COURT FILE NO.: 26922/04

DATE: 2012/07/31

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

LINDA EARLE-BARRON

S. Schneiderman for the applicant

Applicant

• and -

JOHN BARRON

D. Spiller for the respondent

Respondent

HEARD: April 18, 19, 20, 21, August 29, 30, 31, September 1, 2, December 19, 20, 21, 22, 2011; & February 17, 2012

Reasons for Judgment

[1] This was a prolonged, intervallic and acrimonious family law proceeding wherein both parties disagreed on almost every issue and fact.

[2] Fundamentally, there are two sets of issues before the court. The first series includes claims for retroactive child and spousal support, equalization of net family property, a s.5(6) Family Law Act unconscionability argument and costs as a result of a withdrawal of an unrelated wrongful dismissal action.

[3] The second segment is a significant component of the equalization of the net family property claim. This issue revolves around two companies, namely U.S. Consolidators Inc. (“USC”) and U.S. Distributors Inc. (“USD”), and determination of the applicant’s 33.3% share of the fair market value of these companies as at the valuation date. There was extensive viva voce and documentary evidence presented during this trial on this specific question.

BACKGROUND

[4] The parties met in 1995 and they were married on April 29, 1997. For the purpose of this litigation, the parties separated on March 14, 2004.

[5] The parties had two children together: Carter, born April 14, 1998 and Cooper, born March 1, 2000. Since the date of separation, both children and the applicant continued to reside in the matrimonial home, located at 1 Treanor Crescent, Georgetown, Ontario.

[6] The applicant had a 33.3% interest in USC and USD, both of which were logistics companies whose primary purpose was the shipment of goods, principally to the United States, and the provision of warehouse facilities for various corporations.

[7] In the course of undertaking the required analysis, I have taken into account the whole of the evidence. However, I will not attempt to recount all of that evidence in these reasons, but instead emphasize the particular evidence and considerations that form the central foundation for my findings.

MRS. EARLE-BARRON’S EVIDENCE

[8] Ms. Linda Earle-Barron, the applicant, was born in 1963. She has four children, two with Mr. Barron.

[9] She has been involved in the trucking industry for many years, and has extensive experience in that area. Between 1997 and 2000, she worked at National Fast Freight, (“NFF”) a trucking company, where her tasks involved expediting and logistics. While at NFF, she met Bill Yarn and Rob Donohue, who were employed by the company. (The three later banded together to create USC, in circumstances detailed below.)

[10] Mrs. Earle-Barron testified that after the parties were married, Mr. Barron was laid off from Nortel and received a severance package. He was not employed for the following 12 months, and remained at home with the children. Mrs. Earle-Barron claimed that, while she worked full time, Mr. Barron would go out four times a week, and spend $400.00 to $500.00 per week on bingo or other games of chance. Mr. Barron continued to play bingo despite her objections. She testified that Mr. Barron did not contribute to the household expenses once he was laid off from Nortel.

[11] In early 2001, Mrs. Earle-Barron wanted Mr. Barron to get a job. Mrs. Earle-Barron testified that Mr. Barron was hired by her company USC and earned $26,000.00 to $30,000.00 in 2002. His duties at USC involved some administration, and he was later tasked to work in the warehouse. From August 2004 to February 2005, Mr. Barron worked at Honeywell, before being hired by Chrysler in January 2005.

[12] For her part, in 2001, Mrs. Earle-Barron started USC with partners Bill Yarn and Rob Donohue. The three partners each invested $15,000.00 in the new enterprise. She borrowed some of that money from Mr. Donohue. Mr. Barron also provided $10,000.00 to Mrs. Earle-Barron, in order to assist her with the start-up of USC. She testified that this money was returned back to him sometime in 2002 or 2003. There were various corporate and shareholder agreements over the lifespan of USC, involving several parties related to the principals of USC.

[13] Mrs. Earle-Barron claimed that USC did quite well, largely due to her experience and contacts in the trucking industry. She testified that during the early years, USC was profitable because the disparity between the Canadian and US dollars created a competitive advantage for USC. When the US dollar weakened in value vis-a-vis the Canadian dollar, shipments to the United States also declined. The structure of receivables and payables were based on the exchange rates between the US and Canadian currencies, which had a great impact on the profitability of USC. In particular, USC paid its expenses in Canadian funds, yet billed its receivables in U.S. dollars. When the Canadian dollar increased in value vis-a-vis the US dollar, the real costs of USC escalated while its revenues declined.

[14] Mrs. Earle-Barron testified that General Electric Lighting (“GE”) was one of the principal clients of USC, and a main source of its revenue. However, that business terminated in March 2004, which had a negative impact on USC.

[15] During the course of the trial, extensive volumes of financial and corporate documents were filed, and Mrs. Earle-Barron testified about how much money she made from her company. In that regard, she outlined some of the financial transactions involving payments to and from Bill Yarn and Rob Donohue. Mrs. Earle-Barron also testified about corporate expenses and credit card statements, differentiating between personal expenses and corporate expenses incurred during the relevant time period.

[16] The witness produced extensive USC financial statements and other documentation to lay the foundation for the opinion of the valuators. Mrs. Earle-Barron discussed the impact of USC’s principal clients, referred to as the “top 20 bill-to’s”. After discussing the significant loss of GE’s business, she testified that, in 2007, Phillips Electronics (“Phillips”) also ceased being a customer and that too had a significant negative impact on the profitability of USC. She diligently began to look for other business, focusing on the warehousing component of her corporations.

[17] Mrs. Earle-Barron testified about a company known as Client Resources Inc. (“CRI”). CRI was an employee placement company, retained to locate potential new hires for USC. She testified about various invoices and cheques ostensibly exchanged between USC and CRI. The intention was that CRI would provide staff for USC. Pat Yarn, the wife of partner Bill Yarn, was the principal involved with CRI. Mrs. Earle-Barron admitted that some of the CRI invoices were fabricated and that no services from CRI actually were rendered in support of some of these transactions.

[18] Mrs. Earle-Barron commenced another business, USD, but it ceased operations after about one year. USD was a warehousing business and effectively had no assets.

[19] Mrs. Earle-Barron testified about a promissory note owing to Pat Yarn, which was apparently based on a USC shareholder’s resolution.

[20] Mrs. Earle-Barron detailed the value of her personal property before and during the marriage; as well as post-separation. That property included jewellery, furniture, automobiles, household and other personal assets and liabilities.

[21] Mrs. Earle-Barron testified about the matrimonial home. She opined as to the value of the home as of the date of separation, and her rationale in support of her position. In that regard, she testified that, from 1999 to 2004, improvements were made to the home’s kitchen, front walk, landscaping, bathrooms and other areas, and that a swimming pool was added. She testified that the defendant did not contribute financially to any of these improvements.

[22] Mrs. Earle-Barron testified that, in October 2004, she wanted to sell the matrimonial home. She testified about the arrangements to sell the home, and agreed that she listed the home for $459,000 as she wanted to get as much money as possible for the house. She added that there were no offers on the home, and now believes that the listing price was too high. Mr. Barron remained at the home throughout 2004, and until a motion was brought in January 2005 that made arrangements to have him leave the home.

[23] Mrs. Earle-Barron testified that she has sole custody of the children, Cooper and Carter, and they continue to reside with their mother in the matrimonial home. Their schools are situated nearby.

[24] Mrs. Earle-Barron produced documentation to support her position that her income for the relevant years was as follows; 2004 - $113,551.00; 2005 - $151,000.00; 2006 - $102,000.00; 2007 - $162,000.00; 2008 - $100,000.00; and in 2009 - $109,000.00.

[25] On January 20, 2005, Belleghem J. ordered the applicant to pay monthly spousal support of $1,500.00, based on the income of the parties known to the court at the time. Mrs. Earle-Barron testified that Mr. Barron had not disclosed his acceptance of employment with Chrysler; an acceptance which pre-dated the case conference held on January 20, 2005. She testified that Mr. Barron knew by the time of the conference that he was going to be hired by Chrysler. Mrs. Earle-Barron only learned about the Chrysler hiring in 2009 or 2010. She testified that she did not seek to vary her monthly spousal support obligations because she did not receive Mr. Barron’s actual income information until close to the trial date. She testified that Mr. Barron did not file timely income tax returns.

[26] Mrs. Earle-Barron discussed child care expenses, including money paid to the nanny, Helen Talata, and others. She also testified about Mr. Barron’s Ford van, claiming that she co-signed the loan and made payments towards this vehicle purchase. Nevertheless she admitted that the van effectively belonged to Mr. Barron.

[27] In cross-examination, she testified that she made reasonable attempts to sell the matrimonial home, but the real estate market started slowing down in October 2004.

[28] She testified that Mr. Barron had received money from the pay-out from his former employment, and that most of his money went into a “locked-in” RRSP plan. However, $10,000 was advanced to her by Mr. Barron, and these funds were quickly repaid.

[29] Mrs. Earle-Barron was cross-examined extensively about her $75,000 bonus paid to her daughter, Lisa. Mr. Barron admitted that she did not include that amount in her income for the appropriate tax year, or in her financial statements filed for this litigation. She admitted that one financial statement was false. She did not dispute that the Canada Revenue Agency (“CRA”) might not have received all the tax to which it was entitled. She was unable to respond to suggestions that there may have been a scheme in effect to evade the payment of income tax.

[30] Mrs. Earle-Barron agreed that that Mr. Yarn and Mr. Donohue had some concerns about a potential conflict of interest with USC while they were employed at NFF. However, she testified that she personally had no involvement with NFF while she was working for USC.

[31] Mrs. Earle-Barron also was cross-examined at length about her alleged lack of disclosure over the course of time leading up to the trial. This included an alleged failure to comply with numerous requests by Mr. Mozessohn, (conveyed through counsel), for production of further documents needed to prepare his report. Mrs. Earle-Barron did not dispute that her former counsel, Mr. Sullivan, repeatedly asserted that certain requested documents were not going to be disclosed based on relevance. (She added that Mr. Sullivan had to withdraw as counsel due to a conflict of interest.) She admitted she should have been more forthcoming with respect to some of the documents being sought by Mr. Barron.

[32] Mrs. Earle-Barron admitted endorsing some CRI cheques even though those cheques were marked payable to Mr. Barron, (named on the relevant cheques as “Jack Barron”). She nevertheless denied endorsing cheques payable to Mr. Barron without having first advised him. She admitted giving some cash back to Bill or Pat Yarn.

[33] Mrs. Earle-Barron was questioned about the doubling of rent expense ostensibly related to USC’s increased warehouse space. She admitted that USC revenues were the same in 2006 and in 2007, and that USC also enjoyed a period of free rent in 2005 and 2006. She nevertheless claimed that USC’s costs were up while its revenues remained static and then spiralled downward.

[34] Mrs. Earle-Barron was asked about alleged personal expenses which included, but were not limited to, Wal-Mart, a Club Link membership, restaurants, gasoline charges, and other expenses charged to credit cards issued by Canadian Tire, Master Card, Scotia Bank, and Scotia line Visa. There was also questioning about a purported ‘corporate’ expense for a trip to Aruba in 2004.

[35] Mrs. Earle-Barron also was questioned about payments made to Max Persaud, who worked for Phillips and was the principal contact person involved with freight sales. Mr. Persaud and Mrs. Earle-Barron negotiated the various rates to be paid for USC’s shipping services. Mrs. Earle-Barron admitted there were monies paid directly to Mr. Persaud, premised on the notion that such payments were necessary to keep Phillips as a customer. She testified that there were no invoices related to these payments, and that they were based on a percentage of sales. She did not know if Phillips was aware of these payments. When asked if it was a bribe or other improper “under-the-table” payment, she responded that “it was the cost of doing business.” She added that if Mr. Persaud was not paid, “it would be unlikely that USC would receive the Phillips’ business”.

[36] Mrs. Earle-Barron testified that USC ceased operations in January 2011. She acknowledged that she still maintains a relationship with some USC clients, a number of whom will likely remain with her. She testified that she expects to do well in the coming years, but that is not the current reality.

MR. BARRON’S EVIDENCE

[37] Mr. John Barron, the respondent was born in 1962. He completed high school, and then took electronic courses with Nortel. He met Mrs. Earle-Barron in 1995, and they later began cohabitation in Mrs. Earle-Barron’s townhouse. Mrs. Earle-Barron had two children, Matthew and Lisa, from a previous relationship.

[38] Prior to the couple’s marriage in 1997, Mr. Barron was working at Nortel and earned close to $50,000 in 1996. After the marriage, Mr. Barron allowed Mrs. Earle-Barron to have access to all of his income and deal with all of the household expenses.

[39] Mr. Barron testified that he had declared bankruptcy at some point prior to the couple’s marriage. He testified that he nevertheless had cleared all of his debts and obligations at the time of marriage.

[40] Mr. Barron testified that Mrs. Earle-Barron previously had worked for Concord Transport as a Sales Account Executive, and was extensively involved in the freight industry. She met Mr. Rob Donohue and Bill Yarn in 1997, who hired her as a Sales Manager at National Fast Freight (“NFF”).

[41] Mr. Barron also discussed his social activity surrounding bingo. He described visits to casinos by both Mrs. Earle-Barron and himself as routine events, up until the end of the relationship in March 2004. He testified that “normally Linda gave me $750 to play bingo”. When asked where the money came from, he testified that he did not know, “just that she gave it [money] to him”. He testified that, if he won at bingo, he would give her the winnings. He testified that he usually went to play bingo one or two times a week, and perhaps more on occasion. He denied that he spent excessive amounts of money on gambling. He added that Mrs. Earle-Barron agreed to his bingo outings.

[42] Mr. Barron testified about various vacations that the couple took between 1997 and 2004. Specifically, he testified about the Mexican vacation in March, 2004, which was enjoyed by the parties one week prior to their separation. They were accompanied at the time by Bob Sullivan, (who he knew as a friend and lawyer), his wife, and Bill and Pat Yarn.

[43] Mr. Barron testified that after Carter was born in April, 1998, he took paternity leave from Nortel to take care of his son. He testified that Mrs. Earle-Barron went back to work shortly after Carter’s birth. He added that he also took care of Mrs. Earle-Barron’s son, Nathan and described the parties’ respective work schedules and babysitting arrangements.

[44] In August, 1999, the parties moved from Mrs. Earle-Barron’s townhouse to the current matrimonial home in Georgetown. The reason for the move was that Mrs. Earle-Barron wanted a bigger house as they had three children and she was pregnant with Cooper. He testified that Mrs. Earle-Barron handled the purchase of the new residence, as “she was always in charge of the finances”. He testified that he did not contribute to acquisition of the house, but that he paid some of the bills. He testified that the house was purchased for $273,000.00, with a $251,000.00 mortgage on the property. Title to the matrimonial home was placed in his wife’s name, as he was an undischarged bankrupt. He testified that Mrs. Earle-Barron was fully aware of his financial situation and his bankruptcy.

[45] Mr. Barron testified that, after relocation to the new matrimonial home in 1999, Mrs. Earle-Barron again took care of all the household and financial details, bills and groceries, and told him when and where to purchase various items. He testified that he would pay whatever his wife requested. He gave details about his personal efforts towards the upgrading of the home, including deck work, painting, kitchen renovations and flooring work, while at the same time he was taking care of the children.

