COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Kumagai v. Campbell Estate,

2018 BCCA 24

Date: 20180119

Docket: CA43580

Between:

Chong Ae Kumagai
aka Chong Ae Campbell
aka Chongae Campbell aka Chongae Ae Kumagai,
aka Chong Kumagai aka Chongae Kumagai aka Chong Campbell,
aka Chong Ae Shin aka Chongae Shin

Appellant/
Respondent on Cross Appeal

(Claimant)

And

Barbara Saganiuk,
Executrix of the Estate of Earl Campbell, and
Maple Meadows Mobile Home Park Ltd.

Respondents/
Appellants on Cross Appeal

(Respondents)

Before:

The Honourable Madam Justice D. Smith

The Honourable Mr. Justice Harris

The Honourable Mr. Justice Hunter

On appeal from:  Orders
of the Supreme Court of British Columbia, dated
March 15 and June 23, 2016 and (
Kumagai v. Campbell Estate
, 2016
BCSC 450 and 2016 BCSC 1161, New Westminster Docket No. E44609).

Counsel for the Appellant:

D.H. Goodwin

Counsel for the Respondents:

A.T. Briscoe

K. Mundstock

Place and Date of Hearing:

Vancouver, British
  Columbia

October 11
‒
12, 2017

Place and Date of Judgment:

Vancouver, British
  Columbia

January 19, 2018

Written Reasons by:

The Honourable Madam Justice D. Smith

Concurred in by:

The Honourable Mr. Justice Harris

The Honourable Mr. Justice Hunter

Summary:

Ms. Kumagai appeals from
a final order under the Family Law Act, S.B.C. 2011, c. 25 with respect to
the valuation and division of certain reserve lands registered under
Certificates of Possession in the name of her now deceased husband, and the
quantum of spousal support awarded her from his estate. The Estate
cross-appeals alleging errors in the finding of Ms. Kumagais entitlement
to spousal support, the refusal to retroactively vary a prior interim order for
spousal support, and the dismissal of the Estates application for an order
that Ms. Kumagai pay one-half of its probate fees.

Held: appeal allowed; cross
appeal dismissed. The evidence did not support the judges discount of the
appraised value of the deceased husbands lands based on its highest and best
use by the parties jointly retained expert. Evidence must be adduced to
establish a legal impediment to the use of land that justifies rejecting the
highest and best use valuation. Family property must be valued as of the date
of trial unless there is a finding of significant unfairness under s. 95
of the FLA. The resulting increase in the compensation award impacted the issue
of the appropriate quantum of spousal support, which is remitted to the trial
court for reconsideration. The Spousal Support Advisory Guidelines do not
strictly apply where the payor is an estate. On the cross appeal, the judge
correctly determined ss. 170(g) and 171 of the FLA permit an order for
spousal support payable by a deceased spouses estate where an interim order
for support was made prior to the spouses death. The judges decision not to
retroactively vary the interim order is owed deference and was not made in
error. The judge correctly determined that probate fees are not family debt.

Reasons for Judgment of the Honourable
Madam Justice D. Smith:

[1]

Chong Ae Campbell (now Kumagai) appeals a final order under the
Family
Law Act,
S.B.C. 2011, c. 25 (
FLA
) with respect to: (1) the
valuation and division of certain reserve lands of the Tzeachten First Nation
Band located near Chilliwack, B.C. (the Band), registered under Certificates
of Possession (CPs) in the name of her now deceased husband, Earl Campbell, and
found to be family property pursuant to the
FLA
;

and (2) the
quantum of spousal support awarded Ms. Kumagai from Mr. Campbells
estate (the Estate).

[2]

The Estate cross-appeals: (1) Ms. Kumagais entitlement to
spousal support from the Estate; (2) the quantum of interim spousal
support awarded Ms. Kumagai, which the trial judge declined to change in
the final order; and (3) the dismissal of the Estates application for an
order that Ms. Kumagai pay one-half of the Estates probate fees.

Background

[3]

Mr. Campbell was a member of the Band and a successful businessman.
At the time of his death, he held six registered CPs on Band lands upon which
the family residence was located and he operated several of his businesses,
including a mobile home park (cumulatively the Campbell Lands).

[4]

Mr. Campbells businesses included a gas bar/convenience store, a
coffee shop/restaurant, a management office building, several storage
facilities, and billboard rentals, located on 2.098 acres and registered under
one CP (cumulatively the Commercial Lands). His mobile home park operated as
Maple Meadows Mobile Home Park Ltd. (MHP), which produces rental income from
149 fully-serviced rental pads and from billboard signs, is located on 19.002
acres and is registered under two CPs (the MHP Lands). The family residence
was situated on 17.172 acres and registered under three CPs before it was
damaged by fire and rendered uninhabitable (the Residential Lands).

[5]

Mr. Campbell enjoyed a disposable annual income from his various
businesses of between $300,000 and $700,000. He was the sole principal of MHP,
which operates under a lease agreement with Mr. Campbell that expires on
June 30, 2023. Mr. Campbell annually withdrew the companys pre-tax
income in the form of wages, salary and dividends, and paid no income tax on
that income as it was earned on reserve lands.

[6]

Ms. Kumagai was born in Korea. She grew up in impoverished
circumstances and had only grade 3 education. She speaks both Korean and
English but never learned to read or write either language. She moved to Hawaii
when she was 19 where she met Mr. Campbell in 2002. He was then 59 and she
was 47 with a 15-year-old daughter. She owned and operated a jewellery retail
business and described her standard of living as comfortable, providing her a
net annual business income of between $40,000 and $50,000.

[7]

Mr. Campbell was smitten with Ms. Kumagai. After a
three-year courtship, he persuaded her to marry him and move to Canada. In
return he promised that he would open a jewellery store for her, buy her a
house and support her and her daughter (then age 18).

[8]

Ms. Kumagai moved to Canada and on December 2, 2005, the
couple began living together in a marriage-like relationship in the family
residence. They married on May 27, 2006, and remained together for nearly
7 ½ years before their separation on July 25, 2013.

[9]

Mr. Campbell brought all of the property into the marriage. He was
a controlling man with respect to their finances and Ms. Kumagais
personal time. He would become angry if Ms. Kumagai left the house without
him or talked to anyone else, including her brother. However, he, as promised,
funded her daughters living expenses and education in Hawaii and she, as
promised, devoted all of her time to meeting his needs.

[10]

The couple enjoyed a lavish lifestyle. Mr. Campbell bought Ms. Kumagai
expensive gifts and took her on extravagant shopping trips. They also dined out
at high-end restaurants and travelled extensively.

[11]

During their marriage, Mr. Campbell suffered from declining health.
He also gained a significant amount of weight. When he was unable to take care
of himself, Ms. Kumagai attended to his personal hygiene.

[12]

In March 2013, the family residence and all of its contents were damaged
in a fire. The house was rendered uninhabitable and was never rebuilt.
Thereafter, the parties lived in a hotel and then a rental home.

[13]

In June 2013, Mr. Campbell collapsed and was taken to the hospital.
He was placed in an induced coma for about a month and had a tracheotomy
performed on him. During this period, Ms. Kumagai remained by his side,
caring for him as best she could. When he awoke he asked for Ms. Saganiuk.

