Merrifield v Merrifield, 2021 SKCA 85

Court of Appeal for Saskatchewan Docket: CACV3459 Citation: Merrifield v Merrifield , 2021 SKCA 85 Date: 2021-05-28 Between: Curtis Richard Merrifield Appellant (Respondent) And Janel Lynn Elizabeth Merrifield Respondent (Petitioner) Before: Ryan-Froslie, Leurer and Barrington-Foote JJ.A. Disposition: Allowed in part Written reasons by: The Honourable Mr. Justice Barrington-Foote In concurrence: The Honourable Madam Justice Ryan-Froslie The Honourable Mr.

Justice Leurer On appeal from: DIV 619 of 2018, Saskatoon Appeal heard: May 20, 2020 Counsel: Raymond Wiebe and Rochelle Blocka for the Appellant Cara Haaf for the Respondent Barrington-Foote J.A. I. INTRODUCTION [ 1 ] On August 6, 2019, a judge of the Court of Queen’s Bench [Chambers judge] made interim orders relating to the parenting of the three children of the parties, and for the payment of child support and spousal support by the appellant, Curtis Merrifield [Interim Decision]. The Chambers judge also ordered Mr. Merrifield to pay $150,000 as an interim distribution of family property and that Ms.

Merrifield have exclusive possession of the family home. Mr. Merrifield was also ordered to provide broad disclosure of documents relating to his personal finances and to the finances of companies in which he is a shareholder, director or officer. [ 2 ] Mr. Merrifield has appealed the orders for child support and spousal support, principally on the basis of alleged errors in the calculation of his income, and the order for an interim distribution. He has also appealed the order for disclosure as overbroad.

Notwithstanding the deferential standard of review that applies in these circumstances, I have concluded that Mr. Merrifield’s appeal should be allowed in relation to child support, spousal support and disclosure. My reasons follow. II. BACKGROUND A. Introduction [ 3 ] The parties began cohabiting in 2002 and married on February 4, 2003. They separated on January 2, 2018. There are three children of the marriage, all of whom are under the age of 18. The children have resided primarily with Ms. Merrifield in the family home since the date of separation and will continue to do so.

Most parenting issues were resolved by the parties before the application that resulted in the Interim Decision was heard. [ 4 ] The key issues in this appeal relate in one way or another to a group of closely held companies. Mr. Merrifield, like his father, is in the automotive and recreational vehicle business. Mr. Merrifield is, directly or indirectly, the sole, majority or a major shareholder in 15 companies [Merrifield companies], which include automotive and recreational vehicle dealerships.

His interests in the dealerships, and in the associated financing and real estate companies, are held through a complex structure which includes holding companies, family trusts, and payments between these entities of rent, management fees, and dividends. His father has interests in a family trust and in other companies in the automotive business. [ 5 ] In broad terms, Ms. Merrifield takes the position that Mr. Merrifield’s interests in the Merrifield companies are divisible family property. Mr. Merrifield says that none of those interests are divisible.

The parties’ dispute on this point results from the fact that, shortly before their marriage, they entered into an Interspousal Agreement. That Agreement dealt with the division of property and responsibility for debts on separation, dissolution of marriage or death of a party. It also provided that the Agreement constituted full and final satisfaction of all claims for “alimony”. Mr. Merrifield has nonetheless acknowledged that Ms.

Merrifield is entitled to interim spousal support. [ 6 ] The Interspousal Agreement provided that certain property was to be “One Party Property” rather than divisible family property, including the following: 1.2(

l) As to Curtis, however the same may be acquired by Curtis, any and all security, share or other property interest of any kind whatsoever, direct or indirect, held and/or owned by Curtis in Watrous Mainline Motor Products Limited, or any successor corporation thereto, including any security, share or other property interest of any kind whatsoever, direct or indirect, held and/or owned by Curtis in a corporation, trust, discretionary family trust, partnership, or other entity which has a security, share or other property interest of any kind whatsoever, direct or indirect, in Watrous Mainline Motor Products Limited, and for the purpose of this subparagraph 1.2(l), and for the

purpose of this Agreement, the reference to Watrous Mainline Motor Products Limited shall include any reconstruction or reorganization of the said corporation or any corporation formed upon that reconstruction or reorganization, or other change in the corporate structure of Watrous Mainline Motor Products Limited; and further that for the purposes of this subparagraph 1.2(l), the term “property interest” notwithstanding the generality of the foregoing, shall include any shareholder loan account, director’s bonus, or dividends as may be owing and/or declared payable. [ 7 ] The extent to which this provision applies to the Merrifield companies is in dispute and is relevant to Mr.

Merrifield’s appeal of the order for an interim distribution of family property. Further, the extent to which income earned by these companies should be taken into account in the calculation of Mr. Merrifield’s income is a central issue in the appeal of the child support and spousal support orders. In his July 9, 2019, affidavit, Mr. Merrifield lists the 2018 pre-tax corporate income (loss) of the companies (excluding 101282904 Saskatchewan Ltd.) as follows: 2018 Pre-Tax Income (Loss)

a) Rosetown Mainline Motor Products Limited $140,289.00

b) Mainline Chrysler Dodge Jeep Ram Ltd. ($440,768.00)

c) Kindersley Mainline Motor Products Limited $190,100.00

d) Virden Mainline Motor Products Limited ($261,290.00)

e) Manitou Mainline Chrysler Dodge Jeep Ram Ltd. ($608,236.00)

f) Mainline RV Products Ltd. ($652,857.00)

g) Mainline Real Estate Ltd. ($22,004.00)

h) Virden Mainline Real Estate Ltd. $27,165.00

i) Curtis Merrifield Holdings Ltd. $850,151.00

j) Mainline Automotive Group Ltd. ($197,941.00)

k) Mainline CDJR Holdco Ltd. $357,095.00

l) Manitou Chrysler Dodge Jeep Ram Ltd. ($608,236.00)

m) Manitou Land Corp. ($21,034.00)

n) Merrifield Family Holding Company Ltd. $63,149.00 TOTAL ($1,184,417.00) [ 8 ] On this appeal, Ms. Merrifield submits that the Chambers judge was correct in attributing 65% of the $850,151 in pre-tax net income from one of the companies, Curtis Merrifield Holdings Ltd. [Holdco], to Mr. Merrifield. In this context, she places particular emphasis on Mr. Merrifield’s failure to provide better evidence as to his business affairs and that large capital dividends were declared in his favour by Holdco in 2017 and 2018. She also submits that the Chambers judge was correct in attributing $96,580 in income to Mr.

Merrifield for personal benefits received from two of the Merrifield companies. [ 9 ] Mr. Merrifield takes the position that his income is the $243,467 shown in his 2018 personal tax return; although on this appeal, he did not take issue with the decision of the Chambers judge to attribute to him as income $131,100 in dividends that were declared in favour of Ms. Merrifield. He also asserts that he is required to pay for all personal benefits he receives from the Merrifield companies.

He maintains that his interests in the companies are not divisible family property and were improperly taken into account in the order for an interim distribution. B. The Interim Decision [ 10 ] The Interim Decision dealt first with the issue of Mr. Merrifield’s income. The Chambers judge briefly outlined his view of key legal principles to be applied on an application for interim support, describing such an order as a “stopgap, designed to keep a party’s body and soul together until pre-trial conference and, if required, trial” (at para 4).

He noted that “[b]inding factual determinations are seldom made at [the interim stage]” and that “[o]n incomplete and conflicting affidavits, the parties cannot expect anything but the court’s best interim analysis based on that type of material” (at para 4). He confirmed that he was unable to make the far-reaching determinations about Mr. Merrifield’s income sought by Ms.

Merrifield, as his findings were “necessarily limited by the material” (at para 6). [ 11 ] The Chambers judge then commented that it is “a settled matter of law that on applications of this type, there is a significant onus on the party in control of the assets and income” to disclose and explain the information necessary to undertake the analysis (at para 7).

Further, he noted, citing Potzus v Potzus , 2017 SKCA 15 , [2017] 7 WWR 296 [ Potzus ], that the corporate veil could be pierced to address any unfairness “that arises if the party in control of the assets can ‘divert, manipulate or shelter’ income through corporations” (at para 7). [ 12 ] Having outlined these legal principles, the Chambers judge dealt with the facts. He bluntly rejected Mr.

