If Ontario’s new adjudication system to resolve construction disputes works as well as its designers hope it will, the system will evolve into a mechanism of last resort, lawyers attending a recent Construction Act implementation workshop were told.
Construction lawyers Sharon Vogel of Singleton Urquhart Reynolds Vogel LLP and Geza Banfai of McMillan LLP hosted a session that dissected adjudication issues as part of an Osgoode Professional Development session in Toronto April 30.
Once the adjudication and prompt payment measures in the new act become law on Oct. 1, 2019, the mere threat of one party to a construction contract taking another party to adjudication should force owners and contractors to strive to resolve differences through other means.
“What do we need to do to make this work?” asked Banfai, a member of the advisory group assisting the Ministry of the Attorney General in implementing the new act. “My own view is that the real power of adjudication isn’t so much the fact that we have the process, it is the threat of it.
“The threat of current enforcement mechanisms is not much of a threat. This is. How do you respond to a threat? Well you agree to mediate a lot more.”
The Construction Act was passed by the Ontario legislature last December with many of the reforms to the province’s construction lien system due to take effect July 1. The new act calls for contractors to be paid within 28 days of receipt of an invoice, and subcontractors seven days after that down the chain.
Vogel, co-author of Striking the Balance: Expert Review of Ontario’s Construction Lien Act, the report commissioned by the Ontario government to recommend a template for construction lien reform, explained the linked payment and adjudication measures required a transition period in part because there is significant adjudication infrastructure to be set up.
“Hopefully cash will flow, that is what we really hope, through these mechanisms, prompt payment and adjudication,” she commented in an interview. “Parties will be more satisfied with the speed with which they are getting paid. And when they are not, they are going to have a mechanism to address that lack of payment.”
Panellists Banfai and Vogel explained an Authorized Nominating Authority (ANA) will be created with the authority to train and certify adjudicators, set up adjudications and establish a public registry of adjudicators.
Speaking personally, this will force lawyers to get to the point a lot quicker
— Geza Banfai
The adjudication clock will start ticking once an owner or contractor decides to dispute an invoice. Parties may agree on an adjudicator from the registry, but if they can’t, the ANA will have seven days to appoint one. The act outlines when documents must be produced and when a decision must be reached by an adjudicator — within 30 days of receiving documents, although the deadline can be extended if the parties agree.
The whole adjudication process is intended to be concluded in 46 days.
That’s a timeline that “freaks us out,” commented Eric Tilley, senior vice-president of legal services at Infrastructure Ontario, a panellist at an afternoon session discussing issues of interest to project owners.
“When you’re talking about the AFP (alternative, financing and procurement) side, what Infrastructure Ontario does, the nature and the size of the disputes that we are getting into, a 30-day resolution of those particular disputes, that is frightening, to me.
“I have heard the term ‘rough justice’ used. Sure, we need things to be faster, we need to be more accessible, there needs to be faster payment on disputes, but at the same time, 30 days to resolve a multi-hundred-million-dollar dispute, that’s really rough justice.”
Tilley later said, “Get ready, because it’s going to get a bit wild in terms of trying to meet those timelines.”
Banfai discussed the special needs of AFP projects and said after much negotiation that took into consideration the concerns of financing bodies, it was decided to permit the independent certifiers that play important roles in AFP contracts to serve as adjudicators.
As for “rough justice,” Banfai commented, “I think the legal community will need to do considerable adaptation in terms of its approach and its thinking. I think we, particularly lawyers, will need to get used to rough justice. Some of us are more used to it than others. If your prejudice is that justice cannot possibly be achieved without turning over every rock, reading every single email, and getting a ruling on everything you can think of…this regime will get stressful for you.
“Speaking personally, this will force lawyers to get to the point a lot quicker and identify the point a lot more sharply.”
Vogel said the new system is not meant to be a windfall for lawyers.
“It is the prospect of an adjudication that forces the parties to utilize other mechanisms, negotiating, mediation — mediation has increased sixfold in the U.K. with the introduction of adjudication,” she said.
The Osgoode Construction Law Certificate program continues Oct. 29 to Nov. 2 with topics including legal reform and construction projects 360.