Agreements to arbitrate in family law
The Ontario Superior Court of Justice recently considered the question of when a court may or may not find that an order to arbitrate a family law dispute is enforceable.
The parties were separated and had been involved in a family law matter since 2014.
In August 2016, the parties and their counsel appeared for a final trial management conference before a judge, who noted that the parties had settled all of their issues on a final basis. The judge issued an order in accordance with the parties’ final minutes of settlement. Among other things, the order provided that the mother would select one of three named people to act as the parties’ parenting coordinator, whose services would include resolving disagreements by way of secondary arbitration.
The parenting coordinator the mother ended up choosing did not offer secondary arbitration services. As a result, a motion was brought before another judge in June 2017. At that time, the other judge appointed one of the other two remaining people as the parties’ parenting coordinator.
The mother’s counsel subsequently indicated that he would bring a motion for an order setting aside the relevant provisions of the two orders on the basis that the court lacked jurisdiction to make them, and that the orders were not enforceable.
The father brought a motion for contempt, while the mother brought her motion to set aside or declare unenforceable the challenged provisions of the orders.
The relevant legal principles
The court explained that it did not have jurisdiction to confer decision-making power on an arbitrator or another third party in the absence of consent. That said, the court advised that there is no impediment to incorporating into an order the requirement that disputes will be arbitrated where parties do consent.
The court’s decision
In this case, the court noted that the order of the first judge was made on consent, and the parties were represented by experienced lawyers when it was negotiated. As a result, the first judge had the necessary jurisdiction to make the challenged order.
Similarly, as the other judge’s order flowed directly from the consent order of the first judge, the court concluded that the other judge also had the necessary jurisdiction to the make the second order.
Furthermore, the court concluded that the challenged paragraph of the order of the first judge did not simply represent an unenforceable agreement to agree. The court stated:
In other contexts, it is clear 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. In such circumstances, it has been held that such an agreement is enforceable.
The court noted that, in this case, the parties acted as if they had a binding agreement to arbitrate (at least until the proceedings before the other judge were concluded). Specifically, the parties agreed that parenting disputes would be dealt with by a parenting coordinator – and if necessary, arbitrated. The mechanical terms of setting out the details of the process were not essential.
The court also referred to a unanimous judgment from the Supreme Court of Canada (SCC), in which the SCC recognized a general organizing principle of good faith contractual performance – i.e., that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations. The court noted that:
The Court [SCC] made it clear that these principles apply to all types of contractual relationships. I see no reason why they should not apply to family law contractual relationships, and indeed in some ways they perhaps should be applied even more strongly to family law contractual relationships.
As a result, given that the parties had entered into a clear agreement to arbitrate (as outlined above), the court concluded that the principle of good faith and honest contractual performance required that the parties take the necessary steps to make that agreement operative. That is, the court found that since the mother had been ordered by the other judge to execute the parenting coordinator agreement, she had an obligation to do so.
In the circumstances, the court adjourned the father’s motion for contempt.
If you have any questions about arbitration or your separation in general, contact Gelman & Associates. Our goal is to provide you with the information and resources necessary to make informed decisions about your family law matters. In addition to our firm’s handbook on separation and divorce and numerous web-based resources, we give all prospective clients a comprehensive family law kit during their initial consultation, which includes detailed information and resources to help individuals understand and navigate the separation and divorce process.