Wolfson v Wolfson, 2021 NSSC 260

SUPREME COURT OF Nova Scotia FAMILY DIVISION Citation: Wolfson v Wolfson , 2021 NSSC 260 Date: 2021/09/03 Docket: SFH No. 1201-071176 Registry: Halifax Between: Louis Wolfson Petitioner v. Jennifer Wolfson Respondent Library Cover Sheet Judge: The Honourable Justice Theresa M. Forgeron Heard: March 9, 10, and 11, 2020; January 20, 21, and 25, 2021 in Halifax, Nova Scotia Submissions February 10 and 12; March 1 and 3, 2021 Decision: September 3, 2021 Counsel: Kim Johnson and Ashley Donald for the Petitioner, Louis Wolfson Richard Bureau and Ryan Christen for the Respondent, Jennifer Wolfson Law: Family Law Issues: Value of shares; Disposition costs; Classification of corporate shares;

Section 18 claim; Unequal Division; Imputation of income; Jurisdiction to adjust for CCA claimed by companies; Pre-tax corporate income; Child support in shared parenting arrangement; and Spousal support. Result: Duty to Provide Evidence of Value Inherent in the duty to disclose is the duty to fairly value assets. The onus is on the party who owns the asset to provide credible and meaningful evidence of value. The onus is not on the non-owning party seeking disclosure. Deductions for Disposition Costs Law surrounding the calculation of disposition costs reviewed.

Husband’s request, to have over $1.8 million in notional disposition costs related to real estate commission, was reduced by 70% given evidentiary burden, absence of credible evidence, available options, and other contingencies. Husband’s request to have $7.4 million reduction for capital gains tax rejected and replaced with a reduction of $1 million. Husband did not provide expert evidence on the calculation of the capital gain or on the projected amount of capital gains tax.

Adverse inference drawn where husband not an unsophisticated or impecunious litigant and the issue of capital gains was neither an unexpected nor novel legal or factual issue. Husband strategized that he would be in a better legal and financial position by omitting the expert evidence than he would be by producing it. Husband’s request to reduce the appraised value of the rental properties rejected in the absence of credible evidence. The value of the husband’s shares in the companies that own the rental properties is $13,908,662.

Classification of Corporate Shares Review of legal principles and law surrounding classification of business assets. Because the MPA is remedial legislation, it must be ascribed a liberal and purposeful

interpretation in keeping with its stated objectives. As such, otherwise business assets may be classified as matrimonial depending on the primary purpose of the asset, including whether the asset is generating income in the entrepreneurial sense, whether the asset is a capital asset acting passively, or whether the asset was acquired from funds diverted from the family. Further, the court must examine the parties’ intention and treatment of the asset when considering classification issues.

The companies were owned, operated, and managed for two primary but equal purposes – as an income producing vehicle, and as a retirement vehicle. Neither purpose was more vital, valuable, or significant than the other. The rental properties were created, developed, and operated to provide both a consistent cash flow and to increase capital for the parties’ retirement. 50% of the value of the shares owned by the husband were classified as excluded business assets, while 50% were classified as matrimonial assets.

The parties’ retirement intention was not a fleeting, future, or inconsequential plan, casually or inadvertently spoken, rather it was an intention specifically planned and orchestrated. $6,954,331 classified as a matrimonial asset.

Section 18 Claim Law surrounding s. 18 claims reviewed. Wife denied s. 18 claim despite proof of direct and indirect contributions because she received dividends from companies. Given classification decision, it was appropriate to address the wife’s contributions as part of her unequal division claim . Unequal Division Claim Law surrounding unequal division reviewed.

Wife proved by strong and convincing evidence that an equal division would be unfair or unconscionable on a broad view of all relevant factors: the acquisition of the assets; the wife’s disproportionate assumption of childcare and domestic responsibilities and its impact on the husband’s ability to focus on the business; and the substantial increase in the value of the assets over the 12 years of marriage. In these circumstances, an equal division would produce a result that would offend the concepts of fairness and conscionability.

An equal division of all matrimonial assets ordered, plus another $1 million to the wife. Cumulatively, the wife received 32.19% of the value of the corporate shares because of the classification and unequal division rulings. In many jurisdictions business assets are divided and support paid without the collapse of either the “goose” or its “golden egg.” Details surrounding the timing, security, and applicable interest rate to be applied to the equalization transfer to be submitted by September 21.

Wife’s Income Wife’s income was deemed to be $55,000 per annum which took into consideration income the wife will earn from her investment, which had an unpredictable and inconsistent payout. Jurisdiction to Adjust for CCA Claimed by Companies Law unsettled and no Nova Scotia appellate direction. Given the remedial nature of the Guidelines, their stated objectives, and case authorities, court has jurisdiction to adjust for the CCA claimed by the husband’s companies either pursuant to ss. 18 or 19 of the CSG or through s. 11 of

Schedule III. Preference is for calculation to occur under s. 18 or s. 11 because s. 19 would place the evidentiary burden on the spouse who lacks control of the asset and the associated evidence. In this case, the burden is of no consequence, because even if it rests on the wife, she overwhelmingly satisfied it. Husband’s Income Husband’s annual income set at $660,000 in recognition that significant capital expenses will be incurred as the companies proceed with their development plans. This figure excludes the benefits provided to the husband by the companies because of limited evidence about their value.

Some of these benefits, however, are considered as part of the parties’ circumstances in the calculation of child and spousal support.

Child Support in Shared Parenting Arrangement Law surrounding child support in shared parenting arrangement reviewed. After conducting Contino analysis, the set-off approach correctly captures the spirit and intent of s. 9 and was in keeping with the parties’ submissions. Set-off amount of $7,324 per month is the appropriate child support figure, together with s. 7 expenses, which are to be prorated between the parties after spousal support is calculated, including expenses related to private school, faith, activities, and health.

If the parties are unable to agree on process to manage the payment of special expenses, then submissions to be provided by September 21. Spousal Support Court must follow binding direction of NSCA - SSAGs are a tool to be used for comparative purposes but do not replace the analysis required under the Divorce Act . Wife has strong compensatory and non-compensatory spousal support claim. Parties enjoyed an affluent lifestyle. Given shared parenting arrangement, parties should share a similar standard of living. Spousal support payable until January 2030 .

As requested, parties are to recalculate spousal support figures based on parties’ deemed incomes, sharing of special expenses, and debt payment. Further, benefits husband receives from companies reduce his need. Submissions due September 21. SUPREME COURT OF Nova Scotia FAMILY DIVISION Citation: Wolfson v Wolfson , 2021 NSSC 260 Date: 2021/09/03 Docket: SFH No. 1201-071176 Registry: Halifax Between: Louis Wolfson Petitioner v. Jennifer Wolfson Respondent Judge : The Honourable Justice Theresa M.

Forgeron Heard : March 9, 10, and 11, 2020; January 20, 21, and 25, 2021 in Halifax, Nova Scotia Submissions: February 10 and 12; March 1 and 3, 2021 Decision : September 3, 2021 Counsel : Kim Johnson and Ashley Donald for the Petitioner, Louis Wolfson Richard Bureau and Ryan Christen for the Respondent, Jennifer Wolfson By the Court: Introduction

[ 1 ] Louis and Jennifer Wolfson are separated spouses with two children. They seek a divorce, a division of their property, and the resolution of maintenance issues. All financial issues were aggressively litigated. In addition to the testimony of the parties and other lay witnesses, four experts offered opinion evidence about the contested property and support issues. [ 2 ] The most significant property issue concerns the classification and division of the shares which Mr. Wolfson owns in a group of 12 companies.

The group of companies owns, operates, and manages 21 rental properties under the name of Peppermint Properties. Nineteen of the rental properties were acquired after the marriage. Mr. Wolfson seeks to classify his shares as business assets and exclude them from division. [ 3 ] In contrast, Ms. Wolfson asks that the shares be classified as matrimonial and divided equally. In the alternative, she seeks compensation for the work she did on behalf of the companies and also seeks an unequal division. Ms.

Wolfson states that the exclusion of the corporate assets would produce an unfair or unconscionable result. [ 4 ] In addition, Ms. Wolfson seeks support. Settlement of the maintenance issues was hindered because the parties disagreed on the quantification of their incomes. Mr. Wolfson wants to impute income to Ms. Wolfson because he states that she is underemployed. In contrast, Ms. Wolfson seeks to pierce the corporate veil so that Mr. Wolfson’s income includes some of the corporate income. [ 5 ] Ms. Wolfson seeks both child support and spousal support.

