Docket: CACV2442 Angela Beth Ackerman (Petitioner) Appellant - v. -, 2014 SKCA 137

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2014 SKCA 137 Date: 2014-12-23 Between: Docket: CACV2442 Angela Beth Ackerman (Petitioner) Appellant - and - Brett Christopher Ackerman (Respondent) Respondent Coram: Ottenbreit, Caldwell and Ryan-Froslie JJ.A. Counsel: James J. Vogel for the appellant R. Bradley Hunter, Q.C. for the respondent Appeal: From: 2013 SKQB 247 Heard: September 17, 2014 Disposition: Allowed in part

Written Reasons: December 23, 2014 By: The Honourable Madam Justice Ryan-Froslie In Concurrence: The Honourable Mr. Justice Ottenbreit The Honourable Mr. Justice Caldwell Ryan-Froslie J.A. I. Introduction [ 1 ] Angela Ackerman appeals a decision of the Court of Queen’s Bench dividing the family property accumulated during her marriage to Brett Ackerman. It is her position the trial judge erred by failing to include certain assets in the distribution, by double accounting for or incorrectly including certain debts, and in how he valued a dump trailer and her husband’s interest in a corporation.

She also contends the trial judge erred by valuing the real estate owned by the partnership and corporation as of the application date, as opposed to the date of adjudication. Finally, she takes issue with the trial judge’s decision to allow Mr. Ackerman an exemption for the fair market value of the partnership interest he brought into the marriage. She argues that exemption was not proven and, if it was, it would be unfair and inequitable to allow it. [ 2 ] Mr.

Ackerman acknowledges the trial judge erred by failing to include his truck and shareholder loan in the division of the family property and also by deducting a $140,000 line of credit twice in valuing the partnership. He opposes the balance of Ms. Ackerman’s appeal.

He cross-appeals contending the trial judge erred by attributing to him $150,000, which he had allegedly withdrawn from the company, and by failing to take into account his 2010 and 2011 personal income tax, as well as the contingent tax liability payable on the disposition of his partnership and corporate interests. [ 3 ] There is some merit to both appeals. The trial judge overlooked some property and incorrectly included some debts in determining the value of the family property for division purposes. His judgment must be adjusted accordingly. I would affirm the trial judge’s decision in all other respects.

While the trial judge may have erred by failing to take into consideration all the relevant factors set out in s. 23(5) of The Family Property Act , SS 1997, c F-6.3, when determining whether allowing the exemption for Mr. Ackerman’s partnership interest would be unfair and inequitable, that error does not affect the ultimate division of the family property. II. Background [ 4 ] The Ackermans began living together on December 1, 2006. They were married on January 12, 2008 and separated just over three years later on March 12, 2011. Shortly thereafter, on March 30, 2011, Ms.

Ackerman commenced a court application for division of the family property. [ 5 ] When the parties began living together on December 1, 2006, Ms. Ackerman owned a home on Reynolds Street in Regina. In addition, during the period the Ackermans cohabited prior to marriage, Ms. Ackerman built a home on Nicurity Drive. Both those homes were sold netting approximately $80,000 to $85,000 each. Most of the money from those sales was ultimately used to build a home on Grove Avenue which became the Ackermans’ family home. [ 6 ] At both the commencement of cohabitation and the date of the marriage, Mr.

Ackerman owned an interest in a partnership with Patrick Allingham. The partnership was formed in the fall of 2005 for the purpose of purchasing revenue property. A formal partnership agreement was signed in May 2006. Mr. Ackerman maintained his interest in the partnership throughout the marriage. It was described as an equal partnership with both Mr. Ackerman and Mr. Allingham owning 50% of the assets and being responsible for 50% of the debts. Mr. Ackerman and Mr.

Allingham were both real estate agents and their real estate commissions were considered partnership assets and shared equally. [ 7 ] In addition to his partnership interest, Mr. Ackerman owned real property in his personal name at the time of the marriage, including a home on Pasqua Street, three other houses (one of which he owned jointly with his brother), and a half interest in a cabin. All of these properties were sold during the marriage and, according to the evidence of Mr. Ackerman, the net proceeds went into building the Ackermans’ “dream home” on Grove Avenue.

The Ackermans put more than $1,000,000 into that home. According to Mr. Ackerman, $450,000 of that money came from the net sale proceeds of the real estate he owned personally at the date of the marriage and $150,000 was attributable to the sale proceeds of Ms. Ackerman’s Reynolds Street and Nicurity Drive properties. The balance of the money came from a mortgage ($272,000) and a line of credit ($160,000). [ 8 ] The family home proved to be a financial disaster. Shortly before the Ackermans’ separation, they discovered shifting soil had rendered the home structurally unstable and virtually unsellable.

By the time of trial, the home had been unsuccessfully listed for sale for a number of months at an asking price of $389,000. The home was valued by the trial judge for division purposes at $275,000. [ 9 ] During the marriage, Mr. Ackerman and Mr. Allingham incorporated a company, Allman Homes & Realty Ltd. (“Allman Homes”) for the purpose of building and selling homes. The company was financed by taking out loans in their personal names and by them lending money to the company in the form of shareholders’ loans.

[ 10 ] In addition to the partnership, Allman Homes and the Grove Avenue property, the Ackermans had bank accounts, RSPs, investments and vehicles. Mr. Ackerman owned a 2011 GMC Denali diesel truck valued at $43,000 and Ms. Ackerman owned a 2008 Acura RDX valued at $22,000. III. The Trial Decision [ 11 ] The main issues for determination by the trial judge were: (

i) what date should be used to value Mr. Ackerman’s corporate and partnership interests, (ii) the value of his corporation, and (iii) whether Mr. Ackerman was entitled to an exemption for the fair market value of his partnership interest as of the date of marriage. [ 12 ] The trial judge found the assets of both Allman Homes and the partnership consisted primarily of real estate that had increased significantly in value between the application date being March 30, 2011 and the date of adjudication being April 2013.

Despite this, he found those assets should be valued as of the application date because of the effort expended by Mr. Ackerman to improve the property and to address any concern that Mr.

