CITATION: McLean v. Dahl, 2017 ONSC 1288

COURT FILE NO.: FS-13-0295

DATE: 2017-02-23

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

William Scott McLean

Applicant

• and -

Vikki Dahl

Respondent

COUNSEL: M. A. Currie, for the Applicant T. Nieckarz and K. Commisso, for the Respondent

HEARD: October 17 – 21 and October 24 – 28, 2016, at Thunder Bay, Ontario

BEFORE: Madam Justice H.M. Pierce

Reasons for Judgment

Introduction

[1] This has been a bitter marital dispute, mired in litigation and sadly requiring occasional police intervention. The parties’ relationship, which began as a love match, has become poisonous.

[2] The issues to be determined in this case are:

1. whether three properties registered in the wife’s name during marriage were intended as a gift or a resulting trust by the husband;
2. whether the husband retains sole ownership in a bank account transferred into the parties’ joint names during marriage pursuant to a resulting trust;
3. the value of the husband’s shares at the date of marriage;
4. the value of the wife’s unvalued chattels at the date of separation;
5. which of the parties has possession of the wife’s engagement ring;
6. the value of the husband’s tools and equipment remaining at the cottage at the date of separation;
7. the value of the parties’ property, once equalized; and
8. whether an unequal division of property should be awarded to the husband, pursuant to s. 5(6) of the Family Law Act, R.S.O. 1990, c. F.3, as am.

[3] In addition, the husband asks for orders transferring properties to him.

[4] Both parties seek a divorce. At the trial no clearance certificate was filed by either party; upon the filing of a “clear” clearance certificate, a divorce order shall issue.

[5] Counsel for the parties advise that, upon determination of these questions, further issues may need to be adjudicated if the parties cannot agree. These include:

1. whether either party’s net family property should be adjusted on account of notional costs of disposition of the properties, including but not limited to tax;
2. determination of occupation rent;
3. whether credits are owed to either party for post-separation expenses or contributions to the value of any of the properties and current value; and
4. whether there should be further adjustments to the husband’s net family property for notional income tax costs arising from the value of his shares at the date of marriage.

[6] By agreement, counsel for the parties made closing submissions in writing. I am indebted to counsel for the quality of these submissions, which have greatly assisted the court in deciding this case. While it is unclear when the husband’s reply submission was filed, it arrived on my desk sometime before Christmas of 2016.

[7] The parties began cohabiting in the summer or fall of 2006. They married on April 7, 2007 and separated on April 11, 2013. This was a second marriage for the husband, and a third marriage for the wife. At the time of marriage, the husband was 51, the wife 38. Although the wife had two children from her previous marriages, there were no children of this marriage.

[8] When the parties began their relationship, the husband was employed as a mechanical engineer at Cook Engineering. He was one of four directors on the company’s board of directors. The wife worked as an administrative assistant for the company. She later left the company for some short-term employment, then qualified for her real estate licence. She now works as a realtor. The wife’s spousal support claim was settled before trial.

[9] In 2010, another engineering firm, Genivar, acquired Cook Engineering by purchasing all of its shares as a block. The husband claimed a deduction for the value of his shares at the date of marriage. This issue was the subject of competing expert testimony by the parties’ business valuators.

Are the Properties Registered in the Wife’s Name a Gift or Subject to a Resulting Trust?

[10] During the marriage, three properties were acquired by the parties and registered in the wife’s name alone. Firstly, land was purchased on Falconcrest Drive in the City of Thunder Bay, upon which a home was constructed that served as the parties’ matrimonial home.

[11] Secondly, a home on Porcupine Boulevard was purchased. That residence was occupied from the date of purchase by the wife’s parents.

[12] Thirdly, an older cottage at Loon Lake was purchased, demolished and was being rebuilt at the time of separation. I will deal with the circumstances of acquisition and development of each of these properties in more detail.

[13] The husband seeks a declaration that he is the sole beneficial owner of these three properties because of his financial and other contributions. The husband claims that the properties were registered in the wife’s name for convenience and to avoid creditors. He argues that his retirement would be funded by capital he invested in these properties, much of which came from the sale proceeds from his shares. He relies on the presumption of resulting trust set out in section 14(1) of the Family Law Act. In the alternative, Mr. McLean seeks a declaration that the parties own the properties jointly.

[14] The wife counters that she provided money and other contributions to the properties. She says that the husband gave them to her in happier times in order to provide her with financial security.

[15] Each case turns on its facts. So, too, do the authorities that each party has cited to support his or her position. However, some of the following principles of law are helpful in weighing evidence in this case.

[16] In order to determine the equalization of net family property between the parties, the court must first determine issues of title between the parties, including whether legal title reflects beneficial ownership (See: Korman v. Korman, 2015 ONCA 578 at para. 25, 2015 CarswellOnt 12612).

[17] Section 14 of the Family Law Act establishes that the presumption of resulting trust applies to questions of ownership between married spouses. It states:

PRESUMPTIONS – The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not married, except that,

(a) the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants; and

(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a).

[18] The onus is on the party seeking to rebut the presumption to do so on a balance of probabilities. With respect to the three properties, the burden falls on the wife. In order to prove that the presumption of resulting trust is rebutted, she must show, on a balance of probabilities, that the husband actually intended the properties as a gift at the time they were acquired (See: Korman at paras. 26 – 27).

[19] After-the-fact evidence of intention may be considered so long as the court considers that there may be self-serving changes in intention over time (See: Rascal Trucking Ltd. v. Nishi, 2013 SCC 33, 2013 CarswellBC 1716).

[20] In Berdette v. Berdette, 1991 CanLII 7061 (ON CA), [1991] O.J. No. 788 (C.A.) at para. 17, 1991 CarswellOnt 280, the court held that the failure of the donee to fulfill the donor’s expectations during marriage does not vitiate the gift. The court quoted with approval the British Columbia Court of Appeal’s conclusion about gifts, citing Young v. Young (1958), 1958 CanLII 277 (BC CA), 15 D.L.R. (2d) 138 at pp. 139 – 140. Although the context of the marriage relationship has evolved, the principle with respect to the immutability of gifts remains constant. The court observed:

Even if the defendant had been to blame in parting from the plaintiff which we must assume he was not, and even if the plaintiff had in mind that he expected the defendant to keep on working continuously on the farms, the plaintiff was in much the same position as a husband who puts a residence in the joint names of himself and his wife. No doubt most husbands who do this have vague notions that they can retreat from what they have done if the wives leave them or otherwise fail them; but of course that is a delusion. Nothing is clearer than that a gift thus made cannot be revoked unless an express power of revocation is preserved. None can be implied no matter how natural such an implication might be. Here, no matter what the plaintiff’s expectations were, no power to revoke the gift to the defendant was reserved; so that was the end of the matter.

[21] In Brown v. Brown, 2015 ONSC 7968, 2015 CarswellOnt 19409 at para. 29, the court concluded that, absent any other evidence of intention, the facts that the parties managed the property as if they were joint owners and that the husband made a greater financial contribution towards the home, supported the conclusion of resulting trust.

[22] The husband relies on Greco-Wang v. Wang, 2015 ONSC 3444, 2015 CarswellOnt7933 at para. 21. In that case, the court made a distinction between circumstances where property is transferred to defeat existing creditors. In such a case, the presumption of resulting trust is rebutted. However, when property is transferred in circumstances where there are no creditors, or at best “an uncertain specter of creditors,” the claim for resulting trust is allowed.

Falconcrest Drive

[23] I will next consider the evidence as it related to the acquisition of each property, beginning with Falconcrest Drive.

[24] The parties first lived together at the home Mr. McLean had shared with his first wife. He indicated that Ms. Dahl was not happy there and wanted a new house. Her children were then living with the couple and she felt that the residence was not well suited to a family. She stated that they discussed whether to buy or build. As Mr. McLean enjoyed building, he proposed to build a new house for Ms. Dahl.

[25] Each had money to contribute to the purchase price: he had $40,000 and she had $25,000. They searched for land and in September of 2007, purchased a lot on Falconcrest Drive in Thunder Bay. Title to the property was registered in the wife’s name alone. Ms. Dahl remembered both spouses being involved in locating the lot and arranging the purchase.

[26] They designed and planned the house they wanted and Mr. McLean acted as the general contractor, performing a significant amount of the construction work himself. It was evident at trial that he took pride in building a fine home for his wife. She described him being generous in other ways as well in the early part of their relationship.

[27] Mr. McLean began preparing the site and constructed a shop on the property in the fall of 2007. The shop provided storage for his tools. In the spring of 2008, work began on the house and garage. Some of the specialty work, such as site preparation and excavation, concrete finishing, fabrication of trusses and support beams, insulation, drywall, some wiring, cabinets, stucco, decking, and other functions were done by sub-contractors. Mr. McLean also hired two university students to assist him with framing.

[28] Mr. McLean admitted that Ms. Dahl had been involved in the aesthetic aspects of the house finishing. I find that her contribution to the construction of the house went far beyond that.

[29] In examination-in-chief, Mr. McLean acknowledged that Ms. Dahl attended at the site with him to review the site survey. He admitted that she also coordinated the sale; and that they jointly reviewed house designs and sketches, selected windows, pot lights, kitchen design, plumbing fixtures, cabinetry, paint colours, stair rail and panels, ceramic tile, consulted with an interior designer, selected the fireplace, televisions, window coverings, and made furniture purchases.

[30] In her testimony, Ms. Dahl indicated that she was part of every aspect of the planning, and spent many hours researching the design, consulting suppliers, and attending to finishing. She indicated that she often attended at the worksite, cleaning, bringing lunches to Mr. McLean and keeping the home running, while both parties worked full-time.

[31] Although he minimized Ms. Dahl’s financial and non-financial contributions to the building of the house, even by his own admission, she was significantly involved. She contributed a significant sum of money to the project. As a newlywed, she advocated for the construction of this residence which was planned as the couple’s matrimonial home. A number of the communications with suppliers either copy Ms. Dahl, refer to her, or are sent directly to her.

[32] Ms. Dahl testified that she paid for some of the construction costs, as she could afford. She stated that she either gave the receipts to Mr. McLean, recorded them on her computer that her husband subsequently “wiped clean,” or simply discarded them. It is not disputed that Mr. McLean, who was the larger income-earner, paid a greater share of the costs of construction. While the residence was being built, Ms. Dahl covered some of the day-to-day expenses at Mr. McLean’s home where she and her children lived with him. Then he sold that home and they moved to temporary quarters. They finally moved into Falconcrest late in 2009.

[33] At issue is Mr. McLean’s intention when the property was registered to Ms. Dahl. Did he intend it as a gift? Has Ms. Dahl rebutted the presumption of resulting trust and proven, on a balance of probabilities, that Mr. McLean intended the property to be a gift to her?

[34] Mr. McLean testified that in 2003, he was involved in an engineering project in Nevada that had some design problems. The issue was resolved in 2005 which left Mr. McLean paying the deductible for his errors and omissions insurance. His American partners told him that they put their assets in their wives’ names so that they would be out of the reach of creditors. He testified that the title to the property was put in Ms. Dahl’s name to avoid business liabilities. He also stated that at the time of the purchase, he owned a house. He acknowledged that they were in love and he wanted to make her feel comfortable in the marriage.