Child support is linked to household standards of living given the shared parenting arrangement. Further, although the parties agree that Ms. Wolfson is entitled to spousal support, they do not agree on quantum or duration. [ 6 ] This divorce hearing was complex and protracted. Despite direct evidence being adduced through affidavits and extensive expert reports, the trial nevertheless took six days to complete. The trial was held in March 2020 and January 2021.

In February and March 2021, the parties provided lengthy written submissions to thoroughly review the evidence and to articulate their clients’ respective positions. Issues [ 7 ] The following 11 issues will be determined in this decision: • What is the value of Mr. Wolfson’s shares in the corporate holdings once disposition costs are considered? [paras 52 to 112 ] • What are the other assets and debts of the parties? [paras 113 to 145 ] • Did Mr. Wolfson prove that the shares he owns in the group of companies that own and operate rental properties are exempt business assets? [paras 146 to 202] • Did Ms.

Wolfson prove entitlement to a s.18 claim? [paras203 to 235] • Did Ms. Wolfson prove that an equal division is unfair or unconscionable? [paras 236 to 291] • What is the appropriate division of the assets and debts? [paras 292 to 301] • What is the income of Ms. Wolfson? [paras 302 to 316] • Is CCA a permitted adjustment in determining Mr. Wolfson’s income? [paras 317 to 363] • What is the income of Mr.

Wolfson? [paras 364 to 414] • What is the appropriate child support award? [paras 415 to 449] • What is the appropriate spousal support award? [paras 450 to 475] Background Before the Marriage [ 8 ] When the parties started to date in 2004, they were living and working in different provinces. Ms. Wolfson was educated, employed, and living in Ontario. She was a teacher with an honours certification in special education. She owned a condo, a pension, and a significant investment that her father acquired on her behalf through savings which were invested when she was a young girl. [ 9 ] For his part, Mr.

Wolfson was educated, employed, and living in Nova Scotia. He was a lawyer having graduated in 2002 and called to the bar in 2004. Further, in 2003, Mr. Wolfson created a management company, LSC Leasing Inc, to provide management services for some of his grandfather’s rental properties. [ 10 ] In 2004, Mr. Wolfson acquired his first rental property which he purchased from family members. The Pepperell Street property was placed in the ownership of 5900 Holdings Limited. The property was acquired with the financial assistance of Mr. Wolfson’s father and a CIBC mortgage. Mr.

Wolfson said he had no personal resources. At his father’s request, Mr. Wolfson’s two sisters were given non-voting discretionary shares. They are not involved in the operation or management of the company and have no decision-making authority. They have not received any benefit from the company. Mr. Wolfson has sole control of the company. [ 11 ] The Pepperell Street property is composed of two large, four-unit buildings which required extensive renovations. The renovations were completed by September 2005. The renovations were financed by loans from Mr. Wolfson’s father and a LOC.

After the property was fully rented in September 2005, the company refinanced with RBC to repay Mr. Wolfson’s father and the LOC.

Ms. Wolfson’s Career Path After Marriage [ 12 ] The parties married five months later in February 2006. Ms. Wolfson agreed to move to Halifax. She found employment as a substitute teacher and then secured a term position as a resource teacher from October 2006 until June 2007. She stopped working as a teacher because the parties’ first child was born in October 2007. Their second child was born in July 2009. Ms. Wolfson remained out of the work force to care for both children. [ 13 ] In addition to caring for their young children, the home, and helping with the companies, Ms.

Wolfson completed her master’s degree in Education on a part-time basis between 2007 and 2010. [ 14 ] Given the extent of her responsibilities, in 2012, Ms. Wolfson opted for part-time employment with the Nova Scotia College of Early Childhood Education. Once this employment ended, Ms. Wolfson began working for Peppermint Properties for several months in 2014 and 2015. Afterwards, she started working at MSVU as a practicum supervisor in the Department of Child and Youth Studies. In 2016, Ms. Wolfson secured other employment at MSVU as a course lecturer.

She is now currently employed, on a part-time basis, as faculty at MSVU. She also takes on other part-time contract work when available with MSVU and other entities, such as Debate Camp. Further, throughout the marriage, her investment produced considerable dividend payments which Ms. Wolfson consistently used for the benefit of the family. [ 15 ] Ms. Wolfson has not been employed on a permanent, full-time basis since the marriage. Mr. Wolfson’s Career Path After Marriage [ 16 ] Mr. Wolfson became the primary wage earner in 2007 when Ms. Wolfson took maternity leave.

His income was generated from his employment as a lawyer, and from his work managing and renting properties. [ 17 ] In 2008, LSC Leasing Inc assumed the management of all the rental properties owned by Mr. Wolfson’s grandfather. In addition, in 2008, Mr. Wolfson stopped practicing law. He was not satisfied working as a lawyer. The parties therefore agreed that Mr. Wolfson should concentrate his efforts on developing and managing rental properties. Mr. Wolfson remains working in this field. Acquisitions of Rental Properties After Marriage [ 18 ] Mr.

Wolfson acquired a large portfolio of rental properties after the parties married. In 2007, Mr. Wolfson’s companies, Cabin 5 Holdings Limited, Lioncore Holdings Limited, and Cocowood Holdings Limited purchased six properties from the Ivany Apartment Company Inc. These properties were situate at 6190 Jubilee Road, 1840 Robie Street, 2586 Sherwood Street, 6008 Shirley Street, 6014 Shirley Street, and 5676 Columbus Street. [ 19 ] 6190 Jubilee Road is a 23 unit apartment building.

After purchase, the apartments were updated resulting in an significant increase in rents within a few years – from $17,775 to about $30,000 per month: exhibit 11, para 125. [ 20 ] 1840 Robie Street is used for student housing and caters to medical students because it is close to the hospital. Bedrooms were added to the units to increase revenue.

In addition, the property contains a large parking lot close to the hospital which is rented out to tenants and hospital staff. [ 21 ] 2586 Sherwood Street was rented out until it was sold in 2011 for a “good profit”: para 158, exhibit 11. [ 22 ] 6008 and 6014 Shirley Street are each six-unit apartment buildings that were subject to minor renovations. The limited work that was done “significantly increased the value of the property:” para 139, ex 11. Lioncore arranged for the subdivision of the two properties.

These properties are across the street from the former QE High School which soon will be the site of a major hospital expansion: para 141, exhibit 11. [ 23 ] 5676 Columbus Street is an eight-unit apartment building which was modestly renovated since purchased by Cocowood Holdings Limited. It is the only property currently owned by Cocowood. It is in the north end of the city. The income from this property as well as the property’s value increased since its acquisition: para 154, exhibit 11. [ 24 ] In 2008, more properties were acquired.

Cabin 5 Holdings Limited purchased 1949 Oxford Street and Oxford East Holdings Limited was incorporated to purchase three adjacent Oxford Street properties – 1935, 1941, and 1945. These properties were renovated after purchase. 1949 Oxford Street is an eight unit apartment building which was modestly renovated, resulting in significant rent increases. An extra bedroom was added to 1941 Oxford Street while extensive renovations were effected on 1935 Oxford. These properties focus on the student market.

They are profitable and rents increased considerably since acquisition: para 172. [ 25 ] 1945 Oxford Street is the only property that is currently not rented because it is in a state of disrepair. It is located directly between 1949 and 1941 Oxford, thus offering significant developmental opportunities. [ 26 ] More properties were purchased in 2009. Mr. Wolfson incorporated Windsor & Almon Holdings Limited to purchase and renovate property situate on 2810 Windsor Street which was acquired from Mr. Wolfson’s grandfather. It was extensively redeveloped. Tenants were evicted and the building gutted.

Renovations took about a year to complete. When completed, commercial tenants were located and the upper loft style apartments were successfully rented. The basement is used for residential and commercial storage. [ 27 ] In 2010, Lioncore Holdings Limited bought 1834 Robie Street. It is adjacent to the 1840 Robie Street property which Lioncore also owns. It is a 13-bedroom triplex arranged over three separate flats. It too has a large parking lot which is rented out to tenants and hospital staff. Cosmetic renovations resulted in increased rent for each of the bedrooms.

The units cater to students. [ 28 ] Further in 2010, another company was incorporated, Tobin & Queen Holdings Limited, to purchase and renovate an apartment building on 5320 Tobin Street which was sold by Mr. Wolfson’s grandfather. The 34-unit apartment building was extensively renovated

after tenants moved out. It too continues to be profitable, although damage from a 2019 hurricane caused issues for which there is insurance coverage. [ 29 ] In 2011, 6252-56 Shirley Street was bought for $850,000 and placed in Mr. Wolfson’s name personally. It was extensively renovated and then sold in 2012 for $1,805,000. Scant details were provided about the renovation costs, tax consequences, or the treatment of profits. [ 30 ] In 2011, 6275 Liverpool Street was purchased by Mr. Wolfson in trust and a conventional mortgage, personally held, of about $178,000, was secured.

