In a recent endorsement in Accurate Railroad Construction Ltd. v. Sierra Infrastructure Inc., 2024 ONSC 3722, the Divisional Court addressed a key procedural issue under the Construction Act regarding a stay of an adjudicator’s determination pending judicial review.
Under the Act, judicial review of adjudication determinations is generally limited to narrow grounds, with fraud being one of them. The Act aims for the swift resolution of disputes to maintain the flow of funds within construction projects. Therefore, determinations must be paid even while judicial review applications are pending, and failing to comply can itself be grounds for refusing leave for review.
Background
The issue centered on the Applicant’s motion for leave to bring an application for judicial review of an adjudicator’s determination, requiring repayment of over $288,000 to the Respondent, and seeking a stay of the adjudicator’s determination pending judicial review.
The Applicant, Accurate Railroad Construction Ltd., alleged that the decision was tainted by fraud, with claims of misrepresentation in documents presented by the Respondent, Sierra Infrastructure Inc., during adjudication.
Accurate then requested a case conference to seek a stay of the adjudicator’s determination, pending its motion for leave to bring an application for judicial review and a stay of the adjudicator’s determination pending judicial review. At the case conference, Accurate argued that Sierra misled the adjudicator by submitting a summary chart which contained erroneous data so “precisely mixed and matched”, that on its face, it appeared these errors were not accidental but deliberate, constituting fraud.
In response, Sierra argued that there was a wide gap between an error in a summary chart and an intentional act of deceit or fraud.
Court’s Considerations
Justice Myers, in his endorsement, emphasized the court's preference for expedited proceedings, avoiding prolonged delays and cumbersome litigation, particularly for an interim determination when the statutory purpose is “prompt payment”.
Accurate, however, proposed a schedule involving cross-examinations and a hearing no earlier than three months after this case conference. Alternatively, Accurate was prepared to split its contemplated motion, and have the portion seeking a stay pending judicial review heard first. The court found both proposals problematic, lengthy, having the potential to lead into time consuming refusals and “meta-motions”, and inconsistent with the concept of an expedited schedule.
In other words, the court was hesitant to grant Accurate a stay in the face of drawn-out legal proceedings. At the same time, despite Sierra’s arguments, the court was hesitant to allow Sierra to benefit from a mistake in its summary chart, even if it did not amount to fraud.
While Accurate pushed for an interim stay of the determination, Sierra did not oppose the stay on the condition that Accurate secure the amount in court. Relying on the previous guidance of the Divisional Court in Anatolia Tile & Stone Inc. v Flow-Rite Inc., Justice Myers accepted this solution, ordering that the sum of $288,493.07 be paid into court as security. In doing so, the court was able to achieve a compromise between the Act’s objective of ensuring prompt payments, while allowing for judicial oversight if fraud is alleged.
Takeaways
- Limited Grounds for Judicial Review: The Act permits review of adjudication determinations only on narrow grounds, including fraud.
- Prompt Payment, Not Just Prompt Adjudication: The Act emphasizes prompt payment, not just prompt adjudication. Non-payment of an adjudicator’s determination, without a stay or securing the amounts when a stay is granted, can undermine the legislative goal of the prompt payment regime. In situations where a stay of a determination is sought, courts will likely require that the disputed amount be secured in court while judicial review proceedings are ongoing, even in the face of fraud allegations, as seen in this case.
- Expedited Processes Preferred: Courts prefer to expedite leave applications, minimizing the need for stay motions and delays in the adjudication process. Applicants seeking judicial review must present clear and expedited schedules when seeking interim relief.
This decision reinforces the balance between ensuring the integrity of the adjudication process and judicial oversight when necessary, while safeguarding the prompt payment regime critical to the construction industry.