- in Canada
- with readers working within the Insurance, Healthcare and Oil & Gas industries
The appearance of arbitrator bias has been a topic of significant interest in recent years, as well as significant concern given the risks it poses. As a result, any case law that handles new or uncommon factual applications of this issue will be of interest to readers.
One recent example is MTCC No. 1251 v Windsor Arms Hotel Corp., 2025 ONSC 5009, where the Ontario Superior Court considered the issue of an arbitrator having an unrelated matter referred to them by a party's expert witness, as well as the arbitrator's handling of the potential appearance of a conflict of interest once it arose. While the Court acknowledged that a single business referral may not be sufficient grounds for disqualification, the arbitrator's subsequent handling of the conflict created an undeniable perception of partiality. Below, we review the decision.
Background
The case arose from a long-standing dispute between Metropolitan Toronto Condominium Corporation No. 1251 ("MTCC 1251"), which owns the common elements of residential portion of a Toronto property, and the Windsor Arms Hotel Corporation ("Windsor Arms"), which owns and operates a luxury hotel occupying the first four floors. The parties were governed by an agreement from 1999 that addressed shared spaces, services, and utilities. Over several years, numerous disputes arose, leading the parties to engage an arbitrator for a mediation-arbitration.1
When mediation failed, the arbitration was scheduled to proceed for five days. One of the central issues to be decided was whether HST was applicable to certain fees paid between the parties. As part of its materials delivered in advance of the hearing, MTCC 1251 delivered an expert report from a tax lawyer on the HST issues (the "Tax Expert").2
Roughly 30 hours before the hearing was set to begin, the arbitrator emailed the parties to disclose a "clear appearance of conflict." The conflict stemmed from the fact that the Tax Expert had recently referred an unrelated litigation matter to the arbitrator's law firm, and the arbitrator himself had been tasked with "preparing the pleadings and assuming carriage of it." The arbitrator advised that he had no prior dealings with the Tax Expert, and that no discussions had occurred with respect to his involvement in the arbitration.3
The arbitrator's email presented three options to resolve the conflict: (1) his resignation, (2) a written waiver from both parties, or (3) the exclusion of the Tax Expert's evidence with a corresponding adjournment to allow MTCC 1251 to retain a new expert. The next day, counsel for Windsor Arms asked the arbitrator to elaborate, taking the position that there was no conflict. Counsel also suggested a fourth option that the Arbitrator did not mention: "the client [who had been referred to the Arbitrator's firm] could retain someone else and [the Arbitrator] would no longer act." In response, the arbitrator reiterated his position, advising that he was content to proceed with the arbitration provided that "everyone signs off in one way or another about what might be perceived to be a conflict of interest."4
On the day the hearing was scheduled to begin, MTCC 1251 declined to waive the conflict. Windsor Arms, however, took the position that there was no conflict and the arbitration should proceed. The arbitrator then reversed his position, stating that because Windsor Arms objected to him withdrawing (in other words, because there was no agreement between the parties that his withdrawal was necessary), he would no longer resign. In a series of subsequent emails, the arbitrator suggested the arbitration could and should still proceed, prompting MTCC 1251 to bring a formal motion (within the arbitral process) for his removal. The arbitrator heard the motion and determined that there was no conflict. Consequently, MTCC 1251 commenced an Application in the Superior Court of Justice.5
Issues
The sole issue before the Court was whether the circumstances gave rise to a reasonable apprehension of bias, a standard set out in s. 13(1) of the Arbitration Act, 1991, which provides that a court may remove an arbitrator where circumstances exist that may give rise to a reasonable apprehension of bias.
