Jul 27, 2020

Blaneys Appeals July 20 to 24, 2020

Kyle v. Atwill, 2020 ONCA 476 (CanLII)

[Feldman, Brown and Zarnett JJ.A.]

Counsel:

Aaron Franks and Rhea Kamin, for the appellant

Carolyn Shelley and Silvia Cioci, for the respondent

Keywords: Family Law, Marriage Contracts, Setting Aside, Rescission, Equalization of Net Family Property, Spousal Support, Civil Procedure, Limitation Periods, Relief Sought, Declarations, Discoverability, Statutory Interpretation, Family Law Act, R.S.O. 1990, c. F.3, ss. 2(8), 2(10), 7(3)(b), 33(1), 33(4), 52, 56(4), Limitations Act, 2002, S.O. 2002, c. 24, Sched. B., s. 4, 5, 16(1)(a), 16(1)(c), 19(1)(a), Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, Starz (Re), 2015 ONCA 318, 125 O.R. (3d) 663, Fehr v. Sun Life Assurance Company of Canada, 2018 ONCA 718, Peikut v. Romoli, 2020 ONCA 26, Alguire v. The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202

Facts:

The parties entered into a prenuptial agreement (the “marriage contract”) immediately before their marriage. The contract waived any entitlement to spousal support and provided that the parties would be separate as to property. After seven years of marriage, the parties separated. Eventually, the husband brought family law proceedings claiming equalization of net family property and spousal support. The wife defended by relying on the marriage contract as a complete answer. He replied by asking the court to set aside or rescind the marriage contract on the basis that he had signed it without financial disclosure, without legal advice, under duress, and under a clear power imbalance. Although the husband commenced the proceeding within the six-year limitation period for equalization claims under the Family Law Act, s. 7(3)(b), more than two years had elapsed since the parties separated. The wife’s position was that the request to rescind the marriage contract was out of time.

On summary judgment, the motion judge found that rescission of a marriage contract constitutes a “claim” under the Limitations Act, 2002, that claim is subject to the two-year limitation period in s. 4 of that Act, and the husband discovered his claim roughly two months after separation. The motion judge therefore found the claim to be time-barred.

Issues:

Did the application judge err in determining that the husband’s application to set aside the marriage contract was statute-barred?

Holding:

Appeal allowed.

Reasoning:

Yes. The husband’s plea for rescission of the marriage contract under ss. 56(4) of the Family Law Act is a proceeding for a declaration where no consequential relief is sought and therefore, under s. 16(1)(a) of the Limitations Act, 2002, no limitation period applies to that pleading. The husband’s claim for equalization is subject to the six-year period set out in s. 7(3)(b) of the Family Law Act, and his claim for spousal support is not subject to a limitation period, pursuant to s. 16(1)(c) of the Limitations Act, 2002. Neither is time-barred and the action was therefore permitted to proceed.

The question to be decided on this appeal was whether the application to set aside the marriage contract is subject to no limitation period because it is a proceeding under s. 16(1)(a) of the Limitations Act, 2002 for a declaration where no consequential relief is sought, or whether it is subject to the general two-year limitation period and if so, when the loss or damage occurred and when the claim was discovered. The standard of review is correctness, as the question to be determined was a question of law.

In the family law context, the operation of the Limitations Act, 2002 together with the Family Law Act prescribes limitation periods that are, in most cases, considerably more generous than the two-year period set out in s. 4 of the Limitations Act, 2002, in recognition of the unique situation of spouses and families on the breakup of a marriage. Section 19(1)(a) of the Limitations Act, 2002 provides for the application of limitation periods contained in other acts. One such limitation period is s. 7(3) of the Family Law Act, which sets out three limitation periods for applications for equalization of net family property that may be brought under s. 5 of the Family Law Act: (a) two years after the day the marriage is terminated by divorce or judgment of nullity; (b) six years after the day the spouses separate and there is no reasonable prospect that they will resume cohabitation; (c) six months after the first spouse’s death.

Unlike with limitation periods contained in the Limitations Act, 2002, the court may extend limitation periods specifically provided in the Family Law Act under s. 2(8) of that Act, in certain enumerated circumstances. With respect to spousal support, the Family Law Act does not provide a limitation period for seeking an order for spousal support under s. 33(1) of that Act. The limitation issue is dealt with in s. 16(1)(c) of the Limitations Act, 2002, which provides that there is no limitation period for bringing a proceeding to obtain support or to enforce a contract providing for support under the Family Law Act.

