Adjudication under Ontario’s new Construction Act

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By David I. Bristow, QC, LSM, C.Arb
Adjudication is somewhat similar to a mandatory arbitration, with new and strict rules leading hopefully toward ‘prompt payment’ legislation under Ontario’s new Construction Act. Part II.1 of the Bill, “Construction Dispute Interim Adjudication,” covers interim adjudication in Section 13.1 to Section 13.24.

Before diving into the topic, it is important to note this article is not an opinion as to whether the adjudication amendments will be favourable or unfavourable to the industry, but simply explores what the adjudication amendments say. Prompt payment is one of the major objectives of the Act as a whole and Part II.1 certainly follows this objective.

Similar versions of the proposed Part II.1 have been enacted in the United Kingdom, Australia, New Zealand, and Singapore. While reportedly working satisfactorily, none of those examples of legislation contain anything similar to the province’s Construction Lien Act beyond the adjudication section. (For more information, see the December 2006 paper, “The Adjudication Option: The Case for Uniform Payment and Performance Legislation in Canada,” by Duncan W. Glaholt. This remains the definitive writing in Canada on adjudication in other countries. Visit www.glaholt.com/files/adjudication_-_construction_law_reports.pdf.)

Bill 142 received First Reading in the Ontario Legislature on May 17, 2017, and Second Reading on Wednesday, October 4, 2017—it was “on Division,” which means it was not unanimous. Third Reading will hopefully take place before year’s end, with Regulations by early 2018. It is anticipated the Act will be passed by the spring. However, all this remains to be seen.

How will adjudication work?
‘Adjudication’ means the construction dispute interim adjudication of any matter that falls within Part II.1, and if one party is not satisfied with the adjudicator’s decision, the party can proceed with a court action or an arbitration to reverse what the adjudicator has decided. The adjudicator’s decision, however, must be followed immediately.

Who will be the adjudicator?
The Lieutenant Governor-in-Council may designate, by regulation, an entity to be the Authorized Nominating Authority (ANA) for the appointment of adjudicators.

The duties of the ANA include:

  • developing and overseeing programs for the training of persons as adjudicators;
  • qualifying adjudicators;
  • maintaining a publicly available registry of adjudicators;
  • appointing adjudicators; and
  • performing any other duties of the Authority as set out in this Part or that may be prescribed for the purposes of this Part.

The powers of the ANA are, subject to the regulations, to set fees for training and qualifications of persons as adjudicators (and for the appointment of adjudicators), and to require their payment. They can also exercise any other power set out in this Part (or that may be prescribed for the purposes of this Part). It is contemplated most of this will be done through regulations, which, at present, are a work in progress.

What disputes can be adjudicated?
The following disputes can be adjudicated:

  • the valuation of services or materials provided under
    the contract;
  • payment under the contract, including in respect of change orders, whether they are approved or not, or of a proposed change order;
  • disputes that are subject of a Notice of Non-Payment under Part I.1;
  • amounts retained under Section 12 (set-off by Trustee) or under Section 17.3 (lien set-off);
  • nonpayment of hold-back under Section 27.1; and
  • any other matters to which the parties to the adjudication agree, or that may be prescribed.

Expiry of adjudicating period
An adjudication may not be commenced if the Notice of Adjudication is given after the date the contract or subcontract is completed, unless the parties to the adjudication agree otherwise.

‘Multiple’ matters
Adjudication may only address a single matter unless the parties to the adjudication and the adjudicator agree otherwise.

Application despite other proceedings
A party may refer a matter to adjudication even if the matter is the subject of a court action or of arbitration, unless the action or arbitration has been finally determined.

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