Ackerman had deliberately increased the mortgages on the properties between the date of application and the date of adjudication. [ 13 ] The trial judge valued Allman Homes using its net worth as set out in its February 28, 2011 financial statement (-$11,574) and then adjusting that net worth to take into account the sale of three Estevan condos owned by the company, and three homes being constructed by the company on its McAra Street lots. He found the company was worth $112,805.89 as of the date of application and Mr.

Ackerman’s interest was thus valued at $56,402.95 for division purposes. [ 14 ] Finally, the trial judge concluded Mr. Ackerman was entitled to an exemption for his 50% interest in the partnership. The trial judge valued the partnership at $766,052 as of the date of the marriage and $502,323 as of the date of the court application. In other words, the partnership had decreased in value during the marriage. After applying the exemption, Mr. Ackerman’s partnership interest was attributed a negative $131,864.50 for distribution purposes. The trial judge went on to find that the family property in Ms.

Ackerman’s possession exceeded that in her husband’s possession by $8,580. He determined, pursuant to s. 23(4) of The Family Property Act , that it would be inequitable to require Ms. Ackerman to make an equalization payment to Mr. Ackerman given the extent of the exemption pertaining to the partnership. He thus reduced the amount of that exemption by $8,580 to eliminate the necessity for an equalization payment. IV. Preliminary Matters [ 15 ] The respondent, Mr. Ackerman, brought an application to adduce fresh evidence pursuant to Rule 59 of The Court of Appeal Rules .

The evidence he sought to adduce consisted of a September 5, 2014 affidavit sworn by him in which he attested to the circumstances surrounding the acquisition and ownership of one specific piece of property, namely, 2829 MacKay Street. Attached to that affidavit were copies of certificates of title for the property and a mortgage statement. [ 16 ] At the hearing of the appeal, an oral decision was given dismissing Mr. Ackerman’s application. [ 17 ] To succeed in an application to admit fresh evidence, the applicant must establish the following: (

i) that despite due diligence, the evidence was not available for use at trial; (ii) that the evidence is relevant, in the sense that it bears upon a decisive or potentially decisive issue in the action; (iii) that the evidence is credible, in the sense that it is reasonably capable of belief; and (iv) that the evidence is such that, if believed, it could reasonably, when taken with the other evidence adduced at trial, be expected to have affected the result. (See: Wal-Mart Canada Corp. v Saskatchewan Labour Relations Board , 2006 SKCA 142 at para 4 , 289 Sask R 20.) [ 18 ] In this case, the evidence Mr.

Ackerman sought to adduce was in existence at the time of trial and, with due diligence could have been presented. While the certificates of title and mortgage statement are relevant and credible, their admission could not reasonably be expected, when taken with the other evidence adduced at trial, to have affected the result. At trial, uncontroverted evidence was presented, in the form of Mr. Ackerman’s testimony in-chief and on cross-examination, that 2829 MacKay Street was owned by Allman Homes. He also testified as to the circumstances surrounding the property’s purchase, development and value.

In short, other than the certificates of title and the mortgage statement, the evidence sought to be adduced by Mr. Ackerman was not “fresh” evidence. [ 19 ] Mr. Ackerman’s application to admit fresh evidence was not only unnecessary, but failed to meet the requisite requirements for admission. Accordingly, that application was dismissed with costs to Ms. Ackerman, fixed at $500. V. Issues [ 20 ] The issues with respect to Ms. Ackerman’s appeal are as follows: (

i) Did the trial judge err in law by valuing the partnership and Allman Homes as of the application date? (ii) Did the trial judge err in valuing the corporation, Allman Homes, as he did? (iii) Did the trial judge err in law by omitting assets belonging to Mr. Ackerman from the division of family property or by double accounting for or incorrectly deducting certain debts? and, (iv) Did the trial judge err in law by granting Mr. Ackerman an exemption for the partnership interest he owned at the date of the marriage?

[ 21 ] The issues relating to Mr. Ackerman’s cross-appeal are as follows: (

i) Did the trial judge err by attributing $150,000 to Mr. Ackerman, being money withdrawn from Allman Homes? (ii) Did the trial judge err by failing to take into consideration Mr. Ackerman’s personal income tax liability for the 2010 and 2011 tax years? and, (iii) Did the trial judge err in law by failing to take into consideration the contingent tax liability payable on Mr. Ackerman’s disposition of his corporate and partnership interests? VI. Jurisdiction and Standard of Review [ 22 ]

Section 55 of The Family Property Act provides for appeals from decisions involving the division of family property. That Act gives trial judges significant discretion both in determining the value of assets for distribution purposes and in deciding what constitutes a fair and equitable division of the family property in accordance with the tenor of the Act (see: Muranetz-Dubelt v Dubelt , 2010 SKCA 5 at para 12 , 343 Sask R 215). [ 23 ] Deference is to be accorded such decisions.

An appeal court should only interfere if the trial judge has abused his or her discretion by erring in principle, disregarding a material matter of fact, or failing to act judicially, or if the result is so plainly wrong as to amount to an injustice (see: Rimmer v Adshead , 2002 SKCA 12 at para 58 , [2002] 4 WWR 119). [ 24 ] The standard of review with respect to findings of fact is a palpable and overriding error (see: Housen v Nikolaisen , 2002 SCC 33 , [2002] 2 SCR 235 and H.L. v Canada (Attorney General) , 2005 SCC 25 , [2005] 1 SCR 401). [ 25 ] As pointed out by this Court in Tether v Tether , 2008 SKCA 126 , [2009] 4 WWR 274, a determination of “fair market value” is a question of fact.

VII. Analysis [ 26 ] Because Mr. Ackerman’s cross-appeal will affect the value of the family property for distribution purposes and because that value is important in determining Ms. Ackerman’s appeal with respect to the exemption, I will deal with the cross-appeal first. 1. The Cross Appeal (

i) Did the trial judge err by attributing to Mr. Ackerman $150,000, being money withdrawn from Allman Homes? [ 27 ] The trial judge included as property for division purposes $150,000 in cash which he credited to Mr. Ackerman. This was described by the trial judge as having been “received from the corporation”. Mr. Ackerman argues no such asset existed as of the date of application. Counsel for Ms. Ackerman was unable to identify any evidence that supported its existence. It was obviously included by the trial judge in error.

