Dungey v Dungey, 2020 SKCA 138

Court of Appeal for Saskatchewan Docket: CACV3382 Citation: Dungey v Dungey , 2020 SKCA 138 Date: 2020-12-17 Between: Lee Alexandra Dungey Appellant (Respondent) And David Bruce Dungey Respondent (Petitioner) Before: Richards C.J.S., Schwann and Tholl JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Tholl In concurrence: The Honourable Chief Justice Richards The Honourable Madam Justice Schwann On appeal from: 2019 SKQB 34 , Regina Appeal heard: September 8, 2020 Counsel: Brad Hunter, Q.C., for the Appellant James Korpan, Q.C., for the Respondent Tholl J.A. I.

Introduction [ 1 ] Lee Dungey and David Dungey separated after a lengthy marriage. Almost five years passed between the date the petition was issued and the commencement of the trial. The main issues at the trial were the choice of the valuation date for the business owned by Mr. Dungey and the quantum of spousal support he would be required to pay. On appeal, Ms. Dungey contends the trial judge erred in his determination of property equalization by choosing the petition date for valuing the business and by failing to apply a discount to the income tax adjustment.

She submits these errors resulted in an unfair and inequitable division of family property. In the alternative, she argues that the value of the business was understated as of the petition date because of the manner in which certain expenditures were recorded. Ms. Dungey further argues the trial judge failed to attribute corporate income to Mr. Dungey, thereby causing the quantum of spousal support to be set too low. Lastly, she asserts he erred by declining to make an order for retroactive spousal support. [ 2 ] Mr.

Dungey submits the trial judge did not err and, given the deferential standard of review applied to such matters, argues that the appeal should be dismissed. [ 3 ] In my view, the trial judge did not err in any of his determinations and the appeal must be dismissed in its entirety. II. Background [ 4 ] Mr. Dungey was born in 1953 and Ms. Dungey was born in 1957. They met in Kingston, Ontario, in 1983 and began living together in 1985. They were married in 1989 and adopted a five-year old boy in 1994. [ 5 ] Each of the parties worked in the restaurant/retail industry in Kingston, with Mr.

Dungey eventually buying a McDonald’s franchise in Kenora, Ontario, in 1992. After they moved to Kenora, Ms. Dungey worked part-time at a liquor store. In 1998 or 1999, they sold the McDonald’s franchise and moved back to Kingston. The parties spent some time investigating and discussing franchise opportunities. At some point, Mr. Dungey applied to become a Canadian Tire franchisee – known as a dealer – and was accepted after a rigorous vetting process.

Under the Canadian Tire system, once a new dealer successfully completes the training program, he or she is offered an opportunity to purchase a specific small store somewhere in Canada of Canadian Tire Corporation Limited’s choosing. If the new dealer declines to purchase the first store that is offered, the relationship with Canadian Tire ends. A new dealer cannot simply purchase a large-volume store or a store in a desired geographic location.

If the dealer does well in the first store, he or she can, with Canadian Tire’s permission, sell the existing store and purchase a higher volume store with increased profit potential. If the dealer continues to perform well, after a minimum of two years of operation, he or she can continue to move up to higher-volume stores as they become available. [ 6 ] In 2000, Mr. Dungey was offered his first Canadian Tire store in Glace Bay, Nova Scotia. He accepted the opportunity and the parties and their son moved to Nova Scotia. This Canadian Tire store, and all subsequent stores, were owned by D.B.

Dungey Holdings Inc. [the Corporation], whose shares are solely owned by Mr. Dungey. He managed the store and worked long hours, thereby increasing the store’s sales volume and profitability. The parties mutually decided it was best if they did not work together. As a result, Ms. Dungey took no role in the management or operation of this store, with the exception of doing some painting. In Nova Scotia, she parented their child, took care of the family home and did volunteer work. [ 7 ] In 2004, Mr. Dungey sold the Canadian Tire store in Nova Scotia and purchased a larger-volume one in Estevan, Saskatchewan.

The parties and their son moved to Saskatchewan for two years. Mr. Dungey again worked long hours to manage and

improve the store. For the first year, Mr. Dungey lived in Estevan while Ms. Dungey rented a small home 1.5 hours away in Wilcox,Saskatchewan, so that their son could attend Notre Dame College and pursue his hockey ambitions. Mr. Dungey would travel to Wilcoxevery weekend and for the odd weeknight. Their son moved into the dorms at Notre Dame College for the next school year andMs. Dungey resided with Mr. Dungey in Estevan. During that time, Ms. Dungey worked as a manager at Boston Pizza for a period of sixor seven months.

She did not do any work directly related to the Canadian Tire store in Estevan. [8] In 2006, Mr. Dungey sold the Estevan store and acquired the Canadian Tire store in Grand Falls-Windsor, Newfoundland andLabrador, along with its satellite store in Lewisporte. These stores represented a sizable increase in sales volume over the Estevan store. Atapproximately the same time, the parties bought a cottage on Lake Winnipeg in the resort community of Dunnottar, Manitoba, in closeproximity to Ms. Dungey’s parents and her other family members. In June of 2006, Mr. Dungey and their son moved to Newfoundland,while Ms.

Dungey stayed in Dunnottar overseeing extensive renovations to the cottage before she moved to Newfoundland in late fall.Ms. Dungey spent a further six months in Manitoba from spring to fall of 2007. She moved back to the cottage in April of 2008 and haslived there exclusively since that time. Mr. Dungey and their son remained living in Newfoundland. As an adult, their son moved toWinnipeg and lives on his own. Mr. Dungey visited Ms. Dungey in Manitoba approximately five to six times per year from 2008 to 2012.She did not go to Newfoundland after April of 2008. However, they spoke on the telephone daily.

It appears they also took some vacationstogether in this period. [9] In the fall of 2012, Mr. Dungey sold the Newfoundland stores, after significantly increasing their sales volume, and purchasedthe Canadian Tire store in Yorkton, Saskatchewan. A condition of the purchase required the building of a new store, so the original storewas replaced with a much larger one in 2013. Mr. Dungey worked even longer hours at the Yorkton store than he had in Newfoundland.Ms. Dungey arranged for flowers and the caterer for the grand opening but was not otherwise involved in the operation of the Yorktonstore. [10] Mr.

Dungey purchased a residence in Yorkton in September of 2012 after the parties had toured houses together and jointlychosen the home. He expected that Ms. Dungey would move from the cottage and live with him in Yorkton, but Ms. Dungey remainedliving in Manitoba. The parties spent some very limited time together over the next year and separated in January of 2014. The petitionwas issued on Mr. Dungey’s behalf on January 31, 2014, but was not served on Ms. Dungey until July of 2014. [11] Mr. Dungey unilaterally and voluntarily paid Ms.

Dungey $12,000 per month for spousal support beginning in February of2014, with the amount not being subject to taxation in Ms. Dungey’s hands. Ms. Dungey has never agreed that this amount was sufficient.Mr. Dungey also continued to pay the mortgage payments on the cottage until the mortgage was paid off in November of 2014. Therewere no interim court applications regarding spousal support. [12] The value of the Corporation increased dramatically between the petition date and the date of trial. III. Queen’s Bench Decision [13] The trial commenced on November 5, 2018.

The issues were division of family property and spousal support. The parties wereable to agree on the value and division of many items of property. They only disagreed on the value of the Corporation, the exchange ratethat should be applied to an investment Mr. Dungey held in the United States and the possession of a few small-value items: Dungey vDungey, 2019 SKQB 34 [Trial Decision]. With regard to spousal support, Mr. Dungey agreed that Ms. Dungey was entitled to spousalsupport, but the parties disagreed on the quantum. [14] Mr.

Dungey testified on his own behalf and called one expert witness, Michael Kamien, to testify about the value of theCorporation. Ms. Dungey testified on her own behalf, and called her own valuation expert, John Benson. [15] After reviewing the facts, the trial judge began his analysis with the division of family property. He addressed the small-valueitems and then turned to his determination regarding the value of the Corporation. The valuation of the Corporation was, in some ways,more straight-forward than many business valuations seen in property division cases.