Merrifield’s position that his income was the $243,467 shown in his 2018 personal tax return: [8] While (as discussed below) I am unable to make exact determinations of income, the father’s position that the mother is providing a “fantasy” to the court holds no allure for me. For the father to come to court and plead that he enjoys ‘‘little” income (he says $243,467) yet enjoys the high flying (sometimes literally) lifestyle that he does is at best disingenuous, and perhaps outright mendacious. As well, the father and/or his accountants are in possession of the knowledge regarding the father’s business affairs.

Little has been done in his material to clarify those affairs. The mother is still chasing disclosure as a part of this application. [9] I also note that while the father claims a modest income, his leisure activities are not consonant with same. He says many of these business trips and other expenses are for legitimate business purposes. Some may be; with many others, it is difficult to accept that argument. As an example, mother’s counsel cited the father’s use of corporate funds to sponsor his current girlfriend in a “bikini contest’ in the USA.

It is difficult to conceive of this being a legitimate business expense, unless of course it is “monkey business” that is in issue. The father, through his material and submissions, appears to be able to keep a straight face while proffering explanations of his expenses which are, at best, thin. The father also appears to show no shame at enjoying such a lifestyle while simultaneously refusing to pay support for his children at an appropriate level.

[ 13 ] The Chambers judge did not review Ms. Merrifield’s evidence as to corporate expenses that she alleged had been incurred for Mr. Merrifield’s benefit. Those expenditures included many trips taken on a company plane, the use of a Saskatoon condominium and of a cottage in Waskesiu, Saskatchewan, both owned by Merrifield companies, and the personal use of motor vehicles. Nor did he review Mr.

Merrifield’s evidence that many of the trips were for business purposes, that the condominium and the cottage were for business use, and that he was charged by the companies for all personal benefits he received. [ 14 ] The Chambers judge then stated his conclusions as to the attribution of income. His explanation was very brief: [10] While in these circumstances I am prepared to assess the father’s income for interim support purposes as higher than he claims, I am not prepared to add back everything claimed by the mother.

I do agree with mother’s counsel that Potzus bears striking similarities to the case at bar, and in Potzus a significant amount of pre-tax corporate income was attributed to the payor. I have relied upon Justice Wilkinson’s comments in Potzus in conducting the analysis hereunder, including her comments on s. 18 Guidelines regarding the clawback of pre-tax corporate income for support purposes.

I am, however, being very conservative on this interim application as to the percentage of such income I will attribute to the payor father, using a 65% figure. [11] For the purposes of calculation of interim support I determine the father’s gross annual income as follows: Employment income: $39,288 Dividends: 198,428 Dividends assigned to petitioner (Sch.

III): 131,100 Interest: 183 Net rental income: 5,562 Capital gains: 10 Pre-tax corporate income (65%): 552,598 Increase in corporate expense (65%): 96,580 $1,023,749 [ 15 ] Although the Interim Decision does not explicitly say so, the parties agree that the $552,598 in pre-tax corporate income attributed by the Chambers judge to Mr. Merrifield was 65% of the $850,151 income of a single Merrifield company, Holdco. The Chambers judge did not explain why he chose 65%, or why he chose to make the award based on the pre-tax income of only one of the Merrifield companies.

He attributed the same 65% share of the increase from 2017 to 2018 in travel and entertainment expenses incurred by Holdco and one other Merrifield company, Mainline Automotive Group Ltd. [MAG]. [ 16 ] In the result, the Chambers judge ordered that Mr. Merrifield pay child support of $16,630 per month, commencing July 1, 2019, based on an income of $1,023,749. That amount was calculated pursuant to s. 3 of the Federal Child Support Guidelines , SOR/97- 175 [ Guidelines ]. He also ordered that Mr. Merrifield pay 100% of eligible expenses within the meaning of s. 7 of the Guidelines , as he concluded Ms.

Merrifield had no income. Mr. Merrifield takes no issue with the order that he pay all eligible s. 7 expenses. [ 17 ] The Chambers judge dealt next with spousal support. He noted that the analysis on such an application is focused on the payee’s need and the payor’s ability to meet that need. He calculated, based on his conclusions as to Mr. Merrifield’s income and interim child support, that the application of Carol Rogerson and Rollie Thompson, Spousal Support Advisory Guidelines (Ottawa: Department of Justice, 2008) [ SSAG ], would generate a range of $19,961.22 to $23,745.63. [ 18 ] In assessing Ms.

Merrifield’s needs, the Chambers judge considered the budget in her financial statement, which claimed that she had annual expenses for herself and the children of $526,160.54. He reasoned that since he had ordered child support of $199,560 plus s. 7 expenses, she was claiming $300,000 of expenses on her own account. He opined that while the parties had lived a lavish lifestyle before they separated, her expenses might be “trimmed”.

He suggested it was “difficult to accept” her claim for $67,000 for food, restaurant meals, hair care and household supplies; $10,000 for furnishings and equipment; $50,000 for her clothing and footwear; $60,000 for clothing for the children; and $200,000 for entertainment, recreation and vacations. [ 19 ] The Chambers judge then dealt with the application of the SSAG , noting that Linn v Frank , 2014 SKCA 87 , [2014] 10 WWR 215, confirmed that while they are a guideline, a judge must still conduct the analysis mandated by the case law.

He referred to Potzus as to the application of the SSAG to high-income earners. He noted that a judge must undertake an individualized, fact-specific analysis where the payor’s income is higher than the $350,000 ceiling up to which the SSAG presumptively apply, and that when a payor’s income is far above that ceiling, the order will often fall below the SSAG range. He then summarized his reasons for making an order in an amount lower than the SSAG range (at para 23): (

a) Both parties need to curtail spending, at least on an interim basis. I note, for example, the mother’s expansive expenses in her financial statement provide for lots of ongoing spending but there is no mention of saving for the future. (

b) The mother’s claimed expenses are inflated and unreasonable. The two cornerstones of an interim spousal support analysis remain needs and means. Her need is just not what she claims it to be. (

c) The father’s income, even as I have calculated it, is far above the ceiling for the SSAG range, making the SSAGs less reliable and, as said in Potzus , such awards will usually (but not always) fall below the low end of that range. (

d) The overall test is whether an interim spousal support award satisfies the objectives in s. 15.2 of the Divorce Act . [ 20 ] On this basis, the Chambers judge ordered interim spousal support of $17,000 per month, which, as he said, put “cash flow of just over $403,000 into the mother’s hands, when child and spousal support are considered” (at para 24). The Chambers judge observed that Ms. Merrifield’s asserted expenses were inflated and unreasonable, but did not explain how he arrived at that number. Nor did he comment on Mr. Merrifield’s evidence that Ms.

Merrifield’s annual expenses, based on the family’s pre-separation expenditures, would be $107,000 per year, not including s. 7 expenses.

[21] Having fixed child and spousal support, the Chambers judge ordered that Ms. Merrifield have exclusive possession of thefamily home, noting that she would have to make the monthly payments associated with that occupancy. Mr. Merrifield deposed that thoseexpenses, including taxes, insurance, municipal services, repairs and utilities, would be approximately $23,000 per year. Ms. Merrifieldestimated that amount to be approximately $30,000.

The Chambers judge dismissed her application for exclusive possession for the monthof August 2019 of a cabin at Waskesiu, owned by Holdco, noting that it was owned by a corporation and may not be divisible as familyproperty. He also questioned his jurisdiction to make such an order. [22] The Chambers judge turned next to Ms. Merrifield’s application for an interim distribution of family property in the amount of$150,000, pursuant to ss. 21 and 26 of The Family Property Act, SS 1997, c F-6.3.

He noted that Conley v Conley (1985), (SK KB), 48 RFL (2d) 331 (Sask QB) [Conley], which he described as the controlling authority, set out a non-exhaustive list offactors to be considered on such an application. He commented as to each of the Conley factors, finding as follows: (

a) There is a live issue as to whether the corporate assets are family property, or are excluded from any distribution by theInterspousal Agreement; (

b) The net assets available for distribution far exceed the $150,000 requested by Ms. Merrifield; (

c) Litigation is at an early stage, and considerable time will pass before the trial date arrives; (

d) Mr. Merrifield has control of almost all of the assets and, in particular, the liquid assets, except the family home; (

e) Funds can be made available for distribution and no prejudicial tax implications have been shown. The Chambers judgeexplained this conclusion as follows at paragraph 40: …The father seems steadfast in his resistance to disclose matters to the mother. He conflates his presumed success in his position with theultimate result at trial. He is sure he will win. I am not. He ought to make broad disclosure. He has not. As well, he is in the best positionto set out any adverse consequences of an interim distribution. His evidence and that of his accountant might best be termed cryptic. (

f) Ms. Merrifield needs capital to finance this litigation. [23] In the result, the Chambers judge ordered the $150,000 interim distribution. [24] Finally, the Chambers judge dealt briefly with the disclosure application. He found that Mr. Merrifield “often blurs the linebetween corporate and personal assets and funds”; books expenses to companies that seem to be entirely personal; has the corporationsowning assets used for personal purposes, such as Ms. Merrifield’s vehicle; and claims a personal pre-tax income of $243,000 despitehaving expenses far exceeding that amount (at para 43).

