Bate v. Smith

2017 BCSC 2078 Bate v. Smith

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Bate v. Smith, 2017 BCSC 2078 Date: 20171116 Docket: E152561 Registry: Vancouver Between: Leanne Elizabeth Bate Claimant And Gregory Edmund Smith Respondent Before: The Honourable Mr. Justice Greyell Reasons for Judgment Counsel for the Claimant: S.L. Booth Counsel for the Respondent: C.A. Millar Place and Dates of Hearing: Vancouver, B.C. October 12 & 23, 2017 Place and Date of Judgment: Vancouver, B.C. November 16, 2017 [1] On July 20, 2017, I issued reasons indexed as Bate v. Smith, 2017 BCSC 1261, in which I concluded, at para. 69: [69] For the above reasons I grant the order requested in the notice of application, I declare that the parties entered into a binding settlement agreement upon the claimant's acceptance of the terms of the [Mediation Record ("MR")]. As the parties have had subsequent discussions concerning the precise terms of implementation of the MR they have liberty to apply as to the wording of the order arising from this application. [2] The parties have now applied to resolve four issues with respect to the settlement of the order: 1. The quantum of support; 2. The dates of valuation and closing of the corporate transactions referred to in the decision; 3. The formula for the amount of compensation to be paid in relation to the corporate transactions; and 4. Costs. [3] The dispute arises from the parties'

attempt to resolve a settlement of their family law issues pertaining to child and spousal support payments and a division of their various interests in a family holding company and in other corporate assets referred to in the indexed decision. Their financial affairs were complex. [4] The parties attended mediation on two occasions in an attempt to settle their support and property issues. In addition, there were numerous court appearances, including for interim support and for a restraining order on the sale or encumbering of corporate or other property. A trial date was set and examinations for discovery were conducted. The parties attended their second mediation several weeks prior to the scheduled trial date. The mediation concluded with the respondent tabling an offer, which the claimant accepted. [5] I described the Mediation Record ("MR") at para. 20 of the indexed decision: [20] The MR provided for the division of family property as follows: that the respondent would pay the claimant $410,000 net of taxes to recognize exclusion claims she had advanced; that the parties would equally divide various retirement accounts and CPP credits; and importantly stipulated that, provided that "[a]fter receiving tax advice with respect to the division of IN8 and Cholmeley", the companies would be divided on two bases: either (a) the respondent would purchase the claimant's interest

in Cholmeley and IN8 in "the most tax efficient manner for BOTH parties", with the purchase price of her interest being calculated "after payment of the exclusion [payment of $410,000] (provided that sum is paid out of one or both of the companies) after taking into account the deduction of the shareholder's loan balance (which will be divided equally between the parties) and then taking into account and minimizing taxes incurred, if any, in funding the purchase price" OR by (b) a "rollover and equal division of the companies" as the parties mutually agreed. [6] As I found the MR to be a binding settlement agreement, the outstanding issues, to the extent they are referenced in the MR, must be governed by the terms of the MR. I turn to those terms. The Quantum of Support Child Support [7] Paragraph 19 of the MR provides that: Child support will be dealt with under the shared custody provisions of s. 9 of the Guidelines based on an earned income differential between the parties of $125,000. Child support will be paid for Aidan pursuant to the CSG for so long as he remains a child for support purposes by proportionate (to income) sharing of his costs after taking into account a reasonable contribution from the child. However, for the months of September through to Aidan's 19th birthday - child support will be paid on the basis of three children to include Aidan but Ms. Bate will

be responsible for paying the billeting costs that are being incurred. After Aidan's 19th birthday, Aidan's support will be calculated in accordance with the CSG as set out above. The parties will exchange the documents required by Section 21 of the Child Support Guidelines on or before May 15 of each calendar year beginning in 2017. The parties may then review and adjust table child support and Section 7 Expense contributions and re-determine same in accordance with the Child Support Guidelines. If the parties cannot agree, payments will continue at the last ordered or agreed amount pending review before the Courts but will be retroactively adjusted June 1 2017 and each year thereafter. [8] In my view, rather than to insert a figure based on DivorceMate calculations provided by the parties, the appropriate order to make is to incorporate the words of para. 19 of the MR into the final order. The parties should then be able to arrive at the correct figure for child support. RESP Contributions [9] I find that para. 14 of the draft order reflects para. 16 of the MR. Spousal Support [10] The claimant is entitled to the payment of lump sum spousal support in the amount of $235,000 as of October 31, 2016, with post judgment interest on that amount. The respondent seeks a credit for amounts paid on account of spousal support since October 31, 2016. The claimant says she was

disadvantaged by the respondent's failure to pay her the lump sum. Had she received it and invested the lump sum at 5% interest, she would have earned roughly $8,800. [11] I make no adjustment in the respondent's favour. I find that the respondent, in failing to adhere to the MR, caused his own loss. Closing Date and Valuation Date [12] The MR, which was signed October 5, 2016, and which was subject to each party receiving satisfactory tax advice on or before October 19, 2016, set out steps to be taken in resolving their dispute, including their respective interests in their various family properties, and set a closing date of October 31, 2016 (para. 24: "Transaction above to close October 31 unless otherwise agreed"). Given what had to be accomplished in the interim, the October 31, 2016 date for closing was an aggressive one. [13] The respondent submits that the valuation date should be the date of the hearing, but, for convenience, requests that the court set it as September 30, 2017, which is the corporate year end for two of the companies. The financial statements will be prepared by that time, so there will be no extra cost incurred in preparing an extra set of statements. [14] When the agreement did not close, the claimant sought disclosure of corporate and the respondent's personal accounts relating to the assets being valued in order to determine whether there had been

