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Divisional Court’s strict enforcement of the prompt payment and adjudication regimes under the Construction Act (Ontario)

( Disponible en anglais seulement )

4 octobre 2022 | Riccardo Del Vecchio, Michael Fazzari

A recent decision from the Ontario Divisional Court suggests that applications for judicial review will likely fail when orders by an adjudicator under the Construction Act remain unpaid prior to an application for judicial review, and where no stay has been sought pending judicial review. The decision in SOTA Dental Studio Inc. v Andrid Group Ltd.[1] signifies the first time that an application for judicial review of an adjudicator’s decision under the Construction Act (the “Act”) has been dismissed in these circumstances.

Background

The applicant in this matter, SOTA Dental Studio Inc. (“SOTA”), owns a property on Highway 7 in Vaughan, Ontario. SOTA retained the respondent, Andrid Group Ltd. (“Andrid”), to perform work in connection with the construction of a dental office on the subject property. Andrid performed the work, completed the contract and sent invoices to SOTA. SOTA did not dispute the invoices within 14 days of receipt, and the invoices were due and payable. On account of the non-payment of invoices, Andrid commenced an adjudication pursuant to the prompt payment and statutory adjudication provisions of the Act. The Adjudicator ordered that SOTA pay to Andrid the amount of $38,454.55 for work completed.[2] SOTA failed to make full payment in accordance with the Adjudicator’s order, which led Andrid to pursue enforcement efforts by notice of garnishment, through which the amount of $6,711.04 was collected.

Divisional Court’s Decision

SOTA sought leave to bring an application for judicial review of the Adjudicator’s determination, but did not seek a stay of the determination in the process. SOTA was granted leave, and a case conference commenced three days later. It was at this case conference that the issue of SOTA’s failure to bring a motion for the stay of the Adjudicator’s order was brought to light. The case conference endorsement specifically stated that an application for judicial review does not stay the Adjudicator’s order and that if an applicant seeks a stay pending the application, then a motion will have to be brought for a stay.[3]

The Divisional Court determined that failure to bring a motion to stay an adjudicator’s order and failure to pay in accordance with the prompt payment requirements of the Act may lead courts to refuse leave.[4] Prompt payment adjudication determinations are not subject to appeal, but only judicial review with leave from the Divisional Court.[5] In these cases, even if leave is granted, it does not serve to stay the prompt payment order unless ordered by the Court.[6]

Reinforcement of the spirit of prompt payment provisions

In rendering its decision, the Divisional Court upheld the spirit of the prompt payment provisions of the Act. The Divisional Court reinforced the principle that a purpose of these provisions is to avoid the consequences of disruptions to construction projects by providing for an informal and expeditious adjudication.

The decision highlights that prompt payment is integral to the scheme of the Act and that owners should not be permitted to run up costs and delays through litigation in the face of an adjudicator’s order under the prompt payment provisions of the Act.

Key takeaways

The Divisional Court’s decision emphasizes the importance of complying with an adjudicator’s order (or obtaining a stay of the order), even when seeking judicial review of the order in question.  In fact, doing so may be necessary to bring an application for judicial review of the adjudicator’s decision.

Further, the Divisional Court’s decision serves as a reminder of the purpose of the prompt payment scheme under the Act. The provisions require prompt payment to avoid the consequences of disruptions to construction projects and the obligation to pay promptly, when ordered by an adjudicator, is fundamental to upholding the purpose of the scheme.

Please contact Miller Thomson’s Construction Law team if you have any questions about the issues outlined in this article.

[1] SOTA Dental Studio Inc. v. Andrid Group Ltd., 2022 ONSC 2254

[2] Ibid at para 4.

[3] Ibid at para 7.

[4] Ibid at para 12.

[5] Ibid at para 10.

[6] Ibid.

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