Court File and Parties
COURT FILE NO.: FC-17-1323
DATE: 2021/04/07
SUPERIOR COURT OF JUSTICE – Family Court
RE: Barbara Cohen, Applicant
AND
Steven Cohen, in his capacity as Trustee of the Estate of Sidney Cohen and Susan Charendoff, Respondents
BEFORE: Justice A. Doyle
COUNSEL: Stephen Victor and Katherine Cooligan, Counsel, for the Applicant
Daniel Schwartz and Marta Siemiarczuk, Counsel, for the Respondent Steven Cohen
Jonathan Richardson, Counsel for Susan Charendoff
HEARD: March 30 and April 6, 2021 via Zoom
ENDORSEMENT
Overview
[1] The Respondent Steven Cohen, in his capacity as trustee of the Estate of Sidney Cohen (“Estate”) brings this motion for leave to amend the Answer of the Estate to include the defence of laches. It submits that the proposed amended Answer does not introduce any new material facts nor will it disadvantage the Applicant. The Respondent Susan Charendoff, the daughter of the late Sidney Cohen, supports this motion.
[2] The Applicant opposes this motion on the basis that laches is not a tenable cause of action and an amendment will cause her disadvantage not compensable by costs or an adjournment.
[3] At the heart of this motion is whether the equitable remedy of laches is available as a defence to an application to set aside a domestic contract pursuant to the statutory right under s. 56(4) of the Family Law Act, R.S.O. 1990, c. F.3 (“Family Law Act”).
[4] For the reasons that follow, the Court grants the Estate’s motion to amend its Answer as set out in its Notice of Motion.
Background
[5] This motion was brought on the first day of trial. This trial deals with the validity and enforceability of the marriage contract (“contract”) entered into by the Applicant and the late Sidney Cohen on June 30, 1986, the day before their wedding.
[6] In 2008, the parties signed an amending agreement which related to their matrimonial home and a mortgage in favour of the Respondent, Susan Charendoff.
[7] Sidney Cohen passed away on January 4, 2017.
[8] That year, the Applicant brought an application, seeking among other things, an equalization payment and an order setting aside the contract pursuant to the Family Law Act and she brought a separate application for dependent’s relief under the Succession Law Reform Act, R.S.O. 1990, c. S. 26.
[9] In 2018, Justice Maranger consolidated the two proceedings.
[10] In 2019, Justice Audet bifurcated the trial and ordered that the parties first proceed to “Phase 1” of the trial which would deal with the issue of the validity and enforceability of the contract. Phase 2 would deal with all other issues.
[11] In her endorsement found at 2019 ONSC 4456 at para. 51, Justice Audet stated:
….I am of the view that there are clear advantages in allowing the issue of the validity of the marriage contract to be bifurcated from the other issues in the case and adjudicated prior to the trial on the remaining issues.
Estate’s Position
[12] The estate requests the following amendment to its Answer:
Paragraph 64.1 Additionally and in the alternative, Barbara’s claim to set aside the Marriage Contract is also barred by the doctrine of laches. Even after discovering this alleged claim, Barbara allowed Sidney to carry on for years as if she accepted the Marriage Contract. She benefited from Sidney’s promises set out in the Marriage Contract, including allowing Sidney to pay for all of her usual and ordinary day-to-day expenses. Sidney also gifted Barbara millions of dollars in investments. Barbara declined opportunities to pursue this claim while Sidney was alive, instead resolving to wait until he passed to make her claim, when Sidney could no longer give his evidence. Having acquiesced to and benefitted from the Marriage Contract, it is unfair to now try to resile from it.
[13] Firstly, the Estate is not requesting an amendment to add any further material facts. Since the Limitations Act defence has already been pleaded, the facts supporting that defence will also be relevant to a defence of laches.
[14] The Estate indicates that its Answer already sets out the facts outlining the Applicant’s delay in taking any steps to address her concerns with the contract. Further, in reliance on the contract, the late Sidney Cohen provided generous financial gifts to the Applicant, her children and grandchildren.
[15] Secondly, the Estate submits that this amendment would promote the rationale expressed by Justice Audet which would save the court time, expense and resources. This can only be accomplished if the Court in Phase 1 fully determines the Applicant’s claims to set aside the contract which would include the estate’s defences to those claims.
[16] Thirdly, the Estate relies on r. 11(3) of the Family Law Rules that states a Court shall permit an amendment unless certain factors apply.
[17] There is no disadvantage to the Applicant that cannot be compensated in costs and/or an adjournment.
[18] The Estate indicated there is no need for the trial to be adjourned as the parties had anticipated this would be part of Phase 1 trial and the estate could lead all of its evidence within the timelines set out in the Trial Scheduling Endorsement form.
[19] The Applicant has not provided any responding materials showing any disadvantage to her.
[20] Next, the Applicant has been on notice that a limitations defence was being advanced as it was pleaded in the Amended Answer dated April 11, 2019.
[21] In December 2020, the Applicant refused to consent to an amendment of the Answer to plead the equitable defence of laches on the basis that it was not a legally tenable defence.
[22] Therefore, there has been no delay on the part of the Estate as the Applicant has known about the limitations defence for two years and the intent to plead laches for 4 months.
[23] In fact, questioning and documentary discovery took place within the context of the facts supporting the limitations defence and post-execution events (i.e. events occurring after the execution of the contract on June 30, 1986).
[24] Finally, s. 56(4)(c) of the Family Law Act specifically provides that in an application to set aside a domestic contract, the court may consider the law of contract, which incorporates the common law and equitable principles. Also, see s. 96 of the Courts of Justice Act, R.S.O. 1990, c. C.43, that reads:
96(1)Courts shall administer concurrently all rules of equity and the common law.
(2)Where a rule of equity conflicts with a rule of the common law, the rule of equity prevails.
[25] If the legislature had meant to limit the ambit of the law to common law, it would have said so.
[26] The Court must allow the amendment unless it is plain and obvious that the claim cannot succeed. The Estate’s proposed amendment includes a tenable cause of action.
