Scherer v. Scherer
[Indexed as: Scherer v. Scherer]
59 O.R. (3d) 393
[2002] O.J. No. 1661
Docket No. C34899
Court of Appeal for Ontario,
McMurtry C.J.O., Catzman and Charron JJ.A.
April 26, 2002
Family law -- Property -- Equalization of net family property -- Extension of time -- Parties separated in 1989 -- Husband's only significant asset at time of separation was matrimonial home -- Wife and children continued to live in matrimonial home after separation -- Husband bringing application for equalization of net family property in 1997 in response to wife's divorce petition -- Husband's motion to extend time for bringing equalization claim under s. 2(8) of Family Law Act dismissed -- Appeal dismissed -- Husband did not have apparent grounds for relief under s. 2(8)(a) of Act as case for unequal division in favour of wife appeared overwhelming -- As former lawyer, husband should have been aware of availability of equalization claim and significance of limitation periods -- Husband did not satisfy good faith requirement under s. 2(8)(b) of Act -- Family Law Act, R.S.O. 1990, c. F.3, s. 2(8).
The parties separated in 1989 after a 23-year marriage. The husband practised law and provided for his family up to 1984. In that year, he was convicted of defrauding some of his clients, sentenced to seven years' imprisonment and disbarred. He served two years of his sentence. He did not provide any financial assistance to his family between 1984 and 1997. The wife lived in the matrimonial home with the children after the separation and supported her family with the assistance of her father. In 1997, two years after the limitation period prescribed by s. 7(3)(b) of the Family Law Act for claiming an equalization of net family property expired, the husband made an equalization claim by Answer and Counter-Petition to the wife's Petition for Divorce. The matrimonial home, which was in the respondent's name, was the only asset of significance to the claim for equalization. Section 2(8) of the Family Law Act provides that the court may extend a time prescribed by the Act if satisfied that the applicant meets the three conditions set out in that section: (a) there are apparent grounds for relief; (b) relief is unavailable because of delay that has been incurred in good faith; and (c) no person will suffer substantial prejudice by reason of the delay. The motions judge held that the husband met the first condition, but not the second or third. The motion was dismissed. The husband appealed.
Held, the appeal should be dismissed.
The motions judge erred in finding that the husband had met the condition under s. 2(8)(a) on the basis that he had attested to several reasons why he did not assert his claim prior to the expiration of the limitation period. The "relief" under s. 2(8) is not referable to the extension of time sought by the moving party on the motion, but to the relief sought on the prescribed claim. The "relief" in question here was the equalization payment sought by the husband. While he proceeded on a wrong principle, the motions judge reached the correct result. Having regard to ss. 5(6) and (7) of the Act, the wife appeared to have an overwhelming claim for an unequal allocation of net family property. Accordingly, the husband had not made out a sufficient basis to meet the first condition under s. 2(8).
The motions judge's conclusion on the issue of good faith was based in part on his finding that the husband, as a former lawyer, should have been aware of the availability of a claim for equalization and the significance of limitation periods and that, at the very least, he should have inquired as to the implications of the dissolution of his marriage. That finding was amply supported by the record. The conclusion that the husband had not shown that the delay was incurred in good faith was open to the motions judge on the record.
The motions judge, at least implicitly, found that the wife would be substantially prejudiced by the delay because she had arranged her financial affairs based on the assumption that matters between the husband and herself were resolved. This finding could not be supported on the record. There was no evidence that the property issues between the spouses were ever addressed, let alone resolved. Indeed, the wife expressly stated that she did not bring her action for divorce earlier because the husband had repeatedly told her that he would counterclaim for his share of the house and she wanted to avoid that. Moreover, the prejudice to the wife occasioned by the husband's lack of financial contribution to the family after 1984, while substantial, was not attributable to the delay in bringing the claim for equalization and was not relevant on the s. 2(8)(c) inquiry. However, it was an important factor that could and should have been taken into account in the motions judge's assessment of the husband's grounds for relief under s. 2(8)(a).
APPEAL from an order of Day J. (2000), 11 R.F.L. (5th) 389, 1 C.P.C. (5th) 133 (S.C.J.) dismissing a motion to extend time for bringing a claim for equalization of net family property.
