2008 BCSC 306 D. v. D.

Before: The Honourable Madam Justice Humphries

Reasons for Judgment

Counsel for the plaintiff	D.B. Chiasson
Counsel for the defendant	A.E. MacLennan, Q.C.
Date and Place of Trial:	October 15 – 19; 22 – 24, 26, 29 – 31; November 1, 2, 5 – 7; 13 – 15, 2007
	Vancouver, B.C.

[1] The plaintiff, Ms. D., 37, and the defendant, Mr. D., 40, have cohabited since 1991, had their first child in 1994 and married in 1995. They have a second child, born in 2000. They separated on May 15, 2003 when Ms. D. left the matrimonial home. The parties have agreed that Mr. D. will have sole custody and primary residence of the two children, and Ms. D. will share guardianship and have supervised access.

[2] This action concerns the determination and division of assets, and child and spousal support. Both parties want a divorce, and the requirements for granting a divorce are satisfied, but both counsel have requested that there be a delay in granting the order for divorce so the tax consequences of any orders respecting the division of assets can be dealt with.

[3] An order was made earlier in the proceedings to designate this style of cause by initials. I vacated that order, but after hearing the evidence, I am of the view that the interests of the children are not served by having their parents identified by their full names in this judgment, and in fact, public disclosure of this family’s personal circumstances and history would be harmful to the children. A perusal of the evidence as recounted in these reasons will disclose the court’s concerns.

I. Financial Background

[4] At the time the parties met in 1991, neither had any assets or income to speak of. Ms. D., originally from Ontario, was working at a restaurant in Whistler, B.C., and Mr. D. was a student at Dalhousie University, spending some time in Whistler and working at a construction job. The couple returned to Halifax where Mr. D. resumed his schooling. Ms. D. wished to return to Ontario and Mr. D. went with her. They broke up briefly in late 1992, reconciled in early 1993, and returned to Nova Scotia where their first child was born in 1994.

[5] Ms. D. comes from an exceedingly wealthy family. Although she had been cut off from financial support at the time she met Mr. D., she began to receive funds from her mother, GR, upon the birth of the first baby.

[6] Meanwhile, Mr. D. had resumed his program for a degree in recreational studies at Dalhousie University, but quit school in the spring of 1994 with only his practicum outstanding. He had set up a practicum plan with a supervisor who went on maternity leave and was replaced by an inadequately trained person who was unable to provide the experience Mr. D. needed. Troubles arose and he left the program uncompleted. He considered completing it the next semester, but by this time the couple had had the baby. Ms. D. had been very ill for months during her pregnancy, and after discussing their situation with GR, the couple returned to Whistler in the fall of 1994. Meanwhile, GR had found a house for the couple in Whistler and gave them the down payment of $60,000. The couple married in 1995 and have lived in the Whistler area ever since. Mr. D. has never completed his university degree.

[7] Mr. and Ms. D. have lived solely on dividends declared by GR since their marriage. Neither has worked outside the home, at least in any venture that made money. The corporate structure through which the D.’s receive dividends is complicated and for their purposes, controlled entirely by GR.

[8] During their respective testimony, it became apparent that neither Ms. D. nor Mr. D. understood the complications of the family finances. A business valuator was called as a witness by the plaintiff, but his role was limited to assessing the rateable and fair market values of the various share holdings, which appeared to be of little interest to either of the parties by the end of the day. He provided a very brief overview of the corporate structure without reference to how the mechanics of the payments to the D.’s actually worked, but the little he did provide was helpful. The main evidence concerning the interrelationships of the companies, the provision of loans, and the payment of dividends came from Ms. D.’s accountant, MS, who had assumed control of administering a budget for each of the parties in 2004, a year after their separation. Unfortunately, MS had such an antipathy to counsel for the defendant and to Mr. D., and such sympathy with Ms. D., with whom she sat through the entire trial, that she was defensive, argumentative, and reluctant to explain things clearly or to be forthcoming with information under cross-examination. As well, counsel for the defendant objected to much of MS’s evidence on the basis that MS had no personal knowledge of the documents upon which she had compiled her summaries and statements. Whatever the cause or justification for either position, it made my task of trying to understand the financial details, the mechanics of which should not have been contentious, somewhat difficult.

[9] Volumes of documents were put before me, some referred to briefly, many not raised again. Little argument was addressed to the details or to the documents, with the exception of a few. Against this unsatisfactory evidentiary background, I have tried to gain an understanding of the complex interrelationships and various uses of the corporate holdings and dividends, at least enough to determine the issues at trial, which, it will become apparent, may well be of only academic interest at the end of the day.

[10] The underlying source of the family wealth is a very successful operating company. As the valuator put it: “[the operating company] is the primary company and the primary source of value which flows up to the shareholders through a complex corporate structure.” The corporate structure permits Ms. D. and her siblings to enjoy some benefit from the ongoing success of the operating company while ensuring that dividend income would not be derived by them unless their mother, GR, wanted them to receive it.

[11] In very simple terms, the operating company is controlled by GR, along with her sister and a niece, who own shares in various companies which in turn own shares in a second layer of companies, which in turn own shares in a third layer of companies, some of which are held personally by GR herself. Because of the interrelationship between the layers of companies, they all have some relevance to Ms. D.’s financial situation, but for the purposes of this action, it is only the third layer that is of concern. The valuator was required to assume a share price for the operating company in order to come up with rateable values for Ms. D.’s shares in the third layer of companies, given that the value flows through the layers of companies to the ones in which she holds an interest.

[12] The third layer of companies, 412*** Ontario Ltd. (“412”), and 812*** Ontario Ltd. (“812”), are the vehicles through which GR declares dividends to her four children, including Ms. D. Each sibling owns 100 common shares of each of those companies, and just slightly more than 1% of the votes in 412. GR holds the preference shares in 412 and controls 95.96% of the votes. GR holds all of the special shares and all of the votes in 812. Dividends in each company are declared at the sole discretion of GR, and need not be distributed equally among the siblings.

[13] To date, the family unit of Mr. and Ms. D. has received dividends three times a year, amounting to approximately $300,000 – 320,000 annually. The dividends are declared to Ms. D. and have always been deposited into their joint account at Scotiabank.

[14] One of the main purposes of the complicated corporate structure is to avoid paying income tax. In keeping with this goal, Ms. D., who, because of a longstanding marijuana addiction, was unable to obtain life insurance to cover eventual inheritance tax consequences, entered into an estate freeze in 2001. She transferred 80% of each set of her common shares in 412 and 812 into a company named 2002*** Ontario Ltd. (“#2002”), receiving preference shares in exchange with a total redemption value, according to the current financial statements of the company, of $13,560,886. She retained 20% of the shares in 412 and 812 in her own name.

[15] The Class A common shares of #2002 are held by a family trust which Ms. D. created for the benefit of her children. The Articles of Incorporation for #2002 provide that no dividends are payable to the common shareholder until the preference shares are all redeemed. According to MS, no dividends have ever been declared for the benefit of the common shareholder, which is the trust.

[16] Mr. D. testified that the couple was reluctant to enter into the estate freeze, not completely understanding it, but they were assured that GR had done the same thing on an earlier occasion and that it would secure their future. Mr. D. said he and Ms. D. discussed it as securing both their and their children’s future. Ms. D. also testified to her lack of understanding and her reluctance to enter into the freeze, and said she insisted on keeping 20% of the shares of 412 and 812 in her name because of her suspicions about it.

[17] When GR declares a dividend from 412 or 812, 20% goes to Ms. D. personally and 80% goes to #2002. According to MS, #2002 can retain the dividend, pay it out as a taxable dividend, pay it out as a capital dividend, or allow the redemption of preference shares. Throughout the marriage, #2002 has regularly paid the money out as capital dividends, and Ms. D. has occasionally redeemed preference shares. The D.’s have used all of the dividends as they were declared, whether they came to Ms. D. directly or through #2002. By filtering 80% of the dividends from 412 and 812 through #2002, and out as capital dividends, there is a substantial tax advantage.

