Rodway v Reardon, 2019 SKCA 99

Court of Appeal for Saskatchewan Docket: CACV3158 Citation: Rodway v Reardon , 2019 SKCA 99 Date: 2019-10-03 Between: Steven Rodway Appellant (Respondent) And Kathryn Reardon Respondent (Petitioner) Before: Whitmore, Schwann and Leurer JJ.A. Disposition: Appeal allowed in part Written reasons by: The Honourable Mr. Justice Whitmore In concurrence: The Honourable Madam Justice Schwann The Honourable Mr. Justice Leurer On Appeal From: 2017 SKQB 324 , Regina Appeal Heard: January 9, 2019 Counsel: James Korpan, Q.C., for the Appellant Joanne Moser, Q.C., for the Respondent Whitmore J.A. I.

Introduction [ 1 ] The appellant, Steven Rodway, appeals the decision of a judge of the Court of Queen’s Bench with respect to the division of property between himself and the respondent, Kathryn Reardon: Reardon v Rodway , 2017 SKQB 324 [ Trial Decision ]. For the following reasons, I would allow the appeal in part. II. Background [ 2 ] Mr. Rodway and Ms. Reardon met in 1997 and commenced a relationship. At that time, each owned their own home and had children from previous relationships. After cohabiting for a number of years, the parties purchased a new home and moved into it. Ms.

Reardon sold her home and put the sale proceeds towards the new home [Family Home]. Mr. Rodway retained his former home [Upland Property]. [ 3 ] The relationship ended in 2013 and Mr. Rodway continued to reside in the Family Home. [ 4 ] Mr. Rodway is the primary owner and operator of a numbered company [the Corporation], which he has operated since 2006. [ 5 ] Ms. Reardon commenced this action for division of family property in May of 2013. III.

The Trial Decision [ 6 ] At trial, the date of the commencement of the relationship was disputed, which would determine the date of valuation of assets, and which, in turn, would affect the value of certain family property. The entitlement of Mr. Rodway to certain exemptions, the valuation of assets, and the appropriate division of assets were also in dispute. [ 7 ] The trial judge rejected Mr. Rodway’s position that the relationship commenced in May 2002 and accepted Ms.

Reardon’s testimony that the common law relationship commenced in October 1997, with the result that the effective date for determining the family property was October 1999. [ 8 ] The trial judge then analyzed the appropriate date to value the family property in question. Ms. Reardon sought to have the Family Home and Mr. Rodway’s Upland Property valued as of May 31, 2013, being the date of the commencement of the action. She alleged Mr. Rodway had been in possession of these homes since the date of separation, and she claimed that Mr.

Rodway’s delay in bringing this matter to trial had allowed the properties to deteriorate. [ 9 ] Mr. Rodway sought to have the two homes valued as of May 2017, being the date of trial, and denied there had been any deterioration in the properties. He stated the appraisers called to testify at trial confirmed that the properties had declined in value over time and it would be unfair to burden him with their loss in value.

[ 10 ] The trial judge found that Mr. Rodway had been in possession of the Family Home since the parties separated. The trial judge found there was no evidence Mr. Rodway took any steps to list the Family Home for sale or to sell it, but also found Ms. Reardon could have pushed the action along. He was not satisfied there had been any deterioration in the two properties over time. [ 11 ] Mr. Rodway called an appraiser to testify. He had determined a value for each house as of the date of trial, but did not present a valuation for any other time. The appraisers called by Ms.

Reardon did not provide a clear value as at the date of trial. The trial judge therefore preferred Mr. Rodway’s appraiser’s valuation and determined the time of trial was the appropriate date to value the properties as they were the only precise valuations before him. [ 12 ] The trial judge then dealt with exemptions claimed by Mr. Rodway. Mr. Rodway claimed an exemption with respect to his interest in the Upland Property and with respect to his interest in the Corporation, given that he had owned these interests prior to his common law relationship with Ms. Reardon. [ 13 ] The trial judge found that Mr.

Rodway had not adduced any evidence to establish the value of the Upland Property as at the date of commencement of the relationship. Further, he found it would be unfair to grant Mr. Rodway an exemption for the Upland Property when Ms. Reardon had sold her home to purchase the Family Home in which Mr. Rodway shares the value. Accordingly, the trial judge did not allow Mr. Rodway any exemption for the Upland Property. [ 14 ] Mr. Rodway did not tender any evidence as to the value of the Corporation at the date of commencement of the relationship.

The trial judge therefore found he was unable to establish any exemption amount for Mr. Rodway. [ 15 ] The trial judge then dealt with certain business debts in the process of calculating the value of family property. He accepted Ms. Reardon’s evidence that a line of credit from a bank in the amount of approximately $226,000 was incurred to provide financing for constructing a building for Mr. Rodway’s business over Mr.

Rodway’s evidence that it was incurred to pay him back for what he had invested in the Family Home. [ 16 ] The trial judge found the debt was being repaid by the Corporation and neither party had expended any personal funds to reduce the debt. He found that Ms. Reardon was pressured or, at least felt pressured, into co-signing the promissory note for the line of credit, but that her doing so did not change the nature of the debt. The trial judge determined that debt should be taken into account in arriving at a value for the family property. [ 17 ] Mr.

Rodway also claimed two debts, one in the amount of $150,000 and the other in the amount of $135,982. He testified both of these sums were advanced by E.M., an associate of Mr. Rodway, to Mr. Rodway for investment in the Corporation. [ 18 ] Although Mr. Rodway testified the $150,000 debt was secured by a mortgage against the Upland Property, only a one-page document purporting to be the mortgage was tendered as evidence at trial. It contained only the amount of that debt, but no signature page or repayment terms.

