Alberta Court Issues Wide-Ranging Judgment On Settlement and Mediation of Arbitrations
In Pinder v. Woodrow, the Alberta Court of Queen’s Bench recently issued a judgment addressing a number of arbitration and mediation issues. The judgment arose from a settlement that in turn arose from a mediation conducted during the course of the arbitral hearing. As a result, the court dealt with a number of issues that are not frequently addressed in arbitration law. In particular, the judgment of the court dealt with the formalities –or lack thereof- that should be met in conducting a mediation and concluding a settlement during an arbitration. In Canada, there are two regimes relating to whether arbitrators may act as mediators. So this decision, while it involved a matrimonial dispute, is of interest to all those engaged in arbitral law.
The parties entered into an arbitration agreement to deal with a number of matrimonial issues. The agreement was subject to the Alberta Arbitration Act (the Act). The agreement stated that the arbitration award would be delivered within 30 days of the close of the hearing “subject to any reasonable delay due to unforeseen circumstances.” The award was to be in writing and to set out the facts found by the arbitrator, apply the relevant law and the determination of the issues in dispute. The agreement provided for an appeal to the Court of Queen’s Bench on a question of law, or with leave of the Court on a finding of fact involving a material misapprehension of the evidence.
While evidence was being given during the hearing, the parties entered into settlement discussions. The Arbitrator acted as the mediator with the agreement of the parties. The parties reached a settlement agreement. Both parties, through their counsel, advised on the record that they were in agreement with the terms of the Settlement Agreement as a final settlement. The Arbitrator submitted his final statement of account three days later.
The settlement agreement was set out in a document entitled “Settlement Terms”. It was signed by the Arbitrator, both of the parties, together with their respective counsel. It included a term that any dispute involving the content of the agreement was to be referred to the Arbitrator for binding determination.
The parties then acted in accordance with that document. The husband commenced paying child support, the wife transferred property to the husband. The husband made repeated demands that the wife comply with all aspects of that document.
Two months after the document was signed, the wife’s counsel applied to the arbitrator for relief, taking the position that the arbitration had been adjourned and that it was still open to the arbitrator to continue the arbitration and issue a final award. The wife alleged that the arbitration had not been formally concluded and that it was still open to the parties to reach a full and final settlement, that the settlement document was not an Arbitral Award within the meaning of the arbitration agreement or the Act, that errors were made during the process that necessitated a remedy; and that the arbitrator retained jurisdiction to deal with these matters.
Counsel for the parties appeared before the arbitrator. After that appearance, the arbitrator issued a written decision in which he stated that the settlement agreement was his final award and he refused to grant any relief to the wife. The next day, the wife filed an application appealing the arbitrator’s decision of the prior day.
Decision of the Court
The judge hearing the application made a number of decisions:
- Reasons for Decision in a Settlement: The requirement, in s. 36 of the Act – that an arbitrator give reasons for decision – does not apply when the parties settle the dispute during the arbitration.
- Ingredients of an Arbitral Decision: The settlement agreement complied with the other requirements of s. 38 of the Act, namely that it be signed by the Arbitrator, and indicate the date and place where it was made. The settlement document should be examined in conjunction with the executed Certificates of Independent Legal Advice, the Matrimonial Property Act acknowledgements signed by both parties and their counsel, the attachments to the agreement, and the content of the record from December 13, 2013 in which the parties confirmed their agreement with the settlement. In totality, those documents set forth the date of the settlement agreement and the place where it was made.
- Settlement Document may be an Arbitral Decision: The fact that the document was entitled “Settlement Terms” and was not referred to as an arbitration award was of no significance. “It was, in fact, an arbitral award and treated by all concerned as such until a much later date, well after the expiration of the 30 day appeal period…Further, there is nothing in the Act or the agreement which prescribes the form of an arbitration award, just that it comply with the requirements of s. 38.”
- Natural Justice, Fairness and Equal Treatment: While the wife was not present during some portions of the hearing, her counsel was present. Accordingly there was no breach of the rules of natural justice nor did the process result in either unfair or unequal treatment of the wife.
