Neigum v Van Seggelen, 2022 SKCA 108

Court of Appeal for Saskatchewan Docket: CACV3842 Citation: Neigum v Van Seggelen , 2022 SKCA 108 Date: 2022-10-05 Between: John Jerome Neigum Appellant (Respondent/Respondent) And Debrah Lydia Van Seggelen Respondent (Petitioner/Applicant) Before: Schwann, Tholl and Kalmakoff JJ.A. Disposition: Appeal allowed Written reasons by: The Honourable Mr. Justice Kalmakoff In concurrence: The Honourable Madam Justice Schwann The Honourable Mr.

Justice Tholl On appeal from: FLD 271 of 2016, Saskatoon Appeal heard: June 8, 2022 Counsel: Matthew Wiens for the Appellant Samuel Edmondson and Lauren Scharfstein for the Respondent Kalmakoff J.A. I. INTRODUCTION [ 1 ] John Neigum appeals against the decision of a Court of Queen’s Bench judge, sitting in Chambers, concerning the division of family property between him and his former spouse, Debrah Van Seggelen ( Van Seggelen v Neigum (26 April 2021) Saskatoon, FLD 271/2016 (QB) [ First Fiat ]; and Van Seggelen v Neigum (24 June 2021) Saskatoon, FLD 271/2016 (QB) [ Second Fiat ]; [collectively, Decision ]).

The Decision determined that minutes of settlement the parties had executed at a pre-trial conference were enforceable as a judgment and that Mr. Neigum must bear the tax liability arising from the manner in which certain assets were disposed of to facilitate the property division. [ 2 ] I would allow the appeal and set aside the Decision . In my respectful view, the Chambers judge erred by finding that the parties had reached a consensus ad idem on all of the material terms necessary to make the settlement agreement enforceable.

I would remit the matter to the Court of King’s Bench for continuation of the pre-trial conference and, if necessary, a trial with respect to the division of family property. My reasons follow. II. BACKGROUND A. The family property dispute [ 3 ] The parties began cohabiting in 1992. They separated in 2015. Ms. Van Seggelen filed a petition in August of 2016 to commence a family law proceeding. Mr. Neigum filed an answer and counter-petition in October of that year. [ 4 ] The main area of dispute between the parties related to division of the family property.

Property division was not a straightforward matter, for several reasons. The parties had a farming operation, which they had incorporated as J & D Neigum Farms Ltd. [the Corporation]. They each owned shares in the Corporation. The Corporation owned farmland, equipment, machinery, and other assets. Mr. Neigum also operated a plumbing and heating business during part of the time they had cohabited. Further, in addition to having a family home located on their farm, the parties owned other real estate, including a house in Unity that Mr.

Neigum had owned before they became spouses, and a condominium in Saskatoon that they had purchased together. [ 5 ] Perhaps unsurprisingly, both parties claimed unequal division of family property in their respective petitions, for a variety of reasons, including that some of the property they owned may be exempt from division, and the fact that the respective tax liabilities each party may face could vary significantly, depending on how the property was allocated. [ 6 ] In December of 2017, the parties appeared before Dufour J., in Chambers, and consented to an interim order that dealt with certain aspects of the property division ( Van Seggelen v Neigum (8 December 2017) Saskatoon, FLD 271/2016 (QB) [ Dufour Order ]).

The Dufour Order addressed various procedural matters regarding disclosure, appraisal of assets, and the requirement for Mr. Neigum to establish his claimed exemptions. It also provided for an interim distribution of some of the family property, pursuant to s. 26 of The Family Property Act , SS 1997, c F-6.3 , on the following terms: (

a) Mr. Neigum would make a $10,000 cash payment to Ms. Van Seggelen; (

b) Ms. Van Seggelen could sell the Saskatoon condominium (of which she had had interim exclusive possession since October 25, 2016) and retain the proceeds of the sale as part of her share of the family property (subject of course to Mr. Neigum’s contributions to the mortgage payments, condominium fees, taxes and insurance until the date of sale being taken into consideration in determining final property division); and

(

c) The net proceeds of the sale of farm machinery and equipment owned by the Corporation would be paid to Ms. Van Seggelen. [ 7 ] The sale of the Saskatoon condominium occurred in May of 2018 and, after accounting for payments Ms. Van Seggelen was required to make to the condo board for stucco repairs, net sale proceeds of approximately $30,000 were realized. The Corporation’s machinery and equipment were sold at auction on April 19, 2018, producing net proceeds of approximately $550,550 [equipment sale proceeds]. The equipment sale proceeds were paid directly from the auction company to Ms.

Van Seggelen, net of the auction fees. As of the date of the Decision , this payment had not been accounted for in the Corporation’s financial records, nor had a tax form been issued from the Corporation to either party regarding the payment. B. The settlement agreement [ 8 ] A pre-trial conference was held on February 15, 2019, presided over by the Chambers judge who ultimately rendered the Decision . The parties agreed that the most significant family property assets remaining to be divided had the following values: (

a) Family home and buildings on farm home quarter: $575,000 (

b) Five quarter-sections of farmland: $815,000 (

c) The Corporation: $651,103 (

d) House in Unity: $45,000 [ 9 ] A settlement was reached at the pre-trial, and minutes of settlement were prepared and signed by the parties and their solicitors. The terms of the minutes pertinent to this appeal read as follows: 2. Except as otherwise provided herein, each party shall retain, free and clear of any claim by the other spouse, all personal property currently in his/her possession. 3. [Mr. Neigum] shall be entitled to retain the home quarter, all farmland, and the house in Unity. [Ms. Van Seggelen] shall provide [Mr.

Neigum] with a transfer authorization, transferring her interest in these properties to [Mr. Neigum], so that he may mortgage same, to provide for the payment of the equalization payment herein. … 8. With respect to the corporate shares in [the Corporation], the parties agree that the value of such shares is $651,103. [Ms. Van Seggelen] shall sell her 100 Class C common shares to [Mr. Neigum] for the sum of $325,552, shall resign as a director of [the Corporation], and shall be released from any liability for any outstanding debts of [the Corporation], if any.

