K.L.C.C. v. J.M.L.C.

2003BCSC1546

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: K.L.C.C. v. J.M.L.C. 2003 BCSC 1546 Date: 20031015 Docket: E010074 Registry: New Westminster Between: K.L.C.C.

PLAINTIFF And J.M.L.C.

DEFENDANT Before: The Honourable Mr. Justice Ralph Reasons for Judgment Counsel for the Plaintiff John S. Harvey Counsel for the Defendant Margaret Smyth Date and Place of Trial/Hearing: June 9-13, 2003 New Westminster, B.C. [1] Mr. and Ms. K.L.C.C. were married in May 1979 and separated in March 2000. They are the parents of two sons now aged 23 (D.1) and 20 (D.2) who, although beyond the age of majority, are enrolled in programs at BCIT which commenced in September. [2] Ms. K.L.C.C.'s application for divorce is not opposed and there will be judgment granting the divorce. [3] What must be addressed in this action are the division of family assets, Ms. K.L.C.C.'s claim for spousal support, and issues relating to child support. D.1 resides with Mr. J.M.L.C.. D.2 resides with Ms. K.L.C.C.. Pursuant to s.57 of the Family Relations Act, R.S.B.C. 1996 c. 128, a declaration was made December 1, 2000 that there is no reasonable prospect of reconciliation between the parties. Ms. K.L.C.C. is now 49 years old and Mr. J.M.L.C. is 55. [4] Prior to and for a period of time after the marriage Ms. K.L.C.C. worked as a teller and then as a supervisor in a bank. She continued in that employment until the birth of the parties' second son. Ms. K.L.C.C. had the major responsibility for the care of the children and the management of the family household. She returned to some part-time employment

with a bank in the mid-1990s and undertook some on-the-job training with a travel agency around 2000. She has had some part-time employment as a foreign exchange clerk with a travel agency but was laid off from that employment at the time of the trial. [5] After training as an electronics technician at BCIT in 1976, Mr. J.M.L.C. became a technician for a cash register company. In time, he became the company's operations manager. When the company faced financial problems in 1985-86 Mr. J.M.L.C. and three others who had been associated with the company decided to start their own electronic cash register and scanner business. A British Columbia company, A.[ ] Services Ltd ("A.[ ]") was incorporated in 1987 and an Alberta company, [ ]1 Alberta Inc. ("[ ]1), was incorporated approximately 2 years later. Corporate Assets of the Parties [6] Two numbered companies now own the shares of the British Columbia and Alberta companies. A.[ ]'s shares are owned by [ ]2 B.C. Ltd. and the shares of [ ]1 are owned by [ ]3 Alberta Inc. Mr. J.M.L.C. owns one third of the shares of [ ]2 B.C. Ltd. and Ms. K.L.C.C. owns one third of the shares of [ ]3 Alberta Inc. Because the parties and counsel referred to the corporate assets as A.[ ] and [ ]1, however, I will continue to refer to them in this manner or as "the Alberta company" and the "the British Columbia Company". [7] Ms. K.L.C.C. is a director

of the Alberta company but not of the British Columbia company. Mr. J.M.L.C. is a director of the British Columbia company but not of the Alberta company. It is clear that Ms. K.L.C.C. played no role in the operation of the business and that her limited participation in the companies was for the purpose of maximizing the tax advantages to the parties of such participation. Ms. K.L.C.C. has been paid a salary by the Alberta company since its inception and that arrangement has continued to the present time. The parties agree that the fair market value of Ms. K.L.C.C.'s shares in the Alberta company is $535,821 and the fair market value of Mr. J.M.L.C.'s shares in the British Columbia company is $455,400. [8] Over time the companies have prospered and Mr. and Ms. K.L.C.C. have benefited substantially from that success. The parties sold their first home on P.1[ ] and purchased a larger home on P.2[ ] in Port Coquitlam. Ms. K.L.C.C. continues to live in the home. The parties agree that its value is $440,000. [9] For a period of time all payments made to Ms. and Mr. J.M.L.C. by the companies were paid into their joint bank account which was managed by Ms. K.L.C.C.. The payments into the account included regular salary payments but also periodic bonuses paid to Mr. J.M.L.C. by the British Columbia and Alberta companies. [10] Beginning in about 1998 and without informing Ms. K.L.C.C.,

