



COURT OF APPEAL FOR ONTARIO

CITATION: Buttar v. Buttar, 2013 ONCA 517

DATE: 20130815

DOCKET: C55491

Rosenberg, Goudge and Tulloch JJ.A.

BETWEEN

Doris Marion Buttar

Applicant  (Respondent)

and

Bruce Edgar Buttar

Respondent (Appellant)

Aaron M. Franks and Michael Zalev, for the Appellant

Donald R. Good, for the Respondent

Heard: April 30, 2013

On appeal from the judgment of Justice Mary J. Hatton of
    the Superior Court of Justice, dated April 18, 2012 and the costs order dated
    September 19, 2012.

Rosenberg
    J.A.:

[1]

This appeal arises out of a judgment by Hatton J. resolving a number of
    issues following the parties separation after a 36-year marriage. During most
    of that time, the appellant husband and the respondent wife were engaged in a
    dairy farming operation and accumulated a number of properties for that
    purpose. The appellant raises issues concerning the calculation of Net Family
    Property (NFP) and spousal support. However, the principal issue involves the
    application judges order dividing the six jointly-owned farm properties
    between the appellant and the respondent in satisfaction of the equalization
    and spousal support payments. .

[2]

For the following reasons, I would allow the appeal in part, and set
    aside the order distributing the properties between the parties. I would allow
    the appellant to deduct his disposition costs from his NFP, but I would dismiss
    his appeal as it relates to the exclusion of the milk quota from his NFP and the
    payment of spousal support.

A.

THE FACTS

[3]

The following summary sets out this familys history and the history of
    the acquisition of the jointly held properties.

[4]

The appellant and respondent married in 1972 and separated in 2008. They
    have three adult children. The appellants parents were farmers. After the
    parties, who had met in college, graduated, the appellant began to work on the
    farm with his father, although he also held another job. The respondent worked
    as a teacher. In 1973, the parties built a house on the Donaldson Road property
    that was owned by the appellants parents. In 1976, the appellant started
    farming full-time. Two years later, the appellants parents gave the parties
    the Donaldson Road property.

[5]

In 1979, the appellants parents transferred ownership and control of
    their farming business to their son and his wife. As part of the transaction,
    the Home/Main farm, including its properties, was gifted to the appellant and
    the respondent jointly. 5,970 kg of milk quota and equipment were gifted to the
    appellant alone. The livestock was sold to the appellant for $55,000. The
    transfer was structured so as to minimize income tax consequences. Particularly,
    by structuring the milk quota part of the disposition of the farm as a gift to his
    son, the appellants father was able to avoid tax consequences in accordance
    with    s. 73 of the
Income Tax Act
, R.S.C. 1985, c. 1 (5th Supp). The
    Dairy Farmers of Ontario confirmed that there was no selling price listed on
    the application to transfer the quota.

[6]

In 1980, the appellant started farming with his cousin David. He and
    David purchased the Watt farm. The joint farming operation continued until
    1988. At that time, the appellant and David divided their milk quota and the
    appellant purchased some of Davids quota, leaving the appellant with 8,785 kg.
    of quota. In the meantime, the parties and their children had moved into the
    Home/Main Farm and the appellants parents had moved into the Donaldson Road
    Property.

[7]

In 2002, the parties purchased another farm, the Blezard Farm. In 2004,
    they purchased Davids interest in the Watt farm. In 2007, they purchased
    Davids Farm. Finally, at some point the parties also purchased the School
    Farm.

[8]

Thus, at the time of separation, the parties jointly owned six properties:

·

The Home\Main Farm;

·

The Donaldson Road property, which is comprised of two severed
    lots;

·

The Watt Farm;

·

The Blezard Farm, which is also comprised of two lots;

·

Davids Farm, and

·

The School Farm

[9]

The parties also jointly held a time-share interest in a Collingwood
    property, which was also transferred as part of the trial judges order.

[10]

In
    the 1990s, the parties began a series of improvements to the family farm
    business and borrowed heavily from Farm Credit Canada to finance the
    improvements. At the date of separation, the gross value of the farm properties
    was $2,330,000 and the jointly owed debt to Farm Credit Canada was $1,411,574.00.
     The appellant also owned 27,561 kg of milk quota with a value of $1,867,572.30
    (before capital gains tax) and farm equipment and cattle with a value of
    $370,072.12 (before capital gains tax). The parties had other assets as
    follows: the appellant, $74,269.16; the respondent $56,594.

