CITATION: Crosslinx v. Ontario Infrastructure, 2021 ONSC 3567

COURT FILE NO.: CV-20-00649072-00CL

DATE: 20210517

ONTARIO

SUPERIOR COURT OF JUSTICE

(Commercial List)

BETWEEN:

CROSSLINX TRANSIT SOLUTIONS GENERAL PARTNERSHIP and CROSSLINX TRANSIT SOLUTIONS CONSTRUCTORS

Applicants

– and –

ONTARIO INFRASTRUCTURE AND LANDS CORPORATION, as representative of the Minister of Economic Development, Employment and Infrastructure, as representative of Her Majesty the Queen in Right of Ontario

and

METROLINX

Respondents

Matthew P. Sammon, Andrea Wheeler, Jacqueline Chan for the Applicants

Peter Wardle, Sharon C. Vogel and Jesse Gardner, for the Respondents

HEARD: February 22, 23, 2021

Koehnen J.

OVERVIEW

[1] This application arises out of the effects that the current Covid-19 pandemic is having on a large-scale construction project in the city of Toronto known as the Eglinton Crosstown Light Rapid Transit line. The project involves the construction of a 19 km light rapid transit line of which 10 km will be underground as will 15 of its 25 station stops. At the time the application was heard, the project employed 1,500 people.

[2] The applicants represent a consortium of four of Canada’s largest construction companies that are building the project. The respondents represent agencies of the Crown in Right of Ontario who have commissioned the project. The distinction between each of the two entities that comprise each of the applicants and the respondents, is largely irrelevant to the application before me. As a result, unless otherwise required by the particular circumstance, I will simply refer to the parties as the applicants and the respondents. Where I quote from documents, and the documents refer to Project Co. or CTSC, they are referring to the applicants. Where the documents refer to HMQE (Her Majesty the Queen Entities), they are referring to the respondents.

[3] The core issue between the parties is whether the applicants are entitled to invoke a procedure under the contract that could result in an extension of the time that the applicants have to substantially complete the project.

[4] The legal manifestation of this issue is as follows: The contract calls for the project to be completed by the Substantial Completion Date. There are significant penalties if the applicants do not do so. The contract also contains provisions that permit the respondents to require the applicants to implement “additional or overriding procedures” in the event of an Emergency. If the respondents call for such procedures, the applicants can invoke a process, which the contract refers to as a Variation Enquiry, to determine whether the “additional or overriding procedures” should lead to an extension of the Substantial Completion date.

[5] The applicants say that the Covid-19 pandemic is an Emergency that required them to implement additional or overriding procedures in the form of social distancing measures that slowed down construction. They seek declarations to the effect that they are entitled to a Variation Enquiry under the contract.

[6] The respondents have refused to declare an Emergency because it was not necessary to do so given that the province had already done so. They say that they have not required any “additional or overriding procedures” because the applicants were already taking sufficient measures as a result of the obligation on the applicants under the contract to maintain a safe and healthy workplace.

[7] As a preliminary issue, the respondents move to stay this application. They base their motion to stay on provisions in the contract that require all litigation to be postponed until after Substantial Completion so that all litigation can be addressed in a single, global proceeding.

[8] I dismiss the motion for a stay. Although the contract calls for litigation to be postponed until after Substantial Completion, it also contains exceptions to that general rule and allows the parties to apply to the court for interim protection. In addition, the contract contains a mechanism to extend the Substantial Completion Date. To defer disputes about the implementation of that mechanism until Substantial Completion has been achieved robs that process of practical effect.

[9] I grant the declarations the applicants’ request. I find that the respondents did call for “additional or overriding procedures.” If I am wrong in that, the only reason the respondents did not require “additional or overriding procedures” was that the applicants were proactive and implemented such measures without the need for the respondents to direct them. To deny the applicants the benefit of the Variation Enquiry process in the circumstances of this case would be applying the provisions of the contract in a way that is contrary to their underlying purpose.

I. The Motion to Stay

[10] The respondents advanced two reasons for a stay of this application:

A. The contractual provision to the effect that all litigation should be stayed until after Substantial Completion.

B. The applicant’s alleged failure to comply with the process leading to a Variation Enquiry

A. Stay of Litigation until after Substantial Completion

[11] Schedule 27 contains the agreement’s dispute resolution provisions. Section 10.1 of Schedule 27 embodies the concept that all litigation surrounding the project should be bundled together into a single piece of litigation following Substantial Completion. It provides:

…all adjudication, arbitral and litigation proceedings between the Parties prior to Substantial Completion shall be stayed and consolidated into, as applicable, a single adjudication, arbitration and a single litigation proceeding, with the adjudication, arbitration and, if applicable, litigation, proceeding promptly and expeditiously after Substantial Completion.

[12] Section 10.1, however, contains a number of exceptions including where:

(c) the issue in a particular Dispute is such that waiting until after Substantial Completion to resolve that Dispute will cause irreparable harm to one of the Parties;

[13] In addition, s. 13.2 of Schedule 27 allows for access to the courts despite the provisions of s. 10. It provides:

Nothing contained in this Schedule 27 will prevent the Parties from seeking interim protection from the courts of the Province of Ontario, including seeking an interlocutory injunction where available pursuant to Applicable Law, if necessary to prevent irreparable harm to a Party.

