Docket: 1890 Peter Guckert Appellant - v. -, 2012 SKCA 121

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2012 SKCA 121 Date: 2012-12-12 Between: Docket: 1890 Peter Guckert Appellant - and - Johanne Guckert Respondent - and - Koncrete Construction Ltd., Brent Guckert and Sheldon Guckert Respondents - and - Koncrete Construction (BPG) Inc., and Koncrete Construction (SJG) Inc., and Kindersley Concrete Products Ltd. Third Parties - and -

Sun Life Assurance Company of Canada Intervener Between: Docket: 1892 Koncrete Construction Ltd., Brent Guckert and Sheldon Guckert Appellants - and - Peter Guckert Respondent - and - Koncrete Construction (BPG) Inc., and Koncrete Construction (SJG) Inc., and Kindersley Concrete Products Ltd. Third Parties - and - Sun Life Assurance Company of Canada Intervener Coram: Lane, Caldwell and Herauf JJ.A. Counsel:

James Vogel and Joanne Moser for Peter Guckert Anthony Merchant, Q.C., and Gerald Heinrichs for Johanne Guckert R. Bradley Hunter, Q.C., for Koncrete Construction Ltd., Brent Guckert and Sheldon Guckert Paul Harasen for Sun Life Assurance Company of Canada Appeal: From: 2009 SKQB 484 Heard: September 17, 2012 Disposition: Appeal allowed in part Written Reasons: December 12, 2012 By: The Honourable Mr. Justice Lane In Concurrence: The Honourable Mr. Justice Caldwell The Honourable Mr.

Justice Herauf Lane J.A. [ 1 ] This is an appeal of a trial judge’s decision and resulting order dividing the family property and ordering the appellant Peter to pay spousal support to the respondent Johanne. The central issues on appeal are: (1) the trial judge’s award of spousal support to be paid by Peter; and, (2) the trial judge’s order the parties’ company continue to maintain and divide a Sun Life life insurance policy owned by the company and taken out for the purposes of the parties’ estate planning.

The insurance policy, with a death benefit of $3 million payable on the last to die of the parents, was to benefit their three adult children. [ 2 ] Peter contends the order to pay spousal support amounts to double dipping and because he may have to borrow monies or sell his shares to acquire Johanne’s interest in the family company he is being required to pay support based on a much reduced income producing asset. He further says the trial judge did not have the authority to make the order he did requiring the company to maintain the life insurance policy.

I will expand on his position later. [ 3 ] The respondent company, Koncrete Construction Ltd. (“KCL” or “the company”), is the parties’ significant asset and was built up during the course of their marriage. At the time of the trial, Peter and Johanne each owned 14 Class A and 2 Class B shares. Their two independent adult sons, Brent and Sheldon, who are active in the business, each owned 1 Class A and 1 Class B share.

Their third child, Shelley, also an independent adult, has never participated in the business and has no shares. [ 4 ] The respondents, Brent and Sheldon, also had their own companies and all were joined in the action in response to claims against them by the respondent Johanne. There were allegations the company was improperly transferring assets and one of the purposes of consolidation of the actions was to determine valuations so an appropriate remedy could be crafted. The sons join issue with their father challenging the order respecting the life insurance policy.

They also claim the trial judge erred in failing to award them costs when firstly, the claims against them were dismissed, and secondly, in the case of the sons’ companies, counsel for the respondent Johanne, at the commencement of the trial, said they were not pursuing any remedies against the sons’ companies. [ 5 ] Johanne had also commenced actions for wrongful dismissal in her capacity as a minority shareholder of KCL, for oppression claiming the other directors and officers conducted the family business in a manner which was oppressive, unfairly prejudicial and which disregarded her interests.

These actions were dismissed by the trial judge and no appeal was taken from the resulting order. [ 6 ] Sun Life Assurance Company of Canada (“Sun Life”), which was not a party at trial, before us sought leave to intervene because the order to divide the life insurance policy could not be complied with under the terms of the policy and it was not aware of the order until it was served upon them.

Sun Life says it is a “person interested in a proceeding” within the meaning of Rule 17 of The Court of Appeal Rules (Civil) because the trial judge’s order compelled Sun Life to divide the policy into two parts (or at the option of the sons into three equal policies), each providing for a $1 million death benefit to each child.

