Alberta now has its first court decision on the prompt payment and adjudication regime that was introduced as part of the province’s August 2022 reforms to its builders’ lien legislation. In Welcome Homes Construction Inc v. Atlas Granite Inc[1], Applications Judge Schlosser of the Alberta Court of King’s Bench clarified that an adjudication determination was independent from and unaffected by the potential invalidity of the claimant’s underlying lien. However, he also made some surprising comments in obiter regarding a purported distinction between the Alberta and Ontario adjudication regimes, one that may not be fully borne out by the language and history of each province’s legislation and that may lead to further unexpected interpretations in future cases.
Welcome Homes involved a relatively straightforward residential construction dispute. A homebuilder, Welcome Homes, retained a granite supplier, Atlas Granite, to provide a series of marble countertops for a new home under construction. After a dispute arose regarding the proper length of one of the countertops, the builder refused to take delivery of the disputed countertop and refused to pay the supplier for any of the other work and materials it had previously provided. Welcome Homes ultimately terminated its contract with Atlas Granite, and the supplier registered a builders’ lien, which appeared on its face to be out of time.
After the lien was registered, the parties agreed to make use of the new adjudication process set out in Part 5 of the updated Alberta Prompt Payment and Construction Lien Act[2](the “PPCLA”), and their selected adjudicator awarded Atlas Granite a substantial portion of its claim. However, Welcome Homes refused to pay the adjudicator’s award and instead served Atlas Granite with a notice to prove lien under the PPCLA, seeking to establish that the lien was invalid. The parties applied to the Court for advice and direction regarding whether the adjudicator’s determination was subject to and contingent on the validity of the underlying lien.
Applications Judge Schlosser noted that, while the lien may well have been subject to timing concerns that could impact its validity and enforceability, such issues were irrelevant to the adjudication determination, which ruled on the underlying contractual dispute as opposed to the lien itself. He then went further, stating that the adjudication process was only designed to handle contractual disputes and that an Alberta adjudicator could not rule on any aspect of the lien:
The crucial point is that an adjudicator determines contractual rights; not lien rights, even when they overlap. As I read it, the amended Act does not permit an adjudication between a subcontractor and an owner (for example),where the lien rights are the only basis for a direct claim. The amendments are designed to deal only with contractual rights between contracting parties in a construction dispute; though a lienable right gives access to this procedure and the lien frames the dispute.[3]
Section 19 of the Prompt Payment and Adjudication Regulation (the “Regulation”) issued under the PPCLA outlines what matters are permitted to be submitted to adjudication, and begins by confirming that it is only a process that can be accessed between parties to the same contract:
19 A party to a contract or subcontract may refer to adjudication a dispute with the other
party to the contract or subcontract, as the case may be respecting any of the following
matters:
(a) the valuation of services or materials provided under the contract or
subcontract…;
(b) payment under the contract or subcontract…;
(c) disputes that are the subject of a notice of non‑payment under Part 3 of the Act;
(d) payment or non‑payment of an amount retained as a major lien fund or minor
lien fund and owed to a party during or at the end of a contract or subcontract,
as the case may be;
(e) any other matter in relation to the contract or subcontract, as the case may be,
that the parties in dispute agree to, regardless of whether or not a proper
invoice was issued or the claim is lienable.[4]
Subsection 19(e) may have itself been dispositive to the case at bar, as it expressly permits contracting parties to adjudicate any matter in dispute relating to their contract, whether or not it is lienable or subject to the prompt payment regime. Since Welcome Homes and Atlas Granite had agreed to submit their countertop dispute to adjudication, this provision made it clear that the adjudicator could rule on it regardless of the claim’s underlying lienability. This was also a dispute about contractual rights and obligations associated with “the valuation of services or materials provided under the contract”, independent of the lien that resulted from it. Atlas Granite’s lien, had it been valid, may have provided Atlas Granite with additional security in respect of its claim for payment, but even absent such security, the contractual claim remained intact. Applications Judge Schlosser confirmed: “The determination of the validity of a lien is not something that would affect the outcome. The adjudicator determines contractual rights, not lien rights. The lien rights are superfluous and in the circumstances do nothing other than to frame the dispute and give access to the procedure.”[5]
This conclusion was sufficient to resolve the issue before the Court. However, Applications Judge Schlosser then continued to discuss the adjudication regime generally, particularly identifying that “[t]here is an important difference between the Ontario and the Alberta legislation”[6]in respect of the legal effect of an adjudicator’s determination. While the Ontario adjudication regime has been consistently held to be an interim dispute resolution process that is only temporarily binding on parties, providing an efficient way to get project funds flowing pending the final resolution and determination of a matter, Applications Judge Schlosser held that “an adjudication 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.”[7]
This purported distinction was based on minor variations in the wording of each province’s legislation: while the Ontario Act states that an adjudicator’s determination is binding on the parties “until a determination of the matter by a court, a determination of the matter by way of an arbitration…or a written agreement between the parties respecting the matter”[8],the Alberta Regulation states that an adjudicator’s determination is binding on the parties except where a court order is made, an arbitrator has been appointed, a party applies for judicial review, or the parties enter a written agreement resolving the matter. Applications Judge Schlosser acknowledged that both provinces’ Acts expressly state that nothing restricts a court’s authority to consider the merits of a matter previously determined by an adjudicator, but then stated that “the mechanism for challenging an adjudicator’s order in Alberta is judicial review”[9].
