Lisa’s 2022 Hot Topic #1: Arbitrator resignation – the when, how, and what next? – #696

Although there is provision in most provincial domestic arbitration legislation and the Model Law for the resignation of the arbitrator, there is little guidance on when the arbitrator may do so and the potential consequences once that occurs. However, two cases released in 2022 are helpful in that they suggest: (1) potential limitations on the discretion of an arbitrator to resign, regardless of the rights contained in the legislation; and (2) how the parties many anticipate this issue and provide for it in their arbitration agreement if it is important, so as to minimize the inevitable disruption that arises when an arbitrator resigns.

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Ontario – Arbitrator no jurisdiction to hear challenge for bias after partial final award – #691

In Aroma Franchise Company, Inc. v Aroma Espresso Bar Canada Inc., 2022 ONSC 6188, 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.

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England – Court clarifies requirements for validly appointing arbitrators – #646

As our readers know, Canadian courts have been generating a wealth of jurisprudence on many international arbitration-related issues of late. However, there are still some lacunae in Canadian jurisprudence, which courts will often fill by referring to jurisprudence from other leading arbitral jurisdictions, including England and UNCITRAL Model Law on International Commercial Arbitration jurisdictions such as Australia, New Zealand and Singapore. Article 2A(1) of the Model Law explicitly provides for this: “In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith.” Because of this, Arbitration Matters will occasionally report on interesting cases from other jurisdictions which could be applied in Canada if the issue were to present itself here. One such case made our radar this week, because it deals with an issue that is seldom fought about in Canada: whether an arbitrator was validly appointed. In ARI v. WXJ, [2022] EWHC 1543 (Comm), Justice Foxton of the English Commercial Court rejected the Claimant’s argument that the Respondent’s appointee was invalidly appointed, and that the arbitrator appointed by the Claimant should therefore decide the dispute as sole arbitrator.

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Ontario – “Vigorous” intervention and “difficult”, “incisive” questions by arbitrator not bias – #632

In Dufferin v Morrison Hershfield, 2022 ONSC 3485, Justice Woodley dismissed an application made pursuant to sections 13(6) and 15(1) of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17, for an order removing an arbitrator on the basis that, “circumstances exist which give rise to justifiable doubts about the Arbitrator’s independence and impartiality, which are alleged to give rise to a reasonable apprehension of bias”. Essentially, the allegations were that the arbitrator had “entered the fray” because of the many questions he asked the witnesses, pre-judged the issues, and become an advocate for the Respondent. Justice Woodley found that the arbitrator was interventionist, but that she could find no bias or a reasonable apprehension of bias; “instead, [she] found a deeply invested, engaged Arbitrator that worked tirelessly for the parties in furtherance of his mandate, which was to determine the truth of the issues before him”. The Applicants were not out of time to bring their application because the alleged conduct complained of was “cumulative”. In any event, it would be “nonsensical” to allow a partial arbitrator to continue, even if the Respondent had not objected in time.

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Ontario – Arbitrator’s notes not a substitute for transcript – #627

In Aquanta Group Inc. v Lightbox Enterprises Ltd, 2022 ONSC 3036, Justice Morgan was asked to appoint an arbitrator when the parties could not agree. The Respondents opposed all arbitrator candidates on the Applicants’ list and requested the appointment of an arbitrator who was previously appointed by the parties in an earlier arbitration involving the same parties and the same agreements. The Respondents argued that this would facilitate costs and time savings by allowing the arbitrator to use his notes from the earlier arbitration because there was no transcript of that arbitration. The Applicants had challenged the award arising from the earlier arbitration and opposed the appointment of the same arbitrator on the basis of reasonable apprehension of bias. Justice Morgan rejected the Respondents’ request to appoint the same arbitrator and found that their proposal, among other things, violated the principle of deliberative secrecy. In the alternative, the Respondents agreed to the appointment of certain candidates on the Applicants’ list. Justice Morgan chose one of those, “resort[ing] to the entirely arbitrary approach of going in alphabetical order”.

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Québec – Court extends arbitrator’s immunity to appointing authority – #619

In B Smart Technology inc. v. American Arbitration Association, 2022 QCCS 1526, Justice Mark Phillips granted the Defendants’ Application for dismissal of the Plaintiff’s Request for Provisional Interlocutory Injunction and Order to Safeguard the Rights of Plaintiff. The Defendants were the American Arbitration Association (“AAA”) and the arbitrator it had appointed. In its Request, Plaintiff sought orders: (1) to recuse and replace the arbitrator; (2) to review the arbitration proceedings, including the costs of the proceedings, the reimbursement for arbitrator’s fees paid to date; and (3) alternatively, the annulment of the arbitration clause and referral of the dispute to the Superior Court. Justice Phillips’s judgment was mainly based on the application of two well-known principles in arbitration law: arbitrator protection against prosecution/immunity (sec. 621 CCP); and the exclusion of court review except as provided by law (sec. 622 CCP). Justice Phillips reaffirmed that the arbitrator’s protection against prosecution is broad and applies both to the arbitrator’s liability and to any challenges against the conduct of the arbitration process itself. He found that the institute offering arbitration services is covered by the protection as well. Justice Phillips also confirmed the exclusion of court review principle, which prevents courts from interfering in an arbitration process other than within the strict and limited occasions provided by law. In this case, the law did not provide for court intervention. Finally, the issue was moot because the arbitrator terminated the arbitration for the Plaintiffs’ failure to pay his costs, as he was entitled to do under the AAA Rules.

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Québec – Statutory tribunal chair disqualified for bias for comments made in presence of witness during hearing break – #582

In Terrebonne Police Brotherhood Inc. v Truchon, 2022 QCCS 34, Justice Poulin granted, in part, the plaintiff union’s application for judicial review of a decision rendered by a three-person statutory 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. Justice Poulin set aside the tribunal’s ruling and found that those 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.

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Québec – Judicial immunity precludes compelled evidence on bias challenge; application to arbitrators? – #554

In Credit Transit Inc. v. Chartrand, 2021 QCCS 4329, Justice Lussier of the Québec Superior Court quashed a summons served upon a judge, which purported to compel him to give evidence in relation to an application to disqualify him as the appointed case management judge on grounds of alleged bias. The Court held that judicial immunity, which safeguards judicial independence, also protects judges from being compelled as witnesses in relation to the exercise of their judicial functions.

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Ontario – “Cumulative series of events” complaint does not extend deadline for raising arbitrator bias – #527

In Spivak v. Hirsch, 2021 ONSC 5464, Justice Jarvis heard a motion to remove an arbitrator pursuant to sections 13 and 15(1) of the Arbitration Act, 1991, S.O. 1991, c. 17 on the basis that the arbitrator demonstrated a reasonable apprehension of bias, actual bias and had not treated the applicant fairly and equally. The applicant raised concerns which she said, cumulatively, constituted bias. Essentially, the applicant argued bias on the basis of awards issued against her and that she was not being afforded the same litigation latitude as the respondent. The court dismissed the application. A reasonable person, when considering the applicant’s concerns in the context of the entirety of the arbitration proceedings, would not think this amounted to bias. In any event, the applicant was out of time. Section 13 of the Arbitration Act makes it mandatory that a person who wishes to challenge an arbitrator must do so within 15 days of becoming aware of the grounds for challenge. There is no discretion to extend the time to take into account earlier incidents of alleged bias.

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