Oatmeal webinar: Adjudicating construction disputes

Jeff: Okay, wonderful. Thank you, everyone for joining us. I would say this morning but it's not morning for some of our attendees and it's great to have you with us. Our discussion today promises to be interesting, indeed, as my colleagues, Jacqueline, or Jay, Sahil and Tristin are going to take you through how to protect and collect your accounts receivable. At the end of the session we will automatically transfer you into smaller groups, each moderated by one of our presenters, to allow you to have a more focused discussion around any questions on this topic that you may have. It will really let you get some of your personal questions answered. As well, although your mics have been muted just to eliminate some of the noise disruptions during this presentation, we do encourage you to turn on your webcams. No one really likes presenting to a bunch of black boxes and we're no different. So your mics will be turned back on, however, at the end of the session when you go into those rooms so you will be free to discuss and talk about anything that you'd like to with each of our presenters, or with one of our presenters I should say. Without further ado, I'd like to introduce you to Jaqueline, or Jay, who will take us through a summary of the adjudication rules and processes as well as a summary of the Ontario Dispute Adjudication for Construction Contracts Update. For those that don't know Jay, she's a partner at Gowling here in Waterloo, and specializes in commercial and insurance litigation with an emphasis on construction. She loves to travel and has lived in Japan and Australia. When she does travel she tends to focus on enjoying the food, culture, language and, maybe most importantly, wine. She's currently been to 5 of our 7 continents which is quite a feat. So, Jay, I will let you take it away.

Jacqueline: Thank you, Jeff. Appreciate that. So, Chantelle, if you could go to the next slide, please. Okay. This looks a bit overwhelming but don't worry. We're going to take you through the process kind of from start to finish. But we're going to have to take a step back. This is adjudication. This is a reminder because we know have three Construction Act regimes. When can you adjudicate? Alright, so, it has to be, yes Sean, my understanding is you will be getting a copy of the slides. I just saw a chat pop up and thought I would answer that right away. Again, for our international guests, this is with respect to Ontario, and I know the UK started adjudication about 20 years ago so this might be a bit of an old review for them, and we're still figuring things out as we go along. But when can you adjudicate? It doesn't apply if the contract was entered into, the main contract with the owner, was entered into before October 1, 2019. It also doesn't apply if the procurement process, or the RFP process, was commenced before October 1, 2019. It doesn't apply if you're a subcontractor and if the contract I just referenced before was entered into before October 1, 2019. So the key takeaway is, call it the when, and we're going to try to explain the who, the what, the when, the where, the why for the adjudication. So that is the key aspect of things.

Let's start with this chart that we have. We have a claimant delivering a notice of adjudication to the respondent and the authorized nominating authority. Let's stop there. Who can request an adjudication? It can be an owner. It can be a contractor. It can be a subcontractor. That can be the who. So the claimant can be those but it has to be with the person with whom they have a contract. What can you ask for for adjudication? What can an adjudicator do? As long as it's a party to a contract you can refer an adjudication, with the other party to the contract, for any of the following: valuation of services or materials provided under the contract; payment under the contract including a change order, whether approved or not or proposed change order; disputes that are subject to the notice of non-payment; amounts retained by section 12 setoff by a trustee or subsection 17(3), lien setoff; non-payment of holdback under section 27(1); and basically any other matter that the parties to the adjudication agree to or may be prescribed. So we've got the who and the what. Let's look at the when. So we've got the claimant delivering the notice to respondent, the authorized nominating committee, which I will also touch upon is the Ontario Dispute Adjudication For Construction. So it's called ODAC and we'll go into a bit more about what ODAC does but basically they are the authorizing authority to appoint the adjudicators.