[46] In February, 2000, he received a buyout from Nortel. He took the buyout and stayed at home to mind the two young boys. His buyout included a pension and a lump sum in the amount of $68,000.00 which was placed into a “locked-in” self-directed R.R.S.P. He described his role from February 2000 to October 2002 as that of a “house husband”, minding all of the children day and night. He testified that Mrs. Earle-Barron never complained about his staying at home, and agreed to this arrangement. He testified that no other child care assistance was provided until the hiring of Helen Talata in 2003.

[47] He testified that Mrs. Earle-Barron left NFF in 2002 and started USC. There were three shareholders, including Mrs. Earle-Barron, who each contributed $15,000 to start up the company. Mr. Barron believed that he gave Mrs. Earle-Barron $10,000 for the start-up costs, and that Mrs. Earle-Barron paid him back shortly thereafter.

[48] Mr. Barron described his personal vehicle, a 2002 Ford Windstar van. He testified that he made all payments for the van, even though Mrs. Earle-Barron had co-signed the loan agreement.

[49] Mr. Barron decided to go back to work after his employment insurance ran out and his wife suggested that he ought to be employed. He testified about his employment at USC, commencing in November 2002. His tasks involved clerical duties, mail, and handling receivables and payables. He worked part-time, and remained the primary care giver for the children during the period from October, 2002 to October, 2004. He added that Mrs. Earle-Barron “lived for the company”, and worked many long hours into the evening.

[50] In May, 2003, Mr. Barron was advised by Mrs. Earle-Barron that he was going to work in the warehouse, and he never questioned this change of duties. In August, 2003, he was making close to $65,000.00 per annum. He testified that his salary subsequently went up to $86,000.00, yet there was no prior discussion about the increase. He testified that Mrs. Earle-Barron’s accountant prepared his income tax returns while he was employed at USC.

[51] Mr. Barron testified about another company Mrs. Earle-Barron created in order to pay the nanny, Helen Talata. As he trusted his wife, he participated in this endeavour. He testified that at one point, he tried to get the CRA to remove his link to that company.

[52] Mr. Barron testified that he knew Max Persaud, who was in control of freight for Phillips. USC had a business arrangement with Mr. Persaud, whereby USC paid Mr. Persaud for the shipping business of Phillips based on a percentage of Phillips’ payments to USC. Mrs. Earle-Barron paid Mr. Persaud with cheques, and Mr. Barron described this arrangement as a “kick-back”. Mr. Barron was aware of these cheques as he personally printed the cheques payable to Mr. Persaud on behalf of USC, at the direction of Mrs. Earle-Barron. Mr. Barron testified that, as far as he was concerned, this was not a commission but money for services paid “under the table”. He testified about other cheques issued by USC to other individuals that were highly suspicious, apparently for services that apparently were either not rendered or were inflated.

[53] Mr. Barron testified about the various personal expenses that Mrs. Earle-Barron paid for on behalf of Mrs. Earle-Barron. For example, gasoline, groceries, Costco purchases, and camping equipment were mentioned. Many of these expenses were paid through credit cards issued to USC. Mr. Barron also described a Club Link golf membership being paid by USC. However, he was not certain if this expense was personal or related to the business of USC.

[54] In examination-in-chief, Mr. Barron testified that he never heard of CRI or the payment scheme involving CRI and USC at the relevant time. After the parties’ separation, Mrs. Earle-Barron told him that she forged his name on the endorsement of cheques from Pat Yarn of CRI, payable to the name of “Jack Barron”. He testified that he saw one cheque made out to “Jack Barron” but did not see any of the other numerous CRI cheques. Mr. Barron emphasized that his legal name is “John” not “Jack”, and that only his close friends refer to him by the latter name. In explaining how he had seen the one cheque from CRI made payable to “Jack Barron”, Mr. Barron testified that Mrs. Earle-Barron gave him this one cheque around Thanksgiving 2003. He was advised that the money really was owed to Pat Yarn, and this was a mechanism to have cash sent from CRI to USC and then back to Pat Yarn. He testified that he did not benefit from this or any other CRI cheque, that the signatures on the various cheques as presented were not his, and he could not say who endorsed those cheques. He testified that none of these cheques went into his personal account; rather, the majority of these cheques were deposited directly into Mrs. Earle-Barron’s chequing account. He testified about his understanding of the various CRI invoices forwarded to USC.

[55] Mr. Barron testified about Mrs. Earle-Barron’s income from USC, including the various bonuses that were paid out. He testified about two cheques written to Rob Donohue and Mr. Yarn and about some other payments and agreements between Bill Yarn, Rob Donohue, their respective wives, and Mrs. Earle-Barron. Although Mr. Barron alleged secret arrangements between these various parties, he also admitted that he was not privy to the details and wasn’t aware of the specifics of those alleged transactions.

[56] Mr. Barron testified about the Pat Yarn promissory note. He claimed he neither saw nor knew of this note prior to the trial. He testified that Mrs. Earle-Barron never discussed this obligation, and he disputed the validity of this note.

[57] In 2004, he was asked to leave the matrimonial home, yet he did not leave until February 2005. He claimed that there was a toxic environment at work after March 2004, and that he was harassed during the remainder of his employment at USC. He added that Mrs. Earle-Barron allowed him to take time off post-separation in order to find a new job. In 2004, he started a job at Honeywell, earning $43,000.00. He testified that, in January, 2005, he moved from Honeywell to Chrysler. He claimed that Mrs. Earle-Barron was aware that he was starting his new employment with Chrysler as he had informed both his wife and her lawyer before the January 20, 2005 family conference. He did not know his initial salary, and by April 2005, he was employed full time with Chrysler.

[58] Mr. Barron disputed Mrs. Earle-Barron’s evidence about her income in that she repeatedly omitted her true income in her financial statements. He added that Mrs. Earle-Barron did not earn $113,000.00 in 2004 as that amount did not disclose all of her benefits and other income, including a company car, cheques from Pat Yarn, and a $75,000.00 bonus nominally paid to Mrs. Earle-Barron’s daughter, but for Mrs. Earle-Barron’s sole benefit. Mr. Barron asserted that Mrs. Earle-Barron made more than double the $113,000.00 she had claimed.

[59] There was a great deal of testimony with respect to Mr. Barron’s income through and for the years 2005 to 2009. He testified about his various tardy filings of income tax returns, and believed he still had not yet filed his tax return for 2010. He provided his available notices of assessments and reassessment from the CRA, and exclaimed - in what can only be described as an understatement – “I am not very good with tax”. Mr. Barron testified that his current tax arrears are in excess of $50,000.00. He testified that his income for the relevant years was as follows; in 2005 - $85,246.00; 2006 - $100,696.00; 2007- $101,265.00; 2008 - $58,603.00 and 2009 - $40,263.00.

[60] Mr. Barron indicated that, when he moved out of the matrimonial home, his financial situation plummeted and his standard of living decreased drastically.

[61] Mr. Barron testified about various family conferences, and motions held during the course of this litigation. He testified about the 2005 family conference wherein the parties arranged for a $3000.00 payment to facilitate his departure from the matrimonial home. He alleged that Mrs. Earle-Barron had deceived the court on several occasions with respect to her income. He testified that he had difficulty making the monthly payment of $1478 for child support, despite his cheques being garnished. He nevertheless testified that his payments of child support were up-to-date and that he had received his spousal support payments from Mrs. Earle-Barron on time. However, he stated that there were arrears in the support owing to him based on Mrs. Earle-Barron’s true income.

[62] In explaining his late production of bank records, Mr. Barron testified that his Scotia Bank chequing account was his primary, and only chequing account. He indicated that he could not produce the documents before the eve of his testimony in mid-trial because he could not find them. Shortly before his testimony, he found the records in his parents’ basement, notwithstanding Mrs. Earle-Barron’s numerous earlier requests for his bank statements.

[63] In cross-examination, Mr. Barron was questioned about his numerous automated bank machine withdrawals over the course of the marriage, particularly during the years: 2002, 2003 and 2004. Mr. Barron disputed the suggestion that the monies were withdrawn specifically for bingo. He stated that the money was used for groceries, gas, food and household expenses.

[64] With respect to the matrimonial home, Mr. Barron said he placed a designation or lien on title believing that Mrs. Earle-Barron was going to sell the home behind his back, such that his equalization payment would be imperilled.

[65] Mr. Barron claimed that he did not know details of the alleged “kickback” or scheme with respect to CRI until Pat Yarn testified during this trial. He testified that once he heard the testimony of Pat Yarn, he recalled Mrs. Earle-Barron telling him that Pat Yarn owed money to her. However, in cross-examination, he acknowledged that he had some awareness of the CRI scheme at the time Mr. Mozessohn was preparing his expert’s report. When confronted on this point, Mr. Barron agreed that he had also written to Ms. Barbara Anderson in 2006, and at that time he mentioned his suspicions to her about the CRI and USC arrangement. He claimed that he had forgotten this fact when he testified during his examination-in-chief.

[66] Mr. Barron also was questioned with respect to the signatures on the various CRI cheques presented to the court. His response in every instance was that the signature was “similar” to his, but that he actually only signed the first cheque. He confirmed that the money from the first cheque went into his bank account and was used to renovate the bathroom in the matrimonial home.

[67] Mr. Barron acknowledged that he did not file timely income tax returns, and that he did not disclose his 2005, 2006 and 2007 income tax returns until March 30, 2009. He was cross-examined at length about his failure to disclose various documents to Mrs. Earle-Barron between 2006 and 2010, and his failure to ever produce his tax returns for the years 2002 to 2004.

[68] Mr. Barron denied that Mrs. Earle-Barron asked him to pay child support from March of 2004. He started paying child support after May 2005, and acknowledged he had a responsibility to pay child support. He stated that he had only $1600.00 when he left the home in March 2004, and that his salary had decreased from $86,000.00 to $33,000.00 per annum. He claimed that he was struggling because of the breakup, and was unable to pay child support in 2004. He also had an obligation to make car payments of $651.00 per month. When asked why he did not pay child support before May 2005, Mr. Barron replied that Mrs. Earle-Barron did not ask for child support and she made more money than he did at the time. Mr. Barron was asked that if he was able to pay $73,000.00 to Mr. Mozessohn for expert fees, why was there not a similar effort made towards the payment of his arrears of child support. He responded that he could not borrow any more money, and that he would have paid his child support obligations had Mrs. Earle-Barron paid him his share of equalization.

[69] Mr. Barron was questioned about the timing of his job offer at Chrysler in January of 2005, and what he told or did not tell Mrs. Earle-Barron. He was questioned about finances and credit cards. Mr. Barron denied reporting anything about Max Persaud in his discussions with Mr. Mozassohn. He also denied telling Mr. Mozassohn about Mrs. Earle-Barron’s $75,000.00 bonus received indirectly from Lisa Earle in 2004.

[70] Interestingly, when asked in cross-examination, Mr. Barron did not know the names of his two sons’ current schools.

[71] Mr. Barron was cross-examined about the various expenses that he claimed were personal to Mrs. Earle-Barron but paid by USC. He was questioned about the American Express Corporate card. He did not know about the various, specific personal expenses listed on this credit card and whether they were related to business or personal matters. He denied the applicant’s assertion that he never contributed to the financial or household expenses.

[72] In re-examination, Mr. Barron testified that he did not have access to a credit card, and that he used either used a bank card or cash. He testified that he only learned of the applicant’s claim for an unequal division of net family property at the time of her motion to amend the application in March 2011. He indicated that he was surprised about the claim, and unfortunately, did not keep careful records because the matter was not raised before that date. In his view, the alleged gambling or bingo activity had never been an issue.

[73] On the topic of child support, Mr. Barron claimed he did not provide timely support because he believed that the children “were not in need”. He felt it was important to finish the litigation process and settle the issues.

ANALYSIS:

[74] I have reviewed the relevant exhibits, the testimony of the witnesses and the numerous reports. I also have considered the written and oral submissions of counsel.

Credibility of the witnesses

[75] In my view, neither Mrs. Earle-Barron nor Mr. Barron was credible. For the most part, I cannot rely on their testimony to the extent that their evidence is not corroborated or supported by other extrinsic or reliable facts.

[76] Mrs. Earle-Barron appeared to minimize her knowledge of various issues involving USC and her participation in the numerous transactions affecting all of the various stakeholders. She was evasive at times with respect to various expenses and related questionable payments to and from USC. While she conceded points in examination-in-chief, (for example, the bogus CRI invoices), I find that these admissions were advanced in an attempt to minimize any subsequent adverse impact on her credibility when these issues would likely be raised during cross-examination.

[77] I find that Mrs. Earle-Barron lied under oath during previous questioning on examinations and in her affidavit.[^1] She withheld her actual income and she did not include her true income for the appropriate tax years in her financial statements prepared for this litigation. (As an example, I refer to the $75,000 bonus.) I am not convinced that she was entirely forthcoming even to her own expert. She admitted that her financial statement filed for this litigation was false.

[78] At times, Mrs. Earle-Barron was inconsistent in her evidence relating to the matters raised in questioning and in her affidavits. For example, she testified that she had no involvement with NFF while she was working for USC. She asserted the legitimacy of the CRI invoices and payments up until the eve of trial. She minimized her involvement in what can only be characterized as shady or suspicious dealings with the various invoices, agreements and payment schemes that appeared to reflect the true business culture at USC during her stewardship. Contrary to the suggestion raised at trial, I do not accept or find that she was acting at the direction of Mr. Yarn or Mr. Donahue.

[79] Mr. Barron’s testimony was effectively impeached in what can only be described as a classic textbook cross-examination by applicant’s counsel. Mr. Barron was wholly inconsistent with respect to most of his testimony, or resorted to responses based on mere guesswork or speculation. Some examples, (of many that could be given), include his testimony concerning such matters as the payments made to Helen Talata, his vehicle and the co-signing of the Ford van purchase, his own banking records and expenses, and his purported knowledge of the inner workings at USC.

[80] Mr. Barron also contradicted himself on the issue of his knowledge of the CRI transactions. He is not credible when he testified to his purported lack of knowledge of the CRI scheme on prior occasions, including when Mr. Mozessohn was preparing his report. His evidence was wholly inconsistent and self-serving when the document he wrote to Ms. Barbara Anderson was presented to him in cross-examination, and his response was that he did not recall when he wrote it. Counsel for the respondent attempted but was unsuccessful in rehabilitating the witness with respect to his evidence.

[81] I also find that Mr. Barron exhibited limited insight when he claimed his inability to borrow funds to satisfy his ongoing child support obligations, but would have paid his child support had Mrs. Earle-Barron paid him first. Notwithstanding that responsibility, Mr. Barron borrowed money to pay his expert to advance this litigation. In an attempt to address this inconsistency and justify his inaction on the issue of child support, he opined without any foundation that the children did not really require child support from him as they were not in need.

[82] Mr. Barron’s testimony was speckled with innuendo and conjecture as he commented on the various expenses paid for by USC. He vacillated on the issue of his income and repairs to the home. He changed his version about his control over funds and the payment of household expenses. He did not know to what extent Mrs. Earle-Barron used the golfing privileges at Copper Creek for corporate clients. He guessed whether the nanny was or was not required to care for the boys when his two sons were at various ages. While I could go on for pages with examples, suffice it to state that Mr. Barron’s testimony was replete with inconsistencies and I find that his credibility is extinguished except where there is reliable corroboratory evidence.

[83] It should be noted that this case does not turn solely on the credibility of the parties, but the unreliability of their evidence is a significant factor in my findings.

Income Issues

[84] The applicant submits that Mr. Barron has no credibility on the issue of income, in that he gambled away his money, his financial records are scant, he didn’t file tax returns and his evidence is fraught with inconsistencies.