These special limitation periods account for the need to allow spouses more time to try to resolve their property issues without having to go to court, and the fact that a spouse or former spouse’s support needs can change over time and may be addressed whenever they do.

Persons who are married or intend to marry may agree regarding their rights and obligations during and after the marriage in a marriage contract, which is one form of domestic contract: Family Law Act, s. 52. A domestic contract prevails over the Act unless the Act provides otherwise: s. 2(10). A number of provisions of the Family Law Act permit a court to set aside all or part of a marriage contract, two of which were relevant to this appeal. First, in the context of an application for spousal support, s. 33(4) gives the court the power to set aside a provision in a marriage contract that waives or reduces the right to support in three enumerated situations, including where the provision results in unconscionable circumstances. Second, s. 56(4) allows a court to set aside an entire marriage contract or any provision in it, on application.

There is no limitation period provided in the Family Law Act for setting aside all or part of a domestic contract under s. 56(4), although that section specifically contemplates a court application for such relief. There is also no limitation provided for setting aside a spousal support provision of a marriage contract under s. 33(4), but that determination is made as part of a spousal support application for which there is no limitation period, as provided in s. 16(1)(c) of the Limitations Act, 2002. Because the Family Law Act is silent as to the limitation period that applies to an application to set aside a marriage contract or a provision in it, one must look to the Limitations Act, 2002 to determine which provisions of that Act, if any, apply.

The majority of the Court (Feldman J.A. and Zarnett J.A.) did not share the Brown J.A.’s view that the provision establishing the limitation period for seeking equalization should be read to also apply to an application to set aside a marriage contract under s. 56(4) of the Family Law Act. The fact that the Family Law Act does not provide a limitation period for an application to set aside a marriage contract under s. 56(4) was a clear legislative signal that the Limitations Act, 2002 is to apply.

The Court agreed with the motion judge that the application to set aside the marriage contract is an application for a declaration. However, the Court did not agree that that application seeks consequential relief. A declaratory judgment is a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs – it is restricted to a declaration of the parties’ rights and does not order any party to do anything.

Different limitation periods may govern different claims in the same action. The key, therefore, is not whether consequential relief in the form of a claim for a remedy against another party is sought procedurally in the same proceeding or in a subsequent proceeding. The key is whether the request for a declaration coupled with a claim for enforceable relief is, in substance, a claim for a remedy against the other party and not merely a request for a declaratory order. This is because, if it is a claim for a substantive remedy against another party, then the limitation period applicable to that substantive remedy will apply to that claim. Similarly, if a declaration is necessary as a prelude to a claim for a remedy against another person, no limitation period applies to the proceeding for a declaration, but the applicable limitation period for seeking the remedial order may still bar that claim. Accordingly, if a party seeks both consequential and declaratory relief against another party, the consequential relief is subject to the limitation periods set forth in the Limitations Act, 2002, or in this case, the Family Law Act, while the declaratory relief alone benefits from the absence of a limitation period. The bar is not against joining a claim for consequential relief; the bar is against applying no limitation period to the consequential relief.

Applying the principle to this case, where the husband seeks a declaration that would remove a significant obstacle to his claims for equalization and for spousal support, that declaration is subject to no limitation period, pursuant to s. 16(1)(a) of the Limitations Act, 2002. The limitation periods governing the consequential relief he seeks, namely equalization and support, are the periods applicable to those forms of relief: six years from the date of separation for equalization, and no limitation period for support. Conversely, had the husband brought his equalization claim seven years after the date of separation with no reasonable possibility of reconciliation, and therefore out of time, the fact that he would be able to obtain a declaration setting aside the marriage contract would not mean that his equalization claim could proceed. That claim would remain time-barred, subject to the power of the court to extend the time under s. 2(8).

