Frondall v Frondall, 2020 SKCA 135

Court of Appeal for Saskatchewan Docket: CACV3357 Citation: Frondall v Frondall , 2020 SKCA 135 Date: 2020-12-09 Between: Douglas Frondall Appellant (Petitioner) And Barbara Frondall Respondent (Respondent) Before: Schwann, Barrington-Foote and Tholl JJ.A. Disposition: Appeal allowed in part Written reasons by: The Honourable Madam Justice Schwann In concurrence: The Honourable Mr. Justice Barrington-Foote The Honourable Mr. Justice Tholl On appeal from: DIV 32 of 2016, Saskatoon Appeal heard: June 8, 2020 Counsel: Brent Barilla, Q.C., for the Appellant Sean Sinclair for the Respondent Schwann J.A. I.

Introduction [ 1 ] This is an appeal from a Queen’s Bench decision following trial.

In his written reasons released on December 13, 2018, the trial judge directed Douglas Frondall to pay Barbara Frondall $863,480 to equalize the division of the family property and awarded her monthly spousal support of $8,250 for an indefinite duration ( Frondall v Frondall (13 December 2018) Saskatoon, DIV 32 of 2016 (Sask QB) [ Judgment ]). [ 2 ] The trial judge dealt with retroactive spousal support in a subsequent addendum to the Judgment ( Frondall v Frondall (9 November 2019) Saskatoon, DIV 32 of 2016 (Sask QB) [ Addendum ]) .

The Addendum corrects an error in the Judgment concerning a credit that had been made in Mr. Frondall’s favour and also concludes that Mr. Frondall had overpaid spousal support by $70,601, less income tax paid by Ms. Frondall on that amount. [ 3 ] Mr. Frondall appeals from both the Judgment and the Addendum , alleging numerous errors of fact and law on the part of the trial judge. For the reasons that follow, I would allow Mr.

Frondall’s appeal with respect to the pre-tax value of two of the companies, set aside the trial judge’s decision to impute income to him, determine the amount of his income for spousal support purposes, adjust the amount of monthly spousal support payable to Ms. Frondall, and provide him with an additional credit to offset against spousal support for 2018. In all other respects, Mr. Frondall’s appeal must be dismissed. II. Basic facts [ 4 ] Mr. Frondall and Ms. Frondall were married in 1986. They have three children, all of whom are grown and independent.

The parties separated in 2015 and the petition in this matter was issued in November of that same year. [ 5 ] Apart from periods of maternity leave following the birth of their children, Ms. Frondall had worked outside the home throughout the marriage. Ms. Frondall has a university degree in computer sciences and worked as a computer programmer and, more recently, as a business systems development manager. Ms. Frondall retired in 2011 due to ill health. She was 55 years of age at the time of trial. [ 6 ] Mr.

Frondall holds numerous qualifications and professional designations, namely, chartered professional accountant, certified management accountant, certified valuation analyst, fellow chartered professional accountant and chartered merger and acquisitions professional. For the better part of their marriage, Mr. Frondall was the managing partner of a group of companies called Virtus Group [Virtus] until he accepted a buyout in 2014. At the time of trial in 2017, Mr.

Frondall worked as a consultant for Virtus and did merger and acquisition consulting work on the side through his firm Transitus Mergers and Acquisitions Inc. [Transitus]. Mr. Frondall was 58 years of age at the time of trial. [ 7 ] While the parties were able to resolve many of the property issues prior to trial, they remained firmly divided on spousal support and the valuation of some of the family property, notably the share value of the Doug Frondall Group of Companies [DFGC]. DFGC consists of Doug Frondall Prof.

Corp., Kaizen Holdings Ltd. [Kaizen] and Debrenlar Holdings Ltd. [Debrenlar]. [ 8 ] Both parties tendered expert witnesses at trial to express an opinion on the value of DFGC. Mr. Frondall relied on his friend and former business partner, Neil Weber. Ms. Frondall called Keith Thomson. Neither party objected to the qualifications of the other’s expert. In addition to how the trial judge handled the expert opinion evidence of Mr. Weber, Mr. Frondall asserts he made five

fundamental errors in how he valued and divided the family property that was in dispute. [9] With respect to spousal support, Mr. Frondall conceded entitlement and duration but sought to have significant incomeimputed to Ms. Frondall. The parties advanced vastly different positions about Mr. Frondall’s income. Mr. Frondall asserts the trial judgemade multiple errors respecting his determinations on the spousal support issues, ranging from the income of the parties, the quantum ofgo-forward support and retroactive support for the period of November of 2015 to December of 2018. III. Analysis A.

The Expert Evidence [10] The trial judge began his decision by addressing the expert reports and testimony that had been presented by the parties at trial.Mr. Thomson, who had been called by Ms. Frondall to express an opinion on the share value of DFGC, certified that – as per Rule 5-37 ofThe Queen’s Bench Rules – his opinion was objective, non-partisan and that he was aware his duty was to the court and had made hisreport in conformity with that duty. [11] Mr. Frondall relied on the expert evidence of Mr. Weber who did not certify that his report was independent.

The trial judgemade the following observations in relation to Mr. Weber’s report: [13] … Quite the opposite. At the opening of his written report, which he said was an “Advisory Report”, Mr. Weber writes: As Mr. Frondall is a previous Partner of Virtus Group LLP, and currently acts as a Senior Consultant, we are acting in an advisorycapacity and have not been engaged to prepare an independent Calculation of Value Report as to the value of the shares of the FrondallGroup.

Therefore, it must be clearly understood that the calculation of value and comments in the following advisory report do notconstitute our independent calculation with respect to the Fair Market Value of the shares of the Company. … • The methodology used within the report primarily relates to mathematical calculations, with most [of] the assumptionsprovided by Mr. Frondall, and the balance of the calculations primarily involving the calculation of inherent taxes. (Emphasis added in the Judgment) [12] The trial judge’s observations were supported by Mr. Weber’s testimony.

He was upfront with the Court by making clear thathis testimony and report was advisory in nature and not independent insofar as his opinions were based on assumptions that had beenprovided to him by Mr. Frondall. Based on Mr. Weber’s own position, the trial judge summarized that expert’s role in this manner: [14] … Mr. Weber testified in direct examination that: [W]e simply took assumptions from Mr.

Frondall, applied mostly mathematical formulas associated with those calculated inherent tax andany assumptions that we would have to make were fully disclosed and identified within the report. [13] As noted, neither counsel objected to the admissibility of the other’s expert opinion. Ms. Frondall chose to explore theweaknesses in Mr. Weber’s report through cross-examination that largely focussed on his close relationship with Mr. Frondall and the factthe assumptions used in the preparation of his report had been provided to him by Mr. Frondall.

This caused the trial judge to ask himselfwhat use he could make of Mr. Weber’s evidence in light of those factors since both called into question his independence, which the trialjudge recognized as “a threshold issue that must be addressed as part of the judge’s gatekeeper function” (at para 15). [14] The trial judge considered the factors applicable to the admissibility of expert evidence – drawing a distinction betweenadmissibility and weight.

Dealing first with admissibility, he appropriately referenced R v Mohan, (SCC), [1994] 2 SCR 9[Mohan]: relevance, necessity, absence of an exclusionary rule and a properly qualified expert, he observed, were the applicable factors atthe gatekeeper stage.

Even if the expert evidence meets the Mohan criteria, quoting from White Burgess Langille Inman v Abbott andHaliburton Co., 2015 SCC 23 at para 24, [2015] 2 SCR 182 [White Burgess], the trial judge went on to note the existence of a residualdiscretion: “At the second discretionary gatekeeping step, the judge balances the potential risks and benefits of admitting the evidence inorder to decide whether the potential benefits justify the risks” (Judgment at para 16).

Finally, the trial judge commented on the need forthe expert opinion to be independent. [15] With regard to the issues of impartiality and independence, the trial judge observed that a reasonable person might detect a“whiff of potential bias” (at para 18) because Mr. Weber and Mr. Frondall were friends, former business partners in Virtus, and currentlyenjoy a work relationship. In the end, the trial judge concluded that, while it may have been unwise for Mr.

Frondall to have called anexpert with such close personal connections, he did not find that fact, on its own, to be sufficient “to render his evidence to beinadmissible” (emphasis added, at para 19). [16] The real issue, as the trial judge saw it, arose from Mr. Weber’s perceived lack of independence because his opinions were “notthe product of the exercise of his own expertise. Rather, as he clearly stated, he relied on [Mr. Frondall’s] assumptions and performedmathematical calculations based on those assumptions” (at para 20). In this respect, the trial judge saw parts of Mr. Weber’s opinion as anattempt by Mr.

