The Ontario Court of Appeal recently weighed in on the enforceability of contractual limitation periods in the context of multi-tier dispute resolution clauses. In Ontario (Transportation) v. J & P Leveque Bros. Haulage Ltd., 2025 ONCA 573, the Court considered how a contractual limitation period applies in relation to dispute resolution provisions which require several steps be completed within a certain timeframe.
The case offers important guidance for anyone drafting, administering, or litigating contracts that impose time limits on dispute resolution.
Background
The Ministry of Transportation of Ontario ("MTO") hired J & P Leveque Bros. Haulage Ltd. ("Leveque") to rehabilitate a section of Highway 60. Their contract included a multi-step dispute resolution process which provided the following summarized steps be completed:
- The party raising a dispute must first issue a request for clarification to the contract administrator.
- The contract administrator then performs a "field level review" within 30 business days. The disputing party then has 15 business days to accept the result or otherwise reject it and file a notice of claim for a regional level review.
- A regional manager from MTO then has 60 business days to conduct a regional level review. Either party then has 15 business days to accept or reject the result. If rejected, they then have 15 days to elevate the claim to either a provincial level review or the referee process.
- In a provincial review, the MTO claims manager has 60 business days to issue its decision. Either party then has 15 business days to reject the result and proceed to the referee process.
- In the referee process, an appointed referee (or panel of referees) then has 90 business days to issue its decision.
- A referee's decision is binding unless, within 30 business days, a party files a notice of protest. After that, the parties had 60 days to attempt alternative dispute resolution (ADR) before starting litigation.
A key factor is that the contract required that the parties cannot resort to litigation unless (a) the review process had run its course, and (b) the litigation was commenced no later than two years after the date of contract completion.
Here's where things went wrong: the referee released its decision after the two-year period had already expired.
The contract between MTO and Leveque was completed on July 19, 2019. In September 2019, Leveque raised a dispute regarding additional payment it says was owed. The parties proceeded through the multi-step dispute process as set out above. On April 1, 2021, Leveque rejected the provincial level review and referred the dispute to a panel of referees.
The decision of the referee panel was not released until October 19, 2021. However, the two-year contract completion date already passed on July 9, 2021. The MTO promptly filed a protest of the referee decision and attempted to invoke ADR, but Leveque argued that it was too late and the contractual limitation barred further steps.
The motion judge agreed with Leveque and granted summary judgment. The Court of Appeal allowed the appeal, set aside the summary judgment, and ruled in favour of the MTO.
The Court's Reasoning
Two issues framed the appeal. First, how should courts review a standard form contract? Second, how does a limitation clause apply when a required step cannot be completed in accordance with a contractual deadline?
Standard of Review
Because the contract was a government-issued standard form contract, the Court held that its interpretation should be reviewed on a correctness standard. In other words, appellate courts need not defer to the lower court's reading of the language. This ensures consistency when the same wording is used in many contracts.
Limitation Periods and Common Sense
The Court emphasized that contracts must be read as a whole and interpreted in a way that accords with commercial common sense. Here, the two-year limitation provision assumed that the referee's decision would be released within that window. To require the MTO to protest a decision within the two-year limitation period despite the decision not yet having been released would be contrary to common sense: "It is commercially absurd to require a party to protest a decision that has not yet been released, just as it is absurd to conclude that a decision rendered late is, for that reason alone, final and binding on the parties."
The Court concluded that the contractual limitation could not bar the MTO's claim when the referee's decision arrived late. In such situations, the statutory limitation period under the Limitations Act, 2002 operates as a backstop; that is, the statutory two-year limitation period begins to apply from the date of discoverability (in this case, the date the decision was released).
Key Lessons
The Leveque decision stands for a straightforward but important principle: contracts must make sense in practice. If a multi-step dispute resolution clause requires steps that cannot physically be completed within a contractual deadline, the courts will not let one party use that deadline as a shield.
But the case also highlights the importance of clarity. Section 22 of the Limitations Act, 2002 allows business agreement contracts to provide for different limitation periods, but only if the contract's language is clear. Had the contract explicitly said that late referee decisions were final and unchallengeable, the outcome could have been different.
Practical Guidance
For drafters, project managers, and litigators, the decision provides several takeaways:
- Draft with contingencies in mind. If deadlines are strict, the contract should say what happens if steps are delayed. Silence on this point will likely invite the Court to interpret contractual deadlines in a manner that makes practical, commercial sense (in this case, by applying statutory limitation periods rather than contractual limitation periods).
- Distinguish between aspirational and mandatory timelines. Is the two-year period an absolute bar, or is it meant to guide the process? Make that explicit.
- Monitor disputes closely. Even if a contract deadline is missed, prompt action once a delayed decision is issued may preserve rights.
Conclusion
MTO v. Leveque underscores that courts will not enforce limitation periods in ways that defy logic or fairness. At the same time, it reminds contracting parties that clear drafting can avoid uncertainty. For those working in construction, procurement, or any field where standard form contracts govern disputes, this case is a valuable prompt to revisit your agreements to ensure they strike the right balance between certainty and practicality.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
