An explanation of how mediation-arbitration in family law works: the initial arrangements, the process, the advantages and the disadvantages.
By Malcolm C. Kronby (Ontario)
Over the past five years or so there has been an increasing tendency in family law disputes to use a hybrid mediation-arbitration process. This brief paper will attempt to explain how mediation-arbitration (hereafter “med-arb”) works: the initial arrangements, the process, the advantages and disadvantages. Some of this is personal and anecdotal, deriving from my experience in conducting hundreds of ADR processes over the past twenty years or so.
Mediation-Arbitration in Family Law: Ensuring a Balanced Process
In a med-arb process typically, but not always, the same person acts as mediator and arbitrator. This is a problem for some parties and their counsel and is far from universally accepted. Of course, the parties can agree to mediate without agreeing to arbitrate, just as they can agree to arbitrate without first mediating. It follows that if med-arb is conducted by one person, the parties and their counsel trust that person to conduct a fair and balanced arbitration, no matter what he or she has heard in the mediation process (this will be closed mediation). It is analogous to a judge conducting a mediative pretrial conference, and then acting as the trial judge. Paul Jacobs put it this way:
“The parties may sometimes be concerned with an arbitrator having been the mediator with whom inside secrets were shared in a mediation caucus. The parties have to trust the neutrality of the professional to fulfill not only the functions of a mediator, but if those fail to yield a settlement, then they must have equal trust in the competence and fairness of the professional as an arbitrator who is to make a final decision respecting their matters. Moreover, there is the risk that a slightly unsure party may not be prepared to disclose important matters during a mediation for fear that it might somehow taint or prejudice a subsequent arbitration.”[1]
I would not expect med-arb to occur unless both parties are represented by knowledgeable counsel. Indeed, I would not undertake the med-arb process unless the parties are represented. I will do either mediation or arbitration with an unrepresented party, although some of my colleagues refuse to do so.
Med-arb may arise in the context of litigation as a result of a consent interim order, or by the agreement of the parties. It can never be imposed. The med-arb agreement or order includes or necessarily implies a waiver of section 35 of the Arbitration Act, which states, “The members of an arbitral tribunal shall not conduct any part of the arbitration as a mediation or conciliation process or other similar processes that might compromise or appear to compromise the arbitral tribunal’s ability to decide the dispute impartially.”
In Marchese v Marchese[2]the parties, who had been engaged in litigation, entered into a consent order that obligated them to attend for med-arb regarding all issues. Following an unsuccessful mediation, the husband refused to participate in arbitration. He brought on a motion to set aside the consent order. His motion was stayed and he appealed. The Court of Appeal stated:
“We do not agree with the submission that there is any ambiguity in the words “mediation/arbitration” or that those words mean “mediation or arbitration.” Mediation/arbitration is a well recognized legal term of art referring to a hybrid dispute resolution process in which the named individual acts first as a mediator and, failing agreement, then proceeds to conduct an arbitration.
“In our view, the mediation/arbitration agreement may be reconciled with the Arbitration Act, s.35 which prevents an arbitrator from “conducting any part of the arbitration as a mediation.” If s.35 applies (a point we need not decide) it can be waived and the agreement to engage in “mediation/arbitration” in this case amounted to a waiver.”
Med-arb agreements are now specifically recognized in regulations under the Arbitration Act (Ontario Regulation 134/07).
In a case where the parties consented to an order for med-arb, the order provided that they would enter into a med-arb agreement. The husband neglected or refused to sign the agreement, and subsequently, in a motion where he attempted to derail the arbitration, he argued that it could not proceed although there was a consent order, because there was no specific agreement. The judge ruled that the execution of the med-arb agreement was a performance obligation, but was not necessary in order to proceed with the arbitration[3]. Because of subsequent amendments to the Family Law Acr and Arbitration Act any valid “family arbitration” now requires a “family arbitration agreement” In writing with independent legal advice to each party. Also, the arbitration must be conducted in accordance with the law of Ontario or a Canadian province, so rabbinical law or sharia law or even the law of England or the United States cannot be applied.
The same case provides instruction on the conduct of the med-arb where the mediator and arbitrator are different persons. The parties had agreed in the consent order that my colleague, Philip Epstein, would mediate the issues, and if the parties could not reach an agreement, I would arbitrate the issues. Before the mediation process got started the wife asserted that she had not received the financial disclosure from the husband that was necessary to enable her to prepare meaningfully for the mediation. Her lawyer wrote to both the mediator and arbitrator to request that the arbitrator make an order that the husband provides the outstanding financial disclosure by a certain date and that the mediation be rescheduled to a later date, for the stated reason that he did not think the mediator had jurisdiction to make an enforceable order for financial disclosure. The arbitrator replied that he had discussed his letter with the mediator, and also agreed that a motion for disclosure should be brought before the arbitrator, and the matter could then move back into mediation. The judge found that the better procedure would have been to complete the mediation process before communicating with the arbitrator and said:
“In a two-step procedure such as the one agreed to by the parties, it would have been preferable for the applicant to ask the mediator to request financial disclosure by the respondent as a condition precedent to continuing the mediation. It is highly likely, with a professional and knowledgeable mediator, that if one party fails to make all of the financial disclosure after being requested to do so by the mediator, the mediator would terminate the mediation… As a practical matter, if one party is not prepared to provide relevant financial disclosure before mediation, mediation is like to be a waste of time. The parties might as well get on with arbitration…
“An arbitrator’s jurisdiction is to arbitrate and to make rulings and/or orders which are relevant to the arbitration proceedings. The arbitrator’s jurisdiction does not include the power or the authority to make rulings/orders that are related to the mediation process or supervise the mediation process.