Frondall to slide his opinions through the back door via his expert. [17] Given Ms. Frondall’s approach to Mr. Weber’s evidence, coupled with the fact all of the evidence was in and arguments hadbeen made, the trial judge found himself in a conundrum at the time of writing his decision. He stated that he could either (

a) overrideMs. Frondall’s “tacit consent to the admissibility of Mr. Weber’s report and testimony” (at para 24), or (

b) apply White Burgess to findMr. Weber’s evidence inadmissible. The trial judge opted instead for the following approach:

[25] … the reasonable approach is to disregard Mr. Weber’s opinions that were based solely or primarily on assumptions or opinions that[Mr. Frondall] provided to him (for example, in respect of the value of the Las Palapas investment). There are, however, some areas inwhich Mr. Weber expressed opinions using valuation methodologies that Mr. Thomson testified were valid (for example, the use of acapitalization rate to determine the gross value of the Plainsman Plaza investment). There are gray areas between those two examples towhich I will accord a lesser weight to Mr.

Weber’s opinions. [18] The trial judge concluded his remarks on the expert evidence issue by emphasizing the point that, even though Mr. Thomsonhad the expertise and was independent, he was not required to accept all of Mr. Thomson’s opinions. As the trial judge properly noted, therole of an expert is to assist the court, while the role of the court is to render a decision. 1. The standard of review [19] The appropriate starting point is the standard of review. The selection and application of the standard of review is significantgiven Mr.

Frondall’s overarching assertion that the erroneous choice of expert opinion in this case resulted in findings of fact that areplainly wrong, amount to an injustice and are unreasonable. I understand Mr. Frondall’s argument to be this. He contends the trial judgemisapplied White Burgess and, broadly speaking, erred in his preference of Mr. Thomas’s evidence over Mr.

Weber’s because hemisunderstood that both experts had developed their respective opinions from the same set of facts and information. [20] The admissibility of an expert’s evidence is a question of law “reviewable for correctness insofar as the proper articulation andapplication of the legal test is concerned” (R v Dominic, 2016 ABCA 114 at para 17, 335 CCC (3d) 178). Absent an error in principle,deference is owed to trial judges in relation to their decision to admit or reject expert evidence: Hess v Thomas Estate, 2019 SKCA 26 atpara 30, 433 DLR (4th) 60, and R v Chung, 2018 SKCA 70 at para 16.

In R v D.D., 2000 SCC 43, [2000] 2 SCR 275, the Supreme Courtexpressed the principle in this way: “Where the record clearly does not support a finding of admissibility on the basis of the Mohancriteria, the Court of Appeal may rule that the evidence should not have been admitted” (at para 13). As it pertains to a trial judge’sdecision to admit or reject evidence, absent an error in principle, appellate deference is owed to the decision of the trial judge. [21] This case was about the valuation of certain family property.

Valuation is a question of fact that attracts the deferential palpableand overriding error standard of review: Kassian v Kassian, 2019 SKCA 101 at para 74, 33 RFL (8th) 333 [Kassian]; Ackerman vAckerman, 2014 SKCA 137 at para 25, [2015] 6 WWR 626 [Ackerman]; and Tether v Tether, 2008 SKCA 126 at para 21, [2009] 4 WWR274 [Tether].

Where a decision on value is premised on the expert opinion of one qualified expert over another qualified expert, therelated findings of fact are accorded deference on appeal: Kassian at para 74, Stelter v Stelter, 2012 SKCA 117 at para 31, 405 Sask R 63,and Kolibab v Tenneco Canada Inc. (1999), (SK CA), 180 Sask R 278 (CA) at para 8.

This point accords with whatthis Court said in Labreque v Labreque, 2014 SKCA 59, 43 RFL (7th) 71: “it is the function of the trial judge, when faced with competingopinions from professional witnesses, to accept or reject all or parts of the evidence” (at para 29). [22] With respect, Mr. Frondall’s assertion that a reasonableness standard of review applies to the selection of which expert opinionevidence to accept is incorrect. Mr. Frondall’s suggested approach ignores the deferential standard of review applicable to the admissionor rejection of expert evidence absent an error in principle.

Furthermore, his position ignores the nature of the errors specifically identifiedin his grounds of appeal and the differing standards of appellate review they attract. [23] Mr. Frondall’s secondary argument goes to the weight the trial judge assigned to the expert evidence. Citing this Court’sdecision in Arslan v Sekerbank T.A.Ş., 2016 SKCA 77 at para 50, 400 DLR (4th) 193 [Arslan], Mr. Frondall argues that findings of factand inferences drawn from those facts are subject to a reasonableness standard of review. Respectfully, Mr. Frondall’s reliance on Arslanis misplaced.

As this Court made clear in Arslan, weight is a question of fact and, as Caldwell J.A. observed, “this Court, after a trial withviva voce evidence, would normally defer to the judge, absent palpable and overriding error” (at para 50). However, as Caldwell J.A. wenton to note, based on this Court’s earlier ruling in Valley Beef Producers Co-operative Ltd. v Farm Credit Corporation, 2002 SKCA 100 atparas 117–118, 218 DLR (4th) 86, a reasonableness standard is to be applied to affidavit evidence.

Whether that standard continues toapply to affidavit evidence is doubtful given the Supreme Court’s subsequent ruling in Mowatt v Nelson (City), 2017 SCC 8, [2017] 1SCR 138. However, since we are dealing with viva voce evidence and not affidavit evidence, I need not explore that aspect any further. [24] With that, I turn to Mr. Frondall’s specific arguments. 2. Failure to object at the admissibility stage [25] Mr. Frondall’s first argument raises a question of law. He argues that Ms. Frondall’s failure to object to the admissibility ofMr.

Weber’s opinion evidence at the threshold qualification stage forfeited her right to subsequently challenge or contest the weight thatshould be assigned to his evidence. [26] As noted above, Mohan stipulates four requirements for the admission of expert evidence: a properly qualified expert,relevance, necessity and the absence of an exclusionary rule. The party seeking to adduce expert opinion evidence must establish thoserequirements at the first step of an admissibility analysis (White Burgess at para 53).

Once established, the trier of fact must go on to thesecond gatekeeping step and balance the “potential risks and benefits of admitting the evidence” (at para 24). [27] White Burgess resolved the question of where issues of independence and impartiality are positioned in the analyticalframework.

Speaking for the Court, Cromwell J. approached this issue from the perspective of an expert’s duty to the court, which he saidis to be “fair, objective and non-partisan …” (at para 10) and whether “the relationship or interest results in the expert being unable orunwilling to carry out his or her primary duty to the court to provide fair, non-partisan and objective assistance” (at para 50). A discussionof this duty is found in Wise v Abbott Laboratories Ltd., 2016 ONSC 7275, 34 CCLT (4th) 25 [Wise]: [60] … An expert witness has a special duty to the court to provide fair, objective and non-partisan assistance.

This special duty iscomprised of impartiality, independence, and the absence of bias. The expert must be impartial in the sense that he or she is expressingtheir own unbiased professional objective assessment. The expert must be independent in the sense that his or her opinion is the product oftheir own, independent judgment based on their own knowledge and judgment and uninfluenced by the litigant who retained them. Theexpert must be unbiased in the sense that he or she does not favour one litigant’s position over another. The fact that an expert is paid by

one of the litigants does not, standing alone, undermine the expert’s impartiality, independence, or freedom from bias. [28] The duty spoken of in White Burgess is summarized in the Canadian Encyclopedic Digest (CED 4th (online), Evidence,“Independence” (IX.3(e)(iii)) [CED Evidence]): §511 … A proposed expert witness who is unable or unwilling to comply with this duty is not qualified to give expert opinion evidenceand should not be permitted to do so.

Less fundamental concerns about an expert’s independence and impartiality should be taken intoaccount in the broader overall weighing of the costs and benefits of receiving the evidence. (Footnotes omitted) [29] Having framed things in this way, Cromwell J. then outlined the procedure and shifting burden associated with those sorts ofconcerns. Once a proposed expert expressly recognizes and accepts his or her duty is to the court, that testimony is generally sufficient toestablish that the witness meets the duty.

The burden then shifts to the opposing party to persuade the court that the opinion evidenceshould not be received because of that expert’s inability or unwillingness to comply with the requisite duty (White Burgess at para 48). [30] In his decision, I am satisfied the trial judge properly identified the two-step process relating to the admissibility of expertevidence prescribed by White Burgess.

