A recent decision of the Nova Scotia Supreme Court concludes that where the parties use a "specific" rather than a "universal" arbitration clause the court will still lean towards remitting the matter to arbitration.
In Black & MacDonald Ltd v. Degremont Ltee 2009 NSSC 85. In the case the defendant ("DL") had contracted with Halifax to build three sewage treatment plants. DL then contracted with the plaintiff ("BM") for the supply and installation of some of the treatment systems and equiptment. The contract between DL and BM contained a clause wherein the parties agreed to submit disputes about interim payments to arbitration. A dispute arose over an interim payment and BM commenced an action in the Supreme Court of Nova Scotia. DL then applied for a stay of the action, on the grounds that the arbitration clause applied to the dispute in question.
Justice Coady considered the law. Because the arbitration clause was not a "universal clause" (that is, one that remitted all disputes to arbitration). It was a "specific" clause. His Lordship was accordingly required to analyse carefully the nature of the dispute to see if it came within the arbitration clause. Normal contractual interpretation principles were to be used to determine whether the dispute fell within the arbitration clause. He noted too however that if there was any doubt the matter should be resolved in favour of arbitration. In the end he concluded that the matter did fall within the clause. He stayed the action and remitted the parties to arbitration.
The moral of the story? If parties are to consider arbitration as an alternative dispute resolution system they should use "universal" rather than "specific" arbitration clauses. Use of "specific" clauses simply invites litigation over whether the dispute should be resolved through arbitration or the court--which in the end surely defeats the entire purposes of having any type of arbitration clause in the first place.
Showing posts with label arbitration. Show all posts
Showing posts with label arbitration. Show all posts
Wednesday, March 18, 2009
Saturday, February 21, 2009
Following the wrong path ...
Arbitrations are often conducted by lawyers (both as advocates and as arbitrators). As a result there can be a tendency on the part of the players to replicate rather than avoid the formalities of the traditional legal system. The tendency must be resisted if it is not to eviscerate the benefits of ADR.
A recent case out of Ontario demonstrates what can go wrong if arbitrators and advocates are not more cautious about transferring court-like procedures into the arbitration process. In Van Kempen v. Brown Pineo Insurance Brokers Ltd a dispute arose between an employer and an employee. The employee considered himself dismissed in December 2003. Arbitration proceedings (pursuant to the employment agreement) were commenced. After a 23-day hearing the arbitrator released decisions on various aspects of the dispute in February and April 2008. Damages of $285,500 were awarded to the employer together with costs of $355,800.
The history of this case raises a question and a concern. First, why did it take more than four years to get to a hearing (or at least a decision), and why did the hearing take so long? Was it because the lawyers and the arbitrator chose the "traditional" approach of the courts to evidence and procedure? If so, wouldn't that defeat one of the ends of the arbitration process, which is to substitute more flexible (hence less expensive and quicker) procedures for those of the courts?
Second, the fact that the costs (which had been awarded on a full indemnity basis because of the losing party's failure to accept some offers to settle) were so high--higher than the damages awarded--raises the possibility that "ordinary" people will be reluctant to try arbitration because of the fear of the consequences. Which means that deep-pocked litigants will be able to "scare" impecunious opponents to give up otherwise meritorious claims or defences.
When that happens in the courts we become justly concerned about the resulting denial of access to justice. What then do we say when it happens in the field of arbitration--a field that at least in part was fashioned to address the problem that people couldn't afford to access justice through the court system.
A recent case out of Ontario demonstrates what can go wrong if arbitrators and advocates are not more cautious about transferring court-like procedures into the arbitration process. In Van Kempen v. Brown Pineo Insurance Brokers Ltd a dispute arose between an employer and an employee. The employee considered himself dismissed in December 2003. Arbitration proceedings (pursuant to the employment agreement) were commenced. After a 23-day hearing the arbitrator released decisions on various aspects of the dispute in February and April 2008. Damages of $285,500 were awarded to the employer together with costs of $355,800.
The history of this case raises a question and a concern. First, why did it take more than four years to get to a hearing (or at least a decision), and why did the hearing take so long? Was it because the lawyers and the arbitrator chose the "traditional" approach of the courts to evidence and procedure? If so, wouldn't that defeat one of the ends of the arbitration process, which is to substitute more flexible (hence less expensive and quicker) procedures for those of the courts?
Second, the fact that the costs (which had been awarded on a full indemnity basis because of the losing party's failure to accept some offers to settle) were so high--higher than the damages awarded--raises the possibility that "ordinary" people will be reluctant to try arbitration because of the fear of the consequences. Which means that deep-pocked litigants will be able to "scare" impecunious opponents to give up otherwise meritorious claims or defences.
When that happens in the courts we become justly concerned about the resulting denial of access to justice. What then do we say when it happens in the field of arbitration--a field that at least in part was fashioned to address the problem that people couldn't afford to access justice through the court system.
Wednesday, February 18, 2009
On-the-fly procedures ...
The other day I performed a med/arb fashioned by the parties. They recognized that there wasn't much dispute on the facts (as opposed to their legal consequences). They suggested that I meet with each side and hear their evidence (in the absence of the other), and then attempt to mediate a settlement. If that didn't work, I was to decide whether I had enough information to make a binding decision without a "formal" hearing. If so, they were content to let me make a decision. If not, I could hear evidence and cross-examination and then make a decision.
What I found interesting is that the parties recognized what most decision-makers will tell you: the issues that divide parties are rarely factual; they are more often about the emotional reaction of the parties or the legal inferences or consequences to be drawn from those facts. Why then is it necessary to burden the parties with the requirements of formal proof? Why not let them tell their story in their own words (which is what they so often want to do) and then provide them with a decision. Much quicker, much cheaper and, I believe, ultimately much more satisfying to the parties.
What I found interesting is that the parties recognized what most decision-makers will tell you: the issues that divide parties are rarely factual; they are more often about the emotional reaction of the parties or the legal inferences or consequences to be drawn from those facts. Why then is it necessary to burden the parties with the requirements of formal proof? Why not let them tell their story in their own words (which is what they so often want to do) and then provide them with a decision. Much quicker, much cheaper and, I believe, ultimately much more satisfying to the parties.
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