Prompt payment legislation has already been implemented in Ontario (2019), Alberta (2022), Nova Scotia (2019), and Saskatchewan (2020). British Columbia will very likely be adopting a similar legislative scheme soon. To prepare for a similar regime being implemented in B.C. stakeholders in the construction industry need to consider two questions:
- How has that legislation been implemented in other provinces?
- When can we expect a similar legislative scheme to be implemented in B.C.?
Prompt payment legislation in Ontario and Alberta
One key takeaway from Ontario and Alberta is that the timelines for the new dispute resolution process are tight. In Alberta, after filing for adjudication, the parties have four days to appoint an arbitrator. If they fail to do so one will be appointed for them. After the adjudicator is appointed, the claimant has five days to deliver its submissions. The respondent must deliver its submissions 12 days later. The adjudicator will make a determination 30 days later. Those timelines will require owners, contractors, and consultants to have legal assistance closely coordinated with the project so they can move quickly to assist.
In Ontario, the adjudicator has broad authority to issue directions the govern the adjudication, conduct on-site inspections, obtain expert reports, and determine the adjudication. Therefore, depending on how complicated each payment dispute is, they could become like short trials, and become disruptive to owners, contractors, and consultants.
In Ontario and Alberta, timelines start to run once a “proper invoice” is issued by a contractor to owners. That means the invoice must be sufficiently broken down on the payment terms for all the work and materials it encompasses. These requirements to comply with the statute may be an added benefit of the prompt payment system is that it will require contractors to submit invoices that comply with the statute if they want to rely on the adjudication process. That should reduce disputes parties often have over invoices not being sufficiently particularized.
Similar to an arbitration, the scope of an appeal for prompt payment disputes is limited to very narrow grounds. Any right to appeal will likely be restricted to clear errors of law or fact made by the adjudicator. That is why it is extremely important for parties to have their project management and legal teams effectively set up to handle these disputes. There will be an even greater need for new construction arbitrators to adjudicate these disputes. In Ontario and Alberta, entirely new “nominating authorities” were created to certify and train adjudicators. They provide a roster and nominate the adjudicator for your dispute.
When is prompt payment legislation coming to B.C.?
On August 11, 2022, the Select Standing Committee on Finance and Government Services recommended to the B.C. Legislature as part of its Report on the Budget 2023 Consultation that the Government of British Columbia “prioritize the enactment of prompt payment legislation that is inclusive of lien reform and adjudication”. The B.C. Construction Association has been active in lobbying our government since Ontario implemented the prompt payment legislation.
Given this recommendation, it is expected B.C. will undertake consultation with the construction industry regarding potential draft legislation in 2023. The only remaining sessions the legislature sits is for part of April and May, then October and November. Therefore, if the legislative assembly does not turn its attention to passing prompt payment legislation by the end of spring, it would be likely addressed in the late fall.
British Columbia will have its version of prompt payment legislation soon, likely by the end of this year. Stakeholders in the construction industry must ready themselves to understand how these changes will impact their contracts and projects. In most other jurisdictions where prompt payment legislation has been enacted, parties do not have the option to contract out of it. These significant changes will drastically alter how business is carried out in our construction industry. Prompt payment legislation will help minimize the disruption of payment disputes from escalating to liens being placed on the property, but they must be handled efficiently to avoid frequent payment disputes disrupting larger projects. Construction industry stakeholders will need to have counsel ready to handle these disputes effectively while minimizing the disruption to the project.