He was alert to the concept of an expert’s duty to the court and, quoting from White Burgess (inturn quoting from National Justice Compania Naviera S.A. v Prudential Assurance Co., [1993] 2 Lloyd’s Rep 68 at para 27 (QB)), notedthat “[e]xpert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced asto form or content by the exigencies of litigation …” (Judgment at para 17). While the trial judge noted a “whiff of potential bias”, hisprimary concern was with Mr. Weber’s independence. From this, the trial judge said that “[Mr.

Frondall] had provided his opinionsthrough Mr. Weber” (at para 21). I pause here to note that no appeal has been taken from those findings. [31] However, as the trial judge went on to observe, Ms. Frondall did not challenge Mr. Weber’s independence at the qualificationstage; instead, questions along those lines came up during cross-examination. While I am satisfied the trial judge identified the applicablelaw, the question raised by this appeal is whether he applied it properly. [32] To assess this issue, it is necessary to recount what transpired at trial.

Unfortunately, the expert opinion issue in this matter didnot unfold in the manner outlined in White Burgess. At the commencement of trial, counsel for Mr. Frondall informed the trial judge thatthe parties intended to call two expert witnesses: Mr. Weber and Mr. Thomson. As mentioned above, Mr. Weber felt obliged tocharacterize his work product as an “Advisory Report as the Calculation of Value” [Advisory Report], because Mr. Frondall was hisprevious partner in Virtus and was currently a senior consultant with that partnership. Mr.

Weber testified that he was comfortable withaccepting the engagement because, as he put it, he “simply took assumptions from Mr. Frondall, applied mostly mathematical formulasassociated with those, calculated inherent tax, and … any assumption that we would have to make were disclosed and identified within thereport”. Importantly though, Mr. Weber did not certify to his independence as required by Rule 5-37 of The Queen’s Bench Rules.

Amongother things, Rule 5-37 stipulates that an expert’s duty is to assist the court and provide opinion evidence “that is objective and non-partisan” (Rule 5-37(2)(a)). [33] In spite of this state of affairs, Ms. Frondall did not object to the admissibility of Mr. Weber’s opinion evidence. Her lack ofobjection was presumably based on counsel’s agreement in advance of trial as evidenced by the following exchange at the start ofMr. Weber’s testimony: MR. SINCLAIR [counsel for Mr.

Frondall]: … just for simplicity’s sake … inadvance of this, [we] have had a discussion and agree that -- that the -- therespective expert witnesses don’t need to go through the full qualification process.THE COURT: All right. Thank you very much.…THE COURT: … so Mr. Weber is being qualified to give expert opinion evidencein the areas of providing a calculation of the value of 100 percent of the issued andoutstanding shares of the Doug Frondall Group of companies as at November the6th.

Namely, Doug Frondall CPA Professional Corporation, Kaizen Holdings, andDebrenlar Holdings Ltd. [34] On the surface, given how both counsel approached the expert evidence issue, the trial judge was not asked to rule on theadmissibility of Mr. Weber’s opinion. Neither counsel alerted the trial judge to Mr. Weber’s failure to file a Rule 5-37 form, nor didMs. Frondall express any concern with his objectivity and partiality at the outset of his testimony. [35] As noted above, this unsatisfactory state of affairs left the trial judge to wonder what use he could make of Mr.

Weber’sevidence when it came time to write his decision. As he saw things, it left him with the choice of either overriding Ms. Frondall’s consentor holding that – in spite of her failure to object – Mr. Weber’s evidence was inadmissible. As he adroitly noted, “That makes for a toughcall after all of the evidence is in and final arguments have been made” (at para 24). [36] Finally, it is worth noting that Mr. Frondall did not object to Ms. Frondall’s line of cross-examination in relation to Mr. Weber’spersonal connections with him or Mr. Weber’s independence; nor did he argue at trial that Ms.

Frondall had forgone the opportunity toobject once she had conceded admissibility. True, Mr. Frondall objected to questioning about the valuation process, but that concernrelated to the data provided to both experts by him and not to the admissibility or weight of Mr.

Weber’s evidence. [37] The danger of admitting opinion evidence that has not been properly vetted at the threshold admissibility stage has beenrecognized in numerous decisions: see, for instance, Mohan at 21, R v Clark (2004), (ON CA), 181 OAC 276 (CA),and J.P. v British Columbia (Children and Family Development), 2017 BCCA 308, 1 BCLR (6th) 17 [J.P.].

The Court of Appeal forBritish Columbia put it this way in J.P.: “The difficulty with admitting opinion evidence that has not properly been vetted for thresholdadmissibility is that it may have insufficient probative value and, accordingly, cause significant prejudice by distorting the fact-findingprocess” (at para 224). This approach is reflected in the following excerpt from Alan Bryant, Michelle Fuerst, and John Sopinka in The

Law of Evidence in Canada, 5th ed (Toronto: LexisNexis, 2018) (QL): §12.148 The Supreme Court of Canada and appellate decisions have emphasized the importance of the trial judge’s gatekeeper role in thecontext of determining admissibility of expert evidence. Judges should no longer admit expert evidence with impunity and only analyzefrailties in the evidence in weighing the evidence.

Instead, at the second stage of the Abbey analysis of admissibility of expert evidence,courts must weigh the strength or cogency of the evidence against its potential prejudice in the sense that it may be used by the trier of factfor an impermissible purpose, may create unfair prejudice against the opponent, or may confuse or mislead the trier of fact, therebyrendering the trial unfair, or result in an inefficient and costly trial. [38] Where the appropriate screening is not carried out at the threshold admissibility stage, the evidence should be excluded: WhiteBurgess at para 23 and Compton v Toyota Canada Inc., 2019 NLCA 79 at para 56, 58 MVR (7th) 12 [Compton].

Trial judges must bevigilant to issues of this sort and properly exercise their gatekeeping function at the admissibility stage and not leave it to a question ofweight: see R v J.-L.J., 2000 SCC 51 at para 28, [2000] 2 SCR 600. [39] This leads to the issue of whether a party’s failure to object to the admissibility of the other party’s expert evidence precludesthat party from raising issues about the impugned evidence in the context of weight.

This issue came up in Compton, where the Court ofAppeal for Newfoundland and Labrador had little difficulty concluding “the absence of an objection to admissibility is not determinative”(at para 74).

Quoting from R v Graat, (SCC), [1982] 2 SCR 819 at 823, that court went on to note that “the failure by aparty to ‘object to the admission of inadmissible evidence’ would not ‘stand in the way of directing a new trial if such evidence is held tobe inadmissible’” (Compton at para 74). [40] In Wise, both parties submitted that the other side’s expert witness was partial, dependent and biased but neither objected at thethreshold admissibility stage. Instead, the parties suggested the other party’s expert opinion evidence be given no weight. The courtrejected that argument.

It found it to be “misconceived, illogical, intellectually dishonest, and inconsistent with the trend of the moderncase law, which is to tighten the admissibility requirements and not to leave evidentiary matters to the weight to be given the evidence” (atpara 65). The court rejected counsel’s suggestion to admit the evidence but give it diminished weight. However, Wise was concerned witha very different situation. There, the court was faced with a binary choice: admit the evidence if the expert was qualified or exclude it in itsentirety. This is not the situation here.

Wise does not stand for the proposition that concerns as to independence or impartiality, regardlessof the nature and extent of those concerns, must always result in the exclusion of opinion evidence. Nor does it mean that such concernscan never be considered in determining weight. [41] Where does all of this leave me? After careful consideration of the law, the positions of the parties at trial and how thingsplayed out before the trial judge, I find myself unable to give effect to Mr. Frondall’s argument. I come to this decision for several reasons. [42] First, Mr.

Frondall has cited no authority for the proposition that a party’s failure to object to the admissibility of the otherparty’s proposed expert on grounds of partiality or bias disqualifies the party from making submissions about the weight to be assigned tothat evidence at a later stage in the proceedings. [43] Second, both parties consented to the admissibility of the other’s expert evidence. While their consent did not relieve the trialjudge from his gatekeeping responsibilities, the parties obviously put their minds to Mr.

Weber’s unique situation, yet were – on the faceof it at least – comfortable with the court receiving his testimony. Furthermore, when counsel for Ms. Frondall cross-examined Mr. Weberon these very issues, Mr. Frondall did not object to a line of questioning probing Mr. Weber’s independence and impartiality, even thoughits purpose was obvious. [44] Third, Mr. Frondall chose to tender Mr. Weber as his expert witness in spite of their close personal and professionalconnections. Moreover, he knew that Mr.