Mr. J.M.L.C. discontinued paying his bonus payments into the joint account but continued the payment in of his salary from the British Columbia company. Ms. K.L.C.C.'s salary from the Alberta company also continued to be paid into the joint account. [11] Prior to the separation of the parties Mr. J.M.L.C. received four bonuses not disclosed to Ms. K.L.C.C.. Their after tax values totaling $115,000 are made up of: 1) $20,000 from A.[ ] in a December 1998 distribution; 2) $20,000 from A.[ ] declared in January 1999 for fiscal 1998; 3) $25,000 from [ ]1 Alberta Inc. in a February 1998 distribution; 4) $50,000 from [ ]1 Alberta Inc. from a June 1998 distribution. [12] It also appears from the evidence that in 1998 and perhaps 1999 Mr. L., one of the principals of the two companies, was resident in Alberta. During that time period Mr. J.M.L.C. made an "arrangement" with Mr. L. to receive a portion of what would otherwise have been Mr. J.M.L.C.'s share of bonuses paid by the companies. The arrangement was that Mr. L. would claim the bonuses as income and pay income tax at the Alberta Rates which were lower than the rates in British Columbia. Mr. J.M.L.C. denies that his purpose in setting up this scheme was to conceal funds from Ms. K.L.C.C.. [13] Corporate records for this time period demonstrate an unequal division of bonuses among the three principals and indicate that Mr. L. was

receiving approximately double the amount paid to the third principal and much more than was paid to Mr. J.M.L.C.. The corporate records also indicate that prior to this time the principals had mostly received equal bonuses. A precise accounting for this arrangement was not presented. The parties agree, however, that the approximate after-tax value of the funds allocated to Mr. L. which would have otherwise been allocated to Mr. J.M.L.C. is $350,000. [14] It is Mr. J.M.L.C.'s evidence that Mr. L. has since paid him this amount by way of a cheque used by Mr. J.M.L.C. to purchase a condominium in Coquitlam in January 2002 for the amount of $282,000. He says that the balance of the $350,000 was used to purchase furniture and household goods for his condominium and to pay schooling expenses of the children but that he kept no records of these transactions. [15] The parties have agreed that the four bonuses described above and the after-tax funds received back from Mr. L. amounting in total to $465,000 are a family asset to be divided between them. For reasons to be considered below, however, they do not agree that the funds should be divided equally. [16] The parties further agree that the following items are assets to be divided equally between them: 1) a shareholder's loan owed to Mr. J.M.L.C. by A.[ ] in the amount of $17,857; 2) a director's loan owed to Mr. J.M.L.C. by A.[ ]

in the amount of $190,500 3) a shareholder's loan owed to Ms. K.L.C.C. by [ ]1 Alberta Inc. in the amount of $4945.13; [17] There are four additional company-related matters disputed by the parties. The first arises out of a 1999 allocation of a bonus of $163,000 to Mr. J.M.L.C. by the Alberta company amounting to $81,500 after tax for which Mr. J.M.L.C. holds a note from the company. The second matter arises out of a further $22,866 bonus paid to Mr. J.M.L.C. by [ ]1 Alberta Inc. on January 31, 2001 and allocated to the 2000 fiscal year. The third matter relates to a 2002 bonus allocation to Mr. J.M.L.C. by A.[ ] in the net amount of approximately $28,000. The $28,000 remains in the company at the present time. I will deal with thee three matters later in the judgment. Other Assets of the Parties [18] As I have noted above the parties matrimonial home on P.2[ ] has an agreed value of $440,000. [19] The parties each have savings accounts. The amount of Ms. K.L.C.C.'s accounts set out in her August 30, 2000 financial statement was $129,000. The amount set out in her statement of May 5, 2003 was $169,582. [20] The amount of Mr. J.M.L.C.'s account set out in his financial statement of November 30, 2000 was a $6000 term deposit. At trial he stated that there was an error in the statement and the amount of the term deposit he held was $60,000 and not $6000. The source of the deposit