[18] Each of Ms. D.’s preference shares in #2002 is stipulated to have a value of $1,000. To date, she has redeemed preference shares in #2002 five times: 58 in 2002 before separation; and 62 in November of 2003, 31 in September of 2004, 30 in December of 2005 and 65 in September of 2006, all after separation. On December 17, 2004, a restraining order with respect to the disposal of family assets was granted on the motion of Mr. D. MS was apparently of the view that the restraining order did not apply to the redemption of preference shares.

[19] At the time of the estate freeze in 2001, Mr. D. was made a director of #2002 and a trustee of the children’s trust, along with Ms. D.’s brother and one of the family’s financial advisors from Ontario. In October of 2004, following the separation of May 15, 2003, Ms. D. removed Mr. D. as director of #2002 and as trustee for the children. She stated at trial that she intends to add her sister to the list of trustees, but she also stated that the best thing for her children would be to cut them off and make them fend for themselves, something she said she may do in the future.

[20] In addition to the dividends which flow to the family unit from 412 and 812, Ms. D. has two other main sources of funds available to her. The first is a trust created for her by her grandmother’s will, called the EGD Trust, which is invested with a management company called ”B. Ltd.”. It appears that Ms. D. was also entitled to a sum of money under the will, perhaps as much as $100,000, when she reached 30. Although neither Mr. D. nor Ms. D. was clear about this money, it seems that it came to the family and was used for family purposes. The remainder of the inheritance, that is, the EGD trust, became accessible to Ms. D. when she reached 35, which was after separation, although there has been no use of the “B. Ltd.” account, which is currently worth about $240,000.

[21] The second source of funds available to Ms. D. is shareholders loans from 412 and T. Holdings Ltd/T. Trust, a trust which was set up by Ms. D.’s father, into Ms. D.’s company, L. Productions Inc. (“LPI”). According to Ms. D., each of the four children of GR was provided with money to start a business, although the youngest daughter decided not to accept the money. Ms. D. and her two brothers each received a loan of $1.7 million; each of them invested unwisely, according to Ms. D., and the loans were increased for all three by another million dollars. At the time of this action, various corporate manoeuvres had taken place to wipe out the brothers’ debts, but LPI’s loan of $2.7 million remains unpaid. It is understood, however, that if a corporate reorganization can be accomplished to eliminate or minimize tax consequences, LPI will not have to repay that money. LPI holds assets worth approximately $900,000, which leaves the company in a deficit position in the amount of $1.8 million.

[22] Although originally created as a production company for Ms. D.’s musical aspirations, LPI has become the vehicle for Ms. D.’s unsuccessful ventures into the business world. In 1996, hoping to follow in the family footsteps into a business, Ms. D. bought a large lodge north of Whistler. Ms. D. attempted to run a restaurant on the property for a couple of years but lost a great deal of money and suffered some serious setbacks through fire and flood. She entered into various other arrangements with leaseholders but nothing was successful. At present, she lives in the lodge and has hopes of making it a going concern. The lodge, together with another piece of recreational property on Lillooet Lake, comprise the assets of LPI.

II. The marriage and separation

[23] The couple lived in Whistler B.C. throughout their married life. In 1998, Ms. D. decided the house that her mother had helped them purchase was no longer suitable and put in an offer on another home on Alta Lake. Ms. D. testified that this move was made without obtaining family approval. The couple moved into that home and it is the present matrimonial home, where Mr. D. lives with the children. It is worth approximately $1.5 million; the mortgage is approximately $.5 million.

[24] Mr. D. testified that it was only upon going through the estate freeze in 2001 that the couple realized the value of their wealth. He hoped to become more financially responsible. He asked a friend, who was also an investment advisor with a reputable company, to assist the couple in some financial planning. After ascertaining that retirement funds were not a problem, given the preferred shares in #2002, and that the children were taken care of through the trust, the advisor discussed investment options with the D.’s. He suggested they could either save $1,000 a month, or take out a loan on a line of credit and invest it, covering the interest which would be tax deductible. The couple decided to take out a line of credit (“LOC”) with Scotiabank. It was secured on their house. The investors group then invested the money in mutual funds. Ms. D. was a full participant in this decision, although she said many times during her testimony that she was too passive and trusting, and she expressed great scepticism about the investment advisor’s good faith. Although this investment seemed to be a significant indicator to Ms. D. of Mr. D.’s untrustworthiness and financial irresponsibility, it appeared to be a legitimate attempt to put some structure into their financial situation and ensure they saved some money every month.

[25] Ms. D. gave a series of answers, mostly non-responsive, to whether the two discussed their future security in terms of the preference shares. She said maybe Mr. D. did, but there was no need for her to do so; she was “covered.” She said as long as Mr. D. was married to her, he was okay, but the “ride is now over for him”, and he has to save. However, she did agree that the whole purpose of the preference shares was to provide for the future, but said it all depended on whether she and Mr. D. were married. She agreed that Mr. D. had her “vague approval” for his financial planning, but continually evaded answering the question about planning for future security by saying it was all up to her mother who could cut them off at any time. She said Mr. D. had been trying to secure his future, based on a delusion of comfort and entitlement, but she was on the way out of the marriage. She mentioned Mr. D. and the investment advisor getting their “paws” on her money, and said the advisor took $15,000 of her money for nothing. These latter references show that Ms. D. was conflating this conversation in 2001 with a later transaction that took place just at the time of separation in 2003. I accept Mr. D.’s evidence, together with the investment advisor’s evidence, that the couple were both proceeding on the basis, expressed to the advisor in 2001, that there was no need to provide for retirement because their future financial security was assured through the preference shares.

[26] According to Ms. D.’s testimony, Mr. D. lived a wastrel’s life, spending great amounts of money needlessly and acquiring assets just to keep up his status in Whistler and ensure he would have something to claim when the marriage ended, notwithstanding that Ms. D. ended the relationship unilaterally and without warning. She alleged that Mr. D. let the household fall into disarray and disrepair, and that he let the bills pile up until the couple was besieged by collection agencies.

[27] Ms. D. put forward as an example of Mr. D.’s irresponsibility several occasions on which she said he had let the house run out of propane, thus putting the family at risk. Mr. D. admitted the propane had run out on a few occasions – two were his responsibility, one was a billing mistake, and one occasion was a result of Ms. D. not realizing how the thermostat worked. He testified that the situation was quickly rectified on all occasions except one, when they spent the weekend at the Chateau Whistler, which the children treated as an adventure.

[28] Ms. D. was particularly critical of the purchase of a Road Trek van in 2001, which she claimed the couple paid too much for, through the fault of Mr. D. The purchase price was approximately $79,000, but the couple paid only $10,000 down and opted for a five year renewable conditional sales agreement with low monthly payments. Ms. D. kept the vehicle upon separation and uses it herself; the value has been reduced through hard use and through several accidents that Ms. D. has had while driving it. In 2006, after separation, Ms. D. refinanced the loan for the van without notice to Mr. D., and because of the extended payment plan that they both decided upon, the couple still owes $67,780 on it.

[29] The couple bought another vehicle, a Mini, in 2001. Mr. D. also purchased a truck. Each of these vehicles has an estimated worth of $15,000.

[30] I will mention at this point that a great deal of the trial was taken up with a recitation by Ms. D. of the shortcomings of Mr. D., and his response to her innumerable allegations respecting his irresponsibility, greed, false sense of entitlement, wastefulness, and emotional cruelty. Both parties gave many examples of their respective views of each other’s financial extravagance.

[31] By and large, I found Mr. D. to be a straightforward witness. However, Ms. D. was prone to exaggeration, emotional overlay, and running commentary which was difficult for counsel or the court to control. If she was reined in on one subject, she quickly took off at another. Ms. D. did not treat the witness box as a place in which to recount relevant facts having regard to her oath, but as a kind of personal podium from which she could throw out any passing impressions she had, together with criticisms and speculation about Mr. D. and his counsel, regardless of their significance or consequences. Her evidence was given without regard for chronology or relevance to the actual question she was asked, thus making it difficult to sort out sequences of events. She frequently gave a series of different answers to a question, often contradicting herself without apparent concern. In short, where their evidence conflicts I prefer that of Mr. D., unless otherwise stated.

