How Much Weight Should be Afforded to an Adjudicator’s Decision?

Miclex Construction Inc. v. North Central Co-Operative Association Ltd., 2023 ABKB 46 (“Miclex”), reminds us that Alberta courts will tend to accord deference to a consultant’s determination of a matter where the construction contract provides the consultant first instance authority to resolve disputes between the parties. This raises the question of what the limits of that deference are, and whether there is any basis to apply this reasoning to a determination of an adjudicator appointed under construction legislation.^[1]Such as that provided under Part 5 of the Prompt Payment and Construction Lien Act, RSA 2000 c P-26.4 the “PPCLA”, or Part II.1 of the Construction Act, RSO 1990 c C.30

Arad Incorporated v. Rejali et al., 2023 ONSC 3949 (“Arad”) illustrates the significant difference in approach that courts tend to take towards relying on the determinations of an adjudicator. In short, the much more circumscribed involvement of an adjudicator compared to the involvement of a consultant lessens the persuasiveness of an adjudicator’s determination in subsequent proceedings.

Takeaways

• Adjudicator ≠ Consultant: A consultant making a determination in a construction dispute under a construction contract has many superficial similarities to an adjudicator making a determination under construction legislation. Despite these similarities, an adjudicator’s limited involvement in the project compared to a consultant’s more involved role suggest that a consultant’s determination may receive more weight than an adjudicator’s.
• Case-by-Case Approach: While the courts tend to provide deference to a consultant’s decision, particularly depending on the context of the dispute, there does not appear to be a hard and fast rule for how the courts will handle an adjudicator’s findings. It seems likely there may be a degree of deference, but this deference will likely be assessed on a case-by-case basis, depending on the surrounding circumstances and the evidence presented and reviewed. Cases dealing with consultant deference may provide indicia for setting adjudication processes in an effort to lend more weight to the ultimate decision. Even so, adjudication determinations are likely to run up against the inherently expedited and summary nature of the process, thereby limiting their ultimate evidentiary weight.

Miclex Construction Inc. v. North Central Co-operative Association Ltd.

Consultant determinations “difficult to depart from […] without expert evidence”

In Miclex, the owner retained the contractor to construct the project under a standard form CCDC-2 stipulated price contract. Under the CCDC-2 contract, the owner appointed an architect as the consultant to administer and manage the construction contract. Part of the consultant’s duties under a CCDC-2 contract are to interpret the requirements of the contract documents in the first instance in the event of a dispute.

The contractor submitted a claim for additional costs arising from delays and extra work performed that was not contemplated in the contract documents. The consultant denied the majority of the contractor’s claims for additional compensation, leading to the contractor filing a lien for the disputed amount and bringing an application to declare its lien valid and for summary judgment under both the Alberta Rules of Court and the PPCLA.

Applications Judge Schlosser noted that the starting point for the claim was “that the consultant has considered the claims that form the basis of this lawsuit and has rejected all but the amounts that have been admitted”.^[2]Miclex at para 6. The Court cited several Alberta decisions that hold that a court will give deference to a consultant’s decision: “[u]nless the consultant’s opinion is obviously biased, patently incorrect, or displays a demonstrable and significant error, it is difficult to depart from it without expert evidence.”^[3]Miclex at para 15. The Court dismissed the plaintiff contractor’s application, finding that there was no counter veiling expert evidence, and noting that “the law is not kind to claims for unapproved extras, or claims for quantum meruit in a builders lien context”.^[4]Miclex at para 21.

Applications Judge Schlosser relied on ASC (AB) Facility Inc. v. Man-Shield (Alta) Construction, 2018 ABQB 130 (“ASC”) for the proposition that consultant determinations are to receive deference. In ASC, the court reasoned that “contractual interpretation, precedent, academic rationale, and practicality” supported giving deference to a consultant’s decisions “unless they reveal significant errors”. The court in ASC pointed out that the deference owed to a consultant stems largely from its role in construction projects, noting that they have access to the project site, expertise to evaluate the work observed, and regular interactions with the parties, the work, the contract, and the parties’ interactions under the contract. These are all advantages that a court lacks.^[5]ASC at para 19.

