COURT FILE NO.: 557/08

DATE: 20091217

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

LEITCH, DAMBROT AND SWINTON, JJ.

B E T W E E N:

ALLSTATE INSURANCE CO. OF CANADA

Eric Grossman & Tanya Zigomanis, for Allstate Insurance Co. of Canada

Plaintiffs

(Appellant)

• and -

TAJENDAR SHARMA AND THE FINANCIAL SERVICES COMMISSION OF ONTARIO

Tajendar Sharma in person

Joe Nemet for The Financial Services Commission of Ontario

Defendants

(Respondent)

HEARD at Toronto: November 30, 2009.

LEITCH, J.:

NATURE OF PROCEEDING:

[1] Allstate Insurance of Canada (“Allstate”) applies for judicial review pursuant to subsection 2 (1) of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1, of a decision of Arbitrator John Wilson refusing to declare a mistrial and/or disqualify himself from further participating in The Financial Services Commission of Ontario (FSCO) Arbitration A07-001223.

[2] Allstate seeks an order prohibiting FSCO from continuing with Ms. Sharma’s arbitration proceedings; an order prohibiting Arbitrator Wilson from presiding over any further arbitration proceedings relating to Ms. Sharma’s application; and an order quashing all decisions of Arbitrator Wilson since June 12, 2008 with respect to Ms. Sharma’s application.

[3] On July 8, 2009, Jennings J. granted a motion to stay the arbitration and prohibited Arbitrator Wilson from taking a further role in the arbitration pending the disposition of this judicial review.

[4] After hearing argument in this application, the Court announced that the application for judicial review was dismissed with reasons to follow. These are the reasons for the decision.

BACKGROUND:

[5] Ms. Sharma was injured in a motor vehicle accident on November 21, 2001. She applied for and received statutory accident benefits from Allstate, payable under the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, O. Reg. 403/96, as amended.

[6] Ms. Sharma’s entitlement to statutory accident benefits is disputed. With Allstate’s agreement Ms. Sharma has submitted this issue for arbitration.

[7] Arbitration hearings were held on June 9, 10, and 12, 2008. More hearings were to be held on September 23, 2008.

[8] On June 12, 2008, Ms. Sharma had an emotional outburst during cross examination. Arbitrator Wilson closed the record of proceedings for that day. Thereafter he advised Ms. Sharma that the process was difficult, and suggested that she try resolving her issue with Allstate. Arbitrator Wilson proposed that Ms. Sharma involve another arbitrator to discuss settlement.

[9] There is a factual dispute respecting what Ms. Sharma told Arbitrator Wilson. According to Allstate, Ms. Sharma told Arbitrator Wilson that she would not settle her case for the amount that Allstate had offered, and she stated a number. Allstate submits that they last offered Ms. Sharma a much larger sum than the amount Ms. Sharma reported and it had never made an offer for the amount she reported to Arbitrator Wilson. Ms. Sharma disagrees that she made any disclosure of a settlement amount and submits that Arbitrator Wilson did not hear and was not privy to settlement numbers during her outburst.

[10] Mr. Grossman, counsel for Allstate, requested that Arbitrator Wilson go back on the record so that the off record discussions could be put on the record, but Arbitrator Wilson indicated that he did not intend to reopen the record.

[11] On June 18, 2009, Arbitrator Wilson ruled that Allstate was not entitled to file an expert report of Dr. Brigham on catastrophic impairment because Allstate had exceeded the deadlines in Rule 39.1 of the Dispute Resolution Practice Code.

[12] On June 19, 2008, Mr. Grossman wrote to the Director of Arbitrations to explain the events and to request that he declare a mistrial.

[13] On June 24, 2008, Allstate was invited to bring a motion for mistrial under Rule 67 of the Dispute Resolution Practice Code. Thereafter that motion was scheduled to be heard July 28, 2008.

[14] On July 16, 2008, the Appellant filed a Notice of Appeal referring to the disclosure of settlement discussions to Arbitrator Wilson, alleging an error in law regarding Dr. Brigham’s report, and seeking Arbitrator Wilson’s disqualification.

[15] On July 18, 2008, FSCO Director’s Delegate Evans rejected Allstate’s appeal as premature.

[16] On July 30, 2008, Arbitrator Wilson released a letter decision conceding that Ms. Sharma may have disclosed the existence of a settlement offer, but dismissing the argument that this compromised his ability to impartially adjudicate the issues.

[17] On September 17, 2008, Allstate filed a second notice of appeal seeking a reversal of Arbitrator Wilson’s July 30 ruling and his removal from the scheduled arbitration hearings.