With respect, this does not appear to be an accurate reading of the Alberta legislation, and it does not fully reflect the history of Alberta’s legislative prompt payment amendments. While it is possible to challenge an adjudicator’s determination using judicial review, section 34 of the Regulation makes it clear that the permitted grounds for judicial review are exceedingly narrow and are limited to significant concerns relating to procedural fairness, such as fraud, the reasonable apprehension of bias, the use of an unqualified or uncertified adjudicator, or a party’s legal incapacity. The much broader avenue available to parties in Alberta for challenging an adjudicator’s result is exactly the same as it is in Ontario: relitigating the dispute before a fresh trier of fact, who is permitted to reconsider its merits de novo without deference to the adjudicator’s prior conclusions.
It is notable that the initial draft of the adjudication regime proposed by the Alberta Legislature in Bill 37 (the original 2020 version of the lien legislation amendments that eventually became the PPLCA) contained language that aligned much more directly with Applications Judge Schlosser’s conclusions in Welcome Homes, but this wording was significantly revised and adjusted in the final version of the legislation that was actually passed. Originally, section 33.6(4) of the draft PPCLA in Bill 37 read: “Subject to section 33.7 [Judicial Review],the determination of a matter by the adjudicator is final and binding on the parties to the adjudication.” This aligns with the reasons in Welcome Homes almost verbatim. However, after additional consultation, the Legislature altered and clarified this wording into its current form:
33.6(5) The determination of a matter by the adjudicator is binding on the parties to the
adjudication, except where
(a) a court order is made in respect of the matter,
(b) a party applies for a judicial review of the decision undersection 33.7,
(c) the parties have entered into a written agreement to appoint an arbitrator under
the Arbitration Act, or
(d) the parties have entered into a written agreement that resolves the matter.[10]
The word “final” was intentionally removed from the version of this section that became law in Alberta, and it was replaced with a list of the various mechanisms that could prevent an adjudication ruling from becoming the final word on a dispute, a list that is nearly identical to that found in the Ontario Act. The primary typographical difference from the equivalent wording in Ontario’s legislation is the use of the words “except where” as opposed to “until” in the description of the binding duration of the adjudication order. However, practically speaking, this difference in terminology is not likely to make any difference in application: in both cases, an adjudicator’s determination has immediate effect and is binding until the parties otherwise agree on a different result or until a more formal arbiter rules on the dispute. If no subsequent agreement or ruling comes about, the determination stands, in either province.
On a plain reading of the two sections at issue, there does not appear to be any “important difference” whatsoever between how the adjudication regimes in Alberta and Ontario are intended to function. While any semantic difference is likely largely illusory in practice, such difference is now the subject of express judicial recognition and is embedded in our case law. This could take future PPCLA jurisprudence in Alberta down unexpected interpretive paths that were neither foreseen nor intended by our Legislature, particularly if it means that existing Ontario adjudication jurisprudence can be distinguished and disregarded on this basis. While the primary decision in Welcome Homes is undoubtedly correct, this additional commentary on the legal effect of adjudications in Alberta as opposed to Ontario may not be, and its ultimate impact is not yet clear.
[1] 2024 ABKB 301.
[2] RSA 2000, c. P-26.4.
[3] Welcome Homes, supra note 1 at para18.
[4] Prompt Payment and Adjudication Regulation, Alta Reg 23/2022at s. 19. Emphasis added.
[5] Welcome Homes, supra note 1 at para. 26. The comment in this last sentence is likely inaccurate: as noted above, under subsection 19(e) of the Regulation, the parties had access to the adjudication procedure regardless of whether lien rights were triggered, as long as they mutually agreed to it.
[6] Ibid at para 19.
[7] Ibid at para 23. Emphasis added.
[8] Construction Act, RSO 1990, c C.30 at s. 13.15(1).Emphasis added.
[9] Ibid at para 20.
[10]PPCLA, supra note 2 at s. 33.6(5). Emphasis added.
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