1. DISPUTES INSIDE THE TENT:
Getting into them, out of them and
avoiding them altogether
Miranda Lam
Litigation Group
February 2011
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

2. 2
OVERVIEW
¬ Common Forms of Dispute
¬ Mechanisms for Dispute Resolution
¬ Mediation
¬ Arbitration
¬ Litigation
¬ Avoiding Disputes Altogether
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

3. 3
Common Forms of Dispute
¬ The obsessed entrepreneur
¬ Family feud
¬ Sibling rivalry
¬ Clinging founding patriarch
¬ Marriage dissolution
¬ Estate planning
¬ Three’s a crowd
¬ The selfish shareholder
¬ Deadlock
¬ Complaints by directors or creditors
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

4. 4
Suggested Mechanisms for Dispute
Resolution
¬ Mediation
¬ Arbitration
¬ Litigation
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

5. 5
Mechanisms for Dispute Resolution
¬ Alternative Dispute Resolution
¬ Mediation
¬ Process by which two or more parties to a
dispute attempt to resolve the dispute by
reaching an agreement amongst themselves by
utilizing the services of a mediator
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

6. 6
Mechanisms for Dispute Resolution
(contd)
¬ Alternative Dispute Resolution (contd)
¬ Arbitration
¬ Process of resolving disputes between two or
more parties whereby a third party (an arbitrator)
hears or reviews evidence and renders a binding
decision based on the parties’ legal rights.
¬ The arbitrator may be a single person or a panel
of three whose appointment is agreed to by the
parties or pursuant to the rules of arbitration that
the parties have chosen.
¬ Process is consensual and consent cannot be
withdrawn once the process is commenced.
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

7. 7
Mechanisms for Dispute Resolution
(contd)
¬ Litigation
¬ A claim is commenced by an aggrieved party in
the court against another
¬ The dispute is resolved by a judge
¬ Process is governed by civil litigation rules
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

8. 8
Advantages of Alternative Dispute
Resolution
¬ Expediency
¬ Expertise
¬ Control
¬ Relationship preservation
¬ Confidentiality
¬ Cost effective
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

9. 9
Challenges with Alternative Dispute
Resolution
¬ Lack of certainty
¬ Difficulties with enforcement
¬ Appeals
¬ Planning and foresight
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

10. 10
Litigation Process
¬ Advantages
¬ Certainty
¬ Enforceability
¬ Availability of options for recourse and relief
¬ Public
¬ Challenges
¬ Inefficient
¬ Not cost-effective
¬ Relationships challenged
¬ Public
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

11. 11
Committing to a Dispute Resolution
Process before a Dispute Arises
¬ Mechanism embodied in agreement
¬ Considerations relating to arbitration
¬ Agreement to arbitrate
¬ Choice of forum or place of arbitration
¬ Use of a neutral administrative service provider
¬ Choice of law
¬ The appointment of an arbitrator
¬ Language
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

12. 12
Committing to a Dispute Resolution
Process before a Dispute Arises
¬ Considerations relating to arbitration (continued)
¬ Arbitral Process
¬ Ad hoc v. institutional rules of procedure
¬ Ad hoc
¬ Specific, tailor-made for certain situations
¬ Negotiated beforehand
¬ Institutional
¬ Defined body of rules
¬ Some judicial interpretation
¬ Available to suit most situations
¬ Which process is for you?
¬ Choice of counsel?
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

13. 13
Avoiding Disputes Altogether
¬ Do not make him or her a partner or a shareholder
¬ Maintain good corporate governance
¬ Enter into a considered shareholders’ agreement
¬ Commit to a dispute resolution mechanism
¬ Record shareholders’ expectations
¬ The nature of the business
¬ Commitments to each other as shareholders and/or
employees
¬ Operational issues
¬ Exit mechanism
McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549

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McCarthy Tétrault LLP / mccarthy.ca / February 2011 / Docs #10053549