In 2015, the property was placed in the name of Harvard Properties Limited. In 2016, Harvard Properties transferred 6275 Liverpool Street to 2966 Windsor Holdings. This home was rented until it was torn down to create a parking lot for 2966 Windsor Street. [ 31 ] Similarly in 2011, Mr. Wolfson purchased 2840 Windsor Street in trust and secured a mortgage of about $337,000 in his name. In 2015, the property was transferred to Harvard Properties Limited. This property provides stable rental income and has development potential. [ 32 ] In 2012, Mr.

Wolfson purchased 2844 Windsor Street in trust by personal mortgage financing of $400,000 and, in 2015, transferred the property to Harvard Properties Limited. This property provides stable rental income and has development potential. [ 33 ] In 2012, buildings were purchased from the estate of Mr. Wolfson’s grandfather by three companies - 7145 Quinpool Holdings Limited, 2759 Windsor Holdings Limited, 2966 Windsor Holdings Limited. 7145 Quinpool Road is a 64-unit apartment building.

This property may be redeveloped now that the HRM Centre Plan is finalized for this location. 2759 Windsor Street required extensive renovations of about $1 million that were completed in 2013. 2966 Windsor Street is a 24-unit residential apartment building that also underwent extensive renovations. In addition, 2966 Windsor Holdings Limited purchased 6275 Liverpool Street. Renovations and the Liverpool acquisition cost about $1 million. The renovations were completed by 2015. All properties are successfully rented. [ 34 ] In 2013, 2834 Windsor Street was purchased in Mr.

Wolfson’s name in trust and then transferred in 2015 to Harvard Properties Limited. This property also provides stable rental income and development potential. [ 35 ] All rental properties are operated through Peppermint Properties while LSC Leasing Inc provides management services to the entire group of companies. The individual companies pay management fees to LSC which in turn pays Mr. Wolfson. LSC Leasing Inc issued non-voting discretionary shares to Ms.

Wolfson after the marriage so that dividends could be distributed to her. [ 36 ] At the time of trial, the rental properties consisted of 21 different buildings, most with multiple units. The companies own 257 separate rental units which house 338 tenants. The companies also receive rent from parking tenants. Other Assets of the Parties [ 37 ] In addition to the rental properties, the parties have two homes. Their principal residence is on Inglis Street, Halifax while their summer home is in Chester. Both properties are held in Ms. Wolfson’s name.

Further, the parties acquired retirement savings, savings, investments, and vehicles, as well as investments for their children. Separation [ 38 ] Mr. and Ms. Wolfson separated in January 2018. They both continued to live in the matrimonial home until July 2018 when Mr. Wolfson moved into a nearby house that Mr. Wolfson states was bought by his father for him. He says that he pays rent to his father. [ 39 ] Initially, the children lived with Ms. Wolfson slightly more than with Mr. Wolfson. The parties then implemented a shared parenting arrangement where the children spend equal time with both parents.

In January 2020, the parties reached a final settlement on the parenting issues. The arrangement continues to be one of shared parenting. [ 40 ] Unfortunately, the parties did not reach agreement as to the interim payment of support. Ms. Wolfson continued to deposit her income and additional funds into the joint chequing account to pay for her expenses and those of the children. Similarly, Mr. Wolfson continued to put money into the joint account to pay for the household expenses and those of the children. He also paid Ms. Wolfson’s monthly Visa bill and paid for some of the children’s expenses.

The children’s expenses include private school tuition and Camp Kadimah expenses. At this stage, it is difficult to disentangle the intermingling of funds, except for one expense. The parties agree that Ms. Wolfson will reimburse Mr. Wolfson $26,862 for legal fees that he paid on her behalf. [ 41 ] Despite participating in a settlement conference, the parties were unable to resolve any of the financial issues. A trial was therefore necessary. The Trial [ 42 ] The trial was scheduled to be heard over three days on March 9,10, and 11, 2020. Regrettably, the evidence was not completed within that time.

I hoped to reschedule quickly but the court closed because of Covid. The trial did not resume until January 20, 21, and 25, 2021. [ 43 ] Mr. Wolfson’s evidence proceeded first. In addition to Mr. Wolfson, three lay witnesses and one expert witness testified. Lorne Timmons, who is Mr. Wolfson's personal and corporate accountant testified in a non-expert capacity, as did two people who worked for Mr. Wolfson’s companies - Andrew Raftus and David Green. [ 44 ] Mr. Wolfson's expert witness, Paul Bradley CPA, CA, CBV, CFE , a partner with Deloitte LLP, provided testimony of his analysis of Mr. Wolfson's income. Mr.

Bradley was qualified as an expert in the field of quantifying Guideline income, including corporate attribution for the purposes of assessing the quantum of child and spousal support, as well as business valuations of tangible

and intangible assets based on corporate financial statements. [ 45 ] Ms. Wolfson retained three experts to provide opinion evidence. First, Nikki Robar, CPA, CA, CBV , a partner with Pricewaterhouse Coopers LLP, provided expert evidence about Mr. Wolfson's income. Ms. Robar was qualified as an expert witness in the field of quantifying Guideline income, including corporate attribution for the purposes of assessing the quantum of child and spousal support, business valuations of tangible and intangible assets, and general accounting and taxation matters. [ 46 ] Ms.

Wolfson’s second expert witness was Chrystal Fuller, LPP, MCIP of Brighter Planning. Ms. Fuller was qualified to provide expert opinion in the field of planning and development potential of real estate properties. Ms. Fuller provided an expert report relating to the best use and planning of the corporate rental properties. [ 47 ] The third expert witness was Jeff McLean, AACA, P.App of Altus Group. He was qualified as an expert in the field of commercial real estate valuation and appraisal. Mr.

McLean provided expert evidence as to the value of some of the corporate real properties. [ 48 ] In addition to the expert evidence, Ms. Wolfson and her father, Peter Miller, testified. Mr. Miller appeared remotely by way of video link with the Newmarket Courthouse in Markham, Ontario. [ 49 ] Given the volume of evidence and the significant delay between the two sets of trial dates, counsel confirmed that written submissions were preferred. These submissions were received by the court on February 10 and 12; and March 1 and 3, 2021.

Credibility and Reliability Issues [ 50 ] Both parties argued that the evidence of the other was not trustworthy and that credibility and reliability assessments should be resolved in their respective favour. Extensive examples were proffered in support of their positions. The parties relied on credibility and reliability factors such as those stated in Gouthro v Gouthro , 2017 NSSC 246 . [ 51 ] I considered the law, the parties’ arguments, and the evidence in my analysis of the case.

I acknowledge issues surrounding the reliability and credibility of the evidence of both parties and their respective lay witnesses which I considered when drawing the conclusions that I have. I find that some of the reliability and credibility issues arise because of faded memories and the passage of time; and some because of the tendency to remember and recall details based on one’s own perspective. Further, I find that Mr. Wolfson did not always tell Ms. Wolfson the truth during the marriage which ultimately impacted on the accuracy of some of her recall. Finally, I find that Mr.

Wolfson at times intentionally coloured the truth when he testified to advance his own position. Analysis [ 52 ] What is the value of Mr. Wolfson’s shares in the corporate holdings once disposition costs are considered? Owner’s Obligation to Provide Meaningful and Credible Evidence of Value [ 53 ] Mr. Wolfson is the controlling shareholder of 11 private companies which own and operate 21 rental properties. Mr. Wolfson owns all shares in the 11 companies, except for 5900 Holdings Limited. Mr. Wolfson’s two sisters were issued preferred shares in 5900 Holdings Limited.

The sisters neither play a role in the company’s operations nor do they receive financial benefits from the company. [ 54 ] Further, Mr. Wolfson owns the controlling shares in the management company, LSC Leasing Inc. LSC Leasing Inc does not own real property but rather offers management services to the rental properties. Ms. Wolfson has preferred shares in LSC Leasing Inc. [ 55 ] Mr. Wolfson did not supply proof of the value of his shares in the 12 companies in either of his Statements of Property, despite his obligation to do so.

