In Maharajh v Mathura, 2024 ONSC 5737 (“Maharajh”), the Court granted an application to remove an Arbitrator for undue delay. The Arbitrator went silent for four months without explanation and then consented to the Applicant’s request that she resign. The Court was required to rule on the issue when the Respondent refused to consent. The delay was “undue” because the Applicant was prejudiced by it. This undermined the arbitration agreement. The parties could not cooperate, so their dispute returned to court.
Background to the Dispute – This case arose out of a matrimonial dispute.
At a Trial Management Conference on October 16, 2023, the dispute was set for a 5-day trial to start on March 18, 2024. The possibility of a Mediation/Arbitration was raised, and the endorsement at the Trial Management Conference stated that if a Mediation/Arbitration was to take place, it was to be scheduled by the end of 2023.
The parties agreed to pursue a Med/Arb and selected an Arbitrator. The parties and the Arbitrator entered a Med/Arb agreement. A mediation took place on March 8, but it was not successful. The Arbitrator directed, as a precondition to the arbitration, that the parties exchange settlement offers. The Applicant did so on March 19, 2024, but the Respondent did not.
The Arbitrator then went silent, without explanation, and did not respond to multiple attempts by counsel for the parties to contact her between April and July of 2024. The Respondent became a self-represented litigant in May of 2024 and did not engage productively with the proceedings, which further frustrated the process.
The Applicant wanted to move the matter forward in a timely manner but was frustrated in her efforts. Finally, her counsel wrote to the Arbitrator on August 12, 2024, stating that the Applicant was suffering significant prejudice due to this delay. The letter stated that the“[Applicant] is the one bearing the prejudice to this delay; she has outstanding claims for equalization, post-separation adjustment expenses, ongoing and retroactive child support & section 7 expenses. She is in desperate need of interim relief.” (at para 13, quoting the letter).
In response to this letter, the Arbitrator gave the parties available dates, but did not give any explanation for her prior lack of engagement. The Applicant asked the Arbitrator to recuse herself, and the Arbitrator wrote to the parties on August 14, 2024, seeking their consent to withdraw. While the Applicant supported this, there was no response from the Respondent. The Arbitrator indicated that if she did not hear from the Respondent by August 23, she would withdraw. However, on August 23, the Respondent wrote to the Arbitrator to advise that he did not consent to her withdrawal.
Application to Remove Arbitrator – The Applicant applied to the Court to have the Arbitrator removed due to the significant delay.
Section 15(1) of Ontario’s Arbitration Act, 1991, SO 1991, c 17 (“Arbitration Act”) provides:
“The court may remove an arbitrator on a party’s application under subsection 13 (6) (challenge) or may do so on a party’s application if the arbitrator becomes unable to perform his or her functions, commits a corrupt or fraudulent act, delays unduly in conducting the arbitration or does not conduct it in accordance with section 19 (equality and fairness) [emphasis added by the Court].” (Arbitration Act, s 15(1)).”
Order to Remove Arbitrator – The Court held that the Arbitration Act gave it jurisdiction to remove an arbitrator for undue delay. This is an extreme remedy and the Court explained that:
“In considering when delay is “undue”, this Court has stated that mere delay is insufficient to destroy the arbitration. Instead, “[a] party must show more, in the form of some prejudice or actual unfairness that fundamentally undermines the agreement to arbitrate.”: Rosenberg v. Minster, 2014 ONSC 845 at paragraph 58.” (at para 19).
In the extreme circumstances of this case, the Court concluded that, “I am satisfied on a balance of probabilities that (a) the Arbitrator has unduly delayed the parties’ arbitration; and (b) this has caused prejudice and unfairness to [Applicant] that fundamentally undermines the agreement to arbitrate.” (at para 20).
While some delay was the fault of the Respondent, who did not engage productively with the proceeding, the Court held that significant periods of delay were caused by the Arbitrator, who did not respond in a timely manner. The Court pointed out that, “[h]ad the initial trial set for March 18 proceeded, the parties likely would have had a decision by now. This itself has caused the Applicant significant prejudice and, I find, is fundamentally unfair.” (at para 23).
The Court removed the Arbitrator.
Contributor’s Notes:
The Court’s removal of an Arbitrator is a remedy of last resort. It is a significant step and potentially has serious consequences for the parties, the Arbitrator, and the arbitration itself. Courts must permit the arbitration to proceed and only intervene if it is critical. Consequently, removal of an Arbitrator for delay is subject to a high threshold and requires the delay to be “undue”. The party seeking this relief must establish prejudice or actual unfairness. This will turn on the particular facts of the case. For example, the 4-month delay in Maharajh caused significant prejudice to the Applicant, as trial dates were missed and the issues that were presented in the matrimonial context necessitated timely relief. That period of delay might not cause the same level of prejudice in a different fact pattern, such as an arbitration arising at the end of a large infrastructure project.
The remedy of removal of an Arbitrator will have a significant impact on the arbitration itself, but its significance will often depend upon the stage of arbitration. For example, the removal of an arbitrator at the outset may not be as significant as the removal of an arbitrator mid-way through a proceeding or after the close of the hearing. It is a step which is not to be taken lightly, as it will be disruptive, likely to incur costs, and cause at least some delay for the parties. This is why it is a remedy of last resort.
Procedurally, the Court in Maharajh ordered that the Arbitrator be given notice of the motion seeking her removal, but she was not a party. The Court declined to appoint a substitute Arbitrator, finding that, “I am further satisfied that it is not productive for the Court to select a new Arbitrator. The record shows clearly that the parties cannot work cooperatively to benefit from the “less formal, more expeditious and therefore faster” arbitral process […]. The Respondent’s failure to engage in any way in this proceeding shows the futility of continuing with arbitration. Formal court proceedings are required.” (at para 25).
The exercise of the supervisory power of the Court was necessary to facilitate the proper functioning of the overall system. For an excellent survey of this important topic, see: Douglas F. Harrison, “Removing an Arbitrator for Incapacity or Undue Delay” (2020) 1:1 Can J Comm Arb 63, which outlines the law, practical issues which can arise, and examples of treatment by courts and arbitral institutions.