Suderman v Yakubowski-Suderman, 2022 SKCA 87

Court of Appeal for Saskatchewan Docket: CACV3611 and CACV3699 Citation: Suderman v Yakubowski-Suderman , 2022 SKCA 87 Date: 2022-08-03 Between: Norman Grant Suderman, Administrator of the Estate of Kevin Wade Suderman Appellant/Respondent by Cross-Appeal (Respondent) And Colleen Carol Yakubowski-Suderman Respondent/Appellant by Cross-Appeal (Petitioner) Before: Richards C.J.S., Ottenbreit and Leurer JJ.A. Disposition: Appeal allowed in part; Cross-Appeal allowed in part Written reasons by: The Honourable Mr. Justice Leurer In concurrence: The Honourable Chief Justice Richards The Honourable Mr.

Justice Ottenbreit On appeal from: DIV 15 of 2009, Saskatoon Appeal heard: December 3, 2021 Counsel: Timothy Stodalka for the Appellant/Respondent by Cross-Appeal Ammy Murray for the Respondent/Appellant by Cross-Appeal Leurer J.A. I. INTRODUCTION [ 1 ] Litigation ages poorly. Costs soar. Witnesses die. Memories fade. Documents disappear. Circumstances change.

Small complications twist into wrens’ nests. [ 2 ] This is what confronted a Court of Queen’s Bench judge who was asked to untangle a decade-old dispute involving the division of the family property of Colleen Carol Yakubowski-Suderman [Colleen] and Kevin Suderman [Kevin]. These reasons address several appeals from the judgment following a trial between Colleen and Norman Suderman [Norman]. Norman is Kevin’s brother and the administrator for Kevin’s estate. [ 3 ] Colleen and Norman are unhappy in different ways with the trial judgment.

Between them, they put into issue nearly all of the significant findings made in it. They also join in identifying errors in that judgment, but not as to the implications of these errors to their respective bottom-line positions. All of this led to the filing of two notices of appeal by the estate, which were later consolidated, and a cross-appeal by Colleen. [ 4 ] I agree that the trial judgment must be varied. In these reasons, I identify where the trial judge fell into error and the ultimate impact that the required adjustments have on the equalization payment due from the estate to Colleen. II.

BACKGROUND [ 5 ] Colleen and Kevin were married in 1992. They later bought a house in Hanley, Saskatchewan, and a vacation property in Yuma, Arizona. [ 6 ] Other than owning homes together, Colleen and Kevin lived separate economic lives. Kevin farmed with Norman. Colleen operated a lounge and restaurant through a corporation, Crazy Cactus Restaurant Ltd. [Crazy Cactus]. [ 7 ] On January 13, 2009, Colleen filed a petition seeking divorce, spousal support and an equal division of family property pursuant to The Family Property Act , SS 1997, c F-6.3 [ FPA ].

Later that same year, Kevin filed his answer and a counter-petition seeking an unequal division of family property. Colleen’s petition was subsequently amended to request an order for the unequal division of family property. [ 8 ] Kevin brought some farmland into the marriage. During the marriage, more was purchased. Some was registered to Kevin alone and some was registered with other names also on title. After the separation, Kevin continued to farm using the farmland and equipment acquired during the marriage.

The value of the farmland appreciated significantly throughout this time. [ 9 ] After the break-up, Collen lived in the home in Hanley, although Kevin, and later the estate, paid some of the expenses associated with it. Beginning in 2016, Colleen leased the Hanley property to third-party tenants. She also continued to carry on Crazy Cactus’ business until its assets were sold in 2012. [ 10 ] Colleen and Kevin were inattentive to their businesses. In practical terms, this led to unfiled tax returns and unpaid taxes.

The trial judge noted that all of this resulted in considerable confusion and difficulty in reconciling their books, as well as various penalties and interest charges. [ 11 ] For many years, little was done to advance the litigation. In part, this was because of Colleen’s and Kevin’s attempts to reconcile. Any prospect of this ended around 2014. Thereafter, the parties agreed to sever the question of divorce from the issues relating

to the division of the family property. A judgment for divorce was granted on February 25, 2015. [ 12 ] Kevin died intestate in October of 2016. Norman was later appointed administrator for the estate. The litigation continued between Colleen and the estate. [ 13 ] On June 28, 2017, Colleen and the estate entered into an interim property distribution agreement [Interim Distribution Agreement].

This agreement set out terms allowing for the sale of some of the estate’s assets and for the payment of some of its liabilities. [ 14 ] The farmland was sold between May 31, 2018, and February 28, 2019, and the net proceeds placed in trust by the estate. The parties agreed that, for the purposes of the division of the family property, the farmland should be valued as of the date it was sold. [ 15 ] The matter finally proceeded to trial in November of 2019. At it, Colleen abandoned her claim for spousal support and the case continued on the issue of the division of property under the FPA .

The trial judge issued his reasons in February of 2020: Yakubowski-Suderman v Norman Grant Suderman, Administrator for the Estate of Kevin Wade Suderman (26 February 2020) Saskatoon, DIV 15 of 2009 (Sask QB) [ Judgment ]. [ 16 ] At paragraph 11 of the Judgment , the trial judge summarized the parties’ agreement as to some property values and shared debt.

The following table sets out, in aggregate, those agreed-upon values, as well as the valuation date agreed to for each: Asset Value Hanley house and Yuma vacation property (Current Value) $322,280.00 Household Good and Vehicles (Date of Petition) $30,510.00 Select items of farm equipment and machinery (Date of Petition) $198,201.00 Bank accounts (Date of Petition) $3,160.52 Registered investments (Date of Petition) $67,959.67 Debts (Date of Petition) ($182,486.87) Farmland (Date of Sale) $1,701,100.00 Total agreed upon property value $2,140,724.32 [ 17 ] Although these matters had been agreed upon, many others were in dispute.

The Judgment dealt with some, but not all, of the contentious matters. As a bottom line, the trial judge determined that Colleen should receive an equalization payment from the estate of $853,208.43, as well as title to the Hanley and Yuma properties. [ 18 ] After the trial judge delivered the Judgment , the estate applied under Rule 10-10 of The Queen’s Bench Rules seeking post- judgment clarifications and corrections. That Rule allows a party to apply for the amendment to a judgment or order “if there are clerical mistakes or errors arising from an accidental slip or omission”.

In a letter to the local registrar asking that this matter be brought before the trial judge, the estate asserted that “there are parts of the judgment on which the Court should have but did not adjudicate and/or there are errors in the calculations in the judgment”.

Colleen conceded that there were several matters that the trial judge had failed to address in the Judgment but argued that most of the changes the estate wanted to see made to it fell outside the scope of what would be permitted under Rule 10-10. [ 19 ] The trial judge addressed the estate’s application and the issue of trial costs in a corrigendum and addendum: Yakubowski- Suderman v Suderman (3 September 2020) Saskatoon, DIV 15 of 2009 (Sask QB) [ Corrigendum ].

In it, the trial judge found that Rule 10- 10 “allows for certain post-judgment redress by the Court for clerical mistakes or errors arising from an accidental slip or omission, or if some aspect of the trial was not adjudicated, or in any calculations”. However, he also held that he “should not stray into the appellate jurisdiction nor should [he] entertain the request to make corrections on wrongly decided points” ( Corrigendum at para 5). [ 20 ] After making certain adjustments, the trial judge summarized his final conclusions with respect to the family property held by each party.

These are set out in the following table, found at paragraph 14 of the Corrigendum : Description of Property Colleen Kevin Hanley House $185,000.00 Yuma Arizona Property $137,280.00 Household Goods $4,000.00 $500.00 Disputed Equipment $117,300.00 Agreed Equipment $198,201.00 Agreed Vehicles $18,250.00 Boat and Trailer $200.00 Bank Accounts $500.00 $1,743.60 Rings $4,060.00 $3,500.00 Riverbend Co-op $917.00 Registered Assets (Net) $4,714.64 $46,255.11 Grain on Hand at Petition $57,728.00 2008 Dodge Truck $18,000.00 Farm Sale (Net) $1,597,523.00 Rental of Hanley House Adjustment $13,200.00 Asset Subtotal $366,754.64 $2,042,117.71

Less Interim Distributions ($70,846.65) ($79,607.70) Less Agreed-Upon Debt ($17,775.00) ($164,711.88) Subtotal ($88,621.65) ($244,319.58) Less Exemptions ($10,281.50) Total $278,132.99 $1,787,516.63 Property Held by the Parties $278,132.99 $1,787,516.63 [ 21 ] Based upon these findings, the trial judge adjusted the equalization payment due to Colleen from what he had found in the Judgment , that is from $853,208.43 to $754,691.82.

