsel for both parties immediately advised the Court that the trial would take much longer than one week, but that they took the one-week slot because their earlier trial date had fallen victim to the mass adjournment that took place early in the Covid-19 pandemic. [ 4 ] The trial took place over 16 days during November 2021, January 2022, and February 2022.

Written legal argument was delivered in tranches with the final amended brief being received by the Court on May 24, 2022. Further written responses to my questions to counsel were delivered in late July 2022.

[ 5 ] These reasons deal with two issues: (1) division of matrimonial property; and (2) spousal support. [ 6 ] The matrimonial property is to be divided equally. The matrimonial property consists mainly of residential and commercial real estate held personally and through corporations. The key factual issue affecting the division of property is the value of the property. [ 7 ] I conclude that the parties’ real estate portfolio should be left mainly in the hands of Mr. O’Kane, as he is best positioned to maximize its value. He is required to make an equalization payment to Dr.

Lillqvist to compensate her for the fact that he retains a disproportionate share of the matrimonial property. [ 8 ] Dr. Lillqvist claims both retroactive and prospective spousal support. I conclude that retroactive spousal support is due over and beyond the amounts of interim spousal support that was paid by Mr. O’Kane. Going forward after the division of matrimonial property and the making of the equalization payment, however, no spousal support is warranted. Mr. O’Kane’s income is largely derived from the matrimonial property.

After the division of the matrimonial property and making the equalization payment, Mr. O’Kane’s earning capacity will be effectively halved. In the future, Dr. Lillqvist is equally capable of deploying her share of the matrimonial property and money received pursuant to the equalization payment to earn income. With the division of the matrimonial property and equalization payment, the parties’ earning capacity will be comparable because what Dr. Lillqvist can earn as a part-time physician in Scandinavia that is roughly equal to what Mr.

O’Kane should draw as salary from his real estate business for performing the functions of book-keeper and caretaker. Allegation of Expert Bias [ 9 ] Mr. Lawritsen, Dr. Lillqvist’s business valuation expert, was previously appointed by Justice Yungwirth as the Court’s expert pursuant to Rule 6.40 of the Alberta Rules of Court . Mr. Lawritsen delivered his report to the Court on April 23, 2018. [ 10 ] Mr. O’Kane disagreed with many of Mr. Lawritsen’s conclusions asserting that Mr. Lawritsen was biased in favour of Dr. Lillqvist. Mr. O’Kane believed that Mr. Lawritsen had met more frequently and for longer with Dr.

Lillqvist when he was acting as the Court expert. [ 11 ] Mr. O’Kane hired his own business valuation expert, Mr. Doran, to respond to Mr. Lawritsen. Shortly after Mr. Doran delivered his report responding to Mr. Lawritsen, counsel for Dr. Lillqvist wrote to counsel for Mr. O’Kane advising that he wished to retain Mr. Lawritsen on behalf of Dr. Lillqvist to respond to Mr. Doran’s report. Counsel for Mr. O’Kane responded that he neither consented nor objected to the proposed engagement of Mr. Lawritsen on behalf of Dr.

Lillqvist. [ 12 ] The subsequent engagement of a Court expert by one of the parties is unusual, but not necessarily problematic. Experts hired by parties, just like Court-appointed experts, must be independent and impartial: White Burgess Langille Inman v Abbott and Haliburton Co, 2015 SCC 23 at paras 11-12 . [ 13 ] When evaluating the unusual situation of Mr. Lawritsen moving from his role as Court-appointed expert to being engaged by one of the parties, the Court cannot turn a blind eye to the circumstances of the parties and the context of the litigation. Throughout these proceedings, Mr.

O’Kane controlled most of the family assets and, accordingly, had the most resources to deploy for the purposes of litigation. By hiring his own expert to criticize the work of Mr. Lawritsen, he put Dr. Lillqvist in the position of having to defend Mr. Lawritsen’s work. She had three alternatives. First, she could have tried to compel Mr. O’Kane to contribute to Mr. Lawritsen’s continued work as a court-appointed expert. Of course, this was not practical given that Mr. O’Kane had engaged an expert to criticize Mr. Lawritsen and, like everything in this proceeding, such a motion would have been contested.

Second, she could have hired a new expert who would have had to learn the file at significant expense before preparing a responding report. Third, she could engage Mr. Lawritsen to respond to the criticisms of his report. Dr. Lillqvist cannot be faulted for making the economical choice to engage Mr. Lawritsen, especially given that Mr. O’Kane stated through counsel that he did not object. It would be unfair at trial, after Dr. Lillqvist has relied for several years on Mr. O’Kane’s non-objection, to give any credence to Mr. O’Kane’s concerns arising from Mr.

Lawritsen’s prior role as Court-appointed expert. [ 14 ] Counsel for Mr. O’Kane maintains that, leaving aside his former role as Court-appointed expert, Mr. Lawritsen demonstrated bias. Counsel for Mr. O’Kane submits that Mr. Lawritsen’s “expert reports and oral evidence smack of bias. He attempts to idealize [Dr. Lillqvist] and demonize [Mr. O’Kane] throughout....” Various conclusions by Mr. Lawritsen are cited by counsel to Mr. O’Kane to support the allegation of bias. [ 15 ] Counsel for Dr. Lillqvist alleged that Mr. O’Kane’s expert, Mr. Doran, was biased. Counsel for Dr. Lillqvist alleges that Mr.

Doran acted for Mr. O’Kane as an advisor before taking on the mantle of a testifying expert. Counsel for Dr. Lillqvist gives examples of what is alleged to be Mr. Doran’s bias. [ 16 ] Both experts in this case appear to have been sucked into the vortex of animus that exists between the parties. The positions of the two business valuation experts appear to be influenced by the clients they serve. However, the Court cannot determine the assets and financial capacity of the parties, which is necessary for the Court to decide the issues of spousal support and division of family property, without expert evidence.

Put differently, I must work with what the parties’ experts produced because there is no alternative. [ 17 ] To some extent, partisan influence on experts is always present in adversarial litigation. Parties do not hire experts that disagree with them and parties influence expert views in various ways. Courts are not naïve to this reality. In the present case, I approach the evidence of both business valuation experts aware that the parties and their counsel influenced the views of the experts. Division of Matrimonial Property

Relevant Law [18] The Matrimonial Property Act, RSA 2000 c M-8 (“MPA”) was replaced on January 1, 2020 with the Family Property Act,RSA 2000, c F-4.7 (“FPA”). The provisions of the MPA continue to apply in the present case. The FPA transitional provision states thatthe MPA continues to apply to parties who were living separate and apart before the FPA came into force: FPA s 39(2). [19] The Court of Appeal in Hodgson v Hodgson, 2005 ABCA 13 at paras 19-21 set out a four-step approach for dividingmatrimonial property.

The Court of Appeal’s four-step approach was summarized as follows by Justice Loparco in Stalzer (Estate) vStalzer, 2019 ABQB 658 at para 18: 1. Determine all property owned at the date of trial; 2. Discern the property that is exempt from distribution under s 7(2) of the MPA or that can be traced to s 7(2) property as notconnected to the marriage; 3. Determine what property falls under s 7(3); and 4.

Divide the balance of the remaining assets equally, unless it would be unjust and inequitable to do so considering the factors setout in s 8. [20] The only potentially exempt property in dispute in the present case is property acquired by inheritance: MPA, s 7(2)(b). [21] MPA s 8 provides that the matters to be taken into consideration in making a distribution under s 7 are the following: (

a) the contribution made by each spouse to the marriage and to the welfare of the family, including any contribution made as ahomemaker or parent; (

b) the contribution, whether financial or in some other form, made by a spouse directly or indirectly to the acquisition, conservation,improvement, operation or management of a business, farm, enterprise or undertaking owned or operated by one or both spouses or byone or both spouses and any other person; (

c) the contribution, whether financial or in some other form, made directly or indirectly by or on behalf of a spouse to the acquisition,conservation or improvement of the property; (

d) the income, earning capacity, liabilities, obligations, property and other financial resources (

i) that each spouse had at the time of marriage, and (ii) that each spouse has at the time of the trial; (

e) the duration of the marriage; (

f) whether the property was acquired when the spouses were living separate and apart; (

g) the terms of an oral or written agreement between the spouses; (

h) that a spouse has made (

i) a substantial gift of property to a third party, or (ii) a transfer of property to a third party other than a bona fide purchaser for value; (

i) a previous distribution of property between the spouses by gift, agreement or matrimonial property order; (

j) a prior order made by a court; (

k) a tax liability that may be incurred by a spouse as a result of the transfer or sale of property; (

l) that a spouse has dissipated property to the detriment of the other spouse; (

m) any fact or circumstance that is relevant. [22] The Court of Appeal in Stuve v Stuve, 2019 ABCA 142 at paras 13-14 emphasized the importance of weighing MPA s 8factors despite the presumption of equal division of property. Piercing the Corporate Veil [23] Counsel for Dr. Lillqvist cites the majority decision of Antonio JA in Aubin v Petrone, 2020 ABCA 13, leave to appeal toSCC refused, 39038 (25 June, 2020) for the proposition that piercing the corporate veil is sometimes necessary and appropriate in afamily law proceeding: para 34.

