This year marks another pivotal period in the evolution of construction law in Ontario. Most notably, Bill 216, Building Ontario For You Act (Budget Measures), 2024 resulted in the passage of amendments to the Construction Act, RSO 1990, c C.30 (the “Act”), receiving Royal Assent on November 6, 2024. These amendments are discussed by Jacob McClelland and Amir Ghoreshi in this newsletter.
The amendments coincide with the release of the Ontario Dispute Adjudication for Construction Contracts (“ODACC”) 2024 Annual Report (the “Report”). The Report marks five years since the introduction of adjudication in Ontario. In this article, we review ODACC’s Report and key takeaways for the fiscal year 2024 and compare certain findings to the first year of adjudication. We also present suggestions for how, going forward, the ODACC Reports might unpack interesting aspects of the adjudication process and provide further insight into its growing use since it was first installed in Ontario as a dispute resolution mechanism.
Adjudication Then and Now
In 2020, Glaholt Bowles LLP published a special edition newsletter entitled Adjudication: One Year in Review. In one of the articles, we discussed interesting findings in the first annual report from ODACC. Today, in addition to highlighting how adjudication has played out in Ontario in fiscal year 2024, we also draw some comparisons between the first and fifth year of adjudication to reveal several insights.
First, the raw data shows that 32 matters were commenced in the first year of adjudication, but in 2024 that number has increased nearly nine-fold to 277. As stakeholders in the industry have become more familiar with the adjudication process, and perhaps how it can be beneficial to keeping projects on target through quick resolution, the use of adjudication has exploded.
Second, because of the increased use of adjudication, the number of disputes reaching a determination have also soared. In 2024, 151 determinations were made, totaling $30 million in awards required to be paid. In comparison, in the first year of adjudication, only 3 determinations were made with a total amount of awards sitting at $30,000. The tremendous shift in the size of these awards from $30,000 to $30 million in only five years signals the growing value that adjudication is having on keeping money flowing on projects.
Third, like in the first year of adjudication, residential matters continue to dominate the pool of disputes with 40% coming from residential construction. However, adjudications of disputes in the transportation and infrastructure sectors are gaining momentum in second place with approximately 30% of the matters coming from these sectors. This is in comparison to the first year of adjudication, where transportation and infrastructure disputes comprised only 3 of the 32 disputes (9%). None of the 3 transportation and infrastructure disputes during the first year of adjudication actually resulted in a determination.
Fourth, in terms of the nature of the disputes that resulted in determinations in fiscal year 2024, the top two categories, which made up 80% of the cases, were:
a. disputes that dealt with payment under the contract, including in respect of a change order, whether approved or not, or a proposed changed order (50%); and
b. disputes that dealt with the valuation of services or materials provided under the contract (30%).
Fifth, in terms of the decision makers themselves, there was a drop in the number of adjudicators from the first year (65) to the fifth year (52). The distribution of professional training of the adjudicator is consistent. In our newsletter, Adjudication: One Year in Review, we noted that notwithstanding the limited cases where an adjudicator has more than one profession, most were engineers or project managers, with lawyers being the third most prevalent profession. Five years later, this distribution largely remains the same. We also continue to see a dearth in the number of architects, despite the regular role of architects as consultants on a wide range of construction projects. In the first year of adjudication, two adjudicators were professionally trained as architects. Today, that number has only increased to three.
Lastly, the Report pointed to an increase in consolidated adjudications where multiple parties with disputes related to one construction project resolved their dispute together. There were no such cases noted in the first annual report, which is likely explained by the smaller pool of cases and limited number of large infrastructure projects where there are typically numerous disputes and therefore more potential for consolidation. Still, the increase in consolidated cases by 2024 is a very good indication of adjudicators and the parties making concerted efforts to streamline disputes and focus on efficient resolution in real time which reflects the legislative intent for adjudication.
Overall, the above comparison between the first and fifth year of adjudication illustrates how its use has expanded exponentially across the province, as well as the importance of the adjudication process in keeping funds flowing within the construction pyramid.
Expanding the ODACC Annual Reports
Each year, ODACC’s Annual Report is much anticipated by the construction law community as it provides us with a bird’s eye view of the landscape of adjudication. However, the opportunity exists for these reports to uncover much more of what is happening “on the ground”, and the following represents some topics of interest for further exploration:
The Parties to Adjudication. The use of adjudication has picked up in pace and will continue to move rapidly given the recent amendments to the Act. One area of interest is getting a better sense of the parties electing to start an adjudication and perhaps signaling increased trust in the process. For instance, are more public entities (typically the owners on major infrastructure projects) taking the initiative to start adjudication proceedings? How often do professional consultants initiate proceedings as compared to contractors and subcontractors? Given the dominance of residential matters, are parties to those disputes often self-represented and how does this compare to other industry sectors? Are there any notable trends in determinations for matters where one of the parties is self-represented?
Surveys of Participants. If ODACC conducts annual surveys of the participants’ experience of adjudication (including that of the adjudicator), to consider incorporating a section in the annual reports to discuss some of those findings. If ODACC does not do any surveying, it may be worthwhile in terms of identifying areas for improving the experience. Surveys may also uncover the reason for current trends such as the lack of experienced architects as adjudicators.
Selection of Adjudicators. What, if any, trends do we see regarding the professional background of adjudicators initially selected by the parties and, of the determinations rendered each fiscal year, the professional background of the adjudicators in those cases? For instance, do lawyers dominate across the dispute categories? Are project managers only utilized for specific types of disputes, etc.?
Awards. The ODACC analysis of the awards paid out each fiscal year excludes determinations where the adjudicator ruled that no awards should be paid. Arguably, trends related to these determinations are just as insightful as the cases where awards are paid and therefore should be included in the analysis each year.
Appeal of Determinations. Understanding how the judiciary engages with adjudication determinations is always an area of interest for construction lawyers, particularly when it comes to advising clients in the dispute resolution process. Another insightful addition for future Reports is to include a section on appeals. A starting point is to highlight how many determinations are appealed each year, the basis for appeal, and whether these appeals are upheld or dismissed.
Amendments to the Act and Adjudication
The coming into force date of the new amendments of the Act has not been announced but the construction industry is already anticipating the impact of these legislation changes, including the impact on adjudication. The ODACC annual reports are the best source for tracking the evolution of these new changes if ODACC can expand the types of data that it collects and how it is communicated to the public. For instance:
Whether the parties to adjudication will continue to utilize adjudication for “real time” dispute resolution as intended, or whether the new amendments to allow for adjudication for completed contracts will see more post-project (completion, abandonment or termination) adjudication.
Any noticeable trends in comparing the outcomes of adjudications by private adjudicators versus parties formally going through the ODACC process with an assigned adjudicator.
Whether the ability to appoint private adjudicators will result in the dominance of cases being heard by a select group of adjudicators (e.g., lawyers).
Whether the instances of appeal will be reduced given the new ability of the adjudicator to make determinations regarding their jurisdiction, mirroring the competence-competence principle in arbitration.