Tag: Arbitration

12 Nov

Mediation or Arbitration – What’s the Difference?

Kira Domratchev Estate & Trust, Litigation Tags: , , , , , , , 0 Comments

In the estates regime, mediations occur regularly, particularly in Toronto, where mediations are a mandatory part of the litigation, in accordance with Rule 75.1.02(1)(a)(i) of the Rules of Civil Procedure.

A mediation is always an opportunity to attempt to settle a matter without resorting to costly and time consuming litigation. At mediation, the parties will each stay in separate rooms and the mediator (that is usually chosen by the parties to the litigation), will shuttle between the rooms seeking a more in-depth understanding of the parties’ positions as well as probing opportunities for settlement. Sometimes, before the mediation begins, the mediator will do an introduction to all the parties before they break off into separate rooms, explaining how the day will go.

An important aspect of mediation is the fact that a mediator has no decision-making power. He or she cannot force the parties to settle but can provide his or her opinion on the issues. As such, settlement at mediation can only be reached upon the agreement of the parties themselves.

Another means of dispute resolution (other than litigation) that is not often resorted to in estate litigation, is arbitration. Before agreeing to attend an arbitration, however, it is important to consider whether this form of dispute resolution would be helpful in the particular circumstances of the matter.

Arbitration, unlike mediation, is an adversarial dispute resolution process (similar to litigation) determined and controlled by a neutral third party. The arbitrator can make a final decision, called an “award”, contrary to a mediator, who cannot. The most significant aspect of arbitration, however, is that the courts generally do not interfere in a dispute that is subject to an arbitration agreement. As such, there is a risk that should a decision be made by an arbitrator, the court would then refuse to hear the matter further, leaving arbitration as the ultimate medium of resolving the particular matter.

Why is that so important?

In a situation where the parties have already engaged in settlement negotiations and there appears to be a gap between their respective positions, an arbitration may be worthwhile to pursue, particularly should litigation be untenable to the parties given the cost involved and/or if the matter in dispute does not involve a lot of money. In such a situation, a final arbitral award may bring finality and allow the parties to move on, particularly if the gap between the parties’ positions is not significant.

If, however, the parties had not yet engaged in negotiations and no offers to settle were made, pursuing arbitration may be a serious gamble. That is so because the issues to be arbitrated are set out by the parties and though the arbitration process is similar to traditional litigation, the arbitrator will not have an opportunity to hear all the relevant evidence. As a result, agreeing to arbitrate in a situation like that may cause prejudice to a client who may then not be able to appeal the “award” made by an arbitrator, outside of the regime put in place by the Arbitration Act, 1991, SO 1991, c 17.

Thanks for reading!

Kira Domratchev

Find this blog interesting? Please consider these other related posts:

Mandatory Mediation

Nine Mediation Pitfalls to Avoid

Arbitration: A Valuable Alternative

23 Jul

Arbitration and Trusts – Can Trustees be bound by arbitration?

Stuart Clark Estate & Trust, Trustees Tags: , , , , , , 0 Comments

The use of a Family Trust is a common estate planning tool, whereby an asset, whether it be cash, a family cottage, or otherwise, is placed into a trust to be held for the benefit of the family. More often than not, when such a Family Trust is established, both spouses are named as trustees of the trust, and the beneficiaries are often the two spouses together with any children that they may have. The trust is often discretionary, whereby the trustees may distribute some or all of the trust assets to any one of the beneficiaries to the exclusion of the others.

While the administration of the trust often goes smoothly while everything is going well in the relationship, the question emerges of what should take place should the spouses later separate and commence divorce proceedings. Although we do not tend to see arbitration used as often within the estates and trusts context, the same cannot be said for family law proceedings, where, anecdotally at least, it appears that parties are much more willing to enter into binding arbitration in order to settle their dispute rather than adjudicate the matter before the courts. When the two spouses (who are also the trustees) separate, and as part of the divorce proceedings agree to enter into binding arbitration, the question often emerges of whether the internal administration of the trust can be caught up in the arbitration process?

Inevitably, as part of such an arbitration, one of the spouses will often take the position that as both trustees have signed the arbitration agreement, that the arbitrator has now assumed the powers of the trustees, and may utilize the discretion afforded to the trustees to determine how the trust assets should be distributed as part of the divorce process. Without commenting on whether a trust may be bound to the arbitration process in the event that the trustees have only signed the arbitration agreement in their personal capacities, and not their capacities as trustees, the courts have been clear that unless the terms of the trust specifically contemplate otherwise, that trustees may not delegate the fundamental decision making powers entrusted to them as trustees to any person (whether it be arbitrator or otherwise). As put by Professor Waters in Waters’ Law of Trusts in Canada:

“The courts, however, continue to adhere to the principle that a delegate may not delegate his duties when the nature of the task is one which he is required to perform personally. This prevents the trustee from appointing an agent to perform the task of this kind, whether or not he has an express, implied, or statutory power to appoint agents. Indeed, any act of an agent purportedly carrying out such a task would have no legal effect; it would bind neither the trust nor any third party.  [emphasis added] (4th ed., pg. 913)

Using this rationale, unless the deed of trust specifically contemplates that the trustees may delegate their decision making to an arbitrator, the trustees may arguably not delegate their fundamental decision making powers to an arbitrator, for to do so would be an improper delegation of their authority. As made clear by Prof. Waters, any decision made by the arbitrator concerning the internal management of the trust would arguably not be binding upon the trust or any third party, as they could arguably not have assumed such powers in the first place.

Stuart Clark

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