[85] In turn, the Respondent submits that Mrs. Earle-Barron did not disclose her $75,000.00 bonus received in 2004 at the case conference held in January 2005, that this fact was not discovered until 2010, and that Mrs. Earle-Barron never corrected her evidence or filings in subsequent court proceedings. He submits that Mrs. Earle-Barron’s true income greatly exceeded $200,000 for all the years from the date of separation to 2010.

[86] I find that both parties failed to disclose their actual incomes during the course of this litigation for a variety of reasons not limited to posturing during the various case conferences and motions. I find that both parties are to be faulted in this regard.

[87] I find that Mr. Barron failed to disclose his income with respect to the Chrysler employment and purposely did not state his true earnings for the purposes of support. I find that he failed to correct his evidence in relation to such matters. While it was clear that the Chrysler job involved a provisional term of employment, Mr. Barron was aware of the increase in his income. Such problems are further compounded by Mr. Barron’s failure to file his income tax returns in a timely manner. I accept that Mrs. Earle-Barron did not know the true state of Mr. Barron’s income until much closer to the trial date.

[88] Equally, I find that Mrs. Earle-Barron also persistently withheld her true income from Mr. Barron at various material times during this litigation. I also find that Mrs. Earle-Barron failed to provide disclosure of her actual sources of income and other benefits or payments in conjunction with her involvement with USC and related parties or businesses.

Retroactive Spousal Support to the date of trial

[89] From 2001 to 2004, Mr. Barron worked at USC full time, earning anywhere from $33,000 to $86,000. There appeared to be an income splitting arrangement in place. Mr. Barron remained in the matrimonial home until February 2005. I do not accept that Mrs. Earle-Barron made it difficult for Mr. Barron to leave USC. The respondent submits that additional retroactive spousal support from the date of separation to post 2010, and up to the time of trial is owed to him, based on the true income of Mrs. Earle-Barron disclosed during this trial.

[90] I find that there is no evidence before me from Mr. Barron to support any claim for spousal support on a compensatory or needs basis. Further, given that both parties withheld their true incomes from the other over the course of this litigation, I find that Mr. Barron is not entitled to any additional retroactive spousal support (over what had been previously ordered) from the date of separation to the commencement of trial.

Overpayment of Spousal Support

[91] Notwithstanding the aforementioned, and based on previous court orders, Mr. Barron’s entitlement to spousal support up to 2010 is conceded by Mrs. Earle-Barron. Therefore, the issues before me are the imputation of the parties’ income over the period post-separation, and the quantum of spousal support which is either owing to Mr. Barron or owed as a result of an overpayment by Mrs. Earle-Barron.

[92] I accept that Mr. Barron failed to disclose his true income and benefitted from an overpayment of spousal support for the years 2005 to 2010. I am satisfied that Mrs. Earle-Barron’s income statement and spousal support schedules presented to the Court during final submissions are reliable and supported by the evidence. I accept the various scenarios provided by the applicant. I am satisfied that the “Overpayment II” scenario, (which includes the amounts of $14,069.00 for 2005; $16,272.00 for 2006; $11,112.00 or $16,488.00 for 2007; $13,398.00 for 2008; $12,036.00 for 2009 and $5,232.00 for 2010), accurately states the amounts owing to Mrs. Earle-Barron by Mr. Barron as an overpayment on spousal support.

[93] I find that Mr. Barron’s true income was only disclosed close to the commencement of trial, and that this lack of timely disclosure was compounded by his dogged failure to file timely tax returns. I am satisfied that the average of these overpayment amounts, as shown in Mrs. Earle-Barron’s spousal support chart, is appropriate. The average gross amount of overpayment is $74,807.00. When I deduct $25,500.00 for the spousal support arrears, we are left with a net overpayment of $49,307.00 payable by the respondent to the applicant.

Retroactive Child Support

[94] The parties agreed that there was retroactive child support owing by Mr. Barron. The remaining issues are the appropriate quantum, and when the commencement of such support ought to have occurred.

[95] Mr. Barron’s testimony that there were no arrears in child support is contrary to Mrs. Earle-Barron’s position that approximately $17,000.00 remains outstanding.

[96] In determining whether to make a retroactive award of child support, a court should strive for a holistic view of the matter and decide each case on the basis of its particular facts. I should consider the reason for the recipient parent's delay in seeking child support, the conduct of the payor parent, the past and present circumstances of the child, (including the child's needs at the time the support should have been paid), and whether the retroactive award might entail hardship.[^2]

[97] An order for child support based on the information known to the court at the time was made on May 13, 2005 by Clarke J. However, the intent or effect of that order was the subject of debate between the parties. Subsequently, Dunn J.’s order for interim custody in favour of the applicant was made in December 2006. The child support order was varied by Coats J. on April 6, 2010.

[98] Mr. Barron’s position is that the appropriate amount of retroactive child support is $10,400.00. Mrs. Earle-Barron argues that Mr. Barron owes $16,000.00 in arrears, and that the shortfall in child support obligations equals $28,131.00.

[99] I am not satisfied with the respondent’s submissions and schedules relating to retroactive child support (and for that matter, spousal support). In my opinion, much of the information and figures referred to in the respondent’s materials are not substantiated by the evidence. For example, Mr. Barron uses a constant figure of $200,000.00 for Mrs. Earle-Barron’s income for all of the relevant years. This number appears to be based on conjecture, and I find that Mr. Barron has not substantiated his calculations based on the evidence adduced at trial.

[100] In contrast to the respondent’s submissions, I accept the applicant’s trial brief materials and submissions on the issue of retroactive child support. I accept her position regarding the necessity of hiring a nanny to mind the two boys even as they approached their pre-teen years, as I do not have reliable evidence to contradict Mrs. Earle-Barron’s assertions. In my view, Mrs. Earle-Barron’s calculations in her support guidelines chart are firmly established by the testimony that I accept and the documentary evidence adduced at trial.

[101] I have considered the criteria and find that retroactive child support ought to be paid based on the child support payments schedule presented to the court by the applicant. While I accept the applicant’s position on retroactive child support, I nevertheless part company with Mrs. Earle-Barron in relation to the claim for child support for the 2004 calendar year.[^3] At the time, Mr. Barron was still living in the matrimonial home, and I find that he was caring for the two children and contributing equally to the care and well-being of the children. I am satisfied that he was actively involved in the care of the children and that there were joint parenting responsibilities.

[102] As mentioned, I am not prepared to award retroactive child support for 2004. It was conceded by Mr. Barron that he owed $16,223.00 in child support arrears. Based on the remainder of the calculations in the applicant’s chart, I accept that the retroactive child support owing by the respondent to the applicant is $16,511.00.

Promissory Note

[103] I have reviewed the promissory note dated December 15, 2003. The amount referred to in the note is $54,000.00. The indicated borrower is Mrs. Earle-Barron and the indicated lender is Patricia Yarn. While I am satisfied that Mrs. Earle-Barron received $54,000.00 from Ms. Yarn in 2003, the question remains whether this note in fact relates to a loan or something else. In my consideration of the Bills of Exchange Act, R.S.C. 1985 C.B-4, I note the evidence discloses that, subsequent to December 2003, there was never any demand for repayment, and no payments against the interest or principal were ever made with respect to the impugned note.

[104] The respondent argues that this “promissory note” was a gift or some other transfer of money, but not a loan. Frankly, the evidence on this entire issue is somewhat lacking. I have reviewed the document and the evidence of Mrs. Earle-Barron and Ms. Yarn. There is no other reliable viva voce evidence to rebut the assertion that the document is a genuine promissory note, confirming the existence of a loan. While I remain concerned about the legal nature of this document and the true intent of the parties, given the evidence adduced at trial, I am persuaded, on a balance of probabilities that this document is a true promissory note and for the purposes of equalization is a loan instrument. Therefore, it is an appropriate deduction on the applicant’s NFP statement.

Matrimonial Home

[105] The applicant submits that her testimony combined with that of Ms. Jackson be accepted, and that the value of the matrimonial home for equalization purposes be determined at $404,000.00.

[106] The respondent argues that the house was listed for sale at $459,000.00, and that Mrs. Earle-Barron simply did not make reasonable efforts to sell the home for that proper price. He argues that the listing price of $459,000.00 is the appropriate amount for the purposes of equalization.

[107] Ms. Cheryl Jackson testified on behalf of the applicant. She has been a real estate agent for over 20 years. She was the agent involved in the attempt to sell the matrimonial home in 2004. She described her training, her history and her involvement with the sale of the matrimonial home, including her opinion as to its value.

[108] She described the market in Georgetown and, in particular, the area surrounding the Trainor Crescent home. Ms. Jackson felt that there generally was a strong market, but that the market was not reacting favourably to the listing of the home. She completed a comparative market analysis.

[109] Ms. Jackson listed the matrimonial home by meeting with Mrs. Earle-Barron on October 1, 2004. There were no offers in the first 90 days. At the end of October 2004, the price was reduced from $459,000.00 to $439,000.00. Again, there were no offers.

[110] Mr. Appleby testified on behalf of the respondent. Mr. Appleby completed an appraisal report in January 2010. Mr. Appleby testified that his conclusions were based on representations made by Mr. Barron, including the nature and timing of various improvements to the home. His opinion was that the home was valued at $459,000.00 as at March 2004.

[111] I find that Mr. Appleby’s evidence was general and unhelpful. He did not have reference to his notes regarding dates and specifics of the various improvements made during the course of the relevant dates. He did not have supporting documentation to assist him in reaching his conclusions. With all due respect to Mr. Appleby, I am not convinced that he had the best opportunity to provide his opinion based on details provided by Mr. Barron, as the foundation for such information was not reliably established in the evidence.

[112] I accept Ms. Jackson’s evidence regarding her efforts to sell the property. Ms. Jackson indicated that while the property was initially listed for $459,000.00, she felt at that time that the property was listed at too high a price. She felt that the appropriate price range was between $404,000.00 and $410,000.00, and believed that the house would sell for about $395,000.00. Unfortunately, the property did not sell. According to Ms. Jackson, the assessed value for the property as at March 14, 2004 was $404,000.00.

[113] While it is true that the value of the house on the actual valuation date has not been fully ascertained, the best evidence before the court is the efforts of the realtor and her knowledge of this particular home in 2004. In this regard, I prefer the evidence of Ms. Jackson, who actively marketed and attempted to sell the property in 2004. I accept that, for the purposes of equalization the value of the matrimonial home is $404,000.00.

THE VALUATION OF USD AS AT MARCH 14, 2004

[114] Both parties concede that, for the purpose of equalization, the value of USD is nil.

THE VALUATION OF USC AS AT MARCH 14, 2004

Position of the Parties

[115] The applicant submits that as per the expert opinion of value in the Taylor Leibow (“TL”) report prepared by Brad Borkwood dated September 23, 2010, the value of USC at March 14, 2004 should be accepted as $257,000.00. She submits that the amount of $257,000.00 should be reduced to either $103,000.00 or $167,000.00, (the mid-point between $231,000 and $103,000) in accordance with TL’s addendum report dated May 31, 2011. She further submits that value of $103,000.00 or $167,000.00 should be reduced to nil, on the grounds of unconscionability within the meaning of s. 5(6) of the Family Law Act.

[116] The applicant submits, in particular, that when evaluating the company the court must consider the post separation market decline from the date of separation going forward. Mrs. Earle-Barron argues that USC has a zero or diminished value, due to the decline of the US dollar, which dramatically affected USC’s market. Although USC was earning some revenue post separation on the warehousing component, the trucking portion of the business was in serious decline due to the fluctuation in the currency discrepancies.

[117] The applicant argues that there was no opportunity to dispose of the assets of USC before this decline occurred. She submits that it would be unconscionable to pay more than the net worth due to the market decline. The applicant urges the court to consider and apply s. 5(6) of the Family Law Act.

[118] Finally, the applicant suggests that Mr. Barron knowingly participated from the various transactions, including those vis-a-vis CRI, and as he was fully aware of these transactions he directly or indirectly benefitted from them.

[119] For his part, the respondent submits that the court ought to accept the expert opinion of value of Brian Mozessohn of Schwartz, Levitsky, Feldman (“SLF”), and that the value of Mrs. Earle-Barron’s 1/3 interest in USC at the valuation date ranged between a low of $445,000.00 and a high of $515,000.00, arriving at a mid-point of $480,000.00.

[120] The respondent also submits that no reduction should be applied to the value of USC as a result of the Addendum report produced by TL, which purported to revise their opinion based upon certain facts, (alleged to have been known to Mrs. Earle-Barron prior to TL’s initial report). The respondent further submits that the value of USC ought not to be “further reduced” by the operation of s. 5(6) of the Family Law Act (“FLA”).

[121] The respondent argues that the applicant took steps to deceive the CRA in the course of paying out bonuses and income to the shareholders. He contends that the lack of timely and relevant disclosure impeded his expert’s assessment of USC and that she misled her own expert with respect to certain transactions.

The experts

[122] Brad Borkwood of TL was called as a witness by Mrs. Earle-Barron, and Brian Mozessohn of SLF was called by Mr. Barron. Both expert witnesses are Chartered Accountants, Chartered Business valuators and they are members of the Canadian Institute of Chartered Business Valuators. These experts were helpful to the court, however, their opinions failed to narrow the issues in dispute.

[123] Mr. Mozessohn is the president of SLF Valuations Inc. and has acquired 23 years experience in areas that include asset and income valuations and litigation accounting. In his current practice, Mr. Mozessohn completes business valuations for various industries in contexts such as purchase, sale and mergers, shareholder and partner buy-outs or disputes, income tax and estate planning, as well as matrimonial disputes. He previously has been qualified as an expert witness before various courts and other adjudicative panels.

[124] Mr. Borkwood also has extensive qualifications and experience. He is a Senior Manager with TL. He has approximately 10 years experience in accounting, audits, business valuations and litigation support.

[125] I have considered both valuators’ approaches, analysis, reports and testimony with respect to their conclusions and opinions.

The Taylor Leibow Reports

[126] The respondent submits that the first finalized TL report of June 29, 2010 valued Mrs. Earle-Barron’s interest in USC at $197,000.00 However, the initial draft of that report presented to Mrs. Earle-Barron by TL valued her interest at $212,000.00.[^4] The respondent submits that the $15,000.00 reduction followed an April 8, 2010 email from Mrs. Earle-Barron to senior consultant Christine Sawchuk and Brad Borkwood of TL. In the email, Mrs. Earle-Barron noted that she had retained new counsel who had communicated with TL.[^5]

[127] The applicant disputes the respondent’s submissions that the Court should draw an adverse inference from the fact Mr. Borkwood discussed his draft report with her and subsequently made a change to his conclusions. In that regard, Mrs. Earle-Barron refers to a document entitled “The Use Of Draft Reports”, issued by the Canadian Institute of Chartered Business Valuators. [^6]

[128] In cross-examination, Mr. Borkwood testified that two things contributed to his change of the risk assessment factors in finalizing his report. The first was Mrs. Earle-Barron’s April 8, 2010 e-mail, wherein she made comments emphasizing USC’s reliance on her. The second was the applicant’s answer to item 14 in a questionnaire where, Mrs. Earle-Barron’s description of USC’s reliance on her provided Mr. Borkwood with additional “insight”. The applicant submits that while in the April 2010 email she complained to Mr. Borkwood about the indicated minority discount, that figure was left unchanged.