[35] At the time of their marriage, Ms. Dahl earned $40,000 a year. She owned two investment properties that had equity between $30,000 – $45,000, some investments and a vehicle. She did not know Mr. McLean’s salary, but appreciated that he had equity in a house, owned RRSPs, and had common and preferred shares in Cook Engineering.

[36] Unlike her husband, Ms. Dahl remembered some discussion about ownership before the lot was purchased. She recalled Mr. McLean saying that it would be nice if she did not work and that she should sell her investment properties. She stated that she was concerned as she had always worked and the properties represented her long term retirement plan: she had no pension.

[37] When she expressed reservations about her financial security in case they should divorce, Mr. McLean told her that they would put the property in her name. He explained that he had researched family law and that she would be protected: if she owned the house, she could live in it and it would be hers. She could sell it or keep it. She would not be displaced if they separated. She stated that he said he would be protected through the equalization process.

[38] Ms. Dahl said that Mr. McLean showed her the table for equalization and explained how she could list the house with her assets. She said there was no discussion about Mr. McLean receiving an unequal division of property. There was no discussion about professional liability or Cook’s American division. She was unaware of any lawsuit in the United States. She recalled him saying, “I want to build a house for you.” Ms. Dahl said, “We were both excited.” He would refer to it as “your home” when they were with friends.

[39] Ms. Dahl stated that Mr. McLean was unconcerned that her financial contribution to the purchase price was not equal to his and confirmed that she was the legal owner. Ms. Dahl testified that Mr. McLean never told her that he wanted his money out of Falconcrest if they separated. She said he expressed that they were a team.

[40] Mr. McLean assured her that he understood the property regime in the Family Law Act. He made no effort later to change the title to the property.

[41] Both parties met with the real estate lawyer who gave them no advice about the implications of Ms. Dahl being the sole purchaser. Mr. McLean took out a line of credit which was not secured against the house. At that point, their relationship was very happy.

[42] Ms. Dahl agreed that Mr. McLean did a lot of work to build the residence at Falconcrest. Ms. Dahl testified that she contributed financially when she could either, by giving Mr. McLean money or buying things. She stated she would pay sub-contractors or give her husband money to pay them. She would source items in Duluth or pick up things at Ryden’s. It was her evidence that more of her money was used to pay for interior finishing or furniture.

[43] A few years later, when the marriage was faltering, the parties discussed building another home. Ms. Dahl stated that she would prefer a different kitchen layout and that Mr. McLean wanted a bigger shop and garage. This after-the-fact evidence confirms that the parties thought of the home as theirs, not Ms. Dahl’s.

[44] In my view, this case is on point with the facts in Brown. The parties managed the property as if they were joint owners, even though the husband made the larger financial contribution. Mr. McLean also contributed a substantial amount of labour to the project. Both put money into the acquisition of the property and the building of the home. They shopped for the land, planned, built, and furnished their matrimonial home. This residence symbolized their hopes and dreams for the marriage. Even later, when they were dissatisfied with the home and each other, they discussed building a new house that could accommodate each person’s desires.

[45] I am not persuaded that protecting the home from potential future creditors weighed heavily in Mr. McLean’s thinking; Ms. Dahl does not recall any conversation about this. The professional negligence claim had been settled two years previously and there is no evidence that Mr. McLean took any steps to change title to any other property or possessions.

[46] More telling is Mr. McLean’s assertion that Ms. Dahl would have legal title and he would be protected by the equalization process under the Family Law Act. Putting title in Ms. Dahl’s name was a romantic gesture designed to reassure his wife, but by referring to the equalization process, Mr. McLean signalled his real intention: to retrieve some of his investment in Falconcrest if the marriage failed.

[47] Both parties had been divorced, the husband recently. In middle age, each had his and her own reasons to want financial security. Neither spouse, in the flush of early love, wanted to face another separation and its financial implications. Regrettably, each was satisfied with internet self-help instead of legal advice.

[48] Against this background, I find that Ms. Dahl has not rebutted the presumption of resulting trust by proving gift. I find that Mr. McLean is entitled to a beneficial half interest to the Falconcrest property by virtue of resulting trust. The parties have agreed the value of the Falconcrest property is $600,000.

Porcupine Boulevard

[49] In 2011, a second property was purchased in Thunder Bay: Porcupine Boulevard. This property was also registered in Ms. Dahl’s name. It was and is occupied by Ms. Dahl’s parents. The purchase price, $287,500 less Ms. Dahl’s $7,000 commission, was taken from the parties’ joint account.

[50] There is little conflict in the evidence about the acquisition of this property. Ms. Dahl’s parents lived in Nipigon where they owned a home. They were experiencing health problems that required them to travel to Thunder Bay in order to receive treatment. Ms. Dahl thought they should buy a home in Thunder Bay to be closer to the parties should their health deteriorate.

[51] Ms. Dahl proposed that the parties buy a house for her parents in Thunder Bay so that they would not have to travel back and forth. Mr. McLean agreed, stating that he thought real estate would be a good investment, more secure than the fluctuations in the stock market. To some degree, Ms. Dahl corroborated his testimony on this point. She indicated that Mr. McLean had suffered substantial losses by gambling in the stock market.

[52] Mr. McLean indicated that he intended that her parents would occupy the house for the short-term and then it could be used to generate rental income. He denied any intention to gift the property to his wife.

[53] Mr. McLean commented, “I didn’t think there was any problem putting the property in my wife’s name. I trusted my wife. It would be secure from creditors.” By this time, Ms. Dahl was a qualified realtor and had her own professional liability insurance. Presumably, Mr. McLean, as a professional engineer, did too. He had previously paid a deductible to resolve an American claim.

[54] Ms. Dahl disputes that the house on Porcupine Boulevard was intended as a rental property. She observed that if the house were to be used for rental income, they would have bought a different kind of house. She stated that at the time of purchase, the honeymoon was over, and the couple was experiencing the normal ups and downs of married life.

[55] Ms. Dahl assumed all responsibility for locating the house and closing the sale. This was logical as the purchase occurred at a time when Mr. McLean was working out of town a good deal; however, he conceded that he was in Thunder Bay on the day the agreement of purchase and sale was executed and also on the day of closing. He described the title arrangement as a matter of convenience, given his work commitments.

[56] Mr. McLean had little recollection about discussions involving the purchase of the house on Porcupine. He agreed that Ms. Dahl’s parents sold their modest home in Nipigon and moved to Thunder Bay.

[57] Ms. Dahl said the parties discussed that her parents could stay at Porcupine Boulevard as long as they wanted so long as they paid the costs of occupancy – in other words, so long as it did not cost the parties anything. She said there was some initial discussion about putting the house in her parents’ names, but Mr. McLean was concerned that there might be competing claims from Ms. Dahl’s brothers against their parents’ estates on death. She conceded that there was no discussion about putting title in her name although she said that Mr. McLean was aware of it and wanted it to be that way. She said that he subsequently referred to the Porcupine property as “your home.”

[58] After the purchase, on various occasions, Ms. Dahl’s parents gave the parties joint cash gifts totalling $15,000 which were a thank you for the parties’ kindness. Subsequently, Mr. McLean wired the garage on the property and a gas fireplace was installed. These improvements cost about $14,000, according to Ms. Dahl.

[59] Ms. Dahl’s mother, Faye Dahl, testified as to her recollection about the purchase of the Porcupine house. She stated that Mr. McLean did not talk about the purchase initially. Then he discussed that the property should be put in Vikki’s name so that her brothers would not pursue claims against it upon the parents’ deaths. She said that Mr. McLean told her they could live there as long as they wanted; that there was no time limit.

[60] In my view, Ms. Dahl has not rebutted the presumption of resulting trust. I do not agree that Mr. McLean intended the house to be a gift to Ms. Dahl.

[61] At the time of the purchase, the husband would have been about 55 years old. The parties were rapidly spending the “windfall” the husband realized in the sale of his Cook shares by high living and stock market losses. The purchase price for the Porcupine Boulevard residence was a significant depletion of his retirement funds. Furthermore, the funds for the purchase came from the parties’ joint account in which his share proceeds had been deposited. Thus, the husband’s explanation that he intended Porcupine as an investment is probable.

[62] The wife’s testimony that her parents would pay the carrying costs of the residence so that it would not cost the parties anything corroborates Mr. McLean’s plan to invest in real estate. At the time of trial, Faye Dahl was 77 and her husband 79. Mr. McLean’s objective to secure his investment in real estate is not inconsistent with supporting the wife’s parents as they aged and became frail.

[63] Mr. McLean reasoned that the home would increase in value and he would recover on his investment. The fact that he subsequently wired the garage and they spent money on a gas fireplace suggests that he was interested in protecting the investment, as well as providing for the comfort of the elderly Dahls, with whom he had a good relationship.

[64] I find that Mr. McLean is entitled to a beneficial half interest in the value of the home on Porcupine Boulevard, by virtue of a resulting trust. The parties have agreed the value of the property is $290,000.

West Loon Lake

[65] In May of 2011, a third property, a cottage located at West Loon Lake was purchased and registered solely in the wife’s name.

[66] At marriage, the husband owned a one third interest in a family cottage at East Loon Lake. He stated that Ms. Dahl disliked the lack of privacy and inconvenience of sharing this family cottage with his family. He indicated that on one occasion, Ms. Dahl tried to force his siblings out.

[67] Ms. Dahl stated that she told her husband when the Genivar sale was done, “I’d love the privacy of our own camp [cottage] so we could have family and friends whenever we wanted.” Ms. Dahl said that Mr. McLean replied, “You find the lot and I’ll build you a camp. I love building.”

[68] Ms. Dahl testified that she had conversations with him about whether he wanted to be on title to which he replied, “I have a camp. I have no children so I have no one to pass it on to.”

[69] His evidence was that he trusted his wife and did not think there would be an issue about putting the property in her name; it was more convenient to do so. He stated that he did not intend to gift it to her.

[70] Mr. McLean stated that he intended to develop real estate assets that would not be subject to stock market fluctuations. He believed that cottages do not decline in value and that he could always sell if he did not like it.

[71] Ms. Dahl searched for a property and called Mr. McLean when she found one. He told her to go ahead and buy it. The fact that she consulted him about the cottage purchase suggests that she regarded it as a joint undertaking.

[72] Mr. McLean said that title to the cottage was put in Ms. Dahl’s name because he had a hectic travel schedule that spring; however, he conceded that he was home both at the time the agreement of purchase and sale was signed and at closing. He made no subsequent attempt to change the title.

[73] Ms. Dahl made arrangements for the purchase; closing took place in May of 2011. The purchase price was $147,000. Mr. McLean did not see the property until after closing. The purchase was funded from the parties’ joint bank account into which the husband had deposited his share proceeds.

