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Ontario government loses another battle in war with 407 (June 21, 2005)

TORONTO, Ont. -- The Ontario Court of Appeal has upheld a February 2004 ruling that 407 ETR has 60 days to address ...

TORONTO, Ont. — The Ontario Court of Appeal has upheld a February 2004 ruling that 407 ETR has 60 days to address a default in its contract with the Ontario government only after an arbitrator has decided that a default in the contract has actually occurred.

But the court has also ruled that 407 ETR must apply to the court for a deferral of the 60 days if an arbitrator is not immediately available to address the question of whether a default has occurred in the contract.

“Sometimes an arbitrator cannot be assigned within the first 60 days of the government claiming a default,” explained 407 ETR spokesman Rob Nicol. “That’s why the court amended the original February 2004 ruling.”

On Feb. 9, 2004, Ontario Superior Court Justice Ian Nordheimer issued a “final and declaratory” ruling that the contract’s 60-day “cure period” — the period of time allotted for 407 ETR to address any default of its contract with the government– could not begin until after an arbitrator ruled that a default had taken place.

But, according to today’s Court of Appeal ruling, the judge failed to provide a remedy that would have delayed the running of the cure period only until an arbitrator had determined the underlying dispute and the application of the cure period.

The issue of the “cure” period originally arose when the Government served the company with a default notice after the company raised tolls on Feb. 1, 2004.

Under the contract, the company has 60 days to “cure” a default. The government argued that the cure period ran from the date that the default notice is served, while the company took the position that the cure period does not begin until after an arbitrator rules that a default has taken place.

“The court has clarified an important provision of the contract regarding the cure period,” said Enrique Diaz-Rato, President and Chief Executive Officer of 407 ETR. “The court agreed with our fundamental point which is that the cure period does not automatically begin when a notice is served by the government, but only after the matter can be determined by an independent arbitrator.”

But the “cure” period battle is only the first of an ongoing war between the Ontario government and 407 ETR.
The dispute over the right to raise tolls is expected to be heard by the Court of Appeal later this year, following a recent decision by an arbitrator and the Superior Court in the company’s favour.

Today’s decision states that 407 ETR is not in default and its effect is that the running of the cure period has not commenced pending the upcoming Court of Appeal decision.
407 International Inc. is the sole shareholder, operator and manager of 407 ETR, which extends 108 kilometres east-west, just north of Toronto.

407International Inc. is owned by a consortium comprised of Cintra Concesiones de Infraestructuras de Transporte, Macquarie Infrastructure Group and SNC-Lavalin.

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