This transfer of the corporate shares will be completed with the assistance of an accountant, to ensure that all income tax liabilities have been considered, and so that [Ms. Van Seggelen] is able to utilize her lifetime capital gains exemption, on the basis that the corporation is a qualified small business corporation, which should result in a NIL tax implication for [Ms. Van Seggelen]. [Mr. Neigum] shall then be entitled to wind up [the Corporation] as and when he wishes to do so. Should [Ms. Van Seggelen] become responsible for any outstanding debts of [the Corporation], [Mr.

Neigum] shall be required to reimburse her for same, together with any other costs, including solicitor-client costs, incurred by her in relation to such debts. … 10. [Ms. Van Seggelen] shall be responsible for any current debts in her name alone. 11. [Mr. Neigum] shall be responsible for any current debts in his name alone. 12. After taking into consideration the values of all family property herein, the $10,000 interim distribution made to [Ms. Van Seggelen], the overpayment of $224,998 to [Ms. Van Seggelen] from the [equipment sale proceeds], [Ms.

Van Seggelen]’s share of the Saskatoon condominium expenses from May 2017 to the date of its sale in September 2018 ($15,992), [Mr. Neigum] shall pay an equalization payment to [Ms. Van Seggelen] in the sum of $390,000. As it is agreed that he will have to mortgage property, in order to obtain such equalization payment, such sum shall be paid to [Ms. Van Seggelen] no later than sixty (60) days after today’s date. [ 10 ] To summarize this in clear terms, Ms. Van Seggelen agreed to sell her shares in the Corporation to Mr. Neigum for $325,552.

That amount was notionally deducted from the equipment sale proceeds ($550,550) that had been paid to Ms. Van Seggelen under the Dufour Order . This resulted in an “overpayment” to Ms. Van Seggelen of $224,998. Ms. Van Seggelen agreed that Mr. Neigum would keep the family home, the farmland, the buildings on the home quarter and the house in Unity and, taking all of that into account, he was to make an equalization payment to her in the amount of $390,000. C.

The application for judgment [ 11 ] Soon after the minutes of settlement were executed, an issue arose concerning the tax treatment of money—the equipment sale proceeds—that had been taken out of the Corporation to settle the family property dispute. Ms. Van Seggelen took the position that, based on advice from her accountant, Mr. Neigum should be responsible for paying the income tax on the $224,998 “overpayment” as that portion of the transaction was properly seen as him having taken money out of the Corporation to cover his personal debt to her. [ 12 ] Mr.

Neigum, on the other hand, took the position that, because all of the equipment sale proceeds had been paid directly to Ms. Van Seggelen initially under the Dufour Order , she should be deemed, for the purpose of determining tax liability, to have received the money from the Corporation as a dividend. [ 13 ] Correspondence between the parties’ solicitors followed, but they were unable to resolve the issue. The pre-trial conference

was reconvened before the Chambers judge on January 2, 2020, but no further agreement was reached. [ 14 ] Ultimately, Mr. Neigum did not make the equalization payment specified in the minutes of settlement and, on February 12, 2020, Ms. Van Seggelen filed an application in the Court of Queen’s Bench, seeking the following relief: 1. Judgment pursuant to section 29(1) of The Queen's Bench Act, 1998 in the terms of the Minutes of Settlement reached at pre-trial conference. 2.

In connection with the enforcement of the Minutes of Settlement, a determination of the impact of such Minutes on the issue of the income tax to be payable with respect to the interim distribution of family property payment to the Petitioner, in the sum of $550,550. 3. Costs of this application. [ 15 ] The affidavits the parties filed in support of their respective positions on the application focused on the contentious issue of who should bear the tax consequences that resulted from removing the equipment sale proceeds from the Corporation. [ 16 ] In that regard, Ms. Van Seggelen deposed as follows: 27.

It was my understanding that, (

i) as [Mr. Neigum] was retaining [the Corporation], (ii) the $550,550 was received as an interim distribution payment from [Mr. Neigum], and (iii) the sum of $224,998 was being deducted off the equalization payment that would otherwise have been owing to me, any tax liability regarding that $224,998 would be payable by [Mr. Neigum]. … 30. I am advised by my solicitor, and do verily believe same to be true that, on or about February 28, 2019, she received a telephone call from [Mr.

Neigum]’s solicitors, indicating that the tax consequences regarding the $550,549.74 I had received, from the [equipment] sale proceeds, needed to be taken into consideration, and that, at 40%, such could be over $220,000 of personal income tax liability. 31. Although there was a reference to $325,552, which was payment to me for my interest in the corporate shares, in the Minutes of Settlement, which had agreed to be done at a NIL tax liability to me, this left $224,998 upon which personal tax at the rate of 40% might have to be paid. … 33.

No reference had been made to any taxes owing on such possible dividends by the corporate accountant in my solicitor’s queries of him, nor was such referenced in [Mr. Neigum]’s pre-trial conference brief. [ 17 ] Mr. Neigum, on the other hand, said this: 21. Pursuant to paragraph 8 of the Minutes of Settlement, I agreed that the transfer of [Ms. Van Seggelen]’s shares in [the Corporation] would be completed with the assistance of an accountant, and that any income tax associated with the transfer of the shares … should be mitigated using [Ms. Van Seggelen]’s lifetime capital gains exemption. … 23.

I agreed to settle this matter with [Ms. Van Seggelen] with the understanding that I would only be responsible for paying a total of $390,000, as agreed upon in the Minutes of Settlement. I did not intend, by executing the Minutes of Settlement, to bind myself to pay any income taxes on behalf of [Ms. Van Seggelen]. 24. At the end of February of 2019, I was advised by the Corporate Accountant that personal income tax would need to be paid on the [equipment sale proceeds] that were removed from [the Corporation] and paid directly to [Ms. Van Seggelen]… … 26.

The issue of payment of Personal Income Tax was never brought to my attention prior to the Pre-Trial Conference and was not discussed at Pre-Trial. I also understand and verily believe that the Personal Income Tax was not discussed by [Ms. Van Seggelen]’s and my respective legal counsel prior to on or around February 28, 2019. [ 18 ] Before the Chambers judge, Ms. Van Seggelen argued that she had ensured, at the pre-trial conference, that all relevant information regarding the income tax consequences to the Corporation had been before the Court.

