In June 2020, Glaholt Bowles LLP completed one of the first adjudications under the new Construction Act, R.S.O. 1990, c. C.30 (the “Act”).
The adjudication provisions under Part II.1 of the Act came into force on October 1, 2019 and were developed to ensure continuity of work on jobsites and cash flow through the construction pyramid.
Adjudication is available where both the procurement process (if any) is started, and the contract is executed, after October 1, 2019. It is unavailable in situations where the contract may have been executed after October 1, 2019 but the procurement process was commenced prior to that date. In other words, both the procurement process (if any) must have commenced and the contract must be formalized after October 1, 2019 for adjudication to be an option.
This article discusses a first-hand experience of legal advocacy in an adjudication and provides insight into whether this new form of dispute resolution serves to meet the legislative goal of efficient resolution of contract disputes on construction sites.
The Decision to Adjudicate
The decision to pursue adjudication on behalf of a subcontractor client (the “Claimant”) was based on several factors including availability of adjudication, the nature of the dispute and client cost considerations.
Our firm saw an opportunity to explore a quick form of resolution which had the potential to meet the needs of our client. The claim centered on a residential project dispute between two private individuals and involved no procurement process. Section 87.3 (4) of the Act, the transition provision, makes it clear that in determining the availability of adjudication, the contract governs.
Here, the contract between the contractor and owner of the residence had been formalized after October 1, 2019. The subcontractor’s agreement was also formalized after October 1, 2019. It is important to note that had the contract been effective prior to October 1, 2019, it would not have mattered that the Claimant, as subcontractor, entered into the agreement after that date. Adjudication would not have been available in those circumstances.
We grappled with a few anomalies in deciding whether to pursue adjudication. First, there was no written agreement but only an oral agreement along with payment records and various communications (emails, texts) related to the subcontract. Second, section 13.5(3) of the Act explicitly states that adjudication is not available when a contract or subcontract is complete, unless the parties agree otherwise.
In our case, if section 13.5(3) had been raised, we were prepared to take the position that the “completion” of a contact was not the same as an effective termination of the contract (as in our case) and therefore the adjudication period had not expired for the Claimant. To reiterate, adjudication is meant to be a “real time” resolution vehicle for active projects which is why it is unavailable in contracts that are completed.
The types of disputes that may be referred for adjudication are listed under section 13.5(1) of the Act. We determined, based on the facts, that the Claimant’s dispute fell into the category of “payment under the contract”.
We continued our analysis of whether to pursue adjudication by taking stock of the scope of the claim. The claim was relatively small (less than $100,000) and the issue fairly discrete and straightforward (non-payment). Section 13.5(4) of the Act explicitly states that unless the parties agree otherwise, adjudication should only address a single matter. We were confident that the facts of the claim met this requirement.
Finally, we were conscious of the Claimant’s costs and business needs. As the operator of a sole proprietorship, the Claimant’s priority was to recoup funds as quickly as possible. Adjudications can be completed in writing and written materials have strict page limits and submission deadlines. Importantly, a determination must be made by the adjudicator within 30 days (s.13.13(1)) unless an extension of time is approved with written consent of the parties (s.13.13(2)). An attractive feature of adjudication is the ability to avoid expansive hearings and protracted pleadings, which are typical of traditional lien actions.
Following our review of the Claimant’s dispute, we decided adjudication was appropriate in the circumstances. We issued a Notice of Adjudication to opposing counsel as required under section 13.7(1) of the Act.
Ontario Dispute Adjudication For Construction Contracts (ODACC)
On July 18, 2019, the Province of Ontario announced the appointment of ADR Chambers as the Authorized Nominating Authority under section 13.2(1) of the Act.
ADR Chambers, for the purposes of carrying out its mandate, operates under the title Ontario Dispute Adjudication for Construction Contracts (“ODACC”). ODACC oversees the appointment of adjudicators and each adjudication proceeding.
ODACC’s website is a critical tool in the adjudication process. It acts as both a source of information and, if so desired, the administrative centerpoint of the proceeding via the online portal.
In our case, we used the online portal and found it user-friendly. After registering an account, we were able to create a file online for the new claim. We completed and electronically submitted the online form for the Notice of Arbitration.
Each party (or their counsel) must register for an ODACC account to use the online portal. The online portal can be used to send and receive all materials pertaining to the claim. The adjudicator and the parties can also use it for direct communication. All conversation histories are saved to the system. When a message is sent or received, it is viewed by all parties along with an ODACC administrative coordinator.