The expression “piercing the corporate veil” is a way of saying that the separate legal personality of acorporation will be disregarded: Kosmopoulos v Constitution Insurance Co, (SCC), [1987] 1 SCR 2 at 10. [24] Piercing the corporate veil is unnecessary in the present case. The parties own multiple companies, one is owned by Dr.Lillqvist and the balance are owned by Mr. O’Kane. All the companies, including the one owned by Dr. Lillqvist, are under the controlof Mr. O’Kane.

[ 25 ] The expert valuators and the real estate appraisers upon whom they rely do two things: (1) value real property; and (2) value the shares of the corporations that hold real property. Where the real property is held directly by the parties, things are straightforward. Where the real property is held through a corporation, the shares of the corporation must be valued. The value of those shares, of course, is dependent on the value of the underlying real estate holdings. [ 26 ] The expert business valuators engaged by both parties respect the separate legal identities of the corporations owned by the parties.

Looking inside a company to ascertain its assets and liabilities and, in turn, determining the value of shares in the company, is not piercing the corporate veil.

The term “piercing the corporate veil” should not be used for circumstances where valuators look inside a company to determine the value of shares held by a party; it should be reserved for situations where a corporation’s separate legal personality is disregarded. [ 27 ] The majority in Aubin pierced the corporate veil as a remedy to allow the matrimonial property judgment to be enforced against corporate assets despite the fact the judgment was against a separate legal person who was a shareholder, Mr. Petrone: para 74.

At this juncture in the present case, there is no need to lift the corporate veil for the purpose of judgment enforcement. It is both premature and seemingly unnecessary, as there is no evidence that there are restrictions on the transfer of Mr. O’Kane’s shares or complicating third party interests as there were in Aubin . Background to the O’Kane-Lillqvist Relationship and

Section 8 Analysis [ 28 ] Mr. O’Kane and Dr. Lillqvist met in Kitzbuhel, Austria in the winter of 1987. That summer, Mr. O’Kane travelled to Finland to ask Dr. Lillqvist to marry him. [ 29 ] The first challenge the parties faced was to decide where to live. Mr. O’Kane was from Australia and only spoke English. Dr. Lillqvist could speak English, and she believed that her medical training would enable her to work anywhere. So, they decided to move to Australia. [ 30 ] Prior to getting married, Mr. O’Kane purchased a house for the couple in the suburbs of Sydney. Mr.

O’Kane financed the house purchase with a bank mortgage and money borrowed from his parents. [ 31 ] The couple got married in Australia in March 1988. Dr. Lillqvist passed the medical exams required to work as a doctor in Australia, but she was unable to get a residency position. To pass the time and make some money, she worked in a ski shop. [ 32 ] During her first year in Australia, Dr. Lillqvist struggled with allergies and asthma caused by the unfamiliar environment. In 1989, Dr. Lillqvist gave birth to the couple’s first child. She travelled back to Finland with her infant.

Upon arrival, her allergies and asthma immediately improved. When she returned to Australia, so did her allergies and asthma. [ 33 ] Dr. Lillqvist’s allergies and asthma were intolerable, so the couple decided to move away from Australia. Mr. O’Kane and Dr. Lillqvist considered several options before settling on Canada. Mr. O’Kane was born in Canada and maintained a Canadian passport. [ 34 ] In early 1991, the couple relocated to British Columbia. The couple sold their Australian home and purchased a house in the BC Lower Mainland. Mr. O’Kane requalified as an accountant in Canada and began work. Dr.

Lillqvist passed the Canadian medical exams but was unfortunately unable to secure an internship or residency position in Canada. [ 35 ] Dr. Lillqvist travelled home to Finland in 1992 to give birth to the couple’s second child. [ 36 ] During the mid-1990s, Mr. O’Kane worked a series of jobs based in Vancouver and later in Edmonton. He enjoyed a successful career with promotions and ever-increasing responsibility in each role. [ 37 ] In 1995, Mr. O’Kane was offered an opportunity to transfer to Houston, Texas. Dr. Lillqvist did not want to live in the southern US, so the couple decided to stay in Canada. Mr.

O’Kane took a different opportunity in Calgary. [ 38 ] Dr. Lillqvist initially stayed in the BC Lower Mainland with the children. There she oversaw the completion of house renovations and the sale of the house before moving to Calgary. [ 39 ] In the late 1990s, Mr. O’Kane acquired a struggling piping solutions business called Capitan with loans from a mentor and his father. He rebuilt Capitan and eventually sold it in 2000. He stayed on as CEO of Capitan for a year after selling the company. [ 40 ] After selling Capitan, Mr. O’Kane started buying real estate.

At first, he purchased apartment buildings with partners. As his portfolio grew, he bought out his partners and ran the real estate business on his own. [ 41 ] During the early years in Calgary, Dr. Lillqvist raised the couple’s two children. Having given up hope of becoming qualified as a medical doctor in Canada, she took a four-year program in Traditional Chinese Medicine. She then got a part-time job in a naturopathic clinic. Dr. Lillqvist became disenchanted with TCM and naturopathy and did not remain in this job. [ 42 ] Later Dr. Lillqvist enrolled in a paramedic program.

Her studies were unfortunately interrupted by the health issues of her father and stepfather, which required her to make trips back to Finland. [ 43 ] Throughout the time that she lived in Calgary, Dr. Lillqvist would travel back to Finland to practice medicine. Sometimes this was for 4 to 6-week stints during the summer holidays and sometimes for longer stretches. [ 44 ] During the mid to late 2000s, Dr. Lillqvist supported Mr. O’Kane in his real estate business.

She worked odd jobs including site supervision, landscaping, and office work. [ 45 ] There is a presumption of equal division of matrimonial property: Hodgson at para 21 ; see also Jensen v Jensen , 2009 ABCA 272 at para 20 . This presumption may be departed from where it is just and equitable to do so, considering the s 8 factors in the MPA :

Hodgson at para 21 ; Jensen at para 23 . [ 46 ] The parties started with no meaningful assets. Mr. O’Kane built up a successful real estate business that owns many rental and condominium properties in Calgary. He could not have done this without Dr. Lillqvist taking on the role of primary caregiver to the couple’s two children. Dr. Lillqvist sacrificed her career as a medical doctor in Finland to live in Australia and Canada to support Mr. O’Kane and raise their children. An equal division of matrimonial property is just and equitable in the circumstances. Property Owned by the Parties (

i) Personally Owned Property a. General Approach [ 47 ] The valuation of real estate, even by experts, evades scientific precision. Every real estate valuation, whether stated to be or not, is an estimate. Accordingly, where competing valuations are sufficiently close and there is no issue of principle at stake, it is appropriate to split the difference in the valuations. As the

summary table in this

section and tables in following sections show, the expert valuations for many of the properties owned by the parties are relatively close, and the difference in value on the whole matrimonial estate is driven by fundamental disagreements over the value of a small minority of the properties. [ 48 ] The analysis in this

section and the following sections of these reasons is dedicated to the property where there is a material difference in value asserted by the parties. Where there is no material difference in value, the mid-point between the values claimed by the two parties was chosen. Materiality for the purposes of these reasons is defined as a difference in value of more than 10% or more than $100,000. b. Greenview [ 49 ] The personally-owned property where the parties are most at odds are the units in the Greenview condominium complex.

The parties own 19 units at Greenview personally and another 17 units through 982416 Alberta Ltd. The valuations by the expert real estate appraisers treat the personally-owned and corporately-owned units at Greenview as a single block for valuation purposes. [ 50 ] The expert real estate appraiser engaged on behalf of Dr. Lillqvist, Jay Boville of Sage Appraisals, pegged the value of the 36 units at Greenview at $6.1 million. [ 51 ] Sage Appraisals inspected six of the 36 units. Mr. Boville determined that the highest and best use of the 36 units was as rental accommodation.

He then looked at rents for comparable units in the area to determine market rent. The market rent was then used as the key input to a valuation of the units using an income approach. The net operating income of the 36 units was capitalized at a rate of 5% to determine the market value of the 36 units. [ 52 ] Mr. O’Kane engaged two real estate appraisers to value the Greenview units and two further real estate appraisers to comment on the work of Sage Appraisals with respect to the Greenview units. Mr.