any dissipation or loss in value of the assets. The respondent provided such disclosure in September 2017. There may still be matters yet to be disclosed. Further, the value of the assets has fluctuated over time, primarily as a result of market conditions affecting the underlying value of the assets. [15] Section 87 of the Family Law Act, S.B.C. 2011, c. 25 [FLA], sets a mandatory date when the value of family property "must be determined": Valuing family property and family debt 87 Unless an agreement or order provides otherwise and except in relation to a division of family property under Part 6, (a) the value of family property must be based on its fair market value, and (b) the value of family property and family debt must be determined as of the date (i) an agreement dividing the family property and family debt is made, or (ii) of the hearing before the court respecting the division of property and family debt. [16] Section 87(b)(ii) of the FLA does not apply in this case as the issue before me was the enforceability of the MR, not the division of the family property. The parties had already addressed that issue in the MR. [17] I consider myself bound by s. 87(b)(i) of the FLA and set the date of valuation at October 7, 2016, the date counsel for the respondent advised there was an agreement: see para. 24 of the indexed decision. [18] The closing date should follow the

time parameters set out in the MR. The offer was made October 5, 2016 and contained an October 31, 2016 closing date, "unless otherwise agreed." It would be consistent with the original agreement that the closing date should now be imminent. I set November 30, 2017 as the closing date "unless otherwise agreed", the court will assist them in doing so. [19] The parties have a dispute over whether $15,000 should be paid back by the respondent to IN8. [20] The claimant says the amount should be paid back to IN8. Paragraph 24 of the draft order prepared by her counsel contains a proviso that "$15,000 (sum previously removed by the Respondent)" will be added back into the equity of IN8 by the respondent, and paid to the claimant as part of the compensation owed to the claimant in exchange for her shares in the company. [21] The respondent says the $15,000 was paid to the claimant and he should not have to account for it. [22] While the respondent is correct that the funds were paid to the claimant, they were paid to her, not as an advance on her share in IN8, but rather as an amount directed to be paid by Master Muir, pursuant to an order of October 22, 2015, "without prejudice to either party's position on interim support." The amount was not characterized as an advance on her interest in IN8. Accordingly, it is an amount appropriately included in the order as an addition to restore

the equity in IN8 to the state it was in prior to the payment. Costs [23] The claimant seeks special costs or, in the alternative, double costs. She says the respondent repudiated the agreement reached in an endeavour to take advantage of her, to better his bargaining position and seek more advantageous settlement terms. While reserving the right to speak to costs, the claimant addressed some of these issues in the original hearing, to which I referred, at paras. 66 and 67: [66] The respondent says the claimant did not act in a reasonable manner in proceeding with the closing agenda in an expeditious manner and he was entitled to repudiate the agreement. While I understand the respondent was anxious to compete the terms of the agreement, I do not accept the respondent's argument that he was entitled to repudiate the agreement. While there were delays in the communications between counsel, a good deal of that delay occurred because the claimant's counsel was away from the city for a period. Understandably, the claimant did not want to proceed in the absence of her counsel. Her delay was not unreasonable in the circumstances. In my view, her counsel addressed all outstanding issues within a reasonable time period and has pressed for the conclusion of the contract terms. [67] In addition I find that the respondent has continued to take steps in furtherance of the agreement

subsequent to his taking the positon that he had repudiated the agreement for the claimant's failure to respond to his counsel. Many of the changes he has proposed are for the purpose of bettering his position, e.g. seeking to adjust spousal and child support to accord with his present income as opposed to having these matters dealt with by a review in accordance with the terms of the MR; many others are minor modifications of the agreement reached by the parties after acceptance of the offer contained in the MR. [24] The claimant relies on Garcia v. Crestbrook Forest Industries Ltd., [1994] B.C.J. No. 2486 (C.A.), and Ring Contracting Ltd. v. B & G Logging Ltd., 119 B.C.A.C. 166 (C.A.). In the context of this case, the claimant says the respondent was dishonest when he represented that he had not received tax advice (when he had), that he had asserted there was no agreement after October 31, 2016 to extend the dates for completion (when there had been such an agreement), and that his continuous rejection of the terms of settlement as reflected in the draft order represent egregious conduct which deserves the sanction of the court by way of an order of special costs. [25] The respondent relies on the decision of Madam Justice Gropper in Westsea Construction Ltd. v. 0759553 B.C. Ltd., 2013 BCSC 1352, where, at para. 73, after summarizing a number of cases, she said: [73] I have

undertaken a thorough review of the cases involving special costs. Having examined the authorities provided by both sides, it is apparent to me that the courts have been somewhat inconsistent in their determination of what amounts to reprehensible conduct and that those authorities must be reconciled. Based upon my review of the authorities, I have derived the following principles for awarding special costs: a) the court must exercise restraint in awarding specials costs; b) the party seeking special costs must demonstrate exceptional circumstances to justify a special costs order; c) simply because the legal concept of "reprehensibility" captures different kinds of misconduct does not mean that all forms of misconduct are encompassed by this term; d) reprehensibility will likely be found in circumstances where there is evidence of improper motive, abuse of the court's process, misleading the court and persistent breaches of the rules of professional conduct and the rules of court that prejudice the applicant; e) special costs can be ordered against parties and non-parties alike; and f) the successful litigant is entitled to costs in accordance with the general rule that costs follow the event. Special costs are not awarded to a successful party as a "bonus" or further compensation for that success. [26] While this was clearly a hard fought case and the respondent may have taken unreasonable positions in rejecting the MR in an attempt to better his position, I do not think his conduct rises to the level where special costs should be awarded. I do think his conduct caused increased costs to the claimant as her lawyer was required to respond to the respondent's tactics. I consequently award that costs be taxed at Scale C. "Greyell J."