In proceedings brought pursuant to the Matrimonial Property Act, R.S.N.S., c. 275, the titled spouse has a positive obligation to both identify their property and to provide credible and meaningful proof of value. In Canadian Family Law 6 th ed., (Toronto, Irwin Law, 2015), authors Julien and Marilyn Payne state as follows at p. 2-8: … The Ontario Court of Appeal made it clear in Homsi v. Zaya that the party asserting the value of an asset must provide credible evidence as to its value. This requirement obliges the party to provide not just a guess but a realistic value based on credible evidence.

At times, documentary evidence or expert valuations may be required and it may be necessary to obtain information in the possession of a third party. ….

However, it is not always necessary to call expert evidence to prove values for minor assets and a court is entitled to ascribe a global value to ordinary household contents. [ 56 ] Similarly, in Evidence in Family Law (Loose leaf ed., 2021), author Harold Niman states as follows about the obligation to provide meaningful financial disclosure in family law proceedings at p 2-8: The requirement for parties to make full and complete financial disclosure is fundamental to family law proceedings. Financial statements must be filed wherever financial disclosure is relevant to the issues in a case.

As Galligan J. opined in Silverstein v. Silverstein , financial statements “must not be perfunctory pro forma documents but they must be real, complete, up-to-date and meaningful”. …. [ 57 ] And at p 2-10: In addition, the onus of establishing the value of all property is on the owner – not the party seeking disclosure – and this obligation may require the party to obtain an expert valuation report. It is not acceptable to simply insert “unknown” in a financial statement, even if property values will ultimately be potentially deducted or excluded from a party’s net family property. [ 58 ] In Virc v.

Blair , 2017 ONCA 394 , the Ontario Court of Appeal confirmed the obligation of the titled spouse to provide credible evidence of value:

[56] The husband submits the trial judge misapprehended the evidence and misunderstood the disclosure he made to the wife. Hesubmits he did disclose the existence of his assets as required by the Family Law Act.

His wife, he argues, had the ability to value theassets, but did not do so. [57] The trial judge found, at para. 94 of his reasons: [T]he husband never alerted the wife to the fact that the book value of Renegade's investments significantly exceeded their market value.At best, the husband's evidence is that he did nothing to prevent the wife from testing the veracity of his representation of the company'svalue.

The trial judge concluded this was not a sufficient discharge of the duty to make full disclosure, especially given the husband's valuationexpertise and the wife's deference to that expertise. [58] In my view, the husband's submission is improperly characterized as an alleged misapprehension of fact on the part of the trialjudge. In reality, the husband asserts an error of law, in that the husband submits he fulfilled his disclosure obligations because the wifecould have sought to independently verify his valuations. [59] The trial judge did not err.

Inherent in the duty to disclose is the duty of the titled spouse to fairly value the asset. This is a basicprinciple of disclosure. The onus is on the party asserting the value of an asset that he or she controls to provide credible evidence as toits value: Menage v. Hedges (1987), (ON SC), 8 R.F.L. (3d) 225 (Ont. U.F.C.), at para. 44; Homsi v. Zaya, 2009ONCA 322, 65 R.F.L. (6th) 17 (Ont. C.A.), at para. 38.

The husband's submission to the contrary is wrong in law. [59] In Leskun v Leskun, 2006 SCC 25, the Supreme Court of Canada approved the comments of Fraser, J which underscored thecritical nature of disclosure, while further noting that the non-disclosing husband had a poor platform from which to launch an appeal: 34 In all of these circumstances, the appellant has a poor platform from which to launch an attack against the trial judge's conclusionregarding his assets and liabilities. As Fraser J. commented in Cunha v.

Cunha (BC SC), (1994), 99 B.C.L.R. (2d) 93(S.C.), at para. 9: Non-disclosure of assets is the cancer of matrimonial property litigation. It discourages settlement or promotes settlements which areinadequate. It increases the time and expense of litigation. The prolonged stress of unnecessary battle may lead weary and drainedwomen simply to give up and walk away with only a share of the assets they know about, taking with them the bitter aftertaste of areasonably-based suspicion that justice was not done. If problems of calculation exist the appellant is largely the author of his own difficulties.

I would not interfere on that basis. [60] Moreover, Beaton, JA in Donner v Donner, 2021 NSCA 30 discussed the frustrations associated with decision-making in theabsence of adequate evidence and the potential consequences for the non-disclosing party: [42] As noted by Ms. Donner, in family litigation trial judges are unfortunately often faced with making decisions without the benefitof adequate information. While this can undoubtedly be frustrating for the opposing party, insufficient disclosure leaves trial judges todo justice as best they can with the limited information provided.

There comes a point in a case where both the opposing party and thejudge should end efforts to secure more or better disclosure, and instead forge a way to a hearing and decision. If not, already burdenedtrial dockets would risk becoming even more congested, and the resolution opposing parties seek further delayed.

The consequences tothe party who falls short of meeting disclosure obligations can be addressed by such “tools” as, for example, adverse inferences thejudge might draw, credibility findings and evidentiary conclusions the judge might reach, and potential cost consequences that might beimposed on a non-disclosing party. [61] I now return to the case before me. Although in his Statements of Property, Mr. Wolfson listed his share ownership in his 12companies, he did not provide credible or meaningful proof of the value of his shares.

His failure to do so created a substantive andproblematic evidentiary gap. [62] To address the gap, appraisals of the real property owned by the companies were entered into evidence. Some of the appraisalswere acquired by Ms. Wolfson for litigation purposes; others are dated and were created for non-litigation purposes. Thus, the bestevidence of the value of Mr. Wolfson’s shares, are the property appraisals of the rental properties owned by the companies. From theseappraisals and other evidence, each party put forth their position on the value of Mr. Wolfson’s shares, which I now review. Position of Mr.

Wolfson [63] In his post-trial submissions, Mr. Wolfson appears to adopt the position that the value of his shares equals the value of therental properties owned by his companies, less debt, disposition costs, and environmental and capital expenses. Mr. Wolfson appears tostate that his shares have a net value of less than $6 million. He extrapolated this number based on the following reasoning: • He accepted the

schedule created by Ms. Wolfson’s expert, Nikki Robar. This

schedule lists and values the corporate real propertybased on the greater of their assessed, appraised, or net book values. This

schedule also deducted the balance of the corporate long termdebt. • He accepted the increase in the values of the real properties that were appraised after the Robar

schedule was created. Hiscalculations reflect this increase. • He deducted legal fees of $1,500 per property, together with HST. • He deducted 5% real estate commission, together with HST.

• He deducted 54% of the net value of the properties for the payment of capital gains tax based on his personal tax rate. He relied onGomez-Morales v Gomez-Morales (1990), (NS CA), 100 NSR (2d) 137 (SCAD) and Simmons v Simmons, (NS SF), 2001 NSSF 35. Mr. Wolfson stated that all tax consequences must be considered even if there is no evidence ofimminent sale because assets must be valued at their realizable value. He noted that taxes are an obvious disposition expense whichcannot be ignored - just as they are not ignored in the valuation of RRSPs and pensions. Mr.

Wolfson opined that a significant injusticewould be created if the inevitable tax consequences were ignored. • He said further deductions, which were unquantified, were appropriate because the Altus appraisals assumed no environmentalissues and no significant capital expenses when Mr. Wolfson testified otherwise including in exhibit 11, tabs D, L, and Q. [64] Mr.

Wolfson’s calculation, without reference to the unquantified environmental or capital expense deductions, is as follows: Real Estate Value $31,462,700 5% Commission ($1,573,135) HST ($235,970) Legal Fees ($28,500) HST ($6,525) Long Term Debt ($15,976,281) Taxes (54%) ($7,366,836) Equity $6,275,453 Position of Ms. Wolfson [65] Ms. Wolfson stated that valuation is a non-issue because the only evidence about the value of Mr. Wolfson’s shares came fromher experts, Ms. Robar and Mr. MacLean. Ms.

Wolfson stated that the properties owned by the companies are valued at $31,462,700.This ultimately was the same conclusion reached by Mr. Wolfson. Ms. Wolfson agreed that the long term debt should be deducted whichresults in equity of $15,486,419 in the corporate real property. [66] Ms. Wolfson, however, clarified that this value is limited because it relates to the real property only. It does not include thevalue of the good will, cash balances, shareholders loans, trade receivables and payables, or other property and equipment owned by thecompanies in which Mr. Wolfson has shares.

In addition, the figure of $15,486,419 does not account for increases in equity through thepayment of debt or the increases in the fair market value of the real property since the appraisals were conducted. [67] Ms. Wolfson also disputed Mr. Wolfson’s attempt to artificially reduce the value of the property holdings for reasons whichinclude the following: • There is no evidence that the companies would ever pay the speculative 5% real estate commission fees to dispose of the entireportfolio of properties.

