Court File and Parties

COURT FILE NO.: FC-11-2960 DATE: 2016/08/15 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: John Malcolm Campbell, AND Jennifer Margaret Nicol

BEFORE: Justice A. Doyle

COUNSEL: Colin McCorriston, for the Applicant Janet Preston, for the Respondent

HEARD: July 19, 2016

Endorsement

[1] This is a motion by the applicant for an order pursuant to section 2(8) of the Family Law Act, R.S.O. 1990, c. F.3 (FLA), extending the time to bring an application for an equalization payment pursuant to section 7(3) of the FLA. He is also seeking a declaration that he has brought his equitable claims based on unjust enrichment and trust doctrines within the prescription periods.

[2] The respondent opposes the motion on the basis that the applicant is not able to satisfy the grounds in s. 2(8) and that he failed to file a claim for equitable relief within two years as required pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.

[3] The parties were able to resolve the issues of financial disclosure and temporary child and spousal support. Therefore, the Court orders a temporary order in accordance with the terms set out in the consent filed by the parties.

[4] For the reasons set out below, the Court grants the applicant’s motion for an order pursuant to s. 2(8) of the FLA and declares that the equitable claims set out in his application are not prescribed by a limitation period.

Background

[5] The parties were married on October 29, 1988. The applicant claims that the separation occurred on November 1, 2005. The respondent states that the separation occurred on October 29, 2005.

[6] The parties have two children: Robin, who is 22 years old and has recently graduated from university, and Marshall, who is 18 years old and will be commencing university in September 2016.

[7] At the time of the separation in 2005, the applicant commenced employment with ProSlide Technology and was scheduled to complete training in California. From 2006 to 2008 he travelled overseas installing water slides for that company. He worked 60 to 70 hours per week in, at times, difficult conditions so he could provide for his family.

[8] The respondent and the children remained in the matrimonial home located at 77 Kenora Street in Ottawa, which is solely owned by the respondent.

[9] In the early years after the separation, the applicant would stay in the matrimonial home in a separate bedroom when he was in town but then later stayed with friends and family.

[10] The respondent is an artist and her income has been in the range of $3846 in 2010 to $13,455 in 2015. From the date of separation until the consent signed at this motion, the applicant paid support to the respondent on a voluntary basis without a formal agreement or court order, albeit at times on a tardy basis. In 2015, the applicant’s annual income was $91,000.

[11] In 2008, the parties attended mediation with an experienced mediator in Ottawa but mediation failed. The respondent indicates it is due to the failure of the applicant to provide financial disclosure, which the applicant denies.

[12] The applicant retained counsel and prepared the documentation for the commencement of the application. His application and his financial statement were dated October 28, 2011.

[13] When his lawyer attended the Family Court counter, the staff would not issue the application as the applicant had not provided his 2010 notice of assessment (NOA) which must be filed with his financial statement in accordance with the Family Law Rules. The applicant attempted to obtain the respondent’s consent to an order dispensing with the requirement to file the NOA, but she did not respond.

[14] As soon as the applicant received his 2010 NOA from the Canada Revenue Agency, his lawyer issued the application. The application was issued on December 12, 2011 which is 44 days past the six year limitation set out in s. 7 (3) (b) of the FLA if you assume a date of separation of October 29, 2005. It would be 42 days past the limitation period if you assume a date of separation of November 1, 2005.

[15] Whether the date of separation is October 29, 2005 and November 1, 2005, it is clear that the applicant issued his application outside the limitation period.

[16] The application seeks, among other things, a divorce, custody or access, child support, equalization of net family properties and “a declaration that the respondent has a half interest in the current value of 77 Kenora Street in Ottawa Ontario matrimonial home, … on the basis of the applicant’s constructive and resulting trust claims in those properties or in the alternative that the respondent will be unjustly enriched if she is allowed to retain all of the current value of her interest in the matrimonial home, the apartment building….”

[17] The applicant filed an application for bankruptcy after the separation. He was discharged on August 18, 2007. He declared bankruptcy due to an accumulated $50,000 debt incurred from 2003 to 2005 to support the family.

