Superior Court of Justice - Ontario

COURT FILE NO.: 36329

DATE: 2015/11/04

RE: LEDORE INVESTMENTS LTD., carrying on business as ROSS STEEL FABRICATORS & CONTRACTORS (Plaintiff)

And:

ELLIS-DON CONSTRUCTION LTD.[^1] (Defendant)

BEFORE: Justice I. F. Leach

COUNSEL: W. Ross MacDougall, for the plaintiff Angelo C. D’Ascanio, for the defendant

HEARD: September 11, 2015

ENDORSEMENT

[1] This is a motion by a party to an arbitration proceeding, pursuant to s.45(1) of the Arbitration Act, 1991, S.O. 1991, c.17, for leave to appeal a decision by an arbitrator.

[2] Specifically, Ellis-Don Construction Ltd., (“Ellis-Don”), a defendant and plaintiff by counter-claim in this action and related arbitration proceeding, seeks leave to appeal certain aspects of a decision rendered by arbitrator Larry Banack (“the arbitrator”) on April 9, 2015. Those particular aspects of the decision were made in favour of the plaintiff and defendant by counterclaim, Ledore Investments Ltd., carrying on business as Ross Steel Fabricators & Contractors (“Ross Steel”).

Facts – Procedural history

[3] For purposes of this motion, the underlying facts and procedural history are not in dispute and may be summarized as follows:

• The parties were involved in work done to rehabilitate the Bluewater Bridge; a bridge spanning the Canadian-American border between the communities of Point Edward, Ontario, and Port Huron, Michigan. In particular, Ellis-Don was awarded a prime contract for rehabilitation of a section of the bridge in 1997, and Ross Steel was awarded a subcontract to perform structural steel subcontract work for Ellis-Don.
• On or about August 19, 1997, the parties entered into a standard form subcontract, (albeit with a number of changes made to customize the agreement to their needs), to govern their relationship. Although the document apparently was never formally executed, both parties accept that they are bound by its terms.
• Article 4 of the parties’ agreement dealt with “Payment”, and Article 4.3 dealt in particular with interest. It read as follows:

4.3 (a) Should either party fail to make payments as they become due under the terms of this agreement or in an award by arbitration or as ordered by a court, interest at 3 percent per annum above the bank rate on such unpaid amounts shall also become due and payable until payment. Such interest shall be compounded on a monthly basis. The bank rate shall be the rate established by the Bank of Canada as the minimum rate at which the Bank of Canada makes short term advances to the chartered banks.

(b) Interest shall apply at the rate and in the manner described by paragraph (a) of this Article on the amount of any claim settled from the date the amount would have been payable under this agreement, had it not been in dispute, until the date it is paid.

• Article 15 of the parties’ agreement deals with “Waiver”, and Articles 15.1(a) and 15.2 in particular read as follows:

15.1 As of the date of the final certificate for payment of the prime contract, the contractor expressly waives and releases the subcontractor from all claims against the subcontractor, including without limitation those that might arise from the negligence or breach of this agreement by the subcontractor, except one or more of the following:

(a) those made in writing prior to the date of the final certificate for payment of the prime contract and still unsettled.

15.2 As of the date of the final certificate for payment of the prime contract, the subcontractor expressly waives and releases the contractor from all claims against the contractor arising out of the work performed under this agreement or in respect to any matter relating to the subcontractor’s involved in the project including without limitation those that might arise from the negligence or breach of this agreement by the contractor except those made in writing prior to the subcontractor’s application for payment upon total performance of the subcontract work and still unsettled.

• As work on the project progressed, Ellis-Don complained about alleged delay in the work being performed by Ross Steel. Letters of complaint in that regard, with particulars, were sent by Ellis-Don to Ross Steel on June 17, August 13, August 25, September 21 and November 3, 1998, advising Ross Steel that any delay costs would be charged back to Ross Steel. In November of 1998, Ellis-Don also started a “delay cost file” against Ross Steel.
• By late December of 1998, Ross Steel had finished all of its subcontract work on the project for Ellis-Don, (except for some deficiency work), and it rendered bills to Ellis-Don for that completed work.[^2] However, Ellis-Don withheld the release of its last payment to Ross Steel, as well as Ross Steel’s outstanding holdback.
• On January 18, 1999, Ellis-Don then sent Ross Steel a letter which included the following comments:

As you are aware, there are a number of outstanding issues to be resolved between Ellis-Don and Ross Steel regarding Ross Steel’s performance on this project. The late submission of shop drawings, insufficient man power and your refusal to work overtime are some of the major factors that contributed to Ross Steel’s consistent failure to meet milestone schedule dates. The schedule slippages by Ross Steel had a serious impact on the work of Ellis-Don and other subcontractors and affected the overall completion of the project. In addition to impacting the schedule, Ross Steel also forced Ellis-Don to expend substantial monies to accelerate the work in an effort to recover the schedule. We are currently assessing the financial impact that Ross Steel’s schedule slippages have had on Ellis-Don and we intend to recover these costs from you.

