Construction Adjudication – The “New Kid” on the ADR “Block”
Construction adjudication is a recent, and transformative, addition to the ADR spectrum – bringing expeditious resolution of disputes to the construction sector.
I. Introduction
Transformative change in the world of alternative dispute resolution (ADR) came to Canada not many years ago—Construction Adjudication. Its implementation in Quebec[1] and Ontario[2] continued an international trend toward the adoption of this timely and cost-effective means of resolving disputes in an industry where disputes have been rife.
Construction Adjudication was introduced in the United Kingdom in 1998 as a key element in addressing numerous problems in the construction industry including payment delays and the proliferation of protracted and costly disputes.
Similar criticisms have been levelled, for many years, at the Canadian construction industry. The escalation in cost and delays in resolving construction disputes, either by litigation or arbitration, called for a new approach. The success of Construction Adjudication in the U.K. led to its adoption elsewhere including Australia, Ireland, New Zealand, and South Africa.
Construction Adjudication, while not designed to replace either litigation or arbitration, is recognized and accepted as an additional and effective tool for resolving construction disputes, and in the process, alleviating pressure on the courts.
In addition to Quebec and Ontario, Saskatchewan and Alberta introduced Construction Adjudication regimes in 2022.[3] The Federal Government did so in December, 2023.[4] In Manitoba, New Brunswick, and Nova Scotia, legislation and regulations are at varying stages of enactment and review.[5]
II. What is Construction Adjudication?
Canadian Construction Adjudication regimes differ in many key respects but have many common elements.[6]
A. Governance
The process is administered and largely designed by private and statutorily empowered entities called Authorities. (In Quebec, Construction Adjudication is administered by IMAQ, an affiliate of the ADR Institute of Canada.) These Authorities have extensive powers over the adjudication process and the adjudicators like those of professional governing bodies. These powers include:
- training, certifying, and appointing adjudicator rosters;
- appointing adjudicators to specific disputes;
- maintaining records of adjudications and reporting to government authorities on an annual basis; and
- establishing and administering:
- policies and procedures for the adjudication process (e.g. fee structures and forms);
- governance policies for adjudicators (e.g. complaints, discipline, and codes of conduct);
- websites with publicly available instructional and educational materials respecting the adjudication process.
B. Matters That Can Be Adjudicated
Only disputes from construction contracts are subject to Construction Adjudication. Regulations in Ontario, Saskatchewan, and Alberta specify the types of contractual disputes that can be adjudicated. These include:
- the valuation of services or materials;
- payment issues including in respect of change orders;
- holdback amounts;
- non-payment issues that arise in respect of the prompt payment provisions of the legislation; and
- other matters agreed by the parties.[7]
C. Procedure
The issuance of a Notice of Adjudication triggers a series of short deadlines established by regulation (typically measured in days or weeks) respecting the steps in the process culminating in the delivery of the adjudicator’s decision (typically called a “Determination”).
Determinations can be filed, and then enforced, as a court order. Adjudications typically take 30 to 45 days from commencement to completion.
D. Adjudicator Powers
An adjudicator’s powers are extensive and inquisitorial in nature and typically include powers to:
- issue directions to the parties (often for clarifications or additional submissions);
- obtain information through independent research;
- conduct on-site inspections;
- enlist the assistance of construction industry professionals;
- grant limited duration deadline extensions;
- draw inferences based on the conduct of the parties; and
- apportion costs.
Determinations are usually based on written submissions and documents. Evidence is usually unsworn.
E. Binding Effect of Determinations
The binding effect of a determination is often described as “interim” because, pursuant to legislation, it will be nullified (or suspended) upon the occurrence of certain events.[8] Such events include:
- issuance of a court order (Alberta) or determination of the matter by a court or through arbitration (Ontario);
- the determination is set aside by a court on judicial review;
- the parties settle (Alberta); or
- the parties appoint an arbitrator (Alberta).
In Quebec parties have an unfettered right to litigate or arbitrate once an adjudication is complete. If the dispute proceeds to litigation or arbitration following the determination, the court or the arbitrator is not bound in any way by the determination and may decide the matter on its merits.
III. How does Construction Adjudication Compare to Arbitration?
There are several similarities between Construction Adjudication and arbitration. In both:
- there are governing statutes;
- the rules of evidence are not as rigorously followed as in litigation;
- decisions can be reviewed by a court through judicial review;
- results can be enforced by court order; and
- the rules of natural justice and procedural fairness apply.
However, there are differences:
- adjudication submissions are typically written and unsworn, with relevant documents submitted simply as attachments;
- Construction Adjudication processes are designed to result in determinations within a few weeks to a couple of months from commencement.
- Determinations are binding, but only on an interim basis; and
- construction adjudicators are required by legislation to be trained, certified, and appointed to a roster by the governing Authority whereas ADR organizations do not have the same extent of authority over arbitrators or the arbitration process.
IV. Conclusion
Construction Adjudication is not intended to replace litigation or other forms of dispute resolution. All have their place in the Canadian dispute resolution system. Construction Adjudication is a new and distinct form of dispute resolution, the “New Kid on the ADR Block” as it were. Even though determinations are binding only on an interim basis, experience shows that just a minority of cases ultimately go to a court or arbitrator following a determination. Construction Adjudication is robustly providing a timely and cost-effective option for resolving construction disputes. It will, almost certainly, continue to gain traction across the country.
[1] Bill 108, an Act to facilitate oversight of public bodies contracts and to establish the Autorite des marches publics, 1st Sess, 41st Leg. Quebec, Assented to December 1, 2017, SQ 2017, c 27
[2] Bill 142, Construction Lien Amendment Act, 2017, S.O. 2017, c. 24
[3] March 21, 2022 in Saskatchewan, Builders Lien Act, SS 1984-85-86, c. B-7.1, Builders Lien Regulations, RRS, c. B-7, Reg. 1; and August 29, 2022, Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4, Prompt Payment and Adjudication Regulation, AR. 23/2022.
[4] Federal Prompt Payment for Construction Works Act, S.C. 2019, c. 29, s. 387 and Federal Prompt Payment for Construction Works Regulations (Dispute Resolution) (SOR/2023-271)
[5] For a full update on the status of legislation in these jurisdictions see: Glen Ackerley and Kathleen Gregus, “Cross Jurisdictional Legislative Comparison of Prompt Payment and Adjudication Regimes Across Canada”, Nov. 2023, a report done for the British Columbia Construction Association.
[6] This article does not provide a comprehensive comparison, or guide to the specific provisions of, prompt payment and construction adjudication in Canada. For such a comparison see: Ibid. Glen Ackerley and Kathleen Gregus.
[7] See, for example, section 19 of the Alberta Prompt Payment and Adjudication Regulation, supra. footnote 5. In Quebec the parties are at liberty to submit to adjudication any “dispute that is unable to be resolved amicably”.
[8] The Alberta Court of King’s Bench in Welcome Homes Construction Inc. v. Atlas Granite Inc. 2024 ABKB 301, suggests that adjudicators’ determinations are “final and binding”. Whether this was, indeed, a binding decision of the court, and the extent to which this decision influences subsequent adjudications or court decisions, remains yet to be seen.
Barrie Marshall KC is a retired lawyer currently providing part-time Construction Adjudication and mediation services. Barrie practised law for 42 years largely in the area of dispute resolution.
