Docket: CACV2378 Robert Linn Appellant (Respondent by Cross-Appeal) - v. -, 2014 SKCA 87

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2014 SKCA 87 Date: 2014-08-22 Between: Docket: CACV2378 Robert Linn Appellant (Respondent by Cross-Appeal) - and - Darla Frank Respondent (Appellant by Cross-Appeal) Coram: Jackson, Ottenbreit and Herauf JJ.A. Counsel: Deidre Aldcorn for the appellant/respondent (cross-appeal) Lindsay Wacholtz for the respondent/appellant (cross-appeal) Appeal: From: 2013 SKQB 28 Heard: February 19, 2014 Disposition: Appeal dismissed, cross-appeal allowed in part

Written Reasons: August 22, 2014 By: The Honourable Madam Justice Jackson In Concurrence: The Honourable Mr. Justice Ottenbreit The Honourable Mr. Justice Herauf Jackson J.A. I. Introduction [ 1 ] This is an appeal and a cross-appeal from a Queen’s Bench decision equally dividing matrimonial property between Robert Linn and Darla Frank, and awarding indefinite spousal support to Ms. Frank ( 2013 SKQB 28 , 412 Sask. R. 164). Mr. Linn has appealed and Ms. Frank has cross-appealed. [ 2 ] Mr. Linn’s appeal centres on the valuation of his shares in South Country Ag Ltd. and the order granting Ms.

Frank indefinite spousal support. Ms. Frank cross-appeals almost all aspects of the determination of the amount of spousal support. II. Application to Adduce Fresh Evidence [ 3 ] At the hearing of this appeal, Mr. Linn applied to adduce fresh evidence intended to show the following: (

i) he sold his shares in South Country Ag in 2013 and (ii) he retired in 2013 and is now receiving a salary at a considerably reduced rate. On the day of the appeal, we dismissed his application to adduce fresh evidence with costs in the usual way for the following reasons. [ 4 ] Mr. Linn sought to file fresh evidence to address the issues of share value and his tax liability upon selling the shares, and to respond to Ms. Frank’s argument that spousal support should be based on his 2010 income. In reply, Ms. Frank demonstrated that Mr.

Linn’s evidence was incomplete. [ 5 ] The fresh evidence does not indicate the sale price of the shares or to whom they were sold or how he structured his financial affairs in relation to the tax payable when he sold the shares. At least facially, it appears that Mr. Linn may have restructured his corporate affairs with certain assets now being held by his new partner and by a family trust.

These gaps in the evidence mean that the Court would be unable to act in any way on this evidence. [ 6 ] Thus, the application to adduce fresh evidence fails on the basis that it lacks credibility and in this state could not reasonably, when taken with the other evidence adduced at trial, be expected to have affected the issues to which it is directed (see Wal-Mart Canada Corp. v. Saskatchewan (Labour Relations Board) , 2006 SKCA 142 , 289 Sask. R. 20 at para. 4 ). As this Court has often said, evidence of this nature is usually better treated in an application to vary. III.

Recalculating the Base Distribution Amount [ 7 ] Before considering Mr. Linn’s appeal and Ms. Frank’s cross-appeal, it is necessary to recalculate the base amount for the purposes of distribution. The parties agree that the trial judge made certain mathematical errors when he valued the family property available for distribution. [ 8 ] Mr. Linn submits that the trial judge erred by (

i) miscalculating the net sale proceeds of the Singer Crescent property in Mr. Linn’s possession, (ii) excluding the value of farmland owned by Ms. Frank from the value of the property in Mr. Linn’s possession, and (iii) miscalculating the total property in the possession of each spouse. Ms. Frank agrees that the trial judge made these errors. [ 9 ] After correcting these mistakes, the value of the assets in Mr. Linn’s possession is $2,690,176 and the value in Ms. Frank’s possession is $677,175.

The values in paragraph 158 of the trial judgment must be corrected to read as follows: Total assets for distribution : $3,367,351 Ms. Frank’s one-half share: 1,683,676 less assets in her possession -677,175 Total payable by Mr. Linn to Ms. Frank 1,006,501 less Singer Crescent property sale -170,332 less sale of the cabin -92,441 Balance payable to Ms. Frank $743,728 Thus, the total amount of the assets that Ms. Frank is to receive—according to the trial judge’s approach to valuing the shares—should have been $1,006,501 rather than $1,166,331.

[ 10 ] Ms. Frank also asserts that the trial judge made an error that affects the amount of assets she must rollover to Mr. Linn. Mr. Linn agrees. [ 11 ] The rollover amount should be reduced from $30,232.00 to $24,190.96. The parties agree that this error must be corrected in the ultimate judgment roll, but the amount of any eventual distribution is not affected by this correction. [ 12 ] I will now turn to consider the issues in Mr. Linn’s appeal and Ms. Frank’s cross-appeal. IV. Mr. Linn’s Appeal—Valuing the Shares, Fixing the Minority Discount and Adjusting for Tax Liability A.

Did the trial judge err with respect to the valuation of Mr. Linn’s interest in South Country Ag? 1. Background [ 13 ] At the time of trial, Mr. Linn owned 59.3% of the shares of South Country Ag. South Country Ag’s primary function was to hold shares in South Country Equipment Ltd., which owns agricultural equipment and vehicle dealerships. As of November 7, 2008, the date of application requesting property division, South Country Ag held a 30% interest in South Country Equipment. The parties were divided at trial as to how Mr. Linn’s shares in South Country Ag should be valued. [ 14 ] It was Mr.

Linn’s position at trial that clause 5.1 of South Country Ag’s Unanimous Shareholders Agreement provided the complete answer as to how his shares should be valued.

Clause 5.1 reads as follows: 5.1 The fair market value of the Corporation shall be determined based on the following formula: The retained earnings of the Corporation as at its last fiscal year end based on financial statements prepared by the accounting firm engaged by the Corporation at its last annual meeting plus one-half (½) of the retained earnings of South Country Equipment Ltd. (Unanimous Shareholders Agreement dated December 15, 2004, Appeal Book p. 806–807) [ 15 ] According to the evidence, and as found by the trial judge, Mr.

Linn encouraged South Country Ag’s employees to acquire shares in the company (see 2013 SKQB 28 at para. 52 ). When they bought or sold their shares, the shares were valued according to clause 5.1 (see para. 55). As proof of this statement, Mr.

Linn put in evidence a table showing the acquisition and the sale of shares in South Country Ag over a period of time, which were based on the value of the retained earnings in South Country Ag and South Country Equipment (see Exhibit R-6, Appeal Book p. 1314). [ 16 ] To demonstrate the current value of his shares as of November 7, 2008, using the formula from clause 5.1, Mr. Linn engaged Keith Thomson, a chartered accountant with Thompson Jaspar & Associates, to prepare a report for the Court. Mr. Thompson opined that Mr.

Linn’s shares in South Country Ag were worth $1,861,650—based on the formula in clause 5.1. [ 17 ] For her part, Ms. Frank argued that Mr. Linn’s shares in South Country Ag should be valued according to generally accepted accounting principles based on an adjusted net book value. As part of her evidence, she filed a report prepared by Michael Radcliffe, a chartered accountant and certified business evaluator with Meyers Norris Penny. [ 18 ] Mr.

Radcliffe calculated “the fair market value of all of the issued and outstanding shares of South Country Ag as at the Valuation Date [November 7, 2008] to be in the range of $4,600,000 to $5,000,000” and where “a specific amount is required, … $4,800,000 is the midpoint of the above noted range” (Appeal Book p. 775). Using the mid-point of the range, Mr. Linn’s 59.3% of South Country Ag is worth $2,846,400. [ 19 ] At trial, Mr. Linn and Ms. Frank invited the trial judge to choose which method of valuation should be used based on the reports alone and their oral and written submissions.

They presented the trial judge with an “Agreed Statement of Facts,” which reads as follows: The Parties have reached agreement on the following statement of facts in this proceeding . Each of the Parties has reserved the right to argue the relevance of these facts to the questions of law for which the Court’s determination is sought. 1. The Meyer’s Norris Penny valuation of South Country Ag. Ltd. as at November 7, 2008, as calculated by Michael Radcliffe, BComm, CA, CBV in his February 1, 2011 Valuation Report accurately calculates the value according to the adjusted net book valuation approach . 2.

The Thompson Jaspar & Associates June 30, 2009 letter to David Kowalishen by Keith Thompson, CA, accurately calculates the value of Mr. Linn’s shares of South Country Ag. Ltd. as at September 1994 and November 2008, based on the formula provided in the respective Unanimous Shareholders Agreements that were in place at the relevant dates. 3. Michael Radcliffe and Keith Thompson have each prepared an assessment of the income tax contingency of a notional distribution. Mr. Radcliffe’s assessment incorporates a discount for the contingency. Mr. Thompson’s assessment does not apply a contingency. 4.

