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Should Ontario prompt payment bill and Lien Act be linked?

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by Kelly Lapointe last update:Aug 27, 2014

During the second day of committee hearings for Bill 69, the Prompt Payment Act, presenters were asked if the issue should be encompassed within reforms to the Construction Lien Act.

They are two different issues, argued Ron Johnson, deputy director of the Interior Systems Contractors Association of Ontario (ISCA).

“The problem is when you’re using payment terms that exceed 45 days then you have no lien rights after 45 days since you’ve last been on the job. Therefore, the lien act is useless to you,” he told the Daily Commercial News after the hearing.

He added that contractors are currently on payment terms between 60 and 120 days.

“By the time a contractor figures out they’re not getting paid, they have no lien rights anyway, so the Lien Act is ineffective.” Ontario General Contractors Association (OGCA) president Clive Thurston said the two issues are “clearly” linked.

“One of the reasons liens are used is when people don’t get paid. There is a direct connection between the failure of the Lien Act to operate properly and why prompt payment came about,” he told the Daily Commercial News.

The OGCA did not make a presentation at either of the two committee hearings.

“There’s no question that the refusal of successive governments to address a 30-year-old piece of legislation, that is no longer relevant or even in compliance with current law, led people to seek another solution and that was prompt payment.”

The presenters at both the March 19 and 26 committee hearings have supported the principles of prompt payment, though some disagree with the way the bill in its current form approaches the issue.

If passed, the private members bill, introduced by MPP Steven Del Duca, would build a framework to ensure all contractors, from general contractors and down the subcontracting chain, receive payment within 30 days. Ontario is the first Canadian jurisdiction to table prompt payment legislation, though stakeholders in other provinces are watching the province closely as they hope to introduce some form of prompt payment.

The key concerns expressed by EllisDon at the hearings include that the bill prohibits milestones and other performance-based payments and provides expansive rights to financial information.

“Bill 69 sets out a proscriptive framework for making payment, in respect of any improvement, without taking consideration the relative complexity of the project...or its interaction with existing laws. The bill eliminates the ability of parties to freely contract terms that meet the needs of the particular project,” said Jody Becker, senior vice-president and general counsel for EllisDon, a member of the Fair Payment Reform Ontario (F-PRO) coalition.

The coalition includes Eastern Construction, ACS Infrastructure Canada, Carillion, Dragados Canada, PCL Construction, Aecon and Bird Construction. It argues that the bill in its current form poses significant risks across the sector and for taxpayers.

Sandra Skivsky, the director of marketing and development with the Ontario Masonry Contractors Association, a member of the National Trade Contractors Council of Canada (NTCCC), told the committee that the bill is simply about being paid for work that has been done to satisfaction.

“It’s not being paid for deficiencies or work not done or providing over payment possibilities,” she said.

“It also gives the contractor the right to mitigate damages...it preserves the right of a contractor to make a business decision, weigh the likelihood of getting paid and decide whether to continue bleeding money or to try and stem it.

“Nobody walks off the job when they’re getting paid.”

She also noted that Bill 69 was not created from “some Utopian wish list”.

“It mirrors the current unaltered standard document. These are supposedly consensus documents developed by a broad spectrum of the construction industry and are promoted by industry organizations like the Canadian Construction Association and the OGCA.”

Proposed amendments from some of the bill’s supporters include allowing for milestone payment plans within a contract between the general contractor and the owner; changing the 10-day deemed certified timeline to 20 days, but payment is still due on the 31st day; allowance for alternative financing and procurement contracts; exemptions for a single-family private residence; a one-year implementation time frame to allow for industry to adjust; and financial disclosure information by an owner to a contractor be limited to information sufficient to demonstrate that financial arrangement. The Crown, municipalities and school boards would be exempt from the requirements of subsection 1 of section 14.

Thurston says this leaves room for various interpretations as to the definition of the Crown.

“Is the interpretation that an IO (Infrastructure Ontario) project means that IO itself is not governed by it, but the contractor doing the IO project is? You know what lawyers will say, ‘no they’re working for a Crown corporation and the same protection would be extended to them.’ I’m not saying that’s right, I’m just saying you can see where the battle lines will be drawn and how the lawyers will be re-interpreting it.”

The OGCA says the bill should not be referred back to the House for third reading and it recommends the government commit to drafting its own bill and set up a consultation process that should also include a comprehensive review of the Construction Lien Act. It proposed a review process that includes senior practitioners and legal experts.

Other presenters at the second day of committee hearings were: Carpenters’ District Council of Ontario, Dragados Canada Inc., Ontario Construction Finishing Industries Alliance, the Regional Municipality of Waterloo and Manion Wilkins & Associates Ltd.

The bill will now head into clause-by-clause analysis on April 2 and 9.

Follow Kelly Lapointe on Twitter @DCNKelly.

last update:Aug 27, 2014

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