The Ontario Court of Appeal handed down a decision in 2012 that provides important clarification on the topic of arbitration clauses contained in negotiated separation agreements.
In the case of Grosman v. Cookson, the spouses had separated in 2001 after a marriage of 34 years. Both parties agreed to participate in mediation which resulted in a freely negotiated and comprehensive separation agreement that required the husband to pay the wife $8,500 per month in spousal support. The agreement also provided that in the event that either of them wanted to vary that particular aspect of the agreement, the issue would be settled through the use of a mutually appointed mediator/arbitrator, rather than through the intervention of the court. This is known as an “exclusive arbitration” clause.
After the couple formally divorced in 2004, the husband paid the agreed upon spousal support. However, the husband, who happened to be a lawyer, announced in 2010 that he intended to retire from full partnership at his law firm, but was intending to stay working as a consultant for them on a reduced income. This change triggered his desire to vary the support he had been paying to the wife. They attempted mediation but were unable to come to terms. And in 2011, the husband stopped paying support entirely, eventually owing the wife arrears of more than $60,000.
The wife took several legal steps including filing the separation agreement with the court, asking that its terms be enforced by way of court order and also took steps to have the agreement enforced by the Family Responsibility Office (FRO). Additionally, the wife went to court to have the husband’s application to vary dismissed, as she asserted that the parties’ rights and obligations to each other in connection with disputes to vary the agreement were already governed by the exclusive arbitration clause. At first, the judge dismissed the wife’s summary judgement application; however, she appealed to the Court of Appeal and was successful.
In overturning the initial ruling, the Ontario Court of Appeal found that the separation agreement negotiated between the parties controlled in this case. The agreement clearly and specifically included the exclusive arbitration clause, and because it envisioned the particular circumstances that took place (i.e., that the wife would file the separation agreement with the FRO), the court had no jurisdiction to hear the variation application at all.
Nothing in the relevant provisions of the Family Law Act, which allowed for the separation agreement to be filed and enforced by the FRO, could be read as intending to oust the right of the spouses to mandate the use of mediation to solve their variation-of-support disputes. Rather, the couple’s decision to include an exclusive arbitration clause in the separation agreement should be given full legal effect, without court interference. Undeniably, on policy grounds the court emphasized that such arbitration clauses were an important and worthwhile means by which spouses could mutually agree to resolve their differences without recourse to the time-consuming and expensive avenue of the court process.