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Legal Notes: Adjudication in the time of COVID-19

John Bleasby
Legal Notes: Adjudication in the time of COVID-19

Amendments to Ontario’s Construction Act that came into effect last fall have transformed the construction industry in the province. In Parts One and Two of this Construction Act series, prompt payment and dispute timelines were examined. Part Three considers the process of adjudication.

Ontario’s adjudication process is intended to provide a faster, less cumbersome and less expensive payment dispute resolution mechanism than court proceedings. As such, the process needs to be considered as part of the Act’s overall objective of improving the flow of funds between contracted parties.

A request for adjudication, only allowed between contracted parties, must commence before work under the contract expires unless otherwise agreed. Notice must be given that includes details explaining the nature of the dispute and the type of redress being sought. Disputes that qualify for adjudication focus on payment issues, such as costs associated with approved or proposed change orders, non-payments subject to a Non-Payment Notice, holdbacks and other retained amounts.

As with other portions of the Act amendments, there are strict timelines tied to the adjudication process. The first relates to the selection of the adjudicator. Within four days of Notice being given, two things have to occur — both parties must agree on an adjudicator, and that adjudicator must agree to take on the dispute.

A registry of qualified adjudicators is maintained by Authorized Nominating Authority (ANA). Although adjudicators do not require a legal background, 10-years minimum experience in the industry at some responsible level is expected.

If the parties agree, there is a further five days allowed for the transmission of documents from the referring party to the adjudicator. The adjudication process and written determination must be completed within 30 days. However, this can be extended, either for 14 days at the request of the adjudicator if both parties consent, or for a specified period agreed to in writing by both parties and approved by the adjudicator.

However, if the parties cannot agree on an adjudicator, or if the adjudicator declines, the matter is referred to the ANA at the request of the party giving notice. The ANA will then appoint an adjudicator within seven days, after which the same procedural timelines apply.

Of particular interest during this period of COVID-19 is the adjudicators’ authority to conduct adjudications as they deem appropriate. Robert Kennaley of Kennaley Construction Law explains. “It is understood and anticipated that many (if not most) adjudications will be conducted in writing only, without the adjudicator or hearing verbal submissions or from witnesses,” he told the Daily Commercial News. “Where the adjudicator determines that an actual hearing of some description is necessary, it will be in the adjudicator’s discretion to require a virtual hearing.” Kennaley adds that any objections to such a process would be made on a case by case basis.

As Gowling outlines, the adjudicator’s discretion includes the power to “make directions respecting the conduct of the adjudication; take the initiative in ascertaining the relevant facts and law; draw inferences based on the conduct of the parties to adjudication; and conduct an onsite inspection.”

As part of the final determination, the adjudicator can assess procedural costs as seen fit — usually shared, although possibly levied against one party for actions seen as “frivolous, vexatious, an abuse of process or bad faith.” This can include the costs associated with other qualified persons in the construction or accounting industries who might be called upon by the adjudicator for assistance.

The option remains for a either party to make application to the court to enforce the adjudicator’s ruling. Furthermore, if the adjudicator’s ruling is not paid, the aggrieved party has the right to suspend work or terminate the contract.

This expedited adjudication process is new to Ontario. However, drawing on the example of the U.K. model on which the Ontario was based, Gowling suggests that few cases will likely go beyond adjudication to the courts — the system appears to be effective.

Review previous instalments of this series:

 

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

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