There is no evidence that companies generally pay this amount for the disposition of commercial properties. • There is no evidence to suggest that $7,400,000 in capital gains tax is accurate. Lorne Timmons, the corporate accountant, did notprovide expert evidence. He commented on Mr. Wolfson’s personal tax rate only, and without any reference to the corporate properties.Mr.

Timmons stated that he did not calculate the amount of capital gains or capital gains tax that might be incurred. • If there is a realizable capital gain, income tax is payable on only 50% of the gain, making the effective rate 27%: Income Tax Act, RSC 1985, c. 1(5Th Supp), s. 38. • It is nonetheless inaccurate to suggest that the equity should be discounted by even 27%. Before such a discount is employed,evidence about the proceeds of disposition, adjusted cost base, and outlays and capital expenses must be considered. In short, expertopinion is necessary. • Mr.

Wolfson’s calculation assumes no eligible small business capital gains exemption. • Mr. Wolfson’s calculation does not distinguish depreciable property. • In the Altus Report, Mr. MacLean appraised the Oxford Street Site; the Robie Shirley Street Site; and the Windsor Edinburgh Site. Tabs D, L, and Q of exhibit 11 do not relate to these properties. They relate to 6190 Jubilee Road and 7145 Quinpool Road. Further,these reports were never posed to Mr.

MacLean; he was not cross-examined on these reports. • The Altus Report does provide for a demolition allowance for 1945 Oxford Street which was vacant since 2016 as noted in exhibit7, page 53, tab A. • Mr. MacLean indicated that no structural survey was completed on 1935-37 Oxford Street. Further, both units at 1935-37 Oxfordare currently rented, corroborating that the property is structurally sound. • Over $400,000 was paid on the principal of the long term debt since the March 2020 court appearance. [68] In

summary, Ms. Wolfson stated that Mr. Wolfson’s shares are worth no less than $10 million, and likely substantially more.She noted that no value was placed on good will, cash balances, shareholders loans, trade receivables and payables, or other property and

equipment owned by the companies. Further, she strongly opposes Mr. Wolfson’s other claimed disposition, environmental and capitaldeductions. Tenuous Agreement on Value [69] Despite the evidentiary gap, it appears a tenuous agreement about the value of Mr. Wolfson’s shares has emerged - the valueof his shares roughly equals the equity in the rental properties. Further, the parties appear to agree that the rental properties have equityof at least $15,486,419, without considering deductions for disposition costs and expenses associated with capital and environmentalimprovements. Mr.

Wolfson claims significant deductions for these expenses; Ms. Wolfson strenuously objects to their inclusion. Law on Deductions for Disposition Costs [70] Gomez-Morales v Gomez-Morales, supra, is often cited for the proposition that disposition costs should be deducted whencalculating the fair market value of capital property. This statement is an oversimplification of the ratio of the case. I will explain byreviewing three key components of the decision, as follows: • Why tax consequences should be considered. • How counsel and courts should approach the issue. • The importance of evidence.

Why Tax Consequences Should Be Considered [71] In Gomez-Morales, Hallett, JA stated that tax consequences should be considered for two reasons - legislative intent andinevitability of payment. First, he noted that although not engaged in the case before him, s. 13(

m) nonetheless did “evidence a concernby the Legislature that taxation impacts on many property transfers and, in my opinion, it is a factor that warrants consideration on adivision of assets in this case, even though the division relates to a business asset:” para 27. [72] Second, Hallett, JA confirmed that although it may be difficult to determine the “exact tax cost”, income tax consequences “arenot speculative and cannot safely be ignored simply because a disposition may be “well down the road:” para 35.

He then noted that“[e]ven on death, capital property attracts capital gains tax unless there is an exemption or postponement; inherent in the ownership ofmost capital property is a contingent liability for income tax:” para 35. He later held that “[n]o one has yet been able to take theirproperty to the grave or to avoid the long and omnipresent arm of the tax collector”: para 38. Approach To Be Taken [73] Hallett, JA discussed the approach that counsel and courts should undertake when confronted with the issue. The suggestedapproach involves three aspects.

First, the court must, of necessity, value the assets of the parties: [36] …. In determining what amounts should be paid to a spouse under

Section 12 or

Section 13 of the Matrimonial Property Act, theCourt must, of necessity, value the assets of the spouses. [74] Second, counsel should determine if detailed financial information relevant to income tax consequences should be adduced.Hallett, JA stated that where there is a real possibility of a s. 13 order being made, such evidence is relevant and should be presented: [36] … Counsel for the parties will have to assess whether detailed financial information relevant to income tax consequences of adivision need be adduced in a given case.

In many cases, such evidence would not be necessary and the expense of adducing the samecan be avoided.

In cases such as this, where the only asset of any real value is a business asset and there is a real possibility of a Section13 Order being made that would affect the asset, such evidence is relevant and should be adduced. [75] Hallett, JA noted that where capital property is likely to be included in the court’s division order and there is credible evidencethat it will be sold, fairness requires that disposition costs be deducted from the value of the asset: [37] If an award is likely to be made that cannot be satisfied out of matrimonial assets but will involve a division of business assets as inthis case, then in determining the value of assets of the payor spouse, each asset and the circumstances of the payor spouse should belooked at to determine if the appraised or market value of the asset should be reduced to recognize the reality of disposition costs (legalfees and real estate agent's commission for example on a sale of real property) and any tax costs associated with disposition of the asset. [38] If there is credible evidence that the capital property will be sold, in the event of a substantial award the tax and disposition costscan be calculated with accuracy and should be deducted from the value of the asset.

If there is not any credible evidence on the issue, theCourt will have to consider the personal and financial circumstances of the payor spouse and the nature and history of the asset todetermine if fairness demands there be a reduction in the value of the asset to recognize the contingent liabilities or expenses that relateto capital property such as disposition costs, capital gains tax and recapture of depreciation that would likely become a reality on thedisposition now or in the future…. [76] Hallett, JA declined to establish one specific principle of general application, emphasizing that each case must be assessed onits own facts and merits: [38] … In short, each case must be looked at on its own facts, recognizing the inherent contingent liabilities that usually float around theownership of capital property.

I do not think one can establish any more specific principle for determining this issue of valuationalthough Courts have tried (see annotation by James G. MacLeod to Heon v. Heon (1989), (ON SC), 22 R.F.L. (3d)273). I am not in favour of deducting the full notional tax costs in every case as proposed in the Heon case as fairness may be sacrificedmerely for the sake of consistency nor am I in favour of a regime that is founded on the cop-out theory that there should be no reduction

of the value of the payor spouse's assets because, as disposition is "well down the road", the tax cost is too speculative to consider,particularly if the Court has not analyzed the facts of the case. One cannot say as a general rule that the income tax consequences ofdisposition of capital property are so speculative that they can be safely ignored. It may be that in some cases the potential tax is soinsignificant in relation to the value of the assets that it would be safe to ignore the issue.

The Importance of Evidence [77] Finally, Hallett, JA discussed the importance of evidence from the party seeking a deduction: [39] Provided it is relevant in a particular case and there is evidence from which a finding can be made, an attempt should be madeto assess the tax consequences associated with the eventual disposition of an asset and an adjustment of value made if fairness dictates.As stated by Lambert, J.A., in Murchie v. Murchie (1984), (BC CA), 39 R.F.L. (2d) 385 (B.C.C.A.) at p. 390: "There is...no absolute rule as to whether tax consequences should or should not be taken into account.

The circumstances of each casewill dictate what seems to be the best course in valuation." and by Finlayson, J.A., in McPherson v.

McPherson, the cases "turn on their own facts." This leads me to the question whether or not the appellant has adduced sufficient evidence to prove that the amount to be paid tothe respondent should be reduced to take into account that a sale of the Laval Street property will likely result in disposition costsand attract capital gains tax or require the appellant to use his exemption to avoid the tax and thus diminish his capital gainsexemption which I suggest is in the nature of a deferred cost. The evidence of Mr.

Mahar proves that a sale would attract capitalgains tax of $24,000.00 unless the appellant's exemption was used, in which event there would be no tax payable: Mr. Mahar's evidencealso proves that in the normal course of events the disposition of an apartment building would entail payment of legal fees and likely areal estate agent's commission.

On the other hand, there is no evidence from the appellant's mouth that he intended to sell the LavalStreet property if a substantial award was made in his wife's favour nor what his intention was respecting the use of his capital gainsexemption. [Emphasis mine] [78] In Gomez-Morales, an expert, Keith Mahar, CA, testified at trial that the sale of the rental property would attract legal fees andreal estate commission of $14,000 and $24,000 in capital gains tax if the capital gains exemption was not used.