Cases referred to Merklinger v. Merklinger (1996), 30 O.R. (3d) 575n, 26 R.F.L. (4th) 7 (C.A.), affg (1992), 11 O.R. (3d) 233, 43 R.F.L. (3d) 109 (Gen. Div.) Statutes referred to Family Law Act, R.S.O. 1990, c. F.3, s. 2(8), 5, 7(3)(b)
David M. Goodman, for respondent. Robert G. Schipper, for appellant.
The judgment of the court was delivered by
1CHARRON J.A.: -- The appellant Bernard Scherer appeals from an order dismissing his motion to extend the time for bringing a claim for equalization of net family property pursuant to s. 2(8) of the Family Law Act, R.S.O. 1990, c. F.3 (the "Act").
2After a 23-year marriage, the parties separated on September 22, 1989 without reasonable prospect that they would resume cohabitation. It is common ground between the parties that the limitation period prescribed by s. 7(3)(b) for claiming an equalization of net family property expired six years later on September 22, 1995. The appellant did not bring his application for equalization until almost two years after the expiry of the limitation period on July 4, 1997. He made his claim by Answer and Counter-Petition to the respondent's Petition for Divorce issued on June 11, 1997. He then brought this motion for an extension of the prescription period. The motion was first returnable in October 1997, but, for reasons that are not relevant to this appeal, the motion was not heard until March 2000.
3Section 2(8) of the Family Law Act provides that the court may extend a time prescribed by the Act if it is satisfied that the applicant meets the following three conditions:
(a) there are apparent grounds for relief;
(b) relief is unavailable because of delay that has been incurred in good faith; and
(c) no person will suffer substantial prejudice by reason of the delay.
4The motions judge held that the appellant met the first condition, but not the second or third. Consequently, he dismissed the motion for an extension of time.
5As the reasons that follow will show, it is my view that the motions judge made a number of errors in his application of the test for an extension of time under s. 2(8) of the Act. As a result of these errors, it became incumbent upon this court to make its own assessment whether the appellant has met the three conditions. Having reviewed the record, it is my view that the appellant's motion was properly dismissed, although for different reasons than those given by the motions judge.
6First, I will set out the relevant facts and then I will deal with each condition in turn.
The Facts
7The appellant and respondent are presently 66 and 62 years of age respectively. They were married on June 21, 1966 and they separated on September 22, 1989. There are seven children of the marriage, now ranging from approximately age 20 to age 33. The oldest child, Shael Daniel, suffered a permanent brain injury as a result of a motor vehicle accident which occurred on May 18, 1987, and requires ongoing institutionalized care. At the time the affidavits were sworn in 1997, two of the children were still living with the respondent in the matrimonial home. The respondent's elderly father also lived in the matrimonial home.
8At the time of marriage, the appellant was a practising lawyer; the respondent was a high school teacher. The appellant practised law until early 1984 when he was convicted of defrauding some of his clients. He was sentenced to seven years' imprisonment and ordered to pay compensation of approximately $2.3 million. He was also disbarred. The appellant spent two years in custody from 1984 to 1986. After his release from jail, he lived in the matrimonial home until the parties' final separation in September 1989.
9Up to 1984, the appellant provided for his family. It is common ground that none of the defrauded clients' money was spent on the family. The respondent alleges in her material that the appellant spent this money on gambling. The appellant does not deny this anywhere in his material. In fact, on the advice of his solicitor, he refused to answer any questions related to his criminal convictions on his cross-examination. The appellant did not provide any financial assistance to his family between 1984 and 1997, when this litigation commenced. At that point, he sent some child support cheques in accordance with the Federal Child Support Guidelines for the remaining children of the marriage. The respondent did not cash any of these cheques.
10The respondent worked as a high school teacher throughout the marriage, albeit on a part-time basis during the years that the children were younger. At the time of the appellant's imprisonment in 1984, the children were aged 3, 6, 8, 11, 13, 15 and 16. Since that time, the respondent has single-handedly supported her family with the assistance of her father. In her cross-examination, she stated that it is at the request of her children that she did not cash the child support cheques sent to her by the appellant.
11The appellant had no assets at the time of separation. The respondent's only asset of any significance was the matrimonial home. The matrimonial home is the only asset of significance to the claim for equalization. The house was purchased in the respondent's name in 1971 for $84,000. According to one real estate appraisal filed by the appellant, its estimated value in the fall of 1989 [was] $720,000. In her 1998 cross-examination, the respondent estimated that the property's present value was $350,000. She stated that the house needed a lot of repairs. The mortgages on the home (which included a mortgage secured in 1983 to repay a defrauded client) were paid off by the respondent's father.