[11]

After
    the separation, the parties and their children conducted some negotiations about
    what to do with the dairy operation. The parties have different views as to why
    those negotiations failed. In the event, the appellant sold the dairy quota in
    two lots in early 2010 for $1,867,572.30, which he used to pay off the FCC
    debt. The balance of $358,253.46 was paid into the respondents lawyers trust
    account. These funds were eventually disbursed by agreement between the
    parties. Later in 2010, the appellant sold the dairy herd and farm equipment.
    He used some of this money to purchase other equipment, including farm
    machinery and a tractor trailer. As a result of the various sales, the
    appellant incurred $280,000 in capital gains taxes after using his $750,000
    lifetime capital gains exemption.

[12]

At
    the time of application, the respondent was 65 years of age and the appellant
    was 62 years of age. During the marriage, the respondent held a number of jobs
    to supplement the farm income. She also assisted with the dairy operation until
    it was sold in early 2010. During the last years of the marriage, the
    respondent had only sporadic employment with a local service club. Thus, from
    2007 to 2009, she earned less than $3,000 a year. In 1989, the respondent was
    diagnosed with breast cancer. A second cancer diagnosis was made in 2006. As a
    result of the cancer and subsequent treatment the respondent has difficulty
    with heavy manual labour.

[13]

The
    farm business was successful. The income was reported on the appellants tax
    return and reached almost $900,000 in 2010. After the dairy operation ended,
    the appellant derived income from various jobs. He expected his annual income
    to be less than $20,000. The appellant paid spousal support of $2,000 per month
    from the date of separation to February 2010, when the dairy operation ceased.
    He had not paid any spousal support since that time.

B.

THE ISSUES

[14]

By
    the time of the application, many financial issues had been settled. The
    application judge dealt with six issues, four of which remain issues on this
    appeal as follows:

1. Whether the appellant can deduct from
    his NFP the present value of the disposition costs, and in particular the
    capital gains tax, that he will incur upon sale of the properties.

2. Whether the appellant can exclude
    from his NFP the milk quota his father gave him in 1979.

3. How much spousal support is owed to
    the respondent.

4. Whether, and if so how, the jointly-owned properties should
    be distributed.

ISSUE 1: DISPOSITION COSTS

(1)

The Reasons of the
    Application Judge

[15]

The
    appellant claimed that, in calculating his NFP, he was entitled to claim as a
    debt any capital gains he would incur after using his $750,000 lifetime
    exemption. The application judge allowed the appellant to claim as a debt the
    capital gains already incurred at the time of the application. She did not,
    however, allow him to claim the expected capital gains tax liability that would
    arise from the proposed sale of all the farm properties. The appellant sought
    to claim $270,000.

[16]

The
    application judge concluded that the sale of the properties was not inevitable.
    Her reasoning was related to her ultimate conclusion that each party would be
    given specific property as a result of the judgment in this case. She
    speculated that the parties, in deciding what to do with the properties
    respectively allotted to them, might choose to retain the properties or
    transfer them to their children. She therefore held that neither party would be
    given a capital gains deduction for the future sale of any property, and that
    each would individually bear the costs of any capital gains tax incurred on
    future dispositions. It should be pointed out that this would not be a serious
    hardship for the respondent, since she still had her lifetime capital gains tax
    exemption available to her.

(2)

Analysis

[17]

In
    my view, the application judge erred in not permitting the appellant to treat
    as a debt under s. 4(1) of the
Family Law Act
, R.S.O. 1990, c. F.3
    (the Act) the capital gains taxes he would incur on the proposed sale of the
    properties. There are a couple of reasons for this, including, as will be
    discussed below, that the appropriate order in this case would have been to
    order the sale of the properties in question. Once sold, the disposition costs
    would be inevitable.

[18]

Quite
    apart from the appropriateness of an order for sale in this case, the
    application judge erred in law in refusing to allow the capital gains tax as a
    cost of disposition.

[19]

The
    test for deducting disposition costs from NFP as set out in
Sengmueller v.
    Sengueller
(1994), 17 O.R. (3d) 208 (C.A.), at pp. 213, is as follows:

In my view, it is equally appropriate to take such costs into
    account in determining net family property under the
Family Law Act

if
    there is satisfactory evidence of a likely disposition date and if it is clear
    that such costs will be inevitable when the owner disposes of the assets or is
    deemed to have disposed of them
. In my view, for the purposes of
    determining net family property, any asset is worth (in money terms) only the
    amount which can be obtained on its realization, regardless of whether the
    accounting is done as a reduction in the value of the asset, or as deduction of
    a liability: the result is the same. While these costs are not liabilities in
    the balance sheet sense of the word, they are amounts which the owner will be
    obliged to satisfy at the time of disposition, and hence, are ultimate
    liabilities inextricably attached to the assets themselves. This is consistent
    with McPherson but goes beyond it. [Emphasis added.]