Payments were not being made on the mortgage, although E.M. was living in the Upland Property rent-free, which was treated by both Mr. Rodway and E.M. as payment of interest on the $150,000 debt. [ 19 ] The $135,982 debt was secured by a promissory note payable by Mr. Rodway. The trial judge had no evidence before him as to repayment of the debt and, like the $150,000 debt, he found that there was not a sufficient explanation for why Mr.

Rodway would be personally responsible for the debt when the loan had been advanced to the Corporation. [ 20 ] The trial judge was not satisfied there was any intention to repay the debts and found that E.M. had advanced the funds out of friendship with Mr. Rodway. He then concluded it was unfair to include these amounts in the calculation of family property as the debts were really debts of the Corporation. [ 21 ] Turning to the calculation of the value of the Corporation, the trial judge noted the documents filed with the corporate registry at Information Services Corporation showed Mr.

Rodway as holding a 65% interest in the Corporation. However, Mr. Rodway testified that he had deliberately misstated his interest as 65% (in the annual return) in order to induce a minor shareholder to pay for his shares. The trial judge did not accept that evidence over the corporate documentation and found Mr.

Rodway’s interest in the Corporation to be 65%. [ 22 ] The trial judge then considered the testimony of appraisers who had been engaged by the parties and found the financial statements of the Corporation for the year ending December 31, 2012, as completed by the Corporation’s accountant, to be the most reliable evidence of the value of the Corporation. The trial judge did not find Mr. Rodway’s evidence as to deductions and adjustments to those financial statements to be credible, and concluded the valuation determined on a liquidation basis to be the most appropriate method of valuation, as proposed by Ms.

Wightman, a business valuator called by Mr. Rodway, and who had valued the Corporation at $497,230. [ 23 ] The trial judge determined certain other matters that are not contested on this appeal and set out his conclusions as to the division of family property. IV. Issues [ 24 ] Mr. Rodway appeals from the Trial Decision , claiming the trial judge made a number of errors: (

a) the trial judge erred in the valuation of the Upland Property and in not granting Mr. Rodway an exemption for the Upland Property; (

b) the trial judge misapprehended the evidence regarding certain debts and erred in not including those debts in the determination of family property;

(

c) the trial judge misapprehended the evidence as to Mr. Rodway’s ownership interest in the Corporation and erred byattributing to him a 65% interest instead of a 51% interest; and (

d) the trial judge misapprehended the evidence as to the value of the Corporation and erred by valuing the Corporation as ofDecember 31, 2012, instead of valuing it as of the date of application. V. Jurisdiction and Standard of Review [25] The jurisdiction to hear this appeal is found in ss. 7(2)(

a) and 10 of The Court of Appeal Act, 2000, SS 2000, c C-42.1 ands. 55 of The Family Property Act, SS 1997, c F-6.3. [26] This Court set out the applicable standard of review for family property division under The Family Property Act, in Riley vRiley, 2011 SKCA 5, 336 Sask R 110: [5] When an appellate court reviews a decision of a trial court, three standards of review are usually engaged: (

i) the standard ofreview concerning questions of law, i.e., did the trial judge decide all questions of law correctly (see: Housen v. Nikolaisen, 2002 SCC 33(S.C.C.) at para. 8, [2002] 2 S.C.R. 235 (S.C.C.)); (ii) the standard of review as to factual findings, i.e., did the trial judge make anypalpable and overriding error with respect to a material finding of fact (see: Lensen v.

Lensen, (SCC), [1987] 2 S.C.R. 672(S.C.C.) at p. 683 and Housen at para. 10); and (iii) the standard of review with respect to discretionary matters, i.e., did the trial judgeconsider all relevant matters (see: Friends of the Oldman River Society v. Canada (Minister of Transport), (SCC),[1992] 1 S.C.R. 3 (S.C.C.), at 76-77 and the cases referred to therein). When the decision under review divides family property, all threetypes of review are engaged to a greater or lesser extent (see: Russell v. Russell (1999), (SK CA), 179 D.L.R. (4th)723 (Sask. C.A.) at para. 18), but there is an overarching consideration.

Given the provisions of The Family Property Act, with itsemphasis on a “fair and equitable” distribution of property, considerable deference is owed to the trial judge’s overall decision as toentitlement and valuation (see: The Family Property Act, ss. 21(2), 22(1) and 23(4); Russell at paras. 19 and 71; and Muranetz-Dubelt v.Dubelt, 2010 SKCA 5 (Sask. C.A.) at para. 12, (2010), 343 Sask. R. 215 (Sask. C.A.)).

While the standard of appellate review permits acourt of appeal to intervene in the face of an error of law, a palpable and overriding error of fact, or an abuse of discretion, the court mustbe aware that disturbing one of a trial judge’s many decisions as to entitlement to family property, or its valuation, may disturb theoverall equities that have been achieved in arriving at what constitutes a fair and equitable distribution. The standard of appellate reviewin family law matters reflects this deference to the trial judge’s overall distribution of family property.

See also: Grosse v Grosse, 2015 SKCA 68 at para 15, 387 DLR (4th) 473; Schimelfenig v Schimelfenig, 2014 SKCA 77 at para 13, 442Sask R 30; Propp v Propp, 2014 SKCA 5 at para 27, 433 Sask R 42; Stelter v Stelter, 2012 SKCA 117 at para 7, 405 Sask R 63; andWilliams v Williams, 2011 SKCA 84 at para 3, 343 DLR (4th) 720. VI.