The trial judge explained his final calculation of the equalization payment as follows: [15] Since Kevin has more family property, then there has to be an equalization in favour of Colleen calculated as follows: What Colleen has - $ 278,132.99 What Kevin has - $1,787,516.63 Total Property - $2,065,649.62 Total property divided by two: $2,065,649.62 ÷ 2 = $1,032,824.84 Colleen’s equalized share should be: $1,032,824.81 - $278,132.99 = $754,691.82 Therefore, Colleen should receive an additional $754,691.82 from the money held in trust at the [estate’s solicitors’] trust account. [ 22 ] The trial judge also found Colleen to be entitled to costs.

III. ISSUES [ 23 ] The outcomes of the appeal and cross-appeal are determined by the answers to the following questions: (

a) Did the trial judge err in how he accounted for interim distributions of family property? (

b) Did the trial judge err by characterizing payments made to Norman as interim distributions of family property? (

c) Did the trial judge err by refusing Colleen’s request to share in Kevin’s post-petition farm income? (

d) Did the trial judge err in his determination of the value of grain on hand as at the date of the petition? (

e) Did the trial judge err in how he attributed income from the rental of the Hanley property? (

f) Did the trial judge err in how he valued Crazy Cactus? (

g) Did the trial judge err by finding that Colleen had not dissipated family property? (

h) Did the trial judge err by failing to deduct capital gains taxes when determining the value of Kevin’s farmland? (

i) Did the trial judge err by failing to account for Kevin’s unpaid 2008 taxes? (

j) Did the trial judge err in his valuation of farm equipment? (

k) Did the trial judge err in his costs award? [ 24 ] My conclusions on these issues mean that there is enough money in trust with the estate from the sale of family property for it to pay what is due to Colleen. This makes it unnecessary to decide an issue relating to Norman’s alleged personal liability in the event of a shortfall. IV. ANALYSIS A. Did the trial judge err in how he accounted for interim distributions of family property? [ 25 ] As I will explain, the issue under this head devolves to one of accounting.

[26] Colleen received $49,013.85 pursuant to the Interim Distribution Agreement, and a further payment of $21,832.80 inNovember of 2018. Both parties agree that Colleen must account for these payments as interim distributions of family property. TheInterim Distribution Agreement contains Colleen’s acknowledgment that the $49,013.85 was a “pre-payment of the Estate’s obligation toher pursuant to the provisions of [the FPA]”.

Colleen also agrees that the second amount was properly accounted for by her as an advanceon family property. [27] The trial judge also found that other payments were made by the estate which must be accounted for as interim payments to it.As I will explain under the next heading of these reasons, there is a dispute as to whether these payments were properly characterized asbeing interim distributions of family property. [28] The trial judge took account of what he found to be interim distributions in the table reproduced at paragraph 20 of thesereasons.

He did so by deducting their total amount from the assets in possession of the party to whom the advances were made.

I haveemphasized this with italics in the following excerpt from that table: Colleen KevinAsset Subtotal $366,754.64 $2,042,117.71Less Interim Distributions ($70,846.65) ($79,607.70)Less Agreed-Upon Debt ($17,775.00) ($164,711.88)Subtotal ($88,621.65) ($244,319.58)Less Exemptions ($10,281.50)Total $278,132.99 $1,787,516.63 Property Held by the Parties $278,132.99 $1,787,516.63 As can be seen from this excerpt, the approach taken by the trial judge was to treat the advance made to each party as having the effect ofreducing the amount of family property he found to be in each party’s hands, but without making any other adjustments. [29] In Benson v Benson (1994), (SK CA), 120 Sask R 17 (CA) [Benson], Cameron J.A. set out the basicprocedure for effecting a distribution of family property pursuant to the FPA, as follows: [19] In the light of these and other provisions of [The Matrimonial Property Act, SS 1979, c M-6.1], the practice is to resolve thesecases along the lines suggested by Carter, J., in Rathie v.

Rathie (1980), (SK KB), 2 Sask.R. 361, 17 R.F.L.(2d) 265(Q.B.), determining, first, the property and its value subject to distribution. This ordinarily entails compiling an inventory of the propertyowned by the spouses as of the time of application and establishing the net value of that property as of that time or the time ofadjudication. Exceptions aside, this is the property and its value which is subject to distribution.

It is the practice to go on from there tonext determine whether any of that property or its value is exempt from distribution; then to determine whether any of it ought not to bedistributed equally having regard for the equitable considerations mentioned in the statute; and finally to decide how the distributionshould be effected. This Court has repeatedly affirmed the Benson framework. See, for example, Lonsdale v Evans, 2020 SKCA 30 at para 13, 37 RFL (8th)251. [30] The estate and Colleen disagree as to how the interim distributions made in this case should be accounted for within the Bensonframework.

I will illustrate this dispute with reference to the interim distributions made to Colleen. [31] The estate argues that a proper accounting for the interim payments should recognize that, because of the interim paymentsmade to Colleen, the value of family property in her hands has gone up by $70,846.65, and the value of family property in its hands hasgone down by the same amount.

It says the resulting net amounts should be used for the purposes of calculating what property is in eachparty’s possession before any equalization payment is made. [32] For her part, Colleen submits that the interim distributions should be considered as a reason for the court to order an unequaldistribution of family property. She supports her argument with reference to s. 21(3)(

i) of the FPA. This provision identifies, as one factorthe court shall have regard to when considering if it is appropriate to order an unequal distribution: (

i) a previous distribution of family property between the spouses by gift or agreement or pursuant to an order of any court of competentjurisdiction made before or after the coming into force of this Act or The Miscellaneous Statutes (Domestic Relations) Amendment Act,2001 (No. 2)[.] [33] There are at least two approaches that have been used by the courts of this province to account for interim distributions offamily property.

In some cases, interim payments have been accounted for when calculating the share of family property in each party’shands before then turning to determine what the equalization payment must be. This was done by the trial judge in Carruthers vCarruthers, 2019 SKQB 7 at 65 (Schedule “A”) [Carruthers QB], aff’d 2021 SKCA 52 at para 106, 56 RFL (8th) 110 [Carruthers CA].

Inother cases, courts have calculated the family property in each party’s hands without consideration of any interim distributions and thendeducted the interim distribution from the amount payable in an equalization payment, as if the interim distribution were a type ofadvance. It was done this way in Tyacke v Tyacke, 2019 SKQB 271 at 45 (Appendix A) [Tyacke QB], aff’d 2021 SKCA 80 at paras 90 and135, [2021] 12 WWR 628 [Tyacke CA]. See also: Kassian v Kassian, 2019 SKCA 101 at paras 25 and 94, 33 RFL (8th) 333 [Kassian];and S.B. v T.B., 2022 SKCA 65 at para 140.

There are even examples where the same judge has employed a particular technique in onecase, but a different one in another (contrast, for example, Sergent v Borisko, 2016 SKQB 355 at paras 30 and 90, with Tyacke QB atAppendix A). [34] At the end of the day, I do not see how it matters which of these two approaches is used, so long as the effect of making thedistribution is properly taken into account.

Here, having regard to the timing of when the interim distributions occurred, it would seem tome that the approach suggested by the estate presents the necessary calculations in a simple and straightforward manner, and I will use it

later when I summarize my conclusions. At least in this case, I see no basis for the accounting approach for interim distributions advocated for by Colleen. Section 21(3) (

i) of the FPA is directed towards identifying circumstances that should result in the unequal division of family property. Here, the intent behind any accounting for the interim payments is to ensure that there is an equal division of the family property, not to effect an unequal one. [ 35 ] Unfortunately, however the accounting is done, it is evident that the trial judge erred in his calculations.

