References and Construction Claims
By Harvey J. Kirsh, B.A. (Tor.), LL.B. (Osg.), LL.M. (Harv.), C.Arb., C.S.
Many government infrastructure projects in Canada now call for the appointment of a “Referee” and for the use of an alternative dispute resolution process called a “Reference” for the relatively informal resolution of disagreements, claims, and disputes arising out of the project agreement. It has worked effectively in Ontario, Nunavut and elsewhere.
Government procurement contracting will sometimes call for all disagreements, claims, and disputes, including those in respect of the interpretation, breach, performance, or validity of the project agreement, to be resolved in accordance with a Reference. The process, which is mandated strictly by the contract between the parties, is launched by the appointment of a Referee who has authority and jurisdiction over the process.
The Nunavut Reference
The Government of Nunavut, one of the Territories of Canada, recently participated in a Public-Private-Partnership with a joint venture of design-build and engineering contractors, as well as financial partners, relating to the development, financing, design, construction, operation and maintenance of an infrastructure improvement project in Nunavut’s capital, Iqaluit.
The project agreement included a dispute resolution provision which contemplated that representatives of the Government and the joint venture contractor would initially meet on a without prejudice basis in an attempt to negotiate a settlement of the dispute. If the dispute were not resolved by direct negotiation, then a “fast-track referee process” would be instituted, which generally provided:
- that the appointed Referee would conduct an independent, confidential, and without prejudice review of the dispute “in such manner as the Referee thinks fit” (thereby permitting the Referee to tailor or prescribe his or her own terms of reference);
- that the Referee would render a written, reasoned, and impartial decision regarding the dispute; and
- that the decision of the Referee would not be binding on the parties but is intended to assist them in reaching agreement with respect to the dispute.
In this case, all parties agreed that:
- there would be no pleadings, and that the contractor’s notice of dispute would constitute its claim document, and that the Government’s response would constitute its defence document;
- there would be no pre-hearing oral examinations of any witnesses or of representatives of either party;
- neither party would submit experts’ reports;
- the parties would not submit hearing memoranda; and
- at the hearing, there would be no examinations or cross-examinations of witnesses, but rather each party’s representative would make an oral presentation of its respective case. Furthermore, there would be no court reporter, and no transcript would be prepared of the hearing.
In the circumstances, the Referee was left to determine liability, at least preliminarily, on the rather circumscribed and limited basis of the notice of dispute, the response notice, and the unsworn oral presentations made by representatives of the parties.
If the dispute is not completely resolved as a result of the decision of the Referee, then, within a short time frame thereafter, either party may commence proceedings to have the dispute finally resolved either by arbitration or litigation, and the proceedings before the Referee would not be admissible into evidence in any such subsequent proceedings.
The Ministry of Transportation of Ontario Reference
The Ministry of Transportation of Ontario (MTO) enters into capital contracts for the construction, reconstruction, maintenance and repair of bridges, highways and roads in the province. The scope of such contracts includes a host of incidental services relating to, for example, traffic management, signage, resurfacing, grading, drainage, bridge and culvert design or rehabilitation, and paving.
MTO’s construction contracts typically provide for the appointment of a neutral Referee, who is required to conduct an independent, confidential, and impartial review of the dispute, without any reasonable apprehension of bias.
The Reference process contemplates that:
- the party initiating the claim must submit to the Referee and the opposing party a written notice of claim, and the MTO must then respond with a written submission explaining its defence;
- the Referee will then hold a meeting with the parties to obtain whatever clarification may be necessary regarding the claim and the defence. The meeting “will not be conducted as formal presentations but as a meeting for the Referee to ask questions of either party in the presence of all the parties as the Referee requires”;
- the Referee’s responsibility is to consider only the facts associated with the claim and to issue a provisionally binding written and reasoned decision, which “may direct an award of actual costs or an Extension of Time, or both”, all in accordance with the terms and conditions of the construction contract. The Reference process requires that the MTO and the contractor abide by the decision from its date through to contract completion; and
- If a party disputes the Referee’s decision, that party must deliver a Notice of Protest to the other party within 30 business days. In the absence of any Notice of Protest, “the Referee’s decision shall become final and binding”.
There are no oral examinations for discovery, no fact or expert witnesses, limited documentary production, and virtually no legal submissions, and, as is the case with the Nunavut Reference procedure, the Referee is left to determine liability on the limited basis of the notice of claim, the information and project documentation, and the parties’ unsworn submissions.
The MTO Reference procedure provides a measure of finality to the dispute if neither party contests the Referee’s decision by serving a Notice of Protest. By contrast, the Nunavut Reference procedure does not promote the same measure of finality in that the default under that procedure is that it leaves the door open for either party, after the issuance of the Referee’s decision, to commence proceedings to have the dispute finally resolved either by arbitration or litigation.
Harvey J. Kirsh, B.A. (Tor.), LL.B. (Osg.), LL.M. (Harv.), C. Arb., C.S., is an Arbitrator, Mediator, Adjudicator and Referee with Kirsh Construction ADR Services Ltd. His biographical information and contact coordinates may be accessed at http://kirshadr.com/