Notwithstanding the above, Ellis-Don has now received an interim assessment of the liquidated damages by the owner for the late completion of the project in the amount of $105,000 for the period of December 3 to December 23, 1998 (copy attached). Additional damages may be assessed when work resumes in the spring of this year. These damages are solely attributable to Ross Steel and on account of this we are withholding the release of any further monies to you at this time.

It is our intention to contest the assessment of liquidated damages by the owner and we will advise you of any further developments in regards to this matter.

• In July of 1999, Ellis-Don and the owner reached a settlement, whereby the owner waived its claim for liquidated damages from Ellis Don. At some point between July 19 and the middle of August 1999, the owner then issued a final certificate of payment for the project.
• The parties met on August 4, 1999, and again on February 17, 2000, with a view to resolving their dispute as to how much money was owed by Ellis-Don to Ross Steel. However, they were unable to settle their disagreement.
• On March 2, 2001, Ross Steel commenced this action by issuing its statement of claim. Its prayer for relief included claims for the unpaid balance said to be outstanding on its sub-contract with Ellis-Don, as well as damages for delay, and alternative claims for relief including breach of contract damages and quantum meruit compensation, together with claims for interest and costs.
• On May 14, 2001, Ellis-Don responded with delivery of its statement of defence and counterclaim. Amongst other things, Ellis-Don claimed damages from Ross Steel for its alleged delay, breach of contract, negligence and negligent misrepresentation. Ellis-Don also asserted a right of set-off in relation to amounts otherwise owed by Ellis-Don to Ross Steel.
• A reply and defence to counterclaim was delivered by Ross Steel on August 17, 2001.
• Notwithstanding this early period of activity, the formal litigation between the parties apparently then went dormant for a considerable period of time, leading to a motion by Ellis-Don to have the claim by Ross Steel dismissed for delay. That motion was dismissed on September 5, 2012, but resulted in renewed efforts by the parties to move their dispute forward to a conclusion.
• Following oral examinations for discovery in December of 2013, the parties then agreed to have the issues raised by this action determined by way of binding arbitration. There was no formal arbitration agreement. However, by way of correspondence, the parties agreed that all the Rules of Civil Procedure would apply to the arbitration, and that the arbitrator would have all the powers of a judge. It is common ground that the resulting arbitration agreement between the parties was silent in respect of appeals, from any resulting arbitration decision, on questions of law.
• In the course of the resulting arbitration proceeding, Ross Steel brought a motion before the arbitrator for declaratory relief and partial summary judgment. In particular, Ross Steel sought a ruling that Ellis-Don’s counterclaim, (based on the alleged delays by Ross Steel), was “barred and estopped” by the provisions of Article 15.1 of the parties’ agreement. As that in turn would negate Ellis-Don’s alleged right of set-off in relation to at least $742,372.46 that Ellis-Don otherwise admittedly owed to Ross Steel, Ross Steel also moved for partial summary judgment in that regard. (Ross Steel moved only for partial summary judgment, leaving its claims for extras, and claims challenging certain back charges levied by Ellis-Don, for later resolution in the arbitration proceeding.) In its motion, Ross Steel also sought, in relation to any sum awarded by partial summary judgment, an award of interest calculated at the rate specified by the parties’ agreement.
• In addition to defending the aforesaid motion brought by Ross Steel, Ellis-Don brought its own cross-motion before the arbitrator, seeking a declaration that the claims for extras and other delay claims being asserted by Ross Steel were “barred and estopped” by the provisions of Article 15.2 of the parties’ agreement.
• The aforesaid motion by Ross Steel and cross-motion by Ellis-Don were heard by the arbitrator on March 12, 2015.
• As noted above, the arbitrator then released his decision on April 9, 2015.

[4] I will return to more detailed consideration of the arbitrator’s analysis in the course of these reasons.

