Important changes are coming to the law governing construction projects in Ontario, the Construction Act. Starting Oct. 1, 2019, construction projects in Ontario will be subject to new prompt payment obligations as well as a new interim adjudication process.
Prompt payment obligations
The new prompt payment obligations will compel parties to a construction project to invoice and pay funds owing for the project in a timely manner. This will ensure that suppliers, workers and subcontractors are paid on time.
As part of these new changes, a contractor to a construction project will now have to provide a proper invoice to the owner. A proper invoice will need to include specific information, including:
The contractor’s name and address, the date of the invoice and of the services supplied;
A reference to the contract or other document under which the services are provided;
A description of the services and materials supplied;
The amounts payable and payment terms as well as payment details.
A proper invoice will have to be provided on a monthly basis, unless the contract agreed by the parties provides otherwise. Once a proper invoice is received, the owner must pay the invoice within 28 days, unless the owner wishes to dispute the invoice. Notice must be provided within 14 days after receiving the invoice if the owner wants to dispute it (in part or in whole).
Once the contractor receives payment from the owner further to a proper invoice, the contractor will have to pay its subcontractors and suppliers within seven days (if the invoice was paid in full by the owner). A contractor may provide a notice of non-payment to a subcontractor in the event of a dispute as well. Contractors and subcontractors will be able to charge interest on late payments.
Interim adjudication process
In the event of a dispute, the Construction Act will now include an interim adjudication process. Under this new process, qualified adjudicators will promptly determine disputes arising during the course of a project. These could include disputes related to the valuation of services, a payment under the contract (or the refusal to make a payment), charges or other amounts retained by a party. Parties can agree on a procedure related to this adjudication process, so long as it complies with the requirements of the law and its regulations.
The Construction Act and its new regulations will define how these interim adjudications will be conducted. Any party will be able to provide notice of its intention to refer a dispute to interim adjudication. Adjudications will only be conducted by approved adjudicators. Adjudicators will be named by an authorized nominating authority (being ADR Chambers). The process will be streamlined. Parties will have to exchange documents and information quickly. The adjudicator will be able to take a hands-on approach in the process, which could even include an on-site inspection of the construction project. Decisions will have to be rendered within approximately 35 days after the appointment of the adjudicator.
A determination by an adjudicator under this new interim adjudication process will be binding on the parties until a determination of the matter by a court (or by an arbitrator), or until there is a written agreement between the parties regarding the matter. An interim decision under this process will therefore not prevent the parties from seeking a final determination before a court or an arbitrator later. However, the determination and reasons of an adjudicator will be admissible as evidence.
The new interim adjudication process should nevertheless provide parties to a construction project a more efficient manner to resolve disputes during the course of a construction project.
Both the prompt payment obligations as well as the interim adjudication process will only be applicable to new construction projects in Ontario starting Oct. 1, 2019.
Stefan Kimpton is an associate with the Fasken Ottawa office where he practises as part of the Labour, Employment & Human Rights (LEHR) and Litigation groups. He advises private and public sector employers on labour and employment law, commercial and construction litigation and education law. Stefan can be reached at email@example.com.