As a result of the contractual obligations of sellingdealers and purchasing dealers, Canadian Tire stores are valued strictly at book value based on a formula prescribed in the dealers’contracts. No value is assigned for profit potential, goodwill, location or any other intangible asset. Negotiation on price is not permittedand a store cannot be sold for higher than book value. Further, they cannot be offered for sale to the public at large and must be sold toanother dealer approved by Canadian Tire.

After conducting its review of the assets, and making some adjustments for accruals such asunpaid staff vacation pay, Canadian Tire tells the purchasing dealer and the selling dealer what the price will be. As a result, this made thedetermination of value relatively straight-forward and the experts both easily agreed on the value of the Corporation as of two differentdates. The pre-tax value as of December 31, 2014, which was the value that best approximated the petition date, was $1,950,069.

The pre-tax value as of December 31, 2017, which was the value that best approximated the adjudication date was $4,679,000. Not surprisingly,Mr. Dungey asserted the petition date was the appropriate valuation date while Ms. Dungey asserted the adjudication date should bechosen. [16] After referencing the definition of value found in s. 2 of The Family Property Act, SS 1997, c F-6.3 [FPA], the trial judge setout to determine whether he should use the petition date or the adjudication date to value the Corporation.

Referencing Benson v Benson(1994), (SK CA), 120 Sask R 17 (CA) [Benson], he noted the petition date is generally the date that is chosen.However, he continued his analysis, focussing on those cases highlighting market force influences: Benson, Russell v Russell (1999), 1WWR 619 (Sask CA), and Mehling v Mehling (1989), (SK CA), 75 Sask R 195 (CA).

He also referred to Ackerman vAckerman, 2014 SKCA 137, [2015] 6 WWR 626 [Ackerman]; Thomas v Thomas, 2016 SKCA 53, [2016] 9 WWR 1 [Thomas]; Rapp vBaumann, 2018 SKQB 134; and Kormos v Kormos, 2018 SKQB 195, for guidance with regard to choice of valuation date. [17] The trial judge determined market forces were not the cause of the increase in value of the Corporation. Instead, he found it wasMr. Dungey’s skills and efforts as an operator that had caused the increase in value.

As a result, he chose the petition date as theappropriate valuation date. [18] Having chosen the petition date for valuing the Corporation, the trial judge applied a tax discount to that value. Mr. Kamien

testified as to the exact amount of tax Mr. Dungey would have to pay if he withdrew all of the petition-date value of the Corporation. That amount was $635,773. The trial judge subtracted that entire amount from the pre-tax value, leaving an after-tax value of $1,314,296. He assigned that value to the Corporation. [ 19 ] The trial judge then addressed Mr. Dungey’s investment in a limited partnership in the United States. Its after-tax value was found to be $353,870.63 USD. The parties disagreed on the exchange rate that should be used to convert it to Canadian dollars.

Due to the decrease in the relative value of the Canadian dollar between the petition date and the adjudication date, the investment was worth significantly more as of the adjudication date as opposed to the petition date. The trial judge found that this represented a textbook example of market forces changing the value of an item of family property and, therefore, he valued the investment as of the adjudication date.

This is not challenged on appeal. [ 20 ] After summarizing the property in each party’s possession and subtracting their respective debts, the trial judge concluded that each party was entitled to $1,151,334.32 of net family property plus $281,868.96 of registered family property (i.e., RRSPs). This division was in addition to the items such as vehicles and household goods that had already been divided in specie. Ms. Dungey held $708,997.03 in net non-taxable property and $245,647.85 in RRSPs so, in order to equalize the family property, Mr.

Dungey was ordered to pay her $442,336.79 and complete a rollover of $36,221.11 of RRSPs. [ 21 ] Turning to spousal support, the trial judge first determined each party’s income. Ms. Dungey’s annual income was imputed at $65,000. Mr. Dungey’s annual income was set at $574,283. [ 22 ] In examining Mr. Dungey’s income, the trial judge took note of his contractual obligations to Canadian Tire with regard to limits on the amount he can draw out of the Corporation each year. Under the contract, Mr. Dungey has to maintain equity at a minimum of 25%. His annual draw cannot cause that equity to fall below that level.

There are significant consequences for falling below 25% equity, which can include revocation of the franchise by Canadian Tire. The contract further encourages the dealer to grow the equity to 35% or greater. If 35% equity is maintained, the dealer has greater flexibility with regard to borrowing and can lower his or her debt servicing costs. The trial judge also noted Mr. Kamien’s testimony that dealers are encouraged to maintain their equity in the 35% to 40% range to provide a cushion for bad years and to allow for ongoing acquisitions and expenses.

The trial judge found these restrictions to be sensible given the “inevitable vicissitudes of the retail marketplace” ( Trial Decision at para 59). He rejected Ms. Dungey’s expert report that added the Corporation’s income to Mr. Dungey’s income each year because her expert had not been aware of the contractual restrictions that prevented the depletion of the equity. Relying on these contractual restrictions, the trial judge did not add any corporate income to Mr.

Dungey’s income, except to the extent that it had been distributed to him through dividends. [ 23 ] Continuing in his analysis of income, the trial judge rejected Mr. Dungey’s suggestion that his income should be the three-year average of his personal income from 2011 to 2013. On the authority of Linn v Frank , 2014 SKCA 87 , [2014] 10 WWR 215 [ Frank ], he determined he should include some of the post-petition increase in income and choose the income period that he believed to be equitable and just in the circumstances. The trial judge took the average of four years of income reported by Mr.

Dungey on his personal income tax returns for the years 2013 to 2016, arriving an average of $574,283. This income consisted mainly of an annual salary of $150,000 plus annual dividends received from the Corporation. On this basis, he imputed an annual income to Mr. Dungey of $574,283. [ 24 ] Entitlement to spousal support was conceded so the trial judge moved on to examine the appropriate quantum of spousal support.

He referenced Carol Rogerson and Rollie Thompson, Spousal Support Advisory Guidelines (Ottawa: Ministry of Justice, 2008) [ SSAG ], but noted there were other considerations when a payor’s income exceeds $350,000. The trial judge set out portions of Carol Rogerson and Rollie Thompson, Spousal Support Advisory Guidelines: The Revised User’s Guide (Ottawa: Minister of Justice and Attorney General of Canada, 2016) [ Revised User’s Guide ], regarding income over $350,000 and observed that his general discretion to set spousal support was further enhanced by the incomes in this matter.

He then stated that the range of spousal support from the SSAG was $15,915 to $21,220, with a midrange of $18,568. The trial judge noted Mr. Dungey had been voluntarily paying non-taxable spousal support of $12,000 per month, which he found to be the equivalent of $18,816, if it had been taxable income for Ms. Dungey. He concluded this was an appropriate amount of spousal support. He ordered Mr. Dungey to pay spousal support in the rounded up amount of $18,900 per month, until further order of the court.

Retroactive spousal support was awarded only to the extent that the trial judge ordered spousal support to commence on December 1, 2018. IV. Issues [ 25 ] The following issues must be determined in this appeal: (

a) Did the trial judge err by valuing the Corporation as of the petition date instead of the adjudication date? (

b) Did the trial judge err by failing to discount the tax liability? (

c) Did the trial judge err by not adjusting the petition date value of the Corporation to reflect the accounting treatment of certain expenditures? (

d) Did the trial judge err by not imputing all or a portion of the Corporation’s pre-tax income to Mr. Dungey? (

e) Did the trial judge err by not awarding a greater amount of ongoing spousal support? (

f) Did the trial judge err by not awarding retroactive spousal support? V. Analysis A. Property division

1. Standard of review [ 26 ] An appeal from a decision that divides family property necessitates the application of various standards of review. This Court’s decision in Riley v Riley , 2011 SKCA 5 , 336 Sask R 110 [ Riley ], provides a helpful

summary of the applicable standards: [5] When an appellate court reviews a decision of a trial court, three standards of review are usually engaged: (

i) the standard of review concerning questions of law, i.e., did the trial judge decide all questions of law correctly …; (ii) the standard of review as to factual findings, i.e., did the trial judge make any palpable and overriding error with respect to a material finding of fact …; and (iii) the standard of review with respect to discretionary matters, i.e., did the trial judge consider all relevant matters … . When the decision under review divides family property, all three types of review are engaged to a greater or lesser extent … but there is an overarching consideration.

