Beginning in 2019, several Canadian jurisdictions have enacted prompt payment and adjudication legislation designed to reduce payment delays to contractors and subcontractors. Legislation proposed or enacted across Canada includes strict deadlines for the adjudication of disputes to reduce payment delays to contractors and the subsequent chain of subcontractors involved in construction projects large and small.
Recent legislative changes
Amendments to the Province of Ontario's Construction Act came into force on October 1, 2019, requiring an owner to pay a properly issued invoice within 28 days or dispute the invoice within 14 days providing reasons for non-payment. In turn, contractors are required to pay their subcontractors within 7 days of when a contractor receives payment from an owner or dispute a subcontractor's invoice within 7 days. Amendments to the Construction Act also introduced a dispute resolution regime designed to ensure swift resolution of disputes by independent adjudicators. Any party to a construction contract may refer a dispute over payment or the proper valuation of services to a dispute adjudicator. The dispute adjudication process is intended to move quickly and lead to the resolution of payment and valuation disputes much quicker than using traditional Court processes.
The Province of Alberta introduced its own Prompt Payment and Construction Lien Act in 2022 featuring many similarities to Ontario's Construction Act. Owners are similarly required to issue payment within 28 days of receiving a proper invoice from a contractor or dispute the invoice within 14 days. A contractor also has 7 days within which to pay a subcontractor after the contractor is paid by the owner. However, the Alberta legislation requires that all subcontractors be paid in full within 7 days even if the owner fails to pay the contractor in full, unless the contractor undertakes to refer the payment dispute to Alberta's dispute adjudication process within 21 days. The dispute adjudication process operates similarly to that in Ontario, with the process moving quickly with strict deadlines.
Since the introduction of prompt payment and dispute adjudication legislation in Ontario, the remaining Provinces across Canada have considered or enacted similar legislation. The most notable Province that has not enacted similar legislation is British Columbia. Prompt payment legislation was proposed in British Columbia as early as 2019 but failed to achieve the legislative support necessary to come into force. Prompt payment legislation remains elusive in British Columbia.
The majority of the remaining Provinces of Canada have enacted at least some form of similar legislation to that in force in Ontario and Alberta. Despite some legislative differences, there is a clear trend across Canada toward out-of-court adjudication of valuation and payment disputes involving owners, contractors and subcontractors.
Takeaways
Although prompt payment legislation provides many benefits, it also imposes strict timelines on parties seeking payment for services performed or involved in payment or valuation disputes. Owners, contractors and subcontractors ought to be aware of their rights and potential remedies when pursuing or disputing the valuation and payment of services provided in construction projects across Canada.
For further information contact Gordon Becher – Whitelaw Twining
