Alberta construction adjudications are final and binding? Judicial interpretation of Part 5 of the Prompt Payment and Construction Lien Act

In addition to extending lien periods, the Alberta Prompt Payment and Construction Lien Act,[1] which came into force on August 29, 2022, also introduced the concepts of “prompt payment” and construction adjudication to the province. As we near the two-year anniversary of its implementation, adjudications under the PPCLA remain relatively uncommon and much of the current understanding of its nature has been based on assumptions arising from the Ontario experience, and the growing body of jurisprudence in that jurisdiction. As a result, the decision in Welcome Homes Construction Inc v Atlas Granite Inc[2]comes as a surprise as the Court, arguably in obiter,[3] stated that the adjudication process introduced by Part 5 of the PPCLA is “final and binding,” contrary to the common understanding that these kinds of adjudications serve as an interim decision in respect to payment, which can then be challenged if additional proceedings are commenced.

Background

In this case, the matter before the court was a relatively small dispute centering on the dimensions of marble countertops. The respondent, Atlas Granite Inc, (“Atlas Granite”), had installed the countertops in a new home pursuant to a contract with the applicant home builder, Welcome Homes Construction Inc (“Welcome Homes”). A dispute arose when Welcome Homes insisted the dimensions of the countertops that had been installed were incorrect and refused to pay Atlas Granite for the work. In response, Atlas Granite registered a lien and, before commencing a court action, the parties agreed to resolve the dispute through the adjudication process under PPCLA.

The adjudication resulted in an award in favour of Atlas Granite. Welcome Homes then served a Notice to Prove Lien under the PPCLA, presumably disputing the validity of the lien on the basis of it having been filed late. Before the proceedings associated with the lien progressed, the parties agreed to seek advice and directions from the court with respect to, among other things, whether the enforceability of the adjudicator’s decision depended on the validity of the lien.

Ultimately, Applications Judge Schlosser determined that the Notice to Prove Lien (and Atlas Granite’s lien rights) were superfluous to the adjudication decision regarding Welcome Homes’ contractual liability to Atlas Granite pursuant to the terms of their agreement.[4] However, in reaching this substantive conclusion he made some puzzling comments in respect to the nature of adjudications in Alberta and, in particular, whether the decisions of adjudicators are interim or final.

Are Adjudication Decisions Interim or Final?

In discussing the subject, Applications Judge Schlosser relied on a comparison between the PPCLA and the adjudication framework set out in the Ontario Construction Act, RSO 1990, c C.30. Specifically, he looked to and noted the following:

1. Both the Ontario Construction Actand the PPCLA provide that nothing restricts the authority of a court to consider the merits of a matter determined by an adjudicator.[5]
2. The mechanism for challenging an adjudicator’s order in Alberta is judicial review.[6]
3. The operative provision of the Ontario Construction Act provides that an adjudicator’s determination is binding until the matter is further determined (whether by a court, arbitral tribunal, etc.):[7] (emphasis in original)

13.15 (1) The determination of a matter by an adjudicator is binding on the parties to the adjudication until a determination of the matter by a court, a determination of the matter by way of an arbitration conducted under the Arbitration Act, 1991, or a written agreement between the parties respecting the matter …

4. By contrast, under the PPCLA an adjudicator’s determination is binding except in certain contemplated circumstances set out in subsection 33.6(5):[8] (emphasis in original)

33.6(5) The determination of a matter by the adjudicator is binding on the parties to the adjudication, except where

1. 1. 1. a court order is made in respect of the matter,
      2. a party applies for a judicial review of the decision under section 33.7,
      3. the parties have entered into a written agreement to appoint an arbitrator under the Arbitration Act, or
      4. the parties have entered into a written agreement that resolves the matter.