The order requires Sun Life to take certain steps to divide the policies when the policy in question does not permit it to be converted into three policies and the conversion option in the policy is one which requires a new replacement policy at new premium costs reflecting the current ages of the parents, Peter and Johanne. It says the new cost of the insurance would almost double the original cost assuming the parties are even insurable. Sun Life proposed an alternative option and that is KCL, as owner of the policy, irrevocably designate the three children as beneficiaries.

This option was rejected by Peter and the sons. [ 7 ] Sun Life’s application for intervener status was opposed by counsel for Johanne, who, in turn, made his own application to adduce fresh evidence on appeal – the fresh evidence being Sun Life’s position the policy did not allow for the order made and Sun Life’s proposal the company irrevocably designate the three children as beneficiaries.

[ 8 ] The facts are completely set out in the judgment of the trial judge but a brief review will set out the background. The parties were married in 1963 and, at the time of the trial in 2009, the respondent was 67 years old and the appellant 70. The separation has divided the family. Their daughter, who, as stated above, was never active in the company, has sided with her mother, and the two sons, who are actively running the company, have sided with their father.

The mother is alienated from her sons and the daughter is alienated from her father and brothers. [ 9 ] The trial judge noted the ages and health problems of Johanne and Peter and said they are entitled to retire and each would be obligated to invest their assets to produce secure and reasonable retirement income. Although there were significant assets, the greatest was the company which had been successfully built up over their marriage. During better times they agreed on a succession plan to benefit the three children with the boys eventually to take over the company.

A component of the succession plan was the $3 million last to die life insurance policy taken out on the lives of the parents by the company and paid for by the company. The original design of the plan was to have the company make initial substantial contributions to a pool which was to be invested by the insurance company, with the pool being of sufficient size to pay future premiums. Because of market conditions, the returns expected were not attained and the pool is expected to be depleted by 2015.

The value of the life insurance policy was included in the business valuation performed by the business valuators who testified at trial and the value of the policy was included as an asset of the company. Throughout the proceedings, all the parties maintained the beneficiaries of the policy were the three adult children. [ 10 ] In addition to a division of the personal property, the family home and debts, Peter was awarded the company in the distribution of the property and was ordered to pay Johanne half the company’s value.

As mentioned, the trial judge ordered the company to maintain the policy and the pertinent provisions of the insurance policy order will be dealt with later. I. THE APPELLANTS’ POSITION [ 11 ] Peter contends the trial judge erred in his awarding spousal support to Johanne. He says the trial judge failed to consider his unchallenged evidence he would have to sell his shares to pay out the property division. The income on which the trial judge based his decision was not supported by any evidence that the level of income was sustainable or was an appropriate level of income given the investment in the company.

He further contends the trial judge failed to consider what Johanne receives by way of property distribution in calculating the amount of support. He says it is an error to calculate the amount of ongoing spousal support on a predetermined annual income produced by the asset ordered to be split between the parties. Paying spousal support from the equalized property constitutes double dipping.

He does not seek a recovery of support paid to date, but does seek an end to the ongoing spousal support order. [ 12 ] With regard to the issue of the insurance policy order, Peter says the trial judge had no jurisdiction or authority to interfere with the company’s internal operations by ordering it to maintain the policy to, in effect, set up a trust for the benefit of the three adult children. Further, the trial judge had no jurisdiction to compel the insurer, a non-party, to comply. He contends the trial judge had no authority under the provisions of The Family Property Act, S.S. 1997, c.

F-6.3, to pierce the corporate veil and fetter the activities of the company to protect the daughter’s (who was not a party to the action) potential inheritance. Further, he says the potential benefit which may be paid on the death of a life insured is not family property in any event. He relies on Anthony v. Anthony , 2007 SKQB 21 , 292 Sask. R. 160 at paras. 23 to 29 , for the proposition that an inheritance triggered by a death which occurs after a petition is issued is deemed not to be shareable. The potential inheritance was not an entitlement which was received during the marriage.

