Bill 62: Welcome Guidance and Further Amendments to Alberta’s Prompt Payment and Construction Lien Act

Introduction

Bill 62, Red Tape Reduction Implementation Act, 2021 (“Bill 62”),[1] recently passed its first reading in the Legislative Assembly of Alberta on April 8, 2021. Through Bill 62, the Government of Alberta has provided some much needed guidance to the construction industry on Alberta’s new prompt payment and adjudication processes and how they will operate in practice. As summarized in our previous update, the Government of Alberta introduced major changes to the construction industry in Bill 37, the Builders’ Lien (Prompt Payment) Amendment Act, 2020 (“Bill 37”).[2]  Bill 37 will amend the Builders’ Lien Act to become the Prompt Payment and Construction Lien Act (the “PPCLA”) when it comes into force on July 1, 2021.

Bill 37 was and is largely silent on how the adjudication process will operate in practice, with much of the detail being left to the still unpublished Regulations. However, while most of the key changes summarized in our previous update remain unchanged, Bill 62 introduces several important amendments to the application of the PPCLA and to the adjudication process, which are outlined below. Most importantly, Bill 62 has:

  1.  Clarified the scope of projects and services that will be subject to the PPCLA;
  2.  Allowed for certificates of substantial performance to be posted electronically; and
  3.  Revised the adjudication model in the PPCLA by:
    1.  Adding circumstances in which a party will not be able to commence an adjudication; and
    2.  Providing several exceptions to the final and binding characteristic of adjudication.

Application of the PPCLA

Bill 62 provides some clarity regarding what projects and professionals the PPCLA does and does not apply to. In short, Bill 62 will amend the PPCLA to allow the Regulations to prescribe classes of professionals “acting in a consultative capacity” that will be subject to the provisions in the PPCLA. Conversely, Bill 62 confirms that the PPCLA does not apply to:

  1.  public works (as defined in the Public Works Act);
  2.  agreements to finance and undertake an improvement in which either the Crown, or a provincial corporation (as defined in the Financial Administration Act) that is an agent of the Crown, is a party; and
  3.  any other agreements, entities, undertakings or works as may be prescribed by the Regulations.

While most of these areas have already been established under the case law that has developed under the existing Builders’ Lien Act, providing such explicit clarity in the PPCLA itself should be of assistance to parties in the construction industry who will have to grapple with the immediate prompt payment provisions set to come into force on July 1, 2021.

Certificates of Substantial Performance

Further bringing the PPCLA into the 21st century, Bill 62 allows for the provision of an electronic copy of the certificate of substantial performance called for by section 20 of the PPCLA

Adjudication

Additional Bars to Adjudication

Adding to the statutory bars to adjudication already set out in the PPCLA,[3] Bill 62 adds two more disqualifying circumstances where a party cannot refer a dispute to adjudication. These are where either: i) one party has already commenced an Action in Court; or ii) if the contract or subcontract has been completed, unless both parties consent.[4] 

Such clarification that adjudication is only available for disputes while the contract is in progress highlights the fact that the adjudication system is intended to keep projects progressing, and for resolving disputes quickly, so the parties can get back to work. Where the contract work is completed, the need for such an expedited dispute resolution process is arguably diminished.

An interesting development to watch for will be where nominating authorities and Courts start to draw the line regarding whether a contract has been completed, and whether contracts will be considered to be complete where there are alleged deficiencies in the work or whether the contractor’s warranty obligations are still intact, and whether it will matter if the claim relates to alleged deficient work versus a warranty claim.

Further, the creation of a bar to adjudication where an Action has been commenced creates an incentive for parties to race to initiate proceedings in their venue of choice. Under Bill 62, the tie goes to the party who has commenced an Action;[5] this ability to circumvent the adjudication regime in the PPCLA is curious, particularly when considering the specific carve-outs to the binding nature of adjudications that Bill 62 has introduced.

Exceptions to the Binding Nature of Adjudications

The PPCLA, as presently formulated, sets out an adjudication system that is final and binding. Parties can challenge an adjudicator’s decision through Judicial Review, but the mere filing of a Judicial Review Application would not Stay the effectiveness of the adjudicator’s decision. This “made in Alberta” model departed markedly from other jurisdictions which have a “pay now, argue later”[6] system of interim binding adjudication, where adjudicated decisions could ultimately be challenged in Court but were binding on the parties until any such Court Order or arbitral Award was issued. 

Bill 62 now provides that an adjudicator’s Order will be binding except for where:

  1.  a Court Order is made in respect of the dispute;
  2.  a party applies for Judicial Review of the determination;
  3.  the parties enter into a written agreement to appoint an arbitrator under the Arbitration Act; or
  4.  the parties enter into a written agreement that resolves the dispute.

Where these exceptions do not apply a party can apply to the Clerk of the Court, where the adjudicator’s Order can be registered as an Order of the Court, and commence enforcement steps accordingly.

Bill 62 also provides statutory limitation periods of:

  1.  2 years to register an adjudicator’s Order from the date of the Order or final determination of the Judicial Review; and
  2.  30 days to file and serve an Originating Application for Judicial Review from the date of the notice of determination.

Bill 62 also proposes to remove the previously listed grounds for Judicial Review that were set out in Bill 37.

Parties seeking to enforce an adjudicator’s Order must also serve written notice on the other party within 10 days of the clerk registering the Order. If an Order requires an amount to be paid to a contractor or subcontractor, any related requirement of the contractor or subcontractor to pay a subcontractor will be deferred pending the outcome of the enforcement of the Order. 

Conclusion

While Bill 62 provides some much required clarity and refinement to the PPCLA, some of the proposed revisions to the adjudication regime appear to substantially weaken the “pay now, argue later” ethos that typifies most statutory adjudication regimes.

The PPCLA will usher in major changes to Alberta’s construction industry. Despite the further clarity provided by Bill 62, many questions still await clarification through the still unpublished Regulations. With proclamation of the PPCLA fast approaching, it is incredibly important to have competent counsel with a deep understanding of construction law and the capacity to move quickly to present or respond to disputes under the new regime competently and effectively. The lawyers at McCarthy Tétrault have extensive experience in the construction industry and can help you navigate this complex legislative scheme.

We will continue to monitor the progress of the PPCLA and Bill 62 and will provide further updates as they become available.

 

 

[1] Bill 62, Red Tape Reduction Implementation Act, 2021, 2nd Sess, 30th Leg, Alberta, 2020 (first reading of the Legislative Assembly of Alberta 8 April 2021) (“Bill 62”).

[2] Bill 37, the Builders’ Lien (Prompt Payment) Amendment Act, 2020, 2nd Sess, 30th Leg, Alberta, 2020 (as passed by the Legislative Assembly of Alberta 9 December 2020) (“Bill 37”).

[3] Section 33.4 of the PPCLA provides that a “party to a contract or subcontract may refer to adjudication a dispute with the other party to the contract or subcontract”. Further, section 33.6 sets out the circumstances where a dispute cannot be adjudicated, which are: “if the adjudicator does not have the jurisdiction to hear the matter or where, in the opinion of the adjudicator, the court is the more appropriate forum for hearing the matter”; or “if, in the opinion of the adjudicator, the dispute is frivolous or vexatious.”

[4] Section 2(4), Bill 62.

[5] Section 2(4), Bill 62.

[6] See, for instance the recent amendments made to Ontario’s Construction Act, RSO 1990, c C-30.

Bill 37 Builders’ lien act Prompt Payment Adjudication Bill 62

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