was proceeds from the sale of the first matrimonial home at P.1[ ] . The amount set out in his statement of May 22, 2003 was $20,000. [21] Each party has registered retirement savings plans. The value of Ms. K.L.C.C.'s RRSP is $191,556. The value of Mr. J.M.L.C.'s RRSP is $289,121. [22] The furniture and household contents of the matrimonial home remain with Ms. K.L.C.C.. Ms. K.L.C.C. says they have a value of $10,000. Mr. J.M.L.C. says the value is $50,000. The parties' incomes [23] The parties' combined incomes from the Alberta and British Columbia companies have been substantial. It was exceptionally high in 2000 by reason of the "Y2K" computer work associated with the products sold and serviced by the two companies. The combined incomes for recent years are: 1999 $229,000 2000 $446,000 2001 $325,000 2002 $150,000 In addition Mr. J.M.L.C. deferred to 2003 a further $49,733 bonus that was allocated in 2002. [24] In his financial statement of May 22, 2003 Mr. J.M.L.C. states that when Ms. K.L.C.C. "is no longer on the payroll" he anticipates that his income will increase from the present $76,156 to between $100,000 and $150,000. [25] Mrs. K.L.C.C.'s income has mostly been derived from the Alberta company. Her total income and the portion from the Alberta company for the past three years is as follows: 2000 $42,962 ($37,100) 2001 $85,924 ($75,130) 2002 $91,276 ($74,410) Of Ms.

K.L.C.C.'s 2002 income, $9,300 was derived from her travel business employment. Educational and Living Arrangements of the Children [26] D.1 is 23 years old and resides with his father. He is enrolled in a 2-year human resource management program at BCIT which commenced in September. Prior to this he has undertaken some post-secondary education at the University of British Columbia. Mr. J.M.L.C. has paid for D.1's tuition, books and student society fees. He also provides D.1's food and home-related needs. Ms. K.L.C.C. has not contributed to the support of D.1. D.1 is paid $600 per month by A.[ ] for cleaning and related services which are said to be provided to an employee of A.[ ] who resides with the defendant. The nature and purpose of that arrangement are not clear from the evidence. [27] D.2 is 20 years old and resides with his mother. He has commenced a 2-year computer program at BCIT in September. He was employed part-time during the summer. He earned approximately $1800 in 2002. Mr. J.M.L.C. has paid D.2's tuition, books and student society fees. [28] On December 1, 2000, when both children were residing with Ms. K.L.C.C., Mr. J.M.L.C. consented to an order that he pay child support of $1250 per month. The order was varied by consent on June 25, 2001, to provide child support of $778 per month for D.2, who continued to reside with Ms. K.L.C.C.. [29] In December 2001 Mr.

J.M.L.C. purchased a new car for D.1 at a cost of $23,927 as a reward for his school performance. In September 2002 he purchased a new car for D.2's use at a cost of $22,157 although title to the vehicle remains in Mr. J.M.L.C.'s name. The Issues [30] The following issues must be addressed: 1) the determination of family assets; 2) the division of family assets, including the issue of whether the court should infer that Mr. J.M.L.C. has concealed assets in a manner which should affect the division; 3) whether, as part of the division of assets, Mr. J.M.L.C. should be required to buy out Ms. K.L.C.C.'s interest in the Alberta and British Columbia by way of compensation order; 4) child support for D.2; 5) Ms. K.L.C.C.'s claim for spousal support 6) costs, including Ms. K.L.C.C.'s claim for special costs. [31] The most complex issue raised in the action is the determination and division of family assets. The parties agree, however, that, excluding furniture and household contents, the assets in issue and their values are as set out below. The item numbers correspond with a Scott schedule produced by the parties as follows: 1) Matrimonial home $440,000 2) A.[ ] - [ ]2 455,400 3) [ ]1- [ ]3 535,821 4) Shareholder's loan (A.[ ]) 17,857 5) Director's loan (A.[ ]) 190,500 6) Bonus A.[ ](2002) 28,022 7) Shareholder's loan - [ ]1 4,945 8) Note due to Mr. J.M.L.C. - [ ]1 104,367 9) Bonus