Applicant’s Position
[27] The Applicant reiterates that the claim brought pursuant to s. 56(4) of the Family Law Act to set aside the contract is based on, among other things, the following grounds:
The Applicant did not understand the nature or consequences of the contract;
The Applicant did not receive proper independent legal advice;
The late Sidney Cohen exerted undue influence on her to sign the contract;
There was an inequality of bargaining power between the couple;
The terms of the contract are unconscionable; and
The contract is not consistent with the overall objectives of the Family Law Act.
[28] This section provides the Applicant with a statutory and legal right. A claim for declaratory relief arising from statute is a legal claim and cannot be defeated by an equitable defence.
[29] The thrust of the Applicant’s argument is that laches is not a tenable claim as it is an equitable remedy. An equitable remedy can only be used when there is an equitable claim as set out by the Supreme Court of Canada’s decisions in M.(K.) v. M.(H.) 1992 31 (SCC) and Anderson v. Municipality of South Vancouver et al. 1911 37 (SCC).
[30] A s. 56(4) claim is a claim for a declaratory judgment and “a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs”. See Children’s Aid Society of Regional Municipality 2017 ONCA 931, at para. 74.
[31] Further, the case law supports the fact that s. 56(4)(c) of the Family Law Act incorporates only the common law principles of contracts and not the equitable principles.
[32] In her Application, the Applicant specifically pleaded that the Limitations Act 2002 did not apply to s. 56(4) of the Family Law Act. This was confirmed by the Ontario Court of Appeal in Kyle v. Atwill, 2020 ONCA 476, at para. 57: “There is no limitation period for bringing the proceeding requesting a “declaration setting aside a marriage contract, whether as a stand-alone matter or if the proceeding also claims other family law relief”.
[33] At paragraph 59, the Court of Appeal stated:
Moreover, while spouses may seek to set aside a marriage contract in the circumstances set out in s. 56(4) at any time, a spouse is unlikely to bring such an application during the marriage…If they remain happily married, there will be no need.
[34] Leave to the Supreme Court of Canada was refused.
[35] The Applicant indicates that there is a presumed disadvantage to her as the Estate’s motion to bifurcate which was granted by Justice Audet was meant to streamline the process. The Estate represented that it would be a short trial with few witnesses. For the past two years, the parties have returned to the court almost a dozen times to deal with procedural issues and now with an amendment there will be further delay.
[36] She submits that Phase 1 was to deal strictly with the validity and enforceability of the contract and that it would not include the limitations defence.
[37] There is a presumed prejudice to the Applicant.
[38] This matter has been in litigation for 4 years and the Applicant is 79 years of age and this matter should be brought to a conclusion. An amendment would result in further disclosure including the value of the Estate and likely an adjournment of the trial.
[39] The Estate did not bring this motion in a timely manner and by not doing until this stage of proceedings will bring disadvantage to the Applicant that cannot be compensated by an adjournment or costs.
Analysis
Introduction
[40] Firstly, this is a motion for an amendment and not to determine whether the Estate has established laches in this case.
[41] I am to assume that the facts as pleaded in the Answer of the Estate are true.
[42] Family Law Rule 11(3) uses commanding language and is in the form of a directive. It reads:
(3) On motion, the court shall give permission to a party to amend an application, answer or reply, unless the amendment would disadvantage another party in a way for which costs or an adjournment could not compensate. O. Reg. 114/99, r. 11 (3).
[43] The party resisting the amendment must “show that there is an existing bar in the form of a decided case directly on point from the same jurisdiction demonstrating that the very issue has been squarely dealt with and rejected by our courts”. Dalex Co. v. Schwartz Levitsky Feldman, 1994 7290 (ON SC), [1994] O.J. No. 1388 (S.C.), at para. 6.
[44] The amendment must be allowed unless it is “plain and obvious” that it discloses no reasonable defence in law or it “is certain to fail because it contains a radical defect” (Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959)
[45] In Brookfield Financial Real Estate Group Limited v. Azorim Canada et al., 2012 ONSC 3818, Justice Brown stated that on a motion to amend , the court will consider the tenability of a proposed claim by applying the principles under r. 21.01(1)(b) which operates to weed out the hopeless claims. The claim must assert a legally sufficient claim.
[46] The opposing party must demonstrate that it is plain and obvious that the amended claim stands no chance of success. Justice Brown referred to Morden and Perell, the Law of Civil Procedure in Ontario 1st ed. (Markham, Ont. : Lexis Nexis 2010) where the authors stated at para. 23 of this decision:
On a motion to amend a pleading, the court does not examine the factual merits of the proposed amendments or the moving party’s motives for seeking the amendment, but it does examine whether as a matter of law, the amendment raises a tenable claim or defence and whether the proposed amendment has been properly pleaded in the sense of complying with the rules that govern pleadings, including sufficient particularity. Put somewhat differently, it makes little sense to grant an amendment that will immediately be challenged as legally unsound, and the court may inquire into the merits to ensure that the amendment is tenable in law and compliant with the rules of pleading.
[47] In Moghimi v. Dashti, 2016 ONSC 2116, Justice Myers stated:
[19] That is, even if an amendment will not cause harm to the other party that cannot be prevented or repaired with an adjournment or a costs award, an amendment will not be allowed if it is proposed in bad faith or if it is plain and obvious that there is no legitimate basis for the amendment.
[20] Under the Rules of Civil Procedure the review of the merits of a proposed amendment to a pleading is phrased slightly differently. On a motion to amend under Rule 26.01, the court will consider whether a proposed amendment pleads a “tenable” claim. In Marks v. Ottawa (City), 2011 ONCA 248 the Court of Appeal wrote that a "proposed amendment must be shown to be an issue worthy of trial and prima facie meritorious." In Brookfield Financial Real Estate Group Limited v. Azorim Canada (Adelaide Street) Inc., 2012 ONSC 3818 at para. 23, D.M. Brown J. (as he then was) adopted the following discussion of the issue from Morden and Perell, The Law of Civil Procedure in Ontario, 1st ed. (Markham, Ont.: LexisNexis, 2010)
[48] On a motion to amend a pleading, the court does not examine the factual merits of the proposed amendments or the moving party's motives for seeking the amendment, but it does examine whether as a matter of law, the amendment raises a tenable claim or defence and whether the proposed amendment has been properly pleaded in the sense of complying with the rules that govern pleadings, including sufficient particularity.