12In his Answer and Counterpetition, the appellant seeks a declaration that the respondent holds 50 per cent of the matrimonial home in trust for him, or alternatively, payment of one-half the difference between their respective net family properties. It is the latter alternative claim which is the subject-matter of this motion. In her Answer to Counterpetition, the respondent relies on the prescription period in defence to the claim for equalization and, alternatively, claims an unequal division of net family property.
13The appellant explains his delay for bringing his claim for equalization by stating that he did not want to disturb the respondent's possession of the matrimonial home and her enjoyment of it with the children and her father. He states further that, once the respondent brought a Petition for Divorce, he had no alternative but to preserve his rights with respect to the home. He states that he was not aware of any statutory time limit for making a claim because the law was amended after he ceased practising law. There is no evidence that he sought legal advice with respect to his rights during the relevant period of time.
14The respondent states that she did not commence her divorce action until almost eight years after separation because she knew that if she "rocked the boat" she would be faced with a counterclaim. She states that on a number of occasions when she raised the topic of divorce and Ghet (a divorce in the Jewish faith) with the appellant he told her that if she pursued those options he would immediately counterclaim for a portion of the house and for an equalization payment. Although she did not seek legal advice as to any limitation period, she states that she knew in her mind that, if she waited long enough, he would not be able to make a claim against the house. She states that she has governed her life accordingly for the past ten years in order to avoid having to pay him an equalization payment and that her father has also governed his affairs on those terms by supporting her family and paying off the mortgages.
Apparent Grounds for Relief
15The motions judge dealt with this first condition as follows [at p. 391 R.F.L.]:
Section 2(8) of the Act sets out three conditions which must be met before a Court will exercise its discretion to extend the limitation period. The first is whether there are apparent grounds for relief. Based on the materials filed on this motion, I am satisfied that this threshold has been met. Mr. Scherer has attested to several reasons why he did not assert this claim prior to the expiration of the limitation period.
(Emphasis added)
16It appears from these reasons that the motions judge was of the view that the first condition under s. 2(8)(a) established an initial "threshold" that required the moving party to show apparent grounds for obtaining an extension of time. However, the "relief" under s. 2(8)(a) (and under s. 2(8) (b)) is not referable to the extension of time sought by the moving party on the motion but to the relief sought on the prescribed claim. The "relief" in question here is the equalization payment sought by the appellant in his Counterpetition. It is incumbent upon the appellant to show that he has apparent grounds for making that claim.
17Under s. 5(1) of the Act, "the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them." At the time of separation, the respondent owned the only valuable piece of family property, the matrimonial home. The value of the appellant's assets on valuation date was zero. Hence, there is no doubt from a strict mathematical standpoint that the appellant has apparent grounds for his claim. However, the formula set out under s. 5(1) is subject to variation in an appropriate case. The respondent is claiming such variation in her Answer to Counterpetition. Hence, the apparent merits of the appellant's claim must be assessed in the context of the entire proceedings and the circumstances of both parties.
18Subsections 5(6) and (7) of the Act are particularly relevant to the respondent's claim to a variation of the equalization payment.
5(6) The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,
(a) a spouse's failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;
(b) the fact that debts or other liabilities claimed in reduction of a spouse's net family property were incurred recklessly or in bad faith;
(c) the part of a spouse's net family property that consists of gifts made by the other spouse;
(d) a spouse's intentional or reckless depletion of his or her net family property;
(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;
(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;
(g) a written agreement between the spouses that is not a domestic contract; or
(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.
(7) The purpose of this section is to recognize that child care, household management and financial provision are the joint responsibilities of the spouses and that inherent in the marital relationship there is equal contribution, whether financial or otherwise, by the spouses to the assumption of these responsibilities, entitling each spouse to the equalization of the net family properties, subject only to the equitable considerations set out in subsection (6).
(Emphasis added)
19Given that the most significant liability noted in the appellant's financial statement is the Criminal Compensation Court Order, the appellant can hardly dispute the existence of the factors set out under s. 5(6)(b) and (d) and, consequently, the respondent's claim to a variation of the equalization payment appears meritorious on its face. Further, post-separation events can be taken into account in determining unconscionability: see Merklinger v. Merklinger (1992), 11 O.R. (3d) 233, 43 R.F.L. (3d) 109 (Gen. Div.), affd (1996), 30 O.R. (3d) 575n, 26 R.F.L. (4th) 7 (C.A.). When the respective contributions of the parties, financial and otherwise, are considered for the years following the separation, the uncontested evidence in support of the respondent's claim to an unequal division seems overwhelming.
