This article was produced in partnership with Goldman Sloan Nash & Haber
Lexpert spoke with Kaleigh Du Vernet, partner at Goldman Sloan Nash & Haber, about one of the biggest changes brought by Ontario’s Construction Act.
Ontario’s new Construction Act, which came into force in 2018 and 2019, did so intending to modernize liens, holdback, prompt payment and dispute resolution.
Following on the heels of similar movements in the US and UK, the Act was sparked by an expert review of the Construction Lien Act that—in addition to making more than 100 wide-ranging recommendations—suggested a five-year review of how the new legislation is affecting the industry.
That review is now well underway by owners, contractors, subcontractors, lawyers, and financiers alike, and Kaleigh Du Vernet, partner at Goldman Sloan Nash & Haber LLP, says it’s an apt time to take a look at one of the biggest changes put into play: adjudication.
Under the new regime, single-matter payment disputes can be resolved by an independent third-party adjudicator. This is overseen by the Ontario Dispute Adjudication for Construction Contracts (ODACC), which is responsible for administering construction-related adjudications, as well as the training and qualifying of adjudicators.
The option has taken the industry some time to become familiar with and adopt, but the use of adjudication has been picking up in the past year, Du Vernet suggests.
According to ODACC’s 2022 Annual Report, the organization has seen significant increase in both the number of cases using adjudication to resolve disputes and the number and types of parties choosing to resolve disputes through adjudication.
“It took a while for parties to get used to it, and it’s still taking a while,” she says. “Firstly, because the transition process only applied to contracts after October 2019, and, secondly, because it’s something new for everyone and that can be a little bit intimidating.”
Prior to the offering of adjudication as a quick, interim method of resolution, payment disputes were a prolonged process, which went against the new Act’s goal of reducing payment cycles that were becoming excessively long . Now, if an adjudicator dictates one party to pay another, that payment must occur within 10 days.
“The Construction Act set an entirely new landscape to the way that any party was able to deal with disputes,” Du Vernet says, adding that while most of the changes between the Construction Lien Act and the current Construction Act were updates to existing legislation, adjudication was completely new. “Prior to the Construction Act, what was missing was a dispute resolution process that was more efficient.”
She notes that adjudication—to enforce the new prompt payment regime introduced in the Construction Act—has been a positive step for the industry. Both reduce financial uncertainty at a time when construction faces some significant economic headwinds.
As parties familiarize themselves with adjudication, Du Vernet notes it is important to recognize that it is a non-binding, interim dispute model, and doesn’t prevent future claims from still being made.
“Let’s say there are five adjudications on one project, at the end of the day the owner can still say, ‘We don’t think any of that should have happened, so we’re going to commence formal dispute processes.’”
It’s also, she notes, designed for smaller claims, and industry parties are “still figuring out” what the adjudication process for larger claims would look like.
Nothing is perfect, and with the ongoing review of the Construction Act in progress, Du Vernet has at least one element of adjudication she’d like to see slightly, but carefully, improved. “A more universal process for dealing with larger matters would be helpful,” Du Vernet suggests.
“One of the beauties of adjudication is it’s a custom process, there are no rules, and this adds so much to the benefits of the process,” she says. “But having some more universal qualities and processes would help when contemplating its use on larger, more complex disputes.”
She says, however, it’s important for owners and contractors and vested parties to recognize that “adjudication is here to stay,” even if a few select aspects of it remain “a work in progress.”