Ontario now has three years of adjudication under its belt after changes were made in 2019 to the province’s Construction Act (formerly the Construction Lien Act).
An analysis of adjudication statistics published by MLT Aikins LLP indicates an increase both in the number of hearings and in amounts claimed. Interestingly however, while the total value of all claims increased to over $35 million in 2022, and individual claims increased by over 300 per cent to $270,000, there was a low level of success over the past two years.
“For both 2021 and 2022, the average amount awarded by adjudicators was only around 10 per cent of the average amount claimed (10.4 per cent and 10.3 per cent, respectively),” says MLT Aikins. “This is potentially surprising, as claimants generally have an advantage in being able to prepare their claim prior to initiating the fast-track adjudication process.”
It could be that some adjudication claims are being settled quickly out of court. The report notes in 2022, “24 of 121 adjudications were terminated prior to a determination, with 17 of those being settled outside the adjudication process.”
Of course, adjudication is only one method of resolving disputes. Although less formal than a full court proceeding, where available adjudication is usually governed by strict timelines. What is often preferred as an alternative when reconciliation fails, is an arbitration process agreed to between the parties under their contract.
The authority of an arbitrator should not be underestimated.
As described by Montréal lawyer Catherine Jing Ou, “An arbitrator’s task is to interpret the words of the contract informed by the factual matrix. The goal of contractual interpretation is to ascertain the objective intention of the parties at the time of contract formation. In order to reach this goal, the arbitrator’s interpretation is expected to remain grounded in the text of the contract so as to avoid effectively creating a new agreement between the parties.”
Arbitration has become a more popular way to resolve disputes without the cost and time involved with a full court case or the legislated time restraints of adjudication.
However, problems arise when one party isn’t happy with an arbitrator’s ruling.
As Toronto-based facilitator, mediator and arbitrator Michael Erdle writes, “One of the main reasons to choose arbitration is that parties want a decision that’s final and binding. Until they lose. Then they want a court to give them a do-over to fix the arbitrator’s terrible mistakes.”
However, when the arbitrator’s authority is questioned in court, the judge almost always upholds the arbitrator’s ruling. As Ou says, the arbitrator deals with the facts surrounding the contract, whereas a judge makes ruling based on law.
In fact, even when an arbitrator drifts into areas of law, the court still supports the original ruling, as Legal Notes outlined recently in the Tall Ships Development vs. City of Brockville dispute. A case from British Columbia went the same way.
As Erdle writes, “The case involved a claim for unpaid invoices on a construction project and a counterclaim for negligent work. The arbitrator awarded damages to the builder and dismissed the counterclaim. The developer was granted leave to appeal to the BC Supreme Court on three questions of law under the Arbitration Act.”
While the appeal justice did determine that the arbitrator had made errors in law, his words speak to how similar disputes are likely to turn.
“I agree that the arbitrator misstated the law in some respects and referred to legal principles that had no obvious application to the task at hand. However, when the award is read as a whole, I do not consider that these erroneous statements affected the determination of the largely factual issues required to be resolved. The result would be no different if a standard of review of correctness were applied.”
There will be winners and losers no matter what dispute resolution path is chosen. However, negotiation, adjudication or arbitration would each seem a more satisfactory route versus going to court.
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Noes column ideas to firstname.lastname@example.org.