Canada – Non-party Witnesses Applying to Arbitrator to Quash Summonses Do Not Attorn to Jurisdiction

Despite extensive rights of appeal provided in BP’s and D’s agreement to arbitrate, Mr. Justice William S. Chalmers in Bergmanis v. Diamond, 2021 ONSC 2375 held that their agreement did not apply to non-party witnesses who successfully applied to the arbitrator under sections 29 and 30 of the Arbitration Act, 1991, SO 1991, c 17 to quash summonses issued by the arbitrator.  Unsatisfied with the arbitrator’s decision to quash summonses, claimant appealed but without seeking leave.  Chalmers J. held that the successful non-parties did not attorn by applying to the arbitrator to quash the summonses and therefor the general provisions for appeal under the legislation applied. Relying Ontario First Nations (2008) Limited Partnership v. Ontario Lottery And Gaming Corporation, 2020 ONSC 1516, Chalmers J. held that Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 did not modify the standard of review remained.  Chalmers. J. further held that a legal principle as important a solicitor-client privilege is not a question of legal importance to the legal system as a whole if neither of the parties disputes the legal principle.

Two (2) law firms, BP and D, entered into a February 1, 2007 personal services agreement (“PSA”) by which D was to refer all personal injury matters to BP between February 1, 2007 and January 31, 2013 in exchange for a percentage referral fee.   The PSA stipulated that D would keep records regarding referrals and the parties would submit disputes to arbitration.

BP alleged a decrease in referrals in 2012 and learned that D was referring files to other law firms. BP sought referral records from D and one of its lawyers J.  J refused to produce the records, asserting that he was an independent contractor as of 2009, not an employee of D, and not bound by the PSA.

BP instituted litigation against BP and J.  J applied to strike the litigation, arguing that the PSA governed the dispute and had to be arbitrated.  The parties settled J’s motion with J’s agreement that he be bound by the arbitrator’s determinations.  The parties’ agreement to arbitrate provided appeal rights as follows:

The parties agree that an appeal from the Arbitrator’s award, or any determination of a preliminary motion, including any determination on costs, is permitted on a question of fact, a question of law, or a mixed question of fact and law”.

In the arbitration, BP disputed the sufficiency of the referral records communicated by D and J, both in terms of the period of time, the extent of the information and the summary format in which the information was provided.  At the request of BP, the arbitrator issued summonses to non-party lawyers to whom D had referred files.   BP’s request sought the following information from those lawyers:

(i) a list of all clients referred to non-party lawyer/law firm by J/professional corporation or D during the period from February 1, 2007 to January 31, 2013 inclusive;

(ii) a list of all referral or related fees paid to J, his professional corporation or D with respect to the referrals referenced in (i), including the amount and date of the payment;

(iii) a copy of any contract, e-mail or other document between non-party lawyer/law firm and any of J/his professional corporation or D evidencing how referral fees were to be calculated; and,

(iv) a list of any remaining open files arising from referrals in (i).

Following service of the summonses in November 2018, the recipient lawyers responded in different ways.  Several provided the requested information while some objected on a solicitor-client basis.  The latter filed a motion before the arbitrator to quash the summonses and, with the parties, argued the motion June 12, 2019.

In the hearing before the arbitrator, BP conceded that solicitor-client privilege covered the information sought but declined the option to receive the information with clients’ names redacted.  Without that information, BP agued it would not have sufficient information to cross-reference the information with referred to BP but declined.  The arbitrator issued reasons June 14, 2019 in which he accepted the non-party law firms’ objections. See para. 17 of Chalmers J.’s reasons reproducing key passages of the arbitrator’s reasons.

The arbitrator identified the competing submissions as to whether clients contacting J would have had a reasonable expectation of privacy and concluded that they would have.  He applied section 30 of the Arbitration Act, 1991, SO 1991, c 17

No person shall be compelled to produce information, property or documents or to give evidence in an arbitration that the person could not be compelled to produce or give in a court proceeding”. 

This section follows the general provision at section 29 which provides in part that:

– a party may serve a witness with a notice, issued by the arbitrator, requiring the witness to attend and give evidence at the arbitration at the time and place named in the notice; and,

– that notice has the same effect as a notice in a court proceeding requiring a witness to attend at a hearing or produce documents, and shall be served in the same way.

As part of that decision, the arbitrator awarded costs against BP in favour of the three (3) of the non-party law firms in the amounts of $14,498.92, $14,766.25 and $14,064.27.

Following receipt of the decision, BP applied July 18, 2019 for reconsideration, offering to accept the option dismissed earlier to received redacted information.  The arbitrator refused by decision which issued August 8, 2019, explaining that reconsideration was limited to correct for errors as a result of oversight and BP’s request did not qualify. BP appealed as did one (1) of the non-party law firms which cross-appealed its award of costs.  

Chalmers J. noted that the appeal and cross-appeal raised four (4) issues: jurisdiction to hear the appeal; standard of review; did arbitrator err in quashing the summonses; and, did the arbitrator err in costs award.

