Tag: Family Law
The transfer of inter-generational wealth has long been a way for families to grow from one generation to the next. Many parents plan the transfer of their wealth at a time when their children are adults, and may be married with families of their own. And while in many respects the saying “what’s mine is yours, and what’s yours is mine” is true when it comes to marriage; it may not always be true when it comes to divorce. This is a key consideration for parents who wish to exclusively benefit their child with a gift or inheritance in the event of divorce.
The Family Law Act (“FLA”) provides guidance on how assets may be divided in the event of divorce. Section 4(2) states that property (outside of a matrimonial home) that was acquired by gift or inheritance from a third person after the date of marriage does not form part of that spouse’s net family property. Donors and/or testators may also expressly provide that income from said property is to be excluded from the spouse’s net family property. The FLA further provides that property (other than the matrimonial home) into which the gift or inheritance can be traced will also be excluded.
If a donor or testator’s intention is to have these assets excluded from a net family property calculation, it is encouraged that they formalize their intentions through proper deeds and/or wills.
Moreover, it is equally important for recipients of gifts and/or an inheritance to be mindful of where those assets are allocated upon receipt. For example, a recipient of a gift of money may want to be cautious of placing these funds in a joint bank account, where the assets may become commingled and difficult to trace.
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The recent Ontario Superior Court of Justice decision in F.K. v. E.A. addresses limitation periods and discoverability in the context of setting aside a marriage contract.
By way of background, husband and wife began their relationship in 2000, cohabitating in June of 2004, and marrying on July 20, 2005. Shortly before marriage, on July 14, 2005, the (soon to be) husband and wife entered into a marriage contract. The marriage contract was prepared by the wife who obtained a template off the internet. The husband and wife eventually separated on August 13, 2012. A dispute arose over certain terms of the marriage contract. The husband thereafter brought a claim on August 24, 2017 for spousal support, equalization, as well as setting aside the marriage contract. Two of the issues that the Court addressed included whether (i) the relief sought to set aside the marriage contract is subject to the two year limitation period and, if so, (2) whether the husband brought his claim in time.
Regarding the first issue, the Court found that the husband’s claim to set aside the marriage contract is a claim as defined in section 1 of the Limitations Act and therefore subject to the two year limitation period.
As it relates to the second issue of discoverability, evidence was adduced that the husband met with a lawyer in October 2012 to discuss the dispute with his wife and certain legal issues arising with respect to the marriage contract. Based on this evidence, the Court established that by that date at the latest, he first knew: that the injury, loss or damage had occurred; that the injury, loss or damage was caused by or contributed to by an act or omission; and, that the act or omission was that of the person against whom the claim is made. The Court dismissed the husband’s claim finding that the two years began running the date he met with his lawyer.
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A recent decision of the Ontario Superior Court of Justice highlights the importance of preserving a surviving married spouse’s ability to elect for an equalization of net family properties within the six-month limitation period.
Upon death, a surviving married spouse in Ontario can elect for an equalization of net family properties under Sections 5 and 6 of the Family Law Act instead of taking under the predeceasing spouse’s will or, if the spouse has not left a will, on intestacy. Subsections 6(10), 6(11), and 7(3)(c) of the Family Law Act provide that the surviving spouse must ordinarily make an election within six months of date of death and not after that date. The Court may, however, extend the election deadline in the event 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 (subsection 2(8) of the Family Law Act).
Courts have reviewed the circumstances in which an extension is typically ordered. The requirement that the delay be incurred in good faith has been interpreted as meaning that the party has acted honestly and with no ulterior motive (see, for example, Busch v Amos, 1994 CanLII 7454 (ONSC)).
In Mihalcin v Templeman, 2018 ONSC 5385, a surviving spouse had commenced two claims with respect to the estate of her late husband and an inter vivos gift made to a live-in caregiver. However, neither of the proceedings had sought any relief relating to an equalization of net family properties, nor did the wife take any steps to make an election or to extend the time within which she was permitted to do so. The Court reviewed whether the delay in making the election was in good faith. The evidence regarding the reasons for the delay in electing for equalization were considered to be vague and insufficient to satisfy the evidentiary burden that the delay was incurred in good faith. Accordingly, the applicant was not permitted to amend her pleadings to incorporate this relief.