O’Kane obtained more than one valuation for all the properties in dispute, though not necessarily four as in the case of the Greenview property. The Greenview appraisals and reports containing commentary were provided to the Court as part of the Agreed Exhibits. Not all the experts were called to testify. Nevertheless, this number of experts and expert reports on a single issue is excessive. Had the parties not agreed on the admissibility of the expert reports, I would have excluded all but one of Mr.

O’Kane’s experts pursuant to Rule 8.16(1) of the Alberta Rules of Court , which provides that “[u]nless the Court otherwise permits, no more than one expert is permitted to give opinion evidence on any one subject on behalf of a party.” [ 53 ] Jean-Marc Raymond of Wallace Appraisal Services Ltd. and Brett Dombrova of CDC Inc. both valued the Greenview units as condominium units as opposed to rental units. I accept that this is the correct way to value the Greenview units.

The Greenview units are legally condominium units, not rental units, and any valuation must consider that condominium fees are payable, which the Sage Appraisals did not. The argument that the units could be sold as a block and operated as a rental building ignores that the 36-unit building owned by the parties is part of a four-building complex and that condominium fees relate, in part, to the site as a whole. [ 54 ] Valuing the Greenview property as a collection of condominium units as done by Wallace and CDC is appropriate. However, I have concerns about how Mr. Doran used the Wallace and CDC appraisals.

Wallace and CDC only valued two units. Mr. Doran averaged the Wallace and CDC valuations for each unit and then extrapolated the values to arrive at a value for all 36 units. [ 55 ] Counsel for Dr. Lillqvist submits that Mr. Doran is not qualified as a real estate appraiser and that, accordingly, it is inappropriate for him to assume that the value of the whole block of 36 units can be extrapolated from the valuations of only two of those units. Sage Appraisals goes so far as to accuse Mr. Doran of violating the Real Estate Act , RSA 2000, c R-5 by acting as a real estate appraiser.

I disagree with the submission that Mr. Doran is acting as a real estate appraiser, but I recognize that his methodology is not as robust as the approach used by Sage Appraisals, who inspected six units. [ 56 ] Mr. Doran’s use of two units instead of the six units viewed by Sage Appraisals means that his sample is less representative of all 36 units, and the choice of units may have been affected by Mr. O’Kane, who controlled the property and retained the experts.

There is a risk of selection bias. [ 57 ] The correct way to value the Greenview property is as a collection of condominium units rather than as a rental property. Accordingly, I do not accept the Sage Appraisal valuation. However, as set out above, I am concerned that Mr. Doran’s method which used fewer units to extrapolate value risks understating the value of the Greenview property. To mitigate the risks of Mr. Doran’s approach, I conclude that his valuation should be increased by 10%. [ 58 ] There is also a lawsuit involving the parties and the manager of the Greenview site over payment of condominium fees.

Mr. O’Kane and Dr. Lillqvist are defendants in their personal capacity, and 982614 Alberta Ltd. is also a defendant. The defendants have

denied liability. I recognize that defendants in litigation often deny liability even if the prospects of success are not great. However, no evidence has been adduced to allow me to assess the merits of the litigation. Accordingly, the lawsuit is not accounted for in my valuation of the Greenview property. c. 2102, 10 Street SW [ 59 ] 2102, 10 Street SW is referred to as the Mount Royal residence. The Mount Royal residence was acquired by the parties as a rental property in 2006. Renovations of the Mount Royal residence began in 2011, prior to the end of the parties’ relationship.

Upon completion of the renovations and after the parties separated, Mr. O’Kane moved into the Mount Royal residence with his new partner in late 2012. [ 60 ] The cost of renovating the Mount Royal residence and payments for the mortgage on the Mount Royal residence were absorbed by various corporations owned by the parties and controlled by Mr. O’Kane. [ 61 ] As with the Greenview property, Mr. O’Kane had two appraisals and a further two commentaries on the appraisal conducted by Dr. Lillqvist’s appraiser.

This is not the way litigation should be conducted and, had there been an objection, I would have allowed only one of Mr. O’Kane’s experts to testify on the value of the Mount Royal residence. [ 62 ] Dr. Lillqvist’s real estate appraisal expert, Sage Appraisals, valued the Mount Royal residence at $2,200,000. Mr. O’Kane’s experts, Wallace Appraisal and CDC, valued the Mount Royal residence at $2,000,000 and $1,925,000 respectively. Mr.

Doran, taking all three appraisals into account, used a value of $2,048,300 for his analysis. [ 63 ] The Sage Appraisals value is higher because they made an adjustment for the greater lot size relative to comparable houses used to determine the market price whereas Wallace and CDC did not make such an adjustment.

Wallace and CDC did not make a lot size adjustment because the lot is sloped and in their view the negative value attributable to the slope offsets any positive value attributable to the greater lot size. [ 64 ] Wallace and CDC ought to have applied a lot size adjustment because the Mount Royal residence lot is far larger than the comparable properties. The Mount Royal residence lot is 2,032m 2 and is between 500m 2 and almost 800m 2 larger than all but one of the comparable properties identified by the appraisers.

In some Calgary neighbourhoods, 800m 2 would be two lots, each capable of accommodating a sizable home. [ 65 ] Only one of the comparable houses identified by the expert appraisers has a lot size approaching that of the Mount Royal residence.

The property with a comparably sized lot was opposite to a school and located on a corner, which makes it of limited use as a comparison. [ 66 ] Had the Mount Royal residence lot only been marginally larger than comparable homes used to determine the market price, I would have accepted that the decreased value attributable to the slope offset the increased value attributable to the larger lot size. I do not accept that the slope of the Mount Royal residence lot negates the value attributable to the larger size because the lot is so much larger than the comparable houses used to determine lot size.

Accordingly, I accept the value estimated by Sage Appraisers. d. Finland Properties [ 67 ] Dr. Lillqvist and Mr. O’Kane jointly own Inkoo (aka Blackhorse), a lakeside property located 63 km from Helsinki, Finland. The property has a cabin, an older recreational building, a garage, and a woodshed. The Inkoo property is comprised of two legal titles. [ 68 ] Mr. Lawritsen used a value of $496,838 for the Inkoo property. This value was taken from an expert appraiser engaged on behalf of Dr. Lillqvist. Counsel for Mr.

O’Kane required the expert appraiser to testify at trial pursuant to Rule 5.40(1), but the expert appraiser was unable to do so. Accordingly, the expert appraiser’s report was removed from the Agreed Exhibits and is not a part of the evidentiary record. [ 69 ] Mr. Doran used a value of $706,814 for the Inkoo property. This was taken from a report by Matti Aijala, an expert appraiser engaged on behalf of Mr. O’Kane. Mr. Aijala’s report was entered into evidence pursuant to Rule 5.39(1), and he was not required to testify pursuant to Rule 5.40(1). As such, the evidence of Mr.

Aijala is the only evidence of the value of the Inkoo property before the Court. Mr. Aijala’s report appears to be a competent and professional assessment of the value of the Inkoo property, so I accept his valuation. [ 70 ] Dr. Lillqvist owns Aurinkokaillo, an undeveloped piece of land located 8km from Kirkkonummi, Finland. Dr. Lillqvist inherited 1/3 of this property from her father on his death. She subsequently bought the other 2/3 of the property from her sisters. [ 71 ] Mr. O’Kane did not contest Dr. Lillqvist’s claim to having inherited 1/3 of the Aurinkokaillo property. Mr.

Doran accepted the value of Aurinkokaillo proposed by Dr. Lillqvist, and his report only includes 2/3 of the value of Aurinkokaillo in the calculation of personally-owned matrimonial property. [ 72 ] Dr. Lillqvist owns another property in Finland called Kaitavaara. There are no valuations for Kaitavaara and Mr. O’Kane does not contest Dr. Lillqvist’s ownership of the property or her claim that it should be exempt. e.

Tax and Disposition Costs [ 73 ] No tax and disposition costs are appropriate in respect of the personally-held properties that are for personal use rather than operation as income-generating properties. These properties can be expected to be held for a long time and, where those properties are primary residences, they will not attract any tax on disposition. [ 74 ] The Court, by reason of a lack of evidence, cannot determine what, if any, tax may be due on disposition of property in

Finland. I am nevertheless satisfied that assuming no tax on disposition is the correct approach by reason of responses to a question that I posed to counsel for both parties. Counsel for Mr. O’Kane advised that, while it was not apparent on the face of the reports in evidence, Mr. Doran’s tax calculation assumed that there would be no tax on the Mount Royal residence or the Finland properties. [ 75 ] Mr. Lawritsen did not calculate tax that would be paid on disposition of the remaining personally-held real estate (Greenview; 922, 19 Ave SW; and 1723, 10A St SW). Mr.

Doran calculated the taxes owing on disposal to be $108,800. I accept Mr. Doran’s calculation. [ 76 ] By reverse engineering the numbers, it is apparent that Mr. Doran uses 5% of market value for disposition costs and Mr. Lawritsen uses 3% of market value for disposition costs. Disposition costs represent realtor fees, lawyer fees, and other fees associated with the disposition of property. The offer that Mr.

