A recent decision by Justice Steele in the Ontario Superior Court of Justice has brought some much-needed clarity for road building contractors seeking to uphold (or overturn) an interim-binding decision of a referee under MTO’s dispute resolution procedures.
Background
In HMQ (Minister of Transportation) v. Bot Construction (Ontario) Limited, a payment dispute arose on an MTO project as a result of additional costs incurred by Bot for excavating, stockpiling, and compacting an unforeseen volume of rock material (the “Claim”). Bot ultimately submitted the Claim to a referee in accordance with the contract’s dispute resolution procedure, set out in the February 2016 SP100S55 amendment to the contract’s general conditions.
A contractually mandated meeting was held between the parties and the referee. At the referee’s request, the referee received additional submissions and information after the meeting and before rendering a decision requiring MTO to pay Bot the sum of $341,012.70 plus HST for the Claim. The referee’s decision was provisionally binding on the parties, subject to the right of either party to “review” the decision by filing a notice of protest within 30 days.
The contractual dispute resolution process set out in SP100S55 does not specify a format or any procedural rules for a review of the referee’s decision. The contract provides that either party may “resort to litigation” for a review of a referee decision.
MTO Moves to Review (and Reverse) the Referee Decision
MTO commenced an application seeking a declaration from the court that the referee’s decision was wrongly decided and for an order requiring Bot to return to MTO the payment awarded by the referee. To our knowledge this is the first court challenge of the MTO’s unique referee process and the path to be followed in seeking review of a referee decision under protest.
The grounds advanced by MTO in challenging the referee decision included an allegation that the referee had deviated from the prescribed referee process by allowing reply submissions from Bot in response to written submissions by MTO that differed from those provided in MTO’s original field level decision to deny the claim. MTO alleged that the referee erred by encouraging further submissions from both parties at the referee meeting.
MTO further alleged that the referee had made an error in interpreting and applying the relevant contractual provisions, particularly with respect to the contractual provisions dealing with increases in the volume of blasted rock material (compared to its pre-excavation volume) after it was placed and compacted in a stockpile by Bot.
MTO sought a review of the referee decision by the court on a summary basis to be restricted to the limited documentary record that was before the referee. MTO took the position that this initial review of the referee decision could then be challenged a further time by the unsuccessful party with the commencement of a regular court action seeking a final decision at a trial based on a full documentary record.
Faced with the prospect of multiple proceedings to uphold the referee’s decision, Bot moved for an order to convert MTO’s application into a regular action destined for a trial that would provide a single-step to fully and finally resolve the dispute. Kyle MacLean, a partner with Advocates LLP, argued the motion on behalf of Bot.
The Decision
In her decision on Bot’s motion, Justice Steele reviewed the relevant factors that favour converting an application into an action, which would proceed to a full trial, including the following:
- Where there are material facts in dispute;
- Where the issues to be determined go beyond the interpretation of a document;
- Where there are complex issues and/or credibility determinations that require the court to weigh evidence; and
- Where the judge hearing the application cannot make a proper determination of the issues on the documentary record.
Justice Steele then reviewed the record before the court on MTO’s application and noted that there was conflicting evidence on the central issue of how the excavated rock volume changed based on Bot’s handling and compacting operations. Resolving the contradictory evidence on this type of issue could not be done by a review of the contract documents and would likely require evidence from the road building industry and/or experts.
Another factor in favour of reviewing the referee decision by an action leading to a full trial was the lack of a complete record of the referee proceedings. There was no transcript or other record of the referee’s meeting with the parties, resulting in an incomplete record of the evidence considered, which prevented the court from making a proper determination of the issues on the application.
Finally, Justice Steele observed that reviewing the referee decision on an interim basis by way of an application was not required under the contract’s dispute resolution provisions. To do so would add an additional step that would only increase the cost and time of all parties on their way to a final resolution. Converting the application into an action and sending it to trial in the normal manner would permit the court to finally resolve the dispute on its merits.
For these reasons, Justice Steele ordered that MTO’s application to review the referee decision must proceed by way of an action. As the party challenging the referee decision, MTO would be the plaintiff and Bot the defendant. The provisionally binding decision and resulting payment that MTO had to make under order of the referee would stand until such time as a trial judge ruled that the payment need not have been made, or otherwise determined that Bot was entitled to keep the award of the referee.
Implications for Industry
This decision provides procedural clarity for road building contractors who are seeking to review (or uphold) a referee’s interim binding decision. The lack of a complete evidentiary record for referee proceedings, when paired with the complex factual issues that are often encountered on MTO project disputes, will generally favour proceeding by way of an action for a final determination of the claim. Doing so will ensure that a contractor can secure the quickest and most cost-effective resolution of their dispute with MTO.
Advocates LLP acts frequently for general contractors encountering problems on their ICI and infrastructure projects around Ontario, including those under contract with MTO, Metrolinx, Infrastructure Ontario, and local Municipalities. We have extensive experience working with clients to assist them in preparing for and managing the MTO referee process. Contact any one of our partners or visit us at AdvocatesLLP.com , and we would be pleased to assist.
Tags: contracts, MTO, paving, referee, road builders