HKA's Franco Mastrandrea on implementing Alberta's Prompt Payment Act
Franco Mastrandrea, PhD, a partner at risk and disputes consultancy HKA, in a recent thought piece distilled the lessons learned from decades of the adjudication process as Alberta follows other provinces in implementing reforms to enforce prompt payment in the construction industry.
Alberta’s Prompt Payment and Construction Lien Act (the “PPCLA”), which came into force on August 29, 2022, requires that new contracts provide for adjudication. Adjudication is an alternative dispute resolution process wherein a neutral third-party reviews parties’ submissions and decides the case. Adjudication is more informal, flexible, faster, and cheaper than a court hearing.
Adjudication has been utilized in the UK construction industry for more than 25 years, with the streamlined process producing thousands of voluntary and contractual adjudications.
Alberta’s PPCLA allows for adjudication on matters relating to valuation of services or materials provided, payment under the contract including the payment of change orders, disputes that are the subject of a notice of non-payment, 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, and any other matter in relation to the contract that the parties in dispute agree to.
The adjudication process from commencement to determination is expected to take 46 to 56 days. The adjudicator’s determination is binding except in cases where a court order is made in respect to the matter or if a party applies for judicial review.
Mastrandrea says in-house counsel and lawyers need to be alert to the deadlines and stipulations in the Act, with multiple deadlines for various phases triggered once an adjudication commences.
Experts still have a place in adjudications, commonly where issues are complex or involve technical matters such as delay and quantum, engineering, and architecture. Complex disputes may enable concessions in the tight, time-limited stages of the Act – like, for example, if an expert is required to respond to a claimant’s delay or quantum expert reports.
Mastrandrea says responding parties need to be prepared for possible adjudications by having the relevant records and being able to assemble and analyze them efficiently for prompt presentation.
Mastrandrea – a chartered arbitrator with over 40 years of experience in construction – says adjudication meetings or hearing should not be needed in most cases, unless they advance an adjudicator’s understanding. Hearings require only the attendance of parties able to answer enquiries from the adjudicator, but failure to attend without justifiable reason might draw adverse inferences.
A seasoned adjudicator could ask relevant and focused questions to answer matters not covered in submissions; a green adjudicator might rely solely on party submissions. As such, adjudicators may have to do some extra work to uncover relevant issues to make a just decision.
Adjudicators should provide reasons for their decisions, Mastrandrea says, since that benefits both parties – especially the loser, who might use it to guide future conduct.
Adjudication decisions are binding until they are overturned by an arbitrator (where the contract allows for one) or in court.
Mastrandrea notes the idea of natural justice – the right to an impartial and fair hearing – is at the core of making adjudication an effective and beneficial process.
“Clarity on jurisdiction, good practice and procedures, and attention to the rules of natural justice are prerequisites,” he says. “Adjudicators must give each party a fair opportunity to advance its case and challenge the opposing one. They should avoid being drawn into other lines of enquiry not raised by the parties. But where it could potentially illuminate the crux of a dispute, a different hypothesis can be explored and natural justice protected by giving both parties a proper opportunity to consider the matter.”
