12 NOV 2019
The new prompt payment and adjudication provisions under Part I.1 and Part II.1 of Ontario's Construction Act came into effect on October 1, 2019. The amendments have ushered in a fundamental shift in the way payments flow on a construction project. The prompt payment and adjudication provisions apply to all projects, regardless of size, and to all payers.
Adjudication is intended to be a "swift justice" process for parties to resolve payment disputes, or any other disputes agreed to by the parties, during the life of the construction project.
On July 18, 2019, the Ontario government announced the appointment of alternative dispute resolution company ADR Chambers to fill the role of the Authorized Nominating Authority ("ANA"). The ANA will train and qualify a roster of adjudicators to resolve construction disputes.
Any party to a contract or subcontract may refer a dispute to adjudication by giving a written notice of adjudication. Careful consideration should go into drafting the notice of adjudication, since an adjudicator's jurisdiction is limited to the four corners of the notice.
The party referring the matter to adjudication must give an electronic copy of the notice of adjudication to the ANA. The parties may agree on the choice of adjudicator, or they may request that the ANA appoint one. However, if the adjudicator does not consent to the appointment within four days, it is mandatory for the referring party to request the ANA to appoint an adjudicator.
Speed and agility will be important and necessary during this process, as will be keeping the lines of communication open, between lawyers and clients, between counsel themselves, and among counsel and the proposed adjudicator, and the ANA.
Once the adjudicator is appointed, the referring party must provide its documents to the adjudicator and the responding party within five days. The responding party must in turn provide its response and all relevant documents within the timelines prescribed by the arbitrator. Both parties will need to need to be both proactive and reactive at the same time, nimble, thorough, and focused on the real issues at hand. Parties must also be prepared to mobilize quickly.
"Careful consideration should go into drafting the notice of adjudication, since an adjudicator’s jurisdiction is limited to the four corners of the notice".
Heal and Co LLP
Robust internal systems, strong project management skills, foresight and open lines of communication in your own company will be crucial. The UK experience illustrates the risk of early smash-and-grab tactics in an attempt to catch an opposing party unaware. Project staff should be actively encouraged to convey circumstances where there is the potential for a dispute, so that key documents can be gathered and analyzed, and the narrative developed.
Strong analytical and written advocacy skills will be crucial, since a significant number of adjudications will be decided in writing. In other words, there may be only one opportunity for a party to advance a claim, or respond to a claim. In these circumstances, the best foot will definitely need to be put forward.
The adjudicator's decision is binding until the end of the contract. It is not appealable, and there are only very limited grounds for judicial review, thus, parties must be prepared to live with the outcome of the adjudication, whether good, bad or indifferent, until the contract is finished.
Catherine DiMarco is a founding partner of the Toronto-based boutique law firm of Heal & Co. LLP. Catherine is an Executive Member of the Board of Directors of the Canadian Construction Association, and an Executive Member of the Ontario Bar Association's Construction and Infrastructure Law Section.