GLOBAL VANTAGE: ADJUDICATION IN CANADA – LESSONS FROM ACROSS THE POND

On 1 October 2019, Ontario became the first Province in Canada to adopt an adjudication regime comparable to statutory adjudication under the Housing Grants, Construction and Regeneration Act 1996 (the “Act”) in England and Wales (see our earlier update here). In this article, we consider how the adjudication landscape has developed in Canada over the past five years and what the domestic construction industry can expect moving forwards.

What is Adjudication?

Adjudication is an interim dispute resolution method, designed to provide a decision by an independent third party that is binding on the parties until the dispute can be determined by court proceedings, arbitration, or settlement.  It is often described (with some merit) as a “rough and ready” process, its intention being to help resolve construction disputes cheaper and faster (typically, in 30 days or less) than traditional forms of dispute resolution such as litigation and arbitration.

Adjudication in England and Wales

In England and Wales, the right to adjudicate on qualifying construction contracts and crystallised disputes “at any time” has been available since the Act came into force in 1996.

Whilst adjudication under the Act was initially designed to help resolve simple payment disputes, over the past two decades (for better or for worse) it has grown in popularity and scope, and statutory adjudication is now regularly used in relation to complex, high-value matters. Statistics from Kings College London’s 2023 report on Construction Adjudication in the United Kingdom emphasise this point, with a regular flow of c.2,000 annual referrals to adjudicator nominating bodies over the past five years.

Adjudication in Canada

By comparison, construction adjudication in Canada is a relatively new concept. However, the current direction of travel suggests that there’s certainly an appetite for it within the domestic market. Since Ontario introduced its adjudication regime in 2019, similar legislation has been enacted in the Provinces of Saskatchewan and Alberta and, in December 2023, the Federal Prompt Payment for Construction Work Act came into force, which introduces adjudication on federal construction projects. Other Provinces have also passed similar legislation, albeit this is not yet in force.

Despite construction adjudication in Canada and certain of its Provinces being in its infancy, matters concerning adjudication are already finding their way to the courts.

• The recent decision in Ledore Investments v. Dixin Construction (2024 ONSC 598) in the Ontario Divisional Court is one such example, which considers issues of procedural fairness and the availability of judicial review as a means of setting aside an adjudicator’s decision. Ultimately, the court in Ledore found that there had been a breach of procedural fairness, in that the adjudicator had reached a decision based on an issue that had not been pleaded or relied upon by either of the parties, and judicial review was held to be available in those circumstances.

• Another example is MGW-Homes Design Inc. v. Domenic Pasqualino (2024 ONCA 422), where the Court of Appeal for Ontario was asked to consider the appropriate court in which an appeal of an order vacating a writ of enforcement (i.e. preventing the successful party from enforcing the decision) issued in connection with an adjudicator’s decision should be heard. This turned on whether the appealed order constituted a “judgment” for the purposes of Section 71 of Ontario’s Construction Act. The Court of Appeal in MGW found that the relevant order did constitute a “judgment” in this context (noting the Construction Act’s purpose of promoting efficiency and a trend towards a “broad interpretation” of the term “judgment”), and therefore that the appeal lay to the Divisional Court.

For the time being, the regimes in Canada focus (to varying degrees) on governing issues concerned with prompt payment and protecting cash-flow and, whilst the different pieces of legislation often do (with the agreement of the parties) allow adjudication to be used to resolve disputes more widely (i.e. other than in relation to payment), there seems to be somewhat of a reluctance to do so – statistics from Ontario Dispute Adjudication for Construction Contracts’ (ODACC) 2023 Annual Report demonstrate that of the 161 adjudications completed during the fiscal year, only three related to matters outside of the specific categories identified in Ontario’s Construction Act. However, as experience of adjudication begins to develop, we expect to see the scope of referrals grow similar to under the Act in England and Wales.

One of the benefits that the new regimes in Canada have is the wealth of experience on which they can draw from overseas, allowing stakeholders to learn from what has and has not worked in other jurisdictions to make adjudication more user friendly and attractive. One example of this is the way in which ODACC, which is the sole authorised nominating authority for adjudicators under Ontario’s Construction Act, makes use of a custom computer system to facilitate the administration of adjudications. Those with experience of managing multiple adjudications will appreciate the benefit that having a centralised system such as this offers. Similar “quality of life” improvements could mean that the ceiling for referrals in Canada is perhaps even higher than in England and Wales.

Lessons From Across The Pond

In England and Wales, we have over 25 years’ experience of adjudication. Whilst the Canadian regimes are not without their own unique features, we anticipate that many of the strategies that we have witnessed being used with success in England and Wales will be of similar benefit to Canadian contractors and consultants. With that in mind, points for those considering adjudication to be aware of include:

• Understand the applicable law that governs your contract, and whether adjudication is available in the circumstances that you find yourself in. For example, in each of Ontario and Saskatchewan, unless the parties to the adjudication agree otherwise, an adjudication may not be commenced if the notice of adjudication is given after the date the contract or subcontract is completed. This is a more restrictive approach than the availability of adjudication “at any time” in England and Wales. Moreover, in each of Ontario, Saskatchewan and Alberta, a provision in a contract or subcontract that names a person to act as an adjudicator in the event of an adjudication is of no force or effect. You do not want to get to the point of referring the dispute, only to find that adjudication is unavailable, or the process is not as you anticipated.

• Given its expedited nature, if you are the party considering launching the adjudication, ensure that as much of the “groundwork” with regards to preparation and production of relevant materials is completed before you issue your referral. Whilst there is always the risk that new matters crop up during the dispute, by “front loading” work you give yourself a better chance of navigating the tight timescales. This offers an immediate upper hand over the opposing party.

• Aim to agree a timetable as early as possible. In our experience, significant amounts of time can be spent over the course of an adjudication simply going back and forth on the dates for submissions (and subsequent extensions to them). This not only increases the potential costs of the process but also takes away time that could be used scrutinising the more substantive points in dispute. It also runs the risk of creating a negative impression on the adjudicator.

• Avoid tunnel vision. Whilst it may seem obvious, it can be easy to lose sight of the bigger picture and the commercial context when you are amid a dispute and dealing with the pressures of some very serious allegations. However, the decision to adjudicate is not one to be taken lightly and it is important to complete a thorough investigation of the advantages and disadvantages/risks and understand the “end goal” should you be successful (as well as the worst-case scenario).

Conclusion

The appetite for statutory construction adjudication across Canada does not appear to show signs of slowing down any time soon. Alongside Ontario, Saskatchewan and Alberta, we understand that legislation is in force, close or being mooted which introduces adjudication regimes in Manitoba, British Colombia, Nova Scotia, New Brunswick, and Quebec. Therefore, forward thinking contractors and consultants could do worse than to familiarise themselves with the basic tenets of adjudication, and how it may be of use for (or against) them on projects in Canada. If our experience in England and Wales serves as a guide, it seems only a matter of when, not if, adjudication comes to a Canadian project near you.