COURT FILE NOS.: FS-15-00401094 and 08-115/17

DATE: 20181228

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

DIANE PLESE

S. Grant, E. Crawford and M. Lawson for the applicant

Applicant

• and -

ROBERT HERJAVEC

H. Niman, B. Smith, H. Cairns and S. Conlin for the Respondent

Respondent

AND IN THE MATTER OF THE ROBERT HERJAVEC FAMILY TRUST

BETWEEN:

ROBERT HERJAVEC, Trustee

-and-

DIANE PLESE, BRENDAN ALEXANDER HERJAVEC and SKYE TAYLOR HERJAVEC,

Objecting Beneficiaries

D. Chernos for the applicant, Trustee

P. Roy and T. Markovic for the respondents, objecting beneficiaries

HEARD: October 1-5, 9-12, 15-19, 22-25, 29, 30 and 31, 2018

REASONS FOR JUDGMENT

MESBUR J

Introduction:

[1] This case involves both family law and trusts. The family law case includes the usual issues of equalization of net family property and spousal and child support. The trust issues arise in the context of an application to pass the accounts of the Robert Herjavec Family Trust (the Family Trust). On September 21, 2018 I made an order that both the family law case and the application to pass the trust’s accounts be consolidated and tried together. The cases are interrelated, and decisions in the passing of accounts are relevant to the outcome of the family law case.

[2] An outline of the facts will inform the issues arising in both cases.

The facts:

[3] Many of the important facts of this case are not in dispute. The parties have delivered statements of agreed facts which form the bulk of what I have outlined below. The parties’ oral evidence confirmed most of what follows.

[4] The applicant, Diane Plese and the respondent, Robert Herjavec, were married for 24 years before their separation in July of 2014. Both are now 56 years old, and are the parents of three adult children, now 25, 22 and 20 years old.

[5] Mr. Herjavec was born in Croatia, and immigrated to Canada with his parents when he was about eight years old. The family initially settled in Halifax, but ultimately relocated to the Toronto area. Mr. Herjavec completed secondary school in Etobicoke, and then attended the University of Toronto where he began studying business and accounting, but, finding it boring, completed his degree in English literature.

[6] After university, Mr. Herjavec applied for and obtained a job with a computer company called Logiquest. After working there for three or four years, he moved to another company called Data Systems. Data Systems was a value added reseller, or “VAR”, of computer software. At some point, Mr. Herjavec made a deal with the company’s parent to grow their business in Canada in exchange for a small interest in the company. He ultimately sold his interest in 1989 for about $60,000.

[7] Ms. Plese was born and raised in Ontario. After completing her secondary school education she attended the University of Western Ontario where she completed a six-year degree in optometry. After graduation, she worked in various optometry practices, ultimately establishing her own office. Mr. Herjavec became Ms. Plese’s patient when they were both in their late twenties. They began a relationship, and were married in June of 1990. On their return from their honeymoon, Mr. Herjavec lost his job. Shortly after, he began his own business, a company he named Brak Enterprises. The work “Brak” means “marriage” in Croatian.

[8] Brak operated in the same line of business as Data Systems, namely as a value added reseller of cyber security software. Value added resellers are commonly referred to as “VARs”. As Mr. Herjavec explained it, one of the advantages of operating a VAR is its relatively low overhead costs. VARs have no warehousing costs for inventory. They have no research and development costs. They have no manufacturing costs. A VAR needs to find customers who need a product. The VAR then purchases product to sell to the customer at a higher price. Brak was a highly successful VAR.

[9] Meanwhile, the parties purchased a home in Mississauga. Since Mr. Herjavec was essentially self-employed, title to the home was taken in Ms. Plese’s name to protect it from creditors. The family grew, first with the arrival of a son in 1993, a daughter in 1996 and another daughter in 1998. It was a busy household. The children’s grandparents helped with child care while Ms. Plese returned to work on a part time basis after taking maternity leaves. After the children were born, she limited her work as an optometrist to part time work only. She has not worked outside the home on a full time basis since 1993.

[10] Brak grew and prospered. The family lived comfortably. They purchased another property, a ski chalet in Caledon, and joined the local ski club. Title to the Caledon property was taken in the names of Ms. Plese and the two older children, who were the only children born at the time. Each has a one third interest in the ski chalet. Mr. Herjavec is passionate about cars, and acquired a number of vehicles. The parties worked and raised their family together. Mr. Herjavec described them as a good team. Ms. Plese echoed this.

[11] Sometime around 1996 Mr. Herjavec’s lawyer suggested he create an estate freeze by establishing a family trust. Acting on this advice, Mr. Herjavec caused the Robert Herjavec Family Trust to be created. His lawyer was the settlor, and settled $100 into the trust. Mr. Herjavec was named sole trustee with unfettered discretion as to the disposition of the trust corpus among the beneficiaries. Mr. Herjavec was not a beneficiary. I will refer to the Robert Herjavec Family Trust as either the “Family Trust” or simply the trust.

[12] The year following year, Mr. Herjavec transferred 75% of his Brak shares into the Family Trust.

[13] Brak had been doing considerable business with AT&T. In around 2000 AT&T offered to purchase Brak for about $31 million. Both Mr. Herjavec and Ms. Plese viewed this as unimagined wealth. It would change the family’s life and lifestyle fundamentally.

[14] Since Mr. Herjavec had transferred 75% of his Brak shares into the Family Trust when the AT&T purchase of Brak closed, about $21 million of the proceeds were paid to the Family Trust to be administered according to the trust’s terms. Mr. Herjavec received roughly $8 million personally. Mr. Herjavec testified that even though $21 million was trust property, he viewed both the money in the trust and his portion of the Brak proceeds as one pot of money.

[15] After the Brak sale, the family’s spending patterns changed dramatically. A new family home was purchased for over $7 million. It was located in the exclusive Bridle Path area of Toronto. In addition to many bedrooms, bathrooms, living and dining and family room, it also featured an indoor swimming pool, a ballroom, teahouse, and a huge garage, large enough to store many vehicles.

[16] They acquired a new recreational property on Fisher Island in Florida. It cost more than $2.6 million. Boats and cars were purchased. The children were sent to exclusive private schools. Ultimately, Ms. Plese stopped working outside the home altogether.

[17] Brak had two key employees, Sean Higgins and George Frempong. Mr. Herjavec says both of these gentlemen had an equity interest in Brak of 5% each. This would have resulted in each of them receiving about $1.55 million on the sale. Instead, on the sale, Mr. Higgins received a gross payout of only $600,000 while Mr. Frempong received just $2,250. There were payouts to many other employees as well. They are described in the closing documents as “Payments to Employees Under the Employee Participation Plan”.[^1]

[18] After the Brak sale, Mr. Herjavec “semi-retired”. He spent more time at home, caring for the children, but soon he grew somewhat bored with retirement. He was itching to get back into business again. In around 2003 he established The Herjavec Group, which all the parties refer to as “THG”. Mr. Herjavec had remained in touch with his key employees from Brak, Mr. Higgins and Mr. Frempong. Mr. Higgins had joined AT&T after AT&T purchased Brak, while Mr. Frempong went to Deloitte where he started their security practice. Mr. Higgins had just been let go from AT&T, and was looking for another position. Both he and Mr. Frempong joined Mr. Herjavec at THG. They have remained there since.

[19] THG has grown and prospered. Like Brak, THG began primarily as a VAR, a value added reseller of cyber security software. In addition to its operations as a VAR, it has expanded to provide services as well as cyber security products to its customers. These are variously described as managed services, advisory or consulting services and installation and professional services. These services are generally provided under long term contracts. They rely on an ongoing relationship with the customer. They generate higher margins and longer term predictable cash flows than the simple provision of product.

[20] THG has acquired other companies, and has expanded its operations into both the United States and the United Kingdom. Through another holding company, THG acquired a private jet. It also acquired a number of luxury vehicles, as well as racing cars. Mr. Herjavec is an avid car enthusiast and race car driver. He participated in many car races under the Herjavec Group banner. The costs of acquiring the aircraft, luxury vehicles and racing cars were all expensed through THG. The Canada Revenue Agency (CRA) reassessed THG for these expenses. THG filed notices of opposition to the reassessments. They were ultimately resolved just before the end of this trial. I will have more to say about these issues when I address the valuation of THG.

[21] Mr. Herjavec began to write and speak extensively about his successes as an entrepreneur. He has written books, and delivered many speeches. He travels a great deal as a result. Mr. Herjavec also parlayed his entrepreneurial success into participation in various television reality shows. These have included both the Dragons Den and Shark Tank programmes, as well as Dancing with the Stars.

[22] The premise of both Dragons Den and Shark Tank is that a panel of successful entrepreneurs (the Dragons, or Sharks, as the case may be) decide whether or not to invest in fledgling companies. The owners of the fledgling companies pitch their ideas on air to the entrepreneurs, who in turn decide whether or not to invest, either with, or without a potential equity interest. After the program airs, the Dragons/Sharks will conduct their usual due diligence and decide whether to actually invest or not. The on-air bidding process does not create a binding contract of any kind.

[23] Dancing with the Stars is a program in which “stars” (of which Mr. Herjavec was one) are paired with a professional dancer, who teaches them to dance. The pairs compete against one another. Mr. Herjavec is now married to his former dance partner from Dancing with the Stars, Kym Johnson.

[24] In 2014 Mr. Herjavec was involved in an extramarital affair, with someone other than his current wife. The affair precipitated the separation from Ms. Plese, and apparently came as a complete surprise to both her and the children. The parties separated on July 24, 2014. Ms. Plese commenced her divorce application about seven months later, on March 3, 2015.

[25] Ms. Plese says it was only after the parties separated and she began the family law case that she discovered the Family Trust had virtually no assets remaining, and had been in that position since about 2008. Ms. Plese and the two older children say they were shocked by this discovery. Ms. Plese demanded Mr. Herjavec provide an accounting of the use of the trust funds. This led to Mr. Herjavec as the trustee ultimately moving to pass the Family Trust’s accounts. Ms. Plese and the two older children have delivered objections to the passing of accounts. The passing of accounts is an issue I will need to determine. Simply put, Ms. Plese and the two older children[^2] take the position that as trustee, Mr. Herjavec breached his fiduciary duties and improperly took benefits from the Family Trust for himself or for THG even though neither he nor THG were beneficiaries of the Family Trust. Ms. Plese says Mr. Herjavec owes money to the Family Trust. She goes further and suggests that because the Family Trust provided financing to THG in its early days, the trust should be awarded an equity interest of some kind in THG.

[26] This is a very brief outline of the facts. I turn now to the fundamental issues on which the parties disagree.

The issues to determine:

[27] The fundamental issues that divide the parties are

a) the passing of the Family Trust’s accounts and a determination of whether Mr. Herjavec owes any money to the Family Trust and whether the Family Trust has a beneficial interest of any kind in THG;

b) the impact, if any, of any findings on the passing of accounts on the equalization issues;

c) if Mr. Herjavec breached his fiduciary duties as trustee, what, if any, remedy flows from that breach;

d) the value of various boats and a motorcycle at valuation day;

e) the value of the matrimonial home and cottage at valuation date;

f) the value of Mr. Herjavec’s business interests at valuation date;

g) whether, and to what extent, notional disposition costs should be considered in determining each party’s net family property (NFP);

h) Both Mr. Herjavec’s and Ms. Plese’s respective incomes for support purposes;

i) whether Ms. Plese is entitled to continued spousal support and if so, in what amount and for what length of time;

j) determination of Mr. Herjavec’s child support obligations;

k) any retroactive adjustments of both child and spousal support.

[28] I will deal with the trust issues first, since my decision on those issues may have an impact on the calculation of the parties’ respective net family properties.

[29] Once I have decided the trust issues, I will determine the parties’ net family properties, and the equalization payment owed by one to the other. In that regard, it is the valuation of the former matrimonial home on High Point and the valuation of THG that create the largest differences between the parties.

[30] Once I have determined the equalization payment I will be in a position to address the parties’ respective incomes, means and needs in order to decide the support issues.

[31] I begin with the Family Trust and issues flowing from Mr. Herjavec’s actions as Trustee.

The Family Trust:

[32] When Mr. Herjavec entered into the agreement to sell Brak to AT&T the Family Trust held 75% of Brak’s shares and would therefore receive 75% of the Brak proceeds and minimize some of the tax impact of the sale. As I have said, in consultation with Mr. Herjavec’s lawyer, the Robert Herjavec Family Trust had already been established. The trust agreement is made as of the 20^th^ of December, 1996 between Mr. Herjavec’s lawyer as the settlor and Mr. Herjavec as the Trustee.

[33] Paragraph 4 of the trust agreement is its operative provision. It says:

The Trustee shall hold the trust fund and until the time of division he may from time to time pay, or make payable, to or apply for the benefit of his spouse and children (all of whom are hereinafter referred to as “ROBERT HERJAVEC’S FAMILY”) or such one or more of them to the exclusion of the other or others and in such proportions as the Trustee in his uncontrolled discretion may determine, all or so much of the net income, if any, derived from the trust fund and so much of the capital thereof as the Trustee in his uncontrolled discretion from time to time determine [sic] to be appropriate for the respective benefit of the members of ROBERT HERJAVEC’S FAMILY. Any net income from the trust fund which is not so paid or payable or applied in any year or within three months thereafter shall be accumulated by the Trustee and added to the capital of the trust fund and dealt with as part thereof, provided that if at the time of division the Trustee is still holding the trust fund, he shall thenceforth pay to or apply for the benefit of the members of ROBERT HERJAVEC’S FAMILY, or such one or more [sic] them to the exclusion of the other or others, and in such proportions as the Trustee in his uncontrolled discretion determines, the whole of the net income, if any, derived from the trust fund.

[34] When the trust was established in 1996, only the two older Herjavec children had been born.

[35] The trust agreement goes on to define the term “time of division” in paragraph 1(f) :

“time of division” means the earliest of

(i) The date of the fiftieth (50^th^) anniversary of the date hereof; or

(ii) Such date as the Trustee may in his absolute discretion determine by instrument in writing signed by the Trustee and delivered in counterparts to every adult beneficiary living at the time of the signing of such instrument, it being acknowledge [sic] that it may be advisable that the time of division may be the date which is one day prior to the twenty first (21^st^) anniversary of the date hereof.

[36] Paragraph 5 of the trust agreement stipulates that “[a]t the time of division, the Trustee shall pay or apply the trust fund to or for the benefit of all or any of the beneficiaries set out in Schedule “A” or such one or more of them to the exclusion of the other …” The Schedule “A” initially attached to the trust agreement says:

The Beneficiaries of the ROBERT HERJAVEC FAMILY TRUST are listed below:

Brendan Alexander Herjavec;

Skye Taylor Herjavec

Diane Plese

[37] After the youngest child, Caprice, was born, Mr. Herjavec (but not the settlor of the trust) attached an addendum to Schedule “A” to add Caprice’s name. Even though the operative portion of paragraph 4 of the trust agreement clearly says the beneficiaries of the trust are to be Mr. Herjavec’s spouse and children, and even though Mr. Herjavec purported to specifically add Caprice to Schedule “A”, Ms. Plese takes the position Caprice is not a beneficiary of the trust. The corollary of her position is that any trust funds that Mr. Herjavec used to benefit Caprice either directly or indirectly are a misuse of trust funds.

[38] I do not accept this position. The clear intent of the trust agreement was to benefit Mr. Herjavec’s family, namely his wife and children. The only reference in the trust agreement to Schedule “A” is to what happens at the date of division. Schedule “A” has no applicability otherwise. Until that time, the beneficiaries of the trust are Mr. Herjavec’s spouse and children. That includes Caprice.

[39] As Trustee, Mr. Herjavec has very broad powers, which include advancing money out of the trust fund by way of loan to any person or corporation, “such loan to be made with or without interest, upon such terms as to payment and with or without security all as the Trustee deems advisable”.[^3]

[40] Mr. Herjavec is not a beneficiary of the Family Trust. Even though he is not, he admits that he provided himself with some benefits from the trust. Even though as Trustee he owed a fiduciary duty to the trust and its beneficiaries, he did not properly fulfil those duties. He kept no proper records of the trust. He provided himself with some benefits from the trust. He provided benefits from the trust to THG. He comingled trust money with other money, including accounts of THG. Now, some twenty-two years after the trust was established the court must ascertain how the trust funds were used. This task is complicated by the fact that many banking records (both of THG and the parties’ joint bank account) no longer exist. As a result, Mr. Herjavec retained Enzo Carlucci to assist in tracing funds in and out of the trust and determining what, if any, benefits the beneficiaries received either directly or indirectly from the trust corpus. This exercise then led to the application to pass the trust’s accounts. The passing of accounts requires the court either to approve both the income and capital receipts and disbursements of the trust or not. This requires an analysis of the extent to which the beneficiaries received all the benefit of the trust funds, or whether non-beneficiaries have done so.

[41] Mr. Herjavec takes the position he has accounted for all the funds traced in and out of the Family Trust, and that the beneficiaries have actually received benefits far in excess of the actual trust funds. He relies on Mr. Carlucci’s evidence to support his position. I agree with him.

To what extent have the beneficiaries benefited from the trust corpus?

[42] Mr. Herjavec should have kept separate and careful accounts for all the receipts and disbursements in and out of the trust. He was under a fiduciary duty to do so. He candidly admits he failed to carry out this duty properly, although he did so out of ignorance, rather than any malicious or unlawful intent.

[43] When Ms. Plese demanded an accounting of the trust disbursements, Mr. Herjavec was in a position where he had to provide one. He retained Enzo Carlucci at the Duff & Phelps firm to assist in this exercise.

[44] When Mr. Carlucci began his task, he was a managing director at Duff & Phelps. He subsequently left Duff & Phelps and joined the accounting firm, KPMG, as a partner. Mr. Carlucci was qualified as an expert in both accounting and forensics. He testified that the initial tracing of the trust funds took at least two full time staff, whom he supervised, himself and a co-op student. After being retained in May 2016, it was a full time job for two people for three months. Mr. Carlucci spent 50 to 60% of his own time on the assignment as well.

[45] Mr. Carlucci and his team reviewed ten years’ worth of bank statements. There were eleven bank accounts or investment accounts to review, spanning the period from 2002 until valuation day in 2014. Mr. Carlucci’s task also required him to review all the transactions in the THG shareholder account. That account had about 3,700 transactions to review.