[32] The evidence as a whole disclosed that Mr. D.’s spending was not particularly heavy, certainly not in the context of the dividends the couple were confident of receiving. He bought a skidoo, and Ms. D. herself wanted one, so they bought a second one. He had a series of mountain bicycles, some worth very little, and a good one worth about $3,000. He joined a golf club at Ms. D.’s insistence, rather than keeping on with the arrangement he had with the club supervisor to do volunteer work in exchange for playing privileges. Mr. D. testified that both their children and the children’s friends enjoy using the club, and he frequently takes them there. Mr. D. has also always had a ski pass. All members of the family, including Ms. D., participate in skiing to greater or lesser extents.

[33] Mr. D. has indeed pursued recreational activities, but most of his married life has been spent caring for the children, as the couple agreed that Ms. D., who had little interest in assuming the traditional tasks of motherhood, should be free to pursue her dream of a music career and running the lodge. Mr. D. had no direct role in the restaurant, but would bring the children up to the lodge, cut the lawns, and do the recycling and odd jobs.

[34] Mr. D. testified that he handled the household budgets based on a system suggested to him by Ms. D.’s brother, SR, after a discussion in 2001 in which Mr. D. mentioned how difficult it was to control household spending. SR showed Mr. D. how to set up online banking and explained the family system of accounts. When the dividends came into their joint GAIN account, Mr. D. put enough into another account to handle the mortgage and other monthly expenses, and put another amount into a third account that could be accessed by bank cards. He testified that he did this in order to control Ms. D.’s spending, and would top up the bank card account as needed. Ms. D. of course had access to the larger GAIN account, but that account was not readily accessible with a bank card. Mr. D. testified that he ensured they were never without money between dividend payments.

[35] Mr. D. also handled the routine household chores, although Ms. D. would do some cooking and liked to organize the house, following the lead of Martha Stewart. Ms. D. testified that she lost her motivation for household organization when Ms. Stewart was sent to jail.

[36] There was disputed evidence about the amount of money Mr. D. brought into the relationship through the cultivation of marijuana, which, according to Ms. D., was an ongoing and preoccupying activity, and his only contribution to the family funds. On the other hand the evidence was clear that Ms. D. herself actively encouraged anything that would provide a regular supply of marijuana. In my view, this issue, although apparently looming large in Ms. D.’s mind from the amount of time she spent on it during her evidence, was ultimately irrelevant to the issues I have to decide.

[37] Ms. D.’s spending through LPI, was, to put it mildly, outrageous, as was the transparently artificial characterization of many items and trips as business expenses. Ms. D. has invested a large amount of time and money into a singing career that has so far not been successful. During the marriage and after the separation, while Mr. D. was taking care of the children, Ms. D. often left Whistler for extended periods to pursue adventures, taking friends along and writing the expenses off as business expenses on the understanding that the trips and connections she thought she was making would somehow assist in her musical career when it gets established. In addition to these trips, very large sums of money were spent on an unusual variety of projects, all of which were unsuccessful.

[38] Immediately upon taking over the lodge, Ms. D. spent over $30,000 on a festival, which made no profit. She also produced a music video, three CD’s of her songs, and operated a t-shirt operation, which she described as “botched.” On another occasion, Ms. D., over Mr. D.’s objections, invested in a tantric sex video and tantric pillows by giving the “film maker” $110,000. The money was never seen again; neither was the video. On another occasion, she invested $90,000 in an old convent in Nelson, B.C., which she called “the TempL,” where she and her friends could ring temple bells and wait for some sort of “holistic convergence.” She also paid about $7,000 for a trip to Egypt for herself and a hula hoopist whom she intends to use in her future musical act. Upon their return from Egypt, she gave the hoola hoopist another $8,000. She gave other large sums of money to a variety of people whom she hopes will help her eventual career. All of these amounts were written off as business expenses by Ms. D.’s accountant, MS, who, according to Ms. D., made the relevant decisions for tax purposes at the end of the year.

[39] In the months prior to separation, in March and April of 2003, Mr. and Ms. D. met with a business planner and the same investment advisor who had advised them previously to discuss future plans for the lodge. The investment advisor and the business planner are husband and wife.

[40] Various options were discussed, but Ms. D. was set on re-establishing it as a restaurant with other amenities attached. Ms. D. asked the business planner to look into a certain restaurant in Chilliwack that might be a worthwhile partner. The business planner did, and formed a positive opinion of the Chilliwack operation, which was well run and thriving. However, when she saw the proposal they put forward, she advised Ms. D. against it, and Ms. D. ceased to deal with her. Ms. D. entered into an arrangement with the Chilliwack business, but the venture did not succeed.

[41] In April and early May of 2003, Ms. D. began taking steps to get a large advance of money from T. Holdings Ltd., money which would equalize her business loans with those given to her brothers, and the investment advisor was working with her to that end. The firm that controlled the family money in Ontario was, according to the advisor, reluctant to simply send the money to Ms. D., as LPI had already used up $1.7 million at that point. They agreed to send $275,000 to the investment advisor’s group on Ms. D.’s behalf, having received written instructions from Ms. D. and been told that she had in mind a long term investment, using only the interest on the investment, 12%, every month. As well, the advisor had arranged for the repayment of a loan of $120,000 which Ms. D. had made to a local private school, and this money, along with the interest on the $275,000, would finance her operation on an ongoing basis. Between the request for the money on May 9, 2003 and its receipt by the investment group on May 28, 2003, Ms. D. left Mr. D. on May 15, 2003.

[42] In early June 2003, Ms. D. sought $55,000 from the investment group in order to cause LPI to buy the recreational property on Lillooet Lake, and by June 20, 2003, she demanded the remainder of the investment fund and was compelled to pay to the investment firm a redemption fee of approximately $15,000. This fee appears to be one of the sources of Ms. D.’s resentment for the financial advisor (see para. 25 above).

[43] The evidence of Mr. D., the investment advisor, the business planner and even Ms. D. herself are in accord that the initial discussions regarding the use of the money were with both Mr. D. and Ms. D., and according to the advisor, both Ms. D. and Mr. D. signed the document acknowledging the redemption fee upon early withdrawal of the money. Ms. D. acknowledged that she signed a document but said she must have been tricked. She was uncertain in her testimony about what the $275,000 was for. She initially said it was for her business, but then admitted she might be wrong. In any event, she said she simply waited for her bank account to load up, and the amount deposited was gone in less than a month.

[44] The investment advisor is, as mentioned, a friend of Mr. D.’s. Ms. D. has therefore become convinced that he and the business planner have conspired against her with Mr. D. to some undetermined end. Both the advisor and the planner testified. They appeared to be straightforward business people with expertise in their respective areas.

[45] The amounts of the loans before and after separation, their sources and the route by which they became available for Ms. D.’s use through LPI was not clearly explained. Ms. D.’s accountant, MS testified, after much argument with Mr. D.’s counsel, that LPI received loans from either 412 directly or through T. Holdings Ltd. of over $500,000 after the separation; an additional amount of about $260,000 went into #2002 and then into LPI, but there must have been more than that to lead to the present deficit shown on LPI’s books. It may be that those amounts are in addition to the $275,000 already advanced and spent by Ms. D. immediately after separation. In any event, Ms. D. entered into various unsuccessful arrangements after the separation to lease the restaurant, including the venture with the Chilliwack business, and lost the rest of the money, leading to the present deficit position of LPI.

[46] At the time of the separation in May of 2003, the couple had embarked, at the insistence of Ms. D., on an extensive and expensive renovation of their backyard. Their plan was to pay for it through loans from T. Holdings Ltd. to LPI, which they intended to withdraw from LPI and pay tax on so they could be used for family purposes. As already noted, Ms. D. was expecting to receive the large payment into LPI to equalize the extra amounts already given to her brothers for their respective failed business investments. However, when Ms. D. left the marriage on May 15, 2003, although the money did come into LPI as set out above, it was not used to pay for the backyard, which was already under construction.