[ ]1 (from Mr. L.) 250,000 10)Bonus A.[ ] (from Mr. L.) 100,000 11) Bonus January 1999 20,000 12) Bonus December 1998 20,000 13) Bonus June 1998 50,000 14) Bonus February 1998 25,000 15) Deleted by the parties 16) Ms. K.L.C.C.'s investment 129,000 17) P.1[ ] proceeds 60,000 18) Ms. K.L.C.C.'s RRSP 191,556 19) Mr. J.M.L.C.'s RRSP 289,121 20) Insurance policy (cash value) 10,300 Total (rounded) $2,922,000 [32] Mr. J.M.L.C. disputes the inclusion of items 6, 8 and 17. Item 6 relates to a 2002 bonus allocation to Mr. J.M.L.C. by A.[ ] in the net amount of $28,022. The funds remain in the company at the present time. It is Ms. K.L.C.C.'s position that the funds are a family asset but in her submissions recognized that "the parties are entitled to the salaries they received each year." Mr. J.M.L.C. says that the funds represent post-separation income to which Ms. K.L.C.C. has no claim. In my view there is no basis to treat this amount as a family asset and I conclude that it should be deleted from the list of assets. [33] Item 8 is made up of two parts. The first arises out of a 1999 allocation of a bonus of $163,000 to Mr. J.M.L.C. by the Alberta company. It amounts to $81,500 after tax for which Mr. J.M.L.C. holds a note from the company. Ms. K.L.C.C. says that it is the equivalent of a shareholder loan in the company and was owing to Mr. J.M.L.C. at the date of the triggering

event. As such Ms. K.L.C.C. claims one-half of it. [34] In my view it is significant that the records of [ ]1 Alberta Inc. entered as an exhibit in the trial show that for 1999 the other two shareholders in the equivalent position to Ms. K.L.C.C. were allocated "wages" of $60,000 and Ms. K.L.C.C. was allocated no amount. The other two managers in the equivalent position of Mr. J.M.L.C. were allocated bonuses of $103,000 and Mr. J.M.L.C. was allocated $163,000. While it may be questionable whether this portion of item 8 is a "family asset", I conclude that $30,000 (the $60,000 "wages" after tax) of the $81,500 is held for the benefit of Ms. K.L.C.C.. [35] The second part of item 8 arises out of a further $22,866 bonus paid to Mr. J.M.L.C. by [ ]1 Alberta Inc. on January 31, 2001 and allocated to the 2000 fiscal year. Mr. J.M.L.C. says that the funds are post-separation income and not a family asset and that would appear to me to be supported by the evidence. In my view Ms. K.L.C.C. has not demonstrated a basis on which this payment can be characterized as a family asset and I would exclude it from the schedule of assets. [36] In the result, it is my view that the amount set out in item 8 should be deleted from the schedule of assets but there should be added to Ms. K.L.C.C.'s ultimate share of the assets a further $30,000. [37] Item 17 is characterized by Ms. K.L.C.C. as "P.1[ ]

proceeds". Mr. J.M.L.C. received all of these proceeds and, although the evidence is not entirely clear, deposited them in his own bank account or a term deposit. It is his evidence that he used the funds for living expenses and that they have now been reduced to approximately $20,000. His position is that $20,000 is the appropriate amount to use in item 17 and that the proper characterization of that amount is as a savings account. [38] I can find no basis in the evidence to conclude that Ms. K.L.C.C. has received her share of the P.1[ ] sale proceeds. In my view the amount of $60,000 allocated to item 17 is correct. [39] I therefore find the value of family assets exclusive of the furniture and contents of the home to be $2,790,000. [40] Turning to the division of assets, the parties agree that a substantial number of the assets should be divided equally between them. It is the position of Ms. K.L.C.C., however, that 6 of the assets should be divided unequally in her favour. That position is not based on the factors set out in s. 65 of the Family Relations Act, but rather on what Ms. K.L.C.C. alleges is Mr. J.M.L.C.'s significant failure to disclose his assets. Ms. K.L.C.C. says that Mr. J.M.L.C. has concealed assets and, as a means of redressing the resulting loss to Ms. K.L.C.C., the court should divide the 6 assets disproportionately in her favour to compensate her for

being unable to share in the value of concealed assets. [41] In support of her submission Ms. K.L.C.C. points to Mr. J.M.L.C.'s failure to disclose a CIBC bank account in his first financial statement and the fact that the amounts in items 11, 12, 13 and 14 of the schedule of assets cannot be fully traced into his bank account. [42] In addition Ms K.L.C.C. refers to the suspicious manner in which Mr. J.M.L.C. directed the payment of company funds to Mr. L.. Ms. K.L.C.C. says that this was part of a design by Mr. J.M.L.C. both before and after this litigation commenced to deprive her of assets. [43] Ms. K.L.C.C. also says that of particular concern is the fact that Mr. J.M.L.C. lied in his examination for discovery when he denied advancing funds to the woman with whom he was having a relationship. [44] As noted above, the parties' first family home was on P.1[ ] in Port Coquitlam. When the parties purchased their home at P.2[ ] in Port Coquitlam they retained the P.1[ ] home as a rental property. Mr. J.M.L.C. later commenced a relationship with the tenant at the property. [45] Ms. K.L.C.C. learned of the relationship and demanded the eviction of the tenant. Mr. J.M.L.C. provided the tenant with $65,000 to enable her to purchase a condominium. The source of the funds was Mr. J.M.L.C.'s personal bank account. In an examination for discovery in July 2001 Mr. J.M.L.C. denied making

