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Construction - Prompt Payment (2). Sayers Foods Ltd. v. Gay Company Ltd.
In Sayers Foods Ltd. v. Gay Company Ltd. (Ont Div Ct, 2026) the Ontario Divisional Court dismissed a statutory JR, this brought against an adjudicator's order for "the Applicant to pay $685,574.91, plus interest .... pursuant to the prompt payment regime in the Construction Act" [under Part II.1 - Construction Dispute Interim Adjudication].
The court summarizes and illustrates an example of a Construction Act 'prompt payment' case:Summary and Disposition
[10] The application is dismissed.
[11] The Determination turned primarily on the Adjudicator’s findings in respect to Sayers’ delay claims. The Adjudicator found that construction schedules were not agreed in the Contract, and that Sayers had not pursued a claim for a credit in respect to its claims in accordance with the Contract. These findings were reasonable. Further, Sayers’ arguments respecting the reasonableness of these determinations do not raise grounds within this court’s jurisdiction to review in all the circumstances of this case.
[12] Sayers has not identified any “procedure to which the adjudication was subject” that was not followed that prejudiced its right to a fair adjudication, thus not raising any reviewable ground for procedural fairness issues. In any event, the process followed was procedurally fair in all the circumstances.
[13] Sayers raises several arguments that are inconsistent with the prompt payment provisions in the Construction Act: these arguments, collectively, challenge the Legislature’s wisdom in prioritizing prompt payment ahead of preserving common law contractual rights to leave issues (and payment) until after a complete litigation process. Those arguments do not avail Sayers. The prompt payment provisions require a payor to establish its set-off claims, pursuant to the applicable contract, through the prompt payment process, if it wishes to resist an interim prompt payment determination. Where a payor is unable to do so, prompt payment will be directed, and the payor may be left to pursue its claims after payment.
[14] Decision in this case is straightforward in light of the contract entered into between the parties: it is a comprehensive CCDC agreement, with an “entire agreement” clause, and payment certification and payment provisions. The Adjudicator reasonably construed these provisions and reasonably applied his reading of the contract to the record before him. It is apparent that the Adjudicator found the issues to be as straightforward as we do: Gay Co. was entitled to payment under the contract and should have been paid promptly in accordance with the payment certifier’s certification and the Adjudicator’s Determination. Sayers had the benefit of the work done by Gay Co. and its suppliers, and payment should have flowed through the construction pyramid in a timely way, as contemplated by the parties’ agreement and the Construction Act.
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Arguments Before this Court
General
[32] Sayers’ principal argument is that it has a meritorious delay claim and the Adjudicator erred in rejecting it and erred in ordering prompt payment in the face of that claim. This principal argument is packaged in multiple ways, as we shall explain, but this is the nub of the case.
[33] In our view, Sayers’ argument was considered by the Adjudicator and rejected on the merits, for detailed reasons responsive to Sayers’ arguments. On judicial review, the starting place in this court is the findings of fact and analysis of the Adjudicator: judicial review is not a re-hearing de novo before this court on the record below, but rather a review of the decision in light of the record below.
[34] In its factum, Sayers provides a summary of the facts cited to the record below, and not to the Adjudicator’s decision (Factum, paras. 5-55). As this court has stated, repeatedly, this is not the correct approach to the facts on appeal or on judicial review. The correct approach is to set out the facts, as found below. Where an appellant or applicant disputes a factual finding, the finding below should be set out (cited to the decision) and then the basis on which the applicant says the finding is unreasonable or is a result of a palpable and overriding error (cited to the record). To fail to approach the findings below in this way is to mistake the role of this court, which is not to determine the facts at first instance on the basis of the record below, but to review the decision below. See Feng v. Ontario Securities Commission, 2025 ONSC 2268, para. 12 (Div. Ct.); H.H. v. Canada (Attorney General), 2005 SCC 25, para. 4.
[35] Sayers’ approach to the facts in its factum reflects its approach to the principal issue: it seeks to reargue the points it raised below rather than to address the findings made below and to explain why they were not reasonably available on the record. This approach is not salvaged by inviting the court to review the entire record and come to its own view on the facts and then arguing that the decision below is unreasonable because it does not accord to the view the court should take on a de novo review of the record.
