Ontario – litigation offers proof of concept that arbitration matters – #081

In Network Site Services Ltd. v. Town of Oakville, 2018 ONSC 2599,  Mr. Justice David A. Broad resolved litigation commenced in early 2012 regarding a road reconstruction project certified to have been substantially performed on September 30, 2011.  The parties to the litigation had entered into a detailed set of contracts which identified mediation and arbitration but made neither mandatory.  

Further to a public tender, Network Site Services Ltd. (“Network”) and the Corporation of the Town of Oakville (“Oakville”) entered into an October 18, 2010 contract (the “Contract”) worth $3.78 million for the reconstruction of a 1.2 km stretch of road.  The scope of the work included water main installation and road reconstruction.

The parties negotiated an increase to the contract which lead to a payment exceeding $4 million but difference remained.

Network filed Ontario Superior Court proceedings in early 2012 and claimed the following amounts:

(a)   unpaid quantities of unit-price line items specified in the Contract, in the amount of $333,847.15;

(b)   unpaid claims asserted during the Project for the cost of changes or extra work in the amount of $196,785.63; and

(c)   unpaid claims for changes and extras discovered after the action was commenced in the amount of $320,304.11.

The hearing on the merits took place September 11-15, 18-19, 21-22, 25 and November 17, 2017.   Network and Oakville filed a jointly-prepared Scott Schedule, setting out the particular claims in a table with each party’s position on the workmanship and costs for each claim. The court heard from four witnesses for each party.   The decision issued on May 5, 2018.

The decision is reassuringly typical for a Canadian Superior or provincial court:  well-structured, clearly written, identifies and addresses the competing arguments on each claim and applies a robust analysis of the relevant legislation and case law to the facts in a convincing manner.   The quality of Canadian courts makes the decision unremarkable but no less appreciated.  Absent any appeals, the decision effectively resolves a dispute first identified as early as December 2011.

The purpose of this note is only to point out a missed opportunity.

The contractual documents included the General Conditions, condensed in Broad J.’s reasons to “GC” for ease of reference.  Broad J.’s reasons reproduce or refer to a number of the provisions in the GC.  For example, see paras 14-18, 28-37.

The reasons also contain two brief mentions which deserve attention:  the time line of the litigation and the availability of alternative dispute resolution.

The mention of the court litigation’s timeline occurs in Broad J.’s review of a particular head of damages, namely for changes and extras.

[37] Network acknowledged through counsel that its claims for changes and extras discovered during the course of the litigation in the amount of $320,304.11 were first advanced by delivery of written claims on April 21, 2016 and received by the Town on April 26, 2016, being in excess of four years after issuance of the Statement of Claim, and four and one-half years following issuance of the said Certificate of Substantial Completion of the Contract.

The mention of alternative dispute resolution occurs just before that paragraph when Broad J. notes the moment in December 2011 when the parties had effectively identified a dispute over certain unpaid quantities and costs for changes or extra work.

[35] Network’s claims for unpaid quantities of unit-price line items and for claims asserted during the project for the cost of changes or extra work were delivered to the Town in September and early October 2011, in connection with the preparation of Progress Payment Certificate P11 leading to the certification of substantial completion of the Contract. The Town did not take the position at that time that these claims were out of time or barred by GC 3.13.03, but rather the parties engaged in negotiations respecting the resolution of these claims pursuant to GC 3.13.04, as exemplified, among other things, by the detailed exchange of their respective positions by email in December 2011. Neither mediation under GC 3.13.05 nor arbitration under GC 3.14.01 were mandatory, and neither of these provisions were invoked by either party.

Network initiated its Superior Court litigation in the first quarter of 2012, namely January-March 2012.  The May 2018 reasons issued from the eleven-day hearing in the Fall of 2017 with the eight witnesses.  The hearing was compact and no doubt reflected the skill of the attorneys and trial judge in condensing the presentation of the facts and argument.  The joint-filing of the Scott Schedule also reflects a high level of cooperation between the parties allowing Broad J. to issue the quality reasons.

Arbitration was identified in the GC but not mandatory and neither party invoked it.

Query: what would the timeline to get to the Fall 2017 hearing have been had the parties agreed to do the same work but in arbitration rather than the courts?

Arbitration matters.