COURT OF APPEAL FOR ONTARIO
CITATION: Ontario (Transportation) v. J & P Leveque Bros. Haulage Ltd., 2025 ONCA 573
DATE: 20250801
DOCKET: COA-24-CV-0514
Roberts, Miller and Pomerance JJ.A.
BETWEEN
His Majesty the King in the Right of Ontario
(as represented by the Minister of Transportation)
Plaintiff (Appellant)
and
J & P Leveque Bros. Haulage Ltd.
Defendant (Respondent)
William R. MacLarkey and Andi Jin, for the appellant
Eric A. F. Grigg and Felicia R. Lozon, for the respondent
Heard: January 7, 2025
On appeal from the judgment of Justice Paul M. Perell of the Superior Court of Justice, dated April 18, 2024, with reasons reported at 2024 ONSC 2285.
Pomerance J.A.:
INTRODUCTION
[1] This case is about the interpretation of general conditions in a standard form construction contract. The contract was between the appellant, the Minister of Transportation (“MTO”) and the respondent, J&P Leveque Bros. Haulage Ltd. (“Leveque”), and required Leveque to rehabilitate 27 kilometres of Highway 60. The general conditions set out a detailed, multi-step claims review process. A party contesting the final step in the process—the referee decision—was required to file a notice of protest and engage in alternative dispute resolution (“ADR”) before commencing litigation. These steps were to be completed within two years of the date of contract completion.
[2] That did not happen in this case. The referee decision, which ruled against MTO, was not released until after the two-year period had expired. The question is whether, in these circumstances, the parties were bound by the contractual two-year period. Can a party be required to protest a decision before it has been rendered?
[3] Once the referee decision was released, MTO acted quickly to register its notice of protest and invoke ADR. It subsequently commenced a civil action by filing a statement of claim against Leveque, seeking recovery of the $1.8 million awarded to Leveque by the referee panel. Leveque brought a motion for summary judgment. It argued that the contractual two-year deadline ousted the two-year limitation period under s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and that MTO was therefore out of time to bring its claim, having commenced litigation more than two years after contract completion. The motion judge agreed and awarded Leveque summary judgment.
[4] MTO appeals, arguing that the motion judge erred in his interpretation of the contract. I agree and would allow the appeal for the following reasons.
A. Background
(1) The Contract
[5] The general conditions of the parties’ contract prescribed a multi-step dispute resolution process, consisting of a three-level claims review process, a referee process, a referee decision, a notice of protest, and a 60-day period to explore ADR. The process may be summarized as follows:
The party disputing an aspect of the contract or payment was required to deliver a request for clarification to the contract administrator.
The contract administrator then conducted a “field level review” within 30 business days. The disputing party had to accept or reject the result of that review within 15 business days. If they rejected it, they were then required to submit a notice of claim for regional level review.
The regional level review was to be conducted by an MTO regional manager. They had 60 business days to complete the review, at which point either party had 15 business days to accept or reject it. If they rejected it, the disputing party could either bring a claim for provincial level review or begin a referee process.
If the disputing party chose a provincial level review, the manager of MTO’s Claims Office would conduct it within 60 business days. At that point, either party could object to the decision and begin the referee process.
If the referee process began, a referee or referee panel was to be selected, and would have 90 days from referral to decide a claim.
The referee or panel decision would be provisionally binding on the parties, but within 30 business days of its release, either party could deliver a notice of protest. They then would have 60 days to explore ADR before they could commence litigation. The notice of protest and ADR could not be instigated before contract completion, and had to be to be invoked within two years of completion. If neither party delivered a notice of protest within 30 business days, the referee’s decision became final and binding.
[6] The provisions at issue read as follows:
3.14.13.07.03: Referee decisions may be reviewed by either party by filing a Notice of Protest within 30 Business Days of the date of the Referee decision. Such reviews shall be dealt with according to clause GC 3.14.14, Further Avenues of Dispute Resolution, which shall not commence until the date of Contract Completion and no later than 2 years after the date of Contract Completion.
3.14.14.02: If the parties fail in their efforts to resolve the Claim then the parties agree that prior to resorting to litigation they may explore further alternative dispute resolution methods that are acceptable to the Owner. The Contractor shall provide written notice to the Manager, Claims Office, Provincial Highways Management, of the desire to explore further alternative dispute resolution methods within 30 Business Days of the Contract Completion date if the Referee decision was protested according to paragraph GC 3.14.13.07.03. The parties agree to explore all avenues of alternative dispute resolution and shall attempt to negotiate the method and the terms for the alternative dispute resolution in an effort to settle the Claim before resorting to litigation. If the parties are unable to agree upon an alternative dispute resolution method and its terms within 60 Business Days of the request to explore alternative dispute resolution, then either party may resort to litigation.