[5] For now, by way of a broad description, (to conclude this summary and overview of the events leading to the motion now before me), I note that the conclusions reached by the arbitrator essentially included the following:

i. The arbitrator found that that Ellis-Don was barred from asserting, (either by way of set-off or counterclaim), its claim for relief based on the alleged delays and failings of Ross Steel. In particular, the arbitrator found that the letters by Ellis-Don to Ross Steel in that regard, (including the letter by Ellis-Don to Ross Steel on January 18, 1999), were not sufficient to satisfy the requirements of Article 15.1 of the parties’ agreement.

ii. Without any claim of its own to assert by way of set-off or counterclaim, Ellis-Don essentially had no defence to Ross Steel’s claims for $742,372.46 which Ellis-Don otherwise admittedly owed to Ross Steel. The arbitrator therefore granted partial summary judgment to Ross Steel in that amount.

iii. The arbitrator also found that Ross Steel was entitled to interest on that $742,372.46, calculated at 3 percent per annum above the bank rate, compounded on a monthly basis from August 4, 1999, until the date of payment. This was said to be in accordance with the provisions of the parties’ agreement dealing with interest, and would result in an interest award to Ross Steel worth approximately $1,200,000. (The arbitrator allowed the parties 15 days in which to submit their respective compound interest calculations, for inclusion in a further award. However, at the request of the parties, and with their consent, the arbitrator agreed to postpone submissions and calculations in that regard pending further notice from the parties.)

Appeal proceedings - motion for leave

[6] Although the arbitrator’s decision also denied certain claims advanced by Ross Steel, only Ellis-Don has sought to appeal any part of the arbitrator’s decision of April 9, 2015.

[7] In particular, in its notice of motion dated May 4, 2015, Ellis-Don seeks relief including:

• leave to appeal the arbitrator’s decision that Ellis-Don was contractually barred from asserting its claims based on the alleged delays and failings of Ross Steel;
• leave to appeal the arbitrator’s decision that the rate of interest referred to in the contract applied to the amounts found to be owing to Ross Steel;
• an order allowing the contemplated appeals; and
• costs of the proceedings before the arbitrator, as well as the costs of this motion.

[8] However, the parties indicated in their “Amended Certificate of Readiness of Special Appointment”, filed on September 2, 2015, that I would be asked to render a decision only in relation to Ellis-Don’s requests for leave to appeal; i.e., with the balance of the motion, (involving substantive review of the arbitrator’s award by way of appeal), to be adjourned.

[9] In particular, the certificate filed and signed on behalf of both parties confirmed their mutual intention to have substantive argument of the contemplated appeal, on its merits, adjourned to a date to be fixed in the event leave to appeal was granted.

[10] The parties’ agreement to narrow the scope of the exercise before me was then confirmed by counsel when they appeared to address the matter on September 11, 2015.

Analysis

[11] Ellis-Don seeks leave to appeal based on alleged errors of law made by the arbitrator in arriving at his impugned decisions.

[12] In particular, Ellis-Don seeks leave to appeal on the following grounds:

a. that the arbitrator erred in law in finding that the letters sent by Ellis-Don to Ross Steel, (and the letter of January 18, 1999, in particular), did not constitute an unsettled “claim made in writing”, capable of satisfying the provisions of Article 15.1 of the parties’ agreement; and

b. that the arbitrator erred in law in finding that the contractual interest provisions in Article 4.3(a) and (b) of the parties’ agreement applied so as to give rise to “pre-judgment” interest on the principal amount awarded to Ross Steel.

[13] It is common ground that, since the arbitration agreement of the parties did not address the issue of possible appeals on questions of law, the applicable test for leave to appeal from the arbitrator’s decision is set forth in s.45(1) of the Arbitration Act, 1991, supra, which reads as follows:

Appeals on questions of law

45. (1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,

(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and

(b) determination of the question of law at issue will significantly affect the rights of the parties.

[Emphasis added.]

[14] The parties also agree, (and I am independently satisfied), that the requirements of s.45(a) are met in this case. The importance to the parties of these issues is understandable, given the substantial sums involved.

