Riemersma v. Riemersma

2013 BCSC 474 Riemersma v. Riemersma IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Riemersma v. Riemersma, 2013 BCSC 474 Date: 20130319 Docket: E47727 Registry: Vernon Between: Shirley Anne Riemersma Claimant/Respondent And Albert Riemersma, Friesland Farms Ltd., Friesland Development Ltd., and First Gear Holdings Ltd. Respondent/Appellant Before: The Honourable Mr. Justice Rogers On appeal from: Supreme Court of British Columbia, December 14, 2012 (Riemersma v. Riemersma, Vernon #47727) Reasons for Judgment Counsel for the Claimant/Respondent: P.A. Dyck Counsel for the Respondent/Appellant: S.M. Soll Place and Date of Trial/Hearing: Kelowna, B.C. March 6, 2013 Place and Date of Judgment: Vernon, B.C. March 19, 2013 Introduction [1] This the respondent's appeal of a master's interim spousal support order. The appeal itself is presaged by the appellant's application to introduce fresh evidence on the appeal. The claimant opposes the application and the appeal. The appeal focussed on the respondent's ability to pay support and the master's decision to rely primarily upon documentary evidence relating to the payor's income and to put over to a later hearing issues arising from undocumented assertions. Fresh Evidence Background [2] The parties were married in March 1986. They had two children, both of whom are now independent adults. The parties separated in 2007 or 2010, depending on whose evidence is accepted. The date of their separation is not relevant to the present application. The claimant is 56 years old. She has not worked outside the home since 1988. The respondent conceded that the claimant is entitled to spousal support. The respondent is 62 years old. During the marriage he owned and operated a dairy farm in the Lower Mainland of British Columbia. The respondent stopped operating the dairy farm in 2007. Instead, he allowed another outfit to make use of his milk quota. The operator paid substantial sums of money to the respondent, or rather to the closely held corporation of which the respondent is the sole shareholder, for its use of the milk quota. [3] In October 2012, the claimant filed a notice of application seeking, among other things, interim spousal support. She supported her application with her affidavit #2, sworn July 16, 2012 and #3, sworn November 14, 2012. The respondent opposed the application with his affidavit #2 sworn October 26, 2012. For the purposes of the fresh evidence application, the relevant portion of the respondent's affidavit is at paragraph 15: 15. The income from Friesland Farms has consisted in recent years from the milk quota and the sale of hay. Friesland Farms was receiving about $29,000 per month pursuant to the subcontract for the quota. However, due to financial constraints, Bofano Consolidated will only be paying about 75% of what was previously being paid so Friesland Farms will be receiving about 22,500 per month as of October 1, 2012. [4] Concerning this piece of evidence, in her reasons for judgment the learned Master said: [10] I have been asked to deduct $14,000 and $80,000 because I am advised that this income will not be received in the coming year. That may well be the case, but in this interim application, I am going to rely on actual financial statements and not projections. So when the 2012 financial statements are available, that argument may be made to vary this order either at trial or in the interim prior to trial. [5] In the result, when she assessed the income available to the respondent for spousal support, the learned master did not take into account the reduction of income that the respondent predicted in the excerpt above. [6] The fresh evidence the respondent wishes to adduce in this appeal comprises documents relating to his corporation's deal with Bofano Consolidated Inc. and Nata Farms Ltd. concerning the milk quota, two letters from Nata's lawyer concerning the price reduction, and a series of cancelled cheques. The documents relating to the contracts all pre-date the hearing of the interim application. The letters from the lawyer post-date the application, but contain information that was available to the respondent before the application was heard. The cancelled cheques demonstrate that before October 2012 the respondent's corporation was receiving approximately $29,000 per month for the use of its milk quota, and after that month it received approximately $22,000. [7] The principles that govern an application to adduce fresh evidence in an appeal are well known. They were laid down by the Supreme Court of Canada in Palmer v. The Queen, [1980] 1 S.C.R. 759: (a) the evidence could not have been obtained by due diligence; (b) the evidence must be credible (i.e., reasonably capable of belief); (c) the evidence must be relevant (it bears on a decisive or potentially decisive issue at trial); and (d) the evidence, if believed, could reasonably be expected, along with the other evidence, to have affected the result. [8] The standard for admissibility of fresh evidence on appeal is a stringent one as was noted by Madam Justice Ryan, writing for the Court in Scott v. Scott, 2006 BCCA 504 at para. 21: ... the nature of an appeal is to examine the record and determine whether there has been an error of law or a palpable error of fact: it is not a continuation of a trial at a different stage. Thus, generally speaking, the need for certainty and finality leaves no room for the admission of fresh evidence on appeal. [9] In my view, the respondent's application to adduce new evidence in the appeal must fail because he cannot satisfy the first leg of the Palmer test. With the exception of the cancelled cheques, all of the information contained in his affidavit #3 was available to him ahead