The question of which business valuation method is appropriate is a question of law or mixed facts and law as is the question of whether a discount ought to be applied to the tax calculation on a notional disposition of shares. The preceding facts are acknowledged and agreed to for the purposes of the within proceeding [emphasis added]. (Appeal Book p. 768– 769) [ 20 ] Sometime after the trial had ended, the trial judge found he was unable to choose between the two approaches.

On January 27, 2012, he issued a fiat, the principal parts of which read as follows: [4] My current analysis leads to a conclusion that accepting the agreed statement of facts may result in errors of fact and law. Neither

opinion provides a business evaluation wherein value is determined “according to known facts and future probabilities” as specified byWilkinson J. in Waller v. Waller (1998), (SK KB), 165 Sask. R. 161 (Q.B.), at paragraph 19. In this case, the knownfacts include that Mr. Linn is alive and, thus, seem to negate the application of the USA’s

Article 5.1. Also, the calculation based on thatformula makes no reference to other provisions of the USA concerning the formulae. Mr. Radcliffe’s calculation is based on a sale andon assumed facts of an open and unrestricted market absent compulsion. In fact, there has been no sale, and no consideration given to theUSA and its terms obliging sale, imposing restricted redemption provisions and possibly of the tag-along/drag-along provisions. In thisregard, the decision of Wright J. in Rosenau v. Rosenau, 2004 SKQB 275, 267 Sask.

R. 1, at paragraph 78 to 82, may need consideration. [5] My concern is that were I to reject both reports on the ground that they fail to value Mr. Linn’s shareholder interest in accordancewith the law and relevant principles (see Knudson v. Knudson, 2008 SKCA 106 , 2008 SKCA 196, 298 D.L.R. (4th) 109 atparagraph 23), a new trial may be necessary. [6] The fact that neither party called their respective expert to give oral evidence is of significance given the particular difficulty Iam now experiencing with respect to their evidence.

Their failure to testify removed the advantage to the Court of hearing cross-examination and having an opportunity to pose questions to enable the Court to have an appreciation of each report and its foundation. Itis to be remembered that the experts are more than a party’s witness. They are, in effect, officers of the Court, a role which has beenreemphasized in the revised Queen’s Bench Rules. [7] Where evidence of value is lacking, alternative courses of action appear to exist. In Knudson v. Knudson, supra, the Court ofAppeal made its own calculation. McIntyre J. in Thompson v.

Thompson, 2004 SKQB 100, [2004] S.J. No. 152 (QL) (as affirmed by theSaskatchewan Court of Appeal at 2004 SKCA 169, [2004] S.J. No. 810 (QL)), in the absence of direct evidence of market value,engaged in his own analysis of the financial records. In Stephen v. Stephen (1999), (SK KB), 183 Sask.

R. 161(Q.B.), at paragraphs 21 to 46, having cautioned against use of expert evidence limited by the instructions given, McIntyre J. went on tomake a detailed analysis of the other evidence to arrive at his own valuation. [8] The above comments are made to alert counsel to the nature of my concerns and my present inability to reach an evaluationwhich engages the facts and business circumstances existing on valuation date. These may involve factors both positive and negativefrom a business valuation approach which, in turn, affect value. [9] In

summary, I invite counsel to consider my comments and the following matters for discussion at the time of a scheduledconference call: 1. Whether there is evidence presented at trial by which a valuation date value may be reached absent the reports of the accountants. 2. Whether the accountants should be recalled to give evidence-in-chief and be cross-examined. 3.

Any other alternate process the parties wish to raise. [10] While the foregoing may result in oral or written representations or even further evidence, the first step will be a conference callto be recorded as part of the trial process, at which time I will invite counsel to provide me with their initial response to this fiat. (AppealBook p. 82–83) [21] As a result of the ensuing conference call, the trial was reopened. Both Mr. Linn and Ms. Frank agreed to call the authors of theirrespective reports. [22] At the reopening of the trial, Mr. Radcliffe testified first. Notwithstanding Mr.

Linn’s original decision to call Mr. Thompson,Mr. Linn elected not to call him—once Mr. Radcliffe had completed his testimony. Thus, the trial judge was left with the testimony ofMs. Frank’s expert only. [23] With this evidence, the trial judge was required to determine the value of Mr. Linn’s shares in accordance with ss. 2 and 21 of TheFamily Property Act, S.S. 1997, c. F-6.3. According to s. 21(1), the court must “order that the family property or its value be distributedequally between the spouses.”

Section 2 defines value to mean “(

a) the fair market value at the time an application is made pursuant tothis Act, or at the time of adjudication, whichever the court thinks fit; or (

b) if a fair market value cannot be determined, any value at thetime an application is made pursuant to this Act, or at the time of adjudication, that the court considers reasonable.” [24] Section 21(1) of The Family Property Act required two questions to be answered in this case. The first question was the effect ofclause 5.1 of the Unanimous Shareholders Agreement. In addressing this question, the trial judge had to decide whether clause 5.1limited to whom Mr. Linn could sell his shares, which would then affect their fair market value. The trial judge ultimately determinedthat clause 5.1 did not limit Mr.

Linn’s choice of buyer: 74 The unanimous shareholders agreement with respect to South Country Ag does not limit Mr. Linn’s ability to sell his shares inthat company to a third party, nor does it require that he value his shares in accordance with clause 5.1. The agreement provides thatMr. Linn may sell to anyone at any price he chooses but he must first offer the shares to the existing shareholders in proportion to theirshareholdings.

If they do not wish to purchase the shares, he is then free to sell them to a third party provided he does so on the sameterms as he offered to the other shareholders and that he do so within 30 days [emphasis added]. [25] The second question was whether Mr. Linn was legally obliged to value his shares in accordance with clause 5.1. The trialjudge again answered this question in the negative.

He determined that clause 5.1 is only engaged in the circumstances defined as“triggering events” in the Unanimous Shareholders Agreement: 75 None of the events which would trigger the use of the formula set out in clause 5.1 existed as of November 7, 2008. At that point,Mr. Linn was alive, he was not retiring or terminating his employment, he was not disabled, bankrupt or insolvent. His shares were notliable to be seized or subject to an order pursuant to The Family Property Act. In other words, none of the condition precedents requiredto trigger clause 5.1 existed [emphasis added].

The trial judge found that, even though past share sales to employees were valued using clause 5.1, such a fact did not create a legalrequirement where one did not exist (see para. 76). [26] The trial judge then rejected Mr. Thomson’s valuation on the footings that it was not put forward as representing the fair marketvalue and it contained an error: 77 Mr. Thomson’s valuation is of little assistance to this Court. He does not state in his report that valuing Mr. Linn’s sharespursuant to clause 5.1 of the unanimous shareholders agreement represents, in his opinion, the fair market value of those shares.

Hisreport amounts to no more than a calculation based on the formula set out in clause 5.1. Moreover, in doing his calculation, Mr. Thomsonvaried the terms of the formula. He used only 30% of the retained earnings of South Country Equipment versus 50% as set out in theclause. He did this based on the fact that South Country Ag only owned a 30% interest in South Country Equipment as of November 7,2008. While that may be true, it is not up to Mr. Thomson to unilaterally change the terms of the agreement. There is no evidence thatthe shareholders ever agreed to the formula used by him [emphasis added]. If Mr.

Linn’s shares had been calculated precisely in accordance with the formula contained in clause 5.1, the share value would be$2,113,678.50 rather than $1,861,650 as calculated by Mr. Thomson (see Ms. Frank’s trial brief at pp. 17–18). [27] Having rejected Mr. Thomson’s approach to valuation, the trial judge then turned to consider whether Mr. Radcliffe’s valuationshould be accepted. He found that “Mr. Radcliffe was aware of and considered the terms of the December 14, 2004 unanimousshareholders agreement” (para. 79), but “it would not affect the price Mr.

Linn could obtain by selling his shares to a third party”(para. 79). [28] The trial judge also considered whether he should accept Mr. Radcliffe’s inclusion of an amount for good will as part of the fairvalue of the South Country Ag shares. This issue is linked to the issue of whether the market for the shares was open or closed. The trialjudge also accepted Mr. Radcliffe’s valuation on this point, saying: 90 It is inconceivable that a business person would sell their interest in a company for less than its fair market value unless themarket dictated that or they were selling to a non-arm’s length party.

The cash flow generated by South Country Equipment warrants avalue being attributed to good will. I accept Mr. Radcliffe’s evidence that there are purchasers in the marketplace who would pay for thatgood will. In the circumstances, I am satisfied that including a value for good will is warranted and I accept the evidence ofMr. Radcliffe with respect to what that value should be [emphasis added]. [29] Mr. Linn appeals from the trial judge’s decision to value his shares in accordance with Mr. Radcliffe’s opinion. His appeal counsel,who was not counsel at trial, submits the following: 1. Mr.