[14]

Ms. Saganiuk and Mr. Campbell had been in an intimate
relationship between 1991 and 1999. She began working in his businesses in
1995; they remained close friends. In 2009, he executed a general power of
attorney in her favour over his businesses. In February 2013, following a
one-week stay in the hospital, he gave her signing authority over the
businesses bank accounts.

[15]

Realizing the marriage was over by his rejection of her, Ms. Kumagai
filed a Notice of Family Claim on July 26, 2013. On July 29, 2013,
she obtained a without notice order freezing all of Mr. Campbells assets
and accounts.

[16]

On July 30, 2013, Mr. Campbell executed his Last Will and
Testament (the Will). In the Will, he designated Ms. Saganiuk as his executrix
and directed her: (1) to transfer his properties and businesses to his
then 13-year-old grandnephew (his sisters grandson) upon the grandnephew
reaching the age of 30, at which time the grandnephew would also receive 70% of
the residue of the Estate; (2) to pay herself $10,000 per month to manage
his business assets, a further $3,000 per month as an executors fee, and 20%
of his Estate upon the grandnephew turning 30; and (3) to pay his wife
$5,000 per month until the grandnephew reached 30 years of age, when she would
receive 10% of the residue of his Estate.

[17]

On August 13, 2013, Ms. Kumagai obtained an interim, without
prejudice order, for spousal support in the amount of $5,000 per month,
commencing August 1, 2013.

[18]

On August 21, 2013, at age 70, Mr. Campbell died of congestive
heart failure, never having left the hospital after his June 2013 hospitalization.

[19]

Due to a potential challenge to the validity of the Will, the complexity
of the Estates business assets, and the matters at issue in the family law
proceeding, on September 20, 2013, the Minister of Indian Affairs and
Northern Development (the Minister) made an order pursuant to s. 44(1)
of the
Indian Act
,

R.S.C. 1985, c. I-5, transferring
jurisdiction in relation to testamentary matters and causes with respect to
the estate of the deceased, to the Supreme Court of British Columbia.

[20]

In the underlying Notice of Family Claim, Ms. Kumagai had requested
an order for divorce and corollary relief under the
Divorce Act,
R.S.C.
1985, c. 3 (2
nd
Supplement) and the
FLA.
After Mr. Campbell
died, Ms. Kumagai amended the Notice of Family Claim to plead relief
against the Estate for a division of the net family property and spousal
support.

[21]

On October 2, 2013, Ms. Kumagai obtained an order increasing
her interim support to $15,000 per month against the Estate, and an enforcement
order for the arrears of support under the August 13, 2013 interim order
in the amount of about $33,500.

The valuation of the Commercial, MHP and Residential Lands

[22]

The Band is an independent First Nation band that is governed by a Chief
and four Councillors. Its lands are comprised of approximately 699 acres, of
which the Band holds title to about 10%. The remaining 90% has been allocated
to various Band members who hold title to the lands under registered CPs. Mr. Campbell
was one of those Band members.

[23]

The Band is one of the entrepreneurial bands in the Lower Mainland. It
encourages economic development and is a leader in market housing and market
development for its members and the broader community. This is achieved through
99-year leases between CP holders and non-Band individuals or developers. These
business arrangements within the surrounding community have led to the
development of a number of successful residential communities on CP lands.

[24]

The 99-year leases to non-Band developers are typically pre-paid at
values comparable to what they would pay for fee simple ownership. It makes
little difference to non-Band member parties whether the return on their
investment is through ownership or long-term leases. For these reasons, the
99-year lease is generally equated with fee-simple ownership for appraisal
purposes.

[25]

The Band is subject to the
Indian Act.
However, pursuant to the
First
Nations Land Management Act,
S.C. 1999, c. 24, s. 6, it may enter
into an agreement with the Minister to establish a land management regime over
its reserve lands and establish rules and procedures with respect to the use,
occupation and possession of its land and interests in it upon the breakdown of
marriage.

[26]

On April 24, 2008, the Band enacted the
Tzeachten First Nation
Land Code
(the Land Code). The Land Code gives the Band exclusive
jurisdiction of the lands within the boundaries of its reserve lands and
authorizes the Band to create and enforce its own land laws, similar to that of
a municipality. To that end, the Band has passed a Zoning and Land Use Law, in
conjunction with a Land Use Plan (LUP) for both land management and
governance purposes. In 2011, the LUP designated the Residential Lands as
Potential Commercial, Existing (or Potential) Residential New or Densified and
Potential Greenway Walk/Bike.

[27]

The Band has not yet enacted provisions with respect to the transfer or
testamentary disposition of an interest in the Band lands to another Band
member. However, under the
Indian Act
the Minister has the discretion to
authorize the transfer of those matters to the jurisdiction of the B.C. Supreme
Court.

[28]

On November 20, 2009, the Band enacted the
Matrimonial Real
Property Law,
Law No. 09-03, which applies to Band members and their
spouses. It provides that the former
Family Relations Act
(now the
FLA
)

and the
Divorce Act,
apply as modified by this Law and to the
extent possible subject to this Law, the Land Code, and the common law. It is
common ground that the provisions of the former
Family Relations Act,
R.S.B.C.
1996, c. 128 (
FRA
)

(and now the current
FLA
)

with
respect to the right of ownership and possession of land do not apply to an
interest in reserve lands. See
Derrickson v. Derrickson,
[1986] 1 S.C.R.
285 at 43, 8488.

[29]

At the date of trial, Deanna Honeyman was the lands manager for the
Band. Ms. Honeyman was responsible for the overall management of the Band
lands and, with the assistance of an enforcement officer, also responsible for
the enforcement of its laws including taxation of the leased lands to non-Band
members. She testified that where CP land is leased to a non-Band member, that
individual must pay the property taxes associated with the CP land. She
identified six residential developments for which CP Band members have granted
99-year leases to non-Band developers, which have resulted in about 768 single
family homes. At the time of trial, there was a further residential development
under construction, immediately adjacent to the Residential Lands, also subject
to a 99-year lease.

[30]

Ms. Honeyman confirmed that any proposed development of CP lands
would have to be reviewed by the Bands lands advisory committee, which would
then make recommendations to the Band Chief and Council about whether the
development should move forward. She was not aware of any impediments to the
development of Mr. Campbells CP lands beyond the ordinary. In
cross-examination, Ms. Honeyman indicated that Mr. Campbells death
created an impediment to development of the Campbell Lands in the sense that
the CPs in his name would have to be transferred to another member of the Band
before any development could proceed. When asked in re-examination if there
would be any impediment to a Band member, who was holding the CP registration
in trust only for the Estate, being registered as the CP title holder, Ms. Honeyman
responded that she did not know.

[31]

In preparation for the trial of the underlying family law proceeding,
the parties jointly retained an expert to conduct a fair market valuation of Mr. Campbells
interest in the Campbell Lands as if it were equal to fee-simple ownership, but
with consideration given to any unique concerns or features arising from the
fact that allowable land uses are subject only to Band Council Resolution and
not subject to local or Provincial government regulations. No other special
instructions or extraordinary assumptions were given.

[32]

Reid Umlah was chosen by the parties to conduct the appraisals. Mr. Umlah
was qualified as an expert in the valuation of First Nations lands and
related issues (2016 BCSC 450 at para. 75). He began doing First Nations
work in the mid-1990s; today 80% of his business is focused on First Nations
issues. He was asked to value the Campbell Lands as of (1) December 2,
2005 (the date of cohabitation), (2) August 21, 2013 (the date of Mr. Campbells
death and closest to the parties date of separation), and
(3) January 28, 2015 (the closest date to the date of trial).