O’Kane received from Main Street for the Greenview units, which I do not accept as being indicative of value, shows that it is possible and even likely that a single buyer without a realtor may acquire the Greenview units. To account for this possibility, the lower rate for disposition costs, 3%, should be used.

Given the uncertainty of the timing of the disposal of the personally held real estate, it is appropriate to include only 50% of the expected tax on disposition and disposition costs. [ 77 ] The parties are directed to have their experts calculate the disposition costs according to the method set out above in para 76. Once that is done, the experts can determine the net fair market value of the personally-held Greenview units, 922 19 Ave SW, and 1723 10A St SW. f.

Liabilities on Personally-owned Real Estate [ 78 ] The preceding discussion did not address the liabilities that attach to the personally-owned real estate. The expert appraisers do not differ materially on the extent of the liabilities. Much of the difference between the expert appraisers is accounted for by Mr. Doran’s recognition of an accrual for unpaid condominium fees. This is the subject of the Greenview lawsuit. As I concluded above, the Court is not able to assess the likelihood of success or failure in that case and must, for present purposes, take the parties’ denial of liability at face value.

Accordingly, I accept Mr. Lawritsen’s calculation of liabilities. g. Conclusion on Personally-Owned Real Property [ 79 ] My conclusions with respect to the value of the personally owned real estate are set out in the table below. These values do not account for the tax and disposition costs that remain to be calculated by the parties’ experts as set out above in paras 73-77.

Property Lawritsen Doran Court 2102, 10 St SW 2,220,000 2,048,300 2,200,000 922, 19 Ave SW 130,000 130,000 130,000 1723, 10A St SW 805,000 820,000 812,500 3012 Edenwold Heights NW 150,000 152,500 151,250 Greenview (19 units) 3,320,000 2,327,000 2,559,700 Aurinkokaillo (2/3) 100,371 98,200 99,286 Inkoo 496,838 706,814 706,814 h. Vehicles [ 80 ] Mr. O’Kane owns many cars including collectors’ items and sports cars modified for racing. Dr. Lillqvist owns older vehicles with high mileage. [ 81 ] To divide the matrimonial property, the parties’ vehicles must be valued.

However, the evidence concerning the value of the vehicles is problematic. [ 82 ] Mr. Lawritsen determined the value of Mr. O’Kane’s cars and Dr. Lillqvist’s vehicles using internet listings for sale of what appear to be similar vehicles with similar characteristics. Mr. Lawritsen is not qualified to value cars. [ 83 ] Mr. Doran did not attempt a valuation of the parties’ vehicles. Mr. O’Kane, however, engaged Norm Flanders to value some of his cars (2004 Porsche GT3; 1997 Toyota Supra Twin Turbo; 2007 BMW M5 Sedan; 1993 BMW E4 M5 Sedan) to rebut to Mr. Lawritsen’s valuation. Mr.

Flanders did not testify at trial; his reports were accepted into evidence by agreement of the parties. The agreement to enter the reports into evidence was not a concession by Dr. Lillqvist that the contents of the reports are correct. [ 84 ] Counsel for Dr. Lillqvist sought access to Mr. O’Kane’s vehicles for the purpose of having an expert prepare a valuation to respond to Mr. Flanders’ reports, but counsel for Mr. O’Kane denied access on the grounds that the request was made outside the time provided for expert reports in the litigation schedule. [ 85 ] In substance, the reports by Mr.

Flanders are primary reports, not responding reports and should have been delivered at the same time as the other primary reports. Delivering a primary report and calling it a rebuttal report is unfair because it denies the opposing party an opportunity to respond. [ 86 ] I cannot accept Mr. Lawritsen’s valuation because he lacks the qualifications to value automobiles. I also have grave concerns about Mr. Flanders’ valuation because he was engaged by Mr. O’Kane, raising the possibility that Mr. Flanders lacks the requisite independence and impartiality to act as an expert. I am concerned that Mr.

O’Kane influenced Mr. Flanders. [ 87 ] As I will explain in following paragraphs, I accept some of Mr. Flanders’ valuations and not others despite there being no expert car valuations offered on behalf of Dr. Lillqvist. The Court of Appeal has said that “[a] trial judge is not obligated to accept the evidence of any expert”: Robinson v Williams Estate , 2007 ABCA 19 at para 18 . Rather, the “trier of fact is entitled to reject

uncontradicted expert opinion evidence if there is a rational foundation for doing so”: Ganges Kangro Properties Ltd v Shepard, 2015BCCA 522 at para 50, citing R v Molodowic, 2000 CSC 16 , 2000 SCC 16 at para 8. This includes instances where the expert isthe sole expert: for example, see GTA Structural Steel Ltd v 20 Ashtonbee Holdings Ltd and Hady Construction (Toronto) Inc, 2012ONSC 7158 at paras 43-49, Christakos v De Caires, 2016 ONSC 702 at paras 56-57 and, in the arbitration context, Spadacini-Kelava vKelava, 2020 ONSC 7907 at para 176. [88] I accept Mr. Flanders’ valuations of the two BMWs.

The valuation of the 2007 BMW M5 is similar to the prices in the listingsof comparable cars for sale identified by Mr. Flanders. Mr. Flanders’ valuation of the 1993 BMW M5 is significantly lower than theprices of comparable cars listed for sale, but it is justified by the higher mileage than the comparable vehicles for sale. [89] I do not accept Mr. Flanders’ valuations of either the 1997 Toyota Supra Twin Turbo or the 2004 Porsche GT3. The prices ofcomparable vehicles listed for sale are significantly higher. The only reason why Mr.

Flanders’ valuations are so low relative to salelistings for comparable vehicles is because the two vehicles were modified for rally car racing and have been driven in rally car races.Because of the modifications, Mr. Flanders halved the value of these two cars. Mr. Flanders does not cite any authority or justify his50% reduction in value; he simply states that racing cars lowers their value. While that may be the case to some degree, the vehicles inquestion are in excellent shape, and the Porsche has low mileage. [90] The range of sales listings for above average condition 2004 Porsche GT3s identified by Mr.

Flanders was USD $85,000 toUSD $114,800. The lone Canadian listing for a 2004 Porsche GT3 was for $144,900. I do not accept that Mr. O’Kane’s 2004 PorscheGT3, which he kept in excellent condition, is worth $44,825. This is less than a third of the price of a similar car listed for sale inCanada. I set the value of the 2004 Porsche GT3 at $90,000. This value still represents a significant discount from sale listings ofcomparable vehicles to account for the racing modifications and use as a race car. [91] The range of sale listings for mid-1990s Toyota Supra Twin Turbos was between $65,000 and $100,000.

The vehicle at thelow end of this price range is four years older that Mr. O’Kane’s vehicle and has been driven 20,000 more kilometers. I do not acceptthat Mr. O’Kane’s 1997 Toyota Supra Twin Turbo, which Mr. Flanders says is in above average condition, is worth only $34,600. I setthe value of the 1997 Toyota Supra Twin Turbo at $60,000, which is a significant discount from what it would be worth without racingmodifications and use as a race car.

Vehicle Lawritsen Flanders Court1993 BMW M5 32,000 6,650 6,6502007 BMW M5 24,000 21,325 21,3251997 Toyota Supra TwinTurbo 130,000 34,600 60,000 2004 Porsche GT3 150,000 44,825 90,000Mitsubishi Outlander 10,000 n/a* 10,000O’Kane Total 346,000 124,700** 187,975Subaru Forester 13,000 n/a* 13,000Polaris Razr 8,000 n/a* 8,000Lillqvist Total 21,000 52,600** 21,000 *Mr. Flanders did not appraise these vehicles. **Mr. Doran identified these amounts for Mr. O’Kane’s vehicles and Dr. Lillqvist’s vehicles. i.

Conclusion on Other Personally-owned Assets [92] The table below sets out the personally-owned assets of the parties as of the valuation date.

Property Lawritsen Doran CourtBOK Vehicles 346,000 124,700 $187,975BOK Securities (TFSA)357,077 120,900 120,898*BOK Cash/OtherSecurities n/a n/a 575,721* O’Kane Total 703,077 145,600 884,594PL Securities (RRSP) 499,147 499,147 499,147PL Cash/OtherSecurities n/a n/a 98,916** PL Vehicles 21,000 52,600 21,000Lillqvist Total 21,000 52,600 110,016 *Brian O’Kane Statement of Income, Assets and Liabilities, June 30, 2021. **Petra Lillqvist Statement of Income, Assets and Liabilities, August 24, 2021.