[46] Ultimately, Mr. Carlucci provided an opinion on the benefits the beneficiaries derived. He described what he called three different “mandates” for which he was required to provide an opinion. He described them as follows:[^4]

Mandate 1 – Performed a financial tracing analysis to identify the nature and amount of the inflows and outflows from the Trust’s bank/investment accounts as it relates to the Trust’s Share of Brak Proceeds (i.e., $21.1 million)

Mandate 2 – Identified how funds transferred from the trust to THG were used once in THG.

Mandate 3 – Verified the ultimate use of Mr. Herjavec’s Personal Brak Proceeds, including amounts that were directly transferred to THG.

[47] Mr. Carlucci later received what he called “Mandate 4”. He describes it as responding to the Alvarez & Marsal (“A&M”) report, dated January 31, 2018. Specifically, in doing so, Mr. Carlucci and his team did the following: (i) quantified amounts transferred from the Trust to THG; and (ii) analyzed payments of beneficiary expenses by THG, with a view to determining outstanding balances, if any, of funds owing by THG to the Trust.

[48] Mr. Carlucci approached his task in the following manner. First, he attempted to collect all the banking and other records for the trust, as well as the shareholder loan account records at THG. He was hampered to some degree by the fact that THG’s document retention policy disposes of bank statements after seven years. What this meant was that Mr. Carlucci did not have THG banking records going back as far as 2002 when 75% of the Brak proceeds were paid into the Family Trust.

[49] Mr. Carlucci did, however, have all the statements from the trust’s various accounts, as well as a complete record of all funds going in or out of Mr. Herjavec’s shareholder loan account with THG. He was also able to review banking records from the parties’ joint bank account from 2005 onward.

[50] Mr. Carlucci began with the Brak proceeds and how they were used. He determined that after the Brak sale, the Mr. Herjavec funded the family’s expenses primarily from his $8 million share of the Brak proceeds. When those funds were exhausted by the end of 2003, Mr. Herjavec turned to the Family Trust and its share of the Brak proceeds.

[51] Mr. Carlucci then started with the transfer of 75% of the net proceeds of the Brak sale into the Family Trust. He analysed the various transfers in and out of the Family Trust to determine the extent to which the beneficiaries actually benefitted from the trust proceeds.

[52] Next, Mr. Carlucci attempted to identify all the transfers out of the trust, and determine for whose benefit the transfers were made. In doing so, he analysed transfers in terms of whether a transfer was for the sole benefit of a beneficiary, or beneficiaries. If it was, he allocated 100% of the benefit to the beneficiary or beneficiaries alone.

[53] If Mr. Carlucci determined that a transfer out of the trust was for the general benefit of all the Herjavec family members, he allocated the benefit as one fifth to each of the five family members. He therefore allocated one fifth of these benefits to Mr. Herjavec personally. If funds were transferred out of the Family Trust into Ms. Plese’s and Mr. Herjavec’s joint account, Mr. Carlucci allocated half of those funds as benefiting the beneficiaries, even though it is quite probable other family members in addition to Ms. Plese received benefits from the funds.

[54] Some transactions were quite clear, others were less so. On the balance of probabilities, I find Mr. Carlucci’s analysis persuasive and accept it.

[55] Mr. Carlucci candidly admitted that determining whether the youngest child is a beneficiary of the trust is a matter for the court. If she is not, then his calculations must be adjusted accordingly. Since I have determined the youngest child is indeed a beneficiary, there are no further adjustments to be made on that account.

[56] There is no question significant transfers were made from the trust into THG, and then paid out. All the transfers into THG were recorded as advances from shareholder, and appear in Mr. Herjavec’s shareholder loan account. Mr. Carlucci’s set out first a summary of inflows and outflows from the trust account. These are found at page 9 of Exhibit 73, and summarize Mr. Carlucci’s findings. Simply put, they show proceeds of sale from Brak of $21,083,250 going into the trust.

[57] Mr. Carlucci then identified money being used to purchase High Point Road for Ms. Plese for $7,550,000. Taxes were paid on behalf of the trust itself and the beneficiaries. These totalled $6,173,601 for the trust, Ms. Plese and each of the three children. In April of 2000 $968,981 was transferred from the Family Trust directly into Ms. Plese’s investment account. Next, $2,622,200 was used to purchase the Fisher Island property. Since Ms. Plese and Mr. Herjavec each has a one half beneficial interest in that property, only $1,311,100 can properly be called a beneficiary expense. These transfers alone total $16,003,782, which were clearly for the benefit of the beneficiaries.

[58] A net amount of $2.3 million went from the trust to THG. Mr. Carlucci then analyzed what THG paid for the benefit of the family members, namely the beneficiaries. This included such direct payments as tuition fees for the children. As I have said, many payments went to the parties’ joint account. That account was used to pay the day to day expenses of the family. Because the joint account was in the joint names of Ms. Plese and Mr. Herjavec, Mr. Carlucci allocated half of the payments to the joint account as being for the benefit of the beneficiaries, with the other half being for Mr. Herjavec’s benefit. This approach is more than fair, and likely overstates the benefit flowing to Mr. Herjavec.

[59] Mr. Carlucci opined that from 2003 to 2008 THG directly paid $4,799,891 on account of beneficiary expenses through both payments to the TD Bank joint account and in direct repayments from THG to the Family Trust. By the end of 2008 the trust corpus was largely expended. Mr. Carlucci also pointed out, however, that in the years following 2008 up to date of separation, THG continued to fund Ms. Plese’s and the children’s expenses. During this period, THG paid an additional $5,298,813 for the benefit of the beneficiaries without any reimbursement from the trust. All these sums Mr. Carlucci identified and explained far exceed the total Brak proceeds paid into the Family Trust.

[60] Mr. Carlucci was an excellent witness. His analysis was methodical and logical. He did not hold on to positions if he was successfully challenged on them. Mr Carlucci’s demeanor suggested he had no personal interest in the outcome of the case; rather, his role was to analyse where the trust funds had gone, and advise the court. He did. I accept his analysis and opinion.

[61] Ms. Plese says in analysing the benefits the beneficiaries received I should consider nothing that occurred after 2008 when the trust funds were exhausted. She goes even further and suggests that Mr. Herjavec abdicated his responsibility to support his family when he used the trust funds to do so. She seems to suggest that all the trust corpus should have remained in the Family Trust.

[62] I will deal with the second assertion first. It seems outlandish to suggest that a parent or spouse who settles $21.1 million of his own funds into a trust for the benefit of his family cannot use the trust corpus for that very purpose, and is somehow abdicating his support obligations when he does not pay for family expenses directly out of his other resources. I give no weight to that argument at all.

[63] As for benefits Mr. Herjavec provided after 2008, I reject Ms. Plese’s argument in this regard as well. Money was improperly comingled. As I see it, Mr. Herjavec could (and should) have paid all the family’s expenses out of the trust and created all the benefits for the family out of the trust funds alone. He should have used his own funds for THG. I therefore look at the issue as whether the beneficiaries ultimately received benefits equal to or exceeding the trust monies. On Mr. Carlucci’s analysis (which I accept) they did, and more so.

[64] I therefore conclude the beneficiaries have effectively received the benefit of all the trust funds. The accounts have properly accounted for both the capital and income receipts, and the capital and income disbursements of the Family Trust.

[65] I now turn to Ms. Plese’s next argument, namely that the trust has an ownership or equity interest in THG.

Does the trust have an ownership interest in THG?

[66] Ms. Plese takes the position the trust money that went into THG was provided at a critical point in its history. She suggests that THG was a start-up company at the time, and had it borrowed from either a conventional lender, or more likely, from a venture capital lender, any such lender would have insisted on and been granted warrants or some other kind of “equity kicker” in THG. This is the opinion advanced by Ms. Plese’s expert, Mr. Beaton.

[67] Mr. Beaton suggested that THG used the Trust for seed capital and described the Trust as an “early stage lender” to THG. He says THG was a start-up in the years 2003 to 2005. He says this would (and should) have resulted in the Family Trust receiving an equity interest in THG. I disagree with Mr. Beaton’s analysis.

[68] First, THG’s financial statements show it was not a “fledgling” company in those years. In its first year of operation, THG had a completed business plan and almost $1 million in revenue. By 2004 THG had over $4.1 million in revenue, a net profit and positive EBITDA.

[69] Second, Mr. Herjavec argues that the money transferred from the trust to THG was not needed primarily for THG’s purposes in any event. The money was needed to fund expenses for the beneficiaries. THG used a relatively minor amount of money from the Family Trust to address its unfunded business cash needs. These totalled about $400,000 to $500,000 in 2004. I find Mr. Herjavec’s argument persuasive. It belies Mr. Beaton’s analysis.

[70] Third, THG had conventional bank borrowing, with no “equity kicker” or grant of warrants for years. Mr. Herjavec has always been adamant that he would never dilute his equity in THG for a lender. He never has.

[71] Finally, there is another important factor no one seems to have considered. The trust agreement itself gives Mr. Herjavec as trustee unfettered discretion to lend trust funds to a corporation, with or without interest, and with or without security. The funds advanced to THG and ultimately repaid can clearly fall into this category. As I see it, Mr. Beaton’s analysis regarding an equity kicker (as he calls it) has no bearing on the facts of this particular case, and Mr. Herjavec’s specific powers as trustee.

[72] I therefore reject the argument that the Family Trust has any interest in THG at all.

[73] Next I must address whether Mr. Herjavec benefited from the trust corpus, and if so, has he retained that benefit.

Has Mr. Herjavec benefited from the trust corpus?

[74] There is no question Mr. Herjavec improperly received certain direct benefits from the trust. These include a transfer of about $16,000 to his RRSP. He has repaid these moneys to the trust. Apart from that, as I see it he has accounted for and repaid any funds he improperly received from the trust.

[75] As a result, I conclude that it is more likely than not the beneficiaries received the benefit of all the trust funds, whether directly out of the trust, from THG or indirectly through Mr. Herjavec. The estate accounts are therefore passed, without alteration. The objecting beneficiaries’ claims are dismissed. Mr. Herjavec owed nothing to the trust on valuation day other than the $16,000 for his RRSP. Neither the Family Trust nor the beneficiaries, (Ms. Plese in particular), had any interest in THG through the trust, on valuation day.

[76] This leaves, however, the issue of Mr. Herjavec’s breach of his fiduciary duties, and what, if any, remedy should flow from that breach.

Breach of fiduciary duty and appropriate remedy

[77] There is no question Mr. Herjavec breached his fiduciary duties in comingling trust funds with both his own funds and those of THG. Although there is no question there was a breach of fiduciary duty, it was an innocent breach. The beneficiaries acknowledge Mr. Herjavec did not really understand that he was not a beneficiary and could not benefit himself from the trust. Even though Mr. Herjavec breached his fiduciary duties, the trust and beneficiaries have suffered no loss, other than the cost of the exercise of passing the trust’s accounts.

[78] Mr. Herjavec suggests I should exercise my discretion under section 35 of the Trustee Act [^5]. Subsections 35(1) and (2) say:

(1) If, in any proceeding affecting a trustee or trust property it appears to the court that a trustee, or that any person who may be held to be fiduciarily responsible as a Trustee, is or may be personally liable for any breach of trust whenever the transaction alleged or found to be a breach of trust occurred, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust, and for omitting to obtain the directions of the court in the matter in which the trustee committed the breach, the court may relieve the trustee either wholly or partly from personal liability of the same.

(2) Subsection (1) does not apply to liability for a loss to the trust arising from the investment of trust property.

[79] As the Court of Appeal pointed out in Cahill v Cahill [^6] the trustee bears the burden of showing he or she acted honestly, reasonably and ought fairly to be excused. The court must consider the Trustee’s breach in light of all the circumstances. These will include whether the breach was technical, or a minor error in judgment, whether the Trustee was paid, and whether the Trustee is a professional.

[80] Dealing with the last two factors first, Mr. Herjavec was neither paid, nor is he a professional Trustee. That being said, his breaches were more than technical. Since Mr. Herjavec had no idea what his obligations were as Trustee, it is hard to quantify his errors in judgment as minor or otherwise. Nevertheless, overall the beneficiaries have suffered no loss as a result of Mr. Herjavec’s actions.

[81] That being said, Mr. Herjavec’s breach of fiduciary duty and cavalier attitude to the trust corpus caused the entire application regarding the trust. Had he conducted himself appropriately, kept proper records and routinely passed the trust’s accounts there would have been no need for the application at all. As a result, the trust should bear none of its own costs. Similarly, Ms. Plese and the other opposing beneficiaries should not have to bear any of the trust’s costs or their own in relation to the passing of accounts. The appropriate remedy is for Mr. Herjavec to bear all the costs of both the trust and the beneficiaries personally. An order shall issue to that effect.

[82] This brings me to the issues in the family law case. The first matter to determine is each party’s net family property, and the amount of any equalization payment one owes to the other.

Equalization of net family property

General comments and observations

[83] Although the parties agree on the value of a great number of their respective assets and liabilities at valuation day, they disagree on a number of others. These include two of the three family homes, namely the former matrimonial home on High Point Road and the Lake Rosseau cottage.

[84] They also disagree on the value of some boats and vehicles, as well the treatment of certain Aeroplan points. Importantly, they have a fundamental disagreement on the value of THG. The valuation “spread” between their two valuators on THG’s value alone is about $30 million.

[85] Ultimately, the real conflict between the parties lies not in the historical facts of their case or who did what, but rather on the considerable difference in the expert opinions each has proffered both to determine the value of these assets and to determine Mr. Herjavec’s income.

[86] When it comes to debts and other liabilities, issues remain as to the appropriate amount of disposition costs (notional or otherwise) to be attached to the various assets. I must decide all of these issues in order to determine each party’s net family property (NFP) and the equalization payment owed from one of them to the other.

[87] I have attached as Schedule A to these reasons a net family property statement. It includes all the values the parties themselves have agreed on. I have inserted all the values I have determined for these various contentious issues. I will discuss each of them in turn. Before doing so, however, I wish to comment in a general sense on the expert testimony the parties relied on to support their respective positions on the value of the major contentious assets, particularly the High Point Road home, and THG, as well as the determination of Mr. Herjavec’s income.

[88] The valuators disagreed on both the values of both High Point Road and THG. In each case, each valuator, supposedly acting entirely independently, suggested values that benefitted the position of the party who had hired him. Similarly, when it came to expert opinion on Mr. Herjavec’s income, Mr. Herjavec’s expert, in particular, seemed particularly aligned with Mr. Herjavec’s position. Sadly, this is often the case.

[89] I have always been tempted to ask valuators whether their opinions would have been the same had the other party retained them. I have never given in to that temptation, but merely make the observation. It seems to me that in order to provide the court with truly independent, unbiased and reliable opinions, it would be preferable to require the parties to jointly retain a single expert, or, perhaps, to require the parties to fund an expert who would be retained by the court, at the parties’ expense.

[90] I will have more specific comments on the experts’ evidence when I discuss it in more detail, below. I turn now to decide the value of the contentious assets.

Vehicles and boats

[91] Mr. Herjavec owned a 2014 Indian Chief Classic Motorcycle on valuation day. He had purchased it on June 5, 2014 for $24,300. For the purpose of calculating equalization of net family property, Ms. Plese values the motorcycle at $22,111.97[^7], presumably to take into account instantaneous depreciation on a vehicle. She takes the position that this is a reasonable approach, given that the motorcycle was purchased just weeks before the separation.

[92] Mr. Herjavec, however, values the bike at $10,000. He testified that he crashed the bike and damaged it in the few days between its purchase and valuation day. He says he told no one because he was too embarrassed. I have no evidence of the actual damage to the motorcycle, and what, if any, impact it had on the motorcycle’s value. It seems to me a value of about $20,000 would be reasonable to take into account both some depreciation and some damage. I therefore fix its value at valuation day at $20,000.

[93] The 2014 Christ-Craft boat was purchased in February of 2014 for $153,680. Mr. Herjavec took delivery of it in May of 2014. Based on some advice Ms. Plese received from “Peter from the Cove”, she assumed depreciation of 12.5% on the purchase price, resulting in a value on valuation day of $125,220.

[94] When he values this boat for equalization purposes, Mr. Herjavec uses its sale price in January of 2016, some 18 months post-valuation day. He proposes no basis for his position. Interestingly, Mr. Herjavec valued the Chris-Craft at $110,000 in his first financial statement, sworn in 2015. He provided no basis for that valuation either.

[95] At least Ms. Plese has articulated her approach to valuing the Chris-Craft. Even though “advice from Peter at the Cove” is inadmissible hearsay, it at least sets out Ms. Plese’s reasoning for her position. It has the ring of common sense. I therefore set the value of the Chris-Craft at valuation day value to be $125,000, rounded.

[96] The parties have used the same principles or methodology in valuing a 2014 Nautique boat. It also was purchased in February of 2014 and was sold in January of 2016. Ms. Plese has valued it in the same way as she approached valuing the Chris-Craft. Namely, she used the purchase price less 12.5% depreciation, while Mr. Herjavec has used its sale price in January, 2016. Again, Mr. Herjavec’s financial statement from 2015 valued it at $110,000 on valuation day, but with no basis for that value, either.

[97] I prefer Ms. Plese’s value, since at least it is based on a somewhat principled approach, as opposed Mr. Herjavec’s suggestion a sale price 18 months after valuation day should be used. Accordingly, I find the Nautique was worth $100,865 on valuation day.

Aeroplan and Amex points

[98] The family has had the use of considerable Aeroplan and American Express points accumulated on the Amex card that was used to pay for family expenses.

[99] Ms. Plese says the points should be split, while Mr. Herjavec takes the position the points belong to THG. Since THG is the actual credit card holder, THG would be the owner of the points. Also, since no one led any evidence on the issue, I assume the value of the points, such as it is, has no material influence on the valuation of THG.

The High Point Road Home

[100] Ms. Plese owns 100% of the issued and outstanding shares of a numbered company which in turn held title to the High Point Road Home as bare trustee for Ms. Plese. While the parties were married, and until their separation the parties occupied High Point as their family residence. It was therefore their matrimonial home as defined in the Family Law Act. Once the parties divorced and ceased to be spouses, however, the property ceased to be their matrimonial home. At that point, Ms. Plese was free to sell the property without Mr. Herjavec’s consent. She did so. High Point was sold in February of 2018 for a sale price of $17,395,000. That, of course, was its value in February of 2018, nearly four years after valuation day. Although the listing agreement provided for a 2.5% commission to the agent, ultimately the agent reduced his commission to 1.5% in order to secure the sale.