So, timeframe. Did the parties agree on an adjudicator and does the adjudicator confirm appointment? If that is the case you only have up to 4 days. So there's 4 days to deliver it and figure out do we agree and does the adjudicator agree? Let's just say the adjudicator says, "Yeah. I agree. I am happy to take on adjudication." If you follow the circle around there's only 5 days for the claimant to deliver to the adjudicator all their documents. What happens if the adjudicator says, "Nope. I don't want to adjudicate." for whatever reason. There might be a conflict. They don't feel comfortable. He had to meet the timing. Or if you don't agree on the adjudicator. Then the claimant refers to the ANA for an adjudicator. ANA has up to 7 days to appoint the adjudicator and the adjudicator has to agree and then that 5 days comes into play again. Claimant delivers documents to adjudicator - 5 days. So basically the takeaway is once you know the adjudicator, and the adjudicator agrees, there's only 5 days to get those documents. Now, we're going to say, "Okay. What does the notice have to say?" So the notice for the dispute to adjudication has to be written. It has to have the names and addresses of the parties. It has to have a description of the dispute including details as to how and when it arose. It has to have what are you trying to get. What kind of answer/relief are you trying to get? It should put the proposed name of the adjudicator.

So we're now at the point where the claimant has delivered all the documents. So then you look and your going to say, "It's blank." as to when the respondent is supposed to deliver its materials. That's because it falls now onto the plate of the adjudicator. So you'll see that the adjudicator has basically 30 days to deliver its decision. Has 30 days to figure out what it does and its role is pretty great in that, with that, it has to look at contracts, expert reports, potential viewings, that type of thing. So the adjudicator's going to look at this and then say, "Alright, respondent. I know I have 30 days, and there is a slight extension of an additional 14 days, so that 30 days could actually be 44 but for the most part it should be 30 days. They're going to say, "Respondent, I have the claimants. You only have this much time to deliver your materials to me." and then the adjudicator has that timeframe to deliver a written decision. If we have the written decision then we have a situation where two things can happen. The written decision is binding on the parties to the adjudication until there might be a court determination. Which means that, ideally, payment gets made within 10 days from the decision. However, if you don't agree with the adjudication, section 13.1(8) does allow the adjudicator's determination to go to the court for judicial review. Now you need leave, and it has to be done within 30 days, and it's pretty high test. That is something that you want to consider in that regard.

So, you can see that that is pretty strict. What we would like to suggest is that with this adjudication, because basically you've got, I think we said a total of about 49 days, so the positive is you can have a decision dealt with pretty quickly. The negative is you have to be ready and organized to go. Organization is key. If you're thinking on delivering a notice of adjudication, and you know what the notice has to include, you have to explain what your dispute is, you better have the proper facts and documents to include. You better have the supporting documents, and you better have things put together in a special way, such that you have document matter data base by project. You better say to your personnel, "You know what? We need to have our project records. We need to have them filed appropriately. We need to have them easy to access." Nowadays, with the pandemic taking place, a lot of organizations have moved from paper to electronic. If you're able to move to electronic, and get it organized in such a way by project, it also makes it easier for you to put everything together and get it sent, both to the respondent and the adjudicator, and respondents, people responding to this, all these tips apply to you as well. So, again, organization is key. You want to make sure it's by project because you don't want to be confused with projects. You might want to create some sort of process and make sure your personnel or individuals know a couple of things. One, they need to know the actual details. They need to know the timing and they need to know the process. So you might want to start at the beginning of a project a bit of a checklist. I'm not saying that you want to go to adjudication. I'm saying the more organized you are, and the more documents you have behind you, the easier it would be when you do get to adjudication, if that's the step. As I said, develop a protocol and follow it. The other thing is you see the timing. Those are strict timetables. 4 days moves just like that. 5 days moves just like that. So you're going to want to make sure that you have something in place, so that you can figure out the timing along the way, because there's a strict adherence to the adjudication process. That is kind of the high overview. So it can be very, very quick.

