The Construction Litigation Landscape in Ontario: Court, Arbitration and Adjudication

Ontario’s construction industry now operates in a dispute-resolution landscape that is more complex than at any point in recent memory. Adjudication has become a routine feature of payment disputes, arbitration clauses are increasingly sophisticated, and court processes continue to evolve. The challenge is no longer simply resolving disputes efficiently but choosing the forum that best supports a party’s commercial and strategic objectives.

This choice matters. Selecting the wrong forum can increase cost, extend timelines, and weaken a party’s negotiating position. Selecting the right one can keep projects moving, preserve cash flow, and provide a clear path to resolution.

This article summarizes the key features of each forum and provides practical guidance for making informed decisions about dispute resolution in Ontario’s evolving landscape.

Litigation in the Ontario Superior Court of Justice

The courts are the traditional forum for resolving construction disputes. Absent a binding arbitration or other dispute resolution process, the Ontario Superior Court of Justice (“Superior Court”) is the default forum for most construction-related disputes. Further, it is the necessary forum for lien proceedings, insolvency-related matters and multi-party tort or negligence claims that cannot easily be addressed in arbitration.

A party can commence an action in the Superior Court by way of a statement of claim. A defendant can counterclaim against the plaintiff and can also bring in third parties who are necessary to the dispute. The parties will generally participate in a discovery process whereby they disclose all relevant documents to each other and then have the opportunity to examine the other party or parties under oath. Once the discovery process has concluded, the parties will attend a pre-trial and then a judge will decide the dispute after a trial involving evidence from all of the relevant witnesses. In addition, the parties have broad appeal rights with respect to decisions made by the Superior Court.

The Superior Court has broad inherent jurisdiction with respect to almost all disputes surrounding a construction dispute. It is very rare that a party will challenge whether the Superior Court has the power to grant a certain remedy to a party.

Further, matters that are before the Superior Court are generally public. In the absence of a sealing order being granted, which is a rare occurrence, anything that is filed with the court is a matter of public record.

With that said, there are certain limitations to litigation before the Superior Court. The Rules of Civil Procedure are mandatory and do not allow for much flexibility in the process that is used. The parties do not have any ability to tailor the process or even the decision-maker to the nature of the specific dispute. Further, the timelines for resolving a dispute before the Superior Court are generally longer than with arbitration or adjudication. This generally makes litigation more costly than other forums with the caveat that the parties are not required to pay a third party to arbitrate or adjudicate the dispute. 

In conclusion, litigation is often the most effective forum when:

• lien or trust claims are involved;
• multiple unrelated parties must be involved in the action;
• broad documentary disclosure, particularly from third parties, is required;
• the court’s coercive powers are needed to compel participation or production;
• novel relief is being requested or there are likely to be issues relating to jurisdiction; or,
• a party does not wish for the dispute to be confidential. 
  

Arbitration

Arbitration is a private, contract-based dispute-resolution process where parties appoint an arbitrator or panel of arbitrators to decide their dispute. Parties generally proceed to arbitration when their contracts require them to do so. With that said, the parties can agree to refer a dispute to arbitration even when there is no contractual requirement to do so.

On the other hand, absent a binding arbitration clause, a party cannot be forced to arbitrate without their consent. This can sometimes be a challenge when there are multiple parties involved in a dispute with separate contracts that contain different or inconsistent dispute resolution provisions.

Arbitration is a confidential process that operates outside the court. The parties can appoint an arbitrator with the technical expertise that is needed for a dispute and can create a bespoke process that is specifically tailored to the dispute at hand. Arbitration can be as streamlined or as structured as the parties require. Straightforward disputes may proceed on a documents-only basis, while complex engineering disputes benefit from expanded expert processes and multi-stage hearings.

When the process is designed carefully, arbitration can be significantly faster than litigation in the courts. Arbitrators generally have more availability, and the parties can impose deadlines that align with the urgency of the project.

Further, parties do not have the same ability to appeal a decision of an arbitrator as they would a decision of the Superior Court and dispute resolution processes can be crafted to significantly limit a party’s ability to challenge an arbitrator’s decision in the courts. 

