Focus On

EQUALIZATION OR DIVISION - Company shares, stock options - Valuation date

Monday, November 18, 2019 @ 9:09 AM  


Lexis Advance® Quicklaw®
Appeal by the husband and cross-appeal by the wife from trial judgment respecting division of property and spousal support. The husband argued the trial judge erred in choosing the application date instead of the adjudication date for determining the value of shares. In the alternative, he argued the trial judge erred by failing to apply a minority shareholder discount to the share valuation and by failing to consider the tax implications when he determined the value of the husband’s business interests. The husband argued the trial judge erred in the duration of spousal support and the review provision. The wife argued the trial judge erred by attributing a portion of the business interests as property in her possession when all the business interests should have been found to have been in the husband’s possession. The parties married in 2001 and separated in 2011 after cohabiting for 13 years. The wife worked full-time at the start of the relationship but began cutting her work back substantially in 2003 because of her ongoing health issues. She was completely financially dependent on the husband for the last eight years of the marriage. The husband was the general manager of a glass company, Dynamic, he co-founded in 2001. The husband and wife also owned shares in two businesses. At the time of trial, the husband and the co-owners of Dynamic were involved in litigation. The trial judge determined the appropriate valuation date for the Dynamic shares was the application date. While the trial judge recognized there was a decrease in the value of Dynamic between the application date and the adjudication date, he found he could not conclude there was a noteworthy decrease in value or make a likely attribution of any such decrease. The trial judge found the wife was entitled to spousal support on a compensatory and non-compensatory basis until 2024. The trial judge ordered a review of the spousal support in 2023 upon application of either party.

HELD: Appeal allowed in part. Cross-appeal allowed. The trial judge did not err in determining the application date was the appropriate date for valuation of the assets or in determining there should not be an adjustment for the minority shareholding or potential tax consequences. There were ample grounds for the trial judge to reject the assertion that the amount received in the Dynamic settlement represented the fair market value of the Dynamic shares as of the adjudication date. There was no reliable evidence of the value of Dynamic’s shares as of the adjudication date. While there was evidence that some factors beyond the husband’s control caused a decrease in the value of Dynamic, there was also evidence that he remained firmly in charge of the business for three years after the application date. There was little evidence supporting the assertion that tax consequences might materialize, and the remaining evidence pointed to the absence of tax consequences. The trial judge did not err in determining the duration of spousal support but erred in imposing the review provision. The trial judge also erred in finding a portion of the business assets were in the wife’s possession and thus understated the amount owed by the husband to the wife. The wife never had possession or control of her share of the value of the businesses. While business interests were jointly owned, they were in the husband’s sole possession and control and he used that control to appropriate their entire value to himself. The property judgment was thus varied to $346,981. The trial judge correctly used a 13-year relationship as the basis for determining the appropriate range under the Spousal Guidelines. The duration provided by the trial judge, given the wife’s permanent inability to work, was within the acceptable range for duration. The trial judge fully considered the parties’ circumstances and provided cogent reasons for his determination of the appropriate duration. The trial judge erred in making the review provision. There was no uncertainty regarding the wife’s health, ability to work or likelihood of attaining self-sufficiency. The uncertainty regarding the husband’s retirement date was not a genuine issue and did not constitute a material uncertainty.

Kassian v. Kassian, [2019] S.J. No. 407, Saskatchewan Court of Appeal, R.G. Richards C.J.S., B. Barrington-Foote and J.A. Tholl JJ.A., October 15, 2019. Digest No. TLD-November182019001