Overview & Background
On July 15, 2024, the Divisional Court clarified the scope of an adjudicator’s jurisdiction and the conditions for judicial review of adjudicators’ decisions in Jamrik v. 2688126 Ontario Inc., 2024 ONSC 2854 (Div. Ct.). Writing for a panel of the Court, Justice Corbett’s decision addressed procedural fairness, an adjudicator’s authority to make findings of fact and law, and how adjudicators should manage procedural fairness and unargued submissions.
In doing so, the Court overturned an adjudicator’s order requiring the applicant to pay $564,812.87 pursuant to the “prompt payment” provisions of the Construction Act. The applicant successfully argued that the adjudicator lacked jurisdiction because the contract was “completed” according to section 2(3) of the Act.
Was the contract “completed” for the purpose of determining an adjudicator’s jurisdiction?
Pursuant to subsection 13.5(3) of the Construction Act, an adjudication cannot be commenced if the contract is “completed”. According to subsection 2(3), a contract is deemed to be completed if the lesser of either 1% of the contract price or $5,000 remains outstanding.
In his decision, the adjudicator found that the contract was not completed because an unpaid invoice exceeded 1% of the contract price, without evaluating whether any contract work remained unfinished. On this basis, the adjudicator determined that he had jurisdiction to make the order for payment from Mr. Jamrik to 2688126 Ontario Inc. o/a Turnkey Construction’s (“Turnkey”).
However, the Divisional Court found that applying the test under subsection 2(3) of the Act to determine that the contract was not completed was an error of law. There is an abundance of caselaw under section 2(3), which does not only apply to the Construction Act adjudication provisions, which provides that “completion” of a contract refers to the performance of the work, not the state of accounts.
Was the adjudicator bound by precedence?
The Divisional Court then considered whether the adjudicator was bound by this caselaw, rejecting Turnkey’s argument that “requiring adjudicators to seek guidance from the case law would frustrate the goal of timely adjudication…”.
Adjudicators are bound by decisions of the Divisional Court and the Ontario Court of Appeal. As a best practice, the Court suggested that adjudicators should follow decisions of the Ontario Superior Court of Justice as well. Timely adjudication concerns could be mitigated by allowing parties to submit legal arguments during adjudication.
Procedural fairness and unargued submissions
The Court found that where the adjudicator is required to make a determination on a point that had not been raised by the parties in their submissions, such as the issue of contract completion in the case at hand, the adjudicator should give notice to the parties and allow them to prepare supplementary submissions.
This practice ensures procedural fairness and helps prevent incorrect legal interpretations. The Court reinforced that adjudications aim to facilitate ongoing work and payment, underscoring the importance of thorough and fair adjudication.
In coming to this determination, the Divisional Court also considered the purpose of interim determinations, being that “[adjudications] exist because of a recognition that money should continue to flow, and work continue to be done…”, as opposed to the normal course of litigation and lien actions. This demonstrated that the issue of contract completion was integral to the purpose of adjudications, which ultimately spoke to the importance of an adjudicator taking jurisdiction on this basis.
Conclusion
The Divisional Court granted Mr. Jamrik’s application and remitted the case for a new adjudication because the original adjudicator failed to properly address whether the contract work was completed. This decision emphasizes the need for adjudicators to follow established legal precedents, and maintain procedural fairness, including by allowing supplementary submissions on unargued points where appropriate. An adjudicator must be correct, in law, on jurisdictional issues, but will be afforded deference on findings of fact related to their jurisdictional analysis.
Ultimately, the decision highlights the balance between timely resolution and adherence to legal principles.