Ontario – court declines jurisdiction to determine pending court costs once parties settle through mediation/arbitration – #079

In Patterson v. Sarafian, 2018 ONSC 274,  Mr. Justice David Jarvis had to resolve the court’s jurisdiction to deal with costs of motions reserved, but not decided, when the parties later agreed to mediation/arbitration and settled their disputes.  Though the court litigation involved a family law dispute, the result and reasoning can apply to commercial disputes in which court litigants agree to become arbitral parties and subsequently resolve their disputes.  The resulting settlements can have the effect, intended or not, of resolving issues left pending from the court litigation.

The two litigants, spouses in a divorce proceeding, had begun court proceedings related to their divorce and separation.  During the litigation, the husband obtained an order in his favour but costs were reserved.  Later, the spouses entered into a submission agreement, undertaking to terminate litigation and resolve their differences by mediation/arbitration.  The mediation began October 24, 2017 and led to the signature of Minutes of Settlement effective December 14, 2017.  The preamble to the Minutes of Settlement mentioned that the parties had agreed “to settle all outstanding issues between them” and introduced other terms, including the following:

1.4 They (i.e. the parties) agree to be bound by this Agreement, which settles all issues between them. 

 9.1 This Agreement is a full and final settlement of all issues arising out of the breakdown of their marriage between Leslie and Daniel and all rights and obligations arising out of their relationship…

 9.2 Except as otherwise provided in this Agreement, Leslie and Daniel release each other from all claims at common law, in equity or by statute against each other, including claims under the Divorce Act, (RSC 1985, c 3 (2nd Supp)) the Family Law Act, (RSO 1990, c F.3) and the Succession Law Reform Act (RSO 1990, c S.26).

In January 2018, the husband’s counsel contacted the court to inquire about the costs reserved for an April 19, 2017 court decision.  The husband claimed that the costs remained outstanding, claiming that the mediation/arbitration process had solved the costs relating to that process but not the court’s.  The wife claimed that the costs had been settled and that the court no longer had jurisdiction.  The wife submitted that the costs of the court litigation had not been raised as outstanding when they entered into the September 12, 2017 mediation/arbitration agreement.

Jarivs J. carefully analyzed the particular facts of the case.  A key finding was that the husband knew that the court litigation costs had not been decided but that he did not mention them as being a separate issue when negotiating the Minutes of Settlement.

The analysis still lends itself as guidance to commercial litigants who also, by submission agreement, agree to dispense with existing court litigation in favour of submitting to mediation and arbitration.   Litigants must turn their minds to issues left unsettled by their litigation once they agree to resolve “all issues between them” in mediation/arbitration.   While each case is decided on its own facts, the analysis undertaken by Jarvis J. does show some considerations which can apply if and when a court must determine the extent of one venue’s settlement over the prior, collateral incidents of another venue.

Jarvis J. declared that the court had no jurisdiction because the parties had definitively settled all outstanding issues stemming from their family law dispute.

The reasons do not expand on the exact grounds for lack of jurisdiction.  For example, the reasons do not specify whether the lack of jurisdiction was due to (i) the absence of a dispute, given the settlement, (ii) the undertaking to mediate/arbitrate definitively excluded the court’s involvement or (iii) the arbitrator being authorized to resolve any disputes stemming from the Minutes of Settlement.