Radcliffe’s valuation of the South Country Ag shares was based on an open market and not what would likely occur in an actualtransaction. 2. The evidence overall supports the conclusion that an arm’s length third party would be unlikely to purchase Mr. Linn’s sharesbecause the success of South Country Ag depends on the working relationship among the management and staff at eight dealerships. 3. The trial judge erred in principle by relying solely on the hypothetical calculations contained in Mr. Radcliffe’s Report in the faceof evidence at trial from Mr. Bode, a co-director in South Country Equipment, and Mr.

Linn that a sale to a third party was unlikely, andthat no one could buy Mr. Linn’s shares without “John Deere’s blessing” (AF20). [30] These arguments raise the preliminary question as to whether Mr. Linn is entitled to argue in this Court that the trial judge shouldnot have adopted Mr. Radcliffe’s valuation. 2. In light of the Agreed Statement of Facts, and the position taken at trial, is Mr. Linn entitled to argue that the trial judge shouldnot have adopted Mr.

Radcliffe’s valuation? [31] In order to respond to this question, it is first necessary to consider the effect of the “Agreed Statement of Facts.” [32] The “Agreed Statement of Facts” is not an agreement as to “facts” in any usual sense of a document that recognizes or reflectsthe parties’ agreement as to past or present facts or the parties’ future intentions; instead, it reflects the parties’ intention to save costs bysignificantly narrowing the issues the judge had to decide. In that regard, it has the same effect as an Agreed Statement of Facts.

Oncethe agreement was signed, the trial judge was not asked to “test” the foundation for their experts’ opinions. The trial judge was left tointerpret the Unanimous Shareholders’ Agreement and to determine whether a valuation made pursuant to it would represent fair value.And if the trial judge did not accept Mr. Linn’s submissions in that regard, he would be free to accept Mr. Radcliffe’s valuation. Byvirtue of his appeal, Mr.

Linn contests or challenges the underpinnings of the parties’ agreement reflected in the Agreed Statement ofFacts. [33] As a general rule, appellate courts are unlikely to hear a new argument on appeal where counsel conceded the basis of thatargument at trial. For example, in Re National Trust Co. and Bouckhuyt et al. (1987), (ON CA), 61 O.R. (2d) 640(Ont. C.A.), the Ontario Court of Appeal addressed a situation where the appellant challenged the validity of the regulations on appealdespite conceding their validity at trial.

After citing the general rule against hearing new arguments, Tarnopolsky J.A. rejected theparticular new argument: That principle is applicable to this appeal. It would, I think, be even more unfair to the respondent and the intervenant to permit theappellants to raise the issue at this stage, given that the appellants had specifically conceded on the application that they were not

challenging the validity of the regulations . These reasons will, therefore, proceed on the basis that the regulations of the Tobacco Board are valid [emphasis added]. (p. 646) [ 34 ] Similarly, in Eagle Resources Ltd. v. MacDonald , 2002 ABCA 1 , [2002] 3 W.W.R. 217, the Alberta Court of Appeal disapproved the practice of making express tactical choices at trial and then seeking to reverse them on appeal.

On this point, the Court explained, “[e]qually fallacious is the legal proposition that a Canadian litigant whose counsel made sensible tactical choices in his argument but still lost, may then reverse those tactical choices and refight the battle with different troop dispositions” (at para. 3). (See also Sinclair v. Hlady , 2014 SKCA 53 at paras. 12 and 13 .) [ 35 ] In the within appeal, counsel for Mr. Linn asserts that the trial judge’s decision to reconvene the parties and reopen the trial gave the parties the opportunity to resile from the positions taken in the Agreed Statement of Facts.

This might have been the case, but only Ms. Frank availed herself of the opportunity—by calling her expert—to explain the foundation of the approach to valuation that she espoused. Indeed, if anything, what happened when the trial reopened affirms Mr. Linn’s acceptance of the approach reflected in the Agreed Statement of Facts when he declined to call Mr. Thomson to testify. [ 36 ] It is clear from the evidence and the trial judge’s reasons that Mr. Linn did not challenge Mr. Radcliffe’s methodology . At no time did Mr.

Linn present an alternative valuation using the adjusted net book value with different assumptions than those used by Mr. Radcliffe. From this, I can only conclude that Mr. Linn was prepared to accept Mr. Radcliffe’s conclusion—if his own approach to valuation did not win the day. [ 37 ] Thus, the trial judge is entirely correct when he stated: 80 As per the Agreed Statement of Facts, Mr. Linn takes no issue with Mr. Radcliffe’s calculations. [ 38 ] Even if we were to accede to Mr. Linn’s argument, it is not clear what we would be expected to do with it. Rejecting Mr.

Radcliffe’s valuation would leave the Court with Mr. Thompson’s methodology, which clearly does not reflect fair market value. When questioned about this on the hearing of the appeal, counsel for Mr. Linn submitted to the Court that there may be some room to adjust Mr. Radcliffe’s valuation by accepting the lower end of his range of valuations, but this argument, too, is off the table, given what transpired at the reopening of the trial. [ 39 ] When the trial reopened, the trial judge quizzed Mr.

Radcliffe specifically on what factors influenced his decision to fix the value of the shares at the mid-point of the range. Mr. Radcliffe explained: THE WITNESS Ultimately where you would want to pick a value it would be, I guess, confidence to extenuating, you know, circumstances that are out there. The other -- the only other transaction we could find in the marketplace would suggest a higher end of the range as opposed to the lower.

If -- if there was things that -- that we weren’t aware of, or we were concerned about, you know, say the right amount of compensation if there’s more adjustments to reduce income, the income -- a lower income would produce a lower amount on the lower end of the range. Those kind of things would affect … the value and conclusion … but because it’s a calculation report we put a range on it. (T288–289) [ 40 ] It may have been open to Mr. Linn to challenge the selection of a mid-range when the trial reopened, but he offered no evidence that would have allowed the trial judge to pick the lower end of the range.

Indeed, neither counsel asked any questions of Mr. Radcliffe on this point. For this Court to select the lower end of the range would be an arbitrary exercise of our power as no evidence exists one way or the other—except for Mr. Radcliffe’s expert opinion that the mid-range was what should be accepted. Mr.

Radcliffe’s answer may not be particularly satisfactory, but it is the only one possible in the circumstances since neither side led any evidence on the question of where to position the value of the shares on the range recommended by him. [ 41 ] I recognize, however, that the trial judge’s decision to conduct an independent analysis of good will appears to open that particular issue for appellate review. While it is not clear why the trial judge engaged in a separate analysis of good will, the trial judge’s conclusion on this point is embedded in Mr. Radcliffe’s fundamental premise that Mr.

Linn would not sell his shares unless he could receive full value for them, which would include an amount for good will. And this is what I take the trial judge to have decided when he found Mr. Radcliffe’s approach to be the “proper” approach when he valued South Country Equipment as a going concern: 78 South Country Ag is no more than a holding company. Its value comes from the shares it owns in South Country Equipment. I find Mr. Radcliffe’s approach to valuing those companies is the proper approach to be employed in the circumstances of this case. Mr.

Radcliffe valued South Country Equipment as a going concern which is in line with accepted valuation principles and case authority . (See: Waller v. Waller , supra , at para. 19 ; Rosenau v. Rosenau , supra , at para. 58 and Elik v. Elik , supra , at para. 17). He valued South Country Ag, which is a holding company, based on net book value [emphasis added]. [ 42 ] The trial judge concluded that a limited market for Mr. Linn’s shares did not make the definition of “fair market value” inappropriate. The trial judge went on to state: 65 Mr.

Linn’s argument that the “market” for his shares is limited does not make the definition as set out herein inappropriate. That definition presupposes an informed purchaser who would know all of the relevant facts which would include, in this case, the financial situation of the companies, the economic outlook, the existence of the unanimous shareholders agreement, the percentage of shares being acquired and the necessity for John Deere approval [emphasis in original]. [ 43 ] Thus Mr. Linn’s grounds of appeal and arguments, challenging the valuation of the share price, are not accepted.

He cannot resile from the positions taken at trial. The trial judge’s decision that the value of Mr. Linn’s 59.3% share of the company is worth $2,846,400 is sustained.

B. Did the trial judge err by selecting a minority discount of 10%? [44] Mr. Radcliffe offered the opinion that it might be appropriate not to apply a minority discount because if one of the existingshareholders in South Country Equipment were to acquire South Country Ag’s shares, the buyer would become the majority shareholder.If that were the plan, a “premium” rather than a minority discount should be applied to the suggested share value. In the end, however,since it was Mr. Radcliffe’s firm belief that Mr.