[49] Rule 11(3) mandates the Court to permit a party to amend a pleading unless the amendment would disadvantage the Applicant in a way in which costs or an adjournment cannot compensate or there is no tenable cause of action.
[50] Therefore, based on the above principles and for the reasons set out below, the Court permits this proposed amendment at this stage of the proceedings.
[51] As set out below, the Applicant in this case has failed to demonstrate that the equitable defence of laches is not available in this case. Although the Applicant has provided a comprehensive review of the case law, I find that there is no decided case that has dealt squarely with the issue that is before the Court.
[52] Also, for reasons set out below, I find that any prejudice to the Applicant can be compensated by costs and/or an adjournment along with the Court’s case management powers set out in the Family Law Rules.
Setting aside a domestic contract
[53] Firstly, the Court will review the claim brought by the Applicant.
[54] Section 56(4) of the Family Law Act reads as follows:
(4) A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract. R.S.O. 1990, c. F.3, s. 56 (4).
[55] The provision requires a court to undertake in a two-step process when conducting a review of a domestic contract. The Court of Appeal explained the process in LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, at para. 51:
The analysis undertaken under s. 56(4) is essentially comprised of a two-part process: Demchuk v. Demchuk (1986), 1986 6295 (ON SC), 1 R.F.L. (3d) 176 (Ont. H.C.). First, the court must consider whether the party can demonstrate that one or more of the circumstances set out within the provisions have been engaged. Once that hurdle has been overcome, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement.
[56] Fairness is an appropriate consideration in the exercise of the court’s discretion in the second stage of s. 56(4) analysis. See also Virc v. Blair, 2014 ONCA 392,
What is laches?
[57] Laches is a defence that bars recovery by the Applicant because of the Applicant's undue delay in seeking relief. Laches has been found to be a defence to a proceeding in which an Applicant seeks equitable relief. This means that it is an unreasonable delay that can be viewed as prejudicing the opposing party.
[58] The person invoking laches is asserting that an opposing party has done nothing with respect to their rights, and that, as a result of this delay, circumstances have changed, witnesses or evidence may have been lost or no longer available, etc., such that it is no longer a just resolution to grant the Applicant’s claim. Failure to assert one's rights in a timely manner can result in a claim being barred by laches.
[59] In determining whether there has been such delay as to amount to laches, the main points to be considered are (1) acquiescence on the Applicant 's part, and (2) any change of position that has occurred on the Estate’s part.
[60] In this case, the Estate argues that the late Sidney Cohen relied on the validity of the contract when he made certain decisions impacting on his finances. The principle of fairness is a consideration when dealing with step 2 set out in LeVan.
[61] In its Answer, it pleads that the Applicant knew in 2008 (at the time of the amending agreement) or even earlier that she was not happy with the contract. It pleads that she sat on her rights and did not proceed to deal with this contract until her husband passed away. He is no longer here to defend himself. Instead, he made certain financial decisions that were to his detriment relying on the validity of the contract which included financial gifts to the Applicant and her children and grandchildren.
[62] Therefore, the Amended Answer properly sets out the allegations that support a defence of laches, i.e. delay by the Applicant and the late Sidney Cohen’s change of position.
Limitation Act
[63] The issue of limitations arose in Kyle v. Atwill, 2020 ONCA 476.
[64] In Kyle, the Court of Appeal considered s. 16(1) of the Limitations Act which provides a list of proceedings for which there is no limitation period. Subsection 16(1)(a) provides that “[t]here is no limitation period in respect of […] a proceeding for a declaration if no consequential relief is sought”.
[65] After considering the respective limitation periods in the Family Law Act and the Limitations Act, the Ontario Court of Appeal described s. 56(4) as a provision requesting declaratory relief.
[48] This description of declaratory and remedial judgments is reflected in the jurisprudence of this court. A declaratory judgment is a “formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs – it is restricted to a declaration of the parties’ rights and does not order any party to do anything”: Starz (Re), 2015 ONCA 318, 125 O.R. (3d) 663, at para. 102; see also Fehr v. Sun Life Assurance Company of Canada, 2018 ONCA 718, 84 C.C.L.I. (5th) 124, at para. 207; Peikut v. Romoli, 2020 ONCA 26, 55 E.T.R. (4th) 166, at paras. 12-13.
[66] At para. 56, the Court of Appeal concluded that the Limitations Act did not apply to claims seeking declaratory relief.
[56] In summary, although one may always characterize any relief that is sought that depends on the outcome of the declaration proceeding as consequential relief, the intent and effect of s. 16(1)(a) is not to preclude the party seeking the declaration from also asking for consequential relief as a matter of procedure. It is to prevent a party who seeks a consequential remedy from circumventing the limitation period that is applicable to the claim for the remedy by joining that claim with an application for a declaration: see, for example, Alguire v. The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202, 140 O.R. (3d) 1, at para. 29; see also Sarna, at pp. 55-56.[3]
[67] In Kyle v. Atwill, 2020 ONCA 476, at para 57, the Court of Appeal stated:
I conclude that a proceeding under Section 56(4) of the Family Law Act comes within s. 16(1)(a) of the Limitations Act. There is no limitation period for bringing the proceeding for a declaration setting aside a marriage contract, whether as a stand-alone matter or if the proceeding also claims other family law relief.”
[68] However, the Statute of Limitations is concerned only with the time that has passed. Laches is concerned with the reasonableness of the delay in a particular situation and so is more case-specific and more focused on the equitable conduct of the Applicant and the Estate’s reliance on the contract. Those considerations are not unique to the laches defence because they are characteristic of equitable reasoning and equitable remedies.
[69] The Court of Appeal did not consider or determine that all defences dealing with a delay to pursue a claim were barred. More specifically, it did not deal with the defence of laches.
