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OSWCA members identify gaps in prompt payment regime

Don Wall
OSWCA members identify gaps in prompt payment regime
DON WALL - Construction lawyer Robert Kennaley hosted a session dealing with prompt payment under Ontario’s Construction Act during the OSWCA conference.

Call them bumps in the road, growing pains, gaps and confusion – it’s clear that more than a few Ontario project owners and contractors are experiencing struggles as they deal with prompt payment provisions in the province’s relatively new Construction Act.

Ontario Sewer and Watermain Construction Association executive director Patrick McManus said recently the OSWCA receives frequent inquiries about the prompt payment and adjudication functions of the legislation even though those provisions came into force Oct. 1, 2019, replacing the Construction Lien Act.

The concerns prompted a call for a session reviewing the provisions at the OSWCA’s recent convention held in Niagara Falls.

Robert Kennaley of Kennaley Construction Law was recruited to address stakeholder complaints in a session billed as Sticking the Landing with Proper Invoices and Adjudications: the Draft Invoice and other Roadblocks to Prompt Payment.

In his presentation he revealed Ontario’s Attorney General Doug Downey is currently considering proposals to deal with the problems, though he said afterwards he could not divulge more details.

The attorney general’s office was asked for confirmation of the review. A statement from the ministry said it is reviewing proposed amendments to the Construction Act submitted by stakeholders.

“There remains confusion, old act mindsets and, in many cases, a lack of knowledge of many of the functions which could be leveraged to get paid and resolve disputes more quickly,” McManus said. 

Kennaley focused his seminar on ways owners are establishing conditions for contractors to give a proper invoice for the purposes of the Construction Act. Once a proper invoice is submitted, there is 14-day window in which the owner must give the contractor a notice of non-payment, after which it becomes obligated to pay the contractor on the 28th day.


A Wild West regime

Often, Kennaley said, the owner finds itself in a position of trying to buy extra time before the end of that 14-day period simply because it has not been able to complete the due diligence required.

It’s “a bit of the Wild, Wild West” when it comes to the new prompt payment and adjudication regime, Kennaley said.

“Owners, consultants and contractors are all trying to do their best to deal with that 14-day window,” he said. “Their goal is to put the owner in the best possible position to evaluate the proper invoice and decide whether or not they need to give a notice of non-payment. 

“Some try to develop mechanisms that perhaps will fit all circumstances, but that can be difficult to do.”

At times, without necessarily intending to, Kennaley said, the owners go too far in terms of their expectations for documentary backup, disclosure or what they term a “draft invoice.”

“In our view, the owners or their consultants are not looking to take advantage,” he said. “They are simply trying to come up with processes that will work for everyone and which ensures that owners have enough information to make the call on the proper invoice within the 14 days.” 


A process that works for both sides

Other strategies owners are using include asking to do site visits or requesting extensive backup documentation, said Kennaley.

“It’s an ongoing effort in which hopefully everyone is trying to come up with processes that will work for both sides,” he said.

Contractors for their part are learning to step up their game to start the clock ticking because they want to get paid, Kennaley said. 

“This means they have to meet the requirements for a proper invoice under the act and not miss a comma,” he said. “They don’t want, for example, to leave a name out and leave the clock unticked simply because they failed to tick a really easily ‘tickable’ box.”

Kennaley said despite the “gaps and confusion in the legislation,” the new regime with its flaws is certainly better than the alternative.

“The alternative is, waiting five to seven years to get paid or get a dispute resolved because they are dragged into the Ontario Superior Court in a legal litigation process,” said Kennaley.

“The attorney general is in process of addressing some of these (issues). There are and will be growing pains.” 

McManus said the OSWCA has been working through the Construction and Design Alliance of Ontario to provide recommendations for amendments to the Construction Act to the government.

Follow the author on Twitter @DonWall_DCN.

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