Based on the difference in legislative wording, and judicial commentary on the Ontario Construction Act characterizing the Ontario adjudication framework as “an interim dispute process that is temporarily binding on the parties,”[9] Applications Judge Schlosser concluded that “an adjudicator’s decision under the Alberta Act is intended to be final and binding with respect to the parties to the matter in dispute, except where the Court makes an order, or an application for judicial review provides a different result.”[10]

Counterpoints

Although he leaned heavily on the wording of the legislation in reaching his conclusion, it is noteworthy that, in interpreting the nature of adjudications in Alberta, Applications Judge Schlosser did not appear to consider:

1. The fact that original wording of the proposed amendments under the PPCLA (as set out in Bill 37 – Builders’ Lien (Prompt Payment) Amendment Act, 2020), expressly provided that “[s]ubject to section 33.7, the determination of a matter by the adjudicator is final and binding on the parties to the adjudication.”[11] As noted above, the current wording of the PPCLA does not include the word “final” and expressly contemplates a number of exceptions where the Adjudicator’s decision is not final.
2. The fact that the Government of Alberta’s website references the amendments to the original draft legislation[12] and specifically states that one of the key changes made from the original version[13] is to “Change adjudication decisions from final and binding to interim and binding.”
3. The abbreviated nature of the adjudication process, which requires parties to prepare materials in unusually tight timelines and the adjudicator to render a decision in short order, is much more consistent with “an interim dispute process that is temporarily binding on the parties,” than it is with any sort of process that is reasonably expected to be truly final and binding.

We expect questions will remain in respect to these points until further judicial interpretation clarifies the nature of these adjudications. While there is no question that an adjudication decision can be binding on the parties as the process results in a monetary judgment enforceable by the Courts, it remains the case that the PPCLA clearly allows for further consideration of the decision in several respects (pursuant to Section 33.6).

Takeaways

Although not the primary focus of his decision, Applications Judge Schlosser’s comments about the nature of adjudications under the PPCLA are concerning for both claimants and respondents, and parties are well advised to obtain legal advice and put forward their best case at the adjudication level, as:

1. For the time being, this decision provides some authority that adjudication decisions in Alberta are final and binding subject to the exceptions set out in the PPCLA. Parties for whom adjudication is an option should carefully weigh and consider the implications of a decision that is both “rough justice” and potentially final and binding.
2. The specific wording with respect to the exceptions contemplated in Section 33.6(5) is not clearly defined and was not considered in this decision. As noted above, Section 33.6(5) states that the adjudicator’s decision is binding on the parties, except where:
   1. A court order is made in respect to the matter;
   2. Judicial Review has been sought based on the limited enumerated items found in the Prompt Payment and Adjudication Regulation, Alta Reg 23/2022 at Section 34;
   3. There is a written agreement to appoint an arbitrator under the Arbitration Act; or
   4. A written agreement resolves the matter.

Further judicial consideration of these exceptions would be welcome guidance to parties seeking greater certainty on the appropriate manner in which to challenge adjudicative decisions.

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[1] RSA 2000, c P-26.4 (the “PPCLA”)

[2] Welcome Homes Construction Inc v Atlas Granite Inc, 2024 ABKB 301 (“Atlas”)

[3] Or obiter dictum, refers to a judge’s comments or observations in the reasons for their decision which are made in passing and are not essential to the substance of the decision itself. Remarks made in obiter, themselves, do not create binding legal precedent.

[4] Ibid at para 24.

[5] Atlas, supra, at para. 20

[6] Atlas, supra at para. 20

[7] Atlas, supra at para. 21

[8] Atlas, supra at para. 22

[9] Atlas, supra at para. 23, citing SRK Woodworking Inc. v. Devlan Construction Ltd. et al., 2022 ONSC 1038, at para. 90; Anatolia Tile & Stone Inc. v. Flow-Rite Inc., 2023 ONSC 1291 at para 3; Ledore Investments v. Dixin Construction, 2024 ONSC 598, at para. 34

[10] Atlas, supra at para. 23

[11] Builders’ Lien (Prompt Payment) Amendment Act, 2020, s. 33.6(4)

[12] https://www.alberta.ca/implementing-red-tape-reduction

[13] being the key changes to the former Alberta Builders’ Lien Act contemplated under Bill 62