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Kyle v Atwill: Domestic Contracts and Limitation Periods

Factual Background

The issue on this appeal is whether setting aside a marriage contract is subject to a limitation period. The parties had entered into a prenuptial agreement which waived any entitlement to spousal support and provided that the parties would be separate as to property. The parties separated in 2012. The husband eventually commenced proceedings claiming equalization of net family property and spousal support. The wife defended this application by relying on the marriage contract. The husband replied by asking the court to set aside the marriage contract on the basis that he entered it without financial disclosure, without legal advice, under undue duress and under a clear power imbalance. The motion judge found that the recission of a marriage contract constitutes a claim under the Limitations Act and as such, it is subject to a 2-year limitation period. The claim was therefore found to be statute-barred. The motion judge found that s.16(1)(a) of the Limitations Act, which provides that there is no limitation period for a proceeding for a declaration if no consequential relief is sought, was not engaged because the husband was also seeking consequential relief of spousal support and equalization.

Legal Analysis

On appeal, the court held that the Limitations Act and the Family Law Act work together to provide limitations in the family law context and as such, the court must interpret them in light of each other. Typically, a domestic contract will prevail over the Act. However, several provisions in the Family Law Act permit a court to set aside all or part of a marriage contract. The two sections relevant in this decision are s.33(4) and s.56(4). Section 33(4) allows the court to set aside a provision in a marriage contract which waives or reduces the right to support. Section 56(4) allows a court to set aside a domestic contract or a provision in it if a party failed to disclose significant assets, or significant debts or other liabilities existing when the contract was made, if the party did not understand the nature or consequences of the domestic contract or otherwise in accordance with the law of contract.

While the court agreed with the motion judge that the application to set aside the marriage contract was an application for a declaration, they did not agree that the application sought consequential relief. The court determined that in deciding whether s.16(1)(a) applied, they must look at whether the request for a declaration coupled with a claim for enforceable relief is a claim for a remedy against the other party and not merely a request for a declaratory order. Therefore, the court held that where the husband sought a declaration that would remove a significant obstacle to his claims for equalization and spousal support, that declaration is not subject to any limitation period pursuant to s. 16(1)(a)

Interestingly, the court notes that if the husband had brought his equalization claim seven years after the date of separation, 1 year longer than the limitation period for equalization claims, the fact that he would be able to obtain a declaration setting aside the marriage contract would not consequently allow his equalization claim to proceed.

The court concluded that there is no limitation period for bringing the proceeding for a declaration of setting aside a marriage contact whether it is a standalone matter or if other claims of relief are made. As such, the court found that the motion judge erred in law in failing to find that s.16(1)(a) of the Limitations Act applies to a proceeding under section 56(4) of the Family Law Act and in finding that a two-year limitation period applied. Instead, the court found that the rescission of a marriage contract is a proceeding for a declaration where no consequential relief is sought and therefore, pursuant to s.16(1)(a), no limitation period applied. In allowing the appeal, setting aside the summary judgement and allowing the husband’s action to proceed, the court also awarded costs to the husband.

For more information, please call us at Feldstein Family Law Group P.C. or contact our firm online.

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