Alright. Could we turn to the next slide, please. Alright. Thank you, Chantelle. Remember, at the beginning of this, I talked about ODAC. Next slide, please. October 1, 2020, ODAC released its first report, annual report. So again, recall October 1, 2019, was the key date when adjudication could apply to projects started after October 1, 2019. As you can appreciate there would be nothing on October 1, 2019 because there would have been no contracts that would have started on that day. So what they did is they said, "Okay. You know what? We're going to do like a little bit of a snapshot and kind of figure out how have we done since October 1, 2019?" The report was released on July 31, 2020, so approximately 10 months, and they tried to figure out how have we done in the past 10 months. Now the report, you'll see on the bottom on the slide, we do give you a website. The website is something you can look up and the report is there along with the key statistics, the demographics, that type of thing. I should also add, in case you were wondering, we talked about the appointment of the adjudicator and reaching out to ODAC, they're the ones that keeps the roster of the adjudicator from whom you can choose. So this report does provide key statistics, demographics and it provides a summary of services. So if you're trying to figure out what does ODAC offer to me, and I appreciate that we have owners, we have some lawyers, we have some consultants, we have project certifiers all on the phone, so if there's things that you're looking for and there's questions you're asking about how ODAC might come into play, you can take a look at the website and understand that. ODAC is very proud that they also created a portal. It's kind of a state of art computer system, they said, and it gives you online portal so you could also understand the adjudication process. Because the snapshot we gave, even though we laid out the timeframe, it can be a bit confusing. A bit intimidating. As I said it's very strict timing. If you could take me to the next slide, please. Thank you.

Adjudication has not been widely adopted, as I said, only because realistically the report only covered the first 10 months and the chances of having contracts started after October 1, 2019, has been slim. But they were able to tell us that there were 32 notices that have been submitted in those 10 months. So let me tell you what those 32 notices were. They were with respect to primarily residential, actually, but it's broken down like this. 22 were residential. 5 were commercial. 2 were public buildings. 3 were transportation and infrastructure. 0 were industrial. So let's just pause for a second about that breakdown because adjudication applies to everyone, as we saw as to who can apply for adjudication, but also the type of adjudication is the type of industry structures. It's broad. From residential to transportation and infrastructure. So those were the 32 notices of adjudication that were submitted. As noted, it hasn't been a huge uptake at this point but that's okay because there's still, people will recall, just because we have adjudication now you still have the lien process. The update has extended the timeframe but you don't have to go to adjudication. We still have the prompt payment and people potentially will be following the prompt payment aspect of things. So adjudication, as I said, hasn't quite reached its high uptick right now. As I said, there's more residential aspect of things. If we could go to the next slide, please. Thank you.

So the roster, kind of like your guest list, is a bit of a mixture. The highest number at the time of certified adjudicators, and again it's ODAC that adjudicates the process, certifies the adjudicators, we'll come into what they have to do in a minute, but at the time of the report there were 28 engineers. There were 26 project managers. 22 lawyers. 10 quantity surveyors. 9 arbitrators. 2 architects and an accountant in a pear tree. No. Just kind of like the 12 Days of Christmas. But this is the type of certified adjudicators that we have. So a nice broad base. So if someone on the call is saying, "You know what? I would like to become an adjudicator." you can go to the ODAC website that we highlighted. You have to have 10 years of relevant construction industry experience. You have to complete a training course and you have to pass an exam and then you take on adjudication assignments. So you can be appointed as an adjudicator. So there is a process in place. The adjudicators, if you're actually looking for adjudicators, and/or if you wanted to maybe ask someone about the process that they've gone into and they're listed as an adjudicator, you could reach out to them, either for their experience so far and/or if you want to retain them as an adjudicator, can be found at that ODAC link that we have in the slide. So it talks about that. 65 adjudicators have been certified to date. When I say certified to date, it's a bit stale dated now because that report went to the end of July. So I suspect that ODAC will give us another update at the end of July, 2021. It'll be interesting to see if the spread of adjudication industries has changed. It will be interesting to see if there's been additional adjudicators and, of course, it will be quite interesting to see if the number of matters referred to adjudication have increased. I will note that ODAC has said in its report it doesn't plan to cap the number of adjudicators so if you're interested then that is a plan you can follow and right now they're keeping it open. The important thing about adjudication, we've shown on how quickly you can adjudicate. We've shown the breadth of the type of adjudication and we've shown who can adjudicate. The nice thing too is, with respect to fees, as a litigator I can tell you that litigation can be time consuming and expensive, although we are obviously worth our time in that regard, for our skill and experience. But adjudicators are willing to conduct flat rates that's in proportion to the amount in dispute. As I understand it from the report, and each adjudicator would of course speak for themselves with respect to the adjudication, and the adjudication cost is a responsibility of the parties, so it's a factor when you're thinking about adjudication but they have flat rates. So there's a real positive to adjudication between the timing and the cost and the input. The other positive is it's a very discreet issue that you can have before the adjudicator. The experience we have from our UK colleagues is that once the uptick takes place people are really quite happy with the adjudication results. It helps them get over a hurdle. It helps them move forward. It keeps the relationship and the construction project moving. Often they would say that once that adjudication is done it's not often they're going to dispute something later on by taking it to court. At the end of the day they just keep moving forward. I will also highlight one thing that I failed to mention. When you talked about the payment within the 10 days, remember the slide we showed you, payment within 10 days, if they don't pay you within the 10 days, the person that's responsible for the payment if that is the award by the adjudicator, then interest comes into play and there is a cost of removal and potentially return to get them back to site. So there's a bit of a hammer there to try to motivate payment in that way. Okay, next slide, please.