[14] Section 40 of the Project Agreement (the contract) expressly creates a process whereby the applicants can obtain extensions to the Substantial Completion Date during the course of construction. Disputes surrounding that process are to be determined according to Schedule 27. It would make no sense to interpret Schedule 27 as requiring that disputes about extensions to the Substantial Completion Date be deferred until Substantial Completion has been achieved. To do so would deprive the applicants of the benefit of the contractual provision that allows the Substantial Completion date to be extended.

[15] To stay this application until after Substantial Completion has been achieved would subject the applicants to irreparable harm because it would deprive them of a contractual right for which they have bargained namely the right to invoke a process that could lead to the extension of the Substantial Completion Date. Deferring that determination until after Substantial Completion has been achieved would subject the applicants to adverse consequences including payment of liquidated damages, loss of financing, termination of the contract, insolvency and loss of reputation; none of which would have arisen if the Substantial Completion date should have been extended. As a practical matter, one cannot re-institute the contract after it has been terminated and completed by another party. I am satisfied that both the loss of a contractual right and its potential consequences here amount, as a practical matter, to harm that is irreparable.

B. Applicant’s Alleged Failure to Comply with The Variation Process

[16] The respondents’ second ground for staying the application is the allegation that the applicants have failed to comply with the process leading to a Variation Enquiry. On my view of the facts, the applicants have complied with the process but it is the respondents who have tried to frustrate it.

[17] The first step for a party that seeks relief under Schedule 27 is to deliver a Notice of Dispute. The parties are then required to make good faith efforts to resolve the dispute through meetings of Party Representatives. Each Party Representative is required to give the other, on a without prejudice basis, frank, candid and timely disclosure of relevant facts, information and documents. If the Party Representatives are unable to resolve the dispute within 10 business days after receipt of a Notice of Dispute, the dispute is elevated to discussions between Senior Officers. If the Senior Officers cannot resolve the dispute, it is referred to an Independent Certifier[^1] for resolution. If either party disagrees with the decision of the Independent Certifier, it can proceed to litigation. The Independent Certifier’s decision must, however, be complied with unless and until it is overturned in a subsequent proceeding.

[18] On May 11, 2020, the applicants delivered a Notice of Dispute. The key relief sought in the Notice of Dispute was:

(i) A determination that the pandemic constituted an Emergency under the Project Agreement.

(ii) A determination that the respondents ought to have directed additional or overriding procedures in response to the pandemic which should have led to a Variation Enquiry to determine whether the Substantial Completion Date should be extended.

[19] On May 15, 2020 the applicants sent the respondents, a detailed letter which set out the costs and delays that the Covid-19 pandemic created.

[20] On May 26, 2020 the respondents replied denying that the applicants were entitled to a Variation under the Project Agreement. In addition, the respondents asked for detailed additional information about the project including daily labour records, the applicants’ actual cost records and copies of invoices and purchase orders supporting amounts already spent. In the same letter, the respondents indicated that they were willing to engage in a meeting of Party Representatives but would refuse to move beyond that to a meeting of Senior Officers unless all of the information requested in the letter was produced.

[21] The applicants were eager to move negotiations forward so that they could invoke the Independent Certifier procedure if the Senior Officers could not reach an agreement. They were met with two roadblocks. First, the Independent Certifier process could not be initiated until the Senior Officers had met. The respondents refused to have the Senior Officers meet unless they got all of the information they requested. Second, s. 3.4(a) (iv) of Schedule 6 to the Project Agreement provides that the Independent Certifier can only act in accordance with the joint direction of the parties. As a result, if the respondents were not prepared to give a joint direction to the Independent Certifier that defined the issues he or she was to address, the process could not move forward.

[22] In argument before me, the respondents submitted that the applicants could have broken the logjam by filing a separate Notice of Dispute concerning the respondents’ request for further production. That too would have had to proceed through the two layers of negotiation envisaged by Schedule 27 and then possibly to an Independent Certifier for a decision on the obligation to produce documents. That too, however, would have depended on both parties directing the Independent Certifier to make a decision about the production of documents. I note that the respondents never served a Notice of Dispute defining that issue.

[23] There is ample room for mischief and delay in this process. By way of example, document requests can be used to frustrate and delay what is intended to be a speedy negotiation process under Schedule 27. The timelines for those negotiations are measured in days, not weeks. That suggests a somewhat high level business approach to the issues as opposed to a granular, autopsy litigation type approach.

[24] It strikes me that the respondents’ refusal to move to further discussions in the absence of documentation that satisfied them reflects this sort of mischief. It is difficult to see how any dispute could move forward if it can be held up by one of the parties asserting that it is not satisfied with the documentation it has received. Rather than preventing the dispute resolution process from moving forward because of dissatisfaction with documents, the preferable approach would have been to ask the Independent Certifier to order further production or to argue before the Independent Certifier that the applicants’ limited production made it impossible for the Independent Certifier to conclude that the Substantial Completion Date should be extended.

