Ontario’s relatively new Construction Act allows a party involved in a construction project to submit disputes to the Ontario Dispute Adjudication for Construction Contracts (“ODACC”) for adjudication. Parties can also submit disputes to the ODACC after the end of the project if the parties agree.
When ODACC adjudication first became available, parties were understandably reluctant to use the new process. However, the ODACC’s Annual Reports indicate that adjudications are becoming more common: 50 adjudications were initiated in the ODACC’s 2021 Fiscal Year while 121 adjudications were initiated in its 2022 Fiscal Year.
One of the key purposes of adjudication is to enforce the Construction Act’s prompt payment provisions. Adjudication also provides a means to keep a project moving if a dispute arises. Therefore, the ODACC process is intended to be swift. The ODACC’s pre-designated processes limit the length of submissions and volume of evidence and require an adjudicator to release the adjudicator’s determination to the parties 35 days after appointment.
An adjudicator’s determination is binding on an interim basis. A party ordered to pay money must do so within 10 days of a determination and the determination can be enforced as if it were a court order. A party can also suspend work if it is not paid by that deadline.
For these reasons, parties to construction-related disputes may not always be satisfied with the process or results of adjudication.
As discussed below, there are three ways to address an adjudicator’s determination in an attempt to achieve a different result.
Section 13.15 of the Construction Act states that an adjudicator’s determination is binding subject to “a written agreement between the parties respecting the matter.”
There are myriad of reasons why parties to a construction project may enter into a written agreement about a dispute that has been adjudicated. For example, the parties could avoid the time, expense, and disruption of addressing the dispute further by compromising based on the adjudication result. The circumstances or facts could evolve as the project progresses, meaning that an adjudicated dispute needs to be addressed again in any event. Finally, the dispute could be settled with other issues that arise during the project.
Litigation or Arbitration
As indicated, an adjudicator’s determination is only binding on an interim basis. In other words, submitting a dispute to adjudication does not preclude the parties from litigating or arbitrating if they disagree with the adjudicator’s analysis or the results of the determination.
In contrast to the expedient ODACC process, litigation or arbitration gives the parties an opportunity to exchange documents, submit expert opinions, and make full arguments about the case before the arbitration panel or judge. In litigation, in particular, the parties would undergo the full discovery process.
While additional dispute resolution would certainly involve additional costs and likely delays, it may be warranted in complex cases where the damages, time, or other entitlements at stake outweigh the time and resources required to pursue the claim.
Finally, an adjudicator’s determination can be set aside for judicial review to the Divisional Court of the Ontario Superior Court of Justice. A party requires leave from the Divisional Court before it may pursue an application for judicial review.
However, the grounds for seeking a judicial review are quite limited. Section 13.19(5) of the Construction Act stipulates that an adjudicator’s determination can only be set aside for specific reasons:
- The applicant participated in the adjudication while under a legal incapacity.
- The contract or subcontract is invalid or has ceased to exist.
- The determination was of a matter that may not be the subject of adjudication under this Part, or of a matter entirely unrelated to the subject of the adjudication.
- The adjudication was conducted by someone other than an adjudicator.
- The procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject under this Part, and the failure to accord prejudiced the applicant’s right to a fair adjudication.
- There is a reasonable apprehension of bias on the part of the adjudicator.
- The determination was made as a result of fraud.
The threshold for seeking leave for judicial review is also high. The Divisional Court in Anatolia Tile & Stone Inc. v Flow-Rite Inc., 2023 ONSC 1291, established the following test for seeking leave under the seven grounds for judicial review listed above:
(1) There is good reason to doubt that the impugned decision is reasonable; or
(2) There is good reason to believe that the process followed by the adjudicator was unfair in a manner that probably affected the outcome below;
(3) That the impact of the unreasonableness or the procedural unfairness probably cannot be remedied in other litigation or arbitration between the parties; or
(4) The proposed application raises issues of principle important to the prompt payment and arbitration provisions of the Construction Act that transcend the interest of the parties in the immediate case, such that the issues ought to be settled by the Divisional Court.
The Divisional Court noted that this is a “high bar” and that leave for judicial review would be “granted rarely”.
Therefore, in the vast majority of cases, continued disagreement about the subject-matter of an arbitrator’s determination will be resolved through settlement negotiations leading to a written agreement, or by litigation or arbitration.