Court File and Parties

COURT FILE NO.: FS-18-56 and CV-18-49 (Walkerton) DATE: 20220317 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Aurelia Urness Applicant

-and-

Larry McDonald and Jamie Nicholas McDonald Respondents

Counsel: Michael H. Murray and William Clayton, for the applicant G. Edward Oldfield, for the respondents Larry McDonald Julia M. Fischer, for the respondent Jamie McDonald

Heard: June 14, 15, 16, 17, 18, 21, 22, 23, 24, 25, 30, 2021 by video conference, with written submissions July 15, 16 and 21, 2021 and a further hearing on November 22, 2021 by video conference and consent affidavit evidence received December 17, 2021, further submissions on White v. White received February 25 and March 3, 2022

Justice R. Chown

Reasons for decision re sale of jointly owned properties

Endorsement

[1] These reasons detail my findings and ruling on the applicant’s motion for the sale of five farm properties jointly owned by the parties.

[2] The parties were married on August 8, 2009 and were separated on December 1, 2017. During the marriage, they operated a substantial farm operation. This operation is conducted on:

a. five jointly owned farm properties;

b. two properties solely owned in the name of the respondent; and

c. other lands which are rented, in some cases regularly, and in some cases not regularly, depending on the rental market.

[3] The parties have been unable to resolve the issues arising from the breakdown of their marriage. The largest financial issue between the parties is equalization. At the request of both parties, a consent order was made bifurcating the trial. They hoped determinations of the values of the properties would assist them in negotiating a resolution. I heard the first part of the bifurcated trial and have issued reasons at 2021 ONSC 1014 in which I determined values as required.

[4] The applicant brought a motion which was argued on the first day of the trial for an order for the sale of the jointly owned properties. I released an endorsement in which I said I would reserve my decision as I anticipated the evidence I was about to hear during the trial would be important to the decision.

[5] I received additional argument on the motion at the end of the trial. While my decision was under reserve, White v. White, 2021 ONSC 6018 came to my attention. As this decision had been released after argument of the motion, I decided I should give the parties an opportunity to make submissions arising from it. I have now received and considered those submissions.

Positions of the Parties

[6] The respondent argues that s. 11 of the Family Law Act applies in this case and prohibits me from ordering the sale of any of the farm properties.

[7] The applicant argues that s. 11 of the FLA does not apply, but s. 2 of the Partition Act does apply. She argues that the factors which might justify refusing an order for the sale of the properties are not present, and binding jurisprudence requires that I order the sale of all the jointly owned properties.

[8] For ease of reference, Appendix A sets out the applicable legislation.

General Principles

[9] The applicable principles to be considered a motion for sale of jointly owned properties during family law proceedings were set out in Dhaliwal v. Dhaliwal (2020) ONSC 3971, at para. 16:

a. Section 2 of the Partition Act empowers the court to order the sale of a jointly owned property, including a matrimonial home.

b. A joint tenant has a prima facie right to an order for the partition or sale of property held with another joint tenant.

c. A court is required to compel partition and sale unless the opposing party has demonstrated that such an order should not be made.

d. The other joint tenant has a corresponding obligation to permit the sale. These are fundamental rights flowing from joint tenancy.

e. The onus is on the party who opposes a sale to establish that there is a sufficient reason, recognized in law, why the court should exercise its discretion to refuse a sale.

f. Generally, the party opposing the sale must show malicious, vexatious or oppressive conduct relating to the partition and sale issue in order to avoid the sale.

g. Each case must be considered on its own facts. The court must consider all relevant factors in exercising its discretion.

h. In family law cases, an order under the Partition Act should generally not be made until any dispute related to the property has first been determined.

i. The Family Law Act does not displace the Partition Act. But in family cases a partition application should generally not be granted where it can be shown that a legitimate family law claim would be unfairly prejudiced.

j. In assessing and guarding against potential prejudice, the court must take a realistic view of the potential impacts of a sale – both positive and negative – in relation to the interests of both joint tenants, and the family as a whole. Where the financial or other circumstances of the parties are such that a sale would be the inevitable result at trial, there is little justification for delaying the sale.

m. Orders for sale of a matrimonial home at the interim stage should not be made as a matter of course. The court must be mindful of the whole of the proceeding, and the need to achieve a final resolution for the family as fairly and expeditiously as possible.

n. Timing can be a relevant consideration in dealing with a motion for sale at a temporary stage. The availability of a trial within a short period might reduce the pressure for an immediate sale.

r. A pending equalization claim may also be relevant. The court cannot compel one joint tenant to sell to the other. Nor can it give either joint tenant a right of first refusal. But a recipient of an equalization payment may propose to set that entitlement off against their former spouse’s share of the equity in the home. If a sufficiently particularized proposal seems viable -- and especially if it would benefit a child -- sale should be delayed to allow proper consideration of that option.

s. The court must consider and attempt to guard against potential prejudice. Are there realistic issues or claims yet to be determined on a final basis, which would be prejudiced or precluded if a property is ordered to be sold at the temporary stage? [Citations omitted.]