[70] However, the case is instructive for this motion as it confirms that s. 56(4) is a claim for declaratory relief.
Equitable defence is not available to a legal claim
[71] The Supreme Court has concluded that equitable defences are only available when dealing with equitable claims.
[72] In M.(K) v. M(H), 1992 31 (SCC), [1992] 3 S.C.R. 6, the Supreme Court provides a history of laches from the time of the Judicature Act which imported equitable doctrines including laches.
[73] The Supreme Court referred to the leading case:
The leading authority on laches would appear to be Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221, in which the doctrine is explained as follows, at pp. 239-40:
. . . the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.
[74] Later, the Supreme Court stated:
The rule developed in Lindsay is certainly amorphous, perhaps admirably so. However, some structure can be derived from the cases. A good discussion of the rule and of laches in general is found in Meagher, Gummow and Lehane, supra, at pp. 755-65, where the authors distill the doctrine in this manner, at p. 755:
It is a defence which requires that a defendant can successfully resist an equitable (although not a legal) claim made against him if he can demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant's conduct or (b) caused the defendant to alter his position in reasonable reliance on the plaintiff's acceptance of the status quo, or otherwise permitted a situation to arise which it would be unjust to disturb. . . .
Is a claim under s. 56(4) of the Family Law Act for declaratory relief a legal or an equitable claim?
[75] The Court must determine whether the declaratory relief set out in s. 56(4) of the Family Law Act is a legal or an equitable claim.
[76] The Court asked counsel to provide further argument on this issue at the return of this motion.
Estate’s Position
[77] The Estate argued that declaratory relief is an equitable claim.
[78] It relies on Hongkong Bank of Canada v. Wheeler Holdings Ltd., 1993 148 (SCC), [1993] 1 SCR 167, where the Supreme Court held that even if the remedy was sui generis in nature, the equitable principles applied.
[79] In support of their position, the Estate filed an excerpt from Lazar Sarna’s The Law of Declaratory Judgements, 4 ed. 2016 Thomson Reuters Canada Limited.
[80] The Estate indicates that there are no decisions that the declaratory relief under s. 56(4) is not an equitable claim.
[81] It relies on a number of cases that have found that equitable principles applied in applications under s. 56(4). For example, in Grant-Hose v. Grant-Hose 1991 12846 (Ont. S.C.), Justice Mendes da Costa at paras. 40-41 stated that “Included in the phrase “the law of contract” is the principle of unconscionability, a development of equity.”
Applicant’s Position
[82] The Applicant argues that the claim under s. 56(4) of the Family Law Act is a legal right and that laches does not apply to the exercise of statutory rights because those rights are legal in nature. She relies on M(K) and Goertz v The Owners Condominium Plan No. 98SA12401 2018 SKCA 41.
[83] Further, she argues that statutory relief of a declaration of rights is not equitable relief. She is not seeking to enforce equitable rights or claiming equitable relief and hence laches does not apply. (See Anderson)
[84] The Applicant relies on the Kyle decision where the Ontario Court of Appeal confirmed that since the Family Law Act did not provide a limitation period dealing with s. 56(4) it was the legislative intent that the Limitations Act did not apply. (para. 38)
[85] At para. 48 of Kyle, the Court of Appeal confirmed that a declaratory judgment is a ‘formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs- it is restricted to a declaration of the parties’ rights and does not order any party to do anything.”
[86] Further, since this matter deals with a statutory claim then the Court is bound by the Ontario Court of Appeal’s decision in Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada 2015 ONCA 764.
[87] In that case, the Ontario Court of Appeal found that the defence of laches could not invoked to respond to a loss-transfer claim under s. 275 of the Insurance Act and said this at para. 55:
Permitting a defendant to rely on the defence of laches where the claim is a legal claim and subject to and within the basic limitation period prescribed under the Limitations Act, 2002 would also be counter to the purpose of that Act of promoting certainty and clarity in the law of limitation period: msi Spergel v. I.F. Propco Holdings (Ontario) 36 Ltd., 2013 ONCA 550, 117 O.R.(3d) 81,at para. 61.
Analysis
[88] In order to determine the nature of the declaratory relief set out in s. 56(4), the Court must follow a comprehensive approach taking into consideration the history and development of this area as it deals with family law.
[89] Firstly, it is clear that equitable remedies are available to claims of declaratory relief.
[90] I rely on Hongkong Bank of Canada v. Wheeler Holdings Ltd., 1993 148 (SCC), [1993] 1 SCR 167 where the Supreme Court considered whether a claim for declaratory relief is equitable in nature. In that case, Justice Sopinka, writing for the court surveyed both international and Canadian case law which considered whether declaratory relief is equitable or sui generis in nature. While not strictly reaching a conclusion on the nature of the remedy, the court states that “even if the remedy is seen to be sui generis, equitable principles such as clean hands can play a role in the exercise of the court's discretion whether or not to grant the remedy.” The Court goes on to state that “in the exercise of the discretion whether or not to grant a declaration, the court may take into account certain equitable principles such as the conduct of the party seeking the relief. "
[91] In Hongkong, the Supreme Court states at p. 191:
This discretion is employed, as discretion was originally employed in respect of all equitable remedies, primarily to do justice in the particular case before the court. It is wide enough to allow the court to take into account virtually all objections and defences possible in equitable proceedings
[92] The Court then notes that the author of that portion goes on to “cite various English cases in which the motives of the plaintiff were taken into account, the claim was dismissed on the basis of laches, and inequitable behaviour on the part of the plaintiff was considered to be a defence to a declaratory judgment."
[93] In Oro-Medonte (Township) v. Warkentin, 2013 ONSC 1416, at para. 139, Justice Howden considered Hongkong, and concluded that “[t]he result from that decision is that the doctrine of laches, based as it is on the conduct of the party seeking relief, may be applied to claims seeking declaratory relief such as this one.”
[94] A number of courts have applied equitable principles to those who seek declaratory relief. See McMurtry v. McMurtry, 2016 ONSC 2853 affirmed at 2017 ONCA 296.
