Ontario the Outlier: An Analysis of the Integration of the Lien and Adjudication Regimes under the Construction Act

1. Introduction

In 2015, at the request of the Ministry of the Attorney General and the Ministry of Economic Development, Employment and Infrastructure, an expert review was initiated to provide a legal opinion, with meaningful consultation with various construction industry stakeholders, on amendments to the Construction Lien Act, which came into force in 1983. Subsequently, the report entitled Striking The Balance: Expert Review of Ontario Construction Lien Act (“Striking The Balance”) was delivered on April 30, 2016, which set out a detailed analysis of the Construction Lien Act, as it was then, and as part of this process, the report reviewed and commented on legislation governing the construction industry in other jurisdictions around the world. Ultimately, Striking The Balance provided a series of recommendations, which included substantive and procedural amendments to update and modernize the construction lien process as well the introduction of prompt payment and adjudication. On July 1, 2018, a number of amendments, including new regulations, modernizing and renaming the legislation as the Construction Act (the “Act”) came into force and effect, and on October 1, 2019, the prompt payment and adjudication provisions of the Act came into force and effect.

The construction lien regime has long been available in Ontario, with the first such legislation coming into force and effect in 1873.[1] Consequently, while the governing legislation was changed and modified over time, the lien as a remedy has traditionally been available to those entities performing work and supplying materials to construction projects for close to 150 years. However, the adjudication regime was an entirely new concept, borrowed from other jurisdictions internationally. Adjudication had been implemented into the Act as targeted interim binding dispute resolution for parties to construction contracts and subcontracts.[2]

Striking The Balance closely examined differences in statutory adjudication in a number of jurisdictions, including the United Kingdom, New Zealand, Ireland, Singapore, Malaysia, Hong Kong, and Australia. In particular, the experience in the United Kingdom was examined and in this regard, it was noted that since adjudication was introduced in 1998, the experience has been largely positive, providing “rough justice” and efficiencies in payment and performance.[3] Furthermore, the implementation of adjudication also created certain judicial efficiencies given the significant reduction of construction litigation and workload with the Court.[4] However, importantly, during the time that statutory adjudication has been implemented and available in the United Kingdom, the construction lien, as a remedy, has not existed.

As noted in Striking The Balance, most jurisdictions that have adopted adjudication do not have lien legislation, including the United Kingdom, Ireland, Hong Kong, Singapore, and Malaysia.[5] Other jurisdictions, such as New Zealand and certain states and territories of Australia, repealed the lien legislation as adjudication was implemented.[6] Other territories in Australia kept its lien legislation, but such liens are different in process and substance, and do not compare to the lien regime in Ontario.[7]  

However, while there was certainly significant appetite to introduce prompt payment and adjudication in Ontario as part of the amendments to the Act, during the consultation period, there was “virtually unanimous support for the continuation of the lien/holdback regime as a means for protecting the construction industry.”[8] Accordingly, both the construction lien and adjudication regimes would co-exist as part of the amendments to the Act, with the old guard meeting the new dispute resolution process.  

As stated by construction law expert and author, Duncan Glaholt, “while other jurisdictions have exacted construction adjudication, such as the UK, Singapore, and Australia, Ontario is unique in that adjudication is aligned with prompt payment in its lien statute, meaning it is difficult to draw direct comparisons with other jurisdictions.”[9]

Indeed, upon the introduction of the amendments introducing prompt payment and adjudication, Ontario became distinct and uniquely situated as the first and one of the few, common law jurisdiction in the world to combine robust construction lien and adjudication regimes into a single, integrated scheme governing the construction and infrastructure industry.