of the hearing. At paragraph 12 of his affidavit #3, the respondent offers only this as his rational for not having put that information before the court in the first instance: 12. On or about October 1, 2012, I was informed by Joe Bifano of Nata Farms Inc. ("Nata"), the operating company and subsidiary of Bifano Consolidated Inc., that it was reducing the price for the milk quota from $7.75/kg to $6.00/kg, being the amount paid by Nata to the other quota holders. My former lawyer did not inform me that I needed to provide a written document or other evidence to confirm the recent change in the milk quota revenue. (emphasis added) [10] On a plain reading of the respondent's affidavit it becomes clear that he simply failed to appreciate that it would be in his best interests to put forward clear and conclusive evidence on what was for him a very important issue. Now, after reasons for judgment have been delivered and an interim order has been entered, he wishes to repair his case by adducing better evidence than he had in the first instance. This is exactly the kind of maneuver that the rule in Palmer was designed to prevent. [11] For that reason the respondent's application to adduce fresh evidence must be dismissed. The claimant is entitled to her costs of the application on Scale B. The Appeal The Evidence before the Master [12] As noted above, the parties were married in March 1986. Their two children are 24 and 21 years old and they are independent of their parents. The parties do not agree on the date of their separation. One says it was in 2007, the other says 2010. For the purposes of the appeal, nothing turns on that dispute. The claimant is 56 years old and has not worked outside the home since 1988. The respondent is 62 years old and, until 2007, was the owner/operator of a dairy farm located near Agassiz, B.C. [13] The respondent is the sole shareholder of Friesland Farm Ltd. Friesland Farm owns a valuable milk quota and generates money by essentially renting that quota to dairy operators. The respondent is also the sole shareholder of Friesland Development Ltd. Friesland Development's assets include a number of development properties, and one half of the shares of a corporation called First Gear Holdings Ltd. First Gear owns various real estate holdings. [14] The parties put into evidence their personal financial statements. The claimant's statement confirmed her affidavit evidence that she has no employment income. The claimant put her total annual expenses at $106,000 (rounded). In his financial statement the respondent asserted that his income was $43,600 per year and that his total annual expenses were $107,000 (rounded). [15] For a period of time after their separation, the claimant, who was living at the parties' recreational property in White Lake, B.C., used her credit card to pay her personal expenses. The respondent paid the claimant's credit card bills. In October 2011, the respondent stopped paying the claimant's credit card accounts. By October 2011 the claimant had withdrawn $60,000 from the parties' joint line of credit. She used the line of credit borrowings for her living expenses. The respondent has paid the mortgage on the White Lake recreational property and has also made payments on the balance owing on the line of credit. The respondent's affidavit indicates that he has used "personal income" for those two expenses and they have totalled $26,000 (rounded) and $27,500 respectively. The respondent did not describe over what period of time he had incurred those expenses. [16] The claimant put into evidence the most recent corporate financial statements available to her when the application came on for hearing. The financial statements for Friesland Farms and Friesland Development were for their years ending August 31, 2011. Those statements were, therefore, a year and some months out of date. The financial statement for First Gear was for its year ending November 30, 2011. [17] The financial statement for Friesland Development revealed that it lost $14,000 in 2011. In his evidence, the respondent did not assert that Friesland Development was, or would within any reasonable time frame, become profitable. First Gear's financial statement revealed that in 2011 it lost $12,000 (rounded). The respondent's evidence did not address the question of when or if Friesland Development might realize income by virtue of the shares it owns in First Gear. [18] The respondent deposed that Friesland Farms' pre‑tax net income of $218,750 was used, in part, to pay down $60,600 on a mortgage and that it gave subsidies of $68,000 to Friesland Development and $86,000 to First Gear. The respondent did not describe how he had come to understand that Friesland Farms' pre‑tax income was different than the $201,620 shown on its 2011 financial statement. The company issued a 2011 T4 to the claimant for $32,000. It is common ground that Friesland Farms did not actually pay any money to the claimant in that year. The parties agreed that the $32,000 was, in fact, money that would be available to the respondent out of the company's account. [19] For the sake of convenience, I will repeat here the respondent's affidavit evidence concerning changes in Friesland Farms' income: 15. The income from Friesland Farms has consisted in recent years from the milk quota and the sale of hay. Friesland Farms was receiving about $29,000 per month pursuant to the subcontract for the quota. However, due to financial constraints, Bofano Consolidated will only be paying about 75% of what was previously being paid so Friesland Farms will be receiving about 22,500 per month as of October 1, 2012. [20] The evidence was clear that Friesland Farms relied on income derived from its milk quota. The respondent