CITATION
CITATION: Mosaic Transit Partners General Partnership v Ontario Infrastructure and Lands Corporation, 2025 ONSC 697
COURT FILE NO.
COURT FILE NO.: CV-24-00725933-00CL
DATE
DATE: 20250219
SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
RE: MOSAIC TRANSIT PARTNERS GENERAL PARTNERSHIP and MOSAIC TRANSIT CONSTRUCTORS GENERAL PARTNERSHIP, Applicants
AND
ONTARIO INFRASTRUCTURE AND LANDS CORPORATION, as representative of the Minister of Economic Development, Employment and Infrastructure, as representative of His Majesty the King in Right of Ontario and METROLINX, Respondents
BEFORE: Penny J.
COUNSEL: Matthew P. Sammon, Andrea Wheeler, Lauren Mills Taylor and Brianne Westland, for the Applicants
Sharon C. Vogel, Cheryl Labiris, Alegria Indio and Catherine Gleason-Mercier, for the Respondents
HEARD: January 30, 2025
ENDORSEMENT
1There are two motions before the court. In the underlying Application, Mosaic seeks declaratory and other relief in relation to an alleged breach by the respondent of a design/build contract between the applicant and the respondent. The breach is said to arise from the respondent entering into an operator contract with a third party (the Toronto Transit Commission) which is inconsistent with, and conflicts with, the design/build contract between the applicant and the respondent.
2The two motions are:
(a) the respondent’s motion for a stay of the Application based on an earlier settlement agreement and an arbitration clause contained in the settlement agreement; and
(b) the applicant’s motion for production of an unredacted copy of the respondent’s operator agreement with the TTC.
Background
3The Finch West light rail transit project (the “Project”) is an 11-kilometre light rail transit line consisting of 16 surface stops as well as a below-grade stop at Humber College and an underground interchange station at the Finch West subway station.
4Ontario Infrastructure and Lands Corporation (“Ontario”), as representative of the Minister of Economic Development, Employment and Infrastructure, His Majesty the King in Right of Ontario and Metrolinx, entered into a Project Agreement with Mosaic in 2018. Mosaic is responsible for designing, financing, constructing and maintaining (but not operating) the Project.
5The Project Agreement contemplates an “Operator” but the Operator is not a party to the Project Agreement. The TTC was contemplated to be, and now is, by contract with Ontario effective May 2024, the Operator. The operator contract is called the Train Operating and Services Agreement, or “TOSA”. Mosaic was not involved in the negotiation of the TOSA. Mosaic is not a party to the TOSA. Until recently, Mosaic had no knowledge of the contents of the TOSA.
The Mosaic Application
6The Project was originally scheduled to achieve substantial completion by September 2023. This was later extended to December 2023 under Minutes of Settlement agreed to between the parties. For reasons not material to these motions, the substantial completion milestone has not been met. It seems, however, that Mosaic has “nearly completed the testing and commissioning of the Project”.
7The TTC will take over responsibility for Project operations once the Project is ready for what is described as “Revenue Service” (essentially, ready for use by the public). Before Revenue Service can begin, however, the TTC must engage in critical tasks which are necessary pre-conditions to Revenue Service. For example, before the Finch West LRT can open the public, the TTC needs to participate in training activities on the light rail vehicles, communication systems and other equipment. The TTC also needs to coordinate with Mosaic about the design and operation of certain aspects of the system (which the TTC will ultimately be responsible for using once the line is open).
8The dispute over which issue is joined in the Application is Mosaic’s allegation that the Project Agreement requires Ontario to contract with the TTC so as to require the TTC to fulfill identified “Operator Tasks” on the timelines required by the Project Agreement. In other words, Mosaic says it is Ontario’s responsibility to engage an Operator that is ready, willing, and able to complete the Operator’s functions under the Project Agreement and to contractually oblige the Operator to do so. For this to happen, Ontario must execute a contract with the TTC requiring the TTC to complete the Operator Tasks as set out in the Project Agreement. This, Mosaic alleges, Ontario has failed to do in the TOSA. The result, in essence (Mosaic further alleges), is a mismatch between Mosaic’s contractual obligations to Ontario under the Project Agreement and TTC’s obligations under the TOSA. This failure to contractually oblige the TTC to comply with the parameters of the Project Agreement during the transition to Revenue Service is, Mosaic says, having a detrimental impact on Mosaic’s ability to fulfill its contractual obligations under the Project Agreement, with significant financial, reputational and other consequences.