Justice Bruce Fitzpatrick commented as follows with respect to the importance of limitation periods, generally (at para 48):
I am mindful of the general importance of limitation periods for the conduct of litigation. There is an obligation on parties to put forward all known legitimate claims within certain time limits. In this case, the time limit was relatively short. I think it cannot be readily ignored. The evidentiary record is not sufficient for me to say that justice requires me to exercise my discretion in favour of allowing [the applicant] to amend her claim so as to include a claim for equalization in all of the circumstances.
Where an equalization of net family properties may be sought at a later time (for example, pending the outcome of a will challenge or dependant’s support application), it is prudent to seek an extension well before the expiry of the six-month limitation period as courts may or may not assist a surviving spouse in seeking this relief down the road, if and when it may become advisable.
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Other blog entries/podcasts that may be of interest:
- When is it Appropriate to Extend the Time Granted in Favour of Equalization Under the Family Law Act?
- Equalization Claims and Unequal Division of the Net Family Property
- Family Law Equalization Claims and Bankruptcy
- Consolidation of Family Law Act and Dependant Support Claims
The Ontario Court of Appeal recently considered the issue of whether the litigation files of the Office of the Children’s Lawyer are subject to a freedom of information access request in Ontario (Children’s Lawyer) v. Ontario (Information and Privacy Commissioner), 2018 ONCA 599. This appeal arose from a father’s request for the production of the Children’s Lawyers’ records. The Children’s Lawyer acted for the father’s children in the course of a custody and access dispute. Accordingly, a portion of the Children’s Lawyer’s records were privileged.
Justice Bennotto, in writing for a unanimous panel, found that the issue turned on whether the records are “in the custody or under the control” of the Ministry of the Attorney General for Ontario (“MAG“) for the purposes of the Freedom of Information and Protection of Privacy Act, R.S.O. 1990, c. F. 31.
The answer was no.
The Children’s Lawyer’s records are not in the custody or under the control of MAG because she operates separately and distinctly from MAG and,
“ [she] is an independent statutory office holder appointed by Cabinet through the Lieutenant Governor. She derives her independent powers, duties and responsibilities through statute, common law and orders of the court.
 To allow a disgruntled parent to obtain confidential records belonging to the child would undermine the Children’s Lawyer’s promise of confidentiality, inhibit the information she could obtain and sabotage her in the exercise of her duties. This would, in turn, impact proceedings before the court by depriving it of the child’s voice and cause damage to the child who would no longer be meaningfully represented. Finally, disclosure to a parent could cause further trauma and stress to the child, who may have divided loyalties, exposing the child to retribution and making the child the problem in the litigation.”
For those practising in the estates and trusts context, it is important to note that the role of the Children’s Lawyer is different in family law.
In civil matters that implicate a minor’s financial interest in property, the Children’s Lawyer acts as the minor’s litigation guardian and she is represented by the lawyers of her choice. In custody and access disputes, the Children’s Lawyer acts, at the request of the court, as the minor’s lawyer.
Bonus answer: the current Children’s Lawyer is Marian Jacko.
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It is not uncommon for dependant’s support claims to be commenced contemporaneously with family law claims after death, with the dependant’s support claim often forming a sort of safety net should the family law claim not be successful. This is likely in part on account of section 63(4) of the Succession Law Reform Act providing that an Order providing for the support of the deceased’s dependants can be made “despite any agreement or waiver to the contrary“, such that the court in certain circumstances can make an Order for dependant’s support notwithstanding that agreements such as marriage contracts may have been entered into prior to death which may otherwise have severely restricted the surviving spouse’s entitlements.
While it is not uncommon for family law and estates claims to be brought contemporaneously, this can sometimes result in an in issue in the form of a multiplicity of proceedings, with multiple proceedings being before the court at the same time, often on different court lists. In Toronto, the family law claims would likely proceed before the Family Court, which is governed by its own “Family Law Rules“, while the estate law claims would proceed before the Estates List of the Ontario Superior Court of Justice, with such a process being governed by the more standard Rules of Civil Procedure. Different courts, different rules, different timelines.
It appears that such a multiplicity of proceedings became an issue in the recent Cohen v. Cohen decision, with the Applicant’s counsel eventually moving to have the family law and estate law proceedings consolidated and heard together before the Family Court. Opposing counsel objected, taking the position that a dependant’s support Application under Part V of the Succession Law Reform Act could not be heard before the Family Court, and that such a proceeding must proceed before the standard Ontario Superior Court of Justice.