In this regard, according to the facts as found by the trial judge, prior to the interim distributions, Colleen held family property valued at $366,754.60 and family debt totalling $17,775.00, leaving family property with a net value of $348,979.60. After the interim distributions, Colleen held family property valued at $70,846.65 more, that is, $419,826.25. Again, according to the facts as found by the trial judge, before the interim payments to Colleen, the estate held family property with a net value of $2,042,117.71.

The making of the interim payments would reduce the net value of the family property in its hands by $70,846.65. However, the calculations performed by the trial judge did not recognize these mathematical certainties. [ 36 ] As I have explained, by the trial judge’s calculation, after account was taken of the interim distributions to her, Colleen held family property valued at only $278,132.99. The trial judge reached this conclusion by deducting – rather than adding – the amount of the interim distributions to the total family property in her hands.

In other words, the trial judge’s calculation proceeded based on the erroneous idea that the total family property in Colleen’s possession had decreased, not increased.

At a basic level, the error of the trial judge can be seen in the fact that the effect of the interim distributions was not to reduce the total amount of family property in Colleen’s hands, but to increase it. [ 37 ] The trial judge also failed to account for the fact that the effect of the interim distributions to Colleen was to decrease the value of family property in the estate’s hands by the amount of the interim payments it had made to Colleen.

As I have explained, because $70,846.65 was transferred from the estate to Colleen, the total value of family property in the estate’s possession decreased by that amount. No account is made of this fact in the table found at paragraph 20 of these reasons. [ 38 ] In conclusion on this issue, the trial judge erred when he accounted for interim distributions of family property. B.

Did the trial judge err by characterizing payments made to Norman as interim distributions of family property? [ 39 ] The trial judge found that, in the final division of family property, the estate must account for payments made to its creditors totalling $79,607.70 as interim distributions of family property. The estate says that the trial judge erred by ordering this adjustment. Its argument amounts to an attack on the trial judge’s finding that, as a matter of fact, these payments were interim distributions of family property.

This finding of fact must, therefore, be respected unless it is the product of palpable and overriding error: Frondall v Frondall , 2020 SKCA 135 at para 21 , 49 RFL (8th) 293 [ Frondall ]; and Dungey v Dungey , 2020 SKCA 138 at para 27 , 454 DLR (4th) 560 [ Dungey ]. [ 40 ] In reaching the conclusion that the estate must account for payments made to its creditors, the trial judge first observed that, prior to trial, Crooks J. had authorized payment of $13,019.25 to the lawyers handling Kevin’s estate and a further payment of $5,444.45 to the accountants handling Kevin’s estate: Yakubowski-Suderman v Suderman (20 August 2019) Saskatoon (Sask QB) [ Crooks Fiat ].

The trial judge characterized these as “an advancement to Kevin” ( Judgment at para 90). He also agreed with Colleen that the reimbursement of Norman from estate accounts for $21,618.39 in legal fees, $41,000.00 for personal expenses and $21,144.00 for an administration bond relating to the estate “ought to be considered as a prepayment on Kevin’s family property” (at para 91, quoting from Colleen’s trial brief). [ 41 ] The payments listed by the trial judge in paragraphs 90 and 91 of the Judgment total $102,226.09.

In paragraph 93, the trial judge summarized his conclusion relating to these advances made to the estate by stating that it must account for $79,607.70. The trial judge did not explain the discrepancy between this total and the sum of the amounts referred to in paragraphs 90 and 91, although the difference would appear to be reflected in overlap between those payments. [ 42 ] In any event, no issue was taken with the fact that the payments the trial judge identified in paragraphs 91 to 93 of the Judgment were made by the estate and that Colleen received no benefit from them.

However, the estate challenges the trial judge’s finding that these were interim distributions of family property. As I will explain, I agree with the estate on this point. [ 43 ] Consideration of this issue begins with a brief explanation of how the estate was administered. I will then review the circumstances surrounding the making of the payments the trial judge characterized as constituting interim payments, including the events leading to the Crooks Fiat . [ 44 ] As the administrator of the estate, Norman was required to gather all of Kevin’s assets.

These included the family property titled in Kevin’s name that would be subject to division with Colleen. They also included assets that would not be shareable, such as property that Kevin had acquired after the issuance of the petition in early 2009. [ 45 ] The payments to Norman of $41,000.00 for personal expenses and $21,144.00 for the estate’s administration bond were made pursuant to the Interim Distribution Agreement. The

preamble to the Interim Distribution Agreement recites the parties’ shared understanding that, as of June 2017 – that is, prior to the sale of the farmland – the estate held $218,269.52 in a solicitor’s trust account, $116,060.94 in a chequing account, $150,668.85 in an expired term deposit, as well as a small amount in a U.S. dollar chequing account. These are the accounts from which the payments were made, which the trial judge identified as constituting interim distributions.

The Interim Distribution Agreement contains the parties’ acknowledgment that there was a dispute as to whether the monies contained in these accounts constituted family property that would be subject to division. [ 46 ] The overarching conclusion I draw from this is that it was inappropriate for the trial judge to have proceeded on the basis that, simply because payments were made from the estate accounts, they were from family property. The evidence was that there were sources of cash, other than family property, from which those payments could have been made. The trial judge overlooked this fact.

[47] Colleen’s outstanding application for a division of the family property meant that Norman’s ability to deal with assets thatmight constitute family property was restricted by s. 34 of the FPA. That provision states as follows: Distribution in accordance with court order 34(1) Where an application for a family property order is made or continued by a surviving spouse or is continued by the personalrepresentative of the deceased spouse: (

a) the personal representative of the deceased spouse shall hold the estate subject to any family property order that may be made; and (

b) no personal representative shall proceed with the distribution of the estate other than in accordance with and subject to the familyproperty order.

(2) Unless he or she has the consent of the surviving spouse to the distribution, a personal representative who distributes a portion of theestate contrary to subsection (1) is personally liable to the surviving spouse for any loss suffered by the surviving spouse as a result of thedistribution.

(3) No settlement or agreement made by a personal representative respecting an application that has been commenced for a familyproperty order is valid as against a surviving spouse unless it is confirmed by an order of the court.

The existence of s. 34, and the dispute over whether the accounts contained family property, explains why the estate sought Colleen’sconsent to the distribution of monies from those accounts and why the Interim Distribution Agreement provided that Norman “does nothereby admit that he was required to obtain [Colleen’s] consent to the distribution”. [48] The trial judge misapprehended the significance of the authorization given by Crooks J. for the estate to pay its lawyers andaccountants. The Crooks Fiat expressly grounded the order authorizing the payment of these estate expenses in s. 34.

Justice Crooks notedthat there “is a significant amount of funds held in trust on behalf of the estate” (at para 47). She expressly found that the payment of theestate’s legal fees “will not disadvantage either party” and that the fees “were incurred for specific services and there are significant fundsavailable to pay these fees” (at para 57).

While I would not interpret the Crooks Fiat to constitute an express finding that the monies usedto pay these accounts were non-family property, it is equally impossible to interpret the fiat the other way, that is, being based on the ideathat the monies used for this purpose were family property. [49] In simple terms, the trial judge’s decision to treat the payments of the estate expenses as interim distributions of family propertyrested on the assumption that, simply because these payments were made from a bank account into which the proceeds from the sale offamily property were also deposited, these payments were subject to division.

The trial judge overlooked the fact that money in the trustaccount was derived from sources in addition to family property. The estate argues that the failure by the trial judge to account for this factconstitutes a palpable error and requires this Court to intervene. [50] I am satisfied, from my review of the record as a whole, that the source of the funds used to advance monies to the estate wasnot family property. In this regard, Kevin had accumulated assets of a value well in excess of the amounts of these payments that were notfamily property and, therefore, not shareable with Colleen.

Colleen attempts to answer this point by submitting that Kevin was only able toacquire these assets by depriving her of her share of the family property. However, this is properly accounted for by Colleen’sparticipation, to the extent that the FPA contemplates, in the post-petition income that Kevin had earned from his use of family property.

Iwill discuss this issue under the next heading of these reasons. [51] In conclusion on this issue, in my respectful view, the trial judge erred by incorrectly characterizing payments totalling$79,607.70 made to Norman from the estate’s trust account as constituting interim distributions of family property. C. Did the trial judge err by refusing Colleen’s request to share in Kevin’spost-petition farm income? 1. The issue [52] Kevin’s post-petition farm income was brought into dispute for two reasons.