[47] After the separation, Ms. D.’s elder brother, SR, became involved in their finances at the request of Mr. D., who was concerned that Ms. D. would be able to spend the next dividend payment which was due in a matter of weeks, leaving him and the children with no resources. SR took control of the accounts and established a budget for Mr. D. and Ms. D. as well. Mr. D. testified that he told SR that the couple planned to use money from T. Holdings Ltd. coming into LPI to pay for the backyard. SR explained that this was not possible, although Mr. D. said he did not understand the explanation. SR suggested they cash in the investment funds and use the LOC to pay for the backyard and various other expenses. Ms. D. says about $85,000 went to pay for the backyard, relying on the records kept by MS. However, there were funds spent on other improvements to the residence as well. According to Mr. D., about $120,000 was used to pay for the work done on the residence, Ms. D. took about $50,000, and various credit card payments were made.

[48] SR handled the budgets for both Mr. and Ms. D. until the end of 2003, when MS took over. The dividends were divided equally between Mr. D. and Ms. D.

[49] MS testified that there were no more loans coming in from the family after the separation, so the parties had to live within the expected cash flow – that is within the dividends which came in to Ms. D. personally and to #2002 three times a year: in March, July, and November. During the time that MS has been involved, that is since 2004, 812 has not declared a dividend. All the money has come from 412.

[50] The amount of dividends, even divided in two, is substantial; the expenses were also high. Mr. D. said he got about $145,000 a year for himself and the two children, and there was $60,000 left after servicing the mortgage and regular expenses.

[51] MS cut Mr. D.’s budget from the amount it had been under SR, and controlled it closely. Of particular concern were expenses related to the attendance of the oldest child, who suffers from a severe learning disability, at a learning centre in Vancouver. No extra money was advanced to allow Mr. D. and the children to have accommodation during this period, so they stayed with friends, sleeping on the floor. Ms. D. appeared to be under the misapprehension that Mr. D. simply wanted to rent and maintain an apartment indefinitely in Vancouver, but Mr. D. testified it was only to allow him and the children to have somewhere to live for the summer months while the oldest child went to the learning centre.

[52] There were many disputes between MS and Mr. D. over expenses, receipts and methods of payment. Although both children lived full time with Mr. D., MS wanted Mr. D. to sign a tax return allowing Ms. D. to claim a child for tax purposes, which Mr. D. refused to do. Apparently MS then deducted the amount that Ms. D. could have saved in taxes from Mr. D.’s budget. Mr. D.’s refusal to sign the tax return has reverberated through Ms. D.’s list of resentments ever since.

[53] MS testified that Ms. D. asked her many times to cut off all funds to Mr. D., despite his role as sole caregiver to the children, and admitted she had attended a family meeting in which Ms. D., alone of all the family members, expressed this view.

[54] Initial steps were taken by MS in 2004 to effect the reorganization necessary to allow tax free repayment of the LPI loans, but this was not completed. As mentioned above, Mr. D., who was given no information respecting the reorganization or its purpose, obtained a restraining order in December of 2004 upon learning that it was contemplated.

[55] At that time the trial was expected to begin in June of 2006, but it was adjourned at the request of the plaintiff. Although the dividends were well over $300,000, the parties felt it was necessary to take out an additional loan of $50,000 on the LOC, which they split equally, despite Mr. D. having care of the children, and despite the money available to Ms. D. through the loans to LPI.

[56] The trial was next set for January of 2007, but Mr. D. applied to adjourn it based on his inability to prepare for trial due to illness. He filed medical reports to substantiate his claim that he was suffering from broken ribs and pneumonia, but the plaintiff suggests that he misled the court by pretending to be sicker than he was because his ski pass shows that he swiped his ski card occasionally during that period, although there are many days during the Christmas season when there was no activity on the card.

[57] Mr. D. testified that he did try to ski one day with the children and GR, who was visiting for Christmas, but was forced to return home. He said he would also use his card occasionally to get up above the clouds to have lunch at restaurants on the mountain, feeling that sunshine helped his pneumonia. There was no suggestion that there was any benefit to the defendant arising out of the adjournment or that it did anything other than perpetuate the difficult circumstances that existed while MS managed their budgets.

IV. Roles of the Parties During the Marriage

[58] The evidence of both Ms. D. and Mr. D. was clear that, throughout the marriage, Ms. D. was not interested in being a mother, and she spent a lot of time away from the home. She left the child-rearing to Mr. D., who was happy to assume the responsibility, never stinted on helping the children with getting to and from school and their activities, assisted with their homework and spent extra time on homework with the older child. He is given credit by independent witnesses – the child’s tutor, and the mother of the child’s best friend – for the confidence of the older child, who, despite suffering from a severe learning disability, is a happy outgoing girl.

[59] In argument, counsel for Ms. D. characterized Mr. D. as selfish, putting his interests ahead of everyone else’s. I assume he was instructed to make those submissions because there was no basis in the evidence for it when Mr. D.’s activities and lifestyle are looked at in the context of this marriage.

[60] Ms. D. admitted that during periods of illness that centered round her pregnancies, she required a great deal of care for long periods of time and Mr. D. provided it. She admitted that Mr. D. encouraged her in the pursuit of her dreams of a musical career and, by taking care of the home, allowed her the freedom to travel and do her projects.

[61] Ms. D. alternated between acknowledging her appreciation for the freedom she was accorded as a result of Mr. D. taking over the care of the house and children and resentment at his perceived interference with her relationship with the children. Whenever Ms. D. did attempt to have a weekend or a trip with the children, it almost invariably ended in a serious altercation between her and the eldest child, and the outing would be cut short, with Mr. D. having to arrange to get the child or children back to Whistler. It is not productive to set out the unpleasant details of these events further. However, as a general overview, Mr. D. testified that their lives depended wholly on anticipating, reacting and adjusting to Ms. D.’s moods, and after listening to many days of evidence from the two of them, especially Ms. D.’s own account of her activities, whims, and impulses, I accept Mr. D.’s evidence on this point. Ms. D. explained many of the difficulties she had by saying she has a serious health problem which has been improperly diagnosed but which, by the time of trial, she felt she was beginning to cope with successfully.

[62] In any event, the interests, priorities and lives of the parties became increasingly divergent, both before and after separation. While Ms. D. travelled extensively, used up prodigious amounts of money through LPI, spent the personal dividends freely, and had little to do with her children, Mr. D. stayed at home, took only short vacations, ensured the mortgage and monthly expenses were paid, used the dividends for himself and the children, and devoted himself to the home, the children, their schooling and activities, and pursued his own recreational activities when he could. This is not to paint Mr. D. as selfless; he obviously enjoys remarkable freedom from the usual financial cares that beset single parents because of the large amount of money available to him as the spouse of Ms. D., and he does not live a Spartan lifestyle. However, there had to be a responsible parent for the children; he assumed that role willingly and according to the evidence of independent witnesses, he fulfills it well.

III. The Assets and the Positions of the Parties

[63] The assets that are agreed are family assets are:

(1) the matrimonial home and contents;

(2) the motor vehicles and snowmobiles.

[64] The parties disagree on whether the following are family assets are:

(1) the shares in 412 and 812;

(2) the shares in #2002;

(3) the EGD trust;

(4) LPI.

[65] The plaintiff also lists the shares in T. Holdings Ltd., and the children’s trust as being in dispute.

[66] Although a valuation report was prepared and filed, neither party submits that the corporate holdings need to be valued, the plaintiff because she says Mr. D. is not entitled to any of the corporate holdings, and the defendant because he seeks transfer of the shares in specie. The gist of the report is that the fair market value of the holdings in 412, 812 and #2002, being dependent upon the discretion of GR to declare dividends, are worth very little or nothing. #2002 has about $24,000 cash. The rateable value of Ms. D.’s shares, that is the value without taking into account the nature of and limitations on the share holdings, was calculated based on share values of the operating company of $7.65 and $8.00. Given the position of the parties, the share value is not of significance. The figures are extremely high, regardless of which value is used.