[18] On September 19, 2008, FSCO Director’s Delegate Lawrence Blackman released his decision rejecting Allstate’s appeal on the grounds that he did not have jurisdiction to overturn the decision.

[19] On September 23, 2008, the scheduled hearing date, Mr. Grossman and Ms. Sharma appeared before Arbitrator Wilson.

[20] Mr. Grossman advised Arbitrator Wilson as a preliminary matter that neither Mr. Grossman nor Allstate would participate further in the arbitration because Allstate had commenced an application for judicial review.

[21] Mr. Grossman took the position that Arbitrator Wilson did not have jurisdiction to make a further order and advised that Allstate would be content if Arbitrator Wilson adjourned that arbitration sine die to permit the judicial review procedures.

[22] On September 23, 2008, Arbitrator Wilson adjourned the matter and reserved on the terms and conditions of the order.

[23] On September 29, 2008, Arbitrator Wilson released a letter decision on the adjournment and its conditions. The conditions included that Allstate begin paying Ms. Sharma an interim attendant care benefit of $ 400/wk until February 2, 2009, with a provision that either party could seek to vary the order after that date if no decision had been rendered on judicial review.

[24] On September 26, 2008, Arbitrator Wilson released his full decision on the mistrial and recusal motion which is the subject of this application.

[25] On November 28, 2008, Allstate issued and served FSCO and Ms. Sharma with the notice of the judicial review application.

[26] Allstate commissioned an affidavit to be used in the judicial review proceedings. The affidavit contained evidence of the settlement discussions and was intended to be put under seal pursuant to s. 137 of the Courts of Justice Act, R.S.O. 1990, c. C.43, during the judicial review application hearing.

[27] The affidavit was served on Mr. Nemet (counsel at FSCO) and Ms. Sharma without any express reference to confidentiality in the accompanying letter.

[28] Ms. Sharma sent a letter to Arbitrator Wilson, dated February 18, 2009, enclosing the affidavit. She also referenced portions of it in her letter, specifically, the exact amount of a settlement offer from Allstate. The Affidavit had not yet been put under seal.

[29] The hearing resumed April 16, 2009, before Arbitrator Wilson, and Mr. Grossman made submissions on Allstate’s request to set aside the order for interim benefits. At the hearing, Mr. Grossman learned that Arbitrator Wilson had the affidavit filed in the judicial review proceedings and was privy to all settlement numbers discussed in the off the record and confidential meetings of Allstate and Ms. Sharma, leading up to the arbitration. Ms. Sharma argued that she was not aware that Allstate intended to put the affidavit under seal.

[30] Arbitrator Wilson requested written submissions from the parties on the significance of the disclosure of settlement numbers.

[31] On May 29, 2009, Arbitrator Wilson ruled that Allstate was responsible for the delay in the judicial review; that interim benefits should continue; and that the hearing should resume before him on an expedited basis. He noted that Allstate could seek an interim order of the Divisional Court pursuant to s. 4 of the Judicial Review Procedure Act.

[32] Allstate brought a motion for interim relief to the Divisional Court, on notice to FSCO, returnable July 8, 2009.

[33] On June 18, 2009, Arbitrator Wilson wrote to the parties demanding that the arbitration be resumed forthwith. Allstate submits that Arbitrator Wilson disregarded counsel’s schedule.

[34] On July 8, 2009, Jennings J. granted a motion to stay the arbitration and prohibited Arbitrator Wilson from taking a further role in the arbitration pending the disposition of this judicial review. Jennings J. ordered that the FSCO complete the record for the judicial review application and that the file in this matter be sealed until the judicial review application is disposed of, unless this court extends the order.

THE DECISION UNDER REVIEW

[35] In his decision, Arbitrator Wilson stated that he did not recall hearing the settlement numbers mentioned by Ms. Sharma, but considered the possibility that he may “have been unconsciously compromised by the utterance.” He reasoned however that a miscarriage of justice would not necessarily result from a continuation of the proceedings. He distinguished the case before him from his decision in Webber and State Farm, a case in which he indicated that settlement discussions should be kept separate from arbitration proceedings. In Webber, the critical details of the settlement position and the party’s evaluation of its own case may have been inadvertently disclosed to the arbitrator, which he reasoned was not the case before him.

[36] Arbitrator Wilson distinguished arbitration proceedings from a jury trial and observed that mistrial jurisprudence stems from the concern of jurors making decisions based on extraneous evidence. Arbitrator Wilson characterised the arbitration process as more resilient than imagined by Mr. Grossman. He noted a professional arbitrator is in a position to weigh evidence and disregard irrelevant evidence.