[129] In arriving at a reduction in their first finalized report, as compared to the draft report, TL applied a multiple of 4.0 to 4.6 to expected earnings rather than the stated multiple of 4.4 - 4.9 as noted in their first report. While it may be debatable whether there was any new information provided to TL by Mrs. Earle-Barron regarding risk, the risk factors discussed at para. 9.3.4 of the finalized TL report of June 29, 2010 remained the same as those indicated in the draft report, but the additional return on investment that would be required by the purchaser on the equity portion of the total investment in the company’s enterprise value was adjusted by TL to 12-16 percent.

[130] In my view, Mr. Borkwood was unable to adequately explain why changes were made to his analysis following the contact he had with Mrs. Earle-Barron including the April 8, 2010 email. If there was new information provided to justify a change, it does not seem to have been provided in subsequent TL reports or referred to in any substantial and reliable manner detail during this witness’ testimony.[^7] This raises a very serious question in my mind as to whether Mr. Borkwood demonstrated a willingness to adjust results according to the wishes of the client. In any event, by the conclusion of Mr. Borkwood’s testimony, I am satisfied that, even if I were to accept his opinion as to USC’ value, I would find it to be $276,000.00 as opposed to $257,000.00 based on various normalization adjustments that he conceded to counsel during his testimony.

The Schwartz, Levitsky, Feldman (SLF) Reports

[131] In arriving at his opinion as to the maintainable earnings of the company, the applicant submits that Mr. Mozessohn exercised his discretion in a manner that rendered his opinion unreliable, as he breached virtually every proscription as set out in the case of Regina v. Inco.[^8] She argues that the expert took on the role of advocate and in the course of doing so applied flawed reasoning, which was conceded by him in cross-examination;[^9] that he made assumptions for which he had no support and did so without any attempt to find support, which was done by him as a result of being influenced by the exigencies of litigation;[^10] that he failed to state certain assumptions on which his opinion was based and omitted material facts which could detract from his opinion; that even when he reached conclusions similar to Mr. Borkwood, his flawed reasoning rendered his conclusion suspect; and that he used hindsight to rely on events after March 2004 to buttress his opinion as to USC’s value.

[132] Much of the focus of the cross-examination dealt with the issue of the lack of disclosure and information allegedly not provided by Mrs. Earle-Barron. To an extent, Mr. Mozessohn was handicapped by the lack of timely disclosure sought during the course of this litigation leading up to the trial date. Mr. Mozessohn’s responses were premised on the information he had at the time. I am not prepared to diminish the reliability of Mr. Mozessohn’s testimony based on the lack of productions. Much of the absent financial information and documentation ought to have been produced by the applicant when it was requested.

Conclusion with respect to the experts’ opinions.

[133] In my assessment of the evidence of all the witnesses, and in particular, the testimony and the demeanour of Mrs. Earle-Barron, (to the extent that I am able to do so), I am satisfied that the applicant did not merely provide information to Mr. Borkwood, rather she directed, or at minimum influenced, a change to the draft report so that the finalized version would conform to her expectations as to USC’s value. I say this as I am persuaded that Mrs. Earle-Barron is a focussed and determined individual who demonstrates controlling tendencies. I am not persuaded that Mr. Borkwood was exercising his independent judgment; rather I find that he made efforts to accommodate his client’s wishes.

[134] Another factor that affects the weight of Mr. Borkwood’s evidence is my conclusion that Mr. Borkwood suffered from the lack of timely and relevant information which lead to him having to produce his addendum report. This report appeared to me to thrown together at the last moment.

[135] I also found Mr. Borkwood’s testimony to be somewhat scripted. I have some difficulty accepting the objectivity of his calculations and valuations, and I cannot give his evidence as much weight as I give to that of Mr. Mozessohn.

[136] In contrast, SLF did not alter its conclusions upon a review of its draft report with Mr. Barron. Even if there were changes, I am satisfied that Mr. Barron did not exert any undue influence, given his minor role and limited knowledge of the state of affairs at USC.

[137] Mr. Schneiderman, on behalf of the applicant conducted what can only be described as an extremely effective and potent cross-examination of Mr. Mozessohn. However, notwithstanding this effort, I cannot accept the applicant’s submission that Mr. Mozessohn’s opinion, calculations and his normalizing adjustments were flawed due, in part, to an allegation that he was assisting Mr. Barron in securing a larger equalization payment by enhancing the value of USC.

[138] In my opinion, Mr. Mozessohn properly conceded points raised by counsel in cross-examination. He provided reasonable explanations for his conclusions. I am satisfied that, where Mr. Mozessohn referred to hindsight in reference to some of his conclusions, he did so in an appropriate manner and in accordance with the practice and principles of a certified business valuator.[^11] I reject any contention that Mr. Mozessohn acted as an advocate for Mr. Barron.

[139] Aside from his impressive credentials, I find that Mr. Mozessohn assiduously examined or attempted to examine primary sources such as USC financial statements, supporting documentation, and other relevant financial material to the extent that such material or information was provided to him.

[140] Based on my assessment, I do not find Mr. Borkwood as credible as Mr. Mozessohn. Where their evidence is in conflict, I prefer the evidence of Mr. Mozessohn, and accept that the starting point for the fair market value of USC is premised on the SLF report and opinion of value.

Valuation Approach

[141] The applicant submits that Mr. Mozessohn approached his valuation by first normalizing the earnings of USC for the first two fiscal years ending July 31, 2003, the 9-month period from August 2003 to April 2004, and the fiscal year ending July 31, 2004.[^12] He then made adjustments to the normalized earnings, took those amounts, and used multiples of 4.25 and 4.75 to arrive at the estimated “en bloc” value of $1,340,000.00 and $1,573,000.000. Mr. Mozessohn then applied a 10% minority discount to Mrs. Earle-Barron’s one-third interest to arrive at a mid-point value of $480,000.00.

[142] The applicant contrasts the approach taken by SLF. Mr. Borkwood also normalized the earnings of USC and applied a multiple to the maintainable earnings. However, he did not treat it as an ““en bloc”” sale but as a sale of Mrs. Earle-Barron’s one third interest, and then he applied a discount rate of 15 percent. The respondent submits that Mr. Borkwood did not assume USC could replace the revenue lost by removal of GE’s business, unlike Mr. Mozessohn who employed two competing assumptions, namely the permanent loss of GE and the replacement of GE with a like customer.

[143] The respondent submits that SLF considered but ultimately rejected the approach of TL whereby TL applied a multiple to EBIT or EBITDA (earnings before interest, tax depreciation and amortization) to arrive at an enterprise value. [^13]

[144] In O’Neill v. O’Neill the Court described, in the following terms, the methodology used in determining a company’s value.[^14]

There was substantial agreement between the experts as to the appropriate methodology to be employed in valuation of 24 Hour Toner. The goal was to ascertain the fair market value, or, the highest price obtainable, expressed in terms of money or money's worth in Canadian dollars, in an open and unrestricted market between informed and prudent parties, acting at arm's length, with neither party under any compulsion to transact (para. 5, Valuation Estimate of Mr. O'Neill's interest in 24-Hour Toner Inc. as at June 3, 2001, prepared by Ms. Russell on May 5, 2004). As Ms. Russell explained, the earnings method is used where the business being valued is earning a fair return on its capital employed and the hypothetical purchaser wishes to acquire the future indicated earnings generated by the enterprise. This presumes that the buyer is purchasing the business as a going concern, as was the case here. Accordingly, the earnings value of a going concern is based upon the yield to an investor at the desired rate of return on his investment, having regard to a number of factors. The reported earnings, usually for the previous three to five years, generally serve as a guide to the future, and the value of the business is determined on this basis. These amounts are adjusted for:

(a) extraordinary and non-recurring items that would otherwise distort the estimate of future profits;

(b) non arm's length expenses that are of an uneconomic nature; and

(c) consistency with the operating conditions expected to prevail in the future.

[145] In O’Neill, the multiple is described as being typically applied “to the after tax maintainable earnings to determine the value (of a company) as a whole on a cash flow basis before taking into account redundant assets or liabilities”. In O’Neill, Harvison Young J. went on to state that: [^15]

The multiple, or price/earnings (cash flow) ratio, is a risk/reward indicator giving the rate at which investors are capitalizing earnings (cash flow) for a share at any given time, and is a concept widely used in the study and examination of price and values of publicly owned corporate securities by financial advisors, security analysts, stock brokers and others interested in the valuation of common shares. This multiple, which is the inverse of the rate of return that a prospective purchaser would consider acceptable on an investment in 24 Hour Toner, is applied to the after-tax maintainable earnings to determine the value of 24 Hour Toner as a whole on a cash flow basis (before taking into account redundant assets or liabilities, the tax shield benefit from existing assets and certain other items). Put simply, the general idea is that the higher the risk, the higher the return that an investor would want to compensate for that risk.

In the course of the trial, the distance between Mrs. Earle-Barron and Mr. Barron on this issue was narrowed considerably. In her report, Ms. Russell, by applying multiples of 3.5% and 4.5%, was concluding that an investor would want an after tax return in the area of 22%-28%. In her report, Ms. Blake applied a multiple of 2.5% to 3.0%. This implies a very rapid pay-back to investors in the order of a rate of return in the range of 33%-40%, meaning that a purchaser would recover his or her capital in just over two years. Both Ms. Blake and Ms. Russell agreed that the choice of the appropriate capitalization rate is as much an art as a science, and has a strong subjective element. The difficulty in this case, particularly when considering the matter from the vantage point of 2001, is assessing that level of perceived risk.

[146] Mr. Mozessohn’s valuation approach was to use a capitalized, maintainable after tax earnings technique, similar to the approach taken by Mr. Borkwood. However, the methodology applied by Mr. Mozessohn differed in two significant ways from the TL report, in that Mr. Mozessohn used an ““en bloc”” approach which contemplated the sale of 100 % of the shares of USC without any consideration of the terms of the shareholders agreement; whereas Mr. Borkwood valued Mrs. Earle-Barron’s share of USC and based his value on a one-third interest but also took into account the restriction on transfer of shares, together with the restriction on management which also required the concurrence of the USC shareholders. [^16]

[147] It appears that SLF used a capitalized earnings approach by capitalizing USC`s normalized earnings with an earnings multiple. TL used a capitalized earnings approach but proceeded by estimating earnings of USC before interest expense and then deducted bank expense from the enterprise value.

[148] According to Mr. Mozessohn, the approach taken by TL is typically used in situations where a company has interest bearing debt capital of a material nature and its capital structure is not necessarily similar to other companies in the same or similar industry. The balance sheet of USC as of the valuation date shows only bank debt and no other third party interest bearing debt. As a freight forwarder, USC was non capital intensive. Mr. Mozessohn opined that while TL`s approach was not incorrect, it may have been inappropriate in this case. [^17]

[149] I am satisfied that both experts went through a process of normalizing earnings of USC and applied a multiple. Having reviewed the various approaches to the documentation filed and the testimony of the experts, Mr. Borkwood has not satisfied me as to his rationale for his selected value approach over that chosen by Mr. Mozessohn.

[150] I reject the applicant’s argument to the effect that the methodology applied by Mr. Mozessohn, (in that he used an “en bloc” approach which contemplated the sale of 100% of the shares of USC and failing to take into account the restriction on transfer of shares), in some manner negates the reliability and potency of Mr. Mozessohn’s opinion. For the reasons mentioned throughout this judgment, (including but not limited to the questionable actions of the shareholders), I am not persuaded that the restriction engaged by the shareholders agreement, (even if I were to accede to the validity of such an agreement), in of itself impacts on the soundness of Mr. Mozessohn’s opinion. To the contrary, I find that Mr. Borkwood, in employing his approach, effectively diminished the value of USC.

[151] In order to assist the court, Mr. Mozessohn prepared a summary of differences between the opinions of value offered by Mr. Borkwood and himself as depicted in Exhibit# 69. The SLF valuation was based on a revised report dated March 31, 2011, and opined that Mrs. Earle-Barron’s interest in USC was worth $480,000.00. Mr. Borkwood’s revised report dated September 23, 2010 (prior to any consideration of the CRI and Max Persaud issues) was $257,000.00. [^18]

[152] Mr. Mozessohn broke down the $223,000.00 difference between the two valuations with various headings known as normalization adjustments. [^19] These amounts included the following: $28,000.00 for the permanent loss of the GE Lighting business; $27,000.00 for personal expenses; $22,000.00 with respect to bad debt added back to valuation; $21,000.00 for rent; $16,000.00 regarding the foreign exchange, $9,000.00 with respect to professional development and training; $33,000.00 regarding income tax rate differential; $44,000.00 representing the difference between the valuators weighted average cost capital; and $15,000.00 with respect to the minority discount differential. Those amounts totalled to $215,000.00 and the remaining $8,000.00 of the global difference reflected other sundry or nominal differences which included computer expenses, insurance, repairs and maintenance, telephone and professional fees, donations and management remuneration.

[153] Generally speaking, my preference is towards to Mr. Mozessohn’s opinion as to Mrs. Earle-Barron’s interest in USC as at March 14, 2004. However, I find that some of the normalized adjustments must be deducted from Mr. Mozessohn’s opinion of value of $480,000.00, as they are either not fully substantiated by the evidence or were effectively challenged by applicant’s counsel. Specifically, I am satisfied that the calculations arrived at by Mr. Mozessohn in describing the differences between the SLF and TL valuations with respect to foreign exchange, management remuneration, professional development and training, the minority discount and the weighted average cost of capital are reliable. I find that there is evidence to support Mr. Mozessohn’s conclusions with regard to the differences in these normalization adjustments.

[154] However, I do not accept Mr. Mozessohn’s opinion in five areas of his normalization of adjustments. These fields include: GE Lighting Permanent Loss, a portion of the Personal Expenses, Bad Debt Add Back, rent, and the income tax differential, plus some of the sundry normalization adjustments. Leaving aside for the moment the s. 5(6) unconscionability argument, I now turn to the specific differences between the valuators’ opinions.

Minority Discount

[155] Both valuators used a technique to recognize that the objective was Mrs. Earle-Barron’s one third minority interest in USC. Each valuator applied a percentage discount at the end of their respective calculations. TL applied a 15% “non-controlling discount” and specifically noted that approval of 2/3 of the shareholders was required to dispose of shares pursuant to the shareholder agreement.

[156] The applicant submits that Mr. Borkwood normalized the earnings of USC and applied a multiple to the maintainable earnings. The difference was that he didn’t treat it as an “en bloc” sale but as a sale of Ms. Earle-Barron’s one-third interest which, according to the applicant made his minority discount (15%) a more reasonable reduction. Mr. Mozessohn acknowledged that the difference in the minority discount was that he chose a rate of 10% compared to Mr. Borkwood’s selection of 15% and, as mentioned, the fact that Mr. Mozessohn did not take into account the restriction on disposition of the USC shares.

[157] The applicant submits that Mr. Mozessohn applied a 10% minority discount to Mrs. Earle-Barron’s one-third interest in USC, but he did so by applying it to the “en bloc” values (high and low). He added the redundant assets which he determined to be $144,000.00. Mrs. Earle-Barron further suggests that Mr. Mozessohn disregarded a significant risk in that his entire approach to the valuation of USC was premised on the assumption that all shareholders would agree to a 100% sale of the shares. The applicant submits that Mr. Mozessohn acknowledged in cross-examination that his assumption gave no weight to the potential risk that all the shareholders would not agree to the sale despite the clause in the shareholder’s agreement that provided for a restriction on disposition of shares during the period that the corporation was being valued.[^20]

[158] The respondent argues that the applicant’s assertion that TL did not treat it as an ““en bloc”” sale is inconsistent with TL’s report. The respondent argues that an informed and prudent purchaser would value Mrs. Earle-Barron’s interest in USC without giving any weight to the restrictions contained in the Shareholders Agreement. The respondent claims that it would be inconsistent, with a notional sale of Mrs. Earle-Barron’s interest to consider the Shareholders Agreement.

