Lisa’s 2022 Hot Topic #2: Challenging the arbitrator – #700

Parties keep trying, but the threshold is still high for disqualifying an arbitrator. These cases in 2022 provide a sampling of the circumstances in which the threshold is met – and those in which it is not.

The Proactive arbitrator: Dufferin v Morrison Hershfield, 2022 ONSC 3485

In this case, 14 days into the arbitration  (and 2,658 pages of transcript and thousands of exhibits later), the Respondents applied to the Arbitrator to remove him for bias pursuant to Rule 3.6 of the ADR Institute of Canada Arbitration Rules. It provides that a party may challenge an arbitrator if, “circumstances give rise to justifiable doubts about the Arbitrator’s independence or impartiality.” The Arbitrator dismissed the application and the respondents brought a court application seeking his removal for bias pursuant to s. 13(1) of the Ontario Arbitration Act, 1991, SO 1991, c. 17 on the ground that “circumstances exist that may give rise to a reasonable apprehension of bias”.

The Respondents argued that the arbitrator had “entered the fray” because of the many questions he asked the witnesses, that he had pre-judged the issues, and that he became an advocate for the Claimant. They alleged a pattern of objectively biased conduct:

 “(a) making repeated statements of position (rather than questions) and examining the [Respondents’] witnesses in a manner that indicated a pre-judgment of issues and credibility;

(b) advocating positions favourable to the [Claimant], seeking admissions adverse to the [Respondents], and engaging in cross-examination of the [Respondents’] lay witnesses; and

(c) failing to demonstrate a balanced/proportionate approach with witnesses of both parties”.

The claimant argued that the challenge was tactical.

Justice Woodley reviewed the entire hearing transcript (!), which she said did not bear out the Respondents’ complaints. She described the Arbitrator’s approach as, “a somewhat inquisitorial process”, but did not give rise to a reasonable apprehension of bias for various reasons, including that:  Procedural Order #1 permitted the Arbitrator to interject with questions of any witness at any time; the Arbitrator was prepared and asked “difficult”  and “incisive” questions to witnesses for both parties; while he “vigorously” questioned witnesses, counsel always had the opportunity to ask questions that arose from his line of questioning; the Arbitrator advised counsel that his questions were to assist counsel in understanding what he thought were important issues and allow them to address them; and he alerted one party to his view that it had a “credibility deficit”. In short, the Arbitrator’s approach allowed the Respondents to understand the case they had to meet.

Parties who choose arbitration invariably state that they want a process that is more time efficient and less costly than litigation. So long as the parties are treated equally and fairly and are given the opportunity to present their case and respond to the opposing party’s case, there is a lot of procedural flexibility in how that can be achieved. But just in case… this Arbitrator ensured that his process was included in Procedural Order #1! For a more detailed discussion of this case, particularly the procedural approach where the rules agreed upon by the party provide time limits which are not consistent with the applicable arbitration legislation see my Case Note – “Vigorous” intervention and “difficult”, “incisive” questions by arbitrator not bias #632)

Multiple appointments: Aquanta v Lightbox, 2022 ONSC 3036

In this case, Justice Morgan granted an application to appoint an arbitrator, about which the parties could not agree. The Respondents opposed all candidates proposed by the Applicant and, instead, sought the appointment of an Arbitrator whom the parties had previously appointed in an earlier arbitration involving the same parties and the same agreements with the same arbitration clause. The Respondents argued that this would facilitate costs and time savings because the Arbitrator was familiar with the matters and could use his notes from the earlier arbitration – there was no transcript. This was critical to their argument that issues raised in the first arbitration were res judicata in the second. The Applicants opposed the appointment of this Arbitrator on the basis of reasonable apprehension of bias. The Arbitrator had made key findings in the first arbitration, including adverse findings of credibility against the Applicants’ key witnesses. The Applicants were not successful in the first arbitration and their appeal was pending.

Justice Morgan did not address the Applicant’s argument that the Arbitrator should be disqualified for reasonable apprehension of bias, referring to another decision in similar circumstances, also involving a very experienced arbitrator in which it was said that:

“the arbitrator would no doubt approach the matter objectively, but that a reasonable apprehension of bias existed because of the perception of non-objectivity. That is, the findings of credibility unfavorable to one party suggest that the previous arbitration may influence the credibility determinations in the subsequent arbitration.

Justice Morgan dismissed the Respondent’s proposal. He found it would violate deliberative secrecy because the Arbitrator’s notes would have to be produced to the parties if he relied upon them. Moreover, due process required the award arising out of the second arbitration refer only to the evidentiary record to deal with the res judicata issue. 

The arguments made by the Respondents about process efficiency were clever and would ordinarily be received favourably by a court, but they had to give way to due process concerns. (For a more detailed summary of this case, see my Case Note – Arbitrator’s notes not a substitute for transcript #627.)

Challenge to 1 member of a panel: Terrebonne Police Brotherhood Inc. v Truchon, 2022 QCCS 34

This case arose out of a challenge in the context of a statutory tribunal hearing, but still remains of interest. The Applicant police union applied for judicial review of a decision rendered by a three-person tribunal.. The tribunal had dismissed the union’s motion for an order disqualifying the entire tribunal based upon comments made by the chair, which were overheard by a witness and an observer during a break in the hearing. 

