B.C. – ex parte communications on procedural matters create reasonable apprehension of bias and grant judicial review of award – #063

The B.C. Court of Appeal in Hunt v. The Owners, Strata Plan LMS 2556, 2018 BCCA 159 held that ex parte communications between one of the parties and the arbitrators on procedural matters would create a reasonable apprehension of bias, leading an informed person to believe that the arbitrators would likely not decide the matter fairly.  Ruling that the test for a reasonable apprehension of bias required no proof of actual bias or that the communications changed the award, the Court granted the appeal from the chambers’ judge’s decision in Hunt v. The Owners, Strata Plan LMS 2556, 2017 BCSC 786 which initially dismissed a judicial review application.

The arbitration was conducted between two owners of a residential unit in a strata building (the “Hunts”) and the Strata Corporation (the “Strata”) under the Strata Property Act, SBC 1998, c 43 (“Strata Act”). The Hunts initiated an arbitration in April 2014 with the Strats to resolve the Hunts’ concerns about the installation of equipment in the building which the Hunts believed would impact their enjoyment of their unit.  The arbitrators ruled against the Hunts, determining that there had been no plan to install the equipment and therefore no dispute to arbitrate, and awarded special costs against them.  The Hunts’ sought leave to appeal the special costs award but that appeal was dismissed.

When preparing for the assessment of special costs, the Hunts obtained the file of the Strata’s lawyer and became aware of four (4) ex parte communications with the arbitrators.

Informed by their discovery of the ex parte communications, the Hunts applied under section 187 of the Strata Act.  The application was dismissed.  The chambers judge identified the Hunts’ two arguments: (a) there was a reasonable apprehension of bias; and, (b) the arbitrators had failed to meet their duty imposed by s. 181 of the Act to advise the Hunts of the possibility of mediation. Under the latter section, the chambers judge found that there was no prejudice to the Hunts arising from the failure of the panel to advise of mediation as a possibility because she determined that they were not open to compromise, were aware of mediation and had no dispute to mediate.  The chambers judge did not expressly deal with the role of the ex parte communications.

The Hunts appealed, arguing that the chambers judge erred in failing to set aside the award on the basis that the ex parte communications gave rise to a reasonable apprehension of bias.  At the appeal level, they abandoned their argument under section 181.

The Strata submitted the ex parte communications were procedural and did not give rise to any reasonable apprehension of bias and did not affect the outcome as there was no dispute to arbitrate.

Following the ruling in Henthorne v. British Columbia Ferry Services Inc., 2011 BCCA 476, the Court of Appeal held that when reviewing a lower court’s decision on a judicial review of a tribunal’s decision, no deference is due on whether the correct standard of review was applied by the court or whether the tribunal met that standard: both issues are questions of law.  The appellate court is in the same position as the court below.  As well, the Court asserted that “courts have the final say on issues of procedural fairness”.  By way of introduction to its analysis of the chambers judge’s decision, the Court concluded that “if this Court determines the arbitration panel did not afford procedural fairness to the Hunts, then the chambers judge committed a reviewable error for which this Court can substitute its view.

The Court then set out the standard of procedural fairness to which arbitrators are held.  The Court set out a series of short declarations drawn from the case law and sections 183 and 184 of the Strata Act.  Those declarations are best cited verbatim (the key sources appear in paras 74-79):

– “All administrative bodies owe a duty of procedural fairness to the persons before them, but the extent of that duty can vary depending upon the nature and function of the tribunal”;

– “The closer the function of the board is to the judicial function of adjudicating a dispute, the more decision-makers will be expected to comply closely with the standards expected of judges, including conducting themselves to avoid a reasonable apprehension of bias”;

– “Arbitration is a form of judicial proceeding and, as such, the arbitrators must be impartial, independent decision-makers, free from “reasoned suspicion of biased appraisal and judgment””;

– “Arbitration decisions made under the Act can affect the quality, value and enjoyment of a strata owner’s residence and major asset.  These are therefore important decisions to the persons affected by them.  Correspondingly, the process which precedes arbitration decisions is also very important”; and,

– “The arbitration proceeding provided for under the Act anticipates procedures similar to a judicial proceeding, including such procedures as a hearing open to the affected parties and the opportunity for each party to present and rebut evidence”.

