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Prompt payment adjudication has had a steady rollout across Canada since being introduced in Ontario in October 2019. Saskatchewan and Alberta have come aboard, with Manitoba, British Columbia, Nova Scotia, New Brunswick and Quebec expected to join soon.

However, three years after adoption in Ontario, the construction industry has apparently been slow to embrace the process.

The number of construction projects underway in the province is high, yet adjudication has been used surprisingly little for dispute resolutions. Of the 67 adjudication decisions in 2022, only 12 were commercial, another 15 related to transportation and infrastructure and three concerned public buildings.

The basic concept behind prompt payment adjudication is straight forward enough: Make sure funds flow to all levels of the construction pyramid in a timely manner without involving liens brought before the court. 

In Ontario, the process is overseen by adjudicators with industry experience, certified by the Ontario Dispute Adjudication for Construction Contracts. The adjudicator must act in a manner that is perceived to be fair and unbiased, maintaining good written communications with the parties at all times.

High legal-like standards are critical since the decisions, although not made by a judge, are enforceable similar to an arbitration, and can include garnishment orders or asset sales enforced by a sheriff.

As Dr. Franco Mastrandrea, partner with global consultancy HKA , “The standards expected of experts in adjudication should be no lower than those in arbitration or litigation.”

The speed of the process can be a double-edged sword, in that it can be an advantage for the claimant but a disadvantage for the respondent.

Faren Bogach, founder of Toronto-based law firm Construct Legal, told the Daily Commercial News adjudication “can be a way to determine quicker resolutions of disputes for those on lower tiers of the construction pyramid.”

However, she adds, “Adjudications happen in a short period of time but can require a lot of immediate time for the project staff to assist with either preparing or responding to a claim. It can take a project person out for a few days without warning.”

To a great degree, that was the act’s intention. The surprisingly low average award granted in Ontario last year of slightly more than $50,000 appears to confirm smaller disputes use the process.

Another reason for hesitancy by the construction industry suggested by Bogach is the nature of adjudication decisions.

“Given that the decisions are interim, it can be costly to litigate disputes more than one time. It is unclear whether the findings and materials from an adjudication can be used by the court.”

What the prospect of adjudication can do is create leverage to encourage the two parties to negotiate a dispute rather than risk an adjudication ruling that can only help one of the parties.

“In some instances, commencing adjudication forces the parties to take a hard look at the disputes and try to narrow or resolve them. It is a stick to bring the parties to the table,” says Bogach.

Andrew Konopelny, a construction lawyer at MLT Aikins LLP in Regina, told the adjudication option “has flipped the relationship between owners and contractors.”

“Traditionally, the owner controlled the funds, and contractors have had to seek payment upon project completion if they believe they have been underpaid,” he said. “But if a contractor wins an adjudication mid-project, it may now be the owner attempting to recover funds post-project.”

What might the future hold for adjudication?

“Adjudication is still an unknown,” says Bogach. “Many parties have not tried it. There is fear of the unknown and the risk of trying new things.”

A of liens and adjudication, written in May for a group of Ontario ministries, points out some disputes that might have used the adjudication process are still subject to the transition provisions of the Construction Act.

Adjudication clearly has advantages, but more time is likely needed before passing final judgment on how it fits among Canada’s dispute resolution options.

John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.