Écrit par Brian Reid, Geoff Stenger, Peewara Sapsuwan and Celina Glabus
The enactment of prompt payment and fast-track adjudication legislation across Canada has created some uncertainty regarding the finality of an adjudicator's decision. In the recent decision of the Ontario Superior Court of Justice (SCJ), Arad Incorporated v Rejali, 2023 ONSC 3949 [Arad], the SCJ considered this issue and held that the adjudicator's decision was not a final determination of the parties' legal rights.1
In Arad, the plaintiff and defendant entered into a contract whereby the plaintiff would provide services and materials for the defendant's project.2 A dispute arose, and the plaintiff registered a lien on the property, which was then vacated pursuant to section 44 of the Ontario Construction Act by the posting of security to stand in place of the lands (the Security).3
The parties subsequently commenced two adjudications under the Construction Act: one by the plaintiff for alleged monies owing, and the other by the defendant for monies allegedly overpaid to the plaintiff's principal.4 The adjudicator dismissed both adjudications, finding that neither party owed any amounts (the Decision).5 Relying on the Decision, the defendants applied under section 44(5) of the Construction Act to have the Security returned to them on the basis that the lien had been ruled invalid.
The Court concluded that the Decision was interim in nature and not determinative. The Court also stated that the Decision formed an insufficient evidentiary basis to conclude that the lien was invalid.6 This conclusion was informed by several factors, including that the adjudicator had made findings based on his personal experience in engineering and construction and not on the expert opinion or reports presented by the parties. The adjudicator also made some findings based on inadmissible evidence.7
The Court explained that while it should consider an adjudicator's determination on a section 44(5) motion, it should be wary of relying solely on the adjudicator's findings to reduce or return security.8 The Court also provided that in adjudicative decisions, not all evidentiary rules may be adhered to or subject to scrutiny through, for example, the discovery process. To do so would affect the purpose of the adjudicative process to provide a quick determination and ensure the money flows down the construction pyramid.9
Given the evidentiary shortcomings of a fast-track adjudication process, it is unsurprising that the Court in Arad confirmed that the Decision could not be relied on to form a final decision. However, given the potential persuasiveness that such a decision may have on a future judge or arbitrator, it is essential that parties put their best foot forward in the adjudication process. Parties should also be aware of the risk of duplicate costs associated with both an adjudication and arbitration or litigation proceedings.
If you have any questions about this decision or construction-related disputes, please contact a member of the Bennett Jones Construction Group.
1 Construction Act, RSO 1990, c C 30.
2 Arad Incorporated v Rejali, 2023 ONSC 3949 at para 4.
3 Ibid at para 5.
4 Ibid at para 7.
5 Ibid at para 8.
6 Ibid at para 24.
7 Ibid at para 25.
8 Ibid at para 28.
9 Ibid at para 28.