Using the online portal is more efficient than email or hardcopy correspondence. The portal keeps the adjudication organized, with all information and required next steps clearly displayed on the user “dashboard”. The portal is truly a “one-stop shop” for carrying out an adjudication proceeding under the Act.
Notifications are sent to the user’s email whenever materials are uploaded to the online portal or a new message is available. We experienced some technical glitches where notifications were significantly delayed, but ODACC quickly resolved that issue and has since made instant notification a reliable feature for users.
It is not required that parties register and use the online portal as part of the adjudication. Given that adjudications will likely be in writing in most cases, the option remains to circulate documents and other correspondence via email, fax or mail. However, the online portal is recommended based on our experience.
Even if a party does decide to use the online portal, the regulations under the Act still require that any documents (including the Notice of Adjudication) be “given” to the opposing side under the rules of court (s.13.7(1)). In other words, despite using the online portal to submit all documents, we still formally served the materials on opposing counsel.
The Adjudication Process
Notice of Adjudication
The Notice of Adjudication is an important document for the Claimant because it must concisely describe the dispute in 250 words or less. In addition, it must include: (1) the Claimant’s suggested adjudicator; and (2) the suggested procedure for conducting the adjudication.
I. Selecting an Adjudicator
In selecting a proposed adjudicator, we had two options. The first option was to review the ODACC registry of adjudicators and select from the extensive list of certified adjudicators. The registry provides background details of each adjudicator including their profession, years of experience, professional memberships, languages spoken and fee range. The second option is choosing a certified adjudicator based on recommendations from colleagues or other networks. In our case, our proposed adjudicator was based on a short list of recommendations from other practicing construction lawyers.
It is not required that an individual be a licensed lawyer in Ontario to be certified as an adjudicator. Many are accountants, project managers, architects, quantity surveyors or engineers. Depending on the nature of the dispute, some parties may not want a lawyer as an adjudicator. Instead, the parties may decide that an adjudicator with training and depth of experience in a highly technical profession (e.g. structural engineering) is better suited to make a determination.
Still, any adjudicator has the ability to request the participation of an independent “assistant” under section 13.12(5) of the Act.
If the parties cannot agree to an adjudicator, one will be assigned by ODACC.
II. Selecting an Adjudication Procedure
ODACC’s website provides four (4) “pre-designed” options for conducting an adjudication. The first three options are strictly in writing, where the parties exchange written materials of varying lengths. The fourth option involves a 30-minute oral presentation by each party.
If none of the four pre-designed procedures fit the needs of the parties, a fifth option is for the parties, with input from the adjudicator, to develop a customized process. A customized process may involve, for instance, a site visit or the appointment of an assistant. An assistant is an experienced professional such as an architect, engineer, or actuary who carries out the role of an expert in helping the adjudicator determine facts in question prior to reaching a determination.
Each type of procedure has its own cost implications. Adjudicator fees can range from a flat fee of $800 all the way to hourly rates of $750 per hour depending on both the amount of money in dispute and the complexity of the issue. In our case, the adjudicator’s fee was due 10 days after the adjudicator agreed to hear the matter.
The Claimant and Respondent each pay 50% of the adjudicator’s fee and are expected to cover their own legal costs unless the adjudicator determines otherwise.
In our case, we initially selected the pre-designed process #1, which allows for a maximum of 2 pages of written submissions from both parties. However, based on the adjudicator’s recommendation, all parties agreed to pre-designed process #2, which allows the Claimant a total of 5 pages of submissions and a one-page reply. The Respondent is also allowed a total of 5 pages.
The adjudicator must approve the selected procedure for conducting the adjudication. It was helpful to have the adjudicator’s input in selecting the procedure because we had initially underestimated the length of written submissions we would need to effectively advocate our client’s position.
A more difficult decision is determining whether written submissions will suffice or if your client would benefit from the comparatively more costly and time-consuming options of oral submissions or site visits. The need to ensure your client is positioned for the best possible outcome is paramount and that may mean that the truncated pre-design procedures are not suitable given the substantive issue in dispute.
After we submitted our notice of adjudication and received confirmation of the adjudicator’s approval to hear the matter, we had five (5) days to submit our supporting documents.