First, as of the date of Colleen’s petition, Kevinhad an inventory of grain that had been grown during the couple’s marriage. This grain on hand was, therefore, family property subject todivision in accordance with the FPA. In this regard, family property is defined in s. 2 to mean any real or personal property “that, at thetime an application is made pursuant to this Act, is owned, or in which an interest is held, by one or both spouses, or by one or bothspouses and a third person”. Kevin sold this grain after the petition was issued.

Since no valuation of the grain had been conducted,Colleen and the estate agreed, at trial, that the proper approach for determining its value was to calculate the net proceeds from its sale.This task was made difficult because of Kevin’s incomplete record-keeping and the fact that he did not file income tax returns for manyyears after the couple had separated.

Instead, these were only prepared after his death by an accountant retained by the estate. [53] The second and more controversial reason that Kevin’s post-petition farm income was at issue was because it was generated, inpart, from his post-petition use of family property, that is, farmland and equipment owned by him as of the petition date.

Colleen claimedthat she should be entitled to a share of that income. [54] In making this argument, Colleen relied on s. 21(2) of the FPA, which allows a court to deviate from the usual rule that there bean equal division of family property where, “having regard to the matters mentioned in subsection (3), the court is satisfied that it wouldbe unfair and inequitable to make an equal distribution of family property or its value”.

Colleen’s submission was that “post-separationfarm income generated from jointly held property can properly be considered shareable family property, or as an appropriate adjustment tofamily property” (Judgment at para 58, quoting from Colleen’s trial brief). In support of her submission, Colleen relied on variousauthorities, including Benson and Russell v Russell (1999), (SK CA), 180 Sask R 196 (CA) [Russell]. Before the trialjudge, the estate acknowledged that “the principles found in Russell allow the Court to make the statutorily permitted equitable adjustment

as per s. 21 of the [FPA], [but] these equitable considerations should not be applied as argued by Colleen” (Judgment at para 59). [55] The trial therefore proceeded on the basis that “both parties acknowledge that Colleen could possibly have an equitable claim”for an unequal distribution of the family property based on Kevin’s use of family property to generate income that only he received. Thetrial judge described the task before him as being “to determine what this income was and then see what role the equitable principles playin the context of this case” (at para 60). 2.

The Judgment [56] After a review of applicable legal authorities and the parties’ positions, the trial judge began his analysis of this issue bycriticizing the estate for not setting out what it believed Kevin’s income to be. The trial judge noted that Colleen had done this, but he was“not persuaded the evidence supports this argument”, stating that “[t]o support such an ambitious approach would have required some sortof opinion evidence (such as an agrologist or agricultural economist) to try to establish the various assumptions she puts forward” (at para62).

The trial judge also discounted many of the estate’s arguments and concluded that he did “not believe it is in real dispute that[Colleen] may have been entitled to an equitable sharing of the post-petition income derived from the principle [sic] asset of the parties:the farm” (at para 63). He then stated: [64] My approach here is straightforward. I will try to determine what the farm income was from 2009 to the sale and then (like inRussell) see if it is appropriate to apply some sort of percentage to the income as an equitable sharing.

This percentage would take intoconsideration Colleen’s limited role in the farming operation, the passage of time to get to trial, Kevin’s labour and management, and theeffect of the loose partnership with Norman. [57] Following a review of the evidence, the trial judge found that over the seven years following the parties’ separation, Kevin hadearned “$234,584.59 of income from farming” (at para 80). As the trial judge also explained, this works out to “an average after-taxincome of about $33,500.00 per year” (at para 81).

In calculating this figure, the trial judge took specific note that it “does not take intoconsideration that some of Kevin’s income was derived from non-family property assets (i.e. leased lands)” (at para 82). [58] Having made these findings of fact, the trial judge determined that Colleen was not entitled to share in the post-petition incomegenerated from the use of family property. He gave three reasons for this conclusion, as follows: [83] I am not persuaded that Colleen should share in the after-tax income from the farmland.

Firstly, I was not provided with a clearbasis in evidence or argument for such entitlement. Secondly, the amount Kevin may have actually been entitled to (if he had paid histaxes correctly) is rather modest. Finally, Colleen did not pursue this claim diligently. The resulting delay of over 10 years weakens theequitable considerations. Accordingly, I am not prepared to exercise my discretion and try to come to some sort of equitable allowanceusing a percentage as suggested in Russell or otherwise. [59] The question under this heading is whether the trial judge erred in reaching this conclusion. 3.

Analysis [60] A starting point to determining whether the trial judge erred is to understand that the property that is divisible under the FPA isthat which existed as at the date when the proceedings seeking a division of family property were initiated. The converse is that propertyacquired by a spouse after the application date is not divisible. These points were reiterated by Ottenbreit J.A. in Rankin v Rankin, 2022SKCA 32, [2022] 6 WWR 19 [Rankin], as follows: [50] The law governing how family property is to be identified and determined is not in dispute.

It is the property that exists at the dateof application. This is clear from the definition of family property in s. 2(1) of the FPA set out above, as well as a long line of case lawconfirming the same (see, for example, Benson v Benson (1994), (SK CA), 120 Sask R 17 (CA) at para 32 [Benson],and cases following).

The upshot of this is that property acquired by a party after the application date [after acquired property] does not fitinto the definition of family property in the FPA and therefore cannot be identified and valued as such. … [52] Despite the expansive definition of family property, the identification of property as such in any case is constrained by therequirement in s. 2(1) of the FPA that the property must be in existence at the date of application.

It is well established that after acquiredproperty is not family property. (Emphasis in original) [61] Justice Ottenbreit also referred to Qually v Qually (No. 5) (1987), (SK KB), 61 Sask R 178 (QB), asauthority for the more specific proposition that “crops grown after the date of application are not family property” (Rankin at para 53).Having summarized these conclusions, Ottenbreit J.A. noted, with reference to Russell and several other cases, that the court can “considerthe nature of the parties’ dealings with the family property after the application date or the acquisition of property after the applicationdate as a factor bearing on both the equal or unequal division of that family property and the determination and division of its value”(Rankin at para 90). [62] In Russell, this Court found in ss. 21(2)(

q) and 21(2)(

t) of The Matrimonial Property Act, SS 1979, c M-6.1, the authority toconsider a claim to entitlement to proceeds from crops grown on farmland after the date of application: [91] Clauses 21(2)(

q) and 21(2)(

t) of The Matrimonial Property Act permit a court to make any “order that it considers fair andequitable” having regard for any “relevant fact or circumstance.” Mr. Russell used the land and equipment to generate income withMrs. Russell’s share of the property and she had been without her share of the property for some five years. These are relevant facts orcircumstances to which a court might reasonably have regard in considering an unequal division.

The equivalent provisions of the FPA are ss. 21(2) and 21(3) (q). [ 63 ] Many cases have applied Russell in the context of considering whether to order a share of post-petition income derived from the use of family property. I will refer to only two of those cases to illustrate how its principles have been applied. [ 64 ] In Lerner v Lerner , 2008 SKQB 308 , 321 Sask R 78 [ Lerner ], Herauf J. (as he then was) considered whether a spouse was entitled to share in the rental income that had been generated by farmland between the date of application and the date of trial.

He agreed that it would be unfair to exclude the income from distribution, noting that “the value of this asset is not derived from any labour or further investment by either party” (at para 86). The parties agreed to the deduction of land taxes and mortgage interest. In addition, Herauf J. deducted costs relating to insurance, maintenance and repairs.

In determining the precise amounts to be deducted for mortgage interest, Herauf J. noted “that this is basically a judgment call” and adopted what he regarded “to be the fairest method to deal with interest charges” (at para 94). [ 65 ] In Riben v Riben , 2010 SKQB 431 at paras 39–42 , 365 Sask R 1, aff’d 2013 SKCA 114 , 423 Sask R 305, Ryan-Froslie J. (as she then was) considered a claim like that made by Colleen in this case. She found that the spouse in possession of the farming partnership “should be viewed as ‘renting’ the land from the partnership on a cash basis” (at para 44).

