Scott R. Fairley – Partner, Gionet Fairley Wood LLP
The Construction Lien Act, as it used to be known, was amended in two stages to create the current Construction Act. The second stage of those amendments, effective as of Oct. 31, 2019, implemented both the prompt payment regime and the adjudication process. As we have now had some experience with adjudications, this article is intended to provide information and insight into the process. While there seemed to be an initial reluctance to use the adjudication process, it is proving to be a useful tool that should be considered along with remedies such as liens, bond claims and breach of trust actions.
What is adjudication?
Adjudication is designed to provide a prompt interim decision to resolve certain disputes that can arise during the life of a project. A decision that is made through an adjudication is an interim decision, but it must be followed. If any party wishes to bring court proceedings relating to the same issues at a later date they can do so, but they must abide by the adjudication result in the meantime. The hope and expectation is that interim decisions are implemented and not revisited in subsequent litigation. However, the immediate goal is to quickly resolve issues and keep the project on track.
Through the adjudication process, the parties to a construction dispute appoint a certified adjudicator to determine the dispute under tight timelines, such that a binding and enforceable decision is made within 35 days. The adjudication process is administered by the Ontario Dispute Adjudication for Construction (ODACC). Detailed and helpful information about the process can be found on ODACC’s website: www.odacc.ca. ODACC operates a web-based portal through which a party can initiate an adjudication, appoint an adjudicator, file materials, and receive the adjudicator’s decision. The on-line process includes various model processes, most of which are based on written documents and submissions, without live witnesses or oral arguments.
The adjudication process is commenced by creating a Notice of Adjudication through the ODACC portal. It is also possible to commence an adjudication without using the on-line system, for those who wish to do so based on printed materials. Once the case is created within the ODACC system, it sends an email to the respondent advising that an adjudication has been commenced. The timelines are tight, as the respondent has only four days to respond to the initial notice, and an adjudicator is appointed on consent, or seven days after a request that ODACC appoint one. The adjudicator registry includes certified adjudicators who are engineers, project managers, lawyers, contractors and others. Documents are due to be delivered within five days after the adjudicator is appointed, and the default deadline for the adjudicator’s decision is 30 days after the claimant delivers it documents. As such, the parties can expect that the adjudication will be a fast moving and less formal process that will result in a binding decision quickly. There are very limited opportunities to challenge an adjudication decision, and a decision can be enforced with the authority of a court order.
What issues can be determined by adjudication?
Most of the types of disputes that will be subject to adjudication are set out in section 13.5 (1) of the Construction Act. The majority of these disputes relate to the valuation of services, payment, change orders, and payment of holdback, but can include other matters that the parties agree to submit to adjudication. These issues, which are among the most commonly raised during a project, can be determined on an interim but enforceable basis, with the parties reserving their right to have the issued determined on a final basis through litigation at a later date.
The experience so far?
The transition provisions that implemented this process in October of 2019 are somewhat complex. The adjudication process applies to contracts entered into after Oct. 31, 2019, where there was no procurement process commenced, or prior contract on the project, before the transition date. As such, the number of adjudications per year is increasing as we move further from the commencement date. ODACC publishes Annual Reports on its website which demonstrate this trend. For example, the 2021 ODACC Annual Report outlined that there were 50 adjudications commenced in Ontario in 2022. According to the 2023 Annual Report, there were 269 adjudications commenced in that year and 161 determinations rendered.
In relation to the hands-on experience, we have found the process to be very user friendly. The information that is found on ODACC’s website is very helpful and includes extensive descriptions of the process and instructional videos. Commencing an adjudication is relatively straightforward. The parties are free to settle cases at any stage during an adjudication, and we have found this to be a regular outcome. Commencing an adjudication, with its tight timelines, tends to cause parties to assess their position, and can motivate them to settle quickly.
In relation to pursuing payment, an adjudication decision requiring payment can be enforced with the strength of a court order, including garnishment of payments and bank accounts. While the decision is interim, its enforcement can seem quite final, and can cause a lien a lien or court action to be unnecessary. As such, this process can be useful tool to obtain payment in a short amount of time, regardless of its interim nature.
Finally, some clients have found the adjudication process to be one that they can initiate and advance themselves, without legal representation, or with representation in the background. There is no requirement that a party have counsel, and we have clients who have set up accounts with ODACC and commence their own adjudications with satisfactory results.
In summary, we have found adjudication to be a useful and efficient process. It can be a process that is much faster and less expensive than the other options, and should be considered by those who have disputes. The time and effort of reviewing the information on ODACC’s website would be time well spent.