[10] The Divisional Court, in Nogueira v. Nogueira, 2021 ONSC 7564, at para. 3, recently cited Dhaliwal with approval.

[11] Neither Dhaliwal nor Nogueira involved farms, but the above principles remain applicable here. However, s. 11(1) applies to farms so additional considerations are in play.

Issues

[12] Determining which sides’ position should be accepted involves consideration of the following issues:

1. Does s. 11 of the FLA apply here?
2. Is the requested order an order being made “so as to require or result in the sale of an operating farm or so as to seriously impair its operation”? This involves three sub-issues: a. Is the requested order an order being made “so as to require or result in the sale of an operating farm”? b. How much of the operation is included in the phrase, “an operating farm”? c. Which properties can be sold without seriously impairing the operation of the farm?
3. Is there “no reasonable alternative method of satisfying the award”?

[13] Before discussing these issues, I will:

a. Review the jurisprudence which gives joint owners strong rights to force a sale of jointly owned properties;

b. Consider the purpose of s. 11; and

c. Review some of the jurisprudence that has considered or applied s. 11.

A Joint Owner’s Right to Sell is a Strong Right

[14] Jurisprudence from the Court of Appeal strongly supports a joint owner’s right to both hasten and maximize recovery by forcing a sale. As Finlayson J.A indicated in Silva v. Silva (1990), 1 O.R. (3d) 436, at p. 445, one joint owner should not be able to tie up the other’s capital in a property and effectively hold the money “hostage” pending the outcome of the dispute. On behalf of the applicant, Mr. Murray argues that that is precisely what has happened here and that the applicant cannot move on with her life because she has not been able to access the capital to which she is entitled.

[15] Mr. Murray referred me to Buttar, at para. 63, where the Court of Appeal allowed an appeal from a trial decision that contained an order distributing various properties between the divorcing parties. Rosenberg J.A. said:

[T]he fundamental problem with the judge's order in this case was that it took away the appellant's right to the highest price for his interest in the properties. …. As Granger J. said in Batler v. Batler (1989), 67 O.R. (2d) 355, [1988] O.J. No. 2115 (H.C.J.), at p. 356 O.R.:

A joint tenant is entitled to the highest price for his or her interest which may be more than the appraised value of the property. In today's real estate market, the appraised value of the property may not reflect the fair market value. The true test of the fair market value is to sell the property in an open market. Unless the parties agree to a transfer of the property at an agreed price, the property should be listed for sale and sold, to ensure that fair market value is obtained.

This court has jealously guarded the rights of joint owners to the best price for jointly owned property.

[16] Mr. Murray also pointed me to Barry v. Barry, 2020 ONCA 321, where the Court of Appeal held it was wrong for the trial judge to grant the respondent the right to purchase the matrimonial home after obtaining a fair market value assessment; and to Martin v. Martin (1990), 8 O.R. (3d) 41 (C.A.), where the Court of Appeal held it was wrong to give one spouse a right of first refusal on the sale of the matrimonial home because that distorts the market and eliminates the need for the spouse to compete to acquire the property.

[17] Mr. Murray also referred me to Skrlj v. Skrlj (1986), 2 R.F.L. (3d) 305 (Ont. H.C.J.), at 309, where Galligan J. said that in matters of equalization,

the courts must decide the rights of separating spouses in strict compliance with the terms of the Act, even if, in an individual case, a judge may feel that the result does not appear fair according to that particular judge's sense of fairness. I think the legislature has clearly expressed its intent to remove judicial discretion from property disputes between separating spouses. In this case certain suggestions were put to the court about how this dispute could be resolved by transferring assets to discharge corresponding liabilities. In my view, that is the stuff of settlement. Separating spouses can settle their differences as they see fit but if they do not settle them and decide to come to trial, they are entitled to, and should expect to get, adjudication, not mediation.

[18] Mr. Murray urged upon me that a decision over the sale of the farm properties may not be driven by sentimentality. The fact that the home farm has been in the respondent’s family for five generations, and that the respondent hopes to pass it on to his son, should not drive the decision. I substantially agree with this submission, but I note that the court in McLean v. McLean, 2014 ONSC 2837, at para. 183, did reason that, “Wherever reasonably possible, a court should not order the sale of farm assets that have been in a spouse's family over many decades and the spouse does not wish to see the farm sold.” Carter L.J.S.C. alluded to similar sentiments in Postma.