Despite the expertevidence, Hallett, JA underscored the lack of trial evidence concerning either the husband’s intention to sell or his intention to use hiscapital gains exemption. [79] In reaching his decision, Hallett, JA held that although ½ of the disposition costs payable by the wife would notionally be$19,000, her share should nonetheless be reduced to $8,760 to reflect contingencies: [46] Considering that disposition of the Laval Street property will take place at death if not sooner, it is therefore fair that the amount of$68,760.00 be reduced to recognize the reality that in this case there will likely be disposition costs at some time.

There is also the taxcosts that hovers over this property. Recognizing these facts, I would reduce the award to the respondent respecting the Laval Streetproperty to $60,000.00. The reduction in the award is not a precise calculation; that is not possible, but an effort must be made torecognize the inherent liabilities that are associated with ownership of most capital property.

In this case, half of the full tax costs on adisposition if the exemption were not claimed would be $12,000.00 and half of the disposition costs $7,000.00, for a total of $19,000.00.These costs may not be incurred in full, depending on whether or not the exemption is used and the possibility it will not be necessary toengage a real estate agent.

The sum of $19,000.00 has been reduced to $8,760.00 to reflect these and other contingencies. …. [47] The award of $60,000.00 in connection with the Laval Street property shall finalize the division of property between the spouses andthe award shall bear interest in accordance with Civil Procedure Rule 62.26(3) and the Interest on Judgments Act, R.S.N.S. 1989, c. 233,at the rate of five per centum per annum from August 23, 1989, the date of the trial judge's Order.

Caselaw from other Jurisdictions [80] Unsurprisingly, other courts have discussed the impact of evidentiary gaps when deciding whether to deduct disposition costs.For example, in Rick v. Brandsema, 2009 SCC 10, the Supreme Court of Canada considered whether, when valuing a dairy farm, thetrial judge erred in declining to make a deduction for notional disposition costs.

Citing authorities from Ontario and British Columbia,Abella J, for the unanimous court, held at paras 54 to 57 that the trial judge’s decision not to make a deduction was “completelysupportable” because of the absence of evidence regarding an imminent or eventual sale. The authorities relied upon included theMacPherson decision which was not entirely endorsed by Hallett, JA in Gomez-Morales. [81] More recently, in Berta v Berta, 2015 ONCA 918, at paras 77 to 82, the trial judge’s decision to assign a nil value to proposeddisposition costs was upheld on appeal.

Decision [82] I will now assess the facts and merits of the claimed disposition costs based on the approach suggested by Hallett, JA. Then Iwill assess the unquantified claim related to capital and environmental improvements. Why Disposition Costs and Income Tax Consequences Are Relevant [83] The issue of disposition costs is relevant because the Wolfson divorce involves the division of capital property either under s.12 or s. 13 of the MPA. Disposition costs will be triggered in one of two ways - if Mr.

Wolfson disposes of his shares in any of thecompanies, or if any of the companies sell the real property that they own. If Mr. Wolfson transfers his shares, he will incur dispositioncosts. If any of the companies sell real property, it is the company, and not Mr. Wolfson, that will incur disposition costs. [84] Disposition costs at some point will include legal fees, potential real estate commission if the corporate real property is sold,

and capital gains tax. Mr. Wolfson can neither take his “property to the grave” nor “avoid the long and omnipresent arm of the tax collector”: para 38 of Gomez-Morales v Gomez-Morales . Value of Mr. Wolfson’s Shares in the Corporate Holdings [ 85 ] The approach suggested by Hallet, JA is not easily applied because of the deficiencies in the evidence. As stated previously, I have no direct evidence of the value of Mr. Wolfson’s shares in the various companies. Instead, the parties relied on the report of Ms.

Wolfson’s expert, Nikki Robar, to provide a baseline of the value of the corporate real property. [ 86 ] At the request of Ms. Wolfson, Ms. Robar produced a report detailing the income of Mr. Wolfson. In that report, Ms. Robar specifically notes that she did not prepare a valuation of the companies. She states as follows in exhibit 5, tab E: E.16 We have not prepared a valuation of the Wolfson companies; however, the attached

Schedule E.1 reflects the greater of the municipality assessed value, appraised value (for 5 properties only) and net book value of the properties, totaling $30,241,977. This is $15 million greater than the net book value of real property reported in the Companies’ financial statements. As at May 31, 2019 the companies reported total debt of 16 million borrowed against the properties. This suggests there is approximately $14.2 million of equity in the properties available to the Companies and/or its owners for future business or other investment. [ 87 ] Despite Ms. Robar’s caveat, both parties agreed in their post-trial submissions that the Robar

Schedule should be adopted as proof of value, subject to upward adjustment because of the subsequent appraisals on some of the corporate rental properties. [ 88 ] I accept the parties’ tenuous agreement in the circumstances of this case. I accept that Mr.

Wolfson owns the controlling common shares in the following companies which own the following rental properties with the noted associated values: • Tobin & Queen Holdings 5230 Tobin Street $5,840,000 • 7145 Quinpool Holdings 7145 Quinpool $2,228,300 • Harvard Properties 2834/40/44 Windsor $1,100,000 • 2966 Windsor Holdings 2966 Windsor $4,140,000 • 2759 Windsor Holdings 2759 Windsor $3,240,000 • Oxford East Holdings 1935/41/45/ 49 Oxford $3,240,000 • Cocowood Holdings 5676 Columbus $850,300 • Lioncore Holdings 1834/36/38 Robie $3,700,000 6008/ 6014 Shirley • Cabin 5 Holdings 6190 Jubilee $2,308,300 1949 Oxford [i] • 5900 Holdings 6153/5/7/9 Pepperell $1,275,800 6161/3/5/7 Pepperell • Windsor & Almon Holdings 6241 Almon $4,080,000 Total $31,462,700 [ 89 ] Based on the above, the total value of the corporate real property is $31,462,700, from which long term debt of $15,976,281 must be deducted, leaving equity of $15,486,419 .

Given the lack of other evidence as to value, I accept that Mr. Wolfson’s shares in the 11 companies which own the rental properties are worth at least $15,486,419 . [ 90 ] I must now determine if this figure should be further reduced based on Mr. Wolfson’s proposed four deductions – legal fees, real estate commission, capital gains tax, and environmental or capital expenses. Ms. Wolfson did not strenuously object to proposed legal fees of $28,500, together with HST of $6,525, which I therefore adopt as an appropriate disposition expense.

Burden of Proof [ 91 ] In determining the appropriateness of the remaining three claims, I note that Mr. Wolfson bears the civil burden of proof because he seeks the deductions. To be clear, Mr. Wolfson seeks to reduce the value of the real property by significant amounts - $1,809,105 for real estate commission and $7,366,836 for capital gains tax. Mr. Wolfson did not quantify the amount he claims for environmental or capital expenses.

Proposed Disposition Costs – Real Estate Commission [ 92 ] I will now address the real estate commission claim. [ 93 ] Although some evidence was led about real estate commission being incurred on the sale of real property, such evidence was not presented in the manner described in Gomez-Morales . Mr. Wolfson did not produce an expert report detailing the amount of

commission payable in the commercial context. Further, Mr. Wolfson confirmed that he did not intend to sell the corporate real properties. [ 94 ] I must therefore decide if it is more probable than not , that Mr. Wolfson’s companies would expend $1,809,105 in real estate commission to dispose of their portfolios of properties. To assist with my determination, I reviewed Mr. Wolfson’s affidavit for details about his acquisitions of the corporate rental properties.

From the following review, it appears that real estate commission was not likely paid on many of the properties acquired by these companies: • In 2004, 5900 Holdings Limited purchased properties on Pepperell Street from Mr. Wolfson’s mother and aunts. • In 2006, Mr. Wolfson answered an ad in the newspaper seeking tenders on a package of six properties. Mr. Wolfson was successful; he created Lioncore Holdings Limited, Cocowood Holdings Limited, and Cabin 5 Holdings Limited for the purchase of these properties. • In 2007, a Mr. Leventhal asked Mr.

Wolfson if he was interested in buying another package of rental properties. As a result, Cabin 5 Holdings Limited bought 1949 Oxford Street while another company, Oxford East Holdings Limited, was incorporated and purchased the three other adjacent Oxford Street properties. • In 2009, Windsor & Almon Holdings Limited was incorporated to purchase the Windsor Street property owned by Mr. Wolfson’s grandfather. • In 2010, Mr.