Analysis [27] For reference, the relevant sections of The Family Property Act are copied below: Purpose 20 The purpose of this Act, and in particular of this Part, is to recognize that child care, household management and financial provisionare the joint and mutual responsibilities of spouses, and that inherent in the spousal relationship there is joint contribution, whetherfinancial or otherwise, by the spouses to the assumption of these responsibilities that entitles each spouse to an equal distribution of thefamily property, subject to the exceptions, exemptions and equitable considerations mentioned in this Act.

Distribution of family property 21(1) On application by a spouse for the distribution of family property, the court shall, subject to any exceptions, exemptions andequitable considerations mentioned in this Act, order that the family property or its value be distributed equally between the spouses. …

(3) For the purposes of subsection (2), the court shall have regard to the following: … (

b) the length of time that the spouses have cohabited; … (

d) the date when the family property was acquired; (

e) the contribution, whether financial or in some other form, made directly or indirectly by a third party on behalf of a spouse to theacquisition, disposition, operation, management or use of the family property; … (

h) the fact that a spouse has made: (

i) a substantial gift of property to a third party; or

(ii) a transfer of property to a third party other than a bona fide purchaser for value; (

n) interests of third parties in the family property; (

o) any debts or liabilities of a spouse, including debts paid during the course of the spousal relationship; … … Property exempt from distribution 23(1) Subject to subsection (4), the fair market value, at the commencement of the spousal relationship, of family property, other than afamily home or household goods, is exempt from distribution pursuant to this Part where that property is: … (

c) owned by a spouse before the commencement of the spousal relationship.

(2) Subject to subsection (4), property acquired as a result of an exchange of property mentioned in subsection (1) is exempt fromdistribution pursuant to this Part to the extent of the fair market value of the original property mentioned in subsection (1) at thecommencement of the spousal relationship. …

(4) Where the court is satisfied that to exempt property from distribution would be unfair and inequitable, the court may make any orderthat it considers fair and equitable with respect to the family property mentioned in this section.

(5) In making an order pursuant to this section, the court shall have regard to the following: (

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 their spousalrelationship; (

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.

(6) All family property is presumed to be shareable unless it is established to the satisfaction of the court that it is property mentioned inthis section. A. Did the trial judge err in the valuation of the Upland Property and in notgranting Mr. Rodway an exemption for the Upland Property? [28] Subsections 23(1) and (2) of The Family Property Act allow for the exemption of the fair market value of family property thatwas owned or acquired before the commencement of the spousal relationship.

Once the conditions in ss. 23(1) and (2) are met, there is aprima facie entitlement to the exemption that is subject to the court’s discretion in s. 23(4), having regard to the matters in ss. 23(5) and21(3)(a)–(p), that such an exemption would be fair and equitable: see Ackerman v Ackerman, 2014 SKCA 137 at paras 54–56, [2015] 6WWR 626 [Ackerman]; Benson v Benson (1994), (SK CA), 120 Sask R 17 (CA) at paras 55–56 [Benson]; andDeyell v Deyell (1991), (SK CA), 90 Sask R 81 (CA) at paras 83–85 [Deyell]. [29] Mr. Rodway owned the Upland Property before the parties met.

He testified he bought the property in 1984 for between$60,000 and $70,000. The title filed at trial showed a value of $66,000 in 1984. [30] The trial judge rejected Mr. Rodway’s request for an exemption on two bases: (1) because Mr. Rodway had failed to establishthe net value of the Upland Property at the relevant time; and (2) because it would be unfair and inequitable to allow an exemption.Mr. Rodway takes issue with both of these determinations. [31] Mr.

Rodway states that in the absence of any other evidence as to the value of the Upland Property, the trial judge shouldhave placed a value of at least $66,000 on it as at the date of commencement of the common law relationship. He submits it was an errornot to use that value as it was a conservative estimate of the value of the property. [32] Mr. Rodway says the trial judge erred in holding there was no evidence as to the value of the Upland Property in 1999. [33] Further, Mr. Rodway submits the trial judge erred in finding it would be unfair and inequitable to allow him no exemption forthe Upland Property.

He submits that his evidence showed the Corporation performed extensive work on the Family Home to improve itat no cost to the parties. Mr. Rodway also submits he performed improvements to Ms. Reardon’s home prior to its sale that increased itsvalue. 1. Failure of Mr. Rodway to establish the value of an exemption

[ 34 ] The trial judge held that Mr. Rodway had failed to discharge the onus of proving his entitlement to an exemption, stating as follows: [88] As indicated by the authorities cited, the initial onus rests upon the party asserting the entitlement to an exemption pursuant to ss. 23(1) of The Family Property Act . That party is obliged to prove both the existence of the claim and the extent of that claim. [89] Here, the respondent has failed to place before the court any evidence of the value of this property as at the effective date.

Rather, the respondent seeks to have the court select a value that might be seen to be fair. Essentially, the court is being asked to guess and select an arbitrary figure. [ 35 ] I see no basis to interfere with these conclusions. [ 36 ] Mr. Rodway makes no suggestion that the trial judge erred by stating that the party asserting the entitlement to the exemption “is obliged to prove both the existence of the claim and the extent of that claim” (at para 88): see Ackerman at paragraph 55 . [ 37 ] Mr.