Linn would sell to a third party in order to capture the value associated with good will,he recommended a minority discount of 10%. Mr. Radcliffe testified that this was a compromise between a higher discount for an outsidepurchaser and a lower value for an inside purchaser because the two other shareholder corporations in South Country Equipment wouldhave “incentive to buy, to maintain control” of it (T283). [45] From the Queen’s Bench file, it does not appear that Mr. Linn argued for a greater discount. On the other hand, Ms.

Frank arguedagainst her own witness on this point by suggesting that there should be no minority discount at all. As a result of these submissions, thetrial judge considered the authorities that might suggest that no minority discount should be applied. [46] He considered and distinguished Halpin v. Halpin, (BC CA), 83 B.C.A.C. 241, [1997] 2 W.W.R. 745 andGanson v. Ganson (1996), 17 O.T.C. 340 (Gen. Div.), where trial judges refused to apply a minority discount. In Halpin, the Court foundthat the shareholders would act in concert to obtain the best price. In Ganson, the husband was part of a family control group.

The trialjudge in the within appeal found no evidence that a control group would exist, once the shares were sold (see para. 85). This supportedhis conclusion that some minority discount should be applied to arrive at the proper share value. [47] In the result, the trial judge accepted Mr. Radcliffe’s evidence that “in the circumstances a 10% minority discount is appropriate”(para. 81). [48] In this Court, Mr. Linn argues that he should receive a larger minority discount, but this argument is in complete contradiction tohis prior argument, which assumes the shares would be sold to an insider.

As part of the Agreed Statement of Facts, Mr. Linn acceptedMr. Radcliffe’s methodology, which contemplated a sale to a third party, and at trial he was prepared to accept a 10% minority discountas opposed to a 30% premium, which was the alternative. In light of the Agreed Statement of Facts and positions taken at trial, thisargument is also not open to Mr. Linn. [49] In any event, the trial judge accepted Mr. Radcliffe’s expert opinion. As part of that opinion, Mr. Radcliffe opined that a sale to aninsider would be the most profitable option, thus making a minority discount of 10% a highly appropriate resolution.

This ground ofappeal must also fail. C. Did the trial judge err by discounting the contingent tax liability of the shares by 50%? [50] A judge dividing family property may divide the property unequally if the judge is satisfied that it would be unfair andinequitable to make an equal distribution, having regard for a tax liability that may be incurred as a result of the transfer or sale of theproperty (see s. 21(2) and s. 21(3)(

j) of The Family Property Act). [51] It was Mr. Linn’s evidence at trial that he wanted to retire in 2013, and that in order to do so he would be required to sell hisshares. According to the evidence, Mr. Linn would incur a $415,107 tax liability if he sold his shares in one year. To account for thispotential tax liability, Mr. Radcliffe recommended a 75% discount (see para. 152). Mr. Linn’s expert, however, did not recommend thatMr. Linn’s future tax liability be discounted. [52] The trial judge referred extensively to the governing jurisprudence, culminating in Justice Ryan-Froslie’s

summary of theprinciples flowing from the case law set out in James v. Belosowsky, 2012 SKQB 316, 403 Sask. R. 12: 70 Since Carlson, supra, the Saskatchewan Court of Appeal has considered the application of s. 21(3)(

j) of The Family Property Actin a number of cases, including: Dembiczak v. Dembiczak (1985), (SK CA), 48 R.F.L. (2d) 113, 42 Sask. R. 314(C.A.); Deyell v. Deyell (1991), (SK CA), 90 Sask. R. 81, [1991] S.J. No. 49 (C.A.) (QL); Seaberly v. Seaberly(1995), (SK CA), 44 R.F.L. (2d) 1, 37 Sask. R. 219 (C.A.); Vilcu v. Vilcu (1999), (SK CA), 43R.F.L. (4th) 385, 172 Sask. R. 201 (C.A.); Russell, supra; and Mehlsen v. Mehlsen, 2012 SKCA 55, [2012] S.J. No. 314 (QL). From areview of these authorities the following principles emerge: (1) Section 21(3)(

j) of The Family Property Act allows a court to take into consideration a tax liability that may be incurred by aspouse as a result of the transfer or sale of family property or any order made by the court (see: Carlson, supra, and Deyell, supra).

(2) The court should only consider a tax liability where it would be “unfair or inequitable” to make an equal distribution of thefamily property without having regard to the tax consequences (see: Dembiczak, supra).

(3) There must be an evidentiary basis to support the tax consequences. That evidence need not be provided by experts but shouldaddress such matters as the intention or need to dispose of the asset, the applicable marginal tax rate and the potential for tax planning toavoid the payment of tax (see: Vilcu, supra, at para. 50, and Mehlsen, supra, at para. 38).

(4) Where assets are divided in specie no tax liability should be considered (see: Vilcu, supra, at para. 53, Deyell, supra, at page 12,and Seaberly, supra, at para. 29).

(5) Where the order for distribution of family property does not force a sale and where there is no evidence that a spouse intends tosell or otherwise dispose of the assets in the near future then the tax liability must be discounted for contingencies (see: Carlson, supra,at para. 9, and Deyell, supra).

(6) The contingencies referred to in the case law that may result in a discounting of the income tax liability include but are notlimited to the following: (

i) no intention to sell the asset in question in the near future (see: Carlson, supra, at para. 9, and Seaberly, supra, at para. 26); (ii) that there are mechanisms by which the spouse can minimize or defer tax (see: Carlson, supra, at para. 9); (iii) the age of the parties (see: Vilcu, supra, at para. 52); (iv) the reasonable likelihood of some tax liability (see: Deyell, supra, page 13).

(7) The courts generally apply a discount of 50% to the marginal tax rate where the tax liability is contingent (see: Carlson, supra, atpara. 9; Deyell, supra, at pages 12 and 13; Seaberly, supra, at para. 26; Vilcu, supra, at para. 47; and Russell, supra, at para. 75). [53] The trial judge then rejected Mr. Radcliffe’s recommendation of 75%, and settled upon a discount of 50%: 152 Mr. Radcliffe discounted the tax payable with respect to the shares by 75% and with respect to the redundant assets by 50%.

Hedid not explain why he used different percentages but indicated that the discount was to take into account the fact that Mr. Linn had notdisposed of his shares and may not do so for several years and that he had the ability to tax plan in order to minimize and/or defer tax. 153 Based on the case law as cited herein, I find a discount of 50% for both the contingent tax relating to the shares and the redundantassets is appropriate. This would result in an equitable consideration of $207,554 (round figures) for Mr. Linn’s contingent tax liability. [54] On appeal, Mr.

Linn argues that the trial judge should not have discounted the amount of tax that would be payable for thefollowing reasons: (

i) all his shares would have to be sold in one tax year to comply with the timeline set out in the judgment at a 44%marginal tax rate and (ii) in any event, he wanted to retire at age 55, which would see him sell his shares in 2013. [55] As authority for the proposition that the trial judge should have deducted the potential tax liability without discount, counsel forMr. Linn cites Bilusack v. Bilusack, 2012 SKQB 128, 395 Sask. R. 129. Mr.

Linn argues that the trial judge should have found, relyingon Bilusack, that the distribution would force a sale such that tax liability was not contingent and therefore should not have beendiscounted. [56] These arguments directly challenge the trial judge’s underlying findings of fact. By virtue of the trial judge’s decision, he must betaken to have held that Mr. Linn would not sell his shares in one year or, if he did, he had the ability to arrange his affairs to avoid payingthe whole of the tax. In my view, these findings are entirely reasonable and grounded in Mr. Radcliffe’s testimony. [57] Mr.

Radcliffe testified that Mr. Linn had the capacity to organize his affairs to minimize the effects of a share sale in order toexplain why he would apply a 75% discount: Q All right. If you can just describe for us the figures in these two documents? A Effectively, what I’ve done is separated the shares from the redundant assets. In the valuation, as I mentioned earlier, there isredundant assets of 560,993. I tax effected those in my valuation to 474, so I’m just showing those tax effected separately from theshares.

That’s the redundant asset column, and the shares of SCA, excluding redundant assets column, what we’re doing is identifyingMr. Linn’s pro rata share at 59.3 percent, and we’re calculating the potential taxes owing, and we’ve assumed that there is a discount ofthose taxes through the benefit of time, value of money, and potential for tax planning, and that’s why I’ve discounted them by 75percent on the -- on the shares, and I’ve discounted by 50 percent on the redundant assets because the assets would come out of the corp.sooner than the shares.

Q So just on that point about the discounts, just maybe generally explain to us the theory behind the discounts and why you wouldapply it in this type of a scenario? A Again it -- it comes to time value of money and when a party would likely be incurring the taxes. If someone is incurring the taxesimmediately, then you would probably do far less discount.

You’d probably be closer to full value of taxes, but to the extent that they’regoing to be incurred a lot further into the future, and there is tax planning opportunities, and I’m not a tax practitioner so I couldn’trecite the potential tax opportunities, but I know from experience that we have a very busy tax group that do structure tax transactions todefer them into the future, so I know they’re available, and that’s the concept that I was getting at here, that you wouldn’t use 100percent of the taxes.