Wolfson incorporated Tobin & Queen Holdings Limited to purchase properties on Tobin Street owned by his grandfather. • In 2012, two other holding companies were created to purchase properties from the estate of Mr. Wolfson’s grandfather. [ 95 ] I infer that Mr. Wolfson was able to purchase many rental properties without the use of a real estate agent. Given this background, would Mr. Wolfson’s companies expend $1,809,105 in real estate commission fees? I find that Mr. Wolfson’s companies would likely not incur the amount claimed given other available options.

Other available options include the following: • The companies do not sell their properties. Instead, Mr. Wolfson, on retirement or death, may arrange for the transfer of his corporate shares to his children so they can continue operating the rental properties. This appears to be Mr. Wolfson’s current stated intention as noted at para 63 of exhibit 11. • Mr. Wolfson’s companies may sell a portion or all their real properties to family members, friends, or business acquaintances without the use of an agent. • Mr. Wolfson may connect with other property developers to seek their interest.

Given current market conditions, Mr. Wolfson’s companies would likely be successful in selling at least some of the properties in this manner. • Mr. Wolfson may use other media tools or sales alternatives to market and sell the corporate properties. • Mr. Wolfson may make a business arrangement for a significantly reduced commission for the properties that are to be sold. Mr. Wolfson has exhibited an uncanny ability to manage, save, and stretch the value of a dollar. I find that he would not pay anything near 5% in real estate commission for the sale of the corporate properties. [ 96 ] Given Mr.

Wolfson’s evidentiary burden, the absence of credible evidence, my findings, available options, and other contingencies, I reduce the claimed $1,809,105 in fees and HST by 70% to produce a probable, but generous, figure of $542,732 for expenses and HST related to the marketing and sale of the rental properties. Proposed Disposition Costs – Capital Gains Tax [ 97 ] I will now address Mr. Wolfson’s claim for a deduction of $7,366,836 for notional capital gains tax.

Did he prove this claim on a balance of probabilities? [ 98 ] The calculation of notional taxable capital gains is complicated and is based on several considerations. First, I must identify who will incur the gain. Will Mr. Wolfson sell or dispose of his shares in the companies; or will the companies sell the real property that they own; or will some combination of both options occur? If Mr. Wolfson sells his shares, he will likely incur a capital gain.

If the companies sell the real property that they own, then the companies will likely incur a capital gain. [ 99 ] The calculation of taxable capital gains in either situation is a multi-step process. Starting with a sale of the shares, the first step is to calculate the gain. In general, the gain is the amount by which the “proceeds of disposition” exceed the total of the “adjusted cost base” and the “outlays and expenses” incurred to sell the property: ITA , s. 40(1).

To determine this amount, I require credible evidence of the following: • The proceeds of disposition – normally the sale price of the property: ITA , s. 54. • The adjusted cost base - the cost of a property plus any expenses to acquire it, such as commissions and legal fees.

The cost of a capital property includes capital expenditures such as the cost of additions and improvements to the property: ITA , ss. 53(1), (2), 54. • Outlays and expenses – any amounts incurred to sell a capital property, including fixing-up expenses, finders’ fees, commissions, brokers’ fees, surveyors’ fees, legal fees, transfer taxes, and advertising costs: Canada Revenue Agency, “ Capital Gains 2020 ”, T4037(

E) Rev. 20, pp. 5, 7, 8. [ 100 ] The calculation of the tax consequences of a disposition of Mr. Wolfson’s shares is further complicated by the potential

availability of the capital gains exemption for dispositions of “qualified small business corporation shares”: ITA , s. 110.6. The exemption is only available to individuals and, as of 2020, is limited to $883,384 as a lifetime total. In “ Capital Gains 2020 ”, T4037(

E) Rev. 20, the CRA states at p. 13: For 2020, if you disposed of qualified small business corporation shares (QSBCS), you may be eligible for the $883,384 LCGE. Because you only include one-half of the capital gains from these properties in your taxable income, your cumulative capital gains deduction is $441,692 (1/2 of $883,384). [ 101 ] On the other hand, if the rental properties are sold, rather than the shares, both the value of the buildings and the land must be determined as separate properties: Income Tax Regulations , C.R.C., c. 945, s. 1102(2) .

For the buildings, which are depreciable assets, the gain (and thus the capital gain) is again the amount by which the proceeds of disposition exceed the total of the adjusted cost base and the outlays and expenses. Before calculating the capital gain, however, any capital cost allowance (CCA) claimed to date must be “recaptured”. Any gain on the sale, up to the original cost, is a recapture of CCA, which is brought into business income and fully taxable.

Any gain above the original cost is a capital gain that is ½ taxed: ITA , ss. 13(1), 40(1)(a), 38(a); David Sherman, The Lawyer’s Guide to Income Tax and GST/HST (Toronto: Thomson Reuters, 2017), at pp. 121, 265-66. [ 102 ] It is obvious from even a cursory review of the provisions of the ITA and Income Tax Regulations cited above that the calculation of taxable capital gains in the circumstances of this case is a highly technical exercise that requires special knowledge of accounting principles and income tax law.

An expert should have analyzed the financial data to produce an evidence-based calculation. [ 103 ] The detailed financial information suggested by Hallett, JA, and relevant to the calculation of the gain, income tax consequences, and potential exemptions, should have been adduced by Mr. Wolfson. It was not. His failure to do so is troubling. As a result, I draw an adverse inference against Mr. Wolfson for the following reasons: • Mr. Wolfson is not an unsophisticated or impecunious litigant.

Rather, he is an astute and strategic businessman with knowledge of the law. • The issue of capital gains was not a novel factual issue which unexpectedly arose during the hearing. It was a known and live issue from the outset. For example, at para 64 of exhibit 11, Mr. Wolfson stated in part: “… Sale of real estate generates massive tax implications from the recapture of capital cost allowance and capital gains taxes.” Mr. Timmons also said that he spoke about the issue with Mr. Wolfson. • The issue of capital gains was not a novel legal issue which unexpectedly arose during the hearing.

The decision of Gomez- Morales , and its recommended approach has been a staple since 1990. [ 104 ] In drawing an adverse inference, I find that Mr. Wolfson strategized that he would be in a better legal and financial position by omitting the expert evidence than he would be by producing it. This is not an appropriate outcome, especially in the family law context. [ 105 ] Further, I make the following additional findings relevant to the claimed deduction for capital gains tax: • The property division that I order will involve capital property. • Mr.

Wolfson provided no evidence that he intended to sell some or all of his corporate shares. • Mr. Wolfson provided no evidence that the companies intended to sell some or all of their real property. In fact, Mr. Wolfson said that he did not intend to sell the corporate real property. • Mr. Wolfson will face tax consequences when there is a disposition of his shares. • The companies will face tax consequences when there is a sale of their real property. • I have no expert evidence quantifying the capital gain or capital gains tax that would attract if Mr.

Wolfson disposed of some or all of his shares. • I have no evidence about whether the capital gains exemption for the disposition of qualified small business corporation shares will be available to Mr. Wolfson if he sells or otherwise disposes of his shares. See O’Neill v. O’Neill , [2007] OJ No 1706 (Ont Sup Ct

J) for an example of a case where the parties’ respective experts disagreed on whether the disposition of the husband’s shares would trigger an entitlement to the capital gains exemption. If the capital gains exemption is available to Mr.

Wolfson, I find it would be prudent for him to make use of it in the event a capital gain was incurred on the disposition of any of his shares. • I have no expert evidence quantifying the capital gain, capital gains tax, or the taxes associated with the recapture of CCA that would attract if the companies sold some or all of their real property. [ 106 ] Given my analysis and findings, I conclude as follows: • Mr.

Wolfson did not prove that a discount of $7,366,836 should be granted for notional capital gains tax that would attract to him if he sold his shares or if the companies sold the rental properties. • I cannot use his proposed $7,366,836 as a reference point or guide because it is based on an erroneous calculation. It is a number devoid of meaning. [ 107 ] Further, I recognize that in Gomez-Morales , where credible expert evidence was adduced, Hallett, JA nonetheless reduced the claimed disposition expenses by more than 50%. [ 108 ] What is the fair, just, and appropriate outcome in this case?

Given the absence of credible evidence on the amount of the gain or

on the amount of the capital gains tax, and given my negative inference, my findings, and the various contingencies, I assign a discount of $1 million to represent the notional discount for capital gains tax while repeating the words of Hallett, JA at para 46 Gomez-Morales : This valuation of half the equity is therefore somewhat arbitrary and for those who will criticize this approach, all I can say is that there is often little accounting precision on the division of assets between spouses.

