Court File and Parties
COURT FILE NO.: FS-22-27633 DATE: 2022-09-06 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Natalie Witkin AND: Stuart Storm
BEFORE: Justice Nakonechny
COUNSEL: L. Baumal for the Applicant N. Waldman for the Respondent
HEARD: September 6, 2022
ENDORSEMENT
[1] The Applicant wife’s motion originally sought disclosure from the Respondent husband for valuations of his interest in certain corporations and a valuation of the husband’s income. Much of the disclosure has been agreed to. Counsel shall prepare a draft Order on consent.
[2] The remaining claim on the wife’s motion is for an order that the husband, at his sole expense, obtain a valuation of his interest in 2079978 Ontario Inc. as at the date of separation, March 31, 2019, within 60 days.
[3] It is not disputed that the husband owned 33% of the shares in 207 on the date of separation. The husband claims the shares were gifted to him by his father, Martin Storm, during the marriage so the asset is an excluded property under s. 4(2) of the Family Law Act. The issue of whether the asset is excluded is not before me.
[4] In 2018, 207 purchased a 25% interest in 2565385 Ontario Inc. The only asset owned by 256 was a property at 980 Islington Avenue, Toronto with a gas station. Martin gave an interest free loan of $249,200 to 207 for it to purchase 25% of 256.
[5] In 2020 (after separation) the 75% shareholder of 256 purchased 207’s 25% interest in 256. 207 re-paid the loan to Martin at the closing of the sale.
[6] The husband received dividends from 207 totalling $113,944 in 2020 and 2021. The husband argues that this is the value of his shares of 207 at the date of separation. 207 is now dormant with a minimal amount in a bank account. The husband’s position for calculating equalization is that the value of the asset at date of separation is $113,944 and the same value should be excluded from his net family property.
[7] Martin’s Affidavit states that he gifted $150,000 to the husband’s siblings in 2020 and 2021 and made a payment to the husband to “top up” the $113,944 he received as dividend income from 207 to equal $150,000. This, the husband argues, is proof that his shares in 207 were a gift from his father.
[8] The wife argues that the husband has delayed or refused to make proper financial disclosure since separation. The wife started this Application in 2022 because the husband’s continued to insist his franchise and his interest in 473973 Ontario Limited were excluded assets. He refused to provide documents relating to these companies and 207 even after the wife signed a confidentiality agreement as requested.
[9] The wife states that the husband has failed to pay proper child support for the two children, aged 20 and 17, in accordance with his income or contribute his proportionate share to their s. 7 expenses.
[10] The husband has changed his position on the franchise and 473 and agreed to a joint valuation of those assets. He has also agreed to a valuation of his income for 2019, 2020 and 2021.
[11] The husband argues that the Family Law Rules do not require a party to provide a certified value of their business interests. He states that the wife’s request for a valuation is disproportionate and that he has provided every document that is relevant to the issue including the Minute Book and some pages of the Financial Statements of 207 for relevant years.
[12] The husband argues that 207 is an excluded asset which will not impact the equalization calculation. He states that the value of the dividend income he received in 2020 and 2021 is the appropriate value to use in the equalization calculation (with the corresponding exclusion) and that amount does not warrant the cost of a valuation.
Analysis
[13] The Family Law Act contains no definition of value other than the provision in s.4(4) that when value is required to be calculated at a given date, it shall be calculated at close of business on that date.
[14] However, the case law provides that in valuing a business, “fair market value” should be used as an initial guide unless the court finds this would result in an inequitable valuation, Menage v. Hedges (1987), 1987 CanLII 5234 (ON SC), 8 R.F.L. (3d) 225 (Ont. U.F.C.), O’Neill v. O’Neill, [2007] O.J. No. 1706 (S.C.J.).
[15] It is not clear from the evidence before me that the value of the dividends the husband received in 2020 and 2021 is the fair market value or even the appropriate value of the asset on valuation day. 207 is a holding company which owned shares in a company that owned land and earned rental income from an operating business. There may be a number of factors to be considered in determining the value of the husband’s interest in that business on valuation date which are different than the factors used to calculate the dividend paid to him on the sale of his shares 18 months later.
[16] The husband’s proportionality argument suggests that the cost of the business valuation is disproportionate to his value of the asset: amount of the dividend income he received. That may be the case if the dividend income is, in fact, the value of the asset on valuation date. Again, there is not sufficient evidence before me to determine that.
[17] I adopt the reasoning of Lemon, J. in Kraemer v. Kraemer 2019 ONSC 944 and Akbarali, J. in Laurent v. Laurent, 2019 ONSC 3535 (S.C.J.), citing Menage and Conway v. Conway (2005), 2005 CanLII 14136 (ON SC), 16 R.F.L. (6th) 23 (Ont. S.C.): Parties have the onus to provide credible, authentic evidence of the accurate value of their assets and liabilities on the date of marriage and the date of separation. While disclosure must be relevant and proportional, where the value cannot be readily determined or there is serious dispute, an independent valuation may be required.
[18] The issue of whether 207 is an excluded asset is in dispute. I cannot presume that the value of 207 will not be relevant to the equalization calculation. The husband’s position that it is an excluded asset does not make it so and does not negate his obligation to provide proper evidence of the value of the asset on valuation date. I find that a certified business valuation is necessary to determine the value of the husband’s interest in 207 as at the date of separation.
[19] If it is determined that 207 is an excluded asset, the husband may have a claim against the wife for the cost of the valuation.
Order to Go
The parties have consented to the relief requested in paragraphs 3, 4, 5 and 6 of the Applicant’s Notice of Motion dated August 25, 2022. There may be revisions to the language in paragraphs 3 and 4 with regard to documents the Respondent does not have in his possession or control. Order to go in accordance with the agreed upon draft Order which may be sent to AnnaMaria.Tiberio@ontario.ca for my signature.
Within 30 days of the date of this endorsement, the Respondent shall retain a Chartered Business Valuator at his own expense to conduct a valuation of his interest in 2079978 Ontario Inc. at the date of separation, March 31, 2019. Within 45 days of the date of this endorsement, the Respondent shall through counsel provide the Applicant with the name of the valuator and written confirmation from the valuator with an estimate of the date by which the valuator’s report will be concluded. The Respondent shall cooperate and provide the valuator any and all information requested by the valuator to complete the valuation.
If the parties cannot agree on costs, the Applicant shall serve and file her costs submissions within 14 days from the date of release of this endorsement. The Respondent will have 14 days thereafter to serve and file his submissions. There shall be no reply submissions. The submissions shall be no more than two pages, exclusive of any costs outline, case law and offers to settle. The submissions shall be sent by email to AnnaMaria.Tiberio@ontario.ca.
Date: September 6, 2022