[36] The Adjudicator’s decision rests on his careful review of the Contract. He found that the Contract contains an “entire agreement clause” (it does: Article 2 [Determination, para. 62]). It sets out a process for payment certification (it does: Article 5, and GC 5.3 [Determination, para. 25-28]). It contains provisions for Sayers to claim credits, which Sayers did not follow (it does: Article 6.6)). It does not contain a contractual commitment to meet a schedule or any remedies for failing to do so (there are no such provisions in the Contract). The Adjudicator found that there were obligations to provide and update schedules in the Contract, but that these did not amount to a contractual obligation to meet these schedules, or an obligation to pay consequential damages for failure to meet that obligation (paras. 52-64).
[37] In this case, the parties entered into a comprehensive written contract. Sayers has not persuaded us that the Adjudicator was unreasonable in his findings in respect to the terms of that agreement. Nor are we persuaded that the Adjudicator committed any error in principle in his approach to contractual interpretation: the Adjudicator cited and applied the applicable jurisprudence[5] and Sayers has not pointed to any aspect of the Adjudicator’s analysis that was not faithful to that jurisprudence. The Adjudicator distinguished the two authorities relied upon by Sayers on the basis that the contracts in both of those cases were substantially or wholly oral, a proper basis to distinguish these cases from this case, where a formal written contract containing “entire agreement” and formal amendment clauses.[6]
[38] Further, Sayers does not engage with the core of the Adjudicator’s analysis in its written or oral submissions. It does not address the entire agreement clause. It does not address the effect of the payment certification process in the contract or its contractual obligation to pay in accordance with a payment certificate. It does engage in the issue of the contract’s provisions for Sayers’ to claim a credit, but it mischaracterizes the Adjudicator’s findings on this issue (without addressing the findings the Adjudicator actually made on this issue). . Sayers Foods Ltd. v. Gay Company Ltd.
In Sayers Foods Ltd. v. Gay Company Ltd. (Ont Div Ct, 2026) the Ontario Divisional Court dismissed a statutory JR, this brought against an adjudicator's order for "the Applicant to pay $685,574.91, plus interest .... pursuant to the prompt payment regime in the Construction Act" [under Part II.1 - Construction Dispute Interim Adjudication].
The court illustrates complexities that can arise under this 'prompt payment' regime, here in the context of it's statutory JR provisions [s.13.18]:Grounds advanced for judicial review
[3] The Applicant seeks judicial review based on several of the grounds for judicial review prescribed in s. 13.18(5) of the Construction Act (Notice of Application, para. 5):(a) The determination was of matters that may not be the subject of adjudication;
(b) The determination was made as a result of fraud by the Respondent;
(c) The procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject, the result of which created unfairness to the Applicant affecting the outcome;
(d) There is a reasonable apprehension of bias on the part of the Adjudicator. [4] During case management, the following issues were particularised as the grounds for the application (Case Management Direction dated July 18, 2024, (unreported)):(a) Section 13.18(5)(3.) – The conflict of (notice/additional) holdback obligations and the interim payment order. This complaint naturally falls into the enumerated ground that the payment ordered was subject to holdback, which the Act expressly states at section 13.19 may not be the subject of a payment order under Adjudication. Thus it was a matter that could not be the subject of adjudication and the Adjudicator erred in failing to understand his jurisdictional limit in the circumstances. In connection with this issue, the Applicant also alleges that the Adjudicator mis-states the position of the Applicant before him and made an unreasonable finding of fact as a result.
(b) Section 13.18(5)(3.) – The multiple matters exclusion under section 13.5(4) of the Act, which relates to the position taken by Sayers in the Preliminary Objection and also focuses on matters that ought not be subject of an adjudication. Multiple matters are expressly excluded from being the subject of an adjudication, and thus the ultimate Determination dealing with all of the matters in dispute in the project was a collection of matters that may not be the subject of an adjudication.
(c) Section 13.18(5)(5.) – The procedural unfairness complaints related to alleged non-compliance with s.13(11) and the Adjudicator’s directions respecting the order of written submissions and the deadline for reply submissions.
