The Reasonable Apprehension of Bias in Strata Arbitrations
Paul G. Mendes, Partner
Phone: 604-685-4894
Email: pgm@lmlaw.ca
Hunt v. The Owners, Strata Plan LMS 2556, 2018 BCCA 159
As a lawyer, I tend to be pretty friendly and familiar with other lawyers, even those that I don’t know. In the strata bar, which is much smaller than most, we are all on a first name basis.[1] Sometimes, however, that familiarity and chumminess between lawyers can be misinterpreted by lay people. In litigation, for example, the client hires a lawyer to be a fierce advocate. Clients may interpret friendliness or familiarity between opposing lawyers as a lack of loyalty to the client.
The same thing can happen when a lawyer is up against a self-represented person in strata related court proceeding or an arbitration. Judges are all former lawyers, and many arbitrators are practicing or retired lawyers. In some cases, the lawyer and the judge or arbitrator may even know each other, usually from other cases. Details of this previous relationship may come out during the proceedings, and those details, along with casual banter between the lawyer and the decision maker can appear as a possible bias on the part of the decision maker to the lawyer representing the other party.
That is what happened in Hunt v LMS2556, although the apprehension of bias was not due to good-natured banter between an arbitrator and lawyer, but informal communications between a lawyer representing the strata and the arbitrators assigned to hear the case. The lawyer did not share those communications with the lay litigant, and when the arbitrator decided the case in the strata’s favour, the lay litigants applied for judicial review. When the Court dismissed their petition for judicial review, they appealed that decision too.
At issue in the case were four informal emails that the strata’s lawyer sent to the arbitrator (another lawyer) about the procedures for the arbitration. The emails were informal because the lawyer did not copy the owners with those communications. The owners only found out about them after the fact.
The Court of Appeal relied on case law asserting that arbitrators are essentially private judges who must conduct themselves according to the same standards as judges during a proceeding. Arbitrators must be impartial, independent decision-makers, free from “reasoned suspicion of biased appraisal and judgment,” and that each party to an arbitration has the right to “sustained confidence” in the impartiality of the arbitrator.
The strata tried to argue that since the informal communications between the lawyer and the arbitrator were only about the arbitration procedure, it was not necessary to disclose those communications to the lay litigants, so there could be no “reasonable apprehension of bias” from these informal communications with the arbitrator. The Court of Appeal disagreed and ruled that any private communications about the arbitration with an arbitrator created a reasonable apprehension of bias against the party that was not involved in those communications. As a result, the court of appeal set aside the arbitration decision and remitted the case back to arbitration. The takeaway for lawyers, in this case, is that you should never communicate with an arbitrator without copying all parties with those communications and any responses. The Supreme Court of BC has a practice direction on communicating with the court which requires a lawyer to first obtain the other side’s consent before communicating with the court. Lawyers should follow a similar practice when communicating with arbitrators.
But there is another aspect to this case that is worth noting. The arbitrator who decided the case ordered the unit owners to pay $106,000.00 in costs to the strata. That bill would have included the arbitrator’s fees in this case (and there were three of them). In arbitrations, like court proceedings, the losing party must pay costs to the winning party. Typically that order for costs includes payment of the arbitrator’s fees. Contrast that to a court petition, or a CRT proceeding, in which the cost the having the proceeding heard in court, or the CRT is limited to the filing fee. The losing party is not ordered to pay Judge’s salary or the CRT tribunal member’s per diem rate on the case.
What I am getting at here is that arbitrations are expensive. Arbitrators are private judges, and they don’t come cheap. One of the arbitrators, in this case, charged $400 per hour or $3,000 per day to hear the arbitration. One of the things that the strata’s lawyer discussed with the arbitrator in those informal communications was how worried the unit owners were about the cost of the arbitration after they were asked to pay $15,000 for their share of the arbitrator’s fees!
Arbitrations can be very effective for resolving specialized disputes quickly, but they can also be punishingly expensive, so they are generally not suited to resolving most strata disputes. The dispute here was over the installation of an air conditioning unit on the common property. The Hunts opposed the AC unit because they felt it would be too noisy and that it would unreasonably interfere with the use and enjoyment of their strata lot. Although it is possible that that dispute was worth $106,000 to the parties, that seems extremely unlikely to me. For that reason, I always advise against using arbitration to decide most strata disputes. The cost of losing the arbitration can be punishing and is often disproportionate to what is at stake in the typical strata dispute.
That is not to say that there is no place for arbitrations in strata disputes, but it does not mean that you should think long and hard about initiating a strata arbitration when much less costly options like Court and the CRT are available.
[1] In fact, I think it is safe to say that society as a whole is on a first name basis. Gone are the days when we commonly referred to each other by honorific titles like Mr. or Ms. But I digress…
WHAT WE DO: Lesperance Mendes has been advising and representing strata owners and strata corporations in strata property disputes since 1997. If you are considering legal action to resolve an outstanding strata dispute, consult with one of our experienced strata lawyers today. For information contact Paul G Mendes, Partner at 604-685-4894 or email Paul at pgm@lmlaw.ca.
THIS ARTICLE IS NOT LEGAL ADVICE: This article provides general information and should not be relied on without independent legal advice.