The Alberta Court released its first decision in Welcome Homes Construction Inc v. Atlas Granite Inc, 2024 ABKB 301 (the Decision) addressing the streamlined adjudication process under the Prompt Payment and Construction Lien Act (PPCLA). In doing so, the Court provided guidance on: (i) the interaction between lien proceedings and adjudication; and (ii) the impact of a Notice to Prove Lien on an adjudicator's decision.
Background
Welcome Homes Construction Inc. (Welcome Homes) engaged Atlas Granite Inc. (Atlas Granite) as contractor to supply marble countertops for a new home. After a dispute arose about the length of the kitchen island countertop, Welcome Homes refused to pay for or take delivery of the work or materials supplied by Atlas Granite.
Welcome Homes terminated the contract on March 9, 2023. Atlas Granite filed a lien on May 17, 2023 (68 days later).
Prior to commencing a court action, the parties agreed to follow the new adjudication process under the PPCLA. The adjudicator awarded $12,775.29 to Atlas Granite. Welcome Homes subsequently served a Notice to Prove Lien on Atlas Granite. The parties then stayed the lien proceedings by consent order and sought advice and directions from the Court about the impact of the lien issues (including lien validity and the Notice to Prove Lien) on the adjudicator's decision.
The decision
In the Decision, the Court considered the following issues, amongst others: (1) what impact did Atlas Granite's filing of a potentially invalid lien have on the adjudicator's decision? and (2) did Welcome Homes' service of a Notice to Prove Lien on Atlas Granite override the adjudicator's decision?
Issue #1 — Interaction between lien validity and adjudication
The Court noted that Atlas Granite's lien may have been invalid since it appeared to have been filed after the 60-day notice period prescribed by the PPCLA. Nonetheless, it ruled that the validity of the lien was irrelevant to the adjudicator's decision regarding the dispute.
In reaching its conclusion, the Court considered the adjudication provisions under the PPCLA. It found that the adjudication process is meant to deal with contractual disputes between contracting parties (i.e., owner-contractor, contractor-subcontractor, subcontractor-subsubcontractor, etc.). The Court noted that lien rights help to frame the dispute and give access to the adjudication procedure. However, it determined that the adjudicator's decision did not depend on the validity of the lien to be binding on Welcome Homes and Atlas Granite.
Issue #2 — Effect of a Notice to Prove Lien on an adjudicator's decision
The Court held that Welcome Homes did not override the adjudicator's decision simply by serving a Notice to Prove Lien on Atlas Granite. The Court drew a distinction between section 13.15(1) of the Ontario Construction Act and section 33.6(5) of the Alberta PPCLA. It noted that, while the Ontario Act states that an adjudicator's decision is binding on the parties until a determination of the matter by the Court, the Alberta legislation provides that an adjudicator's decision is binding except where it is displaced by court order or judicial review.
Section 13.15(1) of the Ontario Construction Act provides:
13.15(1) The determination of a matter by an adjudicator is binding on the parties to the adjudication until a determination of the matter by a court, a determination of the matter by way of an arbitration conducted under the Arbitration Act, 1991, or a written agreement between the parties respecting the matter [emphasis added]
Section 33.6(5) of the Alberta PPCLA states:
33.6(5) The determination of a matter by the adjudicator is binding on the parties to the adjudication, except where
- a court order is made in respect of the matter
- a party applies for a judicial review of the decision under section 33.7
- the parties have entered into a written agreement to appoint an arbitrator under the Arbitration Act, or
- the parties have entered into a written agreement that resolves
the matter
[emphasis added]
The Court reasoned that the differential use of the words until and except in the statutes implied that, whereas construction adjudication under the Ontario regime is an interim dispute process that is temporarily binding on the parties, adjudication in Alberta is intended to be final. Therefore, an adjudicator's decision may only be displaced by a court order or judicial review.
The Court held in the result that Welcome Homes' Notice to Prove Lien did not supersede the adjudicator's decision.
Key takeaways
Considered narrowly, the Decision indicates that adjudication in Alberta is meant to be an abbreviated process that deals with contractual obligations between contracting parties, and that an adjudicator's decision may not be overridden simply by serving a Notice to Prove Lien on the opposing party.
At a broader level, the Court's comments about the finality of Alberta adjudication decisions suggest that Alberta could take a slightly different approach to Ontario with respect to the treatment of adjudication decisions in subsequent court proceedings.
In both Alberta and Ontario, the applicable acts provide for the same non-exclusive remedies to challenge an adjudicator's decision. A party may: (i) start a court action and seek an order from the court; or (ii) seek judicial review of the adjudicator's decision. Both acts also provide that an adjudicator's decision may be overridden by arbitration.
Where a court action is commenced to challenge an adjudicator's decision, Ontario courts have found that adjudication is considered an interim remedy and that courts should be "weary (sic) solely relying on the findings of an adjudicator in this process...".1 Whether a distinction in Alberta transpires remains to be seen.
As the construction adjudication procedure gains momentum in Alberta, it is important for parties to know their rights under the PPCLA. Osler will continue to assess decisions respecting the new adjudication process under the PPCLA to ensure clients are well equipped to address these issues as and when they arise.
Footnote
1. Arad Incorporated v. Rejali et al, 2023 ONSC 3949 at para 28.
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.