British Columbia’s New Arbitration Act

, ,

On September 1, 2020, British Columbia’s Arbitration Act, S.B.C. 2020, c. 2 (the “New Act”) came into force. The New Act introduces important amendments that aim to improve the efficiency of the Province’s arbitral process. This will improve commercial dealings by clarifying ambiguities in the previous legislation and creating greater uniformity in arbitrations laws nationally. To that end, the New Act closely resembles The Uniform Law Conference of Canada’s Uniform Act. In turn, the Uniform Act is a national project that strives to harmonize Canada’s arbitration laws with the United Nations’ UNCITRAL Model Law. Generally, these national and international model laws seek to limit judicial intervention in arbitral proceedings, and, thereby, create greater certainty in private dispute resolutions. The New Act strives towards this end as well.

The New Act introduces several important changes worth highlighting. First, Sections 21 and 22 impose a duty on the arbitrator and parties, respectively, to seek a “just, speedy, and economical determination of the proceeding based on its merits.” This explicit focus on the timely and economic resolution of disputes is the principle that underpins all of the New Act’s reforms. Appeals, for instance, are sent directly to British Columbia’s Court of Appeal on questions of law (s.59). Likewise, the time period for appealing an arbitral award or setting it aside due to an apprehension of bias has been shortened from 60 to 30 days (s.60).

In further regards to time limits, section 11 of the New Act reads: “the law with respect to limitation periods for commencing court proceedings applies to commencing arbitral proceedings.” This provision was absent from the previous legislation, creating an ambiguity because British Columbia’s Limitation Act, SBC 2012, c 13, does not specify that it applies to arbitrations and it contains court-centric language. Consequently, it is now clear that parties to an arbitration agreement will have two years from the date that they knew or ought to of known they have a potential claim against another party to pursue arbitration or their claim will be statute barred.

Arbitrators now have expanded authority.  Section 23 of the New Act empowers arbitrators to rule on their own jurisdiction. Where this power is exercised as a preliminary matter, either party may refer the issue to the Supreme Court of British Columbia within 30 days of receiving notice of the arbitrator’s ruling for a re-determination. In exercising their jurisdiction, arbitrators are now permitted under section 25 of the New Act to apply equitable principles, whereas the previous legislation limited their authority to the application of statutory law.

Turning to procedures, the New Act no longer specifies default rules. The British Columbia International Commercial Arbitration Centre’s rules (“BCICA”) previously applied by default, unless the parties agreed otherwise. While the New Act removes any reference to the BCICA’s rules, it has incorporated some of their key elements. For example, section 29 allows arbitrators to subpoena non-party witnesses. Where parties have not specified and cannot agree on the applicable rules, arbitrators appear to have discretion under section 32 to make procedural orders that could include the selection of arbitral rules.

Where the parties cannot agree on an arbitrator, the selection is made by the legislation’s designated appointing authority. Under section 2 of the New Act’s attendant Arbitration Regulation, BC Reg. 160/2020, this appointing authority is the Vancouver International Arbitration Centre (“VIAC”).[1] Previously, such appointment disputes were resolved by application to the British Columbia Supreme Court. By creating the VIAC, the New Act increases efficiency by reducing arbitrations’ reliance on the courts. In addition, the VICA can set arbitrators fees and impose terms on awards whenever an arbitrator’s fees remain unpaid.

Finally, the New Act introduces three other significant changes that were previously absent from the legislation. First, a witness’s evidence is to be written, unless otherwise agreed to by the parties. Oral evidence is limited to cross-examinations. Second, section 68 requires confidentiality. The parties may not disclose information about the proceeding or its outcome. Third, arbitrators may grant interim orders, even on an ex parte basis. However, these orders do not constitute an arbitral award, nor are they enforceable in the courts.

The New Act applies to all arbitral proceedings commenced on or after September 1, 2020. However, it does not apply to proceedings that fall within the jurisdiction of the International Commercial Arbitration Act, RSBC 1996, c 233, nor does it apply to family law matters.

[1] The BCICA was re-branded as the VIAC.

/by

Conspiracy By Family Members

, ,

In Leitch v. Novac (2020 ONCA 257) the Ontario Court of Appeal held that “invisible litigants” cannot impede family law proceedings with impunity. Writing for the Court, Houringan J. described these invisible litigants as the parties’ extended relatives who insert themselves into family law proceedings far beyond the permissible grounds of providing emotional support. Rather, invisible litigants exacerbate litigation by encouraging the parties to advance needlessly adversarial positions and by helping to shield a party’s income and assets from the courts.