The Purpose of s. 11

[19] The Supreme Court of Canada has held that “the modern approach to statutory interpretation requires that the words of a statute be read ‘in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament’”: 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, at para. 6, citing E. A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87, as quoted in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21.

[20] Part I of the Family Law Act provides for fair division of property between spouses on marital breakdown.

[21] Section 11 “effectively directs the court to avoid forcing the sale of an operating farm whenever possible”: Martin v. Sansome, 2014 ONCA 14, at para. 81. It is an instruction to the court to find a way to minimize the harm to an operating farm or business when addressing equalization. The purpose seems to be to prevent killing the goose that lays the golden eggs. To preserve income earning power. To preserve value. These objectives will typically benefit both spouses.

Jurisprudence Applying s. 11

[22] In Postma v Postma, [1987] O.J. No. 1338, 6 R.F.L. (3d) 50, 3 A.C.W.S. (3d) 198, the parties jointly owned an operating farm. One of the issues for the court was how the wife would realize her interest in the farm. The court considered whether the appropriate remedy was a court-ordered transfer of the wife’s interest in the jointly owned farm to the husband in exchange for a cash payment, or in the alternative sale of the farm and division of the proceeds.

[23] The court recited s. 11(1) and said:

The prohibition against sale is mandatory unless there is no reasonable alternative method of satisfying the award.

In spite of my feelings on the sale of farm property and the provisions of Section 11(1) of the Family Law Act, the evidence at trial leads me to the conclusion that there is no reasonable alternative method of satisfying the award. The best evidence of the respondent is that the farm cannot cash flow even close to one half of what the respondent would have to pay the petitioner for her interest in the assets. No evidence was adduced of any concrete proposals to any lending institution.

The property therefore must be sold.

However, in view of the lack of evidence on what arrangements could be made with a lending institution and the recent drop in interest rates, I would direct that the respondent have 90 days from the date of these reasons, to arrange financing to purchase the petitioner's interest in the jointly owned assets … If such financing cannot be arranged, then the sale will proceed. [Emphasis added.]

[24] The court held that the wife was entitled to a cash payment for her interest. The court said at , 6 R.F.L. (3rd) 50 at p. 63:

I do not think that s. 11(1) of the Family Law Act was intended to prevent a joint tenant from realizing his or her interest in the property or that s. 9 contemplated that the interest of one joint tenant to be made subservient to that of the other. A deferral of payment would quite possibly mean an increase of first mortgage indebtedness and her deferred amount ranking as a second mortgage.

[25] In Pfeffer v. Pfeffer, [1989] O.J. No. 1198 (S.C.J.) the court determined the equalization amount, which resulted in the husband owing about $77,000 to the wife. The court’s findings included a determination of the value of the farm, which was registered in the name of the husband. The court addressed s. 11(1), saying:

This section must be interpreted to hold that there is a definite obligation under the terms of the Act to preserve an operating farm regardless of which spouse will finally own it. The court cannot, in its order, direct that the deposed spouse will receive less than an equal share; the distribution scheme should be such that the parties should not be bound by an interwoven scheme for a long period of time after separation, which would be contrary to the spirit of the Act. The separation of the interests of the parties should be severed as soon as possible, and this notwithstanding the Statutory provision that a deferral of up to ten years may be used in making payment of the amount due to the departing spouse; that the non-owning spouse's interest cannot be secured inadequately or be in a subordinate position to the interest of the continuing owner, so that his ownership is preserved at the expense of the former spouse.

[26] The court ordered that the husband could pay $50,000 within 90 days, in which case the wife would have a charge over the farm for the balance, with the debt to be retired under a payment schedule. The court doubted that the farm generated the cash flow required to carry the debt against it and ordered that the farm be sold if the husband did not exercise this option.

[27] Landry v. Landry, [1994] O.J. No. 1744 (Gen. Div.) was a motion before trial for, among other things, the sale of a jointly owned operating family farm. Desmarais J. found, based on the farm cash flow, value, and existing indebtedness, that it would be “economically impossible” for the husband to borrow enough money to pay the required equalization to his wife. He therefore ordered the sale of the farm.

[28] The parties both referred to Cudmore v. Cudmore, [1997] O.J. No 847 (Gen. Div.), a trial decision in the divorce of a farm couple after a 30-year marriage. The parties owned the farm as joint tenants. The issues at trial included equalization and whether the farm should be sold. Granger J. held that the applicant was “simply seeking a realization of her rightful interest in the farm property.” He held that “in the circumstances of this case, I could not properly refuse such a sale.” However, the decision contains no reference at all to s. 11.