You would discount them by a certain amount, given those potentials to defer taxes [emphasis added]. (T286–287) [58] If anything, Mr. Radcliffe’s testimony provided an explanation for the 75%, which the trial judge nonetheless rejected. It wasMr. Radcliffe’s opinion that Mr. Linn would not sell, but if he did sell, he would not sell at a disadvantage—hence the 75% rather than a50% discount on the suggested tax liability that would be incurred. [59] As the trial judge indicated, many decisions have resulted in the application of a potential tax liability at 50% (see Carlson v.Carlson (1984), (SK CA), 34 Sask.

R. 287 at para. 9 (CA); Deyell v. Deyell (1991), (SK CA), 90Sask. R. 81, at pages 12 and 13 (CA); Seaberly v. Seaberly (1995), (SK CA), 37 Sask. R. 219, 44 R.F.L. (2d) 1para. 26 (C.A.); Vilcu v. Vilcu (1999), (SK CA), 172 Sask. R. 201, 43 R.F.L. (4th) 385 at para. 47 (C.A.); Russell v.Russell (1999), (SK CA), 180 Sask. R. 196, 1 R.F.L. (5th) 235 at para. 75 (C.A.); or Beug v. Schmidt, 2008 SKQB380, 321 Sask. R. 102). Higher and lower discount rates have, however, been applied. For example, in Chambers v. Chambers, 2011SKQB 20, 368 Sask. R. 126 contingent tax was discounted at 66%, and in Ritchie v.

Ritchie (1994), (SK KB), 121

Sask. R. 197 , the contingent tax discount rate was 80%. Like many family property decisions, establishing the appropriate discount rate requires the trial judge to consider the probability of a future event and the party’s willingness and ability to plan for it. [ 60 ] Only one decision cited by Mr. Linn provided no discount for a tax liability, and that is Bilusack . In my respectful view, however, it is a misreading of Bilusack to say it stands for the proposition for which counsel cites it.

In Bilusack , the trial judge balanced deducting a portion of the future tax liability against a claim for occupational rent and spousal and child support. Bilusack does not support Mr. Linn’s claim that the tax should not be discounted in the within case. [ 61 ] The trial judge found that Mr. Linn’s liability to pay tax was contingent in this case because of his ability to minimize the tax payable. The trial judge did not accept wholly Mr. Radcliffe’s opinion, and did apply a discount of 50%, thus giving some effect to Mr. Linn’s testimony that he would retire, and Ms.

Frank did not appeal from this conclusion. [ 62 ] This ground of appeal fails. V. Mr. Linn’s Appeal with Respect to Indefinite Support and Ms. Frank’s Cross-Appeal with Respect to the Spousal Support Order A. Introduction [ 63 ] The parties cohabited from September 1992 to September 10, 2008—thus for 16 years. [ 64 ] Ms. Frank was born on April 29, 1956. She attended the Northern Alberta Institute of Technology and has a journeyman certificate as an instrument mechanic. She was employed as a journeyman instrument mechanic from 1981 to 1992 in the oil and gas industry in Alberta.

In 1992, she was divorced and living in Edmonton, Alberta with her seven-year old son. She was earning $75,000 per annum, before deciding to move to Mr. Linn’s farm in 1992. [ 65 ] Mr. Linn was born on March 30, 1958. In 1974, he quit high school to take a pre-employment mechanics course. Shortly thereafter, he started work in the family John Deere dealership business as a mechanic. Mr. Linn’s father was the general manager and sales manager and his mother was the accountant. In 1981, sadly Mr. Linn’s father had a heart attack and Mr. Linn took over the management of the business. Mr.

Linn and the senior employees of the company bought out Mr. Linn’s parents’ shares in 1988. The company had 25 employees at that time. [ 66 ] In 1992, Ms. Frank moved to Mr. Linn’s farm outside Mossbank, Saskatchewan. Mr. Linn was separated from his second wife when Ms. Frank and Mr. Linn began their relationship. Each party had a seven-year old son from a previous marriage and both children lived primarily with the parties. Ms. Frank did not work outside of the home during the whole of their relationship together. Her job was to raise the two boys, and to support Mr.

Linn in the family business and then in its successor businesses throughout the relationship. Ms. Frank played a particular role in raising Mr. Linn’s son. [ 67 ] In the fall of 2008, the parties decided to separate. On November 8, 2008, Ms. Frank commenced an action for a distribution of family property and spousal support. At that time, Mr. Linn was 50, and Ms. Frank was 52. The trial did not take place until 2011, and due to the illness of the trial judge, judgment did not issue until January 28, 2013—when the parties were 55 and 57, respectively. [ 68 ] After separation, Ms. Frank remained in the family home.

Ms. Frank worked in a dress shop and earned $4,055 in 2009. In 2010, she had no employment income; she attempted to start a home-based reflexology business and earned net income of $80 from it. [ 69 ] Ms. Frank received $6,750 per month from February 1, 2009 until July 1, 2009, in accordance with an interim spousal support agreement, and $8000 per month from August 1, 2009 until the date of judgment, January 28, 2013, in accordance with an order of Dufour J. made on application by Ms. Frank. [ 70 ] At trial, Ms.

Frank claimed $31,079 per month as spousal support under The Family Maintenance Act, 1997 , S.S. 1997, c. F-6.2. Mr. Linn submitted that the trial judge should award Ms. Frank no spousal support as she had received interim spousal support and she would receive a significant family property award. [ 71 ] The trial judge found that Ms. Frank was entitled to compensatory and non-compensatory support. In determining the quantum of support, the trial judge imputed income to Ms.

Frank in the amount of $30,000 per annum ($2,500 per month) as a potential wage and $49,400 per annum ($4,117 per month) as investment income. [ 72 ] He ordered that Mr. Linn pay $10,000 per month on an indefinite basis with a review of support when Mr. Linn retires and sells all his shares in South Country Ag, at which time Ms. Frank will bear the onus “to show that spousal support should continue” (para. 209). [ 73 ] Mr. Linn appeals from the trial judge’s decision ordering indefinite support. Ms. Frank cross-appeals several aspects of the trial judge’s decision in relation to spousal support as well.

I have chosen to group the issues as follows: 1. Did the trial judge err by imputing a salary of $30,000 per annum to her? 2. Did the trial judge err by imputing investment income of $49,000 per annum to her? 3. Did the trial judge err when he fixed Mr. Linn’s income for the purposes of spousal support at the amount he was earning as of the date of application? 4. Did the trial judge err by ordering indefinite support? 5. Did the trial judge err by ordering a review when Mr. Linn retires or sells his shares in South Country Ag where Ms.

Frank will bear the onus to show a continued need and a continued ability for Mr. Linn to pay?

6. Whether the quantum of spousal support is appropriate? 7. Whether the trial judge misapprehended the evidence by limiting retroactive spousal support to the period February 2009 to July 2009? [ 74 ] These questions require the Court to consider a preliminary matter. In making their submissions in the Court of Queen’s Bench, each side relied upon the Spousal Support Advisory Guidelines ([Ottawa]: Department of Justice, 2008) and structured their evidence with an eye to the Guidelines .

The trial judge referred to the Guidelines at several key junctures in his reasons either to make or to explain a decision taken. In this Court, counsel again relied upon the Guidelines to support an argument or to refute an argument made by the other side. In light of this, some general comments regarding the applicability of the Guidelines in this province must be made. B. Analysis 1. Effect and Application of the Spousal Support Guidelines (“ Guidelines ”) [ 75 ] The parties never married. Thus, their support obligations fall to be assessed in accordance with The Family Maintenance Act, 1997 .

Section 5 and s. 7(1) of that Act state the following: Spousal maintenance 5

(1) On application, the court may order a person to provide maintenance for his or her spouse, in accordance with need, to the extent that the person is capable of doing so.

(2) An order for the maintenance of a spouse should: (

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

b) relieve any economic hardship of the spouses arising from the breakdown of the spousal relationship; and (

c) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time. … Amount of maintenance 7

(1) In determining the amount, if any, of maintenance to be paid for a dependent spouse, the court shall take into account the needs, means and economic circumstances of the parties, including: (

a) the age and the physical and mental health of the spouses; (

b) the length of time the spouses cohabited; (

c) the measures available for the dependent spouse to become financially independent and the length of time and cost involved to enable the dependent spouse to take those measures; and (

d) the legal obligation of the respondent to provide maintenance for any other person. [ 76 ] These provisions closely parallel s. 15 of the Divorce Act , R.S.C. 1985, c. 3 (2nd Supp.) thus raising the same issues in relation to the Guidelines for the purposes of appellate review as have arisen with respect to the Divorce Act. The trial judge described the Guidelines in this way: 198 Carol Rogerson & Rollie Thompson, Spousal Support Advisory Guidelines ([Ottawa]: Department of Justice, 2008) have been utilized by this Court on numerous occasions.