(ii) Corporate Property a. 982416 Alberta Ltd. [ 93 ] 982416 Alberta Ltd. owns 17 units in the same Greenview building that the parties personally own 19 units. Applying the same methodology that I did above in paras 47-48 for the personally owned units, the value for the units owned by 982416 Alberta Ltd. is $2,108,700. [ 94 ] 1630, 15 th Ave SW, which is known as “Cambridge House”, is a 16-unit rental building. Mr. Boville of Sage Appraisals concluded that the value of Cambridge House was $2.3 million using both the income approach and the direct comparison approach to valuation.

Baojun Chen of Wernick Omura Singh Real Estate Valuation and Advisory (“WOS”) concluded, using the income approach, that the value was $2.1 million and, using the direct comparison approach, that the value was $2.2 million. Mr. Chen explained, however, that he thought that the income approach was more appropriate. [ 95 ] The difference in results in the valuations of Cambridge House by Mr. Chen and Mr. Boville using the income approach is a function of small differences in assumptions used in the calculation of net operating income and choice of different capitalization rates.

These discrepancies are not significant and all fall within the range of what is reasonable, but together they produce a difference in value of $200,000. Both Mr. Boville’s and Mr. Chen’s income approach valuations are reasonable. Accordingly, I find the value of Cambridge House to be the mid-point of $2.2 million. [ 96 ] 982416 Alberta Ltd. owns small interests in two joint ventures, both of which are managed by the majority owner. Both Mr. Lawritsen and Mr.

Doran use the appraisals of the real estate owned by the joint ventures by Jiabali Li of WOS as the basis for valuing the joint venture interests. [ 97 ] The material difference in the valuations of the interests in the two joint ventures is because Mr. Doran applied a 25% minority discount and Mr. Lawritsen did not. Mr. Doran explained that a minority discount was appropriate due to Mr.

O’Kane’s lack of control of the investment and what he called “marketability concerns.” [ 98 ] A minority discount is inappropriate in the context of a family corporation where the shareholders have good relations: Peregrym v Peregrym , 2015 ABQB 176 at para 242 . A minority discount is appropriate where a minority shareholder can be obstructed by other shareholders: Numair v Numair , 2022 ONSC 3449 at para 156 . I conclude that, in the present case, a minority discount on the joint venture interests is appropriate for the reasons expressed by Mr.

Doran, especially the fact that any sale of 982416 Alberta Ltd’s interest may be obstructed. [ 99 ] A minority discount is typically in the range of 20% to 40%: Chateauvert v Chateauvert , 2018 ABQB 2 at para 360 . Mr. Doran used a minority discount of 25%, which I find to be appropriate in the circumstances. Accordingly, I accept Mr. Doran’s valuations for both joint venture interests.

Property Lawritsen Doran Court Greenview 2,780,000 1,917,000 2,108,700 1630, 15 th Ave SW 2,300,000 2,100,000 2,200,000 Red Deer JV 264,000 208,500 208,500 Horton Road JV 372,000 294,150 294,150 Other Assets 13,517 13,500 13,500 Total 5,729,517 4,533,150 4,824,850 Total Liabilities 3,980,732 3,980,700 3,980,732 FMV 1,748,785 552,450 844,118 b. 1773690 Alberta Ltd. [ 100 ] The only property owned by 1773690 Alberta Ltd. is 1518, 15 Ave SW, also known as “Canterbury House.” [ 101 ] The valuation of Canterbury House by Mr. Boville of Sage Appraisals is $2.3 million and the valuation by Mr.

Chen of WOS was $2.2 million. [ 102 ] By operation of my approach to materiality set out in para 48, the difference should be split at $2.25 million. Given that it is at the high end of the range of value difference to fall under my split the difference rule, I will explain why this is appropriate based on the two valuations. [ 103 ] Mr. Boville and Mr. Chen both use an income approach. The differences in their valuations are attributable mainly to two things. First, there is a difference in capitalization rates with Mr. Boville using 5% and Mr. Chen using 4.85%. These rates are both within the appropriate range.

Second, Mr. Boville uses lower numbers for insurance and property management costs than Mr. Chen. Mr. O’Kane testified that, in his view, the insurance and property management costs used by Mr. Boville were inappropriately low. He

further testified that the actual insurance cost for Canterbury House was higher than that used by Mr. Boville though he did not produce any documentary evidence of the insurance costs. [ 104 ] Sanjit Singh, also of WOS, provided a one-page Expert Rebuttal Report, with respect to the insurance and property management fees for Canterbury House. He stated that the property management fee should not be 4% of Effective Gross Income (EGI). Instead, Mr.

Singh said should be 7% to 10% of EGI and that “insurance expenses are higher than reported by Sage.” No reasons or support for these opinions were offered in the Expert Rebuttal Report. On cross-examination, Mr. Singh conceded that he had no evidence to support his assertions. Similar concerns are expressed by Mr. Singh about other valuations in this proceeding by Mr. Boville, also without any substantiation. [ 105 ] Splitting the difference between $2.3 million and $2.2 million is appropriate because the difference in value is driven by minor discrepancies on matters of judgment.

Both valuations are reasonable, and the valuators have given no compelling reason to choose one or the other. [ 106 ] The remaining issue with respect to 1773690 Alberta Ltd. is whether 1/16 of Canterbury House is owned by Shimon Sherrington, the son of Mr. O’Kane’s new partner. Mr. Sherrington testified that he purchased a 1/16 interest in Canterbury House in 2014. He said that he paid the purchase price of $35,000 to 1773690 Alberta Ltd. Mr. Sherrington further explained that he drafted the purchase agreement which both he and Mr. O’Kane signed. [ 107 ] Mr.

Sherrington testified that he received two pay-outs in respect of Canterbury House, amounting to $12,500. Instead of being paid out, he also received the benefit of living in another building owned by one of the O’Kane companies for a year. Mr. Sherrington testified that he believes that some money is owed to him by 1773690 Alberta Ltd., but that he has been content to leave the money with the corporation for the time being. [ 108 ] The arrangement with Mr.

Sherrington is unconventional, but his testimony that he invested money with 1773690 Alberta Ltd. and owns a 1/16 interest in Canterbury House was not contested in cross-examination. I conclude that Mr. Sherrington owns 1/16 of Canterbury House, and this must be accounted for in the valuation of 1773690 Alberta Ltd. c. Blue Fish [ 109 ] The only property owned by Blue Fish is 1716, 10 th Street SW, also known as the “Valencia.” [ 110 ] Mr. Boville of Sage Appraisals valued the Valencia using both the income approach and the comparison approach.

He arrived at a similar value using both methods, but he indicated that the income approach was preferable for income generating properties. He concluded that the Valencia was worth $2.15 million. [ 111 ] Mr. Chen of WOS approached the valuation of the Valencia in the same way as Mr. Boville. He concluded that the Valencia was worth $1.9 million. [ 112 ] The critical difference between Mr. Boville’s valuation and Mr. Chen’s valuation is that Mr. Boville used different rents for different kinds of units whereas Mr. Chen treated the building as being comprised of twelve identical one-bedroom units.

This error by Mr. Chen is significant. The penthouse apartment in this building, currently occupied by Dr. Lillqvist, can generate rents much greater than a standard one-bedroom apartment. There is also one two-bedroom apartment that can generate rent greater than a standard one- bedroom apartment. [ 113 ] I accept Mr. Boville’s estimation of the rent for the penthouse apartment, though he states that he likely underestimated the rent. If Mr. Chen had used Mr.

Boville’s estimation of rent for the penthouse apartment in place of the rent of one of the twelve one- bedroom apartments, it would have made a difference in value of almost $200,000. The $50,000 balance of the difference in value is attributable to the difference in capitalization rate and minor differences in operating expenses. [ 114 ] Given Mr. Chen’s error, I conclude that Mr. Boville’s estimation of the value of the Valencia should be accepted. Mr. Lawritsen and Mr.

Doran appear to use the same numbers, apart from those derived from the valuation, to determine fair market value of Blue Fish net of tax and disposition costs. Accordingly, I accept Mr. Lawritsen’s conclusion as to the fair market value of Blue Fish after accounting for 50% of tax and disposition costs. d. Vectus [ 115 ] Vectus was a construction company that Mr. O’Kane owned with his friend Andrea Battiston. Vectus did construction work on properties owned by the other O’Kane companies. Vectus also competed for work from third parties, including work on schools for school boards. [ 116 ] Mr.

O’Kane testified that he sold his interest in Vectus to his business partner, Mr. Battiston, in 2014 after he suffered a stroke. Mr. O’Kane explained that he sold Vectus for book value because the company had no value apart from the contracts that it was awarded from time to time. [ 117 ] Dr. Lillqvist expressed her view that the sale of Vectus was a sham. Her view is rooted in the fact that Mr. O’Kane continued to use a Vectus email address after selling his interest and Mr. O’Kane or his companies continued to provide services to Vectus following the sale. Mr. Lawritsen’s view is that Mr.