[159] In order to value a business as a going concern, the court assumes a hypothetical purchaser who is at arms’ length and informed in an open and unrestricted market. The earnings method is used where the business being valued is earning fair return on its capital employed and the purchaser wishes to acquire the future indicated earnings generated by the enterprise.

[160] Based on my assessment of the evidence, and I said in paragraph 150, I am prepared to give little weight to the existence of the restrictions in the shareholder agreement as relevant to the appropriate discount. Mr. Borkwood noted a minority interest discount can range from 10% to 40%. In cross-examination, Mr. Mozessohn testified that as Mrs. Earle-Barron had enjoyed the day to day control over the company, and her trust agreement with the other shareholders was irrelevant to the minority discount calculation because the agreement would not have any bearing on a 100 % “en bloc” sale. He maintained that based on his 23 years as a business valuator, his view that a minority discount of between 5 - 20% would be appropriate for a 1/3 interest.[^21] SLF calculated the difference in value between the two valuators and found that the disparity in opinion on the issue of the minority discount totalled $15,000.00.

[161] I accept Mr. Mozassohn’s minority discount and his rationale. I am satisfied that SLF considered the existence of the shareholder agreement, that Mrs. Earle-Barron held the other shareholders’ shares in trust and that she exerted a degree of influence and control over the ongoing corporate operations of USC. I am not persuaded that the shareholders agreement would impact on the valuation of the company for purposes of this exercise.

General Electric Lighting

[162] The expert’s opinions relative to their approaches in valuing the GE account was calculated as a $28,000.00 differential.

[163] GE and USC had a written contract for one year commencing June 17, 2003 and which renewed automatically year to year and was cancellable by either party on 90 days written notice. When asked to provide correspondence regarding alleged “termination” of the GE contract, Mr. Sullivan, (USC’s lawyer at the time), claimed that there was no documentation between the company and General Electric related to the termination of GE as a customer. Mrs. Earle-Barron’s evidence was that GE was terminated before March 14, 2004, when USC could not meet the bid requirements. The only document that existed relative to this issue was the online bid document produced to Mr. Mozessohn.

[164] The respondent’s position on the GE sales is that the Court should not accept that the contract with GE terminated as of March 14, 2004, because Mrs. Earle-Barron did not produce any letters from GE indicating that the contract was terminated on a given date. It was also suggested that Mrs. Earle-Barron retained clients for many years, as such an inference could be drawn that GE would have remained with USC after March 14, 2004. Mr. Barron argues that the Court can accept a contingent liability that is manifested after separation if that liability is reasonably foreseeable at the date of valuation. [^22]

[165] In cross-examination, Mr. Borkwood made it clear that he did more than simply rely on Mrs. Earle-Barron’s statements that GE was terminated as a client. He examined the sales records, which demonstrated that the GE sales trickled to a halt in April 2004. In my view, this was consistent with Mrs. Earle-Barron’s testimony that the contract was effectively terminated as of March 2004.

[166] I am persuaded by the evidence that no sensible purchaser would consider GE as a continuing customer for USC post March 2004. USC would be obliged to give representations and warranties to the potential purchaser and they could not include any reference to the effect that GE was a current customer of the company. I am satisfied that if USC could have replaced GE by that point in time, presumably it would have done so.

[167] Both valuators had to work with a situation where there was no agreement as to the date of GE’s termination. However, based on Mrs. Earle-Barron’s testimony, which I accept on this point, coupled with the USC business records, I am satisfied that the applicant has met her burden. While Mrs. Earle-Barron acknowledged that some minimal shipments continued with GE after the valuation date, I am not persuaded that there was an ongoing business relationship post - March 2004.

[168] I find that the loss of GE by the valuation date was permanent. I agree with the applicant that the respondent has not established a foundation for the inference that GE would have remained with USC after March 2004. The amount of $28,000.00 must be deducted from Mr. Mozessohn’s summary of normalized differences between SLF and TL.

Legal Fees

[169] There was some evidence to suggest that Mr. Sullivan was USC’s corporate counsel as well as Mrs. Earle-Barron’s matrimonial lawyer at the same time. Mr. Mozessohn added back professional fees to USC’s revenue on the assumption they were incurred in connection with Mrs. Earle-Barron’s matrimonial proceedings. In cross-examination, Mr. Mozessohn agreed that he had not seen the actual invoices and he believed that he did not ask for them. However there was an original request of Mr. Sullivan for “full details” about professional fees. [^23]

[170] The respondent submits that some documents provided by Mrs. Earle-Barron suggest that Mr. Sullivan was both USC’s lawyer and her matrimonial lawyer. The difficulty with the argument is that there was no identification of these documents during the trial. Even if some legal invoices were rendered for matrimonial services and some were not, I agree with the applicant that Mr. Mozessohn did not have adequate support for his assumptions on this point.

[171] While I have some lingering doubts as to the reliability and appropriateness of some of the legal fees incurred as a direct or indirect expense of USC, those professional fees adjustments are part of a group of sundry items which taken collectively result in a difference between TL and SLF of $8000.00. In the overall evaluation of USC and given that these fees manifest in an unidentified and unquantifiable amount of the $8000.00 sundry normalization adjustments, I am not prepared to carve out this portion of the deduction without specific evidence as to the appropriate quantum.

[172] For the aforementioned and following reasons, including other items found in the summary of normalization adjustments, I am prepared to arbitrarily split the difference and deduct $4000.00 from Mr. Mozessohn’s sundry adjustments.

Insurance

[173] The insurance expense is part of the group of sundry normalization adjustments which cumulatively results in an $8000.00 difference between SLF and TL.

[174] Mr. Mozessohn agreed that “key-man” insurance would be an appropriate expense. Mr. Mozessohn could not recall the Manulife policy and he agreed that the shareholder agreement called for “key-man” insurance. [^24] I am cognizant that Mr. Mozessohn had requested but had not received copies of all policies from Mrs. Earle-Barron.

[175] I am satisfied that Mr. Mozessohn, who conceded this point in cross-examination, improperly added the cost of the insurance to his normalization calculations. While Mr. Mozessohn cannot be faulted for not having the documents disclosed to him in a timely manner, there is a reference in the shareholder’s agreement that provides to Mrs. Earle-Barron the benefit of securing some form of key-man insurance.

[176] Again, in the overall evaluation of USC and given that insurance expense manifests in an unidentified and unquantifiable amount of the $8000.00 sundry normalization adjustments, I am not prepared to carve out this portion of the deduction without specific evidence as to the appropriate quantum.

[177] For the aforementioned and following reasons, including other items found in the summary of normalization adjustments, I am prepared to arbitrarily split the difference and deduct $4000.00 from Mr. Mozessohn’s sundry adjustments.

Bad Debts

[178] The respondent submits that SLF found that two accounts Wiresmith ($35,000) and Frost ($10,000) were atypical for USC and that they were non-recurring and added back to the company’s value for normalization purposes. [^25]

[179] In Mr. Mozessohn’s report, he claimed that “we were not provided with any additional information in connection with the expense”. Mrs. Earle-Barron was asked to provide documentation to “describe with supporting documentation” the Frost and Wiresmith matters, however, according to Mr. Barron, only the ledgers were provided.

[180] I am not persuaded that Mr. Sullivan declined to provide documentation in relation to the request for documents in support of any bad debts. I accept the applicant’s position that Mr. Mozessohn received the general ledger and that there was no evidence that former counsel for Mrs. Earle-Barron declined in providing information regarding bad debts. There is also some evidence to suggest that the general ledger was made available to Mr. Mozessohn.

[181] The applicant argues that Mr. Mozessohn’s conclusion that bad debts were non-recurring was premised, in part, on his assumption of her experience in the trucking industry. Mr. Mozessohn claimed that it was unlikely someone with her experience would allow bad debts to reoccur. [^26]

[182] In this context, I am prepared to accept the applicant’s evidence and her experience in the trucking industry. Mr. Mozessohn could not elaborate on the extent of Mrs. Earle-Barron’s experience in the trucking industry and I am not persuaded that Mr. Mozessohn adequately considered the applicant’s experience as part of his decision that such bad debts were in fact not typical. In this case, I find that it is likely that bad debts were typical as of the valuation date.

[183] I also do not accept the respondent’s submissions that Mr. Borkwood testified that the Wiresmith account was considered collectible as at the valuation date.[^27] Again, through effective cross-examination, Mr. Mozessohn conceded that he lack some foundation for his opinion.

[184] I am persuaded that the bad debt differential ought not to have been added to the differential. The bad debt “add-back” results in a difference of $22,000 that must be deducted from the summary of differences between SLF and TL.

Personal Expenses of Mrs. Earle-Barron

[185] Mr. Mozessohn reviewed the credit card statements and compared them to the general ledgers of USC. He stated that he could not reconcile them. In 2006, he had asked Mr Sullivan to produce “full detail of all amounts reflect in the credit card statements in excess of $400 together with supporting documentation.”[^28] Mr. Mozessohn estimated Mrs. Earle-Barron’s personal use of the USC corporate credit cards to be about 30% and he added that back into his normalized adjustments.

[186] Mr. Mozessohn considered the normalized 2003 and 2004 personal expenses and through his calculation arrived at a midpoint of $1,050,000.00. He deducted $953,000.00 actual to arrive at $97,000.00 and taking one-third at 85% and arrived at a figure of $27,000.00 for personal expenses.

[187] The respondent submits that Mr. Borkwood based his opinion on additional information provided anecdotally by Mrs. Earle-Barron. The respondent also submits that neither Mrs. Earle-Barron nor Mr. Borkwood could provide details of the credit card items or explain them in cross-examination. I note that Mr. Borkwood was not cross-examined on the details of the various impugned credit card expenses, rather, he was only asked about his approach. He explained that he only examined the larger credit card items and if the explanation from Mrs. Earle-Barron was plausible he left it in as a business expense.

[188] While it is clear that Mrs. Earle-Barron failed to disclose requests to justify personal expenses over and above $400 to Mr. Mozessohn, I find that Mr. Barron’s testimony had a degree of speculation as to what expense may be properly characterized as personal versus business. On its face, many of the expenses might be considered personal, however, the evidence and testimony does not lead me to conclude that all of the expenses were not related to the business of USC. I agree with the applicant that specific credit card expenses were not dealt with to any great extent by the respondent. Indeed, the cross-examination in this line of questioning was limited.

[189] A summary of expenses was admitted into evidence and I have considered its trustworthiness in my assessment. While I am sceptical about this summary and there remains a lingering question in my mind as to the validity of some of the various corporate versus personal expenses, I will not entertain or engage in a review of the impugned expenses through a line-by-line analysis.

[190] The onus is on the applicant to prove that these USC expenses were not personal expenses. To a degree, Mrs. Earle-Barron was able to offer reasonable explanations for some of the expenses incurred related to her company. Therefore, I am prepared to accept some, but not all of the explanations offered by the applicant with respect to these expenses. While I am satisfied that the summary of expenses should be given appropriate weight, based on the lack of reliable evidence, I am prepared to arbitrarily accept that 50% of the expenses as found in the normalization adjustments were related to the business of USC in one form or another. Even if I am in error, and some additional personal expenses are intermixed with legitimate corporate expenses, I am neither prepared nor required to sift through the volumes of receipts and expense documents to arrive at an exact amount.[^29] I accept that the applicant has not fully discharged her onus and I am left with some degree of uncertainty as to the exact quantum. Therefore, the amount of $13,500.00 must be deducted from Mr. Mozessohn’s summary of difference between SLF and TL.

Rent

[191] The difference between the valuators’ opinion on the issue of rent is $21,000.00. Mr. Borkwood “adjusted rent to recurring levels” in effect, recognizing large increases in USC’s rent payments in 2003 and 2004. It appeared that Mr. Borkwood reduced USC’s income in 2002 and 2003 by increasing rent in those years by $111,000 and $37,000 respectively.

[192] In Mr. Mozessohn’s critique report of August 25, 2010, he questioned Mr. Borkwood’s conclusions. Mr. Mozessohn disagreed with TL’s assessment and noted that USC had no warehousing income in 2002 and in 2003 and 2004 it averaged 10.5% of total revenue. USC leased a third unit midway through fiscal 2003 increasing their space by 86%. The rent expense went up in 2003-04, while warehouse revenue actually decreased. Mr. Mozessohn found this “did not make sense” and he believed that Mr. Borkwood’s approach was to decrease the value of USC.

[193] The respondent refers to Mr. Mozessohn’s critique to say that given the direct relationship between revenue from warehousing and warehouse rent, it was inappropriate to adjust the rent as an expense. The respondent raises a concern about the validity of Mrs. Earle-Barron’s actions in assuming an increase in rent without proportional warehouse income. He submits that this action cannot be justified by USC in the normal course of a successful business.

[194] Mrs. Earle-Barron was asked to explain the rent expenditure as it was alleged that it was not proportionate to the increase in warehouse income. She testified that the increase in warehouse space in 2004 was to achieve additional revenue to offset the potential decline in trucking sales. I agree with the applicant that, at the relevant time, the business decision for this endeavour seemed to be quite reasonable.

[195] I do not conclude that paying unusually high rent without corresponding increases in income was part of any design or scheme to artificially diminish the value of USC in the year of valuation and prior year. I am satisfied that the increased rent expense was a valid business decision. The amount of $21,000 for rent must be deducted from the summary of differences between SLF and TL.

Foreign Exchange

[196] Both experts adjusted normalized earnings for foreign exchange impact on USC’s sales and costs of sales in $US between the years of 2002-2004.

[197] SLF used an exchange rate of 1:34:1 as at March 12, 2004 (Friday) given that March 14, 2004 fell on a Sunday. TL used the rate at March 15, 2004 (Monday) of 1:33:1. It was conceded by both experts that the appropriate rate was that which was utilized by SLF and would be the rate as known as at March 12, 2004. The disparity in the overall normalization adjustments value of USC resulting from the use of the variation in the exchange rate is $16,000.

Weighting of adjusted earnings

[198] Both experts applied weighting to the normalized earnings. That means that they made the following adjustments. Once Mr. Mozessohn normalized the earnings for USC, he arrived at the following amounts for fiscal July 31, $168,254.00 (2002), $568,942.00 (2003) and $626,254.00 (2004). Mr. Mozessohn then exercised his discretion in applying a weight to each of the years of the company’s operation, .5 for 2002, 2 for 2003 and 3 for 2004. Mr. Borkwood, had normalized his earnings at $59,927.00 (2002), $221,904.00 (2003) and $332,065.00 (2004). Mr. Borkwood applied two series of weightings. At the low end, zero (2002), zero (2003) and one (2004). At the high end, zero (2002), one (2003), zero (2004). [^30]

[199] The applicant adds that in applying the weights that he did, Mr. Borkwood implied that an arm’s length purchaser dealing with a company only in existence for about three years would conclude that the earnings should be somewhere between the 2003 earning and 2004 earnings.

[200] The respondent submits that the different approaches to the weighting result are not material to the overall result of value as the group of these sundry issues collectively result in $8000.00 one way or the other.