[101] In order to calculate Ms. Plese’s net family property, I must determine the value of High Point at the date of separation. Each party retained an expert to provide the court with an opinion as to the value of the property on valuation day. Both experts are highly qualified. Their qualifications were accepted by the opposing party. Each was entitled to provide his expert opinion on the value of High Point on valuation day. Craig Laine testified for Ms. Plese. He put the value at $14 million on valuation day, while Mr. Herjavec’s expert, James Parthenis, valued it at $17,600,000, or about $200,000 more than what it sold for four years after valuation day.

[102] For the reasons I will set out, I do not fully accept either valuator’s figure.

[103] Each appraiser approached his task by first inspecting High Point, photographing it, and, in the case of Mr. Parthenis, measuring the exterior perimeter of the property. Each appraiser searched for similar, comparable properties that had sold at or around valuation day, and adjusted the sale price of each comparable for its differences from High Point. For example, if a comparable were smaller than High Point, the comparable’s price would be adjusted upward to reflect a comparable price had it been of similar size to High Point. Similarly, if the appraiser considered a comparable’s location to be inferior to High Point’s, the comparable’s sale price would be adjusted upward to reflect what it likely would have sold for had it been in High Point’s superior location. If a comparable’s lot size were smaller than High Point’s, the comparable’s sale price would be adjusted upward to reflect what it would have sold for had it had a lot as large as High Point’s.

[104] High Point is a very large home. MPAC shows its size as 22,588 square feet. This does not include the finished basement. For his appraisal, Mr. Laine used a figure of 22,800 square feet, relying on the floor plans he was provided for the property. Mr. Parthenis began by using a 10-foot tape measure to measure the exterior dimensions of High Point. He says this is the methodology mandated by his professional governing body. While this may be the case, it yielded a square footage measurement that is significantly higher than either the size of the home according to MPAC or the measurement Mr. Laine used. Mr. Parthenis’ measurements were a full 2,170 square feet larger than Mr. Laine’s. [^8]

[105] This difference becomes problematic when adjusting the comparables for size. In looking at the comparables Mr. Parthenis used, none of the square footage measurements were taken using the same methodology Mr. Parthenis used. The square footage each appraiser used for all the comparables were the square footages from MPAC values.

[106] This difference must be reconciled in order to compare the appraisals to each other in a meaningful fashion. Since both appraisers adjusted comparable sales to reflect the difference in size between the comparable and the High Point home, Mr. Parthenis’ adjustments must be reduced to reflect a reduction in size for High Point of 2,170 square feet. Similarly, I would adjust Mr. Parthenis’ valuation to reflect this reduction of 2,170 square feet. The valuators both used a figure of roughly $400 per square foot to reflect the value per square foot of the homes themselves. Thus, Mr. Parthenis appraised value at valuation day must be reduced by $868,000, making it $16,732,000.

[107] Another difference between the appraisers relates to the size of the garage at High Point. Mr. Parthenis described it as having parking for 10 cars, while Mr. Laine only allocated 7 parking spaces. The difference relates to lifts in the garage that allow for additional vehicles to be parked. I accept Mr. Parthenis’ opinion that High Point has 10 parking spaces. Mr. Laine valued parking spaces at about $20,000 each. Therefore, Mr. Laine’s value must be increased by $60,000 for three additional spaces, bringing it to $14,060,000. Even with these two adjustments, the valuators’ opinions are still $2,672,000 apart.

[108] Both valuators used two of the same properties as comparables. Astonishingly, in each case their adjusted values were about $2 million apart. Mr. Parthenis’ adjusted value for each was about $2 million more than Mr. Laine’s. Since High Point is Ms. Plese’s asset, it is her interests to have a lower value for the property, since a higher value will increase her NFP. Similarly, it is in Mr. Herjavec’s interests for High Point to have a higher value. It is shocking to me that two reputable appraisers, taking their duties as experts seriously, namely to be independent and uninfluenced by the party who retained them, could come to such different conclusions, using essentially the same approach and methodology for each of these two comparables. I find it suspect when each appraiser’s opinion so clearly aligns with the interests of the party who hired him. While I recognize that valuation is an art, not a science, I would have expected the ultimate opinions to have been much closer to one another.

[109] In the result, I have difficulty accepting either appraiser’s opinion. This leaves me to try both to reconcile their differences and consider the evidence as a whole in order to determine, on a balance of probabilities, the value of High Point on valuation day.

[110] Both appraisers used 37 The Bridle Path as a comparable. In Mr. Laine’s case, he adjusted its value to $16,911,900 while Mr. Parthenis adjusted it to $18,400,000. One of the significant differences in their valuations relates to adjustments for location. Mr. Laine made none, while Mr. Parthenis adjusted the value of 37 The Bridle Path upward by $1,420,000 to account for what he called High Point’s better location.[^9]

[111] I heard a great deal about the two Bridle Path areas in Toronto. One is south of Post Road, while the other is north. Mr. Parthenis described the more desirable part of the area as the three streets south of Post Road, namely Park Lane Circle, High Point Road and the section of The Bridle Path found south of Post Road. These properties tend to have larger lots and larger homes. 37 The Bridle Path is north of Post Road. Mr. Laine made no adjustment for this location, since as he explained, a purchaser will consider all kinds of factors when coming to a decision to purchase a property and deciding what to pay for it. I would think that is particularly so when dealing with properties of the size and finish of both High Point and the various comparables each appraiser used. Each is unique in its own way, and each has different features that appeal to different potential purchasers.

[112] If I ignore Mr. Parthenis’ adjustment for location on 37 The Bridle Path, its comparable value becomes $16,980,000, or very close to Mr. Laine’s opinion. It seems to me this is the best way to reconcile their differences on this property.

[113] Mr. Laine considered a fourth comparable after delivering his initial report. This comparable appears in an appendix to Mr. Laine’s report, rather than on the comparable grid page in the report. He explained this as being due to the computer template he uses, which does not permit 4 comparables. I accept this evidence.

[114] This property is 83 the Bridle Path, which is squarely within the “more exclusive” Bridle Path area. Mr. Laine adjusted its value to about $14,400,000 on valuation day. It had sold for $11,300,000 in December of 2013, about seven months before valuation day.

[115] Mr. Parthenis also used 83 The Bridle Path as one of his comparables. In his case, however, he adjusted its value to $17,450,000 on valuation day. The valuators therefore have a $3 million difference of opinion regarding the adjusted value of this one home. A significant difference in their appraisals relates to the adjustment each allocated for the smaller size of 83 The Bridle Path. In Mr. Parthenis’ case, he adjusted the price upward by $6 million for this factor alone, while Mr. Laine made an upward adjustment of $4,088,192 on this account. This is a difference of nearly $2 million on this adjustment alone.

[116] As I have already said, Mr. Parthenis valuations must be adjusted downward by at least $868,000 to account for the measurement differences in his approach. This factor alone would reduce his adjustment for the size of 83 The Bridle Path to $5,132,000, and reduces his adjusted value for this property to about $16,582,000. But this still leaves a difference of more than $2 million in the valuators’ ultimate opinions.

[117] The valuators both adjusted the value of 83 The Bridle Path by reducing its sale price to reflect the fact that it is in superior condition to High Point. Mr. Parthenis adjusted downward by $450,000 while Mr. Laine’s adjustment was a reduction of $1,033,000. Mr. Laine had not actually inspected 83 The Bridle Path, nor had Mr. Parthenis. Both described the condition of High Point as “average”. Mr. Parthenis described the comparable as “newer/superior” while Mr. Laine called it “good”. Given the difference in their descriptors I would have expected their adjustments to have been reversed. That they were not gives me pause. I would reduce Mr. Parthenis’ adjustment to that of Mr. Laine. This results in an adjusted value for 83 The Bridle Path on Mr. Parthenis’ analysis to about $16 million.

[118] Mr. Laine’s appraisal must be adjusted upward regarding the parking issue. He adjusted 83 The Bridle Path to compare it to High Point’s having only 7 parking spots, not 10. Accordingly, his adjusted value for 83 The Bridle Path (which has only 5 parking spots) must be increased by 5 additional spots at $20,000 each. This would add another $100,000 to his comparison, bringing it to about $14,500,000.

[119] Ms. Plese argues that Mr. Parthenis’ opinion should be rejected because he failed to consider the impact of certain areas of mould at High Point. She says his professional standards required him to do so, and he did not. Mr. Parthenis opined the mould was insignificant. I do not see it as having a large impact on the value of High Point on valuation day.

[120] But this still results in a difference of $1.5 million between the appraisers on this property alone. How can it be reconciled?

[121] Both appraisers agreed that the Toronto residential real estate market has been steadily rising since valuation day. They tended to agree that on a fairly conservative basis that increase has been about 4.5% a year. Ms. Plese therefore argues that if one looks at the actual sale price of High Point in 2018, and reduces that sale price by 4.5% per year back to valuation day, it results in a valuation day value of about $14 million, which supports Mr. Laine’s opinion. She suggests that it is beyond reason to suggest, as Mr. Parthenis does, that High Point’s value decreased over four years in the hottest real estate market Toronto has seen for many years. I tend to agree.

[122] When I consider overall market conditions alone, I simply cannot accept Mr. Parthenis’ opinion that the value of High Point remained stagnant, and ultimately declined by $200,000 in an unprecedented buoyant and rising market. I reject his opinion that High Point was worth over $17 million at valuation day when it sold for slightly less than his appraised value four years later. That being said, I view Mr. Laine’s opinion as artificially low, given the comparables he used, particularly those that were the same as Mr. Parthenis’.

[123] I recognize that looking at the actual sale price of High Point in 2018 and working backward is not a recognized “valuation” technique that either of the experts would use. It seems to me, however, that it gives the court a kind of reality check against which to consider each expert’s opinion. Interestingly, if I use the same 4.5% factor[^10], and work back to the date High Point was purchased, the arithmetic yields a value then of roughly what Ms. Plese paid for it.

[124] That being said, I accept Mr. Parthenis’ opinion that the increases in the Toronto real estate market did not occur on a straight line basis, but had peaks and valleys over the years. I also accept that High Point is a unique property, which would appeal to only a small cadre of unique potential buyers. That factor militates against simply looking at the 4.5% factor.

[125] When I take the evidence as a whole, I find it more likely than not High Point was worth $15,500,000 at valuation day. I have included this value in the net family property statement that is attached to these reasons as Schedule “A”.

[126] In valuing the matrimonial home, there is also the question of what disposition costs, if any, should be deducted from its value to calculate Ms. Plese’s NFP.

[127] Ms. Plese takes the position normal real estate commission of 5% should be deducted. Mr. Herjavec says I should apply hindsight to some degree, and use either the actual commission paid, or discount a normal rate to account for the fact the home was not sold on valuation day, and Ms. Plese could reasonably have been expected to sell it at some point in the future. He suggests I use 2% which is the same rate I applied in Fielding v Fielding. [^11] I agree.

[128] It seems to me Ms. Plese’s proposed rate of 5% is unreasonable for a number of reasons. First, parties often negotiate lower rates on sales of their homes. Here, in fact, Ms. Plese initially negotiated a rate of only 2.5% and ultimately paid 1% less than that. Second, at valuation day it was by no means clear when, or if, High Point would be sold. It was not jointly owned; Ms. Plese had complete control over when it might be sold. Mr. Herjavec could not compel its sale. Given those uncertainties, a discounted rate is appropriate. It seems to me that applying a rate of 2% to account for notional commission is reasonable. Therefore, under Ms. Plese’s debts and other liabilities at valuation day I have included notional disposition costs of $310,000, being 2% of the value of High Point at valuation day.

Lake Rosseau cottage

[129] Mr. Herjavec purchased the cottage in February of 2014 for $5,050,000. The transaction closed in May 2014, about two months before the parties separated. The equity in the property at that time was $1,810,525. Ms. Plese takes the position the purchase price is the most reasonable estimation of the cottage’s value at valuation day, since the two events occurred almost simultaneously.

[130] Mr. Herjavec says I should use the actual sale price of the cottage when he sold it two years after valuation day. If I accept his position, the net value would be $1,499,403 for equalization purposes. Mr. Herjavec suggests I should accept his position because after he closed the purchase he discovered many hidden defects in the property that had not been revealed by the home inspection he had conducted prior to buying the cottage. He says he incurred significant expense in repairs, and in fact the cottage sold in 2016 or less than he had paid for it.

[131] Neither party commissioned a formal valuation of the cottage to ascertain its valuation day value.

[132] As I see it, the best evidence of value at valuation day is the actual price Mr. Herjavec paid when he bought the property a few weeks before valuation day. I do not know whether Mr. Herjavec discovered the latent defects before valuation day or not. I have no real evidence of when the problems presented themselves. If Mr. Herjavec did not find the problems before valuation day, there is no reason to suggest that another purchaser would have known of the issues on valuation day, and paid less for the cottage as a result. I have no evidence that had the property been offered for sale in the open market on valuation day it would have fetched a significantly lower price because of these unknown problems. I therefore accept Ms. Plese’s valuation, and fix the net value of the cottage at $1,810,525 at valuation day.

[133] As for notional disposition costs on the cottage, it seems logical to apply the same reasoning as I used for High Point, and deduct notional disposition costs of 2%. Therefore I would include the sum of $36,210 as a debt Mr. Herjavec owed on valuation day. This represents notional disposition costs on the sale of the cottage.

Fisher Island property

[134] At the commencement of trial, the parties had not yet agreed on the value of the Fisher Island property. They now agree that its value in Canadian dollars at valuation day was $2,341,672. They also agree its current value is $4,810,000.

[135] Ms. Plese and Mr. Herjavec each own 50% of the shares of an Ontario numbered company which is the registered owner of Fisher Island. I have included their respective 50% interests in Schedule A, based on the property’s agreed upon valuation day value. Therefore, the figure of $1,170,836 appears in the calculation of each party’s NFP.

[136] An issue is what should be done with Fisher Island. One of the difficulties is that the property is located in Florida. This court has no jurisdiction over property outside Ontario, although the court does have jurisdiction over the parties themselves. Earlier in this litigation, the parties had consented to an order for sale of Fisher Island. For any number of reasons, a sale has not occurred.

[137] The parties will therefore take all necessary steps to cause their numbered company to sell the Fisher Island property. They will immediately retain a realtor to list and sell the property. They will list it at a listing price the realtor recommends, and will cause the numbered company to accept the first reasonable offer to purchase Fisher Island. On sale, the net proceeds of sale will be paid to the numbered company, to be paid out to the parties, as equal shareholders, in equal shares, in the most tax effective fashion they can.

[138] The value of THG is the most contentious property issue in this case. I turn now to discuss it.

Valuation of Mr. Herjavec’s business interests on valuation day

[139] The most challenging aspect of determining NFP is valuing Mr. Herjavec’s business interests on valuation day. Ms. Plese’s valuator, Mr. Beaton, from Alvarez and Marsal (“A&M”) puts the en bloc “mid-point” value of THG at about $52,576,000 while Mr. Freedman, from Duff & Phelps, who is Mr. Herjavec’s valuator, says it is $24,156 million. Mr. Freedman goes on to value Mr. Herjavec’s interest in THG at only 90% of that figure, to account for what the parties have referred to as “phantom options.” These, according to Mr. Herjavec, give two of his key employees a 5% interest each in THG on a sale.

[140] Both experts are highly qualified, with years of experience in valuing corporate interests. Mr. Freedman’s expertise has focused on conducting valuations in the context of matrimonial proceedings. Mr. Beaton’s expertise extends to providing assistance in actual transactions. Mr. Beaton is based in Seattle, Washington, and has less experience in Canadian courts than does Mr. Freedman.

[141] Both valuators signed the requisite acknowledgement of their duties as experts, namely to provide opinion evidence that is fair, objective and non-partisan. As was the case with the real estate appraisers, their opinions squarely align with the interests of the party who retained them. Again, I am astonished that there should be this kind of disparity between them. I wonder if their results would have been the same had they been retained by the other party. This case highlights in very stark fashion the continued problems with expert evidence. Notwithstanding the experts’ clear duties, they nevertheless end up supporting the position of the party who hired them. The changes to the expert rules, and the requirement for experts to acknowledge their duties of independence and impartiality were supposed to solve the problem of experts simply being “hired guns”. Sadly, the problem remains. I must therefore approach each expert’s opinion with a certain degree of caution and skepticism.

[142] Both experts valued THG on the capitalized free cash flow approach. Mr. Beaton, however, used two additional methodologies in coming to his ultimate opinion of value. He used what are called the Guideline Public Company Method and the Guideline Company Transaction Method. Each of these additional methodologies yielded different, and higher, valuations for THG. Ultimately, Mr. Beaton weighted the values from each methodology to come to his final opinion on THG’s value. He weighted the Public Company Method valuation at 10%, because he said the public companies were not that similar to THG. He weighted the Transaction Method valuation at 15%, because he felt those comparable companies were closer in size to THG. He gave his capitalized free cash flow approach a 75% weighting. Mr. Beaton’s use of these additional methodologies account for roughly $4 million of the value he attributes to THG.

[143] In Exhibit 76, at page 6, Duff & Phelps has set out a rough reconciliation of the Duff & Phelps and A&M conclusions on THG’s values. This chart begins with Duff & Phelps’ estimate of THG’s en bloc fair market value, and then adjusts that figure to reconcile the areas of difference between the two valuators’ opinions. Thus, the methodology begins with the Duff & Phelps’ estimate for the en bloc value of THG of $24,156,000 and adds the various adjustments from the A&M opinion to conclude with A&M’s estimate of the en bloc fair market value THG of $52,576,000.

[144] I will use the same approach, and adjudicate each of these discrete areas on which the experts disagree in order to decide the ultimate value of Mr. Herjavec’s THG shares. These different areas can be roughly categorized as follows:

a) Differences in estimated after-tax free cash flows relating to:

i) Loss of Rogers revenue

ii) EBITDA of Sentry Metrics

iii) Private aircraft expenses

iv) Car racing expenses

v) Capital expenditures; and

vi) Discretionary expenses

b) Shark Tank/Dragons Den investments;

c) Non-arm’s length payments to Ms. Johnson

d) LA Ferrari

e) Other luxury vehicles

f) Phantom stock options

g) Discount of contingent costs of disposition

[145] The experts’ differences in their estimated after-tax free cash flow for THG creates the largest difference in their opinions using the capitalized free tax flow valuation approach.

[146] Mr. Freedman also disagrees with Mr. Beaton’s use of the two additional valuation methods, namely the Guideline Public Company Method and the Guideline Company Transaction Method (described above). As I have said, using these additional valuation approaches adds roughly $4 million to Mr. Beaton’s opinion of value.