As he put it, “[i]t does not presently appear to me that the father could possiblyhave paid all his expenses from that modest income” (at para 43). Based on this, he found that there was good reason to question how Mr.Merrifield had arranged his financial affairs, calling for broad disclosure. [25] In the result, the Chambers judge – while refusing to require the disclosure of general ledgers or accountants’ working papersabsent a reasonable basis to do so – ordered the disclosure of all other items requested by Ms. Merrifield.

These records included theincome tax returns and Canada Revenue Agency assessments and notices of assessment for all of the Merrifield companies. They alsoincluded the income tax returns and Canada Revenue Agency assessments and notices of assessment for GR Merrifield Holdings Ltd. andWatrous Mainline Motor Products Limited. Those two are not Merrifield companies or companies of which Mr. Merrifield is a director orshareholder, but rather, companies in which Mr. Merrifield’s father has an interest. [26] The order also required disclosure of all bank account statements for any private corporation of which Mr.

Merrifield is ashareholder, director, or in which he may have an interest, and all credit card statements for all credit cards held by any private corporationof which Mr. Merrifield is a shareholder, director, or in which he may have an interest. III. ANALYSIS A. Standard of review [27] The standard of review applicable to appeals of interim orders for child and spousal support is deferential. In Potzus, WilkinsonJ. (ad hoc) described it this way: [30] The fact-based, discretionary nature of support awards means that significant deference is warranted on appeal.

An appeal court isnot entitled to overturn a support order simply because it would have balanced the relevant factors differently or arrived at a differentdecision: Hickey v. Hickey, (SCC), [1999] 2 SCR 518 at paras 10-12 [Hickey]. Appellate courts should only intervene insupport awards where the trial judge’s reasons “disclose an error in principle, a significant misapprehension of the evidence, or unless theaward is clearly wrong” (Hickey at para 11).

A trial judge’s decision to attribute income under s. 18 of the Guidelines is a decision aboutsupport and must be accorded comparable deference on appeal. [28] The shorthand description of the proper scope of appellate review in Hickey v Hickey, (SCC), [1999] 2 SCR518, adopted in this passage is the same in substance as that in Rimmer v Adshead, 2002 SKCA 12 at para 58, [2002] 4 WWR 119.

As thisCourt noted in Kot v Kot, 2021 SKCA 4 at para 15, it reflects the fact that, “as Cameron J.A. said in Rimmer, where powers arediscretionary, they ‘fall to be exercised as the judge vested with them thinks fit, having regard for such criteria as bear upon their properexercise’ (at para 58)”. Where the appeal is of an interim support order, the relevant criteria or principles are those specified in thelegislation relating to child and spousal support and the case law interpreting to that legislation.

That includes – as the Chambers judgepointed out – case law that confirms that interim decisions must and should be made expeditiously even if there is incomplete andconflicting evidence. This principle is often explained in the systemic terms summarized by Richards J.A. (as he then was) in Mantyka vDueck, 2012 SKCA 109, 399 Sask R 303:

[47] …This Court has repeatedly discouraged appeals from interim orders in family law proceedings. See, for example: Foss v.Foss (1991), (SK CA), 31 R.F.L. (3d) 367; Graham v. Tomlinson, 2010 SKCA 101, 324 D.L.R. (4th) 156 at para.15; Dauk v. Law, 2005 SKCA 145, 275 Sask. R. 158 at para. 6; Hall v. Hall, 2011 SKCA 86, 337 D.L.R. (4th) 89 at para. 1. It has takenthis approach in an effort to help litigants avoid both the delays that such appeals necessarily involve and, as well, to avoid the cost ofsuch proceedings.

As Jackson J.A. said in Hall ”[i]n most cases, the interests of the parties, and the children, are best served by proceedingquickly to the pre-trial settlement conference stage rather than expending time and scarce resources on an appeal from an interim order”. [29] The following comments by Wilkinson J. in Potzus also stress the significance of the fact these are interim orders, particularlyin cases involving high-income earners and families with high net worth: [111] Where a trial is pending, it is not the function of a Chambers judge to make “bell-weather orders” predicting, to a nicety, theoutcome at trial: see Dyck v Dyck, 2008 MBCA 135 at para 30, 77 RFL (6th) 70.

Nor is it a Chambers judge’s task to find the rightnumber for the long term, especially where there are complex issues in relation to income attribution from corporate earnings and thesupport obligations for high-income earners. An individual earning annual income in excess of $150,000 is more capable than most oftolerating margins of error in interim, stop-gap orders. Where the family property falls into the multi-million dollar range, there isconsiderable malleability when it comes to making equitable adjustments in the final outcome.

To front-end load every conceivableargument onto a Chambers judge in an interim support application pre-empts the investigation that is properly the function of the trialjudge. A trial is the natural forum for arguments of the kind that were advanced here. There, testimony can be scrupulously examined andissues explored with the benefit of a full and complete evidentiary foundation.

Decisions as to interim support are always modifiable attrial, where they can be assessed based on the entirety of the evidence: Linn v Frank, 2014 SKCA 87, [2014] 10 WWR 215; and Ford vFord, 2015 SKCA 23, 457 Sask R 19. [30] Needless to say, none of this means that Chambers judges can do as they wish. Interim decisions relating to child and spousalsupport must be made judicially, having regard to the applicable criteria. That is so despite that a Chambers judge will often be justifiablyfrustrated by the shortcomings in the evidence. B. Income 1. Did the Chambers judge err by attributing corporate income to Mr.

Merrifield pursuant to s. 18of the Guidelines? [31] Mr. Merrifield challenges the calculation of his income in two respects. He submits that the Chambers judge erred byattributing any pre-tax corporate income from the Merrifield companies, and by attributing corporate travel and related expenses incurredby Holdco and MAG, to him as income, pursuant to s. 18 of the Guidelines. The relevant part of s. 18 is as follows: 18

(1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the spouse’sannual income as determined under

section 16 does not fairly reflect all the money available to the spouse for the payment of childsupport, the court may consider the situations described in

section 17 and determine the spouse’s annual income to include (

a) all or part of the pre-tax income of the corporation, and in any corporation that is related to that corporation, for the most recenttaxation year; or …

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries,wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm’slength must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances. [32] In broad terms, the key principles relating to the application of s. 18(1)(

a) adopted by this Court in Potzus and other leadingcases were summarized by Tholl J.A. in Dungey v Dungey, 2020 SKCA 138, 454 DLR (4th) 560 [Dungey]: [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 thepayment of support, subject to the corporation’s reasonable business needs, obligations and management of risk: Bear v Thompson, 2014SKCA 111, 378 DLR (4th) 649 [Bear], Potzus v Potzus, 2017 SKCA 15, [2017] 7 WWR 296, and Walker.

While the attribution ofcorporate income is limited to the amount of the most current year’s pre-tax corporate income, a court is fully entitled to scrutinize acorporation’s historical earnings and other financial information to determine what portion of the current year’s income should beattributed: 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 anamount that fully and fairly reflects the income available for support purposes: M.H. v A.B., 2019 SKCA 135, 36 RFL (8th) 261. [33] Walker v Walker, 2019 SKCA 96 at paras 28–31, 31 RFL (8th) 310, also summarily describes the principles that govern theapplication of s. 18, and how ss. 18 and 19 work in tandem to assist in determining a fair income for the purpose of calculating childsupport.

So too does M.H. v A.B., 2019 SKCA 135 at paras 80–90, 36 RFL (8th) 261, which discusses the purpose of s. 18 in the contextof the framework for the calculation of income contained in ss. 16–20 of the Guidelines. Among other things, Kalmakoff J.A. thereadopted the approach outlined by Wilkinson J. in Olchowecki v Olchowecki, 2005 SKQB 144, 267 Sask R 83: [86] As this Court stated in Potzus v Potzus, 2017 SKCA 15 at para 76, [2017] 7 WWR 296, the overall objective of ss. 16–20 of theGuidelines is to find an amount that fully and fairly reflects the income available for child support purposes.

