Parties choose to arbitrate their family law disputes for many reasons: the privacy of the process, the cost, the ability to appoint a decision-maker who is a family law expert as opposed to our generalist judges, etc…   Arbitration is, in a sense, a “private court”.  One would, therefore, perhaps expect its process to mirror that of our Ontario courts.  Not so, says the recent decision of the Ontario Superior Court of Justice in Kroupis-Yanovski.  Thankfully, in this case, the court held that a process that differs from that of the courts can, and did, afford parties procedural fairness.  Or, put another way, there is more than one way to get a fair result.

Following separation, the wife commenced court proceedings claiming custody, support, equalization of net family property, and other relief. While the proceedings were ongoing, the parties entered into a consent order referring all of the issues to mediation/arbitrator and granting the arbitrator all of the powers of a Superior Court judge.  Following the order, the parties entered into a mediation/arbitration agreement appointing the arbitrator to mediate and, if mediation failed, permitting that same person to arbitrate the various issues between them. The Agreement permitted the arbitrator to determine the arbitration procedure in consultation with the parties’ counsel and that the procedure would be “similar to a court procedure where possible”.

The arbitrator had a volume of evidence to consider, including the parties’ sworn Financial Statements, their Tax Returns, bank account statements, credit card statements, and some information regarding past income-splitting by the husband. When determining the process for the arbitration (i.e. how it would happen), the arbitrator proposed to arbitrate via “final offer selection” (also known colloquially as a baseball style arbitration). The parties agreed. 

In this final offer selection process, the parties exchanged and provided the arbitrator with their final and best offer on all of the issues.  The parties then had 7 days to decide whether to accept the other’s offer. No offer was accepted, so the arbitrator held a brief oral hearing to enable the parties to make submissions. Following the hearing, the arbitrator selected the better offer, provided short reasons for why he did so and made an award in terms of that offer.  Under “final offer selection” there is no jurisdiction to make an award incorporating features of both offers nor is there any ability for the arbitrator to incorporate any of his own terms.  It is all or nothing – husband or wife’s offer in its entirety. 

Ultimately, the arbitrator chose the wife’s offer as the better offer.  The award followed her offer, along with brief reasons.  The husband was unhappy and appealed the arbitrator’s decision, claiming:

i)                    final offer selection was ill-suited to resolve multiple issue cases;

ii)                   the process did not include an opportunity to provide either sworn testimony or a right of cross-examination; and

iii)                 the arbitrator’s reasons were inadequate.

The court upheld the “final offer selection” process.  Both parties had agreed to it, both availed themselves of legal representation and each had an opportunity to provide written submissions and to respond to the other party’s written submissions. The court determined that “final offer selection” is not a process which, in itself, is contrary to law, even where there are multiple issues to be resolved.  The husband was barred from complaining about a process which was adopted with his full knowledge and consent, particularly since the arbitrator had given both parties the ability (which they rejected) to modify the final offer selection process.     

The Agreement provided the arbitration process was to be “similar to court procedure where possible…” The court held that “similar” does not mean identical or “the same as”. Instead, flexibility is codified in the Arbitration Act, which allows an arbitrator to determine procedure provided that procedure is fair and treats the parties equally. Procedural fairness demands that each party have the opportunity to present his or her case and to respond to the case of the other.  This does not necessarily mean an oral hearing is required.  Rather, one of main benefits of arbitration is the ability to craft an efficient and cost-effective process tailored to the parties and the case at hand and, thus, an oral hearing is not always called for.  In this case, the parties knowingly chose the baseball style process for themselves, following legal advice and a clear articulation of the pros and cons of same.  The court held that this was not a case of parties attempting to confer legitimacy on an unfair process.  Instead, it was a fair process willingly and knowingly crafted by and entered into by the parties, to which result the husband was bound.  Glad the court in this case did what I think a major league umpire would have done in the circumstances: despite having cried foul, the husband should be made to “PLAY BALL”!