Adjudication decision upheld at the Superior Court.

Date: November 2022

A recent motions decision from the Ontario Superior Court of Justice discussed the impact of the construction adjudication process on holdbacks.

The defendant owner asked for directions regarding whether he should pay an adjudication order with respect to a contractor payment dispute in the face of a perfected lien registered by a subcontractor. The lien was registered by the subcontractor before the adjudication commenced between the contractor and owner.

The owner paid an amount of the adjudication order which represented the amount of the adjudication award that was in excess of the notice holdback. However, the owner did not satisfy the balance of the adjudication order because he was concerned that he would have to pay twice since the adjudication order did not address the 10% statutory holdback or mandatory notice holdback related to the subcontractor’s lien.

The owner did not seek leave to appeal the adjudication order and instead brought a motion for directions.

Among other things, the motions judge found:

  • that the court did not have the jurisdiction to vary an adjudicator’s order;
  • that absent a stay, an adjudication order must be paid (reiterating previous decisions) even if it means that someone will have to pay twice in the short term; and
  • the concern about the owner having to pay twice ignores the trust provisions of the Construction Act which provides that all amounts paid to the contractor were trusts funds for the benefit of subcontractors (there was only one subcontractor).

This motions decision from the court opines on a number of issues but importantly, builds on previous decisions that continue to (albeit slowly) add teeth to prompt payment. Click here for a link to the decision.

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