Again, we've already talked about the fact that they're determine quickly. We've talked about the type of disputes but there it is, in black and white, for people to take a look at things. The other benefit is, we talked about cost, timing, input, discreet issues, is that they're not public record. Now, that could be something that, again, relationships, business details, some people would prefer that neither one knows what's happening in that regard. So that is kind of a high overview for adjudication. At the end of it, depending on what Jeff has to say, we can answer questions later or if there's something in the chat I will pay attention to the chat. But otherwise I want to say thank you so much for joining us from everywhere. Hopefully that was helpful and I'd like to turn it back to Jeff, please.

Jeff: Thank you, Jay, very much. I appreciate that joke. I know I was on mute but I was laughing about the 12 Days of Christmas joke. Next I'd like to welcome Sahil to lead us through some of the lessons learned from adjudications. Sahil brings a wealth of experience in helping clients ensure they are put and stay on track. Where disputes are unavoidable he is also able to conduct formal and informal dispute resolution proceedings. So welcome, Sahil, and thank you for being with us today.

Sahil: Thank you, Jeff, and good morning, everyone. At least all who are joining here from Canada. I see that we have people from all over the place. From Europe, from Middle East, from India, welcome and thank you for joining us. What I'm going to speak with you is now that we have started to conduct adjudications what are some of the lessons that we have learned, and continue the flow of information that Jay has given us, and really tell you how this works practically when an adjudication is commenced on a construction project. What is an adjudication? It is a means of a dispute resolution. You do adjudication on an invoice by invoice basis (ie: you can have an adjudication every single month if there is a dispute). It is fast. It is effective and I will explain more as to how it can be effective in some of the other slides. You cannot contract out of the adjudication for construction projects in Ontario so it is accepted by the parties and you get an opportunity to make both arguments and submissions and submit documentary record to support your submissions. The most important thing that Jay has said, if you have no documents you have no claim. Either your bringing the claim or you're responding to claim, I can tell you from experience and now having done adjudication, that documents are the key source of effective adjudication. Because this is not like your typical dispute resolution (ie: an arbitration or a court matter). Yes, the Act allows for experts and others to hinge, but you're not going to have expert opinion reports because you have such a short period of time to get things in order, in order to either commence adjudication or respond to an adjudication. Therefore documents, documents, documents is a key and also having documents in a way that can be shared with both your internal or external legal team, if you choose to have a lawyer represent you, and the documents perfectly labeled so that you're not spending time, very crucial time that you're going to have in order to respond to an adjudication, trying to figure out where the documents, who has access to the documents, how can we get the documents over to your external lawyer? Next slide, please.

What are some of the other lessons that we have learned? Like Jay mentioned there is a roster of adjudicators on the ODAC website. This is one of the photos that we have taken from there which basically is an adjudicator registry. If you are the party commencing an adjudication you can propose an adjudicator that you think has the skill set and the experience to adjudicate the dispute in question and propose that adjudicator. If the responding party agrees with it, you have an adjudicator, otherwise the ODAC will appoint one from its registry. Next slide, please.

