Prompt Payment legislation is intended to keep cash flowing down the construction pyramid from the owner to the contractor and its subcontractors and suppliers. So far, no province has enacted prompt payment legislation. An attempt was made in Ontario a couple of years ago to enact standalone legislation, an attempt which may reap its rewards if prompt payment provisions are included in Ontario’s amendments to its Construction Lien Act, as recommended in the April 2016 report titled “Striking the Balance: Expert Review of Ontario’s Construction Lien Act”.
At the Federal level, Bill S 224, Canada Prompt Payment Act was introduced in 2016. Although it is not yet law, it is making its way through the process, and passed second reading in the Senate on November 28, 2016.
The fate of Bill S-224 remains to be determined, but some of the highlights of Bill S 224 include:
- Application: to construction contracts with federal government institutions.
- Payment: minimum monthly payments by the government institution, and payment by the contractor within 30 days of the later of the last payment period or receipt of a payment application.
- Milestone Payments: are permitted but the prime contract must have milestone payments before the subcontract may have them. Payment is then due based on the achievement of the milestone or the certificate for payment for the milestone by the payment certifier.
- Deemed Approval: a payment application is deemed approved if there is no written notice of dispute within 10 days of the payment application. A notice of dispute must set out the reason and amount of payment in dispute, and only that amount may be withheld from payment.
- The Teeth:
- Suspension and Termination: failure to pay gives the payee the right to suspend or terminate the contract, but 7 days’ notice must be provided. If the payee is the contractor, they may suspend payment to their subcontractors, if the payee is a subcontractor it too may suspend payment to its subcontractors.
- Interest: a payer is required to pay interest on any amount due either at the rate provided in the contractor a rate prescribed by regulation is there is none in the contract.
- Dispute Resolution: anyone may refer a dispute to adjudication by providing notice identifying the matter in dispute, the relief sought and propose a time table for the process.
- Right to Information: the payee may give notice to a payer requesting disclosure of dates for the payments under the contract, when the contactor is the payer, it must provide notice upon receiving payment of the date and amount of payment received that relates to the work performed by the payee. If the payer does not provide the information or misstates the information it is liable for resulting damages.
- No Waiver: no one can contract out of the rights, obligations or remedies under the Act.