An error that is easily understandable given the volume of monetary transactions between Mr. Ackerman and both the corporation and the partnership. As the amount was entered in error, the division of family property should be adjusted to omit it. (ii) Did the trial judge err by failing to take into consideration Mr. Ackerman’s personal income tax liability for the 2010 and 2011 tax years? [ 28 ] The evidence establishes that as of the application date (March 30, 2011), Mr. Ackerman had an outstanding personal tax liability for the 2010 income tax year of $18,270.27. That debt was paid in April 2011. Mr.

Ackerman also argued he had a contingent tax liability with respect to his 2011 personal income tax which he suggested should be calculated by taking 25% of his total tax liability for that year ($8,995.72). The 25% was based on the fact the court application was commenced on March 30 th , at which point one-quarter or 25% of the year had passed. Mr. Ackerman argued his personal income tax for 2010 and 2011 were family debts within the meaning of s. 21(3) (

o) of The Family Property Act . [ 29 ] The trial judge did not take into consideration Mr. Ackerman’s personal income tax liability for either the 2010 or 2011 tax years, even though that issue was raised in argument. [ 30 ] Mr. Ackerman’s 2010 personal income tax liability was clearly a family debt. It was accumulated during the marriage and was due and owing at the date of the court application. That debt relates to income earned and used while the parties were living together. Mr. Ackerman did not pay income tax instalments in 2010. In the circumstances, the existence of that debt is an equitable consideration pursuant to s. 21(3) (

o) that should have been taken into account when dividing the family property. [ 31 ] Mr. Ackerman’s 2011 personal income tax liability, however, is a different matter. The parties separated on March 12, 2011. There was no evidence as to how much income had been earned by Mr. Ackerman from his business enterprises as of that date. As such, it cannot be said that Ms. Ackerman shared in any income earned by Mr. Ackerman the 2011. Moreover, as of March 30, 2011, there was no debt owing to Revenue Canada, only a contingent tax liability. In the circumstances, it would not be appropriate to take into consideration Mr.

Ackerman’s 2011 personal income tax liability. (iii) Did the trial judge err in law by failing to take into consideration the contingent tax liability payable on Mr. Ackerman’s disposition of his corporate or partnership interests? [ 32 ] Mr. Ackerman argued that if he disposed of his interest in the partnership or Allman Homes, he would have to pay income tax with respect to that disposition, and that that contingent tax liability should have been taken into account by the trial judge. He asserts this is an equitable consideration pursuant to s. 21(3)(

j) of the Act . Mr. Ackerman calculated his contingent tax liability by taking what he asserted was the increase in value of the partnership and Allman Homes during the marriage and applying a tax rate of 22%. He then discounted the tax liability by 50% for contingencies. He relied on the Queen’s Bench decisions of Crowe v Crowe , 2001 SKQB 202 ,

205 Sask R 241 [Crowe] and Frank v Linn, 2013 SKQB 28, [2013] 7 WWR 542 (varied on other grounds by this Court at 2014 SKCA87, [2014] 10 WWR 215) and this Court’s decisions in Carlson v Carlson (1984), (SK CA), 34 Sask R 287, Shockeyv Shockey (1985), (SK CA), 38 Sask R 47, and Russell v Russell (1999), (SK CA), 179 DLR (4th)723 [Russell]. [33] While the disposition of Mr. Ackerman’s interest in the partnership and Allman Homes may generate a tax liability, this was notargued before the trial judge and, more importantly, there was no evidence from which a contingent tax liability could have beenapproximated.

The degree to which Mr. Ackerman’s partnership and corporate interests increased during the marriage is notdeterminative of his tax liability on the disposition of that property. Moreover, I note the partnership did not increase in value during themarriage. The figure used by Mr. Ackerman’s legal counsel in calculating the contingent tax liability was actually a capital loss and thus,using his method of calculation, there would be no contingent tax liability. [34] Mr.

Ackerman testified that the corporate tax rate applicable on the disposition of the company’s real estate would be 13% and thathis personal income tax rate is 22%. Mr. Ackerman’s legal counsel suggested in calculating the contingent tax liability a rate of 22%should be used, but there was no evidence that that was the appropriate tax rate. There was no evidence how either the corporation or thepartnership would be disposed of or when that disposition might occur. Would the company sell the real estate and thereafter be woundup or would Mr. Ackerman sell his shares in the company to a third party?

Would the partnership be dissolved or would Mr. Ackermansell his interest in it to another? The answer to these questions is key to when determining the contingent tax liability. [35] It is not sufficient to merely raise as an issue concerning potential tax liability on the disposition of assets. Evidence sufficient tocalculate such contingent tax liability, with some degree of precision, is required. Absent such evidence, allowing an unequal division ofthe family property based on what amounts to no more than speculation is neither fair nor equitable.

Expert evidence is not necessarilyrequired, but a tax calculation based on supporting evidence is. (See: the Saskatchewan Court of Appeal decisions in Frank v Linn atpara. 52 and Vilcu v Vilcu (1999), (SK CA), 172 Sask R 201 at para 49.) [36] When capital gains are in issue, evidence must be led as to the adjusted cost base and the sale price of the property, as well as theamount of any applicable exemptions. Where interests in corporations or partnerships are being disposed of, how that is to beaccomplished is key to determining what tax may be triggered by the disposition.

Also of importance are the applicable marginal taxrates. No evidence of these matters was presented in this case. In the circumstances, the trial judge did not err in law by failing to takeinto account Mr. Ackerman’s contingent tax liability. 2. Ms. Ackerman’s appeal (

i) Did the trial judge err in law by valuing the partnership and Allman Homes as of the application date? [37] Value is defined in s. 2 of The Family Property Act to mean: (

a) the fair market value at the time an application is made pursuant to this Act, or at the time of adjudication, whichever the courtthinks fit; or (

b) if a fair market value cannot be determined, any value at the time an application is made pursuant to this Act, or at the time ofadjudication, that the court considers reasonable. This definition gives trial judges considerable discretion in determining whether to use the application date or the adjudication date tovalue family property. The ambit of that discretion has been considered by this Court and a review of that jurisprudence reveals thefollowing principles: (

i) The application date is the date traditionally used by courts for valuation purposes (see: Benson v Benson (1994), (SK CA), 120 Sask R 17 (CA) at para 34 [Benson]). (ii) Generally, property should be valued consistently at either the application date or the date of adjudication.