[15] To the extent necessary, I also find that determination of the questions raised by Ellis-Don would “significantly affect the rights of the parties”, in the sense required by s.45(b) of the legislation. In that regard:

• I respectfully disagree with authorities, such as Denison Mines Ltd. v. Ontario Hydro, 61 O.R. (3d) 291 (S.C.J.), which have interpreted s.45(1)(b) as imposing a requirement that the proposed appeal will have an impact on the “future or ongoing rights” of the parties, thereby effectively precluding an appeal in situations where, as in this case, the relationship between the parties has come to an end.
• I instead agree with authorities holding that future or ongoing significant impact is a sufficient but not necessary factor in the required s.45(1)(b) determination, and that the purpose of the second prerequisite established by s.45(1)(b) is to eliminate grounds of appeal that are less than decisive to the outcome of the arbitration. See, for example: McAsphalt Marine Transport Ltd. v. Liberty International Canada, [2005] O.J. No. 1424 (S.C.J.), at paragraph 36; Aronowicz v. Aronowicz, [2007] O.J. No. 295 (S.C.J.), at paragraphs 27-29; and Ottawa (City) v. The Coliseum Inc., [2014] O.J. No. 4165 (S.C.J.), at paragraphs 40-41.
• The questions Ellis-Don seeks to raise on appeal are capable, in my opinion, of having a decisive impact on the outcome of the matters addressed by arbitration. In particular, if Ellis-Don’s counterclaim is not barred, that obviously may give rise to a significant right of set-off substantially undermining if not thwarting the claim being advanced by Ross Steel. Similarly, even the preliminary calculations performed by the parties underscore the importance of the determining the proper basis for determining entitlement to interest, as that interest may well exceed the principal amount owed by one party to the other.

[16] In my view, the real issue for determination on this motion is whether Ellis-Don’s contemplated appeal truly raises “questions of law”, in respect of which appeals are permitted pursuant to s.45(1) of the Arbitration Act, 1991, supra.

[17] That threshold determination is important, as leave to appeal can only be granted if an alleged error made by the arbitrator is one of law, and not one of mixed fact and law.

[18] The distinctions to be made in that regard, and the proper approach to be taken in making such determinations, were clarified and emphasized by the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.

[19] That case dealt with the interpretation and application of s.31 of the Commercial Arbitration Act, R.S.B.C. 1996, c.55, which governs appeals from commercial arbitration decisions in British Columbia, and generally limits appeals to questions of law where the parties consent to the appeal, or questions of law where the parties do not consent but leave to appeal is granted.

[20] The test for granting such leave, pursuant to s.31(2) of the British Columbia legislation, is worded differently from the test for granting leave pursuant to s.45(1) of Ontario’s Arbitration Act, 1991, supra. However, insofar as both provisions limit possible appeals to questions of law, the general principles and guidelines established by the Supreme Court of Canada in that regard apply to interpretation and application of the Ontario leave provisions as well. See Ottawa (City) v. The Coliseum Inc., supra, at paragraphs 34-36.

[21] In my view, relevant general principles and guidelines from the Sattva decision include the following:

• Historically, the determination of legal rights and obligations of parties under a written contract was considered a question of law. However, that historical approach has now been abandoned in favour of recognition that contractual interpretation involves issues of mixed fact and law. It is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix.
• One central purpose of drawing a distinction between questions of law and those of mixed fact and law, (highlighted by provisions such as those restricting possible appeals from arbitration decisions to questions of law), is to limit the intervention of appellate courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute. It reflects the role of courts of appeal in ensuring the consistency of the law, rather than providing a new forum for parties to continue their private litigation.
• Bearing in mind that central purpose, the key difference between “questions of law” and “questions of mixed fact and law” will be the degree of generality or “precedential value” involved.
• In that regard, it is not easy to say precisely where the line should be drawn between cases where a proposed appeal involves a dispute over a general proposition that might qualify as a principle of law, or a dispute over a very particular set of circumstances that is not apt to be of much interest to judges and lawyers in the future. However, as the level of generality of a challenged proposition becomes more narrow and particular, it inherently loses its precedential value, (e.g., of clarifying what the correct legal test is), and approaches what is really pure application, (e.g., of applying an established legal standard to a set of facts).
• The legal obligations arising from a particular contract are, in most cases, limited to the interest of the particular parties to that contract. Moreover, the goal of contractual interpretation, (to ascertain the objective intentions of the parties), is inherently fact specific. Determinations of contractual interpretation therefore generally will be treated as involving questions of mixed fact and law.
• In rare cases, it may be possible to identify an “extricable question of law” from within what was initially characterized as a question of mixed fact and law. For example, in the course of contractual interpretation, a legal error may have been made through “application of an incorrect principle”, “failure to consider a required element of a legal test”, and/or “failure to consider a relevant factor”.
• However, courts should be cautious in identifying extricable questions of law in disputes over contractual interpretation, bearing in mind the legislative intention to restrict such appeals, and the reality that the applicant for leave and its counsel will seek to frame any alleged errors as questions of law. Again, the circumstances in which a question of law can be extricated from the interpretation process will be rare. Where the legal principle is not “readily extricable”, then the matter should be treated as one of “mixed fact and law”, in respect of which an appeal from the arbitrator’s decision is not permitted.[^3]

[22] With the above principles, guidelines and cautions in mind, I now return to consideration of whether the contemplated appeal by Ellis-Don from the arbitrator’s decision centres on a question or questions of law, in the sense required, to bring it within the limited scope of appeals permitted by s.45(1) of the Arbitrations Act, 1991, supra, if the other requirements of s.45(1) are satisfied.