[25] Moreover, although the respondents assert that they required additional information to assess the Notice of Dispute, Andrew Hope, an Executive Vice of Metrolinx, admitted in cross-examination that the dispute between the parties was principally a legal one. As Mr. Hope testified, “the difference of opinion was over whether we were required to issue [ ] additional and overriding procedures.”

[26] That testimony was consistent with the respondents’ behaviour. The CEOs of the parties engaged in discussions in which the respondents made a substantial settlement offer to the applicants in relation to their Covid-19 and other claims accompanied by an enforceable term sheet. As a result, it is somewhat difficult to accept the proposition that the absence of the more granular information that the respondents sought was a barrier to discussions between Senior Officers and the subsequent appointment of an Independent Certifier.

C. The Issue of the Allegedly Privileged Email

[27] The parties spent a good deal of time arguing about whether an email dated June 20, 2020 in which the respondents made the settlement offer referred to above is subject to settlement privilege and should not have been produced.

[28] In my view, any privilege over the document has been waived for purposes of this application. The email is, however, of limited importance to the application and its disposition.

[29] I come to the view that privilege has been waived because one of the positions the respondents advance on the application for a stay is that the applicants did not give the respondents enough information to allow them to proceed to the Senior Officers discussions contemplated by Schedule 27. In the June 20, 2020 email, however, the respondents made a material settlement offer to the applicants after discussions between Senior Officers.

[30] Settlement privilege, like other forms of privilege, can be waived either expressly or by implication. The party asserting waiver bears the onus of establishing that waiver has occurred.

[31] The principal here is analogous to the state of mind exception that applies to waivers of solicitor client privilege. Where one party has voluntarily put its state of mind regarding legal advice at issue, it has implicitly waived privilege regardless of whether it intended to do so. The rationale underlying waiver in such cases is the need for fairness and consistency.[^2]

[32] By taking the position that they had inadequate information to proceed to Senior Officer discussions, the respondents put their state of mind at issue. Doing so allowed the applicants to test that assertion by referring to the June 20 email.

[33] The respondents submit that there were two streams of without prejudice discussions, one that related to the Covid work and another that related to delays that were not caused by Covid. Even if I accept that proposition, it has no bearing on the analysis because the respondents connected the two streams in their June 20 email by offering to settle both the Covid and non-Covid claims for a global amount.

[34] I appreciate the respondents’ argument that the June 20 email does not tell me whether the settlement offer it contains is larger, smaller or the same as earlier offers to settle the non-Covid claims. Had the settlement in the June 20 email been for the same or a lesser amount than their earlier offers, I expect the respondents would have told me that. Given that the applicants had already disclosed the email, they could hardly take issue with the respondents’ disclosure of other information which would put the June 20 email into a different context. The respondents chose not to do so.

D. The Test for a Stay

[35] The court’s authority to grant a stay is rooted in section 106 of the Courts of Justice Act[^3] which provides:

A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.[^4]

[36] Section 106 gives the court broad discretion to stay proceedings unfettered by any specific test.[^5] The discretionary power is highly dependent on the facts of each case.[^6]

[37] The respondents submit that the test for a stay requires me to weigh the following factors:

a. whether there is substantial overlap of issues in the two proceedings;

b. whether the two cases share the same factual background;

c. whether issuing a temporary stay will prevent unnecessary and costly duplication of judicial and legal resources; and

d. whether the temporary stay will result in an injustice to the party resisting the stay.[^7]

[38] For me, the most relevant factor is the last, namely whether the stay will result in an injustice to the party resisting it. In my view, staying this proceeding would result in such an injustice. It would continue to leave the parties in a deadlock from which there is no apparent exit. As noted earlier, staying the proceeding would deny the applicants the benefit of accessing a dispute resolution mechanism for which they bargained and which could lead to an extension of the Substantial Completion Date. Depriving a party of a contractual right for which they bargained results in an injustice.

II. The Application for Declarations

[39] The nub of the issue between the parties is whether the respondents asked or should have asked the applicants to implement additional or overriding procedures with respect to the project. Had they done so, it would have given the applicants the right to initiate a Variation procedure which could result in an extension of the Substantial Completion date.

[40] The issue arises out of section 62.1 (c) of the Project Agreement which provides:

If, in respect of any Emergency, HMQ Entities notify Project Co that they require compliance with any additional or overriding procedures as may be determined by HMQ Entities or any other statutory body, then Project Co shall, subject to Schedule 22 - Variation Procedure (if compliance with such procedures constitutes a Variation), comply with such procedures (whether such procedures are specific to the particular Emergency or of general application and on the basis that such procedures shall take precedence to the extent that they overlap with the procedures mentioned in Section 62.1(a) or (b)).

[41] The concept of “additional or overriding procedures” is not defined in the Project Agreement.

