Reynolds, Vogel discuss ‘striking a balance’

On the heels of two prior failed attempts to achieve Construction Lien Act reform, the spotlight was on Ontario’s construction industry as its executives prepared to discuss the exceedingly complex file with government-appointed review facilitators Bruce Reynolds and Sharon Vogel during the second half of 2014.

There could have been continued dysfunction, as was on display at meetings of Ontario’s standing committee reviewing Bill 69 in the spring of 2014, when after many months of consensus-building by key stakeholders, the process fell apart during two days of discordant hearings.

But this time around, said Reynolds and Vogel in a recent interview, construction stakeholders were seized with good will, recognition of the common interest and a willingness to work hard to find solutions. The results, made public Sept. 26 when Attorney General Yasir Naqvi released the lawyers’ 299-page report titled Striking the Balance: Expert Review of Ontario’s Construction Lien Act, are a credit to the industry, say the co-counsels.

The report, issued after 77 written submissions were digested, 30 stakeholder meetings held and five special advisory group meetings convened, offers a roadmap for modernizing Ontario’s construction lien and holdback rules, introduces rules on prompt payment and creates a new process to resolve disputes. Naqvi said he would be consulting with stakeholders this fall with the intention of introducing legislation next spring.

"We were very impressed by the stakeholder submissions that we received," said Vogel. "They were very well done, and many were very balanced. In our stakeholder consultation meetings we aimed to be transparent and inclusive and I think that the stakeholders approached meetings in the same spirit."

Reynolds and Vogel, construction law experts with Borden Ladner Gervais LLP, were commissioned with their task in February 2015 with an original target date to report by December 2015. Twice the reporting deadline was extended, with the report finally submitted April 30.

Why the delays? First, the co-counsels said, the stakeholders asked for more time to make submissions, especially as more information poured in and further responses were required. Then they described an evolution in the process beginning last fall as a growing role was introduced for an advisory board.

Reynolds and Vogel said originally there was not even such a body proposed. But then renowned former Justice Dennis O’Connor, now a colleague at Borden Ladner Gervais LLP, got involved. He had conducted two public inquiries, Walkerton and Mahar Arar, and had good experiences with an advisory board. And so the creation of an advisory board to be called into action after the stakeholders had been consulted was approved for the lien reform process.

The work of this board, said Reynolds, in effect changed the very nature of the process. Whereas before their work would have been creating recommendations out of often diverging points of view, with the advisory board, it became a process of forging consensus.

"When we convened the advisory group, it proved to be so helpful and productive and important that we were realizing great strides were being made," Reynolds said.

"But it was a lot of hard work, rolling up sleeves, white-boarding, with subgroups separating and bringing the two subgroups back together, so there was really a lot of intellectual heavy lifting that took place within the advisory group."

The meetings were four hours of tough slogging each time, said Vogel.

Before the third meeting, members of the advisory board approached the co-counsels and said that with another meeting or two, important additional progress could be made, said Reynolds. The plan was OK’d by the client, the attorney general, and so the final reporting deadline of April 30 was established.

"Holding those extra meetings proved to be very beneficial and important," said Reynolds.

"By the end of the fifth meeting we had achieved a general consensus in relation to the core issues that we had taken under consideration as a group, as a team."

The wait between April 30 and Sept. 26 was attributed solely to the need for a new minister, Naqvi, sworn in after a cabinet shuffle in June, to digest the file, Reynolds and Vogel said.

"There were no revisions, none," said Vogel, when asked if the attorney general’s office sought changes to the report in that period.

Vogel and Reynolds emphasized that the package of 100 recommended reforms was just that, a package. Recommendations cannot be "cherry-picked" and looked at independently, Vogel said.

For example, where a general contractor has not received payment and thus may not have the funds to pay a subcontractor, the so-called "real-time" adjudication system becomes an integral mechanism towards a solution.

"This remedy is very, very effective at unlocking that payment gridlock at the owner/general contractor level, and then allowing the true value of a setoff to be determined very rapidly, and freeing up the payment stream," said Reynolds.

"If the owner stops paying, the general contractor will not be required to make payments from funds it does not have, down the chain, so long as they are pursuing remedies that are available to them to unlock the payment stream and free up the funds to flow down to the subcontractor level."

Reynolds said the imperative was to strike a balance between freedom of contract and regulation.

"This, in a sense, was the heart of it," he said.

"In regards to promptness of payment, elements of Bill 69 were viewed by a number of other stakeholder groups as a very significant constraint on freedom of contract in the committee meetings around Bill 69.

"So the balance point with regard to prompt payment is a balance point that maintains the ability of the market to agree on payment terms."