Commercial Litigation and Dispute Resolution Blog

The British Columbia Court of Appeal recently released its decision in Hunt v. The Owners, Strata Plan LMS 25556, 2018 BCCA 159, reaffirming the longstanding maxim that “justice must not only be done, it must be seen to be done.” 

The Hunt decision arises out of arbitration over concerns about the installation of a heating, ventilation and air conditioning unit between Mr. and Mrs. Hunt, two owners of a residential unit in a strata building, and the strata corporation. Of interest to the Court of Appeal were not the matters originally in dispute between these parties, but rather several ex parte communications between counsel for the strata and the arbitrators.

The owners were self-represented and largely unsuccessful at the arbitration. The strata corporation was represented by lawyer Patrick Williams, and was ultimately awarded special costs by the arbitration panel.  In the course of preparing for the assessment of those costs, the Hunts obtained Mr. William’s file and discovered that he had four private communications with the arbitrators over the course of the arbitration. These ex parte communications were not disclosed to the Hunts by either Mr. Williams or the arbitrators.

The first ex parte communication occurred soon after the arbitration was commenced. The Hunts initiated the arbitration and nominated lawyer Elaine McCormack as arbitrator. The strata did not accept the Hunts’ choice of arbitrator and nominated lawyer Frank Borowicz, Q.C. The Strata Property Act required Ms. McCormack and Mr. Borowicz to either name a third person to act as the sole arbitrator or name a third arbitrator to act with them and to chair the panel. The Hunts wrote to the strata expressing a preference for a single arbitrator on the basis that it would minimize costs. The first ex parte communication happened soon thereafter in an email sent from Mr. Williams to Mr. Borowicz outlining the strata corporation’s position that there be a three person panel as opposed to a sole arbitrator. This email was not copied to the Hunts or Ms. McCormack. Following this communication, Ms. McCormack and Mr. Borowicz selected lawyer John Sanderson, Q.C., to act as the third arbitrator and chair of the panel.

The second ex parte communication happened after a pre-hearing conference attended by the Hunts and Mr. Williams. Mr. Sanderson took Mr. Williams aside following this hearing and discussed the strata’s position on settlement. The third such communication was between Ms. McCormack and Mr. Williams, both of whom had just finished a meeting on an unrelated matter.  Ms. McCormack took Mr. Williams aside in the lobby of the building and commented that the arbitration should not go much further based on the comments Mr. Williams had made to Mr. Sanderson following the pre-hearing conference.

The fourth ex parte communication was a telephone call between Mr. Williams and Mr. Borowicz. Mr. William’s notes of this call reveal that they discussed the timing of a possible mediation prior to the eventual hearing. The arbitrators did not raise the possibility of a mediation with the Hunts.

Following their discovery of these conversations, the Hunts brought a petition to set aside the arbitration award, including the costs award, on the basis that there was a reasonable apprehension of bias. The petition was dismissed and the Hunts appealed that dismissal to the Court of Appeal.

The Court of Appeal found that the arbitrators placed themselves in an impossible position and undermined their appearance of neutrality by allowing the ex parte communications to take place. The appeal was allowed on the basis that there was a reasonable apprehension of bias, and the court set aside the arbitrators’ decision, including the costs award. In doing so, the court elucidated a number of principles relating to the impartiality of arbitrators.  

Arbitrators are expected to play a role similar to a judge. They must be impartial decision makers free from “reasoned suspicion of biased appraisal and judgment.” This requirement of impartiality is a fundamental tenet of our legal system that requires judges and arbitrators to refrain from discussing any part of an ongoing case with only one party to the dispute. It does not matter if discussions are only in relation to procedural matters or do not deal with the merits of the dispute between the parties. Any such discussions could give rise to a reasonable apprehension of bias.

The ruling in Hunt is a cautionary tale for both arbitrators and counsel alike. Although the formalities and decorum obligations found in judicial proceedings may be absent from their arbitral counterparts, the consequences of fraternization outside of the permissible channels for doing so can be severe. Lawyers involved in arbitration, whether as counsel or arbitrator, must conduct themselves appropriately, regardless of their level of familiarity with the other individuals involved. The issue is not whether an arbitrator is actually biased, whether he or she favours one party over another, whether ex parte communications relate only to trivial matters, or whether one party has no reasonable chance of being successful on the merits. What matters is whether there is a reasonable apprehension of bias. Once this has been established, the underlying proceeding is set aside as void and it is unnecessary to embark on any further inquiries.

Public confidence in arbitral proceedings is fundamentally important. The requirement that arbitrators must not only be impartial but must be seen to be impartial is necessary to ensure that this confidence is not eroded.