[33]

Mr. Umlah determined the market value of the Campbell Lands based
on their highest and best use. In his March 16, 2015 report, he
described highest and best use as the reasonably probable and legal use of
vacant land or an improved property, which is physically possible, appropriately
supportable, financially feasible, and that results in the highest value. He
relied on the accepted definition of market value from the
Canadian
Uniform Standards of Professional Appraisal Practice
of the Appraisal
Institute of Canada, which defines market value as the most probable price
which a property should bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and seller each acting prudently
and knowledgeably, and assuming the price is not affected by undue stimulus.
In
Southam Inc. (Pacific Newspaper Group Inc.) v. British Columbia (Assessor
of Area No. 14  Surrey/White Rock),
2004 BCCA 245, this Court
accepted the definition of highest and best use as a market-driven concept that
identifies the most profitable,
competitive
use to which property can
be put: at para. 14, referring to comments in
Ford Motor Co. v.
Edison,
127 N.J. 290; 1992 N.J. Lexis 32 (New Jersey Sup. Ct.) at p. 6,
citing
Meyer v. Department of Revenue
, Or.Tax, No. 3049, 1991 WL
244494 (Nov. 20, 1991) (underlining added in
Southam
).

[34]

In his report, Mr. Umlah further noted:

The Tzeachten have capitalized on
the creation and implementation of an effective Land Use Plan for their lands
and have shown a willingness to create and develop business partnerships within
the surrounding community.

[35]

Mr. Umlah determined that the existing use of the Commercial Lands,
with further commercial development, and the MHP Lands, represented their
highest and best use. He estimated the market value of these lands using an
income approach, which based their value on their income-earning potential.
He determined the highest and best use of the Residential Lands would be
residential development to urban densities with some commercial development
along the propertys frontage, based on the historical patterns of development
in the area, the highly trafficked road adjacent to the lands, the LUP, and the
evidence of six existing residential developments, including one under
construction immediately adjacent to the Residential Lands. He used a direct
comparison approach to estimate the market value for the Residential Lands,
which involved identifying recent sales of ten similar vacant sites and making
adjustments in value to take into account any dissimilarities between those sites
and the Residential Lands.

[36]

In the result, he determined the market value of the three categories of
lands registered to Mr. Campbell, as of the date of cohabitation, date of
separation and date of hearing, as follows: (1) the Commercial Lands at
$1,980,000, $3,180,000 and $3,280,000, respectively; (2) the MHP Lands at
$5,720,000, $7,770,000 and $7,850,000, respectively; and (3) the
Residential Lands at $4,380,000, $6,260,000 and $6,730,000, respectively.

[37]

Mr. Umlah also conducted a supplementary appraisal of the
Commercial Lands based on the assumption that the property had no further redevelopment
potential beyond the existing developments that were already present. This
assumption reduced the valuations of that property to $1,590,000, $2,520,000
and $2,770,000 respectively.

[38]

On cross-examination, Mr. Umlah agreed that although the value of
the Band lands is essentially equivalent to fee simple values, a 10% reduction
might be appropriate for 99-year prepaid leases of CP lands. However, he
clarified that this conclusion was based on one study only he had completed
that compared leasehold condominium units to fee simple condominium units.

[39]

At the request of the Estate, Mr. Umlah also appraised the
Residential Lands based on an assumption that they had no development potential
for the foreseeable future, given that Mr. Campbells grandnephew would
not realize his interest in the Estate for many years to come. He used a cost
approach in appraising the property as a single registered CP, which estimates
the value of the lands as if they were vacant and adds the estimated cost of
reproducing the existing buildings less any accrued depreciation. Based on
these assumptions, he determined the Residential Lands would have a market
value of $1,630,000, $1,750,000 and $1,780,000 respectively. He also stated
that his valuations for the Residential lands would increase if the three CPs
were appraised as three individual home sites in accordance with their CP
titles.

The division of property

[40]

The judge found Mr. Umlah to be a very credible witness and
accepted his opinions in their entirety. In particular, he accepted Mr. Umlahs
valuations of the Commercial Lands as commercial property and his valuations of
the MHP Lands as a mobile home park. He did not accept Mr. Umlahs
valuations for the Residential Lands based on their potential high-density
residential and possible commercial development along the frontage, finding:
(1) there was no evidence that Mr. Campbell intended to develop the
Residential Lands; and (2) there was no evidence that the executrix, Ms. Saganiuk,
who is not a member of the Band, had any authority to develop the property on
behalf of the Estate. He also rejected as pure speculation the argument that
the Minister might appoint a new Band member as the executor under s. 43
of the
Indian Act
, to develop the land on behalf of the infant beneficiary.
In the result, he accepted the Estates submission that the Residential Lands
should be valued as a single residential site with no development potential,
which reduced the increase in their value from the date of cohabitation to the
date of separation to only $120,000.

[41]

At trial, Ms. Kumagai requested a compensation order for her half
interest in the net value of the family property after the deduction of the
family debt. The only family property at issue in this appeal is the judges
finding as to the increase in the value of the Campbell Lands from the date of
the couples cohabitation to their date of separation, as Mr. Campbell
brought all of the property into the relationship.

[42]

Section 85(1) of the
FLA
defines excluded property not subject to
division as (a) property acquired by a spouse before the relationship
between the spouses began. Section 84(1)(a) identifies family property as,
on the date of separation, (i) property that is owned by at least one
spouse, or (ii) a beneficial interest of at least one spouse in
property. Pursuant to s. 84(2)(g), family property includes the amount
by which the value of excluded property has increased since the later of the
date (i) the relationship between the spouses began, or (ii) the
excluded property was acquired.

Section 87(a) of the
FLA
provides
that the net value of the family property (here the increase in value of the
excluded property less the family debt) must be based on its fair market value
as of the date of an agreement between the parties or the hearing before the
court on the division of property. In this case, there was no agreement and
therefore the relevant date for the valuation of the net family property was
the date of hearing.

[43]

The judge found no basis to award other than an equal division of the
net family property having been satisfied that such a division would not be
significantly unfair pursuant to s. 95(1) of the
FLA
. He further
noted the comments of Justice Baker in
Jaszczewska v. Kostanski,
2015
BCSC 727, revd in part on other grounds 2016 BCCA 286, at para. 144,
which expressed the view that a mere disparity in wealth at the commencement of
a relationship would not generally justify an unequal division of family
property at the end of the relationship. However, the judge chose the valuation
of the three categories of lands as of Mr. Campbells date of death, being
the closest date to the date of separation, over their valuations as of the
date of trial, stating:

[120]     It would be unfair to allow the claimant [Ms. Kumagai]
to participate in any increase in the value of the Campbell Lands after she
separated from the relationship.

[121]    In my view, it is
appropriate in this case to award compensation to the claimant in lieu of a
division of property and based upon the increase in value of the Campbell Lands
during the period between December 2, 2005 (the date when the parties commenced
co-habitation) and July 25, 2013 (the date that the claimant separated from Mr. Campbell),
at which time I find that there was no reasonable prospect of reconciliation.

[44]

The judge also found that the Estates probate fees were not a family
debt and dismissed the Estates application to deduct their amount as a family
debt in calculating the value of the net family property for the compensation
order.