[18] At the first case conference on February 8, 2012, Justice Sheffield granted leave to the applicant to bring a motion regarding the limitation period and the date was to be fixed by the trial coordinator at counsel’s request. The applicant took no steps to bring a motion at that time.

[19] On March 18, 2013, a second case conference was held before Master Roger (as he then was). His endorsement indicated that the next step was either a motion on the issue of limitation or a settlement conference. Again, the applicant took no steps to bring a motion. Counsel for the parties continued their negotiations.

[20] A dismissal order was issued on January 8, 2014. The respondent indicates that she was concerned with respect to support and hence in September 2015 brought a basket motion to set aside the dismissal order. The order was granted.

[21] This motion was originally set for March 2016 but was adjourned due to unavailability of respondent’s counsel.

[22] This motion was heard by the court on July 19, 2016 almost 11 years from the date of separation.

Applicant’s position

[23] The applicant submits that he has met the conditions set out s. 2(8) of the FLA for an extension of time to bring his application for an equalization of net family properties.

[24] He submits the following:

• he has apparent grounds for relief as he would be entitled to approximately $245,000 as an equalization payment which is half of the appraised value of the matrimonial home at the date of separation;
• his delay was incurred in good faith as he was only 44 days late in filing his claim (if one assumes October 29, 2005 is the date of separation) and the parties had both hoped to resolve issues without the need of lawyers. The parties agreed that the home was not to be sold or disposed of until the children were older; and
• the respondent will not suffer substantial prejudice by reason of the delay as the applicant is prepared to search bank records and mortgage documents and pay appropriate fees to assist in obtaining the figures to complete the respondent’s assets and debts disclosure for the preparation of the net family property statement.

[25] The applicant trusted his lawyer to issue the claim and was not aware that a motion without notice could be brought to dispense with the filing of the NOA. This would have permitted his lawyer to issue the application within the prescription period.

[26] He submitted that both parties were interested in resolving issues without court and lawyers. He refers to an email dated April 5, 2015 from the respondent to the applicant in which she states: “I really don’t want to sell the house this spring but am out of other options. We discussed not involving the lawyers and want to continue that way. Please contact me asap so we figure this. I need a decision made on how to proceed before the 15 th of the month”. Around that period of time, the parties had a meeting at Starbucks to discuss the renovation of the matrimonial home and the sale.

[27] The applicant also wishes a declaration that the applicant is not outside the limitation period with respect to his claim for unjust enrichment and trust claims on property as the claim was issued before the expiration of the ten-year limitation period set out in the Real Property Limitations Act, R.S.O. 1990, c. L. 15.

Respondent’s position

[28] The respondent asserts that the applicant has not satisfied the conditions in s. 2(8) and he has done nothing to move this matter along before or after the expiration of the limitation period.

[29] Since the unjust enrichment claim is founded in equity, he is barred from proceeding in accordance with the two year limitation under the Limitations Act, 2002.

[30] She further submits that the applicant has shown indifference and a careless disregard of his obligation to act with reasonable dispatch to pursue his rights and bring them to the conclusion. He has shown a lack of good faith even if the delay cannot be characterized as intentional or as a result of wilful blindness: see Dekker v. Dekker.

[31] The respondent states that the applicant has not demonstrate good faith:

• Mediation in 2008 did not proceed because he did not provide the necessary financial disclosure;
• He brought the application late;
• He did not file a motion after the two case conferences;
• There was a dismissal order which she moved to set aside;
• He made no attempts to discuss and negotiate the issue of limitation; and
• Between 2013 and 2015 he was aware of the legal rights and obligations with respect to property and he took no action.

The respondent has gone on with her life and arranged her financial affairs without consideration of the applicant’s claim. She would suffer substantial prejudice if this motion is granted.

Legal Principles

[32] Section 7 (3) of the FLA states:

An application based on subsection 5 (1) or (2) shall not be brought after the earliest of,

(a) two years after the day the marriage is terminated by divorce or judgment of nullity;

(b) six years after the day the spouses separate and there is no reasonable prospect that they will resume cohabitation;

(c) six months after the first spouse’s death.