There was no payment due to the children during the marriage and, therefore, the insurance policy was not something the trial judge could allocate, value or divide. [ 13 ] The sons and the company adopt Peter’s argument the trial judge did not have jurisdiction to award relief over specific corporate property. The trial judge was limited by The Family Property Act to dealing with a “security, share or other interest in a corporation” but not property within the corporation itself.

Further, any distribution of property is between the spouses and the authority does not extend to the awarding of family property to non-parties, in this case the adult daughter. The trial judge had no authority or jurisdiction to try and protect a non-party’s interest in the estate plan their parents had developed. [ 14 ] Continuing, they argue there is no authority in The Business Corporations Act , R.S.S. 1978, c.

B-10, to allow the court to deal with individual corporate assets in a situation where there is no finding of oppression. [ 15 ] The sons also say the trial judge erred in failing to award them, their companies, and KCL costs. Johanne’s actions against them were dismissed and, in the case of their personal companies, counsel for Johanne, at the opening of trial, said he was not pursuing any remedies against their companies. II. The RESPONDENT JOHANNE’S POSITION [ 16 ] The respondent says the order of spousal support was correct and was based on an analysis of income Peter drew from the company.

This income is unrelated to the underlying value of the shares. Peter was able to earn significant income while he held less than 50% of the shares. His income in the future will be based on what the company chooses to pay him. The trial judge based his income on evidence submitted and no error was made. The husband will have an income stream considerably higher than that of the respondent, a fact that was recognized by the trial judge. [ 17 ] The respondent argues it is the intention of The Family Property Act that judges effect fairness within the family unit.

Her counsel argues the trial judge was fully alive to the inexplicable and inappropriate conduct of the individual respondents and took reasonable steps to protect the daughter’s interests to ensure that she receives $1 million upon the death of the last of her parents, which was the intent of the parents’ estate plan. The court did not remove the asset from the company operations but simply preserved the insurance policy asset.

Johanne contends it was clearly open to the trial judge to protect the interests of the daughter and suggested the court has jurisdiction to make such an order through the operations of The Saskatchewan Insurance Act , R.S.S. 1978, c. S-26, or The Business Corporations Act . In the alternative, because Johanne owned 44.4% of the company they seek an order designating that 44.4% of the value of the insurance policies be paid to her estate. It is to be noted there are two policies but the issue in dispute pertains to the policy taken out as part of the estate plan.

She makes several arguments urging the court to make any appropriate orders to preserve the daughter’s interest including directing the insurance company to divide the policy. [ 18 ] The respondent says justice in this case must be addressed by a transfer in specie of the insurance policies or some other

appropriate resolution so that Peter does not receive the $3 million insurance policy which was intended to pass to the three children on the deaths of the parents. The respondent does not wish to leave her husband and sons the policies because they can change the beneficiaries and are likely to do so.

The solution the trial judge arrived at to prevent an injustice was reasonable and appropriate. [ 19 ] Finally, the respondent argues the trial judge’s decision as to costs was correct and, in reality, the respondent ought to have been entitled to costs because it was necessary, in order to obtain a fair and appropriate remedy, to fully expose the unfair or inappropriate involvement of the sons and of the company in the litigation. The trial judge properly exercised his discretion in his decision regarding costs. III. ANALYSIS 1. Spousal Support [ 20 ] I will deal firstly with the issue of spousal support.

I find Peter’s argument not persuasive. The amount of spousal support was based on the income evidence tendered. Peter’s income was the amount the company paid him. It paid him that amount even though he was a minority shareholder. Should he sell the shares he acquires from Johanne, he will still have the same number of shares which generated the income on which the trial judge based his findings. Peter will have business income from the company and Johanne will not.

This income will continue as long as the company continues to pay him while Johanne will generate income only from her investment of the money she receives from the sale of her share of the company; income that will be considerably lower than Peter’s. The trial judge simply recognized that Peter will have a continuing substantial income and Johanne will not. With regard to Peter’s argument that Johanne is double dipping, double dipping simply does not arise in the circumstances of this case. Peter’s income is not derived from a divided or equalized asset but continues to be derived from his employment at KCL. 2.

Insurance Policy [ 21 ] I now turn to the issue of the insurance policy. Again, the parties throughout were all of the position the beneficiaries of the policy were the three adult children. Indeed in his factum, Peter, at para. 8, states “The beneficiaries of the life insurance are the children”. Unfortunately, for whatever reason, the policy was not carefully reviewed until this Court pointed out the policy reads that the company, KCL, is the beneficiary and not the children.