[67] Using $8.00, the rateable value of Ms. D.’s shares is $16,995,558. The following list shows the values of the particular assets, and contains a short description of the nature of Ms. D.’s interest in the asset:

#2002 - $13,560,886 (#2002 holds 80% of Ms. D.’s common shares in 412 and 812 through which GR declares dividends; this figure is the value of preference shares as stipulated in the financial statements. 100% of the common shares are held by the children’s trust, and no dividends have ever been declared for the common shareholder);

412 - $840,000 (the assets of 412 are shares in one of the upper levels of companies referred to earlier at para. 11; Ms. D. holds 20% of her shares in 412 personally; 80% are held by #2002; dividends are declarable at GR’s discretion only);

812 - $4,400,000 (the assets of 812 are shares in another of the upper levels of companies; Ms. D. holds 20% of her shares personally; 80 % are held by #2002; dividends are declarable at GR’s discretion only);

LPI – (-$1,709,463) (this is the deficit resulting from the loans of $2.7 million to LPI from T. Trust. and 412, all of which is theoretically owed to them or to #2002, and taking into account the assets of just under $1 million – the lodge and the Lillooet Lake property);

T. Holdings Ltd/T. Trust – (-$313,287) (the T. Trust was set up when Ms. D.’s father lent money to the four siblings. Its assets consist of T. Holdings Ltd. It has no value and the books show a deficit, so the valuator assumed that Ms. D. would be liable for ¼ of the debt);

B. Ltd. - $217,442 (this is the sole investment of the EGD Trust from Ms. D.’s grandmother’s estate, with the value as of the date the valuator did his report, September 2005; it is now worth about $240,000).

[68] According to the valuator, the fair market value of the latter three is the same as their rateable value.

[69] Ms. D. wants the home sold, the debts paid off, and the proceeds reapportioned to her, 60/40. She wishes to keep the Road Trek van, but says Mr. D. should be responsible for half the remaining loan. Mr. D. could then keep the Mini and the truck.

[70] She asserts that none of her shares or corporate or trust holdings are family assets. Her counsel submits that Mr. D. should get some spousal maintenance, but should finish his degree and get out and get a job so that he can become independent and self-sufficient as soon as possible. He suggested Mr. D. might work part-time as a sports instructor or a windsurfer repairman, apparently while being solely responsible for the two children. He submits the hours from 9:00 a.m. to 3:00 p.m. are free for Mr. D., and he should be working during that time. Counsel suggested that Mr. D. should have income imputed to him of $25,000 for purposes of child support, at least so he can share in payment of extraordinary expenses.

[71] Despite her counsel’s submissions, Ms. D.’s evidence was confused on the latter point. It appears that she does not actually want Mr. D. to get an ordinary job that would take him out of the house and away from the childcare responsibilities; however, she takes the position that Mr. D. has always hidden behind the title “primary caregiver for the children” when she wanted him to do something that would allow her to have a ready and acceptable answer to the question: “what does your husband do?” Ms. D. said it was her hope that Mr. D. would become the money manager of the family funds as her own father had done; of course, Mr. D. did attempt through the investment group to save and increase the money that was given to the family, but Ms. D. became very suspicious of those efforts, at least in retrospect. The efforts eventually came to nothing when the line of credit had to be cashed in to pay debts upon the separation. Whatever her views on Mr. D.’s future employment, Ms. D. stated clearly that she does not want to give Mr. D. anything at all, but will live by what the court tells her to do.

[72] Mr. D. seeks a reapportionment of the matrimonial home to him, on the basis that he will assume the mortgage and the line of credit. He wishes to retain the household furnishings, with some exceptions, the Mini and his truck.

[73] He claims half the shares in 412, 812, and #2002 as family assets on the basis that they used throughout the marriage, and were considered to be a basis of future security for the whole family. Despite the obvious problem of the shares being worth only as much as GR decides to let the shareholder have, counsel for Mr. D. submits that will not present a problem in reality. Mr. D.’s relationship with GR is a good one; he is and will continue to be the sole caregiver for her two grandchildren, and the court should assume that the dividends will flow as they always have if the shares are distributed equally between Ms. D. and Mr. D., as there is no evidence to suggest they will not.

[74] Mr. D. also asks that the funds in the B. Ltd. account be transferred to him, under the supervision of an accountant, to be used to pay the mortgage, line of credit, and other debts. In addition, he says Ms. D. should pay him $25,000 to be applied to the LOC for the funds she received in the June 2006 advance. He also claims that the equalization advances from T. Holdings/T. Trust to LPI post-separation are family assets because they were originally intended to be used to pay for the backyard renovations.

[75] Although asserting that LPI is a family asset, he takes the position that Ms. D. should retain it along with the Road Trek van, for which she would be solely responsible. She refinanced it without his knowledge at a time when she was receiving and spending large amounts of money through LPI, and could easily have paid it off. She has had accidents in it and reduced its worth.

[76] Mr. D. takes the position that this is a wealthy family that can afford to have a parent on hand for the children. Due to the elder child’s learning disabilities and tutoring, he is in fact only free from 11:45 a.m. to 2:45 p.m. most days. The suggestion that he could obtain a job in his present circumstances, especially when his degree was left unfinished many years ago as a result of a mutual decision by both parties, is unrealistic and ignores the value to the children of his assistance and daily presence.

[77] On the approach put forward by counsel for Mr. D., child support would be calculated on the total income received by Ms. D., whether taxable or not, including redeemed preferred shares, with non-taxable dividends grossed up, based on a written summary provided by Ms. D. each January respecting funds received in the previous year.

[78] If Mr. D. is not successful in his claim for half of the shares in 412, 812 and #2002, he asserts entitlement and need for spousal support. In any case, he asks that his claim for spousal support be adjourned generally.

IV. Discussion

[79] The relevant sections of the Family Relations Act, R.S.B.C. 1996, c. 128, are:

S. 56(1) Subject to this Part and Part 6, each spouse is entitled to an interest in each family asset…

(2) The interest under subsection (1) is an undivided half interest in the family asset as a tenant in common.

…

S. 58(2) Property owned by one or both spouses and ordinarily used by a spouse or a minor child or either spouse for a family purpose is a family asset.

(3) Without restricting subsection (2), the definition of family asset includes the following:

(a) if a corporation or trust owns property that would be a family asset if owned by a spouse,

(i) a share in the corporation, or

(ii) an interest in the trust

owned by a spouse;

…

(e) a right, share or an interest of a spouse in a venture to which money or money’s worth was , directly or indirectly, contributed by or on behalf of the other spouse.

S. 59(1) If property is owned by one spouse to the exclusion of the other and is used primarily for business purposes and if the spouse who does not own the property made no direct or indirect contribution to the acquisition of the property by the other spouse or to the operation of the business, the property is not a family asset.

(2) In s. 58(3)(e) or subsection (1) of this section, an indirect contribution includes savings through effective management of household or child rearing responsibilities by the spouse who holds no interest in the property.

S. 60 The onus is on the spouse opposing a claim under s. 56 to prove that the property in question is not ordinarily used for a family purpose.

…

S. 65(1) If the provisions for division of property between spouses under s. 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to

(a) the duration of the marriage

(b) the duration of the period during which the spouses have lived separate and apart

(d) the extent to which property was acquired by one spouse through inheritance or gift

(e) the needs of each spouse to become or remain economically independent and self sufficient, or

(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse

the Supreme Court, on application, may order that the property covered by s. 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.

(2) Additionally or alternatively, the court may order that other property not covered by section 56, Part 6 or the marriage agreement, as the case may be, of one spouse be vested in the other spouse.

[80] Together, counsel provided over 50 cases, but referred to very few of them in argument, I suspect because it is difficult to find one similar to this. There are many cases dealing with inheritances, discretionary and contingent trusts, discretionary dividends, and families who have accumulated wealth which they pass to their children through various means, usually managing to avoid significant tax consequences. However, generally one or both of the parties has some sort of employment, or has access, either immediate or deferred, to the capital from which the income they receive derives, or the wealthy parents have asserted an interest in the proceedings in some manner.

[81] One case, which was not referred to by counsel, bears some similarity to the facts before me and reflects Ms. D.’s position that Mr. D. is essentially on his own from now on. In Niem v. Ko, 2003 BCSC 1913, 4. E.T.R. (3d) 279, the wife’s mother had supported the parties entirely through a 12 year marriage. Certain assets were registered in the wife’s name, and the mother was added as a party to the action in order to assert a beneficial ownership in all assets. The trial judge held that the mother was the beneficial owner of all of the assets; those in which the wife held legal title she held as trustee for her mother. Since neither party owned any assets, there were no family assets to divide.

