Background.
Agreements between two sophisticated parties are generally looked at a different light by the courts. A court is likely to adopt a textual interpretation of the agreement. This contrasted to how legislation is generally interpreted nowadays, where a purposive interpretation is taken by the courts.
In this recent case, the Government of Canada accepted a bid from a proponent (“Tower”) for the replacement of all the windows of a federal penitentiary.
Tower was given a lump sum by Canada to complete the project.
Tower incurred further charges that it sought to obtain from Canada. Tower submitted a “claim” under the governing agreement between the parties. Canada rejected the claim and issued a final decision. Tower acknowledged receipt of the decision.
The terms of the dispute resolution clause required Tower to dispute the decision within 15 day of the decision. However, Tower failed to do so.
It now brings an action of which Canada brought a summary judgment to dismiss the case altogether.
Court.
The court decided that there were no material facts in dispute and there was no genuine issue for trial.
The court rejected Tower’s argument that there was an implied waiver to the dispute resolution deadline to challenge a final decision. The court reasoned that Tower’s evidence does not support such an implied waiver.
The court held that Canada adhered strictly to the terms of the agreement throughout the duration of the contract. It never once paid Tower outside of the strict processes contemplated in the GC, which included provisions related to dispute resolution in the event of disagreement.
There was no air of reality to Tower’s waiver argument, the court held. The court reasoned:
[22] There is simply no air of reality to Tower’s waiver argument. Tower was a sophisticated commercial enterprise engaged in a multi-million-dollar contract with the Government. It knew that it would have to comply with the strict terms of the GC to receive additional payment totalling over $1,000,000. Most tellingly, Tower employed the process outlined in the GC to make the 2013 Claim in the first instance.
The court then went to stating that when Tower failed to provide notice of the dispute to Canada, it accepted Canada’s final decision. The court justified the importance of binding notice provisions in a contract through policy rationales. Holding that the purpose of binding notice provisions is to provide the other party with sufficiently detailed information to allow it to consider its options and take corrective action before the contractor pursues a claim.
Noting that such policies is important in disputes in government construction contracts, which involve sophisticated commercial enterprises, a competitive bidding and selection process, use of public funds, contracts of adhesion, and which have precedential value beyond the immediate parties: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] SCC 37 at para. 37-43.
Takeaway.
The courts place a high standard on sophisticated commercial parties to follow the contract with precision. With good reason, contracts such as the one in this case must have taken months or even years to create. For a court to start setting aside displaces first contract law principles such as consensus ad idem and the many other principles that govern our contract law. Not to mention the time and energy invested to govern the parties.