The Minutes of Settlement
9The Project Agreement contains, in Schedule 27, a detailed dispute resolution process which does not require arbitration. As will be set out below, the arbitration agreement entered into between the parties is in Minutes of Settlement and relates only to those things covered by the Minutes of Settlement. For disputes not covered by the Minutes of Settlement, the procedures set out in Schedule 27 remain in force and applicable.
10As a result of COVID-19 and other problems, Ontario and Mosaic became embroiled in significant disputes about the Project. Legal proceedings were instituted and prosecuted in this Court. Ultimately, in June 2023, Ontario and Mosaic resolved those disputes in Minutes of Settlement (with effect on July 14, 2023).
11Among other things, the Minutes of Settlement contain a release. The release in section 7 provides for the release of all claims against Ontario “which have been, might have been, or might be hereafter advanced by [Mosaic] arising from facts, events, and/or circumstances: (a) which are known or Ought to Be Known to [Mosaic] as of” July 14, 2023. “Ought to Be Known” is a defined term in section 1.2(nn) in the Minutes of Settlement. Suffice to say for current purposes that “Ought to Be Known” is given a broad definition which includes the exercise of due diligence (itself broadly defined) and good industry practice. This is further bolstered by the acknowledgement of Mosaic in section 7.6 of the Minutes of Settlement.
12Finally, the Minutes of Settlement contain an arbitration clause for claims “arising out of” the Minutes of Settlement. Section 34.1 provides that:
any and all disputes, controversies, or claims arising out of these Minutes of Settlement, including, without limitation, its enforceability, performance, breach, or validity shall not be subject to Sections 2 to 7 of Schedule 27 to the Project Agreement (Dispute Resolution Procedure), but shall be determined by arbitration. The Parties acknowledge and agree that under no circumstances will any litigation relating to these Minutes of Settlement be before the Commercial List of the Ontario Superior Court of Justice.
The process leading to the Application
13In May 2024, in accordance with the procedures set out in Schedule 27, Mosaic delivered a Notice of Dispute under the Project Agreement seeking: a determination that Ontario had breached the Project Agreement by entering into an Operator Agreement which failed to require the TTC to perform the “Operator Tasks” required by the Project Agreement within the timelines required by the Project Agreement.
14The Parties progressed through the stepped negotiations required under the dispute resolution provisions set out in the Project Agreement, but did not resolve the issues in the Notice of Dispute. Mosaic, as required under Schedule 27, then referred the Notice of Dispute to the Independent Certifier. The Independent Certifier subsequently advised the parties that it had “analyzed the Notice of Dispute and conclude[d] that this matter exceed[ed] its capacities and mandate as the Independent Certifier”.
15Mosaic then submitted a Notice of Election to Submit Dispute to Litigation and, in July 2024, issued the Application which gives rise to these motions. For the purposes of Ontario’s motion for a stay, the following relief is at issue:
a) A declaration that by executing the Train Operating and Services Agreement between Metrolinx, the Toronto Transit Commission (“TTC”) and the City of Toronto with an effective date of May 2, 2023 [sic], the Respondents have:
i. breached the Project Agreement (as defined below), including but not limited to, sections 8.l(a) and 64.12(a) of the Project Agreement; and
ii. breached their obligation to retain an Operator (as defined in the Project Agreement) on terms consistent with the Project Agreement and that is contractually obligated to fulfill all of the Operator’s roles and tasks under the Project Agreement.
Does the subject matter of the Application fall within the scope of the release and arbitration provisions of the Minutes of Settlement?
16The law governing Ontario’s motion is not in controversy. The Arbitration Act provides that “no court shall intervene in matters governed by this Act” except in a narrow set of circumstances. Courts are to adopt a “hands off” approach where the parties have agreed to arbitrate their disputes. Where the subject matter of a dispute falls under an agreement to arbitrate, a stay is mandatory.
17In Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, the Supreme Court established a two-part framework to assess whether a stay of court proceedings in favour of arbitration should be granted:
(a) the technical prerequisites for a mandatory stay of court proceedings; and
(b) the statutory exceptions to a mandatory stay of court proceedings.
The onus is on the moving party in part one to establish an arguable case that the technical prerequisites have been met. Then, in part two, the onus shifts to the party resisting the stay to establish, on the higher civil standard of a balance of probabilities, that a statutory exception applies such that the mandatory stay should not be granted.
