The Ontario Divisional Court recently confirmed that “contract completion” is defined the same way for adjudication purposes as for all other purposes under the Construction Act (Ontario) and completion determined by reference to the value of uncompleted work and not the statement of accounts.

In Jamrik v 2688126 Ontario Inc. (2024 ONSC 2854), the Ontario Divisional Court released a decision which assessed an Adjudicator’s determination of when a contract in dispute was deemed “completed” pursuant to sections 2(3) and 13.5(3) of the Construction Act. The Court found the following:

  1. The Adjudicator erred in making a finding on whether the contract was completed when submissions were not made on the issue.
  2. “Contract completion” as defined under section 2(3) of the Construction Act, applies to the entire Act, and not just adjudication provisions of the Act.
  3. Deemed “contract completion” is determined by reference to the value of uncompleted contract work, not the state of accounts outstanding between the contracting parties.

The facts

This dispute arises from 2688126 Ontario Inc’s (o/a “Turnkey Construction”) claim for prompt payment against Stephen Jamrik (“Jamrik”). By way of adjudication, the Adjudicator granted Turnkey Construction’s request for an order for prompt payment and ordered Jamrik to pay Turnkey Construction a total of $564,812.87.

The Adjudicator referred to the following provisions of the Construction Act, to make the determination on jurisdiction. 

  • Section 13.5 (3) of the Construction Act provides: “An adjudication may not be commenced if the notice of adjudication is given after the date the contract or subcontract is completed, unless the parties to the adjudication agree otherwise.”
  • Section 2(3) of the Construction Act provides: “A contract is 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:

(a) One per cent of the contract price

(b) $5,000”

The Adjudicator determined that the contract was not “completed” pursuant to the Construction Act because more than one per cent of the contract price was owing and unpaid. Since the contract was determined not to be completed under the Act, the parties could resolve their dispute by adjudication, and, accordingly, the Adjudicator had jurisdiction to make the Order.

Jamrik sought judicial review of the Adjudicator’s determination, and, specifically, the Adjudicator’s determination that the contract was not “completed.” Jamrik argued that the Adjudicator did not have jurisdiction to make the impugned order for prompt payment.

Judicial Review: The Adjudicator erred in their interpretation of contract completion

Justice Corbett, for the Divisional Court, found that the Adjudicator was “plainly wrong in law” in finding jurisdiction and misconstrued the plain meaning of deemed “contract completion” under the Construction Act. Justice Corbett also noted that the Adjudicator did not cite any legal authority for their interpretation of “contract completion” and made a determination solely on there being outstanding payments amounting to more than one per cent of the contract price.

Justice Corbett found that the definition of “contract completion” as provided in section 2(3) of the Construction Act applies to the entire Act, and not solely the adjudication provisions of the Act. Accordingly, the Court emphasized that completion, substantial performance and last supply of services and materials to an improvement all relate to the status of performance of contract work, and not the value outstanding claims for payment. The Court stated that any interpretation otherwise would result in there being no time restriction in asserting construction liens where the value of a dispute was de minimis relative to the contract.

Justice Corbett also found that the Court was unable to make a finding on the completion of the contract. Justice Corbett noted that while it is the Adjudicator’s choice to decide a point on a basis not raised before him by the parties, it is a matter of procedural fairness to ensure that the parties have made submissions on material points to address the unargued point in question.

For the aforementioned reasons, Justice Corbett referred all issues back for fresh determination. As such, the issues of contract completion and whether adjudication is available will be re-adjudicated.

Key takeaway: Adjudication is an interim remedy for ongoing construction projects

The purpose of the prompt payment provisions under the Construction Act is to prevent the interruption in the flow of funds in a construction project that may ensue as a result of on-going litigation. In most instances, delays in payment in the context of construction projects result in delays in construction, increased costs, and in some cases unavoidable insolvencies.

Adjudication allows for contractors to seek this relief for payment under the Construction Act during the course of the project, as opposed to commencing claims by way of action or through the Small Claims Court (or, if required under the contract, arbitration).

This decision by the Divisional Court clarifies for both contractors and owners when a contract is considered to be “completed” in order to pursue these claims by way of adjudication.