Weber had not certified his independence and impartiality through a Rule 5-37 form. [45] Fourth, as I read his decision, the trial judge did not find Mr. Weber to be partial in the sense that he lacked an unbiasedprofessional, objective assessment. His concern was whether Mr. Weber’s opinion was the product of his own, independent judgmentuninfluenced by Mr. Frondall. That said, I do not interpret the trial judge’s reasons as actually having made a finding of fact on that point. [46] Fifth, having admitted Mr.

Weber’s Advisory Report and testimony into evidence, the trial judge was not obliged to thenblindly accept his opinion on each and every issue, nor was he prevented from assigning it varying weight. This approach is consistentwith the important role of the trial judge, as pointed out in CED Evidence: §544 At the end of the trial, the trier of fact must assess the expert evidence along with all the other testimony. The trier of fact is notobliged to accept any aspect of the expert opinion, even where it is uncontradicted: R. v. Abbey (1982), (SCC), [1982] 2S.C.R. 24 (S.C.C.); Dorion v.

Roberge (1991), (SCC), 78 D.L.R. (4th) 666 (S.C.C.). [47] To simply conclude that Mr. Weber’s evidence must have been accepted by the trial judge and not be assessed as to its weightis irreconcilable with the role of a trier of fact. A trial judge is not obliged to accept an expert’s opinion even where it is uncontradicted. Atrial judge may prefer the evidence of certain witnesses over others and “place more weight on some parts of the evidence than others …”(Northrock Resources v ExxonMobil Canada Energy, 2017 SKCA 60 at para 10, [2017] 12 WWR 369).

Finally, as pointed out in Robergev Bolduc, (SCC), [1991] 1 SCR 374 at 430–431, an expert is not the final arbiter of the issues at play and a trial judge isnot obliged to accept the testimony of a witness even if his or her evidence was admissible. [48] Even if I were to agree with Mr. Frondall’s argument, he has not offered a remedy or explained where all of this would lead. Forinstance, he has not suggested that Mr. Thomson’s opinions should be rejected outright and Mr. Weber’s opinion adopted, nor has heasked for the trial decision to be set aside and a new trial ordered.

But, if he had asked for a new trial, that hardly seems a fair result sinceit was Mr. Frondall who had tendered an expert with close personal and professional connections. [49] In the end result, while I do not condone how the trial judge dealt with this matter at the trial, I find his path forward in dealingwith this issue to have been both fair and reasonable in the circumstances.

3. Weight of expert evidence [50] By way of a second argument, Mr. Frondall contends the trial judge ought not to have preferred Mr. Thomson’s evidence overMr. Weber’s because both experts were asked to offer an opinion on the share value of the DFGC group of companies based on the sameset of documents and information that had been provided to them by Mr. Frondall. Since both experts clarified this to be the case,Mr. Frondall argues there was no basis for the trial judge to have been critical of Mr.

Weber’s lack of independence and that, in any event,his role was limited to doing mathematical calculations and calculating the tax ramifications, if any. [51] While Ms. Frondall concedes both experts used the same documents and information to inform their opinions – whichoriginated from Mr. Frondall – she maintains on appeal that Mr. Weber went beyond that data set. She says Mr. Weber relied on certainopinions and assumptions that had been provided to him by Mr. Frondall and, further, that some of the assumptions included inMr.

Weber’s Advisory Report and testimony were personal in nature rather than professional. [52] In general terms, I see no obvious error with how the trial judge dealt with Mr. Weber’s opinion evidence. The trial judge choseto disregard the portions of his evidence that were based solely or primarily on assumptions or opinions that had been provided to him byMr. Frondall. That is a qualitatively different thing from preparing an opinion from shared data. In any event, as will become apparent inthe discussion that follows, the trial judge actually accepted Mr.

Weber’s opinion in relation to some of the corporate assets; and, wherehe found Mr. Weber’s testimony to fall somewhere between those two absolutes, he accorded Mr. Weber’s testimony a lesser weight. Asthis Court noted in Clemens v McGruther, 2019 SKCA 46 at para 34 [Clemens], the privileged position of the trier of fact and thedeferential standard of review do not leave much room for appellate intervention on the broad question of weight.

Simply put, “It is notthe function of an appellate court to reconsider the expert evidence and come to a different conclusion” (Clemens at para 34): also seeKolibab v Tenneco Canada Inc., (SK CA), [2000] 1 WWR 590 (Sask CA). [53] The trial judge provided cogent reasons in each instance as to why he preferred Mr. Thomson’s opinion and rejectedMr. Weber’s – or, conversely, accepted Mr. Weber’s opinion but rejected Mr. Thomson’s. Given the deferential standard of review, I seeno overarching error in how the trial judge dealt with the issue of weight. The real question raised by Mr.

Frondall’s appeal is whether theevidence could not reasonably justify the conclusions reached by the trial judge: see Joseph Brant Memorial Hospital v Koziol, (SCC), [1978] 1 SCR 491 at 504. [54] I will now turn to how the trial judge dealt with the disputed property with those principles in mind. B. Property Issues 1. Standard of review [55] Division of family property engages various standards of review. Those standards were helpfully summarized in Riley v Riley,2011 SKCA 5, 336 Sask R 110 [Riley]: [5] When an appellate court reviews a decision of a trial court, three standards of review are usually engaged: (

i) the standard of reviewconcerning questions of law, i.e., did the trial judge decide all questions of law correctly (see: Housen v. Nikolaisen, 2002 SCC 33 atpara. 8, [2002] 2 S.C.R. 235); (ii) the standard of review as to factual findings, i.e., did the trial judge make any palpable and overridingerror with respect to a material finding of fact (see: Lensen v. Lensen, (SCC), [1987] 2 S.C.R. 672 at p. 683 and Housen atpara. 10); and (iii) the standard of review with respect to discretionary matters, i.e., did the trial judge consider all relevant matters (see:Friends of the Oldman River Society v.

Canada (Minister of Transport), (SCC), [1992] 1 S.C.R. 3 at 76–77 and thecases referred to therein). [56] Riley went on to address how the standard of review fits within the broader context of entitlement and valuation under TheFamily Property Act, SS 1997, c F-6.3 [FPA]: [5] … Given the provisions of The Family Property Act, with its emphasis on a “fair and equitable” distribution of property, considerabledeference is owed to the trial judge’s overall decision as to entitlement and valuation (see: The Family Property Act, ss. 21(2), 22(1) and23(4); Russell [(1999), (SK CA), 179 DLR (4th) 723 (CA)] at paras. 19 and 71; and Muranetz-Dubelt v.

Dubelt, 2010SKCA 5 at para. 12, 343 Sask. R. 215). While the standard of appellate review permits a court of appeal to intervene in the face of an errorof law, a palpable and overriding error of fact, or an abuse of discretion, the court must be aware that disturbing one of a trial judge’s manydecisions as to entitlement to family property, or its valuation, may disturb the overall equities that have been achieved in arriving at whatconstitutes a fair and equitable distribution.

The standard of appellate review in family law matters reflects this deference to the trialjudge’s overall distribution of family property. [57] A determination of value is a question of fact subject to the palpable and overriding error standard of review.

As it pertains todiscretionary decisions, an appeal court may only intervene where the trial judge is found to have erred in principle, misapprehended orfailed to consider material evidence, failed to act judicially, or where the result is “so plainly wrong as to amount to an injustice and inviteintervention on that basis” (Rimmer v Adshead, 2002 SKCA 12 at para 58, [2002] 4 WWR 119 [Rimmer]): also see Strom v SaskatchewanRegistered Nurses’ Association, 2020 SKCA 112 at para 60–63 [Strom].

Another formulation of this standard is found in Penner vNiagara (Regional Police Services Board), 2013 SCC 19, [2013] 2 SCR 125 [Penner], where the Court said this: [27] A discretionary decision of a lower court will be reversible where that court misdirected itself or came to a decision that is so clearlywrong that it amounts to an injustice: Elsom v. Elsom, (SCC), [1989] 1 S.C.R. 1367, at p. 1375. Reversing a lowercourt’s discretionary decision is also appropriate where the lower court gives no or insufficient weight to relevant considerations: Friendsof the Oldman River Society v.