While the Guidelines are not law, they are considered a useful tool in calculating spousal support and ensuring that spousal support awarded to individuals in similar circumstances is in a similar range [emphasis added].

[77] The trial judge used the Guidelines in these specific ways in his reasons: (

i) he referred to jurisprudence, which in turn relied on theGuidelines, to impute income to Ms. Frank, (ii) he set forth the range of support that the Guidelines would suggest in this case, andexplained his departure from that range (paras. 198 to 200), and (iii) he ordered indefinite support, which he stated “is in line with” theGuidelines (at para. 201). [78] The trial judge is clearly correct as to the status of the Guidelines.

They have no legislative or regulatory status and they are auseful tool in “calculating spousal support and ensuring that spousal support awarded to individuals in similar circumstances is in asimilar range” (para. 198). [79] While these observations are clearly correct, that does not end the matter. If the Guidelines are “a useful tool for trial judges,” whatrole do they play on appeal? [80] This Court of Appeal is one of the few courts of appeal in Canada that has not spoken on this issue. This does not mean that theGuidelines are not being used or followed in this jurisdiction.

Since the first working draft of the Guidelines to the present version, theiruse, importance and impact have grown to the point where it is a rare case where they are not cited for one reason or another. A quickreview, using a standard search engine, reveals over 100 reported family law decisions in this jurisdiction alone where the Guidelineshave played some role.

Only a few of those decisions have been appealed, and none of them has demanded some statement from thisCourt whether the application of the standard of review has been affected by the Guidelines.[1] [81] Since Saskatchewan is one of the last Courts of Appeal to comment on this issue, we have the benefit of extensive appellate andtrial jurisprudence from across the country, including from the Court of Queen’s Bench of this province. It is not my intention to canvassthat jurisprudence as it has recently been thoroughly reviewed by Ross J. in Dowhaniuk v. Dowhaniuk, 2014 ABQB 217.

From this caselaw, some observations can be made about the role of the Guidelines when applying the standard of review for the purposes of thewithin appeal. [82] First, when a court of appeal reviews a spousal support order, where the application of the Guidelines has been put in issue, thecourt refers to the usual standard of review first stated authoritatively by L’Heureux-Dubé J. for the Court in Hickey v.

Hickey, (SCC), [1999] 2 S.C.R. 518: 11 Our Court has often emphasized the rule that appeal courts should not overturn support orders unless the reasons disclose anerror in principle, a significant misapprehension of the evidence, or unless the award is clearly wrong. These principles were stated byMorden J.A. of the Ontario Court of Appeal in Harrington v. Harrington (1981), (ON CA), 33 O.R. (2d) 150, atp. 154, and approved by the majority of this Court in Pelech v. Pelech, (SCC), [1987] 1 S.C.R. 801, per Wilson J.; inMoge v. Moge, (SCC), [1992] 3 S.C.R. 813, per L’Heureux-Dubé J.; and in Willick v.

Willick, (SCC),[1994] 3 S.C.R. 670, at p. 691, per Sopinka J., and at pp. 743-44, per L’Heureux-Dubé J. 12 There are strong reasons for the significant deference that must be given to trial judges in relation to support orders. This standardof appellate review recognizes that the discretion involved in making a support order is best exercised by the judge who has heard theparties directly. It avoids giving parties an incentive to appeal judgments and incur added expenses in the hope that the appeal court willhave a different appreciation of the relevant factors and evidence.

This approach promotes finality in family law litigation and recognizesthe importance of the appreciation of the facts by the trial judge.

Though an appeal court must intervene when there is a material error,a serious misapprehension of the evidence, or an error in law, it is not entitled to overturn a support order simply because it would havemade a different decision or balanced the factors differently [emphasis added]. [83] Within the confines of the standard of review analysis as articulated in Hickey, the issue for an appeal court then becomes theextent to which a failure to follow or apply the Guidelines gives rise to “material error” or “an error of law” permitting or requiringappellate intervention. [84] Second, the starting point for any analysis of the appropriate level of spousal support continues to be the legislative obligationsprescribed by the applicable legislation.

A court referring to the Guidelines must still perform the analysis prescribed by Moge v. Moge, (SCC), [1992] 3 S.C.R. 813 and Bracklow v. Bracklow, (SCC), [1999] 1 S.C.R. 420. If the trial judgedoes not perform that analysis, it may not be possible to sustain the decision on appeal whether or not the Guidelines are applied (seeSawatzky v. Sawatzky, 2008 ABCA 355 at para 16, 59 R.F.L. (6th) 88).

A complete factual analysis is also important to determine whichof the amounts suggested by the appropriate range apply or to determine whether to give effect to one of the exceptions—or indeedwhether to fix an amount suggested by the Guidelines at all (see Deringer v. Hill, 2007 SKQB 206 at para. 16, 308 Sask. R. 122). [85] Third, it is critically important to understand that the Guidelines require more analysis than inserting a few numbers into a formulato obtain a number, which is then considered to be the ideal and immutable amount of spousal support.

The Guidelines recognize theconsiderable discretion enjoyed by trial judges. The Spousal Support Advisory Guidelines: A New and Improved User’s Guide to theFinal Version ([Ottawa]: Department of Justice, 2010) also make it clear that a sophisticated analysis of the parties’ needs and means isrequired to arrive at the best possible spousal support order in the circumstances of each case. This principle is fully understood in themany decisions of the Court of Queen’s Bench to date (see, for example, Billett v. Billett, 2013 SKQB 269 at para. 63, 425 Sask. R. 217;Verhelst v.

Verhelst, 2013 SKQB 12 at para. 52, 415 Sask. R. 17; Sangray v. Sangray, 2012 SKQB 455 at para. 6, 407 Sask. R. 149;Geransky v. Geransky, 2012 SKQB 218 at para. 25). [86] Fourth, when counsel makes a submission with respect to the Guidelines in the trial court, it is expected, as a matter of goodjudicial decision-making, that the trial judge’s reasons explain why the Guidelines were or were not followed. This would be so inrelation to any significant argument seriously made to a court at any level (see Fisher v. Fisher, 2008 ONCA 11 at para. 103, 288 D.L.R.(4th) 513).

[ 87 ] Fifth, with the passage of time, more and more of the reported decisions are awarding an amount derived from the application of the Guidelines such that future compliance with them will become more typical. They will become a “litmus test,” to use the words of Steele J.A. in Kynoch v. Kynoch , 2013 MBCA 73 at para. 48 , 294 Man. R. (2d) 250, for what constitutes an “equitable sharing of the economic consequences of marriage or marriage breakdown” ( Moge at p. 866). See also De Winter v.

De Winter , 2013 ABCA 311 at paragraph 28 where the Court referred to the Guidelines as being “a useful tool when determining spousal support … and the need to view the award through the lens of the criteria set forth in the Divorce Act .” [ 88 ] Sixth, over time it can only be expected that the Guidelines will influence judicial thinking about what is a clearly wrong award. As the Court stated in Fisher , “when considered in their entirety and subject to their limitations, the Guidelines also assist in informing an appellate standard of review” (at para. 102).

This will permit the use of the Guidelines to ensure consistency in situations when the parties do not wish to use the courts to resolve the question of spousal support (see: S.C. v. J.C. , 2006 NBCA 46 , 27 R.F.L. (6th) 19 at para. 5 , leave to appeal refused). [ 89 ] In sum, the role of the appellate court reviewing a spousal support order in 2014 remains the same as under Hickey : i.e., a court of appeal will intervene only if it finds a material error, a serious misapprehension of the evidence, or an error in law.

A court of appeal will show considerable deference to the decision under appeal, but if the Guidelines have been fully argued by counsel, an appeal court may intervene if reasons are not or cannot be given to support the trial judge’s disposition in relation to them. [ 90 ] It is important to stress that the foregoing points are broad observations only. They do not prescribe when this court will intervene. In the pre- Guidelines era, it was not possible to determine the precise point at which an appellate court would intervene.

This was so because many factors entered the equation; evidence and individual circumstances, as well as the particular issue the appellate court is asked to address, influence outcomes. The same can be said in the Guidelines era. The Divorce Act and The Family Maintenance Act, 1997 continue to grant considerable discretion to judges of first instance. 2. Did the trial judge err by imputing a salary of $30,000 per annum to Ms. Frank? [ 91 ] Relying on the Guidelines and their comments about self-sufficiency, counsel for Mr. Linn submitted at trial that the judge should impute income to Ms. Frank.

