The PPCLA and Adjudication: What Issues Can the Adjudicator Address?

The new Prompt Payment and Construction Lien Act (“PPCLA”) as set out in the Builders’ Lien (Prompt Payment) Amendment Act scheduled to take effect August 29, 2022, has introduced a plethora of changes to builders’ lien legislation in Alberta. One of the practices introduced and completely new to Alberta is adjudication.

The PPCLA outlines who will administer the adjudication system, the qualifications to become an adjudicator, and the basic procedure for adjudication. This article will focus on what issues can be determined using the adjudication process.

In addition to the PPCLA, the Prompt Payment and Adjudication Regulation (the “Regulation”) provides guidance with respect to the adjudication process. Pursuant to section 19 of the Regulation, any dispute with respect to the following matters may be referred to adjudication:

  • Valuation of services or materials, including with respect to change orders;
  • Payment;
  • Disputes that are the subject of a notice of non-payment;
  • Payment of the major or minor lien fund; or
  • Any other matter that the parties agree to.

This provision is so broad that it is almost unhelpful. On its face, the intent of adjudication appears to be to quickly resolve disputes in relation to payment that arise during a project. However, a dispute with respect to payment is often inseparable from the underlying issue or reason that payment is being withheld or disputed – changes, deficiencies, design errors, delays, scope disputes … the list goes on. Can the adjudicator deal with these underlying issues?

The answer is – maybe. It remains to be seen how challenges to the adjudicator’s scope of authority (i.e. jurisdiction) will be handled. An adjudicator is expressly granted the right in the PPCLA to refer a matter to court if they believe that they do not have jurisdiction to hear a matter or where a court is the “more appropriate forum”, in the opinion of the adjudicator. We anticipate that where a dispute is complex, the adjudicator will decline to make a determination. For example, where payment is withheld because of an alleged construction defect, leading to delay in a project and other potential damages, an adjudicator may determine that a court is better suited to resolve the issues between the parties. However, different adjudicators may take different approaches to this question. Adjudication decisions will not be reported, so consistency among adjudicators may be an issue.

An adjudicator cannot determine disputes in relation to public works (as defined in the Public Works Act) or once a contract is complete. Based on the experience in Ontario, where a similar adjudication regime has been in place for just shy of two years, it is anticipated that the bulk of adjudications will relate to payment issues. More complicated issues such as delay will likely be resolved by the courts or arbitration.

Where a party believes that an adjudicator has acted outside their authority or exceeded their jurisdiction, applying to the court for judicial review is appropriate. The court will then determine whether or not the adjudicator was entitled to make the determination made. However, given that a court order will always take precedence over an adjudication determination, it is more likely that parties will simply commence litigation (or arbitration where appropriate) if they take issue with an adjudicator’s determination. The adjudicator’s determination is binding and enforceable except where (a) a court order is made in respect of the matter, (b) a party applies for a judicial review of the decision, (c) the parties have entered into a written agreement to appoint an arbitrator, or (d) the parties otherwise settle the matter by written agreement.

Overall, it remains to be seen what issues adjudicators will see fit to provide determinations on. Most likely, the adjudication process will be used to resolve relatively simple issues primarily relating to payment. However, the PPCLA and the Regulation leave plenty of room for interpretation.