[7] Typically, it would take 12 months to progress from the initial submission of a request for clarification to a referral to a referee or referee panel. The referee process would typically take six and a half months to complete.
(2) The Dispute
[8] Leveque claimed that MTO owed it an additional $1.8 million due to standby delays and extra working time. The following is a summary of the procedural history of the ensuing dispute:
On July 19, 2019, the contract was completed.
On September 23, 2019, Leveque issued a request for clarification claiming additional payment. That was more than nine months after the last claimed day of standby, and more than two months after contract completion.
On November 5, 2019, MTO responded to the claim.
On November 13, 2019, Leveque issued a notice of claim for field level review.
On December 24, 2019, the contract administrator issued a decision unfavourable to Leveque.
On January 15, 2020, Leveque submitted its notice of claim for regional level review. MTO did not exercise its right to invoke the referee process.
On April 21, 2020, MTO’s regional office issued its regional level decision, again unfavourable to Leveque.
On May 12, 2020, Leveque issued a notice of claim for provincial level review. MTO did not exercise its right to invoke the referee process.
On August 6, 2020, when the provincial level decision was due, MTO requested more information from Leveque. Leveque had until September 3 to provide it, but did not do so. MTO granted Leveque an extension to October 19, and Leveque ultimately delivered on October 9.
On March 15, 2021, MTO issued its provincial level decision.
On April 1, 2021, Leveque rejected this decision, and referred the claim to a three-member referee panel.
July 9, 2021 passed. This was the date for the completion of the claims review process under the two-year post-completion deadline set out in the contract.
On October 19, 2021, the referee panel released its decision. It awarded Leveque $1.8M.
On October 21, 2021, MTO served a notice of protest.
On December 1, 2021, Leveque informed MTO that it was outside of the contract’s two-year limitation period.
On November 14, 2022, MTO commenced an action against Leveque.
Leveque moved for summary judgment, arguing that the action was out of time under the contractual limitation period.
(3) The Motion Judge’s Decision
[9] The motion judge agreed with Leveque’s position that MTO’s action was out of time and granted Leveque summary judgment. He determined that because the contract was a “business agreement” within the meaning of s. 22(6) of the Limitations Act, it ousted the statutory limitations period and replaced it with the contractual limitation of two years from contract completion. He concluded that the two-year period for completion of the claims review process started on July 9, 2019, the date of contract completion. He found that there was nothing absurd about enforcing the time limit, even though no referee decision had been rendered during that period. But for the delays caused by MTO during the process, he reasoned, the steps could have been completed during the two-year period.
B. Issues
[10] MTO raises several issues on appeal. In my view, the appeal turns on the following issues:
i. What is the standard of review?
ii. Did the motion judge err in his interpretation of the contractual claim review process?
[11] It is therefore unnecessary for me to address the other issues raised by MTO.
C. Analysis
(1) Standard of Review
[12] Appellate courts generally review a lower court’s interpretation of a contract deferentially: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50-52. Not so, however, where (a) the contract at issue is a standard form contract; (b) the interpretation has precedential value; and (c) no factual matrix specific to the parties exists to guide the interpretive process: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 24.
[13] The parties agree, as do I, that the contract in this case is a standard form contract. It is used repeatedly, so this court’s interpretation has precedential value. The interpretive process does not hinge on a specific factual matrix, disputed findings of fact, or disagreement about the surrounding circumstances. Therefore, a correctness standard applies. Beyond the interpretation issue, the appellant challenges certain findings of fact made by the motion judge. On those points, it is agreed that the standard of review is palpable and overriding error.
(2) Did the motion judge err in his interpretation of the contractual claim review process?
(i) Governing Principles
[14] The principles that govern contractual interpretation are well settled.
[15] First, the interpretation must be grounded in the text and read in light of the entire contract. The contract must be read as a whole, “giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva, at para. 47.
[16] Second, given that the contract in this case contains standard form clauses, there are few “surrounding circumstances” bearing on the analysis. The surrounding circumstances are those relating to the overarching commercial objective. Postponing the claims review process, and any ensuing litigation, until after contract completion allows the necessary work to be done without the distraction of outstanding or ongoing disputes.
[17] Third, a commercial contract is to be interpreted in keeping with sound commercial principles and good business sense, so as to avoid commercial absurdity: 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, 150 O.R. (3d) 481, at para. 64; Toronto (City) v. W. H. Hotel Ltd., 1966 CanLII 8 (SCC), [1966] S.C.R. 434, at p. 440. Commercial contracts are to be construed in accordance with sound commercial principles and good business sense, objectively rather than from the perspective of one contracting party: Kentucky Fried Chicken Canada v. Scott's Food Services Inc. (1998), 1998 CanLII 4427 (ON CA), 114 O.A.C. 357, at para. 27.
