Med-Arb and Final Offer Arbitration: McLaren v. Casey, 2016 BSSC 169

One of the benefits of family dispute resolution is that one can tailor the process to meet the needs of the parties. In a recent case, McLaren v. Casey, the parties did just that. They agreed on a mediation-arbitration process, which permitted the arbitrator to make a final decision, based on the last best offer of a party, if the parties were unable to settle their dispute in mediation.

Critical parts of the written agreement provided that the process would be set over to a separate day for arbitration if the parties failed to settle the issues after two mediation sessions.  The parties were to provide a summary of the facts and issues before the arbitration date. On the arbitration date the parties were given an opportunity to summarize the evidence, their legal positions and present their last best offer.  The arbitrator was then to choose between the offers and make an award. The award was to be without reasons, unless one of the parties requested reasons. The arbitrator also recommended that each of the parties should have lawyers present for the arbitration. The parties chose not to have lawyers present before the arbitrator, but were represented by and continued to seek legal advice from their lawyers.

The parties were able to settle certain issues including parenting arrangements at mediation, but some of the financial issues remained outstanding. The parties made written submissions on the balance of the outstanding issues. The arbitrator selected the husband’s offer and made an award. The award was based on the whole package offered, rather than selecting from the offers on an issue-by-issue basis. The award dealt with issues of child and spousal support, imputing incomes, re-apportionment of family property and debt. The husband sought to enforce the award in Supreme Court and the award was partially enforced before the wife applied to the Court to set aside the award based on arbitral error. The wife alleged 19 such errors. The wife did not file any appeal about the orders made to partially enforce the award.

The major argument in this case appears to be that the wife alleged that she did not understand the nature of the process. She alleged that she was unfamiliar with the concept of last best offer, the rules used in the arbitration (BCICAC Shorter Rules of Procedure) and whether the offer submitted was to be issue by issue of was to be a package.

There are limited grounds to review an award and the intent of this article is not to deal with all the grounds for recourse. Under section 2.1 (3) and (4) Family Law Act an award may be set aside if:

  • A party took improper advantage of the other party’s vulnerability, including the other party’s ignorance, need or distress;
  • A party did not understand the nature or consequences of the agreement;
  • Other circumstances that would, under the common law, cause all or part of a contract to be voidable

A court may decline to act under subsection (3) if, on consideration of all of the evidence, the court would not replace the arbitration agreement with an order that is substantially different from the terms set out in the arbitration agreement.

On the evidence before the judge, he was not satisfied that the wife misunderstood the nature of the last best offer process. The arbitrator had explained the process and had given the parties a copy of a recent Ontario court decision – Kroupis-Yanovski v. Yanovski, 2012 ONSC 5312 which explained the nature of the process.

The Court upheld the award and indicated that allowing the application to proceed would amount to a collateral attack on parts of the award that had been already implemented by court order.  The Court indicated that while there may have been aspects of which the wife was uncertain, these could not be seen as a “. . . misunderstanding of the nature or consequences of the agreement – being to enter arbitration to resolve the family dispute outside of the courts with an arbitrator and customized process.

One of the beauties of final-offer arbitration is that the parties are able to avoid the costs of the arbitrator rendering an award.  Award writing is a substantial expense of the arbitration process.  It may make sense with final offer arbitration not to render written reasons as there often is not evidence led and therefore there is no need for the arbitrator to evaluate the evidence, just the offers and arguments that are made.

Written awards can provide transparency as the parties can determine whether the arbitrator has made clear findings and clear reasons. It can result in the acceptability of an award and reduce the need for one party to seek a review of the award.   Arbitrators generally write a decision with the losing party in mind so that a party can understand why she or he lost the case.

The point of interest in this decision is that the court gave substantial deference to the parties’ agreement to resolve their issues outside of court with a process tailored to their dispute.  The Court said that it would not be appropriate to proceed “considering the intention of the arbitration to have been a final determination of the issue and the substantial deference to decisions made in arbitration; the need for the orderly administration of justice, the fact that the litigation surrounds a financial dispute rather than a public law issue; and in my view of the lack of merit to the proceeding . . .”

Paul Love, Arbitrator & Mediator, January 8, 2017