“It is preferable in a two-step process that there is no communication between the mediator and the arbitrator on any subject except whether the mediation is concluded.”
Hercus v Hercus: Wher Med-Arb Went Wrong
Hercus v Hercus, [2001] O.J. No. 534, is a case where a med-arb went horribly wrong. By agreement of the parties, a psychologist was dealing with issues of custody, access and child support. The matter moved back and forth between mediation and arbitration sometimes bypassing the mediation phase of certain issues, was replete with ex parte communications and withholding of information from the wife, and excesses of jurisdiction. The wife applied to set aside two arbitration awards and to remove the arbitrator and his firm from the case, and to deal with some costs that the arbitrator had awarded against the wife in excess of jurisdiction. The application was granted, the arbitral decisions were set aside, and the court ordered the trial of the issues of custody and access.
In the mediation phase of med-arb, the parties will perceive that the mediator’s recommendations may well be promulgated if the matter proceeds to arbitration, so they are likely to settle in mediation. This is a huge advantage over pure mediation, which lacks any (benign) coercive element; the parties can just walk away from mediation.
An example of benign coercion occurred a few years ago when I was conducting the mediation phase of a med-arb. Under the Family Law Act, there is a right and obligation to equalize “net family property” meaning, roughly, the net worth built up during married cohabitation regardless of who contributed to it. The settlement was blocked because counsel for the husband insisted that an investment account in his name and deriving from his contributions was his separate property and not the proper subject of equalization, which was absolutely wrong in law. I recessed the mediation to meet with counsel for the parties. I told counsel for the husband that her position was untenable, and that if the matter proceeded to arbitration, I would undoubtedly rule that the investment account was subject to equalization. She immediately accepted what I said — she had probably just been posturing in the mediation — and less than an hour later the whole case was settled.
Preliminary Determination of an Issue by an Advisory Opinion
Some med-arb agreements provide for a preliminary determination of an issue by an advisory opinion. The advisory opinion is completely non-binding, whereas a bifurcated issue would produce a binding result, but it often helps the parties either to understand what evidence they will need at an arbitration hearing or enables them to settle a conflicted point. As one example, I was arbitrating a case where there was an issue about the valuation date for the equalization of net family property. Under the Family Law Act “valuation date” has several definitions, the most common being “the date on which the spouses separate and there is no reasonable prospect of resumption of cohabitation.” This can be seriously and legitimately controversial, especially in circumstances where the parties are living apart but actively pursuing reconciliation, and an earlier or later valuation date may have significant financial consequences. The parties called for a non-binding advisory opinion about the valuation date on an agreed statement of facts, which enabled them to resolve that issue.
The downside of an advisory opinion which, of course, can only happen if the parties want it and invoke it, is that one side may be inconsolably unhappy, and then may seek by whatever means to delay, obstruct or avoid the arbitration hearing and award.
Sometimes a case cannot be settled in mediation despite strenuous and bilateral efforts to do so. I have had several examples of declaring mediation ended, and when I addressed setting up the arbitration process, counsel for both parties said that I have already heard and seen everything I need, so there is no need to have an arbitration hearing: just make a decision. In that situation, parties and their counsel will sign an amending agreement declaring that the mediation is deemed to be open rather than closed and to waive calling evidence at an arbitration hearing.
Med-arb is a pragmatic way to resolve family law issues in ADR. When the parties enter into a med-arb agreement, it may fairly be said that the case is over, in the sense that everybody knows it will come to an expeditious end. In the course of the mediation phase, although nothing will be prejudged, the parties are much more likely to be sensitive and responsive to the recommendations of the mediator. The prospect of settlement is enormously enhanced.
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[1] Paul Jacobs, “MedArb in Family Law —Then, Now and….?,” International Bar Association Mediation Newsletter, April, 2006
[2] (2007), 35 R.F.L. (6th) 291 (Ont. C.A.)
[3] Kay v Korakianitis, (2007), 40 R.F.L. (6th) 402, Murray J.(Ont. S.C.J.)
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Malcolm C. Kronby, J.D., Q.C., Cert. F. Arb., is counsel at Epstein Cole (Toronto, Ont.) and a family law specialist certified by the Law Society of Upper Canada (LSUC). Since 1965, his practice has focused almost exclusively on family law, encompassing nearly every aspect of the field. He has served as counsel in more than 160 reported decisions at trial and appeal.
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