(a) jurisdiction to hear the appeal (paras 22-31) – In their PSA (or June 2, 2015 agreement to arbitrate negotiated after J’s motion to strike), the parties agreed among themselves that they permitted appeals of a preliminary matter as a question of fact, law or mixed question of fact and law.  Chalmers J. noted the non-party law firm’s objection to that approach to appeals, arguing that it was not a party to the PSA or June 2, 2015 agreement to arbitrate a was not bound by it.  Absent agreement, section 45(1) of the Arbitration Act applied.

BP argued that the non-party law firm had attorned to the arbitrator’s jurisdiction by making its application and not objecting to his jurisdiction.  The non-party law firm disagreed, referring to the jurisdiction exercised by section 29(1) of the Arbitration Act. They cited Dian Musical Reproduction Rights Agency Limited v. Canadian Recording Industry Association, 2005 CanLII 62970 (ON SC).

[9] BMG was not a party to the arbitration.  The arbitrator had no inherent jurisdiction, unlike a Superior Court judge.  The jurisdiction did not arise from the arbitration agreement nor from the Arbitration Act, 1991 S.O. 1991, c.C-17. […]

[10] A non-party discovery order to answer pre-hearing written interrogatories was made without notice to BMG.

[11] While the arbitration agreement purports to give the arbitrator the jurisdiction, an arbitration agreement cannot give an arbitrator jurisdiction over a non-party”.

Chalmers J. held that, by bringing its motion before the arbitrator, the law firm had not attorned to the arbitrator’s jurisdiction and was not a party to the PSA (or June 2, 2015 agreement to arbitrate).

Chalmers J. next held that BP’s proposed appeal of the result on the non-party law firm’s motion to quash was not covered by the PSA (or June 2, 2015 agreement to arbitrate) and therefore the appeal fell within the provisions of the Arbitration Act which only permits appeals on questions of law with leave.  Chalmers J. concluded that BP had no right to appeal the arbitrator’s decision to quash the summons served on the non-party law firms.

[30] This appeal involves the application of the law of solicitor-client privilege to the unique facts of the dispute and therefore is a question of mixed fact and law.  I note that the Arbitrator described the motion to quash as being “fact-specific”.  I also note that BP, at para. 24 of its factum, states that the appeal is one of mixed fact and law.  An appeal of mixed fact and law is not permitted under the Act.  And even if the appeal involved a question of law, it would only be available with leave.  BP did not seek leave”.

(b) standard of review (paras 32-34) – BP argued that Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 changed the standard of review, having imposed a standard of correctness for appeals of an administrative decisions where, inter alia, legislation contains an appeal to the courts.

It is BP’s position that, based on Vavilov, the starting point for an appeal of an arbitral decision should be correctness.  If Vavilov does not apply, BP argues that the starting point is reasonableness, but that the circumstances of this case require a correctness standard because the application of solicitor-client privilege is a question of law of central importance to the legal system as a whole”.

Chalmers J. disagreed, relying on the effect of Vavilov as stated in Ontario First Nations (2008) Limited Partnership v. Ontario Lottery And Gaming Corporation, 2020 ONSC 1516 paras 69-72 and its reliance on Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), [2014] 2 SCR 633 paras 104 and 106 and Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII), [2017] 1 SCR 688 para. 74.

In addition to asserting that the standard was reasonableness, Chalmers J. also held that the question before him was not of central importance to the legal system as a whole.

There is no dispute as to the legal principles that apply to the scope of solicitor-client privilege.  The Arbitrator noted that the legal principles were agreed upon, and his decision was based on the application of those agreed-upon principles to the facts”.

(c) whether arbitrator erred in quashing the summonses (paras 36-40) – Chalmers J. summarized the arbitrator’s reasoning to quash the summonses he had earlier issued, noting that the responsive information was clearly covered by the solicitor-client privilege.

[36] Solicitor-client privilege is broad and protects all communications between a solicitor and client that are connected with that relationship: see Minister of National Revenue v. Thompson, 2016 SCC 21, [2016] 1 S.C.R. 381, at para. 19.  The privilege applies not only to advice provided by the lawyer but to all information that arises out of the relationship.  It therefore applies to the names of the clients and their fees and accounting records: see Canada (Attorney General) v. Chambre des notaires du Québec, 2016 SCC 20, [2016] 1 S.C.R. 336, at paras. 73-74.

[37] The information requested in the summonses included clients’ names and accounting information with respect to referral fees.  I am satisfied that this is information concerning the carriage of the clients’ files and is presumptively privileged.  The Arbitrator concluded that the documentation was privileged and quashed the summonses.  I am satisfied that the decision of the Arbitrator was within the range of reasonable outcomes”.

On appeal, BP proposed that respect of the privilege could be met by redacting the information.  Chalmers J. observed that BP had refused this solution and its motion for reconsideration had been dismissed.  Chalmers J. noted that redaction had not been raised by BP and had not been overlooked by the arbitrator.  Rather, despite not being raised, the arbitrator had proposed it and it was rejected by BP. Chalmers J. still questioned whether even the redacted format would still be sufficient to respect the privilege and not identify the clients.

Chalmers J. added comment on deference to the arbitrator with six (6) years of involvement in the dispute.

[40] The Arbitrator has been involved in this arbitration for over six years.  He is familiar with the parties and the matters in issue.  He has a good appreciation of the factual matrix and how the information requested from the Responding Lawyers applies to BP’s case.  He applied the agreed upon principles of solicitor-client privilege to the facts and quashed the summonses.  He is entitled to deference.  I conclude that the Arbitrator’s decision to quash the summonses is within the range of reasonable outcomes”.

(d) whether arbitrator erred in costs award (paras 41-47) – BP appealed the costs award but Chalmers J. reiterated his earlier determination that BP had not sought leave with respect to the costs award and he added that the costs award did not qualify as a question of law.  As he had not set aside the arbitrator’s decision on the summonses and as BP noted that costs should follow the event, Chalmers J. found no basis on which to interfere with the costs award.

On the cross-appeal, the non-party law firm argued that the costs were unreasonable and qualified as an error.  Having taken the lead on the motion, it argued that it should not have been awarded costs equivalent to the other two (2) law firms.  It added that the arbitrator “failed to follow the well-established principle that strangers brought into litigation who are wholly successful on a motion should be awarded costs on a full indemnity basis”.  BP argued that costs are discretionary and the arbitrator’s decision merited deference.

Chalmers J. dismissed the cross-appeal.  He held that the determination of costs on a motion to quash a summons did not involve questions of law of central importance to the legal system and, in addition, the result felt with the range of reasonable outcomes.

urbitral notes – First, see the earlier Arbitration Matters note “B.C. – court adjourns its assistance to issue subpoenas approved in international commercial arbitration – #416”. Despite having “no difficulty accepting” the arbitrator’s conclusion that non-party witnesses had testimony “relevant to the issues in the Arbitration and material to its outcome”, Mr. Justice Gordon C. Weatherill in Octaform Inc. v Leung, 2021 BCSC 73 opted to adjourn an arbitral party’s applications to issue subpoenas in assistance of an arbitration conducted under the International Commercial Arbitration Act, RSBC 1996, c 233.  Weatherill J. did affirm that arbitrations are “autonomous, self-contained, self-sufficient processes”, did acknowledge that “[i]t is the task of the Arbitrator to determine the truth” and did note that the arbitrator had not varied his initial approval of the subpoenas request after having participated in fourteen (14) days of hearing. Nonetheless, Weatherill J. considered the applications “premature”.  He commented on whether one witness had been duly contacted and recorded that the other witness had set conditions on potentially attending. The witnesses did have over three (3) months between service of the October 9, 2020 applications and the January 14, 2021 hearing at which the witnesses were represented and could have addressed any concerns about willingness to participate. Weatherill J. still opted to see whether either witness in the future “unreasonably refuses to provide written evidence in chief and attend the hearing of the Arbitration for viva voce examination in chief, cross-examination and re-examination”. At that future time he advised “I will consider issuing the requested subpoenas”.

Second, see the recent introductory paragraph to the judicial review decision in Cura v. Aviva Insurance Canada, 2021 ONSC 2290.  The Ontario Divisional Court began its reasons with the following.

[1] Litigants, whether they are before an arbitrator or a trial judge must, absent exceptional circumstances, proceed with their litigation to its ultimate conclusion before anyone aggrieved with an interim ruling or order initiates an appeal or an application for judicial review. There is good reason for this proposition. Numerous decisions are made by arbitrators and trial judges during the course of a hearing. Many of these decisions the parties may not agree with. Litigation in general would come to a grinding halt if an aggrieved litigant sought redress in a higher court every time he or she lost an argument during a trial or arbitration. This application for judicial review should serve as a reminder to heed this basic direction”.

Third, regarding subpoenas issued against mediators, see the earlier Arbitration Mattes note “Québec – trial judge on own initiative quashes subpoena issued to mediator – #339”. Without need for application by either the opposing party or the proposed witness, Madam Justice Céline Gervais in PC Avocats inc. (Perras Couillard Avocats) v. Perreault, 2020 QCCQ 1972 quashed a subpoena sent to the attorney who served as mediator in court-supported mediation.  In quashing it proprio motu, Gervais J. explained to the self-represented litigant that the mediator was not compellable and all that transpired during the mediation was confidential.  Gervais J. also commented on the role/liability of lawyers in a client’s own decision to engage in mediation and negotiate a settlement.

author

Daniel Urbas

Daniel Urbas is an experienced litigator, arbitrator and mediator with over 25 years of dispute resolution experience. He has earned a variety of repeat, annual peer recognitions including “Leading Lawyer” in “Commercial Arbitration” in the 2019 edition of the Lexpert ® / American Lawyer Guide to the Leading 500 Lawyers…

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