[201] This exercise involves a subjective assessment on the part of the valuators. I accept Mr. Mozessohn’s opinion and his experience in arriving at his conclusion and explanation for applying the weighting that he utilized. I find that this was a valid exercise of his professional judgment.

Income Tax Rate differential adjustment

[202] The applicant is critical of SLF’s August 2010 critique report wherein Mr. Mozessohn reviewed Mr. Borkwood’s initial report of June 2010 in regards to the tax rate. Mr. Borkwood used a tax rate of 27.37% based on a midpoint of the maximum tax rate of 36.12% and the small business tax rate of 18.62%. This approach was to account for the uncertainty of the buyer and whether the lower small business tax rate would be available. Mr. Mozessohn was of the opinion that it that the buyer would be able to access the small business rate.

[203] The applicant submits that despite the fact that he used the small business tax rate, Mr. Mozessohn agreed that one could reasonably allow for two contingent tax rates, the full corporate rate and the small business tax rate. The applicant concludes that it was reasonable for Mr. Borkwood to average the full corporate tax rate and the small business tax rate because there was no certainty about the size of company that would buy USC. Mr. Mozessohn acknowledged in cross-examination that the trend in the industry was for larger trucking (or logistics) companies to consolidate with smaller ones.[^31] Mrs. Earle-Barron submits that were that to have occurred with USC, the small business tax rate could not be available to a third party purchaser.

[204] The applicant also argues that it is inappropriate for a value or to speculate on tax situations potential purchaser. In referring to O’Neill, the trial judge held:[^32]

Similarly, Ms. Russell and Ms. Blake also disagreed on the appropriate assumptions to be applied to the tax situation of a potential buyer who had other businesses. Ms. Russell disagreed that it is appropriate to speculate as to the potential particular tax situation of a buyer and factor that in to increase the disposition costs as a result. I agree with Ms. Russell on this point. Ms. Blake's evidence did not satisfy me that her approach constituted an accepted valuation practice in such circumstances. Accordingly, I accept Ms. Russell's assumption of disposition costs.

[205] I accept Mr. Mozessohn’s evidence that he used the actual federal-provincial tax rates in existence in 2004. The respondent submits that in cross-examination, Mr. Mozessohn maintained that he did not believe an average tax rate is applicable to this situation. [^33] I do not fault Mr. Mozessohn in his approach on the potential tax situation of a potential purchaser but merely took an approach that he described was consistent with his obligations as a business valuator to consider the fair market value of USC.

[206] However, the small business tax rate used by Mr. Mozessohn, which would produce higher after-tax earnings is not reasonable in the circumstances of this case. [^34] To his credit, Mr. Mozessohn agreed that it would be reasonable to allow for the two contingent tax rates, the full corporate rate and the small business tax rate. He stated that averaging those two rates would be appropriate if those tax rates were reasonable under the circumstances.

[207] There was no evidence lead to suggest the category or nature of a potential purchaser and I find that the use of both rates is reasonable under the circumstances. Thus, I find that there must be an adjustment for the income tax rate differential. The amount of $33,000 for the income tax rate differential must be deducted from the summary of differences between SLF and TL.

Earnings Multiple

[208] The earnings multiple is established by looking at the rate of return that a purchaser would expect from the company. Mr. Mozessohn applied an earnings multiple of 4.25 and 4.75 which recognized a return on equity only. Mr. Mozessohn arrived at a rate of return of 21.05% and 23.5%. He identified his figures as being made up of an after tax risk free rate of return of 4.06%, an equity risk premium of 7.2%, a micro cap premium of 4%, an industry risk discount of 3.7% and a company specific adjustment of 9.5 at the low end and 12 % at the high end. [^35] Mr. Mozessohn then arrived at his earning multiple by taking the inverse of 21.05% and 23.5%, i.e. dividing those amounts into 100. [^36]

[209] In TL’s June 29, 2010 report, the return on equity component multiple was 29% to 34% which equated to a multiple between 2.94 to 3.45 times earnings. In TL’s September 23, 2010 report the return of return on equity was 23% to 29% which equated to a multiple of 3.45 to 4.35 times earnings. The applicant suggests that Mr. Borkwood testified that it is appropriate to use the risk free rate without a tax deduction because corporate earnings are received before tax and the individual shareholder would pay the tax when these amounts are withdrawn as dividends.[^37]

[210] The applicant submits that the impact of the application of the different multiples is that Mr. Mozessohn thought it reasonable for a purchaser to wait between 3.56 to 3.84 years to recover their investment. Mr. Borkwood testified that it would be unreasonable to expect the buyer to wait 3.56 to 3.84 years to recover his investment, a more reasonable time frame was 2.5 years. Mr. Borkwood’s comparable company specific percentiles were 16% at the high end and 12% at the low, referencing that the potential loss of Phillips presented a serious risk to USC.

[211] Mr. Mozessohn testified that he employed the rates of 9.5% at the low end and 12% at the high end because various considerations. [^38] Mr. Mozessohn disagreed with TL’s calculations of their WAAC figures; in that TL recorded the tax risk free rate instead of the after tax earnings; TL calculated the small business tax rate versus the maximum rate of tax,[^39] they considered the costs of debt based on 27.37% instead of 18.62%; TL applied as micro-cap premium of 9.9% notwithstanding they selected a micro-cap rate of between 4% and 4.5% and TL upgraded the company specific risk modifier to 12%-16% on urging only from Mrs. Earle-Barron. [^40] SLF re-calculated TL’s WAAC bearing in mind the above and determined the midpoint.

[212] In each case of Mr. Mozessohn and Mr. Borkwood, there was a discretionary assessment in the series of numbers used for the return on equity. The amount of time a buyer would expect to wait to recover his or her investment is a matter of subjective opinion. Neither expert is necessarily wrong. Moreover, the multiple selected is based on risk factors which are entirely subjective. [^41]

[213] As mentioned, I find that Mr. Borkwood was influenced to a degree in order to satisfy Mrs. Earle-Barron’s expectations. It is apparent to me that after the production of TL’s initial report, Mr. Borkwood changed its risk modifiers from 10-12% in the draft report to 12-16% in the subsequent report, and arrived at different results in his analysis for the earnings multiplier and ROE considerations, thus reducing the fair market value of USC. I am not satisfied with Mr. Borkwood’s explanations for these adjustments.

[214] I accept Mr. Mozessohn’s evidence whereas he relied on a department of Finance Canada report for 2004 that was overall positive for economic growth in terms of the outlook in relation to the multipliers. I also refer to Exhibit #8 wherein Mrs. Earle-Barron had initially advised TL that: “…in March 2004 I was optimistic about our future prospects”.

[215] I find that Mr. Mozessohn’s calculations and conclusions are reliable and flow from the underlying documentation as known to him at the relevant time. I accept Mr. Mozessohn’s critique of Mr. Borkwood’s approach and modifications to the issue of the earnings multiples.[^42] I accept the manner in which SLF chose to calculate the multiples and the WAAC, which resulted in an overall difference between the two valuators of $44,000.00.

Management remuneration

[216] This issue is part of the sundry group of normalized adjustments which collectively results in an $8000.00 difference between the valuators. Both valuators grappled with the problem of normalizing the appropriate value of management compensation. The applicant submits that SLF’s approach in removing all compensation and adding back numbers based on statistical information was “flawed”. [^43] The respondent responds that Mr. Borkwood spoke to Mrs. Earle-Barron and concluded that her salary reflected the “true economic value” of her services.[^44] He eliminated the bonus of $231,000.00 in 2003 and the $75,000.00 bonus expensed to Mrs. Earle-Barron’s daughter Lisa in 2004.

[217] Quite reasonably, Mr. Mozessohn stated that a buyer would want to know the market value of the company and he utilized statistical resources in support of his position. The respondent submits that SLF’s approach of adjusting Mrs. Earle-Barron’s salary to market rates, although not perfect, is at least more objective than the approach taken by TL.

[218] In the overall evaluation of USC and given that management remuneration forms an unidentified and unquantifiable part of the $8000 sundry normalization adjustments. I am satisfied that Mr. Mozessohn’s approach on this issue is the appropriate one and I am not prepared to carve out this portion of the deduction as found in the group of sundry normalization adjustments.

Client resources Inc. (“CRI”)

[219] CRI was a company owned or operated by Pat Yarn. Its alleged purpose was to locate and place suitable candidates for employment with USC.

[220] The respondent submits that the CRI payments to various parties was a sham operation. He adds that Mrs. Earle-Barron (as the principal and operating mind of USC) was fully aware of the CRI payments and actively participated in those improper payments despite her protestations to the contrary.

[221] I am satisfied that Mr. Barron did not know about the cheques made out to him by Patricia Yarn. I note that some of those cheques had not been endorsed.[^45] I not only accept Mr. Barron’s evidence that he does not use the name “Jack Barron” but I also accept that where there is an endorsement found on these cheques, the signature thereon was not that of Mr. Barron. I find that Mr. Barron did not have the experience and personal knowledge of USC’s business affairs and dealings during the material period of his employment. [^46]

[222] Mr. Borkwood went to some effort in his attempt to validate the CRI invoicing and opined the rates reflected in these documents appeared to be “market rates”. Moreover he appeared to base his determination that 10% of CRI expenses for hiring could properly be considered as “recurring”. It appeared to me that his conclusions were premised on discussions with Mrs. Earle-Barron.

[223] I reject Mr. Borkwood’s conclusions and assertions. It is a question of fact for this Court to determine whether some expense for the employee placement agency is warranted for USC. I am satisfied that the fees paid were discretionary and atypical for a company like USC. The applicant’s evidence that at least some of the employees “hired” by CRI on behalf of USC were legitimate employees who were not friends, or known to the applicant was unreliable.

[224] I find as a fact that Mr. Barron did not benefit from any alleged payments from CRI. I am also persuaded that these cheques were made to disguise what only can be described as a sham operation involving CRI and USC. Moreover, Mrs. Earle-Barron did not reveal the invoicing scheme until prior to the commencement of trial.

[225] As mentioned, the issue of payments for “professional development” results in a difference between TL and SLF in the value of USC of $8000.00. Mr. Mozessohn disallowed all payments to CRI and expressed his concerns to the court. I find Mr. Mozessohn entirely credible on this issue.

[226] I conclude by finding that the CRI and USC business relationship was a subterfuge and given the non-arms length nature of the entities, it is very likely that Mrs. Earle-Barron, Mrs. Yarn and the other USC shareholders improperly benefitted from this scheme. I reject any and all argument that this Court ought to accept or attribute some valid consideration in favour of USC with respect to the CRI transactions.

Mr. Borkwood’s Addendum report

[227] The TL Addendum report of May 31, 2011 referred to some concerns about “allegations” which arose after the TL reports were released.

Phillips and Max Persaud

[228] The applicant submits that the value of her interest from USC should reasonably be reduced from $257,000.00 to either $103,000.00 or the mid-point value of the complete loss and risk of loss namely, $167,000.00. In examination-in-chief, Mrs. Earle-Barron testified that the price of securing the business from Phillips was to pay a (secret) commission to Max Persaud. The amount of that payment was 5% of the sales from the Phillips account.

[229] In his addendum report prepared May 31, 2011, Mr. Borkwood opined that the arrangement with Max Persaud could negatively impact the value of the company as at March 14, 2004 in that: it created the risk of the complete loss of Phillips’ business if the arrangement was discovered; or the uncertainty of the potential loss of the business relationship between USC and Phillips could result by the possible discovery of the payments to Max Persaud.

[230] In the event of the complete loss of Phillips, Mr. Borkwood claimed that the value of USC would be dramatically reduced to only liquidation value, (without minority discount), of $103,000.00. On the other hand, Mr. Borkwood said that if the loss of Phillips did not occur, the mere risk of that event could materially reduce the value of Mrs. Earle-Barron’s interest in USC, inclusive of a minority discount of 15%, to $231,000.00.[^47] The applicant argues that a third potential scenario was a valuation somewhere between the complete loss and risk of loss of Phillips, the midpoint value in that scenario being $167,000.00.

[231] The applicant provided the case of Gregoric v. Gregoric (1990) 4 O.R. (3d) 588 (Gen Div.) for the proposition that a secret commission is a reasonable basis for concluding that the business acquired by that commission payment would normally be lost and a liquidation approach is appropriate. The applicant argues that in Gregoric all that the Court had before it was the percentage of sales represented by the customer who was secured by the secret commission and the fact that there was a secret commission being paid.[^48] She stresses that the facts in that case are similar to the case at bar.

[232] I find that the Gregoric decision relied on by the applicant turns on different facts. In that case, payment of secret commissions was readily admitted as part of the valuation process and there appeared to be sufficient foundation of facts to substantiate a claim in that regard. Further the Gregoric decision is distinguishable as the court found that there was a resulting trust or alternatively, a fiduciary relationship between the parties. In my view, the case at bar is not one in which a trust or fiduciary expectation was established and the considerations in Gregoric do not arise.

[233] The respondent submits that Mrs. Earle-Barron’s conduct cannot be used at this stage to support a reduction for the value of the company based on improper or fraudulent activity.

[234] Mr. Mozessohn testified that his requests about this subject were met with denials.[^49] Mr. Mozessohn would not allow any deduction in the value of USC for the secret commission arrangement, even though he conceded that he had some awareness of the possibility of these payments. Mr. Mozessohn believed that the arrangement with Mr. Persaud was an unacceptable business practice and he acknowledged that there was a potential for risk.

[235] Even if I were to accept the general tenor and assumptions as found in the TL addendum report, specifically I find that assumption #1 of the report “that that Phillips would be lost as a customer”, is not substantiated by the evidence. The applicant failed to adduce evidence to demonstrate the true state of affairs or the nature of the relationship between USC and Phillips during the relevant period. I reject Mr. Borkwood’s addendum report as the underlying facts contained therein were not corroborated by the evidence.

[236] I am persuaded that Mr. Borkwood ought to have been alerted to these “allegations” from the SLF report dated Dec, 2007. Presumably TL or Mr. Borkwood would have canvassed these issues with Mrs. Earle-Barron before issuing its report rather than cobbling together an opinion on the eve of trial in order to remediate what was, in fact, conceded during the trial as improper or highly questionable transactions. Prior to the trial, Mrs. Earle-Barron chose to deny knowledge of payments made to Mr. Persaud. The applicant’s reluctance to provide information on these issues to both the respondent and to her own expert in a timely manner before trial, gives this court little comfort that it can be relied upon for any purpose.[^50]

[237] I do not find the applicant’s testimony credible on this issue. I find that Mr. Mozessohn, quite properly would not allow for any deduction in the value of USC based on a potential loss of business premised on the results or impact of this secret commission or payment arrangement with Mr. Persaud.

[238] Further as a matter of public policy, I am disinclined to accept the applicant’s addendum report in order to support a claim to further reduce USC’s value on the basis of secret commissions, dishonest invoicing or questionable business activity. This amounts to an abuse of process and offends the principle that the court will not aid a litigant who advances his or her claim upon an illegal or immoral act, described as the legal maxim “ex turpi causa non oritur actio”. [^51]

CONCLUSION REGARDING THE FAIR MARKET VALUE OF USC

[239] Mr. Mozessohn’s estimated fair market value of Mrs. Earle-Barron’s 33.3% share in USC as at March 14, 2004 is $480,000.00. For the aforementioned reasons, I accept Mr. Mozessohn’s detailed calculations, his report and his summary of differences between SLF and TL with respect to the fair market value as at March 14, 2004, with the following modifications.