Canada (Minister of Transport), (SCC), [1992] 1 S.C.R. 3, at pp. 76–77. [58] While these authorities provide that a failure to give any or sufficient weight to a relevant consideration may give rise to error,as this Court recently said in Strom, “it must be kept in mind that the allocation of weight is, within the limits of the discretion granted, forthe initial decision-maker. An appellate court is not entitled to substitute its own discretion for that of the trial court or Chambers judge

merely because it would have exercised the original discretion differently” (citations omitted, at para 62). 2. Pre-tax value of the corporations [ 59 ] The trial judge began his analysis by setting out the two-step framework he would use to determine the share value of DFGC. The first step required him to determine the pre-tax value of the corporations. Because Mr. Frondall wished to retain the in specie corporate property, the second phase required the trial judge to consider the corporate after-tax value by deducting Mr. Frondall’s expected personal income tax. [ 60 ] Mr.

Frondall asserts the trial judge made numerous errors in how he dealt with the pre-tax values for the companies that formed the DFGC. a. Buyout amount due from Virtus [ 61 ] The trial judge’s determination of the amount that remained due and owing to Mr. Frondall on the Virtus buyout was not raised as a ground of appeal. I mention this asset only to illustrate how the trial judge did not blindly accept the expert opinion of Mr. Thomson. [ 62 ] The experts had presented different approaches to determine the amount of the Virtus buyout. Mr.

Thomson applied a small business tax rate of 12.5% to arrive at a value of $1,134,922. Mr. Weber applied a tax rate of 17.29% to arrive at a value of $1,067,692. Mr. Weber’s higher tax rate took into account the likelihood that DFGC would earn other income over the remaining years; therefore, he concluded a higher tax rate would be applied. The trial judge preferred Mr. Weber’s approach, finding the remaining buyout to be $1,067,692. b.

Cut Casual Steak & Tap [ 63 ] Kaizen, one of the DFGC corporations, had advanced $135,000 to Cut Casual Steak & Tap [Cut Casual] prior to the date of petition and a further $35,000 after the date of the petition for a total advance of $170,000. Cut Casual repaid Kaizen one-half of the total ($85,000) following the date of petition, which Kaizen accepted in full satisfaction of the debt. Mr. Thomson’s approach was to reduce the value of this receivable because Kaizen had recouped 50% of the total loan.

He therefore reduced the petition date value ($135,000) by one half to arrive at a value of $67,500. [ 64 ] At trial, Mr. Frondall argued that Kaizen would not have recouped anything from Cut Casual had he (through Kaizen) not advanced a further $35,000, post petition. His approach was to deduct the second $35,000 loan from the original $135,000 loan and then reduce that number by 50% to arrive at a value of $50,000. Mr. Weber gave this opinion of value at trial but, in expressing it, acknowledged that he had simply accepted Mr.

Frondall’s reasoning in coming to that figure. [ 65 ] The trial judge found insufficient evidence to support Mr. Frondall’s argument that repayment of the loan was leveraged by the infusion of a further $35,000. Accordingly, he found the value of Cut Casual to be $67,500. [ 66 ] On appeal, Mr. Frondall argues Mr. Thomson’s valuation ignores evidence that, but for the additional $35,000 loan, no money would have been returned to Kaizen. Mr.

Frondall submits that he was only able to negotiate a re-payment of $85,000 in exchange for the $35,000 cash call because the payment was a condition for the return of the $85,000. [ 67 ] Having reviewed the record, I find there was an insufficient evidentiary foundation for the inference Mr. Frondall sought to draw: i.e., that recovery of the Cut Casual investment was tied to or leveraged by his infusion of $35,000. Considerable deference is owed to the trial judge’s decision as to the valuation of family property: see Riley at para 5 . There is no error here. c.

Las Palapas restaurant [ 68 ] Debrenlar, a DFGC company, invested $25,000 in the Las Palapas restaurant. Mr. Weber valued that interest as of the date of petition at $12,500. Mr. Weber testified that he valued the shares in Las Palapas based on representations Mr. Frondall had made to him, except for a minor tax saving that increased Mr. Frondall’s stated value ($12,500) to $14,293. Mr. Weber confirmed that this value was not based on an independent assessment of value. When asked why he had suggested that number, Mr.

Frondall replied, “I probably couldn’t even sell it ’cause it’s such a small minority interest at stake that there’s very limited, if any market for that”. [ 69 ] Mr. Thomson assigned a value of $30,432 to Debrenlar’s interest in Las Palapas based on its book value and historic dividends the restaurant had paid. Under cross-examination, Mr. Frondall agreed Debrenlar had received dividends of $7,500, $14,500 and $15,000 respectively in the years between 2014 and 2016 for its investment. [ 70 ] As explained in the Judgment , the trial judge rejected Mr.

Weber’s valuation because it was based on assumptions or opinion provided to Mr. Weber by Mr. Frondall: “I cannot accept Mr. Weber’s valuation based on [Mr. Frondall’s] assumption …” (at para 38). He accepted Mr. Thomson’s book value of $30,432 instead. [ 71 ] Mr. Frondall argues the trial judge erred by simply preferring Mr. Thomson’s evidence over Mr. Weber’s without undertaking an independent analysis. He further argues that since the trial judge only had the benefit of his evidence, but none from Ms. Frondall on this point, Mr.

Thomson’s valuation was without evidentiary foundation and merely amounted to a critique of Mr. Weber’s Advisory Report. [ 72 ] Mr. Thomson’s opinion of value was based on the book value recorded in the corporate financial statements. The information about historic dividends served to solidify his inference that $30,432 was a representative value. On this point Mr.

Thomson testified as follows: “Well, as far as I’m aware, this investment throws off dividends quite regularly, and had a proper value -- valuation been done of it, I suspect it probably would be worth more than the book value, but I don’t have enough information and I didn’t undertake such a valuation”.

[ 73 ] While Mr. Thomson did not undertake an exhaustive analysis of value, he had not been asked to do so and, importantly, neither had Mr. Weber. Mr. Thomson simply drew an inference of value based on the facts known to him. The trial judge’s reason for preferring Mr. Thomson’s valuation over that of Mr. Weber’s is grounded in the evidence. Respectfully, given the deferential standard of review, there was a basis for the trial judge’s decision that ought not be disturbed on appeal. d. Machetoso [ 74 ] The trial judge found Machetoso Holdings Inc. [Machetoso] to have a value of $30,432.

However, Machetoso is the same entity as the Las Palapas restaurant. Both parties agree the trial judge erred by double counting this asset. Accordingly, the pre-tax value of DFGC will be reduced by that amount. e. Plainsman Plaza Partnership [ 75 ] Debrenlar is one of 15 limited partners that own units in the Plainsman Plaza Partnership [Plainsman]. Mr. Weber valued Debrenlar’s interest in Plainsman at $513,676. Mr. Weber arrived at that value by taking the gross rent, deducting expenses, applying a 7% capitalization rate, and then dividing that amount by the 15 unit holders.

Application of that approach netted a value of $383,631. Mr. Weber then added back the amount in the capital account to arrive at a pre-tax value of $513,676. [ 76 ] Taking a somewhat different approach, Mr. Thomson valued Debrenlar’s interest in Plainsman at $550,987. [ 77 ] The trial judge agreed with Mr. Weber’s approach, noting that his calculation involved a generally accepted valuation methodology as opposed to that used by Mr. Thomson. For that reason, the trial judge accepted $513,676 as the pre-tax value. The trial judge also accepted Mr.

Weber’s opinion that income tax ($137,599) should be deducted from the gross rent, which brought Debrenlar’s pre-tax share value in Plainsman to $376,077. [ 78 ] The parties took a different approach over whether the full amount of the refundable dividend tax on hand [RDTOH], estimated to be $75,161, should be added back to the $376,077. Mr. Thomson was of the view the RDTOH would eventually be refunded to Debrenlar when dividends were declared such that the amount of this credit should be added back to achieve the correct value. As explained below, Mr. Weber took a more nuanced approach.

The trial judge accepted Mr. Thomson’s opinion, added back the RDTOH to arrive at a total share value for Plainsman of $451,238. [ 79 ] Mr. Frondall argues the trial judge erred by adding the RDTOH to the Plainsman value without first discounting it for tax. He says the trial judge erroneously preferred and deferred to the evidence of Mr. Thomson for the reasons discussed above, and second, he erred by not properly considering the evidence before him or in failing to carry out his own analysis of the issue. [ 80 ] As noted, there was no unwarranted or deferential preference for Mr. Thomson’s evidence over Mr.

Weber’s in a general overarching sense. This conclusion is obvious from the fact the trial judge had accepted most of Mr. Weber’s evidence concerning Debrenlar’s interest in Plainsman. That alone disposes of Mr. Frondall’s first argument. [ 81 ] That said, there is merit to Mr. Frondall’s second argument that the trial judge erred by either ignoring or misunderstanding the evidence about the RDTOH. Let me explain. [ 82 ] On the surface, the trial judge’s decision to include the RDTOH is supportable at law. The following passage from Andrew J. Freedman, Vivian Alterman, Sue C. Loomer and Paula G.