(d) Section 13.18(5)(5.) - Clarity on what threshold of proof parties should be required to prove a set-off delay claim, particularly if it is a complex delay claim in a truncated adjudication. The experience of this Adjudication has shown how Adjudications naturally were not designed to address complex, multi-matter disputes at the end of a project. They are not designed, nor intended, to address long standing chronic disputes. If complex matters are going to be allowed to be adjudicated, with no monetary cap, then adjudicators and the profession must be given guidance on what the threshold of proving such a claim ought to be given [that] adjudications are interim in nature, and deal with an incomplete record. The concern of the underlying adjudication is [that] Sayers was put to the test of proving its set off claim on the same standard a party would be expected to do at a trial. Requiring such a standard on such a compressed timeline is unattainable and procedurally unfair. Adjudicators ought to be instructed to consider the prejudice of making orders with no monetary cap if the dispute is complex, the record is incomplete, and the determination may be highly (irreparably) prejudicial to a party if it turns out to be wrong.
(e) Section 13.18(5)(5.) - In addition to the above, if these payment awards are truly “interim”, then Adjudicators ought to be instructed to also consider the irreparable harm, and balance of convenience to the parties when making such an “interim” order. That consideration needs to be baked into the procedures adjudicators ought to follow with making payment orders. The goal should be to not allow a result where the “interim” payment, in effect becomes permanent. Adjudicators ought to be mindful of the surrounding circumstances and the concern if a payment is made. Owners have no recourse or security if an “interim” payment is made, and the contractor becomes insolvent. This is of particular concern in this case given Gay’s inability to pay subcontractors, and the 65 lawsuits it is currently involved in (as shown in the Leave Application).
(f) Section 13.18(5)(7.) - The procurement of the decision through fraud by Gay Company as set out in the leave application, relating to the undisclosed Lawson Gay Affidavit.
(g) Section 13.18(5)(6.) - The concerns of the appearance of bias by the Adjudicator. [5] The leave panel directed the parties to “fix the questions for review” with the case management judge (D.L. Corbett J.). At the first case management conference (June 28, 2024), the case management judge directed Sayers to state the issues for review with particularity. This was done, and the issues particularised by Sayers were the issues the case management judge directed be the “questions for review”. In the case management direction of July 18, 2024, at para. 1, it was directed that “[t]he issues for judicial review shall be as set out at the end of this direction” (which are quoted verbatim, above). Neither party subsequently sought directions to vary the issues for the application. On this basis, we would not permit the parties to raise any issues that were not stated in the case management direction of July 18, 2024, as among the “issues for judicial review”.
Jurisdiction and Standard of Review
[6] This court has jurisdiction over this application pursuant to ss. 2(1) and 6(1) of the Judicial Review Procedure Act, RSO 1990, c. J.1 (the “JRPA”) and s. 13.18 of the Construction Act.
[7] Section 13.18(5) of the Construction Act provides:The determination of an adjudicator may only be set aside on an application for judicial review if the applicant establishes one or more of the following grounds:1. The applicant participated in the adjudication while under a legal incapacity.
2. The contract or subcontract is invalid or has ceased to exist.[2]
3. The determination was of a matter that may not be the subject of adjudication under this Part, or of a matter entirely unrelated to the subject of the adjudication.
4. The adjudication was conducted by someone other than an adjudicator.
5. The procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject under this Part, and the failure to accord prejudiced the applicant’s right to a fair adjudication.
6. There is a reasonable apprehension of bias on the part of the adjudicator.
7. The determination was made as a result of fraud.
No challenge is brought to the constitutionality of this provision, and we proceed on the basis that this court’s jurisdiction is circumscribed by 13.18(5).[3] [8] Grounds 1, 2 and 4 do not arise in this case. The questions over which this court has jurisdiction, therefore, are whether Gay Co. has established a basis for review under any of ss. 13.18(5)3, 5, 6 and/or 7.