In ultimately rejecting the position of opposing counsel, and ordering the family law claims and the estate law claims to be heard together before the Family Court, Justice Maranger provides the following commentary:
“Counsel representing the estate argued that a strict reading of section 57 (1) of the Succession Law Reform Act (“court” means the Superior Court of Justice) statutorily precludes consolidating a dependant’s relief application with a family law act application, because the SLRA does not specify Superior Court Family Branch. I reject that argument, clearly a reference to the Superior Court of Justice can in certain circumstances allow for the reading in of the Superior Court Family Branch. A family branch judge is a Superior Court judge for all purposes including hearing cases under the Succession Law Reform Act.”
Cohen v. Cohen suggests that estates law cases and family law cases can be consolidated and heard together by the same court notwithstanding that such courts may be specialized for a different purpose. What impact, if any, the use of the Family Law Rules would have upon adjudication of an Application for support under Part V of the Succession Law Reform Act remains to be seen.
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The answer is no according to Borges v. Santos, 2017 ONCJ 651.
In Borges v. Santos, a garnishment proceeding was commenced by Maria, who was entitled to child support from Antonio. Maria sought to garnish a trust that was established from the Estate of Antonio’s mother. Pursuant to the Will of Antonio’s mother, the Trustees were given an absolute and unfettered discretion to pay any part of income or capital for Antonio’s benefit and to keep Antonio’s comfort and well-being in mind in exercising their discretion. In this case, the Trustees also happened to be Antonio’s brother and sister as well as the gift-over beneficiaries of this Trust such that they will be entitled to all income and capital that were not distributed to Antonio 21 years after their mother’s death.
In one of her arguments, Maria contended that the Trust was not truly discretionary because of the non-arm’s length relationship between the Trustees and Antonio since they were siblings. The Court in case clarified that Tremblay v. Tremblay, 2016 ONSC 588, “does not stand for the proposition that all familial relationships between trustees and beneficiaries automatically demonstrate that the trust is under the control and hence the property of the beneficiary” for the purposes of the Family Law Act.
Interestingly, Antonio gave evidence in this proceeding that he wanted the Trustees to honour his child support obligations to Maria, although they chose not to comply with his wishes. Ultimately, as obiter, the Court also asked the Trustees to consider making a distribution to Antonio for his comfort and well-being by supporting his son, Christopher, while acknowledging that he could not order them to do so.
For those of you who are interested in the essential elements of a Henson Trust, click here, for a previous blog on this topic by Ian Hull.
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Where an incapable person is named as a party in a legal proceeding, the appointment of a representative is necessary to ensure that the person’s interests are adequately represented in the litigation.
Litigation Guardians in Civil Proceedings
Rule 7.01(1) of the Rules of Civil Procedure states that, unless the Court orders or a statute provides otherwise, a litigation guardian shall commence, continue or defend a proceeding on behalf of a “party under disability.” The Rules define “disability” to include a person who is mentally incapable within the meaning of sections 6 or 45 of the Substitute Decisions Act, 1992.
Rule 7 of the Rules of Civil Procedure provides additional guidance regarding litigation guardians in civil proceedings, including the powers and duties of a litigation guardian.
But what about parties who are under an incapacity and who are named as parties in a family law proceeding in Ontario?
“Special Parties” Under the Family Law Rules
In Ontario, the Family Law Rules apply to family law cases in the Superior Court of Justice’s Family Court, the Superior Court of Justice and the Ontario Court of Justice. The Family Law Rules provide guidance on the appointment of representatives for incapable persons in family law matters.
Rule 2 of the Family Law Rules defines a “special party” as a party who is a child or who is or appears to be mentally incapable for the purposes of the Substitute Decisions Act, 1992 in respect of an issue in the proceeding.
Pursuant to Rule 4(2), the Court may authorize a person to represent a special party if the person is appropriate for the task and willing to act as representative. If there is no appropriate person willing to act, the Court may authorize the Children’s Lawyer or the Public Guardian and Trustee to act as the representative.
Mancino v Killoran – More Than One Potential Representative
A recent decision illustrates the conflicts that may arise when more than one person believes that they are the most appropriate person to act as an incapable person’s representative in a family law proceeding.
In Mancino v Killoran, 2017 ONSC 4515, the Applicant asserted a claim for spousal support and for an interest in a property against the Respondent (“Michael”). Michael had been diagnosed with Alzheimer’s, and was a resident at a long-term care home. Michael’s sister (“Colleen”) and his son (“Allan”) both sought to represent Michael’s interests in the litigation, and filed affidavits in support of their positions.
