Grosman v. Cookson [See Note 1 below]

111 O.R. (3d) 641

2012 ONCA 551

Court of Appeal for Ontario,

O'Connor A.C.J.O. and

Ducharme J.A. [See Note 2 below]

August 24, 2012

Family law -- Support -- Spousal support -- Enforcement -- Section 35 of Family Law Act not superseding parties' agreement in valid domestic contract to arbitrate disputes about varying spousal support -- Family Law Act, R.S.O. 1990, c. F.3, s. 35.

The parties entered into a separation agreement which provided that the husband pay spousal support. It also provided that variation of these payments would be dealt with by arbitration. The husband subsequently sought a spousal support variation to take effect after he retired. Mediation on this issue failed so the parties arranged an arbitration but it did not proceed. The husband stopped paying spousal support. The wife filed the separation agreement with the Ontario Court of Justice under s. 35(1) of the Family Law Act ("FLA") with a view to enforcing it. The husband brought an application in the Superior Court of Justice to vary or terminate his spousal support obligations under the separation agreement. He also moved under s. 35(1) of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31 ("Enforcement Act") for an order that the director of the Family Responsibility Office ("FRO") refrain from suspending his driver's licence. The wife brought a motion to dismiss the husband's variation application on the basis that the court lacked jurisdiction because the separation agreement required this request to be dealt with by arbitration. The motion judge dismissed the motion, holding that, having sought the benefit of enforcement under s. 35 of the FLA, the wife could not argue that the court lacked jurisdiction to consider variation of the support terms of the agreement. The wife appealed.

Held, the appeal should be allowed.

Section 35 of the FLA does not supersede the parties' agreement in a domestic contract to arbitrate rather than litigate disputes about varying spousal support. Section 35 of the FLA applies in circumstances where the director of the FRO has initiated the process to suspend the payor spouse's driver's licence and the payor spouse has applied under s. 35(1) of the Enforcement Act for an order that the director refrain from doing so. If the FLA does not allow the parties to avoid their bargain to use private arbitration as the exclusive means of settling disputes, neither does s. 35 of the Enforcement Act.

APPEAL by the wife from the order of Johnston J., [2011] O.J. No. 6408, 2011 ONSC 7032 (S.C.J.) dismissing her motion to dismiss the husband's application to vary spousal support.

Cases referred to Canada (Canadian Private Copying Collective) v. Canadian Storage Media Alliance, [2004] F.C.J. No. 2115, 2004 FCA 424, [2005] 2 F.C.R. 654, 247 D.L.R. (4th) 193, 329 N.R. 101, 36 C.P.R. (4th) 289, 136 A.C.W.S. (3d) 48; Dormer v. McJannet, 2006 CanLII 42670 (ON SC), [2006] O.J. No. 5106, 35 R.F.L. (6th) 418 (S.C.J.); O'Connor v. O'Connor, 1990 CanLII 12278 (ON CJ), [1990] O.J. No. 2693, 28 R.F.L. (3d) 99, 21 A.C.W.S. (3d) 1027 (Prov. Ct.); [page642] Puigbonet- Crawford v. Crawford, 2006 CanLII 38881 (ON SC), [2006] O.J. No. 4626, 152 A.C.W.S. (3d) 991 (S.C.J.)

Statutes referred to Arbitration Act, 1991, S.O. 1991, c. 17 [as am.] Family Law Act, R.S.O. 1990, c. F.3, Part III, ss. 35 [as am.], (1) [as am.], 2(a), (b), (4), 37 [as am.] Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31, ss. 34, (1), 35(1) [as am.], (6) [as am.]

Authorities referred to Sullivan, Ruth, Sullivan on the Construction of Statutes, 5th ed. (Markham, Ont.: LexisNexis, 2008)

Harold Niman and Daniel Bernstein, for respondent (appellant). R. Steven Baldwin, for applicant (respondent on appeal).