O’Kane sold Vectus for less than its fair value because he did not get value for goodwill. [ 118 ] Mr. Battiston paid for Mr. O’Kane’s interest in Vectus by making monthly “management fee” payments to Red Trout from January 2014 to December 2014. Structuring the payments this way is peculiar, but it does not imply that Vectus was sold improvidently.

[ 119 ] Mr. Battiston, was an arm’s length third party, so Mr. Doran concluded there was no reason to question the value at which Mr. O’Kane’s interest in Vectus was sold. I agree. [ 120 ] No value should be attributed to Vectus given its sale in 2014. The proceeds of the sale flowed into Red Trout, which is being valued in this proceeding. e. 1749196 Alberta Ltd., Red Trout, & European Building Imports Inc. [ 121 ] For 1749196 Alberta Ltd., Red Trout, and European Building Imports Inc., the differences in value determined by Mr. Lawritsen and Mr. Doran are negligible.

According to the methodology described above in para 48, I split the difference in value for these three companies. f. Conclusion on Corporate Values [ 122 ] For each of the corporations other than Red Trout which does not own real estate, it is necessary to account for tax on disposition and disposition costs to reach a net fair market value. I direct the parties and their experts to calculate disposition costs at 3% of fair market value.

Using 3%, which is the low end of the range, is appropriate given the possibility, even likelihood, that the sales of these properties would be conducted privately without the assistance of a realtor. Tax on disposition will have to be recalculated by the parties’ experts given that my values for the underlying properties are different than the values used by the parties’ experts. I further direct that only 50% of tax on disposition and disposition costs be included in the calculation of net fair market value.

Inclusion of only 50% of tax on disposition and disposition costs is appropriate because of the uncertainty of the timing of disposition and the possibility for tax mitigation.

Corporation Lawritsen FMV Doran FMV Court FMV 982416 Alberta Ltd. 1,748,785 552,450 844,118 1773690 Alberta Ltd. 310,000 175,800 194,200* 1749196 Alberta Ltd. 329,342 319,300 324,321 Blue Fish 2,035,663 1,785,600 2,035,663 Red Trout 1,204,952 1,205,100 1,205,026 European Building Imports Inc. 63,439 64,100 63,770 Vectus Inc. 142,500 0 0 *Must be adjusted by the parties’ experts to account for Shimon Sherrington’s 1/16 interest in Canterbury House. Exemptions (

i) Inheritance Exemption [ 123 ] Property acquired by inheritance is exempt from distribution in a matrimonial property dispute: MPA , s 7(2)(b). The inherited property is to be valued as at the time at which the property was acquired. (ii) Mr. O’Kane’s Inheritance Claim [ 124 ] Mr. O’Kane claims an inheritance of $3,192,373. This amount is comprised of $1,288,151 in cash and a stock portfolio in Australia with a value of $225,584, both of which were provided for in the will of Mr. O’Kane’s mother, Jean O’Kane, and vetted through an Australian probate process. Mr.

O’Kane also claims that his inheritance includes loans made by his father that were forgiven as part of the resolution of his mother’s estate. [ 125 ] Mr. O’Kane transferred $818,500 of his cash inheritance to his new partner. He invested the balance of $469,651 in a brokerage account which has subsequently declined in value to $318,695.23 as of June 30, 2021. Mr.

O’Kane’s inheritance exemption before accounting for his claim of forgiven loans is $544,279.23 which is comprised of the Australian stock portfolio valued at the time of inheritance ($225,584) plus the diminished value of the cash inheritance invested in the Canadian brokerage account ($318,695.23). [ 126 ] Mr. O’Kane claims that loans made by his father, William O’Kane, were converted into real estate investments by Jean O’Kane after William O’Kane passed away in 2010. Mr.

O’Kane claims that, by agreement with his siblings following Jean O’Kane’s death in 2015, the Canadian real estate interests held by Jean O’Kane by reason of the conversion of the loan were to flow to Mr. O’Kane. The rationale was all the O’Kane siblings had received similar support from their parents and all the loans had been forgiven. Accordingly, Mr. O’Kane claims that an amount of $1,678,837 is exempt from distribution. [ 127 ] Mr. O’Kane produced a spreadsheet print-out from February 1995 covered in handwriting. The spreadsheet print-out indicates interest was calculated and due to Mr.

O’Kane’s father prior to 1995, and the handwriting describes an outstanding loan to Mr. O’Kane of $284,046.80. [ 128 ] Mr. O’Kane’s evidence is that the total principal amount owing to his father as of June 30, 1996 was $383,000. This amount was made up of a house loan of $183,343 and a $200,000 investment in a company owned by Mr. O’Kane. I refer to this as the “First Loan.” Mr. O’Kane’s evidence is that interest accrued on the First Loan at a rate of 6% per year. A further $71,841 was said to be owing on the First Loan in unpaid interest to December 31, 1996.

[ 129 ] Shortly before her death, Jean O’Kane signed a document prepared by Mr. O’Kane dated February 25, 2015, which set out that the total sum of principal and interest owing to her on the First Loan as of December 31, 2014 was $1,299,250. [ 130 ] According to Mr. O’Kane, his father advanced money to him to invest in Calgary real estate in the early 2000s.

I refer to this as the “Second Loan.” A document signed by Jean O’Kane and dated March 5, 2015 states that, as of December 31, 2012, the outstanding amount on the Second Loan “after accounting for profits amounted to $235,694.15.” The document further provides that the parties agreed that the sums would accrue interest until the funds were invested in real estate. [ 131 ] By way of agreements signed in early 2015, but backdated to January 1, 2014, Jean O’Kane purportedly invested $990,000 in properties owned by the O’Kane companies with Jean O’Kane taking a 100% interest in 4623, 73 Street NW for $215,000, a 15/16 interest in 1518, 15 Avenue SW for $525,000, and a 100% interest in 1630, 15 Avenue SW for $250,000.

Jean O’Kane did not get a registered interest on title in exchange for her investment. Instead, the interests were treated as loans to the numbered companies that owned the respective properties. [ 132 ] Mr. Doran calculated Mr. O’Kane’s inheritance as being $1,299,000 from the First Loan plus a further $379,000 attributable to the Second Loan for a total of $1,678,000. From this amount, he deducted the $990,000 notionally invested by Jean O’Kane in real estate owned by the companies owned and controlled by Mr. O’Kane.

He then added back the increased value of the notionally invested funds calculated using the appraised values of the relevant properties. According to Mr. Doran, the $990,000 invested by Jean O’Kane became $1,552,600 by the valuation date. Mr. Doran calculated that the loans from Mr.

O’Kane’s parents and subsequently forgiven following Jean O’Kane’s death had increased to $2,241,700 as of the valuation date. [ 133 ] The Alberta Court of Appeal cautioned in Jensen at para 55 that “ [a] court should be wary of evidence that is self-serving when a resulting trust is asserted by one spouse, in order to defeat a matrimonial property claim.” The same caution should govern when a loan is asserted by one spouse to defeat a matrimonial property claim. [ 134 ] Justice Verville in Dhariwal v Dhariwal , 2015 ABQB 50 at para 59 adopted the approach of Justice Wilson in Locke v Locke , 2000 BCSC 1300 at para 20 .

Wilson J, after surveying cases where family loans were alleged, identified the following factors often considered by courts in determining whether the loan was legitimate: 1. whether there were any contemporaneous documents evidencing a loan; 2. whether the manner for repayment is specified; 3. whether there is security held for the loan; 4. whether there are advances to one child and not others, or advances of unequal amounts to various children; 5. whether there was any demand for payment before the separation of the parties; 6. whether there has been any partial repayment; and 7. whether there was any expectation, or likelihood, of repayment. [ 135 ] Many of these factors are useful for assessing whether the loans that Mr.

O’Kane claims were made by his parents are legitimate. [ 136 ] Because of the contemporaneous documentation—the 1995 spreadsheet with handwriting—setting out amounts owed by Mr. O’Kane to his father, I accept that a loan was made for the purchase of Mr. O’Kane and Dr. Lillqvist’s first home and that a subsequent loan was made as part of an investment in one of Mr. O’Kane’s early ventures before he became involved in the real estate business. There is no reason to doubt that, as of 1996, the principal amount outstanding to Mr.

O’Kane’s parents on the First Loan was $383,000 as alleged. [ 137 ] There are several problems with Mr. O’Kane’s position after 1996 with respect to the First Loan. The interest rate was set at 6% and interest payments were not made after the mid-1990s, if at all. As a result, the interest piled up so that by the end of 2014 approximately two-thirds of the almost $1.3 million said to be owing was interest. While 6% may have been something close to a market interest rate in the late 1990s, for much of the intervening period, borrowing rates were much lower. If Mr.