Given the provisions of The Family Property Act , with its emphasis on a “fair and equitable” distribution of property, considerable deference is owed to the trial judge’s overall decision as to entitlement and valuation … .

While the standard of appellate review permits a court 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 must be aware that disturbing one of a trial judge’s many decisions as to entitlement to family property, or its valuation, may disturb the overall equities that have been achieved in arriving at what constitutes a fair and equitable distribution.

The standard of appellate review in family law matters reflects this deference to the trial judge’s overall distribution of family property. [ 27 ] A trial judge’s decision regarding the valuation and division of family property is accorded significant deference on appeal, given the overall purpose of the FPA , which is to provide a fair and equitable distribution of family property.

Considerable discretion is conferred upon a trial judge under the FPA in order to accomplish that purpose: Dubelt v Muranetz-Dubelt , 2010 SKCA 5 , at paras 12–13 , 343 Sask R 215, and D.B.B. v D.M.B ., 2017 SKCA 59 at para 172 [ D.B.B. ]. A trial judge’s decision with regard to a choice of valuation date for a particular item of family property is accorded this same level of deference: Kassian v Kassian , 2019 SKCA 101 at paras 32–34 , 33 RFL (8th) 333. 2. Valuation date [ 28 ] When a division of property is sought under

Part IV of the FPA , a trial judge must determine the value of the family property to be divided. Because time passes between the commencement of a proceeding and the trial, values often materially change from the point when the petition was issued until the point when evidence is presented at trial. As a result of this reality, the definition of value found in s. 2(1) of the FPA provides the following discretionary choices to a trial judge:

Interpretation 2

(1) In this Act: … “value” means: (

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

b) if a fair market value cannot be determined, any value at the time an application is made pursuant to this Act, or at the time of adjudication, that the court considers reasonable. (« valeur ») [ 29 ] In this matter, there was ample evidence of the pre-tax value of the Corporation at both the application (petition) date and the adjudication date. The value as of the two dates was readily determined because, in a departure from the usual situation faced at trial, that evidence was largely uncontroverted.

As a result, the trial judge had two choices for the pre-tax value of the Corporation: the petition date value of $1,950,069; or the adjudication date value of $4,679,000. The trial judge chose the petition date value. [ 30 ] Ms. Dungey asserts the trial judge erred in his choice of the valuation date for the Corporation. She contends much of the delay between the commencement of the action and the trial was caused by Mr. Dungey so she should not be prejudiced by the significant amount of time that passed. She further argues that Mr.

Dungey strategically chose the date to issue the petition in order to minimize the value of the Corporation. Lastly, she submits using the petition date as the valuation date for the Corporation creates a fundamental unfairness when one looks at the net income the Corporation has earned in the interval between the two possible valuation dates and the significant increase in its value in that period. [ 31 ] In response, Mr. Dungey asserts the lengthy delay between the petition and the commencement of trial – a period of close to five years – was primarily caused by Ms.

Dungey’s failure to diligently deal with the litigation. With regard to the second issue, he argues that the trial judge found as a fact that he did not intentionally chose a date that minimized the value of the Corporation. Lastly, he argues choosing the petition date was not unfair because the increase in value of the Corporation was the result of his skill and hard work in operating the business over a lengthy period post-petition. [ 32 ] The issue of the choice of the valuation date has come before this Court on many occasions.

In Ackerman , Ryan-Froslie J.A. summarized the principles that are generally applied when a trial judge examines which of the two possible dates to use for valuation: [37] … This definition [of value from the FPA ] gives trial judges considerable discretion in determining whether to use the application date or the adjudication date to value family property. The ambit of that discretion has been considered by this Court and a review of that jurisprudence reveals the following principles: (

i) The application date is the date traditionally used by courts for valuation purposes … . (ii) Generally, property should be valued consistently at either the application date or the date of adjudication. If property is valued at different dates, the court should provide an explanation for doing so … .

(iii) In determining the appropriate valuation date, a judge must act rationally based on the evidence before him or her; keeping in mind the purpose of the Act and the justice of the case … . (iv) The choice of a valuation date will be informed in part by the sufficiency of the evidence of value pertaining to each date … . (

v) If property has increased or decreased in value between the application date and the date of adjudication, the reason for that increase or decrease is an important factor to be considered in choosing the appropriate valuation date. If the increase or decrease is due solely to market forces the property should generally be valued as of the date of adjudication … . On the other hand, when the rise or fall in value is attributable solely to the actions of one spouse, it is appropriate to value the property as of the date of application … .

I would add that any contribution by a third party to the increase or decrease in value of family property, would militate in favour of valuing that property as of the application date. (vi) The type of distribution contemplated by the Court, e.g., sale or transfer to one or both spouses, may also be relevant to the choice of the valuation date.

Other considerations may also apply [ 33 ] In Thomas , Ottenbreit J.A. emphasized that the adjudication date may still be used as the appropriate valuation date, even if the reason for the change in value is something other than market forces: [32] As an initial point, Ackerman does not stand for the proposition that where there is a change in value between the application date and the adjudication date due to factors not restricted to market forces, the application date for valuation is invariably the appropriate date.

Section 2(1) of the Act , and the definition of value stated therein, makes clear that where necessary the court can determine a reasonable value based on either the date of application or adjudication … . [ 34 ] After referencing the quotation from paragraph 37 of Ackerman , Herauf J.A., in D.B.B. , noted an overarching reason for the preference for the application date but observed that the adjudication date may be used if there is a rational explanation for doing so: [206] From these comments, it is clear that, generally, the application date is to be used by the trial judge.

This would make practical sense, as this is the time when family property is crystalized under the FPA . However, these comments also illustrate the discretion the FPA confers on the court. The trial judge may use the date of adjudication if he or she provides an explanation for doing so.

The cases show a judge’s decision in this regard should be accorded deference if he or she acted rationally based on the evidence while keeping in mind the purpose of the FPA . [ 35 ] Most recently, this Court in Kassian reiterated that the reasons for the change in value is an important factor when choosing a valuation date, with an emphasis on the role the parties played in bringing about that change: [34] Generally, the application date, as opposed to the adjudication date, is used for valuation in the division of family property in Saskatchewan … .

While property would typically be valued consistently at one date or the other, a trial judge is entitled to value the property on either of the two dates that he or she sees fit.

A trial judge can also value some of the property on one date and some of the property on the other date; as long as he or she exercises that discretion rationally, the choice is based on the evidence and the decision is in keeping with the purposes of the FPA and the justice of the case … . [35] One of the major factors that influences the choice of the valuation date for specific items of property is the reason for any increase or decrease in value of that item between the application date and the adjudication date. … [ 36 ] The use of the adjudication date is generally more appropriate when the increase or decrease in value of a specific item of property is caused solely by market forces because market forces are beyond the control of the parties and neither party should benefit or suffer as a result of circumstances that they have no influence over.

Similarly, when other circumstances over which the parties have little or no control cause the change in value, the adjudication date is typically more appropriate. However, there is often a variety of factors that cause changes in value of an item of property, some of which may be outside of the control of the parties and others subject to a level of control by one or both spouses. For example, the value of an active business may be affected by a downturn in the economy but may also be affected by the myriad of operational decisions made over time by the spouse in possession of the business.