[42] The applicants submit that the respondents called for, or were obliged to call for, additional or overriding procedures. As a result, the applicants seek declarations to the effect that:

i. The Covid-19 pandemic is an Emergency under the Project Agreement;

ii. The respondents have breached their contractual obligations by failing to direct the applicants to implement additional or overriding procedures under section 62.1 (c) of the Project Agreement; and

iii. The respondents have an obligation to provide the applicant with a Variation Enquiry pursuant to Schedule 22 of the Project Agreement with respect to the additional or overriding procedures that are necessary to implement in light of the pandemic.

[43] The respondents say they did not call for and were under no obligation to call for additional or overriding procedures. They argue that the terms of the Project Agreement allocate the risk of the pandemic to the applicants.

[44] I will turn first to the provisions of the Project Agreement on which the respondents rely, then to the events at issue and will then analyse those events in light of the language of the contract.

A. Terms of the Contract

[45] The respondents rely heavily on the words of the contract. They submit that the contract contains numerous provisions that require the applicants to comply with the Occupational Health and Safety Act[^8] and to take all necessary steps to maintain a safe workplace. The respondents argue that those provisions allocate any pandemic risks to the applicants. The key provisions of the contract on which the respondents rely are set out below.

[46] Section 9.2 of the Project Agreement provides:

(a) Project Co shall, at its own cost and risk:

(i) perform all of its obligations under, and observe all provisions of, this Project Agreement in compliance with Applicable Law;

(ii) perform all Project Operations:

(A) in compliance with Applicable Law;

(D) in accordance with Good Industry Practice;

(G) with due regard to the health and safety of persons and property;

[47] Applicable Law is defined broadly to include any statute, by law, regulation or Authority Requirement. Authority Requirement is in turn defined as any “order, direction, directive, request for information, policy, administrative interpretation, guideline or rule of or by any Governmental Authority.” The agreement also defines Governmental Authority broadly.

[48] Section 38.1 of the Project Agreement requires the applicants to comply with all changes in law:

Following any and all Changes in Law, Project Co shall perform the Project Operations in accordance with the terms of this Project Agreement, including in compliance with Applicable Law.

[49] Although there are certain portions of the contract that provide relief for specific types of changes in the law, those are not relevant here.

[50] Section 9.5 of the Project Agreement provides:

9.5 Safety and Security

(a) During the Construction Period and following Final Completion solely in relation to Construction Activities, Project Co shall:

(ii) subject to Section 9.5(b), keep the Site … in a safe and orderly state, as appropriate in accordance with the Construction Safety Management Plan and Good Industry Practice, to avoid danger to persons on the Site …

(iv) comply, and cause each Project Co Party to comply, with Applicable Law relating to health and safety, including the Occupational Health and Safety Act (Ontario) and all regulations thereto;

(v) with respect to the Works, perform, or cause a Project Co Party to perform, all of the obligations of the “constructor”, and indemnify HMQ Entities and each other Province Person against any and all of the liabilities of the “constructor”, under the Occupational Health and Safety Act (Ontario) and all regulations thereto;

[51] As noted, s. 9.5 and other provision of the Project Agreement refer to the responsibility to comply with the Occupational Health and Safety Act.[^9] That Act creates a broad set of obligations on constructors like the applicants including those in section 23 which provides:

23 (1) A constructor shall ensure, on a project undertaken by the constructor that,

(a) the measures and procedures prescribed by this Act and the regulations are carried out on the project;

(b) every employer and every worker performing work on the project complies with this Act and the regulations; and

(c) the health and safety of workers on the project is protected.

[52] In addition, the regulations under the Emergency Management and Civil Protection Act,[^10] which the government of Ontario invoked in response to the pandemic provide:

(1) The person responsible for a place of business that continues to operate shall ensure that the business operates in accordance with all applicable laws, including the Occupational Health and Safety Act and the regulations made under it.

(2) The person responsible for a place of business that continues to operate shall operate the business in compliance with the advice, recommendations and instructions of public health officials, including any advice, recommendations or instructions on physical distancing, cleaning or disinfecting.[^11]

[53] Finally, the respondents rely on the requirement on the applicants to have in place a Construction Safety Management Plan and an Emergency Response Plan. Section 9.2 of Schedule 15-2 of the Project Agreement requires the Construction Safety Management plan to, among other things:

(i) provide a safe workplace; and

(vi) take every reasonable precaution to protect public health and safety during the execution of the Works.

[54] The Emergency Response Plan is required to address issues that “pose a threat to health and safety of any persons” or that “constitute a state of Emergency.” The respondents submit that this indicates that emergencies were contemplated in the agreement and that the applicants were required to bear the risk of emergencies.

[55] The respondents submit that, in addition to the plain words of the contract, several contextual elements suggest that the applicants agreed to assume pandemic risks. First, the contract is a sophisticated commercial agreement. Its main body and key schedules run to over 550 pages. It is used as a template for all public infrastructure projects in Ontario. It reflects a carefully balanced set of risk allocations with which the court should not interfere. Second, the applicants are four of Canada’s largest construction companies. They are sophisticated parties who had access to sophisticated legal advice. Third, the contract has a value of over $5.5 billion. In light of a contractual benefit of that size, it is not unreasonable to enforce the applicants’ acceptance of pandemic risk.

