Prompt payment in Canada: Recent developments

09 May 2019


Since our original article on prompt payment reforms across Canada was published in May 2018, there have been several developments across the country with prompt payment and construction lien act reform.

In Ontario, the first tranche of amendments came into force on July 1, 2018 (dubbed the "modernization" changes, updates to lien timelines, holdback timelines, trust provisions and mandatory bonding on public projects), and the second tranche of the amendments is fast approaching with prompt payment and adjudication coming into force on October 1, 2019. The province has also responded to many comments from the industry regarding the initial amendments with further changes in Bill 57 (proclaimed December 2018), and updated regulations and forms (to be finalized and published shortly). Construction companies, lawyers, owners and the industry in general are all scrambling to implement processes and procedures to make the transition as pain free as possible. The Ontario reforms include somewhat tricky transition rules that are important to follow carefully: if a contract was entered into, or a procurement process commenced, in respect of an improvement prior to October 1, 2019, the prompt payment and adjudication rules will not apply.

The Federal government legislative reform, initially commenced by the introduction of Bill S-224, did result in the commissioning and publishing of a report in the summer of 2018. After reviewing the report, the Federal Government commenced drafting the legislation in the fall of 2018. The drafting process was a bit slower than anticipated, however, very recently the prompt payment legislation was released in the government's budget bill, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures. The proposed legislation is the first major construction legislation at the federal level, but remains subject to a lot of 'tbd' provisions, that will be expanded upon in the regulations, including much of the adjudication regime and the Adjudication Authority itself. The legislation follows much of the Ontario act, including defining capital repair for added certainty of what's covered, defining proper invoice and making it the trigger for the payment timelines, and using the 28-7-7-7 cascading payment obligations from owner to contractor to subcontractor etc., and creating an adjudication process for disputes. Some notable items include: the owner has 21 days to provide the contractor with a notice of non-payment (ON - 14, SASK - 14); introduction of optional holdback no greater than the provincial amount where the work is taking place; 21 days to initiate an adjudication from defined points in time; and adjudication is binding unless parties come to a written agreement or the determination is set aside by a court order or arbitral award. The transition provisions require some mental gymnastics, but the Act will apply, one year after the day on which the Act comes into force, to contracts entered into by a contractor after the day on which the Act comes into force.

Saskatchewan and Nova Scotia have also tabled legislation since this article was initially published. Saskatchewan's Bill 152, The Builders' Lien (Prompt Payment) Amendment Act, 2018, introduced in November 2018, has now passed Third Reading and is now waiting to be proclaimed. The Saskatchewan reforms mirror most of the major prompt payment and adjudication provisions and timelines of the Ontario act, including 28-7-7-7 payment cascade, prescribed forms for dispute, adjudication provisions and an Adjudication Authority.[1]  Nova Scotia has also recently introduced legislation, which has passed second reading and proceeded to Committee stage.[2]  The Nova Scotia act includes many of the same prompt payment and adjudication provisions of the Ontario, Saskatchewan and Federal acts, however, the timelines will be determined via regulations which are not yet available.[3]

Manitoba is the only remaining province actively pursuing legislative change. In November 2018 the Law Reform Commission produced their final report on modernizing the act, and legislation will likely follow in 2019 or 2020; the fate of Bill 218 remains unclear.[4]

New Brunswick remains in a holding pattern after an election in 2018, and no new Law Reform Notes have been published since May 2018 when stakeholder engagement was ongoing.

Andrew J. O'Brien is Director, Surety Risk, with Travelers Canada and Ted Betts is a partner with Gowling WLG.

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