Bill No. 152 An Act to amend The Builders’ Lien Act (the Bill) was brought forward by the Saskatchewan government on November 20, 2018. The Bill is expected to get a 2nd reading soon and should be finalized in the legislature during the spring 2019 session. Development of a regulatory framework will follow, though nothing has yet been made public. It is possible this legislation could be in force by January 2020, but it remains subject to change as the Bill is not yet law. However, it is important for those working on projects in Saskatchewan to understand the currently proposed changes.
Broadly speaking, the Bill proposes:
- a defined payment cycle;
- an adjudication system for resolving disputes;
- the right to suspend work after adjudication, determination and non-payment; and
- interest on any overdue payments.
These changes are in line with legislative changes in Canada’s largest construction market, the province of Ontario in December 2017.
Defined payment cycle
A “proper invoice” must be submitted by the contractor to the owner monthly unless the contract provides otherwise. “Proper invoice” and the process for “giving of proper invoices” are defined in the Bill. Of note for those familiar with CCDC standard form construction contracts and the important role of the “payment certifier” in CCDCs, the Bill provides that a provision in a contract (such as the CCDCs) that makes the giving of a “proper invoice” conditional on the prior certification of a payment certifier or on the owner’s prior approval is of no force or effect. Therefore, additional amendments to the CCDC in the Supplementary Conditions will be required when using CCDCs in Saskatchewan to comply with the Bill.
The new Bill defines numerous deadlines under the prompt payment process. Such deadlines are something that all parties – owners, contractors, and subcontractors – should be intimately aware of so deadlines are not missed. For example, an owner has 28 days to pay the “proper invoice” received in accordance with the Bill. An owner may refuse to pay all or a portion of the proper invoice no later than 14 days after receipt of the proper invoice. After the owner pays the contractor, the contractor must, within 7 days, pay all subcontractors and suppliers. These are only three examples of the numerous deadlines.
The most important change for projects in the Bill is the introduction of the adjudication system. A party to a contract can refer valuation, payments, change order, costs, certification issues and other matters to the adjudicator for determination. A party to a contract or a subcontract may refer a matter to adjudication even if the matter is the subject of a court action or of an arbitration pursuant to The Arbitration Act, 1992 (Saskatchewan).
To address concerns that the adjudication system may be misused, if an adjudicator determines that a party to the adjudication has acted in a manner that is frivolous, vexatious, an abuse of process or other than in good faith, the adjudicator may provide that the party be required to pay some or all of the other party’s costs, any part of the fees that would otherwise be payable by the other party, or both. Therefore, ample consideration should be given prior to proceeding to adjudication for a particular project.
Right to suspend work after adjudication, determination and non-payment
After the adjudication process is complete and a determination is made, if an amount deemed payable is not paid, only then can a contractor or subcontractor suspend work. A contractor or subcontractor does not have a de facto right to simply send an invoice and then suspend work for failure to pay. However, if a contractor or subcontractor follows the process correctly and does suspend work in accordance with the Bill, then the contractor or subcontractor is entitled to reasonable costs incurred.
Interest on late payments
Interest begins to accrue on an amount that is not paid when it is due to be paid at the pre-judgment interest rate in effect pursuant to The Pre-judgment Interest Act; or, if the contract or subcontract specifies a different interest rate for the purpose, at the greater of the pre-judgment interest rate and the interest rate specified in the contract or subcontract. Interest also accrues on amounts deemed payable by the adjudicator in a similar fashion.
We will continue to follow these important changes to construction projects in Saskatchewan as the Bill evolves and regulations are introduced. As always, talk to your lawyer about these changes and how they may affect your current or future projects as this article is just a general overview of the proposed changes.