18Under the first part of the Peace River framework, the moving party has the onus to demonstrate, on an “arguable case” standard, that the technical prerequisites for a mandatory stay of the court proceedings have been met. The arguable case standard is lower than the civil standard and “is clearly something less than the standard of “correctness” or even “likely to succeed””. Rather, it is more like “a reasonable prospect of success” or “not obviously doomed to fail”.
19Peace River sets out the four typical technical prerequisites:
(i) an arbitration agreement exists;
(ii) court proceedings have been commenced by a “party” to the arbitration agreement;
(iii) the court proceedings are in respect of a matter that the parties agreed to submit to arbitration; and
(iv) the party applying for a stay in favour of arbitration does so before taking any “step” in the court proceedings.
The parties agree that the only issue on the motion for a stay is the third requirement -- whether Mosaic’s application is in respect of a matter that the parties agreed to submit to arbitration under the Minutes of Settlement.
20Ontario submits that it has at least an arguable case that the relief sought in the Application is in respect of a matter that the parties agreed in the Minutes of Settlement would be submitted to arbitration. Ontario submits, in support of this position, Mosaic knew or ought to have known, as of the effective date of the Minutes of Settlement, that:
From the outset of the Project, the TTC would be engaged as the Operator. As part of this engagement, throughout the five years of the Project leading up to the effective date of the Minutes of Settlement, Project Co worked with TTC in its role as Operator, including but not limited to Operator training and train operations.
Ontario had not executed any operating agreement with TTC and the negotiations of the TOSA had been ongoing between Ontario, TTC, and the City of Toronto for some time. Mosaic was not involved in those negotiations.
Ontario had not and was not going to provide Mosaic with a copy of any operating agreement entered into with the Operator on the basis that such an agreement is not required in order for Mosaic to perform its obligations under the Project Agreement. As a result, Mosaic knew or ought to have known that without a finalized operating agreement in place, there was a risk that any future agreement could be inconsistent with the terms of the Project Agreement.
Based on Mosaic’s performance of the Works and engagement with TTC, coupled with Mosaic’s obligations under the Project Agreement, including the Minutes of Settlement, regarding the achievement of Substantial Completion, Mosaic knew of the necessity of consultation and coordination with the Operator and what this entailed.
As a result of its performance of the Works, the nature of Ontario’s level of cooperation on the Project at the existing level was satisfactory and accorded with Section 8.1 of the Project Agreement and would be satisfactory in the future if maintained.
21In paras. 53 to 59, of its factum, Ontario sets out in detail pre-TOSA negotiations and obligations acknowledged by Mosaic in relation to the TTC and its intended role as the Operator. Similarly, in paras. 61 to 64 of Ontario’s factum, it also points out the numerous acknowledgments given by Mosaic that Ontario’s level of co-operation, for example, had been satisfactory and that, if maintained at that level in the future, would remain satisfactory.
22The essence of Ontario’s argument is summed up in para 58 of its factum:
[Mosaic] gave these acknowledgements, agreements, commitments, and releases when it knew or ought to have known there was no executed operating agreement between [Ontario] and TTC, and when it knew that it would not be involved in any negotiations of such an agreement nor would it receive a copy once executed. Moreover, [Mosaic] did so when it knew that there were risks associated with Operator-related issues [Ontario] had expressed concerns regarding [Mosaic]’s failures to coordinate with TTC.
23I am unable to accept these arguments. The alleged actionable wrong (breach of the Project Agreement by failing to include in the TOSA a requirement that the TTC comply with the tasks and timelines in the Project Agreement) did not arise, and could not have arisen, until Ontario entered into an agreement with the TTC. The central problem with Ontario’s position is the simple fact that Mosaic could not complain about the failings of the TOSA as of July 14, 2023 because there was no TOSA until May 2024, some ten months later. The very arguments advanced by Ontario to support its position – that Mosaic was not involved in the TOSA negotiations, was not provided with any information about those negotiations while they were ongoing, and was not even provided with a copy of the TOSA once it was concluded – in fact support the proposition that Mosaic could not possibly have “known or ought to have known” about a claim in respect of the TOSA until the TOSA was entered into in May 2024, i.e., long after the July 14, 2023 effective date of the Minutes of Settlement.
