The Power of Perspectives

The Canadian Bar Association

Kim Covert

Past due: More time, consultation needed for prompt payment legislation

November 28 2017 28 November 2017

In a perfect world, no one would need a law to make them pay their bills on time.

In an imperfect world where such a law is apparently necessary, it’s best if that law is founded in extensive consultations with those it affects and doesn’t create more problems than it solves.

For example, the province of Ontario’s recent Expert Review of the Construction Liens Act (Reynolds and Vogel report) was the result of 14 months of consultations with experienced professionals representing a cross-section of the construction industry. The report and its recommendations formed the basis of a bill that will create a prompt payment regime in the province.

The Senate, on the other hand, did not spend anywhere near that amount of time consulting with industry before it passed Bill S-224, the Canada Prompt Payment Act. It also failed to review and revise the bill following the publication of the Reynolds and Vogel report, says the CBA Construction and Infrastructure Law Section in a letter to the Minister of Public Services and Procurement.

“The federal government should follow Ontario’s example and introduce an extensive consultation process before bringing forward similar legislation,” the Section says. “It would be appropriate to review Bill S-224 in light of the considerable work undertaken in Ontario, the conclusions of which would be equally applicable in the federal context.”

Problems with the bill as it is include possible unintended consequences caused by a mandatory adjudication process, which fails to address issues such as the qualifications and powers of the adjudicator, the types of evidence the adjudicator is allowed to hear, how fees are established, and whether adjudication can address multiple issues.

“Perhaps most significantly, Mr. Reynolds and Ms. Vogel testified at the Senate Committee hearing on Bill S-224 on the importance of the government establishing (and funding) an ‘Authorized Nominating Authority’ for the success of an adjudication system, but no authority is contemplated by Bill S-224. Setting up an adjudication system requires active engagement, commitment and funding from the Department charged with its administration.”

The Section also notes that any payment regime must “strike a balance between regulation and freedom of contract.” Bill S-224 is very prescriptive and allows parties limited flexibility to make arrangements appropriate to the particular project, the Section states.

“The CBA Section applauds efforts to consider prompt payment in the construction industry,” the Section says. “However, Bill S-224 raises a number of implications in its current form. Prompt payment legislation will have significant and direct impacts on commercial arrangements throughout the country and any proposed legislation should reflect broad stakeholder feedback and strike a balance between regulation and freedom of contract. Bill S-224 falls short on both of these targets.”

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