[95] In Sara v. Sara (1962), 1962 391 (BC CA), 36 D.L.R. (2d) 499, the British-Columbia Court of Appeal refused to grant a declaration that a marriage was void to a man who had polygamously married his Canadian wife in order to be admitted to the country, and then had been supported by her for a number of years after his arrival, on the basis inter alia that the husband had unclean hands. Re Morris and Morris (1973), 1973 1200 (MB CA), 42 D.L.R. (3d) 550 (Man. C.A.), and Re MacDonald and Law Society of Manitoba (1975), 1975 1138 (MB QB), QB) 54 D.L.R. (3d) 372 (Man. Q.B.), also take the view that the declaratory remedy is an equitable one.
[96] The case of McIlroy v. Taylor (1981), 1981 1693 (ON SC), 32 O.R. (2d) 553, 122 D.L.R. (3d) 686, 22 R.F.L. (2d) 313, involved a claim being made in equity for a declaration that certain land was held in trust and laches might bar such a claim.
[97] Secondly, I find that, in this case, even though the declaratory relief is set out in a statute, this does not change the nature of the claim.
[98] Unlike the statutory rights set out in Anderson, Goertz and Intact, which were newly created statutory rights, s. 56(4) is a codification of rights which existed before the enactment of the Family Law Act.
[99] In Mundinger v. Mundinger 1968 250, the Ontario Court of Appeal dealt squarely with the rights of a party in a domestic contract and applied equitable principles. This was decided before the enactment of the Family Law Act.
[100] It is worthwhile quoting from the decision as it sets out the circumstances and findings in that case are illustrative of the incorporation of equitable principles when dealing with the application to set aside a marriage contract. The Court stated this:
Her condition was such that it can clearly be asserted that her husband was in a position of dominance and control over her of which he took full advantage by exercising undue influence upon her to carry off this improvident and nefarious transaction.
The governing principle applicable here was laid down by this Court in the oft-cited case of Vanzant v. Coates (1917), 1917 573 (ON CA), 40 O.L.R. 556, 39 D.L.R. 485. It was there held that the equitable rule is that if the donor is in a situation in which he is not a free agent and is not equal to protecting himself, a Court of Equity will protect him, not against his own folly or carelessness, but against his being taken advantage of by those in a position to do so because of their position. In that case the circumstances were the advanced age of the donor, her infirmity, her dependence on the donee; the position of influence occupied by the donee, her acts in procuring the drawing and execution of the deed; and the consequent complete change of a well-understood and defined purpose in reference to the disposition of the donor's property. It was held that in those circumstances the onus was on the plaintiff to prove by satisfactory evidence that the gift was a voluntary and deliberate act by a person mentally competent to know, and who did know, the nature and effect of the deed, and that it was not the result of undue influence. That onus had not been discharged; and it was therefore held to be unnecessary for the defendant to prove affirmatively that the influence possessed by the plaintiff had been unduly exercised.
[101] The Court of Appeal alludes to the fact that the “Court of Equity will protect him”.
[102] Equity refers to those principles that were initially created in the English High Court of Chancery which were developed in response to the rigid technical procedures of the common law. Equity might be described as softening or correcting the common law.
[103] In my view, these equitable principles were imported into s. 56(4) of the Family Law Act.
[104] Family Law is a distinct and unique area of law. The law of equity is no stranger to this area of law and, for example, is applicable in claims for constructive trust.
[105] The Court has reviewed the Intact, Anderson and Goertz which all deal with statutory rights. These cases are newly created statutory rights and not a codification of existing common law. These statutory rights do not represent the result of a historical development of judicial decisions codified into one section as found in s. 56(4).
[106] As the discussion of these cases outline below, the Courts in those cases were dealing with particular rights granted to individuals or group under legislation dealing with insurance, municipal and condominium matters. There is no case on point dealing with family law matters, and more specifically with s. 56(4).
[107] Intact deals with whether laches can defeat a right under s. 275 of the Insurance Act.
[108] This section permits the insurer of lighter vehicles to claim statutory accident benefits from the insurer of a heavy commercial vehicle in an accident. This addresses the fact that the insurer of lighter vehicles would have the higher share of the cost of statutory accident benefits as their drivers are more likely to suffer personal injuries than drivers of heavier vehicles.
[109] The first party insurer must intiate arbitration within 2 years and a day requesting indemnification. See Markel Ins. Co. v. ING Insurance Co. of Canada 2012 ONCA 218. The Act also imposes strict deadlines including 90-day notice period for disputes between insurers.
[110] The Ontario Court of Appeal found that the doctrine of laches is not available to defend a claim under s. 275 and even if it was available could not have succeeded in the two matters before the Court. In upholding Chiappetta J. in her decision in one of the appeals before the Court, the Court of Appeal agreed that s.275 was a statutory right and did not have a ‘distinctly equitable flavour’ (Intact para. 16).
[111] At para. 42, the Court of Appeal explored this remedy as it relates to s. 275:
While I refrain from commenting on the availability of equitable remedies generally, I agree with the view that the absence of a laches-saving provision from the Limitations Act, 2002 suggests that the equitable defence of laches is not available to bar a claim that is brought within the basic limitation period prescribed under the Limitations Act, 2002. While the mere fact that the laches-saving provision was left out of the new Act may not necessarily give rise to a presumption that the legislature intended to change the law, the removal takes on additional significance when viewed in context. A number of factors support the conclusion that the removal of the laches-saving provision in this case was intentional.
[112] In summary at para. 33;
In my view, given the historic restriction of laches to claims for equitable relief, the removal of the provision preserving the use of equitable defences from the Limitations Act, 2002 and the comprehensive nature of the new Ontario limitations scheme, the defence of laches cannot be raised to defeat claims for legal relief that are subject to the unexpired basic limitation period under the Limitations Act, 2002, even those with an “equitable flavour”. Accordingly, even if a second party insurer’s right to indemnity under s. 275 might be argued to have an “equitable flavour” because its objective is to re-allocate the cost of statutory accident benefits in a more equitable fashion, a second party insurer cannot invoke the doctrine of laches as a defence.