This ought to end the matter because the insurance policy provisions of the trial judge’s order were designed to protect the daughter’s interest on the assumption the children were the beneficiaries. In reality, the daughter has no interest. Counsel for the respondent argues this Court ought to decide the matter on the basis of the parties’ understanding the beneficiaries were, in fact, the children. It is not open to the Court to do so. [ 22 ] The Court cannot simply rewrite the terms of the insurance policy.

If the policy did not reflect the parties’ intentions, this is not in issue before us nor was it in issue before the trial judge. In the circumstances, in my view, it is appropriate to review the parties’ arguments the trial judge did, or did not, have the authority to make the order he did. I am satisfied the respondent would not succeed in any event. [ 23 ] The trial judge was extremely concerned the daughter’s interest is protected. I will quote from an extensive intervention by the trial judge expressing his concerns about maintaining the policy (and it should be noted the reference to Mr.

Vogel is Peter’s counsel and Mr. Kilback was Sun Life’s financial manager for Southern Saskatchewan who testified on behalf of Johanne): The Court: The policy has been referred to as fully paid up, but we know there’s a -- a pool of money Mr. Kilback said would -- would service that for some time into the future. I know the ages of the parties. You’ve asked questions as to whether he could afford to see the premiums paid. Well, we know there’s a fund securing that -- the premiums for some time to come.

And to suggest that the policy would have to -- they would allow it to lapse and use that fund presumably for other purposes, maybe to pay an equalization payment, seems reckless. Would you pursue with your client whether he has carefully thought that through. I mean, he’s 70 years old; she’s 67. They’re not in the greatest of health. I hope they live a long life, but having done this to -- to allow the policy to lapse seems to be a reckless business decision.

Now, I -- I’m sure you’ll argue all of this at a later point, but I’d like to stop right now while you have your -- your client on the stand because I want to know if that’s a considered decision or is he just responding to your questions. Mr. Merchant and Mr. Hunter aren’t objecting to your leading in-chief. Mr. Vogel: He can’t (inaudible - away from microphone/both parties speaking at once) The Court: -- but -- but if this one of the substantive things of the succession plan that the petitioner and respondent want to do, because I’ve heard Mrs. Guckert saying she wants the children treated equally.

So if they’ve made this investment; it’s there; the premiums will be paid -- I think, was it 2015? Mr. Vogel: Correct. The Court: I’ll be retired by then I hope. Why -- why would one abandon it? That seems to me of all the things they would try to protect, the money is there, there’s the possibility of -- of death, something is not ringing true. Mr. Vogel: And I’ll pursue that.

The Court: And I mean, it just seems to me -- because if the decision ultimately comes to rest and you’re ask -- the court is asked to try and determine that, of all the assets they have, hearing what their intentions are and I believe they both have a very genuine love for their three children, surely the court would want to protect that asset. Mr. Vogel: I will pursue that in just a moment, My Lord. The Court: Would you please because that really concerns me and I don’t want that one to be left on my shoulders without your canvassing their feelings. [Emphasis added] [ 24 ] He continues: The Court: I see.

All right. I -- I don’t want to telegraph anything here, but -- but I want counsel during the course of the trial, while the parties are available, and maybe even while the sons are available, maybe they will testify. I don’t know, but -- but something in the back of my head that represents a modicum of common sense tells me that at the end of the day in this trial, I should -- I should be hearing all counsel saying, you know, there’s one asset that really ought to be preserved and that’s this insurance policy to create this fairly significant estate . And right now, Mr. Guckert and Mrs.

Guckert, they seem somewhat overwhelmed by what is going to happen. And maybe somewhat short-sighted, but because he doesn’t think he would necessarily have the income, it stands to reason that if that pool was depleted even five years from now, the children would say, you know what, mom and dad, indirectly we think that this premium should be paid because now you’re 75 and 72, and they can see the million dollars each on the horizon, so he may feel overwhelmed wondering how he’s going to get out of this financial nemeses. Mrs. Guckert is obviously overwhelmed by what’s going to happen.

