Prompt Payment and Adjudication in Ontario

On October 1st, 2019, the second phase of Ontario’s Construction Act reform took effect and all applicable construction contracts were to be governed by the new prompt payment and adjudication regime in the province. As a result of this transition, Ontario became the first jurisdiction within Canada to have legislation in place that combined prompt payment and adjudication alongside traditional lien legislation. Since its introduction, a number of other jurisdictions in Canada, including the federal government, have followed Ontario’s lead and introduced their own prompt payment and adjudication regime to alleviate the pressure of delayed payments to contractors and subcontractors down the construction hierarchy.

In this editorial, we’ll review a brief definition of adjudication, the timeline for prompt payment, and what you need to consider if you have received a notice of adjudication. If you have any further questions about what falls under the Construction Act or how the prompt payment and adjudication regime functions, feel free to reach out to one of the Toronto construction law attorneys with Cotney Canada.

The Process of Adjudication

Statutory adjudication was first introduced by the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) as a process of interim dispute resolution that is binding upon the disputing parties. The new adjudication process, laid out in the reform of the Construction Act, is highly structured and ultimately designed to resolve construction disputes efficiently and effectively in order to keep payments moving between parties. The adjudicator has broad authority over the disputing parties, and, ideally, the projects are allowed to continue moving in parallel with the adjudication process. The adjudication process itself can be broken down into the following steps:

  1. Any party to the contract or subcontract refers the dispute to adjudication by giving a written notice of adjudication.
  2. The parties select an adjudicator themselves or request the Authority to appoint an adjudicator.
  3. The referring party provides documents necessary for adjudication, and the responding party submits a response to the adjudicator.
  4. The adjudicator makes a determination on the matter within 30 days after receiving the documents.
  5. A party that is required by the determination to make a payment must do so within ten days of receiving the decision.

All disputes are meant to be adjudicated within 46 days; however, extensions may be agreed upon either by both parties or the selected adjudicator.

Prompt Payment Timeline

The prompt payment timeline begins to tick as soon as the project owner receives a “proper invoice” from the contractor. After the contractor invoices the owner of the project, the owner has 28 days to pay the invoice, provided that the invoice conforms to the specifications of Ontario law. If the contractor does receive payment, the contractor must then pay all contractors within seven days of receiving payment for the owner. This includes any and all subcontractors whose services or materials were included in the invoice to the owner.

In the event that an owner wishes to dispute the entitlement of the contractor to receive payment, they must issue a notice of non-payment within 14 days of receiving the invoice. The contractor must then provide notice of non-payment to the subcontractor and so on, down the line through the subcontractors. In contrast, if the contractor receives full payment of a proper invoice and wishes to dispute the entitlement of a subcontractor to payment, they then have 35 days to provide the subcontractor with a notice of non-payment. A similar timeline exists from subcontractor to subcontractor as well. If you have received full payment from a project owner and are looking for a legal ally who can guide you through the process of submitting a notice of non-payment, turn to a Toronto contractor lawyer from Cotney Canada.

If You Have Received a Notice of Adjudication

If you have received a notice of adjudication, it’s important to contact a Toronto construction law attorney with Cotney Canada as soon as possible to understand the prompt payment and adjudication requirements in your jurisdiction, familiarize yourself with the Ontario Dispute Adjudication for Construction Contracts (ODACC) and its processes, and ensure that you comply with any and all deadlines established by the notice of adjudication. Once you have gone through with the process of adjudication and received a determination, an attorney will be an invaluable resource in understanding and potentially disputing the determination.

For example, you’ll want to examine several aspects of the determination, such as amounts payable, enforcement procedures, and expiry of liens. If there are any errors in the determination, such as typographical errors, you’ll need to act quickly, as these corrections must be made no more than seven days following the determination. If the determination involves a payment, you’ll want an attorney to stay on top of deadlines as well, as they must be processed within 10 calendar days of the determination. As for enforcement, it is up to the successful party as to whether or not they wish to enforce the determination. Should you wish to enforce your determination, an attorney can assist you with filing a certified copy of the determination with the court within two years of the determination.

If you would like to speak with one of our Toronto contractor lawyers, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

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