O’Kane were a rational actor with an expectation that he must repay the loan, he would have either negotiated a different rate from the existing lender or refinanced the loan with a new lender. [ 138 ] There is no evidence as to whether security was taken for the loan in Australia. Certainly, once the parties moved to Canada, no security was taken for the loan nor were T5s issued to Mr. O’Kane’s parents in respect of the interest amounts. This is consistent with the First Loan being forgiven at some point or there being no expectation of repayment. [ 139 ] There is a period of almost twenty-years between Mr.

O’Kane’s spreadsheet with handwriting that was prepared for the purpose of reviewing financial matters with his father in early 1995 to his arrangements Jean O’Kane in early 2015 that purported to clarify the amount due under the loans. By 2015, Mr. O’Kane was involved in acrimonious divorce proceedings where it served his interests to have a significant debt to his elderly mother. [ 140 ] On May 31, 2013, Mr. O’Kane completed

Schedule A to Form FL-17, which is a “Statement of Income, Assets and Liabilities”. Before a Commissioner of Oaths he “solemnly declare[d] that the facts set out in this document are true.” Under the heading “Unsecured Debts” he listed $235,694.15 owing to Jean O’Kane. This amount happens to be the same amount that Jean O’Kane stated was owing to her on the Second Loan as of December 31, 2012. [ 141 ] I cannot accept that when completing the Statement of Income, Assets and Liabilities, in 2013 that Mr. O’Kane simply

overlooked or forgot the amount of $1.2 million that, based on his accounting, would have been owing on the First Loan at the time. This is especially the case when it was contrary to his interest to omit the First Loan. Mr. O’Kane is an accountant by training and pays close attention to the books and financial performance of his business. The explanation that best fits with the facts is that the First Loan was either forgiven by Mr. O’Kane’s parents or partially repaid and partially forgiven long before either of Mr.

O’Kane’s parents passed away. [ 142 ] I am satisfied that the Second Loan remained outstanding as reflected in the 2013 Statement of Income, Assets and Liabilities. In the absence of any contrary evidence, I accept Mr. Doran’s calculation that $379,000 was outstanding on the Second Loan as of the valuation date. [ 143 ] Mr. O’Kane’s inheritance exemption is the $544,279.23 calculated in para 125 plus the second loan amount of $379,000 for a total of $923,279.23. (iii) Exemptions Claimed by Dr. Lillqvist [ 144 ] Dr.

Lillqvist claims an inheritance exemption for one-third of the Aurinkokaillo property in Finland and for the entirety of the Kaitavarra property, which is also located in Finland. Mr. O’Kane does not contest these claims. Distribution of Matrimonial Property [ 145 ] Pursuant to the MPA s 9(2)(a), the Court has the power to give effect to a distribution of matrimonial property by “order[ing] a spouse to pay money or transfer an interest in property to the other spouse.” [ 146 ] For the last two decades, Mr.

O’Kane has built and managed the real estate portfolio that comprises the bulk of the value in the marital estate. He is the party best positioned to maximize the value of the real estate portfolio and, if necessary, liquidate part of it to satisfy obligations to Dr. Lillqvist. Accordingly, with a few exceptions, the real estate portfolio will remain in Mr. O’Kane’s control. [ 147 ] The exceptions are the Finland properties and 3012 Edenwold Heights NW which are awarded to Dr. Lillqvist. Dr.

Lillqvist recognized that her continued occupancy of the “penthouse” in the Valencia is impractical and proposed instead that 3012 Edenwold Heights NW be transferred to her for use as her residence in Calgary. Mr. O’Kane, through counsel’s written submissions, agreed to this proposal. [ 148 ] I concluded earlier in these reasons that an equal division of matrimonial property was appropriate. The allocation of most of the real estate portfolio to Mr. O’Kane requires him to make an equalization payment so that the value of the matrimonial property is shared equally.

The division of matrimonial property is set out in the table below. For several of the companies that Mr. O’Kane retains ownership of, the fair market value net of tax and disposition costs remains to be calculated by the parties’ experts. Once the net fair market value is calculated for those companies, the equalization payment calculation should be straightforward.

Property Lillqvist O’Kane Personally-Held Real Estate 0 0 Aurinkokaillo (2/3) 99,286 0 Inkoo 706,814 0 2102, 10 St SW 0 2,200,000 3012 Edenwold Heights NW 151,250 0 1723, 10A St SW 0 812,500 922, 19 Ave SW 0 130,000 Greenview (19 units) 0 2,559,700 Liabilities 0 -3,613,490 Tax & Disp (50%) 0 TBD Non-Real Estate Assets 0 0 PL Securities (RRSP) 499,147 0 PL Cash/Other Securities 98,916 0 PL Vehicles 21,000 0 BOK Vehicles 0 187,975 BOK Securities (TFSA) 0 120,898 BOK Cash/Other Securities 0 575,721 BOK Inheritance 0 -923,279.23 Corporations 0 0 European Building Imports Inc. 63,770 0 Blue Fish 0 TBD Red Trout 0 1,205,026 982416 Alberta Ltd. 0 TBD 1773690 Alberta Ltd. 0 TBD 1749196 Alberta Ltd. 0 TBD Total TBD TBD Equalization Payment TBD TBD Equalized Total TBD TBD Spousal Support

Brief

Summary of Relevant Law [149] The Divorce Act, RSC 1985, c 3 (2nd Supp), s 15.2(1) provides that a Court may make an order requiring a spouse to paysupport in such amount as the Court determines reasonable for the support of the other spouse. Pursuant to s 15.2(3), the order may befor a definite or indefinite period or until a specified event occurs, and the Court may impose such terms, conditions, or restrictions inconnection with the order as it considers just and appropriate. [150] When faced with a question of spousal support, the Court is required by s 15.2(4) to consider the condition, means, needs andother circumstances of each spouse, including (

a) the length of time the spouses cohabited; (

b) the functions performed by each spouse during cohabitation; and (

c) any order, agreement or arrangement relating to support of either spouse. [151] Pursuant to s 15.2(6), a spousal support order should: (

a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (

b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above anyobligation for the support of any child of the marriage; (

c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and (

d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time. [152] Dr. Lillqvist is entitled to both compensatory and non-compensatory spousal support as those terms are explained in Bracklow vBracklow, (SCC), [1999] 1 SCR 420. Entitlement to Retroactive Spousal Support [153] Details of the relationship between Dr. Lillqvist and Mr. O’Kane are set out above in the

section titled “Background to theO’Kane-Lillqvist Relationship and

Section 8 Analysis” at paras 28-46 are relevant to the analysis of entitlement to spousal support but,for the sake of economy, will not be repeated here except as necessary. [154] The marriage lasted approximately 23 years. During that time, Mr. O’Kane pursued his business interests and was the principalbreadwinner for the family while Dr. Lillqvist sacrificed her career as a medical doctor and raised the couple’s children.

The longer amarriage lasts, the closer the economic union and the greater the presumption of equal standards of living upon dissolution: Moge vMoge, (SCC), [1992] 3 SCR 813 at 870. [155] After dissolution of the marriage, Mr. O’Kane continued his real estate business while Dr. Lillqvist worked as a physician inFinland for part of each year. Counsel for Mr. O’Kane submitted that Dr. Lillqvist was underemployed because she did not work fullyears and that this should be accounted for in determination of entitlement to spousal support and the quantum of any spousal support. [156] Dr. Lillqvist and Mr.

O’Kane chose to live in Canada because it was an English-speaking country and Mr. O’Kane was aCanadian citizen. The consequence was that Dr. Lillqvist was unable to practice her chosen profession, medicine, other than duringperiods when she travelled to Finland. [157] Another consequence of the couple choosing to live in Canada was that Dr. Lillqvist has a life that spans two countries. Thiswas recognized by the couple during their marriage when they bought the Inkoo property so that the family had a base in Finland. Dr.Lillqvist has family in Finland including the couple’s adult son who now resides in Finland.

Dr. Lillqvist can only work as a medicaldoctor in Finland or other Scandinavian countries that recognize her qualifications. At the same time, Dr. Lillqvist spent much of heradult life in Canada and the couple’s adult daughter resides in Canada. [158] The argument that a person who lived most of her adult life as a homemaker and split her life between two countries on eitherside of the Atlantic Ocean is, upon separation, supposed to commence full-time work in only one of those countries is unreasonable.

Hertwo-country life is a consequence of the parties’ lengthy marriage, and she cannot be expected upon separation to assume a one-countrylife leaving behind a lifetime of relationships in the other country. She works in Finland and neighbouring countries where she isqualified to do so, she does not work in Canada where she is not qualified to do so. She is not underemployed or, if she is, it is aconsequence of or disadvantage resulting from the marriage. [159] Dr. Lillqvist has had to make do with significantly less income and resources than Mr. O’Kane since separation.