[113] In Goertz, the Saskatchewan Court of Appeal was dealing with a condominium owner who was litigating with the condominium corporation regarding his removal from the board and levy imposed on him. In the original decision, the Court determined primarily that the Condo Corp properly suspended Mr. Goertz’s right to vote at its annual general meeting of owners for failure to pay monies owed by him to the Condo Corp. That decision also dismissed Mr. Goertz’s application respecting oppressive conduct and other relief sought against the Board of Directors of the Condo Corp (Board). The decision of June 6, 2017, dismissed Mr. Goertz’s application to the Chambers judge to modify his Chambers Decision and to address certain issues that Mr. Goertz believed were not addressed therein.
[114] The Court stated at para. 88 to 90:
Laches operates as an equitable defence to an equitable claim, but not to a legal claim. That principle has been one of long standing: see Anderson v Municipality of South Vancouver(1911), 1911 37 (SCC), 45 SCR 425; Heron v Lalonde (1916), 1916 35 (SCC), 53 SCR 503.
[89] A statutory right is a legal right. This Court in Quinn v Prairiedale (Rural Municipality No. 321) (1958), 1958 182 (SK CA), 15 DLR (2d) 399 (Sask CA), held that mere laches and delay could not operate to defeat statutory rights under The Land Titles Act. The Supreme Court of Canada in St. Ann’s Island Shooting and Fishing Club v The King, 1950 28 (SCC), [1950] SCR 211, stated that “there can be no estoppel in the face of an express provision of a statute”. The Court did not mention laches specifically in this case, however similar principles apply since laches is a sub-type of estoppel. That estoppel is not effective against a statutory duty or obligation was noted in Francis at para 37, where a condominium corporation unsuccessfully argued that its otherwise illegal actions should be legitimized on the basis that they had not been challenged over time.
[90] Based on the foregoing, I am not satisfied that the doctrine of laches applies to the Board’s exercise of its statutory rights under s. 77 because those rights are legal in nature.
[115] Again, s. 77 were statutory rights provided to the condominium corporation that did not previously exist.
[116] In Anderson, the Supreme Court dealt with a case of the Plaintiff’s default of taxes. Although he did nothing when he was aware of the fact that his lands had been sold for arrears of taxes, he was still entitled to take advantage of statutory procedure regarding the contestation of sales for arrears of taxes as laches did not apply.
[117] Again, the case is not dealing with a family law matter nor a codification of a previous common law right.
[118] Accordingly, I find that s. 56(4) permitting an applicant to request declaratory relief is an equitable claim or at least sui generis that attracts equitable defences. The case law confirms the equitable nature of declaratory relief in Canada.
[119] Therefore, the defence of laches which is an equitable remedy is available in claims based on s. 56(4) of the Family Law Act.
[120] In Dalex, Justice Epstein further articulated this principle in para. 6:
I start with the proposition, advanced by the defendants, that although the court has inherent jurisdiction to strike out a pleading as disclosing no legally tenable position, such power should be exercised sparingly and only when there is no doubt that no cause of action or defence exists. In order to foreclose the consideration of an issue past the pleadings stage, the moving party must show that there is an existing bar in the form of a decided case directly on point from the same jurisdiction demonstrating that the very issue has been squarely dealt with and rejected by our courts. Only by restricting successful attacks of this nature to the narrowest of cases can the common law have a full opportunity to be refined or extended: see: Krouse v. Chrysler Canada Ltd., 1970 430 (ON SC), [1970] 3 O.R. 135, 12 D.L.R. (3d) 463 (H.C.J.).
[121] Having found no existing bar to this defence, I find that s. 56(4) can be defended by the defence of laches.
Does s. 56(4)(c) of the Family Law Act include both common law and equitable principles of contract law?
[122] In the event that I am wrong and that a statutory right can never be defeated by the equitable defence of laches, then I am of the view that the wording of subsection 56(4)(c) was meant to capture both the common law and equitable principles. The legislature did not limit the analysis under this subsection to only common law principles.
[123] Section 56(4)(c) reads: “Otherwise in accordance with the law of contract.”
[124] In my view, contract law by definition incorporates both common law and equitable principles.
[125] Firstly, I find that s. 56(4) does capture defences available in common law. As stated by Justice Blishen in Toscano v. Toscano, 2015 ONSC 487:
[62] At common law, a domestic contract, like other contracts, can be set aside for: unconscionability, undue influence, mistake, repudiation, duress and misrepresentation.
[126] Other cases have explored what subsection (c) entails.
[127] The Ontario Court of Appeal in Ward v. Ward, 2011 ONCA 178, at para. 21 stated:
[21] Section 56(4)(c) of the FLA permits a court to set aside a domestic contract "in accordance with the law of contract", which [page407] counsel agree would include grounds such as unconscionability, duress, uncertainty, undue influence, mistake and misrepresentation. In addition to the common law grounds, ss. 56(4)(a) and (b) permit a court to set aside a domestic contract in the face of significant non-disclosure or where a party "did not understand the nature or consequences of the domestic contract".
[128] In Kinsella v. Mills, 2020 ONSC 4785, at para. 338, Justice Chapman explored the defences available under subsection (c):
Section 56(4)(c) of the Family Law Act imports all of the common law rules that govern the validity of contracts in general into the statutory framework for setting aside domestic contracts in Ontario. It permits the court to set aside a domestic contract on grounds such as uncertainty, duress, undue influence, unconscionability, mistake, material misrepresentation and lack of complete or adequate legal advice (Dochuk v. Dochuk, 1999 CarswellOnt 353 (Gen. Div.), at para. 3; Ward v. Ward, 2011 ONCA 178 (C.A.);
C.V. v. S.G., 2019, ONCJ 159 (O.C.J.), at para. 270). I discuss the law respecting uncertainty, duress, and undue influence in detail below in my analysis of the Applicant’s claims based on these grounds. In dealing with a claim to set aside a domestic contract on contract principles, the parameters and scope of the court’s authority will be defined by the contract law principles relevant to the case under consideration. For example, the equitable remedy of rescission in contract law may be refused where it would be very difficult to restore the parties to the position they were in prior to executing the settlement agreement (Danylkiw v. Danylkiw, 2004 CarswellOnt 4401 (C.A.), at para. 3). Furthermore, contract principles such as affirmation of contract, acquiescence and laches may be relevant to the analysis.