[74] There was an existing cottage on the property and the parties discussed either upgrading the structure or demolishing it so that the new design could be built on the land. Ultimately, they decided to demolish and build. This joint decision-making also suggests that they undertook this project together, for their mutual enjoyment.

[75] The evidence demonstrates that both parties were heavily involved in planning, designing and decorating the cottage, but that Mr. McLean assumed the burden of technical planning and construction in all respects. Some aspects of construction were performed by others.

[76] Mr. McLean demolished the cottage and built a garage for the storage of tools and materials before building the cottage. Shingling was sub-contracted to a firm that did an inadequate job. When the parties refused to pay, the firm sued them in Small Claims Court and obtained judgment.

[77] The majority of the funding for construction and furnishing came from the parties’ joint bank account although funds also came from their individual accounts. By this time, Ms. Dahl’s career as a realtor was well established, and she was earning about $100,000 a year.

[78] Mr. McLean sent Ms. Dahl messages confirming that visitors “loved your camp and the colours you picked and they all loved your kitchen.” I do not take this as a statement of intention to gift on his part, but rather an affectionate expression of pride in her taste.

[79] By 2012, the marriage was in decline. It descended into distrust and recriminations. The parties were going in different directions. In October of 2012, Mr. McLean accused Ms. Dahl of having an affair. A physical confrontation took place which led to the police charging Mr. McLean.

[80] By the time separation occurred in April of 2013, construction on the cottage was 80% complete. However, there was no occupancy permit. Upon separation, Ms. Dahl changed the locks on the cottage and the garage and arranged to complete the construction herself. In locking Mr. McLean out, she refused to give him his tools that were housed in the cottage and the garage. Ultimately, it took a court order in October, 2014 to obtain access to the tools. Even after the order, the tools were not recovered until late November, 2014.

[81] Not surprisingly, Mr. McLean was angry. His tools were among his prized possessions. In the early days of separation, he sent Ms. Dahl a text advising, “Please be advised that insurance for your Mercedes, Porsche, Harley, and your property at West Loon has been cancelled effective 8:30 Friday April 26, 2013.” In cross-examination, Ms. Dahl disagreed that her husband could not renew the insurance because the property was not in his name. It is not clear whether these assets were covered by a blanket policy that Mr. McLean was paying, or the contract of insurance was simply up for renewal. Regardless, Ms. Dahl says this constitutes proof that Mr. McLean intended to gift the cottage to her.

[82] A year after separation, and when he was still unable to recover his tools, Mr. McLean retaliated by advising the property tax assessment authorities, (“MPAC”) that the value of the property had increased substantially, and so its assessment should be reviewed. The taxes tripled after MPAC’s review. Ms. Dahl also maintains that since it was not in Mr. McLean’s interests to have the taxes raised on a property in which he had an ownership interest, this proves that he intended to gift her the property.

[83] Ms. Dahl moved into the completed cottage in July of 2013, but her dispute with a neighbour and the difficulty of commuting to town in winter made year-round occupancy problematic. Ms. Dahl moved back to Thunder Bay. She rented the cottage to defray the costs or allowed her daughter and boyfriend to live there. She continues to pay the costs of the cottage.

[84] I am not persuaded that Mr. McLean intended to gift the cottage at Loon Lake to Ms. Dahl. While it was Ms. Dahl who wanted a cottage that afforded her more privacy, she sought the approval of her husband for the purchase and collaborated with him in the decision-making with respect to the cottage. The purchase was funded from the parties’ joint account. He took the lead with respect to design and construction: by Ms. Dahl’s evidence, Mr. McLean spent more time at the property when demolition and construction were underway.

[85] It is not probable that Mr. McLean would expend joint funds and a considerable investment of his labour on a cottage without the anticipation of enjoying it on completion.

[86] I find that this, too, was always understood and intended to be a joint undertaking, for the couple’s shared pleasure. Ms. Dahl articulated this common intention to share when she testified, “I’d love the privacy of our own camp so we could have family and friends whenever we wanted” [Emphasis added].

[87] Mr. McLean’s explanation that he wanted to invest in real estate to avoid the risks of the stock market, and his view that cottage property seldom goes down in value has a ring of truth about it.

[88] I find that Mr. McLean is entitled to a beneficial half interest in the value of the cottage at West Loon Lake by virtue of a resulting trust. The parties have agreed that the value of the cottage property is $360,000.

Joint Bank Accounts

[89] The Family Law Act deals specifically with the presumption of ownership when spouses maintain joint bank accounts. Section 14(b) of the Act provides:

(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a).

[90] Subsection 14(a) of the Act stipulates that property held in the name of spouses jointly shall be intended, in the absence of proof to the contrary, to be owned jointly. The presumption may be rebutted by the spouse who seeks to have these monies excluded from net family property (See: Belgiorgio v. Belgiorgio, 2000 CanLII 22733 (ON SC), [2000] O.J. No. 3246 at para. 49, 2000 CarswellOnt 3060 (S.C.J.)). It follows that, in this case, the husband bears the onus of proving on a balance of probabilities that he did not intend the funds to be owned jointly.

[91] In LeCouteur v. LeCouteur, 2005 CanLII 8726 (ON SC), [2005] O.J. No. 1141 at para. 49, 2005 CarswellOnt 1129, the court held that the husband failed to rebut the presumption of resulting trust in respect of funds in a joint account that had “traditionally been used to carry out family decisions for funding special projects”, such as renovations, plans for a new house, landscaper’s bills, a joint debt, and a deposit on a condominium.

[92] In Belgiorgio, at para. 35, the facts were similar. The court held that a joint bank account in which the husband deposited his inheritance was used for household expenses and purchases, and was commingled with household income. The court found that the inheritance lost its excluded character when it was placed in a joint bank account, even if, in retrospect, the husband regretted his actions in not keeping the inheritance separate. It was his intention at the time he deposited the funds that was relevant.

[93] Mr. McLean seeks a declaration that he is the sole owner of the contents of a joint bank account in the amount of $94,565 at the date of separation and of the parties’ earlier joint account, #8998-246.

[94] In order to determine ownership of these joint accounts, it is necessary to review the banking history between the spouses.

[95] Initially, the spouses maintained their own accounts. When the Genivar sale was finalized in February, 2010, Mr. McLean deposited the funds, $953,706.72, into his personal account, BMO #8058-879 where he was holding other savings. Subsequently, he transferred the funds in that account, some $1,018,733 to BMO account #8998-246 registered solely in his name. Other deposits into the account included interest and funds from his chequing account.

[96] According to Ms. Dahl, Mr. McLean always referred to the Genivar funds as “ours.” The funds were used for the couple’s lifestyle, including entertainment, travel, the purchase of a Sea-doo, and a luxury vehicle gifted to the wife when she completed her realtor’s qualifications.

[97] During this period of time, the wife had resigned from Cook Engineering and was without income while she studied for her realtor’s exam. Mr. McLean periodically provided Ms. Dahl with cheques from this bank account to use for her own expenses. These cheques amounted to about $68,000. He does not ask that these funds be returned to him.

[98] Mr. McLean stated that it was his plan to invest the balance of the funds for retirement. That may have been his intention initially, but he did not follow through.

[99] He testified that in the fall of 2010, his wife began harassing him to add her name to the account. He said that he did so to keep peace in the marriage and out of convenience. He denies intending to gift the funds in the account to his wife. The manner in which both spouses used the joint account does not make his explanation credible.

[100] Ms. Dahl denied hounding her husband to add her name to the account. She explained that he agreed that it made sense to add her name to the account so that he would not be put to the trouble of continuing to write cheques every time she needed funds. Mr. McLean added Ms. Dahl’s name to BMO account #8998-246 in about October, 2010. By the time the first statement for the joint account was delivered in November, 2010, the balance in the account was $968,861.

[101] It is common ground that there were no restrictions on Ms. Dahl’s use of the account. Both parties used the account as they saw fit. However, it was their practice to consult one another if major purchases were to be made.

[102] Funds from this joint account were used to purchase the Porcupine Boulevard and Loon Lake properties and to fund construction at Loon. The parties also decided to grant a sizeable loan to friends. The funds came from the joint account. When the funds were repaid to the wife alone, she returned them to the joint bank account.

[103] The parties shared equally the income tax liability attributable to interest earned on the joint account.

[104] I do not accept Mr. McLean’s evidence that he was unaware of the withdrawals Ms. Dahl was making from the account. The bank sent Mr. McLean monthly statements showing all activity on the account. He also had access to electronic banking concerning the account and he banked online regularly. Thus, Mr. McLean could and did see how Ms. Dahl was using the account.

[105] On October 25, 2012, Mr. McLean accused Ms. Dahl of having an affair. He made an issue of her withdrawal of $167,401 from the joint account over the previous two years. Mr. McLean withdrew the balance of the funds, then $77,056.85, from the joint account and placed them in an account under his sole control. Some of the funds were used to pay for construction at Loon. The remaining $30,000 was deposited into account # 3992-937.

[106] After Falconcrest was built, the parties discussed building a new matrimonial home. They searched for property and placed a deposit on it in the amount of $85,000. As the marriage was crumbling, they did not proceed with the project. Mr. McLean took the position that he would not return the $30,000 to the joint account because Ms. Dahl had retained control of an $80,000 refund from the deposit.

[107] When the parties decided to work on their marriage, they agreed to put these funds into a joint account on the condition that both their signatures were required to make a withdrawal. This account was #3992-937. At the date of separation, it had a balance of $94,565.

[108] Has Mr. McLean rebutted the presumption that the funds in the joint bank accounts belong to both spouses? I find that he has not. As in the LeCouteur case, Mr. McLean intentionally transferred solely-held funds to the parties’ joint names, first into account # 8998-246. These funds were used for funding family projects, including the purchase and construction of a cottage, a loan to friends, a deposit on land for a future matrimonial home and sundry other expenses.

[109] Mr. McLean’s explanation that he placed the funds in joint names for convenience sake indicates that he intended that Ms. Dahl have access to the funds. In fact, he had been generous with his wife before the funds were transferred to joint names.

[110] Mr. McLean did not dispute that the spouses discussed major transactions using these funds. Nor did he dispute that the parties shared the tax liability for income on these funds. He was aware by receipt of monthly bank statements and by using electronic banking of the status of the account on an on-going basis.

[111] It is also telling that, when the parties agreed to work on their marriage, after Mr. McLean closed the first joint account, they opened a second joint account into which each deposited monies in his or her control. This was the second time that Mr. McLean intentionally placed funds in Ms. Dahl’s control. It is obvious from his pattern of conduct that he intended her to have access to funds in joint accounts, #8998-246 and #3992-937.

[112] From the time that Mr. McLean added Ms. Dahl’s name to account #8998-246, she became a half-owner of the funds. I find and declare that the parties are entitled to one-half the funds in the parties’ joint BMO account # 3992-937 in the amount of $47,282 each.

