For all the dispute resolution advantages afforded under Ontario’s adjudication process, there is an assumption that the losing party will pay promptly. But what if they don’t pay? Collection can be an entirely new battle.
Under Ontario’s Construction Act, losing parties are allowed 10 days to pay an adjudicator’s order. However, rather than waiting, the winning party should take precautionary steps allowed as a backup plan.
A good first step would be to send a demand letter to the losing party immediately after receiving the order, writes Chad Kopach, partner with Blaney McMurtry in Toronto. This letter would remind them of the 10-day window allowance. He suggests a good follow-up would be to also file the order with the court and to send a second letter informing the losing party of that filing.
“Once the determination has been filed, and the 10-day period has expired without payment, the winning party can then start enforcement proceedings.”
There are a number of conventional enforcement tools available.
“However, the value of those tools depends on whether the unsuccessful party has assets,” associates Zach Flemming-Giannotti and Kyle Kuczynski of Cassels Brock & Blackwell LLP, and summer student Emily Di Bratto, told the Daily Commercial News.
Given the rights available beyond traditional enforcement mechanisms and statutory remedies, they suggest claimants consider construction liens, claims against labour and material bonds and breach of trust claims that can pierce corporate veils.
Their reasoning is that traditional enforcement mechanisms can take time, cost money and can still have uncertain outcomes.
Kopach describes some of the steps involved with those traditional enforcements such as third party garnishment, what he calls “the low-hanging fruit for enforcement.”
“Before garnishment, the winning party will register a writ of execution with the sheriff in any jurisdiction where the losing party might hold assets. In our experience, the best target for garnishment is money in a bank account.”
It’s important to register the writ in the correct jurisdiction, Kopach says.
“This will prevent the losing party from dealing with any real property in that jurisdiction while the writ of execution is outstanding, and ensure the sheriff knows what to do with garnished funds that are received.”
Once the writ of execution is registered, the next step is having the garnishment documents issued by the court. This being done, the garnishment notice must be served both on the bank and on the garnishee. In order to garnish a bank account, the name of the specific bank branch holding the losing party’s accounts must be identified in order to be served.
This process takes money. Kopach estimates costs ranging from $900 to $1,500.
It also takes time. Writs issuance, filing and serving can take about 30 days. Then the bank has another 10 days to respond and send the funds to the sheriff for disbursement. The sheriff has 30 days to disburse the funds. However, even the garnished amounts might be prorated if other parties have also registered writs of execution with the sheriff. And of course, there is the assumption that there is any money at all in the losing party’s bank account. You can’t get blood from a stone.
This is why Flemming-Giannotti, Kuczynski and Di Bratto suggest other means of enforcement. Even so, there are time deadlines with those that need attention.
“Exclusive reliance on traditional enforcement mechanisms could inadvertently allow the other methods’ time periods to expire before the traditional enforcement mechanisms yield any result. There is a strictly enforced 60-day time period to register a lien and, generally, a 120-day time period to give notice of a claim against a labour and material payment bond.”
If the claimant is still working under contract with the losing party, there is, of course, the option to stop work until the award is paid. This mechanism provides a higher level of leverage, Flemming-Giannotti, Kuczynski and Di Bratto explain, plus entitlement to reasonable demobilization and remobilization costs, and interest on unpaid amounts.
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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