[129] In Bruni v. Bruni, 2010 ONSC 6568, at paras. 114, Justice Quinn stated this: “Unexplained delay always is a factor for the court to consider when determining whether to grant discretionary relief.”
[130] In B.J.F. v. B.M.A. 1999 15033 (Ont. S.C.), in addressing a claim under s. 56(4), the court referred to the equitable origins set out in Mundinger and Rosen v. Rosen 1994 2769 (Ont CA) when applying those principles of unconscionability under s. 56(4).
[131] In Miller Paving Limited v. B. Gottardo Construction Ltd., 2007 ONCA 422, at para. 24, Justice Goudge said “it is now undeniable that not just the common law doctrine of common mistake, but also the equitable doctrine, have been woven into the fabric of Canadian contract law.”
[132] At p. 11 of John D. McCamus, The Law of Contracts, 3rd ed. (Irwin Law: 2020, Toronto) states “the law of contracts derives from both common law and equitable sources and is constituted, therefore, by an intermingling of common law and equity doctrines”.
[133] I believe that this reasoning is strengthened by judicial pronouncements that, while not directly addressing the point, discuss the “fusion of the law and equity”, such as Justice Grange on the Ontario Court of Appeal in LeMesurier et al. v. Andrus, 1986 2623, said:
Section 109(1) of the Courts of Justice Act, 1984 (Ont.), c. 11, provides that "Courts shall administer concurrently all rules of equity and the common law." This is the successor of paras. 1, 3, 4, 5 and 7 of s. 18 of the Judicature Act, R.S.O. 1980, c. 223, which required the court to recognize all claims and defences, whether arising under the common law or equity, asserted by both plaintiffs and defendants. The legislation dates back to the Administration of Justice Act, 1873 (Ont.), c. 8, s. 1, which provided that:
The courts of law and equity shall be, as far as possible, auxiliary to one another respectively, for the more speedy convenient and inexpensive administration of justice in every case.
Whatever the original intention of the Legislature, the fusion of law and equity is now real and total.
[134] As well in subsection (c) the Legislature did not restrict the principles of common law. By the plain meaning interpretation, contract law would include both equitable and common law principles. See also Courts of Justice Act, s. 96 that specifically states that the law includes both areas.
[135] Therefore, in my view, subsection (c) permits the court to set aside a domestic contract on the common law and equitable grounds such as uncertainty, duress, undue influence, mistake or material misrepresentation, and as well as equitable defences as affirmation of contract, ratification, acquiescence and laches.
Conclusion on whether laches is a tenable cause of action
[136] In conclusion, I find that the defence of laches is a tenable cause of action and is properly pleaded because:
This equitable defence is available to defend an equitable claim in the form of declaratory relief;
Section 56(4)(c) of the Family Law Act includes the common law and equitable principles of contract law;
There is no case on point that would bar this defence;
As a matter of public policy, I find that the equitable defence of laches would be in keeping with the letter and spirit of the Family Law Act that recognizes in the preamble that the purpose of the legislation is to recognize the equal position of spouses as individuals within marriage. It further states:
• “…whereas in support of such recognition it is necessary to provide in law for the orderly and equitable settlement of the affairs of the spouses upon the breakdown of the partnership….” (emphasis added)
Step 2 of the LeVan case requires the court to determine whether to exercise its discretion as a matter of fairness when determining whether it will set aside a domestic contract. In my view, in applying fairness in a s. 56(4) claim for declaratory relief, the Court should not be precluded from considering equitable defences, such as laches; and
The law of equity developed to provide remedies to individuals who came before the Court whose claim could not fit within the existing common law claims; The rules and remedies of equity were developed to alleviate the hardships wrought by decisions and of the relative inflexibility of the common law.
Issue #2: Would the amendment cause prejudice to the Applicant that cannot be fixed by an adjournment or costs?
[137] Firstly, it indeed unfortunate that the Estate’s motion has come on the first day of trial.
[138] This trial date was set in November 2020. In December 2020, 4 months after the release of the Kyle decision, the Estate requested the Applicant’s consent to the amendment which was denied.
[139] Justice Shelston, relying on the interim finding of Corthorn J. that Phase 1 would not deal with the limitations issue, ordered that this motion would be held after the hearing of Phase 1.
[140] At the hearing of the settlement of the terms of the Order, Justice Corthorn made it clear that her interim findings are not binding on the trial Judge.
[141] Secondly, the parties have not agreed on the scope of Phase 1.
[142] In bringing their motion before Justice Audet, the Estate argued and the Court accepted, that splitting of the issues so that the first part of the trial would only deal with the validity and enforceability of the contract would be a fair and just process. The Court found that the trial would be short and focused. The Estate would not be obliged to disclose the value of the late Sidney Cohen’s estate as its value would be only relevant if the contract is set aside.
[143] The parties never agreed on the scope of the trial, not before Justice Audet, not before Justice Corthorn and not before Justice Shelston.
[144] The Applicant’s position is that Phase 1 should only deal with the events leading up to the execution of the contract and their motion for an order excluding post-execution evidence will be heard after this motion. The case law is clear that the court should only consider events leading up to June 30, 1986 the date of the execution of the contract. The parties have agreed that if the contract is set aside then the 2008 amending agreement fails as well. The reverse is not true.
[145] The Estate now wishes to introduce an equitable remedy that has serious ramifications on the scope of Phase 1. With this amendment, the laches defence could have an implication on the validity and enforceability of the contract and the Court will need to consider the scope of the trial and whether to admit post-execution evidence that shows that the late Sidney Cohen, relied on the contract and acted to his financial detriment.
[146] If this is the case, then the value of Mr. Cohen’s estate may be relevant. Certainly, when determining the level of the late Sidney’s financial detriment, the Court may be aided by knowing the value of his whole estate.