She asserted that the minutes of settlement reflected the “true agreement that was struck between the parties”, and that there had been “no discussion whatsoever at the pre-trial conference of personal income tax liabilities regarding any monies withdrawn from [the Corporation]”, and that there was “no common continuing intention up to the time of signature of the Minutes of Settlement of any agreement regarding personal income tax liabilities”.

As such, she took the position that the doctrine of rectification could not be employed to rewrite the minutes of settlement in such a way as to attribute the tax liability to her. She also asserted that the minutes of settlement could not be voided on the basis of common mistake because, if there had been any mistake about who would bear the tax consequences, it was a unilateral mistake on Mr. Neigum’s part. Nor did the doctrine of non est factum assist Mr.

Neigum, she said, because there was no evidence that he did not understand the nature and character of what he was signing when he executed the settlement agreement. Ms. Van Seggelen also argued that the mere fact that the parties interpreted the ambiguity in the minutes of settlement differently did not mean there was a lack of consensus ad idem . [ 19 ] Mr. Neigum’s position was straightforward. He argued that the minutes of settlement were “comprehensive and validly executed by both parties” and that it was a contract that could not be “inferred to have an effect that is not supported by [its] plain terms”.

Because the minutes of settlement did not contain any terms that modified the legal relationship between the parties such that responsibility for personal income tax would be shifted, he asserted, the plain wording should govern and, therefore, the “basic

interpretation of the agreement should be enforced, and the Personal Income Tax should be dealt with through the normal application” of the Income Tax Act , RSC 1985, c 1 (5th Supp ). D. The Decision 1. The First Fiat [ 20 ] The Chambers judge rendered the First Fiat on April 26, 2021. She began by reviewing the evidence and summarizing the factual backdrop, including setting out the pertinent portions of the minutes of settlement. She then framed the contentious issue that was before her in this way: [30] Both parties agree that the Settlement Agreement is a binding contract.

The contentious issue between the parties on this application – the gulf that separates them – is who is to be responsible for the tax consequences triggered by the sale of the Equipment. [31] The monetary divide between the parties is significant. If [Ms. Van Seggelen]’s position prevails, [Mr. Neigum] will pay her an Equalization Payment of $390,000 and will also incur personal income taxes of approximately $220,000 – effectively leading to $610,000 being paid out of his pocket. If [Mr. Neigum] prevails, he will pay [Ms.

Van Seggelen] $390,000 but she will be responsible for income taxes which will reduce her Equalization Payment significantly. [32] Both parties assert that they would never have settled their family property dispute at the Pre-Trial Conference had they thought that they would bear the brunt of any tax consequences arising out of the settlement. [ 21 ] Next, the Chambers judge reviewed the law pertinent to the determination of applications for judgment based on the terms of a settlement reached at a pre-trial conference.

She cited s. 29 of The Queen’s Bench Act, 1998 , SS 1998, c Q-1.01 , and reviewed authorities including Ruskin v Chutskoff Estate , 2004 SKCA 107 , 254 Sask R 83 [ Chutskoff ], and Cozart v Cozart , 2007 SKQB 160 , 296 Sask R 183 [ Cozart ]. She summarized the relevant principles by observing that her decision was to be grounded in the evidence before the Court on the application, and that it was not open to her to render a decision based upon her own knowledge of what had occurred at the pre-trial conference, or her own understanding of the agreement reached.

She acknowledged that, if she could not “determine on the evidence whether or not a binding agreement was reached and what that agreement was, the application for judgment must be referred to a trial of the issue” (at para 44). [ 22 ] The Chambers judge then recognized that, as a general proposition, minutes of settlement executed at a pre-trial conference are enforceable contracts (see, for example: Kreway v Kreway , 2016 SKQB 115 at para 22 ), and that the

interpretation of settlement agreements must bear in mind the realities of family law litigation, including the parties’ interests in minimizing not only the financial risks of trial, but also the personal and emotional toll that may accompany the trial process. She then turned her attention to the enforceability of the settlement agreement executed by Mr. Neigum and Ms. Van Seggelen, citing this Court’s decision in Tether v Tether , 2008 SKCA 126 , 56 RFL (6th) 250 [ Tether ] as instructive on that question. In that regard, she quoted directly from paragraph 62 of Tether , which reads as follows: [62] In

summary, there can be three distinct lines of inquiry. Firstly, was there a “meeting of the minds”, or consensus ad idem, that was manifest to the reasonable observer. Secondly, was there consensus on all the essential terms of the agreement, for if a material term is not resolved, and is left vague and imprecise, without the tools to refine it, the agreement is illusory and the parties are simply asking the court to make an agreement for them. Thirdly, did the parties make their agreement conditional upon, and subject to, execution of a formal document. [ 23 ] The Chambers judge then went on to say: [54] In [Mr.

Neigum] and [Ms. Van Seggelen]’s case, I am satisfied that there was a meeting of the minds and an agreement reached on all essential terms and that would have been readily apparent to a reasonable and objective observer. Further the agreement was not contingent on further steps other than placing the agreement into a formal judgment ready for issuance. However, the fact that litigants leave the pre-trial conference room without a formal executed consent judgment does not allow a party to avoid the consequences of a settlement that he or she might later come to regret. [55] Importantly, [Mr.

Neigum] does not purport to argue that the Settlement Agreement is not a binding contract. Indeed, in his submissions he confirms that the Settlement Agreement constitutes a binding agreement between the parties. [Ms. Van Seggelen] agrees. It is the impact of the Settlement Agreement – upon whose shoulders the tax obligation lies – that the parties diverge. [ 24 ] After reviewing the parties’ arguments, the Chambers judge determined that the matter fell to be decided by applying the contractual doctrines of rectification and mistake. This was because she viewed Mr.

