Adjudication Coming To A Construction Project Near You – Lessons Learned From The English Experience

Currently in Ontario, there is no mandatory mechanism pursuant to which a party to a construction contract can refer a dispute to adjudication. However, in response to the report titled "Striking the Balance: Expert Review of Ontario's Construction Lien Act" delivered on April 30, 2016, the Ontario Legislature has now introduced a bill providing for numerous amendments to the Construction Lien Act, through Bill 142. It is expected that Bill 142 (which proposes a Consolidated Construction Act) will become law in the future, and it is currently at the second reading stage in the legislature.

Pursuant to Bill 142, a party to a contract between an owner and a contractor will be able refer a dispute to adjudication that relates to the payment or the valuation of services. Since the introduction of Bill 142, there has been significant discussion and debate about how adjudication will impact the construction industry. While some have expressed concerns about the potential for increased costs, the overall sentiment appears to be that adjudication will assist to move money down the construction pyramid more quickly.

In England & Wales, adjudication has been available, on all qualifying construction contracts, since 1998. To get a sense of what we can expect when Bill 142 will become law, and considering the similarities between the common law regimes in both Canada and England & Wales, we have decided to compare the adjudication model proposed pursuant to Bill 142, with the regime that is in place in England & Wales.

Does Adjudication Work?

Adjudication provides a quick, flexible and private means of resolving issues which may otherwise delay or disrupt the completion of a construction contract.

In England & Wales, adjudication has been extremely successful and is widely used within the construction industry. However, it does come with a number of caveats that are discussed below.

Overall, adjudication in England & Wales is considered more cost-effective than litigation and arbitration. This relative cost-effectiveness of adjudication seeks to balance out the financial inequalities between the various parties to construction projects and goes some way to redress the imbalance between the paying party and the payee.

One likely impact on the anticipated adjudication regime in Ontario is that it will allow a contractor (or sub-contractor) to address a payment issue more quickly, without having to incur the time and expense of proceeding through the traditional litigation process (e.g. the courts or arbitration). We anticipate that this will have a positive impact on the flow of funds from the owner to contractors and sub-contractors.

Rough Justice

In England & Wales, there are very limited grounds upon which an adjudicator's decision may be set aside. Most significantly, it is not open to parties to seek...