any contribution to the purchase of the condominium. He did not retract this false statement until many months later. [46] At trial Mr. J.M.L.C. said that he failed to tell the truth because he knew that it could make the woman's condominium an issue in these family law proceedings [47] Counsel for Ms. K.L.C.C. submits that this is a case similar to Cunha v. da Cunha (1994), 99 B.C.L.R. (2d) 93 (S.C.) in which the court found that the respondent had concealed assets and drew an inference that the value of undisclosed assets was at least equal to the value of the disclosed assets. [48] In Eng v Eng, [1998] B.C.J. No. 2574 (S.C.) (Q.L.) Humphries J. referred to Cunha and stated at ¶43-44: According to Cunha, supra, if, at the conclusion of the trial, the court is satisfied on a balance of probabilities that one party has not fully disclosed assets, there an assumption, a rebuttable presumption, or an inference that the concealment is ongoing, and that this should affect the division of assets. In Cunha, the learned judge, being satisfied that the respondent was concealing assets, drew an inference that the value of the concealed assets was equal to the value of those disclosed. As it was an oral judgment following a trial in which the respondent was, for most of it, unrepresented, there is no review of the evidence upon which the learned judge reached the conclusion that assets

were being concealed. It appears, however, that the judge considered such an inference inevitable, given the course of the proceedings. I stress, however, that in order for the presumption to operate, or the inference to be drawn, the court must be persuaded that assets are not fully disclosed. [49] I have considered the submissions of Ms. K.L.C.C.'s counsel. I have also considered Mr. J.M.L.C.'s evidence at the trial, and the corporate financial records that have been produced. In my view Mr. J.M.L.C. has been more forthright in the trial than in his examinations for discovery. More importantly, the corporate financial records of the companies provide a useful additional view of what funds have been available to Mr. J.M.L.C. for the past number of years. They are of assistance in determining whether in the light of this financial information it is likely that Mr. J.M.L.C. has been able to acquire and conceal further assets from Ms. K.L.C.C.. I am not persuaded that Mr. J.M.L.C. has failed to disclose further assets. As a result, I conclude that there is no basis to accede to Ms. K.L.C.C.'s submission to divide the 6 assets in issue disproportionately in Ms. K.L.C.C.'s favour. [50] An equal division of the assets would provide each party with $1,395,000. Ms. K.L.C.C. proposes that this be achieved in part by vesting in her the following: 1) the matrimonial home $440,000 2) Ms.

K.L.C.C.'s investments $129,000 3) Ms. K.L.C.C.'s RRSP $191,000 4) the insurance policy cash value $ 10,300 Total $770,300 I agree with this submission. [51] Ms. K.L.C.C. also proposes that the parties' RRSPs be equalized by a rollover to her of a portion of Mr. J.M.L.C.'s RRSP. I calculate this amount to be $48,832. I agree with this submission. [52] Ms. K.L.C.C. proposes that the balance of approximately $575,900 be paid by a compensation order against Mr. J.M.L.C.. The most significant component of this proposed order is the value of Ms. K.L.C.C.'s interest in the shares of the two companies. The shares of the two companies are valued at $991,221. Ms. K.L.C.C. seeks to have Mr. J.M.L.C. purchase her interest. Mr. J.M.L.C. opposes such an order. [53] Mr. J.M.L.C. submits that he does not hold a majority interest in the companies and would remain a minority shareholder even if he acquired Ms. K.L.C.C.'s shares. He says that the group of potential purchasers is small and it would be difficult to sell his interest. He suggests that Ms. K.L.C.C.'s proposal provides her with all the "good assets" and he principally receives the shares, the estimated value of which may never materialize. [54] Mr. J.M.L.C. submits that if he is compelled to pay Ms. K.L.C.C. for her interest in the companies, then the value should be discounted to reflect the risk that the estimated value will not

