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Appendix B
The Architect as Prompt Payment Adjudicator

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By Allen Humphries, OAA, MRAIC, and Christie Mills, OAA


Preamble

At the time of publication of the Canadian Handbook of Practice for Architects 3rd Edition, prompt payment legislation had been enacted only in the province of Ontario. However, this discussion of the architect as prompt payment adjudicator is included as provincial legislatures and the federal government are exploring their own approaches to prompt payment legislation. Prompt payment legislation is anticipated to become common in many jurisdictions in the future.


Introduction

Adjudication

Adjudication is a form of alternative dispute resolution. It is intended to be quick in order to keep the money flowing in the construction industry. In comparison with mediation, arbitration or litigation, it has been likened to rough-and-ready frontier justice – get it done and move on.


Adjudication under the Ontario Construction Act

The Construction Act (CA) in Ontario came into force on July 1, 2018, replacing the Construction Lien Act (CLA) for new projects. Adjudication is intended to provide a quick and inexpensive binding interim resolution of construction disputes. A party to a contract may refer to adjudication during a dispute with the other party to the contract with respect to any of the following matters:

  • valuation of services or materials provided under the contract;
  • payment under the contract, including with respect to a change order, whether approved or not, or a proposed change order;
  • disputes that are the subject of a notice of non-payment under Part I.1;
  • amounts retained under Section 12 (set-off by trustee) or under Subsection 17 (3) (lien set-off);
  • payment of a holdback under Section 26.1 or 26.2;
  • non-payment of holdback under Section 27.1; or
  • any other matter to which the parties to the adjudication agree, or that may be prescribed. 2017, c. 24, s. 11 (1).

Architects may find themselves involved as a party to adjudication of a dispute under the client-architect agreement, or may be asked by an owner to help prepare the owner’s defense where the owner is a party to adjudication of a dispute under a construction contract. In either case, there will be very limited time available to understand the item in dispute, review the material submitted by the claimant, collect pertinent information from the project files, and compose a response.

The decision in an adjudication is enforceable in court and is binding until the end of the project.


Authorized Nominating Authority

Designated to oversee the appointment of adjudicators and the adjudication process, the Authorized Nominating Authority (ANA) is charged with developing and supervising training and qualifications for adjudicators and maintaining a registry of qualified adjudicators. Architects with 10 years of experience are eligible and are encouraged to apply for this opportunity. One must meet the criteria set out in the regulations, and complete both a training course and an online quality evaluation process. The latter requires video submittals to demonstrate adjudication ability. Applicants also provide the ANA with a completed form, adjudicator declarations and a resumé with details about relevant working experience in the construction industry. Determinations will be made based on qualifications, need and the results of the evaluation process.

In Ontario, the ANA has also established five tiers of adjudication to guide all participants about what to expect in terms of process, timing and costs. As outlined by the ANA, the cost of an adjudication is shared by the two parties and is expected in total to be slightly less than 10 percent of the amount in dispute, with the minimum tier costing $800. It remains to be seen how this will impact the resolution of disputes over small dollar values.


The Adjudicator’s Role

The adjudicator (with the consent of the parties) is free to determine the procedures and process of each adjudication. There is no requirement to conform with the processes outlined by the ANA.

It is anticipated that most adjudications will involve the adjudicator receiving and reviewing written submissions only, with no statements being given in person. Unlike a formal judicial proceeding, witnesses are not sworn in. The parties simply tell their stories to the adjudicator. Unlike a judge, the adjudicator does not need to be a legal expert. Also unlike a judge, an adjudicator may be an inquisitor, asking questions, visiting the site, and pursuing answers where appropriate. After evaluating written and any oral submissions, the adjudicator, relying on their experience in the construction industry, writes a decision and presents it to the ANA and the parties.

In Ontario, an adjudicators cannot be found liable for a decision rendered in good faith.


What Does Adjudication Mean for Canada?

It is difficult to predict how adjudication will be received and the role it will ultimately play. Although adjudication has been used with varying success in other countries, each piece of adjudication legislation, and each construction environment, is different. In England, for instance, it was nine months after the legislation came into effect that the first adjudication took place, because no one wanted to be the first. This is despite the fact that England does not have legislation for construction lien rights.