[45]

In the result, the judge awarded Ms. Kumagai a compensation order
for one-half of the value of the net family property, including the increase in
the value of the Campbell Lands, between December 2, 2005, the date when
the parties marriage-like relationship began, until August 21, 2013, the
valuation date closest to the date of the parties separation, and assuming a
valuation for the Residential Lands as a single residential site with no future
development. In sum, he calculated the market value of the Campbell Lands
before the deduction of the family debt, as follows:

a)

Commercial
  Lands ($3,180,000
−
$1,980,000):

$1,200,000

b)

MHP
  Lands ($7,770,000
−
$5,720,000):

$2,050,000

c)

Residential
  Lands ($1,750,000
−
$1,630,000):

$120,000

Total
:

$3,370,000

[46]

The total value of the Campbell Lands, as found by the judge, was added
to the value of other family property not in dispute, for a total value of the
family property at $3,934,893, less family debt of $16,292, resulting in a
finding of the value of net family property at $3,918,601. The judge awarded Ms. Kumagai
a compensation order for one-half of that amount at $1,959,301, less the
$100,000 previously advanced to her.

[47]

The judge also ordered the Estate to pay either the compensation award
as a lump sum, or in installments of $20,000 per month, with post-judgment
interest on the unpaid balance at the then current interest rate of 2.7%.

Spousal support

[48]

MHP operates on a fiscal year end of August 31. It receives rental
income from the mobile home pads. Mr. Campbell, and, after his death, the
Estate, also received rental income from leased billboards and lease payments
from MHP for use of the CP lands on which the mobile home park operates.

[49]

Before his death, Mr. Campbell withdrew all of the corporate
pre-tax income in MHP to pay himself in the form of wages, salary and
dividends. His income was tax-free as it was realized on the Band Lands. After
his death, the income received by the Estate attracted a range of income tax
rates depending on the type of income that was earned. The rental income from
MHP was classified as inactive income and was taxed at the top-end rate of
about 45%. The dividend income withdrawn by the Estate from MHP was taxed at
about 18%. The overall tax rate paid by the Estate, dividing all the tax paid
by the total income, was about 18%.

[50]

Ms. Kumagai had no independent income during the marriage. The
judge found that she had demonstrated a significant need for spousal support
beyond the monthly $5,000 bequest to which she was entitled under the Will, and
that an additional monthly amount of $5,000 was necessary to meet that
significant need.  He recognized that ss. 170 and 171 of the
FLA
expressly authorized the making of an award against the payor spouses estate
where an agreement or order had been made before his or her death, and, as a
result, Ms. Kumagai was entitled to pursue a claim for spousal support
pursuant to s. 171(3)(a) of the
FLA.
He concluded, however, that he
could not make an award of spousal support against the Estate because at common
law the obligation to pay spousal support died with the payor, and he interpreted
the language of s. 165 of the
FLA
(for making a spousal support
order) as only authorizing the making of an order against a spouse who had to
be living.

[51]

Before the final order was entered, Ms. Kumagai requested the judge
to reconsider and, if necessary, clarify his decision on whether spousal
support under the
FLA
could survive the death of the payor on a proper
interpretation of the
FLA
provisions. If Ms. Kumagai was
successful, the Estate sought clarification of the quantum of spousal support
awarded her in view of the significant payments she was already receiving under
the Will and pursuant to the compensation order.

[52]

In supplementary reasons for judgment (2016 BCSC 1161), the judge
concluded that his initial determination had been in error and that ss. 170
and 171 of the
FLA
did permit the making of an order for spousal support
against the Estate. He found that, despite the wording that suggested only
living persons could be spouses obligated to pay spousal support, the
legislative intent of s. 171(3) had clearly been to provide a mechanism
for ongoing support after the death of the payor, and that it would be an
absurd result if the legislative object and intent of the provisions could
not be met in the absence of redundant and needless verbiage (at para. 20).
As the first interim order for support had been made before Mr. Campbells
death, the judge was satisfied that he could make an award of continuing
spousal support against the Estate in the monthly amount of $5,000 until Mr. Campbells
grandnephew receives his request under the Will.

[53]

However, after he was advised that the payment of spousal support was
not tax deductible by the Estate or taxable in the hands of Ms. Kumagai,
the judge then clarified that amount. Relying on the
Spousal Support
Advisory Guidelines (SSAG),
which have a feature to gross-up non-taxable
income, he found that: the gross amount of Ms. Kumagais monthly bequest
from the Estate of $5,000 was the equivalent to $75,588 in annual taxable
income; and the Estates after-tax income was $293,367, which included $39,800
in rental income from billboards. On appeal, the parties agree that the judge
should have started his analysis with the Estates pre-tax gross income of
$383,415, and then added the annual lease payments from MHP of $76,960, and
lastly billboard rentals of $39,800, to find a total gross income of $500,175.

[54]

Based on his findings of Ms. Kumagais gross annual income at
$75,588, and the Estates gross annual income at $293,367, the judge awarded Ms. Kumagai
monthly mid-range
SSAG
support of $2,223 until the grandnephew turns 30,
at which time Ms. Kumagai will receive her 10% residue of the Estate under
the Will.

[55]

The Estate also asked the judge to reconsider and clarify his rejection of
its request that the October 2, 2013 interim order for increased spousal
support, this one against the Estate, in the monthly amount of $15,000, be
rescinded because no consideration had been given to the change from the
tax-free status of MHPs income to a tax rate of 45% after Mr. Campbells
death, leaving it with a reduced after-tax income of $293,367. Ms. Kumagais
position was that, in the absence of an appeal of that interim order, the
Estate could not now advance its submission. The judge agreed with Ms. Kumagai
that the second interim order should not be adjusted. He held that while
s. 167(2) of the
FLA
authorized a retroactive variation of an
interim order, that decision was subject to the Estate meeting the following
conditions: (1) a change in circumstances of either party since the
interim order; (2) evidence of a substantial nature now available that was
not available when the interim order was made; or (3) evidence of a lack
of financial disclosure by either party that was discovered after the interim
order was made. The judge found no evidence that established any of these
conditions.

On appeal

A.       The division of family property

[56]

Ms. Kumagai raises three issues on appeal with respect to the
amount of the compensation award for her half-interest in the net family
property. First, she submits the judge erred in effectively discounting the
highest and best use appraisal of the Residential Lands by 100% based on:
(1) the assumption that the Residential Lands could not be developed in
the foreseeable future because Ms. Saganiuk, as executrix, was not a
member of the Band and therefore could not obtain approval for their
development; (2) the fact that Mr. Campbell had no intention to
develop the Residential Lands; and (3) the lack of evidence that the Band
would approve the development of the Residential Lands.

[57]

Second, and in the alternative, Ms. Kumagai submits that if the
judge is found to have been correct in finding that the Residential Lands were
not developable, he erred in ignoring or rejecting Mr. Umlahs opinion
that their appraised value should be greater than that of a single residential
site as there was the potential to build a residence on each of the three
registered CPs.

[58]

Last, Ms. Kumagai submits the judge erred in choosing the date of Mr. Campbells
death, being the closest to the date of separation, rather than the date of
trial for the appraisal of the Residential Lands.

Legal impediment?