The text of those sectionsmakes it clear that the tax treatment of income earned by a party is a significant part of that consideration. [87] In Olchowecki v Olchowecki, 2005 SKQB 144, 267 Sask R 83 [Olchowecki], Wilkinson J. described the step-by-step approach thatis to be applied in determining income for child support purposes:

[10] The basic approach in the determination of income is therefore: (1) to employ s. 16 to determine annual income for the year in which the application is heard, using the most current source(

s) of incomeinformation available; (2) the combined effect of ss. 16 and 17 dictates that if there is a material difference between the historical pattern of income and thedetermination under s. 16, the latter should be questioned for fairness; (3) the mere fact of difference does not make the s. 16 determination unfair. The degree of permanence associated with the difference, thequality of the change in income from historical levels, and the reasons giving rise to the change must all be considered: See Fuzi v. Fuzi, (BC SC), [1999] B.C.J. No. 2263 (B.C.

S.C.) (QL); (4) there is an additional test of fairness applied to a s. 16 determination of income if s. 18 is implicated. If the income earner is ashareholder, director or officer of a corporation, the determination of income may include: (

a) all or part of the pre-tax income of the corporation or any related corporation for the most recent taxation year; or, (

b) an amount not exceeding that pre-tax income which is commensurate with the services provided to the corporation.

Added to the pre-tax income are any amounts paid to or on behalf of persons who are not at “arm’s length” unless the payments areproved to be reasonable; (5) fairness in the application of s. 18 will depend on the nature of the relationship between the income earner and the corporation, thenature of the corporation’s business, the legitimate calls on the corporate income, and the corporation’s capitalization requirements, withthe court having the ability to consider the historical income pattern of the spouse and non-recurring gains or losses: See: Kowalewich v.Kowalewich, 2001 BCCA 450, (2001), 19 R.F.L. (5th) 330 (B.C.C.A.) and Boser v.

Boser, 2003 SKQB 477, (2003) 240 Sask. R. 55(Q.B.); (6) lastly, s. 19 operates to impute additional income in appropriate circumstances, including, but not limited to, the enumerated situationsin subparagraphs (

a) through (i). Furthermore, imputed income can be used for the purpose of determining a pattern of income over threeyears pursuant to s. 17 as well as current income: See: Schnell v. Schnell, 2001 SKCA 123, (2001), 213 Sask. R. 174 (C.A.). [34] As is noted above, the Chambers judge stated that he followed the approach specified in Potzus as to what he described as the“clawback of pre-tax corporate income for support purposes” (at para 10).

In her comprehensive reasons in Potzus, Wilkinson J. outlinedboth the general principles applicable to a s. 18 analysis, and principles of particular concern on the facts of that case, which related to ahigh-income payor with substantial business interests in closely held family corporations.

As Tholl J.A. pointed out in Dungey, WilkinsonJ. confirmed the “limited rule” in Potzus, following Bear v Thompson, 2014 SKCA 111, 378 DLR (4th) 649 [Thompson], and also stressedthe need to avoid prejudice to the corporation and third parties: [15] …In terms of approach, the decision favored what it characterized as “the limited rule” (which restricts attribution of income to anamount that is no more than the pre-tax income of a corporation for the most recent tax year) while rejecting “the unlimited rule” (whichallows attribution of income equal to the average of the pre-tax income of a corporation during the preceding three years, notwithstandingit might exceed the corporation’s pre-tax income for the most recent year).

Additional parameters were noted in Thompson, namely, thatattributed income should not put a corporation at risk and should only be in an amount that is surplus to the corporation’s needs and thatattribution should not interfere with the legal and commercial rights of third parties who interact with the corporation. [35] Principles confirmed by Wilkinson J. in Potzus that are of particular interest in this case also included the following: (a) “Generally speaking, the onus rests on the parent who is the shareholder, director or officer of the corporation to establish thatpre-tax income of the corporation is not available for support purposes: R.E.G. at para 184.

The justification is that theshareowner/director/officer will have a deeper understanding of the operational requirements and practices of the company” (Potzus atpara 64). (

b) If the payor claims that attributing pre-tax corporate income will jeopardize the capacity of the corporation to meet itsfinancial needs and obligations, including, for example, capital or working capital requirements, salaries or other operating costs, shareredemptions, or otherwise, they must lead evidence of those facts (at paras 95–108). (c) Section 18(2) provides that payments made or benefits provided to or on behalf of persons with whom the corporation doesnot deal at arm’s length must be added to the pre-tax income of the corporation, unless the payor establishes that the payment wasreasonable in the circumstances (at paras 67–68).

The issue is the reasonableness of the transaction in a commercial sense (at para 72). [36] These principles relate to the nature of the evidence required to prove that pre-tax corporate income should be attributed to apayor.

They recognize the difficulty that the applicant will often have in providing evidence as to whether the corporation can provide thatadditional income, and the corresponding burden on the respondent to adduce evidence. [37] However, a judge hearing an interim application of this kind must apply these principles in a cautious and conservativemanner: Thompson at para 77 and Potzus at paras 85–87.

Quite apart from the need to avoid jeopardizing the ability of the corporation tomeet its financial needs, the direction to be cautious reflects the reality that the respondent will often be unable and could not reasonablybe expected to provide full disclosure and a detailed explanation of financial and other matters relevant to the application.

That said, theextent to which caution is called for will depend on the facts, including but not limited to the size, stability and earnings history of thecorporation, the uncertainties it faces going forward, and the likelihood and extent of the risk which might result if income is attributed. [38] The Interim Decision is very short and contains limited guidance as to what the Chambers judge meant when he said he appliedPotzus. However, certain things are clear. He was very much alive to the fact that this was an interim order and that he must do his bestwith the information he had.

[39] Indeed, and as noted, he commented that such orders are designed to do no more than “keep a party’s body and soul togetheruntil pre-trial conference and, if required, trial” (at para 4). With respect, this aphorism is not only an overstatement; it is incorrect. Suchare the risks of using aphorisms to describe nuanced legal principles.

The reasoning in Potzus as to high-income payors and asset richfamilies demonstrates – as does that in the case law generally – that interim support orders can be well in excess of the amount necessaryto hold body and soul together, which would generally be understood to mean food, clothing and shelter. Child support orders for childrenof high-income payors may include a very significant amount for discretionary spending: Potzus at para 116. I note the useful discussionof this issue in Julien D. Payne and Marilyn A.

Payne, Child Support Guidelines in Canada, 2020 (Toronto: Irwin Law, 2020) at 386–390.The Chambers judge’s conclusion that the appropriate result in this case was to put $403,000 in the hands of Ms. Merrifield demonstratesthat, despite his casual reference to body and soul, he well understood this principle. [40] The Chambers judge also referred repeatedly to the fact that his task was difficult because Mr. Merrifield had failed to clarifyhis business affairs. The lack of more detailed and comprehensive evidence – a point emphasized by Ms.

Merrifield in her submissions insupport of the Interim Decision – is certainly one reason the Chambers judge did not give greater weight to the evidence that theMerrifield companies needed to retain their assets to meet corporate needs. Mr. Merrifield’s evidence on that point is as follows: The company cash flow is necessary to support the dealerships and is not available for an interim distribution. As we are in hard economictimes, we have to inject money to keep the dealerships going, as well as have a sufficient reserve to pay the outstanding debts to GeraldMerrifield Holdings and the General Bank of Canada.

As mentioned, I have to maintain a certain level of working capital in thedealerships to avoid going offside of General Motors’ requirements. In the last year, I have had difficulty meeting those requirements. [41] The Chambers judge fairly described this evidence – which was relevant to both the interim distribution and the s. 18 analysis –as “cryptic”. It is sparse and ambiguous. It does not say when and how much money had to be injected, who the “we” are that had to injectit, how long times have been hard, and how hard times have been.

It says that it has been difficult to maintain working capitalrequirements, which means that they have nonetheless been maintained, and this despite that Holdco, for reasons that Mr. Merrifield didnot explain, declared capital dividends of $745,000 in fiscal 2017 and $605,000 in 2018 in his favour, and that his shareholder loan fromthat company increased by $131,976 from 2017 to 2018. [42] It is also clear that the lack of a more detailed explanation from Mr. Merrifield does not, in and of itself, fully explain theChambers judge’s reasoning. The Chambers judge concluded that Mr.

