Court File and Parties

COURT FILE NO.: CV-14-498869 DATE: 20170125

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

HAROLD GERSTEL AND 2102503 ONTARIO INC. O/A HAROLD THE JEWELLERY BUYER Plaintiffs – and – JOEL KELMAN and THE MORTGAGE MAVEN INC. Defendants

COUNSEL: Wendy Greenspoon-Soer, for the Plaintiffs Ted A. Kalnins, for the Defendants

HEARD: November 30, 2016

LEDERER J.

INTRODUCTION

[1] This is a business dispute. The parties determined that it should be resolved through arbitration. Arbitrators were agreed to and an arbitration agreement was entered into. This action was stayed. One of the two sides, the plaintiffs in the action, (hereinafter referred to collectively as “Gerstel”) became unhappy with the means and manner through which the arbitration was being conducted. Harold Gerstel believes that the process has been unfair and is biased against his interests. This motion seeks to rectify these supposed wrongs.

[2] As a general proposition, the courts through statutory direction and practice are loathe to interfere in an arbitration. Access to the courts to review decisions or the process of an arbitration are to be limited [^1].

[3] Nonetheless, Gerstel seeks an order removing the arbitrators, together with an order setting aside the arbitration agreement and an order lifting the stay. In effect Gerstel wants to stop the arbitration to which the parties agreed and return the process of resolution to this action and the court.

BACKGROUND

[4] On or about December 10, 2010, Gerstel and the defendants (hereinafter referred to collectively as “Kelman”) entered into an agreement by which the former agreed to refer prospective customers to the latter in exchange for two-thirds of the commission on any mortgages secured for such customers. On February 21, 2014, Gerstel commenced this action against Kelman for:

(a) failing to pay Gerstel their (or his) share of the mortgage commissions generated;

(b) under-reporting the amount of mortgage commissions generated; and

(c) failing to provide a proper accounting of the mortgage commissions generated.

[5] To resolve the dispute the parties entered into the arbitration agreement. The agreement appoints as arbitrator the Beis Din, a rabbinical court, in this case made up of three named Rabbis (Rabbi S. Bixenspanner, Rabbi Y. Fried and Rabbi A. Schuster).

THE STAY

[6] The Arbitration Act, 1991 contains a provision allowing, if not actually calling for, a stay of any court proceeding in the face of an arbitration directed to resolving the same dispute. The court “shall” on a motion “stay” the proceeding. [^2] The application for a stay is “presumptive”. [^3] There are exceptions to the general proposition favouring a stay but they are limited. [^4]

[7] In this case a motion for a stay was brought before Mr. Justice Faieta on February 5, 2015. It was opposed by Gerstel who submitted that the arbitration agreement had been frustrated by the failure of Kelman to produce the financial records that had been sought. Gerstel relied on the arbitration agreement. Mr. Justice Faieta made the following findings:

However, the arbitration agreement did not require Kelman to produce whatever financial records Gerstel requested. The agreement required the parties to adhere to the instructions of the Kollel Beis Din. The Kollel Beis Din issued a procedural Order dated March 28, 2014, which required Kelman to make his books available to be reviewed by a mutually agreed upon bookkeeper after Gerstel had stayed this action. The procedural Order also provided that Kelman would be asked to provide additional information regarding his business dealings pertaining to this claim as the Kollel Beis Din sees fit. [^5]

[8] The question of satisfactory production remains an issue on the motion I am now asked to decide.

[9] In opposition to the stay, on behalf of Gerstel, objection was taken to various conversations and contact between Joel Kelman and the arbitrators. In his reasons Mr. Justice Faieta lists the contacts admitted to by Joel Kelman, as follows:

(a) On August 6, 2014, he [Joel Kelman] met [Israel] Kohn [a bookkeeper retained by the arbitrator to review Kelman’s financial records] and Rabbi Bixenspanner, a member of the Kollel Beis Din, to review Kohn’s initial findings regarding Kelman’s financial records; one purpose of this meeting was for Kohn to obtain an explanation from Kelman about his record keeping;

(b) He directed Kohn to not provide any of Kelman’s files or privileged information to Gerstel, however he told Kohn that he could discuss his findings with Gerstel; Rabbi Bixenspanner affirmed that direction;

(c) He had two meetings with Rabbi Bixenspanner pertaining to this arbitration;

(d) He had about five telephone calls with Rabbi Bixenspanner and perhaps three to five telephone calls with Rabbi Shuster pertaining to this arbitration;

(e) He sent several email messages to Rabbi Bixenspanner and Rabbi Schuster pertaining to this arbitration;

(f) Rabbi Bixenspanner expressed dismay to Kelman that Gerstel had commenced this application given that the arbitration had not concluded. [^6]

[10] It was argued, on this basis, that the arbitrator was biased and that the arbitration agreement had, accordingly, been frustrated. Mr. Justice Faieta determined that “there was no physical impossibility of performing the arbitration agreement nor is there an impossibility arising from a development that has rendered the contract no longer lawful.” [^7] The judge went on to say that concerns for the impartiality and fairness of the arbitration process could be addressed by the court on a motion, like this one, relying on section 6 (prevent unfair or unequal treatment) of the Arbitration Act, 1991. [^8]

[11] The question of whether these contacts are demonstrative of bias or unfair treatment remains an issue on this motion.

[12] The motion for a stay was granted by a decision released on March 18, 2015. ^9

THE ARBITRATION AGREEMENT

[13] By the agreement that was signed the dispute was removed from the Court and made subject to “binding arbitration” by the Beis Din (Rabinical Court) composed of three Daiyonim (Judges). It would not be possible nor should any attempt be made to separate this arbitration panel (the three named arbitrators) from its (or their) religious or community foundation. To the contrary, the arbitration agreement is replete with the recognition of those roots and the preference for the primacy, values and approach of the arbitration panel, made up, as it is, of three Rabbis. The agreement provides that the parties:

(1) Adhere to the procedures and instructions of the Beis Din (even if not in total accordance with the Arbitration Act, 1991 of Ontario): Accept the decisions of the Beis Din as conclusive and to abide by its decisions and instructions; not to attempt to introduce outside authorities such as other Beis Dinim (Rabbinical Courts), Rabonim (Rabbis) or Le’ havdil (in contradistinction to our holy tradition)-civil court actions, in any effort to challenge the decisions of the Beis Din. [then in handwriting:] In the event that the one side does not follow the ruling of the Beis Din the other side can go to court including opening of the books according to Beis Din wish.