(ii) The Wrong Question
[18] The motion judge considered the parties’ conduct during the claims review process. He focused on whether they could have completed the process within the designated two-year period. He found that they could have, but for 118 days of delay caused by MTO. He found that it was “not inevitable” that the referee decision would be issued outside of the time limit and that, therefore, “the plain meaning of [the limitation clause] plainly works”. As he put it:
The point of these illustrations is that they demonstrate there is no need to make the presumptive reading proposed by the MTO and that there is nothing absurd about how the Construction Contract was to be performed. These illustrations also make the point that had the parties kept their eye on the 730-day clock stipulated by clause GC 3.14.13.07.03 of the Construction Contract, the contract would have functioned without any problem.
[19] MTO argues that the motion judge erred in calculating the delays attributable to it by counting calendar days as opposed to business days, as contemplated by the contract. It further argues that delay was also caused by Leveque: it waited approximately nine months before initiating the claims review process. The general conditions required that a contractor’s request for clarification be submitted “immediately” upon discovering an issue that might result in compensation.
[20] Whatever the respective delays caused by each of the parties, I do not see this case as turning on a minute parsing of time periods, or an assignment of blame for delay. I agree with MTO that the ultimate question was not whether the claims review process might have been, or could have been, completed within the two-year period. Nor was it whether one party was more at fault for the delay than the other. Rather, the question was how to interpret the language of the contract when, for whatever reason, the claims review process was not completed within that period. I will turn to that now.
(iii) Plain language of the contract
[21] The contract sets a time limit of two years from contract completion. The plain language of the contract, viewed as a whole, contemplates that the referee decision has been released during that period. It follows that the two-year period does not bind the parties when the referee decision is delivered outside of the two-year period.
[22] The motion judge did not expressly invoke the contra proferentem rule of construction, though he did consider the fact that MTO found itself “offside from the plain meaning of its own Construction Contract”. While MTO was responsible for the terms of the contract, that is of little moment in this case. The clause in question—the two-year time limit—does not, on its face, favour one party or the other. As it happened, the referee decision ruled against MTO. However, it could just as easily have been a decision against Leveque, the party that bore no responsibility for drafting the clauses.
[23] The motion judge reasoned that MTO could have sought an extension of the time period for protest, or could have initiated the referee process itself earlier, once the regional review was complete. However, the contract does not provide for an extension of the limitation period, unlike other stages of the claim review process. Regardless, Leveque did not confirm that it would have agreed to an extension had one been sought. Moreover, MTO had no reason to refer the case to the referee process earlier, as the earlier decisions had been in its favour.
[24] In any event, as already noted, the question was not whether the matter could have been completed within the timelines of the contract. The question was whether those timelines applied at all when the referee decision was outside the contractual two-year period.
[25] How then should the relevant clauses be interpreted? Viewing the contract as a whole and applying a commercially commonsense interpretation to the plain and grammatical meaning of the clauses, the period for protesting a decision only applies if there is, in fact, a decision to protest.
[26] For example, consider the following passages:
3.14.13.07 - 9 - Referee Decision .01: The Referee’s decision shall be provisionally binding on both parties subject to the right of either party to protest the decision as set out herein and the Owner standard form PH-CC-751, Referee Services Agreement, or Owner standard form PH-CC-752, Referee Services Panel Agreement, and any mutually agreed upon amendments thereto.
.02: Both parties shall agree to abide by the Referee decision according to the procedures set out in the Owner standard form PH-CC-751, Referee Services Agreement, or Owner standard form PH-CC-752, Referee Services Panel Agreement, and any mutually agreed upon amendments thereto and to comply with the decision of the Referee without delay from the date of the Referee decision. It is understood and agreed that such compliance is without prejudice to a party to protest the decision as described herein or in the Referee Services Agreement.
.03: Referee decisions may be reviewed by either party by filing a Notice of Protest within 30 Business Days of the date of the Referee decision. Such reviews shall be dealt with according to clause GC 3.14.14, Further Avenues of Dispute Resolution, which shall not commence until the date of Contract Completion and no later than 2 years after the date of Contract Completion.
.04: Decisions of the Referee shall be final and binding on both parties in the absence of the issuance of a Notice of Protest by either party within 30 Business Days following the date of the Referee decision. Notwithstanding submission of a Notice of Protest, both parties shall abide by the decision of the Referee ruling and carry out the decision without delay.
[27] As set out above, the contract stipulated that the referee decision was provisionally binding on the parties and that the parties were to abide by the decision, such compliance being without prejudice to protest it. The parties cannot be provisionally bound by a decision that does not exist. Nor can a party protest a decision that has not been released. Without a decision, there is no way of knowing who should protest and on what basis. There is similarly no ability to engage in meaningful ADR before litigation. If one accepts the premise that a decision cannot be protested until it is released, and if, as here, the decision is released after the two-year period has expired, compliance with the two-year contractual period is impossible.