[23] As noted above, the first aspect of Ellis-Don’s contemplated appeal relates to the arbitrator’s finding that the letters sent by Ellis-Don to Ross Steel, (and the letter of January 18, 1999, in particular), did not constitute an unsettled “claim made in writing”, capable of satisfying the provisions of Article 15.1 of the parties’ agreement.

[24] In that regard, the relevant analysis and conclusion of the arbitrator are found at pages 11-14, (paragraphs 52-68), of the arbitrator’s decision. While I have reviewed and considered those reasons in their entirety, they may be summarized as follows, in relation to the claim advanced by Ellis-Don:

• The arbitrator focused on the provisions of Article 15.1(a) of the parties’ agreement, and what needed to be done to avoid waiver and release of the claim Ellis-Don wished to advance against Ross Steel. In particular, the arbitrator focused on what Ellis-Don had to do, prior to the date of the final certificate for payment of the prime contract), to ensure that it had submitted an appropriate “claim … made in writing”, in relation to a claim that was “still unsettled”.
• The arbitrator noted that the contract itself contained no description of what might constitute a sufficient “claim in writing”, or when a claim should be regarded as “still unsettled”.
• The arbitrator acknowledged receipt of authority, provided by the parties, setting forth general principles to be applied in determining whether a party to a building and engineering contract had provided sufficient written notice of a claim, in circumstances where the contract required such notice. In particular, the arbitrator acknowledged that he had been provided with the British Columbia Court of Appeal’s decision in Doyle Construction Co. v. Carling, [1988] B.C.J. No. 832 (C.A.); a decision which has been accepted and considered by other courts, (including courts in Ontario), in determining whether a party to such a contract has provided sufficient written notice of a claim, where such notice is an agreed condition precedent to the advancement of a claim. See, for example: Northland Kaska Corp. v. Yukon Territory, 2001 BCSC 929, [2001] B.C.J. No. 1317 (S.C.), at paragraphs 59-62; Bemar Construction (Ontario) Inc. v. The Corporation of the City of Mississauga, [2004] O.J. No. 235 (S.C.J.), at paragraphs 180-181 and 191-194, affirmed [2007] O.J. No. 3811 (C.A.); and Technicore Underground Inc. v. Toronto (City), [2011] O.J. No. 5667 (S.C.J.), at paragraphs 35-36, affirmed 2012 ONCA 597, [2012] O.J. No. 4235 (C.A.), at paragraphs 37-44.[^4]
• The arbitrator also acknowledged that correspondence sent by Ellis-Don to Ross Steel, (and the letter of January 19, 1999, in particular), met the requirements, set forth in the jurisprudence, for sufficient written notice of a claim under a construction contract. The arbitrator does not expand on his finding in that regard. However, I note that the general principles established by Doyle include indications that provisions requiring such notice will be satisfied where:
  • the complaint goes beyond “grumblings” to display or indicate an “intention to claim”;
  • the claimant gives some particulars as to what the complaint is, so that the other party has an opportunity to consider its position and the possibility of taking corrective measures; and
  • the complaint is timely; e.g., given “in enough time” to permit the other party to take “guarding measures” if it so desires.
• However, the arbitrator then indicated that such jurisprudence, and his view that Ellis-Don had provided sufficient written notice of a claim under the parties’ contract, had no application or relevance to the determinations he was required to make. In doing so, the arbitrator drew a threshold distinction between provisions requiring written notice of a claim, (which in his view was the subject of the jurisprudence to which he had been referred, including the Doyle decision), and provisions such as Article 15.1(a) requiring the making of claims in writing, (which in his view was a type of contractual provision in respect of which the parties had provided no relevant jurisprudence).
• Given what he perceived to be an absence of any legal authority on point, the arbitrator then proceeded to interpret the requirements of making a claim in writing as a matter of first impression, according to what he perceived to be the “ordinary meaning” of such wording. In particular, he held that such wording required “more than simply notice of an intention”. In his view, such wording required that “a demand must be made”, or “a right must be asserted with consequences or relief sought”.
• Having decided the test to be applied for satisfaction of such provisions requiring a claim to be made in writing, the arbitrator then went on to find that the correspondence sent by Ellis-Don to Ross Steel failed that test.
• In that regard, the arbitrator already had stressed that all of the language employed by Ellis-Don in its letters was prospective, and pointed “to an intention to make a claim but not to an actual claim”. [Emphasis added.] However, in finding that Ellis-Don had not satisfied the requirements of Article 15.1(a), the arbitrator repeatedly returned to the point and his essential threshold distinction; for example, by emphasizing that the correspondence was merely “notice to Ross Steel of an Ellis-Don intention to make a claim”, and by referring to Ellis-Don’s correspondence as a “threatened” and “contemplated” claim that was “never quantified nor pursued”. The arbitrator stressed again that a mere “intention to claim is not the same as a claim”, [emphasis added], and found that the letters relied upon by Ellis-Don, even when taken together, accordingly did “not rise to the level of a ‘claim in writing’ that was still unsettled before the date of the final certificate for payment, as required by Article 15.1”.