While one attempts to make the calculations with as much accuracy as possible, the basis of such calculations are generally estimates of value by experts. As a consequence, even as a general rule, a Court's division of property is, at best, an estimate of what is fair in the circumstances applying the criteria of the matrimonial property legislation.

Furthermore, the Courts are regularly called upon in assessing damages arising out of personal injuries or death to fix amounts involving numerous contingencies and there is no reason why the Court should not do so in determining fair values in matrimonial property cases. Proposed Disposition Costs - Environmental or Capital Expenses [ 109 ] Further, I find that Mr. Wolfson did not prove that the value of the rental properties should be further reduced because of unquantified environmental or capital expenses for the following reasons: • Mr.

Wolfson strategically chose not to produce expert evidence of the fair market value of the corporate real property. • If there were credible environmental or capital expenses that would actually reduce the fair market value of the rental properties to less than stated in the appraisals that were exhibited, Mr. Wolfson would have generated an expert report confirming that the appraisals were wrong. He did not. [ii] • Mr. Wolfson neither proffered other expert evidence, nor provided credible non-expert evidence, to negatively impact on the appraised values. I do not accept Mr.

Wolfson’s evidence on this point. • Mr. Wolfson would have produced expert opinion evidence on the fair market value of the rental properties if it were advantageous to him. I infer that he did not do so because he believed that the exhibited appraisals were either accurate or produced an outcome that was less than the fair market value of the properties. • I accept the evidence of Mr. MacLean. He provided professional, balanced, and evidenced-based expert opinion on the value of some of the corporate real property. • Mr. MacLean did not appraise all the rental properties.

Dated property appraisals were entered as proof of value for some of the rental properties. These appraisals do not reflect current market increases, and, I infer, as a result, undervalue the rental properties. [ 110 ] No further reduction to the value of the rental properties owned by the 11 companies is granted. To do otherwise , would produce a result that would be unjust, unfair, and without credible foundation.

Summary of Decision on Disposition Costs and Value of Mr. Wolfson’s Shares [ 111 ] In

summary, Mr. Wolfson owns all common shares in 11 companies that own rental properties with the following value: Total Value of Real Property $31,462,700 Long Term Debt ($15,976,281) Legal Fees & HST ($35,025) Marketing, Commission & HST ($542,732) Capital Gains Tax ($1,000,000) Equity $13,908,662 [ 112 ] Because I have no other credible evidence, I reluctantly assign $13,908,662 as the value of the shares owned by Mr. Wolfson in the various companies. I recognize that it is more probable than not, that this calculation is a conservative one that favours Mr.

Wolfson. [ 113 ] What are the other assets and debts of the parties? [ 114 ] The following are the assets and debts of the parties: 6137 Inglis Street, Halifax [ 115 ] This property is the family home; it is held in Ms. Wolfson’s name. The home was appraised in October 2019 for $915,000 from which agreed upon disposition costs of $53,613 are deducted. In addition, there was a mortgage balance of $283,839 and a LOC balance of $122,034.

The total equity in the family home is $455,514 . 88 Shaw Island Road, Marriott’s Cove, Chester [ 116 ] This property is the parties’ summer home, with desirable ocean frontage and an inground pool. This property is held in the name of Ms. Wolfson. The home was appraised in October 2019 for $1,010,000. Disposition costs of $59,075 are deducted. Further, the LOC with a balance of $8,571 and the shareholder’s loan of $444,000 must likewise be deducted. The total equity in the summer home is $498,354 . [ 117 ] In addition, Mr.

Wolfson claims a further deduction of $2,700 because of what he perceives will be the negative tax consequences

associated with the sale of the summer home. Ms. Wolfson does not agree. She states that the gain on the property would be negligible because of the money spent on capital improvements and, in any event, Mr. Wolfson does not own the property – she has legal title. [ 118 ] I decline to grant a further reduction for capital gains tax. No calculation of the gain or tax was provided. There was credible evidence of capital improvements. Any amount incurred can be offset by the exemption. Household Contents [ 119 ] Mr.

Wolfson states that the Inglis Street household contents are valued at $75,000 while the Shaw Island household contents are valued at $50,000. Ms. Wolfson strongly disagrees that the value of the Inglis Street contents is anything near $75,000. She states that, for the most part, the furniture in the family home was second-hand furniture from her parents. She states that the Inglis Street contents are worth no more than $15,000. [ 120 ] I am not able to ascertain the value of the household contents. Both parties had a positive obligation to provide credible evidence of value.

Both chose not to proffer such evidence. For example, neither party obtained an appraisal. Further, detailed evidence as to value was scant and inadequate. [ 121 ] I therefore order the parties to equally divide the household contents in both homes by a process of alternating selection as will be detailed under the asset division

section of this decision. [ 122 ] Vehicles [ 123 ] There is agreement on the value of the following vehicles: • 2014 Acura MDX $28,000 • 1997 Porsche 911 Turbo S $175,000 • 1997 Porsche 911 Carrera S $110,000 • Boston Whaler $32,000 [iii] [ 124 ] A car loan of $35,235 used to acquire one of the Porsches must likewise be deducted from the equity of the vehicles. The equity in the vehicles equals $309,765 . Pensions and RRSPS [ 125 ] Before the marriage, Ms. Wolfson acquired pension benefits with the Ontario Teacher’s Pension Plan with a commuted value of $102,839.

The parties agree that the commuted value should be used for its value and then discounted for income tax. The parties used a 30% discount which equates to a value of $71,897 . [ 126 ] In addition, Ms. Wolfson acquired pension benefits with Nova Scotia Pension Services with an agreed upon value, including a discount for income tax, of $3,412. [ 127 ] Further, both parties acquired RRSPs during the marriage, which they have discounted for income tax, and which they both agree have the following values: • RRSPs of Mr. Wolfson $62,122 • RRSPs of Ms.

Wolfson $10,860 [ 128 ] The four retirement vehicles have a combined value of $148,291, about 48% of which have their genesis in Ms. Wolfson’s pre- marriage employment. Accounts, Investments, and Securities [ 129 ] Occasionally, counsel used different balances for the parties’ accounts and investments in their Equalization Tables.

I reviewed the Statements of Property and evidence and find that the following listing represents the balances of the parties’ accounts, investments, and securities for division purposes: • RBC **13 (Joint) $13,079 • RBC **50 (Joint) $3,833 • CIBC **32 (LW) $4,982 • RBC US Accounts (LW) $613 [converted to Cndn funds] • CIBC **75 $320,426 • CIBC **65 $12,732 • RBC TFSA (LW) $12,073 • RBC TFSA (JW) $12,095

• CIBC **52 (JW) $133,458 • RBC GIC **99 (Joint) $1,119 • RBC **819 (JW) $14,626 • RBC ** 232 (JW & KM) $24,390 • Manulife CSV (LW) $36,445 • State of Israel Bond (JW) $347 • South Point Properties (JW) $321,658 [ 130 ] The total value of the parties’ accounts and investments is $911,876 . Disputed Property – Inglewood Drive [ 131 ] Ms. Wolfson seeks to include the 5927 Inglewood Drive lot as a matrimonial asset. Ms. Wolfson stated that the parties were gifted the lot by Mr. Wolfson’s grandfather as an engagement gift. Mr.

Wolfson transferred the lot to his grandfather’s estate in 2012 to resolve a family rift and to have the estate’s remaining properties transferred to him. [ 132 ] In contrast, Mr. Wolfson stated that the lot is not matrimonial property for five reasons. First, it did not exist at separation, having been transferred out of his name in 2012. He did not receive any money for the disposition. Second, the property was a gift to him and not to both parties. Third, the property was seldom used by the parties, other than to occasionally walk on it when they were visiting the grandfather.

Fourth, the property was not worth $400,600 because of restrictive covenants and contamination. Fifth, even if the property is included, it would be exempt as a business or inheritance asset. [ 133 ] I find that the Inglewood property will not form part of the asset division because it did not exist at separation. This does not mean, however, that the property plays no role in the resolution of some of the other legal issues. For this reason, I make the following findings: • The Inglewood property was not an advance of inheritance or a business asset. The Inglewood property is no different than Ms.

Wolfson’s share in the South Point Investment, which was acquired by Ms. Wolfson’s father on her behalf when she was young. None of the parties’ money was expended to acquire Ms. Wolfson’s interest in South Point, yet the parties characterized it as matrimonial. The same rationale applies to the Inglewood property. • The Inglewood property was a matrimonial asset as it was an engagement gift to both

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