- Process for converting from Arbitration to Mediation: The conduct of the parties during the hearing – leading to the mediation – was sufficient to satisfy the requirements of s. 35(1) of the Act relating to the conversion of the arbitration to a mediation.
Subsection 35(1) says: “The members of an arbitral tribunal may, if the parties consent, use mediation, conciliation or similar techniques during the arbitration to encourage settlement of the matters in dispute.” (emphasis added)
The parties’ conduct during the arbitral hearing was a sufficient “consent” by the parties to convert the arbitration into a mediation. The court held that there was no need for that process to be “explicit, formal, on the record and take place in advance of the conversion of the process.” The Act contains no ‘formula or “recipe”’ for that consent, and that is “consistent with the overall objective of the legislation – to provide a flexible mechanism to litigants that potentially assists them in the resolution of their dispute outside of the formal court process….Both parties were represented by experienced counsel throughout the process. From their agreement to submit this matter to arbitration, the parties must be assumed, in the absence of any evidence to the contrary, to have understood the flexible nature of the process, including that the process could shift from one mode of dispute resolution to another as circumstances dictated.”
The judge did say that “it would have been preferable if the transcript had recorded the proceedings that led the parties and the Arbitrator to shift from arbitration mode to mediation mode.” However, there was no evidence indicating a lack of consent, and there was “very explicit agreement of both parties that is contained on the record at the conclusion of the proceedings.” On the whole record, the judge was satisfied that the parties had consented to shifting from an arbitration to mediation and that the requirements of s. 35 were met.
- Time to Appeal: The wife’s appeal was outside the 30-day period in the Act for an appeal to be brought. The settlement document was a valid arbitration award within the meaning of s. 38 of the Act. Once the 30-day period expired after the release of that document, then the arbitrator no longer had jurisdiction over the dispute. Neither the Act nor the agreement between the parties allowed for an extension of the 30-day period. The arbitrator’s later decision which dismissed the wife’s application to re-open the matter was of no legal significance or consequence, even though it was entitled “Arbitration Award”.
This decision will be a useful reference anytime settlement discussions occur during an arbitration, and anytime the parties consider engaging in mediation during an arbitration.
The first issue is: how should the parties and the arbitrator record the process by which a settlement is reached during an arbitration?
Section 35(1) of the Alberta Arbitration Act says that “the members of an arbitral tribunal may, if the parties consent, use mediation, conciliation or similar techniques during the arbitration to encourage settlement of the matters in dispute.” (emphasis added) And subsection (2) then says that “after the members of an arbitral tribunal use a technique referred to in subsection (1), they may resume their roles as arbitrators without disqualification.” These subsections state the premise behind section 36 and the policy behind the Alberta Act, namely, that members of the arbitral tribunal may mediate the dispute if the parties consent, and then if the mediation is unsuccessful, they may revert to their position as members of the arbitral tribunal.
This policy position is quite different than that in some other provincial arbitration statutes. Thus, the Ontario Arbitration Act, 1991 states as follows: “The members of an arbitral tribunal shall not conduct any part of an arbitration as a mediation or conciliation process or other similar process that might compromise or appear to compromise the arbitral tribunal’s ability to decide the dispute impartially.”
However, section 3 of the Ontario Act says that, except with respect to certain specific sections, the parties may contract out of the Act. Section 35 and the section dealing with appeals (section 45 in the Ontario Act) are not listed in section 3, so the parties may contract out of them. In addition, under the Ontario Act, the parties could still engage in settlement discussions and mediation: the only prohibition (unless the parties otherwise agree) is that the members of the arbitral tribunal cannot be the mediators.
