Earlier this week we blogged on the benefits which come from participating in mediation. You can read our blog here. The takeaway was that mediation is often a practical means to achieving settlement, or at least coming close to one. We discussed the possibility of a partial settlement on some of the issues where the parties are not able to fully agree on all fronts. After a partial mediation settlement, the parties do not necessarily return to the court – they may engage in arbitration instead. Even when issues arise during the arbitration process, the court may direct litigants to continue private negotiations. This was the case in Kubecka v. Novakovic, which was recently heard at the Ontario Superior Court of Justice before Justice Pinto.
This matter was motion for the appointment of a replacement arbitrator pursuant to the parties’ Mediation-Arbitration Agreement. The issue in this motion was whether in circumstances where the parties disagree, the court should appoint a replacement arbitrator, or whether the court should permit the parties to terminate the arbitral process and continue the litigation in court.
Background
Ms. Kubecka and the late Mr. Kubecka were married in the ’50s. After 60 years of marriage, they separated in or around 2015. These two former spouses were engaged in high-conflict litigation which remained ongoing when Mr. Kubecka passed away on June 10, 2020. Subsequent to Mr. Kubecka’s passing, his daughters, Jacqueline Novakovic and Michele Kubecka began acting as Trustees of Mr. Kubecka’s Estate in these proceedings. Significant conflict between Ms. Kubecka and Mr. Kubecka’s daughters followed.
In 2021, Ms. Kubecka the Estate entered into the mediation-arbitration process in an attempt to resolve the outstanding issues. Mediation concluded with the execution by the parties of Partial Minutes of Settlement which resolved some issues. At the conclusion of mediation, the arbitration process began.
The mediator, Ms. Breitman advised the parties that she was resigning as the arbitrator. The parties could not agree whether a new arbitrator was to be appointed or whether the matter would return to the court. They sought direction from the court.
Overview
Justice Pinto found that this motion largely turned on the interpretation the following section of the parties’ Mediation/Arbitration Agreement:
12. WITHDRAWAL FROM MEDIATION OR ARBITRATION
12.1 Neither party may unilaterally withdraw from this Agreement at either the mediation or arbitration stage. However, the parties may jointly terminate this Agreement by their written agreement. Subject to paragraph 12.2, the Arbitrator shall proceed with an arbitration as provided for in this Agreement notwithstanding that the mediation has been unsuccessful or that one of the parties no longer wishes to participate in the arbitration.
12.2 Ms. Breitman may at any time resign from her appointment as arbitrator by providing written notice of her resignation to the parties.
12.3 In the event that Ms. Breitman’s appointment is terminated, and the parties are unable to agree on a replacement, a court of competent jurisdiction shall appoint a replacement arbitrator on either party’s application to the court.
12.4 In the event that Ms. Breitman’s appointment is terminated, the parties agree that any interim or interlocutory award(s) made by Ms. Breitman will continue to bind the parties and will continue in full force and effect as the basis for the continuation of the arbitration with a replacement arbitrator.
The respondents argued that the reference to “terminated” in paragraph 12.3, did not include the scenario where the arbitrator has resigned. Therefore, they submitted that in circumstances where Ms. Breitman resigned, paragraph 12.3 did not apply, and the matter should return to the jurisdiction of the court.
Justice Pinto disagreed and stated that it would be surprising if the mere resignation of an arbitrator, which can be for any variety of reasons, would trigger the end of the arbitral process and a return to court process. He also considered section 14 of the Arbitration Act, 1991, S.O. 1991, C.17, according to which an arbitrator’s resignation is a form of termination.
Justice Pinto found that paragraph 12.3 of the agreement was enforceable, and a replacement arbitrator must be appointed. He did not think there was any scope for this matter to be returned to court. It therefore appears the court continues to also encourage parties to pursue means of alternative dispute resolution before being willing to allocate further judicial resources to litigants.
If you wish to learn more about enforcing agreements, please have a listen to our recent podcast on this topic here.
Thank you for reading,