The Value of the Parties’ Chattels

[113] It is indicative of the bitterness of this litigation that a lot of trial time was spent discussing the value of chattels, despite the obvious and probably strenuous efforts of counsel to narrow these issues. Specifically, the parties disagree on household contents retained by each spouse but not valued, including tools, furniture, and the wife’s engagement ring. The husband asks the court to determine whether:

a) the $6,000 value ascribed to the wife’s engagement ring should be removed from the wife’s net family property as a date of marriage deduction;

b) the amount of $26,231 should be attributed to the wife on account of furnishings the husband alleges she removed from Falconcrest at separation and did not appraise; and

c) the amount of $13,375 should be attributed to the wife on account of the replacement costs of tools and equipment the husband alleges the wife “stole” from the cottage at Loon Lake.

The Engagement Ring

[114] The parties agree that the value of the wife’s engagement ring for purposes of equalization is $6,000. The wife alleges that the husband has it in his possession; the husband alleges that the wife has it.

[115] Mr. McLean testified that when he and Ms. Dahl met for the first time after separation, she was wearing the engagement ring along with her wedding ring. He stated that he wore his own wedding ring to that meeting as a sign of his desire to make up their differences and he took encouragement from his observation that she had not removed her rings.

[116] Ms. Dahl testified that she packed up and left the matrimonial home in a hurry when her husband was out of town. She testified that she put the ring in a box of valuables and inadvertently left it at the matrimonial home along some jewellery and her computer.

[117] Mr. McLean submits that Ms. Dahl’s testimony is not credible. He argues that the only fair way to deal with the issue is to disallow Ms. Dahl’s claim for deduction of the value of the ring at the date of marriage. He contends that while it was her asset at the date of marriage, it was received as a gift from him and his savings at the date of marriage were correspondingly reduced. He suggests that by removing the deduction from the wife’s net family property, the issue is neutralized.

[118] Ms. Dahl submits that regardless of where the ring is, it was her property at the date of marriage as well as at the date of separation.

[119] I agree that the wife’s explanation of leaving the ring behind when she left Falconcrest is not credible. There is no evidence that an immediate demand was made for the box of valuables in which she placed the ring.

[120] There is no suggestion in the evidence that the wife did not routinely wear her wedding and engagement rings as is customary for most women in Canada. As the best way to transport a hat is on one’s head, the best way to transport an engagement ring is on one’s finger. While it is possible that the ring was lost at a later time, I do not find, on a balance of probabilities, that the husband retained possession of it.

[121] I agree, however, that as the ring was the wife’s property at the date of marriage and on the date of separation, she should be credited with its value on these dates accordingly.

The Appraisal of Chattels

[122] In negotiations leading up to trial, the parties agreed that, for purposes of litigation, they would agree that each brought $5,000 in chattels into the marriage although they did not agree which items were represented by this figure. As well, the wife agreed to accept certain values of chattels, such as lumber in the hope of resolving the chattels dispute, even though she did not agree with its value.

[123] Peter Kantola is a contents appraiser. He was qualified at trial to give expert evidence as a property (chattel) appraiser.

[124] On November 27, 2014, I granted an order on consent that required:

The contents of both parties, save and except any contents acquired by them after the date of separation, as located at 2316 Falconcrest Drive, 243 West Loon Lake, and 510 East Loon Lake Road shall be appraised by Peter Kantola.

[125] The order made no exceptions for items brought into the marriage; thus, the husband’s tools and other pre-marriage chattels were required to be appraised. Despite the plain wording of the order, Mr. McLean directed Mr. Kantola not to value his tools or contents of Falconcrest because he said they were acquired prior to marriage. This was in contravention of the order and undoubtedly prolonged the negotiations over chattels and the trial itself.

[126] In addition, Mr. McLean took the position that it was not necessary to value any items acquired during marriage that replaced pre-marriage assets. This was also in contravention of the order. None of these “replacement” items were identified by receipts or proof of value.

[127] The husband took the position that all of his tools at Falconcrest were acquired before marriage while most of the tools that were located at Loon and “stolen” by Ms. Dahl were acquired during marriage.

[128] Apart from her observation that Mr. Kantola was unduly influenced by unverified information he received from Mr. McLean, Ms. Dahl makes several complaints about the December, 2014 appraisal (Exhibit 39):

1. Certain items were valued in excess of their proven purchase price. For example, a fridge purchased for Loon in July of 2012 was invoiced at $2,333 (including tax and shipping) but appraised at $2,800.
2. Scrap lumber left from the deck of the demolished cottage was valued at lumberyard prices, even though she contends it was rotting.
3. Mr. Kantola’s appraisal indicated that Mr. McLean had receipts for most of the items appraised, and that Mr. Kantola relied on his information in that regard. However, he admitted in cross-examination that he did not see any receipts so that his conclusions were based on Mr. McLean’s recollection of purchase prices.
4. Certain items in Mr. McLean’s possession were undervalued: for example, the pool table that Mr. McLean contended was purchased used. Mr. Kantola valued the table at $725. However, communications regarding a custom-made pool table dating from 2009 estimate a range in value between $2,950 and $3,200. The final receipt was not produced.

[129] Ms. Dahl submits that any items that were actually in her possession and not appraised were offset by the inflated value of the contents she included in her net family property.

[130] In her opening statement at trial, Ms. Dahl alleged that Mr. McLean retained contents and tools that he has not valued. She claimed that the value of these items is significantly greater than what she retained. However, there was little evidence called at trial to support this claim. Consequently, no relief was granted.

Chattels not Appraised by the Wife

[131] Mr. McLean became concerned that Ms. Dahl had removed items from the matrimonial home that she had not identified for valuation. He commissioned Mr. Kantola to do a “desktop appraisal” (Exhibit 38) which was a valuation without physically inspecting the goods to be valued. Mr. McLean advised Mr. Kantola of the items he alleged were in Ms. Dahl’s possession and their purchase dates, and Mr. Kantola attributed a value to them. He concluded that Ms. Dahl had $28,621 in additional assets that were not presented for valuation.

[132] Ms. Dahl also takes issue with the desktop appraisal because:

1. Mr. Kantola indicated that the appraisal was based on information provided by the husband as to the existence, nature and condition of the items reported to him. Apart from a credit card statement for patio furniture, Mr. McLean provided no other invoices or receipts.
2. Mr. Kantola also testified that the husband’s information as to purchase prices of these items were unverified. For example, motorcycle parts purchased by the wife were appraised at $2,330. When the invoice dated March 26, 2013 was produced, it contained charges for labour, lubricants, and parts that were installed on the motorcycle. In addition, Mr. Kantola appraised Ms. Dahl’s motorcycle clothing. By contrast, Mr. McLean’s sports clothing was not valued.
3. No model numbers or specifications with respect to electronics were supplied; Mr. Kantola agreed that this information would be the best way to determine value.
4. Mr. Kantola appraised items on the basis of their depreciated value rather than their fair market value.
5. There are inconsistencies between the values attributed to similar items as between the two appraisals: for example, two area rugs (8’ x 9’ and 7’ x 9’) in the possession of the husband were valued at $30 and $40 respectively when purchase documentation showed a purchase price for these rugs at $1,400 in 2010 (exhibit 50). A “small scatter rug” in the wife’s possession was appraised in the “desk top” appraisal at $150.

[133] Ms. Dahl submits that any unvalued items that she actually had are more than off-set by the inflated value of the contents already accounted for in her net family property.

[134] Mr. McLean argues that some of the values Mr. Kantola ascribed to the wife in the desktop valuation were the same as or less than values Ms. Dahl had disclosed in her financial statement. He notes that after she disputed an entry for Leon’s furniture purchased at separation, she conceded that it was properly included, and belatedly added it to her net family property statement just before trial.

[135] Without the benefit of an invoice, Mr. Kantola valued a car starter ($1,505) that Ms. Dahl says was installed in her car at separation. Like the motorcycle, which the parties agreed to value at $16,500, they agreed that the value of the wife’s Mercedes at separation was $31,000. Thus parts installed in vehicles at the date of separation have been double-counted and will not be attributed to Ms. Dahl.

[136] At Exhibit 21, Tab 5, the wife filed her list of “Items Retained by Wife” where she describes “outside patio sets.” Ms. Dahl disputes that she has two patio sets, explaining that she meant her two sectional pieces put together to make one and not two “sets.” She stated that Mr. McLean has the other set, which is not accounted for in his net family property.

[137] I do not accept this explanation. A “set” is defined in the Oxford Canadian Dictionary, (Don Mills, Ontario: Oxford University Press, 2001) as “a number of things or persons that belong together or resemble one another or are usually found together.” By this commonly understood definition, two matching pieces make one set. Another differently designed combination of furniture would form a different or second set. Ms. Dahl’s list shows that she had two sets of patio furniture.

[138] Mr. Kantola credited Ms. Dahl with four tickets to a Rolling Stones concert, with two purchased on April 9, 20 10 and a second pair purchased the following day. Ms. Dahl’s testimony was that she left a pair of tickets for Mr. McLean when she separated from him on April 11. Mr. McLean disputes this, saying his wife retained the tickets.

[139] The more logical explanation, which I accept, is that a pair of tickets was left for Mr. McLean; otherwise, why would Ms. Dahl have purchased another pair? This may, in any event, be a distinction without a difference, as the tickets were charged to two different credit cards, producing a corresponding debt as of the date of separation that offset the value of the tickets, $2,510. Thus, they have no value attributable to either spouse.

[140] Ms. Dahl disclosed having certain chattels in her first financial statement but in Exhibit 21, (Tab 2) she denied having them or indicated that she had disposed of them: for example, patio furniture; chair; three televisions; a clothes steamer; two mirrors; a king-sized bed; printer/fax; iPad; iPad mini; and iPhone dock stereo, all of which were valued by Mr. Kantola at $11,485. In Exhibit 21, Ms. Dahl characterized some of these items as “old and discarded and bought new.” I find it was probable that she took these items at separation; therefore their value is attributable to her.

[141] Ms. Dahl admitted taking the following items that were not originally appraised: stools; desk; filing cabinet; Macintosh computer; two phones; barbecue; small rug; bench; chair and two paintings. These items were appraised at $5,740 collectively and will also be attributed to the wife.

[142] The parties’ evidence about whether Ms. Dahl took four winter tires mounted on rims, valued at $2,025, is diametrically opposed. Ms. Dahl says that Mr. McLean has them in his shop; Mr. McLean denies this. Although Mr. Kantola appraised and photographed two items in the garage at Falconcrest, there are no items appraised in the shop.

[143] As this is Mr. McLean’s claim – that their value should be added to Ms. Dahl’s net family property statement – his bears the onus of proving they are in her possession. Because she alleges they were left in his shop and Mr. McLean has not disclosed the contents of his shop, I draw an adverse inference that he has the tires. Had he complied with the court order to appraise all chattels at the matrimonial home, there would have been an inventory of the contents of the shop, proving whether or not the wife’s tires were there.

[144] I accept the evidence of the wife that certain items are palpably overvalued in the December appraisal as follows: the cottage fridge by $500 and scrap lumber by about $2,200 for a total of $2,700. As well, the pool table in the husband’s possession is undervalued by about $1,000 based on the supplier’s quotation.