If property is valued atdifferent dates, the court should provide an explanation for doing so (see: Tataryn v Tataryn (1984), (SK CA), 6 DLR(4th) 77 (Sask CA) at 80 and Russell at para. 25). (iii) In determining the appropriate valuation date, a judge must act rationally based on the evidence before him or her; keeping in mindthe purpose of the Act and the justice of the case (see: Benson at para. 33, Russell at para. 28, and Williams v Williams, 2011 SKCA 84at para 29, 343 DLR (4th) 720). (iv) The choice of a valuation date will be informed in part by the sufficiency of the evidence of value pertaining to each date (see:Russell at para. 28); (

v) If property has increased or decreased in value between the application date and the date of adjudication, the reason for that increaseor decrease is an important factor to be considered in choosing the appropriate valuation date. If the increase or decrease is due solely tomarket forces the property should generally be valued as of the date of adjudication (see: Benson at para. 34, Russell at para. 45, Mehlingv Mehling (1989), (SK CA), 75 Sask R 195 (CA)).

On the other hand, when the rise or fall in value is attributablesolely to the actions of one spouse, it is appropriate to value the property as of the date of application (see: Gresham v Gresham (1988), (SK CA), 72 Sask R 9 (CA) and Benson at para. 34). I would add that any contribution by a third party to the increaseor decrease in value of family property, would militate in favour of valuing that property as of the application date. (vi) The type of distribution contemplated by the Court, eg. sale or transfer to one or both spouses, may also be relevant to the choice ofthe valuation date.

Other considerations may also apply.

[ 38 ] Ms. Ackerman argued the trial judge erred in valuing the partnership and Allman Homes as of the application date because those assets increased in value between that date and the date of adjudication due solely to market forces. I cannot agree with her position. [ 39 ] One must keep in mind that it is Mr. Ackerman’s interest in the partnership and the company that constitutes family property for distribution purposes, not the individual assets of those enterprises. [ 40 ] In the scheme for distribution of the family property, Mr. Ackerman is to retain his interest in the partnership.

Accordingly, the partnership had to be valued. Based on the evidence, real estate was sold by the partnership between the application date and the date of adjudication (namely, 2017 Dewdney Avenue East and 610 Connaught Street), mortgages were paid down and additional monies were borrowed. The properties were managed, repaired and in some cases, improved. Insurance claims were made and dealt with. In other words, any change in the value of the partnership between the application date and the date of adjudication was due to a myriad of factors, not just market forces.

Also of importance is the fact that the increase in value was contributed to by the efforts of a third party, Mr. Allingham, who provided not only “sweat equity”, but money to the partnership. [ 41 ] It is appropriate at this juncture to deal with Ms. Ackerman’s argument that the trial judge erred in valuing certain partnership assets, including 2017 Dewdney Avenue East, 610 Connaught Street and a 2007 12-foot dump trailer. Ms.

Ackerman argued that 2017 Dewdney Avenue East and 610 Connaught Street, which were sold by the partnership between the application date and the date of adjudication, should have been valued at their sale price. I cannot agree. Those properties were owned by the partnership and the partnership must be valued as a whole at one date. It is not appropriate to look behind the partnership and value its individual assets as of different dates. To do so would be both unfair and inequitable. [ 42 ] Ms.

Ackerman also argued the trial judge erred in valuing the 2007 12-foot dump trailer at $5,100 being its appraised value as of the application date. It is her position the trailer should have been valued at its purchase price being $22,000 US. This argument fails for two reasons. First, the best evidence of what the trailer was worth as of the application date was the appraisal. Second, the trailer was purchased several months prior to the application date. The purchase price included not just the trailer but four bins. There was no evidence as to what portion of the purchase price was attributable to the bins.

In the circumstances, the trial judge did not err in relying on the appraisal. [ 43 ] The trial judge’s decision to value the partnership as of the application date is entitled to deference. There is no reason to interfere with his decision. [ 44 ] The appropriate valuation date for Allman Homes must be determined taking into consideration many of the same factors used to determine the valuation date for the partnership. The evidence established that the real estate owned by the company increased in value between the date of application and the date of adjudication.

As with the partnership, it is clear that increase was influenced by market forces but it was also due to the joint efforts of Mr. Ackerman and Mr. Allingham. As of the application date, the company was in the process of constructing three homes on its McAra Street properties. Those homes were no where near completion as of that date. Ms. Ackerman played no role in the construction of the McAra Street homes. That was done by Mr. Ackerman and Mr. Allingham. The construction obviously significantly increased the properties’ value.

The Estevan condos, which the company also owned, were marketed and sold between the application date and the date of adjudication. Ms. Ackerman played no role in their upkeep or marketing. Finally, the company accumulated additional debt between the application date and the date of adjudication. Mr. Ackerman’s father lent the company $100,000 to assist in financing its construction projects. As with the partnership, the company’s value changed between the application date and the date of adjudication for a variety of reasons.

Accordingly, the trial judge made no error in deciding to value it as of the application date. (ii) Did the trial judge err by valuing the company, Allman Homes, as he did? [ 45 ] In valuing the company, the trial judge admittedly employed a somewhat unusual method, but explained his reasons for doing so and his methodology was supported by the evidence.

The problem the trial judge faced when valuing the corporate assets was that the real estate involved was in flux, and he had no values as of either the application date or the date of adjudication. [ 46 ] At the date of the application, the company was in the process of constructing three homes on its McAra Street properties. None of the homes were near completion. In September 2011, more than five months post-application, the homes were appraised by Mr. Toth. At that point in time the homes were “substantially” complete. Mr. Toth valued them as though they were totally complete.

He explained his rationale for doing so, and the difficulty associated with valuing homes which are under construction. His valuation did not represent their value as of the application date. The Estevan condos also posed a problem as there were no appraisals for them as of either the application date or the date of adjudication. The only evidence of their value was their sale price. [ 47 ] The Act provides that if a court cannot determine value as of the application date or the date of adjudication, then it may use such value as it considers reasonable. That was the situation the trial judge faced in this case.