The Superior Court's Decision
The Court, after a de novo review of the facts and the applicable law, concluded that the apprehension of bias was reasonable and that the arbitrator should be disqualified. The Court agreed with the arbitrator that in many cases, a single business referral might not be sufficient for removal; however, in this particular case, the arbitrator's subsequent conduct following his initial disclosure – when considered in its entirety – gave rise to a reasonable apprehension. The Court identified seven key events in support of this conclusion.6
First, the arbitrator himself concluded there was a "clear appearance of conflict." It was centrally relevant that the Arbitrator, with full knowledge of both matters, had already made a determination. His initial email went much further than a simple disclosure, as he instead (1) confirmed that he was duty-bound to disclose the referral, (2) confirmed that the Tax Expert was the instructing lawyer in respect of the related matter, and (3) that the arbitrator himself would have carriage of the new matter. He had already concluded there was a "clear appearance of conflict," and his proposed options did not contemplate continuing without consent. This was critical because the determination was made by the one person with complete knowledge of the facts.7
Second, the arbitrator confirmed his conclusion in a second email, which reiterated and repeated his conclusion that a conflict existed. He stated he was not prepared to proceed unless both parties provided a waiver, which essentially confirmed the reasonableness of the apprehension. This should have been the end of the matter.8
Third, the arbitrator refused to provide communications pertaining to the related matter. MTCC 1251 requested production of communications between the arbitrator and the Tax Expert, so it could evaluate the seriousness of the issue. The request was refused, on the basis that those communications were privileged. While the refusal may have been appropriate, it nevertheless still informed the reasonableness of the apprehension of bias because MTCC 1251 was left in the dark regarding the other matter and the relationship between the Tax Expert and the arbitrator.9
Fourth, the arbitrator made an abrupt and unexplained reversal of his position, which the Court found to be problematic. After firmly stating he would not proceed without a waiver, he suddenly decided to continue because Windsor Arms objected to his withdrawal. The Court found that this "fact alone speaks to the reasonableness of the apprehension", as it was largely unexplained and contradicted his prior position.10
Fifth, the arbitrator excluded the clients from a case conference. The arbitrator directed that a case conference be held with counsel only; the Court acknowledged that this is not inherently improper but that, in this specific context where the principals of MTCC 1251 already had an apprehension of bias, their intentional exclusion from the discussion further increased their concern and the objective reasonableness of their apprehension.11
Sixth, the arbitrator had further communications with the Tax Expert. On the day the hearing was scheduled to begin, the arbitrator disclosed that he had been advised by the Tax Expert that he would engage directly with the client (i.e. rather than the Tax Expert serving as intermediary). While the arbitrator was likely trying to manage the conflict, this only revealed that he had engaged in yet another communication with the Tax Expert.12
Seventh, the arbitrator and Windsor Arms misinterpreted a provision in the Reciprocal Agreement that pertained to prior retainers of experts by the arbitrator. Windsor Arms argued that the provision in question applied here; however, that provision stipulated that the parties and their counsel acknowledged that they might retain, employ, or consult with experts who might have been retained by the arbitrator in the ordinary course of his counsel practice, and that the parties waived any appearance of conflict or apprehension of bias arising therefrom. A plain reading of this provision showed that it was intended for a different scenario, where an expert had previously been retained as an expert by the arbitrator in another matter. This was not what happened here.13
The Court therefore concluded that the arbitrator's failure to take into account these subsequent events, and his subsequent dismissal of the motion for removal, was erroneous. The arbitrator had initially correctly identified the issue and his options but then, in the face of objection, chose a course of action that gave rise to a reasonable apprehension of bias.14
Commentary
Although Windsor Arms does not necessarily raise a novel issue of law, it does emphasize how the management of an arbitrator's disclosure, rather than the subject matter of the disclosure itself, can be determinative on a test for reasonable apprehension of bias, and that such management can colour events normal to the arbitration process in such a manner that they are construed in a different light.
Most obviously, the arbitrator's own assessment of their disclosure carries significant weight. The arbitrator's initial declaration of a "clear appearance of conflict" was not merely a disclosure; rather, it was a determinative self-assessment by the person with the fullest knowledge of the facts. The arbitrator's reversal on this point was, unsurprisingly, fundamentally impactful to the test for apprehension of bias.
On the other hand, however, the arbitrator was placed in a somewhat invidious position in that his non-disclosure of his communications with the Tax Expert, while relevant to the Court's analysis, appeared to be the correct approach with respect to the preservation of privilege. It might have been possible for the arbitrator to seek the unrelated client's waiver of that privilege in order to permit the disclosure of those communications, but there would have been no guarantee that the client would agree to such a request. Furthermore, given the abbreviated timeline of events, this might simply not have been logistically possible in the time available.
Similarly, the exclusion of the clients from the case conference – which is generally unremarkable in normal circumstances – was instead determined to be an additional factor that exacerbated the apprehension of bias. Evidently, procedural decisions – even if standard – must be weighed against the specific circumstances of the parties and the situation at hand.
By contrast, it is equally important to highlight the Court's emphasis that a single business referral might not be grounds for disqualification. As we have written elsewhere, serving as an arbitrator is an inherently commercial endeavour, and so too is maintaining a practice as counsel at the same time. In such circumstances, it is entirely possible that these two spheres may overlap – particularly in specialized industries – such that professional relationships and business referrals may exist between participants in an arbitration.
Ultimately, Windsor Arms perhaps speaks most directly to the challenge of managing disclosures for arbitrators wearing more than one hat – i.e. maintaining a counsel practice while practicing as an arbitrator (and in some circumstances, an expert witness practice as well). Ultimately, arbitrators and counsel will need to remain mindful not only of the need for disclosure, but of the manner in which such disclosures are managed as well.
Footnotes
1. MTCC No. 1251 v Windsor Arms Hotel Corp., 2025 ONSC 5009 at paras 12-14 ("MTCC No. 1251").
2. Ibid at paras 15-17.
3. Ibid at paras 19-21.
4. Ibid at paras 22-24.
5. Ibid at paras 25-29.
6. Ibid at paras 30-31.
7. Ibid at paras 34-35.
8. Ibid at paras 36-37.
9. Ibid at paras 38-39.
10. Ibid at para 40.
11. Ibid at paras 42-43.
12. Ibid at para 44.
13. Ibid at paras 45-47.
14. Ibid at paras 51-56.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