[145] Ms. Dahl has added the Leon’s furniture to her net family property. I find that she has not added chattels in her possession worth $17,225 to her net family property statement. This sum shall be reduced by $3,700 to account for over and under-valued assets above, for a net addition to her net family property of $13,525.

Replacement Cost of Missing Tools at Loon Lake

[146] Mr. McLean seeks a finding that $13,375 should be attributed to the wife on account of the replacement costs of tools, equipment and belongings he alleges the wife retained at the cottage. The wife disputes that she retained any of her husband’s tools or equipment; she also disputes that any additional value should be charged to her on account of these items because the evidence is too unreliable.

[147] When the parties separated, construction of the cottage at West Loon Lake was about 80% complete. Unaware of his wife’s intention to separate, Mr. McLean left tools and equipment at the property; Ms. Dahl changed the locks on the cottage and the garage immediately upon separation. Ms. Dahl unwisely took the position that because Mr. McLean refused to return her belongings from the matrimonial home, she would not return his tools. Her items included:

a) Sea-doo and trailer;

b) personal belongings;

c) clothing;

d) golf clubs;

e) mountain bike;

f) sports equipment;

g) kitchen table and chairs;

h) remaining work items from the home office including lap top computer and brief case.

[148] Although Ms. Dahl was the registered owner of the Sea-doo and trailer, Mr. McLean unwisely decided not to release them to his wife on the grounds that he paid for them and was therefore entitled to them. (I note that the wife in her net family property statement, found in her closing submissions, indicates that the husband will retain both the Sea-doo and trailer.)

[149] Ms. Currie advised Ms. Dahl’s then counsel, Mr. Mauro, on October 24, 2013, that the husband would agree to the release of all items except the Sea-doo and trailer. Ms. Dahl complains that when her computer was returned to her, all the files on it had been deleted. Undoubtedly, this game of “tit for tat” escalated tensions between the parties and exacerbated the litigation, at great cost to both parties.

[150] Ms. Dahl testified that Mr. McLean retrieved many of the outside items at Loon Lake while she moved items inside the cottage to the garage so that construction could continue by other tradesmen. Some of these items, including tools, appear on Mr. Kantola’s appraisal of the contents of the garage at Loon.

[151] Ms. Dahl also stated that Mr. McLean’s main shop was at Falconcrest. He brought tools back and forth from Falconcrest to Loon Lake routinely. She denied removing any of his tools or belongings from Loon Lake and denied permitting others to do so. She added that she took reasonable steps to preserve Mr. McLean’s belongings, including moving them to drier ground inside the garage when there was flooding in 2014.

[152] Ms. Dahl also argues that the list and photographs at Tab 8 of Exhibit 20 depicting items the husband says were not removed from Loon Lake are unreliable. The photographs were taken at various points during construction of the cottage. The wife claims that, at best, the photographs show that tools were moved around the site as needed, but they do not prove that the items depicted remained at the cottage after separation.

[153] Because the intervention of his counsel for the return of his tools was not successful, Mr. McLean brought a motion for the return of his tools and belongings. As I have said, the motion was granted on consent in October, 2014, with terms for valuation followed by delivery of Mr. McLean’s goods to his agent. Delivery took place in November, 2014.

[154] As it is Mr. McLean who is advancing this claim to attribute the cost of his missing items to his wife, the onus is on him to prove, on a balance of probabilities, that she retained the goods, and if so, the value of the goods. Exhibit 20, Tab 8, contains a list of the items he says should be replaced by Ms. Dahl. Exhibit 20, Tab 6, contains Mr. Kantola’s appraisal of items from Loon Lake, including some of Mr. McLean’s tools and other belongings.

[155] Before dealing with the merits of this claim, there are some preliminary observations that require comment.

[156] Certain items claimed by the husband are duplicated on Mr. Kantola’s list as having been appraised. These include:

1. Keurig coffee maker;

2. laser level with tripod;

3. level and square;

4. Black and Decker drill;

5. garden tools (shovels, rakes, axe, pick, etc.)

[157] The total replacement value of these duplicated items as claimed by Mr. McLean is $1,530. By comparison, Mr. Kantola valued these items collectively at $245.

[158] Secondly, many of the items claimed for replacement by the husband are consumables. In other words, these items are used up in the course of a construction project and discarded at the end of the project as no longer useful. Examples may include dull saw blades or drill bits. In the case of blades and bits, there is no evidence that Mr. McLean sharpened and reused them. Accordingly, I find that they are consumables.

[159] Other consumables may be incorporated into the structure: for example, plumbing joints. Cleaning supplies are another example of materials used during construction. Consumables are not tools which are used repeatedly from one project to the next. Mr. McLean recovers the value of consumables in the form of the value of the finished building, not as an addition to its value. In this case, Mr. McLean was awarded one half the value of the cottage.

[160] Essentially, the claim for consumables is double-dipping. By analogy, if Mr. McLean worked in the construction trade for others, the cost of consumables used in construction would be incorporated into the price of the contract he negotiated with his client. They are not separately claimed. It follows that there is no obligation on the wife to re-stock the husband’s construction supplies.

[161] The consumables claimed are as follows:

1. carbide blades (table saw);

2. electrical panel;

3. 200 amp meter base

4. box of electrical connectors;

5. electrical boxes;

6. ABS solvent;

7. plumber’s putty;

8. ABS fittings;

9. drywall sanding pads;

10. contents of caulking tote: spray foam, silicone caulk, roof cement, PL premium;

11. 6 – 325 fuel cells

12. oil/degreaser;

13. 4 – finish fuel cells;

14. box of 3.25” framing nails;

15. box of 2.5” framing nails;

16. box of 3.25” ACQ framing nails;

17. box of roofing nails;

18. spare blades;

19. Pex ½” fittings;

20. Pex ¾ ” fittings;

21. spade bits for drill;

22. Forstner bits;

23. 2 spools 150 m. cable;

24. 1 spool 50 m. cable;

25. sheet metal screws;

26. cleaning supplies; and

27. geotech fabric.

[162] The value of these items, as claimed by Mr. McLean, is $2,444. This sum is disallowed for the above reasons.

[163] Mr. McLean also claims for the value of construction stairs used at the cottage construction. He has produced an estimate for construction of rough stairs produced by a third party, in the amount of $1,424. This item was not included in one of the husband’s preliminary lists; it was added after a neighbour advised him in September, 2014 that the stairs had been removed from the property.

[164] Mr. McLean’s testimony was that on every project, a set of rough stairs are built before the finished maple stairs are constructed. In other words, each set of construction stairs are customized to fit the space to be constructed. They are not a tool because they are generally not transferable to another site to be re-used. Once the job is done, they become, essentially, construction scrap. I find, therefore, that the construction stairs are also a consumable, and their replacement value is disallowed.

[165] Even if I were disposed to allow this claim, the cost of the stairs is inflated. They were quoted for completion by a third party, which not surprisingly, claims a profit for materials and labour involved in building them. However, the stairs at Loon were constructed by Mr. McLean himself, on site.

[166] The next item that bears comment is the husband’s claim for replacement of his snowmobile suit at a cost of $768 plus HST. No authority was provided for the court to value clothing as part of the equalization process. Neither spouse has appraised or otherwise claimed for the value of clothing, whether on a depreciated or replacement basis. It is a practice to be discouraged in spousal disputes lest the courts become embroiled in the minutiae of investigating each spouse’s closet. The cost of the suit is therefore disallowed.

[167] That said, it is noteworthy that the snowmobile suit was photographed by Mr. Kantola in the garage at Loon Lake when he appraised items on November 25, 2014 but it was missing when Mr. McLean’s agents went to retrieve his belongings a few days later. Ms. Dahl did not offer any explanation for the missing snowmobile suit.

[168] Sally Southon, a retired woman, owns the house adjacent to the parties’ cottage. She was offered as a witness on Mr. McLean’s behalf. She took a keen interest in the comings and goings at the McLean/Dahl cottage and was quite protective of the husband’s interests, reporting to him by e-mail on various occasions. It is obvious that she disapproved of Ms. Dahl, a perspective that coloured her testimony.

[169] She claimed to have witnessed Ms. Dahl’s daughter and her boyfriend removing Mr. McLean’s tools from the garage in the summer of 2014. In cross-examination, she admitted that she did not see Ms. Dahl’s daughter. She also acknowledged that she had become embroiled in a property dispute with Ms. Dahl in the summer of 2013. Her testimony reflected that animus.

[170] Most of the photographs she presented as proof are not sufficiently clear to be helpful. Nevertheless, I accept that she observed the removal of the construction stairs and the old deck lumber based on the photos taken and a contemporaneous e-mail she sent to Mr. McLean. She also stated that she observed a belt sander and a sawzall box along with other yellow boxes being removed from the garage. There is no evidence about the contents of these boxes or who owned them. Ms. Southon testified that the young men removing them were staggering under their weight.

[171] In cross-examination, Ms. Southon admitted that, at a distance, she could not see whether the tool was a vibrating sander or a belt sander. She also admitted that she assumed it belonged to Mr. McLean. She stated that she did not see “any of them” bring tools, although she reluctantly agreed that she was not at her house all the time.

[172] What was more helpful were the photographs produced by Ms. Dahl in Exhibit 22, Tab 4, showing the contents of Mr. McLean’s shop at Falconcrest together with receipts for certain tools and equipment. While the workshop was a jumble of materials, certain items that are on Mr. McLean’s list can also be seen in Ms. Dahl’s photographs: for example, gas cans, electrical and plumbing supplies; drywall tools; a hammer, soldering supplies; nails; electrical wire; an electric drill; and wrenches.

[173] The photographs of the construction site at Tab 8 of Exhibit 20 and those taken by Mr. Kantola also show tools in use at Loon Lake. Thus, I find that Mr. McLean owned an assortment of tools appropriate to the construction of the cottage at Loon. There being no evidence to the contrary, I find that these were all used tools.

[174] Generally, Mr. McLean was working at the cottage alone. I take judicial notice of the fact that Loon Lake is at least half an hour’s drive from Thunder Bay. Ms. Dahl spoke of the difficulties of commuting to Thunder Bay from that location in winter.

[175] It is probable that Mr. McLean would stock the site with all of the tools he needed for the tasks at hand, rather than running back to his shop in the city to retrieve tools and materials, a waste of time. The list of tools claimed is also reasonable in relation to the type of construction undertaken. There is no dispute that Mr. McLean completed the construction with his own tools.

[176] The question remains: were the tools removed from the site when it was in Ms. Dahl’s control? I conclude that they were. When asked in cross-examination why she could not return Mr. McLean’s tools, Ms. Dahl expressed frustration that Mr. McLean retained her computer on which her work files were stored.

[177] There is also evidence of certain items missing from the cottage. Mr. McLean’s snowmobile suit disappeared shortly after its presence at Loon Lake was documented by Mr. Kantola, a disinterested third party. The deck lumber was disposed of, as conceded by Ms. Dahl. Ms. Southon documented the removal of the construction stairs. She observed boxes being removed from the McLean/Dahl garage, although the ownership and contents are unknown. It is probable that other items were removed as well.

