Canada’s judicial process is rooted in the principles of justice, equity and the rule of law.
In turn, our legal system emphasizes the principles of procedural fairness and due process to ensure access to a fair and impartial process when interacting with the legal system.
The same applies to adjudication under Ontario’s Construction Act. As Faren Bogach of Construct Legal points out, while adjudications under Ontario’s Construction Act are meant to be speedy and targeted, “the procedure still needs to be fair.”
A recent adjudication determination represents an example where the fairness of proceedings was questioned.
Ledore Investments Limited, c.o.b. as Ross Steel Fabricators & Contractors, sought payment of three invoices rendered to Dixin Construction related to its subcontracted supply of services and materials on a project at Lambton College.
Dixin not only failed to pay the invoices but also failed to deliver a Notice of Non-Payment to Ross Steel in accordance with Part I.1 of the act.
The act requires contractors who receive full payment of a “proper invoice” from owners to either pay subcontractors or deliver a Notice of Non-Payment stating its intension not to pay within seven days.
“The adjudicator concluded that Dixin was not required to pay Ross Steel for the invoices,” Brad Halfin, partner at Goodmans LLP, and associate Jill Snelgrove, told the Daily Commercial News.
“But his reasoning turned on a point neither party had raised nor had an opportunity to make submissions on. He determined that the prompt payment provisions of the act were not engaged because Dixin’s (upstream) invoice to the owner for amounts including Ross Steel’s claim was not a ‘proper invoice.’”
Adjudicator Chad Kopach indicated that had the correct prompt payment provisions been engaged, he would have found that the three invoices, for which no Notice of Non-Payment was given, must be paid, Halfin and Snelgrove said.
“The adjudicator determined that Dixin, by its own actions, was not obligated to deliver a Notice of Non-Payment to Ross Steel and therefore, its failure to deliver that notice was inconsequential.”
“Dixin was able to set-off and defend against the amounts being claimed by Ross Steel, a conclusion that the adjudicator could not have reached but for Dixin’s failure to give a ‘proper invoice’ as required by the act,” they said.
The adjudicator’s interpretation brings forth potential implications that may not have been contemplated in the act, perhaps, as the adjudicator noted, causing a contractor to take advantage of its own failure to comply with its obligations under the act.
“The general intent of the legislation is to allow rough justice and to provide deference to adjudicators except in the strictest of enumerated circumstances,” write James Little, partner with Singleton Reynolds LLP, and associates Nicholas Reynolds and Adam Rose.
“After reviewing the facts and the relevant law, the Court made a rare decision to remit the matter back to the adjudicator for further consideration on the basis that the conduct of the adjudication amounted to a breach of procedural fairness.
“In the Court’s view, the problem with the adjudication was not so much that the parties did not raise the issue, but more so that the adjudicator’s determination was not tested by the adversarial process,” they continue.
“The Court noted that both parties could have ‘offered valuable insights to the adjudicator, had they been given the opportunity,’” continue Little, Reynolds and Rose.
“The Court observed that it was ‘fundamentally unfair’ to determine the dispute on an issue that neither party spoke to. The losing party has had no opportunity to know the case it has to meet, or to address the issue that has been determined to be decisive.”
This highlights issues related to “principles of fairness rooted in the more traditional format of adversarial dispute resolution,” they say. It could also cause the “over-legalizing” of adjudication.
“It may be easy to envision sophisticated parties raising technical points of law and policy as ‘determinative’ in an attempt to obtain a tactical advantage over less experienced, self-represented counterparties to adjudication.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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