Was Wife Too Late to Act on Husband’s $21 Million Misstatement from 10 Years Ago?
In law, limitation periods are the deadlines within which a litigant must bring his or her legal claim. These vary according to the type of claim asserted.
If a spouse wants to bring a claim for equalization of Net Family Property, under Ontario’s Family Law Act (FLA) there are two options. The deadline is either: 1) two years after the day after the marriage is terminated by divorce; or 2) six years after the spouses separate and there is no reasonable prospect that they will resume cohabitation. A court can agree to extend that deadline in only specified circumstances.
In a recent case called Hevey v. Hevey, the Ontario Court of Appeal was asked to consider whether 10 years post-divorce was too late for a wife to bring her claim, even though there was up to $21 million in assets at stake.
As the wife explained to the present-day Court, the husband – who was a real estate developer – had provided sworn financial statements during the divorce that indicated his assets were $0. They agreed not to undergo equalization or seek spousal support from each other.
Fast-forward a decade later, when the wife learned that the husband’s financial situation had not been what he portrayed. It seems he was actually worth $21 million at that time. He had just sold one of the family’s commercial properties for $16 million, and set up a complex trust arrangement that made him the sole beneficiary. He attested to his assets in some disclosure materials provided to a bank at the time.
Naturally this was a key discrepancy, especially since it had impacted the wife’s decision not to pursue spousal support as well. She now brought an application for both support and equalization, on the basis the husband had misrepresented his finances at the time of their divorce 10 years ago.
The husband managed to thwart her claims with a successful motion for summary judgment. He convinced the judge that the wife’s application was simply out-of-time under the FLA.
The Ontario Court of Appeal reversed that decision, on several grounds.
First, the motion judge had erred in granting the husband this relief when he had not even filed a formal answer to the wife’s application. Nor had he filed a current financial statement as required by the Family Law Rules. His non-compliance was an affront to the basic disclosure obligations in Family law, and was fatal to his motion.
Next, the judge also misinterpreted the FLA provisions that should have allowed for the wife’s deadline to be extended. Among other things, that test required that the wife show: 1) apparent grounds for an equalization entitlement; and 2) no other relief currently available, due to a delay she incurred in good faith. Here, the motion judge seemed to be looking for signs of the husband’s “established fraud”. But this was not the correct test.
Finally, the motion judge was wrong to infer that the wife was aware or should have known about the $21 million arrangement at the time of the divorce. It was true that she was a sophisticated businesswoman with some bookkeeping experience. But there was “very conflicting” evidence about what she actually knew about the corporate structures and complex trust arrangements it involved. Furthermore, if the husband actively misled the wife at the time of the divorce, this was very relevant to whether she was entitled to spousal support, which was governed by a different FLA limitation period in any case.
Having found that these issues could not be properly determined on the summary judgment motion, the Appeal Court ordered that the matter proceed to a full trial instead.
For the full text of the decision, see:
Hevey v. Hevey, 2021 ONCA 740
