Legal Notes: Mandatory adjudication in Ontario is a year old, what has been learned?

Amendments to Ontario’s Construction Act under Bill 142 came into effect one year ago, in October 2019. Included was a mandatory adjudication mechanism, a quick method of determining binding agreements between contracted parties outside of the courts. The impact has been transformative, particularly in light of COVID-19’s arrival a few months later.

The number of adjudications has steadily grown.

According to the Ontario Dispute Adjudication for Construction Contracts (ODACC), the Authorized Nominating Authority under the Construction Act, 27 adjudications had commenced from October 2019 to June 30, 2020. This has ramped up to a total 40 by the first week of October 2020.

Important lessons have been learned along the way, particularly by those who have been on the receiving end of an adjudication determination.

First is the need to check for errors, say construction law specialists Carly Fidler, Lia Bruschetta and Jagriti Singh of Osler, Hoskin & Harcourt LLP . Since an adjudicator’s determination is binding, the decisions should be carefully reviewed for any typographical errors that might have a bearing on meaning. These must be reported to the ODACC’s Custom System within seven days.

There are other critical timelines.

“A party who is required to make a payment to comply with an adjudicator’s determination must do so within 10 calendar days after the determination has been communicated to the parties,” say Fidler, Bruschetta and Singh. That means internal processes required to approve and make payments must be in place. “Failure to make payment on time could result in significant consequences, including the possible suspension of further work by the successful contractor or subcontractor awaiting payment, until the amount required under the determination is paid, along with interest and reasonable costs resulting from suspension of work.”

However, a successful party who has not received a payment award within the 10 day period could find themselves facing payment demands of their own from those lower down the construction pyramid whose payments had been deferred pending the adjudication outcome. To avoid the squeeze, the successful party can opt to have the determination enforced as if it were a court order.

“Once a determination has been reflected in a court order, the party seeking enforcement can engage more traditional remedies like performing a judgment-debtor examination and seeking a writ of seizure and sale or garnishment,” say Fidler, Bruschetta and Singh. “These remedies have their own strategic considerations including timing and cost.”  

Often inter-party relationships must continue on a project even after a determination has been rendered and complied with. The matter can end there, or the unsuccessful party may decide to take the matter further through arbitration, mediation or the court. 

However, this too has implications that require consideration, say Fidler, Bruschetta and Singh.

“If the adjudicator’s determination is in relation to a contract before the certification or declaration of substantial performance, a party’s choice regarding whether to end the dispute or pursue it further will have an effect on the contract price in determining substantial performance under the Construction Act. Any amounts ordered by an adjudicator to be paid (or deducted amounts if overpaid) will be added to (or subtracted from) the contract price in determining substantial performance.”

Ultimately, the adjudicator’s determination can only be set aside under limited circumstances, such as legal incapacity of the parties, alleged bias by the adjudicator, fraud or a breach of the principles of natural justice. This latter instance is the most likely to succeed, say the Osler specialists. They offer examples.

“A party might argue that the adjudicator overstepped, and has decided something that was not part of the referred dispute. A party might argue that the adjudicator has decided an issue that is not properly the subject of adjudication under the Construction Act.”

In any case, applying for a judicial review of an adjudicator’s determination does not relieve the unsuccessful party from its obligation to pay any amounts awarded, not until the determination is overturned by a divisional court.

John Bleasby is a Coldwater, Ont. based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.