[29] Hinz v. Hinz, [2000] O.J. No. 1327 (S.C.J.) was a motion for summary judgment authorizing the sale of the matrimonial home, which appears to have been a farm property. McDermid J. dismissed the motion on the grounds that the issues required a trial. In doing so, he said, at para. 7: “One must also not lose sight of the provisions of s. 11 of the Family Law Act, which ought not to be thwarted at an interim stage except in the clearest of cases, which in my opinion this is not.”

[30] In McLean, the parties jointly owned a farm operation. After a trial the court found that the wife owed the husband an equalization payment. The jointly owned assets, including the farm, were not included in the court’s considerations over equalization. The wife sought the sale of the farm so she could realize her financial interest in it. Kershman J. said, at para. 183:

Subsection 11 (1) of the Family Law Act only deals with the payment out of an equalization payment. Since no equalization payment is due to the Wife, the Court finds that this section does not apply. However, it is instructive. Wherever reasonably possible, a court should not order the sale of farm assets that have been in a spouse’s family over many decades and the spouse does not wish to see the farm sold.

[31] However, Kershman J., referring to Cudmore, found on the facts that a sale was appropriate:

The Court is satisfied that on the facts of this particular case, the Wife is simply trying to realize her rightful interest in the farm property. She may or may not herself receive any money from the sale, once the payout of any encumbrances registered against the property and the judgments against her are paid; however, to the extent possible, she should have the right to reduce her debt, particularly in her effort to move forward with her own life....

[32] A recent decision, White v. White, 2021 ONSC 6018, is instructive. Tellier J. held that a jointly owned farm property and a jointly owned woodlot were farms and/or a business. Section 11 applied. However, she held, at para. 50, that s. 11:

is not a complete defence to a motion for partition and sale under the Partition Act. Rather, the likelihood that the remedies available to parties under section 9 might apply in any particular case must be balanced against the moving spouse's right to sell a jointly owned businesses or farm and to do so in a manner that achieves the highest market value.

[33] Tellier J. also discussed, at para. 46, the onus in a motion for sale:

[A] motion for partition and sale is essentially a summary judgment motion. This requires the defending party to put his or her best foot forward…

[34] However, the facts of the case were quite different than the circumstance before me. The farm was not profitable and was apparently not a source of income for the respondent. At para. 40, Tellier J. noted:

Importantly, the effect of the farm losses is to drastically reduce William's line 150 income. Without these losses he has a combined pension income from which to discharge any spousal support obligation; with these losses he does not, unless there is an income adjustment made for spousal support purposes. In sum, the farm operates less as a viable commercial enterprise worthy of long-term protection afforded under section 9 of the Act, than as a vehicle for reducing William's income tax liability, while he also attempts to insulate himself from the payment of spousal support.

[35] Tellier J. ordered that the properties be immediately sold.

Analysis

[36] I will now analyze the issues I set out above.

Issue #1: Does s. 11 apply here?

[37] To simplify the language below, when I use the phrase “jointly owned,” I mean jointly owned by divorcing spouses, and do not mean jointly owned by one spouse with someone else.

[38] On behalf of the applicant, Mr. Murray argues that s. 11 is inapplicable in this case. He argues that the proper interpretation of s. 11 requires an examination of the structure of Part I of the Family Law Act. He argues that Part I calls for a three-step process to resolve property issues during a breakdown of a spousal relationship: (1) determine each spouse’s net family property; (2) determine each spouse’s entitlement; (3) make an order to satisfy the entitlement. He argues that s. 11 does not come into play until the third step, when there has been an order for equalization. He argues that because jointly owned properties are, in effect, already equalized, s. 11 never comes into play for a jointly owned operating business or farm.

[39] Mr. Murray submits that s. 11 is directed towards the manner in which an equalization award is satisfied. He relies on the opening phrase of s. 11(1): “An order made under section 9 or 10…” In his submission, this signifies that s. 11(1) only applies to an order made to satisfy equalization.

[40] He also points to the phrase, “unless there is no reasonable alternative method of satisfying the award.” Again, in his submission, this supports the conclusion that s. 11(1) comes into play only after equalization is determined and an award has been made.

[41] Mr. Murray’s argument is also supported by the text of s. 9: “In an application under section 7, the court may order … that, if appropriate to satisfy an obligation imposed by the order, … property be transferred to … a spouse … or sold.” [Emphasis added.] The argument is that s. 9 and 11 are about implementing an order for equalization and do not either authorize a sale of a property or prevent a sale of an operating farm until there is an order for equalization.

