The Court allowed a petition to remove an arbitrator of an underinsured motorist protection arbitration and vacate the rulings and orders made by the arbitrator from the time of his appointment to the present, on the grounds that there existed a reasonable apprehension of bias given that the arbitrator and his law firm had an ongoing contractual and financial relationship with the Insurance Corporation of British Columbia (“ICBC”) who was the Respondent in the arbitration. Although there was evidence that counsel for the Petitioners had some knowledge of the arbitrator or his firm’s previous relationship with ICBC, it was not sufficient to establish waiver.

Administrative law – Insurance Corporation of British Columbia – Mandatory arbitration – Arbitration and award – Conflict of interest – Judicial review – Natural justice – Bias

Tepei v. Insurance Corporation of British Columbia, [2007] B.C.J. No. 2516, British Columbia Supreme Court, November 26, 2007, A.F. Cullen J.

The Petitioners, passengers in a motor vehicle accident sought compensation under the Underinsured Motorist Protection (“UMP”) provisions of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c.231, which requires issues of entitlement to and quantum of compensation be submitted to arbitration under the Commercial Arbitration Act, R.S.B.C. 1996, c.55 (the “CAA”). The arbitrator accepted by both the Petitioners and the Respondent ICBC heard and issued preliminary rulings in favour of ICBC on quantum and causation. Following this, counsel for the Petitioner challenged the arbitrator’s appearance of impartiality or independence and requested the arbitrator voluntarily vacate his rulings and withdraw on the basis of his firm’s business relationship with ICBC. The arbitrator declined, finding no factual basis giving rise to a reasonable doubt as to his impartiality or independence. The Petitioners sought relief from the Court, asserting that the arbitrator committed an arbitral error and failed to observe the rules of natural justice by failing to disclose that he and his law firm had an ongoing contractual and financial relationship with ICBC, and that such a relationship gave rise to a reasonable apprehension of bias. The Petitioners further asserted that the only remedy where reasonable apprehension of bias is established is to vacate the award and give the parties a “fresh start”.

The Court noted that the arbitrator had a mutually and significantly beneficial relationship with ICBC, it was a solicitor/client relationship extending into the future and was subject to renewal. As such, it was a relationship which had the potential to provoke a reasonable apprehension of bias in the absence of any mitigating factors. The evidence was not of actual bias and there was nothing to suggest that the arbitrator acted out of actual bias or otherwise than with integrity. Rather, it was the nature and extent of his relationship with one of the parties to the arbitration and the other party’s incomplete knowledge and understanding of that state of affairs that led to the Court’s orders that the arbitrator must be removed and his rulings be vacated.

While the Petitioner’s counsel had some knowledge of the arbitrator and/or his firm’s previous relationship with ICBC, this was insufficient to establish waiver. Burden of proof falls on the party alleging waiver and waiver will be inferred only where the party alleging bias has full knowledge and failed to make a timely objection. While the nature and state of knowledge of the Petitioner’s counsel was not fully articulated, he was not obliged, particularly in the face of the arbitrator’s statement of independence and impartiality, to “trawl around for information or request disclosure” about the arbitrator’s relationship with ICBC. Therefore, the case for waiver was not met.

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