[9] The standard of review of the Adjudicator’s Determination is reasonableness: Canada (Minister of Citizenship and Immigration v. Vavilov, 2019 SCC 65. Issues of procedural fairness are reviewed in this court on a standard of correctness: Abrametz v. Law Society of Saskatchewan, 2022 SCC 29. In the context of an application for judicial review pursuant to s. 13.18 of the Construction Act, issues of procedural fairness must be analysed through the lens of s. 13.18(5)5: (a) an applicant must show that the procedures followed did not accord with the procedures to which the adjudication was subject under Part II.1 of the Act; and (b) an applicant must show that the failure prejudiced the applicant’s right to a fair adjudication.
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Background
[15] Sayers is a family-owned grocery store in the Town of Apsley, in the Township of North Kawartha, Ontario. In December 2020, the store was destroyed by fire.
[16] Sayers contracted with Gay Co., as general contractor, to build a replacement grocery store. The contract award was in September 2021, with a subsequent re-tender in February 2022. Sayers and Gay Co. entered into a CCDC 2 Stipulated Price Contract in March 2022 (the “Contract”) for the construction of the replacement store. The Contract price was $8,159,730, including HST.
[17] Sayers takes the position that there was an agreement to complete the construction by December 31, 2022, which was subsequently amended by construction schedules agreed between the parties. Sayers says that in April 2022, the parties agreed to a construction schedule “to provide an additional three months” to Gay Co., with the project to reach substantial completion by March 2023, and for the store to re-open in April 2023.
[18] Sayers takes the position that substantial performance of the contract was not reached until March 2024, when the store re-opened. Sayers claims damages for delay, which it alleges “are close to $900,000”.
Events Triggering the Adjudication
[19] Sayers ceased payments to Gay Co. and delivered Notices of Non-Payment under the Construction Act, starting in late November 2023. Gay Co. then commenced two statutory adjudication processes under the Act, on December 21, 2023, and on February 4, 2024, in respect to its November and December 2023 invoices ($585,226.67 and $266,576.66, respectively). On consent, the adjudications were consolidated and heard together before an adjudicator.
The Impugned Determination
[20] The Adjudicator made the following findings:(a) Sayers is the “Owner” and Gay Co. is the “Contractor” pursuant to a “contract” entered into between them on March 22, 2022, for a stipulated price of $7,221,000, plus HST, for a total of $8,159,730, inclusive. (paras. 1-3)
(b) The “Consultant” within the meaning of the Contract, was Maclennan Jaunkains Miller Architects (“MJMA”). Under the Contract, the Consultant determines amounts owing to the Contractor under the Contract and issues Certificates for Payment pursuant to the Contract. “Any issues in respect to the performance of the [Contract] Work or the interpretation of Contract Documents ‘shall’ be referred in writing to MJMA by the party raising the issue for interpretation and findings (GC 2.2.7).” (para. 4)
(c) The two disputed payments were certified for payment by the Consultant, in Payment Certificates Nos. 18 (November 30, 2023) and 19 (December 31, 2023). (paras. 6 and 8)
(d) Sayers raised three reasons why it did not pay the disputed invoices:
(i) Sayers is required to hold back $877,747.00 as notice holdback under the Act in respect to unvacated subcontractor liens;
(ii) Sayers alleges that Gay Co. delivered false statutory declarations when it submitted requests for payment in respect to the disputed invoices, in breach of contract and contrary to the Criminal Code;
(iii) Sayers “intends to make a claim” against Gay Co. for a credit to the Contract price pursuant to GC 6.6.1 for delay, in the amount of $1.2 million, plus $100,000 to $150,000 [per month] until the Project is completed. (para. 10)
(e) Sayers does not dispute the value of the construction work done by Gay Co. (para. 11)
(f) Sayers claims a credit of $184,136.19 for amounts paid by it directly to subcontractors of Gay Co. (para. 12). Gay Co. agreed to this claimed deduction upon proof of payment by Sayers, which was provided. Thus, this credit against the claim was allowed. (para. 12)[4]
(g) Accordingly, the net claim for adjudication was $667,667.14, plus interest (para. 14)
(h) The Consultant certified the disputed Invoices for payment. The Contract required Sayers to pay Gay Co. the amount certified for payment within 28 days, subject only to holdbacks under the Construction Act. (para. 28) [21] The Adjudicator set out the following statements of principle (Determination, paras. 23-24):... the Divisional Court has consistently upheld the principle that “prompt payment is integral to the scheme of the Construction Act”. The purpose of the adjudication provisions is to provide a quick, efficient and interim determination allowing funds to flow down the construction “pyramid”. More particularly, the prompt payment scheme allows for the prompt adjudication of invoice disputes so that construction does not get bogged down in disputes between the parties. As the Divisional Court stated in SOTA Dental
The whole point of these provisions is to require prompt payment to avoid the consequences of disruptions to construction projects of brinksmanship over disputes [that] arise.