[25] In my view, the above circumstances do raise a “readily extricable” question of law, in respect of which Ellis-Don should be granted leave to appeal. My considerations in that regard include the following:

• As noted above, the arbitrator’s decision is premised on his threshold view that provisions of a construction contract requiring “claims made in writing”, (such as the provisions of Article 15.1), must be distinguished from provisions requiring written notice of a claim.
• The implicit if not express corollary is that provisions requiring the making of “claims in writing” must not be treated as provisions requiring written notice of a claim. For that reason, the arbitrator considered jurisprudence relating to the provision of adequate written notice of such claims, and Ellis-Don’s apparent provision of satisfactory written notice in that regard, as irrelevant to determination of the question before him.
• The arbitrator accordingly considered the requirements for satisfaction of a “claims made in writing” provision to be a matter of first impression and fashioned his own test in that regard, based on his view as to the ordinary meaning of such wording. In doing so, he therefore did not apply the general principles in Doyle to determine whether or not the requirements of Article 15.1(a) had been satisfied.
• In my view, there nevertheless is a legitimate and fundamental legal question as to whether the arbitrator was correct in making his general finding that provisions requiring “claims made in writing” should not be treated as provisions requiring written notice of a claim.
• In saying that, I do not purport to offer an answer to that legal question one way or the other, as that will be a matter for the judge hearing the substantive appeal to decide.
• However, it seems to me that Doyle, at least, arguably provides legal authority for the general proposition that provisions requiring claims to be made in writing should be treated as provisions requiring written notice of claims, contrary to the approach taken by the arbitrator. The provisions considered in that case required “claims” under the relevant construction contract to “be made in writing” within a specified time. The British Columbia Court of Appeal clearly treated such wording as “provisions for notice”, as that was the express sub-heading used by the panel, before it then went on to discuss such matters as “what constitutes reasonable notice”, why courts strictly construe such provisions, (since failures in “the giving of a notice bars a remedy”), the elements of satisfactory notice that are required to prevent “the provision for notice” from being rendered useless, and “the purpose of the notice”. [Emphasis added.]
• Moreover, as mentioned above, it seems that other courts, (including courts of Ontario), have not hesitated to treat Doyle as a seminal case regarding what is necessary to satisfy written notice of claim provisions in a construction contract, even though the relevant contractual provisions at the centre of the Doyle case dealt with a requirement that claims be made in writing.
• In the circumstances, it certainly seems arguable that the arbitrator in this case made a discrete but fundamental error of law when he proceeded on the basis that a requirement for claims to be made in writing could and/or should not be treated as a requirement for the provision of written notice of a claim. In particular, there arguably was not only legal authority dealing with that general proposition, but authority suggesting an approach precisely opposite to that taken by the arbitrator. Moreover, in taking that opposite approach, the arbitrator deliberately did not apply the general principles and considerations established by Doyle to reach his conclusion as to whether Article 15.1(a) had been satisfied, but instead fashioned and applied a new test in that regard.
• I am very mindful of the need for caution, emphasized by the Supreme Court of Canada in its Sattva decision, in identifying extricable questions of law in disputes over contractual interpretation. However, it seems to me that the manner in which the arbitrator proceeded in this case bears the hallmarks of that “rare” case in which a question of law is “readily extricable”. In particular:
  • The arbitrator’s decision was premised on his threshold acceptance of a general proposition that provisions in a construction contract requiring claims to be made in writing could and should not be treated as provisions requiring written notice of claims.
  • By proceeding in that manner, the arbitrator arguably applied an incorrect principle, having regard to the Doyle decision, and the authorities which have accepted Doyle as an authoritative case dealing with provisions requiring written notice of a claim, even though the underlying provisions in that case required claims to be made in writing.
  • By proceeding in that manner, the arbitrator arguably failed to consider required elements of a legal test, or failed to consider relevant factors, by deliberately setting to one side the principles and criteria established by Doyle, before fashioning and applying his own new test to determine whether the provisions in question had been satisfied.
  • The questionable general proposition accepted by the arbitrator, and the new test he fashioned to determine satisfaction of construction contract provisions requiring claims to be made in writing, also seem likely to have precedential value extending well beyond the immediate interest of the particular parties to this litigation. In that regard, I note that the parties to this litigation chose to employ a standard form subcontract, (albeit with a number of changes made to customize the agreement to their needs), to govern their relationship. Moreover, the Doyle decision, emanating from British Columbia in 1988, suggests that provisions requiring claims to be made in writing may have been employed in construction contracts across the country, over an extended period of time.

