January 8, 2021
What happens when an arbitrator commits errors of law and a breach of natural justice which require a new hearing?
Usually, a different arbitrator must be appointed. The principles of efficiency, cost-effectiveness and fairness to the parties must be balanced with the need to secure fair and equal treatment. Even when there is no suggestion of bias, the difficulty that any person may have in divorcing themselves from conclusions they have already reached and truly considering an issue afresh may require that the issues be considered by a different arbitrator. Demanding that the first arbitrator jettison all of his previous impressions of the evidence and approach the issues with a truly open mind is “too much to ask”.
In the case of Tall Ships Landing Devt. Inc. v. City of Brockville, a Superior Court judge reviews these principles, and carefully considered her powers under the Arbitration Act, 1991.
She reached the conclusion that a different arbitrator was need. The parties had agreed to submit their differences arising out of a construction dispute to an arbitrator experienced in construction matters. A sixteen day hearing with hundreds of exhibits was held. The arbitrator released three separate rulings, each of which contained defects that required that they be overturned on appeal. The defects went beyond errors of law, by considering issues not raised or argued by any party and failing to consider significant issues that were argued. This is what is called a breach of natural justice.
Unfortunately, the evidence was not recorded, so the judge hearing the appeal could not simply substitute her judgment for that of the arbitrator, and had to order a new hearing.
The City, the winner at the first arbitration, urged the judge to send the case back to the original arbitrator with specific directions as to the law and issues. This would save cost. In its original written applications, Tall Ships did not seek a new arbitrator, but by the time the judge heard oral arguments, it asked for that remedy.
After reviewing prior decisions, and explaining why those sending cases back to the same arbitrator are different, the judge ordered a new arbitrator to hear the case, and provided directions designed to streamline the hearing, and level the playing field going forward – essentially, preventing either party from tailoring their case differently the second time around.
The judge in particular relied upon an early decision in which the judge explained that, even where an arbitrator has done a ‘laudatory’ job:
A new hearing would require the Arbitrator to set all that aside and start without any understanding or predisposition arising from what he had heard and read in August 2010. To my mind, this is too much to ask. Having already accepted the evidence of [the plaintiffs’ witnesses], any effort to impeach them would be prejudiced by the Arbitrator having already heard them and made findings as to their credibility, reliability and the persuasiveness of the evidence they provided. It is evidence they would repeat in any new hearing.
There was little that the parties could have done to avoid this unfortunate result, and the duplication of cost, effort, and delay. They selected a well qualified and respected arbitrator. They presented their respective cases. Through no fault of theirs, everything went sideways. Perhaps if the evidence had been recorded, the judge might have decided to rule on the case without a fresh hearing.
Arbitration is attractive for many reasons, including cost and time saving. Unfortunately, this cautionary tale teaches us that sometimes these efforts backfire. A fair hearing is at the heart of justice, and that need may trump all other considerations.
The decision in this case has been overturned. Please see Too Much to Ask Revised for an updated look at the court’s decision.