BC Court of Appeal allows strata-lot owners’ appeal, sets aside arbitration award due to reasonable apprehension of bias
April 27, 2018
BY Kevin Zakreski
Hunt v The Owners, Strata Plan LMS 2556, 2018 BCCA 159, is the latest chapter in a long-running dispute that arose from a miscommunication over approval to install an air-conditioning unit on a limited-common-property balcony. Even though that miscommunication was corrected (there was no approval and, so, the HVAC unit was never installed), the owners of a neighboring strata lot had nevertheless commenced arbitration proceedings against the strata corporation. Those proceedings have produced an arbitration award in favor of the strata corporation, an award of special costs against the owners, and a ruling on judicial review upholding the arbitration award. And now the court of appeal has allowed the owners’ appeal, setting all that aside.
Each ruling in this case has appeared to bring out a new facet in the dispute. While the decision being appealed focused primarily on section 181 of the Strata Property Act—and its requirement on an arbitrator to “advise the parties of the possibility of a mediated settlement”—this case was largely taken up with considering whether communication between the strata corporation’s lawyer and members of the arbitration panel created a reasonable apprehension of bias.
The court of appeal rejected the argument that held sway with the chambers judge, which was that since the case was ultimately based on a miscommunication, there was nothing to arbitrate or mediate:
As for the repeated submission by the Strata that there was nothing to arbitrate or mediate, this was raised by the Strata below, and accepted by the chambers judge, as a reason for dismissing the application for judicial review. However that submission and finding is irrelevant to the question of whether there was a reasonable apprehension of bias. This assertion is simply one rung of the irrelevant argument that there was no actual prejudice to the Hunts arising from the four ex parte communications even if they did give rise to a reasonable apprehension of bias.
The Strata’s position amounts to an argument that there was no need for an arbitration, and therefore no need for the arbitrators – once appointed and acting as arbitrators – to act fairly. The reverse is true: there was an arbitration; there were arbitrators appointed; and therefore they did have duties of impartiality and procedural fairness.
In the court’s view, these undisclosed communications did create a reasonable apprehension of bias in the circumstances of this dispute:
The chambers judge erred in failing to find that the four ex parte communications between the Strata’s lawyer . . . and the arbitrators, viewed practically and reflected upon, would lead an informed person to conclude that the arbitrators would likely not decide the matter fairly. These communications created a reasonable apprehension of bias.
Having said this, I have no reason to believe that the arbitrators were in fact biased and deliberately favoured the Strata over the [owners]. Suffice it to say, once there is a reasonable appearance of bias, it is unnecessary to embark on the impossible task of determining the actual state of mind of the decision-maker.
By allowing ex parte communications about the arbitration proceeding to take place with [the strata’s lawyer], the arbitrators placed themselves in an impossible position and undermined their appearance of neutrality.
It has to be understood that many strata disputes are initiated or defended by self-represented condominium owners. The lawyers acting on the opposite side or as arbitrators in such disputes are usually earning significant professional fees for their roles. It would not be unheard of for them to refer work to one another and to maintain collegial professional relationships. In such a context, the legal professionals involved must be especially vigilant to maintain appropriate professional distance in order to properly perform their roles.
I would allow the appeal. On the basis that there was a reasonable apprehension of bias, I would grant the petition for judicial review, and set aside the arbitrators’ decisions, including their costs award.
