Time Limitations for Claims to Set Aside a Domestic Contractedit
As we have explained here, the most common grounds relied upon to set aside a domestic contract are:
- Failure to disclose a significant asset or debt in existence when the agreement was formed;
- Failure to understand the nature and consequences of the agreement; and
- Any other ground upon which an ordinary contract may be attacked.
A recent Ontario court case raised the additional question as to the time limitation for bringing a claim to set aside such an agreement.
The couple began their relationship in 2000 and started cohabitating in June of 2004. The couple became engaged in 2004 and the wedding date was set for July 20, 2005; it was decided on and planned in less than 30 days.
On July 14, 2005, the couple entered into a marriage contract styled as a “prenuptial agreement”. It was prepared by the wife who obtained a template from the internet. It waived spousal support and indicated that the wife and husband would be separate as to property and not be subject to an equalization of net family property. The agreement was witnessed by a mutual friend, and her evidence was that both parties went to her place to sign it and appeared to be doing so voluntarily.
Although the agreement indicated that each party retained their own lawyer and received independent legal advice, neither actually did.
There was no formal exchange of financial disclosure. The wife stated there was no need as they had kept their finances separate during their year of cohabitation and that was not going to change. The husband acknowledged having had some general understanding of the wife’s finances, in that she owned a home and a cottage.
The marriage contract indicated that each party was provided fair and reasonable disclosure of their property and financial obligations, and each had, or reasonably could have had, adequate knowledge.
For the most part the wife and husband did keep their finances separate after the wedding, although the husband suggested that this was imposed rather than agreed.
After seven years of marriage, the parties separated on August 13, 2012. The husband moved out of the matrimonial home which was owned by the wife. She provided him with $1,600 to help with first and last month’s rent, and made it clear that he could expect nothing further from her.
Shortly after the separation the husband retained a lawyer. The husband did not dispute the pre-marriage financial arrangement, but claimed that the parties never discussed how they would structure their lives after they married. He said he was presented with the marriage contract six days before the wedding and was told by the wife that she would not go through with the marriage unless he signed, though the wife denied such an ultimatum. The husband went on to say that the wife did not suggest that he obtain legal advice, though the wife claimed that she specifically told him he was free to do so, but the husband said he did not feel that it would be worth the money.
Negotiations ensued. The husband indicated that he suffered a mental health setback in the spring of 2013 and abandoned the negotiations at that time.
It was thus only in August 2017 that his application for spousal support and equalization of property was issued. Part of the pleadings included a claim to set aside the marriage contract.
In January 2019, the wife amended her answer to plead that the husband’s claim to set aside the marriage contract was statute barred pursuant to s. 4 of the Limitations Act, 2002 (the “Act”), which reads:
“4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.”
At issue was:
(1) whether the relief sought by the husband to set aside the marriage contract was subject to the 2 year limitation period and, if so,
(2) whether he brought his application in time.
In addition, the couple focused their argument on three distinct questions arising from s. 2 of the Act:
(1) was the husband’s request to set aside the marriage contract a “claim”; if so,
(2) did the Act “provide otherwise” with respect to the limitation period applying to that claim; and, if not,
(3) when was the claim “discovered”?
There was also a final separate question arising from s. 7 of the Act, as to whether the husband suffered from an incapacity that would suspend the running of the limitation period.
The court began by finding that the husband’s request to set aside the agreement was in fact a “claim” under legislation and was therefore subject to the two-year limitation period.
The court then turned to the question of when the claim was “discovered”. Under the legislation, a claim is discovered when an applicant knows, or ought to have known, that they have suffered a loss and that a legal remedy is the appropriate course of action to redress the loss.
In this case, the court found that the husband knew there had been a loss when he consulted a lawyer in 2012. As a result, the husband was statute-barred from bringing a claim to set aside the agreement seven years past that discoverability point.
The final question was whether running of the limitation period was postponed or suspended because of the husband’s lack of capacity due to his mental health issues.
Section 7 of the Act states:
“7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim,
(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and
(b) is not represented by a litigation guardian in relation to the claim.
(2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved.”
The husband hinted in his affidavit that his bi-polar disorder and mental health delayed him from bringing the application, stating that after his mental health setback in the spring of 2013 “[i]t was not until July, 2017 that I felt well enough to move forward with the litigation.”
However, the court found that the husband had not provided any reliable evidence to rebut the presumption of capacity nor any evidence from 2013 to 2017 related to his general mental health. The court therefore rejected the argument, stating:
“The simple statement that he did not feel well enough until 2017 to move forward with the litigation does not raise a genuine issue about capacity.”
As a result, the court found that the Act applied to the husband’s claim to set aside the marriage contract, and that the evidence clearly established that he failed to bring that claim within the 2 year prescriptive period. The court therefore granted the wife’s motion dismissing the husband’s claim that the prenuptial agreement was void.
Separation and divorce are challenging for everyone involved. When dealing with custody or access disputes, matters involving spousal and child support, the division of assets, and other family issues, emotions can be your worst enemy. Having an experienced family lawyer on your side can help you stay focused and resolve disputes as quickly and amicably as possible.
At Campbell Bader LLP,our team of exceptional family law lawyers offer cost-effective advice for couples considering a marriage contract and can help you draft an agreement that helps provide financial security, and peace of mind. Contact us online or at 905-828-2247. We look forward to speaking with you and going through this process by your side.