(2) Authorize the Daiyonim to accept some forms of evidence as relevant and revealing although they might not be actual Aidous (Halachic testimony), and to rule according to their interpretation of the Halacha (Torah Law).

(3) Authorize the Beis Din to make judgments on the basis of pshara krava l’din (judgment influenced by compromise close to the letter of the law) or on the basis of l’fee ha-tzedic ve’ hayosher (according to justice and righteousness of the case).

(4) Be bound by the decision of two of the Daiyonim.

(5) That the Beis Din and/or that Daiyonim will not be held personally liable in case of possible error in judgment according to true Din Torah (lawsuit in Torah Law) whether that of shikul hada’as (weighing the issues prioritizing one argument against the other) or of ta’ah b’dvar Mishnah (blatant mistake).

(6) That a ma’aseh kinyan (act indicating the binding nature of this arbitration agreement within Torah Law) was made when this Agreement was signed.

(7) Nothing in this Agreement is intended to cancel the provisions of the Arbitration Act, 1991 that the secular law prohibits the parties from contracting out of, namely: Sections 5(4), 19, 39, 46, 48 and 50.

[14] What role can the court play in a proceeding such as this one? This is a private agreement. Its terms set the relationship between the parties. In the handwritten addition, to paragraph (1), the arbitration agreement specifically allows that where a party does not comply with the orders of the Beis Din, the other may go to court to obtain compliance. This specifically includes an “opening of the books” as has been ordered by the Beis Din. Thus, at least, this resort to the courts was sustained.

[15] Is that all the court can do?

[16] Paragraph (7) makes clear that those sections of the Arbitration Act, 1991 that the secular law says cannot be contracted out of are not “cancelled” by the provisions of the arbitration agreement. They remain in place, presumably any alleged breach to be resolved by the court.

[17] Is it only those provisions of the Arbitration Act, 1991 that continue to apply?

[18] More generally, paragraph (1) of the arbitration agreement acknowledges that the procedures utilized by and the instructions given by the Beis Din may not be in total accordance with the Arbitrations Act, 1991 [Emphasis added]. These words impose a general requirement to comply with the spirit, although not always the letter, of the Arbitration Act, 1991.

BASIC RIGHTS AND THE AUTHORITY OF THE COURT

[19] An arbitration should be fair and equal in its treatment of the parties. It should be conducted without even an apprehension of bias on the part of the arbitrator. The first (fair and equal treatment) is required by the Arbitration Act, 1991 section 19(1). [^10] The second (bias) may be the substance of a “challenge” of the arbitrator as defined by section 13(1). [^11] The first is among those matters that the parties cannot contract out of and continues to bind the parties to the arbitration agreement. The second is not directly referred to in the arbitration agreement but to my mind is a subset of unfair and unequal treatment. If an arbitrator is biased, his or her treatment of the parties will not be fair and is unlikely to be equal. It is difficult to accept that, despite the overarching concern against intervention, the court is forestalled from dealing with an allegation of bias. It is not. The Arbitrations Act, 1991 section 15 provides the court with the authority to remove an arbitrator either by a “challenge” that there was a reasonable apprehension of bias [^12] or based on an allegation that the arbitrator did not, in the conduct of the arbitration treat the parties with “equality and fairness”. [^13] Section 6 para. 3 of the Arbitrations Act, 1991 permits the Court to intervene in arbitrations “to prevent unequal or unfair treatment of parties to arbitration agreements.” Section 6, para. 1 allows that the court may assist in the conduct of arbitrations, presumably by providing direction to the arbitrator where necessary. [^14] These sections have application to this case. Otherwise there would be no substance to the specific acceptance of the arbitration agreement by the Beis Din. The three Rabbis that make up the Beis Din are named in the arbitration agreement. The signatures of the parties, on the agreement, were witnessed by Rabbi Bixenspanner. By accepting the arbitration agreement the Beis Din has acknowledged the obligation, in this case, to be bound by section 19(1) (fair and equal treatment (see fn. 10)) and the general assertion, inferred from the arbitration agreement, that the spirit, if not the precise manner of the Arbitration Act, 1991 was to be followed.

[20] In this case Gerstel seeks to remove the arbitrator on the ground that there are circumstances that exist that may give rise to a reasonable apprehension of bias and that the arbitration has not been conducted with equality and fairness. As an alternative, it is open to the court to provide direction to the arbitrator to assist in avoiding or overcoming these problems if, in fact, they exist.

[21] Though it follows that the court has jurisdiction, it needs to be careful in its exercise of that jurisdiction.

[22] The courts are directed by the law. In this situation, under the terms of this arbitration agreement, the arbitrator is to be influenced by “compromise” and the “righteousness of the case” (see para. [13(3)] above). It is not difficult to see that statements made, or ideas provided, that are driven by an inquiry into compromise or righteousness could seem to favour one side and suggest to the other that the decision maker is biased or being unfair in its approach. There is nothing wrong with reliance on compromise or righteousness in a search for the answer to personal or business disputes.

[23] The law of evidence is a broad area of interest and study. “The rules of evidence control the presentation of facts before the Court.” [^15] As it is with many administrative tribunals, the rules of evidence to be applied by the arbitrators are somewhat changed from what occurs in court. Evidentiary rulings are to be made according to “Halacha (Torah Law)” although some evidence may not be actual “Halachic testimony” (see para. [13(2)] above). It is possible that these principles might lead to the admission of evidence our secular law would not allow? Could it be argued that its admission could seem to favour one side or the other?

[24] The courts need to be careful to allow for the confidence and goodwill members of our society demonstrate when they chose to honour the wisdom of their community leaders by relying on them to resolve disputes, internal to that community outside of and away from the courts. This is not to detract from the fact that, in this case, given the terms of the arbitration agreement signed by the parties, the courts continue to have a role to ensure that the fundamental principles of equality and fairness are not breached.

REASONABLE APPREHENSION OF BIAS

[25] There are two aspects to the presence of bias, or at least an apprehension of bias, as perceived by Gerstel.