Under the proposed federal legislation, only fee disputes may be adjudicated. This is a much narrower scope than is permitted in Ontario. Architects will need to become familiar with the legislation applicable to the place of the work.

No legislation is perfect as first implemented. A number of issues have been raised with respect to the Ontario legislation. To remain current, architects will need to monitor any revisions to the legislation, any regulations enacted under the legislation, and any court decisions that impact the legislation. Often, this is best done by speaking with a lawyer specializing in construction law.


Adjudication and the Profession of Architecture

Adjudication and prompt payment (with which it is often paired) should benefit the entire construction industry in the long run by keeping the money flowing. In the short term they will both be disruptive, as they are new and they change long-standing processes and expectations.

They will require close attention until working with the time frames imposed and the notifications required becomes routine for consultants, clients, contractors and all those further down the chain.

Architects should ensure that assisting owners with adjudication is part of the scope of services in the contract with the client. Given that the scope of services required on a project is unknowable at the time of contract signing, a fixed fee is inappropriate. An hourly rate or carrying a cash allowance may be more appropriate for this work.

Architects should also consider that timing is crucial for interim adjudication. In order to respond effectively, it may be necessary to pull someone familiar with the project being adjudicated off their current project to deal with the adjudication. This will disrupt not only the project being adjudicated, but also the other projects in the office as staff and effort are adjusted to be able to respond to any adjudication. The tight time frames may require overtime work and should be appropriately compensated.

Architects should be aware that any new legislation is likely to be dynamic, as amendments are made to address ambiguities and omissions, and court rulings impact the application and interpretation of the legislation. While architects may assist clients, architects should not provide legal advice and should require the client to obtain legal advice regarding time frames that apply and notices that may be required.

In addition to assisting with adjudications under a construction contract, architects may find themselves party to adjudications of disputes in relation to the client-architect agreement. It has been recommended that architects seek out and retain the services of a lawyer to advise about adjudications well before any adjudication is commenced, as there will not likely be any time to find a lawyer once an adjudication is started.


The Architect as Adjudicator

Concerning the progress of the reports and legislation in Ontario, some of the top construction law minds in the country have expressed that adjudication will work better if architects and engineers become adjudicators rather than the field being left just to lawyers.

Architects are well suited to the role of adjudicator for the following reasons:

  • their established role in the industry as impartial interpreters of construction documents and construction progress;
  • the public interest mandate for architects related to their enabling legislation, the architects acts;
  • architects must understand the long-term decision ramifications related to all disciplines that form part of the project’s design and also the broad implications of changes during construction;
  • professional accountability.

The question has been raised as to whether adjudication should be considered part of the “usual and customary services” of the practice of architecture. In Ontario, it is recognized that architects have traditionally acted in many ways as informal adjudicators and are well suited to the role. However, a formal role as an adjudicator operating under separate enabling legislation, requiring separate training and appointment by an ANA, is a separate business enterprise from the provision of architectural services to the public.

Despite formal adjudication services not being part of the normal practice of architecture, architects providing such services can be subject to complaints and/or discipline under their professional licensing legislation for the performance of those duties, as they remain professionals licensed by the provincial regulator. Moreover, the ANA has their own complaints process which must be adhered to for their adjudicators with their own code of conduct. One does not trump the other. Architects would be responsible under both.

The tight time frames affect the provision of adjudication services. While adjudicators are free to accept or reject appointments to act in any dispute, once an appointment is accepted, the legislated and agreed-upon schedules must be complied with. The impact of this must be considered in relation to maintaining professional standards in the provision of architectural services to clients of the architectural practice.

Architects should consider potential conflicts of interest between their role as a formal adjudicator and that of architect in deciding which adjudications to take on. Consider past and present relationships with the parties to the adjudication in order to avoid the appearance of conflict of interest or bias. This is more of a concern where the adjudicator is appointed by the ANA than when the adjudicator is selected jointly by the parties to the adjudication, provided any relationships are known to both parties.


References

Construction Act, R.S.O. 1990, c. C.30, October 1, 2019, https://www.ontario.ca/laws/statute/90c30, accessed May 28, 2020.

O. Reg. 306/18: Adjudications Under Part II.1 of the Act, October 1, 2019,
https://www.ontario.ca/laws/regulation/180306, accessed May 28, 2020.