He began his valuation of the company by accepting its net worth as set out in its February 28, 2011 financial statement (-$11,574). He then added to that amount $36,073.89 representing what he found to be the company’s equity in the McAra Street properties as of the date of application. In determining that amount, he took into account the fair market value of those properties when construction was completed, the stage of construction each house was at as of the application date and the debts owing against them.

Finally, the trial judge valued the three Estevan condos at two- thirds of their sale price, being $76,732 (net), and added that amount to the company’s net worth. The trial judge explained his rationale for doing so. Given the discretion the Act confers on trial judges in circumstances where value is not established as of either the date of application or the date of adjudication, I can find no reversible error in the trial judge’s reasoning. [ 48 ] Ms. Ackerman also contended the trial judge failed to include 2829 MacKay Street when he valued the company. That property consisted of two lots and a house.

According to the evidence of Mr. Ackerman, that property was purchased by Allman Homes for $200,000. The plan was to demolish the home and build two new homes (one on each lot). As of March 30, 2011, nothing had been done. Mr. Ackerman testified that property was included in the company’s financial statement under the heading “real estate”. While the trial judge never referred to the MacKay Street property directly, his reliance on the financial statement to value the company meant the MacKay Street property was included in his valuation.

(iii) Did the trial judge err in law by omitting assets belonging to Mr. Ackerman from the division of the family property and bydouble accounting or incorrectly deducting certain debts? [49] Mr. Ackerman conceded the trial judge erred by failing to include assets owned by him personally in the division of familyproperty, including his 2011 GMC Denali truck worth $43,000 and the shareholders’ loan owing to him by Allman Homes.

The amountof the shareholders’ loan, however, was in dispute. [50] It is clear from para. 150 of the judgment that the trial judge used Allman Homes’ financial statement for the year ending February28, 2011 to value the company for division purposes. That financial statement fixes the outstanding shareholders’ loan owing to Mr.Ackerman and Mr. Allingham at $399,401. As that figure was used to determine the value of the company, consistency requires it alsobe used to determine Mr. Ackerman’s corresponding personal asset. One-half of those loans was owing to Mr.

Ackerman ($199,700.50).That amount must be included as a personal asset attributable to him for distribution purposes. [51] Mr. Ackerman also acknowledged the trial judge erred at para. 134 of his judgment in calculating the partnership debt bydeducting the $140,000 line of credit secured by the Grove Avenue property twice. In addition, I find the trial judge erred, by includingas a debt of the partnership, a line of credit on Ms. Ackerman’s American Express in the amount of $11,000. While Mr.

Ackerman didnot admit this error, his legal counsel was unable to point to any evidence adduced at trial that supported its existence. These two errorsresult in a $151,000 decrease in the partnership’s liabilities. The total liabilities owed by the partnership were thus $459,062, not$610,062 as set out by the trial judge.

This has the effect of increasing the value of the partnership at the date of the court application to$653,323 (before exemptions). [52] Applying these adjustments, as well as those arising out of the cross-appeal, would result in net property for distribution purposesbefore exemptions of $570,587.28. (iv) Did the trial judge err in law by granting Mr. Ackerman an exemption for the partnership interest he owned at the date ofthe marriage? [53] The trial judge granted Mr.

Ackerman an exemption equal to one-half of his partnership interest as of the date of the marriage($383,026) less $8,580 being the amount necessary to reduce Ms. Ackerman’s equalization payment to zero. Ms. Ackerman argues thetrial judge erred in allowing this exemption, first because Mr. Ackerman did not trace the partnership assets in existence at the date ofthe marriage to the partnership assets in existence at the date of the court application.

And second, because the exemption was lost whenone of the partnership properties was put in her name and/or funds relating to the partnership were deposited into joint accounts.Alternatively, if a prima facie right to the exemption was established, Ms. Ackerman contended it was unfair and inequitable to allow theexemption. [54]

Section 23 of the Act provides that certain property (other than the family home and household goods) may be exempt fromdistribution, including property owned by a spouse at the commencement of a spousal relationship. In Benson, this Court determined thatin applying s. 23 a two-step analysis should be utilized. [55] The first step of the analysis is concerned with establishing entitlement to an exemption pursuant to subsections 23(1), (2), or (3) ofthe Act. In this first stage, the spouse claiming the exemption bears the burden of proof.

He or she must establish not only entitlement,but the fair market value of the property at the commencement of the spousal relationship. Once entitlement to an exemption and itsvalue are established, consideration shifts to the second stage of the analysis which concerns subsections 23(4) and (5) of the Act.

In thissecond stage, the burden of proof is on the spouse who opposes the exemption to show it would be unfair and inequitable to allow it inwhole or in part. (See: Benson at paras. 54-56, Deyell v Deyell (1991), (SK CA), 90 Sask R 81 (CA) at para 6 [Deyell]and Ruskin v Dewar, 2005 SKCA 89, 256 DLR (4th) 70 at paras 50-52.) [56] In determining whether an exemption would be unfair and inequitable a court must consider the factors set out in s. 23(5), namely: (

a) any of the matters mentioned in clauses 21(3)(

a) to (p); (

b) contributions in any form made by the spouses to their relationship, children or property prior to the commencement of theirspousal relationship; (

c) a contribution, whether financial or in any other form, made by a spouse directly or indirectly to the acquisition, disposition,preservation, maintenance, improvement, operation, management or use of property mentioned in this section; (

d) the amount of other property available for distribution; (

e) any other relevant fact or circumstance. If the court is satisfied the exemption is unfair and inequitable, the court may make any order it considers fit. [57] In the case at hand, Mr. Ackerman claimed an exemption with respect to his partnership interest. The claim was made pursuant tos. 23(1)(

c) of the Act, that is, on the basis he owned that interest as of the date of marriage. As pointed out by this Court in Knudson vKnudson, 2008 SKCA 106, 298 DLR (4th) 109, the Act specifically recognizes partnerships as distinct assets. It is the existence of thepartnership, as opposed to the individual assets of the partnership, that is to be considered when determining whether to grant anexemption. In other words, to establish his exemption, Mr.

