The lawyers in a long-running divorce case say arbitrations with unlimited rights of appeal are growing in popularity as family law litigants prioritize control and speed of the process ahead of finality.
In 2009, after four years of waiting for a trial in their child and spousal support dispute, Kathleen Patton-Casse and Mark Casse signed an agreement to arbitrate that provided that either party could appeal the decision on a question of law or fact or a question of mixed law and fact.
Casse appealed the ruling by arbitrator Dennis Lane, a former Superior Court judge, and was partially successful as Ontario Superior Court Justice John McDermot set aside a retroactive order for child support. McDermot also substantially cut the spousal support award after finding Lane misstated the law on the tax implications of a retroactive spousal support lump-sum payment and allowed Casse to be reimbursed for mistaken overpayments that Lane had ruled were out of bounds.
On Oct. 25, a three-judge panel of the Court of Appeal for Ontario upheld McDermot’s interference with the arbitral award. They noted the Arbitration Act significantly limits the appeal of awards and that contracting out of this limitation was “unusual.”
“Finality is particularly important in family law cases and the benefits of a final resolution — imperfect as it may be — to the parties and their children cannot be overstated,” wrote Associate Chief Justice Dennis O’Connor for the court.
“In a case such as this, however, in which the parties must be presumed to have made a fully informed decision to agree to leave the door open to appeal the arbitrator’s award, the appeal judge was not mistaken in his articulation of the applicable standard of review.”
But broadly drafted appeal rights are more routine than the appeal court judges suggest, according to Gary Joseph, the lawyer for Casse.
“When I’m involved, I’m always concerned and conscious about appeal rights, so I like to make the agreement as broad as possible so my client has that option,” says Joseph, chairman of MacDonald & Partners LLP.
“With great respect to justice Lane, he made some serious errors. If you look at the dollar difference between what he did on the arbitration and what was upheld on appeal, it’s huge. . . . Mistakes happen. I make them every week in my practice. Everyone does. Happily, we were able to correct it all here.”
Sarah Boulby, the partner at Basman Smith LLP who represented Patton-Casse, says she was also surprised by the Court of Appeal’s description.
“I don’t think it is unusual anymore,” she says. “It’s quite typical. In many cases, people negotiating in family cases say, ‘Well, if we’re going to have appeal rights, let’s have full appeal rights.’”
In this case, she says it was the crowded trial list at the Newmarket, Ont., courthouse that spurred the parties to go for arbitration. After the application was launched in 2005, it was twice listed for trial without ever being called.
Since they were prepared for a trial, the parties were happy to maximize appeal rights in the arbitration.
“I think it’s really a failure of the system that this case was on the trial list twice without being heard,” says Boulby. “Who knows when it was going to get heard? Newmarket is really overloaded and the delays there are terrible. They haven’t been able to get the judges and expand to match the incredible population growth in the region. But they’re not the only one with trouble.”
The case actually dates all the way back to 1999 when the nine-year marriage ended. The pair, both horse trainers, had three children together after meeting at Woodbine racetrack where Casse holds the record for most wins by a trainer.
A 2001 consent order settled financial and custody issues, but in 2005, Patton-Casse brought a motion to vary the 2001 terms. She cited a material change in circumstances because her horse-training business had failed and her eldest son had been diagnosed with Asperger syndrome.
After agreeing to arbitration, they spent five days before Lane, who ordered Casse to pay backdated child support. He also ordered backdated spousal support that, by the time it was set to be reviewed in 2014, would have cost Casse more than $700,000. He also ordered Casse to pay Patton-Casse’s costs of arbitration on a full indemnity basis of $300,000, including $100,000 in forensic accounting fees.
On appeal, McDermot set aside the child support order, finding Lane got it wrong when he appeared to attribute blameworthy behaviour to Casse for refusing to disclose his income despite an earlier court order declaring that he didn’t have to reveal it. He also ordered a $177,000 lump-sum payment to Patton-Casse to settle the spousal support dispute with no prospective support to be paid and cut the arbitration costs award to $179,000.
Both sides appealed that decision, but the Court of Appeal dismissed both and neither side is interested in taking the matter any further.
“A fair degree of litigation fatigue has set in now,” Joseph says.
Boulby says the case highlights the downside of unlimited appeal rights with arbitrations. Lane made his final arbitration award more than two years ago in August 2010.
“One of the problems with arbitration is the first appeal is not to the Court of Appeal, it’s to the Superior Court,” she says.
“It took an incredibly long time for that level of appeal, which meant it was a very extended process. . . . Arbitration in the end wasn’t faster because of that extra layer of appeal, but going into the arbitration, we couldn’t have known there would be an appeal.”
But Joseph says the outcome justifies the original open-ended appeal clause inserted into the arbitration agreement. “Mark faced some negative media reporting after the arbitration award with no retraction or later followup,” he says. “If we’d just agreed on the restrictive appeal rights under the Arbitration Act, he might have been stuck with it and been financially ruined, as well as the ruinous affect on his reputation.”
Despite the lack of finality, Joseph says parties still have a lot to gain from the arbitration process.
“You can certainly have more flexibility in arbitration than in the court system just by being able to stretch or condense days and carry on into Saturday if that’s what you need to get it completed,” he says.