Rodway did not provide evidence of the value of the Upland Property in 1999; instead, he provided evidence from a qualified appraiser of the value of the Upland Property for May 1, 2004, being two years after he claimed the relationship commenced, and evidence of the purchase price of the Upland Property in 1984. [ 38 ] At trial, Ms. Reardon did not take the position that the Upland Property had no value; rather, in the her closing remarks, she said that there was no value provided for the Upland Property for 1999. In response, the trial judge said: THE COURT: -- [Counsel for Mr.

Rodway] says in his Brief -- this isn’t the first position, this is a fallback position, that if the Court was to select 1999 as the appropriate time to assess whether the exemption is there, he says, Well [ sic ], look, the house was purchased for $66,000, so at a minimum that ought to be an exemption going forward. [ 39 ] There was no evidence presented at trial on whether there were any encumbrances on the Upland Property at the crystallization of the spousal relationship in October 1999. [ 40 ] Mr.

Rodway’s argument focused primarily on May 2004, which was the date he asserted was the crystallization of the spousal relationship. In his closing remarks, Mr. Rodway’s counsel said: So the value, as determined by [a real estate appraiser], as of the date we say the relationship began [May 2004], is $112,000. We suggest that that’s an exemption he ought to be given. There is currently 100,000 worth of equity in the property because it’s subject to the mortgage of [E.M.] of 150,000. We suggest the other 100 -- or the other 12,000 is accounted for in the 150, which Mr. Rodway put into the numbered company.

We suggest that to do fairness to the issue, let’s just take 112 for -- half of 112,000 off of the global equalization payment, to recognize this asset which he brought to the relationship. [ 41 ] Mr. Rodway testified that title to the Upland Property was free and clear on May 1, 2004. There is no reference in the transcript to potential encumbrances on the Upland Property in October 1999. [ 42 ] In cross-examination, Ms.

Reardon stated that she knew the mortgage on the Upland Property had been paid off, although there is no indication of when this had happened: Q And are you aware also that there is a $150,000 mortgage registered against the [Upland Property], given by [Mr. Rodway] in favour of [E.M.]? Do you dispute that those are family debts as well, that that’s -- A Yes. Q And on what basis do you dispute that? A I know that the mortgage on the [Upland Property] had been paid off.

The title had been free and clear, so I’m not sure why there was a new debt on it. [ 43 ] The historic certificate of title to the Upland Property lists several encumbrances on it before 1999 with no indication that they were ever discharged. This includes a mortgage registered on the property on February 27, 1997, for $36,000 to E.M. These liabilities were no longer registered against the property as of March 14, 2016, as reflected in a Land Titles Registry search of that date.

The Land Titles Registry only had the 1984 caveat registered against the property by E.M. and the 2010 mortgage held by E.M. registered against the Upland Property at that time. [ 44 ] The existence of the caveat held by E.M. could be significant in determining what the fair market value of the Upland Property was in 1999 because it could limit Mr. Rodway’s interest in the property. There is nothing in the transcripts that explains why this caveat was registered against the property, although it was registered the same day that Mr.

Rodway and his ex-wife became the registered owners of the Upland Property. [ 45 ] The only evidence in the Appeal Book that indicates the liabilities against the Upland Property were discharged is the October 10, 2013 property statement of Mr. Rodway. He wrote that the Upland Property was exempt from distribution because it was “paid off before we met”. The parties agreed that they met in early-to-mid 1997.

There is nothing else in the Appeal Book that indicates at what time, prior to 2016, the liabilities were discharged. [ 46 ] As the trial judge correctly noted, the party seeking an exemption has the burden of establishing the existence the amount

claimed. In this case, Mr. Rodway simply did not do so. He was aware Ms. Reardon was alleging the relationship commenced in October of 1997, but he did not bother to provide any evidence as to the value of the Upland Property as of that date. [ 47 ] The fair market value of a property is a question of fact to be determined by a trial judge. It is not necessary that the person claiming an exemption provide a professional appraisal of the value of the property on the relevant date for the exemption to apply. However, there must be sufficient evidence on which the trial judge can determine the fair market value.

Several decisions illustrate this point. [ 48 ] In Swystun v Janzen , 2016 SKCA 117 at paras 26–28 , 405 DLR (4th) 559 [ Swystun ], the respondent owned three properties at the commencement of the spousal relationship, which was November 2011. The only evidence of the value of the properties was an appraisal that occurred on December 3, 2012. The trial judge used the December 2012 appraisal in combination with the debt against the properties in existence on November 1, 2011, to determine the amount to be exempted.

In upholding the trial judge’s calculation of the fair market value, Herauf J.A stated: [30] The correct value of the property should be the value at the “commencement of the spousal relationship” (s. 23(1)), not the value at the time of application. However, the respondent testified that the values submitted by the appellant in the appraisal reports from December 2012 would be roughly the same as the values of the properties in November 2011.

Thus, in my view, there was evidence upon which the trial judge could have found that the December 2012 values were equal to the November 2011 values. [ 49 ] In Miller v Miller , 2008 SKQB 318 at para 112 , 65 RFL (6th) 198 [ Miller ], the respondent was gifted a parcel of land from his father in 1993, a year before the premarital exemption date.

The trial judge used the 1993 value of land as the fair market value for exemption date of April 1, 1994. [ 50 ] In Hrappsted v Hrappsted , 2000 SKQB 508 at para 25 , 198 Sask R 274 [ Hrappsted ], the respondent claimed an exemption for several parcels of land he purchased two years before the premarital exemption date. The respondent claimed that the value of the property almost doubled in the two years between purchase and marriage. Justice Dielschneider stated: [28] Nevertheless I cannot completely ignore the evidence adduced at trial.