Justice Gareau considered Michael’s power of attorneys and testamentary documents, which were executed at a time when Michael was still capable. Allan was named as Michael’s attorney for property and co-attorney for personal care. Allan was also named as the sole Estate Trustee of Michael’s Estate.
Justice Gareau held that “[t]he fact that Michael…, at a time when he had capacity, placed Allan… in a position of trust over his personal property and the administration of his estate indicates that he had confidence in Allan…to represent his best interests.” Michael’s sister Colleen was not named in any of Michael’s testamentary documents, which Justice Gareau found to be a “powerful and persuasive fact.”
The Court concluded that there was nothing in the evidence that would persuade the Court to depart from Michael’s express wishes regarding the management of his property. In the result, Allan was appointed to represent Michael as a special party in the family law litigation.
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Umair Abdul Qadir
The laws relating to trusts are complex enough, before issues relating to family law are introduced. Even at the best of times, individuals establishing trusts need the advice and services of professionals to ensure that trust structures are sound and their trust goals are met.
But toss in marital discord or separation, and the picture can get murky.
In Ontario, and some other provinces, family law requires an equalization of net family property when a marriage ends. What would happen then if a spouse, perhaps knowing the marriage is on rocky ground, transfers some assets to an alter ego trust, with a child as beneficiary. The transfer to a trust has the effect of reducing the individual’s net family property.
The issue? If the exclusion of a trust asset is challenged, a court could examine the timing and intention in establishing the trust and include it in net family property because the establishment of the trust was a fraudulent conveyance, or intended to avoid an individual’s family law obligations.
Another complication relating to trusts and the calculation of net family property is valuing a spouse’s contingent or vested interest in a discretionary trust. Unless the interest is excluded (gifts or inheritances received during the marriage are excluded for example), interest in a trust forms part of net family property. How then do you value an interest when distributions from the trust are at the discretion of the trustee? Courts have taken different positions – a good overview of different valuation methods is provided here: http://cswan.com/valuing-interests-in-a-discretionary-family-trust/.
Estate freeze considerations
Other forms of estate planning that don’t necessarily involve a trust – such as an estate freeze – can also be impacted by family law. Because the law in many provinces excludes gifts from family property definitions, courts have ruled that shares received gratuitously as a gift through an estate freeze can be excluded from net family property. What’s not clear is whether shares purchased for a nominal amount would still be considered a gift (and excluded for family law purposes) or considered a purchase (which is not excluded).
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Typically, costs awards are not made until the conclusion of litigation. However, in rare circumstances, courts may order that costs are paid to a party at an earlier point during the litigation to assist them with the funding of the litigation itself, even if it is not yet known which of the party or parties will ultimately be successful at trial.
In what circumstances will a court order the payment of legal fees on an interim basis? The Supreme Court of Canada outlined the test for granting an order for interim costs to fund litigation in British Columbia (Minister of Forests) v. Okanagan Indian Band. The Court summarized the test as follows:
- the party seeking the order must be impecunious to the extent that, without such an order, that party would be deprived of the opportunity to proceed with the case;
- the claimant must establish a prima facie case of sufficient merit to warrant pursuit; and
- there must be special circumstances sufficient to satisfy the court that the case is within the narrow class of cases where this extraordinary exercise of its powers is appropriate.
In the Okanagan Indian Band decision, the Supreme Court considered family law disputes as one of the few unique exceptions to the general rule that the costs of an action or application only be awarded at the conclusion of litigation. One factor that the Court refers to as making interim costs awards suitable in family law matters is the presumption that the property in dispute is to be shared by the parties in some way. Ontario courts have acknowledged this presumption to be the basis of allowing interim payments to fund ongoing legal costs in estate litigation, suggesting that the payment of costs to fund the litigation can be accounted for in the final decision. However, a party to family or estate proceedings still needs to satisfy the above test before an interim costs award will normally be made.
In estate litigation, it is not uncommon for the Court to direct the payment of funds for use toward one or more party’s legal fees out of the assets of the estate while litigation is ongoing. Most often, the party to whom interim costs are paid will be entitled to a share of the assets of the estate whether he or she is successful in the litigation or not. The interim costs award can be deducted from the distributions that are ultimately made to that party. While rarely made within contexts other than family and estate litigation, interim costs orders can allow a party that may otherwise be unable to fund litigation to advance or respond to legal proceedings that affect his or her entitlements as the beneficiary of an estate.
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