Written by Vasilis F.L. Pappas, Romeo Rojas and David J. Wahl
In its recent decision, Flock Estate v Flock, 2019 ABCA 194, the Alberta Court of Appeal considered the extent to which evidence and submissions proffered in an arbitration might be admissible in a related court proceeding.
The case reveals that there is a material risk that confidential information in an arbitration may be admissible in related litigation or arbitration proceedings. Accordingly, when faced with the possibility of multiple arbitration or court proceedings, parties should assume that anything they say in one proceeding may be used against them in another and should take care to ensure the positions they are taking in each proceeding are consistent.
Doran Flock and Arlene Flock married in 1982, purchased a property as joint tenants in 1993, separated in 1994, and divorced in 1999. In 2002, the parties agreed to arbitrate a dispute over the property. An award was issued in this arbitration, but was subsequently set-aside. Arlene Flock subsequently died in 2014 with the property action unresolved.
In 2015, the Estate of Arlene Flock commenced a court action in Alberta in connection with the property dispute and attempted to introduce certain materials from the arbitration into the court action, including the final award and submissions by counsel. Doran Flock objected, claiming they were inadmissible. The lower court admitted the arbitration materials, and Doran Flock appealed.
The Alberta Court of Appeal Held That Some Arbitration Materials Might Be Admissible
The Court of Appeal found that the final award was inadmissible, as it had been set-aside and the arbitrator’s findings were therefore merely his personal opinion and had no binding effect or probative value. The Court of Appeal likewise held that evidence recited in the final award was inadmissible, holding that those portions of the award were merely hearsay. And finally, the Court of Appeal found that counsel's arguments in the arbitration were inadmissible as such arguments merely represented litigation positions.
However, the Court of Appeal observed that some materials generated in an arbitration might be admissible in related proceedings. For instance, it indicated that the sworn testimony of witnesses, expert reports, and transcripts from an arbitration might be admissible in a related proceeding.
The privacy and confidentiality of arbitration is not absolute. While arbitration is typically a private and confidential process, it does not necessarily follow that materials submitted in an arbitration will be kept confidential. There is always a risk that a party to arbitration proceeding may voluntarily produce—or be compelled by a court or tribunal to produce—materials from that arbitration in related or parallel court or arbitration proceedings. The Court of Appeal’s decision in Flock gives some comfort that pleadings and legal submissions in an arbitration may be inadmissible in related proceedings; nevertheless, it affirms that sworn witness statements, expert reports and transcripts from a prior arbitration may be admissible in future proceedings.
There is broader scope for disclosure of such materials in parallel or subsequent arbitrations. In the context of related arbitration proceedings—where the courts’ strict rules of evidence do not apply—there remains a significant risk that a party may be allowed (or compelled) to produce not only sworn witness statements, expert reports, and transcripts of testimony in an arbitration, but also the parties’ submissions and related documents in an arbitration.
When there is the potential for multiple related proceedings, plan accordingly. As a best practice, parties faced with the prospect of multiple arbitration and litigation proceedings should assume that their evidence and submissions in one proceeding may be disclosed in other proceedings. It is therefore important for parties faced with such a situation to consider how the various claims and defences that they intend to raise in the different proceedings interact so that they can develop a consistent and unified theory of the case, and so that they do not advance inconsistent positions.