Justice Delayed Is Justice Denied: Alberta's Proposed Prompt Payment Legislation

• Published date: 13 November 2020
• Subject Matter: Real Estate and Construction, Construction & Planning
• Law Firm: McCarthy Tétrault LLP
• Author: The Lay of the Land, Bryan G. West, Jordan Bierkos and Leah Strand

Introduction

The Alberta government is signaling major changes to the construction industry with its proposed prompt payment legislation. Bill 37, the Builders' Lien (Prompt Payment) Amendment Act, 2020¹, passed a second reading on October 28, 2020 and is expected to come into force in July 2021 along with detailed regulations.

Here are some of the significant changes Bill 37 would introduce:

• short timelines (28 days) for paying "proper invoices" (discussed below)
• prohibiting 'pay-when-paid' clauses;
• a new, faster statutory adjudication system for contract disputes;
• longer deadlines to register liens (from 45 to 60 days for most projects);
• increased minimum amount for a lien (from $300 to $700);
• introduction of a progressive release of the statutory holdback;
• improved access to payment information;
• changing the name of the Alberta Builders' Lien Act (the "Act") to the "Prompt Payment and Construction Lien Act".

Background - Why is Bill 37 Needed?

In a press release, the Minister of Service Alberta (Nate Glubish) said the amendments respond to concerns raised by the construction industry about protecting jobs and ensuring everyone in the supply chain is paid on time for their work^.2 Following in the footsteps of other jurisdictions including Ontario, Bill 37 recognizes many practical problems with the current dispute resolution process and introduces changes to move projects forward and keep capital flowing.

The amendments address two major issues:

1. Delay in payment: There is currently no legislative deadline in place for contractors or owners to pay those who provide construction services. The average time for payment has increased to over 70 days in recent years.³ This is compared with payment times of roughly 45 days in other industries.⁴ Currently, the sub-trades, who generally have the smallest revenues and the obligation to incur the capital cost of procuring and supplying the materials, carry the risk of non-payment on most construction projects. A sub-contractor's only bargaining chip is to withhold performance until payment is received, further delaying the project.

2. Delay in resolution of disputes: The current Act contemplates an expedited process for resolving construction disputes. The existing framework removes the presumptive application of the oral discovery rules under Part 5 of the Alberta Rules of Court,⁵ and contains an invocation that claims are to be determined in a summary fashion "so far as is possible".⁶ However despite these existing provisions, they still operate within the confines of the broader court system, which presently require a lien claimant to: i) file a lien, ii) commence an action, iii) receive a Statement of Defence, iv) file affidavit evidence and be cross-examined thereon, v) obtain time before the court, likely in a special chambers application, and vi) have the court determine the matter in a summary fashion. In practice, this means that contested claims are not resolved for months or years, as lien claimants squarely confront two significant...