[28] Moreover, to apply the contractual two-year limitation in the circumstances of this case is to effectively deprive MTO of any meaningful ability to challenge the referee decision and any ability to commence litigation.
[29] These consequences are not merely unpalatable; they are contrary to common sense and lead to commercial absurdity. It is commercially absurd to require a party to protest a decision that has not yet been released, just as it is absurd to conclude that a decision rendered late is, for that reason alone, final and binding on the parties.
(iv) The Limitation Period under the Limitations Act is not ousted where there is no decision
[30] The motion judge found that the contract “plainly and clearly” substituted its own limitation period for that prescribed by the Limitations Act. As he explained:
Section 3.14.13.07.03 is a provision in a business agreement, and there is nothing unambiguous about its plain meaning. It plainly and clearly excludes and substitutes a limitation period for the limitation period prescribed by the Limitations Act, 2002. The plain meaning of s. GC 3.14.13.07.03 of the Construction Contract plainly works. That MTO finds itself offside from the plain meaning of its own Construction Contract has nothing to do with something nonsensical in the plain meaning.
[31] For ease of reference, s. 22 of the Limitations Act is reproduced below:
Limitation periods apply despite agreements
22 (1) A limitation period under this Act applies despite any agreement to vary or exclude it, subject only to the exceptions in subsections (2) to (6). 2006, c. 21, Sched. D, s. 2.
Exception
(2) A limitation period under this Act may be varied or excluded by an agreement made before January 1, 2004. 2006, c. 21, Sched. D, s. 2.
Same
(3) A limitation period under this Act, other than one established by section 15, may be suspended or extended by an agreement made on or after October 19, 2006. 2006, c. 21, Sched. D, s. 2; 2008, c. 19, Sched. L, s. 4 (1).
Same
(4) A limitation period established by section 15 may be suspended or extended by an agreement made on or after October 19, 2006, but only if the relevant claim has been discovered. 2006, c. 21, Sched. D, s. 2; 2008, c. 19, Sched. L, s. 4 (1).
Same
(5) The following exceptions apply only in respect of business agreements:
A limitation period under this Act, other than one established by section 15, may be varied or excluded by an agreement made on or after October 19, 2006.
A limitation period established by section 15 may be varied by an agreement made on or after October 19, 2006, except that it may be suspended or extended only in accordance with subsection (4). 2006, c. 21, Sched. D, s. 2; 2008, c. 19, Sched. L, s. 4 (1).
Definitions
(6) In this section,
“business agreement” means an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002; (“accord commercial”).
[32] The contract in this case is a business agreement. For purposes of s. 22 of the Limitations Act, it may lengthen the limitation period beyond that set by statute. This is because the plain language of the contract postpones the resolution of disputes and does not start the clock until contract completion. If a contract takes five years to complete, the claims review process will not commence until the five-year mark, and then will allow two years for the steps to be completed. In that instance, the limitation period may well exceed the two years set by statute. The language of the contract explicitly authorizes this departure from the statutory limitation period.
[33] The general conditions do not, conversely, expressly authorize a reduction of the statutory period. Nor do they provide that a decision released outside of the two-year period is effectively immune from review. “A court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in ‘clear language’ describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods”: Boyce v. The Co-Operators General Insurance Company, 2013 ONCA 298, at para. 20. No such clear language appears in the contract in this case. Nor, as in Boyce, can this be reasonably construed from the language that does appear.
[34] It follows that where a decision that is part of the claims review process is released outside of the two-year contractual period, that two-year period will no longer bind the parties. Instead, the statutory limitation period will apply.
D. Conclusion
[35] For the above reasons, I conclude that absent the release of the referee decision within two years of the date of contract completion, MTO was not required to file a notice of protest and seek ADR within two years of the date of contract completion. Logically, MTO could not be required to protest a decision that had not been released. This part of the claim review process did not apply in the circumstances of this case.
[36] As a result, the two-year contractual limitation period did not oust the two-year limitation period under s. 4 of the Limitations Act. Because it was commenced within two years of the referee decision, MTO’s claim against Leveque was therefore not statute-barred.
[37] Having arrived at this conclusion, it is unnecessary to address the parties’ positions on whether the motion judge miscalculated due dates and time periods under the contract and his refusal to grant relief from forfeiture.
E. Disposition
[38] I would allow the appeal and set aside the summary judgment issued against MTO. I would set aside the costs award below, and order that the agreed upon, all-inclusive amount of $72,320 be paid to MTO. I would award MTO the agreed-upon costs of $25,000 for the appeal, all-inclusive.
Released: August 1, 2025 “L.B.R.”
“R. Pomerance J.A.”
“I agree. L.B. Roberts J.A.”
“I agree. B.W. Miller J.A.”