Legal Blog

Adjudication Awards

We are getting more and more court decisions regarding adjudication awards. Although the courts could have narrowly interpreted the adjudication and prompt payment provisions of the Construction Act, they have not. Courts have been loath to substitute their opinions for those of the adjudicators. They have confined themselves to the narrow remedies set out in the Act, acting only if an adjudicator’s decision is absurd. They also have done their best to ensure that the awards of adjudicators are paid. We base these conclusions, in part, on the following trilogy of cases: MGW Homes Design Inv v. Pasqualino, a 2024 decision of the Divisional Court, Integricon Construction Inc. v. Steven, a 2025 decision of the Ontario Superior Court of Justice, and Jamrik v. 2688126 Ont. Inc., a 2024 decision of the Ontario Superior Court of Justice (Divisional Court).

Pasqualino

An adjudicator awarded payment of $119,000 to the contractor. The owner unsuccessfully brought a motion for leave to commence an application for judicial review to set aside the award (see March 2023 newsletter). The contractor then filed the award under s. 13.20(1) of the Act so that it could enforce the award as if it were a court order. After the contractor filed a writ of seizure and sale pursuant to the filed award, the owner moved to set aside the writ because the contractor had failed to notify it of the order within 10 days. The owner relied on s. 13.20(3) of the Act, which states “A party shall, no later than 10 days after filing a determination under subsection (1), notify the other party of the filing.”

The motion judge, noting that the contractor had not complied with the 10-day notification requirement, decided that the only just remedy was to strike the writ of seizure and sale. Without the writ, the contractor could not enforce the award.

The contractor appealed to the Ontario Court of Appeal. The Court of Appeal transferred the case to the Ontario Superior Court of Justice (Divisional Court), deciding that only that court had jurisdiction to hear the appeal. In the meantime, the construction lien action was languishing and the contractors required an order to reinstate the action after the registrar administratively struck it off the trial list.

Divisional Court

The court noted that the Act, while imposing a positive obligation to notify, did not specify a remedy if the contractor filing the award failed to comply with that positive notification obligation. The court referred to the obligation more as a “statutorily required courtesy than a strict condition that must be met before enforcement.” The court continually referred to the purpose of the prompt payment and adjudication sections – to ensure that money flowed down the construction ladder so that work could continue. It noted that the requirement to make prompt payment is far more central “to the scheme of the prompt payment provisions than is the requirement to give notice of filing of the determination.” It held that “procedural formalism” should not overwhelm the clear intent of the legislature that prompt payment decisions should be followed without delay and without additional formal process.

However, the court did acknowledge that there should be some consequence for non-compliance with the statutory requirement. In determining the remedy, the court note that it ought to consider the extent of the non-compliance, any explanation for it, any prejudice or absence of prejudice to the payor arising from the failure to give notice, and any other relevant circumstances. If it appears that non-compliance was merely an oversight, then the court can conclude that a simple declaration of non-compliance might be a sufficient remedy. In other cases, particularly when there is prejudice, the court can consider voiding pre-notice enforcement steps, suspending interest during non-compliance, or awarding costs or other sanctions proportional to the harm resulting from the failure.

The court also noted that “it is difficult to imagine any circumstance that would justify an order so draconian as to disentitle a party to ever enforce an adjudicator’s payment determination as a consequence for failure” to notify.

In this case, the contractor had accepted that an appropriate sanction would be the voiding of all enforcement steps it had taken before giving notice of the order; the court agreed.

Integricon

The contract between the owner and contractor called for set payments when specific milestones were reached. The second milestone was reached but the owner refused to pay the full amount – because the owner’s financing report indicated that the draw would be greater than the value of the construction as of the milestone date. The adjudicator ordered the owner to pay the contractor $215,000 in accordance with the strict terms of the contract.

The owner still did not pay the contractor, and the contractor terminated the contract. The contractor presumably filed the award so that it could enforce the award as an order of the court and presumably gave notice to the owner of the filing. The contractor then garnished the owner’s bank account and $130,000 was sent to the sheriff.

The owner brought a motion under the garnishment provisions of the Rules of Civil Procedure for an order to set aside the garnishment, arguing that the garnishment was inequitable. In doing so, the owner raised the same argument that had been unsuccessful in front of the adjudicator (i.e. the award was $215,000 but, in accordance with the actual value or work that the contractor performed, the contractor was only entitled to $47,000).

The motion judge refused to set aside the garnishment, holding that the Rules could not be interpreted to render meaningless the prompt payment and adjudication provisions of the Act. The judge held that there would be no double recovery under the contractor’s construction lien action because the owner would be credited in that action for the amount that it had paid to the contractor. The judge did not care, and courts in general do not care, whether the owner would be able to collect any overpayment to the contractor once the lien action was decided.

Jamrik

Under s 13.5(3) of the Act, “an adjudication may not be commenced if the notice of adjudication is given after the date the contract or subcontract is completed.” As a result of the latest amendments in force on January 1, 2026, the section has been amended such that a party wanting adjudication has until “90 days after the date on which the contract is completed, abandoned or terminated.” The contract in this case took place before the amendments and jurisdiction depended upon whether the contract had been “completed.”

In this case, the adjudicator awarded the contractor $565,000. The owner sought, and was granted, leave to apply for judicial review of the adjudicator’s decision.

The adjudicator had held that he had jurisdiction – because more than 1% of the contract price was owing and unpaid and therefore the contract had not been completed. Presumably, the adjudicator was relying on s. 2(3) of the Act. It states that a “contract shall be deemed to be completed and services or materials shall be deemed to be last supplied to the improvement when the price of completion, correction of a known defect or last supply is not more than” the lesser of $5,000 and 1 per cent of the contract price.

The court held that the adjudicator was “plainly wrong in law” and that the price of completion in s. 2(3) refers to the value of incomplete work and not the quantum of disputed payment claims. In essence, in determining jurisdiction, who cares how much of the contract price is still outstanding? The only relevant question is whether the contract itself is completed.

Because the adjudicator did not set out the facts on which he was relying and those on which it could be determined whether the contract was “completed”, the court was unable to substitute its own decision as to jurisdiction; the only available remedy was to set aside the adjudication award and refer the matter back to adjudication – before a different adjudicator.

Takeaway

The courts will go out of their way to uphold adjudication awards and ensure that payment is made – but not when an adjudicator makes a glaring error in law regarding jurisdiction.

 

Image courtesy of immanuelheims.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.