A trial judge should carefully consider all of the factors that have caused an increase or decrease in value when determining which valuation date to use. [36] The choice of a valuation date requires the exercise of discretion. While the discretion is wide, it is not unfettered and must be applied in a manner that is consistent with the purpose of the FPA . A trial judge may choose either date as long as there is a rational basis for doing so based on the evidence at trial. [ 37 ] As a last point before turning to the merits of the appeal, I must address Mr.

Dungey’s repeated assertions, in both his written and oral arguments, that Ms. Dungey had not contributed to the management or operation of the various stores either pre-petition or post- petition. I take Mr. Dungey’s arguments regarding the absence of Ms. Dungey’s contributions to the operation of the business to be aimed at the period after the petition was issued and relevant only to the issue of determining the appropriate valuation date.

As set out in s. 20 of the FPA , and highlighted in Williams v Williams , 2011 SKCA 84 , at paras 31–32 , 343 DLR (4th) 720, there is generally no relevance to a party’s direct efforts or financial contributions to the acquisition, maintenance and improvement of any family property prior to the petition date. Subject to the exceptions, exemptions and equitable considerations set out in the FPA that may affect the division of property, each party’s contributions are presumed to be equal prior to the petition date because such contribution is an inherent part of a spousal relationship. [ 38 ] Beginning with Ms.

Dungey’s arguments regarding delay, she submits Mr. Dungey delayed in initiating the process and did not follow The Queen’s Bench Rules . She points to the almost six-month delay between the issuance of the petition and its service and alleges subsequent delays in Mr. Dungey filing his property statement and responding to a notice to disclose. Mr. Dungey argues the blame for the delay should be assigned to Ms. Dungey.

He contends she “dragged her feet” throughout, noting that he had to apply to have the matter set down for a pre-trial conference, she successfully had the first trial dates vacated because she had not yet obtained an expert opinion and she had missed the subsequent deadline for providing her expert report.

[ 39 ] While the trial judge did not address the issue of each party’s alleged delay in the trial decision, an exchange amongst the trial judge and counsel during the cross-examination of Mr. Dungey, at pages T275 to T276 of the transcript, demonstrates that the trial judge did not find the details of either party’s delay to be particularly relevant to his decision. At best, it appears the relative level of fault was treated as a neutral factor, with neither party being assigned the blame.

Because both parties were partially responsible for the delay, the trial judge could not have erred by not considering the cause of it as a factor that would favour one date or the other. However, the fact remained that almost five years had passed between the issuance of the petition and the commencement of the trial, during which time Mr. Dungey continued to solely operate and expand the business. The passage of time and what occurred during that period were factors the trial judge took into account as he was entitled to do: see Ackerman and Kassian . [ 40 ] Ms. Dungey further argues that Mr.

Dungey intentionally issued the petition on a date on which he had run the company down to its lowest value possible, resulting in a significant unfairness if the petition date value was used. She submits that he timed the commencement of the action very carefully so that the value of the Corporation would be at a low point. Alternatively, she contends that even if he did not do so intentionally, the timing resulted in a petition date value that is far too low for the business.

She points to the income generated by the Corporation in the years since the petition was issued and the significant increase in value since 2014 as indicative of the unfairness of the valuation. [ 41 ] The argument that Mr. Dungey intentionally chose the petition date to coincide with the lowest possible value of the Corporation was dismissed by the trial judge: [44] There is a suggestion by the respondent that the petitioner consciously chose 2014 because it was a particularly poor year. Respectfully, I get no sense of Machiavellian intent from the respondent’s timing.

The marriage had been uneven for a number of years. Although I concede the respondent was taken by surprise when the petitioner indicated he wished to divorce, a clear-eyed retrospective would hint that it was coming. There is no palpable and overriding error demonstrated in this finding. Mr. Dungey testified as to his reasons why he had the petition issued when he did and categorically denied any strategic timing. This uncontroverted evidence was accepted by the trial judge and his finding of fact cannot be dislodged on appeal. [ 42 ] This leaves Ms.

Dungey’s argument that the timing of the issuance of the petition, even if it was not strategically done, resulted in a significantly unfair valuation of the Corporation. She submits choosing the petition date results in a property division that is profoundly unfair and inequitable, which runs counter to the purposes of the FPA . Ms. Dungey argues that the trial judge disregarded the principles of fairness and equity, which he was required to apply under the FPA . Her specific submissions on this front can be broadly categorized as follows: (

a) The petition date was the lowest point in the value of the Corporation because of the anomalous circumstances of the expenses associated with building a new store, which temporarily lowered the value and profits for that one year only. She argues the petition date value was not representative of the actual value of the Corporation. (

b) The value of the Corporation substantially increased each year post-petition, with subsequent average annual net income approaching the petition date value of the Corporation itself. She argues the Corporation cannot be assigned a value that is not much more than one year’s income that can be generated from the business. Ms. Dungey submits these earnings demonstrate the business was obviously far more valuable than the petition date value would reflect. [ 43 ] Mr.

Dungey asserts the trial judge did not err in choosing the valuation date because the value increased dramatically as a result of his sole efforts and that the benefit of that change in value should not accrue to Ms. Dungey, who took no role in the business whatsoever, and who took no risk in its operation during the five years after the petition was issued. He relies heavily on the decisions in Ackerman and Kassian in support of this argument. [ 44 ] I will begin the analysis of this portion of the arguments by making two observations.

First, the determination of the fair market values as of the petition date and the adjudication date represent findings of fact that were not appealed and were based on largely uncontroverted evidence. Second, it is arguable that choosing either date would have been unfair to the party whose position was not accepted; and, perhaps, the value of the Corporation would have been most fairly fixed at some point in between the two values.

However, the FPA , and the voluminous case law interpreting it, makes it clear that the trial judge had to choose one of the two dates once he determined the evidence allowed him to make a finding regarding fair market value for both dates. He could not choose to pick one date or the other and then adjust the value up or down by an arbitrary amount in order to make the property division more fair or equitable.

His choice was binary. [ 45 ] The trial judge referenced the two choices for a valuation date as set out in the FPA and then correctly instructed himself on the principles from the relevant case law that guided his choice. After doing so, he determined that the appropriate valuation date was the petition date. This was based on his rejection of the submission that market forces caused the increase in value and his finding that the increase came about because of Mr. Dungey’s skills and effort.

In making this determination, he stated the following: [42] There is no question that the adjusted book value of the Company has increased from December 2014 to December 2017. However, market forces are not the cause. The trial was replete with evidence of the skills necessary to have a successful Canadian Tire franchise. The gods of the retail marketplace can be fickle.

Care must be taken as to what product is bought, when it is bought, how it is displayed and the like. [43] The petitioner has shown himself, since his tenure in Cape Breton, that he is a nimble operator and consistently grows the Canadian Tire business in his trading area. As a result of his success he has been consistently offered stores servicing a bigger market. This is how wealth is accumulated in the Canadian Tire system.

I also observe that the respondent has had virtually nothing to do with the business since 2008. [ 46 ] This determination came after his earlier findings of fact, which were not challenged by Ms. Dungey on appeal: [11] In 2004 the petitioner was offered the Canadian Tire dealership in Estevan, Saskatchewan. …

[12] By this time it was no doubt clear to the Canadian Tire Corporation that the petitioner was an excellent operator. … … [15] In 2012 the petitioner was given the opportunity to operate the Canadian Tire store in Yorkton, Saskatchewan. He embraced thechallenge. In due course he was also operating a Canadian Tire store in Melville, Saskatchewan. … [26] Thus, to the extent an owner of a Canadian Tire dealership can accrue wealth, it must be through the efficient and profitable operationof the store.