[82] However, in the case of the D.’s, despite the fact that it is only by the declaration of dividends by GR that this family has survived, Ms. D. does own the shares through which the funds are provided, and there has been no assertion that she holds them or the assets purchased with the dividends as trustee for her mother. Nor is there any suggestion that GR takes any interest whatsoever in these proceedings.

[83] The shares are therefore susceptible to an analysis under s. 58(2) to determine if they are ordinarily used for a family purpose.

The shares in 412, 812

[84] In Evetts v. Evetts (1996), 85 B.C.A.C. 19, the Court of Appeal declined to establish rules for the determination of whether a capital asset held by one spouse is a family asset:

I think it would be unwise to try to establish any rules for the determination of whether a capital asset will be considered to be a family asset. However, one or two guidelines are readily revealed from the cases The fact that income from a capital asset is used occasionally for a family purpose does not of itself make the capital asset a family asset, Stuart v. Stuart (1996), 21 B.C.L.R. (3d) 65 (C.A.). The fact that capital from the asset is used from time to time, when required, for a family purpose may be an indication that the asset is a family asset, Brainerd v. Brainerd (1989), 22 R.F.L. (3d) 113 (B.C.C.A.), but the distinction between income being used for a family purpose and capital being used for a family purpose is not, in itself, determinative, Starko v. Starko, [1986] B.C.J. No. 2341 (S.C.). So the fact that only income is used for family purposes does not necessarily mean that the capital asset itself is not used for a family purpose. The use of the asset to provide financial security and protection against erosion of income or other family misadventure in the future may constitute a present ordinary use for a family purpose, Tezcan v. Tezcan (1990), 44 B.C.L.R. (2d) 343 (S.C.); Folk v Folk (1994), 99 B.C.L.R. (2d) 188 (C.A.). The fact that the words “ordinarily used…for family purpose” are the governing words in the statue means that the use pattern must be examined in each case to determine whether, in the ordinary course, the present use commitment to meet a present or future need includes a use for a family purpose. Ordinary use for a family purpose is not inconsistent with ordinary use for other purposes.

[85] Ms. D. says the family has used the income from the corporate holdings, that is, the dividends that are declared by GR, but never the shares themselves. As well, the dividends, although declared regularly, are solely at the discretion of another party. She relies on Macdonald v. Macdonald, 2002 BCSC 1453, 33 R.F.L. (5th) 119, aff’d 2005 BCCA 23, 37 B.C.L.R. (4th) 121, to say the shares are not family assets, and contends that Mr. D. should get nothing but half the value of the equity in the house, and should endeavour to make himself employable and self-sufficient.

[86] In MacDonald v. MacDonald, the husband was very successful as a stockbroker and owned a consulting company. The wife, who had ceased employment to raise the family, held common and preferred shares in two family companies and was a beneficiary of a family trust. She received regular discretionary payments. The income from the two family companies and the trust were used for family purposes; the husband argued that the wife’s interest in the sources of the income was a family asset. The trial judge found that there was probably a general expectation that the monies would continue to play a role in their lives, but there was no common intention that the interests would provide for the family’s future financial security. Since the assets were controlled by someone else and the wife had no use of or access to the capital of the companies or the trust, they could obviously never be pledged for family purposes. The trial judge held they were not family assets, or if they were, he would reapportion them 100% to the wife, and would reapportion the husband’s consulting company 100% to him. The husband’s income was very high in any event and substantial child support and spousal support were ordered.

[87] The question of whether shares were ordinarily used for a family purpose was also considered in Delesalle v. Delesalle, 2006 BCCA 445, 30 R.F.L. (6th) 1. One of the issues at trial was whether certain preferred shares were family assets. The trial judge held they were not. Income from the shares had been used only twice during the marriage, and there had been no discussion of the future use of the shares. Although other classes of shares were family assets, the preferred shares were not. The Court of Appeal, in upholding him, noted that this determination was a question of fact for the trial judge.

[88] Mr. D. says the shares were used indirectly for family purposes throughout the marriage. The shares attracted the dividends and the dividends were always used for family purposes. The shares shaped every financial decision the couple made and were relied on throughout the marriage for family purposes. Although the shares themselves were never pledged as security, without the shares the couple could not have obtained a line of credit or a mortgage since neither of them has ever worked. Mr. D. contends that it was their joint intention that the shares would continue as the sole source of family support, together with the redemption of the preference shares. Therefore, regardless of the worth of the shares, and whether the dividends are discretionary, he is entitled to half Ms. D.’s interest in the shares.

[89] His counsel provided a number of cases in which the court considered whether the use of income from a capital asset had rendered the capital asset itself a family asset: Hefti v. Hefti (1998), 40 R.F.L. (4th) 1 (B.C.C.A.); Lindholm v. Lindholm, (1999), 71 B.C.L.R. (3d) 118 (B.C.S.C.); Grove v. Grove, [1996] B.C.J. No. 658, BCWLK 1095 (S.C.); and Whittal v. Whittal, (1987), 19 B.C.L.R. (2d) 202 (S.C.), As in Delesalle, the court in each case was concerned with the pattern of use and whether there was evidence to support the use of the asset as security for the parties’ future. I refer also to M. (H.R.) v. B. (D.M.) 2004 BCSC 147, 28 B.C.L.R. (4th) 104, and Lotzkar v. Lotzkar, 2003 BCSC 229, varied 2003 BCCA 581. In each of those cases, only the income from the relevant capital asset was used during the marriage, but the assets themselves were held to be family assets because they were the foundation of the family’s financial security.

[90] In the circumstances before me, the shares were the vehicle through which dividends were declared at specified intervals and in specific amounts. All the money went into a joint account to which both parties had access, and all of it was used for family purposes. The use was customary and constant, not casual or occasional. The couple expected to continue to receive the dividends and to rely on them for family purposes. Neither sought to become employable, and neither expected the other to become employable, despite Ms. D.’s wish that Mr. D. have a job title she could describe if asked. The family conducted its affairs as if the dividends would always arrive and would always sustain them. Although the shares were not used as shares per se, that is they were not pledged as security for a loan, they were the source of income, past, present and future, for this family and were expected by both parties to fulfil this purpose.

[91] There was no distinction drawn between the use of 412 versus 812 in providing dividends to #2002 and Ms. D., so I will treat them as similar entities. I am satisfied that the shares in 412 and 812 are family assets. The presumption under s. 56(2) of the Family Relations Act is that of an undivided half interest in the asset. It would have been helpful to have had some indication from GR as to her intention with respect to these shares and the dividends she has declared and continues to declare, but there was none.

[92] On the evidence before the court, Ms. D. has shown no basis upon which it would be unfair not to reapportion the shares to her. By the circumstances of her birth, she became the potential recipient of great wealth, but she had no role in creating the underlying assets. The relationship lasted 11 years, and the couple was married for 8 of those years. During the currency of the marriage and in the five years since it ended, Mr. D. has always looked after the home and children and will continue to do so. Ms. D. has not been deprived of anything by the marriage or its break-up. She has no need for, or entitlement to, spousal support or for the reapportionment of assets to allow her to sustain herself or promote self sufficiency. She will continue to have great wealth at her disposal, assuming her mother continues to advance money to her through dividends and shareholders loans. Even without that, she has the EGD trust (see below) and the assets in LPI.

[93] Whether the shares will be worth anything in the future is up to GR, but Mr. D. has a half interest in them, whatever their worth may be and regardless of that worth being completely contingent on GR’s good graces (see Whittal v. Whittal and McCarlie v. Bogoch, 2002 BCSC 560,28 R.F.L. (5th) 223). The shares should be divided equally, in specie.

The preference shares in #2002

[94] I accept the evidence of Mr. D., supported by the investment advisor, that the couple considered the preference shares in #2002 as their future financial security. I have already set out the circumstances in which that discussion took place. #2002 came into being as a result of the estate freeze which was itself a vehicle used to plan for the future, both for the parents and the children. Based on Tezcan v. Tezcan (1990), 44 B.C.L.R. (2d) 343 (S.C.), varied (1992), 62 B.C.L.R. (2d) 344 (C.A.), as referred to in the excerpt from Evetts, supra, and Hefti v. Hefti, supra, use of the asset as future financial security constitutes a use for family purposes. There was no other use contemplated for these shares. They are a family asset. Ms. D. has not established that it would be unfair not to reapportion them in her favour, for the same reasons set out above relating to the shares in 412 and 812. The preference shares in #2002 should be divided equally, in specie.