Referring to Russell , she noted that this Court “confirmed crops produced post-application are not family property as they were not in existence on the date the Court application was commenced”. However, she observed that s. 21 of the FPA “permits a Court to make any order it considers fair and equitable having regard, among other things, to s. 21(3) (q), being any relevant fact or circumstance” and the “fact Mr.

Russell used his wife’s share of the farmland and equipment to generate income without accounting to her for some five years was held to be a circumstance the Court might reasonably consider in making an unequal distribution” (at para 99). Ultimately, Ryan-Froslie J. utilized the cash rental approach to account for crops grown post-petition. After establishing an average cash rental value per acre, Ryan-Froslie J. deducted tax costs to arrive at a net figure for each year.

Finally, noting the availability of government subsidies, Ryan-Froslie J. offset a portion of these subsidies against the claim for occupational rent. [ 66 ] The principle that stands behind Russell and cases that have followed it is that, although property acquired after separation does not constitute family property, it is often equitable for a spouse who receives a material benefit from the use of family property prior to its distribution to account for that to the spouse who did not enjoy the same use.

Said another way, the spouse in possession of the asset is called upon to share the return on capital which that spouse exclusively enjoyed. In the scheme of the FPA , this is most often accomplished by making an unequal division of the family property to account for the benefit received by the spouse in possession of the income-generating asset. [ 67 ] The presentation of claims of this nature can be confounded because of evidentiary difficulties. These problems can be as simple as determining what income has been earned from the family property asset.

It is also not uncommon for there to be a challenge in untangling how much of the post-petition income has been derived from the labour of the spouse using the family property, and how much was generated from the use of that capital. [ 68 ] An analogue to the notion that a party who derives a benefit from the post-petition, but pre-division, use of family property should account for that benefit, is the idea that a party who uses a family asset should, in some cases, pay for the use of it.

In Casey v Casey , 2013 SKCA 58 at para 49 , 417 Sask R 34 [ Casey ], Lane J.A. described the authority to order occupational rent as “a discretionary award to be ordered when it is equitable and just in the circumstances”. Because the specific issue in Casey related to the payment of occupational rent in relation to a family home, I will not review the factors that Lane J.A. mentioned to guide the exercise of that discretion.

The point I take from Casey is that, because family property is identified as of the date that the legal proceedings are commenced, the delay in completing those proceedings may have economic consequences that call for an adjustment in the division of the family property in order to achieve equity between the parties. [ 69 ] Justice Tholl’s ( ex officio ) decision in Duckworth v Duckworth , 2019 SKQB 165 , illustrates how the reasoning applied in Casey may be applicable to family property that is not the family home.

In Duckworth , Tholl J.A. cited Casey in support of his conclusion denying a claim for occupational rent for the use of farmland, reasoning as follows: [143] Ms. Duckworth seeks occupational rent for the farmland for the time that has passed from petition date to date of adjudication. She does not offer to pay occupational rent for the condominium she occupied for that same time period. [144] I decline to order the payment of occupational rent.

As set out in Casey v Casey , 2013 SKCA 58 at paras 41 to 48 , 417 Sask R 34, occupational rent may be granted to achieve justice and equity, but it should be used cautiously and limited to exceptional circumstances. The factors in this matter do not support the payment of occupational rent. Each party was in possession of real property. Mr. Duckworth has not generated significant net income from being in possession of the farmland. Ms. Duckworth did not suffer serious financial difficulty.

I do not find justice and equity would be achieved by ordering the payment of occupational rent. [ 70 ] I would offer a final point of introduction to frame my analysis that follows. It flows from the fact that the decision to order a sharing of post-petition earnings is a discretionary one. In Ackerman v Ackerman , 2014 SKCA 137 , 451 Sask R 132 [ Ackerman ], Ryan- Froslie J.A. described the standards of review that this attracts: [23] Deference is to be accorded such decisions.

An appeal court should only interfere if the trial judge has abused his or her discretion by erring in principle, disregarding a material matter of fact, or failing to act judicially, or if the result is so plainly wrong as to amount to an injustice (see: Rimmer v Adshead , 2002 SKCA 12 at para 58 , [2002] 4 WWR 119). [24] The standard of review with respect to findings of fact is a palpable and overriding error (see: Housen v Nikolaisen , 2002 SCC 33 , [2002] 2 SCR 235 and H.L. v Canada (Attorney General) , 2005 SCC 25 , [2005] 1 SCR 401). [ 71 ] After reviewing many authorities, Barrington-Foote J.A. summarized the standards applicable to the appellate review of a discretionary decision in similar terms in Kot v Kot, 2021 SKCA 4 , 63 ETR (4th) 161 [ Kot ]: [20] In

summary, these cases confirm that appellate intervention in a discretionary decision is appropriate where the judge made a palpable and overriding error in their assessment of the facts, including as a result of misapprehending or failing to consider material

evidence. Appellate intervention is also appropriate where the judge failed to correctly identify the legal criteria which governed the exercise of their discretion or misapplied those criteria, thereby committing an error of law. Such errors may include a failure to give any or sufficient weight to a relevant consideration. [ 72 ] As I have noted, in this case, the trial judge gave three reasons for declining to make an order that would allow Colleen to share in the after-tax income that Kevin earned from his use of family farming assets, namely that: (

a) he had not been “provided with a clear basis in evidence or argument for such entitlement”; (b) “the amount Kevin may have actually been entitled to (if he had paid his taxes correctly) is rather modest”; and (c) “Colleen did not pursue this claim diligently” (at para 83). Colleen attacks each of these reasons. [ 73 ] Her principal argument is that several of the trial judge’s factual findings are palpably wrong and these errors led to his conclusion that the income earned by Kevin after the separation was “rather modest” ( Judgment at para 83).

This general description finds definition in the trial judge’s earlier determination that, over the seven-year period after his separation from Colleen, Kevin had earned, on average, $33,500.00 per year from farming. [ 74 ] Between paragraphs 67 to 78 of the Judgment , the trial judge reviewed the tax returns prepared after Kevin’s death for the years 2009 to 2015. The trial judge made specific findings of fact in relation to Kevin’s total income as well as income tax and interest and penalties that became due on that income, for each year.

The interest and penalties had accrued because Kevin had not prepared his tax returns or paid taxes during this seven-year period. Having made these year-specific findings of fact, the trial judge summarized his conclusions as follows: [79] What I can glean from this is that by 2015 (the year before Kevin’s death) he owed $391,084.54 in tax, penalties and interest. This had to be figured out posthumously.

When I add his after-tax income from my above reconstruction, I get: Year Amount 2009 $57,832.04 2010 $88,854.93 2011 $50,875.90 2012 $144,609.13 2013 $163,245.83 2014 $39,904.46 2015 $80,346.84 Total $625,669.13 [ 75 ] Both parties agree that the table found at paragraph 79 of the Judgment represents the trial judge’s determination of Kevin’s after-tax income for 2009 to 2015, that is, Kevin’s taxable income less the income tax payable on that income but before payment of penalties and interest. As this table shows, Kevin’s total after-tax income for the period 2009 to 2015 was $625,669.13.

This works out to an average annual net income of $89,381.30. [ 76 ] Immediately after making these findings of fact, the trial judge continued as follows: [80] However, I believe the total outstanding tax payable, penalties and interest should be deducted from this total, resulting in $234,584.59 of income from farming: $625,669.13 - after-tax income - $391,084.54 - 2015 outstanding tax, penalties & interest $234.584.59 - income from farming [81] The above time period covers about seven years, resulting in an average after-tax income of about $33,500.00 per year.

I appreciate that I am including penalties and interest in this as well, but find this generalized approach is acceptable under the unusual circumstances of this case. [ 77 ] Colleen argues that paragraphs 80 and 81 evince several errors. The first, and most significant of these, is that in these paragraphs the trial judge lost track of the findings of fact he made in paragraph 79 of the Judgment . I agree with Colleen on this point, as does the estate. A review of paragraphs 79 to 81 of the Judgment discloses that the trial judge deducted taxes twice.