B. The Factual Context

[56] I turn now to the factual context in which the contractual provisions on which the respondents rely must be interpreted.

[57] By mid March 2020, the Director General of the World Health Organization had declared Covid-19 to be a pandemic. On March 17, 2019 the Premier of Ontario declared a State of Emergency under the Emergency Management Act.[^12]

[58] On March 23, 2020 the applicants wrote to the respondents asking them to declare an Emergency pursuant to section 62.1 (c ) of the Project Agreement, direct the applicants to take “additional and overriding measures” pursuant to section 62.1 (c) and to provide the applicants with a Variation in connection with the additional and overriding procedures. The letter proposed a number of additional and overriding procedures including implementing social distancing on worksites to ensure that workers remain at least 6 feet apart from each other at all times, staggering shifts to facilitate social distancing and implementing self isolation measures for workers with Covid symptoms, those who have travelled outside of the country or those who have household members who are self isolating.

[59] On March 25, 2020 Metrolinx’s chief Safety Officer wrote to the applicants indicating that they were still awaiting new Ministry of Labour “Covid-19 “protocols”” for construction sites that the Premier had announced earlier that week. The email continued:

Once we have these we will include adoption of the requirements in our site visit observations, whilst respecting social distancing and the need to protect our teams and our contractors also.

[60] In other words, Metrolinx would require the applicants to take whatever steps were set out in the anticipated government construction “protocols”.

[61] On March 27, 2020, the respondents answered the applicants’ letter of March 23 indicating that they had not declared an Emergency under the Project Agreement but that

the Covid-19 pandemic is serious and that it will likely have significant impacts which must be mitigated under the Project Agreement.

When the respondents wrote this letter, they had already concluded internally that there was an Emergency although they had not declared one.

[62] On March 29 government authorities issued the construction “protocols” referred to in the March 25, 2020 email from Metrolinx’s Chief Safety Officer. The document stated:

In order to ensure physical distancing on site, employers should consider:

• staggering start times

• staggering breaks

• staggering lunches

• restricting the number of people on-site and where they are assigned to work

• controlling site movement (by limiting the potential for workers to gather, including personnel in material hoists and site trailers)

• limiting the number of people who use elevators and hoists at one time

• holding meetings in an outside or large space to enable physical distancing

• limiting unnecessary on-site contact between workers, and between workers and outside service providers, and encourage physical distancing in these areas (for example, by removing coffee trucks from site)

[63] The same document noted:

Physical distancing will result in lower staffing on job sites. In order to keep sites open, employers will need to adjust production schedules as the impacts of physical distancing become clear. Owners and trades will need to collaborate to ensure there is a clear understanding of how production will be impacted.

Schedules should consider:

• limiting number of workers to critical number by staggering work schedules

• sanitation of sites and workspaces

• site planning to facilitate appropriate physical distancing (two metres) between workers during any particular shift

• work-site mobility and transportation, including hoist operations

[64] On April 21, 2020 the respondents again wrote to the applicants with respect to the issue of additional or overriding procedures. In their letter, the respondents took the position that the applicants were required to comply with all obligations under the Occupational Health and Safety Act as well as with the guidance of public health authorities, local, provincial and federal governments. The letter continued:

At this point, HMQE do not require that Project Co implement additional and overriding measures in addition to those presently being undertaken by Project Co in its capacity as the Constructor and Employer under OHSA.

[65] On May 26, the respondents advised the applicants:

As HMQE has articulated in its previous correspondence on this matter, Project Co's interpretation of Section 62.1(c) is not supported by the language of the PA. Section 62.1(c) permits but does not oblige HMQE to notify Project Co that they require "additional or overriding procedures". Project Co's compliance with its obligations under the Occupational Health and Safety Act ("OHSA"), as required pursuant to the Project Agreement, represent a sufficient response to the Pandemic such that HMQE do not require additional and overriding procedures at this time.

In fact, HMQE have expressly stated that they "do not require that Project Co implement additional and overriding measures in addition to those presently being undertaken by Project Co in its capacity as the Constructor and Employer under the OHSA."

C. Analysis

[66] The respondents raise three basic arguments to support their position that the applicants are not entitled to invoke the Variation procedure under the contract:

(i) The contract allocates health and safety risks to the applicants;

(ii) The applicants’ Emergency Response Plan suggests that emergencies are for their account; and

(iii) The respondents did not require “additional or overriding procedures” to be implemented.

i. Contractual Allocation of Health and Safety Risks

[67] The fundamental interpretive question on this application is to determine whether, as the respondents submit, the provisions that require the applicants to comply with the Occupational Health and Safety Act mean that the applicants have accepted all risks of the pandemic. I do not believe that such a stark interpretation was intended by the parties when they entered into the agreement.

[68] The contract itself creates the possibility of extending the Substantial Completion Date because of threats to health and safety. Section 62.1(c ) provides that:

If, in respect of any Emergency, HMQ Entities notify Project Co that they require compliance with any additional or overriding procedures as may be determined by HMQ Entities or any other statutory body, then Project Co shall, subject to Schedule 22 - Variation Procedure (if compliance with such procedures constitutes a Variation), comply with such procedures ….

