Prompt payment is a fundamental goal of adjudication processes under the Construction Act and crucial to ensuring that the flow of money on construction projects is protected.1 This goal is frustrated where determinations are not meaningfully complied with. In a recent Ontario Superior Court of Justice case, High Tech Power Inc. v. BDA Inc., Mills J. rendered a decision motivated by this very concern and consistent with the practical, not merely symbolic, goal of prompt payment.2
The Decision
Following an adjudication under the Construction Act, High Tech Power Inc. ("High Tech") obtained a favourable determination against BDA Inc. ("BDA") for $316,960.26. However, when BDA paid out the amount, it did so through its lawyers, with the funds being placed in its lawyers' trust account. Thereafter, on consent, $161,037.68 was released to satisfy a debt owed by High Tech to its unionized workers, but the balance of $155,922.58 continued to be held in trust by the lawyers for BDA.3 The ostensible reason for BDA's retention of the balance was that it was following a third-party demand (by High Tech's surety) to withhold these funds.4
BDA then brought a motion before the Superior Court seeking to reduce the quantum of the bond it had posted to vacate High Tech's lien. The lien action was in respect of the same project and was being pursued by High Tech in parallel to its adjudication. On the motion, BDA argued the bond should be reduced by $316,960.26, i.e., the full amount awarded in the adjudication, even though $155,922.58 had not been paid but was in BDA's lawyers' trust account.
The questions for the court to determine on BDA's motion were straightforward but important: What constitutes "payment" in the context of a construction adjudication order? And specifically, could BDA's payments to its lawyers be considered as payment to High Tech and used to reduce BDA's posted bond?
The court's answer to the second question was "no." The funds held by counsel could not be considered as paid by BDA pursuant to the adjudication determination.5 The court's reasoning was that those funds were still subject to the direction and control of BDA while in the hands of its counsel and, in turn, at the risk of being dealt with contrary to High Tech's interests.6
Key Takeaways
Allowing payments to be held in a lawyer's trust account, and out of an adjudication claimant's reach, impedes the flow of money on a construction project.7 Interpreting "payment" to require actual receipt by the claimant, on the other hand, ensures that prompt payment is achieved in practice and not just on paper.
Footnotes
1. High Tech Power Inc. v. BDA Inc., 2024 ONSC 4327 (CanLII) ["High Tech"], at para 9;Arad Incorporated v. Rejali et al., 2023 ONSC 3949, at para 26.
2. High Tech.
3. High Tech, at para 3.
4. High Tech, at para 4.
5. High Tech, at para 8.
6. High Tech, at para 8.
7. High Tech, at para 9.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.