materialize. He says that the shares should be discounted by $110,000, which constitutes approximately a 22% discount from the fair market value. [55] Ms. K.L.C.C. argues that she has never been involved in the operation of the business and has no level of control given her minority shareholding. She submits further that Mr. J.M.L.C. has demonstrated his capability of manipulating the corporate decisions to deflect her salary to bonuses payable to him. [56] In response to Mr. J.M.L.C.'s submission that the compensation payable to her should be discounted if he is compelled to purchase her shares, Ms. K.L.C.C. says that the parties have agreed on a share value and it should not now be discounted. [57] The starting point for determining whether a buy-out should be ordered is Blackett v. Blackett (1989), 22 R.F.L. (3d) 337 (B.C.C.A.). The application of s. 56(2) of the Family Relations Act gives Ms. K.L.C.C. an undivided one-half interest in the shares of [ ]2 B.C. Ltd. and gives Mr. J.M.L.C. an undivided one-half interest in the shares of [ ]3 Alberta Inc. What must be addressed are the factors that would cause the court to depart from the division of assets which arises from the application of s. 56(2). [58] Blackett recognizes that "[a] compensation order ought not to force the payor to borrow to the point of crippling himself with debt" (at 345). Mr. J.M.L.C. submits that,

even applying the discounted value to the shares he proposes and rolling over the balance of his R.R.S.Ps, a compensation order for the value of Ms. K.L.C.C.'s shares amounts to approximately $330,000. While a compensation order may not "cripple" Mr. J.M.L.C. it would clearly be onerous even if it is achieved in part by a further transfer of his RRSP's to Ms. K.L.C.C.. [59] In my view it is also significant that the estimated $991,221 value of the shares constitutes more than one-third of the value of the family assets. The particular significance is that, if Mr. J.M.L.C. holds all of the shares and the estimated value is too high, he risks receiving substantially less than 50% of the value of the family assets notwithstanding that the division of assets on its face would purport to be an equal division. [60] Although the parties have agreed on valuations of the fair market value of the shares for purposes of this action, I note that the share valuations obtained by each of the parties differ markedly from each other. For example, there are substantial differences in the valuations given to goodwill. In addition, the calculations do not include any discounts to reflect the minority position of the parties as shareholders. In making these observations I recognize that in Blackett the court stated that "compensation" need not amount to "fair market value". [61] If the shares in

issue are transferred to Mr. J.M.L.C., he will remain a minority shareholder in the companies. In addition, the evidence before me is that the companies do not have restrictions on the transfer of shares which would prevent their transfer to each of the parties. Further, should there be evidence of activity on the part of Mr. J.M.L.C. or the companies to deprive Ms. K.L.C.C. of value, there are corporate remedies that would remain available to her. [62] After considering the submissions of the parties and the factors set out above, I have concluded that this is not a case where Mr. J.M.L.C. should be required to buy out Ms. K.L.C.C.'s shares. As a result, each party must take all necessary steps to effect a transfer of one half of their shares to the other. In the event that, in spite of the evidence, there turns out to be some corporate impediment to this, there will be an order that each party hold one-half of their shares in trust for the other. [63] One half of the value of the shares is $495,610. This amount together with the assets set out above valued at $770,300 and the rollover of $48,832 of Mr. J.M.L.C.'s RRSPs totals $1,314,742. Adding the $10,300 cash value of the life insurance policy to Ms. K.L.C.C.'s share provides Ms. K.L.C.C. with $1,325,042. The balance of Ms. K.L.C.C.'s equal share of the family assets is $70,000. There will be an order that Mr. J.M.L.C.

compensate Ms. K.L.C.C. for this amount together with the $30,000 owed to Ms. K.L.C.C. for the reasons set out in ¶ 36 above. [64] The remaining one half of the matrimonial assets exclusive of the furniture and household contents will vest in Mr. J.M.L.C.. [65] There will be an order that the furniture and household contents of the matrimonial home be divided equally between the parties in specie. The articles described in the trial as Ms. K.L.C.C.'s mother's artwork will not constitute part of the furniture and household contents of the parties. In the event that the parties cannot agree on a division of the furniture and household contents, the matter will be referred to the registrar for determination. Spousal Support [66] Approximately 85% of Ms. K.L.C.C.'s income in the past 3 years has been derived from her situation as a shareholder and director of the Alberta company and the income splitting arrangement she has had with Mr. J.M.L.C.. The income splitting arrangement has now come to an end. No evidence was presented, however, on what dividend income Ms. K.L.C.C. might expect as a shareholder in the Alberta and British Columbia companies. Ms K.L.C.C. has the experience and capacity to earn some income at the present time. She will also receive some income from her investments and is likely to derive some dividends from her shares in the two companies. In my view it is

