Khalil Mechantaf | 7 August 2025
The case concerns the interpretation of a standard form construction contract between the Minister of Transportation (MTO) and J&P Leveque Bros. Haulage Ltd. (Leveque) [2025 ONCA 573] for the rehabilitation of 27 kilometres of Highway 60. The contract included a multi-tier claims review and dispute resolution process, requiring a notice of protest and alternative dispute resolution (ADR) within two years of contract completion. However, the referee decision, which ruled against MTO, was released after the two-year period had expired, raising the question of whether the contractual limitation period applied in such circumstances.
Background
The decision, issued on August 1st, 2025, is relevant for commercial or construction agreements with multi-tier dispute resolution provisions. The clause in question contained a field, regional and provincial level review processes conducted by MOT with respect to request for clarification delivered to the contract administrator. At that point, either party could object to the decision and begin the referee process and would take 90 days from referral to decide a claim. The referee or panel decision would be provisionally binding on the parties, but within 30 business days of its release, either party could deliver a notice of protest. The parties would then have 60 days to explore ADR before they could commence litigation.
The referee decision, which ruled against MTO, was not released until after the two-year period had expired. MTO acted quickly to register its notice of protest and invoke ADR. It subsequently commenced a civil action by filing a statement of claim against Leveque, seeking recovery of the $1.8 million awarded to Leveque by the referee panel. Leveque brought a motion for summary judgment.
In the proceeding before the Ontario Superior Court of Justice [2024 ONSC 2285], the motion judge granted summary judgment in favour of Leveque, finding that MTO’s claim was barred by the two-year contractual limitation period.
MTO appealed arguing that the motion judge erred in his interpretation of the contract.
Decision
The Court of Appeal considered the standard of review in standard form contracts and the rules of interpretation of multi-tier dispute resolution provisions. By allowing the appeal and setting aside the summary judgment, the Court ruled that MTO was not required to file a notice of protest and seek ADR within two years of the date of contract completion.
With regard to standard of review, the Court considered that where (a) the contract at issue is a standard form contract; (b) the interpretation has precedential value; and (c) no factual matrix specific to the parties exists to guide the interpretive process, the correctness standard applies. For any other findings of fact, the standard of review is palpable and overriding error.
As to the rules of interpretation, the Court determined that, first, the contract must be read as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Second, given that the contract in this case contains standard form clauses, there are few “surrounding circumstances” bearing on the analysis. Third, a commercial contract is to be interpreted in keeping with sound commercial principles and good business sense to avoid commercial absurdity.
The Court ignored the contra proferentem rule of construction on the ground that the multi-tier dispute resolution clause and its two-year time limit does not, on its face, favour one party or the other.
Implications for drafting and interpreting multi-tier clauses
The decision of the Court of Appeal in Leveque serves as a powerful reminder that multi-tier dispute resolution clauses, when combined with contractual limitation periods, require precise drafting and vigilant time management. If a dispute resolution clause includes a distinct contractual limitation period that alters or shortens the statutory limitation, courts will enforce these provisions as written, provided the contractual terms are clear and comprehensive and, when enforced, do not lead to commercial absurdity. Parties must be highly attentive to such deadlines.
In Leveque, the contractual timeline ran in parallel with the ADR phases, meaning that unless each stage was completed and litigation commenced within the two-year window, the claim was extinguished. That being said, where the limitation period presupposes the release of a decision within a specific timeframe, it is commercially absurd to require a party to protest a decision when, in fact, there is no decision to protest. Moreover, MTO had no reason to refer the case to the referee process earlier, as the earlier decisions had been in its favour. Indeed, interpreting such provision otherwise is not merely unpalatable, it is contrary to commercial sense as it would deprive MTO of any meaningful ability to challenge the referee decision and any ability to commence ADR.
Although the clause in question lengthens the limitation period beyond that set by s. 22 of the Limitations Act, the contract does not expressly provide that a decision released outside of the two-year period is effectively immune from review. It follows that where a decision that is part of a claim review process is released outside a contractual limitation period, that period will no longer bind the parties and will be replaced by the statutory limitation period.
Conclusion
The Leveque decision serves as a cautionary tale for parties who presume that the timelines associated with a stepwise ADR process are fixed or automatically extend the period within which a claim must be brought. Moving forward, parties must draft and manage dispute resolution clauses with precision to preserve their ability to advance claims.