Legal: Adjudication for engineers

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Ontario’s Construction Act expressly gives lien rights to architects to secure payments for their services. Engineers are arguably included in these rights by virtue of their supply of any “design, plan, drawing or specification that in itself enhances the value of the owner’s interest in the land.”

The relatively new prompt payment and adjudication regimes provide further benefit for both professions. In particular, adjudication may provide a way to resolve fee claims without facing—or at least delaying—the professional negligence counterclaims that are a common defence to a consultant’s fee claim.

The key to accessing the prompt payment provisions is a proper invoice, to be paid within 28 days in the absence of a notice of non-payment. Without it, prompt payment may not apply.

If you’re the prime consultant, you’re likely considered a ‘contractor.’

It will also depend on whether the engineer, architect or design professional is a subconsultant or sub-subconsultant, in which case the concept of a proper invoice likely does not apply. There is little downside, however, to making such invoices compliant with the ‘proper invoice’ requirements of the Construction Act.

If the owner doesn’t pay, what then? If you’re the prime consultant, you’re likely a ‘contractor’ under the Construction Act and can adjudicate. If the owner simply refuses to pay under a contract, refuses to pay pursuant to a notice of non-payment of a proper invoice or asserts amounts retained pursuant to set-off, those issues can be adjudicated, with typical timelines on the order of 30 to 45 days for an interim-binding determination.

If prompt payment provisions apply to engineers and architects, you can also arguably adjudicate if the owner fails to deliver a proper notice of non-payment setting out the correct amount being sought and providing clear particulars. Mere ‘placeholder’ notices of non-payment that seek to withhold excessive amounts without justification or that lack sufficient particulars will likely not be permitted based on recent court decisions involving construction (i.e. non-consultant) contractors.

The advantage of adjudication over litigation or arbitration is it gets money in the door in a short period, assuming you are successful. Further, adjudications are presumptively limited to a ‘single matter.’ The less of a reason for non-payment an owner gives to a consultant and the closer a consultant’s invoice is to a ‘proper invoice,’ the stronger the argument for payment to be made.

Fee claims are relatively easily provable.

If a consultant submits a proper invoice to the owner and refuses to add any other issue to the adjudication, that consultant could get a binding order for interim payment long before the owner can make or support a credible professional negligence claim.

Fee claims are relatively easily provable by reference to proper invoices and, thus, through diligent invoicing. Design negligence claims, on the other hand, require an expert report attesting to the consultant’s alleged failure to meet the standard of care. The former is easier to prove during design and construction than the latter. The owner’s defence is to retain an additional expert as soon as it suspects a design defect mid-project, so it can provide an interim report during an adjudication. The advantage, in this instance, may rest with the consultant.

F. Philip Carpenter is a partner at WeirFoulds LLP, a Toronto-based firm focused on litigation, corporate, property and government law. Michael C. Ly is legal counsel at JLL Canada, a real estate services firm specializing in property services and investment management. For more information, contact them at pcarpenter@weirfoulds.com and michael.ly@jll.com, respectively.

This article originally appeared in the March/April 2024 issue of Canadian Consulting Engineer.