[42] Mr. Murray’s argument is further supported by Buttar. In Buttar the trial judge had distributed six farm properties between the parties as part of the equalization order. Section 11 was not mentioned in Buttar so presumably neither party tried to rely on it. Nevertheless, the Court of Appeal held that the trial judge did not have jurisdiction to distribute the properties. Rather, she should have ordered the properties to be sold. In this context, Rosenberg J.A. stated, at para. 53, that s. 9:

gives the court the power to transfer properties only "if appropriate to satisfy an obligation imposed by the order [for the equalization of net family properties]". In other words, the transfer power under s. 9 is specifically connected to the satisfaction of the order for the equalization of net family properties rather than a general transfer power for the settlement of disputes arising from marital breakdown. [Emphasis added.]

[43] Here, equalization has yet to be determined. The court is not being asked to make an order under s. 9 (and s. 10 is not in play). Rather, in Mr. Murray’s submission, the court is being asked to make an order under s. 2 of the Partition Act.

[44] Mr. Murray’s argument is supported to some extent by the comment in Fitzpatrick v. Fitzpatrick, at para. 2, that “ss. 9 and 11 … only come into play after the court has first determined the value of the assets and the consequential equalization calculation,” although the issues and context in that case are substantially different than the circumstance here.

[45] Finally, in Mr. Murray’s submission, a jointly owned property gets divided outside of equalization. The joint owner seeking the sale is not seeking equalization with respect to that asset because its ownership is already equal. The joint owner seeking a sale is seeking division of that asset. There is some support for this argument in McLean. As indicated above, the court said, at para. 183, “Since no equalization payment is due to the Wife, the Court finds that this section does not apply. However, it is instructive.”

[46] In short, it is Mr. Murray’s submission that s. 11 does not apply because the requested order is not “an order made under s. 9 or 10,” and that s. 11 is never applicable to businesses or farms that are jointly owned because jointly owned property is already equalized and not subject to equalization.

[47] Mr. Murray’s arguments are strong and have given me considerable pause, but for the following reasons I do not accept them.

The Text of s. 11(1)

[48] The text of s. 11(1) makes no reference to the way a farm is owned, whether solely, jointly, or through a corporation. It simply references “an operating business or farm.” From the text itself, it seems unlikely that the legislature intended to exclude jointly owned businesses or farms from its effect. It would be a surprising result if s. 11 never applied to protect a jointly owned business or farm from being sold. It must be a very common thing for businesses and farms to be jointly owned by spouses. It seems unlikely that the legislature would have expected courts to take the complex path – through the arguments described above – to get to the position that s. 11 does not apply to jointly owned businesses or farms. If the legislature had intended that the section did not apply to jointly owned businesses or farms, it would have been an easy thing to add an appropriate phrase to cover this point.

[49] The more appropriate conclusion is that, in enacting s. 11, the legislature prioritized maintaining the operation of businesses and farms over some of the property rights of spouses. Under s. 11(1), the strong policy in our jurisprudence which emphasizes the right of a joint owner to maximize and expedite the return of capital from the sale of the asset gives way to the policy choice that operating businesses and farms should be protected from sale unless there is no reasonable alternative. Of course, spouses remain entitled to equalization of family property. Nothing in s. 11 derogates from s. 5(2), where it says: “the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.” It is simply a matter of how equalization may be funded. The legislature has mandated that, where possible, equalization should be funded through means that allow businesses and farms to continue in operation. In many cases, this will benefit both spouses.

[50] I acknowledge that s. 11 is difficult to apply and I anticipate that complexity will result from its application in this case. However, that complexity seems to be acknowledged by the remedial options the legislation provides in s. 9.

The Text of s. 11(2)(b)

[51] Section 11(2)(b) contemplates that s. 11(1) applies to jointly owned businesses or farms which are incorporated. It sets forth additional remedial options available to the court (in addition to those available under s. 9) where the business or farm is incorporated. It says that the court may “order that one spouse transfer … to the other shares in the corporation.”

[52] It would make no sense to say that the ownership structure of a business or farm should impact the application of s. 11(1). That is, it would make no sense that s. 11(1) applies to businesses or farms that are jointly owned through a corporation but not to those jointly owned by spouses as individuals. Again, if this was intended, it would have been an easy thing to add an appropriate phrase to cover this point.

[53] What makes more sense is that s. 11(1), s. 11(2)(b), and s. 9(1)(d)(ii) work in concert to allow the court the freedom to order that one spouse’s ownership interest in a business or farm be transferred to the other for appropriate compensation, regardless of the ownership structure. Sections 9 and 11 work together to provide remedial options that allow the court to do justice between the parties if a farm cannot be sold because of s. 11(1).