[147] I begin with the differences in what THG’s free cash flow is for valuation purposes. Both experts begin with THG’s balance sheet for the fiscal year ended December 31, 2013. They also considered mid-year information from 2014, as well as historical data for THG. They came to roughly the same starting point. It is the adjustments to that figure that create the significant difference in their opinions regarding THG’s value.

Differences in estimated free cash flows

Loss of Rogers revenue and impact of Rogers’ lawsuit

[148] Rogers was one of THG’s largest customers. In September of 2013 Rogers sued THG for more than $4 million, alleging breach of contract, negligence and vicarious liability. Ultimately, the suit was settled[^12] but Rogers did not renew any contracts with THG. The loss of revenue and the lawsuit itself create two potential impacts on THG’s value.

[149] First, I must consider the impact of the lawsuit on THG’s value. Second, I must decide whether the potential loss of the Rogers contract has an impact on THG’s estimated free cash flows, and thus on its value.

[150] Although THG’s financial statements had no note regarding any potential liability concerning the Rogers’ suit, THG’s litigation lawyer advised Duff & Phelps that as of the date of separation a provision of $2.3 million for this potential liability would be reasonable for valuation purposes. This is the figure Duff & Phelps used in valuing the Rogers litigation as a THG liability. To the contrary, A&M used the figure of $900,000 to reflect this liability. A&M’s number results in an additional $1.360 million in value for THG.

[151] The problem with the approach each valuator used is that neither a vendor nor a purchaser would use either. The evidence was clear that a more likely scenario on a sale would be to hold $2.3 million for the potential liability in escrow from the purchase price. Those funds would be held to pay out any ultimate liability. Here, the ultimate payout was $1.527 million, of which $827,000 was tax deductible.

[152] Mr. Herjavec argues this is an inappropriate use of hindsight to value this liability. I disagree. I look at it as a reasonable business approach to the issue, in terms of how both a potential purchaser and the vendor would have dealt with the issue. I therefore value the liability at $ 1.527 million, less the tax deductibility of the portion of the sum relating to legal fees. This figure is slightly less than halfway between the two valuator’s positions. I estimate my figure would add roughly $500,000 to THG’s value from the Duff & Phelps starting point.

[153] The other issue is the loss of the Rogers contract and its impact on THG’s future revenue stream. Duff & Phelps deducted the historical revenue from Rogers when determining THG’s future maintainable earnings. Mr. Beaton, of A&M, determined the Rogers loss would have no overall impact on revenue. Once cash flow multiples are applied, this results in a difference of just over $3.2 million in THG’s value between the two valuators.

[154] There is no question Rogers did not renew its contracts with THG after launching its suit against THG. That being said, THG’s revenues increased significantly even after the loss of the contract. By March of 2014, THG had, in its own words, landed its “biggest deal in [their] history (over $10 million on a single P.O.)” In April of 2014 THG announced a plan for a $250 million expansion. Both of these facts, which occurred prior to valuation day, militate against a significant reduction in value for the loss of Rogers.

[155] Not only that, THG’s Top 10 customers continued to generate and sustain significant revenues. Importantly, THG’s overall gross revenues continued to increase even after losing Rogers. Gross revenues increased from nearly $105 million in 2014 to almost $165 million in 2017. All this occurred without Rogers.

[156] Mr. Herjavec argues that Rogers was replaced with a number of smaller contracts, suggesting this is not really a comparable replacement. I disagree. It seems to me replacing one large contract with a number of smaller ones creates more sustainable revenue and less risk than one large contract. The loss of one would have a far smaller impact on revenue that the loss of a large one.

[157] I would neither discount to the extent Mr. Freedman did, nor ignore the loss of Rogers altogether. I accept roughly one half of Mr. Freedman’s adjustment. Therefore, I would add $1.6 million to the Duff & Phelps valuation, rather than the $3.2 million from the A&M valuation.

EBITDA from Sentry Metrics

[158] The parties separated on July 24, 2014. On September 10, 2014 THG closed a transaction to purchase a company called Sentry Metrics. In 2014 THG earned $203,000 from this source. A&M has assumed the transaction was either “known or knowable” at valuation day, and has therefore included cash flow from this source in valuing THG. This results in A&M including an additional $102,000 in THG’s revenue, resulting in an increase of $670,000 in THG’s value. To the contrary, Duff & Phelps has reduced THG’s cash flow by this sum. The issue is whether the Sentry Metrics transaction was “known or knowable” at valuation day. If it was, then it is reasonable to consider this cash flow in valuing THG.

[159] At the date of separation, THG was in an expansion mode. It had published press releases indicating its intention to invest and expand.

[160] The Sentry Metrics transaction was for $3.5 million. I find it hard to believe that a transaction of this magnitude would have been negotiated and completed in the roughly six weeks between the parties’ separation and the closing of the transaction. I find it more likely than not the transaction was at least “knowable” at valuation day, and would thus include $670,000 in THG’s value on this account.

[161] I note as well from the Sentry Metrics purchase agreement that the vendors all reside in Toronto, or the Greater Toronto Area. It would have been an easy matter for Mr. Herjavec to have called one or all of them as witnesses to provide independent evidence of when the negotiations for the transactions began – that is at or before valuation day or not. I recognize that Ms. McLean, THG’s director of marketing, purported to give some evidence on this issue. She did not join THG until sometime in August of 2014, a month after valuation day, and would thus have had no first-hand knowledge of when negotiations might have begun.

[162] I draw an adverse inference from the failure to call one of the vendors, and conclude negotiations with Sentry Metrics began at or before valuation day. The transaction was therefore known or knowable on valuation day. I therefore add $670,000 to the Duff & Phelps valuation on this account.

Private aircraft expenses

[163] Mr. Herjavec had the use of a private aircraft, owned by a THG related company, Andiamo. Andiamo’s only asset was this aircraft, which in turn it made available to THG at THG’s expense. The cost of maintaining the plane came to more than $2 million per year. This expense was carried on THG’s financial statement.

[164] The issue is whether the aircraft expenses are proper expenses of THG. A&M took the approach that a purchaser would not maintain a private aircraft and a more reasonable approach would be to replace the private aircraft expense with the lower cost of commercial flights to replace private aircraft costs. This adjustment would increase THG’s earnings. On the A&M approach, this results in $8.471 million of additional value for THG.

[165] Mr. Herjavec’s position is that he used the private plane primarily to attend his various speaking and television engagements. These engagements resulted in what THG characterized as “entertainment revenues”. Since valuation day, Mr. Herjavec has incorporated a separate company called Herjavec Entertainment Corp. (HEC) which now receives all revenue of this kind. Mr. Herjavec is HEC’s sole shareholder.

[166] At trial, Duff & Phelps took the position that the aircraft expenses were intertwined with the revenues Mr. Herjavec generated from his various personal appearances and participation in reality television shows. Both experts agreed that a potential purchaser of THG would not pay for the revenue generated by Mr. Herjavec personally through these various activities. In his evidence, Mr. Freedman, somewhat arbitrarily (and for the first time) suggested that it was too complicated and expensive to try determine what percentage of aircraft expenses would be attributable to entertainment revenue and/or Mr. Herjavec’s “personal goodwill”. He therefore suggests there should be no adjustment at all.

[167] Again, I disagree with each expert. From Ms. Plese’s evidence, I conclude the aircraft was often used for personal travel for the family, but those expenses were still recorded as THG business expenses. As such, there must be a deduction of some kind from THG’s expenses for this use, and a corresponding increase in THG’s value as a result. I would add $1 million to THG’s value to account for this.

Car racing

[168] THG spent a great deal of money on car racing. Mr. Herjavec is an avid racer, loves the sport, and participated in numerous racing events. All the cost of racing was expensed through THG. CRA reassessed, suggesting these were not proper corporate expenses, but rather were personal to Mr. Herjavec. Both Mr. Herjavec and THG filed notices of objection.

[169] Just before the end of the trial, CRA disposed of the notice of objection. Their letter[^13] says:

Based on our review, it is our position that the primary purpose of these racing events was for personal enjoyment of the shareholder, and that the business element was merely incidental.

The shareholder is a self-admitted lifelong car enthusiast and while we do not dispute that a hobby can in fact have a business element, we do not feel strongly about that in your case ….

It is our view that the racing activities undertaken by the shareholder are for personal enjoyment, with a business element tacked on.

[170] Nevertheless, CRA decided to allow a deduction of 50% of the disallowed expenses, particularly since both Mr. Herjavec and THG indicated they were no longer engaged in these racing activities.

[171] Neither expert took this ultimate decision into account in determining THG’s value. While CRA’s ultimate position might be viewed as hindsight, I see it as the best indicator of what might have occurred when considering the situation as of valuation day.

[172] A&M added back all the racing expenses into THG’s maintainable cash flow. This results in an addition $4.215 million of value for THG. Duff & Phelps added back nothing, taking the position that notwithstanding CRA’s ultimate position, all the racing expenses were completely legitimate.

[173] I accept neither valuator’s position. I see CRA’s ultimate position as being the best estimate of how the racing expenses would be resolved. I would include half of the expenses in THG’s maintainable cash flow calculation. This results in an additional $2,107,500 in value for THG, to be added to the Duff & Phelps valuation.

Capital expenditures

[174] The difference in how the valuators approached the appropriate treatment of capital expenditures results in a difference of $4.485 million in value, with A&M opining THG was worth this much more on valuation day than Duff & Phelps’ opinion.

[175] In the A&M approach, the cost of depreciation counters the cost of capital expenditures. The capital expenditures relate to items like leasehold improvements, computers, office furniture and equipment.

[176] Duff & Phelps provided a chart of net capital asset additions for THG from 2010 to 2014, relying on the financial statements of THG. The five-year average came to $1.252 million. Mr. Freedman looked at a five-year average of $1.25 million as a reasonable estimate of sustaining capital reinvestment.

[177] The difficulty with the Duff & Phelps approach is that they picked up and included redundant assets in each of those years. Also, in 2014 Mr. Freedman included expenses related to THG’s acquisition of Sentry Metrics. This was a non-recurring capital acquisition. Even though Duff & Phelps included these expenses, they did not include the Sentry Metrics acquisition in determining THG’s free cash flow.

[178] Even though Mr. Freedman agreed on cross-examination that the calculation should not include redundant and capital assets, he did not change his position. Instead, he testified that he relied on the estimate management had provided. Ms. Plese argues that in doing so, Mr. Freedman violated accounting principles and abdicated his proper role as an expert.

[179] I would not go quite so far, but again find each expert’s opinion on this issue unduly aligned with his client’s interests. The Duff & Phelps opinion understates THG’s value on this account while A&M overstates it.

[180] I reject the A&M adjustment of $4.485 million and instead would add $2 million to THG’s value on account of this issue.

Discretionary expenses

[181] The parties put forward various scenarios concerning discretionary expenses THG incurred, and their impact on value. The A&M approach results in an increase of $1.028 million in THG’s value.

[182] The discretionary expenses include such things as the aircraft expenses and car racing expenses, which I have already dealt with above. They also include non arms’ length payments to Kym Johnson, Mr. Herjavec’s current wife. I deal with that issue below. I make no further adjustment on this account.

Shark Tank/Dragons Den

[183] Through his participation in the Shark Tank and Dragons Den reality television programs, Mr. Herjavec caused THG to invest in some of the companies that were “pitched” during the programs. The valuators needed to consider the value of the Shark Tank and Dragons Den investments in valuing THG. The valuators approached their value differently. Duff & Phelps simply used their book value. To the contrary, Mr. Beaton looked at the investments as akin to a pool of start-up companies, with THG acting in the role of a venture capital investor. Mr. Beaton assumed that at least one of the investments would ultimately bear fruit and did what he called an “implied investment” calculation. None of the investments has borne fruit.

[184] I simply cannot accept Mr. Beaton’s analysis. The evidence from both Mr. Herjavec and Erin McLean, THG’s director of marketing, persuades me that none of these investments had any real value or potential value at valuation day beyond what was invested in them. Both the Shark Tank and Dragons Den television programs are primarily entertainment, not investment vehicles. In each of the programs, potential investors (the Sharks, or Dragons) are pitched by contestants who are trying to find financing for their business ideas. The Sharks/Dragons have no prior knowledge of the contestants, their businesses, or their financial status. They receive no financial statements or any other financial information from any contestant before the episode is filmed.

[185] There is an on air bidding process, where the contestants describe their businesses, their financial needs, and likely prospects. The Sharks/Dragons ask questions, and decide whether or not to offer financing to the contestant. The offers made on air are not binding contracts, however.

[186] After the on-air bidding process, the Sharks/Dragons conduct the usual due diligence an investor would normally make, and then decide whether to go through with the investment or not. Even if they do, the terms may change dramatically from the proposal made on air.

[187] THG has a number of these investments. They are carried on the company’s financial statements at book value of $392,000. Nevertheless, Mr. Beaton has valued them at $835,000, making an upward adjustment in THG’s assets, with a corresponding increase of $441,000 in THG’s value.

[188] I accept the Duff & Phelps approach to these investments. Both Mr. Herjavec and THG’s Director of Marketing, Ms. McLean, testified confirming there was no real expectation of profit from any of these investments, and in fact, none has created any. I see no potential growth in any of them that would warrant an increase in THG’s value. Accordingly, I reject Mr. Beaton’s adjustment on this account.

Non-arms’ length payments to Ms. Johnson

[189] The THG financial statements show certain payments being made to Ms. Johnson, Mr. Herjavec’s current wife, and former Dancing with the Stars partner. As Mr. Herjavec and THG’s Executive Vice President and director of marketing and communication, Erin McLean, explained it, THG paid Ms. Johnson a salary equivalent to her annual salary with Dancing with the Stars. Her role with THG was to try to sell two concepts to the BBC on behalf of THG. The BBC owns the Dancing with the Stars franchise. One proposal involved a Dancing with the Stars live program for Las Vegas, and the other was to be a chain of dance studios under the Dancing with the Stars banner.

[190] Ms. Johnson had been with the Dancing with the Stars program for many years, having begun her dancing career in Australia. She apparently is well connected with the BBC.

[191] Ms. McLean described Ms. Johnson’s role in the two proposals as “integral”. Ms. McLean explained that Ms. Johnson’s background as a dancer, working in studios and understanding production cycles, gave THG both context and consultation in how to set up a production, and whom to hire. Ms. Johnson’s relationships with Dancing with the Stars in both the United States and the United Kingdom were very important to the proposals.

[192] I accept both Mr. Herjavec’s and Ms. McLean’s evidence about Ms. Johnson’s importance to these two business proposals. Although Ms. Johnson is not an arms’ length party, I am satisfied that she performed sufficient work for THG to justify the salary she was paid. I make no adjustment to THG’s value on that account.

[193] The next major area on which the experts disagree is the treatment of the “La Ferrari” automobile.

La Ferrari automobile

[194] Apparently, a La Ferrari sports car is a rare and valuable vehicle. They are not routinely manufactured, and when they are, only a small number of the cars are made. Mr. Herjavec is both a car enthusiast and aficionado. He has always been passionate about cars from the time the parties first met. He loves racing cars, and has raced in prominent racing events. In 2014, before the parties separated, Mr. Herjavec caused THG to enter into a contract to purchase a La Ferrari.

[195] The purchase agreement has various important provisions. First, the purchase price is US$ 1,500,000. THG was required to make a deposit on account of the purchase of US$ 600,000, or $645,000 Canadian. THG paid the deposit prior to valuation day. It paid the balance of the purchase price of $1,016,109 when it took delivery in October, 2014, after the date of separation. The purchase agreement contained a provision giving Ferrari, as vendor, a right of first refusal to buy back the vehicle at its fair market value (defined as no more than the purchase price THG paid) at any time within 18 months of THG’s taking delivery.[^14]

[196] After valuation day, but before the La Ferrari was delivered, the vehicle was signed by the grandson of Ferrari’s founder, Ferrari’s head engineer, and Ferrari’s chairman. These signatures substantially increased the vehicle’s value.

[197] The La Ferrari was not delivered until after valuation day. THG paid the balance owing on the purchase price at that time. In June of 2015, or nearly a year after valuation day, THG found a buyer for the La Ferrari for a sale price of $3,881,000. Although the purchase agreement gave Ferrari a right of first refusal to buy the car back at the initial purchase price, it did not exercise that option, and THG effected the sale realizing a significant profit.

[198] Duff & Phelps approached valuing this THG asset by including only the deposit amount that had been paid before valuation day. To the contrary, A&M took the position the value of the Ferrari did not have to be netted off for the amount that had yet to be paid to acquire the vehicle. This approach makes no sense in terms of the provisions of the Family Law Act,[^15] which require the court to take a valuation snapshot as of the date of separation, without the use of hindsight.

[199] When I do this, I must accept the Duff & Phelps approach. I therefore make no adjustment on this account.

Other luxury vehicles

[200] THG deducted expenses for other luxury vehicles. In 2013 the deduction was for $89,821 and in 2014 it was for $47,882. CRA ultimately allowed $65,513 for 2013 and $11,797 for 2014. These adjustments would not result in a meaningful adjustment to THG’s overall value. I therefore make no adjustment on this account.

Tangible asset backing

[201] Both experts approached the issue of THG’s need for a capital injection in 2014 in a slightly different way. Duff & Phelps reduced THG’s value by $1 million to reflect the fact it required a capital injection. A&M took a different approach, and adjusted THG’s cash flow downward, and then applied the appropriate multiple. Their approach reduces THG’s value by $1.766.

[202] As I see it, the Duff & Phelps approach more reasonably reflects how a potential purchaser would approach THG’s value. I therefore make no additional adjustment on this account.

A&M use of market approach valuation methodologies

[203] Duff & Phelps used only the capitalized free cash flow approach to valuation while A&M used both this approach and two “market” approaches to valuation. After doing so, A&M then weighted the values obtained in the three approaches. A&M’s approach adds $4.040 million to THG’s value.

[204] The two market approaches A&M used are the “Guideline Public Companies Methodology” and the “Guideline Transaction Methodology.” Both of these “guideline” approaches use sales of comparable companies to arrive at the value of the subject company. The process is not unlike that used by real estate appraisers, using comparable property sales, and adjusting them to arrive at value of the subject property. Mr. Beaton described it as a comparative approach using transactions in other companies as a measure of value for the subject company. In the Guideline Public Company Method, the valuator will go to public markets and look for similarities to come up with appropriate multiples.

[205] Duff & Phelps did not use either market approach, although Mr. Freedman testified he considered them, but rejected them because there were no true comparables to use appropriately. Ms. Plese argues Mr. Freedman’s evidence should be rejected because he did not mention his consideration (and ultimate rejection) of these alternate methodologies in his reports. I do not see this as a fatal flaw, although it would have been preferable for him to have made a comment in one of his reports, since he knew of Mr. Beaton’s use of the methodology.

