A recent adjudication review by Ontario’s Divisional Court suggests avoiding putting multiple improvements under one single contract and instead executing separate contracts for work on separate improvements.
The Town of Caledon had two wastewater ponds it wanted cleaned up. These were named Pond #7 and Pond #14. Administration and site inspection services for both ponds were contracted to two companies. For the actual cleanup work of the two ponds, Caledon contracted separately with a third company, Bronte Construction.
As , partner with Fasken Martineau DuMoulin LLP, and associate described to the Daily Commercial News, Caledon terminated the contract after Bronte had completed its work. This led Bronte to seek adjudication for amounts it claimed were owed.
All three contracts covering this work were issued on three separate dates.
The adjudicator looked at the three dates related to the “procurement processes” of all three companies. The first two contracts were executed on Nov. 1, 2018 and March 24, 2020 respectively.
Bronte’s contract was executed on May 6, 2021. After review, the adjudicator ruled all three constituted one single procurement process and awarded Bronte $93,445.92.
Dates were fundamental to this case due to the multiple contracts and procurement processes, and the transitional provisions of Ontario’s Construction Act that took effect in October 2019. In fact, the various dates led Caledon to challenge the adjudicator’s jurisdiction during the hearings and ultimately to seek a judicial review by the Division Court.
The Divisional Court noted the procurement processes for Pond #7 commenced prior to Oct. 1, 2019. Since Bronte’s contract was executed after that date, it determined the adjudicator did not have jurisdiction.
On the other hand, procurement for Pond #14 commenced after Oct. 1, 2019. Therefore, the court ruled the adjudicator only held jurisdiction on that part of the work. The award to Bronte was consequently reduced to $11,638.17, plus HST, plus interest. c
“With respect to Pond #7 and Pond #14, the adjudicator ought to have asked whether the procurement process for the improvements that were the subject of the Bronte contract, and not the
Bronte contract itself, commenced before Oct. 1, 2019,” said Lynde and Stonehouse.
To better understand, Lynde and Stonehouse said in the past the Divisional Court has emphasized how the policy of “improvement-by-improvement” underpins the act.
“The key issue in dispute — whether multiple improvements under a single contract can be subject to different transitional periods — hinged on the distinction between ‘improvements’ and ‘contracts.’ Different contracts can be part of the same improvement to the land. In short, the jurisdiction of an adjudicator depends on when the procurement for the improvement started.”
The Divisional Court’s ruling in this particular case was based on wording within the act stating it is the procurement process for the “improvement,” not the procurement process for the “contract,” that informs the jurisdiction of the adjudicator.
In this instance, the adjudicator failed to recognize the design, contract administration, and site inspection work and Bronte’s actual cleanup all contributed to the same “improvement” to Pond #7.
“Since that procurement process began before the Oct. 1, 2019 cut-off, it fell outside the scope of the adjudication provisions of the Act.”
The adjudicator committed an error of law when determining their jurisdiction, thus requiring judicial intervention.
Lynde and Stonehouse concede determining when the procurement process commences can be tricky, particularly for larger, more complex projects.
Referencing the Caledon case, they note that the court appeared to suggest litigation “would have been avoided had Caledon issued two distinct contracts, one for Pond #7 and one for Pond #14, rather than the Bronte Contract.”
Furthermore, while this case illustrates how a single contract for multiple improvements can be subject to multiple version of the Construction Act, as time moves forward, procurement processes prior to Oct. 1, 2019 will become increasingly rare. Therefore, the application of multiple versions of the Construction Act will become less of an issue.
John Bleasby is a freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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