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Six years after its launch, Ontario’s construction dispute adjudication system – originally meant to be “quick and dirty” – is increasingly popular but also more complex, with some cases now stretching to six months.

Construction lawyers Jason Annibale and Donia Hashem, both specialists in dispute resolution with McMillan, told delegates attending the recent Mechanical Contractors Association of Canada Emerging Leaders conference in Toronto that well-timed and well-planned adjudication has been shown to be a powerful tool for resolving disputes.

But the stakes are rising, said Annibale and Hashem in their update.

Given there is often a lengthy exchange of written facts, proceedings stretching over months and multiple rounds of submissions and replies, contractors and their lawyers should approach disputes extra carefully, they urged at the recent session.

“I think it’s wait and see for the moment, because I don’t think a six-month process on its own is necessarily offensive,” Annibale commented in an interview. “I think that is much quicker than a court process and generally quicker than arbitration, but it is definitely something to monitor.”

When payment-related disputes arise and go unresolved, the impacts on the downstream parties can be devastating, the lawyers explained. Prompt payment rules to keep money flowing and the adjudication regime were introduced in Ontario following the 2016 Striking a Balance report.

A qualified third party – the adjudicator – reviews the dispute to make a quick determination on an interim basis. Determination by the adjudicator remains binding, unless it is overturned by a court or arbitration tribunal.

The adjudication provisions came into force through the Construction Act on Oct. 1, 2019. Ontario has since legislated a suite of reforms to that initial system that took effect in January of this year.

Scope broadened

Among the reforms that were introduced, the scope of adjudication was broadened, there was a redefinition of adjudicable disputes and consolidation of disputes was enabled. An expanded timeline of adjudication was also introduced.

Annibale said there were 91 adjudication cases launched the first year and 40 determinations. The latest tally was 324 adjudications commenced and 122 adjudications rendered.

Annibale said with the increased complexity of adjudications, “The procedure itself is expanding. So what can be done, and was often done in 30 days, is expanding to accommodate a more challenging dispute.”

That does not necessarily mean the overall system has become cumbersome, or that there is an increasing incidence of failure of justice, he said. Introducing more complexity does not mean the process itself becomes less streamlined, he said, and disputes are still resolved more quickly than through arbitration or litigation.

Adjudicators will be the gatekeeper within that expanding process, said Annibale.

What the industry needs to do, he said, is to be focused and prepared entering an adjudication – “and that means having your house in order.”

Original goals

Asked whether justice is served as cases become more complex, Annibale suggested it’s useful to go back to the original goals of the adjudication system – to keep money flowing, replacing the old system where various stakeholders in the system often went unpaid for long periods.

“When I hear my clients say they want justice, my initial response is, justice left before you came in the room,” he said. “The very fact that you were put through this process might sit with you as a bit of an injustice.

“I really don’t think justice is being challenged by adjudication. I really do believe it’s being furthered by adjudication.”

What’s important, Annibale said, is the principles of natural justice are being applied, both sides are being heard, there’s no fraud and there is general fairness to the procedure.

Annibale and Hashem also commented on the rise of “smash and grab” adjudications, which they said was a manifestation of the “pay now, argue later” principle.

If a respondent is not vigilant in meeting procedural requirements, Hashem explained, the claimant sometimes “smashes” through a procedural gap and “grabs” payment quickly.

“We cannot say that this is an abusive process, though, because there was a very clear decision by the lawmakers that they were prioritizing payments and cash flow,” she said. “This strategy does not preclude a respondent from later on litigating that very same decision.”