[95] As with the shares in 412 and 812, the actual worth of the preference shares is, of course, dependant on GR declaring dividends, but that does not deprive Mr. D. of his half interest in them.

The matrimonial home and LPI

[96] I will deal next with LPI and the matrimonial home. The assets in LPI and the matrimonial home are the only pieces of real property in issue. Although these acquisitions were fully funded by dividends and loans from GR, the lodge and Lillooet Lake property are held in the name of LPI and the home is held in joint tenancy by Mr. and Ms. D.

[97] Mr. D. says LPI is a family asset, and Ms. D. should have it. Ms. D. says LPI is not a family asset because it never generated any money so there was nothing to be used for a family purpose.

[98] LPI is the vehicle through which Ms. D. pursued her interests. Mr. D. contributed directly in small ways to the various enterprises Ms. D. started on the property, bringing the children to see Ms. D., hauling garbage and recycling, and gardening. He also assisted Ms. D. occasionally in dealing with troublesome business situations. However, the primary basis upon which it becomes a family asset is because in the artificial world in which these two lived, Ms. D. simply could not have “pursued her dream and her beauty” as she put it without Mr. D.’s indirect contribution to LPI through taking care of all the practical necessities of their life. He took over the entire job of raising the children, maintaining the matrimonial home, and ensuring the mortgage and other payments were made.

[99] In Stuart v. Stuart (1996), 21 B.C.L.R. (3d) 65 (C.A.), the trial judge held that certain inherited assets were not business ventures to which the wife had contributed indirectly because the husband himself had made no direct contribution to their acquisition. The Court of Appeal agreed, but said that the section did not only apply to contribution to the acquisition of a particular venture. For instance, if the wife inherited an apartment building and the husband thereafter did maintenance on it, he could be held to have “contributed” to the venture.

[100] This is relevant to the discussion concerning LPI. Although neither party contributed to the funds which permitted the acquisition of the assets of LPI, once Ms. D. was given the “loans” by the family companies, Mr. D.’s contributions allowed her to acquire the assets and to make use of them, and to use all the other money that she spent on her personal explorations. Without Mr. D.’s contributions, she could not have done so. Therefore LPI, which is, in terms of assets, the lodge and the Lillooet Lake property, is a family asset. There is, of course, a huge debt associated with LPI but this would already have been restructured out of existence if Mr. D. had been kept informed of the manoeuvres that were planned after separation, and had not been surprised into obtaining a restraining order. There is no suggestion that this reorganization will not take place once the litigation is concluded.

[101] As Ms. D. took the position that LPI was not a family asset, and Mr. D. took the position that Ms. D. should have LPI reapportioned to her on the basis that he would have the matrimonial home reapportioned to him, little if any argument was addressed to the factors in s. 65 as they pertain to reapportionment of LPI. An application of those factors would allow Ms. D. to argue that it would be unfair not to reapportion LPI to her substantially if not completely, but that is premised on providing an equitable opportunity for Mr. D. to become or remain economically independent and self-sufficient and to provide a home for the children.

[102] It is therefore convenient to consider the matrimonial home at this point. Mr. D. seeks reapportionment to him of the entire interest in the matrimonial home where he currently lives with the children; Ms. D. seeks its sale and reapportionment of the proceeds in her favour.

[103] GR gave the couple $60,000 as a down payment on their first house, which was in turn sold when they bought the present matrimonial home. GR does not assert an interest in the house and the evidence was clear that the money was given to the couple because they were having a baby. The money was not given to Ms. D. alone. There is no basis to reapportion the house because GR supplied the down payment.

[104] The house was paid for through the dividends from GR. In that sense they were a gift from Ms. D.’s family. However, this is not a situation where s. 65(d) is particularly significant. Although the dividends were funnelled through Ms. D.’s corporate holdings, they were given to the family, put into a joint account, and used for family purposes throughout the relationship and marriage since the birth of the first child in 1994, and thereafter until the present date.

[105] Section 65(1)(e) concerns the needs of each spouse to become or remain economically independent and self sufficient. While Mr. D. has always relied on the dividends declared by GR, the parties mutually agreed upon and accepted this lifestyle. It was obviously open to either or both to stand on their own, work for their livings, and raise their children as most people do, budgeting, cutting corners, and making do. There is certainly a strong argument that everyone would have been better off had then done so, as Ms. D. suggested from time to time in her evidence. However, they made the decision, individually and collectively, to depend solely on the dividends provided by GR, and not to pursue goals directed at ensuring their respective employability. It is clear from their discussions with the investment advisor that both Mr. and Ms. D. intended that the family live on the dividends indefinitely, for their future and retirement. This has indeed provided both of them with an enviable lifestyle, at least insofar as material things are concerned. However, Mr. D. is now 40 and though athletic and healthy, is untrained for any remunerative work. I note also that given Ms. D.’s dependence on her mother and the dividends for any income, the realistic likelihood of spousal support is slim.

[106] Considering the factors in s. 65, Mr. D.’s need to become independent and self-sufficient, his role in taking care of the children throughout the marriage to the detriment of his employability (a decision that was made collectively and for the specific benefit of Ms. D., allowing her to pursue her dreams of a music/business career), the need for a home for the children, and the substantial assets available to Ms. D., I am of the view that Mr. D. has established that it would be unfair not to reapportion the matrimonial home entirely to him, subject to the comments below regarding equalization of the value of the pieces of real property. On this premise, LPI is reapportioned 100% to Ms. D.

[107] An alternative approach to the respective reapportionments of LPI and the matrimonial home, and which leads to the same result, is to consider the real property as a whole, and distribute it equally between Ms. D. and Mr. D. The equity in the home is about $1 million; the equity in LPI’s assets is about $900,000.

[108] Whichever approach is used, the parties should agree on the respective values of the assets in LPI and the matrimonial home, or should obtain appraisals, so that any difference between the two values can be ascertained and equalized, either by agreement or by further submissions.

[109] As well, the matrimonial home has a mortgage of $.5 million. The parties must share the mortgage, and counsel may either agree on how this is to be done, or make further submissions on it.

[110] Other than the mention of a couple of items in passing that Ms. D. wished to keep, there did not seem to be an issue that Mr. D. should retain the contents of the matrimonial home.

[111] Mr. D. submits that the money that came into LPI after the separation is a family asset as it was earmarked for the backyard renovations. Instead the renovations were paid from the LOC. Other than the portion that was used to purchase the Lillooet property, the money that came into LPI after separation, either directly or through #2002, has been lost by Ms. D. on various business ventures. Aside from a small amount of money that was expected to go to the backyard renovations, the rest of the funds were not used for a family purpose and were not contemplated to be used for family purposes. The money was to equalize the amounts loaned to GR’s children. The plan to take some of this money and use it for the matrimonial home, even if it could be done, does not make the “equalization funds” into a family asset. The corporate arrangements for the loans are personal to Ms. D. and her siblings for their respective business ventures.

[112] If I am wrong in holding that the money that came into LPI after separation is not a family asset, I would reapportion it and the debt associated with it 100% to Ms. D. in any event. The repayment arrangements and potential corporate reorganizations are between her, her mother and her accountant. They do not involve Mr. D. and there is no reason to involve him in them as long as his interest in the preference shares, discussed below, is not affected as a result of the transactions between #2002 and LPI after separation. This will be a matter for the accountants to work out.

[113] As for the payment for the backyard renovations, those will be shared through joint responsibility for the LOC.

The EGD Trust

[114] I will deal next with the EGD trust, which Mr. D. asserts is a family asset. No use has been made of the trust monies which are held in the B. Ltd. account, which is about $240,000. Neither Ms. D. nor Mr. D. could explain the nature of Ms. D.’s inheritance from her grandmother. Both thought there was $100,000 available to Ms. D. when she turned 30. Mr. D. noted a GIC for $100,000 on the bank statement in October of 2001, and thought that was the money Ms. D. got from the grandmother’s estate upon turning 30. He said they paid for the Mini, a pool table, a hot tub and some kitchen renovations with the money. Ms. D. did not think she ever got the money at all. The evidence was far from clear, but it appears that although the GIC did come from the inheritance and was indeed used by the family, those funds were separate from the trust.