The judgment of the court was delivered by

[1] O'CONNOR A.C.J.O.: -- Does a court have jurisdiction to vary the amount of spousal support in a valid separation agreement contrary to an exclusive arbitration provision if the payee spouse files the agreement for enforcement under s. 35 of the Family Law Act, R.S.O. 1990, c. F.3 ("FLA")? In my view, it does not.

Facts

[2] In 2001, after 34 years of marriage, the appellant wife and the respondent husband separated. Following their separation, they attended for mediation with Mr. Stephen Grant and, in February 2004, they entered into a comprehensive separation agreement (the "separation agreement").

[3] The separation agreement provides that the husband will pay spousal support in the amount of $8,500 per month. It also provides that if either party seeks to vary the amount of the spousal support, Mr. Grant will be appointed the mediator/ arbitrator pursuant to a mediation/arbitration agreement. The mediation/arbitration agreement provides that Mr. Grant is appointed as sole arbitrator pursuant to the Arbitration Act, 1991, S.O. 1991, c. 17. It also provides that the agreement "shall constitute a submission" pursuant to the provisions of the Arbitration Act. [page643]

[4] The parties divorced in August 2004. By its terms, the separation agreement continued in force. For convenience, I will refer to the parties as the husband and the wife after the divorce.

[5] The husband is now 77 years of age and was a successful lawyer. On March 30, 2010, he wrote the wife indicating his intention to retire as a partner in his law firm at the end of 2010. After retirement as a partner, he would continue as counsel with the firm and receive a reduced income. He proposed a variation of the amount of spousal support.

[6] In September 2010, the parties attended a mediation before Mr. Grant to mediate the husband's request for a variation. The mediation failed.

[7] It appears that an arbitration was scheduled for December 2010. The husband changed counsel and the arbitration did not proceed.

[8] On February 1, 2011, the husband stopped paying spousal support to the wife. Through his counsel, he expressed interest in discussing an amicable resolution.

[9] Towards the end of February 2011, the wife filed the separation agreement with the Ontario Court of Justice pursuant to s. 35(1) of the FLA with a view to enforcing its terms. On April 20, 2011, the director of the Family Responsibility Office ("FRO") notified the husband that he was required to make future spousal support payments to the FRO.

[10] On June 14, 2011, the husband filed an application in the Superior Court of Justice seeking to vary or terminate his obligation under the separation agreement to pay spousal support.

[11] On September 6, 2011, the director of the FRO sent a notice to the husband pursuant to s. 34(1) of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31 (the "Enforcement Act"), indicating that the support arrears were $61,212.39. The notice also indicated that the director would be taking steps to suspend the husband's driver's licence.

[12] The husband brought a motion pursuant to s. 35(1) of the Enforcement Act for an order that the director of the FRO refrain from suspending the husband's driver's licence. On October 4, 2011, McMunagle J. granted the husband's motion and required him to pay $1,400 per month for spousal support pending a hearing of the husband's application to vary the spousal support payment.

[13] The wife brought a motion in the Superior Court to dismiss the husband's application to vary the amount of spousal support on the basis that the court lacked jurisdiction because [page644] the separation agreement required such a request be dealt with by way of arbitration.

[14] On November 25, 2011, the motion judge dismissed the wife's summary judgment motion. The wife appeals that dismissal.

Motion Judge's Reasons

[15] The motion judge recognized that there are strong policy reasons requiring parties to adhere to their agreements, in this case, their agreement to arbitrate requests to vary the spousal support.

[16] The motion judge recognized that ordinarily a court would not have jurisdiction to deal with a request to vary in these circumstances. He held, however, (at para. 27) that, "[h]aving sought the benefit of enforcement of Section 35", the wife could not "argue there is no jurisdiction in this Court to consider variation of the spousal support Agreement". Section 35(2)(b) [of the FLA] permits a party who has filed a domestic contract with the court under s. 35(1) to apply to the court for a variation.

