Family Arbitrator’s Jurisdiction Challenged

B9316548187Z-1.1_20150314202542_000_GFTA6A1QO.1-0A family arbitration case from Ontario raises several interesting issues for arbitrators and counsel alike. In Giddings v. Giddings, 2019 ONSC 7203 a couple entered into mediated Minutes of Settlement after several years of litigation.

One of the terms of the Minutes was that an appraiser would be retained to appraise certain real property and if the parties could not agree on the division of the property, an arbitrator would deal with the issue of equalization of family property.

Perhaps predictably, the parties could not agree on the value of one property referred to as Chartwell, and the mediator, Stephen Grant, put on his arbitrator’s “hat” and determined that he had the authority to override the opinion of the appraiser, a finding that led Mr. Giddings to appeal the arbitrator’s decision and file an application to set aside the award.

One of the grounds advanced by Mr. Giddings was that the parties had not signed an arbitration agreement and hence, the arbitrator had no authority to proceed with the matter.

The relevant term in the Minutes of Settlement read:

“Counsel shall resolve all outstanding issues with respect to the parties’ respective Net Family Property, save and except for the present-day value of the properties, real estate commission and capital gains, which will be resolved once the value for the properties listed in paragraph 23 and 27 are determined as provided for in this agreement. In the event the parties are unable to resolve the Net Family Property issues by September 30, 2018, the issue of equalization shall be summarily arbitrated by Mr. Stephen Grant, by way of written submissions. The parties shall proceed to domestic violence screening and thereafter execute an Arbitration Agreement with Mr. Stephen Grant.”

Arbitrator Grant invited submissions with respect to the dispute over the value of Chartwell and the invitation was answered by Ms. Giddings who alleged bias in the report based on Mr. Gidding’s interference with the appraiser. She took the position that the arbitrator was not bound by the appraiser’s opinion but could himself make a decision with respect to value. She also relied on a second appraisal that she commissioned.

With respect to the absence of a signed arbitration agreement, the arbitrator opined that based on the conduct of the parties and their engagement with him on the outstanding issues, they were estopped from challenging his jurisdiction.

The first question considered by the court was whether the arbitrator had jurisdiction where the parties had not executed an arbitration agreement. Justice Gray ruled that the arbitrator did not have jurisdiction, confirming that the formal requirements set out in the Arbitration Act were not discretionary.

The Court then considered whether the arbitrator had the authority to determine the ambit of his jurisdiction and whether the arbitrator’s decision was reviewable. Gray J. found that the arbitrator had ample authority to express his view that he had jurisdiction and authority to determine the value of Chartwell for the purpose of equalization. The Court noted that he interpreted the Minutes of Settlement as a whole and considered the surrounding circumstances.

He remarked that the language of the Minutes “that the issue of equalization shall be summarily determined by Mr. Grant” provided the arbitrator with the ultimate authority to determine the value of the property and that he was not inexorably bound to accept the appraiser’s opinion for the very reasons identified by Ms. Giddings, namely that certain weaknesses may affect the appraiser’s analysis.

The Court also confirmed that the standard of review of an arbitrator’s award will be “reasonableness” unless the question is one that would attract the “correctness” standard, such as a constitutional question or questions of law of central importance to the legal system as a whole and outside the arbitrator’s expertise.

Finally, the Court considered whether it had the authority to order the parties to enter into an arbitration agreement and confirmed that the Court had that authority. In the Minutes of Settlement the parties agreed to enter into arbitration. Relying on Lopatowski v. Lopatowski, 2018 ONSC 824, 140 O.R. (3d) 731 (S.C.J.), the Court cited the following passage:

“In this case, the parties had entered into a clear agreement to the use of a parenting coordinator with broad powers to assist them in parenting disputes, which was to include arbitral authority if necessary. The principle of good faith and honest contractual performance would require that the parties take the steps necessary to make that agreement operative. In a case such as this, the parties, represented by experienced counsel, would know that certain formalities would be required, including statutory formalities.”

Justice Gray commented that the only reason offered for refusing to execute an arbitration agreement was the fact that the arbitrator advised the parties that he had the authority to decide the value of Chartwell, an insufficient reason to breach the contractual terms of the Minutes of Settlement.

The Court dismissed Mr. Gidding’s appeal and application and ordered the parties to sign an arbitration agreement with Mr. Grant.

Lawdiva aka Georgialee Lang

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