24In effect, Ontario is arguing that, because of the history of pre-Minutes of Settlement (and pre-TOSA) disputes with the TTC around training, project commissioning etc., Mosaic knew there was a risk that the TOSA might be inconsistent with the terms of the Project Agreement. Ontario suggests that Mosaic released Ontario from that risk, without knowing anything about the TOSA or its terms and conditions, in the July 2023 Minutes of Settlement. That is not what the Minutes of Settlement say or what the parties intended. A possible claim that a future operator agreement (embodied by the May 2024 TOSA) would constitute a breach of Ontario’s obligations under the Project Agreement was not known, and could not have been known, in July 2023 because there was no such agreement to make a claim about; no actionable wrong had been committed. Furthermore, Mosaic was excluded from the negotiations of the TOSA and provided with no information about it, even after it was concluded.
25Ontario also relies on the reasoning in Crosslinx Transit Solutions v Ontario Infrastructure, 2023 ONSC 3500. This was a decision written by me concerning a different project but involving a somewhat similar set of problems. In that case, the complaint of the builder of the project, CTS, was about the failure of Ontario to enter into an operator agreement with the TTC, in circumstances where CTS alleged the TTC was interfering with CTS’s ability to complete the project in accordance with the applicable project agreement with Ontario. But that case is entirely distinguishable on exactly the same basis as discussed above. There was no operator agreement. The issues about the TTC’s conduct, and Ontario’s alleged failure to rein the TTC in, predated the date of an analogous settlement agreement in that case. As such, the claim, that Ontario was in breach of the project agreement by not reining in the TTC, was caught by the arbitration provision contained in that agreement. The result in that case has no bearing on the very different circumstances of this case.
26For all these reasons, I find that Ontario has failed to establish an arguable case that the subject matter of the Application is caught by the arbitration provisions of the Minutes of Settlement. Indeed, I find, on this record, that it is not.
Is Ontario obliged to produce the TOSA?
27The central relief sought in the Application is a declaration that, by executing the TOSA between Ontario, the TTC and the City of Toronto, the Respondents have: (i) breached the Project Agreement, including but not limited to, sections 8.1(a) and 64.12(a) of the Project Agreement; and (ii) breached their obligation to retain an Operator on terms consistent with the Project Agreement and that is contractually obligated to fulfill all of the Operator’s roles and tasks under the Project Agreement.
28Mosaic says the TOSA is central to the substance of the Application. It also maintains that the TOSA is equally central to the substantive complaint being made by Mosaic, even if that complaint were to be subject to arbitration.
29Until shortly before the motion was argued, Ontario refused to produce a copy of the TOSA to Mosaic at all. Ontario maintains that:
(a) the TOSA is not relevant. It is the Project Agreement, not the TOSA, that sets out Mosaic’s rights and obligations in relation to the Project. If Mosaic’s obligations change, then there is a Variation process under the Project Agreement to address such changes; and
(b) the TOSA contains confidential and commercially sensitive information relating to financial and payment information. The disclosure of this information will prejudice not only Ontario but also the other two parties to the TOSA, the City of Toronto and the TTC.
30A redacted copy of the TOSA was produced on a without prejudice basis shortly before the return of the motion. Mosaic maintains its right to have a complete, unredacted copy.
31The motion for production was brought under Rules 30.04(2) and (5). Rule 30.04(2) contemplates production, upon request, “of any document in another party’s possession, control or power that is referred to in the originating process, pleadings or an affidavit served by the other party.” Rule 30.04(5) provides that the court may, “at any time order production for inspection of documents that are not privileged and that are in the possession, control or power of a party.”
32I find Ontario’s arguments for denying Mosaic’s request for a copy of the TOSA technical in the extreme and unsupported by the record. An unredacted copy of the complete TOSA shall be produced forthwith. I come to this conclusion for the following reasons.
33The Tosa meets the conditions for production under Rule 30.04(2). The TOSA is referred to a total of 69 times throughout the affidavit and notices of motion served by Ontario.
34Ontario says, this does not make the TOSA relevant because these references are “defensive” in nature. I cannot agree. First of all, I find the characterization of the pleading of the TOSA by Ontario as “defensive” entirely unhelpful. The issue is not whether the TOSA is referred to “defensively” or not; the issue is whether the substance of the document is engaged. The cases relied on by Ontario on this point are totally distinguishable – in those cases, it is clear that the content of the document was irrelevant and that the request for production was overreaching and oppressive. Here, the TOSA is at the very heart of the claims raised in the notice of application and on these motions. This is crystal clear from many references in Ontario’s notice of motion and supporting affidavit.