For example, this means buying and selling at the right time, buying and selling the right product, properly displaying theproduct and being alert to local conditions and demands. Skill is required; success is not guaranteed. [47] It was agreed that Ms. Dungey took no role whatsoever in the operation of the store, or anything related to the store, post-petition. On the other hand, there was extensive evidence regarding Mr. Dungey’s skills and the all-encompassing effort that he devoted tothe Yorkton store, which was an increase from the time he spent at the Newfoundland stores.

He also acquired the Melville store as asatellite store in February of 2015. That store was losing money when he acquired it and Mr. Dungey took on its additional risk. Theevidence fully supported the trial judge’s finding that Mr. Dungey’s skills and effort were the cause of the significant increase in the valueof the Corporation. These findings of fact were not appealed. [48] The trial judge’s choice of adjudication date for valuing Mr.

Dungey’s investment in the United States further demonstratesthat he was properly attuned to the need to carefully evaluate the cause of any change in value. [49] The trial judge was well aware of the substantial change in value of the Corporation, and the changes in the levels of Corporateincome, from the petition date to the adjudication date. Given his findings of fact regarding the cause of the increase in value, themagnitude of that change did not require him to exercise his discretion in favour of one date or the other: Kassian. [50] Ms.

Dungey referred the Court to Cey v Teske, 2006 SKQB 315, 286 Sask R 221; Grosse v Grosse, 2012 SKQB 464, 387 DLR(4th) 473 (rev’d 2015 SKCA 68, [2015] 9 WWR 673, leave to appeal to the SCC refused, ); Moore v Moore, 2013SKQB 259, 425 Sask R 58; and D.B.B. as examples where the application of the FPA requirement of equity and fairness resulted in theadjudication date being chosen by a trial judge. None of those decisions applied general principles that are at odds with the principles setout earlier in this decision or those applied by the trial judge in the matter at hand.

The fact patterns that existed in each of those casessimply led to a different choice of valuation date than the decision that resulted from the exercise of the trial judge’s discretion in thecurrent matter. If anything, those decisions serve to highlight the discretionary and fact-specific nature of the choice of valuation date. Thetrial judge was aware of the principles regarding fairness and equity advanced through this line of cases and quoted extensively from othercases to this same effect at paragraphs 39 to 41 of his decision.

In my view, it cannot be said that the trial judge disregarded the principlesof fairness and equity that govern the application of the FPA. He applied those concepts and chose the date that he determined was themost appropriate in the circumstances. Applying the required deferential standard of review, there is no room for this Court to interferewith the trial judge’s exercise of discretion in choosing the petition date as the valuation date for the Corporation. This ground of appealcannot succeed. 3.

Application of a reduction of the value of the Corporation for taxes [51] The trial judge reduced the pre-tax value of the Corporation by $635,773 to account for 100% of the income tax that would bepayable upon Mr. Dungey withdrawing the petition date value from the Corporation. Ms. Dungey submits that the trial judge erred by notdiscounting the amount he found to be payable for taxes. Relying on Deyell v Deyell (1991), (SK CA), 90 Sask R 81(CA), she argues the trial judge should have reduced the adjustment for taxes by 50%. [52] As a preliminary point, Mr.

Dungey submits the Court should decline to consider this issue because it was not raised as aground of appeal in Ms. Dungey’s notice of appeal. With regard to the merits of the issue, Mr. Dungey argues there is no hard and fast rulethat a discount must be applied to a tax liability. He submits the trial judge was alive to the issue and that the evidence established the taxwould be payable and there was no ability to avoid paying it. [53] In my view, the Court should consider the issue regarding the tax reduction. This was an issue that was comprehensivelyargued at trial.

While it should have been made more explicit in Ms. Dungey’s notice of appeal, it is sufficiently captured in that noticeand was clearly set out and argued in her factum. Mr. Dungey had a full opportunity to reply to the issue in his factum and did so. There isno prejudice to Mr. Dungey arising out of the Court considering this issue. [54] It is beyond doubt that a contingent tax liability may be taken into account in the division of family property pursuant tos. 21(3)(

j) of the FPA: James v Belosowsky, 2012 SKQB 316 at para 70, [2013] 5 WWR 415 [Belosowsky], Frank at paras 52–61 andKassian at paras 77–78. The principles from Belosowsky are worth repeating: [70] Since Carlson, [(1984), (SK CA), 34 Sask R 287], the Saskatchewan Court of Appeal has considered theapplication of s. 21(3)(

j) of The Family Property Act in a number of cases … . From a review of these authorities the following principlesemerge: (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 … .

(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 .

(3) There must be an evidentiary basis to support the tax consequences. That evidence need not be provided by experts but should address

such 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 … .

(4) Where assets are divided in specie no tax liability should be considered … .

(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 … .

(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 … ; (ii) that there are mechanisms by which the spouse can minimize or defer tax …; (iii) the age of the parties …; (iv) the reasonable likelihood of some tax liability … .

(7) The courts generally apply a discount of 50% to the marginal tax rate where the tax liability is contingent … . [55] The party seeking an adjustment for future tax payable must provide evidence to establish the necessity of an adjustment.While the full amount of the tax is frequently discounted by trial judges to account for future contingencies regarding the timing of thepayment of the tax, the uncertainty that the tax will be payable, the likelihood of liquidation and other uncertain future events, such adiscount is not required in every case.

If the party who owns the asset provides evidence at trial sufficient to convince the trial judge thatthe tax liability will be incurred, a discount is not required. [56] In a recent decision of this Court, Schwann J.A. noted the following (Frondall v Frondall, 2020 SKCA 135 [Frondall]): [116] … To begin with, a tax liability is an equitable consideration that a trial judge may take into account in dividing the value of familyproperty. Trial judges are not obliged to take a tax liability into account nor are they required to order a dollar for dollar adjustment even ifit is taken into consideration.

Further, a reduction or discount for contingencies is a discretionary decision. It follows from a finding of factthat 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 theassets 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 a discount rate requires the trial judge to consider the probability of a futureevent [immediate liquidation] and the party’s willingness and ability to plan for it” (at para 59): also see Woodward v Woodward, 2016SKQB 301 at para 86, 86 RFL (7th) 357 [Woodward]. … [129] … There are circumstances – albeit rare – where the courts have taken 100% of the tax liability into account: see, for example,Gorniak v Schaeffer, 2014 SKQB 163, 447 Sask R 189.

Conversely, there are cases where a trial judge has refused to deviate from equaldivision of family property in circumstances where a proper evidentiary foundation had not been made out: Gresham v Gresham (1988), (SK CA), 72 Sask R 9 (CA). [130] At the end of the day, the trial judge was required to divide the family property equitably, subject only to exemptions (s. 23 of theFPA) and possible exceptions (s. 21(3)).

While the trial judge had the discretion to apply an exception – tax implications being one suchexception – he was not required to do so. … Appellate courts take a deferential approach to discretionary decisions and may only intervenein the face of an error in principle, a misapprehension of the evidence or where the decision is clearly wrong. Respectfully, Mr. Frondall’sarguments do not persuade me that the trial judge abused his discretion in any of those ways. [57] Turning to the matter at hand, the trial judge did not conduct an extensive analysis of the issue of a discount to the taxespayable.

While his reasons in the Trial Decision were sparse regarding this issue, the trial judge was alive to the need to consider whetherhe should discount the tax calculated by Mr. Kamien. This is seen in the following exchange between the trial judge and Mr. Dungey’scounsel during the trial: THE COURT: No, I understand, but the point you’re making is that, sure there is the million-seven there; but, hey, guess what, when yousell stuff, there’s taxes owing. MR. KORPAN: Correct. Yeah. And, I guess, just for the record My Lord, the amount attributed to the value of Mr.

Dungey’s business, inhis property statement is the $1,773,870 less 50 percent of the contingent tax liability. THE COURT: Well, there is usually a round down of contingent tax liability. MR. KORPAN: So – THE COURT: So you obviously did it then. MR. KORPAN: He’s – my point with the witness is just to confirm to you he’s not conceding that there ought to be a 50 percent discountto a tax liability. THE COURT: He would, no doubt, like me to take into account 100 percent of the potential. MR. KORPAN: Yes. We’re on the same page.