[20]

This
    court had, in the earlier case of
Starkman v. Starkman
(1990), 75 O.R.
    (2d) 19 at pp. 23 and 26, adopted the approach from
McPherson v. McPherson
(1988), 63 O.R. 2(d) 641, as set out in the following passage from
McPherson
,
    at p. 647:

... an allowance should be made in the case where there is
    evidence that the disposition will involve a sale or transfer of property that
    attracts tax consequences, and it should not be made in the case where it is
    not clear when, if ever, a sale or transfer of property will be made and
thus
    the tax consequences of such an occurrence are so speculative that they can
    safely be ignored
. [Emphasis added.]

[21]

The
    test used by the application judge is stricter than the tests in
Sengmueller
and
McPherson
. The application judge looked to whether the
    disposition of the assets was inevitable. Instead, she should have determined
    whether it was more likely than not that the assets would be sold, at which
    point disposition costs would inevitably be incurred.

[22]

Quite
    apart from the appropriateness of ordering the properties sold, the evidence
    established that the appellant would have to sell some of his property
    interests in order to pay the taxes he owed on the sale of equipment and to pay
    the costs order. At that point, the appellant would inevitably incur capital
    gains tax, inasmuch as he had already used up his lifetime exemption.

[23]

The
    NFP of the parties must be adjusted accordingly. Of course, the respondent will
    also be entitled to deduct her costs of disposition.

ISSUE 2:  THE 1979 MILK QUOTA

(1)

The Reasons of the
    Application Judge

[24]

At
    the application, the appellant sought to exclude from his NFP the value of the
    milk quota provided to him by his father in 1979 on the basis that it was a
    gift within the meaning of s. 4(2) of the Act, which provides as follows:

4(2)    The value of the following property that a spouse owns
    on the valuation date does not form part of the spouse's net family property:

1. Property, other than a matrimonial home, that was
    acquired by gift or inheritance from a third person after the date of the
    marriage.

[25]

The
    application judge found that the milk quota was transferred in 1979 as part of
    a larger transaction involving the transfer of the family farm from the
    appellants parents to the parties. She found that the transfer was structured so
    as to minimize tax consequences. As a result of this transaction, both parties
    assumed all the liabilities associated with the transfer. The respondent shared
    equally in assuming the liabilities and paying the expenses of all the assets,
    including the milk quota.

[26]

The
    application judge found that the transfer of the milk quota was not a gift
    because there was consideration for the transfer. This consideration took the
    form of a life interest given to the appellants parents in the family farm.
    The father lived on the farm until his death, while the mother remained until
    she moved to a retirement home. As the application judge said:

[The appellants parents] were both financially provided for by
    the parties for the rest of their lives from income generated by all the
    transferred assets, including the milk quota. The wife cared for both the
    husbands parents until their deaths.

[27]

The
    application judge found that, in any event, the appellant had not shown that
    the quota that was transferred in 1979 was still in the appellants possession
    at the time of separation. The application judge referred to a history of sales
    and purchases of quotas over the years, and concluded that the quota ultimately
    sold in 2010 had been acquired through the combined efforts of both of the
    parties.

(2)

Analysis

[28]

The
    term gift is not defined in the Act. In
McNamee v. McNamee
, 2011
    ONCA 533, 106 O.R. (3d) 401, this court set out the elements of a gift in the
    following way, at para. 24:

The essential ingredients of a legally valid gift are not in
    dispute. There must be (1) an intention to make a gift on the part of the
    donor, without consideration or expectation of remuneration, (2) an acceptance
    of the gift by the done, and (3) a sufficient act of delivery or transfer of
    the property to complete the transaction:
Cochrane v. Moore
, (1890),
    25 Q.B.D. 57 (C.A.), at pp. 72-73 Q.B.D.; Mossman and Flanagan,
supra
,
    at p. 441, Bruce Ziff,
Principles of Property Law
, 5th ed. (Toronto:
    Carswell, 2010), at p. 157.

[29]

In
Peter v. Beblow
, [1993] 1 S.C.R. 980, at pp. 991-92, McLachlin J.
    referred to giving without expectation of remuneration as the central element
    of a gift at law. The only element in dispute in this case is whether the
    appellants father intended to make a gift of the milk quota without
    consideration or expectation of remuneration.

[30]

In
    support of his argument that there was no consideration for the transfer, the
    appellant points to the following pieces of evidence, among others: that the
    appellants father followed the advice of his accountant to gift the quota at a
    deemed valued of Nil to minimize income tax consequences at the time of the
    transfer; that the Dairy Farmers of Ontario confirmed there was no selling
    price listed on the quota transfer application, and that the appellant
    testified that he did not pay anything for [the quota].  The appellant also relies
    upon this courts decision in
McNamee
and submits that the application
    judge focused on the motive for the transfer (deferring taxes) instead of the
    nature of the transaction
.