[206] All of that being said, I do not see the two market valuation approaches as being appropriate here. First, the “guideline” companies Mr. Beaton used are all significantly different than THG. For example, one of his comparables was CGI. CGI had gross revenue of $9.8 billion. THG is nowhere near this large. CGI’s balance sheet shows it owns software licences worth $384 million. To the contrary, THG does not manufacture software and has never had revenues approaching anything like CGI’s.

[207] In addition, CGI has 68,000 employees, compared with THG’s 250. I fail to see how CGI can be a meaningful comparable. Two other companies Mr. Beaton used also have revenues in the billions of dollars. One of them, Booz Allen, relies on significant long-term contracts with US military and government. THG has none.

[208] Importantly, none of Mr. Beaton’s comparables could properly be considered a VAR. Value added reselling was a primary component of THG’s revenue stream at valuation day. As I see it, neither of the market approaches Mr. Beaton used is based on meaningful comparables to THG. I do not see either as providing any useful comparisons to THG, and therefore reject the use of these methodologies in valuing THG. I make no adjustment on this account.

Conclusions on value of THG

[209] When I begin with the Duff & Phelps valuation of $24,156,000 and add all the adjustments I have made above, the en bloc value of THG on valuation day was $32,033,000. I must now consider whether Mr. Herjavec owns only 90% of THG, because of the “phantom options” he says are owned by his two key employees, Sean Higgins and George Frempong.

Phantom stock options

[210] Mr. Herjavec takes the position he only owns 90% of the equity of THG. He says he has granted “phantom stock options” to his two key employees, Sean Higgins and George Frempong, entitling each of them to 5% of any proceeds of sale if THG is sold.

[211] When the parties separated, there was no written agreement of any kind between Mr. Herjavec and either of Higgins or Frempong regarding their interest, if any, in THG. There were, however, ongoing discussions among Mr. Herjavec and these employees in the years before valuation day.

[212] In 2012, Mr. Herjavec approached Mr. Higgins and asked him to dilute his notional 5% so that Mr. Herjavec could offer a portion to another employee as a retention incentive. Clearly Mr. Herjavec was unwilling to dilute any shareholdings of his own to achieve that end. At the time, Mr. Herjavec told Higgins that the phantom shares were not specific to either him or Frempong, but rather were associated with the people filling the roles of running sales or technology for THG. Frempong was in charge of sales and Higgins was in charge of technology.

[213] In 2013 Mr. Herjavec and Higgins had various email exchanges about the phantom options. Mr. Higgins was interested in monetizing his 5% interest. At that time, Mr. Herjavec told Higgins he had no intention of selling THG for at least 10 years, if ever. From this I infer Mr. Herjavec had no intention of paying Mr. Higgins anything unless and until THG were ultimately sold. When valuation day occurred about a year after this exchange, I have no evidence that anything had changed in terms of Mr. Herjavec’s intentions about THG; that is, at valuation day he had no intention of selling THG for at least another nine years, if ever.

[214] Mr. Herjavec and his two employees clearly understood that nothing would be payable to either unless and until THG were sold. In order to receive his phantom shares, the employee would have to be alive and employed at the time of sale.

[215] Both Mr. Higgins and Mr. Frempong testified. While each confirmed his understanding he is entitled to 5% of the company, each was equally clear he had no entitlement to anything unless the company were sold.

[216] Higgins actually signed an agreement concerning the phantom options or units about a year after valuation day. Its terms are clear. Nothing is payable to Higgins unless there is a “liquidity event” in which the majority of the company is sold. Higgins must still be employed at THG at the time of sale without that employment being interrupted after the unit was granted.

[217] Paragraph 2.1 of the agreement is important. By it, THG grants Mr. Higgins, as Unit Holder, one “Unit”. It says, however:

Nothing contained herein grants the Unit Holder any shares or equity interest in the capital of THG nor any option right or privilege (whether by law, pre-emptive, contractual or otherwise) capable of becoming an agreement, for the purchase of shares or an equity interest in the capital of THG.

[218] Paragraph 2.2 provides “[t]he value of a Unit, and the right of the Unit Holder to realize such value in a Unit will only vest on the first occurrence of a Liquidity Event during the term of this Agreement”

[219] What this provision makes clear is that THG’s ultimate obligation is an obligation to pay a sum of money to the Unit Holder. The Unit Holder has no equity interest in THG. The Unit Holder’s right to payment is not vested until a Liquidity Event occurs.

[220] The Unit is not transferable. If the Unit Holder dies more than six months before a liquidity event, all his rights are lost. These terms cover entitlement to payment. The terms of payment are quite another matter. Paragraph 5.2 of Mr. Higgins’ agreement governs that issue. It reads:

Terms of Payment. The terms and schedule of the payment of the Liquidity Event Entitlement shall be determined by the Board in its sole discretion. The Liquidity Event Entitlement of a Unit Holder shall be paid as either (a) a lump sum, or (b) as may otherwise be determined by the Board in its discretion with due consideration given to the terms and context of the Liquidity Event.

[221] THG’s Board of Directors therefore has complete discretion concerning payment of anything owing on account of the phantom shares. Mr. Herjavec is THG’s sole officer, director and shareholder. He therefore has complete unfettered discretion as to how any payment will be made. Clearly, it could be paid over a term of many years.

[222] Paragraph 7 of the agreement refers to risks. It reads:

The Unit Holder acknowledges and agrees that there is no market for the Unit and that there is no guarantee that THG will grow in value, or remain profitable or in business.

This provision suggests to me there may never be any market value for any unit or phantom option.

[223] Last, if there is any question about the proper interpretation, construction or enforcement of the agreement, paragraph 12 requires the question to be referred to the Board, whose majority decision shall be final and binding.[^16] This gives Mr. Herjavec complete discretion to resolve any dispute as he sees fit.

[224] Mr. Frempong did not sign a similar agreement. He relies on his relationship with Mr. Herjavec as a mentor to honour what is essentially their “handshake” agreement. Although he has yet to sign anything regarding the phantom shares, Mr. Frempong acknowledged that any entitlement he might have is dependent on a sale of THG. He recognizes that a sale may never occur. He also confirmed his understanding that if Mr. Herjavec sells less than a majority interest in THG, Mr. Frempong’s notional interest in the company will be diluted. He also recognizes that if THG is never sold, he may never realize on this notional, or phantom interest in the sale proceeds.

[225] So, what were the terms of any agreement between THG and Higgins and Frempong at valuation day? They were certainly no better than the terms Higgins ultimately agreed to. Had they been, he would not have signed the agreement he did. I see the Higgins agreement as a fair distillation of what the terms might have been on valuation day.

[226] What the agreement makes clear is the following. First, the employee has no equity interest in THG. Second, the Units, or phantom options, or whatever one calls them, have not vested, and will not vest unless and until THG is sold. Third, the Units/options are not transferable. Fourth, the Units/options have no market value.

[227] It is against this backdrop that I must determine whether Mr. Herjavec’s stated 100% ownership interest of THG should be discounted by 10% to reflect any potential obligations owing to Higgins and Frempong on an eventual sale. Mr. Herjavec’s valuator, Mr. Freedman, unequivocally, says “no”. He looks at the issue from the point of view of THG, and says the phantom options are a clear obligation of the company that should result in a finding that Mr. Herjavec’s equity interest in the company was only 90% on valuation day. When Mr. Freedman was asked whether he would have taken the same valuation approach were he valuing the phantom options as assets of either Higgins or Frempong on marriage breakdown, he would not answer the question.

[228] Ms. Plese points out that if I determine Mr. Herjavec has only a 90% interest in THG, but he never sells THG and is never required to pay anything to Higgins and Frempong, she will have effectively paid half of a non-existent debt.

[229] I look at the issue in much the same way as I would if I were valuing a contingent liability. Here, there is a potential obligation on THG, under some circumstances, to make a payment to Higgins and Frempong. The seminal case on the issue remains Sengmueller v. Sengmueller [^17] . In it, the Court of Appeal said that when calculating net family property, the fairest approach in determining the disposition costs of an asset is to require evidence as to the time of disposition, and the likely disposition costs at that time. Then, the present value of those disposition costs must be calculated.

[230] Mr. Freedman takes the position that Sengmueller is contrary to proper valuation methodology. While that may or may not be the case, I am bound by Sengmueller. I must try to quantify this contingent liability as of valuation day. In that regard, I approach it much like a guarantee or disposition cost. From the terms of the Higgins agreement, Higgins has no equity interest. The agreement simply creates an obligation to make a payment to him if certain conditions are met. I must determine the likelihood of those conditions occurring on valuation day.

[231] The likelihood of Mr. Herjavec ever having to pay out on the phantom options was remote on valuation day. Only a year before valuation day Mr. Herjavec had clearly stated to Frempong and Higgins that he was unlikely to sell THG for at least ten years, if ever. From this statement I infer that it was unlikely THG would be sold for at least nine years following valuation day, and might never be sold. Thus, any amount that might be payable to the two key employees must be discounted significantly for time.

[232] Secondly, at valuation day there were no clear terms for how, or when payment would be made if THG were sold. Apparently, both Higgins and Frempong had had a similar 5% “deal” with Mr. Herjavec regarding Brak. Had they each actually had a 5% interest, each would have received about $1.5 million gross from the proceeds of sale. They did not.

[233] Mr. Higgins actually signed an agreement (albeit after valuation day) concerning his potential interest in THG or entitlement to be paid something if it were sold. I have set out the relevant terms above. They require me to apply a further discount for the possibility of Higgins having left THG or died more than six months before any liquidity event. In those circumstances, nothing would be payable either to him or his estate. This creates another discount.

[234] Since the actual payment of any entitlement was entirely within the discretion of THG’s board of directors, Mr. Herjavec (as sole officer and director as well as sole shareholder) retains absolute discretion as to when, how, and over what period of time any payment would be made. Thus, any payment could theoretically be spread out over decades. This creates yet another discount.

[235] Fourth, the agreement reserves to Mr. Herjavec’s sole discretion the right to unilaterally change any of the provisions relating to the options. This creates further uncertainty concerning both the amount of any payment and when or how it might be made. Again, a further discount must be applied.

[236] What I discern from this agreement is that it is more likely than not it reflects Mr. Herjavec’s views of THG’s obligations concerning the phantom options. I infer they reflect the situation at valuation day. Thus, there is no way to determine when, if, or in what amount THG would ever be called upon to make payments to Higgins or Frempong. Payment is so speculative I make no deduction on this account, and find that for the purpose of determining Mr. Herjavec’s net family property, Mr. Herjavec was the beneficial owner of 100% of THG on valuation day.

Debts and other obligations on valuation day

[237] The parties agree that in valuing THG, it is appropriate to deduct an amount to reflect notional disposition costs on any sale of THG. They agree on both the figure to be deducted, and a discounted figure to reflect the present value of notional disposition costs, if I were to decide a discount is appropriate.

[238] Again, Mr. Freedman takes the position there should be no discount on account of present value. I reject this position. Since I have determined it was unlikely THG would be sold in the nine years following valuation day, if ever, it is appropriate, using Sengmueller principles to use a present value calculation. The experts agree a 20.6% deduction reflects the present value of notional disposition costs. Given my finding the value of THG on valuation day was $32,033,000 notional disposition costs are therefore $6,598,798.

[239] The parties have agreed on the value of many of their debts and other obligations on valuation day. I have already determined many of them, namely the notional disposition costs to be deducted regarding the various residential properties. This leaves certain other debts to consider.

[240] At the time the parties separated, Mr. Herjavec had been reassessed for his 2013 income taxes. He filed a notice of objection, which was ultimately resolved just before the end of the trial. Mr. Herjavec was ultimately reassessed for 2014 as well. He filed a notice of objection in relation to 2014 as well.

[241] The CRA reassessments related to Mr. Herjavec’s personal use of the aircraft, THG’s investment in luxury cars, THG’s racing/sponsorship expenses and other vehicle expenses. CRA took the position Mr. Herjavec’s personal income should include the benefit of these expenses, which it viewed as personal, not corporate. Mr. Herjavec objected to both reassessments. CRA resolved the issues just before the end of the trial.

[242] It seems to me the best evidence of the likelihood of Mr. Herjavec’s being successful or not in his objections is the actual response of CRA. Mr. Herjavec’s counsel has provided information about additional debt Mr. Herjavec owed on valuation day as a result of the reassessments. Ms. Plese’s counsel raised no issue with these income tax debt figures. I therefore accept them, and have included them as debts owing on valuation day in Schedule A, attached.

[243] Although the parties had filed a joint NFP statement at the beginning of trial which included all the values they had agreed on, and setting out clearly those they had not, in argument Mr. Herjavec’s counsel raised additional credit card debt totalling $40,311 he says Mr. Herjavec owed at valuation day. These figures were raised for the first time in argument.

[244] I have difficulty accepting them at this late date. In the joint NFP statement, numerous figures are marked as “TO BE DETERMINED BY COURT”. As I see it, if there were an issue about these credit card debts, they should have been listed on the joint NFP, with the same proviso about the court’s determining them. These were clearly known at or before the commencement of trial, and should have been included in the joint NFP statement. Not only that, in exhibit 19, Mr. Herjavec describes them as “support credits”. As will be seen below, I decline to make any adjustment one way or the other regarding retroactive adjustments. In any case, if Mr. Herjavec characterizes them as support credits, they relate to expenditures after valuation day. Since they were not included even as items for the court to determine in the joint NFP statement filed at trial, I decline to consider them now.

[245] The other debts relate primarily to the CRA reassessments. These figures were not finalized until Mr. Herjavec received notice from CRA near the end of the trial. I accept these figures as a more accurate representation of Mr. Herjavec’s tax liability than those on the original joint NFP statement filed early on in the trial. I have inserted the appropriate figures for these debts in the NFP statement attached to these reasons as Schedule A.

The equalization payment

[246] I have included in the net family property statement attached as Schedule A all of my valuation decisions, as well as the values the parties agree upon. As a result, Mr. Herjavec will pay Ms. Plese an equalization payment of $2,659,905 unless there is a reason for me to order an unequal division of net family property under the provisions of s.5(6) of the Family Law Act. Ms. Plese relies on the provisions of s.5(6) and asks for an order requiring Mr. Herjavec to pay her more than half the difference between their respective net family properties.

Does section 5(6) apply?

[247] Section 5(6) of the Family Law Act permits the court to award a party a payment that is more than one half of the difference between each party’s net family property. The court has discretion to do so in very limited circumstances. Section 5(6) says:

Variation of share

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

[248] Ms. Plese takes the position Mr. Herjavec improperly comingled trust funds with other funds, thereby committing a breach of his fiduciary duty to the Family Trust and its beneficiaries. She argues that if I determine Mr. Herjavec owes money to the trust, that debt should not count as a debt in determining Mr. Herjavec’s NFP. She argues it would be unfair and unconscionable to do so.

[249] First, Mr. Herjavec owed about $16,000 to the trust on valuation day, and has repaid it. In the context of the values in this case, this figure is de minimus. It hardly reaches the threshold of unconscionability.

[250] Second, I have already dealt with Mr. Herjavec’s breach of fiduciary duty by requiring him to bear all the costs of the passing of accounts application.

[251] Third, I was pointed to no other fact that could possibly lead me to conclude equalization would be unconscionable.

[252] Therefore, Ms. Plese’s request for an unequal division of net family property is dismissed. Mr. Herjavec will simply pay the equalization payment of $2,689,558.

[253] Ms. Plese also asks Mr. Herjavec to pay prejudgment interest on the equalization payment. I will address that issue once I determine the question of spousal support, since I see the two issues as being somewhat interrelated.

Should Mr. Herjavec have time to pay in instalments?

[254] Mr. Herjavec suggests that if he is required to pay an equalization payment to Ms. Plese, his obligation should be spread over time. He relies on section 9 of the Family Law Act. It reads:

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

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

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

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

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

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

(ii) any property be partitioned or sold.

[255] Subsection 9(1)(c) only permits a payment over time in circumstances of hardship. I have no evidence that paying the equalization payment in full would cause Mr. Herjavec any hardship. I have no current valuation of THG. In his last financial statement, Mr. Herjavec lists its value as “unknown”. I assume its value is at least as much as it was on valuation day, or I would have heard evidence to the contrary.

[256] Although Mr. Herjavec shows he had $362,231 in RRSP’s at valuation day, his latest financial statement shows their current value as “n/a”. I have no idea whether he still owns them, or, if he does, what their current value might be.

[257] As far as THG is concerned, its most recent financial statement for the year ended December 31, 2017 (nearly a year ago), shows the company having retained earnings at year end of just over $14 million. It also shows a reduction of about $8 million in bank debt from the previous year. The company’s gross revenues increased only slightly, but net earnings nearly doubled. Mr. Herjavec is THG’s sole shareholder. Mr. Herjavec is THG’s Chief Executive Officer. Mr. Herjavec controls THG’s board, as its sole officer and director. Historically, Mr. Herjavec has been able to access funds from THG almost whenever he has wanted to. In the past, Mr. Herjavec has been able to use THG and his shareholder’s account to pay many expenses for himself and the family. I have no evidence of any change in this regard.

[258] Not only that, all the proceeds of sale of the cottage are being held in trust. Mr. Herjavec was the sole owner of that property. He therefore has immediate access to at least $1.5 million to fund the equalization payment.

[259] Also, Fisher Island will soon be sold. The parties agree its current value is roughly $4.8 million. Mr. Herjavec’s interest in that asset alone is $2.4 million. Mr. Herjavec’s share of the net proceeds of sale are sufficient to fund a significant portion of the equalization payment.

[260] I have no evidence at all of what, if any, hardship would befall Mr. Herjavec if he were required to pay the equalization payment in full. I reject his counsel’s argument he would have to sell THG in order to pay the equalization payment.

[261] Accordingly, Mr. Herjavec’s request to have the equalization payment paid over time is dismissed. He shall forthwith transfer all of the cottage proceeds to Ms. Plese on account of the equalization payment. He shall have 60 days following the release of these reasons to make the necessary arrangements to pay the balance of the equalization payment.

[262] Once Mr. Herjavec pays the equalization payment, Ms. Plese will have an additional $2,659,905 in capital. When Fisher Island sells, she will have roughly $2.405 million[^18] in additional capital to add to the roughly $20 million she had invested when the trial began. She will also receive her one third share of the proceeds of sale of the Caledon chalet. This will give her another $424,300. When all these sums are added, Ms. Plese will have about $25,197,147. I must consider this capital base when I turn to the issue of support.