Merrifield’s evidence was not only lacking in detail, butunbelievable. I note, for example, that he characterized Mr. Merrifield’s evidence that specific business trips and other expenses identifiedby Ms. Merrifield were for business purposes as “argument” that was “difficult to accept”, despite that it was evidence that includedspecifics. Further, the Chambers judge inferred, based on that evidence, that Mr.

Merrifield was misleading the Court, commenting that he“appears to be able to keep a straight face while proffering explanations of his expenses which are, at best, thin” (at para 9). [43] Similarly, the Chambers judge stopped just short of bluntly stating that Mr. Merrifield was lying, asserting that the claim thathis income was $243,467 was – given his lifestyle – “at best disingenuous, and perhaps outright mendacious” (at para 8). He made thatfinding despite being aware that – as noted above – in fiscal 2017 and 2018, capital dividends totalling $1,350,000 were declared in favourof Mr. Merrifield.

At the hearing of this appeal, counsel for Ms. Merrifield conceded that those payments could explain how Mr.Merrifield could both meet his personal expenses and make the payments he did to or on behalf of Ms. Merrifield after separation. Capitaldividends may be paid tax-free by private corporations to Canadian-resident shareholders. Further, while these capital repayments and theshareholder loan – like retained earnings – might be relevant in determining whether the Merrifield companies in general, and Holdco inparticular, could pay out more and still meet their needs, they were not income in the hands of Mr.

Merrifield. It was neither disingenuousnor mendacious of Mr. Merrifield – and thus no reflection on his credibility – to take that position. [44] The Chambers judge was clearly influenced by this important finding as to Mr. Merrifield’s credibility, which he made despitehaving correctly instructed himself as to the difficulty he faced in finding facts as a result of the limited, controverted and ambiguousevidence before him. [45] However, Mr. Merrifield did not take issue with these findings of fact. He has raised only two issues in this context.

He arguesthat the attribution of corporate income to him would put the corporations at risk, encroach on their capital, and interfere with the rights ofthird-party shareholders. He notes in this context that the Merrifield corporations are intertwined. However, he does not base thisargument on an alleged error by the Chambers judge in finding the facts.

He appears instead to argue that this factor was not givensufficient weight. [46] He also submits – in what was very much the central point of his submissions – that it is standard practice to determine pre-taxincome for this purpose by adding the income and losses of all the Merrifield companies. That approach would show a loss of $1,184,417and thus, no net income to impute. He argues that s. 18(1)(

a) explicitly directs judges to use this arithmetic approach, referring as it does tothe attribution of income from any corporation “related to” the corporation at issue.

He cites the decisions in Wildeman v Wildeman, 2014ABQB 732, 603 AR 335; Chapman v Summer, 2010 BCCA 237, 82 RFL (6th) 79; Whalen-Byrne v Byrne, 2016 ONSC 1172, 75 RFL(7th) 388; Bidwell v Bidwell, 2011 ABQB 261; and McCarty v McCarty, 2016 ABQB 91, as authority. [47] The purpose of analyzing all potential sources of the payor’s income – including that which might be attributed under s. 18 – isto arrive at an amount that fully and fairly reflects the income available for support purposes.

The question of whether some or all of thepre-tax income of a corporation should be attributed to a payor to achieve that purpose depends on the facts: Miller v Joynt, 2007 ABCA214 at para 26, 48 RFL (6th) 256; and Chekowski v Howland, 2013 ABCA 299, 36 RFL (7th) 253, where the Court said this: [12] In Kowalewich v Kowalewich, 2001 BCCA 450, the Court emphasized that its role under s 18 is to ensure that there is a fairallocation of pre-tax corporate income between business and family purposes; its job is not to second-guess business decisions: at para 44.In doing so, the Court must have regard to: the nature of the company’s business; any evidence of legitimate business; the fact that fundsneed to maintain the value of the business as a viable going concern are not available for support purposes; the expansion of the business;depreciation; possible economic downturns; and return on invested capital: at paras 58, 61. [13] Koester v Koester, (ON SC), [2003] OTC 1140, 50 RFL (5th) 78 (Ont SCJ), at para 31, outlined the followingquestions relevant to whether a court should exercise its discretion under s 18:

(

a) Because of the separate legal entity of the corporation, should there be a general reluctance by the court to automatically attribute corporate income to the shareholder? (

b) Is there a business reason for retaining earnings in the company? (

c) Is there one principal shareholder or are there other bona fide arm’s length shareholders involved? (

d) What is the historical practice of the corporation for retaining earnings? (

e) What degree of control is exercised by the spouse over the corporation? [14] While a few common themes emerge from the foregoing cases, each case must be decided on its own facts : Miller at para 26 . … (Emphasis added) [ 48 ] The specific factors identified in this passage are not a complete list. They raise questions that may assist in deciding whether income should be attributed. However, the case law as a whole, and the decisions cited by Mr. Merrifield, in particular, demonstrate the point that is finally made: that each case must be decided on its own facts.

Where there are, as in this case, multiple corporations linked by factors such as common ownership, whether directly or indirectly; common direction or control, whether de facto or de jure ; and the flow of payments between companies for management fees, rent, or other costs, the Chambers judge must consider those and all other relevant circumstances. The situation in Potzus , for example, had certain similarities to that in this case.

However, it is also readily distinguishable in many respects and cannot fairly be described as bearing “striking similarities” in a manner that would demand a very similar outcome. [ 49 ] Further, it will often be the case that the pre-tax income or loss in related companies does not, in and of itself, reveal a great deal. Adjustments may be appropriate, for example, to take account of capital cost allowances or non-recurring gains or losses.

The corporate structure of the Merrifield companies and the manner in which it is used to the tax and business advantage of shareholders is complex and, to the outside observer, opaque. An arithmetic approach does not account for these realities. [ 50 ] This does not mean the losses in other Merrifield companies are irrelevant. However, what can be made of those losses, absent the evidence that could only have been provided by Mr. Merrifield? As I have emphasized, there are limits to what a court can reasonably expect from a respondent. The applicant must prove their claim.

However, the evidence in this case could have been substantially better – as, for example, in better explaining the capital dividends, the tough times, and the situation relating to capital requirements – without imposing unrealistic expectations or demanding the kind of evidence that would normally be expected only at trial. I note, for example, that Holdco – which is wholly owned and controlled by Mr. Merrifield – declared large capital dividends in 2017 and 2018, despite the loss suffered by other Merrifield companies in 2018. There is no evidence as to why they were paid out or that they were used by Mr.

Merrifield for business purposes. I have already noted the lack of particulars relating to hard times and business risks, which Mr. Merrifield could have explained in sufficient detail to confirm that those issues are current and significant. The bald statement that a company must retain capital because of an agreement with a third party, without better particulars as to the amount and the agreement, was of little assistance. Shortcomings of this kind in the evidence were exacerbated by Mr.

Merrifield’s refusal to disclose information relating to the Merrifield companies. [ 51 ] In these circumstances, and given the standard of review, I am unable to conclude that the Chambers judge erred by deciding to attribute a portion of the pre-tax income of Holdco to Mr. Merrifield. The Chambers judge did not refer specifically to the potential impact of attributing income on third-party shareholders and to the fact the Merrifield companies are intertwined. That does not mean he ignored this evidence.

Rather, his decision to attribute income from Holdco is comprehensible despite those factors, including as a result of the evidence that Mr. Merrifield had access to far more cash than the amount reflected by his taxable income, and that Holdco was a source of that cash. It was certainly open to the Chambers judge to conclude, based on Holdco’s significant pre-tax income, the evidence as to Mr. Merrifield’s lifestyle, and the evidence of payments to him by Holdco, that Mr.

Merrifield did not meet the onus of proving that a substantial amount of the pre-tax income of Holdco was not available for child support purposes. [ 52 ] The remaining question, then, is whether the Chambers judge erred by attributing 65% of Holdco’s 2018 income to Mr. Merrifield. That too was a discretionary decision. There was evidence that Mr. Merrifield received a $745,000 capital dividend in 2017 and a $605,000 capital dividend in 2018 and that the parties had spent, and that Mr. Merrifield continued to spend, very freely on travel, entertainment, and other consumer items.