35Although the Rule does not require a party to “rely” on a document, Ontario does in fact describe and rely on the TOSA extensively in support of its motions. For example, Mr. Hope’s evidence on the stay motion includes a section titled “the TOSA” in which he alleges that the TOSA “has been discussed between Contracting Authority and Project Co. since 2019, including the status of the negotiations of the TOSA, the execution of the TOSA, and the fact that the TOSA would not be provided to Project Co.” Mr. Hope proffers this evidence in support of Ontario’s position that Mosaic’s claims arising from the TOSA were resolved by Minutes of Settlement.
36Para. 75(a) of the notice of motion on the stay pleads:
“The TOSA has no bearing on Project Co's responsibilities under the Project Agreement and does not impact the Project or its completion. In the event that Project Co requires a change to the Project Agreement prior to Substantial Completion as a result of the TOSA (which is expressly denied), Project Co can initiate a Variation through the existing contractual mechanism described above…”
One cannot support the claim made in this paragraph without reference to, and actually reviewing, the content of the TOSA.
37The TOSA also qualifies for an order for production under Rule 30.04(5). The TOSA is the central document in the central issue raised in the Application, namely, that Ontario, by entering into the TOSA in its current form, breached the Project Agreement. It is clear beyond peradventure that the TOSA is relevant to the claims made in the Application and, for that matter, in the motions before the court now, as well as the motions pending in early March. Further, the TOSA is not the subject of any claim of privilege and is manifestly in the power, possession or control of Ontario.
38Ontario made a half-hearted claim of confidentiality but, as even a cursory reading of the confidentiality provision in the TOSA shows, it is not the TOSA itself that is confidential, but other information which the parties have agreed is “Confidential Information”, exchanged or to be exchanged outside of the TOSA.
39Rule 30.04 does not permit a party to redact portions of a document by merely alleging (without sufficient supporting evidence) that portions of the document are so confidential, private or commercially sensitive that disclosure would cause serious harm. Rather, in the normal course, parties to litigation must produce relevant documents in their entirety.
40In certain circumstances, a party may seek to redact irrelevant information (from an otherwise relevant document) if that information is commercially sensitive. The test for permitting such redactions is well-established. The whole of a relevant document must be produced except to the extent that:
(a) it contains information that would cause significant harm to the producing party; or
(b) it would infringe a public interest deserving of protection: McGee v London Life Insurance Co, 2010 ONSC 1408, at para 9.
41The party seeking to redact portions of a document bears the onus of establishing that redaction is necessary to protect an important interest, such as:
(a) patents or trade secrets;
(b) personal income tax information;
(c) commercially sensitive financial information; or
(d) records of a purely private and personal nature and not relevant to the issues, such as notes between parties, personal diaries, or irrelevant and sensitive medical information.
42The court must be satisfied that the redacted information is both irrelevant to the issues (“serving no legitimate purpose in resolving the issues”) and that the production of the redacted information could cause considerable harm: Rath v Tanzanian Gold Corporation, 2022 ONSC 5184 at para 35. Evidence of potential harm must be “clear and not speculative”: Marsella v BDBC, 2021 ONSC 3276 at para 3.
43The court will order the production of unredacted documents where there is no evidence that the redaction is required to protect commercial interests or to prevent prejudice. Irrelevance alone is not a sufficient ground to redact documents.
44Here, Ontario has proffered no evidence capable of meeting the test for redaction. The only information Ontario has proffered to justify the redactions is:
(a) a bald allegation from its affiant that the TOSA, in general, “contains information that is commercially sensitive and confidential” such that production of an unredacted TOSA “would cause prejudice”; and
(b) a statement from counsel that the redactions were made “in respect of financial and payment implications”.
45These conclusory claims are wholly deficient. They do not come close to establishing that: the redacted information is irrelevant to the issues in dispute and the disclosure of the redacted information could cause considerable harm; or that the redactions are required to protect the Ontario’s commercial interests or to prevent prejudice.
46For these reasons, the TOSA shall be produced to Mosaic, in unredacted form, forthwith.
Conclusion
47The motion for a stay is denied. The motion for production of an unredacted copy of the TOSA is granted.
Costs
48The parties agreed that:
all-inclusive partial indemnity costs of $65,000 should be awarded to the successful party in respect of the motion to stay; and
all-inclusive partial indemnity costs of $25,000 should be awarded to the successful party in respect of the motion for production of the TOSA.
49Accordingly, as Mosaic was successful in both motions, all inclusive partial indemnity costs are awarded to Mosaic in the amount of $90,000.
Penny J.
Date: February 19, 2025