did not provide any detail concerning the current, that is to say in effect at the time, demands on Friesland Farms' income. More particularly, the respondent did not assert that as of October 2012, Friesland Farms required working capital of any amount in order to continue its operations. Neither did the respondent's affidavit evidence provide an explanation of Friesland Farms' income items other than milk quota revenue that appeared on its 2011 financial statement. One of those unexplained items was $14,000 received in respect of a "Settlement from District of Kent". Finally, the evidence showed that in 2011, Friesland Farms had declared a $32,000 dividend to the respondent. [21] The most recent income tax return available to the respondent was for the year 2011. That form showed that he received CPP benefits of $6,959, taxable dividends of $40,200 (the grossed up value of the $32,000 dividend), interest income of $570 and other income of $31. The respondent showed a net loss of rental income of $4,157. His line 150 income totalled $43,620. The dividends were paid to him by Friesland Farms. The Master's Decision [22] The master accurately recounted the evidence before her. She noted that the Friesland Farms' pre‑tax income should be considered to be available to the respondent for the purposes of spousal support, and that the onus lay on the respondent to show otherwise. [23] She determined that the respondent's income was, in part, comprised of the $43,623 shown on his 2011 line 150 plus the $32,000 that Friesland Farms T4'd to the claimant but had not actually paid to her. The subtotal of those sums came to $75,000 (rounded). The learned master then noted that the respondent had stipulated his annual personal expenses at $107,000 and observed that he had not reported increased personal debt in order to meet those expenses. The learned master inferred from those facts a further fact, vis: that the respondent had caused Friesland Farms to pay the gap between the respondent's income and his expenses. That difference was $32,000. In the result, the learned master concluded that, pre‑tax corporate earnings aside, the respondent's income was at least $107,000. [24] Turning to the amount of Friesland Farms' pre‑tax income available to the respondent, the learned master noted the respondent's submission that that figure should be reduced by $14,000 (because that District of Kent item was a one-time event in 2011) and $80,000 (because the company's milk quota income was about to be reduced by that sum annually). The learned master said this about the respondent's position: [10] I have been asked to deduct $14,000 and $80,000 because I am advised that this income will not be received in the coming year. That may well be the case, but in this interim application, I am going to rely on actual financial statements and not projections. So when the 2012 financial statements are available, that argument may be made to vary this order either at trial or in the interim prior to trial. [25] In the result, the learned master determined that the full amount of Friesland Farms' pre‑tax income was available to the respondent for the purposes of spousal support. That figure was $201,620. The learned master fixed the respondent's total income at $309,000. She then employed the Spousal Support Advisory Guidelines, deducted $500 to account for the claimant's obligation to contribute to interest payments on the line of credit, and made an interim order that the respondent pay spousal support of $10,500 commencing December 1, 2012. Grounds of Appeal [26] The respondent says that the learned master committed the following errors: (a) finding that the respondent had employment income of $43,623; (b) adding that "employment income" to Friesland Farms' pre‑tax income in order to determine the respondent's income for the purposes of spousal support; (c) including non-recurring revenue of $14,135 from the District of Kent settlement as part of Friesland Farms' pre‑tax income; (d) imputing $32,000 to the respondent as personal expenses paid on his behalf by Friesland Farms; (e) failing to consider the need of Friesland Farms to provide funds to Friesland development and First Gear and to pay its own debts; determining that the whole of Friesland Developments' pre‑tax income was available to the respondent for the purpose of spousal support; and (f) failing to adjust Friesland Farms' income to account for the reduction of the price it receives for the use of its milk quota. Standard of Review [27] The decision under review was interlocutory. The proper standard of review is, therefore, whether the learned master's decision was "clearly wrong": Abermin Corp. v. Granges Exploration Ltd. (1990), 45 B.C.L.R. (2d) 188 (S.C.). Discussion [28] I will deal with each of the respondent's arguments in turn. They are: (a) Characterization of employment income [29] The learned master described the number that appears at line 150 of the respondent's 2011 T1 income tax return as his "employment income". The respondent objects to this characterization on the ground that the document shows that the figure at line 150 is comprised of CPP benefits, dividends, and interest earned on investments. It was not employment income in the sense that the respondent received a T4 information slip for wages or a salary. [30] The respondent is correct. The learned master did err when she applied the term "employment" to that portion of the respondent's 2011 income. Of course, nothing turns on this minor error. The sum of $43,623 is still the correct number to appear on line 150 of the respondent's tax return, and that number is still the correct number to employ when assessing the amount of money available to the respondent for spousal