How construction adjudication is developing across other Canadian provinces and what Alberta can expect.
Later in 2021, Alberta will be implementing changes to the Builders' Lien Act, including renaming it as the Prompt Payment and Construction Lien Act (the "Act"). The changes will include legislated payment deadlines, increased lien registration periods, and the introduction of a construction adjudication body. Construction adjudication has already been introduced in Ontario via the Construction Act, and other provinces will soon be following suit.
Even outside of the proposed amendments to the Act, it is possible through contract drafting to introduce the concept of "adjudication" into construction contracts. This can be a useful tool to create a mechanism for the quick resolution of disputes on an ongoing project, rather than the dispute snowballing and derailing what could otherwise be a viable project.
While the details of adjudication under the Act have not been finalized (it will be part of the Regulations which have not yet been published), below is an outline of what to expect, and what proactive parties can draft in their contracts even outside of the Act.
Overview: What is Construction Adjudication?
Construction adjudication bodies were originally implemented in the UK as a quick, affordable, independent and binding means of resolving construction-related disputes. Construction adjudication bodies receive their authority for adjudication through the government. The Canadian model for construction adjudication is largely based off this UK model.
One of the clear benefits of having an adjudication-based system for construction disputes is that it is a process specifically tailored to the construction industry. The adjudicators are individuals that have experience in, and understand, the construction industry. While some situations rightly call for a traditional route through the court system that concludes in a trial, trials can often be avoided by obtaining the input of the right industry specialist early on.
When can Construction Adjudication be Used?
Construction adjudication can be used to determine any construction disputes normally dealt with through the Courts or arbitration. This would include determining the value of services of materials provided, disputes related regarding payment non-payment, payment of holdback, and any other issues which parties agree should be adjudicated.
The UK model for adjudication breaks down disputes into four different categories:
- On-line adjudication: $30,000 or less;
- Short-form process: $30,000 - $100,000;
- Standard process: $100,000 - $1,000,000; and
- Specific process: $1,000,000 or greater.
It is hoped that the Alberta construction adjudication body will implement a similar method of categorizing dispute adjudication. This allows for a variety of options so parties can select adjudication best suited to the value and complexity of their dispute.
What is the Process for Construction Adjudication in Alberta?
The process for adjudication will be set out in the Act and its Regulations; however, the parties have the ability to choose the type of adjudication, make the rules and set the timelines for the process. Under the Act, parties to a construction contract may refer a dispute to adjudication, as long as they are a party to the contract. Adjudicators are matched to disputes based on the nature of the dispute and the skills and experience they possess. Parties have the option to select their adjudicator. If they cannot agree on an adjudicator, or the adjudicator does not agree to conduct the adjudication, the parties may request that an adjudicator be appointed.
Adjudicators are selected through an Authorized Naming Authority (ANA). ANA is empowered by the Act to appoint adjudicators. Each adjudicator will go through training to ensure they understand the various types of legal principles that affect a construction dispute, how to asses disputes, how to manage parties, and how to interpret submissions and evidence in order to come to a comprehensive decision.
Adjudicators will be granted a wide range of powers. They will be tasked with identifying issues, facts and law, understanding and applying the Act to the dispute, and making a final and binding determination.
How is Construction Adjudication Being Used in Ontario?
The construction adjudication system has been in place in Ontario for approximately one year. The program is different from the UK model, in Ontario's Construction Act, which calls for prompt invoice payment. In the UK, there are no legislated payment requirements. Moreover, in Ontario, parties may only appoint adjudicators after a dispute has begun, whereas in the UK, adjudicators may be appointed prior to disputes arising. All adjudications in Ontario proceed through the provincial regulator, the Ontario Dispute Adjudication for Construction Contracts (ODACC). ODACC ensures that adjudicators are properly qualified and impartial to disputes.
What are the Benefits of Construction Adjudication?
Construction adjudication has a number of benefits:
- Ensures that invoice payment obligations are enforced;
- Helps bring projects to completion with fewer payment delays;
- Much quicker than litigation/arbitration;
- Less expensive than litigation/arbitration;
- Tailored to the specific dispute;
- Parties have the ability to choose the process, rules and timelines;
- Industry specialists adjudicate matters and provide their industry expertise to assist in resolving the dispute; and
- Adjudicator decisions are binding, at least on an interim basis.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.