[54] Part I of the FLA is remedial legislation and should be given a liberal interpretation. The effect of s. 11(1), s. 11(2)(b), and s. 11(9)(1)(d) should not be circumscribed in the manner suggested by the applicant.

No Precedent

[55] Mr. Murray acknowledged that if his arguments are accepted, s. 11 would never apply to a jointly owned business or farm. He took the position that for a jointly owned operating business or farm, if one owner wants it sold, the court may not apply s. 11 to prevent the sale.

[56] However, no case has been cited to me in which a court has held that s. 11 does not apply to jointly owned businesses or farms. The section has existed for over three decades. I acknowledge that this could be the first time the question has been so directly argued. But I am being asked to interpret decades-old legislation in a way that would give effect to an argument which has never before been given effect. This fortifies my view that the requested interpretation would be surprising.

[57] Several of the cases I reviewed above involved jointly owned properties. In none of these cases was it stated that s. 11(1) does not apply to jointly owned properties.

[58] I conclude that it would be inconsistent with the legislative text and would undermine legislative intent of s. 11(1) to hold that it does not apply to jointly owned farms or businesses.

The applicant is seeking an order under s. 9

[59] I do not accept the argument that the order sought is not “an order made under s. 9 or 10.”

[60] While it is true that the proceeds of sale of a jointly owned property may be equally divided to each side of the ledger in an NFP calculation, interlocutory orders for the sale of jointly owned property are routinely used to satisfy equalization. Typically, parties will want as much of the net sale proceeds distributed as possible, but often one or both parties will want a significant portion to remain in trust until equalization is determined, and then used to satisfy equalization obligations. Rule 66.03 of the Rules of Civil Procedure requires that all money realized in a partition proceeding from sale of land shall be paid into court, unless the parties agree otherwise. Where parties cannot agree on how much should be distributed from trust, courts will order an amount that is reasonable bearing all factors in mind including the possible equalization payment. This reinforces the point. Pre-trial orders for sale are effectively used to “satisfy” equalization.

[61] In fact, s. 9(1)(d)(ii) contemplates partition or sale as available remedies. The argument that the applicant does not rely on s. 9, but rather is only seeking to have the court apply the Partition Act, is artificial. In my view, the requested order would be “an order made under s. 9 or 10.”

Conclusion on Issue #1

[62] I conclude that s. 11(1) applies to the circumstances of this case.

Issue #2a: Is the requested order an order being made “so as to require or result in the sale of an operating farm”?

[63] The answer to this question is obviously yes. The applicant seeks an order for the sale of all the jointly owned properties. If sale of the five jointly owned properties is refused, the applicant seeks the sale of some of them.

[64] This raises the next question: which of the properties make up the “operating farm”? If it is not all of them, then an order for the sale of some of them would not be captured by the section.

Issue #2b: How much of the operation is included in the phrase, “an operating farm”?

[65] Section 11(1) says that an order “shall not be made so as to require or result in the sale of an operating business or farm or so as to seriously impair its operation …” The emphasized phrase suggests how this sub-issue should be resolved in this case. I should not order the sale of any part of the farm if it would “seriously impair its operation.”

[66] However, given the remedial purposes of the Act and the strong jurisprudential policy that a joint owner should be entitled to require a sale of jointly owned property, the section should not be interpreted to prohibit orders which require the sale of components of a business or farm operation. It is open to me to order the sale of one or more of the individual properties that make up the farm. I note that this was done in is Leslie v. Leslie, [1987] O.J. No. 752, where part of a farm operation (one lot of land) was ordered to be sold so that equalization could be satisfied.

[67] “The onus of proving that s. 11 applies should lie on the person wishing to claim its protection”: Nielsen v. Nielsen, at para 10. See also White, at para. 32; Afolabi v. Fala 2014 ONSC 1713, at para. 29. In this case, as the party resisting the sale, the respondent has the onus.

[68] Here, the phrase “operating farm” should include only those parts which the respondent has established cannot be sold without seriously impairing the operation of the farm.

Issue #2c: Which properties can be sold without seriously impairing the operation of the farm?

[69] I have reviewed the trial evidence in more detail in my previous reasons. It is clear to me that the home farm is indispensable to the farm operation. It houses the seed cleaning plant, grain storage and elevator equipment, truck scale, and multiple storage structures. All the farm equipment listed in exhibit 1 is stored at the home farm. The parties agreed this equipment had a 2018 value of roughly $600,000. All the trucks and trailers are stored at the home farm. These had a 2018 value of $254,500. The grain drying and seed cleaning equipment and storage bins are located at the home farm. These have a value in the $450,000 range. The respondent has established that the home farm cannot be sold without seriously impairing the operation of the farm. Significant labour was involved in developing the drying and seed cleaning operation. Moving this equipment is not feasible as it is housed within a purpose-built structure. As a result, the home farm is essential to the farm operation.

