Background
The decision in SOTA Dental Studio Inc. v. Andrid Group Ltd.[1] [SOTA Dental], reinforces the requirement on parties to comply with an adjudicator’s determination within 10 days, even in circumstances where judicial review of the determination has been sought.
In this dispute, Andrid Group Ltd. (“Andrid”) was a contractor retained by SOTA Dental Studio Inc. (“SOTA”), the owner, to build a dental clinic in Vaughn, Ontario. SOTA did not pay all invoices for work completed by Andrid for the construction of the clinic per the prompt payment provisions under the Construction Act (the “Act”) and Andrid elected to adjudicate the dispute. At the adjudication, SOTA was ordered to pay Andrid $38,454.55. SOTA only made partial payment and then sought judicial review of the determination, but did not seek a stay of the determination in the process.
The sole legal issue in this case was whether SOTA was required to abide by the adjudicator’s determination while seeking judicial review, despite not bringing a motion for a stay of the determination pending finalization of the judicial review.
Ruling
The Divisional Court found that SOTA’s non-compliance with the adjudicator’s determination coupled with the failure to seek a stay while pursuing a judicial review undercut the scheme of the prompt payment provisions in the Act.
To begin its analysis, the Court’s reviewed the language at s. 13.18(7) of the Act which makes clear that an application for judicial review does not automatically stay an adjudicator’s determination. A motion must be brought before the court will consider whether to grant such relief.
The Court reiterated that the purpose of the prompt payment provisions of the Act is to ensure that money continues to flow through the construction pyramid and avoid disruption and delay over payment disputes that will inevitably arise. Adjudication was instituted as an alternative dispute mechanism to ensure a speedy resolution is reached by an experienced construction professional in the role of adjudicator.
By flouting the adjudicator’s determination, SOTA was disregarding the core intention of the legislative scheme and the Court simply could not allow this.
Furthermore, s. 13.19(2) of the Act makes clear that a party who is required to pay an amount pursuant to a determination, must do so no later than 10 days after the determination is communicated to all parties. SOTA refused to do this. The Court made it clear that in the absence of a judicially ordered stay, SOTA was under an obligation to make the payment awarded by the adjudicator within the 10 days prescribed by the Act.
At paragraph 12 of its ruling, the Court outlines key principles that all parties to an adjudication must bear in mind:
- Prompt payment is integral to the scheme of the Construction Act.
- Failure to pay in accordance with the prompt payment requirements of the Act may lead this court to refuse leave. Where leave is granted, an applicant must obtain a stay or must make payment, failing which this court may dismiss the application on a motion to quash or at the hearing of the application.
The Court therefore ruled in favour of Andrid and, for its troubles, Andrid was awarded $10,000 in costs.
Analysis
SOTA Dental is a clear signal that despite the relatively new landscape of adjudication in Ontario, courts will defer to and enforce the decision of an adjudicator, particularly in cases where no stay has been sought pending judicial review. An adjudicator’s determination should not be taken lightly, and courts will recognize and protect the legislative intent of the Act given the unique needs of the construction industry where prompt payment is central.
[1] 2022 ONSC 2254.