Amendments to Ontario’s Construction Act, introducing adjudication as a dispute mechanism, came into effect on Oct. 1, 2019. It is a process familiar elsewhere in the world and, in Ontario’s case, largely borrowed from the United Kingdom.
The past four years has provided a learning curve for both legal experts and their clients.
“There were always going to be growing pains as the construction and infrastructure industry and lawyers alike became more familiar with the process and substance of adjudication,” Edward Lynde, partner with Fasken Martineau DuMoulin LLP, told the Daily Commercial News. “Furthermore, many projects continued to be governed by the predecessor legislation, the Construction Lien Act.”
The 2023 Annual Report issued by the Ontario Dispute Adjudication for Construction Contracts (ODACC) makes for an interesting comparative analysis of the past four years.
“The construction and infrastructure industry appears to have a greater understanding of adjudication under the Construction Act,” Lynde observed, “particularly as additional interpretation and guidance is being provided by the court.”
This is reflected by the doubling of adjudications from 2022 to 2023.
Geographically, the process has served all areas of the province over a wide range of subjects and dispute types. Most relate to the valuation of contracted services or materials and their payments.
Breaking 2023 down into industry sectors and dollar amounts, some interesting trends emerge.
All sectors of construction saw significant growth in the number of claims made. However, the commercial sector outpaced all others significantly with a 252 per cent growth over 2022, more than double that of the public building and transportation/infrastructure sectors.
In terms of actual determinations, the commercial sector had a 283 per cent increase year-over-year, surpassed only by the public building sector with growth of 366 per cent. When it came down to the percentage of successful applications, all sectors were about equal, ranging from 59 to 64 per cent.
While the growth in adjudication claims and determinations points to wider understanding and acceptance, the monetary value of the actual determinations are interesting to note.
In all sectors, the amounts determined by adjudication were quite low, on average only 35 per cent of the amounts claimed. Dollar value determination percentages were even less among commercial and public building claims, at only 19 and 17 per cent respectively.
Reviewing these statistics, Lynde said certain trends are emerging that may foretell adjudication’s direction in Ontario.
“It would appear that adjudication has been utilized for small to mid-sized disputes. Large and complex disputes have not typically gone to adjudication. This would make sense and is congruent with the concept of adjudication as ‘rough justice,’ which may not be appropriate for disputes of a certain complexity or quantum.”
Lynde pointed out this trend is consistent to what was seen in the early stages of adjudication in the U.K. and other jurisdictions. Even though determinations are interim in nature, adjudicated resolutions hopefully means disputes may not find their way into more time consuming court proceedings.
“In this regard, if adjudication was an appetizer, it satisfied the appetite for dispute resolution, and the parties refrained from additional entrées, so to speak,” Lynde said.
Interestingly, Lynde noted adjudication in the U.K. has evolved and now addresses disputes with more complexity and quantum. Lynde also offered the observation the sentiment expressed within the legal community and Ontario’s construction and infrastructure industry, “appears to be shades of grey.”
“There seems to be many ardent supporters and vocal detractors, almost in equal measure, which may change over time as adjudication continues to take hold.”
In the meantime, Lia Bruschetta, a partner with Osler, Hoskin & Harcourt LLP, and associate Cole Tavener, write parties in dispute should be particularly aware of the short adjudication timelines prescribed by the act.
“It is important for stakeholders to be prepared for adjudication as well as for what comes after receiving an adjudication determination.”
It is also important to note courts have set a high threshold for judicial review of an adjudicator’s determination.
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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