Authors: John Dipple, Andrew Konopelny
While it was expected that the Saskatchewan Government would implement the new prompt payment and adjudication provisions this year, we understand it is now deferred to a yet-to-be determined date.
As previously discussed in our “Saskatchewan Consulting on Prompt Payment & Adjudication Regulations” blog, the Saskatchewan Government has introduced prompt payment and mandatory adjudication through amendments to the Builders’ Lien Act. The legislation initially received Royal Assent in 2019, and regulations were introduced in August 2020.
How Will the Adjudication Authority be Funded?
From consultation with government officials, we understand that the deferral is related to funding of the Adjudication Authority.
It appears the government is deferring the implementation process to allow for a budgetary review of a funding request for the Adjudication Authority. Our understanding is that the government will address the funding request for its next fiscal year beginning April 1, 2022.
How Will the Adjudication Authority be Governed?
The legislation in both Saskatchewan and Ontario contemplates the creation of an Adjudication Authority; however, it does not include specifics of how that authority is managed and governed.
The Ontario Government selected ADR Chambers to manage the Authority, and formed ODACC (Ontario Dispute Adjudication for Construction Contracts, referred to below as the “Ontario Authority”) to administer the adjudication process in Ontario. The Ontario Authority is a for-profit model, although, as we discuss further below, the profitability of the Ontario model appears yet to be validated.
There is no indication that the Saskatchewan Government has decided on whether the model will be for-profit or not-for profit.
While government has not explicitly named an Adjudication Authority, the Saskatchewan Construction Association has been involved in recruiting potential adjudicators. Our understanding is that the Saskatchewan Government does not intend to operate and manage the Authority, although the legislation allows the government to operate as the Authority on an interim basis.
The Ontario Authority’s 2020 Results
The apparent focus on the cost of the Adjudication Authority in Saskatchewan is interesting, given the first-year results in Ontario. The annual report for the Ontario Authority’s 2020 fiscal year disclosed that in its first year, the authority took in more than $330,000 in adjudicator training and registration fees compared to around $4,000 in adjudication fees from parties.
The report also discloses other information suggesting a modest initial uptake of adjudication and the cost of the Ontario Authority:
- There were 85 applications to become adjudicators, 65 of which were approved.
- Prospective adjudicators paid the Ontario Authority $336,166.17 for training and examination fees.
- The Ontario Authority terminated 21 of the 32 adjudications; only one of the 21 terminated adjudications had an adjudicator appointed. It would appear from this that the Ontario Authority appointed around 10 adjudicators.
- The Ontario Authority only received $3,975 in fees related to adjudications, $1,987.50 which was retained by the Authority and $1,987.50 which was paid to adjudicators.
- There were only 32 Notices of Adjudication between October 1, 2019, and July 31, 2020, which only led to three determinations made by adjudicators.
- The amount claimed in total across the 32 adjudications was $2,906,514.30, for an average claim of $90,828.57.
- The total amount awarded from the three determinations was $35,459.40.
With adjudicators able to make decisions affecting both payment disputes and construction disputes without any limit on the dollar value of their decisions, the administration, management, viability and accompanying fee structure of the adjudication system will be of utmost importance to ensure fairness, transparency and industry confidence in the system.
We look forward to further information from the Saskatchewan Government on the selection of the Adjudication Authority and will continue to update on developments relating to prompt payment and adjudication in Saskatchewan.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.