Child and spousal support:

[263] Both child support and spousal support require the court to determine the income of each of the parties. When it comes to child support, the Child Support Guidelines (CSGs) set out a template for determining each parent’s income. Courts have generally applied the same principles to income determination for spousal support purposes as well.

[264] The relevant provisions of the CSGs are as follows:

First, s.15 says:

Determination of annual income

15 (1) Subject to subsection (2), a spouse’s annual income is determined by the court in accordance with sections 16 to 20.

(2) Where both spouses agree in writing on the annual income of a spouse, the court may consider that amount to be the spouse’s income for the purposes of these Guidelines if the court thinks that the amount is reasonable having regard to the income information provided under section 21.

Section 16 deals with calculation of annual income

16 Subject to sections 17 to 20, a spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with Schedule III.

[265] The adjustments required by Schedule III that are relevant to this case are the following:

Dividends from taxable Canadian corporations

5 Replace the taxable amount of dividends from taxable Canadian corporations received by the spouse by the actual amount of those dividends received by the spouse.

[266] Section 17 gives the court some discretion if the application of section 16 does not result in the fairest determination of income. It reads:

17 (1) If the court is of the opinion that the determination of a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years.

(2) Where a spouse has incurred a non-recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the spouse’s annual income under section 16 would not provide the fairest determination of the annual income, choose not to apply sections 6 and 7 of Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate.

[267] Section 18 contains specific provisions relating to spouses who are shareholders, officers or directors of a corporation. Since Mr. Herjavec is all of those things, its provisions may be relevant. It says:

18 (1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the spouse’s annual income as determined under section 16 does not fairly reflect all the money available to the spouse for the payment of child support, the court may consider the situations described in section 17 and determine the spouse’s annual income to include

(a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or

(b) an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation’s pre-tax income.

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm’s length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances.

[268] The court is also entitled to impute income to a spouse in certain circumstances. These are set out in section 19:

19 (1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:

(a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;

(b) the spouse is exempt from paying federal or provincial income tax;

(c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;

(d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;

(e) the spouse’s property is not reasonably utilized to generate income;

(f) the spouse has failed to provide income information when under a legal obligation to do so;

(g) the spouse unreasonably deducts expenses from income;

(h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and

(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

(2) For the purpose of paragraph (1)(g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act.

[269] So the first step is to decide each party’s income. Only then can I address the specific issues of child support and spousal support in relation to those income findings.

Determination of income

[270] When approaching income determination, each of the experts purportedly used the principles in the Child Support Guidelines to determine income. I have set out the relevant provisions above. I turn first to Ms. Plese’s income, since its determination is far simpler than Mr. Herjavec’s.

Ms. Plese’s income

[271] Although Ms. Plese was trained as an optometrist and practiced in that field for a number of years, she has been completely out of the work force since about 2003. Even before 2003 she had stopped working full time in 1993 after the eldest child was born. Mr. Herjavec does not really suggest that at the age of 56 Ms. Plese should return to work outside the home for wages after complete absence from the workforce of 15 years, and pursuing only part time work during the ten years before that.

[272] Therefore, in determining Ms. Plese’s income, I will simply look at her likely available capital and apply a reasonable investment rate to it to determine her likely income on a going forward basis.

[273] I begin with Ms. Plese’s available capital and how she is likely to use it. Ms. Plese testified she anticipates spending between $8 to $10 million on a house, and about $1 to $2 million on a cottage. Neither of these expenditures strikes me as unreasonable, given the parties’ standard of living both before and after the separation. Therefore, I assume Ms. Plese will spend a total of about $10.5 million on purchasing a home and cottage, with all the attendant closing costs associated with these purchases. I also assume she will have considerable professional fees to pay for the cost of the trial alone.

[274] Ms. Plese had $19,365,000 in August of 2018. She will have roughly $24,811,705 after she receives the equalization payment and her share of the Caledon property and Fisher Island. I accept she will spend about $10,500,000 on a house and cottage. Both with have significant closing costs, like land transfer tax and legal fees. She will have moving costs and “start-up” costs, as all new home owners do. She will have considerable legal and professional fees for the trial, subject, of course, to the ultimate costs disposition of the trial. I estimate she will have roughly $13.25 million to invest after buying a house and cottage, paying her professional fees, transaction costs on real estate purchases, and other “start-up” costs in her new homes.

[275] The parties accepted the opinion from David Jarvis, who has been an active manager/practitioner in the Canadian financial community since 1987. His affidavit sworn September 26, 2018 was accepted into evidence. In Mr. Jarvis’ opinion, Ms. Plese could reasonably expect to earn between 5.56% and 5.98% on her investible assets based on a Growth Portfolio, or 4.84% and 5.13% per year based on a Balanced Portfolio. These figures are before taxes, net of fees, according to Mr. Jarvis.[^19] Ms. Plese describes herself as “frugal”. By this she means she is careful about investments, declining to invest in rapidly depreciating assets, for example.

[276] From this I infer Ms. Plese would likely prefer a Balanced Portfolio, on which she could reasonably earn about 5.13%. I will apply this rate of return to Ms. Plese’s remaining asset base after purchasing a home and cottage. Thus, from her own resources Ms. Plese should be able to generate annual income of about $679,725. I therefore find Ms. Plese’s annual income is $679,725. What, then, is Mr. Herjavec’s income for support purposes?

Mr. Herjavec’s income

[277] The experts essentially agree on the starting point for determining Mr. Herjavec’s income, namely line 150 income as set out in an individual’s income tax return. Both experts have provided opinions on Mr. Herjavec’s income for all the taxation years from the date of separation.

[278] The Child Support Guidelines then mandate certain adjustments to line 150 income. First, Schedule III requires the court to replace the taxable amount of dividends from taxable Canadian corporations received by the spouse by the actual amount of those dividends received by the spouse. This is the approach Ms. Alterman, Ms. Plese’s expert, utilized in determining Mr. Herjavec’s income.

[279] Mr. Freedman, however, departs from this methodology set out in the Child Support Guidelines in determining Mr. Herjavec’s income. In his opinion it is inappropriate to gross up actual dividends the taxpayer receives. He suggests that this provision of the CSGs should really apply only to dividends received from publicly traded companies, and somehow the court should treat dividends from private companies differently. Mr. Freedman says the actual dividends paid to Mr. Herjavec should be notionally repaid to THG, and instead the court should decide how much, if any, of THG’s pre-tax corporate income should be attributed back to Mr. Herjavec under s. 18 of the Guidelines.

[280] No reported case in Canada supports this view. Essentially, this position suggests that I should ignore the reality of the dividends Mr. Herjavec actually received and spent over the years, and should replace them with some notional amount instead. Mr. Freedman went so far as to say that leaving the dividends as paid created a deficit for THG, and this was a “problem” that he felt he had to “fix”. That is neither the job of an expert, nor frankly, of the court.[^20]

[281] The CSGs are quite clear as to the process to follow in determining income. I must begin with line 150 income, and make the mandated adjustments. Only after I have done so do I turn to consider whether this results in the fairest determination of Mr. Herjavec’s income. It is only if I determine line 150, as adjusted, does not reflect the fairest determination of income that I turn to the adjustments in s. 18.

[282] Beginning with Mr. Herjavec’s line 150 income, it was as follows according to his income tax returns:

2012 $ 1,879,000

2013 $ 4,500,000

2014 $ 5,128,000

2015 $ 4,553,000

2016 $14,013,000

2017 $ 3,577,000

[283] The experts agree on certain adjustments for each taxation year. These are various amounts to be subtracted from Mr. Herjavec’s line 150 income. Since I accept Ms. Alterman’s approach regarding the treatment of dividends, I apply her methodology of adding the actual amount of eligible dividends from THG into Mr. Herjavec’s income along with the appropriate gross up on the dividends he received from THG.

[284] The experts agree that certain discretionary expenses should be added to Mr. Herjavec’s income, together with the appropriate gross up for income tax where required. I add these to Ms. Alterman’s income figures, which have been appropriately adjusted for dividends. These additional discretionary expenses result in Mr. Herjavec’s income being the following before considering any further adjustments:

2012 $2,355,000

2013 $5,044,000

2014 $5,833,000

2015 $5,966,000

2016 $6,022,000

2017 $5,417,000

[285] The remaining potential adjustments relate to certain specific areas. Ms. Alterman provided various scenarios including these potential upward adjustments to Mr. Herjavec’s income, along with the appropriate gross up for income tax for each. She candidly said, however, that she did not have an opinion on whether these amounts should be added to Mr. Herjavec’s income or not. She said that is a matter for the court to decide in each case. Mr. Herjavec’s counsel took the position that Ms. Alterman was a less helpful expert because of this. I disagree completely.

[286] Ms. Alterman is quite correct that these are questions for the court to decide, on the basis of all the evidence adduced at trial. Ms. Alterman was a fair and balanced witness. I did not find her unduly aligned with Ms. Plese’s position. Her evidence was helpful and measured. She clearly took her duties to the court seriously.

[287] This leaves the various additional potential adjustments to Mr. Herjavec’s income. Essentially, they relate to expenses THG paid which could be viewed as personal expenses of Mr. Herjavec. If I find all or part of these expenses should be attributed to Mr. Herjavec as income, then they must be grossed up for tax. These potential expenses comprise the following:

• Vasinova legal expenses

• Luxury vehicle related expenses

• Car racing expenses

• Non-arms’ length expenditures regarding Kym Johnson and 5678 Fitness Inc.

I will deal with each in turn.

Vasinova legal expenses

[288] Mr. Herjavec had been in a relationship with a woman named Ms. Vasinova. It ended badly. She began to make very public, ugly accusations against Mr. Herjavec. He responded by suing her for defamation. The suit was ultimately resolved with a settlement in Mr. Herjavec’s favour, including a public apology from Ms. Vasinova.

[289] Mr. Herjavec incurred legal fees in each of 2015, 2016 and 2017 in relation to resolving these difficulties. The legal fees have been expensed through THG. Ms. Alterman suggests these fees could be more properly characterized as being Mr. Herjavec’s personally. THG’s payment of them creates a benefit for Mr. Herjavec. Ms. Alterman has provided the court with the necessary calculations to add them to Mr. Herjavec’s income, if I see fit.

[290] Mr. Herjavec takes the position that the difficulties with Ms. Vasinova reflected on the Herjavec “brand” through THG. He essentially argues that he and THG are synonymous in the area of THG’s entertainment revenue, and thus the legal fees are properly borne by THG. I do not accept that position completely.

[291] While I recognize that THG may have been affected by the sequelae of the suit, primarily it is Mr. Herjavec’s personal reputation that was under attack. I would take much the same approach on this issue as CRA took in relation to the car racing expenses. I would add back half of these expenses (plus gross up) to Mr. Herjavec’s income. Therefore, the following amounts must be added to Mr. Herjavec’s income: $44,500 in 2015; $5,500 in 2016; and $106,000 in 2017.

Luxury vehicle related expenses

[292] The issue of the luxury vehicles had an impact on THG’s value. CRA accepted THG’s position that they were legitimate acquisitions on behalf of THG. I made no adjustment to THG’s value in relation to these vehicles. Similarly, I make no adjustment to Mr. Herjavec’s income on this account.

Car racing expenses

[293] The car racing expenses fall into a similar category to the luxury vehicle related expenses. THG was reassessed (as was Mr. Herjavec) in relation to these expenses. CRA ultimately decided that one half of these expenses were Mr. Herjavec’s personally. While I recognize I am not bound by CRA’s assessment, it seems to me a reasonable approach to accept. This results in the following amounts (inclusive of income tax gross up) being added to Mr. Herjavec’s income: $725,000 in 2012; $453,500 in 2013; $726,000 in 2014 and $232,000 in 2015.

Non-arms’ length expenditures

[294] I have already discussed non-arms’ length payments to Ms. Johnson in my analysis of THG’s value. Since I determined these were appropriate payments on behalf of THG, I come to the same conclusion in determining Mr. Herjavec’s income. I make no adjustment on this account.

Conclusions on Mr. Herjavec’s income

[295] Mr. Herjavec’s adjusted income for support purposes is therefore the following:

2013 $5,479,000

2014 $6,559,000

2015 $6,242,000

2016 $6,027,500

2017 $5,523,000

[296] I assume Mr. Herjavec’s income for 2018 will be at least as much as it was in 2017. If he anticipated any reduction, I am sure he would have led extensive evidence on the point. We are already at the end of 2018. When I look at the pattern of Mr. Herjavec’s income, between 2013 and 2017 I see significant variations. A three-year average, using 2015, 2016 and 2017 yields an income of roughly $5.9 million. As I see it, this is a reasonable assumption for Mr. Herjavec’s income, going forward. I therefore find Mr. Herjavec’s income for 2018 to be $5.9 million.

Spousal support:

Entitlement

[297] In order to decide if Ms. Plese is entitled to spousal support, I begin, as I must, with the provisions of the Divorce Act. [^21] There, the overarching criterion is a determination of what is “reasonable” having regard to the condition, means and other circumstances of the parties. In doing so, I must consider all the factors and objectives of a spousal support order mandated by the Divorce Act.

[298] The relevant statutory provisions are these:

Spousal support order

15.2 (1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse.

Interim order

(2) Where an application is made under subsection (1), the court may, on application by either or both spouses, make an interim order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse, pending the determination of the application under subsection (1).

Terms and conditions

(3) The court may make an order under subsection (1) or an interim order under subsection (2) for a definite or indefinite period or until a specified event occurs, and may impose terms, conditions or restrictions in connection with the order as it thinks fit and just.

Factors

(4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including

(a) the length of time the spouses cohabited;

(b) the functions performed by each spouse during cohabitation; and

(c) any order, agreement or arrangement relating to support of either spouse.

(5) In making an order under subsection (1) or an interim order under subsection (2), the court shall not take into consideration any misconduct of a spouse in relation to the marriage.

Objectives of spousal support order

(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should

(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;

(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;

(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and

(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

[299] I turn first to consider the various factors set out in s.15.2(4).

[300] This was a lengthy marriage of nearly three decades. The parties both testified they worked as a team. Mr. Herjavec himself perhaps put it best in his book titled Driven: How to Succeed in Business and in Life. At page 286 he says:

I’m fortunate in so many ways to have Diane as my spouse. She earned her optometry degree over six strenuous years of study, years that included countless nights of study and work as an intern. She knows what it’s like to work eighteen or twenty hours a day in pursuit of a goal; she understands the motivation behind it. Having obtained her degree she could count on a good income from steady employment, providing a safety net if one of my projects went belly up. This was enormous comfort to both of us, especially during my first years as an entrepreneur.

[301] Clearly, Ms. Plese’s contributions from her own work were critical to Mr. Herjavec’s financial success, particularly in the early years of the marriage when he began Brak. Brak, of course, provided the foundation for THG and its ultimate success. What Ms. Plese lost when she stopped working outside the home was that very steady employment and her own financial safety net created from her own separate earnings. This is a compensable loss.

[302] Ms. Plese’s functions in the marriage included income earning in the early years, asset acquisition (again, in the early years) and having the three children and being the primary parent to raise them and deal with managing the household. Mr. Herjavec became the prime income earner and asset acquirer. These roles required him to work long hours, often out of town. This meant he was less available than Ms. Plese to attend to running the household and managing the family. As a result, Ms. Plese was unable to work full time after the children were born. After the Brak sale, Ms. Plese left the work force completely. I believe her when she said Mr. Herjavec told her not to bother working, since she was bringing home less than what he paid their gardener.

[303] Ms. Plese has therefore been unable to contribute to her own support since 2003. At the age of 56 she is unlikely to be able to return to her previous profession. Absent anything else, she has need of support.

[304] I must also consider any order or agreement relating to support. In December of 2015 Kiteley J made an order for temporary spousal support in the amount of $124,115 per month. Mr. Herjavec has been paying this amount since then.

[305] On the motion, Mr. Herjavec had urged Kiteley J to accept that his income would be only about $1.7 million in 2015. As it turned out, Mr. Herjavec’s, line 150 income in 2015 was actually $4.553 million before any of the mandated adjustments under the CSGs. Using the adjustments I have set out above, Mr. Herjavec’s adjusted income for 2015 was $6.242 million. At the time of the motion, Ms. Plese had virtually no income of her own.

[306] I now turn to consider the objectives of a support order. If the objectives have not been met without a support order, then a support order should be made. Put another way, unmet objectives can create an entitlement to support.

[307] Spousal support is meant to recognize economic advantages or disadvantages arising from the marriage. Here, Mr. Herjavec argues that Ms. Plese’s capital position following the end of the marriage more than compensates her for any economic disadvantages arising from the marriage.

[308] I cannot look at Ms. Plese’s capital base and the income it can generate in insolation. Mr. Herjavec retains a capital base of at least $32 million[^22] plus the ability to continue to earn income of more than $5.5 million a year. I do not have a current valuation of THG, but can only assume if its value had declined significantly since valuation day, Mr. Herjavec would have led evidence to that effect. He did not. He therefore retains capital assets worth at least $32 million, and likely significantly more. He continues to have income of more than $5.5 million per year. In addition, he has a luxurious home in California, together with other assets and savings.

[309] While Mr. Herjavec argues that he and Ms. Plese will have a similar asset base after equalization, his calculations are wrong. Mr. Herjavec already has a home in California, other savings plus the $32 million of value in THG. To the contrary, after buying a house a cottage, Ms. Plese will have about $13.5 million, or less than half of what Mr. Herjavec has.

[310] Not only that, their capital bases do not generate the same level of income. Mr. Herjavec’s assets give him the ability to earn more than eight and half times what Ms. Plese does. This disparity can only be corrected through a generous spousal support order.

[311] Next I must apportion the financial consequences regarding child care. Here, Ms. Plese withdrew from full time work after the children were born, and assumed primary responsibility for their care. She therefore lost the benefits of full time income due to her taking on those responsibilities. Then, she withdrew from the work force completely. Ms. Plese says Mr. Herjavec suggested he was paying the gardener more than she was earning, and encouraged her to stop working. I believe her.

[312] Mr. Herjavec had no such reduction in his ability to earn income and acquire assets. He has continued to flourish financially both after the birth of the children, and, more importantly, since the parties separated. He has had no reduction or diminution in his ability to earn income and acquire assets. To the contrary, both have continued to grow.

[313] As I see it, Ms. Plese has suffered compensable loss on account of her taking on primary responsibility for the children and the household.

[314] Spousal support is also designed to relieve economic hardship. What is “hardship” in the context of this family? I need to look at the pre-separation lifestyle of the family to understand this context.