[178] Ms. Dahl argues that there is no proof that any missing items were replaced. I agree with this submission. Mr. McLean has shown himself to be a meticulous record-keeper. No proofs of purchase were produced. Nevertheless, for purposes of equalization, Ms. Dahl retained the value of the tools and other goods Mr. McLean left at the cottage, with the exception of items disallowed in these reasons. Therefore, they shall be attributed to her for purposes of equalization.

[179] However, I do not agree with Mr. McLean’s submission that replacement value is the appropriate value to attribute to these items. The tools that were available for appraisal by Mr. Kantola were appraised on a depreciated basis, which he determined as fair market value. Neither party took issue with Mr. Kantola’s approach to valuation.

[180] In comparing the difference between the replacement values of the items Mr. McLean claims for items that were duplicated on Mr. Kantola’s list, Mr. Kantola’s values were 16% of Mr. McLean’s values. In the absence of any other evidence about fair market value of used tools, I apply that percentage to Mr. McLean’s claim for missing tools.

[181] I am mindful that his list contains claims for a snowmobile helmet, key and lift, as well as single bed sheets (valued at $90). There is likewise no evidence about the vintage of these items or their depreciated value. The 16% comparator will also be applied to these items.

[182] Mr. McLean’s claim for missing items at Loon Lake is $13,375. From that figure, I have deducted the sum of $1,530 for items duplicated on Mr. Kantola’s list; the sum of $2,444 for consumables disallowed; the sum of $1,424 for construction stairs; the sum of $768 for the snowmobile suit, leaving a balance claimed of $7,209. When the 16% figure for depreciated value is applied, the net claim is $1,153.44. This sum will be added to Ms. Dahl’s net family property for purposes of equalization.

Value of the Husband’s Shares at the Date of Separation

[183] Also at issue is the value of the husband’s 1,100 common shares in Cook Engineering at the date of marriage, April 7, 2007. For the purposes of this discussion, this is the valuation date.

[184] The husband seeks a pre-marriage deduction for the value of both his preferred and common shares in Cook Engineering. The onus is on the party seeking a deduction to prove it on a balance of probabilities. The amount of tax attributable to the share value will be determined by the parties subsequent to trial, based on the court’s determination of value.

[185] The experts agree that the value of Mr. McLean’s 6,129 preferred shares is $167,935. They disagree on the value of the common shares. The husband’s business valuator, Mr. Kubinec, valued the common shares at $688,393 based on an en bloc fair market value. Thus, the husband’s position is that his total shareholding as of the date of marriage was $856,328.

[186] Preparatory to the valuation, Mr. McLean advised Mr. Kubinec that his total shareholding was worth $1,012,459 as of April 7, 2007. Of this, he valued his common shares at $844,525. Interestingly, Mr. McLean represented to his first wife that the common shares had a negative value on November 6, 2005, when he negotiated a net family property settlement with her. I attach no weight to Mr. McLean’s estimate of the share value which was provided to his business valuator as part of the valuation process.

[187] The wife’s business valuator, Mr. Blazino, opined that the common shares were worth $236,000 at the date of marriage. The wife’s position is that the husband’s total shareholding at the date of marriage was $403,935.

[188] Ultimately, there was an en bloc sale of the shares in Cook on January 31, 2010 to a third party, Genivar. Mr. McLean testified he realized a total of $1.2 million dollars plus 3,500 shares in Genivar as a result of the sale of the company. There is no evidence whether Mr. McLean still held the Genivar shares at the date of separation and, if so, their value.

[189] Both valuators evaluated the shares based on a “calculation of value report” which is the lowest level of scrutiny, resting on the shareholder’s assurances of accuracy of value and verification of the information provided and assumptions made. Each valuator agreed that if the terms of their respective retainers had called for more investigation, their conclusions might have been different.

[190] Generally, both valuators agreed as to the approach and methodology. Each assumed that the valuation was based on what a hypothetical purchaser would be prepared to pay for the shares based on what he or she knew about the business at the time of purchase. Both valuators assessed the shares at fair market value, based on the business operating as a going concern and adopting a discounted cash flow approach. They agreed on corporate income tax rates and both assumed there would be future growth in the corporation.

[191] However, the details of their analyses of value differ considerably in several respects. Specifically, they disagreed about:

1. revenue growth rate;

2. salary expense;

3. the discount rate;

4. the application of a minority discount; and

5. redundant working capital.

[192] Mr. Kubinec criticized Mr. Blazino for being excessively wedded to Cook’s historic performance in arriving at his conclusions. In my view, the historic performance of the company through peaks and valleys in the industry was a reliable frame of reference for its likely future performance.

[193] Mr. Kubinec also took issue with Mr. Blazino’s failure to interview members of Cook’s management in order to obtain information for the valuation. However, Mr. Kubinec also failed to interview any members of management, apart from Mr. McLean, his client. As I shall explain, Mr. McLean’s information was not always verified by corporate documents, such as contracts or purchase orders. Therefore, Mr. Blazino’s reliance on the corporate and industry record was not misplaced. He sought and received assurances that he had all of the documents available to Mr. Kubinec, and in addition, he conducted his own research from third party sources, such as public announcements of contracts let.

[194] It is common ground that a valuator must estimate value based on a prospective purchaser’s knowledge available at the time of purchase. If information is not available on valuation day, it may not be considered (See: Airst v. Airst, [1998] O.J. No. 2629 at para. 54, 1998 CarswellOnt 2742 (Gen. Div.)).

[195] Hindsight information is not admissible to determine whether the valuator’s assessment is correct, but it may be used to test whether the assumptions used were reasonable (See: Debora v. Debora, 2006 CanLII 40663 (ON CA), 2006 CarswellOnt 7633 at para. 51, 83 O.R. (3d) 81, (C.A.)). Subsequent events may only be used as a check on predictions. They may not be used as a reference point when unforeseen factors intervene (See: Airst at para. 54).

[196] Where do the valuators differ?

Revenue Growth Rate

[197] The first and most significant difference between the valuations is at the starting point: the revenue forecast that Cook was likely to achieve from 2007 forward. Mr. Kubinec forecast increases in revenue of 40%. Historically, in Cook’s best year, growth in revenue was 11.2%; it was only 9.6% in the year prior to valuation.

[198] The husband supplied Mr. Kubinec with a list of fees earned by Cook over $300,000 between 2000 and 2011. Although Mr. Kubinec asked Mr. McLean to produce contracts or purchase orders to support these figures, Mr. McLean told him that there were none. His evidence in this respect was contradicted by his own witness, Mr. David Butler, who was head of Cook’s mining division in 2007. Mr. Butler acknowledged in cross-examination that although he had not reviewed them, there should be copies of contracts or purchases orders in the company’s office.

[199] Mr. Kubinec projected Cook’s future revenues above base earnings over a five-year period from 2007 forward based on the unverified information supplied by Mr. McLean. His report contains the assumption that, “Contract details provided by Mr. McLean accurately indicate the revenue expected from the contract and the timing of when the work was expected to begin…” For reasons set about below, this assumption was not borne out in fact.

[200] Mr. Kubinec started by:

a) determining the base revenue projected over five years by calculating the average of the previous ten years of revenue net of disbursements as adjusted for inflation and

b) adding to base revenue additional revenue that Mr. Kubinec believed that Cook was capable of earning “above base.”

[201] Mr. Kubinec’s projection of future revenues was more aggressive than Mr. Blazino’s. He assumed that future revenues would increase by 11 – 13% each year through the forecast period. He based his opinion on Cook’s historic performance and expected growth in the engineering industry. He stated that he used the actual revenues recorded on Cook’s audited statements as a check for reasonableness of his revenue projections.

[202] Mr. Kubinec testified that the industry and Cook were growing at double digits, a fact that was supported by the actual revenues. In fact, David Knutson testified that Cook had experienced significant difficulties in mining, transportation, and pulp and paper in early 2000, but that revenues in these divisions were starting to be “pretty solid” by 2007.

[203] Another director, Mr. Scalzo, testified that Cook was affected by recession between 2003 and 2004.

[204] As well, the evidence indicates that Cook’s mining division was in disarray in 2005 when a key mining engineer left and began competing with Cook. I conclude that Mr. Kubinec was unduly influenced by the actual revenues earned after valuation day in arriving at his revenue projections.

[205] Mr. Blazino disagreed with Mr. Kubinec’s starting point because it did not account for the cyclical nature of Cook’s work; the fact that Cook had not achieved growth of between 11 – 13% in 2005 – 2006; or that Cook had consistently performed below industry averages.

[206] Mr. Kubinec’s valuation indicates that projects worth $300,000 or more considered to be “above base” were either in existence or being negotiated at valuation date. By this he meant that only projects that began in 2007 or within an 18-month period of the valuation date were considered. However, his assumptions of growth above base are flawed in several respects:

a) a few projects included in the “above base” calculation were outside of the 2007 or 18-month window specified for inclusion;

b) the scope of a contract may change as a project progresses such that Cook may not know when bidding on a feasibility study, whether subsequent work may follow;

c) the information Mr. McLean supplied did not allocate fees to the year of the project in which they were earned but rather averaged the fees over the life of the contract. This skewed the date of revenues received;

d) many of the contracts included in the list were not known to Cook as of the valuation date but were awarded later: for example, the Totten Mine Dry project and underground infrastructure; the Celgar green energy project feasibility study; some of the Noden Causeway contracts; three other bridge inspection projects; and two projects for Potash Corporation Saskatchewan at Rocanville and two at Piccadilly. If the contracts were not known or awarded to Cook as of the valuation date, they could not have been known to a prospective purchaser;

e) some of the highway and bridge work included in the “above base” revenue calculation was part of the usual pattern of contracts secured by Cook historically;

f) the collapse of the Minneapolis bridge in August, 2007 post-dated the valuation date and is not likely to have motivated the Ministry of Transportation to increase bridge inspection work before valuation date as Mr. McLean claimed. Mr. Scalzo testified that the bridge collapse did not make a huge difference to the Ministry of Transportation’s program of bridge inspections.

[207] I have already mentioned the disarray in the Cook mining division when a mining engineer left the firm in February or March of 2005. He took some staff with him and began to compete with Cook.

[208] In cross-examination, Mr. Butler agreed that some contracts from Cook’s previous clients were lost to this competitor. One such multi-million dollar contract was lost in 2006. Mr. Knutson agreed that Cook was concerned about the new competition in mining for a few years following the key employee’s departure. While there was growth in the mining sector in Northwestern Ontario, Cook did not see any major contracts until 2008, with larger contracts awarded in 2009.

[209] By contrast, Mr. Blazino considered the historical income data from the company leading up to 2007. He began by averaging 10 years of revenue net of disbursements adjusted for inflation. It was his opinion that engineering tended to be cyclical in nature, with highs and lows. The historical financial data from Cook showed this trend. For example, he determined that by 2006, the company was still recovering from a downturn and had not yet recovered to the 2000 level of revenue net of disbursements. He also observed that Cook’s data showed that it had not achieved five to six years of continuous growth and that it had historically under-performed when compared to the engineering industry.