THE COURT: Although – although, again, I remind you, respectfully, we don’t typically do that.

MR. KORPAN: That’s an issue for -- THE COURT: Yeah. MR. KORPAN: -- you to decide -- THE COURT: Exactly. Yeah. MR. KORPAN: -- when you give your decision. THE COURT: It’s an issue for argument. [58] The issue was argued in the parties’ written trial briefs. At paragraph 29 of the Trial Decision, the trial judge referencedMs. Dungey’s concession that there would have to be an adjustment for taxes and quoted her position regarding the amount of thatadjustment from her trial brief. The trial judge referred to Mr.

Kamien’s ability “to employ exact tax which would be applied to the moneywithdrawn from the company” (emphasis added, at para 30). He then accepted that 100% of the tax should be deducted from the value ofthe Corporation and analyzed the issue no further.

While a fuller analysis of this issue would have been preferable, the Trial Decision issufficient for this Court to determine that the trial judge was fully aware of the relevant issues when he deliberated and that he exercisedhis discretion in a manner supportable on the evidence. [59] There was uncontroverted evidence of the amount of tax that would be payable as of the trial date if Mr. Dungey withdrewfunds equivalent to the value of the Corporation from the Corporation. There was also uncontroverted evidence of the source of the fundsthat would be used to pay for a division of property.

When, during his examination-in-chief, Mr. Dungey was asked where he wouldobtain the money to pay Ms. Dungey for her share of the value of the Corporation, Mr. Dungey answered, “I would have to take themoney out of my company. It would be borrowed funds. And I would have to pay that as income in that year. So there would be a taxliability on that money”. [60] The evidence at trial confirmed that all of Mr. Dungey’s available resources were tied up in the Corporation. However, I notethat Ms. Dungey had significant assets in her possession, which substantially lowered the equalization payment. Mr.

Dungey will not haveto take the entire amount out of the Corporation immediately in order to make the payment. However, Mr. Dungey is currently 67 yearsold, so the taxes will have to be paid at some point in the relatively near future when he exits the business, regardless of how he obtainsthe funds for the equalization payment. [61] I note that the trial judge did, in effect, apply a discount to the tax contingency by using the tax rates in effect as of the petitiondate as opposed to applying subsequent higher tax rates. This resulted in a sizeable discount to the tax contingency in a manner thatfavoured Ms.

Dungey. [62] In my view, the standard of review prevents this Court from interfering with the trial judge’s findings regarding the reductionfor tax. The evidence established the exact amount of the tax and supported a finding that the tax would actually be incurred in therelatively near future. This level of certainty regarding the payment of taxes is a key difference from Frondall. The trial judge’s overalldetermination is well supported by the evidence and allowing the tax adjustment in the amount that he did was a decision that was withinhis discretion to make.

I would not disturb the trial judge’s determination on this issue. 4. Adjustment to value for accounting treatment of expenditures [63] Ms. Dungey argues that, if the petition date is used as the valuation date, certain costs incurred for the new store in Yorktonshould have been treated differently from an accounting perspective. She argues that some of the expenditures should have beencapitalized instead of expensed, which would have resulted in a higher petition date value. This argument was not raised at trial and wasnot subject to any comment by the trial judge.

However, this issue was explored in the evidence. The testimony from Mr. Kamienestablished that the expenditures for the new store in Yorkton were accounted for in the usual manner for Canadian Tire and wereproperly done. Mr. Kamien specifically rejected the suggestion in cross-examination that certain items should have been capitalized asopposed to expensed. There is no evidence to the contrary. There is no merit to this ground of appeal. B. Spousal support 1.

Standard of review [64] The standard of review for a judgment for spousal support is set out in Hickey v Hickey, (SCC), [1999] 2 SCR518: [10] When family law legislation gives judges the power to decide on support obligations based on certain objectives, values, factors, andcriteria, determining whether support will be awarded or varied, and if so, the amount of the order, involves the exercise of considerablediscretion by trial judges. They must balance the objectives and factors set out in the Divorce Act or in provincial support statutes with anappreciation of the particular facts of the case.

It is a difficult but important determination, which is critical to the lives of the parties andto their children.

Because of its fact-based and discretionary nature, trial judges must be given considerable deference by appellate courtswhen such decisions are reviewed. [11] Our Court has often emphasized the rule that appeal courts should not overturn support orders unless the reasons disclose an error inprinciple, a significant misapprehension of the evidence, or unless the award is clearly wrong. … [12] There are strong reasons for the significant deference that must be given to trial judges in relation to support orders.

This standard ofappellate review recognizes that the discretion involved in making a support order is best exercised by the judge who has heard the partiesdirectly. It avoids giving parties an incentive to appeal judgments and incur added expenses in the hope that the appeal court will have a

different appreciation of the relevant factors and evidence. This approach promotes finality in family law litigation and recognizes the importance of the appreciation of the facts by the trial judge.

Though an appeal court must intervene when there is a material error, a serious misapprehension of the evidence, or an error in law, it is not entitled to overturn a support order simply because it would have made a different decision or balanced the factors differently. [ 65 ] This deferential standard of review applies to both income determination and the fixing of the quantum of spousal support: D.B.B. , Walker v Walker , 2019 SKCA 96 , 31 RFL (8th) 310 [ Walker ], and P.M. v S.M ., 2019 SKCA 111 , 34 RFL (8th) 34. 2. Mr. Dungey’s income [ 66 ] There was no dispute at trial, or on appeal, that Ms.

Dungey is entitled to spousal support for an indefinite period. It is also uncontroversial that the trial judge imputed annual income of $65,000 to Ms. Dungey. She has not appealed that determination. However, the issues of Mr. Dungey’s income and the quantum of spousal support were highly contested at trial and continue to be so. [ 67 ] The trial judge made several findings of fact regarding Mr. Dungey’s income. Although his income tax returns set out other minor sources of income or losses, the vast bulk of Mr. Dungey’s income is received from the Corporation through an annual salary plus dividends. Mr.

Dungey received the following total combined amounts from those two sources of income for the referenced years: Year Total Income 2013 $583,636 2014 $507,877 2015 $336,813 2016 $868,804 2017 $755,000 [ 68 ] The Corporation’s income before income taxes for the same years was as follows: Year Total Taxes 2013 $43,511 2014 $1,410,572 2015 $1,418,946 2016 $1,575,038 2017 $1,446,347 [ 69 ] The trial judge averaged Mr. Dungey’s salary plus dividends actually received from the Corporation for the four years 2013 to 2016 to arrive at an average annual income of $574,283. In doing so, he declined Mr.

Dungey’s invitation to only use the average of 2013 to 2015 and further did not accept Ms. Dungey’s trial submission that the entirety of the Corporation’s net income before taxes, plus Mr. Dungey’s annual salary of $150,000, should be available as income for the purposes of spousal support. [ 70 ] Ms. Dungey submits the trial judge erred by not adding the Corporation’s total pre-tax income to Mr. Dungey’s salary to arrive at an annual income for the purposes of spousal support.

She argues that his annual income should have been set at $1,633,000, which is the average of the three years of the entirety of the Corporation’s pre-tax income from 2015 to 2017 plus his annual salary of $150,000. [ 71 ] Mr. Dungey submits that the trial judge did not err in basing his income only on his salary and the dividends he actually received. He contends the Corporation’s contractual obligations and sound business reasons were a proper basis upon which to conclude that no further income should be attributed from it. Mr.

Dungey also argues that, in any event, ongoing spousal support should not be based on post-separation increases in income. [ 72 ] The starting point for determining income for the purposes of spousal support is generally the same as the starting point for determining income for the purposes of child support under the Federal Child Support Guidelines , SOR/97-175 : see s. 6.1 of the SSAG , or

chapter 6 of the Revised Users Guide .