Neigum’s position—that the settlement agreement should be interpreted in a way that placed the tax consequences of the removal of the equipment sale proceeds from the Corporation on Ms. Van Seggelen— as a request that she rectify the settlement agreement. Citing Canada (Attorney General) v Fairmont Hotels Inc. , 2016 SCC 56 , [2016] 2 SCR 720 [ Fairmont ], she observed that “[t]he fundamental purpose of rectification … is for the court to rectify a contract to reflect the true agreement of the parties where the contract does not accord with that agreement” (at para 61).

She also noted that rectification is not “equity’s version of a mulligan” (at para 63, citing Fairmont at para 39 ), and that it is not available to cure a party’s error in judgment in entering into an agreement that turns out to have unintended negative consequences. She stated that a settlement agreement ought not to be lightly disturbed by a court through application of the doctrine of rectification, because doing so “requires the court to rewrite what the parties originally intended to be their final agreement in order to escape unintended consequences” (at para 64).

The Chambers judge also reviewed the legal principles underpinning the doctrine of mistake, citing and referring to Boechler v Boechler, 2019 SKCA 120 at paras 42–47 , 34 RFL (8th) 13 in that regard. [ 25 ] Ultimately, the Chambers judge framed the question to be determined as follows: “Did a mistake arise such that the remedy of rectification is available to [Mr. Neigum] to avoid the tax implications arising out of the sale of the Equipment and the implementation of the Settlement Agreement?” (at para 67). She went on to answer that question in the negative. She found that there had been no

misconception between the parties about the settlement agreement on the issue of tax liability for the equipment sale proceeds. She determined that Ms. Van Seggelen’s understanding of the settlement agreement, at the time of execution, was that Mr. Neigum would bear the responsibility for those taxes, and that Mr. Neigum had not even turned his mind to that issue. That, in the view of the Chambers judge, was an error in judgment on Mr. Neigum’s part for which rectification was not available. [ 26 ] The Chambers judge also found that there had not been a mutual mistake regarding the tax consequences.

She said: [71] At best, it might be said that [Mr. Neigum] was operating under a unilateral mistaken belief that [Ms. Van Seggelen] would be responsible for paying any taxes associated with the property division. That is of no assistance to him. The only way that a unilateral mistake can apply is if [Ms. Van Seggelen] knew that [Mr. Neigum] was operating under a misconception that she was paying any applicable taxes and took advantage of his misunderstanding or error.

There is no evidence whatsoever that this was the case. … [76] As made abundantly clear in Fairmont Hotels, the court will not step in to modify an agreement simply because a party discovers that the operation of the agreement triggers an adverse tax implication for that party. Unforeseen consequences do not entitle a party to relief. There is no escape hatch available to a party suffering from buyer’s remorse. Whatever [Mr. Neigum]’s subjective intention was when he entered into the Settlement Agreement, he agreed to make an Equalization Payment to [Ms. Van Seggelen] in the amount of $390,000.

Rectification is not available to shift the tax burden associated with the Settlement Agreement to [Ms. Van Seggelen]. [ 27 ] The Chambers judge also considered, and rejected, any possible claim of non est factum. While she observed that Mr. Neigum was not a sophisticated consumer of legal services, she also noted that he had been represented by counsel throughout the pre-trial conference, and that both he and his counsel had been actively involved in the creation of the settlement agreement. [ 28 ] Finally, the Chambers judge addressed the

interpretation of the settlement agreement. She reviewed the evidence the parties had led on the application and considered a report that had been prepared by an accountant they had retained following the pre-trial conference to canvas the options available to them, in terms of how they would characterize or structure the payment of the equipment sales proceeds, for tax reporting purposes [Koop Report]. She concluded that the Koop Report had no impact on the proper

interpretation of the settlement agreement: [95] The purpose of the Koop Report was to determine whether there was a way to structure the settlement to minimize taxes regardless of the parties’ positions on which of them ought to bear the tax burden resulting from the Settlement Agreement. My task, on the other hand, is to determine whether the Settlement Agreement is an enforceable contract as it was drafted and executed. I have concluded that it is indeed. [ 29 ] Ultimately, the Chambers judge concluded that the settlement agreement was enforceable, and that it did not impose any tax consequences on Ms.

Van Seggelen that would have the effect of reducing the equalization payment owing to her. In that regard, she said: [90] As unintended as it might be from [Mr. Neigum]’s perspective, he shoulders the tax burden himself. Neither contractual

interpretation nor rectification nor mistake provide [Mr. Neigum] with a route to relief from the tax burden. [Mr. Neigum] is not protected from the repercussions of the Settlement Agreement that he freely signed. [ 30 ] Having reached that conclusion, the Chambers judge invited the parties to submit a draft judgment, encompassing its terms, for her to issue. 2. The Second Fiat [ 31 ] The parties were not able to reach an agreement on the terms of a draft judgment. On May 17, 2021, Mr.

Neigum filed an application in which he sought a “reconsideration or amendment” of the First Fiat or, alternatively, directions from the Chambers judge setting the terms of judgment. The live issue in this application focused on a disputed paragraph in the draft judgment that was proposed by Ms. Van Seggelen, which read as follows: 12. The sum of $550,550 was paid to [Ms. Van Seggelen] as an interim distribution of family property, from the sale of the farm equipment and machinery owned by [the Corporation]. [Mr.

Neigum] shall be responsible for any personal income tax consequences arising from the removal of [the equipment sale proceeds] from [the Corporation]. [ 32 ] In his notice of application, Mr. Neigum questioned whether the minutes of settlement could actually have any impact on personal income tax liability resulting from the payment made under the Dufour Order. He sought a ruling from the Chambers judge on how that interim distribution payment should be characterized in the judgment. Mr.

Neigum’s concerns appear to have been motivated by the fact that the minutes of settlement made no direct reference to how the removal of the equipment sale proceeds from the Corporation should be characterized for the purpose of tax reporting. He took the view that, if it were characterized in a manner consistent with general accounting practices, the tax liability would likely fall to Ms.

Van Seggelen, as it would be recorded as a payment from the Corporation to her. [ 33 ] The Chambers judge refused to reconsider the First Fiat , but determined that it was open to her, and necessary, to clarify the terms of the judgment to be issued. In that respect, she clarified the term relating to liability for the personal income tax consequences arising from the removal of the equipment sales proceeds from the Corporation by saying: [13] It is correct that my decision provided that the terms of the Settlement Agreement should be incorporated into a judgment.