White, Financial Principles of Family Law , loose-leaf (Rel 2014-6) vol 1 (Toronto: Thomson Reuters, 2001) at 22-16 makes this point: In family law matters, personal taxes are generally considered, but the impact of RDTOH is often ignored. Ignoring an RDTOH account can have the impact of understating a spouse’s net assets since the taxes are overstated.

In other words, if the RDTOH account is not considered, the value of the spouse’s business interest is understated by the amount of tax savings generated by the RDTOH. [ 83 ] This passage suggests inclusion of the RDTOH is necessary to establish a more accurate valuation of the business interests owned by one spouse. It was therefore appropriate for the trial judge to have taken the RDTOH into account in valuing Debrenlar’s interest in Plainsman.

However, as the passage also makes clear, adding back the RDTOH is necessary so as not to overstate the tax effect. [ 84 ] There must, of course, be sufficient evidence to justify an adjustment for the RDTOH. After a careful review of the record, I am persuaded the trial judge either misinterpreted or ignored the evidence on the RDTOH issue. To begin with, his finding in relation to the RDTOH appears to be premised on his conclusion that Mr. Weber “did not add back the RDTOH” into the valuation (at para 45). That conclusion is not supported by what Mr. Weber actually said. In fact, Mr.

Weber did consider the inclusion of the RDTOH in his calculation of share value in both his Advisory Report (at 16–17) and in his viva voce testimony: Q Okay. So once you determine this ultimate value and you provide you calcunization ( sic ) of values as you did, what’s the next steps to determine the ultimate liquidation value? … [T]here’s some steps in this process, and, perhaps, you can tell us what they are and show us where it is in your report? … A -- and -- and what happens next?

So as we pay dividends out, taxable dividends out, part of the tax that we paid primarily relating to the Plainsman Plaza liquidation, we’re going to get back because that’s our refundable tax. So as we pay dividends out, we calculated that there was approximately 86,569 in tax that’s going to get refunded back to Debrenlar due to the -- to paying that tax when -- when Plainsman would be liquidated. So, essentially, we’re adding to our cash position there. So we have a little bit more cash to distribute.

[ 85 ] But, unlike Mr. Thomson, Mr. Weber went on to provide a detailed explanation about the corresponding tax liability for the Plainsman shareholders. His explanation was grounded on a liquidation approach – which the trial judge implicitly accepted – and the different tax rates for the different types of dividends. Mr. Weber was not cross-examined on this part of his opinion. [ 86 ] Mr. Thomson did not dwell on the dividend facet of this issue in his direct testimony.

Under cross-examination, however, he agreed that the liquidation method begins with an assumption that all assets are sold, liabilities paid and dividends distributed to the shareholders. He also agreed that at this stage of the analysis the amount of a company’s RDTOH has to be determined because it gets it back only when it distributes dividends. Finally, Mr. Thomson agreed a dividend distribution would create a tax liability for the shareholders. The following questions and answers followed those concessions: Q Okay.

And so would it be fair to say that in order to trigger the refund tax credit, in some fashion, you actually have to have a distribution of dividends to the shareholders? A Yes Q Okay. And you’d agree with me then that if there’s no distribution to the shareholders, there can’t be a refund tax credit? A That’s correct, yes.

Q And I’m told, and I’m asking you if you would agree or disagree, that under the current tax rules, in order for a company to collect on a $75,000 refund tax dividend, assuming it’s on hand, that company would actually need to declare dividends of at least of about $196,000 to the shareholders. Sound about right? A Well, it should be three times the amount. Oh, no. Sorry, yes, you’re probably right. Q It sounds about right? A They -- they changed the rules. Yes. Q Thank you. And you’ve said -- you’ve looked at Mr. Weber’s report. He does address the refundable tax refund in his final calculations; does he not?

A Yes, he does, yeah. Q Yeah. And that’s because he did the extra step -- A Yeah. [ 87 ] In light of this evidence, it can be safely concluded Mr. Weber did include the RDTOH, both in his Advisory Report and his testimony; a fact Mr. Thomson conceded at trial. More importantly, though, the trial judge also ignored Mr. Weber’s opinion that any future RDTOH credit would likely be wholly offset by the personal tax liability that would be incurred once a dividend is declared. Mr. Thomson’s approach to the RDTOH failed to account for any contingent tax liability. [ 88 ] Mr.

Frondall’s argument hinges on whether there was sufficient evidence at trial to the effect that a future RDTOH would result in tax consequences such that the RDTOH should have been removed from the valuation or at least discounted. Ms.

Frondall asserts that it is not a reversible error for the trial judge to have declined to account for a personal contingent tax liability when there was insufficient evidence to quantify the potential liability and where a sufficient evidentiary foundation for the contingent tax liability was not established. [ 89 ] The trial judge was left with a consensus of opinion from the two experts, along with Mr. Weber’s more detailed explanation about how the RDTOH should be handled. Mr. Weber was not cross-examined on the tax implications of the RDTOH in contrast to Mr.

Thomson, who did not go on to calculate what that tax liability might be. While the trial judge was not required to accept Mr. Weber’s opinion, in the face of Mr. Thomson’s concessions, the trial judge’s implicit acceptance of Mr. Weber’s liquidation approach, and an incomplete opinion from Mr. Thomson, I am satisfied that the trial judge either overlooked or misunderstood the evidence about the RDTOH. This constituted an error that warrants appellate intervention. Accordingly, the sum of $75,161 should be deducted from the Plainsman value, leaving it with a final pre-tax value of $376,077. f.

Intercompany loan [ 90 ] An intercompany loan in the amount of $615,281 was recorded on the balance sheet of DFGC as an account receivable. Mr. Weber’s report interpreted this entry as if the loan amount had no value but called for corrections by way of re-allocation (Advisory Report at 7): The most significant adjustment to the stated balance sheet as at December 31st, 2015 (and hence assumed to be the same as at November 6, 2015) is a reallocation of the intercompany loan amounts.

Due to the fact that these amounts were not eliminating [ sic ] on combination, a full analysis of the accounts was undertaken from the detail provided. This analysis suggests that certain amounts do not relate to intercorporate balances, but rather relate to amounts either impacting balances of the individual shareholders or errors in the recording of tax amounts, etc. As a result, we have reallocated these amounts to the appropriate categories bracket (based on the information provided) to take into account any ultimate issues in the determination of value.

Our analysis suggests that additional dividends would need to be declared to eliminate remaining related party balances. While no cash would be received by the dividend recipients, tax consequences would likely result. [ 91 ] Mr. Weber’s recommendation was for $70,000 to be re-allocated to each of Kaizen and Debrenlar, with the balance – $334,946 – recorded as a shareholder loan debit balance that, in his view, meant “the shareholders would owe the company that amount, which is typically cleared off by paying dividends to eliminate it”. Mr.

Weber’s recommended course of action was to declare additional dividends to eliminate the remaining balance. As he put it, “While no cash would be received by the dividend recipients, tax consequences would likely result” (Advisory Report at 7). He calculated the attendant personal tax liability to be $138,637. In the end result, Mr. Weber assigned the intercompany loan no value but recommended a series of adjustments (described above) to clear it off.

[ 92 ] Mr. Thomson assigned the intercompany loan no value based on comments Mr. Frondall had made in various documents to that effect. In relation to the personal expenses Mr. Frondall said made up the bulk of the shareholder debt, Mr. Thomson’s report simply repeated Mr. Frondall’s view that DFGC would not be reimbursed, but he did not examine the specifics set out in a document that Mr. Frondall had provided (Mr. Thomson’s report): Loans Receivable The loans receivable are described on the company’s balance sheet as Interco Loans [intercompany loans].

On Document B an analysis has been provided by Doug Frondall of what makes up the balance of $615,281. The document is somewhat difficult to follow; however, Mr. Frondall advises that the company will not be reimbursed for any of the amounts set out on the document and therefore the entire portfolio has no value. [ 93 ] The trial judge gave three reasons for accepting Mr. Thomson’s nil value. First, he found Mr. Weber’s opinion about the personal expenses that allegedly had been paid for by DFGC was based mostly on information that had been provided to him by Mr.

Frondall, and second, as he put it, he “did not know exactly what that information was” (at para 51). Third, the trial judge found Mr. Weber’s evidence thin as to whether and how much of the loan related to Mr. Frondall’s personal withdrawals. [ 94 ] On appeal, Mr. Frondall asserts the $615,281 intercompany loan relates to monies he and Ms. Frondall had withdrawn from DFGC over the course of their marriage that were not properly recorded in the DFGC books as income or dividends or, for that matter, reported for tax purposes.

