ODACC 2023 Annual Report: Key Takeaways From The Implementation Of The Prompt Payment/statutory Adjudication Regime In Ontario

Ontario has had four years of prompt payment/statutory adjudication under its belt following changes made in 2019 to the province's Construction Act (formerly the Construction Lien Act).

The Ontario Dispute Adjudication for Construction Contracts ("ODACC"), the Authorized Nominating Authority, is responsible for administrating construction-related adjudications and for training and certifying adjudicators under the Construction Act and Ontario Regulation 306/18 (the "Regulations").

Section 14. (1) of Ontario Regulation 306/18 requires ODACC to issue and make public its annual report no later than ninety days after the end of each fiscal year.

ODACC issued its fourth Annual Report for the 2023 fiscal year, running from August 1, 2022 to July 31, 2023 in the fall of 2023 (the "Report"). The Report highlights a number of key themes for the implementation of the prompt payment statutory adjudication regime in Ontario.¹

These statistics indicate potential trends for the future of construction adjudication and prompt payment, not only in Ontario but also in Western Canada, where adjudication came into force in two provinces in 2022 (Saskatchewan, Alberta) and is being considered in other provinces such as Manitoba and British Columbia.

1. Increase in the use of Adjudication as a means of dispute resolution – There has been an overall increase in the number of adjudications commenced in 2023 compared to previous years. In the 2023 fiscal year, 269 adjudications were commenced. This 269 figure includes 36 adjudications commenced in the 2022 fiscal year with decisions being rendered in 2023. Therefore, a total of 161 determinations were rendered, compared to the 67 determinations rendered in 2022.
2. There is a disparity between adjudications commenced and determinations issued – of the 269 adjudications commenced in 2023, there were 161 determinations issued. This disparity indicates that many adjudications are not being pursued to final determination, and are either being abandoned or settled prior to an adjudicator issuing a determination. In fact, of the 80 adjudications that were terminated, 44 of them were terminated before an adjudicator was appointed. The Report does not specify if the adjudications not being pursued are being resolved in the claimant's favour outside of the adjudication process or are just being abandoned.
3. Adjudication is (still) fast – Of the 161 determinations rendered during by ODACC adjudicators in the 2023 fiscal year, 65% (or 105 determinations) were rendered within the 30-day timeline prescribed by section 13.13(1) of the Construction Act. This is down from the 75% of determinations made in the 2022 fiscal year.
4. The types of matters being submitted to adjudication has remained fairly consistent – The distribution of subject matter largely continued the trends observed in previous reports. Most determinations related to matters involving:
   1. the valuation of services;
   2. the valuation of materials provided under a contract; and
   3. payment under a construction contract, including in respect of a change order, whether approved or not, or a proposed change order.

It is noteworthy that, of the 161 determinations in 2023, 20 adjudications dealt with "Disputes that are the subject of a notice of non-payment". This is up significantly from 2023, where there were only 3 determinations to fall into this category.

1. Holdbacks are generally not the subject matter of adjudications – In 2023, of the 269 adjudications commenced, there were only 7 adjudications commenced that involved either the payment or non-payment of holdback under sections 26.1, 26.2 or section 27.1 of the Construction Act.
2. The distribution of industry sectors has remained consistent – Of the 269 adjudications commenced in the 2023 fiscal year, 91 involved the residential sector; 64 involved the transportation and infrastructure sector; 81 involved the commercial sector; 22 involved the public buildings sector; and 11 involved the industrial sector.
3. The amounts claimed in statutory adjudications has continued to grow – The total amount claimed in adjudications continued to grow in 2023. The total amount claimed reached approximately $68 million, with $256,000 being the average amount claimed in an adjudication.
4. The amounts awarded are significantly lower than the amounts claimed – the total amount to be paid pursuant to the determinations rendered continued to be significantly lower than the total amounts claimed: in the 2023 fiscal year, a total of $24, 381,989.90 was awarded in the 161 determinations rendered compared to the $68 million claimed.

As contractors, trades, and owners get more familiar with statutory adjudication, the uptake of statutory adjudication over formal court proceedings or arbitration can be expected to accelerate in the coming years. With the current economic uncertainty caused by rising interest rates, increased material costs and labour shortages, adjudication may start playing a more significant role in dispute resolution much sooner than we anticipate.

Footnote

1. References to the Report in this articles are references to ODACC's Third Annual Report issued on

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