[26] The first reflects on production, particularly of the books and records of Kelman that would allow for a review and calculation of the commissions properly payable by Kelman to Gerstel. In the factum filed on behalf of Gerstel reference is made to letters sent by Harold Gerstel, his counsel and Israel Kohn expressing concern over the “deficiency in the materials provided by Kelman”. [^16] On March 28, 2014 [^17] the Beis Din (the Rabbinical Court) issued a procedural order. In part it dealt with the production of the Kelman books. In that regard it said:

In the case brought before the Beis Din of Rabbi S. Bixenspanner, Rabbi Y. Fried, Rabbi A. Schuster, by Yossi Kelman (the Tovea) against Hershel Gerstel (the Nitva) regarding:

A. removing the dispute from secular court and,

B. the request to have access to the business records pertaining to the dispute.

After much deliberation Beis Din has reached a decision as follows:

1. Mr. Gerstel will immediately stay the court case in favour of Beis Din arbitration, subject to the further order of the applicable Beis Din or arbitrator.

2. Once Mr. Kelman is notified by Mr. Gerstel’s lawyer that the court proceedings have been stayed by the court, Mr. Kelman will immediately make his books available to be reviewed by an independent bookkeeper, as mutually agreed by the parties. If the parties do not mutually appoint a bookkeeper within 14 calendar days of the date of this order, then the BD will appoint a bookkeeper, and such decision by BD shall not be subject to appeal.

3. If necessary, Mr. Kelman will be asked to provide additional information regarding his business dealings pertaining to this claim as BD will see fit.

… [^18]

[27] The letters to which counsel for Gerstel refers, in making this submission, are dated May 6, 2014 and April 23, 2015 (from Gerstel’s counsel), July 30, 2014, August 18, 2014 and October 6, 2014 (from the bookkeeper, Israel Kohn). Nothing was forthcoming from the Beis Din until September 29, 2014.

[28] The two letters from Gerstel’s counsel, though somewhat different, one from the other, were both efforts to obtain a comprehensive set of records to be used in identifying what if anything was owed to Gerstel by Kelman. The first two letters from the bookkeeper to the Beis Din express concern for the material that does not seem to be included but which the bookkeeper expected to receive. The third of those letters acknowledges that more material had been delivered but observes that there were still “a number of serious issues regarding payments made by Mr. Joel Kelman …to Mr. Harold Gerstel…”.

[29] This takes me to the letter from the Beis Din (September 29, 2014). This letter, addressed “To whom it may concern”, is the foundation of the claim that there was a reasonable apprehension of bias in the Beis Din arising from the issue of production. It is said, on behalf Gerstel, that this letter was written in support of the motion, then being brought by Kelman to stay this court action. The demonstration of bias, as seen by Gerstel is, that the letter, when it says that Kelman has been complying with the requests of the Beis Din, is directly contrary to the opinion of Israel Kohn, the expert witness retained by the Beis Din. Israel Kohn was not getting what he had asked for.

[30] This is not enough to demonstrate an apprehension of bias, reasonable or otherwise. I start with the observation that, as determined by the procedural order of March 28, 2014, there was a condition precedent to the delivery of the books and financial records to Israel Kohn. First, Gerstel had to stay the court proceeding (see para. [26(1)] above). This had not been done. It was not done until the March 18, 2015 decision of Mr. Justice Faieta. As he said:

Gerstel never sought an order of this court to stay this action as required by the arbitration agreement. [^19]

[31] The order was obtained only because Kelman brought the motion. It is difficult for me to see how Gerstel can rely on this alleged failure when the problem is his own failure to comply with procedural order released by the arbitrator. Although the language is confusing it appears that this was the understanding of the Beis Din. In the letter of September 29, 2014 it noted:

It has come to our attention that Mr. Gerstel has proceeded in secular court contrary of what he agreed to stay the case in secular court [sic], as per his signed agreement to compliance and governance of the arbitration ruling set forth by this bais din. [^20]

[32] The fact is that Gerstel did not proceed to stay the action. The motion before Mr. Justice Faieta, heard by him on February 5, 2015, was brought by Kelman.

[33] Insofar as the requests from counsel for Gerstel are concerned, I return to the decision of Mr. Justice Faieta. In granting the stay he observed that the Beis Din did not require Kelman to produce everything Gerstel asked for (see para. [7] above). The Beis Din required that its order be followed. I point out that the procedural order, in its third paragraph, provided that it might be necessary that additional information be produced (see para. [26(3)] above). This would hardly be the first time that the understanding of what was needed to allow for a proper testing of the issues evolved as the process continued.

[34] Finally, with respect to production, I note that over the course of the development of the information to be put to the Beis Din, it retained Meyer Kern, a forensic accountant, to assist it. As I understand it, a report has been prepared by Meyer Kern. It will be the foundation for the information that will be used by the Beis Din to determine how much, if anything, is owed to Gerstel. Counsel for Kelman was clear. He accepted that for a proper testing of the work done by Meyer Kern to be undertaken on behalf of Gerstel, counsel for Gerstel would have to be provided, at least, with all the original material on which Meyer Kern relied.

[35] I turn now to the second aspect of bias as alleged on behalf of Gerstel. It was proposed that the Beis Din was biased against legal representation. The demonstration of this was said to be found in two emails written and sent on behalf of the Beis Din. The first is dated June 12, 2015 and the second March 7, 2016.

[36] The first refers to the letter from counsel for Gerstel dated April 23, 2015. The email repeats the request for production (the categories of documents) counsel wanted and then ends by asking that Harold Gerstel (“you”) “…send that request in writing, with all of the points in the same fashion if this is what you still want”. This is seen by counsel as a refusal to respect Gerstel’s right to legal representation. She goes further:

It is a breach of the principles of justice, having regard to what’s at stake in an arbitration to deny a party the opportunity to have counsel. [^21]

[37] This is stretching a point beyond the frame it can reasonably tolerate. First of all, the email that this responds to was sent to the Beis Din by Harold Gerstel not his lawyer. In fact, to do this he used an email address that is held in the name of his wife. Surely it would be perfectly logical for the Beis Din to look at this, wonder, who, at this point, was speaking for Gerstel and seek to clarify whether the request from the lawyer still represented the position of Gerstel. The email from Harold Gerstel is dated June 11, 2015. It does not refer to the lawyer’s letter of April 23, 2015. It asks for help to “recover” what Harold Gerstel sees as his money. He does not ask that the documents his lawyer asked for be produced; he requests instead that an order be made requiring Kelman “…to comply fully with Kohn or any other bookkeeper that may be involved”. The Beis Din was asking for clarity, not denying Gerstel legal representation. There was nothing stopping him from consulting with counsel before sending the email of June 11, 2015, or in considering a response to the email from the Beis Din dated June 12, 2015.