But surely they should all be turning their minds to what they have and where the real value lies to the family. They both say they worked their lives, very hard, for themselves, but -- but very much for the children; maybe for the grandchildren. And they’ve entered into this venture and they’ve expended a significant amount of money on that policy and I’m concerned when I hear him simply saying before the court, I’d have to let it go. So, counsel, I -- I missed the -- you’re all here in the room.

I -- I’m interrupting the trial and I don’t mean to do so, but I would hope at the end of the day though, the last thing I would be invited to do is to embrace the idea that the policy goes out the window. I think they would want to cherish that and -- and there are all kinds of ways they could do it, even if the kids end up funneling the payments in to -- to the parents or into the company -- into -- into Koncrete in order to sustain the policy. Mom and dad are not going to live forever. The insurance estate, as I eyeball this whole estate would be the biggest part of their estate.

It would be a small fortune to the children and maybe indirectly to grandchildren . Has this family stepped back from this conflict and started to use some objectivity, thinking about what the big picture is and -- and where all of this is going to go? I’m sorry to interrupt, but -- but there’s an alarm bell here and -- and I just implore everyone to stop and think about it, what they’re about. [Emphasis added] [ 25 ] Finally, at page 573 of the transcript he again expresses his concern: The Court: It’s not a matter of husband or wife owns it. It’s -- it’s a family asset. Mr.

Vogel: And there are options, My Lord, and you’ve got all kinds of options. The Court: In their future and the -- and the future of their children is also very much within their hands. Well, I’m just sending a message out at this juncture and if I’m criticized for it at some later date, fine, but my sense of justice and concern for the Guckert Family is they better stop and carefully reflect about what they are about in this trial and what they might be inviting me to do.

Carry on. [Emphasis added] [ 26 ] The trial judge’s concern ultimately reached expression in the judgment when he said his decision to treat the insurance policy in the manner he did was to “preserve a semblance of justice and equity for family members who are embittered, estranged and forming alliances” (para. 68). [ 27 ] It is necessary to restate the provisions of the trial judge’s order respecting the insurance policy, which provisions I will refer to as the Insurance Order. They read as follows: 5.

That the Sun Life policy (policy R8983840 - formerly 050028523) for $3,000,000.00 death benefit shall be divided into two parts or, at the option of the Respondents Brent Guckert and Sheldon Guckert, into three equal policies, each providing for a $1,000,000.00 death benefit to each sibling. The premiums will be paid by Koncrete Constructions Ltd. until the current premium investment fund is depleted.

In the last year of the fund, it is likely there will not be sufficient money to pay each of the three premiums in total, and the funds will be pro-rated to pay an equal amount of premium on each policy, with Johanne Guckert and Shelly Heck, in one instance, and Peter, Brent, and Sheldon Guckert in the other instance making up any shortfall as they may elect. Thereafter, each beneficiary has the

right to maintain their respective policy by paying the accruing annual premium on behalf of Koncrete Construction Ltd., the policy owner. 6.

Inasmuch as Peter’s distributive one-half interest of Koncrete Construction Ltd. includes the cash surrender value of the $3,000,000.00 life insurance policy, that is the remaining balance of the premium fund managed by Sun Life Financial, and further, inasmuch as Peter Guckert will be empowered as the controlling shareholder of Koncrete Construction Ltd. henceforth, should Peter elect to cause Koncrete Construction Ltd. to attempt to cancel the said life insurance policy in order to indirectly retake the cash value of the remainder of the invested fund onto himself, Peter must give 60 days prior written notice of his intention to do so to each of his three children.

In this manner, each child may elect to pay Sun Life their respective share of the annual premium. In that event, Koncrete Construction Ltd. shall continue to hold the divided life insurance policies as a bare trustee for each insured beneficiary child.

Koncrete Construction Ltd. is hereby ordered to authorize Sun Life Financial to disclose full particulars of the $3,000,000.00 life insurance policy and premium fund, divided or not, to each of his children upon the reasonable request of each child. [ 28 ] The respondent argues the trial judge had authority to make the Insurance Order and specifically references two authorities. [ 29 ] In the respondent’s factum she quotes from N.(W.P.) v. N.(B.J.) , 2002 BCSC 797 , 28 R.F.L. (5 th ) 410: 2. 12.