Arad Incorporated v. Rejali et al.

Adjudicator Determinations may not be sufficient evidence before the Court

As the courts appear inclined to defer to a consultant’s decisions, it will undoubtedly be tempting for a successful party in an adjudication to point to the similarities between an adjudicator and a consultant to seek the Court’s endorsement of an adjudicator’s determination. For instance, an adjudicator is required to have relevant industry expertise,^[6]See, for instance, s. 7(2)(a) of the Prompt Payment and Adjudication Regulation. and is empowered by legislation to have inquisitorial powers, including visiting the site and speaking to experts.^[7]S. 25(1) of the Prompt Payment and Adjudication Regulation.  Conversely, a consultant’s initial determination of a dispute is a form of contractual adjudication.

The desire to rely on an adjudicator’s determinations as the basis to seek further relief from the courts was illustrated in Arad, where the plaintiff contractor filed a lien and commenced an adjudication for monies alleged to be owing. The owner deposited funds into court to have the lien discharged from title. The adjudicator subsequently determined that no sums were owing to the contractor. The owner then applied to the Ontario Superior Court of Justice under s. 44 of the Construction Act seeking a return of the monies paid into court as security for the lien. The only evidence submitted by the owner regarding the merits of the dispute was the adjudicator’s determination.

Justice Sutherland noted that the evidentiary standard on a motion under s. 44 of the Construction Act was similar to that applied to summary judgment motions, though the issue before the Court is narrower since the material question is whether there are any amounts that may attract the security afforded by the Construction Act. Sutherland J. dismissed the owner’s motion, finding that “the determinations of the adjudicator alone do not meet the evidentiary threshold required for the court to conclude that the lien claim does not attract need for security.”^[8]Arad at para 24. In addition to the interim nature of an adjudication, Sutherland J. commented on the evidentiary issues that would stem from relying solely on the adjudicator’s determination:

The adjudicator made findings based on his opinion as an engineer and not based on the expert opinion or reports of others presented by either of the parties. His opinion was not subject to contestation by any of the parties. He made findings based on a site visit and verbal statements during the oral hearing. His findings were not all based on admissible evidence. He admitted that there was contradicting claims and statements made by the parties on the facts: the agreement and the scope of work to be performed and the worked performed. The adjudicator conceded that he did not consider the extra claims of the plaintiff for, in his opinion, he did not receive “proper evidence”. The adjudicator also decided to just rely on the documentation provided and use his own construction and engineering experience to make final determinations.^[9]Arad at para 25.

Consultants vs. adjudicators – do the roles justify a different approach?

It should be noted that Miclex and Arad are not analogous cases in terms of their context. While both cases involved the interim decision maker denying the contractor’s claim, in Miclex the contractor sought to have the court effectively overrule the consultant, while in Arad the owner sought to have the court endorse the adjudicator’s findings. What these cases do demonstrate, however, is that:

• in both instances, the court was not prepared to make a final determination of the matter; and
• the comments from the bench reflected more reasons to be deferential to a consultant’s findings than to an adjudicator’s.

It should of course be noted that each case will need to be evaluated independently based on its own facts, and that courts are likely to approach the matter on a case-by-case basis. Based on the cases and reasoning evidenced by courts to date, these appear to be relevant factors to be assessed:

• the relief sought: whether interim or final, supportive of or in contrast to the interim decision;
• nature of the interim decision: whether highly fact-dependent and technical in nature, versus a legal issue; and
• the process followed and prior involvement of the interim decision maker: whether the decision maker was familiar with and had involvement in the broader project, and what information was available to and relied upon by the decision maker.

Cases decided to date indicate that these factors tend to favour more deference being given to a determination made by a consultant that is actively involved in the project versus an adjudicator. Regardless of which interim decision maker has ruled on a matter, however, these cases do suggest that attempting to have the merits of the dispute determined on a summary basis may be an uphill battle.