Akin to a statement of claim, our supporting documents consisted of a 4-page, written advocacy piece of the issue and why the Claimant was entitled to recovery. The Respondent was given 7 days to submit a 5-page response. The Claimant was then given 3 days to issue a 1-page reply.
Attached documents such as contracts and invoices are not counted in the page limit. However, it is good practice to clarify what limits, if any, might be placed on the number of attachments allowed in the adjudication. In some cases, the need for additional documents (emails, text, etc.) may be necessary to establish key facts. Communication between parties and with the adjudicator is essential to setting the parameters of what is acceptable. Section 13.12(1) gives the adjudicator significant flexibility in overseeing the conduct of the adjudication.
The adjudicator is required to render a determination within 30 days of receiving all documents (s. 13.13(1)). In our case, we received a determination in 13 days.
We were satisfied with the quick turnaround but recognize that this may not occur in other cases. External factors that impact scheduling may arise or the complexity of the issues may require a longer period of analysis and review of materials by the adjudicator.
ODACC uploaded the final determination with written reasons to the online portal. Seven (7) days later, a certified copy of the determination was also uploaded to the online portal.
As soon as we received the certified copy of the determination, we filed it with the court per section 13.20 of the Act, thus making it enforceable as any other court order. In accordance with section 13.20(3), we contacted opposing counsel and provided notice that the determination had been filed with the court.
Notwithstanding the decision to pursue adjudication, an important practice tip is to ensure that any claim for lien is properly preserved and perfected under the Act.
In our case, the Claimant pursued both the adjudication and a standard lien claim. During the adjudication period, we continued to serve pleadings and communicate with opposing counsel concerning the lien action. It is prudent to protect a client’s lien rights in the event the lien remains the only viable method of enforcement.
The determination of an adjudicator is the equivalent of an interim order. Per Section 13.15, it is binding on the parties until a later determination by a court or arbitrator or until the parties enter into a written agreement respecting the adjudicator’s decision.
If the parties accept the determination and thereafter forgo the lien action, another key practice tip is to seek an order on a without costs basis when discontinuing the lien action. If this is not done, there remains an opportunity for the defendant to make a motion within 30 days of the discontinuance to seek such costs under Rule 23.05(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
Secondly, parties should strongly consider executing a mutual “full and final” release to avoid the resurgence of future claims related to the matter already addressed in the adjudication.
If a party disagrees with the adjudicator’s determination, the option remains for them to seek the court’s final disposition in the lien action. However, under section 13.15(2), the court or an arbitrator may consider the merits of a matter decided by the adjudicator. In other words, seeking a final determination in a separate forum will not necessarily lead to a different result from the adjudication.
A party that disagrees with the outcome of an adjudication has the option of seeking judicial review of the decision, with leave of the Divisional Court, as prescribed in section 13.18(1) of the Act.
The lien action was discontinued in our case and judicial review was not sought by any of the parties. Still, anyone participating in an adjudication should be attuned to the reality of parallel proceedings, especially those involving lien actions and should be prepared to protect their client’s interests.
As one of the first completed adjudications in Ontario, our experience confirms what the legislators hoped would be the impact of adjudication. We found the process to be quick and relatively inexpensive as compared to a lien action or other legal proceeding which can seriously hamper the progress of a construction project.
We were impressed by the thoroughness of the analysis and extensive written reasons of the adjudicator. There were no concerns that the adjudicator was engaging in what some have suggested may be a form of “quick and dirty” or “rough” justice. On the contrary, the adjudicator was actively involved in the process and provided direction to ensure the proceedings ran smoothly and all parties would have a fair opportunity to present their case.
Administratively, the ease of use of ODACC’s online portal, along with the pre-designed forms of adjudication made participation seamless. In our case, the fast turnaround in receiving a determination removed any doubt that adjudication can be the “real time” dispute resolution tool that it is intended to be.
If adjudication is going to have the long-term impact of maintaining continuity of work on construction projects and cashflow, then industry stakeholders and their counsel will need to utilize adjudication where appropriate. An interesting study would be the short and long-term effects of these new provisions in the Act. However, such a study cannot take place until there is a sufficient number of adjudications.
Adjudication has the potential to save costs and maintain the focus on bringing projects to completion. With these priorities in mind, we are hopeful that adjudication can serve the construction industry well in this expanded era of alternative dispute resolution.
 Section 16.1(1), O. Reg. 306/18: Adjudications under Part II.1 of the Act.