It is correct that the Settlement Agreement did not contain the language set out in the Disputed Paragraph. However, my decision taken as a whole makes it clear that I was assigning any and all tax consequences arising out of the Settlement Agreement to [Mr. Neigum]. [14] In that regard, see paragraphs 76, 87, 89, 90 and 98 – all of which point very clearly to my conclusion that the tax burden associated with the Settlement Agreement falls upon [Mr. Neigum]’s shoulders. …

… [16] The Disputed Paragraph is needed in order to effect the result of placing the tax consequences of the Settlement Agreement upon [Mr. Neigum] as I intended. Paragraph 15 of the Draft Judgment is appropriate and the Draft Judgment can issue as filed. … III. THE ARGUMENTS [ 34 ] Mr. Neigum invites this Court to set aside the Decision and allow for final judgment to be entered in the bare terms set out in the minutes of settlement, i.e., with no express direction as to who bears the tax liability for the removal of the equipment sale proceeds from the Corporation.

He asserts that the Chambers judge made four errors that would allow this Court to intervene and grant the remedy he seeks. [ 35 ] First, Mr. Neigum alleges that the Chambers judge lacked jurisdiction to make an order determining who would bear the personal income tax liability triggered by the terms of the Dufour Order. He contends that s. 12(1) of the Tax Court of Canada Act , RSC 1985, c T-2 [ TCC Act ] vests the Tax Court of Canada with exclusive jurisdiction to decide matters of tax liability. [ 36 ] The second error, says Mr.

Neigum, is that the Chambers judge failed to provide adequate reasons for her decision. While he concedes that the Chambers judge conducted a thorough analysis of the law pertaining to the contractual concepts of rectification and mistake, he contends that she failed to provide a sufficient explanation for how she arrived at her ultimate determination that he, and not Ms. Van Seggelen, should shoulder the burden of the personal income tax payable on the equipment sale proceeds. [ 37 ] The third and fourth alleged errors are related; both implicate the Chambers judge’s

interpretation of the minutes of settlement. Mr. Neigum says the Chambers judge either erred by finding that the minutes of settlement contained a term making him responsible for the personal income tax payable on the equipment sale proceeds or erred by implying such a term. [ 38 ] Ms. Van Seggelen contests each of Mr. Neigum’s arguments. [ 39 ] First, she says the Chambers judge did not tread on the exclusive jurisdiction of the Tax Court of Canada. Ms.

Van Seggelen argues that, at its core, the application that led to the Decision related to the division of family property, which required the Chambers judge to examine and make a determination about the nature and terms of the parties’ contractual relationship. Such a decision, she contends, falls squarely within the purview of judges of the Court of King’s Bench. [ 40 ] Second, Ms. Van Seggelen contends that the Chambers judge’s reasons are sufficient, because the Decision is intelligible, permits the parties to understand why it was made, and provides a basis for meaningful appellate review. [ 41 ] Ms.

Van Seggelen also contends that the Chambers judge made no reviewable error in her

interpretation of the minutes of settlement. She says the Chambers judge relied only on properly admissible evidence in making her decision, referred to and followed the authoritative jurisprudence, correctly applied the law pertaining to the doctrines of rectification and mistake, correctly applied the principles of contractual

interpretation, and made findings of fact about the parties’ intentions and the underpinning of the minutes of settlement that are amply supported by the record. IV. ANALYSIS A.

Standard of review [ 42 ] I will address each of the arguments identified above in turn but, first, it is useful to set the stage by briefly discussing the standard of review that will guide the analysis. [ 43 ] Decisions regarding division of family property are generally afforded a good measure of deference on appeal, and an appellate court should only intervene where there has been an error of law, a palpable and overriding error of fact, or an abuse of the Chambers judge’s discretion ( Grosse v Grosse , 2015 SKCA 68 at para 15 , 460 Sask R 240; Lonsdale v Evans , 2020 SKCA 30 at para 29 ; see also: Anderson v Anderson , 2021 SKCA 117 at para 26 [ Anderson ]; and Riley v Riley , 2011 SKCA 5 , 366 Sask R 110)). [ 44 ] As this Court noted in Ackerman v Ackerman , 2014 SKCA 137 at para 23 , [2015] 6 WWR 626, an abuse of discretion justifying appellate intervention may result from an error in principle, disregarding a material matter of fact, failing to act judicially, or reaching a result that is so plainly wrong as to amount to an injustice. [ 45 ] The palpable and overriding error standard also applies to appellate review of decisions in which the factual determinations are made on the basis of affidavit evidence ( Yorkton (City) v Mi-Sask Industries Ltd. , 2021 SKCA 43 at paras 22–25 , [2021] 6 WWR 18). [ 46 ] Minutes of settlement created in the context of a court proceeding are to be interpreted in the same way as contracts ( Chutskoff at para 22 ).

Contractual

interpretation involves issues of mixed law and fact and, as such, attracts appellate review on the palpable and overriding error standard, unless there is an extricable question of law ( Sattva Capital Corp. v Creston Moly Corp. , 2014 SCC 53 at paras 50–53 , [2014] 2 SCR 633 [ Sattva ]; see also: Wenkoff v Wenkoff Estate , 2021 SKCA 5 at para 27 [ Wenkoff ]; and PS International Canada Corp. (Seaboard Specialty Grains and Foods) v Palimar Farms Inc. , 2017 SKCA 78 at para 21 ).