[38] The second of these emails is dated March 7, 2016. It was in answer to a letter from counsel for Gerstel dated February 29, 2016. This email asked 16 questions respecting the conduct of the arbitration. In the absence of a response counsel re-sent the email on March 7, 2016, asking for a response to the same 16 inquiries. The email objected to by counsel came back slightly more than 2 hours later. It said:

I will respond whatever and whenever BD directs me to respond and will not be manipulated.

[39] In counsel’s view:

The tone of the Beis Din email and their hostile response to requests for basic procedural information is indefensible, and shows as a reasonable apprehension of bias.

[40] I do not agree.

[41] To my mind this is over-selling something that is not present. It may be that the response was intemperate. Certainly I join counsel in wondering what it is that caused the writer of the email to believe he was being “manipulated.” Decision makers need to consider the impression they are leaving. A reasoned response garners the respect decisions makers need if they are to do the job properly. Not surprisingly, this answer has had the reverse of that desired effect. Having said this, in the end, if the spectre of bias could be raised every time a judge, tribunal member, mediator or arbitrator is too quick and provides an unfortunate answer in an inappropriate tone, a necessary human element of conducting a decision making process: the flexibility and ability to respond to different situations in different ways, could be lost.

[42] I pause to again inject into these reasons the thought that the courts need to be careful and aware when dealing with community based mechanisms of dispute resolution. The role lawyers play may vary. It is not inherently biased for a decision maker to communicate with a party. It is contrary to the rules the court employs but to insist on it, in situations involving other dispute resolution models, may result in too much formality and detract from their ability to succeed. It is possible to attach too much “legality” to these processes.

[43] I am unprepared to say that the facts of this case, in any sense, raise the shadow of bias. I do not accept that any informed person, viewing this matter realistically and practically, having thought the matter through would conclude that it is more likely than not that the Beis Din, whether consciously or unconsciously would not decide this case fairly. [^22]

CONDUCT NOT IN ACCORDANCE WITH EQUALITY AND FAIRNESS

[44] Counsel on behalf of Gerstel submitted that the Beis Din has not complied with the direction found in section 19(1) of the Arbitration Act, 1991 that “the parties [to an arbitration] shall be treated equally and fairly.” As submitted on behalf of Gerstel, the clearest manifestation of this is the communications between one of the three Rabbis who made up the arbitration panel, a fourth Rabbi who acted as the secretary of the Beis Din and Kelman, as well as, discussions the Rabbi (member of the arbitrator) had with the bookkeeper and subsequently the accountant both of whom were retained at different times to assist the Beis Din. These conversations and communications took place in the absence, and without the involvement, of Gerstel who was not advised they were to be or had taken place.

[45] In making this submission counsel for Gerstel relied on Kane v. Board of Governors of University of British Columbia. [^23] In that case the President of the University suspended the appellant, Julius Kane without salary for three months and ordered that Julius Kane pay restitution for his improper use of the university computer facilities. The appeal was to the Board of Governors. The President attended the meeting as a member of the Board. During the meeting both Julius Kane and the President were asked and responded to questions. At the conclusion of the meeting Julius Kane and his counsel were requested to leave in order that the Board might deliberate. The President, who remained in the meeting did not participate in the discussions or vote on the resolution. He did answer questions put to him by members of the Board. The Board approved the suspension and the matter made its way to the Supreme Court of Canada. There the appeal was allowed. The problem was that in answering questions, in the absence of Julius Kane, it was possible that the president could have affected or prejudiced the result. [^24] This is quite different from what we are dealing with here. There, the President was providing information, after the appellant had left, while the deliberations of the decision maker were ongoing. Here we are dealing with a preparatory period during which information is being collected as opposed to evidence being provided.

[46] I begin with the two potential witnesses, the experts retained to assist the Beis Din. On August 6, 2014, Joel Kelman met with the bookkeeper (Israel Kohn) and Rabbi Bixenspanner (one of the three members of the Beis Din). [^25] This meeting, apparently, lasted roughly one hour and was convened without notice to or inclusion of Gerstel or the two other members of the arbitrators, Rabbi Fried and Rabbi Schuster. [^26]

[47] Gerstel objected to being excluded, sought a summary of the discussions and recognition of his need to participate in future meetings. There was no response.

[48] I do not see this as necessarily objectionable. It depends on the process adopted by the arbitrator. The rights asserted by Gerstel, in the making of this objection, could be of concern if the arbitration model was based on a court-like proceeding. Typically, prior to a trial, the decision-maker (a judge) has little, if any, contact with the participants or witnesses and, beyond the pleadings, no introduction to the substantive issues being raised. This is not the only approach available to arbitrators. It is within the jurisdiction of the Beis Din to determine that one Rabbi will act as the lead arbitrator during the investigatory phase of the arbitration. Under the Arbitrations Act, 1991, arbitrators are authorized to determine the procedure to be adopted. [^27] If necessary an arbitrator can seek orders or directions from the court regarding the presentation of evidence. [^28] The arbitrator is not, unless requested by one of the parties, required to hold a hearing. [^29] Insofar as the meetings with Rabbi Bixenhammer are concerned, I point out that the Arbitrations Act, 1991 foresees that the Chairman of a panel may deal with procedural matters without reference to the other members of an arbitration panel. [^30] As I understand it, Rabbi Bixenspanner is the Chair of this panel. This being so it is not surprising that letters were written by Israel Kohn to Rabbi Bixenspanner providing a “list of an analysis of an inspection of the list of payments made by Mr. Joel Kelman” and indicating “his concerns relating to Mr. Kelman’s records.” [^31] Joel Kelman testified that his “private conversations” with Rabbi Bixenspanner were to “get updates on the arbitration proceedings”. [^32] One such discussion related to Israel Kohn’s concerns for the deficiencies in Kelman’s disclosure. [^33] When cross-examined, Joel Kelman testified that during the meeting of August 6, 2014 Rabbi Bixenspanner and Israel Kohn discussed the arbitration proceedings with him and, in particular, the fact that Harold Gerstel was pressing to go to court. [^34] These conversations deal with procedure; not the substance or merits.