He maintains that, because the monies were effectively a negative shareholder loan rather than an intercompany loan, the situation should be rectified by treating this sum as dividend income. Mr. Frondall builds on that argument by stating that, in due course (no timeline offered), he will need to pay income tax – estimated to be $138,637 – for this unreported income. He argues it would be unfair and inequitable for him to shoulder this tax liability alone when it was created by the parties jointly during their marriage. Mr.

Frondall submits the trial judge erred by ignoring this relevant, material evidence. [ 95 ] At trial, Mr. Frondall testified that the intercompany loan was made up of money loaned to the other companies or personal draws that had not been claimed as income. Mr. Frondall had prepared an after-the-fact

schedule detailing the parties’ personal transactions that made up those draws. Although Mr. Frondall testified that the parties had withdrawn corporate funds for their joint use, as it pertained to the intercompany loan, Ms. Frondall said as follows: Q In that Prof Corp, there’s evidence of an inter-co loan of $615,000. Did you know anything about the existence of that? A I didn’t know anything until the undertakings, which it said that [Mr.

Frondall] was taking money over the years and I had no knowledge that he was doing that or where the funds went. [ 96 ] In terms of the personal advances for which a dividend was recommended, the following hypothetical was put to Mr. Weber by counsel for Mr. Frondall: Q So if -- if -- can I put it to you this way? If -- if the CRA looked at the detail that [Mr. Frondall] provided you, and based upon that, would you expect their analysis to be any different than -- than yours? That this has to be accounted for tax-wise? A The -- there -- really, there’s only two options.

One is the money gets paid back to the organization … or there’s a dividend declared in order to -- to wipe it out. … I believe that the CRA would look at it in a similar manner. [ 97 ] Respectfully, the trial judge did not err in the manner suggested by Mr. Frondall. Mr. Frondall’s evidence was not flush with detail. He testified in broad terms about what he believed to be the true nature of the intercompany loan. He provided no specifics to back up his testimony, such as when the money was withdrawn from DFGC, when it would be paid back or when a dividend would be declared.

As things stood at the time of trial, there was no evidence of a dividend having been declared or if the CRA was pursuing Mr. Frondall for unpaid tax. [ 98 ] While Mr. Frondall attempted to fill in some of the evidentiary gaps with the

schedule he had given to Mr. Weber, that document was not entered as an exhibit at trial and Mr. Frondall did not testify to its details or specifics: Q Yeah. So then let’s talk a little bit about expenses. … Okay. Now, where do I find in your materials, the money that you took in 2015? A 2015, there should have been a

schedule for the -- was there not a

schedule for the dividends, how they were calculated Q Well, I -- I don’t recall you actually filing any evidence or going through your expenditures in 2015, did you, yesterday? A What expenditures are you talking -- Q You didn’t do the audit of -- of your expenditures, just Ms. Frondall, correct? A I don’t think we looked at her expenditures. Q Or the income that you spent in -- or the money that you spent in that year, you didn’t go through that? A No, I don’t think we went through her money that she spent either other than just Visa payments that I made. [ 99 ] In my view, neither Mr. Frondall’s nor Mr.

Weber’s testimony advance his cause. The dividend adjustment recommended by Mr. Weber was based entirely on Mr. Frondall’s

schedule that purportedly set out the personal transactions he claims made up the draws over the years. But, as Mr. Weber made clear, he took no steps to verify the information contained in that schedule:

Q And then you made adjustments … and that’s based on, again, all of the information provided to you by Mr. Frondall, being that November 6th, 2015, balance sheet? A That’s correct. [ 100 ] In light of this evidence, the trial judge cannot be faulted for allocating a nil value to the intercompany loan. Placed in an appellate context, Mr. Frondall’s argument is not so much about value but a question of equities, i.e., that the trial judge erred by disregarding material evidence in the exercise of his discretion under s. 21(3) (

j) of the FPA . To be sure, a trial judge is empowered under that

section to consider an actual or potential tax liability as an equitable consideration. However, that is a discretionary call for the trier of fact that is subject to deference on appeal. [ 101 ] The problem with Mr. Frondall’s argument is not that the trial judge ignored this evidence but that, instead, he was not satisfied that Mr. Frondall had established the necessary evidentiary foundation for his position: see Kassian at para 82 . The evidence before the trial judge on this issue was limited and the prospective tax liability for Mr. Frondall speculative.

To frame the principle in the inverse, “An unequal division of the family property based on what amounts to no more than speculation is neither fair nor equitable” ( Ackerman at para 35 ). [ 102 ] The trial judge concluded the necessary evidentiary foundation had not been made out. A review of the record backs up that finding. Having regard to the record, and the deferential standard of review, I see no basis to interfere with the trial judge’s finding in relation to the intercompany loan. g.

Conclusion: Before-tax value of the DFGC corporations [ 103 ] The trial judge found the value of the corporations that formed DFGC, including values the parties had agreed upon prior to trial, to be $2,627,378. The trial judge deducted $89,913 for corporate tax and $50,000 for withholdings as proper corporate liabilities to arrive at a final pre-tax value for DFGC of $2,487,465. [ 104 ] For the reasons expressed above, the pre-tax value of DFGC should be adjusted to account for the double-counting of Machetoso ($30,432) and the tax adjustment for Plainsman ($75,161).

Applying those deductions, I find the before tax value of the DFGC to be $2,381,872. 3. After-tax value of the business interests [ 105 ] Although the parties debated Mr. Frondall’s estimated tax liability at trial, the real issue was whether a discount rate should be applied for contingencies. Mr. Frondall argued that since the only source of available cash to satisfy his equalization obligation and other taxes would be derived from corporate sources – on which he must pay tax, be it from dividend or salary – his full tax liability should be taken into account without discount. Mr. Weber estimated Mr.

Frondall’s tax liability to be $1,379,237. Mr. Frondall sought to have that amount deducted from the overall pre-tax value of DFGC. [ 106 ] Mr. Frondall mounted a two-part argument at trial to advance his position. First, he flagged the negative effect of changes to the small business tax that would necessitate immediate liquidation of corporate assets. The trial judge rejected this argument outright because, as he saw it, the law had not yet been amended and, as such, it was “speculative in the extreme and ought not to be considered” (at para 61). Mr.

Frondall does not appeal from that finding. [ 107 ] By way of second argument, Mr. Frondall had urged the trial judge to divide the family property unequally by invoking s. 21(3) (

j) of the FPA , which permits a trial judge to take into account a tax liability arsing from the transfer or sale of family property or an order of the court. The evidence in support of Mr. Frondall’s pressing financial obligations consisted of the following: $107,000 owing on his 2016 taxes, $31,000 owing for Ms.

Frondall’s 2016 taxes, an equalization payment (as per the trial decision of $863,480), projected costs of $45,000 to assist one of his children with his education expenses, taxes on the anticipated dividends to clear off the intercompany loan ($138,637) and ongoing spousal support ($8,250 per month). [ 108 ] Mr. Frondall testified that he lacked the liquidity to satisfy those obligations. His retirement buyout from Virtus had one year left to run by the time of trial ($1.23 million) and his other income was limited to a base yearly fee of $150,000, annual bonuses averaging $22,000 and $9,500 in director fees.

Those sums, he argued, fell far short of meeting his pressing financial obligations. [ 109 ] Mr. Frondall’s argument was supported by the testimony of Mr. Weber. Mr. Weber opined that taxes should be calculated using the immediate liquidation approach. In his opinion, immediate liquidation had to take place for the same reasons expressed by Mr. Frondall. [ 110 ] Mr. Thomson rejected Mr. Weber’s approach. In his view, an outright liquidation of the corporations in one year would attract the maximum personal income tax rate for Mr. Frondall. Mr. Thomson opined that the examples cited by Mr.

Weber as to when a liquidation approach was appropriate did not apply to Mr. Frondall’s circumstance. When probed on his opinion, Mr. Thomson replied by stating the following: Q So do you believe that a liquidation approach, based on your look at these companies, is appropriate? A No. Q Why is that? A Well, it -- first of all, they’re all -- they’ve all got a positive equity in them. They all take in more than they put out. I see no reason to -- to liquidate them. I don’t know why you’d want to do that.