Ackerman did not have to prove every asset of the partnership was inexistence or traceable to assets in existence at both the date of the marriage and the date of the court application. All he had to establishwas that he owned his partnership interest as of those two dates. The trial judge did not err in concluding Mr. Ackerman had met therequirements of the initial stage of the s. 23 analysis. As such, Mr. Ackerman was prima facie entitled to an exemption for the fair marketvalue of his partnership interest as of the date of the marriage. The trial judge valued the partnership as of that date at $766,052.

Theamount of Mr. Ackerman’s prima facie exemption was 50% of that amount or $383,026.

[58] Ms. Ackerman argued her husband’s right to an exemption was lost; first, because money used to acquire partnership assets wasdeposited to “joint accounts” and second, because one property belonging to the partnership, that is 3820 East Cormorant Drive, wasregistered in her name at the time of the marriage. She relied on the case of Crowe. [59] The first part of Ms. Ackerman’s argument is grounded in s. 50 of the Act which provides that property (including bank accounts)registered in joint names is deemed to be “jointly” owned, “in the absence of evidence to the contrary”. [60]

Section 50 is concerned with the ownership and presumption of advancement with respect to property as between spouses. It wasnot clear from Ms. Ackerman’s factum or from the oral arguments made on her behalf what joint accounts she was referring to. Prior totheir marriage, Mr. and Ms. Ackerman were not spouses within the meaning of the Act, so s. 50 would not apply to that time period. Theevidence establishes the Ackermans had joint accounts during their marriage at the Conexus Credit Union. There is, however, noevidence partnership monies were deposited to those accounts.

The only other joint accounts in existence were those in the name ofMr. Ackerman and Mr. Allingham. The deposit of partnership monies to those accounts was part of the partnership business operationsand did not result in a loss of exemptions pursuant to s. 50. [61] The second part of Ms. Ackerman’s argument relates to the fact 3820 East Cormorant Drive was registered in her name at the timeof the marriage. The partnership purchased that property prior to the Ackermans’ marriage and registered it in Ms. Ackerman’s solename for the purpose of obtaining financing. Ms.

Ackerman did not contribute to the acquisition of that property. She knew why theproperty was placed in her name and that, in doing so, the partnership did not intend her to receive ownership of it. The propertybelonged to the partnership and was transferred to it as soon as refinancing was possible. In the circumstances, that transaction does notaffect Mr. Ackerman’s claim for an exemption. [62] I can find no error in the trial judge’s conclusion that the fair market value of Mr. Ackerman’s partnership interest was prima facieexempt from distribution at the time of marriage. It is Ms.

Ackerman’s position, however, that the trial judge erred by failing to disallowthe exemption on the basis it was unfair and inequitable. This argument engages the second stage of the s. 23 analysis and must bedetermined by taking into account the matters set out in s. 23(5). Ms. Ackerman advances four arguments with respect to the equityissue: (

i) that the fair market value of Mr. Ackerman’s partnership interest decreased during the marriage so that, as of the application date,there was no equity for division purposes (s. 23(5)(d)); (ii) that the majority of the real estate owned by the partnership was accumulated during the period she and Mr. Ackerman cohabitedprior to the marriage (s. 21(3)(b), s. 23(5)(

b) and (c)); (iii) that she owned property when she began living with Mr. Ackerman (Reynolds Street) and accumulated property during the periodof their cohabitation (Nicurity Drive) for which she could not claim an exemption (s. 23(5)(e)); and (iv) that the partnership debt incurred during cohabitation was paid/serviced over the course of the marriage (s. 21(3)(o)). [63] The trial judge addressed the second stage of the s. 23 analysis at para. 120 of his judgment.

He found that to allow the whole ofthe exemption would be unfair and inequitable because, based on his calculations, there was very little family property to divide. Hefound Ms. Ackerman to have net assets of $23,105.40 and Mr. Ackerman to have net assets of $14,525.65 after allowing the exemption.In the circumstances, he felt it would be fair to reduce the amount of the exemption to eliminate any equalization payment due byMs. Ackerman to her husband. [64] It is within a trial judge’s discretion to disallow an exemption in whole or in part.

The exercise of that discretion is entitled todeference by this Court and should only be interfered with if the trial judge erred in principle, disregarded a material matter of fact orfailed to act judicially or if the result is so plainly wrong as to amount to an injustice. The limits of the trial judge’s discretion on thismatter are governed by s. 23(5) of the Act. That subsection requires a trial judge to consider the factors set out therein in determiningwhether an exemption is unfair and inequitable.

In this case, while the trial judge considered whether the exemption was unfair andinequitable pursuant to s. 23(4), and in doing so took into account the amount of family property for division purposes, there is noindication he considered any other relevant factors set out in s. 23(5). In failing to do so, the trial judge erred in principle.

Nevertheless,in light of the adjustments made to the family property for division purposes as a result of this appeal, and in the circumstances of thiscase, that error had minimal impact on the final outcome as the factors, when weighed, do not favour disallowing the exemption inwhole or in part. The only adjustment necessary is to disallow the trial judge’s decrease of the exemption by $8,580, being the amount ofMs. Ackerman’s equalization payment based on the trial judge’s calculation. Let me explain by reviewing the relevant factors. (

a) The amount of the exemption in relation to the family property available for distribution (s. 23(3)(d)) [65] Ms. Ackerman’s first argument raises the question of what should happen when the fair market value of exempt property (in thiscase, Mr. Ackerman’s partnership interest) decreases during the marriage. Ms.

Ackerman suggested that no exemption should beallowed and, in doing so, she relied on the case of Spencer v Spencer (1997), (SK KB), [1998] 6 WWR 314 (SaskQB) [Spencer]. [66] This Court has dealt with exemptions where the fair market value of the property at the date of the marriage exceeds its fair marketvalue at the date of valuation on several occasions. [67] In Deyell, the husband claimed an exemption for the fair market value of farm machinery he owned at the date of the marriage.That machinery decreased in value during the marriage due to use and depreciation.

