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Adjudicator’s Determination “Not Determinative” on Motion to Return Security

Arad Incorporated v. Rejali, 2023 ONSC 3949

This was a motion brought by the defendants under section 44(5) of the Construction Act for the return of monies paid into court to vacate a lien. The sole issue on the motion was whether the court should order the return of the monies paid into court, on the basis that an adjudicator determined the lien claimant was not entitled to any amount.

The parties participated in two adjudications under Part II.1 of the Act. The adjudication initiated by the plaintiff contractor was for alleged monies owing for work performed. The adjudication initiated by the defendant owner was for monies allegedly overpaid to the plaintiff’s principal. The adjudicator dismissed both adjudications, finding that neither party owed the other any amounts.

The defendant relied entirely on the adjudicator’s determination in support of its motion. The only materials before the court on the motion were two affidavits sworn by one of the defendant’s lawyers, setting out the history of the action and attaching the adjudicator’s determination.

Justice Sutherland dismissed the motion, finding that the Court did not have sufficient evidence before it to conclude that the lien claim did not require security. On a section 44(5) motion, the court must be satisfied “that there is no reasonable prospect of the lien claimant proving that the lien claimed attracts the requirement to attract security”. Justice Sutherland found that the adjudicator made some findings based on inadmissible evidence and based on his own opinion as an engineer rather than the expert reports. The adjudicator’s determination alone did not meet the evidentiary threshold for the court to conclude that the lien claim did not require security.

Though it is appropriate for the court to consider an adjudicator’s determination on a section 44(5) motion, “adjudicator’s conclusions are not determinative” on the court’s decision to reduce security. The Court went further, stating that “the court should be wary” of relying solely on the findings of an adjudicator to reduce or return security given that that adjudications have different rules of evidence, and all evidence led in adjudications is not subject to cross examination.

The Court further stated that to permit the plaintiff’s security be returned or reduced would contradict the purpose of the Act by providing owners and contractors an easier means to invalidate security for lien claims. This would contradict the purpose of the adjudicative process, which is an interim procedure designed to keep monies flowing down the construction pyramid – not to determine parties’ legal rights on a final basis.