How Arbitration can help

How Arbitration And Mediation Can Help The Personal Representative
and Trustee

by John Ross Martyn
Barrister-at-Law

(From Issue 5,July 1998)

There is at the present time a good deal of discussion of arbitration and mediation as alternatives to litigation. However, the discussion is often carried on in somewhat general terms. This article will suggest some specific kinds of dispute about Wills and Trusts in which arbitration and mediation may possibly be used with advantage.

Some of my remarks are relevant to both arbitrations and mediations. However, the fundamental differences between the two must always be kept in mind.

An arbitrator arbitrates, that is to say he decides disputes. His observations or suggestions may lead the parties to compromise the dispute he has to decide, but achieving a compromise is not his primary aim. He works differently from a judge insofar as he almost always sits in private, he is less formal, and he conducts all interlocutory hearings himself. Nevertheless, his task is in essence the same as that of a judge.

In contrast, a mediator does not decide anything (other than, perhaps, the details of his own procedure). His objective is to assist the parties to compromise their dispute. In practice, this fundamental difference has at least one result which is worth emphasising. A mediator will usually receive communications from each party on the basis that they are not revealed to the other party. This is something that an arbitrator, like a judge, does not do (except in very unusual circumstances).

I want to look briefly at three kinds of dispute where arbitration or mediation may have advantages over litigation. They are disputes over the validity of Wills and Codicils, which would otherwise lead to a probate action, allegations that the testamentary or intestate dispositions of a deceased person do not make reasonable financial provision for someone, which would otherwise give rise to an application to the Court under the Inheritance (Provision for Family and Dependants Act 1975); and allegations of negligence or breach of the duties of trusteeship, which would otherwise be the subject to a Writ action making those allegations.

An arbitrator cannot decree proof of a Will. His decision has to be followed by a Court Order for proof in solemn form, or an agreed application for a grant in common form. At first sight, therefore, the only advantage of arbitration over litigation is privacy. However, there can be another one, if the arbitrator has experience of probate litigation and is willing to be interventionist. So often allegations of lack of mental capacity or undue influence are made in these disputes, and the weight of them is hard to determine. An arbitrator can at the preliminary meeting, or even earlier, take steps to establish how much weight they really have, well before the substantive hearing. He can then make some appropriate comments - of course emphasising that he is not deciding anything. This separation of the wheat from the chaff, so to speak, and attempt to see how much is one and how much the other, may well save the parties money and disappointment by pointing the way towards a resolution of the dispute without a substantive hearing.

If the arbitrator is willing to be interventionist in a probate arbitration, a probate mediation may not offer any advantage; the lower cost will be counterbalanced by the inability of the mediator to reach a decision binding the parties. There is, perhaps, one exception to this. The greater opportunity that a mediator has to suggest solutions that satisfy injured pride or other hurt feelings may be useful in cases where the dispute is fuelled by those feelings as much or more than by the loss of a hoped-for financial advantage.

Here too a mediation may be a good way forward where the dispute is fuelled by hurt feelings. Also, a mediation will give more scope than an arbitration for the parties to explore what the applicant really wants, and what the beneficiaries are willing to give. Both sides can tell the mediator in confidence what they would like, and what less they would settle for.

On the other hand, the mediator's lack of the powers that an arbitrator has to find out the size and composition of the estate, and to some extent also to find out the resources of the applicant and the beneficiaries, will be a great drawback in cases where one or both sides think that the other is not being open and frank.

In addition, a mediation may well be no use because of the fundamental fact that the parties require a decision. In such cases, arbitration can help. In applications under the Inheritance (Provisions for Family and Dependants) Act, 1975, the Court has to exercise a discretion. Has reasonable financial provision been made, and if not, how should it be made? Quite often beneficiaries accept that the applicant is a person entitled to receive provision. The only live question is, what ought that provision to be? Time and money can be saved by an arbitrator rather than the Court answering that question, especially if he does so on the documents alone. Indeed parties to Inheritance Act applications, or potential Inheritance Act applications, already sometimes agree to submit a joint case to counsel, for his binding decision.

Of course, these vary infinitely in their nature and gravity. Obviously, the relative usefulness of arbitration and mediation in resolving them must depend upon the particular dispute. What can be said about all of them is that the delay, expense and publicity associated with litigation must almost always make an attempt to resolve them by arbitration or mediation worthwhile. This is likely to be in the interests of both the beneficiary who is complaining, and the trustee who is the subject complaint.

First, the trustee is administering property for the benefit of others. Hopefully, mediation can be a way of reconciling differences. The beneficiary can better learn how the trustee is working on his behalf. The trustee can learn how to work better on his behalf or at least to work on his behalf in a way that better pleases him.

Secondly, there may be a parallel with probate actions. In those, it is difficult to determine the weight of allegations of want of capacity and undue influence, as I have already remarked. In actions for breach of duty, it may be difficult to determine the weight of allegations of, for example, lack of care in choosing and changing investments. An interventionist arbitrator can take steps to do this at a comparatively early stage, and help the parties to distinguish cases of a real want of due care from cases based on hindsight, where the only fault of the trustee is a failure to know the future.

The use of arbitration and mediation in probate, succession and trust disputes can grow, and probably will. I welcome comments on my tentative suggestions in this article.