[69] The Variation Procedure is the process by which the applicants can extend the Substantial Completion Date. The first requirement to trigger that procedure is an Emergency. Emergency is defined in s. 1.178 of the Agreement, to include any situation, event, occurrence or circumstances:

(i) That constitutes or may constitute a hazard to or jeopardizes or may jeopardize or pose a threat to health and safety of any persons (including System Users and Province Persons) or any part of or the whole of the Project infrastructure;

(ii) That constitutes a state of emergency declared as such by the HMQ Representative or HMQ Entities (acting reasonably);

(iii) That gives rise to an emergency, as determined by any statutory body.

[70] The broad definition of Emergency to include any hazard that may jeopardize or pose a threat to health and safety coupled with the ability of an Emergency to lead to a delayed Substantial Completion Date would appear to contradict the respondents’ starting point that the applicants assumed liability for any delays attributable to health or safety concerns of workers.

[71] The concept of delay in relation to the Substantial Completion Date should be read in light of the purpose of the contractual provision. The purpose of an obligation to substantially complete a project by a given date is to incentivize constructors to keep the project moving forward and to impose a financial penalty if they do not do so. Owners do not want constructors abandoning their projects to work on more profitable ones. Substantial completion provisions incentivize constructors to remain on the job and complete projects in a timely, efficient manner. Imposing financial penalties for delays caused by the pandemic does not further the purpose of including a Substantial Completion Date in the contract. It merely penalizes a contractor who may be working with heroic efficiency to complete the project in a timely manner even though it is impossible to do so because of circumstances beyond the contractor’s control. Imposing financial penalties on contractors for failing to meet a substantial completion date in those circumstances only incentivizes them to cut corners and imperil public health and safety.

[72] The respondents recognized that the pandemic would cause delays in their letter of March 27, 2020 which noted that the pandemic was serious and “will likely have significant impacts” on the project. Social distancing on a construction site means one can have fewer workers on site at any one time. While working with staggered shifts may diminish the amount of delay, the risk of significant delay remains.

[73] This is a serious pandemic. Millions have died around the world. At the time of writing these reasons, 24,825 people have died in Canada. New variations of Covid-19 have emerged that are highly infectious. A single infection can have an exponential impact on others. In the circumstances I do not think it appropriate to adopt an interpretation of a contractual provision that runs contrary to its purpose and that incentivizes constructors to imperil public health.

[74] On the facts of this case, using the Variation procedure under the Project Agreement is a far more purposive way of applying the Substantial Completion provisions than is the blanket imposition of all pandemic risks upon the applicants. It is worth bearing in mind that the Variation procedure does not give the applicants automatic relief. They must still demonstrate within that procedure that the delays in respect of which they claim are attributable to the new construction requirements arising out of the pandemic. The applicants do not simply get a free ride. Given that the parties specifically contemplated a Variation procedure for health and safety emergencies, it strikes me that it is more appropriate to interpret the contract by having the parties follow that procedure than it is to interpret the contract by reading that procedure out of existence.

[75] The respondents’ focus on the financial value of the contract to justify the construction they advocate is not persuasive. The simple face value of a contract does not provide any indication about the level of risk that the applicants were assuming under it. A large face value may simply reflect the fact that the contract involves an expensive process. A contract with a large face value may still be one that offers the contracting party very little profit which may in fact suggest that the parties did not intend to allocate much risk to the applicants.

[76] Here, the project could be expected to be one that was expensive to build. As noted earlier, it involves the construction of a 19 km light rapid transit line through a densely populated area of Toronto with10 km and 15 stations being built underground.

[77] For the court to draw inferences about risk allocation from the value of a contract, it would be more relevant to know whether the applicants were expected to earn a materially higher profit on the contract than would otherwise be expected than it is to know about the face value of the contract.

ii. The Emergency Response Plan

[78] As noted, the respondents submit that the requirement for the applicants to have an Emergency Response Plan and to manage the project in accordance with that plan in the event of an Emergency suggest that risks of Emergencies were allocated to the applicants under the contract.

[79] I do not read the contract in that way. The relevant provision is section 62.1 which I reproduce in its entirety here for convenience:

62. EMERGENCY MATTERS

62.1 Emergency

(a) From Financial Close until Substantial Completion Date, upon the occurrence of an Emergency, Project Co shall comply with the Emergency Response Plan.

(b) From and after Substantial Completion Date, upon the occurrence of an Emergency, Project Co shall comply with its Emergency Response Plan in accordance with the Output Specifications.

(c) If, in respect of any Emergency, HMQ Entities notify Project Co that they require compliance with any additional or overriding procedures as may be determined by HMQ Entities or any other statutory body, then Project Co shall, subject to Schedule 22 - Variation Procedure (if compliance with such procedures constitutes a Variation), comply with such procedures (whether such procedures are specific to the particular Emergency or of general application and on the basis that such procedures shall take precedence to the extent that they overlap with the procedures mentioned in Section 62.1(a) or (b)). (Emphasis added)

[80] This language appears to do away with the respondents’ argument about the Emergency Response Plans suggesting that pandemic risk was allocated to the respondents. The closing words of s. 62 (c) expressly contemplate that the additional and overriding measures required in an Emergency may overlap with the contents of the Emergency Response Plans referred to in sections 62 (a) and (b). In other words, the concept of “additional or overriding procedures” applies even to the extent that some of those procedures are contained in the Emergency Response Plan.

iii. Did Respondents Require Additional or Overriding Procedures?

