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Legal Notes: Ontario’s mandatory adjudication packs a purpose and a punch other mechanisms lack

John Bleasby
Legal Notes: Ontario’s mandatory adjudication packs a purpose and a punch other mechanisms lack

Negotiate, mediate, arbitrate, adjudicate or litigate. There are a number of processes available in Ontario to resolve construction project disputes, some more amicable than others. However, according to Sahil Shoor, a partner with global law firm Gowling WLG, adjudication has purpose-specific features the others cannot match.

Adjudication is now mandatory in Ontario construction contracts, driven by the primary objective of maintaining the timely flow of funds throughout the construction pyramid so that work can continue smoothly.

Specifically, adjudication works on an invoice-by-invoice basis, Shoor told the Daily Commercial News. “You could have adjudication on every single invoice.”

In the U.K. where mandatory adjudication has been in place for years, Shoor’s Gowling associates speak of its great success, explaining that parties typically adjudicate on a month-to-month basis.

“You win some and you lose some.”

Where does that leave other forms of dispute resolution: negotiation, mediation, arbitration and litigation, for example?

“Mediation has been widely used for resolution of disputes in the construction industry since the early 1990s,” say Bruce Reynolds and Sharon Vogel of Singleton Urquhart Reynolds Vogel LLP. “It has been highly successful and continues to have broad application today. In fact, mediation is often mandated in complex construction cases.”

Shoor agrees.

“We are still going to have bigger issues to be negotiated, mediated and arbitrated.”

He cites the example of a design issue that has an ongoing impact on the project schedule.

“This will dictate how the parties are going to notify each other, and how the consultants on the job are going to make a ruling on whether to proceed through an informal mediation, whether to use the arbitration clause in the contract, or make a statement of claim and go to court.”

Even if an issue has commenced under adjudication, that doesn’t mean it can’t be negotiated or mediated. The issue is whether alternate methods can meet the desired goals within the same tight time frame set out by adjudication.

“It would be a little challenging, although not impossible,” Shoor says.

In fact, timelines for negotiation and mediation can be extended and customized through supplementary documents in the underlining contract.

Arbitration is another dispute resolution process that continues to be available. However, it is hardly amicable and is often as complex as litigation.

While the concept of adjudication is to expedite invoice payment, arbitration is typically undertaken at the end of the project, after it has achieved substantial completion. For example, a conflict could relate to the undetermined costs surrounding known issues, or to preserve the project’s limitation period.

As Shoor explains, “Typically there are a lot of documents, you have experts, you have expert reports, you have discoveries. All those things are part of an arbitration process whereas none of this really takes place in adjudication.”

Nevertheless, Shoor says there are advantages to arbitration versus proceeding through court litigation that relate to privacy.

“Arbitration is a private process, so if there are concerns pertaining to confidentiality you have that protection, whereas the court is open to the public unless you have a sealing order.”

Adjudication in Ontario is in its early days, says Shoor.

“It’s not just a small change, it’s an industry change. The parties in the construction pyramid are going to take a little bit of time to get used to it.”

He further explains adjudication will only affect projects fully contracted after October 2019. Some contracts are still being finalized and may still be in the design phase.

It’s not clear whether adjudication will reduce the number of disputes ending up in lengthier and more confrontational resolution processes. However, Shoor believes it’s important to focus on the larger issue at play.

“We certainly hope that parties can focus on bigger disputes through formal and informal dispute resolutions, whatever might be in their contracts, and really use adjudication for the purpose of getting funds flowing on a month-to-month basis.”

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

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