Manitoba recently introduced Bill 38, The Builders’ Lien Amendment Act (Prompt Payment). If passed, Bill 38 would bring Manitoba in line with Ontario, Alberta and Saskatchewan, which have enacted similar legislation for their construction industries.
The Manitoba approach largely mirrors that taken in other provinces. At its heart, Bill 38 introduces two new systems into The Builders’ Liens Act:
- A “prompt payment” system which stipulates the time in which invoices must be paid on construction projects
- An “adjudication” system which functions as a fast-track process for dispute resolution
If implemented, these changes will require project owners, developers, contractors and subcontractors to adjust their processes and contracts to comply with the new legislation. Changed approaches to project dispute resolution may also be necessary to reflect both the opportunities and requirements of the new adjudication system.
The prompt payment system: Timelines to be aware of
As proposed, the prompt payment regime will mandate payment by owners to contractors within 28 days of receiving a monthly “proper invoice” from contractors, which by default is to be given monthly, or such longer period as defined in the contract.
Once contractors receive payment, they will have seven days to pay their subcontractors and each further subcontractor will have seven days to pay its contractors. Subcontractors may request to be notified of the date the proper invoice was given, allowing them to calculate their expected payment date.
Owners can dispute a proper monthly invoice within 14 days of receiving it by providing a notice of nonpayment to the contractor, who must then provide notifications to affected subcontractors within seven days.
If the owner fails to provide notice in the proper timeframe, it will be liable to pay within the above timeframes. Similarly, if the contractors’ notice is not provided to affected subcontractors within the required time, the contractor remains liable to pay its subcontractors in full within 35 days.
The requirements of a “proper invoice” are defined in legislation and subject to additional requirements added by contract. However, the legislation specifies that these contractual requirements have limits: The contract cannot require certification of a payment certifier or the owner’s approval prior to giving the proper invoice.
The adjudication system: A fast-track process for disputes
Under the proposed prompt payment scheme, adjudication is available to resolve prompt payment disputes as well as a range of other construction disputes. Once a dispute arises, the contractor or subcontractor can unilaterally initiate adjudication, a fast-track process to have disputes decided within short timeframes (typically 30-45 days).
Adjudication decisions are considered “interim and binding” and must be paid within 10 days (with limited rights of judicial review for matters such as bias or fraud). However, even after the adjudication award is paid, decisions can be overturned in a later court or arbitration decision.
To date, the only groups exempt from the application of prompt payment and adjudication in Manitoba are architects and engineers. This differs from other provinces which have limited additional exemptions for specific industries: nuclear (Ontario), mining (Saskatchewan), power utility construction (Saskatchewan) and public works (Alberta).
To accommodate the requirements of these two new systems, Bill 38 extends the lien registration timeline from the current 40-day period to a 60-day period.
Key factors are currently unknown
A few key factors that remain unknown in the legislation are if and when the Manitoba legislature will pass it, and what, if any, the implementation and transitional periods will be (to date, this has differed from province to province).
Our construction and infrastructure team at MLT Aikins has helped clients in Ontario, Saskatchewan and Alberta comply with new prompt payment and adjudication related legislation. If you are a project owner, developer, contractor or subcontractor and want to understand how the new legislation will affect you, please contact one of the authors.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.