There are two Ontario statutes that set limitations in family matters: the Limitations Act and the Family Law Act. In most cases, the Family Law Act sets limitations periods that are more generous than the basic two-year period for claims found in the Limitations Act, recognizing the unique situation of families on marriage breakup. The two-year limitation period in the Limitations Act does not apply to a claim for equalization and there is no statutory limitation period for a claim for spousal support or child support (though there are certain limits to retroactive claims for support). But what about an application to set aside a marriage contract brought under section 56(4) of the Family Law Act, which does not provide a limitation period?
That was the issue in Kyle v. Atwill, where the Ontario Court of Appeal had to navigate the two statutes that work together to set limitations in the family law context. At issue was whether a claim to set aside a marriage contract under the Family Law Act is subject to a limitation period. The parties entered into a marriage contract but separated after seven years of marriage, after which the husband sought equalization and spousal support. Although the application fell within the six-year limitation period for equalization, more than two years had passed since separation, and the wife argued the claim to rescind the marriage contract was out of time.
No Separate Limitation Period to Nullify a Domestic Contract
The court looked at section 16(1)(a) of the Limitations Act which states that there is “no limitation period in respect of . . . a proceeding for a declaration if no consequential relief is sought”. A declaration is a formal statement “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”.
The question the court posed dealt with the meaning of “consequential relief,” trying to discern the intent behind limiting the circumstances when no limitation period applied to when a request for a declaration does not also claim consequential relief. The court emphasized that the Limitations Act is not concerned with procedural issues, but is aimed at governing time limits. Ultimately different limitation periods can govern different claims in the same action. Or as the court put it, combining different claims into a single action would not alter the time limits that applied. Therefore, in a claim for a declaration that may be necessary as a prelude to a claim for a remedy against another party (such as equalization), the proceeding for the declaration may not face a limitation period, but the limitation period for seeking the remedial order may still act to restrict the claim.
In this case, the application to set aside the marriage contract was a proceeding for a declaration that the contract was of no force and should be set aside. However, the court disagreed with the motion judge’s finding that the husband sought consequential relief and could not come within section 16(1)(a). Instead, while the application to set aside the marriage contract was a proceeding for a declaration and is not subject to a limitation period, the consequential relief that the husband sought (equalization and support) still faced the limitations that governed that specific substantive relief: no limitation period for support, and a time limit of six years from the date of separation for equalization.
Limitations Acts Are Concerned With the Amount of Time That Has Passed
The decision in Kyle v. Atwill confirmed that there is no separate limitation period that applies to set aside a domestic contract. However, the Court of Appeal did not consider all defences dealing with delayed claims under section 56(4). Cohen v. Estate of Cohen took a different approach, raising the issue of whether the remedy of laches could act as a defence to an application to set aside a domestic contract. The applicant brought a motion seeking equalization and an order setting aside the marriage contract that she signed with her late husband. The estate sought to raise the defence of laches alleging the applicant knew she was unhappy with the contract but sat on her rights while the applicant’s late husband relied on the validity of the contract when he made financial decisions.
Laches acts as a defence to bar recovery by an applicant because of undue delay in seeking relief, which is viewed as prejudicial to the opposing party. By invoking laches, the individual asserts that the opposing party has delayed acting on their rights, and because of this delay, circumstances have changed, or witnesses and evidence may have been lost so that it is no longer just to grant the applicant’s claim.
Courts Can Evaluate the Reasonableness of Any Delay
The court looked to the decision in Kyle v. Atwill but noted that limitations acts are concerned only with the amount of time that has passed, while laches focuses on the reasonableness of the delay in a given situation. Consequently, it is more case-specific and examines the equitable conduct of the parties and their reliance on the contract. However, equitable defences like laches are only available when dealing with equitable claims. This left the court to determine whether a claim for declaratory relief under section 56(4) amounted to a legal or an equitable claim. Equitable principles were originally developed “in response to the rigid procedures of the common law”.
Looking at the history and development of this area of law, Justice Doyle determined that the defence of laches was available as a defence and that the law of equity was imported into section 56(4) so that both the common law and equitable principles of contract law applied. Moreover, on public policy grounds, laches was found to be in keeping with the letter and spirit of the Family Law Act, which the legislation states are to provide for “the orderly and equitable settlement of the affairs of the spouses”.
Parties Must Be Mindful of How Delay Can Impact a Claim
Domestic contracts enable parties to proactively determine their rights and obligations. Challenging the validity of a domestic contract is not straightforward, and individuals must pay close attention to the timelines applicable to any claim. Family law participants also need to be aware of how different legal principles regarding delay can enable a party to defend the validity of their domestic contract.
Contact the Family Lawyers at Boulby Weinberg LLP in Toronto for Assistance with Domestic Contracts
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