[210] Accordingly, for the year 2007, which was the first year of the forecast, Mr. Blazino adopted an increased factor for growth in revenues to take account of expected growth in the engineering industry, and then adjusted for inflation over the next four years. This growth factor took into account the cyclical nature of engineering by averaging the “highs” and the “lows” in historic revenues (net of disbursements) over ten years. He testified that this “smoothed out” the fluctuations in revenue. The mid-point he adopted was about 20%. In other words, Mr. Blazino assumed that Cook could achieve 20% growth annually above the 2006 revenues plus inflation for the forecast period.

[211] Mr. Blazino tested his assumptions by reviewing Cook’s trial balance for March 31, 2007, which showed unadjusted income and expenses just before the valuation date. Both valuators agreed that a trial balance is not definitive; that this internally prepared document could be unreliable. However, the trial balance showed that Cook was on track to slightly surpass 2006 financial results.

[212] I find that Mr. Blazino’s approach to Cook’s likely future growth is more probable as a starting point to calculate the revenue growth rate.

Salary Expense

[213] Salary expenses may be the most significant expense of a professional services firm. The higher the salaries as a percentage of revenue, the less value there is for shareholders.

[214] Salary expense is affected by the degree to which staff members are productive. It is a measure of how much of their time can be billed to client work. If the existing complement of staff is not fully occupied, the company may have the capacity to take on more work and generate more revenue without having to hire additional staff. Thus, it is not always the case that increased revenues require a greater staffing expense.

[215] Mr. McLean testified that the maximum staff utilization percentage was 75%, achieved by Cook in 2009. He stated that 60% is the break-even point. He commented that at 62% in 2004, the staff was under-utilized. However, this figure rose to 69% in 2007. He explained that Cook was short-staffed in April of 2007 as Alberta was drawing staff away.

[216] Mr. Kubinec calculated that the five-year average for staff utilization was 64.6%. He assumed that Cook would have the ability to increase staff utilization and he projected maximum staff utilization at between 72% and 75%. He said salary costs should be reduced in accordance with these assumptions. Mr. Kubinec projected salary as a percentage of revenue in the range of 58% – 60%. Again, Mr. Kubinec referred to the actual wages as a percentage of revenue from 2007 – 2009 in order to justify his conclusion. He criticized Mr. Blazino for not doing so. Of course, the hypothetical purchaser would not have access to this information on valuation day.

[217] Mr. Blazino agreed that staff utilization was improving in 2007, but not substantially.

[218] The valuators also disagreed on salary expenses. This calculation deals with salary costs as a percentage of revenues. However they agreed generally that staffing expense varies from year to year. For example, the records show that in some years between 2002 and 2006, salary expense compared to revenue decreased. However, in some years, 2003 – 2004, it did not. The cost of salaries compared to revenue declined from 65.23% in 2004 to 64.54% in 2005; and further to 62.09% in 2006.

[219] Mr. Kubinec calculated the cost of salary to revenue at 58%, while Mr. Blazino testified that 62% was the more appropriate percentage, revised from 63% in his report. His figure was based on Cook’s salary expense in the audited financial statements between 2002 and 2006 which he said was consistent as a percentage of revenue.

[220] After reviewing employee utilization figures, Mr. Blazino concluded that with bonuses removed, 62% was the lowest ratio that Cook had ever achieved with the best employee utilization. He reviewed salary costs in the first quarter of 2007, noting that revenues were up and salaries were down to 52.77%. However, the expected profit in the trial balance was similar to the previous year. Consequently, he had unresolved questions about the disclosed salary costs.

[221] Mr. Kubinec’s calculations more closely agreed with actual results when applying maximum employee utilization rates of 72 – 75% after the valuation date. For example, in 2007, the percentage of salary cost to revenue was 55.97%. In 2008, the percentage was 50.66%; in 2009 until the company was sold, the percentage was 51.58%. Mr. Kubinec attributes these falling percentages to significant under-utilization of staff.

[222] Mr. Blazino stated that that these figures would not have been known to a hypothetical purchaser as of valuation date. I agree. They are not in accordance with historical data leaving me to wonder whether Mr. Kubinec in fact used the actual figures to arrive at his calculation, rather than using them to test the reasonableness of his calculation.

[223] In Jackson v. Jackson, 2009 CanLII 43105 (ONSC) at para. 28, the court held that a valuator performing a retrospective valuation cannot use known facts such that he or she knows more than a valuator would have known at the time designated for the valuation.

[224] I find that Mr. Blazino’s conclusion that future salary expense for Cook would be 62% is reasonable based on the information that would be known to a prospective purchaser on valuation day.

The Discount Rate

[225] Both valuators used the same discount rate based on the weighted average cost of capital. The discount rate represents the degree of risk that the projected revenues estimated by the valuator might not be achieved. The husband submits that the riskier projections are for future revenue, the higher the discount rate should be. Mr. McLean argues that because Mr. Blazino projects significantly lower net revenues, the discount rate applied should be significantly lower. He argues that the discount rate applied by Mr. Blazino is untenable. However, there is no evidence as to what Mr. McLean says is the appropriate discount rate to be applied to Mr. Blazino’s revenue projections.

[226] The husband concedes that the discount rate selected by the valuator is discretionary. It is a subjective determination. Mr. Blazino testified that because he had forecast significant growth after valuation day for a company that had historically under-preformed compared to industry standards, 5% is appropriate.

[227] In the absence of additional evidence on this point, no adjustment shall be applied to the discount rate selected by either valuator.

Minority Discount

[228] Whether a discount should be applied to the value of a minority interest shares is another significant area of disagreement between the valuators.

[229] A discount may be applied to the value of a minority shareholding to recognize that a minority shareholder lacks control over the corporation. For example, he or she cannot control the direction of the company, determine dividends or bonuses, or require that shares be redeemed or transferred (See: F. v. V., [2002] O.J. No. 3900 at para. 60, CarswellOnt 4265 (S.C.J.)). As well, the discount recognizes that the shares may be subject to limitations on sale.

[230] The court observed at para. 63 in Balcerzak v. Balcerzak, [1998] O.J. No. 3860 (Ont. Gen. Div.), that a minority discount of 15% was applied where the company was a family business in which all family members had minority shareholdings and worked together closely. However, in Ganson v. Ganson, [1996] O.J. No. 3870, 1996 CarswellOnt. 4073 (Ont. Gen. Div.), the court declined to apply a minority discount in circumstances where the husband owned one third of the voting shares but was part of a voting block of mother, father and son that controlled the family corporation. The valuator in that case opined that the husband was part of a control block that he “presumed would act and conduct their affairs as if with one mind” (See: paras. 47 and 50).

[231] Mr. Kubinec attributed no minority discount to the value of Mr. McLean’s common shares, whereas Mr. Blazino discounted them by 25%, but commented that he would have applied a greater discount had Mr. McLean not been on the board of directors. He testified that the range of minority discounts varied between 0% and 55%. He added that there is not a lot of market for 15% of a privately-held company in the open market.

[232] Mr. Kubinec testified that Mr. McLean as a key employee, held the proxy for another shareholder in addition to voting his own shares at Cook’s annual general meeting in 2006. In my view, evidence of Mr. McLean holding a one-time proxy does not demonstrate that he exercised control over the company. This sounds more like a justification than an explanation.

[233] Mr. McLean argues that the proper value to be attributed to his shares was “fair value.” The valuators agreed that a minority discount would not be applied to a fair value assessment. He submits that fair market value does not always result in an equitable value in the circumstances of a particular case. He submits that in this case, where there was an active market consolidating smaller engineering firms, leading to en bloc purchases and no imminent or forced sale of his shares, applying a minority discount would lead to an inequitable result.

[234] This is a surprising submission for several reasons. Mr. McLean’s expert, Mr. Kubinec, valued Mr. McLean’s shares at fair market value, not their fair value.

[235] Secondly, the testimony of Mr. McLean confirms that at the time of valuation, there had been no offers by Genivar to purchase Cook. In fact, the first Genivar offer was not made until December, 2009.

[236] Thirdly, the reasons for applying a minority discount do not rest on a forced sale of the shares, but rather on the lack of control and liquidity.

[237] Mr. McLean was bound by a shareholder’s agreement that restricted the liquidity of his shares and their value upon sale. The agreement waived the restrictions on individual share dispositions in the event of an en bloc purchase by an outsider, which ultimately materialized in the Genivar sale. However, when a minority shareholding is being valued, different considerations apply, as set out in the Blazino report.

[238] Mr. Blazino’s rationale for his opinion about the effect of the shareholder’s agreement on the purchase of a minority interest is set out at para. 3.30 of his report, as follows:

… The Shareholder’s Agreement binds the Company to repurchase the shares of its shareholders at a price determined by the formula set out in paragraph 5(e). In essence the price to be paid is:

• Preference Shares – set at the redemption value of the preference shares (being $27.40 per share)

• Common Shares – the pro-rata value of the common shares is set at the retained earnings of the Company less the value of the preference shares, or

• The Directors of the Company, in their sole discretion, may decide to establish a price higher than the above amounts.

This formula is true for voluntary or involuntary termination. However there is an overriding provision in paragraph 8 which allows for one or more of the existing shareholders to purchase the shares individually subject to the Board’s approval. Under the agreement no one shareholder is supposed to have ownership of greater than 11% of the common shares.

The Shareholder’s Agreement restricts who is to purchase the shares and also the value that can be received unless the Board of Directors decide to establish a higher price or allow for other shareholders to purchase. Otherwise the price to be paid on the shares is restricted to the net book value of the Company, without payment for goodwill or value of any assets over and above their respective book value.

Although the Board of Directors can establish a higher price, we feel it would be highly unlikely that they would choose to repurchase a minority interest holder’s shares at a price higher than the Company needs to pay. Their duty is to ensure the financial well-being of the Company and therefore, not voluntarily pay more than they need to upon a redemption of shares. We have reviewed the unsigned minutes of the Directors Meeting on December 16, 2005 which details a total redemption of 1,200 common shares for $12,000 paid to three separate common shareholders. This value of $10/share equates to the approximate book value of the common shares on the 2005 audited financial statements. These shares were not purchased by any other remaining shareholders but purchased for cancellation by the Company.

As a result of this transaction we feel it is highly unlikely at the Valuation Date for a different price to be set by the Directors and feel the restrictions of the Shareholder’s Agreement need to be taken into account, resulting in the application of a discount to a Minority Shareholder’s interest.

Another restriction the Shareholder’s Agreement places on the shareholders is that a shareholder may not execute a voluntary Common Share sale notice if another shareholder has previously invoked the share procedure until the expiration of six months from the closing date of that transaction. This can restrict the liquidity of a shareholder.

As a minority interest shareholder, Mr. McLean has restrictions on his shares, restrictions that likely would be taken into account when a purchaser decides what he/she would be willing to pay to own those shares. As a result, the application of a minority interest discount … to the pro-rata value of the common shares is warranted based on these restrictions.