[81] The relevant contractual provision here is section 62.1 (c), the relevant portions of which I repeat again for convenience:

If, in respect of any Emergency, HMQ Entities notify Project Co that they require compliance with any additional or overriding procedures as may be determined by HMQ Entities or any other statutory body, then Project Co shall, subject to Schedule 22 - Variation Procedure (if compliance with such procedures constitutes a Variation), comply with such procedures …

[82] The first requirement to trigger section 62.1 (c) is an Emergency. As already noted, the pandemic falls within the definition of Emergency under the contract. The provincial government invoked emergency legislation and Mr. Hope on behalf of the respondents admitted in his affidavit that there was an emergency.

[83] I address here, the second requirement to trigger s. 62.1 (c). Did the respondents, to use the language of the clause,

notify [the applicants] that they require compliance with any additional or overriding procedures as may be determined by HMQ Entities or any other statutory body …

[84] There seems little doubt that the social distancing measures required on construction sites as a result of the Covid pandemic amount to additional or overriding procedures.

[85] The respondents’ own language says as much. As noted in paragraph 64 above, in their April 21, 2020 letter the respondents stated:

At this point, HMQE do not require that Project Co implement additional and overriding measures in addition to those presently being undertaken by Project Co in its capacity as the Constructor and Employer under OHSA.

[86] In other words, the respondents agree that the applicants have already implemented “additional and overriding measures” that were apparently so effective that the respondents did not require the applicants to do anything beyond what they had already done. That same language was repeated in the respondents’ letter of May 26, 2020.

[87] It also seems clear that the respondents “notified Project Co. that they require compliance with” additional or overriding procedures. As noted in paragraph 59 above, the respondents wanted the applicants to comply with the new construction “protocols” that had not yet been published. The respondents intended to include the adoption of those new requirements in their site observations. In other words, to use the language of s. 62.1 (c), the respondents “required the applicants to comply,” with “additional” measures contained in those “protocols”.

[88] The defendants try to absolve themselves of liability for requiring compliance with these additional measures by submitting that those measures were part of the Applicable Law with which the applicants were bound to comply. Even if the additional measures were not part of Applicable Law, the respondents submit that they were not measures that were “determined by HMQ Entities or any other statutory body” and therefore fall outside of the language of section 62.1 (c ).

[89] With respect to the procedures being part of “Applicable Law” under the contract, Applicable Law is, as noted earlier, defined broadly to include any Authority Requirement which in turn is defined as any “order, direction, directive, request for information, policy, administrative interpretation, guideline or rule of or by any Governmental Authority.”

[90] The construction “protocols”[^13] in question were issued by the government of Ontario. It is unclear on the face of the document which particular governmental entity issued the document. While the respondents have referred to the contents of the document as “construction “protocols””, the document itself does not ascribe to itself any description or title that would allow one to attribute any sort of legal classification to it. The heading on the document is “Construction site health and safety during Covid 19.” The measures that are referred to in paragraphs 62 and 63 above are referred to as “On-site best practices” in the document. Perhaps most importantly for our purposes, the document begins with a boldfaced paragraph stating:

This is not a legal document and employers are advised to seek legal advice.

[91] The applicants submitted in argument that in light of this heading, there was no legal obligation to adhere to the document. The respondents did not contest that proposition in argument.

[92] Although the definition of Applicable Law is broad in the contract, it is difficult to hold that the document falls into the category of Applicable Law when it states on its face that it does not amount to a “legal document”.

[93] Moreover, the terms of the document itself belie any force of law. The document does not require the applicants to take any particular steps. Rather, it says that “physical distancing is required to control the spread of Covid-19” and that to “ ensure physical distancing on-site, employers should consider” the listed suggestions.

[94] The document contains a number of suggestions as opposed to mandatory requirements. As a result, in my view, it does not fall within the Applicable Law with which the applicants would be bound to comply, nor does it reflect any “change in law” for purposes of the contract.

[95] Despite the lack of legal force of the document, the respondents nevertheless required the applicants to comply with those additional measures. In doing so, the respondents, to use the language of section 62.1 (c ) “determined’ procedures with which they required the applicants to comply.

[96] The respondents appear to be taking the position that the applicants are legally obliged to comply with a document that has no legal force in order to avoid the suggestion that the respondents required additional and overriding procedures to be taken.

[97] The respondents themselves failed to comply with the document. The document stated:

Physical distancing will result in lower staffing on job sites. In order to keep sites open, employers will need to adjust production schedules as the impacts of physical distancing become clear.