[315] At the date of separation, the parties lived in a 22,000 square foot home (not counting the basement) with an indoor pool, ballroom, tennis court, tea house, and ten-car garage housing numerous luxury vehicles. The home was located on more than 2 acres in one of the most exclusive areas of Toronto. The parties owned a ski chalet in Caledon, a luxurious vacation property in Florida, boats and other water craft and a Muskoka cottage.

[316] The family travelled extensively. Family holidays were often taken using THG’s private jet, which Ms. Plese described as one that can fly “over the ocean”. Holidays included European destinations. On a holiday in Greece, the parties rented a yacht and staff to sail the family around the Greek Isles. Ms. Plese testified that if the aircraft was being used for THG business, and she wished to take a trip, Mr. Herjavec would charter a private plane for her. Mr. Herjavec did not refute this evidence.

[317] Ms. Plese’s financial statement shows she owns considerable expensive jewellery from Cartier. At valuation day it was worth over $428,000. Ms. Plese says this figure reflect roughly half of what it cost. Again, I heard no evidence to the contrary.

[318] Mr. Herjavec testified he spent $100,000 on a piano for High Point, but, since no one in the family could play, invested a further $25,000 on a device that would play the piano. Mr. Herjavec owned and operated numerous luxury cars. [^23] The middle child, Skye, received a car for her 16^th^ birthday. The children were educated at exclusive private schools. The two girls attended elite American universities. Both older children have pursued post-graduate studies, at no personal financial cost to them. The family lived a rarified existence of privilege and luxury.

[319] It is telling that Skye, when asked whether it was true she enjoyed luxurious holidays with her family, simply answered:

I mean they were just vacations to me, I don’t – it depends on how you see them.[^24]

[320] Skye was then asked how she saw them. She answered:

I was going on vacation with my family … it depends what you – like that’s how I grew up, that’s – it was a vacation with my family is how I saw it.^25

[321] Ms. Plese testified that her lifestyle has suffered since the breakdown of the marriage. For example, instead of travelling by private jet, she flies with commercial airlines. Instead of staying in a suite of rooms at luxurious hotels, she now stays in a single hotel room. I have no evidence that Mr. Herjavec has experienced any similar reduction in his lifestyle.

[322] I conclude that without spousal support, Ms. Plese will have suffered economic hardship as a result of the end of the marriage.

[323] Spousal support is also designed to promote economic sufficiency. There is no question Ms. Plese has been out of the paid workforce since about 2003, or a period of about fifteen years. She has not worked outside the home on a full time basis for about 25 years. No one suggests she should, at the age of 56 and in these circumstances, return to the paid workforce.

[324] So, how should economic self-sufficiency be promoted? As I see it, it is only Ms. Plese’s capital base that can contribute to her economic self- sufficiency. The question is whether her capital base is sufficient to do so. In my view it is not. I will set out my reasons for this conclusion when I discuss the appropriate amount and duration for a spousal support order.

[325] Having considered the factors and objectives of the Divorce Act, I am satisfied Ms. Plese is entitled to support. This brings me to a consideration of the Spousal Support Advisory Guidelines (SSAGs).

[326] Since the advent of the SSAGs many have attempted to approach determining spousal support by simply applying the SSAGs formulas. These formulas are based on each party’s income, age, date of separation, length of the marriage and so on. While the law requires the court to consider the SSAGs in determining spousal support, the SSAGs do not deal with the question of entitlement. They only apply once entitlement has been decided.

[327] I have decided Ms. Plese is entitled to support. It is now that I must consider the SSAGs and their impact on determining both the amount and duration of any support order.

[328] Going forward, I have determine Mr. Herjavec has annual income of around $5.9 million. Thus, his earnings are more than eight times those of Ms. Plese. Nevertheless, Mr. Herjavec says that with her capital base and a reasonable investment return on what she has remaining after reasonably housing herself, Ms. Plese has no remaining unmet need. Not only that, Mr. Herjavec’s position at trial was, first, that Ms. Plese should pay him an equalization payment of about $3 million. Second, she should repay him about $500,000 in what he considered an overpayment of support, and third, that spousal support for Ms. Plese should terminate immediately.

[329] Had I accepted Mr. Herjavec’s position it would have resulted in Ms. Plese’s capital being reduced by roughly $3.5 million, which would have left her with about $8 million to invest after buying a house and cottage. That capital would yield her about $410,000 of annual income, before tax. It is interesting to note that on Mr. Herjavec’s scenario, he would have annual income equivalent to more than 75% of Ms. Plese’s remaining capital base. Mr. Herjavec’s income presumably will recur year over year, while Ms. Plese has no ability to increase her capital base, or, in fact, her income. This result is patently unreasonable in the circumstances of this case.

[330] Given Mr. Herjavec’s income and assets and Ms. Plese’s income and assets, what is the appropriate quantum of spousal support? How long should it last?

[331] Ms. Plese suggests that once entitlement is decided, the operative criterion for determining spousal support should be an application of the Spousal Support Advisory Guidelines. (SSAGs) She says the SSAGs should be applied so that she receives a spousal support award that would provide her with roughly the same net disposable income (NDI) as Mr. Herjavec. She argues that since Kiteley J used a similar approach[^26] on the motion for interim support, I should do the same.

[332] Neither need alone nor blind application of the SSAGs determine the appropriate amount of spousal support, nor its duration. The process is much more nuanced than that.

Determining amount and duration

[333] Given my findings on both entitlement and income, I must consider the effect of the SSAGs. Using the SSAGs, the length of the marriage, each party’s income, age at separation and number and ages of children, the SSAGs suggest a range of monthly spousal support from a low of $153,144 to a midrange of $178,664 to a high of $187,050. The “high” figure would provide each of the parties with half of the total Net Disposable Income (NDI) available.

[334] The SSAGs do not automatically apply in circumstances where the payor spouse earns more than $350,000 per year. Courts have dealt with these high income earners in various ways. In some circumstances, the court will look at the SSAGs result in terms of the net disposable income (NDI) available to each of the parties under various scenarios. In the case of lengthy marriages, courts will often fashion a spousal support order that results in each party have roughly the same NDI.

[335] In other cases, the court will conduct the analysis on a “means and needs” basis; that is, what does the recipient spouse reasonably need to meet his or her reasonable expenses, having regard to the standard of living the parties enjoyed while they were living together.

[336] In my view, having regard to Ms. Plese’s accustomed standard of living, and her likely expenses once she buys a house and cottage, I estimate her net monthly expenses will be about $58,800. In coming to this conclusion I have deleted from her most recent financial statement her stated expenses for maintaining High Point and Fisher Island, and have replaced those expenses (somewhat arbitrarily) with about half of those historical costs to cover off what she is likely to spend to maintain a new home and cottage. I have eliminated her rental costs, since she will no longer incur them once she buys a home.

[337] I have also deleted from her expenses some of the expenses for Skye, who is no longer dependant, and for Brandon, who is well over the age of majority. Last, I have deleted her ongoing legal and experts’ fees, since those have presumably ended with the end of this trial. Even on this basis, Ms. Plese needs at least $58,800 per month, net of tax, to maintain anything close to her former standard of living. A gross income of about $679,000 comes nowhere near meeting those needs since that income would yield Ms. Plese about $29,000 per month after tax, according to SUPPORTmate calculations, using only this income as an input. On a needs basis alone, Ms. Plese has significant entitlement to spousal support.

[338] Other cases focus on a compensatory model, and approach quantum in that fashion.

[339] Mr. Herjavec points to the fact that the SSAGs do not automatically apply to payors whose income is more than $350,000. He urges me to apply what he calls the Halliwell principle[^27] in determining the appropriate amount of support in this case.

[340] In Halliwell, the Court of Appeal approached spousal support with a high income earner in the following fashion.

[341] First, the court pointed out that the approach must be “an individualized fact-specific analysis” which in turn requires a consideration of the effect of the equalization payment. I have already dealt with the effect of the equalization payment in discussing both Ms. Plese’s means and her reasonable needs, having regard to all the circumstances of this case.

[342] Next, the Halliwell court considered the payor’s income in the context of its being more than $350,000 a year. At paragraph 117 the court said: “The SSAGs provide at s.11.1 that after the payor's gross income reaches the ceiling of $350,000, the formulas can no longer be applied automatically. At the same time, they make clear that $350,000 is not a ‘cap’ and spousal support can, and often will, increase for income above that ceiling.”

[343] Ultimately, considering all of these approaches, in the overarching context of the provisions of the Divorce Act, will be the way I exercise my discretion in awarding spousal support.

[344] As I see it, a spousal support award of $125,000 per month is appropriate in all the circumstances of this case. The amount is significantly lower than any of the SSAGs scenarios. It will give Ms. Plese about 39% of NDI, including child support. Since child support will end soon, I look at Ms. Plese’s situation without child support as well. In the months she does not receive child support, she will have monthly net income of just about $87,000 while Mr. Herjavec will have roughly $173,000 per month after tax. As I see it, this is a reasonable balancing of the economic consequences of the end of the marriage, coupled with reasonable compensation for Ms. Plese, over and above simply meeting her monthly needs.

[345] In coming to this conclusion I have also considered the ongoing capital positions of each of the parties. Mr. Herjavec retains THG, which I assume is still worth $32 million. He has a home in California, and after paying the equalization payment will still have about $1.2 million remaining from his share of the ultimate sale proceeds of Fisher Island. He will therefore have remaining assets (without considering his home) of over $33 million compared with the $13.25 million Ms. Plese will have.

[346] As to duration of spousal support, Mr. Herjavec suggests, without any foundation, that spousal support should end after two years. There is nothing on Ms. Plese’s horizon that would suggest either her need for or entitlement to spousal support will change in that time. The SSAGs posit an indeterminate duration for spousal support in these circumstances. Accordingly, I decline to order any termination date for spousal support.

[347] Given the parties’ ages, and given that spousal support is for an indeterminate period, it is important to ensure that spousal support will continue to be paid after Mr. Herjavec’s death, if Ms. Plese survives him. Accordingly, spousal support will bind Mr. Herjavec’s estate, and shall continue to be paid after his death, as a first charge upon his estate.

The effect of Mr. Herjavec’s being an American taxpayer

[348] Mr. Herjavec became a non-resident of Canada in 2016. He now resides in California and is taxed as an American taxpayer. He is subject to federal income tax in the United States, as well as to California state income tax.

[349] Historically, Canada and the United States treated the payment and receipt of spousal support in the same way for tax purposes; namely, the payment of spousal support was tax deductible to the payor, and taxed as income to the recipient.

[350] Apparently, effective January 1 2019 that will change. Beginning in 2019, payment and receipt of spousal support in the United States will be tax neutral. Accordingly, any order made on or after that date is subject to the new rules, while any order with a commencement date before January 1, 2019 made pursuant to an order prior to that date will retain the same deductible/taxable treatment as before.

[351] All of the SSAGs calculations both the lawyers and I have used are premised on spousal support payments being tax deductible to Mr. Herjavec and fully taxable to Ms. Plese. Therefore, commencing December 30, 2018 Mr. Herjavec will pay spousal support of $125,000 per month. Payments will bind his estate and be first charge upon it. This order is premised on the assumption that payments will be fully tax deductible to Mr. Herjavec and taxable to Ms. Plese. If, as a result of any changes to American and California tax rules (or indeed, to Canadian tax rules) this is not the result, the amount of support shall be changed to reflect this new tax treatment so that Ms. Plese receives a monthly net after tax payment of $58,088.

Child support:

[352] The eldest child is 25 years old, and is pursuing a second post-secondary degree. As I see it, he is no longer a child of the marriage. His parents voluntarily contribute to his support and he also has significant resources of his own.[^28] Ms. Plese’s current budget includes expenses incurred on his behalf. The support order I have made is more than adequate for her to continue to do so without any formal child support order being made.

[353] The middle child is now working full time as a financial analyst at JP Morgan. She is no longer a child of the marriage, and thus is no longer entitled to child support.

[354] This leaves the youngest daughter. She is over the age of majority and is completing her first post-secondary degree. Section 3(2) of Child Support Guidelines says the following about children over the age of majority:

Unless otherwise provided under these Guidelines, where a child to whom a child support order relates is the age of majority or over, the amount of the child support order is

(a) the amount determined by applying these Guidelines as if the child were under the age of majority; or

(b) if the court considers that approach to be inappropriate, the amount that it considers appropriate, having regard to the condition, means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child.

[355] The parties seem to agree the youngest child continues to be a child of the marriage, entitled to support. She lives away from home while she attends university. Ms. Plese suggests that a “summer only” formula be used for her support. This would result in Mr. Herjavec paying $14,233 per month for the summer months of May, June, July and August, based on Mr. Herjavec’s income of $5.9 million. Accordingly, commencing May 1, 2019, and for the months of May, June, July and August each year, Mr. Herjavec shall pay monthly table support of $14,233 for Caprice as long she remains in full time attendance at university.

[356] This figure, of course, is the table amount of support. I must also consider whether Mr. Herjavec should pay anything on account of s.7 expenses for Caprice.

[357] Ms. Plese’s financial statement includes all of Caprice’s post-secondary costs. With the spousal support order I have made, Ms. Plese can easily fund these expenses. I have made no adjustment in the child support amount to reflect the fact Mr. Herjavec earns more than $150,000 a year, nor have I applied a Halliwell reduction or adjustment to Mr. Herjavec’s income in determining spousal support. As a result, it seems to me it would be inappropriate in the unique circumstances of this case to make a specific award for section 7 expenses. I therefore decline to do so.

Retroactive adjustments

[358] Both parties seek retroactive adjustments to the amounts paid and received on account of both child support and spousal support.

[359] First, I see no reason to alter Kiteley J’s temporary support order. No one appealed it or attempted to change it. I recognize that Kiteley J made reference to her intention that the order would be in place only for a short period of time. The order was made at the end of December, 2015. According to the endorsement of April 1, 2016, the goal was to have the trial occur in 2016. In fact, the trial was initially scheduled to begin more than two years ago, in November 14, 2016. This did not occur.

[360] In October of 2016 Kiteley J tentatively set a new trial date for October 2, 2017. The trial did not proceed then, either. In late September of 2017, Kiteley J set a new trial date to begin the week of October 1, 2018 for no more than 20 days. The date was peremptory to all parties, and did in fact proceed before me as scheduled.

[361] This case has been actively case managed for years, with a significant use of judicial resources. The fact the parties were content to carry on with their interim order suggests to me the interim order was appropriate at the time in terms of the circumstances then. Although the support order I have made is based on different assumptions and financial findings and is a going forward order, its result is not materially different than the temporary support order. As I see it, no further adjustments are required to the temporary support order.

[362] When parties separate, they make all kinds of financial choices. Courts are, and should be, loathe to reinvent the past unless there are compelling reasons to do so. These would include circumstances such as a recipient spouse going into debt as a result of no, or inadequate, support being paid, or children being unable to pursue their activities, or be properly cared for. None of those circumstances exists here.

[363] Interestingly, each of the parties suggests he or she is owed money on the basis of retroactive adjustments. Ms. Plese claims over $1 million owing on account of retroactive adjustments. Mr. Herjavec claims Ms. Plese owes him about $500,000 in retroactive adjustments.

[364] The parties separated in July of 2014. They continued their financial arrangements after that date much as they had while the family still lived together. The motion for temporary support was heard in the fall of 2015. That order was based on the circumstances at the time and continued to be appropriate until trial.

[365] I decline to make any order for retroactive adjustments on account of either child or spousal support. Both parties’ claims for retroactive payments are dismissed.

Prejudgment interest

[366] Ms. Plese claims prejudgment interest on the equalization payment. She argues that she has been deprived of the use of the equalization payment for roughly four and a half years, and therefore should receive prejudgment interest to compensate her for that loss.

[367] That is true, as far as it goes. Had Mr. Herjavec paid the equalization payment on separation, Ms. Plese would have had a higher asset base on which to earn investment income. This additional investment income could have had an impact on her need for spousal support, and could have affected the amount of temporary spousal support Mr. Herjavec was ordered to pay. If Mr. Herjavec had been ordered to pay less, then it would be reasonable to assume that a higher interim support order has compensated Ms. Plese for not having the equalization payment to invest immediately on separation. This requires me to consider what might have occurred had Ms. Plese had the equalization payment when the temporary support motion was argued. It also requires me to consider what might have happened had Kiteley J known Mr. Herjavec’s actual 2014 income, or his 2015 income.

[368] The motion for temporary support was heard and determined in December of 2015. At that time, Mr. Herjavec took the position his 2015 income would be only $1.625 million even though his 2014 line 150 income had been $5,128,497. Kiteley J rejected Mr. Herjavec’s position, and declined to disregard his 2014 line 150 income. For the purpose of temporary support, Kiteley J decided the fairest determination of Mr. Herjavec’s income would be his 2014 income of $5,128,497.

[369] I have determined Mr. Herjavec’s 2015 income was actually $6.242 million, or roughly $1.1 million more than the figure Kiteley J used. I have also determined the equalization payment is $2,106,167. If the equalization payment had been paid on separation, Ms. Plese would have been able to invest it. Using the same investment rate I have used to determine Ms. Plese’s income, the equalization payment would have generated about $138,000 in income. This might have led to a lower spousal support order, but, at the same time, had Kiteley J known Mr. Herjavec’s actual 2015 income, she might well have ordered more spousal support. I doubt that had Ms. Plese had the equalization payment on valuation day, the outcome of the interim support motion would have resulted in a lower spousal support award.

[370] The equalization payment was due and payable on valuation day. Mr. Herjavec has effectively had the use of Ms. Plese’s money since then, and Ms. Plese has been deprived of the use of her money without being otherwise compensated by a higher interim support award. She is therefore entitled to prejudgment interest.

[371] Ms. Plese has provided calculations of prejudgment interest based on her assumption the equalization payment is $11,964,762. She claims PJI totalling $539,856 on this sum. I have determined the equalization payment is $2,689,558. This figure this represents 22.4% of the amount Ms. Plese’s claimed as an equalization payment. I assume Ms. Plese’s calculations are correct, and therefore fix PJI at 22.4% of the amount calculated. Mr. Herjavec will therefore pay Ms. Plese prejudgment interest fixed at $121,467.