20I am not unmindful of the appellant's contention that he was the main financial contributor up to 1984 and that this would be a relevant factor in the assessment of the claim for a variation of the equalization payment since his financial contribution likely accounted for most of the value of the matrimonial home. However, s. 5(7) of the Act makes it clear that each spouse's contribution is not measured solely in financial terms. During the years that the appellant was the main wage earner, the respondent bore and cared for seven children and continued to do supply teaching. Any claim of unequal contribution for those years is difficult to maintain.
21In all the circumstances, it is my view that the appellant has not made out a sufficient basis to meet the first condition under s. 2(8) of the Act and that his motion for an extension could have been dismissed on that ground alone.
Delay Incurred in Good Faith
22The motions judge reviewed relevant case law on the issue of good faith and concluded that the appellant did not meet this condition for the following reasons [at pp. 392-93 R.F.L.]:
. . . it is readily apparent from the materials filed by Mr. Scherer that he was not ignorant as to the existence of a remedy or of the existence of a limitation period. The uncontested evidence is that he was aware of the existence of the limitation period but chose not to exercise his rights. As was held in Rae v. Rae (1987), 59 O.R. (2d) 225 (Ontario Master) at 227, the failure to make inquiries as to one's rights due to ignorance or willful blindness has been held not to constitute "good faith" for the purposes of these provisions. This was not a case of simple inadvertence, nor a case where the parties consented to waiving the limitation. . . . I do not find that Mrs. Scherer's delay in launching the divorce proceedings constituted a consent to the extension of the limitation period.
As a former lawyer, Mr. Scherer should have been aware of the availability of a net family property equalization and the significance of limitation periods. At the very least, he would have known to inquire as to the implications of the dissolution of his marriage. His materials reveal that he deliberately chose not to meet the statutory limitation period. It is a choice which he made and he must live with the implications of his choice. I therefore find that Mr. Scherer's failure to launch his claim prior to the expiration of the limitation period was not in "good faith" as contemplated in s. 2(8)(b) of the Act.
(Emphasis added)
23The appellant submits that the motions judge misapprehended the evidence when he found that it was uncontested in the evidence that he knew about the statutory limitation period and that he had deliberately chosen not to meet it. The appellant further submits that the motions judge erred in over-emphasizing the importance of his knowledge of his legal rights and in failing to consider other relevant factors on this issue.
24I agree with the appellant that the motions judge misapprehended the evidence when he found that it was uncontested that the appellant knew about the limitation period. In fact, the appellant clearly states in his material that he was not aware of the existence of the limitation period and his evidence in this respect is not contested by the respondent. However, it is apparent from the motions judge's reasons that his conclusion on the issue of good faith was also based on his finding that the appellant, as a former lawyer, should have been aware of the availability of a claim for equalization and the significance of limitation periods and that, at the very least, he should have inquired as to the implications of the dissolution of his marriage. This latter finding is amply supported by the record. In determining the issue of good faith, the motions judge relied on three cases. The substance of his reasons is as follows [at pp. 392-93 R.F.L.]:
In the case of Hart v. Hart (1990), 27 R.F.L. (3d) 419 (Ont. U.F.C.), Mendes de Costa J. applied the following definition of what constitutes "good faith" at page 432:
I believe to establish "good faith", it must be shown that the moving party acted honestly and with no ulterior motive. It does not seem to me that the legislature, anticipating the general newsworthy nature of the family property provisions of the Act, intended that a mere failure to make enquiries should necessarily negate "good faith", provided the absence of enquiry does not constitute willful blindness or does not otherwise, in all the circumstances, fall below community expectations. As I have stated, my assessment of the evidence is that the wife was ignorant of her rights under the Act, and I believe that her state of mind was one of blameless ignorance. [Emphasis added.]
Following the Hart decision, courts began to impose limits on the good faith requirement of s. 2(8)(b). For example, in the case of Busch v. Amos (1994), 9 R.F.L. (4th) 36 (Ont. Gen. Div.), Salhany J. offered the following definition of "good faith" at page 39, paragraph 8:
I agree 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. [Emphasis added.]