This Court, in a two-one split, allowed the fullexemption. Cameron J.A., concurring in the result with Wakeling J.A. (Sherstobitoff J.A. dissenting in part), discussed the scheme andpurpose of The Matrimonial Property Act (now The Family Property Act) at para. 14. He likened marriage to an “economic partnership”for which the Act, in the absence of a written agreement, provides the basis for its dissolution. Justice Cameron pointed out that the Actbegins with a presumption that each “partner” has contributed equally to the partnership and is entitled, on its dissolution, to an equalshare of its assets.

He went on to indicate that the Act recognizes in s. 23 that one or both “partners” may have contributed assets to the

partnership when it was formed, for which they should be credited on its dissolutionment subject, of course, to the rules and equitable considerations set out in the Act . [ 68 ] Cameron J.A. went on to state at para. 15: … Increases in value after the inception of the partnership are shareable in equal proportion.

Decreases in value are in my respectful opinion irrelevant, except as they may go to fairness and equity, all of this being subject, of course, to variation on such grounds. [ 69 ] Wakeling J.A. in addressing the same issue stated at para. 50: … That exemption is then applied "to the extent of the fair market value of the original property ... at the time of the marriage" (s. 23(2)).

This seems to be consistent with the principle established by the Act that an increase in the value of property acquired before marriage is shared by the parties but a loss in value is not. [ 70 ] In Deyell , when determining whether allowing the full exemption would be unfair and inequitable, this Court took into consideration the factors set out in s. 23(5) of the Act , including the fact the value of the property available for distribution exceeded the amount of the exemption claimed. [ 71 ] In Benson , the husband was seeking an exemption for the fair market value of machinery and equipment which he brought into the relationship.

The trial judge ruled no exemption should be allowed because its value was “used up” during the relationship due to use and depreciation. On appeal, the trial judge’s decision was overturned. At para. 66 Cameron J.A., speaking for the Court, stated: With the greatest of respect, this cannot be accepted in light of the decision of this Court in Deyell v. Deyell (cited earlier). It was there held that if the acquisition of an item of matrimonial property of this nature falls within s. 23(4), then the exemption contemplated by the

section is not to be disallowed by reason alone of the depreciating nature of such property. Provided matrimonial property (other than a matrimonial home or household goods) is owned by a spouse before the marriage, it matters not whether it be land or machinery. It matters not, that is, to the first stage of the exemption enquiry , the stage at which the court is called upon to determine whether the party seeking the exemption has met the conditions of s. 23(1)(c), with or without the assistance of the exchange provisions of s. 23(2).

Only at the second stage of the enquiry, when considering whether it would be unfair or inequitable to allow the exemption in whole or in part, is the court to have regard for such matters as the depreciating nature of the property. And even then, the court must be careful so as not to override, in effect, the will of the legislature. With two exceptions only, those being the matrimonial home and the household goods, the legislature expressly chose to provide for exemptions in relation to all matrimonial property brought to the marriage by one or other of the partners.

In sum this is what emerged in principle from Deyell v. Deyell . [Emphasis added] [ 72 ] In Bencze v Archer , 2004 SKCA 92 , this Court allowed an exemption for the fair market value of a waterfowl area brought into the relationship by the husband. At the commencement of the relationship, the waterfowl area had a fair market value of $40,000 while, for distribution purposes, it was valued at $30,000.

Despite the decrease in value, the Court allowed the full exemption because there was no “injustice” created by doing so. [ 73 ] In Spencer , the husband claimed an exemption for farm land he owned at the date of the marriage. A half

section of that land was inherited by him just prior to the marriage. The balance of the farm land had been purchased by him and was heavily encumbered. Payments with respect to the debt were made during the marriage. Due to market forces, the fair market value of the farm land decreased during the marriage. Justice Wilkinson held that the fact the land had decreased in value did not in and of itself “… create a sufficient injustice to displace the legislated exemptions…”. She then considered the fairness of allowing the exemption.

Of particular significance, in her opinion, was the duration of the marriage (14 years), the date the property was acquired (relatively close to the time of marriage), and the amount of the exemption in relation to the amount of other property available for distribution (the exemption was significant). She concluded that a full exemption for the half

section of land the husband had inherited was warranted, but that no exemption should be allowed for the other farm land because it was heavily financed and a substantial portion of the debt was repaid during the marriage. In Spencer , Justice Wilkinson followed the same approach taken by this Court.

She first determined whether an exemption had been proven and then looked at the fairness and equity of allowing that exemption. [ 74 ] Based on the wording of s. 23 and the jurisprudence, I conclude the fact the fair market value of exempt property decreases during the marriage, whether through use, depreciation, as a result of market forces or for other causes does not in and of itself make it unfair and inequitable to allow the exemption.

Once a right to an exemption is established, the spouse claiming the exemption is prima facie entitled to a credit for the fair market value of the exempt property as of the date the spousal relationship commenced. Only if the spouse opposing the exemption can show, using the factors set out in s. 23(5), that it would be unfair and inequitable to allow the exemption, should a court deviate from that prima facie entitlement. In making its determination, a court must keep in mind the purpose of The Family Property Act which is to divide, in an equitable fashion, family property not capital losses.

If the amount of an exemption exceeds the overall value of the property available for distribution, then the full exemption must not be allowed. If the exemption is significant when compared to the overall value of the property available for distribution, it may be unfair and inequitable to allow the exemption in whole or in part. [ 75 ] In this case, based on the trial judge’s calculation, allowing the full amount of the exemption had the effect of decreasing the amount of property available for distribution to almost nothing.

In the circumstances, fairness and equity would have required that the amount of the exemption be significantly reduced. Because the trial judge erred in listing the family property and debts, the unfairness and inequity created by allowing the full exemption is eliminated when the assets for distribution are adjusted in accordance with the findings of this Court. There is now $187,561.28 of family property available for distribution after granting Mr. Ackerman his full exemption ($570,587.28 - $383,026). The overall value of the family property now exceeds the amount of the exemption by close to $190,000.

