As readers will recognize, the case of MGW Homes Design Inc. v. Pasqualino has recently received attention with respect to the Court of Appeal’s consideration of a novel question in the context of statutory adjudication under the Construction Act, being the appropriate appeal route for orders vacating a writ of enforcement issued in connection with an adjudicator’s determination. That decision, which we have written about here, concluded that the proper route of appeal was to the Divisional Court.

In that regard, the Divisional Court quickly released its own decision on this issue, under the citation 2024 ONSC 2852 (available here).

In particular, the Divisional Court was asked to determine whether a writ of enforcement was void and barred the enforcing party from taking any further steps for enforcement, given that party did not comply with the Construction Act’s notice requirements after filing the determination with the court.

In reviewing the Construction Act’s prompt payment provisions, the Court concluded that non-compliance with the notice requirement in this case was not fatal to enforcement, and that it was therefore open to the enforcing party to remedy its error.

Below, we review the Divisional Court’s decision and consider its implications.

Background

MGW Homes Design Inc. (MGW) and Pasqualino referred a home renovation dispute to adjudication, which resulted in a determination requiring that Pasqualino pay MGW. Pasqualino did not comply with the determination and moved for leave to apply for judicial review, which was denied.

MGW filed the determination with the court and obtained a writ of enforcement. However, MGW failed to notify Pasqualino within ten days of the determination having been filed, contrary to s. 13.20(3) of the Act. Pasqualino then brought a motion to vacate the writ of enforcement.

The issue on the motion was whether MGW’s failure to provide Pasqualino with notice in the prescribed 10 days voided the writ, and if so, whether MGW was barred from pursuing enforcement any further.

The motion judge found in Pasqualino’s favour, on four bases: (a) a court ordered enforcement of an adjudicator’s determination is an extraordinary power; (b) similar to liens, the Act prescribes a timeframe that must be followed and leaves no room for judicial discretion; (c) strict compliance with the Act is necessary to enforce an adjudication decisions, such that without compliance, the writ is void; and (d) the 10-day notice requirement is not a suggestion or option, but rather a mandatory rule.[1]

Given MGW’s non-compliance, the motion judge found in Pasqualino’s favour, determining that MGW’s non-compliance meant the writ was void and that MGW was barred from pursuing further steps to enforce the determination.

The Divisional Court’s Decision

The Divisional Court overturned the motion judge, making several important observations in the course of its analysis.

First, the Court disagreed with the motion judge that enforcement of an adjudication determination was an extraordinary power. Enforcement of sub-judicial determinations by court order is regularly used with respect to arbitral decisions, administrative decisions, decisions under the Labour Relations Act, and references directed by a court. Each process is prescribed by the applicable legislation, necessarily curating each process to fit the specific context. With respect to adjudication, the Act’s provisions follow the general Ontario model for enforcement of administrative decisions prescribed under the Statutory Powers Procedure Act.[2]

Furthermore, the context and purpose of the adjudication provisions in “prompt payment” is to facilitate the flow of payment, making expeditious enforcement processes necessary. In that regard, the Court observed that pursuant to s. 13.20(1) of the Act, an enforcing party can file an adjudicator’s determination with a court, and that s. 13.20(3) makes it possible for the enforcement to begin before notice is given. Compared to other enforcement processes for sub-judicial decisions, the Act requires a more expeditious and less onerous process that facilitates the flow of payment and alleviates the risk of work stoppages.[3]

Second, the Court disagreed that the enforcement of prompt payment processes is analogous to the strict compliance requirements for lien claims. To the contrary, strict compliance with lien are necessary for stakeholders in making payments, securing loan advances, and releasing holdbacks; by contrast, an adjudicator’s payment direction is made after procedural timelines have been met, leaving parties with a direction that does not need to be filed with the court unless there is non-payment.

The opportunity to leave to seek judicial review is available; however, the granting of such a motion typically requires the disputed funds to be paid into court.[4] All of these aspects are in place to promote prompt payment. Additionally, there is no provision in that Act that deems a determination to expire if notice is not given that the determination has been filed with the court. Since the nature of the prompt payment provisions is to facilitate the flow of funds, the Court concluded that the notice requirement is “more properly seen as a statutorily-required courtesy than a strict condition that must be met before enforcement.”[5]

Finally, the Court disagreed that a failure to comply with the notice requirement necessarily voids the writ. Since the Act is silent on non-compliance with the notice requirement, courts have discretion in determining appropriate consequences.

Prompt payment is the driving force of adjudication, such that failure to provide notice should not undermine the core objective of prompt payment.[6] Accordingly, there is not a minimum or required sanction for failure to deliver notice,  although the Court observed that there are certain criteria that a reviewing court should consider when deciding how to exercise its discretionary powers in the face of non-compliance:

The court should consider the extent of the non-compliance, any explanation for the non-compliance, any prejudice – or absence of prejudice – to the payor arising from the failure to give notice, and any other relevant circumstances, and then should place these matters in the overall context of the dispute and the breach by the payor of its statutory obligation to make prompt payment in accordance with the Act.[7]

In this case, because the non-compliance was inadvertent and was not egregious, the Court concluded that the consequence chosen by the motion judge was too severe, and that it would offend the purpose of the prompt payment scheme to entirely deprive MGW of the ability to enforce the determination.

Commentary

As with its related decision from the Court of Appeal, the Divisional Court’s decision in MGW continues to contribute to the growing body of case law on statutory adjudication under the Construction Act. Each such decision remains significant in providing guidance as to how the prompt payment framework is to be administered and how it will be applied by the courts.

In that regard, MGW is no different. The clarification provided – i.e. that failure to comply with the notice requirement is not fatal to a writ of enforcement – will be particularly beneficial to those participants in adjudication who are self-represented and not well-versed in the technicalities of the Act (in other words, those for whom it would be more likely that they are unaware of the applicable procedural steps for enforcing a determination). That being said, construction industry participants should not take this to mean that failing to provide notice of filing a determination is inconsequential; rather, as the Court made clear, the possibility of an adverse outcome remains in circumstances where the non-compliance is sufficiently egregious and/or unjustifiable.

On the other hand, however, it is not entirely clear what kind of conduct would rise to the level of justifying a decision to bar a claiming party from seeking enforcement. If the delay was egregiously long – i.e. several months – but due to inadvertence, then it seems plausible that the party seeking enforcement could convince a court to allow for the non-compliance to be remedied.

As always, best practice will of course be to comply with the Act’s timelines.

In any event, the Court’s analysis in MGW also offers a welcomed emphasis on the first principles underlying the prompt payment regime; as the Court observed, the overarching objective of the prompt payment and adjudication regime is to ensure an uninterrupted flow of payments and unimpeded progress of work, and in that regard can be distinguished from the objectives of, for example, the Act’s lien provisions. Ultimately, the Court’s conclusion strikes the right balance.

Samantha Spagnol, summer student, assisted with the preparation of this article.

[1] MGW Homes Design Inc v Pasqualino, 2024 ONSC 2852 at para 13.

[2] Ibid at para 15.

[3] Ibid at para 18.

[4] Ibid at para 21.

[5] Ibid at para 24.

[6] Ibid at paras 25-26.

[7] Ibid at para 30.

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