[49] The remainder of the meeting of August 6, 2014, was spent going through the books of Joel Kelman, deal by deal. [^35] The Arbitration Act, 1991 foresees that an arbitrator may retain an expert to assist it. [^36] Israel Kohn and Meyer Kern were such experts. The review of the transactions on August 6, 2014 was to provide Israel Kohn with what he needed to report to, and to assist the Beis Din, as arbitrator. When Meyer Kern was retained something similar took place:

Since early February 2016, I [Joel Kelman] have had numerous discussions with Kern at his request. He has asked me for various information documents to assist him in preparing an expert report for the Beis Din. I would estimate that we have had over 15 conversations, including at least a couple that lasted more than three hours. I provided him with three years of my company’s bank account statements. I also granted him full access to my computer for the purpose of retrieving any files he believed were relevant to his report. This included access to all mortgage deals I had worked on during the three years at issue, not solely the deals that were referred to me by Gerstel. [^37]

[50] This is different from what occurred in Re: Snider [^38] to which counsel for Gerstel referred. In that case three arbitrators were asked to consider a dispute between Snider and his tenant (Miller). The arbitrator selected by Miller, attended at the farm that was the subject of the lease that gave rise to the dispute. Miller’s son “went after” the arbitrator and took him to the farm. The arbitrator had dinner there and after dinner he and Miller spent an hour or two looking over the grounds. “Miller pointed out what work had been done and spoke about other matters which were the subject of the arbitration.” At the examination for discovery Miller explained his intention: “I want him [the arbitrator] to understand it right on the ground and see how it was. I would rather all three arbitrators came out there and looked at it. [^39] This was about Miller putting his case to the arbitrator. The Alberta Supreme Court [Appellate Division] found that what occurred “amounted to the taking of evidence by one arbitrator in the absence of the other arbitrators and of one of the parties.” [^40] There was no taking of evidence by Rabbi Bixenspanner. He was ensuring experts retained by the Beis Din had the material, from Kelman, needed to produce a report that would be evidence.

[51] What is more disturbing is the suggestion that while Israel Kohn was involved, Harold Gerstel attempted to influence his work. Israel Kohn was retained on the recommendation of Harold Gerstel who had failed to advise that they had been neighbours 20 years earlier and Israel Kohn had done some work for him. During the cross-examination of Israel Kohn, on the motion to stay, he testified that Harold Gerstel had told him to write a letter to the Beis Din. Israel Kohn testified that Harold Gerstel was “pressuring [him] to come through”. [^41]

[52] I pause to point out that while Gerstel complains of being excluded from conversations and communications between Kelman and the Beis Din there is no shortage of emails written by or on behalf of Gerstel to the Beis Din, particularly Rabbi Hoffman. There is no suggestion that these communications were copied to, or otherwise delivered to Kelman (for example see para. [37] above). In view of this, Counsel for Kelman sees it as “self-serving” and “disingenuous” for Gerstel to say that the communication between Kelman and the Beis Din is demonstrative of a breach of fundamental justice. [^42] To me, this going too far. What it demonstrates is that arbitrations carried out by those who are sought because they are community leaders (as opposed to professional arbitrators, lawyers and retired judges) are likely to be less formal or bound up in legal niceties. The question is whether these kinds of communications are inexorably indicative of a fatal flaw in the process. In this case they are not.

[53] There is no question that information passed to the arbitrators and reports produced by experts must be distributed to all parties. [^43] The question is when and whether the fact that, in spite of the requests made by or on behalf Gerstel, this has not been done is fatal to the arbitration. Does it demonstrate or contribute to a demonstration that the arbitration has not been conducted with equality and fairness? It does not, at least not yet. To this point the arbitrator, particularly Rabbi Bixenspanner and the secretary of the Beis Din, Rabbi Hoffman, have done nothing other than deal with procedural issues, retain experts to assist and ensure that the expert(s) have the information from Kelman necessary to assist the arbitrator in determining what, if anything, is owed to Gerstel, by Kelman.

[54] I say “not yet” understanding that the while this arbitration has been underway for some time, it has only now reached the critical phase where exchange of information will have to be completed (see sections 26(3) and (4) of the Arbitrations Act, 1991 quoted at fn. 43) and both Gerstel and Kelman provided with the opportunity to review and respond to whatever has come forward including what any expert report or reports may say and conclude. I was advised late in the submissions that the Beis Din has indicated that it is prepared to hold a hearing. Obviously, a decision having been rendered, the process, viewed as a whole, must be seen to have treated the parties fairly and equally. This has been made clear in this case by the understanding that section 19(1) of the Arbitration Act, 1991, as a result of paragraph 7 of the Arbitration Agreement, is effective and binding (cannot be contracted out of). At a minimum this will require an exchange of all the information provided by the parties that is relevant to the issues at hand, time to properly evaluate that information and some means by which the parties can, at any hearing that is held, make known their views of the situation and issues to be decided. It is for the Beis Din to decide the procedure of the hearing subject to the requirement that it be fair and equal.

[55] The communications between those involved is not the only area of complaint. While acknowledging that arbitrators are not required to adopt a court process, counsel for Gerstel submits that in this case “clearly enunciated judicial principles necessary to ensure fairness” [^44] have not been adhered to resulting in a denial of natural justice and unfair and unequal treatment. What are the markers of these suggested failings?

[56] Counsel for Gerstel says that the Beis Din failed to respond to emails from Gerstel and his lawyers or to answer the questions they contained. Counsel submits that the evidence suggests that Kelman was similarly “ignorant of the actions of the Beis Din.” [^45] It may be impolite to fail to answer but during an introductory stage, when information is being gathered so a report can be prepared, it is not demonstrative of treatment that is inherently in breach of any judicial principle or unfair.

