Can Courts Extend the Limitation Period for Equalization Claims?

Calendar representing extensions of limitation periods in equalization claims

Written on behalf of Shariff & Associates

When a marriage ends, the spouses are entitled to the equalization of net family property, which equally divides the property accumulated throughout the marriage. However, the right to equalization is subject to a limitation period, which is the length of time that parties have to pursue their claim. Any delay, and the failure to bring a claim within the prescribed time limits, can extinguish one’s right to equalization, leaving a significant financial impact.

Limitation Period Imposes A Time Limit on Seeking Equalization

Section 7(3) of the Ontario Family Law Act states that a claim for an equalization payment must commence before the earliest of: two years after a divorce has been ordered, six years after the day the spouses separate, or six months after the first spouse’s death. However, this limitation period can be extended in some circumstances. Section 2(8) provides that a court can extend the limitation period if it is satisfied that:

(i) there are apparent grounds for relief,

(ii) relief is unavailable because of delay that has been incurred in good faith, and

(iii) no person will suffer substantial prejudice by reason of the delay.

Can a Limitation Period be Extended?

In the case of Ramoutar v. Ramoutar, the respondent brought a motion for summary judgment, looking to dismiss the applicant’s claim for equalization. The core question in this matter was whether the limitation period should be extended. It was clear that unless it was extended, the application would be barred by section 7(3), as the parties’ separation date was September 2005, and the applicant did not bring her application until nearly 13 years later.

As the respondent brought a summary judgment motion, he had the burden to establish a prima facie case that there was no genuine issue requiring a trial regarding the extension of the limitation period. If he failed to meet this burden, it would then shift to the applicant to demonstrate that there was a genuine issue. In Poirier v. Alie, the court held that, under the first part of the test, the party seeking to extend a limitation period must demonstrate “an entitlement to the equalization payment”. Yet, the applicant argued that she only needed to demonstrate prima facie grounds for relief.

How Courts Address Allegations of Hidden Assets

Looking back to the time of separation, the respondent suggested they both left the marriage on a “roughly equal footing”. However, the applicant suggested the respondent failed to disclose assets, such as an employee pension and an investment account. She alleged that if those assets were included, she would be owed an equalization payment of $136,588.

Looking at the financial statements, the court found the respondent did not fail to disclose his pension, as it was transferred to a locked-in retirement account (LIRA) and was listed in his net family property statement. There was also no way for the court to value the parties’ business, which each equally shared anyways. Further, there was no proof of the existence of the investment account, and no evidence that showed the applicant would be entitled to an equalization payment based on these assets. Finally, the applicant herself failed to include an asset in her financial statements. Consequently, there were no apparent grounds for relief.

Assessing Whether a Delay was Incurred in Good Faith

The second step of the test assesses whether the delay was incurred in good faith. The good faith concept was considered in El Feky v. Tohamy, which held that:

“it must be shown that the moving party acted honestly and with no ulterior motive. It does not appear to me that the Legislature… intended that a mere failure to make enquiries should necessarily negate “good faith,” provided that the absence of enquiry does not constitute willful blindness or does not otherwise, in all the circumstances, fall below community expectations”.

Additionally, in Poirier v. Alie, the judge found that a lack of good faith “can be demonstrated by indifference or careless disregard for one’s obligation to act with reasonable dispatch”. The applicant in this case explained her delay in pursuing her claim for equalization due to ongoing health issues, her role as the primary caregiver to the children after separation, and the lack of financial support from the respondent.

However, there was little evidence that suggested her health prevented her from pursuing her claim. A note from her doctor merely indicated that she had been under stress for the last few years and had medical issues affecting her concentration and energy levels. Any lack of financial support from the respondent and her role as the primary caregiver to the children (who were 15, 17 and 21 respectively) were not justifications in failing to pursue her claim. She also did not provide any evidence that she sought support from the respondent. Additionally, while she claimed a lack of financial resources prevented her from pursuing her claim, she had access to and borrowed significant funds, but there was no indication what the funds were used for, except that they were not used to retain counsel and pursue her family law claims.

Court Finds Respondent Would Suffer Prejudice Resulting From Delay

There was a six-year limitation period, which expired in September 2011. For the court, the delay was substantial, and could not “be sufficiently explained by inadvertence or a mere failure to make inquiries”. Instead, the “lengthy delay reflects a careless disregard for one’s obligation to act with reasonable dispatch”. Here, the lengthy delay was not incurred in good faith. The judge found instead that the delay substantiated the respondent’s position that the parties had resolved the financial issues between them years earlier. If that was true, the applicant’s efforts to pursue equalization 13 years later showed a lack of good faith.

The final element of the test involves assessing whether a party will suffer substantial prejudice. The respondent argued that he had been prejudiced by the applicant’s delay, as he had organized his financial affairs on the belief that the applicant would not pursue an equalization claim. He claimed they already organized their finances at separation, and that the applicant received a larger share of the proceeds of the matrimonial home. He also suggested that due to the passage of time, he would be prejudiced by the inability to obtain some financial documents that his bank did not retain.

The judge agreed that the respondent would suffer substantial prejudice resulting from the delay. The result was that the respondent successfully established that there was no genuine issue requiring a trial on the question of extending the limitation period.

Courts May Extend Limitation Period if Certain Conditions Are Met

Taylor v. Taylor is another case which considered whether delay was incurred in good faith. Here, the only significant asset at stake was the parties’ matrimonial home. The respondent had to show that all three elements of the section 2(8) test applied and that the court should exercise its discretion to extend the limitation period. The applicant agreed that the first and third elements applied, as there were apparent grounds for the claim, and there was no substantial prejudice to the applicant caused by the delay. The only question was whether relief was unavailable because of delay incurred in good faith.

The judge found there were several factors indicating the respondent had acted in good faith. He made regular payments to the applicant between 2014 and 2021, including payments towards the carrying costs of the home. These payments assisted the applicant and allowed her to continue to reside there with the children. The judge believed this indicated the respondent “had an honest belief that he was entitled to an interest in the matrimonial home” and that he made payments to preserve the asset. Importantly, there were also discussions between the parties about the applicant buying out the respondent’s interest in the home.

Ultimately the applicant had difficulty financing the purchase, and the parties “agreed or acquiesced to deferring the potential purchase by the applicant”. As the judge noted, they agreed to deal with the issue later, which explained the delay. Consequently, all three elements of section 2(8) were met, and the limitation period was extended for the respondent to bring a claim.

The Importance of Understanding Limitation Periods

Failing to bring your claim for equalization within the limitation period can mean that you lose the right to share accumulated property. In some cases where a party has delayed bringing their claim, courts may be able to extend the limitation period. However, the party will need to convince the court that the limitation period should be extended, and there is no guarantee an extension will be granted. Instead, parties should make sure they are aware of the family law limitation periods.

Contact the Family Law Lawyers at Shariff & Associates for Comprehensive Advice on Property Equalization Matters

The skilled family lawyers at Shariff & Associates focus on helping clients navigate complex family law matters, including those relating to property division and equalization, hidden assets, and claims to the matrimonial home. From our office in Whitchurch-Stouffville, we proudly represent clients throughout York Region. To discuss your family law matter with a member of our team, reach out to us through our online questionnaire or contact our office at 905-591-4545.