Well, it has been on the cards since October 20, 2021, when the Government of Saskatchewan announced The Builders’ Lien (Prompt Payment) Amendment Act, 2019 (the “Act”), but it is finally here – as of March 1, 2022, the Act is in full force and effect.
The following is a brief outline of the new procedures and amendments that are coming into force, being – Prompt Payment and Dispute Interim Adjudication.
PROMPT PAYMENT – PART I.1
Now codified under the new Part I.1 of the Act, the prompt payment provisions provide for some substantive changes to the form and manner of invoicing; the timeframes of payments by owners to contractors; the manner of refuting an invoice; and the timeframes for payments from contractors to subs. As these are substantive changes, consideration should be given to each amendment.
You will likely start to hear this term used more and more frequently. Under the new Act a “Proper invoice” is a specifically defined terms and means a written bill or request for payments and must specifically include the contractor’s name and address; date of the invoice and the period during which the services or materials were supplied; information identifying the contract; description of services or materials provided; amount payable; the name, title, telephone number and mailing address of the person to whom payment is to be sent.
- Owner to Contractor
Once a Proper Invoice has been submitted to an owner, the owner has 28 days to pay the contractor. However, an owner is now permitted to issue a notice of refusal to pay (which has its own prescribed form) within 14 days of receipt. Such a notice may trigger the dispute interim adjudication process, which will be discussed further in this article.
- Contractor to Subcontractor
Once paid by the owner, the contractor has 7 days to pay all of its subcontractors. If the payment received by the contractor from the owner is only for a portion of the amount payable under a Proper Invoice, the contractor shall, no later than seven (7) days after receiving payment, pay each subcontractor who supplied services or materials under a subcontract that were included in the Proper Invoice from the amount paid by the owner. In short, monies received for a Property Invoices relating to subcontractors work completed, has to be paid out to that subcontractor within 7 days.
In the event that the owner does not pay, in full, the amount payable under a Proper Invoice within 28 days, the contractor shall, no later than 35 days after giving the Proper Invoice to the owner, pay to each subcontractor who supplied services or materials under a subcontract that were included in the Proper Invoice the amount payable to the subcontractor.
Where a contractor disputes a subcontractor’s invoice, the contractor may refuse to pay all or any portion of the amount within either seven days after receiving a notice of non-payment from the owner; or if no notice was given by the owner, 35 days after giving the proper invoice to the owner.
Any notice of non-payment received by a contractor must be forwarded to subcontractors without delay.
- Subcontractor to Subsubcontractor
Exactly the same as a contractor, you have 7 days to pay out your obligation to subsubcontractors once paid by the contractor.
QUICK REFERENCE TIMELINE
Days Following Issuance of Proper Invoice by Contractor
|Within 14 days >>>||Owner to issue notice of refusal to pay|
|Within 21 days >>>||Owner has to pay|
|After 35 days >>>|| If Owner has not paid, Contractor must pay Subcontractors whose|
services and materials are noted on the Proper Invoice
|Within 7 days after Owner pays >>>||Contractor has to pay Subcontractor|
|Within 7 days after Contractor pays >>>||Subcontractor has to pay Subsubcontractor|
DISPUTE INTERIM ADJUDICATION
The purpose of the dispute provisions is to allow contracting parties to deal with interim-contractual disputes in a cost effective and time efficient manner. It is important to note that this is an interim dispute mechanism, meaning that once the contract is complete these provisions no longer have effect.
The Saskatchewan Construction Dispute Resolution Office (“SCDRO”), a new not-for-profit corporation, will act as the official adjudication authority, working with the ADR Institute of Saskatchewan Inc. who shall provide adjudicators.
When a party to a contract has a dispute relating to the contract, it may refer the dispute to the SCDRO. Such disputes can be on a multitude of matters including, value of services and material; change order; payments; reasonable costs; failure or refusal to certify substantial performance; or any matter that the parties agree to have adjudicated. However, only one such matter may be adjudicated at any one time, unless the parties agree.
This dispute mechanism is enforceable even if there is an arbitration clause in the contract.
Once the Dispute Interim Adjudication process has been engaged, the parties have later than 5 days after an adjudicator has agreed to adjudicate the matter to provide all documents that the party intends to rely. The exact form of the adjudication remains with the purview of the SCDRO – but it is likely to be a balance between written and oral submission, depending on complexities.
As to timelines, the matter is to be adjudicated within 30 days of document production, which may be extended by a further 14 days.
All fees for the adjudication process are to be split between the parties equally.
Decisions can be appealed to court within 30 days of a determination.
Failure to pay following a determination from the SCDRO permits the contractor/subcontractor to suspend further work under the contract. It further, and most notably, entitles the party to all reasonable costs incurred for resuming the working once payment has been received.
A determination of the adjudicator may also be enforced by the courts as an order, provided that the determination is filed within 2 years of the determination.
So, in a nutshell, those are the new rules and procedures. Obviously, as parties work through this new dynamic, and the courts and operators develop new regulations and law, this will shape the way we look at these matters and ultimately, how your internal policies may need to adapt. But in the interim, feel free to reach out to our office if you have any issues or concerns.
This article is of a general nature only. It is based upon laws and policies in effect as of the date noted above, which may change. It is not intended to be relied upon or taken as legal advice or opinion. You should consult with your lawyer to confirm the current state of the law and obtain advice specific to your situation.