[59]

In my respectful view, the judge erred in finding that Ms. Saganiuks
inability, as the executrix of the Will and a non-Band member, to facilitate
the development of the Residential Lands, which Mr. Umlah found was their
highest and best use, effectively constituted a legal impediment that required
a 100% discount from Mr. Umlahs initial valuation, in the absence of any
evidence to support that finding.

[60]

Mr. Umlah, an experienced appraiser of First Nations lands, was
chosen by both parties to conduct a joint appraisal of the Residential Lands
because of his expertise in that area. He applied no discount to his
determination of their fair market value based on their highest and best use.

[61]

The highest and best use analysis requires the identification of the
most profitable, competitive use to which a property can be put: see,
Appraisal Institute and Appraisal Institute of Canada,
The Appraisal of Real
Estate,
Canadian Edition (Illinois: Appraisal Institute, 1992), at p. 284.

It is the reasonable expectation of the market potential for the property
taking into account such factors as: whether the neighbourhood is in a state of
transition; what can be legally built on the property; what is the supply and
demand for various uses; what is the capacity of available services; and what
alternatives are financially viable: see
BC Real Property Assessment Manual
,
looseleaf (Vancouver: The Continuing Legal Education Society of British
Columbia, 1990), §6.3.

[62]

The Estate contends that highest and best use does not mean property
must be valued only on the basis of some potential future best use without
reference to its present use. However, in
Gemex Developments Corp. v.
British Columbia (Assessor of Area #12  Coquitlam
) (1998), 62 B.C.L.R. (3
d
)
354, Madam Justice Newbury, writing for the Court, rejected that position,
stating (at para. 11):

This position runs contrary to
most of the definitions of actual or market value that have been advanced
by courts and learned authors in recent years. British Columbia courts on many
occasions have held that provided a possible future use is not speculative,
it may be considered in determining value and that if an owners present use is
not consonant with a use that would affect the market price, the latter will
govern: see, e.g., Lefeaux v. Corporation of the District of West Vancouver
(1962) Stated Case 33 (B.C.S.C.); Jericho Tennis Club v. Assessor of Area 09
Vancouver (1991) Stated Case 307 (B.C.S.C.); Assessor of Area 10  Burnaby/New
Westminster v. Sears Canada Inc. (1992) Stated Case 332 (B.C.S.C.); and Petro
Canada Inc. (Gulf Canada Ltd.) v. Assessor of Area 12  Coquitlam (1991) 61
B.C.L.R. (2d) 86 (B.C.C.A.), a decision of Proudfoot J.A. in Chambers.

[63]

With respect to First Nations lands, the majority in
Musqueam Indian
Band v. Glass,
2000 SCC 52, accepting guidance from
The Appraisal of
Real Estate
text noted above, confirmed:

[47]      Legal restrictions on land use, as opposed to
restrictions found in the lease, may affect the market value of freehold
property.To determine land value, whether as vacant or as improved, the
appraiser (unless otherwise instructed by the lease) considers the highest and
best use that is legally permissible, physically possible, financially
feasible, and maximally productive. Legal impediments include [p]rivate
restrictions, zoning, building codes, historic district or other non-zoning
land use controls, and environmental regulations (Appraisal Institute of
Canada,
The Appraisal of Real Estate
(Canadian ed. 1999), at p. 270).

[48]      The legal restrictions
on land use imposed by a band on its land are analogous to land laws imposed by
a municipal government.  The legal environment on a reserve should therefore
be taken into account when appraising the lands value. Of course, like
municipal zoning, band restrictions could either increase or decrease land
value depending on how the market responds to them. In
Devils Gap Cottages,
supra
[(November 18, 1991), Doc. T  2468-88 (Fed. T.D.)], Strayer J. (as
he then was) noted that favourable zoning on that reserve increased its value
dramatically over non-reserve land.

[64]

The Court distinguished legal restrictions on the use of the land, which
are relevant to determining highest and best use, from contractual restrictions
imposed in a lease, which generally are not. This was also recognized in
Victoria
University (Board of Regents) v. GE Canada Real Estate Equity,
2016 ONCA
646, where that Court summarized
Musqueam
as follows:

[40]      In conclusion,
Musqueam
establishes that, absent a contrary intention in the lease: (a) the word
land refers to the freehold or fee simple interest in the lands at issue; (b)
the word value means the exchange value of the land, calculated by
determining the highest and best use possible; and (c)
fair market value
should reflect legal restrictions on the land but should ignore any particular
restrictions imposed by the lease itself.
[Emphasis added.]

[65]

In short, legal impediments are
legal
restrictions on the
use
of the land. They do not include an owners intentions or desires, which are
irrelevant, or in this case an executrixs inability to facilitate the highest
and best use of the land, which may be rectified. As a bare trustee, the executrix
could apply to the Supreme Court for an order under the
Trustee Act,
R.S.B.C.
1996, c. 464, for the appointment of a new executrix, or for an order
under s. 43 of the
Indian Act
and
Indian Estates Regulations,
C.R.C.,
c. 954, for the appointment of an administrator that could facilitate the
highest and best use of the land and be in compliance with any Band
requirements. Under s. 44 of the
Indian Act
, orders can be made
pursuant to provincial laws, like the
Trustee Act
, as long as they are
in accordance with (i.e., not inconsistent with) the
Indian Act
.

[66]

More significantly, there was no evidence that any of these issues
raised by the Estate constituted legal impediments, to what Mr. Umlah
determined to be the highest and best use of the Residential Lands. A
professional appraisal must include any legal impediments and none were
included in Mr. Umlahs report. There was simply no evidence to establish
the existence of any legal impediment that might have impacted the highest and
best use valuation of the Residential Lands. Moreover, given the Land Code and
LUP enacted by the Band, and the type and scope of development encouraged and
approved by the Band, the assumption that this would likely continue provided a
sound evidentiary grounding to Mr. Umlahs highest and best use valuation.

Valuation of three residential sites as one

[67]

Section 87(a) of the
FLA
provides that the value of family
property must be based on its fair market value. Mr. Umlah calculated the
fair market value of the Residential Lands based on their highest and best use
for potential development at $6,730,000 as of the date of trial.

[68]

The Estate requested Mr. Umlah to provide an appraisal of the
Residential Lands collectively as one, non-developable residential parcel. This
request was an extraordinary assumption that did not comply with the appraisal
standard of highest and best use and resulted in a reduced valuation of the
property to a third of its market value at $1,780,000 as of the date of trial.
In my respectful view, the judge erred in accepting that valuation for the
Residential Lands as it did not reflect the highest and best use of the
property. The correct assumption for the valuation of the Residential Lands at
their highest and best use was their potential high-density residential and
commercial development. Alternatively, it was at least for their potential
development as three individual residential sites.

Date of valuation

[69]

The judge valued the three categories of land as of the date of Mr. Campbells
death, being the closest to the date of separation. With respect, in my view he
erred in his selection of that date for their valuation in the absence of a
finding that it would be significantly unfair to divide the net family property
equally. This requires an understanding of the division of property provisions
of the
FLA,
which have changed in certain respects from the provisions
under the
FLA
s predecessor, the
FRA
.

[70]

Section 81 of the
FLA
provides that (a) regardless of their
respective use or contribution (b) on separation, each spouse has a
right to an undivided half interest in all family property as a tenant in
common, and is equally responsible for family debt. This provides for a
presumptive equal division of what is found to be net family property under
s. 84 of the
FLA.

