Ontario Court of Appeal clarifies approach to dispute resolution timelines

The Ontario Court of Appeal recently found that a time period in a construction contract for mediation served as a resolution period and not a required precondition for escalating the dispute to arbitration.

Most construction contracts contain a dispute resolution provision. Often these provisions include timelines for key steps in the dispute resolution process such as providing notice of a claim or of a dispute, submitting a claim, responding to a claim or notice of dispute, submitting a dispute to mediation or arbitration, or initiating a court proceeding.

Sometimes, these timelines are deadlines which require a party to take an action within a certain number of days. Sometimes, these timelines set a minimum time period that a party must wait before taking an action. 

In J.P. Thomson Architects Ltd. v. Greater Essex County District School Board^[1], the Ontario Court of Appeal considered the following provision:

“Any dispute between the parties arising out of or relevant to this Agreement which cannot be resolved by the parties within thirty (30) days of the dispute arising, shall be referred to mediation, upon the request of either party.”

The Court of Appeal determined that this provision did not set a deadline obligating the parties to initiate mediation within 30 days of the dispute arising. Rather, this provision established a minimum 30-day period during which the parties must attempt to resolve the dispute before requesting mediation.^[2]

Background and contractual framework

In 2016, J.P. Thomson Architects Ltd. (“Thomson”) successfully bid on two Greater Essex County District School Board (“Board”) contracts for architectural services. The contracts contained General Condition 18, a dispute resolution clause included in the standard-form contract of the Ontario Association of Architects at the time. This clause and others like it are widely used throughout the architectural profession and establish a two-step dispute resolution process: mediation followed (if unsuccessful) by arbitration.

The dispute

In October 2021, Thomson sought mediation under General Condition 18 due to an alleged breakdown of its working relationship with the Board arising from 15 months of growing tensions and unresolved issues. The Board refused to appoint a mediator, denied that a dispute existed, and argued that Thomson was seeking to mediate issues that arose more than 30 days before Thomson’s mediation request.^[3] 

Faced with the Board’s refusal to mediate, Thomson applied for a court order appointing an arbitrator.^[4]  In April 2024, the Ontario Superior Court of Justice dismissed Thomson’s application to appoint an arbitrator, finding that General Condition 18 required Thomson to seek mediation within 30 days of a dispute arising between the parties as a condition to requesting arbitration.^[5]

The Court of Appeal’s decision

Thomson appealed, and the Court of Appeal for Ontario overturned the lower court’s ruling and ordered that mediation proceed. The Court of Appeal ruled that the application judge made a legal error in interpreting the dispute resolution clause. The Court of Appeal held that a party would not lose its right to participate in dispute resolution if it failed to serve a mediation request within 30 days of a dispute arising.^[6]  The 30-day period was properly interpreted as a minimum period in which parties could attempt to resolve their dispute before initiating mediation.^[7]  The Court of Appeal recognized that professional service relationships often involve ongoing issues that may not fit neatly into rigid time categories and that interpreting the 30-day period as a deadline would undermine the integrity of the broader dispute resolution framework, conflict with the language of the clause and other contractual provisions, and disregard sound commercial principles and practical business judgment.^[8]

Practical takeaways for the industry

1. While this ruling clarifies the interpretation of a specific standard-form clause, it highlights the importance of regularly reviewing and refining your dispute resolution provisions to ensure they precisely reflect your intentions and avoid future disputes over procedural technicalities. This ruling also demonstrates the critical importance of properly drafting practical dispute resolution provisions and not relying on boilerplate provisions that do not meet the needs of the parties or the project.
2. The Court of Appeal’s decision encourages parties to engage in efforts to settle their disagreements at every stage. This aligns with fundamental principles of commercial reasonableness and the spirit of alternative dispute resolution, which aims to facilitate resolution and preserve business relationships rather than creating barriers.
3. The ruling indicates that the Court of Appeal prefers a flexible and commercially sensible approach, over a rigid approach, when interpreting timelines within multi-tiered dispute resolution clauses. This is particularly relevant for long-term contracts where disputes may evolve over time rather than arise as discrete, time-bound events. The Court’s emphasis on sound commercial principles and “good business sense” indicates a judicial willingness to look beyond the text to the underlying purpose and commercial context of the agreement.
4. Despite the Court’s flexible approach, it remains essential to read and follow any applicable contractual dispute resolution process, which the Court will, ultimately, interpret and enforce. The Court of Appeal’s decision should not be read as making light of agreed upon dispute resolution provisions.For example, in Bombardier Transportation Canada Inc. v Metrolinx, the Ontario Superior Court applied the same standard of “sound commercial principles” to find that the mandatory dispute resolution provision in that case applied to all disputes arising under the contract.^[9]

Construction practitioners at Gowling WLG routinely draft construction contracts tailored to the specific requirements of a wide range of projects and businesses, and assist with drafting, interpreting, and enforcing dispute resolution provisions. 

If you have any questions about this article or about construction dispute resolution, please contact the authors or a member of Gowling WLG's Infrastructure and Construction Group, or subscribe to our Building Brief newsletter to stay informed.