And again, just to explain the registry has profiles of the adjudicators, which the adjudicators have upload. It basically explains their background, their experience, what they bring to the table and how they can assist with adjudicating your dispute. Next slide, please.

Experts and adjudication. How does this all fit in? You can retain an expert. It could be a consultant on the project, or an outside third party consultant, but the key is going to you're not going to have extra reports which you would otherwise have in arbitration or litigation of a construction dispute. This is going to be an expert who is going to allow an adjudicator to retain an expert to assist in the factual determinations if the adjudicator things they're necessary. Next slide, please.

This is again just from the ODAC like how the system really works. You create a profile and then you submit the matter to adjudication and here are the steps. You can have a claimant representative, if there's a lawyer representing the claimant, respondent case information and you follow the process as to are you the claimant's representative or respondent representative, you upload documents. Next slide, please. The ODAC then emails the respondents to confirm that a notice of adjudication has been filed and the respondent may, and I recommend that you should, respond to the notice of adjudication in writing and you should provide a copy of your response to both the adjudicator and the claimant. Your response to the claimant for adjudication, which is commenced against you, should be filed within the deadlines as Jay took us through (ie: the response shall be provided no later than such day as the adjudicator may specify) but much will be provided by the adjudicator and on the other party on the same day, unless there's an agreement between the parties that the days are changed. You follow the process and the timelines and the adjudicator may request more time to deliver a decision, but the report didn't go into any details pertaining to that, at least now. Again, how do you upload the documents? Again, these are items that, based on our experience doing an adjudication, you're given a set of deadlines as to what document has to be submitted by when. You need to complete by a certain date and then when an upload takes place it tells you when that particular item was completed. For example, in this case, ODAC's asked to proceed without response notice of adjudication, communicate adjudication fees to the parties and such, and you have steps to complete then you have also have bigger milestones. Again, there's a separate section that talks about that and for the purposes of the presentation today, I've taken that out to really explain to you how would this play out practically. Next slide, please.

Upload of the documents. It's ODAC custom system. It would be like any other system where you upload files and this is what it actually looks like when you go into the system to upload files. You select the files that you want to upload, and it gets uploaded, and you will get a confirmation that the document that you've tried to upload has been successfully uploaded. Next slide, please. This is what an email will look like from ODAC, once you have uploaded a document, to let you know that your upload has been successful and everybody who's part of that adjudication, and whose information is available to ODAC, will receive this automatic reply email form ODAC. Next slide, please. This is typically, the adjudication which we did, this is what some of the documents look like which were uploaded, and ODAC messages confirming the documents uploaded by all of the parties. Next slide, please.

Now over to my colleague, Tristan Neill, who's going to tell us what is happening across the country. We can get into more details in the breakout session and if you have specific questions about adjudication and the process, and how to run an adjudication, I'll be more than happy to answer those questions for you. Over to you, Jeff.

Jeff: Wonderful. Thank you, Sahil. As Sahil mentioned, last but certainly not least, I'd like to introduce you to Tristan Neill. Tristan works closely with Sahil on a broad range of construction planning act and expropriation matters and is going to walk us through Alberta's Bill-37 and adjudication laws across Canada. Now for those of you that are joining us from outside of Canada, I'm sure many of this will still apply, in theory and please, if you have more direct questions about where you are please feel free to ask them during out question and answer at the end and we will do our best to answer them. Tristan, are you on camera right now? I can't see you. Yes, you are. Okay, perfect. Take it away, Tristan.