[70] The same cannot be said for any of the other jointly owned properties.

[71] Using the numbering convention from my previous reasons, properties #2, #3, #4 and #7 are all vacant land. Properties #2, #3, #4 and #5 are jointly owned. The respondent owns #6 and #7.

[72] It is essential to the operation of the farm that significant acreage is available for cash crops.

[73] Property #5 and #6 contain dwellings where the respondent and Jamie McDonald respectively reside. I do not think it can be said that these residences are essential to the farm operation. Property #5 and #6 also contain other structures which are in use for storage, but the evidence did not establish that the loss of these structures would seriously impair the operation of the farm.

[74] It was also apparent during the respondent’s cross examination that he rents a significant amount of property and that the seven owned parcels represent a fraction of what he is farming. It was put to him that he rents 1700 acres and that “two thirds of what you’re farming is rented.” The respondent answered that the amount of land he rents fluctuates and, because the rental properties are farther away, farming them is more difficult. He also testified that the rental market is competitive and there are no guarantees that he will be able to acquire rental property in any given year. However, I have no detailed evidence about the extent, location, or pattern of the farming operation’s use of rental properties.

[75] The total tillable acres of the seven owned properties is 545 (see the joint book of documents at p.1283). Of this, 265 acres are solely owned by the respondent. The home farm has about 197 tillable acres. The other jointly owned properties total only about 216 acres.

[76] The jointly owned properties (excluding the home farm) represent only a modest fraction of the total acreage that the respondent farms.

[77] The evidence as a whole does not establish that the farm operation would be seriously impaired if all the jointly owned properties, other than the home farm, are sold. It has not been proven that the home farm, the land that the respondent solely owns, and the land that he rents are insufficient to maintain the farm without seriously impairing its operation.

Issue #3: Is there “no reasonable alternative method of satisfying the award”?

[78] The circumstances here are starkly different than those cases where the farm revenue could not sustain both the farm debt and an equalization payment, as was the case in Leslie, Nielsen, and Postma. The respondent acknowledged that a large equalization payment in favour of the applicant will be required. In cross examination by Mr. Clayton, the respondent said that he had financing in place to fund any required equalization payment. This evidence was not seriously challenged. Although there is a mortgage over the properties, the parties have considerable equity in them. The sale of the property #2, #3, #4, and #7 will yield significant funds to the respondent to pay towards equalization. Ordering the transfer of title to home farm in exchange for appropriate compensation does appear to be a reasonable alternative remedy.

[79] Mr. Murray emphasized that the properties are jointly owned. The applicant is as much an owner of the properties as the respondent. Mr. Murray argues that her rights as an owner would be trampled if the properties are not sold. In addition, practical problems will abound if the properties are not sold. He argues that the applicant would be as entitled to operate the farm as the respondent, and it should not be assumed that title should be given to him. In a rising real estate market, determining market value is exceptionally difficult, whereas in a sale the respondent will be able to bid for the properties. Mr. Murray argues that for these reasons there are no reasonable alternative methods to satisfy the award.

[80] However, as I have said, in s. 11(1), the legislature has prioritized maintaining operating businesses and farms over some property rights of spouses. There will be practical problems implementing s. 11(1) in every case where it applies.

[81] What constitutes a “reasonable alternative method” is informed by s. 9 and 11(2). The legislature must have considered that all or a combination of the remedies contained in these sections constitute, in appropriate circumstances, reasonable alternative methods of satisfying the award. The possibilities explicitly include, in s. 9(1)(d)(i), transfer of property to a spouse.

[82] The text of the Act compels the conclusion that transfer of title to a farm or business for appropriate compensation and with appropriate security is a reasonable alternative method to satisfy and equalization award in an appropriate case. If I am correct that s. 11 applies to jointly owned businesses or farms, and if the mandatory language in s. 11(1) – “shall not” – has meaning, it will sometimes be necessary to order that one spouse keeps or receives title to the operating farm so that it may continue in operation, while the other spouse is compensated for his or her share of its value. Sections 11 and 9 coordinate to allow for this possibility.

[83] I therefore conclude that a reasonable alternative method of satisfying the equalization award, while maintaining the farm as an operating farm, is available here. That alternative involves the transfer of title of the home farm in exchange for payment of appropriate compensation.