Conclusion

[372] FOR ALL THESE REASONS, a final order will issue in the following terms in Court File No. 08-005/17:

a) Declaring that the accounts for the Robert Herjavec Family Trust, as filed by the Applicant trust for the period from December 20, 1996 to May 31, 2016 are hereby passed;

b) Declaring that the capital receipts and capital disbursement of the Canadian Account of the Applicant for the period are as follows:

CANADIAN ACCOUNT

CAPITAL ACCOUNT

Credit balance forward $ 0.00

Receipts $22,277,326.30 $22,277,326.30(total)

Disbursements 22,288,126.86

Debit Balance 10,300.56

c) Declaring that the revenue receipts and revenue disbursement of the Canadian Account of the Applicant for the period are as follows:

REVENUE ACCOUNT

Credit balance forward $0.00

Receipts $1,422,549.74 $1,422,549.74(total)

Disbursements $1,180,958.13

Credit balance $ 241,591.61

d) Declaring that the capital receipts and capital disbursement of the U.S. Account of the Applicant for the period are as follows:

U.S. ACCOUNT

CAPITAL ACCOUNT

Credit balance forward $0.00

Receipts $2,124,348.55 2,124,348.55(total)

Disbursements 2,124.307.37

Credit balance 41.18

e) Declaring that the revenue receipts and revenue disbursements of the U.S. Account of the Applicant are as follows:

REVENUE ACCOUNT

Credit balance forward $0.00

Receipts $1,969.56 $1,969.56 (total)

Disbursements $2,010.74

Debit balance $ 41.18

f) Declaring that the accounts show that there are no original assets remaining in the Trustee's hands

g) Dismissing the beneficiary’s claims against the trustee;

h) Requiring Mr. Herjavec to bear all the costs of both the Robert Herjavec Family Trust and the beneficiaries in relation to the passing of accounts;

[373] AND FOR ALL THESE REASONS a final order will issue in court file FS-15-00401094 in the following terms:

a) Mr. Herjavec shall pay Ms. Plese an equalization payment of $2,659,905. He shall forthwith transfer to her the net proceeds of sale of the Lake Rosseau cottage currently held in trust with his lawyers on account of the equalization payment. He shall pay the balance of the equalization payment within 60 days of the date of this judgment, together with prejudgment interest on the equalization payment, fixed at $121,467;

b) The parties shall forthwith take all necessary steps to cause their numbered company to sell the Fisher Island property. They will immediately retain a realtor to list and sell the property. They will list it at a listing price the realtor recommends, and will cause the numbered company to accept the first reasonable offer to purchase Fisher Island. On sale, the net proceeds of sale will be paid to the numbered company, to be paid out to the parties, as equal shareholders, in equal shares, in the most tax effective fashion they can.

c) Commencing December 30, 2018 Mr. Herjavec will pay Ms. Plese spousal support of $125,000 per month. The payment of spousal support will bind Mr. Herjavec’s estate and be a first charge upon it. This payment is premised on the assumption that spousal support continues to be fully tax deductible to Mr. Herjavec and taxable to Ms. Plese. If that assumption is incorrect, spousal support shall be adjusted so as to provide Ms. Plese with the same after-tax benefit as she would have received had the spousal support payments been taxable to her, namely $58,088 net per month;

d) Commencing May 1, 2019 Mr. Herjavec will pay child support of $14,233 per month for the child Caprice in the months of May, June July and August each year for so long as she remains a "child of the marriage” as defined by the Divorce Act. This payment is based on Mr. Herjavec’s annual income of $5.9 million, and Caprice living away from home during the academic year pursuing post-secondary studies, but primarily living with Ms. Plese during her summer vacation;

e) Both parties’ claims for retroactive adjustments are dismissed;

f) A support deduction order shall issue.

[374] I encourage the parties to settle the issue of costs. Since I retire from the court on December 30, 2018, there is insufficient time for the parties to deliver their costs submissions to me before December 30, 2018. Therefore, if the parties have not resolved the issue of costs within three weeks of the release of these reasons, they will jointly write to Stevenson J, Family Team Leader, for direction as to who will adjudicate the issue of costs. That judge may set a timetable for receipt of costs submissions together with any direction as to the length of the submissions.

[375] As I did at the end of the trial, I wish to thank all counsel for their unfailing courtesy and professionalism to the court and to one another throughout this lengthy and complex trial.

MESBUR J

Released: 20181228

Court File Number

SCHEDULE “A”

TO REASONS FOR DECISION

DATED DECEMBER 28, 2018

in PLESE v HERJAVEC

FS-15-401094

FINAL NET FAMILY PROPERTY STATEMENT

(Complete the tables by filling in the columns for both parties, showing your assets, debts, etc. and those of your spouse)

Table 1: Value Of Assets Owned on Valuation Date (List in the order of the categories in the financial statement)

PART 4(a): LAND

Nature & Type of Ownership

(State percentage interest)

Address of Property

DIANE

ROBERT

Matrimonial Home

1417289 Ontario Inc. is the bare trustee that holds title to 16 High Point Road

See Business Interests Below

Recreational Property

(1/3^rd^ interest)

44 Caledon Mountain Drive, Belfountain, Ontario – Diane has a 1/3^rd^ interest. Sold post separation, net proceeds held in trust, $1,272,925/3

$424,308.40

Recreational Property

7600 Fisher Island Drive, Suite 1641, Fisher Island, Florida

This property is owned by 1492620 Ontario Inc., of which Diane holds 50% shares and Robert holds 50% shares

See Business Interests Below

See Business Interests Below

Recreational Property

15 Winchester Drive, Lake Rosseau, Township of Seguin (net)

$1,810,525.00

15. Totals: Value of Land

$424,308.40

$1,810,525.00

PART 4(b): GENERAL HOUSEHOLD ITEMS AND VEHICLES

Item

Description

DIANE

ROBERT

Household goods

Re: 16 High Point Road, Toronto – divided

Re: 15 Winchester Drive, Lake Rosseau – included in value when sold

Re: 44 Caledon Mountain – assumed to be included in sale value

Not Included

Not Included

& furniture

Cars, boats, vehicles

2009 Porsche Cayenne

$40,262.50

2014 Porsche Cayenne

$86,750.00

2000 Cadillac Deville

$3,500.00

2001 BMW X5

$4,237.00

2008 Cadillac Escalade ESV

$27,537.00

2009 Mercedes S550 (kept at Fisher Island property)

$29,762.00

2012 Mini Cooper (driven by daughter)

For daughter’s sole use

2009 Smart Fortwo Brabus

$11,500.00

2001 BMW Motorcycle

$7,549.00

2003 Vespa

$1,460.00

1986 Ferrari Testarossa

Transferred to Brendan Herjavec in October, 2009

Other special items

Jewellery

$428,795.00

Watches

$225,000.00

2014 Indian Chief Classic Motorcycle

$20,000.00

2014 Criscraft boat

$125,000.00

2014 Nautique boat

$100,865.00

2005 GTX Seadoo (cottage)

$12,000.00

2008 GTX Seadoo (cottage)

$12,000.00

2005 YDV Seadoos

$2,650.00

2008 YDV Seadoo

$4,027.50

Canoes, paddle boards, bicycles and other ancillary items

Value not significant

2008 Karavan Tandem Trailer

$377.50

2009 Segways (2)

$4,770.00

2014 Ducatti Hypermotard

$8,750.00

16. Totals: Value of General Household Items and Vehicles

$555,807.50

$600,985.00

PART 4(c): BANK ACCOUNTS AND SAVINGS, SECURITIES AND PENSIONS

Category

(Savings, Checking, GIC,

RRSP, Pensions, etc.)

Institution

Account Number

DIANE

ROBERT

Joint USD Chequing Account

Fisher Island Regions Bank (USD)

9600652979

$10,702.07

$10,702.07

Joint USD Chequing Account

TD Canada Trust (USD)

7157240

$13,448.71

Funds retained by Diane

Joint Chequing Account

TD Canada Trust

527496

$8,617.42

$8,617.42

Chequing Account

BMO

8010510

$31,686.97

Investment Account

BMO

56466485

$514,300.00

Investment Account

BMO (CDN)

210-70117

$557,488.23

USD Investment Account

BMO (US)

210-70117

$402,764.24

RRSPs

TD Canada Trust

91425357

$26,332.45

Royal Bank of Canada

382-05229-1-4

$42,977.86

BMO

10573394

$38,745.07

BMO

10573394

$13,008.87

BMO

10573394

$20,843.73

Savings Bond (RRSP)

Ontario Savings Bond

639483

$114,239.02

Savings Bond (RRSP)

Canada Savings Bond

12533124

$5,635.09

Investment Account

RBC Dominion Securities Canadian Dollars Parameters

370-56932-1-0

$210.78

Sole Bank Account

UBS AG Private Banking Account

206-795136.60E

$2,741.14

Sole Chequing

RBC Chequing Account

06052-5026117

$5,435.38

RRSP

RBC Dominion Securities Inc.

484-73297-1-3

$221,307.51

RRSP

RBC

697-31673-1-2

$60,219.57

RRSP

Mackie Research Capital Corporation

21-TKE1

$89,501.52

17. Totals: Value of Accounts And Savings

$1,800,789.73

$398,735.39

PART 4(d): LIFE AND DISABILITY INSURANCE

Company, Type &

Policy No.

Owner

Beneficiary

Face

Amount ($)

DIANE

ROBERT

London Life Insurance Company Term Policy no. K153071T

The Herjavec Group Inc.

The Herjavec Group Inc.

$20,000,000

No CSV

Lloyd’s Personal Accident Insurance Policy no. 2014HM05-109

The Herjavec Group (insured: Robert Herjavec)

The Herjavec Group

n/a

No CSV

Canada Life Term Insurance Policy

Robert Herjavec

Diane Plese

$5,000,000

No CSV

18. Totals: Cash Surrender Value Of Insurance Policies

$0.00

$0.00

PART 4(e): BUSINESS INTERESTS

Name of Firm

or Company

Interests

DIANE

ROBERT

1417289 Ontario Inc.

100% Ownership – Bare trust which holds title to 16 High Point Road, Toronto

$15,500,000.00

1492620 Ontario Inc.

7600 Fisher Island Drive, Suite 7641, Fisher Island, Florida

Diane owns 50% of the shares and Robert owns 50% of the shares.

$1,170,836.00

$1,170,836.00

Fisher Island Club Membership

To be sold

To be sold

The Herjavec Group Inc. (“THG”)

$32,033,000.00

Andiamo Inc.

100%

Nil

Herjavec D.O.O.

100%

Nil

7949766 Canada Inc.

Unspecified minor interest

Nil

19. Totals: Value Of Business Interests

$16,670,836.00

$33,203,836.00

PART 4(f): MONEY OWED TO YOU

Details

DIANE

ROBERT

20. Totals: Money Owed To You

$0.00

$0.00

PART 4(g): OTHER PROPERTY

Category

Details

DIANE

ROBERT

Reward points

Aeroplan and Amex points

Owned by THG

Owned by THG

Robert Herjavec Family Trust

Beneficial interest

nil

21. Totals: Value Of Other Property

$0.00

$0.00

22. VALUE OF PROPERTY OWNED ON THE VALUATION DATE, (TOTAL 1)

(Add: items [15] to [21])

$19,451,741.63

$36,014,081.39

Table 2: Value Of Debts and Liabilities on Valuation Date

PART 5: DEBTS AND OTHER LIABILITIES

Category

Details

DIANE

ROBERT

Cottage

RBC Line of Credit Account no. 64670268-001 re: 15 Winchester Drive, Lake Rosseau

Already considered in net value of cottage

Line of Credit

TD Line of Credit Account no. 0337 4512289

Inactive

Credit Cards

Costco American Express Account no. ending 71-004

$2,081.37

TD Aeroplan Visa Infinite Account no. ending 9430

$541.73

BMO Mastercard Account no. ending 1001

$2,134.75

Saks First Avenue Account ending 391

$590.60

Neiman Marcus Capital One Account no. 0499-9127-6053

$3,247.42

Credit Card

RBC Visa Infinite Account no. ending in 9379

$3,460.23

Credit Card

American Express Account no. ending 16700 – corporate card paid by THG

N/A

Shareholder Loan

Owing by Robert to THG (per Duff & Phelps Report)

$3,922,981.00

Disposition Costs

RRSP @ 49% - including savings bonds

$128,273.27

RRSPs @49%

$181,439.10

16 High Point Road, Toronto, Ontario @2%

$310,000.00

15 Winchester Drive, Lake Rosseau, Township of Seguin

$36,210.00

7600 Fisher Island Drive, Suite 7641, Fisher Island, Florida

Equal amounts for each. Will not affect equalization

Equal amounts for each. Will not affect equalization

The Herjavec Group Inc (on $32,033,000@ 20.6%)

$6,598,798.00

Capital Gains Tax

44 Caledon Mountain Drive

$40,993.38

BMO InvestorLine Account #210-70117

$48,454.18

Funds owed to RHFT

Re: RRSP

$16,500.00

Potential amount owing by Robert to the RHFT

nil

Income Taxes re: 2013 Reassessment

Personal use of aircraft

$181,131.00

Luxury investment grade cars

Other vehicle expenses

Sponsorship/racing

$0.00

$15,852.00

$110,652.00

Income Taxes re: 2014 Reassessment

Tax liability for 2014 pro-rated

Personal use of aircraft

Other vehicle expenses

Sponsorship/racing

$635,830.00

$44,260.00

$13,689.00

$97,769.00

23. Totals: Debts And Other Liabilities, (TOTAL 2)

$536,316.70

$11,858,571.33

Table 3: Net value on date of marriage of property (other than a matrimonial home) after

deducting debts or other liabilities on date of marriage (other than those relating directly

to the purchase or significant improvement of a matrimonial home)

PART 6: PROPERTY, DEBTS AND OTHER LIABILITIES ON DATE OF MARRIAGE

Category and Details

DIANE

ROBERT

Land

$0.00

General household items & vehicles

Honda Prelude

$20,000.00

$0.00

Bank accounts, savings, securities, pensions

$61,600.64

$0.00

Life & disability insurance

$0.00

Business interests

$0.00

Money owed to you

$0.00

Other property (Specify.)

$0.00

3(a) TOTAL OF PROPERTY ITEMS

$81,600.64

$0.00

Debts and other liabilities (Specify.)

$0.00

Contingent Disposition Costs re: RRSP’s

$1,875.00

3(b) TOTAL OF DEBTS ITEMS

$1,875.00

$0.00

24. NET VALUE OF PROPERTY OWNED ON DATE OF MARRIAGE, (NET TOTAL 3)

$79,725.64

$0.00

Table 4: PART 7: VALUE OF PROPERTY EXCLUDED UNDER SUBS. 4(2) OF “FAMILY LAW ACT”

Item

DIANE

ROBERT

Gift or inheritance from third person

Income from property expressly excluded by donor/testator

Damages and settlements for personal injuries, etc.

Life insurance proceeds

Traced property

Excluded property by spousal agreement

Other Excluded Property

26. TOTALS: VALUE OF EXCLUDED PROPERTY, (TOTAL 4)

$0.00

$0.00

TOTAL 2: Debts and Other Liabilities (item 23)

$536,316.70

$11,858,571.33

TOTAL 3: Value of Property Owned on the Date of Marriage (item 24)

$79,725.64

$0.00

TOTAL 4: Value of Excluded Property (item 26)

$0.00

$0.00

TOTAL 5: (TOTAL 2 + TOTAL 3 + TOTAL 4)

$616,042.34

$11,858,571.33

DIANE

ROBERT

TOTAL 1: Value of Property Owned on Valuation Date (item 22)

$19,451,741.63

$36,014,081.39

TOTAL 5: (from above)

$616,042.34

$11,858,571.33

TOTAL 6: NET FAMILY PROPERTY (Subtract: TOTAL 1 minus TOTAL 5)

$18,835,699.29

$24,155,510.06

EQUALIZATION PAYMENTS

Diane Pays Robert

Robert Pays Diane

$0.00

$2,659,905.39

Signature

Date of signature

[^1]: Exhibit 52, page 129

[^2]: They are the beneficiaries who have filed notices of objection to the passing of accounts. Ms. Plese takes the position that the youngest child is not a beneficiary of the Family Trust. She has not participated in this litigation at all.

[^3]: Paragraph 8(h) of the trust agreement

[^4]: Exhibit 73, slides 2 and 3

[^5]: R.S.O. 1990 c.T23

[^6]: 2016 ONCA 962, [2016] O.J. No. 6569

[^7]: Given the magnitude of most of the values in this case, I will round most of them. I will take this particular value at $22,112

[^8]: This can hardly be called a minimal difference, when many single family homes are this size or smaller

[^9]: Neither expert explained why the adjusted value for this particular property was significantly higher than the value each expert found for High Point.

[^10]: I recognize that there was no particular evidence concerning the rate(s) of change or increase in the Toronto real estate market from 2003 until 2014. Nevertheless, had the market declined substantially during that period I would no doubt have heard evidence to that effect, since it would have had some impact on the valuation process generally.

[^11]: Fielding v Fielding, 2014 ONSC 2272, 2014ONSC2272

[^12]: Its terms are, and remain confidential

[^13]: Exhibit 80

[^14]: Exhibit 42, pages 8 and 9

[^15]: R.S.O. 1990 c. F.3

[^16]: Agreement between THG and Higgins, exhibit 53 – Compendium Phantom Stock Agreements

[^17]: 1994 CarswellOnt 375 (O.C.A.)

[^18]: The parties have agreed each will likely receive this much, based on the current value of Fisher Island

[^19]: See Exhibit 51, paragraph 2

[^20]: I note, in passing, that Mr. Freedman took a not dissimilar approach in Tauber v Tauber, 2001 28234 (ON SC), 2001 CarswellOnt 2842. (Tab 37 of Mr. Herjavec’s Book of Authorities) There Mr. Freedman suggested a payor’s bonus should notionally be considered in the year it is declared, instead of in the year it was actually paid and received, in order to have the payor’s income track the corporation’s income more closely. I rejected his analysis then as being contrary to the provisions of the CSGs regarding determination of income.

[^21]: R.S.C., 1985 c.3 (2^nd^ Supp), as amended

[^22]: This is the value I attributed to THG alone at valuation day. I have no evidence its value has declined since then. Mr. Herjavec has significant other assets to fund the equalization payment. I therefore assume he has at least the value of THG going forward.

[^23]: These included two Porsche Cayennes, a Cadillac Deville, a BMW X5, and a Mercedes S550. A 1986 Ferrari Testarossa had been transferred to the eldest child before the separation. He does not drive it.

[^24]: Cross-examination of Skye Herjavec October 4, 2018

[^26]: See paragraph 81 of Kiteley J’s reasons, Plese v Herjavec, 2015 ONSC 7572

[^27]: Halliwell v. Halliwell, 2017 ONCA 349

[^28]: According to exhibit 20, he had over $161,000 in his bank account in March of 2011