[17] The motion judge also pointed out that it was a condition of seeking an order that the FRO refrain from suspending the husband's driver's licence that the husband also seek to vary the support order. In conclusion, the motion judge held that the Superior Court had jurisdiction to entertain variation of the spousal support provision and dismissed the wife's summary judgment motion.

Issues

[18] There are two issues: (1) did the motion judge err in holding that s. 35 of the FLA provides a court with jurisdiction to entertain variation of the terms of a separation agreement despite an exclusive arbitration provision in the agreement; and (2) if so, does s. 35(1) of the Enforcement Act independently confer jurisdiction on the court to hear a motion to vary a spousal support order?

Section 35 of the FLA

[19] The relevant portion of s. 35 of the FLA reads as follows:

35(1) A person who is a party to a domestic contract may file the contract with the clerk of the Ontario Court of Justice or of the Family Court of the Superior Court of Justice together with the person's affidavit stating that the contract is in effect and has not been set aside or varied by a court or agreement.

(2) A provision for support or maintenance contained in a contract that is filed in this manner, [page645] (a) may be enforced; (b) may be varied under section 37; and (c) except in the case of a provision for the support of a child, may be increased under section 38,

as if it were an order of the court where it is filed. . . . . .

(4) Subsection (1) and clause (2)(a) apply despite an agreement to the contrary.

[20] The appellant emphasizes that pursuant to s. 35(2)(b), once a domestic contract is filed, it may be varied under s. 37 as if it were an order of the court. Section 37 provides for an application to the court for variation of an order made or confirmed under Part III of the FLA. Thus, the appellant argues that the FLA specifically permits a variation application to the court where a domestic contract is filed with the court under s. 35(1) even where the domestic contract contains an exclusive arbitration clause.

[21] In my view, however, this interpretation overlooks the effect of s. 35(4), which states that subsection (1) and clause (2)(a) apply despite an agreement to the contrary. Subsection 35(2)(b), which permits variation, and upon which the appellant relies, is conspicuously absent from s. 35(4). As explained by Noel J.A. in Canada (Canadian Private Copying Collective) v. Canadian Storage Media Alliance, [2004] F.C.J. No. 2115, 2004 FCA 424, at para. 96, dealing with a series of express exceptions, "if a statute specifies one exception (or more) to a general rule, other exceptions are not to be read in. The rationale is that the legislature has turned its mind to the issue and provided for the exemptions which were intended." Here, subsection 35(4) gives special treatment to subsection (1) and clause (2)(a), which deal with filing and enforcement, to specify that they apply despite an agreement to the contrary. The same special treatment is not afforded to clause 35(2)(b) (the variation provision). It follows, in my view, that the legislature intended that an agreement to the contrary would supersede s. 35(2)(b). Were it not so, the legislature would have so provided in s. 35(4).

[22] The effect is that the FLA permits parties to contract out of the court variation procedure in s. 37, but does not allow them to contract out of the ability to file a domestic contract and have it enforced by a court under s. 35(1) and s. 35(2)(a) respectively: see, for example, O'Connor v. O'Connor, 1990 CanLII 12278 (ON CJ), [1990] O.J. No. 2693, 28 R.F.L. (3d) 99 (Prov. Ct.). [page646]

[23] This interpretation is sensible. An agreement to pay a specific amount of spousal support is not self-executing. The parties require an enforcement mechanism to ensure that each is kept to the bargain. However, it remains open to the parties to contract for exclusive arbitration to vary the substantive terms. In such cases, the court may enforce the domestic contract as it finds it.

[24] In this case, clause (5) of the separation agreement deals with spousal support. The mechanism for review is in clause 5.5. It reads:

Mr. Stephen Grant will continue to be the appointed mediator/ arbitrator for all matters related [to] the review of Spousal Support pursuant to the terms of a Mediation/ Arbitration Agreement dated November 12, 2003 (the "Mediation/Arbitration Agreement"), a copy of which is attached as Schedule "B".