The Parties
The parties in this case were married for 17 years. They have teenage twin daughters. The Applicant-appellant (“Leitch”) is a law professor and mother of the children. The respondents are the children’s father (“Novac”), his casino management company (“Sonco”), members of the Novac family, two family trusts, and directors of Sonco.

Background
This case arose when Leitch filed for divorce and corollary relief from Novac. She subsequently amended her pleadings to include a claim of conspiracy against the above-noted respondents. On application by the non-family respondents, Justice Cory Gilmore of Ontario’s Superior Court held that Leitch’s conspiracy claim was appropriate for partial summary judgement.

Summary Judgement
In the summary judgment proceeding, Leitch argued that the respondents conspired to withhold business income from Novac until his divorce proceedings were completed. This allegation principally arose with regards to a buy-out of Sonco’s five-year management agreement with an Alberta Casino. Under that agreement, Novac was to receive 40% of the contract price as management fees. Consequently, Novac was entitled to 40% of Sonco’s $5.75 million buy-out as income (i.e. $2.3 million). Instead, the respondents diverted this income away from Novac by arranging a loan between Novac and his father. Memos and emails between Sonco’s Chief Financial Officer, Novac, and Sonco’s accountant suggested that this loan was structured with the purpose of shielding Novac’s share of the buy-out proceeds from Leitch’s corollary support claims.

In her decision, Justice Gilmore, as the motion judge, dismissed Leitch’s conspiracy claim on two grounds. First, she found that Leitch’s evidence failed to prove that Novac had the requisite knowledge to have committed the tort. Furthermore, the summary judgment appears to have been decided, in part, because no funds were actually transferred between the defendants.
Second, Judge Gilmore dismissed the claim on policy grounds. She held that the circumstances were analogous to Frame v. Smith, 1987 CanLII 74 (SCC), wherein the Supreme Court of Canada restricted conspiracy claims with regards to custody and child support. If conspiracy claims were not so restricted, Judge Gilmore reasoned that they would “become the new norm” in any family law case where a “payor spouse, in conjunction with a new spouse/relative/business partner, did not fully disclose income, unreasonably deducted expenses, or received income in the form of cash or goods” (para. 41). In effect, she surmised that conspiracy claims would become a form of punitive damages” (ibid.). Instead, she held that the existing legislation and its associated guidelines constitute a complete code from which Leitch could have sought an imputation of income against the father.

In her summary judgment, Justice Gilmore dismissed Leitch’s conspiracy claim and awarded a total of $1.2 million in costs against her for the proceedings.

The Appeal
The Court of Appeal found that Justice Gilmore made palpable and overriding errors of fact and law. Taken in turn, she misunderstood critical email evidence relating to the alleged conspiracy that was sent between Sonco’s Chief Financial Officer, accountant, and Novac. Next, the Court of Appeal also suggested that Justice Gilmore may have erred in law by accepting the argument that the tort of conspiracy requires an actual transaction, when, in fact, a temporary withholding of funds to impede another party’s entitlement can constitute an “act in furtherance to a conspiracy” (para 51).

On the public policy basis for dismissing Leitch’s claim, the Court of Appeal rejected Justice Gilmore’s reasoning because limiting the tort of conspiracy from family law proceedings would enable invisible litigants to interlope in court proceedings with impunity. While Justice Gilmore was correct in holding that an imputation of income claim would enable a claimant to get access to otherwise withheld funds, this remedy does not address the subsequent enforcement problem that arises when a payor has made themselves creditor-proof by conspiring with invisible litigants (para. 47).

Finally, the Court of Appeal made two further procedural comments. First, it held that this case should not have been bifurcated because the factual basis for Leitch’s conspiracy and support claims were indistinguishable. Contrary to the principle established in Hryniak v. Mauldin, 2014 SCC 7, this created the “substantial risk of inconsistent outcomes” between the summary judgement and the subsequent trial. Second, the Court of Appeal found the motion judge’s costs award “troubling.” Citing Yaiguaje v. Chevron Corporation, 2017 ONCA 827, the Court of Appeal reaffirmed the courts’ obligation to ensure that protection orders, such as security for costs, are not misused as litigation tactics. In this case, the motion judge should have considered the order holistically, assessing whether the overriding interests of justice are served by the order sought. In other words, the motion judge’s costs awards were excessive because they would have impeded Leitch’s ability to proceed with the subsequent trial.

Due to Justice Gilmore’s errors of fact and law, the Ontario Court of Appeal remitted this case back to the Superior Court for a re-determination at trial. The $1.3 million dollars in costs were set aside, and Leitch was awarded costs on the appeal.

For our readers, the principle provided by Leitch v. Novac is that family members acting as invisible litigants are not immune from liability.

/by