In one of the few reported court decisions on the Prompt Payment and Construction Lien Act(PPCLA), the Court states that adjudication in Alberta is final and binding on the parties - except where the Court makes an order, or an application for judicial review provides a different result.
Unlike the Ontario Construction Act, which expressly states that an adjudicator's decision is interim binding (i.e. binding and enforceable until a court or arbitrator finally decides the matter), the Alberta legislation does not state whether an adjudication is a final decision or an interim decision. So, it is no surprise that this dispute over the proper interpretation of the PPCLA went to court.
In Welcome Homes Construction Inc v Atlas Granite Inc., 2024 ABKB 301,a residential builder and a trade contractor agreed to resolve a payment dispute by adjudication. The adjudicator issued a written decision awarding the trade contactor part of the amount claimed. The builder delivered a Notice to Prove Lien to the trade contractor. The parties disagreed as to the effect of delivering a Notice to Prove Lien following the completion of an adjudication. The trade contractor applied to the court for advice and directions on how to proceed – i.e. via Notice to Prove Lien or judicial review.
The builder argued that the adjudicator's decision was only interim binding, and so they should still be entitled to challenge the validity of the lien. The trade contractor argued that the adjudicator's decision was final, and it would circumvent the PPCLA to require them to prove the validity of their lien after the adjudication. The Applications Judge concludes that adjudications in Alberta are final and binding, subject to the listed exceptions, based on two important distinctions between the PPCLA and the Ontario prompt payment legislation.
- The Ontario Construction Act provides that an adjudication is binding on the parties until a determination of the matter by a court or arbitrator, whereas the Alberta PPCLA says that an adjudication is binding on the parties except where a court order is made in respect of the matter; “except” does not mean the same thing as “until.” (Other exceptions include where the parties agree in writing to appoint an arbitrator or agree to a settlement in writing – see excerpts from the legislation below.)
- The Alberta PPCLA provides a mechanism for “judicial review” of an adjudication decision.
The Applications Judge bases his decision on a plain language interpretation of the PPCLA and concludes that lien rights are irrelevant to an adjudication. The adjudication process exists to determine contractual rights, not lien rights. An adjudication does not depend on the existence of a valid lien.
Unfortunately, this decision leaves us with as many questions as answers.
- If an adjudication is final and binding, what is the meaning of the phrase “except where a court order is made in respect of the matter” in the PPCLA? It has to mean something other than judicial review, since it is listed separately from the statutory exception for judicial review. Does it mean, as the trade contractor argued, only that a party may apply to court prior an adjudication decision for a court order that the adjudication will be non-binding? If so, what adjudications would be appropriate for such an application?
- Is the Notice to Prove Lien mechanism available after an adjudication? Although this was really the procedural point of contention between the parties, the Court did not directly address this point. A lien claimant may need to enforce its lien to get paid, even after “winning” an adjudication. The owner or builder may take issue with the validity of a lien for a variety of reasons (e.g. timing of lien registration), whether or not money is owing to the lien claimant as determined by an adjudication. So, surely the Notice to Prove Lien mechanism must remain available after an adjudication. The Court decision pronounces that “an adjudicator's decision cannot be overridden by a Notice to Prove Lien by the opposing party.” The practical effect of that pronouncement is not clear, but it should not be taken to mean that the Notice to Prove Lien mechanism is unavailable following an adjudicator's decision.
- If judicial review is the only mechanism available to challenge an adjudicator's decision, what is the standard of review? The Applications Judge mentions the impressive list of qualifications that adjudicators have to meet, which might suggest that the Court will show deference an adjudicator's decision. If so, this would place a surprising amount of power with adjudicators considering the expedited nature of adjudications under the PPCLA.
Relevant excerpts from the PPCLA:
Section 33.6
…
(5) The determination of a matter by the adjudicator is binding on the parties to the adjudication, except where
(a) a court order is made in respect of the matter,
(b) a party applies for a judicial review of the decision under section 33.7,
(c) the parties have entered into a written agreement to appoint an arbitrator under the Arbitration Act, or
(d) the parties have entered into a written agreement that resolves the matter.
(6) Except in the case of an application for judicial review under section 33.7, nothing in this Part restricts the authority of the court or an arbitrator to consider the merits of a matter determined by an adjudicator.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.