[57] Counsel for Gerstel refers to section 26 of the Arbitration Act, 1991. This is the section that requires that any information submitted to a tribunal must be communicated to each of the parties as well (see fn. 43 above). I repeat that during the course of the submissions made to the Court, counsel for Kelman made clear his agreement and understanding that this would have to take place before any hearing or other presentation was made, or provided by the parties, to the arbitrator. Up to now the difficulty has been in getting the necessary information to the experts, first Israel Kohn (the bookkeeper) and subsequently to Meyer Kern (the accountant). It is only now with the material gathered, the report of Meyer Kern completed and a hearing projected that the information must be distributed. To do it otherwise would be to do it in a piecemeal, unorganized and arguably premature fashion.

[58] In a similar vein, counsel for Gerstel submitted that the “discharge” of Israel Kohn also somehow breached “clearly enunciated judicial principles necessary to ensure fairness”. It is said that Israel Kohn was never formally discharged, that his termination was only communicated to Gerstel several months after Kelman had been advised and that this termination was done unilaterally by the arbitrator “or more likely, Rabbi Bixenspanner.” As understood by counsel for Gerstel, the termination of Israel Kohn and the retaining of Meyer Kern were undertaken in breach of the procedural order of the Beis Din dated March 28, 2014 (see para. [26] above). This is not a view I can adopt or agree with. It is not clear to me on what date Israel Kohn was retained, or more particularly, whether it was within the 14 calendar days required by the procedural order of March 28, 2014 and if the “bookkeeper” was retained with agreement of the parties or unilaterally by the Beis Din. Be that as it may, I do not accept that the change to Meyer Kern, or the way it was done, demonstrates any breach of judicial principle or unfairness. The bookkeeper and the forensic accountant were retained to assist the Beis Din. Its decision on this account was not subject to appeal (see para [26(2)] above). Ultimately the Beis Din needed to be satisfied that the individual involved could do the required work. Presumably, a decision was made; better to go with a forensic accountant than a bookkeeper. It may be that the decision was in some way coloured by the fact that Israel Kohn had been retained on the recommendation of Harold Gerstel who did not advise of his personal relationship with Israel Kohn.

[59] The problem, at the time the change was made, was, that for whatever reason Harold Gerstel had not paid his share of the costs of Israel Kohn. Thus, the Beis Din approached Joel Kelman who agreed to make whatever payments were missing. Joel Kelman agreed, understanding that if Harold Gerstel did not, in the end, make the required payments, the amounts paid by Joel Kelman to account for what Gerstel had not paid would be set-off against whatever Kelman was found to owe Gerstel. This is not unfair or contrary to any judicial principle, it is a practical answer to a procedural problem. Gerstel made the requested payment on September 13, 2015.

DID THE BEIS DIN or DID RABBI BIXENSPANNER WITHDRAW?

[60] On behalf of Gerstel, it is submitted that the Beis Din resigned, gave up its jurisdiction and cannot and could not reclaim it. The Beis Din was unhappy with the process and, it would seem, the attitude of Harold Gerstel. On June 23, 2015, on its behalf Rabbi Hoffman requested a meeting with Harold Gerstel, Joel Kelman and Israel Kohn. Rather than agreeing Harold Gerstel objected. In an email he noted that Israel Kohn had already indicated what he needed. Gerstel was critical of the procedure adopted by the Beis Din. He stated that rather than holding another meeting, the Beis Din should order that Kelman produce the documents that had been requested by Gerstel’s lawyer by a certain date, failing which the matter should be permitted to proceed to court. [^46] On June 26, 2015, the Beis Din sent an email to Harold Gerstel:

In light of the latest effort of BD to proceed and the ensuing communications we feel that there is a lack of willingness on your part to participate in good faith. It seems that there is no end in sight and there is no purpose in continuing negotiations. BD has no interest to reply and deal with someone giving orders to BD (or its emissary i.e. Mr Kohn) as how to proceed. [^47]

[61] On July 5, 2015, Harold Gerstel wrote to Rabbi Hoffman indicating that he was willing and able to participate in the ongoing process. [^48] What followed was an email in response, dated July 17, 2015:

After reviewing this case including all the emails exchange etc. over the past year, Rabbi Bixenspanner has asked me to convey to you that the BD feels this will go on and on and will not get anywhere due to a lack of cooperation. There is no use to continue on with this case as BD doesn’t foresee any immediate closure. BD will therefore not continue to arbitrate this Din Torah. [^49]

[62] Harold Gerstel refers to this as “the Beis Din’s resignation email” [^50]. In fact, Harold Gerstel did not accept that the arbitration was at an end. In emails dated August 25, 2015, August 27, 2015, August 31, 2015, September 3, 2015, September 8, 2015, February 9, 2016 and February 16, 2016 sent by Harold Gerstel, or on his behalf, first asking for more information in respect of the concerns expressed in the email of the Beis Din dated July 17, 2015, subsequently for confirmation that the Beis Din had resigned and finally, as a result of an indication from the counsel for Kelman that it had not, for confirmation that the arbitration process was still going on. [^51]

[63] A review of the email of July 17, 2015, reveals that it was written by Rabbi Hoffman and that, within short order he stepped away from any finality that could be taken from it. On August 25, 2015 the wife of Harold Gerstel wrote the following in response to the email of July 17, 2105:

Dear Rabbi Hoffman

Can you please tell me:

Who did not cooperate?

What was the nature of the non cooperation

Thank you

E. Gerstel

[64] The Rabbi responded:

Please realize that whatever i [sic] write is in the name of the members of the Baisdin as I only act as a secretary no more no less. To answer this question you have to address Rabbi Bixenspanner and the BD.

