Ontario Divisional Court dismisses application for judicial review of adjudicator’s determination
The Ontario Divisional Court recently released a decision on an application for judicial review of an adjudicator’s determination under the prompt payment provisions of the Construction Act. The application was dismissed (without any consideration of the underlying merits of the application) because of the applicant’s failure to obtain a stay of the adjudicator’s determination or to make payment. The Divisional Court’s decision is a cautionary tale and highlights the importance of compliance with both the prompt payment and adjudication provisions of the Construction Act.
The underlying adjudication
The applicant, SOTA, retained Andrid Group to build a dental clinic in Vaughan. Andrid Group performed work and invoiced SOTA. SOTA did not dispute the invoices within 14 days of receipt, resulting in those invoices becoming due and payable pursuant to section 6.4 of the Construction Act. When SOTA did not pay, Andrid Group commenced an adjudication under the prompt payment provisions of the Construction Act. An adjudicator was appointed who ultimately determined that SOTA should pay Andrid Group approximately $38,000.
Following the release of the adjudicator’s determination, SOTA did not make payment in accordance with section 13.19(2) of the Construction Act. Andrid Group pursued enforcement efforts and recovered a nominal amount, but a significant portion of the adjudicator’s determination remained outstanding.
The Divisional Court decision
SOTA sought and was granted leave under section 13.18(1) of the Construction Act to bring an application for judicial review of the adjudicator’s determination on September 21, 2021. Prior to the hearing of the application in April 2022, a case conference was held before the Divisional Court to address the scheduling of steps required for the application for judicial review. As part of that case conference, the issue of SOTA’s failure to bring a motion to stay the determination of the adjudicator’s decision was raised.
Specifically, as mentioned in our previous blog post, under the adjudication provisions of the Construction Act, an application for judicial review does not operate as a stay of the implementation of an adjudicator’s determination unless the Divisional Court orders otherwise, therefore a party’s obligation to pay amounts under the determination remains in effect. While SOTA was made aware of this issue by the Divisional Court, no stay motion was brought.
As a result, on April 14, 2022, the Divisional Court dismissed SOTA’s application for judicial review (without any consideration of the underlying merits of the application), suggesting the following principles be borne in mind by parties in future applications:
- Prompt payment is integral to the scheme of the Construction Act. The obligation to pay, and pay promptly, when ordered to do so, is fundamental to the scheme of the prompt payment provisions.
- Failure to pay in accordance with the prompt payment requirements of the Construction Act may lead the Divisional Court to refuse an application for leave.
- Where leave is granted, an applicant must obtain a stay or make payment, failing which the Divisional Court may dismiss the application on a motion to quash at the hearing of the application.
The Divisional Court recognized that prompt payment is reinforced under the Construction Act by the provisions related to appeals and reviews. There are no appeals from prompt payment adjudication determinations. As discussed in our previous blog post, they are “interim binding” on parties until a further determination of the matter by a court, an arbitration, or a written agreement between the parties. There may be judicial review of the decisions (on limited grounds), but only with leave of the Divisional Court.
The Court also rejected SOTA’s argument that “there was no money” to make payment of the adjudicator’s determination. Even though the applicant filed no evidence to support this claim, the Divisional Court accepted it – noting that it reinforced their decision to dismiss the application. If SOTA Dental was in fact insolvent, the Divisional Court did not wish to permit it to run up further costs and delays through recourse to litigation. The avenue for that argument would have been a motion for a stay with proper evidence available to the Court for its consideration.
The Divisional Court’s decision highlights the importance of not only understanding the application and processes that govern adjudications in Ontario, but also understanding what comes next after receiving an adjudication determination. In our previous blog post, we discussed six key considerations that parties to an adjudication will want to keep top of mind if they have received a determination from an adjudicator under the Construction Act.
In particular, where a party wishes to set aside the determination of an adjudicator by an application for judicial review (which can only be done on limited grounds), they must ensure that they adhere to the timelines set out under the Construction Act. As set out under section 13.18(2) of the Act, a motion for leave to bring an application for judicial review of a determination of an adjudicator must be filed no later than 30 days after the determination is communicated to the parties.
Furthermore, the Divisional Court has now made clear that a failure to pay in accordance with the prompt payment requirement of the Construction Act may lead the Divisional Court to refuse an application for leave – and where leave is granted – an applicant must either obtain a stay of the adjudicator’s determination, or make payment, or risk the dismissal of its application for judicial review altogether.