[71]

Section 84 of the
FLA
defines family property as follows:

84

(1) Subject to section
85
[excluded property]
,
family property is all real
property and personal property as follows:

a)

on the
date the spouses separate,

i.

property that is owned by at least one spouse

(2) Without limiting subsection (1), family
property includes the following:

g)

the amount
by which the value of excluded property has increased since the later of the
date

i.

the relationship between the spouses began, or

ii.

the excluded property was acquired.

[72]

Section 85 defines excluded property as property acquired by a spouse
before the relationship between the spouses began (s. 85(1)(a)).

[73]

Section 84 establishes the date of separation as the event when property
is determined to be family property or excluded property. This is comparable to
the defined triggering event under the former
FRA.
The purpose of
s. 84 is to set out the date upon which the property is characterized as
family property, not the date upon which it is valued, which is expressly
addressed in s. 87. See
F.(V.J.) v. W. (S.K.),
2016 BCCA 186 at para. 69.

[74]

Section 87 of the
FLA
requires that (a) family property must
be valued based on its fair market value, and (b) the value of family
property and family debt must be determined as of the date of (i) an
agreement dividing the net family property, or (ii) the date of a hearing
with respect to the division of family property and family debt.

[75]

The date of the hearing for the valuation of net family property is the
presumptive valuation date. Where family property is the increase in value of
excluded property (being property acquired by a spouse before the relationship
between the parties began), the value of that property is determined
presumptively at the date of an agreement between the parties or the date of
hearing.

[76]

A departure from the presumptive date for valuation of family property
is effectively a reapportionment or unequal division of the family property,
which can only be done under s. 95 of the
FLA.
Section 95 expressly
provides for the reapportionment of net family property if an equal division would
be significantly unfair. Under the former
FRA,
a change in the
valuation date from the date of hearing was determined to be an effective
reapportionment of the family assets. See
Martelli v. Martelli
(1981),
33 B.C.L.R. 145 at para. 28 (C.A.);
Toth v. Toth
(1995), 13
B.C.L.R. (3d) 1 at para. 55 (C.A.);
McPhee v. McPhee
(1996), 22
R.F.L. (4
th
) 302 at paras. 1013 (B.C.C.A.); and
Fisher v.
Fisher,
2009 BCCA 567 at para. 61. The same reasoning, in my opinion,
should be applied to the comparable provisions of the
FLA.
Any departure
from the presumptive equal division of net family property under s. 81 of
the
FLA
must therefore be made pursuant to s. 95(1) of the
FLA
,
which imposes a threshold finding that an equal division of the net family
property would be significantly unfair before any reapportionment of the net
family property can be ordered.

[77]

In this case, the judges reasons demonstrate an intention to grant Ms. Kumagai
an equal division of the net family property based on his reference to the
comments in
Jaszczewska
that (1) mere disparity in wealth at the
commencement of a relationship would [not] generally justify unequal division
of family property at the end of the relationship (at para. 150); and (2) [e]xceptions
to equal division of family property are not the norm and [s]ignificant
unfairness must be demonstrated (at para. 151), relying on the following
comments of Mr. Justice Brown in
L.G. v. R
.
G.,
2013 BCSC 983
at para. 71, which state:

In my view, the term
significantly unfair in s. 95(1) of the
FLA
essentially is a
caution against a departure from the default of equal division in an attempt to
achieve perfect fairness. Only when an equal division brings consequences
sufficiently weighty to render an equal division unjust or unreasonable should
a judge[s] order depart from the default equal division.

The judge concluded that it would not be significantly
unfair for the claimant to receive a compensation order equal to one-half of
the family property less one-half of the family debt (at para. 156).

[78]

However, the judge chose the date of separation as the valuation date
for the net family property because [t]he claimant did not participate in or
make any meaningful contribution towards any of the businesses being operated
on the Campbell Lands, nor did she do anything to enhance their value other
than assist Mr. Campbell in the upkeep and maintenance of the matrimonial
home and therefore [i]t would be unfair to allow the claimant to participate
in any increase in the value of the Campbell Lands after she separated from the
relationship (at para. 120).

[79]

The Estate submits that the judge was correct in choosing the date of
separation to value the family property, as pursuant to s. 85(1)(a) and
s. 84(2)(g) of the
FLA,
it says, only the increase in value of the
property acquired by a spouse before the marriage, from when the marriage or
marriage-like relationship began until the date of separation, constitutes
family property. In support of that position, the Estate relies on the
following comments from
V.J.F. v. S.K.W.,
2016 BCCA 186 at para. 1,
where the Court stated:

The basic principle intended to
be applied to the property of spouses on separation is that they keep what is
theirs. Most notably, with respect to property acquired by a spouse before the
marriage, only the increase in value that accrues during the spouses
cohabitation is (presumptively) divisible under the Act. The rest is excluded
property that is presumptively not divisible.

[80]

With respect, the Estate misconstrues the Courts comments in
V.J.F.
At
para. 1, Madam Justice Newbury, writing for the Court, is referring to the
characterization of property as family property or excluded property on the
date of separation, in summarizing the new approach to identifying family
property under the
FLA.
This is confirmed by her later comments (at para. 69),
where she reiterates this point in reference to the specific provisions of the
FLA
:

Equally important, s. 84
suggests that the point in time at which family property (and therefore the
exclusions therefrom) are determined is the
date of the spouses separation
(subject only to the extension under s. 84(1)(b) in respect of property
acquired after separation if it was derived from property described in
s. 84(1)(a).  [Underlining in original.]

[81]

There are two further errors in the judges reasoning: (1) under
s. 81(a) of the
FLA
,

entitlement to an equal share in the
net family property is not dependent on use or contribution to the family
property; and (2) use or contribution to family property is not a
requirement for making an order for an unequal division under s. 95, which
only requires a finding of significant unfairness.

[82]

This interpretation of the interplay between these provisions under the
FLA
was clearly articulated in
Jaszczewska,
where Mr. Justice
Harris, writing for the Court, stated:

[38]      It is safe, therefore, to conclude that the
Legislature intended to limit the circumstances in which a departure from equal
division of family property could be justified because of unequal contributions
to its acquisition, preservation, maintenance or improvement. The
FLA
starts
with the presumption found in s. 81 that family property is to be equally
divided. As I read s. 81, each spouse is presumptively entitled to an
undivided half interest in all family property, regardless of their respective
use or contribution. I do not think the use of the words regardless of their
respective use or contribution in s. 81(a), rather than in s. 81(b),
is inconsistent with that view. Any potential uncertainty on this point would
have been removed if s. 81(b) had read on separation, each spouse has a
right to an undivided half interest in all family property, regardless of their
respective use or contribution. But as I read it, the phrase in s. 81(a)
refers to the basis of entitlement to family property. Entitlement exists
independent of contribution or use, and the extent of that entitlement on
separation is defined in s. 81(b).

[39]      Also, because family
property is generally valued on the date of the hearing, the parties will
presumptively share in any post-separation increases in the value of family
property. Once again, because of s. 81, this entitlement exists
independent of the parties respective contribution to the post-separation
increase in value.

[83]

As to s. 95, Harris J.A. agreed (at para. 41) with the
description of significantly unfair in
Remmem v. Remmem,
2014 BCSC
1552, where Mr. Justice Butler described the standard (at para. 44)
as compelling or meaningful having regard to the factors set out in s. 95(2).
Justice Harris added that significantly unfair requires evidence that rises
to the level of something objectively unjust, unreasonable or unfair in some
important or substantial sense (at para. 42).