In this regard, income taxes were first deducted from Kevin’s gross income to come up with the after-tax income of $625,669.13 referred to in paragraph 79; that is, the amounts listed in that paragraph took into account all of Kevin’s then-unpaid income taxes. Taxes were then deducted again by the trial judge in paragraph 80, along with interest and penalties. [ 78 ] Colleen suggests that the trial judge may have become confused by the piecemeal and non-chronological way that Kevin’s various tax liabilities were determined and paid.

Whatever the source of the trial judge’s confusion, what is clear is that he deducted the income tax attributable to Kevin’s 2009 to 2015 income two times. [ 79 ] The double deduction of taxes from Kevin’s income, when calculating his after-tax income, is an error that can only be described as palpable and overriding. It is palpable because it is obvious.

It is overriding because correction for this error means that Kevin’s average annual income for the period in question was $89,381.30, not the $33,500.00 used by the trial judge in his determination of whether to order the estate to account for a share in this income. [ 80 ] In Crowe v Crowe , 2001 SKQB 202 , 216 Sask R 264, McIntyre J. rejected a claim for post-petition farming income.

However, the amounts at stake were much smaller than those in this case, making it more difficult to conclude that the income was a return on the use of the family property: [97] As indicated, counsel argues Viola should be entitled to an adjustment of $8,091.10 per year using the approach taken in [ Beutler v Beutler , [1997] SJ No 213 (QL) (Sask QB) ], supra . As noted, there did not appear to be any mortgage debt in Beutler . Here there is a

mortgage payment of approximately of $22,000.00 each year. If Beutler is to approximate the revenue Viola might have earned had she been able to earn a rental income from her interest in the farm, then some account must be taken of the mortgage debt for if she is to share in the notional revenue the debt cannot be ignored. It would appear the annual mortgage payment exceeds the annual cash rental value. [98] On the other hand it may be argued that the farm is generating an income for Ken.

Ignoring for the moment that Ken’s labour is a factor in generating what income there may be I am satisfied on the evidence that the farm generated, in the last two years, a modest income at best.

In the circumstances I have concluded there should be no other than equal distribution to compensate Viola for post- application crop income. [ 81 ] Whatever one’s point of reference, I would conclude that the $89,381.30 average annual income that Kevin earned post- petition is not “modest”. [ 82 ] Other than the trial judge’s palpably erroneous conclusion that Kevin’s post-petition farming income was, on average, $33,500.00 per annum, the only anchor I can see for his conclusion that there was no basis in evidence or argument for Colleen to share in that income is that the evidence surrounding the farm’s operations was unclear.

However, although the records relating to Kevin’s post- petition farming income had to be put together by the estate posthumously, they were accepted by the trial judge for the purposes of his fact-finding. There is also no dispute that Kevin was only able to earn this income because he had used family farming assets. While there was certainly disagreement over how much of it was derived from Kevin’s labour and management, and how much of this income was derived from his use of non-family assets, there was no dispute that some part of it was generated by using the marriage’s capital.

Indeed, as I will explain, the trial judge was prepared to offer an estimate of this elsewhere in his reasons. [ 83 ] The trial judge’s third reason for denying Colleen a share in the post-petition farming income was that she had not pursued her claim diligently and the “resulting delay of over 10 years weakens the equitable considerations” (at para 83).

The trial judge’s conclusion that Colleen’s delay was a reason to deny her a share in this income is difficult to reconcile with a finding he made in the context of discussing issues of costs, namely, that Colleen’s “attempts at this litigation have been hampered by a lack of money”.

In explaining this latter conclusion, he pointed to the fact that Colleen had been “unable to retain accounting expertise until the very end and then under special arrangements for payment” ( Corrigendum at para 26). [ 84 ] I would accept that delay or a lack of diligence in prosecuting a claim for family property division may impact any equitable claim, but there must be a reason that links the delay to the equities of the situation. This latter point was made by Herauf J. in Lerner . In that case, nearly eight years had elapsed between separation and trial.

Justice Herauf concluded that delay may bear on the equities of making an adjustment for this post-petition income, depending on the reasons for it. However, he found that delay was not a reason to deny the non-possessory spouse on the facts before him: [87] While I have already expressed my concern that it has been almost eight years from separation to trial I did not sense, nor was it suggested, that the delay was occasioned by Karen in order to delay the date of adjudication to increase the potential family property base.

If I had sensed this as a factor I would have exercised my discretion accordingly. [ 85 ] The estate relies on Harding v Harding , 2014 SKCA 74 , [2014] 9 WWR 658 [ Harding ], in support of its argument that Colleen should be deprived of a share of Kevin’s post-petition income. However, I do not see it as assisting the estate in this case. [ 86 ] Harding dealt with an application to strike an entire property division claim under the Court of Queen’s Bench’s inherent jurisdiction.

Justice Caldwell relied on the three-part test laid out by Richards J.A. (as he then was) for delay in International Capital Corporation v Robinson Twigg & Ketilson , 2010 SKCA 48 , 319 DLR (4th) 155 [ International Capital ]. As noted by Caldwell J.A., that test asks whether: [7] … (

i) the delay was inordinate; (ii) the delay was excusable; and (iii) it might be in the interests of justice that the case proceed to trial notwithstanding the delay ([ International Capital ] at paras. 43-45 ). … [ 87 ] Justice Caldwell acknowledged that the analysis he was conducting in Harding was in relation to an application to strike, which clearly involves different considerations – and a higher threshold – than just the equitable considerations within an FPA proceeding.

Therefore, while the test and criteria from Harding and International Capital may be informative, they are not overly helpful for analyzing this issue under appeal. [ 88 ] In Russell , when dealing with delay as a concern for determining the valuation date for property, Jackson J.A. decided the issue by examining whether either party was blameworthy in the delay and whether either party had benefited from it. In that case, since both parties had dragged their feet, and since neither had benefited (or, rather, both had benefited equally) from the delay, it was a non-issue.

Regarding post-application farming income as an equitable consideration, Jackson J.A. used a similar analysis. The trial judge in that case had allowed the respondent’s claim to an unequal distribution of the post-application crops, but deducted a certain, unspecified amount due to her delay in pursuing the application. Part of the consideration appears to have been the fact that, because of this delay, the respondent had the benefit of exclusive occupation of the family home.

Justice Jackson chose not to interfere with this determination. [ 89 ] In Borland v Borland , 2019 SKQB 220 , Richmond J. determined that an unequal division was not warranted despite one spouse having to pay more of the marital debt than the other over the course of a lengthy delay, because both parties experienced benefits from the delay: the petitioner was allowed to reside in the family home and use the respondent’s equity in it, and the respondent was able to continue receiving his full pension. [ 90 ] Finally, in Dungey , the appellant argued that the trial judge erred by failing to consider the respondent’s delay in issuing the petition when choosing a valuation date for his corporation.

She submitted that the respondent had intentionally waited to file the petition, holding off until such a time when the shares of the corporation would not be worth as much. Justice Tholl rejected this suggestion, writing: [39] … [T]he trial judge did not find the details of either party’s delay to be particularly relevant to his decision. At best, it appears the relative level of fault was treated as a neutral factor, with neither party being assigned the blame.

Because both parties were partially responsible for the delay, the trial judge could not have erred by not considering the cause of it as a factor that would favour one date or

the other. However, the fact remained that almost five years had passed between the issuance of the petition and the commencement of the trial, during which time Mr. Dungey continued to solely operate and expand the business. The passage of time and what occurred during that period were factors the trial judge took into account as he was entitled to do: see Ackerman and Kassian . [ 91 ] These cases illustrate the need to connect the delay to a reason in equity to deny equality in the division of the asset or income.

For example, they show that it is appropriate to consider whether one spouse has intentionally delayed the matter in order to gain, or continue to receive, a benefit from possession of family property.

This benefit could be continued possession of the family home ( Russell , Borland ), not having to pay a debt ( Borland ), or changes in the value of shares ( Dungey ), among many other possibilities. [ 92 ] Overall, as I see it, the questions that must be asked are whether responsibility for the delay rests at the feet of the applicant (in this case, Colleen) and, if so, whether the delay allowed the applicant to unfairly benefit or cause the respondent (in this case, Kevin’s estate) to be unfairly prejudiced. [ 93 ] Here, the evidence would support a conclusion that Colleen was responsible for some, but not all, of the delay.