This result also works seamlessly within the limitation structure of the Family Law Act, because it does not add a new, shorter limitation period of two years, which would disrupt the longer time spouses have been given to resolve their affairs. It does not interfere with the philosophy of the Act, which is to give more generous time periods for separating spouses to resolve their claims for equalization and spousal support. Moreover, while spouses may seek to set aside a marriage contract in the circumstances set out in s. 56(4) at any time, a spouse is unlikely to bring such an application during the marriage, even if the spouse learns that the other spouse failed to disclose some material assets when they were negotiating their agreement. If they remain happily married, there will be no need. An application to set aside a marriage contract would likely be brought in the context of marriage break-up and its financial consequences for the parties. Those financial consequences are governed by the limitation periods specified in the Family Law Act and in the Limitations Act, 2002. An application to set aside a marriage contract will not extend or reduce those periods.

Because of the Court’s conclusion that the request to set aside a marriage contract under s. 56(4) of the Family Law Act is a proceeding for a declaration where no consequential relief is sought under 16(1)(a) of the Limitations Act, 2002, it was unnecessary to consider whether that request falls within the definition of claim, and in that context when the loss or damage occurred and when the husband discovered the claim.

Brown J.A. (concurring in the result):

In separate reasons concurring in the result, Brown J.A. disagreed with the broad statement of the majority opinion that “a proceeding under s. 56(4) of the Family Law Act comes within s. 16(1)(a) of the Limitations Act, 2002.” In Brown J.A.’s view, it may or it may not.

Brown J.A. agreed that a proceeding that seeks only to set aside a domestic contract under s. 56(4) of the Family Law Act and does not seek consequential relief may well fall within the language of s. 16(1)(a) of the Limitations Act, 2002. However, such a proceeding would be a rare bird. The reality of family law litigation is that a proceeding in which an applicant seeks to set aside a domestic contract invariably also contains, as part of the prayer for relief, requests by the applicant for consequential relief relating to support or property equalization. Seeking such relief in the same proceeding in which the applicant attempts to set aside a domestic contract would take the “proceeding” outside of the language of Limitations Act, s. 16(1)(a). On the face of his pleadings, the husband sought relief consequential to setting aside the marriage contract.

The question then was what limitation periods applied to the husband’s proceeding?

The respondent wife supported the motion judge’s conclusions that (i) the husband’s request to set aside the marriage contract constitutes a discrete “claim” within the meaning of s. 1 of the Limitations Act, 2002 (ii) to which the two-year basic limitation period contained in s. 4 of that Act applies (iii) with the result that since the husband discovered that claim no later than October 17, 2012 (iv) his August 24, 2017 application was commenced out-of-time (v) notwithstanding that his requests for an equalization payment and spousal support were brought within the applicable limitation periods. However, the respondent further submitted that the Court should add a gloss to ss. 4 and 5 of the Limitations Act, 2002 so that a “claim” to set aside a marriage contract is presumptively “discovered” on the date the parties separate. This submission appeared to recognize that requiring a party to apply to set aside a marriage contract within two years of the discovery of some “injury, loss or damage” while the marriage remains on-going would result in a harsh, if not absurd, application of the Limitations Act, 2002.

On his part, the husband disagreed that his request to set aside the provisions of the marriage contract regarding his claims for an equalization payment and spousal support was a stand-alone “claim” for limitation period purposes. Instead, he characterized his request to set aside those provisions as a “gateway” to claiming his statutory rights to equalization and spousal support. As such, the timeliness of his “set aside request” falls to be determined by the limitation periods applicable to his monetary claims for an equalization payment and spousal support, a six-year limitation period and no limitation period, respectively.

Brown J.A. was persuaded by the husband’s submission. It more closely accorded with the statutory language regarding the interplay between Ontario’s family law and limitation periods regimes.

The answer really boiled down to the perspective one takes of the proceeding. Is the “set aside request” a discrete, “stand-alone claim”? Or, should the “set aside request” be treated as one subsumed within the “proceeding” claiming an equalization payment and spousal support under the Family Law Act? In answering those questions, courts should be reluctant to discover or add yet another limitation period to family law litigation given the remedial nature of family law legislation. As well, in seeking to answer the questions courts must recognize the reality of contemporary family litigation: a very large number of family law litigants are now self-represented. Accordingly, in this area of the law, necessity dictated that simplicity and understandability of the “rules of the game” must be a major consideration in the interpretative exercise. In Brown J.A.’s view, the statutory language governing claims for equalization payments and spousal support indicates that any related “set aside request” in a proceeding be treated as one falling under the limitation periods that apply to the requests for an equalization payment and spousal support asserted in the proceeding.