NH

[65] Contrary to the position taken on behalf of Harold Gerstel, the Beis Din did not make “a formal decision to resign. [^52] There is no document evidencing a formal resignation or withdrawal of the Beis Din. An email from the Secretary (the July 17, 2015 email) is not enough. A resignation and stepping away requires a formal order signed by the three members of the Beis Din. [^53] While it appears that the patience of the Beis Din was stretched close to the breaking point, it did not cross the line to withdrawal. The email of July 17, 2015 was not sent to Joel Kelman. [^54] He has deposed that:

In or about November 2015, I spoke with the Beis Din to find out what was happening with respect to the arbitration. Rabbi Hofman [sic] advised that Gerstel had caused delay because he was refusing to pay monies owed to the bookkeeper and the Beis Din. This was very unfair to me as I had already paid for 50% of the amounts owing. I also note that it was previously agreed that the cost of the bookkeeper would be split equally between the parties, as noted in paragraph 4 of the Beis Din’s procedural order at Exhibit “D” to Gerstel Affidavit. [^55]

[66] It was at this point that arrangements were made that would allow the arbitration to continue. In the next paragraph of his affidavit, Joel Kelman went to say:

Rabi Bixenspanner advised me that if I paid all amounts pertaining to the arbitration, including the amount owed by Gerstel, the Beis Din would set off Gerstel’s portion against any amount that I was ordered to pay good still in the final arbitration decision. However, I was advised that the Beis Din would be hiring a new accountant expert with greater expertise. [^56]

[67] The Beis Din did not resign. [^57]

[68] It was suggested that Rabbi Bixenspanner did resign. He did not. In one of his affidavits, Harold Gerstel deposes:

I have been told by Rabbi Hofman [sic] that Rabbi Bixespanner is moving to England and will no longer be available to sit on the Beis Din panel. [^58]

[69] It may be that Rabbi Bixenspanner was moving, or has moved, to England. Clearly, if there is to be a hearing he will have to come back. So far as I am aware there is nothing to say that he will not. There is no document demonstrating his withdrawal. Rather, when counsel for Gerstel, on February 22, 2016, wrote to Rabbi Hoffman to confirm resignations of both Rabbi Bixenspanner and the Beis Din [^59] she received the following response, on the same day:

What I spoke with Mr. Gerstel was off the record and I will not confirm to what you have stated. Also please realize that the reason Bais Din said that it may not continue was only because of a lack of cooperation, now BD found a way to work it out without cooperation. It seems that Bais Din has not completely closed the case and Rabbi Bixenspanner is still heading the case.

Bais Din has never written an official confirmation (which was requested at the time) stating that they are resigning this case and BD had its own reason for this. [^60]

CONCLUSION

[70] The parties have executed an arbitration agreement. They have put their faith in the Beis Din, a Rabbinical Court, to carry out the terms of the agreement. This court should be careful before importing its procedure into such a process as if it is the only way to resolve the dispute. To this point the Beis Din has been gathering information. There is nothing that has happened that offends the principles of equality and fairness. Evidently there is to be a hearing. The report of the forensic accountant has been submitted. The process should be near completion. The Beis Din should be left to finish what it has begun.

[71] The motions are dismissed.

[72] I have considered providing some direction as to how this matter should proceed. I have decided not to do so. The arbitration agreement is a private contract. This is a circumstance where the selected arbitrator honours community leadership and reflects community values and faith. The arbitration agreement asks for a decision on the basis of psara krava l’din meaning “judgement based on compromise close to the letter of the law” or l’fee ha-tzedek ve’hyasher explained as “justice and righteousness.” These terms should not be narrowly construed. The agreement calls for evidence that is “relevant and revealing” and for a ruling that is based on an interpretation of Halacha described as Torah Law. There is nothing intrinsically wrong with this. It is not inherently contrary to any relevant legal principle found in our law. It would be inappropriate for the court to impose its view of the process by which these values are to be achieved. It is for those who understand these values and the manner in which their community respects them to set the process. This falls within the responsibility of the Beis Din.

[73] Nonetheless, I make the following cautionary observation. There is nothing in what I have said that allows the Beis Din to do whatever it wants. In particular, in this case the arbitration agreement imposes real limitations on the Beis Din. The agreement that there cannot be and has not been any contracting out of the requirement that it abide by section 19(1) of the Arbitration Act, 1991 (the parties be treated equally and fairly) is one. Presumably there is some flexibility in what this may mean in any particular case. Having said this I point out that if the process adopted by the Beis Din ignores or fails to respect these limitations it does so at the risk that this matter will be returned to the Court.

COSTS

[74] No submissions were made as to costs. It is not clear to me that costs should be awarded. The parties have removed this dispute such that the primary decision being sought will not be made by the Court or through a strict adherence to its process and principles. This motion, at its foundation, was concerned with the juxtaposition of the courts and an arbitrator selected as a result of its ties to and the position its members hold within the community of which the parties are part. This motion was part of a collective search for the relationship of the process selected to the applicable legal principles. In such circumstances, it may be best if the parties each absorb their own costs of this motion. If the parties wish to proceed to have costs considered I may be spoken to.

Lederer J. Released: January 25, 2017

Footnotes

[^1]: The Arbitration Act, 1991 S.O. 1991, c. 17 states at section 6: No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this act: 1. To assist the conducting of arbitrations. 2. Two ensure that arbitrations are conducted in accordance with arbitration agreements. 3. To prevent unequal or unfair treatment of parties to arbitration agreements. 4. To enforce awards. And, in part, at section 7: (1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement stay the proceeding. (2) However, the court may refuse to stay the proceeding any of the following cases: 1. A party entered into the arbitration agreement while under a legal and incapacity. 2. The arbitration agreement is invalid. 3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law. 4. The motion was brought with undue delay. 5. The matter is a proper one for default or summary judgment. And see: Magnotta Winery Corp. v. Ziraldo, 1999 CarswellOnt 3333 (S.C.J.) at para. 23 and Universal Settlements Intern’l Inc. v. Duscio 2011 ONSC 968 at para. 108 in turn referring to Inforica Inc. v. CGI Information Systems and Management Consultants Inc. 2009 ONCA 642, [2009] O.J. No. 3747; 97 O.R. (3d) 161 (C.A.) at para. 18 and Envrionmental Export International of Canada Inc. v. Success International Inc. [1995] O.J. No. 453 9Gen. Div.) at para. 14

[^2]: The Arbitration Act, supra (fn. 1) states at section 7 (1): If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

[^3]: Gerstel et al. v. Kelman et al. 2015 ONSC 978 at para. 31

[^4]: The Arbitration Act, supra (fn. 1) states at section 7 (2): However, the court may refuse to stay the proceeding in any of the following cases: 1. A party entered into the arbitration agreement while under a legal incapacity. 2. The arbitration agreement is invalid. 3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law. 4. The motion was brought with undue delay. 5. The matter is a proper one for default or summary judgment.

[^5]: Gerstel et al. v. Kelman et al., supra (fn. 3) at para. 45

[^6]: Ibid at para. 47

[^7]: Ibid at para. 48

[^8]: Ibid at para. 49

[^10]: The Arbitration Act, supra (fn. 1) states at section 19 (1): In an arbitration, the parties shall be treated equally and fairly.