[84]

In my respectful view, the judges decision in this case to value the
property as of the date of separation is an error. His decision was based on
his finding that it would be unfair for Ms. Kumagai to share in the
increase in the market value of the Campbell Lands after separation because she
did not contribute to that increase. Unfair does not rise to the standard of
significantly unfair under s. 95, and, more significantly, contribution
is not a requirement for an equal division of family property under s. 81
of the
FLA.
Furthermore, as discussed above, by valuing the family
property as of the date of separation, the judge effectively granted Ms. Kumagai
an unequal division of the net family property in favour of the Estate,
contrary to the judges expressed intention to divide the net family property
equally.

[85]

Accordingly, the value of the family property at issue, being the
Campbell Lands held under the six CPs, must be valued as of the date of hearing
and a compensation order made based on those valuations. Using the date of the
hearing and Mr. Umlahs initial appraisal of the Residential Lands based
on their highest and best use, the value of the Campbell Lands would be as
follows:

a)

Commercial
  Lands ($3,280,000
−
$1,980,000):

$1,300,000

b)

MHP
  Lands ($7,850,000
−
$5,720,000):

$2,130,000

c)

Residential
  Lands ($6,730,000
−
$4,380,000):

$2,350,000

Total
:

$5,780,000

[86]

To that total of $5,780,000, the $564,893 of other, undisputed family
property would be added and the family debt of $16,292 would be subtracted, for
a total net family property value of $6,328,601. Ms. Kumagai would be
entitled to one-half that amount, which is equal to $3,164,301.

B.       Spousal support

[87]

The judge initially determined that Ms. Kumagai would be entitled
to monthly spousal support of $5,000 from the Estate, but for his finding that
he was precluded from making such an order under s. 171(3) of the
FLA
.
On reconsideration, he determined that he could make a spousal support award
but reduced the monthly amount to $2,223. This amount is the mid-point range
for spousal support under
SSAG
based on findings of $293,367 income to
the payor Estate and $75,588 income to Ms. Kumagai.

[88]

Ms. Kumagai submits the judge erred by awarding her a monthly amount
of $2,223 after finding that she had demonstrated a significant need beyond the
monthly bequest of $5,000 she receives under the Will, and upon finding that
she required an additional monthly amount of $5,000 to meet her significant
need.

[89]

As noted above, the parties agree the judges finding of the Estates
income at $293,367 should have been its pre-tax or gross annual income of
$500,175 as the starting point for determining the income available for spousal
support. See
Hausmann v. Klukas,
2009 BCCA 32 at paras. 32, 5052,
leave to appeal refd [2009] S.C.C.A. No. 135; and
McKenzie v.
McKenzie,
2014 BCCA 381.

[90]

Ms. Kumagai also submits that the judge erred in characterizing her
monthly bequest of $5,000 under the Will as income, and then grossing it up for
the purpose of applying
SSAG
. She contends
SSAG
is not applicable
in these circumstances where the payor is an estate and therefore the support
payments are not deductible by the Estate or taxable to her. On appeal, the
Estate agrees that
SSAG
is not applicable as it does not include
options that fit with the facts of this case. I agree.

[91]

SSAG
is premised on the principle that payments are deductible by
the payor and taxable to the recipient. Any payment from the Estate, whether it
is a capital bequest or a support payment is not subject to tax. In addition,
the Estates pre-tax income exceeds $350,000, the ceiling above which the
SSAG
formulas do not automatically apply. In my view, assuming entitlement,
SSAG
is not strictly applicable in these circumstances.

[92]

I also agree with Ms. Kumagais submission that it is speculative
to infer that because her bequest under the Will was made, in part, as monthly
payments that it should be treated as income in the form of support payments,
rather than as capital, and therefore grossed up for the purpose of applying
SSAG.
Ms. Saganiuks bequest under the Will was also in the form of monthly
payments with a residual bequest when the infant beneficiary turned 30. In my
view, the monthly payments to Ms. Kumagai under the Will, absent evidence
to the contrary, can only be characterized as a capital bequest. This is
consistent with Mr. Campbells other bequest and supported by the nature
of the property in the Estate, which is not to be sold but to continue to
provide an income stream. It is also consistent with the characterization of
income under
SSAG
. Chapter 6 of
SSAG
states that [t]he starting
point for the determination of income under the Spousal Support Advisory
Guidelines is the definition of income under the
Federal Child Support
Guidelines.
 Section 16 of the
FCSG
directs that income is generally
determined using the income reported under the heading Total income in the T1
General tax form issued by Canada Revenue Agency, subject to certain
deductions. Bequests under a will are usually not reported as income on tax
returns, and therefore would not fall within the definition of income under
SSAG
.

[93]

I am unable to agree, however, with Ms. Kumagais further
submission, relying on
Chutter v. Chutter,
2008 BCCA 507 and
Bell v.
Bell,
2009 BCCA 280, that she should not be required to encroach on her
capital in order to maintain the standard of living she enjoyed with Mr. Campbell
during the marriage. Those decisions addressed principles for ongoing spousal
support for living parties. They do not in my view extend to spousal support
after the payors death, which is governed by the factors set out in s. 170(g)
and s. 171 of the
FLA,
which provide:

170
In an order respectingspousal support, the court
may provide for one or more of the following:

(g)        subject to section 171(1) . that a duty to pay
spousal support continues after the death of the person having the duty, and is
a debt of his or her estate for the period fixed by the court.

171(1)
Before making an order under section 170(g)
the court must consider all of the following factors:

(a)        that
the person receiving spousal support has a significant need for support that
is likely to continue past the death of the person paying  spousal support;

(b)        that
the estate of the person paying  spousal support is sufficient to meet the
need referred to in paragraph (a) after taking into account all claims on the
estate, including those of creditors and beneficiaries;

(c)        that
no other practical means exist to meet the need referred to in paragraph (a).

(3)
If a person having a
duty to pay  spousal support under an agreement or order dies and the
agreement or order is silent respecting whether the duty continues after the
death of the person and is a debt of his or her estate,

(a)        the
person receiving support may make an application under  section 165
[orders
respecting spousal support]
, and

(b)        if, on consideration of the
factors set out in subsection (1) of this section, an order is made, the duty
to pay  spousal support continues despite the death of the person and is a
debt of his or her estate for the period fixed by the court.

[94]

Given my proposed change in the compensation award, proposed change in
the findings for each partys income, and the need to weigh the factors under
s. 171 of the
FLA,
it is necessary to remit this issue to the trial
court to determine an appropriate amount of spousal support in all of the
circumstances. Pending the determination of the quantum of spousal support, I
would maintain the existing order awarding monthly payments of $2,223 to Ms. Kumagai.

On cross appeal

[95]

The Estate raises three issues on the cross appeal: (1) whether the
judge erred in finding that Ms. Kumagai was entitled to spousal support
from the Estate; (2) whether the judge erred in declining to vary the
second interim spousal support award; and (3) whether the judge erred in
dismissing the Estates application for an order requiring Ms. Kumagai to
contribute to the probate fees paid by the Estate. I find no merit to any of
these grounds of appeal and I would dismiss the cross appeal for the reasons
below.