The WCB policy should be listed as a family asset and the order should provide that the defendant be designated as a beneficiary so long as spousal support is payable, and the children should be designated irrevocably as beneficiaries. (I understand that this was the agreement; however, if I am mistaken and the agreement is otherwise, counsel should incorporate the agreed terms into the order.) [ 30 ] In that case, the life insurance policy was assigned to benefit a dependent child for whom support was being paid.

It should also be noted the judge believed the term of the order was agreed to by the parties – in other words, she was not imposing the term. This is not analogous to the case before us. [ 31 ] She then refers to the case of Bennett v. Bennett , 1999 SKQB 145 , where the court ordered a father to designate his son as beneficiary of the father’s life insurance policy and to pay the premiums on the policy. This is not analogous to the case before us because the beneficiary in Bennett was a dependent child and not an independent adult as in this case.

The case authorities cited do not support the argument the trial judge had the authority to make the order. [ 32 ] The respondent then refers to s. 9(1) (

d) of The Family Maintenance Act, 1997 , S.S. 1997, c. F-6.2 which reads: 9(1) On an application pursuant to this Act, the court may make an interim or final order on any terms and conditions that the court considers appropriate, including one or more of the following provisions: (

d) that a person who has a policy of life insurance as defined in The Saskatchewan Insurance Act : (

i) designate his or her dependant as a beneficiary irrevocably or for the period designated by the court; and (ii) pay all premiums on the policy; [ 33 ] The powers set out in the referred to subsection refer to orders made for the purpose of providing financial support to a dependent which is not the case here. [ 34 ] The respondent then looks for support in The Family Property Act . This Act (s. 7) requires the court when dividing the family home or household goods to have regard to the needs the children.

However, the definition of “child” in s. 2 refers to a child under the age of 18 years or, if over 18, who is under the charge of one or both of the spouses but is unable by reason of illness, disability or other cause to withdraw from that charge or to provide himself or herself with the necessaries of life. The trial judge was endeavoring to provide for an independent adult child who was not a party to the action. I see no provision in the legislation which grants the trial judge the authority to make such an order.

The Act certainly provides for the division of family property between spouses but, in this case, the Insurance Order purports to divide family property amongst independent adult children. [ 35 ] Therefore, not only did the policy itself not name the adult children as beneficiaries, the trial judge simply had no authority to make the order pertaining to the insurance policy. The trial judge pierced the corporate veil and treated one of the assets of the company as a separate item of family property.

He then treated the item as an asset which could be maintained in order to protect the interests of the independent adult daughter who was not a party to the action and who had no legal claim to the insurance policy as she was not a listed beneficiary. The appellants’ position must prevail. IV. Costs [ 36 ] The appellant sons and their companies, in my view, ought to have their costs at trial and before this Court. Costs are properly in the discretion of the trial judge and, in this case, they were properly joined for the purposes of valuations.

But if counsel for the respondent had advised them before the trial he was not seeking relief against them and that they need not be part of the trial, they would not have incurred the expense of preparation for trial and attendance thereat. Parties who generate additional unnecessary expense ought to run the risk of having costs imposed against them.

V. Conclusion [ 37 ] Therefore, the order below is maintained save for paragraphs 5 and 6 which are struck. As there was divided success and the order below required each party to bear their own costs, the appellant Peter and the respondent Johanne shall bear their own costs of the appeal. The sons and their companies shall have their costs of the trial below and the appeal in the usual manner. Sun Life is granted its application to intervene but there shall be no order as to costs as the evidence tendered at trial by the regional financial manager did lead to a finding the policy could be divided.

The respondent’s application to adduce fresh evidence is dismissed with costs to the company and the sons as the evidence sought to be adduced was the position put forth by Sun Life. Peter simply adopted the position of the company in opposition to the fresh evidence application and, therefore, is not entitled to costs of the motion. The respondent could simply have allowed Sun Life to make its argument and then respond to it. DATED at the City of Regina, in the Province of Saskatchewan, this 12 th day of December, A.D. 2012. “Lane J.A.” Lane J.A. I concur “Caldwell J.A.” Caldwell J.A.

I concur “Herauf J.A.” Herauf J.A.