As Colleen notes, the parties had some prospect of reconciliation for a period after the petition was filed. It is also clear that Kevin’s death complicated matters even further. Moreover, Colleen has an explanation for much of the delay for which she is responsible. Indeed, in the Corrigendum at paragraph 26, the trial judge noted that Colleen’s efforts to advance the litigation were hampered by a lack of funds. [ 94 ] The evidence does not support an argument that the delay was a product of Colleen’s attempt to gain a benefit. At no point did she receive spousal support.

To be sure, Colleen was left in possession of the Hanley property, but this benefit is negligible compared to Kevin’s possession and use of the farmland, and she must account to the estate for the income that was generated from the rental of the Hanley property to third parties.

I also do not see how the estate suffered any detriment by reason of this delay. [ 95 ] The trial judge’s decision to deprive Colleen of any share of the post-petition farm income cannot be reconciled with his decision to allow the estate to share in a portion of the income that had been generated by Colleen from the rental of the Hanley property. The trial judge reached this conclusion without any further analysis, likely because Colleen was “prepared to allow 50 percent of this income to go to Kevin’s estate” ( Judgment at para 85).

As the treatment of the post-petition income generated by the family home is subject to the same principles as the treatment of the post-petition income generated by the farming operation, it is somewhat difficult to reconcile the trial judge’s distinct treatment of these two income streams. [ 96 ] It also cannot be said that Colleen’s delay was tactical or that she gained procedural or evidentiary advantage from it. The passage of time affected the presentation of both parties’ cases.

I also reject the estate’s argument that allowing Colleen to share in some part of the income that Kevin derived from the use of family property is a roundabout maintenance claim, since the labour factor is being deducted from the distribution in any case. Here, much like in Dungey , I see delay as “a neutral factor” (at para 39).

Considering all of this, I find it difficult to see how the passage of time should be seen as a reason to deprive Colleen of a claim to the income Kevin generated from the use of the family farm assets. [ 97 ] The trial judge’s findings relating to Kevin’s average annual farming income were the product of palpable error and this error played a significant role in his decision. As I have explained, the trial judge committed several errors of principle in his analysis.

Accordingly, his conclusion that Colleen should not share in the income generated by Kevin from his post-petition use of farm assets must be set aside. [ 98 ] The next question becomes what income Colleen should share in. Colleen agrees that it was appropriate for the trial judge to have considered only Kevin’s after-tax income. She objects to the deduction of post-petition penalties and interest, in addition to income tax payable, from the income generated from the use of family assets.

The estate did not strenuously disagree with Colleen that interest and penalties should not be deducted from the calculation of Kevin’s post-petition income. [ 99 ] Colleen challenges the trial judge’s specific findings of fact relating to Kevin’s income. She has presented alternative calculations for that income for the period of 2009 to 2015. However, the totals she presents for any given year differ by only a few hundred dollars from the findings made by the trial judge, as set out by him in paragraph 79 of the Judgment , and do not differ at all for several of those years.

I see no reviewable error in any of this. [ 100 ] Colleen also argues that the trial judge should have included Kevin’s 2016 income in his calculations. I see merit to this argument. [ 101 ] The trial judge stated that he had purposely left out of his analysis any consideration of Kevin’s 2016 farm income “because it becomes submerged in the deemed disposition and resulting tax consequences” (at para 82).

This comment was made with apparent reference to complications relating to the taxation of the farmland following Kevin’s death and, in particular, the capital gains taxes that became payable because of his death. However, as Colleen points out, Kevin died in October of 2016. The estate filed his personal tax return to the date of death, which included his farming income for 2016.

The complications that the trial judge referred to are found in the subsequent tax returns prepared in relation to the administration of the estate. [ 102 ] In these circumstances, I see no basis for the trial judge’s conclusion that the calculation of the farming income earned by Kevin, or the taxes payable thereon, was in any way affected by the consequences of his death.

In my respectful view, the trial judge should have taken Kevin’s 2016 income into account when addressing the post-petition income earned by Kevin from the use of the family property. [ 103 ] Although the trial judge did not make a finding of fact as to Kevin’s 2016 farming income, this Court has the benefit of the methodology used by the trial judge for the prior years. In substance, the trial judge accepted the information found on Kevin’s personal tax returns as prepared by the estate.

Employing the same methodology for 2016, I conclude that Kevin’s 2016 farming income totalled $209,707.00, from which must be deducted income taxes of $73,976.03, for a net amount of $135,730.97. [ 104 ] Kevin’s 2016 farming income must be combined with the amount that the trial judge found to have been earned by him between 2009 and 2015 in order to calculate Kevin’s total, after-tax, post-petition farming income. The sum of these amounts is $761,399.20. [ 105 ] One other adjustment must be made. Colleen is seeking a share in Kevin’s post-petition income, beginning in 2009 until 2016,

when Kevin stopped farming. However, she has shared in the Kevin’s 2009 income, through the award the trial judge gave to her from the sale of grain on hand as of the date of the petition. As I will explain in the next

section of these reasons, the trial judge determined this amount to total $57,728.00, which is but a few dollars different than the $57,832.04 which the trial judge found to be Kevin’s after-tax income for 2009. I will set this slight difference aside. The important point is that Colleen cannot share in the same income twice. I therefore deduct $57,832.04 from the calculation of Kevin’s post-petition income.

Kevin’s post-petition income that Colleen is entitled to share in through the application of the principles in Russell is, therefore, $703,567.79. [ 106 ] The further question becomes what share Colleen can claim from this total. It must, at its maximum, be limited to a portion of the income derived from Kevin’s use of the farming assets that constitute family property. She has no claim to the income that was generated by Kevin’s management and labour. She also has no claim to share in income that was derived from non-family property, such as the leased land.

All of this is muddied because of Kevin’s poor record-keeping. [ 107 ] However, the trial judge made a finding that assists in this regard. Perhaps contemplating the possibility that he might be found to be in error in his conclusion that Colleen should not share in any of Kevin’s post-petition farm income, the trial judge stated that if Colleen had presented her case in a more compelling way, he “would have only provided Colleen with 25 percent of the income to reflect the considerations set out in paragraph 64 above” ( Judgment at para 84). I have reproduced paragraph 64 earlier in these reasons.

In that paragraph, the trial judge noted that any claim by Colleen to a percentage share in the farm income based on Kevin’s use of family property “would take into consideration Colleen’s limited role in the farming operation, the passage of time to get to trial, Kevin’s labour and management, and the effect of the loose partnership with Norman”.

I take the latter comment to also account for the fact that Colleen has no claim to a share of income that was derived from non-family property, which the trial judge recognized at paragraphs 61 and 82 of the Judgment. [ 108 ] Other than delay, which I have already discussed, the considerations that the trial judge points to – namely, that Colleen had a limited role in the farming operation, that account should be taken of Kevin’s labour and management, and the fact that Kevin farmed with Norman and used non-family property to generate income – are central to the determination of an appropriate portion of income in which Colleen should share.

The effect of the trial judge’s determination to allocate 25 per cent of the post-petition farm income to Colleen is that 75 per cent of that income is left in the hands of the estate.

Attributing to Kevin an equal 25 per cent share of the income for the use of the family assets, this means, in effect, that the estate retains 50 per cent – half of the total income – as payment for Kevin’s labour and management, as well as for the use of non-family assets and Norman’s contributions to that income. [ 109 ] All of this serves to convince me that, even though the trial judge factored the “passage of time” into his analysis, this Court should respect his contingent conclusion as to what portion of the post-petition farm income Colleen should be entitled to share in.

I would therefore fix the amount of farm income that Colleen should receive at 25 per cent of Kevin’s post-petition, after-tax farm income of $703,567.79, that is, $175,891.95. 4. Conclusion on Colleen’s entitlement to share in the post-petition farm income [ 110 ] For the reasons I have given, the trial judge erred in not accounting, in the division of family property, for the fact that Kevin had derived a benefit that Colleen did not otherwise share in from his post-petition exclusive use of family farm assets. These facts entitle Colleen to an adjustment of $175,891.95 in the division of the family property.