[25] Clauses 3 and 6 of the mediation/arbitration agreement respectively provide:

3. WAIVER OF RIGHTS TO LITIGATION IN COURTS

By submitting to arbitration . . . the parties hereby waive any right to further litigate those issues in court, whether pursuant to the Family Law Act, R.S.O. 1990, c. F.3, the Divorce Act, R.S.C. 1997, or any other statute, subject to the judicial review rights. . . . . .

6. PRE-ARBITRATION CONFERENCE/MEDIATION

A mediation will be attempted but if it fails to resolve all the issues, the remaining issues will be immediately presented for final binding arbitration by the mediator who will become the Arbitrator. The parties specifically agree that the participation of the Arbitrator in the mediation process shall not disqualify the Arbitrator from arbitrating the disputes between them.

[26] Where an arbitration agreement exists, courts will stay their own proceedings and compel the parties to arbitrate: Dormer v. McJannet, 2006 CanLII 42670 (ON SC), [2006] O.J. No. 5106, 35 R.F.L. (6th) 418 (S.C.J.), at paras. 20 and 34; and Puigbonet-Crawford v. Crawford, 2006 CanLII 38881 (ON SC), [2006] O.J. No. 4626, 152 A.C.W.S. (3d) 991 (S.C.J.), at paras. 8, 13 and 14.

[27] In summary, I am of the view that s. 35 of the FLA does not supersede the parties' agreement in a domestic contract to arbitrate rather than litigate disputes about varying spousal support.

Section 35 -- Enforcement Act

[28] In the alternative, the husband argues that the interpretation of s. 35 of the FLA that I have reached above does not apply in circumstances where the director of the FRO has initiated the process to suspend the payor's driver's licence. [page647]

[29] The director of the FRO may commence a process to suspend a payor's driver's licence under s. 34 of the Enforcement Act. It states:

34. When a support order that is filed in the Director's office is in default, the Director may serve a first notice on the payor, informing the payor that his or her driver's licence may be suspended unless, within 30 days after the day the first notice is served, (a) the payor makes an arrangement satisfactory to the Director for complying with the support order and for paying the arrears owing under the support order; (b) the payor obtains an order to refrain under subsection 35(1) and files the order in the Director's office; or (c) the payor pays all arrears owing under the support order.

[30] In the present case, the husband sought an order under s. 35(1) of the Enforcement Act that the director refrain from suspending his licence. That section provides:

35(1) If a payor is served with a first notice under section 34 and makes a motion to change the support order, the payor may also, on notice to the Director, make a motion for an order that the Director refrain from directing the suspension of the payor's driver's licence under subsection 37(1), on the terms that the court considers just, which may include payment terms.

[31] Section 35(1) requires the payor to make a motion to change the support order as a condition of bringing a motion for an order that the director refrain from suspending the payor's driver's licence.

[32] The husband argues that the "motion to change the support order" in s. 35(1) refers to a motion to a court. He finds support for his argument in s. 35(6) of the Enforcement Act, which states:

35(6) The court that has jurisdiction to change the support order is, (a) in the case of a support order that was made in Ontario, (i) the court that made the support order, unless sub-clause (ii) applies, (ii) if the support order is a provision in a domestic contract or paternity agreement, the Ontario Court of Justice or the Family Court; and (b) in the case of a support order that was made outside Ontario, (i) if the support order was made under the Divorce Act (Canada), the Superior Court of Justice or the Family Court, (ii) if the support order is registered under the Inter-jurisdictional Support Orders Act, 2002, the court in Ontario that has jurisdiction under that Act to vary the support order. [page648]

[33] Thus, the husband argues that the statutory regime requires that having moved for an order that the director refrain from surrendering his licence, he is implicitly permitted under s. 35(1) of the Enforcement Act to move in court to change the underlying support order. If it were otherwise, he would have no recourse to avoid licence suspension.