[33] Section 2 (8) of the FLA states:

The court may, on motion, extend a time prescribed by this Act if it is satisfied that,

(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.

[34] In El Feky v. Tohamy, 2010 ONCA 647, 90 R.F.L. (6th) 302, the Court stated that relief is available if the delay has been incurred in good faith: “meaning the moving party acted honestly and with no ulterior motive” (at para. 34).

[35] In Hutchinson v. Hutchinson (2001), 11 R.F.L. (5th) 297 (Ont. C.A.), at para. 9, the parties separated in 1992 and the motion judge dismissed the wife’s motion to extend the time. The appeal court allowed the appeal and stated:

In our view, it was within the purview of the motions judge to reject the appellant’s explanation for the delay in seeking legal advice until September 1998 in view of the absence of direct evidence on this point and in light of the respondent’s response to this allegation. After that date, however, it was the appellant’s solicitor who could provide the best evidence as to the reason for the delay. While the entire limitation period must be considered on an application of this nature, we are of the opinion that, in this case, the motions judge erred because he focused almost exclusively on the period up to September 1998 and did not give sufficient consideration to events after that date. He placed no significance on the fact that, although the limitation period expired in December 1998, negotiations respecting the resolution of the division of the husband’s pension commenced prior to that time and continued for several months thereafter. There is no suggestion of any bad faith on the part of the appellant or her solicitor after September 1998. Accordingly, we are of the opinion that the motions judge erred in concluding that there was bad faith on the part of the appellant.

[36] In Scherer v. Scherer (2002), 59 O.R. (3d) 393 (C.A.) the court dismissed a motion to extend time where the wife had been prejudiced. She had put her life on hold and had to support her large family almost entirely by herself. The husband brought the application 2 years after the expiration of the limitation period. He was not able to satisfy the conditions set out in 2(8). He was a lawyer (although not practicing) and should have sought advice or known about limitation periods. At para. 24, the court refers to the case of Hart v. Hart (1990), 27 R.F.L. (3d) 419 (Ont. U.F.C.), where 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.

[37] In the case of Busch v. Amos (1994), 9 R.F.L. (4th) 36 (Ont. Gen. Div.), Salhany J. stated at 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.

[38] The Busch case involved an application by the wife for an equalization of the husband's pension 17 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. Finding 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.

[39] Justice Salhany further states:

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.

[40] In Dekker v. 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.

[41] The Court found that she knew she should seek a lawyer upon the breakdown of her first marriage. She has previous experience with lawyers in a charge of impaired driving and an accidental fall. She was unable to explain the delay in filing her application for almost a full year after the interview with her lawyer to discuss legal remedies. The court stated that:

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.

[42] 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.

[43] The passage of time can cause substantial prejudice as it makes the presentation of the responding party’s case difficult or impossible: see Miller v. Miller.

[44] In Poirier v. Alie (2007), 39 R.F.L. (6th) 193 (Ont. S.C.), Justice Parfett extended the limitation period where the husband had exclusive possession of the matrimonial home and paid all expenses. The wife earned substantially more and she had acknowledged that the husband had a right to one-half of the home. They separated in 1995, but only upon sale of the home in 2006 did the wife say to the husband that he had no right to any of the sale proceeds. Every time he tried to pursue it, she would limit access to the children. He relied on her promises that the money was safe. The respondent had a profound impact on the applicant’s behaviour. Her behaviour influenced him not to pursue division of property in a more vigorous manner. He was not careless with pursing his rights. The Court found that there was no prejudice to her as she had admitted that he was entitled to one-half of the home.

[45] In Duncan v. Duncan, 2011 ONSC 2078, 4 R.F.L. (7th) 337, the wife was successful in obtaining an extension. Her alcoholic husband abused her and she had become clinically depressed. The application was commenced approximately 8 years after the separation and the respondent did not file responding materials. The only real issue was the division of the pension and Kershman J. found that the respondent husband would suffer no prejudice. Justice Kershman granted the extension on the grounds that all three conditions were made out.