Other than some minor differences, which are not relevant to the matter at hand, the principles that apply in determining income for the purposes of spousal support are the same principles that apply when determining income for the purposes of child support: Marquez v Sapiola , 2013 BCCA 433 at para 38 , 51 BCLR (5th) 55, and Slongo v Slongo , 2017 ONCA 272 at para 130 , 137 OR (3d) 654. [ 73 ] When a payor spouse is the sole owner of a corporation, all or part of the pre-tax corporate income is available as income for the payment of support, subject to the corporation’s reasonable business needs, obligations and management of risk: Bear v Thompson , 2014 SKCA 111 , 378 DLR (4th) 649 [ Bear ], Potzus v Potzus , 2017 SKCA 15 , [2017] 7 WWR 296, and Walker .

While the attribution of corporate income is limited to the amount of the most current year’s pre-tax corporate income, a court is fully entitled to scrutinize a corporation’s historical earnings and other financial information to determine what portion of the current year’s income should be attributed: Bear at para 74 and Potzus at para 78 .

The objective of analyzing all potential sources of the payor’s income is to arrive at an amount that fully and fairly reflects the income available for support purposes: M.H. v A.B ., 2019 SKCA 135 , 36 RFL (8th) 261. [ 74 ] The overall application of this concept was helpfully summarized by Wilkinson J. in Tucker v Tucker , 2019 SKQB 317 : [33] Attribution of corporate income is guided by Bear v Thompson , 2014 SKCA 111 , 378 DLR (4th) 649 [ Bear ].

There, the Court of Appeal favoured the “Limited Rule”, which restricts attribution of income to an amount that is no more than the pre-tax income of a corporation for the most recent taxation year. It rejected what it termed as the “Unlimited Rule”, which allows attribution of the three-year average of the pre-tax income of a corporation. However, it allowed that a three-year examination of what might have been available from the corporation might serve a more limited purpose and support a decision to attribute the whole of the current year’s pre-tax corporate income to the payor: see Bear , para 56 .

The Court underlined that attribution should only be made from income that exceeds the corporation’s reasonable needs, should not put the corporation at risk and should not jeopardize its ability to meet third party obligations. [34] The onus rests with the parent who is the shareholder, director or officer of the corporation to establish that the pre-tax income of the

corporation is not available to them for child support purposes … . [35] While retained earnings are not a direct consideration in the s. 18 [ Federal Child Support ] Guidelines analysis, to the extent that the current level of retained earnings are deemed sufficient for the purposes of the corporation, it may justify an attribution of the entirety of the corporation’s pre-tax income to the support payor: Schemenauer v Schemenauer , 2018 SKQB 20 at paras 46–47 .

Moreover, in appropriate circumstances, retained earnings can be the focus of an analysis under s. 19 of the Guidelines , where imputation of income is the primary consideration: Potzus . [ 75 ] In the matter at hand, the trial judge considered whether he should attribute any additional income from the Corporation to Mr. Dungey. In declining to do so, he was greatly influenced by the contractual obligations with Canadian Tire that required the Corporation to maintain a minimum amount of equity of 25%, with a recommended amount of 35%. The trial judge noted Ms.

Dungey’s expert was unaware of those contractual obligations. He also reproduced a portion from Mr. Dungey’s trial brief that summarized the relevant evidence regarding the need for maintaining sufficient equity in the Corporation as a cushion against various other business risks and it is obvious that he adopted those reasons as sufficient justification for Mr. Dungey not to remove any additional income from the Corporation. After noting these issues, the trial judge determined the following: [59] Again, I am confident in relying on the expert report of Mr.

Kamien and his deep understanding of the Canadian Tire system. Mr. Kamien’s assessment of income levels available to the petitioner is consonant with the protocols imposed on each of its dealers by the Canadian Tire system. I observe, those retention of cash restrictions are prima facie sensible. They keep cash in each dealer’s business which is consistent with Canadian Tire wishing its dealers to be well positioned to face the inevitable vicissitudes of the retail marketplace. [ 76 ] This finding had a solid foundation in the evidence of Mr. Dungey, Mr. Kamien and the documentary evidence.

This evidence supported a finding that additional income should not be attributed to Mr. Dungey retroactively. However, the trial judge did not address the fact that the recommended equity targets had been reached by the date of trial through the mechanism of Mr. Dungey having retained sufficient previous earnings within the Corporation. Having achieved that equity target, Mr. Dungey no longer needed to retain subsequent years’ income within the Corporation in order to maintain the recommended equity ratio. As seen from the testimony of Mr.

Kamien, and from the Corporation’s financial statements, the equity percentage improved almost every year because Mr. Dungey took significantly less from the Corporation in dividends than it earned. If that pattern continues, the equity percentage will continue to rise each year. If Mr. Dungey does not remove the equity, thereby increasing his income, then the equity will continue to grow and will soon be far past the recommended level. To put it another way, now that he has exceeded the recommended equity level, Mr.

Dungey can remove more of the profit each year without adversely affecting that equity ratio. [ 77 ] In my view, the trial judge misapprehended the evidence and did not realize that because the recommended equity level had been exceeded, additional pre-tax Corporate income was available to Mr. Dungey in the future without placing him offside of the contractually required and reasonably recommended equity levels. I would note, however, that this discussion of the availability of annual withdrawals of net income from the Corporation is further complicated by the fact that Mr.

Dungey will have to withdraw a sizeable amount from the Corporation to pay the property judgment. This will lower the equity in the Corporation and might place limits on Mr. Dungey’s ability to draw additional income from the Corporation in the near future. This nuance was not explored by the trial judge. [ 78 ] The significance of this misapprehension of the evidence must be examined to determine if it had any effect on the ultimate determination of Mr. Dungey’s income for the purposes of spousal support, given that the trial judge determined he should not use Mr.

Dungey’s current income to set income for such a purpose. In other words, this error is only relevant if the trial judge further erred by not using Mr. Dungey’s current income as a basis for awarding spousal support. This requires an examination of whether the trial judge should have attributed additional post-separation income to Mr. Dungey based on the fact that a significantly greater income was now available to him than had been in the past. [ 79 ] The trial judge examined when he should determine Mr. Dungey’s income. Despite noting that the increase in income post- petition was due solely to Mr.

Dungey’s efforts and skills, it is of significance that the trial judge did not refuse to use any of his post- petition increases in income as a basis for calculating spousal support. Rather, he used a hybrid approach to determine that income and partially included post-petition increases in income. The trial judge took a four-year average of Mr. Dungey’s income for the year immediately prior to the issuance of the petition (2013) and his income for the three years after the petition (2014 to 2016). He chose to not include Mr. Dungey’s 2017 income in the average.

In doing so, he found that this combination of annual incomes “gives us the fairest number” (at para 67). Mr. Dungey has not challenged his income being set at $574,283. As a result, the question becomes whether the trial judge erred by not factoring Mr. Dungey’s increased income after 2016 into the mix in a manner that would result in his income exceeding that amount.

This requires an examination of the law regarding the use of post-petition increases in income when setting spousal support. [ 80 ] While post-petition increases in a payor’s income will automatically be used to calculate ongoing child support, the same proposition is not true for spousal support.

This contrast was examined by Professor Rollie Thompson, Q.C., in “To Vary, to Review, Perchance to Change: Changing Spousal Support” (2012), 31 CFLQ 355 at 372–373: Where a child support payor’s income increases after separation, the child automatically gets to share the full benefit of the parent’s improved income by way of child support. There is no “entitlement” issue there. In the law of spousal support, there is an intervening entitlement question, as one spouse does not automatically get to share in the post-separation good fortune of the other spouse.