[31]

In
McNamee
, the father executed a Declaration of Gift at the time he
    issued common shares to his sons, which included the appellant husband, as part
    of an estate freeze. The husband was not aware of the details of the estate
    freeze transaction. This court held that the trial judge in
McNamee
erred in finding that the transfer of the shares was not a gift. With respect
    to the trial judges finding that there was consideration for the transfer, this
    court explained, at para. 29, that consideration is the value that flows from
    a promisee to a promisor as a result of a bargain. There can be no
    consideration, however, when there has been no bargain. The court continued:

[C]onsideration cannot flow from a promisee who does not know
    he or she is negotiating, much less passing value to a promisor in an exchange
    he or she doesn't know exists.

[32]

In
    that case, this court held that the share transfer was unilateral on the part
    of the appellants father, and that the sons had no meaningful input with
    respect to it. This court also held that the fact that the appellants father
    was able to accomplish his corporate planning goals did not amount to
    consideration flowing from his son to him.

[33]

The
    application judges statement that this case can be distinguished from
McNamee
because this was not an estate freeze is less helpful than her ultimate
    conclusion that the transfer was not a true gift to the husband as there was
    consideration provided by both the husband and the wife. That consideration
    consisted of the life interest in the family farm, the fact that the parents
    continued to live on the farm, that they were both financially provided for
    from income generated by the transferred assets, including the milk quota, and that
    the respondent cared for the parents until their death.

[34]

The
    application judges conclusion that the transfer of the milk quota to the
    appellant was not a true gift is based on findings of fact that are entitled to
    deference. The appellant is required to identify a palpable and overriding
    error:
Housen v. Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R. 235, at
    para. 10.

[35]

I
    have not been persuaded that the application judge erred. The application
    judges findings as to the nature of the arrangement between the parties and
    the appellants parents are supported by the evidence. The evidence shows that
    this appellant, unlike the husband in
McNamee,
was involved in the
    transaction. The milk quota was part of a much larger transaction for which
    there was consideration. The items identified by the application judge are
    capable of constituting consideration when the transfer of the milk quota
    transaction is placed within the context of the entire transaction and this
    familys history. The application judge also did not improperly focus on the
    motive for the transaction. The application judges reasons show that she was
    properly concerned with the question whether or not there was any consideration
    for the 1979 transfer of the milk quota.

[36]

Finally,
    the appellant has not demonstrated that the fact the transaction may have been
    driven by tax advice was a basis for finding a gift. As the respondent points
    out the tax treatment of family farms is complex and it is not clear that this
    transaction was contrary to the public policy underlying the tax treatment of
    such farms. I would not give effect to this ground of appeal.

ISSUE 3: SPOUSAL SUPPORT

(1)

The Reasons of the
    Application Judge

[37]

There
    was no dispute about the respondents entitlement to spousal support, although her
    need for it was disputed. At the application, the most contentious issues were the
    appellants actual income and the amount that should be imputed to him.

[38]

The
    appellant took the position that he was entitled to retire from farming and to
    work less for less money. The application judge found the appellants evidence
    as to his inability to earn a greater income to be questionable. He was an
    experienced farmer and had purchased farm machinery and a tractor trailer to
    generate income. He had no health problems and continued to incur substantial
    personal expenses. The application judge found that the appellants claimed drastic
    income reduction from an inferred income of between $60,000 to $80,000 to less
    than $20,000 annually was neither reasonable nor credible. The application
    judge imputed to the appellant an annual income of $40,000.

[39]

The
    application judge also considered the respondents circumstances. This was a
    long-term marriage where the respondent was in a very vulnerable position
    because of her health and her limited ability to earn an income. While the
    appellant had paid other expenses, he had paid no spousal support since
    February 2010. On the other hand, the application judge stated that the
    respondent would have some income, either from the sale of the properties or by
    renting them out. This last appears to relate to the application judges
    ultimate decision to divide the jointly-held properties between the parties.

[40]

The
    application judge determined that the respondent would be entitled to
    indefinite spousal support, given her age and the fact that this was a
    long-term marriage, but instead ordered a lump sum payment. She considered the
Spousal
    Support Advisory Guidelines
and made an award around the midpoint. The
    application judge ordered the appellant to make a lump sum payment of $160,000
    for spousal support. The application judge did not expressly state why the
    spousal support should be a lump sum rather than periodic payments.