The Respondents were members of a tribunal (called the “Dispute Resolution Council”, or “CRD”) appointed pursuant to Québec legislation which had as its  mandate to resolve disputes between a municipality and its employees during the period of negotiation before finalization of a collective agreement. The hearing was for the purpose of addressing the police union’s concern that the CRD was made up of members who were not selected and recognized by the parties and who did not have expertise in the police environment. 

During a break in the hearing, a union witness remained in the hearing room. He testified that he overheard a discussion among the three tribunal members, during which the chair said that, “the police lived in a world of unicorns and that, basically, the police questioned the CRD process and that it was up them to show [the police] how things work”. Another person present in the room testified that, “the expression “unicorn world” was used by the [chair], but never to qualify union demands; neither the [chair] nor the members qualified the trade union position in any way” and that “the [chair] also mentioned that the [tribunal] would show the parties and the union how the system worked; this affirmation did not have a directive, authoritarian meaning, but rather an educational one, in the sense of teaching, and that the [tribunal’s] role was to find a solution for the parties”.

The police union moved to disqualify the tribunal, which dismissed the motion unanimously on the basis that the evidence relied upon was taken out of context and did not reflect the substance of the discussion, and the union agreed that the chair exhibited no animosity towards it.

Justice Poulin applied the reasonable apprehension of bias test and set aside the tribunal’s ruling. She found that the comments demonstrated both a lack of impartiality and a lack of open mind on the part of the chair, which warranted his disqualification. However, the other two members of the panel were not disqualified, even though they contributed to the unanimous decision dismissing the union’s motion. The chair’s comments could not be imputed to them.

Unfortunately, the reasons do not explain why the chair’s comments could not be imputed to the other tribunal members, but one witness’s summary of the conversation, for example, does not suggest that the other tribunal members agreed with the chair’s comments or responded to them. He described the conversation as “of a general nature, and did not relate to the evidence already presented”. The other witness left the room because he felt uncomfortable with the conversation, so he did not hear all of it. (For a more detailed analysis if of this case, see my Case Note – Statutory tribunal chair disqualified for bias for comments made in presence of witness during break #582.)

Editor’s Notes:

First, in Dufferin v. Morrison Hershfield, Justice Woodley provided a useful summary of the test and principles to establish a reasonable apprehension of bias:

1. The objective test established by the Supreme Court of Canada in Committee for Justice & Liberty v Canada (National Energy Board), [1978] 1 SCR 369 applies: (a) the informed right-minded person considering the alleged bias must be reasonable; and (b) the apprehension of bias itself must be reasonable in the circumstances. (This test was also applied in Terrebonne Police Brotherhood Inc. v Truchon.)

2. It is not necessary to establish that the arbitrator is actually biased; the appearance of bias is sufficient. (See Yukon Francophone School Board, Education Area No. 23 v. Yukon Territory (Attorney General), 2015 SCC 25 at paras 20 & 22.)

3. The threshold for finding a real or perceived bias is high (A.T. Kearney Ltd. v. Harrison, 2003 CanLII 32908, at para 7);

4. The presumption of impartiality is high (Wewaykum Indian Band v. Canada, 2003 SCC 45 (CanLII), [2003] 2 S.C.R. 259, at para 59);

5. The inquiry is objective requiring a realistic and practical review of all the circumstances from the perspective of a reasonable person. (Committee for Justice and Liberty v. Canada (National Energy Board), 1976 CanLII 2 (SCC), [1978] 1 S.C.R. 369);

6. A challenge based on reasonable apprehension of bias will be unsuccessful without evidence to support the allegation beyond a mere suspicion that the hearing officer would not bring an impartial mind to bear. Mere suspicion is not enough (G.W.L. Properties Ltd. V. W.R. Grace & Co. of Canada Ltd., 1992 CanLII 834 at para 13 (B.C. Ct. App.)); and

7. When considering bias, whether actual or the appearance of bias, context matters (Telesat Canada v. Boeing Satellite Systems International, Inc., 2010 ONSC 4023).

Second, Aroma Franchise Company, Inc. v Aroma Espresso Bar Canada Inc, 2022 ONSC 6188, is a case to watch in 2023. Justice Cavanagh dismissed the Respondents’ motion to stay or dismiss an Application to set aside a final award on the merits on the ground of the reasonable apprehension of bias of the Arbitrator. The Respondents argued that the Applicant was required to bring its challenge to the Arbitrator first in accordance with Article 13 of the Model Law because the arbitration had not yet terminated; interest and costs had yet to be determined. However, Justice Cavanagh found that the Arbitrator was functus officio. Therefore, the application was properly before the Court. The allegation of bias arose when the Arbitrator emailed the Final Award to counsel for the parties and copied another lawyer at the same firm as counsel for the Respondents, who was not involved in the arbitration. The Arbitrator explained that the uninvolved lawyer was copied inadvertently and that Respondents’ counsel’s law firm had retained the Arbitrator on another matter in which the uninvolved lawyer was also counsel. The Arbitrator also explained that the issues in that case involved contract issues in an industry completely unrelated to the Aroma business and in a different contractual relationship. He further stated, “I don’t believe there is any overlap in the issues between the two cases. I am not aware of any connection between the parties in that arbitration and the Aroma arbitration.”  The specific grounds alleged to support the allegation of reasonable apprehension of bias do not appear in the decision. (For a more detailed analysis of the procedural aspects of this decision see my Case Note – Arbitrator has no jurisdiction to hear challenge for bias after partial final award #691)