[This distinction in policy choices is expressly contained in the Uniform Arbitration Act of the Uniform Law Conference of Canada. Section 35 of the Uniform Act contains an Option A and an Option B. Option A is the one chosen by Alberta. Option B is that chosen by Ontario. The Commentary to Section 35 states:
“Enacting jurisdictions may choose either to allow the arbitrators to practise mediation and conciliation or to forbid them from doing so. The Uniform International Commercial Arbitration Act allows the arbitrators to engage in mediation on the consent of the parties. The present statute provides for a single consent at the beginning of mediation, without a separate consent when the arbitrator goes back to arbitrating, the mediation presumably having failed. The reason for eliminating the double consent found in the international statute was to prevent a party from subverting an arbitration in bad faith at the end of mediation, by refusing consent to return to arbitration. The reason for forbidding a change of role is that a mediator or conciliator may learn things from one party in confidence that he or she may not disclose to the other parties. Knowing this information might be perceived to prevent a judicial disposition of the case on the merits if the person then returns to arbitration.”]
Section 36 of the Alberta Arbitration Act then says that “If the parties settle the matters in dispute during arbitration, the arbitral tribunal shall terminate the arbitration and shall record the settlement in the form of an award.” As noted above, section 38(1) says that “An award shall be made in writing and, except in the case of an award made under section 36, shall state the reasons on which it is based.” (emphasis added).
So it is seems clear that a settlement during an arbitration should be recorded in something called “Award”, even though most litigation counsel might consider a settlement agreement to be an agreement between the parties, not an “award” of the tribunal. It also seems clear from section 38(1) that the settlement “Award” will not contain reasons, and the judge so concluded.
Sub-sections 38(2)-(4) of the Alberta Act say that: an award shall “indicate the place where and the date on which it is made” and “be dated and signed by all the members of the arbitral tribunal, or by a majority of them if an explanation of the omission of the other signatures is included”; and that “a copy of an award shall be served on each party.” (emphasis added) In these subsections, there is no exception for settlements under section 36. So, while one may wonder why these requirements should apply to a settlement, it seems that they do and that they must be met even if the “award” is a settlement.
Under sections 36-38 of the Ontario Act, these requirements apply to a settlement “Award”, even though the members of the arbitral tribunal cannot be the mediator.
The court in the present case demonstrated flexibility in considering all the surrounding facts in order to ensure that the technical requirements of section 38(2)-(4) are met. However, arbitrators and arbitral parties should be aware of these requirements – date, place, signature, service. These requirements should be addressed in the document which the arbitral tribunal issues as its “award” or in some other formal documentation, so that other documents or the surrounding circumstances do not have to be relied upon to provide those elements.
The second issue is: how should the parties’ consent to mediation during the arbitration be evidenced?
In the present case, the judge was satisfied by all of the surrounding evidence – and particularly the documentation after the settlement was made – that the parties had consented. But the judge did say that it would have been better if the “conversion” from arbitration to mediation had been recorded in the transcript of the hearing before the mediation commenced, and possibly in some formal Consent signed by the parties at that time. So counsel and arbitral tribunals in the future might be well advised to adhere to this advice in the future.
Should these requirements, and the same approach to them, apply if the members of the arbitral tribunal cannot be the mediator, as in Ontario (unless the parties contract out of section 35 of the Ontario Act)? Could one argue for a more lax – or stricter – regime when the mediator is a separate person? We will have to await a further decision on that point.
A third issue may be raised by this decision: if the wife’s application to the court related to the conduct or legal issues arising from her application to the arbitrator the day before (what might be called the “re-hearing application”), would it have been out of time?
In the present case, the wife appears to have been complaining about issues that related back to the matters leading up to the settlement. She does not appear to have been complaining about the specific events or legalities of her re-hearing application the day before to the arbitrator. In this situation, the arbitrator and the court found that her application was out of time. But if she had been asserting that her re-hearing application had not been properly dealt with, how should the court have dealt with the timing issue? Did the arbitrator’s disposition of her re-hearing application amount to an arbitral award from which judicial review or an appeal would lie? Does the Act provide any relief in respect of such an application? The present decision did not have to answer those questions.
See Heintzman and Goldsmith on Canadian Building Contracts, 5th ed. Chapter 11
Pinder v. Woodrow, 2015 CarswellAlta 2182, 2015 ABQB 750
Arbitration – mediation – settlement – re-hearing application – appeal and review of arbitral awards
Thomas G. Heintzman O.C., Q.C., FCIArb January 24, 2016