COURT OF APPEAL FOR ONTARIO

CITATION: Danecker v. Danecker, 2014 ONCA 239

DATE: 20140331

DOCKET: C56920

Feldman, MacFarland and Epstein JJ.A.

BETWEEN

Mark Stephen Danecker

Applicant (Respondent)

and

Lise Anita Danecker

Respondent (Appellant)

Luigi De Lisio, for the appellant

Aaron M. Franks and Michael Zalev, for the respondent

Heard: February 10, 2014

On appeal from the judgment of Justice Theresa Maddalena of the Superior Court of Justice, dated March 15, 2013, with reasons reported at 2013 ONSC 1605.

ENDORSEMENT

[1] The parties were married on April 21, 1990, and separated January 13, 2010.

[2] Most of their issues were resolved at the outset of the hearing. The central issue left for determination by the application judge was the equalization concerning the value of the Stamford and Phoenix Physiotherapy Clinic, which the parties operated as a 50-50 partnership. While there was some disagreement about loans to the appellant’s sister and parents those were not pursued before us.

[3] The appellant primarily challenges the application judge’s order that she purchase the respondent’s interest in the partnership for an amount that imputes a value to the partnership with which she does not agree. She also seeks leave to appeal the application judge’s costs award against her.

[4] The parties operated the partnership together throughout their marriage. The respondent’s last day at the clinic was December 4, 2009, and since that time the appellant has run the practice on her own with the assistance of staff but without any participation by the respondent. It is clear from the evidence of both parties that notwithstanding the respondent’s departure, the partnership continued, although the respondent has had no accounting and no payment from the business since the appellant became the sole operator.

[5] Soon after the respondent left in December of 2009, he obtained full-time employment elsewhere.

[6] The evidence relating to the value of the partnership as of December 2009 was sparse. Dwayne Pyper, a business valuator, was retained by the respondent. Mr. Pyper performed a formal valuation and concluded that the business was worth $443,000. Mr. Pyper gave evidence in support of his analysis. The appellant submitted a one-page sheet of calculations prepared by Wendy Neidhardt, a CPA. Ms. Neidhardt valued the partnership at $175,000. Ms. Neidhardt did not testify.

[7] The application judge accepted Mr. Pyper’s formal valuation as being “credible and acceptable”. However, she also accepted the appellant’s argument that Mr. Pyper’s valuation was flawed due to the value he assigned to her contribution to the business and the tax rate he used.

[8] As a result, the application judge concluded that the business should be valued at $309,000, an amount half way between $443,000 and $175,000, and that therefore an equalization of $154,500 should be attributed to each of the parties. We will have more to say about the valuation analysis later.

[9] The application judge then turned to equalization. At para. 71 of her reasons for judgment she made the following observation:

It is inappropriate and unjust to simply deal with this as one might deal with a matrimonial home or other similar property where the parties cannot agree with respect to the joint asset. In those circumstances, such as a matrimonial home, it is clear that the court would simply order the asset listed for sale on the open market and the proceeds divided equally.

[10] The application judge asked rhetorically whether the court can or should order the appellant to buy the respondent’s share or order a sale on the open market and a division of the net proceeds of sale (para. 68). The application judge concluded, in the circumstances where the appellant continued to operate without the participation of the respondent, that if a sale were ordered, the respondent’s entitlement to the profits from December 2009 to the present would have to be resolved. The application judge concluded this would lead to further litigation and not the finality these parties needed.

[11] After citing case law under the Family Law Act, R.S.O. 1990, c. F.3 – which held that, failing agreement of the parties on the value of jointly-owned property, the property should be sold – the application judge nevertheless ordered that the appellant buy out the respondent for $154,500.

[12] We note that in dealing with equalization, the application judge did not then have the benefit of this court’s decision in Buttar v. Buttar, 2013 ONCA 517, 116 O.R. (3d) 481. In the first paragraph of his reasons, Rosenberg J.A. identified the issue in Buttar as: “the application judge’s order dividing the six jointly-owned farm properties between the appellant and the respondent in satisfaction of the equalization and spousal support payments.”

[13] In reviewing the provisions of the Family Law Act, as well as two decisions of Galligan J.A. – Skrlj v. Skrlj (1986), 1986 CanLII 6314 (ON SC), 2 R.F.L. (3d) 305 (Ont. H.C.), decided when he was a trial judge, and Berdette v. Berdette (1991), 1991 CanLII 7061 (ON CA), 3 O.R. (3d) 513 (C.A.), a decision of this court – Rosenberg J.A. concluded, at para. 53:

I agree with Justice Galligan. The scheme of the Act does not support the proposition that an application judge can simply redistribute properties among the parties.

He went on to state, at para. 54:

To a similar effect is the recent decision of this court in Thibodeau v. Thibodeau, 2011 ONCA 110, 104 O.R. (3d) 161. In that case, Blair J.A. endorsed this interpretation of the legislative scheme of the Family Law Act, albeit in the context of a bankruptcy proceeding. As explained by Blair J.A. at para. 37, “[s]eparating spouses are not entitled to receive a division of property. … An equalization payment is the chosen legislative default position”. [Emphasis in original.]

[14] Here, by ordering the appellant to buy out the respondent’s share – based on a valuation the appellant strongly disagreed with – the application judge in effect did what this court has said the provisions of the Family Law Act do not permit.

[15] Mr. Franks, for the respondent, submits that while a buyout order may not be available under the provisions of the Family Law Act, it is arguable that the application judge could have made the order she did under the Partnerships Act, R.S.O. 1990, c. P.5.

[16] However, the application judge clearly exercised her authority under the Family Law Act. In those circumstances, the only available remedy is to list the business for sale. Once sold, failing the parties’ agreement concerning any necessary adjustments, an accounting is ordered to determine the parties’ interests in the partnership to the present date and the calculation of each of their net family properties for the purposes of equalization.

[17] In terms of the listing price, while the appellant, through her counsel, Mr. De Lisio, disputed the value the application judge assigned to the partnership, he advised that if this court ordered that the business be sold, the appellant would not object to it being listed initially at $443,000.00.

[18] We do not want to be taken in any way as endorsing the application judge’s valuation of this business. It is problematic, in our view, in several respects, not the least of which is that the application judge simply took two numbers with which she had difficulty and averaged them. There was no proper analysis of the competing evidence of the value of the partnership.

[19] That said, having ordered the sale of the business and in view of the appellant’s concession referenced above, we order that the business be immediately listed for sale at an asking price of $443,000. If, in connection with the sale, there are any issues that arise and the parties are unable to agree, including those the appellant raises in this appeal, those matters should be returned to the application judge for adjudication and ultimately for the final accounting between the parties.

CROSS-APPEAL

[20] In his cross-appeal, the respondent challenges the application judge’s valuation of the partnership. We agree that the application judge’s method of valuation was flawed. The respondent submits that the figure of $443,000 be substituted for the application judge’s figure of $309,000.

[21] Given our disposition of the appeal, it is unnecessary for us to deal further with the cross-appeal.

DISPOSITION

[22] For these reasons, the appeal is allowed and the cross-appeal is dismissed. An order will issue in accordance with these reasons for the sale of the partnership business and subsequent accounting, if necessary.

[23] Brief costs submissions should be submitted to this court by the appellant within 10 days and by the respondent within 10 days thereafter. Counsel should address both the costs of the appeal and the costs below.

“K. Feldman J.A.”

“J. MacFarland J.A.”

“Gloria Epstein J.A.”