On variation or review, a recipient may get to share none, some or all of the payor’s post-separation income increase. The SSAG cannot simply be applied to the income increase, without more careful analysis. [ 81 ] The trial judge quoted and relied on the following portions of Frank to inform his decision regarding his determination of Mr. Dungey’s income for the purposes of spousal support: [110] The 2010 User’s Guide confirms that a post-separation increase in income raises a distinct issue of entitlement to be resolved as such:

(

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

While this question usually arises at the stage of variation or review, it can also come up at the time of the initial order, if there hasbeen a lengthy period of time since separation or a sudden increase in income after separation, as was true in the Fisher [2008 ONCA 11]case from Ontario. • It is incorrect to say that the Advisory Guidelines always require that incomes at the time of separation must be used incalculating the formula ranges. • It is equally incorrect to state that the spouse’s current incomes are always the correct incomes for formula purposes. • Under the current law, a post-separation income increase on the part of the payor raises another distinct issue for spousalsupport analysis, an entitlement issue, namely whether all, some or none of the increase should be taken into account in calculating theformula range. (p. 51) [111] Faced with a claim for spousal support based on a post-separation increase, a trial judge will consider many factors, including needs,the length of the marriage, the roles adopted during the marriage and the reason for the income increase.

As the Guidelines indicate, “theextent of sharing of these post-separation increases involves a complex, fact-based decision” (p. 145). … [113] Critically, in the within appeal, this Court is faced with a finding that Mr. Linn’s post-separation income was not as a result of anycontribution by Ms. Frank. Thus, in order for Ms. Frank to succeed, this Court would have to find that the trial judge misapprehended theevidence in reaching this conclusion or that it was clearly wrong. Upon review, it is clear that this Court can make neither statement.

Itwas open to the trial judge to draw the inference that the increased funds were as a result of an amalgamation of John Deere businessesdriven by the acumen of Mr. Linn and his business partners. (Emphasis in original) [82] Subsequent to the decision in Frank, the Revised User’s Guide to the SSAG was released. It contains a much more expansivediscussion of the use of post-separation increases in income when determining spousal support.

It is not practical to reproduce all of therelevant portions of the Revised User’s Guide that address this issue, but I note the following parts to be particularly applicable to thematter at hand (at 83): Changing Incomes (

e) Post-separation income of payor increased … In the SSAG (at 14.3), we stated in

summary form, in a short

section on the topic: Some rough notion of causation is applied to post-separation income increases for the payor, in determining whether the income increaseshould be reflected in increased spousal support and, if it should, by how much. It all depends on the length of the marriage, the rolesadopted during the marriage, the time elapsed between the date of separation and the subsequent income increase, and the reason for theincome increase (new job vs. promotion with same employer, or career continuation vs. new venture).

That word “causation” has often been read without the preceding words “some rough notion of causation”. It would be better to describe itas a “link” or “connection”, between the marriage and the increase after separation. That has certainly been the approach of most courts,especially those in B.C. and Ontario. … The looser test of connection is more consistent with the evolution of spousal support law in Canada since Moge [(SCC), [1992] 3 SCR 813], i.e., the recognition of a broad range of spousal support objectives and the rejection of any narrow “causalconnection” test for entitlement.

The basis of entitlement has a significant impact upon the degree of sharing of increases, with compensatory claims more likely to result insharing than non-compensatory claims, but not exclusively so.

There can be sharing – partial, or even full – in non-compensatory casestoo, especially after long marriages. (All emphasis in original) [83] The Revised User’s Guide further indicates that full sharing of post-separation increases of income is more likely when there isa combination of factors, including a long, traditional marriage, a strong compensatory claim based on the assumption of primaryresponsibility for child-rearing, strong non-compensatory claims, and the payor continuing in the same job or line of work after separation.The Revised User’s Guide notes that partial or full sharing is less likely when the increase results because the payor does more work ormuch harder work (particularly if the new work is in a foreign or remote location) or takes on greater risk.

It is also less likely to be takeninto account if the increase results from the payor’s business acumen or occurs long after the separation.

The Revised User’s Guide listsmany more factors under each of these categories, but these are the ones that are the most relevant to this appeal. [84] Reaching further back in time to before the Revised User’s Guide was published, I note that a comprehensive set of principlesregarding the use of post-separation increases in income for the purposes of spousal support was set out in the oft-quoted case ofThompson v Thompson, 2013 ONSC 5500 [Thompson]: [103] … the treatment of post-separation increases in a payor’s earnings in spousal support cases is ultimately a matter of discretion for

the court, to be undertaken having regard for the unique circumstances of each case and the general factors and objectives underlying spousal support. Upon considering these factors and objectives and the relevant case-law, I conclude that the following general principles should guide and inform the court’s exercise of discretion on this issue:

a) A spouse is not automatically entitled to increased spousal support when a spouse’s post-separation income increases.

b) The right to share in post-separation income increases does not typically arise in cases involving non-compensatory claims, since the primary focus of such claims is the standard of living enjoyed during the relationship.

c) Compensatory support claims may provide a foundation for entitlement to share in post-separation income increases in certain circumstances. The strength of the compensatory claim and the nature of the recipient’s contributions appear to be the major factors which may tip the balance either for or against an entitlement to share in the increased income.

d) The recipient spouse may be permitted to share in post-separation increases in earnings if they can demonstrate that they made contributions that can be directly linked to the payor’s post-separation success. The nature of the contributions does not have to be explicit, such as contribution to the payor’s education or training. The question of whether the contributions made by the recipient specifically influenced the payor’s post-separation success will depend on the unique facts of every case.

e) A spousal support award is more likely to take into account post-separation income increases where the relationship was long-term, the parties’ personal and financial affairs became completely integrated during the course of the marriage and the recipient’s sacrifices and contributions for the sake of the family and resulting benefits to the payor have been longstanding and significant. When this type of long history of contribution and sacrifice by a recipient spouse exists, the court will be more likely to find a connection between the recipient spouse’s role in the relationship and the payor’s ability to achieve higher earnings following the separation.

f) In determining whether the contributions of the recipient were sufficient, the court should consider such factors as whether the parties divided their family responsibilities in a manner that indicated they were making a joint investment in one career, and whether there was a temporal link between the marriage and the income increase with no intervening change in the payor’s career.

g) If the skills and credentials that led to the post-separation income increase were obtained and developed during the relationship while the recipient spouse was subordinating their career for the sake of the family, there is a greater likelihood of the recipient deriving the benefit of post-separation income increases.

h) By contrast, the likelihood of sharing in such increases lessens if the evidence indicates that the payor spouse acquired and developed the skills and credentials that led to the increase in income during the post-separation period, or if the income increase is related to an event that occurred during the post separation period.

i) Assuming primary responsibility for child care and household duties, without any evidence of having sacrificed personal educational or career plans, will likely not be sufficient to ground an entitlement to benefit from post-separation income increases.

j) Evidence that the post-separation income increase has evolved as a result of a different type of job acquired post-separation, a reorganization of the payor’s employment arrangement with new responsibilities, or that the increase is a result of significant lifestyle changes which the payor has made since the separation may militate against a finding that the recipient should share in the increase.

k) Where the payor’s post-separation advancement is related primarily to luck or connections which they made on his own, rather than on contributions from the recipient, the claim for a share in post-separation income increases will be more difficult.

l) The court may also consider the amount of time that has elapsed since separation as an indicator of whether the recipient’s contributions during the marriage are causally related to the post-separation income increases.

m) Evidence that the payor also made contributions to the recipient’s career advancement, or that the recipient has not made reasonable steps towards achieving self-sufficiency are also factors that may preclude an award that takes into account post-separation income increases. [ 85 ] In a recent article, “Post-Separation Increases in Payor Income and Spousal Support” (2020) 39 CFLQ 185 (WL), Professor Thompson examined the recent trends regarding the use of post-separation increases in income for the purposes of determining income available for spousal support.

In the article, Professor Thompson comprehensively reviewed the principles from Thompson . In his view, these principles are a good start, but some need to be treated with caution or could be worded more carefully (b and

d) and others should be deleted entirely (i and m). He described the broad test for sharing post-separation increases in i

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