Beware limitation periods affecting your equalization claim

October 24, 2017

 

By: Ashley Iyathurai and Jeff Li

Disclaimer: The information contained in this article is general in nature and does not constitute legal advice. You should contact the Law Office of Jeff Jiehui Li, or another experienced family lawyer if you are concerned about your family law issues.

When married couples separate or divorce, they will usually divide their properties. In Ontario, the division of matrimonial property is based on the principle of  equalization of net family property. Parties may make an agreement regarding property division, or they can resort to the court if they do not want to negotiate or no agreement can be reached. Under the Family Law Act, a claim for equalization cannot be brought after the earliest of:

  1. 2 years after the marriage is terminated;
  2. 6 years after the spouses separate and there is no reasonable prospect that they will resume cohabitation; or
  3. 6 months after the first spouse’s death.

The purpose of this limitation period is to grant separating spouses some degree of finality and resolution so that they can each move on with their respective lives.

Despite this provision, the Act does carve out an extension. Under section 2(8), a court has discretion to grant an extension where:

  1. There are apparent grounds for relief;
  2. Relief is unavailable because of delay that has been incurred in good faith; and
  3. No person will suffer substantial prejudice by reason of the delay.

The party seeking the extension must be able to prove these criteria on a balance of probabilities.

Apparent grounds for relief

Under the Act, the spouse with the lower net family property is entitled to an equalization payment of half the difference between their net family properties. The party seeking an extension of the limitation period must show that there are apparent grounds for making an equalization claim.

In Donnelly v Donnelly, the wife sought an extension to bring a claim for equalization. However, the court noted that this claim was akin to a ‘fishing expedition.’ The wife already had information about the parties’ assets, and she had received substantial financial disclosure from the husband. Furthermore, the wife was educated, and had received legal advice prior to signing the parties’ Agreement.

Good faith

In Hart v Hart, the court noted that to prove ‘good faith’, “it must be shown that the moving party acted honestly and with no ulterior motive.” The court went on to note that merely failing to make enquiries should not negate ‘good faith’, provided that this does not constitute willful blindness or “fall below community expectations.”

In Busch v Amos, the court also considered the definition of ‘good faith’ noting that it was not enough to merely state ignorance. Instead, the moving party must prove that they had “no reason to make enquiries about those rights.”

In Donnelly v Donnelly, the court held that the evidence did not support a finding that the wife’s delay was incurred in good faith. The wife had received legal advice from three lawyers after the parties’ separation. The wife had acknowledged and confirmed that she had received advice and that she had understood the nature of the agreement she was signing.  Despite the fact that the wife had been warned to get accounting and tax advice, she did not do so. The wife had been advised about the agreement, as well as her right to equalization. The court found that the wife was not ignorant of her rights to equalization. Rather, the wife had been fully advised of her rights, and yet chose not to make any other claims.

Resulting prejudice

The language in the Act requires ‘substantial prejudice.’ The moving party must establish that the belated equalization claim will not cause such prejudice to either party. In Busch v Amos, the court noted that “a spouse who arranges his financial affairs following the separation or divorce upon the assumption that matters between him and a former spouse are resolved, is entitled to rely on the limitation period in the Family Law Act.”

In Paulsen v Paulsen, the court granted an extension, allowing the applicant to make an equalization claim. The court noted that the respondent had failed to provide any specific evidence about the prejudice he would suffer if the limitation period were extended. The court also held that the wife’s failure to bring forth an equalization claim had “made little difference to him financially.”

Limitation periods have a significant impact in the family law context. It is important to initiate a claim for equalization on a timely basis to protect your rights. Contact the Law Office of Jeff Jiehui Li to discuss how the limitation period may affect your claims.

 

Related Articles

Dividing Family Property in Ontario

Jeff Li’s Blogs on Spousal Support

Family Law Services

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