Prompt payment in the construction industry has been a hot topic in Canada over the last several years. Legislation was first introduced in Ontario in 2019, with several provinces, plus the Federal government, having followed suit by introducing their own similar legislation. It has been rumoured for quite some time that the B.C. government would likewise proceed with its own version of prompt payment legislation but up until now that has not materialized.
However, on October 7, the B.C. government issued a press release stating that it has introduced Bill 20 Construction Prompt Payment Act. Thus far the government has not stated when the legislation will come into force, either in its current form or as may be amended, but it has stated that when it does so, it will be subject to a transition period. It will also only apply to construction contracts or subcontracts entered into after the legislation comes into force.
The proposed legislation is stated to be based on the current Ontario legislation. The main highlights and policies that underly the proposed legislation are that:
- Contractors, subcontractors, suppliers and workers ought to receive “prompt payment” for their work on a construction project and therefore the proposed legislation provides for timely issuance of: (1) “proper” invoices followed by; (2) payment of same within a set period of time. The concept is that funds are meant to flow down the contractual chain from the owner to a contractor, and then to subcontractors, suppliers and workers in a timely fashion and without undue delay; and
- Contractual payment disputes on construction projects tend to be prolonged and time consuming. Therefore, in furtherance of the policy underlying the proposed legislation of attempting to see those in the industry receive payment of their claims in a timely fashion, the proposed legislation provides for an interim adjudication process which is meant to be a streamlined, efficient process for the resolution of narrow payment disputes with the assistance of an adjudicator. That process is to occur while the project is ongoing and can be revisited once the project is over and addressed as part of a larger dispute if necessary and warranted.
As indicated, the proposed legislation is based on the current Ontario legislation which has been in force for a number of years. Last year, the Ontario government commissioned an independent review of their legislation which culminated in a report (the “Ontario Report”) which contained a number of recommendations from industry participants as to how the Ontario regime could be improved. The B.C. government does not appear to have implemented all the recommendations in the Ontario Report as part of its proposed legislation. Whether it will do so before the proposed legislation comes into force remains to be seen.
Additionally, as part of one of the consequential and related amendments contained in Bill 20, it is proposed that B.C. abolish what has become known as the Shimco lien – namely, a lien against the holdback. That separate and distinct remedy contained in the current Builders Lien Act, S. B.C. 1997, c. 45 has caused some confusion and created some difficulties in the industry in the 20+ years since the Shimco decision was released. It has been the subject of at least two law reform reports recommending that particular lien be abolished and was the subject of the recent Court of Appeal decision in WQC which confirmed the existence of such a lien and that Shimco was correctly decided. If the proposed legislation comes into force, the Shimco lien will be no longer be the law in B.C.
Due to the interim adjudication process that is provided for in the proposed legislation, the government will have to establish an adjudicating authority who will be responsible for the administration of adjudications and the selection and training of adjudicators. In Ontario, that authority is called ONDACC (Ontario Dispute Adjudication for Construction Contracts) and at the federal level the entity is called CANDACC (Canadian Dispute Adjudication for Construction Contracts). It may take some additional time for the B.C. adjudication authority to be established so although prompt payment is clearly on its way to B.C., it may be several months before the legislation in its final form is enacted and comes into force.
We will update this blog further when more information becomes available.