(2)

Analysis

[41]

The
    appellant does not contest the application judges decision to order a lump sum
    spousal support award. He does, however, take issue with the amount awarded. He
    submits that the application judge erred in failing to consider the
    respondents significant capital base, erred in imputing an excessive amount of
    employment income and erred in calculating the lump sum on the basis of
    indefinite support. I would not give effect to these submissions.

[42]

A
    decision as to the amount and duration of support is entitled to considerable
    deference, especially where, as here, the decision is based in part on findings
    of credibility:
Hickey v. Hickey
, [1999] 2 S.C.R. 518 at paras. 11-12.
    In view of the length of the marriage and the respondents vulnerable position,
    as identified by the application judge, it was open to the application judge to
    make an order for indefinite support. Given the appellants investment in
    income-earning property and his experience, imputing $40,000 in annual income
    to him is, in my view, a relatively modest order. The application judge did
    take into account the respondents ability to earn income from any property
    settlement.

[43]

I
    would not give effect to this ground of appeal.

ISSUE 4: DISTRIBUTION OF PROPERTIES

(1)

The Reasons of the
    Application Judge

[44]

The
    appellants position at the application was that the jointly-owned properties should
    be sold, with him in control of the sale. The respondent proposed that the eight
    properties be divided between the parties pursuant to the
Partition Act
,
    R.S.O. 1990, c. P.4.

[45]

The
    application judge accepted the respondents proposal, holding that such a
    division would resolve all property and support issues between the parties. She
    found that this was a high-conflict case in which it was better that the issues
    between the parties be resolved as soon as possible. The wifes proposal would
    allow her to remain in the family home close to her family and friends. In the
    application judges view, the appellants proposal would likely result in
    longstanding issues between the parties because of the difficulty of selling
    the properties.

[46]

The
    application judge attached a schedule to her reasons in which she set out her
    calculation of the net equalization payment owed by the appellant to the
    respondent. She held that each party was entitled to half of the properties and
    the time share. She added together the equalization payment of $112,986.69 owed
    by the appellant to the respondent, the value of the properties, and the
    lump-sum spousal award, and calculated that the appellant owed the respondent
    $1,441,486.69 in total. The application judge then assigned to each of the properties
    the value they had on the date of separation, and distributed the properties
    between the parties to give effect to a value transfer from the appellant to
    the respondent of $1,441,486.69. I have attached the application judges
    Schedule to these reasons to show how she arrived at the distribution of
    property.

(2)

Analysis

[47]

The
    appellant submits that the
Family Law Act
does not give any
    jurisdiction to divide property
in specie
. He also submits that if the
    application judge made her order under the
Partition Act,
and it is
    not clear that she did, that Act does not permit a court to effect the sale of
    properties between the parties at a set price under the guise of
    partitioning. The appellant submits that an ordered sale of the properties on
    the open market was more appropriate in this case. The respondent submits in
    this appeal that the application judge had jurisdiction to make the order
    transferring the jointly-held properties pursuant to either s. 9(1) of the
Family
    Law Act
or under the
Partition Act
.

[48]

While
    the application judge had valid reasons for seeking a quick resolution of the
    issues between the parties, in my view, she had no jurisdiction to make the
    order she did. The application judge referred to the
Partition Act
as
    the basis for the respondents proposal, but did not identify how that Act authorized
    the division of properties that she made. In my view, neither the
Family
    Law Act
nor the
Partition Act
supports the order made by the
    application judge in this case.

(a)

The
Family Law
    Act

[49]

The
    relevant sections of the
Family Law Act
are ss. 5(1), 7(1) and
    9(1)(d), which provide as follows:

5. (1)  When a divorce is granted or a marriage is declared a
    nullity, or when the spouses are separated and there is no reasonable prospect
    that they will resume cohabitation, the spouse whose net family property is the
    lesser of the two net family properties is entitled to one-half the difference
    between them.

7. (1)  The
    court may, on the application of a spouse, former spouse or deceased spouse's
    personal representative, determine any matter respecting the spouses'
    entitlement under section 5.

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



(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.

[50]

In
    1986, soon after the
Family Law Act
came into force, Galligan J.
    described the legislative scheme in
Skrlj v. Skrlj
(1986), 2 R.F.L.
    (3d) 305 (Ont. H.C.J.) at p. 310, in these terms:

The scheme of the Act, insofar as it relates to property, is to
    determine the value of each spouse's net family property as at the valuation
    date as defined in the Act.  Once the value of each spouse's net family
    property is determined, the spouse with the lesser value is entitled to one half
    of the difference, subject to any adjustment if unconscionability, as set out
    in s. 5(6) of the Act, is proved.