This weighs in favour of granting the full exemption. (

b) The date when the family property was acquired (s. 21(3)(d)) [ 76 ] Ms. Ackerman also argued that much of the real estate the partnership owned at the date of the marriage was accumulated during the period she cohabited with Mr. Ackerman prior to the marriage ( i.e. , December 1, 2006 to January 12, 2008). With respect to this

argument, she relies on this Court’s decision in Benson and the Court of Queen’s Bench decision in Ingbrigtson v Ingbrigtson (1990), (SK KB), 85 Sask R 153 [Ingbrigtson]. [77] The evidence establishes Mr. Ackerman and Mr. Allingham formed their partnership in the fall of 2005, prior to Mr. and Ms.Ackerman cohabiting. Mr. Ackerman testified the partnership’s business plan was to purchase homes “in need of a lot of TLC”. He andMr. Allingham would then put $5,000 to $10,000 in “sweat equity” into the properties to increase their value.

The properties would thenbe refinanced to purchase further homes. [78] The trial judge found that, as of the date of marriage, the partnership owned nine homes and had a tenth one under contract.According to the evidence of Mr. Ackerman, six of those homes were purchased prior to the Ackermans’ cohabitation (162 CannonStreet, 2017 Dewdney Avenue East, 3820 East Cormorant Drive, 610 Connaught Street, 211 Cornwall Street North and 8-4500 ChildAvenue). The other four properties were acquired during the period the Ackermans cohabited prior to marriage.

Given the short durationof that period of cohabitation (just over one year), the fact Ms. Ackerman played no role in the partnership prior to or during the marriageand Mr. Allingham’s contributions to the partnership’s operations and development, the fact that the partnership accumulated propertyduring the pre-marriage period of cohabitation does not weigh in favour of a finding that allowing the exemption would be unfair andinequitable.

The Ackermans’ situation is readily distinguishable from the situation in Benson, where the parties cohabited for 11 yearsprior to the marriage and the wife was actively involved in the farming operation. It is also distinguishable from Ingbrigtson where thefarm land in issue was not only purchased during the parties’ cohabitation, but was considered to be a “family asset”. (

c) Property owned at the commencement of the relationship for which no exemption can be claimed (s. 25(3)(e)) [79] Ms. Ackerman argued the exemption is unfair and inequitable because she owned property prior to the marriage, namely, ReynoldsStreet and Nicurity Drive, for which no exemption could be claimed. Those properties were sold and the proceeds used for theAckermans’ joint benefit. This is a relevant consideration in determining the fairness and equity of the exemption, but the overallcircumstances of this case do not render the exemption unfair and inequitable as a result. This is so because Mr.

Ackerman also ownedproperty, apart from his partnership interest, at the date the Ackermans began living together for which he received no exemption. Thatproperty included the Pasqua Street home, three other houses (one of which was owned jointly with Mr. Ackerman’s brother) and a halfinterest in a cabin. All that property was sold during the Ackermans’ marriage with most, if not all, of the net proceeds therefrom goinginto the construction of the Grove Avenue family home. This is also where most of Ms. Ackermans’ equity in her Reynolds Street andNicurity Drive properties ultimately ended up.

Unfortunately, the Grove Avenue family home turned out to be a bad investment. BothMr. and Ms. Ackerman lost money. Mr. Ackerman lost considerably more ($450,000) than Ms. Ackerman ($150,000). (

d) Debts of the partnership paid during cohabitation (s. 21(3)(o)) [80] Finally, Ms. Ackerman argued, relying in part on Spencer, that because the debt owing by the partnership ad the time of themarriage was serviced during the marriage, it would be unfair and inequitable to allow the exemption. In this case, the debt was paid bythe partnership from partnership income. It was not paid by Mr. Ackerman or Ms. Ackerman personally. As a partner, Mr. Allinghamalso contributed to the payment of the debt.

This is a very different situation than that which existed in Spencer where the spousespersonally owed the debt and were paying for it. In the circumstances of this case, the payment of the debt is of minimal weight indetermining the fairness and equity of the exemption. [81] I am satisfied, after considering the relevant factors set out in s. 23(5) of the Act, that it would not be unfair and inequitable to allowMr. Ackerman a full exemption for the fair market value of his partnership interest as of the date of the marriage. VIII.

Conclusion [82] The trial judge’s decision relating to the division of family property shall be varied to provide that Mr. Ackerman pay to Ms.Ackerman the sum of $70,675.24, being one-half of the net family property ($93,780.64) less the net assets in Ms. Ackerman’spossession ($23,105.40). [83] The outstanding line of credit with American Express, which was used to purchase Mr. Ackerman’s GMC Denali truck, has causedsome concern. The debt is secured by Mr. Ackerman’s truck, but it is in Ms. Ackerman’s name. Pursuant to the terms of the judgment,Mr. Ackerman is responsible for repaying that loan.

He has agreed to pay out the loan within 30 days of the date of this judgment.Accordingly, there shall be an order to that effect. IX. Costs [84] This appeal was bifurcated to enable Ms. Ackerman’s appeal dealing with the parenting issues to be heard in June 2014. The costson that portion of the appeal were to be dealt with at the conclusion of the appeal dealing with the division of family property. [85] At the time of the hearing of the appeal with respect to parenting issues, Ms. Ackerman brought an application to adduce freshevidence. Mr.

Ackerman reciprocated with an application of his own contingent upon the success of Ms. Ackerman’s application.Ms. Ackerman’s application was dismissed. Accordingly, there shall be an order that Ms. Ackerman pay to Mr. Ackerman $500 in costsfor that application, which shall be offset against the costs awarded to Mr. Ackerman on his application to adduce fresh evidence on theproperty portion of the appeal. [86] Generally, costs are awarded to the successful party. Mr. Ackerman was successful on the portion of the appeal pertaining to theparenting issues, while Ms.

Ackerman was partially successful in her appeal on the division of the family property. The results of thecross-appeal were mixed. In the circumstances, there shall be no order as to costs for either the appeal or the cross-appeal. DATED at the City of Regina, in the Province of Saskatchewan, this 23rd day of December, A.D. 2014.

“Ryan-Froslie J.A.” Ryan-Froslie J.A. I concur. “Ottenbreit J.A.” Ottenbreit J.A. I concur. “Caldwell J.A.” Caldwell J.A.