I accept the respondent’s evidence that he purchased the SW29 for $18,000, the SW26 for $25,000, and the SW11 for $21,000 for a total value of $64,000. I do not accept the respondent’s evidence of the value of this land at the time of the marriage. The burden is upon the respondent to bring into court proof on a preponderance that what he contends for is true. On a balance of probability he has not satisfied the burden upon him.

I will however accept his evidence that he paid $64,000 for this land and, in the absence of more persuasive testimony, accept it as the 1979 value of the land. … [31] The discussion does not end here however. At the time of the marriage the land was mortgaged in the respective amounts of $16,920 and $22,500 for a total debt of $39,420. The respondent’s evidence is that when he married the petitioner the debt was “somewhat” less.

In the absence of better evidence, and rounding off the amount of the debt at $40,000, I find the land value brought into the marriage was $69,000 less the debt of $40,000 for a net value of $29,000. [ 51 ] In Wiebe v Farthing , 1999 SKQB 4 at para 29 , 184 Sask R 53, the Court denied an exemption for the land that was owned before the commencement of the spousal relationship because the respondent had failed to establish the fair market value of the interest in the property on the date of marriage. [ 52 ] As stated above, the burden of proving the fair market value is on the party claiming the exemption.

For the purpose of s. 23 of The Family Property Act , the fair market value of a property is the net value of the property at the relevant time. [ 53 ] While the Upland Property undoubtedly had value in 1999, the trial judge was presented with insufficient evidence to determine what the fair market value was at that time for the purposes of exemption under The Family Property Act . It is unclear from the evidence what the value of the property was in 1999 as well as whether there were any liabilities on the property at that time. A formal appraisal of the property in 1999 was not necessary, but Mr.

Rodway did not provide enough information to meet his burden of proving on a balance of probabilities the fair market value to be exempted. [ 54 ] In Swystun , Miller , and Hrappsted , cited above, the valuations given at trial were only one to two years removed from the date the claimant argued the premarital exemption should apply. Here, Mr. Rodway seeks to use a value some 15 years before the commencement of the spousal relationship. This valuation is so far removed from the date the premarital exemption should apply as to be useless. 2.

Unfair and inequitable to allow an exemption [ 55 ] Once the conditions of ss. 23(1) and 23(2) of The Family Property Act are satisfied, the burden shifts to the party contending against the exemption to satisfy the court that it would be unfair and inequitable to allow the exemption, having regard for the matters set out in ss. 23(5) and 21(3)(a)–(p) (see: Ackerman at para 55 ; Benson at para 56 ; and Deyell at para 6 ). In Ackerman , this Court stated: [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 to deference by this Court and should only be interfered with if the trial judge erred in principle, disregarded a material matter of fact or failed 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 this matter are governed by s. 23(5) of [ The Family Property Act ] . That subsection requires a trial judge to consider the factors set out therein in determining whether an exemption is unfair and inequitable.

In this case, while the trial judge considered whether the exemption was unfair and inequitable pursuant to s. 23(4), and in doing so took into account the amount of family property for division purposes, there is no indication 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 this case, that error had minimal impact on the final outcome as the factors, when weighed, do not favour disallowing the exemption in whole or in part. The only adjustment necessary is to disallow the trial judge’s decrease of the exemption by $8,580, being the amount of Ms. Ackerman’s equalization payment based on the trial judge’s calculation. Let me explain by reviewing the relevant factors. (Emphasis added) [ 56 ] In addition to rejecting Mr.

Rodway’s claim to an exemption based on the failure to prove its value, the trial judge also found that it would be unfair and inequitable pursuant to s. 23(4) of The Family Property Act to allow the exemption: [93] Here, [Ms. Reardon’s former home] was sold to purchase the [Family Home]. In the process, [Ms. Reardon] invested equity she had in the home to the benefit of both herself and [Mr. Rodway]. She also moved her furniture from this home to the [Family Home]. [Mr. Rodway] now shares in the equity in the [Family Home]. [94] In the circumstances, it would be unfair and unjust to allow [Mr.

Rodway] to keep the equity in [the Upland Property] and not permit a similar benefit to [Ms. Reardon]. As a result, in these circumstances, as well, I determine not to allow this exemption. [ 57 ] Because I see no basis to interfere with the trial judge’s decision that Mr. Rodway failed to establish entitlement to an exemption, there is no need to address Mr. Rodway’s arguments that the trial judge erred respecting s. 23(4) . However, I will briefly address Mr.

Rodway’s contentions. [ 58 ] Although there is no explicit indication in the Trial Decision which factors in s. 23(5) the trial judge considered, it seems evident that he was weighing the fact that both Mr. Rodway and Ms. Reardon had contributed to the overall family estate through their respective family homes. [ 59 ] On appeal, Mr. Rodway argues that the trial judge erred by failing to take into consideration the contributions he had made in “sweat equity”, both to the Family Home and to Ms. Reardon’s home before it was sold. [ 60 ] Mr. Rodway did not specify what factors in either ss. 23(5) or 21(3)(a)–(

p) these considerations would fall under, but it appears that he was referring to s. 23(5)(c), which would allow consideration of a contribution to the maintenance or improvement of property that is the subject of an exemption, or, perhaps, s. 23(5)(e), which allows the court to have regard to “any other relevant fact or circumstance”. [ 61 ] In my opinion, the contributions to the improvement of the Family Home do not hold any relevance to whether it is equitable to disallow the Upland Property exemption. The Family Home is excluded from consideration under s. 23 of The Family Property Act and Mr.