The Guidelines emphasize the importance of imputing income in the spousal context: The income imputing provisions of

section 19 are, if anything, even more important than in child support cases. In every spousal support case, two incomes are in issue. Income may need to be imputed to a payor spouse, but in addition a spousal support case may also require that an income be imputed to the recipient spouse, because of self-sufficiency issues . In these cases, income is imputed to the recipient under s. 19(1)(a), for under/unemployment … [emphasis added]. (p. 46) In the

chapter on “Self-Sufficiency,” the Guidelines expand on the importance of considering income earning capacity of both spouses when the Guidelines are applied: 13.2 Imputing Income The Spousal Support Advisory Guidelines are income-based guidelines and thus require much more careful attention to the actual incomes, or the income-earning capacities, of both spouses. By focussing on income, the Guidelines actually encourage a more sophisticated analysis of “self-sufficiency” on the part of the recipient, rather than some rough-and-ready downward adjustment of the monthly amount of support .

Consistent with Moge , the question is usually: what income could this specific recipient earn, with his or her experience, education and qualifications? As the B.C. Court of Appeal explained in [ MacEachern v. MacEachern , 2006 BCCA 508 ], imputing income provides a ready means of assessing and encouraging self-sufficiency. … Imputing income imposes a discipline on our thinking about self-sufficiency. What sort of employment might the recipient find? Is the employment available full-time or part-time? How much can the recipient realistically contribute to her or his own support?

What are the prospects of any improvement in that income?

If there is training or education required, how will that change the employment prospects of the support recipient? (p. 137) Under the Federal Child Support Guidelines , a court may impute such amount of income to a spouse as it considers appropriate in the circumstances, including that “the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the … reasonable educational or health needs of the spouse” (s. 19.(1)( a )). [ 92 ] The trial judge did not refer to the Guidelines on this point, but he did rely upon Chutter v.

Chutter , 2008 BCCA 507 , 60 R.F.L. (6th) 263 , which relies on the Guidelines to impute income and refers to MacEachern v. MacEachern , 2006 BCCA 508 , 232 B.C.A.C. 185 . The trial judge, in the within appeal, went on to impute income in reliance up on the authority of Chutter : 190 When the parties separated, Ms. Frank was 52 years of age and had been out of the work force for 16 years. I accept her pre- cohabitation career may no longer be a viable option. Ms. Frank took training to become a certified reflexologist.

While she has opened a studio in her own home, she has admittedly earned almost no income from that pursuit. Based on the evidence, I am satisfied Ms. Frank, who has no health issues, has decided not to work. That is a personal choice, the repercussions of which should not be borne by Mr. Linn. I am satisfied, based on the evidence, that Ms. Frank is capable of earning an income either through employment or through her reflexology business in the range of $30,000 per year ($2,500 per month). Minimum wage in Saskatchewan is now $10 per hour. At minimum wage, Ms. Frank would earn $20,800 per year. Given Ms.

Frank’s skill set, she should easily be able to exceed that amount. In addition, Ms. Frank has farmland which she rents out. Based on her 2010 income tax return, I find her income from that source to be $10,252.79 (net) per annum. She will also receive a significant amount of family property. Ms. Frank will retain as her sole property the family home, her farmland and RRSPs in excess of $389,000. Following trial, she received an interim distribution of $125,000. She retains her bank account of $81,377 and she will also receive an equalization payment of $1,166,331. These “liquid” assets total

$1,372,708 and can be used for investment purposes. [93] Ms. Frank accepts the principles from the Guidelines with respect to imputing income, but she submits that no evidentiary basisexisted for the trial judge to impute employment income to her in the amount of $30,000 per annum, or indeed any other amount. Sherelies on Drygala v. Pauli (2002), (ON CA), 61 O.R. (3d) 711 (Ont. C.A.), Scott v. Scott, 2006 ABCA 296, 401 A.R.303, Homsi v. Zaya, 2009 ONCA 322, 248 O.A.C. 168, Fraser v. Fraser, 2013 ONCA 715, 311 O.A.C. 351, and Marquez v.

Zapiola,2013 BCCA 433, 344 B.C.A.C. 133 to support her position. [94] There is nothing remarkable about these decisions. All are examples of where an appellate court intervened because no evidentiarybasis existed to support the finding that either the payor or the recipient was capable of earning income at a certain level. [95] Equally authoritative are those appellate decisions where (

i) appellate courts have sustained a trial judge’s decision not to imputeincome (Bergquist v. Bergquist, 2014 SKCA 20, 39 R.F.L. (7th) 251; P.R.M. v. B.J.M., 2013 BCCA 327, 340 B.C.A.C. 198), (ii)appellate courts have sustained a trial judge’s decision to impute income (Brandl v. Rolston, 2013 BCCA 235; 362 D.L.R. (4th) 439), and(iii) appellate courts have found that the evidence demands that income should be imputed (Corbeil v. Corbeil, 2001 ABCA 220 atpara. 80, [2002] 3 W.W.R. 60; Hawco v. Myers, 2005 NLCA 74, 262 D.L.R. (4th) 719; McEachern v. McEachern, 2006 BCCA 508, 232B.C.A.C. 185; and Richards v.

Richards 2012 NSCA 7, 346 D.L.R. (4th) 653). [96] Four principles emerge from the appellate authorities cited by Ms. Frank and from this expanded list. First, a person is expected totake reasonable steps to obtain employment commensurate with such factors as age, health, education, skills and work history. Second, asupportable finding that a person is intentionally under-employed carries considerable weight. Third, a trial judge’s decision to impute ornot to impute income is still a decision about support and must be accorded deference on appeal.

Fourth, appellate intervention may berequired if the evidentiary base does not support the trial judge’s decision to impute income. In that regard, some factors like physicaland mental health, current useable skills and age play a significant role. [97] The question in the within appeal is whether the evidence supports the trial judge’s decision to impute employment income of$30,000 per annum, having regard for the above principles and relevant factors. In answering this question, four findings of fact aresignificant. First, the trial judge found that Ms. Frank has chosen not to work.

Second, she suffers from no mental or physical healthissues. Third, no impediment, like a lack of linguistic or other employment skills, prevents her from obtaining work. Fourth, she istrainable and has in fact completed training as a certified reflexologist, but gave no reason why she has not pursued employment in thatfield. [98] The trial judge in this case had two reference points: Saskatchewan’s minimum wage of $10 an hour and the amount Ms. Frankmight reasonably expect to receive as an hourly rate as a reflexologist. From her own evidence, Ms. Frank indicated she could charge$40 per hour as a reflexologist.

From this, the trial judge concluded she should be able to earn an annual income of approximately$30,000, which would be 14 hours a week as a reflexologist. [99] Ms. Frank says no evidentiary basis exists to support the conclusion that she could earn $30,000 per annum as a reflexologist. But,in light of the trial judge’s findings that she has chosen not to work and is capable of working, it is not possible for Ms. Frank to makethis claim. When a payor or recipient of support has chosen not to work, the trial judge by necessity must speculate to some extent as towhat work the person might be able to perform.

If some speculation were not possible, it would mean that by not working—and therebyhaving no evidence of what work might be performed—a payor or recipient of support would always be able to resist the imputation ofincome. In this case, the evidence showed that a reflexologist could earn $40 per hour, and no one suggested that such work did not exist. [100] In conclusion, having regard for the standard of review, there is no basis to set aside the trial judge’s conclusion that employmentincome of $30,000 per year should be attributed to Ms. Frank. Thus, this aspect of her cross-appeal fails. 3.

Did the trial judge err by imputing investment income of $49,400 per annum? [101] The trial judge found: 190 … Ms. Frank will retain as her sole property the family home, her farmland and RRSPs in excess of $389,000. Following trial,she received an interim distribution of $125,000. She retains her bank account of $81,377 and she will also receive an equalizationpayment of $1,166,331. These “liquid” assets total $1,372,708 and can be used for investment purposes. 191 Ms. Frank’s RRSPs will increase in value and will provide her with a source of income for retirement.

The income earned fromthat asset will not be immediately available to her and will be sheltered for tax purposes until she withdraws it. The family home is anon-taxable asset but it is not a liquid one. To earn income, Ms. Frank must invest her liquid assets. I accept a portion of those assets willbe utilized to pay her outstanding debts and legal fees. I estimate that these will total approximately $137,400. That would leave$1,235,000 in liquid assets for her to invest. 192 Ms. Frank has an obligation to manage her property in such a way as to maximize her income from it. (See: Holmes v.

Matkovich,2008 YKCA 10, 59 R.F.L. (6th) 60 and Jens v. Jens, 2008 BCCA 392, 57 R.F.L. (6th) 31). Ms. Frank testified she wishes to invest hermoney in an annuity with an interest rate of 2%. In the brief filed in support of her position, at para. 186, the interest rate from theannuity was described as being prime plus 2% (i.e. 5%). 193 I am not satisfied an interest rate of 2% is appropriate, given the amount of money being invested and the current rate of returnon bonds invested for the medium to long term (3-4%). A rate of 4% is more realistic. If Ms.