Extricable questions of law in this sense may include the application of incorrect legal principles, the failure to consider a required element of a legal test, or the failure to consider a relevant factor. The question of whether the requirements for the formation of a contract have been met is also an extricable question of law ( Sattva at para 53 ). B. Analysis of the arguments raised on appeal

1. Did the Chambers judge lack jurisdiction to make the Decision ? [ 47 ] As set out above, Mr. Neigum’s first argument is that the Chambers judge lacked the jurisdiction to make a determination about who, as between the parties, was required to bear the personal income tax liability arising from the removal of the equipment sale proceeds from the Corporation. In that regard, he relies on s. 12(1) of the TCC Act , which reads as follows: 12

(1) The Court has exclusive original jurisdiction to hear and determine references and appeals to the Court on matters arising under the Canada Pension Plan , the Cultural Property Export and Import Act ,

Part IX of the Excise Tax Act , the Old Age Security Act , the Petroleum and Gas Revenue Tax Act ,

Part V.1 of the Customs Act, the Income Tax Act , the Employment Insurance Act , the Air Travellers Security Charge Act , the Excise Act, 2001 , the Softwood Lumber Products Export Charge Act, 2006 , the Disability Tax Credit Promoters Restrictions Act ,

Part 1 of the Greenhouse Gas Pollution Pricing Act , the Underused Housing Tax Act and the Select Luxury Items Tax Act when references or appeals to the Court are provided for in those Acts. [ 48 ] In my view, this

section of the TCC Act does not apply to the present circumstances and, as such, the jurisdictional argument must be rejected. [ 49 ] The application that led to the Decision was not a reference or an appeal on matters arising under any of the statutes listed in s. 12(1). As this Court observed in Anderson v Benson Trithardt Noren LLP , 2016 SKCA 120 at paras 30–34 , when determining whether a matter falls within the exclusive jurisdiction of the Tax Court of Canada under s. 12(1), it is necessary to focus on the “essential character” of the application.

In this case, the application that produced the Decision called on the Chambers judge to examine and make a determination regarding the contractual relationship between the parties, as that relationship was defined by the minutes of settlement. The question arising from the application had nothing to do with the quantity of tax that either of the parties might have owed in relation to the removal of the equipment sale proceeds from the Corporation, or how the transaction should be reported under the Income Tax Act .

Nor did it touch in any way upon the scope, nature or propriety of any other aspect of tax assessment. At bottom, what the Chambers judge was called upon to determine was whether the minutes of settlement contained an enforceable term regarding which one of the parties should ultimately bear the tax responsibility for one particular transaction. In short, the essential character of the application concerned the

interpretation of a contract, which is a matter that falls squarely within the purview of the Court of King’s Bench. 2. Did the Chambers judge fail to provide sufficient reasons? [ 50 ] Mr. Neigum’s second argument is that the Chambers judge failed to provide adequate reasons for finding that he was responsible for bearing the personal income tax liability arising from the removal of the equipment sale proceeds from the Corporation. [ 51 ] I also reject this argument. It is trite law that judges have a duty to give reasons that are intelligible and sufficient to permit meaningful appellate review.

As Schwann J.A. explained in Bhagaloo v M2 Construction & Development Ltd. , 2021 SKCA 168 , while reasons must be responsive to the live issues before the Court and explain why a decision was reached, appellate courts should not intervene simply because the judge in first instance could have done a better job of expressing themselves: [32] In assessing the sufficiency of reasons, an appellate court is to undertake a functional, context-specific approach: Sheppard at para 53, R.E.M . at paras 16 and 35(1), and Hill v Hamilton-Wentworth Regional Police Services Board , 2007 SCC 41 at para 101 , [2007] 3 SCR 129.

Speaking for this Court in Scobie v Thiessen , 2021 SKCA 47 , 54 RFL (8th) 256 [ Scobie ], Ryan-Froslie J.A. said as follows: [33] … an appellate court must apply a functional test – one that takes into consideration the context giving rise to the decision, the record and the purpose of providing reasons, which includes giving an explanation to the unsuccessful party, allowing for meaningful appellate review and enabling the public to satisfy itself that justice has been done: R v Sheppard , 2002 SCC 26 at para 24 , [2002] 1 SCR 869 [ Sheppard ]. [33] The purpose of reasons is fulfilled if they show why the trial judge made the decision that was made, not how it was done: see R.E.M . at para 17, and R v R.I.G ., 2020 SKCA 26 at para 74 .

A trial judge is not obligated to “refer to or resolve every inconsistency raised by the defence in the course of his or her reasons” ( R v R.A ., 2017 ONCA 714 at para 45 , 421 DLR (4th) 100, aff’d 2018 SCC 13 , [2018] 1 SCR 307 ). Nor is a judge required to detail findings on each piece of evidence or controverted fact, “so long as the findings linking the evidence to the verdict can be logically discerned” ( R.E.M . at para 20).

Sufficiency of reasons focusses on whether the reasons disclose what essential facts were found by the judge and why they arrived at the result they did. (Emphasis in original) [ 52 ] In my view, from a functional and contextual standpoint, the Chambers judge’s reasons comfortably meet the test for sufficiency. Read as a whole, the Decision makes it abundantly clear why she reached the conclusion that she did.

She found that, even though the settlement agreement did not explicitly state who was to bear the tax consequences of the removal of the equipment sale proceeds from the Corporation, it was an inevitable consequence of the settlement agreement that one of the parties would be required to do so. She explicitly found that Ms. Van Seggelen had “understood and executed the Settlement Agreement on the basis that [Mr. Neigum] would be responsible for any taxes pursuant” to it, and that her equalization payment would not be reduced ( First Fiat at para 69). She also found that Mr.

Neigum “came into the Pre-Trial Conference armed with all the information that he needed to determine his position on settlement”, and that any mistaken belief on his part about what the tax implications would be could not “be used as an ex post facto justification for avoiding those tax implications” (at para 70). She also considered the equities of the situation from the standpoint of what the tax implications were expected to be and determined that, from an economic perspective, the overall property settlement would be more fairly balanced if Mr. Neigum were required to bear the tax liability.

She went on to explain, in clear terms and with direct reference to the arguments advanced by the parties, why she rejected Mr. Neigum’s

interpretation of the settlement agreement and accepted Ms. Van Seggelen’s. [ 53 ] Taking all of that into consideration, I cannot accept Mr. Neigum’s assertion that the Chambers judge failed to provide adequate reasons. The Decision explains what essential facts she found and why she arrived at the result she did, in a way that permits meaningful appellate review. This ground of appeal must fail.