You’d just be giving up a whole bunch of money to the tax department. [ 111 ] While the trial judge accepted that Mr. Frondall was in need of cash, based on the evidence before him he concluded that need

did not justify an immediate liquidation of all of the corporate assets thereby triggering the maximum tax liability. He gave two reasons toground this conclusion. First, he observed that Mr. Frondall would receive around $500,000 tax-free cash from the sale of the family homeand repayment of certain shareholder loans. As the trial judge noted, “No reason was advanced as to why he could not use these funds tomeet his immediate needs for cash” (Judgment at para 64). Second, the trial judge did not accept that immediate liquidation of all of thecorporate assets was the only option open to Mr. Frondall. Neither Mr.

Frondall nor Mr. Weber explored other possible options to satisfyMr. Frondall’s financial obligations even though, according to the trial judge, he bore the onus of doing so. The trial judge identifiedborrowed funds as one such possibility, but then noted that no evidence had been called with regard to this possibility or its cost relative tothe maximum tax rate that would accompany an immediate liquidation of corporate assets. [112] Having regard to those considerations, and the slim evidentiary record, the trial judge was not convinced that it was likelyMr. Frondall would take such drastic action.

Quoting from Mr. Thomson’s testimony on the point, the trial judge stated as follows: [70] Liquidating all of the assets in one year as [Mr. Frondall] proposes would, in Mr. Thomson’s words, be “highly unlikely because youwould be giving up a whole bunch of your money to the government for no benefit”. I agree. [Mr. Frondall] is far and away too smart topay more tax than he has to. Considering the limited evidence adduced, I will accept [Ms. Frondall’s] methodology. [113] The trial judge rejected Mr. Frondall’s argument and applied a 50% tax discount for contingencies.

This ruling resulted in theapplication of a 19.81% tax rate (one-half of the maximum dividend tax rate). Applied to the before-tax value of the corporations, therewas a downward adjustment of $492,766, leaving the after-tax value of the corporations at $1,994,699. [114] Mr. Frondall makes two arguments with respect to this finding. He argues the trial judge should not have applied a discountfactor because (

a) there was a strong basis to conclude that not only was the tax liability imminent, but it was actually happening and therewas ample evidence for the trial judge to have drawn this inference, and (

b) he ought not to have speculated on other tax planning toolsthat might have allowed for a lower tax rate. I take Mr. Frondall to assert an error of fact in relation to his first argument and an error inlaw in relation the second. [115] It is beyond dispute that a trial judge may deviate from an equal division of family property if it would be unfair or inequitable todo so in light of a tax liability.

James v Belosowsky, 2012 SKQB 316, 403 Sask R 12 [Belosowsky], is routinely cited as the leadingauthority on the question of tax liability and discount for contingencies: [70] Since Carlson, [(1984) (SK CA), 34 Sask R 287 (CA)], the Saskatchewan Court of Appeal has considered theapplication of s. 21(3)(

j) of The Family Property Act in 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), 43 R.F.L. (4th) 385, 172 Sask. R. 201 (C.A.); Russell, [(1999), (SK CA), 179DLR (4th) 723 (CA)]; and Mehlsen v. Mehlsen, 2012 SKCA 55, [2012] S.J. No. 314 (QL). From a review of these authorities thefollowing 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 a spouse asa 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 the familyproperty 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 should addresssuch matters as the intention or need to dispose of the asset, the applicable marginal tax rate and the potential for tax planning to avoid thepayment 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, andSeaberly, 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 to sell orotherwise dispose of the assets in the near future then the tax liability must be discounted for contingencies (see: Carlson, supra, atpara. 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 not limited tothe 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). See also Kassian at paras 77–78 and Linn v Frank, 2014 SKCA 87 at para 52, 442 Sask R 126 [Linn]. [116] Mr. Frondall’s argument must be placed in the appropriate context. To begin with, a tax liability is an equitable consideration thata trial judge may take into account in dividing the value of family property.

Trial judges are not obliged to take a tax liability into accountnor are they required to order a dollar for dollar adjustment even if it is taken into consideration. Further, a reduction or discount forcontingencies is a discretionary decision. It follows from a finding of fact that the spouse claiming the tax liability has not proven that an

order for distribution of the family property is likely to force a sale of the assets immediately or, if that spouse did, they would not have“the ability to arrange [their] affairs to avoid paying the whole of the tax” (Linn at para 56).

In other words, Linn states that “establishing adiscount rate requires the trial judge to consider the probability of a future event [immediate liquidation] and the party’s willingness andability to plan for it” (at para 59): also see Woodward v Woodward, 2016 SKQB 301 at para 86, 86 RFL (7th) 357 [Woodward]. [117] Whether there is a reversible error on this issue depends first on whether the trial judge erred in finding it unlikely thatMr. Frondall would immediately liquidate his corporate assets.

If he did, I must also decide if he abused his discretion by discounting thecontingent tax liability by 50%. [118] Based on the evidence before him, it is clear the trial judge accepted that Mr. Frondall had the need for cash, although he did notidentify the precise amount or break down what that need entailed. This finding is borne out by the evidence discussed above. Even if Iwere to deduct the $138,637 tax liability for the intercompany loan from Mr. Frondall’s tally of debt obligations (as I have concludedabove), discretionary support for an adult child and ongoing spousal support obligations, Mr.

Frondall still had to come up with in excessof $1 million. [119] As I understand his argument, Mr. Frondall suggests the trial judge erred in fact and law by considering the absence of evidenceabout tax planning mechanisms that might be available to him. Mr. Frondall argues this consideration was improper because the partiescould not come to agreement prior to trial on a tax-efficient way to settle matters. Since the window of opportunity had closed by the timeof trial, he argues the trial judge erred by taking the approach he did. Mr. Frondall goes on to argue that since only Mr.

Weber had testifiedabout his pending tax liability, there was an evidential basis for this anticipated liability and compelling evidence that it was not onlyimminent but had come to fruition. He claims the liquidity of his assets made his situation different from others where courts have applieda discount factor. [120] In my view, Mr. Frondall’s argument founders in three respects. First, contrary to his position, Mr. Thomson had testified thatimmediate liquidation was not the only option open to Mr. Frondall. In fact, he said that it was the worst possible option.

It was within thetrial judge’s purview to prefer Mr. Thomson evidence over that of Mr. Weber’s. The fact he did not defer to Mr. Weber’s opinion does not,on its own, justify appellate intervention. [121] Second, the trial judge had to address Mr. Frondall’s argument that immediate liquidation of his corporate assets was the onlyway he could meet his cash needs. To be clear, the trial judge accepted that Mr. Frondall had cash needs but, as he put it, he had to go onto consider whether that need justified an immediate liquidation of the corporate assets, which would cause Mr.

Frondall to incur amaximum tax liability. [122] To find in his favour, the trial judge would have had to ignore the $500,000 in tax-free cash accruing to Mr. Frondall, the otherfamily assets the parties had agreed would be distributed to him (roughly $650,000), the legal onus borne by Mr. Frondall to lead thenecessary evidence to support his assertion, and Mr. Thomson’s testimony. Since Mr.

Frondall had to establish that an immediateliquidation was reasonably likely, the inference drawn by the trial judge, based on the whole of the evidence or the absence of it, was notunreasonable. [123] This is a finding of fact that the trial judge made based on the evidentiary record before him. To overturn this finding,Mr. Frondall has to persuade this Court of the existence of a palpable and overriding error and not simply ask for the evidence to be re-weighed in the hope we will see things differently. I see no such error. [124] That brings me to Mr. Frondall’s argument about onus and tax-planning strategies.

In my view, the trial judge did not misinterpretthe law in this regard. [125] The trial judge’s

interpretation of the onus question is consistent with a long line of jurisprudence beginning with Carlson vCarlson (1984), (SK CA), 34 Sask R 287 (CA), where Tallis J.A. said as follows: [9] On the evidence adduced, the value of these assets should have been discounted. However, I am of the opinion that the appellant is notentitled to the full discount of $79,000.00 (rounded off figure) arising from potential tax liability. In this case the distribution order doesnot force or require the appellant to immediately sell or otherwise dispose of the assets in question.

There is no evidence that the appellantintends to sell in the near future and in any event, he may, as a shrewd businessman, arrange his affairs to minimize or defer the taximpact by taking advantage of the relevant provisions of the Income Tax Act. In the circumstances of this case, the discount in valuecannot be calculated with mathematical certainty because of the various contingencies. (Emphasis added) [126] Mr. Frondall submits that the trial judge erred in taking tax efficiencies into account because the window for significant taxplanning had already closed by the date of the trial.

He relies on Woodward in support of this argument. With respect, Woodward is oflittle assistance to Mr. Frondall. That decision simply says that even though a court is not

[…]