She has notbeen able to enjoy the same lifestyle that she enjoyed while married or the same lifestyle that Mr. O’Kane has enjoyed since separation. [160] From the time of separation, Mr. O’Kane operated the real estate business as he did when the couple was married. Hemaintained exclusive control of the business and paid himself a salary, dividends, and other compensation as he saw fit. As detailedearlier in these reasons, the properties that comprise the real estate business are matrimonial property. However, in the period followingseparation, Dr.

Lillqvist did not receive equal benefit of the matrimonial property. [161] Dr. Lillqvist has established an entitlement to spousal support. Her entitlement to spousal support extends from the date ofseparation until the judgment dividing matrimonial property and requiring an equalization payment is satisfied. Her entitlement tospousal support ends upon the division of matrimonial property and the making of the equalization payment because, without thematrimonial property, the parties’ respective earning capacities are comparable. Mr. O’Kane, though formerly a professional accountant,

has in recent years functioned as a bookkeeper and caretaker for his real estate business. Returning to work as a professional accountant at this stage of his career is not realistic. Without the real estate business, he does not have the capacity to earn any more than Dr. Lillqvist does working part-time as a physician. [ 162 ] Mr. O’Kane’s income derives from the real estate business which is comprised primarily of rent paid by tenants and the proceeds of sales of properties. Upon division of the matrimonial property and after the equalization payment is made, Dr.

Lillqvist will have equal capacity to generate income through investment. Once the matrimonial property is divided and the equalization payment has been made, there will be no basis for ongoing spousal support. Calculation of Spousal Support [ 163 ] Experts for both parties calculated guideline income for the parties for each year from 2012 to 2020. The parties did not supply calculations for 2011, though Dr. Lillqvist does claim spousal support from the time of separation in 2011 to present. The calculations of the experts show that the incomes of both Mr. O’Kane and Dr.

Lillqvist varied significantly from year-to-year. For the purposes of my analysis and calculations, I use an average income calculated by each expert over the 9-year period, as I find that the fairest way to deal with the parties’ fluctuating incomes, especially in the case of Mr. O’Kane, as will be explained. [ 164 ] The partisan approaches of the experts is revealed in the calculations produced. The averages of Mr. Doran’s calculations of the parties’ guideline income for each year in the period show that the parties’ incomes were roughly equal at just more than $200,000 per year.

By contrast, when averaged, Mr. Lawritsen’s calculations for each year shows a discrepancy of approximately $400,000 per year in favour of Mr. O’Kane. I have not been able to accept the calculations of either expert without modification. [ 165 ] Due to the nature of the parties’ incomes and the differing assumptions and opinions in this case, the numbers that I have chosen are the best approximation of guideline income available in the circumstances. O’Kane Guideline Income [ 166 ] According to Mr. Doran, Mr. O’Kane’s annual guideline income ranged from a low of negative $346,100 to a high of $473,100.

The average annual guideline income for Mr. O’Kane over the period 2012-2020, using Mr. Doran’s yearly calculations, is $59,378. [ 167 ] Mr. Lawritsen concluded that Mr. O’Kane’s annual guideline income ranged from a low of $167,300 to a high of $957,300. The average annual guideline income for Mr. O’Kane for the period 2012-2020, using Mr. Lawritsen’s calculations, is $535,189. [ 168 ] The discrepancy in the guideline income calculated for Mr. O’Kane by the two experts can be mainly attributed to several issues of principle which are discussed in the following sections of these reasons. a.

Repair and Maintenance Expenses [ 169 ] The parties disagree about whether repair and maintenance expenses should be included in Mr. O’Kane’s income for the purpose of calculating spousal support. [ 170 ] Mr. Lawritsen, citing appraisal experts engaged on behalf of Mr. O’Kane, said that the repair and maintenance expenses are more than is appropriate for the properties. He said that some of the repair and maintenance expenses are, in fact, capital expenditures. Mr. Lawritsen normalized the repair and maintenance expenses to a set amount per unit per year and added the rest back into Mr.

O’Kane’s income. [ 171 ] Mr. Doran also made a distinction between repair and maintenance expenses and capital expenses. Instead of looking to appraisers to determine an appropriate or normal amount for annual repair and maintenance costs per unit, he looked at the actual expenses. Mr.

Doran classified any expense over $10,000 as a capital expense and subjected expenses between $1,000 and $10,000 to scrutiny to determine their appropriate classification. [ 172 ] The reality is that whether the money was spent on repairs and maintenance or whether the money was spent on capital improvements, the money was spent on the real property that comprises the matrimonial estate. There is no suggestion that the expenses categorized as repairs and maintenance were spent for some unrelated personal purpose. [ 173 ] The money spent by Mr.

O’Kane either preserved or enhanced the value of the matrimonial estate. Now that the matrimonial property is being divided, Dr. Lillqvist will enjoy the benefit of those expenditures. [ 174 ] To include repair and maintenance expenses or a portion thereof in Mr. O’Kane’s income for the purpose of calculating retroactive spousal support would, in effect, give Dr. Lillqvist the benefit of those funds twice—once as income and once as part of the matrimonial property distribution. [ 175 ] Mr.

Doran’s approach to repair and maintenance expenses is the closest to what I have determined to be appropriate in the present case. Accordingly, I use Mr. Doran’s calculation of Mr. O’Kane’s guideline income as the basis for my calculation. b. Amortization Expenses [ 176 ] Mr. Doran and Mr. Lawritsen treat amortization with respect to the corporately held real property differently for the purposes of calculating Mr. O’Kane’s guideline income. [ 177 ] Amortization, as counsel for Mr. O’Kane submits, is a legitimate business expense.

Amortization is an accounting concept where the book value of property is reduced to account for the decreasing value of a capital asset over its useable life. The reduction of value of property reflected in a corporation’s books may or may not correspond with the actual decrease in value of the property.

[178] The starting point for analysis is the Federal Child Support Guidelines, SOR/1997-175 [Guidelines]. The Guidelines atSchedule III, s 11 provide deductions for amortization or capital cost allowance applicable to real property must be included in incomefor the purposes of calculating guideline income. The Guidelines do not expressly provide that deductions for amortization or capital costallowance taken within a corporation owned or controlled by a spouse must likewise be included in income for the purposes ofcalculating guideline income. [179] Counsel for Mr.

O’Kane submitted that “there is no hard and fast rule about whether and to what extent amortization expensesshould be added back into income; rather, the determination is made on a case-by-case [basis].” He went on to cite several cases wherepart or all an amortization deduction was not required to be added back into income.

However, most of these cases concernedamortization or capital cost allowance deductions in respect of equipment, not real property. [180] The appropriate approach to the question of deductions for amortization and capital cost allowance within a corporation for thepurposes of calculating support is set out in Julien D Payne & Marilyn A Payne, Child Support Guidelines in Canada, 2020 (Toronto:Irwin Law, 2020) at 128: Any capital cost allowance permitted to a spouse under the Income Tax Act, with respect to real property, as distinct from personalproperty, must be added back into the spouse’s income under

section 11 of

Schedule III of the Guidelines.

Section 11 of

Schedule III tothe Guidelines refers not to a corporation’s deductions but to a spouse’s deductions for an allowable capital cost allowance with respect toreal property.

Section 11 of

Schedule 3 of the Guidelines should not be read into the analysis of available corporate income under section18 of the Guidelines. However, a payee spouse will not be disadvantaged by the omission of an equivalent provisions in

section 18,because if there is a finding that the spouse’s annual income does not reflect what is actually available to him for child support, a courtcan consider (

i) the pre-tax income of the corporation, or (ii) the value of the spouse’s services to the company. And the former measurewill necessarily add back all tax deductions subsequently utilized by the corporation, including amortization. [181] Counsel for Dr. Lillqvist relies on Krammer (Ackerman) v Ackerman, 2020 SKQB 280 and the cases cited therein for theproposition that deductions for amortization or capital cost allowance in respect of corporately held real property should be included inincome. [182] The facts in Krammer are similar to the present case. Mr.

Ackerman took the position that deductions for amortization on realproperty and equipment should not be included in his income for the purposes of calculating guideline income. According to him, theamortization deductions were appropriate because a significant amount was spent to maintain the rental properties owned by hiscorporation. The Court rejected this position concluding at para 88, “the entirety of the amortization expense for real property should beincluded in the pre-tax net income of the corporation.

I do not include the other amortization as it appears to relate to assets which, in thenormal course, do depreciate over their lifetime.” [183] The discussion in Krammer cites other decisions where deductions for amortization on real property were added back intoincome for the purposes of calculating guideline income: Boykiw v Boykiw, 2013 BCSC 1107; Ross v Ross, 2017 BCSC 371; DPB vMAG, 2011 BCSC 290; and Williams v Williams, 2020 BCSC 597. [184] Justice Lee in Jaasma v Jaasma, 1999 ABQB 764 considered the appropriateness of deductions for amortization of

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