[51]

Earlier
    in that case, Galligan J. dealt with the proposal that properties could be
    distributed. He rejected this approach, in emphatic terms, at p. 309:

In this case certain suggestions were put to the court about
    how this dispute could be resolved by transferring assets to discharge
    corresponding liabilities. In my view, that is the stuff of settlement.
    Separating spouses can settle their differences as they see fit but if they do
    not settle them and decide to come to trial, they are entitled to, and should
    expect to get adjudication, not mediation.

[52]

Justice
    Galligan returned to this issue as a judge of this court, in
Berdette v.
    Berdette
(1991), 3 O.R. (3d) 513 (C.A.) at p. 524:

The intent of this legislation is to establish partnership and
    equal sharing of property accumulated during marriage. That intent is not
    effected, however, by the sharing of the assets themselves as was done under
    the
Family Law Reform Act
, R.S.O. 1980, c. 152, which preceded the
FLA
.
    It is done by the sharing of the
value
of the assets. The distinction
    is crucial and is one that is not infrequently overlooked. For example, in his
    "Annotation to
Rawluk v. Rawluk
" (1990), 23 R.F.L. (3d) 338,
    at p. 345, Professor James G. McLeod speaks of "a statute that, by its
    terms, provides for the equitable distribution of property". In my view,
    the definition of "net family property" contained in s. 4(1), the
    opening words of s. 4(2), s. 5(1) and s. 5(6) all show that the
FLA
does not provide for the distribution of property. Rather, it provides for the
    payment of money when the net family property of one spouse is less than that
    of the other.

I make particular reference to s. 4(1), which defines
    "net family property" as the
value
of all property which a
    spouse owns on valuation day. In this way, net family property is distinct in
    nature from "property" in the statutory sense found in s. 4(1) and
    from the word "property" in its ordinary sense.

[53]

I
    agree with Justice Galligan. The scheme of the Act does not support the
    proposition that an application judge can simply redistribute properties among
    the parties. To interpret the Act in this way would be inconsistent with its
    overall scheme, which gives a judge only a very limited power to distribute
    properties in the circumstances set out in s. 9. That is, section 9 gives the
    court the power to transfer properties only if appropriate to satisfy an
    obligation imposed by the order [for the equalization of net family properties].
    In other words, the transfer power under section 9 is
specifically
connected to the satisfaction of the order for the equalization of net family
    properties rather than a
general
transfer power for the settlement of
    disputes arising from marital breakdown.

[54]

To
    a similar effect is the recent decision of this court in
Thibodeau v.
    Thibodeau
, 2011 ONCA 110, 104 O.R. (3d) 161. In that case, Blair J.A.
    endorsed this interpretation of the legislative scheme of the
Family Law
    Act
, albeit in the context of a bankruptcy proceeding. As explained by
    Blair J.A. at para. 37, [s]eparating spouses are not entitled to receive a
    division of property.  An equalization
payment
is the chosen
    legislative default position. He continued, at paras. 39 and 40, by observing
    that the enhanced remedies available under s. 9(1) can give rise to proprietary
    rights if the record justifies such an exception in the equalization payment
    regime, but only if a real need is shown.

[55]

Trial
    courts have consistently adopted this interpretation. One example is
Zadegan
    v. Zadegan
, [2002] O.J. No. 2190 (S.C.J.), in which, after referring to
    the fact that the parties had provided her with proposals as to how their real
    properties might be distributed, J. Mackinnon J. held as follows, at paras. 90-92:

90

In this way, both parties have, in
    effect, asked the court to redistribute their assets, in order to achieve what
    each of them regards as the proper outcome. In my view, this is not the type of
    order that the court can make under the Family Law Act. That Act does not
    direct the court to redistribute assets in order to make an equal distribution.
    See Berdette v. Berdette (1991), 3 O.R. (3d) 513 (C.A.). Rather, it directs the
    court to determine the net family property of each spouse. Then, if one
    spouse's net family property is less than that of the other, s. 5(1) provides
    for equalization.  [T]he powers of the court to give effect to the
    equalization are set out in s. 9(1):



91
Thus, while s. 9(1)(d) permits
    the court to transfer property in order to satisfy an obligation imposed by the
    order, this is not the same thing as rearranging ownership of assets.

92

Accordingly,
    the court could order the transfer of an asset between the parties in order to
    satisfy an equalization payment, or part of it, but cannot order the transfer
    of various assets between the parties in order to bring about an equitable
    distribution of assets.

[56]

Speaking
    to when an order under s. 9 may be required, Whalen J. held in
Colquhoun v.
    Colquhoun
, [2007] O.J. No. 9, 2007 CarswellOnt 18 (S.C.), at para. 168,
    that there would need to be a proven concern that [the equalization payment]
    will not be honoured.