[240] I have deducted the amount of $28,000.00 for the permanent loss of GE lighting; $22,000.00 for the bad debt “add-back”; $21,000.00 for the rent; $13,500 for a 50% portion of the personal expenses, $33,000.00 for the income tax rate differential and $4000.00 for one-half of the sundry normalization adjustments. These amounts total $121,500.00.

[241] Therefore, I conclude that the fair market value for Mrs. Earle-Barron’s 33.3% share in USC as at the valuation date for the purposes of equalization is $358,500.00.

EQUALIZATION

[242] With two exceptions, I prefer and accept the applicant’s Net Family Property (“NFP”) statement in my determination and calculation of equalization. I am satisfied that the applicant's NFP statement is more reliable, trustworthy and reflects the true state of affairs as they existed at the relevant times. Further, the applicant’s NFP statements are substantiated by various invoices, bills, receipts, financial documentation and other supporting background letters or materials.

[243] I am persuaded by the applicant that she co-signed for the car loan and that she later paid off the loan due to Mr. Barron’s financial circumstances. I find that Mrs. Earle-Barron has fairly provided the values for Mr. Barron’s assets and liabilities in her NFP worksheet. I accept the applicant’s argument and numbers with respect to the values of her household effects, jewellery, investments and other valuable items. I am also satisfied with her explanation about her personal debts and other liabilities including those amounts attributed to income tax and the professional accounting fees. I also accept, albeit with some hesitation, that the promissory note from Pat Yarn is a valid debt as at the valuation date.

[244] I find that the respondent’s financial statements lack the requisite evidentiary foundation to support his calculations and argument. Further, I find that his evidence with respect to various assets or liabilities listed in his financial statements was premised on speculation and conjecture.

[245] As mentioned, I accept the applicant’s NFP statement as the basis for the equalization calculations with two exceptions. The first is with respect to a $25,000.00 claim for disposition costs related to the matrimonial home.

[246] In discussing costs of disposition, the Ontario Court of Appeal in McPherson v. McPherson[^52] considered the valuation of property in relation to a general rule of the deduction of notional taxes and related costs. As Finlayson J.A. held:

The cases appear to turn on their own facts and, if I might hazard a broad distinction, an allowance should be made in the case where there is evidence that the disposition will involve a sale or transfer of property that attracts tax consequences, and it should not be made in the case where it is not clear when, if ever, a sale or transfer of property will be made and thus the tax consequences of such an occurrence are so speculative that they can safely be ignored.

[247] The principle in McPherson does not simply apply to situations where assets must be liquidated in order to satisfy an equalization payment.[^53] The Court of Appeal directs that the principle enunciated in McPherson applies generally to property divisions under the FLA.

[248] In Sengmueller v. Sengmueller,[^54] the Court of Appeal approved the general terms of McPherson. If an asset must be liquidated in order to satisfy an equalization payment, disposition costs will generally be deducted and the court may discount for the notional costs of disposition if, on balance, it is clear that a disposition will take place at a particular time in the future and such costs will be inevitable when the owner disposes of the assets or is deemed to dispose of them. In other words, costs that are not speculative should be allowed, whether or not the disposition of the asset is required in order to make the equalization payment. The authorities tend to support the notion that disposition costs are to be deducted before arriving at the equalization payment, unless it is not clear when, if ever, there will be a realization of the property.

[249] There was limited testimony on this issue. Notwithstanding Mrs. Earle-Barron’s assertion that she will be forced to relocate with her children should there be a significant equalization award in favour of Mr. Barron, I am not persuaded by the applicant that there will be an actual disposition of the matrimonial home. I am of the opinion that the applicant’s statement was mere posturing and presented to the court as part of her argument in support of the equalization claim. In any event, I find that the costs of disposition as listed in the applicant’s financial statement are speculative.

[250] Therefore, I have eliminated the amount of $25,000.00 for disposition costs from part 2 of the applicant’s NFP statement.

[251] For the aforementioned reasons, the second exception is found in part 1(e); namely, Mrs. Earle-Barron’s 33.3% business interests in USC, which I have determined to be $358,500.00 as opposed to the listed amount of $257,000.00.

[252] Based on my findings and after the readjustments as described above, I have revised the applicant’s NFP statement calculations.

Applicant Respondent

Item 22: Total assets on Val. date $ 852,757.34 $ 47,808.00

LESS

Item 23: Debts & other liabilities $ 358,175.17 $ 13,500.00

Item 24: Value of property at marriage $ 93,096.00 $ 0.00

Item 26: Excluded property $ 0.00 $ 0.00

TOTAL NET FAMILY PROPERTY $ 401,486.17 $ 34,308.00

[253] The result is an equalization payment owing in favour of the respondent in the amount of $ 183,589.09.

POST VALUATION DATE EVENTS AND UNCONSCIONABILITY CLAIM

[254] The applicant submits that it would be unconscionable within the meaning of s. 5(6) of the Family Law Act to ascribe any value to USC, even if diminished, to $103,000.00 or $167,000, for purposes of equalization. She submits that the value of USC for equalization purposes should be reduced to nil. The applicant provided various factors to buttress her argument. They include:

a) the post-separation decline of value of USC as a direct result of market forces;

b) it was not reasonable to liquidate USC immediately following separation but rather to attempt to continue the business;

c) that the decline in value of USC to nil is permanent;

d) Mrs. Earle-Barron would be required to liquidate her major asset, the home, to satisfy any judgment to Mr. Barron, that is, based on the valuation of USC;

e) the conduct of Mr. Barron; and

f) the short length of the marriage.

[255] The respondent submits that the s. 5(6) unequal division is frivolous and vexatious and he argues that there is no basis for this claim.

[256] Section 5(6) of the Family Law Act states:

The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,

(a) a spouse's failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;

(b) the fact that debts or other liabilities claimed in reduction of a spouse's net family property were incurred recklessly or in bad faith;

(c) the part of a spouse's net family property that consists of gifts made by the other spouse;

(d) a spouse's intentional or reckless depletion of his or her net family property;

(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2), or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;

(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family; [page174]

(g) a written agreement between the spouses that is not a domestic contract; or

(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.

[257] In Serra v. Serra, 2009 ONCA 105, [2009] O.J. No. 432 (C.A.) at para. 37, Blair J.A. held:

The steps to be taken when s. 5(6) is engaged are well-established. The court must first ascertain the net family property of each spouse by determining and valuing the property each owned on the valuation date (subject to the deductions and exemptions set out in s. 4). Next, the court applies s. 5(1) and determines the equalization payment. Finally -- and before making an order under s. 5(1) -- the court must decide whether the equalization of net family properties would be unconscionable under s. 5(6), having regard to the factors listed in paras. 5(6)(a) through (h).

[A] court may take into account a post-separation date change in the value of a spouse's assets, and the circumstances surrounding such a change, for purposes of determining under s. 5(6) of the Family Law Act whether equalizing net family properties would be unconscionable. An order for an unequal division of net family properties is exceptional, however, and may only be made on such a basis (i) where the circumstances giving rise to the change in value relate (directly or indirectly) to the acquisition, disposition, preservation, maintenance or improvement of property (s. 5(6)(h)), and (ii) where equalizing the net family property would be unconscionable, having regard to those circumstances (taken alone or in conjunction with other factors mentioned in s. 5(6)).

[258] It does not follow from the exceptional nature of an order of unequal division of property that post-separation declines in value cannot be taken into account. The Court of Appeal noted that while some of the factors in section 5(6) do relate to fault-based conduct on the part of the spouse who owns the asset, others do not. Given the statutory language in the Family Law Act, and its purpose, I am satisfied that there is no reason to limit the application of section 5(6) to circumstances only involving misconduct. As Blair J.A. held:

There is no principled reason that I can see, given the language of the Act and its purpose or objects, to confine the word “unconscionable” in s. 5(6) only to circumstances arising from fault-based conduct on the part of one of the spouses. Although unconscionable conduct is obviously an appropriate consideration in determining whether equalizing the net family properties would be unconscionable, in my opinion the true target of the limited exception to the general rule is a situation that leads to an unconscionable result, whether that result flows from fault-based conduct or not.

[259] It is trite law that the threshold for a finding of “unconscionability under s. 5(6) is exceptionally high. I refer to the case of Medeiros v. Medeiros, wherein the Court of Appeal, quoting with approval from Serra, held: [^55]

The jurisprudence is clear that circumstances which are “unfair” or “harsh” or “unjust” alone do not meet the test. To cross the threshold, an equal (sic) division of net family properties in the circumstances must “shock the conscience of the court.

[260] As pointed out by the Court of Appeal, while a market driven decline in value may be a factor in a court’s analysis of unconscionability, it does not necessarily lead to a finding that it is unconscionable. Again, as Blair J.A. held:[^56]

[T]his case is not about whether a significant post-separation drop in the value of an individual's stock portfolio, precipitated by a deep but temporary recession, will amount to unconscionability. Such an occurrence may well be a factor for consideration under s. 5(6)(h), but whether it would be sufficient by itself to constitute "unconscionability" is quite another matter. Each case must be determined on its own facts.

... Section 5(6) does not call for an award that is just short of unconscionable. It provides that the court may award a spouse "an amount that is more or less than half the difference between the net family properties" if "equalizing the net family properties would be unconscionable". (emphasis added) In short, the threshold that an applicant must cross in order to open the door to an unequal division is - as I have said earlier in these reasons - exceptionally high. That is because of the policy underlying the Act encouraging finality, predictability and certainty and minimizing the exercise of judicial discretion to the extent possible, also referred to earlier. Once the threshold has been crossed, however, and the rare resort to judicial discretion under the Act is in play, the court should exercise its discretion as it normally does: by doing what is just, fair and equitable in the circumstances. Such an approach, in my opinion, is (a) true to the language of s. 5(6) itself, (b) reflective of the wording in s. 5(7) establishing that the presumed equal contribution of the spouses leading to the normal equal division of net family property is subject only to the "equitable" considerations set out in s. 5(6); and (c) consistent with the call in the preamble of the Act for "the orderly and equitable settlement of the affairs of the spouses upon the breakdown of the partnership."

[261] The applicant provided the case of Kean v. Clausi, 2010 CarswellOnt 4946 (S.C.J.), wherein a drop in value of just over $83,000.00 on an account with a valuation day value of $228,168.00 was held to be an unconscionable result resulting in an unequal division. In my view, the case is distinguishable.

[262] It is true that the values in that case had little to do with the fault of either of the parties as they were was driven by the general decline in the stock markets after 2008. However, in the case, it appears that the reasoning behind the finding of unconscionability was, to some extent, based upon the fact that the account was in the wife's name for credit-proofing purposes and was controlled by the husband. This resulted in an unfair result to the wife who was the nominal holder of the account. Based upon the surrounding circumstances, the result was found to be unconscionable, which in accordance with Serra held that s. 5(6) is directed towards the result rather than the behaviour of the parties. I note that in Kean, the court held that the outside market forces caused an extreme drop in the value of a matrimonial asset after separation.

[263] In the case at bar, the applicant did not call any expert evidence to assist in her claim that the devaluation of the American dollar versus the Canadian dollar or other market forces resulted in a significant and direct decline in USC’s value. Mr. Borkwood pointed to the devaluation of the US dollar as one factor that gave rise to changes in the business valuation. Mr. Borkwood was not asked to provide an opinion as to the reasons for the alleged decline in the operations of USC and, no doubt, he was not qualified to do so.

[264] There was some contradictory testimony and evidence including various reports provided to this court to indicate that the Canadian economy was improving, although some reports suggested that the economy was trending negatively for non-commodities exporters. Mrs. Earle-Barron provided contradictory statements to the effect that, at times in the period post 2004, USC’s business was improving. Further, I draw a reasonable inference that USC was adjusting to the glacial changes in the currency exchange rates by re-formulating other business strategies or opportunities. For example, USC shifted their focus by increasing warehouse size and moving into that area of logistics. In part, I allowed the rent expense to be deducted from Mr. Mozessohn’s summary of normalized adjustments, as I considered the expense to be a valid business decision on a go forward basis. In my opinion this supported the proposition that USC was attempting to adapt to the incremental changes in the external market driven forces.

[265] The applicant submits that s. 5(6) does not require a severely harsh result as in Serra, but where the amount of the equalization payment itself is not shocking, there must be other circumstances which combine with the result in order to "shock the conscience of the court." Clearly, USC benefitted from a strong American and a weak Canadian dollar and the strengthening trend of the Canadian dollar was not favourable for USC. However, this was not a case where there was an accelerated or dramatic increase in the value of the Canadian dollar. In my opinion, in a situation of pure market driven forces, the result of a drop of value must fall more towards the spectrum of extreme, rather than trending, as found in this case.

[266] I agree with the respondent that the fluctuations in currency in this case fall well short of the requirements to satisfy me that post-valuation date market forces adversely impacted on USC. The effect of the currency exchange rates in this case was clearly overstated. In my opinion, the evidence falls well short of establishing the proposition that the devaluation of the US dollar and the escalation of the Canadian dollar directly or indirectly impacted the value of the USC to the extent that is required to satisfy a finding of unconscionability.

[267] While I need not make a specific finding, there is no evidence to suggest that Mrs. Earle-Barron had been economically disadvantaged as a result of the marriage and its breakdown. Despite the vociferous arguments of counsel, the applicant has not met her onus in satisfying me that there was a post-separation decline of USC as a direct result of market forces or on the basis that it was reasonable for her not to liquidate USC immediately following separation, but rather to attempt to continue the business.[^57]

[268] Apart from the market driven forces impacting on USC, the applicant also asserts unconscionability premised on Mr. Barron’s conduct during the marriage. The applicant submits that the parties enjoyed a short-term marriage and that Mr. Barron was a chronic gambler and gambled away his income and he did not contribute to the household expenses, to the family’s detriment. [^58]

[269] The applicant argues that the respondent spent significant amounts of money for gambling purposes and squandered his income. In support of her position, Mrs. Earle-Barron provided a schedule of ABM monthly withdrawals from the Scotia bank account depicting the numerous withdrawals by Mr. Barron from the joint bank account.[^59]

[270] While it is clear that Mr. Barron participated in bingo on a frequent basis, I do not find on the evidence that he squandered his income or the family wealth on gambling to the extent suggested by Mrs. Earle-Barron. I find that the evidence in this regard is speculative.

[271] Unlike the fact situation in Laing v. Mahmoud,[^60] there is no evidence to suggest that these withdrawals were made several times a day from a bank machine located at or near a casino. While it is clear that Mr. Barron participated in bingo or other games of chance, I do not have credible evidence to satisfy me that he dissipated his income or that he failed to contribute to the household expenses during the relevant period. There is some suggestion of a link between most, if not all, of his bank withdrawals to the specific purpose of gambling. However, one could reasonably conclude that these withdrawals were also directed to the day-to-day household or personal living expenses.

[272] I am not satisfied on a balance of probabilities that these numerous withdraws by the respondent were for the specific purposes of gambling based on the testimony of both parties, neither of whom I find credible on this issue. The bank records themselves neither assist nor detract from the parties’ position on this issue. On all of the grounds alleged, I do not find that the applicant has met her onus in establishing the s. 5(6) unconscionability claim.

Pre-Judgment Interest

[273] Mr. Barron is claiming pre-judgment interest from the date of his Answer. While not specifically raised by applicant’s counsel, I am prepared to assume that Mrs. Earle-Barron would be against any award for prejudgment interest.