Conclusion and Disposition

[84] On a plain reading of s. 11(1), and in accordance with the purpose of s. 11(1), I am prohibited from ordering a sale of the home farm. The requested order for a sale falls within the phrase “An order made under section 9 or 10”. The requested order would result in the sale of an operating farm. The requested order would seriously impair the operation of the farm. There is a reasonable alternative method of satisfying the equalization award.

[85] The legislature has prioritized maintaining the operation of businesses and farms over some other property rights on marital breakdown. Of course, spouses remain entitled to equalization of family property. It is simply a matter of how equalization may be funded. The legislature has mandated that, where possible, equalization should be funded through means that allow businesses and farms to continue in operation. In most cases, this should benefit both spouses.

[86] Implementing this policy choice creates complexity. However, that complexity is not an adequate reason to disregard the intent of s. 11.

[87] The primary considerations being weighed here are the right of the applicant to the best and highest price for the jointly owned properties and the requirement of s. 11(1) – that an order shall not be made so as to seriously impair the operation of the farm. Weighing all of the involved factors, I conclude that the appropriate result is that the home farm shall not be sold but the other jointly owned properties shall be sold.

[88] There is one final factor to address. In the foregoing analysis, I have assumed that if s. 11(1) is applied, the only order that would make sense would involve transfer of title to the home farm from the parties jointly to the respondent alone, for appropriate compensation to the applicant. However, Mr. Murray argued that the applicant would be as entitled to operate the farm as the respondent, and that it should not be assumed that title of any of the jointly owned properties should be given to the respondent. I suspect this argument may have been largely rhetorical because the applicant is seeking the sale of the properties. The respondent solely operated the farm before the parties were married and he and his son Jamie have solely operated the farm since the parties separated. There is no evidence that the applicant would be capable of operating the farm. In addition, Mr. Murray also argued at length that because the respondent solely owns two of the farms, and because he rents extensive acreage, the sale of the jointly owned properties will not seriously impair the operation of the farm. The applicant does not solely own any farm property. However, s. 11(1) does not dictate which of the parties should receive title to the farm and the parties did not have an opportunity to fully address this issue. Therefore, my order that the jointly owned properties, other than the home farm, shall be sold should be subject to the applicant confirming that she will not seek to have title of the home farm transferred to her, rather than to the respondent.

[89] Subject to this proviso, there shall be an order that the jointly owned properties, other than the home farm, shall be sold forthwith.

[90] If further directions are required, the parties may arrange a hearing through the trial coordinator.

Next Steps

[91] I will arrange a conference with counsel to assess trial readiness for the final phase of the trial and address any issues that can be addressed to ensure the trial proceeds efficiently.

Chown J.

Appendix A

Equalization of net family properties

Divorce, etc.

5 (1) When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.

Application to court

7 (1) The court may, on the application of a spouse, former spouse or deceased spouse’s personal representative, determine any matter respecting the spouses’ entitlement under section 5.

Powers of court

9 (1) In an application under section 7, the court may order,

(a) that one spouse pay to the other spouse the amount to which the court finds that spouse to be entitled under this Part;

(b) that security, including a charge on property, be given for the performance of an obligation imposed by the order;

(c) that, if necessary to avoid hardship, an amount referred to in clause (a) be paid in instalments during a period not exceeding ten years or that payment of all or part of the amount be delayed for a period not exceeding ten years; and

(d) that, if appropriate to satisfy an obligation imposed by the order,

(i) property be transferred to or in trust for or vested in a spouse, whether absolutely, for life or for a term of years, or

(ii) any property be partitioned or sold.

Determination of questions of title between spouses

10 (1) A person may apply to the court for the determination of a question between that person and his or her spouse or former spouse as to the ownership or right to possession of particular property, other than a question arising out of an equalization of net family properties under section 5, and the court may,

(a) declare the ownership or right to possession;

(b) if the property has been disposed of, order payment in compensation for the interest of either party;

(c) order that the property be partitioned or sold for the purpose of realizing the interests in it; and

(d) order that either or both spouses give security, including a charge on property, for the performance of an obligation imposed by the order,

and may make ancillary orders or give ancillary directions.

Operating business or farm

11 (1) An order made under section 9 or 10 shall not be made so as to require or result in the sale of an operating business or farm or so as to seriously impair its operation, unless there is no reasonable alternative method of satisfying the award.

Idem

(2) To comply with subsection (1), the court may,

(a) order that one spouse pay to the other a share of the profits from the business or farm; and

(b) if the business or farm is incorporated, order that one spouse transfer or have the corporation issue to the other shares in the corporation.