[115] Courts have considered that an inheritance may still be a family asset if the parties intended that it be used for their future financial security. Mr. and Ms. D. did realize that Ms. D. would have access to more money when she reached 35, but there was no evidence of any discussions about the use of this money for their financial security. It was not necessary to do so, given the dividends coming in from GR. According to Hefti v. Hefti, there is no natural and probable inference that inherited property is held for the financial security of both parties. There must be evidence that it was. Here there is none. Applying Hefti v. Hefti, the EGD trust is not a family asset.

The vehicles and snowmobiles

[116] If the parties cannot agree on the snowmobiles, they will be sold and the proceeds divided equally. Mr. D. will keep the Mini and the truck. Ms. D. will keep the Road Trek van and should be responsible for the debt that remains on it. She has had the use of the van for some time, and has reduced its value through hard use and accidents. Although she would not have been able to pay off the debt in 2006 due to the restraining order, she refinanced it without notice to Mr. D., rather than attempt to reach an agreement to pay it off. She was receiving half the dividends and huge loans through LPI at the time, and this could have been easily accomplished.

The Shares in T. Holdings Ltd.

[117] There was little evidence respecting these shares; from the brief description given by the valuator, they played a secondary role to 412 in providing some of the loans Ms. D. received in LPI. Other than providing a mechanism through which loans funnelled into LPI, they were not in themselves used for a family purpose. If discussed between the parties, it was only in passing. They were not used by the parties and were not relied on for future use. They are not family assets.

The children’s trust

[118] The children’s trust was created through the estate freeze. The trust holds all the common shares of #2002. The children are the sole beneficiaries of any interest or capital. #2002 is structured so that no dividends can be paid to the common shareholders until all the preference shares held by Ms. D. are redeemed. However, Ms. D holds no interest in the trust itself. It is not a family asset.

V. Child Support

[119] Ms. D. has no employment income, but she has sources of income available to her through the family companies. What she will obtain from her mother and what she will choose to avail herself of in any given year is not predictable. Her income tax return is of little assistance because of the substantial tax planning that occurs with respect to her income.

[120] Mr. D. seeks an order that child support be payable at the Child Support Guidelines amount based on the income Ms. D. receives each year. Ms. D. would provide a summary of dividend income, including non-taxable income, appropriately grossed up for purposes of the Guidelines, and preference share redemptions to Ms. D. or his counsel by January 31 in each year. Ms. D. would provide Mr. D. with notice of any other funds she receives, and he would have 21 days to apply for an order that those funds become income for the purposes of child support.

[121] Counsel for Mr. D. emphasized that the parties need a formula so that litigation will not be ongoing. Without knowing what Ms. D. will receive, which could be nothing or a great deal, the consequences of setting out a formula is unclear; nor is it possible to predict what the effect of the application of the Child Support Guidelines will be. Ms. D. should provide the relevant material as set out above and once it is collected and provided for this year, and failing agreement by the parties, it is likely that the court will have to determine an initial level of child support.

[122] According to MS, there was no money other than the dividends coming into the family since she took over the budgets in 2004. The dividends were divided equally. Mr. D. had the responsibility for the children and Ms. D. did not contribute to their support during that period. However it is not feasible to deal with retroactivity until the amount of support is known. As well, Ms. D. has at present no ability to create income herself. Any retroactive amount would presumably have to be paid by Ms. D.’s mother.

[123] Receipts for extraordinary expenses will be produced and the expenses shared equally. If there is an extraordinary expense that the parties do not agree upon, they have liberty to apply, but only after consultation and an attempt at resolution using an independent third party.

[124] Mr. D., whom Ms. D. removed from the children’s trust, should nevertheless be advised of any documents relevant to the trust that affect the interests of the children, and should receive financial statements and income tax returns for the trust.

VI. Spousal support

[125] The circumstances of this family depend on whether and to what extent GR declares dividends; it also depends on the debt to LPI being restructured. Obviously, if no money is forthcoming because GR refuses to declare dividends following this action and these orders, the question of whether Ms. D. is employable, and at what level income should be imputed to her will become relevant. As well, Mr. D.’s employability and his ability to become self-sufficient within a reasonable time will become a more pressing issue. Although the lawyer for the plaintiff addressed Mr. D.’s employability and urged that he become self-sufficient, the suggestions of getting part time work as, for example, a wind surfer repairman or sports instructor, were simply not realistic at this time, given his responsibility for the care of the two children and his lack of training and education which has come about as a result of mutual decisions within the marriage. There is no question of Mr. D.’s entitlement to spousal support in the abstract. However, whether it will become necessary, whether Ms. D. will have the means to pay any support, how and in what amount it will be paid, and its duration, all depend on the actions of GR.

[126] If no dividends are forthcoming, not only will both parents have to get out and find work, it is almost inevitable that the matrimonial home and the assets in LPI will have to be sold. This will place the family in such unanticipated and unpredictable circumstances that speculating about them at this time is a fruitless and unnecessary exercise. If no or little money is forthcoming, the terms of reference for this family will change so drastically that this action will have been a waste of time. The future of this family will have to await the intentions and wishes of GR.

[127] The issue of spousal support is therefore adjourned generally.

VII. Conclusions

[128] In the meantime, and realizing that they may be completely academic, I have reached the following conclusions.

[129] The shares in 412 and 812 and the preference shares in #2002 are family assets and are divided equally in specie between the parties, with the transfer of the shares to be supervised by an independent accountant. If conditions are to attach to the transfer, or if there are consequences arising out of the debt of LPI to #2002, this will have to be addressed further by counsel.

[130] The children’s trust is not a family asset.

[131] The EGD trust and the shares in T. Holdings Ltd. are not family assets.

[132] The remaining assets are divided as follows:

(a) The matrimonial home is reapportioned 100% to Mr. D.

(b) The contents of the matrimonial home will be reapportioned 100% to Mr. D., with liberty to Ms. D. to apply, failing agreement, with respect to any particular item she wishes to keep.

(d) The difference in value between the assets in LPI and the matrimonial home, if any, will be equalized by a method agreed upon between counsel or to be spoken to.

(e) The parties will share equally the liability of the mortgage on the matrimonial home, through a method agreed between counsel or to be spoken to.

(f) The liability from the LOC will be divided equally between the parties.

(g) The money that came into LPI and #2002 after separation, and which has already been spent by the plaintiff, is not a family asset, other than the money used to purchase the Lillooet lake property, which forms part of the assets of LPI and has been reapportioned 100% to Ms. D.

(h) Ms. D. will have the Road Trek van and the debt associated with it.

(i) Mr. D. will have the truck and the Mini.

(j) Unless the parties agree on the snowmobiles, they will be sold and the proceeds divided equally.

(k) The order for divorce, although technically available, is delayed at the request of the parties.

[133] Child support and issues respecting the children will be dealt with as set out above in paras. 119 – 124.

[134] Entitlement of Mr. D. to spousal support is acknowledged, but the application for spousal support is adjourned generally.

[135] Counsel for Mr. D. sought several miscellaneous orders. She raised a particular concern regarding MS’s statement that she kept no records of the time she spent on this file, yet she has charged high professional fees. As well MS testified she has not yet submitted a bill for any work in connection with the litigation. The defendant requests restraint of company funds to be used to pay Ms. D.’s legal and accounting fees, and an accounting of legal and accounting fees already paid from company resources. Since all the dividends have already been used equally by both parties and there is no joint account from which Ms. D. could have paid these fees or can pay them in the future, the practical purpose to be served by such orders is not clear. Counsel have leave to address them further, along with the issue of the proposed restraint on redemption of preference shares by Ms. D.

[136] Counsel have liberty to apply with respect to realization or implementation of any of the above terms, or any matter that was not addressed.

[137] Counsel may address costs at a time convenient for them and the court.

“M.A. Humphries J.”
The Honourable Madam Justice M.A. Humphries

Citation:	*D. v. D.,*
	2008 BCSC 306