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Some ADR clauses in separation agreements may not be enforceable

Although most separation agreements contain some type of dispute resolution clause, Toronto family lawyer Katelynn Schoop says they often don’t meet the formal requirements of the Arbitration Act and, as a result, may not be enforceable.

“Not all, but most separation agreements contain a clause that contemplates that the parties will go to mediation and then arbitration should there be a dispute,” says Schoop, an associate with Stanchieri Family Law.

“Frequently these clauses aren't specific — they will just state that the parties will agree on a mediator/arbitrator and, on occasion, they'll name someone.”

Schoop tells AdvocateDaily.com that the implications of a 2017 Ontario Superior Court of Justice decision — which put limits around when mediation-arbitration clauses will be enforced — are still causing uncertainty.

She says the matter is often cited as ending secondary arbitrations in family law and has left lawyers wondering whether it will apply to these types of clauses in separation agreements.  

“The parties in the case entered into minutes of settlement, which contemplated submitting the remaining issues to arbitration,” says Schoop, who was not involved in the matter and comments generally. “The husband brought a motion seeking to stay the court proceeding so that the arbitration could proceed on the basis of the minutes of settlement. The court found that there was no binding arbitration agreement as the formalities required by the Arbitration Act had not been met.

“It was also significant that an endorsement from an appearance following the minutes of settlement specifically contemplated that a further agreement to arbitrate was needed,” she adds.

The court distinguished a 2015 case, in which the party who disagreed with the recommendations of a mediator-arbitrator had gone through the entire process, noting that it was “quite unlike the present matter where there was a refusal to sign a properly constituted arbitration agreement.”

She says the judge also referred to a 2012 matter, in which the court dealt with a separation agreement referring future issues to mediation/arbitration and that “there was no issue with respect to the nature of the agreement.”

In that case, the court stayed the proceeding and sent the matter back to arbitration, finding that the parties were bound by their agreement to arbitrate, without any discussion about the requirement for a formal arbitration agreement — though this issue was not raised at that stage, Schoop says.

She says courts will enforce the mediation-arbitration provisions of a separation agreement, particularly where the parties had independent legal advice on the agreement.

In a 2018 matter (which cited the 2017 case), Schoop notes the judge upheld an agreement to submit issues to a parenting co-ordinator, finding that “an enforceable agreement can be entered into where the parties agree to certain basic, fundamental terms and leave other incidental terms to be discussed and agreed later.”

She says the court found that the parties acted like they had a binding agreement to arbitrate and relied on the principle of good faith contractual performance established by the Supreme Court of Canada.

Schoop says when she is drawing up separation agreements, she will ask the parties to name a specific mediator-arbitrator and other formal requirements of the Arbitration Act

“We will also ask them to provide a copy of their mediation-arbitration agreement and attach it to the separation agreement — this way there's no uncertainty about what the terms were,” she says. “Our firm is being vigilant with these agreements until there is more direction from the court. We just haven’t seen that application yet.”

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