reasonable to assume that income from these sources should amount to an annual income of at least $30,000. [67] Ms. K.L.C.C. states her monthly expenses at $8,925. This amount includes compulsory deductions of $1820. It also includes child related expense of $1,630 of which $400 is allocated for car insurance and gas. The level of claimed expenses would appear to exceed what has been Ms K.L.C.C.'s actual level of expenses since separation as she has increased her savings over that period of time. As the home is fully paid for, Ms. K.L.C.C. does not have mortgage obligations. [68] Mr. J.M.L.C. states his monthly expenses at $9,908. This amount includes compulsory deductions of $1832 and child related expenses of $1300. [69] Mr. J.M.L.C. is currently drawing $3000 per month from his employment net of deductions but this amount is substantially below what his level of income has been in past years. It amounts to an annual income of approximately $76,000. The combined incomes of Mr. and Ms. K.L.C.C. from the Alberta and British Columbia companies in 2002 was $150,000 not including a bonus of $49,733, the payment of which was deferred to 2003. [70] The valuation report of Mr. Crosson suggests that it is reasonable to assume that fiscal 2002 operational results after normalization are the best indicator of the companies' earnings. On my assessment of the evidence I have concluded

that Mr. J.M.L.C. is likely to earn $190,000 in 2003. [71] I have considered the factors and the objectives of spousal support set out in s.15.2 of the Divorce Act, R.S.C. 1985, c. 3 (2nd supp), as well as the value of the family assets which will be received by Ms. K.L.C.C.. I am satisfied that she continues to suffer economic disadvantage arising from the relatively long marriage and is not presently in a position of economic self-sufficiency. Having regard to her means as described above and the means of Mr. J.M.L.C. I have concluded that Mr. J.M.L.C. must pay spousal support to Ms. K.L.C.C. in the amount of $3000 per month. This order should be reviewed in two years. Child Support [72] Ms. K.L.C.C. claims child support from Mr. J.M.L.C. for D.2 under the Child Support Guidelines as if he were under the age of majority. Mr. J.M.L.C. opposes that order on the ground that he supports and pays the school fees and expenses for D.1 and also pays the school fees and expenses of D.2. [73] Mr. J.M.L.C. submits that each parent should be responsible for the living expenses of the child who resides with him or her and Mr. J.M.L.C. would continue to pay the school fees and related expenses of both children. [74] Both children have embarked on 2-year full-time programs at BCIT which appear to be directed toward career development for each of them. D.1 has received more post-secondary

education than D.2 has. He also appears to be receiving some income through A.[ ] which has not been clearly identified in Mr. J.M.L.C.'s evidence but is not sufficient to meet all of his living and educational expenses. D.2 earns some summer income and occasional part-time income but appears to earn less than D.1. [75] The past academic performance of both children is not particularly distinguished, although there is evidence that D.1's improved performance at the University of British Columbia was the basis of Mr. J.M.L.C. purchasing a vehicle for him. [76] Taking into account these matters and having regard to the factors described in Farden v. Farden (1993), 48 R.F.L. (3d) 60, I am satisfied that both children continue to be children of the marriage. [77] Section 3(2) of the Child Support Guidelines makes the Guidelines applicable to children over the age of majority unless the court considers that approach to be inappropriate having regard to the means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child. I have concluded that a full application of the Guidelines is inappropriate in the circumstances particularly in light of the fact that Mr. J.M.L.C. has been paying all of the school related expenses of both children. [78] The applicable monthly Guidelines amount for one child based upon Mr.