[239] Mr. McLean held 14.6% of the voting shares in Cook. Four other individual shareholders held 15% of the voting shares. Mr. McLean was part of the management group that made decisions for the corporation; Mr. Blazino described him as having “significant influence over the Board of Directors,” but no outright control. He added that:

…no three shareholders collectively control the Board of Directors, resulting in Control of the Company being disbursed among numerous people.

(See MNP Report, at para. 3.29.)

[240] While the evidence suggests that the board of directors often agreed on management decisions, this was not invariably the case. Exhibit 6 is an e-mail sent by Mr. McLean to Ms. Dahl, expressing his frustration at being out-voted by the other directors with respect to an accounting issue. He also expressed frustration with the Genivar negotiations, referring to the “dysfunctional director group.” It is clear that the board of directors did not always manage by consensus.

[241] In addition, the evidence shows that departing shareholders, such as the mining engineer, received a low value – $10/share – for their common shares. Clearly Cook management paid no premium to buy out its minority shareholders.

[242] In my view, a minority shareholder discount is appropriate on the facts of this case for the reasons described by Mr. Blazino. Cook was not a publicly traded company, and therefore subject to greater liquidity challenges. As well, the application of a minority interest discount has the effect of reducing the en bloc value of the company, calculated by Mr. Kubinec, and recognizes that an en bloc purchase secures control of the company for the purchaser whereas a minority shareholding does not. Ultimately, the en bloc purchase price, for which Genivar acquired Cook, offered the individual shareholder a premium for his shares that could not have been foreseen at valuation day. The conclusion of Mr. Kubinec, that the value of Mr. McLean’s shares at valuation day is similar to their en bloc value when sold two and a half years later to Genivar, is questionable.

Redundant Working Capital

[243] The valuators agree that redundant working capital is the amount of working capital on valuation day that is not required to be maintained by the company for ongoing operations. It is an adjustment to future cash flows. For valuation purposes, the excess amount is assumed to be realized on valuation day and added to the present value of projected cash flows.

[244] Mr. Kubinec disagreed with Mr. Blazino’s calculation but did not contest his 5% assumption. Mr. Kubinec decided on 8.33% to apply to projected revenue. He stated that Mr. Blazino should have added $368,551 back into his calculation of value. In the husband’s written submissions, he says this figure should be $371,251, which he says undervalues his shares by $45,884.96.

[245] Mr. Blazino responded that Mr. Kubinec did not understand what the 5% was intended to represent. He stated that Mr. Kubinec incorrectly understood this calculation to represent a percentage of total forecasted revenue. Mr. Blazino opined that the working capital requirements of the company are 5% of the year over year change in revenue.

[246] Mr. Blazino also stated that Mr. Kubinec failed to consider annual capital expenditures for items such as computers and vehicles, thus overstating the amount of capital available to shareholders annually. He testified that Mr. Kubinec was not comparing apples to apples, but that if he was in error, Mr. McLean’s shares would be undervalued by $37,000.

[247] In challenging Mr. Blazino’s conclusion, Mr. Kubinec stated that Mr. Blazino makes no mention of the $9 million sale to Genivar two and a half years later, a figure that should have been used to back-check this calculation by the use of hindsight. Mr. Blazino countered that the Genivar sale was too remote from valuation day for consideration and did not take into account intervening factors after valuation day but before the sale. I agree. This is yet another example of Mr. Kubinec seeming to work backward from the Genivar sale to arrive at his conclusions. It does not square with what a hypothetical purchaser would know on valuation day.

Conclusion About Share Values

[248] In my view, the court’s role is not to revise calculations of the valuators on an issue-by- issue basis to arrive at its own version as to the value of the shares. The court ought not to insert itself into the case as a third valuator in arriving at a conclusion about value by “cherry-picking” between elements of the valuations to create a new valuation. To do so is to risk falling into error. I agree with the husband’s submission that the valuations contain inter-related assumptions.

[249] Rather, the court must assess, on a balance of probabilities, and with reference to expert and lay evidence, whether the owner of the shares has proven their value at the relevant time. If Mr. McLean has not done so, the court must determine on the evidence before it, what the value of the shares was at the date of marriage.

[250] In this case, for the reasons given, I find that Mr. Kubinec’s more aggressive assumptions are not in keeping with Cook’s historic performance, its historic under-performance in the industry, and its prospects for increased revenue as would have been known to a prospective purchaser as of the parties’ date of marriage. In addition, the failure to apply a minority share discount inflates the value of the shares. On balance, I prefer the valuation of Mr. Blazino. I find that the husband’s total shareholding (including preferred shares, as agreed) as of the date of marriage was $403,935.

Net Family Property

[251] Having regard to the foregoing findings, and before any adjusting calculations are made, either as determined by the court or agreed by the parties, I find that Mr. McLean had assets at the date of separation of $1,024,305.67 less debts at date of separation of $4,084.26, less assets at the date of marriage of $795,321.20, leaving him with unadjusted net family property of $224,900.21.

[252] Having regard for the additions to Ms. Dahl’s net family property, I find that she had assets at the date of separation in the amount of $829,441.58 (including the value of her engagement ring, furnishings that were not valued and her husband’s missing tools) less debts at the date of separation of $99,506.58 less assets at the date of marriage of $331,445.28, leaving her with unadjusted net family property of $398,489.72.

[253] Applying the formula prescribed by s. 5(1) of the Family Law Act, the equalization is calculated by subtracting the smaller net family property from the larger and taking one half the difference. In this case, before adjustments, Ms. Dahl owes Mr. McLean an equalization of $86,794.76.

[254] I remain seized of this case to hear arguments, if any, concerning:

a) whether either party’s net family property should be adjusted on account of notional costs of disposition of the properties, including but not limited to tax;

b) determination of occupation rent;

c) whether credits are owed to either party for post-separation expenses or contributions to the value of any of the properties and current value;

d) whether there should be further adjustments to the husband’s net family property for notional income tax costs arising from the value of his shares at the date of marriage;

e) transfer of property; and

f) arithmetic errors.

Unequal Division of Net Family Property

[255] Mr. McLean claims an unequal division of net family property in accordance with s. 5(6) of the Family Law Act on the grounds that an equal division would be unconscionable. As he is the claimant, the onus falls on him. Section 5(6) of the Act provides:

(6) 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;

(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.

[256] The purpose of s. 5(6) of the Act is set out at s. 5(7), as follows:

(7) The purpose of this section is to recognize that child care, household management and financial provision are the joint responsibilities of the spouses and that inherent in the marital relationship there is equal contribution, whether financial or otherwise, by the spouses to the assumption of these responsibilities, entitling each spouse to the equalization of net family property, subject only to the equitable considerations set out in subsection (6).

[257] The test for unconscionability set out in s. 5(6) of the Act is a very high test. In Ward v. Ward, 2012 ONCA 462 at para. 28, 2012 CarswellOnt 8658, the court held that “unconscionable” meant “shocking the conscience of the court;” “shockingly unfair;” “patently unfair;” or “inordinately inequitable.” An unconscionable result is not limited to fault-based conduct but may flow from the financial result with which the spouses are left (See para. 27).

[258] In his submissions, Mr. McLean submits that he “has no problem equalizing with the Respondent the value of property accrued during the marriage. The issue of contributions, direct or indirect, does not weight into his concerns” [Emphasis in original].

[259] Rather, Mr. McLean’s position is that equalization would be:

… an unconscionable result if the Court found that the Applicant had gifted to the Respondent virtually all of his property, including that which had accrued prior to marriage, without adjusting the equalization formula to allow him credit for his pre-marriage property. The effect of the strict equalization formula is to deprive the Applicant of that credit – and to, in effect, equalize all of the property of the Applicant (both pre and post marriage), while allowing the Respondent a credit for her property owned on the date of marriage. All of this is in the face of the parties’ clear intentions to share their lives and the use of their properties to prepare for retirement.

[260] In this case, subsections 6(a), (e), (f), (g), and (h) have no application to the evidence.

[261] Are there any other grounds for a finding of unconscionability under the Act?

[262] Mr. McLean argues variously that, pursuant to subsections 6(b) and (d), Ms. Dahl incurred debts recklessly or in bad faith and/or intentionally or recklessly depleted her net family property.

[263] I do not agree. The wife accounted for her debts at the date of separation, some $99,000. There is no evidence that these debts were incurred recklessly or in bad faith or depleted her net family property accordingly. In addition to credit card debt, some debt involved outstanding taxes; some involved child support.

[264] It was evident that both spouses enjoyed a luxurious lifestyle. Some of the wife’s credit card purchases at separation accrued partly or solely to the husband’s benefit: for example, hotel charges, clothing or concert tickets. For different reasons, neither party showed him or herself especially astute with respect to money management.

[265] The husband argued that the wife had two undisclosed bank accounts at the date of separation. This issue was apparently raised for the first time when the wife was being cross-examined. It was not raised by the husband in his evidence, as might have been expected, under the rule in Browne v. Dunn.

[266] Ms. Dahl did not recall the accounts when cross-examined about a series of transactions: deposits, transfers, and withdrawals, in 2011 and 2012.

[267] She testified in re-examination that this issue had never been raised in the litigation and that she believed that these accounts were where her pay and real estate commissions were deposited. She added that she had listed all her date of separation accounts in her net family property statement, and that there was no value in these accounts at the date of separation.

[268] The transactions reviewed in cross-examination pre-date separation by a year. Given the scope of this litigation, I am satisfied that if the husband believed that the wife had undisclosed bank accounts at the date of separation, he would have sought disclosure before trial.

[269] Does any unconscionability arise from gifts made by the other spouse (s. 6(c))? In my view, this section does not apply to the circumstances of this case.

[270] The court has determined that Mr. McLean did not gift his interest in the three properties to Ms. Dahl. The evidence discloses that each party made contributions to the acquisition and development of these properties, whether by way of financial contribution, planning, sourcing, labour, realty services, household management, or otherwise.

[271] With respect to the Porcupine Boulevard property, Ms. Dahl’s parents gifted to the parties jointly the sum of $15,000, not to Ms. Dahl as Mr. McLean contends.

[272] The other significant gifts from husband to wife are vehicles. Having intentionally made these gifts, it does not now lie in Mr. McLean’s mouth to assert that they are grounds for an unequal division of property: in effect, to take them back.

[273] The assets acquired during the marriage have been equalized and the parties have been fully credited with the value of assets each brought into the marriage. In this case, Mr. McLean was credited with shares brought into the marriage as the court assessed them. The fact that the court did not agree with the value of Mr. McLean’s shares at the date of marriage does not lead to a conclusion of unconscionability. He has not been found to have a negative family property deemed equal to zero at separation.

[274] Accordingly, Mr. McLean’s application for an unequal division of net family property is dismissed.

Costs

[275] If the parties are unable to agree on costs, either may apply to the trial coordinator within sixty days to schedule a hearing to argue costs unless the time for application for a costs hearing is extended by the court. If an appointment is not sought within this time frame, costs will be deemed settled.

Released: February 23, 2017 Pierce J.