The effect of this process has already resulted in a number of Claims for Lien. It is readily evident that the consequences are foreseeable and that a refusal to pay because a delay claim is complicated is inconsistent with prompt payment provisions.
Finally, I note that section 13.15 of the Construction Act confirms that adjudication determinations are interim, allowing the parties to continue litigating the issues including those that are subject to a final and binding determination. The risk to [Sayers] is that it will not be able to retain monies payable pursuant to the Contract as security for a judgment in the delay action. The idea that prompt payment and adjudication can be denied due to a complex issue is inconsistent with the scheme of the Construction Act. Otherwise, if this were the case, there is a strong incentive for a payor to claim that their matter is too complex for adjudication, and this would defeat the purpose of the changes to the Construction Act.
As should be evident from the rest of these reasons, we agree with these statements. Impact of Registered Claims for Lien
[22] The Adjudicator found that an owner’s liability to subcontractors is in respect to the “basic” 10% holdback obligation under the Construction Act. An owner may also be liable for additional “notice” holdback obligations, but these additional obligations do not arise on the mere registration of a claim for lien: they arise upon an owner receiving written notice of lien pursuant to s. 24(2) of the Act. The Adjudicator stated at para. 35 of the Determination:[Sayers] acknowledged that there was no evidence of a written notice of lien. Accordingly, [Sayers’] counsel agreed that there was no obligation to retain additional holdback pursuant to s. 24(2). [23] Before us, Sayers argued that it did not agree “that there was no obligation to retain additional holdback pursuant to s. 24(2).” Rather, it submitted that it had “actual” notice that satisfied the “written notice” requirement in the Act and so did have an obligation to retain additional holdback pursuant to s. 24(2) of the Act.
Alleged False Statutory Declarations
[24] Sayers’ argument on this point is that Gay Co. falsely stated in its applications for payment that its subcontractors had been paid. Its evidence that the subcontractors had not been paid were claims for lien subsequently registered by subcontractors.
[25] The Adjudicator found (at Determination, para. 48) that:(a) There is no need to deliver a fresh Statutory Declaration provided that the most recently submitted declaration remains true;
(b) The Statutory Declaration was true as to the last payment received;
(c) Sayers did not deliver any evidence that subcontractors remained unpaid in accordance with the arbitration schedule or by the time of the oral hearing;
(d) In the absence of cross-examination, the Adjudicator was “reluctant to make any such finding of fraud or untrue statement or any other finding in respect to the credibility of either [side]. [26] Sayers argues that the absence of cross-examinations was a consequence of procedural directions from the Adjudicator, and that it was unfair to decide this issue on this basis, given the evidence that it did provide that subcontractors had not been paid by Gay Co.
Intended Delay Claim
[27] The Adjudicator characterized this as the “primary reason for non-payment (para. 50). The Adjudicator summarized this as follows (paras. 50-51):... [Sayers] has vigorously advanced an argument that the Contract provided for a completion date in March 2023 and that as a result, the Respondent is entitled to a credit for $1.2 million or greater and can-set off this amount against amounts due and payable pursuant to Payment Certificates Nos. 18 and 19.
[Gay Co.] … disputes that [Sayers] has a contractual right to unilaterally set off amounts due and owing based upon a delay claim. In any event, [Gay Co.] denies that [Sayers] is entitled to a credit for delay. [Gay Co.] raises the following defences to [Sayers’] claim:
(a) The Contract did not provide for a scheduled completion date;
(b) [Sayers] has not discharged its burden to claim a credit;
(c) [Sayers’] claim for damages is for indirect or consequential damages which are exclusions in the Contract pursuant to GC 13.1.2. [28] The Adjudicator found that there was no contractually binding schedule and gave detailed reasons for this conclusion (para. 68, following analysis of this issue at paras. 52-67).