[37] Arbitrator Wilson noted that Ms. Sharma suggested that Allstate’s request was untimely. Arbitrator Wilson opined that the timing of the recusal request that coincided with Allstate’s request to waive the time limit for an expert report suggested an ulterior motive, but that he accepted Mr. Grossman’s word that there was no such motive.

[38] Arbitrator Wilson reasoned that a mistrial is an extraordinary remedy to be granted only if prejudice to the moving party, once established, cannot be addressed in any other way. Arbitrator Wilson was not convinced that Allstate was irrevocably prejudiced by Ms. Sharma’s outburst. He concluded the proper remedy for her misconduct was in consideration of an award of cost or expenses, rather than a mistrial [p. 127].

STANDARD OF REVIEW:

[39] There is no issue that an analysis of the standard of review is unnecessary where there has been an allegation of a breach of natural justice or procedural fairness (Shooters Sports Bar Inc. v. Ontario (Alcohol and Gaming Commission), [2008] O.J. No. 2112 (Div. Ct.) at paras. 20 and 21).

[40] Allstate submits that Arbitrator Wilson breached the rules of natural justice and procedural fairness requiring that decisions be free from a reasonable apprehension of bias (Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817 at para. 45).

DISPOSITION

[41] During his submissions, Mr. Grossman questioned the process followed by Arbitrator Wilson and asserted that Arbitrator Wilson made a number of errors before and after his decision under review. He closed the record on June 12, 2008 when Ms. Sharma continued to speak. He also interacted directly with Ms. Sharma which would inform him of her condition which is the issue in the arbitration. He included in all his written decisions references to many authorities which counsel had not referred him to and more importantly which counsel had no opportunity to make submissions on. In particular, with respect to the decision under review, only Webber was put before Arbitrator Wilson whereas he referenced many other decisions in his reasons. Further, Mr. Grossman asserted Arbitrator Wilson awarded interim benefits as a term of the adjournment without hearing evidence. In addition, he insisted that the arbitration continue and according to Mr. Grossman, disregarded counsel’s scheduling conflicts.

[42] Mr. Grossman submitted that these concerns, in the context of his main concern that Arbitrator Wilson had been informed of off the record confidential discussions and had been made privy to incorrect and then later accurate settlement offers, required Allstate to assert there was a reasonable apprehension of bias respecting Arbitrator Wilson which ought to preclude him from continuing to adjudicate in this arbitration.

[43] Allstate’s submission raises the question whether an informed person, viewing the matter realistically and practically, and having thought the matter through, would conclude that it is more likely than not that the decision maker, whether consciously or unconsciously, would not decide fairly. Actual bias need not be established. The matter has to be determined on the probabilities based on the circumstances of the decision. The apprehension of bias must rest on serious grounds in light of the strong presumption of judicial impartiality. The inquiry is highly fact specific. (R. v. R.D.S., 1997 324 (SCC), [1997] 3 S.C.R. 484 at paras. 111 and. 109); Wewaykum Indian Band v. Canada, 2003 SCC 45, [2003] 2 S.C.R. 259 at paras. 52 and 65 ).

[44] For an arbitrator as for a judge, a reasonable apprehension that the decision-maker may not act impartially is grounds for a recusal (Ghirardosi v. British Columbia (Minister of Highways), 1966 47 (SCC), [1966] S.C.R. 367 at 370).

[45] We are satisfied that there is no reasonable apprehension that Arbitrator Wilson may not act impartially. The fact that settlement information was disclosed to Arbitrator Wilson in the circumstances described above, does not raise a reasonable apprehension of bias. He assumed for the purposes of his decision on the mistrial motion that a settlement offer was disclosed because at that time there was a factual dispute as to whether that disclosure had in fact been made. He was correct in stating that disclosure of settlement information does not always mandate the declaration of a mistrial. He considered the case cited by Mr. Grossman, Webber, and distinguished that decision from the circumstances before him. The fact that he also referred to other decisions does not create a reasonable apprehension of bias. He carefully considered Mr. Grossman’s submissions and outlined the reasoning which led to his conclusions.

[46] For the forgoing reasons, the application is dismissed. The stay imposed by the order of Jennings J. dated July 8, 2009 is lifted and the sealing order imposed by Jennings J. will terminate by virtue of this Court making no order with respect to the sealing of the materials filed in FSCO Arbitration A07-001223.

[47] Ms. Sharma shall be reimbursed for her disbursements incurred in connection with this application which she advised were photocopying charges of $75.00 plus postage of $7.00.

Madam Justice Leitch

Mr. Justice Dambrot

Madam Justice Swinton

Released: