Court of Appeal for Ontario

Docket: C65832

Judges: Feldman, Simmons and Nordheimer JJ.A.

Between

Crosstown Transit Constructors Plaintiff (Appellant)

and

Metrolinx Defendant (Respondent)

Counsel

Duncan Glaholt and Michael Valo, for the appellant

Peter Wardle and Evan Rankin, for the respondents

Heard

March 22, 2019

On Appeal

On appeal from the order of Justice Herman Wilton-Siegel of the Superior Court of Justice, dated July 31, 2018 with reasons reported at 2018 ONSC 4650

Reasons for Decision

[1] The applicant appeals from the order of the application judge that dismissed its application for judgment against the respondent in the amount of $7,451,662.65 pursuant to the terms of a settlement agreement.

[2] The parties entered into a contract for the construction of the western portion of the Eglinton Crosstown Tunnel (the "Project").

[3] Pursuant to the contract, the respondent was required to obtain certain insurance including third party liability insurance for the benefit of both parties and other subcontractors on the Project, which it did. The respondent is the first named insured and the appellant is an additional insured in the insurance policies.

[4] An additional term of the contract between the parties was that the appellant was responsible for paying 100% of the deductibles for each third party claim against the appellant made under the insurance policies, save for certain specific exceptions, none of which are of relevance here.

[5] The appellant completed all of its work on the Project and a certificate of substantial performance of the contract was issued on November 29, 2016. There were some disputes outstanding but, after negotiations, the parties entered into a final settlement of the outstanding "contract related issues" between them.

[6] As part of that settlement, the parties agreed to provide mutual releases. One term of those releases was as follows:

THE PARTIES acknowledge that this Release is not intended to, and does not, affect the Parties' rights and obligations with regard to the insurance policies METROLINX was required to procure and maintain under the Contract ("OCIP Policies"). The Parties further acknowledge and agree that they will take all such action as reasonably necessary to allow each Party to secure any benefits which are or may be due under the OCIP Policies.

[7] When it came time for the respondent to pay the final amount due to the appellant under the settlement, the respondent advised the appellant that it was going to withhold, from that payment, the amount potentially due for deductibles relating to outstanding claims by third parties that would be covered by the insurance policies. The amount potentially due, at the time, was $6.4 million.

[8] The appellant took the position that no amount was owing to the respondent in respect of the deductibles as the settlement had resolved all outstanding issues under the contract, including any liability it had for the deductibles. The appellant brought an application for the interpretation of the settlement agreement and for judgment for the amount that the respondent had withheld from the settlement payment on account of the deductibles.

[9] The motion judge found that the above term in the release was ambiguous. However, he concluded, after considering the intentions of the parties and the surrounding factual matrix, that the proper interpretation of the release, read as a whole, was that it did not release the appellant from its obligation to pay the applicable deductibles.

[10] We agree with the conclusion reached by the motion judge but for different reasons. We do not view the term of the release as being ambiguous. There is no dispute that the parties' intention was to protect their rights under the insurance policies. The term in the release is not restricted just to the rights and obligations as stipulated in those insurance policies. Rather, the term expressly states that it is not intended to, and does not, affect the parties' rights and obligations with regard to the insurance policies. In our view, that language clearly applies to all of the rights and obligations of the parties relating to the insurance policies, including the rights and obligations that they agreed upon in the contract with respect to the payment of the applicable deductibles.

[11] However, even if the language of this term of the release is ambiguous, we do not find any error in the analysis and conclusion reached by the motion judge in terms of the interpretation he gave to it, which leads to the same result. The motion judge's interpretation is entitled to deference from this court unless a palpable and overriding error can be shown, of which there is none here: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633. Nor is there any extricable question of law involved that would invoke a correctness standard of review.

[12] We would add that we are unable to see anything in the events that led up to the settlement that would demonstrate that it was the intention of the parties to release the appellant from its contractual obligation to pay the deductibles. The appellant points to an email it sent to the respondent that proposed that mutual releases be exchanged and that the insurance exemption clause be inserted. There is nothing in that email that refers to the deductibles or suggests that the purpose of the proposed changes was to release the appellant from its obligation to pay them. Further, as the application judge noted, there is nothing in the record to suggest there was any reason for the respondent to have agreed to give up its entitlement to have the appellant pay the deductibles. That is, there is nothing in the evidence that demonstrates that the respondent gained anything in exchange for relinquishing its entitlement to be paid those amounts.

Conclusion

[13] The appeal is dismissed with costs to the respondent fixed in the agreed amount of $30,000 inclusive of disbursements and HST.

"K. Feldman J.A." "Janet Simmons J.A." "I.V.B. Nordheimer J.A."