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MARITAL PROPERTY - Equalization or division - Asset types - Company shares, stock options

Friday, January 29, 2021 @ 6:02 AM  

Lexis Advance® Quicklaw®
Appeal by the husband from a 2017 trial judgment respecting division of property and spousal support. The trial judge directed him to make an equalization payment of $863,480 and $8,250 per month in spousal support for an indefinite duration. The parties married in 1986 and separated in 2015. The wife, 55 at trial, worked throughout the marriage but retired in 2011 due to ill health. The husband was the managing partner of the Virtus group of companies until he accepted a buyout in 2014. At the time of trial, the husband, 58, worked as a consultant for Virtus and did merger and acquisition consulting work through his firm Transitus. The parties were unable to agree on spousal support and the share value of DFGC which consisted of several companies. The husband argued the trial judge erred in how he dealt with the pre-tax values for the companies that formed the DFGC. He also argued the trial judge erred by offsetting the amount the husband paid towards the parties’ debts and the costs of the matrimonial home against spousal support rather than by an unequal division of property. The husband disputed the trial judge’s imputation of income of $45,000 to the wife and $281,803 to the husband. The husband argued his only certain income was his $150,000 consulting fee as per the Virtus agreement, possible bonuses under the consulting agreement and $9,500 for corporate directorships. The trial judge also concluded the husband had an earning capacity of additional $77,000 and imputed that amount of income to him. The trial judge declined to deduct any expenses from the imputed income because he concluded Virtus was responsible for expenses under the contract.

HELD: Appeal allowed in part. The trial judge erred in his assessment of the pre-tax value of DFGC. The trial judge erred by either ignoring or misunderstanding the evidence about the refundable dividend tax on hand. The amount of $75,161 should thus be deducted from the Plainsman entity value, leaving it with a final pre-tax value of $376,077. The trial judge did not err in allocating a nil value to the intercompany loan. The trial judge also erred in the double counting of the Machetoso entity. The before tax value of DFGC was thus adjusted to $2,381,872. The trial judge did not err in taking tax efficiencies into account. The 50 per cent tax discount for contingencies imposed by the trial judge was a discretionary decision that was consistent with the jurisprudence. The trial judge explained why an unequal division was not appropriate in the circumstances but found a way to achieve an equitable resolution through spousal support. There was no basis for intervention. The trial judge did not err in concluding that the wife could not engage in full-time employment due to her health issues and in imputing an annual income of $45,000 to her. The trial judge erred in imputing $77,000 to the husband for non-existent consulting work or additional work for Virtus. There was no evidence that Virtus had work for him beyond the required 350 hours. There was no evidence the husband had any sort of consulting business outside of his Virtus consulting agreement and Transitus. The trial judge also misapprehended the evidence about the business expenses in concluding that Virtus was responsible for all of them. The best measure of the husband’s income, on a go-forward basis was the evidence about his known sources of income resulting in an income of $204,803. Based on the wife’s imputed income of $45,000, spousal support of $6,500 per month was awarded.

Frondall v. Frondall, [2020] S.J. No. 473, Saskatchewan Court of Appeal, L.M. Schwann, B. Barrington-Foote and J.A. Tholl JJ.A., December 9, 2020. Digest No. TLD-January252021009