Ontario – Challenge to award for procedural unfairness and insufficient reasons dismissed – #732

In Orion Travel Insurance Co. v. CMN Global Inc., 2023 ONSC 1527, Justice Morgan dismissed an application under sections 45 and 46(1) of Ontario’s Arbitration Act, 1991, SO 1991, c. 17 for leave to appeal and to set aside an arbitral award. Among other things, Justice Morgan rejected the applicant’s argument that it did was denied its “right to be heard” based on the record, finding that this right only affords a party the opportunity to make one’s case—not to re-make one’s case after shortcomings. He also found that the Arbitrator was at liberty to borrow language from the successful party’s written brief, finding that there was no evidence that the Arbitrator lacked independent thought in doing so. In totality, Justice Morgan found the Arbitrator’s reasons intelligible and concise, and that there were no grounds to set aside the award or to grant leave to appeal.

Orion Travel Insurance Co. (Orion), sold and underwrote travel insurance. CMN Global Inc. (“CMN”) was Orion’s claim administrator for three and a half years. CMN sued Orion for unpaid invoices, and Orion counterclaimed for breach of contract, alleging CMN had mishandled over 8,000 individual insurance claims. 

The Arbitrator conducted a mandatory mediation session; and, when it was unsuccessful, the Arbitrator offered his services as a mediator-arbitrator. Although there was no written arbitration agreement, the parties agreed to engage the Arbitrator in a mediation-arbitration process, which the Arbitrator confirmed in a letter to the parties.

The arbitration took place in stages. In preliminary meetings, submissions and interim orders, the Arbitrator issued procedural directions that set out the arbitration process and guided the parties. Both parties participated in these proceedings without objection. As part of this process, the parties’ joint expert (PriceWaterhouseCooper) reviewed the over 8,000 claims in issue and created a representative sample of 718 cases. The parties agreed to use this sample as the basis to analyze all the disputed accounts. 

The Arbitrator bifurcated the arbitration into a liability stage and a quantification of damages stage. After completing the liability portion of the arbitration and receiving two orders on it, the parties made written submissions and a two-day hearing on damages was held. The Arbitrator then rendered a final decision on quantification. 

Orion applied for leave to appeal and to set aside the Arbitrator’s decision on three grounds: 

  1. The Arbitrator did not treat Orion fairly and equally, nor provide it an opportunity to present its case;
  2. The Arbitrator exceeded the scope of his jurisdiction; and
  3. The grounds for the Arbitrator’s reasons in the award were insufficient or lacked independence.

On the first issue, Orion submitted the Arbitrator denied its right to procedural fairness by failing to provide it with an opportunity to make submissions on the final quantification of damages. Justice Morgan stated that the Arbitrator did not deny Orion’s right to procedural fairness because the record of the proceeding did not support this submission. Both parties were able to make submissions on the quantification of damages in writing and at the hearing. The transcripts of the hearing provided evidence that Orion and CMN were treated equally. Orion was aware of the damages case it had to make out, and Justice Morgan did not accept the argument that the parties were treated unequally stating that, “[w]hat the Applicant seems to dislike about the hearing is the result, not the process.

Orion argued that the Arbitrator’s reliance on the data in the PriceWaterhouseCooper analysis was a denial of the Applicant’s right to be heard because that analysis was not included in the joint book of documents or marked as an exhibit at the hearing. The analysis was, however,  provided to the Arbitrator by Orion’s own counsel and formed a part of Orion’s written submission. It wasn’t marked because Orion’s counsel neglected to do so. In rejecting Orion’s argument on this point, Justice Morgan noted that arbitrations are less formality-driven than the trial process. 

Additionally, Orion submitted that it was denied the right to be heard because the evidence it submitted to the Arbitrator was not all of the evidence it could have presented on the damages issue. Justice Morgan held that the right to be heard entails only the opportunity to make one’s case, not the opportunity to re-make one’s case after considering its shortcomings.

On the second issue, Orion took issue with the mediation component of the process. Orion argued that after the matter was identified as a contentious one in need of some adjudication, the Arbitrator fashioned himself a mediator-arbitrator. Orion contended that the Arbitrator failed to engage in the mediation process and that it was unclear during the hearing whether the Arbitrator was acting as a mediator or an arbitrator. 

Justice Morgan rejected these submissions, finding that the record showed that the parties gave up on the mediation relatively early in the process and that the parties intended for the issues to be adjudicated by the Arbitrator in that capacity. 

On the third and final issue, Orion submitted that the Arbitrator’s reasons for decision were “woefully inadequate” and “manifestly deficient“. Orion argued that in at least one instance, the Arbitrator borrowed language from CMN’s mediation brief submitted at an early stage in the process and recited facts that later turned out to be erroneous. Orion submitted that this was evidence of insufficiency or a lack of independent reasons. On review, Justice Morgan characterized this as an unfortunate drafting error and a potential mistake of fact that was not crucial to the ultimate conclusion. Indeed, Orion did not challenge the supposedly erroneous fact, only the source of the error.

Justice Morgan went on to explain that “[a]n adjudicator’s copying from other judgments, external sources, or the parties’ written briefs, is not in and of itself problematic” (para. 50). It is innocuous if the copying amounts to a short cut. There must be something more to bring the judgement into question, such as some sign that the adjudicator has not actively turned his or her minds to the issues. 

In this case, Justice Morgan noted that even though the Arbitrator’s reasons read much like the written brief he favoured, and borrowed and tracked from those submissions, he did not reproduce those submissions verbatim.  Instead, “the Arbitrator took the submissions of the successful side and integrated them into his own thinking on the subject” (at para. 46). The Court found that he could not be criticized for “preferring clarity of logic over novelty of expression” and  stated that “[e]xcavating the untapped poetics of data in a PriceWaterhouseCooper spreadsheet could  challenge even the most creative among us” (para. 47).

Ultimately, Justice Morgan determined that the Arbitrator’s reasons were intelligible, even though they were relatively short. On that point, he found that all that is required is for reasons to show that the Arbitrator was seized of the substance of the issues, setting out the Arbitrator’s conclusion and how he got there. Justice Morgan found that the Arbitrator’s decisions were clear, coherent and concise, endorsing the Arbitrator’s use of briefness and plain language. 

The Court dismissed the application to set aside the award and for leave to appeal it.

Contributor’s Note:

This  case can be contrasted with University of Alberta v Chang, 2012 ABCA 324, where the appellants were successful in showing that the chamber judge did not conduct an independent analysis of the case when he cut and pasted paragraphs from the parties’ briefs and signed them as “Reasons for Judgment”. The Alberta Court of Appeal criticized this practice and remitted the matter back for proper adjudication. In so doing, it noted that briefs tend to be one-sided, and merely copying could lead to problems, including: (i) the reasons lack an appearance of impartiality; (ii) there may be a failure to explain why the evidence or arguments tendered by the other side were discounted. These types of defects could leave the arbitral decision vulnerable to applications for set aside. Thus, while there is accepted judicial economy from copying from parts of the parties’ written submissions, care should be taken to ensure that arbitrators integrate them into their own independent analysis addressing the substance of the issues.