Orders under the FLA that survive death

[96]

The Estate submits the judge erred in finding that Ms. Kumagai was
entitled to spousal support against the Estate pursuant to s. 171 of the
FLA.
It relies principally on the jurisprudence under the common law that held
the payment of support is a personal obligation that does not survive the death
of the payor unless an order or agreement was made during the lifetime of the
payor that reflected an intention to bind the payors estate. (See
McLeod v.
McLeod,
2013 BCCA 552.) The Estate also submits the judges initial
interpretation of the provisions correctly found that the
FLA
did not
permit an existing support obligation of a payor before death to survive after
his or her death as the language of those provisions do not expressly refer to
a deceased spouse. The Estate further submits that the judge erred by finding
that the word order in s. 170(g) and s. 171 could include an
interim order, and, in any event, that none of the factors that must be
considered under s. 171(1) were met in this case.

[97]

On reconsideration of whether the interim spousal support order could
survive the death of Mr. Campbell, the judge found that the object and
intention of the Legislature was clear and to not give it effect would result
in an absurdity (at paras. 921). I agree. In my respectful view, the
judge correctly applied the well-known principles of statutory interpretation
set out in
Rizzo & Rizzo Shoes Ltd. (Re),
[1998] 1 S.C.R. 27 and
reiterated in
Bell ExpressVu Limited Partnership v. Rex,
2002 SCC 42, in
determining that the legislative intent of these provisions was to provide a
mechanism for the ongoing payment of spousal and child support upon the death
of the payor spouse based on the factors listed in s. 171(1). The
Legislature has clearly and expressly changed the common law principles with
respect to support under the
FLA.
I find no error in the judges
reconsideration of this issue.

[98]

I similarly find no error in the judges determination that the
reference to an order in s. 170(g) and s. 171 includes an interim
order. As the judge noted in his initial reasons (at paras. 167169), the
FLA
does not define or limit the meaning of the word order. In comparison,
the
Supreme Court Family Rules
define a final order as an order that
finally resolves the family law claim and the
Supreme Court Civil Rules
define
an order to include a judgment and a decree.

[99]

Section 216(2) of the
FLA
requires a court to make an interim
order in accordance with any requirements or conditions of this Act that would
apply if the order were not an interim order. Sections 161 and 162 of the
FLA
set out the objectives for determining entitlement to spousal support, and
the factors to be considered in determining the amount and duration of spousal
support, respectively, which a court is required to consider in making a
spousal support order. Although the Estate asserts that entitlement is often
not determined when making an interim support order, entitlement is an express
consideration under s. 161 and therefore for an interim order under
s. 216. In short, an order is an order absent language in a provision that
limits the nature and scope of an order that can be made after the death of a
payor.

[100]

I also
find no error in the judges determination, based on all the evidence before
him, that the factors he was required to consider under s. 171(1) were
met. The judge found that, despite the compensatory award for property division
Ms. Kumagai would receive and her monthly bequest of $5,000 under the
Will, Ms. Kumagai had demonstrated a significant need for further support.
It was open to the judge to make such a finding based on the evidence before
him. The evidence of all the claims against the Estate was also before the
judge, and he determined that the Estate was sufficient to meet Ms. Kumagais
need for spousal support in light of those claims. The Estate submits that
s. 171(1)(c) is not met as the $5,000 monthly bequest Ms. Kumagai
receives represents a practical means of meeting her need; however, the judge
clearly stated in his initial reasons that Ms. Kumagai demonstrated a
significant need for support

beyond the $5,000 per month that she is
entitled to receive under the provisions of the Will
 (at para. 184).
As a result, I find no merit to the argument that her bequest under the Will
could be a practical means of meeting the need she demonstrated.

Variation of the second interim order

[101]

The second
interim order was made against the Estate. It increased the first interim order
for monthly spousal support against Mr. Campbell from $5,000, to $15,000
against the Estate, payable in two equal installments of $7,500 commencing on
October 1, 2013. In his final order, the judge declined to retroactively
vary the second interim order.

[102]

On appeal,
the Estate first submits there was no authority under the
FLA
to make an
interim order against the Estate as the word order in s. 170(g) and
s. 171 does not include an interim order. As discussed above, I cannot
agree. There was authority to make the second interim order just as there was
to make the judges final spousal support order.

[103]

Second,
the Estate submits that if there was authority to make the second interim order
against the Estate, and if the judge determined that a spousal support order
should be made at trial, then the judge erred in failing to make his order
apply retroactively to the date of the second interim order, effectively
retroactively varying that order. Again, I cannot agree.

[104]

The second
interim order was not appealed. The judge noted at para. 33 of his
supplementary reasons that if the Estate took issue with the second interim
order, its remedy was an appeal. The Estate submits that it was an error for
the judge to consider that an appeal would be the only available remedy.
However, it is clear that the judge proceeded to consider and apply the factors
that must be established under s. 167(2) of the
FLA
for a variation
of an order (at paras. 34
‒
35).
While the judge had the authority to retroactively change the second interim
order in the final order, he declined to do so. That decision involved the
exercise of discretion for which this Court must give deference. I find no
error in the judges decision not to change the second interim order.

Probate fees

[105]

The Estate
submits the judge erred in dismissing its application that Ms. Kumagai
contribute to the expense of the probate fees in the amount of $170,792. I find
no merit in this submission.

[106]

Section 86 of the
FLA
defines family debt as follows:

86.
Family debt includes all financial obligations
incurred by a spouse

(a)        during
the period beginning when the relationship between the spouses begins and
ending when the spouses separate, and

(b)        after the date of separation,
if incurred for the purpose of maintaining family property.

[107]

The focus on the nature and purpose of determining if a debt is a family
debt was addressed in
Mallen v. Mallen
(1992), 65 B.C.L.R. (2d) 241
(C.A.) at para. 6 where the Court stated:

The proper focus for the
examination of a debt should be a focus on the nature and purpose of the
borrowing and on the expenditure of the borrowed funds. If the funds were used
to acquire a family asset, to maintain a family asset, to discharge a family
burden, or to maintain the family members, then it is likely that equality and
fairness will require an equal sharing of the debt or liability and its
adjustment in the division of the assets in such a way to carry out the
principles of equality and fairness.

[108]

While
Mallen
was decided under the former
FRA,
which contained no express
provision for allocation of family debts, now provided for in the
FLA,
the
characterization of a debt as a family debt in my view remains the same as
articulated in
Mallen.
Simply put, probate fees do not fall within the
definition of family debt under the
FLA.
They are unrelated fees that
are incurred pursuant to the
Probate Fee Act,
S.B.C. 1999, c. 4. I
find no error in the judges determination that the probate fees were not a
family debt.

Disposition

[109]

In the result, I would make the following orders:

a)

The appeal is
allowed in part by: (1) increasing the amount of the compensation order
from $1,959,301 to $3,164,301; and (2) remitting the quantum of spousal
support to the trial court for reconsideration;

b)

The order of
June 23, 2016, with respect to the spousal support awarded to Ms. Kumagai
in the amount of $2,223 monthly, be maintained until the quantum of spousal
support has been reconsidered and finally determined; and

c)

The cross appeal is dismissed.

The
Honourable Madam Justice D. Smith

I AGREE:

The Honourable Mr. Justice
Harris

I AGREE:

The Honourable Mr. Justice
Hunter