D. Did the trial judge err in his determination of the value of grain on hand as at the date of the petition? [ 111 ] As noted earlier, the issue here is the value of grain on hand as of the date of petition. At trial, the parties agreed that this value should be calculated by the trial judge as an ex post facto determination as to the net proceeds from the sale of the grain. This approach required the trial judge to determine Kevin’s farming income and expenses.

The trial judge’s task was greatly complicated by the fact that Kevin had not filed tax returns for the relevant years and that this had to be done posthumously by the estate. [ 112 ] At trial, the estate relied on these tax returns, with some adjustments presented during questioning, as the source for determining the net income derived from the sale of the grain on hand as of the date of the petition.

Colleen attacked the accuracy of the tax returns and presented alternative statements of Kevin’s income and expenses for the years after the petition date. [ 113 ] After summarizing the evidence relating to all of this, the trial judge agreed with the estate’s approach, stating as follows in the Judgment : [35] In any event, I am not prepared to accept Colleen’s argument that Norman filed, in essence, an improper return. There is no evidence by way of accounting opinion, documentation or otherwise that would bring this into contest.

I am prepared to accept Norman’s updated evidence that after appropriate expenses were backed out, the value of the 2009 stored grain was $57,728.00 and not the $179,122.98 claimed by Colleen. This conclusion is supported to a degree by Kevin’s sworn property statement indicating his estimation of the gross value of the grain on hand at $139,839.53. [ 114 ] Colleen challenges the trial judge’s findings.

She concedes that it was appropriate for the trial judge to make “some deductions” for reasonable labour and expenses, but she says that the “trial judge failed to scrutinize the legitimacy of farming income expenses”. [ 115 ] In this case, I can see no basis to conclude that the trial judge erred in his factual findings. In substance, all of Colleen’s arguments reduce to an invitation for this Court to reweigh the evidence that was before the trial judge.

That is not this Court’s role. [ 116 ] I would, accordingly, reject Colleen’s submission that this Court find that the trial judge erred in determining the value of grain on hand as at the petition date. E. Did the trial judge err in how he attributed income from the rental of the Hanley property? [ 117 ] After Kevin died and prior to trial, the Hanley property was leased by Colleen for periods of time. In total, she received $26,400.00 in rental payments. Because this was income generated from family property, both parties agreed that Colleen should account

for it in the division of family property in accordance with the principles established in Russell and its progeny. [ 118 ] The trial judge addressed this issue in the Judgment as follows: [85] … The house was rented for 22 months at $1,200.00 per month from 2016 to the date of the trial. Colleen is prepared to allow 50 percent of this income to go to Kevin’s estate. It will be adjusted accordingly. In the

summary table reproduced at paragraph 20 of these reasons, the trial judge then recorded an adjustment, showing that Colleen was in receipt of $13,200.00 for rental of the Hanley property. [ 119 ] Based on its review of the Judgment , the estate concluded that the trial judge’s approach of only accounting for half of the rental income in his table of family property embedded a mathematical error.

More specifically, the estate’s view was that, to give effect to Colleen’s concession that half of the rental income should go to the estate, the trial judge should have recognized that she was in receipt of the total net rental income and not merely half of it. Accordingly, it brought the matter back to the trial judge in its Rule 10-10 application. However, the trial judge refused to address the estate’s arguments, concluding that they were “a matter for the appellate court” ( Corrigendum at para 12).

The estate now brings this issue forward in its appeal. [ 120 ] Colleen agrees that the trial judge erred when he credited her with only half of the rental payments. I see the same error. Colleen has received the full benefit of the rental payments. In order for the estate to receive a half-share, the amount recorded on the table should be the full amount of $26,400.00. [ 121 ] The estate also argues that the trial judge erred by not treating payments made by the estate for property taxes and insurance due on the Hanley and Yuma properties as an advance to Colleen.

The trial judge refused to account for the payments in relation to the Hanley property, concluding that it was “not an advancement on family property that benefited Colleen solely” (at para 89). It is true that, once account is taken of all of the rental payments in Colleen’s hands, the estate will share in all of the income generated from the leasing of the Hanley property. However, the effect of making these payments is to reduce the value of family property in the estate’s hands. Moreover, one of the payments was in relation to the Yuma property, which benefited only Colleen.

Accordingly, an adjustment for these payments must be made to the value of the family property remaining in the estate’s hands to reflect these payments made by it. According to paragraphs 88 and 89 of the Judgment , these unaccounted-for payments total $12,167.72. [ 122 ] While Colleen conceded that she must be credited with receipt of 100 per cent of the rental payments, in oral argument, she pointed out that she had paid some expenses associated with the home.

She submitted that these should be deducted from the gross rent before an equal sharing of the rental income is calculated. [ 123 ] In principle, I would agree that it would be appropriate to deduct from the gross rent any expenses incurred to earn it, and the record, although thin, might support some small deductions on this score. However, in the circumstances of this case, I decline the invitation for this Court to attempt to quantify these expenses. The trial judge did not make any finding that would support such a deduction. The reason for this is apparent from the record.

At trial, notwithstanding Colleen’s evidence that might have supported an adjustment on this basis, she asserted that there were no such expenses. In this regard, her trial brief stated as follows: 107. Colleen agrees the rental income from the family home is subject to the same unequal division considerations as farming income.

Given that there were no expenses for the rental property, one half of rent paid amount is an unequal division in favour of the Estate. (Emphasis added) From this, I conclude that not only did Colleen fail to ask the trial judge to find what rental-home expenses were incurred, but she invited him to conclude that these expenses did not exist. [ 124 ] Given the concession made by Colleen in her trial brief, it is impossible for me to see palpable and overriding error in the trial judge’s finding that there were no expenses to deduct from the gross rent received from leasing the Hanley property.

In reaching this conclusion, I have set to the side the principles that come into play when a party takes a position on an appeal that is different than that taken at trial. Those provide an additional reason to deny Colleen’s appeal under this head. [ 125 ] In conclusion on this issue, the trial judge erred in how he attributed income from the rental of the Hanley property. The division of family property must account for the fact that Colleen received 100 per cent of the Hanley property rent payments, that is, $26,400.00. F. Did the trial judge err in how he valued Crazy Cactus? 1.

The issue [ 126 ] Colleen opened the Crazy Cactus restaurant in 1996. She owned all of the shares and was the sole director of the corporation through which the restaurant operated. [ 127 ] Neither Colleen nor Kevin put a value on these shares in their property statements. Colleen sold the assets of the corporation in 2012 for $248,000.00, with an additional $2,740.00 for inventory. The total figure was rounded to $250,000.00 in the parties’ trial agreement with respect to the valuation of family property.

Nothing in this appeal turns on this difference. [ 128 ] Where family property includes a corporation or partnership, “it is well established that a party’s interest in those entities is valued and not the entity’s individual assets” ( Rankin at para 51 , referring to Ackerman at para 39 ).

Therefore, the parties properly proceeded at trial on the basis that the mere fact that Colleen had been able to sell Crazy Cactus’ assets for $250,000.00 did not determine the value of the shares of the corporation that held that business. [ 129 ] The sales proceeds were deposited into a bank account held jointly by Colleen and Kevin, but principally controlled by Colleen. Records that would have allowed this money to be traced were imperfect or non-existent. However, some other documents existed, and

testimony was given by Colleen and others, touching on what became of these monies. [130] Jordan Anderson, a chartered professional accountant who testified as an expert on behalf of Colleen, reconstructed theaccounting for Crazy Cactus and filed its tax returns some years later. He testified that, while the corporation’s assets sold for$250,000.00, the company also had liabilities that exceeded this amount.

Testimony in relation to the business was also given by Colleenas well as Bo Clegg, the purchaser of the corporation’s assets. [131] The estate’s position at trial was that the shares had some value, as evidenced by the $250,000.00 received from the sale of itsassets. Colleen took the position that, due to tax liabilities she faced as a director and shareholder of Crazy Cactus, the shares not only hadno value, but they had a negative value.

She asked the trial judge “to subtract $225,000.00 from the overall family property held by [her]”to account for the supposedly sub-zero value of the corporation (Judgment at para 46). 2. The Judgment [132] The trial judge described the “short” of Mr. Anderson’s testimony to be that “the company was not in a positiv

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