In conclusion, arbitration is often the most effective forum when:

• the dispute is technically complex;
• confidentiality is important;
• there is urgency to the resolution of the dispute;
• a final and binding result with limited possibility of appeal is needed;
• bespoke procedures or scheduling flexibility would improve efficiency; or,
• parties want greater control over the process and the decision-maker.

Adjudication Under the Construction Act (Ontario)

Adjudication is a rapid, interim dispute-resolution process that is provided for in the Construction Act (Ontario). It is designed to keep projects moving by addressing payment-related disputes quickly, while still allowing parties to pursue a final determination later.

As with arbitration, the parties generally have the ability to appoint their own adjudicator and select their own process, although there are default processes and timelines for adjudication set out in the Construction Act (Ontario).

Any award made by an adjudicator is binding but only on an interim basis, meaning that the parties must follow the determination immediately, but they remain free to pursue arbitration or litigation afterwards. Importantly, adjudication results do not carry precedential value and do not bind a court or arbitrator. Again, like arbitration, there is a limited right to seek judicial review of an adjudication award.

Another aspect of adjudication that is different from litigation and arbitration are the rules surrounding costs. In adjudication, parties can expect to bear their own legal costs although an adjudicator does have the power to award costs if they determine that a party has acted in a manner that is frivolous, vexatious, an abuse of process or other than in good faith. For that reason, parties may not want to refer disputes to adjudication that are legally or factually complex as there may be significant unrecoverable expenses incurred, even if successful. 

In conclusion, adjudication is often most effective when:

• payments are being withheld and work is slowing;
• issues are narrow and time-sensitive;
• the dispute is not legally or factually complex;
• the parties need an interim ruling to keep the project progressing; or,
• the cost of full litigation would be disproportionate to the amount at stake.

As a final note, parties can anticipate jurisdictional challenges that can increase the complexity of the adjudication. Because the adjudication provisions are relatively new to the legislative regime, there is an absence of clear authority on when adjudication is available in certain circumstances. This can lead to jurisdictional arguments that are usually dealt with as a preliminary issue by the adjudicator. While it is anticipated that there will be legislative changes to clarify when adjudication is available, parties should turn their minds as to whether there is likely to be a jurisdictional challenge. 

Choosing the Right Forum: Strategic Considerations and Key Takeaways

The most effective dispute-resolution strategies begin at the contract negotiation stage. It is important to turn one’s mind to whether arbitration should be provided for at this early stage, otherwise it is likely that the right to arbitrate will be lost. 

In addition, a well-drafted dispute-resolution clause can prevent fragmentation, give parties clarity, and eliminate procedural disputes before they arise. On multi-contract projects, aligning arbitration clauses across agreements is one of the most valuable steps parties can take to avoid parallel proceedings.

Even once a dispute arises, parties often have more flexibility than they may expect. A payment dispute may favour adjudication; a detailed technical dispute may be better suited for arbitration; and a lien or trust dispute may require the courts. Understanding the strategic advantages of each forum allows parties to choose a process that advances their commercial goals.

Parties should consider factors such as:

• Contractual obligations — Are arbitration provisions mandatory?
• Urgency — Does the project need an immediate ruling?
• Complexity — Is the dispute technical and expert-driven?
• Number of parties — Are there multiple parties that need to be brought into one proceeding?
• Confidentiality — Is privacy essential or is there a benefit to having the dispute be public?
• Cost and timing — Which forum aligns with realistic budgets and schedules?

Looking Ahead

Ontario’s dispute-resolution landscape will continue to evolve. Adjudication will expand as more parties use it proactively. Arbitration clauses will become more detailed, addressing consolidation, multi-party issues, and procedural design. As has been well publicized, the Rules of Civil Procedure may be getting a complete revamp.

For owners and contractors, the conclusion is clear: dispute-resolution planning is no longer optional. Choosing the right forum, both at contract formation and when disputes arise, reduces cost, limits disruption, and supports better project outcomes.

 

The information provided in this article is general in nature and does not constitute legal advice. Should you have any questions about the article, please contact the author.