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We’ve previously blogged about division of property, and the critical role this plays following a separation and/or divorce. This week, we review a commonly asked question: what happens if a former spouse misses the deadline for applying for division of property? This issue was explored several years ago in Martynko v. Martynko.
What Happened?
The parties in question had a son together in 1981. They were not married at the time and did not live together following the birth of the son. They began to cohabitate in 1995 and were married in 1997. Their son was 14 years old at the time.
In 2002, an extended conflict between the husband and the son culminated in an incident in January 2002 in which the husband attempted to “herd” the son out the door of the home, and the son struck the husband in the face. The husband left the home for two weeks, staying with friends.
Several weeks later, the husband and wife eventually agreed that they should separate. The wife asked the husband for $50,000 so that she could buy a house. The husband agreed and paid the wife the money which she deposited into a bank account in her name, and from which she eventually purchased a new home that was under construction.
The couple continued to live separate and apart in the home they had lived in during their marriage, both occupying separate bedrooms. The wife moved into her new home after several months. In August 2003, the couple signed a Separation Agreement outlining the details of the $50,000 transferred to the wife, which the Agreement classified as an “out of court settlement”.
In 2006 the husband filed for divorce. The wife elected not to defend the divorce and a divorce order was signed by a judge in 2007. In 2008, the wife brought an action for division of property.
The Trial Decision
The court found that the marriage had “died” at the latest when the husband made the payment of $50,000 to the wife in May 2002. After that, there was no reasonable prospect of reconciliation. The court deemed this to be the valuation date for the purposes of division of net family property.
The court then noted that it had been more than six years between the valuation date and the date on which the wife commenced her application. As such, it was necessary to extend the limitation date if the wife would be permitted to obtain an order for division of net family property. The court noted that s. 2(8) of the Family Law Act permitted the extension of time where:
- There were apparent grounds for relief;
- Relief was unavailable because of delay that was incurred in good faith;
- No person would suffer substantial prejudice by reason of the delay.
The court noted that the wife had not brought any motion to extend the limitation period. In addition, although she contended that the separation date could have been fall of 2003, or even as late as spring 2004, she presented no evidence in support of this position.
Good Faith
The court additionally noted that, notwithstanding what the actual date of separation was, the wife’s application for division of property and spousal support should have been commenced by January 2008 “to be safe”. However, the wife did not bring her application until July of that year, which was well after the expiration of the limitation period based on what the court had determined was the separation date of May 2002.
There was nothing in the evidence that explained why the wife did nothing to assert her rights before retaining a lawyer in October 2007, which was more than five years after the parties separated. The court noted that in a previous well-established decision on good faith, a judge had found that:
…the term “good faith” means acting honestly and with no ulterior motive. I also agree that failure to act in ignorance of one’s rights may, in some circumstances, amount to “good faith”. However, in my view, it is not enough for a party who must establish good faith to say that he or she was ignorant of their rights. They must also establish that they had no reason to make enquiries about those rights. In this case, the applicant in her evidence says that she did not make enquiries about her rights at the time of the divorce because she did not have the money to pay a lawyer. Although she knew that she could obtain a lawyer through the Legal Aid plan, she decided not do so because she did not want the Legal Aid plan to put a lien on her property to secure repayment of part or all of the fees that her lawyer would bill to the Legal Aid plan. In other words, she had the opportunity to consult with a lawyer but deliberately chose not do so. Had she consulted with a lawyer, she would have probably learned about her right to equalization. I am of the view that she was ignorant of her rights because she chose to be ignorant or wilfully blind. I have difficulty in concluding that this amounted to “good faith” on her part.
In this case, the wife testified that the husband did nothing to discourage her from consulting a lawyer, either at the time of their separation, or after. The court also noted that the wife did nothing to respond to the divorce application, which must have been served on her if it had been processed and granted. The court concluded that the wife had failed to satisfy the requirement of good faith for the purpose of extending the limitation date.
Prejudice
The evidence established that the husband remarried in 2008, moved to a new city, and purchased a home with his new wife that had a large mortgage. The court noted that in the same previous decision mentioned above, it had been recognized that:
…a spouse who arranges his financial affairs following separation or divorce upon the assumption that matters between him (and) a former spouse is resolved, is entitled to rely on the limitation period in the Family Law Act. It would seem to me that the purpose of the limitation period is to encourage finality so that the parties can get on with their lives.
In this case, the court was satisfied that the husband would suffer “substantial prejudice” if the wife were permitted to proceed with her application for equalization of net family property.
The court dismissed the wife’s application, finding that she had missed the six-year limitation period (i.e. deadline) outlined in s.7(3) of the Family Law Act, and that she had not established any reason to extend this limitation period.
The wife appealed the decision to the Court of Appeal.
The Court of Appeal Decision
The Court of Appeal dismissed the appeal, agreeing with the lower court that the separation date was May 2002, and rejecting the wife’s claim that the separation date was not until October 2003 (which would have lengthened the amount of time she had to file her application for equalization).
The Court of Appeal also saw no basis on which to interfere with the original trial judge’s decision not to extend the six-year limitation period as the wife had failed to satisfy two of the three mandatory pre-conditions needed to extend a timeline.
Lessons Learned
The Family Law Act sets out strict deadlines that stipulate that an application for equalization of net family property must be brought:
- Two years after the marriage is terminated by divorce or annulment; or
- Six years after the day the spouses separate and there is no reasonable prospect that they will resume cohabitation; or
- Six months after the first spouse’s death (whichever occurs first).
In this case, the relevant timeline was the six years following the date of separation, as that had occurred first.
In this case, the wife should have filed her application within the deadlines, or she needed a much better explanation as to why she had not done so in order to obtain an extension of the timelines.
If you have questions about separation, divorce, or division of property, contact Gelman & Associates. Our team of experienced family lawyers can help you make informed decisions about your rights. With six locations in Aurora, Barrie, Downtown Toronto, Mississauga, North York and Scarborough, we are easily accessible by transit and off-highway. Our phone lines are open Monday to Friday from 8 AM to 8 PM. Call us at (416) 736-0200 or 1-844-736-0200 or contact us online for an initial consultation.
