Alberta – arbitrator’s findings in award have no probative value or binding effect if award set aside – #195

In Flock Estate v. Flock, 2019 ABCA 194, Alberta’s Court of Appeal overturned a chambers judge’s order which had allowed an arbitral party to reuse material from an arbitration in which the final award had been set aside.  Such an award was “ineffectual”, reflected only the “personal opinions” of the arbitrator and had no probative value.  Once set aside, the award did not serve to “crystallize” the interests of the parties or serve to create any issue estoppel.

The litigation stemmed from the dissolution of the marriage between DF and AF and a joint-tenancy entered by the spouses prior to their marriage.  DF and AF had married in 1982, purchased a property (“Prospect Avenue Property”) in 1993, separated in 1994 and divorced in 1994. AF passed away in 2014 and her estate carried on her involvement the litigation. 

The dissolution and the joint tenancy gave rise to various dispute resolution matters including court litigation, then arbitration and lastly post-arbitration mediation.  The outline of the dispute resolution, including applications in first instance and appeals in court, appear in the reasons at paras 3-9.

The dispute resolution included a matrimonial property litigation commenced by DF in 1996 and litigation to sever the joint tenancy commenced in 2015 by AF’s estate. 

During the course of their dispute, the spouses had agreed in 2002 to arbitrate the division of the matrimonial property.

[4] There were no children of the marriage, and the only outstanding issue was the division of matrimonial property. In February, 2002 the parties agreed to arbitrate their dispute, and the six day arbitration hearing was completed in September, 2003. The arbitrator did not deliver his award until 33 months after the hearing. That award was set aside by a Queen’s Bench judge: Flock v Flock, 2007 ABQB 307 (CanLII), 77 Alta LR (4th) 20, 418 AR 350. Leave to appeal was denied: Flock v Flock, 2007 ABCA 287 (CanLII), 42 RFL (6th) 9.

Further to motions and appeals, the matrimonial property litigation was dismissed for delay in 2017.  The litigation to resolve the joint tenancy continued.

A set of applications in the joint tenancy litigation lead to rulings by the chamber judge on various applications including whether any findings from the arbitration were admissible as evidence. This note considers only the issue of reusing material from the arbitration proceedings.

The Court cited, but did not have to apply, Rule 3.14(1)(f) of the Alberta Rules of Court, Alta Reg 124/2010 which provides that:

When making a decision about an originating application, other than an originating application for judicial review, the Court may consider the following evidence only:

(f) evidence taken in any other action, but only if the party proposing to submit the evidence gives each of the other parties 5 days’ or more notice of that party’s intention and obtains the Court’s permission to submit the evidence”.

Having flagged this provision at the onset of its analysis, the Court returned to it later at the close of its reasons and then only to remark that, if applicable, the rule stipulated that reuse of such evidence was subject to the trial judge’s consent.

At paras 24-32, the Court of Appeal examined the admissibility of affidavit evidence filed on behalf of AF’s estate which referred “at length” to the arbitration proceedings.  DF applied to strike those portions of the affidavits referring to the arbitration, arguing that the arbitration had been declared a “nullity”.

The chambers judge dismissed that portion of DF application.  He decided that the arbitration proceedings might be relevant to the intentions of DF and AF regarding the Prospect Avenue Property.  Also, because AF was now deceased, allowing the hearsay in those proceedings was “necessary”.

The Court of Appeal noted that the arbitration dealt with all the matrimonial property and not just the Prospect Avenue Property which was the subject of the litigation to sever the joint tenancy.  The Court observed that “[i]t is unlikely that one could effectively isolate the arbitrator’s treatment of the Prospect Avenue property from his treatment of all of the matrimonial property.

The Court referred to section 37 of the Arbitration Act, RSA 2000, c A-43 which stipulates that an award binds the parties unless it is set aside or varied under sections 44 or 45.  A valid award would produce “a form of issue estoppel with respect to their interests in all of the matrimonial property, including the Prospect Avenue property, and neither party would be able to re-litigate those issues”. However, because the award had been set aside, “it was ineffectual in crystallizing the interests of the parties”.

The grounds for setting the award aside were “of little consequence”.  Having been set aside, the award “has no bearing on the rights of the parties, and is irrelevant”.  The Court of Appeal extinguished any light the award could have cast on the parties’ dispute: “The arbitrator’s opinion and ineffectual ruling about what should happen to the Prospect Avenue property is not evidence of anything other than his personal, and ultimately ineffective opinion.

Later in its reasons, the Court returned to the role of the award to address a variation on the argument made by AF’s estate.  Rather than rely on the affidavit material alone, AF’s estate also adduced the award itself as evidence.

[30] The respondent estate also introduced as evidence the arbitration award, highlighting the arbitrator’s findings about the positions of the parties, their alleged contributions to the purchase and improvement of the Prospect Avenue property, and his proposed division of that property. None of that material is admissible evidence. To the extent that the arbitrator recites the evidence before him, his statements are hearsay. To the extent that he resolves conflicts in the evidence, or makes findings about the entitlements and equities of the parties, his statements are merely his personal opinion. They were struck, so they have no binding effect, and they have no probative value in subsequent proceedings.

AF’s estate argued that the arbitration proceedings could serve a second purpose.  It proposed that the arguments made to the arbitrator, in themselves, demonstrated the parties’ respective intentions regarding how to deal with Prospect Avenue.

The Court disagreed, stating that counsels’ arguments made to the arbitrator are “not evidence of anything other than the party’s litigation position at that time.”  Other than the situation in which counsel makes a “binding admission” as noted in T.L. v. Alberta (Director of Child Welfare), 2006 ABQB 104 paras 25-26, counsel’s arguments have no probative value.  See Canadian Parks and Wilderness Society v. Copps, 2002 FCA 106.

The Court did leave open the application of Rule 3.14(1)(f) for a later application to the trial judge. Acknowledging the economy and efficiency in reusing evidence from either the matrimonial property litigation or the arbitration, the Court underlined that its reasons did not touch on the topic and that the party seeking to reuse that evidence would need to obtain consent from the trial judge.

urbitral note – the reasons do not address the status of interim findings or conclusions made in earlier procedural steps in the arbitration but which were not set aside.  The Court’s reasons leave open the possibility that issue estoppel and binding admissions may arise from earlier, unchallenged steps.