[29] The Adjudicator also found that Sayers did not follow the process stipulated in the Contract for claiming a credit for delay claims against the Contract price (para. 81, following the analysis of this issue at paras. 70-81).
[30] The Adjudicator did not find it necessary to decide the third basis of Gay Co’s defence of Sayers’ claim based on delay (the Contract precluded claims for consequential loss or indirect damages) and so did not do so. (para. 82)
[31] In the result, the Adjudicator found that Gay Co.’s applications for payment had been certified and were payable, subject only to deduction for the amounts paid by Sayers directly to Gay Co. subcontractors and found the balance of $667,667.14, plus interest, was payable by Sayers to Gay Co. . Blackstone Paving and Construction Ltd. v. Barrie (City of)
In Blackstone Paving and Construction Ltd. v. Barrie (City of) (Div Court, 2024) the Divisional Court dismissed a Construction Act JR of a 'prompt payment' adjudication:Jurisdiction of this Court
[2] The impugned decisions are prompt payment adjudications pursuant to the Construction Act. There is no appeal from these decisions, and judicial review to this court is only available with leave: Construction Act, s. 13.18(1). This court’s jurisdiction to grant judicial review is circumscribed by s. 13.18(5) of the Act, and the only basis for review upon which the applicant relies in this application states as follows (s.13.18(5)5):The determination of an adjudicator may only be set aside on an application for judicial review is the applicant establishes one or more of the following grounds:
... .
5. The procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject under this Part, and the failure to accord prejudiced the applicant’s right to a fair adjudication. . Caledon (Town) v. 2220742 Ont. Ltd. o/a Bronte Construction
In Caledon (Town) v. 2220742 Ont. Ltd. o/a Bronte Construction (Div Court, 2024) the Divisional Court considered a JR of a Construction Act adjudication.
Here the court considers the 'prompt payment' and related JR provisions of Construction Act:Limited Jurisdiction of this Court
[56] As noted by this court in SOTA Dental Studio Inc. v. Andrid Group, 2022 ONSC 2254, para. 9 (Div. Ct.):The whole point of these provisions is to require prompt payment to avoid the consequences of disruptions to construction projects of brinksmanship over disputes that arise. The prompt payment provisions are based on similar provisions introduced in the United Kingdom more than a decade ago. They provide for a quick and relatively informal adjudication, by an adjudicator experienced in construction law disputes. The decision is without prejudice to the parties contesting issues between them at the end of the project. It triggers an obligation on the part of the payee to make its payments to its subcontractors, suppliers and workers. Effective implementation of these provisions is intended to reduce terminations (by payors) and work cessations (by payees) in the midst of construction, either of which can cause cascading losses down the construction pyramid. The obligation to pay, and to pay promptly, when ordered to do so, is fundamental to the scheme of the prompt payment provisions. [57] The bases on which the court may intervene on an application for judicial review reflects the nature of the award made by an adjudicator: it is an interim award, without prejudice to the parties, and is to be made swiftly following a prescribed prompt process. The court affords a high degree of deference to an adjudicator’s decision and will intervene only in limited circumstances.
[58] The complete text of s. 13.18(5) of the Act states:The determination of an adjudicator may only be set aside on an application for judicial review if the applicant establishes one or more of the following grounds:
1. The applicant participated in the adjudication while under a legal incapacity.
2. The contract or subcontract is invalid or has ceased to exist.
3. The determination was of a matter that may not be the subject of adjudication under this Part, or of a matter entirely unrelated to the subject of the adjudication.
4. The adjudication was conducted by someone other than an adjudicator.
5. The procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject under this Part, and the failure to accord prejudiced the applicant’s right to a fair adjudication.
6. There is a reasonable apprehension of bias on the part of the adjudicator.
7. The determination was made as a result of fraud.
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