support. [31] The respondent goes on to complain that the learned master committed a further error by not deducting from Friesland Farms' pre‑tax income the dividend that the company paid to the respondent in 2011. The respondent says that including the dividend in the respondent's income but not deducting it from the company's pre‑tax income amounts to double counting. The respondent asserts that the company's pre‑tax income was, therefore, overstated by $32,000. Instead of $201,000, the respondent chose that the company's pre‑tax income should, subject to other arguments the respondent has with respect to that sum, have been fixed at $169,000. [32] The respondent has a valid point here. This case was more an exercise in assessing how much money was available to the respondent than it was about how much money the corporation actually put into the respondent's hands. Whether the corporation actually issued a cheque to the respondent for the dividend amount was not particularly relevant; what was relevant was how much money the corporation could have made available to the respondent. For purposes of the analysis, the fact that the corporation declared that it had paid the dividend to the respondent was enough. The learned master ought to have treated that declaration - which was contained in the corporation's 2011 financial statement - as a notional transfer out of the corporation's coffers and into the respondent's hands. It was an error to include the dividend in the respondent's income but not reduce the money available to the corporation by that same amount. (b) Adding that "employment income" to Friesland Farms' pre‑tax income in order to determine the respondent's income for the purposes of spousal support [33] This complaint is basically a mirror of the first ground of appeal. The dividend should exist on one side of the ledger or the other, i.e.: included in the respondent's income and deducted from the corporation's money; or included in the corporation's income and not attributed to the respondent as income. [34] In my view the learned master was not wrong when she decided to include the dividend in the respondent's income. After all, approaching the issue that way gave effect to the distribution plan reflected in the corporation's financial statement and the respondent's T1 income tax return. (c) Including non-recurring revenue of $14,135 from the District of Kent settlement as part of Friesland Farms' pre‑tax income [35] The financial statement described that item as a settlement from the District of Kent. The respondent's complaint on this ground is that the learned master ought to have intuited that the $14,135 income item on the corporation's 2011 financial statement was a one-time only event. [36] The fatal flaw in the respondent's submission on this point is that he failed to provide the court with any evidence that the payment was a one-time event. On the record before the learned master, that payment could be construed to be the first of several annual payments on a settlement or it could be construed to be a single lump sum payment. In the absence of evidence, which the respondent could easily have provided, one conclusion cannot be said to be more natural that the other. In the result, the learned master elected to keep that figure in the income column and left it for the parties, on further and better evidence at trial, to sort out whether it was a one-time or repeating-income figure. [37] Given the ambiguous description of the income item coupled with lack of any evidence of its nature, I cannot say that the learned master was wrong to treat that item as she did. (d) Imputing $32,000 to the respondent as personal expenses paid on his behalf by Friesland Farms [38] Here, the respondent relies on the case of Kopp v. Kopp, 2012 BCCA 140, which stands for the proposition that a finding that a corporation has used company money for the payor's personal benefit must be supported by evidence. The respondent points out that the claimant did not adduce convincing evidence that the respondent receives personal but unattributed benefits from Friesland Farms to the tune of $32,000 per year. [39] The respondent is correct in saying that the claimant did not produce a compelling case for attributing corporate expenses to the respondent. That said, Kopp does not displace the court's discretion to employ common sense when it analyzes financial information. In this case, both parties filed statements of their income and expenses. The claimant's statement clearly showed that her expenses outstripped her income and that she met her expenses by going into debt - early in the separation she used her credit card and later she used funds taken from the parties' line of credit. In the claimant's case, then, debt was the product of her expenses outstripping her income. The respondent's statement of income and expenses, on the other hand, revealed that his personal income was only $43,000 and his expenses were on the order of $107,000. There was nothing clearly wrong in the master's decision to accept the respondent's sworn statement of his expenses as being reasonably accurate. The respondent's expenses were, therefore, in excess of his income, yet he was not incurring debt to meet those expenses. The money to cover those expenses must have come from somewhere. [40] The master surmised that if the respondent had $43,000 of personal income and had the benefit of the $32,000 that the company T4'd to the claimant but never actually paid to her, making a total of $75,000, then the difference between his income of $75,000 and his expenses of $107,000 must have come from somewhere. The only source for such funds was Friesland Farms. It was, in my view, logical and correct for the learned master