These factors could support a decision to attribute a substantial amount of pre-tax net income from Holdco. [ 53 ] There were also factors which weighed in favour of attributing a lesser amount. Holdco is a holding company with interests in and dependent on the financial performance of operating companies, some of which have other shareholders. There is some evidence of “tough times” in the dealerships, and the financial statements reflect decreased profits in Holdco and some other Merrifield companies between 2017 and 2018.

The financial statements – for what they are worth, taken alone – disclose a combined net loss in the Merrifield companies of $1,184,417 in 2018. There is no historical evidence of corporate income or net income beyond 2017, which is properly taken into consideration: Potzus at para 79 and Thompson at para 74 . The evidence that there was an increase in the shareholder loan from one Merrifield company in 2018, absent a contextual analysis by Ms.

Merrifield, has little or no significance. [ 54 ] Taking all of this into account in light of the standard of review, I find no error in the decision by the Chambers judge to attribute 65% of Holdco’s pre-tax 2018 net income to Mr. Merrifield. Ms. Merrifield led evidence that was sufficient to justify the attribution of a substantial amount of the pre-tax net income earned by Holdco. Faced with that evidence, Mr. Merrifield was obliged to justify his claim that no income was available from the Merrifield companies by leading better evidence to explain his finances. He failed to do so. 2.

Did the Chambers judge err by attributing corporate expenses to Mr. Merrifield as income? [ 55 ] The second issue relating to the calculation of Mr. Merrifield’s income is whether the Chambers judge erred by “adding back” $96,580 in corporate expenses to Mr. Merrifield’s income. It appears that the Chambers judge did so pursuant to s. 18 of the Guidelines ,

rather than s. 19 – which provides that the court “may impute such amount of income to a spouse as it considers appropriate in thecircumstances”. That is how I understand his use of the phrase “add back”. In any event, in this case nothing turns on whether theChambers judge used one

section or the other. [56] As is noted above, the amount attributed to Mr. Merrifield as income on this account was 65% of $148,585 in travel and similarexpenses. That $148,585 total was not calculated based on an analysis of the value of specific benefits alleged to have been provided bythe Merrifield companies for Mr. Merrifield’s personal benefit. Rather, Ms. Merrifield made both general and specific allegations as toMr. Merrifield’s use of corporate assets. The Chambers judge chose to attribute 65% of the increase in travel, vehicle and aircraft expensesincurred by two companies from 2017 to 2018 to Mr.

Merrifield to capture the value of unspecified personal benefits. MAG incurred anadditional $142,136 in such expenses in 2018 and Holdco incurred an additional $6,449; thus, the $148,585 claim. [57] A good deal of Ms. Merrifield’s claim was based on allegations relating to the personal use of a corporate airplane and relatedtravel costs. Ms. Merrifield deposed that MAG purchased an 11-seat airplane in early 2017. There was no evidence as to when the airplanewent into service. In her first affidavit, Ms. Merrifield listed many trips that she allegedly took with Mr. Merrifield on the plane.

Shedeposed that the airplane was frequently used for personal vacations before they separated but did not specify which of this lengthy list oftrips fell into that category. She also alleged that Mr. Merrifield frequently travelled with his girlfriend and listed several such trips in 2018on the airplane. [58] As is noted above, Mr. Merrifield responded to these allegations. He deposed that many of the expenses identified by Ms.Merrifield were proper business expenses. He responded in some detail to Ms. Merrifield’s list of trips he allegedly took after the partiesseparated.

He denied having taken some of those trips at all and explained the business purpose of others. He did not deny having receivedsome personal benefits but deposed that “[a]ll personal expenses are billed to me personally. My CFO and accounting firm (KPMG)monitor this carefully”. Mr. Merrifield’s evidence, if believed, appears to constitute a complete response to Ms. Merrifield’s allegations. [59] However, having concluded that Mr. Merrifield was not a credible deponent – in part because of his explanation of theseexpenses – the Chambers judge did not believe Mr. Merrifield’s evidence.

Nor, for that matter, did he fully accept Ms. Merrifield’sevidence which underpinned this aspect of her claim. That being so, it is not clear how he could conclude – solely on the basis of lineitems in financial statements showing an increase in certain expenditures in two companies – that Mr. Merrifield had received personalbenefits of $96,580. The Interim Decision does not describe a relationship between the value of the travel listed by Ms. Merrifield and the$148,585 figure, whether on a mileage or commercial value replacement basis or otherwise.

Nor does it attempt to place the expensesincurred by MAG and Holdco in the context of expenses incurred by the Merrifield companies as a whole, or, for that matter, to considerwhether the increased expenses in MAG could have resulted solely from the acquisition and use of the airplane at some unspecified pointin 2017. Similarly, the decision to attribute 65% of that amount is not explained. [60] For these reasons, it is my respectful opinion that Ms. Merrifield has failed to make out her claim that corporate expensesshould be attributed to Mr. Merrifield as income.

Given the incomplete, conflicting and suspect evidence, and the lack of analysis, thisissue should have been left to be resolved at pre-trial or at trial. C. Did the Chambers judge err by not considering s. 4(

b) of the Guidelines? [61]

Section 4 of the Guidelines provides as follows: 4 Where the income of the spouse against whom a child support order is sought is over $150,000, the amount of a child support order is (

a) the amount determined under

section 3; or (

b) if the court considers that amount to be inappropriate, (

i) in respect of the first $150,000 of the spouse’s income, the amount set out in the applicable table for the number of children under theage of majority to whom the order relates; (ii) in respect of the balance of the spouse’s income, the amount that the court considers appropriate, having regard to the condition,means, needs and other circumstances of the children who are entitled to support and the financial ability of each spouse to contribute tothe support of the children; and (iii) the amount, if any, determined under

section 7. [62] The Chambers judge calculated child support based on the s. 3 table amount. Mr. Merrifield submits that the failure to considerwhether child support should be calculated pursuant to s. 4(

b) of the Guidelines was an error in principle, as the Chambers judge haddecided that his income was far more than $150,000. However, he did not advance a s. 4 argument in Chambers. His curious explanationfor failing to do so is that he did not expect the Chambers judge to find that his income was more than $1,000,000. [63] Mr. Merrifield also submits that if this Court determines child support anew, it should apply s. 4(b). I agree. I have concludedthat Mr. Merrifield’s income is different than that determined by the Chambers judge, which calls for reconsideration of the child andspousal support awards.

There is sufficient evidence to make that decision pursuant to s. 4 and Ms. Merrifield did not identify anyprejudice that would result from that approach. It is accordingly not necessary that I decide whether the Chambers judge erred by failingto consider the application of s. 4. [64] The leading case as to the analytical framework to be applied when determining if s. 4(

b) applies is Francis v Baker, (SCC), [1999] 3 SCR 250 [Francis]. Francis confirms that there is a presumption in favour of the Guideline amount, and thatthere must be “clear and compelling evidence” that the Guideline amount is inappropriate before a judge can depart from it. It holds thatthere must be an articulable reason for displacing the Guidelines, based on all relevant circumstances. Those include the matters listed in s.4(b)(ii), which are relevant considerations when calculating the appropriate amount. The party seeking a departure from the Guidelinesbears the persuasive burden but need not lead evidence themselves. They may instead rely on the evidence led by the prospective payee

(Francis at paras 42–44). [65] This analytical framework has been repeatedly applied by this Court: see, for example, Jones v Jones, 2017 SKCA 46 at para76, 95 RFL (7th) 43; Klette v Leland, 2014 SKCA 122 at paras 19–20, 52 RFL (7th) 1; and Gould v Gould, 2013 SKCA 34 at paras 13–15,[2013] 9 WWR 1. [66] The first step in the analysis is to determine the income of the parties, and the number and age of the children. Mr. Merrifielddid not take issue with the amounts other than attributed corporate income which were included in the Chambers judge’s calculation of hisincome.

His income for child support purposes – after deducting the amounts necessary to account for my conclusions as to the inclusionof corporate expenses – is accordingly $927,169. The table amount for that income is $15,084.70 a month. [67] Nor did Mr. Merrifield take issue with the Chambers judge’s conclusion that Ms. Merrifield has no income. It is appropriatethat he pay 100% of eligible s. 7 expenses, as ordered by the Chambers judge. [68] It is Mr. Merrifield’s position that child support of $4,145 per month would provide the children with a lifestyle consistent withthat the parties enjoyed during their marriage.