[26] For all these reasons, I think the first aspect of Ellis-Don’s contemplated appeal from the arbitrator’s decision does raise an extricable question of law, in respect of which leave to appeal should be granted, given that the other requirements of s.45(1) of the Arbitration Act, 1991, supra, have been satisfied.

[27] At the risk of repletion, that question of law centres on whether the arbitrator was correct in finding that Article 15.1(a) could not be characterized as a provision requiring written notice of a claim, the satisfaction of which would depend on meeting the criteria established by authorities such as Doyle, but instead required the fashioning and application of the new test articulated by the arbitrator.

[28] Of course, depending on the answer to that question of law, the judge hearing the substantive appeal may or may not be required to address and resolve further issues; e.g., as to how the arbitrator should have proceeded, and what the remedy for any established error of law should be in the circumstances.

[29] I turn next to the second aspect of Ellis-Don’s contemplated appeal, dealing with the arbitrator’s interpretation and application of Article 4.3 of the parties’ agreement.

[30] However, I do not propose to spend as much time addressing Ellis-Don’s request for leave to appeal in that regard for the simple reason that, in my view, there is no discernible “extricable question of law” raised by that aspect of the contemplated appeal.

[31] To the contrary, it seems to me that Ellis-Don’s arguments are inextricably mired in questions concerning the specific and detailed wording of Article 4.3; e.g., questions that are focused on the grammar of the particular wording, competing suggestions as to the “plain and ordinary meaning” to be attributed to that particular wording in this context, and the disputes about the manner in which the parties intended the detailed provisions of Article 4.3(a) and 4.3(b) to interact with each other.

[32] Ellis-Don suggests that an “extricable question of law” in that regard is whether the arbitrator failed to apply the “golden rule” of contractual interpretation; i.e., that the plain and ordinary meaning must be given to the language of the contract, unless that would result in absurdity.

[33] However, I fail to see how that is a “readily extricable” question of law, in the sense required.

[34] The nature of Ellis-Don’s intended arguments in relation to the arbitrator’s decision regarding the interest provisions do not point to any general and incorrect legal principle he is said to have applied. Nor do they suggest any failure by the arbitrator to consider a required element of a legal test, or failure to consider a relevant factor.

[35] Instead, Ellis-Don essentially focuses on a suggested failure by the arbitrator to apply the unquestioned general principle correctly in the circumstances of this particular case. To use the terms employed by the Supreme Court of Canada, in Sattva decision, the challenged propositions in relation to the arbitrator’s interpretation of Article 4.3 do not have a high level of generality, but are instead narrow and particular, and approach what is really pure application.

[36] In my view, the interest-related aspects of Ellis-Don’s contemplated appeal therefore involve a question or questions of mixed fact and law, falling outside the scope of s.45(1) of the Arbitration Act, 1991, supra.

[37] Leave to appeal the aspects of the arbitrator’s decision relating to Article 4.3 of the parties’ agreement therefore must be denied.

Conclusion

[38] In the result:

• Ellis-Don is granted leave to appeal in relation to its contention that the arbitrator erred in law in finding that the letters sent by Ellis-Don to Ross Steel, (and the letter of January 18, 1999, in particular), did not constitute an unsettled “claim made in writing”, capable of satisfying the provisions of Article 15.1 of the parties’ agreement.
• Ellis-Don is denied leave to appeal in relation to its contention that the arbitrator erred in finding that the contractual interest provisions in Article 4.3(a) and (b) of the parties’ agreement applied so as to give rise to “pre-judgment” interest on the principal amount awarded to Ross Steel.