3. Did the Chambers judge err in her

interpretation of the minutes of settlement? [54] As set out above, minutes of settlement arising from a legal proceeding are to be interpreted in the same manner as contracts. Inorder for a contract to exist there must be a consensus ad idem, or a meeting of the minds, with regard to all of the essential terms. Thisrequirement will not be met where “a material term is not resolved, and is left vague and imprecise, without the tools to refine it” (Tetherat para 62). Put another way, a contract is only formed where it would be clear to an objective reasonable bystander that (

i) the partiesintended to contract, (ii) the parties reached an agreement on all essential terms, and (iii) the essential terms are sufficiently certain (see:Jans Estate v Jans, 2020 SKCA 61 at para 34, 59 ETR (4th) 53 [Jans Estate]; Carruthers v Carruthers, 2021 SKCA 52 at para 66, 56RFL (8th) 110; and Matic v Waldner, 2016 MBCA 60 at para 57, 330 Man R (2d)1 07 (leave to appeal to SCC refused,)). [55] As I will explain, this case turns not on an issue of contractual

interpretation, but on an issue of contract formation. Both partiestook the position before the Chambers judge that the settlement agreement was binding and enforceable. However, their positions in thatrespect were anchored in an erroneous characterization of the essential terms of the agreement, which led the Chambers judge to interpretthe agreement from a legally flawed starting point.

In my respectful view, the question of who would bear the tax consequences triggeredby the removal of the equipment sale proceeds from the Corporation was of such fundamental importance to the settlement agreement thatan objective reasonable bystander would not be able to conclude, in the absence of consensus on that point, that the parties had agreed onall essential terms of the settlement. Accordingly, the Chambers judge erred in law by concluding that all of the elements had beenestablished to make the settlement agreement enforceable; there was a failure of consensus ad idem with respect to an essential term.

TheDecision must, therefore, be set aside. Let me elaborate on how I arrive at that result. [56] As a starting proposition, I recognize that courts should be reluctant to void contracts – or settlement agreements – on the basisof uncertainty. But, as Geoff Hall notes in Canadian Contractual

Interpretation Law, 4th ed (Toronto: LexisNexis, 2020) at 77, thecorollary is that courts must also strive to avoid interpreting uncertainties in a way that creates an agreement the parties did not intend: One aspect of the rule that courts should hesitate to find a contract void for uncertainty is that they are reluctant to find a missing provisionso essential that its absence renders a contract void: It is only the lack of a term that is so essential to the contract that without it the courtcannot collect the real intentions of the parties from the language within the four corners of the instrument and so cannot give effect tosuch intentions by supplying anything necessarily to be inferred that will render the contract unenforceable. … Since contracting parties may use very imprecise language yet still intend to be legally bound, application of this principle can defeat theintentions of the parties by finding that an agreement which was intended to be enforceable is not.

An interpretive rule seeks to avoid suchan outcome. It directs a court to make every effort to find a meaning for a contract and avoid (if possible) finding a contract to be void foruncertainty. At the same time, the effort to find a meaning must not go so far that the effect is to have the court write a contract for theparties. Thus, the rule has two distinct elements. First, the court must be hesitant to come to the conclusion that it is not possible to ascribeany meaning to a contract.

Second, while searching for a possible meaning, the court must refrain from imposing a contract upon theparties which would not accord with their actual intentions. [57] To put this succinctly, uncertainty created by the absence of an explicit term will not necessarily render a contract or settlementagreement invalid on that basis. However, where the term is one that is essential to the agreement, in the sense that it is central to theparties’ own understandings of what has been offered and accepted, that uncertainty means there is a failure of consensus ad idem and, assuch, no enforceable contract or agreement.

In Mosten Investments LP v The Manufacturers Life Insurance Co. (Manulife Financial),2021 SKCA 36, [2021] 9 WWR 1, this concept was described in the following way: [67] There can be no enforceable contract without consensus ad idem. The concept it expresses underpins the fundamentalrequirements of contract formation, namely, offer, acceptance, consideration and communication. It holds that every party to anenforceable contract must have the same understanding as to the content of each of its fundamental requirements.

For an enforceablecontract to come into existence, the parties must reach consensus ad idem as to what has been offered and accepted and as to theconsideration therefor. This can only occur where those promises have been communicated to, and understood by, all of theparties. Consensus ad idem is essential to contract formation and enforcement and it is, therefore, the object of contract

interpretation. [58] As the jurisprudence instructs, in order to properly find that consensus ad idem exists, a court must be able to determine therewas a meeting of the minds that was “manifest to the reasonable observer” and that this consensus existed with respect to “all the essentialterms of the agreement”, and that those essential terms are sufficiently certain (Tether at para 62; Anderson at para 72; Jans Estate at para34). [59] In this case, the evidence before the Chambers judge was clear that the parties did not share a common subjectiveunderstanding about who should bear the tax consequences arising from the removal of the equipment sale proceeds from theCorporation.

In the First Fiat, the Chambers judge described the parties’ positions, by reference to the evidence they had provided, in thefollowing way: [25] In her affidavit of February 11, 2020, [Ms. Van Seggelen] described her understanding of the settlement […] It was my understanding that, (

i) as [Mr. Neigum] was retaining the farm corporation, (ii) the $550,550 was received as an interimdistribution payment from [Mr. Neigum], and (iii) the sum of $224,998 was being deducted off the equalization payment that wouldotherwise have been owing to me, any tax liability regarding that $224,998 would be payable by [Mr. Neigum]. [26] Likewise, [Mr. Neigum] summarized his understanding of the agreement by the parties […]: I agreed to settle this matter with [Ms. Van Seggelen] with the understanding that I would only be responsible for paying a total of$390,000.00, as agreed to in the minutes of Settlement.

I did not intend, by executing the Minutes of Settlement, to bind myself to pay anyincome taxes on behalf of [Ms. Van Seggelen].

[…] [30] Both parties agree that the Settlement Agreement is a binding contract.

The contentious issue between the parties on thisapplication – the gulf that separates them – is who is to be responsible for the tax consequences triggered by the sale of the Equipment. […] [32] Both parties assert that they would never have settled their family property dispute at the Pre-Trial Conference had they thoughtthat they would bear the brunt of any tax consequences arising out of the settlement. [60] The Chambers judge held that, even in the face of that divergence in the parties’ subjective understandings, a bindingagreement had been reached.

