Adjudication produces a decision that is binding on the parties, can be achieved inexpensively, and in a short period of time. These benefits may be enough to see it consistently used as a true alternative to other dispute resolution methods.

Statutory adjudication provisions came into force in Ontario on 1 October 2019 and the Ontario Dispute Adjudication for Construction Contracts (“ODACC”) released its second annual report (“the Report”) towards the end of 2021. The numbers in the Report indicate that the construction industry in Ontario has been slow to adopt adjudication as the preferred method for resolving disputes.

ODACC defines adjudication as a real-time dispute resolution process that is:

• Quick: A decision will be made in 39-46 days (unless the parties agree to an extension).
• Cost-effective and relatively inexpensive: Adjudicators set an adjudication process and fee.
• Available as of right: A party to a construction contract can commence an adjudication without the other party’s consent.
• Meant to keep cash flowing: Payments ordered must be made within 10 days.
• Enforceable: The Determination made by the Adjudicator can be filed with the court and enforced.
  
  Given the benefits, why then are there so few adjudications in Ontario?

There were only 50 adjudications commenced with ODACC in the last fiscal year (2021), although this is up slightly from 32 in 2020. Of the 32 Notices of Adjudication in 2020, only 3 related to Transportation and Infrastructure. This number is higher in 2021, with 15 Notices of Adjudication and the total amount claimed is approximately CAD$3.4m. Although the actual amount paid under determinations for this category was significantly lower, at only CAD$612k.

The Report does not break down the figures for why a matter has been adjudicated into industry sectors but the majority of adjudications across the board were related to ‘valuation of services or materials provided under the contract’ and ‘Payment under the contract, including in respect of change order, whether approved or not, or a proposed change order’. Certain members of the legal industry had assumed more adjudications would be related to simple payment issues, but this does not appear to be the case.

Despite the number of adjudications being lower than expected, there is an increasing trend on the usage of adjudications in Ontario. From 1 August 2021 to 1 April 2022 there have been 73 adjudications commenced (with several months before the fiscal year ends), which suggests the market is warming to the usage of adjudications.

In contrast, adjudications are used regularly to resolve a myriad of construction disputes in the UK and other jurisdictions. In a recent article, the RICS stated “the most popular method for resolving construction contract disputes in the UK is adjudication” [1]. In a 2021 Court of Appeal case [2], Lord Justice Coulson remarked on adjudication:

“…it is the only system of compulsory dispute resolution of which I am aware which requires a decision by a specialist professional within 28 days, backed up by a specialist court enforcement scheme which (subject to jurisdiction and natural justice issues only) provides a judgment within weeks thereafter. It is not an alternative to anything; for most construction disputes, it is the only game in town."

Statutory adjudication was introduced in the UK in 1998 and adjudications are used routinely in the UK construction industry. Adjudications are used for disputes related to Payment Notices, Defects, Disruption, EOT’s, Liquidated Damages, and many more construction related issues. The first year (1998) saw 187 adjudications whilst the market familiarised itself with the format and then saw a 600% increase to approx. 1,300 adjudications in the second year (1999). Use of adjudications has remained buoyant throughout the years since its inception in the UK and there are now almost 2,000 adjudications per year. So, this begs the question, why has there been a slow uptake on the usage of adjudications in Ontario?

The most obvious theory for the past 2 years+ relates to Covid-19 and the impact it has had globally. Clearly the ongoing ramifications of Covid-19 are being felt in the industry and it may be a factor in why adjudications are not being used so readily. However, by its very nature, adjudication is a streamlined process which does not really allow for oral hearings due to the swift timelines. The lack of formality with the process goes in its favour and, for the most part, adjudications can be completed on paper. Further, according to the RICS, the UK actually saw an initial increase in matters being adjudicated at the beginning of the pandemic before a drop off during the peak. This suggests it may have been a factor in Ontario, but not one that was overwhelming.

There is greater speculation that the fundamental reason for the slow uptake is a lack of knowledge or awareness in the market. Perhaps, this is in part due to the lack of in person interactions from Covid-19, but it may also be due to the market not being familiar with the matters that can be adjudicated or they do not understand the basics of the process itself. If this is the case, ODACC and industry professionals need to do more to increase awareness in the market on the benefits of using adjudication.

Based on the current numbers, it will be some years before the Ontario adjudication market reaches the level of other jurisdictions. The Report clearly highlights the low number of adjudications in Ontario and, particularly, the low number of adjudications related to infrastructure matters. Although it is encouraging to see a slight upward trend, it will be interesting to analyse the ODACC 2022 report to see if it identifies a continuation of this trend and an increase in adjudications.

References

[1]https://www.rics.org/uk/news-insight/latest-news/news-opinion/adjudication-of-construction-disputes-in-a-post--pandemic-world/
[2]John Doyle Construction Ltd v Erith Contractors Ltd [2021] EWCA Civ 1452