[274] Section 128 of the Courts of Justice Act, R.S.O. 1990, c. C.43 governs the awarding of pre-judgment interest. This provision creates a presumptive entitlement to pre-judgment interest arising from the date the cause of action arose and provides as follows:

128.(1) A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.

[275] Section 130 gives the court broad discretion to depart from the prescribed rate where it is just to do so. This section provides that the court shall take into account a number of factors when departing from the prescribed rate, including the conduct of a party which has delayed or shortened the proceeding. Section 130 reads:

130.(1)The court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable under section 128 or 129,

(a) disallow interest under either section;

(b) allow interest at a rate higher or lower than that provided in either section;

(c) allow interest for a period other than that provided in either section.

[276] As a general rule, the payor spouse is required to pay prejudgment interest on an equalization payment owing to the payee spouse. [^61] However, as the Court of Appeal held in Debora v. Debora (2005), 83 O.R. (3d) 81 at para. 93:

The wording of s. 130 is very broad and, in addition to enabling the trial judge to consider the circumstances of the case, specifically allows the trial judge to take into account [a party's] conduct in lengthening unnecessarily the duration of the proceeding by his persistent refusal to make full disclosure of his income and assets.

[277] In this case, I am satisfied that pre-judgment interest payable on the equalization payment is to be limited to the date that the respondent retained his current counsel. I find that neither of the parties had any interest or desire to get this matter settled nor move the litigation along to trial. Specifically, I find the respondent did not have counsel retained for a period of time which impacted on the flow of this litigation. For her part, the applicant did not provide timely disclosure, delayed with her compliance with several court orders,[^62] and by virtue of her change of counsel was also assiduous in advancing this case before the court.

[278] While I do not fault the respondent for placing a lien or designation on the title of the matrimonial home in order to protect what he perceived was his equalization interests, the effect of such a registration disentitled the applicant from otherwise disposing or dealing with the property, and coupled with the delay in advancing the case, placed Mrs. Earle-Barron in a detrimental position.

[279] I was referred to a letter from Mr. Spiller to counsel for the applicant dated January 20, 2008. For all intents and purposes I find that the respondent effectively retained counsel in January 2008, and it was at that point that this matter moved along in the ordinary yet protracted course of litigation.

[280] In the exercise of my discretion, and taking into account the factors set out in s. 130(2)(a) to (g) I decline to award Pre-judgment Interest on the equalization payment owed by the applicant to the respondent for any period prior to 2008.

DISPOSITION

[281] The following Final Order will issue:

[282] Mr. Barron shall pay retroactive lump sum child support to Mrs. Earle-Barron in the amount of $ 16,511.00.

[283] Mr. Barron shall reimburse Mrs. Earle-Barron for an overpayment of spousal support in the amount of $49,307.00, together with pre-judgment interest in accordance with the Courts of Justice Act.

[284] Mrs. Earle-Barron shall pay to Mr. Barron the sum of $183,589.09 which is the equalization amount as determined by this Court, together with pre-judgment interest in accordance with the Courts of Justice Act for the period after January 20, 2008.

[285] The respondent’s claim for retroactive spousal support is dismissed.

[286] The applicant’s s. 5(6) Family Law Act claim is dismissed.

[287] Upon satisfaction of the equalization and support amounts, the respondent shall remove all liens, registrations and designations filed against the matrimonial home. The applicant shall have exclusive rights and unfettered possession of the matrimonial home.

[288] A divorce order shall issue, effective 31 days from the date of this order.

COSTS

[289] If the parties cannot agree on the issue of costs, I will consider brief written submissions. These cost memoranda shall not exceed 5 pages in length, (not including any bill of costs or offers to settle). The parties shall serve and file their respective costs submissions within 20 days of the date of this order. The parties may submit a brief reply within 10 days of receipt of the other party’s materials.

[290] The respondent had raised a claim for costs related to the termination of the wrongful dismissal action. This issue was not canvassed in any great detail during the trial and the parties agreed that it would be dealt with after the release of my judgment. Therefore, the parties may file separate written materials not exceeding 5 pages in accordance with the aforementioned timetable. However, if both parties so request, I am prepared to hear brief oral submissions on this specific issue. This hearing may be scheduled through the Milton and London trial coordinators in conjunction with the parties’ and my schedule.

A.J. Goodman J.

Released: July 31, 2012

COURT FILE NO.: 26922/04

DATE: 2012/07/31

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LINDA EARLE-BARRON

Applicant

• and -

JOHN BARRON

Respondent

REASONS FOR JUDGMENT

A.J. Goodman J.

Released: July 31, 2012

[^1]: For example, see transcripts of September 14, 2009, Q. 409 at p. 65, Q 411 and 412; p. 193 Q 1224 to 1226.

[^2]: S. (D.B.) v. G. (S.R.), [2006] SCC 37 (S.C.C.) at para 5.

[^3]: I note that the application was commenced on October 25, 2004.

[^4]: See Exhibit# 62, TL’s initial draft report, executive summary. The draft report’s risk multiples were 4.40- 4.80 on p. 5, and in sch.6 they were 4.40-4.90. On pp. 34-35 the risk multiples are based on risk modifiers of 10-12%. See also the Executive Summary; Exhibit# 63 TL’s first Report dated June 29, 2010; at p. 5, TL does not change its stated risk multiples of 4.40 and 4.80 but at sch. 6 and in the executive summary the multiples used are 4.0 - 4.6. See also pp. 34-35 para 9.3.4: the 10-12% additional return on investment was changed to 12-16%.

[^5]: See Exhibit# 64 & email dated April 8, 2010, She states inter alia, As you both know I have retained new counsel, Simon Schneiderman, and I am aware that he has been in touch with the both of you regarding some questions he had on the Valuation…..``One of my biggest concerns are the multiples that were used. I find these to be extremely high for a two year old company…

[^6]: Exhibit# 67, Practice Bulletin No. 7. The bulletin provides that draft reports may be distributed to clients to obtain comment on various factors, including those that could have a material effect on the conclusions to be reached.

[^7]: In my opinion, the onus is on Mrs. Earle-Barron to satisfy me on this point.

[^8]: 80 O.R. (3d) 594.

[^9]: Mrs. Earle-Barron refers to 6 examples in his brief, para12 (a) to (f). I do not find support for this proposition as the point was not conceded by Mr. Mozessohn in either p. 93 or 94 of his cross-examination of September 2, 2011.

[^10]: This concept is discussed in K.M.D. v. T.B.D., [2003] O.J. No. 5103 (Sup. Ct.).

[^11]: Best v. Best (1997), 35 O.R. (3d) 577 (C.A.). See also Ganson v. Ganson, [1996] O.J. No. 3870 (Gen Div.).

[^12]: The reference by Mrs. Earle-Barron (Exhibit# 59, p. 7 para. 39) notes that the unaudited financial statements for those periods were reviewed.

[^13]: The enterprise value of the company differs from the value of the shares of the company because the enterprise value of the company is the sum of the shares and the debt. The multiple used to apply to the enterprise value is the weighted average cost of capital multiple (“WAAC”).

[^14]: (2007, 39 R.F.L. (6th) 72 (Ont. S.C.); [2007] O.J. No. 1706, At para. 49.

[^15]: O’Neill. at para. 62.

[^16]: As mentioned by Mrs. Earle-Barron, I accept that Mr. Barron may have inadvertently misdescribed Mr. Borkwood’s method when he says that TL applied a multiple to EBIT or EBITDA[16] to arrive at enterprise value.[16] Mr. Borkwood applied his multiple to earnings after tax, depreciation and amortization.

[^17]: Mr. Barron’s reference to the transcript is erroneous as it involved a discussion by Mr. Mozessohn of the fact that SLF did not complete an audit of USC, rather it relied on the disclosure that was provided to them.

[^18]: As mentioned, even if I were to accept Mr. Borkwood’s calculations, I find that his estimated value of Mrs. Earle-Barron’s 33 1/3% interest in USC is $276,000.00.

[^19]: Exhibit# 69.

[^20]: I have already rejected this argument. See Exhibit# 12 p. 11 para. 4.01.

[^21]: Contrary to Mr. Barron’s submissions, Mr. Mozessohn did not say that based on his 23 years’ experience, that a 10% minority discount was “correct”.

[^22]: Mr. Barron provided the case of Greenglass v. Greenglass 2010 ONCA 675, [2010] O.J. No. 4409, paras. 26 – 29. This case is not helpful and does not stand for the proposition espoused by counsel, as the issue here is the existence of a contract at the date of separation and not a contingent liability. However, the court must consider a measure of reasonableness relative to the contract’s existence.

[^23]: In his letter of March 16, 2006 Mr. Mozessohn stated: “..We require full detail of the 2002 general ledger for professional fees.”

[^24]: It is worth noting that the shareholder’s agreement stated that the Corporation shall be entitled but shall not be required to own, keep in force and be the beneficiary of a life insurance policy on the life of any one or more of the Shareholders.

[^25]: In fact the amounts were $35,379 and $10,325 respectively. According to Mr. Barron’s reference to the transcript of Aug. 31, 2011 p. 19, Mr. Mozessohn found that the level of bad debts of those two specific write-offs were about the normal experience of the company.

[^26]: Despite Mrs. Earle-Barron’s arguments that Mr. Mozessohn made no effort to clarify his assumption, Mr. Mozessohn appears to have attempted to clarify his assumption in cross-examination on September 2, 2011, p. 17 l. 26-32 & p. 18, l. 1-3.

[^27]: See Exhibit# 56 p. 13 at para 5.5: “Based on our discussions with Ms. Earle-Barron, this receivable was doubtful at the valuation date.”

[^28]: I remain unimpressed with what appears to be Mrs. Earle-Barron’s steadfast and deliberate withholding of documents in response to repeated requests for production by Mr. Mozessohn, in order to prepare his valuation report. As an example, in response to credit card expenses, Mr. Sullivan stated: “…The corporation declines to provide details of every expenditure that exceeds $400.00”. If there are specific items for which you wish an explanation, you may ask and the company will consider your inquiry.”

[^29]: The parties did not assist the Court in the determination of the exact amount of business vis-a-vis personal expenses.

[^30]: Exhibit# 56 schedule 5 reads that Mr. Borkwood applied the weights of 0 [2002], 1 [2003], and 0 [2004] for the low end of the range. He applied 0 [2002], 0 [2003] & 1 [2004] for the high end of the range.

[^31]: I am not certain that the witness can opine in this area given his lack of experience in this particular sector or industry.

[^32]: O’Neill at para 68.

[^33]: It is worth noting that following the statement attributed to Mr. Mozessohn by Mr. Barron, he conceded that, if there were two tax rates as a possible contingency, averaging the two tax rates would be a reasonable step provided the two tax rates were reasonable in the circumstances. See Transcript, Sept 2, 2100, p. 62, line 5-23.

[^34]: It should be noted that in the September 2, 2011 transcript at p. 61, l. 20-24, Mr. Mozessohn denied that he chose to maximize the value of the company, although he did concede that was the effective result of his calculations.

[^35]: Mr. Mozessohn’s evidence of September 1, 2011 at p. 5.

[^36]: Reference is made to the September 1, 2011 transcript at p. 5 l. 29 to p. 6 l. 23.

[^37]: I cannot find the particular reference cited by Mrs. Earle-Barron and the proposition does not appear in Exhibit# 56 p. 32.

[^38]: See Exhibit# 59 schedule 2, note 19.

[^39]: The reference cited by Mr. Barron is not referable to their application as a debt. Rather, there percentages were discussed in the context of the small business tax rate versus the maximum rate of tax. And T’s decision to opt for the midpoint of those two percentages.

[^40]: This is not entirely correct. Mr. Mozessohn does not say that the company specific adjustments changed from 10-12% to 12-16% were only due to Mrs. Earle-Barron’s urging. While an inference can be drawn by this Court, Mr. Mozessohn offered that there were no additional factors that TL had claimed when they reviewed from their draft report that would have caused them to increase the risk from 10-12%. See transcripts, Sept 1, 2011 p. 47.

[^41]: Mr. Barron argues that SLF noted TL’s stated risk factors were found at page 34 para 9.3.4 of the first TL report. SLF discovered that TL had actually used multiples of 4.0 to 4.6 to expected earnings while claiming to use 4.4 to 4.8.

[^42]: See SLF critique report dated August 25, 2010 at pp. 6-7.

[^43]: The $126,000 figure submitted in Mrs. Earle-Barron’s brief is not mentioned in either reference provide by Mrs. Earle-Barron. Schedule 2c Note 17 addressed the method arrived at by Mr Mozessohn in what he deemed was appropriate management remuneration.

[^44]: This statement is incorrect. In Exhibit# 56 p. 26 TL stated that it “considered the management wages paid to Linda Earle-Barron were indicative of the true economic cost of services provided by Linda Earle-Barron.”

[^45]: Exhibit# 50 A.

[^46]: For example, Mr. Barron did not know most if not all of the principal clients, referred to as “the top-20 bill-to’s”

[^47]: The reference in Exhibit# 56 p. 11 para 5.2 does not specifically mention Phillips nor does it delineate the risks to USC of its heavy reliance of USC on its “largest” customer. This information was not found in the transcripts of August 30 or 31, 2011 pp. 17-19 as cited by Mrs. Earle-Barron.

[^48]: Gregoric, paras. 8, 23, 24.

[^49]: “…”No commission amounts have been paid by USC to Max Persaud”. “…”The company is not familiar with the relationship between Max Persaud and 11196343 SMP-54” as found in Exhibit# 66, report of SLF Aug 29, 2011 para 12; Ex 60 vol. 1 tab 6 item 18-0-ii; letter of Sullivan dated March 15, 2006.

[^50]: TL states “We were not given specific information regarding the ramifications of this issue”. See Exhibit# 61, page 2.

[^51]: Stoneman v Gladman, [2005] O.J. No. 5766 (Sup.Ct.) at para. 32.

[^52]: (1988), 13 R.F.L. (3d) 1.

[^53]: Starkman v. Starkman (1990), 28 R.F.L. (3d) 208 (Ont. C.A.).

[^54]: [1994] O.J. No. 276; (1994), 2 R.F.L. (4th) 232 (Ont. C.A.).

[^55]: [2009] O.J. No. 4309 at para 57. See also Roseneck v. Gowling (2002), 62 O.R. (3d) 789 (C.A.); Merklinger v. Merklinger (1992), 11 O.R. (3d) 233 (Gen. Div.) aff’d, (1996) 30 O.R. 575 (C.A.).

[^56]: Serra at para 65

[^57]: I note that Mrs. Earle-Barron was to advise the court about the status of her business in June 2009, by order of Baltman J.

[^58]: Counsel for Mrs. Earle-Barron submitted that by virtue of proceeding with this lengthy and protracted litigation with the potential for an unfruitful award when juxtaposed with Mr. Barron’s enormous costs of litigation incurred to date, demonstrates that Mr. Barron is a serious risk-taker and that he is not afraid to gamble. The point is well-taken and while there may be some merit to this statement, I cannot fault Mr. Barron for litigating this matter even if the outcome turns out to be as described by counsel.

[^59]: $8,260 withdrawn in 2002, $11,220 withdrawn in 2003, & $10,640 withdrawn in 2004.

[^60]: 2011 ONSC 4047, [2011] O.J. No. 3060 (Sup Ct.). See also the case of Naidoo v. Naidoo, [2004] O.J. No. 1458 (Sup Ct.).

[^61]: See Burgess v. Burgess (1995), 16 R.F.L. (4th) 388 (Ont. C.A.)

[^62]: An example is the order of Coats J. of June 17, 2010