Indeed, he deposed that a realistic budget for Ms. Merrifield and the children – with theexception of s. 7 expenses – would be $107,000. Ms. Merrifield, on the other hand, submits that there were ample grounds for theChambers judge to find that $16,630 per month, the s. 3 Guideline amount based on an income of $1,023,749, was not inappropriate. Sherelies on the findings of fact by the Chambers judge that the parties had a lavish lifestyle, and that Mr.

Merrifield has continued to enjoysuch a lifestyle since the parties separated. [69] As I have noted above, the issue is not whether the Guideline amount exceeds the cost of basic necessities for the children, or,for that matter, the cost of providing them with a comfortable middle-class existence. This is a high-income family and child support mustbe assessed accordingly.

The following comments by Bastarache J. in Francis, which stress both a generous approach to the children ofhigh-income parents and the proper limits of that generosity – are particularly instructive in this case: [41] …[C]hild support undeniably involves some form of wealth transfer to the children and will often produce an indirect benefit tothe custodial parent.

However, even though the Guidelines have their own stated objectives, they have not displaced the Divorce Act,which clearly dictates that maintenance of the children, rather than household equalization or spousal support, is the objective of childsupport payments.

Section 26.1(2) of the Act states that “[t]he guidelines shall be based on the principle that spouses have a joint financialobligation to maintain the children of the marriage in accordance with their relative abilities to contribute to the performance of thatobligation” (emphasis added). While standard of living may be a consideration in assessing need, at a certain point, support payments willmeet even a wealthy child’s reasonable needs.

In some cases, courts may conclude that the applicable Guideline figure is so in excess ofthe children’s reasonable needs that it must be considered to be a functional wealth transfer to a parent or de facto spousal support. …courts must therefore have the discretion to remedy situations where Table amounts are so in excess of the children’s reasonable needs soas no longer to qualify as child support.

This is only possible if the word “inappropriate” in s. 4 is interpreted to mean “unsuitable” ratherthan merely “inadequate”. … [45] The task of determining whether Guideline figures are inappropriate under s. 4 must be undertaken by courts armed with all of thenecessary information.

Given that, as I explained above, children’s needs are one of the factors to be considered in assessingappropriateness under s. 4, child expense budgets which provide some evidence, albeit imperfect, of the children’s needs will often berequired in contested cases where the paying parent earns more than $150,000 per annum. … … [49] …the unique economic situation of high income earners must be acknowledged. Child expenses which may well be reasonable forthe wealthy may too quickly be deemed unreasonable by the courts. Of course, at some point, estimated child expenses can becomeunreasonable.

In my opinion, a proper balance is struck by requiring paying parents to demonstrate that budgeted child expenses are sohigh as to “excee[d] the generous ambit within which reasonable disagreement is possible”: Bellenden v.

Satterthwaite, [1948] 1 All E.R.343 (C.A.), at p. 345. (Underline emphasis added, italics emphasis in original) [70] In Potzus, Wilkinson J. explained the connection between the “generous ambit within which reasonable disagreement ispossible” and the spending habits of the family: [117] It is clear from Francis that there is an elastic range within which various amounts of child support are appropriate. It is only whenthe amount is so high as to exceed “the generous ambit within which reasonable disagreement is possible” that the amount becomesinappropriate.

A modest pre-separation lifestyle is justifiable reason to depart from the Table amounts, as Cross demonstrates, while lesscautionary habits may push the generous ambit to its outer limits. A family’s lifestyle and pattern of expenditure are relevant and importantconsiderations in determining appropriateness under s. 4 of the Guidelines: R. v. R. (2002), (ON CA), 24 RFL (5th)96 (Ont CA). [71] I note that the key principles specified in Francis on this point were also succinctly summarized by Ryan-Froslie J. (as she thenwas) in G. (R.E.) v G. (T.W.J.), 2011 SKQB 269 at para 204, 6 RFL (7th) 400. [72] Ms.

Merrifield’s budget includes $60,000 for the children’s clothing and footwear, $20,000 for their allowance and gifts, $500for school fees, books and supplies, and $1,500 for childcare. She also proposed a budget of $20,000 for activities, lessons and supplies,which would certainly include eligible expenditures pursuant to s. 7. Those are the only budget items that are child specific.

All otherexpenses to provide for the children would be part of the family expenses identified in the budget, which include $30,000 for food,$20,000 for food outside the home, $50,000 for recreation and entertainment, and $150,000 for vacations. The Chambers judgecommented that while he appreciated the “lifestyle argument”, he did not accept that her expenditures would be in this amount. I agree.The evidence does not support the conclusion that Ms. Merrifield would incur the expenses specified in her budget in relation to, among

other things, food, recreation, entertainment and vacations, or as a whole. This sort of overreach is both unhelpful and regrettably, not unusual. [ 73 ] Mr. Merrifield’s proposed budget for Ms. Merrifield and the children, on the other hand, is parsimonious. It fails to take account of the family’s pre-separation lifestyle and pattern of expenditure. It is inconsistent with the principle that the children should be affected as little as possible by the breakdown of the marriage and with the ability of Mr.

Merrifield to contribute to their support. [ 74 ] It is entirely appropriate that child support provide some benefit to Ms. Merrifield. However, there is no reasonable basis to conclude – based on the evidence of circumstances and lifestyles of Ms. Merrifield and the children – that the Guideline amount of $15,084.70 is appropriate. An award in that amount would be unsuitable and would exceed the generous ambit within which reasonable disagreement is possible.

That is not an unusual result where the payor’s income is very high and, as such, far in excess of $150,000. [ 75 ] I conclude that an order for child support in the amount of $10,000 per month would be appropriate in light of Mr. Merrifield’s income, Ms. Merrifield’s financial circumstances, and the condition, needs, means and other circumstances of the children. D. Spousal support [ 76 ] Mr. Merrifield acknowledges that Ms. Merrifield is entitled to interim spousal support. It is appropriate to use the same income for the purpose of calculating spousal support as for child support.

That $927,169 income far exceeds the $350,000 ceiling specified in the SSAG . The low and high end of the SSAG range for spousal support, based on Mr. Merrifield’s income of $927,169, are $21,634 and $25,713. [ 77 ] The primary purpose of interim spousal support is to allocate family income in a fair and equitable manner, and the focus when determining quantum is on the needs and ability to pay of the parties: Wongstedt v Wongstedt , 2017 SKCA 100 at paras 23 and 25 , 3 RFL (8th) 43.

In Potzus , Wilkinson J. helpfully summarized key aspects of the correct approach to achieve that result in a high-income case such as this: [126] In the recently released Spousal Support Advisory Guidelines: The Revised User’s Guide ([Ottawa]: Department of Justice Canada, 2016) [ Revised Guide ] by Professors Carol Rogerson and Rollie Thompson, the authors note that the interim support setting is an ideal situation for the use of the SSAG in that there is a need for a quick, easily-calculated amount, knowing that more precise adjustments can be made at trial (page 15).

This rests comfortably with the notion that interim support awards are not intended to be “bell-weather orders” forecasting the outcome at trial. The authors refer to the comments in M. (D.R.) v M. (R.B.) , 2006 BCSC 1921 , 63 BCLR (4th) 331, where Martinson J. laid out the rationale for employing the SSAG in these circumstances, saying: [19] They are a useful tool to have when determining interim spousal support. By focusing on income differences they provide a helpful measure of needs and means.

Their use is consistent with the purposes of interim orders: to bridge the gap between the start of the litigation and the time when a resolution is reached at trial or by agreement; to avoid lengthy and costly interim litigation; to move the litigation to a timely resolution; and to reduce conflict. [127] At pages 56-58, the authors review the case law in high-income situations and note that interim awards are more likely to fall within the formula range, as the goal in the interim period is to maintain the financial status quo.

Decisions rendered after trial, however, indicate a far wider spectrum of outcomes, which the authors discuss in detail.

For present purposes, that body of case law need not be canvassed at length but it serves to demonstrate the importance of the detailed, case-specific analysis that a trial forum is best equipped to conduct. [128] The Revised Guide summarizes the principles that have emerged from case law addressing incomes above the $350,000 ceiling: • The formulas for amount are no longer presumptive once the payor’s income exceeds the “ceiling”. • The ceiling is not an absolute or hard “cap”, as spousal support can and usually does increase for payor incomes above $350,000. • The formulas are not to be applied automatically above the ceiling, although the formulas may provide an appropriate method of determining spousal support in an individual case, depending on the facts. • Above the ceiling, spousal support cases require an individualized, fact-specific analysis.