Tristan: Okay, thanks, Jeff and it's been a very interesting few years across the country in the construction law space because we have seen a lot of changes coming through legislatures across the country and I think we expect to see that continuing in the next few years. So you've heard a lot about the changes in Ontario today. They have been passed and they are in force. Ontario, therefore, has really been at the forefront of the changes in the construction law world. But we are seeing this broader set of so called modernization to construction law legislation across the country, and as it relates to adjudication, the premise is really providing this new, or at least new to these jurisdictions, method of resolving construction disputes that has a focus on efficiency, quick timelines, cost effectiveness and helping to reduce project delay. As you can see on the slide we have some very recent changes from Alberta that were passed just in December of 2020. I'm going to speak about those in a bit more detail. Those are not yet in force. We also have legislative changes being made Federally in Nova Scotia and in Saskatchewan, all in the spring and summer of 2019. Those also have not yet been put in force. So in all four of those jurisdictions we are waiting to see when they will be put in force and then when those changes will actually have effect. Quebec has gone a step further. Its legislation was passed, and it's running a pilot project, and in a number of Provinces such as British Columbia, New Brunswick and Manitoba law reform and legislative initiatives are underway. So as you can see a lot of change has occurred but we're still expecting to see quite a bit of change coming down the pipe in the future. To focus a bit more closely on the changes from Alberta I just wanted to highlight a few key points and a few key differences from what you have heard already today about Ontario.

So one key point that is the same is that parties can only adjudicate matters with other parties to the same construction contract. I know that's a point that's already come up today. It's a very simple point but it's a very important point because you're not going to have a very successful adjudication if you try to adjudicate against a party that you don't have a contract with. While that seems like a simple principle we have seen cases, one just very recently that Sahil and I wrote an article about, not about adjudication but another case where a party tried to seek a remedy, under the Construction Act with a party that it didn't have a contract with. The court shut that down and said, "The Construction Act is really about remedies, by and large, between contracting parties and if you don't have that contract it's not nearly as likely that you're going to be successful and that holds true for adjudication as well."

One area of difference, in Alberta we do not see the timelines set out right in the legislation. As Jay was mentioning, those timelines are very important to the overall principles and the overall process for adjudication so it will be very interesting to see if timelines are set in the regulations, which is expected and then what those timelines actually turn out to be, because that's a very, very key point for the adjudication regime. Another point of difference between Ontario and the Alberta legislation is that in Ontario we have one adjudicating body, ODAC. But in Alberta there's the potential for multiple adjudicating bodies to be appointed. This is important to keep track of because the different adjudicating bodies may not be organized or run in exactly the same way. There may be procedural differences. There may be different rules, and it's important to keep on top of those differences in case one body is more favourable to your situation than another, and just so you don't run into any surprises when you may or may not be as familiar with how the bodies operate. That can lead parties into sticky situation so it's much better to be aware of those differences from the outset. One final difference is that Ontario has clearly set out what subject matter is appropriate for adjudication and we haven't seen that set out in detail in the Alberta legislation. Again, that may well be coming in the regulations under the Act. But it's important to keep in mind, and it will be interesting to see where Alberta lands on this point, because some matters are more amenable to adjudication than others. Simple matters that can be dealt with quickly are going to be successful. Can be dealt with successfully through adjudication. But if you have a very complex matter with a mountain of documents, and you're going to need to compile numerous expert reports, that may be more difficult to do on the shortened adjudication timeline. So it will be very interesting to see where Alberta lands on some of these points and to also watch for the forthcoming legislative changes that may occur when some of the Provinces complete their legislation reform initiative.

So, Jeff, just before turning it back over to you I think the final point to make is that while the presenters today have all been based in Ontario, and are certainly most familiar with the law in Ontario and that is really the area of their expertise, we have colleagues from across the country who can assist with adjudications and other construction law questions. So don't hesitate if you're from another Province to reach out to us. We have resources across the country and most particularly in British Columbia, Alberta and Quebec. So, Jeff, back over to you.

Jeff: Wonderful. Thank you, Tristan, and thank you everyone for joining us today. As I mentioned at the beginning, we're now going to split you up into three groups, each moderated by one of our presenters, for a Q&A session for question and answer period. Please feel free to ask any questions you have that relates to your industry or your business. We will automatically split you up so there's nothing you have to do on your end. I will say that you'll be unmuted and, again, if possible please feel free to turn on your webcams. We've all been showing off our COVID hairstyles during this presentation and we encourage you to do it as well. Thank you again for joining us, and after this question and answer period we will let you go, but we have lots of time so please take care.