[39] At the hearing before me, counsel requested that I adjourn the substantive hearing of any appeal in respect of which leave was granted to a special appointment hearing date to be scheduled in consultation with the London trial co-ordinator.

[40] However, doing so would by-pass the normal steps which must be completed before a special appointment hearing may be scheduled in our region; steps which include the completion, signing and filing of a formal certificate of readiness, which in turn attaches a timetable for the completion of all remaining steps prior to the contemplated hearing.

[41] The importance of adhering to that procedure was emphasized by Justice Grace, (as the Local Administrative Judge for London), in his memorandum to members of the civil bar and their clients dated March 13, 2015. A copy of that memorandum should be available if and as necessary from the London trial co-ordinator.

[42] When counsel have completed those steps, a special appointment for hearing of the substantive appeal may be scheduled in the usual manner.

[43] In that regard, for the sake of clarity, (and bearing in mind that the current court schedule contemplates my commitment to other matters for many months into the future), I confirm that I am not seized of this matter. The substantive appeal may be heard and determined by any judge.

Costs

[44] Because my decision in relation to the leave issues was reserved, the parties had no opportunity to make any submissions in relation to costs of those determinations.

[45] My preliminary view is that:

a. as the parties agreed to have the question of leave to appeal addressed and resolved as a discrete issue, the associated costs should be addressed in a similar fashion; and

b. the parties nevertheless should each bear their own costs in that regard, as success in relation to the leave to appeal issues was significantly and substantially divided.[^5]

[46] However, if the parties disagree and are unable to reach an agreement on costs, they may each serve and file written cost submissions, not to exceed five pages, (excluding any attached bill of costs or offers to settle), within two weeks of the release of this decision.

[47] If no written cost submissions are received within two weeks of the release of this decision, there shall be no costs awarded to either party in relation to determination of the issues concerning leave to appeal.

“Justice I. F. Leach”

Justice I. F. Leach

Date: November 4, 2015

[^1]: Before this motion was argued, I advised counsel for both parties that, while I personally had no prior involvement with this particular matter, I had acted for Ellis-Don Construction Ltd. in the past, many years before my judicial appointment in 2012. My former law firm also was representing Ellis-Don when it delivered its statement of defence and counterclaim, while I was a still a partner at that firm. Before standing the matter down during hearing of an unrelated matter, I therefore asked counsel to seek instructions and determine whether or not the parties were content to have me deal with this motion, notwithstanding that prior representation of the defendant. When the matter was brought forward again later in the day, both parties confirmed through counsel that they had no objection to my hearing and deciding the motion.

[^2]: Paragraph 18 of the factum filed by Ellis-Don suggests these events occurred in late December of 1999, (rather than late December of 1998), and the factum filed by Ross Steel expressly agreed with the summary of facts outlined in the factum filed by Ellis-Don. However, the reference to these particular events occurring in December of 1999 rather than 1998 clearly seems to be a typographical error, (reproduced from a similar typographical error in the arbitrator’s award). The underlying affidavit material and supporting documentation make it clear that Ross Steel was billing for its completed work in December of 1998, and Ellis-Don indicates elsewhere in its summary of the facts, (at paragraph 5), that Ross Steel had finished its structural steel contract work on the project, for Ellis-Don, by “early 1999” . Moreover, as noted below, the owner rendered a final certificate for payment in the summer of 1999, (which in turn seems to make it clear that work on the project and corresponding billings did not continue into December of 1999). Furthermore, in the course of oral submissions, counsel made reference to the relevant bills of Ross Steel being submitted in December of 1998.

[^3]: This summary is drawn primarily from paragraphs 42-55 of the Sattva decision. However, see also Ottawa (City) v. The Coliseum Inc., supra, at paragraphs 34-36.

[^4]: The arbitrator expressly noted that, in addition to the Doyle decision, he had been provided with a copy of the decision in Northland Kaska Corp. v. Yukon Territory, supra.

[^5]: Ellis-Don was granted leave to appeal an issue which, depending on the outcome of the appeal, may or may not have a significant bearing on ultimate determination of which party owes what to whom. Although inherently contingent on that ultimate determination of which party owes what to whom, interest calculated in the manner finally determined by the arbitrator’s decision, (in respect of which leave to appeal has not been granted), may prove to involve a greater sum in absolute terms. Both aspects of the contemplated appeal therefore had considerable importance, but leave was granted only in relation to one desired aspect of the appeal.