[46] In Ferguson v. Ferguson, 2007 ONSC 2367 (Ont. S.C.), the claim was to equalize the husband’s pension. The applicant suffered from a number of medical conditions, which affected her physical and mental state and thus affected her judgment and ability to effectively protect her legal rights upon separation. At para. 19, the Court states: “I do not find that there is evidence of any irreversible financial decisions that have been made by the respondent based on any assumptions he may have had with regard to the pension”.

Analysis

a) Are there are apparent grounds for relief?

[47] The Court finds that the applicant does have an apparent ground for relief. He has a right to an equalization payment as he is entitled to ½ of the value of the difference of the net family properties, which would include the matrimonial home. Based on preliminary figures in the draft net family property, the applicant would be entitled to ½ of the $490,000 value of the matrimonial home at valuation date, equalling $245,000, subject to other credits in the net family properties.

b) Is relief unavailable because of delay that has been incurred in good faith?

[48] The Court finds that the delay was incurred in good faith. The applicant did not just sit on his rights. He was aware of his rights, took some steps to assert his rights, and actually did what was necessary to protect his rights (although 44 days over the time period if one assumes the date of separation is October 29, 2005).

[49] Firstly, the applicant took steps before the prescription period expired and, through no fault of his own, but rather due to procedural requirements, could not issue his claim.

[50] In that 6-year period up to the date of the issuance of the application, the applicant prioritized his family’s needs over his own. He supported them without a court order or an agreement. He did not obtain tax relief for any spousal support payments. He was the main provider as the respondent’s income was minimal as she chose to stay in the home earning a small income as an artist. To support his family, he worked in foreign lands and had to “couch surf” with family and friends when he was back in Ottawa.

[51] The applicant described how he felt intimidated by the respondent. When he broached the subject of the house she threatened to place a sign on the lawn saying that he was forcing the sale and not paying support. In fact, on one occasion, she did place a note with this statement on his car.

[52] Therefore, there is a good faith explanation for the delay in the issuance of the application.

[53] The same pattern described above continued after the issuance of the application.

[54] In two case conferences, he was given permission to deal with this issue. Again, the applicant did not prioritize his rights to obtain his share of the matrimonial home. Instead, counsel representing the parties continued to discuss and negotiate the issues. In the meantime, he continued to pay support without a court order and agreement and help out in the home.

[55] He continued to work overseas and help the family, rather than taking the necessary steps to preserve his rights.

[56] As stated in Scherer, Hart and Dekker, good faith assumes that the applicant acted honestly without ulterior motive. Did he show indifference or careless disregard to his obligation “to act with reasonable dispatch”? It was not indifference on his part or a careless disregard to pursue his rights, but rather working to help his family and taking financial responsibility for them that led to the delay.

[57] On the other hand, he was aware of his rights and did confront the respondent, and on a number of occasions was met with threats that she would ridicule him, denigrate him and embarrass him with signs on the lawn of the home for his children and neighbours to see.

[58] Therefore, the Court finds that the applicant put his family’s needs and financial circumstances in priority to his. The Court notes:

• He paid for many home expenses;
• In 2015 he was involved with getting the house ready for sale. His actions suggest that he was going to profit as well. In fact, he was spending his own money to get it ready;
• The parties agreed not to sell the home until the children were older;
• The applicant was intimidated by the respondent;
• He was troubled when she put a note on his car;
• He did not want to confront her;
• The respondent preferred to deal without lawyers;
• Trying to deal with the respondent caused the applicant some distress;
• After the case conference in 2013, the lawyers representing the parties were trying to negotiate a comprehensive settlement;
• He wanted to allow a $100,000 Line of Credit on the home, but his lawyer said not to;
• After separation he helped at the home, installed an interlocking stone driveway, planting, gardening, and installing new lawns and winter protection on the car port;
• He stored items in the carport; and
• The applicant spent time after the separation cleaning the garage and basement, and paid for a van to take items like old clothing to the Salvation Army.

[59] The applicant felt trapped as he was the sole real provider for the family. The respondent was not working and the applicant went on the road to support the family. The respondent said she would go back to work but did not follow through. She worked as an artist earning about $10,000 per year and made no effort to retrain or to find full-time employment outside the home in the past 10 years.