J.M.L.C.'s income of $190,000 is $1335. If Ms. K.L.C.C. were required to pay support for D.1, the monthly Guideline amount for one child based on her income of $66,000 (imputed income of $30,000 and spousal support of $36,000) is $541. While it is not directly applicable, I think it is appropriate to apply the approach of s.8 of the Guidelines to the basic child support for D.2 but to require Mr. J.M.L.C. to continue to pay for D.2's school as he has to date. This will enable D.2 to complete the program in which he is enrolled. As a result there will be an order that Mr. J.M.L.C. pay child support to Ms. K.L.C.C. in the amount of $795 per month until D.2 completes the 2-year program in which he is presently enrolled. Costs [79] Ms. K.L.C.C. seeks special costs in the absence of an order in the nature of that in Cunha, supra. She asserts that Mr. J.M.L.C.'s conduct in the litigation was "reprehensible" and there is a need to dissuade litigants from a course of concealment and deceit. In addition Ms. K.L.C.C. says that she has been put to significantly more expense in pursuing her claim than was required. [80] It is clear from the evidence that Mr. J.M.L.C. was less than frank in his disclosure of assets early in the action. In addition, Mr. J.M.L.C. lied under oath in his examination for discovery in denying that he loaned or gave $65,000 to the woman with whom he had commenced

a relationship to enable her to purchase a condominium. While counsel for Ms. K.L.C.C. has also characterized Mr. J.M.L.C.'s above-described transfer of funds to Mr. L. as part of Mr. J.M.L.C.'s deceit in concealing assets from Ms. K.L.C.C., I have not concluded that such was his purpose. In making this statement, I am not making any finding as to the propriety or the legality of the tax arrangement engaged in by Mr. J.M.L.C. and Mr. L.. [81] Counsel for both parties referred to a number of cases in which the court has had to consider whether deceit by a party, particularly in relation to assets, should result in an order for special costs. In Emery v. Emery, [1994] B.C.J. No. 318 (S.C.) (Q.L.) the respondent was ordered to pay special costs. He had put forward false evidence at a hearing before the Master, he testified falsely at an examination for discovery and at trial he told lies "frequently and flagrantly". [82] In Yang v. Yang, 2001 BCSC 1322 the court ordered special costs against the defendant. At ¶ 11 Macaulay J. said of the defendant: He has also lied to the courts; this includes proceedings in Taiwan as well as the present, starting with his pleadings, during interlocutory proceedings and again, at trial. Mr. Yang was thoroughly mendacious and unreliable whenever his perceived self-interest conflicted with the truth. [83] In R.A. v. J.S.A., [1999] B.C.J. No. 2062

(S.C.) (Q.L.), A. F. Wilson J. described the plaintiff at ¶ 9: His life appears to have been based on deceit, in particular in his relationship with Mrs. J.S.A. I am satisfied that has continued at this trial. At ¶ 12 he stated: He has shown himself to be willing to deceive his wife, governmental authorities, and the courts, when it suited his purposes. [84] The court found that although Mr. R.A. had been substantially successful, there would be no order for costs in light of his non-disclosure of assets and failure to comply with an order to deliver a list of documents. [85] In Taylor v. Taylor, 2001 BCSC 888, the plaintiff was found to have sworn some deliberately misleading statements before trial and in her property and financial statement. Fraser J. considered that it was "appropriate" that the plaintiff suffer some consequence and awarded her the costs of the trial on Scale 3 but denied her costs and disbursements of all pre-trial proceedings. [86] On my reading of the case law, it is not every dishonest act in the course of a proceeding that, even though reprehensible, results in an order of special costs. Among the factors the court must examine are the seriousness of the reprehensible conduct, its extent, its impact upon the opposing party, the need to deter others and any mitigating factors which might bear on the conduct of the dishonest party. [87] In the present

case Mr. J.M.L.C.'s lie under oath on the examination for discovery must be regarded as serious. Its impact upon Ms. K.L.C.C. was not only the deception itself but also its effect of causing her to have to scrutinize Mr. J.M.L.C.'s financial disclosure in great detail and at considerable expense. Mr. J.M.L.C., however, did disclose the lie before trial, albeit after some considerable delay. As I have noted above, I have also concluded that Mr. J.M.L.C. was more forthright at trial than at his examination for discovery. [88] I have concluded that special costs will not be ordered against Mr. J.M.L.C.. Although the success of the parties might be considered to be divided, it is my view that Ms. K.L.C.C. should recover her costs on scale 4. Scale 4 is appropriate in light of the additional extensive examination of financial and other records that was required to be undertaken on behalf of Ms. K.L.C.C. following Mr. J.M.L.C.'s false answers on the examination for discovery. What was a matter of ordinary difficulty became a matter of more than ordinary difficulty. "Bryan F. Ralph, J." The Honourable Mr. Justice Bryan F. Ralph