MTCC No. 1251 v Windsor Arms Hotel Corp., 2025 ONSC 5009 offers a cautionary tale for arbitrators when confronting late-arising potential conflicts. The Court removed the Arbitrator for a reasonable apprehension of bias. It did so, not because of the potential conflict itself, which it found would have been insufficient on its own, but because of the way the Arbitrator managed the issue after disclosure. It was this handling, rather than the conflict per se, that rendered the apprehension of bias reasonable.
The facts – Months before the hearing, the Applicant delivered its Arbitration Record. It included an expert report by a lawyer, Mr. B, which addressed a central issue in the dispute.
At around midnight, roughly 30 hours before the hearing, the Arbitrator wrote to the Parties disclosing, as he described it, “a clear appearance of conflict”:
“I am duty bound to disclose that [Mr. B’s] firm has referred a litigation matter to my firm. [Mr. B] is the instructing lawyer on the matter. I have been tasked with preparing the pleadings and assuming carriage of it.
I disclose that [Mr. B] and I have exchanged emails concerning the litigation matter. I certify that no discussions were had with respect to his involvement in this arbitration. The first I learned of his involvement was on Saturday 11:45 pm as I was reviewing the materials. I have had no other prior dealings with [Mr. B] that I can recall.”
The Arbitrator proposed some options to the Parties:(1) he resign; (2) the Parties acknowledge and waive the conflict; and (3) the Applicant secure a new expert or the parties agree to admit the report.
The following day, the Respondent asked the Arbitrator to further explain the conflict, taking the position that there was no issue. The Arbitrator responded that he would not proceed unless both Parties agreed that he could.
The day after that, what should have been the first day of the hearing, the Applicant advised, given the significance of the issue, that it declined to waive the conflict. The Respondent maintained its position that there was no conflict.
The Arbitrator then re-considered. He wrote to the Parties stating that in light of the Respondent’s position, he did not think that he could or should resign. He ultimately advised the Parties that if the Applicant wished to pursue the matter, it would have to bring a motion for his removal. The Applicant did so but the Arbitrator dismissed the motion concluding (as summarized by the Court at paragraph 49):
“…[T]here was no reasonable apprehension of bias given that the communications between [the Arbitrator] and the expert ‘were about a litigation matter not in any way related to the issues are [sic] parties in the arbitration, with no evidence of any inducement’ and that there was no ‘cogent or compelling evidence’ before him to conclude that a ‘single business referral should result in the discharge of the Arbitrator’.”
The Applicant then applied to the Court for the Arbitrator’s removal.
The Court’s decision – The Court was of the view that, although the expert’s referral of a matter to the Arbitrator “may not be sufficient to justify disqualification”, it was the initial event in a chain of events that, when viewed together, gave rise to a reasonable apprehension of bias (paragraphs 30 and 31).
The Court made the following observations:
- The Arbitrator’s initial email demonstrated that “the one person who had full knowledge of both matters had determined there was a “clear appearance of conflict” (paragraph 35). The Arbitrator reiterated that view the next day when he required both Parties to waive the conflict before proceeding.
- The Arbitrator later reversed his position and declined to remove himself without explanation despite the Applicant’s refusal to wave the conflict. The Court observed “this fact alone speaks to the reasonableness of the apprehension” (paragraph 40).
- The Arbitrator refused the Applicant’s request to disclose his email communications with the expert so it could evaluate the seriousness of the conflict. While the Court acknowledged this may have been appropriate, it nevertheless contributed to the reasonableness of the apprehension (paragraph 38).
- In the midst of the issue, the Arbitrator convened a case conference but excluded clients. This exclusion, in the Court’s view, contributed to the “objective reasonableness” of the client’s apprehension (paragraphs 41 – 43).
- The Arbitrator disclosed to the Parties that “I was advised this morning by [Mr. B] that I am to deal directly with his client and take instructions exclusively from them”. While this may have been an attempt to manage the conflict, the Court concluded that it revealed further communications between the Arbitrator and the expert witness and “this did nothing to make the already existing apprehension of bias less reasonable” (paragraph 44).
The Court emphasized that if the only issue had been the Arbitrator’s retainer in the unrelated litigation, that alone might not have warranted disqualification. However, at paragraph 52 the Court explained:
“The challenge for me is that this fails to take into account any of the subsequent events that inform the particular and somewhat unique events that occurred here: the initial communication from the Arbitrator himself that there was “a clear appearance of conflict”, the disclosure by the Arbitrator that he had spoken again with the expert and would deal with the other matter directly with the client, the confirmation of that conclusion and the fact that he would not proceed absent a waiver from both parties, and then his change of heart and decision that notwithstanding the absence of a waiver, he would not withdraw.”
Contributor’s Notes:
Other than immediate disclosure, what should an arbitrator do when a potential conflict arises late in the process?
The Court seems to suggest that one course of action would have been for the Arbitrator simply to identify the issue and ask the parties how they wished to proceed (paragraph 34). In this case, however, the Arbitrator’s initial statement that there was a clear appearance of conflict effectively short-circuited any further decision-making process. In the absence of both parties’ waiver, the only option was for the Arbitrator to withdraw.
Some other thoughts and observations:
1. Identify witnesses early. The earlier a potential conflict is identified, the easier it is to manage. Arbitrators should review materials as they are submitted to confirm, at minimum, the identity of witnesses. Counsel can also assist busy arbitrators by listing witnesses in a covering email. Depending on the process, early exchange of witness lists with the arbitrator can also help identify potential conflicts at an early stage.
2. Manage conflicts arising from a party’s own witness. Here, the appearance of conflict arose from the Applicant’s own witness. What obligations rest with the parties in these circumstances? See, for example, Part 1(7) IBA Guidelines on Conflicts of Interest in International Arbitration. Was the identity of the Arbitrator disclosed to the witness? Should inquiries have been made into any past dealings of the witness with the Arbitrator? Should the witness have been advised by Applicant’s counsel against future dealings with the Arbitrator and instructed on disclosure obligations? More broadly, to what extent should a party bear responsibility for its expert’s, or its own, failure in this regard?
3. Track experts as a source of conflicts. The potential for expert witnesses to create conflicts is increasingly recognized in the arbitral community. Some arbitral institutions now require arbitrators to keep a log of all experts who appear before them to attempt to mitigate these risks.
4. Build safeguards for practising lawyers acting as experts and arbitrators. When practising lawyers, particularly those in firms, serve as experts or arbitrators in addition to their counsel work, the potential for conflicts multiplies. Safeguards and vigilance by all participants (counsel, arbitrator, and expert alike) are essential to protect the integrity of the process. Here, the Arbitrator did attempt some form of safeguard in his terms of appointment:
“[T]he parties and their counsel acknowledged that they may or have retained, employed, or consulted with experts who may have been retained or implied by the Mediator / Arbitrator in the ordinary course of the practice of law. The Mediator / Arbitrator was required to disclose such retainer or retainers, and the parties expressly waived any appearance of conflict or apprehension of bias arising therefrom”.The Court found this did not cover the circumstances at issue (paragraphs 45 and 46).
5. Look before you leap. Sitting as a sole arbitrator can be a lonely business. When difficult issues arise, you must be your own best counsel. Whenever possible, “sleep on it”: the way forward is often clearer in the light of day.