Issues with Annual Holdback Release and Lien Expiry on P3 Projects and Beyond

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Issues with Annual Holdback Release and Lien Expiry on P3 Projects and Beyond

Key Takeaways
When is “judicial review” not judicial review? When it’s judicial review of an adjudicator’s determination under the Construction Act.
Why is it not judicial review? Because the drafters of the Construction Act used the wrong term when they were otherwise borrowing wholesale from the test to set aside an arbitrator’s award under the Arbitration Act.
The result of this sloppy use of language is that, pursuant to the recent Divisional Court case of Gay Co. Ltd. v. Sayers Foods Ltd., 2024 ONSC 6123 (Div. Ct.), parties seeking to set aside an adjudicator’s determination must provide notice to the Attorney General pursuant to the Judicial Review Procedure Act where leave for judicial review is granted.
This will add expense and complication for parties seeking to review an adjudicator’s determination. More importantly, it is the wrong result in law, caused by the use of incorrect terminology which should be corrected by the Legislature at the earliest opportunity.
Judicial review under the Act
“Judicial review” under the Construction Act is a misnomer. Section 13.18(5) of the Construction Act mirrors the language of section 46(1) of the Arbitration Act, which permits a court to set aside an award of an arbitrator (emphasis added below):
Construction Act, Section 13.18(5)Arbitration Act, Section 46(1)
The determination of an adjudicator may only be set aside on an application for judicial review if the applicant establishes one or more of the following grounds:On a party’s application, the court may set aside an award on any of the following grounds:
1. The applicant participated in the adjudication while under a legal incapacity.1. A party entered into the arbitration agreement while under a legal incapacity.
2. The contract or subcontract is invalid or has ceased to exist.2. The arbitration agreement is invalid or has ceased to exist.
3. The determination was of a matter that may not be the subject of adjudication under this Part, or of a matter entirely unrelated to the subject of the adjudication.3. The award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the agreement.
4. The adjudication was conducted by someone other than an adjudicator.4. The composition of the arbitral tribunal was not in accordance with the arbitration agreement or, if the agreement did not deal with that matter, was not in accordance with this Act.
 5. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.
5. The procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject under this Part, and the failure to accord prejudiced the applicant’s right to a fair adjudication.6. The applicant was not treated equally and fairly, was not given an opportunity to present a case or to respond to another party’s case, or was not given proper notice of the arbitration or of the appointment of an arbitrator.
 7. The procedures followed in the arbitration did not comply with this Act.
6. There is a reasonable apprehension of bias on the part of the adjudicator.8. An arbitrator has committed a corrupt or fraudulent act or there is a reasonable apprehension of bias.
7. The determination was made as a result of fraud.9. The award was obtained by fraud.
 10. The award is a family arbitration award that is not enforceable under the Family Law Act.
An application for “judicial review” to set aside an adjudicator’s determination under the Construction Act is analogous not to administrative judicial review, access to which is a constitutional right, but to an application to set aside a determination, analogous to the procedure available under the Arbitration Act, with the added requirement for leave of the court.
Consequences of misnomer
The misuse of the term “judicial review” is leading to confusion in the courts and problems for litigants.
In Gay Co. Ltd. v. Sayers Foods Ltd., the Divisional Court considered that the Judicial Review Procedure Act applied to applications for “judicial review” of an adjudicator’s determination. It ordered, pursuant to section 9(4) of that Act, that notice be provided to the Attorney General and ODACC, the statutory adjudication authority.
The court was unequivocal that the Attorney General is always entitled to notice in such cases: “notice to the Attorney General of the Notice of Application is mandatory in applications for judicial review of prompt payment determinations under the Construction Act.“
This requirement will add complication and expense to future cases, both for litigants (who may not be aware of a requirement that is found nowhere in the Construction Act) and for the Attorney General, whose participation in every application to set aside a determination was clearly never intended.
The Judicial Review Procedure Act that should properly have no application to the Construction Act’s procedures. Administrative judicial review is a constitutional right aimed at ensuring that public decision-makers exercise their authority fairly and with due process. Adjudication under the Construction Act, on the other hand, is private and akin to an arbitration – hence the drafters of the Construction Act largely adopting the test under the Arbitration Act. If only they had resisted the urge to use the term “judicial review.”
The good news, however, is that it is never too late to fix the mistake. This is nothing more than legislative housekeeping. With any luck, the Attorney General will change the language in the near future – if for no other reason than to avoid being inundated with notices of applications for “judicial review” in purely private adjudication disputes.
Originally published in the Ontario Bar Association Construction and Infrastructure Section Insider

This article is for informational purposes only and is not intended to constitute legal advice or an opinion on any issues contained therein.

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