[57]

The
    record in this case does not suggest that an order under s. 9 was needed in
    order to enforce the equalization payment. In any event, the equalization
    payment calculated by the application judge was just over $100,000. The effect
    of the application judges order was the compulsory transfer of ownership
    interests in excess of one million dollars, which is far in excess of the
    equalization payment amount.

[58]

To
    conclude, the order made by the application judge in this case cannot be
    supported by the
Family Law Act
. I turn now to the
Partition Act
.

(b)

The
Partition Act

[59]

I
    would make this preliminary comment about the application of the
Partition
    Act
to this case. In
Silva v. Silva
(1990), 1 O.R. (3d) 436, this
    court accepted that the
Partition Act
is not ousted by the
Family
    Law Act
, but stated that the
Family Law Act
should be the
    statute of first resort in matrimonial disputes. Accordingly, it would be an
    unusual result if the
Partition Act
, which deals generally with
    jointly-owned property, could be applied so as to effect a result that is
    inconsistent with the specific provisions and the legislative policy of the
Family
    Law Act
.

[60]

The
    governing provisions of the
Partition Act
, with unnecessary terms
    removed are as follows:

2.

All joint tenants,
    tenants in common,  may be compelled to make or suffer partition or sale of the land, or any part thereof, whether
    the estate is legal and equitable or equitable only.

3.

(1) Any person interested
    in land in Ontario   may bring an action or make an application for the partition of such land or for the sale
    thereof under the directions of the court if such sale is considered by the
    court to be more advantageous to the parties interested.

[61]

Each
    of the properties in question in this case was originally registered as a joint
    tenancy. In August 2010, the parties agreed to sever the joint tenancies and
    the parties now hold the properties as tenants in common.

[62]

The
    application judges order in this case raises two issues. First, does the
Partition
    Act
permit, not the partition of individual jointly-owned properties, but a
    wholesale distribution of several previously jointly-held properties between
    the parties. Second, even if partition could encompass such a distribution, was
    an order of that type appropriate in this case. In my view, this case can be
    resolved on the basis of the second question. However, since the distribution issue
    was fully argued, and the matter appears to be one of first impression in this
    court, I will make some brief comments on that issue as well.

[63]

To
    start with the question of the appropriateness of the order, the fundamental
    problem with the judges order in this case was that it took away the
    appellants right to the highest price for his interest in the properties. The
    values used by the application judge in redistributing the properties were the
    valuations as at the date of separation, and as fixed by the parties for the
    purposes of calculating the equalization payment at trial. There was no
    evidence that those values represented the market value of the properties as at
    the time of the application or that they represented the highest price. As
    Granger J. said in
Batler v. Batler
(1989), 67 O.R. (2d) 355 (H.C.J.)
    at 356:

A joint tenant is entitled to the highest price for his or her
    interest which may be more than the appraised value of the property. In today's
    real estate market, the appraised value of the property may not reflect the fair
    market value. The true test of the fair market value is to sell the property in
    an open market. Unless the parties agree to a transfer of the property at an
    agreed price, the property should be listed for sale and sold, to ensure that
    fair market value is obtained.

[64]

This
    court has jealously guarded the rights of joint owners to the best price for
    jointly-owned property.
Martin v. Martin
(1992), 8 O.R. (3d) 41 (C.A.)
    provides an example of this principle in a slightly different context. In that
    case, this court explained the rationale behind the rule that one party cannot
    be given a right of first refusal with respect to matrimonial property ordered
    sold. As Osborne J.A. explained in
Martin
at p. 48:

A right of first refusal will most often work to discourage
    other interested buyers. If a spouse is granted a right of first refusal, the
    effect of it is to remove that spouse from the competitive market for the
    matrimonial home.

Both Dr. and Mrs. Martin have a right to buy the matrimonial
    home. If Dr. Martin wants to exercise that right he should be in a position of
    having to compete with any other interested purchaser. It is only in that way
    that Mrs. Martin's interest in the property will be fairly and justly
    quantified.

[65]

The
    order of the application judge was, in effect, a forced sale of the
    jointly-owned properties between the parties, without the benefit of fair
    market value. That is not an appropriate use of the
Partition Act
: see
Miller v. Hawryn
, 2010 ONSC 6094, at para. 25.

[66]

For
    that reason, even if the division of the farm properties were permissible
    generally under the
Partition Act
, it would not have been an
    appropriate order in this case.

