Federal CA – Arbitrator/Adjudicator expressing “tentative views” in pre-adjudication mediation to foster settlement not indicative of bias – #515

In Fono v. Canada Mortgage and Housing Corporation, 2021 FCA 125, the Federal Court of Appeal heard a second-level appeal of a prothonotary’s decision to strike out parts of the appellant’s notice of application for judicial review and affidavit on the basis that they contained settlement privileged information, specifically, evaluative statements allegedly made by the labour adjudicator in a pre-hearing mediation, which the appellant argued demonstrated bias. The FCA found the Federal Court judge made no error in upholding the prothonotary’s decision, specifically noting that the impugned statements did not demonstrate bias merely because the labour adjudicator expressed tentative views on offers made and positions taken in the dispute with a view to fostering settlement.

The appeal arose from an application for judicial review of an adjudicator’s decision rendered under Part III of the Canada Labour Code, R.S.C. 1985, c. L-2. In the initial proceeding, the employer (respondent before the FCA) conceded the appellant was unjustly dismissed from his employment, but contested his request for reinstatement as a remedy. Before the Federal Court, the appellant challenged the adjudicator’s decision not to order reinstatement and instead award 12 months’ pay in lieu of notice and aggravated damages.

Among other grounds raised in the judicial review application, the appellant alleged the adjudicator was biased. The appellant’s notice of application and affidavit evidence contained what the prothonotary found, and what the Federal Court judge and FCA agreed, was settlement privileged information aimed at buttressing the bias allegation. This included statements the adjudicator purportedly made during the mediation.

The prothonotary further concluded that the appellant’s bias allegation was not made promptly and therefore declined to consider it on the merits. The Federal Court judge confirmed the prothonotary’s decision that the appellant had effectively waived his right to mount a bias challenge since he failed to raise the objection quickly enough.

Writing for the Court in brief reasons given from the bench, Justice Mary J.L. Gleason found the Federal Court judge rightly concluded the prothonotary made no error in striking the impugned portions of the appellant’s materials. She agreed with the Federal Court judge that the content the prothonotary struck, which included evidence about what the mediator/adjudicator said about the parties’ positions in the mediation, was settlement privileged and should not have been included.

Despite the rulings below that the bias allegation need not be considered on the merits, Justice Gleason made the following comments relevant to arbitrations in which the parties agree to have the same individual attempt to mediate a dispute before acting as arbitrator:

“[9] Further, it is common for labour adjudicators or arbitrators who conduct consensual mediation sessions prior to hearing a case to express tentative views during the mediation as to the potential strengths or weaknesses of parties’ positions with a view to fostering settlement, especially where, as was the case here, the parties are represented by experienced counsel. Such statements are not indicative of bias. See for example Skinner v. Fedex Ground Ltd., 2014 FC 426, 453 F.T.R. 315, at paras 7-10; Santa Fe Masonry v. Bricklayers, Masons Independent Union of Canada, Local 1, 2006 CarswellOnt 8141, [2006] O.J. No. 5099 (QL) (Ont Super Ct J (Div Ct)) at paras 4-10; Richard J. Charney and Thomas E. F. Brady, Judicial Review in Labour Law (Thomson Reuters) (e-looseleaf updated 2021, release 1) ch. 11 at 11.1100-11.1120. By analogy with mediation/arbitration in the family law context, see also Reilly v. Zacharuk, 2017 ONSC 7216, 2017 CarswellOnt 19316, at paras 67-72.”

Justice Gleason went on to describe the adjudicator’s alleged comments about the quality of an offer the respondent made to the appellant as “standard fare” in mediation. She concluded that such content should not be put before the reviewing court:

“[10] It would have a chilling effect on employment and labour mediations and undercut their efficacy if statements such as those the appellant alleges were made by the adjudicator were to be placed before the courts. The comments impugned by the appellant merely reflect the adjudicator’s tentative views as to the strength of the offer made by the respondent as compared to risks associated with pursuing the adjudication. This sort of comment is standard fare in a mediation. The Federal Court therefore did not err in declining to interfere with the Prothonotary’s order striking the impugned paragraphs on the basis of settlement privilege.”

One of the decisions Justice Gleason cited, Reilly v. Zacharuk, 2017 ONSC 7216, contains a reference to another Ontario Superior Court decision (McClintock v. Karam, 2015 ONSC 1024) that describes the sorts of techniques employed in mediations. The Court in that case observed that when the parties agree to have the same person mediate and then arbitrate, they cannot expect the person to wipe his or her mind clean of what they learned in the mediation phase if and when it comes time to arbitrate. The mediator/arbitrator must nevertheless keep an open mind and refrain from coming to a view before hearing the parties’ cases:

“[69] In order to effectively mediate, the person appointed must engage in a process that has a good deal of informality. Mediative techniques include persuading, arguing, cajoling, and, to some extent, predicting. Mediation is a process to secure agreement, if possible. All of those techniques, as well as others, will come into play in trying to secure agreement.

[70] If the mediator/arbitrator must move to the arbitration phase, it cannot be expected that he or she can entirely cleanse the mind of everything learned during the mediation phase, and of every tentative conclusion considered, or even reached, during the mediation phase. However, at a bare minimum the parties are entitled to expect that the mediator/arbitrator will be open to persuasion, and will not have reached firm views or conclusions.”

These decisions arose in the context of family law arbitrations under the Arbitration Act, 1991.

In the result, the FCA dismissed the appeal, with costs, and returned the matter to the Federal Court.

Contributor’s Notes:

First, the FCA’s decision, read together with the referenced Ontario Superior Court family law arbitration decisions, demonstrate a doctrinal overlap between labour arbitrations/adjudications and private commercial arbitrations. Although termed “arbitrations”, labour arbitrator decisions are treated under administrative law principles. Indeed, much of administrative law jurisprudence comes from the labour arbitration realm. While courts and arbitration practitioners must take care when borrowing from administrative law, there are points of convergence, including the accepted “reasonable apprehension of bias test” attributed to de Grandpré J.’s dissent in Committee for Justice and Liberty v. National Energy Board, 1976 CanLII 2 (SCC) , [1978] 1 S.C.R. 369. Since med/arb as a form of dispute resolution exists in both labour arbitration and private arbitration, the FCA’s comments are pertinent to arbitrations conducted under Canadian arbitration legislation.

Second, Justice Gleason’s statement that it is okay for a neutral in a med/arb situation to express “tentative views during the mediation as to the potential strengths or weaknesses of parties’ positions” during the mediation phase is important. Each case will turn on its own facts, and the reviewing court will have to decide for itself whether a mediator crosses the line into demonstrating a closed mind. This decision suggests that when the mediator is also appointed to arbitrate should the mediation fail, he or she should take care not to demonstrate they have come to a view, although evaluative mediation techniques in general are entirely legitimate in med/arb processes.

Third, in McClintock v. Karam, 2015 ONSC 1024, cited above, the Court found the mediator/arbitrator’s conduct crossed the line. His comments evidenced, on a balance of probabilities, that he had all but made up his mind. In contrast, the Court in Reilly v. Zacharuk, 2017 ONSC 7216 rejected the bias allegation, which was based on a strongly worded email, which arose from the applicant’s own conduct, including refusing to return the child to the respondent in violation of the applicable parenting plan. The Court found that the email, read in context, did not raise a reasonable apprehension of bias.