This article is an update to our previous post from June 15, 2021, in which we discussed some important upcoming legislative changes due to the introduction of the new Payment and Construction Lien Act (“the PPCLA”), which will replace the current Builders’ Lien Act.
On February 25, 2022, the Lieutenant Governor in Council officially proclaimed that the PPCLA will come into force on August 29, 2022.
Also on February 25, 2022, the Lieutenant Governor in Council released the much-anticipated regulations under the PPCLA. These regulations consist of the Prompt Payment and Adjudication Regulation and the Prompt Payment and Construction Lien Forms Regulation (collectively, the “Regulations”)
Below is a summary of some of the key aspects of the new Regulations:
We previously reported that the PPCLA introduces an extended lien period of 90 days for contracts related to the supply of work or services in relation to concrete. The Regulations clarify that this 90-day lien period does not apply to entities that install or use “ready-mix concrete”.
We previously reported that, for projects with a completion schedule longer than one year, an owner may be required to release part of the 10% statutory holdback amount on an annual basis. The Regulations clarify that the requirement for a phased release of the statutory holdback will only be mandatory if the price of the contract exceeds $10,000,000. However, parties are still free to specify a phased payment for the statutory holdback in their contracts, even if the contract price is lower than $10,000,000.
As expected, the new Regulations include specific forms for the Notices of Dispute and Notices of Non-payment that must be issued pursuant to the prompt payment scheme under the PPCLA. The new forms consist of the following:
The above forms must be delivered to the relevant party at their regular place of business (unless specified otherwise in a contract).
A Contractor or Subcontractor issuing a Notice of Non-Payment (Form 2 or Form 4, as applicable) must undertake to refer the matter to adjudication within 21 days of issuing that notice.
Prior to the release of these Regulations, the exact mechanisms for the adjudication process under the PPCLA were still largely unknown. These new Regulations detail how the adjudication procedure will be set up and administered.
The Regulations specify that the Minister will appoint a number of “Nominating Authorities” to administer the adjudication process. Those Nominating Authorities will be authorized certify qualified individuals to act as Adjudicators under the PPCLA. The Nominating Authorities will maintain a publicly accessible database of certified and qualified Adjudicators.
Adjudicators are required to have at least 10 years of relevant work experience in areas such as dispute resolution, contract law, or other similar experience. A Nominating Authority should also ensure that its Adjudicators have experience relevant to the industry sectors being referred to adjudication. Adjudicators must also complete training programs, comply with a code of conduct, and pay required fees, as established by the Nominating Authority.
The Nominating Authority must publish a schedule of fees and costs related to adjudication. The Regulations clarify that the costs of adjudication are to be split equally by the parties to the adjudication, unless the Adjudicator directs otherwise.
As expected, an Adjudicator’s jurisdiction will be limited mostly to payment disputes. More specifically, the Regulations restrict the Adjudicator’s jurisdiction to:
A party referring a matter to adjudication must issue a “Notice of Adjudication”. There is no prescribed form for a notice of Adjudication, but it must include
The party initiating an adjudication must provide a copy of the Notice of Adjudication to all parties in the dispute and to the applicable Nominating Authority. All notices and other documents related to the adjudication are to be sent electronically, unless the Adjudicator directs otherwise.
Upon receiving the Notice of Adjudication, the Nominating Authority has 7 days to appoint an Adjudicator and provide all parties to the dispute with the Adjudicator’s contact information.
Once an Adjudicator is appointed, the party initiating the adjudication has 5 days to provide the Adjudicator and all other parties with copies of the relevant contract and any other documents that it wishes to rely upon.
Upon receiving the documents from the party initiating the adjudication, the responding parties have 12 days to provide a response to the Adjudicator and to the other parties.
Upon receiving the documents from the party initiating the adjudication, the Adjudicator has 30 days to make a determination of the matter. The Adjudicator may extend the deadline a maximum of 10 days if the Adjudicator considers it necessary or if requested by the parties.
In conducting an adjudication, Adjudicators have the power to issue directions to the parties, obtain information through independent research, conduct on-site inspections, and obtain assistance from construction industry professionals. Adjudicators may also consolidate multiple adjudications involving one or more of the same parties if the Adjudicator considers it appropriate.
When making a determination, Adjudicators have the authority to issue orders:
Copies of the Adjudicator’s order must be certified by the Nominating Authority and circulated to all parties within 7 days of the Adjudicator making a determination.
An adjudicator’s determination can be set aside upon a party applying for judicial review of the Adjudicator’s determination. The Regulations set out valid grounds for judicial review, including, for example, if the Adjudicator exceeded his or her authority, or if there was sufficient evidence of bias on the part of the Adjudicator.
In addition to the potential for judicial review, the Regulations confirm that an Adjudicator’s decision will not restrict any party’s ability to commence a Court action to consider the merits of any matter determined by an Adjudicator, provided such an action is commenced within 2 years from the date that the Notice of Adjudication was sent.
If you are an owner, contractor, sub-contractor, or supplier in the construction industry, these legislative changes will impact you.
The PPCLA and the Regulations will come into force on August 29, 2022. Any contracts entered into on or after that date will be governed by the PPCLA and the Regulations. We recommend having a lawyer review any contracts to ensure that they comply with the PPCLA and Regulations. We also suggest having a lawyer review your invoices to confirm that they meet the requirements for a “proper invoice” under the PPCLA.
When performing under any contracts entered into after August 29, 2022, you should be aware of the required timelines for payments, as well as the applicable forms and timelines for notifying parties of a disputed invoice or non-payment from an owner or contractor. You should also be aware of the requirements and timelines for initiating or responding to an adjudication under the PPCLA and Regulations. We recommend contacting a lawyer for advice with preparing or reviewing those forms and notices, and for assistance with navigating the adjudication process.
We at Bishop & McKenzie LLP have a capable team that would be happy to assist you with these matters, and with answering any other questions that you may have with respect to these upcoming changes.
Graham W. Sanson