Part II.1 of the Construction Act (Ontario) (the “Act”) introduces a new mandatory interim dispute resolution adjudication process which comes into force October 1st, 2019. It is imperative that both owners and contractors are aware of its fast approaching implementation.
The new adjudication framework provides a party to a contract the ability to refer a matter involving another party to the contract to adjudication. The rationale is that this will provide a quicker, cost effective, and more streamlined approach to dispute resolution with an experienced construction adjudicator. Time will tell if the proposed dispute resolution framework will work as promised. The likelihood of success will almost certainly be determined by the quality and experience of the adjudicator appointed to the dispute. Interestingly, adjudicators will not necessarily be lawyers, mediators, or traditional arbitrators. Instead, it appears that adjudicators can have any relevant occupation as required to provide the expertise needed on any given dispute. Adjudicators may be architects, engineers, or other professionals in the industry and will be appointed by an Authorized Nominating Authority (the “Authority”).
The disputes to be referred to adjudication involve determining the value of services or materials provided under the contract, disputes involving holdbacks, set-offs, change orders, and non-payment.
It is important to understand the timing associated with the adjudication process. Once a party initiates adjudication by submitting notice to the other party, they must then propose an adjudicator. When an adjudicator has been proposed, the responding party has 4 days to agree. If the parties cannot agree within 4 days, the initiating party must request that the Authority appoint one. Once they receive the request, the Authority must appoint an adjudicator within 7 days. Once an Adjudicator has been appointed, the initiating party must provide all documents in support of the claim within 5 days. The adjudicator will determine the appropriate timing and delivery of the response. The written decision of the adjudicator will follow within 30 days. Adjudicators will be permitted to delay their written decision by a maximum of 14 days. Once the decision has been rendered, any payment specified as part of the adjudicators’ order must be made within 10 days.
The adjudicator’s decision is binding and may be enforced as if it were a court order. The decision can only be appealed with leave of the Divisional Court. Should the motion for leave be dismissed, there is no further appeal route. The grounds for appeal are very limited and do not include a disagreement as to interpretation of laws or facts. The grounds for appeal primarily involve conformity with the process itself, ensuring the adjudicator was properly licensed, no parties were under a legal disability, etc. That said, should the matters be later litigated, the Court is not bound by the decisions of the adjudicator. Costs of the adjudication will not be awarded and the parties will be responsible for their own costs. Considering that the cost and delay associated with more formal litigation proceedings are the two primary barriers to entry, we anticipate a number of claimants, specifically sub-contractors, will use this new framework early and often. It is important that both owners and general contractors prepare themselves for these claims by maintaining good record keeping practices given the small window of time allocated to provide written responses to the notice of dispute.