Please pay ASAP – Saskatchewan’s prompt payment legislation will be in force in March 2022

Introduction

The Government of Saskatchewan has announced that the Builders’ Lien (Prompt Payment) Amendment Act, 2019 (the “Act”) will be proclaimed into force on March 1, 2022. The Act received Royal Assent in 2019 but was not immediately proclaimed in force due to logistical and administrative preparations that had to be set in place.[i] The Act is accompanied by a set of regulations, The Builders’ Lien Amendment Regulations (the “Regulations”), that offer detail and elaboration to many of the new provisions. The legislation has two main purposes:

1. Ensuring the prompt payment of contractors and subcontractors; and
2. Establishing an efficient adjudicative process to resolve disputes between owners, contractors, and subcontractors.

Key Features – Prompt Payment and Invoices

The Act requires that owners pay contractors within 28 days of receiving a “proper invoice.”[ii] It also requires that contractors pay their subcontractors who supplied services or materials that were included in the “proper invoice” within 7 days of receiving payment from the owner.[iii] The same 7-day deadline applies to payment of subcontractors by subcontractors.[iv] A “proper invoice” is an invoice that satisfies certain conditions outlined in s. 5.1 of the Act and must be rendered to the owner on a monthly basis unless the contract states otherwise.[v]

If a payor disputes an invoice, they may refuse to pay all or a portion of the amount payable under the “proper invoice.” The payor must, however, give written “notice of non-payment” to the payee no later than 14 days after receiving the “proper invoice” and must “[specify] the amount of the proper invoice that is not being paid and [detail] all of the reasons for non-payment.”[vi] The dispute may then be resolved through “adjudication.” Any undisputed amount is to be paid within the 28 day period.

If a contractor or subcontractor does not receive payment from the level above, they must still pay their subcontractor(s) within defined deadlines,[vii] unless they undertake to refer the matter to adjudication within 21 days, after giving the Notice of Non-Payment to the subcontractor(s).[viii]

Key Features – Exemptions

The Regulations exempt the following professionals from the prompt payment and adjudication regime:

1. Persons supplying services or materials in relation to a mine or mineral resource (other than oil and gas);
2. architects, engineers, and land surveyors; and
3. Persons supplying services or materials in respect to an improvement related to infrastructure for the generation and distribution of electrical energy by SaskPower.[ix]

Key Features – Adjudication

The Act establishes an adjudicative body and procedure to resolve certain disputes between owners, contractors, and subcontractors. This avenue is intended to offer an efficient and cost-effective means for dispute resolution.

The adjudicative regime is to be administered by the “Adjudication Authority” (also referred to as the “Authority”) which is to be designated by the Ministry of Justice. The Saskatchewan Construction Dispute Resolution Office (SCDRO) has been designated as the Adjudication Authority. To serve as an adjudicator, the Regulations require that an individual must have 10 years of relevant experience in the construction industry and must have completed a training program specified in s. 5.43 of the Regulations, in addition to other conditions.[x]

The disputes that are covered by this regime include: valuation of services or materials, payment disputes, disputes about the failure or refusal to issue a certificate of substantial performance and anything else the parties agree to address.[xi] Parties may set their own adjudication procedure in the contract or subcontract, so long as the procedures comply with the requirements of the Act. If the parties did not agree to a procedure, or the procedure to which they agreed does not meet the requirements of the Act, then the procedure set in the Act and Regulations will apply.

The adjudication process includes five steps:

1. The Notice of Adjudication is served.[xii]
2. An adjudicator is appointed, either by consent of the parties or by the Authority.[xiii]
3. Within 5 days after the appointment of the adjudicator, the moving party must provide to the adjudicator and the other party a copy of the notice, contract or subcontract, and any other documents they wish to rely on during the adjudication.[xiv]
4. Within the following 5 days, the responding party may serve the adjudicator and the moving party with a written response and any documents they wish to rely on.[xv]
5. The deadline for the adjudicator’s determination is 30 days after receiving the moving party’s documents,[xvi] although this deadline may be extended.[xvii] The determination must be delivered in writing and, if filed in court, is enforced like a court order.[xviii]
6. Each party to an adjudication is bear its own costs unless the adjudicator orders otherwise.[xix]

An application to the Court to set aside the adjudicator’s determination may be made within 30 days of the determination[xx], and can be made on various grounds enumerated in the Act. Those grounds include a reasonable apprehension of bias on the part of the adjudicator, the contract or subcontract is invalid, and that the procedures followed in the adjudication did not comply with the procedures to which the adjudication was subject pursuant to the legislation.

Key Takeaways

The implementation of Saskatchewan’s prompt payment legislation has been highly anticipated by the province’s construction industry. The objective is that the new regime will enhance fairness in the payment of contractors and facilitate access to efficient adjudication in the construction industry. Whether those objectives have been attained in other jurisdictions where prompt payments regimes have already been effected, such as Ontario, is not yet clear. Time will tell the extent to which the prompt payment regime will impact the construction industry in Saskatchewan, and extent to which owners, contractors, and subcontractors will develop new practices in order to comply with the regime.

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[i] Similar legislation has been enacted in Alberta (the Builders’ Lien (Prompt Payment) Amendment Act, 2020, SA 2020, c 30). This legislation has received Royal Assent but a date for proclamation into force has not yet been set, and the accompanying regulations have yet to be released.

[ii] The Act, s. 5.4(1).

[iii] The Act, s. 5.5(1).

[iv] The Act, s. 5.6(1).

[v] The Act, s. 5.3(1).

[vi] The Act,, s. 5.4(2).

[vii] The Act, ss. 5.5(4) and 5.6(4).

[viii] The Act, ss. 5.5(5) and 5.6(6).

[ix] The Regulations, ss. 5.1 and 5.3.

[x] The Regulations, s. 5.41(1).

[xi] The Act, s. 21.21(1).

[xii] The Act, s. 21.4(1).

[xiii] The Act, s. 21.32(1).

[xiv] The Act, s. 21.41(1).

[xv] The Regulations, s. 5.61(1).

[xvi] The Act, s. 21.5(1).

[xvii] The Act, s. 21.5(2).

[xviii] The Act, s. 21.71(1).

[xix] The Act, ss. 21.6 – 21.61.

[xx] The Act, s. 21.62.