It is not an error, however, to fix an amount in the SSAG range ... Evidence and argument are required. • Where the payor’s income is not too far above the ceiling, the formula ranges will often be used to determine the amount of spousal support, with outcomes falling in the low-to-mid range for amount. How far is “not too far above” is still not clear.

Somewhere between $500,000 and $700,000, it seems. • Once the payor’s income is “far” above the ceiling, then the amount of support ordered will usually be below the low end of the SSAG range, but SSAG ranges are still calculated and sometimes the outcome will fall within the SSAG range. … [131]

Section 15.2(4) of the Divorce Act mandates that in making a spousal support order “the court shall take into consideration the condition, means, needs and other circumstances of each spouse … .” Appropriately, in a situation of pecuniary advantage, the issue of need is well capable of being measured against the parties’ marital standard of living. “Need” can arise from a decline in standard of living as compared to the marital standard. … [ 78 ] The Chambers judge concluded that Mr. Merrifield should pay interim spousal support of $17,000, commencing July 1, 2019.

That amount was below the range specified in the SSAG . He explained why he made an order outside the range, which included the finding that the budget tendered by Ms. Merrifield – which he characterized as amounting to $300,000 – was inflated and unreasonable.

He also noted that Mr. Merrifield’s income was far above the presumptive ceiling, and his analysis would properly have been affected byhis conclusion as to the amount of that income. There is no doubt that his conclusion at paragraph 19 that “this couple’s spending duringcohabitation appears to have been almost profligate” – an oddly judgmental choice of language given his assessment as to Mr. Merrifield’sincome – was front and centre. [79] It also appears that the Chambers judge took account of “saving for the future” in assessing Ms. Merrifield’s needs, and indoing so, erred in principle.

The fact that generous spousal and child support payments may enable a payee to save does not mean that aprovision for savings should be made in calculating the payee’s needs. Given that the issue is means and needs on an interim basis – thatis, during the period the interim order will be in force – a provision of that kind should be made only if there is evidence that the payeemust accrue savings during that interim period in order to meet their needs.

Put differently, in the context of an order for interim spousalsupport, it is difficult to conceive of a situation when saving or otherwise investing would constitute a need in and of itself. [80] I conclude that Ms. Merrifield is entitled to interim spousal support of $12,500 per month which is below the SSAG range. Thatamount takes account of the lifestyle of the parties prior to separation and of Ms. Merrifield’s circumstances, including the moderate costsshe will incur relating to the family home. E.

Did the Chambers judge err in ordering an interim distribution in theamount of $150,000? [81] The Chambers judge correctly identified Conley as the leading authority in relation to the factors to be considered on anapplication for an interim distribution of family property. The approach described in Conley was affirmed by Jackson J.A. in Tofin vGalbraith, 2019 SKCA 35, [2019] 9 WWR 1.

In Geransky v Geransky, 2012 SKQB 218, Ryan-Froslie J. (as she then was) summarizedthe non-exhaustive list of factors specified in Conley, and the particular importance of the second listed factor: [32] The factors to be considered with respect to an interim application for distribution of family property were set out by JusticeHrabinsky of this Court in Conley v. Conley (1985), (SK KB), 44 Sask. R. 76 (Q.B.). The factors may be summarizedas follows: (

i) Were the assets for distribution acquired during the marriage? (ii) Do the net assets for distribution far exceed the amount of the interim distribution requested? (iii) Will there be some considerable period of time before the matter can be brought to trial? (iv) Who has possession and control of the assets? (

v) Can funds be made available for the purpose of an interim distribution either from cash on hand or by way of loans? (vi) Can the distribution be made without prejudicial tax implications? (vii) Can the distribution be made without serious prejudicial effect to the family assets? (viii) Does the applicant need the distribution to meet capital demands? [33] In Waldherr v. Waldherr (1992), (SK KB), 106 Sask. R. 140 (Q.B.), Wedge J. found that the factors outlined inConley did not constitute an exhaustive list.

In her opinion, the most important factor was whether the net assets for distribution “farexceeded” the amount of the interim distribution being sought. [34] Also of importance is whether there is a claim for unequal division of the family assets and any claim for exemptions. [82] As Brown J. noted in Kolitsas v Rathod, 2017 SKQB 245 at para 143, 98 RFL (7th) 290, citing Waldherr v Waldherr (1992), (SK KB), 106 Sask R 140 (QB) [Waldherr], just as the Conley factors are not exhaustive, they need not all be present. [83] The significance of a claim for exemptions is illustrated by Gray v Breeze, 2011 SKQB 193, which has also been frequentlycited.

Justice Popescul (as he then was) there refused an application for a distribution because there were significant exemptions claimed,the majority of the assets were acquired before marriage, and the assets were not liquid. As a result, it was not clear what the applicantwould receive and how the payor would finance the distribution. [84] Kotrla v Mryglod (1998), (SK KB), 173 Sask R 287 (QB), illustrates the same principle. In that case, theapplicant sought an interim distribution of $117,000.

Justice Wilkinson, having cited Conley and Waldherr, commented as follows: [11] The issue of unequal division of the matrimonial assets was not in issue in either of those cases and the valuation issues were notas divergent as they are here. In order to grant the interim distribution requested by the wife in this case it would be necessary to delve intothe merits of the parties’ respective positions and pre-judge the outcome of the trial by determining the value of the business assets andthe likelihood of each party succeeding or failing in its claim for unequal division.

Some of the husband’s dealings with the corporationmay be suspect, including the acquisition of land in the sister’s name in lieu of an unsecured debt and the tendering of documents thatcontradict information contained in the companies’ financial statements. But those are issues for trial.

At this stage, no formal businessevaluations have been completed. [12] Nevertheless, I consider that an interim distribution can be made, even where the net value of the assets are not as significant as inthe cases previously referred to, provided it does not prejudice the parties’ respective positions at trial. [13] Accordingly, I have excluded any consideration of the disputed value of the business assets. The value of divisible property nototherwise in dispute is $227,000. This includes the sale proceeds of the matrimonial home at $117,000, the RRSP’s at $40,000 and the

land acquired in the husband’s name (from shareholder’s loan proceeds) at $70,000. The liabilities, including the disputed debt of$17,650, total $32,219 leaving a net amount of $194,781 for division. (Emphasis added) [85] The same reasoning was applied by Ryan-Froslie J. (as she then was) in Schaffel v Schaffel, 2008 SKQB 91, 313 Sask R 203: [16] Both Conley and Waldherr were cases involving claims for an equal division of the family home and property. In this case, Mr.Schaffel requests an unequal division of the family home and property.

This is an additional factor that the Court must consider indetermining whether an interim distribution is warranted and, if so, the amount. [17] In Kotrla v. Mryglod (1998), (SK KB), 173 Sask. R. 287 (Q.B.), Wilkinson J. (as she then was) dealt with anapplication for interim distribution where an unequal division of the family property was being claimed.

In that case she granted an orderfor interim distribution, but in doing so she excluded the value of the disputed assets and was careful not to pre-judge the merits of thecase. (Emphasis added) [86] In the result, Ryan-Froslie J. excluded the contentious assets from consideration. See also Thair v Thair, 2004 SKQB 343. Inthis case, Mr.

Merrifield claims an exemption pursuant to s. 24 of The Family Property Act, which provides that “family property…that isdistributed or disposed of by an interspousal contract, or with respect to which an interspousal contract provides for its possession, status orownership, is exempt from distribution pursuant to this Part”. [87] As noted above, the Chambers judge reviewed the application of the Conley factors in the circumstances of this case. Mr.Merrifield submits that he erred in doing so.

His principal objection is that the Chambers judge erred by conducting the analysis as if hisinterests in the Merrifield companies are family property, resulting in erroneous answer to questions (i), (ii) and (iv). He also argues thatthe Chambers judge erred in concluding that there would be no prejudicial tax consequences and that Ms. Merrifield needed funds to meetcapital demands. [88] I agree that the Chambers judge erred by conducting the Conley analysis in a manner that treated Mr. Merrifield’s interests inthe Merrifield companies as constituting, in whole or in part, family property.

The Chambers judge was fully alive to the fact that this wasat the heart of the dispute between the parties. However, the following statements by the Chambers judge demonstrate that he nonethelesstook account of these interests: (a) “A major item of dispute is the first factor; that is, whether the assets were accumulated during the marriage. The father takesthe position that an Agreement ousts his corporate assets from any family property distribution, thus there is no basis to make the order.However, my r

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