[67]

Given
    this conclusion, it is not strictly necessary to consider whether the
    application judge had jurisdiction to make the order that she did. I offer,
    however, these brief additional comments. Partition is the physical division of
    land among co-owners such that each is entitled individually to a separate
    parcel: Jeffrey W. Lem and Rosemary Bocska,
Halsburys Laws of Canada 
    Real Property
, 1st ed. (Markham, Ont: LexisNexis Canada, 2012), at HRP-46.
    There is virtually no authority supporting the respondents submission that the
    order that was made could be characterized as a partition, even if it were
    clear that this was the basis on which the application judge made her order. The
    distribution of different properties between joint owners as was done in this
    case is simply not partition; rather, it is an enforced sale between two
    parties at a set price. And, as I have said, it is fundamentally inconsistent
    with the scheme of the dominant legislation, the
Family Law Act
.

[68]

The
    application judge did not refer to any authority to support the order made. On
    appeal, we were referred to only one case in support of the argument that the
Partition
    Act
could be used to distribute separate properties between joint owners: see
Suddick v. Schwenger
(2007), 52 R.P.R. (4th) 306 (Ont. S.C.J.).

[69]

The
    facts of
Suddick
are somewhat complicated. In short, the case involved
    a cottage property in Eastern Ontario (Lot 3). The parties to the dispute
    were three siblings, the children of Charles and Elena Schwenger. In 1966,
    Charles Schwenger obtained Lot 3 from his father. In 1982, he severed Lot 3
    into two lots, the West Lot and the East Lot, and transferred the East Lot to
    his wife, Elena. After Charles Schwenger died, the West Lot passed to Elena such
    that she owned all of Lot 3. She died in 2006 leaving Lot 3 to her three
    children as tenants in common.

[70]

After
    many years of disputes amongst the siblings, the parties made an application
    under the
Partition Act
. The application judge was satisfied that
    there must be partition or sale. He decided that the appropriate remedy was
    partition, with one of the siblings getting the West Lot and the other two
    siblings getting the East Lot. The sibling getting the West Lot was to
    compensate the other two siblings for the difference in value between the two
    lots.

[71]

The
    application judge in
Suddick
held that the parties were the joint
    owners of the entire property of Lot 3. That was the land in question,
    referring to sections 2 and 3 of the
Partition Act
. The fact that, for
    planning purposes, the two parcels could be separately conveyed without further
    approvals had no bearing on that conclusion. As can be seen, this case is not
    authority for the
in specie
division of separate properties, as took
    place in this case, under the
Partition Act
, but was a proper
    partition. It is only in a notional sense that the
Partition Act
was
    used in this case to distribute separate properties. Finally, detracting from
    the cases value as a precedent is that an appeal was taken and allowed, see
    (2009), 69 R.P.R. (4th) 318 (Ont. Div. Ct.), apparently on consent in
    accordance with minutes of settlement.

[72]

In
    my view, the
Partition Act
cannot be used to support the
in specie
distribution of properties, as was done in this case. The application
    judge should have ordered the sale of the properties. Obviously, it would be
    open to the parties to bid on any of the properties.

C.

DISPOSITION

[73]

Accordingly,
    I would allow the appeal and vary the order of the application judge in
    accordance with these reasons, varying paragraph 1 of the Order (the
    equalization payment) to take into account the parties claims for disposition
    costs; and paragraph 3 of the Order (distributing the properties) and ordering
    that the properties be listed for sale, sold and the net proceeds divided
    equally between the parties, subject to necessary adjustments. The appeal is
    dismissed as it relates to the payment of spousal support and the 1979 milk
    quota.

[74]

As
    to costs, if the parties cannot agree, they may make brief written submission.
    The appellant shall make submissions within 15 days of release of the decision;
    the respondent will have 15 days to respond.

Released: MR August 15, 2013

M. Rosenberg J.A.

I agree. S.T. Goudge
    J.A.

I agree. M.H.
    Tulloch J.A.





Appendix A

Schedule B

Determination of Division of Property

a)       each
    party is entitled to half of the eight farm lots and the time share, therefore
    each party received $1,168,500.00 in property.

b)       the husband owes to the wife a net equalization
    payment of $112,986.69.

c)       the
    husband owes to the wife lump sum spousal support, retroactive to March 1,
    2010, in the amount of $160,000.00

d)       the total of a), b) and c) above, owed to the wife,
    is $1,441,486.69



e) wife to receive

main farm

$700,000.00





Blezard farm, Lot 1

240,000.00





Lot 2

150,000.00





Donaldson Road

270,000.00





with lot

80,000.00





_________________________________





Total

1,440,000.00











f) husband to receive

Davids farm

370,000.00





School farm

120,000.00





Watt farm

400,000.00





Time share

7,000.00





_________________________________





Total

897,000.00



g)      Husband owes wife $1,486.69 at the time of the
    property transfers set out in e) and f) above.