The Busch case involved an application by the wife for an equalization of the husband's pension seventeen months after the limitation period had expired. The wife claimed that, at the time of the divorce, she was unaware of the entitlement to an equalization of net family property and she did not seek legal advice because of a lack of sufficient funds to retain a lawyer. Salhany J. found that the wife had an opportunity to consult a lawyer but deliberately chose not to. Concluding that "she was ignorant of her rights because she chose to be ignorant or willfully blind", he concluded that the wife had failed to establish good faith and the application was dismissed.
The facts of this case are analogous to Dekker v. Dekker (1996), [68 A.C.W.A. (3d) 175]. In Dekker, the wife filed her application for division of matrimonial property two years after the expiry of the statutory limitation period. Although the wife met the first and third criteria of s. 2(8), Mazza J. held that she failed in establishing the good faith criteria because:
Clearly, she knew to retain a lawyer to claim relief available to her from the breakdown of her first marriage. Furthermore, her experience in retaining a lawyer to defend her in a charge of impaired driving as well as her decision to explore a possible claim for injuries from an accidental fall clearly indicated her awareness to make inquiries about her rights. Finally, her unexplained delay in filing her application for almost a full year after the interview with her lawyer to discuss legal remedies was fatal to any hope of establishing "good faith". Her delay may not have been intentional or the result of willful blindness, but her lack of good faith was demonstrated by her indifference to and careless disregard for her obligation, as suggested by the limitation period, to act with reasonable dispatch to pursue her rights and bring them to a conclusion.
25It is based on the same line of reasoning that the motions judge found that the appellant had not shown that the delay was incurred in good faith. In my view, this conclusion was open to the motions judge on the record. It was not incumbent upon him to refer to all relevant factors on this issue. I see no reason to believe that the motions judge did not advert to the reasons for the delay as stated by the appellant nor do I see a basis to conclude, in the context of the entire record, that he over-emphasized the importance of the appellant's wilful blindness. I would not interfere with his finding that the appellant did not meet the second condition under s. 2(8)(b).
Absence of Substantial Prejudice
26With respect to the third condition under s. 2(8), the motions judge concluded as follows:
In the case of Deaville v. Boegeman (1984), 48 O.R. (2d) 725 (C.A.), the Ontario Court of Appeal found that the expiry of a limitation period creates a presumption, however slight in some cases, of prejudice to the responding party. In Hart, supra, Mendes da Costa J. stated that "the prejudice at issue is prejudice suffered 'by reason of the delay'." Moreover, s. 2(8)(c) of the Act requires 'substantial prejudice'. The prejudice caused to Mrs. Scherer has been attested to in the materials filed by her on this motion. In addition to putting her personal life on hold, she has supported her large family almost single-handedly with the substantial assistance of her aged father. I adopt the words of Salhany J. in Busch, supra, when he said at page 40:
In my view, a spouse who arranges his financial affairs following the separation or divorce upon the assumption that matters between him and a former spouse are resolved, is entitled to rely on the limitation period in the Family Law Act. It would seem to me that the purpose of limitation periods is to encourage finality so that the parties can get on with their lives.
27Hence, it would appear, at least implicitly, that the motions judge found that the respondent would be substantially prejudiced by the delay because she had arranged her financial affairs based on the assumption that matters between the appellant and herself were resolved. In my view, this finding cannot be supported on the record. The evidence is to the contrary. There is no evidence that the property issues between the spouses were ever addressed, let alone resolved. Indeed, the respondent expressly states that she did not bring her action for divorce earlier because the appellant had repeatedly told her that he would counterclaim for his share of the house and she wanted to avoid that.
28The motions judge also relied on the fact that the respondent had "supported her large family almost single- handedly with the substantial assistance of her aged father" as a relevant factor to the question of substantial prejudice. In my view, the prejudice to the respondent occasioned by the appellant's lack of financial contribution to the family after 1984, while substantial, is not attributable to the delay in bringing the claim for equalization. Hence, I do not find this factor to be relevant on the s. 2(8)(c) inquiry. However, as I have already explained, this factor was an important one that could and should have been taken into account in the motions judge's assessment of the appellant's grounds for relief under s. 2(8)(a).
Disposition
29For these reasons, I would dismiss the appeal with costs. In accordance with the new rule requiring that this court fix the costs of the appeal, the respondent is to serve and file her Bill of Costs together with her written submissions, if any, within seven days of the release of this judgment. The appellant shall serve and file any written submissions in response within seven days thereafter.
Appeal dismissed.
