Dispute boards in Canadian public private partnerships and infrastructure projects

Canadians have used dispute boards in limited fashion on domestic construction projects. Standard form Canadian construction contracts typically do not provide for them. For the most part, the Canadian experience with dispute boards has been confined to major infrastructure improvements.

However, it remains the case that all levels of government in Canada face a significant need to upgrade and improve infrastructure after decades of underinvestment. Significant projects are underway, and more are coming.^[1] Dispute boards allow for early, active engagement in the resolution of disputes and, as such, represent an important risk management tool for owners and contractors alike.

Dispute boards in Canada

In Canada, dispute boards got their slow start about 30 years after the United States, with a 2014 paper listing eight major projects involving such boards in the previous 20 years.^[2] There is a dearth of statistics on the use of DRBs in Canada, but more recent commentary indicates that they are almost exclusively used on infrastructure projects, which the author hypothesizes is mainly to unfamiliarity with the process in other industries.^[3]

Dispute boards are used in Canada almost exclusively for large infrastructure improvements. There are two different variants in current use in Ontario. In one version a single panel member is on standby to be used as and when needed to provide “adjudication” services. In the other variant, three panel members who are actively engaged in the project and who potentially provide “project mediation” and “adjudication” services

The single member on standby model

A large health sector project provides for a “combined dispute board” that operates with a single panel member providing “as needed” adjudication services.

A written agreement between the parties and the dispute board member established a one-person combined dispute board. The board remains constituted until the date of final completion of the project. The agreement stipulates that the member must have significant experience in construction law and be either a lawyer or a former judge or master of a Canadian superior court.

Throughout the project, the parties must cooperate with the board and must ensure that the board is kept informed of the performance of the parties’ obligations under the contract and of any disputes arising during the performance by way of either reports or notices. The agreement specifically sets out that the board must be copied on any amendments to the contract and changes; any dispute notices; progress reports; notices of delay and force majeure; certificates of partial, substantial and final completion; and any other documents a party reasonably believes necessary to keep the board informed of the progress of the work and any disputes. All such documents are to be delivered to the board at the same time they are delivered to the other party. In addition, each party is required to copy the other party in all written communications it provides to the board.

Any party may refer a dispute to the board for resolution and then must, within 30 days, submit a concise written statement of its case to the responding Party and the board. The statement of case only includes the notice of dispute with supporting documents; the issues submitted to the board for decision; a statement of the claimant’s position with relevant facts and law; and any amendments, updates, additions to, or deletions from the notice of dispute. Unless the board orders otherwise, the claimant may not rely on any documents other than those contained in its statement of case. The respondent then has 30 days to deliver a response outlining its position, the issues to be decided and any documents it intends to rely on that were not already provided by the claimant.

At any time during the process, the board may request further documents or statements from the parties. If necessary, the board may call its own experts and certifiers.

The board must decide the issues based on the statements and documents provided and based on the applicable law. In making its decision, the board may consider any failure to comply with the contract, as well as any unreasonable delay in bringing its claim.

The board decision must be in writing and state the findings, reasons, and determination of the board and include a summary of the Dispute, the positions of the parties and the decision requested; and a summary of the relevant provisions of the contract and the relevant facts and law considered by the board. The decision must be delivered within 30 days of the hearing.

Within 30 days of the release of the board’s decision, a party may refer the matter to arbitration, and the decision of the board is stayed during the arbitration. Any such arbitration is conducted de novo.

However, where neither Party delivers a notice of arbitration within the stipulated time, or if any arbitration that is commenced is subsequently abandoned, the decision of the board is final and binding on the parties.

This board is therefore mostly reactive. It reviews documents it receives from the parties and only becomes active if and when called upon.

The actively engaged panel

This approach can be contrasted with a major transit improvement where a redacted version of its project agreement public.[4] Here, too, a “combined dispute board” is established, albeit with three members, two technical members chosen for either technical and/or senior managerial expertise relevant to the project, and a construction lawyer chosen as the chair. While the provisions governing the work of the board mirror those described above, the major difference is that the board here takes a much more active role and may be called upon to act as mediator

Rather than being purely reactive, the board proactively schedules meetings and visits the site. In addition, the board may be called upon to mediate any dispute referred to it.

In practice, in that case, the board regularly conducts virtual meetings of just the board once a month to review all the month’s correspondence and contract documents. In addition, there are quarterly in-person meetings and full day site visits.

The board has also been called upon to mediate. Those mediations were conducted by the chair of the board alone, so that in case the mediation was unsuccessful and there was no settlement, not all board members were exposed to the confidential information shared during the mediation. The board member who conducted the mediations completely isolated himself from the other board members during the mediation rounds. All the other two members ever became privy to was the fact that the mediations happened and what the outcomes were.

Takeaways

The generally accepted definition of a “combined dispute board” is that of a hybrid between a dispute resolution board and a dispute adjudication board. As described by Professor Doug Jones:^[5]

Combined Dispute Boards occupy a middle ground between DABs and DRBs. As noted earlier, the key difference between DABs and DRBs is that the former makes binding determinations while the latter makes non-binding recommendations. CDBs may do both. While the default position for CDBs is that they make non-binding recommendations, a party can specifically request for a binding decision. Unless the other party objects, the CDB must then comply with the request, and the decision will be binding upon the parties.

The Canadian “combined dispute boards” described above are not combined boards as described by Professor Jones, but akin to dispute adjudication boards in that they make determinations that become binding on the parties unless and until challenged and overturned by arbitration. The actively engaged panel model also effectively allows for mediation before a determination is rendered.

In either case, effective use of a dispute board offers opportunities to crystallize and resolve disputes before they overwhelm a project, and without expensive and protracted post-project litigation or arbitration. The role for dispute boards should increase as the scale of Canadian infrastructure development grows.

This article was provided by Glaholt Bowles LLP