to infer that the difference of $32,000 came from the corporation. The learned master did not have to pick apart Friesland Farms' financial statements to come to that inference, neither did she have to turn to the claimant's evidence. A simple application of the learned master's common sense to the respondent's own evidence was sufficient to ground her conclusion that the corporation had paid $32,000 worth of the respondent's personal expenses. [41] There is, therefore, no merit in this ground of appeal. (e) Failing to consider the need of Friesland Farms to provide funds to Friesland Development and First Gear and to pay its own debts; determining that the whole of Friesland Developments' pre‑tax income was available to the respondent for the purpose of spousal support [42] Here, the respondent complains that the learned master ought to have reserved out of the money available to the respondent $60,000 for payment of principal on Friesland Farms' long-term debt and by sums transferred from Friesland Farms to Friesland Development and First Gear. The respondent relies on the aphorism that "one should not kill the golden goose". He asserts that Friesland Farms has to have access to sufficient funds to keep Friesland Developments and First Gear alive and to pay its own debts. [43] Again, the respondent's argument has merit in principle, but where it falls down is in the lack of evidence to support it. The respondent did not adduce evidence to show that Friesland Developments and First Gear are "golden geese" that deserve infusions of capital. On the contrary, the financial statements for those companies indicate that they are losing money. The respondent did not demonstrate with evidence that it would be in Friesland Farms' best interests to keep sending money to those two corporations. Likewise, the respondent did not address Friesland Farms' long-term debt in any detail, other than to say that in 2011 it used some of its income to pay down the principle of that debt by $60,000. The respondent's argument on this issue might have had merit had he adduced evidence that the terms of the loan required that principle payment on an annual basis and that failure to make that payment could result in dire consequences for the company. There was, however, no such evidence. I cannot, therefore, accede to this ground of appeal. (f) Failing to adjust Friesland Farms' income to account for the reduction of the price it receives for the use of its milk quota [44] The respondent argues that the learned master erred by not adjusting Friesland Farms' annual income downwards by $80,000 to account for the respondent's assertion that commencing October 2012 the company will receive a lower price for the use of its milk quota. I have already referred to the respondent's evidence on this point. [45] In her reasons for judgment, the learned master acknowledged the respondent's story - it cannot be said that she ignored relevant evidence. The learned master also observed that the respondent had adduced no documentation of the price reduction. That was, in my view, a pertinent and proper comment. Although the learned master did not say so explicitly, one would expect that in a commercial relationship such as the one between Friesland Farms and the user of its milk quota, a price reduction of that magnitude would have been referred to in some sort of writing, however informal. The learned master elected to treat the respondent's evidence concerning the price reduction as a contingency. Like the income from the District of Kent, the learned master took a restrained and conservative approach to this piece of evidence. She decided to leave it to the parties to adduce better evidence at a later date on the amount and persistence of this price adjustment. [46] What underlies the learned master's approach to this, and to other elements of the case before her, was the difficulty she faced in having to process stale financial data - the 2011 corporate financial statements and the parties' 2010 or 2011 personal T1 tax returns - along with more current data in the parties' statements of personal expenses and debts and the respondent's assertion concerning the milk quota price reduction. On the evidence that the parties chose to put before her, the learned master could not have known exactly how much income Friesland Farms had actually earned in the year preceding the hearing. It follows that she could not have known, nor could she have predicted with any certainty, the net effect of the price reduction on the company's income going forward. Faced with that difficulty, the learned master chose to rely on income and expenses as shown on the documents that were before her. Uncertain matters, matters she could not resolve with confidence based on the record before her, and matters that required guess work, she put over to a time when the parties could adduce evidence that would produce a cogent picture of the financial situation. I cannot say that the learned master was clearly wrong in doing as she did. Conclusion [47] I have found that the learned master was wrong for having double counted the dividends that Friesland Farms paid to the respondent in 2011. However, when applied to the corrected data, the algorithms of the Spousal Support Advisory Guidelines produce a range of spousal support between $8,656 and $11,368. Given that judicial discretion and judgment are still elements of the process of assessing spousal support, and given that the learned master's interim order fell within the correct range, I cannot say that the learned master's decision to order interim spousal support of $10,500 was clearly wrong. [48] The appeal must be dismissed. The claimant may have her costs of the appeal on Scale B. "P.J. Rogers J."