Rodway shares in the equity of the Family Home. I reject, as well, Mr. Rodway’s argument that the sweat equity he put into Ms. Reardon’s former home is a basis for an exemption. Ms. Reardon was not entitled to an exemption for the value of her premarital property because it had been sold in order to purchase the Family Home.

Section 20, which describes the purpose of The Family Property Act , proceeds on the assumption of the equality of contribution by spouses as the basis for an equal division of family property. That is the basis for Ms. Reardon losing any ability to claim an exemption based on her contribution of her former home to the overall family property. It would also be contrary to that purpose to recognize any contribution that Mr. Rodway made to increasing the value of Ms.

Reardon’s former home as a relevant factor favouring an unequal distribution to his benefit. [ 62 ] Based on this, in my view, the trial judge made no error in principle when he determined that, apart from the failure by Mr. Rodway to prove the value of an exemption for the Upland Property, it would be unfair and inequitable to allow for that exemption. [ 63 ] This ground of appeal must fail. B. Did the trial judge misapprehend the evidence regarding certain debts and err in not including these debts in the determination of family property? [ 64 ] At trial, Mr.

Rodway submitted that the $150,000 mortgage he had executed in favour of E.M. and that was registered against the Upland Property, and the $135,982 promissory note he had executed, also payable to E.M., should have properly been included as his personal debts in the calculation of family property. The trial judge rejected these arguments, stating as follows: [106] There are further debts which are said to be the business’ responsibility. These debts are in the amount of $150,000.00 (Exhibit R3, Tab 8) and $135,982.00 (Exhibit R3, Tab 9) and are payable to [E.M.] for money he testified he has lent to [Mr.

Rodway] for investment in the business. [107] The first amount, $150,000.00, is said to be secured by a mortgage against [the Upland Property]. Payments of the interest that is accruing are being made in the form of a forgiveness to [E.M.] for any rent payment while he lives at [the Upland Property]. On the second amount, there is no evidence of any payments having been made. It is signed for in the form of a promissory note. It does not appear there is any intention, or requirements to either pay, or make payments, on either of these debts.

At least, there was no evidence provided to a contrary effect. [108] The first amount is said to be secured by a mortgage on [the Upland Property] (Exhibit R3, Tab 8). While payments in the usual way are not being made, there are payments in the form of a forgiveness of rental payments on the home. The actual document is, however, not in the form of a registerable mortgage. That which was marked as an exhibit consisted of one page. There is no signature page. There are no terms. There is no indication it was this mortgage that was registered against the title to the property.

There is no indication of how this document could be legally enforceable and collectible. [109] The second amount is said to be evidenced by a promissory note (Exhibit R3, Tab 9). The funds appear to have been advanced December 28, 2011. Again, there is no sufficient explanation of why [Mr. Rodway] is indebted when the payment was made to the

business. There is no evidence of payments having been made on this debt. The Limitations Act , SS 2004, c L-16.1 [ The Limitations Act ], suggests enforcement of this amount is barred by the passage of time. [110] It appears from the business valuations performed by the witnesses called by each party, neither valuator took these loans into account in preparing their valuation of the business. Why that was not done is not explained.

How those debts would affect the ultimate value of the business is not known. [111] [E.M.] provided evidence he invested funds into the business in the total amounts as set forth in the two documents. Why this is then the debt of [Mr. Rodway] is not explained. Why the payment was not simply made directly to the business is similarly not explained. [112] As a result of all of the foregoing, I am not able to conclude there is any real intention to repay these loans in full, or even in part. It appears [E.M.] has provided the funds due to his friendship with [Mr.

Rodway]. [E.M.] is living rent free as a result of the interest set- off. There is nothing to convince the court on a balance of probabilities that any further payment will either be made by [Mr. Rodway], or, pursued by [E.M.]. The second amount does not appear to be legally enforceable. [113] In these circumstances and for the reasons given, I determine it would be unfair and inequitable to include these amounts in the calculation of the family property. Accordingly, these amounts will not form a deduction from the property amounts held by [Mr. Rodway]. [ 65 ] Mr.

Rodway argues that the trial judge committed palpable and overriding error in his fact-finding on this front. [ 66 ] I will first deal with the mortgage. Mr. Rodway testified the $150,000 was advanced to him personally by E.M. and was to be used for business purposes. He testified he granted a mortgage on the Upland Property to E.M. in the amount of $150,000 as security for repayment of this loan. In lieu of payments on the interest, Mr. Rodway said that E.M. lived in the Upland Property, free of rent.

E.M. confirmed these statements in his evidence. [ 67 ] One of the reasons given by the trial judge for rejecting an allowance for this debt was that he was not convinced as to the legitimacy of the mortgage document. Before this Court, Mr. Rodway applied to adduce, as fresh evidence, the entire mortgage that he says reflects this debt. Ms. Reardon takes no objection to its introduction into evidence. This evidence makes it clear that at the date of valuation there was a valid encumbrance on the Upland Property in the form of a mortgage for $150,000, and it is Mr.

Rodway, not the Corporation, who granted security in the form of the mortgage and who is ultimately liable for the debt. This mortgage reduces the value of the Upland Property for the purpose of family property division and, accordingly, an adjustment in value should be made to reflect this encumbrance on the title. [ 68 ] Mr. Rodway also says the trial judge erred in finding that E.M. gave the money to him due to his friendship with him. I agree with Mr. Rodway. There was no evidence of that fact. However, there was evidence, both from Mr.