Owners and trades will need to collaborate to ensure there is a clear understanding of how production will be impacted. (Emphasis added)

[98] That this is the very issue in this application. That is to say, that the respondents did not collaborate with the applicants as required under the contract to ensure that there was a clear understanding of how production will be impacted. Put another way, if the document has legal force, it also compels collaboration about how production will be impacted. The only way to give legal force to such collaboration is to require the parties to follow the Variation process under the contract.

[99] As noted earlier, the respondents say that they were not required to issue any additional or overriding procedures because the applicants had already implemented them. I would still not allow the respondents to use that as an excuse to avoid the Variation Procedure under the contract.

[100] To hold otherwise would in effect allow the respondents to take a free ride on the applicants’ sense of responsibility. The applicants could just as easily have done nothing and waited for the respondents or some other statutory body to demand that the applicants implement additional procedures in which case the procedures would have fallen within s. 62.1(c ). The respondents’ interpretation in effect punishes the applicants for being responsible.

[101] In its letter of March 27, 2020 Metrolink stated:

HMQE's priority is the safety of the site and those working on the site.

[102] The respondents’ interpretation of the contract would reduce that ostensible concern about worker safety to nothing but window dressing. The safety of workers would be a priority only insofar as it did not delay the project or otherwise inconvenience the respondents. If there were any inconvenience to be borne, it would have to be borne by the applicants. In my view, that is neither a fair nor responsible approach to take to the issue. While professing to be concerned about worker safety, the respondents would be incentivizing the applicants to ignore worker safety by threatening to punish them for the delays that a concern about worker safety would entail.

[103] The respondents rely on the wording of the contract. I have adopted the same approach but come to a different conclusion than the respondents do about what the contract says and how to interpret and apply it.

[104] The applicants raised other issues in support of their application including principles of good faith and the indivisibility of the Crown. The latter gives rise to the question about the degree to which the respondents, as Crown entities, can take the position that they did not require additional measures when they are relying on the additional measures that another branch of the Crown required by way of the construction “protocols”. In light of my reading of the contract and the “protocols,” I do not find it necessary to address the concepts of good faith or Crown divisibility.

III. Disposition and Costs

[105] For the reasons set out above, I dismiss the respondents’ motion for a stay and grant the following declarations:

(i) The COVID-19 pandemic is an Emergency under section 1.178 of Schedule 1 of the Project Agreement;

(ii) The respondents required compliance with additional or overriding procedures in response to the pandemic to protect public health and worker safety;

(iii) The respondents have a contractual obligation to provide the Applicants with a Variation Enquiry pursuant to Schedule 22 of the Project Agreement, the additional and overriding procedures that are necessary to protect public health and worker safety in light of the Pandemic and the respondents’ directions to the applicants that the project continue uninterrupted through the Pandemic.

[106] Any party seeking costs of the application or the stay motion may make written submissions by May 31, 2021. Responding submissions should follow by June 7, 2021 with reply due by June 11.

Koehnen J.

Released: May 17, 2021

[^1]: The Independent Certifier is BTY Consultancy Group Inc., a consulting firm that is obliged to act impartially, honestly, and independently in making certain determinations under the Project Agreement. [^2]: Sopinka, Lederman & Bryant: The Law of Evidence in Canada, 5th Ed., §14.155 – 14.159; Gale v Halton Condominium Corporation No. 61, 2020 ONSC 5896 at para 8. See also R v Campbell, 1999 CanLII 676 (SCC), [1999] 1 SCR 565 at paras 67-75. [^3]: Courts of Justice Act, RSO 1990, c C.43 [^4]: Courts of Justice Act, R.S.O. 1990, c. C43, s. 106. [^5]: Hester v. Canada, [2008] G.S.T.C. 55, [2008] O.J. No. 634 at para 15 (Div Ct); cited with approval in Grand River Enterprises Six Nations Ltd. v. Canada (Attorney General), 2010 ONSC 2911 at para 14 and Kaye et al. v. Fogler Rubinoff LLP et al., 2019 ONSC 1289, at para 24. [^6]: Campeau v. Olympia & York Developments Ltd., 1992 CarswellOnt 185, [1992] O.J. No. 1946 at para 15, citing Arab Monetary Fund v. Hashim, [1992] O.J. No. 1330 (Ont Gen Div) at para 17. [^7]: Kuchar v Midland (Town – Chief Building Official), 2016 ONSC 6777 at para 20, citing Hollinger International Inc. v. Hollinger Inc., [2004] O.J. No. 3464 at para 5; and Catalyst Fund Limited Partnership II v. Imax Corporation, 2008 CanLII 48809, 92 OR (3d) 430 (ONSC) at para 21. [^8]: Occupational Health and Safety Act, RSO 1990, c O.1 [^9]: Occupational Health and Safety Act, RSO 1990, c O.1 [^10]: Emergency Management and Civil Protection Act, R.S.O. 1990, c. E.9 [^11]: O. Reg. 119/20 filed under the Emergency Management and Civil Protection Act, R.S.O. 1990, c. E.9 Schedule 3 Requirements That Apply to Businesses [^12]: Emergency Management and Civil Protection Act, RSO 1990, c E.9 [^13]: See CaseLines pages A1591- A1595.