Those declarations lead the Court to its conclusion that arbitrators under the Strata Act “are expected to play a role similar to that of a judge, by considering the evidence and issues independently and free from actual or apprehended bias”.

The Court then set out the test for considering whether there is a reasonable apprehension of bias, noted that the test does not require proof of actual bias and that it is irrelevant that the decision would have been different.

[83] The test for considering whether there is a reasonable apprehension of bias is: what would an informed person, viewing the matter realistically and practically, and having thought the matter through, conclude?  Would the person think that it is more likely than not that the decision-maker, whether consciously or unconsciously, would not decide fairly?  This test was set out in Committee for Justice and Liberty v. National Energy Board, 1976 CanLII 2 (SCC), [1978] 1 S.C.R. 369 at 394, per de Grandpré J., dissenting, and is often cited, including in Yukon Francophone at para 20.

 [84] A finding of a reasonable apprehension of bias on the part of a decision-maker invalidates the proceeding, and results in setting aside the decision as void.  This is because it leads to the conclusion that there was not a fair hearing.  This defect cannot be remedied.  It is unnecessary to prove actual bias, and the question of whether the decision would have been different is irrelevant: Nfld. Telephone at 645.”  See Newfoundland Telephone Co. v. Newfoundland (Board of Commissioners of Public Utilities), [1992] 1 SCR 623, 1992 CanLII 84.

The Court then turned to examining the four (4) ex parte communications in turn.  As its introduction to that examination, the Court compared the situation to judicial proceedings.

[86] It is well-accepted in the context of judicial proceedings that a judge ought not to discuss any part of an ongoing case with only one party to the dispute, or a witness.  If a judge were to discuss a case with only one party, even in good faith, this could be sufficient to create a reasonable apprehension of bias.

That prohibition stems from a party’s right to know all the statements made that may affect it and that whoever will determine the party’s dispute cannot receive representations from only one side “behind the back of the other”.  See Kane v. Bd. of Governors of U.B.C., [1980] 1 SCR 1105, 1980 CanLII 10 at pp. 1113-1114.

The Court examined each of the ex parte communications and dismissed the Strata’s distinction that the communications dealt with procedural and not substantive matters.  The ex parte communications involved the availability of mediation and the need for one or three arbitrators.  The Court held that private conversations between an arbitrator and only one party to a dispute do not have to necessarily be about the merits or evidence in order to disqualify.  Following the Federal Court of Appeal in Setlur v. Canada (Attorney General), 2000 CanLII 16580,  the Court asserted that “ex parte communications that touch on procedural matters are not exempt from the principles of procedural fairness that require the maintenance of the appearance of absolute impartiality on the part of the decision-maker.

Such matters, such as the appropriate number of arbitrators or the need and willingness to engage in mediation, can have strategic importance.

The Court’s review of the communications determined that, though procedural, the contents were not trivial.  It is not necessary to review each of them in detail, other than to note that the Court held that they would give rise to reasonable apprehension of bias.  The Court was clear to say that it found no actual bias and no one proved that the decision would have been otherwise.

In its review, the Court focused in on the role of party-appointed arbitrators, devoting paras 106-118 to the distinction between a “nominee” and an “arbitrator”.  The comments were limited to discussing the appearance of influence and not any actual findings.  The Court’s observations mentioned how the exchanges created and compounded apprehensions but, having ruled that actual bias was unnecessary and proof of a different decision unnecessary, did not go further.

Madam Justice Susan Griffin, writing for the Court expressly stated that “I have no reason to believe that the arbitrators were in fact biased and deliberately favoured the Strata over the Hunts.  Suffice it to say, once there is a reasonable appearance of bias, it is unnecessary to embark on the impossible task of determining the actual state of mind of the decision-maker.

Limiting itself to having determined a reasonable apprehension of bias, the Court allowed the appeal with costs in the judicial hearing and the appeal.  No costs were ordered for the arbitration.