Alberta – couple unable to litigate property dispute they agreed to delegate to parents

In Mahajan v. Mahajan, 2019 ABQB 495, Mr. Justice Michael J. Lema stayed a divorce proceeding to provide time for the couple’s four (4) parents to resolve a property dispute delegated to them by the couple in their post-separation agreement.  Lema J. held that no uncertainty existed regarding who would resolve the dispute but only uncertainty as to how they would do so. 

Married in India in 2007, the couple separated in 2017 and signed a 2018 Divorce and Matrimonial Property Agreement (“Agreement”) which dealt with the division of certain personal property and the payment of an identified amount of money as settlement of matrimonial property rights.  The Agreement provided that it was a “full and final settlement of all matters relating to property, both real and personal”.

The Agreement provided the following to determine the division of personal property.

5.6 The parties acknowledge that they have personal property situated in India, namely, gold, cash, a purple coat and RBI cash of 44,000 Rupees. It is agreed that the parties’ parents shall determine the division of these assets and the parties agree to abide by their parents’ decisions with respect to those assets. The parties acknowledge that, once their parents have resolved the distribution of these assets, both parties will cooperate and sign any necessary documents that are required to close both the joint bank account and the safety deposit box/bank locker that are located in India.

The Agreement further stipulated that (i) the laws of Canada and Alberta applied and (ii) the Court of Queen’s Bench of Alberta has exclusive jurisdiction “with respect to addressing an(y) sic issues arising out of this Agreement and the parties irrevocably attorn to that Court”.

Ms. M. applied for a stay of he divorce and Mr. M. objected.  The latter argued that that the Agreement was likely void, “attempts to bind this third party to act as arbiters and decide how to divide the property in question” and para. 5.6 is actually “an agreement to agree” and the parents “cannot agree”.

Ms. M. responded that para. 5.6 “handed responsibility over the property dispute to the parents”, resolution of the dispute is by/between the parents, the Agreement does not govern the parents’ dispute over the property, and a stay of the divorce would prevent undercutting or prejudicing her claim.

Lema J. held that “[t]he wife is correct” and set out the reasons at para. 12.

1. para. 5.6 “effectively carves out the disputed property from the balance of the parties’ property”;

2. the Agreement is more than “an agreement to agree”. 

The parties agreed that division of the Indian property would be determined by their parents and that, once that happened, they would perform any necessary “housekeeping” steps to implement that division. As between the husband and wife, no uncertainty over entitlement exists: the parents will provide the answer, and they (the Canadian couple) will abide by it. As between the parties in Canada and the parents in India, no uncertainty exists over the “division of labour”: the property is identified, the parents will sort out entitlement, and the children will live with that outcome. The only uncertainty is as between the parents. They were handed a dispute and asked to resolve it, but with no particular formula for doing so. One option was that they come to agreement, but that has not been possible so far. But other options for resolution exist, including retaining counsel to assist in resolving entitlement and proceeding to court in India, if necessary;

3. the Agreement governs disputes between the couple and does not govern resolution of disputes between their parents;

4. the Agreement does not provide a framework for resolution of the parents’ dispute.  That resolution may include a decision to mediate, arbitrate or litigate in India.

5. Lema J. was unsure who owned the dispute in issue: “it is not entirely clear who the stakeholders are in this dispute”.

Lema J. held that the parties had removed the issue from being a dispute between themselves.

[13] To summarize on this aspect: via the agreement, the parties offloaded determining entitlement to the Indian property to their parents. Having created the “offramp” for that dispute and a housekeeping duty on the children to implement the outcome once know, the agreement is otherwise silent and, in any case, inapplicable to the resolution of that dispute.

[14] Effectively, the parties said to their parents: “You decide. We will live with whatever you decide.”  Given that, that property “left the equation” governed by their agreement, with the agreement playing no role in the resolution of that dispute.

Lema J. also set out the principles governing stays, at paras 17-22.  He focused the stay request to whether the litigation should be stayed “when associated matters are pending”.  He then listed the factors at para. 23 which justified granting the stay, including:

1.      the evidence is that a divorce being granted in Alberta would undercut or at least prejudice Ms. M’s claim to the return of property in India; and,

2.      that claim, which Ms. M’s parents are pursuing in India is “in gear i.e. is not just theoretical”.

The stay was granted for a limited period of time and, subject to satisfactory evidence that the resolution in India was advancing, could be extended.

If the Indian claim remains unresolved then and the wife presents satisfactory evidence of steps taken toward resolution by then (e.g. initiation and advancement of court proceedings, launch of mediation or arbitration proceedings, or otherwise), I will consider a further stay.

urbitral note – The Agreement can be viewed in different ways.  The Agreement either removed resolution of the dispute to third parties acceptable to the couple or removed the actual dispute to those third parties. In the latter case, the third parties owned the dispute and, failing their agreement, were expected to resolve it.  Lema J. appears to have adopted the former view.

Lema J. respected the parties’ choice, reflected in the Agreement, to have the personal property resolved by the parents and declined to assume jurisdiction over it.  His willingness to pause the court’s own process was made subject to progress being demonstrated in the other dispute’s resolution.