She said: [54] … I am satisfied that there was a meeting of the minds and an agreement reached on all essential terms and that would have beenreadily apparent to a reasonable and objective third party observer. [61] The Chambers judge reached that conclusion notwithstanding that the minutes of settlement had not explicitly addressed thequestion of responsibility for the tax consequences of the removal of the equipment sale proceeds from the Corporation. Moreover, sheappears to have made a factual finding that no agreement had been reached between the parties respecting that specific tax issue. She said: [69] [Ms.

Van Seggelen] … understood and executed the Settlement Agreement on the basis that [Mr. Neigum] would be responsiblefor any taxes payable pursuant to the Settlement Agreement and that her Equalization Payment was $390,000- full stop. [70] [Mr. Neigum], it appears, had not even addressed his mind to the question of who would bear the taxes until after the settlementwas reached at the Pre-Trial Conference… [62] Of course, issues of contract formation, like issues of contract

interpretation, do not turn on the subjective intentions of thecontracting parties; the question is whether an objective reasonable observer would conclude that the parties had entered into a bindingagreement that encompassed all of the essential terms.

As such, the determination of whether the Chambers judge erred in this case byfinding the settlement agreement to be enforceable turns on whether the term respecting who would be responsible for the taxconsequences arising from the equipment sale proceeds was an essential term of the agreement, such that this lack of consensus wouldcause an objective reasonable observer to conclude that a true agreement had not been achieved. [63] I return to the grounding principle that, in order for a binding and enforceable agreement to arise, the parties must agree on theessential terms.

Generally speaking, a document that omits essential terms, or contains vague or incomplete material terms, will notconstitute an enforceable contract (or settlement agreement) (see: Consulate Ventures Inc. v Amico Contracting & Engineering (1992)Inc., 2007 ONCA 324 at para 81, 282 DLR (4th) 697, leave to appeal to SCC refused, ).

However, for a contract orsettlement agreement to fail on the ground that it has omitted a term, the term must be so essential to the agreement that, without it, thecourt “cannot collect the real intentions of the parties from the language within the four corners of the instrument” (Kennett v DiarnoFarms, 2018 SKQB 179 at para 73, quoting from First City Investments Ltd. v Fraser Arms Hotel Ltd. (1999), (BC CA),104 DLR (3d) 617 at para 31 (BCCA)). [64] Based on the evidence that was before the Chambers judge, it was clear that tax issues in connection with the transfer of theCorporation’s shares and the capital gains exemption were of significant importance to the parties.

This is reflected in paragraph 8 of theminutes of settlement, the relevant portion of which I reproduce here for ease of reference: […] This transfer of the corporate shares will be completed with the assistance of an accountant, to ensure that all income tax liabilitieshave been considered, and so that [Ms.

Van Seggelen] is able to utilize her lifetime capital gains exemption, on the basis that thecorporation is a qualified small business corporation, which should result in a NIL tax implication for the Petitioner. (Emphasis added) [65] As this provision demonstrates, the parties had obviously turned their minds to the issue of tax liability insofar as it pertained tothe transfer of their shares in the Corporation and the use of a capital gains exemption.

Specific language was used, in that regard, todemonstrate their understanding that tax liabilities for that aspect of the property division would be addressed and that such was a key partof the settlement. From this, an objective reasonable observer could readily infer that matters of tax liability were important to the parties. [66] Juxtaposed against that explicit term, however, was a complete absence of any term touching on the tax liability arising fromthe removal of the equipment sale proceeds from the Corporation.

As the Chambers judge observed, neither party had thought they wouldbear that tax liability, and both had deposed that they would not have executed the settlement agreement if they had thought that doing sowould saddle them with it. [67] Seen in that light, the term relating to tax liability for the equipment sale proceeds was undoubtedly material and would bemanifestly so to an objective reasonable observer.

This was not a situation where the tax liability in question was unforeseeable orinconsequential, and both parties would surely have been aware that removal of the equipment sale proceeds from the Corporation wouldgenerate a tax consequence. The equipment sale proceeds formed a significant portion of the total value of the property to be dividedbetween the parties, and the tax liability related to their removal from the Corporation ran into the hundreds of thousands of dollars.

It isself-evident that the financial impact of having to bear those tax consequences would be substantial for either party and, depending onwhich way the axe fell, had the potential to seriously affect the overall fairness of the settlement agreement.

In short, an objectivelyreasonable observer would see it as a term that went to the heart of the agreement between the parties, as it affected in a material way therespective costs and benefits of the settlement for each of them [68] As such, the responsibility for the tax liability arising from the equipment sale proceeds was properly seen as an essential termof the agreement. To repeat the words used in Tether, where “a material term is not resolved, and is left vague and imprecise, without thetools to refine it, the agreement is illusory” (at para 62). I find that to be the case here.

There is nothing in the settlement agreement itself,

or elsewhere in the record, that would provide the necessary tools to refine the settlement agreement, short of simply remaking the agreement for the parties.

That is not the proper role of the Court. [ 69 ] Accordingly, although it appears that the Chambers judge was motivated by a desire to interpret the settlement agreement in a manner that would achieve a fair and equitable result and obviate the need for a trial, and steered to the conclusion she reached by the way the parties framed the argument before her, she erred in law by finding that the elements necessary to make the settlement agreement binding and enforceable existed. The Decision must be set aside. V.

CONCLUSION [ 70 ] For the foregoing reasons, I would allow the appeal and remit the matter to the Court of King’s Bench for the continuation of the pre-trial conference and, if necessary, a trial to determine the appropriate division of property under The Family Property Act . [ 71 ] Mr. Neigum is entitled to the costs of the appeal, in the usual way. As for the order of costs made by the Chambers judge, I would set aside that order and replace it with an order that costs in relation to the applications that were before her be costs in the cause. “Kalmakoff J.A.” Kalmakoff J.A.

I concur. “Schwann J.A.” Schwann J.A. I concur. “Tholl J.A.” Tholl J.A.