A recent decision by Ontario Divisional Court makes clear the importance of adhering to the spirit and letter of Ontario’s prompt payment regime under its Construction Act.
For example, if a client party wishes to seek a judicial review of an adjudicator’s determination, the amount determined by the adjudicator must either be paid or a stay must be successfully granted by divisional court. If not, the court might dismiss the application for a judicial review entirely, regardless of any case merit.
The case in question involves work performed on a dental clinic in Vaughan, Ont. by contractor Andrid Group. The client, SOTA, did not dispute the invoice within the 14-day period allowed under Ontario’s Construction Act, but also did not pay. In response, Andrid commenced adjudication proceedings under the act’s prompt payment provisions. The adjudicator awarded Andrid approximately $38,000. Andrid was only able to recover a nominal amount from SOTA, leaving a large portion outstanding.
SOTA then sought and was granted leave to bring an application for a judicial review of the adjudicator’s determination, write Paul Ivanoff and Lia Bruschetta of law firm Osler Hoskins & Harcourt. Meanwhile, SOTA still did not pay Andrid the balance of the adjudicator’s determination. That’s not the way it’s supposed to work, Ivanoff and Bruschetta explain.
“Under the adjudication provisions of the Construction Act, an application for judicial review does not operate as a stay of the implementation of an adjudicator’s determination unless the divisional court orders otherwise, therefore a party’s obligation to pay amounts under the determination remains in effect. While SOTA was made aware of this issue by the divisional court, no stay motion was brought.”
What should have happened is that, if SOTA wanted a judicial review of the adjudicator’s determination after being granted leave to apply, it should have paid the determination or pursued a motion to stay. It did neither.
In fact, SOTA claimed, without any substantiation, that “there was no money” to pay the adjudicator’s determination. As Sahil Shoor and Thomas Hunter of Gowling WLG write, the court not only rejected this argument, but said if SOTA was indeed insolvent, it should not be allowed to “run up costs and delays through recourse to litigation.”
Even obtaining a stay would have been a challenge, Faren Bogach of Construct Legal told the Daily Commercial News.
“The test for obtaining a stay of an adjudicator’s decision would be very difficult to meet in most, if not all, circumstances.”
What can one learn from this case?
“The SOTA case illustrates the importance of understanding the processes surrounding adjudications in Ontario, as well as recognizing the required steps after receiving an adjudication determination,” write Shoor and Hunter. “A party looking to set aside the determination of an adjudicator through an application for judicial review must adhere to the timelines set out under the Construction Act.”
Shoor and Thomas add that in addition to the 14-day review period of an invoice, “a motion for leave to bring an application for judicial review of a determination of an adjudicator must be filed no later than 30 days after the determination is communicated to the parties.”
Ivanoff and Bruschetta add the case, “highlights the importance of not only understanding the application and processes that govern adjudications in Ontario, but also understanding what comes next after receiving an adjudication determination.”
The situation is one of “pay then play.”
“If a losing party is to seek leave on an application for judicial review of an adjudicator’s decision, it will generally have to pay the amount of the determination first,” says Bogach.
“An applicant must either obtain a stay of the adjudicator’s determination, or make payment, or risk the dismissal of its application for a judicial review altogether,” write Ivanoff and Bruschetta.
“The decision seems to suggest that the courts will be strictly enforcing not both the provisions and the spirit of the prompt payment regime in the Construction Act,” said Bogach.
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to firstname.lastname@example.org.