Rodway and from E.M., that the funds were advanced, the mortgage was taken as security, and the loan was to be repaid. To that extent, it is my respectful view the trial judge erred. [ 69 ] Turning now to the promissory note, Mr. Rodway testified the funds were paid by E.M. to the Corporation, but, as reflected in the promissory note, the loan was advanced to Mr. Rodway personally. Mr. Rodway says the trial judge erred in finding there was no evidence of an intention to repay the note, as he says there was such evidence. [ 70 ] I agree with Mr. Rodway that there was evidence in the form of the testimony of Mr.

Rodway that the loan was repaid to E.M. in 2015. However, this error of the trial judge is without consequence. Unlike the registered mortgage, which shows that liability for the debt rests with Mr. Rodway, there was no evidence whether Mr. Rodway or the Corporation repaid the debt. The considerations that apply to the mortgage cannot apply to the promissory note. In the absence of such evidence, I cannot say the trial judge erred in disallowing the debt in determining family property.

The evidence was conflicting at best as to whether the loan was a personal loan or a loan to the Corporation. [ 71 ] It was unclear from the evidence before the trial judge where the ultimate liability for the debt was owed. The facts were that the loan was paid directly to the Corporation and not to Mr. Rodway. However, the loan does not appear in the Corporation’s financial statements, either as a debt or as a shareholder loan from E.M. (who is a shareholder in the Corporation), or from Mr. Rodway. Neither is it reflected as an equity injection.

It was unclear whether any of the debt that related to the promissory note had been repaid or whether Mr. Rodway or the Corporation would repay it. Under these circumstances, the trial judge made no error in disallowing this debt to be factored into the calculation of family property. [ 72 ] I agree with Mr. Rodway that the trial judge erred in finding that “ The Limitations Act … suggests enforcement of this amount is barred by the passage of time” (at para 109).

Section 10 of The Limitations Act provides as follows: Demand obligations 10 Unless otherwise provided in this Act, in the case of a default in performing a demand obligation, the day on which

an act or omission on which a claim is based takes place is the day on which the default occurs. Thus, if a default occurred in the future, the limitation period would run from the date of default, not the date of the promissory note. [ 73 ] However, this error does not affect the trial judge’s conclusion. As it was unclear whether Mr. Rodway or the Corporation repaid the debt, and it was unclear whether Mr. Rodway or the Corporation will make any future payments on the debt, the trial judge

did not err in declining to allow the amount of the promissory note to be deducted from the family property. Once again, Mr. Rodwayfailed to adduce the evidence necessary to establish his claim. It is he who must be faulted for this, not the trial judge. C. Did the trial judge misapprehend the evidence as to Mr. Rodway’sownership interest in the Corporation and err by attributing to him a 65% interestinstead of a 51% interest? [74] Mr. Rodway says his actual interest in the Corporation is 51%, and he testified to that effect.

However, the Corporation’sfilings with the Corporate Registry reflect he has a 65% interest. Mr. Rodway says this is incorrect, but he admits that he deliberatelycompleted the corporate documents to reflect he had a 65% interest in order to induce another shareholder, D.T., to become a 34%shareholder in the Corporation. [75] In the Trial Decision, the trial judge stated the following in connection with Mr. Rodway’s interest in the Corporation: [116] In response to this documentation, [Mr. Rodway] testified he only holds 51% of the issued shares of the corporation.

He indicatedthe representation of a 65% shareholding was done to encourage the third party to the business, a [D.T.], to invest the money which helater said he would invest. According to [Mr. Rodway], this was his way of causing the investment to be completed. [Mr. Rodway]points to photocopies of share certificates contained at Exhibit R3, Tab 16. Those share certificates indicate the following shareholdings:[E.M.], 15 shares; [Mr. Rodway], 51 shares; [D.T.], 34 shares. Those share certificates are all signed by [Mr. Rodway], as president ofthe corporation. The share certificates are not dated.

Neither do they contain the corporate seal. [117] The evidence of [E.M.] indicated [D.T.] had ultimately paid the amount required to then allow for his 34% interest to berecognized. What amount was paid is unclear from the evidence. The amount paid was not provided for in the testimony. Evidence ofsuch payment was not provided through the documents submitted. [118] There is no indication from [Mr. Rodway], or otherwise, throughout the relationship and following the issue of the petition, he didanything other than represent to the outside world his shareholdings were 65% of the outstanding shares.

According to the testimony of[Ms. Reardon], [Mr. Rodway] told her he held 65% of the issued shares of the company. [Mr. Rodway] was content to tell CanadaRevenue Agency, the Royal Bank, Information Services Corporation, and the general public, he was a 65% shareholder. Furthermore, hewas content in the context of these proceedings to initially represent he was the holder of 65% of the issued shares. [119] As a result of these representations, I do not accept [Mr. Rodway’s] present testimony as to what his shareholdings should be. Hisinterest in the corporation is 65% of the issued shares.

Throughout the relationship and following issue of the petition, [Mr. Rodway]was content to allow this representation to go forth. [120] Moreover, there is no evidence tendered either by [D.T.], or in the form of documents, evidencing any payment by [D.T.]. [D.T.]could, presumably, have been called. He was not. There is no indication of why he was not called. The court refers to Murray vSaskatoon (City), (SK CA), [1952] 2 DLR 499 (Sask CA), and the recent comments of this Court in Banford vMitchelson, 2016 SKQB 328.

