Sayers Foods and the Limits of Withholding Payment Under the Construction Act’s Adjudication Regime

Construction delay disputes often follow a familiar pattern. The owner believes the project is late, withholds payment, and assumes the merits of its position will be resolved later through litigation or arbitration. The Divisional Court’s decision in Sayers Foods Ltd. v. Gay Company Ltd., 2026 ONSC 918, illustrates how that approach can conflict with Ontario’s prompt payment regime under the Construction Act.

In Sayers, the court dismissed all grounds of judicial review advanced by the owner, including jurisdiction, procedural fairness, fraud, and bias. A follow-up endorsement also rejected an attempt to revisit one of those issues. Together, the decisions provide meaningful guidance on how courts expect prompt payment adjudication to operate.

Your Contract Is Your Defence

The parties entered into a CCDC 2 stipulated price contract that included an entire agreement clause and payment certification process, but no binding schedule obligation or liquidated damages provision. When the owner refused to pay two certified invoices based on an alleged $1.2 million delay claim, the adjudicator ordered payment and the Divisional Court upheld that result.

The court confirmed that delay-based set-off must be grounded in the contract and actively pursued. In Sayers, the owner invoked a credit provision nine months before adjudication but took no further steps to advance the claim. The adjudicator treated that inaction as fatal.

The court also rejected the argument that adjudicators should apply an injunction-style test when assessing payment defences. The prompt payment regime prioritizes the flow of funds through the construction pyramid, subject to parties’ contractual rights.

Complexity Does Not Defeat Jurisdiction

The owner argued the adjudication was too complex for the adjudicator to decide. The court disagreed. Section 13.5(4) of the Construction Act limits adjudication to a single matter unless otherwise agreed. Here, the matter was the contractor’s entitlement to payment of two invoices, consolidated on consent. Complex defences did not change the nature of the dispute.

Accepting the owner’s position would undermine the prompt payment regime by allowing payors to avoid adjudication through multifaceted defences.

Registering a Lien Does Not Trigger Notice Holdback

The court confirmed that discovering registered liens on title does not constitute “written notice of lien” under s. 24(2) of the Construction Act. Only notice in the prescribed form from the lien claimant triggers the obligation to retain additional holdback.

The statutory regime allows subcontractors to preserve lien rights without automatically tying up funds that adjudication is intended to move through the construction pyramid. However, providing written notice of lien may affect strategy and should be considered carefully. The January 2026 amendments to the definition of “written notice of lien” remain untested, as the court found they did not apply retroactively.

Procedural Fairness Requires Demonstrable Prejudice

The owner raised several procedural fairness arguments: the reversal on the order of submissions, the absence of cross-examinations, and the contractor’s initial failure to upload a complete contract. The court rejected each argument under the conjunctive test in s. 13.18(5)5 of the Construction Act, which requires both a failure to follow a prescribed procedure and resulting prejudice.

The decision highlights the importance of raising procedural concerns promptly during adjudication. The court also noted that the absence of a recording limited its ability to resolve factual disputes about what occurred at the hearing. While recordings are not required, documenting key procedural developments may assist in any subsequent review.

ODACC Determinations Will Become Public

The court confirmed that parties seeking judicial review should serve notice on ODACC as a proper party entitled to participate, and encouraged the development of a service portal.

O. Reg. 264/25 now requires ODACC to publish adjudication determinations on its website, subject to party-driven anonymization. The requirement applies to adjudications commenced on or after January 1, 2027. As determinations become publicly available, parties will gain greater insight into how adjudicators interpret the prompt payment regime.

The Bottom Line

Adjudication under the Construction Act is intended to move money efficiently through the construction pyramid. For contractors and subcontractors, it provides a timely mechanism to enforce payment.

HOW WE CAN HELP

RAR Litigation advises owners, contractors, and construction managers on prompt payment, lien rights, and adjudication strategy under the Construction Act. We assist clients in assessing risk, advancing claims, and responding effectively to adjudications while protecting both legal and commercial interests.

Contact us for strategic advice, risk assessment, and litigation representation.