[147] This, according to the Applicant will lead to an adjournment of the trial and further delay which cannot be compensated by costs. They will require disclosure of the value of the estate so that the Court has a wholesome view of the evidence including the financial implications when it determines whether this is a case for laches. This will lead to delay of the trial.
[148] A flexible and forgiving approach to amending pleadings is required. The Court is mindful of the Family Law Act provisions which indicate that the Court has a duty to deal with cases justly. This principle must be considered in the cost, duration and emotional drain of family litigation. Certainly, it is the litigants’ responsibility to advance their claims in a diligent manner.
[149] In Stefureak v. Chambers (No.3), 2005 16090 (ON SC), [2005] O.J. No. 1949 (S.C.) the court stated that “unfairness” could be a disadvantage under r.11(3) but this is only material if it cannot be cured by costs or an adjournment or both.
[150] In my view, this amendment will not cause a disadvantage to the Applicant that cannot be compensated by an adjournment or costs.
[151] Here, the Applicant had already been put on notice in December 2020, that the Estate wished to amend their Answer.
[152] No additional material facts are pleaded in the proposed Amended Answer. The Applicant has been aware of the allegations regarding the Applicant’s delay and the late Sidney Cohen’s detrimental reliance on the validity of the contract.
[153] Here, there is the added element of the pleadings which indicate that at the time of the signing of the 2008 amending agreement, it is alleged that Ms. Cohen had raised concerns with her lawyer at the time, Mr. Gary Steinberg, regarding the marriage contract. She was aware of her rights and understood the nature of the contract. It is alleged that relying on the contract, the late Sidney Cohen made financial decisions including providing gifts to the Applicant, her children and her grandchildren. These pleadings were known to the Applicant coming into Phase 1 of the trial.
[154] The one difference now is that laches has a wider net that affects the admissibility of evidence. The Court can deal with these evidentiary issues as part of its role as gate keeper.
[155] Questioning has occurred with the limitations defence in mind.
[156] Finally, as the trial Judge, the Family Law Rules, rr. 1 (7.2) and (7.4) provides the Court with the authority to make Orders regarding the process.
[157] I note the objectives of the Family Law Rules which requires the Court to manage cases justly:
(2) The primary objective of these rules is to enable the court to deal with cases justly. O. Reg. 114/99, r. 2 (2).
(3) Dealing with a case justly includes,
(a) ensuring that the procedure is fair to all parties;
(b) saving expense and time;
(c) dealing with the case in ways that are appropriate to its importance and complexity; and
(d) giving appropriate court resources to the case while taking account of the need to give resources to other cases. O. Reg. 114/99, r. 2 (3).
(4) The court is required to apply these rules to promote the primary objective, and parties and their lawyers are required to help the court to promote the primary objective. O. Reg. 114/99, r. 2 (4).
(5) The court shall promote the primary objective by active management of cases, which includes,
(a) at an early stage, identifying the issues, and separating and disposing of those that do not need full investigation and trial;
(b) encouraging and facilitating use of alternatives to the court process;
(c) helping the parties to settle all or part of the case;
(d) setting timetables or otherwise controlling the progress of the case;
(e) considering whether the likely benefits of taking a step justify the cost;
(f) dealing with as many aspects of the case as possible on the same occasion; and
(g) if appropriate, dealing with all or any part of the case without requiring parties, witnesses or lawyers to attend in person on the basis of written documents or by using telephone or video technology, by way of an order under clause 1 (7.2) (i) or (i.1). O. Reg. 114/99, r. 2 (5); O. Reg. 152/21, s. 2.
[158] Just because a laches defence may require the Court to make further rulings on evidence or set further timelines or order vigorous case management orders, this should not preclude an amendment of the Answer to include a tenable cause of action.
[159] It is incumbent on the trial Judge to ensure that this trial proceeds in a manner that is fair to both parties.
[160] I find any disadvantage that may occur to the Applicant can be compensated as follows:
Right to amend the Applicant’s pleadings;
Order of costs;
Adjournment of the hearing (despite the fact that Justice Shelston ordered that the trial was pre-emptory to both parties);
The estate has indicated that the evidence that they intended to call on the laches issue was already factored into the estimate of trial and therefore the trial will not be lengthened; and
This court will continue the trial management and set time lines for further motions and the trial to ensure that the trial proceeds fairly and expeditiously in accordance with the Family Law Rules.
Issue #3: Is the amendment made in bad faith?
[161] There was much dispute as to what was before various Justices and whether Phase 1 would deal with the limitations issue.
[162] This is not a question I need to answer in this motion.
[163] Suffice to say, from the record before me, it is clear that the estate had made the issue of delay as part of their case by pleading the Statute of Limitations.
[164] Given the Kyle decision, the Estate was entitled to canvas other means of putting the issue of delay before the Court. Waiting until December 2020 to declare their intention was in my view not being diligent but was not in bad faith.
[165] Despite the fact that Justice Shelston had made an endorsement that this motion be brought after Phase 1, the parties agreed at the outset of the trial that this motion should proceed. In this way, the Court will be in a better position when dealing with the Applicant’s motion also brought on the first day of trial for an Order to exclude the Estate’s post-execution evidence.
[166] I do not find bad faith on the part of the Estate.
Conclusion
[167] Accordingly, for the above reasons, the Estate’s motion for an amendment to its Amended Answer to include the defence of laches is granted.
Justice A. Doyle
Date: April 7, 2021
COURT FILE NO.: FC-17-1323
DATE: 2021/04/07
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Barbara Cohen, Applicant
AND
Steven Cohen, in his capacity as Trustee of the Estate of Sidney Cohen and Susan Charendoff, Respondents
BEFORE: Justice A. Doyle
COUNSEL: Stephen Victor and Katherine Cooligan, Counsel, for the Applicant
Daniel Schwartz and Marta Siemiarczuk, Counsel, for the Respondent Steven Cohen
Jonathan Richardson, Counsel for Susan Charendoff
ENDORSEMENT
Doyle J.
Released: April 7, 2021