[34] I do not accept this argument. In my view, the statutory regime of s. 35 of the Enforcement Act can be interpreted harmoniously with the interpretation of s. 35 of the FLA discussed above. Put another way, I am satisfied that if the FLA does not allow the parties to avoid their bargain to use private arbitration as the exclusive means of settling disputes, neither does s. 35 of the Enforcement Act.

[35] I reach this conclusion for three reasons.

[36] First, the language of s. 35(1) and (6) of the Enforcement Act is open to a different and more sensible interpretation than that urged by the husband. Section 35(1) provides an avenue of recourse if a payor "makes a motion to change the support order". While the use of the term "makes a motion" may include a motion to a court, there is no reason why the language cannot be more broadly understood to include a motion (or written request) to an arbitrator where the parties have specifically agreed that this should be the exclusive means by which to obtain a variation.

[37] As to s. 35(6), it merely provides which court has jurisdiction in certain circumstances. It does not provide that all motions referred to in s. 35(1) need be made to a court.

[38] Second, the Enforcement Act was first enacted in 1996. Section 35 of the FLA was in force at the time. As I have indicated, s. 35 of the FLA recognizes that the provision in a domestic contract for exclusive arbitration should be applied even after an agreement has been filed under s. 35(1). There is nothing in the wording of the Enforcement Act indicating a legislative intent to alter that important principle. Had the legislature intended to change the effect of an agreement to arbitrate upon the availability of the court variation process, clearer language would be required than that which is found in s. 35 of the Enforcement Act.

[39] The Enforcement Act complements the FLA by providing a mechanism whereby support orders filed with the court under the FLA, which include the terms of domestic contracts, are enforced. Nothing in the Enforcement Act suggests that it is intended to alter the clear effect of the FLA itself.

[40] Interpreting s. 35 of the Enforcement Act in the manner I suggest promotes harmony between that Act and the FLA: "It is [page649] presumed that the body of legislation enacted by a legislature does not contain contradictions or inconsistencies, that each provision is capable of operating without coming into conflict with any other": R. Sullivan, Sullivan on the Construction of Statutes, 5th ed. (Markham, Ont.: LexisNexis, 2008), at p. 223.

[41] Third, accepting the husband's interpretation of s. 35 of the Enforcement Act would create perverse incentives. If the husband's interpretation of s. 35 were accepted, the following scenario would be possible: Two parties enter into a domestic contract that includes an exclusive arbitration clause for the variation of its terms. If one party wants to change the terms, without resorting to arbitration, that party would have an incentive to default on its obligations and hope that the other party submits the contract for enforcement under s. 35 of the FLA. If the other party does, once the director of the FRO attempts to enforce the domestic contract by suspending the defaulting party's driver's licence, the defaulting party could bring a motion to the court to vary the underlying obligation -- thereby circumventing the arbitration agreement. In other words, on the husband's interpretation, parties would be able to, through the Enforcement Act, do what they are specifically not permitted to do under their own agreement.

[42] On the flipside, the husband's interpretation may lead to a chilling effect on spouses submitting their contracts for enforcement under s. 35 of the FLA. Parties aware of the above potential scenarios might be reluctant to submit their domestic contracts for enforcement. Otherwise, the party would risk losing the negotiated terms of the agreement.

[43] All these considerations favour an interpretation of s. 35 of the Enforcement Act that leads to the conclusion that a party may not circumvent his agreement to arbitrate a variation simply because the court's enforcement mechanism has been engaged.

Disposition

[44] In the result, I would allow the appeal, set aside the order of Justice Johnston dated November 25, 2011 and grant the wife's motion for summary judgment dismissing the husband's application to the Superior Court of Justice to vary the amount of spousal support.

[45] If the parties cannot agree on the issue of costs, they may make written submissions regarding the costs of the motion and appeal on a schedule set by the court's senior legal counsel, Mr. John Kromkamp.

Appeal allowed.

Notes

Note 1: Vous trouverez la traduction française à la p. 650, post.

Note 2: Justice Feldman heard the appeal but, due to circumstances that arose after the hearing, was unable to participate in the giving of the decision.