[^11]: The Arbitration Act, supra (fn. 1) states at section 13 (1): A party may challenge an arbitrator only on one of the following grounds: …Circumstances exist that may give rise to a reasonable apprehension of bias.

[^12]: The Arbitration Act, supra (fn. 1) states at section 13(6): Within ten days of being notified of the arbitral tribunal’s decision, a party may make an application to the court to decide the issue and, in the case of the challenging party, to remove the arbitrator.

[^13]: The Arbitration Act, supra (fn. 1) states at section 15 (1): The court may remove an arbitrator on a party’s application under subsection 13 (6)(challenge), or may do so on a party’s application if the arbitrator becomes unable to perform his or her functions, commits a corrupt or fraudulent act, delays unduly in conducting the arbitration or does not conduct it in accordance with section 19 (equality and fairness)

[^14]: See fn. 1

[^15]: Alan W. Bryant, Sidney N. Lederman, Michelle K. Fuerst: Sopinka, Ledereman & Bryant, The Law of Evidence in Canada, Third Edition LexisNexis Canada Inc. 2009 at p. 3

[^16]: Factum of Harold Gerstel and 2102503 Ontario Inc. O/A Harold the Jewellery Buyer at para.43

[^17]: The Affidavit of Harold Gerstel, sworn on May 18, 2016 at para. 10 refers to May 28, 2014 as the date of the procedural order. The factum filed on behalf of Gerstel says it was March 28, 2014. The decision of Mr. Justice Faieta refers to it as March 28, 2014. The document itself appears to be undated. I have selected the decision of Mr. Justice Faieta as the most likely to be accurate.

[^18]: Affidavit of Harold Gerstel, sworn on May 18, 2016 at Exhibit D

[^19]: Gerstel et al. v. Kelman et al., supra (fn. 3) at para. 21

[^20]: Affidavit of Harold Gerstel, sworn May 18, 2016, Exhibit H

[^21]: Factum of Harold Gerstel and 2102503 Ontario Inc. O/A Harold the Jewellery Buyer at para.52

[^22]: McClintock v. Karam, 2015 ONSC 1024 at para. 67

[^23]: Kane v. Board of Governors of University of British Columbia, 1980 SCC 10, [1980] 1 S.C.R. 1105, [1980] 3 W.W.R. 125, 1980 CarswellBC 1

[^24]: Ibid (Carswell) at paras. 18, 20, 21 and 37

[^25]: Affidavit of Harold Gerstel, sworn May 18, 2016, Exhibit G

[^26]: Cross-Examination of Joel Kelman, p. 22 line 2-10, 20-21, p. 25 line 3-4

[^27]: Ibid at section 20(1): The arbitral tribunal may determine the procedure to be followed in the arbitration, in accordance with this Act.

[^28]: Ibid at section 29(4): On the application of a party or of the arbitral tribunal, the court may make orders and give directions with respect to the taking of evidence for an arbitration as if it were a court proceeding.

[^29]: Ibid at section 26(1): The arbitral tribunal may conduct the arbitration on the basis of documents or may hold hearings for the presentation of evidence and for oral argument; however, the tribunal shall hold a hearing if a party requests it. [Emphasis added]

[^30]: Ibid at section 20(2): An arbitral tribunal that is composed of more than one arbitrator may delegate the determination of questions of procedure to the chair.

[^31]: Affidavit of Harold Gerstel, sworn May 18, 2016, at paras. 15-16, Exhibit F and Exhibit G

[^32]: Cross-Examination of Joel Kelman, p. 29, line 6-9, 13-17

[^33]: Ibid at p. 39, line 22-25, p. 40, line 1-7

[^34]: Ibid at p. 21, line 13-18

[^35]: Ibid at p. 24, line 16-17

[^36]: The Arbitration Act, supra (fn. 1) at section 28(1) states: An arbitral tribunal may appoint an expert to report to it on specific issues.

[^37]: Affidavit of Joel Kelman, affirmed on June 21, 2016 at para. 30

[^38]: Re: Snider, 1924 ABCA 548, [1924] 3 W.W.R. 226, [1924] 4 D.L.R. 313, 21 Alta. L. R. 34

[^39]: Ibid at para. 3

[^40]: Ibid at para.12

[^41]: Cross-examination of Israel Kohn, dated January 12, 2015 at Q. 645-646 as referred to in Factum of the Responding Parties at para. 42

[^42]: Ibid (Factum of the Responding Parties) at para. 40

[^43]: The Arbitration Act, supra (fn. 1) at section 26(3) states: A party who submits a statement to the arbitral tribunal or supplies the tribunal with any other information shall also communicate it to the other parties. Which is followed by section 26(4): The arbitral tribunal shall communicate to the parties any expert reports or other documents on which it may rely in making a decision.

[^44]: Factum of Harold Gerstel and 2102503 Ontario Inc. O/A Harold the Jewellery Buyer at para.94

[^45]: Ibid at para. 100

[^46]: Affidavit of Harold Gerstel, sworn July 12, 2016 at Exhibit K

[^47]: Ibid at Exhibit L

[^48]: Ibid at Exhibit M

[^49]: Ibid at Exhibit N

[^50]: Ibid at para. 5

[^51]: Ibid at Exhibits A, Exhibit B, Exhibit C Exhibit D and Exhibit E.

[^52]: Factum of Harold Gerstel and 2102503 Ontario Inc. O/A Harold the Jewellery Buyer at para. 130

[^53]: See for example the Perocedural Order dated March 28, 2014 (see para. [26] above)

[^54]: Affidavit of Joel Kelman, affirmed on June 21, 2016 at para. 24

[^55]: Ibid at para. 25

[^56]: Ibid at para. 26

[^57]: Affidavit of Harold Gerstel, sworn on July 12, 2016 at para.17 and Affidavit of Harold Gerstel, sworn on May 18, 2016 at para. 30

[^58]: Affidavit of Harold Gerstel, sworn on July 12, 2016 at para.17 and Affidavit of Harold Gerstel, sworn on May 18, 2016 at para. 30

[^59]: Affidavit of Harold Gerstel, sworn on May 18, 2016 at para. Exhibit O

[^60]: Ibid at Exhibit P