Frank invests $1,235,000 at 4% (simpleinterest), she would get an income of $49,400 per annum [emphasis added]. [102] Ms. Frank raises several issues regarding the amount of liquid assets. First, the trial judge found that she would receive anequalization payment of $1,166,331. As I have indicated earlier, both parties agree that this is an error. The actual amount of theequalization payment will be $1,006,501.

[103] Second, Ms. Frank asserts that the trial judge erred by not deducting from this amount “expenses incurred since the litigationbegan in November 2008, including an RSP loan, mortgage, MNP fees and legal costs” (Ms. Frank’s factum on cross-appeal, para. 30).There is no evidence from which this Court can quantify this amount. Further, the trial judge awarded Ms. Frank the full amount of theallowable disbursements with respect to Mr. Radcliffe’s evidence and 70% of her costs on Column 4,

Schedule I “B” of The Queen’sBench Rules (para. 216). The effect of this order further muddies the waters as to exactly what Ms. Frank suggests should be deductedfrom the amount she would be able to invest. [104] Third, Ms. Frank submits the evidence does not indicate that she could receive a guaranteed rate of return of 4%. The trial judgedid not indicate where he obtained the information he was relying upon to suggest she could generate a 4% return on bonds. The onlyevidence the trial judge had was that Ms.

Frank planned to invest in an annuity with a rate of return of 2%, which is similar to the rate ofreturn on bonds. At the time of the trial, the Bank of Canada reported yields at between 1.50% and 1.99% (Cross-Appeal Factum,para. 31). Ms. Frank submits that the trial judge could not take judicial notice of some higher amount—particularly when Mr. Linn didnot advocate for such. I agree with this submission. [105] Thus, the amount of investment income should be adjusted in two ways. First, the amount of the equalization payment will be$1,006,501. Second, the expected rate of return should be fixed at 2%.

These adjustments will reduce Ms. Frank’s expected annualincome to a new value: Imputed Income: $30,000 Land Rental (rounded): 10,253 Investment Income: 24,700 Total: $64,953 [106] As will be seen, however, this error will have little effect on the amount of spousal support payable to Ms. Frank. 4. Did the trial judge err when he fixed Mr. Linn’s income for the purposes of spousal support at the amount he was earning atthe date of application? [107] Mr. Linn’s income since 2007 has been as follows: • 2007 $225,970.02 • 2008 $852,022.08 • 2009 $863,682.70 • 2010 $1,211,828.52 [108] The trial judge found Mr.

Linn’s income to be $852,000 for the purposes of spousal support, notwithstanding that his income in2010 was $1,211,828. He found that the increases in Mr. Linn’s income should not be considered because the increases were “as a resultof [South Country Equipment’s] continued expansion due to the efforts of its directors and manager versus any contribution byMs. Frank” (para. 176). [109] Ms. Frank submits that this finding does not accord with the prevailing case law and ought to be set aside.

Case authority confirmsthat where one spouse enables the other to accomplish a career goal, the other spouse is entitled to share in the post-separation increasesin income. In that regard, Ms. Frank relies upon Giguere v. Giguere (2003), (ON SC), 46 R.F.L. (5th) 184 atparas. 8, 10, and 17 and Marinangeli v. Marinangeli (2003), (ON CA), 66 O.R. (3d) 40 (C.A.) at para. 74. [110] The 2010 User’s Guide confirms that a post-separation increase in income raises a distinct issue of entitlement to be resolved assuch: (

d) Post-separation income increase of the payor (FV 14.3) Since the Draft Proposal, courts have continued to struggle with this hard question, which presents a mix of entitlement and quantum issues.

While this question usually arises at the stage of variation or review, it can alsocome up at the time of the initial order, if there has been a lengthy period of time since separation or a sudden increase in income afterseparation, as was true in the Fisher [2008 ONCA 11] case from Ontario. • It is incorrect to say that the Advisory Guidelines always require that incomes at the time of separation must be used in calculatingthe formula ranges. • It is equally incorrect to state that the spouse’s current incomes are always the correct incomes for formula purposes.

• Under the current law, a post-separation income increase on the part of the payor raises another distinct issue for spousalsupport analysis, an entitlement issue, namely whether all, some or none of the increase should be taken into account in calculating theformula range [italic emphasis added]. (p. 51) [111] Faced with a claim for spousal support based on a post-separation increase, a trial judge will consider many factors, includingneeds, the length of the marriage, the roles adopted during the marriage and the reason for the income increase.

As the Guidelinesindicate, “the extent of sharing of these post-separation increases involves a complex, fact-based decision” (p. 145). [112] Giguere and Marinangeli are both distinguishable on the facts of this case. In Giguere, a decision at first instance, the trial judgefound that the husband’s raise was “given to him as a result of the tremendous effort he had put into the company from the outset, whenthe parties were still residing together” (para. 18).

In Marinangeli, the Court of Appeal declined to reverse a trial judge’s decision fixinga retroactive spousal and child support order calculated based on an increase in the payor’s income. The Court found no basis to overturnthe trial judge’s finding that the payor’s continued success was as a result of the recipient’s assistance during the marriage. [113] Critically, in the within appeal, this Court is faced with a finding that Mr. Linn’s post-separation income was not as a result of anycontribution by Ms. Frank. Thus, in order for Ms.

Frank to succeed, this Court would have to find that the trial judge misapprehended theevidence in reaching this conclusion or that it was clearly wrong. Upon review, it is clear that this Court can make neither statement. Itwas open to the trial judge to draw the inference that the increased funds were as a result of an amalgamation of John Deere businessesdriven by the acumen of Mr. Linn and his business partners. [114] Thus, this ground of Ms. Frank’s cross-appeal fails. 5. Did the trial judge err by ordering indefinite support? [115] The trial judge made the following comments regarding duration: 201 Ms.

Frank requests spousal support for an indefinite term which is in line with The Spousal Support Guidelines. While theparties’ relationship was not a long-term one (i.e. more than 20 years), given Ms. Frank’s age, it is unlikely that she will ever be self-sufficient to the point where she is able to maintain the standard of living she enjoyed prior to separation. [116] The duration of spousal support was considered on appeal in Russell v. Russell (1999), (SK CA), 179 D.L.R.(4th) 723, 180 Sask. R. 196 (C.A.), Bradley v. Bradley, 2005 SKCA 53 at para 36, 262 Sask. R. 215 and Bergquist.

In Russell, this Courtset aside a trial judge’s decision not to award indefinite support to the wife as she had become economically dependent on her formerhusband. Similarly, in Cassidy v. McNeil, 2010 ONCA 218 at para. 71, 99 O.R. (3d) 81 the Ontario Court of Appeal determined thatindefinite support was warranted because the trial judge did not adequately explain the reasons behind the term order. [117] In Bradley, the trial judge had ordered term limited support.

A majority of the Saskatchewan Court of Appeal found no error withthis, saying the trial judge had considered the objectives of support and explained why a term order was made: 5 As his reasons for judgment demonstrate, he approached the matter with care, made the requisite findings of fact, and had regardfor all of the requirements and relevant factors set forth in subsections 15.2(4) and (6) [of the Divorce Act]. [118] Since the trial judge’s decision in this case was issued, this Court has issued its decision in Bergquist, which sustained a significantspousal award of indefinite duration. [119] As with any decision in relation to spousal support, each of these decisions is authority for the proposition that there must be amisapprehension of evidence or an error in principle before an appellate court will set aside a decision of a trial judge ordering indefinitesupport.

In the circumstances of the within appeal, no such error can be found. The trial judge correctly summarized the law as it relatesto spousal support in paragraphs 161 to 165. [120] Mr. Linn has not expressly identified any errors the trial judge made with respect to the objectives of spousal support. He has notestablished that the trial judge relied on incorrect evidentiary findings or that the trial judge did not consider all the factors that go into aspousal support order. Mr. Linn’s argument does not address how an indefinite support order has resulted in inequity.

He relies heavilyon the fact that the evidence showed that he wished to retire but even in his own testimony at trial, he questioned whether his obligationsto his family and Ms. Frank would permit him to do so. [121] As previously mentioned, the trial judge considered the high value of the matrimonial property, the employment history andprospects of Ms. Frank, and the standard of living experienced by Ms. Frank after the marriage. He made specific findings regardingcompensatory and non-compensatory entitlement. The nature of Mr.

Linn’s fact-based arguments do not fit with the standard of reviewfor spousal support orders as set out in Hickey and adopted by this Court. [122] Finally, it should be noted the trial judge justified his decision on the basis that an order for indefinite spousal support is also inline with the Guidelines “rule of 65” (pp. viii, 32, 52, 60, 62–63). Ms. Frank’s age at the date of separation (52) and the length of thecohabitation (16 years) is greater than 65, which suggests th

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