[60] Since January 1, 2012 the applicant has been voluntarily paying $2500 per month and he contributed to the purchase and maintenance of the matrimonial home before and after the separation.

c) No person will suffer substantial prejudice by reason of the delay.

[61] The matrimonial home has already been valued as of the date of separation. There is no prejudice to the respondent with respect to that issue.

[62] Regarding the respondent’s other assets/debts as of the date of separation and marriage in order that she can complete the calculation of her net family property, the applicant has agreed to gather all documents at his costs including the mortgage balance and the balance in accounts at the date of separation. He will also assist in obtaining and paying for date of marriage valuations for the respondent.

[63] The respondent says she has moved on with her life and financial decisions have been made without regard to the applicant’s rights to his half of the home. The Court does not accept this proposition as it accepts that discussions had occurred after separation regarding the applicant’s share of the home. The respondent stymied that discussion and placed a roadblock to the applicant pursuing that right. She knew about his rights during the mediation session, as would normally be discussed, and the Court accepts that the applicant continued to assist in the home with maintenance with the prospect of selling it to obtain his half.

[64] As late in 2015, the respondent in her email is negotiating with the applicant and is urging the applicant not to use lawyers.

[65] Therefore the applicant has met the conditions set out in section 2(8) and hence the application can proceed pursuant to section 7(3) of the FLA.

Is the applicant barred from bringing an equitable claim?

Position of the parties

[66] The applicant states that pursuant to the Real Property Limitations Act, he had 10 years to bring a claim, as this is a claim on real property.

[67] The respondent submits his claim is statute barred as the two-year limitation period of the Limitations Act, 2002 applies.

Law

[68] The Limitations Act, 2002, s. 4 states:

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.

[69] The Ontario Court of Appeal in Boyce v. Toronto (City) Police Services Board, 2012 ONCA 230, confirmed that equitable claims are subject to the standard two-year limitation period under the Limitations Act, 2002.

[70] Section 4 of the Real Property Limitations Act establishes a 10 year limitation period for claims for recovery of land or rent. It states:

4. No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

[71] With respect to equitable claims, the Ontario Court of Appeal dealt with this issue in McConnell v. Huxtable, 2014 ONCA 86, 118 O.R. (3d) 561, where the court dealt with a claim for the remedial constructive trust over real property based on an allegation of unjust enrichment. The Court held that the applicable limitation period was the 10 year period under s. 4 of the Real Property Limitations Act.

[72] The question for the Court was whether a claim for unjust enrichment in which the claimant asks the court to impose a constructive trust upon the respondent’s real property is an action to recover any land. The Court answered in the affirmative. The Court concluded that the constructive trust remedy for unjust enrichment as well as the purposes and contextual interpretation of the Real Property Limitations Act justified a finding that the claim fell within this category.

[73] The Court also found that the applicant’s alternative claim for monetary compensation was also governed by the 10-year limitation, not the two-year limitation period pursuant to the Limitations Act, 2002.

Analysis

[74] The applicant issued his application six years after the date of separation. Given the decision in McConnell, the court finds that the proper limitation period for the claim in unjust enrichment is 10 years under the Real Property Limitations Act.

[75] A claim based unjust enrichment has two remedies. The Court must first consider a monetary remedy and secondly a property remedy: see Kerr v. Baranow; Vanasse v. Seguin, 2011 SCC 10, [2011] 1 S.C.R. 269.

[76] Here, the applicant did couch the remedy he was seeking as a property claim for the unjust enrichment claim. The Ontario Court of Appeal in McConnell confirmed that the limitation period for an unjust enrichment claim requesting a property remedy is 10 years. Even though a trial court will, upon finding unjust enrichment, must first determine if the unjust enrichment can first be remedied by a monetary claim as stated in Kerr and Vanasse, the McConnell case states that the claim for unjust enrichment has a limitation period of 10 years even if the alternate claim is for monetary compensation.

[77] Therefore, the applicant issued his claim for unjust enrichment within the prescription period.

[78] The costs of this motion will be reserved to the trial Judge.

Madam Justice A. Doyle Date: 2016/08/15