As Estate litigators, it is not uncommon that we assist clients in obtaining court approval of settlement on behalf of a minor or incapable party.
Pursuant to Rule 7.08 of the Rules of Civil Procedure, no settlement of a claim made by or against a person under disability, whether or not a proceeding has been commenced in respect of the claim, is binding on the person without the approval of the court.
Rule 7.08(4) sets out in detail the materials required for such a motion or application, which includes, among others:
- An affidavit of the litigation guardian, setting out the material facts and reasons supporting the proposed settlement and the position of the litigation guardian in respect of the settlement;
- An affidavit of the lawyer acting for the litigation guardian setting out the lawyer’s position in respect of the proposed settlement, and
- A copy of the proposed minutes of settlement.
When the settlement involves spouses, Estate litigators should be aware of the potential intersections with family law, and consult with family counsel when necessary.
For example, if the settlement in question involves spouses (one of whom is incapable) depending on the content of the settlement, it could constitute a domestic agreement and engage sections of the Family Law Act, RSO 1990, c F.3 (the “FLA”).
Section 55(3) of the FLA sets out that “if a mentally incapable person has a guardian of property or an attorney under a continuing power of attorney for property, and the guardian or attorney is not his or her spouse, the guardian or attorney may enter into a domestic contract or give any waiver or consent under this Act on the person’s behalf, subject to the court’s prior approval” [emphasis added].
The court has held that this section curbs the court’s inherent jurisdiction under the common law nunc pro tunct principle to decree that its orders will have retroactive effect, in the context of entering into domestic agreements on behalf of an incapable spouse.
In Parker v Atkinson, 1993 CanLII 9404 (ONSC), the husband lacked mental capacity to manage his affairs, and his daughter was appointed as his committee. The wife and the committee entered into a marriage contract without prior court approval. After the husband’s death, the committee sought retroactive approval of the contract. The court held that section 55(3) of the FLA requires prior approval of the marriage contract by the court, before such a contract can be entered into on behalf of an incapable person. The court concluded that it did not have the jurisdiction to grant nunc pro tunc approval of the agreement.
In McKenna Estate v Marshall, 2005 CanLII 37001 (ONSC) the court referred to the Parker decision, holding that the court correctly interpreted section 55(3) to require prior approval of the marriage contract, and that approval could not be granted nunc pro tunc. In McKenna and Parker, the court identified that this is made clear by reading s. 55(3) together with s. 55(2). Section 55(2), relating to marriage contracts for minors, provides the court with the jurisdiction to grant approval before or after the agreement is entered into. As such, the court concluded the clear statutory intent was that subsequent approval could not be given under s. 55(3), leaving no scope for the application of the nunc pro tunc principle.
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