Why this witness was not called to confirm the arrangements is a mystery. [121] However, quite aside from any suggestion of an adverse inference being drawn, it appears, according to the evidence, [D.T.] hadnot paid the funds into the corporation as at the date of commencement of these proceedings. Accordingly, he was not entitled to hisadditional shareholding interest, if [Mr. Rodway’s] evidence is accepted. [Mr. Rodway] was, according to his evidence, entitled to thisinterest unless and until the money was paid. As at the date of valuation, therefore, [Mr.

Rodway] held 65% the issued shares of thiscorporation. [76] As can be seen, there was conflicting evidence as to Mr. Rodway’s true interest in the Corporation, but all of the conflictoriginated from Mr. Rodway. There was evidence to support the trial judge’s conclusion that Mr. Rodway held a 65% interest in theCorporation as of the petition date. Perhaps this is not the evidence that Mr. Rodway prefers, but he is the author of the evidence. Therewas no error by the trial judge accepting the evidence he did. D.

Did the trial judge misapprehend the evidence as to the value of theCorporation and err by valuing the Corporation as of December 31, 2012, instead ofvaluing it as of the date of application? [77] The trial judge valued the Corporation as at December 31, 2012. Mr. Rodway says this approach contravenes The FamilyProperty Act, which provides a court may value family property either at the date of the application (here May 31, 2013), or at the dateof adjudication (May 8, 2017). As the trial judge did neither, Mr.

Rodway submits he erred. [78] The following passage from the Trial Decision reflects the trial judge’s reasoning: [122] The business valuators provided their opinions as to value as at December 31, 2012. [Mr. Rodway] seeks to have that valueactually set as of May 31, 2013, the date the petition was issued and these proceedings commenced. [123] Originally, when the action commenced, [Mr. Rodway] provided a balance sheet as at May 30, 2013 (Exhibit P1, Tab 18). It wasthat sheet that purported to contain information of the business as at that date. [Mr.

Rodway] then, later, sought to adjust many of theentries shown to reflect increased costs of the business. [124] I start by determining [Mr. Rodway’s] explanation in this regard was confused and confusing. He originally supplied thedocuments upon which [Ms. Reardon] relied for valuation. At that time, he did not indicate they were in error or incomplete. He later

sought to adjust a number of entries to, in the end result, lower the value of the company. There was no attempt made to equate those cost items with corresponding sales. For example, when were the corresponding sales or income amounts received? Were there corresponding sales? There was no explanation provided by the respondent in this regard. [125] [Ms. Reardon’s] business valuator … addressed this line of inquiry in his evidence.

He indicated that if the respondent’s May 31 adjustments are correctly applied, the conclusion to be drawn is that the business performed extremely poorly in the first five months of the year and then did extraordinarily well in the last seven months. He completed an analysis of the margins earned in those last seven months. He concluded such margins were higher than the historical margins earned by the business. … [130] This all creates uncertainty in both the accuracy and the reliability of the adjusting entries proffered by [Mr. Rodway].

The impression created is the adjusting entries were done solely to minimize the value of the company in these proceedings and not in accordance with generally accepted accounting practices. [Mr. Rodway’s business valuator’s] inability to opine using those adjustments reinforces this view. [131] Because there was no lasting or permanent impact on the business, those entries from May 31, 2013, ought not to be relied upon in isolation from everything that happened with the business.

While family property is to be valued as at the date of application, the court is compelled to utilize the most reliable evidence available to arrive at this value. For all of the foregoing reasons, I do not find [Mr. Rodway’s] adjustments to consist of the most reliable evidence. [132] The financial statement for the period ending December 31, 2012, has been completed by the accountant and is something both experts were prepared to rely upon in their valuation. I find this evidence to lead to the most reliable value for the business. [ 79 ] In my respectful view, Mr. Rodway misapprehends the Trial Decision.

I agree generally with the argument that The Family Property Act requires a court to value family property as of either the date of the application for division or the date of adjudication (i.e., trial date): see the definition of “value” at s. 2(1). However, properly understood, what the trial judge did was determine value on the basis of the petition date but accepted, as a proxy for the value on that date, the valuation as of the closest year-end. [ 80 ] The trial judge did this because, once again, he was unable to rely on Mr. Rodway’s evidence.

Specifically, he was unable to rely on the May 30, 2013, balance sheet of the Corporation as the adjustments that Mr. Rodway had suggested were unreliable. In the circumstances, the trial judge used the best evidence available to him. He did not err in so doing. VII. Conclusion [ 81 ] Throughout his judgment, the trial judge commented on the absence of evidence to support Mr. Rodway’s positions and the unreliability of Mr. Rodway’s evidence. The responsibility for this lack of evidence and lack of clarity must lie at Mr.

Rodway’s feet, and he cannot now successfully argue that the trial judge should have preferred his evidence. It is against this backdrop that the trial judge performed his function in assessing credibility and reliability, and deference must be shown to the trial judge in the exercise of this discretionary function. [ 82 ] I would allow Mr. Rodway’s appeal only to the extent of adjusting the value of the Upland Property from $250,000 to $100,000 to account for the mortgage registered against the title. [ 83 ] Although most of Mr. Rodway’s appeal is dismissed, he is partially successful.

Therefore, it is appropriate that each party will bear his or her own costs. “Whitmore J.A.” Whitmore J.A. I concur. “Schwann J.A.” Schwann J.A. I concur. “Leurer J.A.” Leurer J.A.